Developing trading partners
of the future
In the wake of Brexit, the government has expressed its ambition to be an outward-facing, globally engaged Britain. The new Secretary of State for International Development, Priti Patel, has reaffirmed this ambition and been robust in her defense of aid in the national interest. The Secretary of State has also on a number of occasions expressed an interest in exploring how aid can be used to help develop new trading relationships with our overseas partners. The Government’s UK aid strategy states our aim is to tackle instability, promote economic development and build resilience in the interest of UK national security, boosting
trade and investment and mitigating the impacts of migration, climate change and global pandemics. It is in this context that we convened our panel to provide cross-Whitehall insights as well as the views from overseas partners and those delivering projects on the ground of what is working and what approaches we should be pursing to boost trade and investment and build prosperity in the UK and overseas.
Lord Popat, Prime Minister’s Trade Envoy for Uganda and Rwanda
Lord Popat of Harlow. Image Source: lordpopat.com
Lord Popat was asked to elaborate on the challenges and opportunities to developing greater trading partnerships between the UK and African countries.
He spoke of the great potential in Africa and a great opportunity for British businesses to play a leading role in Africa’s future growth. The UK’s share of trade in Africa has fallen from over 25% to 4% within 30 years due to the emergence of new emerging economies investing in the continent and reticence amongst UK businesses to trade with Africa. Government and companies have a lot of work to do to harness this potential. Some very specific things he mentioned were the availability of direct flights throughout Africa and negotiating very specific trade and investment arrangements with Rwanda and Uganda.
He recognized that while trade is important, aid is also important in terms of putting in place some of the building blocks.
H.E. Yamina Karitanyi, High Commissioner of Rwanda to the UK
The High Commissioner recognised the strong relationship Rwanda has with the UK and that it was a relatively new relationship. Before the genocide, Rwanda did not have a relationship with the UK.
Aid has been very important in helping Rwanda grow and regain stability after the genocide. But in the past 22 years Rwanda has made great strides in reducing it’s aid dependency reducing the amount of the government budget supported by aid from 98% to 19%. Rwanda has lifted 1.45m people out of poverty, but to sustain this we need to generate economic opportunities for Rwanda and the UK.
Rwanda is now looking to build trading partners. While aid has been important, it is not sustainable. The High Commissioner noted that opening up markets is important; the country is ranked highly on the World Bank’s ‘Ease of Doing Business Index’; and that the EAC is a well-integrated market. In fact, Rwanda is strategically placed to access the EAC and Central African market.
She recognized that the conversation about aid and development in the UK had to matter to the UK taxpayer and convey why it helps UK citizens. Business opportunities is a big part of this narrative.
Post-Brexit the UK is looking for alternative markets. The High Commissioner highlighted the Commonwealth as a good option. It has a common law system, which will attract investors. English is a common language, and it is a market which comprises 2bn people. Trade facilitation will be key. This requires a process and some aid to support trade and investment. She also recognized that the private sector is faster and more flexible that government.
She encouraged us to talk to business about what is needed to facilitate trade and reduce dependency on aid. She made an appeal to give countries the opportunity to develop with dignity and made a strong argument for trade in support of national security – citizens will want to protect what they have and will feel more secure when in employment.
Peter opened by emphasising Brexit as an opportunity to focus on removing barriers to trade and investment, particularly non-tariff barriers. This would be in the interest of the UK and developing countries. This is where CDR member companies can play a role. UK aid funds and cross-government efforts can address these non-tariff barriers.
Peter used Nigeria as a case study. Nigeria suffers a number of problems which hinder opportunities for trade and investment and support private sector development. These include: 1. Infrastructure, including the regulatory framework as well as transport and power; 2. working capital, interest rates and collateral for loans; 3. skills in the labour market; 4. security; 5. corruption.
He gave a number of examples of the challenges, such as getting goods from ports to their final destination, regularity of power support and the inconsistent application of regulations to businesses. By he also gave examples of projects which helped register land to provide collateral for business and individuals and programmes to reform the energy sector.
The East Africa Community can provide a good model for other regions. The time is takes to get stock from Mombasa to Kigali has been reduced from 25 day to 5 days, because there was the political will to improve efficiency on this route. The East Africa TradeMark initiative has been largely successful. Investors and UK businesses should look for opportunities in the EAC.
UK businesses and investors have to be realistic about what they achieve when working overseas. Much of the perception about Africa being a difficult place in which to work is due to unfamiliarity of the markets. Rwanda has implemented reforms to improve the ease of doing business – but the High Commissioner pointed out that even in the UK it took her over one month to open a bank account and that price for poor quality hotels in the UK are often much higher than overseas. We should keep things in perspective.
Extractives law reform is an important part of aid-back programming that can support trade and investment facilitation.
More should be done to encourage investment, not just trade. Some of this work is done through CDC, UK Export Finance or other government-backed development finance institutions, but little is done to encourage investment from institutional investors who have the scale to make a big difference. UK aid could be effective in bringing investment. DfID can provide a guarantee against risks or seed capital. World Bank guarantees might also be another way to encourage investments. Lord Popat also mentioned conversations about Prudential Life insurance looking to invest in East Africa and the benefits this could bring.
Our perception towards Africa needs to change. Government has to help trade. We also can help ensure that institutions are functioning and enable governments to better direct public finance.
There was other discussion about air routes, whether we should have an ethical dimension to our interactions with governments, hydropower in Nepal and teaching English in schools, and reform of the judicial system.