Whatever your business, South Africa is at the very end of very long global supply lines. Even before Covid-19 and the civil unrest of July 2021 drove home the importance of shortening and diversifying supply chains, South Africa’s balance of trade and the volatility and weakness of the ZAR were already prompting rethinking as companies shifted to local inventory or increased inventory.
Nico Groenewald, head of agriculture in Standard Bank’s Business & Commercial Clients division.
During the Covid-19 crisis, the South African agricultural sector acted quickly, successfully lobbying the government to exempt farms, agribusinesses and agricultural supply networks from many of the Covid-19 management protocols the most restrictive. As a result, South Africa has never lacked food, even during the most restricted periods of global movement and supply.
Russia’s invasion of Ukraine reminds us that in terms of risk to the global supply chain, South Africa is still vulnerable where it matters most: our food.
Both Russia and Ukraine play an important role in global agricultural markets and global food supply, especially in Africa.
• Russia represents 10% of world wheat production. Ukraine 4%.
• In 2020, African countries imported about US$4 billion worth of agricultural products from Russia. Wheat accounted for almost 90% of these imports.
• During the same period, Africa imported agricultural products worth US$2.9 billion from Ukraine. 48% of this amount was wheat and 31% corn.
• South Africa depends on Russia and Ukraine for around 30% of its wheat imports.
Russia’s invasion of Ukraine also shows how suddenly export chains can be disrupted. Local fruit exporters, for example, will also be affected by the conflict. Russia accounted for 7% of South Africa’s citrus exports in 2020 and 12% of its apple and pear exports.
This crisis highlights the importance of adopting growth and diversification strategies for agricultural production so that South Africa reduces its exposure to global imports.
The crisis in Ukraine and Russia’s international isolation underscore the strategic importance of South Africa’s recent allocation of R6.5 billion to government blended finance programs for agricultural development. To date, mobilizing grants alongside appropriate debt financing has proven effective in helping emerging and black farmers increase production and access agricultural value chains.
The Standard Bank has also found that local production can grow rapidly when industry bodies and large corporations with specific interests – as suppliers or buyers – in small or new farmers contribute to the financing of production, insurance and a secure purchase at the market price.
But farmers are not just expanding the acreage they cultivate, increasing production, switching to new crops or new products, or finding new suppliers or buyers because the government gives them money or because they have access to capital.
Instead, it is markets, sales and incomes that ultimately increase food production and ensure sustainable food security.
To this end, technology opens up new opportunities for farmers to access new markets. For example, Standard Bank recently partnered with Hello Choice, an AgTech company, to create an online marketplace platform where farmers can sell their produce. Connecting new, previously disadvantaged, or even just far-flung small-scale farmers with buyers, buyers, suppliers, and services has resulted in increased agricultural production and improved food security around the world.
On the marketing front, organized agriculture in South Africa is well established with functioning professional industry bodies. Most South African exports are supported by sophisticated marketing channels and enterprises, often directly linked to producers. These not only represent the interests of established farmers, but also work to transform the industry.
The Standard Bank, for example, also collaborates with a range of industry bodies to improve products and production, improve measurement systems and facilitate international liaison. In addition, specific solutions such as Trade Club support and expand access to global agro-ecosystems by helping farmers and agribusinesses source comparable priced, quality-controlled products, goods and services from around the world. whole.
By providing the networks, knowledge and systems to connect all South African farmers – small and large – to local and global agricultural value chains, we can create the market conditions for sustained production increases and security. long-term food.
Standard Bank’s partnership with the Industrial and Commercial Bank of China (ICBC) as well as the various trade corridors the bank supports across Africa and the world are also relevant to increasing food production and promoting food security.
The ICBC partnership, for example, enables Standard Bank to bring African producers of nuts, wine, seeds, chilli, edible oil and other agricultural products to China’s annual international import expo. (CIIE) and the biannual China-Africa Economic Trade Expo (CAETE). Presence pretty much guarantees supply contracts as the full range of Chinese buyers are present.
Standard Bank also hosts, for example, quarterly virtual trade matchmaking events focused on specific sectors. At these events, African producers or exporters are introduced virtually to dozens of potential buyers, often closing deals on the spot.
Encouragingly – from a food production and food security perspective – the 2022 national budget also included allocations for water resource management and water infrastructure development. As one of the 30 driest countries in the world, effective water management at the national level is key to improving food production and food security. At the individual farmer level, however, Standard Bank supports and finances water-efficient irrigation systems and farm-scale green energy solutions.
As Russia’s invasion of Ukraine dominates the headlines, South Africans need to think long and hard about the fundamentals of security. Military equipment and personnel are poor guarantees of security if people do not have access to healthy food at an affordable price. If South Africans should learn from the current crisis in Eastern Europe, it is that sustainable access to capital and markets is fundamentally necessary for sustainable food production – and food security is the only foundation upon which long-term prosperity and social security can be based. built.