Africa: an attractive region for UK companies
Since the UK’s departure from the EU, Africa is of increasing interest as a potential trading partner. In July 2022, the then International Trade Secretary, Ann-Marie Trevelyan, announced that nine trade agreements had been signed between 18 African nations and the UK. And the UK government’s Growth Gateway campaign has been instrumental in promoting two-way trade with African businesses through providing advice, support and online information tools. There’s considerable growth potential for importing from Africa to the UK: in 2021, only 1.5 billion GBP of the 10 billion GBP of fruit and vegetables imported to the UK was from Africa. African economies are growing: the gross domestic product (GDP) of the African continent is projected to increase by 64% by 2027. The population of Africa is expected to grow to 1.5 billion over the same time period. In 2021, the UK became the first non-African country to sign an agreement with the African Continental Free Trade Area Secretariat, pledging to work together on a range of areas including investment and trade facilitation.
The Developing Countries Trading Scheme (DCTS) aims to boost trade with 65 developing countries, supporting these economies by cutting tariffs on goods imported from these countries, meaning that 99% of goods imported from Africa will enter the UK duty-free. As the Institute of Directors has noted, there are strong pre-existing trade ties between the UK and Africa. For example, trade between the UK and Nigeria rose from 3.3 billion GBP in 2021 to 6.8 billion GBP in 2022, a year-on-year increase of 73%.
There is, however, a long way to go: the biggest competition is from Africa’s largest trading partner, China, with the US and Europe also being major players on the continent. There are also concerns that, post-Brexit, the UK may simply be replicating its pre-existing EU trading arrangements. UK versions of the EU’s Economic Partnership Agreements - in essence free trade deals - were concluded with 29 African countries. Some critics argue that there’s now a need for the UK to improve the structure of its trade engagement with Africa and other developing regions. Africa’s exports are still largely concentrated in fuels, ores and metals, rather than consumer goods and services. Many of these minerals are critical for the development of renewable energy technologies, as well as the digital economy. Encouraging and supporting production of these end products in the countries where the raw materials are sourced will improve African economies as well as providing more diversified trade with foreign partners, including the UK.
What are the main opportunities for procurement from Africa?
Fintech: companies such as Uganda’s Chipper Cash, Paystack in Nigeria, and South African payment solution provider Yoco not only provide valuable services to businesses in their own countries, but connect customers and entrepreneurs to the global financial system - which is ideal for UK companies wishing to trade with the African continent while supporting startups and entrepreneurship. Green energy: as mentioned above, Africa has a vast wealth of minerals which can be used to support energy transition programmes, such as the UK’s Net Zero Strategy. These minerals are used in renewable energy technologies such as solar panels, wind turbines, green hydrogen, electric vehicles (EVs) and battery storage. Africa is home to approximately one-third of global reserves of bauxite - the world’s main source of aluminium and gallium - with Guinea alone accounting for over half of global aluminium ore exports in 2020. In 2021, South Africa accounted for nearly 45% of the world’s chromium production - a vital resource for the development of geothermal and hydropower technologies. Food and drink: while cocoa products, coffee and bananas are among the UK’s top imports from the African continent, there’s potential for a wider range of products to be introduced to the UK market. In addition to the demand for African food and drink from communities with African heritage within the UK, there’s a growing interest among other consumer groups. Teff and fonio, for example, are gluten-free grains similar to quinoa, which can be used in bakery products, sports nutrition and gluten-free snacks. And following the UK’s departure from the EU, new markets are being sought out for foodstuffs previously sourced from Europe.
Key countries and goods
Although African countries are not among the UK’s top trading partners for imports (these being Germany, China, the US, the Netherlands and Norway), there is a healthy level of trade in certain goods from the African continent. The UK’s top five imported goods are gas, cars, crude oil, medical and pharmaceutical products, and refined oil. While around 45% of the UK’s imports overall still come from EU sources, new markets are constantly being sought.
According to the Office of National Statistics, the following African countries were particularly significant suppliers of certain goods to the UK last year:
- South Africa: imports of non-ferrous metals (the country’s top export to the UK) rose by 122% over a five-year period, contributing heavily to the total imports into the UK of 5,341 million GBP in 2022.
- Nigeria: imports of crude oil remain significant, although they have seen a drop of 14% over the past five years. However, imports from other African countries, such as Congo, have increased, suggesting that the continent is still an important source.
- Kenya: tea, coffee, cut flowers, fruit and vegetables. Between 1995 and 2021 the exports of Kenya to the UK increased at an annual rate of 2.6%.
- Namibia: printed books, newspapers and pictures accounted for imports to the value of 27.5 million GBP during 2022. The United Kingdom, along with Germany and South Africa, is one of Namibia’s largest markets for these goods.
Trading with Africa: where to start?
When viewing Africa from a procurement perspective, it’s important not to see the continent as a bloc. Africa consists of more than 50 countries, with many similarities, but also important differences. This is, of course, also the case when it comes to trade with other regions such as Asia or America, but these are more well-established, whereas there is often little awareness in the UK of individual African markets.
Many companies therefore prefer to use a wholesaler when purchasing from this region. However, direct contact with African suppliers can save costs and increase profits. There are, of course, significant barriers to trade: differing trade conditions, customs regulations and cultural differences.
However, these are not insurmountable. As the Growth Gateway focused on during its first year on trading with Africa, it has a particularly comprehensive set of resources. It also promotes trade and investment events for companies looking to make contacts and expand their business in the region.
The Growth Gateway prioritises enquiries from businesses that support or enable the following: environmental benefits; employment opportunities and work for women; increased skills and education; reduced inequality, and healthy and resilient communities. There are other sources of advice and support. Africa House London is a social enterprise established to encourage direct investment and trade with key markets in Africa and promote sustainable job creation opportunities and growth for African and UK businesses. It organises in-country trade missions to connect the private sector in the UK with African public and private sector opportunities. In addition, there are several professional trade associations - such as UK-Africa TI, which exists to provide a forum for UK and African businesses to find each other and conduct business.
