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Concluding today, in Geneva: Seventh IMF-WB-WTO Trade conference. WTO Director-General Roberto Azevêdo delivered the opening speech.
AfCFTA updates:
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Morocco’s MPs, yesterday, passed a bill on joining the AfCFTA: the same bill was adopted by the government on 21 February and by the Council of Ministers on 4 June
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South Centre Policy Brief: ‘Phase 1B’ of the AFCFTA negotiations. Profiled statistics from the report (pdf): Table 9 - Share of ECOWAS LDCs’ extra-ECOWAS imports from Africa; Table 10 - Share of ECOWAS LDCs’ extra-ECOWAS imports from selected African countries and customs unions; Table 11 - Share of EAC LDCs’ extra-EAC imports from Africa
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Sensitize Ghanaians about the AfCFTA. Executive Director of the Africa Centre for International Trade and Development, Mr Isaac Hubert Arthur, said businesses in Ghana, as well as citizens, did not know much about the agreement, the opportunities and challenges it posed to them. He said government must educate and popularize the agreement so that more businesses, including SMEs would have knowledge about the continental free trade area. Mr Arthur made these known during a three-day capacity building workshop in Accra for women entrepreneurs, organised by the International Trade Centre in partnership with ACINTaD, under the ‘SheTrades in the Commonwealth’ Initiative.
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CNBC interview with Oby Ezekwesili: AfCFTA creates a big market with less entry barrier
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EABC-ITC-TMEA regional workshop: AfCFTA tariff offers and engagement on trade in services. EABC Chairman, Nick Nesbitt: “If we embrace intra-trade, there will be regional value addition by improving the manufacturing sector which will open up markets across the region advancing Africa’s economy and living standards. Doing business in Africa is difficult due to physical, travel, telecommunication, political and non-tariff barriers. We need to deal with these issues together as the private sector and the policy makers to boost trade in Africa.” [Note: Updates on presentations at the workshop, which concludes today, can be followed by #EABCAfcfta]
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Rwanda’s trade with the DRC set to increase by $56m under the AfCFTA. When the AfCFTA is implemented, the UNECA estimates an increase of intra-African exports of Eastern Africa by over $1bn. For Rwanda, much of that would be explained by increased trade with its neighbour, the DRC. On Friday 21 June, in collaboration with ECA and Trademark East Africa, Rwanda’s Private Sector Federation organized a meeting to discuss the potential benefits from the AfCFTA and how Rwandan companies could take advantage of the new opportunities. Andrew Mold, Acting Director of ECA in Eastern Africa, stressed that the beneficiary sectors would principally be the employment-creating sectors like processed foods, light manufacturing and textiles, creating an additional two million jobs in Eastern Africa. According to Mold, Africa currently has 512 Bilateral Investment Treaties with other countries, of which 44 are Intra- African. Each one of these has different terms and conditions and often are formulated in a way that defends the interests of high-income countries. “That is a problem because there is a lack of coherence between many of the existing Bilateral Investment Treaties. The AfCFTA Protocol of Investment talks about harmonizing investment treaties across the continent to have a unified approach.”
COMESA’s Ministerial Committee on Industry clears industrial strategy for implementation
The implementation of the COMESA Industrial Strategy has officially begun following the approval of an Action Plan and Regional Guidelines on Local Content Policy. Ministers responsible for industry from the 21 Member States and their representatives adopted the two instruments during the closure of the 3rd COMESA Ministerial Committee on Industry last Friday in Nairobi. The ministers urged Member States to integrate activities of the Regional Action Plan into their National Industrial Development Plans for implementation. Regarding the Regional Guidelines for Local Content Policy, the ministers noted that that these enable the formulation of Local Content Policies amongst member states in order to maximize local benefits from industrialization. They however agreed that the Regional Guidelines are not binding but was a tool to simply guide Member States when formulating policy, laws and regulations on local content. When developing the local content framework, the ministers advised Members States to take into consideration the commitments made under bilateral and multilateral agreements, bilateral investment treaties, and the existing regional and continental Free Trade Agreements to avoid the breach of those commitments.
Rwanda Economic Update: Lighting Rwanda (World Bank)
Contribution of net exports to GDP growth was negative in 2018 as export momentum ebbed. After growth of about 34% in real terms in 2017, exports of goods and services almost stagnated in 2018, growing by only 0.8%, highlighting the risk associated with Rwanda’ external volatility. In contrast, imports grew by 9.4% in real terms, driven by construction and manufacturing demand for intermediary and capital goods. Services generally performed quite well in 2018, but with considerable variation by subsector. Accounting for 47.8% of GDP, services grew by 8.8%, up from 7.9% in 2017. Double digit growth rates were recorded in trade services (15.2%), transport (18.3%), and ICT (17.9%). The hospitality sector (hotels and restaurants) also performed quite well as Rwanda continued to successfully position itself as an emerging destination for international conferences and exhibitions, while the sector continued to attract both private and public investment.
Nacala Road Corridor development project Phase V: appraisal report (AfDB)
The Multinational Nacala Road Corridor Development Project Phase V will involve: (i) Rehabilitation of a 55 km road between Nsipe and Liwonde in Malawi; and (ii) construction of a OSBP between Malawi and Mozambique at Chiponde. The total project cost estimate is UA 45.289 million. The AfDB will contribute UA 26.6 million (59%), the EU UA 15.121 million (33%), and the Government of Malawi UA 3.658 million (8%). The project shall be implemented over a period of 5 years starting in July 2019 and ending in June 2024. Extract (pdf): The main drivers for high transportation costs in Malawi can be itemized as follows: (i) long distances to the seaports, (ii) poor road infrastructure, (iii) excessive delays due to lengthy clearing processes at ports and border crossings, (iv) poor logistics supply chain, (v) small trucking market, (vi) and low trade volumes due to the small size of the country’s economy. Malawi’s current total volume of exports and imports is just slightly above 2 million tons per year, transported through four main international corridors: Beira (20%), Nacala (15%), Durban (60%), and Dar es Salaam (5%). The distances to the seaports for these corridors and the current indicative transport costs per ton are presented in Appendix VI. [See Appendix VI: Transport costs for exports/imports by commodity USD/ton for Nacala, Beria, Durban (2016). Exports of tobacco, sugar, tea, cotton, food, crops; Imports of fuel, fertilizer, cement, wheat]
2019 Annual Development Effectiveness Review: Integrating Africa, Connecting People (AfDB)
Agricultural trade analyses:
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South Africa: National Agricultural Marketing Council’s Trade Probe (pdf): this issue of covers the agricultural trade analysis under President Ramaphosa’s administration, the AfCFTA agreement, the US-China trade war, and Brexit trade implications on South Africa’s agricultural sector
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The West African Cashew Sector in 2018: general trends and country profiles (pdf). Cashew cultivation is spread all over the region, with three main producing areas: the Central area (Côte d’Ivoire, Ghana, Burkina Faso, Guinea, Mali, Togo), the Eastern Area (Nigeria, Benin), the Western area (Guinea Bissau, Senegal, The Gambia). An important part of the cashew produced in West Africa is traded through land borders between the producing countries. As most of this trade is unofficial and no reliable data are available about it, we had to estimate it on the base of local trader’s information and monitoring of the entire cashew season with N’Kalô Service.
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Strengthening the US-Kenya trade relationship: growing US agricultural exports to East Africa. Kenya relies heavily on imported food and farm products, much of which the United States produces competitively. In 2018, Kenya imported $2.5bn of agricultural products from the world. While the country’s global imports of food and agricultural products has trended upwards, its imports from the United States have remained steady, resulting in a reduced US market share as other nations increase exports to Kenya. Indonesia is currently the top agricultural exporter to Kenya. The United States is looking to strengthen its trade relationship with Kenya and increase its agricultural exports to the country. Kenya currently boasts a growing middle class, rapid modernization, and a progressive government, all which make it an opportune time to explore increased trade between the United States and Kenya.
WTO’s 21st Monitoring Report on G20 trade measures
The report, released on Monday, shows that the trade coverage of new import-restrictive measures introduced during the period (October 2018 to May 2019) was more than 3.5 times the average since May 2012 when the report started including trade coverage figures. The report found that trade coverage of $335.9bn during the period is the second highest figure on record, after the $480.9bn reported in the previous period. Together, these two periods represent a dramatic spike in the trade coverage of import-restrictive measures, leading WTO Director-General Roberto Azevêdo to call on G20 economies to work together urgently to ease trade tensions. In terms of numbers, G20 economies implemented 20 new trade-restrictive measures between mid-October 2018 and mid-May 2019, including tariff increases, import bans and new customs procedures for exports. While fewer measures were introduced during this review period than in previous periods, the scale of those measures is much increased in terms of their trade coverage and the level of tariffs imposed. A total of 29 new measures aimed at facilitating trade, including eliminating or reducing import tariffs, export duties and eliminating or simplifying customs procedures for exports were also applied by G20 economies. The trade coverage of the import-facilitating measures implemented during the review period is estimated at USD 397.2 billion, which is 1.8 times higher than in the previous G20 Report. [Note: Various downloads are available]
Today’s Quick Links Microsoft’s Africa development centers Reuters: Jumia Food looks beyond Africa’s middle class for growth OECD: Public policy reforms to further improve Portugal’s export performance (pdf) EABC-KEPSA-ITC training on WTO Trade Facilitation Agreement (27 June, Nairobi) WEF’s Annual Meeting of the New Champions (1-3 July, Dalian, China) on the theme Leadership 4.0: Succeeding in a New Era of Globalization |
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tralac’s Daily News Selection
Selected trade events now underway:
Today in Nairobi: EABC-ITC-TMEA Regional consultative workshop on AfCFTA Tariff Offers and engagement on trade in services
Tomorrow, in Johannesburg: UAE-South Africa Business Forum. The UAE’s Minister of Economy, Sultan bin Saeed Al Mansoori, will preside over the Forum which will review investment opportunities in both countries.
The G20 Summit takes place later this week: a commentary by East Asia Forum’s editorial board
Events to diarise:
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5th Tony Elumelu Foundation Entrepreneurship Forum (26-27 July, Abuja): Presidential Dialogue participants
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Kenya will host this year’s Africa Caribbean Pacific Heads of State meeting (between 26 November and second week of December)
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Dubai Chamber’s Global Business Forum on Africa, on the theme Scale-Up Africa (18-19 November, Dubai): UAE seeks deeper ties with African businesses
On the hosting of the AfCFTA Secretariat: Nairobi steps up bid for trade bloc headquarters
Industry and Trade Cabinet Secretary, Peter Munya, says Kenya has upped its campaign to mobilise support from across Africa ahead of a vote by African Union’s Council of Ministers. “We have requested support from our peers within the EAC and we continue lobbying other countries. We also have experience because we host other global bodies like the UN here.” [CNBC interview: The AU’s Albert Muchanga on the role of digital trade in Africa’s growth]
US is targeting sub-Saharan Africa for first free-trade pact (Gulf Times)
The US plans to pursue its first free trade agreement with a country in sub-Saharan Africa as soon as it decides on the most suitable candidate, according to the US Assistant Secretary of State for Africa. “I am passionate about having one with a sub-Saharan African country,” the State Department’s Tibor Nagy said at the University of the Witwatersrand’s Business School in Johannesburg. “We have a number of candidates and now we have to talk to them.” “We want to evolve the trade partnership to something that’s more sophisticated, as African markets become more sophisticated and economies change toward services,” Nagy said on Friday. [Kimberly Ann Elliott: pdf Developing a more inclusive US trade policy at home and abroad (588 KB) (CGD Policy Paper)]
Mauritius-China: Signing of grant agreement, protocol for partial annulation of debt, FTA update (GoM)
Mauritius and China last week signed two agreements, namely, a grant to the tune of 100 million RMB (Rs 513 million) and a protocol relating to the partial annulation of a sum amounting to 78 million RMB (Rs 400 million) of the debt of Mauritius. The signatories were the Financial Secretary of the Ministry of Finance and Economic Development, Mr Dev Manraj, and the Ambassador of the People’s Republic of China to Mauritius, Mr Sun Gongyi. Prime Minister, Mr Pravind Jugnauth also spoke of the free trade agreement which the two countries will soon sign, the first that the Chinese Government will sign with an African country.
Third AU-EU agricultural ministerial conference: pdf Political Declaration and Action Agenda (264 KB) (EU)
The Political Declaration is a strong signal reflecting the shift in Africa-Europe relations based on promoting policy dialogue and cooperation as a development tool, bringing the two continents closer at all levels: people to people, business to business and government to government. These different levels are also reflected in the action agenda, endorsed by all Member States. It includes concrete actions involving cooperation between the two continents in different areas, such as: Farmers’ organisations: launch of a multiannual cooperation programme with African continental, regional and national farmer organisations. The programme will focus on farmers’ integration into value chains while strengthening capacities of farmer organisations to influence policies and business environments. Food safety: The aim is to strengthen food safety governance in Africa and establishing adequate governance structures. This is being implemented mainly through discussions on the support to the implementation and operationalisation of the AfCFTA for Sanitary and Phytosanitary Measures. Research and innovation: Three new contracts will be signed today to boost research and innovation under the Development Smart Innovation through Research in Agriculture (DeSIRA) Initiative:
Delhi offers blueprint to promote development, inclusivity at WTO (LiveMint)
At a closed-door retreat of trade envoys hosted by China on 19 June, India issued a concept paper to galvanize developing countries for advancing “developmental dimension” in global trade so as to counter the “one-sided” agenda being imposed by major industrialized countries. “From New Delhi to Geneva, we have established a platform for developing countries to discuss reforms of the WTO from a developmental perspective,” said China’s trade envoy Ambassador Zhang Xiangchen, suggesting Indian paper has laid out what ought to be immediate priorities. The six-page concept paper says after the immediate priorities are addressed, developing countries must ensure other development concerns, “in particular the outstanding development issues of the DDA (Doha Development Agenda), as well as address the asymmetries in WTO agreements such as those in agriculture and other areas.” [Related: Government’s transport assistance for farm produce exports under attack at WTO; As G20 gets underway this week, Delhi may attempt a tightrope walk; Biswajit Dhar: Trump’s trade war expands to India]
pdf Malawi Economic Monitor: Charting a new course (1.23 MB) (World Bank)
The call is clear: following elections in May 2019, the next five years provide a generational opportunity to break the cycle of crisis and vulnerability and put the country on a path of inclusive growth and job creation for the growing population. To that end, this report recommends policy directions in four interrelated focus areas: the establishment of stronger economic and institutional foundations; the transformation of the economy; building human capital; and resilience. Extracts:
Malawi needs to improve transparency and reduce uncertainty to improve its business environment. A non-transparent and uncertain business environment favors companies with long-established networks, with policy biased in favor of larger firms. This is partly due to the enduring legacy of heavy state intervention, which exacerbates barriers to the entry and success of new companies that could play a role in diversifying exports and the economy. Regulatory deficiencies favor established firms with broad networks that enable them to mitigate various risks. Greater efforts will be needed to make regulation—especially tax and licensing requirements—simpler, more accessible, and easier to comply with. It is also essential that sector regulatory frameworks support a level playing field and encourage longer term investment.
Increasing regional integration and exports could support economic diversification and more inclusive growth. However, to reap this opportunity, Malawi needs to implement policy reforms to address a range of structural and institutional constraints to reduce trade costs. With Malawi currently relying on low-value agricultural exports with margins too small to overcome high-cost transactions, this is particularly critical. The authorities also need to address nontariff barriers, particularly export bans.
Kenya’s commodity exchange to be operational in early 2020 (Xinhua)
Peter Munya, cabinet secretary in the Ministry of Industry, Trade and Cooperatives told journalists in Nairobi that the regulations for the commodity exchange have already been developed to guide the operations of the platform. “Our target is for the first agricultural produce to begin trading at the Commodity Exchange in the next nine months. Thereafter we hope to incorporate all major cash crops as well as minerals in the commodity exchange.” He said funds to implement the commodity exchange will be put in the national budget of the next financial year that begins in July.
Conference report download: 1st Annual EAC Conference (15 March) on the theme Legal, Economic and Business Implications of East African Integration
ITC’s new version of Market Access Map boosts transparency in trade
Trade policy and gender
Nigeria: NECA’s Network of Entrepreneurial Women
Mrs Omolola Ajani is the Chairperson of the Abuja Branch of NECA’s Network of Entrepreneurial Women, NNEW, a platform established under the aegis of Nigeria Employers’ Consultative Assembly. In this interview with our team in Abuja, she outlines efforts of her organization in building sustainable businesses among Nigerian women. She notes that women businesses are yet to feel the impact of the federal government Ease of Doing Business initiative, while outlining the agenda for tomorrow’s training programme with the theme “Instituting Corporate Governance in Our Businesses.”
Levelling the playing field: Dissecting the gender gap in the funding of start-ups (pdf, OECD Science Technology and Industry Policy Paper)
This report investigates the gender gap in the funding of innovative start-ups across OECD and BRICS countries using a detailed micro-dataset on start-ups and their founders. Results from empirical analysis show that start-ups with at least one woman in the team of founders are less likely to receive funding by 5-10%. When such start-ups do receive funding, they receive an amount lower by a third compared to start-ups created by male founders.
Lauren Kyger: Should women have their own provisions in free trade agreements? (Global Trade)
2019 SITA Innovation Forum: remarks by IATA’s Alexandre de Juniac
A few weeks ago, IATA’s 290-member airlines gathered in Seoul for our 75th Annual General Meeting and World Air Transport Summit, where we presented our economic outlook. Overall, we expect the industry will generate a profit of $28 billion this year, marking 10 years of being in the black. At the same time, our customers will enjoy fares that are 40% lower than a decade ago. And we will reward shareholders for a fifth consecutive year by generating a return on invested capital that exceeds the cost of capital. Nevertheless, we have also run into strong headwinds this year; and profits are being squeezed compared to 2018. Passenger demand is rising, but the air cargo market is shrinking. Furthermore, costs are increasing, including fuel, labor and infrastructure. Long-term, we are of course optimistic. We project a doubling of demand over the next two decades. This year we forecast 4.6 billion travelers. In 2037 we see 8.2 billion. China and India will account for 45% of that growth. Even more than today, the travelers of the future will come from all walks of life and economic means.
SWIFT’s new paper: Payments – looking to the future
Innovations in domestic retail payments have multiplied at a gravity-defying pace in recent years, driving unimaginable improvements. Entire domestic markets have completely transformed the way they shift value. With goods and services moving more quickly and across greater distances than ever before, value needs to shift further, faster. Value transfers must be friction-free. They must also be safe, secure and compliant. While banks sit at the centre of this, the core architecture is key. It must be open and trusted, innovative and resilient; its reach must be ubiquitous and its operations robust. It must enable smart, embedded, instant payments, 24/7 from every account to every account, everywhere. It must support banks in this journey. Extract: More than 55% of SWIFT cross-border payments are already being made via gpi, moving more than 40 trillion US dollars’ worth of payments across borders faster than ever before. Half of them are reaching end beneficiary customers within minutes, and practically all within 24 hours. Within two years, every cross-border payment will be a gpi payment. The velocity at which gpi payment transactions can be effected will speed up further as more and more banks move away from batch to real-time processing. Because customers are demanding ever-faster payments and more and more markets are moving to real-time, banks will have no choice but to start processing their payments this way. [How digitalisation will cause the next financial crisis]
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COMESA Industrial Strategy cleared for implementation
The implementation of the COMESA Industrial Strategy has officially begun following the approval of an Action Plan and Regional Guidelines on Local Content Policy.
Ministers responsible for industry from the 21 Member States and their representatives adopted the two instruments today during the closure of the 3rd COMESA Ministerial Committee on Industry in Nairobi, Kenya.
This paves the way for the implementation of the COMESA Industrial Strategy, which is aimed at supporting structural transformation of regional economies through sustainable and inclusive industrialization.
In their decision, the ministers urged Member States to integrate activities of the Regional Action Plan into their National Industrial Development Plans for implementation.
Further, they urged Member States to allocate budgets to implement their industrial development plans in synergy with the regional activities, and in line with the Third Industrial Development Decade for Africa (IDDAIII).
The two-day meeting was chaired by the Minister of Trade and Industry of Madagascar Hon. Lantosoa Rakotomalala, who is also the chair of the COMESA Council of Ministers.
In their final statement, the Ministers directed the COMESA Secretariat to facilitate mobilization of financial and technical resources required for implementation of the Regional Action Plan.
The COMESA Industrial Strategy was adopted by Ministers of Industry in September 2017 who also directed the Secretariat to develop a well-costed Action Plan with timelines and responsibilities. At the same meeting, the ministers directed the Secretariat to come up with Regional Policy Guidelines on Local Content as one way of the regional Industrialization agenda.
