TRADE POTENTIAL BETWEEN SOUTH AFRICA AND ANGOLA - a - Compiled by: Directorate International Trade: Trade Research Desk Department of Agriculture, Pretoria. 1 March 2006 Author: Yusuf Daya [email protected] Recognition for providing direction: Editor and research leader: Ezra Steenkamp. [email protected] - b - SUMMARY OF THE STUDY TO DETERMINE THE TRADE POTENTIAL BETWEEN SOUTH AFRICA AND ANGOLA This trade potential study examines agricultural trade flows between Angola and South Africa in order to identify existing trade patterns and scan for potential opportunities. This study represents one specific country study in a broader intra-Africa study. Angolan country facts are provided to give a broad outline of several key features of the country. A brief historical background is then provided. An overview of the Angolan economy and the country’s infrastructure is also provided. The study continues with a discussion on South Africa’s agricultural trade relations with Angola. The key features of Angolan agricultural and trade policy are examined. A detailed list of and discussion on a range of trade barriers employed by Angola is also examined. The trade analysis examines the existing agricultural trade structure between Angola and South Africa. South Africa’s leading agricultural exports to and imports from Angola are identified and discussed. This is done with the aid of trade databases. Products with the greatest trade potential are then identified and discussed. The study finds that because Angola has been embroiled in civil strife for a number of years, economic development has been slow. In Sub-Saharan Africa, Angola occupies the position of leading oil exporting nation and given it’s wealth of natural resources it has the potential of becoming a leading economy in the region and on the African continent. The Angolan economy is almost entirely dominated by the oil sector, which has resulted in other sectors being neglected. Political reform and a democratic government in recent years have resulted in other sectors, particularly agriculture, being placed high on the country’s development agenda. Angola is also committed to broader African development as envisaged in the NEPAD objectives. The fruits of these reforms are evidence by phenomenal rates of economic growth in the last three years. South Africa’s current agricultural trade profile with Angola reveals that Angola is an important destination for South African exports. Angola represents the second largest market for South African agricultural exports in Africa accounting for approximately 17.5% of total agricultural exports to Africa and generating a revenue of R890 million. Exports of agricultural products to Angola represent almost 4% of South Africa’s total agricultural exports whilst imports from Angola represent less than 1% of South Africa’s total agricultural imports. The composition of the South African export profile to Angola varies considerably. However, several leading products were identified, these include: beverages, vegetables, sugars, cereals and tobacco. In contrast to this relatively diverse export profile, imports from Angola are limited to palm oil and fish oil. The relatively underdeveloped nature of Angolan agriculture limits the potential to export to South Africa. However opportunities do exist in the coffee, fish oil and palm oil sectors, particularly if government initiatives aimed at rehabilitating these sectors are successful. Angola employs a range of trade barriers and several market access constraints exist for exporters wanting to access the Angolan market. Several tariff peaks exist for products of strategic importance for South Africa, particularly within the beverages nomenclature, which is the leading category of exports to Angola. Import requirements are stringent and often cumbersome. Automatic licensing measures, technical measures and price control - a - measures are all used or available to be used by Angolan authorities to control imports. Angola also makes use of import prohibitions and several products require licensing. Prohibitions apply on a large number of agricultural products. Restrictions facing imports of Angolan products into South Africa are primarily in the form of non tariff measures. Technical barriers as well sanitary and phytosanitary measures serve as the greatest restriction facing Angolan exporters. Effective participation in the Southern African Development Community (SADC) may serve as a means of overcoming some of these barriers. The leading competitors in the Angolan agricultural market include Portugal, Brazil and the Netherlands. Other important competitors and potential competitors include the United Kingdom, China and Argentina. However, as an African country, South Africa enjoys a