09 Oct SA Expats And Brexit

Brexit and Saffas: How will the Euro divorce affect South Africans?

A study by PEW research conducted in 2017 estimated that more than 270 000 South Africans were already living in the UK and EU combined.

By far the most popular expat destination for South Africans is the UK, but in the EU, saffas also favour Germany, Netherlands, Portugal, Ireland and Greece.

Of course it’s specifically this idea of relatively open borders and ease of travelling across the EU through a Schengen visa which has appealed to so many expats. Another pull is business — with so many businesses headquartered in the UK and the relative ease of trade which has been allowed under the union.

But what will happen to immigrants who are neither of British or EU descent (or citizenry) following Brexit? Many South Africans are currently concerned about the repercussions — whether the UK exit the EU with or without a deal.

Deal or no deal?

It’s difficult to predict what the eventual outcome will be for foreigners living in the UK or Europe given that the ones in the know don’t even seem to know what will happen to their own countries, native citizens and borders.

The EU still seems keen on finding a solution to the Irish border issue, and yet the same enthusiasm does not seem present in UK ranks, where British Prime Minister, Alexander Boris de Pfeffel Johnson, has willfully obstructed debate on the matter.

Though no one seems to know what the result will be, some hard lines have already been drawn in the sand. Both the German chancellor, Angela Merkel and the French president, Emmanuel Macron, had been stern with Johnson about his lack of progress. And at the time of writing this article, Merkel had already personally rejected Johnson’s new Brexit proposal.

And yet, although time is running out for Johnson to negotiate a Brexit deal with the EU, he will be required by law to seek another extension for Brexit negotiations

Nevertheless, it is a bit confusing to figure out who exactly is in charge and whose ultimatum will be the defining one. The Independent News reports suggested — within the scope of two weeks — that the EU are giving Boris Johnson an ultimatum and conversely that Boris Johnson was giving the EU an ultimatum as well. Both ultimatums seem to hold that the party in question’s terms need to be met or a no deal divorce would be inevitable. And yet Reuters reported within the same time period that, “the EU will never push the UK out, the Union will never close the door” according to an EU official. This suggests that the EU would be keen for another extension should the deadline for a deal not be met. One has to wonder, however, what the point of a deadline is in the first place if it doesn’t serve its intended purpose. On the surface, this seems as preposterous as a borderless border — as the one separating Northern Ireland and the Republic of Ireland. It is this very counterplay of urgency and delay, of power and powerlessness, which has fatigued the masses.

But matters are far more complex than sensationalist media would have us believe. One should be reminded that most of the world’s wars had been fought over borders and autonomy. The tenuous peace on the isle off the coast of England is one which had been innovatively negotiated and, as unconventional as it may seem, it has been remarkably successful since the Good Friday Agreement in keeping the peace.

The true risk of a deal which doesn’t cater for an Irish backstop is therefore one which not only affects financial and social wellbeing but threatens civil unrest and bloodshed. In fact, clashes between different factions in Ireland have already caused numerous injuries. And the Irish and British prime ministers are already at odds over the prospect of direct British rule in Northern Ireland in the event of a no-deal Brexit, with Leo Varadkar opposing the idea.

Urgency or dallying?

This dichotomy in the negotiation tactics is somewhat confusing. For although the prime minister has stated explicitly that Brexit will occur with or without a deal by 31 October, the urgency is dulled by the illegality of such a decision. And given that it seems anyone at odds with the ruling party is simply ousted or throws in the towel, it’s fairly difficult to take things seriously. From Cameron to May to Johnson, the British parliament has made dramatic changes in leadership and policy since the Brexit vote.

It is worrisome for numerous reasons that the prime ministry seems all at once indecisive and hard-bitten; especially since many people seem to believe that the Queen of England has executive power over parliament. Of course in a constitutional monarchy, the Queen’s role as head of state is dictated by the executive powers of the parliament.

To make matters worse, Johnson’s early prorogation of parliament which had been approved by the Queen was subsequently deemed unlawful by the supreme court, but another (much shorter) prorogation is scheduled for the days leading up to Johnson’s meeting with European leaders on 17 October. This seesawing of executive power and resolution is doing little to dispel fears or build trust in the integrity of British leaders.

And what of the EU’s to-and-fro in professing leniency and no mercy? Will the UK continue to bend the EU’s rubber arm? Will the EU tell the UK it’s had enough? And if so, what are the consequences for Ireland?

What exactly are the possible outcomes we can expect at the end of October?

Some people have hinted at the possibility of a second referendum. Some believe that Johnson will thwart the legal system and exit without a deal — challenging the very law which prohibits him from doing so in court. Some believe the court will overrule Johnson and demand a Brexit extension. Some believe Johnson will be ousted.

For the purpose of this article, however, we assume that Brexit is inevitable, and try to understand the implications of this split for South Africa.

The pros

There are at least a few silver linings for South Africans.

On the upside, immigration expert Ryan Rennison from Move Up UK Visa Solutions reckons that Brexit will make it easier for skilled South Africans to find work and relocate to the UK. This is most likely due to a mass exodus of European nationals from the UK.

There is also the odd chance that Brexit could see a significant slump in the pound sterling, which could, theoretically, make travel and investment in the UK far more affordable for South Africans.

