UK-Africa Trade Post Brexit: Opportunities and Challenges
Updated: Jul 23, 2019
The amount the UK invests in Africa has seen a steep rise in recent years with the amount more than doubling between 2005 and 2016, from £20.8 billion to £42.7 Billion. In 2018 Prime Minister Theresa May embarked on a three day tour of sub-Saharan Africa on a mission to strengthen British –African trade post-Brexit. As the UK potentially exits one trade bloc, exploring a closer trade relationship with Africa could be mutually beneficial for both regions.
During her tour, the Prime Minster outlined her ambition for the UK to be the G7’s “number one investor in Africa” by 2022, adding that Britain’s private sector should invest the billions that will see “African economies growing by trillions”.
In the event of a hard Brexit, companies that once traded freely with European markets could see their goods exposed to new costs each time they cross the channel. The UK will have to look seriously into the potential of third country markets with the growth indicators that compliment UK industries in the turbulent economic short run. Africa has that abundance of growth, both in population and production, with its GDP growth projected to accelerate to 4.0 percent in 2019 and 4.1 percent in 2020.
Areas of growth
In 2016 mobile technologies and services generated USD 110 billion of economic value in Sub-Saharan Africa with the number of mobile broadband connections set to reach half a billion by 2020. Information technology is one of the UK’s strongest sectors, second only to financial services. Both regions can work collaboratively to trade equipment and expertise to meet the growing demand for technological products and services.
Africa also has the highest urbanisation rate in the world with about 40% of the population already living in urban areas. The 20 largest African cities are expected to grow by 50% in the next 10 years. The strength of the UK construction industry can compliment this growth very well and the conditions for a closer trade relationship are optimal.
Exiting protectionist policies such as the common agricultural policy could also give UK consumers wider access to African goods. A report by the department for infrastructure and economic co-operation on African trade development shows that producers on the continent are already instituting robust quality control and product safety measures to promote exports.
Challenges to Address
There are a number of challenges that should be addressed for that potential of UK-Africa trade. One issue is that most of the trade arrangements the UK has with African countries were negotiated through the EU. These agreements will cease to apply or will have to be renegotiated when the UK formally leaves the EU.
The continent also has to overcome a number of negative stereotypes such as the vulnerability of property rights and issues with corruption. Entering the African market is still not fully discovered by UK investors and businesses.
The UK also faces stiff competition from China for trade in African markets.According to the ministry of commerceChina has been the largest trading partner in Africa for nine consecutive years. In the first six months of 2018, trade volume between China and Africa exceeded $98.8bn (£77bn), up 16 per cent from the previous year.
However, there are challenges to doing business everywhere in the world. Trade in a broad sense does not take place merely on a primary basis but rather where there is a clear commitment to do more business and form mutually beneficial partnerships. In the light of Brexit, there is a massive opportunity for Africa and the UK to meet each other’s value propositions and enjoy a prosperous trading future.