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tralac’s Daily News Selection
Events listing, Part I
Profiled African trade and development events, starting Monday, for your events calendar:
TFTA Technical Committee on Legal Affairs (28-29 January, Nairobi)
TFTA Technical Working Group on Rules of Origin (30 January – 6 February, Nairobi)
Africa Mining Indaba 2019 (4-7 February, Cape Town)
AU Summit: 34th Ordinary Session of the Executive Council (7-8 February)
AU Summit: 32nd Ordinary Session of the Assembly of the Heads of State and Government
Ministerial Working Group of the Single African Air Transport Market (18-22 February, Addis Ababa)
AfCFTA TWG on Rules of Origin (18 February, Addis Ababa)
Africa Energy Indaba (19-20 February, Sandton)
STC on Finance, Monetary Affairs, Economic Planning and Integration (4-8 March, Yaoundé)
2019 tralac Annual Conference (20-22 March, Nairobi) – details coming soon
52nd Session of the Economic Commission for Africa (20-26 March, Marrakech)
Africa CEO Forum 2019 (25-26 March, Kigali)
World Bank’s Debt Management Facility Stakeholders Forum 2019 (13-14 April, Dakar)
Africa Regional Forum on Sustainable Development (16-18 April, Morocco)
East African Petroleum Conference and Exhibition 2019 (8-10 May, Mombasa)
Inaugural AU-REC coordination meeting (30 June – 1 July, Niamey)
World Economic Forum on Africa (4-6 September, Cape Town)
Conference on Land Policy in Africa 2019 (4-8 November, Abidjan)
West African Economic and Monetary Union: IMF concludes discussions on common policies for member countries (IMF)
Reality Check: Does the CFA franc keep some African countries poor? (BBC Africa)
Many of the concerns about the CFA franc relate to how it limits the economic levers African countries can use - that they can’t set their own interest rates, for instance. The system is designed to make it easier to obtain international currencies needed for trade. And the reserves are also guaranteed by the French central bank - although this facility is rarely called upon. But it’s difficult to say whether the arrangement between the 14 countries and France has had a detrimental impact on their respective economies. It’s clear though that the CFA franc divides opinion and there is a movement of people who would agree with the claims of the Italian politician. Critics point to the fact that the CFA franc countries are poor, call the currency a relic of French colonialism and say it fails “to stimulate trade integration between user nations”, writes the Senegalese economist Ndongo Samba Sylla. But there are economic benefits of a stable and easily convertible currency, says John Ashbourne, senior emerging markets analyst at Capital Economics. “Inflation, for instance, has tended to be much milder in the CFA countries than elsewhere in Africa.”
World leaders at Davos call for global rules on tech (New York Times)
Leaders of Japan, South Africa, China and Germany issued a series of calls on Wednesday for global oversight of the tech sector, in a clear signal of growing international interest in seizing greater regulatory supervision of an industry led by the United States. President Cyril Ramaphosa of South Africa said greater oversight of the tech sector would also be on the agenda of African Union leaders when they meet early next month in Addis Ababa. “When it comes to technology, I would support an overarching body that’ll set standards on a whole range of things,” Mr. Ramaphosa said in an interview, specifically mentioning cybersecurity as a priority. [Tech revolution could cause another world war, Jack Ma warns]
Aftershock: The pervasive effects of tariff hikes (ICC)
A new report launched yesterday at the WEF provides global policymakers with an evidence-based overview of the far-reaching economic and social consequences of trade tariffs. The report, commissioned by the International Chamber of Commerce, as part of the ICC World Trade Agenda – an initiative in partnership with Qatar Chamber of Commerce and Industry – outlines 10 possible effects of a return to the destructive, broad-based tariff increases of the 1930s that have become a genuine possibility in light of recent tit-for-tat hikes by some leading economies. The consequences, illustrated by way of two case studies, range from an increase in poverty to deteriorating health outcomes. While recognizing that trade liberalization has resulted in some negative consequences, the report – prepared by the Economist Intelligence Unit – stresses that tariffs are not the answer.
Indonesia to further relax export procedures (Jakarta Post)
The government said it would ease procedures to boost exports, with the aim of bolstering the country’s current account, as the trade deficit was recorded at $8.57bn in 2018, the largest deficit since 1975. Statistics Indonesia recorded that the country had a $11.4bn trade surplus in 2017. Coordinating Economic Minister Darmin Nasution said in Jakarta on Thursday that the government would look to ease survey requirements for exports, depending on the requirements of the destination country. Such a move was considered a solution for short-term problems faced by exporters, the minister said, adding that the government was also developing medium-term and long-term strategies to enhance exports.
Commodity terms of trade: a new database (IMF)
This paper presents a comprehensive database of country-specific commodity price indices for 182 economies covering the period 1962-2018. For each country, the change in the international price of up to 45 individual commodities is weighted using commodity-level trade data. The database includes a commodity terms-of-trade index - which proxies the windfall gains and losses of income associated with changes in world prices - as well as additional country-specific series, including commodity export and import price indices.
Today’s Quick Links: Australia leads the way on WTO talks to ease cross-border data sharing Global business leaders raise concerns over e-commerce policy changes in India Here’s why SA should be concerned about China’s economic slowdown Ethiopia’s integrated agro-industrial parks support project: AfDB apraisal report Malawi’s Shire Valley transformation programme: AfDB appraisal report Kenya’s Green Zones development support project: AfDB appraisal report African arms market to grow by 50% over five years: analyst |
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76 countries launch WTO talks on e-commerce
At the World Economic Forum in Davos today, 76 countries – the European Union and 47 other members of the World Trade Organisation (WTO) – decided to start negotiations to put in place global rules on electronic commerce.
Commissioner for Trade Cecilia Malmström said: “It is encouraging to see so many partners joining this important trade initiative. Electronic commerce is a reality in most corners of the world, so we owe it to our citizens and companies to provide a predictable, effective and safe online environment for trade. We look forward to working with all interested WTO members, flexibly and pragmatically, to create a truly comprehensive and ambitious set of rules.”
The last two decades have seen the exponential growth of domestic and cross-border electronic commerce. Despite this fast increase in electronic transactions, there are no specific multilateral rules in the WTO regulating this type of trade. Business and consumers instead have to rely on a patchwork of rules agreed by some countries in their bilateral or regional trade agreements.
WTO rules on e-commerce will aim to enhance opportunities and address challenges of e-commerce in both developed and developing countries. The negotiations should result in a multilateral legal framework that consumers and businesses, especially smaller ones, could rely on to make it easier and safer to buy, sell and do business online. The new rules would for instance:
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improve consumers’ trust in the on-line environment and combat spam
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tackle barriers that prevent cross-border sales
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guarantee validity of e-contracts and e-signatures
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permanently ban customs duties on electronic transmissions
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address forced data localisation requirements and forced disclosure of source code
The launch of these negotiations shows the WTO stays in the centre of international rule making and continues to be a platform where groups of interested countries agree to work together to develop new rules in an open and inclusive manner. The negotiating process planned to start in March 2019 is open to other WTO members who may still be interested to join.
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tralac’s Daily News Selection
AfCFTA ratification update, Ambassador Albert Muchanga: Good news! The threshold is within grasp! Parliament of Senegal approved ratification of AfCFTA Agreement yesterday. Seventeen so far, five to go. AfCFTA Champion reaching out to fellow leaders to secure those five before the African Union Summit in February.
Zambia and the AfCFTA, @AUTradeIndustry: The African Union is organizing a meeting on the impact of the AfCFTA on the Zambian economy. The study intends to quantify impacts at level of individual sectors and products in order to establish areas of most risk for Zambia under the liberalization scenario.
New Afreximbank country briefs (pdf): Zambia, Chad, Angola
WEF 2019: selected highlights
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Kagame makes case for an institutionally strong Africa. President Paul Kagame has said that the African continent can no longer continue to delegate responsibility for its growth and development to external parties. Kagame was addressing African Heads of State on Shaping Africa’s Agenda in the Global Context in Davos, Switzerland at the ongoing World Economic Forum Annual Meeting. “Challenges relating to migration, security and climate change among others mean there is no longer any actor who sees an advantage in an Africa that is institutionally weak and economically stagnant. Everyone benefits from a stronger, more united Africa. This is reflected in the more constructive tone of Africa’s partnerships with China, Europe and others. But no one is going to transform Africa on our behalf. It is up to us.”
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Anand Mahindra has a way out. Mahindra Group Chairman Anand Mahindra said that localisation can bypass protectionist policies that have sparked concerns among business leaders across the globe, and help make profits. “We’re in fact using it to make our businesses local. We don’t know how long this protectionist, nationalist thrust may last. I personally don’t think it will be a short-term phenomenon,” Mahindra told BloombergQ on the sidelines of the World Economic Forum in Davos. Mahindra, illustrating an example of how his own automaker benefited from going local, said the move has an “enormous dividend”. “We finally opened an assembly plant in South Africa. The auto market grew one percent last year, we grew 26%,” he said. “We are already seeing the dividends of being seen as local. So there’s huge economic logic for going local. Once you go local, this entire question of protectionism and nationalism hurting you becomes academic.”
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WEF lauches Innovation with a Purpose Platform. While food security is a global issue, its impacts are all too often hidden. The WEF’s new report, Innovation with a purpose: improving traceability in food Value chains through technology investigates the role of disruptive technology applications capable of effectively tracing such inefficiencies in food value chains. Focusing on 12 key technology applications, it estimates the concrete benefits which could be delivered in terms of reduced water usage, greenhouse gas emissions, and food waste; increased productivity and farmer income; and reduced obesity and undernourishment of consumers. [WEF White Paper: Civil society in the Fourth Industrial Revolution]
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Audio: A conversation with Abiy Ahmed, Prime Minister of Ethiopia; CNBC Africa interview with Tony Elumelu (Chairman of Heirs Holdings): How can Africa take advantage of the fourth industrial revolution to maintain the “Africa rising” narrative?
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President Cyril Ramaphosa at the WEF: Why South Africa is on a path of economic renewal, remarks at WEF Global press conference, Ramaphosa’s ‘nine lost years’ speech impresses Old Mutual CEO at Davos
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Confirmed: Ethiopia will host the 2020 World Economic Forum on Africa
International Conference on the Emergence of Africa: emergence, the private sector and inclusiveness (CIEA III)
Two new McKinsey reports:
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Leadership lessons from Africa’s trailblazers. This article presents reflections from five of Africa’s leaders. Taken together, their insights illustrate what is needed to thrive on the continent. Nadia Fettah, CEO of Saham Finances, describes the strategic revitalization of the Moroccan insurance company she leads. James Mwangi, the CEO of another financial-services player, Equity Bank, explains how his company has innovated its business model to boost financial inclusion. Aliko Dangote, who has transformed a trading company into a large-scale manufacturer, elaborates on the resilience he’s trying to build into Dangote Industries and how he hopes this will help the company thrive far into the future. Fred Swaniker, founder of the African Leadership University, shows how technology-enabled solutions can unleash Africa’s young talent. Finally, human-rights advocate Graça Machel shares insights about doing well by doing good, through the lens of New Faces New Voices, the network she founded to expand the role and influence of women in the financial sector. [The authors: Mutsa Chironga, Georges Desvaux, Acha Leke
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Globalization in transition: The future of trade and value chains. Although output and trade continue to increase in absolute terms, trade intensity (that is, the share of output that is traded) is declining within almost every goods-producing value chain. Flows of services and data now play a much bigger role in tying the global economy together. Not only is trade in services growing faster than trade in goods, but services are creating value far beyond what national accounts measure. Using alternative measures, we find that services already constitute more value in global trade than goods. In addition, all global value chains are becoming more knowledge-intensive. Low-skill labor is becoming less important as factor of production. Contrary to popular perception, only about 18% of global goods trade is now driven by labor-cost arbitrage. Three factors explain these changes: growing demand in China and the rest of the developing world, which enables these countries to consume more of what they produce; the growth of more comprehensive domestic supply chains in those countries, which has reduced their reliance on imports of intermediate goods; and the impact of new technologies. Globalization is in the midst of a transformation. Yet the public debate about trade is often about recapturing the past rather than looking toward the future. [The authors: Susan Lund, James Manyika, Jonathan Woetzel, Jacques Bughin, Mekala Krishnan, Jeongmin Seong, Mac Muir]
CEOs’ curbed confidence spells caution (PwC)
PwC’s 22nd Annual Global CEO Survey of 1,378 chief executives in more than 90 territories explores that question and many others regarding the global business climate in 2019. Conducted in September and October of 2018, this year’s survey drills down on CEO insights in top-of-mind areas such as: Growth, Data and Analytics, and Artificial Intelligence. [South Africa: In SA, only 30% of those surveyed expect an improvement]
Ghana set to join ATI (GhanaWeb)
In the bid to lessen the demand for sovereign guarantees by international institutional investors who seek to make investments in Ghana, government is in the process of becoming a member of the Africa Trade Investment Agency. Government has so far secured a grant of $18.4m from kfw, the German government-owned development bank, as part of the Compact with Africa, to pay for its shares, awaiting parliament’s ratification. This will enable ATI commence its operations in the country, providing globally acceptable insurance cover for investments made in Ghana by premium paying clients. The minimum share subscriptions that an African country needs to qualify for membership in the Agency is a minimum of 75 shares having a par value of $100,000 each. By this requirement, Ghana is expected to hold about 184 shares in the Agency.
Ghana to export timber to EU market (Business Ghana)
Ghana is close to making history as the first country in Africa to get clearance to export timber to the European market by the end of the year. This is after the country had met a series of requirements spelt out in the voluntary partnership agreement that was signed with the EU over a decade ago. Currently, processes are being finalised to issue the Forest Law Enforcement, Governance and Trade licence to Ghana to ensure that the export of timber and wood products to the EU meets the acceptable standards. The Deputy CEO of the Forestry Commission, Mr John Allotey, who disclosed this yesterday, said the country would be the second in the world, after Indonesia, to get that licence from the EU.
International trade in services 2018 Quarter 3 (pdf, UNCTAD)
World services exports grew by 4% in the third quarter of 2018, year-on-year (y-o-y), measured in current United States dollars. The growth slowed down across all main service categories, compared with the first half of 2018. The services grouped under travel, which expanded strongly over the twelve previous months, showed the weakest increase in quarter 3. On the regional level, Asia and Oceania were the growth leaders in the third quarter of 2018, recording a high increase in other services (7.7%). On the other hand, the statistics from Latin America and the Caribbean revealed a decline (-2.6%) in exports for that group of services.
Today’s Quick Links: Mozambique to host 2019 US-Africa biennial summit Morocco’s trade deficit rises 8% in 2018 SAPSN statement to the SADC chairperson on Zimbabwe’s current crisis Nigeria outlines strategies to boost economic diplomacy with Russia The value of South Africa’s wine exports grew 4% in 2018: but current shortages of stock meant volume exports fell 6% South Africa: Exports from Richards Bay mega coal terminal dropped in 2018 Loss of FMD-free status devastating for SA’s trade The Gambia’s rice value chain transformation programme: AfDB appraisal report Burkina Faso: 2018 Article IV Consultation and Selected Issues Reports Côte d’Ivoire’s SIR financing highlights innovations in Africa’s debt markets |
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Africa’s youth ready for a digital future but leaders are lagging behind: Ramaphosa at WEF 2019
If Africa’s leaders do not act quickly to move the continent into the 21st century, young people will leave them behind, South Africa’s President Cyril M. Ramaphosa said today at the World Economic Forum Annual Meeting.
Young people are ready for the digital era and are engaged in technology, but governments are not keeping up. They have not “fully embraced this new bright and brave world that young people live in today,” he said.
“Africa now has this great opportunity, having lost out on previous revolutions, to leapfrog,” said Ramaphosa. The speed at which mobile phones have been adopted across the continent over the past decade highlights the willingness of Africans to adopt new technology. “It shows that we have the skills and the capabilities to do this and we should now have the courage to embrace technology in the fullest way.”
Ramaphosa said that with an estimated 9 million unemployed people in South Africa, his government has prioritized job creation and is working with labour unions and other economic stakeholders to develop strategies to address labour market challenges. The country is investing in a programme that aims to equip all young people in schools and colleges with digital skills to enhance their future employment prospects.
Paul Kagame, President of Rwanda, said that it is imperative that all African countries make investments in human capital to bring them into the 21st century. This requires a holistic programme of interventions and investment.
Kagame chairs the Smart Africa initiative, which aims to put ICT at the centre of the continent’s national socio-economic development agenda, improve access of Africans to technology and use ICT to promote sustainable development. Internet connectivity in Africa is just 22%, which shows the opportunity that technology offers the continent to move into the digital age.
Smart Africa is the result of the realization among Africans that their future is, or should be, a digital one, said Kagame. The initiative aims to get political leaders to align their efforts and policies with this goal, he said. There is already a mindset change in governments about the importance of technology as they seek to address the needs of growing numbers of young people.
