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tralac’s Daily News Selection
Featured tweet, @CelestinMonga: Sierra Leone ($500 income per capita) imports onions from the Netherlands, 7,000 kilometers away. Why? It takes more than one month to import fresh, organic onions from nearby Mali. Regional integration is key: check out #2019AEO.
Trade policy updates: Cape Town, Addis Ababa, Geneva
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South Africa’s trade agreements: pdf DTI presentation to the Portfolio Committee on Trade and Industry (678 KB) (27 February)
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Joint ECA-World Bank roundtable on jobs and economic transformation: remarks by Vera Songwe, Akihiko Nishio
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Structured Discussions on Investment Facilitation for Development: remarks by WTO DG Roberto Azevêdo
Commonwealth Digital Connectivity Agenda: UK, South Africa joint announcement
The UK and South Africa have announced their agreement to co-lead the Commonwealth Digital Connectivity Agenda. This is one of five clusters of activity promoted by the Commonwealth Connectivity Agenda on Trade and Investment, agreed at the 2018 Commonwealth Heads of Government Meeting in London. The Digital Connectivity Agenda will facilitate an exchange of experiences, views and best practices on digital connectivity to support inclusive growth and sustainable development in the Commonwealth. Member states will cooperate across a range of areas for the development of national digital economies, including: ICT capability; regulatory frameworks; digital infrastructure; the disruptive effects of digital trade; and the participation of women in the digital economy, in order to enable all members to take advantage of the opportunities presented by digitization. The first meeting is scheduled to take place 19-20 March in South Africa.
The President’s 2019 Trade Policy Agenda
Total AGOA (including GSP) imports declined to $11.4bn during January-November 2018, compared to $12.1bn during January-November 2017, mostly due to a decrease in AGOA imports of oil (down 7.3%) to $7.6bn during January-November 2018, compared to $8.2bn during January-November 2017. AGOA non-oil trade declined by 2.6%, to $3.8bn, during January-November 2018, compared to $3.9bn during January-November 2017. There was a 48.6% decline in transportation equipment imports under AGOA to $555.6m during January-November 2018, from $1.08bn during January-November 2017, and a 19.8% increase in AGOA apparel trade ($1.14bn compared to $947.5m during January-November 2017). Top US imports under the AGOA program during January-November 2018, by trade value, were mineral fuels, woven apparel, motor vehicles and parts, knit apparel, and ferro-alloys. During January-November 2018, based on trade value, the top five AGOA suppliers were, in order, Nigeria, South Africa, Angola, Chad, and Kenya. [ pdf 2019 Trade Policy Agenda and 2018 Annual Report (2.71 MB) ; Related Fact Sheet]
Uganda accuses Rwanda of breaking EAC laws in border row
Uganda is considering petitioning the EAC Secretariat in Arusha to challenge what it perceives as Rwanda’s economic sabotage in breach of the regional bloc’s guidelines, a minister said Sunday. Mr Philemon Mateke, the state minister for regional cooperation, told Uganda’s Daily Monitor Sunday evening that he would confer with his senior line minister, Mr Kirunda Kivejinja, on the petition “because interfering with cross-border trade by Rwanda violates the East African Community guidelines yet it (Rwanda) is the chair of the community.”
President Kagame, the immediate past African Union chairman, succeeded President Museveni as EAC chair last month amid rising tension and long-standing counter-accusations, including claims that either government is propping up subversive elements against the other. Rwanda’s ambassador to Uganda, Maj Gen Frank Mugambage, Sunday said he was “engaged” and unable to speak on Kampala’s latest charges. Kigali at the end of last month abruptly stopped vehicles from Uganda from entering Rwanda through Katuna, citing ongoing construction works at Gatuna side of the frontier. A senior official familiar with the goings-on between the countries, but who asked not to be named due to sensitivity of the matter, said Rwanda’s last-minute notification about closing Gatuna border post was suspicious because road works are planned in advance, and was not likely to have informed its sudden decision. [Updates: Rwanda partially lifts Uganda trade blockade; Rwanda’s claims are false, says Uganda; Ugandan parliament pushes government to explain deteriorating Uganda-Rwanda relations]
Chinese to inspect quality of Kenya’s fresh produce
Chinese inspectors are set to visit Nairobi this month for certification checks on agricultural produce, putting Kenya on the path to fresh produce export to the expansive Asian market. Nairobi and Beijing last November inked a Sanitary and Phytosanitary deal which will see Kenyan exporters sell their farm produce to the populous China upon meeting set health standards and requirements. The agreement, which followed a week-long intense negotiations in Shanghai during the inaugural China International Import Expo, covered more than a dozen of fresh produce where Nairobi has traditionally relied on Europe for market. “We have a team coming in from China on March 27 for the final certification of our produce and then we are good to go,” Jaswinder Bedi, chairman of state-run Export Promotion Council, said by telephone. “We will start seeing a difference (growth in exports) because market expansion is now happening. It takes time to negotiate with some of these countries because they use technical barriers of trade to stop your exports.”
Korea-Africa Economic Cooperation, AfDB connect to bridge East Africa’s digital divide
Policy makers from Central and East Africa have concluded a knowledge event designed to address gaps in policy and operational aspects of e-Government services. The African Development Institute of the African Development Bank organized the workshop under the theme, “Digital economy and e-government: bridging the digital divide”. The capacity building and policy dialogue sessions, convened in collaboration with the Korea-Africa Economic Cooperation, took place in Nairobi, 19-21 February. Participants also discussed the latest ranking of African countries on the e-Government Development Index, published in the UN’s e-Government Survey for 2018.
East Africa gets parliamentary training centre
The EAC has acquired a regional parliamentary institute (EAPI), a training facility expected to harness capacities and narrow the skills gap of parliamentarians and staff in a quest to further strengthen the integration process. The institute was launched Friday by Martin Ngoga, the Speaker of the East African Legislative Assembly, in Nairobi, where it will be located. The launch follows the enactment of the East African Parliamentary Institute Bill, 2011, which provides for the legal framework of its establishment. The idea for EAPI was initially mooted in 2001 as a joint venture between the State University of New York, the National Assemblies of the Partner States and EALA, as well as the United States International University, and initially funded by the FORD Foundation. Under the new arrangement, parliaments from across the bloc are to largely fund the institution, a move hailed as key in its sustainability.
South Africa’s new BRICS Business Council announced (dti)
The new BRICS Business Council is made up of five members with extensive business experience locally and internationally: Ms Busi Mabuza (IDC), Dr Ayanda Ntsaluba (Discovery Ltd), Ms Bridgette Radebe (Mmakau Mining), Dr Stavros Nicolaou (Aspen Pharmacare) and Mr Elias Monage (Afika Group). A core component of the BRICS Business Council is the nine working groups that span the five participating countries. These are: agribusiness, deregulation, digital economy, financial services, energy and green economy, infrastructure, manufacturing, regional aviation and skills development. South Africa is currently the global Chair of the BRICS Business Council, which will be handed over to Brazil, at the BRICS Business Council midterm meeting in April in Johannesburg.
United States will terminate GSP designation of India, Turkey
At the direction of President Donald J. Trump, US Trade Representative Robert Lighthizer has announced that the US intends to terminate India’s and Turkey’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory eligibility criteria. India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors. Turkey’s termination from GSP follows a finding that it is sufficiently economically developed and should no longer benefit from preferential market access to the US market.
Reactions:
It’s official: India is Trump’s next target in the trade wars
India weighs retaliatory tariffs on US imports worth $10.6bn
A bumpy road ahead for India-US trade relations
Altering preferential status a significant change to India-US trade ties says Raj Bhalla
What is GSP, and how did India gain from being on US trade preference list?
India’s Apparel Export Promotion Council to take up duty withdrawal benefit under GSP with Commerce ministry
Today’s Quick Links: Tanzania: Govt launches maize flour standards tests for local processors Michael Kottoh: Boosting development through sovereign wealth funds SADC posts a consultancy for the development of a strategy for conservation and utilization of animal genetic resources US National Security Strategy Development workshop for Central, Southern Africa (8-12 April, Gaborone) Sierra Leone: Government reacts to Ecowas court ruling on Ebola survivors Pakistan: Africa Trade Forum eyes for new openings in African markets Brookings: Is trade with India changing Africa’s health care landscape? EU exit and impacts on Northern Ireland’s services trade |
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JETRO’s 2018 survey on business conditions of Japanese-affiliated firms in Africa: Chinese companies emerge as top competitors for the first time (JETRO)
Regarding cooperation with third country companies, South Africa, India and France were promising. As a regional base, South Africa is attractive because of the know-how and market networks accumulated by local companies have a head start in regional development. It was suggested that India’s appeal lay not only in its excellent strategy in the African market, where there is much affinity for the country, but also in the fact that Japanese companies could launch operations in Africa utilizing their Indian bases. For France, expectations were heard regarding the potential for cooperation in French-speaking African countries.
Chinese companies emerged in the top ranks as competition for the first time in the past four surveys. The ratio responding that they compete with Chinese companies increased from 3.7% in 2007 to 22.9% in 2018 (pdf). More than 40% of companies, when asked about China and its strengthened economic relations with Africa, responded that competition has intensified and is having an effect on their own companies. On the other hand, about 20% of respondents answered that “the situation is bringing about business opportunities and benefits,” with comments including, “We can utilize infrastructure developed by China.”
Nigeria’s Q4 2018 foreign trade in goods (NBS)
During the fourth quarter of 2018, Nigeria’s total merchandise trade stood at N8,606.0bn. Compared to its value of N9,066.9bn recorded in the third quarter, total trade in Q4 2018 was lower by N460.96bn, or 5.1%. The total export component of this trade was recorded at N5,023.7bn, representing an increase of 3.5% over Q3 2018, and 28.5% over Q4 2017. The import component stood at N3,582.3bn in Q4 2018 showing a drop of N631.6bn, or 15.0%, compared to Q3 2018, but an increase of 69.6% when compared with the corresponding quarter in 2017. The increase in export value and decrease in import value (relative to Q3 2018) resulted in a favourable trade balance of N1441.0bn, or 125.5%, over the preceding quarter. By year end 2018, the country recorded a total trade value of N32.264.7bn, representing a 39.3% increase over the corresponding period in 2017. The volume of total merchandise trade in 2018 was the highest recorded since 2014, nearly double pre-recession levels
Zimbabwe-Botswana in diamond deal (Bulawayo24)
Zimbabwe has struck a deal with Botswana to start processing its diamonds at the world-renowned Diamond Trading Company in Gaborone, in a move that is expected to see the country get the maximum possible value from its precious stones. The diamond deal was one of the agreements sealed during the high-level Zimbabwe-Botswana Bi-National Commission summit held in Harare last week. Implementation of the deal will start immediately, with diamond experts from DTC — which is regarded as the world’s most sophisticated diamond sorting and valuing hub — expected in the country this month. Through the bilateral arrangement, Zimbabwe will ship its diamonds to Botswana for processing, cleaning and polishing before they are placed on the market. The MoU for cooperation in geology, mining and metallurgy signed between the two countries provides the bilateral pillars to support the deal. [Botswana credit line to Zimbabwe unpacked]
Zim-bound truckers stuck at Beitbridge after duty hike (NewsDay)
Several Zimbabwe-bound truckers are parked on the South African side of the Beitbridge Border Post as importers ponder their next move following a sharp increase in excise duty by government. The new duties are likely to see an upsurge in fraudulent documentations as importers try to cheat their way out. A shipping agent yesterday said a lot of importers had not anticipated the steep adjustment of duty after government finally conceded the surrogate bond currency was not at par with the United States dollar. “Many drivers have been on the South African side since Friday (last week) when duties were adjusted. Importers are running around to raise duties required now,” the shipping agent said. “We have not been receiving many documents and some are contemplating returning the goods to manufacturers and study the market.” Customs and excise duties shot up threefold to the bond note value last Friday following government’s gazetting of Statutory Instrument 32 of 2019, ushering in the new currency, the real time gross settlement dollar.
South Africa-Eswatini bilateral relations: update (GCIS)
The two leaders [President Cyril Ramaphosa, King Mswati III] directed the ministers of international relations and cooperation in the two countries to convene the Joint Bilateral Commission on Cooperation that oversees the implementation of signed agreements between South Africa and eSwatini. They further directed that ministers should ensure that the issue of congestion at border posts and other outstanding issues are attended to. [SA signs 21 bilateral agreements with eSwatini]
A flood of Chinese screws, nuts and bolts has hit South Africa: now government may strike back (Business Insider SA)
The government has confirmed that a surge in Chinese imports of bolts, nuts and screws is inflicting serious injury on local producers. After launching an investigation last year, the International Trade Administration Commission of South Africa is now satisfied that imports of iron and steel Chinese fasteners is posing a real problem. In a notice in the government gazette on Friday, Itac – the government body responsible for import and export control – says there is enough evidence of a significant sharp surge in imports, and that it is causing serious harm to local producers. Next, the commission will decide whether a “safeguard” is needed.
SA’s chicken sector could hatch 30 000 jobs: if government bans imports (IOL)
That is according to the SA Poultry Association, which believes the scrapping of imports would end the crisis in the local chicken industry. Izaak Breitenbach, general manager of Sapa’s broiler organisation, said statistics showed chicken imports reached a record high last year. “Chicken imports totalled 538434 tons, up from the previous high of 528108 tons imported in 2016. Every ton of imports represents South African jobs lost or not created. We have worked out that we could create 30000 jobs by replacing imports, which were worth R6bn last year.” Breitenbach said Sapa could not understand why the government had allowed the wholesale “dumping” of imported chicken in the country, when South Africa ranked among the top producers of chicken in terms of cost and quality. He referred to the Bureau for Food and Agricultural Policy report, which was released last week. The report “reflected the competitiveness of the South African broiler industry”. “The report showed that we were the fifth most competitive producer of poultry in the world. The chicken industry in countries that ranked higher than us, like the US and Brazil, were subsidised by their respective governments. They receive subsidies for maize and soya feed in those countries; after all, feed represents 70% of the input cost to raise chicken. South Africa is a semi-desert country. Therefore, it is more expensive to produce maize and soya, which affects production costs.”
COMESA to develop a regional code on anti-corruption compliance (COMESA)
COMESA will soon develop a Regional Model Code on Anti-Corruption Compliance to help enterprises in the region improve their business environment. The initiative is part of the activities under the COMESA Business Council Integrity Project which is being implemented in partnership with the Center for International Private Enterprise. As part of this initiative, the COMESA Business Council has rolled out an anti-corruption training programme across COMESA Member States under the Business Integrity Project. So far, trainings have been conducted in Ethiopia, Rwanda and Mauritius targeting the private sector. Zambia’s training took place on 27-28 February, with 60 businesses participating.
Money laundering listing worries Business Botswana (Mmegi)
Business Botswana fears the recent placement of Botswana on a high-risk list by the Financial Action Task Force will affect the ease of doing business in the country. Business Botswana is the country’s largest private sector lobby group comprising major corporations and commercial entities. BB president Gobusamang Keebine said the country’s listing implied that legislation dealing with fraud, corruption and money laundering was weak. “The impact on the country’s economy could be relatively wide as it is linked with the international financial system. The private sector does not know how it will unfold, but the response must be integrated and comprehensive involving all stakeholders.”
Lake Victoria Basin: Uganda hands over chairmanship to Rwanda (EAC)
Handing the instruments of chairmanship, Alfred Okot Okidi, the Permanent Secretary, Ministry of Water and Environment, Uganda, outlined to participating delegates to JRPSC, the key achievements registered during his chairmanship. These included, but not limited to, successful completion of two mega flagship projects – the Lake Victoria Water Sanitation Project phase two and the Lake Victoria Environmental Management Project. The incoming chairperson, Fatina Mukarubibi, the Permanent Secretary, Ministry of Environment, Rwanda, commended the good leadership of the outgoing chairperson and committed to keep the pace set by members of JRPSC and LVBC—the latter is the implementer of the decisions and directives of the former. Mukarubibi called for adoption of innovation, effective regional coordination and working extra harder by EAC Partner States as a way of unlocking existent development challenges - climate change, water hyacinth, among others.
Sezibera on Uganda tensions, SA ties and ‘good’ relations with DRC (New Times)
The New Times’ Collins Mwai and James Munyaneza held an exclusive interview with Foreign affairs minister and Government Spokesperson, Dr Richard Sezibera, during which he addressed a wide-range of issues, from troubled bilateral ties with Uganda, Rwanda’s chairmanship of the East African Community, to Kigali’s relations with the new leadership in DR Congo. He also addressed security challenges in light of the recent UN Experts report and military incursions on Rwandan territory, and the ongoing African Union reform effort.
Annual Survey of Mining Companies, 2018 (Fraser Institute)
Nevada is the most attractive jurisdiction in the world for mining investment, followed by Western Australia and the Canadian province of Saskatchewan, according to the Annual Survey of Mining Companies released by the Fraser Institute, an independent, non-partisan Canadian policy think-tank. This year’s survey of mining executives ranks 83 jurisdictions around the world based on their geologic attractiveness for minerals and metals and the extent that government policies encourage or deter exploration and investment. Overall, investment attractiveness improved in most regions around the world.
The median score for Africa on policy factors (PPI) increased this year (pdf). This was also the case for the region’s median investment attractiveness score. In terms of overall investment attractiveness, as a region, Africa ranks as the second least attractive jurisdiction for investment. Two African countries—the DRC (82) and Zimbabwe (76) —ranked in the bottom 10 of the survey rankings this year based on policy. Zimbabwe was also amongst the bottom 10 in the previous six years on the PPI. Ethiopia was the only African jurisdiction in the global bottom 10 based on its overall investment attractiveness. Botswana is again the highest ranked jurisdiction in Africa on policy, ranking 12th (of 83) in 2018, after ranking 21st (of 91) in 2017. Botswana’s increase in its PPI score this year reflects decreased concern over uncertainty concerning protected areas (-24 points), trade barriers (-20 points), and political stability (-18 points). Namibia is the second most attractive jurisdiction when only policies are considered, ranking 36th (of 83) this year. Four other African countries—South Africa, Tanzania, Zambia and Zimbabwe—experienced notable increases in their PPI scores this year.
India: Cash subsidies to now directly reach farm exporters’ bank accounts (Hindustan Times)
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Featured tweet, infographic, @fadyhocheimy: So I sent DHL from Gambia to Senegal and this is how it traveled to get there. There is a direct 25 min flight almost daily between Gambia and Senegal. So I don’t get it.
New Zealand’s ambassador to the WTO, David Parker, is the new chairperson of the WTO Dispute Settlement Body
Afreximbank’s 2019 Annual Meetings, Moscow: registration opens
Guidelines for national AfCFTA implementation plans: Libreville meeting (UNECA)
Experts, now meeting in Libreville, will review current production and trade within a national and regional context; the identification and prioritization of opportunities for value chain development; a thorough analysis of constraints, including non-tariffs barriers and competitiveness issues faced by businesses and means to address them; strategic actions to boost identified priority sectors; a monitoring and evaluation framework; and financial resources mobilization plans. Taking also the macroeconomic context into account, all these factors will feed into producing guidelines to support 30 countries with the development of their national AfCFTA implementation strategies.
REC, sub-regional updates:
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ECOWAS to develop new Sahel strategy. A committee, comprising of several ECOWAS Directorates, in a meeting on 26 February in Abuja, drafted the Terms of Reference (TOR) that would be used by a consultant to craft a new Sahel Strategy for ECOWAS (2020-2025). The Commissioner for Macroeconomic Policy and Economic Research, Dr Kofi Konadu Apraku, stated that the TOR will enable the consultant to draft a strategy which will deliver clear objectives and chart the path for a comprehensive set of programmes that will guarantee ECOWAS’ development through the provision of enhanced security and stability as well as the improvement of the living standard of the people in the Sahel region. He noted that the implementation of the ECOWAS Sahel Strategy has been challenged by duplication of activities due to the multiplicity of Sahel Strategy initiatives. Hence he stressed the need for a comprehensive strategy which will improve synergy and coordination among all stake holders and interest groups such as WAEMU, the Permanent Inter-state Committee for Drought Control in the Sahel, the Liptako Gourma Authority and the Niger Basin Authority.
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Abidjan-Lagos Corridor Highway. ECOWAS launched the project implementation unit for the Abidjan-Lagos Corridor Highway Development Project, on 27 February in Abuja. The PIU is meant to, among others, provide day-to-day management of the highway project under the supervision of the Commissioner for Infrastructure of the ECOWAS Commission, through his technical project manager. Giving a remark at the start of the 2-Day meeting covering its launch at the Commission’s headquarters, the ECOWAS Commission’s Commissioner for Infrastructure Mr Pathe Gueye stated that the Abidjan-Lagos Corridor Project remains of high importance to the ECOWAS Commission, Corridor Member States as well as Development Partners considering the enormous benefits which will accrue to the region from its implementation.
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Port Sudan Corridor. Preparations have started to establish the Port Sudan Corridor. This will serve as a gateway to international markets, especially Asia, for countries in the eastern and southern African region. Specifically, the corridor will directly serve COMESA states, Ethiopia and Sudan, and later Uganda. It will then extend beyond the regional bloc to Central Africa Republic, Chad and South Sudan. The decision to establish the Port Sudan Corridor was made by the COMESA Ministers of Infrastructure during their 10th meeting in Lusaka, Zambia in October 2017. “The corridor concept has improved the management of international traffic as it provides scope for harmonization of operating procedures, policy, skills, infrastructure and equipment hence directly supporting regional integration,” senior transport economist at the COMESA Secretariat, Mr Bernard Dzawanda, said during the meeting of stakeholders from all Corridor States in Khartoum, 21-24 January 2019. The meeting reviewed and validated the project’s strategic plan and financial strategy and the Corridor Work Programme and Sustainability Strategy. A draft Corridor Agreement developed by COMESA was presented to the delegates. The formation of a corridor management institution, known as the Port Sudan Corridor Authority, was identified as a priority activity.
