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EAC Partner States directed to support local production of essential medical products and supplies to combat COVID-19 in the region
East African Community Partner States have been directed to support local production of essential medical products and supplies including masks, sanitizers, soaps, processed food, ventilators as part of efforts to combat COVID-19 in the region.
A Joint consultative meeting of Partner States’ Ministers and Cabinet Secretaries responsible for Health, Trade, Transport and EAC Affairs via video conference held on 8th May, 2020 to discuss a regional approach to COVID-19 further directed Partner States to facilitate farmers to continue farming activities during this pandemic and post COVID-19 period.
The consultative meeting also directed Partner States to support agro-processing and value chains as an import substitution measure.
The Ministers requested the Ministries of Finance in the Partner States to establish special purpose financing schemes for small and medium enterprises, to cushion them from the negative effects of the COVID-19 pandemic.
The Ministers gave these directives in response to information availed to them that that the region’s key productive sectors are already experiencing a slowdown as a result of the COVID-19 pandemic, with sectors such as agriculture, trade, manufacturing and industry, tourism, offline retail and catering being the worst affected.
Among the negative impacts on the regional economy are a food crisis in East Africa and severe disruptions in manufacturing and industry value chains. On the flipside are beneficial developments such as: increased production of face masks in the region; growing popularity of online retail using e-commerce platforms; growing popularity of online entertainment, and; increased Telecommuting and distance education.
The consultative meeting which was called by Hon. Dr. Vincent Biruta, the Chairperson of the Council of Ministers, and Rwanda’s Minister of Foreign Affairs and International Cooperation, Dr. Vincent Biruta, discussed progress made on the facilitation of the free movement of goods and services in the region; assessment of state of play on cross border clearance of cargo and truck drivers at Malaba and Busia during the COVID 19 pandemic; Impact of the COVID-19 pandemic on the region’s productive capacities and Impact on Macroeconomic stability.
The Ministers commended the EAC Partner States, WHO and Africa CDC for the efforts being made towards addressing the COVID-19, and the steps taken to contain the disease and prevent further spread in the EAC region.
On a harmonized approach to testing services across Partner States, the Ministers urged Partner States to undertake standardised COVID-19 testing based on approved WHO methodologies
The Ministers/Cabinet Secretaries requested the Ministers of Finance to analyse the impact of the COVID-19 pandemic on the fiscal and monetary sectors of the EAC region and recommend an appropriate plan of action.
The EAC Deputy Secretary General in charge of Productive and Social Sector, Hon. Christophe Bazivamo, informed the Ministers that the EAC Regional Task Force has finalised the EAC Regional COVID-19 Response Plan which aims to among other things, ensure a joint and well-coordinated mechanism to fight COVID-19 in the region; timely access to medical therapeutics and health technologies to effectively manage the COVID-19 pandemic in the region; as well as to minimize the number of people who become infected or sick with COVID-19.
The Ministers directed the Secretariat to submit the EAC Regional COVID-19 Response plan to the Partner States and urged the Partner States to submit their inputs on EAC Regional COVID-19 Response plan within one week from the date of submission of the document.
Download: pdf EAC COVID-19 Response Plan, April 2020 (1.94 MB)
On the supply of COVID-19 test kits, equipment and other supplies to the Partner States, Hon Bazivamo informed the Ministers that EAC Secretariat through the EAC Network of Public Health Reference Laboratories for Communicable Diseases (Mobile Lab Project) had received a grant of €500,000 to support the strengthening of laboratory capacity for COVID-19 response in the Partner States.
Hon. Bazivamo told the meeting that the funds were intended to, among other things, purchase and supply adequate tests to facilitate scale-up of testing in East Africa (1,000 COVID-19 test kits per Partner State) and the supply of essential Personal Protective Equipment (PPEs) in addition to those already procured under the Support to the Ebola response.
On the facilitation of the free movement of goods and services in the region, the meeting noted that the Partner States were experiencing challenges in facilitating movement of goods and services.
Consequently, the Ministers directed the EAC Secretariat in collaboration with Partner States to implement a sensitization programmme to destigmatize truck drivers and COVID-19 recoverees in the region.
They further directed the EAC Secretariat to coordinate the activities under the sensitization programmes in the Partner States.
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SADC embracing electronic Certificate of Origin
The review of the pdf SADC revised Regional Indicative Strategic Development Plan (RISDP (1.04 MB) ) and subsequent approval by the Head of States and Government in August 2015 created new demands in the spheres of the regional integration agenda, in particular on the areas of trade facilitation to support the implementation of the SADC Industrialization Strategy and Roadmap to consolidate the SADC Free Trade Area (FTA).
In response to these demands, the Ministerial Task Force on Regional Economic Integration at its 16th meeting held in March 2016 developed and approved the SADC Trade Facilitation Programme which has 28 activities including the implementation of the electronic certificate of origin.
The certificate of origin is a required document by importing country for the purpose of granting duty free and tax free, statistics and risk assessment. It attests the origin of the goods as per the criteria provided in the Protocol on Trade. The Certificate of Origin presents the country were the goods was produced or manufactured and information regarding the product, its destination, and the country of export.
Since the start of the implementation of the SADC Free Trade Area, the certificate of origin has been processed manually by the competent or issuing authority in a country of origin of the goods as provided in Annex I of the Protocol on Trade. This process and procedures although they have been facilitating intra-Regional Trade, but over the year have proven to have some challenges with regards to issuing the certificate of origin, submission of the specimen, stamp and the list of authorised signatories of the respective Member States to Secretariat for inward circulation to other FTA Member.
The implementation of e-certificate of origin is one of the activities meant to support the industrialization strategy and roadmap as part of the consolidation of the Free Trade Area. It is expected that this instrument will overcome the challenges which Traders and Customs Administration are currently facing in the management of the certificate of origin.
In order to implement the e-CoO concept regionally, the Secretariat facilitated the development of the regional eCoO framework with the view to harmonise the process of automation for registration, issuance and transmission of the certificate of origin. The Framework was approved by the Sectoral Committee of Ministers of Trade at the 31st Meeting held in June 2019 in Windhoek, Namibia. The Framework presents appropriate security features which include barcode encrypt and decrypt system. Under this framework, the electronic certificate of origin will operate as presented in the chart below.
Use of Certificate of Origin (CoO)
The Certificate of Origin is a requirement specially in preferential agreements for export and import of the goods subject for duty free and quota free. The CoO is important because it helps to determine whether certain goods are eligible for import under the preferential arrangement or decide whether MFN rates should be applicable. Member States that are signatories of the Protocol on Trade and are participating in the Free Trade Area use the certificate of origin for duty free and quota free market access.
Operation of Electronic Certificate of Origin
The Electronic Certificate of Origin (eCoO) is a document processed and issued electronically by an issuing authority in the country of exportation and transmitted to the country of import through the appropriate protocol. It attests that goods declared by an exporter conform to specific rules of origin and is therefore qualified to be traded under duty free and quota free market access. The SADC e-certificate of origin presents security features which provide confidence and trust to all stakeholders along the chain. Its implementation will therefore overcome the challenge that the traders are currently facing by visiting the offices of the issuance authority for lodging application and getting response on the issuance.
Benefits of the Electronic Certificate of Origin
The implementation of the eCoO will reduce the time taken to process application and insurance since it will allow the trader to apply on-line, trace the application and get the response on the submission through the same platform. A reference number will be will issued for the purpose of process customs declaration at the country of exportation.
The eCoO systems is equipped with security features such as online eCoO authenticity verification, optical watermarking technology to distinguish between original and copies of CoOs issued, digital rubber stamps of the competent authority and signatures of authorized officials, microprint to deter unauthorized re-production of the certificate of origin, 2-D barcode to ensure data integrity, Public Key Infrastructure (PKI) technology to ensure data security and authenticity and printer control language is used to control the printing of only one original certificate of origin. The business community in the region has welcome the introduction of eCoOs as they speed up customs clearance and expedite clearance of the letters of credit by banks.
Going on-line
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In manual environment; the exporters have to rely on getting certification from issuing authority (Chamber of Commerce or Customs Administration). This is monotonous since it called for exporters to:
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Manually fill in the certificate of origin;
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Courier or deliver it to the issuing authority;
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Wait until the authority official reviewed and certified the certificate;
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Send it back to the exporter’s offices; and
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Send the certificate of origin through courier to the importer or attach it to the documents accompanying the cargo.
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In electronic environment; The information required is basically the same for both paper and electronic certificates of origin. The difference is that instead of printing the certificate and taking it to the issuing authority to get it certified, the exporter needs to enter the information online and then the issuance authority will send certified certificate by express mail or via email depending on preference.
Currently, in the region, Botswana, Eswatini, Malawi, Namibia, Tanzania and Zambia have already developed their national module and are working on the component for transmission and receiving (outbound and inbound) of the e-CoO as per the specifications contained in the Framework and they will participate in the pilot phase. SADC Secretariat facilitated the backstopping mission on eCoO in these Member States in order to ascertain their readiness in the pilot exercise. Mauritius has already developed its eCoO module and is currently waiting to exchange with other Member States.
It is planned that the e-CoO will go live in May 2020 in six Member States and it will eventually be rolled out regionally afterwards. This will make the SADC be one of the first Regional Economic Communities (RECs) recognised by Africa Union to implement the e-CoO regionally for trade facilitation. The implementation of the e-CoO is expected to contribute to increased intra-SADC Trade within the realms of the Protocol on Trade and Free Trade Area and support industrialization through increased trade volume of goods produced in the region.
The implementation of the eCoO is expected to contribute to the reduction of non-tariff barriers to trade and enhance participation of SADC Member States in the regional value chain and ultimately, support successful implementation of the industrialization strategy and roadmap in the consolidation of the SADC FTA. This eventually will lead to the improvement of SADC Member States in their ranking in ease of doing business.
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ECA leads discussion on Africa’s COVID-19 lockdown exit strategies (ECA)
African countries are turning their attention to lockdown exit plans as they seek to limit economic and societal damage with figures from the ECA showing the continent losing about 2.5% of its GDP in one month or $65bn. Panelists on an ECA online global debate on Africa’s COVID-19 lockdown exit strategies agreed Africa could not sustain prolonged lockdowns, especially as 40% of the continent’s populace was struggling to survive daily as food shortages mount. But much needs to be done for the exit strategies to be successful, the panelists, including UN Under-Secretary-General and Executive Secretary of the ECA, Ms Vera Songwe; Spain’s Foreign Affairs, European Union and Cooperation Minister, Ms Arancha Gonzalez Laya; and Chief Executive Officer of the NEPAD Agency, Mr. Ibrahim Assane Mayaki, agreed. [Download: pdf The ECA’s presentation (1.39 MB) ]
pdf SADC regional response to the COVID-19 pandemic Bulletin #4 (264 KB) : Regional Trade and Transport Facilitation Committee observations
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NTB 000-949 registered against Mozambique suspending issuance of visas to commercial truck drivers still remains unresolved and is negatively affecting Member States who use the port of Beira.
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Lubumbashi and Kasumbablesa in DRC were placed under lockdown on 28 and 29 April respectively following the recording of the first positive case in the provincial capital. Indications were given that cross border transport will not be stopped during the lockdown.
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Cross border transport drivers in Malawi were reported to have gone on strike demanding to be supplied with PPE and payment of Covid-19 risk allowance. The striking drivers were reported to be threatening to block foreign trucks from entering Malawi until their demands are met.
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A number of transport companies are reported to be laying off employees and going into liquidation as a result of the sudden drop in transport demand due to factories, mines and commerce closing, under lockdown measures. Regional airlines including SAA and SA Express are facing liquidation. The restructuring of the airline industry appears to be inevitable as a consequence of Covid-19 pandemic.
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Construction of the Kazungula Bridge and One Stop Border Post across the Zambezi is proceeding uninterrupted. The two Governments have adopted measures to ensure compliance with Covid-19 health measures. Construction is still scheduled to be completed by the revised dates around July 2020.
What future for women small-scale and informal cross-border traders when borders close? (UNCTAD)
Before the introduction of any transit restrictions in Africa, women informal cross-border traders had already stopped crossing borders for business because of transport and logistics constraints or disruptions in food markets of neighboring countries and in supply chains. After already a few weeks with no gains, there are pressing fears that this crisis will eventually push them out of business. Micro, small and medium enterprises, the backbone of developing countries’ economies, are experiencing some of the most severe effects of the economic slow-down. This is particularly the case of small informal businesses, which usually lack access to social protection.
