What does Brexit mean for Africa?

By Matthew Davies
Africa Business Report editor, Johannesburg

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image copyrightAFP
image captionSome sectors like gold mining may see short-term gains

The only certainty in all this is uncertainty. Uncertainty on the markets and uncertainty over the future of trade relations between the UK and Africa.

The most internationally traded African currency, the South African rand, is already having a bumpy ride in the wake of the UK's decision to leave the European Union.


For its part, the rand has lost more than 8% against the US dollar, although it has gained against the tumbling pound.

That is not good news for a currency that has already lost 21% against the dollar so far this year.

Other African currencies are more insulated from the tempests on the international money markets, but there will be knock-on effects.

If, as some forecast, the UK falls into a technical recession, that could reduce trade and investment between South Africa and the UK. And the UK is South Africa's fourth-largest trading partner.

media captionWhat will Brexit mean for Africa?

Likewise, if a UK recession triggers a fall in consumer demand in Britain, other African exporters could be affected as well. For example, exports of Kenyan roses could fall, as UK consumers demand fewer of them.

The UK's trade deals with Africa are essentially the EU's trade deals with Africa. As the UK exits the European Union, all of those deals will have to be renegotiated.

That could take years, leaving trade relations between the UK and Africa in limbo.

It's likely, though, that the UK will simply keep the same trade deals with its African partners for the foreseeable future.

image captionSouth Africa's currency is the most exposed to the impact of Brexit

But the world of trade negotiations is difficult to predict and to navigate. Some say a UK free from the EU will be keen to improve its trade relationships with its Commonwealth partners - many in Africa.

Others say that, while it will still have to do business with the EU, it will really set its sights on China.

Much of the debate running up to the referendum centred on immigration. Now that Brexit has been confirmed, those Africans living in the UK and those hoping to go to the UK will be concerned about their status.

It's unclear what exactly a post-Brexit immigration policy would look like, but many analysts are saying that controls are bound to be tighter.

image copyrightAFP
image captionSome argue that cutting EU subsidies would help West African cotton farmers

Others say that, in order to boost trade relations with several African countries, the UK could make immigration for Commonwealth citizens slightly easier.

After all, the IMF predicts that by 2019 the Commonwealth will contribute more to the world's economic output than the EU.

So, those African citizens whose countries are members of the Commonwealth may have an easier time immigrating to the UK than those from non-Commonwealth African states.

There may be some unintended consequences as well.

In terms of development aid, Brexit raises another question mark.

The UK has pledged 0.7% of its Gross National Income (GNI) to development aid. Now, while it probably won't go back on that promise, if the UK goes into recession and the GNI falls, that reduces the amount of money for aid in real terms.

More than this, the UK was one of the biggest supporters of EU aid programmes in Africa, both politically and financially. While the UK will most likely continue to honour its own aid commitments, a changing attitude to aid could evolve within a UK-less European Union.

The same principle applies to the EU's Common Agricultural Policy (CAP).

image copyrightAFP
image captionThe vote could mean changes to the way the UK trades with African farmers

Over the years, African farmers have constantly criticised the CAP for the subsidies it affords European farmers, which they argue undermine the concept of a level playing field.

The UK was possibly the loudest voice for CAP reform within the EU. With a UK outside the EU, how the CAP goes forward could raise concerns for Africa's farmers.

But, in the short-term, there will be some glimmers of light for a handful of African companies.

For example, South Africa's gold mining sector may be having a good morning. The uncertainty has made the gold price soar.

But more than that, its costs are in rands, while the gold it sells is in dollars, so with a falling rand against the dollar, there may be some wry smiles in the short-term at least.

Last weekend, South Africa's Finance Minister Pravin Gordhan was quoted as saying that if the UK exited the EU, "the volatility and uncertainty could have a serious impact on us as a country".

Until the fog of panic clears that will hold true, not only for South Africa, but for the continent as a whole.

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