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Minister Baldwin speech on UK-Africa relations
Minister for Africa Harriett Baldwin spoke at the British Foreign Policy Group on 26 June about the future of the UK's partnership with Africa.
Thank you, and thank you all for being here today, to consider the future of British and African partnerships.
I look around the room and I see that some of you can probably remember how you felt when you were 18 years old. Some of us struggle – but some of you could still remember that feeling.
And I think that what is absolutely the most exciting thing about Africa is the way in which the median age is 15, the average age about 18 – and it’s that excitement and optimism and energy that I find so fascinating and exciting in terms of the work that I do with African countries.
So far in this role I’ve had the pleasure of visiting seven African countries and I’ve been really struck in each place that I have visited with the passion, the energy, and the extraordinarily entrepreneurial spirit of everyone that I’ve come across in Africa.
It really is a continent absolutely crammed with possibility.
And for the UK, Africa matters.
This is why – in my role as Minister for Africa in both the Department for International Development and the Foreign Office – I am truly championing a whole-of-Government approach to stepping up our partnership with African countries.
This means bringing together the UK’s development and humanitarian expertise, our world-class diplomacy, our political analysis, our trade experts, our health specialists, our education experts and our military and security excellence.
We are really extending our reach across Africa. So far this year the UK has opened new posts in Lesotho and eSwatini, Mauritania and Chad, and there will be more to come. The vision is that at the end of this process we will have more offices across Africa than any other European country.
That comprehensive and integrated package that we have offers real advantage to the young people of Africa on the issues that they think are most important for their future.
We are listening to them and will be driven by what they most want and need from us. Across the continent we will work together to further the aspirations and ambitions of the countries I am privileged to work with every day.
I don’t really need to emphasise to this audience the scale of the opportunity, but by 2050 the population of Africa is expected to reach 2.5 billion people. That is a both a great opportunity and a great challenge.
Nigeria alone needs to create about 6,000 new jobs every single day until 2030 just to keep up with the growth in its population.
Because without jobs and opportunities, the optimistic and eager 18 year olds I meet today could become the frustrated, hopeless and angry young people of tomorrow.
So the UK must step up its support now, to work with African countries to build opportunities for the growing numbers of young people entering the job market every year.
Creating jobs for millions of young people is vital to ensuring the stability and economic prosperity of the continent.
Reliable jobs represent a ‘win’ for our African partners’ economic futures and a ‘win’ for the UK by supporting all-important trade relationships.
Trade can support the creation of millions of jobs and stimulate the trillions of pounds of investment needed to help countries ultimately move on from a dependence on aid.
This is why – working with the International Trade Centre – we launched the SheTrades Commonwealth programme, an ambitious venture to boost the role of women in international trade, in Kenya, Ghana and Nigeria.
And it is why we will be funding a programme to help countries implement the World Trade Organisation’s landmark Trade Facilitation Agreement – which is expected to boost global trade by up to $1 trillion.
This power of trade is also why the Department for International Development has funded the TradeMark East Africa programme, which has significantly reduced the time it takes to clear and transport cargo through Mombasa port and beyond, encouraging trade in and out of Kenya.
You might also know that the Government just announced the first ever Her Majesty’s Trade Commissioner for Africa. Another sign of our long-term commitment to trade.
But there is also a lack of public and private investment in many African countries. We want to leverage British expertise to help change that. For example using our financial industries and the City of London to foster deeper capital markets and strengthen links between the Bank of England and other central banks.
At the Commonwealth Summit the Development Secretary announced a package of new initiatives to deepen the partnership between the Department for International Development, the City of London and African nations.
It included the launch of a learning partnership between the Bank of England and central banks in Sierra Leone, Ghana and South Africa, as well as support for developing countries to access global capital markets in their own currencies.
The UK’s Development Finance Institution CDC is forging paths for other investors by concentrating its efforts in the poorest and most fragile countries in Africa and South Asia. Between 2014 and 2016 companies backed by CDC created over 3 million new direct and indirect jobs, and paid taxes to national governments worth over $9 billion.
There needs to be a huge increase in private sector funding if the UN Global Goals are to be met by 2030. Which is why we’re providing new capital to CDC to help trigger even more job creation and growth in the poorest countries and to mobilise the private sector to rise to the challenge of investing in new markets.
And it’s why we’re emphasising the value to Global Britain of the UK being a meeting point for the world’s global investment opportunities and the world’s global investors.
There are several other ways I want to highlight this morning in terms of our work with our friends in Africa.
We know that another important way to support African partners to make the most of the demographic dividend by supporting women and men to choose when they have children.
We know that 37 million women across Africa want to have access to family planning options.
And we know about the wider societal benefits of empowering women to take control of their life and health choices.
For over 20 years, DFID has been a world-leader in supporting women and men to access family planning. Our support planned through until 2022 is helping to save the lives of over 6000 women by preventing maternal deaths. And it reaches almost 20 million women with voluntary contraceptive choices.
But now we are going further – building on that expertise to move the conversation on from being ‘just’ a health discussion. Family planning should feature on the finance agenda, on the infrastructure agenda and on investment agendas. This is why the UK is delivering a step change in our support for access to voluntary family planning, doing more to empower women to take control of their lives and their health choices.
And we’re also empowering girls and women to take control of their future through our commitment to girls’ education.
At the recent G7 Summit, the Prime Minister announced that over the next eight years DFID’s Girls Education Challenge will help more than 1.5 million girls transition from primary school through to high school, reducing their chances of early motherhood and increasing their ability to get good jobs.
For every extra year a girl stays in school, her future wages rise by 12 per cent.
This is why we have given such strong support to the campaign to secure 12 years of quality education for everyone, including all girls.
This work on education and family planning goes hand in hand to make sure we are giving today’s girls the opportunities and skills they need to play a vital role in their countries’ progress.
The UK is also building partnerships which tackle shared threats and support Africa’s desire to lead in resolving its own problems.
Whether that’s British military teams training African troop contributors to the important AMISOM mission in Somalia, or the national crime agency working with its African counterparts to shut down illegal smuggling routes.
Britain has been – and will remain – a steadfast partner for Africa’s peace, security and stability.
We will continue to do this because it is absolutely in our national interest to do so – terrorism, illegal immigration and modern slavery do not respect borders.
When communities are safe and when the rules-based international order is respected – that’s when economies can prosper, and everyone can become better off. That is why we also work closely with African partners on the UN Security Council, the Organisation for the Prevention of Chemical Weapons, which is meeting today, and – of course – the Commonwealth.
And there does seem to be an increasing interest from African countries which already represent 19 of the 53 countries in the Commonwealth – we were delighted this year to welcome back The Gambia for example.
