Renewing UK-Africa relations?
Prime Minister Boris Johnson delivered his administration’s first major statement on Africa today, when he hosted African presidents for the UK-Africa Investment Summit 2020.
He spoke mainly about existing private sector initiatives, pushing the idea that the UK is an ‘obvious partner of choice’ for Africa, highlighting financial services in London, tech innovation, security co-operation and the UK’s higher education sector.
The Summit’s pre-publicity described the UK’s desire to take advantage of leaving the EU to secure trade and investment opportunities in Africa, making London a centre for ‘development financing’ for a rapidly growing continent, perhaps even, rather fancifully, the largest source for foreign direct investment (FDI) for Africa.
Only about 2% of current UK trade is with Africa. While Africa attracts less than 2% of all FDI in the world, returns on that investment are on average higher than for FDI to any other region of the world. In that sense, there is huge scope for mutually beneficial trade and investment links.
Nonetheless, for the UK to make a serious commitment to reducing inequality and poverty in Africa would require not just a step-change in the scale of engagement but a dramatic reversal of the policy framework that has dominated the EU and UK’s approach to aid, trade, and investment over the last 40 years. The speech made very little mention of the key issues, mainly listing existing investments.
Because EU trade policies and practice are incredibly difficult to shift, Brexit represents a vital opportunity for the UK both to rethink its own national economic model and, relatedly, its economic relationships with the wider world. It is a shame then that the speech contained no new thinking about the UK’s long-standing ‘Africa model’, which combines the promotion of trade liberalisation, private-sector focused aid and investment, and securitised development policies.
British politicians have long used Africa as a space into which to project a sense of personality of moral purpose, particularly at times of drift or crisis at home. This image-projection often disguises a paucity of ideas. Britain could contribute to overcoming Africa’s marginalisation in the world trade system. This speech showed little evidence that the Prime Minister, who listed the impressive numbers of African countries to which he travelled as Foreign Secretary, had been listening to African leaders then or at the Summit, rather than engaging in publicity stunts.
Hopefully the summit marks an opportunity to re-think the UK’s aid, investment, trade and visa policies.
On aid and investment:
UK government representatives have been briefing that the UK aims to become the G7’s largest investor in Africa by 2022. In 2018, Theresa May made the same suggestion, before relegating it to an ‘ambition’. Boris Johnson did not repeat the claim, sensibly recognising that African states have a number of other suitors.
If it was true that Britain might massively increase the flow of investment into Africa, that could be a good thing. Since the 1970s economic crisis, Western economies simply haven’t proved sufficiently dynamic to build industrial capacity in Africa. African countries have, understandably, been looking to a much wider range of partnerships recently, including most notably with China, which has a much more dynamic economy and a hunger of African primary resources.
Against the UK Government’s framing of the problem for this Summit, Africa’s biggest problem is not the lack of money flowing in to the Continent, but the rivers flowing out – largely as a result of the determined pursuit of investment and capital liberalisation by the US, EU, and UK. Most African countries have been tied, since colonialism, into dependent and unequal trading relations with the West. And rather than simply more investment being the issue, the real question is on what terms it arrives. Recent calculations suggest Africa experienced capital outflows of approximately $1.4 trillion over the period between 1970 and 2015, outweighing the Continent’s total stock of debt in 2015, and all of the foreign aid all of these countries have received.
These effects are partly a result of the difference in the strength of currencies between the rich world and the poor, but also occur because profits made in Africa by foreign investors are typically paid out to shareholders in the West rather than re-invested in Africa. Money laundering, tax avoidance, and the extensive use of tax havens, all of which feature in this week’s revelations about the ‘Luanda leaks’ papers, which feature roles for PriceWaterhouseCoopers, Boston Consulting Group, the British Virgin Islands, and diamond outlets in London’s Bond Street. Grand corruption on the corporate world ties corrupt entities in Africa and in the West, and these are vital problems for that Western states have a genuine responsibility to solve, but have shown little energy to tackle.
For these reasons, no source of investment or trade is necessarily beneficial for the majority of Africa’s population. The Prime Minister span the idea that, even if Britain doesn’t become Africa’s biggest investor, it might at least be the ‘investor of choice’. Theresa May said ‘British investors respect ethical practices, comply with local laws, contribute to local economies and build long-term local capability.’ The Prime Minister also tried to hint that British investment in Mombassa Port had saved Kenya from Chinese investment that would bring with it a more ‘unbalanced’ relationship.
