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4th SADC Industrialisation Week: selected updates
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President Magufuli pushes for intra-African trade. Opening the 4th SADC Industrialisation Week and Exhibition in Dar es Salaam yesterday, President Magufuli – who will assume the regional bloc’s chairmanship during next week’s SADC Summit – said there was an urgent need to do away with hurdles hampering trade among Sadc countries. “An enabling business environment would create confidence among investors in manufacturing and eventually boost the value of intra-African trade,” said Dr Magufuli, whose government has taken a raft of measures with regard to Tanzania’s business environment since he took office in November 2015. He said 62% of exports from Africa are primary goods, whose prices are unpredictable, adding that this is what makes farmers poor. Citing the US, Japan, France and most Asian countries as examples, Dr Magufuli said these nations have strong economies largely due to massive investment in industry.
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Tanzanian PM urges local manufacturers to capture Southern African market. Prime Minister Kassim Majaliwa on Tuesday urged local manufacturers of various goods to capture the expansive market in the 16 member states of SADC. “Tanzanian local industries are manufacturing goods that can compete in the SADC market and elsewhere,” Majaliwa told a news conference shortly after he visited the 4th Annual SADC Industrialization and Exhibition Week in the business capital Dar es Salaam. He said Tanzanian industrialists should find ways of partnering with their counterparts in the other 15 SADC members states with a view of producing goods for exports.
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SADC Executive Secretary, Dr Stergomena Tax: The private sector is a critical partner in the SADC industrialization agenda hence the need for the formalization of the SADC Business Council. “SADC recognizes the role of the private sector, values its contribution. This is evidenced in the ongoing partnership and structures that have been put in place for this purpose, including the Industrial Development Forum and the SADC Business Council,” she further noted. SADC member states are likely to expand markets for goods and services through the signing and operationalization of the new AfCFTA, she stated. The pact had been delayed by the slow pace in the finalization of exchange of offers and the ratification of the COMESA-EAC-SADC Tripartite Free Trade Area Agreement, the SADC top official recounted. She urged member states to finalize tariff negotiations and ratification processes for the Tripartite Free Trade Area Agreement, a catalyst for the Continental Free Trade Area. She also called upon the private sector to join hands with governments in advocating for operationalisation of the COMESA-EAC-SADC Free Trade Area. “Let us utilize trade opportunities created by the SADC Free Trade Area with an integrated market of the 16 countries and a combined population of 327 million and a GDP of about $599bn,” Dr Tax appealed.
The chairman of the Tanzania Private Sector Foundation, Salum Shamte, expressed concern that basic services such as railways, roads, water, electricity and internet are seven times more expensive for African businesses compared to Asian counterparts. It is high time that private and public sectors work together to address the bottlenecks that hold back African businesses, he said, emphasizing that the region has to work as one and remove all cross border trade barriers and increase intra-Africa investments and trade.
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In brief: JPM wants barrier-free trade, Boosting SMEs competitiveness within SADC member states, Optimism expressed over private sector, Namibia hands over chair of SADC Business Council to Tanzania, SADC bloc links with China’s BRI over industrialization strategy
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Related: Southern African News Features preview of the 39th SADC Summit
Post-2020 SADC Agenda: ADC has begun the process of formulating a new development vision to succeed the pdf Revised Regional Indicative Strategic Development Plan (RISDP) (1.04 MB) that was approved in 2015 and runs until 2020. The review process is expected to lead to the development of a framework for the post-2020 regional strategy that takes into account SADC Principles and Common Principles as well as global and continental processes such as the African Union’s Agenda 2063 and the United Nations’ Sustainable Development Goals. With one year left until the 2020 SADC Summit (the 40th), the 39th Summit is expected to review progress towards the development of the post-2020 SADC Agenda.
SADC Protocol on Industry: In a bid to enhance the level of industrial development, both nationally and regionally, and in pursuit of ensuring the attainment of unified goals and cohesion among Member States’ industrialization policies and strategies, SADC is developing a Protocol on Industry, which is set to be completed by August 2019. The protocol will be a binding instrument that will entrench and give legal effect to the pdf SADC Industrialisation Strategy and Roadmap (2.34 MB) and will ensure adequate coordination, monitoring and evaluation of implementation. The proposed protocol is expected to strengthen the level of industrial development in the region and facilitate the harmonization of policies and strategies in Member States. Where Member States already have such policies and strategies in place, these should be reviewed and aligned to the SADC Industrialisation Strategy and Roadmap.
pdf SADC Regional Infrastructure Development Master Plan (3.93 MB) : Implementation of the RIDMP is being done in three phases, covering the Short Term Action Plan (STAP) 2012-2017, the Medium Term Action Plan that runs up to 2022, and the Long Term Action Plan to be implemented up to 2027. Preliminary findings of a study commissioned by the SADC Secretariat show that the implementation of most STAP projects is behind schedule.
On cusp of pan-African trade deal, giant Nigeria clings to protection (Reuters)
Now that Nigeria is in, however, some trade experts fear its long history of economic protectionism and tepid support for the AfCFTA will undermine the bloc. “If Nigeria, after signing, decides not to implement, there will be a problem. There are so many administrative ways in which Nigeria can frustrate this agreement,” said Bismarck Rewane, CEO of Lagos-based consultancy Financial Derivatives Company. “Something has to give,” said John Ashbourne, senior emerging markets economist at London-based consultancy Capital Economics. “Will other African countries allow in Nigerian goods if the (central bank) is actively trying to discourage trade going the other way?” Nigeria’s protectionism has scuppered similar multinational initiatives in the past. Five years after negotiations wrapped up for an economic partnership between the EU and 16 West African nations, Nigeria’s failure to sign the deal has effectively blocked it for the entire region. Its adherence to the West African bloc ECOWAS’ common external tariff regime has also been patchy. [Companion multimedia report: Protectionism vs. a free trade dream in Africa]
DRC: Three Gorges has nothing on China-backed dam to power Africa (Bloomberg)
All eyes are now on Kabila’s successor, Felix Tshisekedi, who’s vowed to connect half of the population to the national grid over the next decade. Inga III, his advisers say, is one of his priorities - even though Tshisekedi hasn’t confirmed he’ll stick with the Spanish and Chinese consortia, which have yet to be awarded a concession contract. “We’re going at cruising speed,” said Michel Eboma, Tshisekedi’s chief adviser for mines and energy. “The president has the general interest of the people at heart, and Inga III aims at improving the life of the population.” Much will depend on China’s attitude. While President Xi Jinping’s government supports the project, he’s increasingly working to ensure that his Belt and Road Initiative doesn’t leave poorer nations with unsustainable debt. The uncertainty surrounding China’s approach has caused dislocations in projects across Africa. Inga III “has to be a project that guarantees repayment of loans because the financial budget of the government is very limited,” said Wang Tongquing, China’s ambassador to Congo. “According to the information I have, the plans of this project are not yet very mature, above all the plan for the consumption of the electricity after construction.”
Natural gas exploration in Mozambique brings in more state revenue (Macauhub)
Filipe Nyusi, speaking at the ceremony to lay the foundation stone of Mozambique LNG’s natural gas processing unit, also said that the project led by the Anadarko Petroleum Corporation group, “will catapult Mozambique’s economy on regional, continental and global levels.” “With the implementation of this facility, whose first stone we had the privilege to lay, a new page in the history of Afungi, Cabo Delgado, Mozambique and Africa has been turned,” said the president, adding that “this project irrefutably defines Mozambique as a destination for foreign direct investment.” The unit is estimated to cost US$150 million and will have the capacity to produce 12.8 million tonnes of liquefied natural gas per year, of which 11.1 million tonnes per year have already been sold to European and Asian buyers.
Biggest vehicle-exporters from South Africa in July 2019 (Carmag)
According to Naamsa, the South African automotive industry’s July 2019 export sales registered a “substantial gain” year-on-year, reflecting a climb of 22,1%, with 34 297 units shipped off during the month. In July, Mercedes-Benz held onto the top spot with 9 495 units of its C-Class exported from the East London plant. This represents an increase of 1 352 units, month on month. Ford, meanwhile, climbed three places to second, shipping off 9 253 units (comprising 9 247 units of the Ranger and six of the Everest) from its Silverton facility in the month. This represents a massive increase of 5 894 units over June’s effort.
Zimbabwe: Government to launch National Export Strategy (Sokwanele)
Government will this month launch the National Export Strategy expected to increase the growth of exports by at least 10% annually. This was said by Foreign Affairs and International Trade Minister, Sibusiso Moyo during an induction of new ZimTrade board members. The new members appointed by Government are the chairperson Mrs Clara Mlambo, Dr Davison Gomo, Ms Florence Makombe, Dr Gift Mugano and Mr Stewart Nyakotyo. The government-appointed members join Mr Admire Masenda, Mr Mike Eric Juru, Ms Peggy Rambanapasi and Mr Brian Kagondo, who were appointed by the private sector. Minister Moyo urged the new board members to consolidate market access opportunities for Zimbabwe in the region and promote regional integration under SADC, Comesa, Tripartite, African Continental Free Trade Area and Europe. He urged the new board to expedite the writing of a new constitution for the organisation to provide a reasonable tenure.
Kenya’s Africa imports beat exports for first time (Business Daily)
Kenya has for the first time bought more than she sold to African countries in the half-year period, signalling continued dwindling competitiveness of her products on the continent. Trade deficit in Africa — the gap between imports and exports — stood at Sh156 million, marking the first time Nairobi has run a deficit since the Central Bank of Kenya started to publicly keep trade records in 1999. Data from Kenya Revenue Authority show total exports in six months through June dropped 1.96% to Sh107.55 billion compared with a year ago, higher than 0.99% in imports to Sh107.71 billion. Orders from Kampala have dropped to Sh30.77 billion in the January-June 2019 from recent highs of Sh34.51 billion in 2013, the statistics kept by the CBK shows. Half-year exports to Tanzania have dipped to Sh15.79 billion this year from Sh21.73 billion five years ago, while those from DRC have dipped to Sh6.86 billion from Sh10.12 billion. Imports from Uganda, on the other hand, have doubled to Sh13.95 billion in June 2019 from Sh5.14 billion in 2014, while Tanzania’s has grown to Sh12.95 billion from Sh8.34 billion. [Editorial comment: Kenya and Africa trade deficit a wake-up call; Peter Biwott, Export Promotion Council CEO: We can emulate the successful sports model to boost exports]
Sachen Gudka: It’s time to capitalize on our export potential (The Standard)
The declining export trend calls for robust and strategic measures to increase our exports to the COMESA region. How can we realize this? First, we must address the cost of production if we are to remain competitive in the regional market. Kenya’s manufacturing sector, for instance, has been operating at about 13% cost disadvantage compared to our neighbouring countries. Second, we must diversify our export portfolio. For instance, tea accounts for 15% of the total value of Kenyan exports to COMESA countries . Such lean diversity limits our ability to competitively take up the huge market in the region. Third, we need to incorporate SMEs along the value chain. This means that we have to put in place preference policies that will favour SMEs under procurement as well as having in place a market structure that supports SME lending, market access and capacity building. Lastly, it is critical that all Member States respect standards, and that standards are not used to create nontariff barriers, which impede business. More so, the Rules of Origin and tariff discussions held since 2015 on Tripartite Free Trade Area should be adopted widely to avoid lengthy negotiations in the AfCFTA. [The author is chairman of the Kenya Association of Manufacturers and vice chair of the COMESA Business Council]
Regulators walk the ‘mobile money’ line (Bloomberg)
African telecom authorities must walk a fine line when it comes to regulating the move of mobile operators into financial services. They want to encourage this shift, but they also don’t want to be in a position where operators don’t have much oversight. This is what’s happening in Kenya, where mobile money transfer services like Safaricom’s M-Pesa don’t operate under regulations specifically meant to govern these kinds of services. The excitement around M-Pesa’s potential led Kenyan authorities to hold off on regulating it too stringently. This is now changing. Concerns over its potential for money laundering and having a single company play such a dominant role in an important part of its economy has seen Kenyan authorities steadily increase regulatory requirements over the last few years. The Kenyan parliament is now even proposing legislation that will see the provider of a telecom service split its other businesses, like M-Pesa, into a separate entity. This move will eventually see M-Pesa “provide separate accounts and reports”.
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39th SADC Summit: Towards Inclusive, Sustainable Industrial Development
Leaders from southern Africa are meeting for their annual summit next week to chart the development agenda of the region.
Running under the theme “A Conducive Environment for Inclusive and Sustainable Industrial Development, Increased Intra-Regional Trade and Job Creation”, the summit will deliberate on a wide range of issues, including reviewing progress made towards achieving the longstanding vision of a united, prosperous and integrated region.
This article looks at some of the major issues expected to be discussed by the 39th SADC Summit scheduled for Dar es Salaam, United Republic of Tanzania on 17-18 August.
Taking stock of the industrialization agenda
One of the major highlights will be a progress report on the implementation of the pdf SADC Industrialization Strategy and Roadmap 2015-2063 (2.34 MB) , which was adopted in 2015 to unlock the industrial potential of the region.
Industrialization is a top priority for southern Africa, and since 2014 all SADC summits have focused on how the region can attain industrial development.
In this regard, the Summit will receive a progress report on how Member States are implementing various measures to accelerate economic growth through industrial development.
As per the theme of the 39th SADC Summit, Member States will between August 2019 and August 2020 focus on creating a conducive environment to allow the private sector and other citizens of the region to actively participate in and fully benefit from measures aimed at advancing the industrialization agenda.
In a bid to enhance the level of industrial development, both nationally and regionally, and in pursuit of ensuring the attainment of unified goals and cohesion among Member States’ industrialization policies and strategies, SADC is developing a Protocol on Industry, which is set to be completed by August 2019.
The protocol will be a binding instrument that will entrench and give legal effect to the SADC Industrialisation Strategy and Roadmap and will ensure adequate coordination, monitoring and evaluation of implementation.
The proposed protocol is expected to strengthen the level of industrial development in the region and facilitate the harmonization of policies and strategies in Member States.
Where Member States already have such policies and strategies in place, these should be reviewed and aligned to the SADC Industrialisation Strategy and Roadmap.
Food security situation
Summit is expected to approve measures to address food insecurity after a poor harvest during the 2018/19 agricultural season.
The SADC region has a cereal deficit of more than 5.4 million tonnes this year following subdued rainfall during the just-ended season, according to a pdf Synthesis Report on the State of Food and Nutrition Security and Vulnerability in Southern Africa (4.15 MB) .
The report indicates that an estimated 41.2 million people are food-insecure in 13 SADC Member States this year.
Summit is expected to approve strategies for addressing the food security, including assisting affected populations with food supplies as well as providing emergency livestock supplementary feeding to save livestock, and importing grain to supplement their reduced yields.
Infrastructure development
Another key issue for discussion is progress towards implementation of the pdf SADC Regional Infrastructure Development Master Plan (RIDMP) (3.93 MB) .
Approved in 2012, the RIDMP is the strategy for the development of integrated regional infrastructure in southern Africa at an estimated cost of more than US$500 billion to meet projected demand by 2027.
Implementation of the RIDMP is being done in three phases, covering the Short Term Action Plan (STAP) 2012-2017, the Medium Term Action Plan that runs up to 2022, and the Long Term Action Plan to be implemented up to 2027.
Preliminary findings of a study commissioned by the SADC Secretariat show that the implementation of most STAP projects is behind schedule.
Post-2020 SADC agenda
SADC has begun the process of formulating a new development vision to succeed the pdf Revised Regional Indicative Strategic Development Plan (RISDP) (1.04 MB) that was approved in 2015 and runs until 2020.
The review process is expected to lead to the development of a framework for the post-2020 regional strategy that takes into account SADC Principles and Common Principles as well as global and continental processes such as the African Union’s Agenda 2063 and the United Nations’ Sustainable Development Goals.
With one year left until the 2020 SADC Summit (the 40th), the 39th Summit is expected to review progress towards the development of the post-2020 SADC Agenda.
In this regard, a progress report is set to be presented to the heads of state and government for deliberation.
Gender empowerment
Gender equality and empowerment are firmly rooted in the SADC Declaration and Treaty that established the shared community of SADC.
Member States fully realize that the equality and empowerment of both women and men is crucial for the attainment of sustainable development.
Significant progress has been made towards gender equality in the region, but more needs to be done.
In this regard, the Summit is expected to explore ways of intensifying its efforts to promote gender equality and ensure that both women and men play an active role in advancing regional integration.
Strengthening peace and security
On the political front, the leaders are expected to discuss the peace and security situation in the region.
The region has generally enjoyed stability despite some pockets of volatility in the eastern part of the Democratic Republic of Congo, the Kingdom of Lesotho and Madagascar.
Summit is expected to take stock of interventions undertaken by the region to promote peace and stability in these and other Member States.
To ensure there is a strong linkage between early warning and early action, SADC has established the Regional Early Warning Centre and the region successfully deployed many strategic teams which have had a positive impact.
Most recent was the SADC Preventive Mission in Lesotho, which was deployed in November 2017 to stabilize the fragile and unpredictable political and security situation in the country, and successfully completed its mission in November 2018.
This supported the deployment of the SADC Oversight Committee to the Kingdom of Lesotho and the team supporting the SADC Facilitator to assist in the national dialogue and the roadmap for reforms.
Sustainable financing of regional integration
Another issue that remains high on the agenda for the Summit is the need for SADC to put in place sustainable financing models to drive forward its regional agenda.
It is estimated that only around 10 percent of regional projects are funded by SADC Member States while the balance comes from international cooperating partners. This situation has compromised the sustainability of regional programmes.
The Secretariat was directed by the 38th SADC Summit to finalize the draft SADC Regional Resources Mobilization Framework, which determines how fiscal space can be created to enable Member States to finance regional activities, programmes and projects.
A progress report on the draft SADC Regional Resources Mobilization Framework is, therefore, expected to be presented to the leaders for discussion.
African Continental Free Trade Area
Summit is expected to discuss how Member States can fully benefit from the African Continental Free Trade Area (AfCFTA) that entered into force in May.
AfCFTA is an enlarged market that brings together all the 55 AU member states, covering a market of more than 1.2 billion people and a combined gross domestic product (GDP) of more than US$3.4 trillion.
The AfCFTA will build on the existence of other FTAs in the continent such as the SADC FTA and the pending “Grand” FTA involving the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and SADC.
Establishment of the AfCFTA is one of the flagship projects or initiatives under Agenda 2063 – The Africa We Want, which is a continental vision and strategic framework adopted by the AU in 2013 to optimize the use of the continent’s resources for the benefit of all Africans.
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The Ministerial Session of the 2019 AGOA Forum began to today in Abidjan: selected updates
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The theme of this year’s Forum is AGOA and the Future: Developing a new trade paradigm to guide US-Africa trade and investment. The US State Department says the 2019 Forum will explore new tools that both the U.S. and African governments have developed over the past year and how to use them most effectively. It will also highlight the important role played by women, youth, civil society, and the private sector in promoting trade, expanding economic growth, and generating prosperity. [For twitter updates: #AGOA2019]
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Extract from the important pdf joint declaration issued today by the African Union and Mr CJ Mahoney (Deputy US Trade Representative) (1.20 MB) : “The United States and the African Union intend to jointly identify subject areas related to the ongoing negotiation and implementation of the AfCFTA as subjects for cooperation and possible technical assistance and capacity building. The United States and the African Union intend to work together to develop activities that support these priority objectives. The United States and the African Union share a mutual desire to pursue deeper trade and investment ties beyond AGOA, which is scheduled to expire in 2025, eventually leading to a continental trade partnership between the US and Africa that support regional integration.”
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US favors bilateral trade deals with Africa, Nagy says. The US favors bilateral trade agreements and will use its first such deal with a country in sub-Saharan Africa as a model for others when the African Growth and Opportunity Act expires in 2025. “Right now, of course with six years away, it may seem like a long time, but it’s not really a long time for this type of activity,” Tibor Nagy, US assistant secretary of state for African affairs, said in an interview at the AGOA Forum in Abidjan, the commercial capital of Ivory Coast. “All options are on the table” for trade pacts after 2025. The mechanics of the continent-wide trade deal will be negotiated in phases and should be fully in operation only by 2030. While these talks are happening and AGOA is still valid, the two accords can complement each other through the requirements of rules of origin, which govern how much of a product needs to be made in a region. “If there’s trade done within the continent-wide free-trade agreement and it meets the rules of origin, then hopefully the African countries can benefit from that, from sourcing their material from within the continent instead of having it come from other places,” Nagy said.
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South Africa’s trade and industry minister Ebrahim Patel: “We have an opportunity in these proceeding to align AGOA to goals of the CFTA to enable us to speak with one voice. The US is the world’s largest economy and access to the US market and to American investment in our economy are important ways of addressing job creation and the elimination of poverty. We look forward to a constructive and positive discussion with the US trade representative.”
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Minister Patel chairs African trade ministers meeting. “It (the AfCFTA) is our ‘made in Africa’ initiative and we have the opportunity in these proceedings to align AGOA and all our external initiatives to the goals of the ACFTA to enable us to speak with one voice and to build African Union institutions.” He bemoaned the fact that out of 1,835 tariff lines under AGOA, sub-Saharan Africa was only using 748, or 40%. “Indeed we only use 13% of the tariff lines under the bigger Generalised System of Preferences,” he said. “We are here to discuss how to turn that around, to identify challenges and to take steps to increase utilisation of AGOA preferences as well as to deepen trade and investment relationships Africa and US.”
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@USMadagascar: Apparel and textiles have benefited the most from four years of renewed AGOA eligibility, and AGOA-related exports are likely to represent close to 1% of GDP for 2019. Madagascar ranks third as a main supplier of apparel among sub-Saharan countries eligible for AGOA 2019.
pdf Decisions of the First Mid-Year Coordination Meeting between the AU, RECs and the Regional Mechanisms (226 KB) (8 July, Niamey)
Note the need to improve the level of integration within the RECs as well as at the continental level and call upon the Member States, RECs and the Commission to strengthen their collaboration in the implementation of the African Integration Agenda; Request the Commission to prioritize support to the promotion of inter-REC co-operation with a view to scaling up the African integration agenda and CALL UPON Member States to allocate adequate domestic resources that contribute to the implementation of the integration agenda;
Mandate the Commission, in collaboration with the Member States, RECs, AU organs, regional mechanisms to operationalize the framework on an effective division of labour, upon its adoption by the Assembly, including through detailed plans of action; Urge all RECs to align their programs and action plans with the continental agenda for Integration, which includes the Abuja Treaty, Agenda 2063 and its ten-year implementation plan;
Also urge Member States to consider the importance of RECs participation in relevant AU statutory meetings to coordinate and harmonize the policies between the Union and RECs for the gradual attainment of the integration agenda of the Union; and clarify the legal status of the RECs in the architecture of African integration; Request Member States, RECs, Commission, AUDA-NEPAD and all other stakeholders to mobilize sufficient and sustainable resources to strengthening the regional integration including through utilizing the AU Partnerships towards the attainment of the continental integration Agenda. [Note: The decisions are also available for download in Arabic, French and Portuguese]
African Medicines Agency Treaty: update
African experts and policymakers have urged continental efforts towards the ratification of the African Medicines Agency Treaty so as to ensure the harmonization of medical products in Africa. They made the urgent call during a meeting of African ministerial meeting, which was held over the weekend as part of the AU’s Specialized Technical Committee Meeting on Health, Population and Drug Control. Amira Elfadil, AU Commissioner for Social Affairs, noted the AU’s commitment to the swift ratification and implementation of the continental AMA treaty. Elfadil also reaffirmed the AU’s leadership role in terms of advocating an “increased domestic funding, partnerships for health care and alignment of donor policies with national priorities - in line with the Agenda 2063.” Elfadil, who applauded the four AU member countries that have already signed the AMA treaty documents, also stressed the continental treaty’s potential in transforming Africa’s pharmaceutical sector. The continental treaty, which was so far signed by three AU member countries that are Algeria, Rwanda and Saharawi, also added Madagascar as its fourth signatory country on Friday. The treaty is expected to enter into force once ratified by 15 AU member countries, the minimum threshold required for it to take effect. [Madagascar becomes fourth AU member state to sign the treaty for the establishment of the African Medicine Agency]
East African Community Monetary Affairs Committee: communiqué (30 July, Kigali)
The meeting reviewed the status of implementation of previously agreed actions towards the operationalization of the East Africa Monetary Union protocol, with a focus on the decisions of the 22nd Ordinary MAC meeting held in Kampala, Uganda, in August 2018. The Governors reflected on the progress in attaining the convergence criteria and highlighted the areas that are lagging behind. Governors noted that Partner States’ Central Banks have made significant strides in the harmonization of monetary policy frameworks, exchange rate policies, rules and practices governing bank supervision, financial accounting principles, as well as payment systems. A number of national laws are also being harmonised. In addition, significant progress has been made towards the establishment of EAMU institutions as required by the Protocol.
Notwithstanding the above, Governors noted that there have been delays in realising targets set out in the EAMU roadmap and that there are several challenges that could further impede the timely implementation of EAMU protocol. Therefore, the Governors pledged to collaborate with stakeholders in the EAC integration process to fast-track pending activities of the EAMU roadmap. The Governors reiterated the need to remain vigilant in fighting the risks arising from recent financial sector innovations especially to ensure that Central Banks in the region can effectively deal with Anti-Money Laundering and Counter Financing of Terrorism. The Governors also noted the need to continue building resilience to shocks in the financial sectors of the EAC Partner States. In this regard, they underscored their commitment to enhance coordination of activities that will support resilience of the financial sector and to follow-up on the progress towards the realization of EAMU.
West Africa Internet Governance Forum: update
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Executive Board concludes 2019 Article IV Consultation. Executive Directors agreed with the thrust of the staff appraisal. They noted the deterioration in macroeconomic outcomes in Zambia and heightened vulnerabilities due to the ongoing drought and recent policy slippages. They expressed concern that public debt and debt service have increased rapidly due to heavy reliance on non‑concessional debt to finance large infrastructure investment, while growth has lagged, thus putting Zambia at high risk of external and public debt distress. Against this background, Directors emphasized the urgency of reforms and of a firm commitment to implement them. Directors noted that under current policies public debt is on an unsustainable path, and ongoing financing constraints have started to force the inevitable fiscal adjustment to occur in a disorderly way, with mounting expenditure arrears. They cautioned that there is a narrow window for tackling fiscal challenges in an orderly and planned manner. This would require a large front‑loaded and sustained fiscal adjustment centered on stronger control and prioritization of public investment projects and postponing the contracting of new non‑concessional debt, accompanied by enhanced revenue mobilization and the scaling back of exemptions and tax expenditures, while reducing domestic expenditure arrears. Directors stressed that the adjustment strategy should aim to minimize drag on growth and contain the impact on priority social spending. Some Directors also urged the authorities to carefully consider the benefits and disadvantages of shifting from a value‑added tax to a sales tax.
