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Tomorrow: President Ramaphosa engages African business leaders on the impact of COVID19
Members of the AU Bureau, other invited Heads of State and/or Government, the African Centre for Disease Control and Prevention and business leaders from some of Africa’s largest firms are expected to participate in the meeting. The engagement aims to foster business support for the African Union’s Joint Continental Strategy for the COVID-19 outbreak; and will discuss the development of a continent wide initiative to assure the resilience of the African economy, and Africa’s joint capacity to manage the economic consequences of the pandemic.
Julia Spies, Maria Cantero: Strengthening African value chains in medical supplies (ITC)
Some of the key suppliers of health products to Africa have recently introduced export restrictions, complicating the continent’s access to these essential materials. Access to goggles is particularly difficult as on average, 76% of African imports are subject to temporary trade measures. As a response to these shortages, African countries could consider ramping up regional production by adding value to available inputs and by cooperating with regional and global partners. Currently, only one in six litres of Africa’s disinfectant imports come from regional suppliers. By strengthening regional and global cooperation, this share could grow.
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Disinfectants require three inputs: ethanol diluted with distilled water, glycerine, and plastic bottles. Africa already produces ethanol, plastic bottles and caps in sufficient quantities. Providing nearly half a million bottles and caps corresponds to a fraction of Africa’s monthly exports of these products (0.2% and 0.1%), with Egypt and South Africa being the main suppliers. Likewise, the required 374,000 litres of ethanol constitute only 1.5% of the continent’s current monthly exports.
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Local glycerine production, however, might be insufficient to meeting the requirements for disinfectant production, calling for a global sourcing strategy in the short run². South Africa, the continent’s only net exporter of disinfectants, sources glycerine mostly from Malaysia and Argentina. An alternative supplier could be Germany with an unrealized export potential for glycerine of $2.9 million to South Africa, and $6.7 million to all Africa.
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For surgical gloves, Africa currently relies almost entirely on imports from non-African suppliers. Malaysia, China and India account for 84% of total imports. While surgical grade gloves can be produced using different types of materials, the most common one is latex. Some African countries have abundant rubber resources and could envisage dedicating some to the production of gloves. By using less than 1% of its monthly exports of latex, Côte d’Ivoire could produce the 13 million gloves that African health responders require each month to face COVID-19. Ghana and Cameroon also have relevant exports of latex but currently do not export any surgical gloves.
African regulatory agencies, ethics committees to expedite COVID-19 clinical trial reviews (WHO Africa)
National regulatory authorities and national ethics committees from across Africa have agreed to combine their expertise to expedite clinical trial review and approvals for new multinational preventive, diagnostic and therapeutic interventions to the COVID-19 pandemic. However, joint reviews are based on voluntary cooperation between the national regulatory authorities and ethics committees. Each country is solely responsible for granting regulatory approval. The agreement was reached during a virtual meeting convened by the World Health Organization (WHO) on 1 April 2020 under the platform of the African Vaccines Regulatory Forum (AVAREF), one of the Continental Technical Committees of the African Medicines Regulatory Harmonization Initiative.
WTO’s DDG Wolff: Policy coordination needed to address pandemic challenges
Is the post Covid 19 world going to be different? What is likely? What will the result be of a reevaluation by the private sector and by governments of global value chains? Will governments turn to what Pascal Lamy has called “precautionnisme”, the antithesis of the dominant motivating force that led to the creation of the multilateral trading system seven decades ago. To what extent will the urge to promote self-sufficiency, onshoring spread? How is this to be accommodated or shaped? Will the pressure for a number of countries to replace lost revenues result in a widespread desire to raise tariff rates (which in the case of many developing countries can be consistent with existing WTO obligations as applied rates are now at levels well below contractually bound rates)? Will a standstill be effective to resist a wave of trade-restrictive measures or will a positive counter, a trade liberalizing initiative be necessary? Where is leadership for the multilateral trading system to be found, and how should it best be expressed? To what extent is investment in the system required by all? Is participation in the system driven to some extent by altruism or is altruism, in reality, informed pragmatism? Is it useful to discern and seek to define common purposes?
UNCTAD’s Robert Hamwey: Environmental impacts of coronavirus crisis, challenges ahead
With the emergence of import restrictions in export markets and sharp declines in the availability of cargo transportation services, the coronavirus crisis has led to increased volumes of un-shippable agricultural and fishery commodities. Many export-oriented producers produce volumes far too large for output to be absorbed in local markets, and thus organic waste levels have mounted substantially. Because this waste is left to decay, levels of methane (CH4) emissions, a greenhouse gas, from decaying produce are expected to rise sharply in the crisis and immediate post-crisis months. As exports of agricultural and fisheries products have declined, production levels have plummeted, causing unemployment levels in both sectors to grow substantially. Many post-harvest processing workers in these sectors are women supporting households, causing extreme hardships, particularly for low-income women in developing countries where social safety nets are not in place.
IATA media briefing on COVID-19: remarks of Alexandre de Juniac
There is a group of passengers—about 60% who will return to travel relatively quickly. But an important 40% are telling us that they will likely wait six months or more. And an even larger portion—nearly 70% are saying that they want to see their financial situation stabilize before returning to the skies. This caution is being seen in the behavior of Chinese and Australian travelers. The virus transmission there is largely seen to be under control. But we have not seen a return of air travel. And indictors from the US domestic market—the world’s largest—align with this. This means that confidence-building measures will be needed to deal with a slower recovery than we had previously anticipated.
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The looming recession means that government stimulus will be critical.
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And government and industry must be aligned and coordinated in measures to ensure that travel is safe
Specifically related to the measures that we will need to take, as we mentioned last week, IATA is hosting a series of regional summits to focus on the industry re-start. These bring together governments and key stakeholders. The aim is to help governments and the aviation value chain to work together for an orderly re-start. [IATA chief economist, Brian Pearce: Assessing prospects for domestic markets (pdf)]
Asia’s airports at ‘rock bottom’ as number of passengers plummets 95% (SCMP)
Asia’s airports have reached “rock bottom” almost four months into the Covid-19 pandemic, with the number of passengers at about 5 per cent of last year’s figures, the global airports’ representative has said. Airports Council International (ACI) Asia-Pacific said new data up to mid-April from 18 of its hubs in “major aviation markets” showed a 95 per cent collapse in passenger volumes year on year. Hong Kong International Airport was on track for a 99.5 per cent decline, according to preliminary official data.
COVID-19 updates:
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Daron Acemoğlu: “The onus is on all of us to try to do the best”
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Stats South Africa rapid response survey: Four in ten businesses feel that they cannot continue to operate
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Bloomberg: South Africa entitled to $4.2bn with few strings, IMF says
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Tobi Lawson: A return to ‘business-as-usual’ will not benefit Africa in the long run
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OECD Sahel and West Africa Club: West African perspectives on tackling the Coronavirus
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UN issues appeal to bolster COVID-19 ‘logistics backbone’: warns global response could stutter to a halt
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ICC releases set of tax measures to save small businesses in response to COVID-19
National trade facilitation committees as coordinators of trade facilitation reforms (pdf, UNCTAD)
This new study, National Trade Facilitation Committees as Coordinators of Trade Facilitation Reforms, aims at updating, and building and expanding on the previous two studies,. The study further incorporates new research areas including monitoring and evaluation, regional integration and e-commerce in the context of the mandate of NTFCs. Information from 52 countries were collected from July 2019 to September 2019 via a standardized questionnaire distributed to chairpersons and secretariats of NTFCs around the world. Analyzing the data collected revealed twelve major trends currently predominant in the evolution of NTFCs around the world. These trends have been categorized into three main pillars: institutionalization, functioning, and financing of NTFCs. National trade facilitation Committees are fast evolving to meet the challenges at hand. This is evident in comparing the results of the past two studies with the outcome of this new study. By comparing the results of this study to those of UNCTAD studies in 2015 and 2017, this study sheds light on how National Trade Facilitation Committees are evolving in terms of mandate, scope, institutional framework and composition, among others, while adapting to new and emerging needs. These leading 12 trends are further elaborated in the study. Extracts:
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As reflected in Table 1, 42% (22 countries) are African NTFCs, 25% are American (13 countries), 17% (9 countries) Asian, 12% (6 countries) European and 4% (2 countries) are from Oceania.
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The majority of NTFCs (52%) affirm to be in contact with other NTFCs in their respective region. There is a positive correlation between the level of development of a country and the probability of being in contact with other NTFCs in the region. As such, 75% of developed countries report to be in contact with other NTFCs in the region, while this figure drops to 56% for developing countries and 36% for least developed countries.
OECD and donor countries working to focus development efforts on Covid-19 crisis (OECD)
The OECD and member countries that provide foreign aid are exploring how they can work to help the most vulnerable countries to weather the Covid-19 crisis, as new data showed a rise in Official Development Assistance in 2019, particularly to the poorest countries. ODA from members of the OECD’s Development Assistance Committee totalled $152.8bn in 2019, a rise of 1.4% in real terms from 2018, according to preliminary data collected from official development agencies. Bilateral ODA to Africa and least-developed countries rose by 1.3% and 2.6% respectively. Excluding aid spent on looking after refugees within donor countries – which was down 2% from 2018 – ODA rose by 1.7% in real terms.
Total ODA in 2019 was equivalent to 0.30% of DAC countries’ combined gross national income, down from 0.31% in 2018 and below a target ratio of 0.7% of ODA to GNI. Five DAC members – Denmark, Luxembourg, Norway, Sweden and the United Kingdom – met or exceeded the 0.7% target (the same five countries as in 2018.) Among non-DAC donors, which are not counted in the DAC total, Turkey provided ODA equivalent to 1.15% of its GNI. ODA rose in 18 DAC countries, with the largest increases in Austria, Finland, Greece, Hungary, Japan, Korea, Norway and Slovenia. It fell in 11 countries, most notably in Poland, Portugal and Sweden, in some cases because of lower spending on refugees. Net ODA has risen for the most part steadily in volume terms from just below $40bn in 1960. Despite the 2008 crisis, ODA rose by 69% in real terms between 2000, when the Millennium Development Goals were agreed, and 2010, as donors committed to increases. Extract: 2019 ODA statistics in detail (pdf). Preliminary data in 2019 show that net bilateral aid flows from DAC members to Africa were $37bn, representing a slight increase of 1.3% in real terms compared to 2018. Within this total, $31bn were for sub-Saharan Africa, an increase of 1.1% in real terms.
Piracy and armed robbery a threat to ships’ crews, warns IMB (ICC)
Seafarers face continuing threats from pirates and armed robbers on the world’s seas, says the International Chamber of Commerce’s International Maritime Bureau, reporting 47 attacks in the first three months of 2020, up from 38 in the same period last year. Pirates boarded 37 ships in the first quarter of 2020. The Gulf of Guinea remains the world’s piracy hotspot. Seventeen crew were kidnapped in three incidents in these waters, at distances of between 45 and 75 nautical miles from the coast. IMB’s latest global piracy report shows zero hijackings in the last two quarters, and no incidents around Somalia.
New agreement to facilitate Sino-Africa trade (NewsGhana)
The South Africa-China Economic and Trade Association (SACETA) and Africa Oil & Power (AOP) on Monday signed an agreement that will introduce Chinese corporations to African projects and firms, SACETA said on Monday. SACETA said the partnership will see the Chinese build critical new commercial links within the private and public sectors. SACETA has over 160 Chinese companies based in South Africa in the sectors of energy, finance, infrastructure, mining, ICT and among others.
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UN issues appeal to bolster COVID-19 ‘logistics backbone’ or response could stutter to a halt
The heads of major UN humanitarian agencies and offices have launched an urgent appeal for $350 million to support global aid hubs to help those most at risk during the COVID-19 pandemic.
In an open letter that appeared on Sunday in The Guardian (UK), the heads of UN agencies, including among others, the World Health Organization (WHO) and the World Food Programme (WFP), along with the Office for Coordination of Humanitarian Affair (OCHA), said cancelled flights and disrupted supply routes have prompted the appeal to enable a rapid scale-up of staff and supplies to places hardest hit by the virus.
Against the backdrop that developing countries, with the least ability to contain the coronavirus, could become repositories for the disease and may drive new COVID-19 waves around the world, the UN agency heads warned that without these facilities, “the global response could stutter to a halt”.
Explaining that humanitarian agencies work in places that are “potentially huge reservoirs where it is hard to manage the virus,” Mr. Lowcock maintained that “nobody is going to be safe, until everyone is safe”.
“This isn’t just about compassion and empathy it’s about hard self-interest.”
WFP needs a massive expansion of its transport and logistics services, including its UN Humanitarian Air Service, which is available to all aid professionals.
The intention is to utilize two active commercial air transport centres in Europe to charter flights for moving humanitarian staff to crisis areas, including the Middle East and Africa. It also aims to transport the provision of seven global field hospitals dedicated to treating humanitarian workers who become infected with the disease during their work.
Appealing for help
The appeal follows months in which countries have largely forged their own ways as many global political institutions – including those of the EU – have struggled to find consensus.
The letter also comes after Secretary-General António Guterres launched on 25 March, a $2 billion appeal for a Global Humanitarian Response Plan, only $550 million of which has been pledged to date, and on the heels of US President Donald Trump’s suspension of WHO funding, the UN agency heading the coronavirus fight.
Disproportionately hit
The letter painted a picture of the coronavirus as the “most daunting challenge facing humanity since the second world war”, pointing out that it “knows no borders, spares no country or continent, and strikes indiscriminately”.
“In this race against an invisible enemy, all countries must fight back but not all begin from the same starting line,” it spelled out, noting that in countries where the world’s most vulnerable need humanitarian aid and supplies to beat back the pandemic, “cancelled flights and disrupted supply routes hit disproportionately hard”.
“It is in everyone’s interest to stop the virus from spreading unchecked, destroying lives and economies, and continuing to circle around the world,” the letter stressed.
The services provided by WFP on behalf of the entire global humanitarian community, will enable “a swift, efficient response to COVID-19 for the most vulnerable people”, promised the UN agency heads.
Noting that everyone around the world, is facing “the same mortal threat”, they underscored that “every step that speeds delivery, saves lives”.
“Now is the time to step up together, to prevent needless suffering, and to fulfil the promise of a better future for all,” concluded the letter.
UN agencies issue urgent call to fund the global emergency supply system to fight COVID-19
Following is the text of the open letter:
Dear donor community,
Humanity is collectively facing its most daunting challenge since the Second World War. COVID-19 knows no borders, spares no country or continent, and strikes indiscriminately. By all accounts, we are at least 12 months away from a vaccine.
In this race against an invisible enemy, all countries must fight back, but not all begin from the same starting line. In countries where the world’s most vulnerable need humanitarian aid and supplies to beat back the pandemic, cancelled flights and disrupted supply routes hit disproportionately hard. It is in everyone’s interest to stop the virus from spreading unchecked, destroying lives and economies, and continuing to circle around the world.
The UN Secretary-General on 25 March launched the COVID-19 Global Humanitarian Response Plan, requesting US$2 billion to boost the global response. You have been fast and generous in your funding and have extended lifelines to those who were already caught up in war, poverty and the worst effects of climate change – especially at a time when your own populations are suffering from the impact of the virus.
Around $550 million has generously been made available to implement the Plan so far, with significant additional resources being mobilized and pledged.
The Central Emergency Response Fund (CERF) has also released $95 million to kick-start the COVID-19 response, help contain the spread of the virus, maintain supply chains, and provide assistance and protection to the most vulnerable people, including women and girls, refugees and internally displaced persons. But more needs to be done.
To get more deliveries off the ground, the UN World Food Programme (WFP) is setting up the vital logistics backbone that will help save lives and help halt the spread of the virus. WFP now urgently needs additional funding to establish the necessary transport hubs, charter vessels and provide aircraft for cargo, health workers and other essential staff.
All elements of the Global Humanitarian Response Plan are crucial and need continued funding, but without these logistics common services, the global response could stutter to a halt. Now is not the time to slow down. No one is safe until everyone is safe.
We, humanitarian organizations from across the world, therefore, call upon you to urgently support this global emergency supply system with an initial $350 million to enable a rapid scale-up of logistics common services.
These services, which WFP provides on behalf of the entire global humanitarian community, will enable a swift, efficient response to COVID-19 for the most vulnerable people. Any delay in our action could undermine global efforts to bring the pandemic under control.
The scale-up of the COVID-19 services includes:
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Establishing, equipping and managing international consolidation hubs and regional staging areas.
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Air and shipping cargo services.
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Passenger air services, with the necessary measures to avoid further spreading of the virus.
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Medical evacuation services for front-line workers.
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Infrastructure and construction of treatment centres.
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Real-time remote data collection.
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Critical investments required to safely deliver operations and services.
Whatever it takes, we as humanitarians are determined to meet people’s urgent needs. The upscaling of the common services that we all depend on is crucial to enable us to meet these needs.
Every human being, in every nation around the world, is facing the same mortal threat. Every step that speeds delivery, saves lives. The COVID-19 pandemic has presented all of humanity with a unique challenge, and only a uniquely global response can halt its forward march.
Now is the time to step up together, to prevent needless suffering, and to fulfil the promise of a better future for all.
We hope to hear from you soon.
Mr. Mark Lowcock, Emergency Relief Coordinator and Under-Secretary-General for Humanitarian Affairs, Office for the Coordination of Humanitarian Affairs (OCHA)
Mr. Filippo Grandi, United Nations High Commissioner for Refugees, United Nations Refugee Agency (UNHCR)
Ms. Henrietta H. Fore, Executive Director, United Nations Children’s Fund (UNICEF)
Mr. David Beasley, Executive Director, United Nations World Food Programme (WFP)
Mr. Achim Steiner, Administrator, United Nations Development Programme (UNDP)
Dr. Tedros Adhanom Ghebreyesus, Director-General, United Nations World Health Organization (WHO)
Mr. Qu Dongyu, Director-General, United Nations Food and Agriculture Organization (FAO)
Mr. António Vitorino, Director-General, United Nations International Organization for Migration (IOM)
Dr. Natalia Kanem, Executive Director, United Nations Population Fund (UNFPA)
Ms. Michelle Bachelet, High Commissioner, United Nations Office of the High Commissioner for Human Rights (OHCHR)
Mr. Gareth Price-Jones, Executive Secretary, Steering Committee for Humanitarian Response (SCHR)
Mr. Ignacio Packer, Executive Director, International Council of Voluntary Agencies (ICVA)
Mr. Sam Worthington, President and CEO, InterAction
Ms. Cecilia Jimenez-Damary, Special Rapporteur on the human rights of internally displaced persons, United Nations Office of the High Commissioner for Human Rights (OHCHR)
Mr. Jagan Chapagain, Secretary General, International Federation of Red Cross and Red Crescent Societies (IFRC)
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tralac’s Daily News selection
The G20’s action on debt is an important first step; now for the hard part (The Africa Report)
A commentary by Brahima Sangafowa Coulibaly, Donald Kaberuka, Louise Mushikiwabo, Ngozi Okonjo-Iweala, Strive Masiyiwa, Tidjane Thiam, Trevor Manuel, Vera Songwe:
The G20 FMCBG’s call for the private sector to join the debt relief, while welcome, must be bolstered by tasking the IMF to work with the Institute for International Finance and the African Union to develop solutions guaranteeing debt sustainability and continued access to capital markets in the future.
