President Jacob Zuma says South African banks and financial institutions can withstand shocks after Britons voted in favour of quitting the European Union (EU).
Zuma says both the Treasury and the Central Bank are in talks with financial institutions on the possible implications of the Brexit vote.
Finance Minister Pravin Gordhan says, “The South African public can be reassured that our banking and financial institutions are well positioned to withstand financial shocks. This is what was demonstrated in the period leading up to the great recession in 2008/2009, when the system demonstrated it resilience.”
The vote sent the rand tumbling more than eight percent this morning, while sterling plunged to its lowest in three decades as Britain’s shock vote sparked turmoil on global financial markets.
Meanwhile, local economists have reacted to how a decision by the UK to leave the EU will affect South Africa.
This week analysts had warned that if the UK left the EU, it would have a negative effect on South Africa.
Economist Goolam Ballim says there will be direct consequences.
“The rand is now trading almost one rand weaker. Immediately this will mean higher levels of inflation and, for instance, a higher petrol price.”
Economist Issaac Matshego says South Africa will also have to look at its trade relations.
“We have to review our relations with the UK, particularity trade relations and also when it comes to issues such as visas.”
Shortly after the result, British Prime Minister David Cameron announced he’ll be stepping down.
G7 SPEAKS OUT
The G7 released a statement this afternoon saying it was monitoring market developments.
It says central banks have taken steps to ensure adequate liquidity and support to functioning markets.
IMF Chief Christine Lagarde has urged authorities in the UK and Europe to work collaboratively to ensure a smooth transition to a new economic relationship. Meanwhile US presidential hopeful Donald Trump says the UK and the EU will remain strong allies of America.