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pdf 2019 Article IV Consultation report (2.46 MB) . External imbalances are projected to widen, adding to pressure on reserves. The current account deficit is expected to widen in 2019 on lower copper exports (with lower prices and production) and the higher imports and interest payments associated with public investment. FDI and other financial account inflows are expected to remain subdued. International reserves under the baseline are projected to decline to 1.6 months of imports by end-2019 and to around 1 month of imports by 2021, leaving little buffer to cushion external shocks or for redemption of the 2022 Eurobond. Additional risks are posed by foreign holdings of local-currency debt (currently at about $0.7 billion, or half of FX reserves). [Note: See Figure 3: Zambia’s external sector]
Today’s Quick Links: The Rwanda Private Sector Federation will, Friday, host The Golden Forum, on the theme Unlocking intra-African trade with the world Financial reports, audited financial statements of the African Union for the year ended 31 December 2018 |
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Diarise:
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tralac’s Certificate Course on International Trade Law and Policy for Africa’s Development (starting 23 September): Applications close on 9 August
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East African Business Council’s 20th Annual General Meeting (8 August, Nairobi) on the theme: Repositioning the private sector in the EAC regional integration agenda
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Third Global Logistics Convention in East Africa (29-30 August, Kigali). Delegates will deliberate on the NTBs that traders encounter on the Northern and Central corridors, e-commerce, and the implementation of the AfCFTA.
USITC hearing on US Trade and Investment with Sub-Saharan Africa: recent trends and new developments
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Post-hearing submission by the Embassy of the Republic of South Africa. South Africa would like to submit its response to some of the issues raised during the public heading, in particular relating to the Copyright Amendment Bill and the Performers Protection Amendment Bill.
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Submission by NAAMSA and NAACAM: The importance of AGOA for the SA automotive industry. The US was the South African automotive industry’s fifth largest trading partner, fifth largest export destination for vehicles and fifth largest country of origin for total automotive imports in 2018 (SA vehicle exports to US 47 627 units in 2016 in US market of 17,9 million). Up to 2017 SA enjoyed an automotive trade surplus with the US but in 2018 this turned into a deficit due to the same BMW and Mercedes Benz models now being manufactured in the US and not exported to the US from SA anymore. Continuity of AGOA up to 2025 will strengthen further trade relations between southern Africa and the United States and will improve the scope of employment creation, industrial growth and development in the southern African region. The SA automotive industry is increasingly involved in regional integration and the building of capacity in other African countries. Both the US and countries involved under AGOA have the potential of generating significant economic benefits from trade as AGOA countries continue to develop, modernize and industrialize. Ultimately, AGOA builds goodwill between the US and Africa. [Related: NAAMSA, NAACAM joint statement (pdf)]
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Submission by Professor Katrin Kuhlmann (President and founder, New Markets Lab). All of the issues covered in the investigation and my testimony are key priorities for the AfCFTA and U.S. engagement with the African continent. All will contribute to market development, investment growth and diversification, and rule of law. Going forward, US trade policy should focus on an active partnership with sub-Saharan Africa designed to unlock this potential, build well-functioning and inclusive legal and regulatory systems, and support the historic harmonization efforts that are already underway. I would like to conclude with a few brief final observations and suggestions for further dialogue:
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Selected other submissions to the USITC hearing, previously posted on the tralac website, can be accessed here.
IATA analysis: Reforms needed to maximize aviation benefits in South Africa
The International Air Transport Association presented its latest study on the economic value of air transport and tourism to South Africa, and identified opportunities for significant expansion over the next 20 years if key policy reforms are made. In 2017, 20.9 million passenger journeys were made to, from and within South Africa, with aviation and tourism representing $9.4bn in gross value added. It accounts for 3.2% of South Africa’s GDP and supports 472,000 jobs. Over the next 20 years the South African market could more than double in size, resulting in 23.8 million additional passenger journeys, over 372,000 more jobs, and a total of $20.2bn in GDP by 2037. IATA identified three areas where government action can enable aviation to continue its growth trajectory and generate even more value in South Africa: Reform harmful policies on immigration; Reduce taxes and charges that are increasing the cost of doing business in the country; Undertake a harmonized strategic approach to policy-making with transport and aviation central to economic planning.
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2019 Article IV Consultation: The current account deficit is projected to substantially widen in 2019 due to lower oil prices and sustained oil production-related imports. The current account deficit is expected to widen to 6.5% of GDP in 2019 with a modest improvement in 2020-21. Despite higher export volumes, the higher current account deficit in 2019 is largely due to a lower oil price assumption. Several oil investment projects are expected to increase both imports of capital goods and concomitant FDI over the medium term. The large FDI inflows and a recovery of capital grants should underwrite most of the current account decline in 2019, likely allowing net foreign assets to improve to CFA -94 billion. The external position is expected to improve gradually over the medium term. Oil production is expected to rise through 2025, supplemented by an expansion in cotton exports. Imports are expected to rise moderately, reflecting higher domestic demand and planned increases in oil capital expenditures. At the same time FDI is expected to increase and external debt amortization to fall. With a lower current account deficit and strong financing, Chad’s NFA position at the BEAC is estimated to turn positive around 2020. The outlook is subject to a number of risks (Table 9):
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Selected Issues: Non-oil growth impediments – crisis legacies and structural weaknesses. The challenging environment for non-oil private sector has translated into a low level of diversification, leaving the government far too dependent on oil revenues and the economy vulnerable to oil price volatility (Figures 10 and 11). Chad’s export diversification index is low, with exports largely dominated by oil (around 94%) and with very small shares in cotton, livestock, and other agri-products. Low diversification and dependence on oil revenues have made the budget very vulnerable to oil price volatility. For instance, during the 2014/15 oil price shock, the drop in oil revenues forced Chad into a sharp and brutal expenditure based fiscal consolidation, with dramatic effects on growth and social outcomes. In addition, with low diversification, Chad’s GDP growth volatility is one of the highest in Sub-Saharan Africa. The private sector in Chad operates in a rather difficult climate. In this regard, areas to improve include streamlining procedures for the creation of small and medium size enterprises, facilitating access to financing for exporting companies to foster trade, modernizing tax administration to reduce non-compliance, widening the tax base, and reforming regulation to facilitate investment in the electricity sector to increase access to reliable and affordable power supply needed to improve Chad’s competitiveness.
Somalia and the IMF: two updates
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IMF Executive Board Concludes 2019 Article IV Consultation. Directors encouraged continued progress on addressing governance weaknesses and the risk of corruption. They emphasized that passage of key legislation - including on revenue, PFM, audit, petroleum, statistics, and anti‑corruption - would promote better governance and transparency. Directors encouraged further efforts to strengthen statistical institutions and address data gaps. They noted that intensive capacity development support will need to be sustained to bolster ongoing reforms. Directors concurred that Somalia’s external debt is unsustainable, and supported the authorities’ continued efforts to make progress toward the Heavily Indebted Poor Country initiative decision point.
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2019 Article IV Consultation. Per capita incomes remain very low. An updated household survey shows per capita consumption is significantly lower than originally estimated, resulting in a 37% downward revision to the level of GDP to $4.7bn in 2018. Per capita income is estimated at around $332, one of the lowest in the world. A large trade deficit is financed by stable external flows (see Tables 7–9). The current account deficit narrowed slightly during 2018, as agricultural exports (mainly livestock) recovered from the 2017 drought. Nonetheless, the trade deficit remains high at 73% of GDP, which continues to be financed by large inflows of remittance and grants (Figure 1). External debt reached about $4.7bn or nearly 100% of GDP in 2018, with 96% ($4.5bn in arrears, of which $1.8bn or 39% reflects late interest and charges).
Jobs in global value chains: new evidence for four African countries in international perspective (World Bank)
What is the potential for job growth in Africa under participation in GVCs? In this study the concept of GVC jobs is introduced which tracks the number of jobs associated with GVC production of goods. A novel decomposition approach is used to account for GVC jobs by three proximate sources: global demand for final goods, a country’s GVC competitiveness (measured as the country’s share in serving global demand) and technology (workers needed per unit of output). Based on newly assembled data, it is shown how GVC jobs and incomes have changed over the period 2000-14 in Ethiopia, Kenya, Senegal and South Africa, compared to developments in some other low- and middle-income countries in the world. The four African countries stand out in terms of a low share of GVC jobs in the (formal) manufacturing sector, and a relatively high share in agriculture due to strong backward linkages, especially in the case of food production. All countries benefitted highly from growing global demand for final goods. At the same time it appears that technical change in GVCs is biased against the use of labour, greatly diminishing the potential for job growth through GVC participation.
WTO launches trade in services dataset by sector and mode of supply
The WTO has launched a new dataset covering the services exports and imports of 200 economies from 2005 to 2017. The economies covered by the dataset includes all WTO members and observers. The experimental dataset, which uses both official figures and estimates for missing data, provides for each economy and sector estimates of how much services is traded through the four modes of supply. As defined in the General Agreement on Trade in Services , the four modes of trading services are through cross-border supply such as through the internet, consumption abroad such as tourism, commercial presence of an enterprise such as establishing an affiliate in a foreign country to serve the local market, and individuals travelling from their own country to supply services in another such as consultants. [Note: Various downloads are available]
Statistical coverage of trade finance: fintechs and supply chain financing (IMF)
Trade finance is the backbone of international trade for entities ranging from a small businesses to multi-national corporations. An estimated 80% of world trade relies on this form of finance. Despite its systemic importance and rapid growth, data availability is only partial. During the 2008 financial crisis, policy makers, notably the G20 recognized that the absence of comprehensive trade finance data posed a significant hurdle for policy-makers to make informed, timely decisions. This paper proposes a stand-alone dataset to reflect the scope, dynamic and recent innovations of the trade finance market to support macroeconomic policy analysis.
IGC call for papers: Conference of the Private Sector Development Research Network (12-13 December, Geneva). “The event focuses primarily on the actions and behaviors of private firms, investors and markets rather than on government policy. It is differentiated from other conferences because of the markets it aims to focus (low and lower-middle income countries), but also the institutions it aims to engage in dialogue (DFIs, think tanks and universities with an active and applied research agenda on private sector development). However, insights for policy and regulation of markets and firms are within scope.”
Today’s Quick Links: Rwanda, DR Congo border traffic returns to normal Museveni: Rwanda-Uganda border impasse will be resolved WCO: East Africa’s good progress on trade facilitation and enhanced border control AfCFTA: How ready is Nigeria’s poultry industry? Nigeria: FG invests N14bn in mineral exploration West Africa Food Security Outlook: June 2019 to January 2020 |
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Today’s featured tweets, by Lily Sommer, are on the @ATPC2 and @afreximbank coordination meeting on informal cross border trade:
A single harmonised continental framework for collecting informal cross border trade is crucial. We need to talk the same language on informal cross border trade, and must move towards an AU framework for measuring ICBT to monitor the performance of the AfCFTA.
pdf Decisions of the 12th Extraordinary Session of the Assembly (205 KB) (7 July, Niamey): On AfCFTA implementation issues
Interim AfCFTA Secretariat organises the inaugural meeting of the AfCFTA Council of Ministers not later than 31 October 2019
Decides to further discuss the submission of the G6 Countries (Ethiopia, Madagascar, Malawi, Sudan, Zambia and Zimbabwe) to undertake liberalization of the 90% of total tariff lines over a period of 15 years, subject to reciprocity, with the view to reach consensus and to report to the upcoming session of the Assembly of the AU in February 2020
Directs the Commission to support the Council of Ministers responsible for Trade to put in place the AfCFTA institutional and governance structures that will facilitate effective implementation of the various trade instruments under the AfCFTA Agreement
Also directs the Commission to have the structure of the AfCFTA Secretariat, its work program and budget approved by the appropriate AU Policy Organs by February 2020;
Takes note of the position of Director General of the World Trade Organization falling vacant on 31st August 2020 and directs the African Ministers of Trade to work towards ensuring that Africa succeeds in getting the position and contributes to the strengthening of the multilateral trading system following the established AU relevant processes and procedures. [Note: The decisions are also available in French, Portuguese and Arabic, here]
pdf Decisions of the 35th Ordinary Session of the Executive Council (1.30 MB) (5 July)
The sub-committee on economic and trade matters: Takes note with concern of the slow pace of the establishment of the AU Financial Institutions (AUFI) and recognises the determination of Africa to be a financially self-reliant continent; Requests the Commission to finalize the comprehensive study, including by undertaking thorough consultations with Member States, in order to understand the challenges and obstacles faced in signing and ratifying the Legal Instruments of AUFI;
Also requests the Commission to continue working with the Association of African Central Banks and the African Securities Exchanges Association to implement the macroeconomic convergence criteria for the establishment of the African Central Bank and fast-track the establishment of the Pan-African Stock Exchange; Takes note of the proposal of the appointment of H. E. Nana Dankwa AkufoAddo, President of the Republic of Ghana, as the Champion of AU Financial Institutions, to provide political leadership and awareness to accelerate their establishment as scheduled in the First Ten-Year Implementation Plan of Agenda 2063: The Africa We Want.
Adopts the theme Silencing the Guns: Creating conducive conditions for Africa’s development as the theme of the year 2020; Requests the Commission, PAP, PSC, AUDA-NEPAD, ECOSOCC and other stakeholders to work with the PRC and the Ministerial Follow-Up Committee on Agenda 2063, to develop a roadmap, including a matrix of planned activities with key deliverables and milestones for implementation of the 2020 theme, to be endorsed during the 33rd Ordinary Session of the Assembly in February 2020. [Note: The decisions are also available in French, Portuguese and Arabic here]
CPIA Africa: Strengthening debt management capacity (World Bank)
The 2019 Africa Country Policy and Institutional Assessment report covers the period January to December 2018. Over this period, the average quality of policies and institutions in International Development Association (IDA)-eligible countries remained unchanged, amid decelerating growth across the region. The overall CPIA score for IDA countries in Sub-Saharan Africa was 3.1 in 2018, the same as 2017, reflecting the slow progress in improving the quality of policy and institutional frameworks in the region. Partly reflecting this uneven performance, per capita income growth has stagnated in recent years, and poverty headcounts remain elevated. Against this backdrop, the 2018 CPIA results reinforce the call for IDA countries in Sub-Saharan Africa to accelerate the pace of policy and institutional reforms to foster rapid economic growth and poverty reduction. Three areas require immediate attention (pdf):
First, the quality of debt management needs to be strengthened. The buildup in public debt has continued in the context of weak debt management systems. Second, business regulatory reforms need to accelerate to support private sector development and job creation. Due to the slow pace of reforms, IDA countries in Sub-Saharan Africa are not converging toward the best business regulatory performance in some areas critical for private sector development including, most notably, in getting electricity. The average cost to obtain an electricity connection remains prohibitively high in many countries. Third, sustained efforts are needed to improve domestic revenue mobilization. In many countries, the yield of the domestic tax system has declined, as widespread exemptions narrowed the tax base amid weak capacity in customs and low compliance of taxpayers. Rationalizing tax exemptions and improving the efficiency of current tax systems could yield more revenue for countries to finance investments in human capital and infrastructure and ensure debt sustainability.
Africa Oil and Gas Outlook for 2019
A report released by Africa Oil Week and Menas Associates about what lies in store for Africa’s oil and gas industry has concluded that, on balance, the continent’s economic performance is promising, particularly as global oil markets finally recover from their 2015-2016 lows. Africa’s proven oil and gas reserves respectively account for 7.5% and 7.1% of global totals. Experts predict that 2019 and beyond will see deep offshore exploration and mega gas finds, with the development of trans-continental pipelines, gas-to-power initiatives and refining potential. The report delves into major trends for 2019, including political transitions and regional integration through the AfCFTA which promises to reduce barriers to intra-African trade, facilitate the movement of people and strengthening Africa’s prominence on the world stage. A rosy picture is painted for natural gas as global consumption rises. Africa’s gas production grew by 8% between 2017 and 2018 – largely out of Egypt. In terms of opportunities, sub-Saharan Africa’s two largest producers of oil – Nigeria and Angola – are expected to launch bidding rounds this year. Equatorial Guinea, Uganda, Gabon and Congo Brazzaville have ongoing rounds, Ghana launched its first licencing round at the 2018 edition of Africa Oil Week, and Madagascar is hoped to offer a number of blocks this year. Africa Oil Week 2019 will feature two days dedicated to national showcases and bidding rounds at their upcoming event with 16 countries – including Côte d’Ivoire, Equatorial Guinea and Mozambique -presenting their national hydrocarbon sector to Africa Oil Week’s audience. [Note: The report can be downloaded here, after registration]
Harry G. Broadman: While advanced countries intensify protectionism, Africa embraces free trade (Forbes)
As to the total welfare gains generated by the reduction of tariffs and NTBs, the IMF estimates that AfCFTA will produce an increase in economic welfare for the continent as a whole of between 2% and 4% percent, depending on how quickly and extensively trade liberalization takes place. Importantly, most projections of AfCFTA’s effects indicate that the largest benefits will stem from the reduction in NTBs. Needless to say, relieving NTB’s in particular will be the toughest goal to achieve since, as is the case worldwide, domestic (in-country) vested interests will have strong incentives to resist unless they can be persuaded otherwise that on net they will gain from the policy changes. This is perhaps the most critical roadblock that Africa’s leadership faces in realizing the potential of AfCFTA. Unless adequate financial and other resources are provisioned within the agreement itself to ease the pain for the dislocation of businesses and workers that always accompanies liberalization of trade regimes and facilitate their transition to other activities, the promise of AfCFTA will surely be diminished. AfCFTA will not remedy all of Africa’s deepest problems. But it could well be an economic game-changer for the continent.
Apapa gridlock saddens me – Buhari (The Punch)
President Muhammadu Buhari said on Wednesday that he was saddened by the Apapa gridlock, especially the toll it had taken on business in the Lagos area. He spoke during a meeting with the leadership of the Lagos Chamber of Commerce and Industry led by its Chairman, Mr Babatunde Ruwase, in Abuja. However, he expressed hope in the ongoing efforts by the Federal Government and the Lagos State Government to end the gridlock. Buhari and the LCCI leadership reviewed Nigeria’s recent signing of the AfCFTA Agreement, both agreeing that there were pros and cons for the country. Buhari said: “The consultative approach Nigeria took on the AfCFTA is just another example of our desire for sustainable and inclusive growth. The team visited all the geopolitical zones. We met farmers, commodity traders, manufacturers, bankers and stock brokers. We listened and made notes of their views. Our studies revealed that although the services sector was doing okay, other key job creating sectors such as manufacturing and processing were still lagging behind. This is evident from the fact that intra-African trade only accounts for 14% of Africa’s total trade. As a continent, our consumption is mostly of goods imported from outside the continent.”
South Africa: A R4.42bn June trade surplus (SARS)
The R4.42bn trade surplus for June 2019 (pdf) is attributable to exports of R108.17bn and imports of R103.75bn. Exports decreased from May 2019 to June 2019 by R3.61bn (3.2%) while imports decreased by R6.33bn (5.8%). South Africa’s top five export countries: China (11.3%), Germany (7.0%), US (6.6%), UK (5.2%), India (4.8%). South Africa’s top five import countries: China (17.0%), Germany (10.4%), US (6.0%), Nigeria (5.9%), Saudi Arabia (5.3%).
Ethiopia opens up banking sector to its diaspora (Reuters)
Ethiopia’s parliament passed a bill on Wednesday to open up the country’s financial sector to an estimated five million of its citizens who have taken other nationalities, including allowing them to buy shares in local banks and start lending businesses. Ethiopia’s banking sector, which is closed to foreign investment and is still one of the most tightly state-controlled in Africa, is dominated by the two oldest and most profitable institutions, Awash Bank and Dashen.
RCEP talks likely to conclude this year, official says (China Daily)
Assistant Minister of Commerce Li Chenggang said since the 27th round of RCEP talks held in Zhengzhou, the provincial capital of Henan province, has made notable progress in many aspects between July 22 and 31, it will be conductive for the upcoming RCEP ministerial meeting to gain more consensus in Beijing from Friday to Saturday. More than 700 representatives from 16 countries including member economies of the Association of Southeast Asian Nations, Japan, Australia and India attended the 27th round of RCEP talks and they reaffirmed the goals reached during the second RCEP leaders’ meeting in Singapore last November. The parties held a plenary session of the Trade Negotiation Committee and parallel sessions of working groups on trade in goods, trade in services, investment, rules of origin, trade remedy, finance, telecommunications, intellectual property rights, e-commerce and laws and mechanisms. [India: Rice exporters want Centre to obtain duty cuts at RCEP]
Today’s Quick Links: Karen Kandie: Powering regional integration through trade Nigerian traders bemoan: Ghana’s borders levy charges too high South Africa in good stead to address global oils demand Africa wants to sell more to China: enter avocados AUC, COMESA, UNDP Africa Office train AU member states in green climate financing Woolworths has now lost nearly R12bn in 5 years trying to go big in Australia OECD: Latest developments in steel making capacity (pdf) |
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Uganda Revenue Authority Commissioner for Customs, Dicksons Kateshumbwa, was recently elected as the World Customs Organisation Council chairperson. Extracts from an interview:
“My first task is to implement the WCO strategic plan 2019-2022, which includes goals like trade facilitation, capacity building, managing supply chains and gender trade. I want to enforce a harmonised system that classifies all products globally. The current one is complicated. We need to review and simplify it for traders to understand. I intend to promote trade, trade facilitation and women in trade. I also want to use this position to increase intra-Africa trade. Finally, I intend to increase capacity building for developing countries.”
No special treatment to China, India, South Africa, Indonesia at WTO, says Trump (Mint)
Continuing his trade wars on multiple fronts, President Donald Trump has dropped another bombshell. He threatened on Friday that the US will no longer treat China, India, South Africa, and Indonesia as developing countries for availing special and differential treatment during the current and future multilateral trade deals negotiated at the WTO. The US, he said, will “use all available means to secure changes at the WTO that would prevent self-declared developing countries from availing themselves of flexibilities in WTO rules and negotiations that are not justified by economic and all other indicators.”
In 90 days, China, India, South Africa, Indonesia , and 30 more countries must stop designating themselves as developing countries for availing what is referred to as the S&DT (Special and Differential Treatment). Otherwise, the US (a) “will not support any such country’s membership in the OECD (the Organization for Economic Cooperation and Development)”; (b) “consider the WTO member’s involvement in global trade, membership in key economic decision-making groups, placement within relative economic and other indicators, and any other factors the United States Trade Representative deems appropriate”; and (c) the USTR shall publish on its website a list of all self-declared developing countries that the USTR believes are inappropriately seeking the benefit of developing country flexibilities in WTO rules and negotiations.”
White House memorandum to the USTR: Memorandum on Reforming Developing-Country Status in the WTO
China most dramatically illustrates the point. Since joining the WTO in 2001, China has continued to insist that it is a developing country and thus has the right to avail itself of flexibilities under any new WTO rules. The US has never accepted China’s claim to developing-country status, and virtually every current economic indicator belies China’s claim. After years of explosive growth, China has the second largest Gross Domestic Product in the world, behind only the United States. China accounts for nearly 13% of total global exports of goods, while its global share of such exports jumped five-fold between 1995 and 2017. It has been the largest global exporter of goods each year since 2009. Further, China’s preeminent status in exports is not limited to goods from low-wage manufacturing sectors. China currently ranks first in the world for exports of high-technology products, with such exports alone increasing by 3,800% between 1995 and 2016. Other economic figures tell a similar story. Valued at nearly $1.5 trillion, China’s outbound FDI exceeds that of 32 of 36 OECD countries, while its inbound FDI of nearly $2.9 trillion exceeds all but one OECD country. China is home to 120 of the world’s 500 largest companies, and its defense expenditures and total number of satellites in space are second only to those of the United States. [Dated 26 July]
Communication from Bolivia, Cuba, Ecuador, India, Malawi, Oman, South Africa, Tunisia, Uganda, Zimbabwe: pdf Strengthening the WTO to promote development and inclusivity (125 KB)
In recent months, some Members have suggested a broad range of reforms at the WTO including a slate of new rules, even though existing mandates from the DDA remain unaddressed. ‘WTO reform’ does not mean accepting either inherited inequities or new proposals that would worsen imbalances. Reforms must be premised on the principles of inclusivity and development and respond to the underlying causes of the current backlash against trade and the difficulties that developing Members continue to face vis-à-vis their industrialization challenges. In addition to these challenges, the WTO is now confronting immediate existential crises: The resort to unilateral measures and the impasse in the Appellate Body. Clearly reform is needed in these areas. Through this concept paper, we seek to identify the issues that must be addressed if the WTO is to be strengthened in a balanced manner. A sine qua non for strengthening the system is unblocking the vacancies in the Appellate Body. This is an urgent priority since in the absence of a functional, effective and independent mechanism for enforcing rules, negotiating new rules in any area makes no sense.
Special and Differential Treatment (S&D) is a treaty-embedded and non-negotiable right for all developing Members. The available data indicates that the gap in the standards of living between developing and developed countries has not narrowed to any significant extent since the establishment of WTO. This necessitates the preservation and strengthening of the S&D provisions in both current and future WTO agreements, with priority to outstanding LDC issues. The multilateral trading system must give policy space for developing Members to fulfil their development goals including industrialization. Developing Members continue to confront many formidable challenges, which underscores the continued relevance of S&DT provisions in their favour.