The two presidents also addressed the issue of the African Continental Free Trade Area, launched in 2018, which aims to significantly raise the current low levels of intra-African trade. Kagame, as Chair of the African Union in 2018, has been a key driver of the initiative, which he called the beginning of a new era for trade and investment in Africa.
The fact that 44 of Africa’s nations signed the agreement at its launch and others have come on board since then shows the strong political will behind the initiative, Kagame said. Integration will eventually create a market of 1.2 billion people and pull together the continent’s countries, many of which are too small to compete effectively alone, he said.
Ramaphosa said: “This could well be the great industrialization moment for the continent.” He predicted that the African Continental Free Trade Area, by opening up trade, will drive the formation of industrial nodes across the continent, boost manufacturing, create jobs and drive skills development.
The World Economic Forum Annual Meeting brings together more than 3,000 global leaders from politics, government, civil society, academia, the arts and culture as well as the media. It engages some 50 heads of state and government, more than 300 ministerial-level government participants, and business representation at the chief executive officer and chair level.
Convening under the theme, Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution, participants are focusing on new models for building sustainable and inclusive societies in a plurilateral world.
Remarks by President Cyril Ramaphosa during the WEF Global Press Conference
Thank you for this opportunity to brief you on the visit by Team South Africa to Davos 2019 and to offer some views on developments in our country.
Over the past few years, representatives of the South African government, business leaders, labour leaders and delegates from other sections of society have come to Davos as Team South Africa.
Although we represent different constituencies, we have a common interest in the development of our country and the promotion of inclusive growth.
We therefore come to Davos with a single message, and this year the message is that South Africa is on a path of growth and renewal.
After almost a decade of economic stagnation and political paralysis, we have begun to turn things around.
We have entered a new period of hope and renewal, and over the last year have taken decisive steps to correct the mistakes of the recent past and put the country back on the path of progress that we embarked upon in 1994.
We have placed the task of inclusive growth and job creation at the centre of our national agenda.
Around a third of working-age South Africans are unemployed, poverty is widespread and levels of inequality are among the highest in the world.
We recognise that we cannot create work on any meaningful scale unless we grow the economy at a far greater rate – and for that we need much more investment in the productive sectors of the economy, in infrastructure and in skills development.
Last year, we launched an ambitious drive to raise $100 billion in new investment over five years.
At the inaugural South Africa Investment Conference in October last year, both local and international companies announced around $20 billion of investments in new projects or to expand existing ones.
According to a report released by UNCTAD on Monday, direct foreign investment into South Africa increased by more than 440% between 2017 and 2018, from $1.3 billion to $7.1 billion.
We aim to sustain – and further increase – this growth in investment.
We are dedicating effort and resources to investment promotion and facilitation, having appointed four prominent investment envoys who have been meeting with investors to promote the opportunities in our country.
They have also been engaging in investors on their concerns and expectations, which is greatly assisting our efforts to create an environment that is even more conducive to investment.
Over the last year we have undertaken measures to ensure greater policy certainty and consistency, including economic reforms in sectors that have great potential for growth.
For example, in the mining industry, we finalised a new Mining Charter that balances the need for transformation with the imperative for new investment in an industry that, despite its difficulties, could be growing and creating jobs.
In telecommunications, we have set in motion the process to allocate high-demand radio spectrum to accelerate broadband access and promote competition within the sector.
In energy, we have signed long-outstanding agreements with independent power producers for another round of renewable energy projects and have published a new energy plan for the country for public consultation.
In tourism, we are reforming our visa regulations to encourage more visitors, as well as making it easier for investors and business people to visit South Africa.
In the wake of a recession in the first half of 2018, we announced an economic stimulus and recovery plan to reignite growth.
It included a reprioritisation of public spending towards sectors like agriculture and small business development, which have great potential to make an immediate impact with long-term benefits.
We also announced the establishment of an Infrastructure Fund that would consolidate all public spending on infrastructure and leverage further funding from the private sector and development finance institutions.
The Fund would also harness private sector expertise to bolster infrastructure management capacity in the state.
South Africa has emerged from recession, and although growth forecasts are subdued, we are determined to unlock the many opportunities that exist in our economy.
Another critical undertaking that we have embarked upon is the restoration of the rule of law and the integrity and credibility of our public institutions.
A commission of inquiry into state capture, which is headed by the Deputy Chief Justice Raymond Zondo, has begun in earnest to uncover evidence of the ‘capture’ of several state institutions and processes by private interests.
This state capture has damage several critical institutions, damaged confidence in our economy and resulted in the theft of billions of rands from the state – and from the people of South Africa.
The commission has heard evidence of corruption on a scale far greater than many people had expected.
As difficult and damaging as some of the testimony may be, this is an absolutely essential process that must be seen through to its conclusion if we are to put this shameful episode in our history behind us.
As part of our drive to end corruption – and to improve the safety of all South Africans – we have taken steps to strengthen the National Prosecuting Authority, South African Police Service and State Security Agency.
We have also addressed problems at the South African Revenue Service and are in the process of putting in place new leadership.
We have also taken measures to stabilise several state owned enterprises that had been weakened by state capture, corruption, mismanagement and poor policy decisions.
We have replaced the boards and executive management in strategic SOEs and have been working closely with the new leadership on the implementation of credible turnaround strategies.
We are currently developing a response to the financial and operational crisis at the country’s electricity utility, Eskom.
In the next few weeks, we will be announcing a set of measures to stabilise and improve the company’s financial position and to ensure uninterrupted energy supply.
We are also tackling the contentious issue of land reform, which has generated a great deal of interest globally and a healthy and vibrant debate within the country.
We are dealing with this issues in a manner that takes the interests of all into account, fully in line with the prescripts of the law and our Constitution.
We are taking a comprehensive approach that sees historical redress as an opportunity for greater agricultural output, improved food security, empowerment, job creation and poverty alleviation.
The progress we have achieved over the last year – and the successes we need to register in the months and years ahead – ultimately depends on our ability to revitalise and strengthen the social compact between government, business, labour and civil society to accelerate infrastructure investment, broaden access to, and ownership of, the economy, and create decent jobs.
This is well within our means – partnership and dialogue are integral to the South African DNA.
As Team South Africa, we call on all our people, and all our friends across the world, to join us on the path of growth and renewal.
I thank you.
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Shaping Africa’s agenda in the global context: President Kagame at WEF 2019
Rwanda’s Paul Kagame delivered remarks at a discussion with African Heads of State on Shaping Africa’s Agenda in the Global Context as part of the 2019 World Economic Forum in Davos, Swizterland. Below are his remarks.
With good leaders we will be just fine. Being old alone is not a bad thing. I appreciate so many of you making time for this important conversation, most especially the Heads of State and Government here with us.
This session is timely. The conditions have never been so favourable for Africa to take the lead in shaping its own global agenda. For too long, we ceded responsibility for Africa’s agenda to others, with some individuals even benefitting, but challenges relating to migration, security and climate change among others mean there is no longer any actor who sees an advantage in an Africa that is institutionally weak and economically stagnant
Put differently: Everyone benefits from a stronger, more united Africa. This is reflected in the more constructive tone of Africa’s partnerships with China, Europe and others. But no one is going to transform Africa on our behalf. It is up to us!
However, today, the pace and quality of integration in Africa is increasing noticeably and this is very significant
Last year, for example, the African Continental Free Trade Agreement was adopted and it is likely to come into force this year. We also agreed on a timetable for the free movement of people and on the establishment of a single African air transport market
At the next AU Summit we expect to consider an innovative proposal to harmonize digital identity platforms across Africa, with common technical standards and data protection norms
The goal is to bring all Africans into productive, knowledge-based economic activity. This is an example of how Africa can work together to prepare for the Fourth Industrial Revolution
This dynamism is consequential for the future. After all, it is no easy matter to forge consensus in a union composed of more than 50 countries and several interlocking regional economic communities
International cooperation is indispensable. It was the brutality of the two World Wars that gave rise to the multilateral system which lately seems to be in crisis, as the World Economic Forum has been highlighting
Reforming the system should not mean a return to the status quo. For many of us, it was hardly a golden age. Rule-making was not inclusive and the balancing of geopolitical interests among major powers often came at a very high price for those on the periphery.
For Africa, the most important thing is to adopt a posture of active responsibility toward shaping our place in the world
In the multi-stakeholder spirit of this gathering, this also requires strategic leadership and investment from the private sector particularly in terms of technology and industrialization
Perhaps the question we should be looking to answer is: Are there any common interests that we can define together, to restore a moral centre to multilateralism?
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ICEA 2019: The concretization of an African private sector
The prioritization of development constraints in Africa is propelling the private sector among the key sectors that can pull both growth and political will by balancing the power relationship between the state and the private sector.
By providing economic thinking focused on the private sector, the Third Africa Emergence Conference used a geometric mindset needed to sort through Africa’s emergencies.
Through the platform of exchange that it offers, this conference provides tangible proof of the necessary cross-border vision that Africa must have on areas such as investment, entrepreneurship, the private sector and the emergence in general.
This conference seems to be that machine which will shake the moribund vitality of the African Union worn down by its infernal cycles of dynamism and torpor. It is perhaps this unexpected actor of African integration that the African Union and ECOWAS are struggling to achieve.
ICEA helps to understand the problems that Africans share in order to provide a global response. Infrastructures, youth unemployment, instability, the problem of funding are all bad news, evoked by President Macky Sall of Senegal, Mali’s Ibrahim Boubacar Keita and president Adesina Akinwumi of AfDB at the opening ceremony, along with France’s Ségolène Royale, former Minister of the Environment, Achim Steiner, Administrator of the UNDP.
Africa on several points is on the same wavelength and the private sector alone crystallizes a significant number of these ills. So the rise of the private sector will be a natural response to the impossible power of the states, the weakness of domestic resource mobilization, that of the African market and Africa’s lag in technology and digital.
Most African countries, as President Macky Sall has pointed out, have taken a break in their economic paradigm, which is reflected in the search for a structural transformation of their economy; Similarly, another breakthrough is taking place in the education system, which is slowly changing to focus on the new technologies and digital technologies that are the Grail of a landmark emerging country like Malaysia.
To this must be added the need for another break which is the bureaucratic break to push youth to entrepreneurship. We have a youth whose professional philosophy is to seek to protect themselves from the market by becoming employees of the private or the public service instead of wanting to conquer the market through entrepreneurship: it is said that the best way to become rich is to create a business.
The weakness of the private sector in Africa is both an evil and an indicator of our level of development: no country has emerged, affirmed the president of the national council of the employers Baidy Agne, without the development of his private sector which has the ability to accelerate growth dynamics.
The state needs the private sector that needs the state and the complexity of this relationship is manifested in the permanent search for a balance between the growth of local businesses and the tax burden, between the use of the foreign expertise and local expertise, between the competition of foreign companies and local businesses, between the financing of local businesses and that of social protection.
But states must not be alone in the search for this balance. The private sector must rely more on its independence, organization and creativity because the true ally of the private sector in my judgment is the African private sector; the optimum growth in Africa can only be achieved if African countries link together their men and their resources.
Final Statement
From 17 to 19 January 2019, at the Abdou Diouf International Conference Center in Diamniadio, Senegal, the third edition of the International Conference on the Emergence of Africa, CIEA III was held.
The event was graced by the presence of their Excellencies:
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Mr. Macky Sall, President of the Republic of Senegal;
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Mr. Ibrahim Boubacar Keïta, President of the Republic of Mali;
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Dr. TUN Mahathir bin Mohamad, Prime Minister of Malaysia;
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Mr. Amadou Gon Coulibaly, Prime Minister of the Republic of Côte d’Ivoire;
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Mr. Lee Ju Young, Vice President of the National Assembly of the Republic of Korea and;
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Mrs. Ségolène Royal, representative of the President of the French Republic.
ICEA III featured the participation of eminent personalities from partner institutions, including Achim Steiner, Administrator of the United Nations Development Program (UNDP), Akinwumi Adesina, President of the African Development Bank Group (AfDB), Hans Peter Lankes, Vice President of the International Finance Corporation of the World Bank Group.
Also participating in this meeting were the leaders of international and African institutions through the African Union, ECA, ECOWAS, WAEMU, BOAD, BCEAO and eminent personalities from the private sector, academia, experts and representatives of civil society.
More than 1300 decision-makers and experts from around fifty countries around the world have discussed the issue of “Emergence, the Private Sector and Inclusiveness”.
The work of this third edition, which started with a high-level session bringing together heads of state and government, heads of institutions, and business leaders, highlighted six major underlying themes the issue of the conference. These are:
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Promote stability, both politically and securely, but also maintain the long-term strategy of emergence;
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Mobilize internal resources and encourage foreign direct investment (FDI) in strategic sectors with technology transfer;
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Develop human capital with special access to training-employment adequacy;
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Establish a network of local SMEs / SMIs through better access to financing and better consideration of local content in development projects;
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Broaden the size of African markets through country connectivity infrastructure and business development reforms and;
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Initiate a sustainable industrialization dynamic for a better valuation of raw materials.
These themes were further explored in discussions in plenary sessions and parallel panels that provided answers to questions relating to the promotion of the private sector as a driver of emergence, and of inclusiveness, a guarantee of the sustainability of emergence.
Following the discussions, the Dakar Conference made the following recommendations to stakeholders.
States are invited to:
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establish the conditions for political, institutional and security stability and build a shared long-term vision that transcends political mandates;
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Maintain efforts to reform the business environment, build productive support infrastructure and connect to markets, as well as training to ensure the employability of young people;
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Pay particular attention to tax reforms, with a view to better mobilizing domestic resources and;
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Promote the advent of national and regional champions, and develop intra-African trade through access to expanded markets.
For its part, the private sector has welcomed the willingness of states to support the rise of national champions. As such, it will have to be part of a long-term dynamic and exploit the opportunities offered by innovative public-private partnerships.
In addition, the private sector is expected to play its full role in the process of enhancing African products through natural resource processing and the use of innovation.
Also, it recognizes the importance of its role in the implementation of initiatives promoting the development of labor productivity as well as social and territorial inclusion.
The technical and financial partners reiterate their support for the efforts of States to formulate Emergence Strategies and to mobilize additional financial resources.
They also reaffirm their willingness to support private initiative, through the revitalization of the corresponding windows.
The conference recognized the importance of the sustainability and institutionalization of the meetings of the ICEA and recommends that the States, the private sector and the partner institutions work to make it a powerful lever of exchange of experiences to guarantee the fulfillment of their ambitions.
Thus, the fourth edition of the ICEA to be held in March 2021 in Abidjan will provide an opportunity to evaluate and learn from this initiative.
With this in mind, an Executive Secretary has been appointed to operationalize the ICEA Roadmap as soon as possible.
Diamniadio, January 19, 2019.
Related News
tralac’s Daily News Selection
Talking African economy at Davos: The AfCFTA and a unified market (Africa Times)
When it comes to a unified African market, Bernard Gautier, deputy CEO of French investment firm Wendel Group, made it easy to see the existing barriers to business and Africa’s economic growth. There’s an office in Morocco with a Congolese staffer and one from Cameroon, he said, but they can’t get to Kenya. One will need weeks to get a visa, while the other can’t get one at all. As Akinwumi Adesina, president of the AfDB pointed out, about half of the 54 African nations still require visas for travel; just a quarter don’t require them, while another quarter issue them on arrival. Moving goods isn’t any easier.
“Today it costs less money to bring a car from Paris to Lagos, than from Accra to Lagos,” said Gautier, an advocate of what the AfCFTA agreement can achieve for Africans who are looking to create 18 million jobs each year through 2035. That’s exactly what the panel of five facilitated by Arancha Gonzalez Laya, the executive director of the International Trade Centre, came to talk about. Laya called the AfCFTA “one area of good news” in the faltering globalization arena, which has seen economic growth slow in China and countries like the United States pull back on trade issues. Yet there’s a long way to go for the AfCFTA to deliver on its potential.
