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Merkel looks to Africa to cement her legacy undermined by migration crisis
German Chancellor Angela Merkel pledged on Tuesday, 30 October 2018, a new development fund to tackle unemployment in Africa, a problem spurring the mass migration that has shaped her long premiership as it nears its end.
Merkel hosted a summit of African leaders a day after her announcement that she would retire from politics by 2021, which sent shockwaves across Europe and started a race to succeed her.
She needs the Compact with Africa summit to show that progress has been made in addressing the aftermath of one of the defining moments of her 13 years in power: her 2015 decision to open Germany’s doors to more than a million asylum seekers.
The Berlin summit, attended by 12 presidents and prime ministers including Egypt’s Abdel Fattah al-Sisi, South Africa’s Cyril Ramaphosa, Ethiopia’s Abiy Ahmed and Rwanda’s Paul Kagame, was designed to showcase the continent as a stable destination for German investment.
International Monetary Fund Managing Director Christine Lagarde was also there, along with a host of international development officials.
The aim was to create good jobs for Africans, easing the poverty which, along with political instability and violence, has encouraged large numbers to head for Europe. But with Africa’s population growing at almost three percent a year, the task is enormous.
“We Europeans have a great interest in African states having a bright economic outlook,” Merkel said in her opening speech, announcing the fund to help small and medium-sized enterprises from both Europe and Africa to invest on the continent.
The 119,000 Africans who arrived in Europe in 2018, according to the International Organisation for Migration, are the tip of the iceberg. International Labour Organisation figures show that 16 million migrants were on the move within Africa in 2014.
While European Union countries invested $22 billion in Africa in 2017, breakneck economic growth will be needed to help bring down the migrant numbers.
Berlin hopes Germany’s manufacturing-based economy, which drove Eastern Europe’s rapid economic growth after the 1989 collapse of Communism, could turn things round.
Merkel needs results fast if she is to ensure the leadership of her Christian Democrats passes to a centrist ally, such as its general secretary, Annegret Kramp-Karrenbauer.
A Marshall plan for Africa?
Other candidates for the party leadership, including Health Minister Jens Spahn or her old rival, the strongly pro-business Friedrich Merz, are well to her right politically and could be expected to want to challenge much of her legacy.
Merkel has said she will remain chancellor but that her current, fourth term up to 2021 will be her last. A whopping 71% of Germans welcomed Merkel’s decision, a poll released Tuesday by broadcasters RTL and n-tv showed.
Germany has introduced tax incentives for its companies to set up plants in Africa, reflecting her view that state aid must give way to private investment if jobs are to be created in their millions.
This would be part of a pdf “Marshall Plan for Africa” (1.58 MB) – named after the US-funded plan that helped to rebuild European states including Germany after World War Two – that she sees as central to her legacy.
Merkel presented her decision to open Germany’s borders in 2015 as an unavoidable necessity driven by the vast scale of the human tide, that year mostly fleeing the civil war in Syria.
An agreement with Turkey sharply curtailed the arrival of refugees into the EU through Greece. But hundreds of thousands of mainly African migrants continued to travel across the Mediterranean, a flow that finally began to abate in the past year with improved efforts to halt smuggling from Libya.
The crisis has upturned European politics, bringing the far right to power in Italy and Austria, and in Germany revitalising the Alternative for Germany (AfD) party, whose demand that the country shut its borders to migrants helped to fuel its surge into parliament in last year’s election.
A successful outcome to the summit may help to strengthen Merkel’s case for remaining chancellor even after stepping down from the party leadership, and could quieten her coalition partners in Bavaria’s conservative CSU and the Social Democrats (SPD).
All three parties have suffered punishing setbacks in regional elections this month, building internal party pressure for them to switch leaders or break up the coalition.
How Germany and Africa work together
The German government is engaged in many different ways in Africa, where it enjoys close cooperation with equal partners in the interests of sound political and economic development. Many of the worldwide challenges Europe faces can only be resolved by working with its neighbouring continent.
Africa’s potential is enormous. About half of the world’s 20 fastest growing economies are in Africa. By 2035 Africa will have the largest potential workforce in the world.
What is the Compact with Africa?
Last year, the Compact with Africa was launched – under Germany’s G20 Presidency. The initiative is designed to improve the conditions for private investment so as to get infrastructure projects off the ground and create jobs. Eleven countries have so far signed up for individual compacts, including Senegal and Ghana, which Chancellor Angela Merkel is currently visiting.
Key players include the African states, as well as the World Bank, the International Monetary Fund and the African Development Bank. They will negotiate individual reform programmes along with possible additional inputs to be provided by G20 partners, and implement these programmes.
What will the partnerships for reform do?
The individual compacts with Africa represent a voluntary political commitment. They do not involve any financial support. That is why the German government has come to agreements on what it terms “partnerships for reform” in addition. These partnerships are already in place with Tunisia, Côte d’Ivoire and Ghana. Last year a total of 300 million euros were invested.
The three partnerships for reform aim to expand the use of renewable energy, improve energy efficiency and develop the financial and banking sectors. This is designed to improve conditions for national and international investors and make it easier for small and medium businesses to access loans. At the same time, more jobs and trainee places will be created for young people in forward-looking technologies.
How are conditions for investment being improved?
Another part of the German government’s Africa strategy is to improve conditions for investment by extending Hermes export credit guarantees. Since June 2018, the level of risk not covered by Hermes guarantees, i.e. borne by the investor, for investments in the public sector has been reduced from 10% to 5% in Ghana. This will open up new sales and investment opportunities for German industry.
How does Germany work with Nigeria?
German development cooperation with Nigeria focuses on sustainable economic development. Germany is, for instance, supporting the reform of Nigeria’s financial sector and fostering the development of financial services for small and medium enterprises (SME). Germany is also active in the renewable energy and energy efficiency sector and in the health sector, where it is tackling polio.
What is “Successful in Senegal”?
Numerous African states receive support from Germany, for instance in the fields of good governance, agriculture and health, as well as in the education and training sector. The project “Successful in Senegal” is developing genuine prospects of a better future in Senegal for youth, young adults aged between 15 and 35, and returning migrants.
How does Germany promote peace, stability and security?
“The Partnership with Africa is about economic development, but also about promoting peace, stability and security. Development is only possible if security is guaranteed,” said Chancellor Angela Merkel at the G20 Africa Partnership Conference held in Berlin in 2017.
In view of worsening conflicts and the spread of terrorist networks, conflict early warning systems, mediation, peacekeeping and measures to support the fight against terrorism are to enhance security and stability on the African continent. In this context, the German government also supports the Sahel G5 states in the field of infrastructure measures.
What do migration partnerships do?
Within the framework of the European Union, Germany has entered into migration partnerships with individual African states with a view to promoting training, employment and economic development, specifically for young people, thus addressing the root causes of migration.
Germany’s Africa policy aims to foster economic growth in Africa through a wide spectrum of development- and security-policy measures, as well as enhancing security on the ground and stepping up cooperation. This is intended to give the people of Africa long-term prospects.
Date: 29 August 2018
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President Cyril Ramaphosa addresses G20 Investment Summit in Berlin
South African President Cyril Ramaphosa has concluded a successful working visit to the Federal Republic of Germany where he attended the G20 Investment Summit and the G20 Compact with Africa Conference.
The visit reinforced cooperation between the governments of South Africa and Germany on bilateral and global issues and underscored the critical importance of German investment to South Africa’s efforts to stimulate sustainable and inclusive economic growth as a means to reduce poverty, unemployment and inequality.
On Tuesday, 30 October 2018, President Ramaphosa addressed the G20 Investment Summit in Berlin in his capacity as Co-chair of the G20 Africa Advisory Group. The Summit was attended by Heads of State and Government of Compact with Africa (CwA) countries as well as German business leaders who affirmed Africa as an attractive destination and partner for trade, investment and the transfer of skills and technology.
The G20 Compact with Africa conference reviewed progress made since the 2017 Hamburg Summit and leaders exchanged views on building on the partnership geared towards promotion of investment in Africa.
Also on Tuesday, President Ramaphosa had a business breakfast with German corporate leaders, trade financiers and investment promotion agencies who were hosted by Prof Heinz-Walter Grosse, Chairman of the Sub-Saharan Africa Initiative of German Business.
German business leaders briefed the President on their experiences in South Africa, including some of the challenges of doing business.
The President emphasised government’s commitment to listen to the needs and concerns of investors, and to address these as a matter of priority.
President Cyril Ramaphosa commended German investors for their continued engagement with South Africa. There are around 600 German companies in South Africa, employing more than 100 000 South Africans.
The President said German companies were among those committed partners who were accompanying South Africa on its journey of renewal after several years of poor economic performance.
President Ramaphosa assured German investors that government was leading an effort to energise South Africans to work in unison to end corruption and achieve sustainable, inclusive growth.
Ramaphosa commenced his working visit with a bilateral meeting with Chancellor Angela Merkel, during which he expressed South Africa’s appreciation for Germany’s ongoing bilateral assistance in critical development areas like health and skills development.
President Ramaphosa and Chancellor Merkel reflected on measures taken by South Africa to improve the investment environment, including addressing policy uncertainty.
Ramaphosa also noted that several German companies had made investment announcements during the recent South Africa Investment Conference and that German companies played a significant role in developing skills and building capacity in South Africa.
The two leaders agreed that bilateral relations would be strengthened through the Binational Commission which will be convened early in 2019.
President Ramaphosa and Chancellor Merkel also agreed on intensified cooperation in the United Nations Security Council during the two countries’ respective UNSC terms in 2019-2020.
South Africa and Germany are committed to working together to ensure that the Security Council contributes meaningfully to resolving important questions on international peace and security.
The President and the Chancellor also agreed on the importance of continuing with the G20 Compact with Africa initiative, and committed to an expansion of trade and investment between South Africa and Germany.
Remarks by President Cyril Ramaphosa during the G20 Investment Summit
Thank you for this opportunity to share some insights on a partnership between Africa and the G20 that has great potential to transform the lives of the citizens and the fortunes of the businesses represented by the leadership gathered here today.
The G20 Compact with Africa is a pioneering initiative to support Africa’s ambition to mobilise domestic and international savings through an improved investment framework.
The initiative is based on the premise that accelerated economic development is achievable when African countries, G20 partner countries and international organisations work together to create a better environment for private investment to lift the standard of living for our people.
This initiative builds on earlier G20 initiatives in Africa, including the G20 Initiative on Supporting Industrialisation in Africa and Least Developed Countries, and the G20 Access to Energy Action Plan.
The Compact with Africa initiative is an instrument that can support the implementation of the African Union’s Agenda 2063, its Agenda 2030 on Sustainable Development and the Programme for Infrastructure Development in Africa.
It is significant that this initiative has been developed as a partnership, where each African country is able to define its own priorities and needs.
This is critical for ensuring the success and continuity of the Compact.
The Compact with Africa also represents a firm political commitment from participating African countries to new developmental and governance approaches that will unlock economic activity.
We applaud fellow African countries that are participating in this initiative, demonstrating the value of global cooperation and coordination towards an industrialised, prosperous Africa.
Since its launch in 2017, we have already witnessed progress under the Compact with Africa Initiative.
We now have a list of flagship projects worth billions of US dollars which are identified and earmarked for investment.
We are convinced that the impact of the Compact with Africa initiative will be enhanced by the involvement of development finance institutions.
Among other things, these institutions have expertise and approaches that could be used to mobilise resources for Africa’s infrastructure.
As part of the effort to promote private investment on the continent, South Africa and the African Development Bank will host the inaugural Africa Investment Forum in Johannesburg from 7 to 9 November 2018.
The Africa Investment Forum is a transactional platform bringing together international financial institutions, sovereign wealth funds and institutional investors.
South Africa, Germany and the African Development Bank will also host the annual Compact with Africa Investor Event on the morning of 8 November.
This event presents an opportunity to showcase improved investment conditions in African countries participating in the Compact with Africa initiative, as well as concrete private sector activity into these countries.
These initiatives complement our own efforts in South Africa, where we launched an ambitious investment drive earlier this year to raise $100 billion in new investment over the next five years.
Last week, we hosted the inaugural South Africa Investment Conference in Johannesburg, which was attended by both local and international investors.
Significantly, there was also great interest from business people and investors from other African countries, suggesting that there is far more potential for intra-African investment.
As African governments work to improve the investment environment and market conditions in their countries, they will no doubt find investor interest not only from G20 countries, but also from other parts of the continent.
Allow me to conclude by thanking Chancellor Merkel and her government, and the German business community, for their steadfast commitment to ensuring that this ground-breaking initiative succeeds.
I thank you.
Doing Business Report: New record set as 314 reforms introduced to improve business climate around the world
Governments around the world set a new record in bureaucracy busting efforts for the domestic private sector, implementing 314 business reforms over the past year, says the World Bank Group’s Doing Business 2019: Training for Reform report, released today.
The reforms, carried out in 128 economies, benefit small and medium enterprises as well as entrepreneurs, enabling job creation and stimulating private investment. This year’s reforms surpass the previous all-time high of 290 reforms two years ago.
“The private sector is key to creating sustainable economic growth and ending poverty around the world,” said World Bank Group President Jim Yong Kim. “Fair, efficient, and transparent rules, which Doing Business promotes, are the bedrock of a vibrant economy and entrepreneurship environment. It’s critical for governments to accelerate efforts to create the conditions for private enterprise to thrive and communities to prosper.”
The report finds that reforms are taking place where they are most needed, with low-income and lower middle-income economies carrying out 172 reforms. In Sub-Saharan Africa, a record number of 40 economies implemented 107 reforms, a new best in number of reforms for a third consecutive year for the region. The Middle East and North Africa region scaled a new high with 43 reforms.
The indicator Starting a Business continued to see the most improvements, with 50 reforms this year. Enforcing Contracts and Getting Electricity saw milestone reforms, with 49 and 26, respectively.
In the World Bank Group’s annual ease of doing business rankings, the top 10 economies are New Zealand, Singapore and Denmark, which retain their first, second and third spots, respectively, for a second consecutive year, followed by Hong Kong SAR, China; Republic of Korea; Georgia; Norway; United States; United Kingdom and FYR Macedonia.
In notable changes to the top 20 ranked economies this year, the United Arab Emirates (UAE) joins the grouping for the first time, in 11th place, while Malaysia and Mauritius regain spots, in 15th and 20th places, respectively. During the past year, Malaysia implemented six reforms, Mauritius five, and the UAE four. The reforms in Mauritius included the elimination of a gender-based barrier to equalize the field between men and women in starting a business.
This year’s top 10 improvers, based on reforms undertaken, are Afghanistan, Djibouti, China, Azerbaijan, India, Togo, Kenya, Côte d'Ivoire, Turkey and Rwanda. With six reforms each, Djibouti and India are in the top 10 for a second consecutive year. Afghanistan and Turkey, top improvers for the first time, implemented record single-year reforms, with five and seven, respectively.
“The diversity among the top improvers shows that economies of all sizes and income levels, and even those in conflict can advance the business climate for domestic small and medium enterprises. Doing Business provides a road map that different governments can use to increase business confidence, innovation, and growth and reduce corruption,” said Shanta Devarajan, the World Bank’s Senior Director for Development Economics and Acting Chief Economist.
This year, Doing Business collected data on training provided to public officials and users of business and land registries. A case study in the report, which analyzes this data, finds that mandatory and annual training for relevant officials is associated with more efficient business and land registries. A second study finds that regular training for customs clearance officials and brokers results in lower border and documentary compliance times, easing the movement of goods across borders. Two other case studies focus on the benefits of accrediting electricians and training of judges.
“This year’s results clearly demonstrate government commitment in many economies, large and small, to nurture entrepreneurship and private enterprise. If the reform agendas are complemented with training programs for public officials, the impact of reforms will be further enhanced, new data show,” said Rita Ramalho, Senior Manager of the World Bank’s Global Indicators Group, which produces the report.
Since its inception in 2003, more than 3,500 business reforms have been carried out in 186 of the 190 economies Doing Business monitors.
Regional highlights
Sub-Saharan Africa set a new milestone for a third consecutive year, implementing 107 reforms in the past year, up from 83 the previous year. In addition, this year also saw the highest number of economies carrying out reforms, with 40 of the region’s 48 economies implementing at least one reform, compared to the previous high of 37 economies two years ago. The region is home to four of this year’s top 10 improvers – Togo, Kenya, Côte d'Ivoire and Rwanda. While reforms in the region were wide-ranging, many improvements focused on easing property registration and resolving insolvency.
East Asia and the Pacific is home to two of the world’s top 10 Doing Business economies, Singapore and Hong Kong SAR, China. Additionally, China is one of this year’s top 10 improvers, advancing more than 30 spots to 46th place in the global rankings. The region’s economies carried out a total of 43 reforms in the past year, with a major push seen in the areas of Starting a Business and Getting Electricity.
Europe and Central Asia also hosts two of the world’s top 10 economies this year, with Georgia moving up to 6th place (from 9th last year), and FYR Macedonia edging up one spot to 10th place. The region also hosts two of this year’s top improvers, Azerbaijan and Turkey. The pace of reforms accelerated in the region, with 54 reforms implemented during the past year, compared with a revised number of 43 reforms the previous year. While reforms in the region covered all areas of Doing Business, many improvements focused on easing construction permitting and cross border trade.
A total of 25 reforms were carried out in Latin America and the Caribbean in the past year. Brazil made the most improvements, with four reforms. The bulk of the reforms in the region were aimed at improving the legal rights of borrowers and lenders with respect to secured transactions, and the process of starting a business.
Economies of the Middle East and North Africa significantly accelerated the pace of reforms in the past year, with 43 reforms, compared to 29 the previous year. This year, the region hosts an economy in the global top 20 grouping, with the United Arab Emirates’ maiden entry in 11th place and one top improver, Djibouti. However, the region continues to lag on gender-related issues, with barriers for women entrepreneurs in place in 14 economies.
