By Paul Vecchiatto, Bloomberg on Business Day Live
FRUIT, wine and nut farmers are bracing for hardship as the US looks set to rescind their duty-free access to the world’s largest market at a time when they are facing the worst drought in 23 years and rising input costs.
The government missed the December 31 deadline to remove barriers on beef and chicken imports from the US, placing it at risk of losing trade preferences for its agricultural goods under the African Growth and Opportunity Act (Agoa).
SA exported $154m worth of farm goods under the programme in the first nine months of last year, according to the Trade Law Centre, which is based in Stellenbosch.
"The US is the crown jewel of our markets," Piet Smit, a citrus farmer in Citrusdal, said. "If we lose the Agoa benefits, there will be extra costs that the farmers will have to swallow."
Adopted in 2000, Agoa eliminates US import levies on more than 7,000 products ranging from textiles to manufactured items from 39 African countries. To remain beneficiaries, countries are required to eliminate barriers to US trade and investment, operate a market-based economy, protect workers’ rights and implement economic policies to reduce poverty.
Agricultural goods accounted for about 14% of total local exports under Agoa in the first nine months of last year, according to the Trade Law Centre. The bulk of its shipments were vehicles and car parts.
SA had made progress in tackling outstanding issues and a deal might still be reached to avoid the loss of the trade preferences, Trade and Industry Minister Rob Davies said on Monday.
If the negotiations collapse, the hardest-hit will be farmers in the Western Cape, which exports 78% of the agricultural goods shipped to the US under Agoa.
"The province’s wine and citrus industries benefit substantially from duty-free access to the US market via Agoa," said Tim Harris, CE of trade and investment promotion agency Wesgro. "We are extremely concerned that these industries will be collateral damage if these benefits are not retained."
Drought has curbed farming, extending a recession in the industry into the third quarter as output contracted an annualised 12.6%.
SA is the world’s second-biggest exporter of oranges and the top producer of macadamia nuts.
It sold 10.7-million litres of wine to the US last year, or 2.5% of its total wine exports, according to Wines of South Africa, an industry body. The wine industry employed 289,000 people nationally, and job losses were likely if trade preferences were lost, said Andre Morgenthal, the group’s spokesman.
SA is the world’s seventh-biggest wine producer. "The US is the last great hope for SA’s wine exporters," Etienne Heyns, global sales executive for Graham Beck Wines, said from Franschhoek. "Should wine be excluded from Agoa benefits, it will add about R5 extra to every bottle."