‘Brexit’ won’t immediately affect SA trade relations – Davies

SOUTH Africa will be watching the impact on the global economy as well as its own if Britain votes to leave the EU, Trade and Industry Minister Rob Davies said yesterday, but it would not have an immediate effect on trade relations.

With much of the world holding its breath until Thursday’s referendum, and the murder of pro-EU British MP Jo Cox throwing the likely result into further doubt, Davies said in the event of “Brexit”, the UK would have two years to negotiate its trade relations with the EU and talks with South Africa might be necessary.

One option would be for the UK to join the European Free Trade Association, which includes Norway, Iceland and Switzerland, with which South Africa has a deal.

Though he declined to give an opinion on how the British should vote, Davies suggested that if UK companies found themselves out in the cold they could always set up in this country to benefit from the recently concluded Economic Partnership Agreement with the EU.

Briefing the media in Parliament on the benefits of the agreement signed last week, Davies said it allowed for more than double the duty free export quota of 50 million litres of wine (now 110m litres), 150 000 tons of sugar, which had been subject to tariffs of between € 34 and € 42 per 100kg, and 50 000 tons of ethanol.

Tariffs on fish had been relaxed without the requirement for European companies to be granted fishing rights in our waters. The agreement recognised 105 geographic indications – including Rooibos and Honeybush tea, and Karoo lamb, which allows only producers in recognised areas to use these names.

In return, South Africa had recognised 251 European geographic indications, most of which were not in use by local producers, except for Feta cheese. In terms of the agreement, producers using the name could continue, but new producers would have to apply for permission.

Meanwhile, odds on a “remain” victory climbed in the wake of Cox’s shooting by a suspected rightwinger, with bookmaker Betfair putting the implied probability voting in favour of staying in the EU at 67 percent, compared with 60 percent before her death.

Markets also interpreted the murder as likely to shift sentiment in favour to remain, with shares, oil and bond yields rising after campaigning for Britain’s EU membership vote was suspended after the killing, according to Reuters.

The recently volatile pound rose 0.5 percent against the dollar, to $1.4277, with analysts noting that Cox’s death could generate sentiment in favour of remaining.

Emerging market stocks also recovered somewhat from the hammering they took from growing anxiety over the likelihood of Brexit.

The rand recouped some of the previous day’s losses against the dollar, gaining 0.98 percent from its New York close on Thursday.

Government bonds also firmed, pulling the yield for 2026 debt 7.5 basis points lower to 9.07 percent.

Analysts said the rand was partly still benefiting from the boost it received on Wednesday from a cautious Federal Reserve policy statement, which saw some investors push out their expectations on the timing of the next rise in US interest rates. – additional reporting by Reuters