The true impact of Brexit on Africa remains unclear
Brexit is a combination of “Britain” and “exit” and refers to the referendum held in Britain on June 23rd, 2016 in which the country was asked whether they wanted to “leave” or “remain” in the European Union. The results declared on June 24th, 2016 surprised many when they were announced, with 52% of the population voting to leave the European Union (EU) after more than 40 years of membership.
This decision by the population of Britain created a huge amount of controversy, uncertainty and apprehension, including the decision by the then Prime Minister David Cameron, a vehement “remain” supporter to step down, being quickly replaced by Theresa May on July 13th, 2016.
Whilst the true consequences of Britain leaving the European Union remain unknown, there is no doubt that their decision has put significant pressure on their relationships with other EU members.
The initial uncertainty and resulting financial crisis seen after the announcement of the result has so far proven to be short lived. The International Monetary fund (IMF) has even since acknowledged that they had in fact been excessively pessimistic about the possible impact leaving the EU could have on the British economy, in fact on July 19th, 2016 they said the following “After saying that leaving the European Union could trigger a UK recession, the International Monetary Fund now expects the British economy to grow by 1.7 per cent this year and 1.3 per cent next year ,” “The UK is still set to be the second-fastest growing economy in the Group of Seven industrialized nations this year – behind the United States – and third-fastest next year, behind the US and Canada”.
Will Africa be the forgotten victim of Brexit?
Research results published by Barclays have concluded that Brexit will have an economic impact on the whole of the African continent, especially sub-Saharan Africa. They believe that the impact is likely to be significant and potentially very detrimental to the continent’s current development plans and forecasted economic growth.
Barclays has identified seven key points which they believe will contribute to the negative impact of Brexit on Africa:
1. Reduced global demand for goods, specifically Africa’s raw materials.
2. A further reduction in commodity prices, explicitly ores and minerals.
3. A drop in tourist numbers if Brexit leads to economic hardship across Britain and Europe as expected
4. Fewer opportunities for African migrants to work in Britain and Europe, in turn reducing the amount of money that is then sent back to their home countries.
5. The amount of aid and financial support from both European governments and Britain could drop significantly if their economies start to struggle.
6. Increased levels of uncertainly are likely to reduce the enthusiasm for making capital investments in Africa, particularly sub-Saharan Africa.
7. Investments made in Europe and Britain will produce lower earnings, South Africa will feel the consequences of this the most as they currently have substantial investments across Europe.
Razia Khan, a chief economist for Africa at the Standard Chartered Bank has said, “Many emerging market and frontier asset markets will come under pressure,”. “Much will depend on how quickly some sort of financial market stability can be restored.”. James Duddridge, the minister for Africa in the UK has accepted that some of the larger economies in Africa may suffer as a result of the Brexit result, however he also stated that once the UK is free from the constraints of the EU, he is expecting that it will in fact result in improved relations and trade deals with the whole of the continent.