Trading Across Borders: How UK Importers and Exporters Can Expand into Africa

Africa's vibrant markets hold untapped potential for UK importers and exporters. With a rapidly growing consumer base and rich natural resources, the opportunities are significant. In fact, the total trade in goods and services between UK and Nigeria rose by 78.2% from the four quarters to the end of Q4 2022, according to data from the UK's Trade and Investment Factsheet. This equates to a rise of £3.3 billion. Moving down to South Africa, the total trade in goods and services between the UK and this region rose £10.7bn in the four quarters to the end of Q2 2022, an annual increase of 6.3% or £638m. Yet, moving into these markets requires a thorough understanding of their trade landscapes. This article presents strategies for UK trade businesses looking to expand into Africa, focusing on Nigeria, Kenya, and South Africa.

Trade Opportunities in Africa

Africa's diverse markets offer a plethora of opportunities for UK-based importers and exporters. Back in 2018, the naira became one of three West African currencies that UK Export Finance has pre-approved for its programme of funding transactions that promote trade with Britain. Uche Uwaleke, professor of Capital Market at the Nasarawa State University Keffi stated "this UK Export Finance pre-approved status for the naira has the potential for strengthening economic ties between Nigeria and Britain as it will provide a vehicle for a significant increase in trade and investment between both countries.” According to former minister for Africa Vicky Ford, this fast-growth market presents “boundless opportunities for African and UK businesses."

Some of the opportunities for UK businesses trading with Africa include:

• Growing Demand: Rapid urbanisation, increasing disposable incomes, and a young population are driving demand for various goods in Africa. UK exporters of consumer goods, technology, and infrastructure materials stand to benefit significantly.

• Resource-Rich Markets: Africa's abundant natural resources offer opportunities for UK importers. For instance, Nigeria is known for its oil, South Africa for its precious metals, and Kenya for its agricultural products.

• Government Initiatives: Many African governments are taking steps to attract foreign trade, offering incentives such as tax breaks, simplified customs processes, and support to set up local operations.

Challenges and Strategies for Overcoming Them

While the opportunities are immense, UK importers and exporters must also navigate a range of challenges:

• Logistical Challenges: Infrastructure constraints can lead to logistical challenges. Overcoming these involves planning for adequate lead times, exploring alternative shipping routes, and building relationships with reliable local logistics providers.

• Tariffs and Trade Barriers: Despite efforts to lower trade barriers, tariffs and non-tariff barriers can still pose a hurdle. Understanding new trade agreements post-Brexit and the African Continental Free Trade Area (AfCFTA) can help navigate these complexities.

• Currency Volatility: Fluctuating exchange rates can significantly impact import/export businesses. Utilising hedging strategies or fintech solutions like Verto can provide protection against this risk.

• Regulatory Compliance: Complying with local and international trade regulations is crucial. Engaging local legal experts and ensuring thorough due diligence can help avoid costly regulatory missteps.