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Zambezi Watercourse Commission. The Council of Ministers met in Dar es Salaam on Thursday to, among other things, approve the strategic plan for the Zambezi Watercourse. The Zambezi water ministers were also expected to approve another big ZAMCOM project - the Zambezi Water Resources Information System – Decision Support System. “It is a framework for facilitating investments in the basin to address Zambezi River Basin development challenges. It is also a step in the right direction in realising benefits of cooperation in the Zambezi River Basin and it will unlock enormous development potential in the Basin,” says Evans Kaseke, ZAMCOM programme manager for strategic planning. Note: The Zambezi River originates in the Kalene hills in northwest Zambia, at an attitude of 1,5000m, and flows south and eastwards to the Indian Ocean, covering a total of 2,574 kilometres. It is shared by eight riparian countries namely Angola (18.2%), Botswana (1.5%), Malawi (7.5%), Mozambique (11.6%) Namibia (1.1%), Tanzania (2.2%), Zambia (41.9%) and Zimbabwe (15.9%).
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SADC Regional Vulnerability Assessment and Analysis Programme. The steering committee recommended that the SADC Member States accelerate the 2019 vulnerability assessments to ensure timely advisory of the unfolding regional food insecurity situation and disseminate the results of the national assessments preferably, by the end of June 2019. The RVAA Programme will synthesize the results of the assessments and analysis into the “SADC Regional State of Food and Nutrition Security and Vulnerability in Southern Africa Report,” that will be discussed by the Council of Ministers and the Summit of Heads of State and Governments in August 2019. The Steering Committee deliberated on the rainfall season performance and the food security situation in the region noting that it is likely that crop production will be negatively affected in many southern and central areas. Satellite rainfall analysis indicates that October 2018 to January 2019 rainfall may be among the lowest since 1981 in parts of southern Angola, western Botswana, northern Namibia, western and central South Africa, Lesotho, western Zambia, and western Zimbabwe. Rainfall was also poorly distributed and below average in western Madagascar, southern Mozambique, and eastern Tanzania. [Southern Africa Price Bulletin: February 2019]
A legal tussle over a strategic African port sets up a challenge for China’s Belt and Road plan (Quartz)
It’s been exactly a year since the Dubai-based port operator DP World accused Djibouti of illegally seizing control of the Doraleh Container Terminal it operated in the northeast African country. The move triggered denunciation from Emirati officials, kick-started a succession of legal battles that have spanned the globe, and brought into focus China’s deepening role in the Horn of Africa. It’s not yet clear how the ruling in Hong Kong might differ from those in the UK, how the Djiboutian government might respond, or if a decision favoring DP World would be implemented in Djibouti. But as challenges involving commercial interests and state sovereignty unfold along the Maritime Silk Road, it might boost Beijing’s plans to establish special courts dedicated to settling the disputes. If DP World wins in Hong Kong, Link says “this will, of course, hurt the reputation of China Merchant’s Port, a growing rival of DP World.” [The author: Abdi Latif Dahir]
Reforming the WTO: a commentary by Switzerland’s WTO ambassador, Didier Chambovey
Reforming the WTO is not just about resolving the dispute settlement mechanism crisis, although this question remains a priority. For Switzerland, it is also about modernizing the organization to enable it to restrain protectionist tendencies and to adapt to major changes in the structures and modalities of international trade. To this end, it is important to increase the transparency of different trade practices and policies. The reform should also examine ways to differentiate commitments made by developing countries according to their respective economic capacities. [Related: pdf tralac Newsletter, October 2018: The Multilateral Trading System – quo vadis? (1.10 MB) ]
US wins WTO ruling on Chinese grains; decision may also affect India (Reuters)
The US has won a WTO ruling on China’s price support for grains, successfully challenging a calculation methodology that is also used by India. A WTO adjudication panel agreed on Thursday with the US complaint that China had paid farmers too much for wheat, Indica rice and Japonica rice in 2012-2015. A disputed corn subsidy had already expired. “China’s excessive support limits opportunities for US farmers to export their world-class products to China,” US Trade Representative Robert Lighthizer said in a statement. China said on Friday it regretted the lack of support from experts, noting that government support for agriculture was a common practice and allowed under WTO rules. [Download: WTO panel report on Chinese agricultural subsidies; Lighthizer sees bigger China ag trade; American Enterprise Institute: In the US-China trade deal both sides must recommit to the WTO]
Brazil joins Australia in formal complaint to WTO over Indian sugar subsidies (ABC)
The world’s largest sugar producing nation, Brazil, has joined Australia to lodge a formal complaint against India with the WTO. Brazil and Australia launched formal dispute action with the WTO overnight, claiming subsidies paid to farmers in India have led to a sugar glut and depressed global prices. “That’s hurting cane growers and sugar millers whether they’re in Australia, Brazil, or any other country in the world,” Australian Trade Minister Simon Birmingham said. Mr Birmingham said Australia was “left with no other choice but to initiate formal WTO dispute action, together with Brazil”.
Christine Lagarde’s 32nd World Traders’ Tacitus Lecture (IMF)
How can finance support sustainable and inclusive growth? Let me start with a data point. Over the next 15 years, $24 trillion of wealth will be inherited by millennials - and they are more than twice as likely as other generations to invest in companies or funds that target social or environmental outcomes. The financial industry has seized this opportunity by offering various forms of impact investing, green bonds, and a panoply of fund products that take account of “ESG” - environmental, social, and governance issues. Clearly, sustainable investing is booming.
Today’s Quick Links: Special Economic Zones as new frontiers for Nigeria’s industrialization UK agrees WTO procurement membership post-Brexit Distortions to agricultural incentives in light of trade policy: a study on Pakistan ITC: Belgium commits €2m to strengthen work on inclusive and sustainable trade in Africa UNIDO: Setting up a quality infrastructure system in Central Africa |
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The WTO’s General Council meets in Geneva. Kenya, Cuba, Bolivia and Laos have associated themselves with the submission by China, India, South Africa and Venezuela on The continued relevance of S&DT in favour of Developing Members, one of the agenda items for discussion.
Diarise: Inaugural Pan African Amcham Summit (9-11 June, Johannesburg)
Alec Erwin: Opportunity for SA to drive car manufacturing industry in Africa (IOL)
If South Africa were to see the rest of Africa only as a buyer of the country’s vehicles - the prospect of a Continental Free Trade Agreement suggests that this might be an enticing prospect - it would be making a costly strategic mistake. In the first place, we would be competing with much larger exporting countries across the world, which are unlikely to let us dominate such a market. But, more fundamentally, this is not a sustainable situation for the larger African economies. For Africa’s larger industrialising economies, the absence of auto manufacturing means all vehicle needs would have to be imported. This has two fundamentally adverse effects.
The first is that it destabilises the balance of payments and, secondly, they lose the key industrialisation advantages that the auto sector provides. In fact, they would be attempting to grow with an inefficient transport sector. It is by no means a coincidence that the global auto industry’s development is characterised by various forms of the partnership arrangement between producer countries. As pointed out at the beginning of this discussion, there are structural features of the auto-manufacturing process - related in the main to economies of scale - that are conducive to a global manufacturing system characterised by high levels of intra- sectoral trade.
In Africa, at present, there is favourable conjunction of events that need to be seized as a strategic opportunity. Firstly, economies such as Nigeria, Ghana, Kenya and Ethiopia are seeking to implement auto programmes. Secondly, South Africa, working with its global OEM (original equipment manufacturer) partners are firm of the view that an African auto partnership of some form is in the best interests of the African economies. Auto policies are complex and multifaceted industrial policies and need great attention to detail and accommodation to the structural realities of this global industry. However, the ingredients are there for Africa to take a very meaningful step towards its industrialisation.
South Africa: January 2019 trade balance deficit of R13bn (pdf, SARS)
The South African Revenue Service today released trade statistics for January 2019, recording a trade deficit of R13.08bn. The trade deficit is attributable to exports of R88.68bn and imports of R101.76bn. Exports decreased from December 2018 to January 2019 by R13.63bn (13.3%) while imports increased by R16.15bn (18.9%). Profiled month-on-month export movements: Vehicles and transport equipment (-51%); Prepared foodstuff (-20%); Precious metals and stones (-12%); Machinery and electronics (-16%); Mineral products (+4%). Profiled month-on-month import movements: Machinery and electronics (+31%); Original equipment components (+79%); Base metals (+74%); Textiles (+74%); Plastics and rubber (+37%).
South Africa: Sugar tax threatens to shrink sugar sector (Xinhua)
South Africa’s sugar industry has lost profit and jobs after the implementation of sugar tax which is threatening to shrink the sector’s stability, said experts on Wednesday. Priya Seetal, Nutrition Manager at South African Sugar Association, told Xinhua that sugar tax’s impact is huge: “It has resulted in a 30% decrease in the amount of sugar that we’ve been selling to the beverage sector. Because of the problems with imports, we have inefficient tariffs protection, it’s difficult to export sugar into the world market because the world market sugar prices are low.” Since the Health Promotion Levy, known as sugar tax, came into effect in 2018, volumes of refined sugar sales have declined, reducing the industry’s revenue by R1bn.
Uganda’s gold exports overtake coffee earnings (The Standard)
Updates from Nigeria
Africa’s richest man makes a $17bn bid for immortality (Bloomberg)
About 40 miles east of Lagos, on more than 6,700 acres of former swampland bound by a lagoon and the Atlantic Ocean, contractors are putting the finishing touches on a fertilizer plant valued at $5bn. Next to it, construction of a vast oil refinery—a $12bn project—is under way. If all goes according to plan, the complex will immortalize the 61-year-old Nigerian businessman as Africa’s most prominent industrialist, vaulting Dangote Industries’ annual revenue from $4bn to about $30bn, roughly 8% of Nigeria’s gross domestic product. Oil industry experts such as London-based CITAC have questioned the project’s timeline, citing logistical and financial challenges. But Dangote insists the refinery, which will be Africa’s largest, is on track. “By 2020 I will finally dispatch oil,” he says during a January interview at his Lagos home. Despite controlling the world’s 10th-largest oil reserves, Nigeria has only four aging, inefficient state-owned refineries, leaving it almost wholly reliant on imports for its fuel needs. Dangote says his massive refinery could end that dependency and lift electricity generation in a nation plagued by blackouts: “It will change the entire economy of Nigeria.”
Dangote Cement exports 0.8Mt of cement (Leadership)
Dangote Cement, has maintained its dominance of the Nigerian market, accounting for 65% of the total volume sold in the domestic cement sector in 2018. The company also exported 800,000 metric tones of cement to West African countries, strengthening Nigeria’s position as a cement exporting country, creating jobs in the economy, and earning foreign exchange. According to the details of Dangote Cement’s audited results for the year ended 31 December 2018, released yesterday on the Nigerian Stock Exchange, it sold a total of 23.54 MT of cement across Africa indicating an increase of 7.4 over 21.92 MT sold in 2017. Nigerian operations accounted for 14.18 MT representing an increase of 11.4% over the volume of 12.72 metric tonnes sold during the preceding year. [Download: FY 2018 Results Statement, pdf]
Importers’ task force intercept 10 containers bearing substandard products (Premium Times)
Aviation Africa Summit: updates
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Remarks by President Paul Kagame. Sixteen countries in Africa are landlocked, including Rwanda. That is almost one-third of Africa. But every country is “air-linked”. So geography should not be seen as an excuse for underdevelopment. This highlights the importance of regional integration, where there have been some notable achievements over the last year. It is therefore important to attract more countries to join the Single African Air Transport Market and to fully implement its provisions. Protectionism among ourselves is a short-sighted policy, which only serves to keep our continental market fragmented, inefficient, and expensive, thereby reducing opportunities for African firms. Removing barriers on the movement of goods and people means there will be steadily increasing demand for commercial air services in the years ahead. One industry analysis has calculated the requirement for new aircraft in Africa over the coming generation at more than 1,000 planes, with a value exceeding $150bn.
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Qatar Airways Akbar Al Bakar: Small fragmented African airlines will continue making losses. In 2018, approximately 220,000 passengers were carried to, from and within Africa, generating almost $34bnin revenue. Some 55% of these passengers originated or ended their journey outside Africa, and interestingly accounted for 74% of the total revenues. This means that intra-African air services currently only contribute to 26% of the total industry revenue. IATA statistics show that currently, 10 airlines operating to and from a total of 7 hubs on the continent have captured over 80% of the African market, both in terms of passenger movement and revenues. This among other things shows the negative impact of the dominance of a few players. With an estimated 320 international airports in Africa, 10 airports in 7 countries account for 49% of total seat capacity and 50% of the total revenues of the entire aviation market to and from Africa. [Ethiopia, China aim at greater heights in aviation cooperation]
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International Civil Aviation Organization compliance key to African air connectivity. On behalf of the President of the ICAO Council, Dr Olumuyiwa Benard Aliu, ICAO’s Regional Director for Eastern and Southern Africa, Mr Barry Kashambo delivered the encouraging remarks to the attending aviation ministers and CEOs in a keynote address. “While many African States have now established effective safety and security oversight capacities in their territories, and no fatal accidents were recorded in either 2016 or 2017 here in Africa, ICAO audits of government oversight in these areas continue to reveal that a number of States are faced with challenges when it comes to assuring their ICAO compliance. In order to address these shortfalls in a collective and sustainable manner, political and government commitments coupled with a cohesive and focused approach involving all stakeholders are key prerequisites.” In addition to cooperation through multilateral bodies, ICAO also encouraged delegates to take note of the importance of the regional coordination mechanisms which permit groups of States to pool and share their resources to prepare for growth.
Equatorial Guinean UNSC Presidency open debate: Silencing the guns in Africa (UN)
The Security Council, Wednesday, adopted a resolution that outlines steps leading towards the goal of ending conflict in Africa through enhanced international cooperation and partnership as well as robust support for peace operations led by the African Union. By that text, the Council also acknowledged that the task of building a conflict-free Africa essentially rests upon the African Union, its 54 member States, their people and their institutions. It also expressed support for initiatives seeking African solutions to African problems, while recognizing at the same time the need for international cooperation and partnership to help speed progress towards realizing that continental objective.
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AfCFTA ratification update, @AUC_MoussaFaki:
“Egypt’s parliament approves ratification of the AfCFTA, bringing total parliamentary approvals to 19, of which 15 have already deposited the formal instruments. Only 3 ratifications needed for the world’s largest free trade area to enter into force. #TheAfricaWeWant.”
tralac Infographic: Status of AfCFTA Ratification
Zimbabwe trade updates:
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“We can’t supply you with dollars anymore,” SA banks tell Zimbabwe. Zimbabwe is in a Catch-22 situation as South African banks are de-risking from supplying the troubled southern African country with US dollar notes, an official with the central bank told miners on Tuesday. Speaking at a post 2019 Monetary Policy Statement review meeting with small-scale miners, Reserve Bank of Zimbabwe deputy director for Financial Markets William Manhimanzi said the central bank was struggling to pay miners in hard cash as it was failing to import notes via South Africa. Zimbabwe pays its gold miners in cash, but has been failing to do so of late as the usual suppliers, South African banks, have been cutting ties amid fears of being fined by the United States’ Office of Foreign Assets Control. Zimbabwe is under US sanctions and unless otherwise authorised or exempt, transactions involving the greenback are penalised if they involve an entity or individual listed on the Specially Designated Nationals List (a list of individuals and entities under US sanctions). The nature of the regulations, however, makes it difficult for foreign banks to know whether they are dealing with Specially Designated Nationals or not, hence the decision by most South African banks to de-risk from dealing with Zimbabwean institutions. [Zimbabwe to manage volatility of new RTGS currency – finmin]
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Gold lost through informal channels: Minister. Zimbabwe is producing close to 100 tonnes of gold, but the bulk of that is being lost to the black market as small-scale miners, who are the main producers in the country, shun official channels, a government official has said. Mines deputy minister Polite Kambamura told leaders of the Zimbabwe Miners Federation at a meeting in Harare yesterday that a lot of gold was being lost through informal channels. Last year, deliveries to the sole buyer of gold, Fidelity Printers and Refinery, amounted to 33,4 tonnes. “The bad news is that for February, after the Reserve Bank of Zimbabwe announced the monetary policy, we have received only 20kg, which means there is a problem there. What we want is to mobilise and redirect gold to small-scale miners. We feel with the current challenges, we are losing gold to other markets. I am very convinced that we are already at 100 tonnes, but we are losing more gold to under-declaration and smuggling. We are losing gold to the other market due to some grievances,” Kambamura said.
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Zim sliding back to 2008: ZCBTA’s Zivhu. ZANU PF legislator and Zimbabwe Cross-Border Traders’ Association chairperson, Killer Zivhu has slammed the move by the Reserve Bank of Zimbabwe to introduce bureau de changes, saying this will encourage parallel market activities and take the country back to the 2008 era. According to the monetary policy, bureau de changes would change a maximum of $10 000 per day. Zivhu said the daily limit was not sufficient for cross-border traders, considering the high unemployment rate in the country, which has forced many into the informal market for survival. [The Herald: Call for packages for cross border traders]
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Botswana government denies offering $600m loan to Zimbabwe. In a statement to Business Day on Wednesday, Botswana’s permanent secretary Carter Morupisi denied that Botswana would provide the loan to Harare. “The office of the president wishes to inform members of the public that the government of Republic of Botswana and the government of the Republic of Zimbabwe are currently holding discussions under the framework of the binational commission which covers a wide range of issues which are mutually beneficial to the people’s of the two countries. As such, media reports that are currently circulating about the line of credit worth $600m that the government of Botswana has committed itself to extend to the Republic of Zimbabwe are unfounded,” Morupisi said. [See also: tweet by Botswana’s Minister of Investment, Trade & Industry, Ms Bogolo Kenewendo]
Profiled, new AfDB workings papers:
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Improving the poultry value chain in Mozambique. This paper examines the poultry industry in Mozambique and makes recommendations about how to improve the value chain in two provinces - Niassa and Zambézia. Understanding the structure and challenges of the poultry value chain is important for the revitalization of the sector and identifying issues that should be tackled through government actions and policy. Extract (pdf):
Despite these potential opportunities, the industry faces two perennial challenges. The most important, as mentioned, is limited access to finance, which hinders access to key inputs such as feed for chicken producers, seeds and fertilizer for grain producers, and machinery for chicken processors, among others. By way of illustration, only about 20% of all adults on average, and 10% in rural areas, have access to banking and financial services. Second, the poor quality of infrastructure increases the costs of service producers, including for financial institutions, as well as the provision of extension services.
In addition to these persistent obstacles to business, the sector faces more specific challenges in Mozambique. In particular, imports from neighboring countries such as South Africa, Zambia, and Zimbabwe, and as far away as Brazil, compete with local producers. Domestic production of poultry products falls well short of demand, so imports are inevitable. But the pressure created by imports on local producers is acute given how developed the industries are in these competing countries. Most Mozambican producers are small scale (falling under the micro classification in Table 1). They face high unit costs of production while more sophisticated operations in neighboring countries enjoy the benefits of economies of scale that outweigh shipping costs.
The government has tried to help the sector through a number of steps, some more dramatic than others. In 2017, the government banned poultry imports. While the ban covered many countries (including South Africa and Zimbabwe), the main target was Brazil, which was believed to be flooding the market and inhibiting the growth of the local industry. The ban was later relaxed for chicken imported from South Africa. It seems to have driven up local poultry prices, not only because of lower imports but also due to higher costs since the ban forced domestic suppliers to import eggs from Europe instead of neighboring countries. The unintended effects of the ban suggest that less dramatic and more long-term policy interventions such as facilitating access to credit, increasing formalization, and extending veterinary services are needed to help boost local production in a sustainable way. [The authors: El-hadj Bah, Ousman Gajigo]
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The diaspora and economic development in Africa. Our results have two major implications. The first is related to the political sense given to the interpretation of these results. Indeed, they should not be interpreted as an incentive for brain drain. By helping to significantly improve the level of income in Africa, the Diaspora reduces the incentive to emigrate because the latter increases when income levels are low in the country of origin. The second area relates to policy measures that could further enhance the impact of the Diaspora on economic development in Africa. Two main virtuous measures could be considered (pdf). The first is the institution of the annual African Diaspora Summer School as a vector for the transmission of development drivers (knowledge, technology, experiences in all fields, etc.). The second is the establishment of a Diaspora savings account in banks in developed countries with the aim of alleviating the constraints of financing for development in Africa. Furthermore, our findings lead to additional implications: [The authors: Blaise Gnimassoun, John C. Anyanwu. The full set of new working papers can be accessed here]
EIF strategic plan 2019-2022 seeks to help least developed countries gain more from trade (WTO)
Officially presented for the first time on 19 February in Kampala, Uganda, the new 2019-2022 Strategic Plan is designed to better position LDCs in the global economy at a time of growing concerns about trade. Drawing from past e-commerce research in a handful of countries, new targets will involve supporting the use and uptake of technology in LDCs that draws from evidence-based trade studies. Extracts (pdf):
Foreign Direct Investment and AfT flows to the LDCs. While investments to boost LDC trade are more pressing than ever, FDI flows directed to the LDCs dropped by 17.1% in 2017. Nearly two-thirds of FDI flows to the LDCs have been going to just five countries, namely Bangladesh, Cambodia, Ethiopia, Mozambique and Myanmar. In addition, despite some fluctuations in the AfT flows to the LDCs over the recent past, the relative share of the LDCs in AfT flows has remained stable overall. In light of the above, supporting the LDCs to revisit investment promotion regulations and to leverage more domestic resources is even more important. This can be achieved by supporting the private sector and particularly MSMEs to thrive, and empowering economic actors, particularly women and youth, to more effectively participate in economic activities.
As of 2017, 37 countries have integrated trade into their NPDs, thereby recognizing trade as an important pillar of development. This paves the way for further integration of trade into sector strategies. For example, in Cambodia and Malawi, trade sector-wide approaches have been adopted, providing a platform to channel resources to national trade priorities. By 2017, trade ministries in more than 15 countries demonstrated a capacity to develop and drive trade development agendas. Thirty-seven countries have established quality, functioning public-private coordination mechanisms, which has improved government engagement with the private sector and led to fruitful partnerships. For example, a Memorandum of Understanding was signed between the Government of Guinea and a Malian private company to export mangoes to Europe using Guinea’s airport.
