No-deal Brexit is a possible withdrawal of the United Kingdom from the European Union with no agreement under the...
accord.
If the deal is approved or
the ending of the two years since the member state indicated its
willingness to leave, the European Union policies and rules cease to be
in force.
The United Kingdom and the
European Union have been on the negotiation table about the withdrawal
arrangement (Mold, 2018), since March 2017, when the UK government
formally announced the country’s withdrawal.
However, the UK parliament
has declined to approve it three times previously, focusing on various
provisions regarding inhabitants’ rights, border activities, monetary
liabilities, and ways of resolving disputes.
Possible consequence of no-deal Brexit
Over the past three decades, we have seen an unprecedented amount of economic growth on the Africa continent.
In part, that success can be attributed to the strong economic ties in the global market and in particular, the European market.
UK is a significant
contributor to development funds in Europe; therefore, Brexit is likely
to be bad news for African countries receiving assistance from the UK
and development partners.
As of 2016, The UK pledged
0.7 per cent of its Gross National Income (GNI) as development aid, a
significant portion of which is earmarked for development in African
nations (FULBRIGHT, 2017).
With a predicted decrease of
7.5 per cent in the next 15 years as a result of no-deal Brexit, it is
inevitable to predict a reduction in foreign aid, hence a hindrance in
the abilities of aid-dependent nations to progress with ongoing
development initiatives.
Brexit might also increases
the risk of individual African nations seeing foreign direct investment
from UK entities fall. For example, with a decline in the growth of the
UK economy, the UK will likely have less incentive to invest in Africa.
According to the IMF’s
Coordinated Direct Investment Survey (CDIS), the UK is amongst the top
five economies providing inward investment into Uganda, Zambia,
Botswana, and Nigeria, making these countries the most likely to feel
the effects of a decrease in financing from the UK.
The UK leaving the EU might
also significantly impact trade in the short term. For instance, as of
2016, figures from the Office for National Statistics (ONS) showed that
African exports to the UK accounted for approximately 4.8 per cent of
total African exports.
This proportion is not as
much as China, given that they accounted for about 15 per cent of
Sub-Saharan African exports, but countries that trade most with the UK
are likely to feel the effect. For example, Kenya, which exports a
significant percentage of its flowers to the UK. It is inevitable for
Kenyan flower exporters to bear some losses.
It is not a question of how
No-deal Brexit is going to affect Africa anymore because that is
inevitable. The more important question is how Africa is going to
respond, but mostly the African nations that are highly dependent on the
UK. It is, therefore, crucial for African political and business
leaders to be proactive and be ready to weather the storm in a swift
manner that ensures the continued growth of the African economy.
The writer is economist at National Bank of Rwanda
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