There were diverse views on the “Brexit” or “Bremain” sentiments by the British citizens. Brexit was the ultimate result on the 23rd June 2016, as citizens of United Kingdom (UK) voted to “leave” the European Union (EU).
The call for Brexit was due to a number of reasons, such as the amount of sovereignty the country has lost to the EU regional bloc. Issues of concern came from various sources highlighting immigration and its impact on jobs, healthcare burden – and the automatic right to other welfare benefits. Issues such as these prompted the Brexit sentiment and caused increased hostility towards the EU – not only in the UK but also in France, Netherlands and Germany.
This special report serves to analyse the implications of Brexit from the EU on Africa’s economy and the continent at large.
Britain joined the EU in 1973 and it brought along its former colonies to position them for aid under an agreement that was already benefiting former French colonies. This arrangement came to be known as African, Caribbean and Pacific States (ACP) – which allowed African aid and trade to be negotiated.
Before Africa joined the ACP in 1975 – its exports to the EU were 6% of all EU imports. But fast-forward to the end of 2000 – Africa’s exports to the EU had shrunk to 1% – and one may conclude that the EU subdued Africa’s capacity to export under ACP. Whereas the EU was awarding large sums of aid to Africa – it was at the same time enforcing punishing and prohibitive trade practices which put brakes on Africa’s growth and innovation potential.
What could potentially be the implications of Brexit on African countries? Several factors might be at play here:
Brexit will have an impact on the global economy; trade and investment are likely to bear the brunt of this. The only trade arrangement the UK has with African countries are negotiated through the EU – which in effect means that once the UK leaves the EU – the trade relationships and agreements would be null and void.
Brexit will be calamitous to Africa – as UK would no longer be shaping and leading some of the most important initiatives in the African continent that form the basis of cooperation between Europe and the continent.
Brexit would negatively impact on the key regional blocs in Africa as it has served as one of the strongest support for the development of economic growth, political and democracy.
The emerging markets and frontier asset markets will by default come under colossal pressure – with financial instability been the order of the day. Countries under the spotlight in Africa where impact would be felt tremendously are among the others, are: South Africa, Nigeria, Kenya and Egypt. Their analysis is as follows.
THE REPUBLIC OF SOUTH AFRICA (RSA)
Brexit is going to have far-reaching financial consequences for Africa and will have a negative impact on the continent’s economies. The UK is the biggest single investor in the SA economy and Brexit has brought about massive political and economic uncertainty – we can expect severe volatility in the markets and a further slowdown in the economy.
Brexit from the EU may be the beginning of the end for the European Union. Brexit would weaken ties between the United Kingdom and African countries. The renegotiation of trade agreements would be a lengthy process – which would in effect cause a diminution in trade volumes between the UK and Africa, with over 100 trade agreements set to be renegotiated by the UK, once Brexit is set in motion.
About the author: Dipolelo Moime, is the founder and CEO of Legato Consultancy Pty Ltd, a dynamic Africa risk advisory, research and management consulting firm in Johannesburg, South Africa. In his capacity he assists multinational corporations with expansion and risk management strategies for Africa and is an expert analyst on various industry topics in Africa. Find him on LinkedIn: Dipolelo Moime.