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Is Africa at Stake?
By admin July 1, 2016

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The Brexit has had serious aftereffects on the political economy throughout the world. The S&P’s credit rating of UK was stripped down to two levels from AAA to AA, and at the same time that of the European Union (EU) has fallen from AA+ to AA. Currency rates throughout the world had plunged and the global market shrunk. Days after the Brexit vote, the global market panicked, stock markets fell, and the economic forecast became bleaker. About a week has passed since Brexit, however, the global markets appeared to have gradually recovered.

Though the world appears to be at a better pace than expected, situations in Africa doesn’t look too favorable. While currency rates of the G20 (except those in Europe) recovered at its rates, South African Rand still has 50 percent more to go till its full recovery. As a result of the Brexit, Nigeria and Kenya are also in a bad situation. According to Public Finance International, the intelligence group EXX Africa inferred that Brexit has put South Africa at higher risk of recession and is likely to trigger a downgrade in the country’s credit rating. As foreign investors seek safe havens, stock markets and currency in Least Developed Countries (LDCs) cannot avoid a reflux of money.

There were many signs already predicted by economists even before the Brexit decision that South Africa remains the most vulnerable among the emerging markets and would suffer the most when Brexit comes to reality. That is because South Africa is too closely tied with the UK that according to analysts from UniCreidt SpA, British banks’ claims on entities in South Africa amount to 178 percent of the country’s foreign-currency reserves. The result of the Brexit also hit Nigeria at its worst timing. According to the data from Nigerian Bureau of Statistics, the UK is the largest source of foreign investment in 2015. At the time when Iranian cheap oils soften the oil prices and less expensive Chinese labor force dominates, it is too difficult to find a breakthrough for Nigeria’s economy. Kenya as well is too dependent on UK investors and its export. Other countries in the region are also worrying about the loss of British investment and demand for exports. In a sense, if Brexit leads to a domestic recession in the UK, there will be other countries following suite, as too many would be affected while also unprepared.

Brexit brought about a tremendous impact throughout the world. The world shook for a week and is getting back to its shape as much of uncertainties unveiled. Africa, however, is still struggling from the endless uncertainties at its worst timing. However, if African countries realize their deeply rooted problems rest in depending heavily on other countries, they can it turn create better solutions and strategies even for their worst case scenarios, eventually providing another chance for the African community to evolve and step up to take control of their economies.

 

For more information:

South Africa could go into recession following UK Brexit vote

Brexit will be terrible for Africa’s largest economies

Rand Snared and Ruble Spared Brexit Risk in U.K. Finance

South Africa’s rand retreats as post Brexit recovery slows

Wall Street, European markets recover post-Brexit

Oil Makes Gains as Markets Recover Post-Brexit

Ratings agencies rip into UK’s credit score after Brexit vote

 

 


Thanks for sharing !


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