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African trade policy events taking place today:
In Maseru: SACU Council of Ministers meeting
In Arusha: EABC-UNECA workshop on the role of the private sector in the AfCFTA
In Abuja: ECOWAS, AU, GIZ workshop on African trade policies and ECOWAS regional trade policy
In Nairobi: John H. Jackson Moot Court Competition – ATPC supporting empowerment of Africa’s future trade negotiators
In Cape Town: AviaDev conference
Concluded yesterday, in Addis Ababa: UNECA inception meeting for a project on strengthening the capacities of selected African countries to counter trade misinvoicing
African trade events to diarise:
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East African regional ministers’ summit on agriculture and trade (2-4 May, Kampala).
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AU training workshop on the settlement of disputes and the AfCFTA (13-17 May, Cairo). One of the main objectives of the AfCFTA under Article 4(f) of the Agreement aims to establish a mechanism for the settlement of disputes concerning the rights and obligations of State Parties. The AfCFTA Dispute Resolution Protocol stipulates a State-to-State dispute mechanism to resolve differences arising out of the AfCFTA. As set out in Article 27, Arbitration is one of the dispute settlement mechanisms that could be mutually agreed upon by the parties. This system is similar to that of the WTO. But the experience of African States at the WTO Dispute Settlement Body is minimal. African States have not had any case as respondents or complainants at this body; there have been only five cases where African States have participated as third parties, two of which as part of the ACP group. Furthermore, AU Member States are signatories to over 900 Bilateral Investment Treaties, which prescribe Investor-State Dispute Settlement as a means of resolving disputes between investors of the home State and the host State. This has yielded in numerous Investor-State disputes, where African States have been respondents. According to the 2018 data of the UNCTAD, there are 101 known ISDS cases concerning African States within international arbitral tribunals. It is therefore of paramount importance to provide capacity in both ISDS and State-to-State dispute to Member States as they embark on the road to greater Intra-Africa trade as well as increased trade activities with third countries outside the continent.
AviaDev conference updates:
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Inter-connected African aviation industry valued at $29bn in direct revenue. AviaDev, Africa’s premier event dedicated to developing connectivity to, from and within the African continent, with partners, MIDAS Aviation and Futureneers Advisors have estimated the potential revenue from new African aviation routes could yield $29bn in direct revenue. This revenue, which is more than the individual GDP’s of 70% of the countries in Africa, could be realized if the largest airports in each African country are connected with one another. Currently, only 33.7% of this huge market is served, meaning that there is over USD $19bn in untapped annual revenue.
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Better air links needed to unlock Africa’s potential – Wesgro CEO. In 2018, six other African countries were among the top-15 source markets for international arrivals by air to Cape Town, especially from Zimbabwe. Wesgro sees the top African growth markets for Cape Town international air arrivals to include Rwanda, Zimbabwe, Egypt and Morocco. RwandAir starting to fly to Cape Town last year played a big role in the growth in arrivals from Zimbabwe and Rwanda, said Harris. The airline has decided to increase its frequencies to the Mother City. Furthermore, the growth in arrivals from Egypt and Morocco took place despite the lack of of non-stop connectivity to Cape Town at present. “This shows that we need better connections between Cape Town and North Africa and the unserved markets in West Africa,” said Harris. Since 2015, four new African airlines started flying to Cape Town, namely Ethiopian Airlines, TAAG, Kenya Airways and RwandAir.
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Related post: The African aviation sector will become one of the fastest-growing aviation regions within the next 20 years, with an average annual expansion rate of almost 5%, International Air Transport Association has said. Currently, there are 731 airports and 419 airlines on the African continent, with the aviation sector supporting around seven million jobs and generating $80bn in economic activity. In terms of passenger numbers, 47 million passengers departed from Africa’s top five airports, which included Cairo, Addis Ababa and Marrakesh in 2018, according to the latest Airline Network Knowledge Expertise & Research report, produced by Ralph Anker. Africa’s aviation potential will be explored at the inaugural CONNECT Middle East, India & Africa event, taking place at the Dubai World Trade Centre on April 30 and May 1, 2019.
Kenya: Economic Survey 2019 (KNBS)
Extracts from Chapter 6: International trade and balance of payments (page 87). Table 6.15 presents information on trade between Kenya and African countries for the period 2014 to 2018. Within the EAC, exports to Tanzania and Rwanda rose by 4.3% and 4.2% to KSh 29.8 billion and KSh 17.8 billion, respectively, while those to Uganda remained nearly constant at KSh 61.9 billion in 2018. Similarly, exports to South Sudan declined by 22.6% from KSh 16.7 billion in 2017 to KSh 13.0 billion in 2018. Total exports to COMESA member states declined by 3.8% from KSh 166.4 billion in 2017 to KSh 160.0 billion in 2018. Exports to the DRC decreased by 19.6% from KSh 18.9 billion in 2017 to KSh 15.2 billion in 2018. However, export earnings from Egypt grew by 5.8% to KSh 20.1 billion in 2018. Export earnings from South Africa improved significantly by 59.0% to KSh 4.4 billion in 2018, largely on account of re-exports of machinery to the country. Exports to Somalia declined from KSh 19.7 billion in 2017 to KSh 15.1 billion 2018.
Expenditure on imports from Africa rose by 2.7% from KSh 200.5 billion in 2017 to KSh 205.9 billion in 2018, accounting for 11.7% of total imports. Imports from the EAC increased by 12.4% to KSh 68.5 billion in 2018 and contributed 33.3% of the value of imports from Africa. The value of imports from Uganda rose by 17.6% to KSh 49.4 billion, largely driven by increased imports of maize, sugar, milk and animal feeds. Imports from Tanzania rose from KSh 17.2 billion in 2017 to KSh 17.8 billion in 2018. In 2018, expenditure on imports from Egypt and South Africa grew by 2.7% and 4.6% to KSh 36.3 billion and KSh 64.7 billion, respectively. However, the value of imports from Zambia, Mauritius and Eswatini (formerly Swaziland) declined by 11.0, 16.6 and 23.2% to KSh 6.9 billion, KSh 6.1 billion and KSh 8.6 billion, respectively, in 2018.
Mauritius: IMF, World Bank reports
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IMF executive board concludes 2019 Article IV Consultation. Directors highlighted the widening external imbalance. While international reserves have improved significantly on the back of strong financial inflows, given the large size of the offshore sector, Directors agreed that the foreign exchange intervention policy should continue to build reserves buffers as conditions permit, to strengthen resilience to shocks. Directors appreciated the authorities’ efforts to bolster competitiveness by introducing effective and efficient initiatives to improve the business climate, build innovation capacity, reduce the skill mismatch, and increase female workforce participation. Maintaining strong and independent institutions is essential to ensure the country remains an attractive investment and employment destination. Directors stressed the importance of implementing the outstanding FSAP recommendations for further strengthening financial stability. They also welcomed the steps taken to comply with the international anti‑tax avoidance initiatives and the efforts to strengthen the AML/CFT framework. In this context, they underscored the need to expeditiously implement the remaining recommendations of the Eastern and Southern African Anti Money Laundering Group (ESAAMLG). Directors also encouraged the authorities to continue to improve data quality.
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World Bank report on earnings mobility and inequality of opportunity in the labor market. Lower-paid workers in Mauritius are to some extent catching up to their higher-paid counterparts over time, according to Mauritius: Earnings mobility and inequality of opportunity in the labor market, a new World Bank report released this week. Inequality remains high, however, and the characteristics that drive earnings inequality also keep individuals from benefitting from earnings mobility, and therefore women, young people, and less-educated workers not only face lower initial earnings, they also face more difficulty in catching up with high-paid workers during their time in the work force. The report makes three key recommendations to equalize earnings and job opportunities, especially for those left behind: Continue with women-friendly social policies; Strengthen policies targeted at developing skills that are in high demand; Consolidate employment programs, connect them with demands from employers, and integrate them with education policies.
Tanzania to establish e-border management system to intensify security (IPPMedia)
The government is finalising plans for the establishment of e-border management control system aimed at improving security at border points and increase revenues, the House heard yesterday. Minister for Home Affairs, Kangi Lugola told the lawmakers that the new system will be operational from July, 2019. He also noted that the government will in the 2019/2020 start using e-passport-permit and e-visa in all Tanzanian embassies outside the country. Tabling the 2019/2020 ministerial budget estimates, the minister said the electronic immigration services has shown great success both locally and internationally, citing recent recognition of Tanzanian passport by the International Civil Aviation Organization.
Nigeria: Committee designs agric produce export template (NAN)
Mr Olayemi Abass, Chairman of the Inter-Ministerial Committee for Produce Export, on Wednesday said the committee had set up a workable template to support agricultural produce export. Abass made this known in an interview with the News Agency of Nigeria in Lagos. He said that the difficulty exporters went through at ports necessitated the emergence of the committee to prevent administrative delays at ports with regard to export. “We have carried out consultations with concerned agencies and we have arrived at a workable template to facilitate exports. The issue of delay at ports has been taken care of because the operatives involved in the delay have been co-opted into the operations of the committee to make exports seamless. Logistics matters and proper storage at ports have to be taken care of in order to make the produce retain its quality up to the port of destination.”
Today’s Quick Links: Maya Forstater: 2.7% of GDP – another big number to take with a huge pinch of salt on multinational tax avoidance in Africa Fostering sustainable development through Chinese overseas economic and trade cooperation zones along the Belt and Road Belt and Road Forum session on financial connectivity: opening remarks by Christine Lagarde The KAZA Uni-visa: Zambia, Zimbabwe push for a single visa in Southern Africa Tanzania: Stiegler’s Gorge contractors get 688bn/- advance payment Nigeria: Unlocking $6bn annual potential of a dying textile industry OECD: The potential economic impact of Brexit on Denmark (pdf) |
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On hosting the AfCFTA Secretariat: Eswatini walking tightrope to become Africa’s trade hub (Yenisfak)
At a breakfast meeting with the local business community, prime minister Ambrose Dlamimi said he had no doubt that Eswatini stands a good chance of winning the hosting rights for the AfCFTA Secretariat. “As a country, we have the advantage of having the best infrastructure and facilities in the continent and have been actively involved in the African trade revolution for many years.” He further said that winning the bid would create demand for the establishment of new diplomatic missions and commercial offices as well as supportive bodies such as research institutions, think tanks, audit firms and travel agents. “This is exactly where the business community comes in,” he said, adding “hosting the AfCFTA Secretariat comes with a lot of opportunities for entrepreneurs across many sectors of business in Eswatini”.
Recent EALA reports on regional integration and trade issues (pdf)
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Report of the 4th EALA on the sensitisation activity held in the EAC Partner States (dated February 2019, uploaded to the EALA www on 7 March 2019)
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Report on the capacity building workshop for Members of the Committee on Communication, Trade and Investment in the area of trade (dated February 2019, uploaded on 20 March)
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Report of the Committee on Communication, Trade and Investment on the status of implementation of the Single Customs territory (report dated December 2018, uploaded on 2 April 2019)
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Report of the EAC Council of Ministers to EALA on progress made by the Community (report dated July 2018, uploaded on 5 April 2019)
Noah Smith: Africa’s only hope is industrialization (Bloomberg)
The question for the US and other developed countries is how they can help African industrialization continue. An industrialized Africa is in America’s best interests. First of all, with Chinese costs rising, African factories are necessary to keep the prices of clothes, electronics and other goods from rising too much. And while some may claim that African competition is taking jobs from American manufacturers, the truth is that if that manufacturing were done in the US, it would be mostly automated. In order to forestall this grim future and give hope and security to the world’s neediest people, the US and other rich countries need to encourage imports of African-made goods. The African Growth and Opportunity Act, passed in 2000, was a good start, but more can be done. Market access ensures stable demand, which provides an incentive for Chinese and other entrepreneurs to invest and build for the long term.
Gold worth billions smuggled out of Africa (Reuters)
Billions of dollars’ worth of gold is being smuggled out of Africa every year through the United Arab Emirates in the Middle East – a gateway to markets in Europe, the US and beyond – a Reuters analysis has found. Customs data shows that the UAE imported $15.1bn worth of gold from Africa in 2016, more than any other country and up from $1.3bn in 2006. The total weight was 446 tonnes, in varying degrees of purity – up from 67 tonnes in 2006. Much of the gold was not recorded in the exports of African states. Five trade economists interviewed by Reuters said this indicates large amounts of gold are leaving Africa with no taxes being paid to the states that produce them.
The customs data provided by governments to Comtrade, a United Nations database, shows the UAE has been a prime destination for gold from many African states for some years. In 2015, China – the world’s biggest gold consumer – imported more gold from Africa than the UAE. But during 2016, the latest year for which data is available, the UAE imported almost double the value taken by China. With African gold imports worth $8.5bn that year, China came a distant second. Switzerland, the world’s gold refining hub, came third with $7.5bn worth. Most of the gold is traded in Dubai, home to the UAE’s gold industry. The UAE reported gold imports from 46 African countries for 2016. Of those countries, 25 did not provide Comtrade with data on their gold exports to the UAE. But the UAE said it had imported a total of $7.4bn worth of gold from them. In addition, the UAE imported much more gold from most of the other 21 countries than those countries said they had exported. In all, it said it imported gold worth $3.9bn – about 67 tonnes – more than those countries said they sent out.
Why Kenya wants shipping lines to register by June 1 (Business Daily)
Kenya has ordered all the shipping lines that ply its waters to register with the industry regulator by 1 June in an effort to boost collection of fees and rid its maritime space of illegal activities. Ships that operate solely on the Kenyan territorial waters must register by 20 May while the foreign-flagged vessels have been ordered to furnish the Registrar of Kenyan Ships with their details by 1 June, the Kenya Maritime Authority says. The move comes amid rising concerns in the maritime fraternity that poor enforcement of existing laws has made it possible for foreign ships to frequently breach Kenya’s boundaries to engage in illegal fishing, smuggling of goods and dumping of harmful waste on the country’s territorial waters.
C-Trade’s Collen Tapfumaneyi: He’s bringing text message trading to Southern Africa (OZY)
For a country with sinking GDP, soaring inflation and a foreign currency crisis, successfully managing one’s financial life here can be difficult. Lining up is becoming a national pastime — for both banks and fuel. But the innovations forged by Collen Tapfumaneyi, who created C-Trade last year after launching Zimbabwe’s first alternative trading platform, the Financial Securities Exchange, could help lift Zimbabwe from its economic doldrums. Their popularity is spreading quickly around the region. Accessible to anyone with a Zimbabwe-based bank account who wants to swap shares in the 56 active listed companies on the country’s stock exchange, C-Trade has seen an average of $300,000 in trades each month since its launch last July.
AFCW3 Economic Update: Digitizing agriculture – evidence from e-voucher programmes in Mali, Chad, Niger, Guinea (World Bank)
The agricultural sector is a significant contributor to the economies of Guinea, Mali and Niger. In terms of share of GDP, agriculture represents 16%, 38%, and 40% respectively. It is also a primary source of employment for most of the population (68%, 57%, and 75% respectively). Hence the main article in the present volume (pdf) is devoted to the innovative effort of introducing e-vouchers schemes, supported by digital means, in Guinea, Mali and Niger. The e-voucher program is built around three key components: a digital platform for SMS messages, a reliable database of electronically-registered farmers in selected regions, and a directory of agro-dealers. In so doing, fertilizers (or seeds) distribution becomes transparent, ensures high quality and as it unfolds, fosters private sector participation. Based on pilot practices in the sub-region, four major lessons are learned:
Concluding today, at the WTO: International Forum on Food Safety and Trade
“Technological advances are revolutionizing the way we trade. And this has an impact on the way that food safety measures are designed and enforced,” DG Azevêdo said in his opening remarks to the Forum. To that end, he called for all the organizations to “collaborate to help build the necessary capacity and skills”. DG Azevêdo asked officials and experts to further look at digitalization and its impact on food safety and trade, ensuring synergies between food safety and trade facilitation, and promoting harmonized food safety regulations in a period of change and innovation. FAO DG Graziano da Silva pointed out the pivotal role that trade rules and regulations are playing along the food supply chain, particularly when new health issues such as obesity become a global challenge: “The international trade and the high consumption of ultra-processed food is a great concern that must be addressed properly, based on the fact that obesity is a public health issue and not merely a consequence of individual choices. The international community must advance the establishment of rules and regulations that encourage the consumption of healthy and nutritious foods.”
African Hotel Chain Development Pipeline survey (New Times)
The big chains, Marriott and Accor, are leading the way in African hotel development which overall has more than 75,000 rooms in 401 hotels in the pipeline, according to the 11th annual survey by W Hospitality Group. The figures represent a 1.5% decrease on the 2018 pipeline, but still more than 12% ahead of 2017. And data for deals which have been realized show almost 100 hotels opened in Africa in 2017/18 with a total of 16,000 rooms. The annual African Hotel Chain Development Pipeline survey had a record 43 international and regional hotel contributors covering 54 countries in north and sub-Saharan Africa, and the Indian Ocean islands. Marriott, the world’s largest hotel chain, has the biggest pipeline in Africa, 42% more hotels and 25% more rooms than second-placed Accor. But in absolute terms, Accor beat the pack in 2018, with a net increase of 3,400 rooms in 15 hotels. Hilton and Marriott signed around 2,000 and 3,600 rooms respectively, but saw a net reduction in their pipelines, due to openings and “cleaning”. Just over half of the rooms in the African pipeline are currently onsite and under construction, making them much more likely to open than those still “on paper”. Ranking the companies on this basis, Accor heads the list, followed by Radisson, then Hilton and, in 4th place, Marriott.
Rwanda: Parliament to launch inquiry into issues dogging agric sector (New Times)
The Lower House on Wednesday resolved to set up an ad hoc commission to examine issues in the agriculture sector. The resolution was made after the MPs were not satisfied with a presentation by the Minister for Agriculture and Animal Resources, Geraldine Mukeshimana, during a plenary session. Persistent post-harvest losses, importation of hybrid seeds (soybean, maize, and wheat), challenges facing milk collection centres and high taxes for marshland users were among the major issues that the minister failed to give convincing explanations for.
Trade wars: What do they mean? Why are they happening now? What are the costs? (World Bank)
How should economists interpret current trade wars and the recent US trade actions that have initiated them? This paper offers an interpretation of current US trade actions that is at once more charitable and less forgiving than that typically offered by economic commentators. More charitable, because under this interpretation it is possible to see a logic to these actions: the US is initiating a change from “rules-based” to “power-based” tariff bargaining and is selecting countries with which it runs bilateral trade deficits as the most suitable targets of its bargaining tariffs. Less forgiving, because the main costs of these trade tactics cannot be avoided even if they happen to “work” and deliver lower tariffs. Rather, the paper shows that the main costs will arise from the use of the tactics themselves, and from the damage done by those tactics to the rules-based multilateral trading system and the longer-term interests of the United States and the rest of the world. [The authors: Aaditya Mattoo, Robert W. Staiger]
Trading off the income gains and the inequality costs of trade policy (World Bank)
This paper characterizes the trade-off between the income gains and the inequality costs of trade using survey data for 54 developing countries. Tariff data on agricultural and manufacturing goods are combined with household survey data on detailed income and expenditure patterns to estimate the first-order effects of the elimination of import tariffs on household welfare. The paper assesses how these welfare effects vary across the distribution by estimating impacts on the consumption of traded goods, wage income, farm and non-farm family enterprise income, and government transfers. For each country, the income gains and the inequality costs of trade liberalization are quantified and the trade-offs between them are assessed using an Atkinson social welfare index. The analysis finds average income gains from import tariff liberalization in 45 countries and average income losses in nine countries. Across countries in the sample, the gains from trade are 1.9% of real household expenditure on average. [The authors: Erhan Artuc, Bob Rijkers, Guido Porto]
Today’s Quick Links: Le nouveau livre de Carlos Lopes analyse les 8 défis de l’Afrique en transformation Last week’s 2019 Forum on Financing for Development Follow-up: outcomes, summary of discussion World Bank’s Commodity Markets Outlook (April 2019): forecasts prices for 46 key commodities. The commodity markets outlook in six charts. Tanzania identifies, digitizes 274 new historical sites to spur tourism South Africa: Fighting a losing battle in R859m illegal abalone trade Nigeria: MAN seeks removal of barriers to industrialisation Nigeria: FG to process mining licences in 15 days EU investment rules leave over 80% of Chinese firms feeling discriminated against, survey says |
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The 8th Annual Borderless 2019 Conference starts tomorrow in Accra. The theme: Trade facilitation intra-regional in West Africa – new trends
Inclusive trade in Africa: The African Continental Free Trade Area in comparative perspective. Providing the first book-length analysis of the AfCFTA, this volume (edited by David Luke and Jamie Macleod, published by Routledge) asks how can it be ensured that the AfCFTA is effectively implemented to deliver inclusive trade in Africa. The contributors assess what important lessons can be drawn from the experiences of regional integration in and beyond Africa, including from success stories like ASEAN as well as from failures like the Free Trade Agreement of the Americas.
A reminder of tralac’s handy guide to the AfCFTA Agreement, providing an overview of intra-African trade in goods and services, intra-African tariffs, and trade facilitation. It is also desktop, tablet and mobile friendly!
Nigeria: Manufacturers call for public debate on AfCFTA impact report (Investors King)
Manufacturers have said there is a need for all stakeholders to discuss publicly the report of the Presidential Committee for Impact and Readiness Assessment of the African Continental Free Trade Area agreement before it is adopted. The committee is said to have completed its work after the timeframe set for it, but manufacturers want its report in the open for public discussion. The President, Manufacturers Association of Nigeria, Ahmed Mansur, stressed this much in a recent interview with our correspondent. “What we are saying now is that the report of that committee ought to be widely discussed and all stakeholders must be aware of what the costs and benefits are. All stakeholders need to see what the opportunities are and what the government will do to mitigate some of the adjustments.”
