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The Africa Confidential Blog

  • 21st October 2019

The week ahead: Africa eyes deals after Brexit

Patrick Smith

We start this week with knife-edge negotiations over Britain's attempts to leave the European Union and their implications for Africa. And then to Nairobi where President Kenyatta is taking on parliament over interest rates. Russia says that 47 African leaders are due in Sochi for a grand summit and tensions are rising fast in Mozambique in the wake of last week's national elections.

AFRICA EYES DEALS AFTER BREXIT: Last-minute deal on Britain's exit from the European Union offers opportunities for African exporters

Britons and Europeans are not the only ones hoping to avoid a no-deal Brexit on 31 October – the deadline for the UK's departure from the EU in the absence of another extension. If the Withdrawal Agreement struck last week by the British government and Brussels is ratified this week, it would allow most African countries to avoid their own trade cliff-edge with the UK.

Although the Theresa May and Boris Johnson governments have been making grand promises for UK-Africa relations after Brexit ever since the June 2016 referendum, progress on new trading, diplomatic and security arrangements has been glacial.

The UK is forbidden by law from negotiating new trade accords with third countries while still an EU member. Even its attempts to roll over the EU's existing trade arrangements with African states have been painfully slow: that is, finalising arrangements under which Britain copies the current EU trade terms with Africa's regional economic communities.

So far, only two trade pacts between the EU and African regional blocs have been rolled-over: with the Southern African Development Community and the East African Community Eastern blocs.

The UK is in talks with Tunisia, Morocco, Ghana, Kenya, Egypt, Nigeria, Côte d'Ivoire, and Algeria. Whatever the outcome in Westminster over the coming weeks, the next couple of years will be a period of maximum leverage for African countries in negotiations with the UK.

As the EU seeks to ramp up trade and investment with Africa, the continent has an opportunity to play the two off against each other.

KENYA'S INTEREST RATE ROW: President Uhuru Kenyatta fights parliament as he tries to end the ceiling on interest rates

A showdown between the executive and parliament is brewing after President Kenyatta last week rejected a finance bill that seeks to retain caps on the interest rates that banks can charge on loans.

The bill, first passed in 2016, limited the rates that banks can charge customers to four percentage points above the central bank's benchmark rate – currently 9%. The rationale was sound – banks were charging prohibitively high rates to local businesses – but the result has been to further constrain private sector lending. Banks have instead invested in the government's Treasury bills.

The President wants to scrap the rate cap, which was one of the reasons for the collapse of the government's $1.5 billion standby facility with the International Monetary Fund, for over a year. But it is unclear how the impasse can be broken.

RUSSIA'S BELATED INDABA: President Putin lambasts the West ahead of his grand Africa summit in Sochi this week

Trade, security and cocking a snook at the West are set to dominate proceedings at President Vladimir Putin's grand Russia-Africa summit on Wednesday and Thursday (23-24 October). Russia is confident that 47 African leaders will attend the meeting, which emulates China's campaign for influence in Africa. Beijing started organising grand African summits over 15 years ago.

Putin wants to convert its defence and military relations into more political and economic influence. He said that Russia has military cooperation agreements with at least 30 countries in Africa, and sells arms to most of them.

Like Chinese leaders, Putin sees a strategic competition playing out in Africa. In an interview with Russia's TASS news agency he warned African leaders to stand firm against what he described as 'pressure, intimidation and blackmail' from an 'array' of Western countries seeking to re-imagine their colonial past.

He didn't name specific countries, only referring to former colonial powers – which covers some of the biggest economies in Western Europe, such as Britain, France, and Germany. The European Union has been accused of attaching political conditions to its aid and investment, and Putin's support for the principle of 'African solutions for African problems' is another veiled swipe at Brussels.

MOZAMBIQUE'S BITTER POLLS: Opposition wants elections annulled as early results point to a hefty win for President Nyusi and Frelimo

Reports of the deaths of at least ten people ahead of national elections on 15 October, combined with reports of abuses and irregularities on voting day risk triggering a deeper crisis as early results show a substantial victory for the ruling Frente de Libertação de Moçambique (Frelimo) in the presidential race.

The conduct of the elections also flouts the August peace deal between Frelimo and the opposition Resistencia Nacional Moçambicana (Renamo). Widespread reports speak of wholesale fraud, including denial of credentials to observers, ghost polling stations, ballot-stuffing and intimidation on an epic scale.

Nyusi was expected to win, but key to the extent of post-election unrest will be the outcome in provincial elections, particularly Zambezia and Nampula, which Renamo expects to win.


IMF AND WORLD BANK WARNING: With 90% of world's economies in 'synchronised slowdown', weak growth is bigger threat to Africa than building up debt

BOTSWANA'S ELECTIONS BREAK MOULD: Elections on 23 October will see biggest challenge so far for the ruling Botswana Democratic Party after former President defects

TANZANIA'S RESOURCE NATIONALISM: Barrick Gold hails new joint-venture mining deal with Tanzania after lengthy battle over taxes and royalties