I am really optimistic about Africa and about harnessing that huge energy and potential – a young and vibrant population which can really make a difference to the global economy.
The young people I have spoken to in Sierra Leone or Zimbabwe, Angola or Cote d’Ivoire, have given me a clear message. They do not want us to give them ready-made solutions. They have plenty of ideas of their own. But they do see ways in which the UK can help. I am determined that the UK listens to them.
It is now time for a bigger, deeper, more mature partnership.
As the Prime Minister said at the G20 summit – we want long-term partnerships which support Africa’s own aspirations and help it take control of its own future growth and find solutions to its own problems.
Global Britain is open, inclusive and outward facing, committed to playing a leading role on the world stage. Leaving the European Union does not mean stepping away from our global responsibilities – quite the opposite.
And this is why we are stepping up our partnerships across Africa, our commitment to the long-term success of African nations and our support to the future hopes of millions of young people.
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Botswana is a shining beacon of hope in the fight against corruption in Africa
Botswana is a shining light and beacon of hope in the fight against corruption in Africa and has one of the best anti-corruption profiles on the continent.
The statement was made today by Said Adejumobi, Economic Commission for Africa’s (ECA) Regional Director for Southern Africa, at the official opening of a 3-day regional conference on the theme, “Corruption and the Challenge of Economic Transformation in Southern Africa”.
Adejumobi stressed that the choice of Botswana to serve as host of the regional conference was not a coincidence. The country, he said, is a success story in fighting corruption; it is one of the best governed countries on the continent, where institutions work and resources are well utilized. It is well-placed to champion the anti-corruption agenda in Southern Africa and can encourage other African countries to follow suit.
“Corruption has had a corrosive effect on Africa’s development; it has weakened public institutions, distorted resource allocation, and affected the quality and scope of the delivery of social services and devalued state and society,” he said. For things to change, Adejumobi observed, “good and progressive leadership can make a qualitative difference, it can help build institutions, diffuse the tensions and high premiums often associated with the struggle for power and curb corruption in the state and society.”
For his part, the President of the Republic of Botswana, Mokgweetsi Masisi, who was the Guest of Honour at the opening ceremony called on governments to put in place sound policies in fighting corruption. He noted that good policies on accounting, internal controls and auditing systems, and strong capacity for anti-corruption and oversight institutions and the existence of the rule of law and due process are essential in fighting corruption.
He elaborated on measures that his government has put in place to fight corruption including a number of relevant legal instruments such as the Proceeds and Instruments of Crime Act and Whistle Blowing Act as well as a specialized corruption court. “We are going to table a Bill in Parliament on Declaration of Assets and Liabilities which will cover all top government officials including the executive,” he said.
President Masisi lauded the organisers of the conference including the ECA and the African Union Southern Africa Office (AUSARO) for bringing together different stakeholders including academics, policy makers, development practitioners, and heads of anti-corruption agencies in the region saying it was a step in the right direction towards zero tolerance for corruption.
Also present was the Minister for Presidential Affairs, Governance and Public Administration, Nonofo Molefhi said the conference was significant to Botswana as the country has set targets for fighting corruption in all its manifestations. “It is therefore encouraging to us to engage, interact, exchange views and in the process, receive guidance and direction from those of you who have a commitment in their own countries to fight corruption,” he said.
Molefhi said Botswana has institutionalized anti-corruption ideals across government and parastatal organizations and local authority in order to root out the corruption scourge. “I want to assure you that Botswana is open to hosting conferences and to apply the lessons for further improvement on our efforts as a country,” he added.
In his keynote address, former President of Liberia, Prof. Amos Sawyer underscored the need to intensify and elevate the conversation about the relationship between political parties, especially ruling parties and legislatures in the promotion of good governance. “I think appropriate institutions which operate at national and regional levels can take the lead,” he said. He observed that rules of political parties pertaining to their internal governance, selection of leaders and candidates directly affect the quality of governance not only of political parties themselves but the quality of governance in the entire political system.
Speaking at the same event, African Union Commission representative, Leopold-Auguste Ngomo said, “like cancer, corruption destroys systems.” He called on African states to move towards zero tolerance of corruption by bringing the culprits to book.
Organized by the ECA, Southern Africa Office, African Union, Southern Africa Office and the Directorate on Corruption and Economic Crime of Botswana, the 3 day conference was followed by a “Consultative Meeting of National Anti-Corruption Institutions” from 21-22 June 2018.
The Consultative Meeting was attended by heads of national anti-corruption institutions in Southern Africa, selected civil society organisations and experts, development partners and regional and international institutions.
The objective of the meeting was to provide a platform for anti-corruption institutions in the region to share knowledge and experiences, lessons learned, best practices, and discuss challenges, opportunities and prospects.
The meeting aimed to upscale the fight against corruption in Southern Africa by creating an increased knowledge base, understanding and policy options on the problem, and also strengthening the capacity of national anti-corruption institutions in the region.
The Consultative Meeting concluded with the formation of the Network of Anti-Corruption Stakeholders in Southern Africa (NASSA), with a 5 member Bureau including; Botswana, Kingdom of Eswatini, UNECA, representative of the media (Weekly News, Mauritius) and representative of the Civil Society (Zambia).
The network is a platform through which anti-corruption institutions can effectively network, strengthen their capacity and enhance their fight against corruption in the region by sharing experience, lessons and best practices.
A selection of presentations from the 3-day regional conference have been made available to download courtesy of the UN Economic Commission for Africa Sub-regional Office (ECA-SRO) for Southern Africa.
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Tanzania Diagnostic Trade Integration Study Update 2017
Boosting growth and prosperity through agribusiness, extractives, and tourism
The Tanzania Diagnostic Trade Integration Study (DTIS) 2017 identifies priority actions in support of the country’s strategy to deliver broad-based growth through trade integration. The study seeks to (a) take stock of the progress in implementing the action matrix adopted in the DTIS 2005; (b) provide an in-depth focus on agribusiness, mining, and tourism; (c) identify obstacles to the realization of the full development potential of agriculture and tourism in Zanzibar; and (d) prepare an updated action matrix. While the report focuses on agribusiness, mining, and tourism, it more broadly addresses the issues of regional integration, trade facilitation, small-scale trade, and gender. The report identifies a package of measures that will support Tanzania’s effective delivery of its Integrated Industrial Development Strategy 2025.
I. Further trade reforms are needed for diversification, job creation, and poverty reduction
a. Growth has been strong, but it needs to be higher and more broad-based to eradicate poverty
Growth has not been high enough to absorb the fast-growing labor force. Tanzania has achieved an annual real rate of growth of 6.4 percent over the past 15 years, which is forecast to continue through 2018. Tanzania’s high rate of growth – driven largely by the construction, transport, communications, and financial services – has outperformed growth in its East African Community (EAC) partners. And yet it has not been sufficient to absorb the 700,000 annual new entrants to the labor market, resulting in underemployment or employment in low-productivity jobs.
Poverty remains widespread. The poverty rate fell from 34 percent in early 2000s, but, at 28.2 percent in 2015 (or 12 million Tanzanians still living below the national poverty line), it remains high. Moreover, while the pace of reduction has been rapid in Dar es Salaam, driven by employment in nonfarm activities and by increased asset ownership, it has been much slower in rural areas and smaller cities.
b. Trade potential has not been fully utilized
• Trade has expanded, but export base has remained narrow
Trade has increased over the past decade. Tanzania’s world market shares of goods and services exports doubled from 0.02 percent to 0.04 percent between 2004 and 2014. Its trade openness rose from an average of 44 percent in fiscal 2005 to an average of 48.6 percent in fiscal 2015, making it the most open economy in the EAC (above Kenya at 47.9 percent, Uganda at 46.1 percent, Rwanda at 45.8 percent, and Burundi at 38.5 percent). However, Tanzania is still below the openness level consistent with its per capita income, and trade growth of 6.2 percent recorded in the past decade was slower than in some other EAC countries (9.5 percent in Uganda and 9.3 percent in Rwanda).
Despite the emergence of new products, trade is still largely dependent on mineral and traditional agricultural exports. These traditional products accounted for 80 percent of exports on average, between 2005 and 2015, with the five largest destinations – India, South Africa, China, Kenya, and the Democratic Republic of Congo – accounting for almost 60 percent of total exports. Mineral exports increased rapidly between 2005 and 2012 driven by higher gold prices, but have subsequently declined in line with fluctuations in international commodity prices. Agricultural exports are relatively diversified, including cereals, seeds, fruits, vegetables, and fish and – since 2000 reforms in agricultural marketing – tobacco, coffee and cashew. The diversity in agricultural exports is not matched by a range of manufactured products. Manufacturing exports are almost entirely accounted for by knitted apparel exports to the United States, which are duty-free under the African Growth and Opportunity Act and have more than doubled from US$17 million in 2014 to US$37 million in 2016.
• The regional trade potential has not been fully exploited
Trade with the EAC has remained relatively low for an economic union. In 2015, Tanzania sourced only 4 percent of its imports from within the EAC and exports accounted for 10.5 percent, growing slower compared to other regions (from 3 percent to 8 percent to the rest of Africa, between 2010 and 2015). There is therefore considerable potential for increasing exports to neighboring countries, but the relatively low degree of trade integration reflects the continued high trade costs.
• Trade costs have been a major impediment
Trade costs have been high and unpredictable. The costs of exporting products from Tanzania to its major markets remained high through 2005 to 2014, with average bilateral trade costs recording only a modest decline from 310 to 275 percent. Average trade costs exceeding 150 percent for agricultural commodities for the 10 largest export partners in 2013 result in trade being crowded out or diverted to informal channels.
High costs divert trade to informal channels. A substantial portion of Tanzania’s trade goes unrecorded. Comparing mirror trade data (that is, the value of Tanzania’s exports to EAC partner countries’ import data for the same products) reveals substantial gaps, indicating that informal exports from Tanzania to partner EAC countries could account for as much as US$262 million. Other estimates show that approximately 500,000 tons of maize were informally exported to Kenya in 2014, amounting to more than US$150 million in value. This is in addition to the dozens of thousands of metric tons of other crops, such as rice, dry beans, coffee, and cloves that are regularly exported to neighboring countries through informal channels.
This ‘missing trade’ has a disproportionately negative impact on small farmers and traders, and women in particular. Women play a key role in small-scale, informal agricultural trade. Estimates indicate that they may represent up to 70-80 percent of the total population of cross-border traders in East Africa, including in Tanzania. They typically reside in remote border locations, often live below the poverty line, can be single mothers or heads of households, and cross-border trade may be their main or unique source of livelihoods. Women also tend to be less educated than their male counterparts, experience lower access to finance, skills, machinery, logistics, and distribution networks, and face gender-specific cultural biases and harassment. As a result, they are disproportionately affected by formal restrictions and informal trade hurdles.
c. Diversification through exploiting links from traditional sectors is key to higher and more broad-based growth
Agriculture provides the main source of income for approximately 80 percent of the population. However, investment and growth in this strategic sector, which remains vital to reduce rural poverty, continue to be held back by unnecessary trade regulations. Tanzania has numerous regulatory agencies and complex trade rules that increase the costs of doing business, slow down farmers’ access to new and improved inputs, and prevent smallholders from competing on a level playing field with larger firms. Virtually all the regulatory agencies target 100 percent physical inspection, testing, and certification, rather than adopting a risk-based approach. Limitations on marketing, the use of consignment-based export permits for maize, and the risk of a sudden policy change all serve to discourage investment.
Tanzania is endowed with large mineral and fossil fuel deposits, but the recent decline in commodity prices has delayed new investments, including in downstream processing. Tanzania is known for its high-grade gold reserves and a wide range of precious minerals including Tanzanite. The sector consists of large-scale mining, gas projects, and artisanal and small-scale mining. A significant provider of jobs, in particular, artisanal mining employs almost 700,000 people, with 27 percent being women. Deepening the links from the mining and extractive sector through encouraging downstream processing has a potential to increase value added from mineral and fossil fuel deposits. But the decline in commodity prices has resulted in the postponement of new investments, including the further development of offshore gas deposits.
Tourism is the sector with the highest job creation potential, but to date, this is not being realized. Tourism accounts for 60 percent of the trade in services receipts and provides jobs for over 450,000 people. With world-class wildlife and landscapes, Tanzania has a natural comparative advantage to grow the sector and develop much stronger links to agriculture, and other sectors. Recent studies have identified tourism’s potential to generate additional jobs by developing a range of products in beach, adventure, conference, and cultural heritage tourism. By diversifying its product range, Tanzania can reach beyond the existing low volume, high-value strategy that channels tourists to the northern circuit. Tourism is also an important source of livelihood and employment for women in Tanzania, yet they face an array of gender-specific constraints ranging from occupational segregation to salary gaps and harassment in the workplace. In addition, sector-wide constraints generally experienced by small-scale operators such as poor access to finance, limited and/or inadequate skills, and difficulties in coping with a complex fiscal and regulatory environment tend to be particularly burdensome for women.
