After 42 years of being an irritant member of the European family, Britain has decided that it no longer wants to be part of it, and have taking a giant step in the unknown or to some a step that will allow Britain to be more prosperous in complete sovereignty.
Brexit has been the major change on the European economic and political landscape since the fall of the Berlin wall in 1989 and its economic implications are seismic. Uncertainty and fear and stalked the markets since the vote two weeks ago and the British pound has fallen to its lowers levels since 1989 and have seen 3 trillion dollars wiped of the stock markets in less than a week after the vote. The economic implications such as these, of Britain’s exit from the European union and its impact on the British economy and the global economy was widely discussed and in some cases hotly debated in the months leading to the referendum, but any effects it might have on sub-Saharan African economies was not part of the narrative or discussions. It is the question that has crossed a few minds with ties to the African continent and in my case I have asked myself a few times, how Britain leaving the European Economic Community will mean for Ghana. So what does Brexit mean for Ghana?
Well here is my take on it. In the short to medium term Brexit should not and will not have any impact on the Ghanaian economy, as any trade agreement that exists, where deals that were struck under European Union rules and that should stay in place until the anticipated date of 1st January 2019 when the United Kingdom finally leaves the European Union. But before then the existing trade volume currently valued at £1.3 billion will have to be renegotiated in order for Ghana and the UK (if Scotland is still in the picture) to have a standing bilateral trade agreement by the time Britain says goodbye to the Union. In the long term however, the trade renegotiations which can be a lengthy, could cause a decrease in trade between the UK and Ghana and the African continent as a whole. The only way Brexit can impart negatively on the Ghanaian economy in the short term, is if Brexit sets off a recession in the British economy and falling demands affects imports into the United Kingdom. A recessionary period is something the Bank of England has not ruled out and is very much in the narrative with regards to post referendum economic discussions. The Bank of England has already hinted at some sort of quantitative easing and reduction of interest rates in the coming months, which gives an indication that the economy is beginning to feel the hot breath of a recession on its back. Any reduction of trade volumes at this time will not be shored up by Ghana’s other EU trading partners as analysts believe that the European Union will be buttoning down the hatches and looking to strengthen the internal trade ties among the remaining nations and will be more inward looking.
This coupled with the uncertainty that will surround the trade renegotiations means that things could be a bit tricky as Ghanaian firms cannot be too sure if new trade deals will be same as those in place under the EU or if it will be better or worse. But in all fairness I suspect that Ghanaian economic analysts and their counterparts on the continent are more worried about a recession in china though.
WHAT ABOUT AID?
The Brookings Institute believes that Britain’s exit from the European Union would be the end of British “OUTWARDNESS” i.e. Britain’s concern with and responsiveness to global development issues and would have “dire consequences for development assistance”. With the United Kingdom being one of the major contributors to the European Development Fund, the arm of the EU responsible for providing funds and development assistance to developing countries. It has been argued that Brexit will cause the European Development Fund not to have the reach it has at the moment, in terms development and assistance to the continent.
According to the Brookings Institute, the UK’s contribution to the fund currently stands at £409 million ($585 million) which accounts for 14.8% of contributions to the fund. Brexit therefore means that the EDF will be starved of valuable resource that is much needed for development and assistance schemes in Africa which Ghana is a beneficiary. This view is not shared by all though, James Duddridge a member of the British Parliament and one of the advocates of the “LEAVE CAMPAIGN” has been on record that UK development aid will be more effective if its directly administered through British Organizations such as DFID and that channeling British aid funds through the European Development Fund has proved to the less efficient in the past.
ANY REASONS TO BE OPTIMISTIC ABOUT UK, GHANA TRADE RELATIONS
When Britain became more engaged in the European project, there are some if not many, who thought Britain was turning its back on the Commonwealth, and rightly so because the Commonwealth over time has become a white elephant, an alliance with very little benefits or none at all if you want to be cynical. With Britain leaving the European Union, there are some, including me who believe that Commonwealth of Nations could be an alliance that has a chance to do more than a social club made up of a fallen empire and its former colonies. Whatever deal Britain will get from its exit negotiations with the European Union, there are about a hundred trade deals the UK will have renegotiated according to the World Trade Organization, so from that standpoint the UK will be eager to deals and will to take advantage of the deep ties it has with the Commonwealth to get some of these trade deals done quicker and that can be beneficial to the Ghana. Brexit provides the Commonwealth a chance to be more than a social club; it could transform it into an alliance that has more economic benefits to it. In any case the fifth largest economy is not suddenly going to bite the dust, so bilateral trade between Ghana and the UK will continue and perhaps on more favorable term, who knows.
In effect, the bottom line is that Ghana should not be worried about Brexit. Ghana still has the other remaining members of the European Union to trade with. There are also huge opportunities to forge trade ties with strong emerging economies like India and Brazil. There is no reason to panic and there should be no knee jerk reactions. What is required is for the leaders to monitor the unfolding situation as closely as possible and react appropriately to minimize any external shocks to the Ghanaian economy.