The long-awaited outstanding ‘development’ issues from the Doha Round continue to be paramount and include: Implementation Issues, Special and Differential Treatment, Cotton, Public Stockholding, Special Safeguard Mechanism, Agriculture Domestic Supports, Fisheries Subsidies, Discussions under the 1998 E-Commerce Work Programme in the relevant WTO bodies. [Dated 22 July]
New Delhi may not join interim arrangement to replace appellate body at WTO (Mint)
India is unlikely to strike bilateral deals with WTO members such as the EU and Canada who have worked out an interim arrangement to preserve the dispute settlement function of the multilateral body by agreeing to set up arbitration panels to resolve disputes. “Why should we give up our right to appeal in the Appellate Body against any adverse judgment by a dispute settlement panel? We are not going to bind ourselves to a bilateral arbitration with other countries. The EU and Canada seem to have given up hope on the survival of the Appellate Body after December,” a senior Indian trade official said on under condition of anonymity. [Text of the EU, Canada statement]
Related news updates, commentaries:
South China Morning Post updates: China, US trade talks resume in Shanghai in shadow of Donald Trump’s angry tweets aimed at Beijing; Trade war tariffs continue to gnaw away at China’s manufacturing outlook, July data shows
Antara Ghosal Singh: China’s evolving strategy for WTO reforms
Growth in Low-Income Countries: evolution, prospects, and policies (World Bank)
There are currently 31 countries classified as low income, less than half the number in 2001. Rapid growth in low-income countries from 2001 to 2018 allowed many to progress to middle-income status, supported by the commodity price boom of 2001-11, debt relief under the Heavily Indebted Poor Country Initiative and Multilateral Debt Relief Initiative, increased investment in human and physical capital, improved economic policy frameworks, and recoveries from the deep recessions in transition economies during the 1990s. However, the prospects for current low-income countries appear much more challenging. Compared to the low-income countries in 2001 that became middle-income countries, today’s low-income countries are further below the middle-income country threshold and more often fragile; their heavy reliance on agriculture makes them vulnerable to climate change and extreme weather events; and their scope to boost external trade is limited by geography. Coordinated and multi-pronged policy efforts are required to address these challenges. [The author: Rudi Steinbach]
Underway in Kigali: Association of African Central Banks 2019 Symposium (28 July - 1 August). The theme: Rising African Sovereign Debt – implications for monetary policy and financial stability
Discussions will include appropriate strategies for sovereign debt management, drawing on lessons learned in Africa and other regions of the world. The exchanges would also focus on the challenges faced by African countries, with a view to keeping the public debt at a sustainable level, consistent with the continent’s economic growth objectives. Concept note (pdf): The external debt of African countries increased by around 10 percentage points since 2010, reaching almost 40% of GDP in 2017. One of the reasons for the increase in the external public debt is the depreciation of domestic currencies, as a significant portion of the debt is denominated in foreign currencies, notably in US dollars and euros. Although the current level of debt in most African countries is unlikely to make monetary policy ineffective, it could be ineffective if the current and growing momentum of sovereign debt continues, particularly in the current context of rising protectionism that could have negative effects on growth and commodity prices, as well as rising interest rates at the global level. [Presentation by Gilles Noblet (European Central Bank): Lessons from European reforms (pdf)]
The sovereign-bank nexus in EMDEs: What is it, is it rising, and what are the policy implications? (World Bank)
This paper explores the sovereign-bank nexus in emerging markets and developing economies: the interconnectedness between the health of the sovereign and the banking system. Data from 140 emerging markets and developing economies suggest that this nexus is rising. First, banks have increased their exposure to their sovereigns in the past decade. Second, government debt has grown, and fiscal positions have deteriorated, raising the specter of sovereign stress. Third, banking system assets and bank credit to the private sector have steadily increased, which may restrict the sovereign’s capacity to contain a banking crisis. Fourth, empirical evidence from 36 emerging markets and developing economies documents the existence of the nexus and suggests that it has increased recently. [The authors: Erik H.B. Feyen, Igor Zuccardi]
International trade, transparency, and gender equality: The case of the Pacific Agreement on Closer Economic Relations (PACER) Plus (UNCTAD)
This report examines the potential implications of the transparency provisions in the Pacific Agreement on Closer Economic Relations (PACER) Plus for gender outcomes in the region of nine Pacific island countries -Kiribati, Nauru, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu, the Cook Islands and Niue - that signed the PACER Plus agreement with Australia and New Zealand in 2017. It also examines the socioeconomic, gender, and trade profiles of the 9PICs and discusses the gender implications of trade. The nine countries share the economic features, challenges, and opportunities of small island developing states. The report argues (pdf) that even though gender equality is not an explicit goal of the transparency provisions of Pacer Plus, there are several potential channels through which they may positively impact gender equality. The benefits from increased transparency in trade are expected to directly affect women entrepreneurs, producers, and traders even though the spillover effects may impact a larger number of women in different economic roles. Improved access to information, better predictability in the application of trade rules, reduced cost (both time and money) to trade, and reduced hidden costs such as illegal fees and bribery - all of which are expected to result from increased transparency - would create new trade opportunities and a more favorable trade environment for women.
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SACU’s reforms in shreds (Southern Times)
Namibia’s Finance Minister Calle Schlettwein, who last week became the chairperson of the SACU Council of Minister, admitted to The Southern Times that there have been delays in implementing the work programme: ”Well yes, I think our ambitions were high than our achievements will show. The work programme that we have had agreed upon basically says that the customs union, which has been a revenue driven organisation most of the time has to re-emphasize real economic integration and shared productive capacity to improve trade within and amongst each other but also to improve SACU’s ability to trade with finished goods with other blocs. This is within the continent, and the world in general.”
Despite the challenges, Schlettwein believes that SACU has made great strides in gaining market access, the world over. SACU has free market access to the EU through the Economic Partnership Agreement. It also has a market access into the US through the AGOA agreement. “Additionally, we have got a market access into Southern America. We got a market access into the African continent through the SADC free trade protocol, which we are part of. That gives us an opportunity to trade globally. What is missing is enhancing productive capacity, enhancing output of finished goods of which we trade. I think that’s where SACU is in within a good opportunity to create cross border value chains within members so that we complement each other without out-competing each other to become export-driven.” [Lesotho finally explains failure to host SACU Summit]
Marek Hanusch: Why South African manufacturing is under pressure – and what to do about it (World Bank)
This dynamic has a few important implications for South Africa. For one, it helps explain why manufacturing exports barely respond to a depreciating real exchange rate: the real exchange rate captures the differential between prices for traded and non-traded goods. South Africa’s long-term depreciation reflects the relative drop in productivity of South Africa’s manufacturing sector. In this case, clearly, a depreciation will not result in higher exports. Our paper also shows that the dynamic disproportionately hurts the poor: the poor consume relatively more manufactured goods (notably food) than services, so if productivity gains are higher in services, the rich can afford more items in their consumption basket at the same price. The poor do not benefit from a similar gain in the goods they tend to buy. South Africa is cheap for the rich and expensive for the poor.
What does this mean for policy, and for the role of the World Bank? Clearly, the answer is that productivity in manufacturing needs to increase. Linking South African manufacturing more closely with global productivity trends requires a further opening of the economy to international trade—this would need to be done very carefully, however, as it can result in large-scale job-losses in the short-term, as South Africa painfully experienced in the 1990s. The World Bank is already working with the South African government to increase global competitiveness, attract foreign direct investment, and foster regional integration. [The author is Senior Economist in the World Bank’s Global Practice for Macroeconomics, Trade and Investment]
AfCFTA will boost Nigeria’s exports by 8% – Osinbajo (Vanguard)
Amidst controversy over the benefits of Nigeria’s signing of the AfCFTA, the Vice President of Nigeria, Professor Yemi Osinbajo, has said that the new trade environment will boost export by 8%. Osibanjo disclosed this at a conference organised by Financial Derivative Company in Lagos yesterday. Represented by Dr Jumoke Oduwole, Senior Special Adviser to the President on Industry, Trade and Investment, he stated: “In spite of the fact that Nigeria just only signed, AfCFTA in terms of readiness, we are not on ground zero. At $35.45bn, Nigeria’s manufacturing value-added, a measure of capacity to produce and export semi and fully finished goods, is about 7 times more than the current average of the top 20 African countries. The concerns raised by some Nigerian stakeholders of the risks of AfCFTA are not without merit. Even prior to the agreement, policies of this administration had identified many of these priorities in the area of competiveness pillar under the economic, recovery and growth plan directly speaks to how infrastructure challenges and how reforms required to deliver an enabling business environment or businesses operating in Nigeria to thrive. And this has been on since 2016.”
Related: Editorial commentary by Lagos-based newspaper, Vanguard: As the frenzy over the delay, the rigmarole and the eventual assent to the African Continental Free Trade Agreement, AfCTA, dies down, we draw attention to the task ahead given its implications to Nigeria’s economy:
Growth slows in Africa for Moroccan banks (Africa Report)
The activity of Morocco’s banks outside the kingdom’s borders is generally decelerating, according to a recent report by the Moroccan central bank. This is due to a slowdown in some countries and international regulations that modify the evaluation of financial results. Last year was a slower year for Moroccan banks in Africa. The three groups with a strong presence on the continent, Attijariwafa Bank followed by BMCE Bank Of Africa and the Banque Centrale Populaire (BCP), had more than Dh284bn ($29.6bn) in assets at the end of 2018, representing an increase of just 1.8% compared to the previous year. After an expansion period – from 2012 to 2015 – the appetite of Moroccan groups has decreased. In 2018, BCP was the only one to establish itself in new territories. It acquired Banque des Mascareignes, located in Mauritius, which itself has a banking subsidiary in Madagascar.
The World Bank has posted an extensive set of Background Notes on São Tomé and Príncipe growth and development policy issues. Profiled reports:
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Where has trade growth come from in São Tomé and Príncipe? The main findings of this note are as follows: Trade remains important for São Tomé and Príncipe, especially imports to satisfy local demand. Total exports have been increasing,both for goods and services. Goods exports, however, remain highly concentrated in cocoa exports to the EU market. Export trends for goods have tended to sustain this dependence, with very little expansion in the extensive margin, and thus with limited diversification of goods exports. This is despite relative comparative advantages in other agricultural products, such as coconuts, dried fruits, and seafood and preferential duty-free and quota-free access into the EU and other developed countries’ markets. Meanwhile, exports of services have increased rapidly, led by travel services. São Tomé and Príncipe exports more services than goods and it has become a net exporter of services. Creating strong (backward) linkages between the tourist industry and the rest of the economy could sustain growth in other industries that, in turn, can support export diversification.
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Is it sustainable to have a large current account deficit and a fixed exchange rate? Sao Tomé and Príncipe pegs its currency, the dobra, to the euro and has both persistent current account deficits and a persistent inflation differential with the Euro Area. In other countries, these characteristics have proved to be unsustainable over time, as rising debt and a worsening trade imbalance leads to the abandonment of the peg. This note examines whether this might be the case in STP, and finds that, despite some vulnerabilities, there does not appear to be an immediate threat to the peg, as the country’s current account deficits seem to be determined not by its trade balance but by its capital balance, which is largely sustained by inflows of aid and remittances. This background note has four sections: [Related Background Notes: Stock take on business environment reform in São Tomé and Príncipe; What is the potential and hindrances for the tourism sector?]
Botswana, Zambia to construct railway across Zambezi at Kazungula (Southern Times)
Zambia and Botswana have signed a $259m agreement to construct a 430-kilometre long railway to link the two countries across the Kazungula Bridge to bolster bilateral trade. The project, it is envisaged, will reduce transit time and transportation costs for both the people and goods traded and will boost trade among other member states in the region. A statement seen by The Southern Times, shows that Zambia Railways Ltd and Botswana Railways’ boards resolved during a meeting in Kasane to facilitate the construction of the lengthy line. The railway project dubbed “Mosetse-Kazungula-Livingstone” will be commissioned by June next year. The actual cost of the project will be determined after undertaking a feasibility study.
Tanzania joins Kenya, Uganda in fall back to old railway (The East African)
As Tanzania continues with the construction of the standard gauge railway, the government has also embarked on revamping the old metre gauge railway network built by colonialists over a century ago. Tanzania’s recent move mirrors Kenya’s and Uganda’s, both of whom have announced plans to revamp their old lines amid uncertainty over the progress of the joint SGR line on the Northern Corridor, due to lack of funding. Tanzania Railway Corporation’s managing director Masanja Kadogosa said the renovation would end years of neglect. Phase one of the programme, which started in early 2018 of the northern railway network from Tanga port to Moshi railway station, covering 353km, is complete. It was fully funded by the government at Tsh5.7 billion ($2.1m). A section of the line connects to Kenya at the junction of Kahe railway station with a branch passing through Taveta border and connecting to the Mombasa-Kampala line at Voi in Taveta hills in Kenya. The line has been out of commission for years from neglect and lack of funding, which resulted in the cargo trains suspending services since 1994. The Minister for Works, Transport and Communication, Isaack Kamwelwe, said the government has started the process of purchasing 22 locomotive engines for passenger wagons, 1,430 cargo wagons and 60 passenger wagons to be used for operations once the first section is complete by December this year.
Kurt Davis: Ethiopia could be the first African country to show China it has bargaining power (Africa Report)
The light railway system in Addis Ababa provides a direct view into the successful and tangible economic diplomacy of China across the African continent. This example of mass public transport is unique in sub-Saharan Africa, with the train and extensive track providing a manifestation of development and growth in this populous East African country.
China begins export of used cars to Nigeria, others (Vanguard)
The Chinese Ministry of Commerce has said that it has commenced the export of used cars to Africa, Asia and Europe, with Nigeria as one of the major destinations for the first batch of 300 cars. It said that the first batch of the 300 exported used cars, with a total value of $2.5m, comprised Land Rover, Toyota, Hyundai, Volkswagen, Trumpchi, King Long, Yutong, Zhongtong and WOHO brands and they are being taken to destinations that include the Lagos port (Nigeria), Sihanoukville Autonomous port (Cambodia), Rangoon Port (Myanmar) and Vorsino and Saint-Petersburg ports (Russia). A statement from China’s Ministry of Commerce said: “Although trade in new cars in China last year almost doubled the 13.82 million used cars figure, trading volume of used cars in developed countries, in comparison, was about two times that of new car sales. China is hoping to key into this yawning advantage lying beyond its borders. It is estimated that used car exports may fetch about 60 billion Yuan for China in export value if the market is fully opened up. It is also expected the trade would generate higher auto parts and maintenance service exports.”
Adam Minter: China will be the world’s used car salesman (Bloomberg)
Hints of that disruption are already emerging in another secondhand marketplace: used clothing. As China has evolved into the world’s largest maker and consumer of apparel, it has also become the world’s biggest disposer of apparel, with estimates ranging as high 26 million tons tossed annually. (The US threw out around 16 million tons of clothing in 2015, the last date for which data is available). Data on China’s used-clothing exports are thin, but in 2015 it officially exported $218.2m in used apparel, while the US shipped $575.5m. Within the industry, it’s widely acknowledged that China is the fastest-growing source of used clothes globally. Traders in West Africa claim that the recent surge in Chinese clothing imports has undercut the market for new and used clothes.
Afshin Molavi: Africa and the Middle East: keys to prosperity (Asia Times)
Here is where cities like Dubai and Abu Dhabi, and countries like Saudi Arabia, Turkey, Egypt and Morocco, come in. One of the defining features of our era today is the massive growth in South-South trade and investment. Countries across the “global South” are no longer waiting for the West to come to their rescue with aid or to invest in their markets; instead, they are increasingly also engaged with other emerging markets. Dubai has become something of a Miami for Africa, a major hub for African business, trade, finance and tourism, while UAE entities have become major investors across the continent. Companies like the Abu Dhabi-based Etisalat and Dubai-based Emirates have become household names across the continent, and are major trade and connectivity enablers; the Dubai-based ports operator, DP World, runs eight marine and inland terminals on the African continent. There are an extraordinary 12,000 African businesses registered with the Chamber of Commerce in Dubai. All of this is positive, but it is not one-way. [The author is senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies]
Today’s Quick Links: CNBC interviews Visa’s Suzan Kereere on the role of digital payments in boosting intra-African trade Akufo-Addo to US House Speaker: Ghana wants more progressive trade relations with US Madagascar: IMF completes Fifth Review of Extended Credit Facility Arrangement Flutterwave, Alipay partner on payments between Africa and China Ethiopian coffee exporters eye young Chinese market World Bank: The basics of food traceability |
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Diarise: The launch of UNCTAD’s Digital Economy Report 2019 (4 August)
Featured infographic, @martinslabber: “Good news, as South Africa’s total trade with Germany increases to R229bn over the 12 months to the end of May 2019. Our exports now above R100bn per annum for the first time in five years (and I imagine longer than that).”
Nigeria and the AfCFTA: selected updates
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Buhari establishes committee for implementation of AfCFTA. President Muhammadu Buhari has approved the establishment of a National Action Committee for the implementation of the AfCFTA Agreement, which he signed on behalf of Nigeria at the 12th Extraordinary Session of the AU Heads of State on 7 July in Niamey. The National Action Committee will be comprised of representatives of ministries and agencies with competent and relevant jurisdiction, and selected stakeholder groups from the private sector and the civil society to coordinate the implementation of all the AfCFTA readiness interventions. On the list of the President’s approval are: fast-tracking domestic work, for the implementation of AfCFTA readiness interventions to enhance productivity, competitiveness and facilitate trade which include policies to grow local capacity to produce and export goods and services; infrastructure projects, trade facilitation, ease of doing business and trade rules enforcement initiatives. And support, actively, Micro- Small and Medium Enterprises. The National Action Committee will upon inauguration, undertake a process of engagement with stakeholders to sensitize them on the opportunities and challenges of the AfCFTA, with preparedness plans for the Nigerian economy.
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Nigeria will lose out on AfCFTA if issues around ports, taxes remain unresolved – MAN DG. Segun Ajayi-Kadir is the director general of the Manufacturers Association of Nigeria. In this interview with Odinaka Anudu, Business Day’s industry editor, he speaks on why the association recently changed its earlier position on the AfCFTA and how the country should position itself to benefit from it. Extract: There is a moratorium for us to get our acts right, and it could be anything between five and 10 years. I believe strongly that if government is willing, and this president has told us that he is willing, we can mitigate those risks and manage the process robustly and become net gainers of the free trade. The only thing is that if we carry on as business as usual, the Nigerian economy will suffer badly.”
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Nigeria traders to Akufo-Addo: Protect our members after winning AfCFTA. The leadership of the National Association of Nigerian Traders (NANTS) has appealed to President Akufo-Addo to guide against what they describe as needless humiliation of Nigerians citizens sojourning in Ghana. NANTS notes that the hosting right given to Ghana is indeed a victory for the entire people of ECOWAS, contrary to happenings to their members, after Ghana’s successful hosting of the AfCFTA Secretariat. “We believe that in order to guide against needless humiliation of Ghana’s integrity herein secured by the hosting of AfCFTA Secretariat, your Government will need to weigh down on politicians as well as miscreants who masquerade as leaders and fan the embers of xenophobic attacks against citizens of other nationals trading in Ghana”, NANTS president, Ken Ukaoha, said.
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Standards Organisation of Nigeria set for full implementation. The Standards Organisation of Nigeria said it is prepared for the imminent implications of Nigeria’s signature to the AfCFTA, recently assented to by President Muhammadu Buhari. The organisation has been working in close collaboration with other Ministries, Agencies and Departments of government as well as development partners to develop the National Quality Infrastructure (NQI) to cater for the free movement of goods and services in Africa. These assertions were made by the Director General, Osita Aboloma, at a media interview on the AfCFTA in Abuja. He enumerated some of the NQI project already delivered by SON to include a National Metrology Institute nearing completion in Enugu, international accreditation of SON laboratories, its training and management systems certification services as well as ongoing automation of all services to stakeholders. These he said, are aimed at promoting the ease of doing business in and with Nigeria. Nigeria, through SON, holds the Chairmanship and Secretary of many of the Technical Harmonization Committees of ARSO, in addition to promoting the participation of many stakeholders in Nigeria in the standards harmonization process, the SON helmsman disclosed. Aboloma acknowledged the imminent challenge of combating the possible dumping of substandard and life-endangering products through the Seaports since the agency is not present to carry out quality verification of products on arrival.
Ghana: pdf Mid-year fiscal policy review of the 2019 Budget Statement and Economic Policy (1.72 MB) (GoG)
Selected extracts: In view of the various reforms and implementation of the government’s priority programmes we believe that Ghana is well positioned to take advantage of the Free Trade Area. As part of measures to ensure that Ghana derives maximum benefit from the AfCFTA, a National Strategy and Action Plan will be developed to further boost industrial production and exports. Government will also undertake the needed institutional, legal and regulatory reforms to facilitate the new trade regime.
The industry sector remained the best performing sector for the third year in a row, growing at 10.6% in 2018, despite the considerable slowdown of the petroleum and electricity sub-sectors. The petroleum sub-sector recorded a growth of just 3.6% in 2018 compared to 80.4% in 2017, while the electricity sub-sector grew by 5.5% in 2018 compared to 19.4% in 2017. The agriculture sector recorded a growth outturn of 4.8% in 2018 compared to a target of 6.8% and 2017 outturn of 6.1%. The less than expected performance of the agriculture sector was attributed to the slower growth of the cocoa sub-sector and the continuous decline of the fishing sub-sector. That notwithstanding, growth in crops other than cocoa posted an annual growth of 6.1% partly reflecting progress on government intervention in the sector including the Planting for Food and Jobs Programme which commenced in 2017. The services sector recorded a growth of 2.7% in 2018 against a target of 4.9% and the 2017 outturn of 3.3%. The services sector remained the dominant sector in 2018, increasing its share marginally from 46.0% of GDP in 2017 to 46.3%. The industry sector increased its share of GDP from 32.7% in 2017 to 34.0% in 2018, while the share of the agriculture sector declined from 21.2% in 2017 to 19.7% in 2018.
South Korea targets Africa infrastructure deals with Nairobi office (Business Daily)
The Korea Overseas Infrastructure and Urban Development Corporation (KIND) will use its new Nairobi office to push for a piece of the countries mega infrastructure deals currently dominated by China and use the country as a stepping stone to the rest of Africa. Kenya now becomes the Korean corporation’s fourth overseas office after Indonesia, Vietnam and Uzbekistan. KIND Executive Vice President Han Kyu Lim said the organisation which supports Korean companies for project planning, feasibility studies, project information and project bankability will soon be a major player in the continent through financed projects and Public-Private Partnership business models. “We are looking into four major deals this year and Kenya is both strategic and still full of business opportunities considering the infrastructure gaps that exists within the country and its neighbours. Our PPP models means we are part of the investment and this is going to be a game changer,” Mr Lim said. The Korean firm also signed a memorandum of understanding with the Eastern and Southern African Trade and Development Bank to facilitate financing of the infrastructure deals that will come from the region as its settles in Nairobi.
India: President Ram Nath Kovind, Defence minister Rajnath Singh to visit African nations this week (Mint)
India is stepping up the intensification of its outreach to Africa with two high-level visits to the resource-rich continent on Sunday. President Ram Nath Kovind will travel to three countries in West Africa, Benin, Gambia and Guinea, the highest-level visit from India ever to the three nations. The second will be a three-day visit starting on Sunday by defence minister Rajnath Singh to Mozambique, seen as a maritime neighbour of India across the Indian Ocean. Kovind’s week-long visit is seen as one that will lay the foundations of India’s engagement with a part of Africa that hasn’t figured very high on India’s agenda, partly because the countries in the region were part of Francophone Africa. [Related: India, Mozambique sign two MoUs to further strengthen defence co-operation]
Refining Uganda’s draft Urban Strategy (ECA)
The ECA and Uganda’s National Planning Authority are this week hosting a workshop to review the country’s draft Urban Strategy and its associated Ten-Year Perspective Plan. The workshop (1-2 August) will allow experts from the two institutions to collect feedback and inputs from government officials and other stakeholders before the finalization of the strategy. Cities account for close to 70% of Uganda’s non-agricultural GDP, with the informal sector being a significant source of employment. Thus, urbanization is both a driver of growth and facilitator of development in Uganda. Speaking ahead of the workshop, Ms Edlam Yemeru Abera, Chief of the ECA’s Urbanization and Development Section, said successful planning and managing the ongoing process of urbanization is a precondition for Uganda to become an upper middle-income country, as part of achieving its Vision 2040 agenda.
Judd Devermont: How Africa is leaving its rural mantle behind (Business Day)
Africa is rural. Or that’s what senior Western officials envision when they talk about the continent. America’s top diplomat for the region, Tibor Nagy, recently said that Africa is “by and large an agricultural society.” He isn’t alone: Germany’s recent Marshall Plan with Africa insists that “rural areas will determine Africa’s future.” This is wrong. Dangerously wrong. Africa is increasingly urbanised, and its future will be shaped not in sleepy remote spaces but in the dense, vibrant clusters of Lagos, Addis Ababa and Kinshasa. Big cities are becoming the engine of the continent, with huge implications for future energy needs, security, governance and public services - as well as rising risks if urban growth is poorly managed. How can the US and its allies change their approaches to face the challenge Africa’s burgeoning urban areas will pose?
Here are four good ways to start: First, US policy and investments should be shifted heavily toward major urban clusters, rather than to countries as a whole. USAID could programme more funds to tackle urban development, while the Millennium Challenge’s city programme in Zambia could be replicated with subnational compacts across the continent. [The author is the director of the Africa programme at the Centre for Strategic and International Studies]
PAP backs SADC Parliament bid (The Herald)
The Pan African Parliament has thrown its weight behind plans to establish a SADC Regional Parliament, which will, among other things, enact robust legislation to combat climate change in the wake of recurring natural disasters such as Cyclone Idai that swept across Southern Africa early this year. Speaking during the official opening ceremony of the 45th Plenary Assembly of the SADC Parliamentary Forum in Maputo last Monday, PAP vice president Chief Fortune Charumbira said the SADC Regional Parliament would bring Southern Africa into the league of other regional blocs, such as ECOWAS, which have such institutions. “Recent benchmarking visits, including one to the PAP, have keenly been followed by the PAP and be assured that the PAP is in support of a SADC Regional Parliament,” he said. “If the EALA and ECOWAS have parliaments, why not SADC? The Bureau of the PAP is privileged to interact with Heads of State and Government at various forums. I assure you that we will push your agenda until we realise the dream of a SADC Parliament. It will not, and never die a pipedream. Be assured. A transformed SADC PF will work better towards addressing climate change through legislation for the region.”
Speaker of SA’s Parliament, Ms Thandi Modise: “Our Parliament, like all Parliaments, is expected to be part of the global community. We influence and are influenced by others we interact with internationally. We need to take the South African participation at both the SADC-PF and the PAP seriously. We have the responsibility to ensure that the host agreement for PAP is concluded and honoured. We fail the continent if we do not ensure that the PAP delivers as excepted and that its administration is up to scratch. The SADC-PF is set to finally become the regional Parliament. This is important as we need to tighten regional cooperation in the same way as West Africa and East Africa have managed to do.”
