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UK votes in favour of Brexit, Rand drops 8%

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British flagBritons have voted in favour of exiting the European Union (EU), and the decision is already having knock on effects for countries across the globe. 

Brexit (British exit from the European Union) means that in the coming months, British and European leaders will begin negotiating the terms of Britain’s departure. On top of this, British Prime Minister David Cameron announced his resignation this morning, indicating that he will step down in October this year.

The Rand has already dropped 8% against the US dollar, the biggest drop since 2008.

Both the United Kingdom (UK) and EU are important trading and investment partners for South Africa. With the global stock markets already in free fall, there is no doubt that the decision will impact South Africa’s already struggling economy and its trade relations with the two global giants.

 

Global markets

With economists unsure of what the future holds for the UK and the EU, markets are in a state of uncertainty.

The British pound plunged 10% over six hours to its lowest level since 1985, while the euro dropped nearly 3%.

Asian markets took a beating, with Tokyo, Hong Kong shedding 7.2% and 4.7 % respectively. Shanghai, Singapore and Taipei were also down.

The Dow futures are down more than 600 points and the Standard & Poor’s 500-stock index about 1 000.

 

Trade agreements in flux

South Africa trades with the UK more than any other African country. According to BBC, trade between South Africa and the UK is worth roughly $14 billion a year.

However, trade has currently been happening under the free trade agreement between the EU and SADC. With the UK no longer part of the EU, all trade deals will have to be renegotiated. For now, trade deals seem to be in a state of limbo as we move into uncharted territory.

 


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