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IMF Executive Board 2018 annual discussions on CEMAC countries’ common policies
On December 17, 2018, the International Monetary Fund Executive Board concluded the annual discussions with the Central African Economic and Monetary Community (CEMAC) on Common Policies of Member Countries and Common Policies in Support of Member Countries Reform Programs.
CEMAC’s economic situation remains challenging. Economic growth in the region, which declined substantially after the oil price slump of 2014, remains sluggish and has not yet picked up as expected. Non-oil growth is projected to decline in 2018 to 1.0 percent (from 2.6 percent in 2017). A larger-than-expected rebound in oil GDP (+7.3 percent) would nevertheless contribute to an increase in overall growth, from 1.0 percent in 2017 to 2.2 percent in 2018. While increasing, inflation would remain low, at about 2 percent at end-year. The situation of the banking sector remains difficult, owing to large government arrears. Non-performing loans continued to rise to 17 percent at the end of September 2018, while several banks continue to fail to meet certain prudential ratios.
The Bank of Central African States’ (BEAC) net foreign assets were lower than expected at end-September and are expected to remain so until the end of the year, despite rising oil prices and the efforts of BEAC and the Central African Banking Commission (COBAC) to strengthen the enforcement of foreign exchange regulations. This largely owes to delays in the adoption of IMF-supported programs and of the disbursement of the related external budget support with Congo and Equatorial Guinea. At the same time, the budgetary efforts of countries with IMF-supported programs are broadly in line with expectations. For the region as a whole, the non-oil deficit at the end of 2018 should be in line with expectations, while the overall balance would exceed expectations on account of higher oil revenues.
The medium-term outlook continues to see a gradual improvement in the economic and financial situation. Reforms to improve the business environment and governance and strengthen the financial sector, along with a lower drag from fiscal adjustment and the repayment of government arrears would contribute to the gradual recovery of non-oil growth, to 4½ percent by 2021. The overall fiscal balance (excluding grants) would be close to balance from 2019 onward, reflecting a further reduction in the non-oil primary fiscal deficit. Public debt would decline significantly, from almost 50 percent of GDP at end-2018 to less than 44 percent of GDP by end-2020.
A further decline in the current account deficit to around 1½ percent of GDP in 2018-20 (compared to 4 percent of GDP in 2017) would contribute to a gradual accumulation of reserves, with reserve coverage reaching almost 4 months of imports by 2020. This outlook is predicated on the full implementation of policy commitments by CEMAC member states and regional institutions and is subject to substantial downside risks, including: further delays in the approval of financial arrangements with the Republic of Congo and Equatorial Guinea; lower oil prices; and tighter global financial conditions.
Selected Issues paper
A regional approach to enhancing governance and reducing the potential for corruption
Good governance, including the control of systemic corruption, is vital for macroeconomic stability as well as sustainable and inclusive economic growth. IMF research shows that weak governance and systemic corruption is associated with lower growth and investment and higher inequality. Investing in good governance and reducing corruption is a largely budgetary-neutral reform to empower the private sector and expand opportunities for all. It is a step of critical importance in the CEMAC, part of the overall objective to address the root cause of the crisis it has faced following the decline in commodity prices in 2014: a largely undiversified economy over-dependent on oil, and still untapped internal regional market.
The CEMAC region was severely affected by a sharp decline in commodity prices after 2014, notably the reduction in oil prices. Facing a continue and rapid decline in regional reserves, the authorities decided at end-2016 to embark on a coordinated and sizeable fiscal adjustment effort by member countries, supported by the IMF and other partners and backed by adequate policies at the regional level in the monetary and financial sectors. The short-term objective is to restore external and domestic stability. In the medium term, addressing the root cause of the crisis would require reducing excessive dependency on oil and lay the foundation for a broader economic base. To unlock this potential, it will be key to address the constraints that affect governance, in particular in the management of public resources, and which feed into a strong perception of corruption.
Scope of Governance Issues in CEMAC
The choice of these themes reflects key features of the CEMAC economic structure. Exports by the extractive sectors represent a dominant part of the regional economic basis and constitute the main source of foreign exchange. Consequently, good management in this sector, where the state is present directly (through its state-owned enterprises) and indirectly (through related tax- collection), is key to ensure good governance at large. Second, the role of the public sector is still a dominant source of aggregate demand, and strong governance in managing public funds directly impacts governance in the CEMAC. Lastly, CEMAC banks play a crucial role in avoiding safe havens for the proceeds of corruption, thereby directly contributing to allocating financial resources to productive ends.
These themes are also directly related to CEMAC’s own regional governance.
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First, the CEMAC regulatory framework for public financial management (PFM) provides strong standards for transparency and accountability in the management of public resources. Weaknesses in this area can create the potential for resources not being collected and used according to the intended purposes. Work in this area is mainly led by the CEMAC Commission.
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Second, a strong AML/CFT regime is a crucial tool in addressing corruption. Because the proceeds of corruption are often concealed to avoid detection or confiscation, an effective AML/CFT framework can contribute to both prosecuting and deterring corruption. The diversion of resources away from economically and socially productive uses can also negatively undermine the stability of a country’s financial system or its broader economy. Work in this area is mainly led by the COBAC.
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Finally, the oil sector is central to the CEMAC, also given the strong presence of the state, through its SOEs, into profit sharing agreements signed with private entities. Such agreements, in turn, should be consistent with the regulatory framework set at the regional level in the area of foreign exchange. As such, the good management of these resources is essential to ensuring external stability to the monetary arrangement. Work in this area is a shared responsibility of member countries, primarily, the CEMAC Commission (in ensuring proper implementation of adequate tax codes and tracking funds which are to be covered by state’s budget), and the BEAC (in fully understanding the link between export commodity prices and volumes and accumulation of foreign exchange).
Conclusion: Enhancing Growth Through Better Governance
The analysis included in this note has underscored that there is great potential to enhance governance in the CEMAC and make this an engine for sustained and inclusive growth. There are two common themes to the set of recommendations included here.
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First, there needs to be a “transparency shock” in the regular production and sharing of basic documentation related to public resource management. This step is an absolute priority, well inscribed in CEMAC’s own institutional set-up, in particular the key directive on transparency and governance.
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Second, and relatedly, there needs to be a continuous focus to turn the CEMAC regional framework, which is overall well designed, into consistent procedures and work practices within public institutions.
There are specific lines of actions. First, there need to be an ongoing effort to translate the CEMAC directives related to PFM into work practices that are fully consistent with the premises and vision of the very directives. This translates into giving absolute priority to ensuring more transparency, full disclosures, ongoing reconciliation, and internal and external audit of transactions of the public sector. Second, efforts to enhance the AML/CFT framework, reflecting the CEMAC’s directive in this area, need to deepen. Finally, the full system of check and balances already provided for by the CEMAC legislation institutional design needs to be forcefully implemented in the extractive sector. This covers, critically, the full disclosure and regular reconciliation of contracts and transactions in the oil sector. It also covers the rigorous implementation of a stronger networks of CEMAC customs, with better governance and more capacity (in particular, in complex sectors such as oil).
The CEMAC regional institutions will have to play a central role to lead progress in these areas, and support member countries’ own efforts. Because such actions result in giving a coherent framework to actions conducted at the country level, the synergic dimension can spur a virtuous circle, key to earn the benefit of an economic and monetary union. The success of the regional strategy that CEMAC member countries and regional institutions are implementing to exit the severe crisis they are facing depends critically on creating the conditions for laying the ground for a diversified economy, within a well-functioning regional market and an environment that provides opportunities for all and where public resources are geared to most productive use. The single most important element in this effort is good governance of public resources and reducing the perception of wide-spread corruption. The CEMAC regional institutions can play an important role in achieving this, in support of member countries’ own effort
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Global creative economy shows resilience, growth – report
The remarkable story of China’s dominance in the trade of creative goods and services is the golden thread of a new creative economy outlook by 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 Creative Economy Outlook: Trends in International Trade in Creative Industries 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 $208 billion in 2002 to $509 billion 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.
These figures are significant on two fronts, says Pamela Coke-Hamilton, who directs UNCTAD’s trade division.
“The creative economy has both commercial and cultural worth,” Ms. Coke-Hamilton said. “This dual value has led governments worldwide to focus on expanding and developing their creative economies as part of economic diversification strategies and efforts to stimulate prosperity and well-being.”
“Within the creative economy, the creative industries generate income through trade and intellectual property rights, and create new opportunities, particularly for small and medium-sized enterprises,” said Ms. Coke- Hamilton.
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.
The creative industries – which include architecture, arts and crafts, marketing and advertising, media and publishing, research and development, software, computer games, and other core creative work – are the lifeblood of the creative economy.
“Although the downturn in global trade has impacted all industries, the report shows the creative economy is more resilient than most,” Marisa Henderson, the chief of UNCTAD’s creative economy programme, said.
“The performance of the creative economy is encouraging and shows it is thriving through the intersection of culture, technology, business and innovation.”
Artistic Asia
China is the biggest single exporter and importer of creative goods and services. It is the main force behind the creative economy boom over the past decade and a half and owns a large portion of it. China’s trade in creative goods between 2002 and 2015 has been exponential, with average annual growth rates of 14%.
In 2002 China’s trade in creative goods was $32 billion. By 2014 this figure had increased more than fivefold, tallying $191.4 billion.
There was a drop off in 2015, when China recorded a $168.5 billion trade in creative goods, but comparatively the country has maintained the lion’s share of the trade in creative goods. In 2015 Chinese exports were four times that of the United States.
The data also shows that Asia outstripped all other regions with China and South East Asia combined accounting for $228 billion of creative exports, almost double that of Europe.
China, Hong Kong (China), India, Singapore, Taiwan Province of China, Turkey, Thailand, Malaysia, Mexico and Philippines were the top 10 performing developing economies stimulating global trade in creative goods.
“Generally, South-South trade is on the rise and looks set to be an area of vibrant future growth especially for the creative economy,” Ms. Henderson said.
Among developed economies, the United States, France, Italy, the United Kingdom, Germany, Switzerland, Netherlands, Poland, Belgium and Japan were the top 10 creative goods exporters.
Creative services
The report also highlights the shift from creative goods production to delivery of creative services as an emerging trend. This is aligned with a global shift toward services as industrial and agricultural outputs decline.
Ms. Henderson explained how newspapers and published products, which were originally a creative good, have flipped to become a creative service with the expansion of online media driven by digital subscriptions and online advertising.
“Creative services will grow,” she said. “Although there is limited data on the trade in creative services, more countries are reporting on creative services trade as it becomes a defining feature of local and regional economies.”
Available creative services exports data from 38 developed countries (with a comparable dataset) remained relatively stable between 2011 and 2015, with average annual growth rates at 4%.
Of all trade in services for the 38 countries, creative services represented an average portion of 18%, growing from 17.3% in 2011 to 18.9% in 2015.
“An important paradigm shift from the industrial to the knowledge economy is underway,” Ms. Henderson said. “In it, there is a new elevation of the role of ideas, imagination and creativity, and because of this, the creative economy.”
“There is a reason to embrace and support the creative economy’s growth,” she said.
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tralac’s Daily News Selection
Featured tweets:
@KendalHembroff: G20 Trade and Investment Working Group meeting [15-16 January] to discuss challenges facing international trading system and need for WTO reform
@SabatucciEU: Next Monday, the AU and the EU will have their first Ministerial meeting after Abidjan Summit. On the agenda: peace and security, economic integration, and global issues.
Continental drifts in a multipolar world: Challenges for Africa-Europe relations in 2019 (ECDPM)
AfCFTA
Highlights from two ECA AfCFTA side-events held during December’s IATF
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Africa set for massive transformation with AfCFTA, says ECA’s David Luke. “Getting the AfCFTA right will depend on getting the level of ambition that we have as a continent,” said Mr Luke, adding the ECA had recently carried out an assessment of the AfCFTA modalities on goods to support the process as more countries are expected to sign and ratify the agreement in 2019. “The findings demonstrate that a double qualification approach to liberalize trade in goods under the AfCFTA would generate larger trade-related benefits for African countries than a tariff line approach.” Liberalizing trade in goods within Africa using a double qualification approach would also support Africa’s industrialization process, since it ensures that intermediates are liberalized early, and therefore rapidly utilized as relatively cheaper inputs towards value addition. The ECA’s analysis also clearly illustrates that African countries should keep their exclusion lists to a minimum in order to maximize the trade-related gains. “Indeed, any excluded list greater than 1% of the total tariff lines under a tariff line approach, or 3% under a double qualification approach, would be expected to bring insufficient trade-related benefits to African countries.” [Download: pdf An empirical assessment of the AfCFTA modalities on goods (553 KB) ]
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Communications on gender and trade issues crucial for successful implementation of AfCFTA. Women-owned businesses tend to focus on local and national markets due to various barriers in accessing export markets, hence the need to ensure the gender sensitive implementation of the AfCFTA, participants agreed. Participants also agreed that to scale-up AfCFTA impact, there was need for coordination through a network for the exchange of information. The ECA is planning a continental training on the AfCFTA for journalists to influence and advocate for the AfCFTA, which should reflect the gender lens. Participants agreed, among other things, that a Champion was needed to advocate for gender considerations in the AfCFTA. [Tender: Develop a responsive communication strategy for COMESA, EAC and ECOWAS, and member states, for the 50 Million African Women Speak Networking Platform Project]
Trade statistics
Selected country trade statistics posted during the holiday season break
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South Africa: November 2018 records R3.49bn trade surplus. The R3.49bn trade surplus for November 2018 is attributable to exports of R118.84bn and imports of R115.35bn. Exports decreased from October 2018 to November 2018 by R2.79bn (2.3%) and imports decreased from October 2018 to November 2018 by R10.57bn (8.4%). Exports for the year-to-date (01 January to 30 November) increased by 6.1% - from R1 080.48bn in 2017 to R1 146.01bn in 2018. Imports for the year-to-date of R1 150.17bn are 13.0% more than the R1 018.18bn imports recorded in January to November 2017, leaving a cumulative trade deficit of R4.16bn for 2018.
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Botswana: Gross Domestic Product Quarter 3, 2018 (pdf). Gross Domestic Product for the third quarter of 2018 reached P48, 912.3m compared to P46, 967.4m registered during the previous quarter. This represents a quarterly increase of 4.1% in nominal terms between the two periods. In the case of foreign trade, real exports of goods and services increased by 13.5% in the third quarter of 2018 compared to a decrease of 31.9% realized in the same quarter of 2017. Imports of goods and services recorded an increase of 0.6% during the quarter under review, compared to 16.4% decline realized in the same quarter of the previous year.
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Tanzania: December 2018 economic reviews (pdf). Exports of goods and services declined to $8,531.5m in the year ending November 2018 from $8,731.4m in the year ending November 2017 on account of a decline in goods exports. Value of goods exports decreased in the year ending November 2018 compared with the similar period in 2017, largely driven by non-traditional goods exports, which accounted for 38.0% of export of goods and services and 71.4% of goods exports. The value of non-traditional goods exports declined by 9.7% to $3,239.0m, with all of its major categories recording declines, save for horticultural products (see Chart 5.1). Manufactured goods export income decreased by 4.4% to $816.1m in the year to November 2018, largely following decline in earnings from export of textiles, cotton yarn, footwear, fertilizer, edible oil, cement, and sisal and tobacco products. Imports: Goods (f.o.b) and services import bill amounted to $10,301.3m in the year ending November 2018 - a 8.2% increase from the year ending November 2017 position, largely driven by goods imports. All major categories of goods import recorded growth in the year to November 2018 compared with the corresponding period in 2017 (see Table 5.2). The increase in import bill for capital goods was associated with the ongoing infrastructural development in the country, including construction of standard gauge railway; roads and bridges; airports; and ports. [November 2018 economic review]
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Tanzania’s exports to SADC rise. The industrialisation drive, which is targeting to transform Tanzania to a middle income country by 2025, continues to bear fruit by cutting the country’s imports and increasing exports to other members of SADC. The Bank of Tanzania economic and operations annual report for the year 2017/18, ending June 2018, shows that Tanzania continued to be a net exporter to others, with a trade surplus of $445.5m in 2017, up from $397.2m in 2016. Specifically, the BoT report indicates that Tanzania recorded a trade surplus with South Africa, DRC, Malawi, Mozambique, Zimbabwe, Angola and Botswana. The trade surplus is a result of decreased imports, mainly from South Africa. The report reveals that South Africa remained the major trading partner of Tanzania accounting for 70.9% of the total Tanzania’s intra-SADC. In 2017, Tanzania’s exports to South Africa increased by 10.7% to $699.8m, from $631.3m in 2016, while imports declined by 12.1% to $415.2 million in 2017 from $472.2m recorded in 2016. The DRC is Tanzania’s second intra-SADC trade partner with export value amounting to $153.6m in 2017, lower than $291m in 2016. Tanzania recorded a trade deficit with Zambia, Madagascar, Mauritius, Namibia, Swaziland, Seychelles and Lesotho due to low exports.
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Tanzania’s direction of trade (pdf). Tanzania’s exports were concentrated to India and South Africa, which accounted for about 40% of exports, while above 34% of imports originated from China and India. See Table 6.2: Direction of Trade in 2017/18, for a list of Tanzania’s main trading partners. [Tanzania grants free access for Uganda’s soya, sugar exports]
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Kenya’s trade deficit jumps to Sh715.7bn. Kenya’s reliance on the international market for most of its goods continued in the first 10 months of 2018, with the country shipping in nearly a trillion-shillings worth of products. During the period, Sh997.1bn goods were imported compared to Sh291.8bn exports. According to the just-released Leading Economic Indicators (October 2018), exports grew by 5%, or Sh14.2bn, to stand at Sh295.6bn compared to 2017’s Sh281.4bn. China remained Kenya’s largest source of imports for machinery and transport equipment, accounting for Sh291.8bn, followed by India at Sh161.2bn, Saudi Arabia (Sh138.4bn) and UAE (Sh126bn). Japan sold to Kenya goods worth Sh78bn, while South Africa brought in Sh54bn worth of goods, US (46.3bn), Germany (39.6 billion), UK (Sh26 billion) and the Netherlands, Sh16.6 billion.
The LEI October report showed that Pakistan remained Kenya’s biggest trading partner, buying fresh produce mainly tea, coffee and flowers worth Sh50.2bn followed by Uganda (Sh42.2bn), the US (Sh39.5bn), the Netherlands (Sh38.9bn) and United Kingdom at Sh37bn. Tanzania bought goods worth Sh22.5bn, UAE (Sh19.5), Egypt (Sh16.6bn), Germany (Sh9.4bn) while France settled for Sh6.7bn. While China remained a major infrastructural construction contractor, its imports dropped by 17.2% from last 2017’s first 10 months where imports, mainly machinery and transport equipment accounted for Sh341.9 billion. [Download: Leading Economic Indicator October 2018]
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Egypt’s exports to East Asian countries up by 126% in 2017. Egypt’s exports to East Asian countries hit EGP 41.8b in 2017 compared to EGP 18.5bn in 2016, a 126% increase, the Central Agency for Public Mobilization and Statistics said on Wednesday. In its annual bulletin, the agency said imports from East Asian countries (China, Malaysia, India, Indonesia, Pakistan, Thailand, Singapore, and Bangladesh) stood at EGP 300.7bn in 2017 compared to EGP 182.8bn in 2016, a 64.5% increase. India topped the list of Egyptian export-recipient countries with exports totaling EGP 16bn in 2017 against EGP 6.5bn in 2016. China came next with EGP 12.4bn in 2017 against EGP 5bn in 2016, though it ranked first in terms of countries sending exports to Egypt. China’s exports to Egypt totaled EGP 144.2bn in 2017 against EGP 90.2bn in 2016. [Egypt’s Doing Business ministerial committee meets]
IMB piracy report 2018: attacks multiply in the Gulf of Guinea (ICC)
Piracy increased on the world’s seas in 2018, with a marked rise in attacks against ships and crews around West Africa, the International Chamber of Commerce’s International Maritime Bureau’s latest annual piracy report reveals. Worldwide, the IMB Piracy Reporting Centre recorded 201 incidents of maritime piracy and armed robbery in 2018, up from 180 in 2017. The Gulf of Guinea remains increasingly dangerous for seafarers. Reports of attacks in waters between the Ivory Coast and the Democratic Republic of Congo more than doubled in 2018, accounting for all six hijackings worldwide, 13 of the 18 ships fired upon, 130 of the 141 hostages taken globally, and 78 of 83 seafarers kidnapped for ransom.
