“By 2022 I want the UK to be the G7’s number one investor in Africa, with Britain’s private sector companies taking the lead,” British Prime Minister (PM) Theresa May announced on her recent Africa visit.
This is a laudable goal for a post-Brexit “Global Britain”. Secretary of Trade Liam Fox has also highlighted growth opportunities in poorer countries. This article shows how the PM’s goals can be achieved by leveraging the UK’s competitive advantages and unleashing the power of its financial and industrial sectors, while improving the lives of the world’s poorest people.
The opportunity is vast for African and other poor countries. Many Commonwealth nations such as Nigeria, Kenya, Tanzania, Cameroon, Ghana, Malawi, Mozambique, Bangladesh and Pakistan fit the World Bank’s categories for low income or lower-middle income countries, with less than US$3,995 gross national income per capita (compared to the UK’s US$42,360). Excluding India, Commonwealth countries in these categories have a total population of almost 900 million.
By 2020, low-income countries (LICs) on average are expected to report an average 5.8% GDP growth compared to 1.8% for the EU and US. According to the World Bank, the top three global growth countries in 2017 were LICs: Ethiopia (8.6%), Uzbekistan (7.6%) and Nepal (7.5%). The world is ramping up to meet the United Nation’s (UN) estimated £1.3 trillion a year investment that all developing countries need to grow. Much of this will be invested in infrastructure, requiring goods and expertise from advanced economies.
The UK manages much of the world’s infrastructure funds, through pension/insurance funds and asset managers. Around them are high-quality firms that provide the goods and services required for design, financing, construction and operations. These include engineers, lawyers, financial services, contractors and equipment suppliers. It’s been estimated that for every £1 invested abroad, £0.20-0.30 is generated in UK exports due to this cluster effect. Now think of £1.3 trillion a year and do the maths!
Financing infrastructure in Africa
But there’s more to this than profits for UK investors and exporters. Efficient infrastructure is a necessary foundation for sustainable prosperity and reducing pollution in LICs. Electricity shortages and poor transportation hobble the prospects for local industry, education and, therefore, personal opportunities. LICs can leapfrog fossil fuels and jump straight to renewables. The good news is that UK fund managers are increasing their investments, which is having a positive impact on the UN’s Sustainable Development Goals, including poverty and climate change. Meeting LIC’s infrastructure demands will improve the environment for us all.
The UK’s advantage also lies in its government’s international reach. The Foreign and Commonwealth Office (FCO) has diplomatic relations that run long and deep, while the Department for International Development (DFID) is one of the largest bilateral donors in LICs. The UK government is already ahead of the curve. Mark Field, Minister of State for Asia, told me: “The opportunities for the UK are clear, and part of my role at the FCO, alongside our other priorities, is to drive cross-departmental support to help British business compete in low-income, high-growth markets around the world.” All of this builds the UK’s brand reputation.