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SA's banking and financial institutions can withstand Brexit - Gordhan

Jun 24 2016 14:49
Carien du Plessis

Johannesburg - Finance Minister Pravin Gordhan has reassured South Africans that the country's banking and financial institutions can withstand the financial shockwaves caused by the result of the Brexit referendum, in which 52% of Britons voted to leave the European Union.

Gordhan on Friday said "the South African public can be reassured that our banking and financial institutions are well positioned to withstand financial shock, and this was demonstrated in the period leading up to the great recession in 2008/09 when the system demonstrated its resilience".

He also said "we are confident that our financial system, including the banks and the regulatory framework we operate under, are extremely resilient and reliable".

But he warned that efforts to stimulate economic growth needed to be stepped up and investors needed to be reassured that South Africa was open for business.

"The monitoring of these processes and events (related to the Brexit) will continue into next week, but this is a time when the efforts that the government, business and labour have been putting into avoiding a downgrade must now continue into ensuring that we collectively stabilise our economy, reassure the financial markets and inspire confidence among South Africans and those investing in SA that we are indeed a country where there is a set of resilient institutions on the one hand and that we are as a country open for business as we all say.

"So the kind of co-operation that we have all seen between government and labour and business to reignite growth must continue with a greater sense of urgency and is quite critical to stabilising the environment, notwithstanding what might be happening within the European context."

AUDIO: Pravin Gordhan reacts to Brexit

'Two years until break concluded'

Gordhan said South Africa would have two years to renegotiate trade deals with the EU and Britain.

"Clearly given the size of the European economy and the British economy and South Africa's links to these economies, this is a very significant decision made by the British public which could have consequences for that particular part of the world and for ourselves as well.

"It will be useful to remember that it takes two years of negotiations between the United Kingdom and EU for any break in their relationship to be concluded.

"We have been saying for some time now that the process leading up to the voting yesterday in Britain would result in volatility in the financial markets and in sentiment and confidence, and this is clearly the case in the events that have unfolded today.

"We have seen that currencies have become volatile, the rand has depreciated, the share market and the London stock exchange have lost significant amounts of money, and all these are reactions to decisions that have been made in the United Kingdom. However the trade links between South Africa, the EU and Britain are fairly strong and are based on solid agreements and we have a two year year period during which whatever changes need to be made to agreements and treaties can be made. The Reserve Bank met early this morning and are keenly monitoring developments that are taking place and implications for SA, and will continue to do so over the next few days and keep the SA public informed about the developments taking place, the implications for us and any measures that need to be taken."

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