The UK’s shift to Africa: How to harness aid to deliver mutual prosperity
The UK wants to become Africa’s partner of choice for trade and investment. This year alone has seen the UK Government host heads of state from 21 African countries for the inaugural African Investment Summit in London.
At the same time, the Government’s cross-departmental strategic approach to Africa has taken root, focusing on prosperity as the first of five ‘shifts’. And there have been a series of commitments and future aid programmes announced to stimulate trade and investment between the UK and Africa, such as the Department for International Development (DFID) and Department for International Trade (DIT) Growth Gateway and TradeConnect.
However, the UK has some way to go to realise its ambition. Africa is the destination for only 2% of UK goods exports, 3% of all UK services exports and just 1% of the UK’s investment flows. Not only do more Chinese, French, American and German goods pass through African ports, smaller economies such as Spain, Italy, Turkey and Belgium also eclipse the UK.
The UK Government is looking to harness aid to change this. But this approach has its challenges. It could be at risk of contravening the rules of Official Development Assistance (ODA) or being perceived as ‘tied aid’. To increase the volume and value of trade using aid expenditure, the UK government needs to promote the right kind of trade and investment between the UK and Africa and deliver it in the right way to realise mutual prosperity.
Focus support and services on the needs of African economies and businesses
It’s vital that UK ODA delivers against its primary purpose – alleviating poverty and promoting sustainable development. It’s also important for trade and investment to have a lasting impact. It should target industries and businesses where ongoing support can be sustainable and self-funding, where the risk of corruption is minimal, and where profits remain local. This is likely to be sectors and capabilities that are internationally competitive, value-adding and not directly associated with extractive industries.
This doesn’t happen by chance or trickle down without direct intervention. It requires detailed analysis and programme design. So, the Government should use the information and resources it already has, such as DFID’s analysis of strategic sectors for African countries, and its relationships with national and regional governments to channel support towards sectors that are of strategic focus or are targeted within national economic development plans. There should also be analysis of the needs of Africa’s businesses and citizens to understand the constraints associated with trade and investment, the support and services that could be provided, and how trade and investment could benefit women and socially excluded groups.
Follow a targeted approach to engage UK business and institutions
The UK Government already provides a range of services to support UK businesses looking to trade and invest internationally. To increase links between the UK and Africa, the Government should raise awareness of African markets, sectors, products and services, and provide services that de-risk investment and trade for UK businesses.
This means providing the right information and services, at the right time, to the right businesses. This will require analysis and segmentation of UK businesses, an appraisal of their needs and an assessment of their potential to trade and invest internationally. It will also mean promoting the value of African markets as destinations for trade and investment, for example as a source of lower-cost inputs or as location for foreign direct investment.
The Government should look to design interventions based on shared capabilities, assets and institutions and root them in a sense of place. This means the role of government will move beyond direct service provision to forming networks and connections that encourage sustainability and deliver impact. The Department for Culture, Media & Sport (DCMS) is pioneering a similar approach. It’s UK-India Tech Hub programme is looking to join up aid with the UK’s Industrial Strategy Grand Challenges and the regions driving it, such as linking the Future Mobility in Maharashtra back to the Midlands Engine and the AI & Data Economy in Karnataka back to the Northern Powerhouse.
Make support digital by default, not just digitally enabled
DFID’s Growth Gateway is harnessing the power of digital to support trade and investment by creating an online portal that signposts UK and international businesses to UK Government services. Delivered in the right way, this could have a transformational impact. It would be the go-to solution for businesses looking to trade and invest, directing them to the information and services they need.
It also has the potential to change how the Government provides support. It will be a rich source of information about the businesses using the tool, including the problems they face in both UK and African markets, what support they need and how effective the support is. This insight will help the Government to increase the utilisation and effectiveness of its services, prioritise its resources and pivot its efforts away from transactional service provision to strategic value-adding work.
Adopt a portfolio management approach to trade and investment development
The cross-governmental nature of this shift towards Africa makes strategic coordination and management paramount. The Government should adopt a portfolio management approach, treating its programmes as a portfolio that’s greater than the sum of its parts. That should include proactive monitoring and evaluation to generate insight that can inform rapid programme evolutions. All of which means programmes should start small before rapidly scaling based on learning.
Aid can be an effective tool for increasing UK-Africa trade and investment. Targeted programme design, strategic coordination across government and adoption of technology and portfolio management practices will increase the potential of delivering mutual prosperity. Acting on these key areas will make the UK Africa’s partner of choice for trade and investment.