Prof Wilma Viviers
TRADE Research Entity, North-West University, Potchefstroom campus
Martin Cameron
TRADE Research Advisory Pty Ltd
‘BREXIT’ – the exit of Britain (or the United Kingdom) from the European Union
(EU) membership as a result of a national referendum on the issue on June 23, 2016.
T
here is an almost overwhelming consensus that
the impact of this decision
will be felt not only in the
UK and Europe but also in many
other countries – including South
Africa. In a recent article in The New
York Times the famous international trade economist Paul Krugman
for one, indicates that a Brexit may
result in “a sustained 2 percent of
GDP loss” for Britain. He goes on to
say that even if the actual number
is smaller or larger, the result will
be a definite loss in GDP. Such a
loss can have adverse spill-over effects for many countries linked either directly or indirectly to Britain’s
economy, including that of South
Africa and other members of the
Southern African Customs Union
(SACU) member countries – Botswana, Lesotho, Namibia and Swaziland.
Thus, the key question for South
African policy makers and business-
es is what impact a Brexit may have
on the South Africa economy – and
within the agricultural sector specifically?
high level at the moment given the
lack of uncertainty – and this poses
the major risk to exporters and importers alike.
Uncertainty the major stumbling
block…
The single major factor that will
influence outcomes is the current
uncertainty. This uncertainty was
created by the fact that it seems
that the UK politicians did not actually believe that the outcome of the
referendum would require the UK
to leave the EU. As a result, there
was a political and policy vacuum
and uncertainty created in the aftermath of the referendum, which
is only slowly starting to be addressed by the UK leadership
changes that are in the making. The
reality though is that it will take a
few years for the UK to extricate
itself from the EU, and there are
many unknowns at this point as to
what the final outcome would look
like. We can only speculate at a
Avenues of influence – South Africa and Brexit…
The main points of interaction between South Africa and Britain (or
the United Kingdom (UK)) is trade
(including foreign direct investment
from the UK), tourism (including
employment and residency of South
Africans in the UK), and the British
pound to South African rand exchange rate. Of these, the most
likely channel of influence will be
via trade.
Given that South Africa is a small
open economy, with strong trade
links to both the EU and specifically
the UK, we cannot entirely escape
the pull of international economic
forces that will most likely result
from the Brexit. These effects will
manifest both directly and indirect-