In a first for South Asia, two of the region’s economies earned coveted spots in the global top improvers. India continued its reform agenda, implementing six reforms in the past year and advancing 23 spots to 77th place in the global ranking. India is now the region’s top-ranked economy. Afghanistan, with five reforms, moved up 16 spots to 167th place in the global rankings. Collectively, the region’s economies carried out 19 reforms in the past year. Many of the reforms focused on improving starting a business, access to credit, paying taxes and resolving insolvency.
The full report and its datasets are available at www.doingbusiness.org.
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President Paul Kagame attends G20 Investment Summit
President Kagame on Tuesday attended the ‘G20 Investment Summit – German Business and the Compact with Africa (CwA) Countries’ where he delivered remarks in his double role as the incumbent Chairperson of the African Union and President of Rwanda.
Held in Berlin under the Patronage of Dr. Angela Merkel, the Chancellor of the Federal Republic of Germany, the pdf G20 Investment Summit (389 KB) brought together German businesses and CwA countries to explore investment opportunities under the framework of the G20 Partnership with Africa.
During the event, German investors presented flagship projects currently undertaken in the CwA countries and explored further opportunities on the African Continent.
In his address, President Kagame highlighted that the G20 Compact with Africa comes at the right time to reinforce Africa’s enterprise-based development consensus.
“We have to challenge ourselves to go beyond the usual routines. We fully share Chancellor Merkel’s impatience to achieve measurable and sustainable results through new projects. After all, the best way to speed up business climate reform is to attract more global firms to Africa, and small- and medium-sized businesses as well. This produces a demonstration effect, which in turn generates even more productive investment. In other words, a virtuous cycle,” President Kagame said.
The G20 Compact with Africa was initiated under the German G20 Presidency to promote investment in Africa. Its primary objective is to increase attractiveness for private investment through substantial improvements of the macro, business, and financing frameworks.
The initiative is demand-driven and open to all African countries. So far, 11 African countries have joined: Benin, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo, and Tunisia.
On the sidelines of the event, President Kagame met with the Chancellor of Austria, Sebastian Kurz, and held bilateral talks with German Chancellor, Dr. Angela Markel.
Address by President Paul Kagame at the G20 Investment Summit
Good morning. It is my pleasure to be back in Berlin, and I thank Chancellor Merkel for the invitation.
Since our meeting last year, there have been major developments at the African Union. The integration of our continent is growing deeper, and this is significant for business. As a result of financial and institutional reform, the African Union has achieved savings of 12 per cent in our next budget, and Member States are paying a greater share of the bill.
We also signed agreements on the Free Movement of Persons and the Continental Free Trade Area, making Africa a single trading bloc. This marks a historic shift in how Africa does business with itself, and the world, and particularly in this case, Germany. South Africa is the latest country to announce plans to ratify the CFTA. I congratulate President Ramaphosa for this step. It confirms the serious political will behind the African integration agenda.
The G20 Compact with Africa therefore comes at the right time to reinforce Africa’s enterprise-based development consensus. The initiative builds on the strong relationships we enjoy with Germany, the European Union, and other G20 partners, as well as similar programs with the multilateral institutions, the World Bank and the African Development Bank among them.
As such, the Compact with Africa has every ingredient for success. But pouring new wine into old bottles is not a winning formula. We have to challenge ourselves to go beyond the usual routines.
We fully share Chancellor Merkel’s impatience to achieve measurable and sustainable results through new projects. After all, the best way to speed up business climate reform is to attract more global firms to Africa, and small- and medium-sized businesses as well. This produces a demonstration effect, which in turn generates even more productive investment. In other words, a virtuous cycle.
The Volkswagen “Moving Rwanda” venture, which Thomas Schaefer will present in the next session, is a very good example of what is possible. Let me share three important features of this project that have broader relevance.
First, the supply chain involves multiple countries in East and Southern Africa, in a “hub-and-spoke” system. A regional approach is key to achieving economies of scale in Africa. Continental integration is also making this an increasingly viable strategy, as I referred to earlier.
Second, Africa can be a global innovation laboratory. East Africa is a young market for new car sales. But we have a great need for mobility solutions, which raise the productivity of the wider regional economy. Volkswagen is not only assembling vehicles in Rwanda, it is pioneering next-generation business models for shared, environmentally-friendly transport.
Third, Volkswagen’s approach has attracted other major players that might not otherwise be in Rwanda, notably Siemens.
But it would not work without local talent. In fact, Volkswagen Rwanda already employs dozens of young Rwandans and East Africans. The senior management team includes a number of young Rwandans who graduated from universities here in Germany. And a youthful Rwandan start-up company is developing the ride-sharing software. I should add that the German Development Agency (GIZ) continues to play an important supporting role.
There is a tremendous amount that we can accomplish together, if we focus on funding and de-risking creative investments led by the private sector, such as the ones we will learn more about today.
I thank you for your very kind attention.
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Nigeria to host Africa Trade Forum 2018
AfCFTA Ratification and Implementation: A game changer for African economies
The Africa Trade Forum 2018, hosted by Nigeria’s Ministry of Industry, Trade and Investment and co-organised by the UN Economic Commission for Africa (ECA), the Rockefeller Foundation and the Federal Government of Nigeria, in collaboration with the African Union Commission (AUC), is set to take place on 2-3 November, 2018 in Lagos.
The Forum will bring together stakeholders from across the continent, from political and governance spheres, the private sector and entrepreneurs, philanthropies, academia, researchers, and development partners, to discuss the process for realizing the African Continental Free Trade Area (AfCFTA).
The AfCFTA was signed in March 2018 by 44 African countries and, if ratified, will become one of the world’s largest trading blocs. It is also the biggest trade agreement signed since the World Trade Organisation (WTO) was established, bringing together 1.3 billion people with a combined gross domestic product (GDP) of more than $2 trillion in a single market. The agreement aims to provide improved competition and lower business costs.
The Forum’s purpose is to look into the challenges and opportunities of the AfCFTA in individual African states, and to better understand how AfCFTA can drive economic development and prosperity on the continent for all of Africa’s citizens.
“The idea of an integrated African market to industrialize Africa, spur growth, enhance welfare and create jobs has been around for a long time. However, with the actual emergence of the AfCFTA in 2018, the decision was taken by the Government to mobilize stakeholders in the Nigerian economy to understand its details, interpret its opportunities and reorganize our economic system for coherence and coordination, if the opportunities of the AfCFTA are to be realized and maximized.
“This Forum is a unique opportunity to proactively engage with a wide range of stakeholders to ensure that AfCFTA works for Nigeria,” says Dr. Okechukwu Enelamah, Minister of Industry, Trade and Investment, Nigeria.
The AfCFTA offers a long-awaited platform for Africa to ramp up its industrialization through various channels such as eliminating tariffs on intra-African trade, which will result in more competitive services that reduce business costs, improve business efficiency, and enhance value to consumers.
Economic Commission for Africa (ECA) Executive Secretary Vera Songwe says in an age of trade wars, Africa is sending a strong message that trade deals and reforms can be approached through consensus-building and cooperation, leaving no one behind.
“In order to ensure the African Continental Free Trade Area has a game-changing impact on African economies, we must now develop clear strategies for product diversification and inclusive implementation. The speed at which countries have signed and are now ratifying the AfCFTA agreement underscores the momentum behind this African flagship initiative,” the ECA Chief said.
According to ECA studies, Africa is less industrialized today than it was three decades ago. The continent’s manufacturing share of output and exports has steadily declined, and Africa’s exports remain largely concentrated in primary commodities and raw materials. Through the AfCFTA, industrialization will help create employment for Africa’s growing youth population, thereby improving livelihoods, access to education and health.
The agreement is also expected to lead to booming multi-sectoral growth in areas including agriculture, where the AfCFTA will provide opportunities to drive agri-business and provide access to new regional markets for farmers and regional agro-value chains.
With regard to access to electricity, about 600 million Africans still lack access to electricity. If current trends continue, it could take up to the year 2080 until Africa achieves full electrification. The AfCFTA would help build momentum on establishing an integrated set of platforms and partnerships to drive regional power systems, accelerate energy access for productive use, and bring down the costs of Africa’s power generation.
“We are delighted to support ECA and AUC to set the table and steer the conversation on the AfCFTA with Africa’s leaders. This Forum is an opportunity to work together to address challenges, discuss solutions, and increase awareness about the agreement’s ability to be a transformative tool that improves the lives of millions of Africans, especially the most vulnerable,” said Mamadou Biteye, Managing Director: Africa, for The Rockefeller Foundation.
The trade forum will provide a platform to discuss Africa’s participation and ownership of the AfCFTA objectives and examine how intra-regional trade can enable prosperity in Africa. The Forum will bring together stakeholders to determine how nations can move from a signed AfCFTA to real action and implementation.
“The AfCFTA is critical for Africa’s economic competitiveness and development. Once the African Continental Free Trade Area starts to fully function, African enterprises will be exposed to large economies of scale and scope. With expanded production and competitiveness, as well as increased investment, our enterprises will be able to increase Africa’s share of global trade, creating opportunities for economic development as well as the prosperity of African countries,” said the Africa Union Commission.
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Global Financial Integrity releases new study on trade misinvoicing in Nigeria
Nigeria trade misinvoicing leads to significant revenue losses
Analysis of trade misinvoicing in Nigeria in 2014 shows that the potential loss of revenue to the government was approximately $2.2 billion for the year, according to a new study by Global Financial Integrity. To put this figure in context, this amount represents four percent of total annual government revenue as reported to the International Monetary Fund. Put still another way, the estimated value gap of all imports and exports represents approximately 15 percent of the country’s total trade.
The report, titled Nigeria: Potential Revenue Losses Associated with Trade Misinvoicing, analyzes Nigeria’s bilateral trade statistics for 2014 (the most recent year for which sufficient data are available) which are published by the United Nations Comtrade. The detailed breakdown of bilateral Nigerian trade flows in Comtrade allowed for the computation of trade value gaps that are the basis for trade misinvoicing estimates.
Import gaps represent the difference between the value of goods Nigeria reports having imported from its partner countries and the corresponding export reports by Nigeria’s trade partners. Export gaps represent the difference in value between what Nigeria reports as having exported and what its partners report as imported.
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“The practice of trade misinvoicing has become normalized in many categories of international trade,” according to GFI President Raymond Baker. “It is a major contributor to poverty, inequality, and insecurity in emerging market and developing economies. The social cost attendant to trade misinvoicing undermines sustainable growth in living standards and exacerbates inequities and social divisions, issues which are critical in Nigeria today.”
Examination of the underlying commodity groups which comprise Nigeria’s global trade show that a large amount of lost revenue ($200 million) was related to import under-invoicing of just five product types. Those products and the related estimated revenue losses include: vehicles ($100 million), iron and steel products ($40 million), electrical machinery ($20 million), ceramics ($20 million), and aluminum products ($20 million). Lost revenue due to mispriced exports ($1.3 billion) may be related to the mineral fuels trade given this category of goods makes up over 90 percent of all exports.
Trade misinvoicing occurs in four ways: under-invoicing of imports or exports, and over-invoicing of imports or exports. In the case of import under-invoicing fewer VAT taxes and customs duties are collected due to the lower valuation of goods. When import over-invoicing occurs (i.e. when companies pay more than would normally be expected for a product), corporate revenues are lower and therefore less income tax is paid. In export under-invoicing the exporting company collects less revenue than would be anticipated and therefore reports lower income. Thus, it pays less income tax. Corporate royalties are also lower.
Total misinvoicing gaps related to imports can be broken down by under-invoicing ($2.4 billion) and over-invoicing ($1.9 billion). It should be noted that these figures represent the estimated value of the gap between what was reported by Nigeria and its trading partners. The loss in government revenue is a subset of these amounts and is based on VAT tax rates (5 percent), customs duties (15.2 percent), corporate income taxes (22.4 percent), and royalties (.2 percent) which are then applied to the value gap.
Export misinvoicing gaps were a massive $5.9 billion for export under-invoicing and $5.6 billion for export over-invoicing. Lost corporate income taxes and royalties are then applied to export under-invoicing amounts to calculate lost government revenue.
The report was published with the generous support of the Ford Foundation.
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Turning tides: EY Attractiveness Program Africa
After facing its lowest economic growth in over 20 years, Sub-Saharan Africa posted a slow recovery in 2017 The IMF forecasts a modest rise in the region’s GDP growth from 2.8% in 2017 to 3.4% this year. In tandem with improved economic performance, FDI projects into Africa rebounded from their lowest level in a decade. Last year, Africa registered 6.2% growth in inward investment projects compared with 2016. Extract (pdf):
Africa’s FDI is more evenly spread than ever before. For the first time since we began tracking FDI in Africa, four of the five regions (East, West, North and Southern Africa) hold an almost equal share of the continent’s FDI projects. We are also seeing investment shifting between countries for the first time. South Africa, once the clear leader in attracting FDI, now shares the top rank with Morocco. This is the first time that South Africa has been challenged in terms of being the most preferred investment destination (measured by FDI project numbers). Ethiopia jumped seven places to become the fifth-largest FDI recipient, its highest ranking yet. These shifting FDI dynamics illustrate a broader trend. Outside South Africa, as growth across the rest of the continent accelerates, so they take a greater share of inbound investment.
Rwanda is, by far, Africa’s most successful country in terms of attracting FDI. This is evidenced by the fact that Rwanda ranks as one of Africa’s most business-friendly destinations. It is also one of the continent’s most consistent rapid growth economies. Rwanda receives 1.5 FDI projects for every US$1 billion of GDP. Measured on the same criteria, South Africa receives only 0.32 projects, attracting only 20% of what Rwanda does, given its relative size. Major economies, such as Nigeria and Angola trail by an even larger margin, receiving only 0.16 and 0.02 projects respectively. Both countries also rank very low on the Ease of Doing Business rankings compared with their counterparts in the continent. That, coupled with their recent low growth after plunging oil prices in 2016 and the same scenario persisting in 2017, would explain their low score according to this methodology.
Zimbabwe: Finance Minister’s speech on promoting FDI (UN-OHRLLS)
In the area of infrastructure development and maintenance, Zimbabwe is currently in the process of upgrading and modernising its road infrastructure along major trade corridors that serve East and Southern Africa, linking the North-South transport Corridor. For those road projects already completed, a Costs-Time-Distance study government has shown that the average speed of heavy trucks has increased from 33km/hr prior to the rehabilitation exercise to the current 48km/hr. This does not only reduce transit time and costs, but also improves competitiveness. Being a landlocked country, Zimbabwe has undertaken a number of reforms to promote and facilitate investment. The country has signed 35 Bilateral Investment Treaties and 10 of these are in force. These provides for pre-and-post investment facilitation and protection. Zimbabwe has also signed 9 Treaties with Investment Provisions and 7 of these are in force. [Various downloads available]
Ease of doing business in Nigeria: a case for eliminating multiple tax reviews, audits and investigations (Deloitte Nigeria)
The National Assembly, EFCC, Ministry of Justice, and other bodies have also been involved in the review of records of various taxpayers. FIRS and SIRS also conduct different types of reviews on taxpayers’ records some of which cover the same taxes and periods. The duplication of activities by government bodies in monitoring and ensuring tax compliance in Nigeria is clearly an inefficient use of resources by both government and taxpayers. Bearing the above issues in mind, as FGN seeks to achieve the budgeted tax revenues for 2018 and beyond, by ensuring increased tax compliance and improved efficiency in tax collection, the following actions may be considered:
Wandile Sihlobo: Predicting the El Niño effect (Fin24)
Admittedly, it is too early to tell how most Southern African countries will cope with the expected weak El Niño in the summer season. Typically, an El Niño weather phenomenon would lead to drier weather conditions in most countries on the continent, almost similar to what we witnessed in the 2015-16 drought years. However, when it is weak, as expected, the impact could be minimal. Above all, the production estimates [noted above] seem to show that they will be able to tide most southern African countries over this forecast El Niño, as it is not expected to be as harsh as the 2015/16 edition which caused widespread drought. The countries that could be pressured, such as Zimbabwe, could find supplies from South Africa, which should comfortably sit with surplus maize. Most importantly, the South African farmers and maize exporters might not face tough competition from neighbouring producers such as Zambia and Malawi, as was the case in the previous year, due to expected tighter supplies in these countries. [AfDB rolls out programme to boost climate risk financing and insurance for African countries]
UAE, Uganda to establish one of the world’s first agricultural free zones (The National)
The UAE signed a deal with Uganda yesterday to establish one of the world’s only agricultural free zones in an attempt to enhance food security in the Emirates. The 2,500-hectare free zone will allow private companies from the UAE to invest in agricultural production and development in Uganda. Mariam Al Mehairi, Minister for Food Security, told The National it will also act as a launch pad for further investment into East and Central Africa. “There is a lot of potential to be unlocked in that area,” she said. The agreement was signed at Agriscape, a two-day exhibition in Abu Dhabi that convenes dozens of producers, suppliers and investors from across the globe. The deal will promote agribusiness between the two countries and lead to an increase in UAE imports of Ugandan crops and beef. [Quick take: Why is African agribusiness luring GCC investors?]
AfricaRice Council of Ministers sends strong signal of commitment to drive Africa’s rice agenda (CGIAR)
The 31st Ordinary Session of the Africa Rice Center (AfricaRice) Council of Ministers held recently under the chairmanship of Dr Papa Abdoulaye Seck, Minister of Agriculture and Rural Infrastructure of Senegal, reaffirmed strongly its commitment to support AfricaRice to help accelerate Africa’s rice self-sufficiency. Calling it a “historic” session, the chair stated: Extracts from resolutions: The Chair of the AfricaRice Council of Ministers should address a letter to the System Council and the System Management Board conveying the concerns of member states of AfricaRice about the drastic reduction in financial resources allocated to Centers, and in particular destined for rice research, whereas rice constitutes a strategic crop for Africa. AfricaRice should solicit institutional and financial support from the AU and the RECs in Africa, through advocacy actions. AfricaRice should extend the Continental plan for Accelerating Rice Self-Sufficiency in Africa study to other member countries in order to provide strategic evidence-based information that will guide decisions for investments in priority areas of the rice value chain and accelerate the attainment of rice self-sufficiency by 2025 in all member countries of AfricaRice. The Council ratified the adhesion of Mozambique and accepted to examine and ratify in due course the request of Kenya for adhesion to AfricaRice. [We’ll make Tanzania major rice producer in region, pledges JICA chief]
Local pharmaceutical appeal to EAC govts for protection against imported drugs (New Vision)
Pharmaceutical manufacturers in the EAC have appealed to authorities in partner states to impose duties on imported medicines that compete with the locally manufactured. They say the medicines imported from mainly China and India, where manufacturers enjoy big economies of scale and get subsidies from their governments were killing local industries by selling cheap products, making it hard for them to compete in the market. The manufacturers also complain that importers of cheap medicines win tenders to supply medicines to government institutions and agencies because they bid with relatively lower rates.
