On the morning of June 24, South Africa woke up to the news that British citizens had decided to exit the European Union. It came as a shock to some while some predicted the move.
To calm terrified South Africans, SA’s former Minister of Finance, Pravin Gordhan provided insight into the implications of the decision.
“Given the size of the European Economy and the British Economy, and South Africa’s links to these economies, this is a very significant decision made by the British public, which could have consequences – both for that particular part of the world and ourselves as well,” said Gordhan.
In a speech addressing the matter, he continued to say, “we have seen that currencies have become volatile. The Rand has depreciated. The share market in the London Stock Exchange has lost significant amounts of money and all of these, are reactions to the decisions that have been made in the United Kingdom. However, the trade links between South Africa and the European Union, and Britain are fairly strong and based on solid agreements.”
The South African public was reassured that banking and financial institutions were positioned to withstand financial shocks of the news. Gordon made reference to the period that lead up to the Great Recession in 2008/2009 when the system demonstrated its resilience.
“We are confident that our financial systems, including the banks and the regulatory framework we operate under, are extremely resilient and reliable,”‘ he said.
It’s going to be a year since the news broke but the same questions asked then are still asked now.
Why should young South Africans care about Brexit?
Here are seven reasons why SA’s youth should really care about Brexit:
1. South Africa cannot afford a further decline in the rand/dollar value at any given time. That alone should be a reason for many eyeballs to pop out when Brexit is mentioned. The outcome of any decline will mean that we all have to dig deeper into our pockets to survive.
2. According to Political Futures Consultancy, Daniel Silke in an article, a weakened or balkanised EU would further hamper any recovery in global trade – already pretty lacklustre. South Africa too would bear the brunt of this as the EU continues to be its major trading partner.
3. Any result particularly a negative one on the economic on London had drastic implications on our country because of our trade agreements between the UK and EU counterparts.
4.While many economists may argue this, but a majority of them are of the view that the most significant threat of Brexit to South Africa may arise from reduced export demand if the UK economy is damaged.
5. Professor, Richard Gibb wrote about the impact of our agriculture, he said, “In 2015, the UK was South Africa’s third most important export market for agriculture. In 2014, approximately 40% of South Africa’s exotic fruit exports, 30% of all fruit exports and 25% of wine exports were destined for the UK market. Clearly, high-value South Africa agricultural exports to the UK are important.”‘ This means our agricultural industry will be affected and we all should worry.
6.The UK is and has been a integral source of foreign investment in SA, it has been reported that some sectors such as our healthy startup culture relying heavily upon it for investment capital. Should Brexit slow down most external trade from the UK, emerging markets like ours, that may lead to far less active foreign investment within our market.
7. The one thing that South Africans don’t really want to hear but need to know and care about is higher inflation rate, weaker growth, and higher interest rates. As unfortunate as it may be the direct impact of that will mean an increase in the petrol price, which proportionally affects the price of food because its mostly transported by road.
Although we have not yet experienced the majority of these, we might want to fasten our seatbelts to prepare ourselves for any rollercoaster ride we may find ourselves in.
Watch: Why SA should care about Brexit
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