Private sector debt is not only a higher share of African external debt, but it makes up a disproportionate share of the debt servicing cost. For several African countries, even where debt levels remain relatively low, the interest cost now accounts for 20% or more of government revenues.
Without significant private sector participation, the standstill will fall short of its objectives. Country participation in a standstill on the private debt should be voluntary. We believe it is in the long-term interest of countries classified as IBRD to participate, so there should be significant incentives in place to encourage their participation, using various levers described below.
To adequately confront this funding crisis, we must be bold and innovative. We believe a special purpose vehicle could be created to serve as a bridge finance facility to be accessed on a voluntary basis. If adequately structured, participating countries would benefit from a lowering of their cost of debt whilst keeping their hardearned market access, and investors would hold paper that would be much more liquid and with enhanced credit. The multilateral institutions working with the IIF and Africa should be tasked to explore this option as they develop work outs for the bilateral debt.
Download: pdf Communiqué: G20 Finance Ministers and Central Bank Governors Meeting - 15 April 2020 (218 KB)
AUC, Afreximbank, Afrochampions, UNECA: Communiqué on the need for a coordinated trade and investment response to the COVID-19 pandemic
In addition to ongoing initiatives, such as the setting-up of the African Union Covid-19 Response Fund and the appointment by the African Union Chair, Cyril Ramaphosa, President of the Republic of South Africa, of Special Envoys, to mobilize international economic support for the continental fight against COVID-19, the AUC, Afreximbank, UNECA and the Afrochampions Initiative are issuing a call to action to AU Member States and institutions, including research institutions, think tanks financial institutions, corporations and the academia, to evolve a collaborative and coordinated trade and investment response to the COVID-19 crisis, building on the AfCFTA as a tool for developing domestic, regional and continental value and supply chains, as well as driving the Post Pandemic economic recovery, growth and development.
In particular, the Pandemic and the attendant challenges in sourcing critical medical supplies and equipment have highlighted the critical gaps in Africa’s productive and manufacturing capacities, as well as the need to build domestic, regional and continental value and supply chains. AU member states must therefore resist the temptation to adopt nationalist and protectionist measures and postures, imposing restrictions to trade and disrupting value and supply chains, but must look instead to coordinating regional and continental responses and measures to address the health and economic challenges. Pooled and integrated intermediate industrial inputs procurement strategies, for instance, are no longer academic; they are an indispensable element of the urgent imperative. So also is the need to recognize the opportunities afforded by cooperation in harnessing the likely resilience of services trade even as the continent strives to support the current levels of cross-border trade in goods. In this connection, the AfCFTA must be the rallying initiative to drive the post Pandemic economic recovery and the strengthening of African domestic, regional and continental value and supply chains.
AfroChampions: Will COVID-19 derail AfCFTA start of trading?
Extracted recommendations: How to salvage and keep AfCFTA on track amidst COVID-19 disruptions:
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AfCFTA negotiations should continue via online and video-conferencing platforms. If done right virtual negotiations could prove to be even faster and cheaper than face to face meetings for certain aspects of the negotiations process.
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The July 2020 date for Start of AfCFTA Trading should not be postponed even if the pandemic persists into July. If AfCFTA trading can take off in the middle of this battle – even if symbolically – will send a strong signal; it should be one of the symbolic victories for Africa in the midst of a crisis. Initial AfCFTA trade can focus on critical goods needed to fight the pandemic such as pharmaceuticals and food products. Governments should ease border crossings for these goods. The AfCFTA can be one of Africa’s main weapons to beat COVID-19.
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The AfCFTA Secretariat, which is temporarily operating out of Addis Ababa, should continue with its staff recruitment and operationalize a fully functional virtual office with newly recruited teams working virtually from their homes across the continent.
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The African Union should convene a major virtual meeting of African trade ministers to deliberate on ways to keep the AfCFTA on track. A fully virtual mode of meetings should be activated to keep the process going.
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African Union should request Ministers of Trade to present COVID19-IMPACT reports of their proposed AfCFTA plans or their already prepared BIAT.
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Each of the member states that have ratified should be made to present a COVID-19-ADJUSTED plan to project how they plan to catch up in the post COVID-19 period.
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We urge African Union President Cyril Ramaphosa to appoint Special AfCFTA Envoys to assist the AfCFTA Secretary General to coordinate with governments towards salvaging and keeping the process on track.
Arkebe Oqubay: How Africa can fight the pandemic (Project Syndicate)
Managing the coming economic crisis also will be critical. This means reducing the damage to the most dynamic sectors as much and as early as possible, because more productive activities have bigger spillover effects and are crucial for recovery and large-scale employment. The biggest mistake would be to place all economic activities on an equal footing and try to make everyone happy. Instead, policymakers should focus on export industries, which are vital to ensure foreign-exchange liquidity, ease balance-of-payments constraints, and generate employment. Encouraging services exports and high-value service activities is also critical, as is ensuring affordable food supplies.
Finding Africa’s path: Shaping bold solutions to save lives and livelihoods in the COVID-19 crisis (McKinsey)
In this article, we present new analysis that underlines the urgency of action required to save lives and safeguard livelihoods in Africa. We also suggest specific approaches that governments, development institutions, and business can take to act decisively on both fronts. These insights build on our recent article “Tackling COVID-19 in Africa.” We focus on three imperatives:
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Protecting lives. We present new analysis showing that bold steps will be needed to strengthen Africa’s health-system capacity over the next 100 days, at a potential cost of more than $5 billion.
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Safeguarding livelihoods. We show that the jobs or incomes of 150 million Africans are vulnerable in the crisis, and we share new analysis of the interventions required to mitigate the economic damage.
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Finding the right path. We consider how governments can make optimal decisions on lockdowns, shutdowns, and shielding of people at the highest risk of contracting the virus, thereby achieving the best possible outcomes in protecting lives and safeguarding livelihoods. [The authors: Kartik Jayaram, Acha Leke, Amandla Ooko-Ombaka, Ying Sunny Sun]
Nigeria to lose over $160m to cocoa, cashew exports over COVID-19 (Nairametrics)
The coronavirus pandemic is expected to cause significant hardship to the non-oil export sector, as Nigeria is projected to lose over $160m to cocoa and cashew exports in 2020. Agricultural exports like cocoa, sesame and cashew exports are predicted to suffer, due to the pandemic that has lockdown economies of nations across the globe. This was disclosed by the Nigerian Export Promotion Council in a report, which was seen by Nairametrics, titled Impact assessment of and Policy Responses to the Coronavirus Pandemic on Agricultural Exports: Early evidence from Nigeria.
What it means: A fall in exports of over $100 million is expected in the cocoa sector due to the declining prices, which can be attributed to the falling demand in Europe. Though Sesame exports are likely to prove more resilient due to a smaller decline in prices and more diversified export markets, Cashew exports are expected to shed $60 million. This is expected owing to the Vietnam Cashew Association’s guidance to enterprises within the country to carefully consider before importing raw cashew.
In brief:
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COMESA: pdf Measures put in place by member states on COIVD-19 (1.79 MB)
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COMESA Business Position Statement: pdf Facilitating the Movement of Essential Goods and Services Across Borders During The Period of COVID-19 Pandemic (341 KB)
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Charles Stith: Working through regional blocs will help Africa fix virus-hit economies
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COVID-19: Heads of WTO, WHO cite importance of open trade in ensuring flow of vital medical supplies
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Newly sworn-in AfCFTA Secretary General, Wamkele Mene, undertakes to serve Africa with resolute determination
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South Africa: Wine industry ready to oppose government’s restriction on movement of liquor
UK provides £1.4m more for UNCTAD’s trade facilitation initiatives (UNCTAD)
The additional funding will enable UNCTAD to continue helping countries establish and maintain national trade facilitation committees, which are key to the implementation of the Trade Facilitation Agreement of the WTO. The new funding phase is the second extension of the collaboration between the UK’s customs authority, the World Customs Organization and UNCTAD to build the capacity of developing and least developed countries towards implementing trade facilitation reforms and meeting their obligations under the TFA.
Today’s Quick Links:
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World Bank/IMF Spring Meetings 2020: Development Committee communiqué
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AfDB rebuts claims that it plans to provide financial support to the East African Crude Oil Pipeline Project
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COVID-19: ‘Phased process’ for lifting restrictions is key, WHO chief urges G20
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Newly sworn-in AfCFTA Secretary General, Wamkele Mene, undertakes to serve Africa with resolute determination
Since the launch of the negotiations in Johannesburg in 2015, remarkable progress has been achieved largely because of the political will and commitment of the Assembly of Heads of States, to provide leadership and to ensure that Africa takes concrete steps towards the creation of an integrated market.
Inspired by the Abuja Treaty, Africa’s integration objectives have continuously been at the center of discussions to fast-track economic development set out in the Lagos Plan of Action with the view of achieving the Africa We Want as enshrined in the Agenda 2063.
The African Union (AU) Assembly of Heads of State and Government during their 33rd Ordinary Session held from 9-10 February 2020 in Addis Ababa, Ethiopia, demonstrated determination to take rapid action to effectively operationalise the African Continental Free Trade Area (AfCFTA), by electing its new Secretary General (SG) in the person of Mr. Wamkele Mene, who is from South Africa, for a four-year mandate. The headquarters of the AfCFTA Secretariat is in Accra, Ghana.
H.E. President Mahamadou Issoufou, President of the Republic of Niger is the Champion and Leader of the AfCFTA negotiation process since March 2017. Fifty four (54) AU Member countries have signed the agreement and 30 of them have ratified it, making this the fastest ratification in the history of the African Union.
Mr. Wamkele Mene, first Secretary General of the AfCFTA) was sworn-in on 19 March 2020 at the African Union Headquarters in Addis Ababa, Ethiopia, in the presence of H.E Moussa Faki Mahamat, Chairperson of the AU Commission, H.E Albert M. Muchanga AU Commissioner for Trade and Industry and H.E Edward Xolisa Makaya, the Permanent Representative of South Africa to the African Union and Chairperson of the Permanent Representative Committee (PRC). The Ceremony was also attended by H.E. Mrs. Amma Adoma Twum-Amoah, Ambassador and Permanent Representative of Ghana to the AU, representing the host country of the AfCFTA Secretariat and H.E. Mr. Zakario Maiga, Ambassador and Permanent Representative of Niger, representing the Champion of the AfCFTA process. AU Staff, dignitaries, invited guests and the representatives of the media also witnessed this very solemn historic moment.
The Secretary General is expected to provide leadership and technical support to AfCFTA Secretariat and overall management of the day-to-day functioning of the Secretariat.He will be responsible for the management of the AfCFTA Secretariat, implementation of the AfCFTA Agreement and strategic collaboration; stakeholders’ engagement; and resources mobilization for the implementation of the AfCFTA Agreement. Amomg others.
The Chairperson of the AU Commission, H.E. Moussa Faki Mahamat congratulated the SG on his election and underscored the challenges ahead: “You have been elected on the basis of your experience and skill. The task that awaits you is quite gigantic but exhilarating because you will be working on the most emblematic project in the history of the African Union. The African Free Trade Zone is a necessity for Africa to strengthen its integration,” said the AUC Chairperson.
“Mr. Mene is entrusted with a huge responsibility to lead one of the key institutions of the African Union and to guide Africa to realize the Aspiration number one of the Agenda 2063 which talks to the attainment of ‘A prosperous Africa based on inclusive Growth and Sustainable Development,” said the PRC Chair.
“We put the AfCFTA Secretariat in very capable hands under Secretary General Mene, we are assured of effective implementation of the AfCFTA Agreement,” said AU Commissioner for Trade and Industry.
According to the new SG of the AfCFTA, Africa is open for business and mutually beneficial investment thereby creating decent jobs and improving livelihoods. He said Africa has a market of 1.2 billion people; it has a combined GDP of US$2.5 trillion, and about 400 continental companies that earn annual revenues of US$1 billion or more.
Mr. Wamkele Mene noted during his swearing in ceremony that, through at least the first half of the decade, seven of the world’s 10 fastest-growing economies were in Africa, according to the International Monetary Fund’s World Economic Outlook Database, October 2019. He stated that, Prof Landry Signé and Acha Leke, writing in 2019 in Foresight Africa, a Brookings Institute publication, African industries have the opportunity to double production to nearly $1 trillion within a decade, with three-quarters of that growth coming from manufacturing to substitute imports and meet increasing local demand. This, he said, is a period of unprecedented challenge to the global economy and the multilateral trading system, on which the global economy is anchored.
“The multilateral trading system is under severe strain, largely due to what appears to be an abandonment of the rules that underpin it. This strain on the multilateral trading system has the risk of reversing the modest gains that we have made in placing development at the centre of the multilateral trading system, since we launched the Doha Development Agenda in 2001. Africa’s response against this strain on the multilateral trading system must be to consolidate and advance our continental market integration objectives, through the AfCFTA. Under the leadership of President Issoufou, our collective priority should be to rapidly conclude Phase I and II of the negotiations of the AfCFTA, in order to unlock Africa’s full productive capacity,” underscored SG Mene.
The second challenge to the global economy according to the new AfCFTA SG is the ongoing Corona Virus scourge, which has ravaged global economic activities, causing a materially adverse impact on global capital markets, severely disrupting trade and global supply chains, and of course creating a negative effect on global public health. Mr. Mene however underlined that Africa should not despair and fall into despondency. “Through the AfCFTA we have an opportunity to reconfigure our supply chains, to reduce reliance on others and to expedite the establishment of regional value chains that will boost intra-Africa trade,” he said.
Mr. Mene promised to engage in discussions on this issue with the Commissioner for Trade & Industry and the technical partners such as the UN ECA and UNCTAD. “As the Secretary-General, I am committed to ensuring that the AfCFTA is effectively implemented such that there is shared and inclusive economic growth.” He explained that the backlash against free trade and trade liberalisation witnessed in recent years is not because trade liberalisation is intrinsically beneficial exclusively to a certain elite or to certain countries. Rather, the backlash is, in part, attributable to the unequal distribution of the benefits of international trade and a lack of shared and inclusive growth. The lesson for the AfCFTA from this backlash against trade liberalisation and the pursuit for freer international trade through the multilateral trading system (i.e. the World Trade Organisation) and through FTAs is that, beyond boosting trade flows, the question of equitable distribution of the gains of the AfCFTA must be at the centre of its implementation.
Mr. Mene further noted that, the AfCFTA should not be perceived to be benefiting only a handful of relatively industrialised countries in Africa but all African businesses. Therefore the need to empower women and young people in Africa as they often face significant challenges when attempting to benefit from trade agreements. “I therefore intend to take concrete steps to ensure that women and young Africans are at the heart of implementation of the AfCFTA. In due course, I will announce specific measures that can be put in place to enable women, young Africans and SMEs, to benefit from the AfCFTA to achieve the objective of inclusive benefits of the AfCFTA .” He emphacised.
The AfCFTA and the 4th Industrial Revolution
With regard to the fourth industrial revolution, the new AfCFTA SG said the global economy is on the brink of a new industrial revolution, driven by new-generation information technologies such as the Internet of Things, cloud computing, big data and data analytics, robotics and additive manufacturing. All of this presents challenges and opportunities for the AfCFTA. He stated that, the 4th Industrial Revolution is likely to impact on the AfCFTA in a manner that we have not fully contemplated.
How is Africa preparing herself for the 4th Industrial Revolution, in the context of the AfCFTA? With the advent of additive manufacturing, what is the impact on industrialisation and job creation in Africa, jobs which may have been created on the back of the AfCFTA? How will the e-commerce and digital trade chapter of the AfCFTA position Africa to be a global player in cloud computing services, data processing and data storage? All of these, Mr. Mene said, are questions that require forward looking intellectual rigour, including analysing how the future of trade and investment flows might change as a result of technological factors and the 4th Industrial Revolution. He added that, such forward looking intellectual rigour is critical in shedding light on the complex policy issues and strategic choices that will shape Africa’s trade and investment prospects over the next 10-30 years.
The new AfCFTA SG reiterated that the Africa Continental Free Trade Area offers Africa an opportunity to confront the significant trade and economic development challenges of our time including: market fragmentation; smallness of national economies; over reliance on the export of primary commodities; narrow export base, caused by shallow manufacturing capacity; lack of export specialisation; under-developed industrial regional value chains; and high regulatory and tariff barriers to intra-Africa trade amongst others. The result of all of this, is a very low percentage of intra-Africa trade of 18%. He said the AfCFTA is also a critical response to Africa’s developmental challenges. It has the potential to enable Africa to significantly boost intra-Africa trade, improve economies of scale and establish an integrated market. It has the potential to be a catalyst for industrial development, placing Africa on a path to exporting value-added products, improving Africa’s competitiveness both in its own markets and globally. It also sends a strong signal to the international investor community that Africa is open for business, based on a single rule-book for trade and investment.
Worth noting that the Fourth Industrial Revolution is a way of describing the blurring of boundaries between the physical, digital, and biological worlds. It’s a fusion of advances in artificial intelligence (AI), robotics, the Internet of Things (IoT), 3D printing, genetic engineering, quantum computing, and other technologies. Whereas a technological revolution is a period in which one or more technologies is replaced by another technology in a short amount of time. It is an era of accelerated technological progress characterized by new innovations whose rapid application and diffusion cause an abrupt change in society.
According to digital dictionaries, the Fourth Industrial Revolution heralds a series of social, political, cultural, and economic upheavals that will unfold over the 21st century. Building on the widespread availability of digital technologies that were the result of the Third Industrial, the Fourth Industrial Revolution is driven largely by the convergence of digital, biological, and physical innovations. It has the peculiarity of changing how we live, work, and communicate. It is reshaping government, education, healthcare, and commerce among other aspect of life.
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AUC, Afreximbank, Afrochampions and UNECA Joint Communiqué on the Need for A Holistic and Coordinated Trade and Investment Response to the COVID-19 Pandemic
The 2020 COVID-19 pandemic is a global crisis that is both unprecedented and with many ramifications. The Pandemic poses significant health and social risks to the entire globe. In addition to its threats to the health and wellbeing of global citizens, it has induced unprecedented worldwide commercial, financial and economic disruptions.
Critical global, regional and domestic value and supply chains, the lifeblood of international trade, have not been spared. The WTO projects a worst-case scenario of a 32% decline in world trade. The resultant impact on overall economic growth shall be considerable. Conservative estimates suggests up to 1% of global GDP shall be wiped off, amounting to about US$ 1 trillion in lost income. On the continent, the situation will be more dire. Initial ECA estimates suggest Africa will face an immediate decline in GDP growth from 3.2% to 1.8% in 2020 as a result of Covid-19, but with a further adverse impact if Covid-19 is not contained in the short-term.
