SACU catches Brexit bug

12 Apr 2019

Anxiety and jittery persist as negotiations between the Southern African Customs Union (SACU) plus Mozambique and the United Kingdom stall for the new Economic Partnership Agreement (EPA) as the United Kingdom (UK) prepares to leave the European Union.

This is due to demands by the UK for special treatment at variance with the benefits provided by the EU SACU EPAs.

“What aggravates matters is the fact, the UK has been given up to the beginning of May this year to leave, by the EU on terms stipulated by the EU or earlier if not on the initially agreed conditions which is this Friday 12th April,” hinted Botswana Chief Negotiator at Ministry of Investment, Trade and Industry(MITI), Phazha Butale.

To confirm the seriousness of the situation, the British High Commission in Gaborone, has confirmed that the UK has already published an interim schedule of tariffs that would apply in the event they may have to quit the EU before an agreement is signed.

Consequently, the risk of massive economic loss weighs the most on Botswana and South Africa because of the sensitivity of the industries affected by issues under contention.

Central to the demands is for the SACU+Mozambique to align with immediate effect, and incorporate the standards for plants and animal disease control referred to as Sanitary and Phytosanitary (PSP) measures to those of the UK. Botswana on the other hand has argued that the proposed EPA is merely intended and has been agreed to be a rollover of every clause, condition and benefits enshrined in the EU-SACU EPAs into the UK-SACU+Mozambique EPAs.

“Regarding the Sanitary and Phytosanitary measures we have proposed to our British counterparts to allow us more time ranging from 18 months to three years, whilst they insist on six months,” Botswana’s Chief Negotiator Phazha Butale, explained.

While UK’s concerns for SPS measures are fully appreciated and understood that they would want a kind of framework that allows them to respond promptly to any outbreak of disease without being impeded by discordant arrangements, due consideration it is expected should be given to the responsibility of other parties to World Organization of Animal Health (OIE) standards.

For her part, spokesperson of the British High Commission, Emily Sunders, qualified their position thus: “We are committed to delivering continuity in our trading relationships and minimising any potential disruption as we leave the EU. That is why the UK government has sought to replicate the effects of the current EU-SADC Economic Partnership Agreement. Our ambition to maintain current trade flows is shared by our partners in SACU and Mozambique. Together, we have made significant progress towards this goal over the past 18 months, and will continue to work in partnership to realise this ambition.”

In this context, mention was made of the fact that naturally when countries promulgate policies or standards, there would usually have been strategic plans normally spreading over an extended period like three, in some cases even five years, and that has cost implications to simply replace overnight.

However, the most contentious issue has to do with the UK insisting on being allowed is cumulating in all the goods produced by trade partners which translates into the purchasing of raw materials from them for processing and value addition then sold back or elsewhere as if originating from the processing country, which Botswana and others hold, will completely kill their sensitive or key industries.

Botswana and the UK have strong historical relations hinging on many areas. The differences, according to Butale were certainly temporal, and further that delayed withdrawal and possible extension of the exit would enable more room for even more fruitful engagement.

For example, UK would be allowed to buy beef, diamonds and or auto mobiles or parts from Botswana or any of the partner countries, modify or process it in any manner they want and then sell it back or to respective or any other  countries as if it originated from them.

Botswana‘s position in this regard is a categorical NO, as they know the implications would be catastrophic, the death knell for the Beef industry. In the case of South Africa and to an extent Botswana as well, the Auto mobile industry would be hard hit if UK assumed the monopoly of everything.

More than 50 000 people who would lose jobs in just Port Elizabeth and East London alone, where South Africa assembles Mercedes, Ford, VW and BMW. Then there is in Botswana, Pasdec in Lobatse and Kromberg & Schubert in Gaborone opposite Old Naledi the latter two of which assemble harnesses for various makes of vehicle.

Mike Mortimer, General Manager for Pasdec, Botswana was reported to be in South Africa when sought for comment.

Be that as it may, the EU-SADC Economic Partnership Agreement is a preferential trade agreement that has been in place since 2016. The agreement benefits all members by providing market access and lowering tariffs.

According to Sunders, these benefits are asymmetrical which means that the EU has committed to liberalising its market at a faster pace than SACU&M, adding that the UK Government is committed to ensuring these benefits are maintained as we leave the EU, so that businesses and consumers are not disrupted.

“The best way to provide that continuity and stability is to have a deal with the European Union so that the UK can remain covered by all of these agreements during the Implementation Period. Nevertheless, we are working to have bilateral agreements in place ready for when we need them, whether that is in the event of no deal, or after the proposed implementation period,” contended the UK Official.

 The UK Prime Minister Theresa May has written a letter to the European Council requesting for a year extension. The Council is expected to meet next week over the request. Should the request fail, with the current stalemate, and UK forced to quit before agreement is reached and signed, SACU and Mozambique will be left in limbo.

Mmantlha Sankoloba, Chief Executive Officer of Botswana Exporters and Manufacturers Association (BEMA), concurred, “BREXIT technically means the United Kingdom will exit from all Agreements the EU had concluded with third parties, including all trade agreements. Consequently exports to the European Union via the United Kingdom will no longer be covered by those agreements and will no longer be able to enter the single market via the UK as is currently the case.”

Botswana exports essentially diamonds, other mining products and beef to the European market. According to Statistics Botswana in reference to Bank of Botswana Data, beef represented 1 percent of Botswana's exports to Europe in 2018 mainly via the UK and Norway.

Some of the beef exported to the United Kingdom is then sold to several European Union member states.

Efforts to solicit comment from the Botswana Meat Commission (BMC)’s Acting General Manager, Boitumelo Mogome, have not been helpful as she ignored our email enquiry.