Another example that could affect market risk over the medium-term is non-tariff measures related to environmental concerns. The EU is a trailblazer in their vision and efforts to become the world's first climate-neutral continent. It aims to reach net zero by adopting targets of reducing greenhouse gas emissions by 55% in 2030 compared to 1990 levels, reaching net zero by 2050. Regulatory reforms that drive these ambitions are included in the EU Commission Fit for 55 package which aims to meet the interim target of 55% emission reduction by 2030. The Green Deal, in turn, is the policy framework under which the EU will push to reach net zero by 2050. Under these regulatory frameworks, trade could be impacted by animal welfare, pesticide use, deforestation and carbon considerations, to name a few. With around a third of the total value of fruit exports from South Africa destined for the European Union, South African fruit producers, and exporters would be ill-advised not to take note of policy developments in this region. Lastly, current global geo-political developments are putting South Africa at risk of losing essential markets. During 2022, the challenges associated with shipping fruit to Russia had an impact
on revenue generated from class 2 and class 3 fruit for citrus. This weighed heavily on the profitability of producers. More recently, combined military exercises between Russia and South Africa pose a threat to South African relations with the USA. With the African Growth and Opportunity Act (AGOA) set to expire in 2025, strained relations between the two countries could have an effect on preferential market access of products such as citrus from South Africa when a new round of AGOA is negotiated. Despite the issues mentioned above, opportunities remain. Our view is that the 2023 and 2024 seasons will likely be the turning point where consolidation and a decrease in shipping costs lead to improved export margins.
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