South Africa’s agricultural exporters, particularly those in the wine, citrus, and fruit sectors, may face increasing competition in the European market. This is due to the European Union’s proposed trade deal with South American countries, which could have a significant impact on the local industry.
Wandile Sihlobo, the Presidential Envoy on Agriculture and Land, as well as the chief economist of the Agricultural Business Chamber of South Africa, has warned of the potential consequences of this deal. He notes that the proposed EU-Mercosur agreement could lead to increased competition in one of South Africa’s most important export markets.
The Mercosur bloc consists of countries such as Argentina, Brazil, Paraguay, Uruguay, and Bolivia. The agreement aims to gradually remove tariffs on around 90% of goods traded between the EU and Mercosur countries over a period of roughly 12 years. This could have far-reaching implications for South African exporters, who currently rely heavily on the European market.
Export Markets Under Threat
The EU is a significant market for South African agricultural exports, accounting for nearly 20% of the country’s total agricultural exports. The products exported to Europe include high-value items such as citrus, wine, fruit juice, avocados, berries, apples, and pears. Sihlobo has cautioned that growing competition from South America in the EU market is something that needs to be closely monitored following this deal.
While Brazil and Argentina currently focus on exporting grains, oilseeds, and beef, the broader impact of increased competition could still affect South African producers over time. Sihlobo has emphasized the importance of seeking new export markets, stating that “the issue of generally increased competition, even if not at the initial stages, underscores the point I have made before that South Africa must consistently seek new export markets.”
Diversifying Trade Markets
In 2023, South Africa exported roughly half of its agricultural production, valued at around US$13 billion. With local agricultural production expected to grow further, Sihlobo believes that the country will need access to more export destinations. He stresses that diversification should not replace existing relationships with Europe, but rather complement them.
Sihlobo has identified Brics countries as a major opportunity for future agricultural exports, despite barriers such as tariffs and phytosanitary restrictions. The warning comes amid ongoing trade tensions between South Africa and the EU, including the long-running citrus dispute currently before the World Trade Organization, EU doesn’t trust Eastern Cape citrus and wants the province quarantined.
