Didiza, at the Agri-Business Chamber Dinner, Cape Town
23 May 2006
Ladies and gentlemen, it is indeed a pleasure for me to be amongst you
tonight. It is however regrettable that this is the last time I address you as
the Minister for Agriculture and Land Affairs.
As you are all aware, agriculture is the backbone of any national economy.
In South Africa, this sector contributes about four percent towards the Gross
Domestic Product (GDP). This in itself is an indictment on the sector to become
more competitive in a changing global environment. This improvement will
however, hinge on how the sector adapts its way of doing business in this harsh
and unforgiving environment.
Notwithstanding governmentâs efforts to foster better trading conditions,
there are still challenges. For instance, the World Trade Organisation (WTO)
negotiations concerning trade imbalances that cause distortions on world
markets are continuing. Some of the most contentious issues are the high
tariffs for certain South African products on European Union (EU) and other
markets. The negotiations are stuck on these two issues and the United States
(US) has still to make some concessions in so far as market access and tariffs.
The same applies to the EU. As soon as this happens the Doha Development Round
will be concluded.
Again there is the wine and spirits agreement between South Africa and the
EU. The agreement has not yet been ratified by Parliament as there is a clause
in the agreement that was in essence a political compromise. The clause states
that trademarks that conflict with geographical indications in Europe will be
given up. But in terms of South African law this is problematic. Before the
agreement can be ratified, this will first have to be sorted out. What is
encouraging is that the Europeans have realised that it is also not in their
interest and might therefore compromise. Discussions are continuing to find
common ground on the way forward.
Ladies and gentlemen, there are also oenological practices and outstanding
technological issues which we are waiting for the EU to reply on those
requests. Some of these have been outstanding for more than two years. The main
problem is that the EU links the wine and spirits negotiations to the General
Trade Agreement, which is a separate issue.
The seventh and final round of South African Customs Union (SACU) and
European Free Trade Association (EFTA) negotiations was held from 24 to 26
August 2005. Four agreements were negotiated that all form part of the
instruments establishing the free trade area between the two sides. The main
agreement covers products classified as agricultural products by the WTO. It
further covers processed agricultural products as well as fisheries.
Within the processed Agricultural Products Free Trade Agreement, the
products classified as processed agricultural products will be subjected to the
same tariff phase down schedules as industrial products on the South Africa
side, while EFTA gave SACU the same preferential treatment it gave to the
EU.
All four EFTA countries did not have an export focus when it comes to
agriculture but are rather inward looking. Only Switzerland requested market
access for processed agricultural products mainly high value-added like
chocolate and speciality cheeses, but no preferences were granted due to
industry sensitivities in South Africa.
Specific areas of interest for the Botswana, Lesotho, Namibia and Swaziland
(BLNS) are beef and mutton, sugar, citrus, table grapes and certain
agro-processing products, as well as speciality products like game or ostrich
meat. No preferences were offered to Norway on basic agricultural products due
to support given to its farmers. Iceland was granted market access for meat of
horses, asses, mules or hinnies, fresh, chilled or frozen. In case of
Switzerland, preferential access into SACU markets has been granted for live
animals, feed supplements and tobacco.
Some of the preferences SACU managed to secure under this agreement are with
Switzerland, Norway and Iceland covering a variety of products.
The timeframe leading up to the implementation of the agreements is
that:
* A legal and technical review of the texts and offers is underway.
* The signing ceremony will take place on a venue and date still to be decided
upon before July 2006.
* Implementation of the agreement subject to ratification of the agreement by
individual SACU Member States is envisaged for 1 July 2006, with the second cut
in tariffs to happen on 1 January 2007 in order to bring the agreements in line
with the SA-EU, Southern African Development Community (SADC) and SACU-MERCOSUR
agreements.
In December 2000 negotiations towards a SA/Brazil Free Trade Agreement was
launched through the signing of a Framework Agreement. The negotiations were
later expanded to include other SACU and MERCOSUR members. The final round of
negotiations towards a Fixed Preferences Agreement (FPA) between SACU and
MERCOSUR took place in December 2004 and a FPA was concluded.
