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UK – Africa: Looking to become the continent’s investment partner of choice

By Nicholas Norbrook, Olivier Caslin
Posted on Tuesday, 4 May 2021 14:39

Britain's Prime Minister Boris Johnson, right, meets the President of Nigeria Muhammadu Buhari during the UK-Africa Investment Summit in London, Monday, 20 Jan 2020. (Eddie Mulholland/Pool Photo via AP)

Brexit marks a set of major realignments for UK foreign policy. So what does this spell for the country’s relationships in Africa?

“One thing that absolutely has not changed is my ambition for the UK to be Africa’s investment partner of choice,” said Prime Minister Boris Johnson during a virus-quietened second edition of the UK-Africa Investment Summit in January 2021.

This is echoed by the UK’s senior trade-focused diplomat, Emma Wade-Smith. Based in South Africa, she says her teams have been doubled over the past 18 months as the government ramps up its post-European future.

“Every day I see the importance of Africa in global trade and investment in general, and the UK in particular,” says Wade-Smith. “And we are not alone, of course, in our interest in Africa’s vast prospects.”

The new ‘scramble for Africa’

Given the scramble by China, India, Japan, Turkey, Russia, the US and a multitude of European countries to tap into expanding African consumer and governmental spending, the UK’s strategy has been to lean on its history – the constellation of former colonies now banded into a club known as the Commonwealth.

“The Commonwealth remains an extraordinary network of developed and developing countries working together on the common goals of prosperity, democracy and peace,” says Wade-Smith. “It comprises more than a quarter of the world’s population, and its diversity allows us to benefit from different approaches to addressing major international issues.”

Indeed, most of the bilateral trade deals that the UK has signed post-Brexit – 15 of which are in Africa – come from Commonwealth countries. That club will next assemble at the Commonwealth Heads of Government Meeting in Kigali on 21 June, assuming the health crisis permits it.

But a big post-Brexit idea – that the Commonwealth and its 19 African countries could compensate for the European market – has died in London.

“The institution should be reorganised to take greater account of the economic weight of India and other countries like Nigeria,” says a source familiar with the organisation’s operations. This transformation does not seem to be on the agenda of the June summit.

Even within the Anglophone ‘family’, there are dissensions. While traditional partners South Africa and Mauritius have been able to draw their neighbours into the fold on post-Brexit trade deals, Ghana was late to sign up and Nigeria is still refusing to do so. Kenya was rebuked by its East African Community counterparts for its eagerness to agree with London.

Beyond the Commonwealth countries lie opportunities for new relationships on the continent. Morocco’s financial sector, for example, has attracted interest from the London Stock Exchange, which partnered with the Casablanca Stock Exchange in 2016.

‘Global Britain’

Politically and economically, the concept, so dear to the Johnson cabinet, of “Global Britain” – a Britain freed from its European chains to sail before the wind of globalisation – remains largely theoretical, especially on the international scene. “It is too nationalistic a vision to be shared outside the UK,” says one London columnist.

It is also unclear what ground the UK wishes to put its stake in. Pushing back from China on Huawei’s 5G technology for mobile networks, for example, would put UK companies in a difficult pass on the continent, which has largely accepted Chinese technology in their telecoms backbone infrastructure.

Likewise, the City of London, a clear asset to those marketing Britain’s assets abroad, does not yet have a clear post-Brexit path: rule-snatcher from the EU? Singapore-on-Thames? A recent decision by the UK government to take a hardline stance on fishing quotas with the EU appeared to take place at the expense of a clearer role for British finance within Europe.

‘Africa accounts for just 2.5% of the UK’s trade’

This will not matter as much if, as Wade-Smith puts it, demand from African buyers for UK goods and services remains strong. But she also admits that the UK has lost some market share in recent years, particularly in the face of the arrival of new countries attracted by African economic opportunities.

Richard Ottaway, chair of the UK’s parliament’s foreign affairs select committee from 2010 to 2015, agrees that Africa has not been a major focus of UK activity.

“Africa accounts for just 2.5% of the UK’s trade. South Africa and Nigeria, the continent’s two largest economies, make up 60% of the entire UK-Africa trade relationship. Our investments lag well behind those of France and the United States,” he wrote in The Africa Report on 23 March. “It is true that where Britain has idled, other less than democratic powers have stepped in.”

With this less-than-subtle reference to China, Ottaway gets closer to the real problem that UK companies face in making deals in Africa: some countries can offer a level of economic diplomacy, such as infrastructure financed upfront, that the UK simply cannot match. Institutions like the UK development financier CDC can help. The CDC – formerly the Commonwealth Development Corporation – used to report to the department for international development, which has since been folded into the foreign office.

For the CDC’s CEO Nick O’Donohoe, the UK has a particular skill set for helping Africa’s private sector to develop, in particular through injections of equity.

“Many mistakes have been made in Africa because too many [development finance institutions] are too focused on debt – they layer too much debt into these companies too early, and that’s not a good thing from a capital-structure perspective.”

The UK minister for Africa, James Duddridge, is also optimistic that the UK can compete with heavy hitters from the east. “Yes, there are a lot of players, but more and more we’ll be working in consortiums across countries, rather than just having a simple offering from country A to country B,” says Duddridge, “and that de-risks some of the purchasing decisions for African countries, [creating] internal checks and balances between countries and companies.”

But post-Brexit and post-Covid diplomacy in Africa does not all look rosy. The announcement by UK chancellor of the exchequer (finance minister) Rishi Sunak of a reduction in the UK aid budget from 0.7% of GDP to 0.5% is a big blow for African recipients – especially as an independent watchdog rated the UK’s aid as “increasingly effective” since 2013.

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