BREXIT – Impact and Economic Lessons for the EAC
The year 2016 had a number of shocking global economic events, notable among which was the British exit from the European Union famously termed as the Brexit. This development came from a shock referendum whose results defied the predictions of many professional pollsters.
There are several economic issues that informed the majority decision. To the British, it is those economic issues that seem to have made the EU seem more of a baggage than a benefit to them. Given that the East African Community (EAC), is an economic bloc built along similar tenets like the EU economic bloc, one needs to ponder whether such economic issues exist and could, therefore, potentially affect the EAC.
Only taking early lessons and any appropriate corrective measures by the EAC member states would avert a future EU-Brexit situation in another economic bloc such as the EAC. The most visible ‘Brexit’ impact on the EAC was the fall in the value of the Pound Sterling. The Pound was massively sold off, which resulted in a rough 7 per cent decline relative to the Ugandan Shilling.
For example, around June 2016 before the vote, the Pound was selling averagely at Shs4,884 and a week after the referendum, it was selling at an average of Shs4,483. The positive effect of the decline in the value of the Pound was to reduce the cost of studying and travelling to the UK. However, it made imports in Britain from the EAC such as flower cuts, vegetables and coffee less profitable thus affecting the EAC balance of trade. On the other hand, a weaker Pound meant British exports to the EAC would become cheaper.
It should be remembered that the British were not part of the six founding states of the European Economic Community (EEC) – the predecessor of the EU – when it came into existence in 1957.
This initial scepticism of the British people in the EEC and later on the EU seems to have been alive and strong for a long time, but was kept ‘under cover’ by a small section of politicians who were at the forefront of the ‘remain in EU campaign’.
In economic relationships such as regional blocs, just like any other relationship, the trust of all parties involved is critical. Therefore mistrust and scepticism are not good for the economic union and may lead to shocking outcomes when important decisions such as ‘leave or remain’ come up.
The recent visit by the Ugandan president to his Tanzanian counterpart was a great gesture in addressing perceived mistrust among some of the EAC member states. Under the perceived ‘Coalition of the Willing’, it was apparent that Kenya, Uganda and Rwanda were entering major EAC- wide projects without the participation of Tanzania and Burundi.
This and other gestures like the Uganda – Tanzania Crude Oil Pipeline to Port Tanga, previously with Kenya to Port Lamu should serve as a corrective action to avert alienation and frustration of any member states which could lead to a Brexit scenario happening in East Africa.
The all important lesson is to have a people-centred EAC. The people of East Africa need to ‘own’ the EAC integration and have a firm sense of belonging as one people, East Africans. All players especially the wananchi need to engage in an important conversation about what they need from the EAC economic bloc.
In conclusion, the EAC is a golden tool for the economic advancement of its people.
Unlike the EU, which is continental and extremely diverse, the EAC is a regional bloc, with a people connected by a common social and political history. Therefore, it (EAC) should steer free of such problems affecting the EU and prove to be a more successful economic and political union.
Source: TradeMark East Africa