Brexit will shave another sliver off SA's already lean growth

South Africa faces economic uncertainty and a dent in economic output if Britain decides to leave the EU after Thursday's game-changing referendum, economists warn.

The vote comes with implications for trade between Britain and its EU counterparts and other trading partners globally. British immigration laws could become stricter, while an increase in capital outflows from emerging-market economies is expected as risk-averse investors seek safe-haven investments.

At worst, Britain's exit from the EU could shave about 0.1% off South Africa's growth, a joint report from the North-West University School of Business and Governance and the TRADE research unit this week showed. The National Treasury, Reserve Bank and international ratings agencies expect South Africa's economy to grow well below 1% this year.

The Reserve Bank expects 0.6%, the slowest pace since the 2009 recession.

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The referendum is to decide whether Britain stays in the EU or leaves .

Nosibusiso Ngqondoyi, head of research at Novare Investment Firm, said the risk of a Brexit for South Africa was the extent to which existing trade agreements would be impacted.

"With the EU currently South Africa's biggest trading partner, and the UK our second-biggest trading country in Europe after Germany, the South African GDP will most certainly be affected."

South Africa's current-account deficit widened to 5% of GDP in the first quarter, which would make a Brexit "all the more undesirable", said Ngqondoyi.

Trade between South Africa and the EU has been increasing over the past five years, with the value of trade growing from R151-billion to R216-billion as the exports of value-added products rose, according to the latest figures from the Department of Trade and Industry.

Markets that are at risk include agricultural produce, transport, equipment, food, beverages and other manufactured products.

South Africa is on the brink of a recession, with economic output having contracted 1.2% during the first quarter.

Foreign direct investment flows are expected to come under pressure should there be an exit.

All this uncertainty is fuelling risk aversion as investors prioritise security and liquidity over potentially higher equity returns

Raymond Parsons, professor of economics at the North-West University School of Business and Governance, said that if the UK decided to leave, the government, business and labour in South Africa would need to add the issue to their agenda of heightened collaboration.

The government, business and labour joined efforts in recent months to devise strategies to revive the lacklustre economy and avert a sovereign rating downgrade.

Neil Shearing, chief emerging-markets economist at London-based Capital Economics, said trade ties with the UK were too weak to have a material impact on emerging-market exporters. But those with large current-account deficits, such as South Africa, Colombia, Turkey and Peru, would remain vulnerable in the event of a vote to leave the EU, "causing widespread disruption to global capital flows". The shock would be short-lived, though, he said.

Opinion polls have narrowed in recent weeks with some showing an expectation that Britons will vote to remain in the EU.

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Gold metal and sovereign bonds, which are considered safe havens, benefited from the recent equity sell-off. Gold prices soared from $1,127 an ounce at the beginning of the month to a peak of $1,298 on Thursday.

Global bond yields have also declined as investors flocked to government bonds amid an increase in global uncertainty.

The rand has been trading weaker on risk-aversion sentiment. It dropped from R14.95/$ to R15.55 on Thursday before rebounding to R15.22 on Friday.

This week, the US Federal Reserve kept interest rates unchanged, citing concern over Britain's possible exit.

Ngqondoyi said: "All this uncertainty is fuelling risk aversion as investors prioritise security and liquidity over potentially higher equity returns."

- Additional Reporting by Andries Mahlangu