SA keen to strengthen ties with EU


17 July 2013

South Africa is keen to strengthen its investment partnership with the European Union (EU), despite the fact that there are some issues that need to be tackled, says Trade and Industry Minister Rob Davies.

Briefing reporters in Pretoria on Tuesday ahead of the 6th SA-EU Summit, which takes place on Thursday, Davies said negotiations on the Economic Partnership Agreement (EPA) between the EU and the African, Caribbean and Pacific (ACP) Group of States would be among the summit’s deliberations.

“The European Union Trade Commissioner, Karel de Gucht, has said that the withdrawal of the provisional market access is October next year. Parliament said the deadline would be 2016. We support this rather than 2014,” Davies said, citing this as one of the issues that needed to be resolved between parties.

The deadline would not affect South Africa but would affect its neighbours Swaziland, Botswana and Namibia, “and we are concerned about the consequences of any unilateral withdrawal of market access to a bunch of countries which are clearly developing countries, merely because we can’t meet an artificially imposed deadline,” Davies said.

Xavier Carim, the Department of Trade and Industry’s deputy director-general for international trade and economic development, said the deliberations were taking place at a time when there were growing imbalances in global trade.

“We have been making progress in the negotiations. It’s been a drawn-out process since 2007. We’ve made significant progress on a number of fronts, but there are still a number of serious issues that need to be confronted,” Carim said.

“The growing concern in the [Southern African Development Community] SADC group is the termination next year. Effectively this will mean that for Botswana, Swaziland and Namibia, they will see massive declines in their exports to the EU and will hold serious socioeconomic consequences for them.”


Balancing trade levels


South Africa already has a bilateral Free Trade Agreement (FTA) with the EU called the Trade, Development and Cooperation Agreement (TDCA), whose architecture is premised on the EU granting the country much more access in terms of the tariff regime in manufactured products than in agricultural products.

In terms of the TDCA, South Africa has duty-free access to the European market for about 65% of its agricultural products, and in return for that the country receives more than 90% (from the EU).

“We as South Africa, having the FTA in place, would not be obliged to negotiate a new trade agreement with the EU. But we said that we would do so and we are involved in the process because we think it is strategic for SA to harmonise its trade relationships with those of our neighbours,” Davies said on Tuesday.

The levels of trade between South Africa and EU have not returned to the levels they were at before the onset of the 2008-09 global financial crisis.

Total trade with EU countries was R383-billion in 2012 compared to R419-billion in 2008. In 2008, South Africa exported R186-billion worth of goods to the EU, with this figure falling to R122-billion in 2012. Imports from the EU, however, have more than recovered, from R233-billion in 2008 to R239-billion in 2012.

This meant that South Africa’s trade balance with the EU had grown negatively from -R47-billion in 2008 to -R95-billion in 2012.

“There are a number of factors that have underpinned this,” Davies said. “[One] of the realities we need to take to take into account is that there’s been constrained growth in some countries of the EU.”


Citrus market watch


Meanwhile, South Africa was was trying to negotiate around the issue of the EU’s decision to “upgrade the surveillance” of the country’s citrus fruit exports.

“The EU has improved or upgraded its surveillance on citrus products which are bearing citrus black spot. They have now strengthened and made more stringent the requirements, and this could affect quite a large number of jobs in the South African citrus industry,” the minister said.

South Africa’s citrus industry exports around 100-million cartons to 45 countries each year, generating around R6-billion in foreign exchange, with about 45% of shipments going to the EU. The industry employs 40 000 permanent workers and 40 000 seasonal workers.

The surveillance upgrade pertains to citrus black spot, a fungal disease caused by Guignardia citricarpa. It affects citrus plants throughout subtropical climates, causing a reduction in both fruit quantity and quality.

Davies said the government had made a presentation to the EU to say “that there needs to be a greater level of flexibility. At this point, they’ve not shown any great willingness to respond”.

He said there was a low risk of transmission of the disease, which did not damage the fruit but is on the rind of the peel.

“There’s a low risk that this could be transmitted to the orchards of Europe. They have increased their surveillance, and if they find five consignments [with citrus black spot], they ban you. That is of concern to us.”

However, Davies said the government looked forward to a “fruitful” dialogue during Thursday’s summit.

One of the things that South Africa wanted to convey to the EU was that the African continent was one of the next growth frontiers, and that the continent was committing itself to industrialisation, which is anchored on strengthening regional integration.

Relations between South Africa and the EU were improving, Davies noted.

“We have seen a strengthening EU investment relationship with South Africa. Between January 2008 and May 2013, there were a total of 350 FDI [foreign direct investment] projects in South Africa by European companies.”