Headwinds towards East African regional integration: will this time be different? (Brookings)
Recent African trade analyses posted by CUTS Geneva:
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Comprehensive review of the EAC Common External Tariff: what are the salient issues? (pdf). The process to comprehensively review the EAC Common External Tariff (CET) presents an opportunity for the region to strengthen its trade and related policies towards enhancing their competitiveness in global trade, while also being mindful of sustainability aspects such as climate change. This briefing paper highlights the salient issues in this regard.
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Reforming the WTO: suggestions for an African Agenda (pdf)
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Competition concerns in cross-border e-commerce: implications for developing countries (pdf)
Kenya: New policy will kill jobs, car dealers say (Business Daily)
The government will implement the national automotive policy over our dead bodies, used car dealers have said. Kenya Auto Bazaar (Kaba) in its ‘Wakenya Hatuwezi Hii’ campaign says the proposed policy is a sugarcoated poisonous capsule that could make the country a captive of multinational car manufacturers. Kaba chairman John Kipchumba said if implemented, the policy would deny Kenyans the freedom to have cars of their choice. “Kenyans will take expensive loans to buy vehicles. The policy will destroy competition by creating a protected market for multinationals through local assemblers and new motor vehicle franchise holders,” Mr Kipchumba told the Sunday Nation. The association says implementation of the policy would render mechanics, taxi drivers, matatu operators, car dealers, clearing agents and millions of other Kenyans jobless. It will sacrifice small and medium enterprises on the altar of greed, it added. “There will be a 70% drop in used vehicle imports while prices will double. We have been importing about 85,000 units every year but the figure will reduce to less than 20,000,” Mr Kipchumba said.
Ambassador Kyle McCarter: The United States – a value proposition (CapitalFM)
Our new strategic partnership with Kenya holds the promise of great prosperity for both of our countries and we want our investments - both public and private - to provide the maximum benefits possible. Our governments have built a relationship rooted in common values. The door is open for private sector-led growth to be the engine that will transform Kenya. The US model focuses on sustainable financing, not unmanageable debt. We believe that hiring Kenyans to manage, lead, and do the skilled work represents the best path to long-term profitability and self reliance. A clear example of how governments, workers, managers, and Kenyans all prosper through transparent business with US companies is the Mombasa-Nairobi highway project that the Kenyan government awarded to Bechtel, a world-class US engineering company. Presidents Trump and Kenyatta committed to concluding the terms of the financing agreement in Washington last year, recognizing the benefits of the project. The new Mombasa-Nairobi highway makes good sense for Kenya’s infrastructure, economy, trade, and regional leadership. [Landry Signé: A Trump visit to Africa is important — and carries some urgency]
Zambia-Saudi Arabia Joint Permanent Commission: update (Lusaka Times)
Zambia and Saudi Arabia have agreed to negotiate and sign a Bilateral Trade Agreement to facilitate seamless trade and a Bilateral Investment Treaty to facilitate investment. And Saudi Arabia is considering sending a Technical team to Zambia to assess the epidemic situation and veterinary services as well as get acquainted with procedures followed to control Foot and Mouth Disease thus to consider uplifting the ban of export of livestock to Saudi Arabia. At the 3rd Session of the Zambia-Saudi Arabia Joint Permanent Commission (16-18 April) the two countries also agreed to explore ways and means of procuring more petroleum products for Zambia from that country. Saudi Arabia expressed interest to cooperate with Zambia in the supply of phosphate fertilizer, investment in farm blocks and health sector in Zambia, training of Zambian medical specialists in various medical fields, renewable energy, collaboration between agriculture and veterinary research institutes, as well as opportunities under the Saudi Fund for Development and the Saudi Export Program. [Nigeria-Pakistan Chamber of Commerce underway]
Mauritius: Tourism sector expected to grow by 3.6% to reach 1 450 000 tourists this year (GoM)
The tourism sector for 2019, according to Statistics Mauritius, is expected to grow by 3.6% to reach 1 450 000 tourists, which is well above the growth rate of 3% required to reach two million tourists by 2030. These figures were revealed at the National Assembly by the Minister of Tourism, Mr Anil Kumarsingh Gayan, in reply to the PNQ of the Leader of Opposition. Mauritius’ competitors in the Indian Ocean, the Minister remarked are Seychelles, Maldives and Sri Lanka, and these countries have adopted an open skies policy: “What a liberal aviation policy implies is that airlines have complete flexibility to respond to market demands and opportunities, and passengers benefit from the widest possible travel and flight options at competitive rates.” Tourist arrivals for the last three months are as follows as per Statistics Mauritius: Total tourist arrivals for January 2019 increased by 1.1% in spite of the adverse climatic conditions; Total tourist arrivals for February 2019 were at par with February 2018. This is mainly explained by the decrease in tourist arrivals from China and India due to the reduction in airlift capacity by 6,500 seats resulting in a drop of 5.6%; and Total tourist arrivals in March 2019 dropped by 4.5% mainly because Easter holidays this year are in April. [Mauritius’ financial services sector is reliable and in conformity to international standards, says Minister Sesungkur]
East Africa: Regional tea exports grow by 21% (Daily Monitor)
Tea export volumes from East Africa to the rest of the world recorded a 21% growth, the latest April auction report has shown. Records from the auction (15-16 April, Mombasa), show that the region exported a total of 9.6 million kilogramme bags, up from 7.5 million kilogramme bags shipped around the same time the previous year. At least six Eastern African member states actively participated in the auction out of the nine auction listed countries. The auction report by the East African Tea Export Auctions showed that Kenya exported over 7.2 million kilogrammes bags more than the 5.7 million it exported the same time last year. This indicated a 19.7% increase in exports. Uganda - the region’s second largest exporter - recorded the highest export margin of 43% increase when it sold a total of 1.4 million kilogramme bags up from 816,621 kilogrammes bags exported around the same time last year. [Related: East Africa braces for tough times as food crisis is forecast; Kenya banks on inter-regional trade to meet food deficit; An interview with NEPAD’s Dr Hamady Diop: Africa needs policy reforms]
Supporting Vietnam’s economic success through greener, cheaper, and more efficient trucking (World Bank Blogs)
To address these issues, our team conducted the first-ever comprehensive study of Vietnam’s trucking sector, which drew on a nationwide survey of more than 1,400 truck drivers, interviews with 150 private and public stakeholders, and a detailed review of the key factors influencing logistics costs and emissions. The results of our analysis and associated policy recommendations have been compiled in a new report: Strengthening Vietnam’s Trucking Sector- Towards Lower Logistics Costs and Greenhouse Gas Emissions. The report identified 14 possible policy interventions along four dimensions, summarized below. While our work focuses on Vietnam, the study draws on international examples as well, and could certainly help other countries modernize their trucking industry. [Nigeria needs a logistics revolution to prepare for the free trade agreement]
China’s trade with other Asian countries: a mixed bag (Hindu Business Line)
A closer consideration of specific countries in the region in Figure 4 reveals a mixed picture within this overall pattern of growing trade surpluses of China. Of the seven major Asian economies considered here, China has had persistent deficits only with Malaysia, which has generally exported high technology goods to China. However, such deficits also declined substantially between 2011 and 2015, and increased slightly thereafter but in 2018 still remained well below the level of 2011. With Thailand as well, China’s trade deficits have narrowed over the years, while the earlier deficit with the Philippines has moved to substantial surplus. Indonesia, Bangladesh, Vietnam and India all show trends of increasing surpluses, to varying degrees. [The authors: CP Chandrasekhar, Jayati Ghosh]
Today’s Quick Links: World Bank Q&A on Rwanda Poverty Statistics India is not a tariff king, has right to protect specific sectors under WTO: experts East Asia Forum: Australia’s Huawei ban raises difficult questions for the WTO US companies could be biggest winners (or losers) in China deal Learning from IDA experience: lessons from IEG evaluations, with a focus on IDA special themes and development effectiveness Dubrovnik Guidelines: Cooperation between China and Central and Eastern European countries |
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AfCFTA ratification update: Cameroon assures ECA that it will ratify Africa’s Free Trade Area Agreement
“Cameroon will ratify the AfCFTA,” the country’s Prime Minister, Joseph Dion Ngute, assured UN Under Secretary-General and Executive Secretary of the Commission, Ms Vera Songwe, on Wednesday. This process, he said, would be completed before Cameroon’s two houses of parliament meet in session in June, just in time to conclude the process ahead of the July African Union meetings.
Women Entrepreneurs Finance Initiative (We-Fi): conference, communique (World Bank)
Heads of state, ministers, leaders of multilateral development banks, private sector executives, women entrepreneurs, and contributing governments of the Women Entrepreneurs Finance Initiative (We-Fi) convened this week at the first We-Fi Regional Summit to discuss concrete ways to strengthen support for women-led small and medium-sized enterprises in West Africa. The Summit concluded with a joint Call to Action, urging wide-ranging public policy reforms and private sector actions to help women entrepreneurs overcome persistent barriers, both financial and non-financial. Extracts from the Call to Action:
More specifically, leaders at the Summit urged governments to undertake legal and regulatory reforms to: Prohibit discrimination in access to financial services based on gender and marital status; Remove labor restrictions for women, particularly in agriculture; Equalize property rights between men and women; Eliminate mobility constraints for women and improve transport safety; Track and increase sourcing from women entrepreneurs for government contracts; Increase women’s access to the basic infrastructure of the digital economy.
Leaders at the Summit urged the private sector and civil society organizations to: Expand women’s access to financial products, notably by accepting different types of collateral; Ensure that financial services are provided in tandem with non-financial support, such as training and capacity-building; Include more women entrepreneurs in sales and distribution channels and work to increase procurement from women-owned businesses; Expand women’s linkages to business networks; Help women entrepreneurs improve access to digital skills, platforms and technology; Prevent and mitigate against sexual harassment in accessing markets and finance; Increase women’s representation at decision-making levels in the financial services industry and in business organizations. Leaders at the Summit urged Multilateral Development Banks to:
African Network for Women in Infrastructure launched (AU)
AU Commissioner for Infrastructure and Energy, Dr Amani Abou-Zeid hosted a dialogue in Cairo to soft launch the African Network for Women in Infrastructure (ANWI) - a new initiative aimed at promoting African women’s participation in infrastructure development at the national, regional, and global levels. At the event, Commissioner Abou-Zeid said “while this is a side event, integrating policy and planning that prioritizes women and hardwires gender is not a side agenda”. She highlighted that a full programme of events will be held this year, with a formal launch of the Network planned for November 2019. AU Commission Director for Infrastructure and Energy, Mr Cheikh Bedda, noted that recognizing the significant gap in women’s participation in the African infrastructure development agenda, the designing of the second phase of the Programme for Infrastructure Development in Africa (PIDA) is expected to address pressing needs of women along the infrastructure value chains. [Egypt elected as new chair of the STC on Energy, Transport and Tourism]
China-Nigeria trade volume hit $15.3bn (Economic Confidential)
China’s non-financial investment in Nigeria has approached about $3bn while the China-Nigeria bilateral trade volume soared to $15.3bn in 2018; 10.8% higher than last year. Charge d’Affaires of the Embassy of People’s Republic of China, Zhao Yong, said this Tuesday at the 2019 “Belt and Road” Nigeria and China Economic and Trade Forum held in Abuja. “In terms of investment, according to incomplete statistics at the end of 2018, China’s non-financial investment in Nigeria approaches $2.8bn, contributing significantly to Nigeria economic diversification and creating millions of job vacancies for Nigerian workers. Ogun Guangdong and Lekki free trade zone is flourishing with about 190 registered enterprises, bringing $63m in total investment. There are also hundreds of Chinese enterprises of different scale in every states of Nigeria in every area of Nigeria economy, thriving in its maximum efforts and contributing to the Nigerian economy.” [President Buhari says India is Nigeria’s biggest trade partner: central bank governor says it’s China]
Kenya: KPA seeking nod to eject state agencies from Mombasa (The East African)
The Kenya Ports Authority is seeking to reduce the number of agencies operating within the Customs points to five from 51, as part of efforts to streamline operations. “Except the Kenya Revenue Authority, every other agency must be outside the port, and this is best practice. We hope that we will push this proposal through so that we are not liable for congestion and other issues,” said KPA managing director Dr Daniel Manduku. He said that some of the duties performed by agencies operating within the port overlapped. The announcement comes after Uganda, Rwanda, South Sudan and Burundi, which use the port of Mombasa, complained of inefficiencies and delays in clearing of goods, adding to the cost of doing business. The EAC partner states want the state agencies kicked out of the customs units at the ports and border points. Cabinet Secretary for EAC and Regional Development Adan Mohamed said that only four “critical” certification bodies should remain at the port of Mombasa, the Nairobi Inland Container Depot and at airports and border points.
Peter Biwott: Value addition only way to Kenya’s growth (Daily Nation)
The ongoing creation of a database for exporters will ease the creation of sector-specific targets of valued-added and manufactured exports in sectors such as textiles, leather, handicrafts, extractive, livestock, agriculture and services. Establishing a repository of exportable products and country-specific buyers directories worldwide will push the realisation of country-specific export targets. Prioritising markets based on, in part, trade imbalance, distance, purchasing power parity, economic status, population, duty-free access and market access will spur exports and forex earnings. Of importance is evidence-based scientific positioning of our foreign representation to deliver on export targets in countries of high interest to Kenya. A repository of Kenyans in the diaspora and regular travellers has brought about tailor-made interventions for them to play a role in promoting exports and investments. Kenyan companies should take advantage of duty-free market access, for example, in Africa, to net more forex. [The author is CEO of Kenya’s Export Promotion Council]
Turkey-Zambia Joint Economic Commission co-chairperson appointed (Independent Observer)
Turkish President Recep Tayyip Erdogan has appointed Minister of Family, Labour and Social Services, Zehra Zumruk Selcuk, as co-chairperson of the Turkey-Zambia Joint Economic Commission. Mrs Selcuk said bilateral relations with Zambia are of strategic importance to Turkey on the African continent. The Minister was concerned that the trade volume between the two countries had not improved since the signing of the Agreement on Trade and Economic Cooperation eight years ago. She made the remarks during a bilateral meeting with Zambia’s Ambassador to Turkey, Joseph Chilengi in Ankara yesterday. “As directed by President Recep Tayyip Erdogan, we want to bring the Joint Economic Commission back to life to increase trade volume and we want to hold the inaugural meeting within this year. When we look at the trade volume, it has been fluctuating. In 2015, the trade volume between Zambia and Turkey was $22m and in 2018, it was $18m,” she said.
South Africa: “Poultry imports are critical to keep prices in check” (Farmers Weekly)
The South African National Consumer Union (SANCU) and the Emerging Black Importers and Exporters South Africa (EBieSA) are contesting the import tariff on chicken proposed by the South African Poultry Association. According to SANCU and EBieSA, an increase in the import tariff would place further strain on consumers, and would have an impact on food security and jobs created by the import and export markets. Clif Johnston, vice-chairperson of SANCU, said that the imposition of import tariffs or the increase of existing tariffs eventually resulted in proportional increases in the price of the protected local commodity, which affected the consumer. “This is the sixth time that the local industry has applied for protection since 2011. For example, in 2013, import tariffs on whole chicken already increased from 27% to 82%, frozen bone-in chicken increased from 18% to 37% and frozen boneless cuts from 5% to 12%,” he said.
IMF forecasts Tanzanian economic growth of 4-5% in medium term (Reuters)
Tanzania’s economy will be subdued if recent government policies and legislation continue, threatening to hit growth in East Africa’s third largest economy, an International Monetary Fund report seen by Reuters on Thursday said. President John Magufuli’s government has embarked on an ambitious program of industrialization, but foreign investment in the country has fallen after contentious government interventions in the mining and agriculture sectors. Foreign direct investment fell to 2% of GDP in 2017, down from about 5% in 2014, the World Bank has said. In a report which was not made public after Tanzanian authorities did not consent to its publication, the IMF said that a weak business environment and the implementation of projects that may not have high rates of return are likely to constrain annual GDP growth to below the 6.3% average recorded between 1998 and 2017.
Zimbabwe: IMF report on government finance statistics technical assistance mission
The mission found that that the authorities are making some progress towards higher quality and more comprehensive GFS, however, sufficient information for meaningful monitoring and surveillance of the public sector in Zimbabwe should be considered a long-term goal with several remaining challenges. The mission recommends the following actions:
UN announces new CEO alliance to fund sustainability: Global Investors for Sustainable Development (UNCTAD)
It announced the Global Investors for Sustainable Development (GISD), a new alliance of chief executives coordinated by UNCTAD and the UN’s Department of Economic and Social Affairs, at the UN’s SDG Investment Fair in New York on 15 April. “We are all aware of the significant funding gap in reaching the SDGs. But we must also be aware that this pales in comparison to the more than $200 trillion of global assets under management,” said Scott Mather, chief investment officer of investment management firm PIMCO, and a founding member of the GISD. “In other words, there is plenty of capital - both private and public - we just need to direct it in ways that deliver sustainability outcomes.” The alliance, announced by UN Secretary-General António Guterres, will comprise between 25 and 30 CEOs who will focus on incentivizing larger amounts of long-term investment for sustainable development.
Today’s Quick Links: Africa’s air cargo sector needs trade and aviation liberalisation to reach full potential Non-stop flight between Cape Town and USA a “game changer” Kenya Airways loses 130 pilots to Middle East carriers Chamber of Commerce, USAID conduct AGOA awareness workshops for Liberia public sector Pakistan’s exports to South Africa fall after anti-dumping duty Mmusi Maimane: Time to close South Africa’s borders Julius Malema wants to remove borders in SA: but how will it work? WTO issues panel report regarding Chinese tariff rate quotas on agricultural imports World Bank’s Research digest newsletter Vol. 13 (No. 3) |
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tralac’s Daily News Selection
Posted, by the AU: The decisions, declarations, resolution and motions from the 32nd Ordinary Session of the Assembly of the Union (February, Addis Ababa). pdf Decisions include (1.73 MB) : On the institutional reform of the AU; the AfCFTA; the Post-2020 Partnership with the EU; the reform of the UNSC; Financing the Union; Scale of assessment for the regular budget and the Peace Fund.
Diarise:
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22nd session of Intergovernmental Committee of Experts for West Africa (8-10 May, Liberia): Demographic dynamics for sustainable development in West Africa (pdf)
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Demographic dividend with a gender dimension: entry points for implementation of SDGs in Africa, Asia, Pacific (23-25 April, Addis Ababa). “For the Africa region, the interventions will focus on three countries - Nigeria, Uganda and South Africa. Two more countries, Ghana and Zambia, have been engaged in the project to champion the commitments and enrich the lessons drawn from the project.”
Cameroon’s national AfCFTA consultation concludes today (UNECA)
More than 100 stakeholders from the private sector, academia and civil society are associated with this first-of-its-kind workshop (in Yaounde) to formulate practical recommendations for the state and its partners with regards to leveraging the opportunities offered by the creation of the AfCFTA. Issues relating to Cameroon’s current state of preparedness for the entry into force of the AfCFTA as well as possible spinoffs and fallouts for the subregion, particularly with regard to the effective harmonization of ECCAS and CEMAC preferential tariffs will be specifically addressed. Cameroon’s preparation for the second round of the AfCFTA negotiations will also be at the heart of the exchanges, with particular emphasis on competition issues, intellectual property and investment.
Congestion at border slows down Zambia, DRC trade (The East African)
Zambia and the DRC are struggling to resolve a gridlock that has made the Kasumbalesa border impassable in the past week, hurting trade between the two countries and threatening diplomatic relations. President Edgar Lungu said last week he would report DRC to SADC over congestion at the Kasumbalesa border post in Chililabombwe district. He blamed DRC for the congestion that stretched 67kms on the Zambia side at the time. It had been reduced to about 50kms on Monday evening. SADC Truck Drivers vice president, Webby Puta, said documentation that is done at Whiskey check point should be done at Kasumbalesa border post to decongest the long queues. Doing so, he said, would cut the distance to the off-loading bay by 90kms. The logistical nightmare at the border is hardly what the two countries need at this time. [Museveni to open one-stop-border post in Kasese]
US EXIM signs MOU with Angola’s Ministry of Finance
“This MOU is a sign of EXIM’s commitment to President Trump’s Prosper Africa initiative and our eagerness to partner with the Ministry of Finance to create economic opportunities and jobs in the United States and Angola,” said Ambassador Gerrish. “We anticipate that the EXIM-backed financing to follow from this agreement will support exporter and supply-chain jobs in multiple industries across the United States and also foster job creation in Angola.” Under the MOU, EXIM and the Angolan Ministry of Finance agreed to exchange information on business opportunities to further the procurement of U.S. goods and services by both state-owned and private-sector small and medium-sized businesses in Angola. Sectors for business development include energy, oil and gas development, infrastructure, railway and road transportation, supply chain infrastructure, environmental projects, agriculture, health care, water and sanitation, and telecommunications. EXIM agreed to explore options for providing the bank’s medium- and long-term guarantees or loans of up to $4bn to support U.S. exports to Angola.
