Topics publications: Agriculture and commodities
Trade Reports
Senegal: the trade policy and performance profile
This paper examines the trade profile and performance of Senegal since 1960, with particular emphasis on the period since 2001. Over the course of 2015, Senegal’s macroeconomic performance was strong with a growth rate of 6.5%, making Senegal the second fastest-growing economy in west Africa (behind Côte d’Ivoire). Growth remained strong in 2016. The primary sector is the fastest-growing sector boosted by extractives, fishing, and agriculture, with the latter helped by good rainfall and strong outcomes from government programmes. Industry decelerated somewhat despite strong performances in construction, chemistry and energy, while services – which represent more than half of the total Gross Domestic Product (GDP) – are still growing rapidly, thanks to advances in the transport and communications sectors. Exports have been growing rapidly, mainly due to stronger output. However, over the past 16 years, Senegal has consistently run a merchandise trade deficit, with imports significantly above exports each year.
Senegal is a member of the Economic Community of West Africa States (ECOWAS). The ECOWAS CET was approved in 2013 with the aim of establishing a customs union for ECOWAS through the adoption of a common external tariff vis-à-vis third countries. The country concluded negotiations for an Economic Partnership Agreement (EPA) with the European Union as part of the West African group in February 2014. The EU-EPA gives reciprocal access: Senegal will continue to access the EU market while liberalising access to its own market for EU exports. The difference, however, is that the EPA gives immediate access to the EU market while West Africa will remove import tariffs over a 20-year transition period. Senegal is also a member of the African group negotiating for a Continental Free Trade Arrangement (CFTA), although to date the rhetoric on progress is running a little ahead of the reality, especially as Africa wrestles with the problem of recalcitrant or failed states within its borders.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
The impact of regional integration on Nigeria’s imports: A case of ECOWAS Common External Tariff on agro-processing
There have been several attempts to foster deep integration within West Africa in times past to take advantage of the well-known gains from this regional integration. These gains include trade promotion and economic growth, but the focus of the current study is increased imports into Nigeria and the implications of these imports on trade creation and diversion, tariff revenues and welfare. West Africa has been involved with this regionalisation process, a process that has culminated in the Economic Community of West African States (ECOWAS) customs union that agreed on a Common External Tariff (CET) with Nigeria scheduled to implement it on 11 April 2015.
This study looks particularly at the impact of the ECOWAS regional trade agreement on trade and agro-processing in Nigeria. To complement this, the effect of a possible ECOWAS-European Union (EU) Economic Partnership Agreement (EPA) on trade, revenue and welfare is also examined. The Single Market Partial Equilibrium Modelling Tool (SMART) is used at a disaggregated six-digit level of the harmonised system for the product analysis.
Overall, the results indicate that a regional trade agreement with ECOWAS and the EU increases the imports of agro-processed products by Nigeria. This import growth is mostly driven by trade creation as a result of the lowering and/or the removal of tariffs. Côte d’Ivoire had the largest positive trade diversion effect among the ECOWAS partners and for the European Union (EU) it was the Netherlands. Nigerian consumers benefit from reduced prices, but the influx of new imports may not favour producers in the agro-processing sector. This is because expensive local production is substituted by cheaper imports. Though not analysed in this study, producers within the agro-processing sector may likely witness an impact of diminishing profits because of strong import competition. The analysis also indicates loss of tariff revenue for the Nigerian government but there is welfare gain in total, as expected.
The implementation of a Free Trade Area (FTA) within ECOWAS serves as a meaningful base provided trade policies are well coordinated and harmonised. The government, however, needs to come up with measures to enable producers of less competitive agro-processing sectors to remain relevant. The results show that Nigeria needs an approach to generate revenue to offset the tariff revenue losses caused by the implementation of the CET.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
The Commodity Down Cycle: Some Policy Options for Africa
This working paper is an extension of a prior tralac working paper, The Commodity Price Downturn and Trade: Finding Solutions for Africa, which examines the extent of the fallout of the commodity price ‘down cycle’ for the countries of Africa, grouped by export specialisation in fuels, mining and agri-food; as well as a fourth group with more diversified exports.
In this paper, a selection of five distinct policy instruments are simulated for the same four groups of countries, in order to assess the potential for alleviating some of the economic stress brought about by the price shocks. It is found that a policy package consisting of the following, in conjunction with an export-promoting policy package, can assist in alleviating the adjustment costs associated with the downturn in the commodity price cycle:
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Depreciation/devaluation of the real exchange rate.
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Market enhancements to the labour market
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Enhancement of trade-related infrastructure
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Market enhancements to lower required rates of return and encourage capital inflows
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Increase the fuel products tax or levy.
