Brexit: Gordhan reassures South Africans

Finance Minister Pravin Gordhan. Picture: Reuters/ Siphiwe Sibeko/File Photo

Finance Minister Pravin Gordhan. Picture: Reuters/ Siphiwe Sibeko/File Photo

Published Jun 24, 2016


Cape Town - South Africa’s minister of finance, Pravin Gordhan, moved on Friday to reassure the country that its financial institutions could withstand the effects of Britain exiting the European Union.

Gordhan acknowledged that the decision UK voters made in a referendum on Thursday was a significant one and could have consequences for South Africa, particularly given the size of the two economies in question and South Africa’s links to them. He added, however, that it would take a couple of years of negotiations to conclude the exit and there would be time for the parties to make any necessary changes to treaties and trade agreements.

“We have seen that currencies have become volative, 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 decision that have been made in the UK,” he said.

“However, the trade links between South Africa and the European Union and Britain are fairly strong and are based on solid agreements and we have a two year period during which whatever changes need to be made to agreements and treaties can in fact be made.”

Peter Worthington, principal and senior economist at Barclays Africa, had earlier told African News Agency that “there are direct 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.

Gordhan’s statement came after a dramatic morning that started with the BBC announcing just before 4.45am that the Brexit vote had gone in favour of Britain leaving the EU. The story quickly claimed the scalp of British prime minister David Cameron, who fell on his sword, saying the British people had decided on a different direction and he believed it was not right for him to continue as leader.

Gordhan said the National Treasury and Reserve Bank had met in the early hours to discuss the situation and whether any response was required. He said the country’s financial authorities would continue to closely monitor the situation and keep the public informed about the developments and any implications for the country.

Acknowledging that volatility in global markets, including rand depreciation, was a reaction to decisions that had been made in the UK, the minister said trade relations between South Africa and Britain and the EU were strong and based on solid agreements.

Gordhan added that South Africans could be reassured that the country’s banking and financial institutions were well positioned to withstand financial shocks, a resilience he said had been demonstrated during the run up to the global recession in 2008/09.

“This is a time when the efforts that government, business and labour have been putting into avoiding a downgrade must continue into ensuring that we collectively stabilise our economy, reassure the financial markets and inspire confidence both among South Africans and those interested in investing in South Africa that we are indeed a country where there is a set of resilient institutions, on the one hand, and that we are a country that is open for business, as we say,”said Gordhan

African News Agency

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