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The AfDB’s Regional Economic Outlook: the West Africa, Central Africa, Southern Africa and East Africa regional reports have been launched
The IMF has posted the Analytical Chapters to the April 2019 World Economic Outlook. Profiled chapter: Economic forces, not tariffs, drive changes in trade balances. Bilateral trade balances (the difference in the value of exports and imports between two countries) have come under scrutiny recently. Some policymakers are concerned that their large and rising size are the result of uneven measures that distort international trade. But is a focus on bilateral trade balances the right one? The short answer is no. Our research in Chapter 4 of the April 2019 World Economic Outlook finds that a tariff-induced change in a specific trade balance between two countries tends to be offset by changes in bilateral balances with other partners through trade diversion, with little or no impact on the aggregate trade balance (the sum of all the bilateral trade balances). [The authors: Johannes Eugster, Florence Jaumotte, Margaux MacDonald, and Roberto Piazza]
Africa’s aviation sector: IATA’s February 2019 releases
UNCTAD’s eCommerce Week
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Network to connect women e-commerce leaders launched. “A systematic effort to collect, nurture and enhance the experiences of women involved in e-commerce is needed,” said UNCTAD Deputy Secretary-General Isabelle Durant. Raising the profile of successful women leaders in e-commerce and the digital economy is an important first step to maximizing new opportunities for women in developing countries. The new eTrade for Women Network, which will complement the current work of the groundbreaking eTrade for all initiative, was announced by Ms. Durant alongside a hotshot panel on changing the narrative of women in e-commerce led by top and emerging women in the sector. Ms Durant said UNCTAD would leverage its existing relationships with partners involved in the eTrade for all initiative to champion the network. The network aims to support women involved in e-commerce in developing countries y collecting, nurturing and showcasing the experiences of successful women leaders. It will also provide them with opportunities to make their voices heard in policy processes both domestically and internationally.
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UNCTAD Rapid eTrade Readiness Assessments of LDCs: policy impact and way forward. Launched in 2016, UNCTAD’s Rapid eTrade Readiness Assessments of Least Developed Countries have set the standard for examining how such nations can seize the opportunities of digitalization. The assessments, made at the countries’ request, aim to help them take stock of their e-commerce capabilities and formulate related recommendations to grow digital trade. To date, 17 such assessments have been completed, and more are on the way. A new policy impact note, released on 3 April during UNCTAD’s annual eCommerce Week, takes a step back and examines the overall findings (pdf). “My hope is that this note will enable LDCs to better understand the policies that should be devised to prepare for a digital future and expand e-commerce effectively along with inclusive patterns of development,” said Shamika N. Sirimanne, who directs UNCTAD’s technology and logistics division. There are currently 47 LDCs, a UN category created in 1971 for nations are deemed highly disadvantaged in their development process, for structural, historical and also geographical reasons.
Blockchain – Africa Rising: Sela Labs, Wala, Cardano, StudEx Wildlife, CryptoSavannah (Forbes)
Now, as the western world debates the potential costs of overhauling our legacy systems in favor of a digital and decentralized future, Africa asks no such questions. It has embraced the future, ready to adapt without regret. Looking at a blank canvas, its leaders can ask the question Westerners would never dare to - If you could rebuild your society, with the aim of a more sustainable and equitable future, how would you do it? [The author: Tatiana Koffman]
What does the rise of the robots mean for trade? (World Bank Blogs)
In spite of anecdotal evidence that some firms are moving production back home (reshoring), the available data tells a different story. Analysis of the impact of robotization on bilateral trade flows over the past two decades suggests that, if anything, automation and 3D printing are boosting trade. A 10 percentage point increase in robots in advanced economies is associated with an 8.6 percentage point increase in imports of semi-finished products – what trade economists call ‘intermediates’ - from developing countries, and a 4.9 percentage point increase in imports of other goods from those countries. The strong impact of automation on imports, particularly of intermediates, proves the importance of GVCs. Advancements in 3D printing also seem to have stimulated trade. Trade in hearing aids shot up by 60% after production shifted almost entirely to 3D printing. But not everybody wins from technological change.
Kenya: President Uhuru Kenyatta’s State of the Nation address
The Path to Prosperity for individual African States lies in promoting Intra-African Trade, Integration and building bridges between our Communities and Nations that recognize that we have far more in common than we have as differences. Mr Speaker, Kenya’s prosperity, security and fraternity lies in ever closer unity with our Partners in the EAC at the first level, and thereafter wider regional and continental alignments. My Administration remains committed to maximizing the benefits for Kenya by mutually deepening economic and eventual political integration of the EAC. In line with the spirit of Pan Africanism, I wish to extend our gratitude to the African Union for appointing one of our own to spearhead infrastructural connectivity across the Continent. This is key to actualizing the shared prosperity of the African people through promoting trade between our brothers and sisters and further strengthening our bond of unity in the great Continent.
In manufacturing, my Administration is prioritizing local motor vehicle assembly and manufacturing of spare parts. This initiative has witnessed Peugeot and Volkswagen assembly lines set up in Kenya. Since their revival, the two companies have jointly assembled 627 motor vehicles; and by the end of 2019, they will have assembled at least 1,500 vehicles. This is a positive beginning for the sector that is expected to rapidly expand and make Kenya the regional Motor Vehicle Assembly hub. To address the perennial challenges in the sugar and maize sub-Sectors, my Administration commits to decisively act on the recommendations of the two sectoral taskforces that are slated to report their findings later on this month. I expect that the teams will propose bold and transformative interventions to revive and sustainably grow these important sub-sectors. Additionally, my Administration has prioritized reforms in the coffee sub-sector, and implemented numerous interventions emanating from the recommendations of the Coffee Taskforce. These include the ambitious rehabilitation of 500 pulping stations (factories) in 31 coffee-growing Counties.
Chicken debate: See Brazil as ‘a partner, not an enemy’ (Daily Maverick)
The SA Poultry Association has lobbied the International Trade Commission of South Africa to increase import tariffs on chicken from Brazil from 37% and 12% to a staggering 82%. SAPA’s rationale, however, is rooted in misinformation and untruths that, if not urgently addressed, could further consolidate the local market and drive up the price of chicken, thereby imperilling South African consumers who are already under significant financial pressure. The Brazilian Animal Protein Association strongly rejects the arguments by the SA Poultry Association and would like to set the record straight.
In this war of disinformation and protectionism, the biggest loser will be the South African consumer. We are not opposed to tariffs in principle, but they need to be reasonable. Increasing the tariffs to 82% from the current 37% and 12% will close the market to imports, as it will render most imports unfeasible. Most critically, an 82% tariff will allow the local chicken industry, already dominated by a few large conglomerates, to further consolidate the domestic market, thereby decreasing competition and leading to further price increases. Brazil is not dumping chicken in South Africa, it is supplying quality, unbrined chicken that is sold at a price comparable to that of South Africa, and helping to meet local demand. This ensures that healthy competition is maintained to the benefit of South African consumers. Once chicken imports have been shut out of the market, it will be very difficult for South Africa to fill the current gap between demand and supply. This is a 30% share that will be impacted. Filling this gap is a long and time consuming process, especially if the local supply is subject to further Bird Flu epidemics, rising input costs arising from droughts and the impact of further load shedding. [The author, Ricardo Santin, is the CEO of the Brazilian Animal Protein Association]
A commentary by South Africa’s trade and industry minister, Rob Davies: How Brexit will affect SA-UK trade relations
Tanzania in plan to establish more mineral trading hubs to fight tax evasion (The East African)
Tanzania’s mineral-rich regions are at advanced stage of establishing government-controlled mineral trading hubs to curb tax evasion and illegal exports of the country’s mineral wealth. Simon Msanjila, Permanent Secretary in the Ministry of Minerals, said the hubs will be ready by the end of June, adding that almost all regions have started procedures for the establishment of mineral markets. This, he said, include allocation of sites and buildings to be used for trade. The trading centres are meant to enable miners to conduct business with banks, retailers, brokers, jewellers and other traders in a well-regulated environment. According to the Federation of Miners Association of Tanzania, there are over six million small-scale miners in the country. Players say with mineral-buying centres in place, the country will collect more levies from artisanal miners, control illegal mining, and achieve better overall regulation of the industry across the value chain. In February, parliament passed a law designed to relieve small-scale miners of the burden of paying a 5% withholding tax and 18% value added tax, leaving the holders of primary mining licences with a tax obligation of just 7%.
Zimbabwe: Mnangagwa’s cabinet approves construction of Beira railway line (Bulawayo 24)
Cabinet on Tuesday approved the proposal for the construction of a railway line and wharf at Beira port to facilitate the transportation of minerals. This follows the country’s endeavour to create a cobweb of railway lines to move freight and passengers to many places at ease. At the same time with Zimbabwe being landlocked — Beira is the shortest gateway to the sea for both imports and exports for the southern country. Information minister Monica Mutsvangwa said Balmoral Corporation Investments has been given the green light to undertake the construction of the railway line.
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East Africa’s economy races ahead of its African peers, modest growth forecast for the rest of the continent – African Development Bank
Job creation and ramping up manufacturing will continue to be major priority areas for creating growth, according to the African Development Bank Regional Economic Outlook Reports 2019.
Economic growth in East Africa is soaring ahead of other regions on the continent at close to 7 percent while the overall outlook for the rest of Africa is cautious, but positive. Job creation and ramping up manufacturing will continue to be major priority areas for creating growth and employment across the continent the African Development Bank regional reports noted.
The Bank launched four of its five regional economic outlook reports this week in Abuja, Yaounde, Nairobi and Pretoria, with specific forecasts for West, Central, East and South Africa. The reports follow the January launch of the 2019 African Economic Outlook, which provides a broader, continent-wide perspective.
East Africa is leading the continent with GDP growth estimated at 5.7 percent in 2018, followed by North Africa at 4.9 percent, West Africa at 3.3 percent, Central Africa at 2.2 percent, and Southern Africa at 1.2 percent.
Economic growth across Eastern Africa will remain at a robust 5.9 percent in 2019, making it a promising investment and manufacturing destination. Within the region, Ethiopia is in the lead as the fastest growing economy with a predicted 8.2% growth in 2019, while Rwanda (7.8%); Tanzania (6.6%); Kenya( 6%), Djibouti (5.9%) and Uganda (5.3%) follow behind.
Growth in Central Africa is gradually recovering, but remains below the average for Africa as a whole. It is supported by recovering commodity prices and higher agricultural output. The region is one of the continent’s least integrated, with potential for reforms and greater linkages, the Central Africa regional report said.
The West Africa Regional Economic Outlook calls on the region to explore innovative means of raising revenue through reforms that enhance tax collection, minimize tax evasion, and curb illicit financial flows. Between 2014 and 2017, West Africa’s GDP growth trailed the rate for Africa as a whole, though it was faster than in Central and Southern Africa. Countries bucking the downward trend, such as Cote d’Ivoire, Ghana and Senegal, continue to offer positive examples of economic recovery in a sober economic environment.
Growth in Southern Africa is expected to remain moderate in 2019 and 2020 after a modest recovery in 2017 and 2018. Southern Africa’s subdued growth is due mainly to economic stagnation in South Africa, the largest regional economy, which has a ripple effect on neighboring countries.
All the regions face similar risks to their economic prospects in 2019-20, these include rising debt, fragility, population growth and climate change.
Job creation, regional integration, key areas for focus
From East to West, North to South, and across Central Africa, employment remains a major concern and concerted efforts must be made to keep up with growth rates, the reports noted. The flagship African Economic Outlook Report pinpoints industrialization as a key to the continent’s employment conundrum. Regional integration, the special theme for this year’s report, is seen as a key gateway to Africa’s economic growth, with a borderless Africa being the foundation of a competitive continental market.
The report outlines five trade policy actions that could bring Africa’s total gains to 4.5 percent of its GDP, or $134 billion a year. First is eliminating all of today’s applied bilateral tariffs in Africa. Second is keeping rules of origin simple, flexible, and transparent. Third is removing all nontariff barriers on goods and services trade on a most-favored-nation basis. Fourth is implementing the World Trade Organization’s Trade Facilitation Agreement to reduce the time it takes to cross borders and the transaction costs tied to nontariff measures. Fifth is negotiating with other developing countries to reduce by half their tariffs and nontariff barriers on a most-favored-nation basis.
Access the regional reports here:
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E-commerce holds huge promise for enhancing free trade in Africa
If the transformative power of digitalization is effectively harnessed, it can significantly contribute to prosperity in Africa.
E-commerce can significantly boost free trade across Africa and therefore help realize the objectives of the Africa Continental Free Trade Agreement (AfCFTA), participants at UNCTAD’s eCommerce Week 2019 were told.
“E-commerce has the potential to lift intra-African trade from the current rate of 18% and to boost Africa’s share of global trade, currently estimated at less than 3%,” said Ajay Kumar Bramdeo, the African Union’s ambassador to the United Nations in Geneva, at a session on “Digitalization and the realization of the African Continental Free Trade Area for digital transformation in Africa.”
Participants celebrated the impending entry into force of the AfCFTA, a milestone achieved on 2 April when the agreement reached the minimum number of ratifications required, 22, thanks to its approval by Gambia’s parliament.
The AfCFTA seeks to create an integrated African market of 1.27 billion consumers, expected to reach 1.7 billion by 2030, with an aggregated gross domestic product of up to $3.4 trillion, said Amani Abou-Zeid, the African Union commissioner for infrastructure and energy.
Digitalization has the potential to lead not only to Africa’s digital transformation, but also to serve as a catalyst for the continent’s overall structural transformation, Ms. Abou-Zeid said.
Hurdles to overcome
However, various issues need to be addressed for Africa to take advantage of current technological innovations and facilitate the achievement of the objectives of the AfCFTA, which was adopted by African Union nations at a summit in Rwanda in March 2018
“In many African countries, adequate and affordable information and communications technology (ICT) connectivity to enable digitalization to take place is still an issue,” Ms. Abou-Zeid noted.
The other issue is whether Africa currently has the legal framework and enabling environment for digital trade and other digital-related activities to flourish in the future AfCFTA market. Other concerns include trust, data privacy and cyber security.
“We are moving towards an integrated African market. Isn’t it appropriate to factor in the digital dimension of such a market?” Ms. Abou-Zeid said.
She underscored the importance of synergies between development and technical partners, noting that though only 1% of all funding provided under Aid for Trade is currently allocated to ICT solutions and multilateral development banks are investing just 1% of their total spending on ICT projects, Africa still boasts a plethora of initiatives related to digital trade.
Digitalization is the new coal
UNCTAD Deputy Secretary-General Isabelle Durant observed that the rate of digitalization remains uneven across Africa. “In some countries, less than 10% of the population uses the internet and only 18% of households have access to it throughout the continent. In most African countries, less than 5% of the population currently buys online,” she said.
In this respect, the AfCFTA represents a godsend. “Digitalization could be to Africa what coal and steel have been to the European Union,” Ms. Durant said.
The European Coal and Steel Community, created in 1951, was a foundation stone of what eventually become the wider European economic union
The AfCFTA offers Africa the opportunity to build its digital infrastructure, both at the national and regional level, and to have a common regulatory framework, consistent competition laws, and their functional application, Ms. Durant.
Digitalization and the AfCFTA offer small and medium-sized enterprises in Africa the opportunity to expand across borders if the existing digital divide is bridged and an enabling environment is created, various speakers at the session noted.
“Digitalization allows businesses to unlock the potential of the Internet, to go beyond small national markets and to scale up their operations,” said Kamil El Khatib, an ICT policy analyst at the African Development Bank.
“The African continent is fragmented but we will unite it digitally,” said Cedric Atangana of Wecashup, a pan-African payment platform. The fifth edition of eCommerce Week – an annual gathering that draws leading e-commerce figures, start-ups, policy makers and officials from around the world – is taking place in Geneva from 1 to 5 April. The theme of this year’s week, which comprises dozens of sessions, is “From Digitalization to Development”.
Last December, UNCTAD organized its first-ever regional edition, Africa eCommerce Week, hosted by Kenya.
tralac’s Daily News Selection
AfCFTA here at last: is Africa ready to embrace it? (Editorial comment, New Times, Kigali)
Global trade growth loses momentum as trade tensions persist (WTO)
Main points. World merchandise trade volume is forecast to grow 2.6% in 2019, accompanied by GDP growth of 2.6%; Trade growth should pick up to 3.0% in 2020 with GDP growth steady at 2.6%; Trade growth in 2020 is expected to out-pace GDP growth due to faster GDP growth in developing economies; Trade tensions still pose the greatest risk to the forecast, but a relaxation could provide some upside potential; Weak import demand in Europe and Asia dampened global trade volume growth in 2018 due to the large share of these regions in world trade; The value of merchandise trade was up 10% to US$ 19.48 trillion in 2018, partly due to higher energy prices; The value of commercial services trade rose 8% to $5.80 trillion in 2018, driven by strong import growth in Asia.
UNCTAD’s eCommerce Week: selected highlights
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Panel: From Digitalization to Development. Session highlights: Digital poverty needs to be a development priority. While some speakers thought the connectivity gap was the core issue, David Porteous, founder and chair of global consulting firm BFA, said the real challenge was the growing divide between consumers and producers in the digital economy. “Many people in most continents will be users of social media,” he said. “What’s not certain is whether they’ll be able to generate incomes that will sustain them and their livelihoods in the future.” Mr Porteous said that although the internet has made it easier for people to create businesses, only 20% or so succeed. “So the question about the digital divide is: how do you deal with that really long 80% tail? How do we make digital a tool of livelihood and production and not merely a tool of consumption?”
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Ministerial roundtable on trade, data and digitalization. The AU’s infrastructure and energy commissioner, Amani Abou-Zeid, said aside from physical infrastructure, mobile money, and a better understanding of the informal economy, one of the biggest challenges in Africa is data. The lack of it, how it differs, and the inability to analyze it when it does exist, are all concerns. “When we talk about data for trade, there is an assumption that this data exists,” Ms Abou-Zeid said. “Lack of up-to-date data is recognized as one of the impacts of lower intra-African trade. When there is data, it can differ from agency to agency and sometimes even within agencies.” The AU is working to address the data issue, she said, saying it would establish a trade observatory located within the AU Commission with funding from the International Trade Centre and the EU. The observatory would deal with the issue of not having a central trade data repository at a continental level and quantitative information to make decisions. Pedro Mancuello, Paraguay’s vice minister of trade, said while more that 86% of people in Paraguay have internet, only 14.3% buy online. This connectivity is a testament to its investment in digital infrastructure, but also a portend of what’s required to get entrepreneurs selling, and consumers buying, online.
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Africa’s online entrepreneurs target the final digital frontier. Yet entrepreneurs face a number of challenges, says Cedric Atangana, WeCashUp chief executive, whose journey to ensure Africans can trade and consume online has seen him develop a continent-wide payment solution and some early precursors to policy. “In Africa, there are over 155 different payment solutions that are running isolated from one another. We have built a tool to aggregate these payment solutions,” said Mr Atangana. “Since we are trying to build a pan-African payments gateway, we deal with over 44 central banks across Africa. To operate, we realized that we had to build a pan-African rulebook so when we do a transfer from Kenya to Cameroon, we respect both banks. This didn’t exist before, so we, as entrepreneurs, had to build it.” Building it does not mean they will come. The African online marketplace is still small. “African businesses don’t produce what the market wants yet. The bigger merchants have a bigger value to bring, so naturally our consumers want to buy from them,” said Mr. Atangana. “The question is, what we are going to do as Africans to help our local businesses grow and export products and services,” he asked the eCommerce Week audience, adding that Africans must help each other. This point was reiterated by UNCTAD secretary-general Mukhisa Kituyi who called on African politicians and billionaires alike to support the growth of the African digital economy.
Nigeria and the IMF
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IMF Executive Board concludes 2019 Article IV Consultation with Nigeria
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pdf 2019 Article IV Consultation report (3.18 MB) . The reelection of President Buhari to another four-year term should provide new impetus to faster implementation of the authorities’ Economic Recovery and Growth Plan. Key priorities under the ERGP – including advancing on revenue mobilization, power sector reforms, and accelerating anticorruption efforts – remain consistent with staff’s past recommendations (Annex I) and should be accelerated now and not await the appointment of a new Cabinet (expected to be sworn in by late May 2019). The parliamentary majority obtained by the governing All Progressives Congress party should also help the government advance more forcefully the key legislative reforms - notably in taxation and the oil sector – currently underpinning the ERGP.
