BIARRITZ, FRANCE – AUGUST 25: British Prime Minister Boris Johnson and South Africa’s President Cyril Ramaphosa join G7 leaders and guests as they gather for a family picture in front of the Biarritz lighthouse on the second day of the annual G7 summit on August 25, 2019 in Biarritz, France. (Photo by Andrew Parsons – Pool/Getty Images) Getty Images
When Britain officially decided to leave the European Union last week, its Brexit opened up a unique opportunity for African nations to flex their collective political muscles and negotiate more advantageous trade deals. The UK has kicked off an 11-month transition period where they will try to sign as many new trade deals as possible. African countries are a prime target and the UK has already announced deals worth nearly $8 billion, as the continent is home to eight of the world’s fastest-growing economies.
The Breakdown You Need To Know: The UK hopes to reverse its dwindling trade with Africa, which fell from 4.2% of its total trade in 2012 to just 2.0% or $46 billion in 2018.
To put that in perspective, China’s 2018 trade with Africa was $204 billion, according to the country’s Ministry of Commerce. CultureBanx noted that British Prime Minister Boris Johnson wants closer economic ties with the continent that’s rich in natural resources.
When UK businesses expand in Africa the continent stands to benefit greatly from the knowledge, skills and technology they have. These companies also bring money in the form of foreign direct investment. Currently, there are 112 African companies with a market capitalization of around $166 billion listed on the London Stock Exchange. This makes the UK the most important center for Africa’s businesses outside the continent.
Africa’s Brexit Breakdown: South Africa, a former British colony and the UK’s largest African trading partner, will bear the brunt of Brexit since several companies are listed on both the Johannesburg and London stock exchanges. Not to mention that the country exports 10% of its wines to the UK.
After South Africa, Nigeria is Britain’s second-largest African market, with Kenya coming in third. Prior to Brexit trade between Nigeria, Africa’s largest economy, and the UK was worth about $7.9 billion, and was projected to reach $26.6 billion by 2020. However, Nigeria has been dealing with falling oil prices, its main source of income. Crude chemicals and allied materials make up almost 25% of Nigeria’s trade with Britain.
The UK is the second-largest export market for Kenya’s cut flowers.These flower exporters could experience some losses caused by a contraction in the UK economy triggered by Brexit, according to a Fulbright report. The Kenya Flowers Association found that the cut flower industry may lose up to $39 million a month if they can’t negotiate new deals.
China vs UK: China is Africa’s top trading partner currently with deals worth well over $300 billion. It’s important to understand that any significant percentage of gains that African nations may make from a lucrative trade partnership with post-Brexit Britain, could immediately be cancelled out due to their existing debt with China. While Chinese debt cannot stop Africa from forming new partnerships, it’s possible that any future deals could be less profitable.
The full impact of Brexit on Africa is yet to be seen. Despite the plethora of investments, African countries sank ever deeper into poverty. Today, Africa is the world’s second-fastest-growing region, and yet 100 million more Africans live in extreme poverty, compared with the 1990s.
By Kori Hale via Forbes