African CEOs are bracing for the spoils from Brexit

What you need to know:

  • It is unclear which way the proposed divorce from the EU will take, but Britons and Africans are ready.
  • African CEOs are instead anxious about how the business climate is cyclically affected by elections, small fragmented markets, inadequate financing, high cost of financial transactions and energy.
  • The UK is the third-largest foreign investor in Africa, second largest in Rwanda, and top in South Africa.

African industry captains see a silver lining in the rocky exit of the United Kingdom from the European Union (Brexit) at a time when a continental free trade area is about to come into force.

A survey by Deloitte on how companies are prepared to exploit the broad market of $3 trillion and a population of more than 1.2 billion people found that three-quarters of executives polled were confident of benefiting from the African Continental Free Trade Area and that competition was the least of their worries.

Instead they were anxious about how the business climate was cyclically affected by elections, small fragmented markets, inadequate financing, high cost of financial transactions and energy.

While most have a strategic plan on integration, the survey found that it was focused on diversification, going Pan-African and proof of concept approach, where experiments are done in segments and countries before being scaled up across businesses and terrain.

Interestingly, few were thinking of going global because of uncertainties surrounding world trade, with the UK about to exit the EU, and China, US and Europe always one drastic decision away from a trade war.

The UK Trade Commissioner for Africa Emmah Wayde-Smith, however, told The EastAfrican they have, over the past two years worked to ensure continuity of trade with Africa, irrespective of what form Brexit takes.

Prime Minister Theresa May had pledged to quit if her proposal is adopted. It had already failed twice among seven other options, creating more anxiety over Africa’s access to the UK market.

On Friday, British MPs rejected Ms May’s EU divorce deal for a third time, opening the way for a long delay to Brexit or a potentially catastrophic “no deal” withdrawal in two weeks.

NO DEAL?

During yet another dramatic day in the House of Commons, Parliament voted down the Withdrawal Agreement by a majority of 58 – a smaller margin than when they rejected it for a second time in February by 149. The result is a devastating blow for the premier, who has tied her personal leadership to the success of this deal — but it is now dead in the water.

It means the UK could leave the EU with no deal on April 12 — in just 14 days’ time. It is more likely, however, that the UK will seek a much longer extension as it seeks to extract itself from the EU.

For this to happen, the UK will have to present a new plan to Brussels by April 10, which the EU would have to accept for Brexit to be pushed back any further.

An extension would also mean the UK takes part in European elections in May.

“There is a complex unfolding with no clarity on what form the withdrawal will take. The opportunities are yet to be discussed in detail but we have frameworks to ensure trade with Africa is not disrupted,” Ms Ward-Smith said.

SAFEGUARDS

Among the safeguards is UK applying the Unilateral Preferences law for qualifying countries in the Africa Caribbean and Pacific (ACP) countries.

Another is the Taxation (Cross-Border Trade) Act 2018, which was signed into law by the Queen in September 2018.

It allows the UK to continue with the least developed countries’ services waiver.

Tanzania and Uganda are in this category. For Kenya and Rwanda, the UK would replicate the preferences already agreed with the EU. This would be in place until 2021.

Trade between the UK and the ACP hit $28.8 billion in 2017.

The UK is the third-largest foreign investor in Africa, second largest in Rwanda, and top in South Africa.

The EU has five economic partnership agreements with Africa and five association agreements, which she said could be tweaked once the UK exits the European bloc.

The UK has committed to the Sustainable Development Goals on free trade access for least development countries.

“We will replicate the EU preferences,” Ward-Smith said.

'ALTERNATIVE FINANCING'

In a briefing to ACP representatives last October, UK Trade Policy Minister George Hollingbery said non-EU trade had become increasingly important to the UK and the imperative was “about facing out to the World.”

“We will be looking at how we can improve our trade preferences scheme by making it more generous, simpler to attain and easier to use,” he said.

The UK has already signed a Statement Agreement with Botswana, eSwatini, Lesotho, Namibia, South Africa and Mozambique to transition the EU agreement ahead of Brexit.

The UK is also giving its companies $1.8 billion aid for trade programmes to enable them strengthen export competitiveness and helping their African counterparts address logistics costs through organisations like Trade Mark East Africa.

Mr Hollingbery added that the UK would also use its independent voice a the World Trade Organisation for better access to world markets by African countries.

To exploit these openings, CEOs are being asked to pursue alternative financing for small and medium-sized enterprises.

“Africa is coming together when other continents appear to be splitting,” said Diane Karusisi, Bank of Kigali CEO.