Spillovers from links between Nigeria and neighboring countries will likely be contained. The CBN’s continued preference for naira stability will help sustain partners’ exports, which is particularly important as Nigeria accounts for 70% of ECOWAS exports. Current growth projections for Nigeria imply neither a shock to Nigeria’s neighbors nor a lift (1 ppt increase in Nigeria’s growth is estimated to increase regional growth by 1/3 ppt). Remaining FX restrictions continue to increase food imports in neighboring countries, a good part of which is reportedly smuggled into Nigeria.
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pdf Selected Issues report (1.36 MB) . Contents include: Macro-structural obstacles to firm performance – evidence from 2640 firms in Nigeria; Governance in Nigeria: focus on the oil sector and aml/cft; Fuel subsidies: latest increase and implications of a change in the regulated gasoline price; Assessing the cost-risk of increasing Nigeria’s external debt; Human capital and gender equality.
Uganda takes lion share of trade at Port of Mombasa (Business Daily)
Talks between Kenya and Uganda when President Yoweri Museveni came visiting last week mainly focused on the Standard Gauge Railway and operations at the Port of Mombasa. The main reason the two facilities took centre stage is obvious to see; the 2018 port transit report places Uganda as the biggest user of the port where it had imported 7.4 million metric tonnes of goods last year. It was an increase from 6.5 million tonnes of goods compared with the previous year. The country’s transit market share in 2018 was a massive 82.1%. Between 2017 and 2018 cargo imports into Uganda increased by 0.9 million tones. According to the report, Uganda was followed by South Sudan that had imported 563,663 tonnes which represented 7.6% of the transit market share. DRC Congo came third with 413,249 imports representing 4.9%. The rest of the imports were Tanzania s 229,652 (2.6%), Rwanda’s 219,650(2.4%), Burundi’s 20, 610 (0.2%). Other countries including Somalia, Ethiopia and Burundi had 0.1% imports through the port. In total the Mombasa port handled 8.8 million metric tonnes of transit goods.
Museveni visit puts Northern Corridor plan back on track (Business Daily)
The East African dream of achieving a seamless Northern Corridor transport network is back on course after Uganda agreed to start construction of the Standard Gauge Railway from Malaba to Kampala after years of uncertainties. Kenya was considering terminating its section of the SGR line at Kisumu should Uganda, which had indicated that it would build its line to connect to Tanzania, stuck to its guns. President Yoweri Museveni’s move comes as a boost to Kenya, whose financing prospects for the second phase had apparently been pegged on Uganda agreeing to put up a line from Malaba to Kampala. Kenya is now certain of extending the facility to the Ugandan border following the commitment by President Museveni that his country will construct a line to Kampala. “We have had great progress on these discussions. It will be a game-changer, especially for movement of cargo from Mombasa to Kampala,” said President Museveni.
George Wachira: Kampala destination a boost for SGR viability (Business Daily)
Yes there will now be two SGRs running parallel along the central and northern corridors respectively from the Indian Ocean into the Great Lakes hinterland with Dar and Mombasa ports competing for western-bound cargo. Specifically, when the SGR enters Uganda, it will present opportunities for extensions to Juba in South Sudan and also to towns nearer the Eastern DRC border. In the meantime, “low hanging fruits” await Naivasha later this year when the SGR reaches the location. Thousands of tonnes of imported materials and equipment destined for the oilfields developments in both western Uganda and Turkana in Kenya will need to be moved. Construction works in both Uganda and Turkana are planned for next year. A sufficiently-sized Naivasha Inland Container Depot will be the ideal location for oilfield materials and equipment import clearance and consolidation for onward transfer to trucks. Longer term, Naivasha will be the ICD of choice for western Kenya imports/exports including tea. The location will decongest Nairobi ICD; lighten the traffic on the escarpment route; while also opening up commercialisation and industrialisation of Naivasha.
Gold importers in Uganda now tasked to classify country of origin (Dispatch)
Companies and individuals importing gold for refining in Uganda for re-exportation, must classify its origin in an effort to stop the trade in conflict minerals. According to the Central Bank, the order is one of the efforts to understand the source of the country’s bulging gold exports. Gold exports have expanded enormously since the opening of African Gold Refinery in 2016. A year before, the country had only exported gold worth $35.7m (Shs 132 billion). It immediately jumped to $339.5m (Shs 1.2 trillion) when the refinery opened. In the 12 months to February 2019, the country exported gold worth $549m (Shs 2 trillion), according to BOU records. This is the first time the country has exported more gold than coffee, a key cash crop. However, a week ago, the Uganda police seized a gold consignment from Venezuela at the African Gold Refinery in Entebbe. The consignment has since been returned after Uganda’s attorney general William Byaruhanga said AGR had lawfully imported the gold. Venezuela is under USA sanctions. The order also comes on the backdrop of a report by the UN which said that the UN had confirmed Kampala was a recipient of smuggled gold from the DRC, an accusation that has hang over Uganda’s neck for decades.
Rwanda, Israel unveil Horticulture Centre of Excellence in Kigali (New Times)
Billed as MASHAV’s biggest sponsored project in Africa, the initiative is expected to deploy modern technology and improve the wellbeing of farmers. It could add impetus to Rwanda’s efforts to diversify its export revenues, currently dominated by traditional exports such as coffee, tea and minerals. Rwanda targets 46,314 tonnes of horticulture output and an annual export revenue of $130m by 2024, according to the Ministry of Agriculture and Animal Resources. The horticulture industry has been growing steadily. For instance, the Minister said, in 2015 Rwanda generated $5m from horticulture exports before the figure sharply increased to $23m in 2018.
India sets up institute in Africa to augment agrarian economy (Economic Times)
In order to complement the efforts of the Government of India to enhance capacity in the areas of agro-financing and entrepreneurship development for African countries, Ministry of External Affairs signed an MoU on Tuesday with National Bank for Agriculture and Rural Development Consultancy Service for setting up India-Africa Institute of Agriculture and Rural Development in Malawi. IAIARD will be a Pan-African Institute wherein trainees, not only from Malawi but also from other African countries, will receive training to develop their human resources and build their capacity. IAIARD will develop training programmes in the areas of micro-financing and agro-financing, among others. The entire expenditure on faculty from India, the travel, logistics and training course expenses for students from other African countries will be borne by the Government of India for an initial period of three years.
Today’s Quick Links: Africa auto sector updates. Kenya: Munya seeks more power to ban select car imports; South Africa: Biggest vehicle-exporters from SA in March 2019, Ford adopts dual-port strategy, moves exports through Durban, PE China imports first consignment of beef weighing 21 tonnes from Namibia UNCTAD’s Investment Monitor #21 Posted by the OECD: Summary Record of the DAC Senior Level Meeting (22 February, pdf); Summary Record of the 1056th DAC meeting (21 January, pdf) Carlo Perrotta (Italy’s Ambassador to Zimbabwe): Human rights must not be forgotten from EU-African dialogue |
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IMF Executive Board 2019 Article IV Consultation with Nigeria
Mobilizing Resources to Invest in People
Spending on health and education in Nigeria is among the lowest in the world. To fund these crucial sectors, Nigeria will have to maximize the amount of revenue it raises. Diversifying the government’s revenue base, increasing non-oil revenues, and securing oil revenues, will all be critical, says the IMF in its latest economic health check of sub-Saharan Africa’s most populous economy.
“Identifying two or three big-ticket items could lift revenue sustainably and in a timely manner – other reforms could follow,” said Amine Mati, IMF mission chief and senior resident representative in Nigeria.
Challenges of a global dimension
According to the report, public services and infrastructure in Nigeria are under considerable strain. Globally, Nigeria ranks first in the number of children out of school. Infant mortality is also high: 12 percent of all children who die under the age of five are Nigerian.
At 1.7 percent and 0.6 percent of GDP, levels of spending on education and health are among the lowest in the world, and insufficient to address growing challenges. To meet these large spending needs, greater resource mobilization is critical. With rapid population growth that could make Nigeria the third most populous country in the world by 2050, these issues will intensify if left unaddressed.
Limited breathing space
The revenue base is simply too low to address the current challenges, says the IMF. At 3-4 percent of GDP, Nigeria’s non-oil revenue mobilization has been one of the lowest worldwide, reflecting weaknesses in revenue administration systems and systemic noncompliance.
For corporate income tax, less than 6 percent of registered taxpayers are active. Estimates on payment compliance in the case of value added tax (VAT) vary between 15 and 40 percent, and Nigeria raises less than 1 percent of GDP in VAT revenue, compared to almost 4 percent of GDP in the countries of the Economic Community of West African States (ECOWAS). Tax exemptions and incentives are narrowing the base.
International evidence shows that a minimum tax-to-GDP ratio of 12.75 percent is associated with a significant acceleration in growth and development of state capacity. It would allow increased expenditure for economic development and reduce budget exposure to oil revenue volatility.
Accelerated and forceful reforms needed to make a visible dent
The government is recognizing these challenges. It has taken welcome steps to increase tax audits, use e-filing, self-assessments, conduct data matching exercises to close collection loopholes, strengthen tax enforcement, and combat corruption in tax offices, and increased excises on alcohol and tobacco. It also launched the Strategic Revenue Growth Initiative that calls for the appointment of a high-powered steering committee to guide reforms and monitor progress on several welcome proposals.
A more comprehensive tax reform could help increase the tax-to-GDP ratio by about 8 percentage points. These could be generated through tax policy and revenue administration measures that could yield an additional 3½ percent of GDP from VAT reforms, 1½ percent of GDP from excises, 2 percent of GDP from the rationalization of tax expenditures, more than 1 percent of GDP from efficiency gains and stronger internally-generated revenue collection, and through taxation of property at the state level.
Such a reform program would broaden the base of income and consumption taxes, improve data collection and monitoring, improve tax compliance and create incentives for sub-national tiers of the government to raise their own revenues.
Moving forward
“VAT reform would benefit both the federal and subnational budgets,” said Amine Mati, IMF mission chief and senior resident representative in Nigeria. “It would include tax credits for intermediary inputs used for the final products and capital expenditures, an annual turnover threshold for VAT registration to exclude small and micro businesses, and improved monitoring and control,” he added.
The report suggests there should be a single and higher rate for VAT of between 10-15 percent. Exemptions should be limited, well-targeted and follow equity considerations. The report underlines that vulnerable populations must be shielded from any negative impact of the reform, including through targeted social transfers.
Short-term tax and customs administration measures are essential, suggest IMF economists. They should include strengthening taxpayer register and improving filing and payment compliance and initiating large scale data analysis and cross matching. Improving filing and payment compliance, for example, through document simplification and penalties for non-compliance, and putting in place appropriate management controls in customs are other key measures.
Oil revenues that make up a substantial share of government revenues also need to be secured. This includes ensuring that the ongoing work on new petroleum legislation brings an appropriate government take, while not discouraging foreign investment. It is also important that any sales of oil assets should be preceded by changes in legislation (Petroleum Profit Tax Act) to ensure revenues of the new operator are not exempted and find their way into public finances.
The report acknowledges that raising revenues in a short time by a significant amount is ambitious, but the authors believe the proposal is feasible, as shown by international experience. Facing this challenge will help Nigeria make the necessary investment into priority areas – crucial to boost living standards for its young and rapidly growing population.
Executive Board Assessment
Executive Directors welcomed Nigeria’s ongoing economic recovery, accompanied by reduced inflation and strengthened reserve buffers. They noted, however, that the medium-term outlook remains muted, with risks tilted to the downside. In addition, long standing structural and policy challenges need to be tackled more decisively to reduce vulnerabilities, raise per capita growth, and bring down poverty. Directors, therefore, urged the authorities to redouble their reform efforts, and supported their intention to accelerate implementation of their Economic Recovery and Growth Plan.
Directors emphasized the need for revenue-based consolidation to lower the ratio of interest payments to revenue and make room for priority expenditure. They welcomed the authorities’ tax reform plan to increase non-oil revenue, including through tax policy and administration measures. They stressed the importance of strengthening domestic revenue mobilization, including through additional excises, a comprehensive VAT reform, and elimination of tax incentives. Securing oil revenues through reforms of state owned enterprises and measures to improve the governance of the oil sector will also be crucial.
Directors highlighted the importance of shifting the expenditure mix toward priority areas. They welcomed, in this context, the significant increase in public investment but underlined the need for greater investment efficiency. They also recommended increasing funding for health and education. They noted that phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable would help reduce the poverty gap and free up additional fiscal space. Directors recommended stronger coordination for more effective public debt and cash management.
With inflation still above the central bank target, Directors generally considered that a tight monetary policy stance is appropriate. They encouraged the authorities to enhance transparency and communication and to improve the monetary policy framework, including by using more traditional methods, such as raising the monetary policy rate or cash reserve requirements.
Directors also urged ending direct central bank intervention in the economy to allow focus on the central bank’s price stability mandate.
Directors commended the authorities’ commitment to unify the exchange rate and welcomed the increasing convergence of foreign exchange windows. They noted that a unified market based exchange rate and a more flexible exchange rate regime would support inflation targeting. Directors also stressed that elimination of exchange restrictions and multiple currency practices would remove distortions and facilitate economic diversification.
Directors welcomed the decline in nonperforming loans and the improved prudential banking ratios but noted that restructured loans and undercapitalized banks continue to weigh on financial sector performance. They suggested strengthening capital buffers and risk based supervision, conducting an asset quality review, avoiding regulatory forbearance, and revamping the banking resolution framework. Directors also recommended establishing a credible time bound recapitalization plan for weak banks and a timeline for phasing out the state backed asset management company AMCON.
Directors urged the authorities to reinvigorate implementation of structural reforms to diversify the economy and achieve the Sustainable Development Goals. They pointed to the importance of improving the business environment, implementing the power sector recovery program, deepening financial inclusion, reforming the health and education sectors, and implementing policies to reduce gender inequities. Directors also emphasized the need to strengthen governance, transparency, and anti-corruption initiatives, including by enhancing AML/CFT and improving accountability in the public sector.
Directors welcomed improvements in the quality and availability of economic statistics and encouraged continued efforts to address remaining gaps, including through regular funding.
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Featured tweet by the AUC’s @AmbMuchanga: Good news! The Parliament of The Gambia has approved ratification of AfCFTA Agreement making us meet the minimum threshold [of 22]. The AfCFTA market is being born and is one step ready for launch of its operational phase in July this year.
Related tralac infographic: AfCFTA ratification update
The Kenya High Commission in Pretoria is to host the 3rd Annual Kenya Trade and Investment Summit later this week (4-6 April). The key strategic focus of the summit is to draw interest on Kenya’s “Big Four” Agenda, and to encourage the South African private sector to invest in manufacturing, universal healthcare, affordable housing, and food security.
AfCFTA: What is in it for Uganda? (Monitor)
Speaking to members of Uganda Manufacturers Association last week in a sensitisation workshop on AfCTA, the commissioner for external trade at the trade ministry, Mr Silver Ojakol, said the government is already doing its job ahead of the ratification expected to be a done deal in the next three months or at worst, by close of the year. Prosper Magazine understands that a Cabinet Sub Committee has been put in place to fast track Uganda’s penetration into the broader market and ensure the country’s competitiveness in the wider regional and continental market. Already, the government has profiled several local commodities which the private sector should embrace for export to the continental market. According to Mr Ojakol, should the private sector players, particularly the manufacturers heed the government appeal, then the chances of being spectators as opposed to active participants will not arise.
NANTS communiqué: Implementation of AfCFTA in Nigeria will increase unemployment among farmers
“To ensure the effective implementation of the AfCFTA, participants urged the government to establish mechanism for developing a national AfCFTA strategy in the form of a standing National Action Committee on AfCFTA Implementation Strategies with mandates to recommend adjustment costs compensation, technology and know-how access, research and development subsidization, export market strategies, AfCFTA rules of origin, skills development, business environmental reforms including AfCFTA Country Business Index, AfCFTA impact monitoring and evaluation, among others. In addition, the need for significant public investment to cooperate in the formulation and enforcement of continental Rules of Origin to forestall trade deflection, institutionalisation of contingent protection measures and implementation of the Trade Facilitation Agreement, was emphasised.” [Nigeria National Accreditation Service: How to free Nigeria of substandard goods]
South Africa’s trade minister Rob Davies: ‘We offer productivity’ to China and other investors (The Africa Report)
UNCTAD’s eCommerce Week 2019 began yesterday in Geneva:
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Enhancing the digital dimension in development cooperation strategies. Session summary: Only 1% of all funding provided under what are known as Aid for Trade programmes is currently allocated to ICT solutions. Similarly, multilateral development banks are investing just 1% of their total spending on ICT projects, only about 4% of which is being spent on policy development, work that is critical if digital economies are to be well regulated. If left unaddressed, current divides are set to widen further, exacerbating existing inequalities. This calls for more attention to the digital dimension in the context of development cooperation strategies of both public donor agencies and their private sector counterparts. “The factors that can contribute to growing the digital economy are clear. But the gap of leaving people behind will only widen if we do not start working together,” said Daniela Zehentner-Capell, who heads the trade policy division at Germany’s Federal Ministry for Economic Cooperation and Development. [Technical note for the panel discussion: Donor support to the Digital Economy in developing countries - a 2018 survey of public and private organizations, pdf; The week’s programme can be viewed here]
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Global regulation of digital trade and e-commerce - what is needed? Comments by WTO DG Roberto Azevêdo. E-commerce has reached a high profile in discussions at the international level. We are seeing a growing number of initiatives on this front. For example, there is now a growing number of regional agreements with provisions addressing specific e-commerce issues. Currently about 30% of the RTAs notified to the WTO contain e-commerce provisions, and this number is bound to grow. This seems to indicate that countries are taking measures – regionally and bilaterally – to try and regulate cross-border e-commerce. And there are also efforts towards a more coordinated approach. Over the past few years, at the WTO, we have witnessed growing interest in discussing e-commerce issues in more detail.
Joining forces for e-commerce: how small African firms succeed with collaborative business models (ITC)
Micro, small and medium-sized enterprises in Africa can tackle e-commerce barriers such as formalization, e-payments and delivery by joining forces through collaborative business models. This paper examines the pros and cons of three models – associations, consortiums and cooperatives – and finds that cooperatives are the most suitable to connect small African firms to cross-border e-commerce. Extract from the Foreword, by Arancha González (pdf):But while we have seen many cases of such micro-multinationals trading internationally from emerging economies, there are still far too few from Africa. ITC’s experience across Africa, including in the West African Economic and Monetary Union and in Rwanda, Senegal and Kenya, have shown us the practical difficulties encountered by local firms wishing to engage in e-commerce. We saw how small companies find it challenging to take part in cross-border e-commerce without access to soft and hard infrastructure, market knowledge and e-payment services. Export procedures, customs regulations and compliance with tax, privacy and payment norms present additional burdens. Despite the challenges, I am optimistic about the opportunities for African e-commerce to flourish. For one, the trend lines are pointing in the right direction.
2nd IMF Fintech Roundtable: speech by IMF’s David Lipton
However, we are also witnessing worrisome changes in the international community that could weaken the spirit of multilateral cooperation and make our task more complex. These forces of fragmentation are evident, for example, in trade disputes; in policies that promote national champions - for example, the battle over 5G networks; and in the potential for a regulatory race to the bottom. These forces of fragmentation have a direct bearing on the issues we are addressing today as international aspects of regulatory harmonization will be implemented in this climate. Countries facing the challenge of fintech have legitimate concerns about competition, about the market power of technology giants, and the cyber-risks and social disruptions that may accompany rapid technological change. Many countries worry about how data is collected and used; and how IT firms are taxed. These are issues that need to be discussed in connection with the subject of fintech.
Didier Nkurikiyimfura (Smart Africa’s Chief Technology and Innovation Officer): Africa needs more data centres
A new report from McKinsey Global Institute: Digital India – technology to transform a connected nation
Nigeria’s Senate rejects Industry, Trade and Investment Ministry’s budget estimates for 2019 (ThisDay)
The Senate yesterday rejected the N15.63 billion budget proposals of the Federal Ministry of Industry, Trade and Investment for 2019 due to the discovery of a strange company listed as a parastatal under the ministry. The Senate Committee on Trade and Investment had in the course of the presentation of the 2019 budget proposals of the ministry before it uncovered a Special Economic Zone Company listed for N42 billion appropriation.
