UK-Africa investment summit hints at post-Brexit future

The first UK-Africa Investment Summit showcased Britain as the “partner of choice” for Africa in trade. But does the promise match the reality?



The UK-Africa Investment Summit opened with the hype and fanfare expected of the new government’s first international trade event, but trade between the partners continues to lag.

The UK turned its charm on African leaders in January, welcoming 21 heads of state to east London to meet with financiers, trade envoys and investors for the first UK-Africa Investment Summit.

Opening the summit, UK prime minister Boris Johnson pitched the UK as “Africa’s partner of choice” in international trade as the country leaves the European Union (EU) and prepares to forge its own trade agreements. Deploying the jovial personality that helped him to secure a firm victory in the UK’s December election, Johnson prompted laughter by underlining this point with an Akan proverb he had “picked up in Ghana”.

“All fingers are not the same,” he said, holding up a hand, “and all countries are not the same… the UK boasts a breadth and depth of expertise that simply cannot be matched by any other nation.”

While deliberately ham-fisted, the speech hinted at the plans being laid in the UK, and the City of London in particular, to cash in on trade with a continent containing some of the world’s fastest growing economies. However, the reality and potential for UK trade on the continent remain limited.

Laying the groundwork

In anticipation of Brexit – the UK departed the EU on 31 January – the country has increased its boots on the ground in Africa, encouraged investment and laid the groundwork to transition EU trade deals with African countries. Over the past year, UK investment in Africa has grown by 14.5% and its Department for International Trade (DIT) has deployed 15% more personnel in African countries, Britain’s trade commissioner for Africa, Emma Wade-Smith, told African Business before the summit.

“We’re now in 23 markets in Africa… we’ve extended out into Guinea, Mauritania, Rwanda and Zimbabwe over the last 12 months as part of this invigorated focus on trade and investment in Africa,” she says.

The trade arrangements with African countries and economic blocs that the UK has been party to as a member of the EU will continue until the end of a transition period ending on 31 December 2020. The DIT has been negotiating with African counterparts to translate these deals into bilateral agreements that will come into force at the start of 2021.

A continuation of the largest of these agreements, SACU + 1 (the Southern African Customs Union plus Mozambique) – which accounted for $12.6bn worth of trade last year with the UK – has been concluded. A UK treaty with Eastern and Southern Africa, which covers Mauritius, Seychelles, Zimbabwe, and Madagascar, has also been struck.

“We’ve also transitioned the association agreements in Morocco and Tunisia, and we’re working really hard on the remaining network of agreements and hope that some of the political conversations we’ll be able to have at the summit will enable us to make a bit more progress on that,” says Wade-Smith.

Negotiators are still hammering out trading terms with Egypt, Ghana, Côte d’Ivoire, Cameroon, Kenya and the East African Community, she says.

Wade-Smith also points out that the UK has already passed legislation to transition the EU’s General Scheme of Preferences, which allows exporters from developing countries to pay less or no tariffs on a range of goods including almost everything except arms. This means that “duty free, quota free access exists for African exporters to get access to UK markets so that our consumers can also have the opportunity to buy more high-quality African goods, than they currently do,” she says.

Emma Wade-Smith, Her Majesty’s Trade Commissioner (HMTC) for Africa

The truth about UK-Africa trade

Despite all this, UK-Africa trade lags behind that of other nations. UK trade with Africa increased 7.5% over the last 12 months to $102bn, with a focus on machinery, oil and gas, tourism and professional services, but it languishes far behind that of China, the continent’s top trading partner at $208bn in 2019.

In a series of tweets to coincide with the summit, Charlie Robertson, global chief economist at Renaissance Capital pointed out that the UK’s trade with Africa has fallen considerably since the colonial era and is now much less important for the continent’s major economies.

He says that the UK once accounted for 70% of international trade with Africa’s biggest economy, Nigeria, but since independence the figure has collapsed from just under 50% to 3%. Africa’s second largest economy, South Africa, “has also re-directed its trade from over a third with the UK to less than 1/20th of its trade now”, while trade with Egypt collapsed after the UK invaded Suez in 1956 and now stands at about 4%. In East Africa, home to some of the world’s fastest growing economies in 2019 – Ethiopia, Rwanda and Kenya – the story is similar. The UK is responsible for just 3% of Kenyan trade. Robertson also points out that UK-Africa trade also accounts for just 3% of the UK’s total global trade.

UK exports to the continent were down to 2.6% in 2019, from 4.1%. in 2012, according to the UK’s Office for National Statistics.

It is “impossible” that Africa could replace the EU as the UK’s main trading partner, says John Ashbourne, senior emerging markets economist at Capital Economics. Whereas China imports African raw materials like copper, iron ore, gas, and oil to power its manufacturing economy, Britain mostly imports consumer goods, thus limiting available imports from the continent. UK needs and African produce simply aren’t complementary, Ashbourne explains. 

“The optimistic take would be that there’s a big potential for growth, but realistically most of what Africa exports is commodity products that the UK doesn’t really need,” he says. “There’s a lot of British businesses that do work in Africa but if you’re looking at the most important trading relationships the UK has, even Africa altogether is just not going to be one of the important ones, compared to trade with the US, China or the EU.”

Nevertheless, the emergence of the African Continental Free Trade Agreement offers opportunities for the UK and Africa to better organise their trading relationships, according to Ebba Kalondo, spokesperson to the chair of the African Union Commission: “The African Continental Free Trade Area agreement is firstly important to boost intra-African trade but it also presents a historic opportunity for continent to continent trading, including with countries like the UK.”

Will Brexit benefit Africa?

Despite disappointing trade volumes, the UK government believe that Brexit holds the promise of improved visa access for citizens of African countries and opportunities in exports, finance and Africa’s growing consumer markets.

And speaking the day after the summit, where the UK had pitched $1.7bn in investment deals to his country, President Uhuru Kenyatta of Kenya called Brexit a “blessing in disguise”.

“I must admit that some of us are not keen on a Brexit situation, but I must also say we are glad that it has happened,” he said. “I think there is huge potential to re-ignite once again the partnership and the investments that were actually the driving force of the global economy.”

The arrival of African companies in London could also help breathe life back into the UK’s lacklustre stock market, which has suffered from a series of high-profile flops, scrapped listings and Brexit uncertainty. With 110 African companies already listed on the London Stock Exchange, with a total market capitalisation of over $175bn, Africa offers significant potential for an uptick in the bourses’ fortunes.

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