Share

Rand holding ground amid Brexit worries - expert

Cape Town – The rand has managed to shrug off the potentially negative effect Brexit could have on emerging market economies, such as South Africa, said Izak Odendaal, investment strategist at Old Mutual Multi-Managers. 

Speaking to Fin24 after British Prime Minister Theresa May delivered her much anticipated address on the UK’s Brexit strategy going forward, Odendaal said an event such as Brexit has the potential to impact negatively on South Africa’s economy, as it changes investors' risk appetite that results in the selling off of the rand, which in turn has implications for inflation and interest rates in South Africa. 

“But the rand is okay. In fact, it has been quite strong over the past six to eight months,” Odendaal said. 

On Tuesday, May outlined the UK’s future outside the EU, saying the country would be a global player that aims to trade freely beyond Europe. She also said that the final exit deal would be put to the British parliament for a vote. 

READ: Pound climbs as Theresa May outlines how Brexit will happen

The pound gained more than 1.5% on May’s promise that the deal would be voted on by both Houses of Parliament before it comes into effect. 

Odendaal said the fact that the UK economy has held up reasonably well after the country voted in favour of leaving the EU, gave the British government more confidence to push for a “hard Brexit” in which it would leave the EU single market and trading with the EU as if it were any country outside of Europe. 

“Whether they (the British government) reads the situation correctly remains to be seen,” Odendaal said. “There’s still a lot of uncertainty, but now we know at least what the UK government’s intentions are. We don’t know if they’ll achieve what they want.” 

What’s positive for South Africa is that the current trade agreements with the EU are still in place, said Odendaal, although new trade arrangements will have to be made once the UK leaves the EU. 

“We’ll have to find a kind of agreement in which South African companies can benefit. Having a trade agreement doesn’t necessarily mean the consumers are buying the project,” Odendaal said. 

In August last year, Ambassador Pieter Vermeulen told Parliament that South Africa will need to keep a close eye on the UK’s negotiations around its exit of the EU and that it will necessitate new trade relations discussions – including a new Bilateral Trade Agreement. 

READ: SA urged to keep close watch on Brexit

Vermeulen at the time urged the South African government to position itself as a ‘priority’ country and start negotiating market access for South African products and services as soon as possible. 

He also suggested that South Africa should look for new opportunities that Brexit may present for the continent as a whole and Brics (the association of Brazil, Russia, India, China and South Africa). 

In her speech on Tuesday, May explicitly mentioned the UK’s intention to trade with “the wider world” – including China, India and Brazil. 

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.88
+0.3%
Rand - Pound
23.87
+0.2%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders