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Ethiopia, Burundi can do more to gain from coffee niche markets
New edition of UNCTAD Commodities at a Glance series focuses on constraints and opportunities for coffee growers in East Africa, with special emphasis on the sustainability of supply.
Coffee producers in Ethiopia and Burundi should capitalize on growing interest in premium markets and environmental sustainability among the 500 million people globally who drink coffee every day to make the most of their inimitable beans, an UNCTAD report into the East African coffee sector has found.
The report, part of UNCTAD’s Commodities at a Glance series, says that the coffee market continues to grow but both Ethiopia – the ancestral home of desirable Arabica varieties – and Burundi, where coffee has been a mainstay of the economy since the 1920s, can do more to take advantage of high-value niche markets and introduce measures to ensure the sustainability of supply.
“The report explores the latest developments in the coffee industry and examines the current state of coffee production and trade in East Africa, using the examples of Ethiopia and Burundi,” said Pamela Coke-Hamilton, director of the international trade and commodities division of UNCTAD.
“The report analyses the importance of coffee in these economies regarding export earnings, farmers’ income and employment generation,” she said.
“It also highlights the challenges of the coffee sector and suggests some potential answers, particularly regarding allowing producer countries to capture a greater share of this commodity’s value.”
Coffee in Burundi
The report found that in Burundi production is volatile, beset by weather cycles, ageing trees – often more than 40 years old – soil degradation, the absence of adequate farming practices and, to some extent, political instability. Together with tea, coffee exports account for 90% of Burundi’s foreign exchange earnings.
But because Burundi has proved it can produce excellent coffee that consumers want, there is every incentive to strengthen the hand of smallholder farmers through more organized cooperatives.
“Also, private investment, including through public-private partnerships, should be encouraged to modernize the sector and make it more competitive,” Ms. Coke-Hamilton said.
“In this regard, Burundi should invest in market intelligence that helps stakeholders to understand better the factors associated with the growing demand in importing niche markets and build on the country’s reputation as a prized source of speciality coffees.”
Coffee in Ethiopia
Ethiopia faces a similar scenario, according to the report. The main problem remains the inconsistent quality of the coffee, with the prevalence of pests and diseases, climatic variability, poor agricultural practices, insufficient training of producers, and weaknesses in the organization and management of the value chain, the report said.
However, opportunities to improve the sector, particularly in the way growers are rewarded, also remain, the report points out.
“Ethiopia has a natural abundance of coffee varieties, enabling it to benefit from market and product differentiation,” Ms. Coke-Hamilton said. “Indeed, the country has a significant comparative advantage in the production of organic coffee with over 90% being de facto organic.”
More than 120 million people in the world rely on the coffee industry, including 25 million smallholders and coffee workers – half of whom live in Africa, the report notes.
Structural imbalance
However, as with most primary commodities, coffee remains characterized by an extended value chain which is only partially visible in producing countries – most of the value is captured by industrial roasters and distributors in consuming countries, namely developed countries, according to the report.
“In many coffee producing countries, particularly in Africa, the structural imbalance of the coffee value chain contributes to exacerbating rural poverty and its associated problems of food insecurity, low level of education, child labour, and rural-to-urban migration,” Ms. Coke-Hamilton said.
“This report is timely because coffee production is also threatened by climate change, which could severely reduce the land available for growing coffee.”
Other serious threats to the sustainability of coffee production in East Africa include the declining quality and productivity of the cultivars, increasing production costs, and a lack of interest from younger smallholders who have observed how generations before them have struggled to make a decent living from coffee farming.
Important measures need to be taken to ensure the sustainability of supply, particularly in the context of growing demand. Such measures could include building national capacities to improve coffee varieties, promoting better agricultural practices, improving the allocation of revenues from coffee among all value chain participants by, among others, increasing the share accruing to producers, and stimulating domestic consumption.
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tralac’s Daily News Selection
African trade policy events now underway:
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In Nairobi: The 6th Pan African Conference on Illicit Financial Flows and Taxation
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In Brazzaville: Republic of Congo, UNECA workshop on the harmonization of ECCAS, CEMAC trade policy instruments
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Starting tomorrow, in Cape Town: tralac’s AfCFTA Stakeholder Workshop (18-19 October)
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COMESA and the AfCFTA: a perspective by COMESA’s new SG, Chileshe Kapwepwe (Friday, 19 October, Chatham House)
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18th International Economic Forum on Africa: launch of Revenue Statistics in Africa (31 October, Paris)
These are the world’s most competitive economies
How well countries adapt to the Fourth Industrial Revolution (4IR) will determine whether they ‘thrive’ or ‘stagnate’ and could further divide workforces and increase social tensions, according to the latest version of the World Economic Forum’s Global Competitiveness Report. Almost 40 years after its first annual assessment of the global economy, the Forum’s 2018 report uses new methodology to understand the full impact of the 4IR, and finds factors including human capital, agility, resilience, openness and innovation becoming increasingly important. The new index measures 140 economies against 98 indicators, organized into 12 ‘pillars’ or drivers of productivity, to determine how close the economy is to the ideal state or ‘frontier’ of competitiveness. Extracts (pdf):
Looking at regional patterns, the top 20 of the GCI 4.0 rankings is composed almost exclusively of economies from Western Europe (10 economies), North America (2), and East Asia and the Pacific (7). In fact, East Asia and the Pacific achieves the highest median score (72.6) among all regions, slightly higher than Europe and North America (70.8). At the other end of the spectrum, 17 of the 34 sub-Saharan African economies studied are among the bottom 20 globally, and the region’s median is a low 45.2, less than halfway to the frontier. Yet the disparities within each region are profound (Figure 2). Mauritius (63.7, 49th), sub-Saharan Africa’s best performer, is nearly 30 points and over 90 places ahead of Chad (35.5, 140th). Across the seven regions, the average score gap between the best and worst performer is almost 30 points.
Mauritius ranks 49th globally. With a score of 63.7 out of 100 it achieves the best performance in Sub-Saharan Africa, in line with 2017. Mauritius’s leading position in the region is reflected in a GDP growth consistently above 3% since 2006, and above 4% over the past three years. The competitiveness performance of Mauritius is relatively strong in eight of 12 GCI pillars, where it ranks 67th or higher. Among these eight pillars Mauritius has achieved its best score on the product market pillar (65.6, 19th), thanks to a high degree of openness (6th) and a non-distortive fiscal policy (62.6, 16th). In addition, Mauritius is characterized by strong business dynamism (66.5, 35th) and sustained by lean administrative requirements (83.2) that enable companies to open and close with relative ease. Finally, Mauritius has achieved a strong performance on the Institutions pillar (38th, 62.9), second only to Rwanda in the region.
South Africa ranks 67th globally – with a score of 60.8. Among its strengths, South Africa is home to a large market size (68.4), good infrastructure (68.6) and a well-developed financial system (82.1, 18th). More specifically, South Africa’s financial sector offers a relatively balanced access to various sources of finance, including credit (100.0, 11th), venture capital (33.0, 63rd), equity (100.0, 2nd) and insurance (100.0, 3rd). In addition, South Africa’s innovation capability is relatively advanced (44.3, 46th), although limited by insufficient research and development (37.5). Among its weaknesses, South Africa’s performances on the health pillar (43.2, 125th) and security (43.7, 132nd) sub-pillar are among the worst in the world. Only 54% of the adult population has access to the internet, and only 70 out of 100 people have subscribed to mobile-broadband services (66th). Similarly, the digital skills (116th) and critical thinking skills (78th) of the current workforce are inadequate for the progress of a successful economy in the Fourth Industrial Revolution.
Table of contents. Chapter 1: Global findings; Chapter 2: Regional and country analysis; Chapter 3: Benchmarking competitiveness in the Fourth Industrial Revolution: introducing the Global Competitiveness Index 4.0
Rilwan Akeyewale: Who are the winners and losers in Africa’s Continental Free Trade area? (WEF)
What next?. Without comprehensive policy-making and preferential treatment for Africa’s most at-risk economies, the AfCFTA could prove to be a force for economic divergence, rather than a force for good. It is therefore important that participating countries build an efficient and participatory institutional architecture to avoid leaving any economies behind. To increase the impact of the trade deal, industrial policies must also be put in place, especially those concerning SMEs and manufacturing. These must focus on productivity, competition, diversification and economic complexity. Furthermore, individual countries under the agreement should introduce policies that address the concerns of labour unions, encourage healthy competition without killing local businesses, ensure strict adherence to waste disposal and protect intellectual property. [The author is CEO, Grandir Inc.]
Amadou Sy: Get the plumbing right – financial integration should support Africa’s trade integration (OECD)
However, lost in the debate about leveraging Africa’s trade integration for stronger and more inclusive economic growth is a policy discussion on increased financial integration. This is not surprising as architects often pay little attention to the plumbing of the buildings they are designing. Yet, plumbers should be taken more seriously. Indeed, the African financing infrastructure can be seen as the plumbing of the continent’s trade integration. And what are some of the necessary building blocks?
Unlocking markets, cross-border trade in Africa using technology (CIO)
Several key technology trends augur well for the implementation of the AfCFTA once ratified and could act to mitigate some of its risks. Two major examples of this are the rising profile of digital commerce platforms (taken in the context of the increasing interconnectedness of market participants via mobile technology) and the combined impact of such fields as data analytics, artificial intelligence and blockchain technology in optimising the production and flow of these goods and services between member countries, while enabling effective value-capture by harnessing economies of scale.
Israeli businesses, exporters encouraged to expand Africa operations (Jerusalem Post)
Israeli companies and exporters were encouraged to expand their trading operations in Africa on Wednesday, with those operating on the continent due to benefit from a further $700m in trade insurance supplied by the state-owned Israel Foreign Trade Risks Insurance Corporation (ASHRA). Citing increasingly healthy diplomatic ties between Israel and African nations, the Economy Ministry, accountant-general and ASHRA decided to double the existing $700m insurance coverage available to Israeli companies operating in Africa to a total of $1.4bn and thereby encourage more Israeli companies to trade on the continent. ASHRA will provide insurance policies backed by a state guarantee to Israeli companies working in a range of African countries, including allocating $150m in insurance coverage to those operating in Kenya, $105m to those in Nigeria, $70m for those in Uganda, $60m for those in Cameroon and $33m for those in Ethiopia.
China prudent in providing financing to Angola (Macauhub)
Angola obtained additional funding of $2bn from China, less than the $11bn sought, as China became more prudent in its lending to the African nation. Speaking about the State visit to Beijing by Angolan President João Lourenço (8-9 October), a source quoted by Angolan newspaper Novo Jornal, said that the $2bn credit line opened by the China Development Bank represents a policy change in the granting of credit, where the application of the funds should be “well justified” according to the country’s priorities. The amount was lower than that sought by Angola because the Chinese Government considered that the needs submitted can initially be met with the amount now available. [China, Angola agree to promote ties as presidents meet in Beijing]
UK-Ghana Investment Summit: address by Baroness Fairhead
It is part of our drive for a stronger, more coherent and more targeted UK approach to Ghana. Only last week, our Trade Envoy to Ghana, Adam Afriyie, witnessed the announcement of a joint venture between the UK’s Baird & Co. and the Precious Minerals Marketing Company for the establishment of an assaying plant in Ghana’s International Airport zone – a first for the region. And yesterday, we convened the first UK-Ghana Business Council – a six-monthly government to government forum to take forward our new strategic partnership. UK Export Finance support in Ghana is in high demand. It has capacity to offer local currency financing, so firms can ‘buy UK, pay Ghanaian’. UKEF’s impact has already been demonstrated through projects such as the Offshore Cape Three Points oil and gas project, for which UKEF provided $400m in finance, and the recently financed Kumasi Airport Phase 2 expansion project. And this is only a part of the wider strategic agenda we have across Africa. [The author is the Minister of State for Trade and Export Promotion]
Nigeria: Senate probes state oil company over import subsidies (News24)
The Nigerian Senate launched a probe on Tuesday into spending by the state oil company of some $3.5bn in import subsidies which was not approved by parliament, a statement said. The fuel subsidy scheme has been described as a sprawling web of patronage and mismanagement, a microcosm of the dysfunction in modern Nigeria. There have been mounting allegations that the Nigerian National Petroleum Corporation (NNPC), which is solely responsible for these imports, has been spending money to subsidise the products without first seeking approval from parliament.
Women’s rights and trade: time for a radical shift (CONCORD)
Today, European decision-makers widely acknowledge that the EU trade policy is not gender-neutral, and that this needs to be addressed. A concrete policy measure that receives a lot of attention is the integration of specific provisions – such as a dedicated chapter – on trade and gender in trade agreements. CONCORD welcomes this greater attention to the interactions between trade and women’s rights and would like to contribute to ongoing debates with this submission. We highlight (pdf) the limitations of what a separate gender chapter or provision can achieve, especially if it is not enforceable, and suggest considering the possibility to include gender equality and women’s rights in the existing sustainable development chapters of trade agreements, that should become enforceable.
Improving food security early warning systems for East and Southern Africa (World Bank)
An assessment of food security early warning systems was conducted to improve food security and resilience in East and Southern Africa. The study aimed at assessing challenges and opportunities for improving food security EWSs for enhanced resilience in ESA. The performance and capacity of EWSs at the regional economic cooperation level and at select member states were assessed. The challenges that recur across the RECs and member states fall into institutional, technical, and sustainability and financial challenges. Actions required to overcome the challenges include:
Today’s Quick Links: Wandile Sihlobo: The problem with being a net importer of wheat New APRA briefs: (i) The political economy of agricultural commercialisation in Zimbabwe (ii) Policy processes and political economy: Ghana country review In Second Committee debate, countries call for moving beyond income to achieve SDGs Caribbean countries set to reduce cross-border trade hurdles Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development: Boom to challenge lithium-rich developing countries Multi-agency meeting: Economic challenges lie ahead as climate change wreaks havoc |
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Who are the winners and losers in Africa’s Continental Free Trade Area?
In March this year, the leaders of 44 African countries endorsed the African Continental Free Trade Agreement (AfCFTA). Since then more countries, including South Africa, have joined in.
pdf The agreement (4.67 MB) is expected to favour small and medium-size businesses, usually known by the acronym SMEs, which are responsible for more than 80% of Africa’s employment and 50% of its GDP.
Obviously, any economic policy that facilitates imports and exports among member countries – with lower or no tariffs, free access to the market and market information, and the elimination of trade barriers – offers numerous benefits to SMEs.
And as history’s largest free trade agreement, which has a market size in the region of $3 trillion, most people are excited at the development. But skeptics have pointed to impending challenges, especially those which affect SMEs. These must be addressed if the AfCFTA is to achieve its objectives. But first, let’s look at who stands to gain.
The wins
1. New markets
The AfCFTA will allow African-owned companies to enter new markets. This expands their customer base and leads to new products and services, making investing in innovation viable.
2. Economic growth
Manufacturing represents only about 10% of total GDP in Africa, on average. This is well below the figure in other developing regions. A successful continental free trade area could reduce this gap. A bigger manufacturing sector will lead SMEs to create more well-paid jobs, especially for young people, thereby alleviating poverty.
3. Foreign direct investment
With restrictions lifted on foreign investments, investors will flock to the continent. This adds capital to expand local industries and boost domestic businesses. New capital enhances an upward productivity cycle that stimulates the entire economy. An inflow of foreign capital can also stimulate banking systems, leading to more investment and consumer lending.
4. Reduction in input costs
The AfCFTA will ease the process of importing raw materials from other African countries. It will also enable SMEs to set up assembly firms in other African countries, in order to access cheaper means of production and thereby increase their bottom lines.
5. Increased efficiency and sales
Global companies have more expertise than domestic companies to develop local resources. That’s especially true for businesses in the manufacturing sector. The AfCFTA will allow multinationals to partner with local firms to develop raw materials, training them in best practices and transferring technology in the process.
The potential losses
A major potential challenge in harmonizing Africa’s heterogeneous economies under one agreement is the wide variation that exists in their levels of development. For example, over 50% of Africa’s cumulative GDP is contributed by Egypt, Nigeria and South Africa, while Africa’s six sovereign island nations collectively contribute just 1%.
The AfCFTA has the greatest levels of income disparity of any continental free trade agreement, and more than double the levels witnessed in blocs such as ASEAN and CARICOM.