These are not just statistics. With closures of borders and restrictions on the movement of people and goods, the pandemic exacts a true human toll from the crippling of essential commercial, economic and social activities. Global job losses attributable to the crisis number in the millions and governments are under pressures to design a mitigating strategy of a kind the world has never seen since the Second World War.
African Union Member States with multifaceted development challenges stand the risk of prolonged agony as a consequence of these disruptions. Coming on the back of declining commodity prices, rising protectionism and heightened debt service burdens, the crisis threatens to wipe away decades of gains.
There is hence need for an equally unprecedented and coordinated trade and economic policy response from African institutions and governments to ensure that the worst impacts of the pandemic are mitigated, and to position for the inevitable post Pandemic economic restructuring.
In particular, the Pandemic and the attendant challenges in sourcing critical medical supplies and equipment have highlighted the critical gaps in Africa’s productive and manufacturing capacities, as well as the need to build domestic, regional and continental value and supply chains.
African Union Member States must therefore resist the temptation to adopt nationalist and protectionist measures and postures, imposing restrictions to trade and disrupting value and supply chains, but must look instead to coordinating regional and continental responses and measures to address the health and economic challenges. Pooled and integrated intermediate industrial inputs procurement strategies, for instance, are no longer academic; they are an indispensable element of the urgent imperative. So also is the need to recognize the opportunities afforded by cooperation in harnessing the likely resilience of services trade even as the continent strives to support the current levels of cross-border trade in goods.
In this connection, the AfCFTA must be the rallying initiative to drive the post Pandemic economic recovery and the strengthening of African domestic, regional and continental value and supply chains.
In addition to ongoing initiatives, such as the setting-up of the African Union Covid-19 Response Fund and the appointment by the African Union Chair, H.E. Cyril Ramaphosa, President of the Republic of South Africa, of Special Envoys, to mobilize international economic support for the continental fight against COVID-19, the African Union Commission, Afreximbank, the UNECA and the Afrochampions Initiative are issuing a call to Action to African Union Member States and institutions, including research institutions, think tanks financial institutions, corporations and the academia, to evolve a collaborative and coordinated trade and investment response to the COVID-19 crisis, building on the AfCFTA as a tool for developing domestic, regional and continental value and supply chains, as well as driving the Post Pandemic economic recovery, growth and development.
Africa has all it takes to emerge out of this pandemic if it remains focused on the value of collective self-reliance through intra- regional trade under the auspices of the AfCFTA.
H.E Albert Muchanga
Commissioner
Department of Trade & Industry
AUC
Prof. Benedict Okey Oramah
President & Chairman of the Board
Afreximbank
William Lugemwa
Director Private Sector Development and Finance Division
UNECA.
Paulo Gomes
Co-Chair
AfroChampions Initiative
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Decisive action in an unprecedented crisis
The world is experiencing unprecedented challenges from COVID-19 – the coronavirus pandemic – that could erase development gains for many countries. The pandemic has profoundly impacted human capital, including lives, learning, basic well-being, and future productivity.
The crisis has also severely tightened external financing conditions for countries across the income spectrum, disrupting trade, supply chains, and investment flows. Multilateral cooperation is needed to contain the pandemic and mitigate its health, social, and economic consequences.
These were key messages from the Development Committee, a ministerial-level forum of the World Bank Group and the International Monetary Fund, in a communiqué issued at the institutions’ Spring Meetings, which were convened online for the first time ever.
The committee, which represents 189 member countries, noted that the Bank Group is uniquely positioned to tackle these complex issues and to play a leading role in the response through its lending, investments, knowledge, and convening capacity. With the pandemic requiring decisive, collective action and innovation, the committee encouraged the Bank Group and the IMF to continue helping all country clients, in partnership with UN agencies, international financial institutions, and bilateral partners.
In his remarks to the committee, World Bank Group President David R. Malpass underscored that “If we don’t move quickly to strengthen systems and resilience, the development gains of recent years can easily be lost.” He added that, while the pandemic’s effects are global, “This crisis will likely hit the poorest and most vulnerable countries – and people – the hardest.”
Emphasizing the need for fast, broad-based action, Malpass reported that the Bank Group’s COVID-19 programs are underway in 64 developing countries and expected to reach 100 countries by the end of April. He outlined three main aims of coordinated efforts across the World Bank, IFC, and MIGA: to protect the poorest and most vulnerable households, to support business and save jobs, and to help developing countries implement emergency health operations and strengthen economic resilience.
Both the committee and Malpass noted that member countries’ strong support has placed the Bank Group in a better position to help countries tackle COVID-19. Malpass said, “With existing resources, fully leveraged and front loaded, we are able to provide $160 billion of financing over the next 15 months.” He added that this total includes $50 billion through grants and highly concessional credit from IDA, the World Bank’s fund for the poorest countries.
The week also saw an announcement by the G20 finance ministers that official bilateral creditors will allow the IDA countries that request forbearance to suspend their debt service payments, beginning May 1. This move had been championed by the Bank Group and the IMF; as Malpass remarked at the press conference after the Development Committee meeting, “It is a powerful, fast-acting initiative that can bring real benefits to the poor.” The committee called on private creditors to participate in the initiative on comparable terms. They also asked the Bank Group and IMF to review the debt challenges of middle-income countries and explore solutions to fiscal and debt stress in those countries on a case-by-case basis. Both the committee and Malpass emphasized that efforts must help enhance the transparency of developing countries’ debt.
The actions being taken reflect the scale of the challenges posed by COVID-19, which Malpass called “an unprecedented crisis, with devastating health, economic, and social effects felt around the world.” He and the committee expressed their sympathy for the human toll and their support for those on the front lines of the pandemic. They also stressed that by acting now, the Bank Group can help countries shorten the time to recovery and lay the foundations for growth and higher living standards for all.
Above all, the urgent response to COVID-19 reflects the Bank Group’s long-term commitment to helping all client countries reduce poverty, broaden prosperity, and achieve their development goals. As the committee put it, “It is only by rebuilding stronger and better that these goals can be achieved.”
Development Committee Communiqué
World Bank/IMF Spring Meetings 2020
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The Development Committee met virtually today, April 17, 2020.
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Our meeting occurred at a time of unprecedented challenges due to the COVID-19 pandemic. Its devastating effects are being felt across the globe as the human and economic toll continues to rise. We express our sympathy to those affected and offer our support and solidarity to those working on the front lines fighting the pandemic.
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The COVID-19 pandemic underscores that the development community increasingly faces global challenges requiring decisive, collective action and innovation. Multilateral cooperation is needed to contain the pandemic and mitigate its health, social, and economic consequences. The World Bank Group (WBG) is uniquely positioned to tackle these complex issues and to play a leading role via its lending, investments, knowledge, and convening capacity.
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We encourage the WBG and the International Monetary Fund (IMF), within their respective mandates, to continue helping all clients, in partnership with the World Health Organization, other UN agencies, international financial institutions, and bilateral partners. We ask them to collaborate in addressing the pandemic, supporting economic recovery, and safeguarding progress toward the twin goals and the SDGs.
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The global economy is experiencing an exceptional negative shock as a result of COVID-19. The attendant sharp decline in global investor confidence has severely tightened external financing conditions for countries across the income spectrum. The pandemic is disrupting trade, supply chains and investment flows. It is also leaving financial and human capital idle, while remittances, transport revenues, and income from tourism have rapidly diminished. In addition, steep drops in commodity prices are harming commodity-dependent economies. We ask the WBG to help countries mitigate these disruptions and support efforts to preserve jobs and boost confidence. Special attention should be paid to the provision of affordable medical supplies and to food security and safety. We also ask that all countries ensure the flow of vital medical supplies, critical agricultural products, and other goods and services across borders, and that they work to resolve disruptions to the global supply chains, to support the recovery.
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The pandemic has already profoundly impacted human capital, including lives, learning, basic well-being, and future productivity. Disruptions in the delivery of essential services and food, combined with employment and income loss for households, are devastating. We ask the WBG to help governments deploy resources toward public health interventions, nutrition, education, essential services, and social protection against the immediate adverse effects of the shocks. We also support the WBG’s emphasis on boosting government preparedness to protect human capital against potential subsequent waves of the outbreak and future pandemics. Efforts should place special focus on fragile situations, small island states, and the poorest and vulnerable people in all countries, with attention to gender issues.
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We commend the IMF and WBG for their rapid response to the crisis thus far. We ask them to help client countries achieve tangible development outcomes and shorten their time to recovery. We urge the two institutions to work with countries to design and implement policies and programs that help lift the poorest households out of poverty and support small businesses. We also call on them to promote structural reforms that lay the foundations for growth and higher living standards for all. We ask them to use all available financial and advisory instruments, facilitate the sharing of lessons, and offer operational flexibility to tackle this common threat at the country, regional, and global levels.
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We welcome the WBG’s estimated financial support of up to US$150-160 billion over the next 15 months, with a focus on the poorest and vulnerable in all client countries. We are pleased that as part of this overall response, and through the Fast Track COVID-19 Facility, IBRD and IDA are making funds available to help developing countries in their urgent response to the public health threat, as they strengthen their health systems, shore up social safety nets, and improve access to services, while bolstering their response capacity and building up disease surveillance. IFC is also making funds available for prompt short- and medium-term financial support to trade flows and the wider private sector. MIGA is making fast-track guarantees available to meet financing needs for the immediate health response and economic recovery.
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We also welcome the IMF’s stepping up of financial support for developing countries through both its regular facilities and emergency funding, which will allow for much needed support at a time when many countries lack the policy and fiscal space to act. The doubling of annual access levels to the IMF’s emergency financing facilities is an important response to the challenges faced by the membership, as is its move to accelerate internal procedures to speed up disbursements.
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IDA countries are severely affected by the pandemic. We recognize the growing burden of debt service and the need for immediate liquidity to tackle the challenges posed by the COVID-19 crisis in a coordinated manner. We therefore strongly support the WBG initiatives for IDA countries, including frontloading of grants and highly concessional IDA19 resources. We welcome the coordinated approach agreed by the G20 and the Paris Club, supported by the WBG and IMF, toward a time-bound suspension by bilateral official creditors of debt service payments for the poorest countries that request forbearance. We call on private creditors to participate in the initiative on comparable terms. We ask the World Bank and the IMF to work with IDA countries to evaluate their debt sustainability based on enhanced transparency, to monitor the use of freed-up fiscal space, and to provide the Development Committee with a progress report at the Annual Meetings. In line with the G20 request to multilateral development banks, we ask the World Bank to further explore options for the suspension of debt service payments over the suspension period, while maintaining financial capacity, current rating, and low cost of funding, and to report to its Board in a timely manner. We also ask the WBG and IMF to review the debt challenges of middle-income countries, and to explore expeditiously a range of solutions to fiscal and debt stress in those countries on a case-by-case basis.
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The WBG has the financial firepower to provide a meaningful long-term response to this crisis thanks to the capital increases for IBRD and IFC, as well as the successful IDA19 replenishment. We encourage all shareholders to accelerate the subscription processes and front-load their contributions to the greatest extent possible.
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This crisis has the potential to erase development gains for many countries. The WBG must not only address immediate economic needs, but also support long-term development priorities; ensuring affordable energy access, building energy security and resilience to economic and environmental vulnerabilities and climate change. We urge the WBG and the IMF to ensure effectiveness on the ground and help countries create the conditions for inclusive and sustainable long-term growth. We also call on the WBG to maintain its critical role in key global challenges, as outlined in the capital package commitments, to achieve the twin goals of eliminating poverty and achieving shared prosperity, as well as the SDGs. It is only by rebuilding stronger and better that these goals can be achieved.
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The next meeting of the Development Committee is currently scheduled for October 17, 2020, in Washington, DC.
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World Bank Group and IMF mobilize partners in the fight against COVID-19 in Africa
The World Bank Group and International Monetary Fund on Friday convened African leaders, bilateral partners, and multilateral institutions to spur faster action on COVID-19 response in African countries.
H.E. Cyril Ramaphosa of South Africa, United Nations Secretary General Antonio Guterres, Director General of the WHO Dr. Tedros Adhanom Ghebreyesus, Africa Union Commission Chairperson Moussa Faki Mahamat, and officials of individual countries outlined their policy plans for effective use of resources, multilateral organizations including the United Nations pledged their continued support, and bilateral partners reemphasized their commitment to a debt standstill beginning May 1, 2020. This comes in response to calls from the World Bank Group President Malpass, International Monetary Fund Managing Director Georgieva, and other partners for creditors to suspend debt repayments in order to provide much-needed support to the poorest countries.
“This pandemic has already had a devastating impact on Africa and its effects will deepen as the rate of infection rises. It is a setback for the progress we have made to eradicate poverty, inequality and underdevelopment,” African Union Chairperson and President of South Africa, H.E. Cyril Ramaphosa said. “While recent announcements from international partners are very welcome, large financing gaps remain and greater support is needed to ensure that African countries are able to respond effectively to the health crisis and address economic challenges.”
Together, official creditors have mobilized up to $57 billion for Africa in 2020 alone – including upwards of $18 billion from the IMF and the World Bank each – to provide front-line health services, support the poor and vulnerable, and keep economies afloat in the face of the worst global economic downturn since the 1930s. Private creditor support this year could amount to an estimated $13 billion. This is an important start, but the continent needs an estimated $114 billion in 2020 in its fight against COVID-19, leaving a financing gap of around $44 billion.
The World Bank Group and the IMF suggested a range of financing options and policy tools as part of the pandemic response, many of which African countries are looking to implement as they plan for the medium and long-term impacts of the crisis. These include further financing from official and private sector creditors.
“The World Bank Group is putting its full capacity to work for people across Africa as they fight this pandemic,” said World Bank Group President David Malpass. “The world has rarely seen a crisis of this magnitude, and no one can stand on the sidelines; we cannot leave any country behind in our response. We have provided emergency support to 30 countries across Africa so far, with more to come, and will continue to advocate for debt relief and increased resources, especially for those countries hardest hit by COVID-19.”
“Our message is clear: We stand with Africa: Through our commitments today we are ‘Mobilizing with Africa’ to help soften the blow of COVID-19 on the continent,” IMF Managing Director Kristalina Georgieva said. “The pandemic is having a monumental impact across Africa and the IMF is leaning forward with many other partners to leverage our resources and to help save lives and livelihoods.” She added that “The IMF will provide more concessional financing and we count on others to step up and do their part, to shield the economy and the people, and provide the foundations for a strong and sustainable recovery”.
It will also be critical for African countries to work together especially on the health response and on limiting trade disruptions to ensure freer movement of medical and food supplies. With so many people working in informal jobs – 89 percent of workers in Sub-Saharan Africa alone – countries need to take immediate steps to expand social safety net programs and support workers and small enterprises. Government services will equally need attention to keep running effectively for the duration of this crisis.
World Bank Group and IMF leaders applauded the groundbreaking accord among G20 countries to temporarily suspend debt payments to IDA and least developed countries beginning May 1, 2020.
The World Bank Group is taking broad, fast action to help developing countries strengthen their pandemic response, increase disease surveillance, improve public health interventions, and help the private sector continue to operate and sustain jobs. It is deploying up to $160 billion in financial support, $55 billion of which will be for Africa, over the next 15 months to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery.
The IMF has been moving rapidly to provide comprehensive support its member countries, by leveraging our $1 trillion lending capacity; doubling annual access limits for our rapid disbursing vehicles to about $100 billion to respond to unprecedented calls for emergency financing from more than 100 countries; approving a short-term liquidity line for countries with very strong economic fundamentals and exploring additional tools to help meet countries’ financing needs; and, revamping our Catastrophe Containment and Relief Trust to help 29 of our poorest and most vulnerable members through rapid debt service relief, 23 of which are in Africa.
Opening Remarks by IMF Managing Director Kristalina Georgieva
Good morning. Excellencies, Ministers of Finance, Ladies and Gentlemen – thank you for participating in this important event.
We are here today to work in partnership with Africa and to bring more attention and more resources to Africa so that the continent can overcome this unprecedented crisis.
The COVID-19 pandemic has turned our world upside down, causing tragic loss of life and disrupting our social and economic order. As you will have seen from our World Economic Outlook, we anticipate the worst global downturn since the Great Depression.
For Africa, we project an economic contraction of at least 1¼ percent this year—the worst reading on record. Already weak fiscal positions will further deteriorate at a time when it is imperative to deploy fiscal policy to strengthen health systems and support vulnerable households and businesses. It is clear that without rapid and adequate international support, the crisis threatens to reverse the continent’s development gains and damage prospects for years to come.
This is the spirit of the call made a few days ago by 18 African and European leaders, among them President Ramaphosa who is with us today, President Macron, and Chancellor Merkel, under the title “Only victory in Africa can end the pandemic everywhere.”
Our meeting today on "mobilizing with Africa" is also about international solidarity and rapid action to address both the health emergency and its economic consequences in the continent. The region is hard-hit and does not have the healthcare capacity, nor the resources, to face this crisis alone. Fiscal space is limited, and fiscal financing needs to address the crisis are large – at least $114 billion for this year. Our decisive actions have helped to meet some of these needs, but there is a US$44 billion gap we must strive to close.
We have a joint responsibility to mobilizing with Africa in its fight against the pandemic and its economic fallout. Let me highlight three proposals:
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First – Options for rapid and scaled-up financing for Africa. The IMF is mobilizing upwards of US$18 billion for Africa in 2020. We have temporarily doubled access under our emergency facilities and streamlined our procedures to deliver rapid financial support to our members – including responding to over 40 requests from our member countries in Africa. We are also seeking to replenish the Poverty Reduction and Growth Trust with the objective to triple our concessional lending capacity for low-income countries. In this respect, I was very heartened by the membership’s response yesterday, with Japan, France, the UK, Canada, Australia and several others promising commitments that take us to 70 percent of the resources needed for this goal.
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Second – Garnering support for debt relief. We wholeheartedly welcome the G-20’s decision to suspend debt service payments from IDA-eligible least developed countries (39 countries in Africa) to official bilateral creditors through end-2020, which responds to a joint call I made with David Malpass few weeks ago. I would like to recognize the work done by France, Germany, China, and Saudi Arabia in pushing through this deal. We have also reformed the IMF’s Catastrophe and Containment Relief Trust to provide debt relief to our poorest members, of which 23 are in Africa and are seeking additional funds to extend the duration of relief. We call on private creditors to also be part of the solution. Together with the World Bank, we will pay close attention to countries faced with high burdens of debt.
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Third – Identifying policy responses to deal with the current shock. The IMF has stepped up advice and knowledge-sharing on policies to address the crisis. We support prioritizing policy action to strengthen health services and so protect the most vulnerable people and parts of the economy. We want to see Africa not only managing these challenging issues, but also capitalizing upon the opportunities the crisis will present – to become more competitive and to leap forward, for example, with e-governance and fintech.
Let me conclude. Working with Africa, I have no doubt that we will overcome this crisis and ensure that Africa will become the most dynamic region in the 21st Century.
