Reviewing South Africa's marketing and trade policies for genetically modified products

Abstract

South Africa is unique in that it has commercialised genetically modified (GM) crops and has a functional biosafety system, which allows for trade in both GM and non-GM crops, despite being surrounded by countries banning the use of GM products. This paper analyses the past achievements and evolving changes in marketing and trade policies for GM products in South Africa. A quantitative analysis of South Africa's GM imports and exports demonstrates the success of South Africa's flexible regulatory system. Yet a review of recent reforms indicates a trend towards more rigid trade and marketing regulations of GM products. This paper suggests five policy recommendations to improve rather than rigidify regulations and allow South Africa to adapt to global changes, manage risks and take advantage of potentially promising new GM technologies.

Keywords:

• GM products
• international trade
• biosafety
• South Africa

1. Introduction

Twelve years after their introduction, genetically modified (GM) crops are produced, consumed and traded in a very large number of countries. Despite divergent opinions on their use, and the multiplication of regulatory frameworks, GM crops are grown in an expanding area in an increasing number of countries. Although many GM crops have been developed, few have been commercialised. In fact, soybean, cotton, maize and canola represent almost the entire GM crop production area. This specialisation and continued growth has resulted in intensive production and trade of these four GM crops.

Markets in GM products, however, have remained polarised, in terms of both products and regions. Depending on the products, national or regional regulations, private standards and alternative consumer demand, separate markets for GM products have been established. In addition, each GM product has been approved in some countries, while many other countries have not adopted any regulations on the use of GM products. This double division (geographic and product based) has resulted in the setting-up of sophisticated regulatory, marketing and trading systems allowing GM and non-GM products to flow from producers to consumers.

To complete this picture, GM products have also moved informally across borders. Some GM crops with formal approval in their original countries have moved to other countries, often due to intentional but illegal introduction by farmers or to unintentional introduction. Lastly, a few GM varieties that were tested but not approved for use in any country have been circulating in their original countries, and have sometimes even been exported.

In this complex trade environment, adaptation is crucial to take advantage of market and biotechnology opportunities, while managing any potential biosafety or commercial risk. In this respect, South Africa can be seen both as a unique example and a pioneer. First, South Africa is among the few countries, and is the only African country, with a relatively large production of GM crops (cotton, maize and soybeans). Second, it is arguably the only country in Africa with a full biosafety system in place. Third, it is the only country where small-scale farmers have been producing and consuming a subsistence GM food crop, white maize (Gouse et al., 2006). Lastly, it produces and exports non-GM food and feed products to sensitive markets.

However, recent developments suggest that South Africa's exemplary status may be unsteady. As GM production grows, and with changes in market conditions, South Africa has continued to evolve in its management of marketing and trade of GM crops. First, by ratifying the Cartagena Protocol on Biosafety, it had to adapt its own national regulatory system. Second, while South African farmers increasingly adopted GM maize, many countries in the region started to ban imports of GM maize; making the GM/non-GM coexistence more challenging. Third, export considerations may have entered the biosafety decision-making process progressively. Fourth, as producers increasingly adopted GM crops, a small share of higher income consumers has started to demand non-GM products.

In this context, South African policies and regulations on GM products are rapidly changing. Imports and marketing strategies are being questioned. Export considerations seem to be increasingly included in regulatory decision-making on biosafety. Domestic marketing regulations are being reconsidered. It is not clear what direction the country will take on these issues, and what will be their consequences for future GM crop production, but now may be a good time to analyse some of the constraints it may face.

A few recent studies have been published on the regulations for GM products in South Africa and the wider region (Wolson & Gouse, 2005; Mupotola, 2005; Gouse, 2006a, 2006b). These studies have offered an explanation why this situation is unique and have identified some of the factors that made it feasible. Yet they may also have avoided diving into some of the critical questions about the commercial risks the country may be taking.

This paper provides a comprehensive analysis of the current situation and potential future of South African trade-related policies on GM products. It reviews the public and private strategies South Africa has adopted that are the basis of its success. The next section provides a first quantitative assessment of the situation of marketing and trade of GM products in South Africa and the region. The analysis is followed by discussion of the evolution of regulatory practices and their potential consequences for the country as a producer, consumer and trader of GM products.

The analysis is based on a synthesis of different types of data. First, 16 semi-structured interviews were conducted with key government, public and private experts in the Pretoria-Johannesburg area in June 2007 (see Appendix A). The authors also conducted several meetings with public and industry experts in Windhoek, Namibia, in June 2007 on the Namibian rejection of GM maize imports from South Africa. Second, secondary data were collected on GM crop and trade issues. Third, bilateral trade data from the FAO (2007) and the UN Comtrade (UN Statistics Division, 2007) were used for the analysis.

2. A unique but challenging situation

2.1 GM crop production

In 1997, South Africa approved the use of the first varieties of GM crops, Bt cotton and Bt maize, both genetically engineered to resist targeted insect pests. Bt cotton was first planted in 1997/98, Bt yellow maize in 1998/99 and Bt white maize in 2001 (Gouse et al., 2005). GM soybean (herbicide tolerant) was approved for planting in 2002. Herbicide-tolerant traits were also later introduced in varieties of maize and cotton. Most recently, multi-trait crops have entered the market. Table 1 reports the succession of GM events approval by year, crop and trait.

Table 1: Chronology of GM event approvals for planting in South Africa

Year	Crop	Trait	Number of events
1997	Cotton	Insect-resistant	1
2000	Maize	Insect-resistant	1
	Cotton	Herbicide-tolerant	1
2001	Soybean	Herbicide-tolerant	1
2002	Maize	Herbicide-tolerant	1
2003	Cotton	Insect-resistant	1
	Maize	Insect-resistant & herbicide-tolerant	1
2005	Cotton	Insect-resistant & herbicide-tolerant	1
2007	Cotton	Insect-resistant & herbicide-tolerant	2
	Maize	Insect-resistant & herbicide-tolerant	1
Total			11
Source: AGBIOS (n.d.).

