The new market access provisions of the SADC-EU EPA came into effect on 1 November 2016 after two conditions were met: ratification of the EPA by the SACU member states and the bilateral exchange of notifications on Geographical Indications (GIs) by South Africa and the EU in accordance with Protocol 3 of the EPA. The new market access commitments have improved market access for South African agricultural products, including fish, sweet oranges, flowers, skimmed milk powder, canned fruits, frozen orange juice, wine, sugar and ethanol. The EPA allows for 96.2 percent of South Arica’s exports to the EU to enter duty-free, while 2.5 percent of South Africa exports have been partially liberalised. Only 1.3 percent of products exported by South Africa to EU countries are excluded from tariff liberalisation. Most of the products excluded from tariff reduction commitments are agricultural products, foodstuffs and beverages. Products not subject to tariff liberalisation include bovine meats and offal, flours (maize and rice), bananas, all starches, sweetcorn, carnations, confectionery, beet and other cane sugar, cherry juice and prepared and preserved tomatoes. In addition, some aluminium products under HS 76 are also excluded from liberalisation.

Improved market access for South African products in the EU market is granted through tariff liberalisation on certain fish, sweet oranges and fresh flowers (roses, orchids, lilies and chrysanthemums); the expansion of quotas granted previously under the TDCA for canned mixed fruit, frozen orange juice and wine; and the introduction of new tariff rate quotas for raw and refined sugar, ethanol, active yeast, white crystalline powder, citrus jams, skimmed milk powder and butter.

Table 1: New market access granted to South African exports

Source: SADC-EU EPA

South Africa is already one of the main supplying countries of wine (especially bulk wine), sweet oranges and Cape hake to the EU. However, there are numerous products granted preferential market access which are hardly being exported. These include ethanol, milk powder, butter, raw cane sugar, fresh flowers and almost all fish (excluding Cape hake). The market access which has been granted presents the opportunity for exports by South African producers; however, it seems that the uptake of quotas is slow and South African producers are yet to take full advantage of the increased market access. According to the Europa tariff quota database[1] the only quotas for 2017 which have been exhausted are for frozen orange juice and bulk wine. At 12 October 2017, the full quota was still available for most products, including milk powder, butter raw sugar for refinery, white crystalline powder, citrus jams, strawberries and tropical canned fruit. Close to 50 percent of both the quotas for canned non-tropical fruit and bottled wine have been utilised, while 23.5 percent, 22.6 percent, 10 percent and 6 percent respectively of the quotas for refined sugar, active yeast, ethanol and apple and pineapple juice have been utilised.

Implications of Brexit

There are two main concerns for South African exporters regarding Brexit; (1) maintaining the same tariff liberalisation commitments with the UK for fish, sweet oranges and flowers than those made under the SADC-EU EPA; and (2) the implication for Brexit for the tariff rate quotas. The UK is a major destination for South African sweet oranges, chrysanthemums and Cape hake. Maintaining the tariff liberalisation of the EPA with the UK after Brexit is vital to ensure South Africa retains its current share of the UK market. South African wines are mainly exported to the UK, while limited quantities of non-tropical canned fruit, citrus jams, apple juice and active yeast were exported to the UK in 2016.

Current indications are that the UK and the rest of the EU will apportion EU tariff quotas based on historical trade flows. This means that products imported into the UK in higher volumes than other parts of the EU will most likely continue to be traded in similar numbers. This does raise some concerns – if the data indicates no historical trade, how will the quota be apportioned? Furthermore, whilst allocating the major portion of a quota to the main destination market assists with the retention of current market share, it does little for new market development and facilitating entry into new potential markets at zero or low rates of duty.

[1] https://ec.europa.eu/taxation_customs/online-services/tariff-quotas_en