Further challenges
1. Increased competitive pressure
Many emerging African markets are traditional economies that rely on farming for employment. These small family farms can’t compete with large agri-businesses in high-income African countries such as South Africa, Kenya, Ethiopia, Egypt and Nigeria. As a result, they may lose their farms, leading to high unemployment, crime and poverty.
2. Choking of local SMEs
Consumers always prefer cheaper products. This may lead to local producers losing huge sales to foreign suppliers, because the latter can lower the cost of their products by leveraging the reduced tariffs imposed on imported goods.
3. Adverse working conditions and job losses
Labourers from poorer countries may be forced to work long hours and to live in shanties without basic amenities such as drinking water and electricity, in order to send money to their families. Some workers might even be forced to accept lower wages and be prevented from joining labour unions, under threat of losing their jobs.
This may explain why the Nigerian Labour Congress (NLC), in their refusal to endorse the agreement, describes the trade agreement as a "renewed, extremely dangerous and radioactive neo-liberal policy initiative".
4. Environmental depletion
Tough competition may lead some companies to disregard the environment when it comes to making products and disposing of waste, just so they can survive in their industry. Many SMEs are likely to cut costs, including those related to manufacturing and the proper dumping of waste.
5. Theft of intellectual property
Many African countries don't have laws in place that protect patents, inventions and new processes. The laws they do have aren't always strictly enforced. As a result, companies' ideas often get stolen. With the AfCFTA, this could get worse, leading SMEs to invest poorly in research and development.
What next?
Without comprehensive policy-making and preferential treatment for Africa’s most at-risk economies, the AfCFTA could prove to be a force for economic divergence, rather than a force for good. It is therefore important that participating countries build an efficient and participatory institutional architecture to avoid leaving any economies behind.
To increase the impact of the trade deal, industrial policies must also be put in place, especially those concerning SMEs and manufacturing. These must focus on productivity, competition, diversification and economic complexity.
Furthermore, individual countries under the agreement should introduce policies that address the concerns of labour unions, encourage healthy competition without killing local businesses, ensure strict adherence to waste disposal and protect intellectual property.
Rilwan Akeyewale is CEO, Grandir Inc. The views expressed in this article are those of the author alone and not the World Economic Forum.
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Changing nature of competitiveness poses challenges for future of the global economy
The WEF’s annual study on the global economy finds a competitiveness landscape radically altered by the impact of the Fourth Industrial Revolution
The changing nature of economic competitiveness in a world that is becoming increasingly transformed by new, digital technologies is creating a new set of challenges for governments and businesses, which collectively run the risk of having a negative impact on future growth and productivity. This is the key finding of the World Economic Forum’s Global Competitiveness Report, published on 16 October 2018.
According to the report, which in 2018 uses a brand new methodology to fully capture the dynamics of the global economy in the Fourth Industrial Revolution, many of the factors that will have the greatest impact in driving competitiveness in the future have never been the focus of major policy decisions in the past. These include idea generation, entrepreneurial culture, openness, and agility.
The new tool maps the competitiveness landscape of 140 economies through 98 indicators organised into 12 pillars. For each indicator, using a scale from 0 to 100, it indicates how close an economy is to the ideal state or “frontier” of competitiveness. When combining these factors, the United States achieves the best overall performance with a score of 85.6, ahead of Singapore and Germany. The average score for the world is 60, 40 points away from the frontier.
One unifying theme among the world’s most competitive economies is that they all possess considerable room for improvement. For example, while the report’s Global Competitiveness Index finds that Singapore is the most ‘future-ready’ economy, it trails Sweden when it comes to having a digitally skilled workforce. Switzerland, meanwhile, has the most effective labour for reskilling and retraining policies and US companies are the fastest when it comes to embracing change.
One of the report’s most concerning findings is the relative weakness across the board when it comes to mastering the innovation process, from idea generation to product commercialization. Here, 103 countries score lower than 50 in this area of the index which is topped by Germany, followed by the United States and Switzerland. The report notably finds that attitude towards entrepreneurial risk is the most positive in Israel and tends to be negative in several East Asian economies. Canada has the most diverse workforce and Denmark’s corporate culture is the least hierarchical, both critical factors for driving innovation.
“Embracing the Fourth Industrial Revolution has become a defining factor for competitiveness. With this Report, the World Economic Forum proposes an approach to assess how well countries are performing against this new criterion. I foresee a new global divide between countries who understand innovative transformations and those that don’t. Only those economies that recognize the importance of the Fourth Industrial Revolution will be able to expand opportunities for their people,” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum.
Openness must be complemented by inclusion
At a time of escalating trade tensions and a backlash against globalization, the report also reveals the importance of openness for competitiveness. For example, those economies performing in indicators that denote openness such as low tariff and non-tariff barriers, ease of hiring foreign labour and collaboration in patent application among others also tend to perform well in terms of innovation and market efficiency. This data suggests that global economic health would be positively impacted by a return to greater openness and integration. However, it is critical that policies be put in place to improve conditions of those adversely affected by globalization within countries.
The report also presents a strong argument that redistributive policies, safety nets, investments in human capital, as well as more progressive taxation aimed at addressing inequality do not need to compromise an economy’s levels of competitiveness. With no inherent trade-off between competitiveness and inclusion, it is possible to be pro-growth and inclusive at the same time. For example, workers in the Index’s ten most competitive economies work on average five hours less per week than workers in the three BRICS economies – Brazil, India and Russia – for which working time data is available.
A key message from the report is the need for a broad-based approach to raising competitiveness – a strong performance in one area cannot make up for a weak performance in another. This is especially true when it comes to innovation: while it is true that a strong focus on technology can provide leapfrogging opportunities for low and middle income countries, governments must not lose sight of ‘old’ developmental issues, such as governance, infrastructure and skills. In this light one worrying factor thrown up by this year’s Index is the fact that, for 117 of the 140 economies surveyed, quality of institutions remains a drag on overall competitiveness.
“Competitiveness is neither a competition nor a zero-sum game – all countries can become more prosperous. With opportunities for economic leapfrogging, diffusion of innovative ideas across borders and new forms of value creation, the Fourth Industrial Revolution can level the playing field for all economies. But technology is not a silver bullet on its own. Countries must invest in people and institutions to deliver on the promise of technology,” said Saadia Zahidi, Member of the Managing Board and Head of the Centre for the New Economy and Society.
Regional and country highlights
With a score of 85.6 out of 100, the United States is the country closest to the frontier of competitiveness. It notably leads the Business dynamism pillar, thanks to its vibrant entrepreneurial culture, the Labour market pillar (score of 81.9 out of 100) and the Financial system (92.1) pillar. These are among the several factors that contribute to making the US’ innovation ecosystem one of the best in the world (86.5, 2nd behind Germany). The country’s institutional framework also remains relatively sound (74.6, 13th).
However, there are indications of a weakening social fabric (63.3, down from 65.5) and worsening security situation (79.1, 56th) – the United States has a homicide rate five times the advanced economies’ average. It is far from the frontier in areas such as checks and balances (76.3, 40th), judicial independence (79.0, 15th), and corruption (75.0, 16th). The country also lags behind most advanced economies in the Health pillar, with healthy life expectancy at 67.7 years (46th), three years below the average of advanced economies, and six years less than Singapore and Japan. Finally, ICT adoption is relatively low compared to other advanced economies, including aspects such as mobile-broadband subscriptions and internet users. With a score of 71.2, the United States trails Korea by a full 20 points.
In addition to the United States, other G20 economies in the top 10 include Germany (3rd, 82.8), Japan (5th, 82.4) and the United Kingdom (8th, 82.0). G20 results are highly diverse. Almost 30 points, and 80 ranks separate the United States from Argentina (81st, 57.5), the worst performing G20 economy.
Singapore ranks second in the overall rankings (score of 83.5), with openness as the defining feature of this global trading hub and one of the main drivers of its economic success. The country also leads the infrastructure pillar, with a nearly perfect score of 95.7, thanks to its world-class transport infrastructure and connectivity.
Besides Singapore and Japan, Hong Kong SAR (7th, 82.3) is the third economy from East Asia and the Pacific region in the top ten, confirming the widely held view that overall growth momentum in the region is set to last. These three economies boast world-class physical and digital infrastructure and connectivity, macroeconomic stability, strong human capital, and well-developed financial systems.
Australia (14th, 78.9) and Korea (15th, 78.8) are among the top 20. The biggest gap in this region lies in the development of an innovation ecosystem – New Zealand ranks 20th on the Innovation Capability pillar, while the Republic of Korea ranks 8th. Emerging markets such as Mongolia (99th , 52.7), Cambodia (110th, 50.2) and Lao PDR (112th, 49.3) are only half way to the frontier, making them vulnerable to a sudden shock, such as a faster-than-expected rise in interest rates in advanced economies and escalating trade tensions.
Of the BRICS grouping of large merging markets, China is the most competitive, ranking 28 in the Global Competitiveness Index with a score of 72.6. It is followed by Russia which is ranked 43. These are the only two in the top 50. Next is India, which ranks 58, up five places on 2017: with a score of 62, it registers the largest gain of any country in the G20. India is followed by South Africa, which falls 5 places this year to 67. Last is Brazil, which slips 3 places to 72.
Europe is made up of a very competitive north-west, a relatively competitive south-west, a rising north-east region and a lagging south-east. Despite continuing fragility from recent political shifts, the continent’s basic competitiveness factors, such as health, education, infrastructure and skills, are firmly in place. Sweden (9th, 81.7) is the highest ranked of the Nordic economies, while France (17th, 78.0) is among the top 20. The greatest disparities in the region lie in national innovation ecosystems, with countries in Eastern Europe and the Balkans lacking basic innovation infrastructure, while countries such as Germany and Switzerland set the global standards for innovation.
Chile (33rd, 70.3) leads the Latin America and the Caribbean region by a wide margin, ahead of Mexico (46th, 64.6) and Uruguay (53rd, 62.7). Venezuela (127th, 43.2) and Haiti (138th, 36.5) close the march. The region’s competitiveness remains fragile and could be further jeopardized by a number of factors including increased risk from trade protectionism in the United States; spillover of Venezuela’s economic and humanitarian crisis; policy uncertainty from elections in the region’s largest economies, and disruptions from natural disasters threatening the Caribbean. Insecurity and weak institutions are two of the biggest challenges for most countries.
Competitiveness performance in the Middle East and North Africa remains diverse, with Israel (20th, 76.6) and the United Arab Emirates (27th, 73.4), leading the way in the region. Saudi Arabia is in 39th position with a score of 67.5 out of 100. A focus on intra-region connectivity, in combination with improvements in ICT readiness and investment in human capital would improve the region’s capacity to innovate, foster business dynamism and increase its competitiveness performance.
Seventeen of the 34 sub-Saharan African economies studied are among the bottom 20, and the region’s average (45.2) placed it less than halfway to the frontier. Mauritius (49th, 63.7) leads the region, ahead of South Africa and nearly 30 points and 91 places ahead of Chad (140th, 35.5). Kenya is in 93rd position with a score of 53.7 while Nigeria is in 115th position with a score of 47.5 out of 100.
About the Global Competitiveness Index 4.0 methodology
Building on four decades of experience in benchmarking competitiveness, the World Economic Forum’s Global Competitiveness Index 4.0 is a new composite indicator that assesses the set of factors that determine an economy’s level of productivity – widely considered as the most important determinant of long-term growth. The GCI 4.0 framework is built around 12 main drivers of productivity. These pillars are: Institutions, Infrastructure; Technological readiness; Macroeconomic context; Health; Education and skills; Product market; Labor market; Financial system; Market size; Business dynamism; and Innovation. They comprise 98 individual indicators. Further details on methodology can be found here.
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South Africa’s agricultural trade: market access permits and export quotas for 2019
The Department of Agriculture, Forestry and Fisheries (DAFF) has issued two new notices concerning procedures for the application, administration and allocation of export quotas under the SADC-EU EPA and market access permits under the WTO Marrakesh Agreement.
Export quotas under the SADC-EU EPA
The Economic Partnership Agreement (EPA) between the Southern African Development Community (SADC) and the European Union (EU) was signed by both parties on 10 June 2016 and came into effect on 1 October 2016. The SADC-EU EPA package contains agricultural products to be exported by South Africa into the EU market under the Tariff Rate Quota (TRQ) regime. The SADC-EU EPA TRQ package offers SA enhanced market access for agricultural products.
On 8 October 2018, DAFF issued a new notice for local exporters wanting to apply for quotas to export agricultural products to the EU for 2019. Permits for exportation of any of the products specified in Table 1 on Export Arrangements, to the EU, will be issued only to exporters in South Africa registered at the Department of Trade and Industry (the DTI) and the South African Revenue Services (SARS). The export permits will be valid from 1 January 2019 until 31 December 2019.
All exporters and potential exporters will be required to comply with the following:
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The sanitary, phyto-sanitary and other technical requirements as stipulated by the EU; and
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The Rules of Origin that form part of the SADC-EU EPA preferential scheme.
Wine exporters that have obtained “Approved Exporter Status” will follow the electronic exporter to client system on Wine Online, a web-based system controlling the local export certification of liquor products. Manually-issued EUR 1 certificates (which enable importers to import products at a reduced or nil rate of import duty in terms of the SADC-EU EPA) will no longer be accepted unless they are declared on Wine Online.
Permits for the products specified will be allocated on the basis of the Preferential Market Access Permit Allocation System which takes into account the following variables:
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The BBBEE status of applicants – obtainable from a valid B-BEE certificate measured against Amended AgriBEE (Agricultural Black Economic Empowerment) Sector Code issued by an accredited verification agency;
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The market share of applicants – derived from historical export data for the past three years (2015, 2016, 2017);
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Quota applied for by applicants;
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Number of applicants; and
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The total quota available for the specific product.
The quantity exported by an exporter will be calculated on the basis of a detailed list of bills of entry for the product concerned submitted together with the application form, for the period stipulated for the product in column 4 of Table 1: Export Arrangements, set out per EU tariff code line. The quotas allocated to exporters will be provisional. The Department will assess the utilization rate during the quota year after which there will be re-allocation.
This notice replaces all previous notices regarding the procedures for the application, administration and allocation of export permits under the SADC-EU EPA.
Market access permits under the WTO Marrakesh Agreement
On 9 October 2018, DAFF issued a notice for South African importers wanting to import agricultural products under the World Trade Organisation (WTO) Marrakesh Agreement. Market access permits will be issued to importers for importation of specified products into the Republic of South Africa for the quantities and at the reduced levels of duty specified.
Permits for the products specified will be allocated on the basis of the Preferential Market Access Permit Allocation Points System which takes into account the following variables:
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The BBBEE status of applicants;
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The market share of applicants – derived from historical export data for the past three years;
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Quota applied for by applicants;
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Number of applicants; and
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The quota available.
The quantity imported by an importer will be calculated on the basis of a detailed list of bills of entry for the product concerned submitted together with the application form, for the period stipulated for the product in column 5 of the Table 1: Import Arrangements.
Products imported under the market access rebate permits are for consumption in South Africa only. If the market share for a particular applicant exceeds the limit for dominant firms contemplated in section 7(a)(c) of the Competition Act, Act 89 of 1998 as amended. The Department can adjust the allocation formula to create fair competition within that industry or sector.
This notice replaces all previous notices regarding procedures for the application, administration and allocation of market access permits under the WTO Marrakesh Agreement regarding market access.
tralac’s Daily News Selection
Report of the G20 Eminent Persons Group on Global Financial Governance: Making the global financial system work for all
Africa and illicit financial flows: three updates
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“Fighting corruption and illicit financial flows in Nigeria is non-negotiable”: this was the statement by Muhammadu Buhari, President of Nigeria, to Thabo Mbeki, former President of South Africa and Chair of the AU/ECA High-Level Panel on Illicit Financial Flows from Africa. The Chair visited the President, who is also the current Champion of AU Anti-Corruption Campaign, to follow up on the efforts of AU Member States to implement the recommendations of the High-Level Panel Report (endorsed by the AU in 2015) and ultimately tackle IFFs nationally. The visit also saw the Chair call upon the President in his capacity as the AU Anti-Corruption Champion to lead the efforts to engage action from other AU Member States towards tackling IFFs at the national, regional and continental level. The two-day event culminated with a technical workshop with Thabo Mbeki. Part of the objectives of the workshop was to discuss the ECA’s proposed Development Assistance Project which aims to support Nigeria and other member states in the fight against IFFs. Following this visit, the Secretariat is expected to further engage the government of Nigeria and foster collaboration to build its capacity to stem IFFs from the country.