But as countries prepare to address the COVID-19 crisis, it is expected that response mechanisms will not immediately prioritize business activities operating in the informal sector. There are ways in which the global threat of the pandemic could be turned into an opportunity for the most vulnerable. This requires governments to acknowledge, on one side, the enormous contributions of the informal sector to employment creation and to the overall economy and, on the other, the fact that formalization is not a realistic and affordable option for everyone. When it comes to informal cross-border trade, efforts should be directed towards providing new incentives to formalization and helping informal traders thrive. The following are policy measures that could serve both purposes. [The authors: Simonetta Zarrilli, Mariangela Linoci]
COVID-19 crisis and the informal economy: Immediate responses and policy challenges (ILO)
COVID-19 lockdown and containment measures threaten to increase relative poverty levels among the world’s informal economy workers by as much as 56 percentage points in low-income countries, says a new briefing paper issued by the International Labour Organization. In high-income countries, relative poverty levels among informal workers is estimated to increase by 52 percentage points, while in upper middle-income countries the increase is estimated to be 21 percentage points. As many as 1.6 billion of the world’s two billion informal economy workers are affected by lockdown and containment measures. Most are working in the hardest-hit sectors or in small units more vulnerable to shocks. These include workers in accommodation and food services, manufacturing, wholesale and retail, and the more than 500 million farmers producing for the urban market. Women are particularly affected in high-risk sectors, the report says.
Kenya: Corona to cut farm exports by Sh150bn (Business Daily)
Kenyan farmers are set to lose up to Sh51 billion from the decline in exports in four months of Corona restrictions, experts have predicted, worsening earnings outlook of key agricultural commodities. Bernard Kiarie, chief executive at the African Alliance Kenya said agricultural exports (horticulture, tea and coffee) which were collectively earning Sh21.4 billion monthly last year are currently down to about 40 percent. That translates to an annualised loss of Sh150 billion. “The situation will be dire in 2020 in case of an underwhelming production. This will result in the need for additional resources from the central government at a time when competing needs are on the rise,” Mr Kiarie said. Low demand in the European market had already pushed the flower industry to the edge from as early as late 2019 with Finlay’s signalling closure of its two farms employing about 1,000 workers, Karuturi laying off more than 3,000 workers while Oserian Farm was to fire 400 staff. At the moment, freight costs have shot up over the Covid-19 period to levels between Sh450 and Sh700 per kilogramme from Sh130 to 330/kg in January. [Nigeria: Agric exports also vulnerable to external shocks, says CBN]
Kenya: Relief for food exporters as more airlines resume flights (Business Daily)
Foreign-based airlines have resumed flying to Jomo Kenyatta International Airport as European countries start easing Covid-19 lockdowns, pushing up demand for fresh produce and the capacity of freighters. The latest entrants are British Airways and Singapore Air, which had stopped plying the Nairobi route following restrictions on international travel and low demand for horticultural produce in Europe after cancellation of orders. Other airlines have also increased their frequencies, with Ethiopian Airlines flying daily from JKIA, KLM three times a week and Kenya Airways also making a couple of trips to Europe and China. “We are happy that the capacity for freight is now building up at JKIA and this will go a long way in ensuring we do not suffer space constraint as well as address the high cargo rates being levied at the moment,” said Fresh Produce Consortium chief executive Ojepat Okisegere.
Pandemic puts strain on 30 major African oil and gas projects (The Africa Report)
To date, oil and gas majors have only officially announced delays and cancellations impacting minor projects, but the start-up dates of most major hydrocarbon projects are expected to be postponed by one to three years. Rystad Energy, an independent energy research and business intelligence company, helps us take stock of the situation.
IATA calls on Nigerian government to support aviation in the face of COVID-19 crisis
Prior to the crisis, aviation contributed $1.7bn to Nigeria’s GDP and supported 241,000 jobs. IATA estimates that the COVID-19 crisis puts 124,000 Nigerian jobs at risk and some $900m of the country’s GDP. The Nigerian government has introduced broad economic relief packages to mitigate the devastation caused by COVID-19 but IATA now urges the government to implement specific financial relief measures for aviation to ensure that, the sector will be capable of driving the recovery.
Trade facilitation in services: two new World Bank research papers
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A conceptual and empirical analysis. This paper discusses how to promote trade in services as a channel for growth, employment, and diversification by assessing services trade costs and identifying policies that contribute to their reduction: a concept termed trade facilitation in services. It summarizes the latest research on the costs facing trade in services beyond discriminatory market access and national treatment and finds that these are high. It proposes measures that could fall under the scope of a potential trade facilitation in services agenda, namely: streamlining processes and procedures used in administering regulatory policies aside from the policy itself, improving access to information on regulatory policies (that is, transparency), and boosting the efficiency of governance structures for regulators that set policies affecting trade in services.
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Concepts and empirical importance. This paper examines the concept of trade facilitation in services from the perspective of the recent literature on the determinants of services trade. The aim is to conceptualize trade facilitation in this area as a dimension of international integration beyond the baseline restrictiveness of policy, as captured by indicators of discriminatory market access. The analysis focuses on the role of governance structures, institutions, and transparency in shaping the environment for trading in services internationally. In addition to examining these factors, the paper provides some novel empirical estimates.
The need to protect science, technology and innovation funding during and after the COVID-19 crisis (UNCTAD)
This policy brief makes a case for protecting science, technology and innovation (STI) budgets during the COVID-19 crisis and its aftermath, based on the fact that continued investments in STI will be critical to the achievement of the 2030 Agenda for Sustainable Development. Even though developing countries as a group have recorded continued growth in R&D expenditure over recent years, the absolute levels remain small and their STI capabilities limited. It is therefore crucial for developing countries to reinforce their commitments to protect investment in STI and to design recovery packages that leverage technology and innovation for sustainable development. Key points:
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Stability and predictability of funding for science, technology and innovation are critical for the ability of national innovation systems to support sustainable development.
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During and after the COVID-19 crisis countries, particularly in the developing world where innovation systems remain fragile, should protect science, technology and innovation resources from austerity drives given their long-term implications for development strategies.
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The policy responses proposed in this policy brief introduce concrete steps in effectively continuing investments in science, technology and innovation, both during and after the crisis, towards the achievement of the 2030 Agenda. [The COVID-19 pandemic and the blue economy: new challenges and prospects for revoery and resilience]
Patterns - and some implications - of COVID-19 financial sector policy interventions (World Bank)
The full effect and duration of the COVID-19 crisis is still unknown, and its peak- and second-round effects are still to come in most countries. With indebtedness at record levels, the tight interlinkages between sovereign, financial and corporate sectors may give rise to adverse feedback loops, especially in countries with weaker crisis management and corporate insolvency frameworks. It is crucial to continue strengthening the resilience of the financial sector, while helping mitigate the impact of the crisis, so that it can play its countercyclical role now, and support the economy in the recovery phase.
Fiscal policies for the recovery from COVID-19 (IMF)
Decisions, including whether and how much to scale up quality public investment, will depend on the needs in specific sectors and their economic and social benefits, financing capacity, and the efficiency of public investment. This last point is critical for all countries because one-third of funds for public infrastructure is lost worldwide to inefficiency and corruption. For advanced economies with ample room in the budget such as Germany and the Netherlands, spending more on public investment is worthwhile because the value of the resulting assets will likely exceed the liabilities incurred given how low interest rates are. This in turn improves the public sector’s net worth. For countries with less room to maneuver when it comes to spending, such as Italy and Spain, they can redirect revenues and expenditures to increase investment. In emerging markets and developing economies such as Brazil and South Africa, high debt levels and rising interest payments call for financing development in a prudent and sustainable way. These countries should try to achieve more with less. Raising tax revenues over the long term would be crucial for low-income developing countries such as Nigeria.
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ECA leads discussion on Africa’s COVID-19 lockdown exit strategies
African countries are turning their attention to lockdown exit plans as they seek to limit economic and societal damage with figures from the United Nations Economic Commission for Africa (ECA) showing the continent losing about 2.5 percent of its GDP in one month or $65 billion.
Panelists on an ECA online global debate on Africa’s COVID-19 lockdown exit strategies agreed Africa could not sustain prolonged lockdowns, especially as 40 percent of the continent’s populace was struggling to survive daily as food shortages mount.
But much needs to be done for the exit strategies to be successful, the panelists, including UN Under-Secretary-General and Executive Secretary of the ECA, Ms. Vera Songwe, Spain’s Foreign Affairs, European Union and Cooperation Minister, Ms. Arancha Gonzalez Laya, and Chief Executive Officer of the New Partnership for Africa’s Development (NEPAD) Agency, Mr. Ibrahim Assane Mayaki, agreed.
“Test, test, test. That is the big issue. Our leaders are now all working really hard to get test kits out to ensure that we can test more, test better and test faster,” said Ms. Songwe, adding this was crucial to curb the spread of the contagion.
She said Africans were not against lockdowns in general.
“It is not about lockdowns. It is about protecting lives. Lockdowns are costing us an incredible amount of money, $65 billion a month. We cannot afford it but we cannot afford to lose lives either so what we need to do is to come back quickly into an exit strategy that allows us to grow back again and grow back in a way that is sustainable.”
For his part, Mr.Mayaki said; “We need smart lockdowns which allow an intelligent exit strategy where the most vulnerable and the local communities are really preserved in terms of quality of life.”
He said as Africa moves towards opening up, there were two critical conditions needed in place to ensure exit strategies succeeded, that is availability of data and coordination.
“If you don’t have the right data to know what the numbers are, how you trace and how you treat, then your exit strategy is affected in terms of efficiency,” Mr. Mayaki said.
He said medium, small and micro enterprises (MSMEs) will be key to revitalizing Africa’s economies once nations start exiting lockdowns.
For her part, Ms. Laya shared Spain’s COVID-19 experiences and pledged her country’s support to Africa.
“It’s important to realize that nobody will be safe until everybody is safe. This pandemic requires big doses of global cooperation. If we are to protect our own citizens’ lives, we need to be talking about other citizens’ lives too,” she said.
“What worries us most now is keeping this spirit of cooperation to ensure that we do not see further fracturing in our societies with the growth of inequalities; further fracturing of the global community with the division of the world in blocs; further fracturing of our economies. We have to push also for cooperation and multilateralism.”
Rwanda's Minister Finance Minister, Uzziel Ndagijimana, said his country was taking steps to ease the COVID-19 lockdown to revive its economy. He emphasized the importance of data and coordination in COVID-19 exit strategies.
Mr. Kennedy Odede, CEO of Shining Hope for Communities, a grassroots movement based in Nairobi, Kenya, said he feared uprisings and disturbances on the continent due to rising inequalities.
“People are struggling and would rather die of the virus than being locked down. Things may explode if we do not work together to address issues on the ground,” he said.
Mr. Haroon Bhorat, Professor of Economics and Director of the Development Policy Research Unit, University of Cape Town, talked about the need for immediate short term plans evolving around food security; vulnerable households left worse off by the pandemic; and severe economic contraction by both large and small firms, among others.
He said Africa, in designing its exit strategies, needs to look at the indirect effects of COVID-19 like trade, FDI and commodity price channels and their impact on poverty reduction and growth.
For his part, Mr. Moustapha Mellouk, Founder of Casablanca Media Partners, said; “As countries move out of lockdowns, media has critical role to play in informing citizens, stimulating confidence, optimism, and trust among populations.”
Panelists also talked about the need for good governance on the continent in dealing with resources availed to fight the pandemic, mental health and food security with Ms. Songwe stressing the importance of the African Continental Free Trade Area (AfCFTA) and making sure food is allowed to move across borders to avert hunger.
More than 1,400 people attended the online debate.
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A reminder that the Joint Bureau of the African Union Ministers of Trade and the Council of Ministers of the AfCFTA took place this afternoon
AfCFTA Secretariat SG Wamkele Mene: ”The consideration for postponement doesn’t mean that there no longer is political will and that there is no longer political commitment. We have to adjust to conditions that unfortunately nobody could have anticipated and we have to give the space to governments to solve the public health crisis as a matter of priority.”
Declaration of Extra-Ordinary Meeting of the Bureau of the STC Communication and ICT. We, the Ministers in charge of Communication and ICT, meeting through video conferencing on 5 May 2020 as the Bureau of the Specialized Technical Committee on Communication and ICT to consider strategies and actions to support the continental strategy on COVID-19 pandemic, hereby commit ourselves to (extracts):
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Build partnerships with private technology companies, social entrepreneurs, national and international organizations to make use of existing technologies to manage the COVID-19 crisis.
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Encourage the design of new applications and services to help in the fight against COVID-19, to facilitate services such as delivering food and other essential items to those most in need by optimizing the entire supply chain via digital government services.
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Develop a continental data policy and regulation framework to achieve uniform data processing system and harmonized legislations that enables cross sector and cross border data transfer, interoperability, aggregation, encryption and anonymization of location data as a valuable asset that can be used to develop digital solutions to counter COVID-19 crisis.
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Work with African ICT and Communication stakeholders to develop a continental digital platform to serve as a secured virtual space to disseminate existing data bases, technical solutions and information on ways and means to combat COVID19 crisis.
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Pursue and expedite the implementation of the pdf African Strategy on Digital Transformation (1.80 MB) .
