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Brexit: Challenges ahead for Africa

Comments (0) Africa, Business, Featured

British Prime Minister David Cameron visits South Africa

The United Kingdom’s departure from the European Union could slow trade and investment in the continent.

Brexit could not be happening at a worse time for Africa.

The economy of the continent is already struggling with falling commodity prices and the economic slowdown in China. The decision by British voters to withdraw from the European Union could trigger decreases in trade with Africa as well as aid and direct investment from the United Kingdom.

The vote, which followed a bitter campaign that centered on immigration, may signal that Britain will increasingly turn away from its support for world development, according to the Brookings Institution.

“Perhaps the biggest impact of the Brexit on Africa would be the end of British ‘outwardness’ – the country’s concern with and responsiveness to global development issues,” Amadou Sy, a senior fellow and director of the Africa Growth Initiative at Brookings, said.

Britain contributes significant aid

The United Kingdom is one of the largest contributors to the European Union’s development assistance fund for low-income economies. The nation contributes $585 million, nearly 15 percent of the total fund, second only to Germany (20 percent) and France (18 percent).

While the U.K. might provide aid directly, new mechanisms and policies would first have to be put in place, a potentially complicated and lengthy process.

Sy said Brexit also is expected to weaken trade ties between the U.K. and Africa.

Britain is one of Africa’s largest trading partners within the EU, accounting for more than 12 percent of all European Union trade with the continent (down from a peak of nearly 18 percent in 2012).

Dozens of trade pacts must be negotiated

According to General Robert Azevedo, director-general of the World Trade Organization, Brexit would require the United Kingdom to renegotiate trade agreements with the organization’s 161 member nations, a complex and time-consuming effort that could slow down trade with African and other nations. With Britain’s exit, the European Union also would have to renegotiate dozens of bilateral trade agreements, Sy said.

For example, a recent agreement between the EU and the Southern Africa Development Community allows free access to the EU market for Botswana, Lesotho, Mozambique, Swaziland and Namibia. However, with Brexit, the value of that access would be significantly diminished as it would not include the U.K. market and a separate agreement might have to be negotiated.

African agriculture may also be affected. According to Sy, the United Kingdom has been a strong opponent against agricultural subsidies the EU provides within the Eurozone because they put African agricultural imports at a disadvantage. With Britain’s departure, Africa would lose a strong voice in the EU for its farmers.

Nigeria, South Africa will feel impact

money nigeriaAfrica’s largest economies may be hard hit.

The U.K. is the fourth largest destination for exports from South Africa. That nation’s battered economy took a further hit as the rand fell by 7 percent the day after the British vote.

Economists at South Africa’s North-West University estimated that Brexit could shave 0.1 percent off South Africa’s annual economic growth, which already declined by more than 1 percent in the first quarter of 2016.

“With current growth in South Africa in 2016 expected to be close to zero, [Brexit threatens] a loss in growth South Africa can ill-afford,” Raymond Parsons and Wilma Viviers, professors at North-West, said.

Nigeria’s market reforms may be delayed

Trade between Nigeria and the United Kingdom is estimated at more than $8 billion and had been expected to more than triple by 2020. However, those advances also are likely to be interrupted as new trade deals are negotiated.

Nigeria, on the brink of recession, has been liberalizing market controls in order to spur the economy. But fallout from Brexit may also slow that effort.

Razia Khan, chief economist for Standard Chartered Bank said risk aversion world wide as well as soft oil prices could slow investment and delay normal operations on the newly liberalized market.

Africa is not alone in feeling the impact of Brexit, and stabilizing markets is the first step to blunting the economic impact, Kahn said.

As emerging markets come under pressure globally, “much will depend on how quickly financial market stability can be restored.”

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A great season for Tunisia’s olive oil

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tunisia olive oil

The EU has granted Tunisia a 2 year tax break on the import of olive oil; now it is down to the country to make it a top seller.

Producers of olives and olive oil since Roman times, Tunisia has stuck to a tried and tested method of harvesting this ancient fruit. Due to relatively cheap labor still on offer in the country, the olives benefit from being gathered using a technique of gentle sweeping with small rakes by a mostly female workforce.

