The Agricultural Business Chamber (Agbiz) said on Monday that while there was room for the localisation strategy in South Africa’s agriculture, food and beverages sector, the focus would not primarily be on the top-ten imported products, but rather on niche and labour-intensive value chains that the country had not yet explored optimally.
Agbiz chief economist Wandile Sihlobo said determining such value chains would require deep research which the Department of Trade, Industry and Competition (DTIC) should lead, along with private sector players.
“The use of trade policy instruments should be carefully thought-out and not lead to a situation where trading partners will deem South Africa as being a protectionist country,” warned Sihlobo.
This was as the South African government was currently drafting its localization strategy as a measure underpinning the Economic Reconstruction and Recovery Plan from the destruction caused by the pandemic.
The agriculture, food and beverages sector accounted for an average 8 percent of South Africa’s total imports over the past five years, an annual value of about $6.5 billion (R99.7bn).
Agbiz said that this made it a fairly notable sector to be explored in the process of promoting localisation.
The top-ten products in the import list accounted for 46 percent of all agriculture, food and beverages imports. These were rice at 7 percent, poultry meat also at 7 percent, wheat at 6 percent, alcohol (vodka, whiskies, spirits, gin, rum, and others at 5 percent , sugar cane at 5 percent. The others are palm oil 4 percent, beer from malt also at 4 percent, protein concentrates at 3 percent, sunflower oil at 3 percent and unspecified animal foods (dog or cat food for retail) at 2 percent.
Sihlobo said that this top-ten import list might draw the attention of policymakers, or even persuade them to explore ways of reducing the imports in this category. He said that, however, this was not where the attention should be. “The focus should rather be on relatively small and niche value chains where South Africa might have capabilities of improving domestic production.”
Agbiz said that as an example, the top-ten imports list consisted of some products that South Africa did not have a conducive climate to increase its production.
Sihlobo said that such products were palm oil, wheat and rice, which account for 18 percent of the overall agriculture, food and beverages import bill of $6.5bn.
“With that said, there could be an improvement in the medium-to-long term in reducing the imports of poultry products, sunflower oil, sugar cane and animal foods through improvements in domestic production. In the case of poultry and sugar industries, the Master Plans and various trade instruments in place are some of the policy steps that seek to support domestic production and reduce import dependency.”
According to the chamber, other imported products, which were not necessarily part of the top ten, and yet notable included live cattle, fruit juices, bottled water, coffee, soybean oilcake, pork products, pasta, honey, pasta, beef and sources, amongst others.
Sihlobo said closely studying this list and identifying products and value chains that South African business can expand operations on would be essential in the drafting of the localisation strategy. “Another important aspect will be an increased focus in value chains that are also labour intensive so that the localization strategy can also address the core challenge in South Africa, which is the growing unemployment.”said Sihlobo.
FNB Business senior agricultural economist Paul Makube said what would be key in the country’s localisation would be a purchasing strategy that sought to empower locals to be more cost effective and enhance import substitution especially for products whose raw inputs were produced in abundance in the country. “This includes agriculture products such as those derived from sunflower, sugar cane and animals (poultry in particular).
Makube also said that the country should incentivise local agro-processing geared for the export market.
He said the country should carve out opportunities in various industry value chains and put in place a plan of actions backed by resources in the form of a public private partnership and encourage local private sector investment in the wake of a constrained fiscus.
“To achieve this we will need political will to allow for more private sector involvement and a concerted drive to unlock new markets especially Asia.”
Source: Independent Online