Brexit – are there any opportunities for Africa?

Just over a year has passed since the announcement of the UK’s vote to leave the European Union and much uncertainty remains.  The UK has now triggered Article 50 of the Lisbon Treaty, activating a two-year negotiation period with the EU, meaning that the UK’s formal exit will not occur until 29 March 2019.  This intervening period of flux could be regarded by those outside the EU as an opportunity to redraw the lines of their engagement with both the UK and the EU.

One continent that has the potential to benefit enormously from this seismic shift in Europe is Africa.  Rather than dwell on the negative consequences, this article seeks to explore the potential opportunities open to Africa in the wake of the Brexit vote.

Many see the UK as a primary trading partner for Africa, but the figures do not fully support this assumption.  True, the UK is one of the biggest buyers of Kenya’s US$1.1bn annual flower and horticulture exports to the EU, but according to the Office of National Statistics, the UK also comprises just 4.8% of total African exports.  So, whilst many have focussed on the negative impact of a possible UK recession following Brexit, it is also worth considering the potential benefits. Outside the EU, and without the bargaining power and economic stability that its membership previously provided, the UK will be keen to negotiate new bilateral trade deals to assure security of supply and export.  Given the UK’s historical ties with Africa, and its position within the Commonwealth, it is not hard to imagine that the UK’s policy makers will swiftly turn their attention to Africa, providing opportunities to boost trade.

Similarly, the role of Economic Partnership Agreements (EPAs) and the Common Agricultural Policy (CAP) (long considered a blight to the development of many African nations) could well be diminished by Brexit.  The EU has historically imposed numerous restrictions on trade deals with Africa, aimed at protecting the EU’s own industries.  Many analysts argue avidly that the strict and inflexible standards imposed, coupled with the subsidies afforded to EU farmers through the CAP, make it impossible for Africa to compete and leave producers with little room for manoeuvre.  With one of the CAP’s most notable critics set to take leave the EU, Africa may finally be afforded the opportunity to negotiate a more balanced trade package and to better exploit its own produce.  The first evidence of this may be beginning to show.  Both Tanzania and Uganda have delayed signing an EPA between the EU and the East African Community, hinting at the prospect of a better deal post-Brexit.  Perhaps, with a weakened EU and an isolated UK, the African trade blocs could finally find themselves with the power to negotiate on more equal terms.

Africa’s interaction with the UK financial sector should also be considered. With the UK’s internationally recognised legal and financial expertise, and financial institutions based on the African continent, able to use their ingenuity and innate understanding of local markets, existing links could be significantly strengthened post-Brexit.  With the pound depressed, UK services will be cheaper, and a strong relationship in this sector could cement the ongoing emergence of Africa’s growing middle class.

International investment in Africa is also expected to increase thanks to the appeal of high yields against a backdrop of sustained low interest rates in the developed markets.  Added to this is the rising price of gold – whilst other commodity prices have collapsed, the recognised stability of gold has helped the economies of South Africa, Tanzania and Ghana (the region’s biggest gold exporters) in particular.  Traded against the US dollar, sales will also increase the flow of this international currency into the region.

Consideration should finally be given to the sphere of aid and security. Much of the UK’s aid and development assistance is currently funnelled through the European Development Fund.  However, following Brexit, the UK is expected to disburse directly to recipient countries through organisations such as DfID and CDC Group plc (CDC), a change which experts predict will result in a more targeted focus with narrower geographical reach.  In fact, the UK government has recently lifted the cap previously imposed on aid funds spent through CDC, via a new strategic framework launched on 6th July 2017, allowing more UK aid to flow to developing countries in Africa and South Asia.   With the UK’s attention anticipated to be on the Commonwealth and other countries with which the UK has strong historical ties, many African nations stand to benefit.

It is therefore possible to paint a picture whereby Africa could benefit from Brexit.  Amidst concerns of a recession in the UK, and with both Sterling and the Euro unsteady against the US dollar, those economies with close ties to the EU and the UK (be that through trade and export, investment, remittances, tourism or currency pegs) certainly face an uphill struggle in this volatile period.  However, the rewards for those countries with the ambition to exploit the potential opportunities on offer could well be sufficient to enable Africa’s march forward to continue.