While the jury is still out on how Brexit would affect trade, the general consensus is that it might actually be advantageous to South African fruit exporters.
Justin Chadwick, CEO of the Citrus Growers Association, said the impact of Brexit will become clearer over the next two years as the United Kingdom and European Union negotiate their divorce.
Chadwick, nevertheless, said that South African fruit producers stand to benefit from a post-Brexit regime. The United Kingdom is South Africa’s second largest market for fresh fruit exports. Approximately 50% of South Africa’s exported soft citrus is absorbed by the region, according to Chadwick’s estimates.
South Africa might benefit from Brexit in two ways. First, through reduced tariffs. Chadwick said that the tariff on South African citrus exported to the European Union, went up to 16% during certain times of the year.
“With the United Kingdom not having a domestic citrus industry to protect, South Africa might be able to negotiate lower, or even the elimination of, tariffs,” he said.
This probability has been discussed with the Minister of Trade and Industry, Rob Davies, who thinks the United Kingdom will most likely maintain the status quo. However, there might be scope for the renegotiation of tariffs on certain products.
The second benefit could come through more lenient import regulations.
“The South African citrus industry has been subjected to very stringent export protocols to prevent the spreading of black spot into the European Union, even though we feel the regime is not technically justifiable,” Chadwick said. “Since black spot is not a threat to the United Kingdom, South Africa might be able to renegotiate certain plant safety regimes that would significantly reduce our export risks.”
Wessel Lemmer, senior economist at ABSA Agribusiness, said that Brexit offered an opportunity for South Africa to strengthen ties with the United Kingdom, especially if the European Union approached Brexit as an opportunity to punish the region. However, he doubted that this would happen.
It was uncertain how Brexit would affect the British economy.
“Time will tell if Brexit leads to lower economic growth in the United Kingdom in comparison with the European Union,” Lemmer said. “The British Pound has weakened from a very strong position against the Euro, since the United Kingdom announced the exit. Remember, however, the United Kingdom did not leave the European Union to become poorer, but to cut immigration and regain sovereignty.”
Lemmer said he does not think that South African fruit trade would be impacted too much should economic growth in the United Kingdom start to decline due to Brexit.
“South African exporters are highly diversified,” he said. “They will simply send fruit to other more lucrative parts of the world if this should happen.”
He added that South African exports to the European market have become more profitable due to the weakening of the pound against the Euro, but exports to the United Kingdom, even after the weakening of the pound, are still a more lucrative option.