Ebrahim Patel. Picture: TREVOR SAMSON
Ebrahim Patel. Picture: TREVOR SAMSON

SA’s industrialisation drive will be boosted following the finalisation of a deal with the UK ensuring it and other countries in the region continue to have preferential access to the UK market after Brexit.

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.

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, which was finalised last week.

Speaking in the National Assembly on Brexit implications for SA, trade and industry minister Ebrahim Patel said the roll-over agreement with the UK provides certainty and predictability for exporters. “It will ensure that in the event of a no-deal Brexit, trade between the UK and SA will continue on the same terms ... Regardless the outcomes of UK debates on Brexit, 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.”

For example, said Patel, under the deal, SA-assembled cars will have tariff-free access to the UK, “making our cars more competitive in that market than cars made in many other parts of the world. This supports SA industrialisation and creates jobs here in SA.”

“Tariff-free imports are also enjoyed for our citrus products, grapes and plums, while SA wine enjoys tariff-free access under a quota,” said Patel.

Sadc-EU Economic Partnership Agreement

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.

Patel said the UK recently published an interim tariff regime in the event of it leaving the EU customs union and in the absence of a replacement to the Sadc-EU EPA. If this were to occur, SA would lose preferential access to the UK market on 114 products, affecting exports of about R7bn.

“This affects, among other things, vehicles, automotive components, wine, textiles and clothing, sugar, fish and machinery. In some cases, this may lead to a loss of exports completely, which would be significant for a number of provinces,” said Patel.

DA MP and trade and industry spokesperson Dean Macpherson said the party believes that the rollover agreement will provide a perfect platform to keep the status quo into the future and will allow SA to build on future trade negations with the UK to widen its ability to export, especially with agricultural products, such as beef and poultry,” said Macpherson.

“But this can only be done if the government is willing and able to map out a long-term future for industry through policy certainty, export promotion and access to development finance.” 

According to a recent update by the Real Economy Bulletin, a review of quarterly trends, developments and data in the real economy, post-Brexit could see an increasingly aggressive Britain striving to re-assert its power in the world and advance its “mercantilist interests”, including in SA and Africa. Alternatively, the world could see a Britain seeking to increase co-operation in its own region and the world, rebuilding multilateral governance based on the values and principles of inclusivity, equity and sustainable development.

According to the bulletin, “The former is more likely. The risks are visible in the US approach to ‘making America great’, which has included threats to the rules-based trade regime globally as well as bullying of some developing economies. The US has clearly signaled that it prefers to drop multilateral arrangements in exchange for bilateral treaties — an approach that inherently disadvantages smaller economies.” 

phakathib@businesslive.co.za