Nyaguthii Maina: Africa must not let disputes with foreign investors undermine its Covid-19 response (Business Day)
In light of these pressing challenges, African states must be prepared for the imminent threat of ISDS claims to undermine these emergency measures and responses. Examples of this risk are already emerging in other parts of the world. The Peruvian government was recently cautioned against measures it intended to take in its efforts to ease the movement of essential goods and workers during the Covid-19 pandemic. The government aimed to waive toll fees, but media reports indicate that concessionaires could bring ISDS claims over unilateral changes to their contracts.
African states should urgently call for the suspension of investor-state arbitration for all Covid-19-related measures, and urge others to do the same. State resources and global financial support should be focused on public health systems, restoring economic health and managing related crises, not defending perverse claims made in times of a global pandemic. [Note: The author is attached to the International Institute for Sustainable Development]
Ethiopia: Request for purchasing under the Rapid Financing Instrument (IMF)
External accounts are expected to weaken materially. The current account is projected to strengthen modestly this fiscal year amid a significant decline in imports of goods and services on the back of weak domestic demand and lower project inflows. Falling remittances and the concurrent decline in exports — ed by air travel — would less than offset the import contraction amid a substantial strengthening in the terms of trade (including from higher coffee prices and lower global oil prices). However, the overall balance of payments is projected to weaken, on the back of a large drop in foreign direct investment, including due to privatization delays, in part due to the pandemic. As a result, an additional financing gap of $1.7bn has emerged for 2019/20. In 2020/21, both exports and imports are expected to grow on the back of an incipient recovery, resulting in a deterioration in the trade balance, but an improved services balance and stronger remittances will mitigate the impact on the current account. Privatization revenues will help contain the additional financing gap, which is projected to reach $731m. [See Box 1: Economic policy response to COVID-19]
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IMF approves $739m in emergency pandemic relief funds for Kenya
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IMF approves $491.5m loan for Uganda to limit coronavirus impact
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Nigeria to extend ban on all flights by four weeks from Thursday
AFSTA/ACTESA: Restrictions on cross-Border movement affecting seed supply chain. Restrictions on cross border movement imposed in response to the coronavirus pandemic by countries in the region, have adversely affected the supply of seeds which may lead to food insecurity. Hence, the African Seed Trade Association (AFSTA) and the COMESA Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA), recommends classification of seeds as essential commodities that should be allowed unrestricted movement across the region. “If the seed movement is not normalized in the next six months, 123 million out of 650 million people in the COMESA region will face starvation,” according to a joint statement issued by the two organizations.[Africa Fertilizer Financing Mechanism: Annual Report 2019]
FAO: Global food commodity prices drop further in April. World food commodity prices declined for the third month in a row during April, as the economic and logistical impacts of the COVID-19 pandemic resulted in significant contractions in demand for many commodities. The FAO Food Price Index, which tracks international prices of the most commonly-traded food commodities, averaged 165.5 points in April, some 3.4% lower than the previous month and 3% lower than April 2019. The FAO Sugar Price Index hit a 13-year low, declining 14.6% from March, when it posted an even larger monthly drop. The FAO Cereal Price Index declined only marginally, as international prices of wheat and rice rose significantly while those of maize dropped sharply. International rice prices rose by 7.2% from March, due in large part to temporary export restrictions by Viet Nam that were subsequently repealed, while wheat prices rose by 2.5% amid reports of a quick fulfillment of the export quota from the Russian Federation. Prices of coarse grains, including maize, by contrast fell by 10%, driven down by reduced demand for its use for both animal feed and biofuel production.
FAO: Task force focusing on impacts of COVID-19 on Africa’s food security begins work. Ensuring people have access to food by keeping borders open for trade is critical during this period of COVID-19 and to achieving the Sustainable Development Goals, FAO Director-General QU Dongyu, said during the first meeting of the Task Force on the impact of COVID-19 on Food Security and Nutrition in Africa. The meeting, co-convened by Qu and Angela Thoko Didiza (Minister for Agriculture, Land Reform and Rural Development of South Africa and Chair of the African Union Specialized Technical Committee on Agriculture, Rural Development, Water and Environment), was moderated by Josefa Sacko, the AUC’s Commissioner for Rural Economy and Agriculture. The Task Force will also provide coordinated support to any new food security “hot spots” resulting from COVID-19, with particular focus on countries facing multiple threats such as the Desert Locust infestation in Eastern Africa.
See related news articles:
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COVID-19: FAO and African Union commit to safeguarding food security amid crisis
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COVID-19: The global food supply chain is holding up, for now
Selected trade data releases, trends:
China’s dollar-denominated exports unexpectedly rose in April, but imports fell the same month as movement restrictions to contain the coronavirus outbreak eased. According to data from the General Administration of Customs released on Thursday, exports rose 3.5% from a year ago while imports fell 14.2% in the same period. Economists polled by Reuters had expected exports to have fallen 15.7% in April from a year earlier while imports were expected to have fallen 11.2% from a year earlier. In March, China’s exports fell 6.6% from a year ago, while imports slipped 0.9% in the same month. China’s trade surplus for the month of April was $45.34 billion — compared to the $6.35 billion economists polled by Reuters had predicted. China reported trade surplus of $19.9 billion for the month of March.
China’s trade surplus with the United States stood at $22.87bn in April, Reuters calculation based on Chinese customs data showed on Thursday. That was much bigger than a surplus of $15.33bn in March. For the first four months of the year, China’s trade surplus with the United States totalled $63.68bn.
Australia’s trade surplus ballooned to a record in March as shipments of iron ore to China surged as the Asian giant came back from lockdown, while exports of gold more than tripled amid a global rush for the safe haven metal. There was also a rare surplus on services as the closure of international borders to contain the coronavirus forced Australians to abandon travel plans and stay home. In all, the trade surplus swelled 174% to A$10.6bn ($6.79bn) in March, easily the fattest on record and far above forecasts of A$6.8bn. The bumper haul meant the surplus for the entire first quarter climbed 41% to A$19bn, likely delivering a timely lift to economic growth just before lockdowns began in earnest. “Taking into account price effects, we now estimate that net trade provided a 0.4 ppt (percentage point) boost to GDP growth in Q1,” said Ben Udy, an economist at Capital Economics.
“Trade is still happening” – Canada’s Deputy Prime Minister. ”One of the areas where we feel that we have been more successful than people might have thought is in maintaining our trade with the United States,” said Chrystia Freeland, Deputy Prime Minister of Canada, on navigating the economic limitations of the COVID-19 era. Commenting on the need to close the Canadian-US border to limit the spread of the coronavirus, she added: “We have been able to cut down the traffic across that border by over 90% and at the same time trade is still happening – goods and services are still flowing across the border.” Freeland’s remarks came during a weekly virtual meeting of the Forum’s COVID Action Platform on 6 May. Launched last month, the Forum’s platform aims to convene leaders from governments and the business community for collective action to protect people’s livelihoods, facilitate business continuity and mobilize support for a global response to the COVID-19 pandemic.
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In the new economy, knowledge is king
Shifts in global trade patterns, coupled with rapid technological changes are presenting challenges to sustaining growth. Therefore, a transition to a more knowledge-based growth model is now ever more urgent in the current uncertain global context.
The economic shocks of the COVID-19 crisis has spelled major impacts for firms across the globe. In the short term, the crisis threatens to cause numerous bankruptcies and layoffs in the private sector, particularly among SMEs. Once mobility restrictions and mandatory lockdowns are removed, thus allowing businesses to reopen – many firms, including both larger corporations and SMEs, will have not escaped unscathed and may face the risk of insolvency.
Firms may stand a better chance during times of crises by harnessing technological and innovative capacity to adapt. Innovative capacity can help firms to pivot to new ways of generating revenue.
In the current crisis, some businesses are repurposing their production lines, and regulatory authorities need to strike a balance to support them as they make these shifts.
For example, textile companies are switching production lines from producing garments to making hygienic masks and medical robes, cosmetic companies are making hand sanitizers, hotels are becoming quarantine centers, distilleries are creating disinfecting alcohol, and automotive companies are evaluating options to produce urgently needed medical devices, such as ventilators.
Building up capacity and capabilities to produce simple products is comparably easy and can be achieved quickly. However, a lack of technological capability in producing complex medical equipment has become a major hurdle for factories looking to shift their production lines. There is a role for strengthening research capacity and helping countries develop science and technology policies that would help increase capacity to reverse-engineer, adopt, and adapt technologies to local needs.
Such belief is ubiquitous among policymakers alike. In order to chart a fruitful path forward to begin this transformation, a clear definition of what an innovation-led knowledge economy is necessary.
First, incentives to develop entrepreneurship with the efficient use of existing and new knowledge can be encouraged by a supportive economic and institutional ecosystem. Second, raising an educated and skilled talent pool is important to cultivate professionals that can create, share, and use knowledge effectively. Third, as innovation brings forth new ways to improve processes across varieties of interlinked sectors and industries, effective communication, dissemination, and processing of information is vital to ensure adaptation. And finally, this growing stock of global knowledge can be leveraged by a system of firms, research centers, universities, and other organizations to adapt to local needs, and in turn, create new technologies.
The COVID-19 Crisis and Global Value Chains: What Does it Mean for SMEs in Malaysia?
The global economic system has grown to be increasingly integrated. Almost 50% of global trade today involves Global Value Chains (GVCs) that have been an important source of growth and poverty reduction.
The global economic disruptions that have ensued due to the current COVID-19 pandemic will likely affect countries that heavily rely on trade in goods and services and that are deeply inserted in GVCs, such as Malaysia. This makes Malaysia particularly vulnerable to supply shocks, since vital sources of inputs may be shut down or countries may start imposing export restrictions. Moreover, the recent growth of GVCs means that, even more than in past crises, the COVID-19 shock is affecting many locations suddenly and simultaneously. This leads to a mutual amplification of reverberations, as the health of any economy must depend on the health of other economies supplying inputs or buying outputs, directly or indirectly.
GVCs are becoming more knowledge-intensive and reliant on high-skill labor, with investments in intangible assets (e.g. R&D, brands, IP) increasing from 5.5% to 13.1% of revenue across value chains since 2000. Moreover, technology and innovation have, on balance, boosted trade and led to the emergence of new traded goods and services. In fact, in 2017, 65% of trade were in categories that did not exist in 1992. Malaysia is deeply embedded within GVCs and has sought to upgrade its position in them. This is particularly true of the E&E sector. Accounting for 98.5% of total firms in Malaysia, and the bulk of production and employment, small and medium-sized enterprises (SMEs) are a crucial component of Malaysia’s economic growth strategy.
New technologies associated with the 4th Industrial Revolution (Industry 4.0) are transforming production processes by reducing the importance of low wages in determining competitiveness. The COVID-19 pandemic has increased the benefits SMEs could derive from using new technologies – e.g. for remote work, and online business platforms. E-commerce and digital payments should also be further encouraged through regulatory reforms and measures to foster innovation. It is thus imperative that Malaysia focuses on building its capabilities in terms of skilled workforce and adoption of technologies, especially amongst SMEs, across the board.
In response to the Industrial Revolution 4.0, the government has launched the Industry4WRD: National Policy on Industry 4.0 to drive digital transformation in various sectors in Malaysia, aiming to be an Industry 4.0 hub in Southeast Asia. In order to achieve this ambition, firms, especially SMEs, would need to aggressively adopt new technologies and effectively participate in GVCs. Measures to boost jobs and private investment, particularly by SMEs, through increased digital adoption are an important step in this direction.
The above is an extract from an article written by Smita Kuriakose, Senior Economist for the World Bank’s Finance, Competitiveness and Innovation Global Practice in Malaysia.
The full article appears in the April 2020 issue of the Development Digest: Navigating a New Normal, a half-yearly publication that features key works from teams based at the World Bank Group Global Knowledge and Research Hub in Malaysia.
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tralac’s Daily News selection
AfCFTA Year Zero Report (AfroChampions Initiative)
This assessment, which was completed before COVID-19 struck, showed that despite the euphoria, AfCFTA commitment and implementation readiness of African governments are surprisingly below 50%. COVID-19 now threatens to derail AfCFTA – which is the more reason the continent should press ahead and use AfCFTA as one of the weapons to beat COVID-19 and speed up post-COVID economic recovery. The rankings by AfroChampions sought to answer two questions: which countries are the most committed to the AfCFTA process. And which countries have the best implementation readiness in terms of trade infrastructure, customs efficiency and access to credit.
The most AfCFTA committed country is Rwanda which scores 83.93% on the commitment scale; and the least committed country is Eritrea with a score of 0.85%. The country with the best implementation readiness is South Africa, with a score of 68% on the implementation readiness scale. South Sudan has the lowest score for readiness. The overall average commitment level of the continent to AfCFTA is at 44.48%; and its overall implementation readiness level is at 49.15%.