AUC Chairperson Moussa Faki Mahamat’s Remarks
I would like to thank you for the opportunity to participate in this high level meeting.
Much has already been said by the previous speakers, and I totally agree with the Chair of the Union President Cyril Ramaphosa.
But I would like to emphasise the situation today on the ground in Africa, keeping in mind that Africa’s continental strategy is already in full swing coordinated by the Africa Union Commission that includes both a response to the public health needs and the socio-economic challenges of this pandemic.
As of today, fifty-two (52) out of the fifty-five (55) AU Member States have reported almost nineteen thousand (19,000) COVID-19 cases and almost one thousand (1,000) deaths. Local transmission is now in forty-three (43) of our member states.
Given that the testing capacity in many of our countries remains poor, I’m sure these figures do not tell the full picture of transmission.
Which is why AfricaCDC, the public health arm of the African Union, needs immediate support to procure life saving medical supplies, but in particular, to increase testing capacities in our countries.
AfricaCDC urgently needs four hundred and thirty million dollars (430million) to implement the Continental strategy, out of which three hundred and fifty million dollars would be to procure urgently needed medical supplies.
Technical discussions with the World Bank are already underway, but time is of the essence. I ask you David for your support to fast track these discussions so these urgent funds are made available to AfricaCDC.
If we get these funds quickly, and when I say quickly, I mean next week or this month, it may buy us precious time to inverse some transmission trends
As you know, African countries are already putting all our modest resources to address the pandemic and ensure socio-economic safety nets in our countries, where eighty-five percent of our people work in the informal economic sectors.
African Finance ministers have estimated the needs to be two hundred billion dollars for the Continent to absorb this extraordinary external shock. And probably more for recovery. But these remain estimations and you and the four AU Special Envoys know better than me about economic projections.
The socio-economic dimension of this pandemic is as crucial as the public health needs. And in Africa, the risks are more pronounced than any where else in the world.
Our public health systems are near breaking point and this crisis risks to reverse the Continent’s hard- won economic and social achievements of the last 30 years. Without your support, this scenario is very probable.
In these extraordinary circumstances, we need extraordinary solutions. To do this, there is need for speed. This is not business as usual, Ladies and Gentlemen, and the normal rules cannot apply. Many countries in the developed world have already gone beyond established frameworks in order to respond to the social and economic impact of the pandemic.
Let us not forget during these times that we need solutions that take into account the different realities of our member states. Many of which are already facing security and terrorism challenges and others under crippling international sanctions, as in Sudan and Zimbabwe.
In this regard, we ask for the suspension of Africa’s public debt for at least two years, and why not, debt cancellation altogether, to ensure that Africa has the fiscal space to devote our resources to response and recovery while we work towards therapeutics or a vaccine when it becomes available.
We are grateful for the steps already taken on debt by the G20, the IMF, the World Bank and others. It is an important first step, but it simply does not go far enough. It also needs to be inclusive to all African countries, recognising the inter connectedness of our economies.
We should also not compromise existing core programs such as vaccination and immunisation by redirecting already committed resources to the pandemic.
We ask for equity based on solidarity, not as a concept of gestures of sympathy, but collective global action, organized around shared vulnerability and common interests, and directed toward common goals.
The World has the means. Let us now mobilise the political will.
This is NOT the time for hesitation or political calculus. We must move now, and we must move together.
The African Union and its members will play their part and we want to count on the solidarity of every one of you here.
Thank you.
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Will COVID-19 derail AfCFTA start of trading?
Preliminary Assessment and Recommendations by AfroChampions
In early March 2020 AfroChampions completed its AfCFTA Year Zero Report: an assessment and ranking of African governments according to their level of commitment to the African Continental Free Trade Area (AfCFTA) and their readiness for Start of Trade in July 2020. The findings proved revealing: some of the least committed countries to AfCFTA (such as countries yet to ratify the Agreement) were among the most prepared logistically to take advantage of trading. Conversely, some of the most committed countries to the AfCFTA were also the least prepared for start of trade.
And despite the great enthusiasm for AfCFTA among citizens and businesses, the AfroChampions assessment found that the continent as a whole had a commitment and readiness level that was below 50%. Just as we were about to publish the report, COVID-19 struck the continent.
Since then, a lot has changed and is changing rapidly. A continent that was looking forward to opening its borders to a new trade revolution starting July 2020, now has almost all of its borders shut in order to fight the pandemic. What will happen to the AfCFTA? Will COVID-19 worsen countries preparedness and commitment to AfCFTA? Below we highlight some of the ways the pandemic is already impacting AfCFTA and threatening the July Start of Trade. We make recommendations to salvage and keep AfCFTA on track.
How COVID-19 is impacting AfCFTA preparedness
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The March 2020 opening and operationalization of the Accra AfCFTA Secretariat has delayed. AfCFTA Secretary-General has been sworn in but is without the full complement of secretariat teams due to disruptions to recruitment and staffing.
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Fast-moving AfCFTA negotiations have slowed down as negotiating teams cannot travel. Consequently, various meetings of ministers and senior officials necessary for crucial deliberations, decision-making and approvals have stalled.
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The highly anticipated July 2020 Start of AfCFTA Trading timeline is at risk in light of the above.
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COVID-19 firefighting means there is significantly reduced attention span for AfCFTA issues among governments, policymakers and the private sector.
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COVID-19 will likely worsen some countries commitment and preparedness to implement the AfCFTA. We expect the AfroChampions AfCFTA country commitment and readiness rankings to be revised in the months ahead.
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There is significant temporary reduction in the levels of intra-Africa trade as a result of border closures and lockdowns. As borders may take long to slowly re-open, the situation will be even more devastating for informal cross-border trade, which is the source of daily livelihoods for many in Africa, particularly for women and youth.
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COVID-19 is already destroying much of the African private sector. AfroChampions early surveillance indicates some of the continent’s strongest companies and businesses are already in severe financial stress. Without an industrial rescue plan COVID-19 could further de-industrialize Africa.
How to Salvage and Keep AfCFTA on Track amidst COVID-19 Disruptions
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AfCFTA negotiations should continue via online and video-conferencing platforms. If done right virtual negotiations could prove to be even faster and cheaper than face to face meetings for certain aspects of the negotiations process.
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The July 2020 date for Start of AfCFTA Trading should not be postponed even if the pandemic persists into July. If AfCFTA trading can take off in the middle of this battle – even if symbolically – will send a strong signal; it should be one of the symbolic victories for Africa in the midst of a crisis. Initial AfCFTA trade can focus on critical goods needed to fight the pandemic such as pharmaceuticals and food products. Governments should ease border crossings for these goods. The AfCFTA can be one of Africa’s main weapons to beat COVID-19.
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The AfCFTA Secretariat, which is temporarily operating out of Addis Ababa, should continue with its staff recruitment and operationalize a fully functional virtual office with newly recruited teams working virtually from their homes across the continent.
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The African Union should convene a major virtual meeting of African trade ministers to deliberate on ways to keep the AfCFTA on track. A fully virtual mode of meetings should be activated to keep the process going.
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African Union should request Ministers of Trade to present COVID19-IMPACT reports of their proposed AfCFTA plans or their already prepared BIAT.
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Each of the member states that have ratified should be made to present a COVID-19-ADJUSTED plan to project how they plan to catch up in the post COVID-19 period.
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We urge African Union President Cyril Ramaphosa to appoint Special AfCFTA Envoys to assist the AfCFTA Secretary General to coordinate with governments towards salvaging and keeping the process on track.
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Africa must be proactive and united in fighting the pandemic; no country should be left behind in the fight. Otherwise borders, travel and trade will continue to be disrupted even if most countries recover and a few do not.
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Economic relief during the crisis is paramount and should be coordinated to include trade in goods critical to the fight against COVID-19. If economies sink too deep, recovery will be slow, and intra-Africa trade will suffer even more. Afreximbank’s US$3 billion COVID-19 facility and AfDB’s US$10 billion facility are laudable steps. These facilities should be targeted at national-level industries and regional value chains that are critical to the fight against the pandemic such as pharmaceuticals, medical equipment, food, agriculture, household consumables, key industrial inputs and transportation.
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Planning for Post-COVID-19 economic and trade stimulus should begin now even as we fight the crisis so that countries will be ready for implementation once crisis eases.
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Guidelines & Financing for a Continental Private Sector & Jobs Recovery Plan which countries can adapt locally, should be jointly coordinated by AU, AfDB and Afreximbank in partnership with governments and African business associations.
There is a Silver lining in the COVID-19 crisis for Africa and AfCFTA
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Potential positive effects on regional trade: In the wake of countries’ struggles to procure goods and supplies from global suppliers to fight the pandemic, COVID-19 is expected to cause a shift from global supply chains towards more regionalized and localized supply chains. Countries are expected to re-balance their over-reliance on distant suppliers in favour of more proximate suppliers. This could have some positive impact on ongoing efforts to boost African regional value chains.
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Potential positive effects on regional and local manufacturing: along with the potential rebalancing towards more regional value chains, COVID-19 is also expected to cause a shift from overreliance on global manufacturing hubs towards more dispersed and diversified regional and local manufacturing. This too could be a boon for ongoing efforts to boost African industrialization.
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Africa’s opportunity to accelerate e-commerce, digital economy & the Fourth Industrial Revolution – which without a doubt will be one of COVID-19’s biggest immediate and long-term impacts. This also reinforces opportunities in clean and green “industries without smokestacks”.
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AfroChampions will soon publish a list of countries that have turned to local sources of COVID-19 related purchases. AfroChampions will make available to the AU and the Secretariat potential local value addition and supply chain opportunities on the continent in the medical and pharmaceutical industries. AfroChampions will present these as preliminary AfCFTA-certified investment candidates for both the Trillion Dollar Private Sector Framework financing opportunities as well as any AU COVID-19 Recovery Fund that may be set up.
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COVID-19: FAO and African Union commit to safeguarding food security amid crisis
Regional body and UN agency join forces to minimize lockdown’s impact on continent where one in five goes hungry
The Food and Agriculture Organization of the United Nations (FAO), the African Union (AU) and international partners on 16 April 2020 described the food and agriculture system as “an essential service that must continue to operate during periods of lockdown, emergency, curfew and other containment measures”.
In a joint declaration, they committed to supporting access to food and nutrition for Africa’s most vulnerable; providing Africans with social safety nets; minimizing disruptions to the safe movement and transport of essential people, and to the transport and marketing of goods and services; and keeping borders open on the continent for the food and agriculture trade.
The document was adopted at a gathering co-organized by the AU and FAO and convened virtually. All 55 AU member states were represented, 45 at minister level. The debate was moderated by the AU Commissioner for Rural Economy and Agriculture, Josefa Sacko.
In his opening remarks, Director-General QU Dongyu said quick, strategic action was needed to lessen the impact of the COVID-19 pandemic on food security in Africa. “Border closures restrict trade and limit food availability in many countries, particularly those dependent on food imports,” he said. He expressed support for measures that do not lead to disruptions in food supply chains: these must be “kept alive,” he stressed.
Angela Thoko Didiza, Minister for Agriculture, Land Reform and Rural Development of South Africa, joined Qu in opening the debate. The Minister, whose country currently chairs the AU, cautioned against any moves to weaken inter-regional trade. Both officials highlighted the toll taken by lockdowns in a continent where informal markets, rather than supermarkets, provide a lifeline for most consumers.
FAO’s Chief Economist, Maximo Torero, pointed to growing evidence of logistical strains in food markets – strains which Qu suggested should be mitigated by “shortening the chain”: producing more, better, and locally if possible.
Minister after minister intervened to outline the challenges posed by the pandemic, in a region of the world where a fifth of the population is undernourished. The CEO of the New Partnership for Africa’s Development (NEPAD), Ibrahim Mayaki, warned of risks to social stability if food and cash were to run low among Africa’s urban residents. Many government representatives described strenuous efforts to bolster welfare benefits, often at great cost to national budgets.
Echoing these concerns, the European Commissioner for Agriculture, Janusz Wojciechowski, outlined an EU support package for Africa that should eventually exceed $20 billion. The World Bank’s Simeon Ehui also detailed support initiatives, including the possibility of re-purposing $3.2 billion in uncommitted funding. Speaking for the African Development Bank, Martin Fregene concluded with details of a COVID-19 response programme that includes targeted technical and financial support.
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tralac’s Daily News selection
AU-FAO ministerial meeting on the impacts of COVID-19 on food security in Africa
Co-convened, yesterday, by the FAO Director-General and the Chair of the AU STC on Agriculture, Rural Development, Water and Environment, moderated by the AU Commissioner for Rural Economy and Agriculture, the meeting discussed food security and nutrition implications of the COVID-19 pandemic in Africa. Extract from the pdf Declaration on food security and nutrition during the COVID-19 pandemic (377 KB) : we hereby commit ourselves to
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Working with local leaders to ensure that downstream and upstream food and agriculture markets and the informal food sector, remain open and operate properly, while complying with health and safety guidelines
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Working with food and agriculture system traders and transporters, and officials in other sectors and local governments, to resolve any bottlenecks affecting the safe movement, transport and marketing of essential people, goods and services in the system
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Keeping national borders open for food and agriculture commodity trade so as not to disrupt regional and interregional trade in food and agriculture products and inputs
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Ensuring adequate emergency strategic food reserves and storage facilities, including through public-private partnerships, where appropriate and feasible, and directly linked to the social protection programs.
Background briefs:
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Social protection: ensuring effective response and inclusive recovery in the context of COVID-19 in Africa
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Crop calendars and recommended actions during the COVID-19 outbreak in the Africa region
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pdf Measures for supporting domestic markets during the COVID-19 outbreak in Africa (206 KB)
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pdf Intra-African trade, the AfCFTA and the COVID-19 pandemic (365 KB)
Andrew Mold, Anthony Mveyange: Prioritizing regional over global value chains to accelerate economic development in East Africa (Brookings)
Recent global trends like the COVID-19 pandemic, the climate change crisis, and heightened trade disputes among the world’s leading trade partners have highlighted the vulnerability of global value chains (GVCs). At present, the scale of the disruption in East Africa is quite dire—imports from China (a common source of intermediate goods) through the Mombasa Port declined by a drastic 20% shortly after the onset of the pandemic, between January and February 2020. In light of these trends, governments and industries in East Africa should consider rapidly shifting from focusing on global value chains (GVCs) to regional ones (RVCs). Given the region’s past difficulties with entering global value chains and consolidating the gains from regional integration processes, heightened emphasis on regional value chains could reap compounding benefits. The time is ripe: As documented in our recent report, the recently signed and ratified AfCFTA can be the great enabler of that shift.
In summary, we believe developmental and policy discourse has been skewed excessively towards equating “export success” with the ability to integrate into GVCs and sell products in high-income country markets. Policymakers in East Africa have, for a long time, embraced such policy strategies. In turn, the region has become more exposed and prone to GVC-related shocks, as seen with the onset of the current COVID-19 crisis. A more rapid expansion of regional trade, by contrast, is arguably the surest and safest way to diversify trade and reduce vulnerability, with the added plus that it is kinder on the environment.
COVID-19 in Africa: Protecting lives and economies (ECA)
We estimate that between 5 million and 29 million people (pdf) will be pushed below the extreme poverty line of $1.90 per day owing to the impact of COVID-19, compared to the baseline 2020 African growth scenario. Vulnerable households affected by COVID-19 face an increased probability of moving into transient poverty by 17.1%, a 4.2% increased probability of staying in poverty for a decade or longer, and a fall in the probability of moving out of poverty by 5.9%. Increased poverty levels will also exacerbate existing income inequalities. For low-income households, which already spend an average of 36% of their income on health care-related expenses, access to health care will become increasingly unaffordable in the wake of COVID-19, leading to an increase in the number of households falling below the poverty line.
Annual formal job creation (currently 3.7 million) is forecast to drop by 1.4 to 5.8%, compared with the baseline 2020 African growth scenario. An increase in informal and vulnerable employment is expected (more than 60% of men, and nearly 75% of women are informally employed in Africa) and an increase in out-of pocket expenditure by poor and vulnerable households. The 2008 financial crisis increased vulnerable employment by 10%. The more systemic shock of COVID-19 is expected to increase vulnerable employment considerably more than this, with the ILO anticipating 19 million job losses in Africa as workers face full or partial workplace closures.
Offline spending on apparel in the European Union is estimated by McKinsey to have fallen 30–40% and as much as 80% in highly infected regions. This puts at peril not just the continent’s $15bn in annual textile and apparel exports, but a crucial source of employment. In Kenya, the sector counts for more than 38,000 formal workers, more than 200 large and medium-size companies, and over 75,000 micro and small companies, including fashion designers and tailoring units. In Ethiopia, the number of textile and garment factories operating in the country was estimated at 122 in 2019.14 Ethiopia counts about 37,000 formal workers while about 450,000 people are informally engaged in activities across the sector. Both countries (Ethiopia and Kenya) export more than 65% of their textile products to the United State and the European Union. Further down the supply chain, falling demand has translated into a 26% fall in cotton prices since December 2019, with knock-on effects for cotton farmers in Benin, Burkina Faso, Mali and Zimbabwe.
African governments should urgently suspend tariffs on essential COVID-19 imports. A list of such products can be informed by the WCO HS classification reference for COVID-19 medical supplies as well as other essential goods beyond medical supplies to prevent shortages and skyrocketing prices. China and at least 12 further countries have already reduced import barriers on COVID-19 medical supplies. Beyond imports, Africa must look to boost its own productive capacity for medical supplies. Many of these products are in considerable demand globally and domestic production will be essential to fill the supply gap. Pooled production and cross-border assistance can help to improve Africa’s response.
Nigeria and the implementation of the AfCFTA: key issues and policy options (Premium Times)
In terms of proposed immediate action that would unlock the AfCFTA’s immense potential in Africa’s largest economy, a labyrinth of regulatory hurdles need to be addressed and a number of enabling intertwined actions require to be considered by all stakeholders. Most importantly, from a trade policy perspective, the National Action Committee and the National Office of Trade Negotiations must take a number of strategic steps, especially against the backdrop of the global COVID-19 pandemic.
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First, they must keep continental integration in focus through stakeholder engagement and communication.
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Second, as Africa’s largest economy, Nigeria must provide leadership in the area of establishing a fair mechanism that would engender a level playing field among countries in the continent, as the AfCFTA has the most profound level of income disparity in any continental trade agreement.
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Third, the Committee must collaborate with development finance institutions (DFIs) to attract investments in power and infrastructure development, as one of the most pressing issues facing the country is the lack of critical trade facilitation infrastructure.
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Fourth, there must be concerted efforts to strengthen the role of the private sector in mainstreaming the objectives of the AfCFTA.
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Fifth, there must be a cohesive strategy for crowding-in the informal sector and shadow economy, given that the informal sector represents more than 66 per cent of total employment in sub-Saharan Africa.
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Six, there must be sufficient flexibility for Rules-of-Origin (RoO) provisions, with a view to enabling SMEs within Nigeria to take advantage of AfCFTA preferential tariffs.