Table 2 shows the estimated areas of GM crops and their proportion of the total crop areas from 1999 to 2007. The adoption of GM maize started very slowly and then rapidly expanded. In contrast, GM cotton was adopted relatively faster in a large proportion of the cotton planting area, even though the total cotton production has been declining in recent years in South Africa. Lastly, the adoption of GM soybean grew relatively rapidly and linearly in South Africa, concurrently with the overall expansion of the soybean production area in the country.

Table 2: Estimated area and adoption rate of GM crops in South Africa 1999–2007

Season	GM maize		GM cotton		GM soybeans		Total GM crop area
	Area (ha)	% total	Area (ha)	% total	Area (ha)	% total
1999/2000	50 000	1	13 200	50	0	0	63 200
2000/01	75 000	2.5	12 000	<40	0	0	87 000
2001/02	166 000	5	26 500	70–80	6000	5	192 500
2002/03	252 000	7	21 500	82	11 000	10.9	273 500
2003/04	425 000	13	32 500	88	47 000	35	504 500
2004/05	410 000	15	19 000	90	70 000	50	515 000
2005/06	455 000	29	19 900	92	135 000	59	607 000
2006/07	1 150 000	45	12 555	93	214 000	79	1 400 000
Sources: Authors' derivations based on Wolson & Gouse (2005); Gouse (2006b); Van Der Walt (2006); Monsanto (2007); DoA (2007).

2.2 Trade analysis: General methodology

There are no published figures on imports and exports of GM as opposed to non-GM products by country.1 The only available data are therefore a mix of GM and non-GM products. However, national import regulations and demand constraints are relatively well known, and so are the countries that produce GM crops and products. Therefore, by making some assumptions about countries whose policy and demand are unknown, and by categorising bilateral trade data on the basis of their origin or destination, it is possible to derive estimates of imports and exports of products that may be GM or contain GM materials as opposed to those considered non-GM.

In the following two subsections, historical bilateral trade data from international databases from 1997 to 2006 are used to analyse the share of potentially GM imports and exports of 13 products derived from GM maize, cotton, soybean and canola. FAOSTAT bilateral trade matrices for South Africa were used to separate out imports by country of origin and exports by country of destination. For products that were not reported in this database, and for the year 2006, the analysis relied on the UN Comtrade database. Because both databases are known to be imperfect and to contain a number of gaps, care was taken to verify that all the main partners were included in the matrices. Because Botswana and Namibia were not reported in the original matrices, their own import or export matrices were used to determine their trade relationships with South Africa.

At the end of the process, tables were compiled of South African export and import quantities by destination and origin for each product from 1997 to 2006 (except for maize flour and soybeans, which are present in UN Comtrade database only for the period 2000–06). Different steps were followed for imports and exports and according to the product, as explained below.

2.3 Imports of potentially GM products

The determination of the shares of GM or non-GM imports for each product relied on several assumptions. First, it was assumed that all products from GM-producing countries may contain GM materials. The years of commercial releases of each GM crop concerned were used as a benchmark for classifying the country as a GM producer and potential exporter. Second, it was assumed that the South African importing regulations have been enforced since the introduction of GM crops. Table 3 provides a chronology of GM events cleared for imports in South Africa.

Table 3: Chronology of GM events approved for imports in South Africa by crop

	Canola	Cotton	Maize	Soybeans
1997		1 event	1 event
2000		1 event
2001	4 events (4;0)		2 events (2;0)	2 events (1;0)
2002			4 events (2;1)
2003		1 event	1 event (1;0)
2004			1 event (0;1)
2005		1event
2007		2 events
Total	4 events	6 events	9 events	2 events
Note: The first number in parentheses is the number of GM events that have been approved only for imports, not for planting; the second is the number of GM events first approved for import and then for production in a later year.
Sources: DoA (2005); AGBIOS (n.d.).

Table 4 presents the results of our analysis, with the minimum, median, maximum, sample average share and total average quantity of imported products that may contain GM products for the relevant periods of reference. The average share of potentially GM imports across years and overall varies significantly by product. Table 4 also shows that the share of GM imports varies more historically for some products than for others. The share of GM maize, GM maize flour, and maize oil derived from GM maize vary quite significantly from year to year. Detailed analysis reveals that the leading exporter of maize to South Africa was Argentina in 1997/98 (accounting for 60 to 90 per cent of South Africa's imports), followed by the US in 1999–2000 (60 to 80 per cent), and Argentina again after 2002 (85 to 98 per cent). In 2001, Brazil was the leading source of maize, but its export quantity was less than the import quantities from Argentina and the US. Non-GM maize was marginally imported during this period, with a peak of 170 000 tons in 2002, coming mostly from Brazil and Mexico. In contrast, during their respective periods, imported cotton products (except cottonseed oil) have remained almost entirely non-GM, because cotton originated mostly from other parts of Africa that had not approved the technology, while imported soybean products have remained mostly GM, as expected, given that the biggest soybean exporters (the US, Brazil, Argentina) were among the first to adopt GM soybeans.

Table 4: Descriptive statistics on the share and total quantity of South African imports that may contain GM material in recent years for each product

	Period	Minimum (%)	Median (%)	Maximum (%)	Standard deviation (%)	Sample share average (%)	Total quantity average (%)
Maize	1997–2006	42	95	100	18	89	92
Maize flour	2000–06	0	49	99	37	58	92
Maize starch	1997–2006	0	4	31	9	7	7
Maize oil	1997–2006	0	71	100	50	54	74
Cotton lint	1997–2006	0	1	2	1	1	1
Cottonseed cakes	1997–2006	0	8	18	8	8	7
Cottonseed	1997–2006	0	0	4	2	1	1
Cottonseed oil	1997–2006	0	4	100	45	32	19
Soybean cakes	2001–06	99	100	100	1	100	99
Soybean oil	2001–06	94	98	100	2	98	98
Soybeans	2001–06	74	94	100	11	91	76
Rapeseed oil	2001–06	0	0	30	12	5	1
Rapeseed	2001–06	0	0	0	0	0	0
Sources: Authors' derivations based on UN FAOSTAT and UN Comtrade data.

