Cape Town
African central banks are bracing for a Brexit fallout that could further damage already shaky economies hurt by a collapse in commodity prices. Below is a timeline of reactions as the UK result became clear.
On Friday, Kenya’s cenral bank said it was prepared for disruptions. “The Central Bank of Kenya stands ready to intervene in the money and foreign exchange markets to ensure their smooth operation” it said.
Other banks around the continent have begun to follow suit. At the same time African economies are faced with a change in the trade landscape. About 20 per cent of South Africa’s Europe bound exports go to Britain.
Another concern as the shock of the exit vote is absorbed is that the political landscape of th past generation is about to change. "Europe is in danger of falling apart into tiny little fascist, nationalistic enclaves of the type that existed before World War 1 and 2," said the influential South African columnist Justice Malala in the Rand Daily Mail.
Timeline of reactions
All times UAE
3.45pm
Some of South Africa’s largest companies that are dual listed in Johannesburg and London are feeling the pain of Brexit. Over the years firms with Johannesburg listings have also signed up with the Ftse for greater exposure to the London capital market.
Anglo American and BHPBillition, two of the world’s largest mining companies, lost 6 per cent and 5 per cent, respectively, of their value during trade on Friday. Johannesburg-based Intu Properties, a £3.7 billion (Dh20.13bn) fund that specialises in shopping centres around London saw nearly 12 per cent of its value wiped out.
The financial services provider Old Mutual with a market value of £9bn lost nearly 5 per cent, while Investec wealth management lost nearly seven per cent on its Ftse listing.
Of the dual listed companies the £89bn British American Tobacco was a rare bull on Friday, gaining nearly 2 per cent in London on Friday.
Dual listed firms are acutely sensitive to currency moves as they involve multiple countries. Old Mutual for example is one of South Africa’s largest pension and investment funds, and its earnings payout to shareholders back in South Africa will decline because of the pounds’ decline against the rand.
11.45am
Ordinary South Africans were mostly indifferent to the news that Britain voted to leave the EU but the country’s markets took a hit as Brexit became a reality.
Local currency the rand plunged more than seven per cent against the dollar, its biggest drop since the 2008 financial crisis as news that the EU, its largest trading partner, was facing a break-up. The rand was the overall biggest loser across emerging markets as the result filtered in, according to Bloomberg.
The rand’s fall comes on the back of a 21 per cent slump this year, making it one of the worst performing currencies in the world. However as the rand lost further ground following the UK referendum against major currencies, it rose nearly five per cent against the British pound.
The rand is one of the most traded currencies globally and even in the best of times is susceptible to volatility. More bad news, however remote, is likely to bring an overreaction to local markets, in the short term at least.
Gold, which underpins South Africa’s mining industry, however, is having a good day. The yellow metal jumped more than eight per cent to US$1 358.54 an ounce, its highest level in two years.
“Gold will be a preferred safe-haven asset with a ‘Leave’ vote,” said Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking. He added that the rally could take bullion to as much as $1 400.
The Johannesburg Stock Exchange fell nearly 5 per cent on opening, but gold stocks enjoyed one of their best days in years, with companies such as Sibanye Gold and AngloGold Ashanti soaring nearly 20 per cent.
The possible break-up of Europe comes at a time when many across Africa are striving for open borders.
“I’m afraid to say that nation states are often less important than tribes” said Martyn Davies, the managing director for emerging markets and Africa at Deloittes. “The EU will soon look like Africa – fragmented and needing visas for everywhere.”
The exit may also provide opportunities for South Africa. Last week, the minister of trade Rob Davies said the country could offer itself as a haven for British companies that lose export advantages to the EU. South Africa, which enjoys a trade pact with the EU could offer preferential access to UK firms.
“Let me just say that if the UK needed to export their products to the EU and if it had no arrangement with the EU, then British companies could come to South Africa and they could establish themselves here,” Mr Davies said.
Some also saw Brexit as an opportunity to rethink the EU style laws that are taking hold in South Africa, especially around health and safety. “Will we still use our EU style smoking and credit laws?” said the economist Mike Schussler. “Will we still want to look like the EU after this? The big bureaucrat EU is falling hard.”
However for many on the African continent it was just another day, as summed up by the head of the Business Intelligence Unit at First Bank of Nigeria, Ifeanyi Uddin, who said via twitter: “Brexit. Okay, so the EU unravels. But I’ve got bigger worries living in Nigeria.”
