News
tralac’s Daily News Selection
The selection: Friday, 8 July 2016
#UNCTAD14 takes place in Nairobi, 17-22 July: online document repository.
Profiled UNCTAD14 uploads (pdfs): Impact of cotton GVC on Africa and farm gate activities: contribution from the Government of Kenya, Sustainable transportation for the 2030 Agenda: boosting the arteries of global trade
Profiled tweets: @DrTaxs: 7 July: Committee of Ministers of Finance approves an Agreement to operationalize the SADC Development Fund; @martinslabber: SA's trade with the Philippines up 19% between 2015 and 12 months to April 2016. Now at US$241mn.
‘Modi in Africa’ updates: @IndianDiplomacy: Here's the link to the Press Statement of PM @narendramodi during his Mozambique visit. [Commentaries: Gopalkrishna Gandhi: 'What we must learn from Africa' (The Hindu), ASSOCHAM: Investment and capacity building agreements imperative to fructify unity b/w India & Africa, Shannon Ebrahim: 'Modi a wizard of foreign policy' (IOL), Nic Dawes: 'Modi's first visit to South Africa comes as old friendship fades' (Hindustan Times)]
South Africa: 2016 Article IV Consultation report (pdf, IMF)
Box 1 ‘Spillovers from global transitions’: This box explores spillovers from the ongoing global transitions - China’s rebalancing, lower commodity prices, and tighter global financial conditions - on South Africa. The results suggest China’s growth matters more for South Africa than U.S.’ and Europe’s growth, with commodity prices and financing conditions the main transmission channels. The impact of commodity prices is amplified by inter-sectoral linkages. Tighter global financial conditions have a significant impact on South Africa, mainly though bond yields and equity prices. China absorbs 10% of South African exports, the most of any country. More importantly, it plays a key role in determining global demand for South Africa’s commodity exports, which account for 34% of total goods exports (51% including manufactured commodities), and commodities imports including oil, which account for 16% of total goods imports.
Box 2 ‘Outward spillovers to Sub-Saharan Africa’: Past research suggests that, apart from its immediate neighbors, South Africa has limited spillovers to the rest of Africa, but these are likely to have increased. Several studies have shown that South Africa’s growth has limited spillovers on SSA, once global growth is controlled for. However, SSA’s share in South Africa’s imports has more than doubled over the last decade. South African companies in retail, banking, and telecommunications have established large networks in several sub-Saharan African countries. South Africa now represents an important export destination and source of FDI, especially for neighboring countries. South African firms have many subsidiaries in SSA, which could dampen their profitability going forward. About 75% of African subsidiaries are in services, trade, and financial sectors. The 10 firms with the highest number of subsidiaries are some of the top listed companies. While African subsidiaries have contributed to South African corporates’ high profitability in the past decade, the deteriorating performance of SSA could adversely affect profitability.
Article IV companion paper: The impact of China's growth slowdown and lower commodity prices on South Africa (pdf, IMF)
This paper estimates the impact of China’s growth slowdown and the recent large decline in commodity prices on South Africa. It seeks to identify the key channels through which a shock to China’s economy is transmitted to South Africa, as well as the propagation of this shock within the economy.
National Treasury response to IMF analysis (pdf)
National Treasury forecast is more positive compared to the IMF. We recognise, as articulated in the IMF report, that a comprehensive package of structural reforms is necessary to increase growth, create jobs and lower income inequality. An IMF/G20 guiding framework for structural reforms recommends that emerging market economies should focus on fiscal reforms, business regulations, labour market, infrastructure, banking/capital markets and product market regulations. South Africa’s structural reforms implementation package is anchored by the Nine-Point Plan, which entails:
Mozambique sees growth slowing, austerity measures needed (Club of Mozambique)
Mozambique, reeling from a sovereign debt crisis, sees 2016 economic growth slowing to 4.5% from initial forecasts of 7% and needs to bring in austerity measures in an amended budget, Finance Minister Adriano Maleiane said on Thursday. “This means that revenue that we should have will also go down,” the minister told journalists after an extraordinary meeting of the Council of Ministers which approved an amended budget which will be put before parliament on Monday. [Carlos Lopes: Mozambique needs “rapid and spectacular” measures to solve debt problem]
Ethiopia Public Expenditure Review (World Bank, GoE)
“Ethiopia’s investments in key sectors have had a positive impact on poverty reduction, now the key is for the country to develop a more effective budget allocation in order to maximize the returns on investment,” said Carolyn Turk, World Bank Country Director for Ethiopia, Sudan and South Sudan. According to the report, Ethiopia’s investment in infrastructure has increased the country’s road network five-fold, reaching 100,000km in 2015. Investment in education has also helped to increase net primary enrollment from 77.5% in 2006 to 92.6% in 2015, according to the report, and education has been extended from 10 million to more than 23 million students in the past decade. Through smart investments in the health sector and only an additional $5 in per capita health spending, the GoE reduced child mortality by more than half from 72 to 31 per 1,000 between 2005 and 2015. This is a record, as no other country has achieved such results for the same level of spending, the report notes.