Air freight demand flat in November (IATA)
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Africa set for massive transformation with AfCFTA, says ECA’s David Luke
Africa is set for massive transformation as more countries are expected to sign-up and ratify the African Continental Free Trade Agreement (AfCFTA) in 2019, says Economic Commission for Africa’s David Luke, Coordinator of the ECA’s African Trade Policy Centre (ATPC).
Mr. Luke, who recently led an ECA delegation to the Intra-African Trade Fair that was held in Cairo, Egypt in December 2018, said intra-African trade, free trade and investments catalyzed by the AfCFTA will without doubt transform the African continent.
He said implementation was key to the AfCFTA’s success once it is ratified by enough countries. At least 22 countries should ratify the historic agreement for it to go into force.
“Getting the AfCFTA right will depend on getting the level of ambition that we have as a continent,” said Mr. Luke, adding the ECA had recently carried out an assessment of the AfCFTA modalities on goods to support the process as more countries are expected to sign and ratify the agreement in 2019.
“The findings demonstrate that a double qualification approach to liberalize trade in goods under the AfCFTA would generate larger trade-related benefits for African countries than a tariff line approach,” he said.
Liberalizing trade in goods within Africa using a double qualification approach would also support Africa’s industrialization process, since it ensures that intermediates are liberalized early, and therefore rapidly utilized as relatively cheaper inputs towards value addition, Mr. Luke added.
The ECA’s analysis also clearly illustrates that African countries should keep their exclusion lists to a minimum in order to maximize the trade-related gains.
“Indeed, any excluded list greater than 1 percent of the total tariff lines under a tariff line approach, or 3 percent under a double qualification approach, would be expected to bring insufficient trade-related benefits to African countries,” the ACPC Coordinator said.
“If the AfCFTA is to be the real game changer for African economies that we all hope for, we must be ambitious and we must not delay.”
Beyond tariff liberalization
Although, tariff liberalization under the AfCFTA can go a long way to addressing the important demand side constraints to trade, particularly those linked to market size, supply side constraints to intra-African trade and investment cannot be ignored, he said.
Border-related and local distribution deficiencies, such as corruption, expensive settlement payments, cumbersome customs requirements and inefficient services, significantly increase the costs of trade and investment transactions on the continent.
“This is why African policymakers made an active decision for the AfCFTA to not only target a reduction in intra-African tariffs, but also an improvement in Africa’s business environment,” said Mr. Luke, adding public-private sector dialogues were crucial for bringing the sometimes distant views of African policymakers and industry leaders together to drive the development of the continent.
At the IATF Mr. Luke and other ATPC officials participated in a number side meetings and panel discussions in which they showcased work being done by the ECA to support member States in a number of areas, including the AfCFTA processes.
In one high-level panel he was joined by panelists, including Ahmed Mansur, Group Chief Executive Director of the Dangote Group; Simon Tiemtore, Chairman, Vista Group; Paulo Gomes, President, Constelor Holdings; Emma Wade-Smith, Britain’s Trade Commissioner for Africa; and Sanjeev Gupta, Executive Director, Financial Services, Africa Finance Corporation. They all agreed that implementation was key to the AfCFTA’s success.
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Communications crucial for successful implementation of AfCFTA
Communications must play a crucial role in building awareness on the gender implications of the African Continental Free Trade Area (AfCFTA) Agreement and the accord as a whole, participants to a recent Economic Commission for Africa (ECA) workshop on trade and gender agreed.
Panellists and participants agreed, for example, that whenever the ECA and its partners organized big events, they should also arrange dedicated sessions on gender. The ECA’s upcoming Africa Trade Forums, they agreed, offer a perfect platform for this. In each of the forums, a women’s business roundtable should be organized to ensure the push against barriers facing women in trade are taken down.
The AfCFTA is one of the milestone trade policy developments in Africa which is expected to change the way Africa does trade and catalyze transformation in a way trade policy has not done before and political will, they added, was also crucial for its successful implementation.
“If the AfCFTA is to be different and transformative it will need to benefit everyone and be an inclusive agreement. This must happen through empowering those who haven’t accessed the market before to do so, including women,” said ECA’s Heini Suominen, the project leader.
Women-owned businesses tend to focus on local and national markets due to various barriers in accessing export markets hence the need to ensure the gender sensitive implementation of the AfCFTA, the participants agreed.
“The AfCFTA will have a number of implications and effects and there is a need to be able to understand how these will impact women,” added Ms. Suominen.
Particpants also agreed that to scale-up AfCFTA impact, there was need for coordination through a network for the exchange of information. The ECA is planning a continental training on the AfCFTA for journalists to influence and advocate for the AfCFTA, which should reflect the gender lens.
Participants agreed, among other things, that a Champion was needed to advocate for gender considerations in the AfCFTA.
In his remarks, ATPC Coordinator, David Luke, said the ECA will continue to work with its partners on initiatives that can be carried out in support of member States.
The workshop, which was a hit at the recently-held inaugural Intra African Trade Fair (AITF) in Cairo, Egypt, focused on the theme Working together for gender-sensitive implementation of the African Continental Free Trade Area: The role of Regional Economic Communities.
Discussions focused on four key issues – structures and frameworks needed for gender mainstreaming in RECs in the AfCFTA context; programmes and initiatives that RECs are carrying out in support of Member States; role of women entrepreneur networks in RECs; and internal REC issues that need to be addressed such as data collection.
The intention is to produce a report summarizing what was learnt from the REC missions structure around these four main issues.
The workshop was complimented by a session under the theme ‘Empowering African women and youth in the new AfCFTA era – Making AfCFTA a reality for women and youth’, which was also hosted by the ECA.
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Refugees, returnees and internally displaced persons in Africa at center of 32nd AU Summit
“Refugees, Returnees and Internally Displaced Persons: Towards Durable Solutions to Forced Displacement in Africa” is the theme that will be at the center of discussions during the 32nd Assembly of Heads of State and Government of the African Union (AU), which kicked off with the 37th Ordinary Session of the Permanent Representatives’ Committee (PRC), on Tuesday, 15th January 2019 at the AU headquarters in Addis Ababa, Ethiopia.
The opening ceremony took place in the presence of the Deputy Chairperson of the AU Commission, AUC Commissioners, all the Ambassadors of the 55 African Union member states based in Addis Ababa, representatives from the diplomatic corps, the international community, civil society, private sector and invited guests, among others.
While making his opening remarks, the Deputy Chairperson of the African Union Commission H.E. Kwesi Quartey noted that the African Union Commission has been undergoing far-reaching, sweeping and progressive Reforms for the past few months.
“Gender-Parity is top on the agenda of leadership, transparency, openness good governance and rule of law both within the Commission as well as in Ethiopia,” he said. He was speaking on behalf of the Chairperson of AUC, H.E. Dr. Moussa Faki Mahamat.
The Deputy emphasized the need for these reforms to help work together and enhance the cooperation of Member States in order to achieve the targets set for the Commission, and the pillar of this process is the Permanent Representatives’ Committee (PRC).
“The Administrative and Financial Reforms are at the core of the Commission’s Institutional reform agenda and together we intend to contribute our best efforts towards our Pan-African Vision of an integerated, prosperous and peaceful continent,” he said.
He further added, the Recruitment process of the Commission has faced many challenges over the years and the Commission headed by H.E. Moussa Faki is determined to live up to expectations by endorsing the recommendations brought by Policy Organs. He explained that, the Human resource management and capacity development are key aspects of the work of the Commission.
The expertise of Member States, as with external auditing, will be sought to review the Union’s recruitment system and because of the shared principles of equity, transparency and solidarity, the Personal Management Offices of Member states have a constructive role to play in strengthening the recruitment processes.
“In order for our Union to achieve the development objectives of Agenda 2063, the new structure being evolved must be fit for purpose,” he explained.
The PRC Meeting is the first of three statutory meetings to be held under the 32nd Summit of the African Union. The second meeting is that of Executive Council, which will held from 7-8 February. The final meeting of the Summit will be of the Heads of State and Government to take place from 10-11 February 2019.
Over two days, the Permanent Representatives will convene in closed sessions to deliberate on the different items on their agenda including: reports of the PRC sub-committees, Reports of meetings of the AU Specialized Technical Committees (STCs) during the last six months, Reports of the Commission, Reports of AU Organs and Specialized Agencies, Reports of the Commission, and the items proposed by Member States.
The Meeting will also consider and prepare draft agenda decisions, and declarations of the 34th Ordinary Session of the Executive Council and the 32nd Ordinary Session of the AU Assembly.
The 37th Ordinary Session of the PRC will officially conclude today, Wednesday 16th January 2019.
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South Africa Merchandise Trade Statistics for November 2018
South Africa trade balance swings to surplus in November
South Africa’s trade balance shifted to a R3.49 billion surplus in November of 2018 from a downwardly revised R4.29 billion deficit in the previous month and beating market expectations of a R2.25 billion gap. Considering the January to November period, the country recorded a R4.16 billion shortfall.
Imports dropped 8.4 percent month-over-month to R115.35 billion, mostly due to lower purchases of mineral products (-10 percent); chemical products (-9 percent); precious metals & stones (-56 percent); original equipment components (-23 percent) and vehicles & transport equipments (-9 percent). The most important import partners were: China (19.6 percent of total imports), Germany (9.5 percent), the US (6.4 percent), Saudi Arabia (4.8 percent) and Nigeria (3.9 percent).
Exports declined 2.3 percent month-over-month to R118.84 billion, mainly due to lower sales of vegetable products (-26 percent); prepared foodstuff (-9 percent) and vehicle & transport equipments (-13 percent). Meanwhile, sales increased for mineral products (2 percent) and chemicals (6 percent). Main export partners were: China (9.9 percent of total exports), Germany (8.5 percent), the US (7.0 percent), Japan (4.9 percent) and India (4.8 percent).
Excluding trade with neighbouring Botswana, Lesotho, Namibia and Swaziland, the country recorded a trade gap of R6.40 billion in November.
The South African Revenue Service (SARS) has released trade statistics for November 2018 recording a trade surplus of R3.49 billion. These statistics include trade data with Botswana, Eswatini, Lesotho and Namibia (BELN).
The year-to-date (01 January to 30 November 2018) trade deficit of R4.16 billion is a deterioration on the surplus for the comparable period in 2017 of R62.29 billion. Exports year-to-date increased by 6.1% whilst imports for the same period showed an increase of 13.0%.
Including trade data with Botswana, Eswatini, Lesotho and Namibia (BELN)
The R3.49 billion trade surplus for November 2018 is attributable to exports of R118.84 billion and imports of R115.35 billion. Exports decreased from October 2018 to November 2018 by R2.79 billion (2.3%) and imports decreased from October 2018 to November 2018 by R10.57 billion (8.4%).
Exports for the year-to-date (01 January to 30 November) increased by 6.1% from R1 080.48 billion in 2017 to R1 146.01 billion in 2018. Imports for the year-to-date of R1 150.17 billion are 13.0% more than the R1 018.18 billion imports recorded in January to November 2017, leaving a cumulative trade deficit of R4.16 billion for 2018.
On a year-on-year basis, the R3.49 billion trade surplus for November 2018 is a deterioration from the R13.38 billion surplus recorded in November 2017. Exports of R118.84 billion are 2.0% more than the R116.51 billion exports recorded in November 2017. Imports of R115.35 billion are 11.8% more than the R103.14 billion imports recorded in November 2017.
October 2018’s trade deficit was revised upwards by R1.26 billion from the previous month’s preliminary deficit of R5.55 billion to a revised deficit of R4.29 billion as a result of ongoing Vouchers of Correction (VOC’s).
Trade highlights by category
The main month-on-month export movements: R’ million
|
||
Section:
|
Including BELN:
|
|
Vehicles & Transport Equipment
|
-R2 200
|
- 13%
|
Vegetable Products
|
-R1 284
|
- 26%
|
Prepared Foodstuff
|
-R 513
|
- 9%
|
Base Metals
|
+R 300
|
+ 2%
|
Chemical Products
|
+R 397
|
+ 6%
|
Mineral Products
|
+R 602
|
+ 2%
|
Total
|
-R2 698
|
97%
|
Total Movement |
-R2 787 |
100% |
The main month-on-month import movements: R’ million
|
||
Section:
|
Including BELN:
|
|
Mineral Products
|
-R2 394
|
- 10%
|
Original Equipment Components
|
-R2 319
|
- 23%
|
Chemical Products
|
-R1 254
|
- 9%
|
Precious Metals & Stones
|
-R1 216
|
- 56%
|
Vehicles & Transport Equipment
|
-R 905
|
- 9%
|
Textiles
|
-R 633
|
- 13%
|
Footwear & Accessories
|
-R 510
|
- 31%
|
Total
|
-R9 231
|
87%
|
Total Movement |
-R10 567 |
100% |
Trade highlights by world zone
The world zone results from October 2018 (revised) to November 2018 are given below.
Africa:
Trade surplus: R15 990 million – this is a deterioration of R179 million in comparison to the R16 168 million surplus recorded in October 2018.
America:
Trade deficit: R958 million – this is an improvement of R1 491 million in comparison to the R2 449 million deficit recorded in October 2018.
Asia:
Trade deficit: R11 571 million – this is an improvement of R10 514 million in comparison to the R22 085 million deficit recorded in October 2018.
Europe:
Trade deficit: R6 118 million – this is a deterioration of R3 698 million in comparison to the R2 419 million deficit recorded in October 2018.
Oceania:
Trade deficit: R1 013 million – this is a deterioration of R429 million in comparison to the R584 million deficit recorded in October 2018.
Excluding trade data with Botswana, Eswatini, Lesotho and Namibia (BELN)
The trade data excluding BELN for November 2018 recorded a trade deficit of R6.40 billion. This was a result of exports of R104.67 billion and imports of R111.07 billion.
Exports decreased from October 2018 to November 2018 by R3.26 billion (3.0%) and imports decreased from October 2018 to November 2018 by R10.52 billion (8.7%).
The cumulative deficit for 2018 is R91.23 billion compared to R24.23 billion deficit in 2017.
Trade highlights by category
The main month-on-month export movements: R’ million
|
||
Section:
|
Excluding BELN:
|
|
Vehicles & Transport Equipment
|
-R2 372
|
- 15%
|
Vegetable Products
|
-R1 337
|
- 31%
|
Prepared Foodstuff
|
-R 645
|
- 15%
|
Base Metals
|
+R 250
|
+ 2%
|
Chemical Products
|
+R 390
|
+ 7%
|
Mineral Products
|
+R 674
|
+ 3%
|
Total
|
-R3 040
|
93%
|
Total Movement |
-R3 261 |
100% |
The main month-on-month import movements: R’ million
|
||
Section:
|
Excluding BELN:
|
|
Mineral Products
|
-R2 412
|
- 10%
|
Original Equipment Components
|
-R2 319
|
- 23%
|
Chemical Products
|
-R1 190
|
- 9%
|
Precious Metals & Stones
|
-R1 029
|
- 70%
|
Vehicles & Transport Equipment
|
-R 920
|
- 9%
|
Textiles
|
-R 703
|
- 16%
|
Total
|
-R8 573
|
81%
|
Total Movement |
-R10 522 |
100% |
Trade highlights by world zone
The world zone results for Africa excluding BELN from October 2018 (Revised) to November 2018 are given below.
Africa:
Trade surplus: R6 093 million – this is a deterioration of R698 million in comparison to the R6 791 million surplus recorded in October 2018.
Botswana, Eswatini, Lesotho and Namibia (Only)
Trade statistics with the BELN for November 2018 recorded a trade surplus of R9.90 billion. This was a result of exports of R14.18 billion and imports of R4.28 billion.
Exports increased from October 2018 to November 2018 by R0.47 billion (3.5%) and imports decreased from October 2018 to November 2018 by R0.04 billion (1.0%).
The cumulative surplus for 2018 is R87.07 billion compared to R86.53 billion in 2017.
Trade Highlights by Category
The main month-on-month export movements: R’ million
|
||
Section:
|
BELN:
|
|
Vehicles & Transport Equipment
|
+R 172
|
+ 15%
|
Machinery & Electronics
|
+R 140
|
+ 8%
|
Prepared Foodstuff
|
+R 132
|
+ 9%
|
Vegetable Products
|
+R 53
|
+ 8%
|
Base Metals
|
+R 50
|
+ 5%
|
Plastics & Rubber
|
+R 36
|
+ 6%
|
Wood Pulp & Paper
|
+R 33
|
+ 10%
|
Animal/Vegetable Fats
|
+R 31
|
+ 25%
|
Textiles
|
+R 30
|
+ 5%
|
Mineral Products
|
-R 72
|
- 3%
|
Precious Metals & Stones
|
-R 189
|
- 24%
|
Total
|
+R 416
|
88%
|
Total Movement |
+R 474 |
100% |
The main month-on-month import movements: R’ million
|
||
Section:
|
BELN:
|
|
Precious Metals & Stones
|
-R 187
|
- 26%
|
Chemical Products
|
-R 63
|
- 7%
|
Wood & Articles Thereof
|
+R 9
|
+ 6%
|
Live Animals
|
+R 14
|
+ 4%
|
Vehicles & Transport Equipment
|
+R 15
|
+ 25%
|
Mineral Products
|
+R 18
|
+ 25%
|
Machinery & Electronics
|
+R 30
|
+ 8%
|
Prepared Foodstuff
|
+R 58
|
+ 10%
|
Textiles
|
+R 70
|
+ 11%
|
Total
|
-R 36
|
80%
|
Total Movement
|
-R 45
|
100%
|
Related News
tralac’s first Daily News Selection for 2019
Profiled AU events, now underway:
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The 32nd Ordinary Summit of the African Union started today in Addis on the theme Refugees, returnees and internally displaced persons: towards durable solutions to forced displacement in Africa. The summit has three segments: 37th Ordinary Session of the Permanent Representatives’ Committee (15-16 January); 34th Ordinary Session of the Executive Council (7-8 February); 32nd Ordinary Session of the Assembly of the Heads of State and Government (10-11 February).
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The 1st AU Supply Chain Platform on the theme, Driving the AU’s strategic objectives through supply chain excellence, began yesterday in Addis. The workshop is intended to create a community of public procurement and supply chain practitioners who will engage through a web-based platform and convene an annual workshop.
The AfDB’s flagship report, the 2019 edition of the African Economic Outlook, will be released on Thursday. The theme: Regional integration for Africa’s economic prosperity
AfCFTA updates:
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AfCFTA ratification barometer: 18 out of required 22 ratifications confirmed. Chad, Congo, Côte d’Ivoire, Djibouti, Eswatini, Ghana, Guinea, Kenya, Mali, Mauritania, Namibia, Niger, Rwanda, Senegal, Sierra Leone, South Africa,Togo, Uganda lead the way. Only 4 left. Make sure your country joins the pioneers! We have ratifications from all regions of the continent, except North Africa. We look forward to have a North African country among the historic 22 ratifications that will effectively bring the AfCFTA into force.
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The 11th meeting of the AfCFTA TWG on Rules of Origin starts on 18 February in Addis Ababa. Upon request from delegates and the AUC Secretariat during previous meetings of the TWG, an advance technical paper, pdf The treatment of goods originating in Special Economic Arrangements/Zones in the African Continental Free Trade Area (551 KB) has been prepared by UNCTAD.
