UK-SA AND BREXIT

Brexit will be good for South Africa, says the UK High Commissioner

By Peter Fabricius 12 August 2019
Caption
There are strong markets in the UK for important products from South Africa for which there is enormous demand in British supermarkets, says UK High Commissioner to South Africa Nigel Casey.

UK High Commissioner Nigel Casey says that post-Brexit, South Africa and the SADC-Mozambique bloc will be able to negotiate one-on-one trade deals with the UK, and not be tied to European Union restrictions.

South Africans need not fear Brexit as it will be good for this country, UK High Commissioner to South Africa Nigel Casey insists.

Britain’s departure from the European Union, which must happen by 31 October, will bring increased trade and development between the UK and South Africa, Casey said in an interview with Daily Maverick.

He said the main question South Africans are asking him about Brexit is “ ‘What’s in it for South Africa?’ Which is exactly the right question to ask? It’s not ‘isn’t it terrible’ but ‘what are the opportunities for us?’.

I think there genuinely are opportunities for South Africa. For a number of reasons. First of all our economies are complementary. There are very few products where we are in competition with South Africa.

And there are strong markets in the UK for important products from South Africa, notably wines, fruits, fruit juices, for which there is enormous demand in British supermarkets.

But also the UK has been a strong market for automotive exports. We’ve had integrated supply chains for a number of years. There are very few areas, chicken might be one, where there might be a clash of interests.

So that’s a very good basis for looking to expand trade in the future.

The second reason is that as we leave the EU and have the freedom to set our own trade policy, we will be able to assume an ambition to have a strong development focus to our trade policy.

So we will be able to use trade policy to drive development in Africa. To help drive intra-Africa trade. And in particular against the context of the Continental Free Trade Area.

There’s a real opportunity to bring together our trade and development objectives which has not always been possible in the past. And finally, I would say that because South Africa has weight in the international system, it’s a country which a lot of people in the UK know and are interested in; it’s a member of the Commonwealth, I’m confident in the world beyond Brexit, when we’re looking for partners we can expand our business with, South Africa will be on that list.”

Casey disclosed that South African and British trade negotiators had met over the past month to do just that by trying to reach a UK-SA free trade agreement before Britain leaves the EU on 31 October. The new deal would replace the current trade arrangement between the two countries which are governed by the European Union-Southern African Development Community (SADC) Economic Partnership Agreement.

The British High Commissioner, Nigel Casey, hosted a celebration of The Queen’s birthday on 26 June 2019 at his residence in Pretoria. Picture: Sebabatso Mosamo/Sunday Times

The trade negotiators picked up the negotiations where they left them in March when they were trying to beat the then-deadline of 29 March for the UK to leave Brexit. The negotiations were suspended then because the EU gave then prime minister Theresa May an extension until 31 October to negotiate a new exit deal.

Casey explained that on the South African side, there had also been a reason for a pause as the country soon went into campaign mode for the 8 May elections.

The good news (now) is obviously that the new South African Government is in place and the new Minister of Trade and Industry (Ebrahim) Patel has injected new energy and impetus into the process and has made clear to me from day one that he wants to get this process wrapped up as quickly as possible.”

Patel had recently told Parliament that he wanted a deal in a matter of weeks.

Casey also noted that South Africa now had “a very heavyweight negotiator, in the shape of Xavier Carrim” who had just returned from being South Africa’s ambassador to the World Trade Organisation (WTO) in Geneva to become the deputy director-general responsible for trade negotiations in the Department of Trade and Industry.

So we’re well placed to get this process done and we hope to do it quickly,” he said, adding that South Africa’s political interest in finishing the job was being matched by the UK.

He said the trade officials had made good progress in their meeting in narrowing down differences. Everyone was aware that they needed to reach an agreement soon so that the parliaments of the seven countries involved could ratify the agreement before 31 October, though in some SADC countries the governments may implement such agreements pending ratification.

The participating countries in the current EU-SADC Economic Partnership Agreement are the European Union on the one side and on the other side the members of the Southern African Customs Union, SACU, (comprising South Africa, Botswana, Lesotho, Namibia and Eswatini) plus Mozambique.

Now the UK and the SACU countries plus Mozambique are hoping as far as possible to “cut and paste” the EU-SADC Economic Partnership Agreement into a new UK-SADC free trade agreement, though the new deal will not be exactly the same for various reasons.

Casey noted that the trade officials had met before the change of government in the UK when Boris Johnson replaced Theresa May as Prime Minister.

Among the new cabinet ministers was a new Secretary of State for International Trade plus new ministers in that department. They needed to be brought up to speed on the details of the agreement although they were aware of the big picture.

Casey said he didn’t want to discuss the details of the sticking points in the negotiations because “successful negotiations need a bit of private space” and also because the issues were essentially the same ones which Britain had been negotiating with more than 30 other trade partners with whom the EU had free trade agreements.