Nigeria: Life expectancy now 52 years (Premium Times)
The National Population Commission says the current overall life expectancy of Nigeria stands at 52.2 years. The Acting Chairman of NPC, Hassan Bashir, stated this in New York while delivering Nigeria’s statement (pdf) at the 52nd Session of the UN Commission on Population and Development. “The total Fertility Rate remains at 5.5 per woman; 63% of the entire population is under the age of 25; 42% is under the age of 15 years. According to him, Nigeria recently concluded the field work of its national demography and health survey in 2018 and while it awaits the outcome of that survey, early and child marriage still persists. He said data available indicated that unintended and unwanted pregnancies were common as 23 per cent of the adolescent girl age 15 to 19 years have commenced reproduction. Mr Bande, Chairman, African Group, UN (pdf), said Africa remained committed to cooperating internationally to ensure safe, orderly and regular migration involving full respect for human rights and the humane treatment of all migrants. “To this effect, the African Group supports the free movement of people and goods within countries as it foster rural-urban inter-linkages, and regional integration.”
South Africa backs Namibia against dumping chicken from Brazil (The Exchange)
The South African Poultry Association said on Tuesday that it had noted with alarm that the insidious dumping of chicken from Brazil that plagues the local industry has also taken root in Namibia. Izaak Breitenbach, general manager of SAPA’s broiler division, said that it was increasingly clear that Southern Africa was now in the crosshairs of exporters looking for markets for the unwanted leg quarters that are the byproducts of their lucrative breast-meat exports to the US and Europe. Breitenbach said that given similar experiences with the effects of chicken dumping in West Africa, it may be necessary for Africa to stand together to fight to dump from big market players. [South Africa welcomes EU’s lifting of ban on ostrich meat]
Museveni wins trade and land concessions from Kenya (The Africa Report)
During a two-day state visit to Kenya last week, Uganda’s President Yoweri Museveni got several key trade concessions and an offer for land to build a dry port in the town of Naivasha. Kenya also agreed to drop a two-year ban on poultry and poultry products from Uganda, allow a three-fold increase on sugar imports, in addition to several other concessions on agricultural products. Uganda, on the other hand, lifted a ban on meat and tile exports. [Tshisekedi moves to secure trade with EAC; A shot in the arm for Kenya’s railway project as Uganda ‘buys into the deal’]
Rural roads, poverty, and resilience: evidence from Ethiopia (World Bank)
This study analyzes the impacts of the recent rural road development in Ethiopia on welfare and economic outcomes. The identification of the impacts relies on a difference-in-differences matching approach, taking advantage of the nationally representative household survey and the original road database, both of which are panel data spanning between 2012 and 2016. The results of the econometric analysis overall suggest that Ethiopia’s recent rural road development has substantially increased household welfare and supported households in coping with the recent severe droughts. This study estimates (pdf) that rural roads increased, on average, household consumption by 16.1% between 2012 and 2016 (or 3.8% per year). The effects of rural road development were largest in the most remote communities, as it increased household consumption by 27.9%. Furthermore, in the communities most affected by the El Niño drought, the likelihood of falling into poverty was 14.4% lower between 2012 and 2016 if the community was connected by a rural road.
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A suite of REC-related policy updates:
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Common Market for Eastern and Southern Africa
An extra-ordinary meeting of the COMESA Council of Ministers will be held on Friday, in Lusaka. Ministers will also be briefed on key regional integration programmes including the TFTA and the AfCFTA. Member States’ level of compliance with their obligations under the COMESA Treaty, particularly on customs matters, will also be discussed.
COMESA Court of Justice retreat: close ties between regional and national courts critical to fortify regional integration
COMESA Secretariat to host the Sustainable Development Goals Center for Africa
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Intergovernmental Authority on Development
IGAD Ministerial Thematic Meeting on Livelihoods and Self-reliance for Refugees, Returnees and Host Communities: communiqué (pdf)
IGAD Technical Boundary Committee submits its report to South Sudan Special Envoy: the committee had to define and demarcate the tribal areas of South Sudan as they stood on 1 January 1956.
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Economic Community of West African States
Experts meet to review the implementation of the ECOWAS regulation on roaming. The Commission of the Economic Community of West African States has brought together experts from member states to evaluate the implementation of the Regulation on Roaming on Public Mobile Communications Networks in the Region, approved by the Council of Ministers in December 2017. The Commissioner of Telecommunications and Information Technologies of the ECOWAS Commission, Dr Zouli Bonkoungou, in his welcome address said that the Roaming Regulation is part of priority programmes of the ECOWAS Commission Management aimed at directly impacting the lives of community citizens. The effective implementation of the Regulation, according to Commissioner Bonkoungou, will enhance the regional integration efforts, the free movement of persons and goods and will also make cross border communications easy among Member States.
ECOWAS validates Regional Public Debt and Monetary Statistic Compilation Tools. Representatives of central banks from member states of ECOWAS have validated regional public debt and monetary statistics compilation tools in a five day workshop which ended on 29 March in Abuja. This includes the methodology which will enable member states compile regional statistics of ECOWAS macroeconomic accounts, government finance statistics, balance of payments as well as monetary and public debt statistics. The harmonized public debt platform was validated through the use of the International Monetary Fund’s Standardized Reporting Forms framework and after taking into account the West African Economic and Monetary Union’s methodology and harmonization framework of its Member States.
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West African Economic and Monetary Union
IMF staff report on common policies for member countries: The WAEMU has remained on a strong growth trajectory. The region continued to exhibit one of the fastest growth rates in Africa in 2018—estimated above 6% for the 7th year in a row - fueled by buoyant domestic demand despite adverse terms-of-trade shocks and persistent security concerns in some member-countries (see Table 1). Inflation stayed low reflecting the peg to the Euro, continued ample agricultural production and limited pass-through of higher world oil prices. Fiscal consolidation efforts are estimated to have reached ½ percentage point of GDP in 2018, with the fiscal deficit narrowing to 3.8% of GDP. Meanwhile, external reserves increased, underpinned by Eurobond issuances. Despite the pull from a wider external current account deficit, reserves reached 4.3 months of imports of goods and services (or 32.2% of M2) at end-2018, up from 3.9 months of imports (or 29.4% of M2) at end-2017. Beyond better enforcement of export receipt repatriation requirements, this improvement was largely due to sizeable Eurobond issues from Côte d’Ivoire and Senegal—equivalent to 1.1 months of imports in net terms, partly compensated by shortfalls in other sovereign external financing. The external reserve import cover of 4.3 months remains below the 5-8-month range estimated as adequate for the WAEMU (see Annex 1).
The 2019 World Bank’s Doing Business Report indicates that the regional business climate has improved though it remains less favorable relative to comparator countries in Africa and Asia. The average WAEMU rank moves up by 4 places between 2018 and 2019, driven mainly by progress in Côte d’Ivoire and Togo. In addition, the region has kept the pace of reforms particularly in the area of starting a business. However, WAEMU countries still lag far behind in the areas of getting electricity or credit, registering property, protecting investors, paying taxes, and enforcing contracts. [The companion Selected Issues report]
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EAC’s Strategic Retreat: opening address by President Kagame. Ten years ago, a similar retreat was held here and it resulted in some good solutions that have contributed to furthering our East African agenda. So let’s maintain that same spirit, of frank, brotherly discussion, aimed at finding the right remedies to the current challenges we face in the East African Community. First, we urgently need to get our house in order, both in terms of ownership, which includes paying our respective dues, as well as enhancing transparency and accountability in the management of the institution. This is the only way to maintain integrity internally, as well as credibility with our citizens, and our partner institutions. It will be very difficult to achieve even the more simple goals we have set, if we don’t get this right. I am sure very good progress has been made. Second, we have to urgently unblock obstacles in ongoing projects, and allow ourselves to finish the good work we have started together. Many of these require little more than political will. Even small triumphs generate so much goodwill, and increase the trust of our people in the East Africa Community. So why deprive ourselves of success that we need, and that is within our reach? [Backgrounder: The retreat came at a time when various regional joint projects have stalled while other multiple initiatives are yet to achieve the desired impact. Below are the top 5 issues that shaped the agenda of the summit:]
Recommendations of the 7th East African Health and Scientific Conference. Based on the keynote speech, parallel sessions and symposia presentations, the conference, held on 29 March, recommends that the EAC should, inter alia: Expedite development and application of innovative approaches (such as the cross border health unit model) to cross-border health, disease outbreak, preparedness and response in border areas, while adding value to the national health system; Promote establishment of national bio banks and data repositories among the Partner States and develop a regional policy for guiding the use and security of the repositories. Urge the Partner States to participate in development, evaluation and formalization of emerging technologies intended for promoting digital health; Harmonise the regional IP policy to guide development and uptake of digital health technologies; Strengthening platform for digital inclusion where communities have full access to information on surveillance and disease management. [Download the conference presentations here]
UNCTAD advises Botswana on investment policy processes: two updates
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“Botswana must target more FDI”. Botswana has been encouraged to attract more FDI and tap knowledge on expanding its digital trade networks. UNCTAD secretary general, Dr Mukhisa Kituyi, said this during a brief panel discussion with the Minister of Investment, Trade and Industry, Ms Bogolo Kenewendo. Dr Kituyi, who was on a three-day working visit to Botswana at the invitation of President Dr Mokgweetsi Masisi, joined Minister Kenewendo to unpack Vision 2036 statement of transforming Botswana from an upper middle-income economy to a high-income economy. Dr Kituyi said there had been a boom in expansion of the digital trade which had grown four times than the normal trade. He said digital trade was critical and it was important for countries such as Botswana to have enabling regulatory measure to allow for ease of doing digital business. He appealed for development of necessary skills and the alignment of educational training with current market requirements. “We must cut back on red tape, create an enabling infrastructure development and trade facilitation where you reduce the risk of being landlocked. But don’t run the risk of attracting more foreign investors than domestic investors. Where this had happened the local enterprises registered offshore and came back as foreigners,” he warned. [UNCTAD chief meets Botswana president over economic reform]
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Transformation team in offing. President Dr Mokgweetsi Masisi says critical issues identified in Vision 2036 call for an urgent need for the development of the National Transformation Strategy. Speaking at a Cabinet retreat at Manong Lodge on 29 March, Dr Masisi said to that end members of the team would be announced in the near future. He said the strategy team would drive the process of transforming Botswana into a high income country, focusing on achieving a diversified and export-led economy among many. The two-day cabinet retreat was facilitated by an UNCTAD team led by secretary general Dr Mukhisa Kituyi.
Mauritius: Launching of the National Electronic Licensing System to ease doing business (GoM)
The National Electronic Licensing System (NELS), a key initiative to improve the investment and doing business climate in Mauritius, was launched yesterday at the Caudan Arts Centre, Port Louis. The NELS forms part of the project ‘Improving the Business and Investment Climate in Mauritius’ which aims to facilitate the business and investment environment by reducing the number of business permit applications and the time taken to obtain business licences and permits. The Vice-Prime Minister also outlined two key projects of the Government aimed at improving regulatory quality in the country. They are: Regulatory review of the business-related regulatory principles, followed by an in-depth review of the regulatory framework for four key sectors namely, land use and construction, trade and logistics, tourism and health and life sciences; Introduction of a regulatory impact assessment tool for evidenced-based approach to business related legislations.
US puts Kenya on list of cash laundering hotspots
The US government has put Kenya on a list of global hotspots for money laundering, citing insufficient controls on the circulation of dirty cash and the lack of laws against terrorism financing. A report published on Friday by the United States Department of State Bureau for International Narcotics and Law Enforcement Affairs said money laundering in Kenya occurs in the formal and informal sectors, fuelled by domestic and foreign criminal operations. “Kenya remains vulnerable to money laundering and financial fraud,” says the report. “It is the financial hub of East Africa, its banking and financial sectors are growing in sophistication, and it is at the forefront of mobile banking.” Kenya recently formed a high-powered anti-money laundering task force to establish the extent of money laundering in the most susceptible sectors of the economy, setting the stage for a crackdown on the suspects. The team gazetted by Treasury Secretary Henry Rotich brings together 30 State agencies from the security apparatus, the Judiciary, as well as banks, Saccos, real estate and gaming regulators.
Starting on Wednesday: the Intergovernmental Group of Experts on E-commerce and the Digital Economy. Background submission: TORs for the Working Group on Measuring E-commerce and the Digital Economy
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A suite of AfCFTA updates:
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Professor Benedict Oramah, Afreximbank President: 2019 Bullion Lecture, delivered earlier this week in Lagos on pdf Leveraging the AfCFTA to Boost Nigeria’s Economic Development (1.18 MB) . Nigeria will need to overcome a number of constraints and concerns in order to be able to reap the benefits the AfCFTA offers. The good news is that as we shall see hereunder these constraints need not be deal-breakers. I highlight the major concerns and the remedies here under:
Current macroeconomic policies may need to be tweaked towards supporting increased regional trade. An environment of low tariffs, and significant reduction in non-tariff barriers envisaged under the AfCFTA, will require maintaining the real exchange rate of the Naira at an appropriate level. This will mean appropriate management of the nominal exchange rate of the Naira, implementation of policies that promote improved productivity, appropriate monetary policies and so on.
At the sectoral level, there will be a need to introduce policies that encourage FDI flows to sectors that have the highest potential for regional trade, namely light manufacturing and agriculture. The Government needs to investigate why most FDIs that come into Nigeria flow to the oil and gas sector and do something to expand the recipient sectors. The interventions could include introducing more friendly investment policies that will reduce investment risks; strengthening the Investment Promotion Agency so that it is able to provide useful information to investors; and strengthening Nigerian Export Promotion Council so that it can contribute effectively to reducing the cost of exporting to near markets.
Some complain that government officials negotiate international trade treaties and make trade and investment policies without consulting those (the private sector) whom those treaties and policies are supposed to serve. Because this concern is Africa-wide and explains why there is usually limited support for trade policies negotiated by African Governments, compared to other regions, Afreximbank and the AU have launched the Pan-African Trade and Investment Policy Committee to serve as a platform for engaging the African private sector in trade policy formulation and trade negotiations.
Some Nigerian manufacturers worry that the AfCFTA will create an opportunity for certain goods produced outside of Africa to enter the Nigerian market from smaller African countries. While this is a valid concern, it does not present an insurmountable problem for various reasons, particularly because: stringent rule of origin is an important component of the AfCFTA and is currently under negotiation; the AfCFTA is expected to have a strong dispute settlement mechanism that will allow any grievances to be settled; and Nigerian companies must also realize that to compete effectively in Africa, they must be ready to compete globally. This will involve retooling their factories to convert them from import substitution to export promotion.
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Francis Mangeni, COMESA’s Director of Trade and Customs: The African Continental Free Trade Area to enter into force. The African Continental Free Trade Area is here and will formally be launched at the next summit of the AU this July in Niamey in Niger. This is one of the biggest achievements and landmarks of all time to come out of Africa.
Another sine qua non for AfCFTA to become functional, is that the countries must add in their Tariff Books, the customs duty rates that will be charged on goods originating from other Tripartite countries. For countries that wish to maintain and extend to others, subject of course to reciprocity, their current trading terms under the full FTAs they belong to, for instance COMESA, EAC, ECOWAS and SADC, modification of the Tariff Books will be very easy, a clerical exercise of a mere hours. Also, countries that have eliminated or significantly reduced their general or Most Favoured Nation duties, such as Libya, Mauritius, and Seychelles, should not face challenges in making tariff modifications for AFTA. However, a bit of work and further negotiations will be required among those who will limit their trade liberalisation in line with the AfCFTA modalities. Ninety percent of product lines will be liberalized over transition periods of 5, 10, 13 or 15 years. Seven percent will be sensitive products, and three percent will be excluded from AFTA altogether. Sorting out which products to put under these various categories, as a pre-requisite exercise, can end up being a pitfall, if proactive hands-on technical and financial support is not quickly rolled out throughout the continent.
A third pre-requisite for trade to happen under the AfCFTA is the necessary customs, standards and trade facilitation documents. These need to be quickly produced by the governments and availed to economic operators for use. Without them, trade cannot happen on AfCFTA terms. There is need for an AfCFTA Customs Declaration, an AfCFTA Certificate of Origin, AfCFTA transit documents, in addition to the five universal documents as well as product specific requirements especially in the agricultural sector. Should all these pre-requisites begin to pose challenges, an easy way forward to put the AfCFTA face to trade on the continent, would be to scale up the on-going Trade Facilitation Programs, such as building one-stop-border-posts, digitisation of customs and other regulatory processes, orientation of existing surface and air corridors into development corridors, adoption of continent-wide payment systems, operationalisation of market-intelligence facilities, and establishment of online and SMS-based mechanisms for addressing non-tariff barriers and some other trade disputes. These are low hanging fruits, so to speak.
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Carlos Ahenkorah, Ghana’s Deputy Minister for Trade and Industry: Adhere to standardized goods, services to facilitate AfCFTA. Ghana’s Deputy Minister for Trade and Industry, Carlos Ahenkorah, has called on ECOWAS countries to adhere to the outlined standards for goods and services to facilitate speedy implementation of the African Continental Free Trade Area. According to him, the African Continental Free Trade Area could be derailed if the issue of standardization of goods and services are not addressed in all countries. “If trade between African countries will work out, standardization comes into play. I say this because if Ghana or any other country should hike up their standards and other countries are unable to keep pace then the process will be hindered. If this is not looked at then the ACFTA might not work properly. We might encounter serious challenges.”
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NANTS backs Buhari over trade agreement. The National Association of Nigerian Traders has thrown its weight behind President Muhammadu Buhari’s refusal to sign and ratify the AfCFTA. President of the NANTS, Mr Ken Ukaoha, disclosed this on Thursday in Abuja at the national validation workshop on the study on Nigeria’s agricultural trade strategies for the AfCFTA negotiations. “There is no doubt that the AfCFTA has potentials to handhold Africans and particularly, MSMEs in our constituency out of the poverty bracket. Economic pundits have noted that with 1.2 billion inhabitants and a GDP of about $3trn, the AfCFTA has the capacity to increase access to markets that are larger than the colonially imposed national boundaries and demarcations,” Ukaoha said. He added: “However good and attractive as all of these pontifications of potentials may sound, this good news cannot come the way of any country at all without the effective, adequate and strategic preparations for the negotiations. Negotiators of AfCFTA must therefore be prepared to navigate into the country’s future only through evidence-based instruments.”
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Assessing inclusion and human rights implications of digital trade. Mr David Luke, ATPC Coordinator, said the AfCFTA offers a platform for African countries to collaborate on the digital economy, which could also help to inform a common African position on e-commerce at the multilateral level. In this regard, ECA has recently established a Digital Identity, Trade and Economy Centre of Excellence which pools various types of expertise, including trade, statistics, technology, project management, policy, and investment, dedicated to working on Africa’s digital agenda.
Gender considerations in trade agreements: perspectives from yesterday’s WTO discussion
Trade and trade agreements can be a useful mechanism to support women’s economic empowerment and thus boost economic growth and poverty reduction around the world, DG Roberto Azevêdo said during the workshop on gender considerations in trade agreements. ”Since 2016, a new trend has emerged with the inclusion of stand-alone chapters on trade and gender in the RTAs negotiated by Canada and Chile. Several others, including the EU and New Zealand, have indicated their intention to address more explicitly the role of women in their new trade agreements. Of course, these efforts are bolstered by the Buenos Aires declaration. But it is not an easy task to mainstream gender into trade policies and into development projects. It is one thing to set an objective in favour of women’s empowerment, it is another to design concrete policies and programmes to implement that objective. We are seeing a range of steps being taken. Some countries have launched processes to translate their gender equality objectives into concrete trade policies and programmes. Some are evaluating the impact of their Aid for Trade strategies to better reach women. Others are organising national consultations to better understand how to integrate gender into their trade policies. And some are thinking about how to design new types of trade agreements, building on the work that has been done so far. We are all still somewhere on the learning curve.”
Isabelle Durant, Deputy Secretary-General of UNCTAD: “Although trade policies should be used to help empower women, this is not a panacea because policy makers cannot address all gender issues through trade. This brings us back to the importance of national policies that must be undertaken with regards to education, women and girls’ access to education, digitization, information, economic opportunities and so forth.”