2.4 Exports of potentially GM products

To determine the potential share of mixed GM exports from South Africa, bilateral export data were categorised by differentiating importing countries on the basis of their import policies and regulations, and by relying on a basic knowledge of the effects of their marketing regulations. More specifically, for each product and each year, importing countries were divided into four groups: (1) countries that have stringent importing and labelling policies, and significant non-GM demand, such as European and East Asian countries (Japan and South Korea); (2) African countries that have initiated a ban of GM imports, such as Zimbabwe; (3) African countries that officially banned imports of GM grains, but that may not completely implement their policies, such as Kenya; and (4) other countries that have no explicit or effective policy on GM imports.

Table 5 shows details of Groups (1) to (3). In Group (1), Western European countries are assumed to import only soybean products that are used for animal feed. Group (2) includes only countries that have explicitly rejected GM products in the past and that are recognised by South African traders as implementing their ban. Lastly, Group (3) is made up of countries that are either known as accepting only non-GM officially or that sometimes require non-GM certificates but do not enforce the regulations strictly.

Table 5: Groups of importers based on their acceptance of GM products

	Group (1): Countries with clear import and marketing regulations that demand non-GM imports	Group (2): African countries with a GM import ban for selected products	Group (3): African countries that officially reject GM imports for selected products
Maize	EU-15 (1997–2003), EU-25 (2004–06), other Western Europe (1997–2006), Japan (2000–06), South Korea (2000–06), Australia and New Zealand (2000–06), China (2002–06)	Namibia (2003–06), Zambia (2002–06), Zimbabwe (2003–06)	Angola (2004–06), Botswana (2003–06), Kenya (2003–06), Malawi (2003–06), Mozambique (2003–06), Mauritius (2003–06), Sudan (2004)
Maize flour	Same as maize	Same as maize	Same as maize
Maize starch	Same as maize, excluding China	None	None
Maize oil	EU (1998–2006), other Western Europe (1998–2006)	None	None
Cotton lint	None	None	None
Cottonseed cakes	Same as maize starch	None	None
Cottonseed	Same as maize	Zimbabwe (2003–06)	None
Cottonseed oil	Same as maize oil	None	None
Soybean cakes	Japan, South Korea (2000–06), China (2002–06)	Zimbabwe (2003–06)	None
Soybean oil	Same as maize oil	None	None
Soybeans	Japan, South Korea (2000–06), China (2002–06)	Zimbabwe (2003–06)	None
Sources: Authors; information based on meetings with organisations listed in Appendix; Gouse (2006b).

Three categories of exports were distinguished: purely non-GM exports, which cover exports to countries in Groups (1) and (2); exports that are officially non-GM, which include quantities going to countries in Group (3); and exports that may contain GM, which consist of shipments to countries in Group (4). Only potentially GM exports after the introduction of the relevant GM crops in South Africa were accounted for.

Descriptive statistics for the estimated shares of exports and total average quantity that may contain or be derived from GM during the relevant periods are shown in Table 6. These shares are computed as the sum of the share of exports to Group (3) and Group (4) countries. These statistics suggest that the selected products are exported largely to countries that do not have particular requirements regarding GM products. Further, three products seem to stand out: maize, cottonseed (used almost entirely crushed for oil and animal feed) and soybeans, of which, at least in any given year, one-fifth of exports goes to countries with non-GM requirements, and in total more than 45 per cent of exported products were probably non-GM. These results are the consequences of the assumptions presented in Table 5. It was assumed that importing African partner countries control the entry of GM grains, that they are mostly concerned with food or feed products, and that they do not all enforce their policies.

Table 6: Descriptive statistics on the shares of South African exports that may contain or be derived from GM crops

	Period	Minimum (%)	Median (%)	Maximum (%)	Standard deviation (%)	Sample share average (%)	Total quantity average (%)
Maize	1999–2006	24	48	99	27	54	49
Maize flour	2000–06^a	50	95	100	22	82	91
Maize starch	1999–2006	88	93	99	4	93	93
Maize oil	1999–2006	100	100	100	0	100	100
Cotton lint	1998–2006	100	100	100	0	100	100
Cottonseed cakes	1998–2006	65	100	100	14	91	93
Cottonseed	1998–2006	12	100	100	35	80	35
Cottonseed oil	1998–2006	100	100	100	0	100	100
Soybean cakes	2002–06	100	100	100	0	100	100
Soybean oil	2002–06	100	100	100	0	100	100
Soybeans	2002–06	3	47	100	38	55	14
^aData unavailable for 1999–2000.
Sources: Authors' derivations based on UN FAOSTAT and UN Comtrade data.

As a complement, Table 7 shows the shares of potentially GM maize and maize flour exports assuming that all African countries with regulations (Groups (2) and (3)) enforce their bans. Maize and maize flour are the only two products imported and targeted by Group (3) countries. Compared to Table 6, as expected, the average share of potentially GM exports in a given year is lower, reaching 40 per cent for maize and 63 per cent for maize flour.

Table 7: Descriptive statistics on the shares of potentially GM exports assuming Group (3) countries are enforcing their import bans

	Period (%)	Minimum (%)	Median (%)	Maximum (%)	Standard deviation (%)	Sample share average (%)	Total quantity average (%)
Maize	1999–2006	4	29	99	38	40	36
Maize flour	2000–06	11	85	100	22	63	81
Source: Authors' derivations.

