Not too far to trade: Three reasons to be optimistic about trade opportunities for the UK and South Africa
15 March 2018
This Easter I’m lucky enough to be going on a big family trip to South Africa. Two of our three children are teens, so it’s probably one of the last chances we’ll have to do a family trip together. And what a time to be going! The excitement and optimism following the swearing in of Cyril Ramaphosa as State President is scintillating, promising many new opportunities.
One of the things I’m looking forward to – in addition to the usual tourist and cultural excursions – is spending a half-day in the PwC Cape Town office to share views with colleagues about economics, politics, PwC, and opportunities to develop UK-South Africa linkages.
PwC in Cape Town moved into a brand new office in 2016, right in the heart of the iconic V&A Waterfront area.
In preparation for this, I’ve been doing a bit of homework and, in particular, I’ve had a quick look at UK-South Africa trade data. In terms of UK exports, the standout trend is the sharp decline since 2011 (see below). My economist colleagues in Cape Town tell me that this is largely to do with diamonds, i.e. South Africa cutting and polishing its own in this period, rather than importing from the UK and elsewhere. Similarly, in terms of UK imports, there was a pretty sharp decline up to 2013, but a gradual upward trend seems to have resumed since then, probably based on a weak rand over that period. Generally, however, it’s safe to say trade activity between the two countries is pretty muted.
So, is that it? Is it ‘too hard’? Are we just ‘too far to trade’?
No, I don’t think so! Although the recent data paint a modest picture, I think there’s a massive business opportunity for the two countries, and one that should be of great interest as the UK looks to its future trading relationships.
Three reasons for this:
Firstly, the figures to date are bound to be due, at least in part, to political instability and governance issues. Being from Northern Ireland as I am, I’ve seen firsthand the adverse economic impact of political instability and the benefits of turning that around. If the new South African political leadership can establish a more solid and transparent governance platform, this is bound to give UK business the confidence it will need to begin or resume trading.
Secondly, I’m convinced that distance is only one of the factors that impacts on trade. Yes, it’s important. But the 10000km between the UK and South Africa isn’t the only thing that self-respecting business people are going to consider when looking at opportunities. The UK and South Africa share a common language and time zone, the legal systems are quite close, and in many ways we’re pretty well-aligned culturally (e.g. we’re mad about rugby union!).
Thirdly, the data above show clear headroom in terms of trade in services. Time zone, language and culture are particularly important for trading services. I’m convinced that commercial opportunities exist, and technological and regulatory advances mean that the coming decades ought to see unprecedented growth in services trade. All of these things, I think, make the prospect of ramping up trade relations a genuine runner. No, we’re not too far to trade.
Panellists at PwC’s “Reimagine the possible” Budget 2018 breakfast session at Gallagher Convention Centre in Johannesburg, on 23 February. PwC Budget breakfast on Twitter
The first budget under Ramaphosa happened on 21 February 2018. Over the next two days my PwC colleagues convened two budget sessions themed “Reimagine the possible”. I like the title. If we’re going to ramp up trade, we’re going to have to reimagine the possible. I’m sure that the time is exactly right for the business community in South Africa and the UK to give it a go.