Uganda: Government puts SGR on hold over unresolved issues (Daily Monitor)
Finance minister Matia Kasaija has said government has put on hold the Standard Gauge Railway venture and has instead turned attention to revamping the old metre-gauge railway network until unresolved issues with Kenya and China have been concluded. “It is apparent the SGR is going to take us a lot of time to complete. First, we have to wait for Kenya to reach at the Malaba [border] point then we can start,” Mr Kasaija told Daily Monitor yesterday. He said government, in the interim, is refurbishing the old railway line as “an alternative” to lower transportation costs for traders. Uganda and Kenya first agreed to construct the SGR in 2008 but the arrangements were only concretised in 2012.
President Museveni, according to sources familiar with the venture, in recent months had been directly involved in discussions on the project, and had hoped to secure financing for the first section of the railway line during his visit to China last month when he attended the seventh FOCAC summit. But he returned empty-handed. However, Mr Kasaija revealed that during the discussions in Beijing, it was agreed that “Uganda and Kenya will embark on joint financing negotiations” after Kenya has completed the current Nairobi-Naivasha section. “Kenya also has its own problems which we cannot speak about in public. We shall wait for them to settle but on our side, we have already compensated people from Tororo to Iganga. When they finish their part, we shall proceed with it.”
American trade delegation looks to expand business opportunities in Southern Africa (Engineering News)
An American trade delegation, comprising businessmen from more than 30 American companies and state government leaders, is in South Africa seeking to expand agricultural export opportunities in the region. The trade delegation, which arrived in South Africa on Monday and will conclude its visit on Friday, is being led by US Department of Agriculture Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney.
Ghana: Enforce laws on retail trade – GUTA (Ghanaweb)
The Ghana Union of Traders Association has implored government to enforce the Ghana Investment Promotion Centre Act 865 section 27, which bars foreigners from engaging in retail business or trade. Ashanti Regional Secretary of GUTA, Mohammed Ali, noted that the call was not to intimidate foreigners in Ghana but rather to encourage authorities to implement the statutory laws of the country without fear or favour. According to him, most foreigners in the retail business evade taxes as well as sell sub-standard products. [Related: The Lagos Chamber of Commerce and Industry will hold a roundtable discussion tomorrow on ECOWAS integration and the challenges faced by Nigerian traders in Ghana]
Ghana: GRA revokes licenses of 20 freight forwarders (Ghanaweb)
The customs division of the Ghana Revenue Authority has revoked the operating licenses of 20 freight forwarders for falsifying the port of loading documents from India to other countries. They also under-declared the values presented to customs for duty and tax purposes. Out of the 20 freight forwarders being sanctioned, 13 are said to have diverted transit goods while seven are being punished for falsifying the port of loading documents from India.
Nigeria: Oil firms, others yet to remit $22bn to federation account – NEITI (Leadership)
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Foreign Domestic Investment into Africa rises, and Morocco joins South Africa as leading investment destinations
According to EY’s latest Africa Attractiveness report, FDI was up across the continent last year, although South Africa experienced a fall in project numbers, on the back of continued weak domestic growth.
The EY 2018 report, ‘Turning tides’, provides an analysis of FDI investment into Africa over the past 10 years. The 2017 data shows that Africa attracted 718 FDI projects which is up 6% from the previous year. This was in line with a recovery in the continent’s economic growth, following a difficult preceding year.
The higher project numbers were driven by interest in ‘next generation’ sectors, namely manufacturing, infrastructure and power generation. Despite the rise in FDI, project numbers remain below the 10-year average of 784 projects (per annum).
The report also highlights the countries with the strongest FDI gains, with Ethiopia, Kenya and Zimbabwe experiencing a major uptick in FDI during the 2017 year. By contrast, South Africa, Egypt, Mozambique and Cote d’Ivoire experienced declines in FDI projects in the same year.
Ajen Sita, EY Africa CEO, says: “2017 was in many respects a key year for the continent. We saw multiple changes in leadership across a number of countries, including South Africa, Zimbabwe and Angola. In addition, Kenya’s election was drawn out which created uncertainty at the time. Changes in leadership have in turn led to a renewed urgency to implement fresh policies as new administrations move to address slow economic growth.”
Emerging market investment into Africa slows
2017 saw a noticeable decline in emerging market investment flows into Africa. This is a major turnaround from the previous year when Asia-Pacific investors strongly increased inbound investments. Last year, investments from this region fell 16% while intra-African FDI also fell by 14%.
The weaker intra-African flows were largely driven by a weaker appetite by both Moroccan and Kenyan investors into neighbouring countries. South Africa’s outward investment project numbers held steady as weak domestic growth saw companies continue the search for external growth opportunities across the continent.
North American (primarily the USA), and Western European FDI flows to the continent remain strong
After the USA, which remains the single largest country investing into Africa, three of the remaining top five investors are European, namely the UK, France and Germany. Of the ten largest investing countries in Africa, six are Western European.
FDI is more evenly allocated across the regions, as South Africa’s lead narrows
The report found that South Africa, Morocco, Kenya, Nigeria and Ethiopia were the dominant anchor economies within their respective regions, collectively accounting for 40% of the continent’s total FDI projects. Overall these four major sub-regions each attract similar FDI when measured by project numbers.
For the first time ever, East Africa became the single largest beneficiary of FDI with 197 projects (27% of total projects). Southern Africa, by contrast, fared lowest of the four major regions, at 162 projects (23%).
Whilst South Africa remains the continent’s leading FDI destination when measured by project numbers, for the first time ever the country’s lead is under threat with Morocco increasing its FDI projects by a sizeable 19% to share the top spot with South Africa.
“Over time and as Africa’s growth accelerates, we anticipate that South Africa’s share of inbound FDI will continue to decline, relative to the rest of the continent. This will be driven by sustained strong growth, particularly in the Eastern-hub economies, and revived growth in the West hub. It illustrates the need for South Africa to ensure its leading economic role across the continent is sustained,” says Sita.
Next steps to increasing Africa’s FDI
“There are major opportunities that the continent can benefit from after the recent leadership changes we have witnessed. These opportunities require emboldened leadership to drive renewed policy reforms and implement new initiatives which encourage inbound investment flows. There are some outstanding examples of how this has already worked in some countries, not least Rwanda, which is able to attract FDI well ahead of other economies of similar size, and indeed, ahead of much larger economies.
“By focusing on improving public sector efficiencies and finances, minimizing bureaucratic processes and partnering with the private sector on major projects, more countries can stimulate much needed FDI. In addition, they should continue to focus attention on increasing their scores on the ease of doing business and global competitiveness rankings,” Sita concludes.
This report and analysis was carried out by EY in Africa, with the participation and collaboration of Graham Thompson, Sampada Mittal, Sanvee Jalan and Shubham Pipraiya.
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Promoting foreign direct investment to LLDCs: Luncheon at the World Investment Forum 2018
On 25 October 2018, on the sidelines of the World Investment Forum in Geneva, the UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS) and UNCTAD co-organised a high-level event for Ministers and Ambassadors from LLDCs to share success stories as well as measures and priorities to boost foreign investment.
The meeting provided an opportunity for different stakeholders, including LLDCs, development partners, business executives, and the United Nations system to take stock of progress and share successful experiences in promoting and facilitating FDI to LLDCs, identify constraints, and suggest recommendations to help LLDCs to attract and optimally utilize FDI to support efforts towards achieving the SDGs.
The 32 LLDCs, with a population of over 500 million, share some common problems due to their geographical location, which affect their economic engagement with the rest of the world. Many LLDCs find themselves marginalized from the world economy, cut-off from the global flows of knowledge, technology, capital and innovations, and unable to benefit substantially from external trade. This situation results in narrow production and export bases, leading to limited economic growth and persistent poverty in the LLDCs.
As a result, the LLDCs have numerous special needs financing requirements including: investment in the development and maintenance of hard infrastructure; investment into soft infrastructure/trade facilitation; enhanced trade –productive capacities, value addition, diversification, and global value chains; enhanced trade in services; enhanced human and institutional capacity building; enhanced regional integration; and mitigation and resilience building to economic shocks, climate change, desertification, and others.
In countries with low domestic capital formation like LLDCs, foreign direct investment (FDI) is an important means of financing development. After five consecutive years of decline (2011-2016), FDI flows to the LLDCs rose by 3 per cent in 2017, to $23 billion. This modest increase still left total flows to LLDCs almost 40 per cent below the peak of 2011.
LLDCs have traditionally been marginal destinations because of the small size of their economies and the inherent geographical disadvantages compounded by poor infrastructure, high transportation costs, inefficient logistics systems and weak institutional capacities. Most FDI to LLDCs goes into extractive sectors, such as mining, quarrying and petroleum.
A key objective for LLDCs is therefore to attract and effectively target FDI in non-extractive sectors, particularly agriculture, so as to encourage job creation, infrastructure development, export diversification and structural transformation. Technical and capacity building assistance need to be increased, for areas such as negotiating contracts, developing bankable projects, and investment facilitation.
As the LLDCs and their partners prepare to undertake the Comprehensive Midterm review of the Vienna Programme of Action (VPoA) for the LLDCs for the Decade 2014-2024 (VPoA) in 2019, it is important to identify ways of encouraging FDI flows to LLDCs.
Statement by Zimbabwe Minister of Finance and Economic Development, Hon. Prof Mthuli Ncube
I am delighted to take the floor and contribute my national perspective to this very important discussion on Promoting Foreign Investment to Landlocked Developing Countries (LLDCs) focusing on our experiences, challenges and strategies that can help attract quality investment.
In light of time limitations, I shall try to zero in more on Zimbabwe’s experiences, and the strategies we are employing to make the country more land-linked and attractive to investment.
Zimbabwe’s National Development blueprints have largely reflected much of the fundamental priorities identified in the Vienna Programme of Action (VPoA) for Landlocked Developing Countries for the Decade 2014-2024. Here I am specifically referring to the issues of transit policy, infrastructure development and maintenance, international trade and trade facilitation, regional integration, cooperation and structural economic transformation.
Zimbabwe is located at a very strategic position as a transit country within the Southern Africa subregion. In recognition of this, the country has harmonised transit policies in compliance with the COMESA and SADC protocols on transit trade, transit facilities, and third-party motor vehicle insurance schemes.
Aside form that, Zimbabwe is also establishing one-stop-boarder-posts to facilitate smooth transit of both people and goods across the country’s borders. A study of one of the completed border posts, the Chirundu One-Stop Border-Post (OSBP) has shown that its establishment induced between US$2.2 and US$3.1 million of Zimbabwe’s annual exports to Zambia.
In the area of infrastructure development and maintenance, Zimbabwe is currently in the process of upgrading and modernising its road infrastructure along major trade corridors that serve East and Southern Africa, linking the North-South transport Corridor. For those road projects already completed, a Costs-Time-Distance study government has shown that the average speed of heavy trucks has increased from 33km/hr prior to the rehabilitation exercise to the current 48km/hr. This does not only reduce transit time and costs, but also improves competitiveness.
In the area of energy. The country has taken the initiative to promote the use of renewable energy in the form of solar generators, apart from the expansion of the current thermal and hydroelectric generation capacity. Great effort is being made to balance the need for climate sustainability and quality affordable investment.
Being a landlocked country, Zimbabwe has undertaken a number of reforms to promote and facilitate investment. The country has signed 35 Bilateral Investment Treaties (BITs) and 10 of these are in force. These provides for pre-and-post investment facilitation and protection. Zimbabwe has also signed 9 Treaties with Investment Provisions (TIPs) and 7 of these are in force. The country has embarked on Ease of Doing Business reforms aimed at boosting the competitive advantage of the economy in attracting foreign direct investment. Measures undertaken under this process include, but are not limited to the following:
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Establishment of the Zimbabwe Investment and Development Authority (ZIDA): A One-Stop-Investment Services Centre.
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Promulgation of a Special Economic Zones (SEZ) law which designate areas to be SEZ and the sectors of investment in these areas. The law also provides a number of fiscal and non-fiscal incentives.
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The Ease of Doing Business Reforms have also been aimed at reducing the cost of trading through trade facilitation in order to attract FDI.
In the agriculture sector, Zimbabwe is a huge producer of tobacco and the bulk of the product is exported unprocessed. The average prices are $3/kg for unprocessed and $6/kg for crushed tobacco as compared to between $30 and $60 for tobacco cigarettes. Therefore, by exporting unprocessed tobacco we are also giving away value of at least $27 per kilogram that could be accruing to the country.
Beneficiation also helps in triggering the emergency of vertical and horizontally integrated industries – a strategy for luring both local and foreign direct investment.
As we go towards the review of the VPoA, we call upon partners to put in place a tracking mechanism that would assist us in reviewing the progress that both ourselves, the LLDCs and the development partners have managed to achieve in the implementation of VPoA priorities. It is essential that cooperation between the public and private sectors be strengthened to turn our statuses to land-linked developing countries.
I thank you.
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tralac’s Daily News Selection
The G20 Compact with Africa meeting gets underway today in Berlin:
President Ramaphosa: In his capacity as co-chair of the G20 Africa Advisory Group, President Ramaphosa will deliver a keynote address at the G20 Investment Summit. The summit brings together German businesses and Compact with Africa countries to explore investment opportunities under the framework of the G20 Partnership with Africa.
President Akufo-Addo: Whilst in Germany, and on the sidelines of the conference, President Akufo-Addo will hold bilateral talks with German Chancellor, Angela Merkel, as well as hold meetings with CEOs of German global enterprises, Volkswagen and Siemens, about their proposed investments in Ghana. President Akufo-Addo will, on Wednesday, 31st October, 2018, deliver the keynote speech at the 18th International Economic Forum on Africa.
Trends in FDI and cross-border investments in Compact with Africa countries
The second edition of the Compact with Africa (CwA) investment monitoring report provides an update of country and sector-level trends in Foreign Direct Investments (FDI) flows and announcements in Cross-Border Investments (CBI) in CwA, covering the five-year period between 2013-2017. It follows the previous analysis released during the 2018 World Bank Group/IMF Spring Meetings and is part of a broader set of efforts by this G20 initiative to better understand the dynamics of investment flows into CwA countries.
The OECD EMnet business meeting on Africa Infrastructure and regional connectivity takes place tomorrow in Paris. A conference preview, by Hassan El-Houry, with special reference to Africa’s aviation sector.
2018 Ibrahim Index of African Governance
Mo Ibrahim: “While Africa’s combined GDP has increased by almost 40% over the last decade, average progress in Sustainable Economic Opportunity has been almost null for Africa’s citizens. This is a huge missed opportunity. It could become a recipe for disaster. With the expected population growth, Africa stands at a tipping point, and the next years will be crucial.” Extracts (pdf):
African countries are taking diverging paths. While in 2017 the range between the highest (Mauritius) and lowest (Somalia) governance scores is the smallest it has been in ten years, increasing divergence appears between country scores. In the earlier years of the last decade, countries were concentrated around the African average score, but over the last ten years have dispersed. Within the last three years, 18 countries displayed their worst Overall Governance performance in a decade, and 28 achieved their best in the same period, highlighting the diverging trends on the continent. The lack of substantial progress in Sustainable Economic Opportunity is mainly driven by a sizeable deterioration in Business Environment (-4.9). In a context where the working age population (15-64) on the continent is expected to grow by +27.9% over the next ten years, Africa’s declining Business Environment is worrying. The African average score of 41.1 is the lowest for this sub-category in ten years and underscores the weak foundations for a large number of African countries to be able to provide decent jobs to their ever-growing working age populations.
Starting next month: Ethiopia to issue visa on arrival to all Africans (Xinhua)
Ethiopia is to issue visa on arrival to all Africans starting on 9 November, said Fitsum Arega, chief of staff at the Ethiopian Prime Minister Office, on Friday: “Consistent with Prime Minister Abiy Ahmed's vision of a closer and full regional integration in Africa, where minds are open to ideas and markets are open to trade, Ethiopia will start on arrival visa to all Africans starting from 9 November”
Angola: National Green Export Review baseline report for wood, fish, coffee (UNCTAD)
It is important to mention that selected sectors covered in this baseline report include those sectors in which Angola has already achieved considerable experience, but further growth can be achieved. Three out of seven products being exported by Angola can be categorized as green products related with the agricultural sector because they have potential to promote local economy, and assist achieving the SDGs. In addition, these three products – wood, fish and coffee – and their value-adding processes have the potential to be drivers of socioeconomic transformation and environmental preservation in Angola. Table 4 summarizes their key export figures (pdf). Figure 12 shows that green product exports have increased by 75% in the period between 2009 and 2015 but on a YoY basis for the last seven years, their average YoY increased only 13% and numbers are declining. Hence, increasing green product exports will require investments in infrastructure, gradual reduction of imports, deepening of financial sector reforms, and improvement of local business environment (e.g. reducing bureaucracy and facilitating credit).
