South Africa, the world’s fifth-largest producer of apparel wool. Picture: AVUSA
South Africa, the world’s fifth-largest producer of apparel wool. Picture: AVUSA

SA should intensify efforts to diversify its wool export markets to remain viable, the Agricultural Business Chamber (Agbiz) says.

This follows the temporary suspension of wool imports from SA by China due to a foot-and-mouth disease (FMD) outbreak.

The wool industry suffered a major setback a few weeks ago following the move by China.

The disease broke out in Limpopo in January, resulting in the World Organisation for Animal Health (OIE) temporarily suspending SA’s FMD-free zone status. 

Wool is ranked the sixth-largest exportable commodity in SA’s agricultural sector. In 2018, wool accounted for 4% of SA’s agricultural exports of $10.6bn.

Heavy reliance on the Chinese market might have served SA well when there was minimal trade friction, the chamber says. It is however now proving to be a challenge and is highlighting the need to diversify wool export markets in the medium to long term to avert a similar challenge in the future.

“While this [diversification] would be a desirable approach, it would be hard for any country to thrive in the wool market without some level of reliance on China due to its dominance,” Agbiz said in a market update this week.  

China accounted for an average of 62% of global wool imports by value over the past five years.

The other markets for the South African wool industry over the past five years were the Czech Republic, Italy, India, Bulgaria, Germany, the US and Malaysia, the chamber noted.

“The other countries that we think SA should explore for the possibility of growing its market share, as a form of diversification, would be India, Italy, the Czech Republic, South Korea, Egypt, Thailand, Bulgaria, and Japan,” said Wandile Sihlobo, the head of agribusiness research at Agbiz.

He said these countries collectively accounted for 27% of global wool imports in 2018. Most importantly, SA already has a presence in these countries, although it has a smaller share in their import volumes than other countries, said Sihlobo.

“Therefore, we can assume that the domestic industry players are somewhat familiar with the technical necessities for wool exports to the aforementioned countries. The competitors that SA would most likely encounter within these markets are similar to the ones that are currently supplying China, which are Australia, New Zealand, Uruguay, Argentina, and UK, among others.”

Sihlobo said that as SA was the second-leading supplier of wool to China in the past two years, the country could still be among the competitive wool suppliers in other markets.

“Looking back into the recent history, one of the periods where South African wool exports to China were suspended due to the foot-and-mouth disease outbreak, was in 2011, but the impact then on export values was minimal, as the matter was resolved within a few months.”

Sihlobo said the recent communication from the domestic wool industry, following a meeting with their Chinese counterparts, suggests that there could be further delays before the current suspension is lifted – which will affect the agricultural trade balance and the growth of the wool industry.

“Perhaps, in the long run, the diversification of the export market should be one of the industry’s strategic goals,” Sihlobo said.

On Wednesday, department of agriculture spokesperson Khaye Nkwanyana suggested that SA will be able to regain all its markets as soon as the foot-and-mouth disease has been contained.

Earlier in 2019, neighbouring countries including Zimbabwe, Botswana, Namibia, eSwatini and Mozambique announced a complete ban on importing SA meat pending the containment of the disease.

“We have negotiated with the OIE … to relax the FMD ban status to allow countries who have banned our red meat to reopen trade. This has happened. Except Botswana, all countries who had banned us have reopened the markets for us,” Nkwanyana said.

Nkwanyana said the government remains locked in negotiations with the Chinese authorities to reopen their markets to wool from SA.

“Our attaché team in China is really seized with this. Red meat is acceptable there in that market, except for the wool,” he said.

phakathib@businesslive.co.za