Speaking after the Eighth EU-SA Summit held in Cape Town in March 2025, European Commission president Ursula von der Leyen observed that SA and Europe have a long and mutually sustaining history. ‘We are united by common passions, […] shared (democratic and constitutionalist) values and common interests,’ she said.

The EU is a unique supranational political and economic union. Within a bloc of 450 million consumers across 27 countries, goods and people have freedom of movement without the hindrance of border checks or tariffs. Citizens enjoy a common currency and a single passport. They experience common foreign and security policies as well as co-operation in justice and foreign affairs. Sovereignty and thus functions are shared between member states and the EU organs based in Brussels.

In Cape Town, Von der Leyen’s main issue was how to deepen the current relationship in an increasingly volatile global economy. ‘We know that others are withdrawing. So here, we want to be very clear with our message: We are doubling down with our support. We are here to stay,’ she said.

This is of course good news for an SA business community looking to diversify and extend export markets as well as a country on the hunt for foreign investment. Nor were these merely nice words. Von der Leyen used the event to announce a €4.7 billion (R24 billion) Global Gateway investment package designed to boost connectivity, develop local vaccine and biomanufacturing capacities and deepen renewable energy production.

According to the EU’s ambassador to SA, Sandra Kramer, this brings total EU investment packages – which combine European grants and loans as well as private sector investment – to almost €12 billion (R240 billion), much of it focused on SA’s growing green economy. Many of the emerging opportunities are directly related to the low-carbon, renewable energy, green hydrogen and sustainability spaces.

‘We [the EU] have prioritised the transition to green energy, ensuring that this process is just and inclusive and safeguards the livelihoods of those most affected by the transition,’ said Von der Leyen.

In November, just before the G20 Summit in Johannesburg, the EU and SA announced the signing of the Clean Trade and Investment Partnership, adding critical minerals to the existing co-operation in renewable energy commitments, which are deepened.

‘This new, dynamic form of trade agreement brings together competitiveness and climate action. We are stepping up mutually beneficial co-operation in the clean economy and on critical raw materials,’ said Von der Leyen.

The EU is SA’s biggest economic partner by any metric. Europe accounts for more than 20% of SA’s international trade (amounting to nearly R900 billion in 2024), well ahead of China (16%) and the US (8%). SA is the EU’s biggest trading partner in sub-Saharan Africa, and the bloc is SA’s largest source of foreign direct investment (FDI), accounting for nearly half.

But the EU is a critical market for SA not only on account of its size. The biggest single export item in SA’s account is automobiles. Europe receives more than 75% of SA vehicle exports, comprising about half the country’s manufactured automobile output.

With SA manufacturing struggling to remain relevant in the face of East Asian competition, the country’s automotive industry has come to assume an ever-greater importance. It accounts for 22.6% of all manufactured goods in SA, contributes 5.2% of GDP and employs 115 000 people. Three of the country’s ‘Big Seven’ automakers are European owned – BMW, Mercedes-Benz and Volkswagen.

‘What makes our relationship so special is that the majority of South Africa’s exports to the EU takes the form of finished or semi-finished products, from cars to heavy equipment to chemicals,’ according to Kramer.

Between 1 000 and 2 000 European firms are reportedly active in SA, employing more than 500 000 people.

Denise van Huyssteen, chief executive of the Nelson Mandela Bay Chamber of Business, the region in which Volkswagen has its SA plant, refers to an ‘industrial symbiosis’ between German automakers and the SA factories.

‘South African manufacturing facilities, many of which are European owned, produce vehicles for the EU market while simultaneously relying on European expertise, components and machinery for their operations,’ she says.

She notes that while SA ‘possesses the intellectual and technical capacity to produce complex, knowledge-intensive manufactured goods’, its current trade mix does not yet fully reflect this. She argues that ‘the strategic imperative is to bridge this gap by transitioning from a commodity-based economy to one driven by value-added products and technological expertise’, adding that ‘the EU partner-ship offers a direct pathway to achieve this’.

Trade between SA and the EU is conducted in terms of the Economic Partnership Agreement (EPA), signed in 2016 between the EU and six Southern African Development Community countries (SA, Botswana, eSwatini, Lesotho, Mozambique and Namibia). Operational from 2022, it fully or partially removed tariffs on 97.8% of goods exported from SA.

However, beyond the warm words exchanged in Cape Town, there are areas of current and potential friction that cannot be wished away.

There are what many consider to be the use of non-tariff barriers to protect EU farmers. EU health and safety standards for agricultural products are notoriously rigorous. The 2021 introduction of new standards to combat two phytosanitary threats – a pest called the false coddling moth and a fungal disease called black spot – saw a 25% reduction in SA’s exports of oranges to the EU over the next two years. SA citrus growers have appealed the issue to the World Trade Organisation.

European countries have every reason to protect their farming industries from external crop and animal diseases. But SA producers believe the citrus industry measures are simply mechanisms to protect Spanish orange farmers from competition. A representative of Spain’s citrus industry – the Valencian agricultural association Ava-Asaja – argued recently that its early-season production of two orange varieties (satsuma and clementines) had dropped 40% since the 2016 EPA allowed SA to sell late-season mandarins into the European market without incurring tariff duties.

The other potential area of friction is the Carbon Border Adjustment Mechanism (CBAM), scheduled for introduction at the beginning of 2026. Carbon-intensive products exported to the EU will incur a tax, designed to level the playing field between (carbon-emitting) foreign producers and (heavily regulated) European industries.

The CBAM is a core component of the European Green Deal, which was introduced in December 2019 and designed to render the continent carbon neutral by 2050. While the EU plans to introduce the CBAM gradually, the first phase will increase the price of cement, fertiliser, iron ore and aluminium exports to Europe, affecting the competitiveness of non-EU producers. Other clauses may affect agricultural goods through a blanket exclusion of crops that use pesticides banned in Europe. The biggest impact could be on SA table grapes, 57% of which are exported to the EU.

Despite these frictions, there is considerable alignment between SA and the EU. SA’s uptake of green economy opportunities has been enthusiastic, as most recently demonstrated by the country’s 2025 Integrated Resource Plan, which envisages that 80% of SA’s future electricity generation capacity will be from renewable sources.

With encouragement and financial assistance from the EU, SA’s industrial and agricultural producers have every prospect of successfully navigating the emerging low-carbon terrain. The long-established mutual interaction between SA and European businesses makes for a fruitful relationship.

By David Christianson