East African leaders must anchor durable integration (The East African)
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Is the AfCFTA practical?: a CNBC interview with Rudi Steinbach (World Bank Africa specialist)
Regional growth spillovers in Sub-Saharan Africa (IMF)
This paper attempts to shed light on this question and fill a gap in the literature that has largely overlooked integration and its implications within sub-Saharan Africa. Namely, we ask how has intraregional integration evolved in sub-Saharan Africa in recent decades and how has this affected growth spillovers on the continent? We focus on trade linkages, which are the strongest in the region. We first present a novel set of stylized facts that document that intraregional integration in sub-Saharan Africa is significantly greater than is widely believed and is indeed inline or greater than in developing and emerging economies in other regions. With this, we identify the countries in sub-Saharan Africa that are more likely to generate regional growth spillovers through trade, as well as the countries that are more likely to suffer from growth spillovers from their regional trading partners. We then estimate and quantify growth spillovers between trading partners in sub-Saharan Africa, in both the short run and in the long run. [IMF Working Paper: pdf Regional Growth Spillovers in Sub-Saharan Africa (567 KB) ]
Extract: The value of the regional imports purchased by the top 10 regional importers (those listed in Figure 6) represents significant shares of the economies of the exporting countries, setting the stage for potentially large spillovers. For instance, South African imports from Swaziland, Lesotho, Zimbabwe and Mozambique represent between 4 and 11% of these economies’ GDP. Zimbabwe’s total demand for goods from Zambia, Malawi and Botswana constitutes between 1 and 4% of these countries’ GDP. Other countries also import in amounts that are non-negligible shares of their neighbors’ GDP, even though they do not constitute substantial shares of total sub-Saharan African intra-regional imports. This is the case of Nigeria, Mali, Ghana, and Burkina Faso, who’s imports amount to more than 1% of GDP of their sub-regional trading partners (see Figure 7). In these cases, any reduction in import demand, caused by an economic downturn in the importing country, could have significant consequences for GDP growth in their trading partners.
From the conclusion: Motivating our econometric analysis is the increasing trend towards regional integration in sub-Saharan Africa that we have documented, a novel result that is contrary to the common perception of countries in the continent as silos who are integrated with the rest of the world but not with each other. Indeed, trade integration in sub-Saharan Africa is now at comparable levels with developing and emerging market economies in other regions. In this vein, we have identified the countries that are potentially the main sources and destinations for growth spillovers via trade linkages, based on their intraregional trade networks. The rate at which these countries will continue to growth will therefore have implications for their major trading partners, as our econometric analysis implies. Supported by appropriate policies, the steady increase in trade integration experienced in sub-Saharan Africa has the potential to be further deepened. [The authors: Francisco Arizala, Matthieu Bellon, Margaux MacDonald; The IMF’s new report, Internal trade in Canada: case for liberalization]
Policy and regulatory issues with digital businesses (World Bank)
This policy paper lays out the key policy and regulatory issues around digital businesses. Competition laws need to be revisited to address the winner-take-all tendency of digital platform businesses. Tax systems should also be updated to close the loopholes available to digital platform businesses so that they pay their fair share to society. This paper also provides the first analysis of the World Bank’s Digital Business Indicators initiative, which collects information on the existence and quality of regulations in broadband connectivity, digital payment, data privacy and security, as well as logistics, in 21 pilot countries. Extracts (pdf): Concerns about anticompetition arise when digital platforms exhibit monopolistic tendencies. Alibaba’s Taobao.com Marketplace and Tmall now account for almost two-thirds of online shopping in China. Flipkart is the Indian e-commerce fortress with a domestic market share of 60%. Grab in Malaysia merged with Uber’s Southeast Asia business, aiming for a dominant position in the regional ride-hailing business. Although dominance alone may not warrant regulatory sanctions, emerging monopolistic behaviors are calling for government intervention. For example, JD.com, China’s second-largest online retailer, is accused of forcing online merchants to slash product prices in preparation for platform-wide promotions. Passengers in Singapore started complaining about higher fares after the Uber-Grab merger deal. The most common way of regulating cross-border transfers of personal data among the countries studied by the Digital Business Indicators project is the adequacy approach. Ten of the 21 countries studied allow cross-border data transfers subject to conditions that vary by country. The Personal Data Protection Agency in Armenia has approved a list of countries to which data transfers are allowed. In Tunisia, the existence of security measures to ensure data protection in the destination country is a key condition for approval of the data protection agency granting the transfer. [Note: The Sub-Saharan Africa countries covered in the Digital Business Indicators initiative are Burkina Faso, Kenya, Senegal, Tanzania]
Communications Authority of Kenya: The Digital Economy Blueprint. “The Blueprint is a framework to improve Kenya’s and Africa’s ability to leapfrog economic growth. The document is hinged on five pillars: Digital Government; Digital Business; Infrastructure; Innovation-Driven Entrepreneurship and Digital Skills and Values. The Blueprint also highlights the cross cutting issues that need to be considered for the success of a digital economy.”
Foreign private investment in Low-Income Countries: more important than you think (CGD)
In a world of stagnating public aid, limited fiscal space, and rising public debt in low-income countries, can they realistically expect to rely more on private finance from foreigners? What does the evidence suggest? Our new paper looks at recent cross-border private capital inflows to LICs. You might be surprised at what has happened since the global financial crisis. For individual LICs, external private capital is an important and growing source of finance (Figure 1). The global financial crisis has not had a lasting, dampening effect on private inflows to LICs - quite the opposite. The median ratio of inflows/GDP reached new highs - over 6% from 2011 on - with the exception of 2015 and 2016 when the downturn in global commodity prices and tightening US monetary policy pushed short-term capital inflows lower. Foreign direct investment - which makes up most of the inflows to LICs - has been stable and resilient throughout the post-crisis period. In contrast to higher median private capital inflows and tax revenue as a share of GDP, median foreign development aid has dropped by almost half as a share of GDP since 2006. We also see an interesting shift in the sources of FDI over a relatively short period of time. China more than doubled its stock of FDI in Africa between 2011 and 2016 (Figure 5) - and the amount is now closing in on that of large traditional direct investors like the US, UK, and France. Much attention has been paid to China’s role as a creditor to Africa; its role as a rapidly growing direct investor has received less attention. [The authors: Nancy Lee, Asad Sami]
Indonesia-Africa Infrastructure Dialogue (20-21 August, Bali): ministerial briefing
Minister Marsudi expressed her hope that the Indonesia-Africa Infrastructure Dialogue would be attended by around 700 participants from 53 African countries and Indonesia. Like the 2018 Indonesia-Africa Forum, this year’s IAID is also expected to produce a number of concrete business deals with Africa. Minister Marsudi also emphasized three strategies to enhance the cooperation with Africa. First, it is important to improve the trade infrastructure to reduce the trade rates with Africa, through a Preferential Trade Agreement with a number of African countries and its entities. Second, it is necessary to strengthen the African diplomacy infrastructure. Third, it is also vital to increase business activities between Africa and Indonesia, among others by organizing and utilizing the four main events at the IAID 2019 forum in Bali, namely the signing of business agreements, PTA discussions, panel discussions, and business exhibitions.
Kenya urges East African countries to implement road overloading law (Business Daily)
Kenya has challenged its East African neighbours to fully implement regional road overloading law passed in December 2015. The Kenya National Highway Authority (KeNHA) said seamlessly implementing the East Africa Community Vehicle Load Control Act, 2016, will protect roads from overloaded trucks. KeNHA Highway Planning and Design director Samuel Omer said Kenya is way ahead in implementing the law but some EAC member states have been reluctant to enforce it along the Regional Trunk Road Network. Mr Omer said Kenya has positioned itself to handle more transporters with the introduction of virtual weigh stations in its 10 weighbridges along the Northern Corridor. At the stations, trucks are weighed while in motion, meaning that little time is wasted in conducting inspection.
South Africa: Nedbank’s billion-rand debt financing deal with Kenya’s Centum (Moneyweb)
Looking to the rest of Africa to grow its property finance loan book, Nedbank Corporate and Investment Banking has provided financing of more than R1bn to Kenya’s Centum Real Estate, part of Centum Investment Company plc. Nedbank CIB’s property finance division – the largest commercial real estate financier in South Africa, reportedly with a 40% share of the market – said in a statement that the deal is linked to Centum’s Two Rivers mega-development in Nairobi. Gerhard Zeelie, Nedbank CIB’s Africa divisional executive for property finance, notes that the deal with Centum is part of Nedbank’s recent move to grow its property finance business northwards, beyond South Africa. “The focus is on Ghana, Nigeria, Uganda, Kenya, Tanzania, Mozambique and Zambia. We are busy working on a number of transactions with a pipeline in excess of $300m [R4.5bn] and are also keeping a keen eye on opportunities in the Francophone countries in West Africa.”
Sustainability and voluntary certification in the Rwandan coffee sector: Developing an action plan to address opportunities and challenges (IISD)
Rwanda’s coffee sector accounts for 24% of domestic agricultural production. About 400,000 small-scale farmers (representing 80% of the country’s farmers) produce an average of 267,000 to 420,000 bags per year, which accounts for 16,000 to 21,000 metric tons of Rwanda’s Arabica coffee annually, representing 0.2% of the world’s coffee exports and ranking 40th globally. Coffee destined for the export market accounts for 95% of Rwandan-produced coffee, while the remaining 5% is sold on the domestic market. Currently, at least 35% of coffee produced globally is certified or verified under voluntary standards. Over the years 2010–2016, certified/verified coffee production increased at a 24% compound annual growth rate. In the Rwandan coffee sector, specifically, there are at least 24 private standards addressing sustainability. In 2016, it was estimated that 32.3% of Rwandan coffee was standards-compliant. The needs assessments and workshop activities (February 2019) expanded on these challenges and provided related recommendations, which this document describes in detail (pdf). [Bitange Ndemo: The future of food regulation]
World Resources Report: Creating a Sustainable Food Future (World Bank)
With the world’s population expected to reach nearly 10 billion by 2050, a major new report shows the global food system must undergo urgent change to ensure there is adequate food for everyone without destroying the planet. The World Resources Report: Creating a Sustainable Food Future reveals that meeting this challenge will require closing three gaps: a 56% “food gap” between what was produced in 2010 and food that will be needed in 2050; a nearly 600 million-hectare “land gap” (an area nearly twice the size of India) between global agricultural land area in 2010 and expected agricultural expansion by 2050; and an 11-gigaton “greenhouse gas mitigation gap” between expected emissions from agriculture in 2050 and the level needed to meet the Paris Agreement. [Niger to stop importing rice by 2023]
The World Intellectual Property Organization has named Switzerland as the world’s most innovative country. Following Switzerland in the rankings are Sweden, the US, the Netherlands and the UK. India has risen most in the rankings since 2018, jumping five places to 52nd most innovative country. The annual Index, which has been published for the last 12 years by WIPO, and a number of partners, is designed to help policy makers better understand innovation activity, which WIPO describes as a “main driver of economic and social development”. Overall, this year’s Index finds that, despite the global economic slowdown, innovation is “blossoming”, particularly in Asia, but trade disruptions and protectionism are putting this at risk. It also notes that planning for innovation is critical for success. [Downloads, rankings here and here]
Today’s Quick Links: Study shows armed groups’ strong capacity to move weapons across borders in Africa Namibia-Zimbabwe Joint Commission of Cooperation: Namibia, Zimbabwe urged to join hands on investments COMESA workshop: Africa urged to establish climate change early warning systems Reuters special report: The wildcat goldminers doomed by their toxic trade Trade and foreign aid: Will Boris Johnson bring an end to DfID? Kenya: South Africa’s Game opens doors in Kisumu World Bank blog: How mobile text reminders earned Madagascar a 32,900% ROI in collecting unpaid taxes Regional workshop on international merchandise trade statistics: implementing IMTS 2010 concepts and definitions (24-28 June, Johannesburg) Hanningtone Gaya: Kenya-Somalia maritime dispute quite unfortunate |
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Regional growth spillovers in sub-Saharan Africa
After close to two decades of strong economic activity, growth in sub-Saharan Africa (SSA) decelerated markedly from 2015-16, to its lowest level in more than 20 years at 1.4 percent in 2016.
Nonetheless, this average mask substantial heterogeneity across the region. While the largest economies (i.e., Nigeria and South Africa) experienced negative or very low growth, a third of countries in the region continued to grow at 5 percent or more during the period. While these trends have been well documented, little is known about how they are interlinked.
This paper attempts to shed light on this question and fill a gap in the literature that has largely overlooked integration and its implications within sub-Saharan Africa. Namely, the authors ask how has intraregional integration evolved in sub-Saharan Africa in recent decades and how has this affected growth spillovers on the continent? They focus on trade linkages, which are the strongest in the region (Arizala et al., 2018). They first present a novel set of stylized facts that document that intraregional integration in sub-Saharan Africa is significantly greater than is widely believed and is indeed inline or greater than in developing and emerging economies in other regions. With this, they identify the countries in sub-Saharan Africa that are more likely to generate regional growth spillovers through trade, as well as the countries that are more likely to suffer from growth spillovers from their regional trading partners. We then estimate and quantify growth spillovers between trading partners in subSaharan Africa, in both the short run and in the long run.
The growth spillover literature is broadly based on the idea that domestic growth in any country is determined by three main drivers: domestic shocks, global shocks, and shocks to a foreign country or region(s) that are transmitted through various channels to the domestic country. While evidence on the comparative importance of each driver varies, it is widely accepted that growth co-moves across countries in the long term in countries who have large bi-lateral trade flows or coordinated fiscal policy, and especially in advanced economies. The presence of growth spillovers in the shorter-term within and between low income and emerging market countries has also been documented. And others bridge the gap between these literatures and show that shocks to long-term growth (trend growth) have larger cross-country spillovers than shocks to short-term growth (cyclical growth).
Yet, whether longer term growth spillovers exist within groups of low-income countries, particularly in sub-Saharan Africa, is less evident. Indeed, it could be argued, a priori, that given the nature of their trade relationships and the structure of their economies, these countries may experience growth spillovers differently than advanced or emerging countries. Structural barriers to regional spillovers in these countries may include their position in global value chains, the absence of widespread multinationals, their reliance on imports for most consumption goods and their historically limited regional integration.
Intraregional Trade Linkages are Steadily Gaining Strength
Though often thought of as silos that are linked to the rest of the world but not each other, sub-Saharan African economies have become much more intertwined in the last 35 years. This trend is particularly well illustrated by the increase in regional trade as a share of total trade, which represented 6 percent in 1980 before taking-off in the early 1990s, and eventually reaching 20 percent in 2016. This increase in regional trade was significant relative to the size of sub-Saharan African economies, and it was faster for small countries in the region, as reflected by the faster growth in the simple average level of trade integration.
Tighter regional trade integration, which coincided with a rise in global integration, is the result of both global developments and of a strengthening of institutional and macroeconomic conditions in the region. The rise in trade with the rest of the World was driven in part by a two-fold increase in the relative price of commodity exports over the period 1995-2013 and in part by a rise of two and a half times in volume of exported commodities (Allard and others, 2016). In addition to these supporting conditions, countries in sub-Saharan Africa substantially strengthened their macroeconomic policies and political and economic institutions over the last 20 years, and experienced abating of internal and external conflicts. These elements all contributed to improving the business environment, which lead to faster growth than in the rest of the World and thereby supported the deepening of regional trade (IMF, 2015). Furthermore, the establishment of regional trade agreements in different subregions also contributed to regional and bilateral reductions in tariffs which further supported regional trade integration (ODI, 2010).
The average level of regional trade integration in sub-Saharan Africa, and hence the potential for regional spillovers, is broadly in line with other developing and emerging market economies in other regions. Measured as a share of total exports, sub-Saharan Africa exhibits the highest share of intra-regional trade integration among emerging and developing economics, followed by Middle-East and North Africa and emerging and developing Asia. Relative to the size of the economy, sub-Saharan Africa is in the middle of the pack.
Many sub-Saharan Africa countries are highly integrated to other countries in the region, as measured by intra-regional trade, and integration is particularly strong within sub-regions. For example, in small and very open economies in the SACU and the Economic Community of West African States (ECOWAS), like Swaziland, Lesotho, Togo and The Gambia, intraregional exports represent more than 65 percent of these countries’ total global exports (IMF, 2012). In many countries intra-regional exports are also large relative to the size of the economy. This is the case for certain countries in the Southern African Development Community (SADC) (Zimbabwe, Botswana, Lesotho, and Namibia) where intra-regional exports represent about 20 percent of GDP, and some Western Africa Economic and Monetary Union (WAEMU) countries (Côte d’Ivoire, Guinea, Senegal), where they constitute close to 10 percent of GDP.
One can also see a concentration of integration from the opposite perspective: demand for regional exports is concentrated in very few countries. Ten sub-Saharan countries represent 65 percent of total regional demand for intra-regional exports, with South Africa, Botswana and Namibia accounting for the largest shares of total regional demand, and South Africa alone importing 15 percent of total regional exports. When countries trade significantly among themselves an economic deceleration in any one country has the potential to weaken demand for intra-regional exports and may constitute a source of wider negative spillovers.
The value of the regional imports purchased by the top 10 regional importers represents significant shares of the economies of the exporting countries, setting the stage for potentially large spillovers. For instance, South African imports from Swaziland, Lesotho, Zimbabwe and Mozambique represent between 4 and 11 percent of these economies’ GDP. Zimbabwe’s total demand for goods from Zambia, Malawi and Botswana constitutes between 1 and 4 percent of these countries’ GDP. Other countries also import in amounts that are non-negligible shares of their neighbors’ GDP, even though they do not constitute substantial shares of total sub-Saharan African intra-regional imports. This is the case of Nigeria, Mali, Ghana, and Burkina Faso, who’s imports amount to more than 1 percent of GDP of their sub-regional trading partners. In these cases, any reduction in import demand, caused by an economic downturn in the importing country, could have significant consequences for GDP growth in their trading partners.
The authors estimate gravity equations to illustrate and quantify the above stylized facts on regional integration (see Annex I). As expected, empirical estimates suggest that trade in the region is larger between closer countries (culturally and geographically) and that regional trade growth over the last four decades was supported by favorable macro-conditions (proxied by GDP per capita and population growth). The authors modify the standard equation to perform cross-region comparisons, and find that distance is a greater barrier to trade in sub-Saharan Africa, possibly because of the well-known infrastructure gaps in the region. Results also show that sub-regional trade agreements played a major role in strengthening bilateral trade in the region, in particular in the cases of the SADC and the EAC.
This Working Paper was prepared by Francisco Arizala, Matthieu Bellon and Margaux MacDonald.
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The future of work in Africa: Harnessing the potential of digital technologies for all (World Bank)
This companion report to the World Development Report 2019: The Changing Nature of Work addresses the key themes of creating productive jobs and addressing the needs of those left behind. It builds on and contextualizes some of WDR 2019’s main messages to key specificities of the sub-Saharan Africa region. The report is structured around three main issues that will shape the future of work in Africa: the human capital needs of a young and rapidly growing largely low-skilled labor force, the prevalence of informal workers and enterprises and the social protection policies to mitigate risks resulting from disruptions to labor markets. Extracts (pdf):
3D printing can have a substantial impact on trade in services. Service agreements have become more important because intermediary goods and goods-related activities are now being supplemented or even replaced by services. 3D printers build physical objects from 3D computer-aided design data and replace certain transportation of goods by transmission of data. At the level of the General Agreement on Trade in Services, this may result in debates about what constitutes a good and a service in WTO legislation and, in turn, some WTO rules may need to be revisited. 3D printing can also substitute for trade in services (through the payment of license fees and royalties for designs) for the goods trade and provides opportunities for countries with restrictive policies toward trade in. Service trade regulations in Sub-Saharan Africa are no more restrictive than in other regions, measured by the World Bank’s Service Trade Restrictiveness Index, but existing de jure restrictions are often compounded by many additional de facto barriers and/or the non-implementation of existing agreements. Although some African regional economic communities have agreed to liberalize services, negotiations in this area have moved at a glacial pace, and services are not currently part of the AfCFTA framework. In summary, the potential effects of new technologies on global production networks and employment remain speculative; for now, the available information provides ambiguous results.
The structural transformation following AfCFTA will have implications for the future of work in the region. Increased trade can reduce overall poverty. Between 1993 and 2008, the change in real income of the bottom 20% of the population in developing countries was strongly correlated with a change in trade openness. Still, the reallocation of factors of production within and across sectors and countries will impose adjustment costs. In the short run, there will be job dislocations across firms, sectors, and borders, as a reduction in trade barriers increases the substitutability of labor within and between countries. Although there are expected economy-wide increases in investments and jobs, they are likely to divert to more efficient locations. Those communities with preponderant employment in declining industries are likely to see increased levels of poverty, absent supportive public policies. In subsequent phases of the integration, ease of labor mobility may affect migration. [The authors: Jieun Choi, Mark Dutz, Zainab Usman]
Review of ISDS decisions in 2018: selected IIA reform issues (pdf, UNCTAD)
In 2018, arbitral tribunals rendered at least 50 substantive decisions in investor–State dispute settlement cases. Most decisions were based on old-generation international investment agreements signed in the 1990s or earlier. Twenty-nine of the ISDS decisions, including five ICSID annulment decisions, were publicly available as of January 2019. Decisions rendered in 2018 touched upon many IIA reform topics, including: preserving the right to regulate (e.g. exclusions from treaty scope, interpretation of fair and equitable treatment, expropriation and umbrella clauses); improving investment dispute settlement (e.g. limitation periods for bringing ISDS claims, local litigation requirements as a prerequisite to arbitration, counterclaims); ensuring investor responsibility (e.g. legality of investment under host State law). Decisions from 2018 show some important developments: UNCTAD’s next High-level IIA Conference, to be held in November 2019, will offer an opportunity to take stock of IIA reform progress and lessons learned. [Companion analysis: Case-by-case tables on key issues addressed by ISDS tribunals in 2018]
South African court blocks Zambian plan to sell Vedanta copper mine (Reuters)
South Africa’s High Court, on Tuesday, ordered the Zambian government to halt the sale of Vedanta Resources’s majority-owned Konkola Copper Mines until a final decision is made through arbitration. Vedanta has been locked in a dispute with the Zambian government since May when Lusaka appointed a liquidator to run KCM, which is 20% owned by Zambia’s state mining company ZCCM and the rest by Vedanta. Zambia accused KCM of breaching the terms of its licence. The dispute in Africa’s second-largest copper producer has intensified concerns among international miners about resource nationalism in Africa. Mumbai-listed Vedanta denies that KCM has broken the terms of its licence and says it will defend its assets in the southern African country.
South African ruling has no effect on the current liquidation process of KCM - Musukwa (Lusaka Times)
Minister of Mines and Mineral Resources Richard Musukwa says the ruling handed by the South Gauteng High Court, granting Vedanta Resources an urgent interim interdict against Konkola Copper Mines minority shareholder, ZCCM Investment Holdings Plc, has no bearing on the current position of government on the liquidation process of KCM. Speaking to the media, after the ruling and flanked by Minister of Justice Given Lubinda and the Attorney General Likando Kalaluka, Mr Musukwa said that there foreign judgments are not enforceable in Zambia until they have undergone a rigorous process and that the judgement has no effect on the processes going on in Zambia about the liquidation of KCM. [UoZ’s Dr Sishuwa Sishuwa: Vedanta must go, but the government is messing up, will pay heavily]
Mozambique: Govt unhappy about South Africa, Zimbabwe, Malawi trade restrictions (allAfrica)
Mozambique’s Minister of Industry and Commerce Ragendra de Sousa has accused South Africa, Malawi and Zimbabwe of creating administrative difficulties that have prevented Mozambican companies from exporting their products under the SADC Protocol, Verdade reports. According to the report, in 2016 a Mozambican brand of soft drinks under the Trade Protocol of the Southern African Countries Communities, began exporting their product to Malawi where, thanks to the low price, managed to position itself as an alternative to soft drinks produced in the neighboring country. In 2017 MBS lifted the ban after the drink’s manufacturer Yaafico Industries complied with the bureau’s requirement on acid levels - but minister Sousa says the ban was lifted after the company proved their drink was safe to drink, and after the Mozambican government intervened. Alluding to the two other neighbouring countries, Sousa said pasta, tubes and even domestic beer are facing “gimmicks” to enter South Africa and Zimbabwe, revealing that he directly told President Emmerson Mnangagwa about the bad practices in Zimbabwe. The minister says Mozambique would use its geographical location as a “weapon”.
Ghana: 1st half export receipts hit $8bn (Modern Ghana)
Export receipt for the first half of this year remained robust at nearly $8.0 billion, the Bank of Ghana has said (pdf). Together with a relatively lower import bill, the receipts positively impacted on the trade account. Provisional trade balance for the first half of this year recorded a surplus of $1.9bn (2.8% of GDP), compared to a surplus of $1.3bn (1.9% of GDP) in the first half of 2018. The trade surplus was partly offset by net outflows in the services and income accounts, leading to a marginal current account surplus of $39m (0.1% of GDP) in the first half of 2019, compared to a deficit of $409m (0.6% of GDP) in the same period last year. Dr Ernest Addison, Governor of BoG, said the current account surplus, though marginal, was the first in recent history.
West Africa piracy a threat to AfCFTA plans, warns Ghanaian defence minister (Business Day)
Piracy off the coast of West Africa threatens plans to bolster regional trade, Ghana’s defence minister warned Wednesday, as navy chiefs discussed efforts to secure the troubled waters. “The sea is the super highway for global trade and the AfCFTA agreement cannot be successful without a secured maritime domain.” The two-day gathering in the Ghanaian capital — which included a delegation from the US navy — also focused on illegal fishing, oil thefts, and human and drug trafficking. “Today piracy and armed robbery in the Gulf of Guinea continue to pose a significant threat to regional and international shipping,” Ghana’s navy head Seth Amoama said. “Threats including illegal oil bunkering, kidnapping for ransom, illegal fishing and drug trafficking are common across our oceans, transnational crimes not only threaten national peace and stability they also come at great cost to the economies.”
