Are Britain’s Brexit trade woes good news for Africa?
According to the UK’s International Trade Committee, British trade with 70 countries is going to “fall off a cliff edge” unless the country’s government takes urgent action. This is just one of the doomsday headlines coming out of the British press as the nation prepares to leave the European Union and the single market access it comes with.
It’s not like the British government isn’t trying to secure trade deals that will minimise the economic impact of leaving the EU. Prime Minister Theresa May has attempted to build trade ties with the US, Australia, China and various other potential partners – including the African continent.
Britain looking to increase trade with Africa
Earlier this year, Britain’s export finance agency, which works alongside the Department for International Trade, announced it will add the Nigerian Naira to its list of pre-approved currencies – a move that “supports increased trade relationships between Nigeria and the UK,” according to UK Deputy High Commissioner to Nigeria, Laure Beaufils, who spoke to CNN in February.
This means the British government can give financial support to Nigerian businesses and projects in the local currency.
Nigeria is Africa’s single largest economy, according to World Bank statistics, and the country is only just emerging from a recession after falling oil prices hit the resource-rich nation hard. It’s also predicted to overtake the US as the world’s third-largest population by 2050.
According to Emma Wade-Smith, UK Trade Commissioner for Africa and the British government’s most senior trade official in Africa, Nigeria isn’t the only nation her country wants to increase trade with as it prepares to leave the EU.
Speaking to African Business last week, the British government is already assessing its existing trade deals with African nations although it’s not able to negotiate new trading arrangements until Britain has officially left the European Union.
“The decision for the UK to move away from the European Union (EU) provides an opportunity to re-engage and refresh the way we operate across Africa. There is much more we can and want to do. There’s everything from ensuring continuity in our existing trade agreements through to figuring out how we realise the full potential of those of those trade agreements,” she told African Business last week.
She also says the government is committed to making sure Brexit doesn’t negatively impact the country’s existing trade deals with African nations.
“The British government has been very clear that Brexit provides this opportunity for us to project a Britain that is still thinking globally and still out there in the world as champions of free trade. This is an exciting moment to explore what that means for us in Africa. There should be more opportunity as we see more British companies exploring markets outside the EU.”
African economists eyeing opportunities
Of course, you have to take anything the British government says right now with a pinch of salt. At a time like this, it needs to hype up its trading prowess and convince the world it remains a global power – a status that is being scrutinised now more than ever.
However, African economists and bankers also expect Britain’s departure from Europe to generate new business opportunities. Above all, the UK’s existing trade deals with African nations and regional blocs will be void once it leaves the EU and this gives Africa the chance to renegotiate its trade deals with the country. Many economists and bankers are confident this will result in more generous terms for African nations as Britain begins the arduous tasks of rebuilding its trade ties.
Some are also hoping Brexit will allow African nations to strike better deals with Britain than the existing Economic Partnership Agreements (EPAs) the EU is pushing African blocs to sign. A British alternative and a weaker EU could help Africa bolster international trade without stifling domestic markets to the same extent as EPAs typically do.
This is assuming the UK does provide a viable trade alternative and the EU is, in fact, weaker without Britain – neither of which is guaranteed.
Brexit risks to African trade
No matter how optimistic certain economists and bankers may be about the Brexit business opportunities for Africa, there are risks. As Osita Ogbu, professor of economics at the University of Nigeria, says: there are ideological issues to consider as well as the obvious economic factors.
“We have to understand the ideology behind Brexit,” he was quoted by Euromoney.com in October. “This is happening under a very conservative government. The Labour party is more liberal towards Africa, historically.”
If Brexit results in a curb on immigration from African nations, an important revenue stream for many countries across the continent will be hurt. Africa is also losing its biggest supporter within the EU when it comes to raising foreign although many argue Africa has relied on foreign aid for too long.
Above all, there’s the risk (or likelihood, as many would argue) that Britain will become a weaker trading prospect once it leaves the European Union. Better terms from a weaker trading partner would be something of a hollow victory in the long run.
Featured image: By Ilovetheeu – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=58644968