Cape Town – South Africa’s financial system was resilient and would be able to deal with any shocks arising from Britain’s exit from the European Union, President Jacob Zuma’s office said on Friday.
“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,” the presidency said in a statement.
Read: #Brexit ‘not good news for SA trade relations’
“We are therefore confident that our financial system including the banks and the regulatory framework are extremely resilient and reliable.”
While the presidency acknowledged that the volatility in the markets might persist, it said talks between Treasury, the South African Reserve Bank and the country’s financial institutions on the effect of the vote on the local economy would continue.
“The Reserve Bank and the 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.
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 percent of its manufactured exports to Europe including the UK, and 36 percent 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.
“Also, the Brexit shock to global confidence will cause a pick up in risk aversion, and put downward pressure on the exchange rate, which intensifies the SARB’s policy dilemma in the face of a weak domestic economy.”
African News Agency