Specific targets
The specific targets of the COMESA Industrialization Strategy (2017-2026) are: to increase value added products and exports as a percentage of GDP from the current estimate of 9% to 29% by 2026; increase the share of manufacturing to GDP to at least 20% by 2026 and increase intra-regional manufactured exports relative to total manufactured imports to the region from the current 7% to 20% by 2026.
At the opening of the Ministerial meeting yesterday, Kenya’s Cabinet Secretary for Trade, Industrialization and Cooperatives Hon. Peter Munya underscored the need for the region to develop and inculcate a preferential taste for its own goods and services.
“We cannot talk about industrialization and Infrastructure development without addressing Local Content policies and regulations as appropriate economic instruments which could be employed to advance regional development by harnessing locally available resources,” Hon. Munya told the ministers.
He observed that the COMESA and Africa in general, were endowed with vast resources- both material and human and it was time the region came up with strategies to harness them for their own development.
“In order to reap full benefits of Local Content, there is need for goodwill and commitment of political leadership, professional, captains of industry and consumers in general,” he said.
Regional Guidelines
Regarding the Regional Guidelines for Local Content Policy, the minsters noted that that these enable the formulation of Local Content Policies amongst member states in order to maximize local benefits from industrialization.
They however agreed that the Regional Guidelines are not binding but was a tool to simply guide Member States when formulating policy, laws and regulations on local content.
When developing the local content framework, the ministers advised Members States to take into consideration the commitments made under bilateral and multilateral agreements, bilateral investment treaties, and the existing regional and continental Free Trade Agreements to avoid the breach of those commitments.
The Minister therefore urged urged Member States to establish mechanisms for greater collaboration in the development of sustainable value chains in order to increase intra trade in manufactured goods;
They urged Member States to use the regional guidelines to develop/review their Local Content Policy Frameworks and to learn from each other through experience sharing on Local Content. The ministers further directed COMESA Secretariat to facilitate Member States in the formulation and implementation of local content programmes.
Secretary General of COMESA Chileshe Kapwepwe thanked the ministers for approving the local content policy and the regional guidelines, which she noted will lead to the development of a vibrant and sustainable industrial sector that will ensure equitable benefits to all the people of COMESA Member States.
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tralac’s Daily News Selection
Today, in Rome: The Third AU-EU Agriculture Ministerial Conference is held on the theme; Promoting Sustainable Regional Agricultural Value Chains. Downloads:
Concept notes for the four sessions, seven side events. Session themes: Agricultural investment; Agricultural research and innovation; Digital solutions in agriculture; Sanitary and phytosanitary standards and food safety. Side event themes: TFRA recommendations, with focus on climate action; Continental strategy for geographical indications in Africa; Africa Food Safety Agency; Opportunities and benefits for women’s engagement with the agri-business development; Modernizing Africa’s agricultural value chains; Financing ETC.
South Africa, India at the WTO: Industrialized nations oppose proposal to reassess revenue loss due to moratorium (LiveMint)
The US and several industrialized countries severely opposed a joint proposal by India and South Africa at the WTO, Monday, for reassessing the revenue and other implications arising from the existing moratorium for not imposing customs duties on electronic transmissions on developing countries. At a specifically convened WTO General Council meeting to discuss the joint proposal from India and South Africa, New Delhi’s trade envoy Ambassador J.S.Deepak told his counterparts from the US and other countries that the magnitude of the “potential tariff revenue loss” due to the moratorium is around $10bn for developing countries as against only $300m for the WTO High-Income Members. The developing countries, he argued, “have the opportunity to generate 40 times more tariff revenue by imposing customs duties on ET (electronic transmissions) as compared to the developed countries, many of which have almost zero bound duties on physical imports of digitizable products,” said a participant, who asked not to be quoted.
AfCFTA updates: South Africa, Morocco, private sector involvement
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South Africa and the AfCFTA: extracts from a presentation by the DTI’s Wamkele Mene to Nedlac’s trade and industry committee (pdf, AgBiz). Strategic importance of the AfCFTA to South Africa: The African market provides SA with alternative market for export of value added goods and services. SA’s total trade with Africa amounted to R421bn in 2017 (exports: R311bn, imports: R109bn). SA had a trade surplus of R202 billion. Manufactured goods amounted to 64% of SA exports to the Continent. SA’s export destination is East and Southern African region, primarily SADC. AfCFTA presents an opportunity for expansion to new markets in West and North Africa. After entry into force of the Agreement, SARS shall introduce legislation to implement the agreed preferential treatment. The Customs and Excise Act amended to: include new tariff structure, Rules of Origin and attendant certificates, Import permits, Tariff Rate Quotas.
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Morocco and the AfCFTA: The Committee of Foreign Affairs and National Defense and Islamic Affairs and MREs (Moroccans Residing Abroad) in the parliament ratified, Wednesday, a partnership agreement in the field of sustainable fishing with the EU and an agreement to establish the African Continental Free Trade Agreement.
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AU’s Khauhelo Mawana urges African businesses to take lead in AfCFTA. ”Multi-national businesses are already strategizing to take full advantage of the AfCFTA market. Some business delegations have visited the AUC enquiring on how they can invest on the continent within the context of the AfCFTA. African businesses should take the lead in trading in the AfCFTA market. It is their market.”
Corporate Council on Africa’s US-Africa Business Summit: selected updates
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The US International Trade Administration website has opened a Prosper Africa section.
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New members of the President’s Advisory Council on Doing Business in Africa. US Secretary of Commerce Wilbur Ross announced that the Department of Commerce, on behalf of President Trump, has appointed 26 members to the President’s Advisory Council on Doing Business in Africa (PAC-DBIA for its 2019-2021term. US Deputy Secretary of Commerce Karen Dunn Kelley: “Over the next two years, the PAC-DBIA will continue to serve as an important forum for dialogue between the US and Africa, with a special focus on advancing the goals of the Prosper Africa initiative”. The appointed members for the 2019-2021 term of the PAC-DBIA are:
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US Department of Commerce: Deputy Secretary Karen Dunn Kelley. When it comes to trade, however, there is room for great progress and opportunity. US exports into Africa have decreased by 32% from their 2014 high. And we want to work with you to better understand how to reverse this trend. We know that American companies offer an unrivaled value proposition. Yet, we have lost ground to the increasingly-sophisticated, but too often opaque business practices of foreign competitors. There are many reasons for the decline in US trade. Within the United States, the Government’s export credit and other financing tools were sidelined or not optimized for current challenges. Many US small and medium sized enterprises have been unaware of the US Government’s export, investment, and risk-mitigation tools. And, the US Government’s personnel in Africa too often worked in silos. Obstacles for US companies within Africa are also substantial. The President’s Advisory Council on Doing Business in Africa noted in their 2018 report, “one of the main reasons US firms are not winning projects in Africa is because they are not competing.”
The US Department of Commerce has also signed MOUs with the governments of Cȏte d’Ivoire, Ethiopia, Ghana, and Kenya to increase bilateral trade and investment. Today, I’m very pleased to add another nation to that list, as we announce that the United States will be signing a Memorandum of Understanding with Mozambique. These MOUs are designed to collectively identify priority projects in key sectors. The United States will then share that information with US companies to pursue the identified projects, as well as identify US Government resources. The MOUs also establish a forum for the governments to address and resolve business climate issues.
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Aubrey Hruby (Atlantic Council’s Africa Center): “The Trump administration is trying to expand the commercial toolbox that exists to help US companies in African markets. Will it work? We don’t know because the global context is what it is. Returns in the US are very high. So I’m not sure that US companies will want to venture outside when they can just stay at home and make a lot of money. But we have more tools than we’ve ever had before.” [Mozambique: OPIC signs letter of interest to invest in cashew company]
Yomi Kazeem: What does Facebook’s Libra currency mean for Africa? (Quartz)
While it’s unclear how adoption of Libra for everyday use in trade and payments will go, there’s an obvious opportunity for an immediate impact in Africa: remittances. Here’s how Facebook puts it: “Success will mean that a person working abroad has a fast and simple way to send money to family back home.” In the company’s best-case scenario, Libra will serve as a more effective cross-border money transfer service based on the promise of speed, lower costs and increased convenience for both senders and receivers. And that poses an existential threat to remittance companies, some of them being younger app-based players like Azimo and WorldRemit and could even hurt traditional behemoths like Western Union and Moneygram. [The consolidation of international correspondent banking relationships in Africa: workshop update]
West Africa to ditch the colonial CFA Franc and establish a regional pan-African currency by 2020 (African Exponent)
After two days of high-level discussions, West African ministers and central bank governors recently agreed on a draft report on the establishment of a regional currency. The report will be reviewed by heads of State in July 2019 on the establishment of a new regional currency. Among the key issues agreed upon are the exchange-rate regime and the monetary policy framework. The Ivorian Finance Minister, Adama Kone said: “At a ministerial level, we’ve established a roadmap.” This means West Africa is on track to have a single currency which will replace the problematic CFA Franc in eight countries in West Africa, provided they meet the convergence criteria. In the words of Guinea’s Alpha Condé: “I am a supporter of a regional currency and in 2020 we will have a single currency in the ECOWAS countries, whether they speak English, Portuguese or French, and CFA franc will become outdated.” Hopefully, the bloc does not postpone the process yet again as has happened since the adoption of the ECOWAS Monetary Cooperation Programme of 1987 in Conakry.
South Africa: Ebrahim Patel and his super-ministry in pole position to rev up policy (Business Day)
One casualty of the top-heavy ministerial mess Ramaphosa inherited was suboptimal co-ordination between the different departments, which may become less of a problem in the industrial arena with Patel’s ascendancy. The government itself recently reported that the state’s R50bn investment incentive basket of 244 programmes has been spread over an array of departments, and cabinet concluded that there should be better co-ordination between them all. The new super-department will allow for much improvement in this area, particularly in the vital areas of BEE and industrial support. Given that incentives are a key consideration when investors — local and offshore — weight up the merits of an expansion or a new project in SA, an overhaul is wise. And overdue. [The author, Duane Newman, is attached to Cova Advisory]
Africa Rail Conference: Minister Fikile Mbalula’s opening address (GCIS)
It will be remiss of me to downplay the fact that like any other mode of transport, rail has its challenges too, particularly in the region. In the absence of a regional rail regulator, we are constrained in ensuring that all these harmonised and adopted standards are implemented and most importantly, complied with in the region. It is against this backdrop that (South Africa’s) Railway Safety Regulator (RSR) is at the forefront, as tasked by the SADC Railways Sub-Sectoral Committee, to develop a framework to support the establishment of a SADC Regional Regulatory Authority. Only a week ago, RSR officials were in Dar Es Salaam, to meet with the Tanzanian Surface and Maritime Transport Regulatory Authority on the same. Even though this endeavour is still at a conceptual stage, I am confident that it will yield the desired outcomes that will enhance the rail industry across the continent.
Indermit Gill, Kenan Karakülah, Shanta Devarajan: Stressful speculations about public debt in Africa (Brookings)
Earlier this month, the African Economic Research Consortium held its 50th Biannual Plenary and Workshop in Cape Town. The topic was Growing with Debt in African Economies, and the discussions were energetic and educational. We presented a paper at the plenary, a preliminary version of which can be found here. Our main points are that public debt dynamics in many countries in sub-Saharan are now working against their stability and growth and, indeed, that of the subcontinent, but the story does not have to end in tears. We come to this conclusion by asking three questions: Has there been an increase in the capacity of African economies to bear higher levels of debt? Do markets and governments in emerging Africa have enough information about each other to make good decisions if there is a debt crisis? And, should we be confident that debt distress in Africa will be resolved in an orderly manner? [17th IMF Public Debt Management Forum: address by Tobias Adrian]
$4.2 trillion can be saved by investing in more resilient infrastructure (World Bank)
The net benefit on average of investing in more resilient infrastructure in low- and middle-income countries would be $4.2 trillion with $4 in benefit for each $1 invested, according to a new report from the World Bank and the Global Facility for Disaster Reduction and Recovery. The report, Lifelines: The Resilient Infrastructure Opportunity, lays out a framework for understanding infrastructure resilience, that is the ability of infrastructure systems to function and meet users’ needs during and after a natural hazard. It examines four essential infrastructure systems: power, water and sanitation, transport, and telecommunications. Drawing from a wide range of case studies, global empirical analyses, and modeling exercises, the report also finds major region and country-specific implications of investing in resilient infrastructure. For instance, today Africa and South Asia bear the highest losses from unreliable infrastructure: In Kampala, Uganda, even just moderate floods block enough streets to make it impossible for over a third of Kampalans to reach a hospital during the critical window of time following a medical emergency; Tanzanian firms are incurring losses of $668m a year (or 1.8% of GDP) from power and water outages and transport disruptions, regardless of their origin. Almost half of transport disruptions in the country are also due to floods, and flood-related transport disruptions cost more than $100m per year. The report offers five recommendations to ensure that infrastructure systems and users become more resilient: [Downloads: Sector Notes, Background Papers]
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Diarise: UNCTAD’s Economic Development in Africa Report will be released next Wednesday (26 June) on the theme Made in Africa: rules of origin for enhanced intra-African trade
Nigeria to consider its local industries in Africa free trade zone decision (Naija247)
US-Africa trade and investment: two important updates on policy issues
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US trade and investment with Sub-Saharan Africa: recent trends and new developments. Following receipt of a request dated 6 May 2019 from the USTR under the section 332(g) of the Tariff Act of 1930, the US International Trade Commission has instituted Investigation No. 332-571, US trade and investment with Sub-Saharan Africa: recent trends and new developments, for the purpose of preparing the report requested by the USTR. The Commission has scheduled a public hearing in connection with this investigation for 24 July 2019. Transmittal of Commission report to USTR: 31 March 2020. The USTR asked that this report should include (inter alia) the following:
Provide examples of how products and services from the United States integrate into key SSA value chains; identify possible opportunities for US firms to better integrate into these value chains, where appropriate; and describe national or regional policies and other macroeconomic factors that may affect future demand for these US products.
To the extent information is available, describe the intellectual property environment, including national and regional laws, enforcement measures, and infringement issues, in key SSA markets. Through case studies describe the effects of the intellectual property environment on trade and investment in the key SSA markets.
Provide a broad overview and examples of technological innovation in the SSA food and agricultural production, processing, and marketing system. This should include a broad description of SSA food and agricultural producers’ use of technological improvements in such areas as crop and livestock nutrition and genetics (including biotechnology); machinery and equipment; data processing and analytics; and digital market information and risk management systems.
Provide information on the market for digital technologies in those key SSA markets as well as the role of digital products and services from the United States. To the extent that data are available, describe the market for digital products and services, such as internet-connected devices, cloud computing,e-commerce, Internet of Things, blockchain, and internet search and digital content, as well as how adoption of digital technologies affects other industry sectors, such as manufacturing and other services.
Provide a summary of recent developments of regional integration efforts in SSA, including progress on the negotiation and implementation of the African Continental Free Trade Area and briefly summarize the AGOA utilization strategies that have been developed by SSA countries.
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USTDA launches Access Africa Initiative. USTDA’s Acting Director Thomas Hardy: “Through Access Africa, USTDA is responding to the rising demand by Africans for increased connectivity and IT infrastructure across Sub-Saharan Africa. Access Africa will also ensure USTDA establishes greater connections between US industry and stakeholders in Africa’s ICT sector through the deployment of quality US ICT solutions across the continent.” USTDA also announced a call for initial ICT proposals for funding from project sponsors in Sub-Saharan Africa or US companies working with African project sponsors. In addition, it will host a series of three reverse trade missions to connect public and private decision-makers from Sub-Saharan Africa to US ICT technology and service providers to support the region’s infrastructure development goals. USTDA also awarded a grant to SEACOM, a pan-African service provider, for a feasibility study that will evaluate the enterprise market for fiber telecommunications services in Kenya, Tanzania, Uganda and Rwanda.
Selected updates following last Thursday’s Budget Day across East Africa
Profiled budget summaries, guides:
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Kenya. PwC: Kenya’s National Budget Bulletin 2019/20; Deloitte: Kenya Budget Highlights 2019/20; Grant Thornton: Budget 2019
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Uganda. Deloitte: Uganda Budget Highlights 2019/20
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Rwanda. PwC: Rwanda’s National Budget Bulletin; Deloitte: Rwanda Budget Highlights 2019/20
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Tanzania. PwC: National Budget Bulletin 2019/20; Deloitte: Tanzania Budget Highlights 2019/20
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Related: Mauritius. Mauritius Chamber of Commerce and Industry; Deloitte: Budget Analysis; KPMG: Budget Highlights 2019/20; PwC: Budget Brief 2019
News updates
EAC tables $111m budget proposals to EALA for financial year 2019/2020. Barely a week after Partner States presented their respective budgets, the EAC yesterday presented for consideration, budget estimates for the Financial Year 2019/2020, totaling $111,450,529 to the East African Legislative Assembly. The Deputy Minister for Foreign Affairs and East African Cooperation, United Republic of Tanzania, Dr Damas Ndumbaro, presented the budget speech on behalf of the Chairperson of the EAC Council of Ministers and Rwanda’s Minister for State, EAC in the Ministry of Foreign Affairs and International Co-operation, Amb Olivier Nduhungirehe. The 2019/2020 Budget is themed: “Transforming lives through Industrialization and Job Creation for shared prosperity”. According to the Chair of Council of Ministers, the priority interventions for FY 2019/2020, will focus on the consolidation of the Single Customs Territory and promotion of intra and extra EAC trade and export competitiveness, development of regional infrastructure, effective implementation of the Common Market Protocol and the enhancement of regional industrial development. Other areas include the implementation of the roadmap towards the EAC Monetary union, institutional transformation focusing on implementation of the institutional review recommendations and improvement of performance management at the EAC Organs and institutions. The Chair of Council proposes that 2019/2020 Budget be allocated to the Organs and Institutions of the EAC as follows:
Debt, deficit and a monetary union conundrum in EA’s expanded budgets. East Africa’s finance ministers presented expansionary budgets with ambitious revenue targets that are likely to be missed, leading to more borrowing amid rising concerns over looming debt distress. In Uganda, Matia Kasaija presented a Ush40.5 trillion ($10.7bn) budget, a 2% rise from this past year’s Ush32.7 trillion ($8.7bn) To fund the rising budget, which is as a result of significant increases in military, public administration and infrastructure spending, East Africa’s third-largest economy plans to borrow more from both local and foreign sources. Kampala is also targeting an already depleted Petroleum Fund, and is tightening the screws on existing taxpayers to fund an 8.2% fiscal deficit. Uganda’s fiscal deficit is significantly above the 3% ceiling agreed with the International Monetary Fund in the charter for fiscal responsibility.
ising budget deficits across the region run against ongoing efforts to establish the East African Monetary Union by 2024: Each EAC member state should keep its budget deficit at around 3%. Kenya, which unveiled a Ksh3 trillion ($30bn) budget, is set to sink deeper into debt under a proposed plan to borrow $5.9 billion to cover a 5.7%. Patrick Ocailap, Deputy Secretary at Uganda’s Treasury, said bringing down the fiscal deficit in time for the EAC Monetary Union timelines is now impossible, but added that Uganda isn’t the exception in this failure as other EAC member states like Kenya are facing a similar predicament. Given the current investments, Mr Ocailap said Uganda will reduce the fiscal deficit to the levels required by the EAC in 2023, just one year before the monetary union is supposed to be launched. [Editorial opinion: Ambitious budgets, wounded economies]
Double-edged tax measures to grow EAC local industries. East African finance ministers converged on tough taxation measures aimed at protecting local manufacturers from “unfair imports competition,” in their spending plans for the coming year. Most of the tax measures, contained in the budget statements for the 2019/2020 fiscal year, were approved during the ministers’ pre-budget consultations in Arusha in May. Higher taxation of imports is aimed at driving consumption of cheaper locally produced goods, spurring the growth of manufacturing and creating jobs that ultimately improve living standards. Proponents of the proposed measures are in line with the EAC Industrialisation Plan that seeks to transform the region into a globally competitive, environment-friendly and sustainable industrial sector that is capable of significantly improving the living standards of the people by 2032. Despite the good intentions, experts have warned that these tax measures - which are also applicable to goods coming from EAC member states - could stand in the way of integration, as each country becomes inward-looking in a bid to build its industrial capacity.