East Africa Regional Economic Outlook: Manufacturing key to growth in East Africa (AfDB)
Extractive sector updates:
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Resource Governance Index: from legal reform to implementation in Sub-Saharan Africa (NRGI)
This report explores common resource governance successes and challenges in sub-Saharan Africa, taking advantage of the rich dataset and wealth of evidence documentation provided by the Resource Governance Index. While the authors detect common trends across the region, there is also great diversity between and within countries. It also documents examples of good practices from which officials in other countries can learn. The authors conclude with the suggestion that policymakers, parliamentarians, civil society, media and regional institutions focus more on narrowing the implementation gap, which will help to restore trust between government, communities and investors and thus strengthen sustainable management of natural resources. Extracts (pdf):
Two countries, Ghana (for oil and gas) and Botswana, achieve satisfactory RGI scores, showing that abundant resources can be governed well. However, no country in the region achieves a good composite score, and five score in the failing category. The overall picture remains that the more dependent a country is on natural resources, the less transparent and accountable the management of the extractive sector. In countries assessed for oil and gas, resources represented 50% of exports and 23% of government revenues on average, and in the RGI they score an average 41 out of 100. In contrast, for mining assessments, the average score is 45 out of 100, while resource dependency was lower: 27% of exports and 14% of government revenues. However, in many countries, these shares reach much higher levels: in Guinea, DRC, Zambia and Niger, minerals accounted for well over 50% of exports. For the biggest oil producers, Angola and Nigeria, oil represented over 90% of exports. In comparing regional averages in the RGI, sub-Saharan Africa emerges as a global leader on contract disclosure rules, an important transparency norm. The region also achieves a relatively high average score for taxation, which reflects growing levels of transparency in revenue collection. In contrast, sub-Saharan African countries fall below global averages in governing SOEs and sovereign wealth funds. Beyond regional averages, there is a great degree of score diversity between countries. The best sub-Saharan African performer in the index (Ghana’s oil and gas sector) and the weakest (Eritrea gold-mining sector) are 57 points apart, which is the widest difference exhibited in any region.
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Multi-year Expert Meeting on Commodities and Development: commodity-dependent countries urged to diversify exports (UNCTAD)
Developing countries that depend on commodities ought to pursue diversification strategies to address the adverse effects of price volatility in international markets, said speakers at UNCTAD’s meeting of experts on commodities and development on 15 April at the UN’s European headquarters in Geneva. UNCTAD defines a country as dependent on commodities when these account for more than 60% of its total merchandise exports in value terms. Today 67% of developing countries (91 out of 135 countries) are dependent on commodities, a situation that has changed little in the last two decades, UNCTAD’s Deputy Secretary-General Isabelle Durant told attendees. Least developed countries are even more dependent as more than 80% of their export earnings come from commodities. Profiled presentations from the expert meeting:
Laurent Pipitone: The state and future of the cocoa and coffee markets (pdf)
Janvier Nkurunziza: Commodity markets – recent trends and outlook (pdf); Commodity dependence and risk management in CDDCs
Bla Josée C. Eba: Managing commodity price volatility: contrasting Côte d’Ivoire and Ethiopia (pdf)
Helping SMEs internationalise through trade facilitation (pdf, Working Party of the Trade Committee, OECD)
Small and medium-sized enterprises play an important role in generating economic activity and employment in developing and developed countries. However, partly due to remaining at-the-border trade costs, SMEs continue to be less represented in international trade – as direct exporters or importers – than larger firms. Indeed, although they represent the majority of enterprises, SMEs are responsible for an average of 33% of exports in selected developed countries and 18% in selected developing countries. Albeit to a lesser extent, the same pattern emerges in terms of imports, with SMEs representing, on average, about 40% of imports in selected developed countries and 34% in a range of developing economies. While less studied in the literature, imports are an important part of the gains from trade for SMEs. Drawing on the OECD Trade Facilitation Indicators and different firm-level datasets, this paper tries to identify specific trade facilitation policies that are critical for the participation of small and medium sized enterprises in international trade, as either exporters or importers. [The authors: Javier Lopez-Gonzalez, Silvia Sorescu]
African Women Leadership Fund: update from Marrakech discussions. “Over the next decade the fund is envisaged to have made an investment of up to $500 million in African owned and women-led companies. The fund is anchored on six pillars:”
Second Fair Pricing Forum (Johannesburg): Greater transparency, fairer prices for medicines ‘a global human rights issue’, says WHO
While developing countries have long struggled with the price of medicines, today’s costs have rendered it a world-wide challenge, and the key topic of concern at a global medicines forum in South Africa, co-sponsored by the World Health Organization. “This is a global human rights issue”, said WHO Assistant Director-General for Medicines and Health Products Mariângela Simão on Saturday at the WHO Forum on Medicines in Johannesburg. “Everyone has a right to access quality healthcare”. The forum on fair pricing and access to medicines provided a discussion platform for governments, civil society organizations and the pharmaceutical industry to identify strategies to reduce prices and expand access for all. It also called for greater transparency around the cost of research, development and production of medicines, to allow buyers to negotiate more affordable prices. [Daily Maverick: Forum steers the search for a ‘fair price’ for cancer medication]
‘Nothing to fear’: EU official says support for Caribbean won’t collapse (The Gleaner)
Nervous Caribbean leaders need not worry about dwindling political and developmental support from the European Union because of possible changes to the make-up of the European Commission, a top EU official has indicated. The EU is scheduled to hold parliamentary elections next month, which could mean personnel changes at the European Commission – the arm that deals with development issues – and a shift in financial support to the Caribbean. Jamaica’s Foreign Affairs and Foreign Trade Minister Kamina Johnson Smith admitted yesterday that she and her counterparts across the Caribbean will be watching closely to see how this unfolds. But EU Director General for International Cooperation and Development Stefano Manservisi sought to allay concerns, insisting that the mandate of the commission would not collapse because of personnel changes.
WBG launches consultations on future strategy for Fragility, Conflict and Violence (World Bank)
The consultations will focus on gathering perspectives in countries faced with diverse FCV challenges, as well as in countries that support World Bank Group programs in FCV settings. They will aim to capture lessons learned and best practices for reducing fragility, conflict and violence and promoting peace and prosperity. Inputs gathered from representatives of government, civil society organizations, international partners, the private sector and others, will be integrated into a comprehensive operational strategy focused on addressing the drivers of fragility and maximizing the World Bank Group’s support for affected people and communities. The development of a World Bank Group FCV strategy comes at a pivotal time: By 2030, at least half of the world’s poor will live in fragile and conflict-affected settings. [Download: Concept note, pdf]
Today’s Quick Links: George Wachira: How Uganda refinery will impact the region Despite lifting ban, Egyptian commodities still absent in Sudanese market Vietnam, Nigeria eye closer investment, trade ties How Africa became collateral damage in US-China trade war Kenya: Bleak economic outlook as below normal rainfall now expected Learning from power sector reform experiences: the case of Kenya |
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Multilateralism: the only safe route for development finance
Lebanese ambassador who presides over UNCTAD's governing body defends multilateralism during UN development financing forum.
As leaders shun the rules-based international order, they undermine the conditions needed to finance sustainable development, Lebanon’s Ambassador Salim Baddoura said on 16 April at the United Nations headquarters in New York City.
Meeting the ambitious targets set by the 2030 Agenda for Sustainable Development – our common compass for a better world for all – means plugging a massive financing gap of at least $2.5 trillion a year for developing countries alone, according to UNCTAD estimates.
Mr. Baddoura, Lebanon’s permanent representative to the UN in Geneva and current president of UNCTAD’s governing body, said such a task is even tougher in a global landscape of weak growth, trade tensions and rising debt distress – and in a world where nations seem more set on protecting their own turf than fighting for the common good.
“Humanity is beset by systemic risks compounded by the erosion of multilateralism and the rise of extremist ideologies premised on forms of intolerant nationalism and exceptionalism,” he told the 2019 ECOSOC Forum on Financing for Development (FfD) follow-up, meeting from 15 to 18 April.
Unless the international community recommits to multilateralism, he said, the world won’t overcome the “chronic underfunding” of the 2030 Agenda’s 17 Sustainable Development Goals (SDGs) – the UN-endorsed blueprint for ending poverty and hunger, reducing inequalities and curtailing climate change.
Policy options for over-indebtedness
Speaking at a high-level meeting held with the International Monetary Fund, the World Bank and the World Trade Organization, Mr. Baddoura cited recent examples of multilateralism at its best in UNCTAD’s work related to financing sustainable development.
For example, he pointed to UNCTAD’s intergovernmental group of experts on financing for development, whose meeting in November 2018 brought together governments, international development agencies and civil society organizations in Geneva, Switzerland, to discuss policy options for tackling the rising debt vulnerabilities of many developing countries.
Debt sustainability is one of the central concerns of the Addis Ababa Action Agenda – the 2015 plan that outlined the means of paying for the SDGs.
Over the past decade, external debt has risen at an average annual rate of 8.5% for developing countries. By the end of 2017, the number of low-income developing countries that were over-indebted or at risk hit 31, compared to 13 in 2013.
“If these trends continue, many countries will face unsustainable debt burdens that could jeopardize development goals as governments spend more on debt service and less on infrastructure, health, and education,” Mr. Baddoura said in a written statement to the FfD forum.
The group explored several avenues for fair and effective debt resolution mechanisms and adopted policy recommendations that were provided as an input to the forum currently underway at UN headquarters.
A toolbox for development finance
Another example is the one-stop-shop for development finance – the Toolbox on Financing for the SDGs – that UNCTAD launched in Geneva during its 2018 World Investment Forum, in collaboration with the then president of the UN General Assembly, Miroslav Lajcák, now Slovakia’s foreign and European affairs minister.
“The toolbox is an online global resource platform for initiatives on sustainability financing,” Mr. Baddoura said in the statement.
The process brought together a range of other United Nations bodies, including the UN Development Programme and UN Environment. Others involved were the business grouping The Global Compact, the World Economic Forum, the International Chamber of Commerce, the insurance giant Aviva, and a host of other public and private sector organizations.
During this week’s FfD forum UNCTAD has also partnered with the Financing for Development Office of the Department of Economic and Social Affairs to organize the SDG Investment Fair, which provides a central platform for closing the Global Goals’ investment gap.
“I am also pleased to note that UNCTAD and DESA are joining hands with other UN entities in co-hosting the Secretary-General’s initiative of establishing a CEO Alliance on ‘Global Investors for Sustainable Development’ (GISD) as part of the implementation of his Strategy for Financing the 2030 Agenda for Sustainable Development,” Mr. Baddoura said in the statement.
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Commodity-dependent countries urged to diversify exports
Experts discuss recent trends in global commodity markets and explore how commodity-dependent developing countries could achieve inclusive growth.
Developing countries that depend on commodities ought to pursue diversification strategies to address the adverse effects of price volatility in international markets, said speakers at UNCTAD’s meeting of experts on commodities and development on 15 April at the UN’s European headquarters in Geneva, Switzerland.
UNCTAD defines a country as dependent on commodities when these account for more than 60% of its total merchandise exports in value terms.
Today 67% of developing countries (91 out of 135 countries) are dependent on commodities, a situation that has changed little in the last two decades, UNCTAD’s Deputy Secretary-General Isabelle Durant told attendees.
Least developed countries are even more dependent as more than 80% of their export earnings come from commodities.
“Heavy dependence on commodities makes these countries vulnerable to shocks and price fluctuations,” said Ms. Durant, adding that a decline in commodity prices can have a negative impact on export and fiscal revenues and may slow down economic growth and development.
Markets trending downwards
As in previous years, commodity prices in 2018 were volatile, but generally followed a downward trend, with variations between commodities, said UNCTAD’s commodities head, Janvier Nkurunziza.
Overall, agricultural products saw falling prices, a trend that began when the most recent commodity boom ended in 2011. Mineral prices, for their part, dropped after an upturn in 2016 and 2017 for ores such as gold, nickel and zinc.
The prices of crude oil and natural gas fuels were the exception in 2018. The price index for energy products increased, particularly from its low level in 2016.
As a result of the downward trend of most commodity prices, countries have been losing crucial import/export revenues.
“The continued fall in commodity prices since their peak in the early part of the decade has affected the ability of countries dependent on these commodities to ensure their socio-economic development,” said Mr. Nkurunziza.
Many commodity-dependent developing countries rely heavily on the production and export of a few commodities with minimal value addition and even fewer forward and backward linkages with other sectors of the economy.
Price drop impoverishing farmers
The drop in export earnings has not only affected state budgets, but also the lives of farmers producing crops such as coffee and cocoa.
In the last five years, the prices per tonne of coffee and cocoa have fallen by 48% and 46% respectively, according to Laurent Pipitone, a director at advisory firm FarmBridge International.
This downward trend caused by production increases and trade uncertainties has impoverished many coffee and cocoa farmers, especially in countries such as Cote d’Ivoire and Ghana.
“A cup of coffee creates the image of conviviality and makes people look trendy and glamorous, while cocoa and chocolate products are associated with the celebration of joyful events, romance and pleasure. Behind the scene is the unglamorous reality of the lives of most coffee and cocoa farmers,” said Mr. Pipitone.
In the 1950s, recalled Mr. Pipitone, a Ghanaian song praised cocoa for its power to lift its farmers out of poverty. Today, price volatility has put paid to those dreams.
Delivery of basic goods and services affected
Equally hit by price volatility are minerals such as cobalt, a key component of lithium-ion batteries widely used in electric cars.
After years of relative calm in cobalt markets, prices per tonne surged by 129% by the end of 2017, driven by increased demand for lithium-ion batteries and other factors.
But the upward trajectory was reversed in the second quarter of 2018, when prices fell by 16%, largely due to excess supply.
The price per tonne of cobalt fell from $90,000 at the beginning of 2018 to $30,000 by the end of the year, a substantial loss in value, said Guillaume Albasini, an energy and mining analyst.
As a result, revenues of cobalt-exporting countries such as the Democratic Republic of the Congo have fallen precipitously, affecting their ability to deliver basic goods and services.
“Cobalt is a key component of lithium-ion batteries widely used in electric cars…electric cars are booming yet in Congo we have a crisis,” observed UNCTAD’s director of international trade and commodities, Pamela Coke-Hamilton.
Diversification strategies way to go
Commodity-dependent countries need to pursue diversification strategies to address the longstanding risks associated with continuous price volatility, Ms. Durant added.
There are two main diversification strategies that can be used by commodity dependent developing countries. One approach is to diversify horizontally by exporting different types of commodities and other products. The other is to diversify vertically through value addition.
“Reducing dependence on commodities through vertical and horizontal diversification remains the surest way to avoid the vulnerability of producing countries to changes in commodity prices. Only diversification of exports and the economy can lead to sustainable development,” Ms. Durant said.
These diversification strategies can contribute to meeting the 17 Sustainable Development Goals set by the international community in 2015 – notably creating jobs and inclusive growth (Goal 8) and fostering the process of industrialization (Goal 9).
The eleventh edition of UNCTAD’s Multi-year Expert Meeting on Commodities and Development, takes place on 15 and 16 April, and brings together experts to discuss policy options for managing risk in the commodity sector of commodity-dependent developing countries.
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tralac’s Daily News Selection
AfCFTA update: The Gambia, today, deposited its instruments of ratification for the AfCFTA with the Chairperson of the African Union Commission, becoming the 20th country to do so.
Underway in Abidjan: Enhancing the quality of informal cross-border trade in the ECOWAS region (organised by ATPC, Afreximbank, AfDB, AUC)
Underway, in Marrakech: Africa Regional Forum for Sustainable Development (16-18 April). Access Forum documentation here; details of side events
Underway, in New York: 4th ECOSOC Forum on Financing for Development. Profiled side event: Investing in micro, small and medium-sized enterprises for achieving the SDGs [Related: Achim Steiner (UNDP Administrator): remarks at LDC ministerial breakfast meeting – Strengthening resilience to debt vulnerability in the LDCs; UNCTAD’s new report: Selected Sustainable Development trends in the least developed countries 2019]
New ACP-EU partnership: ACP Caribbean dialogue (ACP)
As the EU works to modernise its relations with the 79 countries in Africa, the ACP chief negotiators Neven Mimica and Robert Dussey met with ACP Caribbean leaders for a dialogue on the regional EU-Caribbean pillar in the context of the post Cotonou ACP-EU partnership. The discussions form part of broader regional consultations and are focused on the Caribbean’s specific needs and priorities for the coming years. Professor Robert Dussey, the ACP’s chief negotiator, Chair of the Ministerial Central Negotiating Group, and Minister for Foreign Affairs, Cooperation and Africa integration of Togo, said: “These regional consultations proved to bring valuable perspectives on this region’s priorities to our talks. Productive exchanges between the two parties will contribute enormously to the current negotiations for the new post-Cotonou Agreement, and especially to those which will begin on the Caribbean Regional Protocol. Today’s meeting follows the consultation held in Samoa with our ACP Pacific partners in February. The Africa consultation is due to take place soon in Eswatini.” [African farmers to EU: Rein in dairy exports to our continent]
Trade and gender nexus in the context of regional integration: a comparative assessment of EAC, Mercosur (UNCTAD)
This study adopts a comparative perspective to examine the trade and gender nexus in the context of regional integration by drawing upon case studies from two continents: EAC and the Southern Common Market (Mercosur). The findings of the study (pdf) show both important differences and similarities between the two regional contexts. With respect to gender mainstreaming in trade policy, the EAC started in a position ahead of Mercosur. The EAC has considered gender issues as part of its regional integration process since the beginning both through the provisions in the founding treaty and through the 2017 East African Gender Equality and Development Bill. In contrast, Mercosur did not introduce gender provisions in its foundational treaties; gender mainstreaming in regional integration polices was mainly driven by the mobilization of civil society groups (especially women’s organizations).
In both regions, the process of regional integration has been accompanied by a shift of sectoral employment structures towards the services sector. Services absorb the largest share of total employment in MERCOSUR, especially for women, while agriculture continues to be the main sector of employment for women in the EAC. However, in services, women are segregated in lower-skilled services sectors - a pattern that is particularly evident in Mercosur. Gender employment implications of regional integration in manufacturing also show important similarities across the two regions. In both regions, tariff liberalization in export markets contributed towards a feminization of labour in manufacturing (i.e. had a positive effect on the female employment share in manufacturing firms) mainly for production workers without any significant change for non-production ones.
EABC, TMEA team up to push for reforms in EAC’s business, investment (IPPMedia)
Mauritius-Kenya updates
Ministerial Session of the Mauritius-Kenya Joint Commission for Cooperation: outcomes (GoM)
As regards standards, both parties agreed that the Standards Bureau will continue to engage constant dialogue to establish a structure of cooperation. As for connectivity an agreement between the Mauritius Ports Authority and the Kenya Ports Authority will be signed in Mombasa shortly. Discussions also took place on the opportunities for exporting refined sugar by Mauritius to Kenya and on standardisation issues regarding Mauritian products entering the Kenyan market. Moreover, the Ministerial Session took note of the areas of cooperation identified as well as progress made to finalise the six agreements of bilateral cooperation that were signed on 10 April 2019. These are: a Double Taxation Avoidance Agreement; an Investment Promotion and Protection Agreement; a MoU on Cooperation for Development of Special Economic Zones and Export Processing Zone in Kenya; a MoU in the field of tourism; a MoU in the field of higher education and scientific research; and a MoU in the field of arts and culture.
Mauritius-Kenya Business Forum: An economic corridor promoting intra-African Trade and Investment (GoM)
Infrastructure financing in Africa: Raila warns against appetite for foreign loans (Star)
AU envoy Raila Odinga has asked African governments to be cautious about borrowing from abroad. Raila said African nations including Kenya should think first what they can do with their own resources before turning to international donors. “We are here to think about what we can do for ourselves as Africans before we go to the World Bank, EU or to the Chinese,” Raila said. He was speaking in Nairobi during a summit on infrastructure financing in Africa on Tuesday. Raila said Africa needs to come up with a new transcontinental corridor to connect the eastern, western and central countries to the deep sea ports of Lamu in Kenya and Duala in Cameroon. [See also tweeted highlights from @RailaOdinga, @NEPADKenya]
PIDA steering committee meeting: update (AU)
The Programme for Infrastructure Development in Africa steering committee has concluded its deliberations in Cairo, setting the stage for the next phase of PIDA, which will officially launch in January 2021. The committee heard presentations on the status of the implementation of PIDA PAP from RECs and partners, updates on the PIDA Capacity Building Project and the development of the next phase of PIDA, including a short presentation on the African Women in Infrastructure. The Steering Committee discussed the upcoming events until the closure of the current phase of PIDA PAP 1. It also served as a platform for partners to voice their ideas for the next phase of PIDA PAP. PIDA’s governance structure the Institutional Architecture for Infrastructure Development in Africa also came under strong review by the Steering Committee. AUC Director for Infrastructure and Energy, Mr Cheikh Bedda: “The next phase will radically be different in the way it addresses pressing needs on the continent including jobs, youth and women, low access to energy and other basic infrastructure among rural communities.” [Related: Presidential Infrastructure Champion Initiative: Technical Task Team Project Status Report presented at the Windhoek workshop (23-24 January); PIDA documentation]
Nigeria: FG sets up task force to dismantle 43 checkpoints on Benin-Nigeria highway (Eagle Online)
The Minister of Foreign Affairs, Geoffrey Onyeama, says the Federal Government has set up a Presidential Task Force to dismantle all checkpoints on the Nigeria-Benin route to encourage trade and regional integration. Onyeama said this on Monday in Abuja when members of ECOWAS Trade Liberalisation Scheme Task Force at the borders of member states paid him a courtesy visit. The ELTS task force, led by its spokesperson, Ken Ukaoha, also gave the report of its finding on activities across the borders along the Lagos-Seme-Benin route and factors impeding free trade in the region. The minister said the Presidential Task Force on Checkpoints, which would be inaugurated soon, was domiciled in the Office of the Secretary to the Government of the Federation.
