In what many may see as a surprising move, Brits have voted to leave the European Union, ending a four-decade-long marriage.
It was a close race, as only 51.9 percent of Brits voted in favour of leaving.
I’m quite surprised actually. When I was in the UK a while ago, the average man in the street didn’t seem to even know Britain was considering leaving the EU, nevermind understand what it would mean.
Some 33.6 million Brits went out to vote, a turnout of 72.2 percent. That surprised me, it’s likely to be a higher percentage than we’ll see here on August 3, and strikes me as impressive, given the levels of apathy and ignorance I saw.
The consequences have yet to be fully understood as there’s still a way to go before the UK actually packs its bags, but the pound has already taken a hit.
There have, of course, been dire warnings about the consequences from those on the ‘Stay’ side. These include the millions that will be lost to financial institutions, the hammering the pound will take, and the sterling’s loss of its safe-haven position.
Denmark, Ireland and Britain joined what was then the European Economic Community in 1973, after Charles de Gaulle's resignation in 1969.
Under the Labour Prime Minister, Harold Wilson, a vote was held as to whether to stay in the EEC or not in 1975. Back then, Yes won by 67.2 percent.
Regardless of why the Brits wanted to leave, there will be a fallout.
Already, the pound has dropped more than 10 percent to $1.3300, its cheapest level since September 1985, according to Reuters.
Sadly, the rand has also taken a hammering, dropping 7 percent on the news, as investors flee from emerging markets.
Our economy – our poor battered economy – will also take a hit. I foresee investors pulling out, stocks being sold off and the rand losing more ground.
Pessimistic? Maybe. But I’m not the only one.
Joe Rundle, head of Trading at ETX Capital, calls the Leave victory the biggest market shock of all time, and says the pound’s decline could worsen.
“Panic may not be too strong a word.”
Rundle adds: “It’s fair to say we’ve never seen anything like it and the chances are markets will remain highly volatile over the coming hours and days.
All eyes are now on the Bank of England and whether it will take decisive action to restore calm to these febrile markets.”
Others are asking whether this is the beginning of the end for the EU, which is SA’s biggest trading partner bloc.
What this means for SA is yet another yo-yo period for the rand, although gold should benefit.
We really don’t need this, not now. Not when we have less than six months to go before the ratings agencies decide whether to grade us as junk.
Not when we are still reeling from the 1.2 percent economic contraction in the first quarter, with fears of a recession on the horizon.
Not fair, I hear you shout. No, it isn’t.
But then we have so many structural issues that any global issue will hurt. It’s time to look in the mirror to fix our economy – more than time.
Let’s get to it!
* Nicola Mawson is the online editor of Business Report. Follow her on Twitter @NicolaMawson or Business Report @busrep.
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