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Kenya: Potential revenue losses associated with trade misinvoicing. Analysis of trade misinvoicing in Kenya in 2013 shows that the potential loss of revenue to the government was $907m for the year, according to a study by Global Financial Integrity. To put this figure in context, this amount represents 8% 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 23% of the country’s total trade. The report analyzes Kenya’s bilateral trade statistics for 2013 (the most recent year for which sufficient data are available) which are published by the United Nations (Comtrade). [Download: pdf Kenya: Potential Revenue Losses Associated with Trade Misinvoicing (1.54 MB) ]
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A scoping study of illicit financial flows impacting Uganda. Insufficient levels of financial transparency – globally and domestically – and government accountability in Uganda, coupled with a regulatory system that can incentivize financial crimes, are helping to drive high levels of illicit financial inflow and outflows in the country, which are undermining development efforts, says a new Global Financial Integrity report. Of the three sources of IFFs – commercial, criminal, and corrupt – the study found that potentially over-and under-invoiced commercial imports and exports is the largest measurable component, at roughly US$6.7 billion during the 10-year period from 2006-2015. The propensity for misinvoicing merits serious attention. [Download: pdf A Scoping Study of Illicit Financial Flows Impacting Uganda (1.06 MB) ]
Global Investment Trends Monitor (UNCTAD)
Foreign direct investment has dropped 40% year-on-year so far, UNCTAD said on Monday, but the $470m decline is happening mainly in wealthy, industrialized nations, especially in North America and Western Europe. Overall, the global financial picture is “gloomy”, said UNCTAD’s James Zhan, Director, Division on Investment and Enterprise. According to UNCTAD, the development is mainly owing to recent tax reforms in the US which have encouraged big firms there to bring home earnings from abroad – principally from Western European countries. He said that the agency had warned in early January that there was “about $2 trillion of stock in the form of cash or in the form of reinvested earnings of retained earnings outside the US”, which may be repatriated in some form, following wholesale tax reform. In contrast to the overall decline in foreign investment, the UNCTAD report highlights a 42% increase in so-called “greenfield” projects, to $454bn. Extract:
In Africa, the slowdown in FDI continued from 2017 into the first half of 2018 (3% reduction, remaining close to an estimated $18bn for the region). Among sub-regions, only Southern Africa saw a significant increase in FDI (up 40%). The substantial increase was driven to a large extent by South Africa ($3.4bn in the first half of 2018 compared to $1.1bn in the first half of 2017), which is seeing a return to earlier levels of investment after a steep slowdown in the preceding years. A relatively significant decline was registered in resource-dominant Western Africa, with a 17% reduction in FDI in the first half of this year (S$5.2bn to an estimated $4.3bn). Egypt remained the largest FDI recipient on the continent with an estimated increase of 24% compared to the first half of 2017. The volatile global economic environment and mixed commodity price trends are important factors behind weakened FDI to Africa. Also, the expected growth in FDI inflows to Africa due to advances in regional integration has yet to materialize, the African Continental Free Trade Agreement, once in operation, may trigger new investor interest in the continent. [Download: pdf UNCTAD Investment Trends Monitor, October 2018 (1.38 MB) ]
FDI and the skill premium: evidence from emerging economies (World Bank)
This paper combines project-level data on greenfield foreign direct investment with household surveys to estimate the effects of foreign direct investment on the wage skill premium across sectors and regions in seven emerging economies (Brazil, Colombia, Ethiopia, Mexico, the Philippines, South Africa, and Vietnam). The results suggest that foreign direct investment is associated with a higher probability of employment and higher wages for unskilled workers, relative to skilled workers, in six of the seven countries analyzed in this paper. Moreover, the effects of foreign direct investment on wages are relatively larger for unskilled women.
Towards a multilateral investment facilitation framework: elements in international investment agreements (ICTSD)
Investment facilitation is an expansive notion, not always clearly defined and sometimes confused with the concepts of investment promotion or investment retention. There are some slight differences in approaches to the content of investment facilitation across institutions, such as the OECD, UNCTAD, the World Bank, and the G20. From an analytical review of these different approaches, we can conclude that there are at least two different takes on investment facilitation, identified as the normative and functional approaches. [The author, Rodrigo Polanco Lazo, is attached to the World Trade Institute, University of Bern]
Investment conferences to diarise:
World Investment Forum (22-26 October, Geneva)
South African Investment Conference 2018 (25-27 October, Sandton); A preview of the SA Investment Conference: City Press interview with Ms Trudi Makhaya
Africa Chamber Leaders forum: African business leaders set to meet in Kenya to spur intra-Africa trade (Xinhua)
Kenya’s trade lobby will next week host a meeting which will bring together business leaders from across Africa to seek ways of boosting intra-Africa trade. The Kenya National Chamber of Commerce and Industry says the 23-24 October meeting will focus on fast-tracking the realization of the AfCFTA as well as the preparedness of the business community on the continent. Kenya National Chamber of Commerce & Industry national chairman, Kiprono Kittony, who doubles as one of the vice presidents representing Africa at the World Chambers Federation, termed the forum as timely and relevant to tackle existing hurdles in promoting intra-Africa trade. Other topics to be addressed during the event include: cross cutting challenges encountered by African chambers, how to build sustainable chambers in Africa, the role of the Pan African Chamber of Commerce and Industry in promoting intra Africa Trade and the AfCFTA potential, as well as the Rio 2019 World Chambers Congress.
Mauritius: National Innovation Framework 2018-2030 launched (GoM)
The National Innovation Framework 2018-2030, which aims at creating an ecosystem for innovation to facilitate the transition of Mauritius from a middle-income economy to a high-income innovation driven economy, was launched yesterday. The framework document was prepared by the Ministry of Technology, Communication and Innovation jointly with the Mauritius Research Council, in consultation with various stakeholders. NIF 2018-2030 is the culmination of a highly consultative process involving both public and private sectors. Some of the salient points addressed in the document include infrastructure, capacity-building, incentives and governance. [Mauritius, Ghana determined to implement projects by the Ghana Smart City Ltd]
Southern Africa: A promising region for US agricultural exports (USDA)
US agricultural exports to Southern Africa have fluctuated over the past 10 years between $372m and $766m. This fluctuation is caused primarily by drought-related variations in local corn production and competition from other wheat suppliers. South Africa and Angola are the largest importers of US agricultural products in the region, accounting for 90% of US-origin imports in 2017. South Africa serves as a gateway for distribution throughout the region and US products may be transshipped to neighbouring countries. US agricultural exports to Southern Africa totaled $627m in 2017, accounting for only 4% of the region’s $14bn in total imports.
US exports, market share, and the policy landscape. For the last five years, poultry meat and products (excluding eggs) have topped the list of US agricultural exports to Southern Africa, with sales primarily to South Africa and Angola. Exports of chicken legs to South Africa have fared well despite a quota of 65,000 tons (at the most-favored-nation tariff rate of 37%) and prohibitively high anti-dumping tariff rates above the quota. In May 2018, Namibia opened its market to US poultry and FAS projects that Namibian broiler meat imports could increase by about 3.5% this year, reaching approximately 30,500 tons in 2018, driven by local demand that cannot adequately be met by local supply. Broiler meat is relatively affordable and is becoming an increasingly important protein source in the diet of many Namibians. Another new opportunity in the region is the opening of South Africa to imports of US table and hatching eggs. While South Africa was previously self-sufficient in egg production, the local egg industry is now recovering from highly pathogenic avian influenza (H5N8) outbreaks in 2017. FAS projects that South African table egg imports could reach 75 tons in 2018. There are also opportunities for hatching eggs as a result of the H5N8 outbreaks. However, South African government officials have informed FAS that the opening of the hatching egg market will likely be a temporary concession.
The State of Food and Agriculture 2018: migration, agriculture and rural development (FAO)
Rural migration assumes various forms and presents different challenges and opportunities for migrants and societies. This is seen across countries with different levels of development, governance, agricultural resource availability, and rural demographic structures. This report uses a broad categorization of countries in terms of rural migration, which reflect different migration challenges and drivers. Although some countries may have characteristics pertaining to two or more categories, the following five broad profiles are identified: [Download: pdf The State of Food and Agriculture 2018 (4.24 MB) ]
Mozambique Energy Strategy Update: AfDB posts an EOI (pdf, AfDB)
The overall objectives of the assignment is to draw up a National Energy Strategy that clearly sets out the main goals to be pursued in the upcoming ten years (2019-2029), describing the basic decisions to be taken, establishing the priorities of actions to enable Mozambique to act in a free market and reassure resumption of a sustainable growth.
Today’s Quick Links: Reuters: Standard Chartered sees increased China-Africa trade due to US trade war Ed Richardson: Port tariffs, hidden costs stifling business in SADC Leather manufacturers push for Nairobi training hub AfDB’s Desert to Power Program: EOI for in-depth public sector readiness and market assessment study Angola: Tourism and leisure value chain study EOI ILO expresses concern about World Bank report on future of work Development Committee communiqué WEF: The new geopolitics of Artificial Intelligence China emerges as center of thriving used smartphone trade Is India a tariff king? |
Related News
Making the global financial system work for all
We are at a critical juncture. Our fundamental challenge is to build a cooperative international order suited to the 21st century: one that delivers win-win outcomes for nations in a multipolar world. It is within our reach to do so. We otherwise face the prospect of fragmentation, and the steady weakening of our capacity to respond to the much larger national and collective challenges of the future.
Why the need for reform?
The G20 Eminent Persons Group on Global Financial Governance was asked by the G20 Finance Ministers and Central Bank Governors in April 2017 to recommend reforms to the global financial architecture and governance of the system of International Financial Institutions (IFIs), so as to promote economic stability and sustainable growth in a new global era; and to consider how the G20 could better provide continued leadership and support for these goals.
At the heart of the review is the future of the open and competitive world order that has brought a large part of humanity out of poverty, raised living standards across nations, and provided the foundation for unprecedented global peace over the last 70 years. That open order remains critical to every nation’s future. But the system of international governance and cooperation that underpins it is fraying. Left on its own, there is a real risk of drift into a fragmented world, with policies in different parts of the world working at odds with rather than reinforcing each other, and with all nations ending up losing.
We cannot return to the past. Our central challenge is to create a cooperative international order for a world that has changed irreversibly: one that is more multipolar and decentralized in decisions, yet more interconnected, and with challenges ahead that are much larger and more pressing than we have seen in decades.
Getting national policies right is at the core of achieving inclusive societies and mutual prosperity. But international and national initiatives should reinforce each other in a way that creates a stronger future for all. An open, competitive and well-coordinated international order will enable win-win outcomes for nations. Its weakening will lead to lose-lose outcomes, as global growth and opportunities for new jobs are eroded over time, and as financial stability and the global commons become more fragile. Equally, cooperative internationalism will survive only if it helps the broad base of nations achieve inclusive growth.
The reforms proposed in this report strengthen and add resilience to global financial governance for this new, cooperative international order. The present system lacks the coherence, joint capacity and effectiveness to support its most fundamental goals in global development and financial stability. It must be brought up to date with the realities of a new era.
We can achieve this by implementing decisive reforms to make the system work as a system. These reforms are within our reach.
They do not require new international bodies. They instead require that we take bold and defined steps to ensure that today’s institutions – global, regional and bilateral – work together as a system. They require that we build trust and transparency among these different institutions, and leverage their combined strengths, so that the system as a whole delivers greater and more lasting development impact and reduces the frequency and damage of crises.
Key thrusts
The next decade is critical. We need substantially greater impact in helping countries achieve sustainable development and inclusive growth, and in managing the growing pressures in the global commons. The current pace of change will not get us there.
We need bolder reforms to harness complementarities and synergies in the development system:
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Refocus IFIs’ efforts to help countries strengthen governance capacity and human capital, as the foundation for an attractive investment climate, job creation, and social stability.
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Exploit the largely untapped potential for collaboration among the IFIs as well as with other development partners to maximize their contributions as a group, including by convergence around core standards.
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Embark on system-wide insurance and diversification of risk, to create a large-scale asset class and mobilize significantly greater private sector participation.
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Strengthen joint capacity to tackle the challenges of the commons. We must also leverage more actively on the work of the non-official sector, including NGOs and philanthropies.
A decade after the global financial crisis, further reforms are needed to reduce the bouts of instability that set back growth, to keep countries on the path toward openness and to avert another major crisis.
First, to get the full benefits of cross-border capital flows by strengthening support for countries in building deeper domestic financial markets; and developing and evolving a framework of policy guidance that:
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Enables countries to utilize international capital flows without risks arising from excessive market volatility.
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Enables domestic objectives to be achieved in sending countries while avoiding major spillovers.
Second, to create a more robust, integrated system of risk surveillance of a complex, interconnected global financial system, and systematically incorporate contrarian views.
Third, to create a strong and more reliable global financial safety net by stitching together its fragmented layers.
The role of the G20 in the global financial architecture should be reset. It should focus on developing political consensus on key strategic issues and crisis response. This requires freeing up space from its current crowded agenda and devolving work to the IFIs.
We need governance to ensure that the system works as a system:
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Implementing the system-wide reorientation in development finance. A G20-led group, including key non-G20 stakeholders, should steer these shifts over the next three years, before handing the coordinating role to the IFI Heads. This should include achieving complementarity among multiple institutions (multilateral, regional and bilateral), and establishing a clear system of metrics to track impact and value for money.
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Addressing development challenges early. A biennial strategic dialogue, building on existing IFI fora, should bring together the IFIs and other key stakeholders to identify future development risks before they create lasting damage, and assess the adequacy of collective responses.
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The governance reforms to foster global financial resilience require the IMF to play a key role, in interactions with other institutions integral to the international monetary and financial system, and with regular updates to the IMFC.
Governance reforms within the IFIs themselves should cut back on today’s significant overlap between Board and Management responsibilities. They should enable Boards to focus more on strategic priorities, and empower and hold Management accountable for outcomes.
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Global Financial Integrity releases new study on trade misinvoicing in Kenya
New study shows Kenya trade misinvoicing leads to significant revenue losses
Analysis of trade misinvoicing in Kenya in 2013 shows that the potential loss of revenue to the government was $907 million for the year, according to a new study by Global Financial Integrity. To put this figure in context, this amount represents eight 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 23 percent of the country’s total trade.
The report, titled Kenya: Potential Revenue Losses Associated with Trade Misinvoicing, analyzes Kenya’s bilateral trade statistics for 2013 (the most recent year for which sufficient data are available) which are published by the United Nations (Comtrade). The detailed breakdown of bilateral Kenyan 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 Kenya reports having imported from its partner countries and the corresponding export reports by Kenya’s trade partners. Export gaps represent the difference in value between what Kenya reports as having exported and what its partners report as imported.
Revenue lost due to the misinvoicing of imports was $767 million. This amount can be further divided into its component parts: uncollected VAT tax ($324 million), customs duties ($229 million), and corporate income tax ($214 million). Lost revenue due to misinvoiced exports was $140 million for the year which is related to lower than expected corporate income and royalties.
“The practice of trade misinvoicing has become normalized in many categories of international trade,” GFI President Raymond Baker said. “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 Kenya today.”
Examination of the underlying commodity groups which comprise Kenya’s global trade show that a large amount of lost revenue ($92 million) was related to import under-invoicing of just five product types. Those products and the related estimated revenue losses include: mineral fuels ($15 million), electrical machinery ($17 million), vehicles ($18 million), cereals ($21 million), and worn clothing ($21 million). Lost revenue due to mispriced exports ($140 million) may be related to the coffee, tea and spice 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 billion) and over-invoicing ($761 million). It should be noted that these figures represent the estimated value of the gap between what was reported by Kenya and its trading partners. The loss in government revenue is a subset of these amounts and is based on VAT tax rates (16 percent), customs duties (11.3 percent), corporate income taxes (28.1 percent), and royalties (0.1 percent) which are then applied to the value gap. Export misinvoicing gaps were $496 million for export under-invoicing and $341 million for export over-invoicing. Lost corporate income taxes and royalties are then applied to export under-invoicing amounts to calculate lost government revenue.