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For the mined products export specialist group only, tariffs on the fuels and agri products imports can assist.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
The Commodity Price Downturn and Trade: Finding Solutions for Africa
The continent of Africa is the world’s resource vault. More than any other continent or region, Africa is endowed richly with natural resources both in terms of diversity and also extent. This represents a significant advantage from the perspective of international trade, with the countries of the world in need of the commodities Africa has for sale. The extraction of resources and the utilisation of abundant and well-watered arable land for agricultural produce, creates commodities exchangeable for manufactures and services: a seemingly ideal situation. The rest of the world produces exactly those capital goods and technology services that Africa lacks, and that it requires in order to progress up the rungs of economic development.
Yet this stylised transaction is not without significant complications. Over time, the barter value of natural resources has steadily declined, and more recently has experienced unprecedented volatility too. The nations of Africa, and other commodity specialists, find themselves participants in markets over which they have little or no control. They are faced with the prospect of overheated economies in times of price boom, and painful adjustment processes thereafter.
When a commodity-exporting country’s terms of trade fall, this involves a loss of economic welfare and a worsening of development prospects, as the capital goods required to finance development become more costly to the commodity exporter. For this reason the phenomenon of deteriorating commodity prices is important for the commodity-focused exporters of Africa. This paper explores the nature of the problems around commodity prices, the specific issues faced by African countries and the specialist producer groups within Africa, and the potential policy responses by the commodity producing nations.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
An analysis of South African agricultural trade, 2010 to 2014 inclusive: highlighting the importance of Africa
Until mid-November 2013 it was not possible to accurately assess the profile of South Africa’s agricultural trade. It was only at that date that the South African Revenue Service (SARS) announced the revision of trade statistics that entailed the inclusion of the trade data between South Africa and Botswana, Lesotho, Namibia and Swaziland (BLNS) which was previously excluded in the compilation of trade statistics. This revision covered trade data from 2010 to 2012 and then moving forward direct trade with the BLNS will be included to provide accurate reflection of South Africa’s trade. The objective of this paper is to take advantage of trade data that comprehensively includes the BLNS and allows for a full picture of the agricultural trade profile for South Africa. For agricultural products we have used the World Trade Organisation (WTO) definitions.
For South African agricultural exports, Africa is significantly more important than the EU as a destination, while the aggregate BRICs (Brazil, Russia, India and China) are more important than the first single destinations of Hong Kong, United Arab Emirates and the United States of America. This new data highlights the importance of the BLNS countries of Botswana, Lesotho, Namibia and Swaziland and emphasises how this improved reporting of BLNS trade is allowing a comprehensive analysis of South Africa’s agricultural trade. Furthermore, for South African destinations within Africa the feature is that immediate or very close neighbours dominate the list.
By product South Africa exported R105.5 billion worth of agricultural exports in 2014, which constitutes 10.8% of the country’s overall total exports for the year. The top 20 products at the HS 4 level accounted for 66.1% of these total agricultural exports during 2014, while the top five accounted for 36.8% of the total (indicating that exports are relatively concentrated). These top five were citrus fruits, wine, maize, grapes and apples and pears.
The EU is the main source of South African imports, and this share is increasing: from 25.7% in 2010 through to 32.4% in 2014. Similarly, the import share from BRICs is also increasing, while the aggregate share from each of Africa, ASEAN and BLNS declined over the period.
Overall the global South African picture is one whereby exports were 54% above imports for 2014 (although note that by conventional measures imports are undervalued). For the EU these ratios are similar, while the real importance of Africa is highlighted where South African agricultural exports to the continent are around four times the comparable imports. For the BLNS exports are around three times that of imports, while for the BRICs exports are only one half of imports.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Chinese imports from Africa: the impact of the recent commodity price declines
The objective for this paper is to examine Chinese imports from Africa during 2015 and assess the extent to which falling global commodity prices have contributed to changes over more recent import values, and in particular from the 2014 values. We make no attempt to correlate the undoubted relationships between the falling commodity prices and the slowdown in the Chinese GDP growth over the most recent period, but rather examine the trade data. Similarly we make no attempt to examine the falling global commodity prices on African exporters and their trade and economic profiles more widely, but restrict our analysis to Chinese imports from Africa. We use Chinese import data for consistency for the main analysis, and where we cross-check using the African export data we warn of the limitations of this African data in many (if not most) instances.
