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Kenya big casualty as Britons search for long lost glory

NEWS
By Dominic Omondi | June 27th 2016
A demonstrator holds a placard during a protest against the outcome of the UK’s June 23 referendum on the European Union, in central London on Saturday. [PHOTO: AFP]

After years of agitation and dithering, the people of the UK finally on Thursday resolved to leave the European Union (EU), throwing the global financial markets into frenzy.

Although the effects of Brexit (Britain exit EU) on the Kenyan economy were not immediately clear, it might not be easy for the East African economic power-house in the long-run.

Kenya’s exports to the Western Europe which make up a significant part of the EU stood at Sh134.5 billion in 2015 up from Sh128 billion in 2014. Of this, exports to the UK stood at Sh40.7 billion, third behind Uganda (Sh68.6 billion) and Netherlands (Sh42 billion). It is clear that the UK benefited more from EU.

So, what happened to such simple but powerful maxims like: United we stand, divided we fall? Dr Scolastica Odhiambo, economics lecturer at Maseno University, said this was unexpected given that we are in the “era of regionalism.”

Close-minded people

“You don’t do that (exit a regional market). Generally, it is about brotherhood. UK is a very small country and really needed the EU market,” says Odhiambo. But all this is hogwash to the close-minded old people of the UK, especially those aged 65 and above, who decided to sever ties with their European brothers.

This is despite the fact that the EU remains the world’s most exemplary economic integration, albeit the recent global economic meltdown and debt crisis in the Eurozone has made some people get skeptical on the viability of the project.

Some members, who have been unsettled about their continued stay in the EU as the financial crisis had its toll, might be emboldened to follow the UK at the exit door. This would put the very existence of EU at risk. “It is my personal view that the global economic recovery following the Global Financial Crisis and ensuing Eurozone debt crisis is still very fragile and could be easily knocked off course by an event like this,” says Mark Bohlund, Africa and Middle East Economist, Bloomberg Intelligence.

Even worse is that the vote has “already given other anti-EU parties across Europe wind in their sales with several already calling for their own referendum.”

Coming at a time when Kenya is pushing through a new trade deal on flowers with the 27-member common market, the win by the Brexit team, or ‘Britain exit’ might hurt the country. “Our trade with UK is quite high under the EU agreement. Although they are bilateral relationships between UK and Kenya, there are some which are purely EU,” says Dr Odhiambo.

Such agreements include anytime we have an Economic Partnership Agreements (EPAs) such as the African Caribbean and Pacific Group of States Agreement (ACP). These will be affected immediately, and Kenya will be forced to re-negotiate.

According to the Kenya Flower Council (KFC) CEO Jane Ngige, Kenya might be forced to renegotiate for new trade agreements with Britain following its exit from the union.

Dr Odhiambo notes that, according to the rule of origin, most of Kenya’s horticulture gets into the European market via either Amsterdam or the UK first. In most cases, the flowers from the UK would not be taxed by the other countries, but now, Kenyan horticulture might attract high levies in the other EU countries, according to Dr Odhiambo who added that bilateral aid might also be affected.

University of Nairobi lecturer Dr XN Iraki, however, said that except for appreciation of the shilling against the pound, Kenya will not be badly hit. “Not much, except for appreciation of the shilling against pound. Kenya’s trade with Europe is mostly through individual countries not EU. The initial panic will subside and economic realities emerge,” he said.

The appreciation of the shillings might restrict UK visitors from visiting the country as it becomes costly to buy shillings and spend in Kenya. “The weaker pound and increased economic uncertainty could prompt UK residents to downsize their holiday plans to closer and cheaper holiday destinations than Kenya,” said Bohlund.

In 2015, hotel bed-nights occupancy by the British visitors in Kenya stood at 224,500 down from 275,000 in the previous year. Apart from flowers, Kenya also exports tea, vegetables, legumes, cabbages, and coffee to the UK. In 2013, Kenya exported tea worth Sh13.7 billion, flowers (Sh11.4 billion), vegetables (Sh2.7 billion), and coffee (Sh948 million).

On the other hand, Kenya imported cars, tractors (Sh8.7 billion), delivery trucks (Sh3 billion), aircraft, refined petroleum and medicines from its colonial master. But all this might be water under the bridge as the British continue to massage their ego.

It is their puffed up pride and delusions of grandeur that saw them continuously rock the EU boat from within. They refused to forego their currency, the Sterling Pound, fearing that they would relinquish control of their economy to an extraneous entity.

Analysts say that the Britons were never really settled at the European Union. When they joined this common market in 1973, the British refused to relinquish their currency, the sterling Pound, as they tentatively kept one foot in as the other remained outside. Moreover, they were not part of the single Schengen Visa which allowed visitors to EU to visit all the countries, baring their intolerance for all to bear.

Iraki says: “Britons got lots national pride, in monarchy, winning in two world wars, and having never been conquered since 1066. Any whiff of domination raffles them,” says Iraki. And if maxims mean anything to the Britons, then they should know that pride comes before fall.

According to Dr Iraki, other member countries will not immediately be inspired to instigate a mass-walk out. Instead, they “will wait to see how Britain weathers out.” It has already been said that it will be difficult for them to re-join the union having left it.

Liberalism

Already, cracks have started appearing. Iraki says that Scotland, whose section of its leadership have said they will be pushing for another round of referendum on whether to leave or remain in the monarchy, will be another “British nightmare” in the coming days. Northern Ireland which like Scotland voted to remain in the EU has also expressed its intentions to bolt out.

This would leave behind an empty shell in the name of ‘Britain’ comprising England and Wales. And it would certainly not be ‘great.’ But there is some hope. According to Bohlund, irrespective of whoever replaces Prime Minister David Cameron at 10 Downing Street, Africa’s position at the table of negotiation with UK is reserved.

“The Leave camp have frequently spoken about their commitments to liberalism and the Commonwealth nations so increased tariffs towards former UK colonies should not be expected in the short term,” according to Bohlund.

In one of the interviews, before the voting day, one of the Leave campaigners told a radio station that UK-Africa relations would improve when UK was separate, noting that the EU has often frustrated its good gesture towards the continent. “We’ll be able to focus more on our bilateral relationships with Africa and with our traditional partners,” said Duddridge, an MP for the ruling Conservative party referring. Only time will tell.

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