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  July 7th, 2016 | Written by

Africa and Brexit: Not All Bad News

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  • If Britain wanted to, it could turn its EU trade deals into UK trade deals, with the stroke of a pen.
  • African countries may be in better negotiating positions both with a weakened UK and a diminished EU.
  • With increasingly diversified trade and investment ties, Africa is less dependent on its historical partners in Europe.

Amid the global political and economic turmoil in the wake of the narrow decision by British voters in favor of taking their country out of the European Union, there has been no shortage of alarm about the potential toll of Brexit on Africa in terms of diminished trade, investment, and assistance. While there will undoubtedly be a significant negative impact in the short-to-medium term, over the long run, the news may not be all bad from the African perspective.

That’s not to say that Africa, like other regions of the world, has not, in recent days, had cause for anxiety about the fallout from the impending UK-EU divorce. The day before the British referendum, Kenya’s widely respected central bank governor, Patrick Njoroge, warned that his country—East Africa’s largest economy and especially vulnerable to the loss of trade, exchange rate pressures, and capital outflows—would “feel the shock wave” of a Brexit. South African Finance Minister Pravin Gordhan warned his country that the vote would lead to “volatility in the financial markets, and in sentiment and confidence.”

As matter of fact, the day after the June 23 referendum, the rand led the slump in emerging markets, falling to its lowest level against the US dollar since 2008 (15.36 rand to the dollar) and to a record low against the Japanese yen (6.59 yen to the rand). Among the countries on the continent, South Africa is especially vulnerable to post-referendum market uncertainty, not only because its economy shrank sharply in the first quarter, but because many of its major companies are dual-listed on the London Stock Exchange.

For Nigeria, Africa’s most populous country and its largest economy, the British vote also could not have come at a worse time: just four days before Britons went to the polls, the government in Abuja finally abandoned a sixteen-month-old currency peg and allowed the naira to float; the currency promptly plunged from 197 to 284 naira to the US dollar. Moreover, the West African country—which is concurrently battling low prices for petroleum (which accounts for virtually all of the central government’s revenue), the continuing Boko Haram insurgency in the northeast, and growing violence in its oil-producing Delta region (which has cut output by up to one-third)—still has its former colonial ruler, the UK, as its largest source of foreign direct investment last year. In 2015, bilateral trade between the two countries was valued at £6 billion and there was hope that it would grow to £20 billion by 2020. Who knows now whether that goal will be reached given the predicted slowdown in the British economy as well as the need to renegotiate trade agreements that had been reached on the common EU platform?

Beyond the economic impact of a Brexit on African countries, observers like Alex de Waal of the World Peace Foundation worry about the end of the United Kingdom’s contribution to the European Development Fund (EDF), the EU’s main vehicle for development assistance to Africa: currently, the UK is the third-largest donor to the EDF, after France and Germany. De Waal rightly points out that the UK’s influence over European policy towards Africa is about far more than its approximately one-seventh proportion of the aid bill. It is hard to imagine the EU having been as engaged as it has been over the past few years on trying to stabilize Somalia absent British leadership in general and Prime Minister David Cameron’s personal engagement in particular.

Furthermore, the EU was very much a model for the architects of the African Union. What does the rejection of the former project by the citizens of its second-largest economy say about the latter’s lofty ambitions of binding together an even more diverse group of states and peoples?

Notwithstanding these concerns, as far as Africa is concerned, the impact of the British vote to leave the EU is not necessarily entirely negative—a conclusion validated by the not insignificant diaspora Africans in England and Wales who backed the Brexit (although the reasons individuals interviewed have given run the gamut from gratitude for opportunities that have been afforded in the UK to the prospect of a fairer shake at family reunification in an immigration system shorn of its automatic preference for EU citizens).

While African economies heavily dependent upon the export of commodities—whether oil from Nigeria, flowers from Kenya, or copper from Zambia—will be hurt if their customers face hard times, whether it is the UK going into recession or the EU declining in the wake of the UK’s withdrawal, the reality is that many African economies have already been coping with the downturn in emerging markets, whether because of depressed commodity prices, the slowdown in the Chinese economy, or other factors. In fact, for some African countries, that crisis has been something of an opportunity.

Likewise, while the UK’s trade deals around the world, which have been under the aegis of the EU—including more than 100 in Africa alone—will have to be renegotiated, Steve Barrow, head of G10 Research at Standard Advisory in London, has succinctly noted, “[I]f Britain really wanted to, it could simply turn all its EU trade deals with the rest of the world into UK trade deals with them, with the stroke of a pen.” That might certainly be the case with African countries whose competitive sectors are largely not in competition with those in the UK. In fact, a number of African economies may stand to benefit from the UK’s withdrawal from the EU’s Common Agricultural Policy (CAP), which subsidizes European farmers to the detriment of Africa’s agricultural potential. On this issue and others, African countries may find themselves in strategically better negotiating positions both vis-à-vis a weakened UK and a diminished EU. Already, with increasingly diversified trade and investment ties with the United States, China, and India as well as various North African, Middle Eastern, and other Asian countries, Africa is less economically dependent on its historical partners in Europe. And if the British-EU breakup gets especially nasty, African countries, especially the ones with dynamic growth rates, may be able to get better deals from European interlocutors confronting shrinking GDP and less-open markets.

The UK’s junior minister for Africa, James Duddridge, a Conservative Member of Parliament who campaigned in favor of leaving the EU, has actually argued that British-African ties would be enhanced by Brexit, insisting that “we’ll be able to focus more on our bilateral relationships with Africa and with our traditional partners.” Duddridge, who worked as a banker in Africa before entering politics and is a past chair of the Africa All-Party Parliamentary Group, is not alone in making the case that on some security, trade, and development questions, the policy of the British government, if left to its own devices, would be markedly different from the common position advanced by the European External Action Service (EEAS)—and, in not a few instances, the former would have been far preferable than the latter has been. If anything, should the UK not turn entirely inward, but merely refocus such attention it has for Africa on select countries with which it has historic links, such a strategic shift might actually prove mutually beneficial to sustainable security and development.

For Africans, as for many others throughout the world, the prospect of a British exit from the EU is understandably disconcerting with so many political and economic questions unanswered. When the period of uncertainty finally passes, however, the net impact on Africa could well prove not to be the feared blow.

J. Peter Pham is director of the Atlantic Council’s Africa Center.