II. Key elements of the enhanced strategy to reduce trade costs
Driving trade costs down is key to promoting international competitiveness and export diversification. Lowering Tanzania’s trade costs requires three key steps aimed at broadening the economies competitiveness and expanding trade in goods and services:
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Reduce the trade barriers limiting access to markets for exporters, and reform regulations that increase the price of imported inputs. Removing the barriers to regional trade in the EAC and Southern Africa Development Community (SADC) will disproportionately benefit the poor.
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Improve the quality and transparency of trade-related regulations by eliminating redundant regulations that no longer address public safety and welfare concerns, simplify and streamline procedures that remain, and improve administrative efficiency through strengthening capacity and targeting resources through applying risk management.
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Address logistics bottlenecks that increase supply-chain costs and prevent many poor people in rural areas to participate and benefit from trade. This requires investment in both physical infrastructure and regulatory reform to remove the existing policy hurdles.
This work is a product of the World Bank Group, the Enhanced Integrated Framework, and the Government of Tanzania.
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IMF Executive Board 2018 Article IV Consultation with Côte d’Ivoire
On June 18, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation and completed the third reviews under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements for the Republic of Côte d’Ivoire. Completion of this review enables the disbursement of SDR 96.786 million (about US$136.6 million).
The three-year ECF/EFF arrangements with a total access of SDR 650.4 million (about US$917.8 million or 100 percent of Côte d’Ivoire’s quota) were approved by the IMF Executive Board on December 12, 2016.
GDP growth is estimated at about 7¾ percent in 2017 despite the fall in cocoa prices. Inflation remained subdued at about 1 percent. The medium-term outlook is for continued strong economic activity with robust growth and low inflation. Risks to the forecast are broadly balanced.
The Ivoirian authorities have adopted a comprehensive program of economic reforms to achieve a sustainable balance of payments position, inclusive growth, and poverty reduction by investing in priority infrastructure and social projects.
These objectives are being supported by the IMF program arrangements. The program is anchored on the convergence of the budget deficit to the West African and Economic Monetary Union norm of 3 percent of GDP by 2019, to preserve public debt sustainability and support the regional international reserves pool. Fiscal discipline is underpinned by mobilizing revenue and spending prioritization in order to create fiscal space for priority infrastructure and social projects.
Implementing their program, the authorities have pursued structural reforms to further strengthen the revenue administration and public financial management and adopted measures for fiscal consolidation while protecting priority spending. They are also further strengthening the financial system.
Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, deputy Managing Director and Acting Chair, made the following statement:
“Côte d’Ivoire’s performance under its Fund-supported program has been good. The authorities contained the budget deficit in 2017 and are committed to meeting the program budget deficit target in 2018 and reduce the fiscal gap to meet the WAEMU convergence criterion of 3 percent of GDP in 2019. The medium-term outlook remains robust, with growth projected to average around 7 percent over 2018-23.
“Further revenue mobilization is needed to achieve the fiscal objectives. Building on past implementation of fiscal structural reforms, measures to buttress revenue administration and public financial management should accelerate. Moreover, cautious debt and financial management is required to firmly anchor Côte d’Ivoire’s debt on a sustainable path. The authorities are taking steps to further consolidate the banking sector’s stability.
“Continued implementation of reforms that foster sustainable and inclusive growth would be needed. Further improvements in the business environment would help make private investment the main driver of growth.”
Staff report
Recent Economic Developments and Program Performance
Strong net exports and resilient consumption sustained buoyant economic activity in 2017, despite external price shocks and social tensions. Real GDP growth is estimated at 7.8 percent, driven by exceptionally high cocoa exports and crops due to favorable climatic conditions. Domestic consumption was resilient, partly sustained by the government’s wage agreement with civil servants and soldiers.
Nonetheless, a sharp deterioration in cocoa export prices is estimated to have contributed to widening the current account deficit to 2.1 percent of GDP in 2017 (from 1.1 percent in 2016), although this was mitigated by a higher volume of key agriculture exports. Inflation remained subdued, at 1.1 percent (y/y) at end-2017, despite relatively more volatile food and beverage prices.
Outlook and Risks
The medium-term outlook is robust. Growth is expected to average around 7 percent over 2018-23. On the supply side, this projection is supported by a pick-up of the industry (particularly mining and energy production) and services (including telecommunications and construction) over the medium term. Concerning demand, key drivers of growth are projected to be a rebound of private consumption and investment in the near term and rising net exports in 2020 and beyond.
The current account deficit is expected to widen to around 3 percent of GDP in 2018-20 reflecting a decline in primary agriculture exports and an increase in imports of consumption and investment goods, and gradually narrow over the medium term, with industrial exports gathering strength and the services deficit stabilizing. Inflation is projected to remain below 2 percent, reflecting the projected low inflation in trading partners.
Risks to the baseline are broadly balanced. The outlook is subject to risks from tighter global financing conditions or a significant slowdown in foreign investor countries and related spillovers. Underperforming revenue mobilization and spending pressures from social tensions pose risks to the availability of adequate resources for infrastructure and other priority outlays. Tighter financing conditions in the regional sovereign debt market would raise borrowing costs.
More positively, higher prices for agriculture exports could boost fiscal revenues from these commodities. Moreover, rising investor confidence spurred by the successful Eurobond placement, successful structural reforms and initiatives related to the G20 Compact with Africa may result in additional private investment. Finally, downside risks could be compounded by new social demands from various groups.
Article IV Policy Discussions: Fostering sustained and inclusive growth
The post-2011 strong recovery was enabled by productivity rebound, sustained infrastructure development, pent-up domestic demand, and reform implementation. To sustain growth and boost inclusiveness, Côte d’Ivoire needs to continue deepening its reforms.
Structural reforms to improve the investment climate and growth sustainability and inclusiveness
The post-2012 productivity boost is tapering off and would continue to decline without further improvements in the business climate. The growth accounting of per capita real GDP shows that the contribution of the productivity residual to growth has been steadily declining, including with the tapering of the catch-up from the political normalization on economic recovery. Productivity is being replaced by capital as a main driver of growth. Private and public investments are expected to boost capital stock in 2018-23. However, investment is bounded by the availability of funding resources. Improvements in productivity are critical to sustain medium-term growth at the pace of 2012-17. While upgrading public infrastructure is an important step, further improvements in the business climate will help the private sector take full advantage of better infrastructure and shift the economy further towards private sector-led growth.
Côte d’Ivoire should focus on improving the business climate where it lags other sub-Saharan African frontier market countries. The country has made significant progress in reducing processing time for building permits, but still lags sub-Saharan Africa frontier markets and the WAEMU for paying taxes, including because the index does not yet reflect the new system for electronic payment of taxes. While Côte d’Ivoire recently instituted a credit bureau, there is scope for improving credit access by strengthening legal rights for borrowers and creditors, extending the coverage of the credit bureau and deepening credit information on borrowers.
