Africa and Brexit: 5 Facts to Consider

The UK’s decision to leave the EU will cause significant uncertainty over the coming months as the detailed political and legal issues are worked out, writes Joel Segal – Partner and Chair of Africa Business Group at PwC. African businesses and individuals with vested interests in the UK will need to prepare for and adjust to this disruption.

While business confidence and growth may be subdued in the short-term, history has taught us that UK business is adaptable and innovative when confronted with new challenges and opportunities. Looking ahead, the UK remains a highly flexible economy with many strengths in areas such as financial and business services, creative industries, tourism, higher education, and high value manufacturing.

Although there is likely to be short term shock to the UK economy, it should continue to prosper in the long term.

Africa & Brexit: 5 Facts to Consider

A period of uncertainty may create a difficult working environment.

African businesses with close ties to the UK will need to identify how to position their business to adapt to opportunities created by change. ‘Live’ deal discussions, implications for contractual positions, ‘Brexit clauses’ and communication strategies will all need to be considered.

Foreign Exchange (FX) volatility is likely to increase.

The pound has fallen sharply in immediate response to the vote to Leave. Although African currencies are likely to gain against the pound, the South African rand has already fallen against the US dollar. African businesses will need to assess the impact on their existing finance, investment funding and liquidity positions.

African businesses will need to identify the legislation that will remain in force and that which could move over time.

African businesses and individuals operating in the UK will need to understand which EU legislation is likely to be retained in the immediate aftermath of a UK decision to leave, and which is likely to be altered. It will be important to plan ahead for the indirect tax impacts on the movement of goods as duty rates for trade become uncertain and costs potentially increase.

There could be the opportunity to renegotiate trade deals.

The UK’s trade deals with Africa are essentially the EU’s trade deals with Africa. As the UK exits the EU, trade deals with Africa will need to be renegotiated, presenting an opportunity for change. Until that point, we would expect existing trade deals to be upheld.

UK immigration policy may change.

Immigration was a central theme to EU referendum debate. Following the vote to Leave, it is unclear exactly what immigration policy could look like. Africans looking to the move to the UK and African businesses seeking to relocate employees to the UK will need to factor in this uncertainty to their decisions going forward.

Joel Segal is Partner and Chair of Africa Business Group at PwC. For many years, PwC has been working with private businesses, financial institutions, governments and public bodies across Africa. Thanks to a strong local network of partners and teams, they’ve established privileged relationships with clients to provide them with rapid and customised solutions. Their network of firms in Africa collaborate with PwC in the UK, France and the wider global network to meet an increased demand for professional services, to support the growth in trade activity between Africa and the rest of the world. Visit PwC Africa Business Group