decision support modelling south africa’s maize exports · decision support modelling south...
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Springfield Centre | Making markets work
A Strategic Export Market Analysis Approach
South Africa’s maize exportsDecision Support Modelling
in Export Planning and Analysis
AEASA Conference
Mpekweni Resort, 29 Sept 2014
T. Kapuya and W. Sihlobo
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Outline of Presentation
1. Context
2. Methodology
3. Results
4. Summary and Conclusions
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Context
South Africa within the global context
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Background
• Saturated domestic market, slow local demand growth and
increased competition compelling more agribusinesses to
consider exporting or, if already operating in international
level, to diversify into new export markets.
• Key Question are:
– Which markets should SA prioritise and focus its attention on, given
limited resources?
– How do we generate the trade intelligence to answer this question?
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Problem Statement
• Outside of the SADC region, SA’s maize markets are irregular
and inconsistent
• SA’s exports are highly concentrated i.e. a large share of
maize exports goes to a few countries
• This increases exporter’s risk in a global market that is
already uncertain and highly unpredictable
• This motivates the need for “export planning and analysis” in
order to identify available and potential market opportunities
• The aim is to prioritise a diverse set of countries towards
which market development activities can be committed
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Top10 largest global maize export markets (2013)
Brazil22%
South Africa
2%
USA 20%
Argentina
16%
Ukraine14%
India
4%
France5%
Paraguay2%
Russia2%
Romania
2%
The top 10 largest maize exporters by value (2013)
account for 89% of total global maize exports
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Top 10 largest maize importers by volume (2013)
Egypt (13%)
Japan (12%)
Mexico (6%)
S. Korea (7%)Spain (4%)
Netherlands
(3%)
Taiwan (3%)Iran (3%)
Italy (3%)
Colombia (3%)
The top 10 largest maize importers by value (2013)
account for 57% of total global maize trade
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SA’s Top largest maize export markets (2013)
Japan
Mexico
S. Korea
Switzerland
Taiwan
Italy
23% of exports went to Southern Africa; 44% Far East;
6% EU; 14% Americas, 12% others
Zimbabwe
SwazilandNamibia
Botswana
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SA’s Top largest maize export markets (2013)
Japan (28%)
Mexico
(14%)
S. Korea (4%)
Switzerland
(3%)
Taiwan (12%)
Italy (3%)
The top 10 largest maize export markets account for
92% of SA’s total maize exports in 2013
Zimbabwe (11%)
Swaziland (3%)
Namibia
(8%)
Botswana (7%)
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Methodology
The Strategic Export Market Analysis Approach
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The data
• We use trade data from the Harmonized System (HS) - a
numerical classification system of products used as a basis
for international trade statistics by almost all countries.
• Data sourced from the International Trade Centre (ITC)
• A breakdown of trade data into 3 clusters:=> HS-2 digit: the chapter of the good (sector)
E.g. 10 = Cereals
=> HS-4 digit: group within the chapter (sub-sector)E.g. 1005 = Maize (corn)
=> HS-6 digit : product within the groupE.g. 100590 = Maize (corn) nes
HS-2
HS-4
HS-6
Source: Vivier and Cameron (2014)
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The SEMA model
• The Strategic Export Market Analysis approach is a “rules
based” decision support tool
• It uses a sequential filtering process (5 filters) that eliminate
less promising export opportunities, and focuses on those
countries that show the most potential
Filter 1.1: export growth (+ve or –ve; high or low)
Filter 1.2: market share (+ve or –ve; high or low)
Filter 1.3 market size (big or small;high or low potential)
Filter 1.4 market access (high or low tariff and NTM)
Filter 1.5 market competitiveness (high or low costs)
1.1 and 1.2
1.3 and 1.4
1.5
High Potential “strategic” markets
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The Conceptual Framework
Market Access
- Low vs. high tariff barriers
- Low vs. high non-tariff barriers
Market Size
- High vs. low export potential
- Large vs small market
Market Growth
- High growth vs. Low growth
- (+ve) growth vs. (–ve) growth
Market Share
- High Share vs. Low Share
- Increasing vs. declining share
Market Competition
- Farm-level costs
- Supply chain logistics
Market
Analysis
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Results
The outcome of a filtering process…
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Filter 1.1: export growth What is SA’s Market Growth
The world growth rate of 13% is used as a benchmark
to separate low from high growth markets
Key:Green=High growthRed=Low growth
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Filter 1.2: Market Share What is SA’s Market Share?
SA’s market share of the world of 2% is used as a
benchmark to separate low from high share markets
Key:Green=High ShareRed=Low Share
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Filter 1.3 Market Size What is the Market Demand?
Indicative Trade Potential (ITP) to measure SA’s
unutilised export potential. Bubble graphs to illustrate
potentially exploitable market size
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Filter 1.4 Market Access What/Where are the highest tariffs?
