London starts to take Africa seriously

Monday, 27 January 2020
London starts to take Africa seriously

The UK has perhaps the widest range of economic, political, cultural and historical ties with Sub-Saharan Africa of any non-African state. Yet successive British governments have to some extent taken these relationships for granted. While France sought to cultivate its ties with Francophone Africa and China has rapidly increased its influence on the continent, London has taken a more laid back attitude.

However, the prospect of Brexit triggered a re-evaluation of the UK’s African connections under first Prime Minister Teresa May and now Boris Johnson. With the country’s exit from the European Union seemingly done and dusted, the new Johnson government needs to tie up trade agreements with nations across the world, prompting it to take a more pro-active view of sub-Saharan Africa in the process.

In order to promote economic ties, prime minister Johnson is backing the UK-Africa Investment Summit in London on 20 January. The Summit is designed to strengthen Anglo-African economic ties by mobilising new and substantial investment to create jobs and boost mutual prosperity.

Many big British businesses are already very active in Africa, including banks HSBS, Barclays and Standard Chartered; oil companies BP, Shell and Tullow; British Airways, Unilever, Vodafone, Diageo and GlaxoSmithKline. However, the government hopes to encourage more small and medium sized enterprises to take advantage of the opportunities on offer.

London has identified technology, finance, renewables and agriculture as particularly attractive sectors for UK investment. In early January, International Development Secretary Alok Sharma said: “I want the UK to be the investment partner of choice for African nations, by creating new and lasting partnerships that benefit businesses and people in Africa and the UK alike. UK businesses are already leading the way in investing in Africa.” He cited Diageo’s new hi-tech, environmentally friendly brewery in Kenya, which supports tens of thousands of jobs; and solar power company Azuri Technologies’ pay-as-you go solar energy systems, which are being installed in thousands of off-grid homes, particularly in East Africa.

Africa’s growing economic relevance is certainly part of the attraction. Although the continent has not achieved the same levels of growth as Asia over the past couple of decades, average annual growth of 4.6 percent  since the turn of the millennium has made it a more attractive destination for investment. Eight of the 15 fastest growing economies in the world are in Africa. There is the potential for quicker growth over the next 20 years, with fewer conflicts than ever on the continent, technology offering the potential to revolutionise many sectors and international companies eager to secure alternative centres for manufacturing outsourcing as wage rates soar in China. Above all else, a quarter of the world’s population is expected to be in Africa by 2050.

In August 2018, Theresa May led a delegation of investors to Kenya, South Africa and Nigeria, making her the first British prime minister to visit Sub-Saharan Africa since 2013. It was on this trip that the trade deal between the UK and the Southern African Customs Union (SACU) plus Mozambique was announced. Trade between the UK and the six countries stood at £9.7bn ($12.6bn) last year. The global director of government affairs at Diageo, Wilson Del Socorro, said: “Diageo warmly welcomes the news of a UK-Southern African Customs Union and Mozambique agreement in principle. International trade is vital to Diageo as it gives us the opportunity to reach more consumers and markets around the world. Africa is an important growth region for Diageo, including export markets like South Africa for Scotch whisky.”

Some African governments, including the Seychelles, Mauritius, Madagascar and Zimbabwe, have already agreed to give the UK the same trade arrangements as it had as a member of the EU. However, it is possible that Brexit could enable African states to negotiate better trade deals with both the EU and the UK. The EU is due to negotiate a new aid and trade deal with the African, Caribbean and Pacific (ACP) countries and so Brussels and London may compete to offer the best agreements. The UK’s Trade Commissioner for Africa, Emma Wade Smith, has highlighted the benefits of British businesses investing, including generating profits to benefit their shareholders and the UK’s finances through taxes.

The average productivity of UK companies that invest abroad and receive overseas investment is about £88,000 per worker per year, in comparison with just £44,000 for those that do neither. She added: “Evidence shows that UK companies that invest overseas become more competitive and productive. They pick up new technologies and local business know-how, which are then brought back to the UK.”

There are also huge benefits to Africa and Africans, as the UK joins other large economies in competing for influence on the continent, promoting trade and helping to finance infrastructure in the process. The bigger the pool of interested parties, the better the deals on offer for African economies. There could be more opportunities to export goods to the UK post-Brexit, including agricultural produce and textiles. African leaders seem positive about stronger economic ties. Following Johnson’s December election victory, Ghana’s President Nana Akufo-Addo said: “We have an opportunity, together, to renew and strengthen the relations between our two countries, focusing on enhancing trade and investment, and scaling up prosperity for our peoples”.
Africa Business Magazine   

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