Nigeria: MAN's new president calls for detailed review of AfCFTA before signing (Daily Trust)
The new President of the Manufacturers Association of Nigeria, Engr Mansur Ahmed, has called for a detailed study of the potential benefits and costs of the AfCFTA to Nigeria. The MAN president made the remarks at a meeting with the AUC Chairperson, Moussa Faki Mohamat, during his visit to Nigeria. “It is an open secret that, given Nigeria’s demography and rapid growing population any initiative of far reaching consequences on the survival of our fledging manufacturing sector and the production sector in general must be approached with great caution. At the minimum, we insist that a detailed study of the potential benefits and costs to the various sectors and sub sectors of the economy must be undertaken.”
Seme-Krake Joint Border Post: Nigeria and Benin make a new break for the border (News24)
Nigeria's southwestern border with Benin is notoriously chaotic. Travellers and traders battle corrupt officials, hawkers and buzzing moto-taxis just to get to the other side. But a new crossing point has sprung up near the well-worn dirt tracks and roadside markets that the West African bloc ECOWAS hopes will make the movement of people and trade a lot easier. The well-guarded 17-hectare site conforms to international standards and has been built for an estimated $21m. State-of-the-art scanners to detect illicit goods and a weighbridge have been installed. Customs, immigration and other officials will no longer have to work out of makeshift offices in battered shipping containers and huts. Extract from President Buhari's statement: “The border post is strategically important and lies on the Lagos-Cotonou-Lome-Accra-Abidjan corridor, which accounts for about 70% of the entire transit traffic in the sub-region. The corridor is also part of the Trans-African Highway network. This joint border post with modern enabling facilities is a flagship project in ECOWAS and a good example of regional public assets with a spill-over range of benefits. This Seme-Krake joint Border Post is a symbol of integration that brings together the peoples of Nigeria and Benin. I would, therefore, like to reassure you that Nigeria is committed to the operationalization of the Joint Border Post and will work closely with the Republic of Benin to ensure the success of this set of border formalities.”
Noepe-Akanu Joint Border Post: ECOWAS needs functioning regional market – Akufo-Addo (GBN)
President Nana Addo Dankwa Akufo-Addo on Saturday reiterated the call for a functioning common regional market in ECOWAS. He said a sub-regional market must be considered the fundamental objective for all, as the region inched towards total integration. President Akufo-Addo made the call when Mr Jean-Claude Brou, the President of the ECOWAS Commission, handed over to him and President Faure Gnassingbe of the Republic of Togo, a joint border post for Noepe-Akanu at Akanu in the Ketu North Municipality of the Volta Region. The joint post was funded by the EU Transport Facilitation Programme at an estimated cost of €13,6m. It is a 10-hectare facility that forms part of the corridor linking Abidjan and Lagos, and divided into commercial vehicle, cargo handling, and pedestrian sections. The facility houses administration blocks, commercial buildings, customs bridge, truck inspection zones, health services buildings, and pedestrian control zones. It also has a veterinary store and animal park, and heavy goods vehicles’ shelter among other facilities. A total of seven joint border posts across the Sub-region had been earmarked as key elements of a €63.8m grant for the Transport Facilitation Programme.
Berbera Port project and Ethiopia-Somaliland trade logistics: an interview with Dr Saad Ali Shire, Somaliland’s foreign minister (MENA FM)
A: That figure was mentioned in the previous five-year plan [Growth and Transformation Plan (GTP-I)]. It is no longer mentioned in the current one. No one can give you a guarantee. You see, most of the imports and exports process in Ethiopia is handled by the private sector and the private sector goes to where the cost is very reasonable. Hence, they have options. Let's say an Ethiopian businessman wants to import goods from China and he has a number of potions on how to ship the cargo. He can take the cargo to Port Sudan, or now can take it to Assab. Perhaps to Port of Djibouti or can take it to Berbera Port. In order to get a better share of the cargo, any port needs to be more competitive. Every port gets as much as share of the overall cargo based on its competitiveness. Due to that, nobody can guarantee whether Berbera gets a 10 percent or 30 percent share of the cargo. It is a free economy.
Q: You indicated the comparative advantages Berbera has to serve the eastern part of Ethiopia. Apart from that, what could be said about the importance of Berbera to the Ethiopia? A: We have signed a tripartite agreement with the governments of Ethiopia and DP World. That agreement still alive and nothing has changed. The government of Ethiopia didn't communicate with us about backing out of the agreement. There is no indication that they intend to do so. We hope that all the three parties will be onboard to contribute to the development of an efficient port which will serve the whole region.
Anzetse Were: Why thinking of China debt trap diplomacy is a fallacy (Business Daily)
Last month, the South African Institute of International Affairs published my policy insight on the Chinese debt trap. In short, Africa’s growing public debt has sparked a renewed global debate about debt sustainability on the continent. This is largely due to the emergence of China as a major financier of African infrastructure, resulting in a narrative that China is using debt to gain geopolitical leverage by trapping poor countries in unsustainable loans. It essentially argues that African governments are being deliberately lured into debt by the Chinese government through debt trap diplomacy and that China has an ominous plan to mire the continent in debt in order to gain economic and geopolitical control of Africa. My counter-argument is simple: The debt trap narrative undermines the decision-making power and agency of African governments. Even worse, the debt trap narrative ‘infantalises’ African governments, painting them as little more than overgrown children who have to be constantly supervised by other powers if there is any hope of them getting anything right. More seriously, the debt trap narrative is deeply worrying because it is deeply dangerous.
Today’s Quick Links:
Kenya banks on direct flights to boost trade with America
Ethiopian Airlines to launch Moscow flight
Ethiopian Airlines CEO: “Long-term planning”, as China does, is key to success
Fitsum Arega moving back to head Ethiopia’s Investment Commission
Ethiopia expecting large investments from India
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President Cyril Ramaphosa in Germany for G20 Africa Conference
President Cyril Ramaphosa has arrived in Germany where he is expected to participate in the G20 Africa Conference in Berlin.
The conference will discuss progress made with the G20 Partnership with Africa and the Compact with Africa (CwA), the Presidency said on Monday.
The CwA was formally launched during the July 2017 G20 Hamburg Summit and comprises 12 African countries including Benin, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Tunisia, Togo and recently Burkina Faso.
The CwA Initiative is based on the premise that significant economic development can be achieved when African countries, G20 members, development partner countries, and international organisations work together to create a better environment for private investment.
“This conference will therefore also focus on ways in which the G20, African countries and development banks can cooperate to promote private investment and economic participation in Africa while reflecting on the achievements and gains made since the Hamburg Summit of 2017,” the Presidency said.
President Ramaphosa is also expected to deliver a keynote address in his capacity as Co-Chair of the G20 Africa Advisory Group at the G20 Investment Summit.
The summit brings together German businesses and CwA countries to further explore investment opportunities under the framework of the G20 Partnership with Africa.
During the summit, German investors are expected to present flagship projects currently undertaken in the CwA countries.
As part of his working visit, President Ramaphosa will have a bilateral meeting with Angela Merkel, Chancellor of Germany, the Presidency said.
President Ramaphosa will be accompanied by Finance Minister Tito Mboweni.
Germany and South Africa enjoy a robust and growing trade relationship. In 2017, Germany remained South Africa’s third largest global trading partner.
South African exports to Germany amounted to R84.198 billion and imports amounted to R127.543 billion. There are more than 600 German companies in South Africa that sustain approximately 100 000 jobs.
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African governance progress lagging behind needs and expectations of growing population, finds 2018 Ibrahim Index of African Governance
Despite strong GDP growth over the last 10 years, Africa has failed to generate economic opportunities for its booming youth population
The 2018 Ibrahim Index of African Governance (IIAG), launched today by the Mo Ibrahim Foundation, highlights that public governance progress in Africa is lagging behind the needs and expectations of a growing population, composed mainly of young people.
Over the last decade, Overall Governance has on average maintained a moderate upward trajectory, with three out of four of Africa’s citizens (71.6%) living in a country where governance has improved.
Mo Ibrahim, Chair of the Mo Ibrahim Foundation, said: “We welcome progress in Overall Governance, but the lost opportunity of the past decade is deeply concerning. Africa has a huge challenge ahead. Its large and youthful potential workforce could transform the continent for the better, but this opportunity is close to being squandered.
“The evidence is clear – young citizens of Africa need hope, prospects and opportunities. Its leaders need to speed up job creation to sustain progress and stave off deterioration. The time to act is now.”
African governments have struggled to translate economic growth into improved Sustainable Economic Opportunity for their citizens
Since 2008 the African average score for Sustainable Economic Opportunity has increased by 0.1 point, or 0.2%, despite a continental increase in GDP of nearly 40% over the same period. There has been virtually no progress in creating Sustainable Economic Opportunity, meaning it remains the IIAG’s worst performing and slowest improving category.
Defined as the extent to which governments enable their citizens to pursue economic goals and prosper, the almost stagnant Sustainable Economic Opportunity trend strikes a concerning contrast with demographic growth and youth expectations. Africa’s population has increased by 26.0% over the last ten years and 60% of the continent’s 1.25 billion people are now under the age of 25.
A diverging picture across Africa
African countries show increasing divergence in Overall Governance performance. Continental progress is mainly driven by 15 countries that have managed to accelerate their pace of improvement over the last five years. Progress is most striking in Côte d’Ivoire, Morocco and Kenya.
Divergence is also reflected in Sustainable Economic Opportunity trends. While 27 of Africa’s countries have shown some improvement, in 25 countries, accounting for 43.2% of Africa’s citizens, Sustainable Economic Opportunity performance has declined over the last ten years.
There is no strong relationship between the size of a country’s economy and its performance in Sustainable Economic Opportunity. In 2017, four of the ten countries with the highest GDP on the continent score below the African average score for Sustainable Economic Opportunity and sit in the lower half of the rankings, namely: Algeria, Angola, Nigeria, and Sudan.
Meanwhile two of the smallest economies on the continent, Seychelles and Cabo Verde, reach the 5th and 6th highest scores in providing Sustainable Economic Opportunity for their citizens.
Declining Business Environment runs counter to the growing working age population
Calling for attention is the trajectory of the African average score for Business Environment. Deteriorating by almost -5.0 points over the last ten years, this is a worrying trend given that the number of working age Africans (15-64 years old) is expected to grow by almost another 30% over the next ten years.
This will increase demand for jobs in an environment where on average progress in Sustainable Economic Opportunity is almost non-existent. Such demographic figures create a further striking contrast with the drop of -3.1 points in Satisfaction with Employment Creation since 2008.
Additionally, the indicator measuring Promotion of Socio-economic Integration of Youth registers an average continental decline of -2.3 over the last decade.
Education outcomes are worsening
Further cause for concern is Education. While Human Development is one of the bigger success stories of the 2018 IIAG, driven by improvements in Health, the stalling progress in Education seen in last year’s IIAG has now turned to decline.
For 27 countries Education scores registered deterioration in the last five years, meaning that for more than half (52.8%) of Africa’s youth population, education outcomes are worsening. This drop is driven by a fall in the indicators measuring whether Education is meeting the needs of the economy, education quality, and citizens’ expectations of education provision.
Civil society space is shrinking
Progress in Participation & Human Rights has been made on average. Almost four out of five of Africa’s citizens (79.6%) live in countries that have progressed in this dimension over the last decade. However, ‘free and fair’ executive elections do not always translate into a better participatory environment.
Alarmingly, citizens’ political and civic space in Africa is shrinking, with worsening trends in indicators measuring Civil Society Participation, Civil Rights & Liberties, Freedom of Expression and Freedom of Association & Assembly.
Welcome progress in Rule of Law and Transparency & Accountability, which are key to sound governance performance
Although Personal Safety and National Security continue to show average decline over the last decade, Rule of Law and Transparency & Accountability have begun to register welcome progress. Rule of Law is the most improved sub-category in the IIAG over the last five years. African average performance in Transparency & Accountability has also improved, though more needs to be done as it remains the worst performing sub-category.
The IIAG highlights that citizens’ rights and welfare are key to progress in public governance. Overall Governance scores are strongly correlated with citizen-centred measures, including property rights, civil rights & liberties, government accountability and social welfare policies.
The IIAG results also confirm that Rule of Law and Transparency & Accountability are key pillars of good governance. These two sub-categories show the strongest relationships with Overall Governance scores in Africa, with strong performance in these areas being the most common components of countries that perform well.
Transparency & Accountability is also strongly related to the Sustainable Economic Opportunity category and Business Environment sub-category, indicating that improvements in these areas will support progress and economic opportunity in Africa.
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Trends in FDI and cross-border investments in Compact with Africa countries
The second edition of the Compact with Africa (CwA) investment monitoring report provides an update of country and sector-level trends in Foreign Direct Investments (FDI) flows and announcements in Cross-Border Investments (CBI) in CwA, covering the five-year period between 2013-2017.
It follows the previous analysis released during the 2018 World Bank Group/IMF Spring Meetings and is part of a broader set of efforts by this G20 initiative to better understand the dynamics of investment flows into CwA countries.
For the purposes of this report, the analysis of FDI flows is limited to general trends at the country and regional levels, and a comparison of flows to CwA countries relative to the rest of Africa. The CBI analysis, which draws from project-level data, allows for a more detailed look at recent investment trends at the sector and sub-sector levels, and by country of origin.
Key highlights
FDI flows to CwA countries have increased by 36 percent over the past five years, despite deterioration in the external environment and an overall drop of 40 percent in FDI inflows to the rest of Africa during this period. This was largely driven by the global weakening of commodity prices in recent years and the economic slowdown in the EU and China, both important sources of FDI for the region. The positive trend for CwA countries suggests increased resilience against the backdrop of a more challenging global scenario.
FDI stock to CwA countries reached $277 billion and grew at a faster rate (10 percent year-on-year) than the rest of Africa (6 percent year-on-year between 2016-17), signaling higher levels of FDI accumulation in compact countries.
Cross-border investment activity is accelerating in CwA countries. Between July 2017 and June 2018, a total of 274 cross-border investment projects were announced, representing an increase of 12 percent over the preceding 12-month period (July 2016-June 2017).
In 2017, Egypt continued to lead as largest recipient of FDI among CwA countries ($7.4 billion), followed by Ethiopia ($3.6 billion), Ghana ($3.3 billion) and Morocco ($2.7 billion). In Egypt, improved macroeconomic stability and a new investment law passed in 2017 helped boost investor confidence and attract private investment. Ethiopia has maintained strong momentum in recent years, following government efforts to improve the attractiveness of the country as investment destination. Ethiopia recorded a near three-fold increase in FDI inflows over the past five-year period.
Extractive industries (coal, oil and natural gas), real estate, alternative and renewable energy (solar/wind), chemicals (pesticides and fertilizer) and metals were the top five sectors for CBI announcements by U.S. dollar volume in CwA countries over the past three years, reflecting long-term investment commitments and a focus on infrastructure upgrading in the region.
Since 2015, the manufacturing sector attracted the largest number of CBI project announcements in CwA countries (285 projects; 29 percent of total), especially in the food industry, building and construction materials, textiles and automotive sub-sectors, contributing to greater economic diversification in CwA countries.
G20 and the EU accounted for the major share of CBI announcements to CwA countries in the 2015-2018 period with over $39 billion in announced investments or around three-quarters of the total. Russia ($31 billion), China ($30 billion) and Italy ($18 billion) were the three largest CBI source countries.
The pace of reforms in CwA countries accelerated in recent years. CwA countries outperformed the rest of Africa on improvements in Doing Business indicators and distance-to-frontier (DTF) scores. Since the launch of the compact in 2017, a total of 101 reform commitments have been identified during its first year, with additional reform progress expected in 2018. This indicates substantial commitment to the reform agenda and gradual improvement in the enabling environment for business in compact countries.
The report sends a strong signal that sound policies to improve investment conditions are paying off and market interest in Compact countries is growing. At the same time, it underscores the long-term nature of this initiative as it requires time to build up a track record that strengthens investor confidence.
This interim monitoring report was prepared by the International Finance Corporation (IFC) in collaboration with the African Development Bank (AfDB) and the African Center for Economic Transformation (ACET).
About the Compact with Africa
The pdf G20 Compact with Africa (CwA) (1.65 MB) was initiated under the German G20 Presidency to promote private investment in Africa, including in infrastructure. The CwA’s primary objective is to increase attractiveness of private investment through substantial improvements of the macro, business and financing frameworks.
It brings together reform-minded African countries, international organizations and bilateral partners from G20 and beyond to coordinate country-specific reform agendas, support respective policy measures and advertise investment opportunities to private investors. The initiative is demand-driven and open to all African countries.
Since its launch in 2017, the CwA has sparked great interest. So far, 11 African countries have joined the initiative: Benin, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia.
Compact teams in each CwA country are at the heart of implementing the initiative. Promoting private investment and new investment opportunities in Compact countries is critical for the success of the initiative. The annual G20 investor event will be held on November 8, 2018 at the margins of the AfDB “Africa Investment Forum” in Johannesburg, South Africa. This will be an opportunity to interact with the private sector, showcase example of improved framework conditions and concrete private sector activity coming out of the Compact initiative.
The Africa Advisory Group (AAG), which coordinates and advances the CwA initiative, reports bi-annually to ministers and governors on progress, future ambitions and measurable targets in each Compact country.
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Ottawa Ministerial on WTO reform: joint communiqué (GoC)
We note growing trade tensions are linked to major shifts in the global trading landscape. We also note the difficulties to achieve outcomes under the negotiating pillar. We share a common resolve for rapid and concerted action to address these unprecedented challenges and to restore confidence. In this regard, we have identified three areas requiring urgent consideration. First, we underscore the dispute settlement system as a central pillar of the WTO. Second, we must reinvigorate the negotiating function of the WTO. Third, we should strengthen the monitoring and transparency of members’ trade policies which play a central role in ensuring WTO members understand the policy actions taken by their partners in a timely manner. The current situation at the WTO is no longer sustainable. Our resolve for change must be matched with action: we will continue to fight protectionism; and we are committed politically to moving forward urgently on transparency, dispute settlement and developing 21st century trade rules at the WTO. We look forward to reviewing our progress when we meet again in January 2019.
