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A reminder of the call for papers for the TMEA, University of Portsmouth, Centre for International Trade and Investment Law (India) conference: Inclusive and sustainable participation and empowerment of women in trade (29-30 May, Nairobi)
South Africa and its neighbours fail to clinch a post-Brexit trade deal with UK (Daily Maverick)
Amid the continuing uncertainty about when and how Britain will leave the EU, Davies outlined three basic scenarios for future trade between the SACU-Mozambique and the UK: Scenario 1. If British Prime Minister Theresa May managed to persuade parliament to accept her EU withdrawal deal (which has already twice been rejected) then Britain would leave the EU on March 29, but all Britain’s trade arrangements with the EU would remain in place until the end of 2020. This would include the EPA with SACU-Mozambique. That would give the SACU-Mozambique group enough time to negotiate a future separate trade deal with the UK. Scenario 2. If the EU agrees to the UK parliament’s decision to extend the deadline for leaving the EU until the end of June, this will also give SACU-Mozambique time to negotiate a separate trade deal with Britain. Scenario 3. The worst-case scenario. If the EU fails to extend the Brexit deadline until the end of June and the UK Parliament fails to endorse May’s withdrawal plan, Britain will “crash out” of the EU on March 29. In that case, the SACU-Mozambique countries will be subject to a set of import tariffs which Britain published last week for all countries. [The author: Peter Fabricius]
Africa’s continental free trade area: a stepping-stone to integration? (ERF Policy Forum)
Down the road, the biggest challenge will be handling the ‘regional value chain’ motto: how to participate in supply chain trade by moving to downstream activities. So far, with the exception of ‘factory Asia’, other regions have barely participated in supply chains. Exports from Africa, for example, have lower shares of foreign value added while their exports are mostly embodied in exports of other regions, a sign of low downstream activity. A successful industrial policy will require agreement among partners in customs unions to select short lists. ECOWAS, for example, has five tariff bands in its common external tariff (CET) and a long list of exceptions, while the EAC, which currently has three bands, is contemplating a move to a four or five-band CET in the 0-35% range also with an exception list. These difficult choices are compounded by the fact that the new technologies are skill-intensive with few possibilities of substitution with unskilled labour, leaving little room for low-income countries to offset their technological disadvantage in manufacturing activities with low-cost labour. By raising the debate about integration to the continental level, the AfCFTA has, at the very least, made explicit the challenges that lie ahead. Steps along the road are now well defined. [The author: Jaime de Melo]
AfCFTA ratification update: Zimbabwe’s parliament ratifies the AfCFTA
Kenya’s High Court declares the Kenya-Mauritius DTAA unconsitutional (Tax Justice Network)
In reading the judgement, Justice W. Korir granted Tax Justice Network Africa’s submission by declaring void Legal Notice No. 59 of 2014 which renders the Kenya/Mauritius DTAA void and unconstitutional. The long-awaited judgement is in reference to TJNA’s challenge of the constitutionality of the Kenya-Mauritius DTAA signed in May 11, 2012 on the following grounds: The government failed or neglected to subject the Kenya-Mauritius Double Taxation Avoidance Agreement to the due ratification process in line with the Treaty Making and Ratification Act 2012 as a contravention of Articles 10 (a), (c) and (d) and 201 of the Constitution of Kenya; That Legal Notice Legal Notice 59 of 2014 is therefore invalid and that the Cabinet Secretary for Treasury should immediately commence the process of ratification in conformity with the provisions of the Treaty Making and Ratification Act 2012. TJNA calls on the Kenya government to revisit all other recently signed DTAs including those with UAE, Netherlands, China and South Korea and those under negotiation to ensure that they are compliant with this new ruling.
Factoring Promotion Conference: Afreximbank proffers factoring to ease access to financing for African SMEs
Kanayo Awani, managing director of the Intra-African Trade Initiative at Afreximbank, noted that despite its huge opportunities factoring had not yet taken off fully in Africa, with the region accounting for less than 1% of global factoring volumes in 2017. Notwithstanding that, the region had demonstrated strong growth in recent years, with factoring volumes growing from Euro 14.9 billion in 2009 to approximately Euro 22.3 billion in 2017, although most of those volumes were concentrated in South Africa, Tunisia, Morocco, Egypt, Mauritius and Kenya. She said that Africa’s factoring volumes were projected to reach about Euro 200 billion by 2021, resulting mostly from new market entrants supported by the sustained economic growth; rapid rise of Africa’s middle class; emergence of innovative industries supported by technological advancements; rapidly expanding trade and economic relations between Africa and major economies in the South; and increasing focus on regional integration and intra-regional trade under the African Continental Free Trade Agreement. The Factoring Promotion Conference, held under the theme Domestic and international factoring: alternative tools for SME financing in Africa (pdf) (12-13 March, Gaborone), was organized by Afreximbank and FCI.
AfDB, Portugal and Mozambique sign MOU for “Lusophone compact” to accelerate private sector development (AfDB)
The Lusophone Compact is a financing platform, involving the Bank, Portugal, Angola, Cabo Verde, Guinea Bissau, Equatorial Guinea Mozambique and Sao Tome and Principe, which provides risk mitigation, investment products and technical assistance to accelerate private sector development in Lusophone African countries. Projects eligible under the Compact must align with the Bank’s High 5s, the relevant Country Strategy Papers and national development plans, have the involvement of the host country and at least two other Compact signatories, and be in sectors which cover renewable energies, agribusiness and agricultural value chains, water and sanitation, infrastructures, tourism and ICT.
West African Economic and Monetary Union: IMF executive board concludes regional consultation (IMF)
Directors emphasized the need to intensify the pace of structural reforms and regional initiatives to improve competitiveness and inclusiveness, including through continued efforts to promote cross‑border infrastructure projects, and ease custom procedures. Directors also encouraged the authorities to sustain the progress made in improving the quality, coverage, and timeliness of regional data. The views expressed by Executive Directors today will form part of the Article IV consultations with individual member‑countries that take place until the next Board discussion of WAEMU common policies.
South Sudan: IMF staff completes visit (IMF)
On the management of oil revenues, the mission urges the authorities to immediately stop contracting oil advances that are expensive and nontransparent. This measure will also help to ensure that oil revenues will be fully available for financing budgetary spending. Meanwhile, the central bank should continue tight monetary policies and refrain from lending to the government, to keep inflation on a decelerating path and gradually replenish foreign exchange reserves. Fiscal conditions for the remainder of 2018/19 will be constrained by large repayments of oil advances. With a tight resource envelope, the authorities should strictly prioritize core peace-related spending and payment of civil servant salaries. With the clearance of oil advances in the current fiscal year, the 2019/20 budget can be based on a predictable revenue stream.
South Africa will export a record 137 million boxes of citrus this year: and other countries are getting upset (Business Insider SA)
BAPA+40: updates
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The African, Caribbean and Pacific Group of States (2019): extract on the Technical Aid Corps of Nigeria. The Nigerian Technical Aid Corps (TAC), established in 1987 as a foreign policy tool, is Africa’s only sustainable technical aid programme for development, and it is a practical demonstration of effective South-South cooperation. Since the inception of the programme, several thousand Nigerian volunteers have been deployed, growing from a first round of 102 volunteers in the period from 1987 to 1988, to up 1,500 for the period from 2014 to 2016. These professionals currently provide assistance to more than 30 ACP countries in a range of fields including engineering, agriculture, law, medicine, architecture, accounting, radiology, meteorology and education.
Under the programme, development efforts in countries such as Belize and Jamaica have benefited from the deployment of Nigerian health professionals including nurses and pharmacists to assist their health ministries. In Fiji, TAC volunteers have contributed to the drafting of its new Constitution. In Africa, TAC has made contributions to the national development of neighbouring West African countries such as the Gambia, Senegal and Sierra Leone as well as elsewhere on the continent, including the Congo, Ethiopia, Mozambique, Namibia and Uganda. As outlined in the Nigerian Technical Aid Corps Act, ACP countries make specific technical assistance requests to the Government of Nigeria according to their needs, challenges and national priorities. Nigeria finances and deploys skilled technical experts in these areas for a mandatory period of two years, with host countries also providing free medical care, tax exemptions, repatriation costs, and other payment and facilities as agreed. The scheme is the only one of its kind operating in Africa and has been recognized as a model by leading South-South cooperation institutions. Its comparative advantage lies in the fact that Nigeria shares similar development issues with recipient countries, leading to more relevant experience, appreciation and sensitivity in responding to the challenges.
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Cooperation beyond convention: independent report on South-South and Triangular Cooperation. Extracts from 2.4: concluding remarks. At the regional level, as BAPA recommended, it is essential to establish a regional policy forum/committee for dialogue, consultation and consensus-building on SSC and TrC – one that is managed by regional institutions. This policy forum should include representatives from government, development partners, the private sector, CSOs, think tanks and others. These regional forums and their relevant regional institutions should be the drivers to generate data on SSC and TrC. The objective is to drive evidence-based policy discussions around key SSC priorities, including on interregional development problems, relevant sectors with SSC and TrC opportunities, key SSC regional priorities, key SDGs, and other specific regional objectives. The proposed policy forum should also discuss ways to bring about uniform administrative and legal arrangements, technical standards on procurement, and trade rules at the regional level.
Another feature of the new SSC is what we might call its outward orientation. At a time when Northern countries are raising barriers to a variety of trans-border flows and have made international economic sanctions and embargoes an everyday tool of their international policy kit, much of current SSC goes to improve international connectivity and communications, both through physical and digital infrastructure and building the required digital capacities required. Forty years ago, delinking from the global economy was seen by some theorists and governments as the best way for developing countries to achieve both development and autonomy. Today, it is the opposite, with the most successful emerging economies realizing that the shortest path to sustainable development lies in interacting more, not less, with the global economy. SSC and triangular cooperation focus on the implementation of the sustainable development goals in developing countries. The United Nations is at the core of this global governance framework. [South-South Cooperation in a Digital World: 2018 Annual Report in South-South Cooperation]
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Underway, in Marrakech: Africa Regional Midterm Review Meeting of the Vienna Programme of Action for the Landlocked Developing Countries for the Decade 2014–2024
Starting tomorrow in Mauritius: Pension Funds and Alternative Investments Africa Conference. Presentations and panel discussions will cover: The search for returns in a low global return environment; Regulatory developments in South Africa, Nigeria, Kenya, Ghana, Namibia, Botswana, Morocco, Egypt; Preserving and growing capital by insulating investments against market stress; Mega funds; Benchmarking and performance insights.
Profiled EAC policy events taking place this week: Inception meeting on the formative evaluation of the EAC Common Market Protocol; Meeting of constitutional experts; Meeting of legislative draftspersons and competition experts to draft the EAC Competition Act (Amendment)
Gender and trade spotlighted at UN Commission on Status of Women (UNCTAD)
Trade policies are not gender neutral and can affect men and women differently due to the distinct roles each plays in our economies and societies, UNCTAD Deputy Secretary-General Isabelle Durant said on 13 March at the UN headquarters. Ms. Durant was speaking at an event her organization held with the newly-formed Gender and Trade Coalition during the 63rd session of the Commission on the Status of Women convening at the UN, 11-22 March. “If trade policies are designed without taking into account their gender-specific outcomes, these policies risk magnifying existing gender inequalities instead of alleviating them”, Ms. Durant said. For example, trade integration policies in the EAC may have helped create employment opportunities for women in services (though agriculture is still the main employer), but the new jobs sit at the bottom of the career ladder. “White-collar tasks” and higher levels of responsibility and decision-making are still out of reach for women, Ms. Durant said. UNCTAD analysis of manufacturing in SADC and Mercosur reached similar conclusions. Avoiding such outcomes requires an assessment of the potential gender impacts of a trade agreement before negotiations conclude. “Such an assessment could help guide negotiations towards a more gender-sensitive outcome,” she said, adding that UNCTAD’s Trade and Gender Toolbox provides a methodology for these types of evaluations. [ITC: Effective measurement tools essential for empowering women in the economy]
The case for accelerating gender mainstreaming in CARICOM trade policy (Barbados Today)
But there is still lots to do in CARICOM. Despite the fact that CARICOM member states are signatories to a plethora of international treaties aimed at the empowerment of women, their trade policies are, to a large extent, being enacted and maintained in the absence of evidence and data that is timely, comparable and sex-disaggregated. Mainstreaming gender into CARICOM countries’ trade and development policymaking would help to ensure that initiatives under the CARICOM Single Market and Economy and CARICOM’s trade negotiations with third parties are gender-sensitive. It is, therefore, a welcome development that Belize’s recently launched National Trade Policy (2019-2030) incorporates gender equality as a cross-cutting issue [see Chapter 10]. Another praiseworthy development is that in February 2019, it was announced that national consultations were underway on a draft CARICOM Regional Gender Equality Strategy to advance gender equality and equity and the empowerment of women and girls in each of the 15 CARICOM member states. Based on the above, we recommend the following ways in which CARICOM’s trade policies may be more gender-sensitive: [The authors: Dr Jan Yves Remy, Alicia Nicholls]
Arancha González: Helping women crack the “export code” (Project Syndicate)
At the International Trade Center, we are working to enable women to crack the export code and join men as equal players on the global economic playing field. Our research from 25 countries finds that only one in five exporting companies are owned by women, owing to significant gender-based discrimination. With the ITC’s SheTrades Initiative, we hope to connect three million women entrepreneurs to global markets.
New global report calls for urgent measures to close justice gap for women (UN)
The High-level Group on Justice for Women, comprising of justice, human rights and gender experts from different parts of the world, launched a pathbreaking global report, Justice for Women, on 13 March, at a side event on the margins of the 63rd session of the UN Commission on the Status of Women in New York. The report, authored by Jeni Klugman, a fellow of the Kennedy School of Government’s Women in Public Policy Program at Harvard University and Managing Director, Georgetown Institute for Women Peace and Security, was developed as part of ongoing work of the Task Force on Justice, established by the Pathfinders for Peaceful, Just and Inclusive Societies. It documents and explains the justice gap for women and girls; makes the case for investment in the justice sector in a gender-responsive manner; proposes strategies for scaling up existing interventions; and articulates an eight-point call to action to close the existing gender justice gap. [Download: Executive summary, pdf]
Gender quotas help women parliamentarians to rise in numbers (IPS)
When the Inter Parliamentary Union , based in Switzerland, released its annual report on the representation of women legislators worldwide, four of the top five countries were from the developing world. Rwanda led the way with 61.3% of the seats held by women in its lower or single house of parliament followed by Cuba (53.2%), Bolivia (53.1%) and Mexico (48.2%). The fifth place was held by Sweden (47.3%), the only Western industrialized country among the top five. The next five countries in descending order were Grenada, Namibia, Costa Rica, Nicaragua and South Africa, completing the top 10, with the world’s largest number of women parliamentarians. The survey was released to coincide with a two-week long meeting of the UN Commission on the Status of Women. According to the IPU’s yearly analysis, the share of women in national parliaments increased by nearly one percentage point last year, from 23.4% in 2017 to 24.3% in 2018.
Related, quick links:
SADC: Significant achievements in gender equality, but more needs to be done
ECOWAS Commission to consolidate gender equality and women empowerment drive
Fatimah Kelleher: Why the world needs an African ecofeminist future
First Bank of Nigeria’s First Women Network
One in five ministers is a woman, according to new IPU/UN Women Map
East Asia Forum: Investing in women in Asia
SADC Council of Ministers: media briefing (pdf, SADC)
Council noted the progress on the implementation of the Industrialisation Strategy and Roadmap (2015-2063) which is built on four pillars namely: Industrialisation, Competitiveness, Regional Integration, and Crosscutting issues; and noted that an updated progress report on the implementation of the SADC Industrialisation Strategy and Roadmap will be submitted to its meeting in August 2019 after consideration by the Ministerial Task Force on Regional Economic Integration in June 2019.
On the proposed transformation of the SADC Parliamentary Forum into a SADC Parliament, Council directed the Secretariat to constitute a Task Force comprising of Double Troika Members, supported by the SADC Secretariat and the SADC Parliamentary Forum Secretariat to carry out a thorough analysis on the transformation of the SADC Parliamentary Forum and advise on, among others, the governing legal framework; structure; functions and powers; inter- and intra-relationships with other branches of SADC, like Summit and SADC Administrative Tribunal, national Parliaments and the Pan African Parliament; international law obligations; and financing arrangement. Secretariat will present progress to Council in August 2019.
Council also noted the dates for the Inaugural African Union and Regional Economic Communities Coordination Meeting (7-8 July, Niamey), during which the Status of Integration in the SADC Regional Report will be represented.
SACU, Mozambique and the UK ministerial discussions to resolve outstanding issues on the roll-over EPA (GCIS)
South Africa’s Minister of Trade and Industry, Dr Rob Davies, says discussions to resolve outstanding issues on the roll-over Economic Partnership Agreement between SACU, Mozambique and the UK were held on 15 March 2019.The meeting was co-chaired by Ms B.J. Kenewendo, Minister of Investment, Trade and Industry of Botswana, the coordinator for SADC EPA Group, and Mr G. Hollingberry, Minister of State for Trade Policy of the Department for International Trade in the UK. “The meeting noted that the UK’s EU Withdrawal Act of 2018 provides for incorporation of EU legislation that was operative before the UK exits the EU and will form part of domestic law of the UK on the day the UK exits the EU. Therefore, sanitary and phytosanitary legislation of the EU will be domesticated into UK legislation and continue to apply in the UK. Differences between the Parties were significantly narrowed in relation to timeframes for continued recognition of SPS import requirements and the meeting acknowledged that market access for agriculture products is critical to SACU and Mozambique” said Davies.
The meeting provided an opportunity to better understand each other’s positions in relation to continued recognition of EU materials and processing. Cumulation is when material of a third country or processing done in third country is accepted as being from the parties to the agreement. The Parties agreed that the objective of the exercise, as per the agreed terms of reference, is to roll-over the EPA and not to renegotiate the terms of the EPA. The EPA does not provide for cumulation on the basis being advanced by the UK, namely full cumulation with EU material, especially in cases where the EU material is subject to a higher duty when exported to SACU and Mozambique than when the material is exported from the UK. SACU and Mozambique are unable to give any better treatment to the UK than the EU. The SADC-EU EPA has a most favoured nation clause which provides for any better treatment granted to an economy that contributes more than one point five percent (1.5%) of world trade to be extended to the EU. In this regard, the Parties have agreed to continue to engage with a view to find an amicable solution that takes into account the interests of both Parties and promotes mutually beneficial trade, including regional cumulation for SACU and Mozambique.
Internet access in Sub-Saharan Africa (World Bank)
Target 9.c of the Sustainable Development Goals calls for the achievement of universal and affordable internet access by 2020. This note (pdf) analyzes Sub-Saharan Africa’s progress towards this goal. It finds that (i) rates of internet access reported in household surveys differ markedly and are often lower than the prevailing estimates of internet use reported by the International Telecommunications Union, (ii) internet access in regions outside the capital city tends to be lagging and, (iii) lack of access to electricity is a key barrier constraining access to internet among poor Africans.
The AfCFTA and cross-border data transfer: maximising the trade deal in the age of Digital Economy (Lexology)
African leaders must see the nexus between protection of privacy rights, online security and commerce. A comprehensive digital development strategy should address investment in digital infrastructure, complex cross border internet regulatory concerns, bridge digital divide and inclusion, and curtail prospective undesirable social and development effects. Beyond a privacy and data protection framework, the success of the AfCFTA will be hinged on policies around addressing e-transaction and consumer protection, content restrictions and censorship laws, Intellectual property protection, Intermediary liability and competition. The implementation will see multi-national companies navigate global data protection compliance with ease, trade more with Africa without fear of inadequate protection, and increase the intra-continent trade volume. A proper harmonisation of data protection and AfCFTA would create opportunities and a sustainable path for Africa’s youthful and growing population. Also, Africans will dare to build digital businesses products and models not just for the African market, but equally to expand and seek global competitive advantage. Finally, the cybersecurity and data protection laws will be nothing without an efficient enforcement framework. [The author: Ridwan Oloyede]
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Diarise: Canada Africa Business Conference (26-27 March, Gaborone)
Nigeria’s PEBEC launches innovative public service feedback, complaints platform to drive Ease of Doing Business. Access the App here
Featured global trade policy commentaries:
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Clara Brandi, Wallace Cheng: The disputed status of developing countries in the WTO
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Dirk Willem te Velde, Maximiliano Mendez-Parra, respectively: The economic costs of a no-deal Brexit for the poorest countries; UK tariff schedule will hit poorer countries preferences
France’s Macron pledges to invest $2.8bn in Africa
French President Emmanuel Macron who is touring East Africa, with stops in Djibouti, Ethiopia and Kenya, has pledged to invest $2.8bn in Africa by financing and supporting startups and small- to – medium-sized enterprises by 2022. Macron, who started his trip to East Africa Monday, said the French government would support about 10,000 enterprises across the continent by providing credit, technical support and equity financing. The funds will be mobilized via the French Development Agency, AFD, and its private sector financing arm, Proparco. In his stop in Ethiopia, Macron said France will provide about $96m to support the East African nation’s economic openness. The amount should be complemented with a $16mtechnical assistance provided by the AFD.