Somalia and the IMF: First review under the staff-monitored programme (IMF)
Somalia’s economy is recovering but further efforts are needed to secure economic resilience and reduce poverty. Since 2017, growth has rebounded, inflation has slowed, and the trade deficit has narrowed. For 2018, real GDP growth is projected at 3.1% and end-year inflation at 3.5%. The exchange rate has remained stable. The authorities’ efforts to improve domestic revenue mobilization has strengthened revenue performance. This reflects efforts to broaden the tax base, and to develop the tax policy framework and administrative capacity to collect taxes. Data through November 2018 show that domestic revenue reached $161m (31% higher than the same period in 2017), and the overall cash fiscal position was in surplus by $8m.
IGAD Council of Ministers: communiqué (MFA Ethiopia)
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The new head of Afreximbank’s Southern Africa Regional Office: Humphrey Nwugo
The AfDB has posted an EOI for a trade and regional integration expert to work on, inter alia, the Visa Openness Index 2019 and other flagship publications
AUDA-NEPAD High Speed Rail Detailed Scoping Study: update from CPCS Consultants
Hugh Lamarque: Night drivers of the Northern Corridor (ABORNE)
I heard someone say there are three qualities to a good transporter: experience, liquidity, and what they called hustle – keeping things moving against the odds. Kamau has all of them, and a reputation for rapid deliveries that justifies his steep price tag. Even so, uncertainty hangs over every shipment. Will the roads be empty and the printers work? Or will the container flag up red with a revenue authority and need verification? Nothing is guaranteed and almost everything costs time.
eSwatini joins competition to host AfCFTA HQ (APA News)
In a bid to host the AfCFTA Secretariat head office, eSwatini hastily ratified the 56-year-old Vienna Convention on Consular Relations on Friday. Other countries vying for this opportunity are Egypt and Ghana. eSwatini was the only SADC member that had not signed and ratified the convention, which was eventually debated and acceded to within three hours by members of both houses of Parliament who had held a joint sitting on Friday afternoon. Motivating the motion that was moved by Thuli Dlamini, the Minister of Foreign Affairs and International Cooperation, Prime Minister Ambrose Dlamini said he would back the accession of the policy because of the benefits that come with hosting the AfCFTA Secretariat. “When we applied to host the offices we ticked all the boxes except for the convention, so it is crucial that we consider that,” he said a few minutes before the house acceded. The premier said having the AfCFTA Secretariat offices built in the country would render eSwatini the trade capital of Africa.
Namibia-Ghana Joint Permanent Commission of Cooperation: Namibia encouraged to ratify AfCFTA (New Era)
Malawi updates
Malawi Country Strategy Paper 2018-2022 (AfDB)
The business environment is improving yet competitiveness is stagnating. The 2018 World Bank Doing Business report ranked Malawi 110 out of 190 countries, a big improvement from 157 in 2013. Good progress was made in the past two years with the introduction of one-stop service centres, collateral registry and simplification of business registration processes. However, improvement in the ease of doing business is yet to be translated into a competitive business environment. The 2018 Global Competitiveness Index ranked Malawi 132 out of 137 countries with a score of 3.1 out of 7, a decline from the 2014 when the country was ranked 136 out of 148 countries and scored 3.3.
Malawi has a large micro, small and medium enterprises sector, with 987,000 enterprises providing employment to 1.1 million people. However, the country has a very low rate of formal job creation with only 11% of the employed in formal jobs. The main reason is the low rate of private investment, estimated at 6.7% of GDP in 2017, which is well below the 20-25% of GDP needed for sustained, rapid growth.
Because Malawi relies on its neighbouring coastal countries to access global markets for both imports and exports; greater infrastructural connectivity is paramount. According to the 2018 World Bank Doing Business Index, trading across borders has improved by 2.0 percentage points, however still low compared to global rankings with 117 out of 190 countries. In order for Malawi to be able to leverage its membership to the various regional bodies, more attention should be paid to supporting trade facilitation especially in line with infrastructure development along major transport corridors. Malawi stands to benefit greatly from participation in regional value chains on agro-processing in both COMESA and SADC.
Greater commodity and market diversifications are required. In 2017, the country’s main exports were tobacco (59.8%), tea (8.5%), food residues (7.2%), oil seeds (4.7%) and sugar (3.9%), while its main imports were fuel (9.8%), machinery (9.6%), electrical equipment (9.1%), books (8.0%), and pharmaceuticals (6.8%). Its main export trading partners were Belgium 22%, South Africa 8%, Tanzania 8%, Germany 6% and Egypt 6%, while import trading partners were South Africa 18%, China 15%, India 11%, Zambia 7% and UK 5%.
Malawi, Egypt to establish Investment and Trade Council (Malawi News Agency)
New Egyptian Ambassador to Malawi, Hassam Shawky, says Malawi and Egypt are working towards establishing an investment council to promote, among others, trade, investment and agriculture between the two countries. He made the remarks during a press briefing after presenting his letters of credence to President Prof. Peter Mutharika on Thursday. “We are devising a new development programme which includes courses and Egyptian experts coming to Malawi which is completely tailored for the developmental needs of the country. We are interested in the agriculture sector. We are looking at establishing an Egyptian model farm in Malawi.” [Commercial Indian hemp investors dump Malawi]
Malawi Country Environmental Analysis (World Bank)
The Malawi Country Environmental Analysis compiles and reviews existing analyses on Malawi’s environment and natural resources and explores what this evidence means for poverty and economic development. The CEA also identifies 10 strategic recommendations to address the degradation of natural resources and the environment and to promote improved environmental management, investment, and expenditure practices.
Safeguarding of transboundary heritage sites for sustainable development and peace in Africa (UNESCO)
The first regional meeting on “Transboundary Cooperation for effective management of World Heritage Sites in Africa” was held 11-15 February, in the city of Man (Côte d’Ivoire), located at 100 km from the Mount Nimba Strict Nature Reserve, the first African transboundary property inscribed on the World Heritage List. Funded by the Netherlands Funds-in-Trust, the main objective of this activity was to exchange knowledge and share experience on the management of various transboundary and transnational World Heritage sites in Africa, including the use of traditional knowledge. During this workshop, 29 working papers were presented in the presence of about 60 experts, site managers, technical and financial partners, academics, and representatives of the private sector from 20 African countries. 40 institutions involved in African heritage management were represented.
West African states press ahead with solar corridor (PV Tech)
The delivery of gigawatts-worth of solar generation across West Africa lies one step closer to reality after calls were put forward for experts to lay the foundations of a major project that was first envisaged in 2016. Nigeria, Mali, Ghana and the remaining members of ECOWAS are looking to hire two consultants – a renewable specialist and a power system planning expert – to help steer the set-up of a solar corridor in the region. Between April and June this year, the experts will produce a strategic plan on how to deliver the scheme, which aims to push solar capacity up to 2GW (2020) and 10GW (2030) across a vast swath of West Africa from Senegal to Nigeria. The call for consultants comes just a few weeks after ECOWAS states put forward a new, unified energy policy framework.
Indian Ocean Commission: Extraordinary Council Meeting convened in Seychelles (GoM)
The hosting of the second edition of the Ministerial Conference on Maritime Security and the 22nd session of the Contact Group on Piracy off the Coast of Somalia in collaboration with the Indian Ocean Commission’s General Secretariat and the EU, were the main issues discussed during the Extraordinary Council Meeting of the IOC on Saturday 23 February 2019, in Seychelles. The Ministerial Conference was convened to define a regional maritime security and safety policy in the South West Indian Ocean region.
An interview with Mansur Ahmed, President of the Manufacturers Association of Nigeria (Daily Trust)
We are exporting cement to many of our neighbouring countries and we see that part of the challenge is that infrastructure for trade is still also very weak. If you are taking cement from Lagos to Ghana, you will be amazed at the hurdles that you have to go through even though we have the West African Economic Community Agreement, which allows these goods to move freely. We argue with various agencies, both domestically and at the ECOWAS region that there is need to make this agreement actually work, particularly now that we are going into a wider agreement at the continental level. I’m sure you are aware of that there are efforts to expand intra-African trade through the execution of the AfCFTA and when this comes through, it means that we’ll now have the entire African market open to every manufacturer and every producer in the country and in any other country in Africa. It means that this is an opportunity and also a challenge. We also have to meet the requirements of our export market or even our neighbouring countries’ in order to compete with those coming from other regions. This is why we intensify efforts to strengthen the value chain in our market to strengthen the manufacturing sector and increase its contribution to the economy, GDP in particular. This is a continuing effort.
Cedi falls to record low as foreign investors shun Ghana bonds (GhanaWeb)
Ghana’s currency slumped to a record against the dollar after a dovish tilt by the nation’s central bank reduced the appeal of fixed-income assets, sapping foreign-investor demand for the country’s bonds. The cedi has weakened 11% this year, the most among more than 140 currencies tracked by Bloomberg after the central bank unexpectedly cut its benchmark rate in January and signalled more easing may be in store. Out of the GHc2.1 billion ($393m) of two-year and longer-dated maturities sold by the government through 31 January this year, foreign investors bought just 6.3%, according to data from the Central Securities Depository Ghana Ltd. That compares with more than 30% in 2018.
Ghana: Cargo traffic keeps steady growth in 2018; tipped to grow by 10% this year (GhanaWeb)
The country’s two seaports handled combined cargo traffic of over 23million metric tonnes last year, representing an 8% increase over the 21 million metric tonnes recorded in 2017, the Ghana Shippers’ Authority has said. The Port of Tema handled 15.50 million metric tonnes of the total traffic, representing 67% of the total seaborne trade, while the Port of Takoradi recorded 7.62 million metric tonnes, representing 33% of the total seaborne trade. Transit volume from the three landlocked countries of Burkina Faso, Mali and Niger however saw a 3.2% decline, with a total of 996,969 metric tonnes in the year under review. This comprised imports of 879,935 metric tonnes and exports of 87,034 metric tonnes for 2018.
Shoprite has first half-year profit drop in more than a decade (Reuters)
Shoprite Holdings, Africa’s largest supermarket group, reported its first half-year earnings decline (pdf) in more than 10 years, due to currency devaluation in Angola and supply constraints in its home market South Africa. Shoprite, which owns more than 2,800 outlets across Africa, said diluted headline earnings per share for the 26-weeks to 30 December fell to 398.5 cents from 525.6 cents in the comparable period. In the group’s Rest of Africa business, profitability suffered mainly as a result of the Angolan operation, where an 85.1% currency devaluation against the dollar since the beginning of 2018 caused affordability challenges. Rest of Africa reported a trading loss of R61.8m versus a trading profit of R552.7m.
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African trade events to diarise:
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South Africa’s Portfolio Committee on Trade and Industry will, on Wednesday, be briefed by the Department of Trade and Industry on ongoing negotiations, and implementation, of existing international and regional trade agreements.
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3rd SADC-Japan Business and Investment Forum, in preparation for TICAD VII, takes place in Osaka, Japan, on Thursday.
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The AU’s STC on Transport, Infrastructure, Intercontinental and Inter-regional Infrastructure, Energy and Tourism holds its second session, 14-18 April, in Cairo
Ethiopia’s Abiy Ahmed: Africa’s new talisman (Financial Times, Irish Times)
Describing himself as “capitalist”, he nevertheless cites Meles as saying it is the government’s job to correct market failures. “The economy will grow naturally, but you have to lead it in a guided manner.” Still, unlike Meles, Abiy is less wedded to the idea that the state must control the economy’s commanding heights. He is moving swiftly towards privatisation of the telecoms sector in an exercise that should raise billions of dollars, as well as modernising a network that has fallen badly behind African peers. Here too there are risks. “I need to realise the privatisation with zero corruption,” he says, adding that people who have stashed money abroad want to launder it back into the country. [The authors: David Pilling, Lionel Barber]
SADC-IISD Investment Facilitation Workshop: report of the August 2018 meeting (pdf, IISD)
Workshop participants concluded that, at the SADC regional level, facilitation measures should focus on information sharing, intra-regional cooperation, use and strengthening of SADC institutions, and capacity building and technical assistance. In particular, they indicated 41 options for possible facilitation measures at the regional level (as set out in Appendix B, Section B.3.2). Participants recognized the important role that already-existing regional Internet platforms on national investment laws can play as a central feature of regional support. This should be built on best-practice standards in such tools, and experience at the national and regional levels should be used to provide such best-practice standards.
The ability of SADC to develop regional best practices and standards - for example, for ensuring responsible corporate behaviour through the investment-making process - was seen as important and likely to generate more relevant standards for countries from the region. While legally binding approaches were not supported, SADC was seen as the most appropriate level for developing, on an incremental basis, standards for service delivery by governments in facilitating investment, and for incorporating standards for maximizing the sustainable development benefits in the investment-making process. Maximizing the value of regional opportunities through such types of measures was seen as a priority for participants. The ability to generate regional best practices from experience and collective research was an important element of this. There was a strong direction among participants that SADC could assist with technical assistance that supports sustainable development goals related to attracting FDI. Participants noted, for example, the absence of technical support to evaluate and assess investment proposals, to set standards for the economic development aspects of proposals and to identify pipelines of positive proposals. A related issue was the capacity to identify and attract high-level investors with a commitment to being partners in development, as opposed to investors who may have track records that are less supportive of such goals. Conversely, the ability to ensure strong anti-corruption and money laundering was also seen as important.
Bitter aftertaste? Food companies could face costly disputes over land in Africa (Reuters)
Food companies doing business in Africa risk becoming bogged down in decades-long legal disputes over land that could cost tens of millions of dollars, according to a report released on Monday. From sugar to coffee and palm oil, agribusiness firms could find that the land they are using is already claimed or occupied by local people, researchers said. Such disputes, already common, can tie up businesses for years and halt trade - and could cause up to $101m in losses over the next 25 years, said the report from the Overseas Development Institute and TMP Systems. The report, which collected data from nearly 80 firms, is part of a wider initiative to encourage responsible investment in African agriculture and develop trust between companies and communities. Almost half of all land disputes between sugar companies and local communities in Africa lasted more than 10 years, the report found.
AFDB extends funding to Tripartite Capacity Building Programme (COMESA)
The AfDB has provided $2.9m supplementary funding for the Tripartite Capacity Building Programme. The funds will be used to complete critical activities that are essential to the smooth operationisation of the TFTA. Among them is the completion of the industrial and Non-Tariff Measures databases, training of border staff and women traders in risk based sanitary and phytosanitary measures, finalization of the manual on use of Tripartite Rules of Origin and implementation of the Value Chain action plans that are outstanding. AFDB President, Akinwumi Adesina, confirmed the extra funding when he met Secretary General of COMESA Ms Chileshe Kapwepwe in Abidjan on 4 February 2019. The two discussed the TCBP and other areas of regional integration that the Tripartite Task Force needs to pursue.
SADC, Germany identify areas of continued cooperation (SADC)
The purpose of the consultations (19-20 February) was, amongst others, to agree on areas of cooperation in preparation for the next bilateral negotiations between the SADC Secretariat and the Government of the Federal Republic of Germany, to be held in November 2019.
Kenya in spat with Iran over Sh4bn tea exports (Business Daily)
Kenya has protested against a price cap that the Iranian government has imposed on tea exports to the country, putting the Sh4 billion market at the centre of a diplomatic tiff with Tehran. Iran has instructed Kenya to set the maximum price per kilo of tea that it sells to the Asian country at $3 (about Sh300), with anything above the amount attracting a punitive tax. The move has seen Kenya’s Ministry of Foreign Affairs write to the envoy in Tehran, asking him to seek clarification and lobby for easing of the new requirement. Kenya’s tea gets to Iran at about Sh400 per kilo, making it pricier than other teas sold in the country, mainly from India and Sri-Lanka. The quality of Kenyan tea is however superior compared to the others, which makes it highly sought after by the Iranians. Mr Muriithi said market factors make it difficult to sell at Sh300 per kilo in Iran. [Kenya: Exporters hold tea to beat low auction prices]
Controller of Budget says Kenya in debt crisis as loans gobble up Sh1.1trn tax (Business Daily)
The Controller of Budget has raised the red flag on Kenya’s ballooning public debt, warning that the country stands to spend more than Sh61 billion out of every Sh100 billion collected by the taxman for debt repayment this financial year. The Treasury has projected expenditure of Sh1.1 trillion on debt repayment in the 2019/20 financial year which starts in July, an equivalent of 61 percent of the total projected tax collection of Sh1.87 trillion. The Treasury says the public debt will only become unsustainable if it hits 70% of GDP. In the 2019 medium-term debt management strategy, Mr Rotich however proposed a cutback on foreign loans to ease the repayment fears.
Lacina Koné: Safeguarding Africa’s cyberspace (New Times)
Orange Cyber defense estimates that the African market for cybersecurity itself will expand from $1.7bn in 2017 to more than $2.5bn in 2020. Clearly, the opportunities are vast. Safeguarding Africa’s digital prosperity requires everyone to understand the role they play in cybersecurity – from a father using Mpesa (a mobile phone-based money transfer) to pay his child’s school fees to a Chief Technology Officer at a multinational corporation deciding on his/her company’s budget priorities. Governments can support this process by introducing strict laws through reforms, putting in place robust regulatory and legal frameworks and cooperating across borders through clusters of regional CERT (Cyber Emergency Response Team) agencies to identify threats and respond in real time. Cybercriminals move fast, but by working together and giving cybersecurity the attention it deserves, Africa can counter any attack and reap the benefits of the digital economy. [The author is Director General of Smart Africa]
India: E-commerce policy for data protection may further annoy US (Mint)
The stringent norms for data protection and online trade, proposed under the draft e-commerce policy released on Saturday, may further annoy the US, which has raised concerns over growing trade barriers in India. The proposed policy seeks to treat anonymized data collected in the country as a “national asset”, suggesting that such data generated by Indian users on e-commerce platforms, social media and search engines needs to be kept within the country. A business entity, which collects or processes any sensitive data in India and stores it abroad, needs to share such data with Indian authorities when required. Besides, such data must not be shared with a third party, including a foreign government, even with consumer consent. However, there is no restriction on cross-border flow of data among commercial entities if the data has not been collected in India. To break the data monopoly of a few technology giants that creates barriers for new entrants, the policy also proposes that startups be given access to their anonymized data. [Download: India’s draft national e-commerce policy]
Exports to jobs: boosting the gains from trade in South Asia (World Bank)
South Asia’s economy has grown rapidly, and the region has made a significant reduction in poverty. However, the available jobs for the growing working population remain limited. Policy makers are contending with lingering concerns about jobless growth and poor job quality. Exports to Jobs: Boosting the Gains from Trade in South Asia posits that exports, could bring higher wages and better jobs to South Asia. We use a new methodology to estimate the potential impact from higher South Asian exports per worker on wages and employment. We find that increasing exports per worker would result in higher wages, mostly for the better-off groups - like the better-educated workers, men, and the more-experienced workers - although the less-skilled and rural workers would benefit from new job opportunities outside of the informal sector.
Today’s Quick Links: Anzetse Were: Africa should target FDI from emerging markets China’s Xiaomi unveils $680 5G smartphone, sees growth in Africa Attention shifts to ICJ as Kenya stands ground on Somalia border dispute World Finance: Top 5 countries with the highest trade tariffs Debt build-up in frontier Low-Income Developing Countries since 2012: global or country-specific factors and way forward? Eastern Caribbean Currency Union: discussion on common policies of member countries; Selected Issues Paper |
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Marking two years since the TFA entered into force: An Update on the WTO Trade Facilitation Agreement and African countries
This tralac Trade Brief gives an account of the current ratification and implementation status of the TFA by African countries, and highlights potential benefits to African countries if they fully implement the TFA. [Author: Talkmore Chidede]
Note: The incoming Chair of the African Group at the WTO is Benin’s Ambassador Eloi Laourou
The WTO’s Dispute Settlement Body meets on Monday: the agenda items (pdf)
Air Cargo Africa: More integration and air cargo cooperation needed for intra-Africa trade to succeed (The Load Star)
Dick Murianki, general manager of cargo for Kenya Airways, told The Loadstar on the sidelines of Air Cargo Africa that one of his biggest frustrations was the lack of regional trade, which accounted for just 4% of the carrier’s revenues. “We send freighters within Africa, leaving Nairobi full, and they come back empty; we have to fill them with ballast. Nothing is coming back. It makes it very expensive to operate when we have to cost-in the return journey.” Chief executive of Kenya Airways Jan de Vegt pointed out: “The EU, US and China are big land masses with little or no Customs. Here, there are 54 countries all with different rules. It makes it very difficult.” These differing rules have hampered nations’ abilities to trade with each other, said Mr Murianki. “It makes regional trade almost impossible.” [Related Engineering News reports: Single air transport market essential for African air cargo sector, UAVs, e-commerce, set to transform air cargo]
US, others oppose EU’s listing of Nigeria, others on dirty money black list (Premium Times)
Some members of the Global Financial Action Task Force have condemned the EU’s decision to blacklist Nigeria and 22 other countries in an expanded list of countries released last week. The EU Commission said the blacklist would affect countries who have failed to take steps to strengthen their anti-money laundering and terrorism financing regimes. Insiders at the ongoing meeting of the powerful global body told Premium Times that non-EU states took turns to lampoon the decision, with the U.S. describing it as “out of order and confusing”. FATF’s president, Billingslea Marshall, announced the US government’s directive to all US banks to ignore the EU listing of the 23 countries. Countries like Japan, Argentina and others from Africa and the Middle-East agreed with the US’s position on the blacklist. Most members at the meeting faulted the EU’s position which, they said, was taken outside the known global mechanism for tackling illegal monies such as the FATF, Egmont Group and the UNODC.
