Will Brexit matter to the East African Community?

Saturday December 1 2018

theresa may kenya

UK Prime Minister Theresa May addresses Kenya and British business delegates during the Kenya-UK Business Forum at Strathmore University, Nairobi. FILE PHOTO | NMG 

By ANDREW MOLD
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Ever since the Brexit referendum of June 2016, there has been widespread concern about its impact on Africa.

In East Africa, those fears are particularly justified because of its deep historical, economic and political ties with the UK.

Opinions on the impact of Brexit are inevitably speculative — we simply don’t know enough about how Brexit will actually be implemented.

As a consequence of this uncertainty, it is difficult to say how Africa will be affected.

But while there may be a few marginal benefits for the region, the negative impacts could far outweigh any positive changes — unless the region responds appropriately to the challenges from Brexit.

Chief among the potential benefits is that it could open up some new trading opportunities for the region with Europe.

Regardless of the precise terms of the agreement, Brexit is likely to lead to a substantial — if not precipitous — fall in trade between the EU and the UK.

But as a consequence, some of that trade will be deflected towards the rest of the world.

I have recently carried out some simulation work and found that a “hard Brexit” could boost African exports to Europe by about $1.5 billion.

It is also possible that Brexit will lead the UK and EU to rethink key areas of their trade, investment and development policies that affect the region, including the Economic Partnership Agreements (EPAs) and the Common Agricultural Policy (CAP).

On the former, although declining as a trading partner, the UK is still the leading destination for EAC exports to the EU.

If the UK is no longer a member of the EU, then this will inevitably shape perceptions about the value of the EPAs.

On the latter, the CAP represents a longstanding bone of contention, as it has made entry into the EU market extremely difficult for African agricultural produce.

There are also positive signs that post-Brexit the UK will try to reinvigorate its engagement with Africa.

Just a few months after the referendum, Paul Boateng, a member of the British House of Lords, insisted that the UK won’t turn its back on Africa following Brexit, and stressed that it presented an opportunity to “put development at the heart of our trading relationship with Africa.”

Prime Minister Theresa May’s recent visit to South Africa, Kenya and Nigeria is indicative of the renewed interest.

The bad news is unfortunately plentiful. Let me highlight three major problems.

First, as Mohamed El-Erian explained in The EastAfrican last week, Brexit will create even more uncertainty in an already unsettled global economy.

Sensitive as the region is to fluctuations in global commodity markets, that will certainly not help regional growth and development.

Second, while Mr Boateng’s pledge that post-Brexit the UK “won’t turn its back on Africa” is encouraging, the reality is that the UK’s commitment to Overseas Development Assistance may be more difficult to sustain against the economic slump post-Brexit and the rising hostility of the ruling Conservative Party to spending on development assistance.

The UK and the EU are still among the leading donors in the region. A decline in their support, both directly and through the impact of the UK withdrawing from the European Development Fund, could have a notable impact.

Finally, Brexit has arguably dealt a blow to confidence in regional integration processes.

The EU has been a long-standing model of integration — not so much for its successes, but rather for the scale of its ambition.

The EU represents, like the EAC, a bold project of political and economic union. It is not good for regional integration processes elsewhere if the European project begins to falter.

At the United Nations Economic Commission for Africa, we have argued that a key way to reinvigorate regional integration is to move towards the ratification and implementation of the recently signed African Continental Free Trade Area (AfCFTA).

This represents an opportunity to bind our economies, both through greater intra-regional trade and investment. It is e six member states of the EAC have already ratified the AfCFTA.

If I had to single out one lesson, it would be about the importance of keeping all segments of society on board. Citizens need to be fully consulted and supportive, or there is a risk of a Brexit-type backlash.

Andrew Mold is the acting director, United Nations Economic Commission for Africa, Regional Office for Eastern Africa, Kigali

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