Weak Currency And Trade War Provide Impetus For Growth

12 October 2020 – Never has there been a better time for exporters to target the North American market. This is according to Francois Fouche, director of Growth Diagnostics (at the North-West University Business School), who says the ongoing US/China trade war, the weak rand, and the African Growth and Opportunity Act (Agoa) all help to create a favourable environment that allows South African exporters to compete head on in the US market.

“Opportunities are real and interest is definitely growing. We are increasingly getting requests from exporters to give insight into the affected tariff lines into the US and China and to advise on post-pandemic growth strategies.” Fouche says while local exporters may not always have the trade heritage relationships across some agriculture products in the North American market, they do have competitive advantages at present. “Exporters across the region are realising the benefit of getting a foothold in a market the size of America and are using the weaker local currency and the ongoing trade war between the US and China to their advantage.”

The trade war makes many Chinese exports to the US significantly more expensive and vice versa. Namibian beef exports is one such example. “To date African beef has never been exported to the US, but in 2019 Namibia managed to get market access after nine years of negotiations, proving that it can be done.” South Africa, however, is facing stiff competition from South America which is also targeting the US. “They do have some advantages such as being in the same time zone – and from an agricultural perspective they can supply products in the same season as the US.”

He says countries such as Mexico have fiercely fought for market access and worked hard to retain their foothold in the market. “If you look at what Mexico has achieved with avocado exports to the US over the past 20 years, you can see how much progress has been made. The US has become a major market for them.”

The old Nafta and now current USMCA trade agreements allowed them room for growth. Agoa – although not a trade agreement – does have tariff-related incentives for many African exporters. Some South American agriculture economies of scale are in another paradigm with some produce, compared to South Africa, allowing for a more price-competitive product. “But there is no reason why South Africa cannot compete with South American countries – especially when it comes to seasonal agricultural food products – as we do have the advantage of not having a synchronised growing season with the US.”

Fouche says for exporters to stand a chance it is imperative that they have more impactful government support. “Government policies around exports have great intentions but practically speaking the impact is often not so conducive to growth. More evidence-based policy decision making should be a constant business driver to create an increasingly friendly operating environment where our production and our exports can thrive.” Source (FreightNews)