Recommendations
There are three ways that Kenya can curtail revenues losses due to trade misinvoicing. First is through legislative and regulatory measures that posit substantial disincentives for importers and exporters. Second is detecting misinvoicing as transactions are occurring and taking corrective steps in real time. Third is clawing back lost revenues after misinvoicing is found through subsequent audits and reviews. Of these, by far the greater potential for gain is attendant to the first and second options. Clawing back lost revenues after the fact is a difficult exercise.
Methodology
The central objective of the analysis is to identify commodity-trade partner combinations which appear to be more likely than others to present risk of revenue loss due to trade misinvoicing. Toward this end, GFI presents a summary of the methods it used to estimate trade misinvoicing for imports and exports along with a more detailed presentation of potential revenue impacts of import under-invoicing for Kenya. The availability of Kenyan tariff data comparable in detail to the partner country and commodity detail available for Kenyan trade enable the more detailed estimates of revenue loss.
The first two subsections to follow reflect on all the misinvoicing estimates. In subsection A, the bilateral trade data used to estimate misinvoicing are summarized and are compared with other leading aggregate trade series for Kenya. That comparison is intended to shed light on the kinds of information the bilateral trade analysis can provide. Next, in subsection B, GFI provides an overview of the numerous statistical treatments of the basic data that were necessary to enable robust measurements of trade gaps. Finally, in subsection C, details of the potential revenue losses (in import duties) stemming from under-invoiced imports in Kenya are presented.
Related News
A scoping study of illicit financial flows impacting Uganda
Propensity for misinvoicing merits serious attention in Uganda, says new Global Financial Integrity study
There are always political risk and capacity gaps in coordinating government policy with efforts meant to curb illicit financial flows (IFFs).
Political risk and capacity gaps are elevated in developing countries such as Uganda where there are many opportunities for IFFs and where capacities and political will to combat IFFs are limited.
The consequences are also heightened for the citizens of developing countries, including Uganda, due to reduced economic growth, increased income inequality, stubborn poverty rates, lower domestic revenue mobilization, and weaker service delivery at the national and local government levels.
The High Level Panel on Illicit Financial Flows from Africa, led by Former President of South Africa Thabo Mbeki, has provided valuable research on IFFs in Africa and, more importantly, a strong political push to combat them. However, the people of Africa continue to wait for actions from their governments to fight this US$50 billion a year (or more) scourge on their rights and futures.
This paper presents an overview analysis (a scoping study) of illicit financial flows in Uganda, including the magnitudes, sources, relevant policy and economic environments, and most critical steps for the Government of Uganda to curtail the country’s IFFs.
Of the three sources of IFFs – commercial, criminal, and corrupt – the study found that potentially over-and under-invoiced commercial imports and exports is the largest measurable component, at roughly US$6.7 billion during the 10-year period from 2006-2015. The propensity for misinvoicing merits serious attention.
Executive summary
Insufficient levels of financial transparency – globally and domestically – and government accountability in Uganda, coupled with a regulatory system that can incentivize financial crimes, are helping to drive high levels of illicit financial inflow and outflows in the country, which are undermining development efforts.
Uganda will struggle to meet its goal of rising to middle-income status and reducing its reliance on foreign debt unless it increases efforts to combat the commercial tax evasion, corruption, and money laundering of criminal proceeds and terrorist financing. Three policy areas should be the central focus for the government: eliminate the allowance and use of anonymous companies in the economy, reduce the ease and volumes of trade misinvoicing, and enforce anti-money laundering laws, particularly within the banking sector.
Illicit financial flows (IFFs) in Uganda are part of a broader political economy dynamic where continued economic growth and development are hampered by corruption, impunity, and an opaque extractive sector. The growth in Uganda’s economy and its role as a haven for legal and illegal activities stemming from neighboring countries like South Sudan, create perverse opportunities for illicit financial flows. The central government has a decent capacity to combat these opportunities for IFFs on paper, but its willingness or capacity to act to curtail IFFs is lagging.
Trade misinvoicing is the most significant area of illicit financial flows in Uganda that can be estimated using publicly available data. From 2006-2015, the latest years for which the necessary data are available, potential trade misinvoicing amounted to roughly 18 percent of total Ugandan trade over the ten-year period.
The figure for possible outflows is some 10 percent of total trade, and for possible inflows it is around 8 percent of total trade (2006-2015). Viewed in dollar terms, the potential over- and under-invoicing of imports from 2006-2015 was approximately US$4.9 billion, and over- and under-invoicing of exports may have reached US$1.7 billion.
Uganda’s laws and regulations on financial transparency and anti-money laundering have the strongest influence on illicit financial flows, and there are notable gaps in the framework the Government of Uganda has in place to address the sources, transfer methods, and motivations of IFFs in the country.
In particular, laws governing corporations in Uganda are generally weak in so far as they do not require the official identification of the beneficial owners of companies or the complete identity of all shareholders in a company. The government’s anti-money laundering regime mostly exists on paper and could do with strengthening.
The Financial Intelligence Authority, which was only recently established, acknowledges this shortcoming and is working to enhance its performance in helping to prevent, track, and prosecute money laundering in the country. Uganda’s extractive sector and the presence of numerous transnational crime markets add to the importance of both financial transparency and anti-money laundering.
This study was led by Global Financial Integrity with contributions from the Economic Policy Research Centre and Uganda Association of Women Lawyers (FIDA).
Related News
Fighting corruption and illicit financial flows in Nigeria is non-negotiable – President Buhari
“For my administration, fighting corruption and Illicit Financial Flows (IFFs) in Nigeria is non-negotiable”
This was the statement by Muhammadu Buhari, President of the Federal Republic of Nigeria, to Thabo Mbeki, former President of the Republic of South Africa and Chair of the African Union-ECA High-Level Panel on Illicit Financial Flows from Africa.
The Chair visited the President, who is also the current Champion of the AU Anti-Corruption Campaign, to follow up on the efforts of AU Member States to implement the recommendations of the pdf High-Level Panel Report (2.16 MB) (endorsed by the AU in 2015) and ultimately tackle IFFs nationally.
The visit also saw the Chair call upon the President in his capacity as the AU Anti-Corruption Champion to lead the efforts to engage action from other AU Member States towards tackling IFFs at the national, regional and continental level.
Prior to the Presidential visit, Mr. Mbeki met with representatives of the Ministries, Departments and Agencies (MDAs) of the Federal Government of Nigeria which deal with Financial and legislative matters to gain an understanding of the country’s ongoing efforts to tackle Illicit Financial Flows.
In his remarks to the MDAs, the Mbeki recalled the 2015 Special Declaration to address IFFs, which was a realization by African leaders of the excessive losses due to illicit outflows. “The view was that the continent was losing resources which should have been available for its development to these illicit outflows,” he said.
He emphasized the level of losses from IFFs, which at the time of the Panel’s Report was 50bn USD annually, but has now grown to about 80bn annually. He also indicated on a more positive note that, “Africa has led this agenda and brought it to global attention. This was evident when the African Heads of States asked our Panel to help address this issue”.
Mr. Mbeki highlighted some of the recommended actions to address these IFFs saying that Nigeria and in turn, all other AU member states need legislation to deal with money laundering, financial intelligence and tax evasion. He underlined that this issue also requires action from global partners stressing, “since these funds leave the continent to destination countries, this problem cannot be solved by Africa alone.
He acknowledged the capacity constraints nationally and continentally, saying, “As Africans, we must say that having identified the nature and size of the problem, we must work to address the issue. We need to act on this matter in any capacity necessary.”
The Deputy Executive Secretary and Chief Economist of the United Nations Economic Commission for Africa (ECA), Abdalla Hamdok for his part said that as a result of the Chair’s leadership, Africa was able to put the challenge of illicit finance on the global map. He referred to the Panel’s work and Report, whose impact has led to several important continental and global frameworks, including the Addis Ababa Action Agenda, as well as its inclusion in the Sustainable Development Goals.
As the Chair is required to report back to the AU Assembly of Heads of States and Government annually on the progress of implementing the recommendations of his Panel’s Report, Mr. Hamdok said, “Several actions are being carried out, including this visit to Nigeria to determine the state of reaction to this issue, as well as “a technical project which is being worked on by the ECA to help capacitate AU member states against IFFs. Mr. Hamdok also stressed that all these efforts and those not yet mentioned are still, however, based on political will, which is crucial to reducing IFFs from the continent.
Abubakar Malami, Attorney General of the Federation (AGF) for his part elaborated on Nigeria’s efforts to implement strategies to curb corruption and reduce IFFs. “We have taken major multi-dimensional policy decisions relating to institutions, legislations… and above all, recognizing the need for international collaboration as it relates to the fight against corruption and the minimization of illicit financial flows”.
He noted that through legislative processes, Nigeria has “succeeded in establishing and capacitating institutions which are mandated with the statutory role of working to enforce financial regulations as well as tackle various misconducts including corruption and IFFs.”
He also detailed the efforts of the country in fighting corruption and IFFs through the deployment of relevant technology and international collaboration. Additionally, he highlighted the need for collaboration to make it more difficult for IFF perpetrators to move freely, invest in businesses and benefit from the proceeds of crime. He stressed that “we must work to repatriate these funds from the external perpetrators while working to detain them.
The Permanent Secretary of Finance, Mahmoud Isa-Dutse delivered remarks on behalf of the Minister of Finance for Nigeria. In the speech, he commended the Chair and Panel for fighting this plague saying that IFFs have robbed Africa of the required wealth to help build schools, hospitals, roads and other necessary infrastructure. He added that the quest for Africa’s financial development will be accelerated if the efforts to recover these lost funds are successful and the continent’s development will no doubt receive a necessitated boost.
In this regard, he spoke about the work of the Nigerian Extractive Industry Transparency Initiative (NEITI), which is being led by the Minister of Finance. This effort has helped the country recover lost assets from taxes because of the increased transparency.
The two-day event culminated with a technical workshop with Thabo Mbeki. Raymond Baker, President of Global Financial Integrity and Member of the High-Level Panel as well as the Secretariat of the Panel, met with the representatives of the financial agencies and departments.
Part of the objectives of the workshop was to discuss the ECA’s proposed Development Assistance Project which aims to support Nigeria and other member states in the fight against IFFs. Following this visit, the Secretariat is expected to further engage the government of Nigeria and foster collaboration to build its capacity to stem IFFs from the country.
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tralac’s Daily News Selection
Diarise:
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Regional Monitoring Group on the implementation of the EAC Common Market Protocol (17-19 October, Uganda)
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The Global Competitiveness Report 2018 will be released on Wednesday
6th Africa Ireland Economic Forum: selected updates
(i) Africa could hold key to Irish export survival: John Whelan. The two themes of the Africa Ireland Economic Forum – agri-business and women in business – resonated with the wide range of African and Irish businesses which gathered in the Convention Centre in Dublin last week. The Tánaiste and Minister for Foreign Affairs and Trade, Simon Coveney, delivered the opening address, stating: “Since 2014, Ireland’s trade with Africa has increased by 13%. Irish food and drink companies have been particularly successful, with Bord Bia estimating that exports to the continent have gone up by 28% over the past two years.” To help with increased engagement, he announced the expansion of the Africa Agri-Food Development Programme, which assists Irish companies to partner with local enterprises in African countries.
Back in 2013, when I was chief executive of the Irish Exporters’ Association, I urged the Government to take out membership of the AfDB, saying it would offer the opportunity to extend our reach and impact in Africa. On 27 September, Minister for Finance, Paschal Donohoe, finally published the African Development Bank and Fund Bill, 2018. The bill will provide for Ireland’s potential membership of the AfDB and the African Development Fund. Did it have to take five years? But, better late than never.
(ii) Speech by Minister for Foreign Affairs and Trade, Simon Coveney. Later this year, I will unveil Ireland’s new international development cooperation policy, the product of extensive international and domestic consultations which have only concluded in recent days. This policy will guide us in our increased expenditure over the coming years. Already, agriculture, gender equality and the role of the private sector are strong emerging themes for the policy. And as our ODA budget expands, there will be more opportunities to support the Irish private sector to invest and build businesses in Africa. Because we know that development cooperation is only one thread in the increasingly intricate fabric of our relations with Africa. In many ways, it is bringing our trade to new and unprecedented levels which will have the greatest impact.
Turkey-Africa Economic and Business Forum: communiqué (AU)
The Forum was attended by 43 African countries, ECCAS, ECOWAS, financial institutions from Turkey and Africa as well as private sector representatives. Extracts from the communiqué:
To support African Countries in reducing energy costs and increasing access to electricity, decreasing transport costs, boosting intra-African trade, ensuring water and food security and increasing global connectivity; Turkey and the AU will work together towards establishing a partnership in the design, inspection, financing and management of projects under the Program for Infrastructure Development in Africa and the Presidential Infrastructure Champion Initiative.
The Forum recommended the participating countries to take necessary measures to encourage Turkish and African enterprises as well as financial institutions to expand investment and participate in infrastructure projects through various means, such as Public-Private Partnership and Build-Operate-Transfer.
The Forum encouraged the private sector to invest in agriculture, electricity production, transmission and delivery facilities and services, aviation, maritime, education and health as priority areas, especially in small and medium scale enterprises development. The Forum underlined the importance of enhancing Africa’s manufacturing capacities through the establishment of regional manufacturing hubs as a means to increase intra-African trade. The Forum called upon Turkish and African financial institutions to enhance their cooperation, including opening more branches in their respective countries.
Babacar Ndiaye Lecture: Obasanjo, Jeffrey Sachs propose Africa Education Fund (Afreximbank)
Former Nigerian President Olusegun Obasanjo and development economist Jeffrey Sacks have called for the establishment of an Africa fund for education as they delivered the second Babacar Ndiaye Lecture in Bali, Indonesia. The two personalities, who were the guest speakers at the international lecture series introduced by Afreximbank in 2017 to honour the late Dr Babacar Ndiaye, said that such a fund will ensure that every child in Africa got a full high-quality education in this generation. They called on African leaders to support the fund and to make a commitment that every African child should be empowered and financed to stay in school until completing his or her secondary education. Sachs noted that three quarters of African children were currently not completing secondary education and said that with an African fund for education and commitment by African leaders, the continent will be transformed into a middle income to high income economy.
President Obasanjo, laying out his support for the Africa fund for education, argued that there was no shortage of money for good causes in Africa. According to him, people only wanted to know that their money would go where it was supposed to go and that such money would be properly accounted for. He added that it was up to Africans to develop their continent: “Africa is the architect of its own future”. Prof Benedict Oramah, President of Afreximbank, said that the greatest problem of Africa was the neglect of Africa by Africans.
AfDB approves East Africa Regional Integration Strategy Paper
The Regional Integration Strategy Paper 2018-2022 maps out the direction of the Bank’s regional integration work in Eastern Africa over the next five years. The key objectives are fast-tracking structural transformation, increasing trade and promoting financial sector integration and inclusion. The strategy is focused on two mutually reinforcing pillars, namely regional infrastructure development for competitiveness and transformation, and strengthening of policy and institutional frameworks for market integration, growing investments and value chains development. The strategy will guide the Bank’s regional operations in 13 countries, namely Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania and Uganda.
