The resumption of wool exports to China after a nearly four-months suspension comes just as the wool season starts.
The resumption of wool exports to China after a nearly four-months suspension came at an opportune time as the wool season has recently started, according to Wandile Sihlobo, the chief economist of the Agricultural Business Chamber (Agbiz).
He said wool would likely remain a significant contributor to South Africa's agricultural export revenue and not fall off the top exportable products list as they initially feared.
In the first five months of this year, wool was the eighth largest exportable agricultural product, accounting for 3 percent, or $152 million ( R2.5 billion) of the $5.1bn in total agricultural exports during this period.
Germany and Italy's share in exports increased from April as the Chinese exports declined notably. Germany and Italy accounted for a larger market share than China in May.
“The hope is that the European market could remain vibrant as the Chinese market also opens up to South African wool,” Sihlobo said.
China is South Africa's primary wool export market, accounting for an average of 70 percent of exports. Other South African wool industry markets are the Czech Republic, Italy, India, Bulgaria, Germany, the US, Malaysia, Japan, and Mexico, however, these were relatively small and thus could not absorb the volume usually destined for China over the past couple of months.
China had cited the foot-and-mouth disease (FMD) outbreak as a reason to suspend South Africa's wool imports. The suspension happened despite the existence of a unique protocol to handle the wool shipments and avoid any contamination during a FMD outbreak in South Africa.
Sihlobo said South Africa and China had agreed on this protocol following the 2019 outbreak, which weighed on exports.
He said China might have faced capacity constraints during the Covid-19 lockdowns in recent months, possibly leading to delays in activating the protocol.
“Notably, the FMD outbreak has been specific to cattle farms, not sheep farming. Hence, industry role players were appropriately dismayed when China suspended wool imports from South Africa, citing this reason.”
The wool industry is amongst the agricultural sub-sectors with a large share of new entrant black farmers, who it was feared would experience financial pressures if the ban had continued for longer. The National Agricultural Marketing Council estimates suggested that black farmers account for 18 percent, 13 percent and 34 percent of wool, mohair, and cattle production, respectively.
Sihlobo said credit for assisting in the reopening of this critical trade channel for wool must go to the practical and quiet cooperation between the Department of Agriculture, Land Reform and Rural Development, the wool industry and Agbiz, amongst others over the past few months.
“The cooperation between government, industry and organised agriculture during the wool ban challenges is yet another example of the approach that should be used to deal with challenges facing the sector. For example, foot-and-mouth disease, which continues to affect the livestock industry, needs industry and regulators' view on assembling a plan for the sector. On 16 August 2022, the Department of Agriculture, Land Reform and Rural Development aptly decided to restrict the movement of cattle for 21 days, reviewable weekly.
“The path forward at the end of this period requires the input and support of the cattle industry players while leaving sufficient room or flexibility for the regulators,” Sihlobo said.
The SA Inc approach between the industry and government was vital to navigate the broader international trade terrain.
He said difficulties remained for long-term access in the EU for the South African citrus industry and within the Southern African region where the vegetable industry was experiencing losing access to its key markets, such as Botswana and Namibia. These countries combined accounted for roughly 30 percent of South Africa's annual vegetable exports of an average $200m.
BUSINESS REPORT