How Britain’s EU Exit Will Affect Trade and Tourism in Kenya

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Britain is a key ally of Kenya’s and its second largest export market with exports valued at KSh 40 billion/ $400 million in 2015.

Its decision to leave the European Union is a hot topic globally and as the world faces an uncertain future after the Brexit, Kunal Ajmera analyzes what it means for Kenya.

The COO, Grant Thornton Kenya provides an insight into how the Brexit will affect trade decisions and tourism in East Africa’s biggest economy:

 

  1. The EU spends about 100 million Euros per year on development co-operation in Kenya. With uncertainties in Europe due to Brexit we could see funding in key projects start to be cut in coming years. 

    2.       Investors hate uncertainty and anxiety. Brexit leaves many questions unanswered and it could take more than a year to get some clarity. Until that happens the global economy, money markets and stock exchange may go through volatility and general negativity as we are already seeing happen.

 

  1. It is highly likely that US Dollar ($) will gain strength against major currencies in the world and the GBP (£) will lose its value. Initial figures show that the GBP slumped to a 30-year low, falling as much as 11 per cent in just hours after the result. This means that the Kenya Shilling will be under increased pressure. It would be wise for businesses in Kenya to hedge against a future raise in dollar value.

 

  1. The UK is Kenya’s largest tourist source market. At its peak in 2013, Kenya received 198,000 tourists from UK. Tourist arrival numbers from the UK have only just started to increase in last few months after years of terror threats and consequent travel advisories. However with the GBP weakening due to Brexit, it will cost British tourists more to travel to Kenya and we could see a reduced number of tourist arrivals from the UK in near future.

 

  1. Kenya exports a substantial number of products to the UK annually.  The UK is the second largest export market for Kenya after Uganda. These exports were governed by EU trade laws. With UK exiting the EU, Kenya may need to re-negotiate the terms for export and this could take up to one year resulting in disruption and uncertainty.

 

  1. In the immediate short term, the UK is bound to have slower economic growth or even recession due to the EU exit. This will also affect how it trades with other countries in the world. Since the UK is one of Kenya’s biggest trading partners, Kenyan businesses that export to the UK must prepare for slump in business.

 

But Ajmera notes that the UK’s exit from the EU may not be all doom and gloom after all and could also present a new set of opportunities.

“EU laws on import and export are some of the most stringent in the world especially with agriculture, dairy and meat items. The UK can now decide its own rules for import and export and new products may become eligible,” he says.

As Kenya’s largest exports to the UK are agriculture/horticulture products, the country could be set for more trade benefits in the future, Ajmera adds.

Overall, Britain was not just any member of the EU but its most prosperous and also one of its largest contributors. Depending on how things unfold in the coming years other members may also demand for a referendum and this would ultimately weaken the stability of the EU.

 

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