This contrast is not in any blanket sense true – it’s designed to invite the thought that naked exploitation is an exceptional form of capitalism (and *nudge nudge* emanates from China) rather than a part of the system.
One suggestion is that British investment, by being tied in part to the poverty reduction agenda of British aid (through the development Ministry DFID) creates a uniquely beneficial form of investment.
But Britain’s track record offers scant support for this hypothesis. There has been increasing concern amongst development watchers that UK aid is being ‘financialised’. In other words, instead of UK aid money going to African governments and NGOs to support spending in the education or health systems, it is increasingly being invested in private businesses via what used to be called the Colonial (and then the Commonwealth) Development Corporation (CDC).
This was originally a financing instrument set up in 1948 by the Attlee Government to support agricultural development in the colonies. Since its transformation from a public body to a plc, it is now known as CDC Group plc. 100% of its shares are owned by the British Government but it operates as a profit generating investment vehicle that was exposed for its corporate pay practices and loss of focus on poverty reduction by investigative journalists at Private Eye. The result was a parliamentary investigation and some effort at reform. Still, last month, one of its African investments in palm oil was cited in a Human Rights Watch report.
In line with the ‘prosperity, not poverty’ focus of the Conservative’ aid administration, and in spite of these concerns, the UK’s development agency DFID put £1.8bn pounds of extra investment into the fund in 2015 and 2018. Promises of increased UK investment in Africa largely flow from proposals that it should put even more in this year (rather than, say, private investors putting in their own money). The UK’s own Independent Commission on Aid Impact audited CDC last year, and, on its scale, gave it an ‘amber/red’ rating, meaning ‘Unsatisfactory achievement in most areas’.
Investment to Africa can be a good thing, but it must come on terms that African governments and people are able to shape. In May 2016, the Prime Minister gave a speech at the headquarters of Vote Leave, arguing that the British people needed to ‘take back control’ from the anti-democratic structures of European Union, citing the treatment of heavily-indebted Greece by the Union and the corrosive effects of economic dependence being deployed to override sovereign rights. He noted that “The loss of democratic control is spiritually damaging, and socially risky.” He was surely right about that. But Greece’s experience was incredibly familiar to African countries.
Aid and development finance have long been conditioned on African governments abrogating their own sovereign policy rights. Britain since the 1980s has been one of the most aggressive promoters of the neoliberal doctrine and of systems of conditionality that seek control over ever more sensitive elements of African economic and political life. There is little evidence that the Prime Minister has done any thinking about how British, rather than European, technocrats might loosen their grip on African policy and allow the continent’s governments and people to exercise their sovereign rights to shape policy as their own advantage.
The Conservatives’ article of faith, that tariff-free trade between countries creates a rising tide that raises all ships gains very little support from the history of relations with Africa – or generally in relations between rich and poor countries.
Financial flows might be welcomed – but not if they crowd out domestic and public investment, not if they over-ride domestically negotiated labour and regulatory standards. If the price of investment is that African Governments are bribed or encouraged to reduce tariff and non-tariff barriers, rather than being free to set their own tax, trade and industrial protection policies, as has been the long term pattern, there’s little reason for optimism. These policy instruments can be important to creating job-intensive and sustainable growth.
One of the most significant things that the UK could do to increase investment in Africa is to improve the terms of trade for African countries trying to export into the UK market.
British trade policy towards Africa has been dominated since the 1970s by Europe. Two years after the UK joined the EEC in 1973, the bloc signed the Lome Convention with former colonies of France, Britain, and other European countries in Africa, the Caribbean and Pacific (ACP). Reforms to the trade regime in the early 2000s have focused on both welcome market access for African producers selling into Europe and, much less welcome, opening up African markets to competition with European agricultural exporters – most worryingly, those subsidised by the Common Agricultural Policy.
The policy-making process has been dominated by impenetrable, anti-democratic negotiations led by the European Commission through which African states (with the connivance of British administrations) have been divided and conquered, split up into regional sub-groupings that suited a European agenda, rather than African regional integration agenda. The general pattern of trade negotiations, in which relatively poor African states have been bribed with aid to agree to trade deals not in their interest, must not be replicated by the UK.
More developed countries, like South Africa and Nigeria, that would provide stiff competition for French and Spanish agricultural produce, have been pressed to open their markets to European exports while facing continuing barriers to the European market. For example, refined sugar from Nigeria faces high tariffs when exported to the EU.
