South Africa Agricultural Cooperatives' importance in the local Agribusiness landscape

Cooperatives in South Africa are legally governed by the Cooperatives Act (No.14 of 2005) and play a pivotal role in promoting economic development, empowerment and sustainable business models. They are not necessarily nonprofits and are looked at favorably by the National and Provincial governments as a way for informal and smaller entities to work with bigger, more experienced farm owners.

To understand South African Agribusiness, one should consider the importance of over 250 agricultural cooperatives. Not only do these provide a supportive business model for farmers to sell their products, but they also support their farmers with seed, pesticide, fertilizer, medicine and machinery/equipment. 

These co-operatives act as a comparison shopper and have strong purchasing power to acquire equipment for their members. A well-known co-operative originally established itself as a central buying cooperative, which now has 10 specialist divisions including a mechanism division and financial products. Cooperatives are also known to purchase equipment and machinery, such as combine harvesters, to share amongst the farmers/members. 

It is estimated that around 30% of South Africa’s 36,000 commercial farmers (those who manage more than 1,000 hectares of land) are members of cooperatives.

There are also forestry cooperatives, with the largest in southern Africa having 1,800 shareholding members and representing an area of 300,000 hectares in South Africa. 

For suppliers, working with cooperatives to showcase their machinery or provide training on certain software can be easier than selling to retailers or working with individual farmers. Depending on the product, the key to accessing the market is to gain the cooperative’s approval. This will give U.S. firms authentic access to rural markets through trusted entities. It can be seen as giving the seller a social license to operate, which is extremely important in a market that values and takes time to build business relationships and trust.  

Thinking of exporting to South Africa? Please reach out to the U.S. Commercial Service South Africa for tailored introductions to cooperatives that align with your market entry strategy into the challenging but rewarding agribusiness sector. 
 

For more information, contact: 
Kirsten Bell, Commercial Specialist, Kirsten.Bell@trade.gov                
U.S. Consulate Durban, South Africa