To set the scene we start by introducing some graphs and a discussion to illustrate the extent of the global commodity price declines over the most recent period and 2014 to 2015 in particular. The overall metal price index has been steadily declining since its peak in mid-2011. It reached a recent low at December 2015 that was still above the index prices for the early years of this century, and most recently it has shown a slight upturn. More precipitous was the dramatic decline in crude oil prices from late 2014 to prices of around 40 % of those consistently prevailing for the three years to mid-2014. The other two examples of iron ore and copper unit prices that we introduce also shows lows at December 2015, although these declines have been over a slightly longer period and not as precipitous in nature as the crude oil decline.
The profile of Chinese imports from Africa by value shows that they were very consistent over the three years from 2012 to 2014 inclusive at around $115 billion, but during 2015 they declined by 39% in aggregate to $70.5 billion. This decline was significantly greater than the 14% decline in Chinese global imports, and meant that the African share of the Chinese global imports declined from being consistently close to 6 % over the previous three years to 4.19% during 2015.
South Africa has been the main African supplier, with a share of around 40% of the African imports in recent years. Combined with imports from Angola of around 25% this means that around two-thirds of the total have consistently been from two sources. Next in order for 2015 were Sudan (both North and South combined), Democratic Republic of the Congo (DRC), Congo itself and Zambia. These countries are followed by a further ten with 2015 shares of between one and two percent of the total and the top 20 are rounded of by Ethiopia and Tanzania with 0.54% of the Chinese imports each.
Overall we can say that the Chinese imports from Africa during 2015 were dominated by the two source countries of South Africa and Angola with some 65% of the imports between them and the two commodities of crude oil and the mystical commodities nes (possibly gold) with an import share of 58.5%. Most of the other commodities were similarly prized from below the earth’s surface, while the three remaining (logs, oil seeds and tobacco) were grown on the earth’s surface. There are no manufacturing products in the conventional sense of note in the main imports. By value, the imports were down by 39%, and as this decline was greater than the decline in Chinese global imports Africa lost significant market share in China. Driving this change was a fall in average unit prices across all of the major imports.
This Working Paper was prepared during the tralac Geek Week of 11-15 April 2016. The authors are, respectively, tralac Associate; Research Analyst: Centre for Chinese Studies, Stellenbosch University; Policy Analyst: Namibia Trade Forum; and Project Manager: Maritime Research, Innovation and Industry Engagement, South African Maritime Authority.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Sugar: production, trade and policy profiles for South Africa and other selected African countries
While agricultural protection has been declining in recent years, several sectors remain heavily protected in many countries. These sectors include sugar, rice and dairy, and this paper will concentrate upon the first of these, namely sugar. Sugar is in some ways a scenario of two different sectors coming together with one product. These sectors are the sugar-beet industry in the EU in particular and the sugar-cane sector in many less developed countries. In general, the former is more heavily protected while global trade (excluding intra-EU trade) features cane sugar to a greater extent. It used to be that the production costs of sugar from beet were significantly higher than cane, but that situation is changing.
Despite being heavily protected and global sugar trading in a series of complex regimes that include high tariffs, quotas and preferential access, sugar trading represents a significant share of total agricultural exports globally. An analysis of global agricultural trade reveals that sugar (as defined by HS 1701 that includes both beet and cane sugar) had a trade value of $27.9 billion during 2014. This value ranked sugar as the 13th most traded agricultural product at the detailed HS 4 level, and gave it a 1.75 % share of agricultural exports. These numbers were down from the 2011 sugar price spike when sugar was the fourth most traded sector by value with exports of $40 billion that constituted 2.68% of agricultural trade and placed it in third place behind wheat, soya beans and palm oils.
It is against this global background that the objective of this paper is to provide an analysis of the African sugar sector, with an emphasis on South Africa, Swaziland and Kenya. The trade data is generally from the ITC with the production data downloaded from the Food and Agricultural Organisation (FAO). The paper begins with a global profile for the production and trade of sugar and then moves on to examine the country profiles.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Trade liberalisation in Africa: a GTAP analysis of intra-African agricultural tariffs going to zero
This paper uses the Global Trade Analysis Project (GTAP) computer database and takes the full suite of African agricultural sectors and African countries/regions in order to assess the benefits of intra-African tariff liberalisation in agricultural merchandise across the continent.
We start by examining recent intra-African agricultural trade flows by partners and commodities. We find that South Africa is the main trader and tobacco and sugar are the main commodities traded. However, it must be noted that this data is different from the 2011 data used by the GTAP and we caution about data accuracy in Africa in particular. Before undertaking our simulations we incorporate the EU sugar reforms into the data and assess the benefits of liberalisation as they are measured at the end year of 2025.