The pace of reforms to improve governance needs to be sustained. Since 2012, the authorities have strengthened the regulatory environment and set up anti-corruption entities. They adopted the 2013 anti-corruption decree and launched the High Authority for Good Governance (2014) and the Anti-Racketeering Unit (2014). Reflecting progress, the 2017 Transparency International Corruption Perception score improved to 36 in 2017 from 34 percent in 2016.
Improving the business and regulatory environment for agriculture is critical to sustain growth, make it more inclusive, and fight poverty. Agriculture contributed directly to about ⅟4 of the growth in 2017 and employs almost half of the total workforce, of which about three-fourths comes from the rural population, over 40 percent are women, and about 60 percent are unschooled. About 60 percent of families headed by someone employed in agriculture are poor.
To further develop the agriculture sector, the government aims to improve market access for crops by upgrading transportation infrastructure and provide electricity to all the country’s municipalities. It is also developing strategies, with World Bank assistance, to improve the cocoa and cashew sectors and enhance their value added. Moreover, the government aims to further develop the subsistence agriculture sector, an important employer of women, and improve the regulatory framework. While regulations for transportation and finance are relatively sound, regulations pertaining to trade, plant protection and producer organizations as well as the water distribution system are relatively less efficient. Better distribution of water use permits would benefit farmers by ensuring access to water amid competing demands and strained resources.
National and regional policy consistency
Economic policies at the WAEMU level and in Côte d’Ivoire are mutually reinforcing to meet the objectives of maintaining fiscal sustainability and contributing to regional external viability. To ensure monetary stability, the regional central bank, BCEAO, tightened monetary policy in late 2016, which raised the cost of funds in the regional market and stabilized regional FX reserves. These actions contributed to Côte d’Ivoire’s decision to issue Eurobonds for debt financing in 2017 and 2018. More recently, renewed liquidity pressures have pushed up the interbank market rate, and staff has recommended that the BCEAO stand ready to further tighten monetary policy if pressures on the money market or FX reserves persist. Along with other WAEMU members (except Niger), Côte d’Ivoire is expected to contribute to the regional stability by converging to the WAEMU fiscal deficit norm of 3 percent of GDP by 2019. Moreover, its 2018 Eurobond issuances is helping rebuild regional FX reserves
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China-Africa infrastructure cooperation seminar held in Kenya amid growing ties
Kenya on Monday hosted the China-Africa Infrastructure Cooperation Seminar amid calls for enhanced ties with Beijing to boost modernization of roads, ports, railways and telecommunication networks in Africa.
The two-day meeting was organized by Chinese Embassy in Kenya, Kenyan Ministry of Transport and Nairobi-based think tank, African Economic Research Consortium (AERC).
James Macharia, the Cabinet Secretary for the Ministry of Transport, said in his opening remarks that the China funded Mombasa-Nairobi Standard Gauge Railway (SGR) remained a model for cooperation with Beijing to boost infrastructure development and realize socio-economic transformation.
“The SGR project is a game changer. Its benefits are in line with the government’s Big Four Agenda,” Macharia remarked adding that extension of the modern railway project toward the border with Uganda will stimulate trade and industrialization along its corridor.
He hailed the launch of SGR commuter and cargo transport services terming them a game changer in movement of people and cargo between Nairobi and the port city of Mombasa.
Zhou Yuxiao, China’s Ambassador for Affairs of the Forum on China-Africa Cooperation (FOCAC), and Sun Baohong, Chinese Ambassador to Kenya, joined policy makers and scholars at the forum to discuss infrastructure development as a key pillar of Sino-Africa ties.
The China-Africa Infrastructure cooperation forum which focused on the Mombasa-Nairobi SGR project was the sixth one to be held in the continent ahead of FOCAC summit in Beijing in September.
Zhou said China is committed to supporting modern infrastructure projects like the Mombasa-Nairobi SGR to accelerate sustainable development in Africa.
“In cooperation with Africa, China attaches great importance to the economic and social benefits of the projects. It advocates that large infrastructure construction and industrial development should be planned and carried out in parallel so as to make them mutually reinforcing and strengthen Africa’s capacity for sustainable and self reliant development,” Zhou remarked.
Sun Baohong, the Chinese Ambassador to Kenya, said Africa’s economic prosperity hinges on development of modern infrastructure projects.
“The economic take-off of African countries, Kenya included, cannot be realized without the elevation of infrastructure,” Sun remarked.
“Infrastructure cooperation is one of the priorities of China-Africa cooperation under the Belt and Road Initiative,” she added.
Lemma Senbet, the Executive Director of Africa Economic Research Consortium (AERC), said China has emerged as a dependable partner in Africa’s infrastructure modernization.
“No doubt that the China-Africa economic cooperation is at the center of transport and physical infrastructure development,” said Senbet.
He noted that China-funded infrastructure projects have boosted regional integration, access to markets and financial sector development.
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tralac’s Daily News Selection
Underway, in Dar es Salaam: Workshop on establishing a National Trade Facilitation Roadmap in Tanzania (25-29 June)
Underway, in Victoria Falls: NEPAD Agency, PIDA_Africa strategic dialogue on advancing infrastructure development in Africa (25-26 June). Extract from the concept note (pdf): The 2018 Dialogue will focus on three work streams: (i): How to mobilize African institutional investment for infrastructure development in Africa through the NEPAD 5% Agenda Campaign; (ii) Options to scale risk mitigation and operationalize an effective African Guarantee Scheme that enables the mobilization of institutional investment and private finance for African infrastructure projects; and (iii): How to create the foundation for the bankability of trans-boundary projects, including how to enhance the role of the PIDA Service Delivery Mechanism in early stage project preparation.
As the AU Summit preliminary meetings began today in Mauritania: President Kagame meets AU reforms team in Kigali
A listing of this week’s EAC trade and regional integration events
COMESA cues African states against protectionism as free trade takes effect (Business Daily)
COMESA Competition Commission chief executive officer George Lipimile says countries that enjoy some protectionism measures will have to get better alternatives in order not to undermine the effectiveness of AFCTA. Kenya is one of the countries that has been enjoying COMESA safeguards on sugar for over 10 years, even after exhausting the allowable limits. The current quota, which limits the amount of sugar that regional countries export to Kenya to 350,000 tonnes, comes to an end in February next year. ACFTA, which if effective, will allow free movement of goods from one country to another, was signed by 44 African states in Kigali this year. “Countries should not hide on protectionism to hinder free movement of goods under the ACFTA and as a result of this we need to look for alternative ways of issuing the safeguards,” said Dr Lipimile. Dr Lipimile noted that some of the alternatives include looking at case by case for specific countries and if at all it is justifiable for those countries to be given safeguards and to what extent.
