Africans brace for Brexit
“The immediate impact of a vote in favour of Brexit would be financial market volatility which would affect [sub-saharan African] markets adversely as well,” Razia Khan, chief economist for Africa at Standard Chartered, told The Africa Report.
“In a risk-off environment, external financing conditions for African economies, already difficult, would likely become even more constrained,” Khan said. “Longer term, trade agreements would need to be renegotiated with the economic uncertainty likely to impact growth negatively.”
Earlier this year, Kenya’s central bank governor, Patrick Njoroge, said Brexit poses the biggest threat to the country’s economy this year because it would trigger a global recession and Kenya would “feel the shock wave”.
There are similar concerns in South Africa, where the rand is at its weakest level in years. Bloomberg say the rand is among the emerging-market currencies most vulnerable to upheaval if Britain votes to leave the EU. Brexit could also shave about 0.1% off South Africa’s economic growth, according to researchers from North-West University.
Brexit is also feared to hit the UK’s trade links with African countries because it would force London to negotiate new trade agreements with African countries, most of which are signed through the EU. About 80% of UK exports to sub-Saharan Africa go to South Africa, Nigeria, Botswana, Angola, Kenya, Ghana and Senegal, according to Barclays’ Corporate Banking.
Earlier this month, Cecilia Malmström, the EU’s Commissioner for Trade signed a deal with trade ministers from Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa giving them duty-free, quota-free access to the European market.
John Winters, chief executive officer of Barclays’ Corporate Banking, said: “Major African economies, such as South Africa, Nigeria and Kenya have been the primary focus of UK companies to date but with increased competition, especially from Asia, businesses need to diversify their trade and investment markets to broaden their horizons and compete more effectively.”
But the UK’s minister for Africa, James Duddridge has campaigned for Britain to leave the EU. He told Radio France International that the EU is a “wholly inappropriate way to define the UK-Africa relationship” and promised new engagement with the continent if Britain votes to leave.
Britain spends about €12bn a year on international development, making it one of just a handful of rich countries that have reached the UN’s target to allocate 0.7% or more of gross national income for development projects. This gives it clout in the development arm of the EU, which as a bloc has failed to reach the target.
“The outcome of the referendum will have a direct bearing on Britain’s ability to play a leadership role in global efforts to achieve the Sustainable Development Goals, which range from ending extreme poverty and avoidable child deaths, to the expansion of opportunity in education, reduction in inequality, and cooperation to combat climate change,” said Kevin Watkins, executive director of the Overseas Development Institute. “If Britain wants to leverage the assets of the EU development club it needs to retain club membership.”
The EU is made up of 28 member states with a combined population of more than 500 million people. The bloc’s annual gross domestic product amounted to €14.3trn in 2014, according to the International Monetary Fund.
As some of the continent’s biggest economies are pushing forward with regional political and monetary unions, Brexit would pour cold water on the idea that the benefits of closer trade links with neighbouring countries outweigh the perceived loss of sovereignty.
The EU has been touted as a successful regional integration project that has moved from promises to closer trade and cultural links. A sign that it is disintegrating could hit African regional blocs such as the East African Community – which joins Burundi, Kenya, Rwanda, Uganda and Tanzania.
And it will also stir passions best left undisturbed. Njoroge, Kenya’s central bank governor, told the Financial Times: “It will signal a change in the political landscape around the world — I mean the more nationalistic tendencies that this implies”.