Extract: The basic requirements for implementing a FTA are rules of origin and a tariff phase-down schedule. Rules of origin should only be used to reduce trade deflection while, at the same time, creating a conducive environment for trade in originating goods to take place between FTA members. Best practice suggests that rules of origin should not be used as a protectionist measure. The concern of some African countries is how to address unfair competition that may emanate from goods produced in SEZs and trade under AfCFTA preferential treatment. The rationale is that, as goods produced in SEZs benefit from tax and other investment incentives, the cost of manufacture will be lowered so goods produced in SEZs will be able to be sold for less than goods not manufactured in SEZs. The challenge with this argument is: SEZs have evolved from firms in an enclave and many countries offer tax and investment incentives to companies / firms not in a specific enclave; Excluding goods produced in SEZs will reduce the effectiveness and efficiency of the AfCFTA; and, the tax incentives provided to firms in SEZs may not allow them to reduce costs of production.
The preliminary findings of this paper suggest that using rules of origin as a means to avoid unfair competition, a use that rules of origin are not designed for, will be ineffective and counterproductive. Instead AfCFTA State Parties should make use of WTO rules on subsidies and countervailing measure as referred to in Article 2 of Annex 9 to the AfCFTA Protocol on Trade in Goods. The WTO (which most AU Member States are either Members of or are in the process of acceding to) has an Agreement on Subsidies and Countervailing Measures containing the appropriate legal trade remedies to address any unfair advantage that may be conferred by subsidies in form of tax holidays, rebates and incentives to firms located in SEZs.
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pdf African Group declaration on WTO issues (116 KB) . Reaffirm that Special and Differential Treatment shall be an integral part of all WTO agreements and future multilateral outcomes and shall be embodied, as appropriate, in schedules of concessions and commitments and in the rules and disciplines, so as to be operationally effective and to enable developing countries, in particular LDCs in Africa, to effectively address their development needs in line with Africa’s industrial development priorities as encapsulated in the AU’s Agenda 2063 on structural transformation and industrialization; Invite all WTO Members to extend to African graduating countries the existing Special and Differential Treatment measures and exemptions available to LDCs for a period appropriate to the development situation of those countries; Pledge support to African countries in the process of WTO accession and urge Members to desist from making unreasonable requests on African acceding countries to extend any commitments made as a result of their membership to the AfCFTA or that are inconsistent with their levels of development; Underscore that Africa’s priority trade policy objective is the AfCFTA that will build a Single African Market for Trade in Goods and Services, and to ensure that WTO outcomes do not undermine those objectives. [Circulated at the WTO on 8 January 2019, adopted at the AMOT meeting, 12-13 December 2018]
Previews on the theme Africa and/in 2019:
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tralac’s January 2019 newsletter: pdf In this first Newsletter of 2019 (4.77 MB) , we provide a brief overview of recent trade-related as well as domestic developments in select countries, which have, already in this new year, featured prominently in the media. We reflect on these developments and share our views as to why they merit further monitoring. There is a general theme in several of these developments – how (sometimes unexpectedly) national political developments impact on bigger regional and multilateral contexts. There is also a strong reminder that accountability, transparency and robust democratic institutions remain the harbingers of better governance.
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Global Economic Prospects: pdf Sub-Saharan Africa (1.27 MB) (World Bank)
Regional growth in SSA is expected to accelerate to 3.4% in 2019, predicated on diminished policy uncertainty and improved investment in large economies together with continued robust growth in non-resource intensive countries. Growth in Nigeria is expected to rise to 2.2% in 2019, assuming that oil production will recover and a slow improvement in private demand will constrain growth in the non-oil industrial sector. Angola is forecast to grow 2.9% in 2019 as the oil sector recovers as new oil fields come on stream and as reforms bolster the business environment. South Africa is projected to accelerate modestly to a 1.3% pace, amid constraints on domestic demand and limited government spending.
Box 2.6.1: Informality in Sub-Saharan Africa: High average informality. On average in 2010-16, the informal economy in SSA countries amounted to 36-40% of official GDP, informal employment made up 90% of employment and, more narrowly, self-employment accounted for 58% of total employment. Alternative measures of informality, such as the share of the labor force without pension coverage and perceptions of informal activity, were also high compared with other EMDE regions. Heterogeneity. There is wide cross-country heterogeneity. West and East Africa had much higher average shares of self-employed workers in total employment during 2010-16, at 80% and 68%, respectively. In contrast, the shares of self-employed workers in Central and Southern Africa were 48 and 43% respectively, only slightly above the EMDE average. Self-employment made up more than 85% of employment in Benin, Burundi, Madagascar, and Uganda whereas it was less than 20% in South Africa and Mauritius. Evolution of informality in SSA. Informality in SSA has declined gradually over the past three decades, broadly in line with the EMDE trend. Some countries, however, have made significant progress in lowering the shares of informal output and employment, such as Botswana, Ethiopia, Ghana, Malawi, Rwanda, and Tanzania. [Note: The IMF will release its World Economic Outlook Update (January 2019) on Friday, 21 January]
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Africa in an emerging world (Hoover Institution series – Governance in an emerging new world). Profiled contribution: Africa trade and technology (by Anthony Carroll, Eric Obscherning)
Will automation and AI fuel economic development and research as mobile technologies did in the past decade? Will they allow African nations to leap ahead, skipping traditional industrialization steps? The answers to these questions remain elusive, and in many respects it remains too early to tell. But for any chance at positive outcomes – that is, for African countries to fully leverage the power of automation and AI to change sectors like agriculture and manufacturing into globally-connected productivity powerhouses – governments and private sector alike must fully understand the advantages and consequences of this technology and deliberately respond to integrating it into national strategy.
Government leaders should focus on three key activities: Increase financing of internet and communications technology infrastructure development; Integrate technology education into curricula of primary and secondary schools; Implement reforms to data collection and data privacy policies. There is an urgent need to accelerate improvements to the agriculture and manufacturing sectors to increase their value alongside other efforts to diversify African economies, strengthen growth, and build resilience. Given the leapfrogging lessons of mobile technology on the continent over the last two decades, many African countries are positioned well to leverage automation and AI with agility and innovation. Automation and AI in agriculture and manufacturing would unlock tremendous value, connecting these markets to new regional and global marketplaces and allowing them to compete more efficiently and effectively. The challenge lies not in maneuvering these technologies as a vehicle but in ensuring that government, industry, and civil society contribute to creating an enabling environment. Other chapters: A letter from the conveners, African governance: challenges and their implications (Chester A. Crocker), Climate change and Africa’s future (Mark Giordano, Elisabeth Bassini), Africa 2050: demographic truth and consequences (Jack A. Goldstone), Unlocking the potential of mobile tech in Africa: tracking the trends and guiding effective strategy on maximising the benefit of mobile tech (Andre Pienaar, Zach Beecher). Companion analysis: Latin America in an emerging world
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Foresight Africa: top priorities for the continent in 2019 (Brookings Institution)
In this year’s Foresight Africa, AGI scholars and invited experts illuminate the priorities of the continent in 2019, delving into six overarching themes with recommendations for tackling the challenges that lie ahead. This unprecedented dynamism of the continent is creating opportunities for trade and investment and is drawing interest from an increasingly diverse group of external partners. Democracy is consolidating, although the prevalence of tensions and, in some countries, violence during elections point to areas for improvement. The demographic tidal wave looms closer, and job creation has not yet been able to catch up. Despite continued progress on governance, more efforts are needed to eradicate corruption and to elevate the voice of women and young people in decision making. Africa is brimming with promise and, in some places, peril. With its array of contributions, this year’s edition reflects both the diversity of the continent and the common threads that bind it together. With that aim, we hope to promote and inform a dialogue that will generate sound practical strategies for achieving shared prosperity across the continent. Table of contents: Governance lags behind youth expectations and needs (Mo Ibrahim), Reconciling financing needs and rising debt levels (Brahima Sangafowa Coulibaly), How industries without smokestacks can address Africa’s youth unemployment crisis (John Page), A new approach to state fragility (Paul Collier), Spotlighting opportunities for business in Africa and strategies to succeed in the world’s next big growth market (Acha Leke, Landry Signé), Intra-African trade: A path to economic diversification and inclusion (Vera L. Songwe)
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Economic transformation in Africa: key trends in 2019 (ODI)
A commentary by Dirk Willem te Velde: Forthcoming elections in Nigeria have put the spotlight on a faltering economy. While foreign direct investment into the country increased in 2018, foreign reserves, oil prices and growth have all been weaker than expected. With a quarter of the labour force unemployed, jobs and transformation should be central to the election campaign in Nigeria. Elsewhere on the continent, Mozambique hopes to put its debt irregularities behind it following recent action and a renewed focus on jobs and the economy ahead of planned elections in October 2019. South Africa, one of the weakest economic performers on the African continent and with the world’s highest youth unemployment rate, is also facing elections, probably in May this year. At the global level, then, the clouds are darkening. Which countries will seize the opportunities to transform and create jobs in the year ahead?
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Moody’s on Sub-Saharan Africa sovereigns: 2019 outlook negative as fiscal, external challenges persist despite easing pressures. Going into 2019, 15 of the 21 sovereigns that Moody’s rates in the Sub-Saharan Africa region have a stable outlook, while six hold a negative outlook. “Our negative outlook for sovereigns in Sub-Saharan Africa is driven by persistent credit challenges related to their ongoing fiscal and external vulnerabilities,” said Daniela Re Fraschini, Assistant Vice President – Analyst and author of the report. “That said, we expect credit pressures to ease relative to previous years, despite a more challenging external environment, as credit profiles display some resilience at their lower rating levels.”
Bloomberg: A country guide to Africa’s top political risks
Célestin Monga (AfDB): Africa’s historic pivot
Anzetse Were: Key focus points for Africa in 2019
Yinka Adegoke (Quartz): Africa will have some of the world’s fastest-growing economies in 2019 – and a looming debt crisis
Nicholas Norbrook (The Africa Report): Africa in 2019 – how to make a continental deal
John Campbell (CFR): David Pilling’s African Year in Review
Alex Vines (Chatham House): Continental drifts towards Africa
Related News
African Group Declaration on WTO issues
We, Ministers of Trade of the Member States of the African Union, meeting in Cairo, on 12 and 13 December 2018, at the occasion of the 7th Meeting of the African Ministers of Trade (AMOT) in order to, amongst other things, review the state of play in the WTO negotiations, following the outcome of the Eleventh WTO Ministerial Conference;
Took note of the recent developments at the WTO since our last meeting on 18 September 2017, including the rise in trade protectionist measures that have been challenged as being in breach of WTO rules and principles, the Appellate Body impasse, and new negotiating proposals by a few Members that include calls to change the rules and procedures in the WTO;
Took note of the informal processes amongst groups of Members in the Joint Statement Initiatives on electronic commerce, investment facilitation, domestic regulation, and micro, medium and small enterprises and acknowledged that some African Group Members participate in these informal processes;
Concerned with the multiple difficulties and challenges faced by African countries who are in the process of acceding to the WTO;
Acknowledged and welcomed developments to achieve the objectives of the African Union’s Agenda 2063: The Africa We Want, through a rules-based governance system established by the African Continental Free Trade Area (AfCFTA);
Reconfirmed our pledge to work on supporting efforts in the Multilateral Trading System that promote and defend Africa’s interests in line with the African Union’s “Agenda 2063: The Africa We Want”, and recognized the need to build coherence by ensuring that the African Group’s negotiating objectives at the WTO fully support the AfCFTA objectives for continental industrialization, structural transformation and integration;
Welcomed the growing recognition of the importance of industrial policy for development;
Agreed to:
- Reiterate our concern with the lack of progress on issues of longstanding importance to Africa;
- Reaffirm positions adopted in the AMOT Ministerial Declaration of 30 November 2016, notably African Trade Ministers’ commitment to meaningful outcomes on trade distorting domestic support, cotton, public stockholding for food security purposes, the special safeguard mechanism, and Special and Differential Treatment; and recognizing the challenges faced by NFIDCs and emphasizing that any outcome in agriculture negotiations shall accord flexibilities to address NFIDCs and LDCs particular situation;
- Recall and reaffirm the importance of implementing WTO Ministerial, and General Council Decisions and Declarations adopted since Doha in 2001, that keep development at the centre of the work program;
- Reaffirm the importance of the negotiations on fisheries subsidies and the need for Special and Differential Treatment for African countries to guarantee policy space necessary to strengthen their fishing industries and capacities for economic and social development;
- Reiterate our concerns that the Aid for Trade initiative should contribute to meeting the objectives of trade-related capacity-building, overcoming supply-side constraints, infrastructure development, or facilitating the integration of developing economies, in particular LDCs in regional and global trade in ways that support their development. We call upon Members to strengthen and improve the Aid for Trade initiative so that it delivers real benefit to recipient developing countries and LDCs, and to avoid conditioning its implementation to the participation on negotiating new issues in the WTO;
- Commit to strengthen in close coordination with Ministries responsible for Trade on our common positions and stay abreast of all developments at the WTO, and ensure that development remains an integral component of all negotiating outcomes for all African economies in line with the Doha Development mandate;
- Reiterate our commitment in pursuing outcomes on Special and Differential Treatment in line with Paragraph 44 of the Doha Ministerial Declaration;
- Reaffirm that Special and Differential Treatment shall be an integral part of all WTO agreements and future multilateral outcomes and shall be embodied, as appropriate, in schedules of concessions and commitments and in the rules and disciplines, so as to be operationally effective and to enable developing countries, in particular LDCs in Africa, to effectively address their development needs in line with Africa’s industrial development priorities as encapsulated in the African Union’s Agenda 2063 on structural transformation and industrialization;
- Invite all WTO Members to extend to African graduating countries the existing Special and Differential Treatment measures and exemptions available to LDCs for a period appropriate to the development situation of those countries;
- Pledge support to African countries in the process of WTO accession and urge Members to desist from making unreasonable requests on African acceding countries to extend any commitments made as a result of their membership to the AfCFTA or that are inconsistent with their levels of development;
- Underscore that Africa’s priority trade policy objective is the AfCFTA that will build a Single African Market for Trade in Goods and Services, and to ensure that WTO outcomes do not undermine those objectives;
- Re-commit to a rules-based Multilateral Trading System that is fair, equitable, inclusive and development-oriented, and that prioritises Africa’s interests;
- Reaffirm the importance of preserving and adhering to the principles and procedures of the WTO as established in the Marrakesh Agreement. This includes: the architecture for Development and Special and Differential Treatment, for developing countries and least developed countries; the procedures and principles governing plurilateral agreements; a multilateral mandate is the necessary prerequisite to advance any negotiating proposal at the WTO; and the WTO Secretariat preserves its international stature and always remains above the partisan position of Members;
- Oppose unilateral trade measures and call on WTO Members to refrain from any and all measures that undermine WTO principles and the rules based multilateral trading system;
- Urge that priority attention is given to resolving the Appellate Body impasse and commit to work with all WTO Members to find mutually agreeable solutions, while preserving the essential features and integrity of the system;
- Insist that any discussions on the future of the WTO shall include the views and interests of the African Group and address the core issues of development and inclusiveness;
- Instruct officials to work towards a common position on WTO reform.
Cairo, Egypt, 12-13 December 2018
The above communication was circulated to the WTO General Council and Trade Negotiations Committee, at the request of the delegation of South Africa on behalf of the African Group, on 28 December 2018.
Related News
Darkening prospects: Global economy to slow to 2.9 percent in 2019 as trade, investment weaken
Emerging, developing economies should rebuild policy buffers, boost productivity to sustain growth
Global economic growth is projected to soften from a downwardly revised 3 percent in 2018 to 2.9 percent in 2019 amid rising downside risks to the outlook, the World Bank said on Tuesday. International trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures.
Growth among advanced economies is forecast to drop to 2 percent this year, the January 2019 Global Economic Prospects says. Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies. Growth for this group is anticipated to hold steady at a weaker-than-expected 4.2 percent this year.
“At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead,” said World Bank Chief Executive Officer Kristalina Georgieva. “As economic and financial headwinds intensify for emerging and developing countries, the world’s progress in reducing extreme poverty could be jeopardized. To keep the momentum, countries need to invest in people, foster inclusive growth, and build resilient societies.”
The upswing in commodity exporters has stagnated, while activity in commodity importers is decelerating. Per capita growth will be insufficient to narrow the income gap with advanced economies in about 35 percent of emerging market and developing economies in 2019, with the share increasing to 60 percent in countries affected by fragility, conflict, and violence.
A number of developments could act as a further brake on activity. A sharper tightening in borrowing costs could depress capital inflows and lead to slower growth in many emerging market and developing economies. Past increases in public and private debt could heighten vulnerability to swings in financing conditions and market sentiment. Intensifying trade tensions could result in weaker global growth and disrupt globally interconnected value chains.
“Robust economic growth is essential to reducing poverty and boosting shared prosperity,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. “As the outlook for the global economy has darkened, strengthening contingency planning, facilitating trade, and improving access to finance will be crucial to navigate current uncertainties and invigorate growth.”
Analytical chapters address key current topics:
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The informal sector accounts for about 70 percent of employment and 30 percent of GDP in emerging market and developing economies. Since it is associated with lower productivity and tax revenues and greater poverty and inequality, this is symptomatic of opportunities lost. Reducing tax and regulatory burdens, improving access to finance, offering better education and public services, and strengthening public revenue frameworks could level the playing field between formal and informal sectors.
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Debt vulnerabilities in low-income countries are rising. While borrowing has enabled many countries to tackle important development needs, the median debt-to-GDP ratio of low-income countries has climbed, and the composition of debt has shifted toward more expensive market-based sources of financing. These economies should focus on mobilizing domestic resources, strengthening debt and investment management practices and building more resilient macro-fiscal frameworks.
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Sustaining historically low and stable inflation is not guaranteed in emerging market and developing economies. Cyclical pressures that have depressed inflation over the past decade are gradually dissipating. The long-term factors that have helped reduce inflation over the past five decades – global trade and financial integration, widespread adoption of robust monetary policy frameworks – may lose momentum or reverse. Maintaining low global inflation may become as much of a challenge as achieving it.
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Policies aimed at softening the blow of global food price swings can have unintended consequences if implemented by many governments in uncoordinated fashion. Government interventions can provide short-term relief, but widespread actions are likely to exacerbate food price spikes, with heaviest impact on the poor. For example, trade policies introduced during the 2010-11 food price spike may have accounted for more than one-quarter of the increase in the world price of wheat and maize. The 2010-11 food price spike tipped 8.3 million people (almost 1 percent of the world’s poor) into poverty.
“Designing tax and social policies to level the playing field for formal and informal sectors as well as strengthening domestic revenue mobilization and debt management will be important priorities for policymakers to overcome the challenges associated with informality in developing economies,” said World Bank Prospects Group Director Ayhan Kose. “As the economic outlook dims, such efforts become even more important.”
Regional Outlooks
East Asia and Pacific: East Asia and Pacific remains one of the world’s fastest-growing developing regions. Regional growth is expected to moderate to 6 percent in 2019, assuming broadly stable commodity prices, a moderation in global demand and trade, and a gradual tightening of global financial conditions. Growth in China is expected to slow to 6.2 percent this year as domestic and external rebalancing continue. The rest of the region is expected to grow at 5.2 percent in 2019 as resilient demand offsets the negative impact of slowing exports. Indonesia’s growth is expected to hold steady at 5.2 percent. The expansion of the Thai economy is expected to slow in 2019 to 3.8 percent.
Europe and Central Asia: The lingering effects of financial stress in Turkey are anticipated to weigh on regional growth this year, slowing it to 2.3 percent in 2019. Turkey is forecast to experience weak activity and slow to a 1.6 percent pace due to high inflation, high interest rates, and low confidence, dampening consumption and investment. Growth in the western part of the region, excluding Turkey, is projected to slow. Poland is anticipated to slow to 4 percent as Euro Area growth slows. Growth in the eastern part of the region is also anticipated to slow as large economies including Russia, Kazakhstan, and Ukraine decelerate.