3%
18.3%5%
46.5%4.4%
17.5%
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Filter 1.4 Market Access What/Where are the highest tariffs? Trade Agreements?
3%
18.3%5%
46.5%4.4%
17.5%
SADC-FTA
EU-TDCA
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Filter 1.4 Market Access What/Where are the highest tariffs? Trade Agreements? GM bans?
3%
18.3%5%
46.5%4.4%
17.5%
SADC-FTA
EU-TDCA
Broad GM restrictions in most parts of Africa, Europe and Asia
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Filter 1.5 market competitiveness Who/Where is the competition?
Competition in all markets from the largest maize
exports – especially Brazil and Argentina
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Filter 1.5 market competitiveness SA’s farm level global competitiveness
SA’s fertiliser costs exceptionally high compared to
other major global exporters
0
10
20
30
40
50
60
70
Argentina Brazil USA South Africa
US$
/to
n
Comparing Fertiliser Costs at Farm Level
Farm 1 Farm 2 Farm 3
Source: Agribenchmark (2014); BFAP (2014)
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Filter 1.5 market competitiveness SA’s supply chain logistics competitiveness
Source: World Freight Rates (2014)
$0
$500
$1 000
$1 500
$2 000
$2 500
$3 000
$3 500
$4 000
$4 500
$5 000
South Africa Argentina Brazil USA France Romania
US$
/40
fo
ot
con
tain
er
Average cost of shipping costs of grain to SA’s strategic markets
SA’s logistic costs fairly higher than US and EU, but
lower than those of Argentina and Brazil
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Filter 1.5 market competitiveness SA’s supply chain logistics competitiveness
SA’s logistic costs fairly higher than US and EU, but
lower than those of Argentina and Brazil
Source: World Freight Rates (2014)
$0
$500
$1 000
$1 500
$2 000
$2 500
$3 000
$3 500
$4 000
$4 500
$5 000
South Africa Argentina Brazil USA France Romania
US$
/40
fo
ot
con
tain
er
Average shipping costs of grain to SA’s strategic markets
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Strategic Export Opportunities Map
Japan
MexicoTaiwan
Zimbabwe
Korea
Switzerland
Italy
Mozambique
Thailand
UK
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Shar
e
Growth
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Strategic Export Opportunities Map
Low GrowthHigh Share
Japan
MexicoTaiwan
Zimbabwe
Korea
Switzerland
Italy
Mozambique
Thailand
UK
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Shar
e
Growth
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Strategic Export Opportunities Map
Low GrowthHigh Share
Can we grow?
Japan
MexicoTaiwan
Zimbabwe
Korea
Switzerland
Italy
Mozambique
Thailand
UK
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Shar
e
Growth
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Strategic Export Opportunities Map
Japan
MexicoTaipei, Chinese
Zimbabwe
Korea
Switzerland
ItalyMozambique
Thailand
UK
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Shar
e
Growth
High Growth High Share
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Strategic Export Opportunities Map
High Growth High Share
Scope for expansion?
Japan
MexicoTaiwan
Zimbabwe
Korea
Switzerland
Italy
Mozambique
Thailand
UK
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Shar
e
Growth
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Strategic Export Opportunities Map
Can we convert & grow?
Japan
MexicoTaiwan
Zimbabwe
Korea
Switzerland
Italy
Mozambique
Thailand
UK
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Shar
e
GrowthLow growthLow share
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Strategic Export Opportunities Map
High Growth Low Share
Japan
MexicoTaiwan
Zimbabwe
Korea
Switzerland
Italy
Mozambique
Thailand
UK
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Shar
e
Growth
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Summary and Conclusions
So what now?
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A focus on strategic markets requires
different questions
Do I need to retain
market presence?
Can I “explore” &
“acquire” this
market?
Can I “expand” my
market presence
and grow?
How can I optimise
my market presence
in this country – have
we filled our export
potential?
Can we out-compete
our competition and
sustain exports?
Offensive Strategy Defensive Strategy
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Defensive Strategy – “Sustain and Maintain”
Mexico
JapanKorea
Thailand
SACUZimbabwe
Mozambique
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Offensive Strategy – “acquire, convert and grow”
Columbia Venezuela
Mexico
SpainNetherlands
ItalyUK
Germany
EgyptAlgeria
Saudi ArabiaIran
JapanKorea
TaiwanMalaysiaIndonesia
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Conclusion
Higher trade
gains
- building the
base for markets
with more
incentives for
growth
Sustainable
growth
- Markets that
are showing
signs of growth
in the long term
Diversification
- focusing on
emerging
markets, while
preserving the
traditional ones
Consistency in
exports and
market
development
- Through high
competitiveness,
sustained surpluses,
and secure supply
A Maize
Sector
Export
Strategy
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THANK YOU
END