June 23, 2016 marks a watershed in the history of the United Kingdom (UK). On that day, the referendum on the UK’s European Union (EU) membership was held. The result shows that 52% of British voted to leave the EU and 48% voted to remain in the EU. The breakdown of the result across the UK shows that England and Wales voted strongly for Brexit – the word that represents leaving the EU – while Scotland and Northern Ireland voted for Bremain – the word that represents staying in the EU. The dust raised by the outcome of the referendum has not yet settled – the fallout panic from Brexit is still evident, with volatility in the global financial markets staring us in the face. The Economist Intelligence Unit has hinted that panic would continue as uncertainty that Brexit brings persists. Across the world the implications of Brexit have become topical and its ramifications cut across fields of study. Pundits around the world have expressed opinions with trumpeting calls to explore possible interventions in order to address the fallout panic from Brexit. This article examines what Brexit means for Africa, and argues that Africa stands to gain if African countries focus on the economic dimension of Africa’s regional integration. This will enable Africa negotiate better trade relations with the UK and the EU.
Following the UK’s EU referendum, opinions are divided among pundits on what Brexit means for Africa. Clearly, Brexit brings uncertainties to the global markets, as evidence has shown from post-Brexit financial losses. Africa is integrated into the global markets through the commodity markets of African countries. Also, to a large extent, Africa is integrated into the global financial markets through the listing of many African companies in the global stock markets. Prima facie, the uncertainties rising from Brexit appears to have zero immediate effect on African markets. This is because the referendum was not premised on issues facing African economies. The referendum was rather underpinned largely by political sentiments within the EU, though there are economic sentiments.
However, the impact of Brexit on Africa will depend on when the toll of Brexit on European market begins to kick European countries – which the majority of African countries have trade relations with – in the teeth. It is until then that Africa will begin to feel the pains of Brexit. As Africa and Europe are major trading partners – which explains why the effect of Brexit on the EU will have spill-over effects on Africa – the expectation is that Brexit will continue to contribute to increased uncertainty in the global (financial) markets and the risks associated with the global (financial) markets, thereby contributing to the risks that Africa will face in the coming years.
For decades now, the EU has had significant impact on the UK’s foreign policy in Africa. In terms of trade, aid and diplomacy, the UK has remained the most attracted and committed EU member state in Africa. The UK has shared with the EU its (UK) policy-making processes and strategies in Africa and also has sought the EU’s support in implementing its own (UK) foreign policies in Africa. This reveals the influence that both parties have on policies in Africa, which experts have argued should not be divided, but rather jointly sustained for Africa’s economic progress.
What then does Brexit mean for Africa? Brexit will open opportunities for Africa negotiate better trade policies and business relations with the UK – all which have been obstructed over the years by the EU’s trade policies, for example, the EU’s Common Agricultural Policy (CAP). To put into context, the EU’s CAP as it currently operates subsidizes European agricultural products, meaning that African farmers are at disadvantage and cannot compete at the European market. With Brexit, trade negotiations will be on the table – which apparently will by-pass the EU’s trade policies that have not only been detrimental to African farmers but have historically distorted access for African farmers into the European market.
Moreover, Brexit means that the UK will be in direct competition with the EU on many trade policies, including CAP. History has shown that the UK has been pressuring the EU to reform its (EU) trade policies towards Africa, particularly the subsidies to European farmers. Thus, Brexit will offer the UK the opportunity to consolidate its trade relations with African countries, particularly the Commonwealth countries, as opposed to the EU having the exclusive authority to negotiate and decide international trade agreements. This will apparently put the UK in the position to trade freely with Africa – and African countries will be placed on a pedestal to bargain for better deals with both the UK and the EU.
Furthermore, Brexit means that the UK will lose significant trade influences in the EU. Given the uncertainties that Brexit brings to the global financial markets, there is likelihood that the UK may lose some existing trade negotiations with African countries. Before Brexit, there were discussions about merging the Bourse Regionale des Valeurs Mobilieres (BRVM) – which is the bourse for eight African countries that form the West African CFA franc monetary zone – with the London Stock Exchange (LSE). Today, there are many African companies listed on the LSE, as London is seen as the hub of European stock exchange. In the face of post-Brexit shocks and uncertainties, African countries may consider exploring (for those that don’t have) or consolidating (for those that already have) bilateral trade relations with European countries like Germany and France. This will mean that Frankfurt Stock Exchange, which currently ranks among the top ten stock exchanges in the world, may become the new hub of European stock exchange; hence desirable for African companies. From the foregoing, it is clear that African countries need to focus on the opportunities that Brexit presents, rather than jumping on the bandwagon of panic wave. Clearly, regional integration in Africa is still at the infant stage. Brexit has presented African countries with the opportunity to integrate the continent economically and politically. But focus should be on the economic dimension of Africa’s regional integration. Though, Africa is integrated into the global market through the commodity market; however, Africa is still at the bottom end, where it is not optimally utilizing its commodities. Therefore, Africa needs to scale up manufacturing productivity in order to tackle the challenges of job and wealth creation. To do this, Africa needs to promote industrialization through value addition, value process management, technology advancement and scaling up investment in infrastructures. These will help Africa become more competitive in the global market. Chukwuma is a graduate student of Public Policy and Management at the University of Melbourne, Australia. He tweets @CHUMA_47
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