The next round which is likely to be the last round, may take place in
December 2006. Thereafter the various ratification processes must be initiated
so that implementation can then begin. It is hoped that the agreement can be
implemented on 1 January 2007.
Ladies and gentlemen, I am mentioning all these agreements in an effort to
show how government has been engaged in trying to level the playing field in
agricultural trade. But what is interesting is that whilst government is doing
this, The South African Agri-Business sector has not tried hard enough to
penetrate the West African markets. Exports of agricultural products to the
Economic Community of West African States represent only three percent of South
Africaâs total agricultural exports whilst imports from the region represent
less than one percent of South Africaâs total agricultural imports. As an
African country, South Africa enjoys a strategic advantage given the close
political connection between the countries and the promotion of NEPAD
objectives.
Research by Ezra Steenkamp in the Department of Agriculture reveals that
SACU has a comparative advantage in agricultural exports comparing to the
world, since most of the studied SACU agricultural exports have gained world
market share. The export of all SACU agricultural goods increased by seven
percent in US$ from 1994 to 1998, compared to the growth of trade of the same
goods in the world by 5,6 percent. SACU has performed 41st in the world (out of
the 178 countries studied). However, world markets for most of the studied
agricultural products exported by SACU are declining, compared to the general
world trade growth average.
The analyses indicate that the champions in SACU agriculture exports are
grape wines (smaller than 2 litres), plums and sloes (fresh) and grapes
(fresh). These SACU commodities have increased their world market share in the
high growth dynamic world markets for these products. These products are also
less risky and promotional efforts should aim at broadening the supply
capacity.
Underachievers in high world growth market sectors are avocados and to a
lesser extent pears (processed). Avocados present special challenges for trade
promotion efforts. Statistics reveals that the world demand is high, but that
promotional efforts should concentrate on the supply side efforts for quality
export fruit as well as promotional and marketing efforts in high growth
markets where SACU is underrepresented.
The bulk of the analysed SACU agriculture exports were achievers in
declining markets, also called the âcash cowsâ e.g. black tea, bulk wine,
mandarins, clementines, pears and quinces, oranges, pineapples, meat, sugar,
processed fruit, grapefruit, ground nuts and cotton. Many of these products
also face major tariff and non-tariff constraints in the world markets (e.g.
mandarins, sugar and meat). Most of the products exported by developing
countries and in which they have a comparative advantage, fall in this category
(achievers in adversity). Therefore the liberalisation of these markets could
be persuaded in a development round within the WTO, to free up the restrictions
that put constraints on the demand for these products.
South Africaâs ability to adapt to change in the dynamics of world demand
for the fresh food sector as well as the processed food sectors is poor and
rank 117th and 102nd respectively. These results need further clarification
from industry and product specialists. The initial geographic and product
specialisation on the dynamic markets were also poor according to indicators
(probably due to the past effect of sanctions), ranking 78 to 131st in the
world for fresh food and 69th to 85th in the world for processed food.
The main problem which was identified for agriculture was the industryâs
poor adaptation towards new export products compared to its competitors with
indicators for SACU ranking 107th to 133rd in the world. SACU could also
improve on market diversification and market concentration of dynamic world
markets.
Results of many of the indicators of individual processed agricultural
products reveal that they were performing poor in the adaptation to world
dynamics, especially the inability to develop new export products, comparing to
competitors. Examples of such products are textile fibbers, food preparations
(including beverages) and hides and skins and leather. These products were
probably highly protected in the past.
The fresh fruit and vegetables also seems to adjust poorly with the
development of new dynamic export products comparing to competitors, although
the scope of adjustment would be much narrower than for processed produce.
However, there is scope for improving market diversification.
Ladies and gentlemen, wish you well in your endeavours and hope that the
resolutions coming out of this congress will indeed show that this is the âAge
of Hope.â
Thank you!
Issued by: Department of Agriculture
23 May 2006
Source: Department of Agriculture (http://www.nda.agric.za/)
