Fertiliser Policy in East and Southern Africa.Perspective of the

South African Fertiliser Industry

Adam Mostert CEO: Fertilizer Society of South Africa

www.fertasa.co.za

6 February 2014

SA Fertiliser Industry History

• 1666 – Guano - first shipment from the nearby islands to the Western Cape

• 1890 – first import of inorganic fertiliser• 1903 – SAFCO near Durban – phosphate

production from bones• 1919 – Kynoch – first Nitrogen fertilisers• 1953 – Omnia – agricultural lime

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History SA Fertilizer Industry

• 1960s – Foskor, Sasol, Iscor, Fisons, Windmill, Bosveld

• 1967 – Triomf NPK factory in Potchefstroom• 1967/68 – Omnia fertiliser factory Sasolburg• 1983 – Sasol direct marketing to farmers• 1980s till 2005 – Rationalisation of the industry –

mergers, acquisitions and divestitures

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Lifting of Price Control

Severe drought – recession

Withdrawal of marginal land

Stage 3: Growth Stage 4: Maturity

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Crop Area N P2O5 K2O Rate

x 1000 ha % kg/ha

Wheat 511 15 11 2 28 3,7% 55

Maize 2 699 229 124 16 369 50,0% 137

Other Cereals 150 4 2 1 7 0,9% 46

Soybeans 472 1 5 2 8 0,8% 16

Other oilseeds 542 8 10 2 21 2,4% 38

Fibre Crops 42 1 0 0 1 0,1% 25

Sugar Crops 378 33 21 48 101 13,7% 267

Roots and tubers 55 9 9 7 25 3,2% 451

Fruits 314 27 12 24 63 8,8% 200

Vegetables 95 16 15 11 43 5,4% 449

Other Crops 1 615 24 76 9 109 10,9% 68

TOTAL 6 873 369 285 121 775 100,0% 113

1 000 tonnes

TOTAL

Fertilizer Use by Crop in South Africa in 2012

Current state of AgricultureAverage fertiliser use by country in SSA for 2002-2009 (excl. SA)(kg of fertiliser nutrients* per ha of arable and permanent cropland) * Nitrogen (N), Phosphates (P205), Potash (K20) Source: FAOSTAT (2010)

Structure of the Industry in RSA• Completely free market – no protection • Strict Competition Legislation – encourages competition

• Nitrogen production (NH3 from Sasol)– RSA roughly balanced on N trade– All urea is imported

• Phosphate production (Foskor)– RSA is a net P exporter

• Potash – everything is imported• Roughly 45 fertiliser companies & 70 blenders – dry blends

and liquids

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GraslandOndernemings

IndustrialCommoditiess

Holdings

Members of the FSSA - 2014

Services offered by the Industry

Agronomists on farm – fertiliser recommendations

Soil sampling and testing – AgriLASA

Plant tissue analysis

Precision farming

Remedial blends & specialities

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Trade in Southern Africa

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ZAMBIA ZIMBABWE MOZAMBIQUE BRAZIL AUSTRALIA MALAWI DRC ANGOLA KENYA SPAIN0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Export CountriesTop ten for 2012

2011 2012

ton

per y

ear

Purpose of Agri-input Policy

“To achieve economic growth and poverty reduction by enhancing the productivity and profitability of agriculture through the development of the agricultural input sector”

United Nations Economic Commission for Africa

Southern Africa Office

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Fertiliser Policy Constraints(excluding South Africa)

• Unhealthy government involvement in the fertiliser market

Procurement and distribution done by government

• Limited or unsuitable product range – not what is required

• Subsidies resulting in distortion of market prices

• High transport and distribution costs

• Late delivery of product because of slow procurement processes

• Bottlenecks between imports and farm gate

• The above lead to:

• Low application rates – inefficient use of fertiliser

• Depletion of plant nutrients in soil - low yields, low profitability

• Discouragement of private sector participation

Fertiliser Policy Interventions

Design policies according to the development stage of agricultural input systems of the country (IFDC model)Supply Side• Encourage development of the private agricultural input sector• Develop infrastructure to support the full supply chain for inputs• Create and maintain an efficient regulatory system – quality control• Free trade of fertiliser between countries in a region – border posts• Allow free imports of fertilisers – no licenses, no duties• Encourage lower cost of marketing and distribution• Encourage local production of fertilisers utilising local raw materials

where possible• Eradicate corruption

Fertiliser Policy Interventions

Design policies according to the development stage of agricultural input systems of the country (IFDC Model)Demand Side• Create a demand and market for agricultural produce and allow

market forces to determine prices:higher income for the farmer = buying power for inputs = higher application rates = increase in yield = increase in production = increase in income = increase in fertiliser

demand• Encourage collaboration between commercial and small scale

farmers• Do applied soil fertility and plant nutrition research• Provide or support soil laboratory services• Provide agronomic and economic advisory services!!!!!!

Conclusions

• Governments must allow the private sector to approach the fertiliser market as a business and allow the fertilizer industry to develop to the potential of the country.

• The role of government is to provide the environment in which the private sector can do their business in an efficient and productive manner.

• The objective remains:

“To achieve economic growth and poverty reduction by enhancing the productivity and profitability of agriculture through the development of the fertiliser sector”

Thank you

Questions?

Confidential