South Africa: Brazilian chicken ban call ‘opportunistic’ (IOL)
The South African Poultry Association has called for a ban on Brazilian chicken imports following a salmonella scare that led to a recall of 500 tons of product globally. Broiler organisation SA Poultry Association’s general manager Izaak Breitenbach has written to the Minister of Agriculture Forestry and Fisheries Senzeni Zokwana, on behalf of the local poultry industry “requesting action” against Brazilian imports. However, consumer groups and meat importers have lambasted the move as an “opportunistic” bid to protect the interests of local producers. Association of Meat Importers and Exporters’ Paul Matthews said the call for the ban was not necessary and came at a convenient time for Sapa, which had just filed a request with the International Trade Administration Commission for an increase in duty on Brazilian and US chicken imports of 82%. [South Africa: Foot-and-mouth disease hampers hide and skin exports]
South Korea’s Hyundai opens assembly plant in Ethiopia (Reuters)
South Korea’s Hyundai Motor Co opened a 10,000-a-year vehicle capacity assembly plant in the Ethiopian capital Addis Ababa on Thursday, its first factory in East Africa. While second-hand vehicles dominate sales in the Horn of Africa country, Hyundai hopes locally-assembled cars could prove attractive given the cost of imports due to high taxes. Some of the cars will be exported to the region, Haile Gebrselassie said. “This plant is big enough (to assemble) for Kenya, Ethiopia, Somalia, Djibouti, Eritrea and Sudan,” he said. Ethiopia produces around 10,000 commercial and other vehicles a year for its home market. It imported more than 40,000 cars in 2017, automobile traders say. [VW South Africa targets record output despite headwinds]
Zimbabwe’s currency reality check puts plaster on deep wound (Reuters)
“The fact that officials finally came to their senses and ditched the notion that Zimbabwe’s quasi currency was at par with the US dollar, is comforting,” said Jee-A Van Der Linde, analyst at NKC African Economics. “With consumer prices soaring, significant amounts of multilateral debt arrears, virtually no foreign reserves, and confidence at rock-bottom, Zimbabwe’s problems are still far from over – nor is the road ahead any clearer.” [Related updates: US$ remains the base currency for trading - Zimcodd; Bloomberg: Zim says exchange rate to strengthen, thanks to ‘new currency’; Reuters: Zimbabwe’s new currency expected to trade at 2.5 vs U.S. dollar – cbank]
Uganda’s social media tax has led to a drop in internet and mobile money users (Quartz Africa)
In the three months following the introduction of the levy in July 2018, there was a noted decline in the number of internet users, total revenues collected, as well as mobile money transactions. In a series of tweets, the Uganda Communications Commission noted internet subscription declined by more than 2.5 million users, while the sum of taxpayers from over-the-top media services decreased by more than 1.2 million users. The value of mobile money transactions also fell by 4.5 trillion Ugandan shillings ($1.2m). “The decline in the amount of business could partly be explained by the introduction of mobile money tax,” the regulator said. [Perseus Mlambo: Africa’s Digital Generation Gap]
Nigeria hits oil majors with billions in back taxes (Reuters)
Nigeria has ordered foreign oil and gas companies to pay nearly $20bn in taxes it says are owed to local states, industry and government sources said, in a move that could deter investment in Africa’s largest economy. In a letter sent to the companies earlier this year via a debt-collection arm of the government, Nigerian National Petroleum Corp cited what it called outstanding royalties and taxes for oil and gas production. Royal Dutch Shell, Chevron, Exxon Mobil, Eni, Total and Equinor were each asked to pay the central government between $2.5bn and $5bn, said the sources, who saw or were briefed on the letters.
Côte d’Ivoire Economic Outlook: Understanding the challenges of urbanization in height charts (World Bank)
For the seventh consecutive year, economic growth in Côte d’Ivoire was projected to exceed 7% and reach 7.4% in 2018, despite the country’s vulnerability to external shocks and political uncertainty in the run up to the presidential elections in 2020. This was the verdict of the Eighth Economic Update for Côte d’Ivoire published by the World Bank. The country, therefore, continues to have one of the most dynamic economies in the world, boasting the highest growth rates in the West African Economic and Monetary Union, despite a slight drop of 0.3% in relation to its performance in 2017 (7.7%).
Given that by 2050, nearly two out of three Ivorians will be living in an urban center, over 10 million of whom will settle in Abidjan, urban mobility challenges will intensify if no action is taken, and solutions will become increasingly difficult to implement. The report analyzes the daily mobility constraints faced by commuters and proposes several avenues for improving urban transport and ensuring the success of the Greater Abidjan project adopted in 2016. “There are approximately 10 million trips taken every day in Abidjan and each household spends close to CFAF 1075 (about $1.80) and loses over three hours a day in commuting time,” explains Anne Cecile Souhaid, Senior Transport Specialist and co-author of the report. “That is equivalent to nearly 5% of the national GDP in 2017. However, a 20% improvement in urban mobility in Abidjan could generate gains of almost 1% of annual GDP growth.” [Jacques Morisset: The challenge of urban mobility in Abidjan]
Carlos Lopes: How African countries can ‘leapfrog’ the fossil-fuel based growth strategies of developed countries (Global Commission on the Economy and Climate)
Over the next 10-15 years we expect to invest about $90 trillion in infrastructure (more than the total current stock) and the global South will account for roughly two-thirds of this. To add to the urgency, these investment decisions will be taken in the next 2-3 years. Whether or not this infrastructure is sustainable will be a critical determinant of future growth and prosperity. We must act quickly and the following three pillars for action can guide next steps in Africa: green industrialisation, smart urban development and sustainable agriculture.
Will the African Union let climate change derail its development plans? Or will member states seize the opportunities that the low-carbon, climate resilient revolution offers for more inclusive and sustainable economies? African countries are already helping to lead this revolution. In 2016, Uganda published a comprehensive agenda for green growth, incorporating climate action into the country’s five-year national development plan. To those heads of state seeking strategies to ensure their countries’ growth and sustainable development well into the future, I encourage you to act on climate change today.
Nigerian government to screen foreigners for work permit (Premium Times)
The Federal Government will soon begin the enforcement of available immigration laws that allow only foreigners with the requisite residency and work permits to live and work in the country. The Minster of Power, Works and Housing, Babatunde Fashola, disclosed this in Lagos on Thursday in a special event, “BRF GABFEST” organised in his honour. The Minister said the government is currently undertaking the audit of foreigners working at various work sites and businesses across the country to determine the population of foreigners working in the without a valid work permit. “Every foreigner who has the work permit to come to Nigeria legally is welcome. But, if you don’t have the relevant papers, we will take you out,” Mr Fashola said.
Obasanjo, experts meet on population in Africa (The News)
Former President, Chief Olusegun Obasanjo and 18 global experts in population on Tuesday, met to fashion out how to make Africa’s population an asset rather than a liability. At the Africa Progress Group (APG) organized international round table session, held at the Olusegun Obasanjo Presidential Library, the experts, with South African philanthropist and businessman, Jonathan Oppenheimer as special guest, presented diverse papers on population issues, which they noted is a course for concern. “To ensure that Africa’s population is an asset to development, after careful consideration of successful practices in managing populations across the world, participants recommended to African leaders as follows:...”
Take no-deal Brexit off the table, says International Chamber of Commerce (ICC)
A failure to deliver a deal on the UK’s withdrawal from the EU will add more barriers to global trade and risk thousands of UK jobs, said the Secretary General of the world’s largest business organisation. Noting the UK’s historic role as a champion for global trade, ICC Secretary General John W.H. Denton warned that a “no-deal” Brexit will dangerously add additional barriers to trade and investment at a time when protectionist measures worldwide are already approaching alarming levels. With regard to Brexit, ICC has continually called on the UK to seek the closest possible trading relationship with the EU to keep cross-border trade as frictionless as possible. [UK Department of International Trade: update on existing trade agreements if UK leaves EU without a deal; Ngaire Woods: Brexit’s Lost World]
Mohamed A. El-Erian: The dialectic of global trade policy (Project Syndicate)
It is often said that with risk comes opportunity. What initially was viewed as an unfortunate US shift to protectionism may in fact have opened a window to improve the functioning of the global economy and world trade. The next few months will be critical.
Today’s Quick Links: WTO trade indicator points to slower trade growth into first quarter of 2019 Ivory Coast hosts third regional trade policy course Brexit a hot topic for SA fruit exporters CBL Gov. Patray stresses collaboration among ECOWAS central banks ITC guide to Chinese private investment in Africa: insights from SME competitiveness surveys (in Chinese) |
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Diarise: SADC Council of Ministers meeting (15-16 March, Windhoek). Ministers will consider a number of strategic documents, receive reports on the implementation of the priority areas of the revised RISDP 2015-2020, review implementation of the 38th SADC Summit, approve the SADC Secretariat’s budget for the year 2019/2020.
Underway in Arusha: 8th AUC/RECs Sub Committee Meeting on Customs Cooperation. The three-day meeting will also provide updates with regards to the adoption of the AU-wide Trade Facilitation Strategy, identify areas of cooperation and the form of cooperation and, where possible, consider undertaking joint activities.
Contemporary Issues in African Trade and Trade Finance (Volume 4, Number 1, December 2018, Afreximbank). Profiled contribution, by David Luke and Lily Sommer: The AfCFTA – opportunities for industrialization in the digital age (pdf)
Recent estimates for the United States in the period 2010–2016 suggest that for every company that reshores production, 126 African jobs are lost. Until now, reshoring has occurred only on a small scale, but it has been more than offset by new offshoring activities. Some leading firms such as Adidas, Phillips, Fort, and Caterpillar have, however, begun to reshore traditionally labor-intensive manufacturing closer to the home market, and incentives to reshore are expected to increase as the cost of automation falls. This may potentially exclude African countries from participating in GVCs, constraining their options for productive employment, learning and skills development, technology transfer, and industrial upgrading. Although African countries still have time to adapt to the digital future, they have a window of opportunity to expand production in activities where digital technology innovation and/or installation has been slow. The digital economy offers significant opportunities for MSMEs in Africa to innovate. It offers new options for accessing finance, labor, inputs and production services, customer service, sales channels, and marketing locally and at low cost. Multinational companies typically locate their research and development centers in advanced economies and adapt innovations to developing country contexts.
The next phase of AfCFTA negotiations, which will focus on investment, competition policy, and intellectual property rights, should address digital technology. Competition in digital markets is more complex than in traditional markets, since the sector typically includes platform-based business models, multi-sided markets, network effects, and significant economies of scale. Digital markets are also characterized by relatively higher rates of investment and innovation, which lead to rapid technological progress and disruptive innovation. African authorities concerned with competitiveness should strengthen their expertise in intellectual property-intensive and high-tech industries. Although the digital economy creates global markets for content and rights holders, it also creates a threat of increased piracy. A framework that protects intellectual property rights will need to be designed to protect African-grown innovations, while also building in sufficient flexibility to facilitate the transfer of digital technologies from outside the continent.
Digitizing Egypt: update from Minister of Communications and Information Technology, Amr Talaat (Egypt Today)
ICT performance in 2018. In 2018, Egypt’s exports reached $2.5bn in one year, growing 38% in investments in the sector, from LE 15 billion to LE 21.28 billion according to Talaat, who noted that the rate is high, but the number is still small. On a job creation basis, the minister announced plans to create 100,000 more jobs until 2022 in the ICT’s export business, stating that the number of employees in the sector has risen 13% y-o-y to about 175,000. ICT strategy. “Our plan is to grow 55% of Egypt’s export and to have centers or free licenses in the state that export outside the country,” the minister stated, adding that the number of free licenses is expanding and that the ministry is trying to expand and strength them further. “We have 25% that we need to bring in investments of international companies to set up centers in Egypt, depending on Egypt’s market potential.” To bring these investments to Egypt, the ministry put a strategy that stands on two main pillars; one is human development and the second is a digital transformation for creating a digital economy in Egypt.
Moroccan exporters: Free trade with US did not profit Morocco (Morocco World News)
The Moroccan Exporters Association (ASMEX) recently met US Department of Commerce Foreign Commercial Service Officer Nathalie Scharf in Casablanca. The meeting discussed possible future collaborations from a shared profitability perspective, according to Maghreb Arab Press. “The free trade agreement between Morocco and the US has not been beneficial to Moroccan exporters, given the size of the US market and the complex procedures yet unfamiliar to Moroccan companies,” said ASMEX President Hassan Sentissi El Idrissi. “This agreement should be reviewed in such a way as to consider the reality of Moroccan [small and medium-sized enterprises].” Both sides proposed ideas to boost Moroccan exports to the US market. One option involves setting up a program to support and refer Moroccan exporters to major US clients. The two parties also jointly proposed signing a tripartite memorandum of understanding between ASMEX, the Moroccan Investment and Export Development Agency (AMDIE), and the US diplomatic representation for the Select USA program.
Export to grow – Nigeria’s opportunity (Stears Nigeria)
Nigeria’s weak connection to the global economy creeps up in many areas; one of these is government revenues. South Africa collected $83bn in taxes in 2018, and Nigeria collected under $20bn even with three times the population. Part of the problem is the absence of a sophisticated private sector that creates jobs, expands growth, and provides taxable income. With nearly identical GDP’s, South Africa’s stock market capitalisation is over $1 trillion. Nigeria’s? About $31bn. There is no magic to why Nigeria currently has the highest number of poor people in the world. How will we collect taxes when wealth isn’t available? How will wealth be available when people aren’t plugging into the global economy? We understood this in the 1960s when regions had commodity boards that connected Nigerian farmers to the global supply chain. Of course, we lost all this once we discovered oil. We have a large population that is disconnected from the global economy. They don’t do agriculture, cut flowers, sew dresses, mine copper, or assemble phones. Our plug to the world is mainly oil, an industry that cannot produce jobs en masse. The question lingers: How can our large population benefit us and the world? [The author: Seun Onigbinde]
Tanzania rebases economy, 2015 GDP now 3.8% larger – stats office (Reuters)
Tanzania has changed the base year it uses to calculate economic output to 2015, and data from the National Bureau of Statistics showed its economy was 3.8% larger in that year. The bureau said in a document seen by Reuters on Wednesday it had changed the base year from 2007 previously, and calculated the economy’s size in 2015 at 94.3 trillion shillings ($40.56bn) at current prices, up from 90.8 trillion shillings ($39.05bn) using 2007 as the base year. Tanzania last rebased its economy in 2014. [ pdf Revised National Accounts Statistics Base Year 2015: Summary report (432 KB) ]
Tanzania, Barrick agree on plan to settle Acacia dispute (The East African)
Tanzanian authorities and Canadian miner Barrick Gold say they have worked out a plan to settle the disputes between the government and Acacia Mining Plc. The announcement followed a meeting between President John Magufuli and Barrick’s chief operating officer for Africa and Middle East Mr Willem Jacobs at State House Dar es Salaam on Wednesday. “Everything is all set, we are now ready to move on,” Tanzania’s Legal Affairs minister Mr Palamagamba Kabudi said, adding that the implementation is set to begin before end of March. “Significant amounts of real value have been destroyed by this dispute and, in Barrick’s view, this proposal will allow the business to focus on rebuilding its mining operations in partnership with their respective stakeholders,” Barrick said in a statement.
Tanzania U-turns on latest sugar imports ban (The East African)
Tanzania has now backtracked on its decision to ban sugar importation, a week after freezing the issuance of permits. The Minister for Agriculture, Mr Japhet Hasunga, told journalists on Wednesday that the government was now content with the plans by local manufacturers to produce more sugar. “We are now satisfied with the companies’ strategic plans to increase sugar production and that is why we have decided to allow them to supply and import sugar for domestic consumption.” Last week, Mr Hasunga had accused the factories of importing “sugar very fast, overlooking their role of producing,” adding that a freeze on the issuance of permits would force them to concentrate on production. Mr Hasunga said the country has enough stock until May, and that permits would be issued to non-sugar producing companies from June to bridge the gap. The country produces about 320,000 tonnes of sugar against a national annual demand of 670,000 tonnes.
New currency for Zimbabwe as foreign currency crisis deepens (Times Live)
Reserve Bank of Zimbabwe governor John Mangudya has introduced a new local currency - “RTGS dollars” - as the country’s severe foreign currency crisis persists. The announcement was made on Wednesday. Mangudya also announced that the country had ditched the 1:1 ratio between Zimbabwe bond notes and US dollars, a rate maintained by the central bank for nearly three years. Mangudya, who presented the monetary statement after several weeks of delay, also opened up an interbank system where the RTGS dollars would be traded for foreign currency by local banks on “a willing buyer and willing seller basis”. Some of the other highlights of the pdf Monetary Policy Statement (1.27 MB) include:
Effective 25 February, depositors will be able to move US dollars locally between banks under the interbank system; Essential imports such as fuel and electricity will continue to have forex allocated by the Forex Allocation Committee; Gold producers will keep 55% of their earnings in foreign currency; Tobacco and cotton growers will receive 30% of their earnings from crop sales in foreign currency; Tobacco merchants will have 80% of their earnings in foreign currency; All forex holdings will be liquidated within 30 days at the market rate for the day; and a legal instrument will be gazetted that allows for the use of RTGS dollars and all entities, including government and individuals, will recognise the new currency. [Reactions canvassed by NewsDay]
UK to invest up to £30m through partnership with African Union (Dfid)
The UK is set to inject up to £30m into prosperity and security projects across Africa as it steps up its investment in the continent, Minister of State for Africa Harriett Baldwin has announced today. The funding boost comes as Britain signs a new strategic partnership with the African Union, strengthening the engagement between the continent and the UK Government. The funding, which forms part of the partnership agreement, and will be spread over three years, will be used to train peacekeepers in Kenya, assist free and fair elections, and support the next phase of negotiations for the African Continental Free Trade Area.
Beyond the Gap: how countries can afford the infrastructure they need while protecting the planet (World Bank)
“Beyond the Gap” aims to shift the debate regarding investment needs away from a simple focus on spending more and toward a focus on spending better on the right objectives using relevant metrics. It does so by offering a careful and systematic approach to estimating the funding needs (capital and operations and maintenance) to close the service gaps in water and sanitation, transportation, electricity, irrigation, and flood protection. The main innovations of this work relative to other investment needs estimates are the following:
Today’s Quick Links: Morocco, Ethiopia to foster trade and investment partnerships Turkana oil: 18 firms in list of Kenya’s early oil bidders Rwanda border open to imports from Uganda amid trade wars in EAC 4th Pan African Forum on Migration (19-21 November 2018): pdf final report (1.13 MB) Africa must invest in the new ‘high seas’ treaty Egypt, Russia agree to establish company to operate $7bn Russian industrial zone |
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The continued relevance of S&DT in favour of Developing Members to promote development and ensure inclusiveness: a communication from China, India, South Africa and Venezuela circulating at the WTO
The current Special and Differential Treatment (S&DT) provisions in the WTO agreements were established through negotiations and compromises and were not gifts granted by developed Members. Nevertheless, most of the current S&DT provisions are “best endeavour” clauses, lack precision, effectiveness, operationality and enforceability. Their actual benefits to developing Members have fallen far short of expectation. In contrast, it is developed Members that have reaped substantial benefits by seeking and obtaining flexibilities in areas of interest to them; a form of “reversed” S&DT. The WTO rules-based system has helped in the growth of trade but has not made it equitable.
Since 1995, more developing Members have acceded to the WTO pursuant to Article XII of the Marrakesh Agreement. Their accession processes, in which they made tremendous efforts, significantly contributed to upholding the core values of the WTO including free trade, openness and non-discrimination; supporting the rules-based multilateral trading system; and maintaining a transparent, stable and predictable global trade environment. The dichotomy of developed and developing Members is frequently used by almost all International Organizations to describe the structure of today’s global economy. Various indices and classification methodologies may be adopted to determine the constraints and thresholds that divide developed and developing Members but the underlying rationale throughout is twofold: (1) that there are structural features behind the UN classification that distinguish countries in terms of their development challenges; (2) that these features form the basis on which countries classify themselves and are adapted to the various mandates, functions and statistical work of the IOs. For the WTO, the status of developed and developing Members are reflected in the bargaining process, and incorporated into the final rules themselves. The self-declaration approach has proven to be the most appropriate to the WTO, which best serves the WTO objectives.
Are trade preferences a panacea? pdf The African Growth and Opportunity Act and African exports (2.10 MB) (World Bank)
Does “infant industry” preferential access durably boost export performance? This paper exploits significant trade policy changes in the United States around the turn of the 21st century to address this question. The expansion of Generalized System of Preferences products for less developed countries in 1997 and the implementation of the African Growth and Opportunity Act in 2001 is used to assess whether preferential access boosts exports of eligible products in general and apparel specifically. The phase-out of the Multi-Fiber Arrangement in 2005 is used to assess whether any expansion in apparel exports survived the erosion of preferences. To find a causal impact of these changes on exports to the United States from a given beneficiary country, the analysis uses a triple-differences regression and 26 years of newly constructed trade and tariff data at the country-product-year level (1992-2017).
The analysis finds that the AGOA boosted African apparel exports, and the expansion of the GSP increased African exports of other eligible products. While the marginal impacts on African apparel exports grew sharply in the first years of AGOA, the impacts leveled off after 2005, when the end of the MFA quotas unleashed competition from Asian countries. The illusion of sustained African apparel exports is created by three late-bloomers in East Africa offsetting the boom-bust pattern in Southern Africa and the never-significant response in Central and Western Africa. Firm-level customs data for selected countries reveal that even in East Africa, the recent export growth was driven by new entrants rather than by incumbent firms whose competitiveness might have been nurtured by the big preference margins during the early AGOA period. Understanding the heterogeneous response to trade preferences remains a challenge. However, preliminary evidence suggests that preferential access per se was not sufficient but needed to be complemented by specific domestic reforms: tariff liberalization, reduced regulatory burden, enhanced connectivity, and competitive exchange rates. [African Cotton, Textiles & Apparel Monitor: newsletter #3 2019]
Payment systems in sub-Saharan Africa (cenfri)
This two-part note series explores the state of national and regional payment systems in sub-Saharan Africa. Note 1 (pdf) explores themes and imperatives for national and regional payment systems that enable remittances. It provides an overview of the regulatory frameworks in SSA and the principles to be considered to mitigate risks within a payment system. Note 2 (pdf) explores that state and regional payment systems market development through four case studies of regional payment systems as well as five case studies of national payment systems in SSA. [Related: How are African digital platforms shaping the economic development conversation?]
EU and Southern African Development Community hold their first joint council under Economic Partnership Agreement (European Commission)
The first meeting of the Joint Council under the Economic Partnership Agreement between the EU and the Southern African Development Community took place yesterday in Cape Town. EU Commissioner for Trade Cecilia Malmström, who co-chaired the meeting, said: “Trade is a powerful tool for development and I am very pleased to see this development-oriented agreement bearing its first fruit. We need to focus now on putting into practice all remaining aspects of the agreement so that citizens and businesses on both sides can benefit fully from the opportunities provided by our partnership.” The meeting also focussed on the important role that non-state actors could play in the monitoring and evaluation of the impact of the agreement.
