‘Africa Matters’: the future of British-African trade – a conversation with Emma Wade-Smith
On his recent visit to Africa, Jeremy Hunt called for ‘the world to see African nations as partners for investment and trade’. British investment and trade with Africa has been growing steadily over the last decade. Foreign direct investment doubled between 2005 and 2014 from £20.8 billion to £42.5 billion and trade between Britain and Africa rose by 7% in 2018 to hit £33 billion.
As policy uncertainty reigns in Westminster, we spoke to Her Majesty’s Trade Commissioner for Africa, Emma Wade-Smith OBE, about why Africa matters to the UK, the future of British-African trade, and how her team is supporting British businesses on the continent through this time of global instability.
The Prime Minister, Theresa May has set the ambitious target that the UK will be the largest G7 investor in Africa by 2022. Why is Africa a trade policy priority for the UK and how can this promise be achieved?
Throughout the British Government, we have been looking at at how Africa matters across a wide range of issues from security through to prosperity. Africa matters to the UK’s national interest now and, when you project forward to the next 50 years and beyond, the value of that relationship only grows. From my perspective, looking at prosperity and how our commercial partnerships can drive sustainable, inclusive growth and job creation is key. We know that developing markets across Africa will also be beneficial for the UK’s economy, so it feels very much like a win-win situation.
‘Africa matters to the UK’s national interest now.’
Investment is a particularly important part of the story because of its wider impact. The UK is already one of the largest foreign investors in Africa and the largest foreign investor in the continent’s biggest economies such as South Africa, Egypt and Kenya. The focus for the British Government is building on the £45 billion investment stock that the UK has in Africa to drive the kind of growth that we think is valuable. Not only because economic growth is of value in and of itself, but also because we want to drive ethical, sustainable, inclusive and values-driven economic globally.
When you look at our approach to trade globally, the UK is clearly a global leader on open and competitive trade. We want to ensure that we work with African governments on supporting open, free and fair trade and avoiding the allure of protectionism.
Given your belief in competitive and free markets and the UK’s aspiration to be a global leader on these issues, which sectors are British companies particularly competitive in in Africa?
The Department for International Trade has just completed a piece of analysis on what market share UK companies have in different parts of Africa, in which sectors, and where there is untapped potential. The great news is UK companies are doing business across the continent in an ever-wider range of sectors. The mixed news is that in every area there is untapped potential. For me that translates into opportunity.
Historically, the UK has been strongest in oil and gas, mining and the related infrastructure and we have long-term investments and business relationships in those sectors. Nonetheless, there is British expertise across the board. As the growth of renewable energy continues, British companies are operating in that space as well as in water and food security and agri-tech. Not to mention financial services, which fundamentally underpin the growth and diversification that we want to see in Africa’s economies. As we think about how governments prepare for the inevitable demographic transition in Africa, the UK can also contribute skills in healthcare and education.
Of course, underpinning all of this we have a huge amount to offer in terms of technological innovation. Technology is transforming the way that we do business and the innovation coming out of the continent itself is particularly exciting. As governments, we must reflect on how we connect our entrepreneurs and our innovators in this space.
Technology and innovation are clearly at the heart of your work in Africa and you’ve mentioned that one role for government is facilitating the connections that drive collaborative innovation. The UK and South Africa recently announced they would co-lead the Commonwealth Digital Connectivity Agenda, which aims to quadruple trade between Commonwealth countries by 2030 through digital innovation. Can you tell us how initiatives like this help to harness technological innovation? Do you have any other similar ongoing initiatives?
The UK hosted the Commonwealth Heads of Government Meeting last year and it will be Rwanda’s turn next year. We are working closely with the Rwandan Government on handing over the baton and making sure that we continue the pace and the range of trade initiatives that came out of London. One such initiative was SheTrades, which is focused on women’s economic empowerment. Alongside this we are facilitating intra-Commonwealth trade through standardisation and regulation in order to build the economic dividend of being part of the Commonwealth.
Having a common digital agenda with South Africa allows for a 360-degree perspective. Even though we have our own concerns about the implications of digitalisation and Artificial Intelligence for jobs in the UK, fundamentally we have the security of our economic diversity. In developing markets, where there are high rates of unemployment, the prospect of the 4th Industrial Revolution looks considerably scarier. By co-chairing the Commonwealth Digital Connectivity Agenda, we can bring out both the challenges and the opportunities that we face in the Commonwealth and as a planet.
‘The drive from African governments to build a manufacturing base…. is at odds with the potential to lose hundreds of thousands of jobs.’
The challenge is that the drive from African governments to build a manufacturing base, establish business processing capability and create jobs is at odds with the potential to lose hundreds of thousands of jobs because driverless vehicles and robots can do the work that people do today. Governments need to prepare people for this with education, skills and continuous learning. This way we can take advantage of these changes rather than fear and resist them.
Businesses are clearly having to contend with a wide range of uncertainties from technological disruption to climate change to policy uncertainty. What is DIT doing to support British businesses in this environment?