Where does the AfCFTA Process stand and what happens next? (tralacBlog)
Can it be expected that from early in 2019 goods and services can, among the State Parties, be traded under the new preferential rates and market access provisions of the AfCFTA? This will not be possible, for the simple reason that the Protocols on Trade in Goods and Trade in Services are still being negotiated. There are no tariff schedules, no Annex on rules of origin, nor rules for specific services sectors to regulate such trade. And it may take quite some time before they will be finalized. These are sensitive and technically complicated matters; especially when 55 countries at very different levels of economic development are involved. This state of affairs calls for the following observations: [The author: Gerhard Erasmus]
Updates from the 7th African Ministers of Trade Meeting (12-13 December 2018) (tralacBlog)
At the 7th AMOT meeting, the ministers deliberated on the outstanding issues of the AfCFTA including, inter alia, ‘the roadmap for finalisation of outstanding work on AfCFTA negotiations; designation of percentages for sensitive products and exclusion lists, anti-concentration clause and double qualification… rules of origin; trade remedies’. At the end of the meeting, the ministers reached consensus on the completion of the AfCFTA outstanding issues. They agreed on the mechanisms and time-frame for liberalising goods on the African continent. [The author: Talkmore Chidede]
Value add in Africa: First steps in a long journey (FT/IPPMedia)
Tanzania President John Magufuli’s orders to hike cashew prices to protect the country’s struggling farmers, backed up by a pledge to buy Tanzania’s entire 2018 crop when private buyers acting for processors in Vietnam and India refused to pay, underscores the enduring problem for so many of Africa’s commodity producers. African farmers grow around 45% of the world’s cashew nuts, yet 90% of the continent’s crop is exported for processing overseas, denying the industry the opportunity to add value at home and increase Africa’s share of global trade. The Africa Cashew Alliance estimates that a 25% increase in raw cashew nut processing in Africa would generate more than $100m household incomes in the sector. As it is, Tanzania’s farmers get rock bottom prices and the country imports its own nuts back after processing to meet buoyant domestic demand. It’s easy to sympathise with the Tanzanian government, but crop seizures and price hikes aren’t a long-term solution. This lies in developing a local processing industry to add value at home, rather than giving the cashews away to Vietnam and India. [Why Tanzania should now become a net food exporter]
Strengthening economic ties with a growing giant: South Africa in India (Tutwa)
The visit of President Ramaphosa to India later this week, therefore, comes at an opportune time to cement these linkages and explore possibilities for even deeper economic ties. Of symbolic importance, President Ramaphosa will be the guest of honour at the Republic Day celebrations in New Delhi. It is worth underlining that, doing business in India is not for the faint-hearted and the President’s visit provides invited South African firms an opportunity to raise challenges they have encountered with government officials as well as share experiences with their Indian counterparts. The size of the Indian economy may be one of its strengths, but it also means it is unwieldy and complex in some respects. It is suggested, for example, that India not necessarily is approached as one market and that South African businesses should consider regional or sectoral approaches where possible. Different geographic areas within India have become associated with specific economic activities, such as Assam state with energy and Odisha with healthcare. States have the ability to levy taxes on the one hand and to offer incentives for investors on the other. It is therefore critical to understand not only the national business environment in India but also conditions at the state level. [The author: Catherine Grant Makokera]
Trade portal launched for easier business between India and Africa (Indian Express)
A trade portal between India-Africa as market intelligence platform to facilitate the traders of both the region in food and beverages trade has been launched by the Ministry of External Affairs and the National Agricultural Cooperative Marketing Federation. This platform will help in realising opportunities between India and Africa, which need to be capitalized by requisite efforts and germane trade policies. At a recently concluded Indus Food Edition II, organised by the Trade Promotion Council of India, with the support of the Department of Commerce, one of the most important issues raised by African delegates was on advance payments. Also, with Africa recently signing intercontinental free trade agreement, which would allow movement of goods across the continent, delegates from the African nations, including South Africa, recommended that India should initiate FTA negotiations with South Africa or overall Africa for easy market access. [Abuja chamber calls for strengthening of Nigeria-India ties]
South Africa’s dti to unveil master plan to protect textile industry from cheap imports (IOL)
Kenya, Nigeria trade policy postings:
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Kenya to restrict second-hand imports to boost domestic car sector. Kenya plans to restrict imports of second-hand cars to newer vehicles in an effort to boost the domestic automotive sector by reducing the dominance of the used car market. The East African nation undermined what was a thriving vehicle assembly industry in the 1990s with policies that encouraged imports of cheap second-hand cars. The government now intends, by 2021, to restrict imports of cars to vehicles that are three years old or newer, according to a draft policy proposal seen by Reuters on Wednesday. Current regulations allow the importation of cars up to eight years old. Imported second-hand vehicles account for 85% of Kenyan car purchases, amounting to 86,626 vehicles in 2017 and gobbling up precious foreign exchange estimated at about 60 billion shillings ($593m) a year. The target is to gradually but systematically reduce and replace the over 80% market share of used vehicles and used parts with new products manufactured or assembled in Kenya, the government said in the policy draft.
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Importers protest order to transport cargo only on SGR. The Kenya International Freight and Warehousing Association (Kifwa) wants the government to allow shippers to have an option of using alternative means of transport other than rail in the wake of revised rates. Kifwa National Chairman William Ojonyo says forcing shippers to use the SGR is a wrong move that will impact negatively on the economy. “With an increase in the SGR cost shippers should be allowed to have an option of using different modes of transport,” said Mr Ojonyo, pointing out that they were talking with the government on the same. He said that the mandatory rule violates the WTO agreement, where Kenya is a signatory to its rules. Kifwa said that WTO rules on trade facilitation allow for free flow of cargo by the most cost-effective means.
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KRA to block tax cheats from imports. Individuals and firms that fail to file domestic tax returns may be locked out of import and export business from April, the taxman has said in a fresh bid to boost compliance. The Kenya Revenue Authority says the Integrated Customs Management System, to be fully rolled out by March after more than a year’s delay will be connected to electronic tax-filing, iTax, making it possible to flag tax cheats. “The customs system will have capabilities to share data with iTax so that importers who are not compliant in terms of filing their domestic taxes returns are not able to make their customs declarations,” Commissioner-General John Njiraini said.
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Matiang’i, Rotich land powerful posts in new Uhuru order. Interior Cabinet Secretary Fred Matiang’i and his Treasury counterpart, Henry Rotich, secured expanded powers in a new governance structure announced by President Uhuru Kenyatta, technically elevating them to the status of super ministers. The two will now be responsible for supervising and coordinating implementation of President Kenyatta’s ‘Big Four Agenda’ projects through a powerful committee of Cabinet secretaries that will monitor routine progress reports on all projects across the country. Dr Matiang’i will chair the committee, deputised by Mr Rotich. The Big Four projects target manufacturing, universal healthcare, food security and affordable housing.
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MAN seeks infrastructure upgrade to boost Nigeria’s exports. The Manufacturers Association of Nigeria, MAN, has called for upgraded facilities at the country’s export terminals to facilitate export of agriculture produce. Mansur Ahmed president of the Association said delays at sea ports during inspection by various government agencies are compounding efforts in getting products from Nigeria in reaching its destinations especially European market, thus leading to damages and rejection. Ahmed, also said that scientific produce inspection has been identified as a major criterion for high quality produce to guarantee enhanced access of several Nigeria exportable agricultural produce to international market.
EALA Speaker urges regional legal fraternity to remain alive to the integration process (EAC)
The EALA Speaker, Rt Hon Ngoga K Martin, has urged the regional legal fraternity to play a key role in sensitization on the integration process and to act as citizens’ point of checks and balances if the EAC is to make significant gains through a people-centred approach. The East African Law Society CEO, Hanningtone Amol, reiterated the regional law society had intensified its efforts in strengthening the integration process through advocacy around the EAC. He said the regional law society had been re-designed to make it more responsive to the region. The EALS, Mr Amol noted, had finalized plans to launch an EAC Integration index, to be released twice a year giving the state of the EAC as well as an avenue and platform to enumerate policy matters. The EALS, headquartered in Arusha, is the largest organized professional/ civil society dual membership organization in the region: its membership spans to over 15 000 members.
ECOWAS reviews policy documents on prevention of child marriage
Experts in child rights and protection from ECOWAS, in collaboration with the EU and UNICEF, commenced on 21 January in Abuja, the review and validation of the ECOWAS Child Policy and its Strategic Action Plan (2019-2023) which focuses on ending child marriages in the region. The experts identified child marriage as one of the five key priorities for immediate action in the Strategic Framework for Child Protection in West Africa as ECOWAS Member States have the highest prevalence rates of child marriage in Africa and second highest in the world, after South Asia. Opening the meeting, the Commissioner for Social Affairs and Gender of the ECOWAS Commission, Dr Siga Fatima Jagne, noted that the elimination of child marriage in the region has become a priority as six out of fifteen ECOWAS Member States (Niger-76%, Mali-55%, Burkina Faso-52%, Guinea-51%, Nigeria-43% and Sierra Leone-39%) are among the 20 countries with the highest rate of child marriage in the world. The meeting will be followed by a ministerial meeting on 25 January.
AREI’s inaugural ministerial meeting starts in Cairo
The first ministerial meeting of the Africa Renewable Energy Initiative (AREI) kicked off Tuesday in Cairo, with the attendance of energy ministers from Kenya, Chad, Guinea, Namibia, and Egypt. The meeting addressed the Egyptian experience in generating electricity through new and renewable energies during the past four years. The first phase of building an electricity line linking power grids in Egypt and Sudan is set to be completed within the next two months, said Egypt’s Electricity Minister Mohamed Shaker.
Pinelopi Goldberg: Staying focused (World Bank)
The war on poverty will be won or lost on what we do in Africa. While extreme poverty is estimated to have declined to 8.6% globally, it is still stubbornly high in Sub-Saharan Africa where it is projected to remain in double digits by 2030. The model of export-led industrialization that helped millions escape poverty in Asia in recent decades is increasingly under pressure from automation and the backlash against globalization. Regional integration and appropriate investments in infrastructure reducing the costs of transport, communication and trade seem more important than ever – and for this reason we need research to guide sound policies. [The author is WB Chief Economist]
Related News
Talking African economy at Davos: The AfCFTA and a unified market
When it comes to a unified African market – the topic of Tuesday’s panel discussion at the World Economic Forum in Davos – Bernard Gautier, deputy CEO of French investment firm Wendel Group, made it easy to see the existing barriers to business and Africa’s economic growth.
There’s an office in Morocco with a Congolese staffer and one from Cameroon, he said, but they can’t get to Kenya. One will need weeks to get a visa, while the other can’t get one at all. As Akinwumi Adesina, president of the African Development Bank pointed out, about half of the 54 African nations still require visas for travel; just a quarter don’t require them, while another quarter issue them on arrival.
Moving goods isn’t any easier. “Today it costs less money to bring a car from Paris to Lagos, than from Accra to Lagos,” said Gautier, an advocate of what the African Continental Free Trade Area (AfCFTA) agreement can achieve for Africans who are looking to create 18 million jobs each year through 2035.
That’s exactly what the panel of five facilitated by Arancha Gonzalez Laya, the executive director of the International Trade Centre, came to talk about. Laya called the AfCFTA “one area of good news” in the faltering globalization arena, which has seen economic growth slow in China and countries like the United States pull back on trade issues.
‘The next China, after China’
Yet there’s a long way to go for the AfCFTA to deliver on its potential. It was adopted in March 2018 after plans first began through the African Union in 2012. So far, 18 countries have ratified the agreement, or passed legislation to do so, with just four more needed before the AfCFTA will enter into force. Many are in West Africa, with Côte d’Ivoire becoming the most recent signatory in December.
North Africa has so far held out on the agreement, though all countries there have pledged to sign. And Nigeria remains a sticking point, as trade union leaders press for protections. President Muhammadu Buhari, facing elections in another three weeks, is still awaiting results of a study expected this month.
In the meantime, Adesina and other Davos panel participants made the case for just how transformative implementation of the trade agreement might be. The AfCFTA envisions the free movement of goods and services across African borders, with a common African passport and cross-border movement for its people. It’s being supported by initiatives like the Single African Air Transport Market (SAATM) launched a year ago, and the AU Supply Chain Platform unveiled at a workshop in Ethiopia last week.
Adesina’s argument for “bringing all the walls down” rested on solid population and economic data. By 2050, the African population will compare in size to that of India or China, with a similar growth in the middle class. “Think of the next China, after China,” he said. “This is exactly what the continental free trade area is, almost $3 trillion of combined GDP. That’s the market to focus on.”
Benefits to African economies
What the AfDB has already learned is that African countries that participate now in regional markets are the ones with more economic stability, in part because they are buffered from global economic shocks affecting nations that rely on exporting raw materials. Those resources also should be kept in Africa to support its own value-added industries, rather than seeing the profits go to global partners.
Under the AfCFTA, the new African Economic Outlook 2019 estimates an initial increase in Africa-to-Africa trade of 15 percent and some $2.8 billion in gains in real income when Africa’s bilateral tariffs are removed. Eliminating other barriers will be worth $37 billion and push trade gains up by more than 100 percent. That becomes far greater with the implementation of the World Trade Organization’s Trade Facilitation Agreement (TFA), which went into force in February 2017.
More than 30 African nations have signed TFA, in anticipation of trading costs reduced by 14 to 18 percent, and a 0.5 percent boost in world trade expected to benefit the world’s least developed countries (LDCs) most. That has the potential for real economic impact across Africa, where the vast majority – 33 of the 47 LDCs – are located, but it’s not without significant challenges in financing energy and infrastructure needed to support its growth. Also critical to Africa’s free trade transformation is the need for political stability, and tech sector development to avoid what panelist Rob Shuter of MTN called “data nationalism.”
The foundation for Africa’s success are its small- and medium-sized businesses, and support for the role of women and youth in driving entrepreneurship is a priority. The SMBs account for 75 percent of all African business, Adesina said, but only 20 percent have access to finance. The same problem exists on a continental scale: Just 15 countries, led by South Africa, account for 85 percent of the continent’s trade.
“The issue is how do we expand that? Well you can’t do that unless you have trade finance,” he said. The AfDB is investing $1 billion to support SMBs, which was important to panelists including Oxfam executive director Winnie Byanyima as she stressed the importance of addressing economic injustice. Her remarks followed Monday’s release of the Oxfam report on inequality, which many view as driven by factors of unchecked globalization.
Africa, and especially its women and youth, need jobs that provide security rather than a poverty she compared with slavery. “We need to prevent our trade bloc from the risk of allowing the rich countries to undercut our industrial development,” she said, urging Africa to learn from the mistakes of others in implementing the AfCFTA.
Related News
tralac’s Daily News Selection – a WEF special focus
The World Economic Forum 2019 began today in Davos: an easy guide
Today’s profiled WEF session: Achieving a single market in Africa
Africa needs to create 18 million jobs each year to 2035 to accommodate young labour market entrants. What role can the newly ratified African Continental Free Trade Area play to address the opportunities and challenges to generating inclusive growth? Speakers: Bernard Gautier, Akinwumi Ayodeji Adesina, Arancha Gonzalez Laya, Emmanuel Gamor, Winnie Byanyima, Rob Shuter.
WEF reports, news items, blogs:
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Strategies for the New Economy: making skills the currency of the labour market, presents ten strategies and twenty-two case studies that illustrate the range of actions that can be taken by educationalists, education technologists, business leaders and government to shift to a fully skills-based labour market.
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Towards a Reskilling Revolution: industry-led action for the future of work, extends our previous research to assess the business case for reskilling and establish its magnitude for different stakeholders. It also outlines a roadmap for selected industries to address specific challenges and opportunities related to the transformation of their workforce.
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Supply Chain 4.0: global practices and lessons learned for Latin America and the Caribbean, includes the results of a detailed examination carried out in six LAC countries – Argentina, Brazil, Colombia, the Dominican Republic, Mexico and Paraguay – on the state of four supply chains, namely appliances, automotive, food processing and textiles
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A rejection of populism: global public opinion comes out strongly in favour of openness and collaboration. However, regional viewpoints differ. Asked how important it is that countries work together towards a common goal, a global average of 76% said they believe it is either extremely important or very important. These sentiments are felt most strongly in South Asia and sub-Saharan Africa, where 88% share the same view. At the other end of the scale, only 61% of Western Europeans and 70% of North Americans say they consider cooperation to be extremely or very important. [Download Globalization 4.0 poll results here (pdf)]
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In a 5G World, new global architecture needed to protect core values; 5G and the growing need for national CTOs; Who should pay for workers to be reskilled?; Slowdown – rather than collapse – in global growth anticipated for 2019
World Bank president: list of reforms African states should be demanding (The Conversation)
Despite the fact that the selection process may be rigged, African states should use the opportunity to press for reforms to the Bank’s governance to make it more accountable. The truth is that the Bank’s original governance arrangements have changed much more slowly than the scale and nature of its operations. They are no longer fit for purpose. The selection of a new World Bank President offers African states an opportunity to improve the Bank’s governance arrangements. But how? African states should offer the US and their European allies a deal. They will agree to support the US nominee for President in return for their agreement to implement the following package of reforms: [The author: Danny Bradlow]
South Africa Economic Update: Increasing SA’s tertiary enrollment requires rebalancing resources (World Bank)
Enhancing South Africa’s socio-economic inclusion through increasing equitable access to the country’s tertiary institutions in a weak economic environment will require comprehensively improving the country’s post school education and training system, according to a World Bank report released today. While South Africa’s new education policy aims to equip poor and working-class citizens with the skills needed for today’s job market, the latest economic update for the country shows that its implementation could negatively affect the national budget. Announced in December 2017, the policy offers free tertiary education to 90% of academically eligible students, to meet the national goal of doubling Post School Education and Training (PSET) enrollment by 2030.
