Agri Kultuur July / Julie 2016 - Page 40

Prof Wilma Viviers TRADE Research Entity, North-West University, Potchefstroom campus Martin Cameron TRADE Research Advisory Pty Ltd ‘BREXIT’ – the exit of Britain (or the United Kingdom) from the European Union (EU) membership as a result of a national referendum on the issue on June 23, 2016. T here is an almost overwhelming consensus that the impact of this decision will be felt not only in the UK and Europe but also in many other countries – including South Africa. In a recent article in The New York Times the famous international trade economist Paul Krugman for one, indicates that a Brexit may result in “a sustained 2 percent of GDP loss” for Britain. He goes on to say that even if the actual number is smaller or larger, the result will be a definite loss in GDP. Such a loss can have adverse spill-over effects for many countries linked either directly or indirectly to Britain’s economy, including that of South Africa and other members of the Southern African Customs Union (SACU) member countries – Botswana, Lesotho, Namibia and Swaziland. Thus, the key question for South African policy makers and business- es is what impact a Brexit may have on the South Africa economy – and within the agricultural sector specifically? high level at the moment given the lack of uncertainty – and this poses the major risk to exporters and importers alike. Uncertainty the major stumbling block… The single major factor that will influence outcomes is the current uncertainty. This uncertainty was created by the fact that it seems that the UK politicians did not actually believe that the outcome of the referendum would require the UK to leave the EU. As a result, there was a political and policy vacuum and uncertainty created in the aftermath of the referendum, which is only slowly starting to be addressed by the UK leadership changes that are in the making. The reality though is that it will take a few years for the UK to extricate itself from the EU, and there are many unknowns at this point as to what the final outcome would look like. We can only speculate at a Avenues of influence – South Africa and Brexit… The main points of interaction between South Africa and Britain (or the United Kingdom (UK)) is trade (including foreign direct investment from the UK), tourism (including employment and residency of South Africans in the UK), and the British pound to South African rand exchange rate. Of these, the most likely channel of influence will be via trade. Given that South Africa is a small open economy, with strong trade links to both the EU and specifically the UK, we cannot entirely escape the pull of international economic forces that will most likely result from the Brexit. These effects will manifest both directly and indirect-