The EU-SADC Economic Partnership Agreement (EPA) was signed two weeks shy of a referendum in which Britain is set to make a decision on whether to stay as a part of the European Union (EU) or not. South Africa’s celebrations of the EPA were beset by uncertainty over the seemingly possible reality of an EU without Britain. A number of analysts have noted the risks associated with the possible departure of Britain from the EU – ranging from job losses, threats to global growth, capital and investment flight, among others. However, despite an acknowledgment of potential negative impacts on trade, not much discussion has been generated around implications on agricultural trade, particularly from South Africa’s perspective.

What does Brexit mean for South Africa’s agricultural exports?

An exit of Britain would significantly reduce the value of the EPA agreement, for a number of trade-related reasons, for instance:

  • South Africa’s agricultural exports to Britain have averaged 4 billion over the period 2013 and 2015. This essentially represents the value that a Brexit will chip away from the EPA, from a South African agricultural market access perspective.
  • Relative to the EU, Britain accounts for an average of 25% of total EU agricultural imports that come from South Africa. This 25% is disaggregated in figure 1.

With regards to South Africa’s agricultural exports into the EU market, what portion does Britain take?

British imports account for roughly a third of South Africa’s wine imports that enter the EU market. Moreover, Britain consumes a major portion of South Africa’s fresh fruit. For instance, Britain consumes 13% of pears, 15% of oranges, 18% avocados, 25% of lemons, 26% fresh grapes, 30% of the plums, 55% of the mandarins, 68% of fresh apples, and 70% of peaches that enter the EU market from South Africa (figure 2, blue bars).

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Which South African agricultural products have the most exposure in Britain?

Of South Africa’s total agricultural exports to Britain, the top 10 (outlined in figure 2) accounts for R5.4 billion (or 73% of South Africa’s agricultural exports into the British market). These are identified to be among the higher risk products which will likely be most affected, by virtue of their exposure – through value and market share. Figure 2 (purple dots) shows that, of the total Britain agricultural imports from South Africa, 18% are fresh grapes, 13% apples, 11% and 8% are wines in containers less than 2 litres, and more than 2 litres, respectively, 8% mandarins, and 7% oranges.

Concluding Remarks

If Brexit happens, South Africa will no longer have a formal trade relation with Britain, and market access benefits that existed through the Trade and Development Cooperation Agreement (TDCA) and the EPA would no longer apply. In principle, South Africa’s agricultural exports to Britain would immediately face generally higher tariffs set at the Most Favoured Nation (MFN) applicable under the World Trade Organisation (WTO).

However, in practice, analysts argue that Britain would probably make some transitional arrangements that would allow for a “soft landing” – such interim arrangements would be in the form of enabling legislation that would proffer a tariff regime that is akin to the TDCA as a temporary measure, while Britain negotiates a more permanent trade agreement with the Southern African Customs Union (SACU). If this scenario holds, then South Africa’s agricultural market access provisions would likely be maintained under the existing conditions, at least temporarily, until a new Britain-SACU trade agreement is reached.

On the flipside, Britain agricultural exports to South Africa – worth an average of R4 billion per annum – would be subject to higher tariffs. This will include whiskies (R2.2 billion), poultry (R409 million), cheese (R69 million), and milk powder (R48 million). This would potentially be used as motivation by Britain whisky exporters, as well as poultry and dairy industry sectors, to push for improved market access in the SACU region on a more permanent and secure basis.

Enquiries:

Tinashe Kapuya
Email: Tinashe@agbiz.co.za

Wandile Sihlobo
Email: wandile@agbiz.co.za