Import substitution: Will it boost local production in Uganda? In 2017, government imposed a 25% import duty on irish potatoes. The aim was to mitigate importation of the agricultural product that would have otherwise been acquired in Kabale - the potato hub. That year, Uganda imported 158,553 kg of ‘potatoes not prepared or preserved other than vinegar or acetic’ worth $71,438 (Shs267.7b) from the United Arab Emirates, Uganda’s biggest import destination. In 2018, government imposed an even higher import levy on potatoes from 25% to 35%. Uganda Revenue Authority’s annual trade report 2018 indicates only 44,534kg worth $30,448 (Shs114m) of the same product was imported. Government has nearly doubled the import duty on potatoes from 35% to 60% in 2019/20 financial year. Among those products whose import duty is proposed to be 60% for 2019/20, is honey, toothbrushes, ball point pens, exercise books and toilet paper and toothpaste, among others. Importers of granite marble, clay tiles and tomato paste will fork out 35% import duty from 25% for one year.
Tim Njagi (Tegemeo Institute): Kenya’s budget must focus on efficiency – new zero-based strategy could help. It is likely that the government will have to borrow more to address the increasing fiscal deficit, currently at 5.6% of the GDP. The National Treasury has tried to suggest measures that will reduce recurrent expenditures – like reducing the increasing government wage bill, domestic and foreign travel expenditures. But this is unlikely to work. The wage bill has increased by an average of Ksh 46 billion (about $450m) over the last six years due to an increase in the number of employees and salaries. The government must increase human resource planning and management and implement other recommendations proposed in the comprehensive public expenditure review report – like implementing a robust payroll system to prevent leakages and ensure better forecasting. In addition to this, measures to improve fiscal responsibility should be cascaded to county governments where there’s a lack of fiscal discipline and wasteful expenditure is high.
Kenyan manufacturer calls for tax cuts for fair EA competition. Manufacturing is one of President Uhuru Kenyatta Big Four Agenda but imposition of excise duty on Kenyan products in other East African countries goes against the common external tariffs which make it costly to operate. Local manufacturers have on several occasions called for tax cuts to ensure a level-playing ground with other companies in other Eastern African countries. Rajul Malde, Commercial Director of Pwani Oil Company which is one of the biggest manufacturers of edible vegetable oils and fats, laundry and toilet soaps in the African continent says, cost of production is high in Kenya than in Tanzania, Rwanda and Uganda. “We are charged 2% on the raw products we import; our counterparts are not forced to pay this. If the government could remove that cost of production will go down, and consumers will pay less.”
Tanzania’s CTI wants zero duty on crude edible oil imports. The Confederation of Tanzania Industries has lauded the 2019/2020 budget estimates, but proposed for zero import duty on crude edible oil and increased import duty of 35% on iron and steel products to protect local industries. CTI said that maintaining 25% import duty on crude edible oil increases production costs to industries which use the product as raw material hence affecting their competitiveness at internal and external markets. CTI Executive Director Leodegar Tenga said the government should consider zero-rating the products to protect local manufacturers. Crude edible oil is zero rated in other East African partner states such as Kenya and Uganda, he elaborated.
State refutes government, private sector credibility gap claims. Minister of State in the Tanzanian’s Prime Minister’s Office, Investment, Angellah Kairuki told reporters that there was no basis for continued mutual distrust between the government and the private sector, saying the government is readily implementing the reforms as recommended in the blueprint for regulatory reforms to improve business environment. “There is no credibility gap whatsoever. The government recognises and values the private sector. That’s why whenever anything comes up, we come to the table,” she said after opening a business dialogue between the government and US investors. Earlier, US Embassy Charge d’ Affaires Dr Inmi Patterson suggested that there was growing credibility gap between the government and the private sector, arguing that the government doesn’t seem to walk the talk of business reforms.
Tanzania’s Opposition issues alternative budget. Acting shadow Minister for Finance and Planning David Silinde told the national assembly that despite the various changes in economic systems that the country has undergone, it has failed to remove the country and its people from abject poverty. He said the opposition will allocate 20% of the total budget to agriculture, education (20%), industries (15%) and 10% to water and health sectors respectively. He said it was sad to see that 40% of the 2019/20 development budget had been directed to three projects, namely Stieglers Gorge, Standard Gauge and the revival of the Air Tanzania Company Limited, instead of investing more on projects that touched directly on people’s lives.
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Starting today, in Harare: Zimbabwe’s National Consultative Forum on the AfCFTA
AfCFTA negotiations: an important update from @TradeOfficeNG. In Abuja today (19 June) ECOWAS-15 regional stakeholders commence a technical meeting to finalize the Market Access Offer (Schedule) of Tariff Concessions for Trade in Goods for the operational launch of the AfCFTA in July. The Goods Market Access Offer (Schedule) shall establish the 90% level of ambition (non-sensitive) and sensitive lists, and staging periods, for the ECOWAS-15, in the AfCFTA. In the AfCFTA, the ECOWAS-15 is negotiating, collectively, as a Customs Union, with a common, undifferentiated Goods Schedule that shall preserve its integrity as a Customs Union.
SWIFT African Regional Conference (18-20 June, Accra): regional and country trends in messaging traffic
Data released at the conference shows that SWIFT FIN messaging traffic in Africa has grown by 4.4% in the year-to-date. Figures are even stronger in the West African Monetary Zone, where SWIFT traffic increased by 29.0%, far exceeding SWIFT global traffic growth of 6.7% for the same period. Ghana and Nigeria saw growth of 32.1% and 24.5% respectively. According to the latest SWIFT figures, total traffic growth in Africa has decelerated since this time last year, when it reached 16.7%. This is likely driven by slower economic growth in several African countries, including South Africa. SWIFT traffic growth in SADC dropped to 1.6% from 17.4% in the same period in 2018. Traffic growth in South Africa specifically has slowed to 2.9%, down from 14.4% at this time last year. The overall figure does not, however, reflect the strong results in many African markets. In addition to countries in West Africa seeing robust growth such as the Gambia at 18.9%, Liberia at 13.8% and Sierra Leone at 22.6%, several markets in East Africa also experienced strong traffic growth. Kenya and Rwanda saw an increase of 9.4% and 37.1% respectively, versus the same period in 2018. [SWIFT’s Chief Executive: Only favourable regulatory framework will boost intra-African trade; President Nana Addo Dankwa Akufo-Addo: summary of keynote address]
SWIFT’s RMB Tracker: June 2019 special edition
In April 2019, the RMB’s share of international payments currently sits at 1.88%. Looking at cross-border payments, and excluding intra-Eurozone payments, the figure falls even lower to 1.20%. Africa’s adoption of the RMB appears to be increasing. The total payments in all currencies from China to Africa increased by 67.05% in Q1 2019, compared with Q1 2016. But, the amount of RMB used increased by 53.48%. RMB payments from Africa into China have also grown. The total across all currencies shows a healthy increase of 27.76%. But, during the same period, the proportion of RMB used for payments increased by a staggering 123.01%.
Port development and competition in East and Southern Africa: prospects and challenges (World Bank)
Port Development and Competition in East and Southern Africa analyzes the 15 main ports in East and Southern Africa (ESA) to assess whether their proposed capacity enhancements are justified by current and projected demand; whether the current port management approaches sufficiently address not only the maritime capacity needs but also other impediments to port efficiency; and what the expected hierarchy of ports in the region will be in the future. However, in the case of many of the ports, the issue of landside access - the ports’ intermodal connectivity, the ease of international border crossing, and the port-city interface - is more important than the need to improve maritime access and capacity. The analysis finds that there is a need to improve the operating efficiency in all of the ESA ports, as they are currently less than half as productive as the most efficient ports in the matched data set of similar ports across the world, in terms of efficiency in container-handling operations. Finally, given the ports’ geographic location and proximity to main shipping routes, available draft, and the ongoing port-and-hinterland development, the book concludes that Durban and Djibouti are the most likely to emerge as the regional hubs in ESA’s future hub-and-spoke system. [ pdf Download (5.96 MB) ]
Profiled main finding: There is an urgent need to increase maritime capacity in all the East and Southern Africa ports, with certain caveats. The study has highlighted the growth trends across all the commodity groups in the East and Southern Africa (ESA) ports, and the resulting implications for capacity: Depending on growth rates, overall container demand in the 15 ESA ports will start to exceed current total capacity already by between 2025 and 2030; Dry bulk handling capacity gaps are already seen and are expected to be the largest in the ports of Mombasa (30 million tons by 2050), Maputo (15 million tons), Dar es Salaam (8–10 million tons), Berbera (over 7 million tons), and Durban (about 5 million tons); In the case of general cargo, the capacity gaps are neither as large nor expected as soon. No gaps at all in the base case scenarios are expected for the ports of Djibouti, Berbera, Dar es Salaam, Maputo, Durban, or East London; In the case of liquid bulk, demand is expected to be above capacity in a number of the ports by 2020–25. The capacity gap by 2050 will be particularly large in absolute terms at the ports of Mombasa (20 million tons), Djibouti (about 18 million tons), Dar es Salaam (15 million tons), and Beira (8 million tons), and it will be large relative to available capacity at Port Louis and, especially, Toamasina. [The authors: Martin Humphreys, Aiga Stokenberga, Matias Herrera Dappe, Atsushi Iimi, Olivier Hartmann]
Mozambique and the IMF:
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2019 Article IV Consultation. The outlook for 2019 is impacted by the extensive damage from TC Idai and Kenneth. While it is too early to assess the impact of TC Kenneth on growth and inflation, preliminary projections suggest that real GDP growth in 2019 would decelerate to 1.8% owing mainly to losses to agricultural production and disruptions to transport, communications and services. Given the adverse supply shock to food availability in Beira and neighboring districts, inflation is projected to pick up to 8½ percent (y/y) by end-2019.6 Considering the limited room to reallocate budgetary resources, the primary fiscal deficit after grants is projected to reach to 2½ percent of GDP in 2019 due to lower tax collections in the cyclone-hit areas and higher spending related to emergency relief and reconstruction. Large BOP gaps are expected. The non-megaproject current account deficit is estimated to widen after TC Idai, to around 27% of GDP in 2019. Replacement for locally-grown foodstuffs, such as rice and maize, and reconstruction materials along with decreases in export receipts, including from Beira’s port services, will create a significant BOP gap. While external grants are expected to cover most of the external financing shortfall, the authorities will close the remaining BOP gap projected for 2019 with the recent RCF disbursement. [ pdf Article IV Consultation Staff Report (1.60 MB) ]
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Selected Issues report: Mozambique’s natural gas resources – tradeoffs and opportunities. It applies the Debt, Investment, Growth and Natural Resources (DIGNAR) model to analyze the macroeconomic effects of alternative scenarios of scaling-up public investment in a volatile and exhaustible resource revenue environment to meet the country’s development needs. The model results indicate that prudent and gradual investment scaling-up is preferable to aggressive, front-loaded investments given, inter alia, absorptive capacity constraints and private sector crowding-out effects. It also shows that external savings—perhaps put in a sovereign wealth fund—would mitigate Dutch disease effects and serve as much needed fiscal buffer. [ pdf Selected Issues paper (1.15 MB) ]
Anadarko’s statement announcing its Mozambique LNG final investment decision: “The Anadarko-led Area 1 Mozambique LNG project will be Mozambique’s first onshore LNG development, initially consisting of two LNG trains with total nameplate capacity of 12.88 million tonnes per annum (MTPA) to support the development of the Golfinho/Atum fields located entirely within Offshore Area 1. The project has successfully secured in aggregate 11.1 MTPA of long-term LNG sales (representing 86% of the plant’s nameplate capacity) with key LNG buyers in Asia and in Europe. Additionally, the project is expected to have a significant domestic gas component for in-country consumption to help fuel future economic development.”
“The ECOWAS single currency is no longer a technocratic utopia”: Ivorian finance minister Adama Koné (EcoFin)
Finance ministers and Central Bank Governors of the Economic Community of West African States gathered in Abidjan on 17 June to discuss ways to accelerate the creation of the single currency set to come out by 2020. Speaking during the meeting, the Ivorian minister of finance, Adama Koné, admitted that many challenges remained to be met until the project was completed. But there is “a political will” of West African authorities, many of whom are sometimes accused of being reluctant to abandon the highly controversial CFA franc. “The single currency is no longer a technocratic utopia,” he said. According to the official, hurdles to the currency’s creation mainly relate to the free movement of goods, capital and persons within the ECOWAS region. This meeting comes at a time when many observers have expressed doubts about the capacity of the countries to achieve this objective.
ECOWAS Committee holds workshop on measurement harmonisation (GhanaWeb)
The ECOWAS Committee for Metrology (ECOMET) and partners will, over the next three days, deliberate on and adopt drafts documents related to the calibration guides and harmonised verification procedures of measuring instruments to be used by member states. Professor Alex Dodoo, the Director-General of the Ghana Standards Authority, said countries like Ghana and other West African countries ought to work harder than before for the establishment of quality infrastructure to become integrated into the global network of quality and competitive trade. UNIDO’s Mr Fakhruddin Azizi said the implementation of the WAQSP had led to the creation of the ECOWAS Quality Agency (ECOWAQ) with a mission to ensuring the coordination and serve as the secretariat of the various components of the Regional Quality Infrastructure.
pdf AU Strategy for Gender Equality and Women’s Empowerment 2018-2028 (1.58 MB) : extract on Trade and Enterprise
The AU’s comparative advantage: The Continental Free Trade Area has been launched and shows promising signs of accelerating growth. The AU places a particular emphasis on increasing skills in science and technology, trade, the blue economy, and manufacturing and high growth agricultural value-chains. The AU can leverage public-private partnerships to identify solutions, innovations and opportunities. AU Agenda 2063 is prioritising the use of technology to improve agricultural activity especially for low scale farmers, the majority of whom are women. The Pan African E Network is an opening for a gender and ICT initiative. Informal cross-border trade, a sector in which women predominate, represents a significant volume of the total trade. Although women are breaking into traditionally reserved industries like mining, maritime, aviation, construction, IT and processing, the vast majority still operate informally. For example in Togo, women are important economic actors and contribute 46% of GDP. However, women’s enterprises are mainly informal, with over 70% representation in this sector through small craft and trade activities. Although 54% of the workforce is made up of women, there are only 30% women in manufacturing and 40% in agribusiness. Africa is embarking on major infrastructure projects, within countries and across borders. Construction is traditionally male dominated. The coming decade offers the opportunity to open up infrastructure to greater participation for women in the design, implementation, and benefits that ensue.
The AU will: Intervention 1.2: Integrate and implement gender dimensions into AU Flagship projects, transformational initiatives and protocols on economic empowerment, financial inclusion and social protection, set-up African Women’s Development Fund (Fund for African Women 2) and de-risk banking and trading for women. Activity 1.2.1.1: Mobilize technical expertise and funding to develop knowledge and accountability tools to support effective mainstreaming and accountability for gender into all major continental transformational projects and AU protocols, set-up African Women’s Development Fund (Fund for African Women 2) and pilot projects to de-risk banking, formalize trading and recognize care work.
Belt and Road Economics: opportunities and risks of transport corridors (World Bank)
This study analyzes the economics of the Belt and Road Initiative with a particular focus on connectivity. It covers three main areas of analysis. First, it assesses the connectivity (e.g. transport, trade, investment) gaps in the BRI region. Second, it examines the economic effects of the proposed BRI infrastructure improvements, including the impact on international trade, cross-border investment, allocation of economic activity, and inclusive growth in the BRI countries. Third, it identifies complementary policy reforms and institutions that will support welfare maximization and mitigation of risks for all BRI economies. [World Bank: A framework to assess debt sustainability and fiscal risks under the Belt and Road Initiative]
Today’s Quick Links Three new UN reports: UNDESA: 9.7 billion on Earth by 2050, but growth rate slowing; UNICEF and WHO: Billions globally lack ‘water, sanitation and hygiene’; UNHCR: UNHCR’s annual Global Trends Report |
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The US-Africa Business Summit 2019 starts today in Maputo. The event, a Corporate Council on Africa flagship conference, will be addressed by a large number of African Heads of State. A highlight of the proceedings will be tomorrow’s session on Prosper Africa. A DW preview: US African policy’s lost ‘dynamics’
AU Member States, RECs meet over the next two days in Lusaka: the meeting will validate a draft implementation plan of the Global Compact for Safe, Orderly and Regular Migration in Africa
Malabo communique: We, the Governors, representing member countries of the AfDB and State Participants of the African Development Fund
Take note of the on-going negotiations for a Fifteenth Replenishment of the African Development Fund and look forward to a timely and successful outcome; Approved the application of Ireland to become a State Participant in the African Development Fund and a member of the African Development Bank; and authorised a Special Capital Increase for the purposes thereof. We encourage the speedy conclusion of all processes towards effectuating these decisions; Consistent with the theme of the Annual Meetings “Regional Integration for Africa’s Prosperity”, encourage the Bank Group to continue to work with the AU and the RECs to fast-track Africa’s integration and economic and social transformation particularly in view of the entry into force of the Agreement establishing the AfCFTA, which has the potential to increase growth, enhance competitiveness, improve the business climate, as well as ensure greater investment and development of regional and continental global value chains. [Zimbabwe: Mthuli Ncube’s speech to AfDB boards of governors]
Cross-border road corridors: the quest to integrate Africa (AfDB)
This publication provides an insightful new look at Africa’s regional road corridors, the significant leadership role played by the Bank, and the tremendous development outcomes achieved or expected. The quest to Integrate Africa is one of the African Development Bank strategic High 5 priorities. The Bank Group has been a trusted partner and has played a lead role in supporting the development and construction of regional corridors throughout the African continent. In addition to removing infrastructure bottlenecks, the Bank has also supported trade and transport facilitation initiatives including the construction of one-stop-border-posts and the harmonization of documentation and customs procedures. Over the past 12 years, the Bank has financed nearly $8bn of regional transport projects. As a result, close to 13000km of regional highways have been built on 17 road corridors, along with 26 OSBP facilities. Enabled by the corridors, new trading routes have emerged, and positive development outcomes have been recorded along the way. In West Africa for example, 10 years after the Bank financed the Bamako-Dakar highway to the tune of $400m, the route now carries more than 50% of Mali’s import and export goods from and to the port of Dakar and has allowed the country to diversify its trading routes, reduce costs by more than 20% and increase international trade by 10%. [ pdf Cross-border road corridors: The quest to integrate Africa | AfDB (4.85 MB) ]
The 19 profiled corridors, by region: East & Southern Africa: Nacala Corridor, Mtwara Corridor, North-South Corridor (North section), North-South Corridor (South section), Northern Corridor, Mombasa–Addis Ababa Corridor, Nairobi–Lusaka Corridor; Central Africa: Brazzaville–Libreville Corridor, Brazzaville–Yaounde Corridor, Douala–N’djamena and Douala–Bangui Corridor, Cameroon–Nigeria Corridor; West & North Africa: Central Corridor of the TSH, Bamako–San Pedro Corridor, Dakar–Bamako–Ouagadougo–Niamey Corridor, Dakar–Abidjan, Abidjan–Lagos Corridor, Lome–Ouagadougou Corridor, Tema–Ouagadougou Corridor, Trans-Tunisia Corridor.
African Union RFP: Consultancy services for definition of norms, standards for the African Railway Network. Extract from the bid document: The AUC has identified 10 corridors linking the following countries (pdf)
Emerging Capital sees profit in 13,000 trucks linking Africa (Bloomberg)
Emerging Capital Partners LLC paid an undisclosed amount for a majority stake in Inter Africa Transport Forex, which began as a startup in Mauritius in 2007 and now spans 10 countries. It specializes in online fuel orders, cash pay-outs, road tolls, border payments or parking. The investment is being made by the Washington-based firm’s $640m ECP Africa Fund IV. “We’re looking for more opportunities, more recently also in southern Africa,” said Paul Maasdorp, a director at ECP. An almost 10% depreciation in the rand against the dollar over the past 12 months is making it easier for ECP to compete against bids from South African investors in the region, he said. ECP plans to inject additional cash into Inter Africa Transport Forex for expansion as it seeks to ensure ongoing double-digit growth, Maasdorp said.
East African states count losses over Uganda, Rwanda row (The East African)
Kampala has lost more than $664m worth of exports to Rwanda while Kigali has lost $104m during the three months the Gatuna border has been closed, according to Uganda’s East African Community Ministry. The data excludes losses incurred by other service providers like transporters, health and education providers. Although Kenya does not share a direct border point with Rwanda, it has been affected indirectly by the closure as Kenyan exports passing through Uganda were also locked out. Rwanda’s minerals, tea, and coffee are transported to the port of Mombasa through Uganda. Now, more than 80% of Rwanda’s imports pass through Tanzania. Ugandan Junior Minister for EAC Affairs, Julius Maganda Wandera, said economics rather than politics is responsible for efforts to open the border.