Sefatlhego Matebekwane, Agricultural Attachée of Botswana: “We need events such as this seminar today to deepen our understanding, share experiences and lessons learned in terms of women’s empowerment. We know that there is not a one-size-fits-all solution. Therefore, we have to come up with policies that affect different societies differently. The seminar today allows us to analyze the steps taken so far and to ensure that we have enough knowledge and data to design inclusive trade policies that leave no one behind.” [50 Million African Women Speak digital platform: training for users as launch nears]
South Africa’s trade statistics for February 2019 (SARS)
SARS has, today, released trade statistics for February 2019 recording a trade surplus of R3.99bn. These statistics include trade data with Botswana, Eswatini, Lesotho and Namibia. The year-to-date (1 January - 28 February 2019) trade deficit of R9.08bn is an improvement on the deficit for the comparable period in 2018 of R27.97bn. Exports year-on-year increased by 9.3% whilst imports for the same period showed an increase of 3.9%.
Pinelopi Goldberg: Moonshot Africa and jobs (World Bank)
Concerns about robots and algorithms replacing human labor increasingly dominate the public debate not only in advanced economies, but also in emerging and developing economies. Against this background, it is natural to ask how these two views are compatible. To be more specific: How will Moonshot Africa create jobs on a continent where job creation is needed more than anywhere else in the world with Africa’s working-age population projected to rise by 70% in the next twenty years? To date, there has been little work on this question. But, a recent paper by Jonas Hjort and Jonas Poulsen, “The arrival of fast internet and employment in Africa,” published in the American Economic Review in March 2019, takes up this exact question and gives technology optimists reason for hope. In the 2000s, consortia consisting of private investors, African governments and multilateral organizations gradually built, over the course of several years, ten submarine fiber optic internet cables connecting landing-point cities along Africa’s coast with other continents. These cables greatly increased data transmission speeds and capacity on African internet networks and reduced the cost to individuals and firms to access the internet. Hjort and Poulsen use this gradual improvement in connectivity to assess how faster internet access affected jobs in Africa. Using household survey data from 12 African countries with a combined population of roughly half a billion people, the authors document a large positive effect on employment - an increase of 3.1% in South Africa and 6.9 - 13.2% in other countries in the samples – that is primarily driven by increased employment in higher-skill occupations. [Related commentary, by Akihiko Nishio: The jobs challenge is bigger than ever in the poorest countries]
Germany’s new Africa policy (DW)
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Diarise: SWIFT’s African Regional Conference (18-20 June, Accra) on the theme Enabling the Digital Economy
South Africa’s February 2019 trade balance will be released tomorrow, Friday
At CoM2019: Seeking the one pending AfCFTA ratification
EACJ rules that Uganda’s excise duty imposed over goods imported within East Africa is a violation of the Treaty (EACJ)
The court further ordered that implementation of the provisions of Sec 2(a) and (b) of the Excise Duty (Amendment) Act No.11 of 2017 by misconstruction and wrongful re-classification of the British American Tobacco Ltd Uganda’s Cigarettes as ‘imported goods”, contravene and infringe on Articles 1 and 75 (6) of the Treaty as well as Articles 1 (1) and 15 (1) (a) and (2) of the Customs Union Protocol and Article 6 (1) of the Common Market Protocol. The Court further ordered that the government’s misapplication of the provisions of the said Act by issuance of the payment registration slips for additional taxes in the sum of Ug shs 325,208,000 for the BAT’s 1,170 packages of soft cap cigarettes is illegal, null and void and the court ordered the government, with immediate effect, to rescind and withdraw the payment registration slips.
In addition the court ordered the government to ensure the interpretation and application of Excise Duty Act with due regard and in compliance with applicable Community Law and to align the Ugandan tax laws with Community Law applicable to goods from EAC Partner States. The court exercising its discretion ordered each party to bear its own costs on the basis that this case has canvassed matters of grave importance to the advancement of Community law and EAC intra-regional trade, which would be of significant public interest to across section of stakeholders within and beyond the EAC regional bloc. [Kenya, Uganda to continue on the integration path]
Earnings from East African ports improve (The EastAfrican)
African CEO Forum: selected highlights
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Businesses demand more say on EAC agenda to promote investment. Business leaders in the EAC say protectionism and differences between politicians are impeding efforts by companies to invest in the region. Tanzanian business magnate Ali Mufuruki accused politicians of failing to push policies that promote investment in the region. “We have never had the discussion on why there isn’t a single billion-dollar company in East Africa. If we have that conversation, people will start to ask whether it is going to be a Tanzanian or a Rwandan company. We need to be honest with each other and ask what we really want from this union,” Mr Mufuruki told the Africa CEO Forum in Kigali. Saying he had found difficulty in hiring workers in the region, he urged the EAC partner states to relax labour laws and abolish work permits. He asked politicians to let the business community - which is driven by profit and growth - to lead EAC integration. “If business leaders are allowed in the rooms where policies are made, then business can be put at the forefront and we will make more progress,” he said. His message was echoed by RwandAir chief executive officer Yvonne Makolo, who said that the lack of an open skies policy has continued to make air travel expensive for most people in the region and on the continent.
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Tshisekedi fronts DRC as key to Africa’s energy, water woes. Starting with the armed groups in his country which he has vowed to neutralise, Mr Tshisekedi, said their motives were more commercial than ideological. “The militias are petty business people and illegal peddlers of natural resources like minerals and timber. They are getting followers out of social realities like lack of jobs. We want to integrate these people into the society through the co-operation of other countries involved,” he told delegates at the Africa CEO Forum held in Kigali, on Tuesday. He said he would look to move the country forward with progressive policies such as those pursued by President Paul Kagame in raising Rwanda from the ashes of the Genocide Against the Tutsi to one of the world’s business and political success showcases in a short 25 years.
He said the Great Lakes countries should concentrate on common interests such as exploitation of methane gas at Lake Kivu, which is on the Rwandan side close to the DRC border, and hydroelectric power at River Rusisi to help the countries diversify their economies. “These should be co-ordinated for development and peace,” he said. He said DRC was ready to offer its resources and opportunities to other African countries, pointing out that Congo River, in particular, could alleviate disputes on the River Nile, such as that pitting Ethiopia and Egypt over the construction of the Grand Renaissance dam.
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Regulators remain sceptical of cryptocurrencies. “Cryptocurrencies started out as really fantastic ideas, but as time went on, they now look like strong indicators of illicit flows. Even as we look at the potential, we have to look at the risks,” the Central Bank of Kenya Governor Dr Patrick Njoroge said on Monday at the ongoing Africa CEO Forum in Kigali. Regulators are concerned that with no guidelines the digital currencies could have an impact on financial stability. “There is no shared regulation for cryptocurrencies so far. It would be very dangerous for a bank to be part of any system that is not regulated,” warned Mr Alexandre Maymat, head of Africa, Asia Mediterranean Basin & Overseas at Societe Generale, a French-owned investment bank.
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Morocco’s Mohamed El Kettani emerged the 2019 African CEO of the Year at the 7th edition of the Africa CEO Forum. He has invested more than $1bn on the continent over the past seven years. He is a champion of south- south cooperation and is behind the pan-African development of Morocco’s leading bank, Attijariwafa Bank. Ethiopian Airlines won the accolade of ‘African Champion of the Year’ for their intra-African partnerships, reaching 40 countries on the continent. The award was received by the airline’s CEO, Tewolde Gebremariam.
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More inter-Africa trade at CEO Forum. Seen as the continent’s most influential networking platform for private sector actors, delegates participated in over 40 discussion sessions themed around how Africa can move from multi-lateral trade treaties to actual business opportunities. Deals estimated at worth over $1bn were also been sealed during the two-day summit.
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Africa Plastics Recycling Alliance launched (pdf). A number of international consumer goods companies operating across Africa including Diageo, Unilever, The Coca Cola Company, and Nestlé launched the Africa Plastics Recycling Alliance at the CEO Africa Forum in Kigali. This Alliance aims to turn the current challenge of plastic waste in Sub Saharan Africa into an opportunity to create jobs and commercial activity by improving the collection and recycling of plastics. The Africa Plastics Recycling Alliance has been established for companies to:
The productivity cost of illness in Africa: Diseases cost the African region $2.4 trillion a year (WHO)
The World Health Organization estimates that nearly 630 million years of healthy life were lost in 2015 due to the diseases afflicting the population across its 47 member states in Africa, now amounting to a loss of more than $2.4 trillion from the region’s GDP annually. Non-communicable diseases have overtaken infectious diseases as the largest drain on productivity, accounting for 37% of the disease burden. Other culprits for lost healthy years are communicable and parasitic diseases; maternal, neonatal and nutrition-related conditions; and injuries. Around 47%, or $796bn, of this lost productivity value could be avoided in 2030 if the Sustainable Development Goals related to these health conditions are achieved, WHO found. [Download: A heavy burden – the productivity cost of illness in Africa]
New report urges action to close Africa’s gender gaps in business performance (World Bank)
A new World Bank report proposes a menu of evidence-based solutions to address wide gender gaps in the performance and profitability of firms in sub-Saharan Africa. Drawing on rich survey data from several Sub-Saharan African countries including Ghana, Profiting from parity: unlocking the potential of women’s businesses in Africa finds that female entrepreneurs consistently lag men on several key indicators of business performance. Monthly profits and sales from female-owned firms are on average 34% and 38% lower, respectively, than those from male-owned firms. Bridging these business performance gaps is especially critical for African economies, where women are more likely to be self-employed -often out of economic necessity- than to engage in wage work and are more likely to be entrepreneurs than men.
Developing a “Pool of Customs Valuation Trainers” in Southern Africa (WCO)
Under the auspices of the WCO/JICA Joint Project, the Second Working Group Activity (sub-regional workshop) of the Master Trainers Programme on Customs Valuation was held in Maputo (18-22 March). The workshop was the second in a series of activities to be undertaken by these five Revenue Authority countries ( Botswana, Malawi, Mozambique, Zambia, Zimbabwe) to enhance their capacity related to the implementation of Customs Valuation.
The Global Alliance for Trade Facilitation has released its Annual Report 2018 (pdf)
At the close of 2018, 88% of Alliance global private sector stakeholders confirmed that the Alliance is effectively leveraging public-private partnerships to deliver trade facilitation reforms, while 95% of global businesses we work with said they believe Alliance projects are commercially relevant for their business and guided by evidence and global good practice. Ghana: We aim to see 75% of all shipments assigned to the green channel pre-arrival with 90% of all green channel shipments being released upon arrival. This has the potential to significantly reduce the cost of cross-border trade in Ghana. In 2018 the project team, comprised of representatives from the GRA and the business community, completed an analysis of international best practice, including a study visit to Germany, developed the new model and identified the necessary legal and regulatory changes that need to be made to support it. As we enter 2019, we are ready to begin delivering training and piloting the new pre-arrival process.
Paying across borders: can distributed ledgers bring us closer together? (World Bank)
These shortcomings make the cross-border payment industry ripe for disruption and innovation. Some see distributed ledger technologies (DLT) as having the potential to drive industry-wide change. Indeed, B2B cross-border payments, traditionally characterized by fragmentation and opacity, are a potential use case for the successful implementation of DLT. In 2018, Ripple, a FinTech company, piloted xRapid, a DLT-based cross-border payments solution, along the very competitive US-Mexico corridor. Financial institutions involved in the pilot saved 40%-70% in foreign exchange costs, and the average payment times was just over two minutes. The transfer of funds on xRapid took two to three seconds, with most of the processing time explained by domestic payment rails and intermediary digital asset exchanges. [Mauritius: 5th annual SIL e-Gov conference focuses on artificial intelligence, blockchain]
Looking forward: US-Africa relations (Brookings)
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Tunisia has formally ratified its membership of COMESA – becoming its 20th member
Diarise: Transforming Mauritius – policies to foster industrialisation and development. The workshop, 11-12 April, will be organised by UNCTAD, in collaboration with the Ministry of Foreign Affairs, Regional Integration and International Trade, and the Ministry of Industry, Commerce and Consumer Protection.
CoM2019 ends with African governments being urged to embrace digital transformation (UNECA)
The 52nd session of the Economic Commission for Africa Conference of African Ministers of Finance, Planning and Economic Development ended on Tuesday with governments urged to move with speed to embrace digital transformation to spur economic growth. The Ministers said if Africa does not move with speed to adapt modern technologies and ensure everyone has broadband internet access at least by 2022, then the continent will not be able to leapfrog development challenges in the near future. The Ministers also discussed threats and challenges posed by digitization and the need to have measures in place to protect citizens and governments. “Limited Internet access in Africa continues to impede the development of digitization in economic and social sectors, including e-commerce, e-health and e-government, which are constrained by high transaction costs, the spatial distribution of information exchanges, and limited access to international markets,” the Ministers said in their statement. Progress was noted in regional integration efforts on the continent with the ministers committing to taking measures and steps to enhance the incorporation of regional integration agreements and treaties, including the African Continental Free Trade Agreement, into domestic law and implementation. The Ministers said it was worrying that Africa continued to lag behind other regions in terms of infrastructure development.
SA-EU Bilateral Trade Overview, 2018 (SADC-EU EPA South Africa Outreach initiative)
According to DTI figures, the EU remains South Africa’s main trading partner accounting for 26.4% of all trade in 2018; more concretely, the EU accounts for 24% of SA’s exports and 29% of its imports. The EU is also the country’s most stable post-apartheid partner with exports to the EU systematically above 19% of South Africa’s total exports. SA exports have grown 5.3% in 2018 despite recessive economic environment while exports to the EU have grown at a faster pace, 12.5%. This shows that the recent SADC EU Economic Partnership Agreement, which entered into force in 2016 guarantees a strong reliable framework for doing business and engaging on issues of mutual concern.
The deficit in favour of the EU has also been shrinking as South Africa has been developing its industrial base, now at R58bn down from R88bn in 2016. According to EUROSTAT figures, SA has a surplus with the EU of €162m (aprox R2.6bn). A significant part of the discrepancy in statistics has been attributed to a discrepancy in gold exports. At a sectoral level, and according to EUROSTAT figures, SA has a surplus balance with the EU in agriculture of €1.5bn, and of €867m in the automotive sector.
SA exports to the EU are also much more diversified than to other partners, with raw materials accounting for less than half of the total. According to EUROSTAT figures, the automotive sector alone accounts for 21.5% of SA’s exports to the EU, followed by agriculture at 12.4% and machinery at 6%. In the agricultural sector, and according to DTI figures, 37% of SA’s fruits and vegetables go to the EU, followed by 30% of its animal products exports and 20% of its prepared foodstuff including wines. [See: Table 1 – Overview of South Africa’s trade with the world; Table 2 – Bilateral trade SA-EU, pdf]
Namibia: Annual trade statistics 2018 (pdf, Namibia Statistics Agency)
The year 2018 recorded a trade deficit amounting to N$17.38bn, a remarkable reduction of 31% when compared to N$25.18bn observed in the preceding year. The current deficit was mostly attributed to the importation by Namibia of high valued manufactured commodities and machineries, while exporting mostly low value primary goods. Overall exports grew by 45% from N$63.87bn in 2017 to N$92.84bn, while imports recorded a 19% growth from N$89.04bn in 2017 to N$110.22bn. Exports were mostly destined to China which absorbed N$16.41bn (18%) of total exports overtaking South Africa that occupied the same spot in 2017 with N$15.06bn (24%) of total exports. This was mainly due to precious stones and metals destined to South Africa in 2017.
The growth in exports to China was mainly led by minerals such as copper (N$9.766bn) and ores (N$5.956bn). South Africa ranked second with N$14.89bn (16%), followed by Belgium N$9.30bn (10%), Botswana N$9.25bn (10%) and UK N$6.17bn (7%). Imports on the other hand, were mainly sourced from South Africa (N$49.13bn), Zambia (N$15.59bn), China (N$6.25bn), Bahamas (N$5.73bn) and Botswana (N$4.51bn). In terms of economic blocs, SACU was the major market for Namibia’s exports (N$23.44bn) mainly due to export of precious stones and metals to South Africa and Botswana.
pdf Namibia: FY2019/20 budget statement (529 KB) (MoF)
Three years since the implementation of the fiscal stabilization measures, we can together account tangible progress points: Public expenditure is aligned to revenue. Over the past three years, revenue grew by 3.8%, relative to 0.4% growth in expenditure. Expenditure as a proportion of GDP reduced from 42% to 34.9% in FY2018/19. The budget deficit narrowed from 8.1% in 2015/16 to 4.0% in FY2018/19, narrowing it by half over the last three years. Growth in the public debt stock slowed to an annual average of 11.2% in the past two years, compared to an average of 30.1% in the previous three years. The current account deficit narrowed significantly, from 14.1% of GDP in 2016 to 2.1% in 2018/19. The international reserves stock has strengthened from 2.1 months of import cover in 2016 to 4.2 months by February this year. The intensity of the recession has eased from -0.9% in 2017, to an estimate of between -0.5 to -0.2% in 2018. This would indicate that the recession has almost bottomed out and points to the economy recovering to positive GDP growth territory this year and over the MTEF. [Delivered by Minister of Finance Calle Schlettwein]
ECOWAS strategizes development of the Praia-Dakar-Abidjan corridor
IMF – Africa updates:
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Mozambique: Despite the likely adverse macroeconomic effects of Cyclone Idai in 2019, which are still being analyzed, the outlook is for a recovery in economic activity over the medium-term, with more significant expansion with the start of LNG production expected in 2023. The fiscal policy effort was significant in 2017-18. Subsidies on fuel and wheat prices were eliminated, an automatic fuel price adjustment mechanism was adopted, and electricity and public transportation tariffs were adjusted, bringing those prices close to cost recovery levels. Despite these efforts, the overall fiscal deficit in 2018 remained relatively high. Medium-term fiscal consolidation will be essential to ensure that public debt-to-GDP ratios remain on a clear downward path and, given that public debt is in distress, budget financing should rely to the maximum extent possible on grants and highly concessional loans.
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Côte d’Ivoire. Inflation is expected to remain well below the regional norm. The fiscal deficit should reach 3% of GDP in 2019, WAEMU’s regional convergence norm, in accordance with program objectives. Performance under the IMF-supported program was satisfactory in 2018. All performance criteria and all but one indicative quantitative targets for end-December 2018 were met. Almost all structural benchmarks were also implemented. The budget deficit reached 4.0% of GDP, meeting the program ceiling despite weaker than expected revenues which were offset by a slight reduction in public investment.
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Cabo Verde. Cabo Verde’s external position strengthened in 2018 with the current account deficit narrowing to 4.5% of GDP (6.6% of GDP in 2017) owing to strong export performance, increased remittances, and deceleration in imports demand. The signing of an agreement between Cabo Verde and the EU for fish exports is a welcome development in this context. Gross international reserves increased and reached 5.1 months of prospective imports at end-December 2018. In the fiscal area, the overall deficit narrowed, mostly because of strong revenue performance, consistent with sustained economic activity and implementation of revenue administration measures. The overall deficit declined from 3% of GDP in 2017 to an estimated 2.8% of GDP in 2018. However, financing needs rose from 3.4% of GDP to 3.9% of GDP as budget support to financially-strained state-owned enterprises increased.
IFPRI’s 2019 Global Food Policy Report: Urban middle class may offer lifeline to rural Africa (Reuters)
The rise of an urban middle class across much of Africa is stoking demand for food that could curb hunger and cut poverty in rural outposts, a US-based think tank said on Wednesday. The International Food Policy Research Institute said rural communities were in “a state of crisis”, with high poverty rates and poor services driving hunger and malnutrition. One in five people, or more than 256 million, are hungry in Africa, according to the latest figures from the United Nations Food and Agriculture Organization. But there are opportunities too, the IFPRI said in its annual report.