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Seventh, they must figure out a creative and sustainable means of financing the provision of technical assistance that would facilitate seamless implementation of the Agreement and the outstanding Phase II negotiations.
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Eighth, they must clarify the numerous ambiguities currently present in the AfCFTA Agreement. [The author: Dr Ese Owie]
Eritrea: AfDB posts an update for its Interim Country Strategy Paper
This I-CSP update is being conducted after the signing of a landmark peace and friendship agreement between Eritrea and Ethiopia that has restored diplomatic relations. It is also noteworthy that the timing of this I-CSP update coincides with the expression of interest by Eritrea and Djibouti to advance peace and economic integration in the Horn of Africa (HoA). The Bank’s I-CSP missions to Eritrea in April, July 2019 and December 2020 established that there was limited progress on the preparation of the NDP, a clear indication that its preparation will not be completed before December 2020. This delay is mainly attributed to lengthy and high-level stakeholder consultations between the authorities and DPs. The recent agreements and reconciliations between Eritrea and other HoA countries also delayed the NDP. Eritrea will particularly need ample time to articulate its strategic directions to harness the peace dividend while mitigating any possible risks from neighboring countries. Eritrea will also need sufficient time to harmonize and agree with DPs and neighboring countries on key priorities in the context of the HoA regional integration agenda. An inclusive consultation process is necessary to ensure durable peace as a prerequisite for unlocking sustainable and inclusive growth for the country and integration with HoA countries. These consultations have been very slow and given the long period of conflict, time is needed to agree on the minimum platform for regional priorities.
Regional integration and trade. The strategic importance of the State of Eritrea to the region cannot be underestimated as its location next to the Red Sea connects Africa, Asia and Europe and offers tremendous potential for regional integration. Prospects for regional integration have been further bolstered by the peace and friendship agreement with Ethiopia and the growing interest from DPs to support GoSE to tap the benefits of integration and increase its role in the HoA region. This is particularly important given Eritrea’s strategic location on the Red Sea as a hub of transit trade through its ports of Massawa and Assab. Following the restoration of relations with Ethiopia, the GoSE’s goal of making Massawa and Assab active and vibrant ports appears achievable. To this end, Eritrea would need to improve its infrastructure connectivity, in particular, those of a regional nature. According to the 2019 CPIA conducted by the Bank Group, Eritrea’s score on infrastructure and regional integration is only 2.0 out of 5 which is below the average score of 3.2 for Africa. Other countries including Djibouti have demonstrated that investments in port and related logistical services can be a major source of fiscal revenues and export earnings. Eritrea could also ease its power deficits through regional power trade. In this regard, Eritrea has expressed interest in becoming a member of the Eastern Africa Power Pool.
Communiqué of the 41st meeting of the IMFC (chaired by SARB Governor, Mr Lesetja Kganyago) (IMF)
We welcome the coordinated approach agreed by the G20 and the Paris Club, supported by the IMF and World Bank, toward a time-bound suspension by bilateral official creditors of debt service payments for the poorest countries that request forbearance. We call on private creditors to participate in the initiative on comparable terms. We welcome the IMF’s focus on crisis-related work, including on debt and financial stability risks, supporting a sustainable recovery in a way consistent with long- standing issues on our agenda.
We reaffirm our commitment to a strong, quota-based, and adequately resourced IMF at the center of the global financial safety net. We will keep demands on the IMF’s resources under close review. The IMF’s lending capacity of US$1 trillion is critical to maintain confidence that the IMF can fulfill its mandate by helping its members overcome the crisis. The recent Executive Board decisions on the doubling of the New Arrangements to Borrow and on a new round of Bilateral Borrowing Agreements are important steps in this regard. We look forward to swift action by members in implementing these decisions. [Transcript: Sub-Saharan Africa Regional Economic Outlook press briefing, April 2020]
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Without adequate protection, estimates show that over 300,000 Africans could lose their lives due to COVID-19 – ECA report
The Economic Commission for Africa (ECA), in a new report on the coronavirus pandemic, says over 300,000 Africans could lose their lives due to COVID-19. This, as the pandemic continues to impact on the Continent’s struggling economies whose growth is expected to slow down from 3.2 percent to 1.8 percent in a best-case scenario, pushing close to 27 million people into extreme poverty.
The Report, which will be launched virtually on the 17th of April and is titled, COVID-19: Protecting African Lives and Economies, says Africa’s fragile health systems could see additional costs being imposed on them because of the growing crisis that has to-date, resulted in over 16,000 infected Africans and claimed over 800 lives at the time of the report’s launch.
“To protect and build towards the Continent’s shared prosperity, $100 billion is needed to urgently and immediately provide fiscal space to all countries to help address the immediate safety net needs of the populations,” reiterates Vera Songwe, UN Under Secretary-General and Executive Secretary, Economic Commission for Africa.
Africa, notes Ms. Songwe is particularly susceptible because 56 percent of its urban population is concentrated in slums or informal dwellings and only 34 percent of African households have access to basic handwashing facilities.
“The economic costs of the Pandemic have been harsher than the direct impact of the COVID-19. Across the continent, all economies are suffering from the sudden shock to the economies. The physical distancing needed to manage the pandemic is suffocating and drowning economic activity,” she adds.
The Report notes that Africa’s small and medium enterprises risk complete closure if there is no immediate support. Furthermore, the price of oil, which accounts for 40 percent of Africa’s exports has halved in value, and major African exports, such as textiles and fresh-cut flowers have crashed. Tourism, which accounts for up to 38 percent of some African countries’ GDP, has effectively halted as has the airline industry that supports it.
On partnerships, the Report underscores that African economies are interconnected; the response to the crisis ‘must bring us together as one’.
On mitigation, the Report outlines a number of concerted efforts to keep trade flowing, especially in essential medical supplies and staple foods, with a strong policy push to fight the urge to impose export bans. It also proposes that intellectual property on medical supplies, novel testing kits and vaccines must be shared to help Africa’s private sector play its role in the response.
Ms. Songwe also notes that the private sector needs liquidity, but it also needs partners. “That is why we call on the international community to support by injecting more liquidity into our economies,” she adds.
She stresses the need for never-before-seen assistance through innovative financing facilities, stating, “We must build back better, by ensuring that we are climate conscious in rebuilding and by leveraging the digital economy.”
“Women are the front end and the back end of this crisis, they are our nurses and run many of the small businesses, underlines Ms. Songwe, adding: “Policies put in place to respond to the crisis must be in collaboration with them; we must be firm and clear on good governance to safeguard our health systems, ensure proper use of emergency funds, prevent our businesses from collapse, and reduce worker lay-offs.”
The COVID-19: Protecting African Lives and Economies Report is the culmination of in-depth analyses presented to African Ministers of Finance in two virtual meetings, as well as extensive consultations with key representatives from civil society, international finance institutions and the private sector. These presentations, as well as important key messages to the international community are at the disposal of the media and can be found here: https://www.tralac.org/news/article/14477-covid-19-resources-page.html#resources
Across the globe, COVID-19 cases have surpassed 2 million with over 120,000 having lost their lives at the time of the release of this report. Over 302,467 recoveries have been recorded.
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Transcript of Sub-Saharan Africa Regional Economic Outlook Press Briefing, April 2020
Extracts from the press briefing held on 15 April 2020 at the IMF-World Bank Virtual Spring 2020 Meetings, with Mr. Abebe Aemro Selassie, Director of the IMF’s African Department, and Mr. Gediminas Vilkas, Communications Officer at the IMF
MR. SELASSIE: Good morning. Before taking your questions, I would like to briefly summarize some of our, some aspects of the outlook that as we see them today.
First, thank you for joining us remotely for the launch of our regional economic outlook for Sub-Saharan Africa. Unsurprisingly, the outlook this spring is tightly focused on the impact of the COVID-19 pandemic on the region, an unprecedented crisis which is threatening to reverse the region’s recent development and policy gains.
To summarize briefly, the impact that this crisis is having on the region and the policies that are needed to protect lives, and allow a swift recovery, I would like to make a few points. First, outlook in Sub-Saharan Africa is expected to contract by 1.6 percent in 2020, and highest, you know, in per capita terms, this would be higher still at close to 4 percent. This is the lowest growth number that we can find for the region going back at least to 1970.
The possibility that growth could be contracted more still is quite high, and even if the contraction is limited to this level, it is worth nothing that it represents a 5 percentage points downward revision since last October. And it is, as I noted, the worst performance that we’ve seen going back at least to 1970.
The hit to growth reflects a poisonous cocktail of shocks that is affecting livelihoods and economic activity. Swift and decisive measures, closing borders, shattering businesses, requiring people to stay at home have had to be adopted to halt the advance of the virus before it overwhelms already stretched health services, but will also disrupt production and reduce demand sharply.
Of course, worth bearing in mind is that these measures will have the greatest impact on the region’s most vulnerable. People, who in many cases, have to go out every day to earn income to put food on the table are now being required to stay at home now.
Coupled to this plummeting global demand will exacerbate the economic impact greatly by reducing demand for the region’s goods and services, tourism, remittance flows, tighter global financial conditions have already triggered significant capital outflows from the region, and will also adversely impact the prospect for investment going forward. And commodity exporters, will suffer from an additional sharp decline in key commodity prices adding significantly to the region’s difficulties.
As a result, no country will be spared. As elsewhere, the region faces a synchronized and deep economic downturn with less diversified economies. All exporters’ tourism dependent economies set to be very hard. Against this difficult backdrop, several urgent and decisive measured are needed to limit the humanitarian and economic cost of this crisis. The immediate priority is to do whatever it takes to protect people’s health, boosting health spending as needed regardless of fiscal space concerns.
We also see a significant role for fiscal policy in this crisis to mitigate the impact of the crisis. Targeted cash transfers and similar measures to support people whose livelihoods are being upended by the containment and mitigation measures government’s adopted are needed. Where feasible, consideration also needs to be given to temporary and targeted support for hard-hit small and medium scale enterprises.
It is only when the health and acute part of the economic crisis have subsided that fiscal policy can revert to medium-term past consistent with debt sustainability considerations.
Critically, the ability of the countries to mount an adequate response will depend on assistance from the international community. With domestic savings and financing options severely limited, as countries have been shut out of capital markets, excellent financing on concessional and grant terms has an inordinate important role to play.
Looser monetary policy can complement these fiscal efforts and financial measures can help minimize credit or liquidity disruptions for businesses. Countries with flexible exchange rates can consider a combination of currency movement and the drawdown on reserves, while countries facing sizeable and disorderly outflows might consider temporary capital flow measures as part of a wider policy package. This crisis is unprecedented and equally calls for bold and decisive support from the international community.
MR. VILKAS: Thank you. Now I go to a different set of questions. What policy advise IMF is offering for the countries. Question from Kemi Osukoya from Africa Bazaar Magazine – within the current latest decades alone African countries, particular those in Sub-Saharan Africa Region have experienced multiple strikes to their economies: climate-related disasters, Ebola outbreak, now we have COVID-19 pandemic – also, slowdown in commodity prices, which affect all exporting countries like Congo and Nigeria, and all the different things that relates to that.
Based on this uncertainty, what top long-term monetary and fiscal policy measures would cushion against unexpected return on external shocks, and what short-term actions can we take now during this current crisis that can be leveraged later on? Thank you.
MR. SELASSIE: Thank you. I think it’s important to note, I mean, what differentiates this particular crisis from the previous ones that were cited, commodity price declines, or the Ebola outbreak in Western Africa which impacted Guinea, Liberia, and Sierra Leone and the like, is the fact that no country is going to be left untouched by this crisis. Every country in the region will be impacted.
In previous cases we’ve often seen countries that have commodity exporters, or you know, Ebola, those being impacted by the outbreak of Ebola, or natural disasters like Mozambique last year, it’s been country-specific, or impacting a handful of countries.
Even the global financial crisis really largely impacted those countries that were much more integrated into the global capital markets, into global supply chains, and there were still quite a lot of countries that continued to sustain reasonable growth.
This time, however, because the shock is so widespread – because beyond the external impact on the region, we are also seeing domestic supply and demand being disrupted – the shock will be, really, quite widespread.
That’s why to deal with this shock, I think extraordinary type of policy interventions are needed, including the ones I laid out earlier: very supportive fiscal stance, resources being put on the health aspect of the crisis – this is really, really, very important.
Then, once the crisis is behind us is when policies can be recalibrated to more medium-term considerations.
I think, going forward, these are going to have to include deep thinking about how to have more resilient economies to the more medium-term threats that our economies face also, like climate change.
So, how do we build an economy that’s going to be resilient to more detail events, I think, is going to be one of the policy issues that are going to have to be discussed and thought through in the coming days.
Read the full transcript here.
Six Charts Show How COVID-19 Is an Unprecedented Threat to Development in Sub-Saharan Africa
Sub-Saharan Africa is facing an unprecedented health and economic crisis. One that threatens to reverse the development progress of recent years. Furthermore, by exacting a heavy human toll, upending livelihoods, and damaging business and government balance sheets, the crisis threatens to slow the region’s growth prospects for years to come.
Overall, GDP is expected to contract by -1.6 percent in 2020, a downward revision of 5.2 percentage points compared to six months ago, the IMF says in its latest Regional Economic Outlook: Sub-Saharan Africa.
Comprehensive measures are needed to limit humanitarian and economic losses. Despite the limited space going into the crisis, timely fiscal support is crucial to protect vulnerable groups and ensure a quick recovery when the pandemic fades.
“The ability of sub-Saharan African countries to mount the necessary fiscal response will require ample external financing on grant and concessional terms from the international community,” says Abebe Aemro Selassie, Director of the IMF’s African Department.
Here are six charts that tell the story:
1. COVID-19 threatens to unleash an unprecedented health crisis in sub-Saharan Africa. As of April 13, over 7,800 cases of COVID-19 have been confirmed across 43 countries in the region. South Africa, Cameroon, and Burkina Faso are the most affected. The rapid spread of the virus, if left unchecked, threatens to overwhelm weak healthcare systems and exact a large humanitarian toll.
2. The health shock is precipitating an economic crisis and upending the livelihoods of already vulnerable groups. Containment and mitigation measures needed to slow the spread of the virus will severely impact economic activity. Furthermore, a lockdown can have devastating effects – for example, on food insecurity – on households who live hand-to-mouth and have limited access to social safety nets.
3. Spillovers from a rapidly deteriorating external environment are compounding the economic challenges facing sub-Saharan Africa. A sharp growth slowdown among key trading partners is reducing external demand. In addition, tightening global financial conditions are reducing investment flows and adding to external pressures. Finally, a sharp decline in commodity prices, especially oil, is exacerbating challenges in some of the region’s largest, resource-intensive economies.
4. GDP in sub-Saharan Africa is projected to contract by -1.6 percent this year – the worst reading on record. While the effect across countries is expected to differ depending on factors like extent of diversification and dependence on tourism, no country will be spared. Compared to projections made six months ago, growth for 2020 has been revised down for all countries in the region.
5. Timely fiscal support is crucial to limit humanitarian and economic losses. Stepping up health spending is essential, irrespective of fiscal space and debt levels. Given the large but temporary nature of the shock, some discretionary fiscal support is warranted, even in countries with limited space. The focus should be on targeted measures that alleviate liquidity constraints on vulnerable firms and households.
For countries facing financing constraints, especially oil exporters where the shock is likely to be more long-lasting, the aim should be to undertake well-paced, growth-friendly spending adjustments that seek to generate resources for social spending, while mobilizing additional financing from the donor community.
A comprehensive and coordinated effort by all development partners is essential to respond effectively to this crisis. The ability of countries to mount the required fiscal response is highly contingent on ample external financing and grant on concessional terms being made available by the international financial community. Without adequate financing, temporary liquidity issues could turn into solvency problems, resulting in the COVID-19 crisis having long-term effects on economic activity.
Related News
International Monetary Fund and Financial Committee (IMFC) Meeting: Statements and Communiqué
IMFC Statement by T.T. Mboweni, Minister of Finance for South Africa, on behalf of the Africa Group I Constituency[1]
We express our deepest sympathies on the extensive loss of lives due to the COVID-19 pandemic.
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After registering 2.9 percent growth in 2019, the global economy is projected to contract significantly in 2020, following the outbreak of the Coronavirus disease (COVID-19). The ensuing contagion triggered a far-reaching health, economic, and financial crisis. Measures adopted to contain the spread of the pandemic have affected labor markets and mobility, with profound effects on business activity in sectors such as travel, hospitality, entertainment, and tourism. In parallel, the pandemic has resulted in the disruption of supply chains, business closures, job losses, and a sharp contraction in aggregate demand. Emerging and frontier market economies are facing significant risks characterized by an unprecedented and sharp reversal of portfolio flows, tightening global financial conditions, commodity price deflation, and exchange rate pressures.
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Looking ahead, global growth is expected to rebound into positive territory in 2021. This forecast is, however, subject to great uncertainty, with the rebound conditioned on the pandemic fading in the second half of 2020, allowing for the gradual rollback of containment measures and restoration of consumer and investor confidence. It is also predicated on the effectiveness of policy instruments (where there is space) to prevent widespread firm bankruptcies, protracted job losses, and systemic financial strains.
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In view of the enormous challenges facing the global economy, we endorse the key messages from the flagship reports on the need for carefully calibrated domestic measures alongside internationally coordinated policy actions, to limit negative outcomes. In particular, we concur on the need to focus policy actions on containing the virus and protecting lives through investment in short- to long-term human and economic health. We also support the coordinated scaling up of fiscal, monetary, and financial market measures, as necessary. In view of the exceptional circumstances, we urge the Fund to deploy all available policy tools to reduce contagion, boost confidence, restore growth, and reduce unemployment. Economic policies should be geared towards moderating the impact of the decline in activity and averting a severe contraction, while supporting economic recovery once the pandemic fades. Meanwhile, tailored exit strategies to rollback containment measures and revert to prudent pre- crisis policies will be essential.
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We note that economic activity in Sub-Saharan Africa (SSA) is expected to decline considerably, with 3.1 percent growth in 2019 turning into recession in 2020, the first region-wide contraction since 1992. The spread of the Coronavirus presents real and serious setbacks to recent efforts to eradicate poverty, inequality and underdevelopment. At the same time, the collapse in international oil prices, underpinned by the sharp contraction in global oil demand since January, has diminished near-term growth prospects for oil exporters. Given that the channels of economic vulnerability differ across countries in the region, we underscore the need for tailored, and focused Fund support aimed at protecting vulnerable households and businesses, including the informal sector and small and medium-sized enterprises (SMEs). We also support the Fund’s continued policy guidance on exchange rates and capital flow management. Mitigating the downside risks associated with capital flow reversals, and the decline in commodity revenues remains essential.