A developmental regionalism approach to the AfCFTA (TIPS)
This paper argues that adopting a “developmental regionalism” approach to trade integration provides the best prospects for the AfCFTA to catalyse the process of transformative industrial development, cross-border investment and democracy, governance, peace and security in Africa. This paper also discusses the progress being made by African countries and the continent in implementing each of the four pillars of the “developmental regionalism” approach to implementation of AfCFTA) that benefits all African countries and advances the objectives of NEPAD, and Agenda 2063. This paper is organised as follows: Section Two: History of regional integration in Africa: from Pan-Africanism to the AfCFTA; Section Three: Theory and Norms – the case for “developmental regionalism”; Section Four: Four pillars of developmental regionalism: a) Fair trade integration; b) Cooperation on transformative industrialisation; c) Cooperation on cross-border infrastructure investment (and trade facilitation); and d) Cooperation on democracy, good governance and peace and security; Section Five: Conclusion. [The author: Faizel Ishmael]
Related: TIPS Development Dialogue – International Trade and Inclusive Industrialisation (29 January, Pretoria). The speakers: Xolelwa Mlumbi, Neva Makgetla, Faizel Ismail, Christopher Wood.
UNDESA’s World Economic Situation and Prospects 2019.
pdf
Chapter III – Africa
(1.75 MB)
The economic performance varied significantly across the five sub-regions in 2018 (figure III.9). East Africa continues to be the fastest-growing sub-region in Africa with a 6.2% growth rate driven by government spending on infrastructure and domestic demand. North Africa expanded by 3.7%, with economic activity driven by improvements in tourism revenues and rising agriculture production. West Africa, led by the Nigerian economy, grew by 3.2% due to the increase in oil revenue. Meanwhile, economic growth of the Southern African sub-region deteriorated slightly from 1.5% in 2017 to 1.2% in 2018, and remains adversely affected by the economic performance of South Africa. After two challenging years, Central Africa achieved a 2.2% growth rate in 2018, exiting recession of -0.2% in 2017.
Profiled analysis – Box III.3. pdf African Continental Free Trade Area – opportunities and challenges for achieving sustainable development (1.75 MB) :
The implementation of the AfCFTA has some fiscal policy implications through marginal losses in tariff revenue. The small scale of the losses is mainly due to intra-African trade being a small share of Africa’s total trade (only 18% of total exports in 2016), and most intra-African trade is already liberalized under RECs. The AfCFTA is estimated to affect only about 7% of Africa’s total imports under current trade patterns. Nonetheless, there is widespread fear within participating countries that the revenue losses will prove significantly larger, which could delay implementation of the AfCFTA.
The resulting tariff cuts would lead to a redistribution of income from Governments to consumers and producers. Moreover, the AfCFTA is expected to produce additional welfare gains that surpass tariff losses significantly due to better allocation of resources. Furthermore, countries will be allowed to exclude a certain number of tariff lines (e.g., tariff lines that are important for raising tariff revenues) from the liberalization process. Conveying these messages clearly to participating countries is crucial to accelerating the implementation of AfCFTA.
These tariff revenue losses may also be outweighed by the additional revenues from growth to be generated by the AfCFTA, which would broaden the tax base and boost revenue collection from other sources. Growth in Africa is expected to accelerate by 0.3–0.6 percentage points by 2040 (depending on the liberalization approach or scenario adopted), when compared to the baseline scenario. All African countries would experience an increase in their GDP with the AfCFTA reforms, whatever the scenario. Countries such as Zimbabwe are expected to increase by between 3.6 and 31.9%, depending on the scenario. However, these forecasts are likely to substantially underestimate the economic benefits of the AfCFTA, as they do not take into account the impact of liberalization in other areas such as services and investment.
IMF’s World Economic Outlook Update, January 2019
In sub-Saharan Africa, growth is expected to pick up from 2.9% in 2018 to 3.5% in 2019, and 3.6% in 2020. For both years the projection is 0.3 percentage point lower than last October’s projection, as softening oil prices have caused downward revisions for Angola and Nigeria. The headline numbers for the region mask significant variation in performance, with over one-third of sub-Saharan economies expected to grow above 5% in 2019-20. [Christine Lagarde: remarks at World Economic Outlook press conference]
UNCTAD Global Investment Trends Monitor
Global foreign direct investment fell by nearly a fifth in 2018 to an estimated $1.2 trillion from $1.47 trillion in 2017, according to the latest UNCTAD Global Investment Trends Monitor (pdf). The drop, the third in as many years, brings FDI flows back to the low point reached after the global financial crisis, with the decline concentrated in developed countries where inflows fell by as much as 40% to an estimated $451 billion. Of the developing economies, Asia and Africa benefited the most, with flows increasing to developing countries in Asia by 5%. East and South-East Asia, where inflows were up 2% and 11% respectively, took the lion’s share of foreign investment, accounting for one-third of global FDI in 2018 and almost all growth in FDI to developed economies. “South East Asia is the main FDI growth engine,” said Mr. Zhan, with the region rebounding from a dip in 2017, buoyed by growth in Indonesia and Thailand. Greenfield announcements in developing economies rose by 47% reaching an estimated $539 billion and linked to Asian growth prospects. African FDI flows were up 6%, though growth was concentrated only in a few countries such as Egypt and South Africa. “Slow economic recovery in Latin America and the Caribbean saw flows drop by 4%,” Mr. Zhan added.
Next generation UNDP: statement by Achim Steiner (UNDP)
In keeping a firm focus on implementing our Strategic Plan, we will keep three international priorities at the forefront of our thinking and action in 2019: Inequality, climate change, and migration – and its drivers and root causes. In 2019, UNDP will launch a new report on irregular migration, focusing on African migrants who travel to Europe. It offers unique and timely analysis compiling perspectives of 3,027 individuals who have migrated from 43 African countries, and who were interviewed across 40 cities in 13 European destination countries, to which they had primarily arrived by sea. We expect that this report, which follows the 2017 Journeys to Extremism in Africa report, will challenge many commonly held assumptions about migrants and why they move. [Statement to the First Regular Session of the UNDP Executive Board]
Global Commission on the Future of Work (ILO)
The ILO Global Commission on the Future of Work has called on governments to commit to a set of measures in order to address the challenges caused by unprecedented transformational change in the world of work. Co-chaired by South African President Cyril Ramaphosa and Swedish Prime Minister, Stefan Löfven, the commission outlines a vision for a human-centred agenda that is based on investing in people’s capabilities, institutions of work and in decent and sustainable work. Among the ten recommendations are:
A universal labour guarantee that protects fundamental workers’ rights, an adequate living wage, limits on hours of work and safe and healthy workplaces.
Guaranteed social protection from birth to old age that supports people’s needs over the life cycle.
A universal entitlement to lifelong learning that enables people to skill, reskill and upskill.
Managing technological change to boost decent work, including an international governance system for digital labour platforms.
Greater investments in the care, green and rural economies.
A transformative and measurable agenda for gender equality.
Reshaping business incentives to encourage long-term investments.
An executive summary can be accessed here.
Related News
South Africa Economic Update: Increasing South Africa’s tertiary enrollment requires rebalancing resources
Reforming tertiary education in South Africa could reduce inequality of opportunity, boost growth
Enhancing South Africa’s socio-economic inclusion through increasing equitable access to the country’s tertiary institutions in a weak economic environment will require comprehensively improving the country’s post school education and training system, according to a World Bank report released today.
While South Africa’s new education policy aims to equip poor and working-class citizens with the skills needed for today’s job market, the latest economic update for the country shows that its implementation could negatively affect the national budget.
Announced in December 2017, the policy offers free tertiary education to 90% of academically eligible students, to meet the national goal of doubling Post School Education and Training (PSET) enrollment by 2030. However, the 12th edition of the South Africa Economic Update: Tertiary Education Enrollments Must Rise asserts that this will put a strain on the budget, and examines how it can be achieved without compromising education quality and fiscal sustainability.
“There is general consensus in South Africa on the need for a skills revolution, which will enable its youth to participate in a skills-hungry economy and make the country’s economy more competitive in a world that is constantly being reshaped by technological progress,” said Paul Noumba Um, World Bank Country Director for South Africa.
“Notwithstanding the long term need to fundamentally improve the basic education system, investing in human capital by enrolling more students in universities, TVET and community colleges as well as improving the quality of educations is a major imperative.”
“The importance of acquiring skills to enable South African’s youth to find jobs and earn higher wages thereby alleviating poverty, income inequality and joblessness, makes the policy to enroll more students in tertiary institutions a must, but in an environment of weak growth this is a challenging proposition which requires making some difficult trade-offs,” he continued.
The report reviews the impact of the new National Student Financial Aid Scheme (NSFAS), a plan to provide grants instead of loans to pay for education and all associated costs, such as accommodations, transportation and books. With nine out of 10 prospective students eligible for support, the report notes the tertiary education plan will exert pressure on an already stretched fiscus, limiting South Africa’s ability to both expand enrollment in institutions of higher learning and improve the quality of education.
As South Africa strives towards fostering economic growth, and addressing its most pressing development challenges of poverty, inequality and unemployment, the update predicts South Africa’s growth to accelerate to 1.3% in 2019 and 1.7% in 2020, driven by the implementation of the structural reforms announced in 2018. For the country to grow sustainably faster, it will be key to address its skills gap, which perpetuates inequality and fuels policy uncertainty, according to the report. This requires enrolling more students in PSET, the report says, as well as raising graduation rates and improving the relevance of skills taught to labor markets’ needs.
The study finds that the previous student financial aid system was insufficient to cover the financial risks and costs faced by many students pursuing PSET studies, especially Technical Vocation Education and Training (TVET), discouraging enrollments and academic performance. Under the new policy, the report notes that the demand for PSET and TVET could increase the demand for university studies by 23% and for TVET by 88%.
“We see that more than 90% of potential PSET students could benefit from the new National Student Financial Aid Scheme, making it progressive as it would reduce income inequality but would also put a huge strain on the fiscus, equivalent to about one percentage point of GDP, leaving fewer public resources to increase admission capacity without compromising education quality, said Sébastien Dessus, World Bank South Africa Program Leader.
Simulations done for this report highlight the mixed impact of the new financial scheme for implementing the free higher education policy has on inequality, as well as its high macroeconomic cost, making it unlikely for South Africa to meet its national goals of doubling PSET enrollments by 2030. The report argues that South Africa will have to make trade-offs between allocating budgetary resources to support more students to enroll in tertiary institutions on one hand, and expanding tertiary admissions capacity and improving the quality of education on the other to meet this goal.
“Our analysis shows that spreading enrollment growth across a variety of PSET institutions and delivery modalities both public and private can achieve higher enrollments in a financially manageable way from a public resources perspective,” says Dessus. “Non-university institutions such as TVET, community colleges, and distance education institutions usually have lower per-student costs than universities, especially research-intensive ones”.
The report suggests that South Africa could increase enrollments more rapidly and reduce inequality faster by rebalancing budgetary resources and policy reform attention towards interventions that improve the quality of education, while simultaneously expanding PSET admissions capacity.
It also suggests comprehensively improving South Africa’s PSET system by strengthening the quality of education in TVET, community colleges, distance education institutions and historically disadvantaged universities. It points to international experience which shows that countries that face acute public resource constraints cannot achieve rapid growth in enrollment by following the traditional model of building and funding new public universities with budgetary resources.
The report offers internationally tested policy options that have sustainably increased PSET enrollments through: i) diversifying the PSET sector from a mostly government funded-university centric model; (ii) encouraging private sector participation through the adoption of simpler accreditation rules similar to that for public institutions; (iii) strengthening quality assurance mechanisms; (iv) improving resource mobilization; and (v) ensuring greater equity in supporting students.
Implementing such options would be fiscally possible, the report says, by progressively targeting financial support to the poorest students, while extending income contingent loans to more affluent students. As the quality of TVET and community college education improves, the report notes that the high private rate of return to PSET would make such proposal equitable, sustainable, rewarding and safe for new students’ cohorts to enroll in universities, TVET and community colleges.
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World Bank president: list of reforms African states should be demanding
The World Bank will launch the process for selecting the new World Bank President on 7 February. There’s been a great deal of talk about the importance of an open and transparent selection process and the need to appoint the best qualified candidate, regardless of nationality. It can all be disregarded. The new president will be an American.
The US will insist that other countries respect its customary prerogative to select the President of the World Bank – notwithstanding President Donald Trump’s hostility to multilateral institutions. And they will be supported by the Europeans, who will want to protect their own customary prerogative to select the Managing Director of the International Monetary Fund.
Even though the problems caused by this custom are obvious, the remaining World Bank member states will not be able to defeat the US’s demand. This is because the US and the Europeans, together with allies such as Australia, Canada and Japan, control about 48% of the votes in the Bank. This means that any successful non-American candidate would need to garner almost all the votes of the remaining approximately 150 member states.
This is unlikely. At least some states will have their own reasons for opposing the non-American candidate and others will be subjected to economic and political pressure to support the American candidate.
Despite the fact that the selection process may be rigged, African states should use the opportunity to press for reforms to the Bank’s governance to make it more accountable.
The truth is that the Bank’s original governance arrangements have changed much more slowly than the scale and nature of its operations. They are no longer fit for purpose.
Then and now
The World Bank began operations in 1946 with 38 member states and a staff of 26. Today it has 189 member countries and more than 10,000 employees. Originally, the Bank’s board consisted of 12 Executive Directors. Five were appointed by the five largest shareholding member states and seven represented constituencies of the remaining 33 member states.
Today the board has 25 members. Seven represent individual states and 18 represent constituencies of the remaining 182 member states.
Initially, the members were concerned that the Bank could interfere in their domestic political affairs. Consequently, they prohibited it from taking “political considerations” into account in its operational decisions.
Today the Bank, while still bound by this political prohibition, deals with sensitive political issues like climate change, gender relations, protection of the rights of indigenous people and the rights of people involuntarily resettled as a result of Bank-funded projects.
Originally, because of concerns that it was vulnerable to governmental pressure when operating in its member states, the Bank was given immunity from the jurisdiction of its member states. Today it is sufficiently well established that it does not need the same broad protection from its member states.
Nevertheless, it retains its immunity, which it uses to ward off efforts to hold it accountable for the impacts of the work it’s undertaken in member states.
Predictably, its poor governance practices impose the greatest costs on those least able to bear them: its poorest member states and their citizens.
The selection of a new World Bank President offers African states an opportunity to improve the Bank’s governance arrangements. But how?
Possible reforms
African states should offer the US and their European allies a deal. They will agree to support the US nominee for President in return for their agreement to implement the following package of reforms:
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The President will be required to issue an annual public report evaluating how well the Bank is performing against some agreed benchmark; for example, the sustainable development goals. This report will be reviewed by a committee of representatives of the Bank’s stakeholders who will issue their own public report assessing the Bank’s performance against the same benchmark. The advisory council provided for in article 6 of the Bank’s articles of agreement could perform this role.
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The World Bank’s existing independent accountability mechanisms will be strengthened so their findings become binding. These mechanisms investigate claims by communities and groups of individuals who allege that they have been harmed by the actions of the Bank in Bank-funded projects. The Bank, however, is not bound by the findings of these investigations and so may not take the remedial actions required to resolve the problem.
African states have historically been suspicious of these independent accountability mechanisms. Consequently, it may seem counter-intuitive to expect them to support stronger ones. But growing concerns about the Bank’s extensive immunity from member state jurisdiction have increased the potential for both the Bank and its borrower member states to be subjected to stronger and less knowledgeable forms of accountability.
In fact, the US Supreme Court is currently deciding whether to deny the International Finance Corporation’s claim of immunity and allow an Indian community to sue it in a US court. The case arises from the corporation’s failure to act on an independent accountability mechanism report about problems in a project it funded in India.
If the community wins the case, it could mean that an African country could face the indignity of having a US court pass judgement on the adequacy of the operation of Bank-funded projects in its own country.
Based on the international jurisprudence dealing with immunity of international organisations, one way to avoid this outcome could be for the Bank to strengthen its independent accountability mechanisms so that they offer a meaningful remedy to these complainants.
- The roles of the President and CEO of the Bank and the Chair of its board should be split and nationals of different countries hold the two positions. Ideally, if the President of the Bank is an American, the Chair of the Board should be a citizen of a borrower country.
This reform would require an amendment to the articles of the Bank. But it would bring the Bank into line with what is viewed as good corporate governance in most countries.
These reforms, if implemented, would result in a World Bank that is more responsive to the concerns of developing countries and more accountable to all its members and their citizens.
Danny Bradlow is SARCHI Professor of International Development Law and African Economic Relations, University of Pretoria.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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Signs suggest global economic growth spurt has peaked but will remain steady at 3 percent in 2019-2020
Economic prospects threatened by weakened support for multilateralism, tightening of financial conditions and heightened trade tensions
The global economy will continue to grow at a steady pace of around 3 percent in 2019 and 2020 amid signs that global growth has peaked. However, a worrisome combination of development challenges could further undermine growth, according to the United Nations World Economic Situation and Prospects (WESP) 2019, which was launched on Monday, 21 January.
UN Secretary-General António Guterres cautioned: “While global economic indicators remain largely favourable, they do not tell the whole story.” He said the World Economic Situation and Prospects 2019 “raises concerns over the sustainability of global economic growth in the face of rising financial, social and environmental challenges.”