Kenya: Trade deficit narrows as car imports drop Sh21bn (Business Daily)
Reduced demand for vehicles and lower fuel prices cut Kenya’s trade deficit 21.4% in the first four months of the year, helping ease pressure on the shilling. Data from the Kenya National Bureau of Statistics shows that in the first four months of this year, the trade deficit stood at Sh246bn compared to Sh314bn in a similar period last year.
Middle Africa FICC Guidebook 2016: fixed income, currency and commodities (pdf, Ecobank)
However, the medium to long term outlook appears good; African governments are likely to accelerate their ambitious investment plans as risks to the global economy subside over the medium- to long-term. Meanwhile, most Middle African banking sectors remain largely insulated from global financial strains due to limited financial integration of Middle Africa’s banking sector into the global system (bar the trade channel). However, improvements in portfolio quality, liquidity, and revenues would be welcome. The overall positive scenario for Middle Africa in 2016 is beset by numerous risks. External factors continue to pose the largest threats to the region as a whole, but domestic risks are more significant in some countries. Although nearly all countries grew in 2015, some were adversely affected by weakness in the eurozone. Currency pegs to the euro and/or strong trade links to Europe highlight some of the direct links that will remain a major concern for the continent in 2016. Moreover, weak global growth is likely to moderate growth in Middle Africa’s export sector, which in turn could increase pressure on some currencies following relatively strong depreciation in 2015. Some of the more specific risks facing Middle Africa include:
Catalysing impact investing in East Africa: recommendations for development of the services market (FSG)
Based on consultations with over 80 stakeholders in Kenya, Tanzania, Uganda, and Rwanda, the report proposes a market-responsive intervention that helps to scale access to capital raising and associated capacity building services for enterprises. To achieve this, the report recommends the creation of a donor-funded ‘Facility’ to help service providers reach deeper into the pool of enterprises that need support, and to develop a more vibrant impact investing market overall.
G20 trade: Davies to attend G20 in China (IOL)
South Africa’s Minister of Trade and Industry Rob Davies has left for Shanghai, China, to attend the G20 Trade Ministers meeting to be held over the weekend, the dti said on Thursday. A G20 Trade and Investment Working Group (TIWG) was establish this year following a decision by the G20 leaders to better coordinate efforts to reinforce trade and investment. The Trade Ministers will consider the outcomes and recommendations from the TIWG. [G20 an opportunity to promote NZ’s trade agenda]
South Africa: Watchdog probes Transnet for excessive pricing and preferential treatment (Business Day)
The Competition Commission is investigating Transnet for "excessive pricing" in port charges and the preferential treatment of some clients to the exclusion of others. SA’s port charges are excessive by global standards and have long been identified as an impediment to business. Port regulator Mahesh Fakir said the charges being probed by the commission were those levied by Transnet Port Terminals — the operator of the ports — and were not regulated. Tariffs charged by Transnet’s National Port Authority, which owned and managed the eight commercial ports in the country, were determined by the regulator and have been regulated since 2009.
Isabelle Ramdoo: ‘Can local content policies provide a transformative solution for Africa?’ (AfDB)
Implemented in a smart way and in partnership with mining companies, LCPs are thus a powerful tool to stimulate the creation of upstream linkages by capitalising on companies’ own procurement needs as well as labour requirements. Similarly, using LCPs to foster downstream linkages are critical to develop industrial activities: the case of cement in Nigeria is a case in point. It is estimated that 90% of resource-rich countries apply one form of local content policy or another and that 40 and 80% of the revenue created in extractive sector (oil, gas, mining) is spent on the procurement of goods and services. In Ghana for instance, it is reported that 80% of procurement expenditure stays in the country. Although the definition of ‘local’ and ‘content’ is not universally agreed, the scope of procuring domestically nonetheless represents a unique opportunity to supply the extractive sector.
Boosting the power sector in Sub-Saharan Africa: China’s involvement (IEA)
This report analyses China’s engagement in the sub-Saharan Africa power sector, including the key drivers underlying Chinese investments. An overview of Chinese projects (generation, transmission and distribution) during the 2010-20 period is provided in this first-ever consolidated effort to map them. The report identifies the key Chinese stakeholders and assesses their impact on policies affecting energy access, economic development and financing modalities. Two case studies examine Chinese investment at the country level in Ghana and Ethiopia.
Transfer pricing and tax base erosion in Africa: NRGI report, case studies from Zambia, Tanzania, Sierra Leone, Ghana, Guinea
'Beyond AGOA': These new [USTR] reports reveal some promising steps on trade with Africa (ONE)
Trade performance of Asian Landlocked Developing Economies: state of play and the way forward (ESCAP)
Aid for trade and the Trade Facilitation Agreement: what they can do for LDCs (FERDI)
Yesterday’s UNSC briefings on African governance issues: AU Mission in Somalia, briefing on DRC
Land dynamics in Africa: what is the potential for expansion? (pdf, Agbiz)
Global Food Security Act of 2016: Gayle Smith commentary (USAID)
India continues to lead China in pharma exports (Livemint)
Govt aims to make India design hub, new national policy likely (Livemint)
tralac’s Daily News archive
Catch up on tralac’s daily news selections by following this link ».
SUBSCRIBE
To receive the link to tralac’s Daily News Selection via email, click here to subscribe.
This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 350 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome.
