Brexit latest: reaction from Africa

Cape Town All times UAE 11.45am Ordinary South Africans were mostly indifferent to the news that Britain voted to leave the EU but the country’s markets took a hit as Brexit became a reality. Local currency the rand plunged more than seven per cent against the dollar, its biggest drop since the 2008 financial crisis […]

Cape Town

All times UAE

11.45am

Ordinary South Africans were mostly indifferent to the news that Britain voted to leave the EU but the country’s markets took a hit as Brexit became a reality.

Local currency the rand plunged more than seven per cent against the dollar, its biggest drop since the 2008 financial crisis as news that the EU, its largest trading partner, was facing a break-up. The rand was the overall biggest loser across emerging markets as the result filtered in, according to Bloomberg.

The rand’s fall comes on the back of a 21 per cent slump this year, making it one of the worst performing currencies in the world. However as the rand lost further ground following the UK referendum against major currencies, it rose nearly five per cent against the British pound.

The rand is one of the most traded currencies globally and even in the best of times is susceptible to volatility. More bad news, however remote, is likely to bring an overreaction to local markets, in the short term at least.

Gold, which underpins South Africa’s mining industry, however, is having a good day. The yellow metal jumped more than eight per cent to US$1 358.54 an ounce, its highest level in two years.

“Gold will be a preferred safe-haven asset with a ‘Leave’ vote,” said Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking. He added that the rally could take bullion to as much as $1 400.

The Johannesburg Stock Exchange fell nearly 5 per cent on opening, but gold stocks enjoyed one of their best days in years, with companies such as Sibanye Gold and AngloGold Ashanti soaring nearly 20 per cent.

The possible break-up of Europe comes at a time when many across Africa are striving for open borders.

“I’m afraid to say that nation states are often less important than tribes” said Martyn Davies, the managing director for emerging markets and Africa at Deloittes. “The EU will soon look like Africa – fragmented and needing visas for everywhere.”

The exit may also provide opportunities for South Africa. Last week, the minister of trade Rob Davies said the country could offer itself as a haven for British companies that lose export advantages to the EU. South Africa, which enjoys a trade pact with the EU could offer preferential access to UK firms.

“Let me just say that if the UK needed to export their products to the EU and if it had no arrangement with the EU, then British companies could come to South Africa and they could establish themselves here,” Mr Davies said.

Some also saw Brexit as an opportunity to rethink the EU style laws that are taking hold in South Africa, especially around health and safety. “Will we still use our EU style smoking and credit laws?” said the economist Mike Schussler. “Will we still want to look like the EU after this? The big bureaucrat EU is falling hard.”

However for many on the African continent it was just another day, as summed up by the head of the Business Intelligence Unit at First Bank of Nigeria, Ifeanyi Uddin, who said via twitter: “Brexit. Okay, so the EU unravels. But I’ve got bigger worries living in Nigeria.”

Source: Business

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