According to James Norris at Corporate Africa regardless of the type of Brexit including no-deal Brexit, the relationship between the UK and Africa will remain pretty much the same. In fact the harder the divorce the better for African nations because it allows capacity to tailor a trade deal to fit individual nations.
According to UK government figures, bilateral trade stood at £8.8bn (R157.9bn) in the year to the end of the second quarter 2018, a 9.3% increase from the preceding period. The UK remains SA’s biggest source of foreign direct investment — £9.6bn (R172.2bn) in 2017.
“Brexit is especially a tail risk for South Africa and for those companies heavily invested offshore and strong in the UK, it is important, certainly,” according to Peter Attard Montalto, head of capital markets research at Intellidex. He predicts “significant volatility” in the rand-sterling exchange rate — especially under a no-deal scenario.
But he offers some reassurance, saying that any outcome is likely to result in the UK keeping its strong standing in the global economy in the long run and remaining an investment destination. “It will therefore make little sense to have a dramatic shock withdrawal of capital in general by investors on a ‘no deal’, even if some hedging goes on, especially in the currency, which will be the main shock absorber,” he says.
Attard Montalto believes a hard Brexit might work in South Africa’s favour, as it would allow the UK to tailor a trade deal with the country that could usher in more frictionless trade and lower tariff barriers than are the case at present.
Meanwhile, the UK high commissioner to SA, Nigel Casey, assures the FM that his country is determined to prevent disruption in trade; regardless of whether a deal is reached by March 29.
“We have been working intensively with the SA department of trade & industry and its counterparts in the SACU [the Southern African Customs Union] and Mozambique,” he says.
The aim is to replicate the existing economic partnership agreement governing goods, trade and maritime services between the EU, the SACU and Mozambique.
“We are nearly there, but time is now short, and we need one final push to complete that process, and then to get it signed and ratified,” says Casey.
Irrespective of Brexit, the UK is pushing for closer economic ties with Africa — especially Nigeria, Kenya and SA, he says. It wants to replace the US as the continent’s largest investor by 2022. This co-operation extends beyond trade to cover collaboration in research and innovation across the board, and “investing in building links between the burgeoning tech sectors in the UK and SA”.
Angel Jones, CEO of Homecoming Revolution, a recruitment agency that helps professionals return to SA and elsewhere in Africa from advanced economies such as the UK, says anecdotal evidence presented to the company so far suggests Brexit is having little effect on South Africans’ decision to return from the UK.
The company “received a flurry of interest and inquiries from South Africans interested in hearing about opportunities back home” in the immediate aftermath of the referendum, Jones says.
“However, that hasn’t necessarily translated into actual returns.”