A study, undertaken as part of the European Union (EU) and Southern African Customs Union (SACU) Economic Partnership Agreement (EPA) on trade in goods, has highlighted specific opportunities for various industries to grow and/or diversify their exports and, in the process, help to offset some export risks some industries face.
The study, undertaken by market research company Trade Research Advisor, modelled trade opportunities for companies trading out of Southern Africa into the EU, and vice versa, in terms of transportation, economic, commercial and socioeconomic metrics, Trade Research Advisor MD Martin Cameron revealed this week.
"We categorised the outcomes in terms of short-term opportunities, including export promotion opportunities where there are capabilities to export and it is mainly a question of marketing and diversification, and in terms of medium-term opportunities, mainly focused on export development in industries that are less mature in global trade terms.
"We also categorised the research outcomes for longer-term opportunities, such as those presented by beneficiation of raw materials to grow value-added services within a value chain," said Cameron.
For example, based on the different metrics, Hungary has emerged as a key opportunity for growing citrus exports from South Africa, with one of the citrus products being lemons, which face potential anti-dumping trade barriers in the US.
"There is no reason not to increase our direct sales of citrus to Hungary, as it meets all the requirements in terms of trade potential, existing infrastructure and industries and demand, among others, and South Africa has lemon trade deals with other European countries," he said.
"The lemon industry can be a large-scale employer in South Africa and needs to be further developed, but the key message is that there are alternative opportunities that South Africa is not capitalising on," Cameron emphasised.
Companies need to be aware of the opportunities, whether in Southern Africa or Europe, which is what the study aimed to reveal.
"Different regions and their societies also have different tastes, which present additional trade opportunities when companies start delving into individual countries and export opportunities," said Cameron.
A further example of potential trade revealed by the study is for South Africa to increase exports of steel and ferro-vanadium products to Belgium, which, again, meets all the requirements for growth and sustainability of trade, he noted.
"This is an unusual opportunity highlighted by the study, as this market presents a realistic opportunity for trade from South Africa, with all barriers, entry tariffs and logistics metrics considered," he said.
"South Africa supplies some of these [steel] products to Belgium already, but there is scope to supply more while competing with other steel producers and producing regions, including from China and Russia. South Africa is already competing successfully in this market and there is no reason not to exploit this further," he said.
Another example of a potential trade opportunity is in the trade of frozen goat meat. South Africa exports live goats to various Middle East countries, but is, despite having significant local farming of goats, not capitalising on potential trade in this commodity.
"Australia, for example, has capitalised on the demand for goat meat, with one farm having 1.2-million goats aimed at supplying the demands from East Asian and Middle Eastern nations, among others.
"However, the US imports the most goat meat of any country in the world, owing to Latin American and European-descended communities often preferring goat meat as a healthier meat, and highlighting, again, an unusual and unperceived opportunity," he explained.
However, South Africa's goat farming industry is not formalised and does not meet sanitary and phytosanitary standards and requirements, and the country therefore cannot capitalise on this particular opportunity until it formalises the industry to ensure it meets trade requirements, said Cameron.
INFRASTRUCTURE TRADE BARRIERS
"Trade relies on multiple, overlapping components. Trade is not either/or, but rather and, and, and. To successfully reap the benefits of trade, there must be infrastructure in place, services, a robust and stable legal and regulatory framework, and supply and demand," he said.
This is key to understand in the African context, as deficient infrastructure to serve the needs of people negatively affects Africa's economies' growth by 2% a year. The provision of services is a more important determinant for trade than only where the opportunities lie, highlighted Cameron.
"The untapped opportunities will not be realised overnight, and will take work to accomplish. If traditional trading opportunities are excluded, the untapped potential over the short- to medium-term is R76-billion in potential additional trade from South Africa with the smaller, and less well-traded EU States that we can pursue," he illustrated.
The EU delegation to South Africa, in partnership with the Department of Trade, Industry and Competition, will hold a roadshow in provinces over the next few months to disseminate the information from the study with companies through industry associations and business chambers.
"We will start disseminating the information through formal business structures in the Western and Eastern Cape, and KwaZulu-Natal to make companies aware of the opportunities. Particularly after Covid-19, and with the current uncertain global situation, we need exports to help drive economic growth and fund our imports of critical goods that our economy needs," said Cameron.
Further, of South Africa's trade flows with Europe, only 89% of the eligible products exported were making use of the preferential treatments and tariff duties available under the agreement, which is, however, up from 74% when the Economic Partnership Agreement was entered into, said EU delegation to South Africa trade section head Roberto Cecutti.
"The aim is to increase this to 100%. Trade helps the prosperity of nations and improves socioeconomic outcomes by creating opportunities. Investments made by EU nations have led to more than 1 000 companies operating in South Africa, directly creating 350 000 jobs, according to estimates from a study in partnership with the Black Business Council," he said.