Latin America and the Caribbean: Regional growth is projected to advance to a 1.7 percent pace this year, supported mainly by a pickup in private consumption. Brazil is forecast to expand 2.2 percent, assuming fiscal reforms are quickly put in place, and that a recovery of consumption and investment will outweigh cutbacks to government spending. In Mexico, policy uncertainty and the prospect of still subdued investment is expected to keep growth at a moderate 2 percent, despite the fall in trade-related uncertainty following the announcement of the U.S.-Mexico-Canada Agreement. Argentina is forecast to contract by 1.7 percent as deep fiscal consolidation leads to a loss of employment and reduced consumption and investment.
Middle East and North Africa: Regional growth is projected to rise to 1.9 percent in 2019. Despite slower global trade growth and tighter external financing conditions, domestic factors, particularly policy reforms, are anticipated to bolster growth in the region. Growth among oil exporters is expected to pick up slightly this year, as GCC countries as a group accelerate to a 2.6 percent rate from 2 percent in 2018. Iran is forecast to contract by 3.6 percent in 2019 as sanctions bite. Algeria is forecast to ease to 2.3 percent after a rise in government spending last year tapers off. Egypt is forecast to accelerate to 5.6 percent growth this fiscal year as investment is supported by reforms that strengthen the business climate and as private consumption picks up.
South Asia: Regional growth is expected to accelerate to 7.1 percent in 2019, underpinned by strengthening investment and robust consumption. India is forecast to accelerate to 7.3 percent in FY 2018/19 as consumption remains robust and investment growth continues, Bangladesh is expected to slow to 7 percent in FY2018/19 as activity is supported by strong private consumption and infrastructure spending. Pakistan’s growth is projected to decelerate to 3.7 percent in FY2018/19, with financial conditions tightening to help counter rising inflation and external vulnerabilities. Sri Lanka is anticipated to speed up slightly to 4 percent in 2019, supported by robust domestic demand and investment boosted by infrastructure projects. Nepal’s post-earthquake momentum is forecast to moderate, and growth should slow to 5.9 percent in FY2018/19.
Sub-Saharan Africa: Regional growth is expected to accelerate to 3.4 percent in 2019, predicated on diminished policy uncertainty and improved investment in large economies together with continued robust growth in non-resource intensive countries. Growth in Nigeria is expected to rise to 2.2 percent in 2019, assuming that oil production will recover and a slow improvement in private demand will constrain growth in the non-oil industrial sector. Angola is forecast to grow 2.9 percent in 2019 as the oil sector recovers as new oil fields come on stream and as reforms bolster the business environment. South Africa is projected to accelerate modestly to a 1.3 percent pace, amid constraints on domestic demand and limited government spending.
Sub-Saharan Africa: Analytical chapter
Recent developments
The recovery in Sub-Saharan Africa (SSA) continued in 2018, but activity lost momentum in several countries. Growth in the region is estimated to have risen marginally from 2.6 percent in 2017 to 2.7 percent in 2018, slower than expected and still below potential. This reflected a sluggish expansion in the region’s three largest economies – Angola, Nigeria, and South Africa. The region faced a more difficult external environment last year as global trade growth moderated, financing conditions tightened, and the U.S. dollar strengthened. Commodity prices diverged, with metals and agriculture prices dampened by weakening global demand, while oil prices were higher in most of 2018, mainly due to supply factors.
In Nigeria, oil production fell, partly owing to pipeline closures in mid-2018, while non-oil activity was dampened by lackluster consumer demand, as well as conflicts over land between farmers and herders that disrupted crop production. In Angola – the region’s second largest oil exporter – stagnant non-oil activity was aggravated by a contraction in oil production, which fell sharply due to underinvestment and to key oil fields reaching maturity. South Africa’s economy emerged from a technical recession in the second half of 2018, in part due to improved activity in the agricultural and manufacturing sectors. However, growth remains subdued, as challenges in the mining sector and weak construction activity are compounded by policy uncertainty and low business confidence. Against this backdrop, the South African government announced measures to support the economy through reprioritized spending and structural reforms to improve the business environment and infrastructure delivery.
Growth in the rest of the region was broadly steady, although performance varied between country groups. While growth among metals exporters was subdued in 2018, activity in several oil exporters rebounded. In the Central African Economic and Monetary Community (CEMAC), growth benefitted from an increase in oil production and higher oil prices. Economic activity in non-resource-intensive countries remained robust, supported by agricultural production and services on the production side, and household consumption and public investment on the demand side. Several countries in the West African Economic and Monetary Union (WAEMU) grew at 6 percent or more, including Benin, Burkina Faso, Côte d’Ivoire, and Senegal. A strong rebound in agriculture in Kenya, Rwanda, and Uganda, following prior droughts, underpinned the pickup in activity in East Africa.
The median current account deficit is estimated to have widened from 5.8 percent of GDP in 2017 to 6.1 percent in 2018, but sizable differences persist across countries. For large oil exporters (e.g., Angola, Nigeria), external balances improved, driven by higher oil prices and soft import demand. The current account deficit also narrowed significantly in CEMAC, underpinned by strong fiscal adjustments. By contrast, external balances in metals exporters deteriorated amid weaker exports in some countries and higher imports in others. In non-resource-intensive countries, current account deficits remained elevated due to high fuel imports and capital goods imports related to public infrastructure projects. Across the region, balance of payments financing became more difficult against the backdrop of rising external borrowing costs and weakening capital inflows. Eurobond issuance slowed markedly in the second half of the year, while FDI inflows remained subdued.
Currencies in the region depreciated in effective terms amid a broad-based strengthening of the U.S. dollar and weaker investor sentiment toward emerging markets. Investors’ renewed focus on country-specific vulnerabilities contributed to a rapid sell-off of the South African rand and the Zambian kwacha since mid-2018. Elsewhere in the region, the pace of currency depreciation has been more modest.
Outlook
Growth in Sub-Saharan Africa is expected to pick up to 3.4 percent in 2019, rising to an average of 3.7 percent in 2020-21. This is predicated on diminished policy uncertainty and improved investment in large economies, together with continued robust growth in non-resource intensive countries. However, external headwinds have intensified, as growth among main trading partners moderates, global financial conditions tighten, and trade policy uncertainty persists. Per capita income growth is predicted to remain well below its long-term average in many countries, yielding little progress in poverty reduction, and highlighting the need for policy measures to raise potential output while raising the productive capacity of the poor.
Growth in Nigeria is projected to rebound to 2.2 percent in 2019 and 2.4 percent in 2020-21. These forecasts are unchanged from June and assume that oil production will recover, but peak below government targets, while a slow improvement in private demand will constrain growth in the non-oil industrial sector. In Angola, the growth forecast has been upgraded to 2.9 percent in 2019, moderating to an average of 2.7 percent in 2020-21. A recovery in the oil sector, as new oil fields come on stream, is expected to boost growth, along with a pickup in activity in the non-oil sector as reforms bolster the business environment.
Growth in South Africa is projected to recover more slowly than previously expected, to 1.3 percent in 2019, before rising to 1.7 percent in 2020-21. High unemployment and slow growth in household credit extension are expected to constrain domestic demand in 2019, while fiscal consolidation limits government spending. Higher growth in 2020 reflects the expectation that the government’s structural reform agenda will gradually gather speed, helping to boost investment growth, as policy uncertainty recedes and investor sentiment improves.
Excluding Angola, Nigeria, and South Africa, growth in the rest of Sub-Saharan Africa is expected to remain relatively solid, but with significant variation between country groups. Economic activity in CEMAC should benefit from higher oil production and an increase in domestic demand as fiscal tightening eases.
Growth is expected to rise moderately among metals exporters, supported in part by stronger mining activity. However, non-mining activity remains subdued owing to weak business confidence, accelerating inflation in some countries, and sluggish credit growth.
Among non-resource-intensive countries, economic activity is expected to remain robust in fast-growing countries, such as Cote d’Ivoire, Kenya, and Tanzania, boosted by public investment and strong agricultural production, and in smaller economies, such as Madagascar, on the back of solid export performance. While growth in Ethiopia is expected to remain strong, it will be weighed down by fiscal consolidation efforts to stabilize public debt.
Inflation is expected to pick up across the region in 2019, reflecting the pass-through of currency depreciations during 2018 and domestic price pressures among metals exporters and non-resource-intensive countries. Notably, inflation is envisioned to continue to recede in Angola and Nigeria. However, it may rise temporarily in Angola if the anticipated increases in utility tariffs and fuel prices are implemented. In addition, price pressures are likely to intensify in Kenya, Tanzania, and Uganda.
Fiscal balances are expected to improve further, reflecting fiscal consolidation efforts among the large oil exporters and continued adjustment in CEMAC. Policy tightening is likely to yield smaller fiscal deficits in metals exporters, while fiscal deficits in non-resource-intensive countries should also continue to narrow as public investment spending slows to stabilize public debt.
Risks
Risks to the regional outlook are tilted to the downside. On the external front, slower-than-projected growth in China and the Euro Area, which have strong trade and investment links with Sub-Saharan Africa, would adversely affect the region through lower export demand and investment. Moreover, Sub-Saharan African metals producers would likely be among the hardest hit by escalating trade tensions between China and the United States, as metals prices would fall faster than other commodity prices as a result of weakening demand from China. Furthermore, a faster-than-expected normalization of advanced-economy monetary policy could result in sharp reductions in capital inflows, higher financing costs, and disorderly exchange rate depreciations, especially in countries with weaker fundamentals or higher political risks. Sharp currency declines would make the servicing of foreign-currency-denominated debt, already a rising concern in the region, more challenging.
The increased reliance on foreign currency borrowing has heightened refinancing and interest rate risk in debtor countries. Furthermore, the rise in non-resident participation in domestic debt markets has exposed some countries to the risk of sudden capital outflows. In some countries, sizable loans to state-owned enterprises, backed by commodity exports, have increased the risk that a negative commodity price shock could trigger financial crises.
Domestic risks, in particular, remain elevated. Political uncertainty and a concurrent weakening of economic reforms could continue to weigh on the economic outlook in many countries. In countries holding elections in 2019 (e.g., Malawi, Mozambique, Nigeria, South Africa), domestic political considerations could undermine the commitment needed to rein in fiscal deficits or implement structural reforms, especially where public debt levels are high and rising. Insurgencies and armed conflicts, with their adverse effects on economic activity, remain an important risk in several countries. Adverse weather shocks and rising financial sector stress are additional risks.
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Economic transformation in Africa: key trends in 2019
The global economy is slowing down
The US-China trade war, global increases in sovereign debt, and weak 2018 stock market performance have all weakened prospects for economic growth. The IMF prediction that global GDP growth this year will continue at 3.7% seems optimistic. Manufacturing indicators in China and the US are pointing downwards, and the Chinese economy and import demand have weakened. Earlier this month, the World Bank reduced its forecasts for global growth to 2.9% in 2019.
Slower growth, along with more expensive credit globally, will likely harm African economies (even though some such as Ethiopia, Rwanda and Tanzania may still reach 7-8% growth this year). The IMF is concerned that the world is even less prepared now for an economic slowdown than in 2008 before the last global financial crisis hit. Those countries that have successfully diversified and transformed their economies and built up their reserves will be better prepared to weather any shocks.
Global economic governance is weakening
The breakdown in global trade governance as a result of the US-China trade war does not bode well for the 12th World Trade Organization (WTO) Ministerial Conference in Kazakhstan in 2020. No ministerial is scheduled for this year, but July 2019 will see the WTO Global Aid for Trade review on Economic Diversification and Empowerment for Inclusive, Sustainable Development through Aid for Trade. Meanwhile the World Bank now faces a period of leadership uncertainty following the surprise resignation of President Kim.
Japan hosts the G20 summit in June 2019, but not enough time will have passed since the December 2018 summit to develop any significant new proposals. A decade after the G20 took the lead in mitigating the effect of the 2008 financial crisis, it has become a less effective body (though still with effects for Africa, including by maintaining some minimum level of global co-ordination and by committing to a progress report this year of its 2016 initiative on African industrialisation).
Regional and bilateral trade deals are increasingly important
In the face of weak governance and growth globally, Africa is looking inwards. The signing and ratifying of the African Continental Free Trade Agreement (AfCFTA) is progressing well, with sufficient ratifications expected by the time ministers and leaders meet in March 2019. Deep regional integration will help transform the continent. Further negotiations, as well complementary cross-border infrastructure, will be necessary to significantly increase exports and productivity.
At the same time Britain, China, the United States, France and the European Union have all launched initiatives to strengthen bilateral trade and investment relationships with Africa. The United Kingdom will host an Africa Investment Summit in the autumn and is seeking to roll over existing trade relationships if it leaves the EU and develop new trade preference schemes afterwards. The African Union would like the UK to develop an external trade deal for the continent as a whole.
China’s Belt and Road Initiative (BRI) is channelling large amounts of finance and delivering infrastructure in Africa. The physical effects have become more visible, but so have increased debt levels and failures in some countries to use finance effectively for transformation. BRI has also coincided with increased rivalry. Both the US and Canada have started or legislated for a bilateral development finance institution (DFI); the UK has further recapitalised its DFI; and the EU has new financing plans to support African jobs. African leadership needs to be centre stage for these initiatives to work.
‘Skills 4.0’ offers new opportunities in a digital era
The theme of World Economic Forum in January 2019 is Globalisation 4.0, a logical extension of the concept of Industry 4.0 – a world in which digital technologies help manufacturers to automate production and forge new virtual connections.
There is still a small window of opportunity for African countries to build their traditional industrial capabilities, but significant change is underway in the new digital era. ODI, the Pathways Commission, the World Bank and IMF have begun to consider what is already happening and how countries can prepare better, but it will be up to individual governments to take the necessary practical and tailored steps.
There will also be many opportunities for Africa’s global supply of services, as digitalisation can bring financial, legal and other services closer to global consumers. Seizing these opportunities will depend on whether countries can sufficiently support the development of appropriate digital skills in their workforces. ‘Skills 4.0’, such as those that can perform cognitive non-routine tasks, will offer new opportunities for Africa’s services exports and wider economic transformation.
Manufacturing remains critical
Manufacturing’s share of Africa’s GDP has declined over the past decade, even though in absolute terms manufacturing production has doubled over the same period. Manufacturing will continue to be crucial for creating jobs, though we should not expect the same miracles of job- and export-intensive manufacturing growth seen in Asia over sustained periods of time.
African governments are taking different policy approaches to industrial growth. Ethiopia continues to use a targeted approach focusing on special economic zones following the initial success of Hawassa Industrial Park. Car manufacturing is a possible future growth sector for the continent, with Rwanda and Namibia attracting new plants. Kenya is looking at how small firms can play a part in the country’s economic transformation and the president’s flagship ‘Big Four’ agenda, which puts manufacturing into the spotlight. Tanzania is taking an increasingly risky approach, intervening forcefully in the market for cashew nuts for instance. This variety in approaches will provide valuable lessons for what works – and what doesn't.
Jobs will be a focus in some African elections
Forthcoming elections in Nigeria have put the spotlight on a faltering economy. While foreign direct investment into the country increased in 2018, foreign reserves, oil prices and growth have all been weaker than expected. With a quarter of the labour force unemployed, jobs and transformation should be central to the election campaign in Nigeria.
Elsewhere on the continent, Mozambique hopes to put its debt irregularities behind it following recent action and a renewed focus on jobs and the economy ahead of planned elections in October 2019. South Africa, one of the weakest economic performers on the African continent and with the world’s highest youth unemployment rate, is also facing elections, probably in May this year.
At the global level, then, the clouds are darkening. Which countries will seize the opportunities to transform and create jobs in the year ahead?
This commentary was written by Dirk Willem te Velde, Principal Research Fellow and head of the International Economic Development Group. View the original article on the ODI website.
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Africa trade and technology
Introduction
It is perceived that economic nationalism has slowed the meteoric rise of global trade. Since the Uruguay Round created the World Trade Organization (WTO) in 1995, trade of goods and services has become a dominant feature in global economic growth. As a result, hundreds of millions of people in developing countries have graduated from subsistence living to middle-class status. The accession of China into the World Trade Organization in 2001 accelerated both the volume and character of global trade. By 2008, Global Value Chains (GVCs) have come to explain up to 70% of global trade volumes. GVCs optimize comparative advantage across borders and have enabled innovation in trade logistics and services technologies, in addition to a general WTO commitment by member states to facilitate trade.
However, the renegotiation of liberal free trade agreements, such as Brexit and the reconsideration of NAFTA, and the concomitant shift of manufacturing jobs (on-shoring) back into developed economies have accelerated. In the latest WTO Report on G20 Trade Practices, $481 billion in new import restrictive measures were imposed by G20 members in 2018. This is the largest increase of such measures ever recorded by the WTO and six times larger than last year’s. Also, according to the World Bank, the growth in GVC’s has stalled. The WTO appears unable to broker more ambitious global agreements among member states, and there is a perceptible decline in confidence in the organization’s ability to evolve the rules-based global trading system.
The question of Africa’s ability to adapt to these shifting trends in trade must be analyzed in light of its participation in the global economy and its ability to adopt the tools to become more competitive in a world of rapidly evolving technology and supply chains. It should be noted that this analysis will concentrate on sub-Saharan Africa (SSA) and will disaggregate data accordingly, whenever possible. Africa has enormous diversity amongst its 54 nations and even among its regions. This chapter will examine the political economy of Africa’s trade and identify constraints and opportunities that will define its future, including the adoption of artificial intelligence.
Africa and Global Trade
Pliny the Elder is known for two contributions to global learning. One is the discovery of hops as an essential ingredient for brewing beer and the other for the phrase: “ex Africa semper aliquid novi” (always something new out of Africa). What is new about Africa has been the African rising story. While this optimistic narrative is a departure from the doom and gloom scenario of the past, there are storms on the horizon.
The 1970s saw the promise of independence fade into dysfunction, predation, and manipulation by super powers fighting proxy wars across Africa. South Africa, the continent’s most advanced economy, was roiled by Apartheid and the opposition to it, which spread beyond its borders and stifled trade. Nigeria, Africa’s most populous country, was riven by a succession of weak civil governments succeeded by oppressive military regimes, all marked by odious levels of corruption. Development assistance from multilateral and bilateral sources contributed to economic distortion and suffocating levels of indebtedness. As a result, Africa’s portion of global trade had fallen from 3.5% in 1971 to 1.5% in 1999 and consisted mostly of unprocessed goods.
Adding insult to injury, Africa was largely left out of the global trade negotiations under GATT and WTO and thus unable to shape its own economic future. When coupled with the devastation of the HIV/AIDS pandemic, by the 1990s, Africa was on the economic ropes. Famously, in May 2000, The Economist published a feature on Africa entitled “The Hopeless Continent.” African trade statistics notoriously fail to quantify the size of the informal economy and the volume of informal trade of goods and services both internal and externally. A recent IMF study revealed that in Benin, Nigeria, and Tanzania about 65% of the economy is informal.
Current Trade Situation
Nearly twenty years since The Economist declared it doomed, sub-Saharan Africa remains the most under connected region in the world. While absolute trade has increased, the region represents about 2-3% of global trade volume and intra-Africa trade accounts for about 11% of total exports as seen by the below chart comparing Africa’s leading Regional Economic Communities (RECs). These include the East Africa Community (EAC), Economic Community of West African States (ECOWAS), Southern Africa Development Community (SADC) and the Common Market for East and Southern Africa (COMESA). SSA represents Sub-Saharan Africa. This contrasts sharply with South America (22%) and Western Europe (70%).