‘Superstars’: The dynamics of firms, sectors, and cities leading the global economy (McKinsey)
We assess the extent to which a superstar effect can be observed in the global economy in three arenas - firms, sectors, and cities - and inspect the dynamics, including churn and changing characteristics, in each of these arenas. Emerging-market superstar cities have increased their contribution to global GDP by 30 to 40% in the past decade, while advanced-economy superstar cities have increased their share of global GDP by 20 to 30%. Over the past decade, we find a 25% churn rate among superstar cities as some advanced-economy cities, such as Rome, San Diego, and Vienna, have been displaced by emerging-market cities, such as Jakarta, Kuala Lumpur, and New Delhi, with stronger income and population growth relative to peers in the same region and income group. The growth of superstar cities is fueled by gains in labor income and wealth from real-estate and investor income, yet many show higher rates of income inequality within the cities than peers do. Superstar cities share some characteristics in addition to their economic size and incomes. Of the 50 superstar cities, 31 are ranked among the most globally integrated cities, 27 among the world’s 50 most innovative cities, 26 among the world’s top 50 financial centers, and 23 among the world’s 50 “digitally smartest” cities. Additionally, 22 of the superstar cities are national and regional capitals, and 22 are among the world’s largest container ports.
The dynamics of South African investment in the rest of Africa (GEGAfrica)
Figure 10 highlights three further issues. First, in 2016, South Africa was the fifth largest investor in Africa, accounting for 3% of investment into the continent, measured by FDI stock. Second, South Africa’s share of investment into Africa (along with that of a number of other major investors in the continent) fell significantly between 2011 and 2016. This is partly due to the significant rise in investment by China. In the space of five years, China more than doubled its FDI stock in Africa, from $23bn in 2011 to $53bn in 2016, while (in dollar terms) South Africa’s FDI stock in Africa grew by only $1bn in that period. China’s growing prominence as an investor in Africa is highlighted in Box 3.
Figure 14 summarises the operational and investment footprint of South Africa’s largest publicly listed companies in Africa. SACU is a distinct focus market for South African firms, while the broader SADC is also a key market. Namibia had the highest number of target companies operating in the country, with more than half having an operational presence there. This was followed by Zambia and Botswana. While there was also a significant operational presence by South African companies in key West and East African markets (in terms of the number of companies present), it is clear from Figure 14 that company operations were concentrated in Southern and Central Africa, with the overall operational presence far more sparse north of the equator. Overall, there was evidence of an operational presence of at least one company across all 54 African countries, except for Eritrea and Libya.
South Africa Investment Conference: updates
Investment Conference bags R290 billion for SA (SAnews.gov.za)
The inaugural South Africa Investment Conference has secured nearly R290 billion worth of investment announcements for the country. “This R290 billion is what we have now in our hands and these are in addition to the R400 billion which were received during the investment drive by the special envoys and from various countries during state visits which we still need to button down,” said President Cyril Ramaphosa as he thanked investors. [Conference sees R134.1bn in new investments in SA (Business Day)]
Opening address by President Cyril Ramaphosa (The Presidency)
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AU woos Nigeria over free trade. The Chairman of AU, Mr Moussa Faki, is currently in Nigeria to visit and convince all the relevant authorities, including President Muhammadu Buhari, to see reasons. “One the reasons for the visit are to discuss with the president on the African free trade that is yet to be signed.We have to realise that Nigeria is one the important countries in Africa and Nigeria is committed to the development of the continent. He said that Nigeria needed to be involved in pushing the AfCTA agenda for the benefit of the whole continent.
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Nigeria, too big, diverse to blindly sign agreements without understanding – Buhari. President Muhammadu Buhari says Nigeria is `too big and too diverse to blindly sign agreements’ without understanding the consequences of such actions. The president made the declaration when he received representatives of the Lagos Chamber of Commerce and Industry led by its President, Babatunde Ruwase, at the Presidential Villa, Abuja, on Friday. Buhari used the occasion of his audience with members of the LCCI to explain his decision to inaugurate a Presidential Committee to assess the potential costs and impact of the agreement establishing the African Continental Free Trade Area for Nigeria. According to him, Nigeria is still assessing the impact of this agreement on its backward integration and import substitution policies. He said: “Specifically, the provisions on rules of origin and transhipment were matters of concern to us. Already, some of the treaties we are party to have been significantly abused resulting in massive smuggling which has crippled many of our local industries and destroyed millions of jobs. To avoid these past mistakes, we conducted vast consultations across the country in which the LCCI participated. The responses have been mixed.’’
Africa Chamber Leaders Forum: Nairobi Declaration
Extracts: African leaders proposed the KNCCI patron, President Uhuru Kenyatta, become a Goodwill Ambassador of African Chambers of Commerce to spearhead the agenda of the Chambers; African Chambers to actively participate in the on-going negotiations on trade agreements and policies and lobby their respective governments to ratify the AfCFTA; The Chambers should take control of weight stations at Border points to manage harassment
East Africa’s One Stop Border Post project (AfDB)
The African Development Fund, the concessional arm of the AfDB, extended loans of $107m to Kenya and $88m to Tanzania to build a modern and more efficient “One Stop Border Post”. The financing also covered the construction of a 240-km road from Arusha through Namanga to Athi River, near Nairobi. Co-financed by the Japan Bank for International Cooperation, the infrastructure project also facilitates traffic between Zambia, Tanzania, Kenya, Uganda and Sudan. The 240-km road particularly is of strategic importance to the East African region and forms part of the priority Corridor No.5 of the EAC Regional Roads Network, which spans from Tunduma in southern Tanzania to Moyale in northern Kenya, and onward to Addis Ababa. The Arusha region is the hub of tourism in Tanzania attracting more than 80 percent of all tourist visitors. About 41% and 20% of Kenya exports and imports to and from Tanzania respectively go through the project road.
The future of UK-East Africa trade (IFT)
This paper aims to: (i) Give a broad picture of current UK trade with EAC countries, in its context of the EU’s EPA with the region and the EU’s Generalised System of Preferences. We also give a brief overview of the current UK-EAC aid and investment relationship. (ii) Analyse the possible impact of Brexit on UK-EAC trade, suggesting, where necessary, ways of avoiding potential damage to current trade flows. The paper includes case studies of the two most significant EAC exports to the UK: tea and cut flowers. (iii) Suggest ways that UK-EAC trade can be improved after Brexit, in terms of increasing the volume of trade and contributing to the economic development of the EAC countries. (iv) Give a broader set of recommendations on post-Brexit UK trade policy vis-à-vis Africa and the developing world, based on observations drawn from the East African example.
Why British trade with Africa, Caribbean and Pacific nations can boom after Brexit (UK Gov)
Brexit was not and never has been about the UK turning in to ourselves – it is about facing out to the world. Non-EU trade has become more and more important to the UK. A decade ago, most of our exports were to the European Union. Now it’s the other way around. And we now want to increase our trade across the world. So what does that mean in practice? It certainly does not mean changing things for the sake of it. We support a lot of what the EU does, and that’s especially true in the immediate term - we understand that business needs continuity. Instead it means building on what we already do, as a member of the EU. I think there are 4 specific areas to mention. [Note: The author, Minister George Hollingbery - Minister of State for Trade Policy at the Department for International Trade - delivered this speech to representatives from the ACP group of states]
International investment obligations and industrial policy: evolution in treaty practice (ICTSD)
As industrial policies become more widespread and controversial, the relationship between international investment agreements and industrial policy measures has taken on particular importance. This paper addresses this relationship in light of two competing and strengthening influences: heightened scrutiny of industrial policy measures and heightened expectations for sustainable development.
Productivity revisited: Shifting paradigms in analysis and policy (World Bank)
Differences in productivity account for half the differences in GDP per capita across countries, so boosting productivity is critical to alleviating poverty and fulfilling the rising aspirations of global citizens. A new report launched today by the World Bank presents a range of new diagnostic and analytical tools for studying productivity – while challenging many established approaches and policy recommendations in the areas of trade, human capital, and innovation. The report, Productivity revisited: Shifting paradigms in analysis and policy, finds that policies designed to drive private-sector growth need to ensure that resources get to the most productive firms, but also improve the productivity, quality, and the demand base of existing firms and cultivate new and dynamic startups. Policies also need to focus on improving the business environment as well as a range of types of human capital:
Are banks engines of export? Financial structures and export dynamics (World Bank)
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Investment Conference bags R290 billion for SA
The inaugural South Africa Investment Conference has secured nearly R290 billion worth of investment announcements for the country
“This R290 billion is what we have now in our hands and these are in addition to the R400 billion which were received during the investment drive by the special envoys and from various countries during state visits which we still need to button down,” said President Cyril Ramaphosa as he thanked investors.
The President was speaking at the Investment Conference held at the Sandton Convention Centre on Friday. The R290 billion investment brings South Africa one step closer to achieving its target of securing $100 billion in the next five years.
President Ramaphosa thanked the 1050 delegates in attendance for putting their weight and money behind the country’s vision to grow the economy and create jobs.
Among the investments were Sanral which pledged R9.5 billion, R40 billion was committed by NAAMSA, Aspen with R3.4 billion, Vodacom R50 billion, Acwa power R9.6 billion and R29 billion from the New Development Bank.
But the proof is in the pudding, said President Ramaphosa, who told the conference that government would track the impact of the investments and their ability to maximise on job creation.
Thanking investors at the closing of day two of the conference, he said gatherings such as this have changed the tide in the country.
“Through these various conferences, the gulf and the distance that has been there between business and government, and business and labour is reducing. It is through these engagements that we have been able to talk frankly and discuss solutions openly,” he said.
Clearing the path for more investment
In a bid to further draw investments, delegates at the conference entered into breakaway sessions where a total of R10 billion was raised collectively.
During the breakaway session on energy, R1 billion worth of investment in LPG gas pledged by Bidvest.
Delegates not only pledged more money at the sessions but also looked for possible solutions to bureaucratic challenges that might stifle investors.
During the plenary session on agriculture, funding for emerging farmers was noted as critical to ensure growth in the sector. The session also engaged on the need for transformation in the agriculture and fisheries sectors.
With regards to land reform, Agriculture, Forestry and Fisheries Minister Senzeni Zokwana said that the plenary session had stressed that land reform must be undertaken in a manner that does not affect food production.
The need for collaboration between the Agriculture and Water and Sanitation Departments in an effort to assist farmers with access to water was also raised. Delegates lamented the time it takes to secure water use authorisation.
Giving feedback on the plenary session on tourism and film, Minister Derek Hanekom said while delegates agreed that tourism and the film industry have massive investment potential, the challenge of how to translate this potential into numbers remains.
The plenary session gave the thumbs up to the introduction of an online application system and announcement of visa waivers with countries like Egypt, Morocco, Tunisia, Ghana, Cuba and Iran, as they will boost tourism.
The revision of the unabridged birth certificate policy by Home Affairs – that now exempts foreign nationals from presenting documentation – was also welcomed as a step in the right direction.
In concluding day two of the three-day Investment Conference, President Ramaphosa told delegates that government is in talks to make the conference an annual event.
Statement on the outcomes of the inaugural South Africa Investment Conference
President Cyril Ramaphosa has hailed the success of the inaugural South Africa Investment Conference – which has generated announcements of investment of R290 billion – as the beginning of a new narrative on investment in South Africa.
In his closing statement to the conference in Sandton, Johannesburg, President Ramaphosa said the breadth of case studies presented on the performance of current investments and the range of announcements relating to new and expanded investments affirmed that South Africa was a diversified economy that presented great opportunities.
The conference heard investment announcements from companies in mining, forestry, manufacturing, telecommunications, transport, energy, agro-processing, consumer goods, pharmaceuticals, infrastructure, financial services, energy, ICT and water.
Prominent among these were the themes of value addition, beneficiation, innovation and entrepreneurship.
President Ramaphosa has also expressed his satisfaction that most of the investments announced during the conference have originated from South African enterprises and entities or multinationals based in the country. This reflected renewed investor confidence in and commitment to South Africa after a period of uncertainty and a slowdown in investment.
The Inter-Ministerial Committee which hosted the South Africa Investment Conference also commended the conference for setting South Africa on a path of economic renewal and inclusive growth.
The conference was an opportunity for both domestic and international investors to identify opportunities in the country.
The South Africa Investment Conference was convened under the theme: “Accelerating Economic Growth by Building Partnerships”, and was attended by leaders in government and business, members of the diplomatic corps, fund managers and entrepreneurs.
The IMC has expressed government’s deep appreciation for the spirit and focus with which investors responded to government’s invitation to the private sector to help the country achieve investment of $100 billion over the next five years.
“We are humbled and inspired by the significant investment pledges that have been made by South African and international investors who consider themselves as partners in our economic renewal and in the development of our society.
“Government will work with all sectors of society to ensure that we repay the confidence expressed in our economy by supporting these investments with our talents, energy and productivity. We are poised for exciting new possibilities in our economy that will unlock opportunities for citizens, communities and businesses, and which will raise the living standards of large numbers of South Africans who have historically been marginalised from meaningful economic participation.”
The announced total of R290 billion in new investments complements the more than US$28 billion in investment pledges that have resulted from engagements between the President and the President’s Investment Envoys in recent months.
The South African Investment Conference is part of government’s broad and targeted strategy of stimulating economic growth and creating jobs. The three catalysts driving the broader strategy in the immediate term are the Economic Stimulus and Recovery Plan, the Jobs Summit and the Investment Conference.
President Ramaphosa will tomorrow, Saturday 27 October 2018, lead conference delegates on a walk in Soweto to showcase the diversity and vibrancy of township economies and enable interaction between investors and the communities who will support and benefit from the anticipated investments.
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SA hard at work to clear path for investment: Ramaphosa opens the South Africa Investment Conference
Opening the inaugural South Africa Investment Conference, President Cyril Ramaphosa has called on potential investors to invest in the country for more bang for their buck.
“We invite you to invest in our mines and factories, farms and game parks, call centres and technology hubs, refineries and solar farms. We invite you to invest in our people, to harness their energy and unleash their latent capabilities,” Ramaphosa said on Friday.
The President was addressing the 1 050 delegates made up of heavyweights from government, business leaders and captains of industry.
The three-day conference forms part of government’s plan to raise at least $100 billion in investment over the next five years in a bid to boost the country’s economy. The President said the country has worked to attain an environment favourable to investment.
“We have implemented policies to promote black economic empowerment to provide black people, women and people with disabilities with assets and opportunities they need to participate more meaningfully in economic activity. It is a good thing because by so doing, [we] are getting all South Africans to participate in ensuring that this vehicle that is SA Inc. operates on all eight cylinders.”
The Investment Conference builds on the recent Presidential Job Summit, where labour, business, government and the community constituency adopted a ground breaking pdf Framework Agreement (946 KB) to prevent further job losses, create jobs and support companies in distress.
The conference takes place under the theme ‘Accelerating Growth by Building Partnerships’.
In line with the theme, President Ramaphosa stressed that the bold target of $100 billion can only be achieved if everyone puts their shoulder to the wheel.
“We have emphasised the need for more South African companies to lead the investment charge, demonstrating that they have confidence in this economy and in its ability to deliver decent and reliable returns,” said the President.
To ensure ease of investment, Ramaphosa outlined government’s work in addressing stumbling blocks that impede investment. Among them is Invest SA, a one-stop shop that provides information, facilitation and aftercare for businesses and investors. Through this initiative, government aims to fast track investment projects and reduce red tape.
Rallying the potential investors, President Ramaphosa noted the R1 billion Gibela passenger train manufacturing factory which was opened on Thursday.
The investment is a collaboration between Alstom from France and a local consortium made up of black businesses and the community. The President hailed the investment as a clear demonstration of the plethora of opportunities available to the investors.
Cementing the efforts of government to boost the economy, President Ramaphosa reminded delegates of the recently-launched stimulus package.
The package announced in September includes initiatives around growth-enhancing economic reforms, the reprioritisation of public spending to stimulate and support job creation, the establishment of an infrastructure fund, key interventions in education and health, and investment in social infrastructure in municipalities.
“We are here to declare that we are determined to build a country that is driven by enterprise and innovation, to develop an economy that is diverse and resilient and prosperous, and to create companies that achieve sustained returns not only for their shareholders, but also for the workers that drive them and the communities that support them,” said President Ramaphosa.
In closing his welcome address, President Ramaphosa urged delegates to use the conference to engage, network and source out opportunities to invest in South Africa.
Opening Address by President Cyril Ramaphosa at the South Africa Investment Conference
I am pleased to welcome you all to this inaugural investment conference.
We are pleased and humbled that you have responded to the call by the government and the people of South Africa to participate in this conference and thus be part of a new dawn in our country.
As representatives of the domestic and international investment community, as representatives of business organisations and international financial institutions, by your presence here, you have chosen to walk with us along the path of growth, employment and shared prosperity.
Like us, you believe that South Africa is a land of opportunity – a land where the soil is rich and the oceans teem with life, where the beautiful vistas of our country are spectacular and its diverse people are vibrant and resilient.
For you know that its people are its great wealth.
Like us, you believe that there is vast potential in South Africa; and that it has enormous potential that has been constrained for decades by narrow prejudice and debilitating human neglect.
Together with us, you celebrated the miracle of our peaceful transition to democracy.
You were there when we began to rebuild our economy and fundamentally change the fortunes of our people.
You witnessed both our achievements and our missteps.
You supported us and wanted us to succeed as you wished us well.
And when we stumbled, you looked on with concern and disillusionment when it seemed that we may squander the remarkable inheritance of Nelson Rolihlahla Mandela.
Yet, throughout these difficulties, you have retained an abiding interest as both domestic and international business in the fortunes of this country.
We know that, like the people of South Africa, you have harboured a profound hope that we will prevail.
This inaugural South Africa Investment Conference is therefore an expression of a shared hope and a renewed confidence.
It is a bold and unequivocal statement that we are determined to put behind us the period of uncertainty and discord and embrace a future of cooperation and partnership.
