Davies seeks to calm anxieties over UK vote fallout

TRADE and Industry Minister Rob Davies is seeking to engage with British authorities on how they see the future of trade relations with SA.

Davies conceded in an interview with Business Day on Friday that there would be volatility and uncertainty following Britain’s exit from the European Union (EU). But this did not mean trade obligations in terms of agreements signed with the World Trade Organisation, the EU and the Southern African Customs Union (Sacu) would immediately be altered.

Davies said the exit would “supposedly” happen over a mandatory two years, so it would not be as “dramatic as people might imagine”.

“We are seeking to engage (Britain) on how they see our future trade relations evolving. I want a conversation in the first instance with the British ambassador. (But) first of all we have to let the UK settle down. There are many issues to confront,” he said.

There was concern over how the exit would affect the longstanding Trade, Development and Co-operation Agreement concluded between the European Community and SA.

Another anxiety was how it would affect the Economic Partnership Agreement signed on June 10 2016 between the EU and the Southern African Development Community.

Reserve Bank deputy governor Daniel Mminele said on Friday that there was a likelihood of “elevated volatility” in the markets, but the initial reaction on Friday was a result of the markets not expecting Brexit.

The situation was still “fresh” and Bank officials would assess the implications for SA in the coming days, he said. “How we view currency movements has not changed, and we will be informed in terms of how long-lasting this is,” explained Mminele.

Finance Minister Pravin Gordhan sought to reassure the public on Friday that the country’s banking and financial institutions are well-positioned to withstand financial shocks, and expressed confidence that SA’s banks and regulatory frameworks are “extremely resilient and reliable”.

In 2015, the UK was SA’s eighth biggest trading partner, with South African exports to Britain amounting to R41bn and imports from the UK totalling R35bn. This amounted to about 4% of SA’s total trade, worth about R2-trillion in 2015, Department of Trade and Industry data shows.

The department earlier said the UK would remain a key trading partner.

“The UK will have a period of two years to negotiate their exit from the EU after formal notice to withdraw has been given. Until the end of that two-year period, the Common International Trade Policy (CITP) of the EU would continue to apply to SA’s exports to the UK,” read the statement.

“The CITP includes the current free trade agreement between SA and the EU, called the Trade, Development and Co-operation Agreement. It will also cover the Economic Partnership Agreement that was signed on June 10 2016 in Botswana. Therefore, UK rights and obligations under the existing EU Treaties will continue to apply during this period. There will, therefore, be no immediate implications for SA exports into the UK.”

The Sacu, UK and SA would have at least two years to review their trade relationship. One option would be for the UK to join the European Free Trade Area (EFTA) which has a free trade agreement with the EU.

The EFTA also had a free trade agreement with the customs union that SA was part of.

The two had already started a review of this agreement.

Another option would be for the UK and Sacu to negotiate a bilateral free trade agreement.

With Pericles Anetos

A British flag flutters in front of a window in London, the UK. There is concern over how Brexit would affect the longstanding Trade, Development and Co-operation Agreement concluded between the European Community and SA. Picture: REUTERS/REINHARD KRAUSE

A British flag flutters in front of a window in London, the UK. There is concern over how Brexit would affect the longstanding Trade, Development and Co-operation Agreement concluded between the European Community and SA. Picture: REUTERS/REINHARD KRAUSE

TRADE and Industry Minister Rob Davies is seeking to engage with British authorities on how they see the future of trade relations with SA.

Davies conceded in an interview with Business Day on Friday that there would be volatility and uncertainty following Britain’s exit from the European Union (EU). But this did not mean trade obligations in terms of agreements signed with the World Trade Organisation, the EU and the Southern African Customs Union (Sacu) would immediately be altered.

Davies said the exit would “supposedly” happen over a mandatory two years, so it would not be as “dramatic as people might imagine”.

“We are seeking to engage (Britain) on how they see our future trade relations evolving. I want a conversation in the first instance with the British ambassador. (But) first of all we have to let the UK settle down. There are many issues to confront,” he said.

There was concern over how the exit would affect the longstanding Trade, Development and Co-operation Agreement concluded between the European Community and SA.

Another anxiety was how it would affect the Economic Partnership Agreement signed on June 10 2016 between the EU and the Southern African Development Community.

Reserve Bank deputy governor Daniel Mminele said on Friday that there was a likelihood of “elevated volatility” in the markets, but the initial reaction on Friday was a result of the markets not expecting Brexit.

The situation was still “fresh” and Bank officials would assess the implications for SA in the coming days, he said. “How we view currency movements has not changed, and we will be informed in terms of how long-lasting this is,” explained Mminele.

Finance Minister Pravin Gordhan sought to reassure the public on Friday that the country’s banking and financial institutions are well-positioned to withstand financial shocks, and expressed confidence that SA’s banks and regulatory frameworks are “extremely resilient and reliable”.

In 2015, the UK was SA’s eighth biggest trading partner, with South African exports to Britain amounting to R41bn and imports from the UK totalling R35bn. This amounted to about 4% of SA’s total trade, worth about R2-trillion in 2015, Department of Trade and Industry data shows.

The department earlier said the UK would remain a key trading partner.

“The UK will have a period of two years to negotiate their exit from the EU after formal notice to withdraw has been given. Until the end of that two-year period, the Common International Trade Policy (CITP) of the EU would continue to apply to SA’s exports to the UK,” read the statement.

“The CITP includes the current free trade agreement between SA and the EU, called the Trade, Development and Co-operation Agreement. It will also cover the Economic Partnership Agreement that was signed on June 10 2016 in Botswana. Therefore, UK rights and obligations under the existing EU Treaties will continue to apply during this period. There will, therefore, be no immediate implications for SA exports into the UK.”

The Sacu, UK and SA would have at least two years to review their trade relationship. One option would be for the UK to join the European Free Trade Area (EFTA) which has a free trade agreement with the EU.

The EFTA also had a free trade agreement with the customs union that SA was part of.

The two had already started a review of this agreement.

Another option would be for the UK and Sacu to negotiate a bilateral free trade agreement.

With Pericles Anetos

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