“Most Eastern African countries depend on agricultural and mineral products for their exports,” said Nnenna Nwabufo, Deputy Director General, East Africa during her presentation to the Board. “But most of these products are of low-level sophistication and low value added. This is why this Strategy Paper is key to boosting industrialization and intra-regional trade.” [Note: The AfDB has yet to post the strategy on its website; GlobalData: Infrastructure construction in EA to grow sharply over next five years]
Storm in a teacup? Dar, Kampala exporters seek to exit Mombasa auction (The East African)
A push by Tanzania and Uganda to have their own tea auction could destabilise incomes, coming at a time that production and prices in the region have been falling. Last week, Tanzania said it was planning its own tea auction in Dar es Salaam. Uganda had in March this year, said it was planning to market its own tea directly to buyers as it sought better prices, effectively pulling out of the Mombasa auction, the second largest in the world, after Colombo. Kampala has since rescinded the decision. Kenyan tea industry players, however, believe that the two countries’ push for another auction outside Mombasa, which serves the region, with offerings from at least 10 countries as far afield as Madagascar, Zimbabwe and the Democratic Republic of Congo, is not feasible due to low volumes from those two markets. Uganda’s concerns emanate from what it says is loss of identity of its tea once it enters the Mombasa auction, as it is labelled as Kenyan. [Tanzania targets five regions to boost tea yields and sales]
Kenya: Kisii approves Regional Economic Bloc Bill 2018 (The Standard)
Trade facilitation, logistics updates
Ghana’s cargo note tracking policy starts today (Graphic)
The policy was piloted from 1 July 2018 but was suspended in August following agitation by the Ghana Union of Traders Association and the Ghana Institute of Freight Forwards. According to the demonstrators, the introduction of the CTN policy would place further financial burden on traders, but the government has denied the claim. “From today, Monday, importers whose imports from records exceed 36 twenty foot equivalent units per year will be required to obtain a CTN number in the country of export,” the public notice indicated. The public notice indicated that the exemptions were to ensure that small and medium-scale importers, mostly petty traders, market women and men, small distributors and other small to medium businesses were free from the requirements of the intervention.
Ghana: Customs to bond transit trucks from 2019 (Ghana Business News)
Transit trucks conveying exported goods from Ghana’s ports to neighbouring countries are to be bonded by the Custom Division of the Ghana Revenue Authority from next year. The introduction of the bond is to halt the diversion of such goods onto the Ghanaian market. Mr Cletus Poulere, Custom Officer in-charge of the Transit Terminal at the Tema Port, said diversion of goods along the transit corridor had become rampant in recent times, therefore the need to put in measures to curb the exercise. He indicated however that leadership of Customs were working on the finer details of the said bond before its implementation. He noted that diversion of transit goods deprived Ghana and the destination countries of needed revenue, as no duties where charged on them since they were not meant for the Ghanaian market. [West Africa countries push for interlink payment system]
Angola facilitates cross-border trade (Macauhub)
Namibia loses N$8.4bn in direct investment outflows (The Namibian)
The local economy lost N$8,4 billion in direct investments last year, representing a quarterly loss of N$2,3 billion, which could have positively contributed to local economic growth. Direct investment net outflows are defined as the value of outward direct investments made by residents of the reporting economy to external economies. Finance minister Calle Schlettwein made these revelations during a consultative meeting with private sector representatives last week. The meeting was aimed at mapping out strategies on how to improve the performance of the country’s economy. Eloise du Plessis, PSG Namibia’s head of research, said one has to consider the fact that the economy is under severe strain due to reduced government spending, drought, a decline in Angolan investments and spending due to low oil prices, and a contracting property sector. Thus, it is not unreasonable for the private sector to have reined in spending in the local economy.
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Africa and Turkey hold Second Turkey-Africa Economic and Business Forum to promote cooperation opportunities
Africa and Turkey have concluded the 2nd Turkey-Africa Economic and Business Forum in Istanbul, co-organised by the African Union Commission and the country’s Ministry of Trade.
The forum was officially inaugurated on 10 October 2018 and followed an earlier event that was held in 2016. It was meant to promote cooperation opportunities by providing a platform for government, investors, private sector, and financial institutions from Africa and Turkey. More than 3000 delegates across these sectors attended the Istanbul forum.
Promotion of public-private partnerships was highlighted at the forum as a critical element in the development efforts of both Africa and Turkey. Encouraging and facilitating private sector exploitation of investment and business opportunities was therefore a key objective of the forum, as was increasing interaction between the business communities of Turkey and Africa.
“The private sector is the cornerstone of growth and development. While the public sector has the key responsibility of creating the enabling environment for business to prosper, the private sector, on its part, must be prepared to face the challenges of today’s stiff global competition by strengthening capacity, embracing innovation, and working hand in hand with governments to invest in areas that are critical for economic growth,” said the African Union’s Commissioner of Economic Affairs, Professor Victor Harison, at the forum’s opening ceremony.
Raising awareness of the African Continental Free Trade Area (AfCFTA) and its implications for the private and public sectors is another stated objective of the forum. All African speakers at the opening ceremony underscored the importance of the AfCFTA, including Ethiopian President Dr Mulatu Teshome, Commissioner Harison, Rwanda’s Prime Minister Mr. Edouard Ngirente and Mr. Melaku Ezezew of the Pan African Chamber of Commerce and Industry.
The AfCFTA will create a single continental market for goods and services for Africa’s 1.2 billion people, expected to reach 2.5 billion by 2050. With it will come free movement of business persons and investments, as well as enhancement of competitiveness at the industry and enterprise levels. It is one of the key projects under Africa’s Agenda 2063 development framework.
At the political level, there was reaffirmation of the need to grow the Turkey-Africa partnership, with Turkish President Mr. Recep Tayyip Erdogan saying, “We highly value our cooperation with Africa. The forum should contribute to trade and investment between Turkey and Africa and we are keen to strengthen our relationship”. Similar sentiments were expressed by all the African speakers.
At the opening ceremony, two countries – Senegal and Zimbabwe – signed agreements with the Turkish government while the African Union, represented by Commissioner Harison, signed a memorandum of understanding (MoU).
The Africa-Turkey partnership is one of many that the African continent has entered into in order to boost its chances of attaining the aspirations, goals and targets set out in Agenda 2063. Other partnerships exist with the United Nations and its agencies, the European Union, South America, the League of Arab States, the United States, China and Korea.
Joint Communiqué
Turkey-Africa Economic and Business Forum
Under the leadership of H.E. Recep Tayyip Erdoğan, President of the Republic of Turkey and H.E. Moussa Faki, Chairperson of the African Union Commission, the Second Africa-Turkey Economic and Business Forum was held in Istanbul, Turkey on 10-11 October 2018.
The Forum was organized by the African Union Commission and the Ministry of Trade of the Republic of Turkey in cooperation with the Foreign Economic Relations Board of Turkey (DEIK).
The Forum was honoured by the presence of H.E. Recep Tayyip Erdoğan, President of the Republic of Turkey and H.E Mulatu Teshome, President of the Federal Democratic Republic of Ethiopia and Rt. Honourable Edouard Ngirente Prime Minister of the Republic of Rwanda on behalf of H.E. Paul Kagame President of the Republic of Rwanda, and current Chairperson of the African Union.
In the spirit of closer relations between Turkey and African countries, and considering the substantial momentum in Turkey-Africa relations particularly since the declaration of Turkey as a strategic partner of the African Continent in 2008 and the First and Second Turkey-Africa Partnership Summits held in İstanbul in 2008 and in Malabo in 2014 respectively, it was agreed that it is prime to advance the African-Turkey cooperation and build on what has been accomplished thus far.
The Forum was attended by forty three (43) African Countries, Economic Community of Central African States (ECCAS), Economic Community of West African States (ECOWAS), financial institutions from Turkey and Africa as well as private sector representatives.
During the Forum, discussions spanned issues related to “Financing of Trade and investment in Africa”, “Collaboration between Turkey and Africa on Construction, Infrastructure and Energy”, “Integration efforts of Africa and Market Opportunities for Business People”, and “ Fair, Free and Sustainable Trade”.
The Forum noted with satisfaction that the Turkey-Africa Partnership is growing, deepening and getting diversified and the readiness of the Turkish side to further strengthen the economic and commercial ties with African countries.
With a view of enhancing lasting partnership between Turkey and Africa for development and economic integration;
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The Forum decided to continue strengthening the current platform for collective dialogue, consolidate Africa-Turkey traditional friendship, deepen strategic collaboration and enhance the mechanism of practical cooperation between Turkey and Africa.
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Turkey and Africa reiterated their commitment to implement workable solutions that will increase economic resilience, sustain economic growth and decrease disparity, while improving the welfare of the people in Africa.
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The Forum underlined the importance of trade as one of the key engine of economic growth and a strong private sector would be a driving force in this respect.
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With a view to further enhancing commercial and economic cooperation between Turkey and African countries, the Forum reiterated its strong intention to initiate joint action plan to examine possibilities of removing tariffs and other obstacles to trade that would be based on asymmetrical model enabling African countries to protect their sensitive sectors.
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Taking into consideration that Turkey has shown remarkable performance with its steady growth over the last decade and being a major economic power in the region, Turkey expressed its readiness to share its development experience in different fields with African counterparts in order to broaden and strengthen the cooperation and trade relations among themselves.
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The Forum reaffirmed the critical role of the private sector in economic growth and development by generating decent employment in order to create greater opportunities for all, reduce inequalities, raise basic standards of living and ensure environmental protection. In this regard, the Forum underlined the necessity of supporting the private sector activities in Turkey and African countries in order to foster mutual investment and trade in each other’s countries.
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The Forum reiterated its position to prioritize infrastructure cooperation within the Turkey-Africa Partnership and strengthen cooperation in transport, electricity, energy and other areas of infrastructural development within the framework of Agenda 2063 and its flagship projects.
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To support African Countries in reducing energy costs and increasing access to electricity, decreasing transport costs, boosting intra-African trade, ensuring water and food security and increasing global connectivity; Turkey and the African Union will work together towards establishing a partnership in the design, inspection, financing and management of projects under the Program for Infrastructure Development in Africa (PIDA) and The Presidential Infrastructure Champion Initiative (PICI).
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The Forum recommended the participating countries to take necessary measures to encourage Turkish and African enterprises as well as financial institutions to expand investment and participate in infrastructure projects through various means, such as Public-Private Partnership (PPP) and Build-Operate-Transfer (BOT).
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The Forum underlined the importance of trade as a catalyst to significantly increase investments, transfer of know-how and the possibility to exchange knowledge and experience on issues related to development.
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The Forum expressed its support to the Agenda 2063 of the African Union and the 2030 Agenda for Sustainable Development of the United Nations, based on inclusive growth and sustainable development of African countries.
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Noting the importance of the contribution of investments to capacity building in the socio-economic sectors, particularly in the human resource development, the Forum agreed to encourage mutual investment in order to build more diversified economies both in Turkey and in Africa.
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The Forum agreed to enhance information and experience sharing on investment policies, opportunities, regulations and recent economic developments and fields of cooperation in order to create more enabling environment for mutual investment.
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The Forum welcomed the increased investments in the infrastructure, construction and energy sectors, leading to a substantial expansion of Turkish investment securing the long-term sustainability for economic development in Africa.
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The Forum encouraged the private sector to invest in agriculture, electricity production, transmission and delivery facilities and services, aviation, maritime, education and health as priority areas, especially in small and medium scale enterprises development.
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The Forum underlined the importance of enhancing Africa’s manufacturing capacities through the establishment of regional manufacturing hubs as a means to increase intra-African trade.
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The Forum called upon Turkish and African financial institutions to enhance their cooperation, including opening more branches in their respective countries.
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The Forum recognized the important role of the African Union in promoting the integration of Africa.
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The Forum welcomed the signing of the Memorandum of Understanding between African Union Commission and the Ministry of Trade of the Republic of Turkey on Trade and Investment Cooperation as an important milestone of the Turkey-Africa relationship.
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The Forum underlined the role of public communication for raising awareness on the benefits of the partnership.
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The Forum expressed its satisfaction on the achievements of mutual beneficial results and agreed to hold the next Turkey-Africa Economic and Business Forum in 2020.
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The Forum expressed its sincere appreciation to H.E President Recep Tayyip Erdogan, the Government and the people of the Republic of Turkey for the warm welcome extended to all delegations during the event.
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Finally, the Forum commended the partnership between the African Union Commission and the Ministry of Trade of the Republic of Turkey for successfully organizing this important event.
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Africa Ireland Economic Forum 2018: High-level leaders from Ireland and Africa in politics, business and agribusiness meet in Dublin
Next call for AADP applications launched at Africa Ireland Economic Forum
The 6th Africa Ireland Economic Forum took place on the 11th of October 2018 at the Convention Centre, Dublin Ireland. The Forum, organised by the Irish Department of Foreign Affairs and Trade together with the African Embassies in Ireland, brought together business people and thought leaders from Europe’s most dynamic economy with those from the world’s most dynamic continent and is the centrepiece of Ireland’s economic engagement with the countries of Africa. This year’s Forum focused on strengthening trade links in the agri-foods sector.
Ireland’s Tanaiste (Deputy Prime Minister) and Minister for Foreign Affairs, Simon Coveney T.D. opened the Forum. In his remarks he spoke of the enormous potential for agriculture to transform African economies. He shared how for Ireland, agri-business development has been an integral part of Ireland's economic development and transformation story.
Over a few decades, Ireland has grown from predominantly small scale subsistence farming, exporting primary production, to a sophisticated producer of high-end, value-added food. Over €1 billion worth of Irish food and drink is exported every month and over the last 7 years, Irish agri-food exports have increased by 56%, mainly driven by non-EU trade.
Speaking ahead of the Forum, the Tánaiste said: “Since 2014, Ireland’s trade with Africa has increased by 13%. Irish food and drink companies have been particularly successful, with Bord Bia estimating that exports to the continent have gone up by 28% over the past two years. This is impressive and important growth, particularly at a time when Irish companies are looking to diversify markets.
“The Africa Ireland Economic Forum provides a platform for more Irish companies to explore the opportunities in African marketplaces, to meet potential partners and to deepen their engagement with the world’s fastest growing continent.”
Keynote speakers at the Forum included Minister for Agriculture, Food and the Marine, Michael Creed T.D., and the Cabinet Secretary for Trade, Industry and Cooperatives from Kenya, Peter Munya.
Also at the Forum, the Tanaiste announced an expansion and new call for proposals under the Africa Agri-food Development Programme, which is funded by the Irish Government. The objective of the programme is to develop partnerships between the Irish Agri-Food Sector and African countries to support sustainable growth of the local food industry, build markets for local produce and support mutual trade between Ireland and Africa.
The Tánaiste said: “The Africa Agri-food Development Programme has potential to develop in an innovative manner, building on past successes while being more ambitious in its scope. The inclusion of these five additional countries opens new opportunities for dynamic partnerships, and it is really important that we encourage more women to participate in business.” More information on the programme can be found here.
The AIEF was followed by further business to business discussions between Irish and Tanzanian companies at a Roundtable on Trade and Investment Opportunities in East Africa held on Friday 12th October at the Department of Foreign Affairs and Trade.
Address by Tánaiste to participants at the Africa Ireland Economic Forum 2018
I am very pleased to be here this morning to open this 6th Africa Ireland Economic Forum.
That this is the sixth such Forum is a strong statement of developing economic links between us, which the high level of interest and enthusiasm you have shown underlines.
I am particularly pleased to welcome business people from across the continent of Africa and to wish you a very constructive and productive time while in Ireland.
And can I extend a special céad míle fáilte to Cabinet Secretary Peter Munya: we are delighted to have you with us, Peter. Thank you for taking the time to travel here. I look forward to hearing your analysis of the opportunities in Kenya and East Africa, a country and region I hugely enjoyed visiting this time last year.
Those of you here this week may now be aware that we had our annual Budget for 2019 on Tuesday. And I am pleased to be able to confirm that the Government agreed to raise our ODA by almost €110 million next year, in comparison with the amounts announced this time last year. This will be our biggest increase since 2006 and is a first credible step on the road to meeting our target of 0.7% of Gross National Income going towards ODA by 2030.
Later this year, I will unveil Ireland’s new international development cooperation policy, the product of extensive international and domestic consultations which have only concluded in recent days. This policy will guide us in our increased expenditure over the coming years. Already, agriculture, gender equality and the role of the private sector are strong emerging themes for the policy. And as our ODA budget expands, there will be more opportunities to support the Irish private sector to invest and build businesses in Africa. Because we know that development cooperation is only one thread in the increasingly intricate fabric of our relations with Africa. In many ways, it is bringing our trade to new and unprecedented levels which will have the greatest impact.
And so, for me, especially as a former Minister for Agriculture and Food, the themes of today’s forum are particularly salient. For Ireland, agri-business development has been an integral part of our economic development and transformation story. Over a few decades, Ireland has grown from predominantly small scale subsistence farming, exporting primary production, to a sophisticated producer of high-end, value-added food. Over €1 billion worth of Irish food and drink is exported every month. Over the last 7 years, our agri-food exports have increased by 56%, mainly driven by non-EU trade.
