HomeFinancialStakes in Brexit polls and Zim’s opportune moment

Stakes in Brexit polls and Zim’s opportune moment

Respect Gwenzi

Britain awaits results of a highly anticipated general election. It has been dubbed the Brexit election because Brexit is what necessitated the election, after Prime Minister Boris Johnson failed to get parliamentary approval for his Brexit deal in more than two attempts, a fate similarly suffered by his predecessor Theresa May. It is the first winter election in a century and perhaps the most important election in the history of Britain as it may usher the UK into the much-dreaded Brexit whose consequences may be a short-term downside economic shock.

There are four possible outcomes in the general election and these include incumbent and bookmakers favourite Johnson winning a majority. This will enable him to pass the Brexit deal he negotiated with the European Union (EU) earlier in October through parliament and Britain will leave the EU at the end of January 2020. Once Britain leaves, it enters a two-year transition period over which it should negotiate a free trade agreement with the EU. Johnson however said he will not go beyond two years negotiating and will leave with or without a deal at the end of the two-year period, abruptly severing trade ties.

The second possible outcome is that Johnson fails to secure an outright majority, resulting in a hung parliament. Johnson resigns since he does not have obvious allies. If he resigns, Labour’s Jeremy Corbyn may likely form a government through alliances. Corbyn will negotiate a new Brexit deal in three months and put it to referendum in six months. The other possibility is that Johnson may try to hang on to power despite not falling short of a majority.

The fourth likely scenario is that the Labour stuns bookmakers and wins a majority, which will give it free reign to call for a second Brexit referendum and begin its programme of radical economic reform.

It is, however, likely that the scenario of Johnson winning the election but without an outright majority will carry the day, jeopardising his Brexit plan and possibly giving passage to Corbyn rule through alliance. However, what if Brexit was to come through a Johnson majority, what are the potential implications and could Zimbabwe be positioned to take advantage of the opportunities brought out by that respective outcome? It is apparent to note that once Johnson wins with a majority in one-and-a-half months, Britain moves out of the EU, which means all it ceases to be bound by EU statutes and agreements, and neither does it keep enjoying free trade benefits with the union.

A hard Brexit will result in the pound depreciating. This will lead to increases in prices and lower the value of incomes, a familiar trait in Zimbabwe’s case.
Study shows Brexit may provide a unique opportunity for African nations to come together (perhaps by using the regional African trading blocs) to leverage their position and collective bargaining power to negotiate more advantageous trade deals. There have been suggestions that the UK should forge closer links with the Commonwealth nations, including top African economies such as South Africa, Ghana and Nigeria.

Trade statistics show that the share of Zimbabwe’s exports to the EU has drastically declined over the last two decades from a high of 25% to below 10% in present terms. the historical exports to EU were largely in the form of agricultural produce, notably horticulture and produce such as beef.

Now Britain relies more on EU imports for food and this includes lettuce (90%), tomatoes (80%) and soft fruit (70%) among others. Brexit would therefore result in higher food costs than if a deal is not reached with the EU. Britain’s strategy will therefore be to seek cheaper alternatives and, given the exchange rate impact, Zimbabwe’s exports may become more competitive and compelling.

It is imperative for Zimbabwe to do a thorough study, particularly in agriculture to ascertain the possible opportunities which may arise and consequently move to table a value proposition with Britain in due course.

Gwenzi is a financial analyst and managing director of Equity Axis, a financial media firm offering business intelligence, economic and equity research. — respect@equityaxis.net

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