Some of the most committed countries (such as Ghana, Mali, Togo, Uganda) are not necessarily the most prepared in terms of trade infrastructure, customs efficiency and access to credit for industry. Conversely, some of the least committed countries (such as Botswana, Namibia, Tanzania) performed very strongly in terms of implementation readiness. A note on the indicators used:
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Commitment to the Free Trade Agreement/Treaty (Signing and ratification of AfCFTA and a publicly accessible national AfCFTA implementation strategy).
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Commitment to Free Movement (Signing and ratification of Protocol on Free Movement of people and country’s Visa Openness).
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Trade Facilitation Readiness (quality of trade-Infrastructure and efficiency of Customs).
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Access to Credit (Ease of Getting Credit and Cost of Credit).
Table 1 shows the breakdown and weights for all indicators and sub-indicators. While countries could be ranked on a broader set of indicators, the four main indicators above are considered the minimum criteria to show a country’s AfCFTA commitment and readiness in Year Zero of AfCFTA’s operational phase. See Annex 5 for the method used to calculate the ranking. [Astean Chongo: Intra-African trade during the Covid-19 pandemic]
Ms Theo Clarke MP: Now, more than ever, we must keep our promise to help Africa trade out of poverty (PoliticsHome)
Next, we must focus on Africa’s special situation. First, UK Ministers should intensify meetings with experts for advice on how we can keep trade with Africa flowing. Second, the UK and others should target funding urgently for “safe-trade” measures on the continent – such as testing, protective equipment and hand-washing facilities for truckers and officials at key ports and border crossings – being rolled-out by leading development organisations like TradeMark East Africa. Third, we should work with African leaders to chart out a new economic partnership covering trade, green investment and technology, a model the rest of the world can follow to build-back-better. There is much the Government can do to help British companies to export around the world, such as the work being done by the Trade Minister Greg Hands to reduce tariffs. This would make a huge difference to local businesses in the West Midlands such as the ceramic industry in Staffordshire. [Note: The author is Conservative MP for Stafford and co-chair of the UK’s APPG TOP]
Angola eyes former coffee glory for more sustainable growth (UNCTAD)
Angola produced 8,000 tons of coffee in 2017 – a fraction of the more than 230,000 tons it produced annually in the early 1970s when it jockeyed with Côte d’Ivoire and Uganda for the title of Africa’s top exporter. The country aims to reclaim its former glory as part of efforts to diversify an economy that has become highly dependent on oil exports. “Angola’s growth in GDP was remarkable,” said Paul Akiwumi, director of UNCTAD’s division for Africa and least developed countries, “although it was too dependent on one commodity and has proven to be unsustainable in the long term.”
To help, UNCTAD is working with farmers, the government and other players in the country’s coffee sector to assess how producers and exporters could better position themselves within the global value chain. Last November, UNCTAD held, as part of the national green export review process, a workshop in Uíge province to train more than 200 farmers and local public officials to map value chains, assess the opportunities and challenges for green sectors like coffee and draft an action plan. Challenges identified included a lack of access to finance and information, poor roads and unproductive plants and farming methods – most trees are over 40 years old and yields are less than half of what they used to be. “What’s required,” Mr. Akiwumi said, “is a comprehensive and coherent strategy to develop productive capacities in a holistic manner.”
The EU-UNCTAD joint programme for Angola: Train for Trade II is mobilizing all its components to work on the challenges identified.
The World Bank has posted three new papers on trade in services:
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Bernard Hoekman: Facilitating trade in services. In 2016, the Government of India proposed negotiations on an agreement to facilitate trade in services to complement the 2013 WTO Trade Facilitation Agreement in goods. The proposal did not find much support, but plurilateral talks launched in 2017 on various policy areas encompass areas that are very relevant from a services trade facilitation perspective. This paper argues (pdf) that participating in the current plurilateral talks can do much to achieve services trade facilitation objectives by identifying good regulatory practices. Although elements relevant to services trade facilitation are on the table in the WTO, there are important gaps. Identifying priorities for complementary international cooperation to facilitate trade in services on a plurilateral basis requires initiatives that bring together governments, services industry associations, and sectoral regulators.
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Investment facilitation and Mode 3 trade in services: Are current discussions addressing the key issues? Based on a novel approach to measuring the cost of trade in services for Modes 1 (cross-border supply), 2 (consumption abroad), and 4 (temporary movement of service suppliers), developed by the World Trade Organization Secretariat, this paper reviews available evidence on factors affecting trade costs for services supplied via a commercial presence in a host country market, so-called Mode 3 trade. It does so with a view to answering the question of whether the current “facilitation” agendas on services and investment proceeding at the WTO focus on the most important factors affecting Mode 3–related trade costs, by far the most important of all modes of supplying services internationally. [The authors: Roerto Echandi, Pierre Sauve]
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Liberalizing versus facilitating Mode 4 trade in services. The growing importance of services trade for countries across the world is well-documented in the services and trade literatures. At the same time, regulatory and administrative barriers to the movement of service suppliers to deliver services internationally have resulted in very low shares of “Mode 4” trade in total services trade. Against this background, this paper conceptualizes an agenda for trade facilitation in services as it would apply to the movement of natural persons. It also provides descriptive statistical evidence from the Organisation for Economic Co-operation and Development’s Services Trade Restrictiveness Index database. The paper differentiates between regulatory measures that may improve transparency or facilitate access for service providers and those measures that impede Mode 4 trade as well as the administrative, financial, and economic costs of compliance with such measures. [The authors: Anirudh Shingal]
Selected trade data releases, perspectives on trade policy issues:
US international trade in goods and services, March 2020. The US Census Bureau and the US Bureau of Economic Analysis announced today that the goods and services deficit was $44.4bn in March, up $4.6bn from $39.8bn in February, revised.
Canadian international merchandise trade, March 2020. Canada’s merchandise exports fell 4.7% to $46.3bn in March, the lowest level since January 2018. Total imports declined 3.5% to $47.7bn, a level not observed since October 2017. Both exports and imports were down almost 10% on a year-over-year basis. Canada’s trade deficit widened from $894m in February to $1.4bn in March. In real (or volumes) terms, March exports decreased 4.8% and imports were down 5.8%.
Turkey’s March 2020 trade data reveals alarming economic landscape. Turkey’s foreign trade deficit has risen by 180% within the past year following the prevention measures against COVID-19 that reduced export volume significantly, with a 17.8% decrease in exports. The ratio of exports to imports left a deficit of 5.4 billion Turkish liras ($766.13m), with imported goods totaling 18.8 billion liras while exports only reached 13.4 billion liras. Imports grew by just 3.1% compared to the previous year, and industrial production, especially agricultural products and quarrying, made up a majority of exports.
Philippine export and import statistics March 2020: preliminary highlights. Total external trade in goods in March 2020 amounted to $11.44bn, a decline of 25.7% from the $15.40bn external trade in the same month of the previous year. Of the total external trade, $4.53bn (39.6%) were exported goods and $6.91bn (60.4%) were imported goods. The country’s balance of trade in goods in March 2020 posted a $2.38bn deficit, which was lower by 28.6% than the %3.33bn deficit in March 2019. Export sales in March 2020 amounted to $4.53bn, a decrease of 24.9% from the $6.03bn total export generated in March 2019. Total imported goods in March 2020 amounted to $6.91bn, indicating a reduction of 26.2% from the value of imported goods during the same month of the previous year amounting to $9.37bn.
China’s April trade data will be posted tomorrow: exports and imports are expected to record double-digit declines.
APEC Trade Ministerial: statement on COVID-19. We encourage economies to pursue facilitative measures that will expedite our economic rebound. To this end, we have directed our Senior Officials to develop a coordinated approach to collecting and sharing information on policies and measures, including stimulus packages for the immediate responses to the economic crisis and long-term recovery packages, which could help respond to the economic challenges brought on by the pandemic. Where possible, these efforts should take into account recommendations from the APEC Business Advisory Council. This sharing of information seeks to ensure that the strength and learning of one economy may translate into best practices for the region as a whole. [ASEAN intervenes to fight death spiral of food export restrictions]
Simon Lester: Senator Hawley’s many misunderstandings of the WTO. Senator Josh Hawley has a NY Times op‐ed today entitled “The WTO should be abolished.” Debates about the scope and nature of the WTO and the trading system in general are important, but this op‐ed gets so many facts wrong that it cannot serve as the basis for a useful discussion. In this blog post, I’ll go through a few of them. If the early response on Twitter is any indication, plenty of other pro‐trade folks will be doing a similar exercise, so keep an eye out for other commentary on this. Hawley starts off with this:
Launch of US-UK trade negotiations:
The US Chamber of Commerce’s US-UK Business Council welcomes the formal launch of negotiations towards a US-UK trade agreement. In light of the public health crisis and economic downturn arising from COVID-19, these negotiations offer a vital opportunity to deepen one of our most successful commercial partnerships and in so doing, help get our economies on the road to recovery. The U.S.-UK Business Council released updated priorities for these talks, underlining dozens of areas where a robust agreement will benefit both sides. There are also several issues where the United States and the UK can together demonstrate leadership in advancing strong principles globally.
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Joint statement of USTR Robert Lighthizer and UK Secretary of State for International Trade Elizabeth Truss
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Global Trade Review: UK SMEs hopeful for export opportunities as US trade talks begin
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AfCFTA Year Zero Report by The AfroChampions Initiative
An Assessment of African Governments’ Commitment and Readiness for AfCFTA Start of Trading in light of COVID-19
This assessment which was completed before COVID-19 struck, showed that despite the euphoria, AfCFTA commitment and implementation readiness of African governments are surprisingly below 50%. COVID-19 now threatens to derail AfCFTA – which is the more reason the continent should press ahead and use AfCFTA as one of the weapons to beat COVID-19 and speed up post-COVID economic recovery.
The rankings by AfroChampions sought to answer two questions: which countries are the most committed to the AfCFTA process. And which countries have the best implementation readiness in terms of trade infrastructure, customs efficiency and access to credit.
The most AfCFTA committed country is Rwanda which scores 83.93% on the commitment scale; and the least committed country is Eritrea with a score of 0.85%.
The country with the best implementation readiness is South Africa, with a score of 68% on the implementation readiness scale. South Sudan has the lowest score for readiness. The overall average commitment level of the continent to AfCFTA is at 44.48%; and its overall implementation readiness level is at 49.15%.
Some of the most committed countries (such as Ghana, Mali, Togo and Uganda) are not necessarily the most prepared in terms of trade infrastructure, customs efficiency and access to credit for industry. Conversely, some of the least committed countries (such as Botswana, Namibia and Tanzania) performed very strongly in terms of implementation readiness.
A note on the indicators used:
-
Commitment to the Free Trade Agreement/Treaty (Signing and ratification of AfCFTA and a publicly accessible national AfCFTA implementation strategy).
-
Commitment to Free Movement (Signing and ratification of Protocol on Free Movement of people and country’s Visa Openness).
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Trade Facilitation Readiness (quality of trade-Infrastructure and efficiency of Customs).
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Access to Credit (Ease of Getting Credit and Cost of Credit).
Recommendations: the case for COVID-19 accelerated Start of Trade
There have been arguments for a postponement of the July Start of Trade due to the low level of readiness among member States and the ongoing health emergency. AfroChampions is however of the view that the very reasons being cited for a postponement – i.e., low level of readiness and the COVID-19 crisis – are actually the very reasons why the AfCFTA July Start of Trade should not be postponed.
First, low readiness is not a good reason to delay Start of Trade. Rather, Start of Trade is what is needed to improve readiness – because countries will only accelerate their readiness when trading takes off. Also, the race to the July Start of Trade is expected to inject some fresh momentum to coerce non-ratifying member States to swiftly submit their ratified documents to the AUC. As a gesture, the AUC should be accepting electronically ratified versions of the Agreement until the pandemic dies down for hard copy submissions. This can pull along all member States.
Second, COVID-19 is not a reason to delay Start of Trade. Rather, COVID-19 is a reason why we should accelerate Start of Trade. Indeed, we expect the level of readiness and commitment to be impacted by the COVID-19 crisis. Nevertheless, AfroChampions strongly advocates that in the face of COVID-19, Africa should use the AfCFTA to simultaneously play offensive and defensive by adjusting to current and critical issues needed to fight the pandemic. On the offensive, the July Start of Trade can focus on restricted trade in essential goods such as pharmaceuticals and food products to the fight against COVID-19. On the defensive, current border closure will continue as part of anti-COVID measures while at the same time permitting the entry of critical and life-saving goods.
The temptation to postpone is natural, given the health emergency and how it has disrupted preparedness and finalization of negotiations and operationalization. But as we have recommended in the Foreword, it is quite easy to use videoconferencing and online work platforms to keep AfCFTA negotiations and operationalization on track. Negotiators must adapt to the changing times. The new AfCFTA Secretariat must fully embrace and innovate for the crisis period into which it has been birthed. We urge African trade ministers and governments to make the tough, creative, bold choice to march on – despite COVID-19.