I am very conscious that the potential for agriculture to transform African economies is enormous. And, done well, agriculture and agri-business can help give people rewarding and dignified lives in the countryside, ensuring that pressures on growing cities are alleviated.
Sub-Saharan Africa will need to create 18 million jobs each year until 2035 to accommodate its growing population, in particular young people and women. A significant number of these jobs will be created in agriculture and agri-business.
Ireland has technology in agri-business that we are ready and able to share. Africa is seeking to modernise its agricultural sector and enhance productivity. The potential for knowledge and skills transfer through private sector partnerships is considerable.
We are making a concerted effort to boost women’s entrepreneurship by removing obstacles to women’s participation in the labour force and providing support to women to start their own businesses. But our ambition does not stop there, we want to see our business women engage in export markets and think about investing in new business partnerships in Africa.
In certain respects, Africa is leading the way in relation to female entrepreneurship with 26% of the female adult population engaged in early-stage entrepreneurial activity. Nonetheless, social and financial barriers to female entrepreneurship remain in place, most notable inadequate access to finance. A number of women entrepreneurs are here today, actively seeking business partnerships and undoubtedly interested in the experience of Irish women in business.
So the Forum’s themes speak to the potential of both Ireland and Africa. The themes also resonate with the work of our Embassies in Africa where we are investing in agricultural value chains and supporting small holder farmers, especially women, to access finance, technology and markets.
I am particularly pleased to welcome today Vice President Charles Boamah from the African Development Bank which is instrumental in the effort to support women in business. Ireland is well on the way to becoming a member of the African Development Bank – part of our Budget allocation yesterday was specifically with this in mind – and I look forward to deepening our cooperation with the Bank in the coming year. It plays a crucial role in financing the infrastructure necessary to enable the modernisation and transformation of the economies on the continent.
We are also joined by colleagues from the European Investment Bank and smaller funds such as AgDevCo and a new women-focused investment fund, the Lady Agri-Development Fund – brainchild of Cork woman Hilary Barry. We should have plenty of opportunities to discuss options for private sector financing.
At a time when Brexit dominates much of our news coverage of the EU, it is good to remind our audience of the important role Ireland’s membership of the European Union has played in our development. And it is very positive to see a similar commitment to regional integration in Africa. Minister Munya will talk about the progress made in the East African Community, both for free movement of people and economic integration.
More recently, I was very heartened by the decision of the 55 members of the Africa Union to create the Continental Free Trade Agreement involving a commitment to cut tariffs and facilitate the free movement of people and goods. When the CFTA comes into force, it will create the largest free trade zone since the creation of the World Trade Organisation in 1995. And regional integration has the potential to dramatically boost intra-African trade.
As one of the world’s most open economies, free trade has been good for Ireland. Indeed, we can chart our economic development against the gradual opening of our markets, beginning with a free trade agreement with the UK in the 1960s, then joining the EU in the 1970s, which evolved into the Single Market and then Ireland’s membership of the WTO – indeed, the negotiations of the global agreement that led to the WTO were led by a great Irishman, the late Peter Sutherland.
That journey – with many obstacles on its road – led us to where we are today, a dynamic economy which is creating jobs at a faster rate than ever. A gateway into Europe and, we hope, a European gateway into Africa.
In this context, the President of the European Commission, Jean Claude Juncker, spoke last month of his ambition for a new ‘Africa-Europe Alliance for Sustainable Investment and Jobs’. He set out an ambitious EU programme to encourage more private investment in Africa, the success of which would be judged by the number of jobs created. He set a target of 10 million African jobs over the next five years. Ireland is determined to play its part in helping African countries achieve this goal.
We start from a good place – the EU is Africa’s main trading partner, accounting for 36% of Africa’s trade in goods. The EU remains the world’s most open market to African exports. We must commit to better regional integration between Europe and Africa, as we work to meet the challenges together in an increasingly inter-connected world. And in a context, also, where European companies are the biggest foreign investors in Africa.
This is not surprising – Africa and Europe are neighbours. Dakar is closer to Dublin than Galway is to Gallipoli. What is good for one of us must be good for both. This sentiment has been reinforced in my meetings with African leaders as we campaign for a seat on the UN Security Council for 2021 and 2022. The Irish emphasis on partnership is well-received in many of the countries where you live and work.
For similar reasons, it is important that we get right the framework for EU cooperation with Africa, and also Caribbean and Pacific states: improved structures will allow us to make progress on shared objectives. Ireland is determined to play a leading role in shaping how these negotiations advance.
The European Union and its Member States are collectively the world’s biggest providers of development assistance, providing almost 60% of global assistance at time when development cooperation is evolving. But while traditional assistance remains essential, it needs to be complemented with other tools and sources of finance if the Sustainable Development Goals are to be achieved. That is why we need new partnerships. We need to mobilise private resources and find innovative financing models that work. The EU External Investment Plan is, we hope, going to lead the way. The aim is to crowd in private investors, where viable business proposals meet social needs, and where limited public funds can attract private money.
As we innovate along these lines, we can take encouragement from our own very positive experience with the Africa Agri-Food Development Programme. I have a particular fondness for this programme, having launched it when I was Minister for Agriculture and Food in 2012.
The Programme aims to develop partnerships between the Irish Agri-Food Sector and African companies to support sustainable inclusive growth. Over €2 million has been invested to support that aim to date.
I am delighted to announce today an expansion of the programme to cover Botswana, Cóte d’Ivoire, Ghana, Namibia and Rwanda.
I am also pleased to launch the next round of funding.
I believe the Africa Agri-Food Development Programme has potential to develop in an innovative manner, building on past success while being more ambitious in its scope.
Ireland wants to be more prominent in supporting programmes and mechanisms that stimulate private sector activity, and provide opportunities for women and others who struggle to succeed without appropriate supports.
Already, Irish Embassies in Africa are working with host governments to support an enabling environment for the private sector. Ireland’s transformation story, both our mistakes and our innovations, provides a fertile ground for those developing public policy in Africa today.
I’m aware that a number of you will take advantage of your time here to visit some of our centres of excellence in agri-business and agri-technology. Our Embassies have the local knowledge and the networks to support Irish businesses expanding into Africa. Most of our serving Ambassadors, and their African counterparts resident in Ireland, are here today. Take advantage of their presence – after all, we know they live to network!
In closing, let me underline how important our relationship with Africa is, politically, economically and culturally through people-to-people links. There is so much potential and I wish you well as you take advantage of this unique environment. The Forum today offers an opportunity for new connections to be made, for contacts to be established which may in time develop into business relationships and, I hope, enduring friendships.
Thank You.
African Development Bank approves strategy to accelerate transformation of Eastern Africa
The African Development Bank has approved the East Africa Regional Integration Strategy Paper (RISP) laying out the roadmap for accelerating regional integration in the Region with regional infrastructure development among the main pillars of the plan.
The Strategy will guide the Bank’s regional operations in 13 countries, namely Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania and Uganda.
The Regional Integration Strategy Paper 2018-2022 maps out the direction of the Bank’s regional integration work in Eastern Africa over the next five years. The key objectives are fast-tracking structural transformation, increasing trade and promoting financial sector integration and inclusion.
The strategy is focused on two mutually reinforcing pillars, namely regional infrastructure development for competitiveness and transformation, and strengthening of policy and institutional frameworks for market integration, growing investments and value chains development.
Eastern Africa is the fastest growing region in Africa, with real gross domestic product (GDP) growth rate of 5.9% in 2017 compared to the continental average of 3.6%.
But countries in the region grapple with poor infrastructure including power shortages, low electricity connection rates and high cost of electricity for manufacturing enterprises – about four times higher than the global average. They are also characterized by low-level industrialization, with manufacturing added value below 15% in all the region’s member countries.
“Most Eastern African countries depend on agricultural and mineral products for their exports,” said Nnenna Nwabufo, Deputy Director General, East Africa during her presentation to the Board. “But most of these products are of low-level sophistication and low value added. This is why this Strategy Paper is key to boosting industrialization and intra-regional trade.”
Nwabufo added that approval of the Strategy Paper sets the framework for the Bank to support key economic sectors like regional energy and transport, which will underpin Eastern Africa’s transformation.
The Strategy Paper was developed in consultation with Regional Economic Communities (RECs) in Eastern Africa and is aligned with key REC strategies for the East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA) and Intergovernmental Agenda on Development (IGAD). The strategy also responds to priorities in the United Nations Sustainable Development Goals, the African Union Agenda 2063, the Tripartite Free Trade Area, and the Continental Free Trade Area, launched this year to consolidate Africa’s market regimes.
The Strategy Paper also dovetails into the pdf Bank’s Ten Year Strategy (2013-2022) (844 KB) and the High-5s operational priorities – Light Up and Power Africa, Feed Africa, Industrialize Africa, Integrate Africa, and Improve the Quality of Life for the People of Africa.
In this regard, Moono Mupotola, Director for Regional Integration and Coordination at the Bank’s HQ, welcomed the approval of the Strategy Paper, which sets out a clear roadmap for the delivery of Bank’s Integrate Africa High-5 in Eastern Africa.
The Bank’s indicative operational program to roll out the Strategy is estimated at US$3.3 billion and is subject to review at the mid-term. The Bank will work closely with regional member countries and RECs in the region in following up on implementation progress including convening member states to ensure accelerated delivery.
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tralac’s Daily News Selection
Diarise:
(i) COMESA-EAC-SADC Tripartite Transport and Transit Facilitation Programme: validation workshop for cross border road transport agreements, model laws and regulations (22-26 October, Addis Ababa)
(ii) Africa Fintech Summit (8-9 November, Lagos)
African Development Bank support to Lobito Corridor trade facilitation project (Lusaka Times)
The African Development Bank has provided a grant of $8.1m to finance the Lobito Corridor Trade Facilitation Project to map out a strategy for its development. The Corridor traverses four Provinces in Angola namely Huambo, Benguela, Bei and Moxico, four Provinces in The Democratic Republic of Congo namely Kantanga, Tanganyika, Lomami and Lualaba as well as two provinces in Zambia namely, Copperbelt and Northwestern. The Financing will go towards Capacity Building for Trade facilitation and Corridor coordination, Technical Assistance for Value chains development and economic Cluster development and project Management to meet part of the investment requirements on the Corridor over the next three years.
Africa Finance Corporation acquires inaugural $300m facility from Export-Import Bank of China
Africa Finance Corporation announces its successful acquisition of a loan facility from the Export-Import Bank of China of a $200m five-year loan and a $100m five-year stand-by facility for general corporate purpose. The facility from CEXIM marks AFC’s inaugural financing facility from the PRC. This follows the Corporation’s strategic focus to build a broad coalition of investors by diversifying its fundraising activities to include all sources of institutional capital in East Asia, in addition to its existing partners in Europe & North America. To date, the AFC has invested approximately $4bn in projects within 28 countries across North, East, West and Southern Africa.
Kenya to merge finance agencies to form development bank (The East African)
Kenya plans to merge three state-owned development financial institutions into a mega bank, in an attempt to raise funds for its infrastructure projects, amid growing public debt. The Industrial and Commercial Development Corporation, IDB Capital and the Tourism Finance Corporation, which have a huge combined balance sheet, have been earmarked for amalgamation to form the Kenya Development Bank. The structure of the proposed bank is still under discussion, but The EastAfrican has learnt that the government will be leveraging the large balance sheet of the unified bank to secure long-term funding from foreign financiers, using a banking model similar to that of the East African Development Bank and the African Development Bank.
Jibrin Ibrahim: Researching and understanding West African societies (Premium Times)
A clear winner of the West African crisis is China, which is increasing its commerce with the zone, extracting natural resources for its own benefit but also contributing to the infrastructural and social development of the zone. One example that was examined was the massive transformation in physical mobility enabled by the fact that China is able to produce and deliver extremely cheap Completely-Knocked-Down (CKD) motorcycles to West African shores at the rate CFA200,000 or 60,000 naira per unit. The quality of the products is not very high but for the people of West Africa, this has completely transformed the ability of the masses to move. It is also bringing new trade as each CKD has 2,000 different parts that young mechanics are able to put together. The session on motorcycles raised interesting issues about smuggling into the Nigerian market. In 2016, for example, Nigerian motorcycle imports from China was worth $83 million, while that of tiny Togo was $208 million for the same year, the target being the Nigerian market.
Peter Biwott: Market access key to Kenya manufacturing revamp (Business Daily)
There will be value addition for Kenya’s agricultural export products with target markets within the African region and the US. Our UK trade relations have been balanced, but the volumes show very low bilateral trade. Over the last decade, Kenya’s exports trend to the UK have been declining characterized by a narrow range of products mostly comprising of low value raw or semi-processed products, while imports from UK are diverse high value products. Value addition and manufacturing present an opportunity for increased returns in forex earnings, the ultimate answer to the objective to grow our economies that have impact on the livelihoods of the citizens. This will form main area of engagement during the upcoming Intra Africa Trade Fair in December 2018, where Kenya is seeking to use Government to Government (G2G) as well as Government to Business (G2B) as a platform to ensure over 22 AfCFTA member states ratify the free trade protocols to enable citizens realise free trade and invest within the Continent. [The author is chief executive officer, Export Promotion Council]
Nigeria: Ports inefficiency undermining diversification drive, says LCCI (The Guardian)
Lagos Chamber of Commerce and Industry, says the adverse operating environment of the nation’s ports will continue to hinder Federal Government’s effort, to reduce its dependence on oil revenues for economic development. The LCCI President, Babatunde Ruwase, made the statement during the LCCI Freight Forwarders Group annual seminar on Thursday in Lagos. Tagged, Trade Facilitation on Nigeria Integrated Customs Information System (NICIS II)- advantages and development, Ruwase said significant efforts were made in reforming the maritime sector through concessioning of the ports in the early 2000s, but results of the reforms were below expectations. He said that the regulatory landscape was complex with numerous public agencies regulating private terminal operators and myriad of businesses in freight forwarding, logistics and trade: “Consequently, operators and users of Nigerian ports are faced with bureaucratic red tape, constant delays, high cost and illegal charges.”
The Commitment to Reducing Inequality Index 2018 (Oxfam America)
In 2015, the leaders of 193 governments promised to reduce inequality under Goal 10 of the Sustainable Development Goals. Without reducing inequality, meeting SDG 1 to eliminate poverty will be impossible. In 2017, Development Finance International and Oxfam produced the first index to measure the commitment of governments to reduce the gap between the rich and the poor. The index is based on a new database of indicators, now covering 157 countries, which measures government action on social spending, tax and labour rights – three areas found to be critical to reducing the gap. This second edition of the Commitment to Reducing Inequality Index finds that countries such as South Korea, Namibia and Uruguay are taking strong steps to reduce inequality. Sadly, countries such as India and Nigeria do very badly overall, as does the USA among rich countries, showing a lack of commitment to closing the inequality gap. The report recommends that all countries should develop national inequality action plans to achieve SDG 10 on reducing inequality. Extract (pdf):
Seven of the world’s most unequal countries are in Africa. Across the continent, inequality is harming the potential of growth to reduce poverty and deliver shared prosperity, and is hindering the emergence of a new middle class. Instead, the benefits of economic growth are all too often accruing to a small minority. The gap between rich and poor is greater than in any other region of the world apart from Latin America, and in many African countries this gap continues to grow. Table A5 shows the rankings for each pillar and the overall ranking for Sub-Saharan African countries included in the CRI Index. [Downloads include: summary, full text, statistical audit (all pdf). An interactive version of the report can be accessed here]
Digitalization and industrialization: friends or foes? (UNCTAD)
IMF, World Bank Annual Meetings: selected updates
Simeon Djankov blog: The World Development Report 2019 – the changing nature of work – is finally out, officially
Intergovernmental Group of Twenty Four on International Monetary Affairs and Development. We are concerned with rising debt vulnerabilities. We urge the international financial community to strengthen its support of developing countries’ efforts to deal with the interrelated challenges of debt and growth. Flexible implementation of the LIC Debt Sustainability Framework and Debt Limits Policy should accommodate countries’ much needed infrastructure and social spending while preserving debt sustainability. We call for stronger and faster action from the IMF, World Bank Group (WBG), multilateral partners and donors on capacity building for fiscal and debt management, improving debt transparency and developing domestic capital markets. We encourage countries to maintain institutional capacity in these critical areas. We emphasize the joint responsibilities of debtors and creditors in fostering debt transparency and sustainability, and also encourage effective creditor coordination.