Lastly, 2005 was the only year in the series with significant soybean exports for South Africa. That year, almost the entire export quantity went to Zimbabwe, which, according to sources, was testing for and rejecting GM soybeans. Because most of the small quantity exported in 2002 and 2003 was potentially GM, the average share across the years in Table 6 is much larger (55 per cent) than the share of total quantity exported (14 per cent).

2.5 Synthesis: A GM and non-GM importer and exporter

This rapid analysis shows that for the last 5 to 10 years South Africa has been a significant importer and exporter of GM crops and products derived thereof. At the same time, the country continued to export processed and unprocessed non-GM products. However, no general conclusion can be drawn about GM trade in South Africa, as the situation varies by product and year. This rapid analysis is used as a basis for examining the current and future regulatory situation in South Africa.

3. Import regulatory issues

3.1 From commodity clearance to general clearance?

The GMO Act of 1997 (RSA, 1997), as amended on 17 April 2007 (RSA, 2007), provides the general framework for commodity imports. Two institutional entities, the GMO Executive Council (EC) and the Advisory Committee, play a role in the decision-making process for GM import approval. Authorisations of GM organisms for imports but not for planting are called commodity clearances. Once a GM event is authorised for imports, traders can request a GMO import permit.

The permit application is simple and is processed relatively quickly. Nevertheless, commodity clearance does not guarantee the issuance of import permits and several factors can enter into consideration, including socio-economic impacts. This means that other concerns, such as trade related considerations, can be sufficient to decline a GMO permit. Table 8 shows the overall numbers of import permits, the numbers of commodity import permits, and the quantities of maize and soybeans under permit between 1999 and 2007.

Table 8: Total reported import permits and reported quantities of GM maize and soybeans under commodity import permits^a (1999–2007)

Year	Total number of import permits^b	Total number of commodity import permits^c	Quantity of GM maize under commodity import permits (mt)	Quantity of GM soybeans under commodity import permits (mt)
1999	1	0	0	0
2000	69	7	0	0
2001	67	6	1000	18 686
2002	102	36	999 400	27 922
2003	90	14	105 507	20 335
2004	104	27	430 460	16 000
2005	86	2	0	12 100
2006	209	114	1 219 180	51 000
2007	312	215	1 903 334	29 634
Total	1040	421	4 658 881	175 677
^aQuantities of maize permit noted as ‘GMO maize <1%’, reported at 10 million tons (mt) in 2002 (by far exceeding all official estimated imports) and 200 000 mt in 2003 and 2004, were excluded. ^bIncludes commodity clearances. ^cIncludes single permits for ‘use as commodity’ (i.e. those that are not repetition).
Source: Documents available from DoA (n.d.).

In the first years after the implementation of the GMO Act, South Africa issued commodity clearance for a number of GM products. The process worked well with a different regulatory response to import and planting applications, based on risk differences. Yet in recent years the situation has changed. In 2004, on the basis of an objection from Grain South Africa, a domestic farmer group, South Africa decided to temporarily block the approval of a new GM maize event only for temporary imports (Wolson & Gouse, 2005). This GM maize released in the US is resistant to western corn rootworms, a pest neither present nor endemic in South Africa. The company that developed the maize simply requested an import permit to allow imports of mixed GM maize, including this GM event, to be sold in South Africa (just as it does for any new GM product). At a time when the world price maize was relatively low, South Africa maize producers saw this as ‘unfair competition’. Despite the fact that the GM event would not bring any benefit to South African farmers and therefore would not be grown in South Africa, they found it ‘unfair’ that US farmers could grow and export it to South Africa.

What seemed to be a temporary ruling has in fact been in place since then. All new GM events requesting import authorisation have had to pass the full approval procedure for planting. The issue has polarised the agricultural industry: the animal feed industry against the maize producer associations. Maize producers want to keep the requirement that only GM products for planting should be imported. They see the US exports as some kind of ‘dumping’ – or sale below cost of production in South Africa. In contrast, the animal feed industry opposes this position as a protectionist measure (Köster, 2006). As a major consumer of yellow maize, it fears that rejecting imports from the US will increase the price of their main inputs. Furthermore, with the increase in world prices, and the recent droughts that made South Africa a net importer of maize in 2007, it believes the price issue has become irrelevant, and that imports are even more important.

Beyond the debate about the validity of the measure, the issue has evolved to allowing imports of GM maize events not approved for planting in case of emergencies. Even on this issue, the two parties differed at the time of our meetings. The maize growers wanted the threshold based on a quantity gap between consumption needs and harvests plus allowed imports; the feed manufacturer association argued in favour of a broader definition that would include price considerations (i.e. when the price is too high, such maize would be imported).

The authors met with several EC members, representing various government departments. In discussing this issue, two distinct justifications for the change in import regulation were noted. Some of the EC members saw the import rejection as directly related to unfair competition. Others argued that price differences between imported and domestic maize are absorbed by the feed industry, an unfair practice. If there is a price difference, it should be transmitted to consumers, or it will simply translate into additional profit for the industry.

The authors heard about an unpublished consultant's report which seemed to be rejecting the validity of this de facto import barrier. However, even with this report in hand, several EC members were adamant in their support of this import ban except in very specific situations. While it is not within the scope of this paper to fully analyse the consequences of these regulatory options, simple analytical arguments can help to judge their validity.

First, the measure is a selective ban on products not approved for planting, but none of the stakeholders seem to be considering it a risk-related issue; it is a trade concern. Second, although this measure relates to one GM event, because the US marketing system is mostly mixed events it could be considered an effective trade barrier for US maize imports. It is not certain whether the US would have remained a significant exporter in the absence of the moratorium, but past data suggest that it would have continued to be important. For instance, exports from the US went from a peak of over 61 000 tons in 2004 to 3000 tons in 2005 and less than 100 tons in 2006, while Argentina's exports increased from just over 500 000 tons in 2004 to over 1 million tons in 2006. Most importantly, it is the claim that this is unfair trade that makes all GM-related considerations completely irrelevant. What matters to the strongest supporters of the measure is the price of imports relative to the domestic price of maize.