We are here to declare that we are determined to build a country that is driven by enterprise and innovation, to develop an economy that is diverse and resilient and prosperous, and to create companies that achieve sustained returns not only for their shareholders, but also for the workers that drive them and the communities that support them.
We are country that is rich in ways that we often do not appreciate.
There are few places in the world that have the abundance of minerals that lie beneath the ground on which we now stand, that have the soil to sustain such a diversity of plants, crops, livestock and game, where the sun shines nearly all year around and where the golden beaches stretch on forever.
We have an incredible natural inheritance, whose economic and social value we have not yet even begun to effectively explore.
Our political and social inheritance, by contrast, is deeply contradictory.
Through decades of deliberate underdevelopment, the majority of South Africans were dispossessed of their land, assets and livelihoods, and denied the education and the skills that make meaningful participation in the economic life of the country possible.
The devastating effects of this manifest injustice still define our society and severely constrain our economic development.
The continued exclusion of millions of South Africans – particularly as it relates to skills and to ownership of assets – is the single greatest impediment to the growth of our economy and the development of our society.
It explains the persistence of poverty, unemployment and inequality nearly 25 years into our democracy.
It is for this reason that we have placed economic growth and job creation at the centre of our national agenda.
It is for this reason too that we have prioritised the education of our children and the skilling of our workforce, and it is for this reason that we are accelerating the provision of land and other assets to the poor and marginalised.
And it is for this reason that in April this year we launched an ambitious and, in the history of our country, unprecedented, drive to raise at least $100 billion in new investment over five years.
We did so understanding that no meaningful growth and no significant job creation would be possible without a massive surge in productive investment in the economy.
Over the last half year, as we have prepared for this Investment Conference, our four Presidential investment envoys – Phumzile Langeni, Jacko Maree, Mcebisi Jonas and Trevor Manuel – have travelled across the country and around the globe to meet potential investors.
Invest SA, our award-winning investment promotion and facilitation agency, has compiled an investment book of projects that represent great potential.
Today, a number of local and international companies will make announcements on investments to expand existing operations in the country or establish new ones.
In addition to the announcements that will be made at this conference we have received investment pledges from a number of countries.
We have appointed task teams to work with these countries to convert these pledges into investments.
We have emphasised the need for more South African companies to lead the investment charge, demonstrating that they have confidence in this economy and in its ability to deliver decent and reliable returns.
In furtherance of this, I call upon South African companies to engage with our investment envoys on their investment plans, including capital expenditure programmes, so that we can have a better idea as a nation what the future portends for our country on the economic growth landscape.
This conference takes place in the wake of a number of decisive measures we have embarked upon in the last few months to improve the investment environment.
Following thoroughgoing consultations with various role players in our economy, we have been addressing issues of policy uncertainty and regulatory obstacles that have impeded investments in a number of industries.
We have been working with the World Bank to improve the ease of doing business in South Africa and crafting a new FDI strategy for the country.
Invest SA is intensifying its facilitation and aftercare service in terms of international best practice.
Together we are working to fast track investment projects and reduce red tape.
As part of the decisive measures that we have had to take, we have had to confront challenges in some of our largest and most strategic state owned enterprises, which have experienced years of poor governance, a decline in financial and operational performance and corruption.
Given the crucial role of these state owned enterprises in the economy, as providers of critical infrastructure and bulk services, it is essential that they be restored as engines of growth and development.
We have replaced the leadership in several state owned enterprises, ensuring that we have people with experience, integrity and the relevant skills who are now leading the development and implementation of sustainable business models.
As a country, we have also had to confront the bitter reality that several public entities have been severely affected by corruption and the phenomenon of state capture.
One of the urgent measures we have had to take is to end such corruption and hold those responsible to account.
We have established a commission of inquiry into state capture that has begun a thorough and far reaching investigation into these practices.
We have also established commission of inquiry into the South African Revenue Service and the Public Investment Corporation, institutions that are both vital to the effective functioning of our economy.
We are certain that these commissions will not only unearth all instances of malfeasance and governance failures, but will help to restore the integrity, credibility and effectiveness of these entities.
As we put in place the pillars of sustained growth into the future, we are working to address immediate concerns, specifically the effects of two quarters of negative economic growth.
Last month, government announced an economic stimulus and recovery plan that aims to restore growth, save existing jobs and create new ones.
As part of this plan, we are taking immediate steps to finalise reforms in key sectors like mining, oil and gas, tourism and telecommunications – all of which are sectors that have great potential for growth, but which have been constrained by policy uncertainty.
The revised Mining Charter has been finalised.
This is the outcome of extensive and meaningful consultation between government, community, labour and business and represents evidence of our commitment to solving the challenges in the sector collaboratively.
Government has decided to draft separate legislation for the oil and gas industry, settling a long-standing dispute that will provide direction and certainty to an industry with great potential.
Through the publication of a new Integrated Resource Plan for public comment, we have provided detail on the country’s future energy requirements.
Government also signed off a number of outstanding renewal energy supply agreements, bringing significant further investment into a growing sector of our economy.
We have finalised consultations with the telecommunications industry and other stakeholders to ensure allocation of spectrum reduces barriers to entry, promotes competition and reduces costs to consumers.
Our independent communications regulator is now preparing to licence available high demand spectrum.
We have initiated a review of our visa regime to facilitate greater arrivals of tourists, highly skilled individuals, business people and investors.
We are reprioritising our budget – within the existing fiscal framework – to invest more in those activities that will boost growth, including agriculture, township and rural businesses, and infrastructure.
We do so in a severely restricted fiscal environment.
As the Minister of Finance indicated when presenting his medium-term budget policy statement earlier in the week, we are determined to ensure public spending remains within sustainable levels – and that we generate greater revenue by pursuing growth with a single-minded determination.
We see infrastructure investment as a critical enabler of growth and job creation, and are therefore consolidating government infrastructure spending into a single Infrastructure Fund.
We intend to use that Fund to leverage investments from development finance institutions, multilateral development banks, asset managers and commercial banks.
A dedicated team will oversee the implementation of an extensive infrastructure programme covering areas like water, transport, energy, telecommunications and social infrastructure.
Despite the challenges of the present, our economy has several fundamental strengths that makes it a suitable destination for investment.
South Africa has established a diversified manufacturing base that has shown its resilience and potential to compete in the global economy.
Yesterday I had occasion to open the R1 billion Gibela passenger train manufacturing factory in this province.
The investment is a collaboration between Alstom from France and a local consortium made up of black businesses and the community.
The factory employs 800 workers, of which half are women.
We applaud this investment as it confirms South Africa’s manufacturing capability.
Multinationals with a presence in South Africa cite numerous advantages, from excellent financial systems to world-class infrastructure.
South Africa is a regional manufacturing and services hub on the African continent, and, for many companies, serves as a base to export products globally.
We have done much work in recent years to improve investment incentives, establishing, for example, several special economic zones across the country, each having unique offerings for investors.
These include ready infrastructure for business development, reduced costs for key inputs such as land, water and electricity, and reduced corporate tax rates.
We are determined that our economic policy must facilitate inclusive growth.
Given our country’s history of dispossession, and the continued economic exclusion of millions of our people, we have a responsibility to bring all our people into the economic mainstream.
Earlier this month, we convened a Presidential Jobs Summit, which brought together government, business, labour and the community sector to determine a set of practical, achievable interventions that would increase the pace of job creation.
The Jobs Summit agreed on more than 70 focused interventions that will, among other things, boost domestic demand, increase and broaden exports, create pathways for young people into work and develop sectors such as agriculture, manufacturing, mining and the waste economy.
In addition, we are intensifying work to build a robust and effective education and skills development system that equips our youth for the workplace of tomorrow.
It is important to note that seven of South Africa’s universities are in top 500 in the world.
There are nearly a million students in higher education, and there has been a marked increase in science, technology, engineering and mathematics graduates.
We have implemented policies to promote black economic empowerment, to provide black people, women and people with disability with the assets and opportunities they need to participate more meaningfully in economic activity.
Another area that is critical to economic transformation is land reform, which is currently a focus of intense debate across South African society.
There is general agreement among most South Africans that we need to accelerate land reform not only to redress a historical injustice, but also to effectively unlock the economic potential of the country’s land.
We have appointed an Advisory Panel on Land Reform, which comprises people with extensive experience in farming, policy development, academia and law.
The panel will advise government on the implementation of a fair and equitable land reform process that redresses the injustices of the past, increases agricultural output, promotes economic growth and protects food security.
We are committed, as government to pursue a comprehensive approach to land and agrarian reform that ensures transformation, development and stability, while providing certainty to those who own land, to those who need land and to those who are considering investing in the economy.
Our approach reaffirms the constitutional protection of property rights, which, among other things, prohibits the arbitrary deprivation of property.
Together with robust legislation to protect foreign investments, an independent judiciary and the firm rule of law, our Constitution should allay any fears that investors may have of factories being expropriated.
South Africa’s strategic position at the tip of Africa, makes it a key investment location, both for opportunities that lie within its borders and as a gateway to the rest of the region.
Earlier this year, African heads of state agreed to the establishment of an African Continental Free Trade Area that will provide access to a market of more than 1.2 billion people and a combined GDP of more than $3.4 trillion.
This will fundamentally transform the economies of many African countries and will further enhance the attractiveness of South Africa – with its diverse manufacturing base, advanced infrastructure and sophisticated financial sector – as a compelling investment destination.
As South Africa emerges from a period of great difficulty and uncertainty, as it confronts challenges that are immense – but not insurmountable – we can declare with confidence that South Africa is a land of untold opportunity.
It is a land that has known the pain of division and conflict and deprivation.
But, equally, it has experienced the exhilaration of liberation and knows very well the value of partnership and collaboration.
It is therefore our great pleasure to invite you to become our partners in realising the great possibilities that this country has to offer.
We invite you to invest in our mines and factories, farms and game parks, call centres and technology hubs, refineries and solar farms.
We invite you to invest in our people, to harness their energy and unleash their latent capabilities.
We invite you to become valued partners in realising the vision – and sharing the benefits – of a new era of renewal, an era of discovery, an era of prosperity and progress and promise.
I thank you.
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Africa Chamber Leaders’ Forum: Nairobi Declarations
The Kenya National Chamber of Commerce & Industry (KNCCI) hosted World Chambers Federation (WCF) President Peter Mihok and 59 chambers Presidents from the various African states in Nairobi on 23-24 October 2018 for the Africa Chamber Leaders’ forum.
The two-day event focused on fast tracking the realization of the African Continental Free Trade Agreement (AfCFTA) as well as the preparedness of the business community in the continent. The event further recognized that business leaders in Africa need to understand the opportunities arising from this agreement for local as well as foreign investors.
Other topics addressed during the event included cross cutting challenges encountered by African chambers; how to build sustainable chambers in Africa; the role of the Pan-African Chamber of Commerce & Industry in promoting intra-Africa Trade and the AfCFTA potential; and the Rio 2019 World Chambers Congress.
Speaking ahead of the event, KNCCI National Chairman Kiprono Kittony, who doubles as one of the vice presidents representing Africa at the WCF, called the forum timely and relevant to tackle existing hurdles in promoting intra-Africa trade.
“We are pleased to be hosting the continental business leaders to discuss ways of improving intra-Africa trade as there still exists multiple trade barriers that favor trade with other countries in other continents. We believe that the discussions we intend to hold will chart a way forward towards unlocking the potential of opening up trade amongst African businesses and provide new innovative ways to tackle existing bottlenecks to governments and other non-state players,” said Kittony.
The event was also used to inform the visiting delegations on the Blue Economy Conference set to be hosted in Nairobi in November under the theme “Blue Economy and the 2030 Agenda for Sustainable Development”, focusing on new technologies and innovation for oceans, seas, lakes and rivers as well as the challenges, potential opportunities, priorities and partnerships.
The Africa Chambers Leaders’ Forum concluded with a Declaration and set of 18 Key Resolutions.
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Joint Communiqué of the Ottawa Ministerial on WTO Reform
DG Azevêdo welcomes commitment to strengthen the WTO
Speaking at a gathering of ministers to discuss WTO reform, which was convened by the Canadian government in Ottawa on 25 October, World Trade Organisation Director-General Roberto Azevêdo welcomed the commitment of ministers to strengthen the trading system and pointed to the imperative for all members of addressing the significant challenges facing global trade.
The meeting was chaired by Canada’s Minister of International Trade Diversification, Jim Carr. DG Azevêdo joined the meeting at the invitation of the organizers.
The Director-General said: “It is very positive to see the high levels of engagement in this debate about the WTO and its key role in global trade. The discussion focused on ideas and initiatives that aim to improve and strengthen the work of the WTO. This should be helpful in addressing the significant issues and challenges that we face today.
“I was pleased that there was a strong recognition from all those participating in this meeting that it was essential that all WTO members’ views be taken into account as this discussion moves forward. Whatever precise path the debate takes and whatever specific issues members want to take forward, we all have a responsibility to do everything we can to diffuse tensions, mitigate the risks and strengthen the system for the future. I welcome Canada’s initiative to hold this meeting and to shine a light on some of the key challenges before the trading system today.”
The ministers participating in the meeting issued the following Joint Communiqué:
Statement
We, Ministers and Heads of Delegation representing a group of like-minded World Trade Organization (WTO) members[1] met in Ottawa, October 24-25, chaired by the Honourable Jim Carr, Canada’s Minister of International Trade Diversification, to discuss ways to strengthen and modernize the WTO.
We reaffirm our clear and strong support for the rules-based multilateral trading system and stress the indispensable role that the WTO plays in facilitating and safeguarding trade. That system marked the beginning of an unparalleled chapter in global prosperity, growth, and job creation around the world, though the benefits from trade have not always been evenly distributed. We are deeply concerned by recent developments in international trade, particularly the rise in protectionism, which negatively affect the WTO and put the entire multilateral trading system at risk. We note growing trade tensions are linked to major shifts in the global trading landscape. We also note the difficulties to achieve outcomes under the negotiating pillar. We share a common resolve for rapid and concerted action to address these unprecedented challenges and to restore confidence. In this regard, we have identified three areas requiring urgent consideration.
First, we underscore the dispute settlement system as a central pillar of the WTO. An effective dispute settlement system preserves the rights and obligations of WTO members, and ensures that the rules are enforceable. Such a system is also essential in building confidence amongst members in the negotiating pillar. We are deeply concerned that continued vacancies in the Appellate Body present a risk to the WTO system as a whole. We therefore emphasize the urgent need to unblock the appointment of Appellate Body members. We acknowledge that concerns have been raised about the functioning of the dispute settlement system and are ready to work on solutions, while preserving the essential features of the system and of its Appellate Body. For this purpose, our officials will continue to engage in discussions to advance ideas to safeguard and strengthen the dispute settlement system.
Second, we must reinvigorate the negotiating function of the WTO. We need to conclude negotiations on fisheries subsidies in 2019 consistent with instructions from WTO Ministers at MC11. Its rules must also be updated to reflect 21st century realities, such as the Sustainable Development Goals. Addressing modern economic and trade issues, and tackling pending and unfinished business is key to ensuring the relevance of the WTO. This may require flexible and open negotiating approaches toward multilateral outcomes. We welcome in this regard the work that is being undertaken through the Joint Statement Initiatives from MC11. We recognize the need to address market distortions caused by subsidies and other instruments.
Development must remain an integral part of our work. We need to explore how the development dimension, including special and differential treatment, can be best pursued in rule-making efforts. Our officials will examine and develop concrete options for engagement to reinvigorate the negotiating function.
Third, we should strengthen the monitoring and transparency of members’ trade policies which play a central role in ensuring WTO members understand the policy actions taken by their partners in a timely manner. We are concerned with the overall record of compliance by WTO members with their notification obligations and we agree that improvements are required to ensure effective transparency and functioning of the relevant agreements. Specific improvements in this area can be achieved in the near term. Our officials will engage on concrete ideas put forward in this area.
We seek a fully operational WTO that benefits all. Our objectives outlined above will only be reached through sustained and meaningful political engagement and through dialogue with all WTO members. In this regard, we note with appreciation other ongoing efforts by WTO members or groups of WTO members, in particular recent proposals by participants in this group on dispute settlement, as well as transparency and notifications. We affirm our intention to work constructively and collaboratively on these and other proposals.
The current situation at the WTO is no longer sustainable. Our resolve for change must be matched with action: we will continue to fight protectionism; and we are committed politically to moving forward urgently on transparency, dispute settlement and developing 21st century trade rules at the WTO. We look forward to reviewing our progress when we meet again in January 2019.
[1] Australia, Brazil, Canada, Chile, European Union, Japan, Kenya, Korea, Mexico, New Zealand, Norway, Singapore and Switzerland
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tralac’s Daily News Selection
Our featured tweet, @AmbMuchanga: Great news. Got notification from Chief Negotiator. South Africa Parliament has approved ratification of the AfCFTA Agreement. Formal deposit to be done during side event at February 2019 @_AfricanUnion Summit. Momentum towards One African Market growing!
African integration, the AfDB and the upcoming African Economic Conference (3-5 December, Kigali): extracts from an interview with Ms Moono Mupotola
I must add that it is now AfDB policy that all regional projects allocate 10% of the total project budget to soft infrastructure interventions. We are now in the process of developing a trade and transport facilitation toolkit which should substantially assist our task managers in the transport sector to include the soft components in their project designs. The Regional Integration team will then develop similar tools for the power, water and ICT sectors...We now have Regional Integration Coordinators in each of our five regions working closing with our project managers to ensure that soft integration elements are included in most Bank projects. We shall launch at this conference the 2018 edition of our flagship Visa Index, an advocacy tool that has helped spur the debate on the movement of Africans to other African countries...Let me also say we have invited the head of Trade and Integration at the Inter-American Development Bank to provide the integration perspective from Latin America and the Caribbean.
