12 Brexit Implications For Africa That Will Surprise You
The United Kingdom held a June 23 referendum to leave the European Union, shocking the world when voters chose to leave by a narrow margin. While economic uncertainty abounds across the E.U., the impact has been felt worldwide, particularly in African countries that have long enjoyed close relations with the U.K. and the rest of the European continent. U.K. Minister for Africa James Duddridge was a proponent of Brexit, promising that relations with the continent would improve without the burden of the E.U. It remains to be seen whether or not this is true. Here are 12 implications of Brexit in Africa that you probably didn’t even think about.
Brexit harms economies based on exporting raw materials
Many African economies that rely on exporting raw materials could see a huge slow-down in growth and increasing deficits as Brexit harms the global demand for goods. If global demand for raw materials decreases, the prices for key commodities – including minerals, ores, and others – may fall further.
An East African-E.U. trade deal fell through due to Brexit
In late July 2016, Tanzania and Uganda refused to sign an economic partnership agreement between East Africa and the E.U. over Brexit concerns. The deal was meant to ensure that the East African Community (Tanzania, Uganda, Kenya, Burundi, and Rwanda) would be able to continue to export goods to the E.U. without quotas or tariffs. The Tanzanian government said they backed out due to “the uncertainty in E.U. after the exit of U.K.” If the deal is not ratified by Oct. 1, the current trade deals will lapse. The original agreement was negotiated for nearly a decade and has been in effect since October 2014. Should the deal fall through, Kenya will face tariffs of 4.5-to-19.5 percent due to its status as a wealthier developing country than its neighbors.
Source: Financial Times
Tourism will decline
In times of economic hardship, tourism declines. If Brexit results in decreased prosperity across Europe, would-be tourists are less likely to travel to Africa for safaris and other holiday activities, a sector that many African countries have come to depend on.
African immigration to Europe will decline
If the U.K. successfully leaves the E.U., fewer African workers will be able to obtain permits or visas to work overseas in Europe. Many African migrants depend on their ability to travel overseas to work in developed nations and send much of their higher wages back to their home countries.
The U.K. may import more produce from Africa
Currently, nine out of the 10 biggest produce importers in the U.K. are E.U. member countries. Potential changes to E.U. tariffs and the falling value of sterling have forced some retailers to consider sourcing from different countries; 38 percent say they expect to see more produce from Africa. South Africa is already the No. 2 source of fresh fruit to the U.K. after Spain, and Kenya may become a beneficiary of the changing trade patterns.
Source: The Guardian
Aid from the U.K. and Europe may decline
The projected economic slowdown in the U.K. from Brexit will impact the country’s gross domestic product, ultimately impacting the resources available for foreign aid. Many African countries rely on aid from the U.K. and other European governments for vital infrastructure projects and key services for citizens.
Investment in sub-Saharan Africa may slow down due to risk aversion
In times of economic uncertainty, investors are less likely to take risks. Capital flows that were previously booming in sub-Saharan Africa may begin to dry up and financing costs may increase.
African farmers may hurt by E.U. support of agricultural subsidies
The U.K. was one of the staunchest opponents of the E.U.’s support for agricultural subsidies. Without a power player championing the cause, African farmers who stand to be hurt by the subsidies may suffer further.
Africa’s status may be downgraded in U.K. politics
The U.K.’s new Prime Minister Theresa May has decided to fold the U.K.’s African Ministry into the Middle East Ministry as the government attempts to pull staff from various departments to help with Brexit negotiations. Some have pointed to this as a sign that Africa has been downgraded in importance in the U.K., and will have even more trouble fighting for increasingly scarce resources.
South Africa’s rand plummeted following the Brexit vote
South Africa’s close financial and economic ties to the U.K. caused the rand to plummet following the Brexit vote, becoming the worst performing currency after the British pound.
Other secession movements have become emboldened
Following the Brexit vote, other European countries – such as France, Holland, Italy, and Denmark – called for their own referendums to leave the E.U. Similarly, the ground-breaking vote emboldened secessionists in Africa, such as the activists in southeast Nigeria who have been calling for the establishment of an independent country called Biafra for years (in fact, they already called for a referendum earlier this year, which was denied by the Nigerian government).
An end to British “outwardness”
Though less tangible than economic consequences, many fear the Brexit vote represents a time of isolation in British politics. The U.K. may now face opposition and limits to the extent to which it can respond to global development issues and conflicts; as many African countries have long depended on the U.K. as a strong ally to national issues, this is a major concern to African leaders.
Sign up for the AFKInsider newsletter — the most compelling business news you need to know from Africa and the African diaspora, delivered straight to your inbox.