Sadly, what little trade that has occurred remains in raw commodities, mostly agricultural and mineral products. Although economic orthodoxy has long concluded that open markets beget economic growth, our evaluation of World Bank data has shown that there is a very weak correlation between economic growth and merchandise trade.
The most compelling explanation of this is that most external trade from Africa is tied to raw commodities and offer few forward and backward linkages to the local economy. This is in contrast to intra-Africa trade which favors manufactured, fast moving, and consumer goods. There are many reasons for the lack of intra-African trade including:
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Weakness of physical and human infrastructure (more on this later)
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Small size of individual African country markets
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Residual tariffs and onerous non-tariff measures (NTM) on processed and semi-processed African products by both developed and emerging markets
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Export constraints and other pre-border barriers
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Absence of trade finance
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Institutional constraints on enterprise growth and inability to achieve scale
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Currency risk
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Corruption and rent-seeking clientelism
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Civil disruption
Infrastructure
[P]rior to independence, physical infrastructure was designed to satisfy the security concerns of competing European powers and related commercial interests seeking access to Africa’s natural resource bounty. While multilateral and bilateral development assistance fueled a surge of investment in infrastructure in the early years of statehood, many of these investments suffered from poor design and lack of maintenance. In other regions, private investment in infrastructure provided higher yields. For Africa to enhance its trade competitiveness internally and externally, trade related to physical and human infrastructure must be enhanced. This is no mean task. In its most recent analysis, the Africa Development Bank has estimated that Africa needs approximately $170 billion per year in infrastructure investment development, of which 20% is available from African sources.
Market Access
Another obstacle is the resistance of foreign markets to open themselves to African value-added exports. These constraints can occur in the form of tariff biases. For example, cocoa is offered duty free access into the U.S. market, but chocolate is subject to duty. While meat products could enjoy access to European markets, Sanitary and Phytosanitary (SPS) measures thwart these opportunities, often at the behest of protectionist interests. And despite all the rhetoric toward South-South cooperation, China provides duty free access to fewer African products than the United Sates, and it only does so for those countries that fall under the UN’s least developed country definitions, thereby excluding the most export ready economies. Non-tariff measures equally restrict South-South trade and South-North trade.
In order to partly remedy these deficiencies and respond to world opinion, G-8 countries have enacted several trade initiatives in the past twenty years, including the U.S. Africa Growth and Opportunity Act (AGOA) and the European Union’s Economic Partnership Agreements (EPA). AGOA was passed in 2000 and expanded upon the Generalized System of Preferences (GSP) by allowing over 6,000 items from qualifying sub-Saharan African nations into the U.S. market on a zero-duty and nonreciprocal basis. AGOA was supported by over $1 billion of trade-related development assistance, largely through USAID’s Africa Trade Hubs. This market access requires minimal compliance with various standards such as labor and human rights and general business norms.
In 2015, AGOA was extended until 2025, when it is assumed that a more reciprocal agreement is likely. In the past few months, the Trump administration has indicated its intent to negotiate bilateral Free Trade Agreements (FTAs) with willing African nations. As seen in Figure 3, AGOA has achieved modest direct and indirect results. While total two-way trade between Africa and the United States has trebled between 2000 and 2017, the vast majority of the trade has been in petroleum or mineral related products with the most amount of manufactured and agricultural goods limited to a few countries.
The EU’s EPAs are neither as generous nor comprehensive as AGOA. These agreements are an extension of the Lomé agreement of the 1980s and are available to all qualifying African, Pacific, and Caribbean (APC) countries. While they have much more generous provisions than the Lomé agreement, they also require qualifying countries (which include all but the poorest APC countries) to open their markets to European exporters. As seen [below], the results have been inconclusive.
Regional Trade
One of the barriers to intra-Africa trade has been the evolution of a system of regional trade agreements with often conflicting and always confusing results. In order to define its own economic future and accelerate intra-Africa Trade, in 2018, the leaders of 44 African countries signed an agreement to establish the African Continental Free Trade Agreement (AfCFTA). This agreement aims to establish the world’s largest geographic free trade arrangement by 2019. When in force, the AfCFTA will remove trade obstacles such as tariffs, quotas, and NTMs to accelerate the flow of goods and services amongst member states. Such integration is also aimed at increasing Africa’s partnership in GVCs. So far, only 14 countries have ratified the agreement and Nigeria has voiced opposition to the agreement. While the achievement evidences a monumental shift in ambition, it remains to be seen whether this will be transformative as Africa’s supply capacity has always limited the impact of market access agreements.
Services
One area where supply constraints have been less daunting is the services sector. Services are less limited by physical barriers and have been greatly impacted by the growth of telecommunication and internet access across Africa. The impact has been dramatic, and there is evidence of a positive correlation to GDP growth.
According to a Brookings report, services exports grew six times faster than merchandise exports between 1998 and 2015. According to the World Bank’s most recent data, 53.2% of sub-Saharan African GDP is attributed to services. And in Ethiopia and Ivory Coast, the services sector grew respectively by 8.59% and 9.15% in 2016. Kenya, Rwanda, and South Africa have undertaken special measures to grow their services sectors and become knowledge based economies. Botswana has become the global center for diamond sales. However, services expansion is dependent upon access to media and the Internet, and some African countries have put constraints on access in order to suppress political dissent.
Human Capacity
A key component crucial to fostering a prosperous economy is a country’s ability to develop its human capital, or the benefits people can provide, given their knowledge, skills, and work ethic, to an economy. Unfortunately, many African countries are far behind their developed counterparts in this area, greatly hurting their economy in the present and likely in the future. This can be attributed to the collapse of post-secondary education institutions, lack of STEM (Science, Technology, Engineering, and Mathematics) related programs, and the limited possibilities for those who are educated. Although there is some hope on the horizon for these struggling countries, they still have a long way to go.
Due to the economic downfalls for the majority of the continent, Africa is seeing a huge brain drain among those with higher education; qualified professionals are leaving their home country to pursue better opportunities in other countries, typically in the United States or Europe. Those who do receive a good education in Africa are often incentivized to leave for higher paying jobs, a better quality of life, or more opportunities in other countries, thus leaving their home country worse off. The loss of potential workers leaves Africa increasingly reliant on bringing in workers from outside countries, which then hinders building up local skills in the community.
Despite all that Africa has stacked against it, there is hope for its developing countries. Africa has the fastest growing middle class in the world, with the potential to grow its labor force immensely. It has a huge population of untapped potential that could be fixed with innovations and proper allocation of funding. Two changes Africa needs to make are improving school systems and pursuing technological advancements. Innovation is crucial for an economy to prosper, and the way to do that is through improved technology. Access to communications technology has the ability to dramatically improve the efficiency across all countries and give people the means to connect to one another. Similarly, growing the education systems will allow students to get a better education and grow up to contribute to the community. Young adults will be better prepared to enter the workforce and have the tools they need to push the economy into a place that can be beneficial for all. These adjustments will not be easy, but if governments and citizens can come together and develop better policies at all levels, change can happen.
Investment: Africa Rising
A brief mention should be made of Africa’s changing investment landscape. The Africa Rising scenario has become a popular mantra over the past decade and a departure from the Natural Resource Curse scenario that dominated African inward investment for decades. With a growing middle class, a growth in demand in Asia for commodities, and a suite of economic reforms, Africa has once again become a more attractive investment destination. While currency and limits on repatriation of earnings still exist, private equity funds are searching for the higher yields that Africa can offer. Private investment and money remittances from the African diaspora now both exceed the amount of inward development assistance flows. China has made a contribution, first by its state-owned companies and now by 10,000 private companies operating in the continent. However, much of the Chinese capital is in the form of medium- and long-term debt or is bartered in exchange for access to desired natural resources. Surprisingly, according to EY, the United States is still the leading investor into Africa outside of the African continent as measured by the quantity of investments. Within Africa, South Africa and Kenya has become leading investors as they bring not only capital but also access to world-class capital markets.
Although low investment returns in the developed world have incentivized investors to look for opportunities in emerging markets, Africa has set up many obstacles to FDI. First, with the exception of Kenya and South Africa, Africa’s capital markets are weak and offer few opportunities for investors to find attractive exits or raise complimentary capital. Second, Africans need more ambition with regards to the reform agenda, especially as there is compelling evidence that coherent, predictable, and transparent enabling environments are a precondition for investment. The World Bank’s annual doing business survey provides ample evidence of an ongoing African reform agenda. While four of the world’s top ten reforming economies are located in Africa, six of the bottom ten countries in the ease of doing business rank are located in Africa. While some African countries benchmark against other African countries, the reality is that, in a world of GVCs, each country in Africa competes with not only fellow Africa countries but also emerging markets everywhere.
Automation & Artificial Intelligence (AI) in Africa
Enabled by artificial intelligence (AI), machines can learn from patterns in data and proactively improve themselves, bringing human-like cognition to industrial automation and disrupting modes of production and the delivery of services. Global investment in AI has rapidly increased to between $20 billion USD and $30 billion USD in 2016, with 90% allocated to research, development, and deployment, and 10% to acquisitions. Much of this capital comes from companies like Google, Amazon, and Baidu. But there is also a growing contingent of private equity and venture capital investors, which spent between $5 and $8 billion in 2016.
The abundance of interest, capital, opportunities, and promises reminds one of mobile technology just 10 years ago. Will automation and AI do to African nations over the next decade what mobile technology did to them in the last one, fueling a dramatic rise in connectivity and unlocking significant gains in economic development? Like mobile technology and communication capabilities, will automation and AI permit African nations to dramatically increase their research, development, and production capabilities? Will automation and AI give African nations even more power to leapfrog the need for old-fashioned infrastructure and outdated strategies of industrialization?
African leaders, entrepreneurs, investors, and policymakers have the opportunity to leverage automation and AI to improve agriculture and manufacturing in particular. With greater productivity, efficiency, and safety, these high-growth sectors enabled by innovative technology and human capacity can advance sustainable development, maintain inclusive growth, and connect supply chains regionally and globally. PricewaterhouseCoopers estimated that AI technologies could increase global GDP by $15.7 trillion, a full 14%, by 2030, of which $1.2 trillion would be added for Africa. But these outcomes are not possible without considerable challenge and significant investment.
Critical components necessary for automation and AI to take hold are missing across most of the continent except in a handful of countries – namely Kenya, South Africa, Nigeria, Ghana, Ethiopia, and Botswana. For one, the lack of quality first-generation internet and communications infrastructure leaves little to replace and a heavy burden for mobile networks to process the computationally dense work of AI at scale.
Internet connectivity still costs too much for most people; and many of those that can afford it still complain of poor service. Plus, further improvements to human capacity are also required to speed uptake and adoption of the new features afforded to users by automation and AI. Finally, many African countries remain incapable of requisite reforms in the areas of data collection and data privacy, infrastructure, education, and governance.
But there are also opportunities at large and tools available to solve problems and accelerate progress. Mobile technology should be seen as the foundation for automation and AI. A youth culture of strong interest in business creation is a driving force of technology adoption and development, with many young entrepreneurs looking for global opportunities. Internet connectivity has nonetheless provided unprecedented access to information, partnership, and capital.
Automation & Artificial Intelligence in Agriculture
The Global Opportunity Network’s 2016 Report identified smart agriculture as the opportunity with the biggest potential for a positive impact on society – ahead of the digital labor market and closing the skills gap. After all, with 2.3 billion more people in the world by 2050, we will need to produce 70 percent more food than we do today amidst climate change, resource scarcity, and growing inequality. Nowhere are these pressures felt more sensitively than in Africa. Agriculture employs 60 percent of Africa’s workers and produces nearly a third of its GDP.
Until 2025, agriculture will create more jobs than the rest of the economy combined. Buoyed by the increasing demands of population growth and the increasing supply pressures of climate change, agriculture will continue to be a critical pillar of Africa’s economic growth and meaningful participation in the changing global trade landscape. As such, improving productivity and efficiency of agriculture and food processing is an important objective for countries in Africa, who can accomplish this goal with the help of automation and AI.
But the challenges are plenty. For one, there is more uncultivated arable land in sub-Saharan Africa than there is cultivated farmland in the United States, and that land needs to be utilized more effectively and efficiently. Barriers to accessing financing for modernization persist, so it remains difficult and expensive to do so. Young working-age people are leaving rural homes for cities, attracted away from farming to what are perceived to be more ‘innovative’ industries. Climate change, disease, and drought also remain formidable and will almost certainly become more severe in the future. Nevertheless, automation and AI can help solve these, too.
Automation & Artificial Intelligence in Manufacturing
Manufacturing represents almost a third of African countries’ GDP. Overseas Development Institute data show that between 2005 and 2014 manufacturing production within Africa more than doubled from $73 billion to $157 billion, growing 3.5% annually in real terms. Uganda, Tanzania, and Zambia have achieved more than 5% annual growth in the recent past. Manufacturing exports from sub-Saharan African markets almost tripled between 2005 and 2015 to more than $140 billion. Foreign Direct Investment (FDI) in African manufacturing is increasing and increasingly comes from other parts of Africa. Manufacturing investments represent a quarter of all FDI in Mozambique and Tanzania and more than 40 percent in Rwanda. Indeed, The Economist calls Africa “an awakening giant” in 2014; and Irene Yuan Sun, author and consultant, writing in Harvard Business Review in 2017 considered Africa “the world’s next great manufacturing center.
Improvements to manufacturing through automation and artificial intelligence (AI) can accelerate diversification of African economies, increase resilience to economic and climate shocks, and decrease dependence on natural resource exports. Automation and AI have the potential to expand manufacturing capabilities for aerospace, military, medical, dental, textiles, and automotive, all high-growth, high-value sub-sectors. Egypt, Tanzania, Morocco, South Africa, Tunisia, and Kenya are stand-out leaders in terms of pro-manufacturing policy, incentives for investment, and environments for experimentation and commercialization of automation and AI in manufacturing.
Big Data
Automation and artificial intelligence (AI) require large amounts of data from which to find patterns and make predictions. While mobile phones and the growing popularity of social media and messaging applications across Africa have made data more readily available, there remain shortages and barriers. Even in countries where automation and AI hold promise, the quality, timeliness, and availability of data are often poor in quality or missing.
In sub-Saharan Africa, Kenya leads in internet penetration, mobile density, and in trade in ICT services. Expanding internet access on the continent has led to a 25% increase in GDP, worth $2.2 trillion, and 140 million jobs. Even more fundamental than internet access, automation and AI no matter how innovative and disruptive still require basic ICT infrastructure, education, and improved cost and reliability of electricity.
Developing, Not Automating, Human Capacity and Skill
More than just big data, automation and artificial intelligence (AI) rely on significant know-how among its human adopters. No one knows for certain if productivity gains from automation will create more jobs than it destroys, as has occurred during previous technological shifts. The labor effects of automation and AI are often painted as a zero sum, but the truth is more nuanced. The Future of Jobs Report in 2018 predicts the loss of 75 million jobs by 2022 and the creation of 133 million jobs over the same period, for a net increase of 58 million jobs. In other words, innovative technology like automation and AI may create more jobs than it destroys.
Rather than displacing employees, machines can empower low-skilled workers and equip them to take on more-complex responsibilities. This, in turn, can help meet an urgent need for countries lacking widespread access to education and skills training.
Similarly, a World Economic Forum report suggests new technologies have the capacity to both disrupt and create new ways of working, similar to previous periods of economic history such as the Industrial Revolution, when the advent of steam power and then electricity helped spur the creation of new jobs and the development of the middle class. But workers and the systems that educate and train them need to be ready. Significant investment should be maintained in developing human capacity from primary school to university. For instance, backed by Google and Facebook, the African Institute for Mathematical Sciences (AIMS) has created the first dedicated master’s degree program for machine intelligence in Africa.
Way Forward to Enabling Automation, Artificial Intelligence, and Their Benefits
Will automation and AI fuel economic development and research as mobile technologies did in the past decade? Will they allow African nations to leap ahead, skipping traditional industrialization steps? The answers to these questions remain elusive, and in many respects it remains too early to tell. But for any chance at positive outcomes – that is, for African countries to fully leverage the power of automation and AI to change sectors like agriculture and manufacturing into globally-connected productivity powerhouses – governments and private sector alike must fully understand the advantages and consequences of this technology and deliberately respond to integrating it into national strategy.
Government leaders should focus on three (3) key activities:
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Increase financing of internet and communications technology infrastructure development
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Integrate technology education into curricula of primary and secondary schools;
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Implement reforms to data collection and data privacy policies.
There is an urgent need to accelerate improvements to the agriculture and manufacturing sectors to increase their value alongside other efforts to diversify African economies, strengthen growth, and build resilience. Given the leapfrogging lessons of mobile technology on the continent over the last two decades, many African countries are positioned well to leverage automation and AI with agility and innovation. Automation and AI in agriculture and manufacturing would unlock tremendous value, connecting these markets to new regional and global marketplaces and allowing them to compete more efficiently and effectively. The challenge lies not in maneuvering these technologies as a vehicle but in ensuring that government, industry, and civil society contribute to creating an enabling environment.
The above extracts are taken from an article published via Governance In An Emerging New World – Winter Series, Issue 119, on the theme Africa in an Emerging World. The authors are Anthony Carroll, a vice president at Manchester Trade Ltd., and Eric Obscherning, an associate consultant at C&M International.
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tralac’s final Daily News Selection 2018
Today in Vienna: The High-Level Forum Africa-Europe
President Kagame and Chancellor Kurz decided to call for a High-Level Forum to provide a space for European and African leaders, together with CEOs of major global companies, innovation champions, start-ups and other stakeholders, to reflect and act on what needs to be done to secure prosperity and competitiveness on both continents as well as to deepen the relationship in all its aspects with a specific focus on taking our cooperation to the digital age.
Highlights from the pdf Co-Chairs’ Summary (118 KB) :
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The Forum underlined the critical need to step up European private‑sector investments in Africa and highlighted the changes to the policy and legal framework that are needed for that to happen.
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The High-Level Forum Africa-Europe contributed to achieving the development goals of both the African Union’s Agenda 2063 and the 2030 Agenda for Sustainable Development by encouraging and promoting effective public, public-private and civil society partnerships, especially those which mobilise and share cross-regional expertise in challenging policy areas.
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The Forum focused on innovation and digitalisation and the need to realise the full potential of the digital transformation of our societies and our economies. In our endeavour to promote innovation and digitalisation as important enablers of future development we will work together to ensure that everyone can benefit from the ongoing digital transformation. It is our common aim to improve the cooperation between our two continents based on a fair and equal partnership. [Twitter: #africaeurope2018]
EU and ACP countries conclude first round of negotiations to modernise their relations
Seventh Meeting of the African Union Ministers of Trade
Some deadlines for further work on AfCFTA policy issues:
AfCFTA Adjustment Facility: AMOT was informed that a study on the Adjustment Facility had been carried out, based on requests from member states, and that the findings of the study would be disseminated in a dedicated session of the Negotiating Forum (NF). AMOT took note of this update and directed the AUC to organise a dedicated session of the NF to discuss this by April 2019.
Rules of Origin: AMOT took note of the progress towards the development of Appendix IV to the Annex 2 on Rules of Origin and directed the Senior Trade Officials (STOs) to finalize outstanding work on rules of origin by end of June 2019.
Trade remedies: AMOT was informed of some inconsistencies in Annex 9 on Trade Remedies and the need to align these with the Draft Guidelines. AMOT took note of the recommendation of STO on this matter and agreed that the TWG on Trade Remedies considers the inconsistencies and report back to the next session of the NF.
Development of regulations benefiting Special Economic Zones: AMOT noted that the AUC was in the process of developing a technical note which would inform the drafting of the Regulations on Special Economic Zones. Amongst others, the technical note would examine the contributions of the SEZ to industrialization, exports and economic development in Africa. AMOT directed the AUC to present the technical note on this matter to the NF at its next meeting.
Roadmap for finalization of outstanding work on AfCFTA negotiations: Negotiations on Trade in Services be concluded by January 2020; [convene] a meeting of the TWG on Trade Remedies and schedule it for March 2019.