Let us consider the first issue: price competition. A difference in prices is likely to be due to domestic market issues, not to unfair trade practices. In any case, it has no relationship to the use of a particular GM maize event irrelevant to South Africa. Dealing with this issue would require domestic intervention or transportation investment, not a biosafety decision. This ‘biosafety’ measure seems to have been introduced as a non-tariff barrier to trade at a time when maize prices were relatively low.

The second argument refers to the failure to transmit low import prices to consumers. It is clear that this issue is only domestic; it is not related to trade policies and even less to a biosafety decision. Still, if this claim was correct it would suggest possible price distortion in the markets. If a decrease in the price of inputs is not transmitted at all into the seller price, all else being equal, buyers could argue that there is foul play. This would call for measures to assure competition or to restrict anticompetitive pricing behaviours. But in any case, it would not be related to trade policy and even less to import approval.

If the problem is traceability, then South Africa should also have a full traceability system in place for all its maize before requesting the same from importers. To the authors' knowledge this is not the case: most maize is mixed and only a partial share of the maize produced uses identity preservation to sell as GM-free. Traceability requirements could raise the cost of import, to the detriment of consumers. Such a rule would require general clearance of all GM imports. It would be more expensive and time consuming for the applicant to go through the process, and would ultimately encourage large exporters to avoid the relatively small South African market.

Since South Africa is not a big importer, it does not have much bargaining power and will not be able to encourage exporters to produce only the GM events it needs. But because the European Union (EU) is a major importer, as long as South Africa keeps at pace with the EU's approval of new GM events in major exporters (such as Brazil or Argentina), it will be able to source and import the necessary maize and soybeans for its own consumption needs.

Nevertheless, there is a risk that it may not be able to follow up at a sufficient pace, because of these new steps required for all imports and the use of a 0 per cent tolerance level for the adventitious presence of unapproved GM events in imports. With a 0 per cent tolerance level, any shipment merely containing traces of unapproved GM events will be rejected. Because commodity trade is done in large volumes of mixed grains or oilseeds, there is a high risk that, even with the best efforts, shipments from a country with unapproved GM will contain minimal quantities of this unapproved GM, and therefore be rejected.

4. Export and transit issues

4.1 Export policies and export considerations

Unlike imports, exports are largely outside the scope of government regulations. Export permits are required for living modified organisms, intended for planting or contained use. The number of permits has grown from a few to about 60 to 70 per year (Table 9). Maize is the primary crop concerned. In particular, significant quantities of GM maize hybrid seeds for planting have been exported to the Philippines, the only Asian country approving the planting of GM maize thus far.

Table 9: Reported export permits for GM material and quantities of GM export under these permits by crop and year

	Number of export permits	GM maize exports under permit (mt)	GM soybean exports under permit (mt)	GM cotton exports under permit (mt)
1999	0	0	0	0
2000	3	0	0	0
2001	22	0	0	0
2002	41	3.5	0	234
2003	72	442	4	196
2004	67	654	15	121
2005	88	91 573^a	0	249
2006	61	1233	0	138
2007	51	1571	0.2	152
^aIncludes 90 000 metric tons (mt) of maize for food, feed or processing exported to Japan.
Source: Annual data available from DoA (n.d.).

The policy for the transit and consignment of GMO commodities in South Africa indicates that such transit is allowed with specific information requirements and market conditions to make sure it does not enter South Africa's environment and the food or feed marketing channels (EC for GMO, 2000). It is used for the transit of food aid to countries in the region.

Even if export issues are mainly outside the public sphere, they are slowly entering the decision-making process via the inclusion of socio-economic considerations in the deliberations of the EC. The most visible case was the rejection of an application for commercialisation of GM malolactic wine yeast. The wine industry of South Africa, which exports to the GM-averse European market, expressed its concerns about the commercial risk associated with the potential use of GM material in South Africa. Thus the application was rejected by the EC (EC for GMO, 2007).

Obviously, the EC rejection of this application satisfied the wine industry; and is seen by the Council as a positive way to apply socio-economic considerations. Still, it is not clear whether such a decision was useful or even necessary. If the application had been passed, the applicant would not have found any company to sell it to, domestically and internationally. Unless intentionally introduced in a winery, the yeast would not have entered the marketing channel and South Africa's wine image would have been unaffected.

Two other cases were invoked in our discussions. The first concerned the possible future release of GM sugarcane in Australia and Brazil. Regardless of its own research on transgenic sugarcane, the South African sugar industry seems to be keen to remain GM-free. One member of the EC noted that because of this potential risk, import applications for GM sugarcane would be treated very carefully. The other related to a GM potato being field tested in South Africa. Despite the fact that the variety was not used in commercial trade, there were fears that South Africa would lose its exports in the region if it adopted the GM variety. Although these are only discrete cases, they provide some insight into the increased use of socio-economic considerations in biosafety decision-making in South Africa.2

4.2 Maintaining exports within and outside the region

As explained in Section 1, until 2008 South Africa was the only GM-producing country in Africa. The four main neighbouring countries, Namibia, Botswana, Zimbabwe and Mozambique, are some of South Africa's main agricultural trading partners and have restrictions on the import of GM products. Lesotho and Swaziland are located inside South Africa and therefore largely exchange goods with their surrounding neighbour. Another group of countries located further away, Angola, Zambia, Malawi and Madagascar, remain preferred partners for South Africa. Of these 10 countries, at least seven have implemented restrictions on GM maize imports (Table 5).

