By Werner Gerber, Audit Manager BDO South Africa

“The fundamental purposes of the European Union are to promote greater social, political and economic harmony among the nations of Western Europe. The EU reasons that nations whose economies are interdependent are less likely to engage in conflict. These goals are pursued through the unification of European markets under a single currency, the Euro, and through sets of legal standards to which all prospective and member nations, are held. Supranational institutions work with national governments to govern the implementation of these standards and help the EU to act as a unified body on the world stage.” (Source: www.reference.com)

The effect of today’s ‘Brexit’ decision will be monumental, as we are currently seeing with the Pound going into a tailspin. The most significant result will probably be that new trade deals will have to be negotiated.

Angela Merkel, the German Chancellor, had the following to say: “If Britain votes to leave the EU, it will no longer be able to benefit from the advantages of the European common market. And any negotiation will involve the 27 remaining EU members with someone who would then be a third party.”

Negotiations of such a magnitude will take considerable time. With the EU members being some of the UK’s biggest trading partners, this would definitely have a negative influence on their economic growth.

So how this will affect South Africa’s exports?

This factor is especially of interest for a country such as South Africa. According to the Department of International Relations and Cooperation, the UK is South Africa’s most important export market.

Currently all exported goods have to comply with the requirements set out by the EU. Normally these requirements are very strict, so as to ensure that the goods imported by the EU are of of the highest possible quality.

These demanding requirements can sometimes have a demotivating effect on the South African export market. Consequently, we are not exporting as many goods, especially fresh fruit and vegetables, as we are able to or as we would like to, to countries such as the UK.

Due to the lengthy period of negotiations for new trade agreements, it is however very likely that the UK will opt for less strict importation policies, thus giving South Africa the opportunity to increase its export market in the UK.

With the Pound being stronger than the Euro, export revenue would therefore be able to increase significantly.  This could, therefore, be just what South Africa needs to stabilise our economy after the recent drought.

BDO provides audit, tax and advisory services in 157 countries, with over 64 300 people working out of 1 400 offices worldwide, including South Africa.