On Thursday 23 June, the UK’s voting-age citizens took to the polls to decide whether UK should leave the European Union (EU). And by the following morning there was pandemonium as the world’s markets tried to adjust to the new reality of the UK’s 52%-winning vote to exit.
It will actually take at least two years for the UK to officially leave the EU after Article 50 has been triggered – the formal legal process for countries wishing to leave the EU. But the uncertainty around what the future holds has caused market turbulence. Agreements concerning trade and freedom of movement will have to be re-negotiated, leaving businesses unable to make informed calls on investment. After the results of the vote, the pound took a huge knock and rating agencies Fitch and Standard & Poor’s (S&P) slashed their credit ratings for the country.
Africa will not be immune to the effects as its countries face uncertainty around exporting to UK. For example, over a third of flowers sold in the EU come from Kenya – with the UK being the second-largest buyer. Kenya, as well as all other African markets, will now have to renegotiate new deals with the UK.
The continent’s markets are also likely to feel the pinch of a weaker pound in the long term.
“The UK is the fourth biggest investor in Africa so there will be less investment coming into the continent because there will be less growth and less money to spend,” says Leon Ayo, CEO for sub-Saharan Africa at international executive recruitment agency Odgers Berndtson.