ly, dependent on how much the UK
also trades with SA’s other significant trading partners.
The possible effect on the GBP-ZAR
exchange rate of a Brexit is more
indirect. The UK is facing a large
capital outflow due to investors
that want to pre-empt an exit of
the UK from the EU. The outflow of
capital is causing the British pound
to depreciate against both the Euro
and the US dollar. The capital outflow causes a general weakening of
the pound. Due to the general depreciation of the pound the South
African rand could strengthen relative to the pound. Even though this
may be good for trade, it may spell
trouble for global capital markets as
well as the currency market.
UK and South African agricultural
trade – a significant relationship…
The EU is the largest agricultural
trading partner with the UK, and
agricultural imports from the EU
into the UK accounts for around
54% of the UK’s total agricultural
imports over this period. The UK
agriculture imports from South Africa represent more than 10% of the
total imports into the UK from
South Africa during the last 5 years,
while it accounts for around 3.5%
of total agricultural produce imports into the UK for the same period. Within the agricultural imports
from South Africa, products in the
broad grouping of “Edible fruit and
nuts” contributes the major share -
at more than 90% of South Africa’s
agricultural exports to the UK
If one however considers that processed food and beverages are also
major export products from South
Africa to the UK (around 3.5% of all
imports into the UK are from South
Africa), the effect on agriculture
production and sales through
“indirect” means in terms of higher
value added produce also need to
be considered.
What can SA do to weather the
Brexit storm?
There are both positives and negatives for South Africa in a Brexit realising. Some thoughts for business
executives and policy makers:
On the positive side
- as a result of Brexit it becomes
possible for SA to renegotiate trade
agreements with the UK in a more
favourable light and also export to
UK products that are currently prohibited for reasons specific to the
EU agreement and not relevant to
the UK, e.g. Port wine. It could also
be that the EU will want to penalise
the UK in terms of a future agreement, and that the UK in return will
attempt to set up favourable terms
with the rest of the world to replace
some of the products currently being imported into the UK from the
EU. In this context it may be positive for South African agricultural
product exporters. Seasonal differences between South Africa and
Europe have resulted in the EU be-
coming a key market for South African agricultural produce, as well as
the main market for South African
manufactured exports. Business
decision makers and policy ma kers
need to consider these type of implications and pro-actively investigate realistic export opportunities
for agriculture products from South
Africa into the UK that could utilise
a potential gap that could develop
between the UK and EU in terms of
agricultural trade;
On the negative side
- UK capital or FDI flows into South
Africa would come under some
pressure as it seeks to deal with the
adjustment period and policy makers need to be prepared for potential fall-outs as a result – e.g. some
planned investments potentially
being cancelled and credit lines reduced;
- UK exports to the EU will potentially slow down as they lose the
advantages of the EU Common Agricultural Policies; this will also affect South Africa, especially primary
and intermediate exports that are
used in production inputs in UK
products, such as products from the
mining and minerals sector and
some agro-processing to name but
a few. This will not bode well for
South Africa’s already embattled
mining industry in the short to medium term;
- Renegotiation of trade agreements