By meeting grain producers, handlers and experts in South Africa and Namibia, the authors obtained information on how formal trade, particularly exports of maize, are handled at the borders for some of these countries ( Table 10). All of them, other than Swaziland, have non-GM requirements for maize, but specific requirements and border control measures differ widely. Most countries in the region seem to request non-GM certificates. Testing for GM is basic and is not systematic in all countries, and seems to be sometimes applied to a small sample out of large truckloads. Most experts also acknowledge the high likelihood of informal cross-border trade in GM maize.

Table 10: Reported information on border control of GM imports in the region

Country	GM products	Import rule	Tolerance level	Border control
Angola	Maize	No GM imports (2004)	n.a.	Loose; possible tests, fines
Botswana	Maize	No GM imports, milled GM food aid	n.a.	Loose; certificate, possible tests, fines
Malawi	Maize	No GM imports, milled GM food aid	5%	Loose; no systematic test, fines if shipment exceeds tolerance level
Namibia	Maize	No GM imports	∼0%	Strict; certificate, possible tests, possible rejection
Swaziland	Maize	Changing GM acceptance/rejection for food aid	n.a.	n.a.
Zambia	Maize	No GM imports, no GM food aid in 2002, milled GM food aid in emergency after.	n.a.	Moderate; certificate, tests, fines
Zimbabwe	Maize, soy blend	No GM imports, identity preserved requirements for non-GM, milled GM food aid in 2002, no GM food aid after	1%	Strict; certificate, testing with PCR, fines but no observed rejection, except for food aid
Note: n.a., not available; PCR, polymerase chain reaction.
Sources: Gouse (2006b); meetings with maize traders, experts and representatives of the World Food Program in southern Africa.

Food aid shipments, however, are not regulated in the same way: at least four of the eight countries accept or have accepted milled GM maize in cases of emergency. During the 2002 food crisis, the World Food programme replaced GM maize with locally sourced non-GM maize for Zambia, and organised the milling of 15 000 metric tons of maize in South Africa for Zimbabwe.

In the group of eight countries listed in Table 10, three seem to have adopted higher standards. Zimbabwe does request identity preserved non-GM maize and pays the premium for it. Although a large quantity of milled GM maize was imported for food aid in 2002, the country has requested non-GM food aid since then. Zambia's rejection of GM food aid in 2002 was well publicised. Namibia has a reported stricter policy, with an implicit zero per cent threshold. Its policy was adopted to facilitate beef exports to the EU. Interestingly, beef is grass-fed in Namibia, and therefore the portion of maize in cattle feed is reportedly minimal.

4.3 Outlook for the region

Although the GM food issue is not as high on the political agenda as it was in 2002, the region remains largely opposed to the use of GM crops. As countries move towards setting up biosafety systems, they tend to follow a precautionary stance on imports and marketing of GM products, perhaps under the influence of the Biosafety Protocol.

Recent developments show that if non-GM maize became scarcer in South Africa, it would be sourced from other countries in the region. In 2007, South Africa was suffering a severe drought and therefore became a net maize importer. The same year, Zambia and Malawi (supported by input subsidies) had a surplus of non-GM maize and therefore were able to provide non-GM maize. The surge in food prices in 2007/08 and thereafter might spur interest in GM maize.

South Africa's influence in the region is significant, but it is also moderated by other factors. The only way to advance effectively in this area would be via decisions at the regional level, such as the South African Development Community (SADC). The GM debate in a number of SADC countries has gone beyond technical considerations to emotional and political dimensions and it will only be able to move on if it is supported by an external force. Because national politicians are unwilling to change a popular position in their own country, only a higher-level political body could be impartial.

5. Domestic marketing considerations

5.1 Mixed GM/non-GM supply, and demand for non-GM

The introduction of authorised GM crops and their derived products into various marketing channels is bound to result in mixed GM/non-GM products in most marketing systems. Yet because of consumer demand for non-GM products in some countries, the current international marketing system for maize, soybeans or canola distinguishes a mixed GM/non-GM market channel from a pure non-GM market channel. The size of the pure non-GM market channel largely depends on products, their main markets, and the presence or absence of marketing regulations. In South Africa the marketing channels for cotton and soybeans are very largely GM, but non-GM maize represents a significant share of the maize supply. According to an Animal Feed Manufacturer's Association representative, the non-GM maize supply represented about 1 million tons in South Africa in 2007. As the total maize production ranges from 6 to 10 million tons per year (7 million in 2007), the share of non-GM probably represents between 10 and 20 per cent of total production, leaving 80 to 90 per cent mixed GM/non-GM.

Export demand comes from countries that require only non-GM maize. The main domestic buyer of non-GM grains is the Tongaat-Hulett Starch Company, which uses about 600 000 tons of non-GM maize annually to produce non-GM starch that is purchased mostly by the brewing industry. Another buyer, the Woolworths supermarket chain, claims that it has been avoiding GM food products since 2006.

In South Africa, most commercial grain is traded in a pool, using the South African Exchange (SAFEX), but SAFEX does not have a quote for non-GM. These last few years, two main segregation systems have been used for non-GM maize. The first, the reactive system, allowed traders with a specific demand for non-GM to procure and separate non-GM maize from farmers. In this system, non-GM maize growers are identified; they certify that they do not use GM seed. Basic enzyme-linked immunosorbent assay testing, which can detect the presence of a protein derived from transgenic material, is done at the entry to the silo and the maize shipment is then separated from the rest of the marketing channel. The farmer is usually paid no significant premium, but the trader will charge about $3 to $5/ton. This system has been successful so long as there was only a small share of GM maize. In particular, it was used in certain regions of the countries that did not use Bt maize because of low pest infestations. But with herbicide tolerant maize the non-GM supply has become more difficult to obtain in the commercial sector.

