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SA urged to keep close watch on Brexit

Aug 31 2016 19:18
Liesl Peyper

Cape Town - South Africa will have to enter into new bilateral trade discussions with the United Kingdom (UK) following the country’s decision to withdraw from the European Union (EU), said Ambassador Pieter Vermeulen from the department of international relations and cooperation on Wednesday.

Vermeulen and a delegation from the department, including deputy minister Luwellyn Landers, briefed parliament on the implications of Brexit.

“The fact is, much uncertainty around Brexit remains,” Vermeulen said. “We should especially watch the UK’s negotiating strategies around its exit from the EU so that we know how to react.”

In preparation for the eventual Brexit (in less than two years’ time) it will be necessary to enter into discussions with the UK on future trade relations – including a new Bilateral Trade Agreement.

On 23 June this year, 52% of the UK’s electorate voted in favour of exiting the EU. The move, dubbed Brexit, is a major development that holds far-reading global implications, Vermeulen said.

The Brexit rationale

The vote in favour of Brexit was largely influenced by the migration crisis in Europe, increasing scepticism towards Europe, the perception that increased migration leads to decreased employment opportunities for Britons as well as a lack of communication by the EU to spell out the benefits members derive from membership of the block.

In the immediate aftermath of Brexit the British pound reached a record low, coupled with a decline in the London Stock Exchange.

In addition, the UK cut interest rates from 0.5% to 0.25%, while the UK’s Treasury predicted that the economy could contract between 3% and 6% in the months to come.

A lot depends on the agreement the UK would strike with the EU, but Brexit could mean that the UK will have to withdraw from more than 5 000 EU regulations and more than 1 100 trade agreements.

Impact on SA and Africa

Current legislation will cover the prevailing investments from the UK, which accounted for 40% of direct inward investment in South Africa in 2014.

There will also be no change to the framework of South Africa’s relations with the EU, which is South Africa’s largest trading partner. Investments from the EU account for 77% of South Africa’s total foreign direct investment.

Vermeulen urged government to engage with the UK’s political leadership to ensure all strategic bilateral agreements continue “seamlessly” after Brexit.

“South Africa should position itself as a ‘priority’ country and start negotiating market access for our products and services as soon as possible,” he said.

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).

SA’s role

During question time, the DA MP Darren Bergman said the “Brexit ripple” will be “just a shadow” if South Africa doesn’t create political stability.

He was referring to recent comments by ANC bigwigs, such as the party’s deputy secretary general Jessie Duarte about the independence of the South African Reserve Bank (Sarb) as well as the public spat between Finance Minister Pravin Gordhan and the Hawks and Treasury and state-owned enterprises Eskom and Denel.

The ANC’s Bhekizizwe Radebe, who acted as committee chairperson, intervened and asked members to stay on topic and not cast doubt about the independence of South African institutions, such as the Hawks, banks and the Sarb.

Read Fin24's top stories trending on Twitter:

denel  |  eskom  |  brics  |  sarb  |  sa economy  |  brexit
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