Tanzania: Freight agents brace for 10,000 clearing jobs loss (IPPMedia)
Presenting the 2019/2020 budget estimates to the National Assembly on Thursday, Finance and Planning Minister Dr Philip Mpango said that starting next month people will be allowed to clear their good at the port without the need to assign the work to clearing and forwarding agents. The Secretary General of the Tanzania Freight Forwarders Association, Tony Swai, said in an interview that the decision is likely to make a good number of people employed in the profession jobless. “I don’t think this will be possible. The parliamentary budget committee made a false step because we are legally recognized and operate in accordance with the law,” said Swai. [Dar es Salaam port container handling set to double capacity]
EU asks for formal consultations with SACU on trade in poultry (EC)
The EU considers that the extra duties imposed by SACU in September 2018 are not in conformity with the provisions of the EPA between the EU and the Southern African Development Community to which SACU member states – South Africa, the main poultry importer, Namibia, Botswana, Eswatini and Lesotho - are signatories. The EU has on numerous occasions sought an amicable solution to the issue, to no avail. The EU hopes that both sides can still find a mutually satisfactory solution in the course of the 40-day dispute settlement consultations. If no solution is reached, the EU will be entitled under the EU-SADC agreement to request the establishment of an arbitration panel. Safeguard measures can be legally adopted in exceptional circumstances to temporarily counter surging imports that threaten domestic industry. The safeguard measure only had the effect of replacing EU imports, worth earlier some €183 million a year, with the imports from other countries, such as the US and Brazil. [The EU’s Note Verbale, pdf]
Full esteem ahead? Mindset-oriented business training in Ethiopia (World Bank)
Is there a mindset gap holding women back in business? Can entrepreneurship training instill a set of attitudes, behaviors, and strategies that are thought to underpin success in business such as motivation, perseverance, and self-confidence? This study conducted two randomized controlled trials to evaluate the effect of mindset-oriented business trainings on the performance of women-owned micro and small enterprises in Ethiopia.
East Africa: World Bank, IUCEA, three governments launch $293m regional skills development project (EASTRIP)
According to the World Bank EASTRIP Team Leader, Xiaoyan Liang, a quality demand-driven TVET system can be a powerful engine for youth skills development leading to employment and poverty alleviation, and for economic restructuring and transformation, as already demonstrated in the Republic of Korea, Singapore and China, where TVET has been used as an instrument and channel for technology transfer and skills upgrading of workers. Based on government nomination and competitive selection, 16 Regional Flagship TVET Institutes were selected from the three participating countries (Ethiopia, Kenya, Tanzania). Each flagship will specialize in specific sectors and occupations with niche programs in highly specialized TVET diploma and degree programs, as well as industry-recognized short-term courses. EASTRIP will strengthen the capacity of the 16 RFTIs to produce skills for the regional sector markets in transport, port management, energy, light manufacturing, and ICT. [Project documentation can be accessed here]
Supporting smallholder farmers against Big Agriculture (Open Society Foundations)
In the face of this problem, how can we shift the balance of power in the agriculture sector in sub-Saharan Africa? How can we enable smallholder farmers to capture more of the gains? Is impact possible beyond economic gains? In search of an answer, our Soros Economic Development Fund is partnering with Pearl Capital Partners, a Ugandan, Kampala-based fund manager, alongside co-investors that also have chosen to put smallholders at the center of a €20 million debt and equity fund that invests in small and growing agribusinesses in Uganda. Our co-investors in Pearl’s Yield Uganda Fund are the International Fund for Agricultural Development (an agency of the UN), the Ugandan National Social Security Fund, and Finn Church Aid Investments. In many ways, the portfolio is similar to other agriculture-focused impact funds; in other ways, it is not: [Axios: Investors are dubious of Africa’s new cocoa cartel; Daily Nation: How neighbours reap big from Kenya’s faltering farming]
The African Continental Free Trade Agreement at core of deliberations in Nairobi (NEPAD)
“It is difficult to form a compelling vision of prosperity without a role for trade. But for the market to kick off effectively infrastructure that intensifies connectivity and access is necessary,” said Dr William Ruto, Deputy President of the Republic of Kenya. He was addressing Parliamentarians, Government of Kenya representatives, the African Union institutions and the representatives of the key CAADP constituencies during the opening ceremony of the 15th CAADP Partnership Platform Meeting which started on the 11th June 2019 in Nairobi, Kenya. “I want to persuade you, political and knowledge leaders, that this is our moment to take steps that change the fortunes of our continent,” he told participants.
AUC launches digital toolkit, knowledge compendium on agricultural transformation (AU)
The toolkit focuses on the core concepts of CAADP and the results of the January 2018 pdf Inaugural Biennial Review Report (4.18 MB) on the Implementation of the Malabo Declaration. The results of the 2018 report showed that 20 of the 47 countries were on track towards achieving the Malabo Declaration commitments, and 27 countries were not on track. Overall, the 2018 Biennial Review indicates that AU states are not on-track to meet CAADP/Malabo goals by 2025. The Knowledge Compendium focuses on the domestication of the Malabo Declaration into country national agriculture investments plans and processes. The online interactive version includes the ability to view interactive maps by commitment area, view individual country and regional scorecards and results, compare country scores side-by-side, view all scores side-by-side and download resources and tools, including the PowerPoint presentations and the Knowledge Compendium on Malabo Domestication. [The Toolkit is available here; The Knowledge Compendium is available here]
UNCTAD: Report of the Intergovernmental Group of Experts on E-commerce and the Digital Economy (3-5 April, Geneva)
On regulatory issues and challenges: The third panellist discussed digital markets and e-commerce and their implications for competition policy. As required under previous industrial revolutions, it was important to address challenges while embracing change. In Africa, for example, regional integration could be a response to the need to reach critical mass and facilitate intraregional trade. Competition-related concerns included resale price maintenance, cross-platform parity agreements, online sales bans or limitations and geographic price discrimination. The panellist noted that firms had become large and dominant in the market, and network effects were leading to high entry barriers and market power, and that existing competition regulation tools might be inadequate. Reviewing previous cases was useful in improving understanding of new business models. The anticompetitive actions of platforms often implied cross-border effects, which required coordination between authorities. National policy alone could not solve problems, given the size of the issues involved, including privacy, consumer protection, market power and network effects. [The report is an input for the Trade and Development Board’s 66th session, 24-28 June]
Today’s Quick Links: Ghana seeks Gambia’s support to host AfCFTA Secretariat Adesina: “I will run for 2020 AfDB presidency” 7th session of Mauritius-EU political dialogue focuses on elevating existing partnership Quartz: Ghana is betting on a digital census in 2020 to transform its informal economy A review by Axel Schimmelpfennig (IMF African Department) of Taxing Africa Mauritius: Second Generation of the Decent Work Country Programme (2019-2023) finalised Coping with falling oil prices: the different fortunes of African banks World’s population is projected to nearly stop growing by the end of the century |
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The African Continental Free Trade Agreement at core of deliberations in Nairobi
Enhancing Trade and Market Access for Accelerated Agriculture Transformation
“It is difficult to form a compelling vision of prosperity without a role for trade. But for the market to kick off effectively infrastructure that intensifies connectivity and access is necessary,” said Dr William Ruto, Deputy President of the Republic of Kenya.
He was addressing Parliamentarians, Government of Kenya representatives, the African Union institutions and the representatives of the key Comprehensive Africa Agriculture Development Programme (CAADP) Partnership Platform (CAADP) constituencies. during the opening ceremony of the 15th CAADP Partnership Platform Meeting which started on the 11th June 2019 in Nairobi, Kenya.
Africa should promote home grown agriculture products, increase land under cultivation with better technology which will lead to more employment and trade, Ruto said on Wednesday.
He highlighted the importance of free trade in increasing land availability for cultivation. “Free Trade ensures that every producer is connected to the market through efficient systems and evens out pricing imbalances which increases profit margins. Free trade creates demand for efficient technology, inspiring innovation. Under AfCFTA more land will be available for cultivation with better technology, more and better food will be on every table,” he said.
“I want to persuade you, political and knowledge leaders, that this is our moment to take steps that change the fortunes of our continent,” he told participants.
Key factors limiting Africa’s trade in agricultural products include poor quality of physical infrastructure, inefficient customs processes and high harassment costs, inconsistent regional standards and regulations, and non-tariff trade barriers including stringent food safety and traceability requirements in importing countries.
He continued to inform participants that Kenya was committed to working closely with other states to speed up regional and continental integration as part of efforts to boost trade.
He added that Kenya was among those countries, which have agreed that continental and regional integration is the path to transforming African countries from being developing to developed economies.
Commissioner for Rural Economy and Agriculture at the African Union, H.E. Josepha Sacko, applauded Kenya’s commitment to the regional and continental integration in the ongoing efforts to promote trade among African states.
“I must laud Kenya’s commitment and fast-tracking of ACFTA bearing in mind that the country was the first to ratify it,” said Sacko at the meeting.
She asked African countries to work together in coming with a roadmap and policy for agriculture to take its rightful place in the market. “We should enhance trade by coming up with incentives aimed at promoting agricultural sector instead of blaming others on the challenges including food shortage facing the continent,” she explained.
Ms Sacko said boosting of intra-Africa trade in agriculture should be emphasized as the only way to achieve the needs of the continent.
Chairman of Non-State Actors under CAADP Chris Muyunda said the African continent should work towards doubling its trade efforts besides eliminating barriers that have become stumbling block to social economic development.
“As African countries, we need to share information on the types of goods and services required in our respective nations,” Muyunda told participants to the platform.
The CAADP Partnership Platform PP Meeting took place at the Safari Park Hotel, Nairobi, Kenya to review progress and share experience of CAADP implementation since the last CAADP PP in Libreville, Gabon in April 2018.
Hosted by the African Union Commission (AUC) and the African Union Development Agency-NEPAD, the theme of this year’s CAADP PP, namely “Enhancing Trade and Market Access for Accelerated Agriculture Transformation” stems from the recognition of the role that intra- African trade in agriculture can (and should) play in driving economic growth; but also, the significant challenges involved.
The CAADP PP remains a continental agricultural platform for policy dialogue, lessons sharing and accountability among the CAADP Stakeholders to advance the CAADP Agenda. The meeting built on the lessons learned and challenges from previous editions of the PP and further streamline the anchorage of this multi-stakeholder mobilization and engagement platform while also reinforcing the partnership among constituents for accelerated CAADP implementation.
The meeting aimed to review progress against Malabo Goals and encourage policy dialogue and actions (either collectively or individually by organizations/countries) and stimulate peer to peer learning to accelerate progress.
“We all need to work hand in hand to agree on the roadmap and key policy actions that will position the agriculture sector to take full advantage of the single African market of 1.3 billion people and a cumulative GDP over $3.4 trillion. We can make agriculture transformation happen by 2025. As we continue to celebrate the recently launched Africa Continental Free Trade Area (AfCFTA), let us not only debate but take action on how to attract funding from public and private sectors to enhance intra-African trade and catalyze agriculture transformation in Africa,” said H.E Sacko at the opening ceremony.
Despite recent growth in agricultural trade deficits, there are promising signs of export diversification, both in commodities traded and trade partners, as well as increasing intra-African trade in agricultural commodities. This is according to the key findings of the Africa Agriculture Trade Monitor 2018.
In 2015, African countries spent about US$63 billion on food imports, largely from outside the continent. The modelling work by the Economic Commission for Africa (ECA) projects that intra-African trade in agricultural products will be between 20% and 30% higher in 2040 with the AfCFTA in place which would then generate state revenue, increase farmer income and expand both farmer and country capacity to invest in modernizing the sector through processing and mechanization.
The AUDA-NEPAD as co-organiser of the Partnership Platform and implementor of CAADP projects at Regional and National level, was represented by a delegation led by Dr Hamady Diop, AUDA-NEPAD Head of Programme: Natural Resource Governance, Food Security and Nutrition, who spoke on behalf of the AUDA-NEPAD CEO, Dr Ibrahim Mayaki.
He spoke on the challenges in achieving enhanced intra-African trade, amongst these he highlighted the need for countries to showcase improved leadership when engaging in partnerships with development partners, silo mentality in the implementation of agriculture programmes at Regional and Country level and the continued lack of similar vision between state and private sector in the agricultural transformation agenda.
“Africa has faced a food and agricultural import bill averaging US$35 billion a year and rising faster than intra- African trade. Notable among these fast-growing imports are processed products and value-added food, this points to the need for accelerating agro-processing industry development in a value-chain approach to agricultural transformation and, therefore, for stronger linkages between policies and strategies for agricultural, trade and industrial development,” he said.
The Economic African Communities (EAC) shared best practises in achieving a united approach to free trade and development partners underscored their continued commitment to working jointly with African entities such as the AUC and AUDA-NEPAD in implementing ‘real’ transformation in the Agriculture space.
The meeting continued on the 13th June 2019 with the High-Level Ministerial Session on Africa Agriculture Transformation.
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tralac’s Daily News Selection
Tanzania’s President Magufuli will assume the chairmanship of SADC in mid-August. Important dates to note: Fourth SADC Industrialization Week (22-26 July, Dar es Salaam); SADC Council of Ministers and Permanent Secretaries (9-16 August); 39th summit of SADC Heads of State and Government (17-18 August)
The 31st meeting of the SADC Committee of Trade Ministers, and the meeting of the Ministerial Working Group on Regional Economic Integration, will be held later this month in Windhoek
Rwanda’s President Kagame delivers, tonight, the keynote address to the first-ever African Regional Conference convened by the Eisenhower Fellowships Program. The conference theme: The future of Africa’s global integration. Twitter updates: #EFA2019
What next after DR Congo makes formal request to join EAC bloc? (New Times)
The request was made through a letter by President Félix Tshisekedi to his Rwandan counterpart, President Paul Kagame, the current Chairperson of EAC. According to President Tshisekedi’s letter, the need for his push for his country to join the bloc was necessitated by the growing trade volume between individual member states of the EAC and the DRC. DR Congo shares border with four of the six member EAC states. Speaking to The New Times, Olivier Nduhungirehe, the Minister of State for EAC affairs, said that Kigali on Tuesday, 11 June, duly wrote to the EAC Secretary General asking that Kinshasa’s request be put on the agenda of the next Summit of EAC Heads of State and Government.
Yesterday’s East African budget speeches for Fiscal Year 2019-20:
pdf Kenya Budget Statement (4.89 MB) on the theme: Creating Jobs, Transforming Lives – Harnessing the “Big Four” Plan
pdf Uganda Budget Speech (710 KB) on the theme: Industrialization for Job Creation and Shared Prosperity
pdf Rwanda Budget Speech (509 KB) on the theme: Transforming lives through Industrialization and Job Creation for Shared Prosperity
Zimbabwe and the AfCFTA: an interview with the IMF’s representative to Zimbabwe, Patrick Amir Imam (The Independent)
However, for the country to fully reap the rewards from trade liberalisation, achieving macro-economic stability is a priority, and solving the currency issue is a condition sine qua non. In addition, the country must address the structural bottlenecks faced by the private sector and improve the business climate. This includes infrastructural deficits and property right issues for instance. Costs to exporters are large, thus streamlining export administrative requirements would also go a long way in improving export performance. The operationalisation of OSBPs with neighbours will augment trade further. Frankly, with or without AfCFTA, Zimbabwe should implement these reforms as it would benefit from them, but AfCFTA will boost the rewards further. As Zimbabwe is more dependent than other countries in the region on trade revenues, there is a need to mobilise domestic tax revenue to offset the expected revenue losses from AfCFTA. But overall, Zimbabwe will benefit from AfCFTA. [Zimbabwe’s Minister of Industry and Commerce: AfCFTA full implementation in 15 years; Cameroon’s National Assembly considers the ratification of the AfCFTA]
China’s trade deficit with Namibia at N$4,6b during Q1 (The Namibian)
China maintained its position as Namibia’s biggest export market, with exports to that country at N$5,4bn, while imports were only N$859m during the first quarter of 2019. This translates to a trade surplus of about N$4,6bn for Namibia. The statistics showed that the main exports to China were copper and ores. According to the Namibia Statistics Agency’s Trade Statistics Bulletin (pdf) released yesterday, South Africa followed behind China as Namibia’s second leading export market, with exports to that country worth N$3,6bn. Namibia mostly exported precious stones and metals, live animals and fish to South Africa. The other three leading export markets are Botswana, Belgium and Spain, with the value of exports being N$2,4bn, N$1,9bn and roughly N$942m, respectively.
New Africa-Europe Digital Economy Partnership:
pdf Report of the EU-AU Digital Economy Task Force (2.12 MB) . The report calls for a digital economy partnership on equal footing and based on common principles. It encourages European and African political leaders to set the priorities that will enable our economies and societies to make a success of their digital transformation and to use digital innovation to speed up the achievement of the Sustainable Development Goals by 2030. We must focus now on involving all relevant stakeholders in shaping policies and in attracting investments. We also recognise the overarching recommendation to support an African-led process of developing harmonised rules and regulations that support the development of an African Single Digital Market. Improving the business environment and facilitation access to finance and business support services to boost digitally enabled entrepreneurship.
Profiled recommendations: Embed digital entrepreneurship in regional and national policies and enable structured policy dialogue between public and private partners to inform policymakers about the most pressing actions to be made in creating a favourable environment for digital entrepreneurship, with a focus on building on regional and national partnerships. Provide capacity-building support to the African Union Commission and the Regional Economic Communities in integrating markets and promote legislation on registration, ease of doing business and mobile payments integration across borders for digital entrepreneurs. Validate and certify innovation hubs and entrepreneurship incubators with a focus on expertise in the digital economy, ensuring targeted support, i.e. in terms of specific design-thinking and digital infrastructure in the hubs. Create an EU-Africa Start-up Initiative aiming at supporting knowledge sharing between African start-ups and the EU market to increase market-access. Segment and group countries by the maturity level of their innovation ecosystem and define four or five thematic business clusters as centres of excellence, in the context of the EU-Africa Start-up Initiative to be created (proposed action under recommendation on partnerships). [Related: The real controversy about Jumia – why did it list on the NYSE?; #VALUE4HERConnect Network: Africa’s first online platform for female agripreneurs launched in Nairobi]
Joint Statement issued by France and the AUC during the first strategic dialogue devoted to regional integration, multilateral challenges. The minister (Jean-Yves Le Drian, Minister for Europe and Foreign Affairs) and the AUC chairperson (Moussa Faki Mahamat) notably discussed (11 June, Paris) the situations in Sudan, the CAR, the Sahel, the Lake Chad Basin and Somalia as well as the fight against terrorism, trafficking and irregular migration. With respect to all these issues, they agreed on the relevance of cooperation and consultations between the AU and its bilateral and multilateral partners, especially the UN and the EU. Both parties agreed on the importance of continuing to look for long-term predictable financing of peacekeeping operations under AU and UN Security Council mandates. They also applauded the historic entry in force, on 30 May, of the agreement establishing the AfCFTA. Mr Le Drian reaffirmed France’s determination to support the implementation of this initiative, together with the EU. Through the French Development Agency, France will contribute two million euros to funding a facility for technical expertise on such priority issues as regional economic integration. They highlighted the contribution of regional organizations, and especially the AU, to defending multilateralism. As part of the strategic partnership between the AU and the EU, they decided to step up coordination in international forums, at the G7 summit in Biarritz this August, at the climate action summit in September, and at next year’s France-Africa summit on sustainable cities.
Regional Research-Policy Partnerships for Health Equity and Inclusive Development: reflections on opportunities and challenges from a Southern African perspective. This article critically reflects on the experience and lessons from a health-focused social policy research project involving a partnership spanning multiple countries across southern Africa and Europe. It asks what factors condition the efficacy of the partnership–policy nexus. The PRARI-SADC partnership case study used participatory action research to create a regional indicators-based monitoring ‘toolkit’ of pro‑poor health policy and change for the Southern African Development Community. [Note: The case study will be launched on 8 July, in London. Access other project outputs here; IDS Bulletin: Volume 50, Issue 1]
Energizing South-South trade: the global system of trade preferences among developing countries. The Agreement on the Global System of Trade Preferences offers a viable and, currently, unique interregional platform for consolidating and energizing global South-South trade cooperation. Extract (pdf): The São Paulo Round Protocol will enter into force after ratification by at least four of its eight signatories: Cuba, Egypt, India, Indonesia, Malaysia, Morocco, the Republic of Korea and Mercosur (Argentina, Brazil, Paraguay and Uruguay), counted as one signatory. To date, the Protocol has been ratified by India (2010), Malaysia (2011) and Cuba (2013). One additional ratification will bring it into force, though this has not yet materialized due to slow progress on ratification, possibly given changing economic circumstances and policy priorities. Consequently, the liberalization of trade among the participating countries has been held back. Based on a simulation using a computable general equilibrium model, the Global Trade Analysis Project model, preliminary UNCTAD estimates suggest that implementation of the São Paulo Round by all of its current signatories would result in shared welfare gains of $14bn. Enlarging the signatories of the São Paulo Round Protocol to include the 22 countries, and even further to all 43 members of the Global System of Trade Preferences, could significantly expand benefits and boost South–South trade.