The second system involves contract farming schemes and was set up in 2004/05. The arrangement requires the identification of farmers who do not purchase GM seeds. Then the trading company visits the farm and conducts a physical inspection, evaluating the distance from fields potentially planted with GM maize. If all tests are passed, the trader proposes a contract to the farmers in which they guarantee that they will not use GM seeds. The entire marketing chain is strictly controlled, with isolation of the corn, separate handling, and separate storage in the silo using clean or new bins at every stage. Testing is conducted on every load at different levels with rigorous qualitative and quantitative genetic tests.

This identity preservation procedure provides guarantees that the grains do not contain GM material above a certain threshold. In early years it was easy to get close to 0 per cent, but the threshold may increase to less than 1 per cent. The customer price premium for non-GM maize is about $10/ton (which is about 5 per cent) for a total maize price of $200, of which the farmer gets about $3 and the trader certifier $7, but both will probably increase in future years as adoption increases.

5.2 Labelling policy

Many countries have adopted some labelling approach for GM food, but the regulations vary widely across countries (Carter & Gruère, 2003a; Gruère & Rao, 2007). In 2004, South Africa introduced a labelling requirement for non-substantial equivalent GM products (DoH, 2004). GM products (a) whose food composition is significantly different from that of their conventional counterpart, (b) whose nutritional value is significantly different from that of their conventional counterpart, (c) that require significantly different storage preparation or cooking, (d) that have a potential allergen, or (e) that use an animal or human gene, have to be labelled as GM, with clear notification of their specificities.

None of the current GM products commercialised in South Africa (or elsewhere) fits any of these characteristics. Labelling is therefore based on private claims. Companies such as Woolworths have used non-GM labels on some of their products and publicised their claims. But a study using GM DNA testing has shown that these claims are not accurate and may even be misleading (Viljoen et al., 2006). The problem is that there is no public regulation regarding the use of labelling claims for GM or non-GM food.

As a result, South Africa's rather pragmatic and science-based approach to GM food labelling is highly contended. There is a debate between policy-makers both within and outside the EC, the industry and certain non-government organisations regarding additions or changes to the labelling policy. The consumer base is also divided: one section does not want GM food and tends to look for what they consider healthy products, regardless of the price; the other, much larger, segment wants a good product at a low price. The National Consumer Forum is supporting mandatory labelling (Wolson & Gouse, 2005), but other groups are opposed to it. Despite the current debate, most of the population is largely unaware of GM. A public perception study in 2004/05 led by the Department of Science and Technology revealed that nearly 8 out of 10 people surveyed had no knowledge of biotechnology or genetic engineering (DST, 2005).

The retail industry is also not completely in agreement. If Woolworths is already avoiding GM food, Pick n Pay, another supermarket chain, has a clear position on labelling that states that they will not provide claims unless there is a proper protocol for tracing products. Part of the debate relates to the use of positive or negative claims. Some stakeholders argue that a negative claim (such as ‘GM-free’) should not be allowed because of its negative connotation. The other side of the debate concerns the use of voluntary as opposed to mandatory approaches. With mandatory requirements for GM food there is a risk of information distortion in a country where many consumers are largely unaware of the technology and uninformed about it. Mandatory labelling could thus have the same effect as in developed countries, with food companies avoiding GM products altogether, providing no choice or information to the consumer, and a return to no GM production (Carter & Gruère, 2003b).

In the summer of 2007, most stakeholders were expecting the setting-up of a voluntary labelling standard. However, a representative from the Department of Health argued that mandatory labelling would be implemented in the near future. But major changes occurred in 2008. Prompted by pressure groups, and in clear opposition to other departments, the Department of Trade and Industry introduced strict mandatory labelling of GM food in the draft law on food labelling. The Consumer Protection Bill was passed into law in April 2009 (RSA, 2009), but there are still uncertainties about the future regulation and its implementation (Van Dijk, 2010). A strict (EU-like) labelling regulation could have significant economic impacts on GM producers in South Africa. It could also result in price increases at a time where inflationary food prices are already putting a great strain on South African consumers.

5.3 Markets, trade and innovation: What future for new GM crops?

Recent attempts to deliver new GM food crops have been constrained by market considerations. The case of GM potato has been the most debated these last few years (Wolson & Gouse, 2005). Yet its development has been constrained by multiple internal and external factors.3 In the case of GM sugar, similar concerns have been expressed. The South African Sugar Research Institute has been conducting confined field trials of herbicide-tolerant sugarcane. But sugar companies have decided to delay this project because of potential consumer concerns. A GM cassava project resistant to the mosaic virus is ongoing in collaboration with two US institutions. However, there is not much cassava planted in South Africa for food, so even if it does not face much market resistance, it may not have a very large economic impact in the country.

Lastly, drought-resistant maize was approved for a field trial to be launched in November 2007. Its economic potential for South Africa is probably greater than that of all the other crops discussed in this section. It is clear that, if successful, affordable and politically acceptable, this new variety could become extremely relevant not only for South Africa but also for other maize-producing countries in sub-Saharan Africa.

6. Conclusions: From regulatory changes to economic effects

South Africa is effectively both a significant exporter and importer of GM and non-GM products. However, the possible trade of GM depends on the product and the year. The authors analysed regulatory issues related to GM product imports and exports and showed that GM imports are subject to comprehensive regulatory approval in South Africa, but that the process that has allowed South Africa to adapt to global changes seems to be taking a step towards more rigidity and the use of biosafety as an apparent non-tariff barrier to trade. On the export side, despite a changing regional context, and a patchwork of import restrictions on GM depending on product and countries, South Africa has been able to adapt to each specific demand. At the same time, potential export risks have entered the decision-making process as part of the inclusion of socio-economic considerations in biosafety. Lastly, market arrangements and regulations in South Africa show that if non-GM maize segregation has been successful so far, the introduction of strict labelling regulations may create difficulties in the sector.