Ethiopia – Djibouti Transport Corridor Project Phase I: Appraisal report (AfDB)
The project is part of PIDA and will boost regional integration, connecting land-locked Ethiopia to global markets via Djibouti ports and providing access to regional markets such as Uganda and South Sudan through the Kampala-Djibouti corridor. Southwards, the corridor links Mombasa-Addis Ababa corridor connecting Ethiopia and Kenya. The project will support the Djibouti Government’s strategy to boost transport and logistics in order to harness the country’s strategic positioning as a transport hub at the cross-roads of key trade routes between Asia and Europe and between East Africa and the Middle East. Currently, an estimated 35% of Djibouti’s GDP is derived from the transport sector, with Ethiopia accounting for 80% of truck traffic at the ports. The project compliments the Bank’s past interventions at port development aimed at enhancing Djibouti as a hub port (Annex B), as well as the Djibouti-Ethiopia railway by enhancing multi-modal linkages.
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2019 Article IV Consultation. Niger faces daunting development challenges, aggravated by terrorist incursions, low uranium export prices, and climate change. Nonetheless, GDP growth picked up to 6.5% last year- and should average above 7% over the next five years thanks to reforms, substantial donor support, several large-scale projects, and a one-time boost from the projected commencement of crude oil exports in 2022.
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Selected Issues: Navigating the challenges of governance. Descriptive statistics based on the World Bank Enterprise Surveys illustrate the negative association between corruption and private-sector performance in Niger (see figure 3). The analysis employs an unbalanced sample of 302 firms operating in manufacturing and services sectors in the years 2005, 2009 and 2017. To capture the extent of corrupt practices in the public sector that adversely affect private-sector performance, it considers firms in Niger that reported at least one bribe payment request across public transactions, including paying taxes, obtaining permits or licenses, and utility connections. Performance is alternately proxied by sales, employment, and productivity growth. Results show that exporters that pay bribes record on average a negative sales growth of 20.5% against +6.6% for those trading in a “clean” environment. Young firms, defined as those in operation for less than 5 years, register an average sales growth rate of 28.7% in the absence of corruption, against 7.4% otherwise. The negative association is also verified for older firms and non-exporters, and when using productivity growth as a measure of private-sector performance.
Republic of Congo: IMF Staff Report, Debt Sustainability Analysis
The decline in oil prices since 2014 sharply deteriorated Congo’s outlook. Average oil prices declined from over $100 from early 2011 to mid-2014 to below $40 by mid-2016. This led to a collapse in oil exports and a sharp decline in the external current account, with a deficit that exceeded 40% of GDP by early 2016. As a result, oil revenues, which had averaged 35% of GDP during 2004–14, declined to about 15 percent of GDP after the shock (2015–17) and only started to recover in 2018 with rising oil production and prices. Box 2 - Prospects in the Oil Sector (extract): The Republic of Congo’s proven oil reserves are estimated at 1.6 billion barrels and production is expected to peak in 2019. Production was around 121 million barrels in 2018 — an increase of about 20% compared with 2017. This helped Congo reach the third largest output level in sub-Saharan Africa after Nigeria and Angola. There are currently around 40 oil fields in operation, most of which are offshore. The projected increase in production will boost output levels to 140 million barrels in both 2019 and 2020. It results from a new offshore field (Moho Nord, the largest in Congo’s history)—expected to reach a peak level of 37 million barrels in 2019. Production from this new field, combined with Congo’s first deep-water field (Moho-Bilondo), accounted for 45% of total oil production in 2018. Additional capacity is expected to come from the the Banga Kayo and the Nene-Banga fields which will account for 20% of production. [An interview with Alex Segura-Ubiergo, IMF’s mission chief for Congo]
Other newly-posted country frameworks: The AfDB’s Burundi Country Strategy Paper 2019-2023; World Bank’s Country Economic Memorandum for Sao Tome and Principe
Today’s Quick Links: AU may miss 2019 target for Single Airspace of Africa South Africa: US-China trade war causes collateral damage SA must plan for ‘worst case scenario’ amid Boris Johnson’s rise UNCTAD, TradeMark East Africa extend deal to ease trade EDB (Mauritius) joins the World Alliance of International Financial Centres Bank of Ghana Governor expresses doubt on new Eco adoption strategy Kenya: Lobbies oppose draft rules on food, horticulture crops Kenya faces maize imports hurdle as regional states halt sale Ghana Union of Traders Association: Fees by service providers at the port are exorbitant UK’s DIT launches first ever ‘InsurTech for Development’ conference in Africa Africa could be about to benefit from dovish policy shifts in the US, experts predict Reuters: Nigeria’s central bank to start monthly review of banks’ loan ratios |
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Special issue on US-SSA trade and investment
The public hearing, US Trade and Investment in Sub-Saharan Africa: recent trends and new developments, takes place today, 24 July, in Washington. The witness list can be accessed here (pdf).
For background on the Hearing, see the pdf USITC Federal Register Notice (208 KB) .
Background report: pdf U.S. trade and investment with Sub Saharan Africa: Recent developments (5.61 MB)
Extracts from selected advance submissions:
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pdf Ambassador Sankatana Gabriel Maja (148 KB) (Embassy, Kingdom of Lesotho). The Government of Lesotho, through the Lesotho National Development Corporation, actively supports efforts to attract foreign investment to take full advantage of AGOA. These efforts include the creation of an investor-friendly business environment with minimal bureaucratic red tape. All of the investments that have been made in Lesotho in response to AGOA have been predicted on the stability and predictability of the AGOA regime. With less than six years left in the current authorization of AGOA, it is critical that serious progress must be made as quickly as possible in defining the future of the rubric that will govern US-Africa trade and investment relations after 2025. Otherwise, there will certainly be a serious contraction of exports and employment as investors look for more stable environments elsewhere. Last but not least, AGOA has created the US-Africa Trade and Economic Cooperation Forum, commonly known as the AGOA Forum, which has provided an invaluable venue for exploring trade and investment issues between the United States and Sub-Saharan Africa. These annual dialogues are essential in mapping the future of the trade and investment relationship.
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pdf Microsoft Corporation (792 KB) As the United States engages with African leaders on deepening bilateral trade and investment, we therefore encourage US policymakers to focus on the following points (selected extracts):
Freedom to transfer data across borders. Most innovative cloud services today are powered by the analysis of vast amounts of data, often from millions of devices located in many different countries. Firms across all sectors of the economy transfer data across borders every day, not just to support cutting-edge innovation but also for routine business functions. Firms in Africa likewise need the freedom to transfer and analyze data across borders. Unfortunately, certain African governments are proposing data localization mandates that would require firms to store certain types of data in-country or prohibit its transfer across borders. For instance, Nigeria, which is the second largest economy in Africa, still has certain data residency requirements in the public sector that threaten to cross over to other sectors. It requires local storage of data, prohibits the cross-border processing of data, and restricts transfers of data outside Nigeria. Measures such as these would deprive African consumers and businesses of access to valuable technologies and imperil Africa’s ability to achieve its developmental and economic goals. We therefore urge the United States to encourage African governments, consistent with established US trade policy, to commit not to prohibit or restrict the cross-border transfer of digital data.
No customs duties on electronic commerce. The WTO moratorium on customs duties on electronic commerce, first adopted in 1998, has been critical to the growth of the digital economy, and to economic growth more broadly. It has prevented WTO Members from imposing tariffs (essentially, taxes) on all forms of e-commerce, including downloads of digital content and the provision of cloud and other online services. This has helped these industries to flourish and made digital goods and services available to millions of consumers on a cross-border basis, promoting a more truly integrated global digital economy. Recent efforts to renew the moratorium, however, have stalled, in part based on opposition from South Africa. If the moratorium expires and countries begin imposing customs duties on e-commerce, this could impose tremendous administrative and compliance costs on industry that far exceed the nominal value of the duties themselves. The real “cost” of such duties, however, will fall on consumers and businesses in developing economies like Africa, because they will force customers in these countries to pay more for access to digital content and services than users elsewhere pay, placing them at a competitive disadvantage. Consistent with established US policy, we urge the United State to encourage African governments to support an extension (ideally permanent) to the WTO moratorium, and also to commit not to impose customs duties or other charges on e-commerce under national law. [Submitted by Mike Yeh, Assistant General Counsel]
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pdf Aubrey Hruby (149 KB) (Senior Fellow with the Africa Center at the Atlantic Council). In terms of competitiveness, the US economy is services-based, accounting for 80% of annual gross domestic product. The United States’ greater depth and tenure in the services sector are considerable advantages over players like China, for whom services have still not reached potential. Specifically, the United States has global leadership or advantage in financial and information services, agribusiness, entertainment, and niche fields of infrastructure. These must be the fields of emphasis when either expanding or enhancing the US commercial toolkit.
In financial services, US commercial institutions are primely positioned to help solve asset financing and working capital constraints across Africa. And the United States can better support investors and smaller American companies that could be interested in African markets by creating and sharing an African markets data portal and by supporting additional investor trips. In terms of the creative industries, the United States is a leader in entertainment and media and is thus well placed to capitalize on Africa’s $4.2bn in annual creatives revenue, which is rising rapidly. Even within infrastructure, where the storyline often focuses on China’s dominance, US firms are competitive in renewables, oil exploration and engineering, energy management services, and smart city technologies. Data centers and cybersecurity services could be related areas of focus.
Create a US Honorary Commercial Consul Network in African markets. While countries across Africa have made significant progress in simplifying processes for potential foreign investors and businesses, the local complexities of expanding to African markets can still be significant. In its effort to facilitate more investment into African markets, Prosper Africa could work with the Department of Commerce to establish an honorary commercial consul program that would give new US investors access to an invaluable network of American businessmen and women in the market. By engaging people who have established networks and have achieved business success, the United States could quickly establish an invaluable platform to which US companies could turn for commercial guidance.
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pdf Laird Treiber (54 KB) (Corporate Council on Africa). I would like to turn now to my third point, suggesting that the level of US and African trade and investment is well below its potential. While I expect other speakers will present much more complete data, total trade between the U.S. and Africa in 2018 was $61.8bn, an 11% increase over the 2017 level of $55bn. While this is welcome, this only represented 1.1% of U.S. exports and imports for 2018. Also discouraging, 27.5% of the total trade came in oil and gas imports. The leading area of US exports in 2018 to Africa was transportation equipment, accounting for 19%, followed by machinery, agricultural products and chemicals, each around 10%. Worldwide, the largest U.S. export categories are in capital goods, industrial goods, consumer goods, transportation and food, in rank order. This suggests that current US exports to Africa are not yet focused in the sectors of greatest competitive advantage for US companies.
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pdf ACT | The App Association (203 KB) We appreciate USITC’s efforts to evaluate United States’ trade and investment with SSA and related challenges and opportunities. From the perspective of American small businesses in the software development and high-tech industries, the SSA, despite lower-than-expected gross domestic product growth over the last few years, according to the World Bank, presents new opportunities for customer base growth. Increasingly, App Association members are turning to SSA markets as they seek to sustain growth and create more American jobs. Consider the following: (a) In 2017, mobile technologies and services generated 7.1% of GDP across SSA, amounting to $110bn of economic value added. By 2022, the SSA mobile economy will generate more than $150bn (or 7.9% of GDP) of economic value; (b) 300 million more people in SSA are expected to come online via 44 million cellular internet of things connections by 2025; (c) SSA jobs supported by the app economy are expected to increase from 3 million in 2017, to 3.45 million in 2022. This job creation will in turn spur greater growth in SSA, creating further opportunities for American digital economy small businesses.
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pdf Timothy Trainer (86 KB) (Global IP Strategy Center). The high levels of counterfeit and infringing goods in these markets signal the need for massive amounts of assistance. From the perspective of the US government and IPR stakeholders, undertaking an in-depth and detailed assessment would seem to be necessary to safeguard valuable IPR assets exposed in these markets. It is well known that the US and its IP stakeholders already have a list of countries that appear in USTR’s annual Special 301 Report issued identifying IP deficiencies abroad. In some cases, countries have failed to address their IP deficiencies for many years and have appeared in the Special 301 Report year upon year. In an effort to avoid the type of ongoing and repeated identification of a country for many years due to IP deficiencies, I would recommend that the US and the IP stakeholder community undertake a comprehensive assessment of any country that the US might consider as a trade agreement partner. The IP chapters of our free trade agreements obligate our trading partners to a high level of IP protection and enforcement.
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pdf International Intellectual Property Alliance (375 KB) IIPA highlights below serious concerns with South Africa’s copyright law amendments, as well as some positive indications of improvements in copyright protection and enforcement in Nigeria, Burundi, Kenya, Rwanda, Tanzania, and Uganda. South Africa’s current legal regime fails to provide adequate and effective protection of copyrighted materials, and two impending laws that are on the verge of final enactment would further weaken that legal regime. If enacted, the two new laws would violate South Africa’s international obligations (including the Berne Convention for the Protection of Literary and Artistic Works (“Berne Convention”) and the TRIPS Agreement) and would result in a clear lack of adequate and effective intellectual property rights protection. The bills are also inconsistent with obligations of the WIPO Internet Treaties. South Africa’s Cabinet recently approved the country’s accession to these treaties, but at present, South Africa remains just a signatory to the treaties, and not yet a member of either the WCT or WPPT. The South Africa country report from the IIPA 2019 Special 301 submission (7 February 2019) to USTR is appended to this filing and includes a full description of the deficiencies in these two bills, as well as other deficiencies in South Africa’s legal and enforcement regimes. Significant reforms are needed to South Africa’s Copyright Law and Performers’ Protection Act in order to bring the country’s laws into compliance with international treaties and agreements, including TRIPS, and the WIPO Internet Treaties.
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pdf Public Citizen (170 KB) The United States government should not promote maximalist intellectual property policies or condemn countries for pursuing intellectual property policies that safeguard public health. The United States government should also not wield its trade benefits, including those under the African Growth and Opportunity Act, to coerce countries to promote intellectual property. Many lives depend on it.
Related updates on US-SSA trade and investment issues
The 18th AGOA Forum takes place on 4-6 August 2019 in Abidjan, Côte d’Ivoire, on the theme: AGOA and the Future: Developing a new trade paradigm to guide US-Africa trade and investment. Visit AGOA.info for more.
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Press Briefing on the 2019 AGOA Forum: Special Briefing by Ambassador Tibor P. Nagy via Telephone. Click here to listen to or download the audio file.
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The audio file from yesterday’s telephonic preview briefing on the 2019 AGOA Forum, with @AsstSecStateAF and Assistant @USTradeRep for Africa, Constance Hamilton, can be accessed here.
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AGOA CSO Network Secretariat withdraws from the 2019 AGOA Forum: “Since 2003, the AGOA Civil Society Organization Network Secretariat has coordinated, participated in and promoted the CSO Session of the US-Africa Trade and Economic Cooperation Forum. This year, a new approach is being employed to organizing the upcoming CSO Session of the 2019 AGOA Forum – one of directive, rather liaison with civil society. From our vantage point, this new approach is limiting the voice of civil society, marginalizing their participation in the 2019 AGOA Forum and regressing US-Africa trade and economic cooperation.”
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Africa, Japan, and the United States: Opportunities to partner at the 7th Tokyo International Conference on African Development. TICAD7 will be held in Yokohama (28-30 August), where Japan is expected to set up a permanent joint council between its government and private sectors to boost investment in Africa. Historically, the conference has been critical in generating and launching donor programs in Africa and TICAD7 promises to build on this legacy. These initiatives align with U.S. policy in sub-Saharan Africa, and there is an opportunity for greater collaboration between Washington, Tokyo, and African capitals to drive economic growth and stability in sub-Saharan Africa. The audio file from this event, held on Monday in Washington, can be accessed here. Alternatively view tweeted highlights from @CSISAfrica
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Aubrey Hruby: Deconstructing the Dragon – China’s commercial expansion in Africa. In this new issue brief Hruby first describes the opaque G2G nature of Chinese financing and contrasts it with the traditional government-to-business structure of US development finance. She then analyzes US investment in African markets across capital flows and warns of rising competition from Chinese firms in each category. In light of this evolving landscape, Hruby asserts that the United States must build out its commercial strategy towards Africa, using new tools to maintain the upper hand in areas of comparative advantage and double down on key areas of market demand.
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Howard French: How to fix America’s absentee diplomacy in Africa. At the same time, Africa’s fast-rising and young population will represent an increasingly important class of consumers, especially where middle classes continue to grow, as they are in many countries on the continent, from Egypt to Kenya, Ethiopia to Ivory Coast. The United States completely missed the boat in the last major boom of foreign opportunity in Africa, namely the massive and ongoing effort by China and its engineering and construction companies to build road, rail and other infrastructure across the continent. It will miss other opportunities, for which it is even better suited to compete, unless it completely changes the way it thinks about and engages with African countries. Africa’s population growth is making the continent the stage for the fastest and largest-scale urbanization anywhere on the planet, which also represents an extraordinary opportunity for American expertise to help Africa’s new or newly giant cities get things like planning and development right. The rise in the numbers of young Africans will also create an extraordinarily large and almost entirely untapped market for another field, one in which American excellence is universally recognized: higher education.
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Diarise: The 7th Annual East Africa International Arbitration Conference 2019 takes place on 29-30 August in Nairobi
Featured African trade policy tweets:
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@AfricaMediaHub: Assistant @USTradeRep for Africa Constance Hamilton: AGOA is scheduled to expire in six years – in 2025. Our ultimate objective is to have a network of agreements to serve as building blocks to an eventual true Africa-US trade partnership for the 21st century.
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@SymerreGrey: China has over 1million patent applications annually. South Africa has 9000, which is more than entire Africa combined. PIDA-2 has to prioritize Intellectual Property (IP) development and spur innovation and smart infrastructure projects.
pdf A comparison of the provisions of the Economic Partnership Agreements (1.08 MB) (ATPC / ECA)
This paper is intended to be a reference document on the provisions contained in the six agreements and highlight some key areas for consideration when moving forward with the continental integration agenda. The paper is structured as follows: the introduction outlines the status of the economic partnership agreement process and the justification and objective of the work. Section II provides notes on the methodology used. Some key findings from the comparison exercise are highlighted in section III. Section IV provides legal analysis on selected themes. Section V highlights recommendations and additional strategic considerations. The similarities and differences between the agreements are provided in table form, subject-by-subject, as covered in the text of the agreements in the annex. Extract: Going forward in the negotiation and implementation of the economic partnership agreements, it will be important to consider how the agreements will interact with the African Continental Free Trade Area negotiations and implementation, the wider integration agenda and Africa’s relationships with other trading partners. For example:
(a) How will the negotiations of the African Continental Free Trade Area and economic partnership agreement services components interact? In particular, should the agreement services negotiations be halted, or will the services negotiations provide traction for services under the African Continental Free Trade Area?
(b) Although the economic partnership agreements appear to allow enough space for African Continental Free Trade Area implementation, going forward the prospect of an African continental customs union as envisioned in the Treaty establishing the African Economic Community will require harmonization of the agreements, in particular on rules of origin, exclusion lists and trade remedies. What will be the African strategy in that regard? As it currently stands, once the agreements are in force, revision clauses could be used for that purpose. Currently, however, only one African agreement is in force. While some African States have expressed wishes to renegotiate, the European Union position has been that the opening of negotiations is not possible.
Cheikh Ahmed Bamba Diagne: Why abandoning the CFA Franc would be a risky operation (The Conversation)
Why should we, in the short to long term, resist a single currency for the Economic Community of West African States countries? These eight countries – Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo – are worth a collective 58.966bn CFA Francs, that is, $102.2bn (the equivalent of 22% of Nigeria’s GDP). Côte d’Ivoire, which represents 35.2% of the economy of the zone, has never shared governance of the Central Bank. As a result, the zone’s monetary policy responds more to the needs of Cote d’Ivoire than to that of the member states. What then would be the effect of the planned Economic Community of West African States currency, called the ECO, given that Nigeria alone represents 73.1% of the zone’s wealth, against just 26.9% for the other 14 countries? Clearly, there is a strong chance that satisfying the needs of Nigeria would be the chief preoccupation of monetary policy within the region. [The author is Directeur scientifique du Laboratoire de recherche économique et monétaire (LAREM), Université Cheikh Anta Diop de Dakar]
Measuring progress 2019: Financial inclusion in SADC (FinMark Trust)
The SADC Financial Inclusion Strategy has regional M&E indicators which have been integrated into MAP country work in 2018 and into 2019. This regional approach has paid dividends over the last year with a number of regional initiatives being implemented and providing downward pressure for implementation at country level. In turn, country priorities have been escalated into regional-wide programmes. In the SADC region, financial inclusion strives to accomplish three inter-linked goals, namely, improve livelihoods, drive economic growth and drive industrialisation. Extract (pdf): The increase in the cost of using mobile money raises the question of the potential ‘mission drift’ of mobile money operator’s in serving low income customers and thus, the need for appropriate regulation to ensure these costs are kept low. Cross border remittances have seen more competition in terms of the number of products and models across the five countries (Botswana, Eswatini, Lesotho, Malawi, Zimbabwe). This has led to a reduction in the cost of cross border remittances. Different business models are emerging across the countries. For instance, the retailer model is the cheapest in Lesotho while the Money transfer operator model is the cheapest in Botswana. Consistently, this report highlights the need for more primary data on the lower end of the market to deepen customer understanding in order to ensure more robust interventions in order to build sustainable market systems.
COMESA: AfDB approves $300m to boost trade and regional economic development
The African Development Bank re-affirmed its intention to boost economic and regional development on the African continent when its Board of Directors approved a $300m support facility for the Eastern and Southern African Trade & Development Bank (TDB) on 17 July. The COMESA regional trade and project finance package consists of a composite funded trade finance and project finance facility, and an unfunded trade finance risk participation agreement. The facility’s trade finance component will enhance the TDB’s confirmation capacity, support its rapidly expanding forfeiture business, and help it become a globally acceptable confirming bank. The project finance component will facilitate the delivery of export-oriented infrastructure, which will promote regional trade within the COMESA region
ECOWAS: Ministers of Labour and Employment examine harmonised engagement laws, decent work proposals
Commissioner for Social Affairs and Gender, Dr Siga Fatima Jagne, urged the ministers to adopt the text of recommendations being presented to enable the ECOWAS Commission “put in place regional mechanisms that facilitate and enhance the social integration of our citizens in our community space and create conditions for a job decent and regulated at Member State level without xenophobia and other forms of discrimination”. The ministerial meeting was preceded by the brainstorming sessions of the labour experts and General Assembly of the SDF, being a natural follow up to the discussions and review of ongoing activities, including a stock taking of past activities meant to work out appropriate mechanisms for better coordination and implementation of desired programmes and initiatives. It is expected that the documents deliberated upon will be the key frameworks that ECOWAS and Member States can apply in order to achieve the ILO Centenary Declaration for the future of work adopted at its 108th conference held in June 2019.
Facilitating trade in safe foods: standards or regulations? This is the second post in the Feed the Future Enabling Environment for Food Security project’s blog series exploring food safety and cross-border trade. The first post discussed the importance of regulatory cooperation for ensuring food safety in intra-African trade in light of advancements towards Africa’s Continental Free Trade Area. This second installment discusses how different types of standards and regulations work in practice and the complementary roles they each play in mitigating food safety threats.
Illicit trade and the Sustainable Development Goals (UNCTAD)
Illicit trade poses a threat to the achievement of the global goals and requires concerted global action, experts said at a forum organized by UNCTAD and the Transnational Alliance to Combat Illicit Trade (TRACIT) on 18 July. “A dark side of globalization and the expansion of trade has been the alarming emergence of illicit trade,” said Teresa Moreira, UNCTAD’s head of competition and consumer policies. She said economic leakages from illicit trade create an estimated annual drain of US$2.2 trillion to the global economy, nearly 3% of world economy. “If illicit trade were an economy, it would be the eighth largest in the world.” TRACIT’s director-general Jeffrey Hardy highlighted the impacts of illicit trade in various countries – from illegal fishing affecting marine resources in Costa Rica to counterfeiting draining €83bn ($93bn) from the EU’s GDP as well as 790,000 jobs. The statistics are indicative of the problem. Illicit trade in pharmaceuticals is valued at between $75bn and $200bn annually, while wildlife crimes are worth $23 billion, according to TRACIT. [Note: This study maps the 17 UN SDGs against the following sectors: agri-foods, alcohol, fisheries, forestry, petroleum, pharmaceuticals, precious metals and gemstones, pesticides, tobacco, wildlife and all forms of counterfeiting and piracy. Trafficking in persons is also examined as a particularly abhorrent phenomenon affecting supply chains and basic human rights as well as contributing to illicit trade practices.] [ pdf Mapping the impact of Illicit Trade on the Sustainable Development Goals (1.03 MB) ]
WTO analysis: Trade-restrictive measures continue at historically high level
Trade flows hit by new restrictions implemented by WTO members continued at a historically high level between mid-October 2018 and mid-May 2019, according to the Director-General’s latest mid-year report on trade-related developments presented to members on 22 July. The report, which was reviewed at a meeting of the WTO’s Trade Policy Review Body, notes that the trade coverage of import-restrictive measures implemented during the review period is estimated at $339.5bn, the second-highest figure on record after the $588.3bn reported in the previous period. Together, these two periods represent a dramatic spike in the trade coverage of import-restrictive measures. [Informal Trade Policy Review Body meeting: remarks by Roberto Azevêdo]
UN High-level Political Forum: Fairer trade can strike a blow against rising inequality
While the value of trade has increased fivefold and its volume fourfold for the past 30 years, the bottom 50% of the population has captured only 12% of the total economic growth, whereas the top 1% captured 27% of it. In 1990, world trade was about $5 trillion, whereas in 2018 its volume reached $25 trillion. “Trade has contributed to make the pie bigger, but its shares have not been divided equally,” Ms. Durant said. She noted that some developing countries have benefitted from global trade, especially those in east Asia. Many countries in Africa and Latin America, and small island developing states, have not been so well served. In many of these countries, economic growth has been lower than expected, with most gains from trade being captured by a small segment of the population. But rising inequality within countries has not been limited to developing countries. “In many developed economies too, globalization has benefited some more than others, rendering their middle class fragile,” Ms Durant observed. Globalization has therefore led to the marginalization of some regions, some firms and some workers.
Related:
ILO’s Labour Income Share and Distribution dataset: “In Sub-Saharan Africa, the bottom 50% of workers earn only 3.3% of labour income, compared to the European Union, where the same group receives 22.9% of the total income paid to workers.”
William Easterly: “There’s the paradox that globalisation is actually working better – in Africa and Latin America especially; and at the same time there’s an intellectual backlash against it.”