Kenya: French firms reap from Macron tour (Business Daily)
Three French companies signed business deals worth Sh226 billion (2bn euros) during President Emmanuel Macron’s two-day visit to Kenya, making them the biggest beneficiaries of France’s renewed bid to deepen economic ties with Nairobi. A consortium led by French infrastructural firm Vinci secured a 30-year concession contract worth Sh180 billion to build and operate the Nairobi-Nakuru highway. Another consortium led by French aviation giant Airbus won a Sh22.6 billion defence deal for coastal and maritime surveillance. This will see the firm use big data and predictive analysis to boost surveillance along the Indian Ocean. Paris stock exchange-listed French company, Voltalia, an international player in the renewable energy sector, also inked a Sh7.9 billion deal to build a solar power plant in Kenya. [The Africa Report: Macron and the Chinese ghosts at the feast]
Angola may join SADC Free Trade Zone in 2020 (Angola Press)
Angola may enter the free trade zone of SADC by June 2020, the trade director of the Ministry of Commerce, Rui Livramento, said in Luanda. Speaking to journalists, on the sidelines of the seminar on tariff classification and customs assessment, he stressed that the country is currently preparing the first tariff offer for the dismantling of the customs tariff, in order to negotiate with the other members on the positions of national interest. “The negotiable process initially is taking a year, but the dismantling takes 12 or 15 years depending on the sectors of interest of each country.”
Alec Erwin: An industry pact is key to Africa’s auto ambitions (The Citizen)
The auto industry is so complex that a regional automotive pact is required before it can succeed in Africa, says former politician and now consultant, Alec Erwin. Erwin, who was the trade and industry minister in the Mandela government, said only the aircraft and nuclear industries were more complex than automotive manufacture. This meant industrial policy and regional agreement were vital to overcoming barriers and building partnerships. Erwin told the National Association of Automotive Component and Allied Manufacturers of South Africa show in Durban on Thursday that worldwide, with few exceptions, successful auto industries had emerged to turn on regional axes. He cited Korea-Japan agreements in South-East Asia and Mexico-Argentina in the Americas as examples of regional cooperation that Africa should learn from.
Making African cross-border trade cheaper, easier and faster: highlights from the first African Forum for National Trade Facilitation Committees (UNCTAD)
The key to regional integration is transit coordination and customs cooperation. This is especially true in the context of the AfCFTA. New technologies such as Blockchain can be useful tools for the exchange of information. Mutual recognition of controls, inspections, standards conformity can generate savings for both traders and governments and help ensure security, safety, and protection of society. Also, the role of information and transparency could be added in trade facilitation reforms through the Trade Portals. Customs are the drivers for many concrete solutions. These include coordinated border management solutions and coordinated interventions which have proved to be very good solutions for TFA implementation. [The authors: Pamela Ugaz, Sijia Sun. Download the final report of the African Forum: pdf Empowering public-private partnership for trade facilitation (412 KB) ]
Zimbabwe and South Africa set-up a joint technical committee for One-Stop Border Post (African Daily Voice)
The joint technical committee agreed to share and exchange information on the work that has already been done by both countries which would serve as a basis for the negotiations of the One-Stop Border Post. The Commission noted that Zimbabwe submitted proposals to the bilateral agreement for the border post and operational manuals. Other issues that came up for discussion during the BNC included the non-recognition of vehicle third party insurance from South Africa by Zimbabwe and that the fees for the same were significantly increased without notification. As such, it was agreed that meetings should be held in South Africa by the end of April 2019 where the respective players and stakeholders would identify solutions.
Nigeria: FG to implement ECOWAS biometric identity card (The Nation)
The Minister of Interior, Lt.- Gen. Abdulrahman Dambazau (rtd), said the Federal Government would implement the use of the ECOWAS biometric identity card. He noted that it was part of efforts of the government to curb influx of foreigners into the country. The ministry may sign a concession agreement on the implementation of the ECOWAS biometric identity card with Euphoria Press Limited on Friday. The minister explained that ECOWAS Free movement protocol would be accompanied by passports and proper documentation. “We will ensure that we implement the ECOWAS Biometric Identity Card in Nigeria. We will launch it three Months after the signing.” [The implications of the new ECOWAS currency on travel between West African countries]
Rwanda Country Program Evaluation FY09-17: an independent evaluation (IEG, World Bank)
Rwanda has emerged as a top Doing Business reformer, but political economy factors affect the business environment. The country has implemented a number of regulatory reforms, leading to positive developments in the business environment in recent years. In global terms, Rwanda now ranks 41 in Doing Business 2018, up from 62 in 2016 and 150 in 2008. Yet foreign direct investment levels remain low (3% of GDP in 2016) and the private sector’s contribution to the economy is still small. A complex political economy environment has been cited as limiting fair competition and effective implementation of regulatory reforms, with holding companies closely affiliated with the government, the ruling party, and the military playing a dominant role in the private sector.
Despite its impressive achievements, Rwanda faces multiple challenges to its quest for upper MIC status by 2035. Structural transformation is still at an early stage. The private sector remains underdeveloped with a narrow manufacturing base, limited diversification of exports, a small financial sector, and an underdeveloped services sector. Sustaining growth and poverty reduction—from already impressive achievements—will require significant structural change in the economy. Most importantly, in the face of declining foreign aid, limited public resources, and increasing government debt, the sustainability of the public investment–driven growth model of the past two decades is in doubt. As discussed in chapter 4, a new growth paradigm based on dramatically increased outward orientation—including higher, more diversified export growth—will be needed.Extract (pdf):
Revitalizing and sustaining progress will now require a paradigm shift. Rwanda’s growth model for the past two decades depended largely on public investment backed by donor support. The government has in effect taken on the role of catalyst of growth, often seeding business development. Although some increases in private investment were observed in recent years, party- and military-affiliated companies continue to play an important role in the economy (in the views of some, this can have a deterrent effect on private investment). As Rwanda approaches MIC status and the terms of external support progressively “harden,” driving up public debt, the sustainability of this model will come increasingly under strain.
The Bank Group is uniquely positioned to help Rwanda manage the shift to a new, private sector–led growth paradigm. Its current engagement with the Future Drivers of Growth study to help shape Vision 2050, a new long-term plan for Rwanda’s development currently under preparation, has given it a role of trusted development partner. The road map toward a new growth model will need to embrace an ambitious reform agenda that addresses key issues and constraints to attain MIC status and sustain progress thereafter. The most important issues include improvements in nutrition and basic education; appropriate pacing and sequencing of urbanization; dramatically stronger outward orientation—including stronger, more diversified export growth—in part through closer regional integration and cooperation; a more strategic and transparent approach to fostering an enhanced role for the private sector in the economy; increased domestic resource mobilization; and better exercising of expanded local government functions and responsibilities. The Bank Group program can make strategic contributions to help Rwanda follow the road map and realize the vision. [Companion volume: Appendixes]
Nigeria’s ratification of illicit trade protocol is commendable: ERA/FoEN tells govt (ThisDay)
The Environmental Rights Action/Friends of the Earth Nigeria has commended the federal government for ratifying the protocol to eliminate illicit trade in tobacco products. With Nigeria’s depositing of the instrument of ratification at the WHO, it becomes the 51st country to ratify the treaty which was initiated in 2012. The ERA/FoEN boss said that beyond the ratification, the eighth National Assembly should act fast to approve Regulations for the full enforcement of the National Tobacco Control Act, 2015 as a legacy achievement.
The most comprehensive and rigorous assessment on the state of the environment completed by the UN in the last five years was published today, warning that damage to the planet is so dire that people’s health will be increasingly threatened unless urgent action is taken. The report advises adopting less-meat intensive diets, and reducing food waste in both developed and developing countries, would reduce the need to increase food production by 50% to feed the projected 9-10 billion people on the planet in 2050. At present, 33% of global edible food is wasted, and 56% of waste happens in industrialized countries, the report states. [Note: Various downloads are available]
Today’s Quick Links: SWAC/OECD: West Africa Brief (6-28 February) Mauritius does not feature on EU’s blacklist of non-cooperative jurisdictions for tax purposes Malawi: IMF statement at conclusion of staff visit AfDB EOIs: Tracking Africa’s progress in figures, The Africa Tourism Monitor 2019 AfDB releases highlights of 2019 African Economic Outlook in 7 African languages Developing countries would benefit from improved tax collection: what can help Rabat Conference on the Bali Fintech Agenda: remarks by IMF’s Tobias Adrian The role of public-private partnerships in innovation for development: lessons from Africa |
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The GTR AFRICA 2019 conference starts today in Cape Town. Twitter updates: #GTRAFRICA
The WTO’s 2019 Public Forum theme has been announced: Trading forward – adapting to a changing world. The dates: 8-11 October, Geneva.
Featured trade policy commentary, by PIIE’s Anabel González: Bridging the divide between developed and developing countries in WTO negotiations
5th EPRN Rwanda Annual Research Conference: The AfCFTA – challenges and opportunities. Extracts from the keynote presentation by Andrew Mold: pdf The case for implementing the AfCFTA in East Africa – some new estimates (579 KB)
How much is the East African Community currently under-trading? Based on a gravity model using a stochastic frontier approach, the bilateral export flows of the five EAC members States (Burundi, Kenya, Rwanda, Tanzania and Uganda) over the period 1995 to 2016 were examined. Intra-EAC trade is at around half of its potential: The ratio of actual/observed exports (US$ millions) to potential maximum exports (US$ millions) is 51% exports to the EAC and 56% to Africa.
A Computable General Equilibrium model. Global Trade Analysis Project was used to measure the static effects of the AfCFTA on East Africa, using 2014 baseline data with complete liberalisation (i.e. 100%) and standard closure, but fixing wages to reflect high unemployment rates prevalent on the continent. Results suggest large potential gains from the AfCFTA: Increase intra-African exports of Eastern Africa by almost $1bn; Chief beneficiary sectors are labour-intensive ones; Job creation of 0.5 to 1.9 million; Consumer welfare gain of $1.4bn.
A Partial Equilibrium Model. World Integrated Trade Solution SMART was also used to measure the impact of the AfCFTA on East African countries, with 2015 as the base year for most countries and using a complete liberalisation scenario. Results suggest a significant increase in intra-African exports – for Rwanda, a 22% increase over the base year, followed by Uganda (21%), Tanzania (17%) and Kenya (10%). Over one-third of the exports are in manufactured goods.
Speaking also at the ERPN conference, Leonard Rugwabiza, the Economic Advisor at the Rwanda Ministry of Finance and Economic Planning said that in the face of changing global context and economic uncertainties, Africa must also change the ways it does business. “It will be more difficult to govern if we cannot change the structure of our economies and create jobs for our youth. The AfCFTA and the African single market offer us more opportunities to do so than challenges.” [ pdf Concept note (819 KB) ]
Applications for the ECA/ATPC online economic modelling course applied to trade policy reforms, with a focus on the AfCFTA, close on 17 March.
Uganda accuses Rwanda of imposing trade embargo
Foreign Affairs Minister Sam Kutesa said on Wednesday that Rwanda has introduced an export permit system for those who intend to export goods to Uganda. “This is a technical and non-tariff barrier to trade, to which there has been no successful applicant. In effect, this is a trade embargo,” Mr Kutesa said. Ugandan Customs officials and traders at all border points say that goods from Uganda, especially foodstuffs, have been blocked from Rwanda. And Mr Kutesa on Wednesday said that exportation of Ugandan goods to Rwanda had been prohibited. Rwanda authorities, he said, were only allowing trucks carrying transit goods destined for the Democratic Republic of Congo and other countries. Update: “Claims that Rwanda has instituted trade embargo on Uganda are as untrue as they are diversionary,” responded Rwanda’s Foreign Affairs Ministry on Thursday. “It is not possible to have free trade including free movement of goods if traders are killed, tortured, extorted and their property is illegally seized. These are the fundamental issues that need to be addressed,” Kigali said.
Lesotho: pdf Budget speech for the 2019/2020 fiscal year (1.12 MB) (GoL)
Mr Speaker, the challenges facing the Lesotho fiscus have been well canvassed in the past and required actions are well known. But political will has lacked mainly because the actions require sacrifice by public servants and government as a whole. There are three options that government can consider implementing, namely:
(a) Government must contain the impact of the volatility of SACU revenues by designating a fraction of annual SACU inflow that is consistent with permanent revenue and set up a rainy day fund from which annual shortfalls in SACU revenue can be augmented. This would require that Government runs budget surpluses during years of SACU windfalls; and this is where past governments have lacked will. Past decisions of raising wages from temporary revenues have been dangerous and have created the current untenable situation. In FY2019/20 the Ministry of Finance will propose the adoption of a fiscal rule which shall then be passed as law to regulate the volatility in SACU revenues.
(b) The government must ensure that shared economic growth rises faster than the rise in wages. Practically, this means that private investment in sectors whose income is retained in Lesotho such as agri-business, tourism, and manufacturing, must rise much faster. This also means that annual growth rate of GDP must be on the order of 5-10 percent annually and consistently for many years. We know this has not been the case. Below I will outline specific actions in this direction.
(c) Finally, government must reduce its workforce. In an economy with double digit (24%) unemployment this has been extremely difficult to contemplate and it has simply been easier to kick the can down the road. But with little progress on growing the economy and government investments limited by tight fiscal budgets, at some point government will have to confront this monster.
Half of this already high spending bill, is accounted for by wages and salaries. The bill for only 47,000 employees – and Lesotho has a population of 2 million people – is larger than the individual contributions of many important sectors of the economy including the mining, agricultural and construction sectors. The Lesotho wage bill has grown faster than national output and this increase was funded by windfall SACU revenues or hollowing out the share of the budget that used to fund goods and services – which has fallen to below half of the wage bill since 2002. There is therefore an urgent need to adopt measures to reduce public spending as a percentage of GDP, including those aimed at curbing the growing wage bill. [Delivered by Mr Moeketsi Majoro, Minister of Finance; Mauritius 2019/2020 pre-budget consultations]
SACU, Mozambique make progress on impending Brexit (dti)
The Minister of Trade and Industry, Dr Rob Davies says progress has been made to finalise a roll-over Economic Partnership Agreement between the SACU Member States, Mozambique and the UK. Davies, briefing the media in Parliament yesterday, said SACU, Mozambique and the UK have agreed on Terms of Reference for the dialogue on the roll-over of the EPA: “The MoU will carry over the effects of the SADC-EU EPA to ensure that there is no disruption of trade on 30 March 2019 if the UK exits the EU without a deal. The MoU will roll-over the effects of the SADC-EU EPA for a period of 6 months, while the roll-over of EPA is either being concluded or the necessary domestic legislative processes for ratification of the SACU, Mozambique and UK EPA are being concluded.” According to the list, a total of 469 tariff lines will remain dutiable with varying levels and types of duties, including ad valorem, specific, mixed duties; tariff-rate quota based duties. These will affect the following sectors: [Related: Peter Fabricius: Southern Africa scrambles to avoid trade fallout from Brexit; What a no-deal Brexit would mean for Western Cape exports]
The Jobs Diagnostic covers three main areas: macro and demographic trends, labor supply, and labor demand. The first section looks at the relationships between employment growth, labor productivity, and economic growth to set the macro context to later examine labor supply and demand. The second section cover labor supply. It aims to identify trends in labor supply to understand the population’s needs for employment, the unemployment challenges, underemployment, and waged and informal employment. These trends include working-age population , labor force, and inactivity. Once identified, international comparisons are based on a global harmonized household database (International Income Distribution Dataset – ‘I2D2’). The labor supply section in JDs employs a set of harmonized variables that are comparable across countries and time. The third section covers labor demand. It aims to identify the links between sectoral productivity, size, age, and other characteristics to assess the constraints for employment growth, productivity, and wages. Firm-level datasets such as Enterprise Surveys, (which allow for some international benchmarking), or censuses of enterprises are used to do this.
The MUVA+ project: Helping women market traders in Mozambique unlock their sales potential (World Bank)
Providing training for subsistence female entrepreneurs aiming to increase their revenue is nothing new, but MUVA does it a bit differently. We focus on fostering the individual aspiration by valorizing their experience and unleashing their potential, rather than focusing directly on their business and teaching the financial skills they don’t have. We also work on the social norms barriers that hinders dreams of personal achievement. After a four-month training, one of our participants told us that she never thought of her as having a work that was worth something. Now she pays herself a monthly salary and calls herself an entrepreneur. When MUVA+ started, only 13% of participants confirmed that they did something in the previous three months to increase their sales. By the end of the project, that number had increased to 76%. Two more cycles will be implemented this year, and more results in terms of change in profits and personnel empowerment of the participants will be coming soon. Stay tuned. [The author: Luize Guimaraes]
Drivers of gross capital inflows: which factors are more important for Sub-Saharan Africa? (World Bank)
This paper discusses recent trends and investigates the drivers of capital flows across regions in the world, with emphasis on Sub-Saharan Africa. The post-global financial crisis behavior of capital flows into Sub-Saharan Africa is unique and differs from that of global capital flows. The structure of financial flows into Sub-Saharan Africa has shifted toward new sources, such as international bond issuances and debt inflows from non-Paris Club governments. The main message is that the behavior of capital flows into Sub-Saharan Africa differs from that of capital flows into global, industrial, and non–Sub-Saharan African developing countries. The main findings suggest that pull and push factors are the driving forces of capital inflows for industrial countries and non–Sub-Saharan African developing countries – especially better economic performance, sound fiscal outcomes, a greater degree of financial openness, and stronger institutions. The impact of these drivers has become stronger in the 2000s. [The authors: Cesar Calderon, Punam Chuhan-Pole, Megumi Kubota]
Ensuring quality to gain access to global markets: a reform toolkit (World Bank)
Jointly developed by the WBG and the National Metrology Institute of Germany,the toolkit is designed to help development partners and governments analyze a country’s QI ecosystem, provide recommendations to design and implement reforms, and enhance the capacity of QI institutions. The toolkit’s 12 modules provide a systematic, holistic knowledge resource – supported by practical case studies and examples – for QI diagnostics, reform interventions and approaches, and monitoring and evaluation. Related diagnostic tools are also available online, here and here.
One Planet Summit: World Bank update
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SACU, Mozambique make progress on impending Brexit
Substantial progress has made to conclude a Roll-Over Economic Partnership Agreement between SACU, Mozambique and the UK.
The Minister of Trade and Industry, Dr Rob Davies says progress has been made to finalise a roll-over Economic Partnership Agreement between the Southern African Customs Union (SACU) Member States, Mozambique and the United Kingdom (UK).
Davies was briefing the media in Parliament on 13 March 2019 on the rollover of the EPA between SACU, Mozambique and the UK. SACU and Mozambique have been discussing with the UK the rollover of the EPA to avoid trade disruption post-Brexit.
Minister Davies said SACU, Mozambique and the UK have agreed on Terms of Reference for the dialogue on the roll-over of the EPA.
“The Parties have made substantial and substantive progress towards the conclusion of the SACU, Mozambique and UK Economic Partnership Agreement (SACUM-UK EPA). Only two issues remain outstanding. These include cumulation in relation to rules of origin and sanitary and phytosanitary measures or regulatory measures and standards related to food safety and human, animal or plant life or health,” said Davies.
Once the UK exits the EU, materials from the EU that are used in manufacturing products in the UK shall not qualify to be considered in determining the origin of the product for purposes of affording eligibility to preferential market access. This would also apply to some EU materials used in manufacturing products in South Africa for exports into the UK.
On Sanitary and Phytosanitary measures, Minister Davies stated that the Parties have agreed on the need for the UK to continue to recognise EU model health certificates, establishment listings and other import requirements upon the UK’s exit from the EU in order to ensure continuity in agricultural market access. However, the Parties are still discussing the timelines for continued recognition of these import requirements.
“The MoU will carry over the effects of the SADC-EU EPA to ensure that there is no disruption of trade on 30 March 2019 if the UK exits the EU without a deal. The MoU will roll-over the effects of the SADC-EU EPA for a period of 6 months, while the roll-over of EPA is either being concluded or the necessary domestic legislative processes for ratification of the SACU, Mozambique and UK EPA are being concluded,” added Davies.
According to the list, a total of 469 tariff lines will remain dutiable with varying levels and types of duties, including ad valorem, specific, mixed duties; tariff-rate quota based duties. These will affect the following sectors: automotive vehicles, clothing and textile, lamb, beef, pork, poultry, rice, fish, fertiliser, fats and oils, sugar and molasses, ceramics and related products, cheese, tyres and wheels, butter, rum, bananas, fresh beans, bioethanol and spirits, cocoa, polyethylene, clove & vanilla. will undertake an analysis of the implications of the temporary tariff and industry and traders will be advised accordingly.