Supporting Growth in Sub-Saharan Africa
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Within the constraints of limited policy space in many SSA countries, the crisis response by authorities has been swift. At the same time, the measures introduced to contain the impact of the pandemic on livelihoods and the economy have further exacerbated existing fiscal and debt vulnerabilities. We, therefore, call for additional support from the international community and development partners to bolster the fight against the pandemic and limit its economic and social effects. We view the reorientation of the work of international financial institutions towards the immediate priorities affecting the global economy, as warranted. In this regard, we welcome the Fund’s crisis response package, aimed at enhancing the effectiveness of emergency financing facilities used to respond to the urgent needs of emerging market and developing countries (EMDCs) that face immediate financing needs induced by COVID-19 pandemic. Specifically, we welcome the temporary doubling of access limits under the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI). Furthermore, we support enhancements to the Catastrophe Containment and Relief Trust (CCRT) to adapt it to current circumstances. Relatedly, proactive fundraising efforts to replenish the CCRT and the PRGT, are important to ensure the adequacy and self-sustainability of concessional resources.
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In view of the severe liquidity challenges facing EMDCs, we emphasize the need for additional Fund support. Within this context, we express our strong support for a general SDR allocation, given the magnitude and impact of the COVID-19 crisis, far surpassing that of the global financial crisis of 2008. Such broad-based support would help provide non-debt -creating support, including availing resources to fragile states that cannot access concessional and grant resources, boosting reserve positions, and reducing the demand for Fund resources. We also urge the Fund to continue assessing the adequacy of its lending toolkit, including by exploring the viability of introducing short-term liquidity instruments such as the Short-term Liquidity Line (SLL).
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Considering that many countries in SSA lack adequate capacity to effectively deal with the crisis owing to elevated debt vulnerabilities, limited policy space, inadequate social safety nets, and weak health systems, we welcome multilateral collaboration to address common challenges. Innovative approaches to assist countries to raise external grants and concessional finance will be essential. In addition, we support the call for debt relief for poor and vulnerable members, noting that the challenges are particularly acute among fragile and conflict-affected countries. In this connection, we welcome the calls by the IMF and the World Bank for a time-bound moratorium on debt service obligations, including to official bilateral creditors. The temporary suspension of debt service payments would help in creating fiscal space required to fight the pandemic. Our authorities commit to responsible deployment of these resources. In addition, our authorities will continue to leverage Fund technical support to further strengthen their governance, transparency, and accountability frameworks. It will also be particularly helpful for the Fund to enhance the use of tailored digital platforms for capacity development, where feasible.
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We also call on the international community to facilitate the flow of medical supplies to SSA during these exceptional times, in addition to supporting the expansion of local and regional manufacturing capacity to meet the increased need for medical supplies.
Fund Policies
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Beyond the crisis, we emphasize the need for renewed Fund commitment to a focus on emerging macro-critical issues, including debt management, capital flow management, the integrated policy framework, climate change, inequality, diversity and inclusion, and fintech, to support economic recovery efforts and ensure a resilient and sustainable global economy. More importantly, efforts should be made to build resilience to ensure that SSA is better prepared for future shocks.
Fund Resource, Governance and Voice
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Recognizing the current uncertainties, especially the duration of the pandemic and its magnitude, we welcome a doubling of the New Arrangements to Borrow (NAB) and the new round of temporary Bilateral Borrowing Agreements (BBAs) beyond 2020. We urge NAB and BBA creditors to expedite their domestic ratification processes. That said, we also welcome the Fund’s commitment to ensuring the adequacy of Fund resources, including effecting reforms under the 16th General Review of Quotas. We reiterate the need for an adequately resourced and quota-based Fund, to preserve its role at the center of the global financial safety net (GFSN). We also restate the need to prioritize outstanding governance obligations consistent with previous commitments by the IMFC to realign quota shares to reflect countries’ relative positions in the global economy. Furthermore, we reiterate the need to protect the voice and representation of the poorest members of the Fund and repeat our call for a third chair for Sub-Saharan Africa on the IMF Board.
A selection of IMFC statements is available below. The full list of statements is available here.
[1] Angola, Botswana, Burundi, The State of Eritrea, Kingdom of Eswatini, The Federal Democratic Republic of Ethiopia, The Gambia, Kenya, Kingdom of Lesotho, Liberia, Malawi, Republic of Mozambique, Namibia, Nigeria, Sierra Leone, Somalia, South Africa, Republic of South Sudan, Sudan, United Republic of Tanzania, Uganda, Zambia, and Zimbabwe.
Communiqué of the Forty First Meeting of the IMFC
Chaired by Mr. Lesetja Kganyago, Governor of the South African Reserve Bank
April 16, 2020
We express our deepest sympathies for the loss of human lives caused by the COVID-19 pandemic. Our urgent collective task is to mitigate the health and economic impact that the pandemic is having on people worldwide. We remain confident that, working together, we will overcome current challenges to help safeguard the global economy for all.
We are in an unprecedented global crisis. The global economy will contract sharply this year, reflecting necessary health measures to contain the virus, disruptions in economic supply and demand, and tightening financial conditions. Many countries are coping with grave challenges including limited medical supplies and capacities. In particular, many emerging market and developing countries are facing sharp declines in export demand and commodity prices, large capital outflows, foreign exchange shortages, and increasing debt burdens.
While the global outlook is subject to exceptionally high uncertainty, we expect a recovery next year as we continue to employ all available policy tools to defeat the pandemic, protect jobs, and restore growth. We have taken extraordinary macroeconomic action and, working together, will further scale up fiscal, monetary, and financial stability measures, as necessary, to facilitate a speedy return to strong, sustainable, balanced, and inclusive growth. Targeted and sizable fiscal support is critical to provide a safety net for the most affected households and businesses and create conditions for a rapid recovery. We welcome the actions of central banks and financial authorities to alleviate stressed global financial conditions and maintain financial stability.
We support the IMF in assisting member countries through financial support, policy advice, and capacity development, in close collaboration with other international institutions and partner organizations. We welcome the IMF’s crisis response package, comprising streamlined procedures, rapid and enhanced access to emergency financing, including a temporary doubling of the annual access limits under the Rapid Credit Facility and Rapid Financing Instrument, liquidity provision through a new short-term liquidity line for members with very strong fundamentals and policies, and debt service relief to the poorest and most vulnerable countries through a reformed Catastrophe Containment and Relief Trust (CCRT). We also call on the IMF to explore additional tools that could serve its members’ needs as the crisis evolves, drawing on relevant experiences from previous crises.
We welcome the pledges to the CCRT and the Poverty Reduction and Growth Trust (PRGT) received so far and call for additional contributions to ensure that the IMF can support its poorest and most vulnerable members. We welcome the coordinated approach agreed by the G20 and the Paris Club, supported by the IMF and World Bank, toward a time-bound suspension by bilateral official creditors of debt service payments for the poorest countries that request forbearance. We call on private creditors to participate in the initiative on comparable terms. We welcome the IMF’s focus on crisis-related work, including on debt and financial stability risks, supporting a sustainable recovery in a way consistent with long- standing issues on our agenda.
We reaffirm our commitment to a strong, quota-based, and adequately resourced IMF at the center of the global financial safety net. We will keep demands on the IMF’s resources under close review. The IMF’s lending capacity of US$1 trillion is critical to maintain confidence that the IMF can fulfill its mandate by helping its members overcome the crisis. The recent Executive Board decisions on the doubling of the New Arrangements to Borrow and on a new round of Bilateral Borrowing Agreements are important steps in this regard. We look forward to swift action by members in implementing these decisions. We remain committed to revisiting the adequacy of quotas and continuing the process of IMF governance reform under the 16th General Review of Quotas, including a new quota formula as a guide, by December 15, 2023.
We endorse the Managing Director’s Global Policy Agenda.
Our next meeting will be held in Washington, D.C., on October 17, 2020.
tralac’s Daily News selection
The ECA’s African Trade Policy Centre is conducting a short COVID-19 Africa Impact Survey to provide insights into the economic effects of COVID-19 on economic activity and trade for African businesses. The survey can be accessed here.
In a report to be released later this week, the UNECA outlines different scenarios and outcomes as well as the impact the Covid-19 pandemic has had across the continent. The ECA also notes that the economic impact of COVID-19 on African cities is likely to be acute.
African Union’s Labour Migration Advisory Committee: statement on COVID-19 and the condition of African migrant workers
The Labour Migration Advisory Committee is extremely concerned about the welfare of African migrant workers, refugees and Internally Displaced Persons caught in the cross-fire of this current global health crisis. As countries increasingly adopt sweeping measures, thousands of vulnerable African labour migrants have become stranded in their different countries of work. Some are likely to fall victim to hardship, exploitation, and extortion in their desperate effort to return to their homes and families before the intensification of the on-going global containment measures.
The AU LMAC, therefore, calls upon the AUC, RECs, member states, social partners’ organizations and the international community to strategically consider and implement measures to mitigate against businesses collapse, jobs and income losses. In the near future, Member States are encouraged to put in place unemployment insurance plans and to extend social security to workers in the informal economy and rural sectors.
Further, we call on African governments in the post-COVID-19 era to carefully look at and renegotiate the different Labour Migration Agreements that they may have signed with the view of ensuring the enjoyment by migrant workers of adequate health and safety, social protection and portability, and other human and labour rights protections.
Today’s 18th extraordinary summit of the EAC Heads of State on COVID-19 has been postponed, due to a request by South Sudan. The East African Business Council had prepared two inputs for the summit:
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pdf Private sector recommendations on mitigating the impact of covid-19 in the EAC region (1.00 MB) . In a bid to safeguard current and future jobs, exports and businesses as well as offer quick economic recovery for the EAC Bloc, the Board on behalf of the EAC Private sector recommends to the Council of Ministers and to the Summit of the EAC Heads of State as follows:
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Adopt a common regional approach in the preparedness and response measures towards mitigating the impact of COVID-19 outbreak in the EAC
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Implement an Open Skies Policy for cargo carriers into the EAC market to fully liberalise free movement of goods across the EAC without restrictions in line with the Yamoussoukro Decision on freedom rights and the draft EAC regulations on liberalisation of air transport services, during the COVID-19 pandemic
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Provide an environment for private sector collaboration with bovernments to enhance efforts towards mitigation and response measures against COVID-19
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The EAC Partner States to collaborate closely for increased production of essential goods and ensure their free flow across the EAC Partner States
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Allow free movement of essential services and service suppliers such as doctors, nurses, scientists, researchers, truck drivers, etc across the EAC region
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Urge the EAC Partner States to provide fiscal incentives to businesses already involved in manufacturing of essential products such as health equipment, sanitizers, masks, soaps
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Enhance collaboration in information sharing, best practices and any other support initiatives in fighting COVID-19
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EAC Partner States to develop a harmonized economic stimulus package to cushion businesses against the impact of COVID-19 and save jobs.
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pdf A position paper on facilitating air cargo operations in the EAC region during the COVID-19 outbreak (188 KB) . The current COVID-19 crisis on air cargo operations requires extraordinary measures to address the challenges in the region. Like the EU, it demands greater cooperation between East African airlines and the international aviation community, including air cargo and express service providers to ensure the supply and fair distribution of scarce and essential goods. To achieve this cooperation, EABC recommends that the EAC Heads of State Summit considers the following;
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Immediate/short term:
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EAC Partner States to facilitate the use of passenger aircraft for cargo-only operations, including the re-positioning of air cargo flight crews
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EAC adopts and directs the implementation of IATA operational guidelines for ground handling during COVID-19 crisis
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EAC temporarily grants the Yamoussoukro Decision (YD) 5th to 9th Freedom rights, effectively increasing capacity, reducing inefficiencies and costs.
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EAC promotes consolidation of air freight and cooperation between EAC airlines and allows for flexibility in scheduling
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EAC encourages coordination and equitable share for EAC airlines for both south and northbound freight
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To reduce operating costs, that the EAC Partner States waive landing fees, excise duty on aviation fuel, navigation, landing, parking and COVID-19 related fees.
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To encourage imports by air, that the EAC Partner States waive all import duties and VAT by air during the COVID crisis
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EAC Partner States provide subsidies for the Aviation industry in the form of direct financial support; loan guarantees, corporate bonds and tax reliefs.
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Post COVID-19 crisis:
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EAC Partner States fully adopt and implement draft regulations on the liberalisation of air transport services and expand Freedom rights beyond the fourth to foster the growth of both passenger and cargo traffic
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EAC Partner States to harmonise landing fees, excise duty on aviation fuel, navigation, landing, parking and other related fees across the EAC region
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EAC Partner States to improve air transport logistics and infrastructure, security and interconnectivity to attract high capacity carriers.
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Expected long term benefits:
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Increase inter-regional air transport traffic/frequencies by 41% and reduce flight time
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Reduce air transport cost (passenger and cargo) by 10%
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An additional 46,320 jobs and $202.1m per annum in GDP for the EAC partner states
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Related:
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New Times editorial comment: EAC needs a bold Covid-19 strategy
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IOM East and Horn of Africa regional strategic preparedness and response plan to COVID-19
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UNDP partners with Africa CDC to strengthen COVID-19 response
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Arab Africa Trade Bridges initiates program for developing countries amid COVID-19
The IMF posts its Regional Economic Outlook for Sub-Saharan Africa
As with growth, considerable uncertainty remains around budget forecasts for 2020 as more countries put together emergency fiscal measures and commodity exporters adjust to recent price drops. On average, current projections suggest that for oil-importing countries, fiscal deficits in 2020 could be about 2.5% of GDP higher than in 2019, driven mainly by an increase in expenditures reflecting greater health spending and discretionary stimulus in some cases. For oil exporters, the deficits could be 3% of GDP higher, driven by a decline in revenues. The increase in expenditures in oil-exporting countries is expected to be less than for oil importers, given limited fiscal space, and mainly targeted at the health sector.
The evolution of debt levels will depend on a number of factors that are difficult to predict. Additional fiscal stimulus, realization of contingent liabilities, lower than expected growth, and currency depreciation caused by external pressures can all affect debt dynamics significantly. Current baseline projection suggests that, on (simple) average, debt levels will rise temporarily from 58% in 2019 to 64% in 2020 (compared with a projected decline to 56% in the October 2019 Regional Economic Outlook for Sub-Saharan Africa) but decline thereafter as fiscal adjustment plans are implemented (Figure 1.13). This picture masks considerable heterogeneity because several countries are expected to see increases in debt levels ranging from 10% of GDP to 25% of GDP, reflecting lower output, larger fiscal deficits, and exchange rate depreciations.
Once the health crisis abates, ensuring that fiscal policy reverts to its medium-term path will reduce debt vulnerabilities. The size and pace of the adjustment should be guided primarily by long-term objectives for fiscal sustainability and stabilization and the availability of adequate financing. [Download: pdf Regional Economic Outlook - Sub-Saharan Africa: COVID-19: An Unprecedented Threat to Development (4.43 MB) ]
The locust plague: Fighting a crisis within a crisis (World Bank)
If [East African] countries don’t act now, the locust population will swell exponentially - hey are projected to grow by up to 400 times their current numbers by June - and potentially spread to new areas, including West Africa, just as crops are ready to be harvested. Without broad-scale control measures to control the locusts, damages and losses could reach $8.5bn by the end of 2020. Locust plagues can be difficult to control in normal circumstances, requiring cooperation across borders to destroy swarms before they multiply and equipment like airplanes that aren’t always readily available. The COVID-19 pandemic will make things even more challenging. Already, disrupted supply chains are delaying the delivery of locust control equipment and inhibiting access to critical materials and services. Lockdowns and travel restrictions are preventing response teams from reaching areas that desperately need their advice and expertise.
In response to urgent need, the World Bank Group is moving to provide flexible support to countries affected by the outbreak. The Bank Group is coordinating closely with partners, including the UN-FAO, which is leading control efforts. To support the short-term response, the Bank Group is mobilizing emergency financing, combined with policy advice and technical assistance, to support countries in their immediate response to the infestation. In Kenya, US$ 13.7 million in emergency funding supports the Government in setting up six control bases across the affected counties for coordination of the control operations, deploying surveillance aircrafts, and providing ground control equipment and other materials needed for control. Dijbouti will also receive emergency funding. [FAO: In East Africa, a race to outsmart locusts with drones and data]
Today’s Quick Links:
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A traded tree: What rosewood means for Africa
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Special ASEAN Plus Three Summit on COVID-19: statement
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ASEAN Policy Brief: Economic impact of COVID-19 (pdf)
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EAC Secretariat urges Partner States to prepare economic recovery plans for the time after COVID-19
The COVID-19 global pandemic is not only a major health crisis that challenges health systems across the globe. It has far reaching ramifications on economies worldwide. The medium- and long-term effects resulting from the measures taken to slow down and contain the spread of the disease remain unforeseeable.
The East African Community region is no exception. On a positive note, the free movement of goods and services in the EAC has been maintained and the supply situation for staple food and basic necessities is currently secured. However, on the negative side, enterprises across sectors including the agro-industry and particularly the informal sector are suffering. Value chains have been disrupted and tourism, a major source of income in the region, has come to a complete stand-still.
Against this backdrop, the East African Community Secretariat calls upon Partner States to immediately commence developing National Economic Recovery Plans. The East African Community Secretariat has finalised an EAC COVID-19 Response Plan and is developing the EAC Recovery Strategy based on a regional approach. “While many people have already lost their jobs and are struggling to feed their families, there is a window of opportunity to prepare for the time after COVID-19 and to prevent another catastrophe,” says Honourable Christophe Bazivamo, Deputy Secretary General in charge of Productive and Social Sectors, EAC Secretariat. He especially urged Partner States to strengthen their food production systems by allowing farming activities to continue. He further emphasized that Partner States should more than ever before promote the use of technology and digital solutions to improve agriculture production and trade in agriculture products.
The EAC has received good rains since September 2019 in most of its parts and the meteorological forecast up to May 2020 shows near normal to above normal rainfall. As a result, livestock and wildlife are striving and farmers are expecting good harvests. “All this presents good prospects for the agriculture sector,” says Fahari Marwa, Principal Agricultural Economist at the EAC Secretariat. He recommends that pastoralists and farmers should take advantage of these conditions to improve animal, food and cash crop production so as to fill the region’s food basket. This is especially important, as some of the EAC Partner States are bracing for a second locust invasion. The Food and Agriculture Organisation of the United Nations (FAO) has warned that the new generation is expected to hatch in May.
To mitigate the COVID-19 burden and to brace for the expected economic challenges following the pandemic, the EAC Secretariat recommends Partner States to meet the immediate food needs of their vulnerable populations by ensuring that emergency food needs are met, and to adjust and expand social protection programmes. The EAC Secretariat further urges Partner States to gain efficiencies and try to reduce trade-related costs, to reduce food wastage and losses, improve food storage systems and to resolve logistical bottlenecks. According to Kenneth Bagamuhunda, Director of Customs and Trade, EAC Secretariat, other possible measures could include:
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reviewing trade and policy options to address COVID-19 impacts;
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reducing import tariffs on essential goods and inputs;
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reviewing domestic taxation policies on essential goods produced locally;
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assessing the potential impact of exchange devaluation;
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instituting stimulus packages to boost local production and promote imports substitution;
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applying monetary and fiscal measures to counter inflationary pressures;
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upscaling trade facilitation to enhance food trade.
