21 January 2020

UK Africa Investment Summit

The UK has left the EU! Long live the UK!

On 20 January, the UK hosted the UK-Africa Investment Summit 2020, the first of its kind. The event hinted at post-Brexit future as the UK turned its charm on African leaders, welcoming 21 heads of state to London in order to meet with financiers, trade envoys and investors. With the Brexit deadline set for 31 January, starting the clock on an 11-month transition period during which the UK is to secure as many new trade deals as possible, African countries were prime target. The ceremony marked the UK ambitions to create a ‘Global Britain’ following Brexit. It was the latest in a series of “Africa-Plus-One” summits, encapsulating the idea of several African countries engaging a non-African state, preferably an industrialized one. The first summit of this kind was held in France in 1972, followed by Japan in 1993, and the US in 2014 during Barrack Obama’s presidency.  Most recently Russia had an African Summit last October.

Rekindling and old flame

Although, in recent years, the UK has exported significantly less goods to the continent than other EU countries, the dynamics could change after Brexit. The Summit’s pre-publicity described the UK’s desire to take advantage of leaving the EU to secure trade and investment opportunities in Africa, making London a centre for ‘development financing’ for a rapidly growing continent, perhaps even, the largest source for foreign direct investment (FDI) for Africa. The UK hopes to reverse its dwindling trade with Africa, which fell from 4.2% of its total trade in 2012 to just 2.0% or $46 billion in 2018. To put that in perspective, China’s 2018 trade with Africa was $204 billion, according to the country’s Ministry of Commerce.  Most of that trade was with a small handful of countries; South Africa, Nigeria and Algeria account for more than half of all UK-Africa trade. 

At the summit, the UK government announced £1.5 billion ($2 billion) of initiatives, including £350 million to develop sustainable infrastructure projects. London is also setting up “infrastructure partnerships” with Egypt, Ethiopia, Ghana, Kenya and Uganda alongside the African Development Bank (AfDB), with the aim of generating billions of pounds of private sector investment in sustainable energy, transport and telecoms. There was plenty of commercial activity too, with 27 deals worth more than £6.5 billion ($8.5 billion), including a £167 million investment by brewer Diageo in Kenya and a £222 million deal by NMS Infrastructure to build six hospitals in Côte d’Ivoire. 

From aid to trade 

While the UK scrambles to compensate for the potential challenges of committing to Brexit, the government will need to be held accountable for finding a balance between aid spending and trade investments in order to avoid business imperatives overriding development goals. The goal being to avoid larger UK investors getting the upper hand and crowding out local alternatives. Investing is certainly possible in ways that are positive for local economies and where land rights are protected in line with internationally agreed guidelines. But it does require a sophisticated approach that goes beyond the promotional gloss and the hype of international trade fairs. There’s plenty of good research on the implications of trade and investment on development in Africa, including that commissioned by DfID. Let’s hope the arm of the UK government that is promoting trade makes use of it.

With Africa’s new continental free trade area expected to kick off in July 2020, African participants at the summit asked for more robust pan-African deals on goods and services, while urging the UK to do better than the EU’s stringent Economic Partnership Agreements with subregions in Africa. Unlike the EU, the UK signalled a willingness to eliminate rigid rules of origin on products to allow Africans to easily export to the UK.

The benefit of the choice 

For African countries there is opportunity amid the potential Brexit turmoil, with a chance to insist on better trade terms from a UK under pressure to offset the damage of reduced access to the EU. No wonder AfDB president Akinwumi Adesina told the summit “Don’t get scared of Brexit. You can exit and look the other way and Africa will be there.”

In what it called a new scramble for Africa, The Economist advises: “African leaders do not have to choose sides, as they did during the Cold War. They can do business with Western democracies and also with China and Russia—and anyone else with something to offer.” With so many suitors, Africa is finally in a position to choose the best match for its future.

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