strategic advantage over these given the close geographical connection between the countries. In addition both South Africa and Angola are members of the SADC community which accords preferential market access in terms of the SADC trade protocol. In conclusion, the study reveals that the current agricultural trade structure between Angola and South Africa is heavily biased in favor of South Africa. This pattern is consistent with South Africa’s trade structure with most African trading partners and reflects the relatively underdeveloped nature of agricultural sectors in those countries relative to South Africa. South Africa’s imports form Angola, and the rest of Africa is generally limited to primary agricultural commodities whilst it exports to Africa are dominated by value added products. Reducing these imbalances and changing this trade pattern requires innovative approaches that shift away from trade dependent solely on comparative advantage rooted only in natural resources. It should also be noted that another vital area in terms of exports is the exports of skills and services from South Africa. South Africa’s developed commercial farming sector and experience in marketing and processing places the country in a unique position on the continent in terms of available human capital and expertise. These resources provide a valuable opportunity for South African farmers, producers, processors and managers to export their skills not only to Angola but also to the rest of Africa. The export of skills and investment in African agriculture can contribute significantly to the revolution of African agricultural production. This may in turn serve to reduce trade imbalances as Africa’s economies link themselves in the global value chain. - b - TABLE OF CONTENTS 1. INTRODUCTION 4 2. COUNTRY FACTS 5 3. HISTORICAL BACKGROUND 7 4. ECONOMIC OVERVIEW 9 5. INFRASTRUCTURE AND COUNTRY RISK 12 6. INTERNATIONAL AND REGIONAL INITIATIVES AND INTEGRATION 12 7. ANGOLAN AGRICULTURE 14 8. TRADE BARRIERS 15 8.1 TARIFF STRUCTURE 15 8.2 PARA -TARIFF MEASURES 15 8.3 IMPORT REQUIREMENTS AND DOCUMENTATION 16 8.4 PRESHIPMENT INSPECTION 16 8.5 RULES OF ORIGIN 16 8.6 IMPORT PROHIBITIONS AND LICENSES 17 8.7 CONTINGENCY MEASURES 17 8.8 TECHNICAL MEASURES 17 9. BILATERAL TRADE STRUCTURE AND PRODUCT ANALYSIS 18 9.1 INTRODUCTION 18 9.2 SOUTH AFRICAN EXPORTS 18 9.2.1 BEVERAGES (HS22) 19 9.2.2 CEREALS (HS10) 24 9.2.3 EDIBLE VEGETABLES (HS07) 26 9.2.4 SUGAR (HS17) 29 9.2.5 TOBACCO (HS24) 30 9.2.6 EDIBLE FRUITS AND NUTS (HS08) 32 9.2.7 DAIRY (HS04) 33 10. SOUTH AFRICAN IMPORTS FROM ANGOLA 35 10.1 ANIMAL OR VEGETABLE FATS AND OIL (HS15) 35 (A) PALM OIL (HS1511) 35 (B) FISH AND MARINE MAMMAL OIL (HS1504) 36 - a - 11. TRADE OPPORTUNITIES 37 11.1 INTRODUCTION 37 11.2 POTENTIAL FOR SOUTH AFRICAN EXPORTERS 37 11.2.1 BEVERAGES (HS 22) 38 11.2.2 PREP . VEGETABLES AND FRUIT (HS20) 39 11.2.3 DAIRY (HS04) 41 11.2.4 PREP . CEREALS (HS19) 42 11.2.5 MARKET ACCESS CONSTRAINTS 43 12. POTENTIAL FOR SOUTH AFRICAN IMPORTERS 43 12.1 FLOUR MEAL AND PELLET OF FISH (HS230120) 44 12.2 FISH AND MARINE MAMMAL OIL (HS150420) 44 12.3 COFFEE (HS090111) 44 12.4 OTHER PRODUCTS 44 13. CONCLUSION 45 ANNEXURE 1 II AGRICULTURAL PRODUCT COVERAGE II ANNEXURE 2 III SOUTH AFRICAN EXPORTS TO ANGOLA (2HS LEVEL ) 2002-2004 III ANNEXURE 3 VII TRADE POTENTIAL INDEX VII ANNEXURE 3(A) VIII TRADE POTENTIAL INDEX - VIII SOUTH AFRICAN EXPORT POTENTIAL TO ANGOLA VIII ANNEXURE 3(B) XI ANGOLAN EXPORT POTENTIAL TO SOUTH AFRICA XI ANNEXURE 4 XII - b - ANGOLAN TARIFF STRUCTURE FOR PRODUCTS OF IMPORTANCE TO SOUTH AFRICAN AGRICULTURAL EXPORTERS XII 14. REFERENCES A - c - 1. INTRODUCTION The largely rural and underdeveloped nature of large parts of the African continent places agriculture at the forefront in any discussion on the economics of African development and growth. The agricultural sector directly accounts for over 60% of the total labor force; more than 20% of total merchandise exports and approximately 20% of total GDP for Africa as a region (CAADP). In addition to providing the primary source of foreign exchange earnings, agriculture plays the vital role of often providing the only source of livelihoods for a large percentage of the continents population. Any attempts at broad based development across the region therefore have to take cognizance of both the contribution agriculture is likely to make and the role agriculture needs to play in development initiatives. This realization is reflected in the Common African Agricultural Development Programme (CAADP) initiated by NEPAD in terms of which member states commit to contributing 10% of GDP to agricultural development initiatives. The CAADP also recognizes that agricultural trade acts as one of the primary pillars upon which agricultural development