SA’s trade and business interests will be first victims of Brexit
by Pericles Anetos
2016-06-24 17:30:03.0
THE most immediate implications for SA of Britain’s decision to exit the EU (Brexit) will be felt in the country’s trade and business interests, according to a research note compiled by the South African Institute of International Affairs.
The EU is one of SA’s most important strategic trade partners, with the bloc having entered into a series of economic partnership agreements and trade treaties with the country over the years.
However, on closer inspection SA has a more favourable trade balance with Britain within the bloc. In addition, the UK is a key source of foreign direct investment into SA, which totalled an estimated R730bn in 2014.
In 2015, the UK was SA’s eighth largest trading partner. In the period, SA’s exports to the UK totalled R41bn, while UK imports to SA stood at R35bn.
Elizabeth Sidiropoulos, institute CEO and co-author of the research note, said on Friday that the UK’s exit strategy from the EU would determine how existing arrangements would be affected.
The UK will have two years within which to finalise its exit plan once it submits a formal notification to leave the EU.
In the interim, the biggest issue will be market volatility because of the uncertainty triggered by a Brexit — an eventuality the South African economy can ill-afford in the current low-growth environment.
Furthermore, capital constraints triggered by a Brexit could affect SA’s ability to access financing from British banks. "British lenders’ claims on entities in South Africa amount to 178% of SA’s foreign currency reserves," reads the institute’s note.
Finance Minster Pravin Gordhan said the Treasury and Reserve Bank officials met early on Friday and are "keenly" monitoring the developments taking place, and the implications for SA.
Sidiropoulos highlighted the challenges Britain itself might face as it exits the EU.
"It is not just whether Britain wants to negotiate separate agreements with other countries — it is also the appetite of other countries to prioritise Britain (in the event of such talks taking place)," she said.
Britain remains a key player in the global economy as it has traditionally served as the European financial services capital and as a gateway to the bloc.
Cranes are used to unload a bulk carrier at the Tate and Lyle sugar refinery in front of London's financial district of Canary Wharf. Picture: REUTERS
THE most immediate implications for SA of Britain’s decision to exit the EU (Brexit) will be felt in the country’s trade and business interests, according to a research note compiled by the South African Institute of International Affairs.
The EU is one of SA’s most important strategic trade partners, with the bloc having entered into a series of economic partnership agreements and trade treaties with the country over the years.
However, on closer inspection SA has a more favourable trade balance with Britain within the bloc. In addition, the UK is a key source of foreign direct investment into SA, which totalled an estimated R730bn in 2014.
In 2015, the UK was SA’s eighth largest trading partner. In the period, SA’s exports to the UK totalled R41bn, while UK imports to SA stood at R35bn.
Elizabeth Sidiropoulos, institute CEO and co-author of the research note, said on Friday that the UK’s exit strategy from the EU would determine how existing arrangements would be affected.
The UK will have two years within which to finalise its exit plan once it submits a formal notification to leave the EU.
In the interim, the biggest issue will be market volatility because of the uncertainty triggered by a Brexit — an eventuality the South African economy can ill-afford in the current low-growth environment.
Furthermore, capital constraints triggered by a Brexit could affect SA’s ability to access financing from British banks. "British lenders’ claims on entities in South Africa amount to 178% of SA’s foreign currency reserves," reads the institute’s note.
Finance Minster Pravin Gordhan said the Treasury and Reserve Bank officials met early on Friday and are "keenly" monitoring the developments taking place, and the implications for SA.
Sidiropoulos highlighted the challenges Britain itself might face as it exits the EU.
"It is not just whether Britain wants to negotiate separate agreements with other countries — it is also the appetite of other countries to prioritise Britain (in the event of such talks taking place)," she said.
Britain remains a key player in the global economy as it has traditionally served as the European financial services capital and as a gateway to the bloc.
