Britain’s decision to exit the European Union has gotten world reactions on the possible effect on countries of the world, but President Zuma says South Africa should remain calm as he is sure the country will deal with the shock.
Though Britain’s exit is feared to tank many countries financial markets and precipitate a recession, the presidency said talks between Treasury, the SA Reserve Bank and the country’s financial institutions on the effect of the vote on the local economy would continue.
Britain’s decision to leave the EU caused a huge economic breakdown for the country starting with a huge fall of its currency in 30 years resulting to another fall of the rand from R14.33 to R15.45. Still, President Zuma says all is well as he reassures the country and investors that SA will be able to weather it all.
“Our banks and financial institutions are well positioned to withstand financial shocks to the system, as demonstrated in previous episodes, including the 2008/09 global financial crisis,” president Zuma says in a statement.
“We are therefore confident that our financial system, including the banks and the regulatory framework, are extremely resilient and reliable.”
“The Reserve Bank and National Treasury are closely monitoring the unfolding developments and will advise the South African public where necessary,” said the presidency, noting that it could take two years for Britain to negotiate its exit with the EU.
However, finance Miniter Pravin Gordhan says the situation now calls for the country to reignite its growth but like the president, he reassured that the country’s banking and financial institutions were well positioned to withstand financial shocks.
Pravin expressed confidence that SA’s banks and regulatory frameworks were “extremely resilient and reliable.”
“We have been saying for sometime now that the process leading up to the voting in Britain would result in volatility in the financial markets and in sentiment and confidence and this is clearly the case in the events that have unfolded today,”
“The National Treasury and the Reserve Bank have met early this morning and are keenly monitoring developments that have taken place and the implications for South Africa and will keep the South African public informed,” Gordhan said as he urged business‚ labour and government to continue cooperating to support investor confidence.
Meanwhile Peter Worthington, principal and senior economist at Barclays Africa, told African News Agency that Britain’s exit of the EU was negative for South Africa, though “quantifying exactly how much is very difficult”. He said there would be trade impacts, with the UK now facing recession and “the rest of Europe likely to take a hit too”.
“In 2015 South Africa sent 23% of its manufactured exports to Europe, including the UK, and 36% of its agricultural exports,” Worthington said.
He added that there were likely to be other effects too, for example, via investment linkages into and out of South Africa.