European Union threats South Africa after the country cut BITs with EU member states.


Davies, EU in war of words over trade deals

EUROPE’s trade chief on Wednesday delivered a blunt warning to South Africa about the future of its relationship with the European Union (EU), South Africa’s single largest trade partner.

The warning was welcomed by European business leaders attending the South Africa-EU Business Forum, hosted by the Department of International Relations and Co-operation in Pretoria, with one calling it “frank and overdue”.

Tensions between South Africa and the EU have escalated recently, especially with South Africa having joined the Brics bloc of emerging economies, raising fears that this may be at the expense of its long-standing ties to Europe’s developed economies.

European Trade Commissioner Karel de Gucht gave short shrift to pleasantries in his opening remarks to the forum.

He said European investors were “watching developments in South Africa very carefully” after the country “unilaterally” cut bilateral investment treaties with EU member states Belgium, Luxembourg and Spain. It had also indicated it would do the same with about a dozen EU countries in all.

“There was little consultation with us,” Mr de Gucht said in his keynote address to the forum, which took place before the sixth South Africa-EU summit on Thursday.

This meant there was no “predictable” framework for relations, Mr de Gucht said, who warned it may only be a matter of time before investors “looked away”.

The commissioner’s remarks appeared to stun South Africa’s delegation, including fellow speaker Trade and Industry Minister Rob Davies. Late last year, Mr Davies called in Belgium’s ambassador and said South Africa was ending its bilateral investment treaty.

And late last month, South Africa also abruptly cut bilateral investment relations with Spain. An EU spokesman yesterday said this was done at director-general level in the Department of International Relations and Co-operation.

Mr Davies had earlier acknowledged in remarks to the forum that the EU was both South Africa’s biggest trading partner and investor, and said this probably held true for the rest of Africa.

He said that between January 2008 and May this year, 350 foreign direct investments by European companies, worth a total R162.4bn, had been made in South Africa.

Mr Davies said that since the global financial crisis, South Africa’s exports to the EU had dropped significantly and had not recovered to 2008 levels. Meanwhile, EU imports into South Africa had grown.

“That means we have a growing (trade) deficit with the EU.”

European business leaders in South Africa on Wednesday hailed Mr de Gucht for delivering what they said was a “frank and overdue message” to the South African government.

“He was very clear — and in a good partnership one has to be clear if one wants to improve the partnership,” said Matthias Boddenberg, CE of the German Chamber of Commerce and Industry in Southern Africa.

“But I was very surprised. I didn’t expect him to use these key words,” Mr Boddenberg said.

Italian businessman Ezio Vernetti, South Africa-based but covering Africa for shipbuilder Fincantieri, said he was struck by Mr de Gucht’s straight talking.

“There was a lot of realism in what he said,” Mr Vernetti said.

Sidwell Medupe, spokesman for the Department of Trade and Industry, said Mr Davies and Mr de Gucht had held a scheduled bilateral meeting after their opening remarks at the forum.

“That meeting went extremely well. There is nothing wrong between us and the EU,” he said. “We are not at all intending to undermine the protection of investors. We assure them that South Africa is an investment-friendly country.”

He said the joint bilateral agreement between Belgium and Luxembourg, and another with Spain, had not been cancelled, but had “expired”. The agreements remained protected for 10 years after expiry, he said.

Mr Medupe said South Africa did not have a bilateral agreement with the US, which has more than 500 firms in South Africa. Yet investors were “still protected”.

Mr de Gucht said trade relations between the EU and Africa, including South Africa, had been “mutually beneficial”, with each exporting value-added products. He said the EU had agreed in the latest round of economic partnership agreements (EPA) negotiations to an “asymmetric” opening of markets to South Africa’s farm produce.

When the EU took into account the “cancelling” of investment treaties by South Africa, it did not feel it was a reciprocal relationship.

Mr Davies told a media briefing on Tuesday that South Africa would lobby during the South Africa-EU summit for the favourable conclusion of negotiations on an EPA.

There were concerns over the “artificial” deadline of October 1 next year, imposed by the EU, for the conclusion of EPA negotiations with southern African countries. Mr Davies warned that the EU’s threat to withdraw preferential access of products from neighbouring countries such as Botswana if EPAs were not finalised by then would be “devastating”.