Relief for exporters as SA finalises deal with UK ahead of Brexit
The Southern African Customs Union has an ‘in-principle’ agreement with the UK, which is SA’s fifth largest trading partner
SA has finalised a trade deal with the UK ahead of the Brexit deadline, bringing much relief to local manufacturers and farmers.
The UK is due to leave the EU with or without a deal at the end of October. With no deal in place, Britain would immediately fall outside the EU’s trade regime.
The Southern African Customs Union (Sacu), of which SA is a member state, has an “in-principle” agreement with the UK to replicate the existing economic partnership agreement the customs union has with the EU. Sacu includes SA, Botswana, Lesotho, Namibia and Eswatini. Mozambique is also included in the roll-over deal.
Failure to conclude the arrangement would have implied new tariffs on 114 lines of export interest to SA, notably on vehicles, textiles and clothing, and sugar, according to the department of trade and industry.
The UK is SA’s fifth largest trading partner. Trade between the two increased from R63.7bn in 2012 to R106.2bn in 2018. SA exports R64bn worth of goods through the EU customs union, duty free, of which R10bn is from Western Cape industries such as fruit and wine.
At the moment, trade between the UK and each of the Southern African countries is facilitated under the Sadc-EU Economic Partnership Agreement (EPA), which provides preferential market access with almost all trade between the regions.
Trade and industry minister Ebrahim Patel said during a media briefing on Wednesday that an exit in which the UK leaves the EU without any agreement would add significant costs to exporting and importing goods for both sets of countries, as higher tariff duties will need to be added to the cost of trading between the UK and SA.
The new agreement, which will be known as the Sacu [Mozambique]-UK Economic Partnership Agreement, will effectively roll over and replicate the terms of trade present in the existing Sadc-EU EPA, including in respect of tariffs, quotas, rules of origin, and health and safety regulations, the department said. The new EPA will come into effect in the event that the UK leaves the EU on October 31, and will govern bilateral trade between the six Southern Africa countries party to the deal on the one side and the UK on the other.
The processes to bring the new EPA into effect are currently underway. Once signed and endorsed by the cabinet, the agreement will be submitted to parliament for ratification.
Memorandum of understanding
The agreement will also require ratification by the parliaments of the other affected countries. The department of trade and industry said given the time available until October 31, a memorandum of understanding has been agreed, which will allow trade to continue on the agreed terms in the EPA, in the event that the ratification process has not been completed by the date the UK leaves the EU.
“We are aware that there remains an ongoing debate in the UK regarding Brexit, including timing and any terms of exit,” said Patel. “However, we are pleased that regardless the outcomes of these processes, our trading relationship with the UK can continue without disruption. This is important for the thousands of SA workers whose jobs are dependent on this trade; and for the investors who have used SA as an export base to the UK and the rest of the world.”
DA MP and trade and industry spokesperson Dean Macpherson said that while the deal is a welcome sigh of relief for SA’s ailing economy — especially for the agricultural and financial sectors — it still remains important that Patel accedes to the DA’s call to table an executive member’s statement in parliament.
“This will allow all political parties to express themselves on this matter as it will be parliament that will ultimately have to ratify this agreement,” said Macpherson. “The DA believes that this agreement will give the business community the confidence it needs to invest in long-term production and capacity, which will result in increased jobs.”