He said Britain had made progress in these negotiations and had so far reached agreements covering some £70-billion of trade.

But he added “what you agree with one group needs to match or be in agreement with others or you start to create problems with other partners. So that’s what we’re very conscious of so we’re not going to negotiate in public.”

However, he noted broadly that the issues still outstanding were still the same as those in March, around “rules of origin” and “sanitary and phytosanitary” (SPS) protections which countries use to prevent animal and plant imports bringing in diseases.

Back in March, then-Trade and Industry Minister Rob Davies and his officials explained that the difference over rules of origin concerned the UK’s insistence that it should be allowed to include any inputs in its products from EU member states and still enjoy privileged access into the SACU/Mozambique market under the new trade deal. The SACU/Mozambique side felt that this concession might give the UK better market access than the EU itself in some cases.

For instance, if SACU/Mozambique imposed an anti-dumping duty on an input into an EU export to South Africa, that product does not enjoy full duty-free access into the SACU/Mozambique market.

Davies said then that it would violate the Most Favoured Nation provisions of the Economic Partnership Agreement if SACU/Mozambique favoured the UK over the EU in such cases.

In March, and probably still now, under the hard-bargaining Carrim, the SACU-Mozambique side was demanding that if the UK could include any EU inputs into its exports to SACU-Mozambique, the UK should reciprocate by allowing the SACU-Mozambique side to include inputs from all of its members into its exports to the UK.

The example cited is that when Eswatini cans peaches for export to the EU now, it sources the peaches from Greece because South African peaches do not enjoy the same full duty-free, quota-free access to the EU markets as do fruits from other southern African countries.

So under the new trade deal with the UK, Eswatini – and other countries doing the same sort of thing — should be allowed to source those peaches from South Africa, the SACU-Mozambique side was arguing.

The SPS issue concerns how long the UK is prepared to continue to accept the countless SPS certificates negotiated between the EU on the one side and the SACU-Mozambique side on the other, before they have to be re-negotiated with the UK.

If the UK and the EU fail to reach a Brexit deal by then, the UK will crash out of the EU on that date. If the UK and SACU-Mozambique trade negotiators also fail to reach a trade deal by then, a set of “no-deal” import tariffs which the UK published in March will kick in.

Casey said the no-deal tariff schedule was still on the table. Davies said in March the tariffs were mostly favourable to SA and the other SACU/Mozambique countries as most agricultural products would enter the UK duty- and quota-free.

These tariffs would be especially favourable to wine producers as they would effectively allow them to export as much wine as they liked. They are now subject to a 150-million-litre-a-year quota to the whole EU.

But Davies said beef and sugar exports would be subject to higher import tariffs, which would hurt Botswana and Eswatini respectively.

And finished automobile exports would also incur an increased import tariff of 10% which could be fatal for SA auto exports to the UK.

Conversely, UK auto exports to SACU/Mozambique would incur a 25% import tariff and whisky exports would incur import tariffs of R4.50 a litre.

Casey said last week, though, that the no-deal package had explicitly been published as a temporary, one year measure and so the time pressure to reach trade deals between the UK and its trading partners, including SACU-Mozambique, would remain.

As Rob Davies identified, even the relatively generous provisions of the no-deal tariff schedule would cause disruption for certain important sectors, notably automotive.” So there was no complacency on either side about that fallback provision since it would not deal with all the issues now being negotiated.

More broadly, Brexit would be positive for all of Britain’s partners around the world, including South Africa, Casey said.

He recalled that Johnson was personally the author of the “Global Britain” policy “which is really a way of encapsulating the idea that Brexit should be a spur to us for reinvesting in our partnerships around the world and re-engaging beyond our partnerships in Europe.

The UK’s foreign secretary had already begun living that policy by making his first foreign visit to the ASEAN summit to engage with its members.

You will see him focusing on the world beyond Europe as well as Brexit. And I’m sure that will also be true of the Prime Minister even if Brexit is the number one project of the government.

And here in Africa we are living this too,” Casey added, saying the Africa department of the foreign office was getting significant new resources, including more than 400 new diplomatic jobs.

I’ve personally and happily lost two jobs in the last month. When I arrived here I was (also) High Commissioner to Lesotho and what was then Swaziland. We opened our High Commission in Lesotho with a permanent, Maseru-based High Commissioner, Anne Macro (in May).”

And just a week before Casey spoke to Daily Maverick, “last Thursday my colleague John Linfield presented his credentials to King Mswati. And is now resident in Mbabane”.

So we have a permanent presence in both capitals for the first time since 2005. We are also opening for the first time in Mali and Chad, recognising the importance of the Sahel to the stability and security of the continent.”