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National trade facilitation committees lead reforms, respond to COVID-19
The committees are bringing public and private sectors together to ease trade in essential goods to combat the pandemic.
Trade facilitation reforms are at the heart of countries’ responses to the economic slowdown, disruptions to global supply chains and shutdown of businesses due to COVID-19.
More than ever, countries have recognized the need to implement reforms to ease the flow of critical goods and services, such as medical supplies and key agricultural products, across borders, while managing the pandemic’s economic consequences.
A new UNCTAD study underscores the critical role of national trade facilitation committees (NTFCs), the primary trade facilitation coordination mechanism, in helping countries implement impactful trade reforms to fight the pandemic.
“National trade facilitation committees are the right platform to bring together public and private sectors not only to address current bottlenecks to trade caused by the pandemic, but also to prepare for recovery,” said Shamika N. Sirimanne, UNCTAD’s director of technology and logistics.
The committees help establish contacts, coordinate actions, advise in negotiations and lead in mobilizing resources for trade facilitation projects.
In the wake of the coronavirus pandemic, some NTFCs have coordinated the establishment of trade information portals to ease trade by simplifying and explaining procedures and processes as well as COVID-19 emergency measures.
In countries such as Rwanda and Uganda, they have coordinated the dissemination of information on procedures for importing and exporting vital medical and pharmaceutical products.
Besides, they have worked with local authorities to expedite customs clearance and release of goods essential to combatting the spread of the pandemic, such as masks, gels and disinfectants.
Evolving to meet current challenges
UNCTAD’s latest study on NTFCs expands on two previous ones conducted in 2015 and 2017, utilizing information from 52 countries with which the organization has partnered on trade facilitation measures over the years.
It spotlights how the committees are evolving fast to meet current challenges. The study reveals 12 major trends in the evolution of NTFCs around the world.
It shows how NTFCs evolve in aspects such as mandate, scope, institutional framework and composition, while adapting to new emerging needs.
By knowing these trends, the committees can be improved to cater to emerging needs and preemptively address obstacles to their work.
The study underlines the need for countries to consider NTFCs as permanent platforms that coordinate national trade efforts not just for the implementation of the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO), but also trade facilitation reforms beyond it.
“NTFCs’ mandate and scope of action need to be broader and adaptable to current needs of the country,” the study notes. Only then can the committees lead trade facilitation efforts in response to crises such as the COVID-19 pandemic.
Strengthening committees
NTFCs play an important role in the simplification of foreign trade procedures and in keeping costs of trade to a minimum.
They coordinate trade facilitation reforms by opening and guiding discussions between public and private stakeholders, enabling swift and actionable responses to emerging challenges.
NTFCs have long existed in various forms, but they have only started gaining traction in leading trade facilitation efforts in recent years.
In 2004, WTO commenced negotiations on trade facilitation, which concluded a decade later, resulting in the TFA.
When the TFA entered into force in 2017, signatory countries were required to establish and maintain an NTFC or an existing mechanism.
The body would facilitate institutional coordination and multi-stakeholder consultation for effectively implementing trade facilitation measures. More countries formalized the committees.
However, throughout the negotiations to date, institutional setup challenges have emerged in many countries, raising the need to further strengthen the NTFCs.
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Regional business community push for trade facilitation in amid COVID-19
The regional business community, under the umbrella of the COMESA Business Council (CBC) have urged Member States to facilitate the movement of transit essential cargo across the region through pre-clearance and/or prompter clearance and reduction of risk of infections at the border posts.
This is one of the recommendations contained in a position statement issued by the CBC recently that called for the establishment of a common framework to facilitate movement of essential goods and services along the border corridors in the region, while implementing measures against the Coronavirus (COVID-19).
In the statement the Business Council calls for a clear guideline for testing and quarantining truck drivers across the borders, including risk-based quarantine approach that does not exceed a 24-hour period for providing tests results. Increased customs coordination and interfaces will ensure swifter processing of goods and services at the border to reduce clearance times.
CBC urged Member States to consider alternative and practical measures for the movement of cargo across the region such as allowing goods to be transported by a limited number of persons and put in place regulations for truck drivers to have limited interactions with people.
The business council further recommends for the adoption of strategic efforts and actions that directly address issues of ensuring the smooth and timely movement of essential goods and services in the region. A common framework is essential to address issues including classification of essential goods and services by HS Code to ensure uniformity and Harmonization across the countries.
With regard to facilitating the movement of transit cargo across the region, the business community proposes the implementation of instant border measures inquiry, reporting and monitoring platform consisting of border management authorities from each Member State to facilitate the speedier resolution of impediments and barriers to the movement of essential goods and services in COMESA.
The business community is cognizant of the role of specific borders and ports in facilitating intra- Africa and intra-regional trade and therefore has advised Member States to consider a tripartite and continental approach.
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Statement by SARS Commissioner Edward Kieswetter at a Media Briefing
Extracts from a media briefing held on Tuesday, 5 May 2020
Good afternoon and welcome to our media briefing.
So much has changed during the past 2.5 months to bring to a culmination a year that was already characterized with so many challenges ahead of COVID-19 and the investment downgrade. We are already 5 weeks into the new financial year, and the harsh reality is beginning to emerge as Government is trying to balance the health and mortality outcomes on the one hand, with the social and economic challenges on the other.
I would like to start with our current challenges presented by Covid-19, in particular how it has impacted on our work arrangements as well as our initial sense of the impact on tax revenue collections.
REVENUE MANAGEMENT & PERFORMANCE
Tax & Customs Revenue performance was significantly affected during this period. This is an evolving picture and will be continually refined, but will chiefly be a function of:
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The general state of the South African economy heading into the Covid-19 challenge, but aggravated by the investment downgrades by two ratings agencies
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The specific impact of Covid-19 Tax Relief Measures
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Decisions made by government during the various Lockdown Levels that will have a direct impact on economic capacity as well as economic activities
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The general impact on the Compliance environment
1. General State of the South African Economy, Impact of Downgrade & Covid-19
Last week National Treasury pointed to a severe global economic crisis not seen since the Great Depression:
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Predicting a contraction of around -3% for the current year alone
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Advanced economies bear the brunt of this contraction at -6.1%, whilst
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Developing economies projecting a contraction of -1%
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Sub-Saharan economies projecting a contraction of -1.6%
For South Africa, three scenarios are modeled which predicts GDP outcomes ranging from between -5.4% to -16% for the current financial year.
Final outcomes will depend on the extent of the pandemic globally, and locally a function of lockdown decisions exercised as government tries to contain the spread of the virus and manage the health and mortality outcomes.
We concur that there are so many unknowns and indeterminate variables that are confronting all predictive models that are continually being updated.
We are certainly facing the worst economic performance in recent times, which are aggravated by the structural faults in our economy, which includes:
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The stubborn legacy of Spatial & Social inequality that has not been addressed since the start of our democracy
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Still unacceptably poor educational outcomes, which places constrains on future skills
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Unacceptably low levels of labour intensive growth, aggravating already high levels of unemployment
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Poorly performing state owned monopolies with huge negative impact on the state balance sheet and administered prices – driving unacceptable debt service costs and price inflation
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A highly concentrated private sector with limited competition and highly restrictive entry barriers for new and especially smaller players
2. IMPACT ON REVENUE PERFORMANCE
Whilst it is early days, our initial view is that revenue performance will be lower than the February Budget announcement by between 15%-20%. This means that revenue under-recovery could move up to R285 billion.
From the preliminary assessment of revenue performance of the first month we can report:
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The under-recovery of around R9 billion for April represents a year on year decline of 8.8%
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Main drivers for this under-recovery includes:
1. PAYE down on prior year by 5.2%
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65 219 employers who made payments in April 2019, but no payments in April 2020 – tax value of R3.8b
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87 137 employers who made payments in April 2019, made lower payments in April 2020 – tax value R6.1b
2. Domestic VAT down on prior year by 4.3%
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Number of vendors who filed and paid decreased by 13% from 160 136 in April 2019 to 139 313 in April 2020.
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139 313 vendors that paid this year, only 104 996 (75%) are repeat payers (also paid in the PY). Collections from this 75% of vendors that paid in both years contracted by R200m (0.9%). This signifies a strain in the core tax base.
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Year-on-year monthly payments from those who filed decreased by 20% with a tax value of R1.1b
3. Import Tax overall down on prior year by 19.7%
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Import VAT down 25% on prior year – tax value R1.6b
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Customs Duties down 11.8% on prior year – tax value R100m
4. Specific Excise Duties down on prior year by 54.7% – tax value R1.3b (R1.7b lower on alcohol and cigarettes, offset by R0.4b upward correction on Fuel Levy)
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We have already received requests for payment deferrals from 3 taxpayers in respect of Alcohol, Cigarettes and Fuel
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We are currently investigating non-compliance in instances of alcohol and cigarettes
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We have anecdotal evidence that illicit sale of cigarettes and alcohol has continued during the lockdown period – whilst the revenue impact is relatively low as a percentage of total revenue, we raise the criminality thereof as our main concern
5. Corporate Taxes down on prior year by 55.4%
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April is not a significant month for corporate taxes, but early indications point to a downward spiral in all areas with the exception of electricity, gas and water
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We expect that the number of companies who will apply for business rescue will grow over the next year
6. VAT Refunds 12.5% lower than estimated
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VAT refund payments for April is lower as the number of credit returns contracted compared to the prior year for the month of April – refund value of R15.5b compared to R17.7b in April 2019
TAX RELIEF MEASURES
The cost of Covid-19 Tax Relief Measures alone is estimated at R70 billion arising from tax deferrals without penalties and interests, Employee Tax Incentive extensions as well as the temporary suspension of the Skills Development Levy.
This number:
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Includes R5 billion for case-by-case applications for deferrals, but we predict this number to be significantly higher, and
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Excludes a projection of a decline in general compliance simply due to business struggling with cash flow, and unable to repay the deferred payments during the current fiscal year, or simply defaulting and/or failing completely
We therefore project that the total impact of the Tax Relief Measures is likely to be much higher than the R70b initial assessment
IMPACT ON ECONOMIC CAPACITY DUE TO COVID-19 AND LOCKDOWN
A major concern that we have from a revenue perspective is not only a downward trend of economic activities, but a loss of economic capacity due to businesses closing and job losses. The full impact of this will manifest over the next few months, and also depend on how government manages the phasing in of economic activities.
Many businesses will simply not be able to operate profitably at reduced capacity and will fail completely. Those who have started businesses from scratch, will know how hard it is to start a business – it often takes 100 business ventures to start one successfully! The loss of economic capacity in our economy will have long-term tax revenue implications.
Our initial assessment is informed by the following data points. According to STATSSA report on Liquidations & Insolvencies
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Liquidations increased by 12.3%, for February 2020 vs February 2019, with an increase in voluntary applications
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Insolvencies increased by 13.9% for January 2020 vs January 2019
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According to directives finalised, we can report an increase of 1 622 employees retrenched in April 2020 compared to April 2019 – an increase of almost 9% – Total retrenchment in April 2020 amounted to just over 20 000.
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STATSSA also conducted a perception survey, targeting VAT registered businesses, with a reference period of 30 March – 13 April 2020, and reported:
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42% businesses feel they cannot operate through the Covid-19 pandemic
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54% businesses felt they could survive between 1-3 months
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46.4% of businesses have temporarily closed their doors
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Only half of the respondents felt their workforce would not be affected
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36.8% businesses expect that they will definitely decrease their workforce
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20% of businesses have laid off staff in the short term
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28% businesses have decreased working hours
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85.4% businesses reported their turnover below their normal level for the period
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2/3 businesses feel that the impact will be worse than 2008/9 recession
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Of the 707 businesses surveyed:
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Manufacturing – 180
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Trade – 71
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Logistics & Communications – 52
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Real Estate & Business Services – 44
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Construction – 39
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tralac’s Daily News selection
Wamkele Mene: Digital trade the only tool for Africa’s economic recovery (EWN)
AfCFTA secretary-general Wamkele Mene said he had gone back to the drawing board to review his priorities post the COVID-19 pandemic and digital trade may be the only way to awaken the sleeping giant. Mene said digitisation was already a priority before for the AfCFTA before COVID-19, and its advantages were even more pronounced now. He said the African Union was already working to develop digital trade infrastructure to enable the trade agreement to be effectively implemented. “I’m talking from a customs point of view and for goods-in-transit, it’s very important to establish trade facilitation digital platforms but we don’t have them yet at the pan-African level, which is what we are striving towards and this crisis has underscored the need for us to accelerate that work and rely more on digital trade platforms,” said Mene.
In Mene’s vision, the AfCFTA will ensure that rules of origin support Africa’s industrial development objectives. He wants car manufacturers in African countries to use African components that can be manufactured even by countries that don’t have an automobile strategy. He sees more agro-processing because of its high-value addition and contribution to food security, as well as centres of excellence that will benefit not only countries that are industrialised like South Africa but all countries. “Ghana, Nigeria, Rwanda, Kenya, Uganda, Morocco and South Africa all have an auto strategy – all of them see a potential for inward investment if they establish a manufacturing base for automakers to come and invest. We can harness this through the agreement into a pan African value chain of automobiles and other sectors.”