There is so much we do. Let’s start with Brexit. We have a network of partnership agreements and association agreements across Africa, which are currently held by the EU. A major focus over the last 18 months has been working with African governments towards continuity and transition from those EU trading arrangements to UK ones. Our number one priority is continuity. We want to be able to say to companies ‘whatever happens with Brexit, we know that your trading arrangements will be at least as good as they are today’.
‘Whatever happens with Brexit…your trading arrangements will be at least as good as they are today.’
In the course of our discussions, it is clear is that there is desire from both our African and UK partners to build on existing trading arrangements. Are there things that we can do that do not actually require a whole new FTA, to make it easier for companies to do business? Once we leave the EU, we will then have control over our trade policy for the first time in over four decades. We can use that to continue to promote an open and competitive trading environment, which we think is the best possible way to bring about the prosperity we want to see.
As Britain prepares to leave the EU, Africa has been working towards its own free trade area. Surrounding the ratification of the African Continental Free Trade, momentum has been building around the idea that regional integration is the key to unlocking Africa’s economic potential. Do you think that AfCFTA can meet these high expectations?
Firstly, I think it is great that Africa now has the number of ratifications it requires make some real progress on regional integration. There have been many crucial developments before the African Continental Free Trade Agreement, but this is clearly a moment that unlocks a leap forward. When I talk to British companies, they are interested in the scale of the market they can access in Africa. The more progress there is in reducing those barriers to trade across national borders the more enticing Africa becomes to a greater number of companies and I think that’s a good thing for Africa.
This is also a crucial step for manufacturing. One of the first things British companies are asked when they set up operations in Africa is are you going to set up a local factory. Unfortunately, the answer often is no. One of the reasons for this is that the economies of scale do not make sense. The easier the flow across borders the more you will see companies doing those calculations and coming up with a different answer.
As the UK Government, we have supported the African Union some technical assistance and working with countries individually on capacity building around trade policy. In East Africa we have funded programme called TradeMark East Africa which has made extraordinary progress and has reduced the average time to transport a container from Mombasa to Dar es Salaam or Burundi to Rwanda by 15%. These numbers are compelling and change in this direction good for Africa and it’s good for the UK.
During Jeremy Hunt’s recent visit to Africa he visited Senegal and announced a new £4 million English language programme in French and Portuguese speaking countries. Opportunities in non-anglophone countries have often been missed by British businesses and investors. How does the DIT plan to support British businesses in these markets?
It’s a fascinating question. I often get asked why UK companies are less present in Francophone Africa than French companies are in Anglophone Africa. The easy answer is we don’t speak the same language nor do we have the same legal systems and therefore it is more complicated to do business. But I just do not buy that because UK countries do business all around the world. We are clearly able to operate across different legal systems and languages.
As part of our recognition of the growing importance of Africa to our interests we are growing our footprint across Africa by looking at new markets where we do not currently have a trade and investment presence. I have increased my staff across the continent significantly and am building a cadre of investment officers to support UK investment into Africa and engage pro-actively in reducing barriers to doing business.
‘There is a strong demand from governments and companies in Francophone and Lusophone countries to work with British companies and buy British products.’
Fundamentally, there is strong demand from governments and companies in Francophone and Lusophone countries to work with British companies and buy British products. The issue we have is more to do with supply than demand. We are currently working to understand the opportunities and constraints in those markets in order to identify the right targets and increase our market share.
Other than Johannesburg, the London Stock Exchange has the largest concentration of African publicly quoted companies. More than 120 African companies with a combined market capitalisation of $70 billion are listed. What role does the City of London have to play in attracting African companies to the UK and furthering UK-African trade?
I hear all the time about the importance of the City of London for African business leaders. Whether that is as the choice for listing, which I would highly recommend because I think it is the best place for African companies to list internationally, or as a hub for multinational financing.
‘The public sector’s role is to strategically invest to de-risk private sector investment.’
Naturally, partnering with the City of London and the London Stock Exchange is a crucial part of the answer to how we become the largest G7 investor in Africa by 2022. However you package the amount of public sector investment we have, which is considerable through DFIs like CDC and PIDG, private sector investment dwarves that. The public sector’s role is to strategically invest to de-risk private sector investment. The City of London is, and continues to be, an extraordinary asset for the UK and a powerful part of our offer, particularly in relation to Africa.
Finally, as you mentioned, the Commonwealth Heads of Government Meeting is coming up in 2020. Is there a role could an organisation like Invest Africa to play in supporting government conferences like this?
The short answer is yes. I am a huge supporter of governments and the private sector working together to find solutions to the challenges we have been discussing today. Where we have productive partnerships, like the one between the DIT and Invest Africa, we absolutely should be looking for every opportunity to work collaboratively and bring our respective networks and contacts together.
‘Policies do not do business, people do business.’
Fundamentally, you can have all the laws and policies that you want but policies do not do business, people do business. At its core, the Commonwealth is about mutual prosperity and partnerships for the common good. Relationships are key to this and the relationships we have with organisations like Invest Africa matter in a Commonwealth context. The partnership that DIT Africa has with Invest Africa is the first of its kind and we are just starting to see its potential as we look at where our interests align and build meaningful activity around those shared interests. That is very exciting for us and we really value the membership of Invest Africa and the work that we can do together.