Imports, exports and marketing related policies are therefore subject to upcoming discussion and potential changes in South Africa. Table 11 summarises some of the major issues being discussed, the options suggested, and some possible implications they could have for South Africa.

Table 11: Major issues, selected policy options and likely consequences

Major issue	Options	Likely consequences for
		Producers	Consumers	Other countries
Import approval	a) Allow commodity clearance	Competition for grower Usual input for animal feed industry	Maintain acceptable prices	Encourage flexible system
	b) Only general clearance	Possible rent from protection for growers Higher cost of feed for animal production	Increase prices for food and animal products	Encourage stricter import control for South Africa's exports
Socio-economic considerations on commercial risks (exports)	a) Limited role unless clear commercial risks	Potentially more R&D on new GM events	Depending on research and development efforts	Discourage irrational fears abroad
	b) Any potential export issue matters and can trigger rejection	Restrict number of available GM events Possible import restrictions: high input prices Possible loss of competitiveness	Possible price increases Possible future nutritionally enhanced products unavailable	Encourage special interest politics in biosafety abroad
Labelling of GM or non-GM food	a) No change	No change	Risk of inaccurate claims and confusion	No effect
	b) Voluntary labelling rule for non-GM	Better visibility of what is GM, what is non-GM Facilitate producer choice	Facilitate consumer choice with verifiable claims Price reflects costs of segregation	Possible example of labelling that is pragmatic for producer and consumer choice
	c) Strict mandatory labelling GM (as in the EU)	Lower price and quantity of GM Possibly serious diminution of GM buyers	Likely cost paid by all May encourage GM avoidance	Encourage other countries to label and discriminate against South African products
Source: Authors.

Generally speaking, most of the listed changes risk introducing more rigidity into South Africa's biosafety and biotechnology regulatory system and reducing its flexibility. Yet the past 10 years have demonstrated that South Africa's success in taking advantage of biotechnologies in globally changing conditions has relied mainly on its adaptation capacity and the flexibility of its system. Introducing new rigidities unrelated to actual risks and increasing the role of special interest may not be the most needed measures, and could be detrimental to the general public.

Ultimately, South Africa's main success may not be the rapid and successful introduction of productivity enhancing biotechnologies, but rather the fact that these technologies have reached some of the poorer farmers in the country. With stricter market and trade regulations, and more attention to special interest groups, fewer new products are likely to be approved and therefore available to these farmers. Similarly, introducing higher requirements for imports at a time of drought-related shortages, with the continuing increase in grain prices in South Africa, will inevitably lead to price increases for animal producers and eventually consumers. Making all consumers pay for a strict labelling regulation demanded by certain special interest groups when 80 per cent of the population does not know what biotechnology means seems unreasonable. Any price increase will inevitably affect low-income consumers first.

Finally, it is clear that, voluntarily or involuntarily, South Africa is a leader in the region. Setting stricter regulations would make it closer to its neighbours, but it would also risk encouraging more scrutiny and ad hoc bans of its products abroad. Stricter import regulations may protect domestic growers from competition, but they could also encourage future market restrictions that will directly affect the growers. Such a move would encourage the continuation of a complete rejection of GM products by neighbouring countries. Although the benefits and level of use of current GM crops in the broader southern African region still cannot be accurately measured, several ex ante economic studies have shown that they could have significant positive effects if they were introduced to farmers. With global warming and high food prices, blandly rejecting any future GM technologies, such as drought-resistant crops, would be a very risky strategy for southern Africa.

In this context, improving rather than restricting regulatory changes will enable South Africa to adapt to global changes, manage risks rigorously but also efficiently, and take advantage of safe new technologies. The following five broad recommendations should be taken into consideration.

1. Maintain commodity clearance as a separate option for GM commodity imports, based on rigorous scientific assessment, invest in transport and infrastructure to reduce the price gap between domestic and international maize price, and address potential competition issues on maize domestically.

2. Diminish the weight of private export issues in the GMO EC decision-making process, except if duly justified by insiders and outsider expertise. Let the market decide what technology will be viable. Make sure the role of socio-economic considerations in the decision-making is clearly defined.

3. Support the setting-up of a voluntary labelling rule that clearly defines what can be labelled GM or non-GM, encourage an awareness programme and offer increased consumer information.

4. Support the creation of a transparent monitoring system to provide timely information and perspectives on regulatory and market changes in GM production and trade in other countries.

5. Continue to encourage SADC to move forward on adopting clear harmonised case-by-case rules on trade of GM maize and other products in the region.

Acknowledgements

The authors wish to thank all the persons they interviewed during visits to South Africa and Namibia. The financial support from the Program for Biosafety Systems, a project managed by the International Food Policy Research Institute (IFPRI) and funded by the United States Agency for International Development (USAID), is acknowledged. Views expressed in this article are the authors' alone.

Notes

¹GM quantities allowed under import permits and export permits by South Africa do not provide a full representation of trade in GM products.

²In fact, in November 2009, after this manuscript was finalised, the EC rejected the application for Bt potato primarily due to socio-economic considerations (Makoni, 2009).

³These factors played a role in the 2009 rejection of the Bt potato application (Makoni, 2009).

Appendix A: List of institutions consulted in June 2007 in South Africa

AfricaBio; African Feed Manufacturers Association; CropLife Africa-Middle East; Department of Agriculture, RSA; Department of Environmental Affairs and Tourism, RSA; Department of Health, RSA; Department of Science and Technology, RSA; Department of Trade and Industries, RSA; Grain SA; Monsanto, Inc.; Pick n Pay Ltd; SENWES Input Supply Ltd; South African Institute of International Affairs; Tongaat-Hulett Starch; US Department of Agriculture, Foreign Agricultural Services Regional Office; University of Pretoria; UN World Food Program, Johannesburg.