Strengthening transboundary cooperation and integrated natural resources management in the Songwe river basin: project summary. The Songwe River Basin covers an estimated area of 4,200 km2 and is part of the wider Zambezi River basin. The river forms part of the formal border between Malawi and mainland Tanzania. Increasing competition for space, water and natural resources is degrading the Songwe River Basin. Both riparian countries ratified in 2017 the convention creating the Songwe River Basin Commission to sustainably manage the basin natural resources and implement the Songwe River Basin Development Programme (SRBDP). The project (pdf) is critical to prepare the ground for the implementation of the ambitious SRBDP by addressing the problem of environmental degradation. The heart of the SRBDP is a multipurpose dam (115 m high, 330 Mm3) which will supply water for a 180 MW hydropower plant, 3000 ha of irrigation scheme in each country and control floods in the lower part of the basin. It will also provide water for 86 000 dwellers.
Climate financing by multilateral development banks in 2018 reaches a record high of $43.1bn. The regions of Sub-Saharan Africa, Latin America and the Caribbean, and South and East Asia were the top three to invest MDB climate finance. Extract (pdf): Figure 9 in the joint MDB report shows total adaptation finance by region. The largest proportions of adaptation finance were in the following regions: Sub-Saharan Africa, South Asia, and Latin America and the Caribbean. Figure 14 shows total mitigation finance by region. The largest proportions of mitigation finance were in the following regions: Latin America and the Caribbean, Sub-Saharan Africa, and Non-EU Europe and Central Asia. [Zimbabwe Idai Recovery Project: environmental and social review summary; SADC: Lowest rainfall in 38 years; 11th World Chambers Congress, closing today in Rio de Janeiro, spotlights climate change and sustainable development]
Today’s Quick Links: Sub-Regional Coordination Mechanism for Eastern and Southern Africa: summary of outcome statement from 2019 Annual Stakeholders’ Meeting First African Union Workshop on Pre-Shipment Inspections: WCO update South Africa: DTI forges ahead with product standardisation task; Aviation manufacturing can be showcase for industrial stimulation; Ford’s expansion unleashes new potential for SA: R3bn investment, 168 000 vehicles a year Repositioning, refocusing the AU’s communication and outreach functions Egyptian President inaugurates African Anti-Corruption Forum |
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Today is Budget Day across East Africa.
Selected country previews: Rwanda, Kenya, Uganda, Tanzania
African trade policy events to diarise:
25th African Organisation for Standardisation General Assembly 2019 (17-21 June, Nairobi)
Zimbabwe’s National Consultative Forum on the AfCFTA (19-20 June, Harare)
UNCTAD’s World Investment Report 2019 was released yesterday: selected highlights
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Global fFDI slides for third consecutive year. Global FDI flows slid by 13% in 2018, to US$1.3 trillion from $1.5 trillion the previous year – the third consecutive annual decline, according to the World Investment Report 2019 (pdf). The contraction was largely precipitated by United States multinational enterprises repatriating earnings from abroad, making use of tax reforms introduced by the country in 2017, designed for that purpose. Hardest hit by the earnings repatriation were developed countries, where flows fell by a quarter to $557bn - levels last seen in 2004. The tax-driven fall in FDI, which occurred in the first two quarters, was cushioned by increased transaction activity in the second half of 2018. The value of cross-border merger and acquisitions rose by 18%, fueled by United States MNEs using liquidity in their foreign affiliates. Despite the FDI decline, the United States remained the largest recipient of FDI, followed by China, Hong Kong (China) and Singapore. In terms of outward investors, Japan became the largest followed by China and France. The United States was out of the top 20 list, due to its MNEs massive repatriation of investment earnings.
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Foreign direct investment to Africa defies global slump, rises 11%. FDI flows to Sub-Saharan Africa climbed by 13%, to $32bn, recovering ground after successive contractions in the two prior years. North Africa’s FDI flows to climbed by 7%, to $14bn. Southern Africa saw the biggest turnaround, with flows recovering to $4.2bn after net divestment of $925m the previous year. East Africa’s FDI held steady at $9bn. West Africa’s FDI declined by 15%, to $9.6bn. Selected country highlights: FDI in South Africa more than doubled to $5.3bn, although this was largely attributable to intra-company transfers by established investors. Angola remained negative (-$5.7bn), mainly as a result of oil and gas firms transferring funds to parent companies through intra-company loans. Ethiopia topped the region, even as flows to the country declined by 18%, to $3.3bn. Flows to Kenya swelled by 27%, to $1.6bn, due to investment in diverse sectors, including manufacturing, hospitality, chemicals and oil and gas. Nigeria’s flows plunged by 43%, to $2bn while flows to Ghana also dipped, albeit by a more moderate 8%, to $3bn. [ pdf Africa Country Fact Sheet (160 KB) ]
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Global competition for investment prompts a surge in special economic zones. A new wave of industrial policies and increasing competition for international investment has sparked a boom in the establishment of SEZs, according to UNCTAD’s World Investment Report 2019. The global tally of zones has increased to nearly 5,400, up from 4,000 five years ago, and more than 500 new SEZs are in the pipeline. The report observes that only a few countries regularly assess the performance and economic impact of their SEZs, and therefore proposes an SEZ sustainable development profit and loss statement to guide policymakers in the design of a comprehensive monitoring and evaluation system. The report flags new challenges for SEZs:
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Downloads on regional and country data: Country Fact Sheets, Regional Fact Sheets, Regional FDI at a glance, FDI to Latin America and the Caribbean slides by 6%, Developing countries in Asia receive more than $500bn in investments
Selected highlights of the ongoing AfDB Annual Meetings in Malabo
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Opening speech by AfDB President Dr Akinwumi A. Adesina. “We are doing a lot to interconnect Africa and drive investments to the continent. The African Development Bank is right at the heart of making the AfCFTA a success. Trade finance will be crucial for that success. The Bank has already invested over $1bn to support trade finance, which in turn has also helped support 111 transactions in 43 countries and leveraged $7bn worth of intra-regional trade. We’ve invested another $bn in the AfriExim Bank, including $650m for trade finance lines of credit and $350m for trade insurance. We’ve also invested $630m in the First Rand Bank and AbSA in South Africa to support the expansion of access to trade finance for 20 countries. To accelerate investments and mobilize greater resources for Africa, the AfDB with its partners, launched the Africa Investment Forum held for the first time last year in Johannesburg. The event attracted over 2000 participants and investors from 53 countries around the world, including pension and sovereign wealth funds. The results were amazing: investment commitments worth $38.7bn were mobilized in less than 72 hours! And we are only just getting started! The 2019 Africa Investment Forum will hold in Johannesburg from 11-13 November, so please mark your calendars!”
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Launch of the Africa Digital Financial Inclusion Facility. The facility is supported by the Bill & Melinda Gates Foundation, the AFD and the Government of Luxembourg, as initial contributors. The goal is to ensure that at least 320 million more Africans, of which nearly 60% are women, have access to digital financial services. The fund will deploy $100m in grants and $300m in the form of debt from the Bank’s ordinary capital resources by 2030, to scale up electronic financial services for low-income communities. ADFI’s opening project, which serves as a pilot for the facility, is a $11.3m grant from the Bill & Melinda Gates Foundation to the Bank and the Central Bank of West African States. The grant will create an interoperable digital payment system that will allow consumers to send and receive money between mobile wallets, and from these wallets to other digital and bank accounts.
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Launch of the African Agri-Business Engine. The platform will identify investment and finance opportunities in agriculture and agribusiness, and focus its activities in Mozambique, Zambia, Ethiopia, Rwanda, and Kenya. The project will be implemented by Grow Africa and hosted in the AUDA-NEPAD. One of the proposed outcomes of the African Agri-Business Engine is the submission of business-ready deals with leading continental partners at the African Investment Forum in Johannesburg at the end of this year. Its specific objectives:
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The AfDB’s Annual Report 2018, Financial Report 2018
Kenya: Matiang’i orders the deportation of Chinese traders (Business Daily)
Interior Secretary Fred Matiang’i has ordered the Immigration Department to deport foreigners engaged in small-scale trading, two days after an exclusive Business Daily story revealed the presence of Chinese merchants in Kenya’s biggest second-hand clothes market. “We do not have a classification of foreign investors coming into the country to conduct trade or to hawk. I have already directed that those in Gikomba be escorted to the airport tomorrow to ensure they take supper in their homes,” Dr Matiangí said yesterday in Nakuru. Kenya’s lax immigration laws, including the relatively low Sh10 million threshold set for foreigners coming into the country, offers easy access to investment certificates that non-nationals use to set up businesses locally. In an interview Wednesday, Kenya Investment Authority chief executive Moses Ikiara said a review of the minimum amount that foreign investors must have to get an investment certificate is already under way.
Sachen Gudka: Why we should all combat illicit trade head-on (Business Daily)
Counterfeit is the most prevalent form of the illicit trade in Kenya. Just last week, President Uhuru Kenyatta, during his inspection of the Inland Container Depot in Embakasi, remarked that indeed the multi-agency task force had uncovered illicit trade schemes that have been plaguing the local markets by circulating uncustomed goods. Illicit trade undermines national and regional security, destabilises economies, increases the cost of public health, sabotages tourism, stunts innovation, and offers a haven to organised crime and trafficking. Organised crime has a close correlation to illicit trade. As a matter of fact, transnational organized crime is essentially anchored on illicit trade. This economic sabotage is felt at every level of society from start-ups to multinationals. It is important to note that no single entity can effectively enforce anti-counterfeiting measures within and across national boundaries. It was therefore quite encouraging when the Multi-Agency force was set up in 2018 and since then, notable progress in this endeavour has been made. As the umbrella organisation for manufacturers in Kenya, we are even more encouraged with recent amendments to the Anti-Counterfeit Act, 2008, the legislation being the bedrock on which law enforcement can launch their offensive, and aid in increasing the success rate of action taken by law enforcement authorities. [The writer is chairman, Kenya Association of Manufacturers and vice chair, Comesa Business Council.]
Zimbabwe: Local content threshold set at 80% (Bulawayo24)
Government’s much awaited local content strategy, approved by cabinet on Tuesday, has set an 80% minimum threshold for all products. “The Local Content Strategy is a strategy to encourage local value addition through utilisation of domestic resources and localisation of supply chains. The strategy will create economic linkages and business opportunities for local entrepreneurs. The LCS will be implemented through specific evidence-based local content thresholds in prioritised sectors. Objectives of the LCS are to increase average local content levels in prioritised sectors from current levels of approximately 25% to around 80% by 2023,” the Ministry of Industry and Commerce policy document reveals.
Nigeria, Benin Customs adopt single goods declaration procedure (The Guardian)
Under the new system, declarations made for imports transiting from either of the countries to the other would be electronically shared to deal with corrupt tendencies and increase security. Assistant Comptroller-General of Customs, Zone ‘A’, Benjamin Aber: “Deployment of non-intrusive equipment such as scanners will deal with the challenges of trans-border crimes including insurgencies. The electronic platform will integrate the two countries Single Windows trade platforms and also improve the compliance to trade regulatory and fiscal policy measures of both countries. The platform will create effective, predictable and transparent risk management system and reduction in smuggling activities in both countries and ECOWAS”.
Improving the trade facilitation environment in Eastern Africa through knowledge generation, capacity building: AfDB EOI
Services to be provided under the assignment include: Comprehensive studies that assess the current state of logistics and trade facilitation along one of the trade corridors in Eastern Africa; Identification of the major impediments in the business environment policy and regulatory frameworks affecting trade and investment along the corridor. The services are provided to the Pan African Chamber of Commerce and Industry and IGAD. [AfDB EOI: Study of investment climate reforms in selected value chains]
The Age of Digital Interdependence: UN launches new tech report
The report describes a world more deeply interconnected than ever before as a result of digital technology, yet struggling to manage the economic, social, cultural and political impacts of the digital transformation. The report makes a strong call for reinvigorating multilateral cooperation, arguing that it needs to be complemented by a multi-stakeholder approach — involving a far more diverse spectrum of stakeholders, such as civil society, academics, technologists, and the private sector. Giving the example of his own digital company, Alibaba, Mr. Ma said that of the 10 million small businesses selling products via his online platforms, 50 per cent of the most effective “power sellers”, are women. Melinda Gates insisted that women must have a “seat at the table, as the creators of society”, pointing out that women entrepreneurs currently receive just 6% of venture capital funding for digital start-ups. The Panel’s report makes 5 sets of recommendations: [An update on SA’s Presidential Commission on the Fourth Industrial Revolution]
Diagonal cumulation and sourcing decisions (World Bank)
This paper uses the introduction of the Pan-European Cumulation System in 1997 to explore the effects of rules of cumulation on trade in intermediate goods. The system provided the EU Free Trade Area’s peripheral partners (‘‘spokes’’) the possibility of cumulating stages of production from more countries to qualify for preferential access to the European Union market. Therefore, the system might have altered the organization of production in European Union centric value chains. The evidence presented in this paper (pdf) suggests that diagonal cumulation may have led to a reassessment of sourcing decisions established during the pre-PECS bilateral RoCs. Indeed, diagonal cumulation allows preferential access for exports of final goods that are produced with intermediates imported by a larger set of countries. Since ROOs do not typically require whole obtained originating status, the increase in sourcing choices may have led countries to import more intermediate goods also from RoW. Therefore, our results also support the idea that diagonal cumulation can lead to a multilateralization of regionalism.
Today’s Quick Links: AU hopeful of Nigeria’s signing of AfCFTA Here are the top 10 items Nigeria imported and exported in Q1 2019 SA Canegrowers looks to new government for rescue plan The skills balancing act in Sub-Saharan Africa: investing in skills for productivity, inclusivity, adaptability Trade tensions, global value chains, and spillovers: insights for Europe Christine Lagarde: Prosperity and resilience of CESEE economies in a changing trade landscape |
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Foreign direct investment to Africa defies global slump, rises 11% – UN Report
Continent-wide trade agreement bodes well for future investment in Africa and burgeoning SEZs further buttress prospects.
Africa escaped the global decline in foreign direct investment (FDI) as flows to the continent rose to US$46 billion in 2018, an increase of 11% on the previous year, according to UNCTAD’s World Investment Report 2019.
Growing demand for some commodities and a corresponding rise in their prices as well as the growth in non-resource-seeking investment in a few economies underpinned the rise.
While FDI in some large economies on the continent – such as Nigeria and Egypt – contracted, this was outweighed by a surge in flows to others, most significantly, South Africa.
“The African Continental Free Trade Area (AfCFTA) agreement will bolster regional cooperation. This, along with upbeat growth prospects, augurs well for FDI flows to the continent,” UNCTAD Secretary-General Mukhisa Kituyi said.
North Africa
FDI flows to North Africa climbed by 7% to $14 billion.
Investments in Egypt contracted (down by 8% to $6.8 billion), but the country continued to be the largest FDI recipient in Africa. FDI to Morocco increased by 36% to $3.6 billion on the back of sizeable investments in finance and the automotive sector.
Sub-Saharan and Southern Africa
FDI flows to Sub-Saharan Africa climbed by 13% to $32 billion, recovering ground after successive contractions in the two prior years.
Southern Africa saw the biggest turnaround, with flows recovering to $4.2 billion after net divestment of $925 million the previous year.
FDI in South Africa more than doubled to $5.3 billion, although this was largely attributable to intra-company transfers by established investors.
Angola remained negative (-$5.7 billion), mainly as a result of oil and gas firms transferring funds to parent companies through intra-company loans.
East Africa
FDI held steady at $9 billion in East Africa, the fastest-growing region of the continent.
Ethiopia topped the region, even as flows to the country declined by 18%, to $3.3 billion. Flows to Kenya swelled by 27% to $1.6 billion, due to investment in diverse sectors, including manufacturing, hospitality, chemicals and oil and gas.
West Africa
FDI to West Africa declined by 15%, to $9.6 billion, largely due to Nigeria where flows plunged by 43% to $2 billion. Flows to Ghana also dipped, albeit by a more moderate 8%, to $3 billion.
Looking ahead
Multinational enterprises from developing countries are expanding their activities in Africa but investors from developed countries remained the key players.
Based on data through 2017, France is the largest investor in Africa, although its stock of investment has remained largely unchanged since 2013, followed by the Netherlands, the United States, the United Kingdom and China.
Growing demand and a corresponding rise in the price of commodities, of which Africa is a key producer, are expected to prop up FDI flows to the continent in 2019.
Closer regional integration aided by the AfCFTA can also draw additional FDI flows.
While investment in manufacturing and services is likely to be sustained, this is expected to be confined to a few countries in North and Southern Africa, and the emerging manufacturing hubs in East Africa.
Special economic zones buttress prospects
The growing number of special economic zones (SEZs) could become another factor in drawing investment to the continent in the coming years.
There are an estimated 237 SEZs in Africa, some still under construction, along with more than 200 single-enterprise zones (so-called free points).
SEZs operate in 38 of the 54 economies on the continent, with the highest number in Kenya (61). The three largest economies of the continent – Nigeria, South Africa and Egypt – all have well developed SEZ programmes. Many smaller economies have only established SEZ frameworks in the last decade and tend to have fewer zones.
Stronger regional cooperation also creates scope for more ambitious regional and cross-border zones. In 2018, Burkina Faso, Côte d'Ivoire and Mali launched an SEZ spanning border regions of the three countries. Similarly, Ethiopia and Kenya recently announced their intention to convert the Moyle region into a cross-border free trade zone.
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“To integrate Africa, bring down the walls,” Adesina urges at 2019 African Development Bank Annual Meetings open in Malabo
African leaders on Wednesday underscored the urgent need to fast-track the continent’s regional integration process in order to accelerate Africa’s economic transformation.
The call was made at the opening ceremony of the Bank’s 2019 Annual Meetings in Malabo, Equatorial Guinea, with the theme: “Regional Integration for Africa’s Economic Prosperity.”
“Apart and divided, Africa is weakened. Together and united, Africa will be unstoppable,” the Bank’s President Akinwumi Adesina told delegates at the packed Sipopo Conference Center.
Adesina urged African governments to work toward the elimination of non-tariff barriers. “Pulling down non-tariff barriers alone, will spur trade by at least 53%, and potentially double trade,” he said.
The opening ceremony was presided over by the host nation’s President Teodoro Obiang Nguema Mbasogo. Also in attendance were King Letsie III of Lesotho; President Félix Antoine Tshisekedi of the Democratic Republic of Congo; and Ambrose Mandvulo Dlamini, Prime Minister of eSwatini. High-level government officials from Rwanda, Cameroon, the Central African Republic, and Côte d’Ivoire were also present.
In his opening speech, President Obiang Nguema Mbasogo recalled that Equatorial Guinea, once one of the poorest countries in the world, has since been radically transformed with one of the highest per capita incomes on the continent.”
“For me, development is not about per capita income, it is about expanding the opportunities for the people to live a more dignified life,” Obiang Nguema Mbasogo said.
“Equatorial Guinea is open for business. We are committed to regional integration for shared prosperity. We count on the African Development Bank to help us achieve economic diversification and the consolidation of social equality.”
Regional integration is one of the Bank’s strategic High 5 agendas to rapidly advance Africa’s economic transformation.
In the past several years, the African Development Bank has invested over $13 billion in the central African region. “And for every dollar invested, the region has leveraged $36, an incredible rate of return of 36 times,” Adesina noted.
The Bank’s investments include the construction of the Central African fibre optic network that connects the population with faster and less expensive access to the Internet, and is boosting businesses and regional integration.
In his remarks, Equatorial Guinea’s Finance Minister Cesar Mba Abogo said: “Progress is the realisation of utopia. This is a country of utopia in Africa, with independence and the ability to control our own destiny. It seemed impossible at first in the last century but it was done. Now our utopia is regional integration.”
More than 2,000 participants are attending the Annual Meetings, a unique opportunity to share the Bank’s perspectives on the state of Africa’s economy. The meetings also provides updates on the Bank’s work and serves as a platform for the exchange of views on emerging issues shaping the future of the continent.