WTO outcomes must support Africa’s trade priorities: AU trade ministers (New Times)
A confidential report shared to the trade ministers by the coordinating member of the African Group last week and accessed by Business Times says that the proposed reforms do not appear balanced. “It appears that the ideas for WTO modernisation are essentially designed to advance a set of proposals that reflect the particular interests of some members,” the document reads. The document highlights that the proposals are likely to further polarise the WTO membership. It recommends that, “Africa’s defining trade policy objective is the AfCFTA and WTO outcomes must support, not undermine, our integration and industrialisation objectives”.
At the backdrop of these developments, ministers adopted a joint declaration, urging African countries to prepare a common vision to activate the role of the WTO in supporting African countries to ensure that they affirm their entitlement to integration into the international trading system. The declaration has not yet been made public, but ministers made a number of recommendations including, among others, encouraging members to cease from unilateral trade agreements which they say might undermine the principles of global trade.
The Second Regional Dialogue on WTO Accessions for the Greater Horn of Africa: pdf The Djibouti Outcome (508 KB) (WTO)
The discussions (3-6 December 2018) enabled participants to engage in informative and interactive discussions on the contributions of trade and WTO Accessions to peace-building. The Dialogue also discussed various aspects of the WTO accession process, including its interface with the AfCFTA, emerging best-practices in the preparatory and the negotiating phases of the process, the role of the Accession Chief Negotiator, the inclusiveness of the private sector and other stakeholders in the process. Participants welcomed the recent progress registered in the accessions of Comoros, Ethiopia, Somalia, South Sudan and Sudan. They pledged their collective support for the conclusion of the accession of Comoros in 2019, the resumption of the accession Working Parties of Ethiopia and Sudan in early 2019, and the holding of the first Working Party meetings of the accessions of Somalia and South Sudan in 2019 following the submission of their respective MFTRs.
Explaining the WAEMU growth spurt: the role of financial deepening and macro policy (World Bank)
Most countries of the West African Economic and Monetary Union experienced a growth acceleration in 2011-17. This paper identifies the determinants of this growth by combining country-specific information with the results of a cross-country regression model. Growth was characterized by capital accumulation and driven by structural factors, including financial deepening and infrastructure development. What sets WAEMU countries apart from other African countries is the very sharp increase in private sector credit supporting private investment. This was facilitated by a prudent and accommodative regional monetary policy and improved financial regulation. Pro-cyclical fiscal policies supported public infrastructure investment but led to a buildup of public debt. Going forward, growth may lose some steam, given the renewed policy emphasis on fiscal consolidation and monetary tightening.
Madagascar and the Indian Ocean: Appraisal report for project to develop corridors and facilitate trade (AfDB)
Inadequate development and ageing transport infrastructure are among the main obstacles to Madagascar’s capacity to expand its trade with other member countries of COMESA, SADC and the IOC, and, consequently, to promote regional integration. The country’s road network has hardly received any major interventions in the last ten years, due in part to the impact of the 2009-2013 political crisis. Only 24.6% of the paved road network is in good condition. Consequently, improving transport systems connectivity between production areas and export points (ports and airports) to countries in the sub-region is still a key element for increasing trade and investment within the framework of regional integration. This project aims to lay the groundwork for road network development in Southern Madagascar (currently the most isolated part of the Big Island), which is connected to potentially important ports on two maritime fronts: the South-West with Tuléar Port and the South-East with the Ehoala Mineral Port. Both ports provide the country access to the Mozambique Channel and Indian Ocean countries, respectively. The project will be implemented over 5 years, from 2019 to 2023.
The political economy of regional industrialisation strategies (ECDPM)
This paper summarises the political economy analyses of the regional industrialisation strategies in the COMESA, EAC, ECOWAS, and SADC regions, looking at these in terms of the three main market failures that national industrial policies seek to address. At the regional level, targeted coordination and ‘self-discovery’ approaches appear to have had most traction, while public inputs seem best provided at the national level. Establishing regional industrialisation as an overarching objective of regional cooperation and integration processes can also help to ensure that regional approaches to, for example, infrastructure development and trade facilitation, contribute more directly to economic transformation ambitions. Regional strategies make sense at one level, given the potential for regional market integration to promote value chain development and support other industrial objectives. However, they largely ignore the competition dynamics between states in specific sectors. Moreover, their implementation is complicated by the fact that mechanisms used to pursue national industrial objectives often contradict regional commitments. The findings suggest that regional industrialisation strategies should be used to complement national industrial policies rather than to replicate or guide them. [The authors: Bruce Byiers, Karim Karaki, Sean Woolfrey]
Yesterday the ECA commemorated the 60th anniversary of the UNECA: ECA Knowledge Management Digest compilations
Volume 1, October 2018: A review on statistical development in Africa – resolutions adopted by the Conferences of Ministers (1958- 2018); Volume 2, November 2018: Establishment and programmatic review of the African Institute for Economic Development and Planning. Explore resources contained in the ECA Knowledge Repository.
In a first, Vibrant Gujarat Summit to observe ‘Africa Day’ (Indian Express)
To tap the resource-rich and rapidly developing African continent, the Gujarat government in consultation with the Union Ministry of External Affairs is for the first time organising “Africa Day” at the upcoming Vibrant Gujarat Summit where the heads of states, including Paul Kagame, President of Rwanda, and Abiy Ahmed Ali, Prime Minister of Ethiopia, will be present. “Africa Day is being organised in consultation with the Ministry of External Affairs,” said S J Haider, Principal Secretary Tourism, Government of Gujarat, while speaking about the event that will be held as part of the Vibrant Gujarat Global Summit scheduled from 18-20 January. The ‘Africa Day’ event will be organised on 19 January at Mahatma Mandir in Gandhinagar. Currently, South Africa and Morocco are the two African countries who are among the 15 “partner countries” for the summit. At least 12-15 MoUs are expected to be signed during the event.
Russians need to strategise trade with Africa (Modern Diplomacy)
The Deputy Director of the Department of Asia, Africa and Latin America of the Ministry of Economic Development of the Russian Federation, Alexander Dianov, spoke about the non-financial support measures for Russian companies operating within the department: “Currently, there are 10 intergovernmental commissions between the Russian Federation and African countries.” He added: “There are trade missions only in four African countries, and if you take sub-Saharan African countries, the trade mission operates effectively only in South Africa. It is obvious that there is something to work on in terms of developing the infrastructure to support Russian businesses. If there is a serious request from the business community, we are ready to expand the geography of our presence.”
John Stremlau: Trump’s Africa strategy should have cast China as a regional partner, not a global adversary (Times Live)
But does it need to be this way? I would argue not. Africa offers China and America an opportunity to demonstrate to the world – and to each other – that their competition can be constructive with Africa playing a moderating influence by brokering an agreed trilateral agenda. We need to explore ways to advance cooperation between Africa, China and the US as a confidence building measure in relations between the US and China. This would obviously need to be designed for the primary benefit of African partners. Collaborative projects that involve the US and China, with Africa in the forefront, have been the focus of a Carter Centre project since 2014. The centre’s many successful programs in Africa, especially public health, have generated high-level trilateral policy interest. Since the Trump administration took over, these conversations have excluded his senior advisors. Nevertheless, work has continued. This has included recent developments which suggest headway is being made. In early December the South African Institute of International Affairs hosted the troika that leads this project: [Related: Yinka Adegoke: Trump’s focus on Africa might be about China but that could be a good thing; The importance of improving America’s investment policies in Africa: an interview with Yuri Vanetik]
Trade Policy Review: United States of America (WTO)
The 14th review of the trade policies and practices of the United States of America began yesterday at the WTO and resumes tomorrow. The basis for the review is a report by the WTO Secretariat and a report by the Government of the United States of America.
Today’s Quick Links: African Standards and Guidelines for Quality Assurance of Higher Education: update France pledges support to strengthen trade skill set of developing countries UNCTAD: pdf Statistical Tables on the Least Developed Countries – 2018 (1.00 MB) Rwanda will host the second Intra-African Trade Fair, in 2020 The WTO’s Dispute Settlement Body meets today in Geneva: agenda items Murky climate deal lets down poor countries UN Africa Renewal: Towards a safe and orderly migration World Bank Blog: Digitizing to succeed in MENA |
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Cooperation with Africa on an equal footing: Federal Chancellor Sebastian Kurz at High-Level Forum Africa-Europe
“We now have to change the way we look at Africa. We must not think exclusively of poverty, the threat of migration and a lack of respect for human rights. What is required now are encounters and an honest partnership,” Federal Chancellor Sebastian Kurz said at the opening of the High‑Level Forum Africa‑Europe in Vienna.
It was a matter of enabling African people to live a dignified, peaceful and prosperous life. “It is not only about the political partnership but also about economic cooperation. Politicians can establish framework conditions, but the cooperation on an economic level can set in motion sustainable development in the areas of innovation and digitalisation,” the chancellor explained.
By 2050, Africa would have reached a population of approximately 2.5 billion, and would therefore constitute an important market. “Europe needs to recognise the possibilities offered by cooperation among equals.”
By involving businesses, the Forum could make a significant contribution to sustainable development and concrete cooperation. The Federal Chancellor thanked European Commission President Jean-Claude Juncker for the planned support for further investments in the African region.
Jean-Claude Juncker thanked the Austrian Presidency of the Council of the EU for initiating a new partnership with Africa which promotes sustainable investment in the region.
“We are not starting from scratch, the EU has already made available 44 billion euros for the investment plan, of which 37 billion euros have already been committed.”
During the Forum a further two agreements were signed. Small and medium sized enterprises are to be supported by guarantees; approximately 75 million euros will be invested to create around 800 000 jobs. The EU is supporting the African Continental Free Trade Agreement by providing 50 million euros.
“We have to contribute more to making trade in Africa better, fairer and more sustainable” and “encourage” European businesses to get more involved in Africa. The European Commission President added that for this to happen, a “business-friendly climate” was necessary.
In addition, Antonio Tajani, President of the European Parliament, reiterated his demand for a “true Marshall Plan” for Africa, with “massive investment in the private sector”. Such investment could lead to growth and jobs.
“We need to give concrete answers to the youth,” the President of the European Parliament emphasised.
Moussa Faki Mahamat, Chairperson of the African Union Commission, stressed that the youth should be supported through provision of education and the creation of new jobs: “We have to tap into the potential of the youth and use the available resources.”
Paul Kagame, President of the Republic of Rwanda, pointed out that the presence of numerous high-level political and business representatives proved the sincerity of this Forum: “Together, we are strong. This alliance can be mutually beneficial for both continents.”
Prior to the Forum, Federal Chancellor Sebastian Kurz had already met up with Egyptian President Abdel Fattah al‑Sisi in Vienna.
“Egypt is one of Austria’s most important trade partners in Africa and the Middle East. Some 600 Austrian companies do business in Egypt, and the untapped potential remains high. Therefore, close cooperation between Austria and Egypt is in the interest of both states,” Federal Chancellor Kurz stated.
The High‑Level Forum Africa‑Europe took place on 17 and 18 December in the Austria Center Vienna. Its theme was “Taking cooperation to the digital age”. The discussions concentrated on the cooperation in the areas of innovation and digitalisation, with a particular focus on the question of how the advantages of the digital transformation could benefit everyone.
Co-Chairs’ Summary of the High-Level Forum Africa-Europe 2018
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On 18 December 2018, at the invitation of the Chancellor of Austria, Sebastian Kurz, and the President of Rwanda, Paul Kagame, the High-Level Forum Africa-Europe was held in Vienna to discuss “Taking cooperation to the digital age”. More than fifty official delegations from member states of the African Union and the European Union took part in the Forum along with almost a thousand innovators and start‑ups from Africa and Europe, as well as established companies.
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The High-Level Forum Africa-Europe provided a space for European and African heads of state or government, the chairperson of the African Union Commission, the president of the European Commission, the president of the European Parliament, representatives of international organisations, CEOs of major global companies, innovation champions, start-ups and other stakeholders to reflect and act on what needs to be done to secure prosperity and competitiveness on both continents as well as to deepen the relationship in all its aspects with a specific focus on taking cooperation to the digital age.
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The Forum underlined the critical need to step up European private‑sector investments in Africa and highlighted the changes to the policy and legal framework that are needed for that to happen. It emphasised the need for de‑risking and blending in order to leverage resources as well as the need to focus on sectors that have the potential for high job growth in Africa in order to harness its youth dividend.
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The High-Level Forum Africa-Europe aimed at contributing to the ongoing implementation of the joint declaration of the 2017 Abidjan Summit between the African Union and the European Union that was entitled “Investing in Youth for Accelerated Inclusive Growth and Sustainable Development”. The Forum focused on unlocking the potential of the digital economy for Africa and Europe to create jobs, skills and economic development for the youth.
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The High-Level Forum Africa-Europe is to be seen as one of the first contributions to the implementation of a new Africa-Europe alliance as outlined by the European Commission in its pdf Communication on a new Africa-Europe Alliance for Sustainable Investment and Jobs: Taking our partnership for investment and jobs to the next level (302 KB) . This Communication emphasises the need to exploit the full potential of the digital transformation of the economy, in particular eCommerce and data economy, and tackling the areas requiring reform in order to improve the business enabling environment on both continents.
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Furthermore the High-Level Forum Africa-Europe contributed to achieving the development goals of both the African Union’s Agenda 2063 and the 2030 Agenda for Sustainable Development by encouraging and promoting effective public, public-private and civil society partnerships, especially those which mobilise and share cross-regional expertise in challenging policy areas.
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The Forum focused on innovation and digitalisation and the need to realise the full potential of the digital transformation of our societies and our economies. In our endeavour to promote innovation and digitalisation as important enablers of future development we will work together to ensure that everyone can benefit from the ongoing digital transformation. It is our common aim to improve the cooperation between our two continents based on a fair and equal partnership.
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Building on the results of the High-Level Forum Africa-Europe, the Co-Chairs look forward to further strengthening the cooperation between the African Union and the European Union in the future.
Taking cooperation to the digital age
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During the high-level dialogue and the thematic round tables and side events, the participants shared their experience of and expertise on the current general state of political and economic cooperation between Africa and Europe and in particular regarding the contribution of innovation and digitalisation to sustainable economic development. The participants took the opportunity to lay out their vision of the future cooperation between the two continents.
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Following the discussions at the High-Level Forum, the Chairs:
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agree to further promote innovation and digitalisation as important enablers of our future development, so that everyone can benefit from the ongoing digital transformation;
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agree to harness any untapped potential for deepening the African‑European partnership in technology exchange and trade, while emphasising the key role of the public and private sectors in building new partnerships;
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recognise the importance of innovation and digitalisation for economic growth, creating employment opportunities, building resilient societies and fulfilling the Sustainable Development Goals (SDGs).
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At the invitation of the Co-Chairs, young entrepreneurs from Africa and Europe, represented by African Diaspora Youth Forum in Europe (ADYFE), were invited to give their assessment on what needs to be done to enhance the possibilities of young entrepreneurs to do business and to thereby support a sustainable economic development in Africa. African and European governments, the African Union Commission and the European Union Commission are encouraged to recognise the need to foster the development of conducive policies and innovative mechanisms aimed at building the necessary enabling environment and legal frameworks to support private-sector development and, among other things, the establishment of diaspora companies in Africa and Europe.
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The High-Level Forum Africa-Europe provided a space to focus on specific topics closely linked to the digitalisation of economy and society.
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Agriculture 4.0: As recommended by the EU Task Force Rural Africa, there is an opportunity for Africa and Europe to join forces to enhance food production and farming. More needs to be done to support the connectivity of smallholders to the internet, increase the uptake of advisory services and extend the availability of affordable e-Agriculture solutions. In addition, digitalisation along the entire food value chain calls for investments into the design and development of technologies that improve the quantity and quality of food. Agriculture 4.0 can raise productivity and make rural employment more attractive to young people, thus transforming African agriculture and ensuring the continent’s future growth. The risks of digitalising agriculture also have to be addressed so that no one is left behind.
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FinTech in Africa: The round table on financial technology (FinTech) exchanged views on the potential of FinTech markets, critical success factors and on the need for adequate and sensible regulation. The participants agreed that FinTech products deepen financial systems and that some of them can be game changers at the micro-level of economic development. The round table concluded that the potential for FinTech in African markets is huge and that FinTech start-ups should be encouraged in African countries.
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Jobs for the 21st century: It is estimated that in the next three decades the African workforce will experience an annual growth of 15‑20 million increasingly well‑educated young people. In light of these figures, the discussion reflected on how to (i) support employability and access to productive jobs and (ii) best prepare workforces for the future. Participants highlighted the great potential of digitalisation in this respect. ICT skills are critical to Africa’s and Europe’s future development as well as the creation of an entrepreneurial environment. The panellists evaluated ideas and options for how to capitalise on multi-stakeholder dialogue and collaboration, including public-private partnerships, in order to learn and benefit from each other.
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Investing in Start-ups: The round table looked at Africa as an investment case. A pitching session was held with start-ups from Africa followed by a high-level panel discussion with investors, the European Commission and other stakeholders. The round table agreed that it is time to change the narrative of Africa: Africa is a source of worldwide talent and innovative solutions, and offers promising market opportunities. To further enhance collaboration between Africa and Europe, the organisers of the round table have announced a follow-up in 2019 (jointly organised by the African Business Angels Network (ABAN) and the Austrian Angel Investors Association (aaia)).
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Sustainable Energy Access: Eliminating the energy access gap and achieving Sustainable Development Goal 7 by 2030 requires a reimagining of energy systems from the top-down centralised pathway of the past to an integrated pathway, with digitalised energy systems and decentralised renewables playing an important role alongside grid improvements. The round‑table session discussed how digital innovations are revolutionising energy systems and offering opportunities for accelerated access to affordable, reliable, sustainable energy for all.
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eGovernment: Digital solutions provide unique opportunities to guarantee transparency and inclusiveness, as well as to achieve economic growth, increases in productivity and better service delivery. Governments should ensure the best possible use of digital technologies for the benefit of the people and act as facilitators, enablers and regulators, involving all stakeholders through transparent cooperation.
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eCommerce: Against the backdrop of the Fourth Industrial Revolution, the round‑table discussion focused on strengthening eCommerce to create jobs by taking concrete action in the key areas of infrastructure/connectivity, financing/payment systems, access to markets, gender and SME development.
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Further important topics discussed at the Forum concerned:
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Disrupt collaboration: This event focused on African and European public policies to better promote the empowerment of individuals and organisations through networks, agile teams and co-creation and which allow purpose-driven organisations from all over the world to solve local problems.
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Austrian-African cooperation initiative in higher education and research: The Austrian Federal Minister for Education, Science and Research presented a new cooperation initiative in higher education and research that aims to strengthen Austrian-African academic networks and research partnerships. Participants discussed how to further develop bilateral relations between African and Austrian higher education, science and research institutions.
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Connecting Cities: As expressed in the SDGs, cities and municipalities are confronted with challenges such as climate change and the provision of adequate living conditions. The panel addressed the challenges and stressed that it is important for local authorities to work together to find solutions to similar problems, replicate best practices and share existing expertise. Municipal partnerships offer a good opportunity for this.
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Mobilising finance for climate action in Africa: The event focused on innovative financing approaches in the digital age, which have the potential to speed up project implementation and business development in Africa. It explored ideas about de-risking and scaling up climate action projects not only to gather public money but particularly to attract more private investors. Participants learned about market structures, business development mechanisms in Africa and how digitalisation can influence and improve access to finance for climate change mitigation, but also to tackle pollution and improve public health.
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Connectivity in Africa: Access for households and businesses to basic services (energy, water and sanitation, transportation and ICT) is a prerequisite for economic growth and development. Whilst Africa has made significant strides in improving its infrastructure stock in recent years, it remains significantly underdeveloped relative to other emerging regions. Investment in these sectors is a key driver for job creation in both the public and private sectors and especially among the increasing number of young and educated Africans.
