Ladies and Gentlemen, it is indeed a pleasure for me to be amongst by monkey6

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									   SPEECH BY MINISTER FOR AGRICULTURE AND LAND
AFFAIRS MS THOKO DIDIZA AT THE AGRIBUSINESS CHAMBER
                       DINNER


23 May 2006


Ladies and Gentlemen, it is indeed a pleasure for me to be amongst
you tonight. It is however regrettable that this is the last time I
address you as the Minister of Agriculture and Land Affairs.

As you are all aware, agriculture is the backbone of any national
economy. In South Africa, this sector contributes about 4% towards
the Gross Domestic Product. This in itself is an indictment on the
sector to become more competitive in a changing global environment.
This improvement will however, hinge on how the sector adapts its
way of doing business in this harsh and unforgiving environment.

Not withstanding Government’s efforts to foster better trading
conditions, there are still challenges. For instance, the World Trade
Organisation negotiations concerning trade imbalances that cause
distortions on world markets are continuing. Some of the most
contentious issues are the high tariffs for certain South African
products on EU and other markets. The negotiations are stuck on
these two issues and the United States has still to make some
concessions in so far as market access and tariffs. The same applies
to the European Union. As soon as this happens the Doha
Development Round will be concluded.

Again there is the Wine and Spirits Agreement between South Africa
and the European Union. The agreement has not yet been ratified by
Parliament as there is a clause in the Agreement that was in essence
a political compromise. The clause states that trade marks that
conflict with Geographical Indications in Europe will be given up. But
in terms of South African Law this is problematic. Before the
Agreement can be ratified, this will first have to be sorted out. What is
encouraging is that the Europeans have realized that it is also not in
their interest and might therefore compromise. Discussions are
continuing to find common ground on the way forward.

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Ladies and Gentlemen, there are also oenological practices and
outstanding technological issues, which we are waiting for the EU to
reply on those requests. Some of these have been outstanding for
more than two years. The main problem is that the EU links the Wine
and Spirits negotiations to the General Trade Agreement, which is a
separate issue.

The seventh and final round of SACU-EFTA negotiations was held
from 24 – 26 August 2005. Four agreements were negotiated that all
form part of the instruments establishing the free trade area between
the two sides. The main agreement covers products classified as
agricultural products by the WTO. It further covers processed
agricultural products as well as fisheries.

Within the Processed Agricultural Products Free Trade Agreement,
the products classified as processed agricultural products will be
subjected to the same tariff phase down schedules as industrial
products on the SA side, while EFTA gave SACU the same
preferential treatment it gave to the EU.

All four EFTA countries did not have an export focus when it comes
to agriculture, but are rather inward looking. Only Switzerland
requested market access for processed agricultural products; mainly
high-value added like chocolate and speciality cheeses, but no
preferences were granted due to industry sensitivities in South Africa.

Specific areas of interest for the BLNS are beef and mutton, sugar,
citrus, table grapes and certain agro-processing products, as well as
speciality products like game or ostrich meat. No preferences were
offered to Norway on basic agricultural products due to support given
to its farmer. Iceland was granted market access for meat of horses,
asses, mules or hinnies, fresh, chilled or frozen. In case of
Switzerland, preferential access into SACU markets has been
granted for live animals, feed supplements and tobacco.

Some of the preferences SACU managed to secure under this
agreement are with Switzerland, Norway, and Iceland covering a
variety of products.




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The timeframe leading up to the implementation of the agreements is
that:

 A legal and technical review of the texts and offers is underway.
 The signing ceremony will take place on a venue and date still to
  be decided upon before July 2006.
 Implementation of the agreement subject to ratification of the
  agreement by individual SACU Member States is envisaged for 1
  July 2006, with the second cut in tariffs to happen on 1 January
  2007 in order to bring the agreements in line with the SA-EU,
  SADC and SACU-MERCOSUR agreements.