The UK Parliament will vote on 14 March 2019 on the extension of Article 50. Should this receive a majority vote, the UK will remain in the EU and will continue to be bound by the terms of SADC-EU EPA. South Africa will continue to monitor developments in the UK and will advise traders as appropriate.
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5th EPRN Rwanda Annual Research Conference: The AfCFTA – Challenges and Opportunities
Quality research needed to help implement the AfCFTA
With a few more ratifications needed for the African Continental Free Trade Area (AfCFTA) to become effective, scholars meeting for the Economic Research Conference in Kigali pledged to produce good high-quality research papers to inform policymakers and help move the agreement forward.
The 5th Economic Research Conference was held on 12 March, organized by the Economic Policy Research Network (EPRN Rwanda) in collaboration with the UN Economic Commission for Africa (ECA), and in partnership with the United Nations Development Programme (UNDP) and the German Cooperation (GIZ).
Andrew Mold, Acting Director of ECA in Eastern Africa, said that AfCFTA may give the impression that the agreement is simply about free trade, but in reality it is much more ambitious than that. “The AfCFTA goes beyond trade.- It is about creating a continental market. It is about free movement of people and free movement of goods and services, it is about protocols on government procurement and intellectual property,” explained Mold.
Andrew Mold stressed that with the implementation of AfCFTA approaching, policymakers will need high-quality policy advice and research about the potential implications for their economies and where the opportunities reside, as well as where there may be potential vulnerabilities that need addressing.
Twenty-two ratifications are required for the Agreement to enter into force. So far 19 countries have ratified it.
Speaking also at the conference, Leonard Rugwabiza, the Economic Advisor at the Rwanda Ministry of Finance and Economic Planning said that in the face of changing global context and economic uncertainties, Africa must also change the ways it does business.
“It will be more difficult to govern if we cannot change the structure of our economies and create jobs for our youth. The AfCFTA and the African single market offer us more opportunities to do so than challenges”, said Rugwabiza.
The UNDP Rwanda Country Director, Stephen Rodrigues said that the implementation of the agreement needs to be done in a way that is inclusive and benefits small and medium-size SMEs on the continent.
“We should ensure that women and youth are included in implementing the AfCFTA. It is necessary to make policies that are inclusive and take into account people living with disability and those with low levels of education”.
Background
The Economic Policy Research Network is a Non-Governmental Organization aiming at strengthening the capacities of individuals and organizations active in or with an interest in economic policy research and analysis. One of the flagship activities of EPRN is the Annual Economic Research Conference.
This year, the 5th Economic Research Conference convened more than 200 participants, including researchers, senior policy-makers, representatives of the development partners, civil society, private sector and the media.
During the conference, research papers and reports on the topic were presented and discussed. This year’s main theme was “The African Continental Free Trade Area: Challenges and Opportunities”, which was broken down into three sub-themes: i) Regional Integration; ii) Human Capital Development; and iii) Financial Sector.
The conference sought to provide a research platform and opportunity for economic researchers from a wide spectrum such as academics, government officials, representatives of development partners and international and local NGOs with interest on research topics related to African Continental Free Trade Area.
The purpose of the conference was to witness the current progress, evaluate the policy progress, suggest innovative policy solutions and, discuss strategies for achieving desired goals and targets. During the conference, Research Papers by EPRN Researchers and Reports by partner institutions were presented.
Key takeaways from the conference include the following:
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Policymakers will need good research on regional integration issues to formulate policies and how this can be implemented
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Human capital use and innovation must be tackled as a priority
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We need to enhance competitiveness and enterprise development for innovation and growth
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Transforming agriculture and food processing should be an engine of growth
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Capability and accountability of state institutions for economic growth is needed
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Government should put in place policies to help customers acquire long trade credit terms to boost sales and make profit
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There is a need for periodic and continuous policy dialogue around African market-related topics
The final papers with key policy recommendations will be published on the EPRN website.
The Case for Implementing the AfCFTA in East Africa – Some New Estimates
When quantifying the potential benefits of the AfCFTA, different methodologies give different results: Gravity models tend to give larger effects of regional trade agreements, while Computable General Equilibrium (CGE) simulation models show relatively smaller effects of trade policy (Fosu and Mold, 2008).
Gravity model
How Much is the East African Community Currently Under-trading?
Based on a gravity model using a stochastic frontier approach, the bilateral export flows of the five EAC members States (Burundi, Kenya, Rwanda, Tanzania and Uganda) over the period 1995 to 2016 were examined. Intra-EAC trade is at around half of its potential: The ratio of actual/observed exports (US$ millions) to potential maximum exports (US$ millions) is 51% exports to the EAC and 56% to Africa.
Computable General Equilibrium Approach
The Potential Benefits of AfCFTA on East Africa
A Computable General Equilibrium model – Global Trade Analysis Project (GTAP) – was used to measure the static effects of the AfCFTA on East Africa, using 2014 baseline data with complete liberalisation (i.e. 100%) and standard closure, but fixing wages to reflect high unemployment rates prevalent on the continent.
Results suggest large potential gains from the AfCFTA:
- Increase intra-African exports of Eastern Africa by almost US$ 1 billion
- Chief beneficiary sectors are labour-intensive ones
- Job creation of 0.5 to 1.9 million
- Consumer welfare gain of US$ 1.4 billion
A Partial Equilibrium Model – World Integrated Trade Solution SMART – was also used to measure the impact of the AfCFTA on East African countries, with 2015 as the base year for most countries and using a complete liberalisation scenario.
Results suggest a significant increase in intra-African exports – for Rwanda, a 22% increase over the base year followed by Uganda (21%), Tanzania (17%) and Kenya (10%). Over one-third of the exports are in manufactured goods.
This presentation has been made available to download courtesy of the United Nations Economic Commission for Africa (UNECA) Office for Eastern Africa.
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tralac’s Daily News Selection
Trade policy pointers:
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Cameroon will host an AfCFTA national sensitization, information forum in mid-April 2019: further details, here and here
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Togo’s AfCFTA forum: @komitsowou tweets: This week @ECA_OFFICIAL and @ATPC2 join the government of Togo to organize a national AfCFTA Forum in Lomé and Kara. Sensitizing private sector, CSOs, academia, govt officials and journalists is very important to make the AfCFTA work. “Domestication of the AfCFTA at all levels is essential to maximise its gains”: M. Adedze, Trade and Industry Minister of Togo, during the national sensitization forum.
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Rwanda and the AfCFTA: Thursday’s tralac digest will carry highlights of the EPRN Rwanda Annual Economic Research Conference, convened yesterday
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The US Department of Commerce is seeking applications for membership on the 2019-2021 term of the President’s Advisory Council on Doing Business in Africa
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African Cotton, Textiles & Apparel Monitor (#6/2019): articles and commentary on Ethiopia, Rwanda, Mauritius, Nigeria, South Africa
The 16 presentations and keynote speeches from the recent Organic, Fair and Ethical Trade Event (organized by the EU, and co-hosted with AFASA, 19 February, Cape Town) are now available for download. Extracts from the Discussion Paper: pdf Opportunities for South African emerging farmers in the European sustainable agricultural market (755 KB)
The EU is South Africa’s main trading partner, accounting for 26% of all South Africa’s trade. The EU is also the country’s most stable post-apartheid partner, with exports to the EU systematically above 19% of South Africa’s exports. South Africa’s exports to the EU are also far more diverse than to other partners, with raw materials accounting for less than half of the total. Machinery and vehicles alone account for 36% of South Africa’s exports to the EU, followed by agriculture at 13%. The deficit in favour of the EU has also been shrinking. It is now at R76bn (down from R88bn in 2016), though this is subject to yearly fluctuations. In agriculture, South Africa has a surplus balance with the EU of almost €1bn. South Africa ranks 11th in the EU’s top agricultural importing partners.
Zimbabwe, South Africa Bi-National Commission
Joint communiqué (The Presidency): The two sides emphasized the importance of expanding trade and investment to drive the strategic engagement forward. In this regard, the Heads of State directed their Finance and Trade Ministers to work together to achieve these goals. Zimbabwe highlighted the key initiatives taken by Government to improve the ease of doing business in the country and further informed on the country’s efforts to simplify and rationalize investment rules with the view to attract foreign direct investment. The relevant Ministries agreed to consider options for expanding the standing Facility arrangement between the respective Central Banks. Other Financing Options beyond this are also being explored (for example a facility from South African private banks to the Zimbabwe private sector and guaranteed by the South African Government, with an appropriate counter-guarantee from the Zimbabwe Government). They also agreed to work together on re-engagement with the International Co-operating Partners in support of Zimbabwe’s economic reform and Debt Arrears Clearance Agenda.
Opening remarks by President Cyril Ramaphosa: I am encouraged by the participation of South African business in various sectors of the Zimbabwean economy, such as in engineering, construction, banking, retail, hospitality, mining exploration and services, among others. There are undoubtedly good prospects for both of our countries, but there is a need to ensure ease of doing business and elimination of trade barriers. This should include the urgent conclusion of all outstanding work on the Beit Bridge One Stop Border Post for facilitation of free movement of persons, goods and services.
Mauritius-Madagascar: MoUs to enhance cooperation in political, economic and cultural fields (GoM)
Prior to the signing ceremony, Prime Minister Jugnauth and President Andry Nirina Rajoelina had a Tête-à-Tête followed by a working session whereby various issues of mutual interest were discussed namely: agricultural development; fisheries; air connectivity; maritime corridor and cabotage; visa facilitation; commerce; and bilateral agreements as regards employment. Speaking about agricultural development, the Prime Minister highlighted that the Indian Ocean Commission is presently financing feasibility studies to finalise a model of development for maize and soybean, in collaboration with the private sector of Mauritius. Both countries, he pointed out, are determined to provide assistance to their respective private sectors for the implementation of the project, which lies in the context of the regional programme for food security and nutrition of the IOC. As regards air connectivity, the Mauritian Prime Minister highlighted that discussions focused on the agreement for an additional weekly flight of Air Mauritius on Antananarivo. Currently six flights are operated. To facilitate a vibrant Mauritius-Madagascar commercial flux, the Prime Minister expressed his commitment to facilitate trade between the two countries through the establishment of administrative procedures aimed at enhancing the business climate, in particular by offering a modern and efficient custom service.
The illicit tobacco trade in Zimbabwe and South Africa
The study maps the key dimensions of the illicit cigarette trade in Zimbabwe and South Africa, including the key actors, the pathways of trade and the accompanying ‘modalities’ of criminality, as well as other important dimensions of the illicit cigarette market in southern Africa. It identifies “good-faith actors,” primarily in South Africa, whose positions could be strengthened by policy and technical interventions, explores opportunities for such intervention, and assesses the practical solutions that can be applied to combat illicit trade and tax evasion in the tobacco industry. [The author: Simone Haysom] [Related: Tobacco in Africa: production and trade (Ron Sandrey)]
Uganda: Chinese supermarkets shun local goods – traders (Observer)
When Dorothy Kimuli started her company Kims Natural Chilli Sauce some years back, her dream was to capture the local market. Her first target was supermarkets whose shelves were full of imported chilli. Kimuli explained that her goods were first rejected by supermarkets because they were not certified by Uganda National Bureau of Standards and, therefore, did not meet standards. “Actually at first, I did not have any certification but I worked with Uganda Small-Scale Industries Association, and UNBS, and I was certified. Some supermarkets later accepted and put my goods on their shelves. The demand has been good but the Chinese have completely refused to take on most local products. Those who pretend to buy just buy a dozen or two which they put on their shelves; they will pay you when all the stock is completely finished, this becomes costly to small-scale traders and I think it’s a way of putting local goods at bay.” Her complaints came up during ‘Make BUBU work for the growth and competitiveness of Uganda’s small and growing businesses‘ (pdf) conference organised by SEATINI, USSIA and Federation of SMEs–Uganda. Veronica Namwanje, the executive secretary, USSIA, said although the BUBU policy provides an important regulatory foundation for the support of production, purchase, supply and consumption of locally made goods and services; it is non-binding.
Trump’s proposed budget slashes funding to Kenya
President Donald Trump’s proposed budget issued on Monday calls for deep cuts in aid to Kenya as part of an overall rollback in US funding for many Africa-focused programmes. Support for development initiatives in Kenya will fall from the $102m provided in 2018 to $43.5m in accordance with Mr Trump’s spending plan for the 2020 US fiscal year that begins next October. A similar reduction of more than 50% is sought in US economic and development assistance for sub-Saharan Africa as a whole. It will plummet from $1.5bn approved by Congress for 2018 to $665m in 2020. In its State Department budget proposal, the White House justifies these cuts as ways of “reducing dependency on US assistance and increasing self-sufficiency” on the part of African nations.
Testimony by USTR Robert Lighthizer to the US Senate Committee on Finance: Approaching 25 – the road ahead for the WTO
First, the negotiating process at the WTO has largely broken down. Under the old GATT system, from 1947 to 1994, there were eight negotiating rounds – each of which led to lower tariffs and fewer trade barriers among all GATT members. To this day, the basic rules that govern global trade were negotiated under the GATT. But in the 24 years since the WTO began operation, there has been no new significant multilateral market access agreement. Second, much work remains to be done in terms of lowering tariffs – primarily in countries that consider themselves developing. Numerous WTO members continue to have very high “bound” tariff rates that allow them to maintain tariffs significantly above the bound rates that apply to the United States. For example, the average bound tariff rate for all goods in the United States is 3.4%. In Brazil, it is 31.4%. In India, it is 48.5%. In Indonesia, it is 37.1%. Third, too many WTO members are not living up to current obligations. For example, members take on significant commitments to provide regular notifications of subsidy programs and other information critical to trading conditions around the world. Despite the clear obligation to make such notifications, many of our trading partners – including significant economies like China and India – have a very poor track record of providing this critical information.
Today’s Quick Links: AfDB Governors, Alternate Governors, as at 28 February 2019 (pdf) AfDB, APRM EOI: The size and sectoral distribution of state-owned enterprises in Africa (pdf) South Africa: TIPS Real Economy Bulletin Q4 2018 (pdf) OECD’s Working Party on Measurement and Analysis of the Digital Economy: Determinance and impact of automation (pdf) World Bank Chief Economist, Pinelopi Goldberg: Why we need a research department |
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Bi-National Commission: South Africa reiterates support for new Zimbabwe
President Cyril Ramaphosa has reiterated South Africa’s commitment to work with Zimbabwe in addressing the socio-economic challenges experienced by the two neighbouring countries.
President Ramaphosa made the commitment in his opening remarks to the third session of the South Africa-Zimbabwe Bi-National Commission (BNC) in Harare, Zimbabwe, on Tuesday.
The President was in the country for the third session of the SA-Zimbabwe BNC with his counterpart, President Emmerson Mnangagwa. The visit is part of efforts to strengthen mutual cooperation and deepen the implementation of 45 bilateral agreements.
The BNC was preceded by a ministerial session, which was held on Monday, to consider and adopt the draft agreed minutes and joint communique negotiated by senior officials on 7 and 8 March 2019.
During his address, President Ramaphosa said he is encouraged that the two countries are both committed to adhering to the BNC agreement signed in April 2015, which stipulates that the two countries should meet annually.
“Although our BNC is only just over three years old, our relations date several decades. Through steadfast servicing of this BNC, our two countries will be able to consolidate the bilateral cooperation existing between our countries and to explore other areas of cooperation,” the President said.
He saluted the new administration for its efforts through the Programme of Action to take Zimbabwe out of its current difficulties and make it a viable partner for South Africa, the region and other development partners.
“In support of your commendable efforts, in February of this year at the World Economic Forum, South Africa made a call to the international community to assist Zimbabwe and lift sanctions. We are pleased that the European Union heeded the call and in February 2019 decided to lift sanctions on the current members of your administration,” he said.
President Ramaphosa said this is the first of many steps needed to support Zimbabwe’s recovery.
“South Africa stands ready to render support to Zimbabwe within our means in your quest for economic renewal. It is our wish that, using the BNC mechanism, we should at our level strive to provide the strategic impetus to drive the bilateral relations to a significantly higher level.”
The President said South Africa and Zimbabwe should work together to explore a variety of issues to further deepen cooperation. This includes deepening the social ties between the two countries and the region through greater people-to-people cooperation.
The two countries already work together in many critical areas, such as economic cooperation and infrastructure development, energy production, mining, defence, health, transport, migration issues, and information and communication technology. This is through the signed 45 agreements that are being implemented by State departments.
“I am encouraged by the participation of South African business in various sectors of the Zimbabwean economy such as engineering, construction, banking, retail, hospitality, mining exploration and services, among others. There are undoubtedly good prospects for both of our countries, but there is a need to ensure ease of doing business and elimination of trade barriers,” President Ramaphosa said.
This should include, he added, the urgent conclusion of all outstanding work on the Beit Bridge One Stop Border Post for facilitation of free movement of persons, goods and services.
“We have further recognised the challenges raised with us by investors, including among other things, our visa regime, administered prices for ports, rail and electricity, the cost to communicate as well as infrastructure bottlenecks,” the President noted.
“We will not be able to meaningfully address the triple challenges that our country and people face, of unemployment, poverty and inequality without increased investment in critical areas of our economy. It is for this reason that we have prioritised the restoration of a policy and regulatory environment that is stable, consistent, predicable and conducive to attracting investment in South Africa.”
President Ramaphosa argued that economic growth across the continent is vital for sustainable development.
“Economic projections indicate that the African continent will attain GDP growth of 4% in 2019 and 4.1% in 2020. Furthermore, the establishment of the African Continental Free Trade Area will stimulate intra-Africa trade and investment. This development will present more opportunities for both our countries to address our common socio-economic challenges,” he stated.
“To benefit from the establishment of the Continental Free Trade Area, we need to focus our efforts on industrialisation, infrastructure development and the diversification of our economies. We must deliberate too in our efforts to ensure that the benefits of the Continental Free Trade Agreement accrue to the women and youth of our countries, our region and the continent.”
Joint Communiqué
Third Session of the Bi-National Commission between Zimbabwe and South Africa
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At the invitation of His Excellency, Cde Emmerson Dambudzo MNANGAGWA, President of the Republic of Zimbabwe, His Excellency, Cde Matamela Cyril RAMAPHOSA, President of the Republic of South Africa, paid an Official Visit to Zimbabwe from 11-12 March 2019, for the Third Session of the Bi-National Commission (BNC) between the two countries. President Ramaphosa was accompanied by five (5) Cabinet Ministers.
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The Third Session was preceded by the meetings of the Ministers on 11 March 2019 and Senior Officials from 7-8 March 2019.
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During the meeting, the two Heads of State held discussions with a view to further strengthening and deepening bonds of friendship and cooperation between Zimbabwe and South Africa. They also exchanged views on regional, continental and international issues of mutual interest.
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The two Presidents underlined the close and friendly bilateral ties deeply rooted in shared history, sustained and nourished through growing economic partnership, multifaceted cooperation as well as vibrant people-to-people contacts.
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The discussions were held in a cordial atmosphere.
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The two Heads of State welcomed the positive outcomes of the Third BNC held in Harare in 2019. They directed the Ministers and Officials to implement the decisions taken by the Heads of State to further cement the strategic bilateral partnership.
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The two sides emphasized the importance of expanding trade and investment to drive the strategic engagement forward. In this regard, the Heads of State directed their Finance and Trade Ministers to work together to achieve these goals.
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Zimbabwe highlighted the key initiatives taken by Government to improve the ease of doing business in the country and further informed on the country’s efforts to simplify and rationalize investment rules with the view to attract foreign direct investment.
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The relevant Ministries agreed to consider options for expanding the standing Facility arrangement between the respective Central Banks. Other Financing Options beyond this are also being explored (for example a facility from South African private banks to the Zimbabwe private sector and guaranteed by the South African Government, with an appropriate counter-guarantee from the Zimbabwe Government).
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They also agreed to work together on re-engagement with the International Co-operating Partners in support of Zimbabwe’s economic reform and Debt Arrears Clearance Agenda.
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Zimbabwe expressed appreciation for the unwavering commitment of the Government and people of South Africa in calling for the removal of illegal and unwarranted sanctions which are stifling the country’s economic recovery programme.
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The two Leaders unequivocally called for the removal of sanctions on Zimbabwe whose adverse effects have been far-reaching across the political and socio-economic spectrums.
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The two Presidents emphasized the importance of enhancing strategic bilateral engagement, particularly in defence and security cooperation, to accomplish the common interests of the two countries and their peoples.
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At the multilateral level, the Commission welcomed the convergence of views on regional, continental and international issues and agreed to further harmonize their positions especially in view of South Africa’s non-permanent membership of the UN Security Council and its upcoming assumption of the Chair of the African Union in 2020.
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Zimbabwe expressed goodwill and confidence in the successful holding of elections in South Africa which will take place on 8 May 2019.