Nigerian President Buhari, who will meet the Duke and Duchess of Cambridge as well as the Prime Minister, has been arguing ahead of the Summit: ‘in recent years, our relationship – particularly economically – has become increasingly defined by Britain’s membership of the European Union. A new free trade agreement would reconfigure this, presenting new opportunities for both… visa restrictions and customs barriers must be reduced to fulfil the potential these connections could bring to the nations where they today reside. As an African leader, I have an obligation to speak of the fact that while many in the African Diaspora enjoy considerable benefits from life in the West, they do not always feel at the heart of the community. A renewed sense that there are ties that bind us through the Commonwealth, and a concerted effort to grow those links through trade, could act as a spur to encourage togetherness and the certainty of belonging.’
After Brexit, Britain will no longer be tied into the terms of the EU’s Economic Partnership Agreements. It is free to offer much more generous terms, and the implication of the ‘buccaneering Britain’ idea pushed by some Brexiteers suggests they might want to lower barriers to entry for Commonwealth or African producers to the UK market. During Theresa May’s 2018 trip to South Africa and Kenya, the Government confirmed their first trade deal for the post Brexit era and tried to spin it as a win for Africa. The irony was that they literally cut and pasted the EU’s Economic Partnership Agreement with SACU and Mozambique. The ‘continuity EPA’ deal, a Brexit emergency measure, missed the chance to improve South Africa’s terms. South Africa does not, for example, have full duty-free quota free access to the UK market. For certain products, tariff rate quotas apply. Any continuation of this approach would suggest a paucity of ambition, the inability to think seriously about what could be done differently after Brexit.
The questions African states will ask Boris Johnson will firstly be about whether his administration can rethink this ‘reciprocal liberalisation’ system, secondly about what terms other countries might negotiate with the UK that might further weaken African states’ position – especially countries with a similar export profile (Chile and the US both export citrus products and juice, for example), and thirdly about migration and visa regimes.
UK visa regime
In the Prime Minister’s speech, there was a welcome recognition that a clear limitation on UK-African partnership is the existing UK visa regime. He claimed that imminent reforms would make the system fairer and more equal.
Given the centrality of research collaboration and the UK Higher Education system to the Prime Minister’s vision, it is worth reiterating the points made six months ago by a number of concerned All-Party Parliamentary Groups. They found that the UK visa system: “not currently fit for purpose, being inaccessible to many Africans, under resourced, unaccountable and widely perceived as biased or even discriminating against Africans.” Chi Onwurah MP, Chair of the APPG for Africa said the system was: “embarrassing, patronising and insulting to African applicants and leaves the slogan of “Global Britain” empty and meaningless.”
On DFID-FCO re-merger
Liam Fox last Monday laid out his view that the UK’s aid ministry, DFID, should be merged back in to FCO.
DFID emerged as an independent Ministry in 1997, alongside legislation that made the sole legal focus of UK development aid ‘poverty reduction’ as Labour theatrically emphasised a ‘moral’ account of Britain’s role in the world. In the aid field, this meant seeking to remove the most obviously self-interested commercial ‘tying’ of aid, to purchases from British firms while retaining a free trade, free market approach overall.
Fox has argued that UK international assistance ought to be focused on supporting British businesses. Dominic Cummings is rumoured to share the view. Briefings suggest the re-merge may not now happen, but whether it does or not, not much will change. The aid budget is a vanishingly small share of the UK Government’s overall spend and has much greater symbolic than practical importance – as compared to issues around the terms of trade. The OECD’s aim that 0.7% of GDP should be spent on aid would apparently remain a spending target anyway, and any such commitment is incompatible with retying aid to British commercial interests, since the way aid is calculated by the OECD-DAC excludes this kind of thing.
Even if the UK steps away from the DAC definition, without a legislative change to the purposes of aid, changing practices of aid spending would soon provoke a Pergau Dam-style court battle. That case embarrassed the Thatcher Government and informed New Labour’s ‘untying’ of British aid.
So, I think we can mark this part of the debate down as unserious – a nod to a pet obsession of the anti-Cameroonian wing of the Conservative Party, for whom the commitment to poverty reducing aid to foreigners was a central symbolic plank of the move away from being the ‘nasty party’. Any claim that Prime Minister Johnson’s administration will be a ‘one-nation’ centrist government in relation to Africa requires much more concrete commitment than the ‘optimism and vim’ of today’s speech.