Brexit will be terrible for Africa’s largest economies
Lily Kuo&Yomi Kazeem
Quartz africaTime to go.(Reuters/Reinhard Krause) Now that the United Kingdom has voted to leave the European Union, African economies—already struggling from slowing demand from China and flat commodity prices—have now been thrown into confusion along with the rest of the world.
“Many emerging market and frontier asset markets will come under pressure,” Razia Khan, chief economist for Africa for Standard Chartered Bank, tells Quartz. “Much will depend on how quickly someΠ sort of financial market stability can be restored.”The UK’s minister for Africa and advocate for leaving, James Duddridge, has promised that relations with the continent would only improve without the burden of the EU, but Africa’s largest economies are still likely to suffer.
SOUTH AFRICA
South Africa’s rand and trade. South Africa’s already battered economy may be the worst affected by Britain’s exit. As it became clear that the UK vote had swung toward leaving, the rand plunged during early morning trading, becoming the worst performing currency after the British pound. As of mid-morning the rand had fallen more than 7%, its steepest single-day decline since the 2008 financial crisis.
Along with their peers on the London Stock Exchange,major South African companies dual-listed in London and Johannesburg are being hammered. South Africa’s close financial ties to the UK could be a problem—British banks’ claims on South African entities account for 178% of South Africa’s foreign currency reserves, according to analysts from UniCredit.Economists also worry that trade between Africa’s most industrialized economy and the UK will suffer. (The UK is the fourth largest destination for exports from the country, accordingto data from Bloomberg.) Economists at the South African university, North-West, have said Brexit could take 0.1 percentage points off the country’s annual economic growth, which already contracted 1.2%in the first quarter of this year.
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