Global growth is expected to remain steady at 3.0 per cent in 2019 and 2020, after an expansion of 3.1 per cent in 2018. Growth in the United States is projected to decelerate to 2.5 per cent in 2019 and 2 per cent in 2020, as the impulse from fiscal stimulus in 2018 wanes. Steady growth of 2.0 per cent is projected for the European Union, although risks are tilted to the downside, including a potential fallout from Brexit.
Growth in China is expected to moderate from 6.6 per cent in 2018 to 6.3 per cent in 2019, with policy support partly offsetting the negative impact of trade tensions. Several large commodity-exporting countries, such as Brazil, Nigeria and the Russian Federation, are projected to see a moderate pickup in growth in 2019-2020, albeit from a low base.
However, economic growth is uneven and is often failing to reach where it is most needed. Per capita incomes will stagnate or grow only marginally in 2019 in several parts of Africa, Western Asia, and Latin America and the Caribbean. Even where per capita growth is strong, economic activity is often driven by core industrial and urban regions, leaving peripheral and rural areas behind. Eradicating poverty by 2030 will require both double-digit growth in Africa and steep reductions in income inequality.
Further clouding the prospects are a confluence of risks with the potential to severely disrupt economic activity and inflict significant damage on longer-term development prospects. These risks include waning support for multilateral approaches; the escalation of trade policy disputes; financial instabilities linked to elevated levels of debt; and rising climate risks, as the world experiences an increasing number of extreme weather events.
The contemporaneous appearance of several important risks endangers efforts to achieve the 2030 Agenda for Sustainable Development – the universally adopted plan containing 17 specific goals to promote prosperity and social well-being while protecting the environment.
“Alongside various short-term risks, there is an increasing urgency to deal with much more fundamental problems. What we have hitherto viewed as long-term challenges, such as climate change, have become immediate short-term risks,” emphasized Elliott Harris, UN Chief Economist and Assistant Secretary-General for Economic Development.
Strengthening global cooperation is central to advancing sustainable development
The report underscores that strengthening global cooperation is central to advancing sustainable development. The multilateral approach to global policy making is facing significant challenges, including a trend toward greater unilateral actions. Pressures have materialized in the areas of international trade, international development finance and tackling climate change.
These threats come at a time when international cooperation and governance are more important than ever – many of the challenges laid out in the 2030 Agenda for Sustainable Development are global by nature and require collective and cooperative action. Waning support for multilateralism also raises questions around the capacity for collaborative policy action in the event of a widespread global shock.
Global trade tensions pose a threat to the economic outlook
Amid the rise in global trade tensions, global trade growth moderated over the course of 2018, from growth of 5.3 per cent in 2017, to 3.8 per cent. While tensions have materially impacted some specific sectors, stimulus measures and direct subsidies have so far offset much of the direct economic impacts on China and the United States. But a prolonged escalation of trade tensions could severely disrupt the global economy.
Directly impacted sectors have already witnessed rising input prices and delayed investment decisions. These impacts can be expected to spread through global value chains, particularly in East Asia. Slower growth in China and the United States could also reduce the demand for commodities, affecting commodity exporters from Africa and Latin America.
An abrupt tightening of global financial conditions could spark financial turmoil
As global financial conditions tighten, an unexpectedly rapid rise in interest rates or a significant strengthening of the US dollar could exacerbate emerging market fragilities, leading to heightened risk of debt distress. This risk can be further aggravated by global trade tensions, monetary policy adjustment in developed economies, commodity price shocks, or domestic political or economic disruptions.
Many low-income countries have already experienced a substantial rise in interest burdens. Countries with a substantial amount of dollar-denominated debt, high current account or fiscal deficits, large external financing needs and limited policy buffers are particularly vulnerable to financial stress.
Climate risks still not fully integrated into economic decision-making
A fundamental shift in the way the world powers economic growth is imperative. Economic decision-making must fully integrate the negative climate risks associated with emissions. This can be achieved through tools such as carbon pricing measures, energy efficiency regulations such as minimum performance standards and building codes, and reduction of socially inefficient fossil fuel subsidy regimes. Governments can also promote policies to stimulate new energy-saving technologies, such as research and development subsidies. In countries that remain highly reliant on fossil fuel production, economic diversification is vital.
Chapter III. Regional developments and outlook
Africa: Short-term economic outlook improving but continent still faces significant medium-term vulnerabilities
Aggregate GDP growth in Africa slowed to 3.2 per cent in 2018, from 3.4 per cent in 2017. The continent is expected to grow marginally faster at 3.4 per cent in 2019 and 3.7 per cent in 2020. Supporting this performance is the rising demand for Africa’s exports, together with robust private consumption and sustained investments in infrastructure.
However, aggregate GDP on a per capita basis is projected to increase by only 0.6 per cent in 2018 and by 0.9 per cent in 2019 – insufficient to improve living standards for large segments of the population. The continent would need to at least double the current growth rate in order to make significant progress towards achieving many of the SDGs.
Economic performance and prospects differ widely among the five African subregions. After an estimated expansion of 3.7 per cent in 2019, growth in North Africa is forecast to moderate slightly to 3.4 per cent in 2019 and 3.5 per cent 2020, as external conditions are projected to be stable amid a consistent expansion of European economies – the largest export destination.
East Africa will remain the fastest-growing subregion. GDP growth is projected to accelerate from 6.2 per cent in 2018 to 6.4 per cent in 2019 and to 6.5 per cent in 2020, supported by large infrastructure investments and the expansion of domestic markets.
In Southern Africa, economic growth is projected to pick up modestly from 1.2 per cent in 2018 to 2.1 per cent in 2019 and 2.6 per cent in 2020. In South Africa, the subregion’s largest economy, growth will remain subdued amid socio-political challenges, heightened uncertainty in the mining sector, and weather-dependent agriculture. This will continue to weigh on the performance of other economies in the subregion.
Growth in Central Africa is estimated to accelerate mildly from 2.2 per cent in 2018 to 2.5 per cent in 2019, supported by firming oil production, rising investment and diversification measures. Inflation is projected to remain close to the 3 per cent convergence criteria set by the Central African Economic and Monetary Community.
In West Africa, GDP growth is projected to strengthen to 3.4 per cent in 2019, up from 3.2 per cent in 2018, supported by expanding domestic demand, improving terms of trade and capital inflows. The relatively modest aggregate growth largely reflects the performance of the Nigerian economy, which is projected to expand by only around 2 per cent in 2019. In the eight-country West African Economic and Monetary Union, growth will remain above 6.5 per cent in 2019-2020.
The report also notes that inflation receded in 2018 as exchange rate shocks triggered by the commodity price crash of 2014-15 were absorbed into the price level. Inflation in the continent is expected to continue to moderate in 2019 as exchange rates and food production stabilize in most countries.
Risks and policy challenges
Risks to Africa’s economic outlook stem from external and domestic factors. On the external side, the tightening of monetary policies across developed countries – and the strengthening of the US dollar – can limit the capacity to service current debt positions. As monetary conditions are projected to tighten further, the risk of debt defaults could significantly rise and thus increase debt sustainability concerns. Also, a further escalation of trade tensions or a global economic slowdown resulting in lower demand for commodities could substantially impact the economic prospects of African economies.
African Continental Free Trade Area: opportunities and challenges for achieving sustainable development
The African Continental Free Trade Area (AfCFTA) declaration, signed by 49 African Union Members in 2018, is believed to have the capability of boosting intra-African trade and producing the kind of growth that can support economic diversification, industrialization and development of the continent. An additional six Member States signed the Kigali Declaration, committing to signing the AfCFTA after finalizing domestic review processes. Among other goals, the AfCFTA is envisaged to facilitate, harmonize and better coordinate trade regimes, and eliminate the challenges associated with multiple and overlapping trade regimes across countries as well as across regional economic communities (RECs).
The AfCFTA is likely to support the continent’s industrialization and structural transformation agenda, as manufactured products make up 46 per cent of intra-African trade and only 22 per cent of Africa’s trade with the rest of the world, leaving significant scope for African countries to industrialize. According to United Nations Economic Commission for Africa (ECA) estimates, the AfCFTA is expected to increase Africa’s industrial exports by more than 50 per cent over a period of 12 years. This could promote the type of trade that would potentially create jobs for Africa’s growing youth population and establish opportunities for nurturing Africa’s businesses and entrepreneurs.
All countries and regions are expected to increase their exports, regardless of the approach to liberalization, supporting the continent’s industrialization and structural transformation agenda. Intra-African trade is projected to rise by between 15 and 25 per cent. The more ambitious the liberalization approach, the higher the potential trade creation and revenue gains within Africa. Estimates reveal the largest potential increases of over 40 per cent in textile, wood and paper, vehicle and transport equipment, other manufactures and wearing apparel industries.
The implementation of the AfCFTA has some fiscal policy implications through marginal losses in tariff revenue. The small scale of the losses is mainly due to intra-African trade being a small share of Africa’s total trade (only 18 per cent of total exports in 2016), and most intra-African trade is already liberalized under RECs. The AfCFTA is estimated to affect only about 7 per cent of Africa’s total imports under current trade patterns. Nonetheless, there is widespread fear within participating countries that the revenue losses will prove significantly larger, which could delay implementation of the AfCFTA.
The resulting tariff cuts would lead to a redistribution of income from Governments to consumers and producers. Moreover, the AfCFTA is expected to produce additional welfare gains that surpass tariff losses significantly due to better allocation of resources. Furthermore, countries will be allowed to exclude a certain number of tariff lines (e.g., tariff lines that are important for raising tariff revenues) from the liberalization process. Conveying these messages clearly to participating countries is crucial to accelerating the implementation of AfCFTA.
These tariff revenue losses may also be outweighed by the additional revenues from growth to be generated by the AfCFTA, which would broaden the tax base and boost revenue collection from other sources. Growth in Africa is expected to accelerate by 0.3-0.6 percentage points by 2040 (depending on the liberalization approach or scenario adopted), when compared to the baseline scenario.
All African countries would experience an increase in their GDP with the AfCFTA reforms, whatever the scenario. Countries such as Zimbabwe are expected to increase by between 3.6 and 31.9 per cent, depending on the scenario.a However, these forecasts are likely to substantially underestimate the economic benefits of the AfCFTA, as they do not take into account the impact of liberalization in other areas such as services and investment.
The benefits of the AfCFTA would be further enhanced by maximizing the potential that comes with a fast-growing young population and the associated fast urbanization process occurring on the continent. This would be conducive for agglomeration economies providing major opportunities for industrialization through rising demand and shifting patterns of consumption. Through the AfCFTA, the growing middle class can be leveraged to stimulate industrial development to meet the rising demand domestically and regionally, leading to broader integration through value chains. However, for this to be achieved, Africa needs to take proactive steps to curb the associated risks that come with a rising and urbanizing population.
Implementation of the AfCTA may be delayed by the following circumstances: the multiple and overlapping trade agreements in Africa; fear of significant tariff revenue losses by countries; possible uneven distribution of other costs and benefits among member countries; and poor and inadequate domestic infrastructure. The role of payment systems in facilitating cross-border trade and the associated challenges and constraints of various payment arrangements, both at national and regional levels, need to be examined. There is a need, therefore, for policies to mitigate these challenges and help enhance the redistribution of potential benefits and costs of the AfCFTA.
The importance of infrastructure in enhancing regional integration cannot be emphasized enough. Recognizing the importance of efficient transport, communications, energy infrastructure and related services for trade and the pursuit of the continent’s development goals, the African Union Heads of State and Governments, among others, reaffirmed the high priority accorded to infrastructure and launched the Plan for Infrastructure Development in Africa (PIDA) for its accelerated development. The objective of the PIDA is to help African leaders establish a strategic framework for creating regional and continental infrastructure based on a development vision, strategic objectives and sector policies. Accelerating this process is now all the more imperative for taking full advantage of the opportunities offered by the AfCFTA.
This box was written by Hopestone Kayiska Chavula and Nadia S. Ouedraogo, UNECA.
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tralac’s Daily News Selection, with an Ethiopian special focus
AfCFTA could be in force by mid-year: STC of the Ministers of Trade, Industry and Mineral Resources
The Rwandan Department of Trade and Industry last week held the 2nd Ordinary Session of the Specialized Technical Committee of the Ministers of Trade, Industry and Mineral Resources. The objective of the meeting was to consider draft continental strategies which included the AU Commodity Strategy, AU Small and Medium Enterprises Strategy and Trade Facilitation Strategy. The meeting also took note of the various technical reports and presentations in the areas of trade, customs, industry and minerals; which are critical to supporting the AfCFTA. The Executive Secretary of UNECA, Dr Vera Songwe, observed that on the basis of the rate at which ratifications were being deposited, the chances of the AfCFTA entering into force by mid-2019 were brighter. AU Commissioner for Economic Affairs, Prof. Victor Harrison, stressed that integration is the only solution for Africa to become an emerging continent. According to Harrison, African countries need viable financial institutions such as the African Investment Bank, the African Central Bank and the African Monetary Fund, which are provided for in the Constitutive Act of the African Union.
AfCFTA receives further support from Pan-African organisations (New Times)
TradeMark East Africa and the AfroChampions Initiative (ACI) have signed a partnership agreement committing to provide support to governments and the private sector in realising the AfCFTA. The agreement was signed by Frank Matsaert (TMEA CEO) and Ali Mufuruki (Regional Chair, ACI). The two organisations will identify projects of regional or pan-African importance that require investment from African or foreign investors. Both TradeMark East Africa and ACI will then promote and participate in the successful projects which will be designed to support the regulatory and technical implementation of the Agreement on the AfCFTA. [An African Business interview with Jean-Louis Billon, AfroChampions Vice Chair for Western Africa]
The EAC: New dawn for regional relations? (The East African)
Ethiopia
Trade, infrastructure and innovation postings:
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Arkebe Oqubay, Taffere Tesfachew: The journey of Ethiopian Airlines. Despite sceptics who believed Ethiopia lacked the comparative advantage to adopt the latest aviation technologies, Ethiopian Airlines (EAL) has in the past seven decades narrowed the gap between itself and leading global players in the aviation industry by upgrading its technological, organizational, and management capabilities. This paper reviews EAL’s journey to build an internationally competitive airline, explores the challenges and complexities of learning for African firms, and examines implications for capability building and catch-up in late-latecomer countries. One key to EAL’s success was the partnership with a leading global player, TWA. Another was a strong commitment to “Ethiopianization” from an early stage, which increased learning intensity and highlighted the industry’s narrow latitude for poor performance. In the early 21st century, EAL embarked on Vision 2025, at the heart of which are technological capability development, skills formation, aggressive new market development, and commitment to Pan-Africanism. The story shows that African firms can successfully move closer to the productivity frontier in a particularly challenging industry. Extract from the conclusion (pdf): The EAL experience presents a unique example of firm-level learning and catching up in an industry considered alien to a late-latecomer country struggling to reach middle-income level. The relevance of the Ethiopian experience to other 21st century late-latecomers is less clear, depending on country specificity, government commitment, institutional development, and the internal and external policy environments. Broadly, however, a review of the ups and downs in the transformation of EAL from a simple domestic airline into an internationally competitive aviation industry reveals five critical factors.
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Ministry manoeuvres toward digital economy. The Ministry of Innovation and Technology is revising its 15-year-old policy in a bid to digitise the nation’s economy. Revising the national science, technology and innovation policy in collaboration with UNCTAD, the Ministry aspires to lead the economy toward tech-led growth. Failure to align with different sectors, coordinate the sectors and support the nation’s move toward the industrial economy as well as an inability to comply with the current economic reforms are the major reasons for the revision of the existing policy, according to Desta Abera, director of policy, strategy and future planning in the Ministry. The first policy was enacted in 2004 when the government announced a shift in the economic revolution. It identified 11 directions including technology transfer, human resource building, manufacturing and finance. The new policy will be focusing on 24 sectors including agriculture, textiles and information technology. Hence, the UN-organ UNCTAD is assessing 50 sectors including SMEs, manufacturing and foreign direct investment that need to be digitised. The Ministry itself is also conducting a prior assessment for the revision. Finally, the two assessments will be merged to come out as a final draft policy to be sent to the Council of Ministers for approval. The Policy is expected to be approved and implemented, starting September. [UNCTAD Leapfrogging brief: Look before you leap]
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Kenya-Ethiopia agricultural trade corridor study. The USAID East Africa Trade and Investment Hub partnered with New Markets Lab to conduct a study on the Kenya-Ethiopia agricultural trade corridor, also known as the Moyale Corridor. The study, conducted in 2018, was designed around four key objectives: To collect and synthesize existing information on agricultural trade corridors, growth clusters, and similar initiatives in the context of agricultural development and regional trade; To identify the existing business environment, partners, stakeholders, ongoing activities, and milestones achieved along the Corridor; To analyze the obstacles, opportunities, and frameworks of the institutions, partners, and activities that enable or inhibit development along the Corridor; and To assess the potential impact of improved agricultural trade on regional food security and propose policy recommendations that would eliminate obstacles and multiply opportunities along the Corridor. Recommendations (pdf): Focus the Moyale Corridor on agriculture and food security, creating a true agricultural development corridor that incorporates good practices from other corridors; Improve data analysis related to the Corridor’s role in food security; Assess potential for developing priority clusters along the Moyale Corridor, including grains, livestock, beans, and sorghum; Establish an integrated governance structure for the management of the Moyale Corridor; Develop interventions to engage small businesses along the Corridor; Support formalized trade relationship between Kenya and Ethiopia to enhance regional integration; Prioritize additional infrastructure at the Kenyan-Ethiopian border in support of the Corridor.