In December 2000 negotiations towards a SA/Brazil Free Trade
Agreement was launched through the signing of a Framework
Agreement. The negotiations were later expanded to include other
SACU and MERCOSUR members. The final round of negotiations
towards a Fixed Preferences Agreement (FPA) between SACU and
MERCOSUR took place in December 2004 and a FPA was
concluded.

The next round, which is likely to be the last round, may take place in
December 2006. Thereafter the various ratification processes must
be initiated so that implementation can then begin. It is hoped that the
agreement can be implemented on 1 January 2007.

Ladies and Gentlemen, I am mentioning all these agreements in an
effort to show how Government has been engaged in trying to level
the playing field in agricultural trade. But what is interesting is that
whilst Government is doing this, The South African AgriBusiness
sector has not tried hard enough to penetrate the West African
markets. Exports of agricultural products to the Economic Community
of West African States represent only 3% of South Africa’s total
agricultural exports whilst imports from the region represent less than
1% of South Africa’s total agricultural imports. As an African country,
South Africa enjoys a strategic advantage given the close political
connection between the countries and the promotion of NEPAD
objectives.




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Research by Ezra Steenkamp in the Department of Agriculture
reveals that SACU has a comparative advantage in agricultural
exports comparing to the world, since most of the studied SACU
agricultural exports have gained world market share. The export of all
SACU agricultural goods increased by 7% in US$ from 1994 to 1998,
compared to the growth of trade of the same goods in the world by
5,6%. SACU has performed 41st in the world (out of the 178 countries
studied). However, world markets for most of the studied agricultural
products exported by SACU are declining, compared to the general
world trade growth average.

The analyses indicate that the champions in SACU agriculture
exports are grape wines (smaller than 2 litres), plums and sloes
(fresh) and grapes (fresh). These SACU commodities have increased
their world market share in the high growth dynamic world markets
for these products. These products are also less risky and
promotional efforts should aim at broadening the supply capacity.

Underachievers in high world growth market sectors are avocados
and to a lesser extent pears (processed). Avocados present special
challenges for trade promotion efforts. Statistics reveals that the
world demand is high, but that promotional efforts should concentrate
on the supply side efforts for quality export fruit as well as
promotional / marketing efforts in high growth markets where SACU
is underrepresented.

The bulk of the analyzed SACU agriculture exports were achievers in
declining markets, also called the “cash cows” e.g. black tea, bulk
wine, mandarins, clementines, pears and quinces, oranges,
pineapples, meat, sugar, processed fruit, grapefruit, ground-nuts and
cotton. Many of these products also face major tariff and non-tariff
constraints in the world markets (e.g. mandarins, sugar and meat).
Most of the products exported by developing countries, and in which
they have a comparative advantage, fall in this category (achievers in
adversity). Therefore the liberalization of these markets could be
persuaded in a development round within the WTO, to free up the
restrictions that put constraints on the demand for these products.



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South Africa’s ability to adapt to change in the dynamics of world
demand for the fresh food sector as well as the processed food
sectors is poor and rank 117th and 102nd respectively. These results
need further clarification from industry and product specialists. The
initial geographic and product specialization on the dynamic markets
were also poor according to indicators (probably due to the past
effect of sanctions), ranking 78 to 131st in the world for fresh food
and 69th to 85th in the world for processed food.

The main problem, which was identified for agriculture, was the
industry’s poor adaptation towards new export products, compared to
its competitors, with indicators for SACU ranking 107th to 133rd in the
world. SACU could also improve on market diversification and market
concentration of dynamic world markets.
Results of many of the indicators of individual processed agricultural
products reveal that they were performing poor in the adaptation to
world dynamics, especially the inability to develop new export
products, comparing to competitors. Examples of such products are
textile fibers, food preparations (incl. beverages) and hides and skins
and leather. These products were probably highly protected in the
past.

The fresh fruit and vegetables also seems to adjust poorly with the
development of new dynamic export products comparing to
competitors, although the scope of adjustment would be much
narrower than for processed produce. However, there is scope for
improving market diversification.

Ladies and Gentlemen wish you well in your endevours and hope
that the resolutions coming out of this congress will indeed show that
this is the Age of Hope.

Thank you.




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