The Prime Minister of Equatorial Guinea, the president of the Senate, members of governments, the diplomatic corps as well as the African Development Bank’s Governors, Executive Directors, and other dignitaries attended the opening ceremony.
“There’s excitement in the air on Africa’s economic opportunities, and those opportunities are boundless. The newly ratified Africa Continental Free Trade Area will make Africa the largest free trade zone in the world, with a combined GDP of over $3.3 trillion,” Adesina said.
Opening Speech by Dr. Akinwumi A. Adesina, AfDB Group President
I welcome you to the Annual Meetings of the African Development Bank Group. This annual event is always a unique opportunity to share with you the Bank’s perspectives on the state of Africa’s economy, provide updates on the Bank’s work and exchange views on emerging issues shaping the future of the continent.
The Theme for this year’s annual meeting is Regional Integration. Three years ago in Zambia, the focus of our Annual Meetings was Light up and Power Africa. Two years ago, in India, our focus was on Feed Africa. And last year, in South Korea, the focus of our Annual Meetings was Industrialize Africa. This year, we chose to focus on Integrate Africa, our fourth High 5.
Regional integration is crucial for Africa’s accelerated development. We must connect landlocked countries to ports. We must allow free movement of people. Investors must be able to invest beyond the borders of countries. And Africa must trade more with itself.
Apart and divided, Africa is weakened. Together and united, Africa will be unstoppable!
We’re delighted that you’ve all joined us here today in the beautiful country of Equatorial Guinea – a country, you will find to be exemplary in terms of infrastructure.
Thank you, Your Excellency, President Obiang Nguema Mbasogo for Equatorial Guinea’s hosting of this Year’s Annual Meetings and for your generous hospitality.
I would like to take this opportunity to congratulate you on your appointment of the new Minister of Finance, a young, bright and very dynamic 39-year old economist, and a former associate Professor of economics in Spain. My interactions with him showed me you made a very smart choice Mr. President. By his appointment, you have demonstrated remarkable confidence in the youth as you build towards the future. Well done!
That confidence of the youth can be found at the Teg Campus – an IT and coding boot camp right here in Malabo. There, I saw dynamism, resourcefulness and entrepreneurship of the youth in action. The basketball stadium was jam packed – not with basketball players – but with budding young entrepreneurs. The Tech Campus is laying the foundation of what will become the “Silicon Valley” or should I say “the Malabo Forest” for IT in Equatorial Guinea.
Among them is Sigfredo who developed a moving robot and wants to study aeronautics and robotics; 18-year old Angelica who created an intelligent stick for the blind and visually impaired; Mathias, who inspired by the beauty of his country designed an impressive online digital portal; Celso, who has a well thought out agribusiness idea for processing mangoes and avocadoes; and Quintin who is developing a safety and security App for taxi users.
The youth of Equatorial Guinea are the best assets you have, Mr. President! Mr. President, keep up your determination to invest in the youth!
When I visited Equatorial Guinea a few weeks ago and you so warmly received me despite your being bereaved at the time, I was also amazed with the level of world-class infrastructure investments that have been made here, under your leadership, over many years.
I encourage delegates to take some time to visit this amazingly beautiful country and take in the depths of its vast development. In the process, you’ll discover the Equatorial Guinea “you wished you knew”!
We’re delighted that several Heads of State are with us today, including those from the Central Africa region. This region is endowed with vast amounts of arable land, forests, abundant water resources, and rich biodiversity, making it easily one of the world’s leading treasures of natural resources!
This is the first time the Bank is holding its Annual Meeting in the critically important Central Africa region. In the past several years, we have invested over $13 billion in the region. And for every dollar invested, the region has leveraged $36, an incredible rate of return of 36 times.
Our investments have helped construct the Central Africa fibre optic networks that connect the population with faster and less expensive access to the Internet, and in the process, boosting business and regional integration.
Our efforts through the Congo Basin Fund have helped to preserve forests and biodiversity. We are building a prosperous, climate-smart and environmentally secure future for Africa.
Today, a climate-resilient Africa is now urgent, more than ever before, as we all witnessed during the recent devastation caused by cyclones in Mozambique, Malawi and Zimbabwe. The African Development Bank rallied support behind these countries, by providing immediate disaster relief. And just last week, our Board of Directors approved $100 million in funding to support their rebuilding efforts. The global community must support Africa to adapt to climate change and ensure resilient economies, for a greater future.
And the future of the African continent is getting brighter. The 2019 African Economic Outlook of the African Development Bank shows general economic performance has continued to recover. Growth is projected at 4% in 2019 and 4.1% in 2020. This is a strong momentum, from the growth of only 2.1% posted as recently as 2016.
It is worth noting that 40% of African countries are projected to see growth of at least 5% this year, as commodity prices recover and domestic demand and infrastructure investments boost growth.
There’s excitement in the air on Africa’s economic opportunities. And those opportunities are boundless. The newly minted Africa Continental Free Trade Area will make Africa the largest free trade zone in the world, with a combined GDP of over $3.3 trillion. Pulling down tariff barriers alone, will spur trade by at least 53%, and with the elimination of non-tariff barriers, trade could potentially double.
To help accelerate regional integration in Africa, the Bank has been at the forefront in the development of critical infrastructure.
Let me share with you, some of our results. For at the end of the day, it is action and results on the ground that counts.
Here in the Central Africa region, the African Development Bank is financing the Natchigal dam in Cameroon, supporting the development of INGA dam in Democratic Republic of Congo and will support the Corridor 13 road that will link Congo Brazzaville with Central African Republic and Chad. These are all part of the African Development Bank’s vision to ‘Integrate Africa’.
Through the African Development Fund, we financed the construction of the amazing Senegambia Bridge – a dream come true for Senegal and The Gambia.
We are doing a lot to interconnect Africa and drive investments to the continent.
The African Development Bank is right at the heart of making the African Continental Free Trade Area a success. Trade finance will be crucial for that success. The Bank has already invested over $1 billion to support trade finance, which in turn has also helped support 111 transactions in 43 countries and leveraged $7 billion worth of intra-regional trade.
We’ve invested another $1 billion in the AfriExim Bank, including $650 million for trade finance lines of credit and $350 million for trade insurance. We’ve also invested $630 million in the First Rand Bank and AbSA in South Africa to support the expansion of access to trade finance for 20 countries.
Our work, together with the African Union Commission and the Regional Economic Communities, on the Africa Visa Openness Index, continues to monitor how Africa is doing on free movement of people. Progress is being made but much still needs to be done. The Visa Openness Index shows that in 2018, Africans did not require visa to enter 25% of countries in the region; they can get a visa on arrival in only 24% of the countries; but still need a visa to enter 51% of the countries.
To integrate Africa, we should bring down all the walls! The free movement of people, and especially labor mobility, are crucial for promoting investments.
To accelerate investments and mobilize greater resources for Africa, the African Development Bank, together with its partners, launched the Africa Investment Forum held for the first time last year in Johannesburg, South Africa. The event attracted over 2000 participants and investors from 53 countries around the world, including pension and sovereign wealth funds. The results were amazing: investment commitments worth $38.7 billion were mobilized in less than 72 hours!
Just listen to Canada’s Chris McLean the CEO of ShoreChair Capital, a private equity firm with rising investments in Africa “I’ve been traveling to Africa for over 20 years, doing investments, I have never seen anything like the Africa Investment Forum. It created seismic shifts”.
A good example of such seismic shifts is the $2.6 billion deal by investors in South Africa to build the Accra Sky train in Ghana. Also, the African Development Bank, Africa50 and other partners signed a $500 million financing agreement to construct the first road and rail bridge to connect the two Congos: the DRC and the Republic of Congo.
And we are only just getting started! The 2019 Africa Investment Forum will hold in Johannesburg from 11-13 November, so please mark your calendars!
In 2018, the Bank helped to finance and complete a number of major transformative projects, including new international airport terminals in Ghana and Senegal, and the Regional Express Train of Senegal, the first in the West Africa region.
We’ve provided $16 million to ECOWAS to support feasibility studies for the Lagos-Abidjan highway. Our investment in the 1,000 km Addis Ababa-Nairobi-Mombassa highway is transforming trade between Ethiopia and Kenya, which has risen by 400%.
Our investment to expand the Walvis Bay Port in Namibia is opening up trade connections to several landlocked countries in the SADC region, such as Botswana, Zimbabwe and Zambia, and expanding trading volumes from 300,000 to 1 million Twenty-Foot Equivalent Units (TEUs).
The Bank’s investments are making the road from Cape Town to Cairo a reality. Just last year, I had the pleasure of joining the President of Tanzania, H.E. John Magufuli, to inaugurate the Bank-financed 251-kilometer road linking Dodoma to Babati, a critical missing link in the 10,288 kilometers Trans-Africa Highway No. 4 that connects Cape Town-Lusaka-Dodoma-Arusha-Nairobi to Cairo.
Rehema Tukai, who works in Dodoma, had great things to say recently about this road. With a broad smile on her face she said, “visiting my family in Kondoa on the road used to take me 5 hours. Now I get to see them in just a little over one hour”!
We are doing more than infrastructure. The Bank is also supporting the integration of financial markets across the continent, through its Africa Financial Markets Initiative, which is helping to link stock exchanges with a combined total market capitalization of $1 trillion. These include the Johannesburg, Nairobi, Casablanca, Windhoek, Lagos and Cairo stock exchanges.
As we connect nations, through quality transport infrastructure, support ICT backbone networks and financial markets, the Bank is poised to further boost regional integration.
And let’s just be clear: regional integration will be meaningless unless women, who form majority of the traders, effectively participate. To advance opportunities for women, the Bank’s Affirmative Finance Action for Women in Africa (AFAWA) is being rolled out to leverage $3-5 billion, specifically for women businesses in Africa.
I am delighted that the Women Entrepreneurs Finance Initiative (We-Fi) has just invested over $68 million in AFAWA. This is very exciting for women across Africa. When women win, Africa wins!
To help Africa win more, we are positioning the Bank very well to meet the challenges ahead. I am pleased to report that since we last met in Busan, a lot has happened at the Bank. The AAA rating of the Bank was again maintained, as it has been for the past three years. Our loans to countries have expanded, and so have our disbursements.
We’re paying greater attention as well to quality of our projects. The Bank was rated 4th among the 45 development organizations in the 2018 Aid Transparency Index Report – a clear sign of progress made in ensuring greater transparency and reporting across all of our operations.
The Bank also introduced several balance sheet optimization initiatives that have generated global attention, including the Room to Run instrument that sold off some of the risks on our loan books to the private sector in a $1 billion initiative – the first by any Multilateral Development Bank.
And it’s not just about money. It’s all about development impact. In the past three years, the Bank has steadily delivered significant impacts: it has connected about 16 million people to access electricity; 70 million people with access to agricultural technologies to achieve food security; 9 million with access to finance from private sector companies; 57 million with access to improved transport; and 31 million people with access to improved water and sanitation services.
Yet Africa needs more and Africa deserves more! The time is right to do more for Africa. We cannot postpone what is good for Africa into the future.
As Africa’s Bank, we will continue to push for greater results, more development and better quality of life for Africans.
That’s why the Bank is seeking your strong support for the General Capital Increase of the African Development Bank and replenishment of the African Development Fund. We are grateful for the strong support you gave at the conclusion of the Third Governors’ Consultative Committee meeting yesterday on the 7th General Capital Increase for the Bank. And in July we will also meet with our donors for the 15th replenishment of the African Development Fund.
Our shareholders – you the member countries of the Bank – are our best supporters. Just like the remarkable effort on Africa’s regional integration, your collective unity and support of the Bank’s mission is its strength. I am confident that you’ll put the interest, yearnings and aspirations of Africa first, and give its Bank, the African Development Bank, and the African Development Fund, the financing needed to help Africa achieve its desired development.
As James Champy said: “Big results require big ambitions”.
To develop Africa faster, African leaders are thinking big – and they should. Africa should not think small! Africa’s own Bank, the African Development Bank, should not think small! And its shareholders should not think small for Africa!
It’s not about what you can afford for Africa, It is about what Africa needs – and deserves!
Your Excellencies, Governors, distinguished ladies and gentlemen:
Africa needs you!
African integration needs you!
And the African Development Bank needs you!
Today, the African Development Bank Group is much stronger; it is fit for purpose; it is ready to do more and achieve greater results for Africa, with your collective support!
Thank you very much!
tralac’s Daily News Selection
The highlight of the opening day of the AfDB’s Annual Meetings, yesterday in Malabo, was the release of one of its flagship reports, the African Economic Outlook. An easy guide to some of its core messages:
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African Economic Outlook 2019. New research for this Outlook shows that five trade policy actions could bring Africa’s total gains to 4.5% of its GDP, or $134bn a year. First is eliminating all of today’s applied bilateral tariffs in Africa. Second is keeping rules of origin simple, flexible, and transparent. Third is removing all nontariff barriers on goods and services trade on a most-favored-nation basis. Fourth is implementing the World Trade Organization’s Trade Facilitation Agreement to reduce the time it takes to cross borders and the transaction costs tied to nontariff measures. Fifth is negotiating with other developing countries to reduce by half their tariffs and nontariff barriers on a most-favored-nation basis. The 2019 Outlook also looks at the gains possible from regional public goods, such as synchronizing financial governance frameworks, pooling power, opening skies to competition, and opening borders to free movements of people, goods, and services.
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Chapter 1: Africa’s macroeconomic performance and prospects (pdf). Extract from Box 1.2: Potential impacts of escalating trade tensions - modest contraction but opportunities for deeper intraregional integration in Africa. In the short term (within one year), the impact of the trade tensions on Africa’s GDP is about ±0.07% of GDP. In the medium term (within three years), the negative impact of the contraction in global trade volumes grows larger. It is strongest for other resource-intensive exporters, at –2.5%, followed by oil exporters, at –1.9%, and weakest for non-resource-exporting economies, at –1.1%). There are several possible explanations for this pattern. African countries’ size, openness to, and trade intensity with the US and China are significant - more than 60% of Africa’s exports go to the US, China, and Europe, and more than 70% of Africa’s imports originate from these countries. So a decline in demand for Africa’s exports due to a slowdown in the global economy prompted by tariffs is an important channel that could affect Africa. But despite the modest negative effects, Africa could - with the right policy responses - turn the increasing trade tensions into an opportunity to improve competitiveness and deepen intraregional integration. One way is to take advantage of the dislocation and trade diversion caused by the tensions to become the new supplier of goods previously supplied, for example, by China to the United States. Capturing even a small portion of the dislocation from increasing trade protectionism could benefit Africa.
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Chapter 2: Jobs, growth, and firm dynamism (pdf). The return to firm size is even higher in Africa than in other developing regions, with a 0.15% increase in labor productivity for a 1% increase in size. The size effect is even stronger for manufacturing firms in Africa, with 1% increase in size associated with a 0.20% increase in labor productivity - well above the 0.12% increase for firms in the services sector. Wages are also much higher in medium and large enterprises than in small firms and in manufacturing than in services. Wages are twice as high in large manufacturing firms as in large service firms and 37% higher in small manufacturing firms than in small service firms. The African enterprise landscape is dominated by small firms, with too few medium and large firms (the “missing middle” and “missing large”). More than 40% of African firms have fewer than 10 employees, and more than 60% have fewer than 20. Overall, it seems much easier for African firms to shrink than to expand. Currently 55% of firms are small, 30% are medium, and 15% are large. Simulations show that on existing trends, in the long run, 49% of firms will be small, 31% will be medium, and 20% will be large in the long run. This is much closer to the distribution in developing countries, where 21% are small, 33% are medium, and 46% are large. The question is what are the most important factors that drive firm growth?
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Chapter 3: pdf Integration for Africa’s economic prosperity (1.45 MB) . Extract from Box 3.12: Estimating efficiency and revenue gains in five scenarios. The results reported here concentrate on the longer run effects under full implementation of the CFTA using a version of the GTAP model adapted for capturing the expected long-run effects of the CFTA and full implementation of the TFA (see table A3.1 in the online annex for country and sector aggregations). The model is disaggregated into the following regions: Africa, China, the US, Western Europe, rest of East Asia, and rest of the world. Results are reported for North Africa (4 countries) and Sub-Saharan Africa (28). Five scenarios were simulated. Scenarios 1–3 apply only to the 32 African countries and regions in the model; scenarios 4 and 5 include other countries. The scenarios are mostly cumulative:
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Central Africa could be the continent’s rising star, thanks to the AfCFTA. Central Africa stands to benefit the most from the AfCFTA, data from the African Development Bank shows. Hanan Morsy, Director of Research at the Bank, said Central Africa’s real income could increase by as much as 7% in one of the scenarios that researchers describe in the 2019 African Economic Outlook. By the same calculations, East Africa, currently the star performer on the continent, would experience an increase of around 4.2%, followed closely by North Africa. The scenarios measure the potential outcomes of the AfCFTA, ranging from one (least impact) to four (greatest impact): “While there are differences in gains, all African countries are better off with regional integration than without.” Morsy said current levels of growth were not adequate to generate jobs for millions of unemployed Africans, but regional integration could stimulate the growth needed to make a dent in unemployment. Morsy said Africa needed to grow between 4% and 6% in order to turn the tide. The Outlook predicts that Africa can add 4.5% to its GDP, provided that governments do away with bilateral tariffs and non-tariff barriers and keep rules of origin simple.
Next week’s US-Africa Business Summit in Maputo: an interview with CCA’s Florie Liser
We’re pleased that the summit (18-21 June) is serving as the launch for ‘Prosper Africa’ - the Trump administration’s signature initiative with the goal to double US-Africa trade and investment. Several major deals involving American firms will be featured as part of the policy roll-out. On the first day, President Nyusi and Anadarko CEO Al Walker will formally announce agreement on a $20bn liquefied natural gas project. We have an ICT ministerial roundtable and panels on sovereign wealth funds, cybersecurity, housing, digitalization of African economies, industrialization in the consumer goods sector. We have another looking at the entertainment industry – Nollywood and more – and another on housing – the housing shortage in Africa is a huge opportunity for American businesses. And there are more.
A note on the Women’s Business Roundtable, part of the upcoming Southern Africa Regional Africa Trade Forum (Business Day)
The AfCFTA does not incorporate a separate chapter on gender and trade. The preamble of the agreement, however, contains explicit reference to the importance of gender equality for the development of international trade and economic co-operation, and article 3(e) emphasises the promotion of gender equality as one of the general objectives of the AfCFTA. Empowering women’s participation in trade under the AfCFTA requires the implementation of interventions that go beyond protecting traditionally female industries, to include measures that support the building of trade-related and physical infrastructure that impact on the care-burden of women and consequent labour supply, as well as ICT and other capacity-building, technical and vocational skills training programmes. These interventions and other themes of importance will be the focus of discussion at the Women’s Business Roundtable. The Roundtable is part of the upcoming Southern Africa Regional Africa Trade Forum on the AfCFTA, to be convened by ECA and the government, with the AU Commission and EU as collaborating partners. [The author, Nadira Bayat, is a gender and trade consultant at the African Trade Policy Centre]
SADC Business Council, Industrialisation Week: update
Mr Peter Varndell, NEPAD Business Foundation CEO, updated SADC’s Executive Secretary, Dr Stergomena Lawrence Tax, on progress made in the formulation of the SADC Business Council, in response to the decision of the SADC Council of Ministers of August 2017, which directed the Secretariat to establish a private sector engagement mechanism to enable the involvement of the private sector in the implementation of the SADC regional integration agenda and the Industrialisation Strategy and Roadmap (2015-2063). The two parties also discussed the status of preparations for the SADC Industrialisation Week, scheduled to take place 5-8 August 2019, in Dar es Salaam. Dr Tax called upon the NBF to finalize the constitution for the SADC Business Council, a key document that will facilitate the legal and administrative processes leading to the signing of the MoU between the SADC Business Council and the SADC Secretariat.
SADC: Sustainable financing of regional infrastructure and industrial projects, 2019-2021 (AfDB)
The objective of the project is to support sustainable financing of regional infrastructure and industrial projects in the SADC Region. The specific objectives include (pdf): (i) establishment of financing mechanism for regional projects including financial instruments, (ii) prioritising and developing of regional infrastructure projects, (iii) development of regional value chains in the mining subsectors of copper and cobalt, and (iv) capacity building in development of infrastructure and industrial project. While other donors have been supporting SADC in preparation of regional infrastructure projects and development of regional value chains in agro-processing and pharmaceutical, these donors are however not supporting SADC in prioritising the projects as well as developing RVCs in mining sector. The SADC Secretariat will be the executing agency for the project. Implementation of the project will be done through the Project Implementation Unit.
