By Willemien Viljoen, tralac Researcher, discusses non-tariff barriers in the agricultural sector in South Africa
LESSONS from regional integration initiatives have shown that the reduction of tariffs have a limited impact on the enhancement of intra-regional trade. Countries are increasingly recognising that various other barriers contribute more than tariffs to low levels of intra-regional trade. These barriers can be overtly trade restricting by design or have a negative impact on trade through problems of inappropriate application. Due to the challenges these non-tariff barriers (NTBs) and trade facilitation issues pose to regional trade liberalisation and development some countries within southern and eastern Africa have identified the reduction of certain NTBs as a priority area of concern. However, the existence of these trade barriers remains problematic with a prolific increase in NTBs like restrictive product standards, corruption, quantitative restrictions, import licensing requirements, costly and time-consuming product registration procedures and cumbersome and ineffective customs documentation and border procedures. Customs administration, problems with transit traffic and corruption appear to be the biggest NTB in the southern African region in terms of trade costs. These factors all have an impact on transport costs which increase the cost of exporting. Transport costs are higher in southern African than in most other regions; especially in landlocked countries where transport costs account for between 15 and 20 percent of total trade costs. According to the United Nations Economic Commission for Africa (UNECA), the losses which businesses and governments incurred due to delays, complex documentation requirements and unpredictable border procedures where higher than the cost of tariffs in 2010. It is estimated that the annual trade costs due to bribery in Tanzania alone is equal to approximately 18.6 percent of the value of all goods transported across Tanzanian borders.
The situation is especially challenging for the agricultural and food sector due to the number of NTBs applicable and the nature of the sector. Agricultural and food products are perishable and generally subject to numerous sanitary and phytosanitary constraints. Any delay in the export process is generally more costly than for any other category of products due to perishability resulting in the loss of merchandise. NTBs in the agricultural and food sectors are of grave concern for many African countries due to the importance of this sector for economic growth, development and employment. Agricultural production and trade forms the basis for export earnings for many countries on the African continent.
In South Africa the agricultural sector is important for social-economic development since it is one of the most employment-intensive sectors in the economy. Primary commercial agriculture contributes approximately 3 percent to South Africa’s Gross Domestic Product (GDP) and approximately 7 percent to formal employment. Trade Competitiveness Map shows that South Africa’s exports of fresh food in 2013 represented only 0.69 percent world market share, while South Africa’s share in the world market for processed food exports where 0.63 percent. During the same year South Africa’s competitiveness in processed food products decreased by 1.06 percent. Over the last four years South Africa’s exports of agricultural products increased by approximately 3.6 percent. However, agricultural trade accounted for only a small share of South Africa’s total trade. In 2014 South Africa’s agricultural exports were 10 percent of total world exports of which 5 percent where exported to the rest of Africa. In 2014 South Africa exported agricultural products mainly to the Netherlands (8.63%), Namibia (7.94%), UK (7.12%), Botswana (6.73%) and Zimbabwe (6.19%). South Africa’s top five specific agricultural product exports for 2014 were oranges (HS 080510), grape wine (HS 220421), grapes (HS 080610), maize (HS 100590) and apples (HS 080810). These products accounted for 26.12 percent of South Africa’s total agricultural exports for the year.
Due to the distance (and associated increasing transportation costs) and increase in private standards in many traditional markets numerous South African agricultural exporters have expressed interest in increasing their footprint into African markets. However, the proliferation of NTBs are frustrating exporters; reducing their competitiveness and making it too costly to enter these markets and/or retain market share. In the majority of African markets standards regimes are characterized by an over-reliance on mandatory inspections and certifications, unique national standards and testing, overlapping responsibilities for regulation and the discriminatory application of technical regulations and standards for imports. NTBs which are most problematic for South African agricultural and food product exports to African markets include:
• Pre-export verification of conformity to standards of various export products to Botswana, Kenya, Uganda, Tanzania, Mozambique, Zimbabwe and Zambia adding 3 to 7 day lag time and additional costs.
• The lack of harmonized requirements for food labels and packaging materials. Varying requirements are applied by different countries in terms of the size of, information on, location of and warning signs on the labels and the packaging materials which must be used. Labelling requirements in Angola for instance requires: certain basic information in Portuguese; the name of the product; the list of all the ingredients (in descending order, according to their respective proportions); the sell-by and use-by dates; the quantity of the product expressed in terms of volume or weight; the degree of alcohol; the production batch; the name or corporate name and address of the manufacturer, packer or seller.
• Stringent testing requirements place small-scale producers at a disadvantage as they do not have the capacity to absorb the extra costs. The majority of small-scale producers have been exporting to African countries due to prohibitive costs and standards associated with traditional markets like the European Union and the United States. However, with more stringent sanitary and phytosanitary and associated testing requirements in numerous African countries gaining popularity these small-scale producers are facing the erosion of profits. Additional tests are for instance required on all South African wine exports to Ghana and all food products entering Madagascar.
• Seasonal quotas and bans depending on domestic production. These include vegetable, milk and cream, whey and cheese exports to Namibia, Swaziland Tanzania and Rwanda.
• Licensing and registration requirements. This includes tedious and time-consuming registration of all food products to enter the market into Nigeria where the process is very costly and can take between 6 to 8 months to register a product. Non-automatic licenses are required, inter alia, for cattle feed exports to Djibouti; horticultural exports to Namibia and milk, potatoes, onions, animals and vegetable fats etc. exports to Mauritius.
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