Christine Lagarde: New economic landscape, new multilateralism. This kind of partnership is integral to the new multilateralism - not least because tensions arising from exclusion and climate change do not respect national borders. In that sense, solidarity is self-interest. The new multilateralism must also be more inclusive - open to diverse views and voices. It must be more people-oriented - putting human needs first. And it must be more effective and accountable - delivering results for all. The IMF is at the heart of this new multilateralism.
Keeping Asia at the forefront amid growing risks. The Regional Economic Outlook: Asia and Pacific also finds that declining firm dynamism - the decline in young firms, and the rise of so-called zombie firms in financial distress - has played a role in Asia’s declining productivity growth. Measures to boost firm entry and exit can help support economic growth. Furthermore, the regional assessment highlights the significant impact that digitalization is having on the region. For instance, digital innovations accounted for nearly one-third of Asia’s per capita growth over the past two decades. To ensure that the region fully harnesses the digital dividend, policy makers will need to upgrade education, infrastructure, and the regulatory environment. At the same time, digital disruptions -such as displaced workers from automation - will need to be addressed, and financial stability risks from fintech must be managed. These are all serious challenges, but they are surmountable. With continued sound policy making, Asia should have good prospects for staying at the forefront of global growth over the coming decade and beyond.
Today’s Quick Links: From manufacturing led export growth to a 21st Century inclusive growth strategy for Africa: summary of inaugural Babacar Ndiaye Annual Lecture delivered by Joseph Stiglitz (15 October 2017; pdf) IMF appoints Dr Albert Touna Mama as Resident Representative to Ghana Ghana: Mobile money interoperability crosses the 1 million mark Nigeria requires $1trn to modernise energy infrastructure: VP Osinbajo How drones and data are changing India’s farms |
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COMESA-EAC-SADC Tripartite Transport and Transit Facilitation Programme Validation Workshop
The Tripartite Transport and Transit Facilitation Programme (TTTFP) validation workshop for cross-border road transport agreements, model laws and regulations in Eastern and Southern Africa will be convened in Addis Ababa, Ethiopia from 22-26 October 2018.
The TTTFP goal is to assist COMESA, EAC and SADC (Tripartite) member states to harmonize road transport laws, policies, regulations, standards and systems. The TTTFP is funded by the EU under the 11th EDF. TTTFP is coordinated by a Programme Management Unit hosted by SADC Secretariat on behalf of the Tripartite.
Target Participants
The target participants are Experts from the 21 beneficiary member states representing Ministries or Government Agencies with responsibilities and mandates in the following;
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Attorney General Chambers or entity responsible for domestication of international agreements
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Vehicle Load Management
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Cross Border Road Transport Regulation
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Vehicle and Driver Registration and Licensing
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Vehicle Fitness Testing
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Dangerous Goods – Emergency First Responders and Law Enforcement
In addition, fifteen (15) regional subsidiarity organizations with a mandate that covers cross border road transport and trade facilitation have also been invited to participate.
International Cooperating Partners funding and or implementing complementary programs have also been invited.
Documents
The documents to be validated include the following:
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Draft Tripartite Vehicle Load Management Agreement (VLMA)
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Draft Multilateral Cross Border Road Transport Agreement (MCBRTA)
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Draft Model Laws & Regulations
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Vehicle Load Management
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Cross Border Road Transport
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Road Traffic (including Driver Quality and Vehicle Quality)
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Transportation of Dangerous Goods
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Road Traffic and Transport Transgressions
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The two agreements are to be signed by Member States after validation and adoption and the model laws will assist Member States to domesticate the agreements. The TTTFP is also conducting training workshop in each beneficiary member state to explain the contents of the agreements and model laws in order to facilitate signing of the agreements.
The workshop is managed and facilitated by COMESA, EAC and SADC Secretariats and the TTTFP Programme Management Unit.
Related News
tralac’s Daily News Selection
Kenya Economic Update: In search of fiscal space – who benefits from government spending and taxation? (World Bank)
The report builds on the options to enhance domestic revenue mobilization, as outlined in the 16th economic update, by examining the equity implications of government spending and taxation policy measures. In addition to exploring the impact of government expenditure on cash transfer programs, education and health, the KEU reviews revenue raising measures such as PAYE, VAT and excise taxes. The report finds that personal income tax is progressive with the poorest 40% of Kenya’s population contributing 14.3% of market income, but less than 1% of direct taxes. In contrast, 80% of the tax incidence is borne by the richest 10% of the population. This factor is largely driven by the progressive nature of Kenya’s tax system and the limited access to formal sector jobs among poor people. [Download: pdf Kenya Economic Update, October 2018 (1.83 MB) ]
Ghana: Scaling up value creation and local development in the mining sector (UNECA)
The economic contribution of the mining sector in Ghana cannot be overstated. Mining has no doubt brought in significant fiscal payments: total fiscal receipts attributed to the mining sector alone accounted for 22% of government revenue in 2016. The sector is also the largest source of investment inflows from the world’s biggest gold-producing countries and the leading export earner, with a total share of 45.5% in 2016, far ahead of the second and third main exporting sectors, namely, cocoa, which accounted for 22.3%, and crude oil, at 12.5% of total export earnings. Extract: One of the key recommendations contained in this report outlines the need to set up a national suppliers’ development programme. That proposal was endorsed by the Government and the initiative was formally launched at the ministerial level in Accra on 2 November 2017. In rolling out the programme, it goes without saying that it is critical to scale up domestic suppliers’ capacity, capabilities and competitiveness. It is innovative in its approach by also including a strategic pillar on innovation and technology to prepare Ghanaian firms to move up the value chain and improve their productivity now and in the future, as technological progress changes the face of the industry. [Download: pdf Scaling up value creation and local development in the mining sector in Ghana (4.63 MB) ]
Turkey-Africa Economic and Business Forum updates:
(i) Ethiopian president, Mulatu Teshome, yesterday praised Turkey’s opening policy towards Africa as it has helped both countries find mutual business opportunities with each other. The Ethiopian president noted that the total amount of investments by Turkish firms in Ethiopia was around $2.5bn. “As of end of 2017, the number of Turkish firms active in Ethiopia reached 150 and the employment opportunities created by these firms is approximately 30,000. Turkish firms employed the highest number of people in private sector from Ethiopia, Teshome said. Turkey’s exports to Ethiopia were over $440m while imports from the country was $36m in 2016.
(ii) Summary of the joint declaration. The declaration recommended the launch of a joint action plan to examine possibilities of removing tariffs and obstacles to trade while protecting “sensitive sectors” of African countries. Private sector’s activities in both sides should be supported in order to foster mutual investment and trade in each other’s countries, it said. Turkey and African Union decided to form a partnership in design, inspection, financing and management of projects to reduce energy costs and increase access to electricity, drop transport costs, boost intra-African trade, ensure water and food security and increase global connectivity. It added that participating countries will take necessary measures to encourage Turkish and African enterprises as well as financial institutions to expand investment and participate in infrastructure projects through various means, such as Public-Private Partnership and Build-Operate-Transfer.
Wealthy Kenyans hiding Sh15trn in foreign banks (Business Daily)
Kenya’s super-rich are holding more than Sh14.8 trillion in offshore tax havens across the world, a newly published report says. The individuals, who form the cream of Kenya’s wealthiest, mostly use the offshore accounts to hide ill-gotten trillions, evade taxes and steer clear of Kenyan laws, the report by American think tank National Bureau of Economic Research says. “Among the countries that created a lot of shell companies (relative to the size of their economy), one finds Jordan, Russia, Taiwan, the UAE, Venezuela, Zimbabwe and Kenya,” the report says, adding the list is made of countries with high offshore wealth to GDP ratios. At Sh14.8 trillion, the estimated amount of black money held by Kenyans abroad is nearly five times Kenya’s 2018-19 Sh3 trillion budget. About the NBER paper (pdf): “We provide a new international database of GDP, trade balances, and factor shares corrected for profit shifting, showing that the rise of the global corporate capital share is significantly underestimated.”
Kenya: Bill seeks to stop imports of goods produced locally (Standard)
A Bill aimed at locking out cheap imports has been introduced in Parliament. The Bill sponsored by Thika MP Patrick Wainaina seeks to charge a tax that is 10 times the market price of the imports that compete unfavourably against locally manufactured products. If it is approved by Parliament and gets the President’s nod, the SME Amendment Bill 2018 is likely to set the stage for a major trade war with Kenya’s leading importers, including China. “Currently, the country is importing goods worth Sh2 trillion annually and exporting goods worth only Sh500 billion. About 25% of all imports come from China while Kenya only exports 0.5% of total exports to China,” said Mr Wainaina. Speaking when he opened the Thika Business Trade Fair, the MP asked manufacturers and Kenyans to support the Bill when it comes up for public debate. “We should not be importing things like toothpicks, matchboxes, spoons, eggs, oranges, mangoes and pans which are produced locally. We need to protect the local manufacturers by discouraging these imports.”
Tanzania firm halts Kenya flour exports over tax changes (Business Daily)
Tanzania-based Bakhresa Group, which owns one of the largest flour mill in the country, has suspended exports to Kenya citing frequent changes in tax rules. The firm, a well-known family-owned business founded by tycoon Said Salim Awadh Bakhresa, says frequent changes in tax rules have slowed its exports to Kenya and led to losses running into millions of shillings. “The Kenya Revenue Authority has in recent months surprised us with sudden changes that end up increasing our tax liability six fold,” its export manager Yasini Billo said, claiming the changes usually aren’t communicated to importers until products get to the border. “We see the hidden hand of competition in all this since our products do not encounter similar restriction in the other EAC markets that we export to.”
Nigeria worries over Ghana’s continuous closure of shops (News Agency of Nigeria)
Nigeria has expressed concern over the continued closure of Nigerians shops in Ghana two weeks after President Koffi Nana-Akudo gave the order to reopen them. The Senior Special Assistant to the President on Foreign Affairs and Diaspora, Mrs Abike Dabiri-Erewa, said in Abuja when the National Association of Nigerian Traders led by its President, Ken Ukuoha, paid her a visit. Ukuoha had led the Nigerian and Ghanaian Chapters of the union to present a petition on the continuous closure of their shops to President Mohammadu Buhari through Dabiri Erewa’s office. Nigerian traders were shut-out of their business premises in pursuance of the eviction order dated 27th July 2018. The Ghanaian authority was demanding that traders must have one million dollars as minimum foreign investment capital to do business in Ghana as stipulated its Ministry of Trade and Industry GIPC Act, 2013. She expressed worry that in spite the assurance of President of Ghana to Buhari that the shops will be re-opened, and despite an instruction to reopen the shops on 27 September, the shops still remain closed.
Morocco’s ECOWAS bid to undergo legal examination (Morocco World News)
Morocco’s bid to join ECOWAS has been submitted to an independent committee of experts for legal review. The move is the final step of admissibility within the regional body. It comes a year after heads of governments in the Economic Community of West African States (ECOWAS) evaluated the political and economic aspects of Morocco’s prospective membership. The three-member review committee is composed of Ibrahima Fall, former minister of foreign affairs of Senegal; Beninese constitutional law and international expert Joel Aivo; and Ameze Guobadia, Nigerian public law professor at the University of Lagos.
Global economy updates
Debt vulnerabilities in developing countries: a new debt trap? (pdf, UNCTAD)
The two volumes of this publication gather a range of contributions on specific aspects of this important and large topic. Volume I brings together papers that analyse different regional aspects of evolving debt dynamics in the developing world, detailing many of the issues raised in this introduction in these specific contexts. It also introduces an additional, and often neglected, wider feature of these debt dynamics, namely the role of microdebt crises across the developing world and the bankruptcy of the microcredit model. Volume II turns to selected topics and policy options to mitigate developing country debt vulnerabilities in current circumstances, in which a ‘new global deal’ is unlikely to garner the required international political support. [The authors: Bruno Bonizzi, Jan Toporowski, Annina Kaltenbrunner, Yuefen Li]
The Managing Director’s Global Policy Agenda, Annual Meetings 2018: Rising risks – a call for policy cooperation (IMF)
Global debt is at an all-time high of $182 trillion or 224% of global GDP. About two thirds is nonfinancial private (households and corporates) debt, while the rest is public debt. Increasing public debt vulnerabilities in LICs is a particular concern, with about 40% at high risk of, or in, debt distress. This reflects rising borrowing, only to a limited degree for public investment, combined with adverse shocks. A key challenge stems from weak public debt transparency and coverage. As part of our work on debt transparency, we have developed, together with the World Bank, proposals to strengthen borrowers’ debt management capacity, enhance the collection and dissemination of debt data, and deepen debt sustainability analysis.
Launched yesterday in Bali, by the IMF: Sub-Saharan Africa Regional Economic Outlook – capital flows and the future of work. External risks threaten Sub-Saharan Africa’s steady recovery – six charts that tell the story
Launched yesterday in Bali, by the World Bank: Human Capital Index. Individual country briefs and data can be downloaded here.
The Bali Fintech Agenda: a blueprint for successfully harnessing fintech’s opportunities (IMF)
National authorities are keen to foster fintech’s potential benefits and to mitigate its possible risks. Many international and regional groupings are now examining various aspects of fintech, in line with their respective mandates. There have been calls for greater international cooperation and guidance about how to address emerging issues, with some also cautioning against premature policy responses. In response to these calls from member countries, the IMF and the World Bank staff have developed the Bali Fintech Agenda, summarized in Annex I of this paper. The Agenda brings together and advances key issues for policymakers and the international community to consider as individual countries formulate their policy approaches. It distills these considerations into 12 elements arising from the experiences of member countries. The Agenda offers a framework for the consideration of high-level issues by individual member countries, including in their own domestic policy discussions.
Foreign investment across the Belt and Road: patterns, determinants and effects (World Bank)
This paper examines the patterns and economic effects of foreign direct investment across the Belt and Road Initiative countries and assesses the potential role of the initiative in shaping the patterns and effects. Exploring cross-country bilateral transportation cost and foreign investment data, the analysis shows that, by reducing overall travel times and transportation costs, the proposed Belt and Road Initiative transportation network can pave the way for additional investments and increased growth in gross domestic product. But the magnitude of the effect varies significantly across source and destination countries. Aggregate foreign direct investment in Belt and Road Initiative countries is predicted to increase by around 5%, with regions such as Sub-Saharan Africa and East Asia and Pacific seeing greater potential gains. The increase in foreign direct investment can exert a positive effect on GDP, trade, and employment growth, especially for lower-income countries.
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Kenya Economic Update: How Kenya is using tax revenues to enhance access to education and healthcare for low-income families
Efforts to cushion the most vulnerable Kenyans from extreme poverty have been successful, with more than 60% of direct cash transfer benefits reaching the poorest 40% of the population, according to the World Bank’s latest economic update for the country.
The 18th Kenya Economic Update (KEU), In Search of Fiscal Space: Government Spending and Taxation; Who Benefits?, projects real gross domestic product (GDP) growth to rise to 5.7% in 2018 – up from 4.9% in 2017 – and continue to increase steadily to 5.8% in 2019, and 6.0% in 2020. The rebound is attributed to a recovery in agriculture, steady pick-up in industrial activity and continued robust performance of the services sector.
The pick-up in Kenya’s economy is also reflected in improved household consumption and a developing recovery in private investment. Household consumption is supported by strong remittance inflows and improved rains which has led to better harvests and lower food prices. Similarly, private sector investment is buoyed by improving investor sentiment and the availability of previously pent-up investment demand after a challenging 2017.
Further, with benign inflationary conditions, a stable exchange rate, and healthy accumulation of reserves, the stable macroeconomic environment has been broadly supportive of the economic recovery. Nonetheless, with private sector credit growth remaining subdued at 4.3% this pick-up is being curtailed by limited access to credit, as well as headwinds from fiscal consolidation.