SADC trade with EU remains imbalanced, says Rob Davies (Business Day)
The economic partnership agreement six southern African states have with the EU, while beneficial, remains structurally imbalanced, trade and industry minister Rob Davies said on Monday. Exports from the southern African states continued to be dominated by raw materials such as mineral commodities, the minister said in an interview ahead of the first meeting of the joint council of the EU-SADC economic partnership. Davies said the EU had a trade surplus with SA but this had been reducing.
Export potential of Mauritian products in the SADC region discussed (GoM)
The export potential of Mauritian products in the SADC region, and the development of an E-commerce platform for the manufacturing sector, were the focus of a workshop held, yesterday, at Le Sirius, Le Labourdonnais Waterfront Hotel, in Port-Louis. The one-day event was organised in the context of the SADC Trade Related Facility by the Ministry of Foreign Affairs, Regional Integration and International Trade in collaboration with the Economic Development Board and the Mauritius Export Association. It provided a platform for Mauritian businesses to take stock of the findings of a market intelligence analysis undertaken in seven SADC Member States in collaboration with the EDB. [Mauritius Economic Development Board: Africa strategy]
ECOWAS: Committee of Governors and the Convergence Council meeting (Front Page Africa)
The 34th Joint Ordinary meeting of the Economic and Monetary Affairs Committee and the Operations and Administration Committee of the West African Monetary Agency opened on Monday in Dakar. The Joint Meeting was in preparation for the meeting of the Committee of Governors and the Convergence Council scheduled for 21-22 February. The key focus of the 34th Joint Meeting is to review progress on the ECOWAS Single Currency programme, scheduled for 2020 as part of the ECOWAS Monetary Cooperation. In an overview of the macroeconomic situation in ECOWAS member states, the Director General of the Agency, Mr Momodou Bamba Saho, disclosed that the economic activity in the ECOWAS continued to strengthen as real GDP was projected at 3.1% in 2018 compared to 2.3% in 2017.
This performance, the best since 2015, he noted, mainly reflected the outcome of interventions and investment in agriculture, construction and sustained performance in services in most countries as well as increased production of oil and gas in Ghana and Nigeria. The report further showed that Liberia and Gambia also contributed to the growth performance of the region for the period under review. In the area of macroeconomic convergence, the WAMA Director General noted that performance improved in the first half of 2018, in the areas of budget deficit, central bank financing of the budget deficit and gross external reserves. However, he noted that the outturn remained unchanged in terms of the number of countries meeting the criterion on average inflation.
AfDB pledges to support $985m EAC 5th development strategy (New Times)
EAC Secretary General Amb. Liberat Mfumukeko specifically sought support in the areas of Agriculture and Industry, but especially agri-industrialisation. During the meeting, Adesina noted that it was critical to link infrastructure projects with agriculture development and industrial development for the benefits to reach the common citizenry in EAC. Dr Adesina also agreed to support establishment of an AfDB coordination and capacity building unit at the EAC HQs noting that the AfDB portfolio has grown and therefore need for more coordination, strategic and analytical capacity. He said the bank is committed to present EAC bankable projects to the AfDB coordinated African Investment Forum in November 2019 in South Africa. A joint team of EAC and AfDB will work on preparing bankable projects for presentation to that effect.
Why SA blocked Lesotho’s wool in transit to China (MNN Centre for Investigative Journalism)
Lesotho Wool Centre’s failure to secure a veterinary transit (export) permit has caused its 1248 bales of wool worth M21 million and destined for China to be barred from passing through South Africa. The wool, ferried in 12 trucks from Thaba-Bosiu in the Maseru outskirts but was dramatically barred entry into South Africa at the Maseru border on 16 February, may remain blocked from transit for weeks until the required permit is secured. Maseru Dawning Trading (Pty) Limited, a Chinese owned broker that has controversially secured a government deal to auction and export the product under the umbrella of the Lesotho Wool Centre, has previously succeeded to evade mandatory procedures and transited the wool unlawfully through South Africa to China. The MNN Centre for Investigative Journalism has learnt from Dr Luana Schoeman, a Deputy Director: Import Export Policy Unit of Animal Health in the South African Department of Agriculture, Forestry and Fisheries, that the general procedure of the World Organisation for Animal Health is that for any animal product in transit “countries may require some documentation.” ”In South Africa, in-transit or imports are treated the same way. Anyone who wants to export must apply for a transit permit which takes about five days without hiccups.”
More problems for MTN Uganda as authorities query sales figures (Business Daily)
Uganda accused the country’s biggest telecoms operator, MTN Uganda, on Tuesday of underdeclaring its sales and causing public revenue losses, in a further souring of relations with the South African-owned company. The company is a unit of South African telecoms giant MTN Group, which has also had problems in Nigeria where the central bank last year accused it of repatriating $8bn without the correct paperwork. The row was later resolved after the company paid a token settlement. Ugandan government spokesman, Ofwono Opondo, said scrutiny of MTN came after the government acquired the capacity to monitor telecom firms’ transactions for tax compliance and reporting purposes. “It is as a result of that technical capacity that MTN and its officials have run afoul. They have been found that in some instances they have not been making full declarations of transactions which constitutes undermining Uganda’s economy.”
Spanish citrus sector takes stock (Fruitnet )
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The continued relevance of S&DT in favour of Developing Members to promote development and ensure inclusiveness
Communication from China, India, South Africa and the Bolivarian Republic of Venezuela, for discussion at the Formal Meeting of the WTO General Council on 28 February 2019
The persistence of the enormous development divide between the developing and developed Members of the WTO is reflected on a wide range of indicators.
It is evident in levels of economic development, industrial structure and competitiveness, such as GDP per capita, poverty levels, levels of under-nourishment, production and employment in agriculture sector, trade in services, receipts from IPR, share of trade in value-added under GVCs, energy use per capita, financial infrastructure, R&D capacity, company profits, and a range of institutional and capacity constraints, among other things. Despite impressive progress achieved by developing Members since the creation of the WTO, old divides have not been substantially bridged and, in some areas, they have even widened, while new divides, such as those in the digital and technological spheres, are becoming more pronounced.
Against this background, recent attempts by some Members to selectively employ certain economic and trade data to deny the persistence of the divide between developing and developed Members, and to demand the former to abide by absolute “reciprocity” in the interest of “fairness” are profoundly disingenuous. The world has indeed changed in many ways since the GATT and the establishment of the WTO, but in overall terms the development divide remains firmly entrenched. It is therefore of greater concern that some Members would attempt to ignore this reality in an effort to deprive developing Members of their right to develop.
Capacity constraint remains a serious problem for developing Members at the WTO. Notably, they often lack the requisite human resources, negotiating capacity, well-functioning intra-governmental coordination mechanisms, and the effective participation of social partners in trade negotiating processes. These deficiencies diminish not only the ability of developing Members to negotiate, but also the effectiveness of translating negotiated outcomes into measures for domestic economic growth.
The multilateral trading system, from the early days of the GATT until the establishment of the WTO, has recognized the differences in levels of economic development and wisely ensured that Special and Differential Treatment (S&DT) would be one of its cornerstone principles. The S&DT principle was understood as a way to ensure that negotiated outcomes would accommodate differences in levels of economic development as well as the capacity constraint of developing Members. It would allow developing Members the space to calibrate trade integration in ways that help them support sustainable growth, employment expansion and poverty reduction.
The current S&DT provisions in the WTO agreements were established through negotiations and compromises and were not gifts granted by developed Members. Nevertheless, most of the current S&DT provisions are “best endeavour” clauses, lack precision, effectiveness, operationality and enforceability. Their actual benefits to developing Members have fallen far short of expectation. In contrast, it is developed Members that have reaped substantial benefits by seeking and obtaining flexibilities in areas of interest to them; a form of “reversed” S&DT. The WTO rules-based system has helped in the growth of trade but has not made it equitable.
Since 1995, more developing Members have acceded to the WTO pursuant to Article XII of the Marrakesh Agreement. Their accession processes, in which they made tremendous efforts, significantly contributed to upholding the core values of the WTO including free trade, openness and non-discrimination; supporting the rules-based multilateral trading system; and maintaining a transparent, stable and predictable global trade environment.
The dichotomy of developed and developing Members is frequently used by almost all International Organizations (IOs) to describe the structure of today’s global economy. Various indices and classification methodologies may be adopted to determine the constraints and thresholds that divide developed and developing Members but the underlying rationale throughout is twofold: (1) that there are structural features behind the UN classification that distinguish countries in terms of their development challenges; (2) that these features form the basis on which countries classify themselves and are adapted to the various mandates, functions and statistical work of the IOs. For the WTO, the status of developed and developing Members are reflected in the bargaining process, and incorporated into the final rules themselves. The self-declaration approach has proven to be the most appropriate to the WTO, which best serves the WTO objectives.
Development divide
Many developing Members of the WTO have made significant economic progress over the past decades. However, it is also a reality that despite their efforts, they have not come anywhere near catching-up with the developed Members. Further, the gap between the developed and developing Members appears to have actually widened over time, instead of getting reduced. The development divide, which was taken note of in mid-1960s in Part IV of the GATT, continues to remain relevant today - perhaps even more relevant. Attempts at ignoring the need for S&DT provisions, or diluting it, is fraught with the risk of making future negotiations in the WTO even more difficult than today.
In spite of significant efforts made by the developing Members, the standards of living in most of these Members fall far behind that in the developed Members. The gap between the developed and developing Members is manifested in two ways. First, with reference to an indicator, the difference in value between the developed and developing Members widens over time; and second, even if the difference in value does not widen over time, the gap between the developed and developing Members during a time period is substantial. In respect of the indicators discussed below, the gap between the developed and developing Members has remained substantially high. In fact, in many cases the gap has considerably widened.
Besides, the essence of development is the human being. Hence, per capita indicators must be given the top priority when assessing the development level of a country. In WTO agreements, all the indicators used to assess development are based on per capita calculation. For example, in Article 8.2 (b) (iii) of Agreement on Subsidies and Countervailing Measures (ASCM), “income per capita”, “household income per capita” and “GDP per capita” are mentioned for the purpose of measuring the economic development of a member.
Trade: Trade in Services, IPR, GVC Trade in Value-added
According to UN’s World Economic Situation and Prospects Report 2018, in 2016, the population of developing economies constituted 85% of the global total, while their share in global services export was less than 30%, and their shares in the export of financial, telecommunication and other high value-added services were even lower. According to the WTO, the services export per capita of major developing Members was only 10% that of developed ones.
Since the creation of the WTO in 1995, in terms of the receipts of charges for the use of intellectual property rights, developed Members have not only maintained a dominant position but also witnessed much higher growth in contrast to developing Members. In 1995, the IPR receipt of charges of the European Union, the United States and Japan was $14.7 billion, $30.3 billion and $6.7 billion, respectively; by 2017, the figures had increased to $144.1 billion, $127.9 billion and $41.7 billion, respectively. The 2017 figures were respectively 30 times, 27 times and 9 times that of China ($4.8 billion); 206 times, 183 times and 60 times that of India ($700 million); 240 times, 213 times and 70 times that of Brazil ($600 million).
Compared with developed Members, developing Members have a heavier yet fragile reliance on trade. In the process of globalization, thanks to the comparative advantages in labour, some developing Members have been integrated into the global value chain. However, they remain at the lowest end of the “smile curve” by providing raw material, cheap manufacturing or assembling services, with low added-value but high risk.
Capacity constraint
As stated on the WTO website, the multilateral trade rules, the negotiating forum and the dispute settlement system of the WTO are not policy goals in themselves. Rather, they should be translated into the negotiating and participating capacity for developing Members. Thus, it is of vital importance to strengthen capacity building.
The OECD divides the level of negotiating capacity into five folds: (1) the negotiating skills and performance of negotiators; (2) the management capacity and potential of the institutional mechanisms; (3) the capacity of intra-governmental policy coordination; (4) the regulatory framework and public governance; and, (5) social norms and public awareness.
Based on relevant research and case studies of international organizations, the capacity constraint of developing Members in the WTO is reflected in the following aspects:
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The lack of negotiating capacity at human resources level: From the GATT to the WTO, developed Members have been in a dominant position in the initiation of negotiations, the design of rules, the assertion of rights, and even the “flexible use of rules”. However, developing Members, due to lack of resources are usually short of negotiators (especially experienced ones) and thus they are unable to achieve their objectives in the negotiations, as well as manage negotiation outcomes. Furthermore, the government budget is so limited that it is often the case that negotiation officials are not able to participate in negotiations in a systematic way.
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The lack of coordinating capacity at institutional level: Multilateral trade negotiations involve governmental agencies of foreign affairs, economy, industry, trade and other agencies of a member, which require overall coordination, speedy response and flexible adaptation. However, developing Members usually lack a unified policy across different departments and have difficulties in fully assessing and accurately analyzing the impacts of multilateral trade negotiations on the economic system, industrial development, among others; and formulating the national trade negotiation strategies and tactics accordingly. Such incapability leads to deficiencies in the leadership, stability and continuity of trade negotiations.
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The lack of negotiating and supporting capacity at social level: Think tanks and experts have insufficient foresighted visions and suggestions on trade negotiations, and thus failing to provide sufficient academic support to the government’s engagement in the global governance. The business community has not fully recognized the benefits of the trade negotiations and lacks an awareness of cooperation with negotiation officials. The popularization and advocacy of knowledge of multilateral trade negotiations are also insufficient.
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The former Chairperson for Group of 77, Ambassador Luis Fernando Jaramillo from Colombia, stated that “…in many instances translating these multilateral trade rights into concrete trade advantages requires action by governments with active support of the business community. Many developing Members have found themselves poorly equipped in terms of institutions, human and financial resources dedicated to this objective.”
In a word, the fact is that, for the multilateral trade negotiations, developed Members are usually well and proactively prepared, while developing Members often rush to respond in a reactive manner. There is a big asymmetry between the two in formulating multilateral trade rules due to the capacity constraint. The formal “de jure” equality cannot mask the “de facto” inequality in reality.
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EU, SADC hold their first Joint Council meeting under the Economic Partnership Agreement
The first meeting of the Joint Council under the Economic Partnership Agreement between the European Union and the Southern African Development Community (SADC) took place in Cape Town on 19 February 2019.
European Union Commissioner for Trade Cecilia Malmström, who co-chaired the meeting, said: ”Trade is a powerful tool for development and I am very pleased to see this development-oriented agreement bearing its first fruit. We need to focus now on putting into practice all remaining aspects of the agreement so that citizens and businesses on both sides can benefit fully from the opportunities provided by our partnership. The decisions taken today by the Joint Council make us advance in the right direction.”
In the meeting, the EU and SADC representatives have adopted decisions that will ensure an efficient functioning of all institutions created by the EPA. The meeting also focuses on the important role that non-state actors should play in the monitoring and evaluation of the impact of the agreement.
The EU signed an Economic Partnership Agreement (EPA) on 10 June 2016 with the SADC EPA Group comprising Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland. The agreement became the first regional EPA in Africa to be fully operational after Mozambique joined in February 2018.
The EU’s Economic Partnership Agreements aim at promoting trade with participating countries, and ultimately contribute, through trade and investment, to sustainable development and poverty reduction. The EU-SADC EPA is also one of the building blocks towards the future African Continental Free Trade Area (AfCFTA).
Joint communiqué
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The first Meeting of the Joint Council of the EU-SADC (Southern African Development Community) Economic Partnership Agreement (EPA), was held on Tuesday, 19th February 2019 in Cape Town, South Africa. Honourable Bogolo Joy Kenewendo, Minister of Investment, Trade and Industry of Botswana and EU Trade Commissioner, Cecilia Malmström co-chaired the meeting. Commissioner Malmström was accompanied by Honourable Ms Maria Magdalena Grigore, State Secretary for Development Cooperation of Romania and representing the Presidency of the Council of the EU.
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The SADC EPA States were represented by Senator Manqoba Khumalo, Minister of Commerce, Industry and Trade of the Kingdom of Eswatini, Honourable Tjekero Tweya, Minister of Industrialisation, Trade and SME Development of the Republic of Namibia, Honourable Dr. Ragendra Berta de Sousa, Minister of Trade of the Republic of Mozambique, and Honourable Dr. Rob Davies, Minister of Trade and Industry of the Republic of South Africa and a Senior representative from the Kingdom of Lesotho. Several representatives from EU Member States were also present.
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The Joint Council welcomed the inaugural meeting, which took place just over two years after the start of the provisional application of the EU-SADC EPA on 12 October 2016 and took note of its mandate to provide political oversight of the implementation of the Agreement.
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The Joint Council adopted the institutional framework of the EPA containing the following documents: (i) the rules of procedure for the Joint Council, (ii) the rules of procedure for the Trade and Development Committee, (iii) the rules of procedure for Dispute Settlement and Dispute Avoidance and the Code of Conduct of Arbitrators and Mediators.
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Furthermore, the Joint Council endorsed the adoption by the Trade and Development Committee of a list of arbitrators. The adoption of these instruments completes the necessary institutional arrangements to enable full implementation of the EPA.
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The Joint Council welcomed the positive impact of the EPA on trade flows on both sides. The Joint Council agreed that in order to promote two-way trade and at the same time address certain concerns, there was a need to enhance cooperation on sanitary and phytosanitary measures and other aspects including safeguard measures relating to the implementation of the EPA.
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To fully benefit from the EPA, the Joint Council recognised the need for investment, increased manufacturing capacity, sustainable employment and diversified exports. The role of the EU’s development instruments in supporting those objectives was acknowledged and attention was drawn to new opportunities offered within the framework of the Africa Europe Alliance for Sustainable Investment and Jobs.
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The Joint Council endorsed the new trigger levels for products denoted by an asterisk (*) in Annex IV of the EPA Agreement on agriculture safeguards, which will be implemented following internal processes of the Parties.
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Furthermore, the Joint Council exchanged views on the implications of Brexit.
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The Joint Council noted the importance of participation of non-State Actors in the implementation of the EU-SADC EPA and the commitment undertaken to co-facilitate the organisation of a meeting at least once per year of nonstate actors’ representatives from both the EU and the SADC EPA States to discuss EPA-related issues and EPA implementation.
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In addition, the Joint Council welcomed the commitment to undertake further steps towards the development of a common methodology aimed at finalising a monitoring and evaluation framework for the EPA.
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The Joint Council commended the co-chairs for the able leadership and guidance rendered during this inaugural meeting and congratulated the SADC EPA States’ representative, Honourable Minister Bogolo Joy Kenewendo, on assuming the Chair of the Joint Council, from 20 February 2019.
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The Joint Council thanked the Republic of South Africa for hosting the inaugural meeting of the Joint Council.
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tralac’s Daily News Selection
Conference of African Ministers of Finance, Planning and Economic Development (20-26 March) on the theme Fiscal policy, trade and the private sector in the digital era: a strategy for Africa. Profiled submissions:
(i) pdf Fiscal policy, trade and the private sector in the digital era: issues paper (635 KB) . The aim of the present report is to articulate and frame key policy issues and imperatives for African Governments to address challenges and maximize the efficiency and effectiveness of fiscal policy in a digital economy, with special emphasis on the link between trade, the private sector and fiscal performance in a digital era. In particular, the present report analyses how fiscal policy can leverage digitization to increase revenue collection and management, the benefits of digitization to the economy and fiscal policy through private sector and trade, and the challenges of administering the current revenue frameworks in the digital era.
(ii) pdf Assessing the status of regional integration in Africa (1.26 MB) . Overview of African investment trends. The international legal framework governing FDI flows in Africa is complex, consisting of bilateral investment treaties and regional investment agreements. Since the 1960s, African countries have signed 853 bilateral investment treaties, out of which 173 are intra-African. In line with global trends, the pace of concluding bilateral investment treaties picked up around the turn of the century, but it has slowed significantly in recent years. Many of the existing African bilateral investment treaties belong to the old generation marked by broad standards of treatment. Those unreformed treaties can make African countries vulnerable to costly investor disputes. See Figure V: Evolution of bilateral investment treaties in Africa (1980 − December 2018)
Free movement of persons and right of establishment. Overall, as of December 2018, only 11 African countries offered liberal access, either they did not require a visa or allowed one to be obtained upon arrival, which indicates that most countries on the continent still have restrictive visa policies. Going forward, removing visas or offering more visas on arrival could help to make the free movement of Africans a reality. To date, 30 countries have signed the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment; however, the implementation of it remains challenging.
Infrastructure Integration: road transport. Road density in Africa is more than four times lower than the world average, 10 and only 25% of the continent’s road network has been paved compared to more than 50% worldwide. Rwanda, the highest ranked African country in terms of road transport with a score of 5, is only 0.9 points away from the global leader, United Arab Emirates. Efforts are under way to promote an extensive infrastructure project, which is expected to boost significantly AfCFTA.
The mining sector. In seeking to deepen economic integration, deliberations underpinning the launch of AfCFTA have also helped to reinforce the leveraging of continental synergies with the mining sector. Those synergies include the potential for AfCFTA to foster regional linkages between mining and other economic sectors; promote regional mining policies, incentivize the development of regional mineral value chains and enhance resource corridor projects.
(iii) Final outcome report for the Intergovernmental Committee of Experts Southern Africa (18-21 September, Mauritius): pdf The Blue Economy, Inclusive Industrialization and Economic Development in Southern Africa (682 KB)
(iv) Final outcome report for the Intergovernmental Committee of Experts for West Africa (27-29 June, Cotonou): Regional integration in West Africa − new challenges and prospects
EALA commences plenary sitting in Zanzibar
The isles of Zanzibar is hosting the East African Legislative Assembly Sitting (18 February - 8 March). The President of Zanzibar and the Chairman of the Revolutionary Council, Dr Ali Mohammed Shein, is expected to officiate at a special Sitting on 26 February. Key items at the Sitting include debate on the East African Supplementary Appropriation Bill, 2019 and the consideration of various key Committee reports. The Assembly is further expected to receive a briefing by the EAC Secretary General on the status of EAC projects.
Kagame on African Union, EAC and what keeps him awake at night (The East African)
Rwanda’s President Paul Kagame has called for an urgent resolution of differences between countries in the region, which he says are standing in the way of the East African Community’s progress. In an exclusive interview with The East African, President Kagame said relations between Uganda and Rwanda are not improving because of reluctance to solve the differences. The interview discussed his tenure as chair of the African Union, his plans for the East African Community, and his leadership of Rwanda.