The EAC Secretariat also calls upon regional and international Partners to establish and support short- to long-term measures which compliment Partner States’ efforts to contain the impact of the COVID-19 global pandemic on the food and nutrition security in the EAC region.
While starting to prepare for recovery after the COVID-19 outbreak, the EAC Partner States should vehemently continue to implement the measures that prevent and contain the spread of the disease until the pandemic is completely over. This includes bans on non-essential travel and international commercial flights, enhanced active surveillance and quarantining of COVID-19 suspect cases as well as raising awareness on how to prevent and respond to infections. Further, the EAC Secretariat strongly encourages the strategy of “test and isolate” to limit the spread and speed up the containment of the virus.
The EAC Secretariat encourages the EAC citizens to remain vigilant, follow the recommended physical distancing, maintain strict hygiene including washing hands with soap and water and sanitising them, among other preventive measures.
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tralac’s Daily News selection
EAC Heads of State will convene an extraordinary virtual summit, tomorrow, to discuss the coronavirus pandemic
EAC Secretariat urges partner states to prepare post COVID-19 recovery plans
The EAC Secretariat calls upon partner states to immediately commence developing National Economic Recovery Plans. The Secretariat has finalised an EAC COVID-19 Response Plan and is developing the EAC Recovery Strategy based on a regional approach. “While many people have already lost their jobs and are struggling to feed their families, there is a window of opportunity to prepare for the time after COVID-19 and to prevent another catastrophe”, says Christophe Bazivamo, Deputy Secretary General in charge of Productive and Social Sectors, EAC Secretariat. The EAC Secretariat further urged partner states to gain efficiencies and try to reduce trade-related costs, to reduce food wastage and losses, improve food storage systems and to resolve logistical bottlenecks. According to Kenneth Bagamuhunda, Director of Customs and Trade, EAC Secretariat, other possible measures could include:
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reviewing trade and policy options to address COVID-19 impacts
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reducing import tariffs on essential goods and inputs
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reviewing domestic taxation policies on essential goods produced locally
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assessing the potential impact of exchange devaluation
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instituting stimulus packages to boost local production and promote imports substitution
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applying monetary and fiscal measures to counter inflationary pressures
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upscaling trade facilitation to enhance food trade.
COVID-19: Zambia, South Africa working group to ensure smooth flow of essential goods, services (Zambia Reports)
Zambia and South Africa have formed a private sector working group to create a framework targeted at ensuring the smooth flow of essential goods and services during the COVID-19 lockdown across most SADC countries. At the meeting held in Lusaka on Thursday, the countries discussed the necessity of ensuring that South African chain stores operating in Zambia opened their doors wider to local producers and suppliers to ensure that there is business continuity and empowerment during the Covid-19 period, and beyond. Among the other key issues discussed was import substitution, mutual market access, supplier payment systems, banking and financial services, transport and logistics, smoothening of regulatory matters, border clearance and transit insurance, and the creation of the Zambia and South Africa working group on trade and economic facilitation during COVID-19 and beyond.
Speaking at the same event, Shoprite general manager Charles Bota said the chain store buys 43% of its goods from the local market and 3% from local agents who import from outside the country. He said the shop only imports 18% of goods. ZACCI president Jerome Kawesha called on South African chain stores to engage the Zambian private sector regularly and deal with the perception that they deliberately constrain access of local producers and suppliers into their supermarkets and other businesses such as hotels. “We would like to see South African businesses in Zambia signing off-take agreements with our people [local businesses],” said D. Kawesha. ZAM representative Rosetta Chabala added that during this period, “there is need to exhaust local supply capacity before resorting to imports.”
South Africa: Finance minister Tito Mboweni’s briefing on the economy and Coronavirus COVID-19 (GCIS)
In light of our data-dependent approach, we are working tireless to develop a phase 2 set of interventions. Most importantly, the crisis is an important opportunity for government to implement structural reforms to: Restructure the network industries; Liberate SMMEs to be the engines of growth and employment; and Broad-based measures to lower the cost of doing business. We will naturally revise our fiscal framework to take into account the effect of COVID-19 on the fiscus. There are a number of elements to our fiscal response:
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Putting forward clear estimates of the additional health care costs that will be needed
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Reprioritising unnecessary expenditure towards these health care costs
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The impact of slowdown on our projections for revenue
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It should be costed as much as possible (how much is needed?);
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It should be temporary (clear timeline of 1 year);
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It must be crafted as a 3rd line of defence for the vulnerable
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A clear timetable or plan to stabilize debt over the current forecast period
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Supported by an economic recovery plan (structural reforms) and a set of reforms within the fiscal system e.g. passing the RABS (road accident benefit scheme), consolidation of public entities and closure of SAA and SAX.
To fight Covid-19, we must fight intellectual property, trade and investment rules (Mail and Guardian)
Intellectual property rights, investment agreements and trade rules stand in the way of the urgently needed expansion in production of inexpensive ventilators. These rules and regulations act only to protect the profitability of entrenched industries. They cannot be allowed to supersede the basic human right to health. Generic versions of these machines can be built if the firms that own intellectual property are required to give them up. The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips) lays out a global baseline of intellectual property standards. Most of the technology involved in ventilator production would fall under the Trips definition of patents, requiring a minimum of 20 years of intellectual property protection. But 20-year patents are no longer conscionable, because they increase the cost of equipment and the length of time before it reaches patients.
The stark reality is that the pandemic is already killing people and it is likely to get worse. To address this global crisis, South Africa and other states must ignore the restrictive web of trade, investment and intellectual property rules hindering the rapid manufacturing of ventilators and other medical equipment. The Treatment Action Campaign showed what is possible when, with international support, they successfully challenged those profiteering from the HIV crisis. The same can be done today, if the state is willing to place the sanctity of human lives over the profits of those holding ventilator patents. The Covid-19 crisis reveals the necessity of new systems of trade, public health, innovation, and intellectual property based on a global commons. [The author: Jonathan Cannard]
Coronavirus deals severe blow to services sectors (UNCTAD)
The COVID-19 pandemic has dealt a heavier blow to personal services sectors compared with other recent economic crises, an UNCTAD analysis shows. The pandemic has massively disrupted key services sectors, especially tourism, hospitality and retail. This contrasts with the resilience witnessed during the 2008 great recession and the 2011-2013 eurozone sovereign debt crisis, particularly in comparison to trade in goods. An UNCTAD survey found that in the eurozone, the purchasing managers index (PMI) indicator, a measure of prevailing economic trends, in services and the composite PMI both contracted from above 50 points in January to minus 28.4 and minus 31.4 respectively by mid-March. “The situation is expected to worsen due to the drastic but necessary social distancing and lockdown measures adopted in the eurozone in the last month,” said Pamela Coke-Hamilton, director of UNCTAD’s international trade division.
Tourism at stake: Challenges and measures for small businesses (ITC)
After 21 January, 105 countries have imposed global travel bans, with no end in sight. The World Tourism Organization estimates international tourism receipts could decline by 20% to 30% in 2020 compared to 2019, which would mean a reduction four to six times larger than during the 2009 global financial crisis. Travel and tourism are key industries in many developing countries – and international tourist arrivals constitute a major source of their services export. Out of the ten countries most dependent on travel exports, nine are small island developing states. In six Caribbean states, travel exports account for about half of GDP - Antigua and Barbuda (50%), Grenada (48%), Saint Lucia (47%) – or roughly one-third of GDP with Saint Kitts and Nevis (36%), Saint Vincent and the Grenadines (29%), and Belize (26%). In Asia, Macao SAR and the Maldives are subject of severe hits, with travel exports-to-GDP ratios of 73% and 56%, respectively and in Africa, the Seychelles with a ratio of 35%. As of 9 April, three out of the top ten countries most reliant on travel exports have imposed travel bans themselves. [The authors: Julia Spies, Quan Zhao]
Pamela Coke Hamilton, Janvier Nkurunziza: COVID-19 and food security in vulnerable countries (UNCTAD)
Using the most recent data on food import dependence, UNCTAD finds that low-income countries devote 37% of their merchandise export revenue to food imports, more than five times the share by developed economies. This makes these countries extremely vulnerable to external shocks. UNCTAD also finds that small island developing states (SIDS) are highly exposed to international food market shocks, while regional distributions of vulnerability show that Africa and Oceania are most exposed.
Given these fragilities, major food exporting countries need to respect their commitments under the rules of the World Trade Organization to ensure the free flow of food products and refrain from imposing export bans and other export trade distorting measures that can hamper the availability of food imports in vulnerable food-importing countries. In addition, national authorities should ensure that transborder movement of food commodities is not hampered by border closures as a way of controlling the spread of COVID-19, and also allow food to come to urban centres from producing regions in order to prevent food shortages and panic buying.
COVID-19: The global food supply chain is holding up, for now (UN)
The unfolding COVID-19 pandemic is so far having little impact on the global food supply chain, but that could change for the worse – and soon – if anxiety-driven panic by major food importers takes hold, the World Food Programme (WFP) warned on Friday. In a new report, “COVID-19: Potential impact on the world’s poorest people: A WFP analysis of the economic and food security implications of the pandemic”, the UN agency said that global markets for basic cereals are well-supplied and prices generally low. However, it said, given the highly globalized nature of food production and supply, commodities need to move from the world’s ‘breadbaskets’ to where they are consumed – and COVID-19-related containment measures are starting to make this more challenging.
World Economic Outlook, April 2020: Chapter 1 (IMF)
The COVID-19 pandemic is inflicting high and rising human costs worldwide. Protecting lives and allowing health care systems to cope have required isolation, lockdowns, and widespread closures to slow the spread of the virus. The health crisis is therefore having a severe impact on economic activity. As a result of the pandemic, the global economy is projected to contract sharply by –3% in 2020, much worse than during the 2008–09 financial crisis (Table 1.1). In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8% in 2021 as economic activity normalizes, helped by policy support.
Other regions are projected to experience severe slowdowns or outright contractions in economic activity, including Latin America (–5.2%)— with Brazil’s growth forecast at –5.3% and Mexico’s at –6.6%; emerging and developing Europe (–5.2%)—with Russia’s economy projected to contract by –5.5%; the Middle East and Central Asia (–2.8%)—with Saudi Arabia’s growth forecast at –2.3%, with non-oil GDP contracting by 4%, and most economies, including Iran, expected to contract; and sub-Saharan Africa (–1.6%)—with growth in Nigeria and South Africa expected at –3.4% and –5.8%, respectively. Following the dramatic decline in oil prices since the beginning of the year, near-term prospects for oil-exporting countries have deteriorated significantly: the growth rate for the group is projected to drop to –4.4 percent in 2020.
Food prices are projected to decrease by 2.6% in 2020 and increase by 0.4% in 2021. Supply chain disruptions, possibly due to trade restrictions or border delays, food security concerns in regions affected by COVID-19, and export restrictions in large food exporters are significant sources of upside risk for food prices.
Global Financial Stability Report: Chapter 1 (IMF)
The breadth of outflows - in terms of the number of affected counties - was the largest since the global financial crisis. The depth of outflows was significant for many countries, with South Africa and Thailand witnessing outflows of more than 1 percent of GDP in just two months.
Emerging and frontier markets are facing the perfect storm: An unprecedented combination of external shocks (COVID-19 pandemic, oil price decline, increased global risk aversion, and a prospect of global recession) led to a broad-based sell-off in emerging and frontier markets. Emerging market equity prices have fallen by about 20%, on net, since mid-January despite the most recent rebound (Figure 1.7, panel 1). Currencies of commodity-producing economies (such as Brazil, Colombia, Mexico, Russia, and South Africa) tumbled by more than 20% against the US dollar in the first quarter of 2020 (Figure 1.7, panel 2). Currencies of other emerging markets have been relatively less affected, likely due to stronger currency interventions, as well as lower external vulnerabilities. Spreads of dollar-denominated emerging market sovereign bonds rose to nearly 700 basis points by the end of March—the highest level since the global financial crisis—although they have narrowed some in recent weeks. But for some weaker economies, the current shock was particularly severe as the number of distressed sovereign issuers (those with spreads over 1,000 basis points) rose to record levels (Figure 1.7, panels 3 and 4). Oil-importing economies have generally fared better, but lower remittances, reduced external funding availability, and lower external demand may outweigh the positive impact of lower oil prices.
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Finance Minister Tito Mboweni: Media briefing on economy and Coronavirus (COVID-19)
The Covid-19 pandemic is expected to deepen South Africa's economic woes, and is expected to push the economy into a deep recession during 2020.
At a media briefing today, Finance Minister Tito Mboweni said that Treasury will have to revise the national budget across the board to ensure that the Department of Health has the resources necessary to respond to the outbreak.
Treasury has also been in talks with foreign lenders, including the World Bank, the New Development Bank and the African Development Bank on possible loan facilities – strictly to be used for Covid-19 support. According to Mboweni, a facility of $60 million is being considered from the World Bank. The finance minister said that Treasury is considering all options available and will leave no stone unturned in this regard.
While Treasury has also introduced tax relief measures, Mboweni noted that a downturn in tax revenue is also expected due to reduced economic activity.
Treasury will brief Cabinet on Wednesday, on a set of proposals to revive the economy.
Minister’s Remarks
Introduction
The COVID-19 pandemic is one of the greatest challenges that has ever faced our nation.
It is three simultaneous shocks. It is a health shock, which will stretch the resources of our health care system to its limit. It is a global economic shock, which will substantially reduce global growth and consequently external demand, and it is a domestic economic shock, because our domestic policies will reduce economic activity, both from a demand side and a supply side.
In situations such as this, we know that the health and lives of our fellow South Africans must come first. An out-of-control pandemic would hit the economy extremely hard.
It is increasingly clear that, led by our President, we have chosen the right path.
The figures presented by the Minister of Health and his team yesterday show that we are indeed ‘flattening the curve’. Across the world, As of 10.30 am this morning, globally there have been 1.9 million coronavirus cases, and 119,806 deaths. 453,308 people have recovered.
In South Africa, we have kept cases down and deaths down.
Our curve is not rising exponentially, indeed at this point it has a welcome kink.
President Ramaphosa has extended the lockdown by a further two weeks until the end of April. We continue to reiterate pleas calling on all South Africans to stay at home unless it is necessary for them to be outside.
The health of our people, and their lives, must come first. But we must also ensure that we protect their livelihoods.
The economic outlook
Our health approach to this lockdown is ‘data-dependent’. Similarly, our economic response will be data-dependent, and we will evaluate and update our response on a continuous basis.
A short while ago, the Monetary Policy Committee reduced interest rates by a further 100 basis points. Their flexibility, and willingness to act speedily is similar to the approach of many other central banks.
Going into this health care crisis, the economy was already in recession. Without doubt, given what we know since February, COVID-19 will certainly further deepen the South African downturn woes.
Our internal scenario planning has mapped out the economic impact of different lockdown scenarios, together with the consequent different paths for the fiscal deficit, for government borrowing and for the fiscal response.
At this stage, our central scenario is for a deep recession in 2020, followed by a rapid upswing in economic growth.
Critically, the path relies on an understanding of how the global economy will adjust.
We are in constant conversation with the teams at multilateral bodies, domestic and local economists, and of course the South African Reserve Bank. We are also monitoring domestic and global high frequency data to ensure that we understand as well as we can the ongoing evolution of the economy. Our sophisticated banking and payment system provides us with near real time payment data. This shows a substantial fall in transactions in retail, hospitality and food and drink. There was a spike in activity in food (and alcohol) sales prior to the lockdown, and in the first weekend of the lockdown, but these have now settled. In addition, there was large ATM activity in the first weekend, but now things have normalised.
This provides inputs into our forecasting process. The forecasts we have been receiving so far vary from the optimistic to the deeply pessimistic.
On the relatively optimistic side, the Organisation of Economic Cooperation and Development (OECD) has highlighted that economic growth in South Africa will shrink by less than other emerging markets, in part because South Africa is not a net oil exporter.
The International Monetary Fund’s April 2020 World Economic Outlook will be released later today. Current estimates from the IMF show global growth contracting this year by about 2.9%. For South Africa, their initial estimate was for an economic contraction of 5.8 per cent. Other estimates vary.
The most recent official sector forecast is that issued by the South African Reserve Bank a few minutes ago. The Bank expects GDP in 2020 to contract by 6.1%, compared to the -0.2% expected just three weeks ago. GDP is expected to grow by 2.2% in 2021 and by 2.7% in 2022.
The Bank’s headline consumer price inflation forecast averages 3.6% for 2020, 4.5% for 2021, and 4. 4% in 2022. The forecast for core inflation is lower at 3.8% in 2020, 4.0% in 2021, and 4.2% in 2022.
But like I have alluded to in the past, every crisis is an opportunity for us to address our problems and challenges.
The pandemic, and the response to the pandemic, will cause major disruptions to global supply chains. Lockdowns in many countries will reduce consumption, and consequently global demand. This will reduce our exports. Global growth has been revised sharply lower. Our economy is also highly dependent on services, particularly tourism. These will be affected by the global travel ban. These are only two examples of how we will be affected by a complex and unfolding global emergency.
As a small open economy we regularly experience external shocks. For this reason, we have chosen a flexible exchange rate, and monetary policy that is anchored by an inflation target.
This approach has served us well in the past, through many crises, and it is serving us well at present.
In line with the experience of other emerging markets – and similar to other shocks we have experienced in the past – the exchange rate has depreciated significantly and bond yields have risen. Despite historic levels of volatility, the National Treasury has continued borrowing in the domestic market, albeit at record high yields. Due to Treasury’s prudent long-term borrowing strategy, these higher yields will only slowly feed through into higher borrowing costs. In addition, Government has significant cash buffers available. These can be deployed should there be a significant prolonged disruption in markets.
PHASE 1 OF THE ECONOMIC POLICY RESPONSE
When the lockdown was announced, we acted immediately to announce a set of Phase 1 economic measures.
These included:
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Immediate release of fund to where they were needed
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An Instruction Note 8 of 2019/20 applicable to Public Finance Management Act (PFMA) institutions and a Municipal Finance Management Act (MFMA) Circular 100 for municipalities and municipal entities, to speed up the procurement of goods/commodities required to reduce and control the spread of the virus.
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A first set of exceptional tax measures as part of the fiscal package. These measures are over and above the tax proposals made in the 2020 Budget on 26 February 2020. The tax adjustments are made in light of the National State of Disaster and due to the significant and potentially lasting negative impacts on the economy from the spreading of the COVID-19 virus.
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The Office of the Auditor General announced a conditional Exemption Notice in order to ensure effective and efficient service delivery and to minimise any potential delay in decision making. The conditional Exemption Notice will also facilitate and enable legislative processes during the period of the national state of disaster.
All these measures are available on the National Treasury’s website.
Banking and finance market interventions
The banking and finance industry have also taken a steps to help ease the impact of COVID-19.
South Africa has a safe, sound, well-regulated and resilient financial sector. We have deep and liquid markets. Since the global financial crisis, we have taken steps to strengthen the banking system, including increasing capital, improving liquidity and reducing leverage. As a result, the banking and financial system is particularly resilient.
