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SADC EPA TRQ Utilisation Update and opportunities under SADC EPA


SADC EPA TRQ Utilisation Update and opportunities under SADC EPA

Taku Fundira, tralac Associate, discusses tariff rate quotas under the SADC-EU Economic Partnership Agreement

November 1, 2016, marked a new era in the European Union (EU)’s trading relationship with the Southern Africa Development Community (SADC) Economic Partnership Agreement (EPA) group (SADC EPA) which comprises of South Africa, the BLNS (i.e. Botswana; Lesotho; Namibia; Swaziland) and Mozambique. This was when the new market access provisions of the EU-SADC EPA came into effect.

For the BLNS and Mozambique, this meant duty free quota free (DFQF) access to the EU market, while for South Africa, new agreement enhanced 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 SADC EPA allows for full liberalisation of South African fish (select), sweet oranges and fresh flowers into the EU. Furthermore, South Africa will benefit from tariff rate quota’s (TRQs) on selected tariff lines of wine, sugar, fruit juices, citrus jams, canned fruit, skimmed milk powder, butter, yeast and ethanol. Since the Agreement is reciprocal, the EU also enjoys new market access SACU where the fish sector is liberalised and TRQs introduced on selected tariff lines of pig meat and fat, Mortadella Bologna, butter, cheese, wheat, barley, cereal preparations and ice cream.

TRQ utilisation

While the new market access for South Africa under the SADC EPA is an improvement on the previous South Africa – EU Trade and Development Cooperation Agreement (TDCA), analysis of full year trade for 2017, reveals to what extent the new TRQs have been utilised. In most cases there is limited trade or significant under-utilisation of the TRQs except raw sugar; refined sugar; frozen orange juice and wines where there is close to or full utilisation of the TRQ. Other potential exports although under-utilised are active yeasts, non-tropical canned fruits; apple/pineapple juice and ethanol where South Africa is not fully utilising the TRQs although some exporting to the EU is occurring (see table 1). Important to note, however, is that South Africa sugar exports to the EU were non-existent or limited prior to introduction of TRQ on sugar.

Table 1: South Africa Export Quota Utilisation under SADC EPA (2017)

SADC EPA TRQs Table 1 Fundira March 2018

Source: Data obtained from calculations by the South Africa Department of Agriculture, Fisheries and Forestry (DAFF)

A look at the EU’s market access into SACU and more specifically into South Africa, reveals that apart from South Africa’s imports of Cheese; Pig Fat; Wheat & Meslin and Pork, which were near to, or full utilisation of the TRQ, the rest of the products on the list are not traded at all, or trade is limited (e.g. butter) as shown in Table 2.

Table 2: EU Import TRQ Utilisation in tonnes under SADC EPA (2017)

SADC EPA TRQs Table 2 Fundira March 2018

Source: SARS data reported by DAFF

BREXIT matters

Given the importance of the EU market and more specifically the UK for South Africa’s exports. It is uncertain what the SACU trade regime with the UK post-BREXIT (exit of the UK from the EU) will be. The importance of the UK market for South Africa’s products cannot be overemphasised. Thus, any disruption of trade such as the uncertainty around post-BREXIT trade arrangements may severely affect South Africa’s exports. To date, the following concerns from South Africa have been raised among others:

  • Clarity on how the transition will work, for the period when the UK leaves the EU just more than a year from you, and the conclusion of a new agreement between the UK and the SACU member states.

  • Given that there are several Tariff Rate Quotas (TRQs) in the EPA and South Africa will have to negotiate the volume of the TRQs with the UK. While trade data (and for which period) will be used to determine the new quota dispensation for the transition arrangement with the UK.

  • What will happen to the quotas in the SADC EPA – will they remain the same, or will some EU member states want to negotiate reduction of some of these (e.g. wine)?

South Africa needs to take a proactive approach to ensure that preferential access to the UK is not lost post-BREXIT and prepare for negotiations to enhance market access (both in terms of tariff and non-tariff matters) to the UK.

Opportunities under SADC EPA

While the preferential access provided under the SADC EPA creates opportunities for South African exporters, uptake of quotas for some of the products that are eligible for TRQs has been weak. The question is why exporters are not fully taking advantage of the increased market access?

From the analysis above, only wine, sugar and orange juice were fully utilized. Some of the reasons for the failure to fully take advantage of the opportunity include:

  • Exporters are not aware of the TRQs

  • Cumbersome requirements to access the export permits as required by the department of agriculture, fisheries and forestry (DAFF), as Gazetted in October 2016, may be an impediment or costly for exporters to follow

  • Given that South Africa has set its target to expand into Africa under the Continental Free Trade Area (AfCFTA), it may well be that exporters are focusing on the Africa market where demand is high and expected to increase. Given the uncertainty around Brexit, it does make sense to look to other market opportunities

In conclusion, therefore we note that the extent to which the TRQs are being utilized by South African exporters is something that needs further investigation to ascertain reasons behind the low uptake for some of these products.



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