Brexit could derail Cameron trip to Kenya

June 25, 2016June 25, 2016

By JAMES MBUGUA

Brittish PM David Cameron./FILE

The words of Supuu have never rang truer or so Churchillian. Speaking animatedly to a few colleagues outside the small building that houses the SONU office on the Main Campus grounds of University of Nairobi, he said: “Voters are very irresponsible people, you must guide them. You must rig!(elections)”

The British voter yesterday opted to leave the European Union in what was dubbed the Brexit vote. Which is why Supuu’s words, rank next to those of Winston Churchill. Speaking about the system of Democratic government, Britain’s wartime leader noted that: “The biggest argument against democracy, is a five minute conversation with the average voter.”

That conversation should have taken place with the average British voter before the Brexit vote.

Support for the exit was based on opposition to immigration, and an apparent feeling that Britain was contributing more to the EU than it should. The reality after the vote so far has been one of the worst tumbles of the Sterling Pound in recent history. Kenyan bankers were trading it at Sh149 per pound on Thursday before the vote, yesterday it was at Sh136.

The stock prices of UK companies have nosedived to their lowest level since the height of the 2008 global meltdown when Lehman Brothers went down. Indeed, Barclays Bank PLC, a well-known brand locally, plunged by more than 20 per cent as London stocks collectively lost more than £ 120billion.

Scotland which recently held a referendum to leave the British Union, on the promise that the country would remain in the EU, now wants another referendum to leave the UK.

Now it seems even within the British Isles, unity might be hard to maintain.

What does Brexit mean for Kenya?

For starters, David Cameron’s long awaited visit to Kenya, accompanied by a large delegation of UK businessmen and trade deals to boot, could be shelved given the PM has announced his resignation. With a change of leadership, the UK’s spending priorities could change, meaning development spending through DFID could be slashed.

Three, harder life for Brits means people will not look to commit to spend until they are clear about what the future holds for them. So, less UK tourists visiting Kenya. Four, things are going to be more expensive for Britons especially from outside the country and the EU meaning, wallets will be squeezed. Kenyan exports to the UK like flowers could be affected. Financial constraints have a cooling effect on romance.

Tough times for British firms means lower foreign direct investment from UK firms to Kenya. And tighter immigration rules will also mean tougher visa rules for Kenyans to travel to the UK.

Source: The Star

February 19, 2025February 19, 2025

It seems a prediction I made last night about Britain’s aid to Third World countries would substantially decrease due partly to declining pound, and partly to an anticipated recession may prove to be right. And this is particularly good for Somalia. Read on:

Wonkblog

The people who will suffer the most severe impact of Brexit don’t live in the U.K.

By Max Ehrenfreund June 25 at 7:00 AM 

Postcards featuring the World War II British slogan “Keep Calm and Carry On” are seen outside a newsstand in London (Leon Neal/Agence France-Presse via Getty Images)

Britain is not just a hub for global financial activity and a major trading partner for countries on both sides of the Atlantic. Another aspect of the importance of the British economy is the nation’s relationship with the developing world. Immigrants working in Britain send billions of pounds home every year, and the nation is one of the world’s most generous in terms of international aid.

“In relation to developing countries, you know, Britain plays a very important role,” said Alan Gelb, an economist at the Center for Global Development in Washington.

As a result, British voters’ decision to divorce their county from the European Union — which caused a frenzy in global markets Friday — is especially worrisome for those developing economies that are closely bound to Britain.

What happens next after Britain votes for a Brexit from the E.U.
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Play Video1:20

In a stunning victory for the “Leave” campaign, Britain has voted to exit the European Union. Here’s what happens next. (Jason Aldag,Adam Taylor/The Washington Post)

In the short term, the collapse in the value of the pound means that remittances and aid coming from Britain will be worth less to the people receiving it. In the medium term, the possibility for less expansion or even contraction in the British economy generally means that immigrants and the government will have less money to send abroad.

[Five charts capture the world’s stunned — and scary — reaction to Brexit]

Britain has committed to spending 0.7 percent of national income on foreign aid — about 12.2 billion pounds — which is more than all but a handful of wealthy countries. Beyond that bottom line, Gelb said, the British offer aid in ways that are genuinely useful to the countries that receive it. Unlike other nations, they are less likely to focus on advancing their own interests in their charitable spending abroad.

According to the British government, the greatest beneficiary of that aid in 2014 was Ethiopia, which received 322 million pounds that year. That aid alone accounted for about 0.8 percent of the Ethiopian economy at the time, based on data from the World Bank.

Another major beneficiary was Sierra Leone, which received 238 million pounds in aid from the United Kingdom — the equivalent of nearly 6.8 percent of its economy.

With the decline in the price of sterling, the British government will be able to provide less help to those countries. The pound lost 8.5 percent against Sierra Leone’s currency on Friday, implying the fluctuation in currency alone could reduce the size of the African nation’s economy by roughly half of 1 percent.

If the British economy also expands more slowly or enters a recession as a result of the decision to leave, then the government will also have less in revenue from taxes and other sources to devote to foreign aid.

Remittances are a second source of funds from Britain for poorer countries. Nigerian immigrants are sending the most money home, according to the World Bank’s most recent data — an estimated $3.7 billion in 2014, or about 2.7 billion pounds. The combination of those remittances with official foreign aid of 237 million pounds was equivalent to about 0.7 percent of Nigeria’s economy that year.

The good news is that migrants are likely to adjust their behavior to counteract the decline in the pound. Workers can take on additional jobs or reduce their spending to send more money home, protecting their families from fluctuations in global currency markets.

In a detailed study of Filipino migrants worldwide, economist Dean Yang of the University of Michigan estimated that a 10 percent decrease in the exchange rate resulted in a decline of about 6 percent in remittances. How migrants from around the world in Britain will respond to changes in the value of the pound remains to be seen.

“There’s a very, very strong link between how well migrants are doing overseas and how well their families are doing back home,” Yang said.

June 25, 2016 Wiil Waal Reply

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