Summary
Namibian grape exporters are exploring more cost effective ways of shipping cargo to EU markets. These discussions could usefully factor in the possibility of a ‘hard’ Brexit given the concerns being expressed by the European fruit and vegetable industry and UK freight industry in regard to the severe congestion at channel ports which could arise if no agreement is in place once the UK leaves the EU on 29th March 2019. While government initiatives vis a vis the UK and EU authorities respectively in the context of SACU-UK and SADC-EU dialogues would appear to be essential, in order to retain preferential access to the UK market and avoid disruption of triangular supply chains, it will be up to private sector operators to get to grips with the logistical challenges which a ‘hard’ Brexit would give rise to.
Namibian grape exporters are exploring more direct transport routes for serving EU markets. Currently grape exports are carried by road to Cape Town and shipped to Rotterdam for onward distribution. However discussions have been launched with the company NileDutch over the possibility of shipping Namibian grapes to Europe via the Namibian port of Luderitz (1). In a meeting with Aussenkehr-Grape growers in September 2017 NileDutch’s commercial director Leo Huisman committed ‘to provide a reliable and quality service’ through Luderitz (2).
Currently NileDuch primarily operate services to and from West Africa, including a service which links South Africa to ports in Central and West Africa, using a connecting hub in Luanda (3). NileDutch’s services to Europe include connections between West Africa and Tilbury, the main UK port serving London.
The critical consideration for Namibian grape exporters will be the overall cost of shipping and delivery to market. In 2015 an initial trial of exports through Luderitz was undertaken, but according to Sonop Farms Director Nico Van Der Merwe, cost ‘34% more than our current route’ (2). The financial details of costs and scheduling have yet to be discussed with NileDutch.
Since 2004 Namibian grape exports to the EU have more than tripled, with the UK taking on a growing importance as an EU destination. Having taken only 1 in 5 Namibian grape exports to the EU in 2006 by 2016 the UK market was taking 1 in 3. Since 2010 the unit value of Namibian grape exports to the UK has always been marginally higher than to EU27 markets, with in 2016 the average value in Euros being 6.2% higher than for exports to EU27 markets (5).
Namibia Grape Exports to the EU/UK Market
| VOLUME (T) | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| EU | 12,573 | 14,784 | 12,245 | 17,279 | 15,627 | 16,351 |
| UK | 3,512 | 2,890 | 2,967 | 4,213 | 4,002 | 3,495 |
| UK % EU | 28% | 20% | 24% | 24% | 26% | 21% |
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
| EU | 10,989 | 12,142 | 18,333 | 20,470 | 19,037 | 18,741 |
| UK | 2,910 | 3,846 | 4,598 | 4,818 | 5,371 | 6,186 |
| UK % EU | 26% | 32% | 25% | 24% | 28% | 33% |
Source: EC, Market Access Data Base
The prospect of a ‘hard’ Brexit however may disrupt some of the exports to the UK which take place via an EU27 port of initial entry. This may need to be taken into account in discussions of freight arrangements with NileDutch and other companies.
The UK Freight Transport Association (FTA) has been expressing growing concern over the prospect of a ‘hard’ Brexit leading to chaos at UK channel ports. Analysts working for the FTA have noted how without an alternative trade arrangement in place from day 1 of the UK’s departure from the EU, ‘the UK would not have the IT capacity to process goods which pass to and from the continent’. This could give rise to severe congestion at channel ports, resulting in substantial delays for imports from continental Europe (6).
This perspective largely endorsed the view of Freshfel (the European Fresh Produce Association) which in its August 2017 report on Brexit and the European fruit and vegetable industry, expressed serious concerns over the ‘logistical constraints’ and lack of ‘capacity and preparedness’ at the port of Dover for the reintroduction of border controls on EU27/UK trade (9).
These potential port delays are particularly problematical for fresh perishable products which account for half of the 2 million vehicles which enter the UK via channel ports annually (7). For perishable food products port congestion related delays could serve to increase costs, reduce reliability of supply and reduce the wholesale value of products caught up in this port congestion (6).
Against this background in the face of a prospect of a hard Brexit some importing companies in the UK are looking ‘to bring goods in from overseas via Tilbury, Essex, rather than through Europe and Rotterdam’ (6).