The WTO Secretariat has published a new information note looking at how the COVID-19 pandemic has affected e-commerce, including the implications for cross-border trade. It notes the increased use of e-commerce as consumers adapt to lockdowns and social distancing measures and draws attention to several challenges, such as the need to bridge the digital divide within and across countries. The COVID-19 pandemic has made it clear that e-commerce can be an important tool/solution for consumers in times of crisis, and that it is also an economic driver, including for small businesses. However, the pandemic has highlighted not only the importance of digital technologies in general, but also several vulnerabilities across the world. These experiences and lessons raise some useful questions:
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Should new and practical e-commerce solutions to enable the fast and secure crossborder movement of goods and services be considered, to help economic recovery and job creation after the COVID-19 pandemic?
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Network capacity and higher bandwidth services have proved to be crucial, not only during the pandemic itself, but also for e-commerce and economic inclusion in general. Even more importantly, they have demonstrated their role in the delivery of essential services and the equipment of less connected communities when faced with a global crisis. Given these insights, what can WTO members do to improve communications networks and services?
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What can the WTO do to assist e-commerce in developing countries and LDCs, to reduce the digital divide and promote economies that are more resilient to possible future crises or shocks?
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Are there additional actions relating to e-commerce at the WTO that can be taken to assist MSMEs?
pdf E-commerce, trade and the COVID-19 pandemic: WTO Information Note (150 KB)
South Africa: Statement by SARS Commissioner Edward Kieswetter (SARS)
Whilst it is early days, our initial view is that revenue performance will be lower than the February Budget announcement by between 15%-20%. This means that revenue under-recovery could move up to R285bn. From the preliminary assessment of revenue performance of the first month we can report: Import tax overall down on prior year by 19.7%: Import VAT down 25% on prior year - tax value R1.6bn, Customs duties down 11.8% on prior year - tax value R100m. [Download: pdf Statement (1.20 MB) ]
Botswana to slowly end lockdown (Xinhua)
The country’s legislators will convene an emergency parliament meeting on Wednesday to discuss new regulations expected to usher in opening of businesses and schools, under strict supervision. According to proposed regulations, presented by President Mokgweetsi Masisi to parliament on Tuesday, the Southern Africa country wants to gradual allow businesses, traders or school to operate after satisfying Health Services Director or any authorized official that they will prevent the spread of COVID-19.
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Nigeria: FG waives import duties for medical supplies, orders Customs to expedite clearing
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OBG: Digital solutions offer hope for Nigeria as it begins phased easing of Covid-19 lockdown
The Great Shutdown: How COVID-19 disrupts supply chains (ITC)
The factory shutdown in the EU will have the strongest repercussion for the supply-chain exports of other countries. Why? Because the EU is the largest importer of manufacturing inputs (China is the largest exporter), the largest market for three of the world’s five geographic regions, and highly integrated into global value chains. The EU is the main importer of manufacturing inputs from both Africa and Asia and buys almost as much of manufacturing inputs from Latin America as the United States does. Our estimations suggest that EU imports of manufacturing inputs will drop by $147bn, out of which $101bn is intra-EU trade, and $46bn is imports from other regions. China and the United States come second and third, with shutdowns in China and the United States triggering the reduction of imports of manufacturing inputs by $42bn and $38bn respectively (see the columns in the table below). The combined reduction amounts to $228bn, or 2.4% of the total manufacturing imports by the G3, or 11% if only GVC trade is considered.
African exporters may lose over $2.4bn in global manufacturing value-chain exports due to the shock caused by factory shutdowns in the G3. About three quarters of this loss is caused by the temporary disruption of the supply chain linkages with the EU, while the remaining quarter of the reduction being caused by the shutdowns in China and the United States. When it comes to global value chains, Africa is one of the least integrated regions, and hence experiences the least severe effects of supply-chain disruptions originating in the G3. [The authors: Olga Solleder, Mauricio Torres Velasquez]
Foreign direct investment and global value chains in the wake of COVID-19 (World Bank)
At the epicenter of this turmoil are multinational corporations - companies that made investment decisions to fragment and relocate production, in a process that has shaped the geography of global value chains over the last three decades. These enterprises account for 22% of global output and contribute about 70% of total trade—particularly in sectors highly involved in global value chains, such as motor vehicles, electrical equipment, chemicals, and electronics (figure 2). Multinationals also contribute a substantial share of employment. U.S. multinationals alone employed 42.3 million workers worldwide in 2016 and represent 22% of total private industry employment in the United States. Multinational companies in the Netherlands created approximately 1.4 million full-time jobs in 2014—almost 20 % of all full-time jobs created in the country. In China, multinationals employ more than 26 million workers, accounting for 6.4% of total urban employment. [Note: This blog is part of a three-part series on the way in which global value chains are affected by COVID-19]
UNCTAD’s latest Investment Policy Monitor has been posted: This Special Issue of UNCTAD’s Investment Policy Monitor (pdf) analyses what this bleak forecast means for investment policymaking and provides an updated overview of specific investment policy measures that countries have undertaken since the release of UNCTAD’s latest regular IPM in early April 2020. Looking ahead, the pandemic is likely to have lasting effects on investment policy making. It may reinforce and solidify the ongoing trend towards more restrictive admission policies for foreign investment in industries considered as being of critical importance for host countries. At the same time, the pandemic may result in more competition for attracting investment in other industries as economies strive to recover from the crisis and disrupted supply chains need to be re-established. The crisis may also enhance the utilization of online administrative approval procedures for investors and staff. It is also expected that the post-pandemic period will witness an acceleration of countries’ efforts to reform their IIAs to ensure their right to regulate in the public interest, while maintaining effective levels of investment protection. The magnitude of the post-pandemic reconstruction task and the priorities in this process will differ from country to country. However, all governments will face the common challenge of how to make the best use of investment policies in bringing their economies back onto a sustainable development path. In addition to national efforts, successful international cooperation will be crucial, especially for the recovery of developing countries, including least developed countries.
Paul Akiwumi, Giovanni Valensisi: COVID-19 exacerbates poverty risks in the poorest countries (UNCTAD)
To provide a preliminary appraisal of the impact of COVID-19 on LDC poverty levels, UNCTAD has examined the International Monetary Fund’s growth forecasts in GDP per capita (in constant 2011 international dollars) and looked at the effects, stemming from its downward revision following the outbreak of the pandemic. This allows the direct comparison of poverty estimates consistent with the IMF’s reassessment of growth forecasts between October 2019 and April 2020. The results of this UNCTAD research are highlighted in Figure 1: the worsening economic outlook following the emergence of COVID-19 entails an increase of over three percentage points in LDC poverty headcount, with more than 33 million additional people living in extreme poverty. While this exercise is fraught with uncertainties, there are good reasons to believe that these figures are – if anything – a conservative estimate.
Tanzania: Rapid eTrade Readiness Assessment (pdf, UNCTAD)
As Tanzania continues to diversify its economy, it has ambitions to become a regional e-commerce hub. Although the country is geographically well-positioned to reach this goal and has made strides in key areas such as mobile money and logistics infrastructure, an enabling environment across policy areas will be key. The Government should take an integrated approach to policy action, with a clear focus on mainstreaming e-commerce into national development planning and engaging more strongly with the private sector. Deeper trust in digital commerce will also need to be developed among consumers, merchants and investors. To overcome the interconnected challenges and create an enabling e-commerce environment, the Government should begin developing a national e-commerce policy and strategy. This should be led by the Ministry of Industry and Trade and be anchored in the National Committee on Trade Facilitation. E-commerce vendors and the start-up/innovation community should become part of the NCTF, as part of broader efforts to strengthen public-private sector dialogue and partnerships.
The potential benefits of e-commerce are not limited to external trade; it can also spur domestic markets and provide a key avenue for income generation for women. Most Tanzanian MSMEs today, many of which are owned or operated by women, are unable to immediately access international markets. The large domestic market, as well as the market of the East African Community Customs Union, can serve as stepping stones. The Government has signalled interest in establishing a national e-commerce platform, which could help Tanzanian MSMEs deepen their access to domestic and regional markets.
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A new normal: UN lays out roadmap to lift economies and save jobs after COVID-19
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AERC: The impact of regulations on investment in mobile telephone infrastructure in SADC countries (pdf)
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Ireland is the latest country to join the African Development Bank
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UNCTAD: National trade facilitation committees lead reforms, respond to COVID-19
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Conservation in crisis: ecotourism collapse threatens communities and wildlife
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Regional responses to COVID-19 in Africa
Regional policy monitor
The regional economic communities (RECs) and the African Union, as well as interested stakeholders, have responded to the Coronavirus (COVID-19) pandemic and its impacts for trade across the continent. Below is a non-exhaustive list of regional responses, updated regularly from official sources.
Last updated: 8 December 2020 - 22:00 Southern African Standard Time
Visit the COVID-19 Trade and trade-related measures in Africa page for measures adopted by African countries.
tralac’s Daily News selection
The Bureau of the Council of Ministers of the AfCFTA will convene a virtual meeting on Wednesday to discuss AfCFTA implementation issues and a trade response to COVID-19. Senior officials will meet tomorrow.
AfroChampions AfCFTA Year Zero report: highlights (Modern Ghana)
Ghana has been ranked as the fifth most committed country to the implementation of the AfCFTA by the policy and advocacy think tank, AfroChampions. But Ghana did not feature in the top 10 with respect to implementation readiness, according to the group’s AfCFTA Year Zero report. In the combined ranking of Commitment and Implementation Readiness, Ghana was in the sixth spot. The reported noted that some of the most committed countries such as Ghana, Mali, Togo and Uganda “are not necessarily the most prepared in terms of trade infrastructure, customs efficiency and access to credit for industry.” The report added: “Conversely, some of the least committed countries (such as Botswana, Namibia and Tanzania) performed very strongly in terms of implementation readiness.”
The most AfCFTA committed country is Rwanda which scores 83.93% on the commitment scale, and the least committed country is Eritrea with a score of 0.85%. The country with the best implementation readiness is South Africa, with a score of 68%. In the combined ranking of Commitment and Implementation Readiness, Rwanda emerged top of the table. The report further noted that none of the three largest economies on the continent; South Africa, Egypt and Nigeria, feature in the top ten overall country performance. [Note: The report has not yet been posted on the AfroChampions website]
How the AfCFTA will improve access to “essential products” and bolster Africa’s resilience to respond to future pandemics (Brookings)
The pandemic has also highlighted the importance of digitalization for accelerating intra-African trade. As noted above, the inability of the AfCFTA to continue remote negotiations is directly related to poor broadband connectivity on the continent. Moreover, e-commerce is proving critical for businesses to continue to operate and for consumers to access essential goods and services. Creating a thriving environment for e-commerce and e-transactions requires investment in a well-functioning telecommunications infrastructure, in addition to regulatory frameworks that create the enabling environment for e-commerce. This highlights not only the importance of negotiations in telecommunications services, but also the critical importance of pursuing negotiations in Phase III on e-commerce. [The authors: Landry Signé, Colette van der Ven]
Postponing AfCFTA would be a mistake: this is how we can avert it (African Business)
In an open letter to the continent’s political leaders, prominent figures from the world of African business explain why a full-blown postponement of AfCFTA would be a mistake and how some aspects can be rescheduled. “There are aspects of AfCFTA that can be rescheduled because of Covid-19 but there are aspects of the July start of trade that must be implemented – not in spite of but because of COVID-19. This is the conversation we should be having. Which aspects should be rescheduled; and which aspects must start in July 2020?”
ICC joins global trade organisation heads for summit on impact of COVID-19 on Africa
ICC Secretary General John W.H. Denton participated in a historic summit last week to discuss the impact of COVID-19 on the AfCFTA. Convened by Africa investor (Ai), the summit brought together the heads of global trade organisations and recognised the importance of pioneering partnerships and collaboration with the private sector and international organisations in restoring trade confidence and flows in the fight against COVID-19, and in building trade resilience in anticipation of future pandemics. The importance of accelerating the adoption of African eTrade, Paperless Customs and RegTech innovation also featured highly on the agenda.
The Summit, which took place on 30 April, highlighted the urgent need for harmonised regulation to help the African private sector – in particular SME’s – to digitise their businesses, to be able to trade and compete in the ‘Post COVID-19 Contactless Economy’, where ‘Trade and Customs Distancing’ will be the new normal. The African private sectors’ AfricaPLC Industrial eTrade Platform initiative was welcomed as a critical African eTrade and Finance enabler.
