Breaking news this morning has the UK voting to implement a British exit (or Brexit) from the European Union (EU), causing shock across the world. The voting took place yesterday with the results published early this morning. Here’s how they looked:

 

 

In an extremely close vote, and judging from the Facebook posts of many UK citizens this morning, a lot of people aren’t happy about it. The expected also took place this morning with Prime Minister David Cameron (who led the movement to remain in the EU) tendering his resignation. In a speech outside 10 Downing Street he said: “The British people have voted to leave the EU and their will must be respected. This will require strong, determined and committed leadership. I think the country requires fresh leadership. I do not think I can be the captain to take the country to its next destination”.

 

Unsurprisingly, the Pound Sterling took a hit this morning, plummeting to a 30-year low against the Dollar by losing 10% of its value within hours. Share prices of major institutions are also dropping at an alarming rate.

 

 

Potential impact on South Africa

 

It’s too early to know the full impact this will have on us but here are a few key insights for the moment:

 

• If you’re a South African with dual UK citizenship, it’s possible you won’t enjoy the free access you had to the rest of Europe. By the same token, if you have dual citizenship elsewhere within the EU you may not get easy access to the UK anymore.
• The Rand will strengthen against the Pound in the short-term. This is due to the Pound’s temporary (possibly not so temporary) weakness and fluctuation, not because of the strength of our ailing currency. Overall, however, our currency may be further harmed by a strengthening Dollar.
• South Africa may get better trade deals from the EU and the UK. The EU’s combined trading strength allows it to cut trade competitiveness in Europe. With the UK splintering off, South Africa may be able to capitalise by preferring one group over the other depending on the deal they offer.
• South Africa may get worse trade deals from the EU and the UK. There’s going to be a large scale reshuffling and it’s anyone’s guess how it could end up as the UK and EU renegotiate their own trade agreements. However it turns out could dramatically impact South Africa as both trading blocs represent a huge portion of our international trade.

 

According to the Sunday Tribune, several days ago Finance Minister Pravin Gordhan said the UK pulling out of the EU would “complicate life” for South Africa. “It may not immediately impact negatively, especially on trade, but the uncertainty could have a serious impact on us as a country”.