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The two leaders expressed their deepest condolences to the Government and the people of the Federal Democratic Republic of Ethiopia and all other nations on the sad loss of lives in the recent air disaster involving flight ET103.
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At the conclusion of the BNC, His Excellency, Cde Matamela Cyril Ramaphosa expressed gratitude to His Excellency, Cde Emmerson Dambudzo Mnangagwa and the people of the Republic of Zimbabwe for the warm welcome and hospitality accorded to him and his delegation.
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His Excellency, President Ramaphosa extended an invitation to his counterpart, His Excellency, President Mnangagwa, to attend the Fourth Session of the BNC, to be hosted by South Africa in 2020, on a date to be agreed and communicated through diplomatic channels.
Harare, 12 March 2019
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COMESA’s tribute to the late Ambassador Julius Onen, the PS of Uganda’s Ministry of Trade, Industry and Cooperatives
UNCTAD is undertaking an Investment Policy Review of Angola: further details of the 11-22 March mission
The SADC Council of Ministers will meet in Windhoek later this week: details of preparatory meetings now underway
The African Capacity Report 2019 (ACBF)
The 2019 Africa Capacity Report (ACR2019) is the seventh in the series and like those preceding it, measures the capacity of African countries to pursue their development agenda, focusing on key determinants of capacity for development. The theme for 2019 is “Fostering transformative leadership for Africa’s development.” Extracts (pdf):
Country coverage in 2019. This report aims to include all African countries in its analysis. The inaugural edition in 2011 covered 34 countries. The current edition covers 46 countries. Somalia is included for the first time. South Sudan and the DRC are re-included since the technical obstacles preventing their inclusion in the 2017 African Capacity Report have been resolved. Cabo Verde could not be covered as data for that country were not available in time.
Results for the Africa Capacity Indicators. Results are generally satisfactory, driven largely by a strong policy environment. The ACI ranges from 70.8 for Mauritius to 24.0 for Guinea-Bissau (table 1.1), where scores of 0 to < 20 are very low, 20 to < 40 are low, 40 to < 60 are medium, 60 to < 80 are high, and 80 to 100 are very high. No countries are at the very low or very high extremes of capacity. Ten countries are in the high capacity bracket and five are in the low bracket, but no country is in the very low or very high bracket (figure 1.1). The bulk of countries have medium capacity. Two-thirds of countries (67.4%) fall within the medium capacity bracket, 21.7% are in the high bracket, and 10.9% are in the low bracket (see figure 1.1).
Table of contents. Chapter 1: Africa’s capacity development landscape in 2019; Chapter 2: Understanding transformative leadership; Chapter 3: The state and challenges of transformative leadership in Africa; Chapter 4: Lessons on capacity development for transformative leadership from country case studies; Chapter 5: Summary, key messages and capacity development policy recommendations.
Profiled Tables. Country results on the Africa Capacity Index 2019, by rank and index score (p3); Distribution of countries on the Africa Capacity Index 2019, by capacity bracket and indicator cluster (%) (p5); Country results on the Africa Capacity Index 2019, by rank and index score (p16); Distribution of countries on the Africa Capacity Index 2019, by capacity bracket and indicator cluster (%) (p18); Performance of countries on four thematic indices of the Africa Capacity Index 2019, by capacity bracket (%) (p20); Country performance on the Institutional Mechanism for Agenda 2063 and Sustainable Development Goals index 2019 (p24); African output growth, 2014–19 (p30).
Illicit financial flows and illicit trade in Africa in the context of the AfCFTA and the role of South-South Cooperation: BAPA+40 side event (21 March, Buenos Aires)
IFFs and illicit trade are a concern for Africa’s AfCFTA for various reasons. To benefit from regional preferential trade liberalization, African countries need to build and diversify their productive capacities through industrialization in order to boost intra-African trade, develop regional value-chains and ensure that their markets are not being flooded with counterfeited illicit foreign goods that can undermine their local industrial development. The AfCFTA can be a catalyst for industrialization, structural transformation and formalization of informal activities, including informal trade. Africa has to address IFFs and illicit trade in order to divert “lost” funds into the operationalization of the AfCFTA while the latter will also aid to create the conditions and incentives needed to reduce the “attractiveness” of illicit activities. Domestic resource mobilization should be an integral part of Africa’s agenda for deepening regional integration by operationalizing the AfCFTA and the complementary measures needed to make the AfCFTA impactful. Addressing IFFs and illicit trade should be at the heart of this domestic resource mobilization agenda.
Pioneering firms in fragile and conflict-affected states: why and how development finance institutions should support them (World Bank)
The role of ‘first movers’ in fragile states is critical: they grow and diversify markets in ways that no other firms do, generating disproportionate impact in terms of development and stability. But pioneer firms are rare in fragile states. This study documents their profile, their challenges, and the barriers that prevent them from realizing their potential. The study also explores the rationale for development finance institutions to support them, and proposes new ways to offset costs, risks, and the “unknown unknowns” that generate radical uncertainty. Extracts (pdf):
Once a fragile state faces an opportunity for transformation, the critical role of development agencies is to expand the formal private sector as rapidly as possible. Hence, the key areas for international support should shift from the humanitarian agencies to the DFIs. If DFIs are to rise to this responsibility, they will need to overcome a fundamental problem - there are not enough large, formal firms operating in fragile states for them to invest in. Therefore, we need a better understanding of why there are so few formal firms - what are the obstacles to entry by firms, and what can be done to support their entry, survival, and growth.
But, much like everything else in fragile situations, pioneer firms are different from pioneers in other markets. They typically have additional experience, innovate at smaller sizes, and rely less on fixed assets, and on international standards, worker training, or corporate partnerships. The level of development and diversification in the markets suggests an intuitive explanation: the scope for innovation is much broader. Yet pioneers in fragile and conflict-affected states are unable to capitalize on their potential through formal banking. Contrary to other developing countries, pioneers in fragile states finance a higher share of investment through internal funds as they have less access to credit, and face a higher cost for capital. This suggests a clear role for DFIs in supporting their growth by financing them directly, and by supporting their access to finance from private equity and from local financial markets. The task facing DFIs is how to reset negative and self-fulfilling investor narratives such as the ‘basket case’ narrative. Three practical responses by DFIs can complement each other. One is to make a commitment. A second is to disrupt damaging narratives with evidence that is incompatible with them. A third is to replace a damaging narrative with a better one. We consider them in turn. [The authors: Paul Collier, Neil Gregory, Alexandros Ragoussis]
Issue Paper: pdf Financing railway rolling stock – a new solution for Africa (681 KB) (UNECA)
The present issue paper provides an exploration of a new global treaty for the recognition and prioritization of security interests held by creditors in railway rolling stock and includes responses to the following questions: Can the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment be extended to apply to railways? What is the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Railway Rolling Stock (Luxembourg Protocol)? What are the economic benefits of the Luxembourg Protocol? How can creditors who finance rolling stock through leases, secured credits and conditional sale contracts be protected?
Railways could transform the continent, but they currently play an insignificant role, which is not surprising, given the continent’s rail density of one km of rail track for every 357 km2 of land. In comparison, the rail density in the United States is one km of track for every 43 km2, and in Germany, it is greater than one km per 10 km2 (Rosen, 2015). The situation in Africa, however, is getting worse. Between 2005 and 2011, the volume of usable railway tracks in Africa diminished from 58,000 km to 50,000 km. It is nevertheless true that the position is gradually changing. Large rail projects are under way in countries such as Ethiopia, Kenya, Morocco, Mozambique, Nigeria, Senegal and Tanzania, and there are plans to bring railways to Burundi and Rwanda. The Addis Ababa Light Rail Transit network, which cost $475m and has a total route length of 34 km, is now operational. It is the first light rail service in sub-Saharan Africa. However, such projects stretch State financial resources to the limit. [An Issue Paper prepared for the forthcoming 52nd Session of the ECA Conference of African Ministers of Finance, Planning and Economic Development]
Electricity access in Sub-Saharan Africa: uptake, reliability, and complementary factors for economic impact (World Bank)
Electricity Access in Sub-Saharan Africa shows that the fundamental problem is poverty and lack of economic opportunities rather than power. The solution lies in understanding that the overarching reasons for the unrealized potential involve tightly intertwined technical, financial, political, and geographic factors. The ultimate goal is to enable households and businesses to gain access to electricity and afford its use, and utilities to recover their cost and make profits. The report makes the case that policy makers need to adopt a more comprehensive and long-term approach to electrification in the region - one centered on the productive use of electricity at affordable rates.
ECOWAS Parliamentarians engage in the single currency programme
The Parliament of the Economic Community of West African States seeks to become more involved in the region’s single currency creation programme and appropriate recent decisions on the matter issued by meetings at ministerial and Heads of State levels. To do this, it convened a regional meeting (5-7 March, Dakar) on the theme Challenges and outlook regarding the creation of the ECOWAS single currency – mobilising parliamentarians for the actualisation of the project. The President of the Task Force on the ECOWAS Trade Liberalisation Scheme, Djibo Salou, declared that the non-existence of a common currency is an impediment to regional integration and encourages diverse tariff barriers. In turn, Jean-Claude Kassi Brou commended the initiative which, according to him, will enable an assessment of the status of implementation of the regional single currency. “This conference is holding at a time of widespread focus on the single currency implementation deadline, given the slow pace of macroeconomic convergence, harmonisation of financial and economic policies of the region. With the gradual approach of the 2020 target date for ECOWAS, the monetary integration programme has become a topic eliciting keen interest and lively debate within the Community, particularly among policy makers and practitioners.” [EBID holds 61st meeting of Board of Directors]
South Africa: Promoting private sector competitiveness and investment (dti)
South Africa’s Department of Trade and Industry and the World Bank Group yesterday announced an advisory services partnership aimed at improving the business environment for domestic entrepreneurs and undertaking policy and institutional reform to enhance foreign direct investment inflows. The partnership will focus on three key reform areas: business regulation, investment policy and promotion, and market regulation and competition policy. World Bank Group support will be delivered in partnership with the Swiss State Secretariat for Economic Affairs and the Prosperity Fund of the UK’s Foreign and Commonwealth Office. Early deliverables under the support program will be inputs into the Government of South Africa’s Investment strategy, which is expected to address not just horizontal barriers to private sector investment but also sector specific enablers for growth and employment creation.
€1.2m trade hub set for launching in Eswatini
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Diarise:
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The 14th CII-EXIM Bank Conclave on India-Africa Project Partnerships (17-19 March, New Delhi). The programme can be viewed here.
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The African Day of Standardisation will take place on 21 March (to mark the signing of the AfCFTA Agreement on 21 March 2018, in Kigali)
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tralac Annual Conference 2019 (21-22 March, Nairobi). Download the draft programme here.
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Council of COMESA Ministers meeting (5 April, Lusaka)
Adam Elhiraika (Director of the ECA’s Macroeconomic Policy Division) commenting on deliberations during the AU STC on Finance, Monetary Affairs, Economic Planning and Integration: “My take from this meeting is that there is need for better coordination among our African institutions to the extent that we would have common and coherent narratives on Africa’s development challenges and what needs to be done to address these challenges as well as concerted action to support the continent deliver the “Africa we want”.
African standardization updates:
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New ARSO label system boost for traders. Speaking on Friday during the launch in Nairobi, African Organisation for Standardisation President Eve Gadzikwa said the new mark of quality came at a time when the continent was preparing to welcome the Continental Free Trade Area which is expected to significantly boost Africa’s position in international trade. “The African certification system comes when the branding and positioning of African goods and services is very weak, but with the coming of EMA, our goods will soon be labelled and positioned accordingly,” said Dr Gadzikwa. She said the new system positioned Africa to vet and certify goods and services coming into the continent. This could see a significant reduction of counterfeit, substandard and dangerous goods that have plagued the continent for years. ARSO Secretary-General Hermogene Nsengimana said all businesses, including hotels, food production systems and markets were required to be certified by the standards body. “This will be done through the national standardisation bodies of respective countries.”
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A preview of ARSO’s African Day of Standardisation: “We recall that the celebrations give us an opportunity to raise awareness on the impact of corruption in realising the AfCFTA and how the implementation of standards through effective quality infrastructure can be used to create opportunities for the fight against corruption. We call on the ARSO members to work with local manufacturing industry toward improving the quality of locally produced goods through value addition; there is also a need of having a structured cooperation to fight corruption comprising of NBS and customs officials with respect to border post management and inspection of imported goods and the counterfeits, and sensitize the Government of their roles in the establishment and maintenance of effective mechanisms for fighting corruption including effective National and regional Quality Infrastructure, guidelines, laws and information procedures based on the UN and AU Conventions for fighting Corruption. The logical leap from standards development and adoption to compliance and enforcement is the way to go in winning the war of Corruption through standardisation.”
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“Porous borders source of substandard products”. Tanzania Bureau of Standards director general, Dr Ngenya Yusuf, said porous borders were a source for the flooding of substandard products in the country, saying they have started taking measures to control the illegal routes. Dr Ngenya said this recently when speaking shortly after Prime Minister Kasim Majaliwa made his first visit at the Bureau. He also said the organisation is facing other challenges which need government interventions to enable it to run its activities smoothly. Dr Ngenya said one of the most challenges include shortage of staff: whereas the bureau has a total of 470 workers, against the demand of 750 workers. He said the shortage of staff contributes into TBS failing to post officers at all the borders. He also said that with the TBS standard marks, Tanzanian-made goods are likely to compete in internal and external markets. “We have so far provided a total of 440 standard marks worth 341m/- to small and medium entrepreneurs across the country.”
Zambia: Country Partnership Framework, FY19 - FY23 (World Bank)
In addition to supporting the government’s goal to help poor, rural communities become more climate resilient, the CPF more specifically aims to: (a) Expand market opportunities for Zambian firms through increased economic integration with neighboring countries and an adequate rural road network; (b) Reduce the infrastructure gap, increasing access to electricity, and water and sanitation, particularly in rural areas; (c) Support financial inclusion, improve the delivery of basic health and education services, and increase the pro-poor focus of fiscal policy, which includes specific interventions under social protection that are meant to further increase disadvantaged girls’ participation in secondary education and poor women’s livelihood opportunities; (d) Create a concrete plan to address the current debt situation through enough fiscal consolidation and reserves.
Nigeria: Report on the implementation of the Investment Policy Review (pdf, UNCTAD)
Since 2009, Nigeria has had to overcome a series of political, security and economic challenges that has affected its capacity to undertake reforms. As a consequence, the degree of implementation of IPR recommendations remains rather low. Notable exceptions are the recent reforms sponsored by PEBEC, though for many of them, it is too early to assess impact. Another exception is the positive transformation of the National Investment Promotion Commission into a pro-active investment promotion agency. The main findings are described in more detail in the investment policy review implementation matrix (see section 4).
Exerting internal competitive pressure: A competition law is long overdue, as the level of market concentration is high and acts as a de facto entry barrier for smaller, local or foreign, investors. Nigeria remains one of the few African economies without antitrust legislation. Although the Competition Bill adopted by the Federal Executive Council in 2005 could have been improved (by notably clarifying several of its provisions), the IPR recommended to enact it and address its shortcomings by formulating adequate application guidelines. However, the Bill was rejected by the National Assembly. The Federal Competition and Consumer Protection Bill, comprising provisions in line with the recommendations of the IPR, was passed by the National Assembly in November 2017. However, it is still awaiting presidential assent to become law.
Exerting external competitive pressure: The IPR recommended that Nigeria tap the potential of its regional market and become a base for pan-African sourcing. This could be achieved by playing a more prominent role in moving forward the ECOWAS agenda and accelerating integration in the region. It also recommended the establishment of an international trade commission to design a consistent and well-timed process to open up markets to trade. The process, incremental in nature, suggested taking into account the cost and productivity improvements achieved through better infrastructure and regulation. Although Nigeria started applying the ECOWAS Common External Tariff (CET) in early 2015, the level of implementation remains unclear, and an import adjustment tax is still being applied. In addition, the country continues to ban the import of several products, and access to foreign currency is forbidden for 41 categories of imports. Nigeria has not signed the European Partnership Agreement with the European Union, nor has it signed the African Continental Free Trade Area Agreement. An international trade commission was not established, but a Nigerian office for trade negotiations was established in 2017 as an interministerial agency of the Government with the mandate to “align domestic trade policy priorities to changing global reality”.
What would an AfCFTA strategy look like for Botswana?
With the advent of a continental free trade area, Botswana’s trade policy is soon to experience transformational change, shaped by global and regional events. If we are to have effective trade relations and a booming manufacturing sector, we must position ourselves to predict the change. But the image of African trade itself hasn’t been all glorious. To start it off, the already existing regional economic communities do not trade enough amongst themselves. The SADC Free Trade Agreement, which was signed 10 years ago, is essentially defunct. Free trade deals have been an ideal that only exist on signed protocols, but never ratified and implemented. Botswana has recently signed the AfCFTA but hasn’t made public any timelines on ratification. The regional power dynamics are as problematic.
The government of Botswana must put out a valid position beyond the generic fact sheets with statistics of African GDP and trade statistics. A National AfCFTA strategy, if you will, will have to set out a comprehensive framework to advance the country’s economic prosperity in the contested and competitive space of African trade. What are our interests in a continent-wide trade bloc? How do we view the African continent, the AU and the evolving power dynamics? [The author: Bakang Ntshingane]
Kenya eyes wider Horn of Africa market, starting with Ethiopia
Kenya is wooing Ethiopia to open up its market further for Nairobi after a high-level trade and investment forum that Prime Minister Abiy Ahmed hosted in Addis Ababa last week. It is understood that the two countries reviewed the progress of implementation of a Special Status Agreement, which the two countries signed in 2012 to enhance economic partnership. Cabinet Secretaries Peter Munya and Monica Juma for Trade and Foreign Affairs respectively, were the key players in reviewing the agreement that will see different sector leaders commence visits to Addis Ababa to negotiate and sign deals with their counterparts. The Special Status Agreement focuses on trade, investment, infrastructure and food security. Kenya is wooing Ethiopia into joining the EAC in order to extend integration to the Horn of African countries, among them Eritrea, Somalia and Djibouti.
New road could derail Kenya’s Lapsset plan
Somaliland will build a 250km road, from its port city of Berbera to Ethiopian border, in what is likely to provide a mixed bag of fortunes for Kenya. The groundbreaking of the dual carriageway is set to deepen trade relations between Somaliland and Ethiopia, particularly following the upgrading of the former’s port to handle containerised cargo. It comes just days after President Uhuru Kenyatta and Ethiopian Prime Minister Abiy Ahmed presided over the official opening of a two-day Kenya-Ethiopia Trade and Investment Forum in the Ethiopian capital Addis Ababa. The two leaders committed to the implementation of the Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor, also known as the Lamu Corridor. The proposed road is expected to increase trade volumes between Ethiopia and Somaliland by 30%. However, Somaliland, which is keen to win Kenya’s support in its bid for recognition, says its upgraded Berbera Port would work in collaboration with the port of Mombasa.
Kenya’s creative sector yet to weave into global boom
Creative goods exports from Kenya stood at Sh4 billion ($40.9m) in 2013 compared to Sh19.5 billion ($195m) in imports, latest available data by UNCTAD shows. According to the UNCTAD report, Kenya’s top export partners for creative goods are Uganda, Tanzania, Sudan, US and Italy. Others include Burundi, Somalia, the DRC, Rwanda and the UK. Kenya has gained ground to be among the top 10 export partners for countries such as Botswana and Ethiopia. The value of both imports and exports to Botswana was $0.02 million (Sh2 million) each. The value of Kenya’s exports to Ethiopia was $0.51 million (Sh51m), 1.76 times the value of imports from the country. However, it also lost its position among the top 10 export partners for Malawi and Mauritius. [Jen Snowball, Amy Shelver: Arts and culture were given money in SA’s budget – why it matters]
Martin Schäfer: Don’t make investment in SA an ideological issue (News24)
When I talk to German entrepreneurs and investors, they tell me what’s crucial to them when it comes to making their long-term investment plans – and get them approved at corporate headquarters at home. One key topic is certainty. Decision-makers here and back home look for fair and dependable conditions to do business, for an unequivocal commitment to the rule of law, the independence of the judiciary and to honest and ethical business practices. They also seek a fair playing field and comprehensive guarantees for their investment. The years leading up to 2018 were a difficult period in South Africa, and many abroad shared this sentiment. It is no secret that these years were marked by much scepticism as to where South Africa was heading. That has changed. It has changed a lot. [The author is German ambassador to South Africa]
Today’s Quick Links: USITC enquiry: Uncovered innerspring units from China, South Africa, and Vietnam Nigeria yet to meet $2bn textile targets 4yrs after policy Foreign rice threatens Nigeria’s rising domestic production |
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Productive transformation is a must for Africa – AU Committee
African Union Ministers of Finance, Economy and Integration call on formulation of clear and concise public policies in accelerating the process of productive transformation in Africa
There is no alternative to the equation of “developing an African industrial fabric, capable of boosting our production and processing capacity, and reducing our dependence on other continents,” recently argued the Prime Minister and Head of Government of the Republic of Cameroon, Dr. Joseph Dion Ngute – an observation that reflects ECA’s current thinking on the structural transformation and diversification of African economies.