Extending pension coverage to the informal sector in Africa (World Bank)
The coverage of pension systems in the Africa region is limited to the small segment of the population in the formal sector. Coverage is thin partly because traditional contributory pension schemes are not responding to the needs of the informal sector. As a result, a large share of the region’s adult population has no access to contributory pension schemes during their working lives. This means they will not be eligible for a pension. It also means the elderly coverage gap will persist in most countries. Expanding coverage to a larger group of workers is especially important because the elderly is now often cared for by their children. As the children move to cities, their ties to the elderly and home villages weaken. As a result, the elderly may be left behind with fewer resources. Extract (pdf):
Typically, in countries with relatively higher incomes, such as Mauritius and the Seychelles, a higher share of the population contributes to pension schemes, while, in most countries in the region, pension schemes receive contributions from only a small share of the working-age population. In more than half the countries on which data are available, less than 6% of the working-age population contribute to a formal pension scheme. In Ethiopia, Guinea-Bissau, and Tanzania, participation in the contributory pension schemes accounts for less than 2% of the working-age population. The low average coverage of the working-age population in most countries in the region means that few elderly will be eligible for a contributory pension benefit in the future.
Africa is a young continent, but the share of the elderly in the population will rise. Figure 8, which illustrates population projections for the region, shows that Africa will age. Almost 9% of the population is expected to be age 60 or above by 2050. In all countries other than Niger (4%), the share of the elderly is expected to grow appreciably. The share is anticipated to nearly triple in Botswana, Cabo Verde, and Kenya. In Mauritius, the share is expected to reach 30%. However, viewing the elderly as a percentage of the population understates the growth in the number of elderly because, across Africa, the population is also expanding. Even in Niger, where the share of the elderly will remain unchanged, the population itself will more than triple by 2050, suggesting a substantial increase in the number of elderly.
Today’s Quick Links: Africa CDC, WHO statement on Ebola virus disease outbreak in DRC ‘Buhari’s stance on regional cooperation, integration transforming DTCA‘ Agriculture stakeholders task Nigerian govt on AfCFTA Anita Kundy, Aimée Dushime: Will the diversification of exports deliver a great economic deal for African countries? Mastercard Africa boss outlines opportunities for engagement and partnerships in Rwanda How digital technologies can help Africa’s smallholder farmers Britain’s trade department to use part of aid budget |
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AfCFTA ratification update, from @ch_nji: “It’s done, Cameroon has ratified the AfCFTA today, 19 July 2019. Instrument of ratification to be deposited with the depository in the coming weeks. Now, time for technical administrations, civil society and business community to start work on the national strategy.” Once completed, Cameroon will become the 28th country to deposit its instrument of ratification.
See tralac’s infographic on the Status of AfCFTA Ratification
COMESA member states urged to ratify Tripartite Agreement as a building block towards the AfCFTA (UNECA)
Andrew Mold, Acting Director of ECA in Eastern Africa, said that the AfCFTA Agreement itself is not, as the name suggests, simply a Free Trade Agreement - it is about creating a unified continental market. The focus on trade liberalization is just the start. “The Agreement itself is 78 pages long, and the annexes 124 pages long. Its protocols have a lot of implications for business – whether that is on investment, on competition, on intellectual property, or free movement,” said Mold. He added that it is was important for COMESA member states to ratify and implement the Tripartite Agreement between COMESA, SADC and EAC, as a fundamental building block towards the completion of the AfCFTA. Mold was speaking at the panel discussing Africa’s competitive advantages during the 21st COMESA International Trade Fair and High-Level Business Summit in Nairobi on the theme Powering regional integration through trade.
Nigeria and the AfCFTA: two perspectives
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Nonso Obikili: Finally, we’re in the AfCFTA. The flip side to that, however, is with regards to those firms who have historically survived by convincing government to ban or restrict their imported competitors. All those journalists who write those “Nigeria loses x billion naira to imported y” articles may have to rethink their marketing strategy. The firms involved will have to start thinking about productivity growth or they might run into trouble. Note: we don’t have electricity is not a valid excuse. Given our unfortunate history with protectionism, those firms are not insignificant in number. The big challenge for policy makers is to work towards enabling us to compete effectively. The lazy policy days of banning imports to boost local production are probably coming to an end. The AfCFTA means we are going to need firms that are as efficient as those in Ghana and as competent as those in Kenya. This is Nigeria though. We can outperform anybody if we really put our minds to it.
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Franklin Ngwu: It will be interesting to see how we will benefit from AfCFTA when policies are formulated and executed from political, tribal and ethnic sentiments rather than from a nationalistic and patriotic disposition. Unless a miracle happens, it will be almost impossible to benefit from the agreement with only two main functional sea ports and about three or four international airports. How can we produce when electricity production is still below 5,000 MW for about 200 million people. While it is good to sign AfCFTA, we must appreciate that to effectively participate, lead and benefit from it requires more than talks and documentation. It starts with a determined and patriotic formulation and execution of a detailed and well integrated economic development plan through which we can appropriately participate, lead and benefit. Unfortunately, we don’t have such long awaited plan!
Craig Atkinson: Algorithms could give the world its first ‘born digital’ free trade agreement in Africa (LSE)
As the majority of businesses in Africa are small, the AfCFTA must target these enterprises to meet its objective to ‘promote and attain sustainable and inclusive socio-economic development’. Fortunately, legal technology can improve access to, and the functionality of, trade agreements for different user groups, including enterprises, customs agencies and policymakers. A ‘born digital’ AfCFTA would make the agreement easier to access, understand and apply. At the most basic level, this would imply the creation of an authorized ‘machine consumable’ translation of the text. Such a computer-friendly version of a trade agreement could, and should, equally represent any natural language counterpart. To add to usability, computational clauses, navigational aids and meta-data information could be integrated via digital formats.
Use of emerging standards such as Legal RuleML would enable users to easily search and jump between related sections. Metadata on specific sections could help users to identify particular provisions. This would be especially helpful for those unfamiliar with legal and trade terminology when searching for relevant parts of an agreement. A digital AfCFTA also provides an opportunity for home-grown innovation. Creating a machine consumable version of the agreement would provide developers with the means to layer other technological solutions over the digitally expressed clauses, making them even more user friendly and accessible. [The author is a visiting research fellow with the World Trade Institute and director of Lexmerca International Trade; EA business council in new digital push]
Regional integration and informal trade in Africa: evidence from Benin’s borders (Journal of African Economies)
This paper presents the first quantitative study of informal cross-border trade, based on comprehensive data for one country. We use an original survey covering cross-border transactions at non-authorised locations on each land border of Benin to document the size and composition of informal trade flows. We match this data to customs data on legal trade for the same trade directions and period, and identify some of the determinants of informality in trade. We relate tariff and non-tariff barriers to the probability that a given product be traded informally rather than formally. We also identify product characteristics, such as perishability, which associate positively with informality.
A distinction must be made between two forms of informal trade. Some trade goes unrecorded because of evasion at customs, using practices such as underinvoicing, misclassification or misdeclarations. In parallel, some trade occurs outside of official border crossing points, avoiding customs entirely. We focus on the second form. Case studies have suggested the importance in magnitude of this form of trade; we confirm this with our data. Despite the difficulties inherent to collecting data on informal activities, our data offers a remarkably rich view of informal trade at Benin’s borders. The ECENE survey (Enquête sur le commerce extérieur non enregistré) was conducted by the National Institute of Statistics of Benin in 2011: 171 border crossing points were identified and surveyed; a total of 8,883 traders were interviewed, 10,415 single-product flows recorded. These crossing points are all distinct from official border points. The case of Benin is particularly relevant for this issue. [The authors: Sami Bensassi, Joachim Jarreau, Cristina Mitaritonna]
Related analysis, by Niti Bhan: The African Continental Free Trade Agreement and the Age of Interoperability
Namibia favours SACU status quo (Namibian Observer)
Finance minister Calle Schlettwein said the argument by South Africa that SACU member states were benefiting through the existing revenue sharing formula at its expense, were far from the truth. “That is the argument from South Africa. We don’t believe that the argument is necessarily true because the gains that South Africa get by having us as their captive and secure market is huge. So, we have to find out who is gaining and who is not. We do not accept upfront the argument that they are bankrolling us and we are not contributing, it’s not the case.” Quizzed if SACU had a set timeline to conclude the review of the sharing formula, the finance minister said: “It is a work in progress.”
Mozambique: Politics, economy, and US relations (Congressional Research Service)
Investment climate and sectoral trends: Despite some improvements in the ease of doing business, the economy remains constrained by high transaction costs and taxes, cumbersome regulations and laws, poor transport and other infrastructure, and corruption. Mozambique scored 16th out of 48 sub-Saharan African countries assessed in the World Bank Doing Business 2019 survey score, but it scored 135th out of 190 countries globally. Its indicators for starting a business, access to credit, certain investor protections, and tax payment complexity were notably poor. Recent FDI activity has centered on the growing coal sector and natural gas development (see below). FDI peaked at $6.2 billion in 2013 but has since declined steadily, to $2.3 billion in 2017 (latest data), though levels remain far higher than prior to the discovery of gas. Mozambique is a top regional FDI destination; it received the sixth-largest FDI inflows in Africa in 2017. Its total FDI stock is also large; at $37.5bn in 2017, it was the fourth-largest in Africa. Annual US FDI into Mozambique from 2013 to 2017 averaged $824m a year (18% of such FDI).
Corruption and crime: Given the weakness of fiscal and anticorruption institutions, some observers have questioned whether the state has the political will and ability to effectively govern the large expected influx of gas revenue. The government has taken some steps to address such challenges. For instance, in 2009, Mozambique joined the Extractive Industries Transparency Initiative, a voluntary international effort to make extractive industry revenue contracts and revenue payment and receipt data publicly accessible, and to increase related fiscal accountability. The government plans to require beneficial ownership and business interest transparency, to establish a sovereign wealth fund to preserve and manage gas income, and to allocate a fixed share of gas revenue to fund infrastructure development, poverty reduction and economic diversification.
India warns WTO’s appeals body may collapse (Mint)
“The ongoing impasse in filling vacancies of the Appellate Body remains, with no response from the objecting member (the US), in spite of dozen proposals to address to concerns related to its functioning,” India said at an informal trade negotiations committee meeting on Friday. “The (WTO) membership needs to act before the Appellate Body moves from the ICU to the mortuary,” J.S. Deepak, India’s trade envoy warned at the meeting. An end to the Appellate Body frees the most powerful countries from adhering to multilateral trade rules, said a Geneva-based trade law expert, who asked not to be named. “Without resolution of this issue, existing rules will become unenforceable and the adoption of new rules becomes futile,” cautioned ambassador Xolelwa Mlumbi-Peters of South Africa. China has urged the US to engage in exhausting all possibilities and options so to avoid “the real crisis by the end of this year.” However, at the meetings convened by a facilitator — Ambassador David Walker of New Zealand - the US stayed silent. “The US wants to see the closure of the AB because it had repeatedly ruled against several illegal measures adopted by the US,” the expert cited above said. [India, South Africa (and others) urges WTO to ask members to amend laws that allow unilateral curbs]
China’s outward foreign direct investment in Sub-Saharan Africa (pdf, USITC Executive Briefings on Trade)
According to the latest Chinese official statistics, China’s stock of OFDI in SSA amounted to $36.0bn in 2016, an increase of more than two-fold from $11.7bn in 2010. China’s stock of OFDI in SSA was relatively concentrated among a few destination markets – in 2016, the top recipient markets were South Africa, the DRC, Zambia, and Nigeria, jointly accounting for 42% of total Chinese OFDI stock in SSA (Table 1). Although a significant share of China’s stock of OFDI has been concentrated in these markets, investments have become more geographically diversified since 2010. Comparison of the composition of Chinese OFDI at the project level: Among the top recipients of Chinese OFDI in SSA, the patterns of investments differ considerably in terms of targeted industry sectors. Figure 1 compares the sectoral composition of Chinese OFDI in these recipient countries using transaction-level data from the American Enterprise Institute. As can be seen, in the more economically developed South Africa (Fig 1c), Chinese OFDI have been more diversified across sectors, while its investments in Zambia and the DRC were concentrated in mining sectors (Fig 1a and 1b). Continued investments in SSA’s natural resources sector indicates China’s continued interests in the region as an important import source of key minerals and metals (including copper and cobalt) for domestic consumption purposes. Meanwhile, as China’s investment composition in Nigeria demonstrates, China has begun to channel investment into SSA’s renewable energy sector, which helps to expand SSA countries’ electricity system. [The authors: Arona Butcher, Wen Jin “Jean” Yuan, Ujjwall Uppuluri]
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Women’s Digital Financial Inclusion in Africa: A Gates Foundation report prepared for the G7 French Presidency (pdf)
This report profiles five pillars for extending digital financial inclusion to African women - interoperability, digital identity, regulation, assessment of digital readiness, and gender-specific research - and highlights selected initiatives from the African Development Bank, the World Bank, J-PAL Africa, UNCDF, the Alliance for Financial Inclusion, and Oxford University’s Blavatnik School of Government. Together, these offer clear pathways for G7 governments to help reduce inequality and close the gender gap across the African continent. Extract:
For women in low- and middle-income countries, digital savings, credit, and payments services can provide them with a critical link to the formal economy and a gateway to greater economic security and personal empowerment. When women-headed households in Kenya adopted mobile money accounts, poverty dropped, savings rose, and 185,000 women left agricultural jobs for more reliable, higher paying positions in business or retail. In Niger, distributing government benefit payments through a mobile phone instead of cash helped give women who received the transfers more decision-making power in their households. Overall, strong progress has been made with financial inclusion in Africa. Between 2011 and 2017, the share of adults with financial accounts in the region grew from 23% to 43%, driven largely by growth in mobile money. Although East Africa has seen the most dramatic gains, West and Central Africa have also seen rapid uptake in recent years, bolstered by enabling regulatory policies.
Many of these countries also experienced a sharp uptick in financial inclusion rates among women. Between 2011 and 2017, the number of women with their own account doubled in Kenya and Ghana and increased seven-fold in Senegal. In some countries, mobile money has emerged as an equalizing force. For example, in Côte d’Ivoire, the gender gap in access to financial institutions grew by 90% between 2014 and 2017, yet the gender gap on mobile money decreased by 35 percent. Despite this progress, women remain disproportionately excluded from the formal financial sector. As shown in the table on page 6, complex social, cultural, economic, and legal barriers stand in their way. For example, Cameroon, Chad, Gabon, and Niger have regulations that prevent women from opening a bank account in the same way as men. [Melinda Gates pushes G7 to close digital gender gap in Africa; UNDP, AUC to implement African Young Women Leaders Fellowship]
Competition law crosses the digital threshold (UNCTAD)
The disruptive effects of big technology companies on digital and offline markets was the subject of intense discussion at last week’s UNCTAD meeting on competition law and policy. Governments gathered for a three-day meeting (10-13 July, Geneva) with three main issues in their crosshairs: Competition law and the digital economy, Competition in health care services and pharmaceuticals markets, and International cooperation in tackling cross-border anticompetitive practices and mergers. “At a global level competition policy goals don’t need to change – they are sufficiently flexible to accommodate changes in the digital economy,” the University of Melbourne’s Prof. Caron Beaton-Wells said in her keynote address to the meeting (pdf). “But the toolkit needs to be tweaked and enforcement needs to be bolder and quicker.” Prof. Beaton-Wells: “The United States’ and China’s technology giants generate 90% of digital revenues. The same companies are penetrating sectors in the non-digital economy, disrupting traditional business models, in areas such as retail trade and financial services.”
Philip Marsden, the deputy chair of the Bank of England’s enforcement decision making committee: “They’re wonderful and life changing, but at the same time exhausting and very demanding. We have to remember that they have a mommy and a daddy. Who’s that? That’s us, the regulators. We know what the tech giants want. They want our data and they want to make money off it. Enforcers have to run faster to face digital era challenges. We officials cannot wait for the glacial evolution of the judicial precedent, we have to lead it. It is up to us to ensure Big Tech run competitively in the market race,” Mr. Marsden said.
Profiled presentation: pdf Competition Commission of South Africa (336 KB) : These global giants pose a particular enforcement challenge for smaller developing country markets whose own economies are dwarfed by the valuations of these companies. There is a limited ability to effectively challenge global merger activity or pursue complex market conduct cases given the relative unimportance of our markets to these firms. This is particularly the case for those without a strong in-country physical presence, such as search and social media companies, as the regulatory reach is far more limited with most evidence located elsewhere. For this reason, the Commission is of the view that there is a greater need for coordinated enforcement action both regionally and globally. Regional or continental coordination in the case of Africa is also an imperative. This will provide more leverage in dealing with issues that may have a regional or continental dimension, such as development imperatives or digital firms with a stronger regional presence than their position globally.
Intra-African free trade deal success hinges on implementation and speed of execution (Business Day)
For example, to support the expected increase in intra-Africa trade of $119.6bn by 2022, it will require nearly $40bn in trade financing alone. To achieve growth to the value of $27.9bn in industrial goods by 2022, an estimated $9.3bn in trade financing will be required. On the other hand, to support the projected growth in agricultural goods of $5.7bn by 2022, as much as $1.9bn in trade financing will be required. This is a big challenge for African banks in particular and will require flexibility in risk assessments and financing requirements as the African Development Bank already estimates that there is a trade-financing deficit of at least $90bn in Africa as of 2018. African banks, especially to regional banks like the Absa Group, Standard Bank and Ecobank, will need to adopt new ways of assessing risk in trade in order to support corporates as they take advantage of new growth and trade opportunities in Africa. This is important, as strong regional banks have proved to be key in regional economic and trade development in other regions such as Europe, North America and Asia.
The continent will also have to make sure that the benefits do not only accrue to bigger economies such as SA, Nigeria, Egypt, Angola and Kenya if it wants to avoid its own “Brexit” from some of the countries as the agreement matures. This will require careful balancing between opening the markets and protecting smaller players in the markets. [The author, Bohani Hlungwane, is Absa regional head of trade & working capital (ex-SA)]
VAT Administrators in Africa deliberate on revenue mobilisation in Accra
Deputy Commissioner-Small Tax Payer, Ghana Revenue Authority, Daniel Edisi, indicated that about 40 tax administrators from seven countries (Rwanda, Malawi, Uganda, Tanzania, Lesotho, Sierra Leone, Ghana) would partake in this year’s event, organised by VAT Administrators in Africa. Welbeck Asare Asamoah, Executive Secretary of VADA: “It is essential that revenue authorities are abreast with how to track revenue in e-commerce and how to efficiently partner with the telecommunication industries to rake in revenue to help the economy.”
Contextualizing Ethiopia’s recent economic performance: Abebe Aemro Selassie’s keynote address
What has differentiated Ethiopia’s performance? Growth in Ethiopia, on average, has been 8.1% in 2000-10 and 9.5% in 2010-18 - this compares with 5.6% and 5.9% respectively in other fast-growing countries in sub-Saharan Africa. I will look at the composition of growth in a couple of different ways in the next two slides. Here, I focus on the last four decades and rely on a sample of sub-Saharan African and non-sub-Saharan African comparator countries with similar levels of income as Ethiopia and which have witnessed high growth in recent years. What Next? Second, there is a strong need to boost export growth by creating room for higher levels of domestic and foreign private investment. While the export mix has diversified in recent years and manufactured exports are growing at double-digit rates, the levels of most new export lines remain low and, as noted above, the overall export to GDP ratio is declining. Coupled with the higher debt level, this makes the country vulnerable to external shocks and potential difficulties in servicing its debt obligations. Policies need to continue to focus on reducing these external vulnerabilities and achieving the medium-term goal of improving competitiveness and the business climate. To the extent that export diversification can stimulate resource reallocation towards higher-productivity sectors, it will also contribute to higher long-term growth potential. [Note: Ethiopia’s SSA comparators are Senegal, Rwanda, Tanzania, Kenya, Uganda, Ghana. Non-SSA comparators are Egypt, Tunisia, Vietnam, Bangladesh, Cambodia. The author is Director, Africa Department, IMF. This speech was delivered at the International Conference on the Ethiopian Economy]
Tanzania Economic Update (World Bank)
Declining exports and surging imports are widening the current account deficit. The CAD has widened because of lower cashew exports and higher imports of capital goods. It reached 5.2% of GDP in the year ending January 2019, up from 3.2% a year earlier, as exports declined and imports surged (Figure 13 and Figure 14, pdf). The value of exports dropped 3.9%, largely because cashew exports shrank from $529.6m to $196.5m. Meanwhile, the value of imports went up by 7.8% as capital imports rose from $2.7bn to $3.2bn. Launch of major public investment projects, such as the standard gauge railway and expansion of the port of Dar es Salaam, has required imports of building and construction materials and transport equipment. Unlike goods exports, earnings from services exports have gone up. Though slight, the $189m increase in earnings from services more than offset the $56m rise in payments for services. The earnings from services were largely driven by travel activities, especially more tourist arrivals, and transportation of goods to and from neighboring countries. The small rise in payments for services was mainly for transport and related services. [World Bank contradicts Tanzania’s economic growth estimates]
Côte d’Ivoire Diaspora Forum: The untapped potential of remittances (UNECA)
Remittances from the diaspora are an important source of income for African economies, which could be making a huge impact on the ground if exorbitant charges were slashed, says ECA’s Acting Director for the Sub-Regional Office for West Africa, Bakary Dosso. Speaking at the 3rd edition of the Ivory Coast’s diaspora forum he said remittances from the Africa diaspora were growing every year but continued to be eroded by high charges. He also spoke about diaspora investments in West Africa, which, he said, were on the rise. According to Mr Dosso, migrant remittances in 2017 were estimated at over $77bn for the whole of Africa and $31bn for West Africa. Five countries in West Africa were among the top 10 countries that received the largest amounts in remittances in 2017. These are Nigeria ($22bn), Ghana ($3.5bn), Senegal ($1.9bn) and Mali and Togo with $827m and $$403m. Côte d’Ivoire received $342m during the same year. “It is important to note that remittances as a percentage of GDP account for 12% of GDP in Liberia, 9% and 8.5% of GDP in Senegal and Togo; and 7.3% and 6% of GDP in Ghana and Nigeria. This indicator is estimated at 0.8% for Côte d’Ivoire.” Prime Minister Coulibaly said Côte d’Ivoire ranked 18 among African nations receiving remittances – in 2008 it received $199m which rose to nearly $380m in 2017, an increase of 91%. “Our country must meet the challenges of supporting the diaspora in its socio-professional integration.”
Structured Discussions on Investment Facilitation for Development: speech by WTO DG Roberto Azevêdo (WTO)
With this in mind, a look at the current trends gives some cause for concern. Last year, global flows of foreign direct investment fell by 13%, to $1.3 trillion. This represents the lowest level since the global financial crisis and confirms the stagnation of international investment this decade. This is very concerning. Therefore, in order to harness the development benefits of trade and investment, including meeting the Sustainable Development Goals, it is vital to create a regulatory environment that is conducive to attracting and expanding investments. Key elements here are the transparency and predictability of policies and regulations, and more efficient administrative procedures to deal with investments. These are precisely the core elements that you have been discussing all along.
The Standards and Trade Development Facility: Independent evaluation outcomes (WTO)
The Standards and Trade Development Facility is responding to the needs of developing countries by improving their capacity to meet sanitary and phytosanitary (SPS) standards and to unlock trade opportunities, according to an independent evaluation published on 17 July 2019. The report covers the performance of the STDF over the last five years. A new STDF strategy, drawing upon the recommendations, is due to be launched at the end of 2019. Profiled case study: Uganda. Major constraints to SPS and trade for agricultural sector. Uganda faces many challenges in the control of SPS. These are prevalent at the policy level, institutional level and the private sector operators’ level. With such widespread difficulties, systematic change is required to unlock trade opportunities in agriculture. Currently Uganda faces multiple crises in export due to SPS/food safety issues with frequent interceptions (both alerts and rejections) in both of its main markets of Kenya and the EU. At a policy level, Uganda’s SPS framework suffers from out-dated legislation and political interference, which results in a loose system of control. Firstly, the legislation in Uganda for SPS measures is contained within the Food and Drugs Act, which is now 50 years old. Moreover, the “food” part was never enacted, meaning that subsidiary legislation was never developed in Uganda and so in many cases, there is just not any provision for SPS controls, and given the age of legislation, there are no provisions that relate to border control and other trade aspects (such as no legal requirement for health certification for exports). While it has been recognised that new legislation is required, there is no consensus among key players, namely the Ministries of Health, Agriculture and Trade, who are not in agreement regarding either scope or responsibilities, with much of the focus on territorial concerns. Moreover, SPS agencies are often headed by non-technical persons who are politically motivated and driven, and not necessarily best placed to drive through SPS or food safety controls and measures. This all results in a disjointed framework that cannot develop to meet the modern requirements of trade in agriculture and agri-processed products (or national disease, pest and/or food safety control), and in action by public authorities that maintain the status quo. [Available downloads: The full report, Executive summary, Methodology and findings (chapter 2, 3), Conclusions and recommendations (chapter 4)]
Today’s Quick Links: SADC Harmonised Consumer Price Indices: May 2019 African Regional Conference on efforts to “localise” international humanitarian aid New book highlights key outcomes from WTO Ministerial Conferences |
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tralac’s Message on Mandela Day 2019: Good Governance and the State
Mandela Day serves to remind and inspire us to strive for social justice. This is the complex and multi-faceted challenge to adopt policies and strategies for addressing poverty and inequality and to promote economic development; and to do so under the guidance of the right compass and within the broader regional and multilateral context. Good Governance will only be achieved through dedicated effort, inclusivity, transparent structures, and vigilance. This is true for national, regional and multilateral levels of governance.
The Mobile Economy Sub-Saharan Africa 2019: SSA’s mobile economy valued at over $150bn in 2018
Sub-Saharan Africa will remain the world’s fastest-growing mobile region over the coming years as millions of young African consumers become mobile users for the first time, according to a new GSMA study. It reveals that more than 160 million new unique mobile subscribers will be added across the region by 2025, bringing the total to 623 million, representing around half of the region’s population, up from 456 million (44%) in 2018. Subscriber additions will be concentrated in high-growth markets such as Nigeria and Ethiopia. The study calculates that the mobile ecosystem across Sub-Saharan Africa generated almost $150bn in economic value last year – equivalent to 8.6% of the region’s GDP. It is forecast to generate almost $185bn (9.1% of GDP) by 2023. Goodluck Akinwale, head of Sub-Saharan Africa, GSMA: “With mobile technology at the heart of Sub-Saharan Africa’s digital journey, it is essential for policymakers in the region to implement policies and best practices that ensure sustainable growth in the mobile industry, and enable the transition to next-generation mobile networks.”
