Africa and the Brexit Ripple

Brexit was like dropping a rock into a lake. At the center you had the splash that was Britain, then the big ripples, Europe and America, and then you get the smaller ripples, which in this case represent the countries and continents further out affected by Brexit. African trade and economics is reeling from Britain’s June 23 decision to leave the European Union and it is expected that many industries including Kenya’s flower industry will be impacted.

Britain’s renegotiation with the EU is not just about cutting immigration and taking back power from the European Parliament in Brussels. It is the renegotiation of the hundreds of trade deals made as part of the European Union across the world. The EU and African, Caribbean and Pacific (ACP) have trade agreements now as the Economic Partnership Agreements (APEs) which include a number of trade deals including duty free access to the EU market. Now that the UK has left experts believe that the UK will not participate in EU trade agreements and countries such as those in Africa will lose preferential access to the UK market. Despite the trade agreements accounting for only 3.6% of exports coming out of Africa and going to the UK it would have a detrimental effect on industries such as Kenya’s flower producers especially if trade barriers and tariffs are put up.

There is a belief among some British politicians who voted to leave the EU that trade outside the EU would be unaffected and even grow. FXCM reported how Boris Johnson, now Foreign Secretary, believed that banks and business were constrained with trading with the UK due to EU regulations. Until the final Brexit negotiations are done the new trade agreements won’t be fully realized, yet it is clear that the majority of trade agreements between Africa and Britain were done in partnership with the European Union.

This is no clearer than in Tanzania and Uganda’s refusal to sign a proposed regional trade deal with the EU over concerns about Brexit. This agreement was expected to be signed before October 1. If it is not then Kenya’s billion-dollar flower industry will incur tariffs and which in turn would trigger a price rise for these items in Europe. Tanzania and Uganda pulled out of the agreement to protect their economic industries against a now uncertain Europe. It is believed that if an agreement isn’t reached then 4.5 million lives in Kenya would be affected. The UK takes 85% of the flower, fruit and vegetables exports from Kenya.

The impact Brexit will have on the sub-Saharan Africa (SSA) is wide ranging. The Business Inside predicts that growth in SSA could halve to just 1.4% in 2016. The site goes on to state several reasons why Brexit will harm SSA growth. These include global demand for goods such as the export of raw materials. Less migration of African workers in developed countries such as the UK resulting in less money sent back. Potential loss and withdrawal of funding for infrastructure if the UK and EU go into recessions. Tourism could also be affected with the cost of living rising in the UK resulting in less people traveling abroad.