Outcomes
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Businesses play an important role in the realisation of the new Africa‑Europe Alliance for Sustainable Investment and Jobs. In recognition of this, the Forum was accompanied by a business to business (B2B) platform, where entrepreneurs and innovators from both continents had the opportunity to network and to exchange their concepts and solutions for the digital age. Close to 900 start‑ups and innovators from Africa and Europe, as well as established companies actively participated in the B2B platform.
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The Co-Chairs welcomed the launch and the first meeting of the European Union‑African Union Digital Economy Task Force, which was held in the course of the High-Level Forum. The Co-Chairs look forward to the presentation of the report and recommendations of the digital taskforce, which will be presented by June 2019.
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The Co-Chairs welcomed the signing of contracts by the European Commission
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and the United Nations Economic Commission for Africa (UNECA) on “Deepening Africa’s trade integration through effective implementation of the AfCFTA (African Continental Free Trade Agreement) to support economic integration” (EUR 3 million);
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and the Dutch Development Bank (FMO) on the creation of the NASIRA SME guarantee programme, which is the first guarantee agreement to be signed under the EU External Investment Plan. The guarantee volume to be signed is EUR 75 million, expected to generate a total investment of EUR 750 million with the aim of creating or supporting up to 800 000 jobs;
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and the International Fund for Agricultural Development (IFAD) on the establishment of the ABC Fund which promotes smallholder agriculture through investments aimed at the missing middle. The EU funding is for EUR 45 million. Additionally, the Luxembourg Ministry of Foreign and European Affairs and Alliance for a Green Revolution in Africa (AGRA) are contributing EUR 5 million each.
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At the Forum, the European Investment Bank finalised the signing of three major financing operations worth about EUR 500 million which will provide investments in ICT, energy and public transport infrastructure in selected African countries.
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To further contribute to the common goal of establishing a new partnership between Africa and Europe, Austria will establish a new investment fund for SMEs investing in Africa. The fund will focus on smaller but innovative investments with a high potential for sustainable and inclusive growth and will be managed by the Austrian Development Bank (OeEB). The initial capital endowment will be EUR 10 million. The OeEB will strengthen its focus on Africa and will invest about EUR 50 million annually in private‑sector projects.
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The Co-Chairs welcomed the presentation by the Austrian Federal Ministry of Education, Science and Research of a new cooperation initiative in higher education and research that aims to strengthen Austrian-African academic networks and research partnerships. From 2019 onwards the Austrian Federal Ministry of Education, Science and Research will provide funding for setting up this initiative and encourages interested Austrian and African institutions to join a network of higher education and research institutions to be established as part of this initiative.
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To further contribute to i) collaboration on academic research, ii) cooperation in the field of investment and iii) cooperation in the fields of investment, promoting start-ups and entrepreneurship, three Memoranda of Understanding were signed between the Republic of Austria and the Republic of Egypt by the responsible ministers.
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The Co-Chairs welcomed the signing of a Memorandum of Understanding between the International Centre for Migration Policy Development (ICMPD) and private sector partners to launch the “College of Practical Skills and Start‑up Centre initiative”, which will roll out with a pilot project for Nigeria “The Nigerian College of Practical Skills and Start-up Centre”. The initiative will provide training and create jobs for youth, with a specific focus on women. Furthermore, it will support young entrepreneurs with start-up capital and practical assistance.
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African Union Ministers of Trade conclusively reach consensus on all outstanding issues on AfCFTA modalities for tariff liberalization
The seventh meeting of African Union Ministers of Trade (AMOT) ended in Egypt this week with the ministers reaching an agreement on crucial aspects of the African Continental Free Trade Agreement (AfCFTA) modalities for tariff liberalization as the push for more countries to sign and ratify the Agreement continues.
Topics that were before the Ministers during their two-day meeting included the roadmap for finalization of outstanding work on the AfCFTA negotiations; designation of percentages for sensitive products and exclusion lists, anti-concentration clause and double qualification; the AfCFTA adjustment facility that will see the implementation of flanking measures for countries that will be negatively affected by the Agreement; Rules of Origin; trade remedies; and African Trade Observatory and E-commerce, among others.
The AMOT took place on the sidelines of the continent’s inaugural Intra-African Trade Fair in Cairo, Egypt. Africa is seeking to build a single integrated market of over 1.2 billion people with a combined GDP of approximately US$3.3 trillion with the AfCFTA. Under what is being dubbed the ‘Cairo Package’, the Ministers agreed on a large number of outstanding topics of the AfCFTA, in particular mechanisms of trade liberalization and opening African markets to intra-African trade.
With Uganda’s Trade Minister Ms. Amelia Kyambadde chairing, AMOT agreed on the mechanism and timing of liberalizing goods on the continent which is expected to help accelerate the liberalization process as an essential step towards African integration and establishing a unified African market.
Products to be excluded from liberalization will represent no more than 3 percent of tariff lines accounting for no more than 10 percent of the value of imports from other African countries – average of a 3-year reference period to be determined (2014-2016 or 2015-2017).
Sensitive products will be liberalized over 10 years for developing countries and 13 for the least developing countries (LDCs). A transitional period of 5 years or less may be used for countries which require so before the start of liberalization of sensitive products.
During this period, tariffs applicable to sensitive products may be maintained, provided that they are eliminated by the end of the phase-down period provided for under the modalities.
Highlighted outcomes
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On tariff negotiations, submission of the negotiated market access offers are expected for adoption by January 2020.
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On services modalities, Ministers endorsed the Guidelines for development of Schedules of Specific Commitments and Regulatory Frameworks for Trade in Services. However, the minimum threshold as starting point of the negotiations is referred to the Negotiating Forum and Specialized Technical Officer meeting for further discussion.
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On services negotiations, submission of the negotiated market access offers are expected for adoption by January 2020.
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On rules of origin, the AMOT agreed to give a six-month extension to negotiators. Expectation is that they submit the agreed package by June 2019.
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On trade remedies, AMOT noted some inconsistencies in the legally scrubbed annex 9 to the Protocol on trade in goods. They requested the Committee of Senior Trade Officials (STO) to direct the Negotiating Forum (NF) and Technical Working Group (TWG) to report back on a way forward by the next session. To this end, request was made for the TWG on trade remedies to meet in March 2019.
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Crucially on phase 2 issues, AMOT requested the NF to develop the Terms of Reference of the TWGs on IPRs, competition policy and investments by April 2019. AMOT requested the African Union Commission (AUC) and technical partners to conduct situational analysis studies on Phase II issues by April 2019. The ministers also directed the NF to complete phase 2 negotiations by June 2020.
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Inaugural Intra-African Trade Fair ends, Kigali announced host of IATF2020
The inaugural Intra-African Trade Fair (IATF 2018) ended in Cairo on 17 December 2018 with the Rwandese capital of Kigali being announced as the host of the 2020 event.
Former Nigerian President Chief Olusegun Obasanjo, who is also Chairman of the IATF Advisory Council, made the announcement during the closing ceremony, saying that Kigali was selected following a competitive bidding process that took into account a set of criteria and guidelines outlined for IATF hosts.
In an acceptance speech, Sheikh Saleh Habimana, the Rwandese Ambassador to Egypt, said that the selection of Kigali was an honour and privilege for Rwanda, noting that it was coming after the historic signing of the African Continental Free Trade Area Agreement (AfCFTA) in that city in March.
“Rwanda is a country that was reduced to ashes during the genocide 25 years ago,” he said. “Twenty-five years down the road, we are getting ready to receive the continent. It has been said that the trademark of Africa is Ebola, but very soon, the trademark of Africa will be tolerance, peace and opening of doors to whomever is in need. The people and Government of Rwanda will ensure that IATF2020 is a stepping stone to assist in intra-African trade. Rwanda will do its best.”
Earlier, in closing remarks, Chief Obasanjo said that the IATF had been a tremendous success and had succeeded in making market information available so that investors, buyers and sellers know what is available, where and when.
He described the AfCFTA as a robust framework that will enhance intra-African trade and remove trade barriers, adding, “This trade fair will also play a huge role in establishing contacts and driving trade development”.
Chief Obasanjo encouraged Africans to believe in Africa and in what Africans can achieve, stating, “There will be challenges, but while standing at a crossroads, we have identified the right road in order to grow African economies, actualize potential and fulfil our destiny. We must work together so that we can swim together in progress, prosperity and security. There is no pride in poverty; only strength, respect and pride in economic power and development.
He expressed gratitude to the African Export-Import Bank (Afreximbank), the African Union Commission and the Government of Egypt, as well as to the event sponsors, IATF2018 ambassadors, delegates, exhibitors and speakers, for their contributions to the success of the event.
Also speaking, Amb. Albert Muchanga, the African Union (AU) Commissioner for Trade and Industry, reviewed feedback received from IATF participants and acknowledged that they had been both positive and negative, but overwhelmingly positive. He expressed the organisers commitment to learning from and rectifying any shortcomings.
Amb. Muchanga said that the IATF had been a resounding success, noting that visitor numbers and business deals signed exceeded initial targets and that the number of exhibitors visiting one another’s’ stands was very good. “All contributors deserve to be warmly congratulated and appreciated for a job well done and, collectively, all participants in the fair have unveiled a branch that will grow with a dynamism of its own,” he said.
He expressed satisfaction at the large number of youths exhibiting as entrepreneurs, with a higher number of them being female. “They are moving in the right direction. They are creating and securing their future. I congratulate and encourage you to grow your business”.
In his own contribution, Prof. Benedict Oramah, President of Afreximbank, said that, rather than being an ending, the day marked the beginning of a movement to move Africa forward.
He expressed satisfaction at the many successes recorded during the fair, saying, “We’ve shared trade, investment and marketing information; introduced buyers to sellers and investors to investees; signed trade deals; and exhibitors showed their goods and services.”
Prof. Oramah commended the African Union for its support to the trade fair and said that it was a reflection of the transformation of that institution from a political organisation into an engine for economic progress in Africa.
Sherine El Shorbagi, CEO of Egypt’s Export Development Authority, expressed her country’s satisfaction at hosting the trade fair and commended the success of the event.
Intra-African Trade Fair records $32.6 billion in concluded deals
Deals valued at $32.6 billion dollars were recorded at the inaugural Intra-African Trade Fair (IATF) which took place in Cairo, according to preliminary figures released by the African Export-Import Bank (Afreximbank).
Afreximbank said that the amount represented the value of 100 deals concluded during the fair. That number might rise as it did not include some bilateral deals among exhibitors which had not been recorded.
The Bank said that the majority of the deals were in sectors of industrialization/export manufacturing ($6.2 billion); power ($6 billion); and financial services ($1.86 billion). Other key sectors included oil and gas; transport and logistics; heavy industry; mining; infrastructure; healthcare; and SME promotion.
The preliminary report also showed that there was a total of 1,086 exhibitors at the fair, with 45 countries having country pavilions. Five hundred and eighty-four companies were accommodated in country pavilions while 375 were in private sector stands. The creative industries had 36 participating exhibitors.
In addition to operating country pavilions, Egypt and Nigeria also had special country days which allowed them to enjoy a dedicated day during which they organized special programmes to showcase the business and investment opportunities in their countries.
The IATF2018 Conference, which ran alongside the trade fair, featured 42 sessions with 152 speakers.
The Virtual Trade Fair platform, which operated during the fair, attracted 700 total registrations, with the rooms being accessed more than 7,000 times and product information and market resources on the platform accessed or downloaded about 2,000 times. About 300 booths have been built on the platform, which will remain active after the IATF.
The creative industries component of IATF2018 featured six workshops and also attracted six mural artists. It also featured eight mini runway shows and an event called “Fashionable Loud” which was a major attraction attended by many visitors.
The IATF2018 was aimed at promoting trade among African countries and at supporting the implementation of the African Continental Free Trade Agreement.
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Second Regional Dialogue on WTO Accessions for the Greater Horn of Africa: Djibouti Outcome
Trade for Peace through WTO Accessions
Introduction
The Second Regional Dialogue on WTO Accessions for the Greater Horn of Africa took place in Djibouti from 3 to 6 December 2018. The event was organized by the WTO Secretariat in partnership with the Government of Djibouti and the International Trade Centre (ITC). The Dialogue was opened by H.E. Mr. Abdoulkader Kamil Mohamed, Prime Minister of Djibouti; H.E. Mr. Hassan Houmed Ibrahim, Minister for Trade, SMEs, Crafts, Tourism and Formalization (Djibouti); Ambassador Alan Wm. Wolff, WTO Deputy Director-General; and Mr. Rajesh Aggarwal, Chief, Trade Facilitation and Policy for Business, ITC.
The opening statements acknowledged the timely nature of the Dialogue’s ‘Trade for Peace’ theme at a time when the Greater Horn of Africa is experiencing positive social, political and economic developments. Additionally, the opening remarks highlighted the significance of the Greater Horn of Africa as the region with the largest concentration of Acceding Governments in Africa and in the world, with Comoros (located south to the region), Ethiopia, Somalia, South Sudan and Sudan engaged in the process of WTO accession.
Participants and speakers from the Acceding Governments expressed their appreciation for the new ‘Trade for Peace’ initiative. They emphasized that the WTO accession process was an important component of the post-conflict recovery plans of fragile states, since the WTO Accession process enabled states to establish credible economic and trade policy frameworks, and to promote transparency and good governance as part of accession related reforms. The participants also expressed their appreciation for the continuous efforts of the Government of Djibouti towards peacebuilding and stability in the Greater Horn of Africa, highlighted through hosting the Second Regional Dialogue.
Participants engaged in a rich, informative and interactive dialogue over several sessions that spanned four days. The engagements were based on presentations made by representatives of the major stakeholders, followed by open discussions.
Recent Developments in the Greater Horn of Africa
Session 1 was moderated by Ambassador Kadra Ahmed Hassan, Permanent Representative of Djibouti to the WTO. The session provided a platform to discuss recent developments in the Greater Horn of Africa with a presentation by Mr. Joseph Rwanshote, Program Manager Trade, Industry and Tourism, IGAD, and reports by the representatives of the five Acceding Governments on recent developments in their respective accession processes.
Mr. Rwanshote’s presentation highlighted that the region was one of the fastest growing in Africa, experiencing large inflows of Foreign Direct Investment (FDI). The region also witnessed significant infrastructural developments that have strengthened deeper regional integration, such as the establishment of the Djibouti Free Trade Zone and the liberalisation of the services sectors in Ethiopia. He further emphasized that regional integration complemented domestic reforms by fostering synergies in trade relations. Recalling the correlation between trade and peace, he noted that this significantly reduced the likelihood of inter-state armed conflicts.
Ambassador Assoumani Youssouf Mondoha, Permanent Representative of the Union of the Comoros to the African Union, conveyed Comoros’ objective to conclude its accession negotiations in 2019. Since the last Regional Dialogue in Nairobi, Kenya, Comoros had held a Working Party meeting in March 2018. Regionally, Comoros signed the African Continental Free Trade Agreement (AfCFTA), in March 2018 and officially joined the Southern African Development Community (SADC) in August 2018.
Mr. Geremew Ayalew Haile, Minister Counsellor at the Permanent Mission of Ethiopia to the WTO, stated that although the Working Party on the accession of Ethiopia had not met since 2012, the Government had been implementing significant reforms aimed at aligning its domestic practices and policies with WTO requirements. Further, he revealed that Mr. Mamo Mihretu had been appointed as the Chief Negotiator for Ethiopia’s accession and that the National Steering Committee had been re-organized with the specific objective of resuming the accession process as soon as possible.
H.E. Mr. Dahir Adan Abdullahi, State Minister for Commerce and Industry of Somalia, expressed the Government’s strong commitment to its accession process. He stated that since the establishment of its accession Working Party in 2016, Somalia had appointed a Chief Negotiator and was finalizing its Memorandum on the Foreign Trade Regime (MFTR). He further added that Somalia had been undertaking reforms focused on the extraction of natural resources with a view to increasing state revenues; and had been enacting laws on trade licensing, intellectual property rights, investment, and government procurement. Regionally, Somalia had joined the Common Market for Eastern and Southern Africa (COMESA) in July 2018 and was acceding to the East African Community (EAC).
H.E. Mr. Agak Achuil Lual Manok, Undersecretary of Trade of South Sudan, noted that the Working Party on the accession of South Sudan had been established in Buenos Aires as a direct outcome of the first Regional Dialogue. Since then, the Government has signed the AfCFTA in March 2018, and a revitalized peace agreement in September 2018. He added that South Sudan was in the process of implementing its EAC obligations, which complements the requisite reforms being undertaken for the WTO accession process. South Sudan was finalizing its MFTR, and had commenced the process of forming a national steering committee and appointing a Chief Negotiator.
H.E. Mr. Musa Mohamed Karama, Minister of Industry and Trade of Sudan, stated that trade played a key role in fostering peace and stability, and that, in particular, the accession to the rule-based multilateral trading system was considered as a catalyst for the Government’s efforts to undertake the necessary economic reform and to promote the rule of law and good governance. He added that Sudan was establishing a National Committee to ensure that all domestic laws and regulations in the country were WTO-compliant.
Peace-building through WTO accession and regional integration
Session 2, entitled “From Fragility to Resilience: WTO Accession as a Pathway to Peace”, was moderated by Ambassador Alan Wm. Wolff, WTO Deputy Director-General. The session began with presentations by Mr. Michael Ferrantino (World Bank) and Mr. Caiphas Chekwoti (TRAPCA) that provided empirical evidence on the relationship between trade and peace. This was followed by a discussion regarding the impact of WTO membership on peace-building. The discussion was led by Ambassador Mohammad Qurban Haqjo (Afghanistan); Ambassador Zorica Marić-Djordjević (Montenegro); Mr. Nagib Hamim (Yemen); and Ms. Emilia Malavoloneque (Grupo Neosol).
The panellists acknowledged that mutual economic interdependence could be a mechanism for peace. A trade-dependent state was less likely to go to war with a trade partner because of the larger opportunity cost associated with the loss of trade. Internally, changes in real incomes affected incentives to participate in conflict. Empirical evidence shows that the likelihood of conflict tends to be reduced when prices of exportable goods go up and/or prices of consumer goods go down. However, the same theory does not apply to point source resources such as oil and minerals. Increases in the prices of exported oil and minerals substantially raise the risk of conflict.
Additionally, the panellists recognized that while trade and economic integration played a crucial role in fostering peace, this possibility was only enhanced when the pre-requisites for peace were in place. These include (i) good infrastructure that facilitates trade; (ii) good governance underpinned by the involvement of all stakeholders in decision making and effective enforcement of laws and regulations; and (iii) mechanisms that integrate the informal sector into the formal economy. Other accompanying policies that can support the role of trade in fostering peace included: (i) promoting labor-intensive exports; (ii) promoting transparency about the revenues from pointsource commodities; (iii) protecting the incomes of the poorest from changes in trade flows; and (iv) paying special attention to trade with neighbors and addressing the underlying sources of conflict, i.e. ethnic conflicts, religious conflicts. etc.
Lastly, the panellists provided their perspectives on the linkages between trade, WTO membership and conflicts. They emphasised that while WTO accession provided an important vehicle to drive domestic reforms, reform efforts did not end with WTO membership. Continuous reforms would need to be made in the post-accession phase to realize the benefits of WTO membership. It was noted that although the WTO had traditionally not been a player in peace-building, serious consideration ought to be given to greater engagement of the Organisation in peace-building. The “Trade for Peace” Initiative was cited as a way in which the WTO could contribute to on-going peacebuilding efforts in the Greater Horn of Africa.
