South African Farmers Prepare for Impact as US Considers Citrus Tariffs

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JEREMY MAGGS: South Africa’s citrus sector, often hailed as a jewel in our agricultural export crown, is currently grappling with a significant threat. As you may know, the United States is contemplating hefty tariffs on South African citrus due to a protracted trade dispute. Should this happen, it could jeopardize tens of thousands of local agricultural jobs.

This is a serious concern for an industry that contributes billions to the economy and sustains numerous rural families. What’s driving this impending trade conflict, and what implications does it hold for South African workers, exporters, and rural communities?

I’m joined now by Gerrit van der Merwe, the chair of the Citrus Growers Association. Welcome, Mr. van der Merwe. Let’s get straight to the potential economic fallout: If these tariffs are enacted, what are the projected numbers, and who stands to face the most significant impact?

GERRIT VAN DER MERWE: Currently, South Africa ranks as the second-largest citrus exporter globally, with 9% of our produce sent to North America. While that may seem minimal, it represents the livelihood of communities like Citrusdal in the Western Cape.

Based on our estimates, we predict that approximately 35,000 jobs in South Africa could be affected, alongside around 25,000 jobs on the USA side, as this industry has been sustained for about 20 years.

This impacts supply chains, truck drivers, and everyone involved in the process.

Some may refer to it as a marginal issue or cite 1% or 2% of GDP, but for a small town like Citrusdal, it equates to 100% of its economy. Therefore, the repercussions will be substantial, albeit somewhat localized.

JEREMY MAGGS: You’ve been in discussions with the government. What is the industry requesting, if anything? And what feedback have you received?

GERRIT VAN DER MERWE: We’ve begun to inquire about the strategic direction. Are we aligning with BRICS [Brazil, Russia, India, China, South Africa]? Are we distancing ourselves from the USA? Should we be fostering relationships back towards the USA to defend Agoa [African Growth and Opportunity Act] or develop a new trade pact after Agoa concludes at year-end without renewal?

There’s uncertainty regarding our strategy. If we pivot east towards China and India, we will need to negotiate import tariffs since India imposes around 40%, and China isn’t far behind.

While we are part of BRICS, we encounter many import tariffs when reaching out to the east, contrasted against the excellent free trade agreements that countries like Chile, Peru, and Australia enjoy with the Far East.

JEREMY MAGGS: Are you content with the response you’ve obtained thus far?

GERRIT VAN DER MERWE: As a farmer, we are always striving for more [chuckles]. In Citrusdal, where I farm, there’s a sense of urgency. This is not just a business; it’s our livelihood. The local economy serves towns like Citrusdal, with around 15,000 residents, and Clan William, with about 10,000.

Though only 25% of our fruit is sent to the USA, it’s the most profitable portion, and we tailor our crops specifically for that market, which incurs higher costs. Shifting away from this market is not simple; we’ve developed this relationship for two decades.

Our company, ALG [Estates], has an import company based in Florida, with connections dating back 18 years with Whole Foods. It’s unrealistic to simply abandon the USA and hope for similar outcomes in China. Transitioning will take time, and this affects the entire farming community, which is my primary concern.

JEREMY MAGGS: In retrospect, do you believe South Africa has adequately prepared for such risks and diversified its export markets beyond the United States?

GERRIT VAN DER MERWE: Not sufficiently. While we do have good access to various countries due to citrus being a prominent commodity, we lack bilateral agreements or free trade treaties, leaving us at a disadvantage.

Read:
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Negotiating entry into a market is challenging when you face significant import tariffs, ranging from 40% to 20% or 18%, especially while competitors enjoy zero tariffs. This makes meaningful market development nearly impossible, leaving us always playing catch-up.

So, more action is needed, Jeremy. While it’s difficult to criticize the past, it’s clear we haven’t done enough. However, we can’t make a sudden switch. A proper transition to ensure market access and favorable trade agreements will take five to ten years.

JEREMY MAGGS: The stark reality is that you don’t have that time frame, as I interpret your message.

GERRIT VAN DER MERWE: Correct. For those relying on minimum wage, two weeks without income is implausible. While the government claims to provide grants to 25 million citizens, I view this unfavorably; the goal should be to create more jobs rather than relying on assistance for economic growth.

Without the US market, Citrusdal will cease to grow. Economic progress has been notable in Citrusdal; crime rates are low, and employment opportunities abound. Halting that growth will stall job creation, leading to political instability and ineffective local governance.

This is a long-term chain reaction, affecting not just the present but our future growth.

With unemployment at 40% in South Africa, we desperately need success stories, and the US market has provided us with that potential for growth. This current approach contradicts our strategies from the last 20 years and jeopardizes our plans for the coming decade.

JEREMY MAGGS: Would the industry contemplate lobbying influential groups within the United States directly? Has that been discussed?

GERRIT VAN DER MERWE: Yes, we do utilize a lobbyist in Washington, but many major negotiations are state-driven. Lobbyists can only influence so much; ultimately, resolution lies with leaders like [Donald] Trump and [Cyril] Ramaphosa.

JEREMY MAGGS: Lastly, do you agree that this marks the onset of broader agricultural trade tensions beyond just the citrus sector? It seems to suggest a systemic issue that necessitates preparation for an increasingly protectionist global environment.

GERRIT VAN DER MERWE: I actually disagree, Jeremy. Tariffs might aim to prevent outsourcing, which seems to be President Trump’s intent. However, it’s not possible to outsource out-of-season citrus from either hemisphere as they don’t have citrus during their summer, which coincides with our winter. Insourcing simply isn’t feasible.

We’ve managed to keep costs down in the USA, maintaining consistent prices for the last 20 years amidst inflation. We’re assisting in controlling inflation.

Thus, importing out-of-season fruit is beneficial, and I fail to see the drawbacks. While I understand concerns over factories being relocated, the nature of citrus production doesn’t allow for insourcing out-of-season supplies.

JEREMY MAGGS: I’ll leave it there. Thank you very much, Gerrit van der Merwe, chair of the Citrus Growers Association. I appreciate your insights.

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