Expenditures and Activities of
Cairns Group Countries
South Africa is the largest and most highly developed economy in sub-Saharan Africa. Agriculture contributes only 4 percent to South African gross domestic product, but accounts for over 13 percent of employment. South Africa has a developed infrastructure, a market-oriented agricultural sector and increasingly positive trade links with the rest of the world, so it is an entry point for foreign goods in the region. South Africa’s agricultural economy, has two sides: a well-developed commercial sector, and a predominantly subsistence-oriented rural one. The country is a major agricultural exporter, principally of fresh and processed fruits and vegetables, wine, and sugar.
Agricultural Products Marketing Act of 1997 radically changed agriculture toward a free-market system, removing subsidies and financial concessions. South Africa’s Department of Trade and Industry (DTI) administers the nation's export market promotions, which tend to be oriented toward the industrial sector.
Export Promotion Programs
Under the Marketing Agricultural Products of 1996, compulsory levies on producers and processors were to be abolished. This process is almost complete, and producers and suppliers now operate almost completely under a free-market structure. Imports take place freely, subject to the importer’s payment of the relevant tariff. Currently, South Africa does not use direct export subsidies for agricultural exports. The DTI, however, continues to be involved in market promotion by encouraging public and private sector partnerships for trade fairs, missions and market information exchange. Promotions are carried out under three main programs: the Export Marketing and Investment Assistance scheme (EMIA), the Export Credit and Foreign Investment Reinsurance Program, and support through trade fairs, trade missions, and diplomatic missions. The banks also provide export financing such as credit guarantees, assistance programs, and export consulting services.
EMIA is DTI's principal market promotion program. Its fiscal year 1999 budget was about $16 million. EMIA partially reimburses private companies and associations for expenses incurred in promotion of South African products overseas. Its activities target industrial companies, but promotion of processed commodities is also allowed. The EMIA fund also covers the cost of market research and seeking foreign investment.
In South Africa, U.S. agricultural products face competition from the European Union, Australia, Argentina, Canada, India, and Thailand. India and Thailand are the main competitors in the rice market. Canada, Brazil, the U.K., and France are the principal competitors in the poultry sector. In the wheat market, Australia, Argentina, Canada, and the European Union are the main competitors.
European Union exports of these products generally benefit from export subsidies. The EU-South Africa Free Trade Agreement, which took effect January 2000, will help boost the EU's access to the South African market. Most agricultural products are not affected during the initial phase of the agreement. In addition, the pending free trade agreement between South Africa and its neighbors under the South Africa Development Community may offer market access to low-cost producers. They offer lower prices because of transportation advantages or as a marketing tool of their marketing boards. Trade missions and trade show participation are the most common and effective mechanism being used.