Pravin Gordhan: Brexit currency volatility raising business uncertainty

Ask any business owner, ‘we don’t mind a weaker currency, we just want a stable one’. As quotes on imports and exports are near impossible, when swings range from 2 to 8 percent. And just ask the oil traders who are coupling the exchange rate volatility with a volatile oil price. It’s near impossible to plan. Britain leaving the European Union has only exacerbated this effect, and despite offering some assurances on Friday around the financial sector, given it’s resilience during the 2009 global financial crisis, South African Finance Minister Pravin Gordhan says it’s raising uncertainty for business. Tougher as the South African Rand is seen as the emerging markets most volatile currency at present. Another obstacle an already ailing economy has to deal with. – Stuart Lowman

By Jeanette Chabalala

Johannesburg – Finance Minister Pravin Gordhan said following the result of the Brexit referendum, in which 52% of Britons voted to leave the European Union, developing countries, including South Africa, were experiencing volatility in business.

In an interview with Power FM on Sunday, Gordhan said the jumping around in the currency was raising uncertainty for business.

Pravin Gordhan, South Africa's finance minister, speaks during an interview in London, U.K., on Thursday, Mar. 4, 2010. Gordhan said he is “disappointed” by the response of developed countries to the government’s plan to seek about $4 billion in loans from the World Bank. Photographer: Chris Ratcliffe/Bloomberg*** Local Caption *** Pravin Gordhan
Pravin Gordhan, South Africa’s finance minister.

On Monday at 7:00, the rand was down by 4.65% at R15.25 against the dollar and 3.6% up against the ailing pound at R20.44. Jumps in the rand/dollar exchange rate on Friday swung from 2% to 8.5%.

The pound – at a 31 year low – slipped another 2% to $1.3403 as of 12:58 Tokyo time, extending Friday’s 8.1% plunge, Bloomberg said.

South Africa is seen as one of the most volatile emerging markets currently and its currency swings are hard to predict.

“The currency was uncertain for business if you are importing or exporting,” said Gordhan. “If you are exporting you would have a slight advantage when the currency depreciates and if you are importing, it increases the cost of imports,” he said.

“We are importing wheat as a result of the drought and this pushes up the cost of wheat,” he said.

“Throughout the world at the moment they have a reluctance [in] part of business to invest. Demand has dropped across the world including South Africa as well,” he said.

He said this week, the monitoring of processes and events related to the Brexit would continue.

“We need to see how the next week goes, the Reserve Bank… is monitoring the situation carefully.

“The middle eastern markets were open today [Sunday] and they were already showing further decline in trading in those markets so we don’t know what is going to happen tomorrow morning. We attract investments from the UK, Germany and other European countries and we don’t want this uncertainty to impact on investments,” he said.

British Prime Minister David Cameron announced his intention to resign earlier on Friday, while the pound fell to record lows.

Cameron said he would resign by October and insisted that the British people must be respected after voters chose to leave the 28-nation European Union.

He said there could be no doubt about the result of Thursday’s historic vote, but that he was not the “captain” that would steer the ship through difficult negotiations with the EU.

Cameron said: “I am honoured to have been prime minister of this country for six years.” – News 24

Source: http://www.fin24.com/Economy/businesses-are-experiencing-uncertainty-gordhan-20160627

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