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Government to overhaul logistics sector. The Ministry of Revenues is planning to launch a customs single windows service. The administration of Prime Minister Abiy Ahmed, whose focus is on economic liberalization, expressed commitment to enhance the participation of the private sector in the entire logistics supply chain. There is also an initiative taken by the administration to diversify the country’s port access. The expected outcome of the logistics turnaround strategy is to reduce the import-export transit time by half by 2020. “Reduce the number of documents required for import and export by half, reduce the average duel time of imported goods to two days in dry ports and increase general cargo carried by multi-modal transport system coverage to 90%” the document stated.
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Towards a new Ethiopia National AGOA Strategy. The USAID Hub’s lead AGOA strategy consultant visited Ethiopia last week to gather supply-side information and conduct a sector analysis for a new Ethiopia National AGOA Strategy. The Ethiopian government requested the Hub to provide technical assistance on the Strategy, which will set strategic actions and targets for significant growth in exports from Ethiopia to the United States by 2025. The Hub began the strategy in October 2018 with a review of the macro-economic environment and Ethiopia’s trade performance globally and with the United States. The Hub is now refining competitive export sectors and reviewing supply-side capacity. The Strategy process will include stakeholder validation meetings in Ethiopia before concluding the drafting process at the end of March 2019, when the Hub will submit a completed draft to the Ethiopian government.
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Related quick links: Finnovation Ethiopia 2019 (11 March, Addis Ababa); Ahead of a planned Qatari-Ethiopian Business Forum: Ethiopia woos Qatari investors; Ethiopia embarks on electronic trading system for soybean, chickpea; How investment in irrigation is paying off for Ethiopia’s economy; Ethiopia’s sugar sector: high on resources, low on strategy; UN agencies hosts workshop to support Ethiopia’s policy coherence for SDGs; Moving further on civil service reforms in Ethiopia: findings and implications from a civil service survey and qualitative analysis
ECCAS-CEMAC Harmonized Preferential Tariff regime training workshop in CAR (UNECA)
A total of 83 leaders from the public and private sectors of the CAR have completed a three-day training programme to appropriate rules of origin procedures for accrediting national industrial products into the ECCAS-CEMAC Harmonized Preferential Tariff regime. Facilitated by the UNECA’s Subregional Office for Central Africa, the training took place in Bangui as part of a series that has already benefitted local investors and administrative officials in Cameroon, the Republic of Congo, Gabon, Chad and the DRC. Tariff and non-tariff barriers as well as limited economic diversification and product complementarity among Central African states have contributed to the lower performance of the subregion in terms of intra-Africa trade, which stands at about 3% against the African average of 17%.
Guinea-Bissau: Public Expenditure Review (World Bank)
The objective of the Guinea-Bissau Public Expenditure Review is to analyze government expenditure, fiscal revenue, and public financial management in selected sectors (education, health, and security). The PER is a follow-up to the World Bank’s (2017) Public Expenditure Analysis that provided an overall review of public finances in Guinea-Bissau (see Annex I). It contains a wide range of analyses, with some chapters examining public spending trends and outcomes, while others are more process oriented and place a strong emphasis on PFM systems, at macro- and micro-levels. The education and health chapters go beyond the confines of traditional World Bank PERs - namely the efficiency, effectiveness, and equity of spending. Both of these chapters also review the PFM systems in the respective line ministries with a view to identifying options for reform. Further, the PER analyzes the fiscal implications of continuing to spend over 15% of the budget on the security sector and nearly 9% of GDP on wage and nonwage compensation.
Global value chains: what are the benefits and why do countries participate? (IMF)
We use the Eora MRIO database to compute different measures of GVC participation for 189 countries and illustrate global patterns of supply chains as well as their evolution over time in order to contribute to this topic. We find that GVC-related trade, rather than conventional trade, has a positive impact on income per capita and productivity, however there is large heterogeneity and the gains appear more significant for upper-middle and high-income countries. We document that “moving up” to more high-tech sectors while participating in major supply chains does take place but is not universal, suggesting other factors matter. We confirm the findings of the standard gravity literature for GVC trade; highlighting the key role of institutional features such as contract enforcement and the quality of infrastructure as determinants of GVC participation.
Digital opportunities for trade in agriculture and food sectors (pdf, OECD): this report explores ways in which digital technologies can support trade in the agriculture and food global value chains, in particular in relation to market access, traceability and trade facilitation.
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The entry into force of the Agreement Establishing the African Continental Free Trade Area (AfCFTA) and its implementation
The Department of Trade and Industry organized the 2nd Ordinary Session of the Specialized Technical Committee of the Ministers of Trade, Industry and Mineral Resources, under the theme: “The Entry into Force of the Agreement Establishing the African Continental Free Trade Area (AfCFTA) and its Implementation”.
The objective of the meeting was to consider draft continental strategies which included the African Union Commodity Strategy, Africa Union Small and Medium Enterprises Strategy and Trade Facilitation Strategy and to take note of the various technical reports and presentations in the areas of Trade, Customs, Industry and Minerals; which are critical to supporting the African Continental Free Trade Area (AfCFTA).
The Meeting was attended by Member States, Regional Economic Communities, experts from the Afreximbank, the African Development Bank (AfDB), the United Nations Economic Commission for Africa (UNECA), United Nations Industrial Development Organisation (UNIDO) and the United Nations Conference on Trade and Development (UNCTAD).
In her remarks, the Executive Secretary of UNECA, Dr. Vera Songwe noted the centrality of the theme of the STC-TIM, especially on the momentum towards signature and ratifications of the agreement establishing the AfCFTA. She took note of the challenges facing the multilateral trading system and the global dynamics.
Dr. Songwe said Africa has a clear vision to create its own market, and to stop the fragmentation of the internal market through the AfCFTA. She congratulated the 15 countries that have ratified the AfCFTA to date, and expressed her confidence that the requisite 22 signatures needed for entry into force of the free trade regime would be secured in due course.
She further observed that on the basis of the rate at which ratifications where being deposited, the chances of the AfCFTA entering into force by mid-2019 where brighter. Dr. Songwe noted the importance of the digital economy towards the successful implementation of the AfCFTA.
The Executive Vice President of Afreximbank, Mr. Amr Kamel passed his regards from the President and Chairman of the Bank, Professor Benedict Oramah. He congratulated the African Union for the achievements on the AfCFTA and the 2018 Intra African Trade Fair (IATF).
The Afreximbank Vice President commended the AUC for developing the SME Strategy, more so given that the Bank also had a portfolio dealing with the same subject. It was therefore, imperative that the AUC and the Bank explore synergies in this direction to unlock the potential of SMEs in the continent, as well as their contribution to economic growth, employment creation and poverty alleviation.
He pointed out that Afreximbank was playing a critical role in the continent’s development, and welcomed progress on the AfCFTA ratifications. The Bank plans to disburse US$25 billion to African countries as trade and investment finance.
In order to support the implementation of various instruments of the African Union, Mr. Kamel echoed the fact that the Bank is developing various Digital Ecosystems to enhance intra-African trade, and some of these instruments included the Pan-African Payments System Platform, Trade Information Portal, Regulation Platform and a Customer Online Platform.
Mr. Victor Djemba, Head of Africa Division, of UNIDO delivered some remarks on behalf of the UNIDO Director General. He indicated that UNIDO welcomes the progress made towards the operationalization of the AfCFTA since its launch in March, 2018 in Kigali, Rwanda.
He observed that successful implementation of the AfCFTA hinges on the existence of African economies that produce goods and services that can be traded among themselves and beyond. He observed that several critical elements related to industrial development should be taken into account including the promotion of value addition, the improvement of regulatory frameworks (industrial policies, and industrial laws and regulations) for the success of the AfCFTA.
In his remarks, AU Commissioner for Economic Affairs, H.E. Prof. Victor Harrison, stressed that integration is the only solution for Africa to become an emerging continent. In this regard, he said, the AfCFTA provides an invaluable opportunity for African countries to increase their share of manufactured goods, which currently stands at less than 1% of world manufactured goods, through industrialization and the creation of regional value chains.
For the AfCFTA to fully deliver on its expectations, African countries will need to ensure that supportive and accompanying measures are in place, such as targeted measures to support the productive sector, as well as improving the business-enabling environment.
According to Professor Harrison, African countries need viable financial institutions such as the African Investment Bank, the African Central Bank and the African Monetary Fund, which are provided for in the Constitutive Act of the African Union.
In his statement, the Commissioner for Trade and Industry, H.E. Amb. Albert Muchanga congratulated the outgoing Bureau on the commendable work and welcomed the new Bureau of the STC on their assumption of duty. He urged the expeditious completion of the work on the African Union Commodity Strategy.
With regards to on the theme of the meeting, he provided a status update on the ratification of the AfCFTA. Ambassador Muchanga pointed out that the total number of ratifications now stands at sixteen.
“We now have six more ratifications remaining before we reach the magic number of 22 ratifications that are required before the agreement enters into force, a month after receiving the 22nd instrument of ratification,” he said.
He called on all Member States to come on board and complete the six remaining ratifications as the completion will transform into reality the vision of the African Union and Agenda 2063. He called for all countries to sign the Agreement, noting that 49 Member States had signed and more are expected shortly.
In her closing remarks, Mrs. Rakiya Eddarhem, Minister in Charge of External Trade, Kingdom of Morocco and Chair of the STC, expressed her deep appreciation to the Government of the Federal Democratic Republic of Ethiopia for the warm reception and hospitality. She thanked Senior Officials for the high quality of recommendations presented to Ministers for consideration.
The Honourable Eddarhem indicated that Morocco’s return to its institutional family, the AU, has been driven by its commitment and willingness to contribute to the socio-economic development of the African continent. She recalled that throughout its history, Morocco has always been driven by its vocation towards Africa.
At the end of the meeting, through an Official Declaration, ministers commended, among others, the role of the African Union Commission in coordinating the AfCFTA negotiations which led to the successful signing of the pdf Agreement Establishing the African Continental Free Trade Area (AfCFTA) (4.67 MB) in March 2018 at the AU Extraordinary Summit in Kigali; as well as the significant progress made in the ratification of the Agreement. They also stressed the importance of economic diversification and industrialization for the sustainability of AfCFTA.
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EAC still on the right track, says Secretary General
The East African Community (EAC) Secretary General, Amb. Liberat Mfumukeko, has said the region is without doubt,on the right track with significant achievements registered in 2018 despite few challenges.
“The achievements of the EAC have earned us international recognition as the top performing REC on regional integration overall by internationally renowned institutions like the African Development Bank and the World Bank,” he said.
Delivering the Secretary General’s New Year Address 2019 to the staff of the EAC Organs and Institutions, Amb. Mfumukeko informed the staff that in 2018, the EAC set a record in resource mobilization. He disclosed to the staff that Over US$100 million was mobilized from various Development Partners to support various projects and programmes in the Community.
In addition, the EAC and USAID signed a US$20.5 million agreement for energy projects. This is in addition to the more than US$200 million mobilized from USAID in the past two and a half years, added Amb Mfumukeko.
Furthermore, the Secretary General disclosed to the staff that the African Development Bank (AfDB) and African Development Fund (ADF) approved US$2.5 Billion for the implementation of new and ongoing priority infrastructure projects in the EAC region.
The Secretary General outlined other sectoral achievements made in the EAC integration process in 2018 as follows:
In the Infrastructure Sector
The Secretary General said that Partner States continued implementing road and railway projects in the Central and Northern Corridors including the Arusha – Tengeru Dual Carriageway and Bypass Road. He said both roads are part of the Multinational Arusha – Holili / Taveta – Voi Road, which is a successor of the Arusha – Namanga – Athi River Road, both of which have been completed.
The upgrading of the 37 km Ntungamo to Mirama Hills Road to bitumen standard has significantly improved access and speed for freight and passenger services between Uganda and Rwanda, and lower transport costs on the Kampala-Kigali route.
Feasibility Studies and Detailed designs for two multinational road projects have been completed. (i) The first multinational road project will link Tanzania and Burundi through Nyakanazi – Kasulu / Rumonge – Bujumbura. EAC has recently mobilized over US$340 million from the African Development Bank for construction of this road to be undertaken soon; and (ii) The second road links Tanzania and Rwanda through Lusahunga – Rusumo / Kayonza – Kigali.
In addition, the EAC has provided support to the successful implementation of the Lake Tanganyika Transport Programme which will yield numerous benefits for the riparian states and the communities around the lake.
He added that the EAC through its Institutions such as Lake Victoria Basin Commission (LVBC) and Lake Victoria Fisheries Organization(LVFO) is implementing numerous projects on Lake Victoria to improve port infrastructure, navigation safety, fisheries and to fight pollution of the Lake.
Customs
The Secretary General informed the staff that the region’s main priority was to attain the full roll-out of intra-trade and imports regime under the Single Customs Territory. A pilot roll-out of exports under the SCT was successfully implemented and 736 multi-level users trained in SCT processes.
On One Stop Border Posts (OSBPs), Amb Mfumukeko stated that 13 One-Stop-Border Posts were operational in the region. The operationalization and training of personnel at the OSBPs has significantly reduced the time taken by travelers and trucks at the borders from several days to about 15 to 30 minutes on average.
In addition to further enhance trade in the region, the EAC Common External Tariff structure and rates were reviewed and aligned to the global changes of trade and current economic environment in the EAC. Up to 41 Non-Tariff Barriers were eliminated.
Industries
The Secretary General informed the staff that the Secretariat commenced the process of launching an East Africa Automotive Industry platform as a way of implementing the EAC action plan for the automotive sector. The Secretariat has similarly developed draft strategies for cotton, textiles, and leather sectors that will serve as policy instruments to reverse dependency on export of raw cotton and hides and skins, and facilitate development of local supply base of clothing and footwear, and the creation of jobs and reduction of poverty in the region.
Energy
Amb Mfumukeko said that the implementation of projects under the East African Power Master Plan has shown a positive improvement on power supply. “All the Partner States’ electricity generation capacities exceeding their peak demands will raise to significant levels when committed generation projects in the Partner States are commissioned from about 555MW in 2017 to 1,083MW in 2018 and to about 7,480MW by 2022. In this sector, there has been an unprecedented level of resources mobilized”, noted the EAC Official.
Tourism
Amb Mfumukeko informed the Staff that the EAC Secretariat undertook joint tourism promotion at the major international tourism trade fairs in Berlin and London to increase the visibility of EAC as a single tourism destination, and to promote intra-regional tourism and enhance co-operation among tourism players within the region.
Furthermore, the review of Classification Criteria for Tourism Accommodation Establishments and Restaurants commenced in August 2018. The review aimed at taking into account the international tourism trends and best practices in order to ensure that the region enhances its competitiveness and position itself adequately in the global tourism market.
Agriculture
The Secretary General disclosed that the sector accounts for 25-40% of the EAC Partner States’ GDP and is a leading employer for over 80% of the population in the region. The EAC remains strongly committed to support implementation of the Malabo Declaration on Agriculture Growth and Transformation in Africa. In 2018, the Sectoral Council on Agriculture and Food Security adopted the EAC Regional Agriculture Investment Plan (RAIP), which is a key instrument in rallying financial and technical support to spur agricultural transformation in the region.
Furthermore, in 2018, EAC made headways in supporting entrepreneurship in the Agricultural sector. With support of FAO, a program was implemented to build capacity and provide financial support to young entrepreneurs in the agriculture sector. Also, in collaboration with the German Federation of Industries, GIZ and the East African Business Council, a program was initiated to mentor and help growth of small and medium enterprises especially in the field of Agro-processing.
Meanwhile, Amb Mfumukeko informed the staff that Auditors General from the EAC Partner States, reviewed and signed the Audited Financial Statements of the Organs and Institutions for the Financial Year 2017/2018. He thanked all staff, the Heads of Organs and Institutions, and Directors for the commitment, dedication and professionalism in achieving an Unqualified Audit for the entire Community.
The 2019 New Year’s Address to staff was also attended by the EAC Deputy Secretaries General in charge Planning and Infrastructure, Eng. Steven Mlote; Productive and Social Sector, Hon Christophe Bazivamo; and Political Federation, Mr. Charles Njoroge.
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Ethiopia: Ministry manoeuvres toward digital economy
The Ministry of Innovation and Technology is revising its 15-year-old policy in a bid to digitise the nation’s economy.
Revising the national science, technology and innovation policy in collaboration with the United Nations Conference on Trade and Development (UNCTAD), the Ministry aspires to lead the economy toward tech-led growth.