He was speaking at the 3rd session of the African Union’s (AU) Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration, that concluded in the Cameroonian capital, Yaoundé, on 8 March 2019.
“[T]he debates surrounding this issue of productive transformation are more relevant than ever, and the need to find solutions remains an urgent one, as the challenges and weaknesses of the continent’s economies have remained for a very long time, due to their excessive extroversion,” Dr. Ngute added.
Discussions at the STC focused on the theme: “Public Policies and Productive Transformation”. The continent has experienced strong economic growth in the last two decades. However, this growth performance did not lead to the development of the manufacturing sectors and did not create enough decent jobs.
In view of the current high population growth composed by 70% of youth, the continent must create more than 12 million jobs per year to prevent unemployment from rising. The Industrial sector should be at the core of the transformation process while taking into account existing complementarities with the agricultural sector and services.
Countries should adopt measures aiming at diversifying their production and exports by promoting the development of blue economy and taking advantage of the opportunity offered by the prospect of digitalization in the continent.
In this context, AU Commissioner for Economic Affairs of the African Union, Prof Victor Harison – speaking on behalf of the African Union Chairperson. H.E. Moussa Mahamat Faki – highlighted that “the acceleration of the development of the African productive sector is essential for the continent to enjoy a second decade of growth and achieve the objectives of Agenda 2063”.
This brings to light the indispensable role of the secondary sector as the great basis for employment, which should contribute more than ever before to inclusive economic growth in Africa, as posited by Cameroon’s Minister of Finance Louis Paul Motaze, who hosted participants of the session.
What, then must Africa do to boost its secondary sector through massive industrialization?
According to Prof. Emmanuel Nnadozie, Executive Secretary of the African Capacity Building Foundation (ACBF), there are six key actions to take in this regard:
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Building the right strategy and policy mix for massive industrialization;
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Making critical commitments to unleash industrial capacity especially by developing energy and transport infrastructure;
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Creating an enabling environment to attract investors;
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Mobilizing internal and external support anchored on Africa’s self-belief on its ability to industrialize;
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Taking action to make things happen, by “walking the walk and not just talking the talk”; and
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Showing visionary and transformative leadership at all levels.
“This STC and other high-level events, such as the ECA Conference of Ministers and the Commission’s Subregional Intergovernmental Committee of Experts, provide an avenue for good quality dialogue to understand what the binding constraints and opportunities to productive transformation are, in order to define pathways towards achieving it,” said Antonio Pedro – Director of the Subregional Office for Central Africa of ECA.
He noted that, it was through such dialogue that the Douala Consensus on economic diversification through resource-driven and trade-induced industrialization was jointly adopted by ECA and representatives of its member States in Central Africa in September 2017.
“We are happy that some countries in the subregion are taking strides towards operationalizing the concept of economic diversification as outlined in the Douala Consensus. It is not a quick fix though. It requires comprehensive and sound diagnosis, integrated and strategic planning, bold and coordinated action from multiple actors. Our office is developing a body of knowledge and practice on economic diversification, which we are already deploying to the benefit of our member States and Central Africa in general,” Pedro added.
In essence, “the starting point for productive transformation is economic diversification, beyond traditional farming and primary commodities, to include agro-processing, high value services for the digital economy and manufacturing,” argued Dr. K.Y. Amoako – former Executive Secretary of ECA who is now President of the African Center for Economic Transformation (ACET).
This, he said, would lead to “growth with depth,” which also requires engaging in competitive exports and leveraging technology.
“My take from this meeting is that there is need for better coordination among our African institutions to the extent that we would have common and coherent narratives on Africa’s development challenges and what needs to be done to address these challenges as well as concerted action to support the continent deliver the “Africa we want”, mooted Adam Elhiraika – Director of the Macroeconomic Policy Division at ECA.
One of such needed actions is to boost human capital development and establish credible institutions in the investment and business ecosystem in Africa.
“There is absolute need for an African credit rating agency – with a granular understanding of the reality of individual countries and Africa as whole which would then ensure a more accurate assessment of risks, challenges and opportunities thus resulting in credit ratings that reflect the realities on the ground,” he said.
Prof Harison paid homage to the UN Economic Commission for Africa (ECA) and a host of other development institutions and partners in Africa for working tirelessly with the AU towards the productive transformation of the continent.
This STC was held in a context in full effervescence with the Signatures and ratifications of the legal instruments of the AfCFTA. The operationalisation of the Pan African Financial Institutions namely the African Central Bank, the African Monetary Fund, the African Investment Bank and the Pan African Stock Exchange will provide the continent with strong and credible Institutions, enabling it to achieve self-sufficiency and implement the strategies for productive transformation.
Discussions held throughout the event concluded in noting that our countries can improve their ability to make the most of the continent's rich endowment of natural resources by investing in the process of productive transformation through the use of new technology and new processing methods of manufacturing goods. These processes will lead to the development of new products and higher value-added activities; and thus creating higher paying jobs in the productive sectors.
In this regard, productive transformation strategies that are anchored on existing comparative advantages will enable our economies to create economic opportunities for the young Africans entering the labour market and, as a result, promote poverty reduction. In order to achieve this crucial objective of accelerating the process of productive transformation in Africa, it is essential to reinforce regional integration and strengthen the potential of the private sector as a key player in the development of the continent.
The Report of the outcomes of the STC will be submitted for consideration at the AU Assembly of Heads of State and Government in July 2019.
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Our profiled International Women’s Day feature: Women are at the heart of African cities. The continent needs urban policies that empower them (CityMetric)
Growing evidence suggests that when women serve as political leaders, governments are not only more inclusive but also better at delivering public services. When women are represented in local government, they are also more likely to ensure topics important to women are actively considered. For example, Florence Dillsworth, a previous mayor of Freetown, launched a number of projects both around education and income generation specifically for women. African cities, like Kampala and Freetown, are currently undergoing immense changes in their economic, social, and political fabric. The positive role women play in Africa’s urbanisation process is clear and evidenced. We need to continue fighting for women’s voices to be heard and ensure that they can reach their fullest potential within our cities. [The authors: Yvonne Aki-Sawyerr (mayor of Freetown), Jennifer S. Musisi (Bloomberg Harvard City Initiative), Astrid R.N. Haas (International Growth Centre)]
Sustainable African design in focus on Women’s Day (UNCTAD)
Christine Lagarde: A Global Imperative (IMFBlog)
Statement of the Chairperson of the AUC, H.E. Mr. Moussa Faki Mahamat, on the Occasion of International Women’s Day (African Union)
WTO updates:
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Trade and gender training, new research and EIF initiative announced on Women’s Day at WTO. Director-General Roberto Azevêdo announced new efforts for women’s economic empowerment through trade, including a training module and new research on trade, gender and the environment, at an event at the WTO celebrating International Women’s Day on 8 March 2019. He also reviewed the organization’s broader efforts towards gender balance and inclusivity.
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Expert group meeting on trade finance: informal report by WTO Secretariat. Trade finance support by multilateral development banks in the poorest countries was a mirror of trade finance gaps. Demand remains high for multilateral support, notably in view of the reduced network of international banks and a heightened perception of anti-money laundering and know-your-customer regulatory risk. The AfDB and Afreximbank regretted that upstream correspondent banks in Africa had been cutting links temporarily or permanently, leaving significant US dollar shortages. Africa had suffered a reduction of at least 12% of the number of foreign banks ready to confirm letters of credit. Afreximbank’s objective was to link itself to 550 African banks by 2021, and to become one of the “hubs” for African trade banks in their relations with the rest of the world. Local banks faced difficulties in meeting the cost of compliance and the need for training was immense. Afreximbank had introduced its repository on customer due diligence information. The AfDB had provided trade credit totalling $1.3bn in 2018 ($8bn in cumulated support since the beginning of the programme in 2013). The AfDB partnered with the ITFC to offer 500 scholarships for trade finance staff of African banks, to take on the qualifying trade finance course delivered by the International Chamber of Commerce. The Africa Trade Finance Gap study will be updated in 2019. [DDG Wolff: More institutional cooperation is needed to address shortages of trade finance]
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South Africa notifies WTO’s Committee on Safeguards of a safeguard investigation on threaded fasteners of iron or steel
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Brazil, Australia initiate WTO dispute complaints against Indian sugar subsidies. Times of India commentary, by Ritesh Singh: India’s steel industry is a standing example of how protectionism harms the economy
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A reminder of the forthcoming EAC Trade Policy Review (20, 22 March)
African trade finance updates:
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ABSA restructures investment bank to sharpen African focus. ABSA has overhauled the executive management of its corporate and investment banking unit as part of an ongoing group-wide revamp to draw more revenue from operations in Africa. The team of eight, which includes former joint-chief executive officers of the division, Mike Harvey and Temi Ofong, now have a mandate to drive business across the entire African continent, ABSA CIB CEO Charles Russon said in an interview in Johannesburg. As ABSA seeks to boost growth, it will target clients in mining and minerals, agriculture, power and utilities, natural resources and consumer businesses, Russon said, adding that the lender wants to grow more in commercial property finance and structured-trade finance. It will also look to accelerate the expansion of its existing business in Nigeria where it has had a limited presence, and in countries where it has no presence like Angola and Egypt, he said. “We need to be very clear and deliberate in terms of our Nigerian strategy and then execute,” he said. “Nigeria is such an important country in the African economy.”
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Boost for Kenya, UK trade as UBA bank opens in London. Kenyan exporters to the United Kingdom will benefit from reduced trade barriers following the launch of United Bank of Africa-UK. UBA, now the only Sub-Saharan African bank to conduct banking activities in London and 20 other African countries including Kenya, officially unveiled its London subsidiary following regulatory approval from Prudential Regulation Authority, an agency of the Bank of England, to offer wholesale banking activities in the UK. UBA Group Managing Director Kennedy Uzoka said UBA-UK will strengthen the bank’s abilities in meeting the growing cross-border financing needs, while positioning the bank as the prime conduit for trade and foreign investments into and across Africa, as well as export flows to the United Kingdom.
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Putting markets to work: How Ghana will fund development projects through carbon finance. Ghana is hosting the Africa Climate Week in March, which will showcase proven climate solutions to attract private investment and introduce entry points for private sector engagement. The Ghana NDC Investment Forum taking place during the Climate Week - organized by UNDP Ghana and the Ministry of Environment - will bring together international high-level participants from public and private sectors to discuss ways to attract private sector investment at scale. With Ghana’s country-wide clean energy programme close to implementation, the timing of the Africa Climate Week and the NDC Investment Forum couldn’t be better, as the innovative finance mechanism underpinning the programme provides a number of incentives for both investors and the public sector actors. Using carbon finance generated from investors’ sales of ITMOs to boost the share of the national green fund is a concrete way for developing countries to reduce their dependence on bilateral climate finance, which is currently not available at the extent needed to achieve the goals of the Paris Agreement or Agenda 2030. [Mauritius needs assistance of development partners to concretise its climate action plan]
Nigeria: Value of mobile transactions crossed N30bn in February 2019 (TechNext)
Mobile banking apps have continued to grow as important financial tools. According to February statistics released by the Nigeria Interbank Settlement System, the volume of transfers via mobile apps has reached an all-time high. Statistics show that 932,355 mobile transfers were completed in February 2019, representing a huge 80.8% year on year increase. It is also a 28.6% increase over the 724,803 recorded in January 2019. The value of mobile transfers has also hit a new all-time high. While the value stood at N26.8 billion in January 2019, February transactions grew to N30.028 billion, representing 12.1% growth. Meanwhile the February figure is a 34.4% growth over the N22.4 billion recorded in February 2018.
Kenyans in worrying debt levels by mobile lenders
At least 7.6 million Kenyans have multiple loans from mobile lenders, credit history data has revealed. This translates to about 40% of the 19 million Kenyans who have borrowed mobile loans, Metropol Corporation MD has said. Sam Omukoko said every borrower has a loan from at least six out of 10 lenders on average. While there is an acceleration of loans acceptance rate, the CRB notes that the default rate currently stands at 2% of the total accounts. This means that there are currently more than 380,000 borrowers who have defaulted on their loans, this even as most borrow to bet, pay school fees and settle other loans. Yesterday, Parliament’s Information, Communications, and Technology committee asked the Central Bank of Kenya to introduce regulations to control interest rate charged by the lenders. “ The increase is attributable to the introduction of credit reference bureau’s in the country which has seen the number of mobile borrowers increase from 5 million eight years ago to an excess of 19 million,” Omukoko said. [Kenyan banks give the tough anti-money laundering laws seal of approval]
Jacqueline Musiitwa: Banking on Refugees (Project Syndicate)
There is little reason to distinguish refugees from the rest of the world’s unbanked. Contrary to popular belief, refugees are not a higher-risk demographic: the Kiva Refugee Impact Report found that, when it comes to loan repayment, refugees are on par with non-refugees. Moreover, thanks to facial-recognition and artificial-intelligence technologies, banks can now instantly verify users’ identities, using, for example, a quick iris scan run through an open-source identity-verification application programming interface. As a result, refugees’ lack of an identity card, loan collateral, and/or a fixed address is becoming irrelevant. This will be all the more true with the introduction of ID2020, a collaboration among Microsoft, Accenture, and the UN that will use biometric data and the blockchain (distributed ledgers) to create an encrypted, permanent, and shareable means of identification for all refugees.
OECD’s Working Party on International Trade in Goods and Services Statistics: new papers
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OECD-WTO Handbook on Measuring Digital Trade (version 1, draft, pdf). In response to growing demand for coherent and comparable data on digital trade, in 2017 the Inter-Agency Task Force on International Trade Statistics created an Expert Group, drawn from international organisations, national statistics agencies and central banks, to develop a Handbook that provided: a conceptual framework to define digital trade, around which national efforts could be targeted; and mechanism to bring together and share existing national and international efforts on measuring digital trade and/or dimensions of it, that could be used to identify and develop best practice. This Handbook reflects the current outcome of the efforts of that group. As it shows, in many areas, work is still very much in its infancy and in some (for example with respect to the measurement and valuation of many forms of data) it can best be described as embryonic.
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A new look at Trade in Value-Added and Global value chains: a view from the consumption perspective. Global input-output tables have significantly transformed our ability to interpret global production. However, because they value transactions at basic, and not market, prices, many of the related analyses are, in part, revealing only some of the story. At the heart of the debate, and indeed confusion, is that input-output tables in basic prices are in essence a mechanism to provide a view of production and because they remove significant distribution margins at the end of the chain, they are less well equipped to provide a perspective from the consumption point of view. This paper explores the development of a complementary accounting framework in ‘market’ prices and tries to illustrate the insights that can be gained through such an approach.
Today’s Quick Links: A Bloomberg QuickTake: Why a closed border has Uganda, Rwanda at loggerheads The Conversation AU: Introducing gender lens investing: it’s more than pink-washing Kenya: Traders turn to imports as poor seed dims local potato output Workshop on International Humanitarian Law for ECOWAS judges opens in Abuja Cameroon: Joint 2015-2020 CSP Mid-Term Review and Country Portfolio Performance Review Report Togo: Combined report on Mid-Term Review of CSP 2016-2020and 2018 Country Portfolio Performance Review OECD’s Interim Economic Outlook: global growth slowing, as Europe weakens and risks persist (pdf) |
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Trade and gender training, new research and EIF initiative announced on Women’s Day at WTO
World Trade Organisation (WTO) Director-General Roberto Azevêdo announced new efforts for women’s economic empowerment through trade, including a training module and new research on trade, gender and the environment, at an event at the WTO celebrating International Women’s Day on 8 March 2019. He also reviewed the organization’s broader efforts towards gender balance and inclusivity.
“Gender issues are central to who we are as an organization,” said DG Azevêdo in opening the event. “Achieving gender balance and inclusiveness is an ongoing challenge. That applies to the WTO and to trade and the economy more broadly.”
The event – “Unlocking Trade for Women’s Empowerment through Innovation and Sustainability” – took place more than one year after a large group of WTO members and observers endorsed an initiative to boost women’s role in international trade. The pdf Buenos Aires Declaration on Women and Trade (493 KB) fosters the exchange of information about policies and best practices in this area. It also launched a series of workshops about how gender issues connect with topics such as government procurement and global value chains.
“I welcome the ambition that we are seeing behind this work and the remarkable momentum that it has gathered over a fairly short period,” said DG Azevêdo.
“Today we have come a long way from feeling that trade rules are ‘gender neutral’ to the feeling that the way we facilitate trade ideally must be positively gender biased,” said Shishir Priyadarshi, Director of the WTO’s Development Division.
“Trade is not gender neutral. The deeper I analyse the issues, the more I see the demand for gender-responsive trade,” said Anoush der Boghossian, WTO Trade and Gender Focal Point. “International women’s day is a key annual milestone and it helps us set the tone for the work we will carry out this year,” she said.
New work on trade and gender
During the event, DG Azevêdo announced a training module on trade and gender for officials of WTO members and observers, in response to demand by governments. This module will be offered as part of the WTO’s Technical Assistance programme starting in May 2019.
The event also saw the announcement of a research project looking at the intersections between trade, gender and the environment. “Women play a key role, traditionally, in environmental aspects. Whenever there is an environmental issue, they are the first ones to be affected. They are also part of the solution for environmental degradation and pollution,” said Ludivine Tamiotti, from the WTO’s Trade and Environment Division. The study aims to deepen the understanding of trade’s role in this relationship.
Aside from this new work, the WTO and the World Bank are jointly collecting data to better understand how trade impacts women. The two institutions shared preliminary results at a conference in December. They plan to publish findings in the second semester of 2019.
DG Azevêdo also praised the Enhanced Integrated Framework (EIF) for their “Empower Women, Power Trade” initiative. The EIF is a partnership between the WTO and other institutions to assist least-developed countries in using trade for poverty reduction.
“This initiative is unique, because it exclusively targets women traders in the LDCs,” he said. “The target is that by 2022, the initiative will have directly empowered 50,000 women by helping them secure access to markets.”
“Business as usual is not likely to help us achieve our target of increasing the share of women beneficiaries,” said Ratnakar Adhikari, Executive Director of the EIF. “We have launched a dedicated women economic empowerment programme on International Women’s Day in line with our strategic vision of promoting inclusive trade in LDCs. We have backed our commitment by allocating significant financial resources, which may go up to USD 10 million.”
To watch the full event, click here.
Speech by WTO Director-General Roberto Azevêdo on International Women’s Day
Good morning everyone.
Let me start by wishing you all a happy International Women’s Day.
I am pleased to have this opportunity to celebrate this occasion once again at the WTO. The theme for this year’s UN International Women’s Day is “think equal; build smart; innovate for change”. That is what we’re all striving to do. So I think this theme fits well with our event today at the WTO.
We also have an opportunity today to take stock of what has been achieved so far and to introduce some new initiatives on trade and gender.
Gender issues are central to who we are as an organisation. And over the past two years we have been putting a much greater focus on them.
In 2017 a large group of members took a decisive step with the pdf Buenos Aires Declaration on Trade and Women’s Economic Empowerment (493 KB) . In addition, we developed the WTO Trade and Gender Action Plan for 2017-2019.
As a result, trade and gender issues are on the WTO agenda like never before.
The Buenos Aires Declaration is providing a platform to better understand the links between trade and women’s empowerment.
As part of this, members committed to organize a series of thematic workshops from March 2018 to June 2019.
Through these workshops, they have been exploring how trade can better promote women’s economic empowerment. And they have been sharing their national experiences and best practices, along with case stories from the private sector.
Three workshops have taken place so far. During those discussions:
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Members outlined the importance of improving gender-based analysis in trade,
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They looked at government procurement markets and their importance for inclusive economic development,
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And they explored how global value chains can foster women’s economic empowerment.
Three more workshops are being planned to look at: the gender aspects of trade agreements; financial inclusion; and new technologies.
The WTO Trade Policy Review process was identified in the Declaration as one of the tools that could be used by members to share information. Since January 2018, six countries have voluntarily reported trade policies targeting women’s empowerment during their TPR.
The Declaration’s proponents are currently working on a report on its implementation to be presented to ministers at MC12.
The key question in all of this is what role does trade have to play? How can it do more to deliver opportunities for women?
So we are working to improve our understanding of this interaction.
In addition to members’ discussions, the WTO is partnering with the World Bank to generate new data on how trade impacts women. Last December, we presented preliminary findings of nine research papers.
These papers looked at a wide variety of issues: employment, e-commerce, wage gaps, Aid for Trade, and access to GVCs.
The work is ongoing and we will release a joint report in the autumn.
In addition, I am happy to announce that we are launching a new research project looking at trade, gender and the environment.
