Uncertainties of a post-Brexit world bring opportunities for SA and Africa
BUSINESS LIVE / 05 MARCH 2018 - 06:08 / JOHN MARÉ
Innovative South African diplomacy and business sector action would be useful in this time of turbulence, writes John Maré
Continuing uncertainties in Africa are part of a general global turbulence, which has particularly negative implications for the continent. Nevertheless, while the "Golden Pond" period of the Mandela era, the African Renaissance and new international relevance for Africa may have receded, Africa remains a continent of opportunities, still attracting interest from global business and investors.
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Challenges co-exist with opportunities, and political changes in SA could offer particularly good chances for it to reposition itself as a notable player in the international community while contributing supportive leadership for the continent as a whole in this time of instability.
In this situation, Africa’s longstanding important relationship with the EU assumes more relevance, especially economically, despite Africa’s other expanding partnerships.
In 2016, the EU provided Africa with €21bn of development support and €32bn of private investments. SA’s particularly strong relationship with the EU, including being the only African country having an institutionalised "strategic partnership" with the EU, along with SA’s significant role in Africa, give South African stakeholders and especially South African business considerable potential for playing a stronger constructive role.
SA’s position in the international context, which is often broader than is the case for many other African countries, offers additional catalytic opportunities that interact with the EU-Africa/SA relationships. Of special relevance is SA being the African gateway to and current chair of the Brics grouping and chair of the Indian Ocean Rim Association, which aims to expand trans-Indian Ocean business and co-operation.
The EU-AU summit in Abidjan in November 2017 marked 10 years since the adoption of an Africa-EU strategy, which many feel has been underplayed. Unfortunately, the summit’s results, while expanding possible opportunities, have seemingly not had much impact in the general public domain.
The summit focused on investing in youth, a key priority for Africa, and continued the theme the EU presented at the UN Food and Agriculture Organisation in mid-2017, which strongly linked the future of Africa’s youth with sustainable agriculture.
The EU used the summit to expand on details of extending its external investment plan to encourage EU private sector investment in sustainable development. Some €4.1bn of EU Commission funds in the external investment plan will hopefully leverage more than €44bn by 2020, with agribusiness and small and medium-sized enterprise development being among the priorities
The EU is, however, in unprecedented turbulence, with Brexit being a key issue given the UK’s prominent position in the EU and globally. Its prominent historical involvement with Africa, and SA in particular, underlines its relevance for Africa and Brexit, but the many other challenges now facing the UK and EU are not good news for Africa.
Political instability in Germany is another troubling factor. The German situation, as with difficulties for the UK and EU alike, could undermine such Africa-friendly initiatives as the Group of 20-Africa partnership of Chancellor Angela Merkel.
In this context, however, SA’s strong linkages with the EU, UK and Germany could offer leverage opportunities for SA leadership.
The UK is scheduled to leave the EU by March 29 2019, but not much progress has been made on a "deal" to determine its post-Brexit relationship with the EU. Its terms of departure will affect Africa, including its contributions to EU support measures and the appetites of both it and a post-Brexit EU regarding trade and investment and other issues in the international context.
The UK as a key role player in the EU, and especially its influence over trade and economic matters, has probably helped SA get sympathy inside an EU where 'new' members usually have limited interest in Africa.
Unfortunately, many African stakeholders have seemingly not optimally used various EU opportunities to benefit themselves, despite EU capacities and willingness to help do so before Brexit changes matters.
Many third-party countries don’t yet fully comprehend the knock-on effects of Brexit for them, ranging from UK-EU customs clearance procedures, frontier clearance, phytosanitary inspections, insurance and financial services. As regards Africa, negotiation of trade agreements between the EU and SA/sub-Saharan Africa has meant a convergence of UK and EU interests concerning Africa, but this could become competitive with Africa as the loser.
The UK as a key role player in the EU, and especially its influence over trade and economic matters, has probably helped SA get sympathy inside an EU where "new" members usually have limited interest in Africa.
In the post-Brexit era, SA — as with the rest of Africa — will have to diplomatically find new formats for both its UK and post-Brexit EU partnerships. Adding to uncertainties is that the primary structure for EU relations with sub-Saharan Africa, semi-involving SA, and the African, Caribbean and Pacific grouping of countries under the Cotonou Agreement, will end in 2020. Economic partnership agreements are in some cases still being finalised between the EU and African, Caribbean and Pacific countries.
Recent economic partnership agreements with Southern African countries have accelerated South African trade into the EU, with South African wine, sugar and processed agriproducts having especially benefited. South African Fruit & Vegetable Canners’ Association chairman Nassos Martalas underscores this relevance, noting it has allowed the association’s members to improve their margins and market share, despite the EU market being highly competitive, "fuelled by the EU’s direct and indirect subsidies to its own producers". The association looks forward to further improvements in market access "to partly equalise the playing field", Martalas says.
South African stakeholders must strive to get such EU opportunities maintained after Brexit, but this cannot be taken for granted.
Many players with interests competitive to those of SA are already actively trying to explore and promote their positions at this time of change. Various vested interests may change and push for SA’s current privileges to be reviewed, especially given rising populism and protectionism in an EU that recently concluded free-trade agreements with Canada, Japan and others.
The UK has stated it wishes to duplicate economic partnership agreement terms of trade with SA after Brexit, and SA has commendably led efforts by this region to start informal discussions with Britain to strive for the optimal post-Brexit deal. Actually, nothing can be finalised until Brexit has been finalised and the UK’s new position is known.
Britain will need to reassess its position domestically and vis-à-vis new trade agreements with the EU, Australia and others.
Martalas echoes other South African stakeholders in the canners’ association, saying it supports all efforts to duplicate economic partnership agreements gains with a post-Brexit UK. Britain was SA’s largest importer of canned fruit prior to the EU’s enlargement in the late 1970s and early 1980s and the association optimistically hopes this situation can return to that state after Brexit.
Brexit uncertainties are illustrated with the South African motor vehicle sector. National Association of Automobile Manufacturers of SA director Nico Vermeulen notes that a large proportion of vehicles built in SA are exported to the EU, with the UK being a primary market. These vehicles contain EU components but the assembled vehicles are allowed EU market access under the preferential terms of trade granted in the economic partnership agreements.
After Brexit, South African vehicle exports to the UK may require the inclusion of fewer EU-sourced components, especially if the UK leaves the EU without a generous trade deal. In parallel, there could be internal EU pressures for it to revise preferential terms of trade for South African-manufactured vehicles.
Expanded South African action, including new innovative diplomatic foreign policy and a broadened scope for leadership from the business sector on various levels and across a spectrum of issues in the international context, would seem very useful at this time of uncertainties.
Here the EU/UK-SA/Africa challenge is a priority. This is underlined in an era when business in the global context assumes a greater role for public affairs in partnership with the government and other stakeholders.
Turbulent times indeed.
• Dr Maré is an adviser on international public affairs and diplomacy for multinational companies, governments and international organisations.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER