Brexit to have minimal impact on SA trade?

The Brexit vote in Britain

– 52% in favour of leaving

the European Union – will

have only a limited direct

effect on the South African

trade sectors, according to a

consensus of views gathered

from members of the industry

in discussions with FTW.

But this is not a reason to

feel relaxed and optimistic.

Indirect threats exist

from the short-term

financial turmoil the vote

generated – from a necessary

re-negotiation of trade pacts

involving SA, Britain and the

EU; from possibly detrimental

effects on trade in Britain,

Europe and worldwide; and

risk aversion among investors

leading to capital flowing

from emerging markets into

safe havens. But these are not

threats aimed purely at SA, but

a worldwide problem.

But, as just one example

of how serious this could be,

a senior economist predicted

that, in the short term, the

result of last week’s hefty global

equity losses immediately

following the release of the

referendum results may be

a contraction in the world

economy. And, if this is added

to the current global slowdown,

it could prove to be a long-term

economic downturn and the

expletive words ‘recession’ and

‘depression’ might once again

be heard.

From an African, and

especially an SA perspective,

we are particularly vulnerable

in the short term and perhaps

for longer if the UK

goes into recession

after exiting the EU

– which many are

sure will happen. And

African trade would

also be similarly hurt

by the decline in the

EU economy.

In SA, where the economy

has already shrunk 1.2% in

the first quarter, economists

point to this leading to higher

inflation, weaker growth

and higher interest rates.

Indeed, Finance Minister,

Pravin Gordhan, even said

before the vote that if the UK

exited the EU “the volatility

and uncertainty could have

a serious impact on us as a

country”.

But there are still significant

numbers of SA businessmen

who are certain that the

financial damage would

only be short term, and that

recovery was inevitable.

It has been pointed

out that all trade deals in

which Britain is included

– including the recently

signed EU-SADC EPA –

would become void and

would possibly take years to

re-negotiate, which would

seriously hit trade. But the

contrary argument is that

Britain could very simply

convert all its EU trade deals

into UK trade deals with a

few strokes of the pen.