Failure to align with different sectors, coordinate the sectors and support the nation’s move toward the industrial economy as well as an inability to comply with the current economic reforms are the major reasons for the revision of the existing policy, according to Desta Abera, director of policy, strategy and future planning in the Ministry.
The first policy was enacted in 2004 when the government announced a shift in the economic revolution. It identified 11 directions including technology transfer, human resource building, manufacturing and finance. It is also criticised rote adoption of technologies from abroad rather than indigenous innovation.
“The policy focuses more on introducing the sector to the country as it was new for the country then,” Shumet Gizaw (PhD), state minister for the Ministry, told Fortune. “It doesn’t even match with the current situation of the country.”
The new policy will be focusing on 24 sectors including agriculture, textiles and information technology. Hence, the UN-organ UNCTAD is assessing 50 sectors including SMEs, manufacturing and foreign direct investment that need to be digitised.
UNCTAD, which helped 13 countries including Rwanda and Kenya in reviewing their science, technology and innovation policy since 2007, is expected to submit the final assessment to the Ministry in two months.
The Ministry itself is also conducting a prior assessment for the revision. Finally, the two assessments will be merged to come out as a final draft policy to be sent to the Council of Ministers for approval. The Policy is expected to be approved and implemented starting September.
A council, which has members from ministries and the private sector, was formed to follow up and facilitate the revision and implementation process.
Upon approval, the Ministry of Innovation and Technology will take the lead for carrying out the policy in all sectors and industries.
The new policy has also targeted science and technology to contribute two billion dollars to GDP, creating over 20,000 tech jobs with 2,000 SMEs in two years.
For the implementation of the policy, the ministry has also designed a roadmap compatible with the different sectors including agriculture, finance, mining and sugar. It will be sent to regulators in each sector to integrate and harmonise it with their respective plan.
“The roadmap is designed to project and envision the country’s condition in the next decade,” Desta told Fortune.
Proclamation and regulation will follow the policy, according to Desta.
Creating more jobs is the other aim of the policy, according to Getahun Mekuria, (PhD), minister of Innovation & Technology.
“We are reviewing the policy to create more entrepreneurs than job seekers,” Getahun told Fortune. “We need to curb the unemployment rate through technology and science.”
About 19pc of the economically active population in the county was unemployed last year. Addis Abeba and Dire Dawa city administrations as well as Tigray and Amhara regional states are the leading regions in terms of unemployment.
Nebiyat Fikru, an information technology engineer and consultant with over a decade of experience, believes that the Ministry is on the right path. But he makes some recommendations on the revision process.
“The new policy should drag the country away from being a consumer of imported products,” said Nebiyat. “It should steer the country toward being a manufacturer.”
Nebiyat also remarks that information technology should be added to the pillars of the economy along with agriculture, service and industry.
“To build a digital economy, information technology should be counted on as a resource by itself,” Nebiyat told Fortune.
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tralac’s Daily News Selection
Today, in Geneva: Retreat of Ambassadors of Landlocked Developing Countries
South African patent lawyer, Ms Esmé du Plessis, has been appointed to serve on the WTO panel to rule on the US-China intellectual property dispute
The Helen Suzman Foundation (Johannesburg) has posted three analyses of the AfCFTA: (i) An introduction to AfCFTA; (ii) Projected impact on South Africa; (iii) Is Africa ready?. The author: Tove van Lennep
African Economic Outlook 2019
Integration for Africa’s economic prosperity: extracts from
pdf
Chapter 3
(1.45 MB)
Box 3.1. Common external tariffs: Challenges for poor countries. As RECs deepen integration by moving from a free trade agreement to a customs union with a common external tariff, small countries can be left on the sidelines during the negotiations if appropriate measures do not accommodate their peculiar status. Rwanda and Liberia illustrate the contrast between depth and breadth across RECs.
Box 3.3. Does financial integration drive economic activity in Africa? Despite the postulated benefits of financial integration to participating economies, it is unclear to what extent the progress in regional financial integration in Africa has catalyzed aggregate economic activity and thus provided the rationale for accelerating financial integration.
Box 3.7. What night lights reveal about trading across borders. Economic activity is very poorly recorded as remoteness, informality, and poor statistical capabilities combine to produce unreliable GDP and trade data, especially at the subnational level. Poor and sporadic data make it difficult to test whether closer integration concentrates or disperses economic activity. To get around these data problems, illumination (or night lights) captured at a very detailed level from satellite images during 1995–2013 can be used to study light intensity along cross-border corridors, measured as distance to the border. Once corrected for overglow and other confounding influences, light radiance along cross-border corridors proxies the intensity of economic and trade activity across the continent.
Companies to inspire Africa 2019 (pdf, London Stock Exchange)
David Schwimmer (CEO, London Stock Exchange Group): There are 360 companies from 32 different countries across the continent represented in this report, boasting an incredibly impressive average compound annual growth rate of 46%, up from 16% last year. On average, each firm employs over 350 people, with an average compound annual employee growth rate of 25%. A diverse range of industry sectors feature, painting an encouraging picture of the future of the African economy. The growth rates and sector diversity of the firms featured highlight their potential to transform the African and wider economy and become the big global job creators of tomorrow. Forbes review:
The companies featured range from small entrepreneurial businesses (SMEs) through to well-established corporations. Seven major sectors are represented. These spanned Agriculture (53 versus 46 in 2017), Financial Services (48 versus 66 in 2017), Industry (77 versus 81 in 2017), Technology and Telecoms (51 in 2018 - down from 56 last time), Consumer Services (79 - up from 49 in 2017), Renewable Energy (21 versus 29 before), and Healthcare and Education (31 today versus 19). Agriculture remains an important sector for the continent as a whole, with just shy of 15% of all the companies featured. A standout highlight was the number of companies led by women – up this year at 23% - given that it is almost double the proportion for 2017’s report. The fastest growing sectors were found to be within Financial Services and Renewable Energy, which showed revenue growth rates of 70% and 66%, respectively. Consumer Services is the most represented sector with 79 companies from 20 countries this year, which is reflecting the growth of sub-sectors such as Consumer Goods, Food & Beverages, Leisure & Tourism, Media and Retail, as well as the growing middle class in Africa. Nigeria (97), with strong representation from the Industry and Technology & Telecom sectors, and Kenya (66) led the countries represented in the report this year. The East-West African axis dominates this year’s findings with 130 (c.36%) companies from nations in western Africa and 147 (c.41%) from eastern Africa.
Deloitte’s Africa in 2019 Outlook Conference: Moody’s: Rising government debt hampers banking sector. Rising public debt levels affect a country’s banking sector, as this crowds out the private sector - with banks preferring to lend to government, which is seen as lower risk, Moody’s senior vice president Constantinos Kypreos has said. Kypreos explained that tightening global financial conditions are putting pressure on the sector, while banking penetration in Africa remains low and the potential is there for the banking sector to support economies. Asset quality and foreign currency liquidity are of concern for banks on the continent, said Kypreos, adding that “it might not be visible in South Africa because it’s a rand economy, but many, if not most of African countries, are highly dollarised.” He told delegates to the Deloitte Africa outlook conference on Thursday that many banks in sub-Saharan Africa were constrained by size, and unable to fund large projects such as infrastructure. [Related: Deloitte has presented seven predictions or themes that it believes will have a major effect on Africa’s outlook for 2019; African entities urged to be proactive in growing the continent’s economies]
Africa’s FinTech landscape has grown at an annual rate of approximately 24% over the last 10 years (EY)
The EY FinTechs in Sub-Saharan Africa report reveals that the FinTech sector in SSA comprises more than 260 active companies. These active companies are split into local (80%) and international (20%) players. South Africa, arguably the epicenter of SSA FinTechs, harbors about a third of the firms, predominantly in Cape Town and Johannesburg. As the most diversified hub, it exhibits great similarities to more developed markets. The sector has an extensive network of venture capitalists and angel investors and is home to many accelerators and incubators. Kenya, the second largest SSA FinTech hub, hosts around 20% of the entire SSA FinTech landscape, and has a stronger focus on the payments segment. The Kenyan hub is located in Nairobi, which is home to more than 50 FinTechs. FinTechs are already one of the main drivers for financial inclusion in SSA. Nigeria is the SSA FinTech sector’s third largest hub, with most of its FinTechs based in Lagos. Like Kenya, the Nigerian FinTech sector is dominated by the payments segment. In addition to the three main hubs, recent developments have shown encouraging signs of FinTech growth in Ghana, Uganda, Cameroon and Rwanda. Given the increasing interest in the FinTech segment, it is expected that the FinTech ecosystem will further improve across more countries in SSA in the near future.
Fintech network to promote cross-border regulation in Africa
The Africa Fintech Network, which comprises national fintech associations from different African countries, says it plans to unify and channel African fintech initiatives towards producing solutions to drive indigenous creativity and innovation in the continent. According to a statement on Monday, the network was inaugurated recently during the opening session of the maiden Africa Fintech festival in Lagos. It also aims to provide wider market access across Africa in a seamless manner for fintechs and tech-enabled innovative products, explore innovative technology transfer and export beyond Africa to the developed world and other emerging markets, foster multi-national/cross-border fintech policy and regulatory frameworks, engender a coordinated collaboration with the rest of the world, and support the achievements of the AfCFTA and Agenda 2063 of the AU.”
Should sub-Saharan Africa make its own drugs? (McKinsey)
To better understand the realities of promoting local drug production, we undertook a systematic analysis of the current state of the market. The analysis focused on simple, small molecules, such as generic drugs, since the economics and technical challenges would vary for more complex products, such as combination drugs, injectables, and vaccines. We evaluated the costs and benefits of increasing production not only in economic terms but also in their impact on the wider economy and on public health systems. We then compared that to local measures of feasibility, including government will, demand, investment attractiveness, and implementation capacity, especially with respect to quality (See Exhibit 1). [The authors: Michael Conway, Tania Holt, Adam Sabow, Irene Yuan Sun]
ECOWAS trade experts review regional AID for Trade strategy
Trade experts from ECOWAS member states, in a two-day meeting which ended on 21 December 2018 in Accra, reviewed the implementation of the regional Strategy and Plan of Action for Aid for Trade (AfT) which seeks to increase trade in the region and accelerate the integration of Member States into the multilateral trading system. The meeting agreed on the need to update the regional action plan taking into account the AfCFTA, the African Union Agenda 2063, Sustainable Development Goals 2030 and other emerging issues including digital connectivity, structural transformation, industrialisation and the economic empowerment of marginalised groups such as women and the youth. A key tool for effective coordination and collaboration is the ECOWAS AfT website, which is currently being updated and would be relaunched in February 2019. The representative of the Enhanced Integrated Framework, Paulin Zambelongo, noted that the EIF provides support to 47 Least Developed Countries (11 of them are ECOWAS Member States) and 4 graduated countries (including Cape Verde) which are leaving the status of Least Developed Countries. 68% of EIF initiatives are in Africa, followed by 28% in Asia. [Towards a harmonised framework on the recognition of degrees in ECOWAS: key recommendations]
High-Level Consultative Meeting of Heads of State, Government on the situation in the DRC: communiqué
The Heads of State and Government attending the meeting concluded that there were serious doubts on the conformity of the provisional results, as proclaimed by the National Independent Electoral Commission, with the votes cast. Accordingly, the Heads of State and Government called for the suspension of the proclamation of the final results of the elections. The Heads of State and Government agreed to urgently dispatch to the DRC a high-level delegation comprising the Chairperson of the Union and other Heads of State and Government, as well as the Chairperson of the AU Commission, to interact with all Congolese stakeholders, with the view to reaching a consensus on a way out of the post-electoral crisis in the country. The meeting urged all concerned actors in the DRC to interact positively with the high-level African delegation in the interest of their country and its people. [Communique of the SADC Double Troika Summit on the DRC elections]
Today’s quick Links: SADC Parliamentary Forum recruiting for Secretary General “Refusal to follow ECOWAS agreement reason illegal weapons flood Nigeria” Acrow Bridge’s Paul Sullivan elected Vice Chair of USTR’s Trade Advisory Committee on Africa What is behind Jack Ma’s footsteps in Rwanda and Africa? World Bank working paper: Understanding economic growth in Ghana in comparative perspective IMF on China’s Digital Economy: opportunities and risks |
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tralac’s Daily News Selection
African Economic Outlook 2019: Africa growth prospects remain steady, industry should lead growth (AfDB)
Africa’s general economic performance continues to recover and GDP growth is projected to accelerate to 4.0 percent in 2019 and 4.1 percent in 2020. But improved macroeconomic and employment outcomes require industry to lead growth, according to the 2019 African Economic Outlook report, launched today by the African Development Bank.
The focus of the 2019 report on regional integration for Africa’s economic prosperity, highlights integration for trade and economic cooperation and the delivery of regional public goods. Five trade policy actions could raise Africa’s total gains to 4.5 percent or GDP, or $134 billion a year, the report finds.
The Trump Administration’s paper now circulating within the WTO: An undifferentiated WTO – self-declared development status risks institutional irrelevance
Section 5: conclusion. Defenders of the status quo approach by some WTO Members for determining development status - self-declaration - may argue that Members effectively agreed to it by consensus in 1995. They may even claim their authorities would never have sought WTO membership if they could not self-declare as developing. Unfortunately, clinging to this approach leads to a system that prevents true liberalization while anchoring all Members to a world that no longer exists. This contradicts the goals stated by Members in the preamble to the Marrakesh Agreement Establishing the WTO. Self-declaration and its first-order consequence - an inability to differentiate among Members - puts the WTO on a path to failed negotiations. It is also a path to institutional irrelevance, whereby the WTO remains anchored to the past and unable to negotiate disciplines to address the challenges of today or tomorrow, while other international institutions move forward.
Creative Economy Outlook: trends in international trade in creative industries (UNCTAD)
With export growth rates of over 7% over 13 years, global trade in creative goods is an expanding and resilient sector buoyed by China, according to a new UNCTAD report. The second edition of the periodic pdf Creative Economy Outlook: Trends in International Trade in Creative Industries (6.15 MB) examines the global picture and also features 130 country profiles with reported creative goods and services trade data. The data, which covers the period 2002 to 2015, shows the creative economy’s contribution to world trade. Over this period, the value of the global market for creative goods doubled from $208bn in 2002 to $509bn in 2015. The report also charts the remarkable rise of China, whose exports of creative goods grew at double the global average between 2002 and 2015. Design and visual arts are among the highest performing sectors with fashion, interior design and jewelry accounting for 54% of creative goods exports in developed economies and 70% (including toys) in developing economies.
pdf South Africa country analysis (6.15 MB) : South Africa creative goods exports increased from $270m in 2005 to $599m in 2014. Design goods (interior design and jewelry and fashion) was the strongest export category generating $315 million, followed by: publishing (books and journals) which tallied $118m; visual arts (painting, antiques and sculpture) $55m; art crafts at $39m and audiovisuals (CDs, DVs and tapes) at $32m. However, South Africa was a net importer of creative goods. Imports stood at $1.8bn, three times higher than the value of exports. Despite having a growing creative economy, in 2014, the creative goods trade deficit was $1.2bn. The role of trade with other African countries has expanded significantly for South African creative goods, 67% of which went to the African market in 2014, compared with just 31% in 2005. By 2014, trade with Europe and the Americas had shrunk, and the top five export partners for creative goods were Namibia, the United States, Botswana, Lesotho, and Zambia. Creative services exports stood at $128.7m in 2014. Audiovisual and related services accounted for the largest share of creative services exports, driven by a strong local film and television industry. This industry had developed a strong reputation in establishing South Africa as a service-industry oriented country.
Towards a borderless Africa? Regional organisations and free movement of persons in West and North-East Africa (DIE)
The present analysis of ECOWAS (West Africa) and IGAD (North-East Africa) shows that both regional organisations face difficulties with their free movement policies, though the respective challenges emerge in different phases of the political process. In the IGAD region, member states have so far been unable to agree on any free movement treaty, while the ECOWAS region is experiencing delays in the national and sub-national implementation of established legislation. These differences can primarily be explained by historic path dependencies, divergent degrees of legalisation, and differing interests on the part of sub-regional powers. Finally, regional free movement is being hampered in both regions by internal capacity issues and growing external influences on intra-African migration management and border control. From the perspective of development policy, it is expedient to support free movement at sub-regional level in Africa. The following recommendations arose from the analysis: [The authors: Eva Dick, Benjamin Schraven]
Credit reporting without borders: UEMOA case study (World Bank).
The Regional Credit Reporting System in the West African Monetary and Economic Union (UEMOA), encouraged and facilitated by IFC, is a unique example of realigning strategies to leverage international best practices and set up a unique credit reporting model that serves the specific needs of the UEMOA countries. The journey started in 2010 and resulted in the successful establishment of a regional credit information system that is the first of its kind in the world. This Regional Credit Reporting system in UEMOA (covering eight countries – Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) established a Regional Credit Bureau servicing all eight-member countries. The booklet aims to illustrate how the UEMOA region moved from an environment largely devoid of credit information sharing to one where it embraced a regional credit reporting solution based on best practice with the guidance provided by the IFC and become the only existing example of a free cross-sharing mechanism of credit information.
