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In Conversation with Dr Alex Vines OBE

02 September 2016

In this post, we ask Dr Alex Vines OBE (Head of the Africa Programme at Chatham House) for his views on the impacts of Brexit on Africa.

1. Overall is there a material impact on Africa from Brexit short and long term?

In the short term, there will be much less UK focus on Sub-Saharan Africa and a preoccupation with domestic affairs. Some UK ministers and senior officials have already cancelled trips to Africa, for example. Some resources that were focused on Sub-Saharan Africa within government ministries are likely to be refocused on Brexit generally and the specific issues arising out of the UK's withdrawal from the EU. In the longer term, however, I think that the UK will be pushed to make stark choices in terms of its priorities and where it should focus its resources, assets and intellectual capital. This is likely to benefit some African countries, such as Kenya and Nigeria, but could see some African middle powers becoming less important.

2. What are the most significant impacts in your view?

There will be a weaker voice in the EU advocating for Africa, especially for reform and innovation with international development. As a result, we are likely to see a greater focus on other parts of the world. The UK funds some 15% of the European Development Fund which will be lost once Brexit takes place. Somalia, which was a great passion of the former Prime Minister David Cameron, is another good example. The new UK Prime Minister, Theresa May, does not share the same interest in Somalia and, therefore, there will be less UK resources and time focussed on that nation. This, in turn, has regional security implications in the longer term for neighboring countries that are important to clients at Hogan Lovells, being in either Ethiopia or Kenya.

3. Is there anything that African nations can do to position themselves to mitigate these risks?

There is very little that African nations can do at this stage. The EU is pre-occupied by counter-terrorism and migration and, unfortunately, these issues may become even more predominant in EU thinking once the UK withdraws from the EU. 

4. How will Brexit define future engagement between African nations and the EU/UK?

In the current UK government, there is no one occupying a prominent position that has shown a passion for Africa, and it is unclear whether there would be a drive or trigger for this to change in the next few years. A crude analysis of this suggests that there won't be strong advocates for Sub-Saharan Africa and instead, I think that this could mean that we are likely to see attention focussed elsewhere, such as in India or China, with deeper thinking about, and engagement with, these nations. Having said that, the trajectory of travel was that both Kenya and Nigeria were increasingly strategic and important to the UK under David Cameron's leadership and it is conceivable that these nations will continue being important. 

French engagement in Francophone Africa will remain, with a particular focus on infrastructure and development of key markets such as Côte d'Ivoire. More broadly, France will continue to engage in Africa on peace and security. 

5. Will other countries outside the EU be able and/or willing to enhance their role in Africa?

I don't think that the capability currently exists within the EU. Of course, there are Member States which have niche interests in Africa, for example, Belgium is concerned with the African Great Lakes, Belgium's former colonies and the Democratic Republic of Congo; Portugal is concerned with Lusophone Africa and France is mainly concerned with Francophone countries. Whilst historical ties influenced the UK's logic in terms of its focus within Africa, the UK has engaged in a broader strategy in terms of innovation and international development. By way of example, it is one of the largest bilateral aid donors in the Democratic Republic of Congo and one of the largest aid programmes for the UK is targeted towards Ethiopia, showing that the UK went beyond the colonial or near colonial logic.

There will be a lot of activity in terms of diversification, partly encouraged by the low commodity cycle that we are experiencing at the moment, and this will involve a swing back to the West. Trading partners which are likely to become important, other than the UK, are France, the USA and Japan.

6. Which industries do you see as the most vulnerable to the changes that are likely to occur in the wake of Brexit?

Fintech is an example of an area that could be affected quite significantly. I think that we could see movement of some start-ups and innovation to countries like Germany, which may be minded to focus their innovation efforts towards markets other than those in Africa. However, this largely depends on what form Brexit takes in practice. If the UK adopts the Norwegian model, it is unlikely that trade will change in any material sense. 

In terms of trade more generally, Brexit has generated much uncertainty about the UK and the future of the City of London. This uncertainty, in turn, may make investors of funds and sources of equity in London more cautious, causing such capital to move elsewhere. This could impact some of the strategic thinking and importance of London in the longer term. Much of this, again, will depend upon the relationship that is negotiated between the EU and the UK which is difficult to predict at the moment. 

There could be positive implications too. The UK may have to become more active about reaching out to other parts of the world, which may make access to the UK easier. Obtaining visas to work in the UK is currently a significant impediment to enhancing business connections, trade and people-to-people connections.

7. Many have seen the UK as an important voice for Africa within the EU. Do you see any other countries within the EU assuming this voice once the UK has left the EU?

There are some countries that are trying to build their presence in particular African markets, such as Italy which has been very active in the hydrocarbon sector. The UK, however, has shown a pragmatic and unique way of thinking about finance and innovation within Africa, considering how regulation works in practice and the unintended consequences of particular regulatory proposals.

The strong UK voice was partly driven by self interest in wanting to protect the City of London but this has been beneficial for Africa. If there is a somewhat regulatory zeal that comes through the EU, without the brake that the UK has provided, this could make the regulatory landscape a lot more difficult for African countries. This could have a subsequent effect on investors who may perceive the reputation risks to be too high in Africa if there are deepened regulatory prescriptions, which will in turn, encourage them to focus elsewhere. The result of this would be really bad for Africa over the next decade as it needs more foreign direct investment and start-up innovation funds. 

8. There has been a greater move towards interdependence (e.g. the establishment of regional-economic communities such as the East African Community and the Economic Community of West African States) and, in some ways, the EU has been a benchmark against which these unions can model and measure themselves. Is regional integration likely to be affected by Brexit? 

I haven't seen any sign of Brexit affecting such integration at the African Union level, so far. In some ways, these institutions are vulnerable, thin and hollow in that has often been EU money that has been keeping them going. Regional economic integration was also a priority in UK policy so the UK will need to work through this narrative to avoid being seen as hypocritical. Again, this may be helped by the nature of the relationship that the UK and EU establish with each other during the Brexit negotiations.

9. What impact will Brexit have on aid into Africa?

The UK will honor its pledge to commit 0.7% of its Gross National Income towards aid but, given the worsening of the UK economy and the weakening of the UK pound, there will be less aid money in material terms so in the short term, aid is likely to suffer quite badly. In the longer term, UK money may be tied more closely to UK priorities and prosperity so we could see a more mercantilism approach develop.

 

10. What lessons can Africa learn, if any, from Brexit?

Communities that felt threatened, disenfranchised and afraid of globalization were among those that voted for Brexit. The biggest single lesson is, therefore, about managing inequality, which is a global problem and a massive problem in Africa. Zambia, for example, is a middle income country but the majority of people do not belong to the middle classes. One potential silver lining created by Brexit, purely in terms of domestic benefit, is that there may be more money and resources invested into the constituent parts of the UK that have previously lost out, such that there will be less inequality and the quality of some lives may improve. 

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