SA leaving trade money on the table, says the EU

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A booming demand for goods and supply chain disruptions caused by Covid-19 has given the shipping industry one of its best years.
Photo: Getty Images
A booming demand for goods and supply chain disruptions caused by Covid-19 has given the shipping industry one of its best years. Photo: Getty Images
  • An EU study says SA is not taking full advantage of export opportunities.
  • There is potential to export more food and motor vehicle components.
  • The block says it wants to assist SA to move towards greener production.

SA has R350 billion of untapped export potential with the European Union (EU), says a new study funded by the 27-member economic bloc.

While the EU is SA’s biggest export market by a long way and SA benefits from a large number of duty-free items, trade relations with the EU could be exploited to far greater benefit, the head of the trade and economic section of the EU delegation to SA, Roberto Cecutti, said on Thursday. 

The study, which modelled products with preferential access against the potential demand globally, and particularly European countries, was conducted by consultancy Trade Advisory. It found that R350 billion worth of products had potential for export in the short term, in the medium term R280 billion, and the long term R210 billion.

In the short term, motor vehicle components and food and agricultural products held the most untapped potential. In the medium term and long term, food and agricultural products, basic iron and steel, metal products, primary agriculture, and textiles had the largest export growth potential. 

Examples highlighted in the study included the export of ferroalloys to Belgium, lemons and other agricultural products to Hungary, and wearing apparel to Portugal. 

READ | EU carbon border tax won't squeeze existing SA exports just yet

The EU has an asymmetrical economic trade partnership (EPA) with the SADC region, with 96% of SA products carrying no duties with 2.5% of products restricted and 1.3% excluded from free trade. On the other side of the relationship, 13.8% of EU goods are excluded from free trade. 

Roberto Cecutti
Roberto Cecutti, head of the Trade and Economic Section, European Union Delegation to South Africa.

In the case of restricted items where quotas apply, SA was not using its full quota and could export more butter, canned fruit, citrus jam, frozen strawberries, milk powder and crystalline white powder.

Cecutti said the EU wanted to see SA export increase and the EPA, which is under five-year review, renewed and adapted to take account of new developments. 

Martin Cameron of Trade Advisory, who undertook the study, said: "In the global context there is opportunity for SA if we do the right things. And one of those things is to simply be aware of the opportunities and then to figure out how to access them."

READ | SA must step up production of EVs for export or be left behind, says Patel

While the EU is SA’s biggest export market at 40% and its primary market for the export of motor vehicles (24%), new climate change-related regulation could enormously impact these should SA fail to align itself with greener production methods.

The EU has put in place a Carbon Border Adjustment Mechanism that taxes goods on carbon emissions content. SA has three years to adjust to the tax, which will be phased in.

SA will also have to adapt to the production of electric vehicles European countries have begun to set deadlines beyond which they will not import petrol engine motor vehicles. 

"There is a transition period for the Carbon Border Adjustment Mechanism and not all products will be covered by it. It does cover agriculture, steel and electricity in general. We all have an interest in approaching things through dialogue. SA is doing quite a lot already through the emissions trading schemes they have put in place.

"We also have under the Just Energy Transition Partnership (JetP) $8.5 billion that has been put in to support SA. A lot of things can also be done to assist the private sector to become greener … We are having the discussions and we are keeping the channels open," said Cecutti.

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