Revisiting the Georgetown Agreement: comparative region-building in Africa, the Caribbean, and the Pacific (ACP)
The two-day event (26-27 March) will be also an opportunity for reflections by public officials and practitioners of international affairs from the global South. Exchanges will be made on the origins, changing context and geo-political dynamics in which the ACP Group of States is crafting amendments to its 1975 Constitutive Act, the Georgetown Agreement. Extract from speech by Sandra Husbands (pdf) (Minister in the Ministry of Foreign Affairs and Foreign Trade, Barbados): One way of ensuring this sustainable growth and development strategy is through a comprehensive review of our trade. For example, our statistics reveal that Barbados’ trade with some of our ACP partners is virtually non-existent. If you will indulge me for just a while, I will elucidate on this fact for a few select countries. For the 2018 period for example, Barbados’ import and export trade with Ghana was BDS$243,078 and BDS$ 14,638, respectively. Our import and export trade with Nigeria was BDS$ 31,330 and BDS$ 2,844 and with Tuvalu it was BDS$ 27,767 in respect of imports and BDS$ 0 for exports. These are but a few countries within the ACP with which Barbados trades. The statistics are not encouraging. Given the length of time which our grouping has been together, I put it to you that our trade should have been more expansive. As I have said before, these are but a few of the countries with which Barbados trades but I suspect these trade figures are representative of Barbados’ trade with both African and Pacific countries. Further studies must be conducted, thereby allowing us to determine the main hindrances to trade among ACP members. [ACP Parliamentary Assembly: speech by Dr Patrick Gomes, Secretary-General of the ACP Group]
Today’s Quick Links: NAFTA to USMCA: what is gained? Declaration of the SADC Solidarity Conference with Western Sahara IGAD Kampala workshop: Livelihoods and self-reliance for refugees, returnees and host communities Anne-Marie Slaughter, Fadi Chehadé: How to govern a digitally networked world 63rd session of the Commission on the Status of Women: Agreed Conclusions Africa Information Highway: AfDB EOI for technical experts to support field work in Lusophones Call for papers for the 7th IMF Statistical Forum (14-15 November, Washington): Measuring the informal economy |
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CoM2019 ends with African governments being urged to embrace digital transformation
The 52nd session of the Economic Commission for Africa Conference of African Ministers of Finance, Planning and Economic Development (COM2019) ended in Marrakech on Tuesday with governments being urged to move with speed to embrace digital transformation to spur economic growth on the continent.
The Ministers said if Africa does not move with speed to adapt modern technologies and ensure everyone has broadband internet access at least by 2022, then the continent will not be able to leapfrog development challenges in the near future.
Leapfrogging in technology will change the lives of millions of Africans, they agreed, hence the clarion call on the continent’s leaders to embrace technology to improve governance systems, including revenue collection and efficient, transparent use, and ensure its growing youthful population is reskilled to compete in an increasingly digital world.
African economies face major financing gaps and challenges in the mobilization of domestic resources, despite the implementation of several fiscal and budgetary reforms, the Ministers noted, adding digitization may enhance fiscal policy performance and development finance by increasing domestic revenue generation and allocation.
The Ministers also discussed threats and challenges posed by digitization and the need to have measures in place to protect citizens and governments.
“Limited Internet access in Africa continues to impede the development of digitization in economic and social sectors, including e-commerce, e-health and e-government, which are constrained by high transaction costs, the spatial distribution of information exchanges, and limited access to international markets,” the Ministers said in their statement.
Governments, they said, need to design and improve innovative digital mechanisms that facilitate revenue collection and increase the efficiency of tax administration by promoting the use of online platforms for self-reporting by taxpayers and the use of digital mechanisms to record relevant data on transactions and the identity of taxpayers.
They acknowledged the need to increase significantly the availability of high-quality and timely data to support fiscal policy, trade and private sector development in the digital era and strengthening the implementation of national development plans, the 2030 Agenda for Sustainable Development and the African Union’s Agenda 2063.
Member States were urged to undertake the 2020 round of population and housing censuses in Africa with the Ministers noting how they are ‘indispensable tools for promoting development in Africa and providing robust data to support the implementation and monitoring of national development plans, the 2030 Agenda and Agenda 2063’.
They also urged governments to develop and strengthen civil registration and vital statistics information systems and infrastructure as a foundation for legal identity, including effective digital identity systems.
Progress was noted in regional integration efforts on the continent with the ministers committing to taking measures and steps to enhance the incorporation of regional integration agreements and treaties, including the African Continental Free Trade Agreement (AfCFTA), into domestic law and implementation.
The Ministers said it was worrying that Africa continued to lag behind other regions in terms of infrastructure development.
“We acknowledge the need to strengthen resource mobilization in order to close the infrastructure gap and also to build the technical capacity necessary for the preparation of bankable cross-border infrastructure projects and, in this respect, commit ourselves to strengthening cooperation, in particular among landlocked developing countries and transit countries, in the development and management of cross-border infrastructure,” they agreed.
In her closing remarks, ECA Executive Secretary, Vera Songwe, said it was clear from discussions during the conference that Africa can do more and better if it worked closely together and speak with one voice.
She said Africa should tap into the ever-growing digital economy which has disrupted age old industries while giving rise to completely new ones.
“We can do well if we work together and move from theory to action,” said Ms. Songwe, adding discussions had proved that fiscal policy was important if the continent is to increase revenue collection to finance its development, in particular it’s desire to achieve Agendas 2030 and 2063.
She said with the advent of the AfCFTA, Africa was well and truly on the path to economic diversification and inclusion with the digital era bringing in efficient and effective ways of collecting, allocating and use of revenues, among many other benefits.
Morocco’s Economic and Finance Minister, Mohamed Benchaaboun, said it was important for Africa to realize that it needs to rely on itself more than outsiders for its progress and development.
“South-South cooperation is also important for us as a continent. We need to take it to a higher level,” the Minister said, adding the conference had been a huge success.
COM2019 was held under the theme Fiscal policy, trade and the private sector in a digital era: A strategy for Africa.
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The AU has posted the TOR for the proposed African Labour Migration Advisory Committee (pdf). It is one of the agenda items at next week’s Specialised Technical Committee on Social Development, Labour and Employment (1-5 April, Addis Ababa)
South Sudan kicks off World Trade Organisation membership negotiations (WTO)
CoM2019 draws to a close today in Marrakech. Selected updates:
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pdf Report of the meeting of the Committee of Experts (629 KB) : extracts from the recommendations for agenda item 5. ECA should: Work with African countries to finalize the terms of reference of the centre of excellence on digital identity, trade and economy; Regularly monitor the opportunities and threats brought about by digitization of the economies of African countries; Conduct analysis and hold expert group meetings and policy dialogues on digitization and its contribution to the achievement of the goals of the 2030 Agenda and Agenda 2063; Conduct studies on the impact of digitization on tax performance, including quantifying the benefits of digitization, to support evidence-based policy formulation. ECA, in collaboration with the AUC , should: Urgently finalize development of the strategy for digital identity, digital trade and digital economy for Africa, taking maximum advantage of the positive experiences of African countries; Assist countries to develop a common position on multilateral frameworks to tackle base erosion and profit shifting; Pursue, expand and strengthen South-South cooperation, including capacity development in the application of digitization in revenue mobilization and expenditure.
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The 2019 Annual Adebayo Adedeji Lecture, delivered by Dr Omobola Johnson: pdf Digital transformation of Africa – hype or reality? (384 KB)
CEMAC Conference of Heads of State (20 March, Ndjamena): communiqué
Taking cognizance of the state of progress of the process of rationalization of the economic communities, the conference congratulated His Excellency Paul Biya, President of the Republic of Cameroon, President dedicated to the Rationalization of RECs for the significant advances recorded in this process of rationalization RECs in Central Africa under his Dedicated High Presidency. In order to speed up this process and capitalize on the results thus recorded, the Dedicated President of this Program informed the Conference of the organization of an Extraordinary Joint ECCAS/CEMAC Summit in the near future.
On the state of the implementation of the free movement of persons in CEMAC zone, the Conference of Heads of State adopted the Common Policy on Emigration, Immigration and Border Protection of CEMAC, In this regard, it instructed the President of the CEMAC Commission, on the one hand, to accelerate the application of the Additional Act for the abolition of visas for all CEMAC nationals circulating in the Community area, and, on the other hand, to take vigorous action for the implementation of the said Common Policy.
With regard to the issue of repatriation of export earnings, especially of large companies, the Conference gave the CEMAC Commission the task of defending the common and mutually supportive position of the six Member States in order to bring them into compliance strictly the exchange regulations in force. In this regard, the Heads of State and Delegations gave specific guidelines for the conduct of the said mission.
The two keynote documents released during the recent CII-EXIM Bank Conclave on India Africa Project Partnership:
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pdf India-SADC trade and investment relations: harnessing the potential (14.62 MB) (prepared by Exim Bank)
With the increasing diversification of India’s global trade towards other developing countries, SADC has emerged as important partner for India, both as an export destination and an import source. During the last ten years, India’s total trade with SADC countries nearly doubled from $13.7bn in 2008 to $25.5bn in 2017. While India’s total exports to SADC has risen moderately from $6.3bn in 2008 to $9.1bn in 2017, India’s total imports from SADC have more than doubled during the same period, from $7.5bn in 2008 to $16.4bn in 2017. India’s trade balance with SADC has been in favour of SADC throughout the decade with an exception in 2014. Over the years, India’s trade deficit with SADC has widened from $1.2bn in 2008 to $7.3bn in 2017.
The increasing importance of India as SADC’s trading partner can be assessed from the fact that India accounts for a respectable 5.4% of SADC’s global imports in 2017, as compared to 3.5% recorded in 2008. Further, India accounts for around 7.3% of SADC’s total exports in 2017, increasing from 2.3% in 2008, depicting the rising importance of India as SADC’s export destination.
While mineral fuels and pharmaceutical products dominate India’s export basket to SADC, together accounting for 46.7% of India’s total exports to SADC in 2017, the share of mineral fuels witnessed a fall while that of pharmaceutical products more than doubled during the last ten years. Other important items of India’s exports to SADC include vehicles other than railway, machinery and equipment and plastic and its articles.
South Africa is India’s largest export destination in SADC, accounting for around 44.9% of India’s total exports to the region in 2017. Other major export markets in SADC include Tanzania, Mozambique and Mauritius. The share of SADC in India’s global imports has increased from 2.4% in 2008 to 3.7% in 2017. India’s imports from SADC was largely dominated by mineral fuels, oils and its products and pearls and precious stones, which together accounted for 78% of imports from the region in 2017. South Africa is the largest import source, followed by Angola, Botswana, Tanzania, Mozambique and Zambia.
Table of contents. Chapter 1: Background and economic profile of SADC; Chapter 2: International trade of SADC countries; Chapter 3: India’s bilateral trade relations with SADC countries; Chapter 4: Foreign investment in SADC countries; Chapter 5: India’s investment relations with SADC Countries; Chapter 6: SADC’s trade - key observations; Chapter 7: Potential sectors for Indian investments in SADC; Chapter 8: Export-Import Bank of India in SADC Region
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pdf India in Africa: developing trilateral partnerships (437 KB) (prepared by the CII)
The continent of Africa has been the focus of development assistance and cooperation from a host of countries in Europe and North America for several decades. Over a period of time India, China Japan, Turkey and many others joined the efforts to engage Africa economically. At the same time the traditional development partners adjusted their engagement to make it more partnership oriented to develop business and entrepreneurial connections. The significance is that the number of partners Africa now has is large; the depth comes from the intensity of the engagement with traditional partners of Africa and their reorientation to trade and investment over only aid and assistance. In this several countries have reached out to India to start a dialogue, develop ideas and seek commonality of programs in Africa. As this idea fructifies, it will lead to trilateral cooperation in Africa between India and another willing partner. It is thus important to know what potential partners aim for and do in Africa as a way to develop a business-like approach keeping in view their programs and preferences as well. This paper focuses on five main partners: Germany, Japan, USA, France, UAE. [The authors: Amb. (Rtd.) Gurjit Singh, Ms Jhanvi Tripathi]
Trends in trade in counterfeit and pirated goods (OECD)
Trade in counterfeit and pirated goods has risen steadily in the last few years – even as overall trade volumes stagnated – and now stands at 3.3% of global trade, according to a new report by the OECD and the EU’s Intellectual Property Office. Trends in Trade in Counterfeit and Pirated Goods puts the value of imported fake goods worldwide based on 2016 customs seizure data at $509bn, up from $461bn in 2013 (2.5% of world trade). For the European Union, counterfeit trade represented 6.8% of imports from non-EU countries, up from 5% in 2013. These figures do not include domestically produced and consumed fake goods, or pirated products being distributed via the Internet. The majority of fake goods picked up in customs checks originate in mainland China and Hong Kong. Other major points of origin include the United Arab Emirates, Turkey, Singapore, Thailand and India. The countries most affected by counterfeiting in 2016 were the United States, whose brands or patents were concerned by 24% of the fake products seized, followed by France at 17%, Italy (15%), Switzerland (11%) and Germany (9%). A growing number of businesses in Singapore, Hong Kong and emerging economies like Brazil and China are also becoming targets. Small parcels sent by post or express courier are a prime and growing conduit for counterfeit goods.
CDC’s investments in low-income and fragile states: new ICAI review
CDC is the primary vehicle through which DFID invests development capital and plays a key role within DFID’s Economic Development Strategy. It aims to “support the building of businesses throughout Africa and South Asia, to create jobs and make a lasting difference to people’s lives in some of the world’s poorest places”. ICAI is publishing a review of CDC’s investments in low-income and fragile states, which found the UK’s multi-billion pound development finance institution did not do enough to maximise the impact of its UK aid investments. Profiled findings (pdf): CDC has significantly scaled up its human resources in support of its work but has been slow to expand its country presence beyond India. In order to accelerate the scale-up of investment and achieve broader development impacts in more challenging markets, CDC should have prioritised much earlier on in the process its country presence expansion in Africa, the development of its geographic and sectoral plans, strengthened its links with DFID country offices and improved its monitoring and evaluation systems. CDC’s new investments have been concentrated in a small number of larger economies within low-income and fragile countries, as well as in the financial services and power sectors. CDC has faced challenges in finding viable direct investment deals, particularly in Africa.
Corporate taxation in the global economy: opening remarks by Christine Lagarde (IMF)
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South Sudan kicks off WTO membership negotiations
At the first meeting of the Working Party on the Accession of South Sudan on 21 March 2019, WTO members expressed support for working with the world’s youngest nation in order to advance its accession negotiations. South Sudan pledged to use the WTO accession process as an instrument for promoting peace.
“All journeys, short or long, start by a mere single step,” said Aggrey Tisa Sabuni, Chief Negotiator and Presidential Advisor on Economic Affairs, who led a 13-person delegation in Geneva which also included senior officials from the Ministry of Trade, Industry and East African Community (EAC) Affairs, the Ministry of Petroleum, the Ministry of Agriculture and Food Security and the Bank of South Sudan as well as a member of the Legislative Assembly.
Mr Sabuni said that Juba “stands committed to undertake the required reforms for WTO accession in accordance with the principles of the rule of law, transparency, good governance and respect for human rights.” Referring to the ongoing implementation of the Revitalized Peace Agreement signed in September 2018, he added: “Words are not enough. The real question is whether the leadership have the leverage to do things differently.”
It is this context that “draws us to multilateral institutions such as the World Trade Organization for guidance and inspiration. It is through institutions such as the WTO that we can prove our commitment to reforms at all costs,” he added.
Mr Sabuni stressed that apart from oil, which currently accounts for nearly 90% of budget revenues, 60% of its GDP and 95% of exports, South Sudan does not export many products. However, studies have shown that South Sudan has significant potential in agriculture, mining, fisheries, forestry and tourism.
“Accordingly, we believe opening up to the rest of the world is critical to attracting foreign investment, which is needed to develop and realize South Sudan’s potential in other sectors, including jump-starting an industrial and manufacturing sector, not only to diversify the country’s export basket but also to generate high productivity employment for our people, who are mostly young,” he said.
The world’s youngest nation, South Sudan, gained independence on 11 July 2011 and first submitted its application for observer status in the WTO in April 2012. The process then stalled as the country descended into civil war. On 5 December 2017, the government submitted a request for WTO accession which received unanimous support at the 11th WTO Ministerial Conference (MC11) in Buenos Aires on 13 December 2017.
The Working Party Chair, Ambassador Mohammad Qurban Haqjo of Afghanistan, commended the strong determination shown by the government of South Sudan, which submitted a Memorandum on the Foreign Trade Regimen (MFTR) in December 2018. “This is an impressive achievement, since on average it has taken seven years to prepare the MFTR for the nine accessions of least-developed countries completed to date. This is also the record for all ongoing accessions – which on average have taken nine and a half years to submit the MFTR and to hold the first meeting of the Working Party,” Ambassador Haqjo said.
WTO members voiced support for South Sudan’s integration into the rules-based multilateral trading system and began examining the country’s foreign trade regime and regulatory framework. They acknowledged the efforts undertaken by South Sudan over a short period of time and encouraged its representatives to remain on track by commencing work on its market access offers on goods and services and keeping members up to date on all ongoing legislative developments.
South Sudan is a member of the EAC, which it joined in October 2016. The delegation also took part in the third Trade Policy Review of the EAC (Burundi, Kenya, Rwanda, Tanzania and Uganda) on 20 and 22 March.
The meeting of the Working Party was followed by a panel discussion moderated by Ambassador Haqjo under the title “Trade for Peace through the WTO Accession Process: Opportunities for South Sudan”. The panelists were: WTO Deputy Director-General Alan Wolff; Mr Sabuni; Amb. Kadra Ahmed Hassan, Permanent Representative of Djibouti to the WTO; Amb. Zorica Maric Djordjevic, former Permanent Representative of Montenegro to the WTO; and Mr Daniel Weston, General Counsel and Global Head of Corporate Affairs and Creating Shared Value, Nestle Nespresso SA. The discussion touched on how peacebuilding in the country can have an impact on neighboring countries, particularly in the Horn of Africa. The role of the private sector in supporting WTO accession and the peacebuilding processes was also discussed.
Deputy Director-General Alan Wolff made opening remarks at the panel discussion, underlining that the organization will do its part to help WTO acceding governments like South Sudan as well as members use trade as a tool for building and sustaining peace.
Mr Wolff said that the “Trade for Peace through WTO Accession” initiative, which started with the establishment of the g7+ WTO Accessions Group at MC11, “has brought the trade community closer to the peace community in recent months. I am proud to say that we, at the WTO, are doing something different.”
“I think perhaps the most compelling reason for optimism for the multilateral trading system is that conflict-affected countries like South Sudan see in the WTO what the founders of the multilateral trading system saw in its creation in 1947. You see a path toward economic growth, leading to greater domestic stability, and a better chance to attain and sustain peace. South Sudan is the timely reminder of the backbones of the multilateral trading system,” he added.
Mr Sabuni said: “South Sudan is blessed with many natural resources, mostly untapped due to years of instability and conflict, lack of clear rules, predictability and transparency, that investors attach great importance to. Joining the EAC and now seeking membership in the WTO is our way of telling the world that we are committed to undertaking necessary reforms that will allow us to attract foreign direct investment into the various sectors of the economy.
“We believe membership in the WTO will give us the opportunity to create a new virtuous cycle, i.e. increasing the inflow of investment will jump-start and increase productivity across all sectors of the economy. This way South Sudan can trade more, and its economy is set to grow, guaranteeing its citizens high productivity jobs that can allow them to accumulate wealth and rid themselves of poverty. It is only then that the South Sudanese will constructively contribute to the development of our country without resorting to armed confrontations.”
Amb. Hassan stated that peace in South Sudan creates economic opportunities for the entire region of the Horn of Africa where several peace agreements have recently been signed, especially now that the Agreement on the African Continental Free Trade Area is about to come into force. Amb. Maric Djordjevic highlighted four factors that make a compelling case for how WTO accession presents opportunities for peacebuilding in South Sudan.
She stated that WTO accession: 1) contributes to durable peace; 2) is an instrument for better resource mobilization, budget allocation and expenditure management; 3) is a promising framework for reducing the risk factors in countries with high dependence on natural resources; and 4) is an instrument for rebranding a country’s image.
Mr Weston highlighted the potential of the coffee sector in South Sudan where Nespresso has operated since 2011 to help rebuild the nation’s coffee industry that was destroyed by conflict. He stated that the breed of coffee from South Sudan is unique globally, being wild coffee that grows naturally. It has huge commercial viability, having sold out in a record time of “six days” when Soluja ti South Sudan coffee capsules were introduced into the French market, Nespresso’s biggest market. Nespresso hopes to restart its coffee operations soon following the signing of the Revitalized Peace Agreement of September 2018.
DG Alan Wolff welcomes South Sudan’s bid for WTO membership
Remarks at the panel on “Trade For Peace Through WTO Accession”, 21 March 2019
Good afternoon. Let me join Ambassador Haqjo in welcoming you to this Panel that is taking place on the margins of the historic first meeting of the Working Party on the Accession of South Sudan.
I was present and observed the meeting this morning. I felt the sense of pride, achievement and momentum that were generated by the high-level delegation from Juba and WTO Members. This afternoon, I am very pleased to see the presence of Hon. Aggrey Tisa Sabuni, Chief Negotiator with us as a keynote speaker. Also, it is my pleasure to see both Ambassador Kadra Ahmed Hassan of Djibouti and Ambassador Zorica Maric Djordjevic of Montenegro who have been great “Friends of South Sudan” since the 2nd Regional Dialogue on WTO Accessions held in Djibouti, last December.
