Economist spells out dire implications for SA of no-deal Brexit


Brexit will bring costly consequences to the United Kingdom and its trading partners regardless of how and when the UK withdraws from the European Union.

According to Janine Botha, Wesgro economist, while the Department of Trade and Industry was scurrying to finalise a deal ahead of the March 29 deadline that would determine the way forward, one of the few certainties at present was that there would be cost, complications and implications all round, regardless.

Botha said a no deal Brexit would not be good news for South Africa.

“The last thing we want is a no deal because then we move to World Trade Organisation (WTO) rules,” she said.

This, said Botha, would result in major and widespread disruptions in the short term.

The UK would have to trade on WTO principles with all the countries with which it has not concluded a bilateral preferential trade continuity agreement by that day. WTO principles include the Most-Favoured-Nation (MFN) rule, which says that a country has to extend the same tariff rate to all WTO members alike. There are, however, certain exceptions to the MFN rule, such as having entered into a trade agreement with a country, or unilaterally providing preferential market access to developing countries

She said under a no-deal Brexit, there were two scenarios for South Africa – a roll-over agreement with the UK or no roll-over agreement.

“Should the South African Customs Union plus Mozambique (Sacu+M)–UK Agreement be in place in time for the 29 March deadline, that means it has to be signed and ratified by all the parties, and South African goods would then be assured of having preferential access to the UK market the day after Brexit.  If the agreement is not in place in time, then South African goods will also face MFN tariffs upon entry into the UK market.”

At the time of going to press the UK had yet to publish its post-Brexit MFN tariff rates.

“Everything is so fluid at the moment. It is very uncertain,” she said.

Commenting on what would happen if the UK managed to leave with a deal, Botha said this would give South Africa time to work on new trade deals with the country as it could continue to trade with the UK as if it were part of the EU for another two years.

The UK remains the second biggest export market for the Western Cape and is an import destination for fruit and wine exports.

-Liesl Venter


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