Free trade in the SA landscape

by | May 29, 2017 | Wineland, Business and Marketing

For Africa to be economically self-sufficient, continental free trade agreements (FTAs) are the route to go. The Continental Free Trade/EU Agreement includes market integration, industrialisation and infrastructure development.

South Africa is a member of the South African Development Community (SADC) Free Trade Zone, which has 15 members, and the South African Custom Union (SACU), and has been mandated by them to negotiate on their behalf as a region and continent. SACU negotiates as a bloc to boost trade in the region through the SADC Free Trade Area to follow the approved roadmap for the way forward. Although SA will never negotiate as a single entity, this collective bloc also protects underdeveloped markets and boosts the productive capacity of industries thanks to effective strategies.

South Africa currently exports wine free of duty to the SADC member states and vice versa, expanding the market to the East, West and North Africa. The result is market growth, improved service and the duty-free movement of other goods.

SA can export wine to any of the SADC member states (Botswana, Lesotho, Namibia and Swaziland) without paying any duty. This also applies to other SADC member states that want to import wine to SA. All SADC member states enjoy protection against outside states that want to dump their unwanted products in Africa, including any of the SADC member states. No country can export their wine or spirit without paying custom duty to SACU. Trademarks also enjoy protection from states outside SA.

South Africa has three agreements in place:

The vision of the Tripartite Free Trade Agreement (TFTA) is to integrate markets and develop infrastructure and industry. This is an agreement between SADC heads of states, who have signed a declaration of negotiations and the establishment of the Tripartite, Common Market of Eastern and Southern Africa (COMESA), East Africa Community (EAC) and SADC Free Trade Area (SADC FTA).

With Rules of Origin (a portion of the Negotiation of Agreement) being concluded, it means 60% of grape-produced products must be sourced from SADC countries only and 40% from the EAC and COMESA. If the EAC and COMESA can’t supply the 40% grape-produced products, it can be imported from outside the blocs.

The intention is to scale down the 40% as the two blocs can source grape-produced products only from Africa. Furthermore, the three blocs can trade with each other at 0% tariffs or agreed lower tariffs, with no tariff or non-tariff barriers impeding trade. Goods and services can flow from one country to another without any blockage.

The preferential trade agreement (PTA) between SACU and Mercosur (Argentina, Brazil, Paraguay, Uruguay and Venezuela which was suspended on 1 December 2016) came into force on 1 April 2016. The aim is to expand market access to the South American countries at lower tariffs or at 0% tariff, should wine be included as additional product to the Mercosur agreement in the future.

The SADC EU Economic Partnership Agreement (EPA) was concluded in October 2016. In terms of this agreement the quotas for wine were increased from 50 million to 110 million litres, where 77 million litres are for bottled wine and 33 million litres are for bulk wine.

The agreement between the SADC, EU and EPA has created an opportunity for access to the EU market by all sub-Saharan countries. Wine and other goods can be exported duty-free to EU countries. The appeal to all exporters is for them to use the allocated quotas fully so that when the reallocation is done in June and September they can be allocated further quotas.

To address the challenges facing the industry regarding allocations and underutilisation of quotas, 100% utilisation would result in the EU increasing the 110 million litres allocated in 2017. Any underutilisation is negative for the industry and exporters and will result in a reduction of the present aliquot of 110 million litres. This would be sad news for the industry.

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