Said to help retain the flavor of the olives and cause less damage to the trees, handpicking prevails over the commonly adopted method of machine harvesting in Europe. In order to distinguish themselves on the global market, maintaining the best flavor from their olives and being able to confidently ensure a pure product is paramount. “We can say that our bottled oil is 100% Tunisian and that counts for a lot in specialty shops. This is something Italy cannot always guarantee,” said Lemia Thabet, Executive Director of the Tunisian Technical Packaging Centre.

New lease on life for ancestral industry

Tunisia is the biggest producer of olive oil outside of Europe, yet for such a prolific producer the northernmost country in Africa has up until now remained decidedly in the shadows of its European counterparts. It has settled instead for selling off large quantities of oil to rival countries such as Spain, the biggest producer in Europe, and to Italy, commonly thought of as the home of olive oil. The wholesale olive oil is then mixed with the local kind, by way of improving on what will become the big brands we are all familiar with. In this way the “liquid gold” Tunisia produces is generating far less money than if they had the means to bottle, package and label the product on their own.

Tunisian olive oilOn 10th March, 2016, the European Parliament agreed upon an initiative to allow the country to export tax-free olive oil for two years, limited to 35,000 tons per year. The reason for the tax break is in part due to the particularly bountiful spell that Tunisia has been experiencing compared with the rest of the world. Records released by the Tunisian Ministry of Industry, Mines and Energy showed that for the 2014-2015 season, Tunisia exported more than any other country worldwide. In a record-breaking harvest, overseas sales reached 299,300 tons, which equates to a massive 10 percent of the global olive oil consumption. This earned the country, which has a 3,000-year history of olive-farming, a respectable $976 million. “Our record harvest has coincided with a shortfall in international production,” said Abdellatif Ghedira, the head of the government’s National Oil Office. “This year we are the world’s second-largest producer.”

Olive oil economy

Accounting for over 10 percent of Tunisia’s exports and providing a livelihood for hundreds of thousands of people, it is unquestionable that the olive oil trade is of major importance to the country, coming second to tourism. However, after the devastating effects of 2015’s Bardo Museum terrorist attacks and the Sousse beach massacre, what once was the nation’s linchpin, generating 15 percent of the country’s GDP in 2014, is now a sector worryingly in decline.

Bereft of some one million foreign visitors last year, the economy is in crisis and the security of the nation as well, as the somber climate has given rise to expanding terrorism. Recognizing the terrible blows Tunisia has been dealt over the past year and the promise the country had shown for real democratic change, the EU stepped in. A declaration of political support is the primary reason for implementing the measures, in hopes that it will allow the Tunisian economy enough time to recover. “Exceptional times call for exceptional measures. The proposal is a strong signal of EU solidarity with Tunisia,” said High Representative of the European Union, Federica Mogherini, adding, “Tunisia can count on the EU’s support in such a difficult time.”

Promoting the future

The tax break may come as a temporary relief but other obstacles still lie in the paths of the country’s producers. To truly make a success of this opportunity they first need to contend with a market that is very much geared towards promoting Spanish and Italian olive oil as superior. Also for the most profit to be made the entire production process would have to take place on home turf. “We buy almost all our bottles and stoppers from Italy and that pushes up the price, we should be making our own,” said expert Mounir Ouhrani of Slama Huiles.

While there may be some hurdles along the way, Tunisia can rest assured on the product they have to offer. A country that is covered with 1.7 million hectares of olive trees, almost 20 percent of the olive tree orchards worldwide, they are no small fry. The uniqueness of the olive oil they produce is remarked upon internationally; a particularly rich flavor that due to its high fat content is able to withstand high temperatures while still maintaining its notable nuttiness. Pair this with the traditional way in which the olives are harvested and you have two solid reasons why the North African country could make a successful breakthrough onto the global olive oil market. Given the chance and an audience who are willing to look beyond the norm, olive oil could soon be Tunisia’s number one industry.

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EU says it is ready to lend Tunisia 500 mil euro

Comments (0) Latest Updates from Reuters, Middle East, Politics

TUNIS (Reuters) – The European Union said on Friday it was ready to lend Tunisia 500 million euros in 2016-2017 to cope with its economic difficulties, weeks after violent protests erupted in the North Africa country to demand jobs.

Tunisia has been hailed as the success story of the 2011 Arab Spring revolts for its transition to democracy, but economic development and reforms have failed to keep pace with the political changes since the fall of autocrat Zine El-Abidine Ben Ali.


(Reporting by Tarek Amara; editing by Patrick Markey and Kevin Liffey)

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