What Africa should learn from Brexit – African Business

A long-standing commercial truth is that its optimal to trade with those closest to you. Its common sense really the costs of moving goods are lower, synergies are better, the economies of scale kick in and so on. Africa, for example, is banking a great deal on the benefits that the African Continental Free Trade Area (AfCFTA) agreement will bring to growth and prosperity.

Yet by lurching into Brexit, the UKs Conservative government has defied all that by turning the country away from the biggest, richest single market in the world; one with whom we have had fully half our trade for decades.

And its turned out to be what many of us predicted at the time of the 2016 referendum: a monumental act of national self-harm.

In the run-up to the 2016 Brexit vote, the phrase Global Britain was frequently heard, to tunes of imperial nostalgia, jingoistic nationalism and ideas of sovereignty, spurious as they are in todays intricately connected world. We also heard what turned out to be downright lies about Britains ability to thrive alone.

Covid-19, rocketing transport costs and security of supply issues such as in May 2021, when a single giant ship containing vital manufacturing parts became grounded in the Suez canal for six days have undermined the age of hyper-globalisation where supply-parts were outsourced to the cheapest places, however far away.

Countries are increasingly seeking to re-source global supply chains to friendly neighbours. The UK faces multiple crises, which can only be overcome in cooperation with our immediate European neighbours: these include catastrophic climate change, the Ukraine war, economic decline, energy affordability and security.

As a leading member of the European Union, the UK was a critical player in a powerful and wealthy bloc alongside the US and China and now finds itself isolated outside of these global blocs. With its economy flatlining, the UK is having to come to terms with its lack of global influenceas a relatively small country with limited economic and political power.

UK government agencies report a post-Brexit reduction in long-run productivity of 4%, with trade estimated to be 15% lower, relative to remaining in the EU, and a loss of business investment since the 2016Brexit referendum worth 29bn, or 1,000 per household.

Car production has more than halved and Brexit is generally considered the main reason why the UK is the only economy in the richest G7 countries still below its pre-pandemic size.

Amongst the fantasies of Brexiteers was an idea, known as Empire 2.0, that trade with the Commonwealths far flung 53 nations could replace that with the EUs neighbouring 27.

So what lessons might there be for African countries from the UKs rollercoaster Brexit?

The Covid pandemic and Russias war in Ukraine have underlined the risks for Europe of dependence upon Chinese supply chains and Russian oil and gas.

The resilience of the EU is proving to be an asset as it cooperates with NATO in supporting Ukraine against Russian aggression and tackles the mammoth task of ending dependence upon Russian energy.

Similar risks exist for Africa, where both Russia and China are fast extending their influence. According to the Peace Research Institute Oslo, a new Cold War dynamic has heightened the competition for control of Africas vast natural resources and strategic trade routes.

Russia offers a false anti-Western colonialism discourse, with Foreign Minister Sergey Lavrov visiting South Africa in January, hoping to lay the groundwork for the second RussiaAfrica summit, which has been rescheduled for late July 2023 in St. Petersburg.

There is speculation that this is designed not only to compete with the US-Africa Leaders Summit held in Washington in December 2022, but also to demonstrate to China the value of Russias connections on the continent.

Meanwhile there are concerns about the impact of Chinas Belt and Road Initiative on local industries, and also the erosion of sub-Saharan African countries sovereignty.

The strength of the EU could prove to be an example to Africa, as the continent tries to improve regional integration through the AfCFTA. If Africa wishes to take control of its own destiny, then strengthening AfCFTA will enable it to achieve economies of scale and to wield more collective bargaining power in the global marketplace.

Coming into force in 2019, AfCFTA includes all African countries except Eritrea. Members have pledged to eliminate import tariffs on 97% of goods traded between African states by 2064. However, because of the pandemic, and an associated recession, it has made a slow start. In 2021, intra-African trade accounted for just 17% of African exports, which was low compared to 59% for Asia and 68% for Europe, according to theWorld Economic Forum (WEF).

AfCFTA, however, wants to do more than just boost trade in goods, and also cover services, investment, intellectual property rights and competition policy.

There are also currently eight regional economic blocs recognised by the African Union which are expanding their own regional integration: the Arab Maghreb Union (UMA); Common Market for Eastern and Southern Africa (COMESA); Community of Sahel-Saharan States (CEN-SAD); East African Community (EAC); Economic Community of Central African States (ECCAS); Economic Community of Western African States (ECOWAS); Intergovernmental Authority on Development (IGAD); and Southern African Development Community (SADC).

It has been estimated that because of deeper market integration, AfCFTA, if fully implemented, could raise incomes by 9% by 2035 and lift 50m people out of extreme poverty.

The decisions which Africa will make about its economic development will be critical to its own future and that of the world as a whole. Some 600m Africans still live without electricity and, without a focus on its massive potential for developing clean energy resources, the continents carbon emissions are bound to rise dramatically with growth and progress.

Therefore richer countries need to provide concessional finance to boost Africas renewable energy in the spirit of COP27, hosted in Egypt in 2022.

If properly enforced, a robust carbon tax would also help, and might support preserving the rainforests, which are clearly threatened. Africa has the worlds greatest solar energy potential and the continent also has huge potential for green hydrogen production through electrolysis.

Africa deserves to take control of its own future and learn from the success of the EU, by deepening economic integration amongst neighbours across the continent, through AfCFTA and its regional trading blocs.

Its extreme vulnerability to climate change witness disastrously destructive flooding and droughts is an incentive to act on continent-wide net zero strategies. To protect Africas citizens from the global warming weather extremes, economic integration strategies should also be based upon robust clean energy technologies.

Meanwhile there is a stark message for Africa from Britains deepening Brexit plight. Dont turn your backs on your neighbours for fools gold fantasies of trade deals with far-flung nations.

Beware false friends who seek to emulate the era lauded by Britains deluded Global Britain Brexiteers, harking back to the long-lost times of imperial power and its ill-gotten gains. Equally, dont be seduced into replacing European colonialism and US imperialism with their modern Chinese or Russian variants.

Instead cooperate to ensure that the huge AfCFTA becomes a strong player in global markets.

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What Africa should learn from Brexit - African Business