The UK government is stepping up efforts to foster economic relations with Africa, exploring business opportunities across the continent with its first major international investment event since leaving the EU.
The UK–Africa Investment Conference, hosted virtually by the Department for International Trade on January 20, took place on the one-year anniversary of the inaugural event hosted in London’s O2 arena by UK prime minister Boris Johnson.
Mr Johnson opened yesterday’s summit by reaffirming his “ambition for the UK to be Africa’s investment partner of choice,” and the need to build back “better, faster and greener” to recover from the Covid-19 pandemic.
“We in Britain have much to learn from the ingenuity, energy and ambition of African entrepreneurship and wealth creation. Africa is the future and the UK has a huge role to play in realising long-term prosperity for all African nations,” said Mr Johnson.
While attention was put on the success of the 2020 UK–Africa summit — where 27 trade and investment deals worth £6.5bn and commitments worth £8.9bn were announced — some deals have not materialised, owing to the economic hit from Covid-19.
“Despite the pandemic, deals and commitments made around last year’s summit worth £15.4bn all survived”, said Gerry Grimstone, the UK Minister for investment who heads the UK’s recently created centralised office for investment.
“Covid has hampered the appetite of some activities, but recovery will bring opportunity,” said Dirk Willem te Velde, the director of international economic development at think tank ODI. “There needs to be a ratcheting up of the relationship between the UK and Africa in trade, investment, migration and aid,” he added, suggesting that this event should be held on an annual basis for the UK to ensure its position on the continent after Brexit.
Source of investment in Africa
Prior to the pandemic, UK-based investors had begun ramping up their investment activity on the continent. In 2019, the UK outward foreign direct investment (FDI) stock in Africa rose on an annual basis by 14.7% to reach a record £50.6bn, according to ONS figures.
However, Africa still makes up a relatively small share of the UK’s total outward FDI, maintaining its roughly 3% share seen since 2010.
Overall FDI flows — which include both cross-border mergers and acquisitions and greenfield investments — from the UK to Africa have been largest into South Africa, followed by Nigeria and Kenya.
A similar pattern is seen in terms of greenfield investment projects, according to figures from fDi Markets. The UK has historically been the second largest source market of greenfield investment in Africa, outstretching other major markets such as France, Germany and the UAE, but beaten only by the US.
On a sectoral basis, UK investors have been most active in the business and financial services sectors on the continent, announcing 228 and 212 projects, respectively.
Better, greener and faster
With the UK set to host the UN’s 26th Climate Change Conference (COP26) in Glasgow in November 2021, much of yesterday’s conference explored how inclusive, sustainable and resilient investment can help African countries transition to greener economies.
Despite the continent being endowed with substantial renewable energy resources, some 600 million Africans still have no access to power, which equates to roughly 48% of the continent’s 1.2 billion population.
Karl Boyce, chief executive of British and Rwandan energy provider ARC power, told fDi that “Africa has true potential to become the global leader in renewable power generation — particularly from solar power, given the irradiation levels across the continent”.
“However, funding in the sector is still significantly behind where it needs to be to meet this increasing demand. More work remains to be done to create robust regulatory environments which would in turn improve fund flow into the sector,” he added.
While the UK has secured a continuation of preferential trading arrangements with 46 African countries, it has inked post-Brexit trade deals with just 13 individual African countries, most recently with Kenya. In 2019, the UK’s trading relationship with Africa was valued at £35bn.
The long-awaited African Continental Free Trade Area, which is due to be implemented across the continent this year, is seen as another opportunity for UK businesses.
“Trade is still a major objective across [UK] government and it needs to be fleshed out this year,” concludes Mr Willem te Velde.