BREXIT Information for Western Cape Exporters

2019

Department of Economic Development and Tourism

(Western Cape Government)

BREXIT Information for Western Cape Exporters

Background

Brexit is the term coined for the withdrawal of the United Kingdom (UK) from the European Union (EU). The UK government held a referendum in June 2016 on whether the UK should leave the EU or remain a member, the UK public elected to leave the EU. Public support for a British exit from the EU was underpinned, amongst other things, by opinions about immigration, economic discontent in the Eurozone, questions of sovereignty and high expenditure to the EU budget. Even though the referendum was mainly advisory in nature, rather than bound by law, it allowed the UK parliament to evoke EU Treaty Article 50 in March 2017, which permits a member nation to leave the EU. This allowed the UK two years to negotiate its exit and determine its relationship with the EU going forward.

The two main leave options put forward by politicians are a ‘hard Brexit’ or a ‘soft Brexit.’ A ‘hard Brexit’ would take Britain out of Europe’s single market, whereas a ‘soft Brexit’ allows the UK to have a closer relationship with the EU (for example, to remain part of the EU customs union). Consequently, the UK parliament voted against (or failed to ratify) the negotiated withdrawal agreements presented thus far. As a result, the deadline has been extended three times, and is currently set for 31 January 2020.

Depending on how the situation plays out, Brexit will have various implications for South African exporters to the United Kingdom. South Africa currently enjoys preferential trade with the United Kingdom under the Southern African Development Community- European Union Economic Partnership Agreement (SADC –EU EPA). When the United Kingdom leaves the European Union, they will no longer be a party to the trade agreements that the EU have with third party countries like South Africa.

The United Kingdom has therefore negotiated an agreement with South Africa, Botswana, Lesotho, eSwatini, Namibia and Mozambique, which largely replicates the terms of the SADC-EU EPA. These are all the countries that are party to the SADC-EU EPA, and are referred to as the Southern African Customs Union + Mozambique, or SACUM countries. The new trade agreement is therefore called the SACUM –UK EPA. The new SACUM-UK EPA will kick in when, and if, the UK leaves the EU, pending ratification by all the parties.