By Martin Roche (Contributor)
As the world now knows, after more than 40 years of membership the UK is to quit the European Union. Britain’s future relations with the EU are to be negotiated over a yet-to- begin period, though probably starting in the Spring or Summer of 2017. Times are uncertain and nerves unsteady. David Cameron has been replaced as prime minister and leader of the Conservative party by Mrs. Teresa May, the second woman to hold the UK’s top political job.
Mrs. May has appointed her new cabinet and many senior jobs in the key foreign policy and economic ministries have gone to MPs who were at the forefront of the campaign to quit the EU. The most public face of the leave campaign, Boris Johnson, becomes Foreign Secretary. David Davies takes on the critical job of negotiating the UK’s exit from the European Union. Dr. Liam Fox has responsibility for a new department tasked with building new trade deals with countries worldwide. Britain’s huge overseas aid budget comes under the command of another prominent leave campaigner, Priti Patel.
All of these top jobs in the British government matter to Africa. The question is how can African nations benefit from the UK’s changed status? From being part of a union of 27 EU nations, the UK will be on its own. It is taking back vast areas of national sovereignty it had pooled to win the benefits of EU membership.
Let’s look at what Ms. Patel said on being appointed to her new position.
“I am delighted to have been appointed International Development Secretary by the Prime Minister and will make sure we invest UK aid firmly in our national interest, while keeping the promises we’ve made to the world’s poorest people.
“Successfully leaving the European Union will require a more outward looking Britain than ever before, deepening our international partnerships to secure our place in the world by supporting economic prosperity, stability and security overseas.”
Expect to see little change in the UK’s approach to humanitarian aid. When it comes to helping those in urgent need the UK is one of the world’s biggest spenders and often moves with urgency and skill to help people in desperate situations.
National interest
It is on the economic and trade development fronts that the biggest changes are likely to be seen. It is worth repeating the key phrase from Secretary of State Patel’s statement; “..we will make sure we invest UK aid firmly in our national interest.” And, “a more outward looking Britain.”
Aid will be more closely tied with trade than ever before. The British government is readying to urge British companies to look ever-more-closely at investing across the globe, including Africa. According to the UK’s Office of National Statistics, in 2014 Africa accounted for 4.2% of foreign investment by UK businesses, worth £42 billion. That’s a big sum of money, but minuscule compared to the 46.7% invested in Europe and the 35.1% in the USA.
So, how does Africa get a greater share of British inward investment and develop the UK as a bigger export market for its products and produce? The answer is mutually beneficial terms of trade and investment.
Many in Africa have complained that the relationship with the EU is one of unequal partners, with the EU using its economic and political weight to favour itself at the expense of Africa. Conversely, many in Africa and the EU complain that too many African countries need to embrace free trade and are too often protectionist, thus denying their citizens the full benefits of choice, open competition and technological advances, and frustrating inward investment and employment growth. No doubt those conflicting arguments will go on as long as the EU and protectionist countries exist.
Let’s focus on what the UK and African countries can independently achieve together. We are in a new world.
Central to the case of those who fought to end Britain’s EU membership is the argument that EU law prevented Britain developing independent trade deals with non-EU countries. Depending on the outcomes of the UK’s exit negotiations with the EU, those constraints will soon either vanish completely or be much less of a barrier to bi-lateral trade. African governments can expect to soon get a call from British diplomats charged with building new trade relationships across Africa,
Open for business
The mantra of Britain’s new team of trade and aid ministers is that Britain unlocked from the EU is open for global business. These ministers have a great deal to prove and they need to prove it quickly. The vote to quit the EU saw a narrow 4-point victory for the Leave side. Central to its case is that the UK can have a stronger economy by being outside the EU and trading with the world. The new government now has to prove that. It has to deliver.
African and British ministers and negotiators can face each other across the table in the friendliest of bargaining. Advantage has to accrue to both sides. Unbalanced trade and investment deals are in no one’s interests. The objective of deals for all concerned – citizens, businesses and governments –must be economic progress that benefits the many not only the few.
Bi-lateral trade and investment deals have the advantage that they can be tailored specifically to the needs of both parties. Innovations, ideas and structures that would be very difficult or impossible in the world of multi-lateral deals become more possible and more likely when it’s just two nations around the negotiating table. Britain is saying its door is open to the post-EU world, so African leaders who can see the potential for their countries in new relationships with the UK should be on the phone to London now.
I would urge political and business leaders throughout the continent to begin to seriously think how they can maximise the new political landscape to the benefit of their citizens and the long-term health of their economies. Those that can show the UK that they are easing restrictions in areas like competition, protectionist regulation, ease of doing business and getting tougher on corruption will find a ready ear with British ministers. The easier British businesses find it to do business in Africa the more willing the UK government is likely to be in supporting economic development via its overseas aid budget.
The UK is a great prize for any exporting business. It is the world’s fifth largest economy, just ahead of France and just behind Germany. Its 63 million people have a per capita income of US$41,200. The UK had purchasing power in 2015 of US$2,679 trillion. It is predominately a service industry economy (83.5%) and manufacturing, oil and gas account for just 15.2% of the economy. Britain has one of the world’s most efficient agriculture sectors, but domestic food production is relatively small, at just 1.3%. However, the food and drink supply chain is the UK’s largest manufacturing sector, employing 3.7 million people, turning over £80 billion a year and delivering 7% of GDP. But for all that it supplies only 40% of the UK’s food needs and that figure is falling. So, around 60% of the UK’s food market is imported. This is Africa’s biggest immediate opportunity to come from Britain leaving the EU.
Advanced large scale farming, demands efficient and reliable infrastructure. That includes the support infrastructure needed for food production and export, such as fertiliser manufacturing plants, and of course good roads and seaports. Nowadays, digital infrastructure is as vital to large scale farming as tractors. Internet access is now a critical factor for crop management, water use, weather forecasting, obtaining real time market information, payment processing, harvesting and logistics.
Moving up the added value chain
What many in Africa and the UK would welcome is African countries and business leaders taking the opportunity of a direct relationship with the UK to move up the added value chain. For example, developing African brands that sell in their own right in the UK, which is an adventurous food market and open to trying new foods and new drinks.
I see no reason to stop at agricultural products. All kinds of sectors will be able to target UK markets, whether in manufacturing or services. Britain, which is already the largest investor in many African countries, could increasingly look to Africa – if the conditions are right – to warrant more investment in trade, in manufacture, tourism, hospitality, infrastructure, business services and financial services. We all – in the UK and across Africa – need to be ready. But to be able to sell freely into the UK also means the UK has to have fair and open access to markets in other countries.
Get ready. The new world is fast approaching.
About the author
Martin Roche is a partner at the geopolitical consultancy, Etoile Partners (www.etoilepartners.com) He is graduate of the University of Aberdeen, Scotland, where he studied politics, international relations and regional development policy. Etoile works with political and business leaders on developing and guiding communications strategies in sensitive and complex matters such as inter-governmental relations, country promotion, inward investment and trade development, general elections and corporate and financial affairs in the private sector.
