AGRIBUSINESS in S.A
Written by Admin on 25 May 2022
This section will cover the agricultural equipment space as well as agricultural commodities.
South Africa’s agricultural sector is one of the world’s most diverse, consisting of corporate and private intensive and extensive crop farming systems, including vegetable, fruit, nuts and grain production. The well-developed commercial farming in South Africa is the backbone to the country’s agricultural economy.
South African climate ranges from subtropical to Mediterranean, allowing for a multitude of farming opportunities. The country’s biodiversity ensures that products such as grains, fruit and wine are exported and preferred for its exceptional quality. There is a growing demand to improve subsistence farming or informal small scale farming in South Africa.
Compared to the rest of Africa, South Africa has by far the most modern, productive and diverse agricultural economy. South Africa has a well-developed agricultural sector, which will stand the country in good stead in the face of continuing uncertainty both economically and in terms of the weather. There are many factors impacting on the industry – including credit ratings downgrade, land reform concerns, volatile exchange rate, ongoing weather concerns and the latest Covid-19 pandemic.
There are approximately 32,000 commercial farmers in South Africa, of which between 5,000 and 7,000 produce approximately 80% of agricultural output.
Forecasts show that the country’s economic growth will remain under pressure, as consumers continue to tighten their belts because of a contracted economy and higher inflation over the last year. Investment in agriculture is widely recognized as a key precondition in achieving goals related to improving food security, creating jobs, creating wealth, and thereby reducing poverty. There are still notable headwinds moving into 2020 that can affect the farming sector. Weak global growth, domestic in-put costs, aftermath of Covid-19 and policy uncertainty could impact the economy negatively and lead to unintended consequences.
As the agricultural sector is largely export driven, it is hedged against the negative impact of a major credit downgrade, but farmers are susceptible to higher borrowing costs, depressed local demand and foreign animal and plant health import approvals.
Sub-Sector Best Prospects
The best prospects for U.S. suppliers, in South Africa and the region, are:
- Combine Harvesters
- Precision Agriculture Equipment and Technologies
- Soil Testing Equipment
- Spare Parts and Service Facilities
Despite the current economic downturn, farmers appear to be upbeat about current agriculture conditions. Sporadic rains and prevalent dry weather conditions are a concern issue and present opportunities for no till planting equipment. Companies and farmers have indicated a strong interest in soil sampling equipment.
The integration of digital technology into agriculture presents a major opportunity for Sub-Saharan Africa. The emergence of the mobile phone as a popular communication tool, coupled with internet-based solutions, could significantly boost access to financing for agricultural inputs across the value chain. Digitalization, as well as the effective use of fertilizer and seeds, will become increasingly important in unlocking agriculture prospects in Africa. Trending technologies in agriculture include data management, machine learning, artificial intelligence, automation and drone-based applications.
Production research and technology, which South Africa needs to invest in, is an area of opportunity for growth in agriculture and in alleviating the vulnerability of crops and livestock.
There are very few barriers to bringing new equipment to the South African market. Equipment like planters, sprayers, and tilling equipment enter duty free, provided the exact same product is not manufactured in this market. Most of the precision agriculture equipment such as planters, self-propelled sprayers, and combine harvesters are imported from South America, Europe, and the United States; smaller implements are purchased locally. Known U.S. brands such as Massey Ferguson, John Deere, New Holland, AGCO, and Case IH are well-entrenched and well-known for their quality in this market.
South Africa is the platform for “regional expansion,” with excellent opportunities for U.S. business in neighbouring countries such as Zambia, Zimbabwe, Angola, Mozambique and Botswana. Second-hand tractors and equipment are also well-received in these regional markets.
South Africa hosts the largest agricultural equipment show on the continent called NAMPO Harvest Day. This outdoor show takes place in May each year and provides an excellent opportunity for U.S. firms to exhibit their equipment and technology.
A lack of direction on land reform is one the issues that farmers are watching closely. The debate on “land expropriation without compensation” has created considerable policy uncertainty and farmers and potential investors are concerned about the protection of private property rights, thus negatively impacting investor confidence.
All import and export commercial transactions require commodities on custom declarations to be classified according to an appropriate tariff heading. The tariff classification code is directly linked to the rate of duty payable on that commodity. Classification operates as part of the international Harmonized Commodity and Coding System, under the World Customs Organization (WCO) Harmonized System Convention.
Importation of all second-hand goods is subject to import control and an import permit is required.
The agricultural sector is in a precarious situation due to its backward and forward linkages with other sectors in the economy. Thus, the South African agricultural sector will suffer from the so-called contagious effect in that what happens to other sectors of the economy will have a bearing on the agricultural sector as a result of Covid-19.
Exhibitions and Conferences
Show: NAMPO Harvest Day
Focus: Largest Agriculture Machinery and equipment show in the Southern Hemisphere.
Dates: May 11–14, 2021
Venue: Bothaville, Free State, South Africa
South African Agricultural Machinery Association (SAAMA)