South Africa concurs with the new UK agreement in the event of no deal Brexit
South Africa, along with five other countries in the Southern African region have concluded a new trade agreement with the United Kingdom (UK) that will allow business to keep trading freely after Brexit.
The new agreement will govern the bilateral trading relationship between each of the SACUM countries (South Africa, Lesotho, Eswatini, Namibia, Botswana and Mozambique) and the UK in the event that the UK leaves the European Union without an Agreement between the UK and the EU (or what is called a ‘no-deal Brexit’).
At the moment, trade between the UK and each of the SACUM countries is facilitated under the SADC-EU Economic Partnership Agreement (EPA), which provides preferential market access with substantially all trade between the regions.
The UK is currently due to exit the European Union (EU) by 31 October 2019 (though recent developments in the British parliament may impact on this process and date). A ‘no-deal Brexit’ will have a negative impact on the SA economy, jobs and exports.
Speaking after a briefing to the South African Cabinet Committee, the Minister of Trade & Industry, Mr Ebrahim Patel remarked:
“I am pleased that we have concluded this agreement with the United Kingdom. An exit in which the UK leaves the EU without any agreement of succession would add significant additional 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 South Africa. This would impact a range of industries, including our vehicles and auto components sectors, wine and food products. In some cases, this may lead to a loss of exports completely.”
The UK remains one of South Africa’s key trading partners. In 2018, the UK was the fourth largest destination for South African exports, with bilateral trade between the two countries amounting to more than R140 billion.
To avoid the disruption to South Africa’s exports, the SACUM countries engaged with the United Kingdom counter-parts over a roughly two-year period following announcement of the UK’s intention to leave the EU. Following discussion between Minster Patel and his UK counterparts in July this year, the talks were speeded up.
The new agreement, which will be known as the SACUM-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 new EPA will come into effect in the event that the UK leaves the EU on 31 October 2019, and will govern bilateral trade between the six SACUM countries on the one side and the UK on the other side.
The processes to bring the new EPA into effect are currently underway. Once signed and then endorsed by Cabinet, the agreement will be submitted to the South African Parliament for ratification. The agreement will also require ratification by the Parliaments of the other six affected countries.
Given the time available until 31 October, 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 may leave the EU.
“We are aware that there remains an on-going debate in the UK regarding Brexit, including timing and any terms of exit. However, we are pleased that regardless the outcomes of these processes, our trading relationship with the United Kingdom can continue without disruption. This is important for the thousands of South African workers whose jobs are dependent on this trade; and for the investors who have utilised South Africa as an export base to the UK and the rest of the world,” said Patel.
Patel said that the Cabinet Committee noted and welcomed the conclusion of the agreement, which will be finally tabled at a full Cabinet meeting for approval, once the necessary legal steps have been completed.