Bilateral trade between the United Kingdom and African countries
The House of Lords today staged a short debate on bilateral trade between the United Kingdom and African countries.
The 54 countries which comprise the world’s second most populous and second largest continent are a diverse and exciting mixture of nations and cultures. With over 1 billion people – about 15% of the world’s population – living on land which covers over 11 million square miles, Africa is the youngest of the world’s continents, with more than half of its people born in 1991 or later.
Africa continues to face phenomenal challenges – underlined this week by the BBC’s reports from Ethiopia, faced with a new famine. Throughout the continent 100 million people have been pushed into food insecurity. This is often caused by conflict.
There are still 15 African countries involved in war of experiencing post-war conflict or tension. Countries like Eritrea are mired in corruption and its leaders accused of probable crimes against humanity, while Sudan is responsible for genocide against its own people, and terrorist organisations such as Boko Haram and Al-Shabab endlessly murder innocent men, women and children.
It is little wonder in these circumstances that development is hindered, illiteracy remains far too high, and too many people remain hungry or malnourished?
But, the House of Lords debate invited us to focus simply on bi-lateral trade – although trade can never be detached from questions of conflict, corruption and governance. Some of the best work on these issues has been done by Saana Consulting, who work as external secretariat of the APPG on Trade Out of Poverty, for the updates on trade figures which they have provided. They make the point that if you:
- Take Sub Saharan Africa (SSA)– which, with a per capita income of around, $1.25c per day – is the least successful region of the world in reducing poverty. Despite the spectre of war and instability total trade between the UK and Sub-Saharan Africa has increased by nearly 25% from pre-global financial crisis levels up to 2014. Specifically, the UK’s exports to SSA rose by 6% to around US$10 billion, while imports from SSA grew by 47% to US$12 billion.
- Significantly, the UK’s share of SSA trade with the world has remained unchanged at 3% since pre-crisis levels, as other emerging players increase their share. In particular, China’s share of SSA trade increased from 12% to 18% in the same period.
And, extractive industries continue to dominate in SSA exports to the UK. Oil and precious metals make up nearly 80% of the total SSA exports to the UK, while agricultural commodities amount to 11% and exports of motor vehicles, together with machinery & electronic equipment, each only account for 3%. Africa probably holds 90% of the world’s cobalt and platinum; 50% of its gold; 64% of its manganese; 33% of its uranium; 98% of its chromium.
- But far too often these natural resources have been a curse rather than a blessing. Take the Democratic Republic of the Congo. The International Rescue Committee estimates that 5.4 million people died from conflict-related causes in the DRC between 1998 and 2007.
- If we are serious about promoting bilateral trade it is imperative – and equally serious – that, to prevent future atrocities and excesses, multinational extractive industries, especially, publish the net taxes, royalties and details of other payments which they make to governments with which they have had dealings.
So what have been the inhibitors in driving on and scaling up our trading relationships?
Primarily companies identify high costs and risks. African enterprises often lack the capacity to produce for export market standards; and whilst Aid For Trade has achieved some important successes,- including UK funding of £180 million worth of projects in developing countries – projects that are aimed at improving trade facilitation, five years after its birth it has sunk out of view. The new ministerial team urgently needs to refresh the initiative and put in place a follow-on programme.
The Government should consider whether that a follow up programme should include putting in place a Task Force reporting to the Prime Minister to advise the UK government on a successor to AFTi.
The UK needs an up-to-date, whole of Government strategy to accelerate trade and investment in SSA with a clear set of objectives, targets and resources supported across Government – DFID, BIS, FCO and UKTI.
Both Government and business need to understand the opportunities for boosting trade and investment from recent developments in Africa, such as
- The new customs union and common market established in the East African Community (Burundi, Kenya, Rwanda, Tanzania & Uganda).
- The EU Economic Partnership Agreements negotiated with East Africa, West Africa and Southern African in 2015 .
- The COMESA-EAC-SADC Tripartite Free Trade Agreement (a free trade pact to reduce trade barriers signed by representatives from 26 African states in East and Southern Africa in June 2015),
- The WTO Trade Facilitation Agreement agreed in December 2013, which African countries are already starting to implement.
- The launch of negotiations on the Africa Continental Free Trade Agreement at the AU Summit in Johannesburg in July 2015.
A new UK strategy also needs to take recognition of the way China, India and Brazil have increased their trade and investment footprint in Africa in recent years.
At the government level, the UK can work together with them to finance much-needed trade infrastructure projects, such as the construction of roads and power stations. More business-to-business collaboration can also pay off – for example, British companies have found it easier to establish a presence in Angola through joint ventures with Brazilian companies.[
A new UK strategy should have clearly measurable outcomes and track key indicators year on year, like the value of new UK business investments and the number of jobs created. The strategy should support better knowledge sharing and joint working between the government and British businesses who wish to trade and invest in SSA, as well as between departments. The Task Force could be co-chaired by the Minister, Lord Maude, and a leading British business executive and report to the Prime Minister in mid 2016.
We should also expand the UK Prime Minister’s Trade Envoy programme to more key trade partners in SSA
Launched in 2012, the Trade Envoy programme aims to strengthen the UK’s existing relations with markets identified by UK Trade and Investment (UKTI) as those with substantial investment opportunities. Currently, within SSA, there are only Trade Envoys responsible for South Africa, Tanzania and Kenya. With Nigeria accounting for nearly a quarter of UK-SSA trade, the Trade Envoys programme needs to expand to Nigeria as well as other fast-growing, high potential markets like Ethiopia and Ghana. And we should establish an annual UK-Africa CEO & Heads of State summit on boosting UK-Africa trade & investment.
The UK Prime Minister should invite UK business executives and ministers with African business executives and heads of states from key markets to an annual summit in the UK to discuss trade opportunities and solution to overcome challenges in investing in SSA. Lessons can be learnt by the UK from similar initiatives such as the 2014 US-Africa Leaders Summit and 2015 German-African Business Summit.
An African friend has pointed us in the direction which we need to go. He says:
- The trade opportunities must offer value; that
- we need to better understanding the diverse composition of Africa; that
- we need to identify and develop new partners and new channels; that
- the UK must be seen to be genuinely looking out for the interests of Africa – At the moment, Britain is said to be home to most of the stolen funds from Africa by African politicians; that
- we must be truly bilateral – trade mustn’t be a one way street; that
- trade should be able to offer primary socio-economic development of Africa particularly in rural communities and agriculture; and that we must
- eliminate proxies – with most bilateral trade currently done by proxies without direct contact with the true stakeholders involved.