COMESA’s Regional Enterprise Competitiveness and Access to Markets Programme: update (Africa News)
The European Union has committed EUR 10 Million for this programme with the aim to improve competitiveness and market access of SMEs and private sector in a selected number of value chains in the COMESA region. The specificity of this programme is that it will entail a much greater role of the private sector in its implementation, alongside with some COMESA specialised institutions - the COMESA Business Council, Alliance for Commodity Trade in Eastern and Southern Africa, COMESA Regional Investment Authority, African Leather and Leather Products Institution and the Federation of National Association of Women in Business. [Speech of Ambassador Mariani at signing ceremony]
Kenya’s trade surplus with Africa drops to record low (Business Daily)
Kenya’s goods trade surplus with Africa in the first 11 months of 2018 fell below the Sh10 billion mark for the first time in more than two decades, underlining the growing uncompetitiveness of its products in the continent. The surplus - the gap between exports and imports - narrowed to Sh8.89 billion in the January-November 2018, the lowest ever recorded since 1998 when such data was publicly made available. Latest data collated by the Central Bank of Kenya show exports earnings from Africa in the 11-month period through last November slipped 2.16% compared to a year earlier to Sh200.12 billion — the lowest value since Sh171.35 billion in 2010. Imports from African countries, on the other hand, hit a record of Sh191.23 billion, a growth of 5.84%, or Sh10.20 billion, over the corresponding period in 2017, which posted a Sh181.03 billion bill. [See the infographic: Kenya’s trade with Africa. 2007-2008]
Kenya lifts China fish ban to boost supply (The East African)
Kenya has lifted a ban on fish imports following a biting shortage after President Uhuru Kenyatta’s directive against Chinese catch that had flooded the market. The ban was lifted in January, barely three months after the restrictions took effect in November. Mr Kenyatta, in ordering the ban, had said it was inappropriate to bring in the fish when local sources could well satisfy the demand. “We were forced to lift the ban to ease the shortage after a huge consignment of fish got stuck at the port, impacting negatively on local supplies,” said an official at the Fisheries Department who is not allowed to speak on the matter. Kenya imports approximately 1.8 million kilogramme of fish every month. It produces about 135,000 tonnes annual against an annual demand of 500,000 tonnes.
Gauteng eyes mega special economic zone (SAnews)
The Gauteng government will be more aggressive and decisive in pushing their vision of turning the province into a single, multi-tier, mega special economic zone. The provincial government has already started a compact and highly integrated single economy, Premier David Makhura said on Monday. He was delivering his last State of the Province Address (SOPA) at the Alberton Civic Centre, Ekurhuleni, ahead of the May general elections. Makhura said Gauteng is also leading the country in promoting intra-Africa trade with Gauteng based businesses having more than 300 Foreign Direct Investment (FDI) projects, worth R356 billion, across the major regions of the continent. These projects have created and sustained more than 45 000 jobs in Gauteng while contributing to Africa’s industrialisation. [Download: State of the Gauteng Province address by Premier David Makhura]
South Africa: “Time for business to roll up its sleeves” (Forbes Africa)
Ms Busi Mabuza has just been appointed Chair of the South African chapter of the BRICS Business Council. Also the chairperson of the Industrial Development Corporation, she speaks to Forbes Africa about her plans for trade and investment.
South Africa: Outward Trade and Investment Mission to New Delhi, Mumbai (dti)
The Department of Trade and Industry (the dti) will provide a group of companies with an opportunity to explore trade and investment opportunities in India when it leads the Outward Trade and Investment Mission to New Delhi and Mumbai from 4-8 March 2019. The purpose of the mission is to increase the trade of value-added goods and investment between South Africa and India. The companies’ trip is funded by the dti through its Export Marketing and Investment Assistance Scheme. Trade Minister Rob Davies says the mission is also part of the dti’s Integrated National Export Strategy (Export 2030) which is the country’s blueprint towards ensuring export promoting industrialisation to spur economic growth. The strategy aims to increase South Africa’s capacity for exporting diversified and value-added goods and services to various global markets.
Tanzania: Declining exports affect balance of payment (IPPMedia)
The country continued to record a negative balance of payment to the tune of $774.9m in the year ending December 2018, Bank of Tanzania said in its latest Monthly Economic Review. This stands in contrast to a surplus of $1,669.6m in the corresponding period last year. BoT said in the review that the situation was a result of widening current account deficit. But the country continued to maintain impressive foreign reserves with official reserves standing at $5,044.6m, sufficient to cover 4.9 months of imports as of December last year. “The import cover remained above the country and EAC benchmarks of 4 and 4.5 months, respectively,” said the Central Bank report. [Related: Minister assures private sector of conducive business environment]
Nigerians in diaspora remittance contribute 6.1% to GDP (Nairametrics)
Nigerians in Diaspora sent an estimated $25bn in remittances to the country in 2018, representing 6.1% of the nation’s GDP, a PricewaterhouseCoopers Economic Outlook Report (pdf) disclosed. Nigeria’s migrant remittance inflow was also 7 times larger than the net official development assistance (foreign aid) received in 2017 of $3.359bn, while the figure translates to 83% of the Federal Government budget in 2018 and 11 times the FDI flows in the same period. According to PWC, Nigeria’s foreign direct inflow growth in half-year of 2019 is expected to remain low and lower than the moderate increase for FDI growth predicated for half-year of 2018 – adding that election will be a factor in the growth process.
Herman J. Cohen: Trump may be about to undermine Obama’s Africa’s policy (Newsweek)
My message for President Trump is this: you have been wise to continue the US-Africa programs started by your predecessors of both parties. These initiatives aren’t just good for Africa, they’re good for Americans, who enjoy job growth and economic activity from our relationship with the continent, to say nothing of protecting homeland security through close cooperation with African governments. There’s no reason to let a few China hawks goad you into denying Americans those benefits.
Today’s Quick Links: IGAD chief welcomes call by AU for cancellation of Somalia debt Tanzania finds Chinese ‘Ivory Queen’ guilty of poaching China supplies 98% of Kenya’s solar panels |
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2019 Conference of Ministers: Fiscal policy, trade and the private sector in the digital era – a strategy for Africa
The 52nd session of the Economic Commission for Africa and the Conference of African Ministers of Finance, Planning and Economic Development will be held in Marrakech, Morocco from 20-26 March 2019.
The fifty-second session of the Commission will focus on the theme of “fiscal policy, trade and the private sector in the digital era: a strategy for Africa”. The Conference of Ministers provides a suitable opportunity for African Ministers to examine the fiscal policies necessary for the implementation of the African Continental Free Trade Area within the frameworks of the 2030 Agenda and Agenda 2063 and the critical role of private sector in the era of the digital economy.
The Committee of Experts will commence on Wednesday, 20 March and end on Friday, 22 March 2019. The ministerial segment of the Conference of Ministers will take place on Monday, 25 and Tuesday, 26 March 2019. The plenary sessions of the Conference of Ministers will commence with a high-level policy dialogue on the theme for 2019, followed by plenary sessions on a series of sub-themes.
Contributions from seasoned and high-level panellists from within and outside Africa will guide the discussion, which will be informed by recent findings in the concept note and technical background materials towards building consensus on priority areas for action.
Inspiring discussions are anticipated to arise from 20th session of the Regional Coordination Mechanism for Africa (RCM-Africa) and a number of side events scheduled to take place on 23 and 24 March 2019.
Issues paper: Fiscal policy, trade and the private sector in the digital era
African countries have a little over a decade to achieve the 2030 Agenda for Sustainable Development, which aims to lift millions of Africans out of extreme poverty, reduce inequality and enhance sustainable development. However, despite fiscal reforms that raised revenue to gross domestic product (GDP) ratios to an average of above 15 per cent between 2000 and 2017, there remains a significant financing gap to bridge in order to meet the Sustainable Development Goals. Experiences across the globe demonstrate that fiscal policy effectiveness and efficiency can significantly benefit from digitization processes. African countries have the potential to increase tax revenues by between 3 per cent and 4 per cent, by bringing into the tax bracket the “hard to tax” sectors such as agriculture and the digital economy, and the informal sectors. The use of digital technology alone has the potential to raise fiscal revenue by a similar percentage.
The use of digital technology in revenue mobilization and management could potentially strengthen the capacity of African Governments to implement and monitor more effective tax and expenditure policies. Digital technology, especially in big data analytics, has the potential to increase revenue and improve tax administration through lowering the cost of compliance, lowering the cost of tax collection, and increasing compliance. Through big data analytics, revenue authorities can identify new sources of revenue, in addition to being able to deepen engagement with current and potential taxpayers, in a cost-effective way. In tax policy, the availability of detailed data could strengthen the policy and decision-making processes. Similarly, digital technology can enhance fiscal discipline in public expenditure through better monitoring, ensuring that expenditures are in line with budgets and are aligned with medium-term frameworks at the national level.
Indeed, digitization has the potential to widen the tax base by boosting growth and by facilitating private sector development and trade, including intra-African trade in particular. In 2011, digitization impacted the GDP of Africa by US$ 8.3 billion, in addition to creating over 600,000 jobs in Africa. Digitization provides important benefits and opportunities for Africa’s development. In particular, small and medium-sized enterprises, which are the backbone of Africa’s private sector and which employ over 70 per cent of the workforce, stand to gain from lower entry barriers to markets and value chains, as well as support services for trade, finance and logistics.
Digital applications are already being leveraged to promote innovation and entrepreneurship, including the empowerment of traders who are women and young people, and mobile and digital solutions are contributing to filling credit gaps, and offer possibilities for productive job creation for young people. Though important progress is being made, there is a need to increase public and private investment in the development of information and communications technology and related capabilities, to help overcome various challenges faced by trade and the private sector. There is also a need to adapt and harmonize legislation on technology, including intellectual property and data privacy, to rapid technological and social changes so as to maximize the benefits of digitization.
The digital economy, however, also presents several challenges that make it difficult for governments to collect revenue. It has certain distinct features, including the use of data, which in most cases is difficult to assign a value to; and the ability to conduct business without having a physical presence. Current tax policies in most African countries are aimed at a more traditional economy, and do not take into account the distinctive nature of the digital economy, resulting in loss of revenue for governments. Governments will thus need to rethink the current taxation frameworks, to accommodate the digital economy.
The aim of the present report is to articulate and frame key policy issues and imperatives for African Governments to address challenges and maximize the efficiency and effectiveness of fiscal policy in a digital economy, with special emphasis on the link between trade, the private sector and fiscal performance in a digital era. In particular, the present report analyses how fiscal policy can leverage digitization to increase revenue collection and management, the benefits of digitization to the economy and fiscal policy through private sector and trade, and the challenges of administering the current revenue frameworks in the digital era.
Assessing the status of regional integration in Africa
Regional economic communities continue to be the main building blocks of the African Union, as envisioned in the 1980 Lagos Plan of Action and the 1991 Abuja Treaty. The key objective of regional economic communities is to facilitate regional integration and cooperation through various activities and programmes, which has culminated in the establishment of the African Economic Community.
Despite having similar objectives, the regional groupings in Africa were established independently of each other and their integration processes have progressed unevenly. While some Regional Economic Communities have achieved tangible outcomes with regard to many of the dimensions of regional integration, others have continued to struggle to meet even the basic objectives of their respective treaties and the targets of the Abuja Treaty. Despite this heterogeneity in RECs regional integration processes, monitoring and evaluating progress on the levels of implementation of their integration agendas remain a priority for them and for the African Union.
Africa, in general, has registered remarkable progress in various dimensions and aspects of regional integration. Arguably, the historic signing of the treaty to establish the African Continental Free Trade Area (AfCFTA) in Kigali in 2018 has been the greatest achievement in the continents’ integration efforts in recent years. Beyond the establishment of AfCFTA, however, a number of impediments to regional integration continue to linger, including, among them, an infrastructure deficit, low levels of macroeconomic convergence and continued threats to peace and security.
The present paper contains an assessment of the current trends in regional integration in Africa, with a particular focus on progress in the areas of macroeconomic convergence; trade, investment and market integration; free movement of persons; infrastructure, including for landlocked countries within the framework of the Vienna Programme of Action; governance, peace and security; and mining.
Trade, Investment and Markets Integration
Trade, Investment and markets integration play a key role in promoting regional integration in Africa. The implementation of AfCFTA, whose key objective is to boost intra-African trade by forging a single continental legal regime, has potential benefits, including employment creation, industrial linkages, economic diversification and structural transformation, which would contribute to efforts to achieve sustainable development.
Many regional economic communities are making progress in their efforts to promote intra-African trade. The launch of AfCFTA in 2018 is an important milestone, as it provides African countries with a safeguard mechanism in an era dominated by uncertainty following the rise of protectionism. The tables below show some trends in African exports and imports over the period 2010-2017.
The continent continues to trade more with the outside world than internally, with the European Union holding the largest share of exports from Africa, which exceeded an average of 30 per cent from 2000 to 2017.
Only the Arab Maghreb Union (AMU), the Community of Sahel-Saharan States (CEN-SAD) and ECOWAS, have continued to import more from the European Union than from Africa. EAC and SADC have increased their intra-community trade, registering an annual average of 17 and 16 per cent, respectively, during the period under review.
E-commerce, digitalization and integration in Africa
E-commerce has become a key area of interest for governments because of its impact on economic growth and sustainable development. The General Assembly has committed to harnessing the potential of information and communications technologies (ICT) towards achieving the 17 Sustainable Development Goals. The digitalization of economies presents opportunities and challenges for many countries. Shifting from traditional forms of trade to e-commerce can contribute towards lowering transaction costs and the remote delivery of goods and services. It can also spur innovation and job creation. A well-known example of this in Africa has been the emergence of mobile money solutions from which services have been extended to previously unbanked areas.
Worldwide e-commerce sales in 2015 reached $25.3 trillion, 90 per cent of which were in the form of business-to-business e-commerce and 10 per cent in the form of business-to-consumer sales. The cross-border business-to-consumer e-commerce in 2015 was estimated at $189 billion, with some 380 million consumers making purchases on overseas websites. However, e-commerce is hard to measure, and few developing countries can collect e-commerce data and statistics. The International Telecommunication Union estimates that only 18 per cent of African households had access to the Internet at home in 2017 and, on average, there are only 26 active mobile-broadband subscriptions per 100 inhabitants in Africa.
The continent is still lagging with respect to the indicators Cognizant of the growing importance of e-commerce, countries and regional groupings, with support from bilateral and multilateral partners, such as ECA, have been developing strategies and adopting policies to deal with issues related to e-commerce. The African Information Society Initiative, launched by ECA in 1996, was instrumental in developing a comprehensive regional ICT network, which contributed to the adoption by many countries of national information and communication infrastructure plans and strategies.
Some countries have made progress in implementing e-commerce projects. For example, Egypt set a national e-commerce strategy at the end of 2017 to support efforts to expand the country’s expanding digital economy and to carry out the implementation of the 2030 Agenda. Similarly, South Africa framed a policy debate around e-commerce in a document issued in 2000 entitled “Green paper on electronic commerce for South Africa”. That paper is not a policy document, as it was designed to serve as a consultative document and to raise awareness on issues that needed to be addressed during the government policy formulation processes. In it, the benefits that can be gained from e-commerce through the implementation of successful strategies and the contribution that e-commerce can contribute towards the achievement of sustainable socioeconomic growth are highlighted.
Overview of the recent economic and social development performance of Africa
Recent economic developments in Africa
As compared with 2017, economic growth in Africa declined slightly from 3.4 to 3.2 per cent in 2018. Strengthening global demand and a moderate increase in commodity prices, sustained investment in infrastructure, higher oil prices and production, particularly from new fields, strong private consumption and favourable weather conditions are key factors supporting the economy.
Some of the largest economies in Africa, such as Angola, Nigeria and South Africa, are rebounding on the back of private consumption, but their levels of economic growth remain relatively low. Growth in non-resource rich countries, such as Cote d’Ivoire, Ethiopia, Kenya and Senegal remains strong, driven largely by high public investment, especially in infrastructure. The projected GDP growth rate of 3.2 per cent is not sufficient to achieve the Sustainable Development Goal, including Goal 1 of eradicating poverty.
Africa needs to accelerate its rate of growth to double-digit figures between now and 2030 by increasing the level of investment to 30 to 35 per cent of GDP and substantially improving productivity. Investment is currently 25 per cent of GDP, much lower than that of East Asian and the Pacific economies, which were about 32 per cent in 2017. Productivity growth remains low relative to the rest of the world, and is below the levels needed for the continent to speed up economic diversification and enhance its competitiveness in the world market. African countries must embark on reforms that would help build resilience, raise potential growth and inclusiveness and contribute towards the achievement of the Sustainable Development Goals.
Accordingly, it is important to note that despite the uptick in growth since the commodity price-slump that commenced mid-2014, the per capita growth rates of the subregions of Africa have been below their population growth rates. In 2017, North Africa was the only subregion in which its population growth rate, 1.8 per cent, was below the subregion’s per capita growth, standing at 4.8 per cent. However, if Libya is excluded, the subregion’s growth rate was only 1.4 per cent, putting North Africa in line with the rest of the African subregions of reporting an economic growth rate that was less than their population growth rate. This indicates the need for African countries to enhance efforts to finance programmes that would further strengthen economic growth to accommodate population growth. Any effort related to this should be coupled with activities aimed at making government expenditure more efficient through improved public financial management and efficient allocation of expenditures. Specifically, in Africa, there is a need to widen fiscal space by enhancing resource mobilization through effective tax policy and administration and widening the tax base.
Narrowing current account deficits as exports from Africa pick up
Current account deficits continued to narrow in 2018, to 3.1 per cent as compared with 3.9 per cent in 2017, underpinned by shrinking current account deficits in oil-exporting and mineral-rich countries. Those countries have benefited from the increase in oil and commodity prices and oil production. The continent’s largest oil exporters, Angola and Nigeria, recorded improved current account balances. However, some countries, such as Mauritania, Mozambique, the Niger and Seychelles, reported widened current account deficits because of increased demand for capital imports, high fuel prices, especially in oil-importing countries, high price of food imports and increased interest payments on government debts.
Merchandise exports in Africa increased in 2017, after slowing for four consecutive years, as global exports increased by 10.6 per cent, the largest increase since 2012. Exports expanded globally in 2017, with Africa registering the highest increase of 18.3 per cent compared to the Americas, Asia and Europe. The expansion in African exports was mainly on the back of higher commodity prices, and investment and consumption expenditure. As a result, the continent’s share of total world exports increased from 2.2 per cent in 2016 to 2.4 per cent in 2017.
The increase in export receipts has helped to stabilize the level of foreign reserves in Africa. As a percentage of GDP, reserves increased from an average of 6.8 per cent in 2017 to 7.1 per cent in 2018, underpinned by economic growth in oil-exporting countries. In general, however, reserves remain below the levels before the decline in commodity prices in 2014.
Intra-African trade remains more diversified and industrialized
Primary commodities and raw materials still represent the lion’s share of merchandise exports from Africa. Fuels alone accounted for 39.4 per cent of the value of the continent’s total exports in 2017. The share of manufacturing exports of total exports from Africa has remained relatively stable over time. It ranged between 24.3 per cent in 1996 to 26.2 per cent in 2016 and then decreased slightly to 23.9 per cent in 2017. Over the period 2015-2017, on average, South Africa, Nigeria and Algeria were the top African exporters to the rest of the world.
In contrast, merchandise imports to Africa paint a considerably different picture, with total manufactured goods representing 66 per cent of total merchandise imports in 2017, most of which were imported from the rest of the world. This is a reflection of the continent’s comparatively low technology base, low productivity and continued dependence on external partners to meet its industrial needs.
Regarding intra-African trade, it is important to note that three quarters of African exports to African partners are concentrated in only 13 African countries, with South Africa alone capturing about 45 per cent of that share. Over the period 2015-2017, South Africa was the leading exporter to other African economies of food items, ores and metals, and machinery and transport equipment, accounting for shares of 28.9, 25.4 and 60.2 per cent, respectively. Eswatini was the leading exporter of raw agricultural materials, averaging 20.1 per cent of total exports in that sector, and Nigeria was the leading exporter of fuels, averaging 30.7 per cent.
When reviewing imports from African partners, the picture tends to be relatively less distorted, as 19 African countries are the recipients of three quarters of intra-African imports. As with exports, South Africa had the largest share, however, its domination in intra-African imports is considerably less pronounced. On average, over the 2015-2017 period, South Africa was the leading intra-African importer of food items, agricultural raw materials and fuels, Zambia was the leading intra-African importer of ores and metals and Namibia was the leading intra-African importer of machinery and transport equipment.
Intra-African services exports increased from $95.7 billion in 2016 to $109.1 billion in 2017, with travel, transport and other business services being the most predominant exports, accounting for 44.4, 28.3 and 14.4 per cent of the continent’s total services exports in 2017, respectively. This supports the call for trade policies aimed at enhancing the performance of the services sector, especially modern services, that have proven to have a significant impact on both developed and developing countries’ productivity. Regulatory frameworks are needed for the services subsectors that comprise a greater proportion of the sector’s exports, such as travel and transport, to boost the performance and productivity of those sectors through increased and fair competition.
Establishment of the African Continental Free Trade Area
Taking into account, the characteristics of trade in Africa discussed in the previous paragraphs and the current uncertain global context, deepening regional integration in Africa is becoming more and more necessary. Empirical analysis conducted by the Economic Commission for Africa (ECA) indicates that the establishment of AfCFTA could help boost intra-African trade and its industrial content, thereby contributing significantly to the transformation and development of Africa.
It is expected that AfCFTA would also attenuate the domination by the largest economies of Africa of the intra-African market. Indeed, the ECA analysis shows that all countries would benefit from trade expansion following the removal of tariff and non-tariff barriers within the continent and that least-developed countries would likely reap the most benefits in relative terms, especially with regard to expanding industrial exports.
The emergence of mega-regional trade agreements being negotiated without Africa could negatively affect the continent’s trade performance. Some examples of those agreements are the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, signed on 8 March 2018 in Santiago, and the Regional Comprehensive Economic Partnership, which is expected to be signed soon.