This topic will be discussed in more details during today’s session – bringing in members’ perspectives and examples of current national practices.
In line with members’ requests, we are also incorporating trade and gender into our Technical Assistance Plan.
We have developed the first training module on trade and gender. This will be included as part of the courses delivered by the Institute of Training and Technical Cooperation.
The module explains the interaction between trade and women’s economic empowerment. It examines this question in the context of WTO rules and the different perspectives of members as to how they can be translated into trade policies.
The first training based on this module will take place as part of the least developed countries’ introduction course scheduled for May this year.
Indeed, support for LDCs is an important area here.
Women still make up a significantly smaller share of the formal work-force in LDCs – and, again, trade has a potential contribution to make.
Policy reforms, training, capacity development and targeted projects can play a positive role in unlocking the benefits of trade for women.
So I am pleased that the Enhanced Integrated Framework will launch today a new initiative titled “Empower Women, Power Trade”.
This initiative is unique, because it exclusively targets women traders in the LDCs – aiming to achieve gender parity in LDC trade.
The EIF will be supporting LDC governments to formulate and adopt gender-inclusive policies. Financial support of up to 10 million dollars will be made available from the EIF Trust Fund to help implement projects focused on women’s economic empowerment.
As envisaged in the Sustainable Development Goals, these projects could be aimed, for example, at expanding women’s share in wage gains or securing decent jobs.
The target is that by 2022, the initiative will have directly empowered 50,000 women by helping them secure access to markets. So I want to congratulate the EIF. We look forward to seeing the results on the ground.
Finally, I want to say a word about the WTO itself, as an institution.
We are indeed moving towards a more balanced Secretariat.
Women represent approximately 54% of staff in the organization. So here we have more than just parity. The numbers of women in roles classified as “professional” is rising. At present, women account for 45% of these roles. That’s up from 42% in 2014. So I’m sure we’ll get there.
And putting a spotlight on specific grades can be useful. Look at Grade 9 – the grade just before our top, grade 10. In 1995, women represented around a third of staff at this grade. By last year, it was 55%. That’s a very significant rise.
In addition, under the new performance-based promotions system, most promotions to grade 10 have been women. Three out of four to be precise in performance-based promotions.
At director-level, women continue to be under-represented. Out of 20 directors today, just six are women. Again, we have been moving in the right direction, but not as fast as we would hope given the slow rhythm of openings at that level. But as we have more women at grades 9 and 10, we improve the chances of recruitment for director positions.
We will launch an updated report on gender statistics in the Secretariat in May – transparency is an important part of the process. This will give us a clearer picture of where progress has been made, and where more progress is needed.
Achieving gender balance and inclusiveness is an ongoing challenge. That applies to the WTO and to trade and the economy more broadly.
There will be a number of further opportunities to discuss these issues and check-in on progress throughout the year – including in particular at the Aid for Trade Global Review, which will be held here at the WTO in July.
I am also looking forward to these discussions. Astana is an obvious landmark for all conversations that are now under way today. I have no doubt that the signatories of the Buenos Aires Declaration will be looking ahead to consider what may be possible at MC12.
I welcome the ambition that we are seeing behind this work – and the remarkable momentum that it has gathered over a fairly short period.
At a time when we are all striving to make trade more inclusive, this has to be positive.
If we work together on these issues, we can make a real, lasting difference to people’s lives around the world. I can’t think of a better motivation than that.
So thank you for listening. I hope you have an excellent discussion today, and an excellent International Women’s Day.
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Expert Group Meeting on Trade Finance: Informal report by the WTO Secretariat
Introduction
The objective of the February 2019 meeting was twofold: (i) to take stock of the current market situation; (ii) discuss progress on initiatives aimed at addressing the global trade finance gap, namely trade finance facilitation, capacity-building, and a dialogue with institutions part of the Financial Stability Board’s (FSB) on compliance issues.
In his opening remarks delivered on behalf of the Director-General, the Deputy Director-General said that trade flows had been sustained by relatively healthy economic activity in the world’s major economies, although the last two months of 2018 had been weak. In the past decade, the share of intra-developing countries’ trade has increased from one quarter to one third of global trade flows. This means that a bigger share of the trade finance market supported transactions in developing countries and between developing countries. Trade finance gaps remained prominent – some US$1.5 trillion annually. Gaps can be explained by low levels of financial inclusion, lack of human capacity and high perceptions of risk, including that of regulatory risk.
In the past year, the Director-General of the WTO, Roberto Azevêdo, had reflected with WTO Members and heads of partner institutions on progress made since he had launched in 2016 the Trade Finance and small and medium-sized enterprises (SMEs)’ initiative. The Director-General’s proposals were fourfold: support multilateral development banks’ trade finance facilitation programmes by way of advocacy; help increase capacity building support; maintaining an open dialogue with trade finance regulators; and continuing to track trade finance gaps. Thanks to the mobilisation of development institutions, the amount of trade supported annually had increased to some US$30 billion in 2018.
The objective of trade finance programmes of multilateral development banks was not to fill the entire gap, but rather to support trade in challenging markets and to facilitate learning-by-doing by local financial institutions. The foot print of multilateral institutions had increased thanks to the cumulated and sometimes combined efforts of the International Financial Corporation (IFC), the Asian Development Bank (ADB), the African Development Bank (AfDB), the African Import Export Bank (Afreximbank), the European Bank for Reconstruction (EBRD), and Development and Islamic Trade Finance Corporation (ITFC). Direct funding of transactions also supported directly traders, notably SMEs. This SMEs focus was very prominent in trade finance facilitation programmes. The Asian Development Bank alone had supported trade transactions of 3,500 SMEs in 2018. Progress had also been made in addressing knowledge gaps in local financial institutions. Multilateral development banks had boosted their capacity building work on trade finance, in collaboration with the International Chamber of Commerce (ICC) and the WTO.
The Director-General had worked in the past 18 months with the Chief Executive Officer of the International Financial Corporation and the Chair of the Financial Stability Board (FSB) to address some of the regulatory challenges met trade finance providers, notably in developing countries. The Director-General has talked several times to Governor Carney. Both leaders agreed to their small, incremental steps strategy. It payed off. The WTO and IFC participated in workshops on the promotion of KYC utilities. The WTO invited Gerard Hartsink, Chairman of the Global Legal Entity Identifier Foundation (GLEIF) to present at the WTO. The WTO, the FSB and the World Customs Organization examined synergies between the Legal Entity Identifier and the WCO’s Trade Identification Number. Work in this area was on-going. The WTO has been a tireless advocate of Multilateral Development Banks’ own repositories on customers. Joint missions in the field have been gathering experts from the FSB, IFC, WTO and multilateral development banks, to deliver knowledge on trade finance and on compliance requirements. More was expected in 2019. Finally, at the Annual Meetings of the IMF and World Bank in October 2018, the Director-General and Philippe Le Houérou, CEO of the IFC, co-hosted a session on Financial Inclusion in Trade, aimed at discussing future inter-institutional steps that would be necessary to reduce the US$1.5 trillion global trade finance gap. Heads or senior officials of the IMF, EBRD, Islamic Development Bank, African Import Export Bank and FSB also participated in this public session. It was decided that more inter-institutional cooperation was needed to address the shortages of trade finance hindering the trade opportunities of many developing countries. DG Azevêdo and Philippe Le Houérou decided to do a short booklet, sharing best practices (a collection of country cases) on regulatory compliance in trade finance. This would be a joint publication, opened to partner institutions, which would be “launched” at the 2019 Aid-for-Trade Global Review.
Market Situation
The meeting started with a review of the current market situation. Global banks confirmed that demand for trade finance had been sustained in 2018, in most regions of the world. Price competition had been strong, in a context of relatively abundant liquidity for them. However, the context was one of continued consolidation of the financial industry. Digitalization was at the top of the agenda of large institutions to reduce the cost of processing trade finance transactions. While in trade large “buyers” benefited from increased digitalization of transactions, smaller companies being part of different supply chains suffered from the existence of too many uncoordinated digital platforms. The industry tried to address the “digital island” problem. Global banks increasingly pursued an “originate-and-distribute” model, aimed at raising the velocity of their balance sheet; other players would be called on to hold trade finance assets. Such developments resulted in mixed outcomes for SMEs. In developed countries, many SMEs benefited from the drive of the trade finance industry towards supply-chain financing and the expansion of electronic commerce. However, other SMEs, including those operating downstream of industrial supply chains in developing countries, lost from the continuing trend of terminating correspondent banking relationships. Less correspondent banking meant more selectivity by banks in taking on new customers. SMEs were also the most vulnerable company segment in the face of increasing compliance requirements.
While the emergence of regional banks was a positive aspect of bank consolidation in the Middle East or Africa, liquidity remained a constraint for second and third tier banks. There were, though, a trend towards the creation of new correspondent banking relationships, notably between developing country banks, consistent with the expansion of South-South trade. The financial architecture benefited from these new links. While African banks showed greater optimism in the future, the situation within Africa was one of contrast: countries with a strong potential attracted most available financing, while other countries in Northern and Western Africa faced a deterioration of trade finance availability. Banks still faced a significant shortage of US dollars due to the absence of US banks in the continent; multilateral institutions had to offer US dollars clearing services, including to local central banks, by obtaining US dollar resources from Asian markets. In Latin America, banks had significant amounts of available liquidity, but, despite their increasing cooperation to better serve the larger clients, little of liquidity had reached SMEs. The prospects for SMEs was likely to improve with the current expansion of supply chain finance and e-commerce in Latin America. In Asia, volumes of trade finance had also increased in line with the expansion of trade, particularly in the first half of 2018, but de-risking had started to hit the region as Chinese banks were subject to tighter compliance requirements. In this context, banks were given objectives to support SMEs. In the middle-East, the consolidation of banks continued, in a context of rising demand for trade facilities. It had been another modest year in Europe, although the demand for trade finance facilities for extra-EU trade, notably with Asia, increased. All in all, the trade finance environment was one of increasing concentration, but also collaboration between banks regarding investment in technology to reduce the use of paper documents and modernize procedures of trade finance. In the presentation by the Financial Stability Board, it was confirmed that the number of correspondent banking relationship around the world had continued to fall. Still, the volumes of finance within the remaining channels kept rising, thereby confirmation in a growing concentration of (trade) finance flows.
One feature of trade finance markets has been a resurgence of country and political risk. The trade credit insurance industry, while covering higher volumes of trade, also recorded a significant increase in claims (losses). The demand for alternative products such as factoring also increased in line with the expansion of trade. Alternative players such as funds provided liquidity where this was most needed, in developing countries and for SMEs. New laws allowing for factoring have been adopted in Egypt and India. Financial technology institutions (Fintech) would also help in tailoring the risk profiles of individual clients in a more accurate and automated way. Professional associations for trade finance focused on easing compliance, improving cyber security standards, and promoting the low risk profile of the industry.
Trade finance support by multilateral development banks in the poorest countries was a mirror of trade finance gaps. Demand remains high for multilateral support, notably in view of the reduced network of international banks and a heightened perception of anti-money laundering and know-your-customer (AML-KYC) regulatory risk. The African Development Bank and Afreximbank’s regretted that upstream correspondent banks in Africa had been cutting links temporarily or permanently, leaving significant US dollar shortages. Africa had suffered a reduction of at least 12% of the number of foreign banks ready to confirm letters of credit. Afreximbank’s objective was to link itself to 550 African banks by 2021, and to become one of the “hubs” for African trade banks in their relations with the rest of the world. Local banks faced difficulties in meeting the cost of compliance and the need for training was immense. Afreximbank had introduced its repository on customer due diligence information. The AfDB had provided trade credit totalling US$1.3 billion in 2018 (US$8 billion in cumulated support since the beginning of the programme in 2013). The AfDB partnered with the ITFC to offer 500 scholarships for trade finance staff of African banks, to take on the qualifying trade finance course delivered by the International Chamber of Commerce. The Africa Trade Finance Gap study will be updated in 2019.
The ITFC shared similar concerns regarding the poorest countries of the Organization of Islamic Co-operation (OIC). The rejection rates of SMEs requests for trade finance stood around 60%. Support by the ITFC to trade finance had reached US$5.2 billion in 2018, with a cumulated amount of US$45 billion in the past 10 years. The ITFC had also launched its Sovereign Energy Fund, with a starting capital of US$500 million. The ITFC emphasized its increasing involvement in trade and trade finance training. The EBRD also attributed part of the trade finance gap in its countries of operations to the lack of correspondent banking relations. While a decade ago the EBRD could count on an active set of about 100 correspondent banks, this number had fallen to about 30. Although it provided for 100% guarantees to trade loans, the EBRD could not find counterparty banks for several countries because the transaction amounts were too small (Belarus, the Republic of Moldova, the Kyrgyz Republic). The problem had become circular: the cost of compliance for these countries was on the rise because of the small amount of transactions. As the number and value of transactions was further falling, thus the cost of compliance per transaction was further increasing. The EBRD had engaged into a comprehensive effort in training compliance officers of banks, in cooperation with the International Compliance Association.
The Asian Development Bank reported for the second year in a row a 40% increase in the demand for its trade finance facilities. The ADB had supported 4,500 trade operations in 2018 (90% of which were guarantees), involving 3,500 SMEs, and totalling US$6.3 billion. Its programmes focused on Asia’s less-developed countries (Viet Nam, Cambodia, Pakistan). Compliance issues were also prominent in the region. Recent attendance of the Financial Action Task Force meeting led to think that rules on trade-based money laundering could further be tightened, with the risk of adding to current compliance challenges. The representative of the ADB provided a presentation of the scorecard initiative, and subsequent workshop to be organized in March 2019. The initiative benefited from the support of the expert group, which intended to contribute data and analysis. All in all, multilateral development banks (MDBs) had increased their support to trade operations in 2018 relative to the previous year, to close to US$30 billion. The geographical “foot print” of multilateral organizations had also increased.
A representative of the FSB Secretariat updated the group on the FSB action plan on assessing and addressing the decline in correspondent banking, in the context of trade finance. As outlined by WTO senior management, step-by-step cooperation involved the promotion of due diligence utilities, such as the Wolfsberg questionnaire, the SWIFT repository of due diligence information, regional repositories created by multilateral development institutions, and international identifiers to be used by entities engaged into international financial and trade relations. In this context, the WTO and FSB worked at creating synergies between the Trade Identification Number of the World Customs Organization and the Legal Entity Identifier sponsored by the FSB. Regarding capacity-building, the FSB, WTO and multilateral development banks have deployed their best efforts to incorporate compliance modules in trade finance capacity-building activities, and to deliver technical assistance together, “in the field”. More joint technical assistance mission was foreseen in 2019, as capacity-building plans are now being shared by the organizations involved. The dissemination of best practices regarding compliance in the trade finance field was a priority. The joint IFC and WTO publication to be launched in 2019 will contribute to these efforts. Many of the potential actions discussed by participants, notably multilateral development banks, seem to fit with the potential solutions proposed by the FSB presentation. The meeting saw an overall positive engagement and some members of the expert group will be called to contribute in the coming months.
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Africa-Europe Alliance: Task Force for Rural Africa final report (EU)
The Task Force for Rural Africa delivered, today, its final report pdf An Africa-Europe agenda for rural transformation (1.31 MB) for the new ‘Africa-Europe Alliance for Sustainable Investment and Jobs’ unveiled by President Jean-Claude Juncker in the 2018 State of the Union. According to the recommendations of this group of African and European experts, Africa and the EU should develop a partnership operating at three levels: people to people, business to business, and government to government. It would institute a multi-stakeholder dialogue at all levels, starting locally, and enable a closer connection between African and European societies, business communities and governments.
Building on some of the short term recommendations made by the Task Force, the European Commission will start implementing the following projects: (i) Twinning and exchange programmes between African and European agricultural bodies: the Commission has just launched a Pilot Vocational Education and training initiative with Africa of €5m; (ii) AU-EU Agribusiness platform: recognising the key role the private sector can play for structural transformation in Africa, the Commission proposes to set up a platform to link European and African businesses; (iii) Innovation hubs: to support ‘agripreneurs’ and the African agri-food sector, innovation hubs can be established or strengthened with the aim of applying practical knowledge. To make this an open and inclusive process, the Commission will launch an online consultation to gather direct feedback from African stakeholders on the Task Force’s strategic approach and on the state of play of the agri-food trade and cooperation between our two continents. Together with today’s report, the outcome of this consultation will feed into the third AU-EU agricultural ministerial conference in Rome, planned for June 2019.
Japan to launch Africa investment body to counter China and West
Japan will set up a permanent joint council between the government and private sectors to promote investment in Africa as it seeks to play catch-up with China, the U.S. and Europe in the increasingly promising region, government sources said on Thursday. The launch of the joint council will coincide with the Seventh Tokyo International Conference on African Development, or TICAD7, scheduled for August, the sources said. The new permanent public-private council will be made up of officials from Japanese government ministries and agencies, economic organizations and small- and medium-size companies that have relations with Africa. The government bodies will include the Foreign Ministry and the Ministry of Economy, Trade and Industry, while the economic organizations will include the Japan Business Federation, better known as Keidanren, and the Japan Association of Corporate Executives, also known as Keizai Doyukai. The council will meet two or three times a year, with the foreign minister, the economy, trade and industry minister and a business industry representative serving as joint chairpersons. [Guillaume Arditti: Closing Africa’s financing gap; Joseph Mate: Private debt a key component of Africa’s growth matrix]
Abhishek Mishra: Assessing Indian investments in West Africa (ORF)
The West African region has emerged as an important partner for India, both as export market and as import source. This is reflected in the synergy in bilateral trade relations wherein India’s total trade with West African countries $13.5bn to $21.6bn during the decade 2008-09 to 2017-18. India’s exports to the region amounts to $6.4bn, and imports from the region amounts to $15.3bn during 2017-18. However, despite efforts to boost bilateral relations, West Africa’s participation as an investment partner to India remains relatively limited. Looking forward: Priority must be given on forging closer tie-ups in Small and Medium Enterprises. Renewable energy is the next big frontier of India-West Africa partnership to promote green growth. The ECOWAS region should look to access more funds from GOI’s $10bn credit promised to African countries, out of which $2bn have been earmarked for solar projects under International Solar Alliance.
Defining and quantifying South-South Cooperation
This discussion paper unpacks and provides background to some of these conceptual and political debates. It highlights the experiences, approaches and methods used to account SSC taken by different countries and regional institutions in Asia, Africa and Latin America. It will also reflect on potential definitions for SSC, that effectively incorporate aspects of technical and economic cooperation, allowing countries and multilateral institutions to report SSC in a standardised and consistent manner, as part of the SDG monitoring process. Extract (pdf):
SSC is no longer a side-show. Better data is now required to accurately tell the story of South-South cooperation. If the global South doesn’t come up with its own definitions and measures, others (most likely in the North) will continue to produce most of the analysis around SSC. Ironically, most of the current data on South-South development finance is generated in the North, by institutions such as the OECD, Aid Data, research institutes and universities in Europe and North America. Politically, it is no longer tenable to criticise northern statistics and methodologies without presenting a technically sound Southern alternative. BAPA+40 in March 2019 presents a timely opportunity for memberstates and Southern partners to agree on some of the critical conceptual and measurement issues which have prevented SSC analysis and policy from evolving and adapting to the SDG era. [The authors: Neissan A. Besherati, Steve MacFeely; BAPA+40 conference (20-22 March, Buenos Aires)]
Eswatini joins Afreximbank as 51st participating state
Ambassador Promise Msibi expressed regret that Eswatini was only just joining the Bank and expressed the country’s commitment to supporting the work of the Bank. He commended Afreximbank for its effort to introduce a Pan-African Payment and Settlement Platform, said that it would greatly improve the quality of life of Africans, especially in the context of the implementation of the AfCFTA. He noted that Eswatini was positioning itself to host secretariat of the AfCFTA and said that the payment platform would facilitate the smooth takeoff of the secretariat. He urged Afreximbank to move toward a quick implementation of the programme that had been identified in Eswatini. President Oramah said the Bank would shortly be sending a business development mission to Mbabane help move forward the transactions that had been identified.
Great Lakes: Regional ministers to harmonise regional refugee strategy (New Vision)
The Great Lakes Ministers in charge of refugees met in Kampala on Wednesday to harmonise the regional strategy to address repatriation, local integration, financing and eliminating factors fuelling the refugees crisis in the region. President Yoweri Museveni addressed the ministers at Speak Resort, Munyonyo in Kampala on Wednesday. Museveni underlined Uganda’s continued role to lead regional efforts in dealing with the problem and drummed-up partners for further support. Currently about 4.4 million refugees and asylum seekers originate from the Great Lakes region including from Burundi, Central African Republic, the DRC, Rwanda, South Sudan and the Sudan. Technocrats suggested that the ICGLR secretariat should start coordinating efforts to achieve a regional strategy that would achieve durable solutions for the refugees.