Ukaoha said the team undertook a tour from Lagos to Seme and to Benin Republic and discovered 10 checkpoints manned by different uniformed men instead of two approved by ECOWAS law. The task force leader said the situation became worse when the team was returning, as the check points, made up of the police, Nigeria Customs Service, Nigeria Immigration Service, National Drug Law Enforcement Agency, Federal Road Safety Corps and quarantine staff, had increased to 33. [Poor implementation of sub regional projects worries ECOWAS parliamentarians]
Uganda: Cement export earnings rise by 25% (Daily Monitor)
Uganda’s cement exports mainly to the region registered recorded 24% increase in the calendar year ending 2018, a Bank of Uganda report has indicated. Uganda exported a total of 393,052 metric tonnes of cement valued at $56m (Shs210b) in 2018. Last year’s cement exports were higher than the 295,726 metric tonnes exported the previous calendar year 2017 valued at $41.6m (Shs156b). [Botswana: Matsiloje Cement MD claims his company was not protected]
Exploring the role of trade facilitation in supporting integrity in trade (pdf, Working Party of the Trade Committee, OECD)
Private sector surveys have regularly signalled lack of integrity at the border as one of the key obstacles they encounter both when exporting and importing. At the same time, lack of integrity has also been acknowledged by Customs authorities and other border agencies as a critical challenge not only at the border but for the whole economy due to the risks of revenue leakage, the resulting disincentives to trade and foreign investment, and even the decline in public confidence in government institutions. Against this background, the analysis explores available data on border-related corruption as well as on its potential determinants. It thus looks at a set of factors identified through the existing literature in conjunction with the trade facilitation environment, as measured through the OECD TFIs.
Today’s Quick Links: SARB’s Lesetja Kganyago: Reflections on central bank independence (pdf, Stavros Niarchos Foundation lecture, PIIE) Namibia boosts bilateral trade with new Lagos visa office Egypt imposes temporary duties of 15% on iron billets, 25% on steel rebar |
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tralac’s Daily News Selection
Zimbabwe Infrastructure Report 2019 (AfDB)
Zimbabwe has faced headwinds over the last decade resulting in a collapse of the economy. However, following the political transition of November 2017, the new government requested the African Development Bank to update the 2011 Zimbabwe Infrastructure Flagship Report, so as to aid in investment planning as part of the vision 2030. The government also requested the Bank to prepare an urgent economic report, to assist and advice on re-engagement with the international community. All these requests were to aid in the Joint Needs Assessment that was to be coordinated by the Bank, the United Nations and the World Bank. The Bank accepted these requests, cognizant of the fact that policy actions and, in particular, investment in infrastructure have important roles to play in the development of continental trade and in promoting economic linkages within Africa.
This report serves four purposes by providing: (a) the Government with a master plan for rehabilitation of infrastructure assets and recovery in infrastructure services in Zimbabwe within the context of vision 2030; (b) a game plan for re-engagement with the international community in the field of infrastructure in the event that the Government moves ahead with arrears clearance in 2019; (c) a platform from which a strategy for possible AfDB and other donor operations in Zimbabwe can be drawn up; and (d) as part of the Joint Needs Assessment including costing of the infrastructure sectors. The focus of this Report is on the services associated with transport, electric power, information and communication technologies (ICT), and water and sanitation in Zimbabwe. The Report provides a detailed assessment of the current status of the infrastructure and services in these four sectors in the country and their role within the Southern Africa region. [Download: pdf Zimbabwe Infrastructure Report 2019 (5.90 MB) ].
India protests against US-EU move at WTO (LiveMint)
India, South Africa and China are among those that have pushed back against a joint US-EU proposal to call out and punish countries that have not followed notification requirements under various WTO agreements. The countries feel it is unfair to impose harsh requirements on developing countries facing deep capacity constraints, and are reminiscent of colonial era rules. As part of proposed reforms to the global trade body, the US and EU, along with Japan, Canada, Australia, Costa Rica, Argentina and Taiwan, on 11 April, sought to impose stringent notification requirements, including financial penalties, on countries for failure to comply. At the meeting of WTO’s Council on Trade in Goods, the US justified the proposal on grounds of “chronic low level compliance with existing notification requirements under many WTO agreements (by members)”. It seeks to allow “a counter-notification of another member concerning notification obligations”.
Japan, US investors get in on the African start-up scene (The Africa Report)
Start-ups in Africa enjoyed buoyant growth in 2018. According to a study conducted by the US-based venture capital firm Partech Ventures published at the end of March, start-ups across the continent attracted a total of $1.16bn in investments in 2018, double the amount raised in 2017. Silicon Savannah, Kenya’s $1bn technology hub, leads the Partech study’s country rankings, having raised $348m in 44 funding rounds in 2018 – nearly $100m more than that of South Africa. Nigeria ranks second in terms of fundraising by country, with $306m raised in 2018, buoyed by a dynamic entrepreneurial spirit prevailing across Lagos, where entrepreneurs must nevertheless overcome enormous challenges in order to jump start their business.
Judd Devermont: Haven’t we done this before? Lessons from and recommendations for strategic competition in Sub-Saharan Africa (Lawfareblog)
If the US government aims to strengthen its position vis-a-vis Beijing, it needs to harness its private sector, stand up for US values, and institute more robust education and cultural exchange programs with African nations. Moreover, the US needs to do more to court African leaders—of whom only Nigerian President Muhammadu Buhari and Kenyan President Uhuru Kenyatta have visited the White House. The ambassadors in the mid-1960s made the same point. They argued that personal relationships between chiefs of state are important in Africa: “[F]or US policy objectives to be advanced, it is desirable that African leaders be made aware of the US President’s personal interest in African affairs.”
Instead of simply positioning the United States as a competitor, there are opportunities to step in and act as a referee to protect US interests and forestall further negative developments. This is what former Assistant Secretary of State for African Affairs Chester Crocker did in southern Africa, negotiating the Cuban withdrawal from Angola in the 1980s. It allowed the United States to stay above the fray, while ensuring U.S. equities were advanced. In cases where there isn’t a US company in the mix for a business opportunity, the United States could offer its good offices to assist with environment and labor assessments, and support negotiations to ensure African governments obtain the best economic package from China or other foreign actors.
WBG/IMF Spring Meetings: a final set of updates
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Sub-Saharan Africa Regional Economic Outlook: IMF lays out policies for economic recovery amid elevated uncertainty Some 21 countries, mainly the region’s more diversified economies, are expected to grow at more than 5 percent and see income per capita rise faster than the rest of the world on average over the medium term. However, the remaining countries, comprising mostly resource intensive countries, including the largest (Nigeria and South Africa), are expected to see slower improvements in standards of living.
Overall, sub-Saharan African countries need to strike a delicate policy balance between containing public debt levels, investing in human and physical capital, and raising revenue. This calls for urgent action on the fiscal front to improve tax revenue collection, public financial management, and spending efficiency, and on the trade front to reduce non-tariff barriers and deepen intra-trade integration (including in the context of the African Continental Free Trade Area – AfCFTA). Reforms are also needed to facilitate greater private investment, raise productivity, including by promoting diversification and export competitiveness, and strengthen resilience to climatic shocks.
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African Consultative Group Meeting: statement by the Chairman of the African Caucus and the MD of the IMF. Minister Kenneth Ofori-Atta, Chairman of the African Caucus, and Ms Christine Lagarde, Managing Director of the IMF, co-chaired the African Consultative Group meeting at the IMF Headquarters. They issued the following statement after the conclusion of the Group’s meeting:
“We had very productive discussions on Africa’s economic developments and prospects. The economic recovery in Africa is expected to continue. However, under current policies and amid increased global uncertainty, medium-term growth for the region is expected to continue to fall well short of what is needed to absorb new entrants to the labor force. The key challenge that Africa faces is to invest in human and physical capital to create jobs while at the same time reducing debt vulnerabilities.
“Against this backdrop, we agree that countries need to generate fiscal space, enhance resilience including to climate change, and create sustained high and inclusive growth, including by removing obstacles to greater gender equity. This will require, in particular: (i) pursuing growth-friendly fiscal consolidations, where needed, that strike the right balance between development spending, reducing debt vulnerabilities, and meeting essential social needs; (ii) strengthening the effectiveness of monetary policy to enhance the monetary transmission mechanism; (iii) enhancing the flexibility of markets to facilitate adjustment to shocks and preserve competitiveness; (iv) removing trade barriers to boost medium-term growth, including in the context of the African Continental Free Trade Agreement; and (v) addressing illicit financing flows and base erosion to enhance governance and strengthen revenue collection.”
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Abebe Aemro Selassie: IMF’s African Department press briefing. One development that we are very hopeful will facilitate growth, is increased trade integration in the region. We are very encouraged by the progress that has been made towards the African Continental Free Trade Area. Once completed the trade agreement will establish a market of 1.2 billion people, with a combined GDP of $2.5 trillion. The benefits could be substantial, particularly if countries tackle the non-tariff bottlenecks to trade, including by investing in infrastructure, lowering logistical costs and improving trade facilitation.
What is interesting, we think, is that intraregional exports in Africa are more diversified and have a higher technology content, than Africa’s exports to much the rest of the world. And just to give you a couple of numbers on this, 40% of intraregional trade is accounted for by manufactured goods, whereas the region exports to the world 75% of such exports tend to be minerals, the likes of crude oil, and other commodities. Still, one thing to note of course, is that, to ensure the benefits of intraregional integration are shared by all, policymakers should be mindful of the adjustment costs that integration could entail and move swiftly to address those.
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Development Committee: communiqué. We welcome the Mainstreaming the Approach to Disruptive and Transformative Technologies at the World Bank Group paper and the WBG’s efforts to make these technologies affordable and accessible for developing countries. We encourage the WBG to create opportunities for the poor and mitigate risks associated with technology. We ask the Bank Group to continue to work with countries as well as private and public sector partners to mainstream this agenda across sectors. We particularly welcome its work on competitiveness, innovation and consumer protection by supporting agile regulations. We also call on the WBG and IMF to continue work on fintech issues, building on the momentum generated by the Bali Fintech Agenda.
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International Monetary and Financial Committee: communiqué. Free, fair, and mutually beneficial goods and services trade and investment are key engines for growth and job creation. To this end, we recognize the need to resolve trade tensions and support the necessary reform of the World Trade Organization to improve its functioning. We will expedite work for a globally fair and modern international tax system and address harmful tax competition, artificial profit shifting and other tax challenges, such as those related to digitalization. We look forward to results as soon as possible. We will tackle sources and channels of money laundering and terrorism financing, proliferation financing, and other illicit finance. We will also address correspondent banking relationship withdrawal and its adverse consequences. We are working together to enhance debt transparency and sustainable financing practices by both debtors and creditors, public and private; and strengthen creditor coordination in debt restructuring situations, drawing on existing fora. [Note: the IMFC is chaired by Lesetja Kganyago, Governor of the SA Reserve Bank; IMFC press conference: transcript]
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Tenth IMF Fiscal Forum: remarks by IMF First Deputy Managing Director David Lipton. Enhancing the efficiency of spending is crucial to reaching the SDGs. We estimate that countries can save about as much through more efficient spending on education, health care, and infrastructure as they can through tax reform. IMF analysis indicates that, on average, countries lose about 30% of potential returns on their infrastructure investments due to inefficient public investment management. Countries could reduce this loss by about two-thirds with targeted reforms and more effective spending. As many of you know, the IMF has developed the Public Investment Management Assessment framework to help with this task. This tool seeks to assess and improve governance over the full infrastructure investment cycle. This work also contributes to the G20 quality infrastructure investment agenda, which is a cornerstone of Japan’s G20 Presidency.
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Geneva Principles for a Global Green New Deal: top economists outline plan for a global green new deal. The principles are outlined in a new report by UNCTAD’s Richard Kozul-Wright and the University of Boston’s Kevin Gallagher. In A New Multilateralism for Shared Prosperity: Geneva Principles for a Green New Deal, they spell out five key steps that need to be taken to solve the system of “predatory rent-seeking” or “crocodile capitalism” they believe has broken the social contract established in the wake of World War II, allowing global corporations to benefit while the general public loses. In this context transnational corporations’ net income has climbed while global labour income has seen corresponding negative growth. After convening several meetings between policymakers, experts and civil society organizations from across the globe, the economists have advanced a set of ‘Geneva Principles for a Global Green New Deal’. The goal is to lay the foundations for a new multilateralism that rebuilds the rules of the global economy towards goals of coordinated stability, shared prosperity and environmental sustainability, while respecting national policy sovereignty. 5 goals for rebalancing development:
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G24 press conference: transcript. G24’s Spring Meetings preparatory meeting, held in Lima (March 2019): various downloads on a wide range of topics. Two recent G24 working papers: Quantifying the policy space for regulating capital flows in trade and investment treaties (by Kevin P. Gallagher, Sarah Sklar, Rachel Thrasher); Challenges of investment treaties on policy: areas of concern to developing countries (by Kinda Mohamadieh)
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Devex: From critic to cheerleader — David Malpass’ first week at the World Bank
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Kevin Watkins: Will David Malpass trump the World Bank?
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Sub-Saharan Africa: IMF lays out policies for economic recovery amid elevated uncertainty
Navigating Sub-Saharan Africa’s Recovery Amid Greater Uncertainty
Sub-Saharan Africa’s economic recovery is set to continue, but along two tracks. Overall growth is set to pick up from 3 percent in 2018 to 3.5 percent in 2019, and stabilize at slightly below 4 percent over the medium term, the IMF said in its latest Regional Economic Outlook for sub-Saharan Africa.
Some 21 countries, mainly the region’s more diversified economies, are expected to grow at more than 5 percent and see income per capita rise faster than the rest of the world on average over the medium term. However, the remaining countries, comprising mostly resource intensive countries, including the largest (Nigeria and South Africa), are expected to see slower improvements in standards of living.
“External and domestic headwinds are weighing on growth prospects,” said Abebe Aemro Selassie, Director of the IMF’s African Department. “The global expansion is losing steam, including in key trading partners such as China and the euro area; as we see trade tensions persisting; and volatile global financial conditions and commodity prices. Public debt vulnerabilities remain elevated in some countries and non-performing loans remain high, partly due to large public sector domestic arrears.”
Declining budgets and a less supportive external environment complicate the challenge of finding ways to address human and physical capital investment needs, and create enough jobs to absorb the 20 million new entrants to labor markets each year. “Central to resolving this challenge is building up sufficient resources, enhancing resilience to shocks, and fostering an environment conducive to sustained, high, and inclusive growth,” said Mr. Selassie.
He pointed to two broad implications for policies. For the fast-growing economies, such as Benin, Ethiopia, and Senegal, there is need to hand over the reins of growth from the public to the private sector. In many of these countries, public investment had helped spur high growth, while also steadily increasing public debt levels.
In the more resource-intensive and slower growing economies – such as Angola, Nigeria, and South Africa – there is an urgent need to press ahead with much-needed policies to adjust to lower commodity prices and facilitate economic diversification. Prompt action would also help address the policy uncertainties that are holding back growth.
Overall, sub-Saharan African countries need to strike a delicate policy balance between containing public debt levels, investing in human and physical capital, and raising revenue.
This calls for urgent action on the fiscal front to improve tax revenue collection, public financial management, and spending efficiency, and on the trade front to reduce non-tariff barriers and deepen intra-trade integration (including in the context of the African Continental Free Trade Area – AfCFTA).
Reforms are also needed to facilitate greater private investment, raise productivity, including by promoting diversification and export competitiveness, and strengthen resilience to climatic shocks. The crippling effects of Cyclone Idai– decimating physical infrastructure and farmland, and bringing enormous suffering for the 2.6 million people affected in Southeast Africa– underscores the region’s vulnerability to weather-related disasters.
Chapter 3
Is the African Continental Free Trade Area a Game Changer for the Continent?
In 2018, member countries of the African Union took a major step to boost regional trade and economic integration by establishing the African Continental Free Trade Area (AfCFTA). They agreed to eliminate tariffs on most goods, liberalize trade of key services, address nontariff obstacles to intraregional trade, and eventually create a continental single market with free movement of labor and capital. The AfCFTA has been ratified by 22 countries and is likely to take effect in 2019, although negotiations on specific features of the agreement are ongoing. Once operational, the AfCFTA will establish a market of 1.2 billion people with a combined GDP of US$2.5 trillion. This could be an economic game changer for the continent.
Trade integration can help propel development and has prompted spectacular success stories on other continents. Trade integration allows countries to specialize in the production of goods and services for which they have comparative advantage and to exploit economies of scale, thereby improving productivity and growth. Trade integration can also foster structural transformation by spreading knowledge and technology and spurring the development of new products. A large free trade area in Africa will amplify the potential for economic transformation in the region. It will not only boost intraregional trade, it will also attract foreign direct investment and facilitate the development of regional supply chains, which have been key engines of economic transformation in other regions.
However, while trade supports growth, it may also entail costs, and its benefits may not be evenly distributed across and within countries. Policymakers are often rightly concerned that further integrating their economies with those of other countries may benefit some industries and hurt others, negatively affect earnings and employment opportunities in certain sectors and for certain skill levels, and reduce fiscal revenue.
This chapter examines the potential benefits and challenges of implementing the AfCFTA for African countries. It focuses on three questions:
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How has intraregional trade in Africa evolved over time and how does it differ from Africa’s international trade? What does the experience of the African subregional economic communities suggest about the continent’s potential to integrate further?
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What is the potential impact of the AfCFTA on intraregional trade, and what policies are needed to foster further regional trade integration?
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How will the AfCFTA affect welfare, income distribution, and the fiscal revenue of African countries?
The analysis shows that:
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Intraregional trade in Africa has expanded rapidly, and a few regional hubs dominate relatively well diversified trade flows. Intraregional imports, as a share of total imports, almost tripled over the past two decades to 12-14 percent, or about US$100 billion, as several new subregional economic communities (RECs) boosted trade in the region. In 2017, three-quarters of African intraregional trade took place within the main subregional communities. In the process, regional trade hubs emerged, such as Côte d’Ivoire, Kenya, Senegal, and South Africa. Unlike exports to the rest of the world, intraregional trade flows are relatively diversified, contain higher value-added goods than exports to the rest of the world, and include a sizable share of manufactured products (for example, motor vehicles and clothing).
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Despite this expansion, significant opportunities for further regional trade integration lie ahead. After controlling for lower levels of income and economic size and generally longer distances compared with other regions, African countries’ particular features appear to limit their ability to trade (compared with countries in other regions). Some of these features are structural and would require a long-term commitment to change. Others are the result of policy, such as tariffs, trade regulations, and regulatory requirements, and their removal would boost regional integration. Opportunities to expand intraregional trade are particularly sizable for some agriculture-related commodities (for example, food products) and manufacturing industries, as well as in some African subregional economic communities that trade significantly less than their peers.
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Tariffs and, more important, non-tariff bottlenecks are currently limiting intraregional trade integration. The experience of the subregional economic communities suggests that reducing tariffs alone is not sufficient to boost intraregional trade. Poor trade logistics and, to a lesser extent, infrastructure are major obstacles to further trade integration in the region. These bottlenecks are particularly important for landlocked and low-income countries.
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Removing trade barriers to foster intraregional trade may unevenly affect countries in the region. Fiscal revenue losses from lower tariffs are likely to be limited, on average, but they may be significant in a few countries that still apply high export tariffs. Moreover, deeper trade integration can have adverse effects on countries’ income distribution, particularly in countries with more diversified economies and large shares of skilled labor. However, these effects are limited in size as large informality in the economy, while increasing overall inequality, isolates some segments of the population from the short-term effects of trade flows. Moreover, these effects tend to fade away over time. Finally, small countries, more diversified economies, and established regional trade hubs, already open to international competition, are likely to benefit more from deeper regional integration than economies dominated by agriculture and natural resources.
The key findings in this chapter imply that the AfCFTA could significantly boost intraregional trade in Africa if both tariffs and non-tariff policy levers are used. Tariff reductions should be comprehensive in order to have significant effects on intraregional trade flows. Eliminating tariffs on 90 percent of existing intraregional trade flows – the most ambitious target under the AfCFTA – would increase regional trade by about 16 percent, or US$16 billion, over time. Tariff reductions should be complemented with policies addressing non-tariff bottlenecks. Even small improvements in addressing such bottlenecks are likely to have sizable effects. Improving trade logistics, such as customs services, and addressing poor infrastructure could be up to four times more effective in boosting trade than tariff reductions. Moreover, reducing non-tariff obstacles to trade would improve the effectiveness of tariff reductions in boosting trade, especially in landlocked and low-income countries. Therefore, policies to reduce non-tariff bottlenecks, particularly poor trade logistics and infrastructure, should be at the center of the effort to foster deeper trade integration in Africa.
To ensure that the benefits of regional trade integration are shared by all, policies should be put in place to address the adjustment costs that integration may entail. For less-diversified and agriculture-based economies, trade policies should be combined with structural reforms to improve agricultural productivity and strengthen the competitive advantage of these economies. In some countries, measures to mobilize domestic revenues are needed to mitigate the expected revenue losses from tariff reductions. The temporary adverse effects of trade liberalization on income distribution need to be tempered – particularly in countries with more diversified economies – through targeted social (for example, income support) and training programs to ease worker mobility across firms and industries and promote employment.
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African Consultative Group Meeting: Statement by the Chairman of the African Caucus and the Managing Director of the IMF
Minister Kenneth Ofori-Atta, Chairman of the African Caucus, and Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), co-chaired the African Consultative Group meeting on 12 April 2019 at the IMF Headquarters. They issued the following statement after the conclusion of the Group’s meeting in Washington, DC:
“We had very productive discussions on Africa’s economic developments and prospects. The economic recovery in Africa is expected to continue. However, under current policies and amid increased global uncertainty, medium-term growth for the region is expected to continue to fall well short of what is needed to absorb new entrants to the labor force. The key challenge that Africa faces is to invest in human and physical capital to create jobs while at the same time reducing debt vulnerabilities.