To support the real economy, the following steps have been taken by the South African Reserve Bank:
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In line with its Constitutional mandate, the South African Reserve Bank cut the repo rate initially by 100 basis points and an additional 100 bps a short while ago. This will put money straight back into the economy.
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The Bank has also proactively provided additional liquidity to the financial system. This includes purchasing of government bonds in the secondary market to ensure that there is sufficient liquidity in the government bond market.
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Regulatory requirements are expected to release lending of up to R550 billion into the economy, including a reduction in capital requirements of R30.7 billion in capital and a reduction in liquidity requirements. In addition, up to R3 trillion in total exposures will benefit from changes to rules around restructuring.
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Guidance to reduce dividends and bonuses will ensure that banks use capital wisely.
As the President highlighted in his address, Many large institutions have used force majeure to stop paying suppliers. Those who can, should continue to pay (on top of salaries) their suppliers and rentals, to ensure that the underlying economy continues to function and to focus support on those small businesses that really need them. The measures we have announced will assist with cash flow, the aim is to maintain productive capacity, and income for employees.
Banking
In the spirit of working together with Government, the largest banks have announced a number of measures to help their customers, including Instalment reductions, interest and fee deferrals, extension of loan terms, processes to help qualifying customers access debt relief packages like the South African Future Trust and government SME relief schemes, fee waivers and other relief efforts.
Insurance
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Insurance companies have made a number of interventions. These vary across different companies, such as:
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Premium holidays and premium deferrals on a case by case basis
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Paying suppliers in shorter periods to assist with improved cash flow in the system.
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Pre-payment of claims or parts thereof before final assessment and increasing the “grace” period for premium payment.
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Business interruption claims due to COVID-19 to be considered on a case by case basis, and working on clear guidance on how pandemic exemptions will work
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Reduced excesses; and
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Leniencies on missed debits
PHASE 2 OF THE ECONOMIC POLICY RESPONSE
This was only the first phase of our response. In light of our data-dependent approach, we are working tireless to develop an a phase 2 set of interventions.
Most importantly, the crisis is an important opportunity for government to implement structural reforms to: Restructure the network industries; Liberate SMMEs to be the engines of growth and employment; and Broad-based measures to lower the cost of doing business.
We will naturally revise our fiscal framework to take into account the effect of COVID-19 on the fiscus. There are a number of elements to our fiscal response:
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Putting forward clear estimates of the additional health care costs that will be needed
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Reprioritising unnecessary expenditure towards these health care costs
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The impact of slowdown on our projections for revenue
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It should be costed as much as possible (how much is needed?);
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It should be temporary (clear timeline of 1 year);
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It must be crafted as a 3rd line of defence for the vulnerable
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A clear timetable or plan to stabilize debt over the current forecast period
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Supported by an economic recovery plan (structural reforms) and a set of reforms within the fiscal system e.g. passing the RABS (road accident benefit scheme), consolidation of public entities and closure of SAA and SAX
Together with my colleagues in the economic cluster, have put together a few proposals on how we can further grow the economy. These will announced shortly. Amongst the measures we are looking is expanded support for SMME lending through the banking system, similar to in other countries.
Government, through National Treasury, is exploring all funding avenues to finance all Covid-19 related programmes and measures aimed at addressing the pandemic. The funding avenues will not be limited locally, but will include exploring all global partners and international finance institutions. Funding transactions will be announced officially once concluded.
Going back to opportunities emerging from this crisis, we as government have reiterated, the commitment to implement structural economic reforms to address the weak economic growth, constrained fiscus and ailing state-owned companies.
The Covid-19 pandemic and measures taken to address its spread have had a substantial negative impact on economic growth and government’s fiscal position.
The Pre-existing fiscal position was precarious, and we must ensure that whatever we do does not harm our long-run fiscal sustainability. The fiscus’ ability to respond to crisis is weak.
The 2020 Budget was already mildly expansionary and supportive of growth. In particular, the fiscal consolidation path was designed to strengthen our fiscal health. Fiscal health is a necessary, but not sufficient condition, for sustained growth.
Several priority areas were growing at above inflation rates including capital spending.
Nevertheless, given the current crisis, a higher deficit may be accommodated if it is a) temporary and b) if reprioritized spending is directed towards crisis (health) response, and direct fiscal support to the most vulnerable.
The other parts of the package involve the drawing down of existing surpluses (e.g. UIF) or increasing the contingent liability of government (guarantees).
But it is absolutely critical, now more than ever, to focus on raising long-run growth.
Beyond the Covid crisis, a major risk facing the economy and the fiscus is if long-run economic growth returns to the pre-crisis averages of between 1 to 2 percent. Higher levels of economic growth need to become a non-negotiable objective.
In the absence of urgent structural reforms, the considerable fiscal actions to mitigate the current crisis may leave the fiscus on at the edge of a cliff. For example, we must, without any hesitation, act to implement the President’s announcements on electricity, and rapidly work to implementing the range of reforms that we had already set out.
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Africa’s Response to COVID-19: Key Messages for IMF and WBG Meetings
COVID-19 is a global crisis affecting the whole world. As the days go by the impact of the crisis becomes more visible and more general.
Though hit later, Africa is already facing a synchronized and deep crisis. At all levels – health, economic, social – institutions are already overstretched. Africa is almost at a sudden stop economically even before the full brunt of the COVID19 reaches its shores. A heavy and durable economic toll, which will threaten progress and prospects, widen inequalities between and within countries, and worsen current fragilities is afoot on the continent. Unmanaged, it will in turn threaten developed countries’ recovery. This can be mitigated, but only if we act immediately and collectively.
African leaders and policy makers across the board have met and are working together and have expressed their solidarity with the world and amongst themselves. They have agreed to work in a coordinated manner to address this scourge. Countries thank the international community especially the WBG and the IMF for being forward and for moving to repurpose funding of over $2.3 billion dollars already. However they ask for accelerated speed and increased scale to match the level of the crisis.
African countries need support in managing the health crisis, and preparing for a durable economic fallout. The measures being taken in Asia, Europe and North America such as physical (social) distancing and regular hand washing are a particular challenge for countries with limited internet connectivity, dense populations, unequal access to water and limited social safety nets. While stimulus measures being put in place across the developed world already amount to over 10 percent of GDP in most countries, and include immediate unemployment benefits, mortgage suspension, loan standstills, food support, tax holidays, bridge financing for large corporates, additional measures for specific sectors – $500 billion specific stimulus for the US airline sector for example, this is not a possible option for most of the continent.
In line with the steps being taken across the globe, African countries are preparing for the worst effects of this pandemic and ensuing deep recession. Countries like Ghana have extended health insurance to all health workers, Senegal is supplementing nurses’ salaries, Kenya has removed the fee on mobile money transfers and Ethiopia has increased the amount of money you can send on these platforms.
Despite all the efforts made, some support is needed and they also call for solidarity and support from the IMF, the WBG, the EU, the AfDB and The G20 leaders as they meet next week to specifically:
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Support for an immediate and emergency health and human response
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Raising awareness and prevention are the fastest way to flatten the curve. Institutions should support public health campaigns and access to information including through an expedited private sector partnership for internet connectivity to enable economic activity to continue during social distancing measures and to support the effective sharing of information about the pandemic.
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There is a gaping need for additional resources to support Africa’s health systems. At least $15 billion according to WHO is needed to ensure countries can procure the basic materials needed to save lives and, share and promote research, provide vaccines, manufacture, deliver and share emergency services. This will enable countries to focus on managing immediate health requirements. Support should be provided to WHO and CDC Africa with funds channelled through them, the Global Fund, and GAVI and others.
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Deliver an immediate, coordinated, and equitable emergency economic stimulus to African governments in their efforts to respond to the COVID-19 pandemic; namely:
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Endorse a complete temporary debt standstill package for two years for all African countries low and middle income included. Many countries, especially in Africa, have lost market access because of the Covid-19 pandemic, and must also confront the consequences of the pandemic which include substantial losses in major revenue sources. These pressures have made debt service unsustainable for most.
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Announce a US$100 billion to fund the immediate, social safety nets for the most vulnerable, feeding for out of school children, and to protect jobs. As a proportion of GDP this is consistent with measures taken in other regions. A doubling of the access to the Emergency Financing Facility of the IMF could substantially contribute to this objective. Accelerating disbursement of budget support through fast disbursing facilities like the Crisis Response Window, the Global Pandemic Window and reprogramming of regular programs at the WBG and similar measures from the EU and other G20 members bilaterally could provide the additional resources required.
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Support a move to raise Special Drawing Rights Allocations (SDRs) to provide additional liquidity particularly for the procurement of basic commodities, food, fuel, and other essential commodities as well as provide liquidity to the financial sector, private sector, corporates and in particular SMEs over the next two to three years. This could in part also serve as a bridge (SPV) facility for commercial debt servicing.
Countries in return pledge to to build and strengthen systems to fight corruption, enhanced predictability, transparency and accountability of flows so finance ministers can plan effectively and civil society stakeholders can help track fund flows to ensure these reach those most in need expeditiously.
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Implement emergency measures to protect 30 million jobs immediately at risk across the continent, particularly in the tourism and airline sectors.
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Development Finance Institutions must be called to act counter-cyclically and accelerate support to the private sector, specifically in the pharmaceutical sector and the banking sector, as well as, in light of the looming food crisis, measures to support agricultural imports and exports, the pharmaceutical sector. An extended credit facility, refinancing schemes and guarantee facilities should be used to waive, restructure and provide additional liquidity in 2020 and potentially 2021.
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Relevant institutions, the AfDB, EU, EIB, development banks and others should support a liquidity line available to the private sector operating in Africa to ensure essential purchases can continue and all SMEs dependent on trade can continue to function. c. Similar to what is being done at domestic level, leaders should ensure that national and regional stimulus packages covering private and financial systems include measures to support African businesses though allowing for the suspension of leasing, debt and other repayments to global businesses.
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Open trade is important now. Effective supply chains and open trade in support of business will be crucial for a recover better strategy and can help safeguard more jobs. Call on countries to keep global trade, green, and humanitarian lines open. Countries call upon the United Nations Conference on Trade and Development, and Economic Commission for Africa, the World Bank Group and to support and help them in their call for countries to: monitor and all partners for support in keeping trade open, support a call to:
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Urgently suspend tariffs on imports of essential COVID-19 medical supplies;
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To make a diplomatic case against the imposition of export limits by certain countries on essential COVID-19 medical supplies.
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Secure trade and humanitarian corridors to allow for continuous trade; Allow for green lanes for agriculture and agriculture related commodities
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The case for a temporary across the board debt standstill as requested above
There are at least three justifications for a standstill to allow countries to redirect financial resources towards fighting the pandemic.
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The shock is global and may soon overwhelm the like IMF, World Bank, and Paris Club. The crisis in developing countries will be so devastating that it will amplify the harm the pandemic is causing in the US, Europe and China.
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Countries are contending with an exogenous and transitory shock, which merits substantial and unconditional financial assistance. Concerns about moral hazard are outweighed by the urgent need to make sure that a transitory shock does not cause permanent damage. This means avoiding widespread sovereign defaults, contagion and chaos in the sovereign debt markets.
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Pandemic-related official assistance should not be used to allow private creditors to cash out of their positions.
In the event this is not possible the fall back is the creation of a bridge facility (SPV) to honour the commercial debt.
This document has been prepared by the United Nations Economic Commission for Africa ahead of the International Monetary Fund-World Bank Virtual Spring Meetings.
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Stronger partnerships crucial for successful implementation of SDGs in light of COVID-19
The Bureau of the Sixth Session of the Africa Regional Forum on Sustainable Development (ARFSD) has met and adopted an action plan establishing key priorities for implementing key messages from the forum that was held in Victoria Falls, Zimbabwe, in February.
Chaired by Zimbabwe’s Public Service, Labour and Social Welfare Minister, Mr. Paul Mavima, this was the Bureau’s first meeting since the adoption of the Victoria Falls Declaration on the Decade of Action for Sustainable Development in Africa.
The Decade of Action calls for accelerating sustainable solutions to all the world’s biggest challenges, ranging from poverty and gender to climate change, inequality and closing the finance gap.
With the coronavirus pandemic raging on the continent, members of the bureau recognized the unprecedented and serious challenges being caused by COVID-19 and noted with grave concern the growing loss of human lives and huge negative economic and social impacts of the crisis on the continent.
Africa, they agreed, was likely to be disproportionately affected by the pandemic given the region’s underlying vulnerabilities.
The Economic Commission for Africa’s (ECA) recent analysis on the impact of the pandemic estimates that economic growth on the continent is expected to drop from 3.2 percent to 1.8 percent. As of March 2020, a decline of 1.4 percentage points is expected from the effects of COVID-19. Africa’s Finance Ministers have called for an initial support package of US$ 100 billion in 2020 to cushion their nations from impacts of the pandemic.
The bureau agreed that COVID-19 reinforced the need for stronger global and regional partnerships if the sustainable development goals are to be fully achieved and to build resilience to social, economic and environmental shocks and calamities.
Member States and other actors were urged to take urgent and collective measures to curb the spread of COVID-19, provide the necessary support to affected communities and address the social and economic implications of the pandemic.
Bureau members, Zimbabwe (Chair), the Democratic Republic of the Congo, Uganda, Liberia and Morocco, pledged their full commitment to expand outreach, and to take and promote concrete actions in following-up and implementing the outcomes of the sixth ARFSD.
The action plan, which will be implemented with the support of ECA, regional organizations and the rest of the UN Development system, recognizes the challenges and need for quality and timely data and statistics for evidence-based planning, implementation, monitoring and reporting on the 2030 Agenda and the African Union’s Agenda 2063.
The Bureau is expected to finalize by August, the strategic framework of the Solidarity Fund for Statistical Development in Africa, as agreed in the Marrakech Declaration of the Fifth session of the regional forum; and develop a regional strategy to operationalize the Victoria Falls Declaration on the Decade of Action and delivery for sustainable development and key messages of the sixth regional forum by November 2020.
Outcomes of the Victoria Falls forum will be conveyed to the 2020 meeting of the High-level political forum on sustainable development to be convened under the auspices of the United Nations Economic and Social Council in July.
The Bureau committed to contribute to strengthening the capacity of member States and catalyse concrete multi-level actions to follow-up and implement outcomes of the regional forum by carrying out advocacy campaigns at key conferences and other events at global, regional, sub-regional and national levels.
Members also agreed that they will take forward and expand initiatives to strengthen the capacity of subnational authorities in selected countries to conduct Voluntary Local Review to better domesticate and bolster local action to accelerate implementation of the 2030 Agenda and Agenda 2063.
They requested the ECA, which supported the virtual meeting as the Secretariat, and its partners to develop a monitoring and evaluation tool that will enable tracking and comparability of progress of implementation across countries in the region.
The ARFSD is an intergovernmental forum convened by the ECA in collaboration with the African Union Commission, the African Development Bank and agencies of the UN system.
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How Africa’s economies can hedge against COVID-19
In 2018, 44 countries signed the African Continental Free Trade Area at an extraordinary summit in Kigali. There are now 54 signatories. The agreement will create a tariff-free economic environment to spur business growth, boost intra-continental trade, spark industrialization, and create jobs. To mitigate the economic fallout from COVID-19, African Union member countries and the continent's institutions should implement the AfCFTA swiftly.
The AfCFTA paves the way for Africa, with 1.2 billion people and a cumulative GDP of $2.5 trillion – to become the world’s largest common market. But with the coronavirus hitting the global economy, a worldwide recession is looming. The crisis is bound to have destabilizing effects on our fragile economies as the health crisis worsens.
Africa must be prepared. Although the COVID-19 pandemic is affecting Africa the least, the majority of African countries have chosen to pre-empt the crisis by restricting non-essential travel and gatherings and closing schools and universities. It is impossible to know whether these measures will stem the health contagion, but Africa will no doubt experience economic contagion.
Africa’s main partners in Europe, and possibly China, are already suffering, and the continent's economy is still largely extroverted – and thus highly dependent on global demand, especially for raw materials. The Economic Commission for Africa (ECA) estimates that losses in export earnings are expected to reach $101 billion, including $65 billion for oil-producing countries. Health spending could burden state budgets on the continent by at least $10 billion. There are also fears of food shortages and breakdowns in the pharmaceutical supply chain. Two-thirds of African countries are net importers of food and medicines.
As for the health crisis, the recurring threat of Ebola has given some African states experience in slowing a pandemic. In the Democratic Republic of Congo and in West Africa, where the 2014-16 Ebola pandemic hit Guinea, Liberia, and Sierra Leone, the response to COVID-19 is being organized rapidly. National health institutions have reinforced their institutional capacities. The number of African centers capable of performing diagnostic tests has increased from two to 40 in a month, thanks to the World Health Organization, and the African Centers for Disease Control and Prevention of the African Union has received a large donation of COVID-19 testing kits from China. Now, the year-old African Medicines Agency must become operational to ensure the coordination of a pharmaceutical manufacturing plan for the continent.
Aside from the health effects, the looming global recession is bound to destabilize Africa’s economies and transform their structure, trade, and commercial channels, as well as how people work and study. Under these circumstances, Africa has no choice but to rely on its own resilience, strengths, and agility, rather than hoping for external salvation, to mitigate the impact of the coming crisis and prepare for the next cycle of globalization.
More than ever, new technology will be called upon to play a critical role. African companies must speed up their digital transition to remain attractive, which means that governments must accelerate their rollout of essential telecommunication infrastructure, including fiber optics and high-speed Internet, and invest in human capital and capacity building. The effort will be complex and demanding, but the time has come for large-scale mobilization.
In this context, there is a pressing need to reduce the continent’s high trade dependence on non-African partners. The AfCFTA can help facilitate this, but that means dismantling tariff and non-tariff barriers as much as possible, and intensifying the economic regionalization processes that have now begun. The liberalization of tariff barriers on 90% of products, for example, was originally scheduled to take place over five years. This timeframe must be reduced.
As it stands, Africa is the least integrated continent. Intra-African trade accounts for less than 16% of the continent’s total trade. Once fully operational, the AfCFTA could boost intra-African trade by 60% in just three years. The agreement will be a catalyst for endogenous development, through trade, with the extension of value chains across the continent helping to lay the groundwork for industrialization.
The acceleration of the AfCFTA is above all a matter of political will. The cost of dismantling the customs taxes that weigh on intra-African trade amounts to $3.5 billion, which is just over 0.1% of the continent’s GDP. Rescinding these taxes will result in virtually no shortfall, and will unlock the continent’s endogenous growth potential.
Maximizing the possibilities of the AFCFTA will be an effective shock absorber as long as the pandemic, and uncertainty about its course, keeps the global economy depressed. It will also make Africa an attractive proposition when the global economy turns around. The continent has no time to lose.
Ibrahim Assane Mayaki, former Prime Minister of Niger, is CEO of the African Union Development Agency (AUDA-NEPAD).