Why Brexit matters to SA: “Leave” would drop GDP growth another 0.1%

By Rene Vollgraaff

(Bloomberg) — Britain’s possible departure from the European Union could shave about 0.1 percentage point off South Africa’s economic growth due to the nation’s strong trade ties with the U.K. and European Union, according to researchers from North-West University.

Anti-government demonstrators hold placards reading "No Brexit" during a protest outside the parliament in Athens, Greece. REUTERS/Alkis Konstantinidis
Anti-government demonstrators hold placards reading “No Brexit” during a protest outside the parliament in Athens, Greece. REUTERS/Alkis Konstantinidis

“With current growth in South Africa in 2016 expected to be close to zero, it is a loss in growth South Africa can ill-afford at this stage,” Raymond Parsons and Wilma Viviers, professors at the business school and trade research unit at the university in Potchefstroom, 120 kilometers (75 miles) southwest of Johannesburg, said in an e-mailed statement. “Slower economic growth as a result of potentially weaker trade and investment ties with traditional overseas markets means less job creation and yet higher unemployment.”

Africa’s most industrialized economy contracted by 1.2 percent in the three months through March as mining production slumped due to low commodity prices and farming output declined amid the worst drought in more than a century. The central bank’s projected growth of 0.6 percent for this year will be the slowest pace since a 2009 recession and the 26.7 percent jobless rate is the highest in at least eight years.

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The rand is among emerging-market currencies most vulnerable to upheaval if Britain votes on June 23 to leave the EU, according to a ranking of countries in central Europe and Africa based on the depth of their financial ties with U.K. banks, compiled by UniCredit SpA. Bank of England warned this week the damage of the U.K. leaving the 28-nation bloc could extend to global markets and the world economy.

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