Under the new EU-SADC Economic Partnership Agreement (EPA), SA’s wine quota increased to 110 million litres (up from 48 million litres under the Trade Development Cooperation Agreement (TDCA)). As British citizens decide whether to remain or leave the EU (the so called Brexit vote) on 23 June 2016, how will SA’s wine exports be reconfigured should Britons choose the latter?
How much wine does South Africa export to the EU and Britain?
South Africa’s overall wine exports to the EU have averaged roughly 312 million litres over the past two years (from 2014 to 2015) – of which 71% is bulk and 29% is bottled. Over the same period, South Africa exported 111 million litres of wine to the British market – 72 million litres (69%) was bulk wine, and 34 million litres (31%) was bottled wine.
What is Britain’s share of South African wine exports in the EU market?
The British market consumed an average of 35% of South Africa’s total wine exports to the EU in the over the period 2014 and 2015. More specifically, the Britons accounted for 35% of South Africa’s bulk wine exports in the EU market (figure 1), 38% of bottled wine (figure 2), and 24% of sparkling wine.
Unpacking the wine quota under EPA
Under the EPA, South Africa has a wine quota that starts at 77 million litres for bottled wine, and 33 million litres for bulk wine (table 1). Each calendar year thereafter, the quota is set to increase annually by 1% annually (that is, 741 300 litres for bottled wine, and by 317 700 litres for bulk wine).
What would a Brexit imply from a South African wine export market perspective?
The departure of Britain from the EU means that the quota under the EPA would not include the British market. In this case, the quota will be re-allocated among the remaining 27 EU countries. It reduces the EU market from 221 million litres to 145 million litres for bulk wine, and also reduces bottled wine from 90 million litres to 56 million litres .
If we take the starting quota of 77 million litres for bottled and 33 million litres for bulk wine as a starting point, it may be the case that South Africa will not, in the long term, be able to fill the bottled wine, with a gap of about 21 million litres.
Although a Brexit would, in principle, imply generally higher tariffs for South Africa’s wine exports to Britain, the reality is that the possible departure of Britain will not be immediate. According to Article 50 of the EU Treaty, which provides a legal framework for EU member states seeking to leave the Union, a vote for a member state to leave will initiate the negotiation process, but not necessarily cause an immediate withdraw. This suggests that the existing trade relations with Britain will be maintained, at least temporarily. But the time frame for such a transition period is not clear. If the negotiation of Britain’s departure from the EU becomes a prolonged drawn-out process, then it is possible that it could be 8 to 10 years.
 We use the 2014 and 2015 exports as a base period of reference
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