“Against this backdrop, we agree that countries need to generate fiscal space, enhance resilience including to climate change, and create sustained high and inclusive growth, including by removing obstacles to greater gender equity. This will require, in particular: (i) pursuing growth-friendly fiscal consolidations, where needed, that strike the right balance between development spending, reducing debt vulnerabilities, and meeting essential social needs; (ii) strengthening the effectiveness of monetary policy to enhance the monetary transmission mechanism; (iii) enhancing the flexibility of markets to facilitate adjustment to shocks and preserve competitiveness; (iv) removing trade barriers to boost medium-term growth, including in the context of the African Continental Free Trade Agreement; and (v) addressing illicit financing flows and base erosion to enhance governance and strengthen revenue collection.”
Ms. Lagarde stated that “the IMF will remain closely engaged with its African members. The Fund will continue to support the authorities’ efforts to address the current macroeconomic and structural challenges and achieve a stronger, durable and inclusive growth to absorb new entrants in the labor force.”
Minister Kenneth Ofori-Atta echoed Ms. Lagarde on the economic prospects of the continent, and the willingness of the sub-region to work closely with the IMF to tackle emerging concerns. He emphasized the need for members to sustain commitment to structural reforms and encouraged the Fund to show patience in its program engagement when there is demonstrated ownership by country authorities for successful outcomes.
Transcript of the African Department Press Briefing
Washington DC, 12 April 2019
Mr. Abebe Aemro Selassie, Director: African Department: Thank you, Lucie. A very good morning to you all, thank you for joining us this morning. We [have just launched] our Regional Economic Outlook.
The Sub-Saharan Africa economy continues to recover in terms of economic growth. This year we are expecting growth to accelerate to 3.5 percent from 3 percent last year. But these regional average numbers mask quite a lot of difference in terms of outcomes across the region.
Specifically, some 21 countries are expected to grow at 5 percent or more this year, and so, you know, with per capita income increases that are markedly larger than many countries in the rest of the world. And these economies that are growing fast tend to be the more diversified economies.
Still, there are in other set of countries, around 24, mainly resource-dependent economies that are facing sluggish growth in the near term and are seeing slower improvements in standards of livings. This group includes some of the larger economies in the region, the likes of Angola, Nigeria, and South Africa, which account for more than 50 percent of the region's output.
External and domestic developments are having a betting on the economic outlook. On the external front perhaps the most important factors have been the volatility and global financial conditions, as well as the volatility in commodity prices which are posing a challenge for policymakers.
Domestically, one pressure point remains rising public debt vulnerabilities, these are elevated in some countries, and posing a challenge. The reason for the increase in debt levels tends to be very country-specific, for some it is due to addressing the large infrastructure needs. In others it's been the effect of the commodity price shock that hit countries between 2014 and 2016. And yet in others it's been procyclical policies which have led to the marked increase in debt levels.
Looking ahead, we see basically two broad implications for policies. First in the fast-growing economies, the likes of Benin, Ethiopia, Ghana, Senegal, there is a need to hand over the reins of growth from the public to the private sector.
In many of these countries public investments has helped spur higher growth, while also, of course, translating into an increase in public debt levels, so there is a need to strike a better balance between public debt increase on one hand, and the continued investments that are needed in public investment.
In the slower-growing economies, the likes of, as I just mentioned, Angola, Nigeria, South Africa, there is a need to pursue reforms to facilitate economic diversification, and address remaining economic imbalances, many of these cases, private investments remain weak, and a strong focus is needed to address the constraints that are holding such investments back.
One development that we are very hopeful will facilitate growth, is increased trade integration in the region. We are very encouraged by the progress that has been made towards the African Continental Free Trade Area. Once completed the trade agreement will establish a market of 1.2 billion people, with a combined GDP of $2.5 trillion.
The benefits could be substantial, particularly if countries tackle the non-tariff bottlenecks to trade, including by investing in infrastructure, lowering logistical costs and improving trade facilitation.
What is interesting, we think, is that intraregional exports in Africa are more diversified and have a higher technology content, than Africa's exports to much the rest of the world.
And just to give you a couple of numbers on this, 40 percent of intraregional trade is accounted for by manufactured goods, whereas the region exports to the world 75 percent of such exports tend to be minerals, the likes of crude oil, and other commodities.
Still, one thing to note of course, is that, to ensure the benefits of intraregional integration are shared by all, policymakers should be mindful of the adjustment costs that integration could entail and move swiftly to address those.
In addition to these more medium-term challenges that I've been noting we see, you know, countries of course have been hit by significant shocks. Two such examples I want to highlight. I think the first is the security challenge.
Overall the conflict levels in the region tend to be much lower than in the '90s, and even early 2000s. But countries in the Sahel and Lake Chad Basin are facing considerable security threats, and this region (inaudible) economic outlook, we have done some work looking at the recent trends, and the economic impact that conflicts are having.
This is an issue of great concern, and we are discussing with country authorities how best we can minimize their diversion of resources away from much needed development spending.
Another example of the kind of shocks that policymakers have to contend with of course are weather-related shocks. As you know, Cyclone Idai has a devastating impact in Southeast Africa, leading to the significant loss of life and damage.
We are doing everything we can to support the countries that have been affected. Just to give an example, we have moved very rapidly to support Mozambique through a rapid credit facility. We expect the Executive Board to consider this request as soon as next week, within a month of the hurricane hitting – the cyclone hitting Mozambique.
In Zimbabwe, yesterday we announced a staff-monitored program which will support the government's economic policies, and we are having extensive dialogue with authorities.
And then, Malawi, we are in discussions with authorities to provide additional support through the existing ECF arrangement we have with them.
Before I end, I would like to stress that Sub-Saharan Africa remains a region of tremendous economic potential, and while the global environment is increasingly uncertain, there is much that the countries are doing and can do to sustain very high rates of growth, which we are certain will translate into continued improvements and development outcomes.
Questioner: The Trump administration is one in that the Chinese investment in Africa while is good for infrastructure is also can turn out to become death trap and a (inaudible) takeover. We have cases in Sri Lanka especially because the loans from China end up in the hands of very corrupt government, unaccountable government. How big a threat is the Chinese investment and expansion in Africa.
And, finally, yesterday the new (inaudible) president the alarming statistic about Africa. He said by 2030 nine out of ten extremely poor people in the world will be Africans, which is bit surprising seeing all the poor in Asia and in the U.S. and in Europe. Is the IMF seeing the same thing? And, finally, in terms of statistics, we see the IMF has 3.5% projection this year and the World Bank has a different statistics. How does it work? Why do you have different statistics? How do you get to it?
Mr. Selassie: Okay. A lot of questions there. First, on the debt issue, as I flagged earlier, you know, in some countries I think it’s important to know that, you know, with many policy challenges and particularly for the region as diverse as (inaudible) Africa, it is very important to consider them in a country specific context. So, the reason why debt has gone up defers from country to country and the sources of financing also tend to be country specific.
Our advice, of course, always is to make sure that countries are (inaudible) a healthy balance between on the one hand continue to address their development objectives and second, avoiding the sustainability concerns. In some cases, of course, these kind of debt problems can arise from borrowing from bilateral creditors, but in other cases it comes from borrowing from commercial banks. Somebody asked me a question about (inaudible) not so long ago. Right. The issue with debt sustainability had arisen on the context of borrowing from commercial banks that are hidden in that case.
So, the issue of debt transparency is not unique to China, but also to all borrowing that our countries are undertaking and what’s important, again, is making sure that total borrowing levels remain consistent with debt servicing capacity. Failing to do that, of course, is very problematic.
On the outlook for the region in terms of addressing poverty rates, you know, of course this is exactly why we have this dialogue at these meetings. With policymakers, you know, the brunt of our work is to make sure that the region continues to grow as robustly as possible to create the millions of jobs that our economies need to avoid, you know, wore outcomes particularly given the demographic challenges that the region faces. So, this is exactly what policymakers, institutions like the IMF, World Bank are all engaged in to make sure that we can facilitate help economies grow as robustly as possible to reduce existing poverty and avoid poverty levels deteriorating any further.
Read the full transcript on the IMF website.
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Joint AfDB, AUC, UNECA, Afreximbank expert group meeting on informal cross-border trade (16-17 April, Abidjan)
Informal cross-border trade has remained a dilemma for the African continent. It is a pervasive phenomenon around Africa’s internal borders. Although it accounts for a significant amount of trade on the continent, it also remains a moving target, whose data has continually defied capture in national, regional and continental trade and accounting statistics. Sources indicate that between 20 and 40% of trade is informal. The recent ratification of the African Continental Free Trade Area adds impetus to the need to understand this sector. The Expert Group has been put together to address the challenge of capturing data. A key task of the project, among others, is the design of a data gathering and collation methodology and launch of a pilot study on the active Abidjan-Lagos Highway corridor.
Auto giants battle used car dealers for Africa’s huge market (Reuters)
Four years after forming the Association of African Automotive Manufacturers (AAAM) their efforts are starting to bear fruit. Carmakers that set up local assembly plants could get tax holidays of up to 10 years and duty exemptions in Nigeria, Kenya and Ghana, according to government plans seen by Reuters. Thomas Schaefer, who heads Volkswagen’s Africa business, said there is a potential market in sub-Saharan Africa for 3 to 4 million new cars, up from just 420,000 in 2017. But that will require addressing the well-entrenched interests of second-hand car dealers, smugglers and lowering the price of new cars. “It will largely depend on how successful the African governments are in limiting the amounts of second-hand imports and how price-competitive new vehicles can be with their tariffs,” said Craig Parker, Africa research director at Frost & Sullivan, a U.S.-based market research firm. [The authors: Joe Bavier, Emma Rumney, Duncan Miriri]
Alec Erwin: Africa cooperation pacts key to new-vehicle manufacturing (Engineering News)
The key to manufacturing more new vehicles in South Africa and on the continent lies in restructuring the African market around a cooperation agreement in key assembly economies such as Ghana, Nigeria, Kenya and Ethiopia, says advisory and investment holding company UBU Investment Holdings chairperson Alec Erwin. [Related: Supportive policy held up as key to unlocking Africa’s auto ambitions]
Namibia State of Logistics 2018 report (pdf, Walvis Bay Group)
The Port of Walvis Bay, the leading commercial port in Namibia handled 93.1% of total cargo (gross tonnage) transiting to and from the neighbouring countries in 2017. Of the eight or so countries that use the Port of Walvis Bay for imports and exports, Zambia, Angola, DRC, Botswana and Zimbabwe are the main markets for transit cargo by volume. Zambia is the dominant market for transit cargo among these countries, which accounted for 51.8% of all inbound transit cargo via the Port of Walvis Bay in 2017, up from 47.9% in 2016. This represents a 50.9% increase in the volume of imports to Zambia. Similarly, Zambian exports comprising mostly copper and wooden products accounted for 85.7% of total outbound transit cargo by volume (metric tons), up from 72.5% in 2016.
Corridor/border performance: The comparative time it takes (in median hours) to complete border handling, customs clearance and inspection procedures for shipment (both import and transit) to cross border points is shown in Figure 9. On average, it takes 4.9 hours to cross the Namibia-Zambia (Katima/Mulilo) border crossing point (BCP) compared to 1.9 hours at Buitepos/Mamuno on the .Namibia-Botswana BCP, and 1.6 hours at Noordoewer/Vioolsdrif BCP on the Namibia-South African border. Further levels of efficiencies associated with border management is shown (Figure 10) in terms of median (hours) crossing time (and Standard Deviation) at BCP along corridors (Walvis Bay-Ndola-Lubumbashi, Trans-Kalahari and Trans-Oranje) covering the last 12 months (Dec 2017-Nov 2018). During the last 12 months, on average, December 2017 and April/May 2018 had relatively longer border crossing times of above 15 hours compared to the other months of the year.
Developing the West African private sector: AfDB EOI
WBG/IMF Spring Meetings: selected updates
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The World Bank’s Africa Human Capital Plan. Hafez Ghanem (World Bank Vice President, Africa): The Plan is conceived as a means to support countries as they facilitate a people-driven development relying on the potential of African people, especially its women and youth. Through this plan, we will channel our resources and energy into helping governments create an enabling environment in which children enter school well-nourished and ready to learn, where students acquire real learning in the classroom, and workers participate in the job market primed for productivity. Africa’s human capital indicators are undeniably in a dire state, yet we have seen countries turn things around. Twenty-three African countries, covering over 60% of the region’s population, have joined a coalition of nearly 60 countries to join the Human Capital Project, committing to a set of accelerated investments in their human capital.
Extract (pdf): The World Bank Africa region is going to increase the portion of its investments in human capital that incorporate technological solutions and other innovations, starting with 20 projects in FY20 and reaching 40% of all its human capital operations by 2023. By putting people at their center and by prioritizing work-enhancing technologies, the projects will follow certain guiding principles and innovations to mitigate the potentially negative impact of some technologies. Examples of technologies that work to improve human capital include: [Deep Dives (pdf); WB invites Zambia to become a pilot location for the Human Capital Project]
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Intergovernmental Group of Twenty Four on International Monetary Affairs and Development. We call for a collective response to resolve ongoing trade tensions within a rules‑based multilateral trading system. International trade has delivered enormous benefits globally and has been an important engine of growth among G‑24 countries and EMDEs more generally. We stand ready to work with other members of the global community to foster a modern, open, rules‑based, non‑discriminatory and equitable multilateral trading system.
We call on the IMF to intensify its ongoing integrated surveillance efforts to assess the spillovers of domestic policies of systemically important countries on EMDEs, and stress the importance of responsible policies in this area. Within the Institutional View, we reiterate our call for a balanced and context‑based assessment by the IMF of the appropriateness of the mix of measures used by countries in dealing with capital volatility to ensure financial stability. In this regard, we welcome the Fund’s work on an Integrated Policy Framework.
We believe that intensifying the fight against corruption and increasing transparency are essential for achieving a more efficient allocation of resources. We also call for strong international cooperation to combat illicit financial flows and develop an international platform, along the lines of the Stolen Asset Recovery (StAR) initiative of the WBG and the UN, to recover and return stolen assets and repatriate and prosecute fugitive offenders. Accelerating the Fund’s ongoing work on the measurement of illicit financial flows will be helpful in this regard. Further, we welcome the harmonization of anti‑money laundering and counter‑terrorism financing rules and regulations across jurisdictions. In addition, strengthening the rule of law and fostering fair competition are also important to the fight against corruption.
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David Malpass (WBG President): transcript of opening press conference. To your third point, as far as China, and as far as the buildup of debt, let me take a second - a few moments on that. Debt is something that helps economies grow, but if it’s not done in a transparent way, with good outcome from the build-up of debt, then you end up having it be a drag on economies. And history is full of those situations where too much debt dragged down economies. So what we are trying to do - and the World Bank is a key part of the Debt Transparency Project and the collection of data that has been encouraged by the G20 - and so this is a project that we are working hard on. I’ll be reporting to the G20 on the progress during our meetings coming up this week, and the keys are to have transparent disclosure of the debt as it is being created, and also then have the focus be on good outcomes in terms of quality projects. This is critical for poor countries as they try to move forward to have the projects associated with good quality programs and full disclosure of the debt. So I think this is an area that bilateral donors can do much better on and it is something that the world can press on and say, look, this is the way to help countries get ahead in terms of their growth. So it is something the World Bank will be working hard on and it is very important to those countries, to many countries. I’ve got a statistic here: 17 African countries are already at high risk of debt distress, and that number is just growing as the new contracts come in and aren’t sufficiently transparent.
I’m looking forward to a constructive relationship with China. It is one that is evolving and, so you mentioned, the history going back many decades. China has changed greatly over these decades. In economic terms, very much stronger. And so I think that we can think of it as, it’s role evolving from one where it was a major borrower from the World Bank, and I hope benefitted from the loans from the World Bank, to one where now it will be much smaller borrower. In the capital increase that was agreed to by shareholders a year ago, it was agreed that the borrowing by China would fall below a billion dollars by the end of the country program that the World Bank does with China. And so that’s it has already been underway for some time now, the borrowing by China has been going down. That is part of the evolution of the relationship. At the same time, China is becoming more of a donor to the World Bank, and a shareholder in the World Bank, and so we value that constructive relationship.
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Christine Lagarde’s opening press conference: transcript. I would suggest not a single policy but multiple policies, because it will have to be country‑specific, and there is no one‑size‑fits‑all. But we certainly would recommend two key principles. One is, do no harm. Second, do the right thing. So do no harm. The key is to avoid the wrong policies, and this is especially the case for trade. We know that, for many decades, trade integration has helped boost productivity, innovation, growth, employment, and has reduced the cost of living, particularly for the low‑income people. At the same time, we know that the engine of growth needs to be fixed. We need to better address dislocations caused by trade and by technological innovation, however intertwined they are. And we need to do more for those who are left behind. We need to better address unfair trade practices and distortions in the system, including through a WTO system reform. And we need to avoid self‑inflicted wounds, including tariffs and other barriers. So that was for the do no harm. Do the right thing. I would mention a few: [Related: Joint Responsibility Shared Rewards - the managing director’s Global Policy Agenda]
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AfDB’s Akinwumi Adesina makes strong case for increased US investment in Africa. “It is time to turn around the declining investments of the U.S. in Africa. As the world’s private sector leader, the United States has a unique role to play in increasing investments in Africa and expanding opportunities for the US private sector”.
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Cyclone Idai: World Bank statement on high-level meeting on humanitarian and recovery efforts. Discussions underscored the need for a regional approach to longer term reconstruction and development, given the likely ripple effects of the cyclone on the entire region. The cyclone damaged the infrastructure corridor connecting the Mozambican port of Beira with Malawi, Zambia and Zimbabwe, disrupting regional trade and supplies of fuel, wheat and other goods. While the damage and recovery needs assessment is ongoing, early estimates point to over $2bn in recovery costs for the infrastructure and livelihood impacts of Cyclone Idai on Malawi, Mozambique and Zimbabwe. To date, about three million people have been affected, with near total damage in the worst affected areas. [IOM update]
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Beyond uncertainty: leveraging trade to reduce poverty (a joint WTO-IMF-World Bank event).
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Devex: World Bank reforms found ineffective, bank shuffles senior staff
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IEG report: Knowledge flow and collaboration under the World Bank’s new operating model (pdf)
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Applications for UNCTAD’s online course on Trade and Gender for COMESA (pdf) close on 28 April. The course will be held from 20 May to 14 July.
Today, in Cairo: The road to Niamey – taking the agenda of regional integration forward. “The meeting will deliberate on matters of regional integration that will enrich the process of developing a proposal on an effective division of labour among the AU, the RECs, the Member States, and other continental institutions.”
Ethiopia, yesterday, deposited its instruments of ratification for the AfCFTA. Comment from the AU: “Deposits of ratification are expected from Sierra Leone, Zimbabwe and The Gambia whose Parliaments have approved ratification of the AfCFTA Agreement. The Agreement will enter into force one month after receipt of the 22nd instrument of ratification. Currently, the ratification processes are at advanced stages. It is hence expected that more AU member states will deposit instruments of ratification by the time the Assembly convenes in July this year in Niamey, Niger.”
tralac’s AfCFTA Ratification Barometer: updated infographic
AfDB approves $4.8m grant to accelerate African free trade
On 1 April, the Board of the AfDB approved an institutional support grant of $4.8m to the AU to accelerate the momentum of the AfCFTA. The Bank’s grant is targeted at laying the institutional foundations for the AfCFTA implementation secretariat and the roll out of the implementation programmes. “The momentum is now in full swing”, said Andoh Mensah, Manager, Trade and Investment Climate Division at the AfDB. “It is now crucial to establish a robust, efficient, purpose-driven secretariat, capable of addressing improved stakeholder engagement, inclusiveness and ownership in the AfCFTA implementation”.
Key takeaways from Day One of the ICC Banking Commission’s annual meeting in Beijing (ICC)
In addition, the session discussed the results of a new global survey on financial inclusion, released by BNY Mellon with support from ICC. The survey, Overcoming the trade finance gap: root causes and remedies (pdf), examines the causes of the global trade gap and asks participants for strategies to address it. The results reveal that trade finance rejection rates are continuing to increase across institutions and that regulatory revision and technology are considered the most effective ways of narrowing the trade gap. Finally, the panel turned its attention to regional perspectives from Africa. Panellists provided an overview of emerging solutions for improving access to finance in these regions, including the introduction of an intra-African payment system to encourage local bank intermediation for trade finance. [ODI: Blended finance in the poorest countries – the need for a better approach, pdf]
Zimbabwe: IMF staff completes mission for a staff-monitored programme
IMF staff and the Zimbabwean authorities have reached agreement on macroeconomic policies and structural reforms that can underpin a Staff Monitored Programme. The SMP, which will be monitored on a quarterly basis, aims to implement a coherent set of policies that can facilitate a return to macroeconomic stability. Successful implementation will assist in building a track record and facilitate Zimbabwe’s reengagement with the international community. The policy agenda to be monitored under the SMP is anchored on the authorities’ Transitional Stabilization Program and emphasizes fiscal consolidation, the elimination of central bank financing of the fiscal deficit, and adoption of reforms that allow market forces to drive the effective functioning of foreign exchange and other financial markets. In addition, the agreed policies—both macroeconomic and structural—can be expected to remove critical distortions that have held back private sector growth and to improve governance. The SMP also includes important safeguards to protect the country’s most vulnerable people. [Reuters: Zimbabwe seeks $613m aid from donors after drought, cyclone]
Shedding light on Mozambique’s informal economy: a different methodology and new data (World Bank)
Following this methodology, our estimates reveal the significance of the informal sector to the economy of Mozambique. In each of the three cities, the number of informal firms far outweighs the number of formal firms. In the capital city of Maputo, there are four times as many informal as there are formal firms. In Beira and Nampula, the ratios of informal to formal are much higher: in Beira, there are 17 times the number of informal firms as there are formal firms, and a dramatic 36 times the number in Nampula. Our estimates also underscore the importance of the informal sector as a source of employment. In Maputo City there is approximately one informal business for every 10 working age people. In Beira and Nampula, the informal sector is an even greater source of potential employment, with one informal business for every 5 and 6 working-age individuals respectively. We have posted similar data for the city of Harare, Zimbabwe, and are in the final stages of finishing data collection in two cities in Lao PDR. We are preparing to implement the same methodology in Somalia and Zambia. It is our hope that researchers and policy makers will make use of this data.