As Ambassador Haqjo shared his unique connection to South Sudan, I would also like to share my own. Following taking up the post as WTO Deputy Director-General in October 2017, two months later, I participated in the Ministerial Conference in Buenos Aires, Argentina. I was privileged to witness the approval by WTO Ministers of an application for WTO accession from then 6-year old young nation, South Sudan. That was a memorable moment in Buenos Aires in what was a remarkable meeting. I believe the message that South Sudan, by its determination to integrate into the world economy, had sent out to the world was very powerful.
Since then, I had several occasions to engage with high-level delegations from Juba, including the Minister of Justice, the Minister of Education, and of course, senior trade officials. At the WTO’s Public Forum last October 2018, I was privileged to moderate a Panel Discussion on Trade for Peace: Integration of fragile states into the global economy as a pathway towards peace and resilience. As one of the speakers, the Honourable Deng Deng Hoc Yai, Minister of General Education and Instruction of South Sudan struck a sympathetic chord with many of those present when he explained the reasons why South Sudan – as a least-developed and post-conflict country – was committed to accede to the WTO. His firm conviction was that South Sudan’s path to WTO membership will support the maintenance of sustainable peace and stability in the country. His remarks are a timely reminder of the rationale of the founding fathers for the creation of the multilateral trading system following World War II.
The “Trade for Peace through WTO Accession” initiative has brought the trade community closer to the peace community within Geneva in recent months. The initiative started in Buenos Aires, with the establishment of the g7+ WTO Accessions Group.
The Group was launched by eight vulnerable, least developed countries that have long suffered from conflicts and instability: three WTO Members (Afghanistan, Liberia, and Yemen) and five acceding governments (Comoros, Sao Tome and Principe, Somalia, South Sudan and Timor-Leste). In their Ministerial Declaration, the Group pledged to use the WTO accession process and membership to promote peace-building and sustainable development, and to facilitate WTO accessions.
I was pleased to be at the inauguration of this Initiative and have followed the Group’s work since. Their efforts resulted in a series of Trade for Peace events in the fall last year, which included collaboration with the Geneva Peacebuilding Platform. I was also invited to speak at the Paris Peace Forum in November 2018 where I highlighted the role of the WTO in supporting sustainable peace.
In December 2018, I had the opportunity to be in Djibouti for the pdf 2nd Regional Dialogue on WTO Accessions for the Greater Horn of Africa (508 KB) under the theme ‘Trade for Peace through WTO Accessions’. All participants in the Djibouti program agreed that WTO accession was an important component of the post-conflict recovery plans of fragile states, enabling the establishment of credible policy frameworks and promotion of transparency and good governance. They recognized that the Trade for Peace Initiative was an important way in which the multilateral trading system could contribute to peacebuilding efforts in the Horn of Africa and other parts of the world. In this context, the WTO was formally requested to continue to define its role in making its contribution to these efforts, including through greater cooperation between the trade and peace communities.
Today’s panel is part of this effort. I cannot think of a better example of Trade for Peace than South Sudan’s presence at the WTO today. With its strong determination to advance the accession process – which is often complex and challenging, South Sudan is demonstrating the potential of the “Trade for Peace” initiative where peace remains fragile. One of the most compelling reasons for optimism for the multilateral trading system is that conflict-affected countries like South Sudan see in the WTO what the founders of the multilateral trading system saw in its creation in 1947. It sees a path forward toward economic growth, leading to greater domestic stability, and a better chance to attain and sustain peace. The conduct of South Sudan here today is a timely reminder of this fundamental benefit of the multilateral trading system.
Let me assure you on behalf of the WTO Secretariat of our intention to do our part, that is to help WTO acceding governments and Members to use trade as a tool for building peace and sustaining peace. Once again, my sincere thanks to the delegation of South Sudan which is committed to working together with the Members of the WTO to make Trade for Peace a reality.
Thank you.
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India is committed to work with Africa in areas prioritised by African countries: Suresh Prabhu
India is committed to partner Africa in the areas prioritised by the African countries in the spirit of ‘Partners in Progress’.
This was stated by Mr Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, Government of India at the Inaugural Session of the 14th edition of the CII-EXIM Bank Conclave on India-Africa Partnership.
The 3-day Conclave was organised with the support of the Exim Bank of India and the Ministry of Commerce & Industry, and Ministry of External Affairs, Government of India. The Minister added that even as India gears up to become a $5 trillion economy within the next few years, and a $10 trillion economy thereafter, the country endeavours to help Africa sustain its own economic growth momentum.
According to the Minister, India received record FDI inflows in the last fiscal, and Indian outbound investment flows are also increasing. Africa would be the preferred destination for Indian investments, Mr Prabhu said. He pointed out that while physical connectivity between the two regions is being strengthened, the opportunity to expand digital connectivity between India and Africa could obviate the need for widespread and capital-intense physical infrastructure connectivity.
Keeping in view Africa’s central location on the global map, India could help establish strong logistics linkages in the region, Mr Prabhu said. He also highlighted the opportunities for deeper India-Africa bilateral cooperation and partnerships in agriculture and food processing, power projects, new and renewal energy development, skills development, among others. He added that Indian industry will extend all support to African countries to process natural resources in Africa itself.
Mr Prabhu said that India and Africa should take firm steps to enter into a free trade agreement or a preferential trade agreement.
Dr Mahamudu Bawumia, Vice President, Republic of Ghana, said that both India and Ghana were driven by common developmental challenges in an increasingly globalised world. He added that Ghana has undertaken several economic reforms in the areas of ease of doing business and promoting private investments to achieve stability at the macro-economic level. Spelling out the priority areas of Ghana’s economy he said that “trade and investment, investment in human capital and digitalisation hold the key”, adding that India’s expertise in ICT would be a great help for his country to achieve its goals.
Dr Ibrahima Kassory Fofana, Prime Minister of Guinea, in his remarks praised Indian Prime Minister Mr Narendra Modi for starting 18 new embassies in Africa, including Guinea. He said that India’s policies and special focus on Africa could find win-win solutions to the common challenges that both India and Africa are facing today. He cited India’s initiatives like Pan Africa Network among others which have benefitted the continent in the past few years.
He said that Africa offers huge opportunities for investments in the area of agriculture, infrastructure development, power and energy and road sectors, among others.
Mr Monyane Moleleki, Deputy Prime Minister, Kingdom of Lesotho, fondly recalled his term as the External Affairs Minister of Lesotho when he came to Delhi to establish his country’s Permanent High Commission. He congratulated India for making rapid development in the past one and a half decade. He also highlighted the need to have “win-win cooperation” in areas like agriculture, technology, energy and renewable energy sector.
Mr Anup Wadhawan, Commerce Secretary, Government of India, in his address cited that the balance of trade is in favour of Africa. In 2017-18, India’s exports to Africa were valued at US$24 billion, whereas India’s imports from Africa were valued at US$38 billion. He said there is huge potential to expand India-Africa bilateral trade flow, toward which India should look to geographically diversify its trade ties with the African countries, as also diversify the bilateral trade basket.
Mr Rakesh Bharti Mittal, President, Confederation of Indian Industry (CII) said that Indian industry has a very positive outlook on investing in Africa. He referred to Indian investments in Africa’s oil & gas sector as a case in point, and added that there are significant opportunities for investing in Africa’s IT/ITeS, FMCG, e-commerce, agriculture, education, healthcare and media and entertainment sectors. He also cited how India’s capability to develop agricultural equipment for small farmers would be of the essence to Africa.
Mr David Rasquinha, Managing Director, EXIM Bank of India spoke about how the bank has served as an instrument of Government of India in taking forward India’s economic diplomacy outreach.
Mr Chandrajit Banerjee, Director General, CII in his opening remarks said that this year’s Conclave has drawn the participation of 500 delegates from 41 African countries, and an equal number of delegates from India. The Conclave has the presence of 3 Heads of State and Government from Africa as well as 33 ministers from different African countries.
India in Africa: developing trilateral partnerships
During the event, CII launched a report on India in Africa: developing trilateral partnerships. The report is a result of recent developments in India’s, as well as the world’s, approach to Africa.
The world is moving away from Africa as an aid-receiving continent, to a continent with pressing and real business opportunities. This is in large part due to the efforts of African countries as well, who have covered serious ground in creating a new image of change and embracing the future. The African Continental Free Trade Agreement is a case in point.
The report identifies some partners who have already expressed their interest in this sort of arrangement and the potential models that could be adopted, building a business case for partnerships.
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Agro-processing, manufacturing and ICT offer opportunities for Indian investments in SADC region: Exim Bank
The Export-Import Bank of India (Exim Bank) released a new publication entitled ‘India-SADC Trade and Investment Relations: Harnessing The Potential’ during the Inaugural Session of the 14th CII-EXIM Bank Conclave on India-Africa Project Partnership held in New Delhi on March 17, 2019.
The study analyses the current trade and investment scenario in the Southern African Development Community (SADC) region and the opportunities that the region presents for Indian businesses. The study highlights trends in SADC’s intra-regional as well as global trade and foreign investments, and draws strategies for enhancing its trade and investment.
SADC countries are integral part of the African region accounting for around one-third of Africa’s total geographical area, GDP and population in 2017. Among the major regional trading blocs in Africa, SADC is the largest contributor to Africa’s GDP (in nominal terms) in 2017. According to the World Trade Organization (WTO), SADC ranks first among African RTAs in value terms, representing 37.3 percent of total African exports in 2017.
With the increasing diversification of India’s global trade towards other developing countries, SADC has emerged as an important partner for India. During the last ten years, India’s total trade with SADC countries nearly doubled from US$ 13.7 billion in 2008 to US$ 25.5 billion in 2017, with SADC’s share in India’s total trade with Africa having increased from 32.8 percent in 2008 to 42.4 percent in 2017.
The increasing importance of India as SADC’s trading partner can also be assessed from the fact that India’s share in SADC’s global trade has more than doubled from 2.9 percent recorded in 2008 to 6.4 percent in 2017.
The study highlights that though SADC’s trade has grown considerably since the establishment of an FTA in 2008, there exist immense potential for increasing SADC’s regional and overall trade. Key strategies include enhancing intra-regional trade, product and market diversification, reduction of non-tariff barriers(NTBs) and other barriers to trade, and development of regional and global value chains.
The SADC region accounts for 94 percent of Indian investments in Africa during April 1996 to March 2018, with investments, mostly concentrated towards Mauritius, Mozambique and South Africa. The study highlights select potential sectors in broadening India’s investment base in the region, which include agro-processing, mineral processing, and manufacturing (pharmaceuticals, consumer goods including textile and apparel, leather and footwear and automotive components) sectors, and developing information and communication technology (ICT) infrastructure in the region.
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tralac’s Daily News Selection
Diarise: Gender considerations in trade agreements (28 March, Geneva). The workshop is organized by Iceland, Botswana and UNCTAD in cooperation with the WTO. It will explore the role for trade agreements in promoting gender equality and how gender has been integrated in FTAs, in regional integration agreements and preferential trade schemes.
Africa CEO Forum: Trade experts call for more reforms (EA Business Week)
The 7th edition of the Africa CEO Forum has officially opened in Kigali, with business leaders and trade experts calling for more reforms to make the continent more attractive to investments. The forum, which is arguably the continent’s largest international meeting of Africa’s private sector, has brought together more than 1,800 CEOs from top companies, international investors, experts and high-level policy makers from the continent and beyond. Also in attendance are presidents of Rwanda (the host), Democratic Republic of Congo, Ethiopia and Togo, among other delegates. In his opening remarks, President Kagame called the forum is a timely platform to discuss mechanisms on how to make the most from the recently signed ACFT treaty. He urged participants to take the same spirit in driving the continent towards economic success. “Open responsiveness and accountable governments are critical in driving the continent’s economic integration agenda, therefore the private sector should notice what needs to be changed share it with those in the public to able to move forward.” [AfCFTA: Kagame speaks on Buhari and the Nigeria problem. Asked if he was talking to President Muhammadu Buhari on getting Nigeria to come on board, Kagame said: “Not at the moment, but we were talking to President Buhari in the build-up to where we are now, and I think that is as significant as talking to him now”]
David Tarimo (PwC Tanzania) preview of the Africa CEO Forum: It’s time we pushed for greater intra-Africa trade (The Citizen)
Whilst there has been significant focus on how goods can move tax free within the EAC, the same cannot be said for services. A general concern in relation to intra-Africa trade in services is that the tax regimes act to discourage such activity by imposing costs (in particular high non-resident withholding taxes and sometimes irrecoverable Value Added Tax) that would not apply on similar transactions taking place between two parties in the same country. So, why erect these barriers on trade in services between countries? One mechanism that had been hoped would help alleviate some of these distortions had been an EAC double tax treaty - a first version of which was originally signed in 1997. Subsequently, following renegotiation an amended version was signed by all EAC Ministers for Finance on 30 November 2010. But neither the 1997 nor 2010 versions ever came into force as relevant ratification procedures were not completed. In the case of the 2010 agreement I understand that ratification remains pending by Burundi and Tanzania, both of whom appear reluctant to take this step. Even if ratified it would not completely eliminate withholding tax on intra-regional cross border changes but at least the reduced rates would significantly reduce withholding tax costs. Clearly measures such as the recent signature of the CFTA are to be welcomed as a step towards greater African trade integration - but again this initiative focuses on goods. As services become an ever more important part of our economies, there should be a commensurate focus on reducing tax distortions that inhibit regional trade in services. [Africa CEO Forum: Experts make case for economic integration]
COM2019 side event: Briefing on the messages, recommendations of ECA’s regional integration flagship reports
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Selected extracts from the presentation by David Luke: pdf Assessing regional integration in Africa – next steps for the AfCFTA (900 KB) . AfCFTA Protocol on Investment (slide 8). Africa’s investment landscape is fragmented: 854 BITs (512 in force), of which 169 are intra-African (44 in force) – many overlapping and “old generation”, often with ISDS, vulnerable to treaty shopping, and policy space; AfCFTA Protocol on Intellectual Property Rights (slide 9). Africa’s IPR commitments are fragmented: 44 countries member to WTO TRIPs, others in different IP international agreements and FTAs with IPR; Three models proposed for integration in IPR: a) regional cooperation and sharing of experience, b) regional filing systems, c) unification of IP laws; AfCFTA Protocol on Competition Policy (slide 10). Africa’s competition regime is patchy and incomplete: only 23 countries have competition laws enforced by competition authorities.
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Selected extracts from the presentation by Wafa Aida: pdf African Regional Integration Index report (229 KB) . Profiled slides: continental ranking on regional integration (slide 6), trade integration (slide 7), productive integration (slide 8)
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pdf ARIA IX: key messages and policy recommendations (288 KB)
Regional Coordination Mechanism for Africa: updates
UN Deputy Secretary-General Amina J. Mohammed, ECA’s Executive Secretary Vera Songwe and the AU’s Commissioner for Human Resources, Science and Technology Sarah Anyang Agbor spelt out the merits of this AU-UN synergy in the light of dovetailing the UN’s mandates of peace and security with sustainable development.
COMESA’s Assistant Secretary General, Dr Kipyego Cheluget: “Taking into account the new developments both at the UN and AU Reforms, this calls for a rethink of the RCM-Africa, aim at aligning the coordination and leadership roles to the ongoing reforms, the four sub-regional mechanisms need to focus on the regional economic communities where the regional mechanism focuses on support to the AUC.”
Extract from the pdf Issues paper: United Nations support to the African Union Year of Refugees, Returnees and Internally Displaced Persons (661 KB) : The high-level panels on the theme of the 20th Session of RCM-Africa may wish to consider the following: Addressing the root causes of refugees and IDPs; Upscaling durable solutions, including addressing the forced displacement-development nexus; Coordinating the work under the Compacts for Migration, and on Refugees; The RCM for Africa’s support to the AU agenda on refugees, returnees and Internally Displaced Persons.
Extract from the pdf Report of the clusters of the Regional Coordination Mechanism for Africa (594 KB) : The present progress report contains a summary of the support of the UN system agencies working in Africa extended to the AU and its organs in the context of the Joint United Nations-African Union Regional Coordination Mechanism for Africa. It covers support for the implementation of African Union priorities at regional and subregional levels, including those articulated in Agenda 2063. The work of the clusters presented the following challenges:
Profiling of the regional agro-processing value chains in the SADC region (pdf, Agbiz)
The goal of this study [prepared by Imani] is to identify the potential for establishing additional sustainable regional agroprocessing value chains as an integral part of the SADC industrialisation and market integration process. Specific objectives are: (i) Characterise the nature, form, ownership, size, depth and spread of the agroprocessing industry in the region; (ii) Identify regional value chains in the agro-processing industry; (iii) Select potential regional value chains of significance that could be promoted. The project team identified specific regional value chains and agro-processing technologies that offer significant opportunities. It is foreseen that some of these value chains will enhance cross-border and intra-regional trade, whilst others will have the potential to unlock international export markets.
SADC regional workshop for capacity building on Access and Benefit Sharing and Intellectual Property Rights for Animal Genetic Resources: summary of 4-6 March meeting
The power of international value chains in the Global South (ITC)
Companies that engage in South-South value chains and produce higher value-added goods are more competitive and better able to reach growth targets, a new International Trade Centre report says. The report, The power of international value chains in the Global South (pdf), was produced in collaboration with the Research and Information System for Developing Countries, a think-tank based in New Delhi. Using macroeconomic data and a survey of 558 East African firms, the report finds that the recent proliferation of regional trade agreements and rising trade in technology-intensive goods have propelled the South’s ‘remarkable growth’ in the past two decades. The economy of the ‘Global South’ – which encompasses least developed countries, economies in transition and developing economies – more than quadrupled from 2000 to 2016, to $30.9 trillion. The report’s findings underscore the need for decision-makers to step up support for regional cooperation to promote South-South trade and international value chains alongside South-North initiatives. The report sets out almost a dozen strategies aimed at increasing South-South trade, including recommendations to encourage inward foreign direct investment, facilitate imports, target both bilateral and multilateral South-South trading arrangements, and support investment in technology.
Klaus Deininger: The World Bank’s Land and Poverty Conference – 20 years on (World Bank)
In 1999, when a few enthusiasts agreed to meet annually in an effort to base interventions on land, on solid empirical evidence rather than ideology, few would have expected this effort to have such a lasting impact. Twenty years on, the small gathering [which starts today in Washington on the theme Catalyzing Innovation] has morphed into a conference, bringing together over 1,500 participants from governments, academics, civil society and the private sector to discuss the latest research and innovations in policies and good practice on land governance around the world. Three examples illustrate how the years have changed the dialogue: [Launching today: Stand For Her Land]
Rwanda: IMF staff concludes visit
The Rwandan government and the IMF staff team reached preliminary agreement, subject to approval by IMF management and its Executive Board, on policies that could constitute the basis for Rwanda’s new program with the IMF under the new Policy Coordination Instrument. The overall objective of the program would be to support implementation of the National Strategy for Transformation, while maintaining macroeconomic stability. The program would consist of four main pillars: [How much more can Rwanda borrow?]
African private equity deal value dipped in 2018, but more deals are being done (Quartz)
Looking at 2018 data from the African Private Equity and Venture Capital Association, the median PE transaction size across its key African sub-regions was $6m to $8m still quite modest in global private equity deal terms. The growth trajectory of PE investment in Africa has been inconsistent. Last year the number of deals rose to 186 from 171 deals from 12 months earlier, but the total value of those deals fell for a third year to $3.5bn, from $3.9bn in 2017.
Zambia will need a robust industrial development drive to benefit from the AfCFTA (Lusaka Times)
The Center for Trade Policy and Development says for Zambia to maximize benefits from the Africa Continental Free Trade Area, the country will need a robust industrial development drive. CTPD Executive Director Isaac Mwaipopo says the country may not need to go far in re-inventing the will as there is already a viable plan through the Multi facility Economic Zones initiative. Mr Mwaipopo said what the Zambian government now needs to do is to ensure that the MFEZ in general and in particular, the Lusaka South Multifacility Economic Zone is fully supported to realize the purpose of its establishment. He said the MFEZ is a strategic investment which if well executed will give Zambia a competitive edge as it engages in business with other countries on the continent under the continental free trade area.
