British International Trade Secretary (equivalent to Minister in South Africa) Dr Liam Fox announced on his recent visit to South Africa that his country’s export credit agency, UK Export Finance, has increased the funds available to South African enterprises buying British goods and to British companies exporting to South Africa. The intent is to strengthen bilateral trade after Britain exits the European Union (EU) in 2019 – a process popularly known as Brexit.
Fox was in Pretoria to hold talks with his South African counterpart, Trade and Industry Minister Dr Rob Davies. These discussions are the latest in a series of high-level meetings to ensure a smooth continuation of trade and investment relations between the two sides after Brexit.
“The UK has been a significant trading partner of South Africa over the past years and ranks as South Africa’s seventh-largest export partner in the world and second-largest export partner in the EU region,” highlighted Davies. “There is a need to discuss an arrangement on technical issues in order to ensure smooth trade post Brexit.” He pointed out that, between 2003 and May 2017, the UK had directly invested some R159.01-billion in 333 foreign direct investment projects in South Africa.
Fox and Davies reaffirmed their joint commitment to ensuring that bilateral trade after Brexit will continue seamlessly. Moreover, they agreed to expand trade and investment relations that would benefit both sides. In July, Britain’s then Minister for Trade Policy (equivalent to Deputy Minister in South Africa), Lord Price, met with Ministers and senior officials responsible for trade from all the Southern African Customs Union countries (Botswana, Lesotho, Namibia, South Africa and Swaziland), plus Mozambique, also on mutual trade, post Brexit. Both sides agreed that Brexit should not disrupt their trade relations.
In addition to their discussions, Davies took Fox on a tour of the InvestSA One Stop Shop at the Department of Trade and Industry’s head office campus in Pretoria. This is a project to improve South Africa’s investment environment and links and coordinates all three levels of government. It is a partnership that is being developed across the country, starting with the newly established InvestSA Western Cape. Gauteng and KwaZulu-Natal will follow suit before the end of the year. The initiative will then be implemented in the other provinces over a two-year period.
Subsequently, Fox published an opinion piece on the British website brexitcentral.com in support of UK companies investing in other countries. He highlighted “the vast benefits that outward investment can bring to Britain . . . We are the fifth-largest economy but third in the global league of outward investors behind the US and Germany. We are world beaters . . . That’s why I have asked the Department of International Trade, both in the UK and across our foreign posts, to renew our focus on supporting the outward investments of British companies”. He cited the launch of a new State-backed insurance policy to protect British companies investing abroad from losses caused by political or extraneous events in host countries – including civil wars, rebellions, revolutions, nationalisations, and restrictions on remittances (including exchange controls).
He gave six reasons why British companies investing in other countries was good for the UK economy. First, remittances from investments abroad was good for the UK’s “bank balance” – the Current Account position, as it is more formally known. Second, evidence shows that investing overseas makes British companies more competitive, more productive, allowing them to acquire new technologies and expertise (which are transferred back to the UK), and helps build them into global brands. Third, investing abroad aids UK business growth and expansion; increasing investment means increasing trade. Fourth, the transfer of British expertise and capabilities, especially in services, helps “mature” sectors of the host economies more rapidly, “giving greater economic force to both”. Fifth, it increases the reputation of UK business. Sixth, it strengthens Britain’s reputation by displaying the high standards of UK business, improves the likelihood of increasing trade, and “provides employment for the local population, which strengthens bilateral ties, and gives a taste of the benefits of doing business with Britain”.
“There is a compelling case for supporting overseas investment by British firms, and as an international economic department we will introduce additional measures to complement the support we already provide,” affirmed Fox. “In the longer term, we will develop new ways to help British companies that invest and operate overseas . . . Our aim is to build a truly global Britain at the heart of international trade . . . Helping more British companies make good investments abroad will be central to that task.”