Zambia: Digital Financial Services State of the Industry Report (pdf, Bank of Zambia)
The 2019 Report demonstrates some of the true strengths of the emerging Zambian Digital Economy. This is exemplified by the tremendous growth in the number of agents and active DFS accounts or wallets that have been activated. As you will be told by the presenters, the number of agents has increased by 104% from about 23,000 in 2017, to 47,000 in 2018. The report also shows that, as at December 2018, there were 4.3 million active DFS customer accounts, representing 89% growth in active DFS accounts compared to 2.3 million in 2017. The report further indicates an increase in the number of employees that are dedicated to DFS activities with most of them focusing on the distribution channels. [Download: executive summary presentation]
Promoting SME competitiveness in Zambia (ITC)
In this country profile, ITC uses data from its SME Competitiveness Surveys to assess the international competitiveness of Zambian enterprises. Under the aegis of the Ministry of Commerce Trade and Industry, the International Trade Centre, the Zambia Development Agency and the Zambian Central Statistical Office conducted 242 in-depth, face-to-face enterprise surveys in 2018 using the ITC SME Competitiveness Survey methodology. This report focuses on firms in three sectors: agri-food, manufacturing and business support services – all considered as priority sectors in Zambia’s Vision 2030, and key in building a strong export base. Manufacturing enterprises dominated the survey, with 30.6% of the sample engaging in the sector. About 23% and 15% were active in the agri-food and business support service sectors, respectively. Profiled findings (pdf). Agri-food sector: 57% of agri-food firms rated good logistics positively. As a result, an average of 74% of the goods dispatched to clients arrived on time. Most surveyed agri-food firms (55%) held an internationally recognized certificate, and 65% appreciated the quality of the certification infrastructure. While only 31% of surveyed firms in the sector exported their product directly (16%) or indirectly (15%), 64% of the firms expressed their interest in starting to export. Manufacturing sector: Being in a value chain helped firms reduce their dependence on one single supplier: 31% of the enterprises that were part of a value chain did not rely on a single supplier, against 16% for firms outside value chains. [Standard Bank: Zambia’s foreign reserves could fall to $1bn by June]
West Africa Competitiveness Programme: update on the joint ITC/ECOWAS project, funded by the EU’s 11th European Development Fund
Launched, during the Spring Meetings: The Country Diagnostic Platform – a joint database of published country diagnostics by EBRD, EIB, IFC, WB, DFID and Sida
From currency depreciation to trade reform: how to take Egyptian exports to new levels? (World Bank)
Egypt is yet to meet its exports potential, which has been historically hampered by several domestic market distortions and multiple barriers, resulting in weak export performance and modest regional and global integration. Although the liberalization of the exchange rate in November 2016 was a necessary step to correct the exchange rate misalignment and ease the ensuing shortages in foreign currency, it has not been sufficient to guarantee a notable improvement in export performance. This paper analyzes Egypt’s exports along three dimensions that are key for export performance and future growth: (i) composition and relatedness of exported products; (ii) geographic and product concentration; and (iii) relatedness to globally traded products.
Rwanda joins Djibouti to develop ‘Djibouti land in Rwanda’ (ADV)
Rwandan officials will this week join their Djiboutian counterparts on the drawing table to develop a 10-hectare land in Rwanda that belongs to Djibouti, ADV learns here Tuesday. The exercise will include developing several project proposals that would be examined and potentially endorsed by experts of the two countries with the view to fully develop the land, sources told ADV. “Together, we are going to develop infrastructure, advance factory units on the 10 hectares. In the next few months or years, we should see something on the land,” Emmanuel Hategeka, RDB’s Chief Operating Officer told the press during the signing. Aboubaker Omar Hadi, the Chairman of Djibouti Ports and Free Zones Authority indicated that this was part of the bigger plan for the two countries to work together. “We want to take Rwanda to the ocean and we want Rwanda to take us to the heart of Africa,” the Chairman said, emphasising the importance of the partnership.
Nigeria plans special economic zones to double manufacturing by 2025 (Reuters)
Nigeria announced on Wednesday a target to double its manufacturing output to 20% of GDP within six years and will set up production hubs across the country in partnership with regional aid banks. Nigeria is Africa’s biggest economy but it lacks a strong manufacturing base, which contributes less than 10% to its total GDP. The country has maintained a strong currency to ensure it can keep imports pouring in, with a growing proportion coming from China. “Project MINE’s (Made in Nigeria for Export) strategic objectives are to increase (the) manufacturing sector’s contribution to GDP to 20% and generate over $30bn annually by 2025,” the ministry of industry, trade and investment said in a statement. The government has set up Nigeria SEZ Investment Company, which will finance industrial parks in special economic zones in the commercial capital of Lagos, southeastern state of Abia and northern state of Katsina. The government is currently raising capital of $250m for Nigeria SEZ Investment Company. It plans to double its equity to $500m over four years, the ministry said.
UNIDO, African Union to share Quality Infrastructure best practices (UNIDO)
UNIDO, in cooperation with the AUC, convened the first ever International Quality Infrastructure Forum (4 April, Brussels). The forum focused on the contribution of QI to the achievement of the SDGs and to the implementation of the African Continental Free Trade Agreement. The Forum brought together around 140 participants from across Europe and Africa, including representatives of international quality infrastructure governance bodies and practitioners as well as stakeholders representing international, national and regional authorities, industry, civil society and academia. [Rwanda: Standards body to introduce anti-counterfeit innovation]
EU, China sign a Mandate of Trade Heaven (Asia Times)
Sparks did fly in Brussels, but in the end the European Union and China managed to come up with an important joint statement at their summit this week, signed by Chinese Premier Li Keqiang, European Commission President Jean-Claude Juncker and head of the European Council, Donald Tusk. In theory, there’s agreement on three quite sensitive fronts: a complex, wide-ranging EU-China investment deal to be signed “by the end of next year, or earlier”, according to Li; Beijing to increasingly commit to erasing industrial subsidies and the obligation of technological transfers; and a substantial opening-up of the Chinese market to EU companies. [China set to increase imports from Belgium]
Today’s Quick Links: Landry Signé: Africa’s emerging economies to take the lead in consumer market growth Mauritius lifts ban on Kenyan farm produce Zimbabwe to implement ‘use it or lose it’ mining policy Francois Baird: Brazilian chicken producers are running scared State Bank of Mauritius (India) envisions 16 new branches by 2022 EU initiates WTO dispute complaint against Indian tech tariffs Investment policy related to national security: notification to the OECD by Hungary |
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Concluding today, in Windhoek: UNCTAD regional capacity building training workshop on the use of statistics and the Productive Capacities Index to inform evidence-based policy-making in LDCs and other structurally weak and vulnerable economies
An UNECA/AUC delegation is undertaking a AfCFTA National Strategy Scoping Mission for Zambia, consulting civil society, academia and women’s groups
Swaziland and the WTO’s Trade Facilitation Agreement: National Trade Facilitation Committee Empowerment Programme launched
For noting: UNCTAD’s online course on Trade and Gender, starting 15 April. Download the course prospectus here (pdf).
Central Africa Regional Integration Strategy Paper 2019-2025
For its implementation, the selected operational portfolio will cover Cameroon, Chad, Congo, Equatorial Guinea, Gabon, DRC, and Central African Republic, which fall within the operational area of the Central Africa Regional Development and Business Delivery Office. The strategy also seeks to support the integration efforts of the member countries of the Economic Community of Central African States, recognised by the AU as the REC in Central Africa. ECCAS comprises the following 11 countries: Angola, Burundi, Cameroon, Chad, CAR, Congo, Equatorial Guinea, DRC, Gabon, Rwanda, Sao Tome and Principe, and Rwanda. However, from an operational viewpoint, Burundi and Rwanda are covered by the Regional Office for East Africa and are included in RISP 2018-2023 for the region already approved by the Boards, while Angola and São Tomé and Principe are covered by the Regional Office for Southern Africa and included in RISP 2019-2024 for the region. Central Africa is marked by the juxtaposition of several sub-regional institutions with similar objectives and mixed performance. The institutions seek to create an integrated sub-regional space by eliminating problems inherent in fragmented national markets so as to ensure optimal conditions for a larger market. The main sub-regional institutions are CEMAC, ECCAS, CEPGL and LCBC. It should be noted that the six CEMAC countries also belong to ECCAS, with Burundi and Rwanda active in the EAC, while Angola and DRC are also SADC members. Furthermore, Burundi, Rwanda and DRC are COMESA members. The implementation of the strategy will require investments amounting to UA 3.185 billion, corresponding to 30 regional operations over a seven-year period (2019-2025). About 88% of the planned funding would be devoted to strengthening regional infrastructure (energy, transport and ICT), compared to 12% for support to the development of intra-regional trade and build institutional capacity in RECs. [Download: pdf Central Africa Regional Integration Strategy Paper 2019-2025 (9.47 MB) ]
Extracts from Section III: Regional integration agenda: status, challenges, opportunities and lessons learned from experience. Central African (ECCAS) intra-regional trade accounts for barely 2% of the region’s total trade. This situation is due to several factors, including the low production of tradable goods, an embryonic industrial fabric, shortage of infrastructure, numerous tariff and non-tariff barriers, the reluctance of countries to implement reforms for the free movement of goods and persons, etc. There are five different tariff profiles in ECCAS zone: the common external tariff of CEMAC, the East African Community (Burundi and Rwanda), Angola, DRC and Sao Tome and Principe. Through this strategy, the Bank is seeking to triple intra-regional trade in Central Africa (within ECCAS in general), from the current 2% to 6% by 2025.
Tanzania trade and investment policy updates:
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Traders can now export tea to Mombasa via Dar port. Tea traders can now export the product to Mombasa auctions via the port of Dar es Salaam, thanks to an investor’s investment in a state of the art warehouse in Tanzania’s commercial capital. DL Group has set up a warehouse and termed it: Rift Valley Tea Solution Ltd Dar es Salaam, in an endeavour to boost Tanzania’s tea production and exports, the firm’s executive chairman, Dr David Langat, told journalists at the weekend. The Dar es Salaam warehouse, he said, has been certified as a member of the East African Tea Trade Association which runs the Mombasa Tea Auction. He said through the certification, Tanzania tea producers will no longer be required to deliver and warehouse tea in Mombasa so as to sell through the Mombasa auction, but can send samples, catalogue and sale directly from Dar es Salaam and export the produce through Dar es Salaam port, which will reduce the selling and distribution cost of the producers by more than 50%. This means that tea from Burundi, Rwanda, Malawi and Tanzania is warehoused in Dar es Salaam for auctioning in Mombasa. “Lack of an EATTA certified warehouse of this nature gravely undermined efforts toward regional tea cultivation, processing and selling,” Dr Langat said. The DL Group was working very closely with the governments of Tanzania, Malawi, Mozambique, Burundi, Rwanda and Zambia in the endeavour to raise tea production.
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JPM orders an end to bureaucracy. President John Magufuli opened a tea processing company, Unilever Tea Tanzania Limited, in Njombe yesterday and called on government agencies to woo more investors. The President, who is on a tour of southern regions, said many investors were shunning Tanzania and diverting their investments to neighbouring countries because of red tape and unfriendly relations with some government agencies. “We need to change,” said President Magufuli. “Things are not going as they should. There are people who are entrusted with power, but they end up abusing it”. He admitted that there were problems in the country’s tax system because some of the investors were increasingly becoming reluctant to pay taxes.
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Government to meet Chinese investors over business environment. The government is set to meet Chinese investors next week, 17 April, to discuss the challenges that they face in the country. Authorities admitted in Parliament that they were aware of various challenges that investors have been encountering and that it has plans to meet with Chinese investors.
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Investment policy set for review. The government is looking for experts who will review the investment policy, amend the Tanzania Investment Act and reduce bureaucracy in issuance of work and residence permits. The latest move is meant to improve the business environment in the country, a move that may help attract more investors. Responding to some issues raised by a section of lawmakers during a four-day debate of the 2019/20 budget proposal for the Prime Minister’s Office, the minister of State in the Prime Minister’s Office responsible for Investments, Ms Angela Kairuki, said the plan will come up a new investment policy, which would be more friendly for investors. [Government plans to simplify work, residence permit processes]
Zambia-DRC: Kasumbalesa long queues not impacting revenue collection – ZRA
Zambia Revenue Authority corporate communications manager Topsy Sikalinda said: “It is important for the public to know that all trucks currently on the Zambian side in Kasumbalesa have already been cleared by the Zambia Revenue Authority. They are waiting for entry formalities into the DRC and the Zambian government has since engaged the Congolese authorities to deal with the matter.” He said the Zambian authorities have extended border operating hours from 18:00hrs to 20:00hrs. Mr Sikalinda said the Authority has further suspended late clearance fees to encourage transporters to clear goods out of Zambia even after normal working hours. “Starting today, 9 April, the Zambian and Congolese Authorities have agreed to start clearing at least 600 to 700 trucks every day into Congo from the current average of 420 per day. This is expected to help clear the traffic in the next 10 days or so. The congestion has been caused by various factors that include limited parking space, as only one lane is available for exiting into DR Congo due to construction works and the security situation, as most drivers fear for their safety.” [President Lungu to report trucks congestion at DRC’s Kasumbalesa border to SADC]
No-deal Brexit: The trade winners and losers (UNCTAD)
A no-deal Brexit could damage smaller economies trading with the UK, hit EU exports hard, but bring substantial gains for China. New UNCTAD research shows the UK and its future trading partners need to expedite bilateral deals if they are to avoid the costs of exiting the EU without a deal. These costs are considerable, the research found, with the EU standing to lose out on $34.5bn in exports to the UK. The second-biggest loser in the event of the UK’s no-deal departure from the EU would be Turkey, taking a $2.4bn export hit. China, meanwhile, could gain an additional $10.2bn in exports to the UK, with the second-ranked United States standing to add $5.3bn through its exports to the UK.
The biggest beneficiaries of a no-deal Brexit, meanwhile, would be countries which current face higher tariffs. In addition to China and the US, Japan could expect to gain $4.9bn. A no-deal Brexit is also expected to result in increased imports from Thailand, South Africa, India, Brazil, the Russian Federation, Viet Nam and New Zealand, among others. “The UK’s intention to lower Most Favored Nations tariffs would increase relative competitiveness of major exporting countries, such as China or the United States, thereby eroding market-share away from less competitive countries,” added Ms. Coke-Hamilton. [Download UNCTAD’s study: Brexit – implication for Developing Countries]
The Brexiteers need to realise that the Commonwealth is not coming to save them
“The Commonwealth is extremely vague at this time. There’s no set of proposals that anyone can agree with,” is how the body was described by Rob Davies, South Africa’s minister of trade and industry. “The Commonwealth has not played a role in international trade for many years,” he added. Though Davies admits there have been moves made by the UK to begin discussions, he dismisses the idea that the Commonwealth could suddenly become a serious trading entity. Added to that, in the Commonwealth, signing a trade deal with the UK can actually be far from a priority. “Our fundamental focus in on the regional integration processes on the African continent,” says Davies, when asked about South African trade priorities. “So our priority, without any doubt, is on the processes leading up to the creation of the African continental free trade area. That’s our fundamental focus, we look at everything in that context.” [The author: Joe Walsh)
Innocent Bystanders: Why the US-China trade war hurts African economies (CSIS)
It is not inevitable that the U.S.-China trade war will have harmful consequences for sub-Saharan Africa and U.S. objectives in the region. The extent to which negative economic forecasts will materialize is contingent on Chinese and U.S. policy decisions and the ability for global and domestic markets to counterbalance the trade war’s negative effects. There are several short and long-term steps available to Washington to strengthen its U.S.-Africa strategy and resolve the contradictions surfacing between its global and regional approaches: Focus on US strengths, Treat China tariffs as global tariffs, Support African trade initiatives, Protect US-African trade deals. [The authors: Judd Devermont, Catherine Chiang] [China in Africa: The Zambia experience; China’s New Economic Model: opportunities for Africa]
Today’s Quick Links: The IMF’s World Economic Outlook, April 2019: Growth slowdown, precarious recovery Nigeria: Exporters decry non-execution of N29bn export grant Shell plans $15bn investments in Nigeria’s oil and gas development SA’s Rob Davies: SA needs to encourage more local patents SA increasing efforts to invest in intellectual property and technology commercialisation: dti’s DDG Zikode Nissan to produce award-winning Navara pickup in South Africa Jerome Bossuet: Exploring youth’s role and engagement in African rural economies IMF statements: IMF Staff Review Mission to Tunisia; IMF Managing Director on Egypt The WTO’s first ruling on national security: what does it mean for the United States? |
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tralac’s Daily News Selection
Featured tweet, @EgyptAbaba: Few minutes ago, I officially deposited Egypt AfCFTA ratification instrument. Egypt is 18th depositor of the free trade area and four more to go to entry into force. A dream becoming a reality. AfCFTA is priority of Egypt AU Chair agenda.
tralac’s AfCFTA Ratification barometer: update
African trade and infrastructure events to diarise:
EABC-UNECA sensitization workshop on the African Continental Free Trade Area (25 April, Arusha)
PIDA Data collection and validation for SADC, COMESA and specialized institutions (29-30 April, Cape Town)
Dr Francis Mangeni: The African Continental Free Trade Area – more hills to climb (Monitor)
One systemic lesson Africa has learnt is that clear political leadership and proactive engagement of peers at the highest level can dramatically achieve results. The Pan-Africanist energy and activism at the highest political level that has achieved the ratification of AFTA in just over a year, should now be equally deployed to ensure due completion of all key outstanding matters, so that AFTA is operationalised. It is time for Africa to get cracking yet again. [The author is Director of Trade and Customs at the Comesa Secretariat; Albert Zeufack (Chief Economist, Africa World Bank): AfCFTA’s execution will bring down trade volatility]
Africa’s Pulse (World Bank)
The growth story in Sub-Saharan Africa in the past few years has been one of faltering recovery from the worst economic crisis of the past two decades. This remains the case according to the April 2019, 19th edition of Africa’s Pulse, which estimates GDP growth in 2018 at a lower-than-expected 2.3%, with a forecast to 2.8% in 2019. “Three years past the crisis period, we should be seeing a more widespread pickup in growth; instead we have downgraded our estimates again for 2018,” said Gerard Kambou, World Bank Senior Economist for Africa. “Leaders in Sub-Saharan Africa have the opportunity to build stronger domestic policies to withstand global volatility - and now is the time to act.” The report notes that the three largest African economies - Nigeria, Angola and South Africa - play a big role in the region’s growth. While Nigeria grew faster in 2018 than in 2017, thanks to a modest pick-up in the non-oil economy, growth remained below 2%. Angola continued its recession, with growth falling sharply as oil production stayed weak. South Africa came out of recession in the third quarter of 2018, but growth was subdued mostly due to policy uncertainty weakening investor confidence. The report also outlines issues which continue to hold back growth across the region - debt and fragility. [ pdf Africa’s Pulse, April 2019 (2.86 MB) ]
Kenya Economic Update: Unbundling the Slack in Private Investment (World Bank)
The rebound in exports made a modest contribution to the recovery in GDP growth. A more favorable external environment boosted export revenue from tea, horticulture, and tourism. The special Focus Topic shows that agriculture is responsible for most of the country’s exports, accounting for up to 65% of Kenya’s merchandise exports in 2017. Meanwhile, import growth has moderated on account of slowing private investment but also due to a base effect, as food imports have slowed significantly following a bumper harvest of Kenya’s staple food (maize) (Figure 12). On balance, net exports exerted less of a drag on GDP growth in 2018 than in 2017 (Figure 10). In 2019, strong growth in Kenya’s subregional markets is expected to support manufacturing exports, while limited increases in oil prices are expected to reduce the drag from net exports. [ pdf Kenya Economic Update, April 2019 (2.03 MB) ]
The share of value addition compared to agricultural production is relatively low in Kenya. As shown in Figure 42, only 16% of Kenya’s agricultural exports are processed, compared with 57% for imports. Likewise, Kenya exports only $11 of processed agricultural products per capita, compared with $83 in South Africa and $77 in Côte D’Ivoire. This is partly a result of the fact that many of Kenya’s major cash crops either do not require processing (for example, cut flowers) or require only primary processing prior to export (for example, coffee, tea). Of processed exports, only pineapples ($100m per year) and beans ($50m per year) have achieved any significant scale. [Bloomberg: Kenya, World Bank diverge further on 2019 economic outlook; Business Daily: World Bank pushes for e-trade platform]
Kenya: February trade gap widens to Sh192bn as export earnings fall (Business Daily)
The gap between Kenya’s imports and exports widened in the first two months of the year to Sh192 billion from Sh175 billion in the same period last year, official records show. Latest Central Bank of Kenya data indicates export earnings dropped from Sh110.7 billion to Sh104 billion blamed on poor earnings from tea. By comparison, import bills grew slightly by 3.4% to a record Sh296 billion, highlighting growing appetite for foreign goods. This comes as Pakistan ceded its first position as the biggest destination of Kenyan goods to Uganda and Netherlands, which took the first and second spots respectively in the two-month period. [CBK: 2019 FinAccess Household Survey Report]
Nigeria: Dangote Sugar to become global force with backward integration goal (Leadership)
Dangote Sugar Refinery (DSR) Plc is set to become a global force in sugar production by producing 1.5M MT/PA of refined sugar from locally grown sugar cane for the domestic and export markets in 10 years through its backward integration goal. Sugar, a commodity that has received increased attention in recent years, provides an avenue for Nigeria to improve its diversification strategy. According to study, Nigeria’s sugar output barely accounts for 7% of its demand. Grown in states such as Katsina, Taraba, Kano, and Adamawa, the commodity fetches Nigeria a miserly $24.88 million in revenue and the demand gap is approximately 900,000 metric tons. This has resulted in an annual sugar import bill of approximately $100 million, the largest import bill for the commodity in sub-Saharan Africa.