There had also been an upswing in relations with South Africa, with a visit by President Cyril Ramaphosa to Britain in April 2018 and May’s visit to South Africa in August 2018. Both sides were focused on increasing UK investment in Africa which was why May had very deliberately come to SA on her first African visit and had focused on investment to Africa in her keynote speech here.

May had announced Britain’s ambition to become the biggest investor among the G7 countries in Africa by 2022, which meant overtaking the US and staying ahead of France. May had also announced that the UK would be holding an Africa investment summit in London which had now been set for 20 January 2020.

Ramaphosa had been invited “and we very much hope that he and other African heads will attend”.

So we’re living this Global Britain ambition here in Africa and it’s already had a very marked positive impact on our relations with South Africa.”

Casey said the standout British investment in SA since Ramaphosa launched his major investment drive last year had been Rio Tinto’s $400-million expansion of its mineral sands operation in Richards Bay.

It’s a very good example because in our engagement with the president’s investment envoys and team one of the points we’ve made and which we’ve found has resonated very strongly with them has been about the importance of looking after existing investors and looking to existing investors both as the most likely source of fresh investment to South Africa and as the example to everyone else about the benefits of investing here.

If you look after your existing investors, a) they will reinvest and b) others will follow. I think one of the unsung successes of the president’s investment drive and of his investment envoys has been in helping big existing investors deal with challenges that have arisen for their existing presences here in a way which has, a) kept them here, kept them interested, helped them keep operating here successfully; and b), as in the case of Rio Tinto, has unlocked fresh investment decisions. I know that’s very much on the minds of the investment envoys as they go around.

And I think that’s the right focus.” Some of the successes of the investment drive had therefore been slightly invisible as they had been “avoiding negatives”, avoiding existing investors leaving or not expanding operations.

Obviously it’s a challenging environment and the envoys have been the first to admit that it’s sometimes been a tough sell. I think the single biggest challenge is growth… Investors will inevitably look for markets where there is strong growth which is why getting South Africa back on the road to strong growth is so important.

But what is always striking for me is that there is never a shortage of interest when I’m in London in South Africa, what it means, what the prospects are.

And I know from the regularity of visits by senior South Africans to London that they equally recognise that London is and will remain a leading source of capital investment for the African continent, whether that’s British-origin investment or investment that flows through the City of London into Africa. So they’ve always made it a regular stop on international investor roadshows for very good reasons.”

Casey and his counterparts from other big investor countries caused some controversy earlier this year by criticising aspects of the investment environment.

Asked if he was more optimistic a year later, Casey said investors wanted certainty and “one big piece of certainty that’s now in place is that the election is behind us… It’s clear that President Ramaphosa is going to be in charge for the five years ahead and that’s a very important signal to investors about stability and direction.

What would be powerful to build on that would be sustaining the momentum of decision-making on systemically important areas of regulation.”

Casey mentioned especially mobile broadband spectrum allocation because he said it was systemically important and could unlock significant new investment as a number of existing market players were ready and eager to invest more in expanding their networks.

And if you want to bring down the price of data which South Africa wants to, the quickest way to do that is to expand the amount of spectrum available. So I’m delighted that the Cabinet has just decided to approve the guidelines for spectrum allocation which have been sent to Icasa.”

Increasing spectrum could unlock a fresh wave of large-scale investment which would have systemically important effects on the economy by bringing down costs for businesses and individuals and driving growth more broadly.

Completing consultations on the Mining Charter would also be important to give certainty to investors in that still-important sector.

Casey also welcomed the last government’s clarification of some of the rules around tourism. He also welcomed, as he knew lots of international businesses would, Ramaphosa’s stated intention to ease the granting of visas for highly skilled international business people because that would enable inward investment, bringing new players into the market.

Casey noted that Ramaphosa had already laid out all these things in his SONA address and the UK was helping SA implement them.

I was particularly interested in the new roadmap which is in consultation in government at the moment for getting South Africa back into the top 50 of the World Bank’s Ease of Doing Business Index.”

The roadmap sets out very specific measures which government at all levels needs to take to get South Africa up the rankings. A high ranking on this index was undoubtedly an important factor when international companies were deciding where to invest.

Casey said one measure — to reduce the amount of time for registering a business to 24 hours — would be very powerful. The UK was ready to support this and other measures being planned.

It shows a seriousness of intent… every measure that’s announced has a self-reinforcing effect. You get into a spiral of positive sentiment just as easily as you get into a negative one. The markets are surprisingly emotional sometimes in the way they look at investment opportunities and risk. And so getting into a virtuous cycle of good news will be self-reinforcing.”

Casey would not be drawn on whether or not he thought that Ramaphosa’s hands were too tightly tied by ANC alliance ideological politics to enable him to do what he should do to really get the economy going.