South Africa: Cape Town’s boat-building industry generates R1bn annually (Cape Town etc)
As the largest boat-building city in South Africa, Cape Town has generated more than R1bn in export revenue from boat building annually and has directly contributed to the growing number of job opportunities in the sector. Cape Town’s boat building industry is globally recognised for its world-class craftsmanship, innovation and custom-made designs. The city is also the second-largest producer of recreational catamarans in the world and each year the industry grows by 28.8%. [Speed bumps ahead for SA’s motor industry; Mmatlou Kalaba: How droughts will affect South Africa’s broader economy]
Kenya: Re-exports increase to Sh71.4bn in 2018 (The Star)
Foreign goods ordered by Kenyan traders for resale increased by Sh 7.89 billion in 2018 owing to chemicals and mineral fuels. Central Bank of Kenya data on foreign trade for 2018 shows that trade in re-exports goods rose 12.43% to Sh71.4 billion in 2018 compared to Sh63.5 billion in 2017. Re-exports are goods that are imported then processed or manufactured before being exported again to another destination. The main re-exports mainly include petroleum fuels, farm and industrial inputs, motor vehicles and equipment not manufactured in the country.
South Africa: Government intervenes to save the poultry industry (dti)
The South African government continues to deploy a number of interventions to support the poultry industry. In this regard, a task team was established to work towards a comprehensive plan for the industry that will respond to the immediate threats facing the industry and longer-term measures to improve competitiveness and transformation of the industry. The task Team comprises of representatives of government (Department of Trade & Industry; Department of Agriculture Forestry & Fisheries; Economic Development Department); the Industrial Development Corporation; private sector (SA Poultry Association; and one representative from a major poultry companies) and labour (Food & Allied Workers Union). To date, the dti and industry, SAPA, have commenced research work on the development of the Poultry Master Plan, which feeds in to the work of the Task Team.
South Africa: Current account of the balance of payments Q4 2018 (SARB)
In the fourth quarter of 2018 the deficit on the current account of the balance of payments narrowed by R70.2bn to R110.2bn compared to R180.4bn in the third quarter. As a ratio of gross domestic product the current account deficit improved to 2.2% in the fourth quarter of 2018 from 3.7% in the third quarter. For the calendar year, this ratio deteriorated from 2.5% in 2017 to 3.5% in 2018. South Africa’s trade surplus widened substantially, from R10.2bn in the third quarter of 2018 to R71.8bn in the fourth quarter. The improvement in the trade balance came about as the value of merchandise exports increased while that of imports declined. The higher value of merchandise exports reflected an increase in volume, while lower volumes weighed down the value of imported goods. For the year as a whole, the trade surplus deteriorated by R40.6bn to R24.3bn in 2018, from R64.9bn in 2017. [NKC African Economics infographic]
MTN plans to launch Africa’s WeChat
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Africa-Europe Alliance: European Commission committed to a sustainable African agri-food sector
The Task Force for Rural Africa delivered today its final report, an agri-food and rural agenda for the new ‘Africa-Europe Alliance for Sustainable Investment and Jobs’ unveiled by President Jean-Claude Juncker in the 2018 State of the Union.
According to the recommendations of this group of African and European experts, Africa and the EU should develop a partnership operating at three levels: people to people, business to business, and government to government. It would institute a multi-stakeholder dialogue at all levels, starting locally, and enable a closer connection between African and European societies, business communities and governments.
Agriculture and rural development Commissioner Phil Hogan said: “Agriculture and rural development policy is leading the way in EU-Africa political cooperation. The Task Force Rural Africa is at the centre of this work: its recommendations explore ways to boost public and private investment, to exchange best practice and share knowledge, and to deepen policy cooperation across the board.”
International development and cooperation Commissioner Neven Mimica said: “This is a very important day for the Africa-Europe Alliance. Today we have seen the hard work of the Task Force on Rural Africa culminate in concrete recommendations. Now it is up to us to come together, take these valuable recommendations forward and devise solutions that can deliver what we all want: a positive rural transformation, and an inclusive and sustainable agriculture and agri-food sector.”
African Union (AU) Commissioner for rural economy and agriculture Josefa Sacko said: “The Task Force report recognises the new reality of Africa and Europe as global partners on an equal footing. It demonstrates that farmers and the food industry should work hand in hand to take on the new opportunities that the African Continental Free Trade Area will offer and also, build the regional markets needed for Africa’s long term food security.”
Launched in May 2018 by the European Commission, the Task Force was set up to provide advice on strengthening the Africa-Europe partnership in food and farming. The European Commission will ensure follow-up and implementation of several actions recommended by this group of experts to support the development of African agri-food sector and rural economy.
Building on some of the short term recommendations made by the Task Force, the European Commission will start implementing the following projects:
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Twinning and exchange programmes between African and European agricultural bodies: the Commission has just launched a Pilot Vocational Education and training initiative with Africa of €5 million. Additional funds from the EU budget will be made available for other twinning programmes for rural women’s organisations, farmer organisations and cooperatives, businesses and public entities with their peers.
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AU-EU Agribusiness platform: recognising the key role the private sector can play for structural transformation in Africa, the Commission proposes to set up a platform to link European and African businesses. This platform is expected to help identify challenges and opportunities for private investment and trade between the two continents.
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Innovation hubs: to support ‘agripreneurs’ and the African agri-food sector, innovation hubs can be established or strengthened with the aim of applying practical knowledge. These hubs would bring together national research, higher education systems, farmers, their organisations and the private sector to facilitate, amongst others, digital innovation and skills development.
The report handed over today is a landmark in the process towards more cooperation between the EU and Africa in the agri-food sector, identifying four strategic areas of action for the medium to long term: job creation, climate action, sustainable transformation of African agriculture and development of the African food industry and markets.
To make this an open and inclusive process, the Commission will launch an online consultation to gather direct feedback from African stakeholders on the Task Force’s strategic approach and on the state of play of the agri-food trade and cooperation between our two continents. Together with today’s report, the outcome of this consultation will feed into the third AU-EU agricultural ministerial conference in Rome, planned for June 2019.
Effective follow-up will also be ensured through the setting-up of an implementation group composed of ministerial and private representatives from both Africa and the EU. The group will be presented at the ministerial conference in Rome.
Members of the Task Force Rural Africa and authors of the report are Tom Arnold (chair), Kees Blokland, Albert Engel, Chinwe Ifejika Speranza, Bruno Losch, Baudouin Michel, Francesco Rampa, Christine Wieck and Mashiri Zvarimwa.
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South African Government intervenes to save the poultry industry
The South African government continues to deploy a number of interventions to support the poultry industry.
These include measures to boost competitiveness, value-addition and technology upgrading; trade measures; export support to assist the domestic industry to access foreign markets; industrial finance and incentives with conditions for improving competitiveness; and measures to promote growth and transformation of the poultry industry among others.
In this regard, a task team was established to work towards a comprehensive plan for the industry that will respond to the immediate threats facing the industry and longer-term measures to improve competitiveness and transformation of the industry.
The task Team comprises of representatives of government (Department of Trade & Industry; Department of Agriculture Forestry & Fisheries; Economic Development Department); the Industrial Development Corporation; private sector (SA Poultry Association; and one representative from a major poultry companies) and labour (Food & Allied Workers Union). To date, the dti and industry, SAPA, have commenced research work on the development of the Poultry Master Plan, which feeds in to the work of the Task Team.
Global poultry meat consumption is rising, with white breast meat preferred by the higher-income consumers, mostly in developed economies and brown meat being preferred in developing countries. This affects the global price patterns for poultry. In this regard, South Africa has experienced a rise in imports of bone-in chicken portion from a number of trading partners that puts pressure on the domestic industry.
There is a broad agreement that manufacturing-led growth is critical for high economic and employment growth and the poultry sector is critical to this effort. South Africa has adopted a developmental trade policy, which at its core is to support industrial policy. The role of the International Trade and Administration Commission (ITAC) is therefore critical to inform the level of tariff afforded to industry.
An industry that is experiencing challenges and seeks tariff protection is encouraged to apply to ITAC which will undertake an independent investigation and make recommendations as appropriate to the Minister of Trade and Industry in accordance with South Africa’s international commitments on trade. This relates to both tariff investigations and trade remedies.
To this effect, government has put in place a range of trade measures to avert the demise of the poultry industry. These include implementation of anti-dumping measures in cases where through the ITAC investigations, there is evidence that poultry products are dumped in our market.
Safeguard measures have been implemented in cases of a surge in imports that are causing a threat of serious disturbance in the South African market. Duties on imports on whole birds have been increased to 82%, the maximum duty allowed in accordance with our World Trade Organisation commitments. The current duty on bone-in chicken portions is 37%. In addition, Government has opened market access opportunities in the spirit of promoting export-led growth to a number of countries and regions, including the Gulf and EU.
All of these measures has assisted to give the industry the necessary protection. These have been done with major push backs from our trading partners given the rise in consumption of especially bone-in chicken portion in the South African market.
Furthermore, South Africa prioritises food safety and assesses the food safety risks associated with meat products (both locally produced and imported) on a regular basis through the Departments of Agriculture Forestry and Fisheries and Health. For locally produced meats, there are processes followed to ensure food safety. Meat products at the ports of entry are imported in line with the South African food safety requirements. Non-compliant products are rejected and either sent back to the country of origin or destroyed.
The poultry industry is an important sub-sector within South African agriculture. It provides the most affordable source of animal protein to the South African consumer, which makes it critical to food security.
Government remains committed to utilizing industrial and trade policy tools in order to address the competitiveness and sustainability of the poultry industry.
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tralac’s Daily News Selection
AU Ministers of Trade, Industry and Mineral Resources: final declaration of STC meeting (11-12 January, Kigali) on the theme The entry into force of the agreement establishing the AfCFTA and its implementation
Adopt the African Union Strategy for SMEs Development in Africa; the Geological and Minerals Information Systems Strategy; the African Minerals Governance Framework; the Africa Mining Vision Private Sector Compact; Request the African Union Commission, in collaboration with all other Stakeholders to finalize work on the African Union Commodity and Trade Facilitation Strategies and present it to the next Meeting of our STC; Invite the Regional Economic Communities to align their Plans of Action with the AU strategies and to take appropriate measures to operationalize their implementation as mandated by the AU Assembly; Request the AUC to develop other Strategies to advance the work in the areas of trade, industry and minerals
Urge the African Union Commission together with AU Member States to work with technical partners to engage all key stakeholders such as Parliament, civil society and private sector to build a constituency of support for the AfCFTA for enhanced ownership and inclusiveness, to enhance prospects for unhindered implementation of the Agreement; Urge Member states to build and strengthen the capacity of all strategic institutions involved in industry and trade governance to enhance efficiency in the implementation of the AfCFTA Agreement; Note the ongoing digital trade and related initiatives on the continent, such as the Digital Identity led by AUC and UNECA and the African E-commerce Platform, which have the potential to contribute to boosting intra-African trade and transforming Africa and the proposed Ten Framework Principles on Good Digital ID.
On the Africa Continental Free Trade Area: Dr Donald Kaberuka’s keynote address to the East Africa Law Society Annual Conference
Let me end where I began. At the end of the day, it is by promoting economic growth through trade and investment that a fiscal space will emerge to meet the upcoming demographic challenges, while moving up the global value chains. That is the promise of the AfCFTA: a necessary first step to an eventual Continental Economic and Monetary Union. Through the AfCFTA, we will boost intra-Africa trade, increase market size, depth and diversity, increase opportunities for business, consumers, producers, diversify our economies to complex products; thereby expanding fiscal possibilities. It is only by doing so, that we can build resilience in the global system and avoid the demographic cliff. The adoption of the AfCFTA is not a technical choice Africa is making. It is a fundamentally, historic political choice which will have far reaching impact if successful. That is why everything must be done to ensure safe arrival at destination. It will not be easy, it will require astute political management and trade off at each juncture but there is no more choice. [Delivered on 30 November, 2018]
EAC: CET Review resumes amid trade disputes (The East African)
The East African has learnt that Kenya and Uganda went to the Kigali meeting with hard-line positions. Kenya wants the current CET regime that comprises a triple band reviewed to make it a four-band structure, a proposal that Uganda is opposed to. It argues that the three-band structure does not encourage backward and forward linkages in value addition to products, thus curtailing the growth of the manufacturing sector. On exemptions, Kenya is pushing for an end to the frequent tendencies of other member states to seek stays of application for products coming into the region, something the country blames for the problems facing local industry. On sensitive goods like wheat, rice, milk and sugar, Kenya and Tanzania want strict enforcement of duties that have been set at a rate of more than 25 per cent to discourage importation. “The process of reviewing the CET is coming to an end with the points of disagreements becoming fewer,” said Richard Kamajugo, TradeMark East Africa senior director for Trade Environment. The last time the CET was reviewed was in 2010, when the three-band structure was maintained.
Archie Matheson: For want of warm bodies, a trading kingdom is being lost (The East African)
And within the [COMESA] Secretariat there is a department that puts this responsibility into practice, an office small in size but large in mandate: the Directorate of Trade and Customs. Given the role of COMESA on the continental stage, it is perhaps the most important office related to African trade, active in three main areas. The Directorate helps to resolve trade disputes, relating to both rules of origin and non-tariff barriers, covering both trade in goods and trade in services. It is called upon to give official opinion, share recommendations, arrange dialogue between disputing parties, lead on-the-spot verifications, and, if necessary, refer cases to the Council of Ministers. In January 2019 alone, three full interventions were needed and successfully completed. It develops ideas and policies that are then presented to the Council for approval, seeking greater harmonisation and introducing trade facilitation measures.
For an office with such far-reaching responsibilities, it would be reasonable to expect an array of specialists, sufficient in number to cover the rules of origin, NTBs, and small-scale trade issues that arise under Trade in Goods, or the challenges posed within the 12 separate sectors that sit under Trade in Services; experts to drive improvement in trade facilitation; and negotiation specialists for the multitude of international trade agreements. Yet, staggeringly, the Directorate has only four full-time staff: a director, senior trade officer, senior Customs officer, and a senior research fellow. They are assisted by no more than a handful of shorter-term contract staff. Although through its Trade Facilitation Regional Programme, the EU will shortly fund two new project staff to deal with small-scale trade, total numbers are chronically insufficient. The consequences for COMESA members, importers, and exporters are costly – not through a lack of will or ability, but a lack of funding and corresponding capacity. [The author is head of policy and analytics at Botho Emerging Markets Group; Rwanda and Uganda: neighbors at loggerheads]
Kenya bank to open office in China to facilitate Sino-Africa trade
Kenya Commercial Bank, a regional financial institution, plans to open a representative office in China in order to lower cost of Sino-Africa trade, officials said Wednesday. Lawrence Kimathi, KCB Group chief finance officer told Xinhua in Nairobi they are currently in discussions with Chinese government officials and the office should be in place by June. “We hope to use the office to lower cost of transaction between the Chinese and East African business community by enabling payment for imports and exports in local currencies,” Kimathi said when KCB Group released financial results for the full year 2018. KCB Group has presence in Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan. The regional bank also plans to introduce Chinese yuan in all its countries of operations by the end of the year.
South Africa: Economy edges up by 0,8% in 2018 (Stats SA)
The South African economy grew by 1,4%1 in the fourth quarter of 2018, contributing to an overall growth rate of 0,8% for the entire year. The latest set of GDP figures released by Stats SA provides an overview of economic performance in 2018. South Africa found itself in economic recession in 2018, its second since the early 1990s. The 2018 recession spanned the first two quarters of the year, with the economy shrinking by 2,7% in the first quarter and contracting further by 0,5% in the second. Despite the recession, positive growth in the third (2,6%) and the fourth (1,4%) quarters was just enough to push overall growth for the year into positive territory, with the real annual growth rate coming in at 0,8%. This is down from 1,4% in 2017 but up from 0,4% in 2016.
Removal of economic sanctions on Zimbabwe: ECOSOCC communiqué (AU)
Zimbabwe is under three categories of economic sanctions, i.e. three resolutions adopted by the United Kingdom, the United States and the European Union, which are under the acts ZIDERA, AGOA and OFAC. These sanctions have made it difficult for government to access lines of credit, debt relief and directly affects the country’s ability to meet its fiduciary obligations. Based on the matters contemplated above, we at ECOSOCC representing the Southern African Region: Call for the removal of economic sanctions against the Republic of Zimbabwe, its public and private institutions for the easing of the task ahead of solving the economic and humanitarian crises in the Republic; Request the formation of an Africa–Europe study group, through the AU-EU platform, to measure the impact of sanctions on Zimbabwe and to identify the opportunities for cooperation towards systemic economic reconstruction; Advise for a cooperative roadmap to be configured, through dialogues between the government of the Republic of Zimbabwe along with its people and well-meaning partners, for a comprehensive approach towards resuscitation of industry and economic channels for the achievement of a prosperous and peaceful Zimbabwe.
Kenya: Uhuru seeks forum to discuss public expenditure (Business Daily)
Currently, more than 50% of ordinary revenue goes into salaries of civil servants, 30% to recurrent expenditure and only 20% to development. The President said Tuesday the summit, whose date he did not state, would discuss how national and county governments would review their expenditure. “We shall invite all stakeholders to the summit so we find ways of rectifying this wrong so that most of the money will be going to citizens and not to pockets of a few individuals,” he said during the Sixth Devolution Conference in Kirinyaga. Mr Kenyatta said it makes no sense that a county with revenue of Sh9 billion to spend Sh6 billions on salaries and a paltry Sh3 billion on its people.
Nigeria: No more forex for textiles, garments import – CBN (The Tide)
Textiles and garments imports have joined the forex restriction list of the Central Bank of Nigeria, the Governor, Mr Godwin Emefiele, announced in Abuja, yesterday. Emefiele made the announcement during a meeting with textile industry stakeholders and added that the policy would take effect immediately. Nigeria spends an estimated $4billion on imported textiles yearly. Emefiele said that the restriction would rejuvenate the textile industry in Nigeria and ensure that the needed growth was actualised.
George Wachira: Who will be first to export oil – Kenya or Uganda? (Business Daily)
My assessment is that in terms of alignment of various participating parties; legal/institutional capacity development; and status of project design studies, Uganda is definitely way ahead of Kenya. The only hitch, which was encountered recently, is a serious disagreement on commercial terms (tariffs) in respect of the Uganda/Tanzania pipeline between the investors and the two governments.
Uganda joins lobby to enhance transparency in oil deals
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Final Declaration of the 2nd STC of the AU Ministers of Trade, Industry and Mineral Resources
WE, the African Union (AU) Ministers of Trade, Industry and Minerals, meeting in our 2nd Ordinary Session of the Specialized Technical Committee of the Ministers of Trade, Industry and Mineral Resources, under the theme: “The Entry into Force of the Agreement Establishing the AfCFTA and its Implementation”
COMMENDING the role of the African Union Commission in coordinating the AfCFTA negotiations which led to the successful signing of the Agreement Establishing the African Continental Free Trade Area (AfCFTA) in March 2018 at the AU Extra Ordinary Summit in Kigali; as well as the significant progress made in the ratification of the Agreement;
STRESSING the importance of ensuring the successful completion of the outstanding Phase 1 and Phase 2 elements of the AfCFTA negotiations;
ALSO STRESSING the importance of economic diversification and Industrialization for the sustainability of AfCFTA;
RECALLING the Strategy for the Implementation of the Plan of Action for AIDA that was adopted at the 18th Ordinary Session of the Conference of Ministers of Industry (CAMI) in Durban, South Africa, in October 2008; The Boosting Intra African Trade Action Plan that was adopted by the Conference of African Ministers of Trade (CAMOT) in 2012 as well as the Africa Mining Vision that was adopted in 2009;
COMMENDING the significant progress made so far on the implementation of these strategies in the light of the ultimate goals of the Africa Agenda 2063;
AWARE of the contributions that synergies among Africa’s economic sectors can make to the attainment of rapid development, the promotion of sustainable economic growth, and the achievement of the Africa Agenda 2063 objectives as well as Sustainable Development Goals (SDGs);
RECOGNIZE the high potential of rapid growth of the SME’s in Africa and its huge potential for job creation for women and the youth as well as reducing illegal migration as well as eradicating poverty
AWARE of the significance of the Third Industrial Development Decade for Africa (IDDA3) as a global initiative to enhance the implementation of the Accelerated Industrial Development of Africa, (AIDA), to anchor structural transformation in the continent. Acknowledging the collaboration with UNIDO, UNECA, Afreximbank and other strategic partners to implement programs to enhance the continent’s industrial and trade capacity as well as implementation of the AfCFTA.