Today’s Quick Links: Download the study on the Free Movement of Workers in select EAC countries: Burundi, Kenya, Rwanda, Tanzania (pdf) West Africa: CISLAC launches Anti-Money Laundering Tracker to curb illicit cash flows The African Exchanges Linkage Project: update Enugu Chamber of Commerce calls on FG to reconsider signing the AfCFTA NPCC-World Bank: Productivity survey evaluates Mauritius’ current status Mercosur-Chile: Agreement of Economic Complementation SADC should halt democratic backslide of its member states: CSOs |
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Tax reform, digitization key to financing Africa’s development – ECA report
A new report by the UN Economic Commission for Africa (ECA) says it is urgent for African countries to broaden and deepen their tax and revenue collection bases while leveraging digital technologies to boost collection and compliance, to achieve pressing development goals.
Launched today in Marrakech, Morocco, where ECA’s 52nd Session is taking place, the 2019 Economic Report on Africa (ERA 2019), regrets the continent’s weak state revenue-to-GDP ratio which stood at 21.4 per cent in 2018, noting that the continent must significantly augment that figure in a bid to adequately finance crucial development national programs as well as those set out in Agenda 2030 and Agenda 2063.
The Report, whose theme is “Fiscal Policy for Financing Sustainable Development in Africa,” argues that government revenue on the continent can be increased by 12-20 per cent of GDP through the rigorous pursuit of tax and non-tax income collection especially by aligning fiscal policy with the business cycle.
It makes a case for states to invest in strong institutions and advanced data collection methods that better monitor non-tax revenue streams while urging them to boldly venture into hard-to-tax areas such as agriculture, the informal sector and the digital economy.
Reforming tax administration systems through the use of digitization, refraining from issuing unproductive tax incentives and becoming highly debt-disciplined, are other propositions made for expanding the public purse to finance development in Africa.
The continent could increase tax revenue by as much as $99 billion or 4.6 per cent of gross domestic product (GDP) annually if it sets out quickly to implement these recommendation, the Report projects.
There is much to be achieved by leveraging digital systems for revenue harvesting. For instance, Rwanda increased revenue collection by 6 per cent of GDP by introducing e-taxation and South Africa used online tax payments to reduce compliance cost by a whopping 22.4 per cent while lessening the time to comply with the value-added tax by 21.8 per cent.
However, improved tax/revenue performance cannot be hinged on tax efficiency alone but also on the provision of essential public services to reduce inequality and encourage economic growth and compliance, the Report advises.
This should go with combating corruption and reinforcing accountability to reduce inefficiencies in tax collection.
The Report also notes the importance of multinational and state-owned corporations that are dominant in this sector of natural resource exploitation.
“However, multinational corporations also have the ability to undertake complex international tax avoidance strategies that shift profits from where the underlying economic activities take place to low- or no-tax jurisdictions, a behavior referred to as base erosion and profit sharing,” it says.
Closing loopholes in existing agreements with the multinationals could boost tax revenues accruing to concerned governments by about 2.7 percent of gross domestic product (GDP), funds that can be deployed for achieving the Sustainable Development Goals (SDGs), the Report adds.
Africa has a huge financing gap estimated at 11-13 percent of GDP per annum if it must achieve the targets of the UN sustainable Development Goals and Agenda 2063, but ERA 2019 shows how this gap can be quickly plugged.
“To achieve these two agendas, Africa needs to increase its domestic investment rate to 30-35 percent of annual GDP and triple its 3.2 percent growth rate to about 10 percent per annum,” said Mr. Adam Elhiraika, Head of ECA’s Macroeconomics and Governance Division which coordinated work on the Report.
“ERA 2019 is very timely for Africa as it explores comprehensive ways of financing development at a period when funding resources have been squeezed as fallouts of the global financial meltdown of 2008 and the nose-dive in commodity prices in 2014,” said ECA’s Executive Secretary – Ms. Vera Songwe following the Report-launch.
She was upbeat that “though these precedents have rendered the task of pursuing the implementation of the UN 2030 Agenda for Development and the AU’s Agenda 2063 for a prosperous, integrated and peaceful Africa, difficult, I have no doubt that the imperative of raising additional revenues for financing these development agendas will be much easier for African countries that heed the carefully crafted recommendations in this Report.”
“ECA has done such a good job with the 2019 Economic Report on Africa to the extent that we are asking the Commission to go further,” said Mr. Mambury Njie, Minister of Finance and Economic Affairs of the Gambia, who added that “we now know where the problem [with mobilizing internal resources for development] is.”
One way of going further resides in the question: “How can we make fiscal policy support structural transformation in Africa?” quizzed Egypt’s Deputy Planning Minister Dr Ahmed Kamaly.
Debaters at the launch also requested that ECA deepens research on how tax incentives influence investments and revenue collection, though experts tended to agree on growing evidence that incentives did not make a great difference.
Others suggested that the Commission undertakes studies on how to mainstream the informal sector into the formal economy for more revenue wins and seeks to start accompanying member States in playing out the findings and recommendations of the Report.
Extract from Chapter 7: Fiscal and public debt sustainability
Public external debt
Africa’s stock of public external debt averaged about $309bn over 2000-2006 and then rose further to $707bn in 2017 (figure 7.3), with a 15.5% increase from 2016 alone. Most of the rise reflects increased external borrowing by middle-income countries, with five of the six largest economies on the continent accounting for more than half of public external borrowing in 2017.
South Africa borrowed $176bn externally, followed by Egypt at $82bn, Morocco at $49bn, Nigeria at $40bn and Angola at $37bn. The total debt stock was lower in some of the frontier markets than in middle-income countries, but the increase over the past few years was nonetheless considerable. For instance, Ethiopia’s external debt stock rose more than 250%, from $7.3bn in 2010 to $26.5bn in 2017. Kenya’s pace of external debt accumulation was similar, with external debt stocks rising from $8.8bn in 2010 to $26.4bn in 2017 (nearly a 200% rise). Ghana’s public debt rise was close to 145% between 2010 and 2017 (from $9bn to $22bn).
The increase in external debt accumulation raises concerns about debt sustainability in many African countries, especially as external debt stocks have risen much faster than economic growth owing to rising interest rates in international capital markets. While the average ratio of external debt in Africa declined from 119% of GNI in 2003 to 32% in 2012 before rising in 2013 and stabilizing at 46% in 2017, debt ratios are still very high in some countries, mostly low-income economies. Debt ratios in 2017 were high in Djibouti (112%), Mauritius (156%), Mozambique (101%), Mauritania (89%), São Tomé and Príncipe (67%) and Zambia (65%). With the high share of external debt to GNI, debt servicing costs have increased. About a third of African countries had debt servicing costs of more than 10–15% of exports in 2017 (World Bank, 2018), including Côte d’Ivoire, with $2.2bn in external debt; Ghana, with $2.1bn; and Kenya and Zambia, both with $1.6bn; and Ethiopia, with $1.4bn.
The changing patterns of external borrowing help to explain Africa’s rising external debt. In recent years African countries began to diversity the source and composition of their external debt (figure 7.4). They have increased their share of external borrowing from non-traditional creditors (non-Paris Club official bilateral creditors, foreign and domestic commercial creditors and other financial institutions) and reduced the share of concessional borrowing. Countries have been relying more on non-concessional sources (both bilateral and commercial creditors) and are increasingly tapping international bond markets.
The expansion of non-concessional debt with longer maturity was due partly to enhanced IMF guidelines providing more flexibility in external debt sustainability limits and partly to progress by some countries in developing and deepening their financial sector, enabling them to issue dollar denominated sovereign bonds in international capital markets.
Table of contents
Chapter 1: Recent economic and social developments
Chapter 2: Fiscal policy and development finance
Chapter 3: Tax policy and performance in Africa
Chapter 4: Non-tax revenues for financing sustainable development
Chapter 5: Tax administration in Africa
Chapter 6: Multinational corporations, tax avoidance and evasion and natural resources management
Chapter 7: Fiscal and public debt sustainability
Chapter 8: Conclusions and policy recommendations
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The 2019 Economic Report on Africa will be launched tomorrow in Marrakech (pdf)
The IMF’s forthcoming World Economic Outlook includes two analytical chapters on trade policy
Today’s featured tweets:
@jattamensah: Which AU member state will make history as the 22nd country to ratify the agreement so that AfCFTA will enter into force? Africa youth can’t wait longer. They need jobs to be gained from the implementation.
@eolander: Data dump. China’s MOFCOM reports 2018 China-Africa trade totaled $204bn, up 19.7% from 2017. CN exported $104.9bn to Africa (+10.8% YoY) and imported $99.3bn from Africa (+31% YoY). But...just 10 African countries accounted for 70.3% of 2018 China-Africa trade.
tradebarriers.org: Project tackles non-tariff barriers in Africa
Zambian traders bringing molasses into Botswana on the Kazungula Ferry on 1 December 2016 were surprised when border officials asked for a fumigation certificate. The import permit didn’t list such a certificate, the Zambians said. But the officials held their ground. Facing delays, additional costs and the risk of their product going bad, the traders logged the incident via tradebarriers.org, an online tool for private sector operators in 21 countries to report trade barriers they encounter in southern and eastern Africa. Thanks to the tool, run by the Tripartite RECs, and supported by UNCTAD, the issue was flagged to authorities and resolved in May 2017. It turns out the Zambian exporters were right.
Committee of Experts of the ECA Conference of African Ministers of Finance, Planning and Economic Development: selected updates
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Vera Songwe: African countries can do better with improved fiscal policy. A typical economy on the continent, she said, collects just about 16% of GDP in taxes, with the exception of countries like Morocco which collect at least 25%. “Africa could boost revenues by 3% of GDP by addressing its capacity tax constraints. In addition, by better aligning tax rates and revenues with business cycles, countries can boost government revenue by 5%,” Ms. Songwe said, adding the medium-term growth outlook of between 3 – 4 per cent for Africa was insufficient to stimulate quality investments that will generate jobs and accelerate inclusive growth.
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Experts tease out kingpin role of digitization for Africa’s revenue harvest. “Digitalization has the greatest potential to influence trade and productivity in Africa,” asserted Adam Elhiraika, Head of ECA’s Macroeconomics and Governance Division, who buttressed his points with examples from Rwanda and South Africa, using evidence from the soon-to-be-launched 2019 Economic Report on Africa. While Rwanda has increased its tax collection by a commendable 6% of GDP thanks to digital strategies, South Africa has reduced the cost of revenue collection for both the State and taxpayers by 20% by going virtual with the process.
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Adam Elhiraika: Africa needs policies to protect its economies from vulnerabilities. The ECA Director said the AfCFTA is expected to enhance intra-African trade and growth with marginal losses in revenues. “Africa has made good progress in social outcomes, but inclusion especially in areas of health and education remains elusive,” he told the meeting of experts that opened ahead of the Conference of African Ministers of Finance, Planning and Economic Development. He said socio-economic conditions were improving though at a slow pace. He reported that under-five mortality ratio fell by 42% between 1990 and 2017; income inequality has declined though still relatively high (at 0.44 – Gini coef.); the number of working poor declined 52.8% in 2000 to 33.5% in 2015 and projected to further decline to 30.4% in 2019; with steady progress being recorded towards gender parity.
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The 2019 Annual Adebayo Adedeji Lecture will be delivered on Monday. The theme: Digital transformation of Africa – hype or reality? A full listing of the conference side events, which begin tomorrow, can be accessed here.
Profiting from parity: unlocking the potential of women’s business in Africa (World Bank Group)
The report draws on new, high-quality, household and firm level data to present the clearest evidence to date about the barriers to growth and profitability faced by women entrepreneurs. Extract from executive summary: Female entrepreneurs build larger and more profitable companies when they operate in male-dominated sectors. While female entrepreneurs tend to cluster in sectors dominated by other women, such as retail and hospitality, evidence suggests a potential dividend to “crossing over” into male-dominated sectors. Female-owned enterprises operating in male-dominated industries are as large and just as profitable as their male-owned counterparts. They are also larger than those in female-dominated sectors. Studies in specific settings suggest that a female entrepreneur’s decision to work in higher-return sectors is not driven by differential access to education or finance but by social factors, particularly the influence of male role models and exposure to the sector by family and friends. Female entrepreneurs in Africa have systematically lower levels of business capital – including equipment, inventory and property – relative to their male peers. Drawing on data from 14 impact-evaluation datasets from 10 countries in Africa, the typical male-owned firm has over six times the capital investment of female-owned enterprises.
South African formal businesses, 2010-14: firm dynamics, job outcomes, and productivity (World Bank)
The formal private sector has a key role to play in fostering growth and reducing unemployment in South Africa - strengthening its performance is therefore critical. This paper looks at firm behaviour, firm entry and exit, job outcomes, and productivity dynamics using firm-level administrative data for South Africa. It is the first paper to benchmark employment and productivity dynamics against various comparator countries for which similar analysis has been undertaken. The paper finds that South Africa has an aged private sector with low firm dynamism and characterized by large firms that hold a large share of employment and revenue, although they are not as productive as micro firms and pay lower wages on average. The paper also finds that job creation is concentrated predominantly in incumbent firms, which are old and large, and job creation from entry and exit is negligible. [World Bank: Are management practices failing or aiding the private sector in South America?]
Zimbabwe, SA set timelines for deals implementation (Bulawayo24)
Minutes of the third session of this week’s BNC indicate that the two countries set themselves strict deadlines for the completion of specific tasks ahead of the Pretoria meeting. Under the agreement, senior government technocrats from the two countries were tasked with coming up with agreeable areas of cooperation by the end of this month, which will then lead to the development of the MoU for cooperation and a draft implementation plan which will be annexed to the MoU by 30 April 2019. This would then trigger internal processes in terms of ratification of the MoU, according to the two countries’ respective legal requirements. It also means the MoU would have to be ratified by both Zimbabwean and South African parliaments in line with international law.
The two countries also agreed to engage over Zimbabwe’s application for a special dispensation derogation under the SADC protocol in which it was seeking an arrangement whereby its citizens could be allowed to work in other SADC countries without being subjected to rigorous vetting processes. Should an agreement be reached, South Africa will help lobby the SADC bloc to accept Zimbabwe’s application at the SADC summit for heads of state in September this year. The application was initially made in 2017, but was not followed through after SADC member states requested to consult Zimbabwe bilaterally. Zimbabwe also wants derogation on trade in an unspecified number of products.
US Africa strategy speech: address by Deputy Secretary of State, John J. Sullivan (State Department)
We see great opportunity in Angola’s economic diversification policy that will bring new US products and services to Angola. US companies, as global leaders in many sectors, can contribute greatly to Angola’s development by providing high-quality goods and services through transparent processes. In that vein, the United States joined with other nations to vote affirmatively for the International Monetary Fund’s $3.7bn credit line for Angola in December to support the country and the administration’s economic reforms. But based on my discussions with business leaders over the past several days I know the picture isn’t perfect. Companies, US companies in particular, do face barriers to trade in Angola. To remedy this, some time ago, 10 years ago we signed a trade and investment framework agreement to promote greater economic cooperation between our two countries. We are pursuing negotiations to strengthen this trade relationship and reduce trade barriers to the mutual benefit of our citizens.
It’s been a failing, I think, of both of our sides, the United States and Angola that we haven’t pursued these negotiations under the TIFA framework more aggressively, but we’re committed to doing that. President Lourenço’s commitment to combatting corruption is another significant positive signal to foreign investors. The creation of a transparent business environment will generate even greater US private sector interest in trade and investment in Angola. Likewise, parliament’s passage of the new private investment law and relaxed visa requirements will make it easier for private foreign investors to pursue opportunities in Angola. [Kagame concludes two-day visit to Angola]
Egypt and the African Union: selected commentaries from the Egyptian press
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Geography, history, future: umbrella for Arab-African integration. President Abdel-Fattah Al-Sisi pointed out that Arab-African rapprochement is not a new idea. Arab-African summits were convened in Egypt in 1977, in Sirte, Libya in 2010, in Kuwait in 2013 and in Malabo in 2016, and a summit is scheduled in Saudi Arabia later this year. What the summits have revealed, added Al-Sisi, is that common factors binding Arab and African states outweigh the factors that divide. Al-Sisi concluded by saying Arab-African integration needs diligent work from all parties and requires improvements to infrastructure, including establishing a network of land and railway links. He recommended that papers be prepared for the next Arab-African summit in Riyadh focusing on creating a common Arab-African market, ways to provide funds for start-up projects and the best ways to establish transport links and link electric grids.
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Belal Manzour: The African Union in the G20. On the other hand, the AU ranks 11th in the world in terms of its total GDP, which also qualifies the Union for membership of the G20. These two factors underline the importance of benefitting from Egypt’s chairmanship of the AU and its international weight to launch the first official African initiative for the AU to join the G20 as a member. Despite the fact that the agenda of the G20 summit in Osaka has not been announced, a number of indicators appeared in Japanese Prime Minister Shinzo Abe’s speech at the closing session of the previous G20 summit held in Buenos Aires in Argentina in 2018 and reflecting Japan’s interest in certain crucial issues. Events over the past decade have proven that the AU has the chance to earn full membership of the G20. However, in order to do so, the African discourse will need to focus on bridging the gap between the two organisations of the AU and the G20. The AU needs to concentrate less on the inequality between Africa and the G20, even as African countries continue to suffer from poor infrastructure, high unemployment and slow regional integration. Most of the G20’s interaction with Africa also still takes place through development working groups that focus only on the bases of development, such as the elimination of poverty.
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The more Africa’s discourse concentrates only on what the continent can receive from the G20, the less the group will look to Africa as a potential or equal partner. Another issue concerns Africa’s participation mechanisms and engagement in policy-making and the outcomes of the upcoming Osaka meeting. Shinzo’s speech suggested that the AU could adopt a number of alternative approaches to make a concrete contribution here. Environmental and energy issues, as well as the aging of many societies, are at the forefront of the Japanese human-centred strategy. This is particularly significant, since in addition to the vast natural resources of the continent, Africa’s capital lies in its being the world’s most youthful continent.
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The Arab-African Youth Platform: new horizons. The conference ended with a raft of recommendations to improve young people’s access to knowledge, education and health. Topping the recommendations was opening up the Egyptian Knowledge Bank to African and Arab researchers. The platform also saw the launch of an initiative to treat one million African patients with hepatitis C, capitalising on Egypt’s success in combating the virus. Other recommendations included establishing a committee of young Arabs and Africans to explore opportunities for integration and setting up a working group to examine ways to tackle extremism and counter-terrorism.
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Laila Takla: An organisation for African women
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Trade Policy Review: East African Community (Burundi, Kenya, Rwanda, Tanzania and Uganda)
The third joint Trade Policy Review of the East African Community (EAC) takes place on 20 and 22 March, 2019 to provide clarification from the EAC members on its trade policies and practices. The basis for the review is a report by the WTO Secretariat and the EAC, along with policy statements submitted by Burundi, Kenya, Rwanda, Tanzania and Uganda.
Report by the Secretariat: Summary
The East African Community (EAC) consists of Burundi, Kenya, Rwanda, Tanzania, Uganda, and South Sudan (which is not yet a WTO Member). Agriculture remains the key driver of the economies of the EAC countries but the services sector is the main contributor to their GDP. In fact, most of the populations (about 80%) live in rural areas and depend on agriculture for their livelihood. High costs of doing business limit the importance of manufacturing to these economies, while recent oil discoveries, mainly in Kenya and Uganda, are expected to boost the economic development of the countries. Nonetheless, EAC countries face various socio-economic challenges despite their favourable conditions for agriculture, their important sources of renewable energy, and their total population of over 168.2 million. With the exception of Kenya, they all remain least developed countries (LDCs) and are yet to significantly diversify their economies.
During the period under review, the EAC WTO Members recorded strong GDP growth driven by increased public investments in transport and energy infrastructures, favourable weather conditions and strategic policy interventions. Agricultural production was boosted and, driven by buoyant tourism activities, the services sector also recorded a good performance. Individually, performance was mixed. Kenya’s good economic performance helped it to acquire the status of lower-middle-income country in 2014, according to the World Bank’s classification. Rwanda’s strong and continuous economic growth has also been accompanied by steady improvements in many of its social indicators. However, the economy of Burundi has been severely affected by its political crisis since 2015, although recovery signs were noticeable in 2016 and 2017.