Integrate regionally for stronger, sustainable growth in resource-rich sub-Saharan Africa (Brookings)
Given the smaller size of some sub-Saharan African countries, policies to improve the endowment of capital need to be supplemented by efforts to create larger markets that cross borders and make those countries more attractive to both foreign and domestic investors. A more integrated region will help overcome the burdens of low density, thick borders, and long distances that still negatively affect sub-Saharan Africa. My colleagues and I find in a recent report that spillovers from the three large, resource-rich, middle-income countries in sub-Saharan Africa (South Africa, Nigeria, Angola) to their neighbourhoods or the rest of the region are negligible. There is little evidence of statistically significant links between growth rates across sub-Saharan Africa as a whole. Modest integration limits the attractiveness of the region to both domestic and foreign investors. The parallels with the first round of East Asian tigers and the next generation of Asian countries is important: [The authors: Ivailo Izvorski, Djeneba Doumbia]
Nigeria and the AfCFTA: As Nigeria prepares to sign free trade pact (Daily Trust)
In preparation for joining the pact, the Minister of Industry, Trade and Investment, Okechukwu Okechukwu, said Nigeria’s trade team have been working on creating the enabling structures, including the design of the ‘Trade remedy mechanism for the rules-based safeguard of the Nigerian economy’ to serve as a trade remedy mechanism for safeguarding the Nigerian economy when the pact comes into force. The minister also said that a plan, ready for implementation on rules of origin, has been designed and an updated Market Access Goods Offer with a Draft Schedule of Tariff Concessions that provide a basis for re-negotiating the ECOWAS CET and AfCFTA negotiations have been prepared. “This exercise was carried out over a 4-month process with relevant stakeholders in a coordinated parallel process managed by the Tariff Technical Committee in the Federal Ministry of Finance and the Nigerian Office for Trade Negotiations of the Federal Ministry of Industry, Trade and Investment,” the minister said. He also said an updated Market Access Services Offer with a Draft Schedule of Specific Commitments for Trade in Services have been prepared, in an exercise carried out in a consultative process within the Nigerian Coalition of Services Industries.
REC trade and investment policy updates:
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ECOWAS develops regional automotive industry policy. Experts and representative of the Ministries of Industry from ECOWAS member states commenced a two-day meeting on 24 October in Abuja, with the aim of validating the ECOWAS automotive industry policy framework. The ECOWAS Commission’s Commissioner for Industry and Private Sector Promotion, Mamadou Traoré, cited the development of the automotive industry in Nigeria as an example of the impact the industry can have on the region by creating jobs for the youth, reducing poverty and improving its economy. “Apart from Nigeria that has developed a national automotive industry development plan as part of its industrial policy, other Member States of ECOWAS are still importing vehicles and only very few are assembling trucks,” he said. Commissioner Traoré recommended the creation of a regional motor vehicle production system characterized by a high degree of regional integration and interdependence.
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SADC, Russia sign five-year MoU on Basic Principles of Relations and Cooperation. SADC’s executive secretary, Dr Tax, expressed hope that the SADC Investment Forum and the signing of the MoU will go a long way in bringing the Russian investors to the SADC region in the areas of science and technology, infrastructure, particularly energy, pharmaceuticals and medicine. She highlighted that SADC was implementing the pooled procurement of pharmaceuticals and invited Russia pharmaceutical manufactures to partner with SADC in this initiative. She expressed commitment to support SADC Member States to develop and implement strategic programmes and projects with partners from the Russian Federation.
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2nd EAC Development Partners Forum. Addressing the forum, EAC Secretary General Amb. Liberat Mfumukeko said over the last five years, development partners had committed about $500m direct and technical support to various aspects of EAC integration. He disclosed that the main contributors to the EAC Development Programmes include Germany, USAID East Africa, the EU, and the African Development Bank. The German contribution amounts to €286,541,354.42; USAID $237,823,555; and the EU Euro 65,000,000. The head of Delegation of the EU, Amb. Roeland van de Geer, said the forum is valuable for development partners to ensure an alignment of their respective cooperation programmes with those of the EAC. [Germany to tighten development aid conditions for Africa]
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Starting today, in Lusaka: Regional Forum on Climate Adaptation and Food Systems Resilience in Eastern and Southern Africa
pdf South Africa: Medium Term Budget Policy Statement 2018 (730 KB) (National Treasury)
Domestic outlook: The National Treasury forecasts that GDP growth will slow to 0.7% in 2018, down from 1.3% last year, before rising to 1.7% in 2019 and 2.1 in 2020. The economic outlook is weaker than projected in the February 2018 Budget, which forecast 1.5% and 1.8% GDP growth in 2018 and 2019 respectively. The revisions reflect lower production by agriculture and mining in the first half of the year, as well as a lack of new investment. Agriculture and mining are expected to return to moderate growth in the next 12 months, and business and consumer confidence are expected to improve gradually over the medium term. Despite lower commodity prices, the resolution of several longstanding policy issues over the past six months is expected to support investment in mining and energy. Higher agricultural output is expected as a result of improved rainfall in the Western Cape this year.
Balance of payments: The current account deficit widened to 4% of GDP during the first half of 2018 from 2.4% over the same period in 2017. This was largely due to a smaller trade surplus, higher net income payments and deteriorating terms of trade. The value of total exports of goods and services rose by 1.3% in the first half of 2018, while that of imports of goods and services rose by 4.4%. The current account deficit is expected to average 3.2% of GDP in 2018, rising to 3.9% over the medium term, as a result of import growth and weaker terms of trade. [Note: Read the speech by Finance Minister Tito Mboweni here. The complete set of MTBPS documentation can be accessed here]
pdf The case for investing in South Africa: accelerating growth by building partnerships (4.90 MB) . See chapter 6, Opportunities for investors, for sectoral investment opportunities in agriculture and agro-processing, mining and minerals beneficiation, manufacturing, services, and infrastructure.
Trade logistics: Trading across borders in South Africa (World Bank)
This topic measures the time and cost (excluding tariffs) associated with the logistical process of exporting and importing goods. It assesses three sets of procedures – documentary compliance, border compliance and domestic transport – within the overall process of exporting or importing a shipment of goods. The information appearing was collected as part of the Doing Business subnational project in South Africa, which measures and compares regulations relevant to the life cycle of a small to medium-sized domestic business in cities and regions. Explore data for Cape Town, Durban, Ngqura, Port Elizabeth ports:
South Africa-US trade update: Rob Davies welcomes some steel and aluminium product exclusions from Section 232 duties (dti)
The US Department of Commerce has granted product exemptions for imports of 161 aluminium and 36 steel products from the Section 232 duties that the US imposed against foreign imports. Minister Davies welcomes these positive developments as a step towards normalising trade relations between South Africa and the US. Over 800 US companies are represented in South Africa and the trade between the Parties is relatively balanced with total trade reaching R161.4bn in 2017. The exemption of some of the aluminium and steel lines confirms that South Africa remains a source of strategic primary and secondary products used in further value added manufacturing in the US, does not threaten US national security and contributes to jobs in both countries. The products that have been exempted for aluminium include aluminium foil and aluminium plates, sheets and strip. In relation to steel, the products include the hot rolled bars, hot rolled sheets, cold rolled sheets, plates cut and plates in coils. Minister Davies thanks the South African and US companies, as well as Members of Congress that have lobbied for the exemption of South Africa from all Section 232 duties. South Africa continues to encourage its domestic exporters to engage US buyers to consider requesting product exemption from Section 232 duties of all imports from South Africa. While South Africa welcomes this important relief to our exports, Government remains engaged with the US Government and continues to request a country exemption.
Namibia: pdf FY2018/19 Mid-Year Budget Review (445 KB) (GoN)
Closer to home, the South African economy which is the destination of about 14% of Namibia’s merchandize exports has entered a technical recession by the Second Quarter of this year, reflecting continued contractions in such key sectors as agriculture, transport, retail trade and manufacturing. Under these subdued conditions, the South African economy is projected to grow by a lower output rate of about 0.8% this year and rise to 1.4% by 2019. For Angola, the sub-region’s third largest economy and an equally key trading partner for Namibia, an annualized contraction of about 0.1% is projected for this year, after a decline by 2.5% in 2017, with a rebound to positive territory of 3.1% next year.
The decline in investment over the past years calls for a comprehensive set of coordinated actions and policy reforms to enhance competitiveness, strengthen partnerships to foster business confidence and continue entrenching policy certainty. Exports of goods and services are estimated to grow by 2.3% this year, following a contraction in 2017 as import flows continue to lag due to weak consumption demand. This results in positive spin-offs for the current account balance, the trade balance and the stock of international reserves. The current account deficit has narrowed from 14.0% of GDP in 2016 to 4.9% of GDP in 2017 and 1.3% during the second quarter of 2018; International reserves have increased to 5.2 months of import cover in September 2018, which is 7.7 times higher than the currency in circulation and more than sufficient to support the currency peg.
The cost and benefits of tax treaties with investment hubs: findings from Sub-Saharan Africa (IMF)
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South Africa Medium-Term Budget Policy Statement 2018: Reforms to boost the economy
Government on Wednesday announced the proposed reprioritisation of R32.4 billion over the next three years as part of reforms to boost the South African economy.
In the Medium Term Budget Policy Statement (MTBPS) on Wednesday, government said that the structure of South Africa’s economy is not conducive to high growth or job creation.
“These include creating policy certainty in the mining and energy sectors by finalising the Mining Charter and updating the Integrated Resource Plan,” said National Treasury.
It added that growth-enhancing policy initiatives are also underway in the telecommunications, electricity and transport sectors.
“To support these reforms within a constrained fiscal framework, government is proposing reprioritisation of R32.4 billion over the next three years,” it said as newly sworn in Finance Minister Tito Mboweni tabled his maiden MTBPS in Parliament on Wednesday.
Of this amount, said the document, R15.9 billion will go towards faster-spending infrastructure programmes (including R3.4 billion for school infrastructure and eradicating pit latrines), clothing and textile incentives, and the Expanded Public Works Programme.
The remaining R16.5 billion will be allocated to various programmes, including recapitalising the South African Revenue Service (SARS), a minimum wage for community health workers, critical posts and goods and services in health, and streamlining the management of the justice system.
In addition, changes to grant structures amounting to R14.7 billion will promote upgrading of informal settlements in partnership with communities.
Meanwhile, housing subsidies amounting to R1 billion will be centralised to better support middle- and lower-income home buyers.
“In the current year, R1.7 billion is added to infrastructure spending (including funding for fast-spending school building programmes), and R3.4 billion is allocated to drought relief, mostly to upgrade water infrastructure.”
Reforms
Fleshing out progress of President Cyril Ramaphosa’s stimulus package announced in September, the MTBPS further announced a framework for financing infrastructure which will be developed.
The MTBPS noted that a decade of poor economic performance and high unemployment has reinforced the urgent need for a comprehensive programme of reforms to change the underlying structure of the economy.
“Necessary structural reforms include modernising the energy, water, transport and telecommunications industries; lowering barriers to entry and addressing distorted patterns of ownership through increased competition and small business growth; enabling growth in labour-intensive sectors such as agriculture and tourism.”
“National Treasury modelling suggests that such reforms can raise Gross Domestic Product growth by as much as 3% over the next decade.”
Progress has been made in such areas including that the Department of Telecommunications and Postal Services has gazetted a proposed policy for the licensing of high-demand spectrum.
The communications regulator plans to auction spectrum for 4G services by April 2019, and simultaneously establish a wholesale open-access network to lower the cost of data.
Meanwhile, the departments of Energy and Public Enterprises, and the National Treasury, have begun work to determine how a restructured electricity sector can support long-term growth, a secure energy supply, a sustainable electricity utility and higher investment in electricity generation, transmission and distribution.
“Reviews of administered prices in other sectors, such as energy, are underway. Such reforms can boost long-term growth,” it said.
Rebuilding state institutions
On state institutions, government said while the process of rebuilding these is underway with the Judicial Commission of Inquiry into allegations of State Capture among others, challenges remain.
“While the scale of deterioration in the public sector is serious, key institutions established by the Constitution have proven resilient. Parliament, the courts and the Reserve Bank have helped to uncover corruption, with the support of a robust media.”
Treasury also highlighted its efforts to strengthen financial management which include enhancing public finance capacity-building in local government by deploying skilled professionals to manage and recover revenue.
Minister Tito Mboweni: Medium-Term Budget Policy Statement 2018
The economy at a crossroads
It is my singular honour and privilege to table the twenty second Medium-Term Budget Policy Statement for consideration of the House and of all South Africans.
Today I also table:
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The Division of Revenue Amendment Bill,
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The Adjustments Appropriation Bill,
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The Special Appropriation Bill,
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The Rates and Monetary Amounts and Amendment of Revenue Laws Bill,
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The Taxation Laws Amendment Bill,
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The Tax Administration Laws Amendment Bill, and finally,
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The 2018 Adjusted Estimates of National Expenditure.
In A Tale of Two Cities, Charles Dickens opens with: “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity... we were all going direct to Heaven, we were all going direct the other way...”
So too is the present time. As a country, we stand at a crossroads. We can choose a path of hope; or a path of despair. We can go directly to Heaven, or as Dickens so politely puts it, we can go the other way. For ordinary South Africans, it has become a difficult time. Administered prices, such as electricity and fuel, have risen. Unemployment is unacceptably high. Poor services and corruption have hit the poor the hardest.
Under the leadership of our President, and much like the central character in A Tale of Two Cities, we have, as a country, chosen the difficult path of redemption. The Medium-Term Budget Policy Statement is a central part of our planning as a country. It is designed to outline how we spend scarce resources for the benefit of all South Africans.
This Policy Statement provides us with an opportunity to take stock of the strides we have taken in the year. We do this in a data driven way, providing credible evidence to judge our collective performance as a society.
However, it is more than a set of numbers, reams of data, charts, graphs or words. Our performance should be measured by whether people are gainfully employed, whether our children are learning in decent schools, and whether we have health care facilities that are up to standard.
The Medium-Term Budget Policy Statement is an opportunity to restore trust between government and society. South Africans correctly expect more from their government. They are right to expect that their money is spent wisely and productively, and goes to meeting their basic needs.
The 2018 Policy Statement is built on a strong conviction that South Africa can be renewed. It reinforces our commitment to the National Development Plan. It articulates the President’s vision of Thuma Mina.
Together, as a country, we can rebuild and recast our future. We are at a crossroads. This Policy Statement highlights the difficult economic and fiscal choices confronting us over the medium term.
We must choose a path that takes us to faster and more inclusive economic growth and strengthens private and public sector investment. We must choose a path that stabilises and reduces the national debt. We cannot continue to borrow at this rate.
We must choose to reduce the structural deficit, especially the consistently high growth in the real public sector wage bill. New fiscal anchors may be required to ensure sustainability, in addition to the expenditure ceiling.
We must choose public sector investment over consumption. Reconfiguring our state-owned companies requires us to take a hard look at how they operate. Our current challenges with state-owned companies present an opportunity to demolish the walls that exist between the private and public sectors.
Along with other key economic institutions, we will urgently fix the South African Revenue Service. It is a matter of public record that the capacity of SARS has been weakened. It is in this context that the SARS leadership team must be strengthened.
The organisation has many talented and committed employees who want the organisation to succeed and who are working tirelessly to re-build trust.
The global and domestic economic outlook
Madam Speaker, I present this policy statement against the backdrop of a technical recession in South Africa. The economic expectations at the time of the Budget in February 2018 have not materialised. Since then, the risks to the global growth outlook have become more pronounced.
Rising interest rates in the United States of America and a stronger dollar reflect a strong US economy. In the medium term, strong US growth will support export growth.
But monetary policy normalisation has created turmoil in financial markets. Countries with large twin deficits and high levels of external debt – notably Turkey and Argentina – have experienced sharp currency depreciation, rising credit spreads and large capital outflows. In some cases, inappropriate policy responses have exacerbated market volatility.
Developing countries are now expected to grow by 4.7 per cent in 2018 and 2019. For 2018, South Africa’s growth forecast has been revised down from 1.5 per cent to 0.7 per cent. Growth is expected to recover gradually to over 2 per cent in 2021 as confidence returns and investment gathers pace.
That said, any forecast is based on a set of current assumptions. In the documentation tabled today, we outline different scenarios including macroeconomic and fiscal risks. Implementing measures to stimulate the economy The National Development Plan outlines our long-term vision. A core element of this vision is a commitment to strong, sustained and inclusive economic growth to sharply reduce unemployment, poverty and inequality.
During the first decade of our democracy, economic growth was closely linked with that of the rest of the world. Over the past decade, however, our growth has been significantly slower than our peers. With the right initiatives, we can once again recouple our growth performance with that of the global economy. Our growth agenda must raise potential output by boosting productivity, increasing competition and reducing the cost of doing business.
As a start, the President has announced five measures to stimulate the economy:
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Implementation of growth-enhancing economic reforms
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Reprioritisation of public spending to support growth and job creation
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Enhancing infrastructure investment and establishing an Infrastructure Fund
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Addressing urgent and pressing matters in education and health
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Investing in municipal social infrastructure improvement
Allow me to take some time to expand on the various elements of the President’s plan.
Growth-enhancing economic reforms
The first element of the President’s plan is to implement growth-enhancing economic reforms. Rebuilding confidence will unlock private sector investment. Investors are in it for the long run. They want to know that our policies are clear and consistent. We must stop talking in contradictory terms.
The President has already taken the lead in rebuilding confidence by appointing a team of investment envoys. We look forward to the upcoming Investment Conference. Already, in the mining sector, we have finalised the Mining Charter and we are withdrawing the Mineral and Petroleum Resources Development Amendment Bill.
Visa requirements will be eased to boost tourism. We will make it easier for people with skills to work in South Africa. Ten-year multiple-entry visas will be extended to several countries.
In telecommunications, the proposed policy for the licensing of high-demand spectrum has been gazetted. Frequencies to enable high speed internet will be auctioned early next year. Steps will be taken to reduce data costs and improve data quality.
Recently concluded power-purchase agreements will create an estimated 61 000 jobs and enable investment of R56 billion. Through the renewable energy IPPs, we have secured equity for local communities, who will receive about R29.3 billion in net dividend income over the life of the projects. For recently signed projects, 53 per cent is owned by South African shareholders while black shareholders own 34 per cent of the equity.
