Wandile Sihlobo: Wine is looking (surprisingly) fine

Wandile Sihlobo

Wandile Sihlobo

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I had feared that South Africa’s agricultural exports for 2018 would take a big knock because of the decline in the Western Cape’s agricultural production. But the statement released by Wines of South Africa (WOSA), a representative body of the country’s wine producers, late in January 2019 was encouraging.

WOSA noted that “despite 2018 being a challenging year for the wine industry with a low-yielding harvest due to the regional drought, we are excited to report a positive growth in the overall value of our exports”. This essentially referred to the 4% year-on-year increase in the value of South Africa’s wine exports in 2018.  

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The rise in global wine prices and the 13.5% depreciation in the rand against the US dollar in 2018 have somewhat offset the impact of the decline in production volumes on the value of exports. Wine is one of South Africa’s largest agricultural exports, therefore the growth in its exports contributes positively to the country’s agricultural trade balance. 

After this statement, I then checked the available trade data on Trade Map and realised that for the first 11 months of 2018, South Africa’s agricultural exports for 2018 amounted to US$9.9 billion, which is 0.5% lower than 2017’s full year exports.

We are yet to see what the overall 2018 agricultural exports value will be when December 2018 trade statistics are released, but it is clear that there will not be a notable decline, as I previously feared. South Africa’s top export products were edible fruits, beverages (largely wine), spirits, vegetables and wool.

Africa is SA’s largest market

Over the same period, South Africa’s agricultural imports fell by 6.2% to US$6.3 billion. The top imported products by value were rice, wheat, palm oil, sunflower oil and offal, amongst others. But, a closer look at the trade statistics shows that South Africa’s agricultural sector recorded a positive trade balance of US$3.6 billion in the first 11 months of 2018, which is a record level in a dataset dating back to 2001.

The African continent and Europe continued to be the largest destination for South Africa’s agricultural exports, collectively absorbing 65% of total exports over this period, measured in value terms. In more detail, Africa remained South Africa’s largest market, accounting for 38% of agricultural exports. The leading products to these markets were beverages, fruit, wool, sugar and grains.

READ: Underpaid SA wine producers ‘undermine’ industry, limit growth – Vinpro chair

Asia is also an important market for South Africa’s agricultural exports, demanding a 25% export share in the first 11 months of 2018. Wool, fruit, grains, beverages, vegetables and meat were the leading products exported to this region. The Americas and the rest of the world accounted for 5% and 4% shares. Exports to these regions were also dominated by fruits, beverages, vegetables, tea, sugar and grains.

Overall, while the volume of the Western Cape agricultural harvest declined for most commodities, the increase in global US dollar prices and a weaker domestic currency helped to boost the rand value, which in turn, supported the South African agricultural exports. There is still one-month data point to be released, but from the available evidence, it is fair to say that the sector performed well.

Given that 2018 brought some good showers over the Western Cape and other fruit-producing areas of South Africa, one would hope that the 2019 harvest will be relatively bigger, therefore boosting volumes of exports, which in turn, could increase the value.

Given that South Africa’s beef exports have been suspended in a number of markets due to the recent outbreak of the foot-and-mouth disease, and the fact that grain production, and subsequently exports will be low, fruit and wine will be amongst the key products that will support South Africa’s agricultural trade in 2019.

Wandile Sihlobo, an agricultural economist, is head of research at the Agricultural Business Chamber of South Africa (Agbiz). Follow him on Twitter: @WandileSihlobo

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