Volkswagen SA breathes a sigh of relief

Vehicle manufacturer Volkswagen SA is heaving a sigh of relief after the conclusion of a trade pact between South Africa and the UK, which will ensure business as usual if Britain leaves the EU without an agreement.

Thomas Schaefer, chairperson and managing director of Volkswagen Group SA (VWSA), said the danger that a no-deal Brexit held for South Africa, and the vehicle manufacturing industry in general, had now been averted.

Schaefer said it would have been catastrophic for VWSA because its Uitenhage plant exports about 55 000 vehicles a year to Britain. Accordingly, a no-deal Brexit could have seen VWSA lose up to a third of its production.

In volume terms, the UK was the top destination for South African vehicles exported last year.

In value terms, the UK (at R17.2 billion) was second only to Germany (R57.6 billion) as South Africa’s top export market, the latest Automotive Export Manual shows.

Minister of Trade, Industry and Competition Ebrahim Patel said that trade between South Africa and Britain would continue unhindered as a result of the new agreement, irrespective of the Brexit outcome.

Britain is one of South Africa’s most important trading partners. In 2018, bilateral trade between the two countries amounted to R142 billion, said the minister.

The country is also South Africa’s biggest export market after China, Germany and America, and is the seventh biggest supplier of imported goods.

Patel said negotiations over the new agreement began two years ago, and amounted to a continuation of the existing Economic Partnership Agreement (EPA) between the Southern African Development Community (SADC) and the EU.

If Britain left the EU, the EPA would no longer have been applicable to Britain – resulting in the rules of the World Trade Organisation, which are far less favourable in many cases, coming into play.

In terms of an interim tariff regime published by the UK, South Africa would have lost preferential access to the British market for about 114 products. This would have affected exports worth R7 billion.

At this stage, Britain’s departure from the EU is still uncertain, with the deadline having been extended several times. The country now has until January 31 2020 to get its affairs in order but must also hold a general election in December.

Schaefer said the agreement was good news for the motor industry, but there were still stumbling blocks facing the South African sector, including problems with Transnet’s uncompetitive service and uncertainty over electricity supply.

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