Britain has voted to leave the European Union in a close Referendum- to leave or stay in the EU with leave campaign winning with 51.9% of the vote cast as against the stay campaign’s 48.1%. Boris Johnson former mayor of London and Nigel Paul Farage who is the leader of the UK Independence Party (resigned as UKIP leader) and a former commodity broker led the leave campaigners while Prime Minister David Cameron and Labor Party Leader Jeremy Corbyn (under pressure to resign- a third of his cabinet misters have resigned) led the stay campaigners. Prime Minister David Cameron has since announced his resignation; he will step down after the Tories convention in October to elect a new leader. “The British People have made a clear decision to take a different path and, as such, I think the country requires a fresh leadership to take it in this direction. I love this country, and I feel honoured to have served it,” PM David Cameron said in a televised address in the early hours on Friday, a day after the Referendum.
But how does all these British politics affects Ghana and Africa? Is there an economic gain or loss to Ghana as Britain leaves the EU? Dr. Vladimir Antwi-Danso is a Senior Research Fellow at the Legon Centre for International Affairs and Diplomacy and he believes there are no significant gains to be made by Ghana by this change in course for Britain’s association with the EU, “there will be no significant change in our relationship with Britain in the political front,” he said in an interview on Joy Fm’s Super Morning Show on Friday morning. How about the economic relationship between Ghana and the UK? Already the British Pound Sterling has hit a 30-year low and FTSE 100 dropped 8.7pc following British vote to leave the EU. France’s economy overtook the UK’s as the pound slumped to its weakest level in more than three decades, sending investors fleeing to the “safe haven” of gold. After jumping 8.1pc to a two-year high, the price of the yellow metal softened slightly to trade 4.5pc higher.
This may be seen as a good sign for the cedi to also make some gains against the pound. As at Friday (24th June, 2016) morning a pound was being sold for 5.46 cedis. But Razia Khan, head of research for Africa at Standard Chartered Bank, told Daily Nation that emerging and frontier markets could come under pressure if Britain exits and causes investor capital flight to relative safe havens such as US treasuries, which would lead to a stronger dollar. This is seen a day after the vote to leave EU won and the dollar is gaining much ground against the pound. A dollar is now being sold for 1.37 dollars.
The implications of today’s Brexit vote will be far reaching and long-lasting as markets awaken to the dawn of a new day for Europe.
From a trading standpoint, these unprecedented events make for difficult trading conditions as thin liquidity and vast daily trading ranges renders the near-term technical of limited utility.
Accordingly, it is prudent to use this time to reflect on the bigger picture to offer some clarity amid the chaos of these historic moves.
With that said, Keep in mind more volatility is expected as US markets come online and we’ll want to see the dust settle before operating on these pairs- for now, we’ll be looking for reactions / inflections in price around these defined levels.
Also, in Ghana, since 2017, marks the last year of the the IMF bailout it is quite prudent our government promotes the activities of exportation than importation to stabilize our local currency in terms of our international trade since the IMF program will put much pressure on our economy.
-Gabriel Ofori Yeboah- Investment Consultant and Banking & Financial analyst
Gold prices are up thanks in part to investors fleeing the pound sterling to a safer haven with the commodity-gold. This should bring some relief to our mining sector especially gold mining in the short-term because for the past months the commodity has suffered a slump in prices due to the drop in demand from China. Currently some mining companies are “under maintenance” but this current turn of events will send some waves of a possible return to increase in operations for these mining firms. There’s the economic gain in employment, increased revenue for government and the firms’ own corporate social responsibility programs which benefits the host mining communities.
On issues of trade between Ghana and the UK- Ghana’s third largest import trading partner is the UK after China and the USA. Ghana imported $1,403,213,611 worth of goods from the UK out of the total $12,787,233,399 in 2013. Such huge volumes coming to Ghana from the UK means Ghana cannot sweep whatever happens in the UK under the carpet when there is sudden turn of events like we are witnessing after the Referendum. Ghana should now position itself to make some substantial gains from Britain as a trading partner. The strength in numbers, had Britain voted to remain in the EU has been dealt a huge blow and we can take advantage of this. We can now deal with the UK as a trading partner separate of the EU; meaning they wouldn’t be under any EU trade regulations. Ghana should position itself to renegotiate trade deals with UK as the UK exits the European Union. This could take years but the will to follow through must be there. In the short to medium term not much substantial gain will be achieved.
Ghana has benefited significantly from EU sponsored aid programs in Africa and the UK has been a significant contributor to the aid programs. While UK leaving EU won’t renege on its aid efforts, its contributions to an EU led efforts will drop significantly, Ghana and Africa will be the biggest losers in this regard. Move towards trade deals should be high on the agenda than aid.
As it stands now, the only certainty as noted earlier is the uncertainty. Nothing is going to really change in the short-term since these political, economic and trade relations take time to be planned, and negotiated to make them binding.
Author: Paa Swanzy-Essuman || firstname.lastname@example.org