In that context, the AfCFTA reforms – on which Africa has full control – can be seen as powerful tools that could help mitigate the possible negative effects from external shocks on African economies. They can also contribute towards enhancing the continent’s trade performance by making African economies more competitive and enabling the development and upgrading of regional value chains that can assist African countries in integrating into global value chains.
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3rd STC on Finance, Monetary Affairs, Ecnomic Planning and integration (4-8 March, Yaoundé)
The 3rd Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration will focus on the theme of “Public policies for productive transformation” with discussions on sub-themes such as strategies for productive transformation in Africa; the role of regional integration and the private sector; and transformative leadership and Africa’s productive transformation.
Profiled conference documentation:
(i) pdf Financing the Union: towards the financial autonomy of the African Union (820 KB)
Implementation of the 0.2% import levy. Since the adoption of the Kigali Decision in July 2016, there has been unprecedented momentum gathered around its implementation. By 20 December 2018, there were 25 countries, representing about 45% of AU membership that were at various stages of domesticating the Kigali Decision on Financing the Union. A criteria made up of four elements was drawn to help classify a Member State as having commenced implementation of the Kigali decision:
Member States collecting the levy. Of the 25 Member States stated above, there are 15 countries that are known to be collecting the levy on eligible imports. The following are the Member States: Kenya, Gabon, Congo Brazzaville, Cameroun, Rwanda, Sierra Leone, Chad, Cote d’Ivoire, Djibouti, Benin, Guinea, Ghana, Sudan, Mali, Gambia. As of 31 December 31 2018, an amount of $61,438,497 was received from these Member States ($35,989,757, $4,039,685 as contribution to regular budget and Peace Fund, respectively, representing 60% and 33% of amount expected). Another $1,079,369 was received as advance contribution to the 2019 budget, which came from Cote d’Ivoire and Mali. All the above Member States, except Chad and the Gambia paid their 2018 contributions to the AU using the new system.
Other Member States commenced the process to implement the Kigali Decision. There are a further six Member States that are on record to have started the process of domesticating the Kigali Decision. Their current status on whether they are collecting the levy is not yet known. The following is the list of countries: Nigeria, Comoros, Mauritania, Ethiopia, Senegal, Libya.
All other Member States not yet implementing the Kigali Decision. There are currently 30 Member States that are not implementing the Kigali Decision on financing the Union. The following Member States fall under this category: South Africa, Burkina Faso, Egypt, Madagascar, Morocco, Niger, Angola, Togo, Tunisia, E-Swatini, Tanzania, Eritrea, Congo Kinshasa, Burundi, Zambia, Lesotho, Uganda, Liberia, Equatorial Guinea, Cape Verde, Mozambique, Central African Republic, Botswana, Somalia, South Sudan, Guinea Bissau, Zimbabwe, Sahrawi Arab Republic, Namibia, Sao Tome and Principe.
(ii) APRM support to member states in the field on rating agencies: concept note (pdf). The decisions to establish APRM support to member states in the field of rating agencies emerged from concerns over the impact of poor ratings in African countries by the three leading ICRAs, namely: Standard & Poor’s, Moody’s, and Fitch – which are domiciled in the USA and the UK. These ICRAs provide sovereign credit ratings in Africa, which aim to provide investors with specific insights into the creditworthiness or the ability to repay a borrowed amount together with interest, as well as the level of default risk associated with investing in a particular organisation or economy. The APRM Support to Member States on ICRAs is primarily interested in ICRAs Sovereign Credit Rating as they are essential in determining the interest rates that a borrower entity or a government must pay in servicing its debt, thus affecting the cost of capital. The APRM Support to Member States is accordingly based and modelled on this premise. The APRM Support to Member States on International Credit Rating Agencies is a paramount prerequisite to improve the continental financial architecture and access to affordable capital. The support would complement other AU instruments such as the 2009 African Investment Bank Protocol which aims to provide capital raising capabilities to Member States through the issuance and sale of both bonds and securities and assist in mergers and acquisitions operations.
(iii) pdf Draft Africa Regional Multidimensional Regional Integration Index (1.02 MB) . The AUC undertook this study with a view to producing a more understandable and broader monitoring and evaluation framework for the integration process. With the prior existence of an index (ARII), the AUC also wanted to broaden the base of integration assessment tools. In the first section, the context, basis, and rationale of the preparation of this report were recalled and explained. The existence of ARII required the study to rigorously specify its objectives, methodology and added value in terms of assessing integration. This section has set the scene for a better understanding of the work done by the AUC. Since the Abuja Treaty and the Agenda are the two key programmes on which the entire study is based, it was necessary to recall, in a second section, the main stages, the goals of the Abuja Treaty and of Agenda 2063. The deadlines for each step and the other initiatives taken were recalled as a compass for the evaluation. This section equally made an overview of the vision of Agenda 2063, highlighting the areas of integration selected among the eight priority projects. The selected dimensions were then presented in this section in order to link them to specific goals of the Abuja Treaty and Agenda 2063. There are eight dimensions : (i) free movement of persons; (ii) trade integration (iii) integration of persons or social integration, (iv) infrastructure integration, (v) financial integration, (vi) monetary integration (vii) institutional integration and (viii) environmental integration.
(iv) Report of the capacity building workshop on the role of capital markets in mobilizing domestic resources in Africa (5-7 December 2018, Gaborone); Discussion note by ACBF: pdf Capacity building for the formulation of public policies for productive transformation (539 KB)
China suspends wool trade from South Africa due to foot-and-mouth disease outbreak (ABC)
Australian woolgrowers are set to benefit from the suspension of wool exports from South Africa to China due to an outbreak of foot-and-mouth disease (FMD). The peak body of the South African wool industry, Cape Wools SA, released a statement saying that the industry decided on Friday to postpone a crucial wool auction due to China’s customs department suspending “all greasy wool imports from South Africa as a result of the foot-and-mouth disease outbreak earlier in the year”.
COMESA to intensify lobbying its member states to sign air transport commitment (COMESA)
COMESA will this year intensify advocacy activities in 15 of its 21 Member States to ensure they sign the Solemn Commitment to Implement the Single African Air Transport Market. So far only six COMESA countries (Egypt, Ethiopia, Eswatini, Kenya, Rwanda, Zimbabwe) have signed the commitment. On 28 – 29 January 2019, Africa aviation industry stakeholders met in Dakar and agreed to focus this year to finalize and execute the SAATM Implementation Road Map. They also agreed on the need for early completion of the 55-country study on SAATM socio-economic benefits to Africa. COMESA signed the memorandum of the establishment of SAATM with AFCAC in 2018. It is currently the lead REC on the formulation and implementation of an eight million euros Eastern and Southern African aviation programme to be funded under 11th European Development Fund. In ECOWAS, 13 out of its 15 members have signed the Commitment with the remaining two states expected to come on board soon. [Cross Border Traders Association of Zambia poised for support]
Zambia: World Bank adopts new country partnership framework
The World Bank Board of Executive Directors has endorsed a new five-year country partnership framework to support the government of Zambia address the structural challenges and promote pro-poor growth with a focus on rural areas. The CPF will also support expansion of market opportunities for Zambian firms through increased economic integration with neighboring countries and an adequate rural road network. It is also expected to help reduce the infrastructure gap, increase access to electricity, and water and sanitation, particularly in rural areas.
Seventh African Fiscal Forum: leveraging fiscal policy to manage risks and support inclusive growth (IMF)
The IMF’s African and Fiscal Affairs Department, the Kenyan Treasury and the EC organised the Seventh African Fiscal Forum (14-15 February, Nairobi). In their opening presentations, Abebe Selassie, director of the African Department and Vitor Gaspar, director of the Fiscal Affairs Department of the IMF highlighted the need to build tax capacity and invest in human and physical capital in a context of still muted economic growth and rising debt burdens. Kenya’s Minister of Finance, Henry Rotich stressed that if SSA is to use fiscal policy more actively to manage risks and support inclusive growth, it must do so without compromising two strategic priorities: economic and fiscal sustainability. Félix Fernández-Shaw, director at the European Commission’s DG-DEVCO, stressed the importance of making best use of all financial resources and implementing reforms to improve policies and good governance.
Mauritius is not in the European Commission’s blacklist (GoM)
The adoption of a new list of 23 countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks was announced by the European Commission, in a Press Release issued on 13th February 2019. Mauritius is not in the European Commission’s blacklist. According to a communiqué published by the Ministry of Finance and Economic Development yesterday, the European Commission’s new list not only confirms that Mauritius has in place the necessary legal framework and controls to prevent money laundering and terrorist financing risks but also underscore the effectiveness of their implementation. The 23 jurisdictions are:
Tanzania hydropower dam to cost more than double – study (The East African)
Tanzania’s Stiegler’s Gorge Dam, due to be built on a Unesco World Heritage site, will cost more than double the government’s estimates, an independent study shows. In December, Tanzania signed a deal with two Egyptian companies, El Sewedy Electric Co and Arab Contractors, to build the $3bn hydroelectric plant. Joerg Hartmann, an independent expert and assessor on the sustainability of hydropower projects, said the dam was likely to cost $7.58bn once financing and other costs were taken into account, rising to $9.85bn on account of cost overruns associated with such projects. His study was published by OECD Watch, a worldwide network of civil society organisations with more than 130 members in over 50 countries. [Download: Economic feasibility of the Stiegler’s Gorge Hydropower Project]
Batoka Gorge Hydroelectric Scheme: a macroeconomic assessment of public investment options (World Bank)
This paper aims to improve the tools available to facilitate the assessment of the macroeconomic implications of large infrastructure projects and enhance the capacity for management of public investment decisions. The macroeconomic assessment of public investment options (MAPIO) model was applied to the Batoka Gorge hydroelectric scheme to provide an analysis of impacts on key macroeconomic variables. The MAPIO model shows the project provides a robust financial and economic investment option with a net positive impact on the national economies in both Zambia and Zimbabwe. The estimates are considered conservative and the returns remain robust when subjecting the model to extreme assumptions to test the sensitivity of the results.
Ethiopia to privatize mobile telecom, aviation, energy sectors (Quartz Africa)
As part of the transition, observers say privatization of the operator must also come with full liberalization of the telecoms sector to trigger full and fairly-regulated competition. Interchanging a state-controlled sector with the private monopoly “would be the worst possible ownership model,” says Henok Assefa, managing partner at Addis Ababa-based consultancy Precise. Both the telecom segment and Ethiopia’s receptiveness to economic liberalization will also likely depend on achieving political pluralism, ensuring peace and security, and dealing with the vested interests in the ruling party who might be wary of decentralization. And while the introduction of these reforms is propitious, Ndhlovu says “it also incumbent among businesses and investors to understand Ethiopia’s disposition and remain pragmatic in their approach to the country.”
Today’s Quick Links: The current state of fruit and vegetable agro-processing in South Africa (pdf) More than just growth: accelerating poverty reduction in Kenya Creating opportunities for a new forestry economy in Mozambique Mozambique, DRC sign deals with World Bank to cut carbon emissions, reduce deforestation Does automation in rich countries hurt developing ones? Evidence from the US and Mexico China January trade surplus with US narrows to $27.3bn |
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Public policies for productive transformation: 3rd STC on Finance, Monetary Affairs, Economic Planning and Integration
Implementing effective public policies that facilitate productive transformation is essential for reviving economies. The 2019 African Union Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration will be held under the theme “Public Policies for Productive Transformation” from 4-8 March in Yaoundé, Cameroon.
Productive transformation is defined as the diversification into new products and higher value-added activities as well as in technological upgrading, the creation of more productive and better jobs and employment patterns that result in rising wages and poverty reduction (Nübler, 2014). It is imperative as it translates into economic diversification and sophistication by creating new products and higher value-added activities, improving productivity and creating decent jobs.
Despite two decades of increase in Africa’s economic growth, the continent is still facing low productivity as it relies mostly on exporting primary products. In addition, this growth did not translate into employment creation and poverty and inequality reduction. African economies must diversify away from primary production (resource extraction and agricultural commodity production) to improve their economic position vis-à-vis the rest of the world. Economies overly focused on primary production are risky because they tend to lack diversity and are vulnerable to fluctuations in global commodity prices.
The 2018 STC was held under the theme, Domestic resource mobilization: fighting against corruption and illicit financial flows. The Member States noted that these issues have been the major obstacles for growth on the continent as annually an amount of US$ 50 billion that could contribute towards Africa’s development is being lost through tax evasions, corruption, financing of criminal activities, smuggling and trafficking in minerals, wildlife, among other issues. In this regard, Member States agreed to build strong institutions and promote good governance to reduce illicit financial flows so as to channel these resources towards continental development programmes.
Building on previous STC Meeting, the theme for the 2019 STC aims to offer a platform to deliberate about the right mix of public policies which have the potential to transform African countries into productive economies. This will include defining the relevant capacities that will be required for the effective designing and implementation of the policies so they can accelerate inclusive growth and sustainable development.
Public Policies for Productive transformation
Africa is rich with many natural resources and yet considered as one of the poorest regions in the world. The African continent is endowed with numerous natural resources (such as gold, diamonds, oil, cotton, bauxite, uranium, and iron ore) and young and entrepreneurial population (AUC/OECD, 2018) – hence the potential for transformation. More effort is required towards productive transformation in Africa as most countries tend to produce and export unprocessed raw products.
Product diversification is of paramount importance as measures of diversity make strong predictions about future GDP growth. It is also widely recognized that increased productivity is achieved in countries that were able to modernize their activities and create advanced export goods. March 21, 2018 marked the beginning of a new era for the African continent when most of the Heads of State and Government of the African Union signed the historical African Continental Free Trade Area (AfCFTA), which aims to remove or reduce the barriers and constraints associated with trade. This agreement offers a huge opportunity for Africa to diversify its production and exports.
Many megatrends may shape Africa’s development dynamics and must be considered in devising the development strategies aimed at transforming the economies. The prospects include the stronger role of emerging countries, the new production revolution, the youth bulge and the demographic dividend, the urban transition and the expansion of the middle class, and climate change.
Africa’s emerging digital transformation with the availability of technologies such as robotics, cloud computing, artificial intelligence, high speed internet, offers tremendous opportunities for African firms to create new services, improve their productivity and growth and diversify their business activities. However, the new industrial structures can also exclude African firms if they lack the appropriate technological and social infrastructure as well as human resources. There is lack of capacity in governments to mobilize resources or tap into the capital markets for financing infrastructure as well as lack of competent human resources to structure financing to meet issuers’ needs. Capacity enhancement in these areas is therefore required to push the structural transformation agenda.
Africa is a very youthful continent with 19% of the global population totaling 226 million and these figures are expected to double by 2030. This youth bulge can be a huge asset, and offer an opportunity towards driving the economic, technological and social transformation if appropriate policies are implemented in order to harness their potential. Africa is churning out more than 80 percent of graduates from the humanities and social sciences to go into today’s world, which demands critical technical skills in science, technology, engineering, and mathematics. Africa needs an estimated 1.6 million agricultural scientists and 4.3 million engineers to be able to meet the first 10-year implementation plan of the African Union’s Agenda 2063.
Private firms should be the major drivers of Africa’s productive transformation as they are essential in creating jobs, mobilizing domestic resources, driving innovation and accelerating productivity growth. Innovation and technological progress are important drivers of economic development. However, for most African countries, the major proportion of domestic contribution to R&D activities is provided by the government, with little from the private sector. Despite African governments’ reiterated commitment to fulfill the promise made almost a decade ago to invest 1 percent of gross domestic product (GDP) in R&D, they are the weakest R&D investors worldwide.
The African Union Agenda 2063 calls for African countries to transform the structure of their economies through promoting quality growth that generates decent jobs and reduces poverty, supporting anti-inequality and diversifying economies to make them more resilient to shocks. Public policies for productive transformation are fundamental aspects for economic development and are key to realizing the African Union Agenda 2063.
African Union through Agenda 2063 envisions African countries with transformed economies capable of creating strong, robust and inclusive growth generating jobs and opportunities for all. Several pan-African initiatives emphasize the importance of industrialization for sustainable economic transformation. In all this, change and transformative leadership capacity is recognized as one of the most critical enablers for Africa to achieve its productive transformation.
Bearing all that in mind, it is feasible to create public policies that enable productive transformation on the African continent. It is in this context that the STC will facilitate a dialogue among Member States that will guide the continent towards economic and productive transformation. The participants will examine the nature, pattern and constraints of productive transformation in African countries, identify the successful policies and good country-case studies for productive transformation, the capacity requirements for productive transformation and the prospects for industrialization as well as the role of the private sector and regional integration.
Sub-Themes
A. Overview of the state of productive transformation in Africa
Productive transformation translates into economic diversification by creating new products and higher value-added activities, improving productivity and creating decent jobs. Understanding of the factors shaping the economic structure in African countries, drivers of exports and dynamics of employment, is essential in achieving successful productive transformation. Globally, the African continent is still experiencing low levels of productive transformation as it heavily relies on producing and exporting raw products. The level of industrialization is still low. African countries have shown no progress in product sophistication since the end of the 1960s as the prevalence of high-value goods in the production and export portfolio is still low compared to other regions. The productive structure is the key element for realizing the African Union development agenda and inclusiveness. In comparison with other regions, Africa is still lagging behind as it lacks innovation that is required for diversification and sophistication.
The globalisation of economic activity is leading to integration into fragmented systems of production with the value chains offering huge opportunities for diversification. Nevertheless, this form of specialization might not always reflect the real process of productive transformation as it might exhibit divergence between the export of manufactured goods and the level of value addition creation in the local economies. Efforts are required to develop the capability of economies to increase competitiveness of their exports, seize opportunities offered by FDIs and integration into the global value chains. The phenomenon of immiserizing specialisation due to the fragmentation process should be avoided as in this case the participation of countries in the global production systems will not have strong impacts on productivity, intensification of high-skilled labour, wages and ultimately growth dynamics.
The bottlenecks of productive transformation success include; weak productive capacities such as physical and institutional infrastructure, capital and technical skills to produce more high-value goods, financial constraints and unfavourable business environment. Another issue lies in the need for visionary and transformative leadership and mind-set change which are key to driving the industrialization agenda for African countries. Therefore, much more needs to be done in order to tackle all these issues. More diversification of the production structure and larger product sophistication would permit African countries to raise their exports to the global and regional markets as well as increase their market share in the context of fast-growing demand for modern products led by the raising middle class consumers.
B. Strategies for productive transformation in Africa
Public policies are vital for achieving the transformation agenda in Africa. Effective public policies that promote quality of exports and investments in physical and technological infrastructure development should be at the core of the transformation process for the African continent. In addition, skills development through capacity building in Science, Technology and Innovation, improvements in the enforcement of property rights and reinforcement of the regulatory framework, strong institutions, assistance to local firms and private sector development should be at the core of the transformation process for the African continent. Lack of entrepreneurial skills, access to finance, high costs of inputs, weak infrastructure development are amongst other factors constraining the competiveness and development of local firms.
Policies for industrialization should take profit from the innovation potential of local entrepreneurs. The number of entrepreneurs that can be stimulated to engage in cost discovery in modern sectors of the economy determines the range of goods that an economy ends up producing and exporting. In this regard, private initiatives need to be inserted in comprehensive frameworks of public actions.
Productive transformations leads to movements of people within and between mega-sectors, but also within and between countries as people are in search of new or better employment opportunities. Hence, governments should not only focus on implementing efficient policies for manufacturing but also support the development of both the agricultural and agribusiness sector, and the non-farm informal economy in urban and rural areas. Promoting agro-industrial development would create more productive jobs as it will shift the surplus of labour from low-productivity agriculture and informal sectors into activities with higher productivity.
For productive transformation to be efficient, the under-developed agricultural sector needs also to be addressed, especially by supporting the sectors with strong comparative advantages. Specializing in some products will generate higher growth and decent jobs than specializing in others. These promising products and sectors need to be identified and supported. African countries should continue to tap into international good practice models and learn from countries which have successfully transformed their economies along an industrial trajectory. It is however important to note that having policies for productive transformation is not enough. There is need to effectively increase implementation capacity at national, regional and continental levels.
C. Role of regional integration and the private sector
The African Continent has made remarkable progress in terms of regional integration as supported by the recent historical signing of the African Continental Free Trade Area (AfCFTA) which offers an important stepping-stone for policy action. As this Agreement will enable free trade and movement of the people within the continent, countries will need to diversify and produce more sophisticated products. In order to make the agreement operational and revive industries more investment is required to support the transformation.
Regional and global markets offer new opportunities for Africa, if governments adapt their development strategies. The refocusing upon regional trade integration offers investment opportunities in building high quality infrastructure required for a successful productive transformation (roads, railways, maritime transport, airports, water and energy regional projects, construction, etc.). Regional value chains can boost Africa’s industrialization. However, for regional integration to provide the expected benefits in trade, peace, security, investment, and above all economic transformation and sustainable development, African countries, the RECs and continental bodies need to understand the key issues and constraints, formulate and coordinate appropriate strategies and policies, and implement successfully the different regional development projects and plans.
The state provides an enabling environment for private sector economic activities by implementing appropriate economic policy reforms and providing the necessary legal and regulatory framework. It is also expected to provide some of the social and physical infrastructure, sometimes in partnership with the private sector. When this is in place, the private sector can mobilize resources, create jobs, innovate and advance technological progress.
Africa’s business opportunities are now attracting international investors and there is optimism about prospects for doing business in Africa for the coming years. Simplified administrative procedures and reduced start-up and operational costs have made the business environment more attractive. 29.5% of foreign investors cite this improvement among the main motivations to invest in Africa, compared to 12% in 2003-07. External financial inflows must better benefit diversification of the economies and productivity, and create more jobs. Inflows into Africa reached 8.8% of GDP between 2009 and 2016, significantly higher than in Asia (3.8%) and LAC (5.2%). But 36% of total FDI between 2003 and 2014 was concentrated in the extractive industry. Opportunities abound now in many other sectors such as infrastructure, agriculture, financial services, consumer products and ICT.