“The Bank lauds the government for embarking on needed fiscal consolidation to safeguard macroeconomic stability and help crowd in private sector investment”said Carlos Felipe Jaramillo, World Bank Country Director for Kenya. “Further recalibrating the slowdown in expenditures between recurrent and development spending in favor of the former should allow fiscal consolidation to become more growth friendly.”
Since the 2017 announcement of the “Big 4” development agenda, which prioritizes food security, housing, universal health coverage and manufacturing, Kenya has made some progress in instituting policies that crowd-in private sector engagement, particularly within the affordable housing pillar.
The legal and regulatory framework for the Kenya Mortgage Refinance Company (KMRC) has been completed, the Stamp Duty Act providing an exemption for first-time home buyers has been signed into law, and standardized forms to register a change in property ownership have been introduced. Further reforms are needed to advance the goals of food security and nutrition, universal health coverage and manufacturing competitiveness, to maximize the inclusiveness of economic growth.
“While progress is being made to advance the “Big 4”, given the ambitious nature of these objectives, it calls for accelerating the pace of structural reforms, particularly in areas that helps crowd in the private sector to advance the “Big 4,” said Allen Dennis, World Bank Senior Economist and Lead Author of the KEU.
Building on the options to enhance domestic revenue mobilization, as outlined in the 16th economic update, the special section of the KEU examines the distributional consequences of government’s spending and taxation measures. The analysis could provide input for designing pro-poor policies and describes the rate at which economic growth translates into poverty reduction.
The report finds that personal income tax is progressive with the poorest 40% of Kenya’s population contributing 14.3% of market income, but less than 1% of direct taxes. In contrast, 80% of the tax incidence is borne by the richest 10% of the population. This factor is largely driven by the progressive nature of Kenya’s tax system and the limited access to formal sector jobs among poor people.
The special section also examines which benefits of social spending accrues to the poor. For example, cash transfer programs are well-targeted because a large fraction of the benefits is captured by the poor.
“We are glad to see that Kenya continues to invest in social protection programs. They are extremely important to support poor Kenyans, and protect vulnerable households,” said Utz Pape, World Bank Senior Economist of and lead author of the economic update special section on fiscal incidence analysis. However, cash transfer schemes in Kenya cover only a small portion of the population and could be expanded further to increase their poverty-reducing effect.
The economic update notes that many poor Kenyans still remain without support from direct cash transfer programs due to small coverage of existing programs. As a result, the report says there is only a very modest impact of direct cash transfer programs on poverty and inequality. To reduce poverty in Kenya more strongly with direct cash transfer programs, the report recommends that they be expanded, but cautions that it will require enhancing revenue mobilization to pay for the bill.
Commitment to Equity
Public education is an area where Kenya shows strong commitment to equity, according to the report. A disproportionately larger share of children from poor households benefit from spending on public education, compared to children of higher income households, who more often enroll in private primary education institutions. However, the report notes that spending on higher education increasingly benefits those who are better-off, as lower-income households often do not pursue higher education.
The KEU also examines equity impacts of public spending on health by analyzing outpatient care in lower-level facilities. Poor people are less likely to consult health providers, the report notes, and when they do, they are more likely to consult public facilities, particularly lower-level facilities such as dispensaries and health centers. Conditional on uptake, public health spending on out-patient care is pro-poor, according to the report. However, the associated user fees and over-the-counter purchases are regressive, meaning that low-income households pay a larger share of these costs than high-income households, relative to their market income.
The KEU recommends shifting public resources from higher-level health facilities to lower-level facilities, as this is likely to benefit poor people while also improving access. However, the report warns that the absorptive capacities of these facilities might be limited, potentially constraining the impact of increased spending at a certain point.
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tralac’s Daily News Selection
Selected African trade events now underway:
NTM Week 2018 (9-11 October, Geneva: Shaping sustainable trade amid protectionism
2nd Africa-Turkey Economic and Business Forum (10-11 October, Istanbul). Update: Erdogan calls on Africa to trade in local currencies
Events to diarise:
(i) Respect for IP – Growing from the Tip of Africa (23-25 October, Sandton); (ii) IORA Tourism Ministerial (23 October, Port Elizabeth); (iii) Consultative meeting on the SADC Entrepreneurship Support Facility (24 October, Windhoek)
Tripartite FTA update: COMESA welcomes South Africa’s ratification
South Africa has ratified the Tripartite Free Trade Agreement becoming the fourth country to do so after Egypt, Uganda and Kenya. This is according to a notification sent by the South African Government to the Chair of the Tripartite Task Force, Ms Chileshe Kapwepwe, who is the Secretary General of COMESA. The process of ratification has been set in motion in a number of member states and it is expected that this target will be reached by end of April 2019, which is the deadline that the Tripartite member states set for themselves. With this latest development, 10 more ratifications are now needed for the Agreement to enter into force. “This development adds to the aura of expectations around the TFTA which groups 29 of the 55 countries negotiating the AfCFTA,” the COMESA Director of Trade and Customs, Dr Francis Mangeni, who is also a member of the technical negotiating team, said in Lusaka, adding that all the Annexes to the TFTA Agreement have been concluded.
On the basis of the provisions on transitional arrangements, he explained, once the threshold for minimum number of ratifications is achieved, then implementation of the Agreement commences immediately, on the basis of the principle of variable geometry. This is aided further, by the fact that exchange of tariff offers is near complete. All the member states, save for SACU countries, EAC countries and Egypt chose to offer their respective RECs preferential arrangements and were therefore not negotiating tariff offers. “The negotiations between EAC and Egypt are complete,” Dr Mangeni said. “Those between SACU/Egypt and SACU/EAC are nearing completion. In the latter case, divergence has narrowed down to just one product line. All the negotiating parties have agreed to a deadline of December 2018.”
Negotiations on the Tripartite rules of origin are highly advanced. From the total of 5,387 tariff lines, Rules of Origin have now been developed for 3,267 tariff lines (at 6-digit HS 12 version), representing 60.8% of all the tariff lines. In addition, a draft manual on application of the Rules of Origin has been developed and is ready for use. A number of tripartite instruments have also been developed and are now ready for use. The tripartite guidelines on implementation of Trade Remedies are ready for use and so are certificates of origin, export declaration and import declaration forms among others. In addition, the Tripartite Agreement on the Movement of Business Persons has also been finalized and will be ready for use once it undergoes legal scrubbing. [Youth Connekt Africa Summit in Kigali: Experts advocate for ‘made in Africa model’ to drive AfCFTA]
Termination of the South Africa-Zimbabwe trade agreement: what next? (tralac)
What is the background to this bilateral agreement, what does it provide for, why is it being terminated now, and how will trade between South Africa and Zimbabwe in future be conducted? Are there other bilateral trade agreements which may go the same way? Are bilateral trade agreements involving only certain Members of a Customs Union permissible? Do the recent developments indicate the advance of a proper rules-based trade regime for Southern Africa? This Policy Paper discusses these questions. It will also refer to relevant provisions in the SACU Agreement and the SADC Protocol on Trade. It concludes with a discussion about overlapping membership challenges and the amendment of the provision dealing with derogations under the SADC Protocol on Trade. [The author: Gerhard Erasmus]
Zimbabwe: Trade deficit down 44% (The Herald)
Zimbabwe’s trade deficit went down 44% to $127m in August 2018 from $229m in February 2018 on the back of significant growth in exports during the seven-months period. Official statistics from the Zimbabwe National Statistical Agency show that between February and August 2018, the country’s total exports amounted to $2,4bn, a 24% increase, from $1,9bn recorded in the same period last year. Zimbabwe’s total trade for the period February to August 2018 increased by 25% to $6,4bn, from $5,1bn recorded in the same period in 2017.
ECOWAS FTA update: National experts validate draft Supplementary Acts on community rules of origin
Regional experts have validated the draft Supplementary Act fixing community rules of origin and procedures applicable to goods originating in ECOWAS. When adopted, the validation would, among others, repeal and replace Protocol A/P.1/01/03 dated 31 January 2003 which had defined the notion of products originating in ECOWAS Member States. Broadly, through the various articles, the national experts examined how sufficiently processed or transformed were the products under consideration, the notion of originating industrial products, identification of originating industrial products, goods manufactured in free zones or under suspense or end-use procedures, principle of territoriality, Sets, the proof of Community Origin, Validity of the Proof of Origin, Control of the Proof of the Community Origin, repeal, Dispute resolution. The work of the national experts is expected to be presented to the meeting of Directors-General for onward consideration by the Ministers of Finance of the region. All 15 Member states, the ECOWAS Commission, the WAEMU Commission and GIZ were also represented at the meeting. [Fitch: ECOWAS medicine registration to boost pharmaceutical growth prospects]
Promoting SME competitiveness in Francophone Africa: standards open doors to trade (ITC)
Companies in 16 French-speaking African countries are more likely to export when they comply with international standards, according to a joint survey (pdf) by ITC and the Permanent Conference of African and Francophone Consular Chambers. Among 9,000 firms surveyed, only 25% have an internationally recognized certificate, generally for quality or safety. Getting more agriculture firms certified could boost the number of exporters. Only 7% of enterprises in the agriculture sector export, but 70% of those that do hold an international certificate. The survey also found that the smaller the firm, the less likely it was to have an internationally recognized certificate. Extract (pdf):
More than 9,000 in-depth surveys. In total, 9,396 enterprises were surveyed in Benin, Burkina Faso, Cameroon, the Central African Republic, the Republic of the Congo, Côte d’Ivoire, the Democratic Republic of Congo, Gabon, Madagascar, Mauritania, Morocco, Niger, Senegal, Togo, and Tunisia. The survey captured information on a wide variety of firms. Seventy-nine percent are micro firms, defined here as having 1–9 employees, 16% are small firms (10–49 employees), 4% are medium-sized (50–249 employees) and 1% are large (250+ employees). Regarding sectors, 43% of the enterprises surveyed are active in the retail sector, 33% in services, 16% in manufacturing and 8% in agriculture.
Agriculture in Africa: selected updates
Identifying and promoting regional value chains in leather and leather products in Africa (UNCTAD)
The leather and leather products (LLP) industry provides a tremendous opportunity to the region to form regional value chains and add greater value to the region’s exports. At present, the region is the largest source of the basic raw material (i.e. hides and skins) to the leather industry of the world but exports it with little value addition. This study identifies potential regional value chains for Africa that can be formed in LLP. The report examines the changing patterns of intra-regional and global trade of sub-Saharan Africa, highlighting the importance of intra-regional trade in leather and leather products. Inputs and outputs of leather industry are identified and their emerging global as well as intra-regional trends are highlighted. It also estimates intra-regional trade potential in LLP. The impact of tariff liberalization on potential intra-regional trade is also explored.
Sustainable agricultural mechanization: A framework for Africa. The framework, developed by the AU and the FAO, identifies 10 priorities for AU member states to include in their national plans, ranging from the need for a stable supply of machine spare parts and innovative financing mechanisms, and the importance of regional collaborations that allow for cross-border hiring services. [Download: pdf The Sustainable Agricultural Mechanization: A Framework for Africa (4.50 MB) ]
Open access World Development article: Can commercial farming promote rural dynamism in sub-Saharan Africa? Evidence from Mozambique. The authors: Steven Glover, Sam Jones.
Kenya: Shady parallel economy where tax-free billions roam (Business Daily)
Since the partnering of the Kenya Revenue Authority, the Kenya Bureau of Standards and Anti-Counterfeit agency to stamp out a secret economy run by powerful individuals out to cut corners, a lid has been lifted offering a sneak preview into the shadowy dealings estimated by the Kenya Association of Manufactures at Sh200 billion. Usually described by government officials as cartels, they are roaming free in almost all sectors of the economy jeopardising the effectiveness of policy planners. Illegal imports are circulating freely in the economy, many companies are facing survival battles and standards of goods having been compromised as some of the very officials employed to guard against such economic crimes look the other way. Development economist Anzetse Were says underground economy is rampant because the government has fundamental capacity constraints.
Ghana: Government will no longer absorb CTN cost (GhanaWeb)
The government will not be able to absorb the cost of the cargo tracking note (CTN) when the implementation of the module starts on 15 October 2018. This, however, means that shippers or importers are now to pay for fees or charges applicable to the CTN module contrary to an initial pledge by the government to absorb the cost. To mitigate the burden on shippers, information available to the GRAPHIC BUSINESS indicates that the government intends to introduce a scheme under the CTN where an importer that ships not more than three 20-foot equivalent unit (TEU) into the country in a month would be exempted from paying any charges in relation to the CTN.
In Bali: Launch of the Global Dialogue on Trade platform (ICC)
Launched today by ICC Secretary General John W.H. Denton and WTO Director General Roberto Azevedo, the new Global Dialogue on Trade platform will provide concrete support to the on-going intergovernmental approach to improving the multilateral rules-based trade system. The initiative – digitally enabled and managed by ICC – will convene open dialogue among multilateral institutions, think tanks and businesses from around the world. Following an initial call for debate themes, the platform will seek input from users to assess elements in the existing framework that work well, elements that should be improved and what should be addressed to help the WTO effectively deal with the challenges and disruptions of the 21st century. The call for themes will close on 31 October, to be followed in November by the platform’s first three privately-held, digital debates on selected themes. [Related: IMF’s Christine Lagarde: How global trade can promote growth for all; WTO’s Roberto Azevêdo: Financial inclusion in trade – reducing the global trade finance gap]
Today’s Quick Links: Namibian Trade Forum launches roadshow to promote the EU-SADC EPA Russia to set up nuclear energy plant in the COMESA region Kenya, Uganda cooperate on trans-boundary water matters under IGAD auspices AfDB publishes newly harmonized “additionality” framework for private sector operations UNCTAD’s eTrade for all: Year in Review 2017-2018 |
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COMESA welcomes SA’s ratification of the Tripartite FTA
South Africa has ratified the Tripartite Free Trade Agreement, becoming the fourth country to do so after Egypt, Uganda and Kenya. This is according to a notification sent by the South African Government to the Chair of the Tripartite Task Force, Ms. Chileshe Kapwepwe, who is the Secretary General of COMESA.
“This is excellent news,” said the Secretary General. “This development moves the tripartite process to near operationalization.”
The process of ratification has been set in motion in a number of member states and it is expected that this target will be reached by end of April 2019, which is the deadline that the Tripartite member states set for themselves. With this latest development, 10 more ratifications are now needed for the Agreement to enter into force.
“This development adds to the aura of expectations around the Tripartite Free Trade Area Agreement which groups 29 of the 55 countries negotiating the African continental Free Trade Area,” the COMESA Director of Trade and Customs, Dr Francis Mangeni, who is also a member of the technical negotiating team, said in Lusaka on Tuesday, adding that all the Annexes to the TFTA Agreement have been concluded.
Transitional arrangements
On the basis of the provisions on transitional arrangements, he explained, once the threshold for minimum number of ratifications is achieved, then implementation of the Agreement commences immediately, on the basis of the principle of variable geometry. This is aided further by the fact that exchange of tariff offers is near complete.
All the member states, save for Southern Africa Customs Union (SACU) countries, EAC countries and Egypt chose to offer their respective Regional Economic Communities’ preferential arrangements and were therefore not negotiating tariff offers.
“The negotiations between EAC and Egypt are complete,” Dr Mangeni said. “Those between SACU/Egypt and SACU/EAC are nearing completion. In the latter case, divergence has narrowed down to just one product line. All the negotiating parties have agreed to a deadline of December 2018.”
Rules of Origin
Negotiations on the Tripartite rules of origin are highly advanced. From the total of 5,387 tariff lines, Rules of Origin have now been developed for 3,267 tariff lines (At 6-digit HS 12 version), representing 60.8% of all the tariff lines. In addition, a draft manual on application of the Rules of Origin has been developed and is ready for use. Trade can therefore commence on all the aforesaid tariff lines.
A number of tripartite instruments have also been developed and are now ready for use. The tripartite guidelines on implementation of Trade Remedies are ready for use and so are certificates of origin, export declaration and import declaration forms among others.
In addition, the Tripartite Agreement on the Movement of Business Persons has also been finalized and will be ready for use once it undergoes legal scrubbing.
“This latest ratification, moves the Tripartite process one step closer to the implementation stage, and it is likely to present more scope for early harvest and by extension, prospects for fast tracking the continental integration agenda,” Dr Mangeni said.