| Comment and Analysis
Whether Namibian grape exporters continue to serve the UK market will depend on both the terms and conditions of access to the UK market and its commercial attractiveness of the UK market in the post Brexit period. In terms of access to the UK market a critical issue will be ensuring the existing EPA duty free-quota free access is rolled over from day 1 of Brexit. This can be seen as primarily the responsibility of the Namibian government negotiating in a SACU context. The UK and EU authorities currently have an “understanding” on the need to ensure disruption of trade with third countries as a result of the Brexit process is minimized and are nominally committed to taking whatever steps are necessary to minimize disruptions. However this is based on the assumption there will be a smooth Brexit. This “understanding” could be put under strain were a ‘hard’ Brexit to take place, and MFN duties be reintroduced on mutual EU27/UK trade. Namibia’s position is complicated by its association with South Africa, where the UK has major export interests. The maintenance of existing UK preferential access to the SACU market is seen as a priority, in order to prevent UK exporters being placed at a disadvantage vis a vis their EU27 competitors. If EU27 exporters find themselves needing to seek out alternative markets in the face of a re-imposition of MFN duties on their exports to the UK, any moves to simply roll-over UK preferential access to the South African market may face opposition from EU27 exporters,. These are the kinds of pressures which could put the current UK/EU “understanding” on the need to minimise disruption of trade with third countries under strain. However even if the Namibian government successfully secured the rolling-over of current duty free-quota free access to the UK market, administrative complications could arise for freight forwarded to the UK market via Rotterdam or other EU27 ports of landing. For example, it is unclear whether following the UK’s departure from the EU, UK customs authorities will continue to recognise the EUR1 movement certificate or whether alternative proofs of origin will be required. Similar question arise with reference to SPS certification and SPS clearance at the initial port of landing. While the UK Food Standards Agency Chair Heather Hancock has confirmed the agency ‘will continue to work closely with the European Food Standards Agency after Brexit’ (7), this needs to be seen in the context where as part of the Brexit process the UK government is also withdrawing from the European Food Safety Agency. Against this background there is a danger that the technical willingness to cooperate could become politicized in the context of a ‘hard’ Brexit. This would be particularly the case if the UK began diverging from EU standards in its efforts to conclude new trade agreements with non-EU trading partners. This issue has already been raised by the US Commerce Secretary, who suggested the UK government may wish to align its standards with countries which favour less regulation than the EU. These comments led to a swift response from the EC’s Brexit chief negotiator Michel Barnier, who declared ‘it is for the British to tell us if they are going to adhere to the European model’, with the UK’s reply to this question being of considerable importance since ‘it will shape the discussion on our future partnership and the conditions for ratification of that partnership’. Since these unresolved issues potentially carry cost implications for Namibian grape exporters, clarification will need to be sought from UK Ministers within the ongoing SACU-UK dialogue on Brexit issues. If alternative documentation (including on SPS matters) will be required then this will need to be clearly specified at an early date so as to minimise trade disruptions. While these issues can all potentially be addressed through direct negotiations, the issue of the commercial impact of severe congestion at channel ports is something which Namibian grape exporters will need to factor into their current discussions on alternative more cost effective routes to EU28 markets. Fortunately only a limited volume of Namibian grape exports to the UK go via an EU27 member states, with this trade generally being driven by the sudden emergence of more commercially attractive market opportunities in the UK. |
Sources:
(1) allafrica.com, ‘Namibia to export grapes directly to EU from the Port of Luderitz’, 29 September 2017
http://www.freshplaza.com/article/182149/Namibia-to-export-grapes-directly-to-EU-from-Port-of-L%C3%BCderitz
(2) New Era, NileDutch offers new hope for grape export through Lüderitz port’, 26 September 2017
https://www.newera.com.na/2017/09/26/niledutch-offers-new-hope-for-grape-export-through-luderitz-port/
(3) NileDutch, ‘South West Africa services’
https://www.niledutch.com/en/services-profiles/south-west-africa-services/
(4) Namibian, ‘Grape exports reach N$800m in 2016’, 25 January 2017
https://www.namibian.com.na/160504/archive-read/Grape-exports-reach-N$800m-in-2016
(5) EC Market Access Data Base
http://madb.europa.eu/madb/statistical_form.htm
(6) Foodmanufacture.co.uk, ‘Food logistics firms grapple with Brexit challenges’, 9 October 2017
https://www.foodmanufacture.co.uk/Article/2017/10/05/Food-logististics-firms-grapple-with-Brexit-challenges
(7) Foodmanufacture.co.uk, ‘Food industry worst hit of all industrial sectors in the event of a hard Brexit’, 13 November 2017
https://www.foodmanufacture.co.uk/Article/2017/10/28/Food-industry-worst-hit-of-all-industrial-sectors-in-the-event-of-a-hard-Brexit
(8) Foodmanufacture.co.uk, ‘Food-industry-faces-unprecedented-supply-chain-challenges’, 7 November 2017
https://www.foodmanufacture.co.uk/Article/2017/10/05/Food-industry-faces-unprecedented-supply-chain-challenges
(9) Freshfel, ‘Impact of Brexit on the European fruit and vegetable industry’, 3 August 2017
http://freshfel.org/wp-content/uploads/2017/08/20170803-Freshfel-Inventory-for-BREXIT-negotiations.pdf