Ongoing reform efforts by EAC countries aim at establishing a monetary union by 2024. Indeed, in 2013, they adopted the East African Monetary Union Protocol (EAMU Protocol), on top of the macroeconomic convergence framework in place since 2007. Price stability is the primary objective of monetary policies in all EAC WTO Members. However, core macroeconomic policies are not yet harmonized and remain country specific. Inflation, highly volatile during the review period, is driven mainly by international food and oil prices. As a consequence, agricultural performance, especially domestic food supply, is also a determinant of inflation. Regarding fiscal matters, notwithstanding reforms undertaken, domestic resources mobilization remained insufficient to match increased public expenditures, mainly on ongoing infrastructure projects, which translate into continued fiscal deficits.
The ratio of EAC WTO Members’ trade (including intra-EAC trade) in goods and services to GDP remains moderate, at about 50%. The low intra-EAC trade in goods (at around 10% of the total merchandise trade of the Community over the review period) reflects, inter alia, informal (unrecorded) cross-border trade; poor infrastructure; and non-tariff barriers including cumbersome administrative procedures. In other words, nearly 90% of the EAC’s trade in good takes place outside the region, with imports originating mainly from China, India, the European Union and the United Arab Emirates, which are also among the main export markets. Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Community (SADC) countries (excluding EAC member States) are also important destinations.
Overlapping membership of regional economic communities by individual EAC countries, notably COMESA and SADC, remains a challenge and further complicates the national trade regimes. In June 2015, negotiations were concluded for a Tripartite (COMESA-EAC-SADC) Free Trade Agreement (FTA) in Goods, with a view to rationalizing the integration process in the region. Negotiations on trade in services and on other trade-related areas (including competition policy, intellectual property rights) are expected to start after the launch of the FTA on trade in goods.
Under the U.S. African Growth and Opportunity Act (AGOA), Kenya, Rwanda, Tanzania, and Uganda benefit from duty-free and quota-free access for a range of products, including selected agricultural and textile products. Kenya, Tanzania, and Uganda are also eligible for preferences under the “wearing apparel” provisions of the AGOA. The negotiations on an Economic Partnership Agreement (EPA) with the European Union were concluded in October 2014. As at December 2017, the EPA was ratified by Kenya and signed by Rwanda. Under the Everything but Arms initiative of the European Union, all EAC countries, except Kenya, are eligible for preferences.
The EAC seeks to promote the Community as a single investment area; its Treaty calls for the harmonization and rationalization of investment incentives, including those relating to taxation of industries. However, the legal and institutional frameworks for investment remain country-specific.
The national investment codes are generally liberal, with no major restrictions on foreign presence. Local and foreign investors receive the same treatment in terms of incentives.
Under the WTO Trade Facilitation Agreement (TFA), Kenya, Rwanda, and Uganda have deposited their instruments of acceptance. All EAC WTO Members have notified their Category A commitments. A Regional Trade Facilitation Sub-Committee was established in 2015 to coordinate the implementation of the TFA and other trade facilitation measures decided at the regional level. EAC countries continue to fulfil their notification obligations at various degrees. However, there are several areas where notifications remain outstanding.
Customs procedures are carried out by licensed customs clearing agents. Pre-shipment or destination inspections for customs valuation purposes are not required in any EAC country. However, pre-shipment inspection for conformity assessment purposes is required for certain goods in Burundi and Kenya. Although some customs procedures and documentation requirements continue to be country-specific, and national customs continue to use different computer systems, noticeable progress has been made towards full harmonization, in accordance with the provisions of the EAC Customs Management Act, 2004 (as amended in 2009), and the EAC Customs Management Regulations, 2010.
A regional Authorized Economic Operator (AEO) programme was introduced in 2016. All imports into the EAC and intra-EAC transfers of goods are cleared under the EAC’s single customs territory (SCT) model. Under the SCT, imports are declared only at the country of destination, and are released at the first point of entry; the goods are then moved under a single bond to the final destination. Customs valuation is broadly based on the provisions of the WTO Agreement on Implementation of Article VII of GATT 1994. However, national customs administrations encounter implementation difficulties.
Since the last Review of EAC members, the CET average rate slightly increased from 12.7% in 2011 to 12.9% in 2018. Three tariff bands (zero, 10%, and 25%) apply to most imports; higher rates, ranging from 35% to 100%, and alternate duties apply to a list of “sensitive” items. As a consequence, the ad valorem CET rates exceed a number of corresponding ad valorem rates bound by Burundi, Kenya and Rwanda. Moreover, for some lines, applied alternate tariffs may exceed bound ad valorem rates. Bindings cover 22.4% of all Burundi’s tariff lines, 16.1% of Kenya’s, 100% of Rwanda’s, 14% of Tanzania’s, and 16.5% of Uganda’s. In accordance with the provisions of the EAC Customs Management Act, 2004, and the EAC Customs Management (Duty Remission) Regulations, 2008, the national duty and tax exemption and concession schemes are mostly harmonized in the EAC. The schemes, including ad hoc duty and tax exemptions, have led to significant revenue forgone by EAC countries.
Fees on some services and documents issued by Customs have been harmonized. A development levy of 1.5% on a list of products from non-EAC countries is also collected. Various other duties and charges are levied individually by EAC countries.
All EAC members apply internal taxes (VAT and excise duties), whose regimes are not yet harmonized. VAT applies to goods and services, including imports, at standard rates ranging from 16% in Kenya to 20% in Tanzania. Reduced rates are in place in Kenya (12%) and Uganda (6%). Exports are zero-rated under the national VAT regimes. Excise duties are levied on a list of products at rates which are determined by individual EAC members.
No contingency measures have so far been imposed by EAC countries. They are governed by the EAC Customs Union (Anti-Dumping Measures) Regulations, 2004; the EAC Customs Union (Subsidies and Countervailing Measures) Regulations, 2004; and the EAC Customs Union (Safeguard Measures) Regulations, 2004. EAC members may initiate investigations and reviews against each other. However, this has never happened. Kenya also has national legislation on trade remedies.
The export regime, including procedures and documentation requirements, is not yet fully harmonized. All EAC countries apply export taxes on raw hides and skins. In addition, export duties and taxes are collected on specified items by Burundi (minerals); Kenya (wet blue leather, crust leather, and raw macadamia nuts); Tanzania (raw cashew nuts, wet blue leather, and fish and fish products); and by Uganda (raw tobacco, fish and fish products, and coffee). In general, these measures are meant to encourage domestic value addition. A number of export promotion instruments are harmonized within the EAC. These include: manufacturing under bond, export processing zones, and duty remission schemes. Goods benefiting from any of these schemes are destined primarily for export, and manufacturers are required to sell at least 80% of their products outside the EAC.
Standards and technical regulations regimes remain country-specific to a large extent. However, harmonization efforts are ongoing at the regional level, and the East African Standards Committee (EASC) oversees the development of new standards and the harmonization of the existing ones. As at 30 September 2018, the EAC catalogue included 1,526 standards, of which 1,007 were international. On SPS, harmonized measures and procedures have been developed for plants; mammals, birds and bees; fish and fishery products; and food safety. In general, EAC countries continue to experience challenges in the harmonization of their regimes on SPS-related measures, standards and technical regulations, particularly with regards to the mutual recognition of inspection certificates, and this contributes to further increasing trade costs in the region. During the review period, several measures were notified by EAC countries in the areas of SPS and TBT.
None of the EAC countries has notified a state-trading enterprise pursuant to Article XVII:4(a) of GATT 1994 and paragraph 1 of the Understanding on the Interpretation of Article XVII. However, state-owned enterprises remain an important feature of the economies. Competition is regulated at both regional and national levels. The EAC’s Competition Act was adopted in 2006, and came into force in 2014. Its implementation agency, the EAC Competition Authority, deals with all competition issues having cross-border effects. In principle, domestic competition issues remain under the jurisdiction of national competition laws and institutions. Uganda does not have a formal regime on competition, and Burundi and Rwanda are yet to establish their competition authorities.
Intellectual Property Right (IPR) issues are not harmonized in the EAC, but efforts are being made at regional level to assist EAC member States to implement the TRIPS Agreement with a view to promoting copyright and cultural industries, traditional knowledge, geographical indications, and technology transfer. Furthermore, a regional IP Protocol and Policy were adopted by the Council of Ministers in 2013 to maximize the benefits of TRIPS flexibilities. The protection of IPR remains a challenge for individual EAC countries. While the framework for IPR protection is yet to be fully established in Burundi, in Kenya for example, a well-established Anti-Counterfeit Agency is tasked with combatting counterfeiting, trade in counterfeit goods and other related dealings; and anti-counterfeit legislation is being amended to increase the penalties, and broaden the scope to include unbranded goods and labels. At the regional level, actions are being initiated to fight counterfeit and pirated products. An EAC Anti-Counterfeit Bill is being drafted to provide a legal framework for EAC members to prohibit trade in counterfeit goods.
Sectoral policies are not harmonized within the EAC, but countries are making joint efforts under several regional initiatives, mainly on agriculture and services, their main economic sectors. Agriculture plays a key role in the economies of all EAC member States, in terms of contribution to GDP, livelihood, and foreign exchange earnings; one of the agriculture policy priority is to achieve food security. Its contribution to GDP ranged from around 25% in Uganda to around 42% in Burundi. Agricultural exports are dominated by coffee, cut flowers, tea, tobacco, fish and vegetables.
With high costs of doing business due, inter alia, to high regulatory burden and increased import competition, manufacturing is characterized by limited value addition. It is highly concentrated in agro-processing activities, and is dominated by micro, small and medium enterprises. Costly and unreliable energy supply is also a major impediment to the development of manufacturing within the EAC. In a move to attract foreign investment, including in the manufacturing sector, the EAC countries provide, inter alia, corporate income tax incentives, and remission of customs duties and VAT.
The services sector constitutes the main contributor to GDP in all EAC countries. However, its potential remains untapped. Under the GATS, EAC countries have individually undertaken commitments, generally on a few service categories. Under the EAC Common Market Protocol, the member States are committed to liberalizing a list of services in, inter alia, finance, transport, communication, tourism, and business services across all modes of supply. The number of subsectors covered by the commitments range from 59 in Tanzania to 101 in Rwanda. Countries are also committed to refraining from introducing any new restrictions on the provision of services.
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The joint trade policy review of EAC member countries began today at the WTO: download reports prepared by the EAC and WTO secretariats, advance questions
The World Travel and Tourism Council has posted its Economic Impact Research 2019 report: the Africa Region highlights (pdf)
Artisanal and small-scale mining: the paradox of extraction (ACET)
There are an estimated 9 million artisanal and small-scale mining (ASM) operators and about 54 million dependants of the activity in Africa. ASM is the second largest employer after agriculture and employs 10 times more miners than the large-scale mining sector, producing 18% of Africa’s gold and almost all gemstones except diamonds. ASM has gained more prominence as a source of livelihood over time, with the number of miners quadrupling between 1999 and 2014. In Eritrea and the Central African Republic, for example, more than half the population is dependent on ASM. ASM affords higher income than agriculture, often provides employment in depressed agricultural areas, and slows down rural-urban migration. The problems associated with ASM are manifested in different ways across countries. However, Ethiopia’s fundamental policy changes can inform how other countries go about harmonizing ASM and agriculture in order to achieve sustainable growth. The key takeaways here are that there is need to:
Tanzania sets up mineral trading centres to curb illegal gold exports
Tanzania has ordered all mineral-producing regions in the East African nation to set up government-controlled trading centres by the end of June, accelerating efforts to curb illegal exports of gold and other precious minerals. The trading centres will give small-scale miners direct access to a formal, regulated market where they can go and directly trade their gold. They currently struggle to access formal gold dealers who mostly based in the capital Dar es Salam and major towns. A statement from the prime minister’s office said the first mineral trading centre was inaugurated in the northwestern town of Geita on Sunday, close to the country’s biggest gold mine owned by South Africa’s AngloGold Ashanti. Small-scale miners produce around 20 tonnes of gold per year in Tanzania, but an estimated 90 percent of the output is illegally exported, according to a report by a parliamentary committee. It exported gold worth $1.549bn last year, up slightly from $1.541bn in 2017, central bank data shows.
Free movement of labour in East Africa: IOM study
A new study has urged member countries of the East African Community to adopt labour migration policies based on international best practices, improve data management and boost the operationalization of One Stop Border Posts. The comparative study assesses migration patterns and policy issues in Burundi, Kenya, Rwanda and the United Republic of Tanzania – four of the six EAC countries. “We appreciate the commitment and cooperation from the United Republic of Tanzania in conducting this study and are confident that the presentation of the results will assist the Government of Tanzania and the other three EAC Member States in improving their management of migration flows, in p articular those related to labour,” said IOM Tanzania Chief of Mission Dr Qasim Sufi. Twenty different institutions in the United Republic of Tanzania and Zanzibar, including the President’s Office, the Ministries of Trade and Industry, Ministries of Labour, Immigration Departments, Trade Union Congress of Tanzania and Association of Tanzanian Employers participated in the launch event that took place in the capital city of Dodoma. Three similar events will be held in Bujumbura, Burundi on 20 March; Kigali, Rwanda on 21 March; and Nairobi, Kenya on 4 April 2019.
IGAD drafts protocol to end border restrictions
The Intergovernmental Authority on Development has drafted a new protocol to resolve cross-border restrictions among member states and cause easy mobility of people, goods and services. During the high-level experts technical review meeting at the Commonwealth Speke Resort Hotel in Munyonyo, Kampala on Monday, the technocrats said the new protocol was drafted on a unanimous decision by all IGAD member states as prescribed in the 1966 IGAD establishment agreement, trade unions and the East African Community. The draft protocol seeks to address four major freedoms: “Movement of people aimed at abolishing visa, labour mobility, establishment of businesses and residence.” Dr Mehari Taddele, the IGAD lead expert, said currently there are many border conflicts within African countries and the problem has been caused by absence of a direct protocol to address the issues. “By the time the first protocol was made, there were no problems we are seeing right now like fights at borders. These have been mainly caused by countries assuming sovereignty, political affiliations and trans-border issues. The new protocol will tackle these issues. We also want to see that we develop infrastructure and also abolish visas in the region.”
Increased EAC border disputes threaten Kenya’s export market (The Standard)
Already, Kenya’s share of the EAC export market has shrunk considerably as an influx from cheaper goods from China and India and South Africa flood the region. “We have expressed our concern with authorities in both countries that the stalemate at the border of Uganda and Rwanda does not augur well for the free movement of goods across the community,” said East African Business Council Chair Nick Nesbitt, who also heads the Kenya Private Sector Alliance. Mr Nesbitt says the stalemate not only threatens the business of transporters and clearing and forwarding agents but also has a knock-on effect on the future of Kenya’s business interests in the region. “To the extent that Rwanda could turn to the Rwanda-Tanzania corridor for its transport solutions, this presents a challenge to Kenyan cargo operators as well as the businesses and communities along the Northern transport corridor that depend on the same for their livelihood.”
Chinese opening-up policy to boost Kenya’s exports: PRC official (Xinhua)
China’s opening-up policy will boost Kenya’s exports to the Asian nation, a Chinese government official said on Tuesday. Li Xuhang, Charge d’Affaires at the Chinese Embassy in Kenya told a press conference in Nairobi that Beijing’s ever growing consumer market will bring more export opportunities for Nairobi. He revealed that currently the annual bilateral trade value has reached 537 billion shillings ($5.37bn) while China’s non-financial direct investment in Kenya amounted to about $520m dollars in 2018, which was more than two times the amount during the previous year. The Chinese official also noted that due to the strong bilateral ties, there were around 170 Kenyan students who obtained Chinese-funded scholarships for studying in China in 2018, and 686 government officials and professionals went to China for training programs during the same year. In the aviation sector, Li said that direct flights between China and Kenya have now increased to 10 per week, and the number of annual Chinese tourists visiting Kenya has reached 81,000. [Govt, China talks on $3,7bn railway loan underway]
Nigeria: Strategic approaches to industrialisation never worked – Emefiele (ThisDay)
The Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, has responded to critics of the central bank’s intervention initiatives in the textile and garment industry, maintaining that contrary to suggestions, the adoption of strategic approaches towards industrialisation of the economy had never yielded positive results in the past. The CBN governor, who said this in response to the Director General, Lagos Chamber of Commerce and Industry, Muda Yusuf, who had in a statement urged the Federal Government to reconsider the recent CBN ban of forex to textile importers and allow for strategic approaches, said allowing for continued importation, dumping as well as smuggling - as insinuated by Yusuf - was not the best way out of the current situation. He said smuggling remained the greatest challenge to the country’s industrialisation, adding that nothing could be achieved unless it is tackled head on. The CBN governor was speaking during a stakeholders’ engagement on repositioning the oil palm value chain. [Dangote’s Nigeria tomato plant resumes after years idling]
US poultry exports to South Africa: an update from GAIN (pdf, USDA)
On 1 February 2019, South Africa notified Post of the amended guidelines for the utilization of tariff rate quota allocations for US bone-in chicken imports. The amended guidelines are supposed to address the primary challenges that have arisen since the inception of the quota in 2016, and will take effect on 1 April 2019. Some local importers have expressed their concerns that certain amendments could adversely affect the full utilization of the quota. Post will continue engaging with South African government and industry contacts to monitor the changes and resulting impact on the administration of the quota. Through the first 10 months of the 2018-2019 quota year, the United States has exported 58,600 tons of U.S. bone-in chicken meat to South Africa compared with 51,600 tons during the same period in 2017-2018 quota year. Overall, many importers are of the view that their submissions to ITAC were not incorporated into the amended guidelines. Some of the importers, especially HDIs, are concerned that the amended guidelines do not address the main challenges they have been facing since the inception of the TRQ; financially, partnerships and operational challenges.
Ethiopia: Gender Diagnostic Report (World Bank)
This report presents evidence on the mechanisms underlying gender gaps in the Ethiopian workforce. Using data from the 2011-2016 Ethiopia socio-economic surveys, this report provides a detailed understanding of the constraints faced by female farmers, entrepreneurs, and employees. To that end, the diagnostic makes four key contributions (pdf): first, this report provides an overview of the labor force in Ethiopia and identifies the factors that predict whether, how much, and in what sector an individual works. Second, this report uses Oaxaca-blinder decompositions to measure and account for gender gaps in economic outcomes in agriculture, self-employment, and wage labor. Third, this report identifies the links between labor market skills, social norms, and gender gaps in the Ethiopian workforce. Fourth it provides policy makers with a menu of innovative programming examples.
Conference of Directors General of Customs of the West and Central Africa region: WCO update
At the invitation of the WCO Council Vice-Chair, Général de Brigade Toumany Sangaré, Director General of Guinea Customs, WCO Secretary General Kunio Mikuriya attended the 24th Conference of Directors General of Customs of the West and Central Africa region, held in Bangui, 13-15 March 2019. There was a particular focus during the conference on: Performance measurement and national experiences of using performance measurement tools, such as the WCO Time Release Study; Progress achieved with regional security-related initiatives, such as “Sécurité par Collaboration (SPC++)” where the WCO West and Central Africa Security Project was highlighted, as well as the efforts aimed at countering the illicit trafficking of cultural objects; Developments with regard to pre-shipment inspection contracts, which were discussed at length; The interconnection of transit systems, including advances as regards the development of the different existing systems and pilot projects.
14th CII-EXIM Bank Conclave on India-Africa Project Partnerships: selected updates
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India proposes pact with Africa to enhance bilateral trade. India has proposed to Africa that both sides should work towards entering into a free trade agreement or a preferential trade agreement to enhance and strengthen their economic relationship in a new global trading order. This suggestion came from Suresh Prabhu, Minister for Commerce and Industry and Aviation, during his address at the 14th CII-EXIM Bank Conclave on India Africa Project Partnership in the Capital. Prabhu said the proposed FTA should look to first benefit Africa and help increase its share in the global market place. Commerce Secretary Anup Wadhawan said the Commerce Ministry was working on a “comprehensive strategy” to boost India-Africa trade. In 2017-18, India-Africa bilateral trade was about $63bn, higher than $52bn in the previous fiscal. The potential for trade and investment ties is much more and there is also need to diversify the bilateral trade basket, Wadhawan added. [Conclave on India-Africa project partnerships concludes]
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Conclave documentation: (i) A listing of project opportunities (by sector, country), (ii) Conference programme (pdf)
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Related commentaries: In search of the Africa Manifesto; Abhishek Mishra, Gayathri Iyer: Can the Western Indian Ocean region be a game changer for India?
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