HEREBY:
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REAFFIRM our commitment to the completion of all outstanding phases of the AfCFTA negotiations, and the upgrading and diversification of our economies’ productive capacities through increased value addition and transformation of raw materials as well as the development of a competitive services sector, so as to increase Africa’s competitive position in the global economy;
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RECOMMIT ourselves to the achievement of the goals set out in the various Trade, Industry and Mining development programmes and projects contained in the BIAT, AIDA and AMV;
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ADOPT the African Union Strategy for SMEs Development in Africa;
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ADOPT the Geological and Minerals Information Systems (GMIS) Strategy;
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ADOPT the African Minerals Governance Framework (AMGF);
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ADOPT the Africa Mining Vision Private Sector Compact;
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REQUEST the African Union Commission (AUC) in collaboration with all other Stakeholders to finalize work on the African Union Commodity and Trade Facilitation Strategies and present it to the next Meeting of our STC;
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INVITE the Regional Economic Communities (RECs) to align their Plans of Action with the AU strategies and to take appropriate measures to operationalize their implementation as mandated by the AU Assembly;
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REQUEST the AUC to develop other Strategies to advance the work in the areas of trade, industry and minerals
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REITERATE our commitment to promoting increased value addition to Commodities through the development of mining, agribusiness and agro-industry value chains;
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CALL UPON Member States to fast track the process of ratification of the Agreement Establishing the AfCFTA;
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CALL UPON Member States to fast track the process of ratification of the Statute on the establishment of the African Mining Development Center;
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URGE the African Union Commission together with AU Member States to work with technical partners to engage all key stakeholders such as Parliament, civil society and private sector to build a constituency of support for the AfCFTA for enhanced ownership and inclusiveness, to enhance prospects for unhindered implementation of the Agreement.
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URGE Member states to build and strengthen the capacity of all strategic institutions involved in industry and trade governance to enhance efficiency in the implementation of the AfCFTA Agreement.
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NOTE the ongoing digital trade and related initiatives on the continent, such as the Digital Identity led by AUC and UNECA and the African E-commerce Platform, which have the potential to contribute to boosting intra-African trade and transforming Africa and the proposed Ten Framework Principles on Good Digital ID.
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RECOMMEND to the relevant Policy Organs of the AU the adoption of a Summit Decision on the need for a continental approach for the establishment of digital ID platforms across Africa based on the Ten Framework Principles on Good Digital ID as a foundation for minimum requirements.
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MANDATE the AUC, in collaboration with AU Member States, UNECA and all relevant stakeholders to develop a comprehensive AU Digital Trade and Digital Economy Development Strategy to enable African countries to fully benefit from the 4th industrial revolution and facilitate the AfCFTA implementation and ultimately Africa’s economic and structural transformation.
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URGE the AUC and Member States to explore mechanisms to mobilize financing for the development of SMEs in the continent, and explore the development of innovative instruments such as business development services to enhance access to finance, and markets to boost the survival, and viability of SMEs.
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CALL UPON Member States to put in place mechanisms for the domestic resource mobilisation and the financing for Mineral Resources Development and the AUC to explore mechanisms for establishing the Minerals Development Fund.
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URGE for continuing cooperation between the AUC and the Afreximbank as well as other financing partners towards the financing of the African Union Trade and Industry Agenda.
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WELCOME the Afreximbank Pan African Payment platform as an important initiative to Boost Intra-African Trade, and REQUESTS the Afreximbank to accelerate its implementation and encourage similar initiatives.
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RECOGNISE the continuing importance of private sector engagement in the realization of the continent’s trade and industrial development agenda and welcome the Pan Africa Trade and Investment Committee (PAFTRAC) as a private sector led platform for the consolidation and advocacy of the African private sector position on continental trade and investment issues;
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URGE the AUC to develop a programme of work on the Presidential Fashion Initiative as an initiative for the promotion of the African Fashion Value Chain and as a tool for employment and wealth creation in African Economies;
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CONGRATULATE the Government of Egypt on the successful hosting of the first Intra-Africa Trade Fair, jointly organized by the African Union, the Afreximbank and the Government of Egypt, held in Cairo, Egypt, from 11-17 December 2018;
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FURTHER CONGRATULATE the Government of Rwanda on its successful bid to host the 2nd edition of the Intra-Africa Trade Fair to be held in 2020, to be co-organized by Afreximbank and the African Union Commission;
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REQUEST the AUC, in collaboration with Member States, Regional Economic Communities and Partners to implement this Declaration and to report progress to the STC on Trade, Industry and Minerals.
Adopted on this 12th day of January, 2019 in Addis Ababa, Ethiopia
There is a time for everything: the African Continental Free Trade Area
Remarks by Dr. Donald Kaberuka at the 23rd East Africa Law Society Annual Conference in Mombasa, Kenya, 30 November 2018
Thank you and Good Morning.
It is a pleasure to be here. I thank you all for inviting me and for your presence here this morning.
This will be the first time I speak at the East Africa Law Society.
Thank you so much Richard Mugisha, and your Governing Council for making this possible.
I want to thank you all in this conference, for your contributions to the Society. A vibrant group such as this is a vital part of the journey to build a prosperous East Africa.
I thank you in particular for asking me to speak on the AfCFTA, a decision which, in my judgment, is the most important Africa has taken since the attainment of total liberation in 1994.
So this morning I want to share with you the following:
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What is the AfCFTA?
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What does it mean?
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What it is not
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Why now?
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What is the remaining agenda to make it a reality?
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What are the complementary measures needed?
I would then like to conclude by sharing with you my view that the AfCFTA is an undertaking beyond an exercise in tariff elimination, one beyond simply a larger, deeper trading space.
Before I do so I would like to spell out the context:
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A time when multilateralism is deficient: from trade, security, epidemics, migration, refugees, let alone economic cooperation;
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A time when the geopolitical situation is ever more complex;
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A time when populism is gathering force, appeals to narrow nationalism, and more dangerously, as during the Cold War, African countries are called upon to take sides in conflicts which are external to Africa.
Most importantly, all three developments are taking place when the Continent is set to have the largest working force in the world, which represents both an opportunity, but also a challenge.
Each time I have spoken at different events of this nature, I have always reminisced on Mwalimu Julius Nyerere’s remarks in the South African Parliament in 1997 about what it means to be African;
Why the rest of the world views us all as Africans, in spite of the different colonial boundaries we inherited and agreed to abide by.
I strongly recommend this reading to all Africans in this room.
I have also reflected on the recent history of other parts of the world, especially our most immediate neighbour: Europe.
After years of bloodletting in Napoleonic Wars, European nations convened an important rendez-vous known as “the Congress of Vienna”, to make peace and agree on how to conduct their relationships in a peaceful way.
Despite much hype, and incidentally agreed diplomatic practice which still governs how countries relate to each other today, it did not stop Europeans from fighting each other in the so called World War 1 and World War 2.
In fact, the post-Congress of Vienna era was possibly the most bloody in Europe. So in the ruins of World War 2, in 1951, they got together and constituted the European Coal and Steel Community (ECSC).
Along the way came Treaty of Rome, the European Economic Community (EEC), Maastricht, the European Union (EU) and subsequently for some, the Treaty of Lisbon, the Euro and the Schengen Agreement.
Europe has been at peace since, and despite recent turbulences (the Euro Crisis, the Brexit divorce), Europe has been quite prosperous.
Europeans have learnt the lessons from their painful history, although they sometimes forget!
So what is the AfCFTA?
It is an initiative to remove tariffs among and between African nations, to be complemented by efforts to lower non-tariff restrictions, promote free movement of persons and a single Africa aviation market.
When countries wish to expand trade among themselves, they may go through several stages:
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Preferential Trade Agreements: lower tariffs compared to non-members, but not necessarily elimination;
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Free-Trade Areas: eliminate tariffs among members, but keep them against non-members and free to treat external parties differently.
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Customs Union: eliminate tariffs among members but also have one common tariff for non-members;
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Along the way, Nations may then progress
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to Common Markets,
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Monetary unions ,
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Total Economic Unions, and maybe even some degree of political union.
In the past 50 years, African Countries have undertaken these different arrangements with varying degrees of success.
It is important for us to remember that East Africa was in the 1960s and early 1970s, a far more advanced union than even the European Union today.
Alas, it did have its ups and downs, and it is our collective mission to correct that historical setback.
The AfCFTA builds on the progress made in regions such as the EAC and ECOWAS.
If successful, the AfCFTA would significantly raise trade levels by and create one of the largest and most ambitious economic and investment space in the World.
What the AfCFTA is not
The AfCFTA is only 90% liberalization.
It is not simply about trade. It is about investment, jobs, people and their livelihood.
It is a pragmatic, sequential arrangement with a view to proceed cautiously bearing in mind political realities and current regional arrangements.
Each country still has the option of pointing out products that are sensitive; products that require time, infant industries that need a period of adjustment to full competition.
It also has provisions for a “Negative List”; products that will remain protected.
That said, the AfCFTA is not just about physical merchandise. It is also about services, logistics, finance, data, IT.
It is important to emphasise this point because some countries who are not signatories have not fully appreciated that there are not only enough safeguards against things like dumping, non-respect of rules of origin etc.
They may also wish to take note of the fact that the services sector is probably as important as physical goods.
Our calculations show that around 50% of all the welfare gains in the AfCFTA are generated by the services. So, even countries without large manufacturing sectors have a lot to gain.
I want to suggest that as AU member states move through the tortuous stages of ratifications and implementation, this moment should not simply be seen as one about elimination tariffs – but of a potential to generate a change in mindsets.
Why now?
At the foundation of the OAU, it was agreed that colonial borders, even though a historical wrong, should be recognised and maintained as such.
Those borders were left intact as “scars of history”, not because they were meaningful. The focus was to be on liberation and economic integration.
Political liberation was completed in 1994, with the end of apartheid in South Africa. Economic integration is still very much a work in progress.
Despite much progress, numerous achievements, integration is still seen as too slow and unsatisfactory for many young Africans.
But then, one must admit facts, the “realpolitik”.
The AU of the OAU, before it, remains an Intergovernmental Organisation. It can only move at the pace that individual sovereign nations are willing to accept.
Not surprisingly therefore that it has sometimes seemed like two steps forward, one step backward.
This is the reality for all similar organisations.
With the AfCFTA however, a giant leap is made; capable of increasing Africa’s internal trade by 52%.
But it is not simply about trade.
It is about jobs, diversification, prosperity, opportunities. It is about stability, peace and security. It would be a quantum leap and a paradigm shift.
The global trends leave Africa no choice. The demographic dynamics make this an imperative.
That is why, it is critical to address the fears of those who would be reluctant or are in a “wait and see” attitude. It is important to deal with those fears – real or perceived, and that is possible.
Those fears range from:
- Potential loss of revenues;
- Loss of jobs;
- The economy is too small;
- There is not yet adequate infrastructures;
- The RECs will be weakened;
- There is not enough safeguards;
- The risk of dumping;
- The need to protect the so-called “infant industries”.
I must commend AfCFTA negotiators who were able to address many of those fears through a well sequenced, gradualist approach to the AfCFTA.
Going forward:
I understand the negotiators are now tackling all matters to do with rules of origin, dispute resolutions, Intellectual Property rights, the negative lists, anti-dumping measures, etc; all things needed for a smooth implementation of the Free-Trade Area.
In principle therefore, this package should bring every country to the zone of comfort.
It is important to appreciate that trade today is not what it was 30 years ago. It is no longer about simply trucking goods across the borders, or shipping containers across the oceans.
It is a package of physical merchandise, data, services, communication, IT, insurance, trade finance and the whole range of associated investments.
Complementary measures
While, Agreement on a free trade area is a significant achievement, it is important to understand that the existence of a free-trade area does not on its own necessarily lead to free-trade.
Tariffs are only one part of the problem, often not even the most important one.
Studies conclusively show that the welfare gains are probably four or five times higher if non-tariffs restrictions are also removed.
By non-tariff restrictions, I refer here to quotas, import bans, excessive documentation, roadblocks, health and sanitary measures which are not justified, etc.
Yet, we know that dealing with such non-tariff barriers (NTBs) is a much more complex process, politically. Eliminating NTBs will require a higher level political threshold.
It will require the mobilisation of the citizens, the businesses who provide the services, to the varying domestic constituency interests, to demonstrate that this is not a “zero sum game”.
Finally, and above all, the timing: the geopolitical context in particular and the weakening multilateral trade context. You just have to look at the outcomes of the last 11th WTO Ministerial Conference in Buenos Aires (Argentina).
Little progress or none at all: all around.
Gone are the days of the bullish sentiments of the Uruguay Round or even the modest hopes which were pinned on the Doha Round.
The AfCFTA should therefore be seen as much more than a tariffs elimination exercise.
It should be a quantum jump in how our continent repositions itself in the context of a weak multilateral system and on the eve of a potential “demographic cliff” for Africa, for lack of a better word.
That is why dealing with fears, convincing doubters or even cynics who think all this is an utopia, is so critical.
You just have to listen carefully to the debate on Brexit!
Three additional issues in particular have been pointed out:
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The implications for the RECs; will the Regional Economic Communities co-exist seamlessly with the AfCFTA?
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AU’s implementation track record of its decisions; will member countries implement?
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The challenge of adequate supportive infrastructure, how will the Free Trade Area function, without adequate highways, etc.
Concerning the RECs, I believe Article 21 and two other Articles provide the necessary clarity: the AfCFTA will build on and strengthen rather than weaken the RECs.
In relation to infrastructure, it is well known that the AfCFTA will be accompanied by an African Trade Development Plan of action.
That is why the Single Air Market is so critical or is one of the ways of the intensifying commercial links and progressively lowering costs of doing business.
The Africa Trade Action Plan is quite comprehensive; it concerns:
- Trade-related infrastructure;
- Trade Finance;
- Payment Systems;
- Investment policy harmonisation;
- Movement of Persons
As for whether member countries of the AU will see through the implementation, I would like to respond this way: that is the whole essence of the AU reforms.
The ordinary citizens of Africa want an AfCFTA within a stronger African Union which is focused, effective, relevant, and which funds itself rather than remaining dependent on the outside world, half a century of independence!
These are all the matters over which President Paul Kagame of Rwanda has made proposals.
These proposals have been adopted, at the highest level. The first of which is precisely to deal with the implementation crisis – decisions taken and not implemented.
It is an existential issue for the AU and the expectations is that it will be resolved this time.
Part of the problem is that we do not mobilise the African Citizenry enough. Hence one of President’s proposals is to figure out a way to bring the AU closer to the people, such as the African Volunteer Corps.
In that spirit, the people of Africa need to be mobilised for the AfCFTA and the AU Reform.
Nothing should be taken for granted.
We need to get the AfCFTA out of the high-level conference halls to the people at all levels, to advocate, to demonstrate the criticality for their future. This is crucial to the success of this historic enterprise.
In this regard and concerning the Reform of the AU, I would like to refer to the financing of our organisation, which falls within your purview, as Ambassadors, to advocate and follow through.
There is no shortage of technical proposals – beginning with the set of ideas put forward by President Obasanjo in 2015 and those adopted by the AU Summit a year later.
Just to refresh your memory on AU finances, there are mainly five challenges:
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A high level of external dependence;
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An equally high level of internal dependence on a few countries; five to be precise.
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Duplication of roles with RECs and other continental organisations which does not only increase the burden and multiply transaction costs, but does not even reflect comparative advantages;
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New and emerging onerous responsibilities such as the very costly peacekeeping missions or peace stabilisation, for which the UN or the International Community is not able or willing to come to the table.
At the AU Heads of State Summit in 2015 in Johannesburg and Kigali in May 2016, Leaders decided that the AU had come of age and had to henceforth autonomously fund its activities.
They resolved that external dependency was not right, was politically risky, and was not even necessary.
The decisions by the Heads of State are now in the implementation phase by the competent AU organs.
A committee of 15 Finance Ministers has been entrusted with the follow-up. They have met several times and are making good process.
Equally, a parallel Committee of 15 Foreign Affairs Ministers is tackling the other aspects of reform of the AU and indeed will be meeting this weekend in Addis.
The AU Extra-Ordinary Summit this last week has taken far reaching decisions which will lead to an Organisation fit for purpose for our times.
Let me now make my last point!
At the end of the day, a free-trade area is only a means to economic transformation, fiscal space and fiscal sustenance needed for the challenge ahead.
It has often been said that the next 30 years will be a turning point. The expectations that the bulging demographic dynamics, and the associated benefits that the so-called demographic dividend will bring.
What we need to discuss a bit further is the enormous fiscal stress which that will entail, and the need to generate the means to do so.
Funding the needs in education, training, health, jobs and infrastructure will be a fiscal challenge as none we have seen before.
Especially coming at a point when ODA in sectors such as health, which has been receiving large inflows from external sources like the UN, philanthropy and vertical funds, will be tapering off.
This morning, I want to say that tough choices have to be made, but that we must reject the Hobson choices.
A choice between defaulting on our historic duties to invest in this generation, in this so called demographic dividend; or alternatively doing so in a fiscally unsustainable way, through excessive debt, huge deficits or inflation.
These fiscal needs, driven by the demographics and the SDGs will need a carefully planned response which can only be done sustainably on the back of strong growing economies, not ODA.
The ODA will be used for leveraging, for blend finance; but domestic resource mobilisation will be the decisive element. This was the conclusion of the Addis FFD Conference in 2015.
It is also self-evident that more rigorous public financial management for accountability, value for money, efficiency, sealing loopholes will be needed.
Our countries will need to craft strategies that are less and less dependent on volatile commodity exports and greater reliance on domestic demand, regional trade, and greater participation in higher levels of the global value chains – in other words the fruits of the AfCFTA.
In recent months, much has been said about the need to avoid debt traps.
In the light of previous debt crisis and painful resolutions, International Organisations are raising caution. This is as it should be. However it is important to nuance.
This does not mean avoiding access to global capital markets. All countries in the world were poor at some point. The issues here are beyond simple debt-to-GDP levels; the most often quoted dynamic.
Countries can default even at very low level of debt-to-GDP (Ecuador defaulted in 2008 at a very low 27% debt-to-GDP).
It is about broad debt dynamics. In the context of Africa today, that risk exists but can be managed.
40 countries are still in comfortable territory. It is only in 15 countries, heavily dependent one or two commodities, where the risk of distress is real.
The alarm being expressed is not so much about the stock of debt but more about:
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The speed of debt accumulation (debt servicing costs have increased three times in the last five years);
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Large currency, maturity and investment mismatches;
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Debt governance and transparency;
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Poor debt management capacities.
You will recall that at the turn of the Millennium, where African economies as a whole, turned a corner that was in part due to debt cancellation initiatives such as HIPC and MDRI.
In the following years, economies were growing so strongly on the back of robust export performance, investments, strong domestic buffers in terms of comfortable liquidity and robust banking systems such that for the first time in many years, access to international capital markets became a reality.
The signature was good, international markets were benign and the fiscal room was there to borrow.
Indeed, even during the Global Financial Meltdown in 2008/2009, our economies were able to pull out strong countercyclical measures that minimised the damage.
Macroeconomic indicators were in a positive space, low deficits, strong current account positions and good buffers generally.
I remain convinced that despite recent challenges globally and locally, exception made for a few outliers, the prospects for economic growth remain positive.
The slowdown in two of Africa’s largest economies tends to bring down the averages; but other medium sizes economies such as Ethiopia, Ghana, Ivory Coast, Senegal, Kenya, Rwanda and many more are registering strong resilience and robust growth prospects.
That said, this time round, African economies are more vulnerable to slower economic growth, movements in interest rates, hardening of international market access conditions and limited domestic debt management capacity.
Therefore, while continued safe, well managed access to debt markets is to be encouraged, it has to be part of an integrated debt strategy rather than an opportunistic access to markets or a supply-driven exercise by international banks and lenders.
International Organisations have a key role to play in building debt management capacity in particular.
Assisting the countries conduct proper market analysis ahead of issuance – which can be quite complex given markets behaviour in the last few years – support on things like databases, data accounting, data reporting, DSA, etc.
I am persuaded that many African countries are capable of ensuring a sound macroeconomic environment and robust risk bearing platforms, drawing from the past experience and accumulated reform experience.
There is still a lot of room on the revenue side with potential to raise additional revenues anywhere between 3-5% of GDP.
There is still room to better plan investments both social and physical to assure value for money and minimise waste. Macroeconomic discipline is something which African countries have demonstrated in the past. We cannot afford to slide.
Let me end where I began.
At the end of the day, it is by promoting economic growth through trade and investment that a fiscal space will emerge to meet the upcoming demographic challenges, while moving up the global value chains.
That is the promise of the AfCFTA. A necessary first step to an eventual Continental Economic and Monetary Union.
Through the AfCFTA, we will boost Intra-Africa trade, increase market size, depth and diversity, increase opportunities for business, consumers, producers, diversify our economies to complex products; thereby expanding fiscal possibilities.
It is only by doing so, that we can build resilience in the global system and avoid the demographic cliff.
The adoption of the AfCFTA is not a technical choice Africa is making. It is a fundamentally, historic political choice which will have far reaching impact if successful.
That is why everything must be done to ensure safe arrival at destination. It will not be easy, it will require astute political management and trade off at each juncture but there is no more choice.
Thank you for listening.