The South African wine industry stands to benefit from the Economic Partnership Agreement (EPA) that a group of Southern African Development Community (SADC) countries has negotiated with the European Union (EU).

 

The EPA was initialled by the chief negotiators on 15 July 2014, signalling the conclusion of ten years of negotiations, and resulting in improved market access for 32 agricultural products – including wine – to the European Union. This according to a press release issued by the Department of Trade and Industry (DTI).

 

The participating countries include Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa.

 

Through the EPA, South Africa has obtained improved market access through inter alia, duty free quotas or tariff reductions for wine exports to the EU and additional policy space for export taxes compared to the current bilateral Trade, Development and Cooperation Agreement (TDCA), as well as an additional agricultural safeguard for certain agricultural products. The EPA will replace the market access chapter of the TDCA for South Africa.

 

The duty free quota – specifically pertaining to the common customs tariff (CCT) – for wine exports to the EU has been increased from 48 million litres currently to 110 million litres per year.

 

In order to promote the export of bottled wine, the quota will be split between bottled (in containers of 2 litres or less) and bulk (in containers holding more than 2 litres) wine. The type of container (plastic, glass, etc) will be irrelevant.

 

The ratio of bulk versus bottled wine, as well as the detail relating to the administration of the quota – which is currently managed by the Directorate: Food Safety and Quality Assurance of the Department of Agriculture, Forestry and Fisheries (DAFF) – will be subject to consultations between industry and Government in due course.

 

Sparkling wine is not included in the duty free quota, as it is already duty free under the TDCA. It will therefore remain duty free under the EPA.

 

In the course of negotiations, various Geographic Indicators (GI’s) on certain South African agricultural products such as dairy were under review. Only a few GI’s pertaining to wine still need to be finalised.

 

“The EU remains one of the most prominent export markets for the South African wine industry and the improved market access that comes with the EPA will certainly bode well for export growth, economic development and job creation,” commented VinPro managing director, Rico Basson.

 

The South African wine industry exported close to 115.7 million litres packaged wine to the EU and 220.1 million litres bulk wine in the year ending June 2014. This represents close to two thirds of South Africa’s total wine exports.

 

“Although the quota allows for a combination of bulk and packaged products, the wine industry views this as an opportunity to find a balance between these two categories,” said Basson. The financial benefit derived from the duty free export component should therefore be strategically applied towards increasing its market share of packaged premium products in the EU by establishing and strengthening brands and promoting Brand SA.

 

Producers are, however, advised to guard against attempts by EU retailers to drive down price points following the concession.

 

Following the initialling of the agreement, a process with an expected timeframe of eight months will follow before implementation, including legal vetting, presentation to Cabinet, submission to the Parliament for ratification and conclusion of the respective national approval processes by each of the parties involved. A specific date will be specified on which the TDCA will be replaced by the EPA.

 

According to Basson the signing of the EPA is a good start towards achieving one of the objectives of a new strategic framework that is being developed by the wine industry, namely expanding trade agreements as a prerequisite for growth. The industry will now further focus on developing agreements with potential trade partners in Africa and other developing countries.