EAC, ECOWAS parliamentarians meet to popularise Free Movement Protocol (AU)
Opening the consultation yesterday in Nairobi, the Head of Humanitarian, Refugees and Displaced Persons Division, Ambassador Olabisi Dare, said it was organized to enable the two parliaments compare notes with each other in the area of free movement of persons in their respective regions, and to open their borders to each other by ratifying the Protocol on Free Movement of Persons in Africa by ratifying the Protocol. “Considering that the Protocol only needs 15 ratifications to come into force and that Six Member States of the EAC and the 15 member States of the ECOWAs have already made significant progress in this area of Free Movement of Persons within their regions, the AU Commission has already embarked on its ratification campaign’’, he said.
The meeting is expected to develop a comprehensive ratification roadmap in support of the Protocol from EAC and ECOWAS regions, to provide recommendations for the harmonization of the regional norms and policies on free movement of persons and border security management with the African Union Protocol by the end of 2020, and to develop a plan to popularize the adopted African Passport as framed in the guidelines for the design, production and issuance and its minimum technical specification and security features.
ECOWAS Central Banks working group meet on single currency
The meeting (held on Monday) discussed the findings of a study commissioned to address key issues confronting the process leading to the establishment of a momentary union in the ECOWAS Region namely: the exchange rate regime, momentary policy framework and the model of the future ECOWAS Central Bank. Welcoming the Central Bank Governors, Jean-Claude Kassi Brou, the President of the ECOWAS Commission, reminded them of their commitment to seek consensus on the outcome of the studies. President Brou added that expectations are high within the Community and as such the need to double their efforts to put in place all the key pillars that are required for the establishment of the monetary union. [ECOWAS Annual Review meeting on strategy to curb trafficking in persons]
Dubai exports in first quarter of 2019 soar by 30%
Dubai recorded a non-oil foreign trade of AED 339 billion in the first quarter of 2019, an increase of 7% on last year’s AED 316 billion. Exports registered the most growth, rising 30% to reach AED 42 billion while re-exports grew 7% to AED 106 billion. Imports rose by 4% to reach AED 190 billion. Data released by Dubai Customs on Wednesday showed that Dubai’s first quarter of 2019 non-oil trade volumes increased by 32% to 28 million tons, up from 21 million in the same quarter last year. Exports rose by 94% to 6 million tons while re-exports surged 41% to 4 million tons and imports rose 16% to 17 million tons. [Regional highlights: Trade with Asia, the largest trading region for Dubai, increased by 7% to AED 208 billion. Trade with Europe, the second largest partner, touched AED 58 billion. Africa witnessed the biggest growth, rising 36% to reach AED 42 billion. Americas and Oceania also contributed with high single digit growth, up 7% (AED 27 billion) and 9% (AED 3.5 billion) respectively.]
Today’s Quick Links: Madagascar: IMF staff completes program review mission Kenya shuts Somalia border as secessionist group raises eyebrows AfDB: Donors pledge $17m to Africa Solidarity Trust Fund SME Mauritius Ltd to focus on digital platform Mauritius to host 2nd Edition of the Ministerial Conference on Maritime Security World Bank: Mali Growth and Diversification OECD: Draft agenda for the Informal Advisory Group on measuring GDP in the Digital Economy (1-2 July) |
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Central Africa could be the continent’s rising star, thanks to the African Continental Free Trade Area
Central Africa stands to benefit the most from the AfCFTA, data from the African Development Bank shows.
Hanan Morsy, Director of Research at the Bank, revealed the findings at the launch of one of the Bank’s flagship reports in Malabo, where the African Development Bank is hosting its Annual Meetings.
Morsy said Central Africa’s real income could increase by as much as 7% in one of the scenarios that researchers describe in the 2019 African Economic Outlook. By the same calculations, East Africa, currently the star performer on the continent, would experience an increase of around 4.2%, followed closely by North Africa.
The scenarios measure the potential outcomes of the AfCFTA, ranging from one (least impact) to four (greatest impact). “While there are differences in gains, all African countries are better off with regional integration than without,” Morsy said.
Morsy said current levels of growth were not adequate to generate jobs for millions of unemployed Africans, but regional integration could stimulate the growth needed to make a dent in unemployment. Morsy said Africa needed to grow between 4% and 6% in order to turn the tide.
The Outlook predicts that Africa can add 4.5% to its GDP, provided that governments do away with bilateral tariffs and non-tariff barriers and keep rules of origin simple.
The launch included a panel discussion by Finance and Economic Planning Ministers, who are also Governors of the Bank.
Aïchatou Kané, from Niger, said the Economic Community of West African States, ECOWAS, was in the “fast lane” of integration and planned to have its own currency in 12 months.
Kané’s comments were echoed by Burkina Faso, Zimbabwe, and Tanzania who all agreed that integration would help the continent remain relevant as a global economic player.
Regional integration is one of the Bank’s High 5 strategic areas and the theme of the 2019 Annual Meetings. The AfCFTA is the cornerstone of the integration project. The AfCFTA was launched in March 2018 and the key 22nd ratification was received in April 2019. The next step is for African ministers of trade to work on how to facilitate the launch of the AfCFTA during a summit meeting on 7 July 2019.
The AfCFTA will constitute the world’s largest free trade area, consolidating an integrated market of 1.3 billion consumers with a combined gross domestic product (GDP) of about $3.3 trillion. It is estimated that Africa’s GDP growth could reach 6% a year with a borderless continent (UNECA).
The four-day Annual Meetings are being hosted in Malabo, the capital of Equatorial Guinea. More than 2,000 ministers, government officials, development partners and civil society representatives have gathered in the island capital to discuss Africa’s development agenda.
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tralac’s Daily News Selection
The AfDB’s 2019 Annual Meetings opened today in Malabo on the theme Regional Integration for Africa’s Economic Prosperity. AfDB President Akinwumi Adesina said the bank had invested around $1bn through various initiatives, including cross border infrastructure, to move trade across African borders. “If we get our integration right, Africa will be more competitive, will be able to create a massive amount of jobs and, more importantly, Africa can develop in dignity and confidence.”
Trade Kenya’s training for technical staff expected to run the Kenya Trade Remedies Agency entered its second day today in Nairobi. The agency is expected to implement laws on anti-dumping, subsidies, countervailing measures and safeguards according to WTO agreements.
tralac Trade Brief: Africa in the Digital Economy
This Trade Brief provides an update on the situation of Africa’s progress in assimilating into the global digital economy, addressing the most pressing current challenges and reviewing several of the most exciting current initiatives underway. Although many challenges remain, much progress has been made over the space of a few years in the mid 2010s. The digital economy, and especially e-commerce, offer a means not only for greatly extending Africa’s trade with the rest of the world, but also trade within the continent. Never before have so many initiatives been in place with the goal of both digitalising Africa’s trade and bringing African markets closer together. [The author: John Stuart]
Innovation Africa Digital Summit: update
Speaking at the Innovation Africa Digital Summit on the theme National Agenda Acceleration in Addis Ababa, Oliver Chinganya, Director of the ECA’s African Center for Statistics, said technology and innovation have been the backbone of African economic success over the last two decades but internet and internet-related penetration remained limited. “This relatively low level of the ICT maturity is limiting the government’s plans in many economic sectors, including its ability to deliver on the planned digitalization of the public administration services like censuses, health and education.”
He added: ”In an era marked by intense competition, globalization, and increased importance of knowledge as an economic driver, it is important for organizations and governments to understand the dynamic and significant role that ICT play in enhancing competitiveness in the context of AfCFTA implementation. Therefore, there is a need for governments to establish and implement strategies and policies taking into consideration the effects of economic, social and technology factors on ICT maturity as well as relationship between ICT maturity and global competitiveness.”
UN chief urges digital tech panel to come up with ‘bold, innovative ideas’ for an ‘inclusive’ future
In his appeal to a UN panel of experts led by philanthropist Melinda Gates and Alibaba founder Jack Ma, Secretary-General António Guterres called on its members to reflect on the risks and benefits of our digital age – the so-called Fourth Industrial Revolution. Created at the express wish of the UN chief in 2018, the high-level panel is a relative rarity – only 20 or so have been convened in the organization’s more than 70-year history. The panel’s diverse membership – which includes US internet pioneer Vint Cerf, and South Korea-based digital marketing mastermind and CEO of Adriel, Sophie Eom – fulfils the UN chief’s wish to include input from industry and the private sector, as well as governments, academia, civil society and inter-governmental organizations. The discussions will result in a final report, to be published in the summer. The Panel’s online call for contributions, which is open until 31 January 2019, has already yielded close to 100 written submissions from 33 countries.
The future of women at work: Transitions in the age of automation (McKinsey Global)
ECA, AU updates on the weekend’s AMOT discussions:
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African Ministers of Trade pave way for the operationalisation of the AfCFTA. Addressing the ministers, Ms Giovanie Biha, the Deputy Executive Secretary of the ECA said: “AfCFTA legally entered into force but for it to deliver its transformative economic potential, the signatory countries – and the few countries that have not yet signed – must rapidly join and ratify the Agreement to ensure that the continent moves forward together as one entity.” Noting the issues on the agenda of the ministers, including the scheduling of tariff offers and finalization of the Rules of Origin, she added, “difficult decisions must yet to be made and compromises sought, as we transform the AFCFTA legal text into an operable instrument.” Ms. Biha also stated that following the operationalisation of the Agreement at the Niamey Summit, progress must be made with the AfCFTA implementation roadmap. The ECA African Trade Policy Coordinator, David Luke, confirmed that the ECA flagship report Assessing Regional Integration in Africa (ARIA IX), focusing on the Next Steps for the AfCFTA will be launched during the Business Forum.
The Ministers of Trade considered the report of the STO and adopted the following decisions: Customs unions to maintain the integrity of their Common External Tariff in accordance with the adopted modalities; 90% of non-sensitive tariff lines to be communicated to the AUC ahead of the NF, STO and AMOT meeting which will take place in Niamey before the Summit. The remaining 10 per cent sensitive and excluded products will be tabled to the AU Summit in January 2020 for clearance; The agreed Rules of Origin, the Online Tariff Negotiation Portal, the African Trade Observatory, the Pan-African Payment and Settlement platform, and the Non-Tariff Barriers mechanism will be tabled for clearance at the Niamey summit in July.
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Ministers of trade deliberate on the operationalization of AfCFTA ahead of Niamey Summit. Uganda’s Minister of Trade, Industry and Cooperatives and Chairperson of the African Union Ministers of Trade, Amelia Kyambadde, emphasized that with the entry into force of the AfCFTA, the focus is now on how Africa can strategize to take advantage of the huge market opportunities and Africa’s demographic dividend to boost intra Africa trade. “A united Africa will be powerful, attractive to investment and a solid negotiating force. We still have outstanding work on product rules of origin, finalization of tariff offers, trade in service market schedules and trade remedies, but I think this is an opportunity for us to transform Africa for the benefit of future generations”, she noted. She further highlighted five key priorities areas member states should focus on: boosting of Intra-Africa Trade; Infrastructure interconnectivity and trade facilitating logistics; Industrialisation and development of regional value chains; Employment; and Beneficiation of minerals and natural resources.
pdf Mauritius 2019-2020 Budget speech (953 KB) (MoF)
Our aim is to further extend the production space of Mauritius beyond our frontiers in partnership with other African countries. Africa Rising calls for massive investment, quality expertise and more trade. With regards to creating new assets in Africa, we will: First, build on the agreement with Mozambique towards the setting up of a regional value chain for Liquefied Natural Gas. Second, develop a Textile City on the 80 hectares of land in Moramanga, which the Malagasy Government has agreed to allocate to Mauritius. Third, develop projects to take advantage of the Industrial and Technology Park in Naivasha, Kenya. And fourth, consolidate our ongoing initiatives in the Special Economic Zones in Senegal, Côte d’Ivoire and Ghana. As regards cross-border financing, the Mauritius-Africa Fund will further expand its strategic partnerships with Pan-African and international multilateral development financial institutions, such as the Trade and Development Bank, AFREXIM Bank and Fonds de Solidarité Africain to mobilize project finance for the benefit of Mauritian enterprises willing to expand in Africa.
Logistics are the backbone of Trade. Good logistics reduce trade costs and help countries compete globally. In the 2018 Logistics Performance Index, Mauritius scored of 2.72 out of a maximum of 5 points. To improve the score under the Logistics Performance Index, a series of other measures will be implemented, namely: Cargo Handling Corporation Ltd will implement an electronic payment system to expedite the payment process; Working hours of MRA Customs and other port operators and agencies will be harmonized; and, MPA will reduce the cut-off time from 24 hours to 12 hours for compliant traders for export consignment. [The full set of budget documentation can be accessed here]
Ethiopia forecasts 9% growth, plans higher spending in 2019/2020 (Reuters)
Ethiopia’s economy is projected to grow by 9% in 2019/2020, finance minister Ahmed Shide told lawmakers on Tuesday as he presented plans to raise spending. Ahmed proposed 386.9 billion birr ($13.48 billion) in government spending for 2019/2020, which if approved will be 12% higher than 2018/19’s 346.9 billion birr figure. Lawmakers from the ruling coalition, who dominate parliament, are expected to approve the plans over the next few weeks. The International Monetary Fund projected the country’s growth for 2019 at 7.7% in April.
China ready for trade talks with East Africa bloc: ambassador to Kenya (Reuters)
China is ready to negotiate a trade deal with the six-nation EAC to address Kenya’s complaints about a huge trade imbalance in favor of the Asian economic giant, China’s ambassador to Nairobi told Reuters. Kenyan officials said the government was not ready to discuss a free trade agreement as it fears a surge of imports from China but that a partial deal might be possible. Chinese ambassador Wu Peng said Beijing was ready to open trade talks with Kenya via the EAC, which also includes Uganda, Tanzania, Rwanda, Burundi and South Sudan, guided by World Trade Organisation rules. Chris Kiptoo, the principal secretary in charge of trade at Kenya’s trade and industrialization ministry, said Nairobi feared a free trade agreement with China would lead to a surge of imports. He added that the government was seeking a preferential, non-reciprocal trade deal, giving Kenyan exports duty free access to China. Such a scheme could be modeled on the Africa Growth and Opportunity Act, which allows African exports like apparel and textiles duty free access to the U.S. market. [Kenya launches 2nd phase of China Trade Week amid positive reception]
The Chinese in Gikomba (Business Daily)
Small-scale traders in Gikomba, Nyamakima and Kamukunji markets in Nairobi have new competitors - the Chinese. Tens of Chinese traders have opened shops in the crowded, informal markets that have for decades served as the entry points for second-hand clothes and cheap Chinese imports. Backed by strong financial muscle, the traders who have taken strategic control of the supply chain from import to wholesale and down to the retail level, are giving local traders a run for their money. The teeming Gikomba market has for decades been a magnet for traders from neighbouring countries, including Tanzanians, Rwandese and Congolese, but local traders say the Chinese businessmen have posed a new threat to their survival given their deep pockets.
Efforts to reach the Chinese embassy in Nairobi to respond to the claims of unfair business practices were not successful. The Director of Immigration Services, Alexander Muteshi, blamed Kenya’s lax laws that have allowed the influx of Chinese nationals involved in small businesses and asked us to direct our questions to Parliament instead. “You have raised a very valid concern. The challenge however for us is to review our laws to raise the investor amount threshold and also not to act contrary to World Trade Organisation requirements of locking out investors. It is a matter that needs to be addressed by our Members of Parliament to give us guidance.”
Today’s Quick Links: Namibia: Deadline to apply for live sheep exports tomorrow South Africa: Truck attacks could see companies shunning Durban UN trade cluster sets sights on creation of multi-donor trust fund Eritrea: World Bank’s country engagement note Sierra Leone’s tax reform: World Bank’s engagement note |
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Ministers of trade deliberate on the operationalization of AfCFTA ahead of Niamey Summit
Africa has made commendable progress in securing deposits of instruments of ratification on the Agreement Establishing the African Continental Free Trade Area (AfCFTA).
The Agreement officially entered into force on the 30th of May 2019 with twenty four (24) instruments of ratification deposited with the African Union Commission. The African Union is setting the pace for the launch of the operational phase of the operational phase of the continental market in July this year.
To build on this momentum and deepen the continental economic integration, the African Union Ministers of Trade (AMOT) held a two-day meeting in preparation for the upcoming Extraordinary Summit on AfCFTA in Niamey, Niger.
Uganda’s Minister of Trade, Industry and Cooperatives and Chairperson of the African Union Ministers of Trade, H.E. Amelia Kyambadde, emphasized that with the entry into force of the AfCFTA, the focus is now on how Africa can strategize to take advantage of the huge market opportunities and Africa’s demographic dividend to boost intra Africa trade.
“A united Africa will be powerful, attractive to investment and a solid negotiating force. We still have outstanding work on product rules of origin, finalization of tariff offers, trade in service market schedules and trade remedies, but I think this is an opportunity for us to transform Africa for the benefit of future generations,” she noted.
She further highlighted five key priorities areas member states should focus on such as boosting of Intra-Africa Trade; Infrastructure interconnectivity and trade facilitating logistics; Industrialisation and development of regional value chains; Employment; and beneficiation of minerals and natural resources.
The supporting tools for the AfCFTA will be launched at the Extraordinary Summit in Niger. These are; the Pan-African Payments and Settlements Platform; Online Mechanism for Monitoring, Reporting and Elimination of Non-Tariff Barriers within the AfCFTA; the password protected online portal for tariff concessions and Dashboard of the African Union Trade Observatory.
African Union Commission Commissioner for Trade and Industry, Amb. Albert Muchanga, while calling on the ministers to conclude on the supporting tools for the AfCFTA, stated that the July Extraordinary Summit would also adopt the agreed Rules of Origin for the AfCFTA.
“My appeal to you is to provide the necessary political oversight to the remaining negotiations on the AfCFTA while providing further guidance to any remaining sticky areas. We are now awaiting the finalization of the outstanding work to enable the continent to take advantage of the enlarged market,” he stated.
The report of the Ministers will input into the pdf report of the AfCFTA Champion (692 KB) , the President of the Republic of Niger H.E. Mahamadou Issoufou, whose report will be considered at the Summit. The AfCFTA Extraordinary Summit will be preceded by side events such as Civil Society Forum on 3rd July and Business Forum on 6th July, 2019.
The Deputy Executive Secretary of the UN Economic Commission for Africa (UNECA), Ms. Giovanie Biha, noted that the meeting of the African Union Ministers of Trade comes at a critical juncture for the AfCFTA.
“The AfCFTA is not merely a project of a small sub-set of African Union members. We should aim for no less ambition than every country in this continent signs and ratifies the Agreement, to ensure that our continent moves forward collectively, and meaningfully, in trade integration,” she underlined.
She applauded the signatory countries and invited the few countries that have not yet signed to rapidly join and ratify the Agreement to make progress with the AfCFTA implementation roadmap and ensure that the continent moves forward together as one entity.
The 8th meeting of the African Union Ministers of Trade (AMOT) was preceded by the meeting of the 8th Senior Trade Officials (STO) and the 15th Negotiating Forums (NF). The meeting was attended by AU Ministers of Trade from Member States, the African Union Commission (AUC), the Regional Economic Communities, the African Development Bank (AfDB), the African Import and Export Bank (Afreximbank), United Nations Conference on Trade and Development (UNCTAD) and United Nations Economic Commission for Africa (UNECA).
The Extra-ordinary Summit will also make a decision on the location of the secretariat of the African Continental Free Trade Area which will have the principal function of implementing the Agreement through a focused work programme. Seven Member-States: Egypt, Eswatini, Ethiopia, Kenya, Ghana, Madagascar and Senegal submitted bids to host the secretariat.
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tralac’s Daily News Selection
A selection of African trade and development events to diarise:
The 2019-2020 Mauritius Budget was presented to the National Assembly today. Download the full Budget Speech on the theme: pdf Embracing a brighter future together as a nation (953 KB) . Additional documentation is available here.
