JOHANNESBURG – The prospect of a no-deal Brexit could have devastating consequences for the struggling South African economy, Trade and Industry Minister Rob Davies warned on Friday.
However, he said South Africa and the UK were on the verge of finalising an agreement aimed at safeguarding their bilateral trade agreements post-Brexit.
This as British MPs are set to have what has been dubbed a meaningful vote on Prime Minister Theresa May’s Brexit deal tomorrow, in time before the March 29 deadline to leave the EU.
The lawmakers’ votes will decide whether the Brexit deal can proceed.
“A no-deal Brexit could be disruptive to our trade with the EU. Forty percent of our wine exports go to Britain,” said Davies.
In 2016 the EU and six southern African nations including South Africa signed an Economic Partnership Agreement (EPA) that was considered a victory for South Africa’s trade and intellectual property interests.
The deal was hailed for gaining greater access for South African ethanol and some canned fruits. It was also aimed at protecting the trademarks of rooibos, honeybush, Karoo lamb and local wines.
Davies said the EPA was beneficial to the economy as it increased the quotas for wine exports, among other things. In terms of geographic indications the department was happy that the country got recognition for rooibos and honeybush, to name but a few products.
“Rooibos products were being patented by companies in Europe, which was an issue,” said Davies.
The agreement also saw South Africa’s annual duty-free quota of 48million litres of wine exported to the EU increasing to 110million litres, worth billions of rand.
Efficient Group chief economist Dawie Roodt said on Friday that a no-deal Brexit possessed a bigger danger for South African exports to the EU.
“In a really bad scenario the UK economy can contract by 2percent and go into recession,” he said, adding this could lead to the UK importing less, thus affecting South Africa.
“Also, London is the world’s financial centre, a hard Brexit will be disruptive to the financial market and likely lead to a much weaker pound and a much stronger US dollar and euro,” he said.
“That implies a weaker rand and that is potentially a big threat to the South African economy in the short term.”
Economists.co.za chief economist Mike Schussler said the UK was one of South Africa’s biggest trading partners. “Commonwealth countries have always had close relations with the UK,” he said.
Schussler said that a no-deal Brexit could have an impact on the local economy, battling a 27.5percent unemployment rate. However, he stressed that it was difficult to say to what extent a no-deal Brexit would affect South Africa.
“If Brexit doesn’t work out well the UK’s economic growth could start declining. It’s not going to be easy,” he said.
“We need to be careful about how this whole thing plays out. But there is no way that we can influence it.”