SA exports to EU EPA member states
The sugar, frozen orange juice and (bulk) wine industries have nearly, if not completely, exhausted the TRQs since 2017. An upward trend was recorded for apple juice and bottled wine: apple juice increased from 19% to 86% and bottled wine increased from 64% to 84%.
However, active yeast, ethanol and tropical canned fruit show a relatively low level of utilisation amounting to 21%, 16% and 8% respectively in 2018. Furthermore, the take-up for processed products in the dairy industry, some fruit products, and white crystalline powder remains 0%. Research findings show that there are multiple supply- and demand-side constraints that restrict TRQ usage and exports in general, rather than limitations in the EU market. Climate variability in South Africa has adversely affected the production of sugar and fruit (apples, pears and apricots). This is directly related to the amount of fruit that can be processed, thereby limiting canned fruit, with production directed towards higher value fresh fruit.
Health concerns are driving down consumer demand for tropical canned fruit and foodstuffs with high sugar content, which reduces investment in the upstream segment. In South Africa’s key markets this trend has been documents with consumers shifting towards fresh fruit and “no-sugar” substitutes. As such, companies are adjusting to these changing consumer patterns by supplying more fresh fruit compared to canned. At the same time, there is lower demand for sugar in beverages, with downstream producers using artificial sweeteners.
In the biofuels sector, the delay in implementing the Biofuels Regulatory Framework has delayed capital investment in the sector, and as such domestic production and exports are limited. Bioethanol production, as mentioned, relies on sugar by products. Any capacity constraints at the production level affects bioethanol product as was highlighted during stakeholder consultations.
More importantly, the lack of a residual monitoring plan militates against any effort to export in dairy products to the EU. For other products i.e. bioethanol and canned fruit, the respondents did not list EU regulatory and legal standards as a barrier to trade. Over time, exporters have developed capabilities to meet the standards. Case in point is the local presence of the Perishable Produce Export Certification Agency, which authenticates the health standards and regulations in SA and eases entry into the EU market
EU exports to SA
Under the EPA’s TRQ allocation, the EU has market access to the SACU member states across nine agriculture products. Within each product’s TRQ allocation, South Africa is generally allocated close to 80% of the annual quota.
In 2018, the TRQ allocations for SA were fully utilised for pork, butter and other dairy fats, pig fat and wheat, with ice cream and cheese recording strong growth. Barley exports via the TRQ are none given that SA currently has zero duty rate for barley imports into the country. Zero percent TRQ usage was only recorded for cereal based preparations and Mortadella di Bologna. Research findings indicate that there is a general lack of awareness regarding the TRQ opportunities.
Actions required to increase trade
While the EU and South African government can increase awareness among exporters of the TRQ opportunities that are available, there is a pressing need to bolster capacities through addressing technical issues and addressing structural issues that have a direct impact on the capacity and competitiveness of the industries within South Africa.
There is need to prioritise the development of technical capabilities for exporting in South Africa e.g. developing a monitoring plan for dairy products and ramping up the SPS technical capacity at DALRRD. The residual monitoring plan is required to facilitate exports to the EU in the animal and dairy sectors.
Government needs to conclude the Biofuels Regulatory Framework with some urgency. This will encourage firms to invest in expanding biofuel production, and simultaneously attract new entrants. Here South Africa may be able to learn more from the EU regulatory experience through study tours or knowledge-sharing events.
The fruit industry (and agriculture in general) is already suffering from the impact of climate change. A climate mitigation strategy is needed by the industry, and this may include investing in yield varietals that are less vulnerable to the effects global warming.
These are a just some of the recommendations that the study is putting forward in order to not only increase usage of the existing TRQ opportunities, but exports more generally.