It’s not for me to comment on internal policies. I would just say we are looking at what can be done, rather than what can’t be done. And to support that and enable it.”

The UK was doing that specifically through its Prosperity Fund, a major part of its international aid fund, and the main instrument it was using in South Africa to support government departments and provincial and city governments, including the ease-of-doing-business programme in DTI which was just one of nine strands of the assistance.

In general, it was providing technical advice to improve public policy, including helping the Health Ministry to improve patient safety, based on Britain’s experience in its National Health Service.

Casey said the UK and South Africa were also working well together on international issues including on the UN Security Council where the UK is a permanent member and SA is occupying a temporary seat this year and next.

Our colleagues in New York report a very good, positive experience of working with South Africa as a vocal, active member of the Council particularly, but by no means exclusively, on African issues.”

Despite a perception by some that SA mostly votes with Russia and China and against the three Western permanent members of the Council, Casey noted that to date this year the Security Council had passed 31 resolutions on which SA and the UK had voted the same way on 29 occasions.

The only two exceptions had been resolutions to impose sanctions on the spoilers of South Sudan’s peace process and renewing the UN peacekeeping mission in Western Sahara.

South Africa had abstained from both votes “really to express a difference on tactics rather than on objectives”, he said.

That’s a pretty remarkable congruence of views and it’s been underpinned by very regular transparent open dialogue here in Pretoria.

I think South Africa is a respected voice and I think it’s shown, contrary to what some people suggested before January, that South Africa has really demonstrated its sovereignty and independence in the choices its made, the emphasis it put on issues.”

The UK and SA were working particularly well together on the “Women Peace and Security Agenda” which was about maximising women’s participation in peacebuilding, peacekeeping and mediation where South Africa had particular strengths based on its history.

Casey said both the UK and SA were focusing on taking practical action on this agenda, rather than just making statements. He added that in April 2019 South Africa had established its voice and independence from other powerful members of the Security Council in its explanation of its vote on UN Security Council Resolution 2467 in April which aimed to curb conflict-related sexual violence. South Africa found itself at odds with Russia and China on the one side and the US on the other.

Casey said that he had not been surprised by the position South Africa took on the Venezuela crisis when it voted against a US-sponsored draft resolution which was critical of the Venezuelan government, and instead voted for a Russian-sponsored draft resolution fully supporting Venezuela. Both draft resolutions failed because of opposition from the other bloc on the Security Council.

Outside the Security Council, the UK had been “working on the same page as South Africa on Iran with respect to the nuclear deal” — the agreement signed by Tehran and Western countries several years ago for Tehran to halt its nuclear weapons development programme in exchange for the lifting of Western sanctions against it.

Last year US President Donald Trump pulled out of the deal and re-imposed sanctions on Iran. As a result, Iran has threatened to pull out of the deal and tensions are consequently rising in the Middle East.

Casey said South Africa had “an important role to play there as a leading member of the Non-Aligned Movement in helping to defuse tension by encouraging Tehran to de-escalate the situation.”

Britain was encouraging this and both it and SA were strong believers in the nuclear deal.

Last year the UK and SA had a serious difference within the Organisation for the Prohibition of Chemical Weapons (OPCW). The UK and other Western and some non-Western nations wanted the OPCW to be given power to attribute chemical weapons attacks in Syria to those responsible for them.

SA, an OPCW member, supported Russia in arguing that the OPCW should not be given that power. Since then the Western nations had prevailed and the member states had decided last year that the OPCW should acquire powers of attribution.

But Casey said that decision was now behind the UK and SA and so London would be keen to work with SA and other nations to make sure the agreement was implemented. It was important to keep agreements like this one alive or it might fade out of existence.

He noted that South Africa had played a big hand in shaping the Chemical Weapons Convention which the OPCW implements and had been a big player at the OPCW.

So we’ll be looking to the South Africa delegation to implement the decisions which were taken last year.”

Asked if it was not rather unnerving for a British diplomat to be facing his country’s uncertain future after Brexit, Casey said “the flipside of that is that it’s the greatest challenge of our diplomatic careers. So you’re either up for that, or you’re not. And we’re up for it.”

He added that South Africa was one of three countries that would have no difficulties in shifting to a bilateral relationship with Britain because, for almost all of its history, that was what it had been.

Outside the EU, the UK would have the freedom to set its own trade policy and would use it to drive intra-African trade to boost development in Africa. That would happen particularly in the context of the African Continental Free Trade Area and particularly, for instance, by supporting trade facilitation- removing non-tariff barriers which block intra-African trade, such as poor infrastructure and excessive red tape at international borders.

Casey insisted that the UK would continue to stick to its goal of spending at least 0.7% of GNI on development aid annually. “It’s in legislation so you’d have to pass a law to change it.” DM

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