The decision by British voters to exit the European Union is going to have far-reaching financial consequences for South Africa and will almost certainly have a negative impact on the economy.
Neil Roets, CEO of debt management firm Debt Rescue, says South Africans should prepare themselves for hard times ahead. “The United Kingdom is the biggest single investor in the South African economy and with the massive uncertainty the UK about the actual impact of the leaving the EU, we can expect severe volatility in the markets and quite possibly a further slowdown in the economy.
“This is going to have a direct impact on the workforce in the form of rising prices and possible layoffs. With the Rand already under pressure imported goods which includes things like crude oil and maize meal which is in short supply form local growers is going to increase in price significantly.”
Virtually everything we consume is transported by road and we can expect commodities such as food to increase further still.
Entering uncharted territory
Hot on the heels of the bad news from England is the fact that fuel prices are going to increase significantly.Independent economist Dawie Roodt predicted a 50 cents a litre increase in the price of diesel with petrol costing 15 cents a litre more. He said there was no doubt that South Africa was entering uncharted territory in terms of the full impact of Brexit and the effect that it was going to have on the economy.
“The exit of the UK from the EU may be the beginning of the end for the European Union. Right wing parties across the EU have been making it clear that they were dissatisfied with the rules and regulations imposed on them by Brussels.
“Now that the UK has actually voted to leave, I expect several other EU member states to take the same route.
“Exactly how this is going to impact the South Africa is not quite clear at the moment but I have no doubt that it is going to make life much more difficult for consumers.” Roodt says.
Roets said the 50 cents a litre increase expected for the diesel price is going to affect everybody because most commodities are transported by road. “We are on the eve of a perfect storm which is going to affect everybody but especially the poorest of the poor who spend more than 50% on food.”
Roets said the fact that most consumers owed more than 75% of their monthly salary cheques to financial institutions showed just how dire the situation actually is.