Carlos Lopes, “Africa’s Stake in Brexit”:
By far the most significant impact of a “hard Brexit” for Africa would be felt in the financial services sector. In negotiating the UK’s exit from the EU, Prime Minister Theresa May’s government will be seeking to ensure that the City of London retains its place as Europe’s premier financial center. But even if May fails, London-based financial institutions could simply pull up stakes and decamp to continental Europe. Africa, however, could suffer as a result.
For example, the strengthening of the African banking sector in recent years – including the expansion of cross-border banking activities – has been made possible in part by innovative fintech (financial technology) products developed in London. Cutting-edge finance solutions used to modernize institutions like Standard Bank, Africa’s largest bank, depend on the expertise housed at UK-based institutions. If Brexit weakens London’s role as a financial center, the collateral damage for Africa would be measured in diminished investor confidence, gaps in banking services, and interrupted networks and processes. The financial innovation engine, in other words, could grind to a halt.
A weaker UK financial-services sector could also lead to a dearth of talent with knowledge of African markets. That could hurt UK-African trade more broadly. Unfortunately, Britain may be more important for Africa’s future in this regard than vice versa. With less than 5% of Britain’s trade deficit tied to Africa, the continent is not likely to be near the top of the UK government’s current preoccupations.
Diplomatic ties could be damaged, too, if a more inward-looking UK closes its doors to African travelers and students seeking to enroll in British universities. In short, the historical, political, and economic ties strengthened over decades could fray as UK-EU negotiations move forward.
But the risk Brexit poses to Africa should not be overstated. For one thing, trade isn’t the backbone it once was in the relationship. Only a small number of African countries are vying for access to the UK market, whereas many are looking to conduct more trade with one another.
Africa is learning to stand on its own in other ways, too. Since 2000, total annual aid to Africa has averaged $50 billion, while tax revenue during the same period grew from $163 billion to an astonishing $550 billion. The increase in FDI inflows, access to sovereign debt, and sharp expansion of migrant remittances have all contributed to a shift in the revenue base away from commodities. And African leaders are today busy establishing new alliances with their neighbors, improving business environments, and collaborating on industrialization projects.