Olu Fasan: Nigeria’s signing of AfCFTA must be meaningful, not perfunctory (Business Day)
However, the immediate action must be to ratify the AfCFTA agreement, because treaties are not self-enforcing in Nigeria. In its 2017 trade policy review, Nigerian officials cited “the difficulties in the domestication” of its WTO commitments for its failure to meet the commitments. Therefore the 9th National Assembly must speedily domesticate Nigeria’s AfCFTA commitments. What’s more, Nigeria must also create other relevant institutions and laws, including a robust trade remedies regime to deal with injurious trade practices, a key concern. Nigeria must seek international support, such as within the aid for trade framework, to build those institutions. But the biggest challenge is the policy mindset. AfCFTA is not compatible with Nigeria’s protectionist practices, such as import restrictions. However, free trade agreements often serve as external constraints on domestic protectionist measures and as a trigger for far-reaching domestic reforms. Thus, Nigeria must use AfCFTA to transform its domestic policies and institutions. That way, its signing of the agreement won’t be perfunctory, but meaningful.
Adu Owusu Sarkodie: Ghana hopes to benefit from hosting Africa’s free trade area secretariat (The Conversation)
Ghana’s hope is that hosting the secretariat will boost the hospitality sector – and more broadly the services sector – and generate increased international exposure. There should also be a boost for job creation as the secretariat hires staff; ranging from economists to translators, administrators and technicians. There is no clear deadline on when the secretariat is expected to be up and running. The AU itself still has to clear a number of hurdles,, including adopting a structure, staff rules and regulations, and the secretariat’s budget.
US to establish West African Trade Hub in Nigeria (The Cable)
Representatives of the US government say plans are underway to establish the West African Trade Hub in Lagos and Abuja. Grace Adeyemo, director of the Nigeria-American Chamber of Commerce, said this at a conference for Prosper Africa, an initiative of the US government targeted at “creating an enabling environment for foreign and direct investment” in African countries. Adeyemo expressed optimism about the economic prospects of the President Donald Trump-backed trade initiative, which, according to her, prompted the decision to move the trade hub into Nigeria.
The AfDB’s Zimbabwe Country Brief 2019-2020, Country Portfolio Performance Review
The Country Brief 2019-2020 is a short-term programming framework for the Bank’s operational activities in Zimbabwe. This is in accordance with the Bank’s Operational Guidelines of the Transition Support Facility. Its objectives are to update the Board of Directors on recent political and economic developments in the country, articulate challenges, opportunities and lessons to guide the Bank’s future operations. It builds on the achievements of the CB 2013-2016 (initially approved in 2013) to provide a programming framework for the period 2019-2020, and makes a case for the country’s eligibility to access resources under ADF-14 and 15. It should be noted that the country had no new strategy between end December 2016 and December 2018, pending finalization of discussions on arrears clearance. In 2016, an Interim Strategy Paper was prepared in anticipation of arrears clearance by the end of that year. However, following lengthy negotiations with the government and failed meeting of targets to clear the arrears, Management made a decision to prepare a new CB starting with a completion report for the previous CB, which was endorsed by CODE on 16th November 2018. Extract: Section 2.1.35 Regional Integration:
Being a landlocked country, regional integration is important for Zimbabwe’s growth and development. Its central geographic position in SADC region makes it a critical transit country and therefore key to regional trade. However the country’s infrastructure has deteriorated resulting in transporters having to take longer routes by-passing Zimbabwe to move goods mainly from South Africa into the sub-region. With regards to power transmission, Zimbabwe holds great opportunity for the evacuation of power from the Grand Inga as well as the Batoka Gorge Hydro Generation projects. Given the weakening external position, the GoZ has inconsistent import controls policy, often putting it on collision path with its trading partners, especially South Africa. From a fragility point of view, the poor economic performance of the Zimbabwean economy has had a negative impact on the sub-region, while weakening economic conditions in South Africa also present increasing risks to Zimbabwe. [Background: AfDB’s 2018 Zimbabwe Economic Report, pdf]
The Zambia Economic Brief, Wealth beyond mining – leveraging renewable natural capital, is posted
The external sector weakened in 2018. The current account balance weakened from a deficit of 1.7% of GDP in 2017 to 4.1% in 2018, reflecting increased deficits in income and services accounts amidst a narrowing trade surplus. Both exports and imports of goods and services increased in 2018 relative to 2017, but imports rose at a much faster pace of 17% (to $10.2bn from $8.7bn) than imports (10% from $9.1bn to $10.0bn). The growth of exports particularly moderated in H2 2018 where copper prices fell by an average of 11% below their H1 2018 level. As a result, the balance in goods and services deteriorated from a surplus of $351m to a deficit of $210m (Table 3, pdf). The deficit on primary incomes narrowed from $1.1bn to $407m, largely on account of a sharp decline in primary income outflows. The balances on secondary incomes declined from $359m to $276m, reflecting a decline in grants and remittances. Summing up these developments, the deficit on the current account widened to $1.1bn in 2018 from $428m in 2017.
Egypt Economic Monitor: Taking Egypt’s exports to new levels (World Bank)
The severe foreign currency crunch that peaked in late 2016 motivated the GOE to introduce transformative economic reforms to alleviate the longstanding structural constraints to inclusive growth and macroeconomic stability. The flagship reforms of the economic program were (i) the liberalization of the exchange rate to eliminate the large currency overvaluation and foreign exchange shortages; (ii) a fiscal consolidation program that introduced a VAT and a gradual reduction in energy subsidies and the wage bill, and (iii) major energy sector terms to address power outages by public and private investment in generation and establish Egypt’s potential as an oil and gas producer by reducing pricing distortions and arrears. These reforms were complemented by efforts to improve the business climate and attract private investment, starting with legislative reforms and the introduction of new laws on industrial licensing, investment, and insolvency. Macroeconomic indicators have reacted positively to the stabilization reforms.
Extract from the accompanying research paper, From currency depreciation to trade reform: how to take Egyptian exports to new levels? (pdf): Table A.7 shows that Egypt is under‐trading with 63% of destinations, with African countries representing half of these destinations. The other half encompasses other small Asian and European countries and American and Pacific islands. At the same time, the country is over‐trading with around 20% of the markets, mainly with the USA, EU countries, China, Japan, Canada and some Asian countries, compared to the expected levels. The remainder 10% of Egypt’s trade partners has an index close to 1 (from 0.90 to 1.10), pointing out that the observed level of trade is in line with the expected level. At the product level, Egypt is under‐trading in 53% of the products, over‐trading in 13%, while 32% of its products are in line with the expected level of trade. Surprisingly, some of the under‐traded products are among those in which Egypt has a comparative advantage such as textiles, garments, fertilizers, chemicals and wooden products (Table A.10 in Appendix 2). This suggests that even in these promising sectors, Egypt is not exploiting its full trade potential, which raises questions around other factors that may hinder the development of these exports sectors.
Angola: World Bank approves new package of projects
The World Bank Board of Executive Directors approved a package worth $1.320bn from the International Bank for Reconstruction and Development to support the government of Angola in its efforts to promote more inclusive growth, improve water services, and strengthen the national social protection system. The approved package will finance the following three projects: Growth and Inclusion Development Policy Operation, Luanda Bita Water Supply Project, Strengthening the National Social Protection System Project.
UNCTAD’s Liner Shipping Connectivity Index 2019
China has retained its lead as the country best connected to others by sea, the index shows. The country’s LSCI has increased by 51% since 2006. “A country’s position in the global container shipping network – its connectivity – is an important determinant of its trade costs and competitiveness,” said UNCTAD’s chief of trade logistics, Jan Hoffmann. Five of the top 10 best connected economies in 2019 are in Asia, with Singapore, Korea, Hong Kong (China), and Malaysia rounding out the top-five list, each with a score of more than 100, according to the index’s metrics. At the other end of the table, small islands developing states (SIDS) have hardly seen any improvement, meaning trade in shipped goods remains problematic in those countries, with knock-on economic effects. “We observe a ‘connectivity divide’ – a growing difference – between the best and worst connected countries,” Mr. Hoffmann said.
Shape up or ship out: Africa’s ports threatened by cleaner fuel targets (The National)
In just six months the world’s cargo shipping fleet will have to switch to cleaner burning fuel, and ports globally are preparing for the change. In January the International Maritime Organization will implement a new benchmark for the bunker fuel that the vast majority of ships use to power themselves across the oceans. Sulphur found in ship emissions must be slashed from the 3.5% global limit currently in place to 0.5%. Ships are a major source of greenhouse gas emissions. For Africa-directed commerce, the question is how ready are the 172 ports that line the continent. Only a handful have adequate refining capacity, mostly in north Africa. For most, petroleum products including bunker fuel must be sourced from international markets and imported. South Africa, one of the few countries with domestic refining capacity, is preparing for the changes, according to the country’s Maritime Safety Authority (MSA). However, the country is still coming to grips with the details of the plan, such as the proper handling of ships coming into South African ports without the compliant fuel, the availability of facilities to test fuels in use by ships and the handling of vessels using non-compliant fuel but fitted with sulphur reducing equipment, among other issues.
2019 External Sector Report: the dynamics of external adjustment (IMF)
After narrowing sharply in the aftermath of the global financial crisis, overall current account surpluses and deficits reached 3% of world GDP in 2018, declining marginally while rotating toward advanced economies in recent years. The IMF’s multilateral approach suggests that about 35–45% of overall current account surpluses and deficits were deemed excessive in 2018. The 30 systemic economies analyzed in detail in this report (which includes South Africa) and included in the individual economy assessments are listed in Table 3.B. They were generally chosen on the basis of a set of criteria, including each economy’s global rank in terms of purchasing power GDP, as used in the IMF’s World Economic Outlook, and in terms of the level of nominal gross trade and degree of financial integration. [Transcript of the External Sector Report press conference]
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Digging beneath the surface: an exploration of the net benefits of mining in Southern Africa (World Bank)
Many ex-miners suffer from vocational diseases to this day. While mining has helped build the economies of Southern Africa, it has come at social and environmental costs that cast a long shadow. Inequality is also high in many Southern African countries, suggesting that mining has not translated into inclusive growth. This report attempts to examine and weigh the various benefits and costs that mining has brought to the Southern Africa region. Data limitations are significant, restricting authoritative conclusions on whether the benefits from mining are positive or negative, on balance, for Southern African societies. The emphasis of this report is thus on taking stock of various benefits and costs associated with mining, while drawing on available information and thought experiments to highlight the potential trade-offs and how they affect stakeholder groups: workers, investors, governments, communities, and the rest of the economy. The countries this report focuses on are Botswana, Lesotho, Eswatini, Namibia, South Africa, Zambia, Zimbabwe. Extract (pdf):
Even though this study finds that the net benefits of mining are positive for Southern African societies overall - keeping in mind the data constraints in deriving this conclusion — there is still room for contestation. This contestation can link to the overall amount mining is expected to contribute to an economy, with governments developing requirements designed to foster greater linkages (referred to as “beneficiation”). Or it could be about the overall distribution of income from the proceeds of the production process, with governments trying to capture a higher share of the rent, workers and communities trying to obtain higher wages or benefits or demanding better compensation for the costs they incur. Such contestation can become particularly tense when external pressure increases, say due to falling commodity prices, or due to changes in the production process, such as mechanization, impacting jobs. Such conflict can be further fueled by incomplete transformation due to opaque reporting or accounting practices, which can undermine trust during negotiations. The study shows that these social dynamics at times result in policies (or actions such as strikes) that can reduce the commercial viability of mining, limiting investment and potentially causing the closure of mines. In other words, where the benefits and costs are considered to be inequitably distributed, the process of unlocking mineral wealth grinds to a halt altogether.
Zambia’s wealth beyond mining: leveraging renewable natural capital (World Bank)
Zambia’s path to economic recovery remains weak, reflecting both exogenous and policy uncertainties, says the latest World Bank’s Economic Brief on Zambia. Despite the Zambian economy growing by 3.7% in 2018 from 3.5% in 2017, a stronger recovery was undermined by lower crop harvest and fiscal slippages that led to the accumulation of new public expenditure arrears and high government borrowing that impacted private sector activity. Under the current policies, growth is forecast to weaken to 2.5% in 2019 and remain below 3% over the medium-term. While inflation remained within the authorities’ target range of 6-8% in 2018, averaging 7.5% for the year, pressures are now mounting, leading the central bank to tighten its monetary policy stance in May 2019 for the first time in over two years. The brief suggests some policy options including (i) front-loading fiscal consolidation to return to medium risk of debt distress and create fiscal space for inclusive growth; (ii) strengthening debt management to reduce the debt service burden and minimize debt related vulnerabilities; (iii) rebuilding foreign exchange reserves to buttress external stability, and (iv) implementing plans to improve the financial and operational sustainability of ZESCO and enhance the transparency of State-Owned Enterprises.
pdf Central Africa Regional Integration Strategy Paper 2019-2025 (9.47 MB) (AfDB)
This Central Africa Regional Integration Strategy Paper explains how the African Development Bank Group will work towards making this vision a reality over the next seven years. The Bank’s investments in regional operations in Central Africa grew 15% between 2017 and 2018, reaching $1.1bn in August 2018. Over 2019 to 2025, investment will rise to $4.4bn – 88% in hard infrastructure and 12% in trade facilitation and capacity building. Implementing the RISP-CA will require investments of UA 3.185 billion, corresponding to 30 regional operations over a seven-year period (2019–2025). About 88% of the planned funding will be devoted to reinforcing regional infrastructure (energy, transport, and information and communication technology) while 12% has been earmarked for developing intra-regional trade and building institutional capacity in regional economic communities. The Regional Integration Agenda: status, challenges, opportunities, and lessons learned:
Central African intra-regional trade (trade within ECCAS) accounts for barely 2% of the region’s total trade. This situation is due to several factors, including the low production of tradable goods, an embryonic industrial fabric, a shortage of infrastructure, numerous tariff and non-tariff barriers, and countries’ reluctance to implement reforms for the free movement of goods and persons. The ECCAS zone has five tariff profiles: CEMAC’s common external tariff, the East African Community (Burundi and Rwanda), Angola, DRC, and Sao Tome and Principe.
The Central African region’s business climate does not attract sufficient investment or stimulate the private sector. Per capita foreign direct investment flows in the ECCAS zone fell by 55% between 2011 and 2015, dropping from $337.6 to $153.20. Most local investments come from supplier credits, forcing companies to mobilize their cash flow, profits, and depreciation provisions. The region’s financial system, which is mainly dominated by the banking sector, is not dynamic enough. This hampers the region’s ability to finance economies as a means to develop regional markets. For example, in the CEMAC zone, total assets are estimated at 25% of regional GDP and the sector’s activity is dominated by banks whose business model is mainly based on a restrictive credit policy whose high fees are a barrier to all but large companies. Access to finance for small and medium-sized enterprises is limited and constitutes a major challenge in the region. As at 31 December 2016, CEMAC’s banking system counted 52 banks that provide very little medium-term financing (3 to 7 years) and impose rigid access conditions. Long-term financing (over 7 years) is scarce and accounts for 3% of loans. Finally, the proportion of companies with a credit line is 9% in Central Africa versus 23% in sub-Saharan Africa, and the self-financed investment rate of Central Africa companies is 93% compared to 79% in sub-Saharan Africa.
Ensure 3-years of economic stability before adopting Eco: Professor Quartey (GhanaWeb)
Morocco and the IMF:
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Executive board concludes 2019 Article IV Consultation. Morocco’s medium-term prospects remain favorable, with growth expected to reach 4.5% by 2024. However, this outlook remains subject to significant domestic and external risks, including delays in reform implementation, lower growth in key partner countries (particularly the euro area), higher oil prices, geopolitical risks, and volatile financial conditions. On the upside, lower international oil prices could help further strengthen the economy’s resilience and increased regional integration in the Maghreb region could become an added source of medium-term growth for Morocco.
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pdf 2019 Article IV Consultation Staff Report (2.35 MB) . Morocco’s current account is characterized by large trade deficits, a tourism-driven surplus in services, and strong remittances. The trade deficit is highly sensitive to external demand, particularly from the Eurozone (2/3 of export market), and the price of oil, of which Morocco is one of the largest net importers. Since 2012, the sharp decline in oil prices has helped shrink the share of oil imports as percent of GDP from 12.6% in 2012 to 5.4% in 2016. However, with higher oil prices, the share of oil imports recovered to 7.4% of GDP in 2018. At the same time, the composition of exports has gradually shifted toward higher value-added sectors, with automobile exports overtaking the traditional export engines: phosphate and textiles. Tourism receipts, at about 6,5% of GDP, have remained robust despite the low euro. [See Figure 4: External Developments, 2009–19]
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pdf Selected Issues (865 KB) . This paper assesses the potential reaction of output and employment to different reform scenarios in Morocco. We focus on two broad reform categories emphasized in the literature as having significant potential for promoting growth and employment in emerging markets: reduction of firm’s barriers to entry, and improvement in labor market policies and human capital.
Four AfCFTA updates: South Africa, Ghana, Nigeria, NTB online tool
AfCFTA offers SA the chance to become a more industrialised manufacturer. As countries begin to implement AfCFTA, regional and continental trade, their markets will become more integrated and it will be easier for companies to integrate into regional and global supply chains. Original equipment manufacturers across Africa are increasingly interested in the opportunities these developments are creating for increased trade and investment, at a time when the US government is increasing its efforts to support more trade and investment in and with African countries. It’s thus important that Africa harnesses and observes these evolving opportunities across the continent. AfCTA will allow goods and services for 1.2-billion people to truly utilise an intra-African trade model. The biggest challenge in terms of creating a single market in Africa has to do with the relative imbalances that exist. In order to ensure its sustainability, a single market in Africa would have to be fair to all and one from which everyone can benefit. Such a market would depend on two-way flow and mutual benefit, so there could not be one dominant ‘player’. Going forward, we perhaps need to look at trading blocs in north, south, east and west Africa; and at creating component movement within these trading blocs as well as between them. [The author, Mike Whitfield, is the Chair of Nissan Group of Africa]
Ghana’s export-oriented SMEs and the AfCFTA: roadmap for Africa Free Trade Area to be drawn. Following the official launch of the five operational instruments to govern the working phase of the AfCFTA agreement last week, key stakeholders in Ghana’s export and trade sectors have initiated moves to draw a roadmap to maximize the potential benefits of the trade policy by local producers of goods and services. This is under the auspices of the Ghana Export Promotion Authority, in collaboration with the Africa Centre for Economic Transformation, bringing together representatives from the Ministry of Trade and Industry, International Chamber of Commerce, the Institute of Statistical, Social and Economic Research as well as some trade technocrats. The roadmap is aimed at setting modalities for export-oriented indigenous SMEs to harmonize trade strategy for exploiting the benefits and opportunities as well as ameliorating key challenges of the policy. In Ghana, it is estimated that SMEs contribute more than 70% of Ghana’s GDP and account for 92 out of every 100 businesses. [GUTA: Importers, consumers reaping from Akufo-Addo’s import duties cuts]
AFCTA agreement will benefit workers, open Africa trade relations. The president of the Nigeria Labour Congress, Mr Ayuba Wabba, on Tuesday commended President Muhammadu Buhari for signing the AfCFTA. He said the agreement would benefit the lives of Nigerian workers and open trade relations in the region. “Critically, we said that our jobs must be protected, Otherwise, our jobs will be taken away and the unemployment situation will continue. What we, organised labour, are impressed with is actually the consultation process that went into the process. If policies are about the people, then they should be consulted and that is the hallmark of it. It was because we shouted that people started asking questions about the content of the agreement. So, how do we sign what we are not aware of? We don’t just join the bandwagon. Africa is about Nigeria. Some of those countries that signed earlier are less than local government in Nigeria. If Nigeria has not signed the agreement, it means Africa has not signed it because we are the largest economy in Africa and also the key market in Africa. What we are impressed with and have canvassed that all other policies should be tailored along is the consultations. We have also insisted that it should be made in Africa goods and it should be strictly trade among African countries and that you import goods from other parts of the world, dump them in one African country and begin to flood our market with the goods. That is not part of the agreement because it is going to affect our economy and we will be at the receiving end.”
An innovative online tool by UNCTAD and the AU is set to help African countries navigate non-tariff barriers. Buy-in and ownership by the AfCFTA member states is the main reason this mechanism will work, UNCTAD economist Christian Knebel said. “Over several negotiating rounds, the online tool was reviewed and approved by technical experts, chief negotiators, senior trade officials, ministers of trade and finally launched by heads of state. There was a strong commitment to implementing the mechanism and achieving inclusiveness for small traders.” The tool will be managed by the African Union through the AfCFTA Secretariat, to be based in Ghana. An NTB coordination unit in the secretariat will manage the system and facilitate the resolution of reported barriers between countries. Governments have committed to appointing national focal points to help resolve NTBs. These officials are mandated to receive NTB complaints in real-time and resolve them within given deadlines to enhance and facilitate intra-Africa trade.
International trade in services: 2019 Quarter 1 (pdf, Unctad)
World services exports remained at the level of the previous year in the first quarter of 2019 (measured in current United States dollars, year-on-year). The most recent estimates point to a slight downturn in transport and travel exports since the beginning of the year, offset by an increase in international trade of other services. In general, the growth observed over 2018 has receded. On the regional level, Europe registered a decline in services exports (-2.1%). Asia and Oceania - the growth leaders - recorded an increase (+3%), mainly owing to exports of other services (+4.8%). The figures from Latin America and the Caribbean revealed a considerable weakening (-4.3%) of other* services trade. While the trade in transport dropped overall in the first quarter of 2019, Latin America and the Caribbean witnessed a rise of exports in that category (+2%).
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Kenya: Ruto, Raila jointly launch national export strategy (The Standard)
Deputy President William Ruto and Opposition chief Raila Odinga yesterday launched a national export strategy aimed at bridging Kenya’s trade deficit. In a rare public display of unity, the two political rivals sat side by side while launching the policy document the pdf Integrated National Export Development and Promotion Strategy (4.44 MB) . The event was marked in Nairobi, where the Kenya Trade Week also started yesterday. Ruto expressed concerns about Kenya’s trade deficit, saying the country lagged behind. “It is clear Kenya’s export numbers are lagging behind; others in the global market,” said Ruto, adding: “We need to solve this problem. Our trade deficit is close to a trillion shillings.” Ruto said the policy document would help grow the Kenyan export share as a percentage to the country’s Gross Domestic Product from eight to 22% per cent. Raila complained about Kenya’s energy sector, saying it was hampering investment. “To do value addition you need a lot of power. Energy costs currently are too high. When the cost stands at 16 cents per unit, you cannot compete effectively internationally. You cannot compete with someone who pays 3 cents for power.”
Kenya: High exports cut current account deficit to 4.2% (Business Daily)
Kenya’s current account deficit narrowed to 4.2% of GDP in the 12 months to May from 5.8% in the corresponding period in 2018 buoyed by higher horticulture and tourism inflows. By the end of last year, the deficit stood at 5%, but has been progressively narrowing this year. In the 12 months to April the deficit stood at 4.5%, meaning the country’s position improved in May. “This reflects strong performance of exports particularly horticulture, resilient diaspora remittances, and higher receipts from tourism and transport services. Lower food imports also contributed to the narrower trade balance,” said CBK in its latest weekly bulletin (pdf).
Kenya’s open borders spell doom for struggling farmers (The Standard)
As a share of total imports, Kenya’s food imports have increased from 7% in 2008 to 10% last year, with the country’s imports dependency ratio (IDR) getting worse. According to figures by the FAO, Uganda, Ethiopia, Tanzania, and Rwanda, have lower cereal imports dependency ratio, meaning most of their domestic supply of maize, wheat, rice, and other cereals are produced locally. With a three-year average of 32.7% between 2011 and 2013, Kenya has the highest cereals IDR, higher than Africa’s average of 28.9%. Ethiopia’s dependence on imported cereals is at 7%, Uganda (8.6%), Tanzania (12.2%) and Rwanda (32.5%). To agricultural experts, sufficient supply of cereals is an indicator of food security in a country. Most of Kenya’s imported food comes mainly from Uganda and Tanzania. The rest, especially processed, is brought in from Asia and Europe. Imports of primary foods such as maize, onions, tomatoes, garlic, beans, eggs, tea, milk, citrus fruits have increased eight-fold in the last 10 years in value - from Sh3 billion in 2008 to Sh25 billion in 2018. Most of these foods and beverages have come from Uganda, Tanzania, and Ethiopia. [KNBS: Enhanced food balance sheets for Kenya 2014-2018 results]
Namibia: Charcoal industry now employs some 10 000 workers (New Era)
The charcoal industry in Namibia is experiencing an unprecedented boom with a growth of 42% in tonnages, according to the latest year-to-year figures. The blossoming industry also recorded a dramatic increase of 66% in production value, the State of Namibian Agriculture, a study by the Namibia Agricultural Union has revealed. Normally the industry is the supplier of some 6 000 jobs, but the current increased activities have pushed this figure up to between 9 000 and 10 000 workers. Considering different and connected factors such as current market demand and the industry’s ability to respond to such demand, it is estimated that Namibian charcoal exports could increase to 200 000 tonnes by 2020. Charcoal – also called Namibia’s black gold – is mainly an export product with valuable contributions towards the GDP of the Namibian economy. Charcoal production is also an important activity for managing bush encroachment in Namibia with an estimated 160,000 tonnes of export volume annually, making it the largest exporter of charcoal in the Southern African region.
Tanzania: Govt to boost tobacco growing communities to boost incomes (IPPMedia)
Prime Minister KassimMajaliwa has said the government is working to find markets for Tanzania’s produced tobacco to boost incomes and improve the welfare of farmers. He made the statement on Sunday when addressing tobacco stakeholders during a meeting held in Tabora region. He said the government has already negotiated with several countries, including Egypt and Vietnam that have promised to purchase the crop.