South Africa: ABSA’s commentary on the March merchandise trade figures (pdf, ABSA)
Last Thursday, the South African Revenue Service reported a record merchandise trade surplus of R24.3bn in March, up from a downwardly revised surplus of R13.7bn in February (previously: R14.2bn). This was well above the Thomson Reuters consensus of R9.0bn and our forecast of R10.0bn. The March surplus reflects both import compression and stronger exports. Following a robust February balance, exports rose by 8.5% m/m to R118.5bn, but imports fell 1.3% to R94.2bn. The rise in exports was mainly due to the value of precious metals and stones rising a further 21.0% m/m to R26.0bn, fuelled by surging palladium and rhodium prices that hit a record high in February. Meanwhile, imports declined mainly as a result of the value of textiles falling by 35.0% m/m to R3.0bn. We believe that the fall in the textile imports value in March was likely reflecting early COVID-19 supply disruptions from China. The March data bring cumulative merchandise trade surplus for Q1 to R270.6bn on a seasonally adjusted and annualised basis, equivalent to 5.1% of GDP. Assuming the structural ‘invisibles’ balance remains at -3.3%, we now forecast a current account surplus of 1.7% in Q1.
Trump administration pushing to rip global supply chains from China - officials (Reuters)
The Trump administration is “turbocharging” an initiative to remove global industrial supply chains from China as it weighs new tariffs to punish Beijing for its handling of the coronavirus outbreak, according to officials familiar with U.S. planning. “We’ve been working on [reducing the reliance of our supply chains in China] over the last few years but we are now turbo-charging that initiative,” Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the US State Department told Reuters. “I think it is essential to understand where the critical areas are and where critical bottlenecks exist,” Krach said, adding that the matter was key to US security and one the government could announce new action on soon.
The United States is pushing to create an alliance of “trusted partners” dubbed the “Economic Prosperity Network,” one official said. It would include companies and civil society groups operating under the same set of standards on everything from digital business, energy and infrastructure to research, trade, education and commerce, he said. The US government is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “move the global economy forward,” Secretary of State Mike Pompeo said April 29. These discussions include “how we restructure supply chains to prevent something like this from ever happening again,” Pompeo said.
Doug Barry, spokesman for the US-China Business Council: “Diversification and some redundancy in supply chains will make sense given the level of risk that the pandemic has uncovered. But we don’t see a wholesale rush for the exits by companies doing business in China.”
Trade Dialogues on Food: remarks by WTO Deputy Director-General Alan Wolff (WTO)
1 in every 6 people around the world depends almost entirely on international trade to be fed and I want to expand on that. That’s 17% of humanity or 1.3 billion people. Currently, there are over 30 countries in the world that must rely on imported food, not to increase their food variety, but to avoid starvation. There are many reasons for this situation that include poor agricultural productivity, and serious land and water limitations. Many of these countries lie in Africa, and some are in the Middle East.
Globally agriculture uses up around 40% of the global land area, and about 70% of the world’s total freshwater, mostly for irrigation. International trade in food is trade in land, trade in water and trade in energy. As the United Nations Development Program tells us, were a country such as Egypt to aim for food self-sufficiency it would need three River Niles not one. So I hope that this helps our viewers visualize just how critical it is to keep international trade in food flowing. Trade in food is not a luxury, but a must. Now reliance on international trade for food security is only likely to grow. According to the Potsdam Institute for Climate Impact Research, if you roll the clock forward, by the year 2050, around 50% of humanity could depend on international trade to be fed and not just today’s 17%. [Trade Dialogues on Food]
Africa looks to build food self-sufficiency as COVID disrupts global supply chain (Cornell Alliance for Science)
“The Covid-19 pandemic provides a golden opportunity for Ghana to optimize our potential for food production to meet domestic needs, grow our agricultural exports and create jobs for the youth of this country,” Dr. Owusu Afriyie Akoto, Ghana’s Minister for Food and Agriculture, told a media briefing in the capital Accra. “In the wake of export bans in countries from where we import a large chunk of our food items like rice and poultry, it provides a compelling situation for us to put strategic measures in place to ramp up production for all our key staples,” the minister added. “It also gives us the opportunity to intensify agro-processing, thus reducing post-harvest losses and ensure year-round food availability, whilst creating the needed jobs.”
Africa’s poultry industry, for example, has struggled over the years because imported products are usually less expensive than those that are home-produced. This has led to the local poultry industry collapsing in many African countries. Isn’t it curious that poultry products produced in France and shipped across the Atlantic Ocean, all the way to Togo, could cost about 50% less than chicken meat produced in the capital city of Lome?
Related:
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COVID-19 in Africa – some reflections on trade matters
Reality check
Poverty, inequality and exclusion are key factors contributing to the devastating effects of COVID-19 on all African countries. Issues like fragile healthcare systems, food insecurity and large informal economies make this much more than a massive health and economic crisis. COVID-19 is a fundamental development crisis for Africa.
A recent McKinsey report highlights the extensive impact of COVID-19 on Africa’s economies – noting the slowdown in economic growth, job and productivity losses, and bankruptcies. Importantly, the analysis also notes that school and university closures will impact future human resource capacity and are likely to particularly impact girls, some who may not return to school.
The interaction between gender and the pandemic is particularly important in Africa. In many countries the majority of healthcare workers (nurses) are women, and women are also primary care providers at home.[1] Informal traders and especially informal cross-border traders are predominantly women. Women’s roles in agriculture vary across countries; in some, for example Uganda, Tanzania and Malawi, women’s labour input into crop production is higher than 50%.
World Health Organisation (WHO) Regional Director for Africa Dr. Mathsidiso Moeti has noted, “for socially restrictive measures to be effective, they must be accompanied by strong, sustained and targeted public health measures that locate, isolate, test and treat COVID-19 cases.” Nationwide lockdowns have been implemented in a number of African countries, including Kenya, Uganda, the Republic of the Congo, Botswana, Zimbabwe and South Africa.
South Africa’s initial stringent lockdown regulations were eased when it became apparent that a complete lockdown was not feasible. Social distancing, lockdowns and recommendations to frequently wash hands mean very little when your household does not have access to running water. Compound this with living with members of your extended family in a small corrugated iron shack, and you are all dependent on the income that your mother generates through cross-border trade.
Lockdowns, social distancing and other measures, that include trade restrictions, aimed at reducing the transmission of the virus also mean loss of income and jobs, as well as closure of small and vulnerable businesses. Making trade easier and less costly with due safety measures should be a key policy objective.
The pernicious effect of non-tariff barriers (NTBs) on intra-Africa trade far exceeds that of tariff barriers. Policy makers should not add unnecessary NTBs during the crisis, and COVID-19 should push us to look to digital solutions to reduce the transaction costs of trade.
COVID-19 and intra-Africa trade
Intra-Africa trade remains low by comparison with other regions. Africa’s exports are predominantly commodities like oil, minerals, cocoa and coffee, so it can be expected that for the foreseeable future Africa will continue to trade mostly with global trading partners. Growth slowdowns across the world will mean lower export earnings.
In 2018, 15% of Africa’s total exports were destined for other African countries. South Africa is a key driver of intra-Africa exports, accounting for 34% of the total intra-Africa exports. South Africa’s distribution industries (logistics, freight forwarding, wholesale and retail) are important conduits for its exports of agricultural and industrial goods, especially in east and southern Africa. Approximately two-thirds of intra-Africa trade takes place in the Southern African Development Community (SADC), and about half within the Southern African Customs Union (SACU).[2]
At this time, South Africa’s deep integration into southern Africa especially makes the region very vulnerable to any trade measures adopted by the country. Delays at borders and export restrictions[3] will impact vital supply chains across this region and exacerbate the COVID-19 impact on fragile neighbouring economies. A second-round effect could well be a new wave of migration to South Africa, as those left destitute seek income opportunities elsewhere.
Informal cross-border trade
Estimates of intra-Africa trade generally do not include informal cross-border trade (ICBT).
Studies across the continent indicate that ICBT is substantial and that it includes both agricultural as well as industrial goods.
ICBT is rarely illegal. Lack of formal employment opportunities in most African countries make informal economic activities the only viable income-generating opportunities. Tariffs, complex rules of origin and other NTBs associated with customs procedures make ICBT the preferred trade option. Time required to comply with procedures is also a major factor for informal traders. Lack of access to credit means that traders have to make regular trips across a border – weekly or even daily – to ensure reliable household income. For customers, ICBT has during food crises often been more reliable than official food support.
Since 2005, the Uganda Bureau of Statistics and the Bank of Uganda have been doing surveys of ICBT with east African neighbours. The 2016 study concludes that ICBT accounts for between 25-40% of formal intra-regional trade flows. In SADC, ICBT is also significant, accounting for between 30-40% of total intra-SADC trade, with an estimated value of US$17.6 billion. Women make up the largest share of informal traders; more than half in western and central Africa and about 70% in southern Africa, according to the Food and Agricultural Organisation (FAO). Unsurprisingly, there is increasing evidence that ICBT plays an important role in food security and poverty alleviation.
ICBT includes agricultural goods (staples such as maize, rice, soybeans) as well as industrial goods (shoes, clothes). Some regional economic communities, e.g. the Common Market for East and Southern Africa (COMESA), have introduced Simplified Trade Regimes (STR) for small traders, while others like SADC have not.
COVID-19 is a good reason to adopt STRs in regional economic communities where they don't exist yet, and to review and improve the regimes that do exist.
Trade policy responses to COVID-19
Protectionist policies at the best of times and most certainly during times of crisis are not advisable. The reality is that if all adopt such beggar-thy-neighbour policies, we will all lose. This will only serve to deepen the crisis and make recovery more difficult and costly. With unrestricted trade, goods can move from where there is a surplus to where there is a deficit. This is necessary not only for medical equipment, medicines and personal protective equipment but also for all other goods. Agricultural trade is of course particularly important, especially for food insecure households in Africa.
The World Bank has published a list of trade policy do’s and don'ts in response to COVID-19. The do’s include measures to facilitate trade by reducing tariffs to zero on COVID-related medical products and food products, and removing quantitative restrictions and export taxes. The don’ts include trade restrictions to protect domestic industry and closing borders. Indications are, however, that most African countries are implementing measures that will impact trade – including export restrictions for specific products and other border measures that will slow trade and reduce supply chain efficiency.
Source: https://logcluster.org/document/global-logistics-cluster-covid-19-cargo-...
These restrictions apply to trade in goods, but also impact transport, logistics and other services. This is a reminder that the impact of trade restrictions will permeate throughout the economy. We can expect that adjustment costs after the crisis for developing and especially for least developed countries (LDCs) will be markedly higher than for developed countries. The fact that Africa is home to 33 of the world's 47 LDCs makes the continent particularly vulnerable both now and post-crisis. This makes it even more important for African countries to be cautious when considering restrictive trade measures.
This article was first published by Trade for Development News by the EIF.
[1] Burkina Faso, Burundi, Egypt, Eswatini, Ghana, Nigeria, Mozambique and Kenya are among the African countries where the majority of nurses are women.
[2] All SACU member states (South Africa, Botswana, Lesotho, Namibia and Eswatini) also belong to SADC.
[3] As of 20 March, 2020 export of face masks, disinfectants, alcohol-based sanitisers and hydroxychloroquine, require export permits, see details – http://www.itac.org.za/upload/Covid-19%20Export%20Control%20Reg%2027%20March%202020.pdf. South Africa has also introduced rebates (subject to a permit) on imports of essential products – these include food preparations, medicines and medical supplies, for details, see http://www.itac.org.za/upload/Rebate%20Application%20(COVID-19).pdf
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A new normal: UN lays out roadmap to lift economies and save jobs after COVID-19
There will be no return to the “old normal,” governments must act to create a new economy and more jobs.
The urgent health crisis that is COVID-19 has created a historic recession with record levels of deprivation and unemployment, creating an unprecedented human crisis that is hitting the poorest hardest, especially women and children. In a new framework released today as a roadmap to support countries’ path to social and economic recovery, the United Nations calls for an extraordinary scale-up of international support and political commitment to ensure that people everywhere have access to essential services and social protection.
The “United Nations Framework for the immediate socio-economic response to COVID-19: Shared responsibility, global solidarity and urgent action for people in need” calls for protecting jobs, businesses and livelihoods to set in motion a safe recovery of societies and economies as soon as possible for a more sustainable, gender-equal, and carbon-neutral path – better than the “old normal”.
“This is not only a health crisis but a human crisis; a jobs crisis; a humanitarian crisis and a development crisis. And it is not just about the most vulnerable. This pandemic shows that we are all at risk because we are only as strong as the weakest health system. Its unprecedented scale demands an unprecedented response,” said United Nations Secretary-General António Guterres, who presented his report on the socio-economic impacts of COVID-19 “Shared Responsibility, Global Solidarity” in March.
