On Brexit and Africa, direct and indirect impacts

Brexit and Africa

As the case may be for many countries the Brexit referendum could have negative consequences. Yet, it is already quite clear that the influence on African countries will be important both directly and indirectly in a negative but also potentially positive light.

The impact on security, for instance, will be a negative one. The UK has provided assistance in a number of countries, take the horn of Africa as an example – through European development programmes the countries in this region have received a great deal of aid from the EU. Yet, if it wasn’t for the UK’s influence within the EU, these countries might not have been considered.

Although there had been a reduction in aid to African countries, the difficulties – especially those related to the migrant crisis – have meant that European countries have been trying to find solutions to the systemic problems on the continent as well as in the countries of origin.

By improving the security situation or the economic realities in the country, the hope is that fewer people will flee their home countries and come to Europe. These moves may be reduced by Brexit, as Europe’s concerns turn to look at solving its own difficulties rather than external issues.

Furthermore, the UK’s role in the EU vis-à-vis trade with, and throughout, African countries is an important one. With the UK leaving the EU, African countries are likely to lose a key ally in the institution that has long argued for more free trade with countries outside the EU. This reduction of barriers would have been important for African exports, but without the UK – and with the economic difficulties faced by EU economies – there could be more of a move towards protectionism.

Diplomatically, the UK will be stretched with Brexit negotiations, especially on those around trade with the EU. This means that in the medium-term, the UK’s trade agreements with various African countries are likely to remain as they are with the EU currently.

We may instead see the UK prioritising some key African partners within renegotiation of trade agreements (for example: Nigeria and Kenya) – some African countries will gain from the UK’s ability to renegotiate trade deals, while others are unlikely to see a difference – for those key African partners, Brexit could be beneficial in the long run.

Much of the recent talk surrounding Brexit has been about the UK’s global economic and trade role. Many have started to insinuate and stir the discussion around how the UK’s trade relationships with former British colonies and the Commonwealth will develop. We foresee that in the short- to medium-term the UK will be busy negotiating the future of its relationship with the EU with the Commonwealth countries becoming a lesser priority.

However, after the preliminary dust has settled it is likely that the Commonwealth may become an important area of growth of trade and economic links. Although, to achieve this, Britain may have to increase its diplomatic power which had been reduced following the 2007-08 economic crisis, to strengthen those ties.

From a political economic point of view, the UK is a major trading partner for a great number of African countries, and with the pound weakened and the UK economy possible going into recession it may have a knock-on effect on some countries. In terms of number of projects receiving FDI (not value of FDI), the UK was the second highest source of FDI in Africa in recent years, and the worry is that this may well be reduced if economic problems return to the UK.

However, it is also important not to overstate the direct impact of Brexit. Many African countries have spent the last 20 years reducing their economic dependency on ‘Western’ countries, and now have a more balanced relationship, with a number of countries. While Brexit is an opportunity for African countries to engage directly with the UK (and not just the EU), they are not as likely to suffer in the same way as before. Away from the UK and the EU – China is incredibly important to many African countries, while there has been a huge push globally to strengthen economic ties with Africa, for example India, Turkey and Japan are all increasingly important factors for growth.

Brexit may be an opportunity for less traditional partners to increase their roles on the continent. It is already clear that India’s role would increase, but Australia, Turkey, the GCC, Israel and Japan might be interesting choices for a number of African countries to strengthen trade and political relationships. African countries have less economic dependency on one country, which means that they can deal with shocks more effectively.

Source: Menas Associates/Edo Ndeke/Stefano Ghirardi
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