Financial safety nets and bank resolution frameworks in Southern Africa: key issues and challenges (World Bank)
This report provides an assessment of the current state of development of financial safety nets and bank resolution frameworks in eight countries in southern Africa (Botswana, Eswatini, Lesotho, Mozambique, Namibia, South Africa, Zambia, Zimbabwe). It has been prepared to inform ongoing and planned technical assistance projects in the southern Africa region and to provide a basis for engagement with the authorities in each of the countries covered by the study. This summary draws from more detailed material contained in a comprehensive study.
Migration and Development Brief #31: Sub-Saharan Africa (World Bank)
Remittances to Sub-Saharan Africa grew almost 10% to $46bn in 2018, supported by strong economic conditions in high-income economies. Looking at remittances as a share of gross domestic product, Comoros has the largest share, followed by the Gambia, Lesotho, Senegal, Cabo Verde, Liberia, Senegal, Zimbabwe, Togo, Ghana, and Nigeria. The Bank estimates that officially recorded annual remittance flows to low- and middle-income countries reached $529bn in 2018, an increase of 9.6% over the previous record high of $483bn in 2017. Global remittances, which include flows to high-income countries, reached $689bn in 2018, up from $633bn in 2017. Regionally, growth in remittance inflows ranged from almost 7% in East Asia and the Pacific to 12% in South Asia. The overall increase was driven by a stronger economy and employment situation in the United States and a rebound in outward flows from some Gulf Cooperation Council countries and the Russian Federation. [Dilip Ratha blog on the report]
Global trade turmoil: implications for LDCs, Small States and Sub-Saharan Africa (Commonwealth Secretariat)
The analysis highlights that, although the tariff war involving China and the USA draws intense focus, world trade is also going through some structural changes, complicating the situation further. Since the global financial crisis of 2008, LDCs, small states and sub-Saharan Africa have witnessed a lost decade of gains from trade in the sense that each of these country groups’ combined trade hardly expanded. Extracts:
A strong recovery in 2017 led SSA’s exports to rise by $50bn over the previous year to reach $373bn. The comparable increases for LDCs and small states were $25bn and $1bn respectively. But still, these country groups’ total exports in 2017 were just about at the same level as in 2008 (Figure 7). During 2000–08, LDC exports grew nearly five-fold, from $43bn to about $200bn, which is just about the same size as in 2017. For the group of African, Caribbean and Pacific countries, including SSA and small states, their combined exports of goods and services during 2000–08 rose by more than three times, from $146bn to $482bn as against their corresponding exports of $448bn in 2017. From this perspective, the period 2008–2017 can be seen as a lost decade of gains from trade for the world’s poorest, smallest and most vulnerable countries.
Considering international trade performance, 36 Commonwealth LDCs, small states and SSA economies (out of a total of 45; more than 80%) suffered lower export growth during 2013–17 than during the pre-crisis period (2000–08), as Figure 10 shows. For nine countries, export growth was not affected by the global financial crisis. The analysis presented in this paper has also revealed a rather dramatic declining export orientation (i.e. export–GDP ratios) for these groups of countries. [The authors: Mohammad A. Razzaque, Syed Mortuza Ehsan]
The Chinese are here: an analysis of import penetration and firm performance in Sub-Saharan Africa (The IGC)
Our findings show compelling evidence of the positive effects of Chinese imports on productivity. Increased Chinese penetration enables surviving firms to increase their share of skilled workers by almost 4%, thereby allowing firms to shift production from low-skill to high-skill-intense products. The effect is not homogenous across SSA firms. Firms located further away from ports benefit more from Chinese imports, highlighting the importance of transport infrastructure in SSA countries. These findings suggest that Chinese imports have triggered a pro-competitive effect for firms with lower access to ports and have resulted in a catch-up in performance for less productive and less trade-exposed surviving firms. [The authors: Christian Darko, Giovanni Occhiali, Enrico Vanino]
Beitbridge Border Post: Border delays rile transporters (The Herald)
Transporters and customs clearing agents have expressed concern over the delays in the movement of cargo at Beitbridge Border Post, which is SADC’s busiest inland port. They said they had been experiencing delays in the last three weeks after the Zimbabwe Revenue Authority introduced a new way of confirming payments for several levies and duties on commercial cargo. The agents said payments used to reflect under 30 minutes in the Automated System for Customs Data, but it was now taking 24 hours or more. In addition, they said the introduction of duty top-ups emanating from the fluctuating rates between the RTGS and Unites States dollar had worsened the situation.
Namibia commits to Rand peg as economy limps out of slump (Bloomberg)
Namibia is ruling out dropping its currency peg with the South African rand “unless something very drastic happens,” given the close trade links to its larger neighbor and the drive by the world’s biggest producer of marine diamonds to recover from a two-year recession. “We have to consider all the options, but after having considered that we still think that backing one-on-one with the rand is the best option,” Namibian President Hage Geingob said in an interview in Cascais, Portugal, where he attended the Horasis Global Meeting. [Note: The summit briefing prepared by Oxford Analytica can be accessed here, pdf]
Today’s Quick Links: African pharma: a prescription for success SADC absorbs 93% of Zimbabwe’s exports Malawi 2018/19 maize output up 24%, minimal effect from cyclone Idai The DRC and China’s Sicomines: why future deals should be different Sales of Western Sahara “conflict minerals” rise: but trade is getting harder for Morocco to maintain Second ECOWAS Best Practices Forum in Health opens in Accra An overview of the 2nd Ethiopia-Brazil Trade and Investment Forum (28 March, Sao Paulo) Ghana signs $180m agreement with Exim Bank of India Ashlin Perumall: Blockchain and cryptocurrency regulation in Africa Development bank climate funds seek new dollars, as competition heats up To meet development goals, FAO ‘cannot only focus on tackling hunger anymore’ |
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Africa’s Pulse: Growth in Sub-Saharan Africa remains below three percent three years after crisis
Digital revolution can unlock inclusive growth and job creation across Africa
Growth in Sub-Saharan Africa has been downgraded to 2.3 percent for 2018, down from 2.5 percent in 2017, according to the April 2019 issue of Africa’s Pulse, the World Bank’s bi-annual analysis of the state of African economies released on Monday.
Economic growth remains below population growth for the fourth consecutive year, and although regional growth is expected to rebound to 2.8 percent in 2019, it will have remained below three percent since 2015. This issue of Africa’s Pulse also looks at how fragility is holding back sub-Saharan Africa, and how the digital economy can help the continent move forward.
“The digital transformation can increase growth by nearly two percentage points per year and reduce poverty by nearly one percentage point per year in sub-Saharan Africa alone. This is a game-changer for Africa,” said Albert Zeufack, World Bank Chief Economist for Africa.
The slower-than-expected overall growth reflects ongoing global uncertainty, but increasingly comes from domestic macroeconomic instability including poorly managed debt, inflation, and deficits; political and regulatory uncertainty; and fragility that are having visible negative impacts on some African economies. It also belies stronger performance in several smaller economies that continue to grow steadily.
In Nigeria, growth reached 1.9 percent in 2018, up from 0.8 percent in 2017, reflecting a modest pick-up in the non-oil economy. South Africa came out of recession in the third quarter of 2018, but growth was subdued at 0.8 percent over the year, as policy uncertainty held back investment. Angola, the region’s third largest economy, remained in recession, with growth falling sharply as oil production stayed weak.
Growth picked up in some resource-intensive-countries like the Democratic Republic of Congo and Niger, as stronger mining production and commodity prices boosted activity alongside a rebound in agricultural production and public investment in infrastructure. In others, like Liberia and Zambia, growth was subdued, as high inflation and elevated debt levels continued to weigh on investor sentiment.
In the Central African Economic and Monetary Community, a fragile recovery continued as reform efforts to reduce fiscal and external imbalances slowed in some countries. Non-resource-intensive economies such as Kenya, Rwanda, Uganda, and several in the West African Economic and Monetary Union, including Benin and Côte d’Ivoire recorded solid economic growth in 2018.
Africa’s Pulse also found that fragility in a handful of countries is costing sub-Saharan Africa over half a percentage point of growth per year. This adds up to 2.6 percentage points over 5 years.
“The drivers of fragility have evolved over time, and so too must the solutions,”said Cesar Calderon, Lead Economist and Lead author of the report. “Countries have a real opportunity to move from fragility to opportunity by cooperating across borders to tackle instability, violence, and climate change.”
Taking the Pulse of Africa’s Economy
The growth story in Sub-Saharan Africa in the past few years has been one of faltering recovery from the worst economic crisis of the past two decades. “Three years past the crisis period, we should be seeing a more widespread pickup in growth; instead we have downgraded our estimates again for 2018,” said Gerard Kambou, World Bank Senior Economist for Africa. “Leaders in Sub-Saharan Africa have the opportunity to build stronger domestic policies to withstand global volatility – and now is the time to act.”
The report notes that the three largest African economies – Nigeria, Angola and South Africa – play a big role in the region’s growth. While Nigeria grew faster in 2018 than in 2017, thanks to a modest pick-up in the non-oil economy, growth remained below 2%. Angola continued its recession, with growth falling sharply as oil production stayed weak. South Africa came out of recession in the third quarter of 2018, but growth was subdued mostly due to policy uncertainty weakening investor confidence.
Growth performance was mixed in 2018 across the rest of the continent. Growth in resource-intensive economies was buoyed by stronger commodity prices and higher mining production, according to the Pulse, but also benefited from higher agricultural production and more public investment in the necessary infrastructure to connect people and goods to markets. Reform efforts in the Central African Economic and Monetary Community are beginning to bear fruit, although there are signs that reforms are slowing down in a few places. And non-resource-intensive economies such as Kenya, Rwanda, Uganda, and several in the West African Economic and Monetary Union, including Benin and Côte d’Ivoire recorded solid economic growth in 2018.
The report also outlines issues which continue to hold back growth across the region – debt and fragility. It is not just the growing amount of debt, but also the type of debt that countries are taking on that is leading to widespread vulnerabilities. External debt is shifting from traditional, concessional, publicly-guaranteed sources to more private, market-based, and expensive sources of finance, putting countries at risk. By the end of 2018, nearly half of the countries in Sub-Saharan Africa covered under the Low-Income Country Debt Sustainability Framework were at high risk of debt distress or in debt distress, more than double the number in 2013.
Low growth in just a handful of fragile countries costs the continent more than half a percentage point of growth per year, the report finds. That is 2.6 percentage points over five years. The report recommends countries focus on building state capacity and strong institutions that secure peace and stability, as well as deliver better services to their people to rebuild the social and economic foundation needed for a successful future.
“As the nature and the causes of fragility evolve, the approach to overcome it becomes more complex,” said Calderon. “It increasingly requires collective solutions. Regional and sub-regional institutions are needed to address peace and security challenges as well as economic shocks that spill over national borders.”
The report also highlights the opportunities on the horizon for Sub-Saharan Africa, including the digital revolution. The continent is at an important inflection point of demand for and support for the digital transformation, and the African Union recently endorsed the aspiration that every individual, business, and government across the African continent will be connected to the internet and can reap the benefits. This can pay huge dividends in terms of inclusive growth, innovation, job creation, service delivery, and poverty reduction in Africa.
Across the African continent, including sub-Saharan and North Africa, the digital transformation could increase growth per capita by 1.5 percentage points per year and reduce the poverty headcount by .7 percentage points per year, according to the report. In Sub-Saharan Africa alone, the digital revolution can increase growth by nearly two percentage points per year and reduce poverty by nearly one percentage point per year.
When paired with stronger investments in human capital, impacts across the African continent can be more than doubled. Impacts are greater if expansion of the digital economy is accompanied by regulations that create a vibrant business climate, skills that allow workers to access the jobs of the future, and accountable institutions that use the internet to empower citizens.
Africa’s Pulse is a biannual analysis of the near-term macroeconomic outlook for the region, published around the World Bank/IMF Spring and Annual meetings each April and October. Each issue also includes a special focus on a particular development challenge that is shaping Africa’s economic future. It is produced by the Office of the Chief Economist for the Africa Region of the World Bank.
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Kenya Economic Update: Transforming agricultural productivity to achieve food security for all
Kenya’s economic outlook remains stable amid threats of drought in 2019
Kenya’s real gross domestic product is projected to grow by 5.7% in 2019, a slight decrease from the estimated 5.8% growth experienced in 2018, according to the new World Bank Kenya Economic Update. While the medium-term growth outlook is stable, the report notes that recent threats of drought and continued subdued private sector investment could drag down growth in the near-term. The growth forecast for 2020 stands at 5.9%.
Growth in 2018 was driven by favorable harvests, a resilient services sector, positive investor confidence and a stable macroeconomic environment. Nonetheless, the demand side shows significant slack with growth driven primarily by private consumption while private sector investment remains subdued. So far in 2019, a strong pick-up in economic activity was underway for Q1 of 2019 as reflected by real growth in consumer spending and stronger investor sentiment. However, a delayed start to the long rain season (March – May 2019) could affect the planting season-resulting in poor harvests. In addition, the below average short rains (October – December 2018) and the ensuing food shortages across several counties in the northern part of the country that has prompted emergency interventions, could impose unanticipated fiscal pressure constraining development spending. These developments have slowed the growth forecast for 2019.
“Delays in the long rain season and a growing need for emergency interventions to deal with food shortages is a reminder of the outstanding challenges in managing agricultural risks in Kenya,” said Felipe Jaramillo, World Bank Kenya Country Director. “Policy measures would be required to transform the agriculture sector through increasing productivity and enhancing resilience to agricultural risks to boost smallholder farmers’ income by improving access to competitive markets.”
The 19th Kenya Economic Update (KEU), Unbundling the Slack in Private Investment, attributes the slack on the demand side of the economy to two factors: Insufficient credit growth to the private sector (which stands at 3.4% in February 2019), and inherent room for improvement in fiscal management. On private sector credit, the report recommends fast-tracking solutions to factors that led to the imposition of the interest rate cap and building consensus for its eventual reform. On the latter, ensuring prompt payments to firms that trade with the government could restore liquidity and stimulate private sector activities. Other crucial reforms outlined in the report are improved revenue mobilization and accelerated structural reforms that crowd in private sector participation in the Big 4 agenda.
“Several macroeconomic policy reforms, if pursued, could help rebuild resilience and speed-up the pace of poverty reduction,” said Peter Chacha, World Bank Senior Economist and Lead Author of the KEU. “These include enhancing tax revenue mobilization to support government spending, reviving the potency of monetary policy, and recovery in growth of credit to the private sector”.
Transforming agriculture sector productivity and linkages to poverty reduction
Agriculture remains a key driver of growth in Kenya and a major contributor to poverty reduction. The Special Focus section of the KEU notes that Kenyan households that are exclusively engaged in agriculture contributed 31.4% to the reduction of rural poverty, and agriculture remains the largest income source for both poor and non-poor households in rural areas.
“We found that productivity increases in the agriculture sector not only benefits poor households, it can potentially lift them out of poverty,” said Ladisy Chengula, World Bank Lead Agriculture Economist and author of the report’s special section on Transforming Agriculture Sector Productivity and Linkages to Poverty Reduction.
From 2013-2017, the report notes the agriculture sector contributed on average 21.9% of gross domestic product (GDP), with at least 56% of the total labor force employed in agriculture in 2017. Agriculture is also responsible for most of the country’s exports, accounting for up to 65% of merchandise exports in 2017. As such, the sector is central to the government’s Big 4 development agenda, where agriculture aims to attain 100% food and nutritional security for all Kenyans by 2022.
Despite progress towards achieving food security for all Kenyans, the analysis finds that real agricultural value-added has declined relative to levels attained in 2006. This was due to weather related shocks, prevalence of pests/disease and dwindling knowledge delivery systems such as the lack of extension services on adoption of modern technology.
The analysis highlights a few of the many factors underlying low agriculture sector productivity and high vulnerability to climate shocks; and proposes policies that could help transform the sector to boost farmers’ income-thereby contributing to the overall poverty reduction in Kenya.
“There is a need to reform the current fertilizer subsidy program to ensure that it is efficient, transparent and well targeted; invest in irrigation and water management infrastructure to build resilience in the sector; and leverage disruptive technologies to deliver agricultural services, including agro-weather and market information and advisory services,” said Chengula.
Finally, to boost farmers’ incomes policy could seek to address post-harvest losses and marketing challenges by fast-tracking implementation of the national warehousing receipt system and commodities exchange, while scaling up agro-processing and value addition to increase returns on agricultural produce.
Boosting agricultural productivity
The report recommends policy reforms that could help transform the sector and deliver on food and nutritional security, including:
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Enhance access to agricultural financing: While Kenya represents a vibrant and enabling market for FinTech, the report notes the more traditional banking that is needed to service commercial agriculture is lacking. About 4% of commercial bank lending is for agribusiness, despite most Kenyans being employed in agriculture or agribusiness.
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Increase the use of fertilizer: The report found that fertilizer use remains inadequate in Kenya. The report also found the targeting mechanisms for the government’s fertilizer subsidy program is inefficient, often benefiting medium/large scale famers relative to small-scale farmers. Reforming fertilizer subsidies to ensure that they are efficient and transparent, and target smallholder farmers remains key in restoring productivity.
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Establish structured commodities trading: Like most countries in Africa, the government still retains a big role in marketing agricultural outputs, especially maize, leaving little room for private sector participation. Further, National Cereal and Produce Board (NCPB) buys maize at a premium above the price determined by market forces. These interventions result in undue fiscal pressures, mis-allocation of resources from other potentially high productivity expenditures (extension services) and disincentivize private sector participation. Structured commodities trading could minimize inefficiencies and transform small holder farmers from subsistence into successful agribusinesses.
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Invest in irrigation: While 83% of Kenya’s land area is arid and semi-arid, 2% of arable land is under irrigation compared to an average of 6% in Sub-Saharan Africa and 37% in Asia. The low usage of irrigation means Kenya’s agriculture is fully rain dependent and susceptible to drought shocks. The analysis shows that investing in irrigation and agricultural water management for smallholders can reduce productivity shocks and raise the sector’s total factor productivity, potentially climate proofing the sector.
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Support stronger farmer organizations: Kenya has many geographically dispersed smallholders that are not integrated into key agriculture value chains. Dispersion increases production costs and reduces small farmers’ competitiveness. The analysis shows that stronger farmer organizations (FOs) could foster economic inclusion of smallholders and increase their market power-thereby raising their incomes and productivity. Further, while value addition to agricultural commodities remains low, increasing the agribusiness to agriculture ratio could create more jobs and reduce poverty.
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tralac’s Daily News Selection
The World Bank-IMF 2019 Spring Meetings open today in Washington
UNCTAD’s Ad Hoc Expert Group Meeting on Competition Law and Policy takes place today in Geneva
UNCTAD’s eCommerce Week: WTO negotiations on ecommerce
UNCTAD stands ready to work with developing countries to enhance their preparedness to seize the opportunities of e-commerce should they choose to join proposed talks among WTO members, the organization’s Secretary-General Mukhisa Kituyi said. “It is a fact that 76 WTO members have launched plurilateral negotiations on trade-related aspects of e-commerce. However, we must ensure that there is a balanced approach that adequately takes into account the needs and considerations of developing countries,” Dr Kituyi told delegates at the fifth edition of UNCTAD eCommerce Week. Speaking at a session on the expectations for the proposed WTO negotiations – which have sparked diverging views among countries – the UNCTAD chief observed that although 88 WTO members are reluctant to join the process, it’s too late in the day for them to be stuck on whether or not there will be e-commerce talks at the global trade body at all
Participants at the session heard various national perspectives on the proposed plurilateral negotiations under the WTO. “We know that the digital economy is growing about 32% faster than the wider economy and creating jobs three times more quickly. E-commerce has been a longstanding element of the WTO’s work,” said Frances Lisson, the ambassador of Australia to the WTO. India’s ambassador to the WTO, J. S. Deepak, argued that proposed negotiations on e-commerce under the WTO were premature. The ambassador of Benin to the WTO, Eloi Laourou, said joining the discussion on the proposed negotiations now would allow the concerns of least developed countries such as his to be considered from the get-go. [UNCTAD’s 2018 Annual Report 2018 has been launched]
AfCFTA: What is in it for Ethiopia? (The Reporter)
Mamo Esmelealem Mihretu, Ethiopia’s Chief Trade Negotiator, says such initiatives bring about the potential to attract better investment to the country and the country will get more export revenue because of the access it has to a wider market. Being a pioneer in the establishment of the AU, Ethiopia is also playing a leadership and a pioneering role in the process of forming this continental free trade area, which Mamo says is expected and important: “The role Ethiopia is playing is expected and benefitting both in terms of political and diplomatic realms in addition to the immense economical significance it carries with it. The CFTA gained credibility for Ethiopia supported it and played a front runner role.”