Related: pdf Global Humanitarian Response Plan COVID-19: April-December 2020 (1.98 MB)
“Everything we do during and after this crisis must be with a strong focus on building more equal, inclusive and sustainable economies and societies that are more resilient in the face of pandemics, climate change and the many other global challenges we face,” he said. This new framework released today sets the way United Nations entities will deliver this vision on the ground. Decisions made in the next few months will be crucial for the progress towards the Sustainable Development Goals (SDGs), the UN’s framework for social and economic recovery stresses.
Noting that during the Ebola outbreak in 2014, more people died from the interruption of social services and the economic breakdown than from the virus itself, the framework focuses on protecting the needs and rights of those most affected by the pandemic, starting with the most vulnerable countries, groups, and those who risk being left behind.
Drawing lessons from the 2008-2009 global economic and financial crisis, the framework notes that countries with strong social protection systems and basic services suffered the least and recovered the fastest. To prevent billions of people from sliding into poverty, governments around the world will need to rapidly adapt, extend and scale-up safety ‘cushions’, such as cash transfers, food assistance, social insurance schemes and child benefits to support families.
For the impacts of COVID-19 to be reduced, the UN calls for an extraordinary scale-up of support to cope with the challenges ahead, including immediate social protection responses that consider differentiated impacts on vulnerable groups, children, women, men, and those in the informal sector. This is particularly urgent considering that 4 billion people, more than half of the world population – including two out of three children – have no or inadequate social protection.
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How countries can expand access to digital financial services
A new World Bank report provides valuable insights for policymakers and for financial sector players seeking to expedite financial inclusion and development of digital financial services.
Access to affordable financial services is critical for poverty reduction and economic growth. Countries with deeper, more developed financial systems have higher economic growth and larger reductions in poverty and income inequality. For poor people, access to and use of basic financial services can improve incomes, increase resilience and improve their lives. Women especially benefit.
Far too many people – 65 percent of adults in the developing world – lack access to even the most basic transaction account that would allow them to send and receive payments safely and easily, much less the savings, insurance, and credit services that would help them expand their businesses, mitigate risks and plan for their futures.
Digital financial services, powered by fintech, have the potential to lower costs by maximizing economies of scale, to increase the speed, security and transparency of transactions and to allow for more tailored financial services that serve the poor. This report – Digital Financial Services – describes the tools of digital finance, the successful business models and policies for encouraging their growth. It explores risks and challenges of new types of services and the legal and regulatory frameworks needed for confronting them. Finally, it includes country experiences with promoting the expansion of digital financial services and the obstacles along the way.
The current COVID-19 pandemic has amplified the urgency of utilizing fintech to keep financial systems functioning and keep people safe during this time of social distancing, falling demand, reduced input supply, tightening of credit conditions and rising uncertainty. At the same time, these new technologies must be designed and implemented carefully to manage their risks, particularly for the poor and vulnerable, so as not to exacerbate the challenges posed by this crisis. There is also an urgent need for investment in the prerequisites for developing digital financial services, such mobile broadband infrastructure – including in remote areas – expansion of digital identification, and open application programming interfaces. These investments should be complemented with the relevant legal and regulatory frameworks that can allow most people to benefit from digital financial services and ensure a competitive ecosystem.
Fintech is helping governments quickly and securely reach people with cash transfers and other forms of financial assistance and reach businesses with emergency liquidity. It is allowing people to transfer funds – including cross-border remittances – and to pay bills from their home, or in a market or store setting, with limited physical contact. But the potential is much larger than what has been achieved. The coronavirus crisis has highlighted the benefits of digital financial services in many different dimensions and its critical role in achieving the Sustainable Development Goals.
In this way, increasing usage of digital financial services can hasten resolution of the health emergency, support economic recovery and underpin the return to economic growth. Over the longer-term, it will contribute to economic development and ending poverty. We hope this report will provide valuable insights for policymakers and for financial sector players seeking to expedite financial inclusion and development of digital financial services.
This publication was produced by a World Bank Group team led by Ceyla Pazarbasioglu, Alfonso Garcia Mora, Mahesh Uttamchandani, Harish Natarajan, Erik Feyen and Mathew Saal.
COVID-19: Using economic stimulus to reduce the long-term hunger impact
Beyond the COVID-19 health emergency, a recession looms, and countries ought to take measures now to soften the longer-term impacts on hunger and food insecurity, a new FAO policy brief says.
Forecasts for the global economy vary in details, but all point to a historic downturn. The International Monetary Fund now expects worldwide gross domestic product to shrink by 3.0 percent in 2020, compared to January projections of 3.3 percent growth. The large downturn is also expected to usher in the first outright recession in sub-Saharan Africa – where about a quarter of the population is undernourished – in 25 years.
In the 2019 State of Food Security and Nutrition in the World (SOFI) report, FAO analysts noted that economic slowdowns and downturns helped explain rising undernourishment levels in 65 of the 77 countries that recorded such rises between 2011 and 2017. That underscores the risk of adverse hunger trends ahead.
The new FAO Policy Brief offers an analysis of food supply data since 1995, which is linked to FAO's statistical development of the prevalence of undernourishment (PoU) indicator, and correlates them to past local economic trends in countries that are net food importers.
It notes that in the absence of timely and effective policies, millions of people are likely to join the ranks of the hungry as a result of the COVID-19-triggered recession. That number will vary according to the severity of economic contractions, ranging from 14.4 million to 38.2 million people, or even 80.3 million should there be a truly devastating contraction of 10 percentage points in all 101 net food-importing countries' GDP growth.
The Policy Brief warns that the actual outcome could be worse if current inequalities in access to food are worsened. It includes scenarios and methodology and a technical note was developed and published simultaneously to explain those aspects in further detail.
"The Policy Brief offers evidence in favor of making hunger reduction a priority of the economic stimulus measures to address COVID-19," says Marco V. Sánchez, Deputy-Director of FAO's Agricultural Development Economics Division.
Safeguarding trade and food supply chains and promoting social protection to ensure food access
As the world is not facing food shortages, FAO is urging that countries do their best to keep trade flowing and food supply chains alive and increase agricultural output during the international health crisis. The large-scale fiscal and monetary responses that governments are crafting to respond to the expected blow to economic growth, represent an opportunity to tackle the longstanding issues in many middle and low-income countries of inequality in accessing healthy food.
Cash and in-kind transfers, new credit lines for key actors in food systems, safety nets, income support, distribution programmes such as food banks, and continuing school-feeding delivery, should be directed to the most vulnerable and poorest people. Such targeting, the brief enjoins, will also maximize the effect that public resource outlays have on keeping demand more dynamic and safeguarding people from falling into chronically weak dependencies that can last for years.
There are encouraging examples of "stimulus for food" initiatives in low and middle-income countries – at least 106 countries have introduced or adapted social protection measures in light of the COVID-19 pandemic, according to a real-time review of social protection policy measures from the World Bank and the International Labour Organization – although the ability of African countries to deploy cash transfers has so far been weak.
International cooperation and assistance is needed to help the poorest and most vulnerable countries, and this can be linked to recipient countries reallocating more of their own resources to achieve the desired objectives and avoiding the highly adverse outcome of increased inequality in access to food.
Targeting public stimulus measures towards initiatives to bolster food access during the pandemic also offers an opportunity to build more lasting resilience into food systems to safeguard them against economic slowdowns and downturns in the future.
Related FAO Policy Briefs
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EAC unveils COVID-19 Response Plan
The East African Community has unveiled a comprehensive COVID-19 Response Plan to reinforce measures to protect and prevent further spread of the novel coronavirus pandemic within the region.
The response plan was developed following a directive by the Joint Meeting of Ministers responsible for Health, Trade and EAC Affairs held via Video Conference, which directed the EAC Secretariat to finalize and submit the EAC Regional COVID-19 Response Plan to the Partner States.
Among the key interventions proposed in the plan that was unveiled by the EAC Deputy Secretary General in charge of the Productive and Social Sectors, Hon. Christophe Bazivamo, on behalf on behalf of the Secretary General, are risk communication and community engagement, which will entail strengthening sensitization programmes and awareness creation on COVID-19.
The response plan further seeks to ensure access to Infection, Prevention and Control (IPC) materials, laboratory supplies and equipment by the EAC Organs and Institutions, and the EAC Partner States.
Another key intervention is to strengthen the region’s capacity for COVID-19 surveillance and reporting at all key border points, and build knowledge on safety measures, existing prevention and control strategies, and relevant regional guidelines.
Mitigation of the fundamental impacts of the pandemic on the vital economic and social sectors of the region including Micro, Small and Medium Enterprises is another key intervention outlined in the document.
Other proposed measures include: building regional capacity to support Partner States on surveillance, monitoring and coordination of preparedness and response to the pandemic; research and development, and resource mobilization.
Other regional responses from across the region
The EAC is working with Partner States and Development Partners to mobilize various stakeholders to achieve a broad coalition in stepping up preparedness against COVID-19 in the region. These include airport authorities in Partner States’ points of entry, government regulatory agencies and other regional organizations.
Among the efforts taken so far by the Community include training of EAC Mobile Laboratory experts with one expert per Partner State having completed training on COVID-19 laboratory diagnosis at the EAC Headquarters in Arusha, Tanzania.
The Community has also procured nine (9) mobile laboratories and is finalizing the distribution of the same to Partner States in April 2020. The mobile labs have a biosafety level ¾ capable of diagnosing Ebola and COVID-19.
“Staff from the Partner States have been trained and the laboratories are currently being handed over to respective countries with Burundi, Rwanda, Tanzania and Uganda having already received their labs,” said Hon. Bazivamo.
“Each EAC Partner State has received 100 test kits with an additional 500 having been ordered and will be will be distributed to the Partner States as soon as they are received,” added Hon. Bazivamo.
The bulk of the response will be managed at Partner States’ level with few regional interventions being coordinated by the EAC Regional Ad Hoc Coordination Committee (EARCC).
The EARCC (renamed Regional Taskforce on COVID-19) is linked to the national taskforce of each Partner State, and works closely with implementing agencies including GIZ, TradeMark East Africa, JICA and USAID KEA.
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Insights on African businesses’ reactions and outlook to COVID-19
New ECA-IEC report takes stock of the impact of COVID-19 on businesses and trade
The African Trade Policy Centre (ATPC) of the United Nations Economic Commission for Africa (ECA) and International Economics Consulting Ltd., jointly carried out the first comprehensive survey on the COVID-19 pandemic and its economic impacts across Africa in mid-April. There were 210 respondents, made up of a mix of micro, small, medium and large enterprises from across the 54 African countries. The results have highlighted the major challenges that firms are facing due to the current crisis.
Many companies have expressed their concern about the direct impact on company turnover, with the smallest firms expecting to be hit the hardest. The lack of operational cash flow, lower capacity utilisation, disruption in supply chains and decrease in demand may force some businesses to close down, with obvious adverse effect on workers, finds the survey.
The survey also finds that access to credit is elusive to businesses of all size, with less than two fifths of requests being granted, while one to two thirds of loan requests are not even offered a response. The hardest hit, again, being the smallest companies. Across the board, enterprises have also signalled their disappointment with their own government responses to the crisis.
However, the lack of external support has forced companies to come up with novel ways of conducting business. A number of effective measures have been adopted by businesses to mitigate the effects of operating in this new environment, such as adopting technology, working remotely and using e-commerce. Generally, while firms judge the short-term outlook on revenues to be severe, they are more optimistic over a longer time horizon (one year or more).
What the results mean for Africa going forward
ECA recently published its forecast of growth for Africa, suggesting between 1.8% and negative 2.6% for the continent in the year ahead.[1]
The survey results for mid-April, covering all African countries, highlight the major challenges faced by businesses. Four fifths of companies expect a direct impact on their turnover, with the smallest firms hit the hardest. Concerns surrounding cashflow rank highest in the minds of small business owners, while larger businesses are more concerned by reduced opportunities to meet customers and the need for diversification of product and service offerings. Workers are directly impacted by the crisis, particularly in smaller-sized companies, and often forced to work remotely when not laid-off.
Trade has been impacted and those businesses relying on overseas suppliers express challenges in accessing supplies. Greater difficulties are faced by manufacturing than service industries, whose production is more fragmented and more affected by physical barriers arising from the pandemic. While African supplies seem more readily available, they appear underutilised, pointing to opportunities for boosting intra-regional trade.
Access to credit during COVID-19 has proved elusive for all businesses, regardless of size, but once again small businesses have been hit the hardest. The main use of credit is to finance working capital and between just one sixth to two fifths of requests for financial support are positively responded to by the financial institutions. More troubling is that between one third to two third of loan requests are not even offered any response.
The disappointment expressed by respondents to government responses has forced initiative from businesses. A number of effective measures have been adopted by businesses to mitigate the effects of operating in this new environment, such as adopting technology, working remotely and using e-commerce. Despite this, businesses would like to benefit from postponed tax payments, working capital, subsidised wages, access to low interest loans as well as seeing assistance to workers in the informal sector.
[1] pdf COVID-19: Protecting African Lives and Economies (1.36 MB)