Is SA ready for Bojo’s no-deal Brexit?

The possibility of Britain crashing out of the European Union (EU) without divorce papers on October 31 is becoming more of a possibility as the day draws nearer, but what would this mean for South Africa?

“The results of the referendum must be respected. We will leave the EU on October 31. #Leave31Oct,” wrote UK Prime Minister, Boris Johnson on his Twitter account on Tuesday.

The UK went from being South Africa’s eighth largest export market in 2017 to the fourth largest in 2018. Last year the country exported just under R64-billion worth of goods to the UK mainly precious metals, motor vehicles and agricultural products while South Africa imported R43.5-billion worth of goods from the UK.

The trade between the two countries represents 18% of South African exports to its largest trading partner, the EU and 10% of EU imports from South Africa. Exports to the UK are topped by minerals and motor vehicles with both products accounting for 25,1% and 11,9% of total exports respectively.

Earlier this week Downing Street sought to downplay a leaked document called “Operation Yellowhammer” which predicted that the UK faced massive food, medicine and petrol shortages in the event of a no-deal Brexit. The prime minister’s office said that the document is “old” and ra “worst case scenario.”

Bloomberg this week reported that France has predicted a no-deal as the most likely scenario, meaning the immediate imposition of border controls between the EU and the UK.

With Brexit looming, South Africa and its trade partners in the Southern African Customs Union (SACU) which includes members of the Southern African Development Community (SADC) and Mozambique have been working towards maintaining normal trade relations post-Brexit as part of the Economic Partnership Agreement (EPA) with the EU.

The agreement was provisionally entered into in October 2016, six months before the UK invoked article 50 of the EU treaty, indicating its intention to withdraw from the bloc. Under the agreement over 90% of South African goods including wines, platinum and motor vehicles are able to enter into the UK completely duty free or partially duty free.

Under the deal however South Africa’s car exports, would still be subject to 10% tariffs – a situation which former trade and industry minister Rob Davies described as one that would “write off” the country’s automotive industry.

In July SACU members met in Johannesburg to finalise some outstanding issues in the EPA but have not indicated whether or not the deal is close to conclusion. “The deal will be much easier to conclude until we get certainty around what the EU and the UK have decided on their withdrawal agreement,” Independent agricultural economist and trade policy analyst, Tinashe Kapuya said.

The National Association of Automobile Manufacturers of South Africa (NAAMSA) reported higher global vehicle exports in 2018 , with Europe on the whole dominating as a region with 233 772 vehicles exports. This represented a 22,7% increase from the previous year.

“Traders shouldn’t be worried too much. There are discussions underway about the trade of goods to make sure that a trading arrangement will be in place that doesn’t disrupt the current flow of goods between South Africa and the UK,” says director at the Tutwa Consulting group, Catherine Grant. But she says that a no-deal Brexit could have a negative impact on the auto industry.

“The automotive industry is probably the most concerned as the UK will likely impose tariffs on motor vehicles as well as some parts. If there is no deal between the UK and the EU then there will definitely be a disruption to the global supply chain in the automotives production,” says Grant.

Kapuya says Brexit delays could benefit SACU members who are yet to sign a trade deal with the UK before October 31. “Delay of Brexit buys us time to negotiate the outstanding issues so we will have a coherent regional agenda in which we will try to finalise some of the issues,” he said, adding that “the rollover agreement is still being negotiated under very uncertain circumstances we [SACU] have done what we can so far to ensure a smooth transition.”

Thando Maeko is an Adamela Trust Business reporter at the Mail & Guardian