Brexit and the customs union: How does it affect South Africa?

Flickr / Tyler Merbler

Brexit sends Rand spiralling, bigger impact than Nenegate

In the wake of the United Kingdom’s historic vote to leave the European Union, the Rand took a heavier knock than when Zuma fired then finance minister Nhlanhla Nene.

Brexit and the customs union: How does it affect South Africa?

Flickr / Tyler Merbler

Our currency weakened by more than 7.8% following the result of the UK’s Brexit referendum, sending the Rand from R14.33 to the Dollar to R15.45.

Fin24 reports that, compared to this, the firing of Nhlanhla Nene seems like a mere blip, as that only caused a 5% drop in the Rand.

 “I am not sure what to write because even up to when I went to bed at midnight it looked like the remain were going to win. Five hours later and unofficially the British public has decided to leave the EU by 52% to 48%,” said to Adam Phillips of Umkhulu Consulting.

If you’re looking to head on over to the UK, however, your pocket will be taking less of a knock than before, as the Pound weakened significantly in its global standing, with the UK stock market losing in the region of 122 billion Pounds already.

 “This is not going to be good for farming exports,” Phillips said.

“The Japanese equity market is down over 7%.”

“The SA Reserve Bank will be monitoring very closely, although there is not much they can do,” he said.

“Remember that the UK now has two years to finalise everything with the EU, so I am sure there are going to be plenty of meetings and new decisions from it,” he said. “As it stands this is a disaster for all emerging market currencies.”

According to John Cairns from RMB, the Brexit result “would generate bedlam. Our guess would be for GBP/USD to drop 12% to 1.30, while USD/ZAR spikes 4% or more, well into the 15.00+ area. Volatility would be extreme.”