South Africa has become a major player in African potato and onion production. These are crucial crops for both the local market and elsewhere in Africa. Although these markets are largely self-sufficient, they offer opportunities for European cooperation and trade, particularly with the Netherlands.
The country is also known as the 'rainbow nation', because of its cultural diversity. The country has the largest economy on the African continent. The population has doubled from 30 million in 1980 to 60 million today. Due to the production of relatively cheap agricultural products, it has become a major exporter on the African continent. The proximity of important ports and export markets strengthens the regional pivotal role. Droughts in neighbouring countries such as Namibia and Botswana also create extra demand for South African products.
Potatoes: A Growing Industry
South Africa produces 2,5 million tonnes of potatoes annually, making it the 39th largest producer in the world. With an average yield of 38 tonnes per hectare, the country’s potato industry is robust. The harvest season peaks in May, with most potatoes being consumed locally as fresh produce. The market for industrial potatoes is growing thanks to companies such as McCain and PepsiCo, who are stimulating demand for French fries and chips with the introduction of local brands such as Simba chips. Specific varieties: Sound (from Meijer Potatoes), Mondial (from HZPC) and El Mundo (from STET) are the main varieties for local consumption.
Over the past two decades, the potato area has grown by 25% to meet rising domestic demand and support modest export growth. Currently, 8% of total production is destined for export. The local potato market is characterised by strong price fluctuations. Recently, the price level even peaked at €540 per tonne (10.149 rand), compared to €250 per tonne (4.700 rand) today. Potatoes for export fetch an average of €270 per tonne, while imports are minimal. This is due to high transport costs, which increase the final cost to €500 per tonne.
The strong price fluctuation in the current season is partly caused by a huge drought in the northern growing region of Limpopo. Despite good local potato production, the South African market for frozen potatoes still shows a significant shortage. Recent figures show that €30 million worth of fries and other frozen potato products have been imported into the country. That is twice as much as the €15,8 million in export value.
Onions: A stable crop with export potential
South Africa produces over 600.000 tonnes of onions annually. The predominantly sandy soils, dry climate and efficient irrigation systems help with this. The growing conditions minimise the risk of fungal diseases, making the onion a relatively low-maintenance crop. The majority of the production is consumed locally. Approximately 120.000 tonnes are exported annually to neighbouring countries such as; Mozambique, Angola and Botswana.
In contrast to potatoes, the South African onion market has less price volatility. The opposite of the Dutch markets. Local market prices fluctuate around €265 per tonne (5.000 rand). Export prices to neighbouring countries are slightly higher due to transport costs. Tariff barriers, such as an import duty of more than 50% in Angola, pose a challenge for exporters. Countries that have been severely affected by drought nevertheless remain demand markets. Imports of onions from Europe are rare for South Africa. Only at the change of season, between the old and new harvest in May, are onions imported from Spain and Egypt.
Due to pressure from the South African Potato Organisation and local industrial players, an extension of the tariffs for the next five years has been set. Currently, the import tariffs for Dutch product amount to 239% (instead of 104% previously), 67% for Belgium and 181% for Germany. In August 2024, European exports nevertheless peaked at almost 4.000 tonnes of fries. The highest level in over a year. In the months before, exports amounted to only a few hundred tonnes.
Challenges and opportunities
South Africa’s regional dominance in potato and onion supply stems from its ability to meet the needs of drought-stricken neighbours such as Namibia and Botswana. Some parts of Namibia have received less than 80mm of rain in a year, making local farming unsustainable. However, high transport costs and tariff barriers limit South Africa’s export potential to these countries.
For European exporters, South Africa can serve as a springboard to access more regional African markets. For example, with seed potatoes, sowing seeds and agricultural machinery. South Africa can be seen as the gateway to the southern part of the continent. Labour is abundant and relatively cheap, while the unemployment rate remains at a high level of 32%. Trade agreements have been set up with European institutions, such as the Dutch embassy, that focus strongly on agriculture. The local currency, the rand, is relatively strong and stable compared to other African currencies. The proximity of deep-sea ports and an efficient supply chain, such as from Durban and Cape Town, are favourable for imports and exports. Corruption remains a concern, but the impact is limited. By working with established institutions and companies, the risks are minimised.
Conclusion
The South African potato and onion markets are examples of resilience and growth, driven by local and pan-African demand. For Dutch companies, these sectors offer opportunities. The import of frozen potato products is still hampered by high import duties and anti-dumping laws. However, it is important to consider that the population has limited financial resources for their food supply. Protecting a local market by maintaining high prices is good for local producers. For those who have to feed themselves at low cost, it is controversial to say the least.