New agreement to ensure continued SA-UK trade

Wednesday, September 18, 2019

Trade and Industry Minister Ebrahim Patel says a new economic partnership agreement will ensure that trade between South Africa and the United Kingdom continues under the same terms in the event of a no-deal Brexit.

The Minister said this when he delivered a statement on Brexit and the impact it will have on the South African economy at the National Assembly on Tuesday.

In the event that the UK leaves the European Union on 31 October 2019, the new agreement between the UK and six SACUM countries – Lesotho, Swaziland, Namibia, Botswana and Mozambique, will govern trade between the UK and these countries.

“This is an important agreement to provide certainty and predictability for exporters.

“It will ensure that in the event of a no-deal Brexit, trade between the UK and South Africa will continue on the same terms.

“This means that South African businesses, which use South Africa as an export base to the UK can begin to plan, knowing that their preferential access will be protected,” he said.

No-deal Brexit and what it would mean to SA

Patel’s address to the National Assembly came amid fears that a no-deal Brexit would mean that South Africa would have to forfeit the benefits it enjoyed under the current trade agreement that protected several SA exports.

Following a referendum held in the UK in 2016, the UK notified the European Union of its intention to exit the trade block by 31 October this year. However, processes in the British Parliament may affect the date.

Should there be no agreement on the terms of the departure, it will be in the form of a no-deal exit.

Patel told MPs on Tuesday that this would have a material impact on the six SACUM countries that trade with the UK under the terms of the existing SADC-EU economic partnership agreement.

All trade will then fall under standard World Trade Organisation rules, meaning that the normal import tariffs would apply and many of SA’s products will lose duty-free status.

“For SA and indeed for the SACUM countries, reverting to trade on WTO terms would incur significant costs.

“In March this year, the UK 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, South Africa would lose preferential access to the UK market on 114 products, affecting exports of around R7 billion.

“This affects among others, vehicles, auto 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,” he said.

He also said that in addition to this, UK exports to SACUM countries would be subject to higher tariffs, which may also increase the costs of these products in SA, and if they are input costs into SA-made products, it will hurt local industries.

There would also be potential loss of trade for SACUM neighbours: for Botswana the costs would be in beef exports; Eswatini in sugar exports; Namibia in fish, fruit and beef exports.

Why UK is SA’s important trade partner

The UK is one of South Africa’s most important trading relationships and in 2018 bilateral trade between SA and UK was worth R142 billion.

It is estimated that SA’s exports to the UK supports 56 500 direct jobs and a further 117 500 indirect jobs, bringing the total number of jobs supported by exports to the UK to nearly 175 000.

SA’s exports to the UK support jobs in platinum mines in North West and Limpopo; citrus industries in Eastern Cape, Western Cape, Limpopo and Mpumalanga.

It also supports SA’s wine, grape, apple and berry industries. It supports the automotive industries in Eastern Cape, KwaZulu-Natal and Gauteng. It supports the beneficiation of platinum, through the sale of about R1.4 billion worth of catalytic converters used in British-assembled cars.  Across the country, trade with the UK supports industry and jobs.

Patel said the new agreement, once approved by Cabinet, will be submitted to the National Assembly for ratification. 

He said the new agreement will bring back certainty to local investors.

“It means that those investors who held back on capital-commitments or managers who pressed the pause button on new orders, until they have certainty, can begin to invest and to produce again.

“And it means that the thousands of workers from across this country, whose jobs are supported by trade with UK, can feel confident that this government is working for them.” –

Most Read

SAnews on Twitter