IMF reviews of Central African Economic and Monetary Community policy issues:
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pdf Common policies of member countries (1.03 MB) . The regional strategy has helped to avert an immediate crisis but continues to face headwinds: two countries have yet to enter financing arrangements with the Fund: regional reserves have underperformed despite higher-than-projected oil prices; the projected recovery of non-oil growth has still to materialize; and the security, social, and political context remains challenging.
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pdf Selected issues report (913 KB) : A regional approach to enhancing governance and reducing the potential for corruption. This note assesses the link between governance and economic performance in the CEMAC. It highlights areas where the CEMAC’s governance is weak, based on available indicators over-time, and highlights areas for improvement. The focus of this note is on the regional dimensions of reform that can support better governance. It is recognized that the thrust of actions in this area are largely in the remit of national authorities. However, the very design of an economic and monetary union results in a set of policy and reform dimensions that have a distinct regional feature. For these, improvements require a coordinating or even steering role by regional institutions, to set a coherent framework for and maximize synergies of reforms at the country level. The note focuses on three key areas where governance has a specific regional dimension. First, it examines gaps in the implementation of regional standards for public financial management. Second, it looks at standards to strengthen the framework underpinning efforts in the area of any-money laundering and combating the financing of terrorism. Finally, it assesses the framework for management and accountably of oil resources.
A governance dividend for Sub-Saharan Africa? (IMF)
This paper investigates the correlation between overall governance and one crucial dimension thereof, namely corruption, and economic performance in SSA. Our main goal is to test whether weak governance and corruption have any impact on SSA growth. At the same time, it is important to acknowledge that low corruption and good governance are not the sole drivers of growth. Indeed, there are various examples of countries perceived as being poorly governed that have had episodes of strong growth driven by other factors, for example natural resource wealth. In other cases, countries with good governance have not necessarily benefited from strong growth. While the estimated correlations between governance/corruption and growth do not prove causation, they do suggest [inter alia] the following: The impact of weak governance on GDP per capita growth is stronger in SSA relative to the rest of the world and bringing governance to the world average could increase GDP per capita by an estimated 1 to 2 percentage points. Corruption also has a deleterious impact on SSA countries relative to the rest of the world and bringing corruption to the world average could increase GDP per capita by 1 percentage point.
A new world: the geopolitics of the energy transformation (IRENA)
To assess the impact of the energy transition on different regions, Figure 5 shows each region’s net fossil fuel exports and imports as a share of GDP. While the graph above masks differences within regional groupings, it has the advantage of uncovering major differences between regions and country groupings. The majority of countries in Sub-Saharan Africa (pdf) will benefit from reducing fossil fuel imports and generating renewable energy domestically, because this will boost job creation and economic growth. The exceptions to this are the two biggest oil producers in the region, Nigeria and Angola, which are at risk because they depend heavily on fossil fuel rents. Because of their size and large fossil fuel exports, they skew the data for SSA as a region. In the long-term, however, African countries have a unique opportunity to leapfrog the fossil fuel-centred development model despite recent discoveries of oil and gas.
The rail freight challenge for emerging economies: how to regain modal share (World Bank)
Successful railways now focus on understanding the logistics of targeted freight and positioning rail transport services as part of an overall logistics system aimed at meeting customers’ needs. By responding to new trends in logistics and partnering with road haulers, port operators, forwarders, intermodal terminal operators, and third-party logistics companies to provide the seamless service delivery required by changing supply chains, rail freight organizations in Europe and North America have regained modal share or reversed a trend of falling shares. Emerging economies can learn from their experience. The analysis presents examples and lessons of good (and not-so-good) practice. It summarizes what successful rail freight organizations have done to increase market share and provides options for policy makers. [The author: Bernard Aritua]
Effective trade costs and the current account: an empirical analysis (IMF)
A view receiving increased support is that the height of trade costs in prime export sectors has a strong effect on current account balances: countries specializing in sectors that face relatively high trade costs, such as services, tend to run current account deficits, and similarly, countries specializing in low trade cost sectors, such as manufacturing, tend to run current account surpluses. To test this view, we first infer comparative advantages and trade costs, by sector, within a large sample of countries for the period 1970–2014. Then we construct effective trade costs—trade costs weighted by sectoral comparative advantage—to gauge the height of a country’s overall trade costs. Results reveal that, although higher effective exporting costs are associated with lower current account balances, their impact is quantitatively limited; furthermore, the effective costs of importing often have no statistically significant effect. [Companion IMF analysis: Macroeconomic consequences of tariffs]
A quartet of recent OECD trade reports:
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Measuring distortions in international markets: the aluminium value chain (pdf). The aluminium sector has seen major changes over the last 15 years, notably the rise of the People’s Republic of China as the leading producer by a wide margin in most segments of the value chain. This unprecedented increase in output has fuelled concerns about excess capacity in the sector that is depressing global aluminium prices and threatening the viability of producers worldwide. To understand whether this increase in capacity has been driven by non-market forces, this report examines 17 of the largest firms operating along the aluminium value chain, which together make up more than half of global smelting capacity. Profiled key finding: Total government support for the 17 firms reached up to $70bn over the 2013-17 period, depending on how financial support (i.e. concessional loans) is estimated. Although all 17 firms received some form of support, it is highly concentrated: the top 5 recipients receive 85% of all support, most of it at the smelting stage of the value chain.
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Barriers to trade in digitally enabled services in the G20 (pdf), Trade and cross-border data flows (pdf), Principles for market openness in the digital age (pdf)
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African Economic Outlook 2019: Africa growth prospects remain steady, industry should lead growth
Five policy actions could raise Africa’s total gains to 4.5 percent of GDP, or $134 billion a year
Africa’s general economic performance continues to recover and GDP growth is projected to accelerate to 4.0 percent in 2019 and 4.1 percent in 2020.
But improved macroeconomic and employment outcomes require industry to lead growth, according to the 2019 African Economic Outlook report, launched today by the African Development Bank.
Published annually since 2003, the AfDB’s flagship report provides headline numbers on Africa’s economic performance and outlook. The focus of the 2019 report on regional integration for Africa’s economic prosperity, highlights integration for trade and economic cooperation and the delivery of regional public goods.
In opening remarks to diplomats, government officials, policy makers and students gathered at the Bank’s Babacar Ndiaye auditorium in Abidjan, Cote d’Ivoire, Senior Vice President Charles Boamah said even though the report presents daunting challenges, “Africa has the means to overcome them by joining hands together and removing barriers to integration and drivers of migration.”
Guest speakers included Kanny Diallo, Minister of Planning and International Cooperation for the Republic of Guinea and Alma Oumarou, Minister and Special Advisor to the African Union Champion for Regional Integration.
The 2019 African Economic Outlook report analyses gains of regional public goods, including synchronizing financial governance frameworks, opening regional aviation to competition, and facilitating the free movements of people, goods, and services through open borders.
Highlights
The 2019 report focuses on three key areas – Africa’s macroeconomic performance and prospects; Jobs, growth, and firm dynamism and Integration for Africa’s economic prosperity.
The Bank’s Director of Macroeconomic Policy Forecasting and Research Department, Hanan Morsy, provided participants with the report’s “storyline” and noted that in spite of a rising national debt across Africa, “there is no systemic risk of debt crisis.”
At the current rate of labor force growth, Africa needs to create about 12 million new jobs every year to prevent unemployment from rising. The report states that a “concerted industrialization effort that builds on countries’ comparative advantage,” is required.
“Manufacturing-driven growth has the highest impact on job creation,” Morsy said.
At the core of African integration, the African Economic Outlook suggests that “a borderless Africa” is one of the key foundations of a competitive continental market that could serve as a global business center.”
The African Continental Free Trade Agreement (AfCFTA), signed in March 2018 by 44 African countries, offers substantial gains for all African countries the report says, citing new data and analytics.
5 Key trade policy actions
Significantly, the report identifies five key trade policy actions that could potentially bring Africa’s total gains to 4.5 percent of its GDP, or U$134 billion a year:
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eliminating all applied bilateral tariffs in Africa;
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keeping rules of origin simple, flexible, and transparent;
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removing all non-tariff barriers on goods and services;
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implementing the World Trade Organization’s Trade Facilitation Agreement to reduce cross border time and transaction costs tied to non-tariff measures ,and;
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negotiating with other developing countries to reduce their tariffs and non-tariff barriers, by 50%.
The African Economic Outlook bridges a significant knowledge gap with respect to African economies through regular, rigorous, and comparative analysis. It also provides relevant and essential reference material on Africa’s economic development, for researchers, investors, civil society organisations, and development partners.
A full set of updated growth projections will be released in May 2019, ahead of the Bank’s Annual Meetings in Malabo, Equatorial Guinea.
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An undifferentiated WTO: Self-declared development status risks institutional irrelevance
Communication from the United States
In the preamble to the Marrakesh Agreement Establishing the World Trade Organization, the Parties recognized that “their relations in the field of trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development….”
Since the WTO’s inception in 1995, Members have made significant strides in pursuing these aims. Global Gross National Income (GNI) per capita on a purchasing-power-parity (PPP) basis, adjusted for inflation, surged by nearly two-thirds, from $9,116 in 1995 to $15,072 in 2016.The United Nations Development Program’s (UNDP) Human Development Index (HDI) for the world increased from 0.598 to 0.728 between 1990 and 2017.
According to the World Bank, between 1993 and 2015 – the most recent year for which comprehensive data on global poverty is available – the percentage of people around the world who live in extreme poverty fell from 33.5 percent to 10 percent, the lowest poverty rate in recorded history.Despite the world population increasing by more than two billion people between 1990 and 2015, the number of people living in extreme poverty fell by more than 1.1 billion during the same period, to about 736 million.
Trade appears to have been an important contributor to these positive trends. Between 1995 and 2017, exports of goods more than tripled and exports of services more than quadrupled, increasing by 260 percent and 315 percent, respectively. Underpinned by principles of transparency, openness, and predictability, WTO rules were crafted in part to set conditions most favorable for increasing trade, attracting investment, and improving efficiency.
The economic tides since the creation of the WTO have lifted nearly all boats. Regional data, as shown in Table 1, makes this clear. For example, the share of the population in East Asia and the Pacific living in extreme poverty fell from 54 percent in 1993 to 2 percent in 2015 (from 902 million people in 1995 to 47 million, a 95 percent decline); in South Asia, the share fell from 45 percent in 1993 to 12 percent in 2015 (from 542 million people to 216 million, a 60 percent decline); and in Latin America and the Caribbean, the share fell from 13 percent in 1993 to 4 percent in 2015 (from 61 million people to 26 million, a decline of nearly 58 percent). However, it is clear that some countries have not benefited as much from the rising tides. In Sub-Saharan Africa, the decline in the share of population living in extreme poverty was much more modest, from 59 percent in 1993 to 41 percent in 2015. Notably, the number of extremely poor people in Sub-Saharan Africa actually rose by 26 percent (from 327 million to 413 million.) A review of economic, social, trade, and other data for individual WTO Members reveals an even starker picture of economies that have substantially advanced in development and those whose gains have been more modest.
While helping to lift WTO Members to disparate levels of development, the economic tides also eroded the old order, including the development divide that was frequently described in “North-South” terms. Under this framing, countries had been broadly grouped into the industrialized “North” and the developing “South”. The South had one significant subset, the least-developed countries (LDCs), whose membership was determined according to criteria set by the United Nations. Whatever its usefulness was in 1995, the binary “North-South” construct does not reflect the development realities of 2019.
Despite the great development strides made in the years since the WTO’s inception, the WTO remains stuck in a simplistic and clearly outdated construct of “North-South” division, developed and developing countries. Each is a seemingly static set, regardless of economic, social, trade, and other indicators. This binary construct does not reflect the realities of 2019. Nor does it reflect how Members viewed development at the time the WTO was created. The preamble to the Marrakesh Agreement Establishing the World Trade Organization recognizes there are “needs and concerns at different levels of economic development,” implying there could be many levels of development.
We should also recall that in the preamble to the Marrakesh Agreement Establishing the World Trade Organization, Members also expressed their desire to contribute to the objectives noted above “by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.” Indeed, this is a foundational principle going back to the GATT 1947.
There has been much discussion lately about staying committed to the “rules-based multilateral trading system.” However, if you look behind the curtains, that system is hardly monolithic. All the rules apply to a few (the developed countries), and just some of the rules apply to most, the self-declared developing countries. The perpetuation of this construct has severely damaged the negotiating arm of the WTO by making every negotiation a negotiation about setting high standards for a few, and allowing vast flexibilities or exemptions for the many. These are not “reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.”
Other international organizations have recognized that in order to properly carry out their functions, they must make distinctions among what have traditionally been considered “developing country” members. To not do so, puts those that need special and differential treatment (S&D) the most at a disadvantage and perpetuates conduct that is no longer warranted by factual circumstances.
Self-declared paralysis at the WTO
The WTO’s approach to determining development status has not varied since the creation of the organization in 1995. The WTO Agreement does not specify criteria or a process for determining development status. Nor does it establish gradations among developing Members, with one exception – LDCs. The WTO – unlike the UN, the IMF, and the World Bank – does not have an analytic classification system for development status.
Lacking formal guideposts, any WTO Member can “self-declare” as a developing Member and thereby assert its right to benefit from S&D treatment – such as longer implementation timeframes – afforded to self-declared developing Members. According to the WTO Secretariat, there are 145 distinct S&D provisions contained in the WTO agreements.
Whether the WTO’s status quo approach to development status was sensible at its dawn, it makes no sense today in light of the vast changes in development and increasing heterogeneity among Members, seen in a number of economic, social, and other indicators explored in Section 1. For example, OECD members, G20 members, and other Members who have made significant gains in development can claim to be developing Members whenever and wherever they see fit, as if the world has stood still since the inception of the WTO. This does not seem to align with the original intent of S&D, which was conceived as a tool to help Members thought to be having difficulty integrating into the world trading system.
Self-declaration can lead to unpredictable and illogical results in the operation and implementation of existing WTO agreements. For example, Kazakhstan – ranked in UNDP’s “Very High Human Development” quartile and having made no previous claim to developing Member status – claimed such status for the first time for the purposes of implementing its obligations under the Trade Facilitation Agreement. Some of the wealthiest WTO Members – including Singapore; Hong Kong, China; Macao, China; Israel; the State of Kuwait; the Republic of Korea; United Arab Emirates; Brunei Darussalam; and Qatar – insist on being considered developing Members and can avail themselves of S&D provisions at their discretion – just like Sub-Saharan Africa.
In addition, the Bali Decision on tariff rate quota (TRQ) administration saw the creation of a mechanism to ensure unfilled TRQs were not a result of protectionist measures. Unfortunately, in the end, the mechanism applied only to developed Members; self-declared developing Members were only required to address the issue on a best-endeavor basis. While additional flexibilities and exemptions had been proposed in the Doha agriculture text and rejected, Bali was the first time that Members agreed to use development status to exempt all self-declared developing Members from a new commitment rather than take a smaller cut or a longer time to implement.
Simply put, self-declaration has severely damaged the negotiating arm of the WTO by making differentiation among Members near impossible. By demanding the same flexibilities as much smaller, poorer Members, export powerhouses and other relatively advanced Members – as evidenced by the indicators in Section 1 – create asymmetries that ensure that ambition levels in WTO negotiations remain far too weak to sustain viable outcomes. Members cannot find mutually agreeable trade-offs or build coalitions when significant players use self-declared development status to avoid making meaningful offers. Self-declaration also dilutes the benefit that the LDCs and other Members with specific needs tailored to the relevant discipline could enjoy if they were the only ones with the flexibility.
The following sections provide illustrative examples of how self-declaration – negatively affected negotiations at the WTO in the past. Ongoing negotiations and proposals for future work may need to confront this issue as well. For example, fisheries subsidies negotiations provide an important testing ground for the WTO’s ability to develop effective disciplines that prohibit the worst forms of fisheries subsidies – those that support illegal fishing and contribute to overcapacity and overfishing. In order to be effective, these disciplines must apply to the world’s largest fishing nations, many of which are self-declared developing countries. In agriculture, China and India – the world’s two largest providers of trade-distorting support – have put forward a proposal that calls for the elimination of the Total Aggregate Measurement of Support only for developed Members, as a prerequisite for self-declared developing Members to make any domestic support reforms.
Conclusion
Defenders of the status quo approach by some WTO Members for determining development status – self-declaration – may argue that Members effectively agreed to it by consensus in 1995. They may even claim their authorities would never have sought WTO membership if they could not self-declare as developing. Unfortunately, clinging to this approach leads to a system that prevents true liberalization while anchoring all Members to a world that no longer exists. This contradicts the goals stated by Members in the preamble to the Marrakesh Agreement Establishing the WTO.
Self-declaration and its first-order consequence – an inability to differentiate among Members – puts the WTO on a path to failed negotiations. It is also a path to institutional irrelevance, whereby the WTO remains anchored to the past and unable to negotiate disciplines to address the challenges of today or tomorrow, while other international institutions move forward.