Supporting Angola’s trade diversification: UNCTAD mission to develop transport, logistics infrastructure and services (10-14 June, Luanda)
15th CAADP Partnership Platform: Enhancing trade and market access for accelerated agriculture transformation (11-14 June, Nairobi)
AUC-IEA ministerial forum: The future of Africa’s energy (12 June, Addis Ababa)
Draft EAC Regional Framework on Trade on Trans-boundary Security: validation workshop (12-14 June, Dar es Salaam)
Launch of the World Investment Report 2019 (12 June, Geneva)
IORA conference: Modernising trade in the Indian Ocean Rim (17-18 June, Durban)
The African Continental Free Trade Agreement: Welfare gains estimates from a general equilibrium model (IMF)
Using a multi-country, multi-sector general equilibrium model based on Costinot and Rodriguez-Clare, we estimate the welfare effects of the AfCFTA for 45 countries in Africa. Three different model specifications - comprising both perfect competition and monopolistic competition - are used. Simulations include full elimination of import tariffs and partial but substantial reduction in non-tariff barriers. Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures. Extract:
We estimate income and welfare changes for 45 African countries and other world regions. The model simulations use a comprehensive database comprising output, trade flows, and import tariff and non-tariff barriers for 26 sectors in all countries considered. Simulations include full elimination of import tariffs and a 35% reduction in NTBs. We find that the welfare gains from combined tariff elimination and NTB reduction is about 2 to 4%, depending on the model structure used and the extent of NTB reduction considered. Because existing intra-African tariffs are already generally low, overall gains from tariff elimination in the continent are quite modest, with the bulk of gains stemming from the reduction in NTBs. [The authors: Lisandro Abrego, Maria Alejandra Amado, Tunc Gursoy, Garth P. Nicholls, Hector Perez-Saiz] [ pdf Download (3.64 MB) ]
EABC: This week’s budgets must focus on value chains (IPPMedia)
The East African Business Council has urged partner states to consider lowering the cost of doing business in the bloc in a bid to promote local manufacturing, regional value chains, and create employment opportunities. “As EAC partner states unveils their budgets for the 2019/2020 fiscal year, governments should consider improving transport infrastructures, energy and access to credit to ease doing business in the EAC,” said a statement by EABC signed by Peter Mathuki, the executive director. “The EAC partner states’ budgets for the financial year 2019/2020 should prioritize achieving the vision of the EAC industrialization strategy which includes being globally competitive, environment-friendly and ensure a sustainable industrial sector,” the statement intoned. The EABC suggested that partner states budgets for the coming fiscal year should address the challenges of EAC regional integration, such as the high costs of doing business and the cost of borrowing, allocate budget funds for implementation and monitoring of the Common Market and Customs Union protocols and increasing intra-EAC trade through the elimination of non-tariff barriers. The budgets should also focus on improving trade facilitation, fast track the finalization of the EAC Common External Tariff to avoid trade distortions, elimination of work permit fees and restrictions for East Africans and enhance public-private dialogues for trade and investment. [Kenya’s budget reading set for 13 June: a KPMG commentary]
Third time around, EAC states fail to agree on joint tax bands (The East African)
East African member states have failed for the third consecutive time to agree on a common tariff for goods entering the region, casting doubts on the proposed review of the Common External Tariff. At a recent meeting in Entebbe Uganda, countries maintained hardline positions on how they expect the three-band tariff structure to be amended. The dispute largely revolves around the number of tariff bands to be included in the new structure and the type of goods to be put in each new band. Kenya’s Principal Secretary in the department of Trade Chris Kiptoo told The EastAfrican that member states have now gone back for further consultations in their home countries and hope to resume talks in October.
Uganda plans to restore old railway at $205m (The East African)
G20 Ministerial Statement on Trade and Digital Economy
pdf Extract from the lengthy statement (89 KB) : We, the G20 Trade Ministers, exchanged views on the current trade environment. We agree that expanding trade and investment will be important factors to promote future widespread economic prosperity and sustainable growth. We note that trade and investment growth slowed in 2018 and that this is contributing to a weaker global growth outlook for 2019-20 than previously projected. While growth is expected to increase in 2020, downside risks arising from the current trade environment could undermine this growth. We continued our dialogue to mitigate risks and enhance confidence among exporters and investors, as we committed to do in Mar del Plata last year. We affirmed the need to handle trade tensions and to foster mutually beneficial trade relations. We strive to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, to keep our markets open. International trade is important for productivity, innovation, job creation and development. We recognize the contributions that the WTO has made to this end. We agree that action is necessary to improve the functioning of the WTO. We recognize our business community’s call for the G20 to continue supporting the multilateral trading system.
South Africa and the G20: (i) South Africa calls for a developmental-oriented digital economy; (ii) A summary of Minister Ebrahim Patel’s input
2X Challenge members launch business competition in Africa (EIN)
Leading development finance institutions including FinDev Canada, CDC Group of the UK, Proparco of France, and the Overseas Private Investment Corporation of the US, along with the Mastercard Foundation announced at the Women Deliver 2019 Conference that they are joining forces to sponsor the 2X Invest2Impact – Business Competition. While there is no shortage of business competitions on the African continent, and many women-focused entrepreneurial forums, programs, and initiatives, 2X Invest2Impact will stand out by focusing on growth stage women-owned businesses, poised for investment capital. 2X Invest2Impact will provide them with mentorships, business development services, visibility, and the opportunity for funding. “The credit gap for women-owned SMEs globally is estimated at $287bn. This means that 70% of women owned SMEs cannot access the financing they need to grow a business. This competition aims to directly address this,” said Paul Lamontagne, Managing Director of FinDev Canada. The goals of 2X Invest2Impact are to: [Nigeria: Dangote seeks law on gender equality; Aubrey Hruby: Congress must invest properly in the DFC]
Today’s Quick Links: Anzetse Were: Africa should be proactive to cash in on US, China fallout China’s trade surplus in May hits $41bn, double than expected Eswatini, Afreximbank sign declaration for a credit facility of up to $140m Sierra Leone’s tax reform: World Bank’s engagement note Tanzania seeks EACO, SADC telecommunications uplift Allianz Group: Nigeria ranks highest in piracy, vessel stowaways IMF Blog: The rise of powerful companies Google made $4.7bn from the news industry in 2018, study says |
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The African Continental Free Trade Agreement: Welfare gains estimates from a general equilibrium model
In March 2018, representatives of member countries of the African Union signed the African Continental Free Trade Area (AfCFTA) agreement, providing a framework for trade liberalization in goods and services which is expected to eventually cover all African countries.
Using a multi-country, multi-sector general equilibrium model, the authors of this IMF Working Paper estimate the welfare effects of the AfCFTA for 45 countries in Africa. The model simulations use a comprehensive database comprising output, trade flows, and import tariff and non-tariff barriers (NTBs) for 26 sectors in all countries considered. Simulations include full elimination of import tariffs and a 35 percent reduction in NTBs.
Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures.
The authors find that the welfare gains from combined tariff elimination and NTB reduction is about 2 to 4 percent, depending on the model structure used and the extent of NTB reduction considered. Because existing intra-African tariffs are already generally low, overall gains from tariff elimination in the continent are quite modest, with the bulk of gains stemming from the reduction in NTBs.
Policy Implications
There are several policy implications of these results that should be considered to realize the full potential welfare benefits of the provisions contained in the AfCFTA. These include:
AfCFTA members should adopt a well-articulated and phased program for reducing all NTBs to the maximum extent feasible. The simulations assume partial, albeit significant, elimination of NTBs, and there is much to be gained from further reduction in these barriers. The NTB reduction program should include addressing a broader array of barriers that hinder trade, including infrastructure gaps, and an improvement in the business environment in Africa. The quality of ports, air transportation, and other measures of infrastructure where efficiency is relatively low in Africa compared with other regions, need to be addressed. The reduction in ground transportation costs is especially critical to encouraging intraregional trade, given the geographic configuration of the continent. Other areas, such as customs efficiency and other administrative procedures required for international trade, also need an overhaul to improve efficiency. In addition, creating an enabling business environment would be particularly relevant to facilitate intraregional trade. In this area, the reduction in the cost and time necessary to create new businesses is important. Finally, concerted efforts are required to increase financial depth and inclusion in Africa to bring it on par with other regions, as well as promoting access to trade financing or bank funding to create or expand businesses. It is expected that all these efforts and initiatives will help to promote the AfCFTA agenda.
AfCFTA members should limit the extent and scope of carve outs for tariff reductions. This a very relevant consideration since the AfCFTA proposes to liberalize only 90 percent of the tariff lines. Intra-African trade is concentrated in a few products, and much of it is already tariff-free, being concentrated in the existing free-trade areas. If a substantial portion of the remaining trade is contained in the remaining 10 percent of tariff lines, the potential welfare benefits of the AfCFTA would be reduced, especially if potentially exempted sectors are the most protected. To fully realize welfare benefits from the AfCFTA, member countries need to liberalize 100 percent of the tariff lines, even if this is completed in a phased manner over the medium term.
In the long run, to fully leverage the economic opportunities of the AfCFTA, policy makers would need to adopt supporting policies to encourage structural transformation. In particular, countries will need to lower their dependence on commodities and move up the value chain. Policies to encourage structural transformation could include training programs for workers to ensure a smooth reallocation of labor and capital to sectors that are more likely to grow, such as manufacturing. It is only in this way that the continent would be able to use the AfCFTA as a mechanism to claim its place in the global value chain.
Finally, there are at least three areas in which the analysis presented in this paper could be extended in future work. First, the model is static, so it is unable to provide guidance on the potential dynamic supply-side responses to the AfCFTA, such as increased private and public investment. As mentioned above, a significant reduction in infrastructure gaps will require substantial public investment. The effects of this could be modeled more thoroughly in a dynamic setting that allows comparison of costs and benefits from it, including those resulting from lower trade costs. A dynamic model could also take account of higher foreign direct investment flows into the region in response to the increase in unified market size derived from the agreement. These responses would further raise the welfare and income gains from the AfCFTA. Second, while the model considers the distribution of income or welfare changes across countries, it focuses on economy-wide changes at the national level, and does not consider domestic income distribution effects. These effects can be economically and socially important and deserve to be examined, and adequate responses to them provided. Third, work can be extended to capture some specific characteristics of African economies, including a broad coverage of the informal economy and informal trade between countries, as well as imperfect factor mobility across sectors.
This paper was prepared by Lisandro Abrego, Maria Alejandra Amado, Tunc Gursoy, Garth P. Nicholls, and Hector Perez-Saiz. IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF.
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tralac’s Daily News Selection
Selected resources, previews of this weekend’s G20 Trade Ministerial in Japan:
The IMF’s G20 Surveillance Note, other IMF G20 resources; Asia Times: G20 finance ministers land for showdown in Fukuoka; Bloomberg: Here’s what to watch at the G20 finance meetings this weekend; LiveMint: Decision on $300bn China tariffs after G20 meeting, says Donald Trump
SAnews: South Africa to participate in key G20 Trade Ministers’ meeting
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Brookings ‘Figures of the week’ feature: Africa’s international trade in services
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UNWTO: Exports from international tourism hit $1.7 trillion in 2018 – a 4% increase in real terms over the previous year
TFTA negotiations update: Conclusion of the bilateral tariff negotiations between SACU, EAC
The conclusion of the SACU-EAC negotiations marks a significant step towards realising the benefits of the TFTA. The main aim of the SACU-EAC market access negotiations has always been to provide commercially meaningful market access for the private sector in the two regions. The SACU-EAC private sector will thus have access to new and dynamic markets for exports as well as new sources of inputs for domestic production processes, thereby enhancing intra-regional trade. Furthermore, there is emphasis on the development of regional value chains in a wide range of sectors, to deepen integration between SACU and the EAC. The conclusion of the negotiations provides an opportunity for the TFTA to be a building block and to have a coordinated approach for negotiations in the AfCFTA.
Doing Business in Mozambique 2019 (World Bank)
Doing Business in Mozambique 2019, the first sub-national Doing Business report on the country, measures four regulatory areas impacting the business environment: starting a business, registering property and enforcing contracts in ten provinces and trading across borders in three ports and one border crossing. No single Mozambican province dominates the indicator rankings across all areas benchmarked, leaving room for all locations to learn from each other’s good practices. Gaza stands out by ranking in the top third on two indicators — third in starting a business and second in registering property. If Maputo City adopted the good practices already in place, its overall performance would improve, and it would jump from 135 to 113 in the Doing Business global ranking. Extract (pdf):
In trading across borders, the border crossing of Ressano Garcia outperforms the three seaports measured (table 1.2.) Ressano Garcia has shorter times and lower costs associated with terminal handling and fewer documentary requirements. Its strong performance is also a testament to the gradual implementation of the one-stop border post project, under the framework of the 2007 agreement reached by Mozambique and South Africa to improve customs clearance procedures for commercial cargo at the border and reduce waiting times. Among the three maritime ports, it is easiest to export coal from Beira due to a faster clearance process that does not require phytosanitary certificates, supervision of packing or scanning inspections. Nacala, the deep-water port located in Nampula Province, ranks last out of the four locations measured due to the burdensome and expensive procedures to export pigeon peas to India — especially considering that the supervision of packing usually takes place at Nacala’s Special Export Terminal, where there are long lines and high fees. It is easier to export aluminum than sugar from Maputo port because the major exporter, Mozal, operates its own dedicated aluminum port terminal; also, aluminum exports do not require phytosanitary certification. The import of auto parts is easiest through Nacala because of considerably lower customs broker fees. Yet the process still takes longer in Nacala than in Maputo. Time to comply with documentary requirements is an area where all the border crossings perform well due to the implementation of the electronic single window, a portal connecting the main stakeholders. However, there is room for improvement in customs clearance and terminal handling procedures. [Download the Portuguese version here]
Mozambique, Malawi, Zimbabwe: AfDB appraisal report on post-cyclone Idai and Kenneth emergency recovery and resilience programme
The scale of devastation by the Tropical Cyclone Idai and Kenneth is clearly beyond the capacity of the governments of Mozambique, Malawi and Zimbabwe to handle alone. More importantly, the nature of the economic impact is eminently regional in nature (pdf). The transport corridor is at the epicenter of the cyclone and flood damage, linking the port of Beira with Zimbabwe and Malawi is a key growth pole for the region. Beira port has become the most active gateway to serve the Central Mozambique and landlocked countries of Malawi, Zambia, DRC and Zimbabwe. The destruction of roads, rail and port infrastructures in Mozambique has had an effect on the balance of payments and price levels in Malawi and Zimbabwe. In addition, Mozambique is an energy hub exporting electricity into the Southern Africa Power Pool, and the disruption to the transmission lines in Mozambique caused by the cyclone, led to blackouts as far as South Africa. The regional impact of the cyclone shows that building early warning systems and meteorological forecasting capacity in any one country is a regional public good. [Borgen Project: Climate-smart agriculture in Senegal]
Nigeria: Foreign trade in goods, Q1 2019 (Nairametrics)
Nigeria’s total trade hits N8.24 trillion in the first quarter of 2019, according to the latest foreign trade report released by the National Bureau of Statistics. According to the NBS report, the value of total imports rose 3.39% in Q1 2019 when compared to Q4 2018. It also increased by 25.84% over the corresponding quarter of 2018. Similarly, the value of total exports in Q1 2019 increased by 1.78% against the level recorded in Q4, 2018. It, however, decreased by 3.90% against its value in Q1, 2018. The value of total exports was N4.54 trillion within the quarter; Imports increased by 3.39% to N3.70 trillion; Trade Surplus stood at N831.62 billion. Major export trading partners, percentage share in Q1: India 16.43%, Spain 10.74%, Netherlands 8.94%, South Africa 7.18%, France 6.67%. Major import trading partners and percentage share in Q1: China 26.4%, Swaziland 14.3%, United States 8.8%, India 6.6%, Netherlands 4.1%.
Ethiopia 2019/20 coffee exports to rise to record high – USDA (Reuters)
Ethiopia, Africa’s top coffee producer, is expected to export a record-high 4 million 60-kg bags of coffee in 2019/20, the US Department of Agriculture attache in Addis Ababa said, as yields improve and the area dedicated to coffee farming increase. Production of coffee is expected to rise to 7.35 million tonnes in 2019/20, an 1.4% increase from the 2018/19 season. Exports account for just over half of overall production, and are forecast to grow 0.5% in 2019/20 from the previous year to reach 4 million bags. Coffee is Ethiopia’s most important export. Exporters in the country are facing increased regulation, the USDA said, with the government banning several exporters in recent months for defaulting on their contracts and hoarding beans. Extract from the USDA report (pdf):
Coffee is the most important foreign currency earner for Ethiopia. In addition to ensuring the volume and quality of coffee exports, exporters must properly manage the contracts. While most exporters assist the economy by supplying quality coffee to the international market, the government is also taking strict actions against those who fail to comply with their contracts. In March of 2019 alone 81 coffee exporters have been banned from trading with the Ethiopian Commodity Exchange (ECX) because they defaulted on their contracts. Ethiopia has more than 400 coffee exporters, 395 coffee farmers who directly export coffee, and over 30 import-export companies who export coffee and use the foreign currency to import other materials like vehicles and construction inputs. Ethiopia exports coffee to over 60 countries. Based on the coffee export data in 2017/18, the principal export markets for Ethiopian coffee were: Germany (22 %), Saudi Arabia (16 %), United States of America (11%), Belgium (7 %), Sudan (6 %) and Italy (5 %).
Uganda: State of the Nation Address, 2019 (State House)
As regards international trade, our exports revenue of goods and services grew at 8.2 % in 2018/19, amounting to $7.012bn ($3.8bn being earnings from trade in goods, $1.89bn from services and $1.312bn from remittances). The total import bill for goods and services stood at S$8.8bn, creating a trade deficit of $1.86bn. Under the 2020 Coffee Road map which I launched a few years ago, the volume of coffee exports reached 4.5 million bags in FY 2017/18 earning the country $492m. Light industrial goods exports fetched us $382m, while tourism revenues amounted to $1.0bn in the same year.
If we can increase production per hectare of coffee as an example from the current 0.67 tonnes to 2.2 tonnes per hectare like in Brazil and Vietnam, Uganda would be earning about $2bn from unprocessed coffee alone. At 2.2 tonnes per hectare, Uganda will produce 21 million bags of green coffee and if this coffee was roasted here (roasting alone), Uganda would fetch $6.7bn. But if it was transformed into soluble - instant coffee, we would then generate $16.8bn for the country. This is possible. We just need to be better organized and focused on distribution of better seedlings, better harvesting, post-harvesting methods and storage. We are going to process much of this coffee. By processing 60,000 tonnes of coffee, per year, by Ms Henrica Pinetti’s factory, Uganda will earn $330m.
Today’s Quick Links: South Africa: SARB report on current account of the balance of payments PwC Nigeria: AfCFTA – Thriving in a New Africa, Part 1 (pdf) Observer Research Foundation: Need for integrating the African continental infrastructure framework South Africa: Agro-processing sector outward selling mission to the US (14-19 October, pdf) DHL rolls out e-commerce platform to more African markets following initial success Kuwaiti company Agility wants to increase its logistics parks in Africa 2019 UK Trade and Export Finance Forum: speech by Dr Liam Fox WTO issues updated dispute settlement case summaries World Bank Group Boards’ Calendar: June-August (pdf) World Bank: China’s high-speed rail development |
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Conclusion of the Bilateral Tariff Negotiations between SACU and the EAC
Press release
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The COMESA-EAC-SADC Tripartite Free Trade Area (TFTA), which was launched on 10th June 2015, aims to establish a single market for 27 African countries with a combined population of about 700 million people (57% of Africa’s population), and Gross Domestic Product above USD 1.4 trillion.
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The TFTA is built on three pillars (market integration, infrastructure development and industrial development) and there is a parallel agreement on movement of business persons. The Tripartite approach reflects the desire to advance regional integration from multiple fronts. As such, the TFTA would facilitate development of regional infrastructure for cross-border trade and lead to harmonisation of trade regimes amongst Tripartite Member/Partner States, stimulate industrial development through creation of value chains and facilitate movement of business persons.
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As part of the market integration pillar, Member/Partner States have been engaged in bilateral tariff liberalisation negotiations. The market access negotiations between the Southern Africa Customs Union (SACU), consisting of Botswana, Eswatini, Lesotho, Namibia and South Africa, and the East African Community (EAC), which consists of Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda have largely been successfully concluded.
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The conclusion of the SACU-EAC negotiations marks a significant step towards realising the benefits of the TFTA. The main aim of the SACU-EAC market access negotiations has always been to provide commercially meaningful market access for the private sector in the two regions.
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The SACU-EAC private sector will thus have access to new and dynamic markets for exports as well as new sources of inputs for domestic production processes, thereby enhancing intra-regional trade.
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Furthermore, there is emphasis on the development of regional value chains in a wide range of sectors, to deepen integration between SACU and the EAC.
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The conclusion of the negotiations provides an opportunity for the TFTA to be a building block and to have a coordinated approach for negotiations in the African Continental Free Trade Area (AfCFTA).