Impact of non-implementation of revised EAC RoO: the case of motor vehicle assemblers in Kenya (East Africa Trade and Investment Hub)
This case study analyses the impact of non-implementation of the pdf EAC Rules of origin 2015 (792 KB) and highlights the specific experience of private sector companies compared to the general performance of the Motor Vehicle Assembly Industry in the region. It illustrates how two large private sector companies have not been able to take advantage of the revised RoO which require that locally assembled motor vehicles be given preferential treatment in other Partner States. The study reveals continued violation of commitments undertaken by EAC Partner States in terms of non-implementation of RoO. It identifies five significant negative impacts: (i) underutilized assembly capacity; (ii) further investment disincentive as a result of low capacity utilization; (iii) fewer jobs created as a result of less market; (iv) high prices for consumers; and (v) negligible regional sales/loss of a regional industrialization opportunity.
Extract (pdf): This study finds that the implementation of the zero-import duty provided for by the RoO will in turn reduce the Retail Selling Price of Kenyan assembled motor vehicles in the Partner States by 14-20%. In addition, industry players will be able to optimize their industry capacity utilization to at least 30,000 units per annum. The assemblers project that they can progressively increase assembly line jobs by 1,000, with the additional knock-on effect of increasing the parts manufacturers/suppliers to assembly plants employees to approximately 6,000. This study makes the following recommendations: [Note: Over the coming weeks, the USAID Hub will publish a series of EAC Common Market Implementation Impact Studies]
Kenya: International trade moved from Foreign Ministry (Daily Nation)
President Uhuru Kenyatta has handed all matters of international trade to the Ministry of Industrialisation, buttressing the docket for Cabinet Secretary Adan Mohamed, but potentially reducing areas of turf wars between departments. In the new Executive Order 1 for 2018, the President transferred the Department of International Trade, headed by PS Chris Kiptoo, from the Ministry of Foreign Affairs to that of Industrialisation, Trade and Co-operatives. The President said the new directive “supersedes the Executive Order No 1” of 2016 to rearrange government departments and ministries. In the new structure, the President says the Ministry of East African Community will be dealing with implementation of the EAC treaties as well as projects under the Northern Corridor. However, it is not clear whether it is Peter Munya who should continue to negotiates the EPAs agreements with the EU (and EAC member countries) or Mr Mohammed. [Mandera County pays the economic cost of Somali border closure]
East Africa: Northern Corridor initiative resumes meetings (New Times)
Foreign Affairs Ministers of the Northern Corridor Integration Project initiative are convening in Nairobi today. The ministerial meeting will make way for a Heads of State Summit slated for tomorrow. The body has not held summit level sittings since April 2016, which had led to concerns on whether the initiative is still alive. The slowdown in regards to regular meetings and consultation had been previously explained as due to the busy election calendar of member countries in 2017. The initiative was borne when Presidents Paul Kagame, Yoweri Museveni, and Uhuru Kenyatta first met in Uganda on June 2013, to discuss how to co-operate and speed up development in the region. South Sudan has since graduated from observer status to an active member of the initiative.
Ghana: Single window saves Ghana $500m in two years – UGBS report (GhanaWeb)
The introduction of the national Single Window system has saved Ghana $500m since its implementation in 2016, a University of Ghana Business School report has stated. Dubbed the Ghana Business Development Review, the 20-page report discusses developments, performance, managerial and governance issues and major constraints on businesses covering the period 2015-2017. According to the report, the introduction of the Single Window system, apart from increasing revenue, had also made operations at the ports more effective and productive. The report also quoted figures from the Ghana Revenue Authority’s Customs Division’s Monthly Revenue performance, noting that the implementation of the single window system had increased government revenue significantly by 24% over the past two years, rising from GH¢744 billion in 2015 to GH¢975 billion in 2017.
Mauritian exchange sees $6.5bn gold trading in five years (Moneyweb)
A Mauritian commodity exchange that plans to start operating in the fourth quarter expects to trade $6.5bn of gold annually within five years, part of the Indian Ocean island nation’s plan to become a financial gateway to Africa, its chairman said. The introduction of the Mauritius International Derivatives and Commodities Exchange brings to fruition Prime Minister Pravind Jugnauth’s pledge last year to introduce gold trading to the country. Mauritius’s Financial Services Commission approved Mindex’s license application “in principle,” exchange chairman Hirander Misra said Monday. Its operations will eventually include derivatives trading, a vault to store bullion and a refinery, he said. Mindex projects that it will trade 31 tons (997 000 ounces) of gold in 2019, increasing to 156 tons by 2023. [Mauritius industrial production year-on-year at 2.7%]
Kenya: Authorities arrest standards bureau head over fertiliser imports (Reuters)
The authorities have arrested the managing director of the Kenya Bureau of Standards (KEBS) and other officials on charges they allowed the import of fertiliser that failed KEBS tests, the public prosecutor said. Investigations by the Director of Criminal Investigations found that the fertiliser imported from Morocco failed to meet KEBS’s standards when tested but it was released to the market instead of being destroyed or returned, the Director of Public Prosecutions, Noordin M. Haji, said in a statement.
South Africa: SABS under fire for costing SA R4bn a year (Fin24)
The SA Bureau of Standards has been strongly criticised by business, which says the entity is losing the country at least R4bn a year in exports in the manufacturing and engineering sectors alone. This comes after years of businesses complaining about a lack of testing by the SABS, resulting in manufacturers losing contracts because they are unable to obtain the SABS mark timeously, or they have been unable to renew 2 600 permits to use the mark. Trade and Industry Minister Rob Davies is assessing representations from the SABS board on why he should not go ahead with his intention to put the entity under administration for not performing to its mandate. The SABS falls under Davies’ department. SABS CEO Boni Mehlomakulu hit back at industry and the department of trade and industry this week, saying she was fulfilling her mandate according to policy that was implemented in 2005. She said the issues affecting industry were inherent in the policy, which emerged from the 2004 National Economic Development and Labour Council report, titled Modernising the South African Technical Infrastructure.
Nigeria: FG mulls implementation of auto policy (ThisDay)
The Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, says the federal government is finalising the auto policy and would soon commence its implementation. Enelamah said this in his keynote address delivered at the seventh German-Nigerian Business Forum in Lagos. He said the federal government had been reviewing the policy to ensure its effective implementation. For close to four years now, there has been no pronouncement by the federal government on the automotive policy which was introduced in 2013 by the administration of former President Goodluck Jonathan. The policy was to encourage auto firms to set up their plants in Nigeria.
