What would be the implications of no-deal Brexit on African countries?

No-deal Brexit is a possible withdrawal of the United Kingdom from the European Union with no agreement under the accord.

If the deal is approved or the ending of the two years since the member state indicated its willingness to leave, the European Union policies and rules cease to be in force.

 

The United Kingdom and the European Union have been on the negotiation table about the withdrawal arrangement (Mold, 2018), since March 2017, when the UK government formally announced the country’s withdrawal.

 

However, the UK parliament has declined to approve it three times previously, focusing on various provisions regarding inhabitants’ rights, border activities, monetary liabilities, and ways of resolving disputes.

 

Possible consequence of no-deal Brexit

Over the past three decades, we have seen an unprecedented amount of economic growth on the Africa continent.

In part, that success can be attributed to the strong economic ties in the global market and in particular, the European market.

UK is a significant contributor to development funds in Europe; therefore, Brexit is likely to be bad news for African countries receiving assistance from the UK and development partners.

As of 2016, The UK pledged 0.7 per cent of its Gross National Income (GNI) as development aid, a significant portion of which is earmarked for development in African nations (FULBRIGHT, 2017).

With a predicted decrease of 7.5 per cent in the next 15 years as a result of no-deal Brexit, it is inevitable to predict a reduction in foreign aid, hence a hindrance in the abilities of aid-dependent nations to progress with ongoing development initiatives.

Brexit might also increases the risk of individual African nations seeing foreign direct investment from UK entities fall. For example, with a decline in the growth of the UK economy, the UK will likely have less incentive to invest in Africa.

According to the IMF’s Coordinated Direct Investment Survey (CDIS), the UK is amongst the top five economies providing inward investment into Uganda, Zambia, Botswana, and Nigeria, making these countries the most likely to feel the effects of a decrease in financing from the UK.

The UK leaving the EU might also significantly impact trade in the short term. For instance, as of 2016, figures from the Office for National Statistics (ONS) showed that African exports to the UK accounted for approximately 4.8 per cent of total African exports.

This proportion is not as much as China, given that they accounted for about 15 per cent of Sub-Saharan African exports, but countries that trade most with the UK are likely to feel the effect. For example, Kenya, which exports a significant percentage of its flowers to the UK. It is inevitable for Kenyan flower exporters to bear some losses.

It is not a question of how No-deal Brexit is going to affect Africa anymore because that is inevitable. The more important question is how Africa is going to respond, but mostly the African nations that are highly dependent on the UK. It is, therefore, crucial for African political and business leaders to be proactive and be ready to weather the storm in a swift manner that ensures the continued growth of the African economy.

The writer is economist at National Bank of Rwanda

editor@newtimesrwanda.com

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