WTO accession and the AfCFTA
Session 3, entitled “WTO Accession and the African Continental Free Trade Area (AfCFTA)”, was moderated by Mr. Micheal Ferrantino (World Bank). The panellists included Ambassador Chiedu Osakwe, former Chairperson of the Negotiating Forum of the AfCFTA; Dr. Mag-Teerey (Djibouti); Ms. Maika Oshikawa (WTO); and Ms. Mariam Soumaré (WTO). They provided insights on the current architecture, challenges and benefits of the AfCFTA. For the nine African Acceding Governments,6 the panellists recognized that synergies could be built around their respective regional, continental and multilateral interests.
The panellists recognized that the AfCFTA was an agreement which could modernize African economies through its unique institutional framework which had been adapted to accommodate African realities. At the same time, the AfCFTA contained several provisions that mirrored WTO provisions. The WTO accession process, through its rigorous reform processes could support the Acceding African Governments in creating the enabling environment to effectively implement provisions under the AfCFTA in relation to core trade issues like: customs co-operation, technical barriers to trade (TBT), sanitary and phytosanitary (SPS) measures, trade facilitation etc. The binding commitments undertaken by the Acceding Governments during their accession processes, for which they bear accountability at the multilateral level – through Trade Policy Reviews, the Dispute Settlement System and transparency mechanisms – are also fundamental in creating the enabling environment for implementing the AfCFTA provisions.
While the WTO accession process could complement the reforms envisaged for AfCFTA purposes, African Acceding Governments were advised to pay special attention to the sequencing of their respective regional and multilateral negotiations. It was acknowledged that the Regional Economic Communities (RECs) played an important role in the AfCFTA and the WTO accession process since they could act as benchmarks or building-blocks towards further trade liberalization.
Finally, Mr. Rajesh Aggarwal (ITC) provided insights into the business implications of the AfCFTA, highlighting the need for private sector involvement in the negotiations by: (i) using existing national and regional business organizational structures to engage with national trade negotiators; (ii) collaborating with other stakeholders involved on trade and integration issues; (iii) fostering business level consensus by sharing data on challenges and successes of implementation. Commentators of this session included private sector representatives from Comoros, Ethiopia, Somalia, South Sudan and Sudan.
Conclusions and recommendations
Participants welcomed the Djibouti Regional Dialogue and its focus on the contributions of trade and WTO Accessions to peace-building in the Greater Horn of Africa, as well as the exchange of experiences, views and perspectives. Various aspects of the WTO accession process were discussed, including its interface with the AfCFTA, emerging best-practices in the preparatory and the negotiating phases of the process, the role of the Accession Chief Negotiator, and the participation of the private sector and other stakeholders.
Participants appreciated experience sharing as one of the most effective ways to build accession knowledge and negotiating capacity. In this regard, they welcomed the continuation of the Regional Dialogue until all accessions in the Greater Horn of Africa are completed. It was also suggested that Eritrea may consider joining its neighbors’ efforts to pursue WTO accession, as this would support the region’s on-going efforts for deeper economic integration and would help consolidate the recent peace initiatives.
In this regard, the WTO was invited to explore greater co-operation and engagement with the peace community, building on the recent “Trade for Peace” Initiative, and to define its role in how trade and the WTO could contribute to on-going peace-building efforts around the world. There was a clear recognition that economic and trade aspects should be given a greater role in peacebuilding.
Participants welcomed the recent progress registered in the accessions of Comoros, Ethiopia, Somalia, South Sudan and Sudan. In particular, they pledged their collective support for the conclusion of the accession of Comoros in 2019, the resumption of the work of the Working Parties for the accessions of Ethiopia and Sudan in early 2019, and the holding of the first Working Party meetings of the accessions of Somalia and South Sudan in 2019 following the submission of their respective MFTRs.
Dialogue participants reiterated strong appreciation to Djibouti, as the only WTO Member in the Horn of Africa, for supporting the accession efforts of its neighboring countries, and requested Djibouti to use its position to actively participate in the work of the WTO to promote the interests of the Region.
Acknowledging the importance of stakeholder inclusiveness in the accession process, participants expressed appreciation to the ITC for ensuring the participation of private sector representatives in the Second Regional Dialogue, and requested their continuing participation in future Dialogues. They also acknowledged the importance of gender considerations in both capacity-building and the composition of the accession negotiation team.
Participants acknowledged the ongoing support provided by development partners for technical assistance, training, capacity building, and trade infrastructure, in order to enable African countries realize the full benefits of the AfCFTA and the WTO. They also agreed on the urgent need to enhance trade policy knowledge and capacity, including for analysis, strategies and negotiations, covering both the legal and economic aspects, especially for countries which are emerging from conflicts. In this regard, they appealed to development partners, especially AfDB, IGAD, IMF, ITC, TRAPCA, UNECA, WBG and the WTO, to increase support for the accession process and subsequent implementation.
Participants recommended that consideration be given to the establishment of the Office of Trade Negotiations by each African country, in order to promote coherence and effectiveness in policy making and strategic planning in trade, at the national, regional and multilateral levels.
Participants also pledged their strong support for the fundamental values and principles of the Multilateral Trading System and expressed their concerns about recent protectionism and unilateralism. In this context, they acknowledged the ongoing discussions on WTO reform, which provided an opportunity for the WTO to update its rules and modernize its function, in order to respond to the requirements of the 21st Century.
Participants expressed their appreciation to the Government of Djibouti for hosting the Second Regional Dialogue and the warm hospitality provided to the participants, as well as the invitation to participate in the Second International Trade Fair of Djibouti, opened by H.E. Ismaïl Omar Guelleh, President of the Republic of Djibouti. They also expressed their appreciation to the WTO Secretariat and the ITC for the excellent arrangements.
Dialogue participants requested Djibouti to report on the outcome of the Second Regional Dialogue to the WTO membership at the upcoming General Council meeting on 12 December, and to the AU Trade Ministers at the upcoming meeting on 12 to 13 December in Cairo, Egypt. The Participants also requested that this Report of the Djibouti Dialogue be circulated as a WTO document of the Sub-Committee for Least Developed Countries and the General Council.
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Murky climate deal lets down poor countries
The international deal hammered out during last-minute talks at the 24th UN climate change conference (COP 24) has been lambasted for failing to address crucial issues related to reducing emissions in developing countries.
After a tense night of talks in Katowice, a city in coal-fuelled Poland, countries agreed a complex set of rules on 16 December to support the implementation of the pdf Paris Agreement (505 KB) . The deal states that all countries will have to describe their domestic attempts to reduce emissions in greater detail than ever before, providing information on their mitigation, adaptation and finance plans.
But the final agreement fails to deliver on action points brought forward by developing countries, including compensation for irreparable damages caused by climate change and financing for adaptation and mitigation technologies.
“The advanced text concluded at COP 24 reflects a considerable progress, especially after facing persistent logjam at previous sessions,” Vaibhav Gupta, senior programme lead for the Council on Energy, Environment and Water in India, told SciDev.Net.
However, Gupta observed that “sticky issues around climate finance and the guiding principles of equity and differentiation have not been adequately settled”. For example, under the agreed financing framework, developed countries have to report on what they do, but what they report is their choice.
“I am also disappointed by the exclusion of any capacity improvement plan,” Gupta says, which would help developing countries build the right infrastructure to count, manage and report on their emissions.
“Some interpret this definition in terms of carbon credits, but its architects chose to keep its meaning more general, so countries will be able to exchange a broad range of tokens coming from their mitigation efforts,” says Leonardo Massai, a climate policy expert with the Coalition for Rainforest Nations, who negotiates as part of the Democratic Republic of Congo team.
Following opposition from Brazil, any decision on the final shape of this system has been postponed to next year's talks in Chile. Critics said that this is devastating, as an effective mitigation market is a core feature of the Paris Agreement and would allow countries with lower capacity to act faster by piggy-backing on emission reduction efforts of more advanced countries.
COP 24 also failed to address the issue of loss and damage caused by climate change, a traditional sticking point of the negotiations that many thought could be solved this year by enshrining a robust framework for financial compensation in the rulebook. Ahead of the release of the final deal, Francois Martel, secretary general of the Pacific Island Development Forum, told SciDev.Net that this issue was a red line for small island states.
“For us, it's a reality,” he said. Martel is flying back to his home country Samoa for Christmas when the country is usually hit by cyclones which people can no longer prepare for. “We don't know which island will be hit. Before, cyclones came only from the north, now they come from any direction. We never know.”
If the deal marks one success, it was bridging differences between global powers such as China and the United States. But observers agree that, while some productive compromise has been achieved this year, the most burning issues have just been rolled over to the next meeting.
“The barely adequate outcome in Katowice means there’s much work ahead to ensure countries live up to their responsibilities to put more ambitious action on the table by 2020,” said Rachel Cleetus, climate and energy policy director with the American think tank Union of Concerned Scientists. “Every fraction of a degree [of warming] avoided matters.”
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EU and ACP countries conclude first round of negotiations to modernise their relations
The two chief negotiators met on Friday, 14 December 2018 in Brussels to take stock of the progress achieved and discuss next steps.
The first series of talks between the EU and 79 countries in Africa, the Caribbean and the Pacific (ACP) led to broad convergence on the structure of the future agreement and the strategic priorities.
On Friday, at the ACP house in Brussels, the EU’s Chief Negotiator, Commissioner for International Cooperation and Development, Neven Mimica, said: “We welcome the progress made so far. There is still a great deal of work ahead, given our ambitions and the scope of what we want to achieve together. We are looking forward to stepping up the pace to embark on a new path with the negotiation of tailor-made EU-Africa, EU-Caribbean and EU-Pacific pillars early next year.”
The ACP Council of Ministers met on Wednesday, 12 December 2018 to take stock of the negotiation process. The Ministers appreciated the substantive progress made in the talks and observed that the coming stage in the process is demanding and would require flexibility and convergence from both sides.
The ACP Chief Negotiator and Chair of the Ministerial Central Negotiating Group who is also the Minister for Foreign Affairs, Cooperation and Africa integration of Togo Professor Robert Dussey, said: “I take pride in the achievements recorded in a short span of time since the start of the negotiations. The positive spirit exhibited by the two sides is greatly encouraging and extremely useful in reaching a meaningful outcome in the next round.”
Next steps
As of January, talks will intensify. The second round of technical negotiations is expected to take place over a three-month period. Throughout that time, EU and ACP countries will start drafting the agreement around agreed priorities.
Background
The Cotonou Agreement currently governing EU-ACP relations is due to expire in 2020. Political negotiations on a new ACP-EU Partnership were launched in New York on 28 September, although the renewal process started in the course of summer 2018.
Since mid-October, the technical work, organised in five specific sessions, mainly focused on the so-called common foundation at EU-ACP level. This contains the values and principles that bring the EU and ACP countries together. It also indicates the strategic priority areas that the two sides intend to prospectively work on together.
In the future agreement, on top of the foundation there will be three action-oriented regional pillars to focus on each region’s specific needs. Through the future partnership, EU and ACP countries will seek closer political cooperation on the world stage. Together, they represent more than half of all UN member countries and unite over 1.5 billion people.
Declaration of the Co-Presidents on Post-Cotonou Negotiations on the occasion of the meeting of the 36th Joint Parliamentary Assembly
The Co-Presidents of the ACP-EU Joint Parliamentary Assembly (JPA) welcome the adoption of the negotiating directives by the EU and the negotiating mandate of the ACP Parties, and the launch of negotiations intended to conclude a successor Agreement to the ACP-EU Cotonou Partnership Agreement.
The Co-Presidents draw attention to the resolution adopted at the 35th session of the JPA on a strong parliamentary dimension, and to the resolution adopted by the European Parliament on 14 June 2018 on Negotiations for a new ACP-EU Partnership Agreement. The Co-Presidents echo the desire expressed by both negotiating parties in their respective mandates to conclude a successor Agreement at ACP-EU level, recognising the desire of the ACP Group of States to maintain its deep and unique partnership.
An ambitious and comprehensive Agreement is needed between the two parties to reflect the new geopolitical reality and tackle common challenges including climate change, poverty, terrorism, migration, illicit financial flows and achieving the SDGs. Globalisation can only be effectively harnessed and regulated at multilateral level, in which the ACP and EU can emerge as a powerful joint force.
The Co-Presidents reiterate that the new institutional and financial architecture must reflect these ambitions that continue to be based on the principles of democracy, human rights and the rule of law. In addition to the regional pillars, the common foundation must remain a strong element of the Partnership, with regular meetings at all levels to monitor the implementation of the Partnership Agreement and build momentum for ACP-EU cooperation at the global level.
The post-2020 Partnership must be one of equal partners and better serve the needs of its citizens in ACP countries and the EU. In this regard, the Co-Presidents emphasise that a strong parliamentary dimension is essential for democratic legitimacy. This must include an autonomous Joint Parliamentary Assembly, meeting independently of the ACP-EU Council meetings, in order to assess the impact of the Agreement, hold the executives to account and provide a genuinely pluralistic parliamentary forum for citizen representation. Adequate resources are needed in order to support the Partnership including JPA at secretariat level.
Democratic legitimacy goes beyond parliamentary representation, and requires a formalised participation of non-state actors as provided for in the current Cotonou Agreement.
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Towards a safe and orderly migration
A global migration compact may help combat the myth that migrants are liabilities
In August 2018, French President Emmanuel Macron, German Chancellor Angela Merkel and British Prime Minister Theresa May visited countries in Africa, sparking hope of increased foreign direct investments (FDI) in the continent.
Mr. Macron was in Nigeria, Ms. Merkel visited Ghana, Nigeria and Senegal, and Ms. May made stops in Kenya, Nigeria and South Africa.
Apart from the question of FDI, these influential leaders were looking at how to stem the flow of African migrants traveling to Europe in search of jobs and better lives.
“I believe in a win-win game. Let’s help Africa to succeed. Let’s provide new hope for African youth in Africa,” President Macron said in Nigeria, explaining that it was in Europe’s interest to tackle migration from Africa at its roots.
New York Times writers Eduardo Porter and Karl Russell echoed the French president’s sentiments: “If rich countries want fewer immigrants, their best shot might be to help poor countries become rich, so that fewer people feel the urge to leave.”
Africans on the road
Every day hundreds of Africans, including women and children, strike out in search of real or imagined riches in Europe or America. About a million migrants from sub-Saharan Africa moved to Europe between 2010 and 2017, according to the Pew Research Center, a Washington, D.C.-based nonpartisan fact tank.
While Ghana, Kenya, Nigeria, Senegal, Somalia and South Africa are the top way stations for sub-Saharan migrants moving to Europe and the US, Pew lists South Sudan, Central African Republic, São Tomé and Príncipe, Eritrea and Namibia as having some of the fastest-growing international migrant populations living outside their country of birth.
Africans are on the move because of “conflict, persecution, environmental degradation and change, and a profound lack of human security and opportunity,” states the International Organisation for Migration (IOM), in its World Migration Report 2018. Migration corridors mostly used by Africans are Algeria to France, Burkina Faso to Côte d’Ivoire, Egypt to the United Arab Emirates, Morocco to Spain, and Somalia to Kenya.
Of the 258 million international migrants globally, 36 million live in Africa, with 19 million living in another African country and 17 million in Europe, North America and other regions, Ashraf El Nour, Director of IOM, New York, informed Africa Renewal.
When unregulated and unmanaged, migration can create “false and negative perceptions of migrants that feed into a narrative of xenophobia, intolerance and racism,” UN Secretary-General António Guterres noted at an event in New York last September.
“The narrative of migrants as a threat, as a source of fear, which has colored international media coverage on migration, is false,” said Mukhisa Kituyi, Secretary-General of the UN Conference on Trade and Development (UNCTAD), a UN body that deals with trade, investment and development issues, in an interview with Africa Renewal.
Orderly migration
The Global Compact for Migration, the first-ever intergovernmentally negotiated agreement on international migration, could counter negative perceptions of migrants, experts say.
The IOM states the compact will help achieve “safe, orderly and regular migration,” referring to it as an opportunity to “improve the governance on migration, to address the challenges associated with today’s migration, and to strengthen the contribution of migrants and migration to sustainable development.”
The compact consists of 23 objectives, among them mitigating the adverse drivers and structural factors that hinder people from building and maintaining sustainable livelihoods in their countries of origin; reducing the risks and vulnerabilities migrants face at different stages of migration by respecting, protecting and fulfilling their human rights and providing them with care and assistance; and creating conditions that enable all migrants to enrich societies through their human, economic and social capacities, and thus facilitating their contributions to sustainable development at the local, national, regional and global levels.
The compact also refers to enabling faster, safer and cheaper transfer of remittances and fostering the financial inclusion of migrants; ensuring that all migrants have proof of legal identity and adequate documentation; and providing migrants with access to basic services.
The Global Compact for Migration is not legally binding, but its provisions can be a powerful reference point for those formulating immigration policies as well as for human rights advocates in the face of mistreatment of migrants.
Negative attitudes or even violence against migrants typically stem from fears that they take jobs away from native-born citizens or that they engage in criminal activities, according to a study by the South Africa-based Human Sciences Research Council (HSRC), a statutory research agency.
In the HSRC study, which focused on South Africans’ attitudes toward immigrants, 30% of the public blamed foreigners for “stealing jobs from hardworking South Africans,” while another 30% pointed to immigrants’ criminal activities.
But IOM South Africa countered that “immigration does not harm the long-term employment prospects or wages of native-born workers,” adding that “migrants are twice as likely to be entrepreneurs [as] South African nationals.” The South African government regularly condemns xenophobic attacks.
Economic perspective of migration
Mr. Kituyi said that most migration studies focus on “the plight of migrants, the crisis of international solidarity or humanitarian challenges.” He wished that more attention were paid to migration from the perspective of economic development.
Ms. Lúcia Kula, an Angolan migrant who is a researcher in the UK, concurred, adding that conversations about migration should shift to the migrants’ contributions to their new society.
“One of the main things they [immigrants] do in the economies they get into is create value. They enter niches where they are more competitive... and it can boost the local economy,” Mr. Kituyi elaborated.
Many migrants are talented professionals and offer expert services in their new countries. Iso Paelay, for example, left Liberia in the heat of the war in the 90s and resettled in Ghana, where he became a star presenter for TV3, a leading media house in the country. Apparently, Liberia’s loss was Ghana’s gain.
Mr. Kituyi points to a phenomenon of migrants going to other countries to engage in the ethnic food business. “They start creating routes to get food from their home country,” he said. Ethiopian restaurants in Nairobi, Kenya, including Abyssinia, Habesha and Yejoka Garden, serve Ethiopian dishes such as injera.
Abuja International Restaurant in Union, New Jersey, sells Nigerian food such as eba, amala and fufu and the popular beer Gulder. In New York, Africans and others throng “Little Senegal,” a single street in Harlem, to shop for anything African – foodstuffs, music CDs, hair products, religious items and finely tailored clothes.
While working hard, earning money and making contributions to their new countries, African migrants also “remit small monies back home to support their families,” explained Mr. Kituyi. “Eighty-five percent [of immigrants’ earnings] goes to the host country and 15% to the country of origin through remittances.”
“A good chunk of the money I make here [in the US] I spend here; I pay my bills and get things for myself. I remit some to upkeep my parents,” concurs Ms. Christy Emeagi, a lawyer who left Nigeria “because I wanted a better life for my unborn children.”
The inclusion in the Global Compact for Migration of ways to make remittances faster and safer will be sweet music to African migrants.
In 2017, remittance flows from migrants to sub-Saharan Africa were $38 billion, reports the World Bank. That is more than the $25 billion official development aid (ODA) to the region that year.
Currently, says Mr. Kituyi, “it is painful to see an overly high cost of transaction mostly going to international payment services like Western Union, PayPal and so on.”
Achieving the objectives of the Global Compact for Migration may take some time, experts believe. Nevertheless, the compact’s immediate impact is that safe, orderly and regular migration is currently at the forefront of global conversation. And that is a step in the right direction.
This article appears in the December 2018 - March 2019 edition of Africa Renewal, published by the United Nations.