As is usually the case, South Africa is the leading beneficiary, with the economy at 2015 being some $1,840 million better off than it would otherwise have been. Kenya is the next largest African gainer, followed by Senegal and Côte d’Ivoire. Zimbabwe is the big loser, and outside of Africa all countries/regions show a loss. For South Africa, the largest contribution ($753 million) is from changes in the capital investment situation as investment is attracted into the country, and this is followed by improved terms of trade (as measured by the model).
The key agricultural sectors are vegetables, fruits and nuts; crops (other); meat of cattle, sheep, goats and horses; vegetable oils and fats; dairy products; refined sugar and associated products; food products not classified elsewhere; and beverages and tobacco. By country, the key ones were South Africa, Kenya, Tanzania, Uganda, Zimbabwe and Cote d’Ivoire. Overall, the largest impact is felt in the vegetable oils and fats sector, with Côte d’Ivoire and Kenya the African gainers.
The more interesting outcome, however, is in the sugar sector, where South African gains through better access into Kenya, which in turn makes significant gains as it reduced its sugar production significantly and transferred resources out of a sector which had been heavily protected but technically inefficient. This is a classic example of how regional integration can benefit a country through efficiency gains. Changes in other sectors are often dominated by South Africa.
We find that Kenya, Tanzania, Zimbabwe and the rest of Africa lose significant tariff revenues that in the real world has to be adjusted for in some way, and that Senegal, Kenya and Côte d’Ivoire all report an enhancement in labour market remuneration of around 0.2% or more. Overall, Zimbabwe is the big loser in Africa from this liberalisation, and only Tanzania has a similarly meaningful loss.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
South Africa’s agricultural trading relationship with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The objective of this paper is to analyse the Southern African Customs Union’s (SACU) agricultural trading relationship with particular focus on South Africa’s dominant trading position vis-à-vis the rest of SACU member states, namely Botswana, Lesotho, Namibia and Swaziland (BLNS). Aggregate trade data for the first section of the paper was sourced from the International Trade Centre (ITC), while for the second section of the paper, the trade data that was used was sourced both from the ITC and from the SACU Secretariat. All data is expressed in rand (millions) and relative market shares.
South Africa’s aggregate exports to the SACU region steadily increased from R80.6 billion in 2010 to R131.3 billion in 2014 and recording a 62.9% growth over the period. Its aggregate imports from SACU similarly increased from R18.3 billion in 2010 to R29.6 billion in 2014, recording a 61.5% growth over the period. The agricultural products in the top 25 listing of exports to SACU were maize, sugar, wheat, cigarettes and juices, with maize, sugar and wheat accounting for 6.5%, 5.3% and 4.4% respectively in 2014.
South Africa’s top three imports from SACU were odoriferous mixtures, diamonds and chemical industry products, totalling R3.5 billion, R2.4 billion and R2.0 billion respectively in 2014. Within the top 25 there were the agricultural products of sugar, beer, beef, sugar confectionery, live cattle, and sheep and goat meat. Total agricultural imports from SACU increased from R5.1 billion in 2010 to R6.5 billion in 2014, representing a 28% growth over the period. Sugar ranked the highest followed by beer and beef.
Intra-BLNS agricultural trade is extremely limited. Namibia exports some beer to both Botswana and Lesotho and imports some beef from Botswana. Lesotho has virtually zero exports to the other BLNS partners but imports cotton from Botswana. Botswana imports various products in minor amounts from Namibia, while Swaziland is not actively involved with the BLNS partners.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Shall we samba? – an update
The world’s economic and trading environments have changed since the 2010 publication of tralac’s South Africa’s way ahead: Shall we samba? In this update to that publication, we examine how the South American Mercosur economies of Brazil in particular have fared from these changes, with again a special focus on agriculture and Brazil’s trading relationship with South Africa. Trade data is updated to December 2011 where possible, but with a literally last minute inclusion of some comments on Brazil’s 2012 trade.
As Brazil is a key agricultural trading partner in this BRIC relationship, the focus of this Samba update will place Brazil against a BRIC background and to complement this we will reference some of the papers intended for a new BRIC book to be published in cooperation with the National Agricultural Marketing Council (NAMC).
In general, we find that while the scars of the bleak year of the 2009 global downturn are apparent, Mercosur countries have recovered better than South Africa. Given the direct definitional economic relationships between trade performance and Gross Domestic Product (GDP), the emphasis in this Update is on trade as this is crucial in determining economic wellbeing.
We cannot, of course, directly predict the future, but recent past performances give valuable clues as to how countries may weather the storm clouds that have not fully dissipated since 2009 and indeed are still growing in Europe and other places.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.