Nigeria: Automobile policy impacting negatively on revenue, NPA boss laments (Ripples)
The Nigerian Ports Authority (NPA) on Thursday said the revenue accruing from car importation into the country dropped by 20 percent this year, a fallout of the Federal Government’s Automobile Policy. The NPA warned that the drop in the revenue was an indication that the government’s overall revenue might be affected negatively, and called for an urgent review of the policy in order to reduce subsequent losses. The automobile policy, which raised import duties on cars, was introduced in 2013 by former President Goodluck Jonathan to revive the ailing Nigerian auto industry, encourage local manufacturing of vehicles and discourage importation of cars. The Managing Director of NPA, Hadiza Bala-Usman: “We have recorded a drop in revenue by 20%. How many cars are being manufactured and how many Nigerians can really afford to buy brand new cars? So, the implication is that while the government is losing revenue on importation, the manufacturing or assembly plants are not achieving the aims of the policy.”
Reimagining regionalism: Heterodox and feminist policy proposals from Africa and the Caribbean (FES)
Reimagining Regionalism is a compilation of five policy papers that present heterodox and feminist policy proposals around fundamental questions of economic policy and sustainable development: trade, climate change, fiscal governance, agriculture, and debt. This analysis emerges from three regional workshops co-convened in 2016 and 2017 by Regions Refocus and several autonomous regional civil society groups in collaboration with the Friedrich-Ebert-Stiftung. Answering the call of these workshops for regional specificity and analytical clarity, Reimagining Regionalism addresses separate but related policy areas fundamental to the Caribbean, the African continent, and the overlaps between them. Written by leading activist intellectuals from the Caribbean (Mariama Williams, Rosalea Hamilton and Vanus James, and Don Marshall) and Africa (Tetteh Hormeku-Ajei and Mohamed Said Saadi), the papers articulate shared imperatives of democratic participation, meaningful policy space, and targeted efforts to stimulate and bolster domestic productive capacities.
Monday’s Quick Links: CGD: Domestic resource mobilization in low-income countries – proposal for a surge in multilateral support Brookings: Enhancing the attractiveness of private investment in hydropower in Africa AIIB Summit: Will the bank be more hands-on with funding environmental projects? AIIB to expand spending to $3.5bn, with focus toward India |
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NEPAD Strategic Dialogue on Advancing Infrastructure Development in Africa
The New Partnership for Africa’s Development (NEPAD) Dialogue on Advancing Infrastructure Development in Africa is a multi-stakeholder consultation aiming at defining concrete policy recommendations for Africa’s leadership that advance infrastructure projects implementation under the umbrella of the Programme for Infrastructure Development in Africa (PIDA).
The dialogue is structured around specific instruments developed by the NEPAD Agency to drive the critical components of infrastructure development on the continent focused on project preparation and the mobilization of private investment.
The 2018 Dialogue will focus on three work streams: (1): How to mobilize African institutional investment for infrastructure development in Africa through the NEPAD 5% Agenda Campaign; (2) Options to scale risk mitigation and operationalize an effective African Guarantee Scheme that enables the mobilization of institutional investment and private finance for African infrastructure projects; and (3): How to create the foundation for the bankability of transboundary projects, including how to enhance the role of the PIDA Service Delivery Mechanism (SDM) in early stage project preparation.
The 2018 Dialogue is a NEPAD initiative led by the Regional Integration, Infrastructure and Trade Program (RIITP) that contributes to other policy sectors such as industrialization and job creation.
Objectives
This two-day meeting will bring together representatives of development finance institutions, private sector experts, Regional Economic Communities, infrastructure project authorities, and Project Owners. The Dialogue will first deliberate on the technical modalities involved in scaling of risk mitigation for private investment in Africa’s Infrastructure, including African institutional investment. Secondly, the meetings will discuss the operational modalities of early stage project preparation to deal the complexity in bringing regional projects to bankability.
In terms of the specific sessions, the first day (25 June) will begin with a session on mobilizing institutional investment for infrastructure development in Africa. The session will build on initial research on the financial potential of Pension and Sovereign Wealth Funds to invest into Africa’s Infrastructure. The day will close with brainstorming on the required steps to scale risk mitigation for infrastructure projects. The second day (26 June) will be devoted to the challenge of project preparation. Starting with a session on regional infrastructure for development and job creation, the day will close with a discussion on how to enhance the bankability of PIDA Projects.
The objectives of the different sessions are provided below.
Session 1: NEPAD 5% Agenda: Mobilizing institutional investment for African infrastructure
The objective of this session is to discuss the financial potential of Pension and Sovereign Wealth Funds to invest into Africa’s Infrastructure, as well as possible implementation strategies and concrete action steps. Downloads:
pdf AU-NEPAD Continental Business Network 5% Agenda Report 2017 (1009 KB)
pdf NEPAD-CBN Report on De-Risking Infrastructure and PIDA Projects in Africa, June 2016 (3.00 MB)
Session 2: Guarantee and Risk Mitigation Scheme enabling institutional investment and private finance of infrastructure projects, funds, and vehicles
The objective of this session is to discuss challenges and modalities towards scaling risk mitigation and an African Guarantee Scheme to enable the mobilization of African pension fund investment for African infrastructure.
Session 3: Regional infrastructure for development and job creation
The objective of this session is to demonstrate the potential of PIDA Projects in terms of job creation and share NEPAD’s approach in estimating the potential for job creation. The session will also facilitate discussions between NEPAD, partners, and stakeholders on the Toolkit and ways it can be used to advance the development and finance of regional infrastructure and job creation.
Session 4: PIDA Service Delivery Mechanism (SDM): Early stage project preparation for infrastructure projects in Africa
The objective of this session is to:
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Inform Project Owners on the operational modalities of the SDM and how they can benefit from its services;
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Through case study presentations, identify best practices in early stage project preparation of cross-border projects;
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Enhance partnerships among Project Preparation Facilities; and
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Discuss key challenges and possible SDM solutions.
Session 5: How to create the foundation for project bankability at the early stage of preparation?
The objective of this session is threefold. First, the session will discuss the complexity of the institutional landscape of transboundary projects and how it affects the investability of such projects. Secondly, through group discussion, the session aims to set forth best practices and practical action steps from experts, DFIs, and investors on ways to achieve bankability. Finally, this session will identify challenges and solutions through case studies from projects in the SADC North South Corridor Programme, with a focus on Railway Projects and the EAC Multimodal Corridor.
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Comesa cues African states against protectionism as free trade takes effect
A regional body has urged African states to seek alternative ways of protecting some sectors of their economy as a continental free trade area takes effect.
The African Continental Free Trade Area (AFCTA) is expected to come into effect at the end of the year.
