The importance of improved EU market access for South African agro-industry
Expanded market access into the European Union (EU) is important for the agricultural sector in South Africa (SA), notably for the beneficiated agri-sector, including canned fruits and vegetables. "Beneficiation" relates to the value addition of the primary agricultural product through further processing including, for instance, preservation, packaging as well as improved taste and application through addition or mixing of ingredients. This process uses local resources, inputs and labour, all of which require a higher level of sophistication and skill that support wealth creation within local and rural communities. The trade relationship between SA and the EU under the bilateral Trade Development and Cooperation Agreement (TDCA) of 2000, is currently being merged into a regional Economic Partnership Agreement (EPA) that could be finalised at the end of 2011. The SA agricultural sector hopes that this can be achieved and hopes to strengthen its access to EU markets in this context.
In terms of market access for agricultural products, the TDCA is not particularly supportive of SA's beneficiated agricultural sectors. For example, it allows SA canned fruits entering the EU with only limited tariff relief on a few quotas, whereas it grants most EU beneficiated agricultural products duty-free and quota-free access into SA, despite the fact that the EU subsidises its agriculture whereas SA does not.
Africa has long asked for a partnership to develop economic sectors that are based on the beneficiation of primary materials, notably to strengthen rural development and support growth across a wide variety of sectors. Agro-processing is a key example of such sectors: it does not only provide higher skilled and paid employment, but also allows value addition through the utilization of a variety of primary inputs and secondary materials.
SA beneficiated agricultural sector: a driver of regional agriculture development
The overwhelming majority of canned fruits and vegetables are produced within SA. The importance of SA's production of beneficiated agricultural products in the SA economy and in the SACU region (where national productions are much smaller) demonstrates the potential for SA to provide capacity building to the regional beneficiated agri-processing sector and also illustrates the potential for joint ventures between SA companies and those in the region in support of the development of the regional economy.
Being responsible for collecting customs revenue for SACU and supplementing the distributed revenues in what can be considered as developmental funding, SA plays a crucial role in supporting development within SACU.
Besides, retarding the development of SA's beneficiated agricultural sector by restricting market access to the EU is detrimental to rural development. SA hopes that the EPA can provide a homogenized trading regime with the EU under which SA as well as Botswana, Lesotho, Namibia, Swaziland and Mozambique can have similar trading provisions with the EU, therefore including increased market access for SA's agricultural products. The EPA could also be a platform for EU support across various agri-sectors.
The challenges in negotiating such an EPA are considerable, and even more due to the EU's scepticism to grant SA the same market access coverage it is willing to grant other Southern African countries, despite the fact that SA's economy is dominant in the region and has a key role to play in strengthening economic regional integration 1.
But precisely because SA's economy is far more developed than other economies in the region, SA is a competitor for the EU which has strong commercial interests to protect, often leading to protectionist tendencies. Thus, the EU may face challenges giving SA the same privileged access to the EU market as it gives to other economies in Southern Africa. In the context of the EPA negotiations, SA has to consider the interests of all its partners within SACU which may often have more restrictive defensive interests than SA vis-à-vis EU imports into the SACU market. This, therefore, often makes it difficult for SA to broaden the coverage of its market access offer as much as the EU would like it to do. SA and the EU both face challenges in what they can offer each other in terms of market access, although the need to take into account the broader interests of developing the Southern African economy is acknowledged by both.
Such a challenge is a problem in particular for SA exporters, especially those dealing with agricultural products. Non-SA SACU exporters of beneficiated agricultural products currently enjoy privileged access into the EU market under the unilateral EU Market Access Regulation 1528/2007 granted to those that have concluded an interim EPA. Lesotho and Mozambique can besides benefit from the Everything But Arms (EBA) program, which provides least developed countries (LDCs) privileged market access into the EU without the need for reciprocity. Namibia, however, seems to be in a more delicate situation. With the recent proposal of the European Commission to reform the GSP, the country might indeed be placed under a much less favourable treatment if it does not sign the EPA. Namibia's main exports, however, while having a large component of some agricultural exports (especially beef products) do not include beneficiated fruit and vegetable products.
Paradoxically the EU has often granted better market access to countries which are in less urgent need of specific rural development than those in Southern Africa where the SA agri-sector plays a significant role. The South African beneficiated agro industry is competing with, for instance, producers from Chile, who benefit from tariff-free access to the EU in spite of being in a far better economic position than most of Sub-Saharan Africa.
In September 2010, political statements of support from the EU and SA President Jacob Zuma emphasized that political determination could deliver a mutually advantageous EPA by December 2010. Although this targeted date was not met, the SA agri-sector hopes for such a result in the latter half of 2011. The challenges are great, but so are the potential gains of a revitalized EU/Southern African economic partnership that spans many sectors with beneficiated agriculture, being a key focus and a driver of rural development.
Author: Rudi Richards was until recently the Chairman of SA Fruit & Vegetable Canners' Association in South Africa (SAFVCA) - a voluntary grouping of fruit and vegetable canning and processing industry members.
1 See recent development in this respect in the EPA update on p14 of this issue.