How will Brexit affect SA?

Ahead of the United Kingdom (UK) referendum on whether or not to stay in the European Union (EU) on 23 June, Justmoney looks at the possible impact a Brexit (British Exit) could have on South Africa.

Brexit has been a major discussion point over the last couple of months with both sides of the camp making exaggerated claims about the impact of voting ‘yes’ or ‘no’ on the British economy. For those not in the know, Brexit stands for ‘British Exit’ from the European Union (EU). The British get to cast their vote on whether to stay or leave the EU at the end of this month.

While a Brexit is a possibility, Philippe Brugere-Trelat, executive vice president and portfolio manager at Franklin Mutual Series, says: “I believe the results of the June 23 referendum will likely mirror those of the 2014 vote on Scottish independence: Once people are in the voting booth, I believe they will sober up and decide to stick with the status quo. I think the “remain” camp will likely win, although the margin may be narrow.”

Will they or won’t they?

Despite being of the belief that the ‘In’ campaign will win the referendum, Brugere-Trelat notes that certain events may swing the vote the other way.

“If a destabilising event such as a terrorist attack occurs on UK soil between now and the day of the vote, all bets are off. If such a tragedy occurs, I believe it’s possible the “leave the EU” camp could win by a significant margin, as UK voters may regard a terrorist strike as an attack on their sovereignty,” says Brugere-Trelat.

The impact of an ‘out’ vote

If the UK vote ‘out’, Brugere-Trelat the pound will drop by as much as 10% to 15%. This would probably have an impact not only on the UK economy, but on the companies operating there as well.

“A potential Brexit has been our focus for the last several months, and we have re-examined all of our UK investments with that possibility in mind. That said, we haven’t completely changed our view on our UK holdings. We have trimmed the sails by keeping in close contact with the companies’ managements and have asked them how they plan to react if Brexit becomes a reality,” reveals Brugere-Trelat.

Travelling to the UK

For individuals, the impact of a Brexit may vary. For South Africans working or planning on visiting the UK should be no change with regards to visa and passport requirements, according to a report. The same goes for South Africans who hold both a South African and a British passport - you will be able to travel, work and live in the UK the same as you do now.

However, for South Africans with an EU passport, things will change. In a news report, Breytenbachs Immigration Consultants highlights that EU passport holders in the UK will need to apply for the relevant UK visas or permits, as stated in the UK immigration laws. Following a Brexit, the free movement of EU passport holders into and out of the UK will cease, requiring people to apply for the necessary documentation to be able to enter the country.

Isaac Matshego, an economist at Nedbank, states that he does not expect visa requirements to be tightened for South Africans. In addition, he does not anticipate “any changes to bilateral agreements between the two countries.”

According to Matshego, there would be “no direct impact on the SA economy as trade relations would not alter significantly.”

But not everyone has a view. When asked for comment, Old Mutual responded: “Our economist says the SA impact of Brexit is too vague to give much insight at this point.”