In addition to these, Mamo observes that the CFTA is a learning environment for Ethiopia which is in the process of acceding to the WTO. “As the subjects of negotiation both for the CFTA and the WTO are the same, the experience from this will help us in our negotiations for WTO accession,” Mamo said indicating that trade in goods, services as well as trade related to infrastructure are all negotiation subjects which are relevant in the WTO accession process. Mamo is of the view that the negotiation for the AfCFTA was hastened because of the lesser impact the agreement would have on the country, while the perceived benefits are far higher; perhaps much higher than the feared threats.
EAC Kigali retreat: Monetary Union and federation will hasten EAC integration (The East African)
Mr Mohamed said the EAC’s problems are not structural in nature and can be resolved with strong political will. “Why are we not obeying the Common External Tariffs? If they are not working we should look at refining them rather than going back on them to appease business lobbies,” Mr Mohamed said. The meeting particularly discussed the persistent non-tariff barrier challenges between Kenya and Tanzania even as it avoided the ongoing diplomatic tiff between Uganda and Rwanda. Multiple sources at the meeting said the Uganda-Rwanda stand-off alongside Burundi’s closure of its border with Rwanda were listed among issues in need of political will. “We are facing issues of implementation, especially with regard to non-tariff barriers between Kenya and Tanzania. There are political issues that need political will,” Rwanda’s State Minister for East African Community Affairs Olivier Nduhungirehe said.
IGAD task force to co-ordinate regional interventions (The East African)
Countries in the Horn of Africa have formed a task force to co-ordinate regional interventions in the face of threats to marine resources and security around the Red Sea and the Gulf of Aden. The team was formed on Thursday in Nairobi by the Committee of Ambassadors from IGAD partner states of Kenya, Uganda, Ethiopia, Sudan, Djibouti, Somalia and South Sudan. The decision was prompted by the need for the states to have a common position on the region’s security and economic interests. The areas of concern are maritime security, migration, terrorism, prevention of illegal and unregulated fishing, pollution, piracy and the dumping of toxic waste.
Angola’s preparations for joining the SADC FTA: WCO update
The WCO, with financial support from the Finland Project II for ESA, organized a national workshop on Rules of Origin for Angola Customs. This workshop was conducted in Luanda, 25-29 March, and was attended by more than 40 officials from Angola Customs and several ministries and other agencies. Angola will join the SADC Free Trade Area in June 2019. Within the framework of this agreement, there is a wide range of possibilities for cumulation with other partner countries in order to strengthen regional integration between SADC members. Topics discussed during the workshop included the key concepts for proper origin determination, related operational and procedural issues, the establishment of an efficient organization and provision of effective training and private sector outreach.
Angola: AfDB posts an EOI for a study to facilitate the transition from the informal to the formal economy
The consulting firm will, inter alia, carry out the following activities: (a) assess the current landscape of the informal sector, needs, constraints and opportunities for conversion to the formal economy; (b) assess and present a summary of international best practices and lessons in the area of transitioning informal economic activities to the formal sector and its success factors; (c) review the existing policies, strategies, regulatory framework and initiatives in Angola that promote the transition from the informal to the formal economy; (d) develop a simplified legal framework for the start-up business and taxation incentives for micro and small enterprises, and the informal sector; (e) develop a business model for the “Entrepreneur’s Single Desk”, including its geographical scope and the type of services offered;
West African Customs implement their regional interconnectivity project to manage their transit operation (WCO)
According to the timetable presented at the Abidjan meeting, interconnectivity is to be rolled out by 2020 for the 15 ECOWAS Customs administrations, but it is the aspiration of the Customs administrations of the WCO West and Central Africa region that this solution should be deployed throughout the region, including in Central Africa. The WCO has undertaken to continue providing technical support to this initiative, which it sees as a priority issue for the region in order to contribute towards the mobilization and coordination of the partners and donors who, together, want to provide support for interconnectivity. [Related WCO update: Building a Regional Framework for Customs Integrity in West Africa]
Nigeria Biannual Economic Update (World Bank)
Nigeria’s emergence from recession remains slow: real GDP grew by 1.9% in 2018. While this was above the 0.8% growth of 2017, it was below the population growth rate, government projections and pre-recession levels. The oil and gas sector reverted to contraction from the second quarter of the year and the non-oil economy was thus the main driver of growth in 2018. While agriculture slowed down significantly due to conflict and weather events, whose effects were not counteracted by direct interventions by the Central Bank of Nigeria, non-oil, non-agricultural growth, which remained negative up to the third quarter of 2017 strengthened through 2018 - but remained weak – with services (primarily ICT) resuming as the key driver. As the oil sector is not labor-intensive, and the non-oil economy was still relatively weak, nearly a quarter of the work force was unemployed in 2018; and another 20% under-employed. With 3.9 million net entrants into the labor force (now 90.5 million people) during 2018 (up to September) (4.5% growth), but virtually no growth in the stock of jobs, unemployment rose by 2.7 percentage points since end-2017, and more than doubled compared to the pre-recession levels (9.9% in Q3 of 2015).
Note: Three sets of comparator country groups are used to benchmark Nigeria’s economic outcomes: structural, aspirational and regional peers. Structural peers include countries that resemble Nigeria in the key economic structure and performance indicators: these are lower middle-income countries with nominal lower-middle countries with nominal income per capita of at least 50% that of Nigeria’s, and/or upper-middle income countries with nominal income per capita less than double that of Nigeria’s; with natural resource share in total exports of 20% or more (Algeria, Egypt, India, Indonesia and Iran) and large populations. Aspirational peers are countries that Nigeria can potentially improve to match its economic performance: upper-middle income countries with nominal income per capita at least double that of Nigeria’s; with natural resource share in total exports of 20% or more, and population of over 30 million (Brazil, Colombia, Malaysia, Mexico, Peru, Russian Federation and South Africa). Regional peers are geographically close countries that exhibit similar economic characteristics (Angola, Cameroon, Cote D’Ivoire, Ethiopia, Ghana, Kenya, Senegal, Tanzania and Uganda).
Building New Platforms of Cooperation: President Buhari’s keynote address to the Middle East and North Africa WEF
In the spirit of “Building New Platforms of Cooperation”, we partnered with the Kingdom of Morocco to domesticate fertilizer production in Nigeria and revive over two million tons of abandoned fertilizer blending plant capacity. The outcome is we created tens of thousands of jobs in agriculture, logistics, manufacturing and retail sectors. We are able to achieve moderate growth. But it was inclusive. Nigeria is now at a new dawn and embarking on a new development trajectory. We are determined to industrialise Nigeria leveraging our comparative advantage. We recognize the private sector as the engine of growth and a veritable partner in our economic agenda. The Middle East is a natural partner. Africa and the Middle East must, therefore, focus on policies that will deliver shared economic prosperity for all our citizens. On trade and investments for example, we can do more. Africa represents only five per cent of Jordan’s trade with the world. But we have the resources, the people and the markets to do more.
Izaak Breitenbach: Brazilian dumpers doth protest too much (Daily Maverick)
Ricardo Santin calls SAPA’s challenge of this predatory trade practice “protectionist” and offers up the fact that only about 500,000 tons of chicken consumed in South Africa are imported from countries such as Brazil. Let it be noted that this represents about 24% of the entire market, a bigger volume than the output of even the biggest single South African producer. If you bear in mind that the EU, for instance, keeps imports strictly within 7% of market volumes, it is preposterous that Santin can expect South Africa to simply nod and accept more than three times more while its own industry contracts. But if you consider that Brazil is presently the source of 61% of all those imports, it makes sense why Mr Santin is protesting so much. Who is being protectionist now? What is at issue here is the damage that dumping does. Dumping prevents expansion, inhibits job creation and stops emerging farmers from entering the market and becoming landowners. This is the experience in South Africa, and now also in Namibia, and no amount of posturing about the importance of trade partnerships can change that. [The author is GM of SAPA’s Broiler Organisation]
South Asia Economic Focus, Spring 2019: exports wanted (World Bank)
Using a gravity model, we show that South Asian countries export only a third of their potential. If countries export closer to potential, not only would short-term adjustments be easier, but also the long-term growth potential would be higher. Closing the export gap is an essential step in addressing both short-term and long-term macroeconomic challenges in South Asia. India: GDP is forecast to expand 7.5% in FY2019/20. Credit growth will benefit from relatively more accommodative monetary policy amid benign inflationary conditions. Support from delayed fiscal consolidation will partially offset the effects of political uncertainty on economic activity around elections in May.
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tralac’s Daily News Selection
tralac’s March 2019 newsletter is posted: the newsletter carries a comprehensive report of debates at tralac’s annual conference, convened recently in Nairobi
Diarise: The Africa Women Innovation and En-trepreneurship Forum (29-30 October, Cape Town)
COMESA Intergovernmental Committee: Fresh push for states to ratify the Tripartite FTA as deadline draws near
The deadline set by the Tripartite Council of Ministers for member states of three RECs to sign and ratify the TFTA lapses this month. So far only four countries in the COMESA, EAC and SADC tripartite bloc have signed and ratified the agreement. These are Kenya, Egypt, South Africa and Uganda. A total of 22 out of 26 countries in the tripartite bloc have signed the agreement. Delegates attending the 7th extraordinary meeting of the COMESA Intergovernmental Committee that opened in Lusaka earlier this week, were informed that eight of the 19 countries that had ratified the AfCFTA were Tripartite Member/Partner States. Zambia’s Minister of Commerce, Trade and Industry Hon. Christopher Yaluma, who opened the meeting, said it was time for the remaining countries to sign the tripartite given that is was supposed to the building bloc to the continental FTA. “I cannot overemphasize the absolute importance of all of us ratifying the Tripartite Agreement so that it enters into force immediately. After years of negotiation, the Tripartite FTA is ready for implementation. It is very much a low hanging fruit.” Currently, 93% of the work on Rules of Origin has been completed, providing the basis for trade to begin. In addition, the legal texts have been concluded and adopted.
AfDB’s East Africa regional economic outlook: East Africa’s economy races ahead of its African peers
Despite these drivers and opportunities, progress in regional integration has been limited. What are the major challenges of regional integration in East Africa? Lack of complementarity in trading, low competitive position of countries to supply goods in the region (which is related to lack of structural transformation, low productivity, and a wide infrastructure gap), institutional capacity weakness to advance regional integration, and failure to address political issues related to regional integration. Several policy directions aimed at boosting regional integration in East Africa emerge from this analysis. Extract (pdf):
Fourth, since increased intra-Africa trade is a major policy instrument for advancing regional integration, it is imperative to capitalize on the high political goodwill associated with the CFTA. The agreement establishing the CFTA also came with an implementation action plan that tackles constraints on intra-Africa trade by holistically addressing trade policy, trade facilitation, productive capacity creation, trade-related infrastructure provision, trade finance, trade information, and factor market integration
Fifth, the lesson from East Asia on the policy direction of structural transformation and process integration is instructive: deliberate and conscious state action—in the form of unilateral tariff reductions, the establishment of export processing zones and duty drawback arrangements, and entry into sectoral trade agreements (especially in information and communication technology and in the context of value chain creation) - are the foundation for success. East African policymakers may draw an important lesson from this experience and tune their own country policies along this line. These policies also require building the capacity of regional and national institutions tasked with these issues
London panel awards $385m Djibouti port compensation to DP World (The National)
The London Court of International Arbitration ordered the African nation to pay $385m (Dh1.41bn) plus interest for breach of the Doraleh Container Terminal holding company’s exclusive rights. The ruling states that the 2006 concession remains valid despite the government of Djibouti taking over the terminal in February after cancelling DP World’s operating rights the previous year. The ruling gave DP World the right to claim further damages if Djibouti continues with plans to develop the container port with any other operator, the ruling said. Executives said it was the fifth legal ruling that upheld ownership rights against the government of Djibouti since the battle for control began. “In respect of the development of the Djibouti Multipurpose Port facility, the facts are clear,” the ruling said. “At no stage before the decision was made to go ahead with that facility with China Merchants did Djibouti offer DCT the right to develop the proposed container facilities at the DMP.” [Aboubaker Omar Hadi, chairman of Djibouti Ports and Free Trade Authority tells In Business Africa how Djibouti plans to turn itself into a key port for East Africa]
UNCTAD’s eCommerce Week concludes today:
Blockchains in trade logistics – implications for developing country integration in global supply chains. “With any technology disruption, I think labour force is one area we need to look at closely,” said Ziyang Fan, head of digital trade at the WEF. Mr Fan said trade logistics technologies have traditionally hurt ‘blue-collar workers’ but that this is changing with the ‘fourth industrial revolution’. “With blockchain, with artificial intelligence, the ‘white-collar’ workers will face more disruption in terms of job loss,” he said, citing the examples of port clerks and supply chain middlemen. Alvaro Cedeno, Costa Rica’s former ambassador to the WTO, worried that technologies like blockchain will leave worse off those who still don’t even enjoy access to basic technologies. “There are literally billions of human beings that still haven’t even received the benefits of the third industrial revolution – and in some cases even the second industrial revolution,” he said, citing the 1 billion people who don’t have electricity and the 4 billion who lack access to the internet. Are we thinking about including the excluded?”
Business models worldwide face radical change: ILO-IOE study (ILO)
The skills gap is a major issue, with 78% of corporate executives saying schools are failing to meet future employers’ needs, according to the research conducted by the ILO’s Bureau for Employers’ Activities and the International Organisation of Employers. More broadly, the report identifies five trends that are radically altering global business models regardless of size, sector or location: technological innovation, global economic integration, climate change and sustainability, demographic and generational shifts, and a global shortage of skilled labour. Note: At least 30 respondents were selected from each of the following countries: Tanzania, Nigeria, Morocco, South Africa, Haiti, Bolivia, Brazil, USA, Nepal, India, China, Indonesia, Malaysia, Russia, and Germany. Extracts (pdf):
Businesses in Africa, Asia and Latin America reported that automation has already affected low skilled jobs, with 53%, 49% and 47% of executives respectively saying they have already experienced a noticeable impact. In Europe the same was true for 47% of businesses. Survey respondents from the manufacturing sector were, as expected, the most affected by this trend, with 33% reporting large impacts compared to 7% from the retail sector (Figure 2.2).
Globally, employers and businesses are increasingly encountering challenges in locating, hiring and retaining talent. However, skills requirements and ease of recruiting varies widely across regions, defying any obvious patterns of developed vs. emerging economy. As illustrated below (Figure 6.1), a large proportion of businesses in the USA (61%), Brazil (70%), India (66%) and Germany (65%) agreed that businesses are looking for quite different skills in new recruits than three years ago. In a similar vein, executives across Bolivia (60%), Haiti (53%), China (47%), South Africa (51%) and Malaysia (63%) agreed in similar proportions that it is becoming harder to recruit people with the skills needed. The USA (31%) resists the trend slightly as the nation where fewest businesses report recruitment difficulties, with Nigeria (41%) in a similar position. [UNECA: Are Africa’s education systems adapted to the needs of tomorrow? The answer is probably no, presently]
From transport to growth corridor: do communities benefit from the Central Railway Transit Corridor in Tanzania? (IGC)
This present study builds on a previous IGC funded project that surveyed enterprises and households along the central railway route. The current project examines the potential for a rehabilitated central railway in stimulating socio-economic transformation of communities in the transit corridor. Based on the above findings, we recommend the government to: (i) Focus on the need for complementary infrastructure linking train stations to the production areas to improve access to markets and bring about expected transformation. This includes roads and other railway lines linking potential ‘value’ sites (farms, production sites, industries, etc.) to the train stations; (ii) Put more emphasis on strategies for supporting production activities along the corridor, which would potentially increase cargo volumes for the SGR in future. That is, in addition to current emphasis on physical infrastructure, efforts should be put on promoting investment in economic activities which have potential to generate future cargo volumes and stir local economic development; (iii) Manage expectations around SGR by collaborating with Local Government Authorities to develop proactive strategies for amplifying the benefit of transport infrastructure to the communities along the corridor. This involves two levels of interventions: [The author: Josaphat Kweka]
Karen Bosman: The four Brexit scenarios for South African exports (Daily Maverick)
So what does Brexit mean for South African exports? Well, there are a number of variables. These include, first, what happens between the UK and EU, and second, what happens between the UK and South Africa.
Trade investment summit aims to increase trade and economic development between Kenya, SA (Citizen)
“This summit will provide an opportunity to build on the last two summits. More South African companies have the Kenya market and penetrated Kenya and expanded their businesses. We supported more outbound missions to South Africa in the areas of manufacturing and services,” said Kenya High Commissioner Jean Njeri Kamau said speaking at the Kenya Trade Investment Summit held in Bryanston North of Johannesburg on Thursday. Cabinet Secretary Foreign Affairs of the Republic of Kenya, Monica Juma added that the summit presents an excellent opportunity for networking and forging of strategic partnerships aimed at exploring the investment opportunities available in both Kenya and South Africa. She said that the summit would hear information about the Kenya government’s priorities in the next five years, which present an excellent attraction for foreign direct investment.
We want to move Nigeria to top 100 in world business index – VP Osinbajo (Leadership)
Vice President Yemi Osinbajo has disclosed that the major focus of the federal government is to move Nigeria into the top 100 in the 2020 World Bank Doing Business Index. Osinbajo, who disclosed this during the 2019 Presidential Enabling Business Environment Council (PEBEC) Awards held at the old Banquet Hall of the State House, Abuja said in the past three years, Nigeria has implemented more than 140 reforms to make doing business in Nigeria easier. This is even as the senior special assistant to the President on Industry, Trade and Investment, Dr. Jumoke Oduwole, said states in the country adopted PEBEC model in 2017, adding that five states have been recognised by the World Bank. Osinbajo said the World Bank also reported in 2018, that 32 states of Nigeria improved their Ease of Doing Business environment led by Kaduna, Enugu, Abia, Lagos and Anambra States.
Nissan task ECOWAS on competitive auto industry master-plan (Vanguard)
Nissan made this appeal through its Director of Sales and Operations, Jim Dando, who said instead of allowing every country in the sub-region own a vehicle assembly plant, which might not be economically viable, some countries should rather concentrate on their areas of proportional advantage. “We would rather strategically create opportunities, that some might specialise in providing tyres, others batteries and shock absorbers, while those countries who do not ultimately assemble vehicles won’t all make the same vehicles because it doesn’t make sense to compete against each other.”
Today’s Quick Links: The OECD and Sahel and West Africa Club report, Women and Trade Networks in West Africa, is now available online World Economic Forum on the Middle East and North Africa (6-7 April): preview Chinese tech investors are turning towards MENA: here’s why Indonesia’s growing influence in Africa More educated, less paid: what’s behind the gender gap in Mauritius? World Health Statistics Overview 2019: Women outliving men ‘everywhere’, new UN health agency statistics report shows Bangladesh’s fifth Trade Policy Review concludes today at the WTO: access the documentation here Europe and Central Asia Economic Update, Spring 2019: financial inclusion Revenue administration: IMF report on short-term measures to increase customs revenue in low-income and fragile countries World Bank: Measuring what matters in global value chains and value-added trade |
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Fresh push for states to ratify the Tripartite FTA as deadline draws near
The deadline set by the Tripartite Council of Ministers for member States of three regional economic blocs to sign and ratify the tripartite free trade area lapses this month.
So far only four countries in the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and Southern African Development Community (SADC) tripartite bloc have both signed and ratified the agreement. These are Kenya, Egypt, South Africa and Uganda. A total of 22 out of 26 countries have signed the agreement.
Delegates attending the seventh Extraordinary meeting of the COMESA Intergovernmental Committee that opened in Lusaka on 3 April 2019, were informed that eight of the 19 countries that had ratified the African Continental Free Trade Area (AfCFTA) Agreement were Tripartite Member/Partner States.
The AfCFTA attained the requisite 22 ratifications for entry into force on Monday this week when The Gambia received parliamentary approval. All 22 countries must deposit their instruments of ratification with the African Union Commission Chairperson before the Agreement can enter into force.
Zambia’s Minister of Commerce, Trade and Industry Hon. Christopher Yaluma who opened the meeting said it was time for the remaining countries to sign the tripartite given that is was supposed to the building bloc to the continental FTA.
“I cannot overemphasize the absolute importance of all of us ratifying the Tripartite Agreement so that it enters into force immediately,” he said. “After years of negotiation, the Tripartite FTA is ready for implementation. It is very much a low hanging fruit.”
Currently, 93% of the work on Rules of Origin has been completed, providing the basis for trade to begin. In addition, the legal texts have been concluded and adopted.
The minister noted that most of the member/partners states of the tripartite were already using the existing COMESA or SADC free trade area agreements meaning they were ready. He called on member States to the ratify the agreement within the period remaining before the tripartite ministers’ deadline.
Pressing Issues
The extra ordinary IC meeting was convened to deal mainly with pressing administration and financial management issues while at same time receive updates on regional integration programme matters.
It was attended by Permanent/Principal Secretariats from the ministries that coordinate COMESA activities in Member States whose recommendations will be tabled before the Extraordinary Council of Ministers meeting on Friday this week.
In her statement, Secretary General Chileshe Kapwepwe said, since she assumed office last year, she has identified areas for immediate change at COMESA Secretariat aimed at strengthening service delivery to stakeholders.
“The need to have fast and better responsiveness to the needs of Member States, addressing inadequate resourcing through the development of a strategic resource mobilization plan, addressing the organizational structure of the Secretariat for enhanced performance,” she said.
“My goal is to shift focus of COMESA Policy Organs engagement from administrative to programnme implementation issues. It is only through programme implementation that we shall be able to create jobs and improve the standard of living and quality of life of our people.”
The IC observed a moment of silence for one of their departed member, Ambassador Julius Onen, Permanent Secretary in the Ministry of Trade in Uganda who passed away last month as well as the victims of the fatal Ethiopian Airlines Flight and to those who died after Cyclone Idai hit Mozambique and parts of Malawi and Zimbabwe.