For South Africa as a country, there is also the chance that the UK’s exit from the EU will see both the UK and European countries look elsewhere for products or services which had been provided by these respective regions. Where the EU favours service and product delivery between member states, a British exit could prove beneficial to emerging markets who seek to fill in the gaps. In fact, the UK High Commissioner had assured South Africa that Brexit would offer advanced benefits to South Africa, since we can renegotiate trade deals without EU restrictions.

Another pro is that Minister of Trade and Industry, Ebrahim Patel, has assured saffas that the R7 billion trade deal between SA and the UK will continue unabated irrespective of the Brexit outcome.

The cons

Travel restrictions

Though any new travel restrictions wouldn’t make much difference to South Africans travelling to Europe or the UK from their native country, it would certainly make a difference to those already living within these regions or people who wish to piggyback on the Schengen visa.

Earlier this year, the EU stated that it would make a travel concession for British citizens to grant them visa-free access the the European Schengen district, they also made it clear that this would only be granted if the UK reciprocates. And the UK has already stated that it would tighten border control after Brexit. 

It’s hard to know exactly how borders will be controlled once Brexit is finalised given that the UK and EU have not been able to agree on much during negotiations. The EU has stated, however, in a no-deal Brexit scenario people with a UK passport will need at least 15 months left on their passport and can travel visa-free to the EU for 90 days.

Of course, for South Africans who have been in the UK for several years and have UK or EU passports, this presents the same headache as it does for native Europeans and Brits. Though a UK or European passport will undoubtedly still hold more sway than a South African passport, restrictions are undoubtedly on the cards either way.

And for those who have already made travel plans, the EU and UK have stated that travel arrangements made with companies outside their territories or those which do not offer ATOL and ABTA protection may possibly not be honoured after 31 October — so perhaps it’s a good idea to keep the travel arrangements on hold until you’re sure! Travellers are further urged to take out travel insurance for costs which may no longer be covered across borders.

Harder to find work

Although contrary to our commentary in the pros section, there’s also a chance that Brexit will make it harder to find a job in the UK or EU regions.

In the UK, the lack of growth and economic losses as earlier have already made businesses more conservative in their employment policies — opting for a cautious approach in these uncertain times. This means that companies are hiring less aggressively than they did pre-referendum.

In the EU, South Africans may have to contend with returning European citizens or exiting UK citizens as many people from Britain are now flocking to Europe to build new lives or take up the lives they’d left behind when immigrating to the UK before. In fact, countries like the Netherlands have already reported an influx of new business and immigrants to their shores. 

South African economy

Unfortunately there are quite a few cons in the pipeline. Of particular importance is the renegotiation of trade deals. Though renegotiation could benefit SA, we should also consider what delays there will be during these trade negotiations, which restrictions will apply in the interim, and how much manpower it will take to get all the new agreements in place.

In fact, it seems it’s exactly the renegotiations which could be the biggest threat to SA’s economy, according to British trade expert, professor Richard Gibb. Had the EU and UK been certain of their future and negotiated their own deals punctually, South Africa will have had a better idea of what to put on the table and how the split will affect us. Unfortunately the uncertainty means that whatever new deals will be made will have to be negotiated at lightning speed to mitigate the financial impact of our own no deals (albeit that these no deals will be temporary). With the UK currently SA’s largest trade partner in the EU when it comes to exports, new deals are crucial for our economic survival.

Agricultural economist and trade policy analyst Tinashe Kapyua has stated that a no-deal Brexit will see trade between SA and the UK roll back to World Trade Organisation (WTO) rules which will see us forfeit preferential trade deals and see increased tariffs of between 10% and 22% levied on exports to the UK.  Such an event would single-handedly cripple the South African automotive industry, according to former trade and industry minister Rob Davies.

And how will new border and customs checks affect us? It seems most countries will have to jump through a few extra hoops to get their products flowing through the EU and UK after Brexit.

Another point to consider is that Brexit could see a slump in UK or European currencies. This may make it cheaper for saffas to travel and invest, but as we’ve seen in the past, underperformance by major currencies has historically seen the rand take a major knock.

Though a slump in foreign economies has often pushed investors to divert their funding to emerging markets, South Africa’s economy would hardly allay investor fears and is therefore not the place people want to ‘stash their cash’. Furthermore, although we could see better rates for exports to the UK and EU, these rates could also conversely see the respective regions import less to address the financial shortfalls.

Lastly, it is important to remember that the UK is one of the biggest tourism partners for South Africa. In fact, for the Western Cape alone, the UK is the largest source of foreign direct investment and the largest source of tourism investment.

Past behaviour has proven that businesses are skittish for investment and hiring when facing uncertainty — which is exactly what is happening in the UK right now. A research paper on the topic which was published in August, states that investment had tapered off by 11% since the referendum and productivity had been cut by up to 5% throughout the UK. In fact, studies show that the UK has already lost £66 billion since the referendum in 2016.  If the UK’s economy suffers any further losses, South Africa will feel a definite pinch in our tourism and investment pockets.

Move your rands

Though Brexit spells certain headaches for UK citizens, it’s clear that South Africa may be at the receiving end of even more financial woes if international unrest is to continue.

With current crises in DA and ANC ranks, several SOE bailouts as well as SARS and SARB drama, the lack of tourism income and possible investment cuts amid the Brexit divorce could be catastrophic to our economy.

But we’ll have to wait or see what the future holds. Perhaps the UK or EU holds the key to your future after all? Or perhaps some other distant shores like Australia, New Zealand or Canada area awaiting you.

Whatever your future, Rand Rescue can help you move your money across borders. Leave your details below and we’ll get back to you.