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Real Economy News in Real Time
R/€ = 18.99 Change: -0.04
R/$ = 16.76 Change: 0.01
Au 1808.13 $/oz Change: 7.53
Pt 839.69 $/oz Change: 5.71
 
 
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South African agriculture has an Achilles heel – its dependence on imported key inputs

16th April 2020 BY: Rebecca Campbell
Creamer Media Senior Deputy Editor

While South Africa is a net exporter of agricultural products, the country has to import a large proportion of the inputs it requires to produce this surplus, independent research body the Bureau for Food and Agricultural Policy (BFAP) warns. In its latest brief report, The Use of Agricultural Inputs in South Africa'', it highlights that the measures taken around the world, and in South Africa, to counter the Covid-19 pandemic, such as lockdowns and transport restrictions, could affect agricultural input supply chains and prices.

For South Africa, the situation has been worsened by ratings agencies downgrading its sovereign credit ratings, which are now all at sub-investment grades. Additionally, the rand has suffered severe depreciation against major currencies. On April 3, the rand:dollar exchange rate was R19.35:$1.00, which was an almost 40% (or R5.36) depreciation since the start of the year. On the other hand, on April 6 the price of Brent crude oil was $27.60 a barrel, which represented a 60% price fall since January.

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“South Africa is highly dependent on imports of agricultural inputs,” stated the report. “For instance, it is estimated that more than 80% of domestic fertiliser demand and more than 95% of plant protection chemicals are imported. This implies that local prices are subjected to the same supply and demand forces that drive international markets: for example, the farm gate price of domestic fertilisers is strongly influenced by international price fluctuations, currency exchange rates and shipping and distribution costs.”

And this country also imports other agricultural inputs, such as tractors, machinery, implements and the spare parts that they all require. Of these mechanisation-related inputs, the biggest element (at 32%) is composed of tractors of more than 130 kW, while machinery parts represented 20%. In monetary terms, imports of agricultural machinery parts were worth R826-million a year. The average total annual value of all mechanisation-related products during the period from 2017 to 2019 was more than R8-billion. 

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South Africa also imports animal feeds and inputs for animal feeds. Again, during the period from 2017 to 2019 these had had an average value of just over R6-billion a year. This is despite the fact that 50% to 60% of animal feed rations are composed of maize, of which South Africa is expected to harvest a large surplus this year, and that the country can now produce about 75% of its requirement for soybean oilcake (with most of the rest coming from Argentina). However, a large proportion of other inputs, including vitamins, minerals and amino acids, come from China. And 68% of imported animal vaccines are sourced from the US, the Netherlands and France.

“The risks associated with the high dependence on imports for critical inputs are twofold: Firstly, it relates to availability, either due to supply disruptions in major sourcing countries, or logistical and distribution challenges arising from Covid-19 containment measures,” BFAP points out. “Secondly, there are also risks related to affordability, which is linked to availability but also influenced by the macroeconomic environment, where the relative weakness of the exchange rate, for instance, has the potential to cause substantial price volatility.”

“Throughout the value chain, continuous and frequent planning and communication will be essential to mitigate the risk of product unavailability and major price hikes,” it highlighted. “It is therefore vital that supply chains of agricultural inputs are functioning at efficient and effective levels.”  

EDITED BY: Creamer Media Reporter
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