Brexit or no Brexit, it will be affecting SA

IT’S the nature of globalisation that as South Africans we take an interest in what decision British citizens make this week on their future — is it inside or outside the EU.

The Investopedia definition of globalisation, of which historians can’t really pinpoint the start, is the tendency of investments and businesses to move beyond their own markets into others around the world, increasing interconnection.

And we are connected to this week’s decision on the British Isles. It matters not only to our immediate prospects as markets react to the decision on Thursday. An exit — a “Brexit” — will weaken the rand even further. The silver lining there is that gold will rally as a safe haven and our miners of the yellow metal will be in the money. A vote to stay in should, in theory, result in the opposite and a less bullish mining quarter.

We should try to capture the longer-term impacts of the more dreaded decision of an exit. What if Britain decides to forge ahead on its own — is it really that much of a deal?

At first glance, perhaps all we should expect is a shake-up in the markets through, as I said earlier, a further weakening of the currency and more riskaverse behaviour in capital markets.

And thereafter, a return to some sort of normal. Mmm . . . normal, a word that’s not been associated with the global economy for close on a decade.

If there’s anything I can guarantee from watching the global economy struggle since the end of 2008 to regain some sort of sure footing, it’s that there’s no such thing as normal.

Were the Brexit backers to win, it should take about two years for the queen and her subjects to divorce themselves from Brussels, the seat of the 28-member EU.

During this period, one can only imagine the uncertainty that would plague global markets and, in turn, national economies, in the developed and the developing worlds.

Inasmuch as the world’s growth nodes are in the emerging basket, Europe, the US and other developed countries are still the blue-chip clients. Their struggles have fast-tracked Chinese plans to develop a consumerist class, something that’s not too easy. Anyway, I digress. In the dust that would be unsettled with a British exit, we’d also have to consider to what extent anti-EU formations throughout mainland Europe would be emboldened.

In economically ruined countries such as Greece, under strain from the necessary but unwanted austerity measures imposed mainly by Germany, the idea of a grand divorce and a return to the drachma would become sweeter.

Who knows what the Italians would do?

What will happen is a delay in any possibility of a final solution to questions over the long-term survival of the EU and fiscal union.

In Greece, the idea of a grand divorce will become sweeter

The sovereign debt crisis of a few years ago — one that hasn’t quite been resolved — illustrated this truth.

Europe needs to function in much the same manner as the US and its 52 states. A British exit would push that possibility back another decade, if not more.

The uncertainty that surrounds the EU project that began in 1993 will be with us longer, and while growth, and strong growth at that, may very well return to paper over the cracks, there’ll always be that underlying uncertainty about it.

Because it’s our biggest trading bloc, South Africa, more than any other emerging market, is tied to the EU’s fate and that of the UK, our secondbiggest European trading partner after Germany.