Restructuring of the electricity sector is underway. This must include a long-term plan to restructure Eskom and deal with its debt obligations. A review of the current Electricity Pricing Policy will form a part of this process. We are building partnerships to find solutions to the development challenges faced by South Africa and the region. Partnerships are essential.
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The recent Jobs Summit brought together business, labour, community and government to leverage our collective strength towards the urgent need to protect and create jobs.
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South Africa offers a strong investment value proposition. We have a highly diversified, open economy with an abundance of natural resources, an extensive and modern infrastructure network and sophisticated and deep financial markets. The upcoming investor conference will showcase these strengths to local and international investors.
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We are upgrading the economic planning and coordinating capacity of the state. Southern Africa – Towards Inclusive Economic Development or SA-TIED is a programme with other government departments and international agencies to produce high-quality evidence-based policy research. We have already published 24 research papers in 2018. The programme will train young scholars and give government officials the opportunity to obtain their PhDs in Economics and related fields. Our ultimate aim is to improve the interface between cutting-edge research and policy formulation.
Reprioritisation of public spending to support growth and job creation
The second element of the President’s plan is about reprioritisation and more effective spending. Spending is projected to be R5.9 trillion over the medium term. Spending will still grow faster than inflation. This is a lot of money. We can do more with it. We are proposing a combination of reprioritisation, changes to grant structures and in-year allocations amounting to more than R50 billion. Of this amount, reprioritisation of R15.9 billion goes towards infrastructure programmes, supporting industrialisation, and the Expanded Public Works Programme. An additional R16.5 billion of reprioritisation will be allocated to various programmes, including funding to restore capacity at the South African Revenue Service.
Agriculture will be an important driver of our economic recovery. The Land Bank will continue to support emerging farmers. Our reprioritisation efforts will support the Bank to conclude transactions worth R16.2 billion over the next 3 to 5 years that will create jobs in agriculture. A significant portion of the funding will go towards export-oriented crops that are highly labour intensive.
Housing subsidies amounting to R1 billion will be centralised to help low- to middle income households access affordable home loans, which will result in more South Africans acquiring their own homes.
We are determined to support greater economic development within our townships and countryside communities. Our spending on infrastructure aims to promote industrialisation across the country. We are spending R668 million over the medium term to revitalise government-owned industrial parks in township areas. So far, government has upgraded infrastructure at Vulindlela and Komani, both in the Eastern Cape, Botshabelo in the Free State, Seshego in Limpopo and Isithebe in KwaZulu-Natal.
Since 2011, municipalities have completed over 270 projects to the value of R3.7 billion funded through the Neighbourhood Development Partnership Grant. This has attracted over R8.7 billion of private investment in the township. In Tembisa in Ekurhuleni, public investment to the value of R125 million in roads and transport infrastructure has enabled access to social and economic facilities. The investment will attract an estimated R3.5 billion of additional public and private investment in commercial, retail and residential developments. In Msunduzi Municipality over R77 million in public investment in the Edendale Urban Hub has already attracted private and public sector investment in excess of R1 billion. We will continue to roll these out in other parts of the country.
The Giyani Water Project is plagued by malfeasance. It is a cesspool of corruption. The challenges range from a complete disregard for supply chain rules to poor contract management, resulting in irregular expenditure. It is clear that a new delivery and financing model is required to provide water services to communities. A key element of the new approach will be a stronger focus on project management and contract governance to ensure that projects, such as the Giyani Water Project, are fit for purpose and maximise value for money in the water sector. I have asked the Director General of the National Treasury to work with the Department of Water and Sanitation to ensure that appropriate action is taken against all guilty officials implicated in the Auditor-General’s report. The President has informed me that he will go to Giyani to see exactly what has happened and what needs to be done.
We are dealing decisively and urgently with the water crisis in the Vaal River System. Our immediate focus is to mobilise short-term financing by reprioritising funds and increasing capacity. I have asked the President and the Minister of Defence for the military to assist with engineering and other expertise to resolve the crisis in the Vaal River System. I am happy to report that approval has been granted. The generals in charge have already started working on solutions.Water is critical. Current water delivery models are not working in many cases and we need to consider new ideas and models.
Given the land transport intensity of our economy, it is vital that our road network supports growth and development. Over the medium term, funds are reprioritised to enable the strengthening and rehabilitation of the national non-toll road network, of which about 75 per cent is beyond its design life. But if we want a road transport infrastructure that works, we need to pay our tolls. Government remains committed to the user pay principle because it is the most efficient and effective way to ensure that the direct benefits of services are paid for by those who use them. We need to restore a culture of payment in this country to ensure the sustainability of our services and to give confidence to those institutions who invest in our bonds.
Establishing an infrastructure fund
The third element of the President’s plan is to improve government’s approach to infrastructure investment and to establish an Infrastructure Fund. Over the next three years, public infrastructure expenditure is estimated to be R855.2 billion, of which state-owned companies alone account for R370.2 billion.General government accounts for the remaining R485 billion, mainly in the form of conditional infrastructure grants. Too many projects are poorly prepared. Too often, government spends money on infrastructure when it could be better and more effectively done by the private sector.
The Development Bank of Southern Africa, the Government Technical Advisory Centre and the Presidential Infrastructure Coordinating Commission will receive R625 million to strengthen project preparation. Development finance institutions, multilateral development banks and private banks have committed technical resources to help finance, plan and implement projects. We will develop innovative finance solutions that combine capital from the public and private sectors.
Government will establish an execution unit made up of engineers, quantity surveyors, architects and other professionals to ensure that challenges in the Vaal River System and with the Giyani Water project are resolved. The execution unit will also advise government on new delivery and financing models to provide basic services to communities.
Government will develop a framework to help investors assess potential long-term returns on public infrastructure projects. We want to enable investment in public infrastructure by commercial banks, development finance institutions and pension funds. This will require both innovative financing mechanisms and accompanying regulatory reforms.
We have successfully partnered with the private sector in the past. The N3 highway between Johannesburg and Durban and the N1/N4 platinum highway were built and are operated and maintained by the private sector. For these projects to operate efficiently, we have service level agreements in place with our private sector partners. These kinds of partnerships will be accelerated.
Addressing urgent and pressing matters in education and health
The fourth element of the President’s plan is to address urgent and pressing matters in education and health. The largest allocations in the medium-term are for education, health, social development and community development. Together, these four areas will receive more than 60 per cent of non-interest expenditure. Nobody should learn in a school that is unsafe. Our children must have access to adequate sanitation. We have committed to eradicating pit latrines at schools. The President has directed that there is a plan to ensure that all schools have safe and appropriate sanitation.
We will ensure that female learners in schools have access to sanitary pads. Several provinces have already taken the lead in rolling out the provision of free sanitary pads in schools. Funds will be added to the provincial equitable share to enable provinces to progressively further this objective.
Access to health care services is enshrined in our Constitution and in our Bill of Rights. We will continue to work closely with the National Department of Health and other role players to ensure that the gradual phased implementation of National Health Insurance is adequately financed. We are immediately reprioritising R350 million to recruit in excess of 2 000 health professionals into public health facilities. We are further reprioritising R150 million to purchase beds and linen for hospitals where the need is most dire. These two interventions build on the Presidential Health Summit convened last weekend which has brought new focus to improving the quality of health care.
Investing in municipal social infrastructure improvement
The final element of the President’s plan to stimulate the economy focuses on investing in municipal social infrastructure. All South Africans share the pain of poorly performing municipalities: potholes, broken street lights, roads that flood when it rains, and challenges with electricity.
We are acutely aware that some municipalities are facing serious capacity constraints in executing their plans and programmes. The Auditor-General has consistently shared audit messages that emphasise the importance of accountability in the management of municipal affairs. This year, 113 municipalities adopted unfunded budgets, up from 83 in the previous year. Municipalities owe more than R23 billion to service providers – mainly to Eskom and water service agencies.
In many cases, like in the Modimolle-Mookgophong municipality, the financial challenges faced by municipalities are a reflection of weaknesses in governance, or even fraud and outright corruption. The funds lost by municipalities in the collapse of VBS Mutual Bank offer a dramatic illustration of how greed and corruption impacts the achievement of developmental objectives.
This matter was ventilated in the house yesterday. But this is not the only case in which public funds have been diverted to benefit a few greedy individuals. There are such many cases where projects are manufactured, contracts are awarded corruptly and construction costs are inflated, or where corrupt practices have taken hold in the provision of land use rights.
For those with some knowledge of the Bible, you will recall the words of Isaiah in chapter 58 verse 12: “Your people will rebuild the ancient ruins and will raise up the age-old foundations; you will be called Repairer of Broken Walls, Restorer of Streets with Dwellings”
We must repair our towns, and our streets, and fix the pipes under our roads.The National Treasury will work closely with the Department of Cooperative Governance and Traditional Affairs to deal with financial misconduct in all spheres of government. We are developing measures to improve transparency and governance processes. Key is the employment of qualified, competent and incorruptible officials.We need to restore a culture of compliance with the PFMA and MFMA in all organs of state.
Civil society can help. In some cases, such as in Emalahleni, citizen associations have successfully challenged local government to implement the measures prescribed by law to address financial problems.
Fiscal stance
The President’s plan is achievable. But any growth plan must be built on two macroeconomic preconditions: a sustainable fiscal position and low and stable inflation. I am confident that Governor Kganyago and his team will continue to work tirelessly to keep inflation down. And please, let us not distract him with these regular attacks on the mandate and independence of the South African Reserve Bank. Today we reiterate what is contained in section 224 (2) of the Constitution: “The South African Reserve Bank, in pursuit of its primary object, must perform its functions independently and without fear, favour or prejudice, but there must be regular consultation between the Bank and the Cabinet member responsible for national financial matters.”
My job is to make the fiscus stronger.
Government remains committed to its goal of stabilising and bringing down the debt to-GDP ratio. In recent months, deteriorating economic performance, revenue shortfalls and a weaker rand have all contributed to higher debt projections. The consolidated budget deficit is estimated at 4 per cent in 2018/19, compared with the 2018 Budget projection of 3.6 per cent of GDP. After rising to 4.2 per cent, the deficit stabilises at 4 per cent in the outer years. Gross debt is on pace to stabilise at 59.6 per cent of GDP in 2023/24.
Other risks identified in the February 2018 Budget have materialised, including a public-service wage agreement significantly above inflation, and the continued decline in the financial condition of some state-owned companies, leading to requests for budget support.
In recent budgets, we took important steps by reducing the expenditure ceiling and increasing taxes. Given the weakness of the economy, government is aiming to manage these pressures, while avoiding additional fiscal measures that could limit growth.
The 2018 public-service wage agreement exceeds budgeted baselines by about R30.2 billion over the medium term. We have not allocated additional money for this. National and provincial departments will be expected to absorb these costs within their compensation baselines. The Department of Public Service and Administration will work with national and provincial departments to help them manage the implementation of the agreement, while protecting our key developmental priorities.
The wage bill remains the biggest cost pressure on the budget. Over time, wages have crowded out other goods and services and capital investment, particularly in health, education and defence. In some cases, this has contributed to a build-up of unpaid invoices in provincial departments.
Around 85 per cent of the increase in the wage bill is due to higher wages, rather than headcount increases. The national wage ceilings remain unchanged, despite the new wage agreement. Revenue collections up to the end of September 2018 have grown by 10.7 per cent compared to the same period last year. Latest estimates, however, suggest that the full year tax collections will be R27.4 billion less than expected, of which R20 billion reflects increased VAT refunds, and R7.4 billion reflects lower corporate tax and personal income tax. Although some of the VAT refunds reflect ‘once-off’ payments, we expect revenue shortfalls of R24.7 billion in 2019/20 and R33 billion in 2020/21, relative to the 2018 Budget.
Madam Speaker, concerns have been expressed about the slow pace of VAT refunds. We recognise that this has hurt the cash flow of a number of companies, including small businesses. The Acting SARS Commissioner has committed to processing the outstanding VAT refunds as quickly as possible. We estimate total additional VAT refunds of R20 billion, made up of R11 billion to clear the backlog, and an upward revision of R9 billion for the current fiscal year.
We are of the view that this will provide a much-needed boost to the real economy. An Independent Panel of Experts investigated options to mitigate the impact of the VAT increase on lower income households. My thanks to the panel for their excellent work. I would also like to thank the 30,000 individuals and NGOs who provided comments on the Panel’s recommendations.
Madame Speaker, I received 3 299 tweets in total. One of them is from Tintsi Ngwenya in Johannesburg, who said: “Sanitary pads should be tax free”.
After considerable debate and consultation, as of the 1 April 2019, government will zero-rate the following items:
- Sanitary pads
- Bread flour
- Cake flour
The revenue loss associated with zero-rating these items is estimated at R1.2 billion.
However, zero-rating these products targets low-income households and restores the dignity of our people.
On carbon tax, we have heard the concerns of business and labour during the parliamentary hearings. The carbon budgeting system and the carbon tax will be aligned. This is done by imposing a higher tax rate as a penalty for emissions exceeding the carbon budget. The original date of implementation was 1 January 2019, but this will be postponed to 1 June 2019.
Restoring good governance and fighting corruption
We can spend our money better. Too much money goes missing. We must restore good governance and fight corruption in all of its forms. Money that leaks out of the system is no longer available to support our efforts to reduce poverty and lighten the burden of the poor.
Madame Speaker, among the many tweets we received from the South African public was a plea to strengthen the internal auditing capacity at our municipalities. It is necessary for us as a country to face up to the events of the recent past, and learn from them. We are taking the following steps to strengthen financial management:
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Treasury will work with the Office of the Auditor-General to reduce fruitless and wasteful, irregular and unauthorised expenditure. Law enforcement agencies will act against those implicated in wrongdoing.
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At local government level, we are deploying skilled professionals to boost revenue collection and attain our developmental objectives. Many of these are retirees that have heard the President’s Thuma Mina call.
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There will be financial recovery plans for non-performing departments.
Reforming state-owned companies
Madam Speaker, our state-owned companies can spend our money better. Many of these state-owned companies need to be reconfigured.
In the past year, almost all of the regional and domestic routes operated by South African Airways have become profitable. SAA will reduce and ultimately stop operating loss-making international routes. SAA procurement has unlocked annual cost savings of R400 million.
Despite these efforts, SAA is still loss-making and even more radical measures need to be undertaken. There should be no holy cows!
To support a sustainable reconfiguration of our airline portfolio, in 2018/19 government will provide additional funding for SAA and South African Express Airways. Minister Gordhan and I are working closely to limit the fiscal cost of these measures. By the end of the year, the boards of these two companies will present plans to strengthen and align their operations.
Government has been working with the Johannesburg Stock Exchange to strengthen debt listing requirements for all issuers, including state-owned companies. These proposals aim to bring about increased transparency and improved governance for SOCs, and complement other government measures.
Thank you and conclusion
Madam Speaker, as I conclude, allow me to thank the President for his guidance and leadership. My appreciation also goes to the Deputy President. I would like to thank the Minister of Defence and my Cabinet colleagues, including members of the Ministers’ Committee on the Budget, for their cooperation and support.
I also wish to thank Provincial Premiers, Finance MECs, and Municipal Mayors, who share our fiscal and financial responsibilities.
Deputy Minister Gungubele, the acting commissioner of the South African Revenue Service, the 10th Governor of the South African Reserve Bank and the Director-General of the National Treasury have been resolute pillars of support.
I know that Members of the House will join me in expressing appreciation to:
- Staff of the National Treasury,
- The South African Revenue Service, and
- The finance family institutions.
I am also grateful to the finance and appropriation committees, who have responsibility for steering consideration of the Division of Revenue Amendment Bill, the Adjustments Appropriation Bill, the Finance Bill and the Taxation bills.
Madam Speaker, let me summarise my main points.
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South Africa finds itself at a crossroads. This Medium-Term Budget Policy Statement highlights the difficult choices that we need to make over the next few years.
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Our economic outlook has been revised down due to a technical recession and turmoil in international markets. Our economic growth will be just 0.7 per cent this year, rising to over 2 per cent over the medium-term. Relative to the 2018
Budget, revenue has been revised down. Once-off factors have contributed to the debt projections being revised upwards.
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Against this background, together, we have much to do. We must repair damaged government institutions, as their failure impacts poorer households the most. There have been failures at municipal, provincial and national departments. There have been governance challenges at key state institutions.
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State institutions are being repaired and renewed, but serious governance problems exist across the public sector. Our state-owned companies need to be reconfigured in a number of ways.
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The President has initiated a plan that will support our economic recovery. We will implement growth enhancing economic reforms. We will reprioritise public spending to support growth. We will take steps to establish an Infrastructure Fund that will create opportunities for private-sector financing. We will urgently deal with education and health, and invest in municipal social infrastructure.
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Our growth reforms will be underpinned by fiscal and monetary stability. I will ensure our debt stabilises and is reduced as soon as possible.
In conclusion, Speaker, let us not forget that this year marks the centenary of Madiba’s birth. As we were preparing this Medium-Term Budget Policy Statement, his wise words came to mind: “Difficulties break some, but make others. No axe is sharp enough to cut the soul of a sinner who keeps on trying, one armed with the hope that he will rise even in the end.”
We can choose whether or not these difficulties break us as a country, or make us. We can choose whether we will allow the axe to cut our soul, or if we will try again. We must make sacrifices and choose a path of redemption.As Dickens notes: “It is a far, far better thing that I do, than I have ever done; it is a far, far better rest that I go to than I have ever known.”
All South Africans want us to choose the path of prosperity and opportunity. We are at the crossroads, we can either choose to go left or to go right or to go straight on the path to nowhere. We are choosing the road of prosperity and opportunity, where the true spirit of South Africa lies. I urge South Africans to journey with us on this path.
A path destined to take us out of poverty and deprivation.It is a call to all of us: public servants, business, civil society, communities and labour.
This is what our people deserve.
I thank you.