Fostering stronger linkages between FDI firms and the local economy is essential to create more jobs, better transfer of knowledge and technology, contribute to addressing the lack of capabilities and technological sophistication required to transform the structures of production and exports. It is important to move towards a form of specialization that result in greater value addition creation and development of local economies. In fact, the way countries participate in the global value chains and the real origin of their economic diversification and sophistication is significant to a sustainable and inclusive productive transformation. The industrial development policies should be anchored to the global value chains that offer tremendous opportunities for transformation but also should pay attention to the large participation of local operators, particularly youth and women.
An all-inclusive response taking into account all existing trade-offs have to be clearly set by governments in order to reach efficiency, ensure complementarity and avoid competition between economic sectors and activities, Regional Economic Communities, private and public spheres, development targets, nullification of impacts produced by incentives and policies, market failures with externalities, and ultimately waste of resources. In fact, policies for productive transformation are composite bundles of various types of interventions that have different impacts on growth and socio-economic outcomes. Coherent, resilient and sustainable strategies at national, regional and continental are needed in the way policies are designed in order to achieve an effective transformation that is crucial in shaping Africa’s future.
D. Transformative leadership and Africa’s productive transformation
Social and economic transformation as depicted in Agenda 2063 and the Sustainable Development Goals (SDGs) requires radical change, including a transformative leadership. Agenda 2063 and the Ten-Year Implementation Plan recognize the critical role in Africa’s transformation of leadership that is visionary, recognizes and nurtures talent, creates space for individual expression, and motivates and brings out the best in people. Historical evidence, too, indicates that successful transformation has occurred mostly in countries that were governed over long periods by a capable, credible, and committed government under strong political leadership that is skilled in devising public policies that advance socio-economic growth.
Transformative leadership could play a strategic role by supporting initiatives aimed at accelerating the successful implementation of Agenda 2063 and the SDGs, industrializing the African economies, promoting the creation of innovative technical solutions to the challenges faced by countries, modernizing the agriculture sector and developing global value chains for African products. In realisation of the importance of transformative leadership, ACBF’s most recent flagship publication (the 2019 Africa Capacity Report), is on ‘fostering transformative leadership for Africa’s sustainable development.’
Some progress has been made toward transformative leadership for productive transformation in Africa. For instance, there is evidence that development of policies that have driven long-term socioeconomic performance are correlated with transformative leadership, even though it is difficult to directly establish a causal connection from transformative leadership to socioeconomic development. Further, the framework for transformative leadership is being improved in a number of countries through constitutional changes aimed at institutionalizing the values and ethics of transformative leadership, on human rights, transparency, accountability, and codes of conduct for public officials. And most countries have established institutions to train transformative leaders.
Today, the key question remains as to how leadership in Africa can be associated with productive transformation via, for instance, the generation of economic and social opportunities, the acceleration of rural development, and the development of smart cities. Moreover, it is crucial to see how far transformative leadership has been able to promote productive transformation by building a strong and entrepreneurial human capital that takes responsibility for its own destiny.
Issues worth being examined include the role of transformative leadership in strengthening entrepreneurship, advancing economic freedom, promoting business performance and business climate for more FDI and technology upgrading, supporting budget efficiency and mutual accountability as well as participatory policy process in shifting production and export structures, ensuring coherence in long-term development plans and vision, and building human and institutional capacities. Unless capacities are built for a transformative leadership in Africa, that can spearhead effective public policies for the productive transformation envisaged in Agenda 2063 and the internationally agreed SDGs, Africa will largely remain stagnant.
Objectives
The main objective of the STC meetings will be to appraise the Ministers of the implementation status of make new recommendations especially around the current theme. The STC will provide concrete policy actions and measures required for productive transformation for consideration and approval by the African Union Summit in June/July 2019.
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Transparency, inclusivity and development needs take centre stage at the Seventh African Fiscal Forum
The International Monetary Fund’s African and Fiscal Affairs Department, the Kenyan Treasury and the European Commission organised the Seventh African Fiscal Forum in Nairobi, Kenya, on 14 and 15 February.
This annual event brings together senior officials from ministries responsible for finance across Sub-Saharan Africa (SSA) to discuss fiscal challenges facing the region. It is an opportunity for countries to share experiences and learn from each other – and its main aim is to entrench a more effective fiscal policy for the region. This year’s Forum comes at an important point, where countries are translating the UN Sustainable Development Goals into their national policy priorities, costing and financing frameworks.
The theme of this year’s Forum was Leveraging Fiscal Policy to Manage Risks and Support Inclusive Growth. Issues discussed included fiscal transparency and managing fiscal risks, addressing developmental needs, and spending to promote inclusivity. The event was attended by more than 80 participants, including officials from the finance ministries of about 30 countries and representatives from regional organisations.
In their opening presentations, Abebe Selassie, director of the African Department and Vitor Gaspar, director of the Fiscal Affairs Department of the IMF highlighted the need to build tax capacity and invest in human and physical capital in a context of still muted economic growth and rising debt burdens. Kenya’s Minister of Finance, Henry Rotich stressed that if SSA is to use fiscal policy more actively to manage risks and support inclusive growth, it must do so without compromising two strategic priorities: economic and fiscal sustainability. Félix Fernández-Shaw, director at the European Commission’s DG-DEVCO, stressed the importance of making best use of all financial resources and implementing reforms to improve policies and good governance.
A key theme running through the Forum was how to face the region’s developmental needs. According to recent IMF analysis, achieving the Sustainable Development Goals in Sub-Saharan Africa would require on average extra annual spending of 20 percent of GDP by 2030 – more than in any other region. Solutions discussed included raising government revenue by enhancing tax capacity, strengthening international taxation and limiting tax expenditures. Establishing strong governance frameworks for the much-needed scaling-up of public investment and for attracting private investment was another issue that was dealt with in depth.
How to gear government spending to promote inclusivity was another central theme. The discussions here centred around reforming subsidies and social assistance to reach those in greatest need. Gender-responsive budgeting was also considered as a way for governments to promote equality between sexes and raise economic growth through fiscal and budgetary policies.
The Forum broadly took the view of fiscal transparency as a core component of effective fiscal and risk management. Transparency in fiscal operations aids information flow and accountability, and by extension promotes good decision-making. It is an area where many countries in Sub-Saharan Africa are making a significant push, using means such as IMF-supported fiscal transparency evaluations.
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African Union Department of Rural Economy and Agriculture:
pdf
Continental strategy for Geographical Indications in Africa 2018-2023
(3.29 MB)
The protection of GIs could give African countries a natural competitive advantage since they apply mainly to agricultural and cultural products. However, it should be pointed out that unless African countries attach the requisite importance to the legal and institutional implications to geographical labelling in their individual countries, the anticipated gains and benefits will be reduced. Africa’s main challenge is to ensure that the appropriate and relevant institutional frameworks are put in place through the assistance and policy direction of the relevant state institutions and governments at large. The national regulatory frameworks of African countries on GIs are still evolving. Most countries have enforced a legal framework to protect GIs but, at the time of writing, policies and legal frameworks on GIs differ among countries (and even in countries among products).
A continental strategy should provide support to individual countries to develop appropriate systems through the drafting of a continental model law. Efforts need to be made to inform communities on the relationships among the various mechanisms so that everyone is able to understand the law. For example, confusion exists between the concepts of traditional knowledge and GIs. Furthermore, the difference between AOs and GIs is not always clear when provisions exist for both levels of protection. AOs and GIs should coexist and provisions made to understand the relationship between the two options as well as between GIs and traditional knowledge.
FinTech in Sub-Saharan Africa: a potential game changer (IMF)
While acknowledging the large potential gains from FinTech, there are concerns about new vulnerabilities that these technologies and business models may bring. New competitors without previous experience in the industry are providing innovative financial services. For instance, blockchain-based technology promises to enhance trust in economic exchanges. Its applications are designed to provide a secure digital infrastructure to verify identity, facilitate faster and cheaper cross-border payments, and protect property rights. However, these technologies may be rapidly creating new types of risks that are not well understood or covered by existing regulations. Against this background, a careful consideration of the potential of FinTech is needed to boost banking and financial development in sub-Saharan Africa.
pdf FinTech in Sub Saharan African Countries: A Game Changer? (803 KB) – Extracts: Within sub-Saharan Africa, East Africa is the clear leader in mobile money adoption and usage. Despite the success of mobile money in sub-Saharan Africa, there is a wide degree of cross-country difference (see Figure 4). East Africa developed an infrastructure that uniquely built upon the latent demand for mobile financial services in sub-Saharan Africa:
(i) East African countries favored a telecom-led regulatory model. In this framework, the telecom provider works with the financial regulator to establish the infrastructure for mobile payments. The telecom-led model has proved more successful in attracting users than the bank-led model that other sub-Saharan Africa countries promoted. (ii) East African countries tended to have a single telecom provider with a large market share, which provided an initial critical mass of users needed to push mobile money past the niche level. In Kenya, Safaricom has a share of nearly 70% of the market; in Tanzania, Vodacom has a market share of close to half. Having a large market share allowed most mobile payment users to operate on a single platform without facing compatibility issues, though this raises concentration and potential stability concerns. (iii) East African countries, particularly in the East African Community, have national identification systems. These systems facilitate faster mobile payment adoption rates and enable more secure transactions.
West Africa: Stakeholders shown how to sustain customs union in AfCFTA implementation (News Ghana)
Mr Peter Joy Sewornoo, Trade Policy Directorate of the ECOWAS Commission, said a uniform customs union liberalisation scheme, ratifications and signatures was valid for the attainment of the AfCFTA framework agreement. He said the 90% level of ambition, which constituted the sensitive and exclusion clauses of the AfCFTA framework agreement, was okayed by all parties to liberalise trade. He said there was disagreement on the remaining 10% designation for sensitive products of 7% and exclusion list of 3% for liberalisation on import value limitation, which is an anticlimax for ECOWAS member states in the journey to actualize the AfCFTA. He said the ECOWAS common external tariff implications are that the 7% sensitive products would attract 429 tariff lines and an import value of 10.3%, which would directly affect Ghana, Cote d’Ivoire, Nigeria and Cape Verde while the other 3% would draw 184 tariff lines on import value of 7.1%.
DHL Global Connectedness Index: Mauritius is SSA’s most connected country
DHL has released the fifth edition of the pdf DHL Global Connectedness Index (14.51 MB) – a detailed analysis of globalisation, measured by international flows of trade, capital, information and people. The new report represents the first comprehensive assessment of developments in globalisation across 169 countries and territories since the Brexit referendum in the UK and the 2016 presidential election in the United States. The world’s top five most globally connected countries in 2017 were the Netherlands, Singapore, Switzerland, Belgium and the United Arab Emirates. Eight of the top 10 most connected countries are located in Europe, helping make it the world’s most connected region, in particular for trade and people flows. North America, the leader in capital and information flows, ranked second among world regions, followed by the Middle East and North Africa in third place. In sub-Saharan Africa, the highest ranking country was Mauritius, which featured in 40th position, while South Africa was named the highest ranking country on the African continent itself, with an overall ranking of 56th place.
pdf Sub-Saharan Africa: key issues and US engagement (1.77 MB) (Congressional Research Service)
What is the scope of US-Africa trade and economic relations? Africa accounts for a small share of overall US trade and investment activity, making up less than 1% of such U.S. global transactions in 2017. As it has over the past several years, the US ran a goods trade deficit with the region in 2017 (totaling $10.8bn), importing $24.9bn and exporting $14.1bn. US exports are diverse while imports are mostly in primary products (oil alone accounts for over 40% but has declined significantly in recent years). Motor vehicles (exclusively from South Africa) and apparel are the region’s only significant manufactured exports to the United States. Over half of US trade with the region is with the two largest economies, Nigeria and South Africa. US foreign direct investment in the region is also concentrated in a few countries, including Mauritius ($10.4bn in 2017), South Africa ($7.3bn), Nigeria ($5.8bn), Ghana ($1.7bn), and Tanzania ($1.4bn). The small stock of sub-Saharan African FDI in the United States comes almost exclusively from South Africa ($4.1bn in 2017). See Figure 3 for a snapshot of US-Africa trade and investment.
How does the Administration’s trade policy affect US trade with the region? US trade policy has been a key focus of the Trump Administration, particularly with regard to the US trade deficit, foreign trade barriers, and the effects of import competition on US manufacturing. While US trade with Africa may be of less concern to the Administration, as such trade is minimal and US imports mostly consist of primary products, US trade policy changes could significantly affect US trade with some African countries, notably South Africa.
Focus on reciprocal trade agreements. The Administration has made reciprocal trade negotiations a top priority of its trade policy with Africa. It is likely, however, to confront the same challenges that have dogged previous US pursuit of an FTA in the region, including concern among African countries over the extensive nature of US FTA commitments and concern over how an agreement with select countries may negatively affect African efforts toward regional integration. On the first issue, the Trump Administration may be more flexible in its approach than previous Administrations, as evidenced by announcements for limited-scope bilateral US negotiations with the EU and Japan. The Administration’s stated preference for bilateral agreements rather than agreements with larger regional blocs, however, appears at odds with the push among many African states for more regionally integrated trade policy, including via the African Continental Free Trade Area, signed by 44 African states in March. Congress is also expected to play a role in determining the scope of any new U.S. agreements in the region and would have to approve such agreements through implementing legislation. [Related CRS report: Generalized System of Preferences: overview and issues for Congress]
dti update: pdf Negotiations of a rollover EPA between SACU and Mozambique and the UK (375 KB)
Extract from a presentation to the Portfolio Committee on Trade and Industry: Immediate way forward: (i) Joint legal scrubbing of the Agreement to be undertaken on 18-21 February 2019 (ii) Ministers expected to sign the Agreement early March 2019 (iii) Parties to the Agreement will follow their internal legal processes to ratify the Agreement, after which it will enter into force once the UK leaves the EU and the EU-SADC EPA no longer applies to the UK.
Uganda: Concluding statement of the 2019 Article IV Mission (IMF)
The current account deficit increased to 6.1% of GDP in FY17/18. Imports of goods and services grew by 17% – mostly capital goods associated with the large infrastructure projects – outweighing the 9% growth of exports. Financing came from FDI, public-sector debt disbursements, and a decline in international reserves. Reserves amounted to $3.2bn at end FY17/18. Uganda’s external position is weaker than implied by medium-term fundamentals and desirable policies. The current account deficit is expected to widen further during the preparation phase for oil production. Therefore, it is important to ensure Uganda maintains an adequate level of reserves. At present, international reserves are equivalent to 4.1 months of next year’s imports which is a sound buffer against potential shocks. Bank of Uganda appropriately plans to continue to build reserves opportunistically to maintain this reserve coverage. The flexible exchange rate regime continues to serve Uganda well.
Ethiopia, Africa’s top coffee producer, may triple output in five years (Bloomberg)
Ethiopia is replacing old trees and cutting existing ones to allow new stems to sprout as ageing trees become less productive. That could help boost output to between 1.2 million tons and 1.8 million tons by 2024, up from an estimated 600 000 tons in the recent harvest, the Ethiopian Coffee and Tea Authority said. Old trees account for about 60% of the 1 million hectares (2.5 million acres) of trees in production, while another 1.5 million hectares aren’t yet yielding beans, according to the authority. New trees in the country, where smallholders account for almost all output, take about three to four years to start producing.
Kenya: Illicit cigarette trade denying KRA massive revenue – BAT (The Star)
700 million counterfeited cigarettes were traded in Kenya last year, according to a market research by leading manufacturer BAT. British American Tobacco announced yesterday (pdf) that the illicit trade has grown from 12.4% to 14.1%. It is higher in neighbouring Uganda at 22%. The firm’s financial director Sidney Wafula said the trade denies Kenya Revenue Authority Sh2.5 billion annually in tax revenue while the industry loses Sh900 million. “Our independent third-party research shows that the counterfeit cigarettes are either smuggled into the country, having been destined for a lower tax market that was never reached,” BAT managing director Beverly Spencer said.
Over 250 Made-in-Rwanda products receive RSB approval (New Times)
The locally made products got standards approval under the nationwide campaign dubbed, ‘Zamukana Ubuziranenge’, which focuses on helping Made-in-Rwanda products to gain consumer confidence among the public and increase the export volume. Launched in 2017, the five-year campaign targets more than 300 products and 93 small and medium enterprises across the country. The 2017/18 fiscal year saw 144 new products certified and 78 recertified while 115 new products were certified during the past six months of the current fiscal year (2018/19). Raymond Murenzi (Director General of Rwanda Standards Board): “As the standards body for Rwanda, we have harmonised 286 (EAC) standards equivalent to 70% of EAC standards to facilitate regional trade and this is why the S Mark certified products will find no difficulty to penetrate the East African market.”
WTO’s Trade Facilitation Agreement: update
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DHL Global Connectedness Index: Globalization hits new record high
International flows of trade, capital, information and people all intensified significantly for the first time since 2007
DHL has released the fifth edition of the DHL Global Connectedness Index (GCI) – a detailed analysis of globalization, measured by international flows of trade, capital, information and people.
The new GCI report represents the first comprehensive assessment of developments in globalization across 169 countries and territories since the Brexit referendum in the United Kingdom and the 2016 presidential election in the United States.
In spite of growing anti-globalization tensions in many countries, connectedness reached an all-time high in 2017, as the flows of trade, capital, information and people across national borders all intensified significantly for the first time since 2007. Strong economic growth boosted international flows while key policy changes such as US tariff increases had not yet been implemented.
The 2018 index measures the current state of globalization, as well as individual rankings for each country, based on the depth (intensity of international flows) and breadth (geographical distribution of flows) of countries’ international connections. The world’s top five most globally connected countries in 2017 were the Netherlands, Singapore, Switzerland, Belgium and the United Arab Emirates.
Eight of the top 10 most connected countries are located in Europe, helping make it the world’s most connected region, in particular for trade and people flows. North America, the leader in capital and information flows, ranked second among world regions, followed by the Middle East and North Africa in third place.
“Even as the world continues to globalize, there is still tremendous untapped potential around the world. The GCI shows that currently, most of the movements and exchanges we’re seeing are domestic rather than international, yet we know that globalization is a decisive factor in growth and prosperity,” explains John Pearson, CEO of DHL Express. “Increasing international cooperation continues to contribute to stability so companies and countries that embrace globalization benefit tremendously.”
“Surprisingly, even after globalization’s recent gains, the world is still less connected than most people think it is,” commented GCI co-author Steven A. Altman, Senior Research Scholar at the NYU Stern School of Business and Executive Director of NYU Stern’s Center for the Globalization of Education and Management.
“This is important because, when people overestimate international flows, they tend to worry more about them. The facts in our report can help calm such fears and focus attention on real solutions to societal concerns about globalization.”
At the global level, the GCI shows, for example, that just about 20% of economic output around the world is exported, roughly 7% of phone call minutes (including calls over the internet) are international, and only 3% of people live outside the countries where they were born. The report also debunks the belief that distance is becoming irrelevant. Most countries are much more connected to their neighbors than to distant nations.
Emerging economies remain less connected than advanced economies
The GCI continues to reveal vast differences between levels of globalization in advanced versus emerging economies. Emerging economies trade almost as intensively as advanced economies, but advanced economies are more than three times as deeply integrated into international capital flows, five times for people flows, and almost nine times with respect to information flows.
Additionally, while leaders from large emerging markets have become major supporters of globalization on the world stage, emerging economies’ progress catching up in terms of global connectedness has stalled.
Southeast Asian nations beat expectations
The five countries where international flows exceed expectations the most are Cambodia, Malaysia, Mozambique, Singapore, and Viet Nam. Four of these top five countries are located in Southeast Asia. Southeast Asian countries benefit from linkages with wider Asian supply chain networks as well as ASEAN policy initiatives promoting economic integration. This is positive news for the region, because deeper global connectedness can help accelerate countries’ economic growth.
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WTO Members discuss progress and assistance on Trade Facilitation Agreement’s 2nd year
World Trade Organisation (WTO) members took stock of progress in implementing the Trade Facilitation Agreement (TFA) at the 12-13 February meeting of the Committee on Trade Facilitation, a week before the second anniversary of the Agreement’s entry into force.
Members considered a report from the WTO Secretariat, which found that 141 or 86% of WTO members have now ratified the TFA roughly two years since it entered into force on 22 February 2017 when the WTO crossed the required threshold of 110 member ratifications. Zimbabwe, Cameroon and Ecuador were the latest to ratify the TFA since the last Committee meeting in October 2018. Egypt at the meeting said it would soon ratify the Agreement.
Full implementation of the Agreement, which seeks to expedite the movement, release and clearance of goods across borders, is forecast to slash members’ trade costs by an average of 14.3 per cent, with developing and least-developed countries having the most to gain, according to a 2015 study carried out by WTO economists. The TFA is also likely to reduce the time needed to import goods by over a day and a half and to export goods by almost two days, representing a reduction of 47 per cent and 91 per cent respectively over the current average.
As of 12 February, the current rate of implemented commitments under the TFA stood at 61.3 per cent. Broken down by level of development, this equates to a 100 per cent rate of implementation by developed members, 60.3 per cent among developing members and 22.8 per cent among least-developed countries (LDCs).
Developed countries committed to implement the Agreement in full upon its entry into force, while developing and least-developed members set their own timetables for implementing the TFA, taking into account their respective capacities. These commitments have been communicated to the WTO in a series of notifications.
Several members remarked positively on the progress made while some noted that much remains to be done to fully implement the Agreement across the entire WTO membership. They called for the timely fulfilment of obligations to implement the TFA, with some noting that 2019 would be an important year with the deadline coming up for LDCs to report on what technical assistance they require and for developing members to notify definitive dates when they would implement provisions of the Agreement for which they had asked assistance.
The Committee reviewed a total of 16 new notifications from members on their respective timetables to implement TFA provisions and other information such as trading procedures and assistance for carrying out the Agreement. Members heard presentations on special procedures for processing and temporarily admitting goods for special circumstances, National Trade Facilitation Committees, and advance Customs rulings for traders who may want clarity on their transactions before the goods are shipped. Members also continued to debate a proposal on formalizing the Committee’s rules of procedure and heard updates on recent and upcoming activities aimed at enhancing TFA implementation.
The Committee on Customs Valuations held a workshop the next day, 14 February, on linkages between customs valuation and the TFA, which provided opportunities for members and other organizations to share experiences on a national and regional level.
The next Trade Facilitation Committee meeting will be in June.