Britain is nearing the final stages of Brexit. In just over five months, at 23:00 London time on 29 March 2019, the UK is due to leave the bloc.
What remains to be seen is what kind of a deal, if any, Britain will leave with and the final terms of the negotiations. But what is crystal clear is that in a post-Brexit universe, when Britain will no longer be the gateway to Europe, it is imperative that it strengthens its relationship with the rest of the world. Africa is key to this shift. I believe that there is an enormous opportunity for Britain to build on its historical relationship with Africa and to capitalise on the continent’s trade and investment opportunities.
The UK is already the second-largest direct investor in Africa after the US, with trade and investment just shy of £43bn in 2016, according to data from the United Nations Conference on Trade and Development. Theresa May’s expressed wish to be the G7’s largest investor in Africa by 2022 looks achievable, albeit with a constant eye on the rear-view mirror.
London is an important trading hub for Africa and will continue to be so post-Brexit. It isn’t just the maturity and depth of the city’s capital markets and access to finance offered – London is also an information hub. Along with New York, London is where business and investment leaders meet regularly at international conferences and events to discuss Africa’s progress and challenges.
But perhaps most importantly of all, despite Britain’s colonial past, the UK is seen as setting the gold standard in terms of corporate governance.
It often goes unmentioned, but there is considerable stored value in how Britain’s financial institutions and businesses are held in the highest regard by many in Africa’s business community. Its heritage and reputation for fairness, transparency and dependability leaves it in a very strong position when it comes to deal access on the continent.
The time to invest in Africa is now and the continent is at an inflection point. Rising equity values on international stock markets have made investments in mature economies expensive. This is driving overseas investors to look elsewhere for diversified risk, which is highly conducive for Africa.
We are also seeing the African regions acting more in concert, beginning to make persuasive arguments for their merits. New leadership in South Africa, Angola and Zimbabwe is taking us in a fresh direction and is a cause for renewed optimism.
Which leads to the big question: what happens next? Well, £3.5bn of new UK funding for CDC, the UK’s development finance institution, will be invested over the next four years to develop hundreds of thousands of jobs, build stability and trigger growth in some of the poorest and most fragile African countries. And, in my view, CDC has a good track record of success over the long term.
The British prime minister made it clear that the private sector is expected to match the UK government investment. One area I’d like to see more overseas private capital is in transport. Africa desperately needs better roads, ports and airports. It currently costs up to four times more to move goods through African ports than in Europe. And only a quarter of the roads in sub-Saharan Africa are paved, which can add up to 75% to the price of goods in parts of Africa.
Moving people and goods efficiently is at the heart of all trade, and Africa will struggle to benefit from abundant opportunities unless we can leverage private capital more quickly to tackle these remaining infrastructure issues. The UK government is sinking up to £300m through its Private Infrastructure Development Group into essential infrastructure but, given that the infrastructure spending gap in Africa is around £130bn a year, there’s clearly an urgent need to act faster in mobilising more capital into this sector.
But I am optimistic about the UK’s future relationship with the continent, and I urge Britain to reinforce that the perception of risk of investing in Africa is much greater than the reality of risk – to ensure that pledges and commitments promptly turn into action.
Paul Boynton is CEO of Old Mutual Alternative Investment.