South Africa’s Finance Minister Pravin Gordhan offers his insights into how the shock UK vote to leave the European Union will affect his country. He is banking on the resilience of South Africa’s banking system and urges that the efforts of Government, Business and Labour must continue – but now with a greater sense of urgency.
Pravin Gordhan: South Africa woke up to the news today that the British citizens had decided to exit the European Union. Clearly, given the size of the European Economy and the British Economy, and South Africa’s links to these economies, this is a very significant decision made by the British public, which could have consequences – both for that particular part of the world and ourselves as well.
It would be useful for us to remember that it takes two years of negotiations between the United Kingdom and the European Union for any break in their relationship to be concluded. We have been saying for some time now, that the process leading up to the voting yesterday in Britain would result in volatility in the financial markets, and in sentiment and confidence. This is clearly the case in the events that have unfolded today.
We have seen that currencies have become volatile. 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 decisions that have been made in the United Kingdom. However, the trade links between South Africa and the European Union, and Britain are fairly strong and based on solid agreements.
We have a two-year period during which, whatever changes need to be made to agreements and GT’s can in fact, be made. The National Treasury and the Reserve Bank have met early this morning and are keenly monitoring developments that are taking place and the implications for South Africa. They will continue to do so over the next few days, and keep the South African public informed about the developments that are taking place and the implications for us, and if there are any measures that need to be taken.
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The South African public can be reassured that our banking and financial institutions are well positioned to withstand financial shocks. This was demonstrated in the period leading up to the Great Recession in 2008/2009, when the system demonstrated its resilience. Equally, we are confident that our financial systems (including the banks and the regulatory framework we operate under) are extremely resilient and reliable.
The monitoring of these processes and events will continue into next week, but this is a time when the efforts that government, business, and labour had been putting in avoiding a downgrade must now continue in ensuring that we collectively stabilise our economy, reassure the financial markets, and inspire confidence – both amongst 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 as a country, we are open for business (as we all said).
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The kind of cooperation that we’ve seen between government, labour, and business to reignite growth must continue with a greater sense of urgency. It’s quite critical to stabilising the environment, notwithstanding what might be happening within the European context.