Can the peace-trade equation stabilise the Horn? (ISS)
Through the AfCFTA’s implementation processes, countries in the Horn could potentially create conditions that would enable them to coexist peacefully. A good example is the Ethiopia-Djibouti relationship. Both have invested more than $15bn for road and rail connectivity. Ethiopia uses the Djiboutian ports for 95% of its foreign trade and has invested heavily in them. Djibouti’s trade with Ethiopia accounts for more than 80% of its GDP, including electricity and water imports from Ethiopia. The region has the potential to effectively implement the AfCFTA, with dividends for peace and security. Trade disputes among Horn countries that might arise as the deal is activated could be resolved through its dispute settlement mechanism. Those responsible for this mechanism must recognise the challenges covered here, and the region’s peace and security dynamics. This is especially so given that one of the Horn’s most devastating wars, between Eritrea and Ethiopia, had trade relations at its heart.
Lesotho: Drought breeds multi-faceted crises for border communities (Lesotho Times)
The recent El-Nino induced drought has spawned a multi-faceted crisis for Basotho communities in the border areas with South Africa who are often forced to illegally graze their livestock in the neighbouring country. Sub Inspector Pita said Basotho nationals took advantage of the porous borders to illegally graze their livestock in South Africa. He said this had created a vicious circle where local and South African farmers stole each other’s livestock. “On this (Lesotho) side there is no veld solely because of the drought and the fact that farmers this side do not practice rotational grazing so they end up stealing or grazing their livestock in the fields of SA farmers. Some Basotho steal the livestock in South Africa and others even steal animal feed to come and feed their own livestock.” He said such practices caused problems for local farmers whose livestock were impounded as they were forced to pay fines in the region of M2500 for the release of each cow.
Women’s Empowerment and Demographic Dividend in the Sahel: resource mobilization roundtable
Pr Mariatou Koné (Ivorian Minister of Solidarity, Social Cohesion and the Fight against Poverty, and President of the Regional Steering Committee of SWEDD), reiterated the objective of the round table (6 July, on the sidelines of the AU Summit), which is to increase the investments of development partners and the private sector to enable the consolidation and extension of the SWEDD project to all 11 countries of the Sahel and beyond. Indeed, following the encouraging results recorded in the beneficiary member countries, the extension of SWEDD was desired. Each of the twelve private sector representatives expressed their support for various aspects of the SWEDD Project, including the training of women and girls, mentoring, project development, equipment provision, women’s entrepreneurship, awareness raising around the project, the granting of scholarships, funding through CSR programmes, etc. [SWEDD partners with Ecobank Foundation]
Nigeria needs radical industrialisation, NECA tells FG (Punch)
The Nigeria Employers’ Consultative Association has urged the Federal Government to reassess its strategies and tailor its policies and reforms towards a radical industrialisation of the country. The Director-General, NECA, Mr Timothy Olawale: “There is no better time for the government, to focus on a radical industrialisation of our country as a means of making it the hub of economic activities in the West African sub-region and also ensure Nigeria benefits maximally from the AfCFTA. We have consistently taken the lazy path of tax increases that stifle and further burden businesses rather than the ingenious way of promoting and stimulating production. Government should demonstrate a bold attempt to industrialise the country and take it out of the woods by embracing a major policy shift from focus on taxation to production. What our economy requires now are radical far-reaching policies like the abolition of the Value Added Tax on real estate sales, financial services and domestic airline ticket sales, and abolishing capital gain tax on sales of shares and import duty on spare parts. Reduction of VAT on small traders to 3%, abolition of import duty on machinery and raw materials, among many others. All these will directly stimulate production and create wealth for the nation and its citizenry.”
China: Ramping up investment in African agriculture (CTA)
Beijing’s main motivation for supporting investments in African agriculture is widely assumed to be securing food supplies for China but this is not supported by data. Africa supplied only 2% of China’s agricultural imports during 2010-15, according to Chinese customs figures, the USDA report notes. And, while much of its technical assistance and aid focuses on rice, China does not import rice or any other grains from Africa. Indeed, FOCAC stressed in its action plan the importance of helping Africa to achieve food security by 2030. Rather, aid flows appear to be designed to build goodwill in African countries, facilitating the entry and profitability of Chinese firms, and building markets for Chinese inputs such as rice seeds. For example, investments by Chinese animal feed supplier New Hope Group, including in Egypt and South Africa, focus on building markets in those countries for its feed.
Going for Growth (OECD)
Slow growth, high uncertainty and rising levels of inequality should prompt policy makers to take urgent action to achieve stronger, sustainable and more inclusive growth, according to the OECD’s annual Going for Growth report. It points out that the weakening of growth comes at a time when globalisation, digitalisation, population ageing and environmental degradation are key forces shaping economic developments. To better manage these megatrends, governments must carefully select, prepare, prioritise and implement country-specific structural reforms that boost long-term growth, improve competitiveness and productivity, create jobs and ensure a cleaner environment and equal opportunities for all. This year’s edition presents the top structural reform priorities in 46 OECD and non-OECD economies, alongside assessment of progress countries have made on key reforms in the past years. It points to a disappointing pace of reforms in 2017-2018, finding little sign of an imminent pick-up from the already modest pace of reform observed in the previous two years. [Chapter 3: The integration of green growth in Going for Growth 2019; South Africa Economic Snapshot; Various downloads]
Grow with the flow: An independent evaluation of World Bank Group support to facilitating trade 2006-17 (World Bank)
Sub-Saharan Africa accounted for 30% of the Bank Group’s trade facilitation projects (a total of 99). However, South Asia had a higher average per country (5.6 projects) compared to Sub-Saharan Africa (3.2 per country). The Bank Group also supported regional trade facilitation projects (12% of the portfolio) mostly delivered through World Bank loans in Sub-Saharan Africa. A total of 46 trade facilitation projects were regional projects, of which 65% were loans and 61% were in Sub-Saharan Africa. These projects focused on facilitating trade but also on improving logistics related to road or other transport infrastructure. These interventions were focused on technology upgrades, risk-based management, agency coordination, and organizational improvements to facilitate trade. Trade facilitation intervention areas also varied significantly by region. Rules and border operations were more common in Sub-Saharan Africa, East Asia and the Pacific, and Europe and Central Asia (See figure 2.2.b, pdf).
Today’s Quick Links: EAC Gazette: 2 July 2019 Ruan Jooste: Chunks of SA’s new competition law hand huge new powers to Trade and Industry Minister Ebrahim Patel Mauritius: Reform in the sugarcane sector a necessity, says Prime Minister World Bank: Decomposing the labour productivity gap between migrant-owned and native-owned firms in Sub-Saharan Africa Small Island Developing States: Mauritius hosts first technical meeting on pooled procurement Cabo Verde: IMF executive board approves new policy coordination instrument Managing for Sustainable Development Results: OECD DAC Guiding Principles (pdf) |
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tralac’s Daily News Selection
Starting tomorrow, in Niamey: Lake Chad Basin Governors Forum 2019. The forum (16-18 July) will assess cooperation and firm up plans for the region’s stabilization.
tralac’s latest Newsletter: Dispute settlement in trade agreements and an update on the AfCFTA
Egypt’s April 2019 trade balance deficit hits $3.87bn (Ahram)
Egypt’s trade balance deficit rose to $3.87bn in April 2019 compared to $3.63bn in April 2018, marking an increase of 6.8%, the Central Agency for Public Mobilization and Statistics (CAPMAS) said on Thursday. Egypt’s exports increased by 0.5% in April 2019, recording $2.58bn compared to $2.57bn in the same period the previous year. The agency attributed the boost to the increase in exports of some products like petroleum products by 231%, crude oil by 35%, garments by 4.8% and plastics by 8.8%. The report showed that Egypt’s imports increased by 4.2% to reach $6.46bn during April 2019. Iron and steel, wheat, plastics and pharmaceutical drugs accounted for most of Egypt’s imports during April.
Kenya: Traders protests over delays at Taveta one-stop border (Daily Nation)
The government’s move to allow traders to import duty free maize to avert a looming shortage has been slowed down by delays at the Taveta OSBP. Maize traders importing the produce from Tanzania are stuck at the post along the Taveta-Holili border due to what they term as delays occasioned by Kenya Revenue Authority officers. The traders said their trucks, ferrying tonnes of maize, have been stuck at the border for one week due to the extended delays by rogue KRA officers. On Sunday, the traders protested outside the KRA offices, demanding the transfer of one officer whom they alleged has been frustrating the clearance of their cargo. Operations have been paralysed at the border point as hundreds of trucks carrying assorted goods, including agricultural produce, are stuck.
Mozambique: Substitute imports by reactivating paralysed industries (AIM)
Mozambique’s Minister of Industry and Trade, Ragendra de Sousa, on Thursday called for substituting imports by reactivating industries that have been paralysed for years, or even decades. Speaking in Maputo, at a meeting of the Coordinating Council of his ministry, Sousa pointed out that Mozambique imports about $15m worth of tyres every year, yet it has its own tyre factory, Mabor, on the outskirts of the capital, which is producing nothing. “The glasses from which we drink our water are all imported, yet we have the glass factory Vidreira”, he added. He pointed out that, with the exploitation of the enormous natural gas fields in the Rovuma Basin, “in about eight years time, the income of Mozambicans will grow, and when that happens the type of goods citizens want changes to the goods that are supplied by light industries”. The country would need to produce refrigerators, batteries, radios, among other products, and the first step towards this would be to ensure that the existing factories are all working again.
Exporters should leverage on Zimbabwe’s central location: a commentary by Allan Majuru, CEO of ZimTrade
The current trade figures show that Zimbabwe has not fully using its competitive advantage to become Zambia’s top trade partner. Statistics from Trade Map indicated that although Zambia is amongst the top five export markets for Zimbabwean products, Zimbabwe accounts for less than 2% of Zambia’s total import bill. With the short distance of around 500km between Harare and Lusaka, there is room for Zimbabwe to grow exports to Zambia from the current $66m recorded in 2018. This is against a total import bill of $177m from Zambia, creating a trade deficit of $111m. To close the current trade deficit, local industries can leverage on current major exports into Zambia to expand and introduce new commodities into that market. In 2018, Zimbabwe’s major exports to Zambia were fish, tea, unprocessed tobacco, cement, sugar cane, among others. Through taking advantage of these products already in the Zambian market, there is a huge potential for Zimbabwe to supply processed FMCGs to the Zambian market at low tariff rates riding on the COMESA and SADC trade agreements that the two countries are signatories to.
We must not be trade partners only, but production partners: an interview with Issa Aremu, GS of the National Union of Textile, Garment and Tailoring Workers of Nigeria
We must improve on the training and retraining of the workforce because if we are going to trade with fellow Africans, apart from making the goods and services competitive, the workers must also be competitive. The Organisation of Trade Union Unity and the trade union centres must look at the labour components of the agreement and ensure that workers are not put at risk. Yes, we must produce in Africa, yes we should trade with ourselves, but African workers must produce the products. There must be minimum acceptable conditions for work, just as there are in the EU and we must replicate that here so that the trade does not worsen poverty. Secondly, the type of technology we are going to apply for production must absorb more workers. It is fine to talk about the fourth industrial revolution with Artificial Intelligence at the base of it, but with the massive youth unemployment confronting Africa, what kind of technology are we going to apply for production? Will it be labour-intensive or capital intensive so that we can realise the objectives of full employment we are looking for? For me, what will solve these problems for us?
Liberation of financial services in Africa (Bloomberg)
First and foremost, to succeed in delivering on the AfCFTA, African governments will need to provide tangible support for the liberalisation of trade and services. However, there is some doubt as to the capacity of many governments to provide the level of support required. Due to the novelty of the changes proposed under the agreement, there will be a steep learning curve. Governments must make a commitment to being involved in the learning process and to make adjustments along the way, based on real-time feedback and results. In making this commitment, governments must engage private businesses and incorporate their approaches and perspectives into the implementation of the AfCFTA. Emphasis will need to be placed on human capital by training individuals to be valuable assets to the formal sector. This should include both government and business policies that encourage technical, skill-specific training, which will provide individuals with the skills they need to quickly and successfully enter the workforce and provide the support required for sophisticated businesses to thrive. Local businesses will also need to play an active role in the development of the implementing framework for the agreement. Sound technical capacity is an essential element for successful implementation. Businesses will have to insert themselves into the process, providing technical support to governments. Strategic planning on the part of both governments and businesses will be essential.
How Africa is setting an example for Arabs (Gulf News)
Arab leaders and citizens do not often look at Africa for inspiration. This month something remarkable happened that promises to change the fate of African nations for good. The AfCFTA pact aims are creating a single market for goods and services, facilitate free movement of people and investments, and eventually introduce a single-currency union. The Arab world, of over 300 million citizens, should have moved to integrate its economies and create a viable free trade zone long ago. Ironically, the legal frameworks and agreements within the Arab League charter and beyond do exist and references to intra-Arab free trade have been made since the mid 1950s. But a quick look at intra-Arab trade reveals that it only makes less than 10% of total external Arab trade estimated at $1.75 trillion dollars. Interestingly, trade among GCC countries makes up more than 70% of total intra-Arab trade and more than 80% of total Arab external trade, the bulk being oil and related products. It is incumbent upon the GCC countries to take the lead in integrating other Arab economies since they have the infrastructure, wealth and experience.
Rwanda Country Programme Evaluation FY09-17: an independent evaluation (World Bank)
Trade and gender-related issues
East Africa: Women cross-border traders compendium. The USAID Hub trained 391 women cross-border traders on trade regulations, business management and entrepreneurship. This effort led to improved policy advocacy and increased formal trade in the form of trade commitments for 17,509 metric tons of staple foods valued at $5,651,285,laying a foundation for future trade. This was achieved through two grants, one to the Agricultural Market Development Trust (AGMARK) which focused on building the capacity of traders at the Eastern border points of Busia, Malaba, Isebania, Namanga, Taveta, Mutukula and Gatuna, and one to the Agribusiness Focused Partnership (AGRIFOP) which focused on the Western border points of Gisenyi, Kagitumba, Rusumo and Nemba
Oxfam: Gender inequalities and food insecurity. Ten years after the food price crisis, in a context of climate change and increased conflict, new policies are needed to rebalance the global agri-food system to meet smallholder communities’ needs, with a renewed focus on women. To help achieve this, Oxfam recommends (pdf):
Ghana loses $200m yearly from petroleum smuggling – NPA boss
Ghana loses about $200m of tax revenue due to the smuggling of petroleum products and other nefarious activities in the petroleum sector every year. Chief Executive of the National Petroleum Authority, Mr Alhassan Tampuli, said those activities also cause the country to lose about $12m from the unified petroleum price fund annually. Describing the activities as lucrative, Mr Tampuli mentioned Takoradi port, Tema main Port, Prampram, Aflao and the eastern coastline as the unapproved offshore routes used for the smuggling. He was speaking at the opening of the Ghana International Petroleum Conference (GhipCon) 2019 on the theme “Regional Collaboration: A Catalyst for Transformation”. [Local producers say lower tariffs threaten agri-businesses; Ghana seeks support from Burkina Faso to fight Planting for Food and Jobs fertilizer smuggling]
Today’s Quick Links: Zimbabwe: Five contractors gun for Harare-BeitBridge road tender 5 questions for Michael Mabasa, CEO of the National Association of Automobile Manufacturers of SA Turkey to sign double taxation avoidance agreement with Kenya by end of 2019 DR Congo joins EAC electronic cargo tracking initiative (Still) Made in China: how tariff hikes may trigger re-routing circumvention Brazil’s exports to Arab markets surge 15.1% during first half of 2019 |
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tralac’s Daily News Selection
Diarise:
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Uganda-Tanzania Business Forum (4-5 September, Dar es Salaam). The business forum, to be presided over by President Museveni and Tanzania president John Magufuli, will raise awareness about investment and business opportunities, address residual non-terrify barriers hindering trade and investment, as well as opening dialogue for interaction between the two countries.
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On 30 November, 2019 the EAC will celebrate 20 years of existence. Lest we forget, it was on 30 November, 1999 at Sheikh Amri Abeid Memorial Stadium in Arusha, that the heads of state of the Republic of Uganda, the Republic of Kenya and the United Republic of Tanzania, put pen to paper to sign the treaty reviving the EAC. Again, to jog our memory, the EAC had earlier been established in 1967 and it collapsed 10 years later in 1977. The current EAC 20-year journey has been remarkable, the inevitable challenges notwithstanding.
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The Second Intra-Africa Trade Fair (1-7 September 2020, Kigali). The organisers of the IATF2020 expect it to surpass the achievements of the inaugural trade fair, held in Cairo in 2018, by attracting 10,000 participants and generating intra-African trade and investment deals worth more than $40bn, Prof. Benedict Oramah, Afreximbank president, has said. Key features will include an IATF2020 Conference, a Creative Africa initiative to showcase Africa’s creative economy, Country Days dedicated to specific African countries, and an interactive online Virtual Trade Fair.
Tripartite Free Trade Area update by South Africa’s foreign minister, Dr Naledi Pandor (DIRCO)
“Our country appended her signature on the Agreement establishing the TFTA on 7 July 2017 in Kampala. To date, the Agreement has been signed by 23 member countries and requires 14 ratifications to enter into force. To date, only Kenya, Egypt, Uganda, and South Africa have signed and ratified the agreement. South Africa will intensify its diplomatic efforts aimed at urging other TFTA members to sign and ratify this important trade facilitation instrument in order for it to become operational. To this end, a TFTA Summit is scheduled to take place in January 2020 in Rwanda. We hope that the ratification threshold would have been achieved by that date.”
Nigeria’s membership of the African Continental Free Trade Area: perspectives from a debate, yesterday, in Nigeria’s Senate
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Senate wants Nigeria’s business community to explore benefits of AfCTA. The Senate on Thursday asked the federal government to enlighten the Nigerian business community on how to leverage on the immense benefits of the AfCTA agreement, signed by President Muhammadu Buhari on Sunday. Barau Jibrin and 40 other senators sponsored a motion on Nigeria’s membership of AfCTA. Mr Jibrin, in his motion, complained that not many Nigerians understand the profound benefits of the agreement “in the light of the rather intricate interplay of economic theories and their applications as they affect the common man”.
The Senate Leader, Abdullahi Yahaya, said “it is one thing to sign a free trade agreement and another thing to yield opportunities from the agreement”. He added: “We have had a lot of failed signatures of so many international conventions and so many trade agreements. Global trade, whether bilateral or multilateral is the foundation of global peace and prosperity. Nations that don’t have good foundations of global relations across the seas and across the nations, have a tendency of becoming markets for other nations making their economy vulnerable. Yes, we are the largest country but we are the largest consuming economy because we fail to take advantage of the trade agreement that we sign with other countries.” [NANTS urges FG to boost MSMEs funds]
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Why Nigeria has become a dumping ground. Senator Orji Uzor Kalu, the Senate Chief Whip, has blamed the high cost of goods as reasons Nigeria is a dumping ground for goods from African countries and beyond. Kalu spoke during the debate on a motion on “Nigeria’s membership of the African Continental Free Trade Area”. The debate was sponsored by Senator Jibrin Barau representing Kano North Senatorial district. [Related: Rwandan MPs urge government to do more to facilitate trade]
Nigeria: Customs generates N203.3 billion in Apapa (The Guardian)
The Nigeria Customs Service, Apapa Area Command, has racked in revenue of N203.26 billion for the half-year period January 1 to June 30, 2019, which represents 54.5% of its annual revenue target of N372.56 billion in the year. Controller of the Command, Comptroller Mohammed Abba-Kura, who disclosed this in Lagos, Tuesday, said the Command also recorded a high level of compliance in export trade within the period, which saw it generate approximately $46.6 million (N14.3 billion) FOB from a total of 95,229.15 metric tonnes of exported goods.
State of food and nutrition security and vulnerability in Southern Africa 2019: SADC RVAA synthesis report (pdf, SADC)
According to the SADC 2019 Synthesis Report, 41.2 million people in 13 countries are estimated to be food insecure in the 2019/20 year. Comparing the 11 member states that provided data last year, food insecurity has increased by 28% and is 7.4% higher than it was during the severe El Niño-induced drought of 2016/17. The countries with the most significant increase in food insecurity compared to last year are Zambia, with a 144% increase; Zimbabwe, with a 128% increase; Eswatini with a 90% increase; Mozambique, with an 85% increase; and the DRC with an 80% increase. Extract (pdf): A strong drought affected central and western parts of the region during the 2018/19 rainfall season. Large parts of southern Angola, northern and southern Botswana, northern Namibia, north-western South Africa, southern and western Zambia, and north-western Zimbabwe received their lowest seasonal rainfall totals since at least 1981, when regional, comparable records began. The severe El Niño-induced drought of 2015/2016 had primarily affected the south-central and east-central parts of the region.
Drivers of cross-border banking in Sub-Saharan Africa (IMF)
As highlighted in a recent IMF paper, the number of pan-African banks has increased significantly in recent years, and seven groups from the region now dominate the landscape. Banks based in South Africa, Morocco, Nigeria, and the West African Economic and Monetary Union, have emerged. Ecobank (Togo and WAEMU) has the most widespread presence, with operations in 33 SSA countries, while Standard Bank (South Africa) is the largest group by asset size. Three Moroccan banks (Attijariwafa, BMCE/Bank of Africa, and GBCP) have emerged with a large footprint especially in francophone west and central Africa. In addition, about 50% of the subsidiaries of Attijariwafa, BMCE/Bank of Africa, Ecobank, and Standard Bank are systemically important in their home countries. Despite the importance of these developments for the economy of the region, to date the determinants and impact of their growth and the impact they may have on the regional financial sector development have not yet been explored in depth. This paper aims to address this gap by documenting and analyzing the pattern of growth of pan-African banking, collecting new quantitative evidence, and exploring the drivers of these changes. We update the map of cross-border lending in SSA countries by assessing recent changes and by estimating annual cross-border flows in the eight major SSA cross-border banking groups with the aim of identifying the main drivers of these flows. [The authors: Paul Henri Mathieu, Marco Pani, Shiyuan Chen, Rodolfo Maino]
Jacques Morisset: How can Côte d’Ivoire escape the curse of cocoa? (World Bank)
While the current situation for cocoa producers in Côte d’Ivoire is hardly cause for celebration, emerging trends suggest that the future could be bleaker still. On the demand side, new social and environmental concerns among consumers (opposition to child labor and the destruction of forests) will increase costs for producers, who must now certify their cocoa through increasingly sophisticated monitoring mechanisms. Consumer tastes are also shifting toward luxury chocolate, which is not good news for Ivorian producers, whose cocoa beans are generally not of the best quality. On the supply side, recent changes also point to an even less favorable situation for Ivorian producers. Depletion of the available arable land and the labor force (the typical cocoa farmer is over 45) will prevent them from clearing new land, which has traditionally been their response to increases in demand in recent decades. Furthermore, it is estimated that one third of existing cocoa orchards will have to be replaced because of the aging of trees and the spread of epidemics in coming years. In addition, the effects of climate change, which have already begun to be felt, threaten the fertility of many farms, especially in the eastern part of the country. However, these upheavals could turn out to be good news for Côte d’Ivoire, as they will force farmers and policy makers to react. The World Bank’s ninth economic update for Côte d’Ivoire suggests several approaches that could make the cocoa sector a driver of the economic transformation that the country is entitled to expect. [Côte d’Ivoire Economic Outlook: Urgent actions needed to modernize the cocoa sector]
Sierra Leone: Economic update (World Bank)
The special topic of the 2019 Update focuses on deepening the financial sector for inclusive economic growth and development. The report notes that usage of the financial system is low in Sierra Leone with only about 5% of adults using formal savings products and about 54% saving money within the past year. Access to finance for enterprises is a significant barrier to growth of the private sector with 40% of firms indicating lack of credit as their biggest constraint. Only 11% of Sierra Leoneans have mobile money accounts compared to 20.8% in Liberia, 38.9% in Ghana and 72.9% in Kenya.
Central African Economic and Monetary Community: Common policies in support of member countries reform programs (IMF)
The regional strategy has helped stabilize the regional economic position, but challenges remain. Facing these challenges, the CEMAC authorities reiterated their full commitment to the regional strategy and their readiness to implement additional corrective measures if needed. At their 24 March 2019 meeting in N’Djamena, CEMAC Heads of State urged each member state to adhere to the fiscal adjustment targets agreed under IMF-supported programs; encouraged Congo and Equatorial Guinea to conclude IMF-supported programs as soon as possible; and, among others, supported a strong implementation of the CEMAC foreign exchange regulation. The CEMAC authorities also decided to set-up a Tripartite consultative forum to bring together country authorities, regional institutions, and IMF staff to discuss further policy responses in case of new emerging challenges or weak program implementation. At the first meeting of this forum on April 2nd, the authorities agreed to high-level policy actions to keep the strategy on track (see Annex 1).
Current challenges to developing country debt sustainability (UNCTAD)
Section II examines the debt indicators for 145 developing and transitional countries on a regional basis (pdf). The data are limited in scope but provide a useful point of departure for forming a picture of debt at the regional level. More specific data for emerging markets as a subcategory of developing countries show increasing exposure of emerging markets to spillover debt from advanced countries. Financialization has not delivered on its promises of growth and, in the context of persistent downward pressure on aggregate demand, income and employment, together with systemic financial fragility and recurrent instability, a new development agenda must be found.
ASYCUDA marks 30 years of helping customs agencies boost revenue (UNCTAD)
The ASYCUDA journey began 35 years ago with Mauritania. The software has been regularly updated and upgraded over the years. It’s now being improved to offer single-windows environments, bringing together various parties that interact with customs during import and export procedures, such as ministries of health, agriculture and defense, as well as chambers of commerce and banks. “A key value of the ASYCUDA programme has always been the collaborative network of administrations, partners and experts,” said Shamika N. Sirimanne, UNCTAD’s director of technology and logistics. She added: “The collaborative spirit is what makes ASYCUDA truly unique, allowing it to adapt to the ever-changing needs of customs officials.” ASYCUDA is UNCTAD’s largest technical assistance programme. In 2018, it was active in 72 countries and signed 29 new projects worth around $24m. Beneficiary countries and regional organizations provided about two-thirds of the funds in 2018. The remaining amount came primarily from institutional donors. [Download: A compendium of ASYCUDA case studies 2019]
Today’s Quick Links: South Africa: Citrus industry hopeful for resolution to port crisis as operator takes action Investments in the Ogun Guangdong Free Trade Zone exceed $2bn Africa50 outlines investment projects Harnessing technology for agricultural development in Africa: Lessons from Tanzania ECOWAS, China sign implementation agreement for the Commission’s new HQ OECD: Fostering participation in digital trade for ASEAN MSMEs (pdf) |