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Brexit weighs on SA trade ties


Brexit weighs on SA trade ties

Brexit weighs on SA trade ties
Photo credit: Bloomberg

The UK’s possible exit from the EU could prompt a renegotiation of the recently signed EU-Southern African Development Community (SADC) Economic Partnership Agreement (EPA), Willemien Viljoen, a researcher at Trade Law Centre, said yesterday.

The EPA, signed in Botswana on Friday, includes a bilateral protocol between the EU and South Africa on the protection of geographical indications and on trade in wines and spirits.

As part of the agreement, the EU agreed to protect, among others, names such as rooibos and honeybush.

The UK will hold a referendum next Thursday to decide if it will stay in or leave the EU, and, according to South African trade analysts, a UK exit from the EU, also known as Brexit, will have consequences for South Africa.

Viljoen said: “There are numerous questions which will have to be addressed. This is especially the case in terms of trade and investment relationships as these have been ceded to Brussels to negotiate these on their behalf.

“Trade and investment issues will be affected if there is an exit from the EU. The UK will have to renegotiate their relationship with the EU. The SADC EPA was also officially signed last week.

“However, the UK was a signatory party to this agreement, thus the EPA would also have to be renegotiated.”

He said should they leave the EU, the UK would also have to renegotiate its position in the World Trade Organisation (WTO). “Although the UK is a member of the WTO in their own right, the UK will now require to have their own tariff book as it will no longer rely on the common external tariff applicable to products exported to the EU.”

DNA Economics managing director Matthew Stern said yesterday should it break away from the EU, the UK would cease to be party to any of the EU’s trade agreements.

These included the EPA, he said, noting there were no clear benefits for South Africa in a UK exit from EU.

Risk anxiety

Gavin Williams, a partner at law firm Herbert Smith Freehills, said South Africa’s financial services business using London as their base to access the EU market could face the possibility of having their market access curtailed or cut off.

Meanwhile, British retailers New Look and Iceland Foods and the Virgin Active gym club chain are prepared for either outcome when the country votes next week, according to the head of their South African owner.

“Our businesses are strong enough to go with whichever scenario,” Brait South Africa chief executive John Gnodde said, adding that strong cash-flow generation had enabled the companies to be prepared.

Brait, whose biggest shareholder is South African billionaire Christo Wiese, increased its exposure to the UK last year, acquiring majority stakes in Virgin Active and clothing retailer New Look and increasing its holding in discount grocer Iceland.

Hanns Spangenberg, a senior economist at NKC African Economics, said the UK’s possible withdrawal from the EU had heightened risk anxiety in broader emerging markets, with investors seeking safe-haven destinations like the US.


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