What is Brexit?
Brexit stands for the British exit, and this meant that the United Kingdom was leaving the European Union. It came about after the UK had a national referendum where 17.4 million people voted to leave. The EU was formed to allow trade between member countries and also allowed people to travel as they chose. Creating a unified group eased trade because there were no extra charges.
The UK kept negotiating for no-deal or negotiated deal”. As the EU became more and more integrated, the people chose to give their sovereignty; the UK wanted to stay independent. Since the UK is one of Kenya’s most significant sources of revenue because it’s an export destination and trade partnerships, the decision has had some ripple effects on the economy.
The decision has impacted the economy in both negative and positive ways. Kenya has several companies that the UK holds the most significant shares, like the Williamson tea limited. With this in mind, it means that the tea growers who mostly export tea and coffee to the United Kingdom will experience delays in the whole process.
When there are export delays, it also impacts the economy; we go to a loss because there’s no revenue. There would be fewer inflows, and the primary market is likely to suffer. Brexit has caused both economic and financial shifts, and some of these changes occurred abruptly.
Kenya may lose Sh 2 Billion if the Great Britain decides to leave the European Union. In December 2017, the revenue from exports hit a staggering Sh 38.6 billion in just 12 months. Research has shown that this reduced after the Brexit campaign began. The UK is also the largest consumer of flowers, and Kenya has been enjoying the market since it brings in around 4 billion per month. If the deal changes, then Kenya suffers a big hit that negatively affects the economy.
Looking at the tourism part of it, Kenya gets foreign exchange from the UK, and the industry is significant, especially the hospitality sector. We benefit in terms of jobs, visas, and their domestic spending. Most of the tourists come from the UK and now that they are withdrawing just when Kenya is improving the tourism industry.
It means that there’s going to be depreciation in their currency, sterling pound, and it will affect the GDP.
The aid that comes to Africa, especially Kenya, mainly comes from the UK. The Brexit will deprive the country of the funds, bringing to a halt all the UK supported developments in the country. The Kenyan shilling may depreciate too, in the Forex Exchange market.
As much we feel crippled by the Brexit decisions and the external and internal shocks it will cause, we can benefit as well. Brexit allows us to foster trade ties between Kenyan and Britain. This opportunity will enable Kenya to come up with better trade deals. Dealing with Britain directly eliminates the extra costs of going through the EU. It also opens up opportunities for exporting more products.
As the UK moves from the EU, Kenya is still going to be beneficiaries through the commonwealth partnership. The ties will open up the market and foster a good relationship. The agricultural sector will also benefit. Kenyan farmers can access the UK market once the Common Agriculture Policy that favors European farmers is out of the way.
Kenya can also approach other European countries and seek new trades with them. This move could boost the Kenyan economy and reduce over-dependence on the UK.
Even though the governor of the central bank of Kenya, Patrick Njoroge, assures us that Kenya is immune to the shocks arising from Brexit, the statistics speak for themselves. Trade partnerships give us duty-free access to products, and they support the president’s big four agendas, affordable housing, food security, manufacturing, and universal health care.
Brexit will bring changes to the economy, whether we like it or not. Renegotiating the trade deals would create uncertainty since Kenya may not know what’s in it for them after the Brexit. The outcomes of Brexit are inevitable, and it will take time to fill the space the UK has left. So currently, the world is waiting to see how the negotiations will turn out so that they can get a way forward.