Comesa Competition Commission (CCC) chief executive officer George Lipimile says countries that enjoy some protectionism measures will have to get better alternatives in order not to undermine the effectiveness of AFCTA.
Kenya is one of the countries that has been enjoying Comesa safeguards on sugar for over 10 years even after exhausting the allowable limits.
The current quota, which limits the amount of sugar that regional countries export to Kenya to 350,000 tonnes, comes to an end in February next year.
ACFTA, which if effective, will allow free movement of goods from one country to another, was signed by 44 African states in Kigali this year.
“Countries should not hide on protectionism to hinder free movement of goods under the ACFTA and as a result of this we need to look for alternative ways of issuing the safeguards,” said Dr Lipimile.
Dr Lipimile noted that some of the alternatives include looking at case by case for specific countries and if at all it is justifiable for those countries to be given safeguards and to what extent.
Sugar safeguards
Speaking during a two-day media workshop organised by CCC in Nairobi on Monday, Dr Lipimile noted that Kenya’s argument for the extension of sugar safeguards in 2016 was justified.
“I looked at the issues that were raised and the argument that was given by Kenya was justifiable,” he said.
Comesa Competition Commission (CCC) is an affiliate of the regional business bloc that oversees all mergers and acquisitions as well as checks on anticompetitive practices within the 19 Comesa member states in Africa.
It has been operational since 2013.
CCC has of late handled a number of mergers between multinational firms that have presence in Kenya.
Last year, CCC cleared the acquisition of Monsanto Company by Bayer.
CCC received notification in relation to acquisition of Monsanto Company by Bayer at an estimated cost of Sh6.2 trillion cash deal that includes the takeover of the latter’s Kenyan subsidiary.
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Northern Corridor initiative resumes meetings
Foreign Affairs Ministers of the Northern Corridor Integration Project (NCIP) initiative are convening in Nairobi, Kenya today.
The ministerial meeting will make way for a Heads of State Summit slated for tomorrow.
The body has not held summit level sittings since April 2016, which had led to concerns on whether the initiative is still alive.
The slowdown in regards to regular meetings and consultation had been previously explained as due to the busy election calendar of member countries in 2017.
At the onset, Heads of State Summits would be held quarterly.
The sessions opened over the weekend with a two-day meeting of technical officials which made way for a ministerial meeting today.
State Minister of Foreign Affairs Olivier Nduhungirehe confirmed that the initiative has resumed meetings.
He admitted that the over duration without meetings had held back a number of projects and initiatives such as infrastructure projects in energy and logistics.
“It has been a while since there was a Northern Corridor Initiative meeting. This has affected the follow up and progress on a number of regional initiatives such as infrastructure projects in railway and energy,” he said.
At the summit, Rwanda will be represented by several ministers; one for Trade and Industry, Defence as well as that of Infrastructure.
He said that the government is optimistic that the meeting will help pick up pace of delayed projects and integration efforts.
The initiative was borne when Presidents Paul Kagame, Yoweri Museveni (Uganda), and Uhuru Kenyatta (Kenya) first met in Uganda on June 2013, to discuss how to co-operate and speed up development in the region.
There are 16 projects being coordinated under NCIP, with each of the three founder countries initially allocated a set of projects to coordinate.
Projects coordinated by Rwanda are: immigration, tourism, trade, labour and services; the single customs territory; defence cooperation; peace and security cooperation; and air space management.
South Sudan has since graduated from observer status to an active member of the initiative.
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IGAD signs cross-border trade policy
Members of the Intergovernmental Authority on Development (IGAD) have adopted a regional policy framework on cross-border trade that promises to be a lifeline for the region’s small-scale traders.
Trade ministers from Djibouti, South Sudan, Sudan, Uganda, Somalia and Kenya and a representative from Ethiopia meeting in Mombasa last Thursday signed a policy document seeking to strengthen border security systems, support trade facilitation at border crossings and promote participation of border and communities in policy making.
The Informal Cross-Border Security Governance policy tackles issues related to food security, employment, peace and security in the region’s borderlands.
Kenya’s Trade Cabinet Secretary Adan Mohamed said the initiative is expected to sensitise on cross-border trade among member states.
“The beneficiaries are likely to be women and youth, and we are happy that today we have a framework that will recognise the socioeconomic contribution of informal cross-border trade within member states,” Mr Mohamed said. “It will also help us understand the linkages between cross-border informal trade and cross-border security,” he added.
The policy document will be presented to the Igad Heads of State for onward transmission to the African Union.
Mr Mohamed said that improving cross-border trade is one step towards the Continental Free Trade Area that the Heads of State signed in Kigali in March.
Uganda’s Trade Minister Amelia Kyambadde said the policy will regulate the informal trade within Igad countries and provide an opportunity to grow the informal sector.
“This policy will have an impact because every country’s economy is driven by 15 per cent informal trade. So far there is no data available to quantify cross-border trade, meaning elicit goods are finding their way into the countries.
“The newly implemented policy is expected to formalise trade across borders and bring on board all member states from East Africa and the Horn of Africa. We were working only around East Africa but now we are also bringing on board members from the Horn of Africa and this will stimulate infrastructure development in future,” said Ms Kyambadde.
Mr Mohamed added that Igad is prepared to take up its role as the lead co-ordinator in charge of implementation the policy framework.
“We are looking forward to the opportunities for important improvements in the lives and livelihoods for the beneficiary communities in our region that will be created by the policy framework,” he said.
Ms Kyambadde said the policy document will regulate the informal trade within Igad and also provide an opportunity to grow the informal sector.
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tralac’s Daily News Selection
Featured tweet, @SongweVera: Africa badly needs a common platform for intellectual property rights. In 2008, 10 million apps downloaded from the Apple Store; in 2018, 180 billion apps were downloaded. The 2nd phase of AfCFTA negotiations should help establish a common approach to IPR protection.
The World Bank posts its new Africa Regional integration cooperation assistance strategy, FY18-FY23
Context: Going forward, the nature and pace of integration in Africa would also be defined by wider economic opportunities and challenges. In particular, there are likely to be four key economic drivers of regional integration. First, nature of economic growth and macroeconomic stability could be an important factor for integration. The past decade has seen the continent grow largely on the back of a commodity price boom and largely sustainable debt levels. With the recent retreat of the commodity super-cycle, there is an opportunity to push ahead with greater intra-African trade as a potential driver for increasing productivity and economic diversification. Second, the ongoing demographic boom and rapid urbanization could be another important factor for integration. For instance, how is Africa going to take advantage of its burgeoning youth cohorts to meet the growing food needs and rising purchasing power of its urban population? Third, an accelerated pace of structural reforms, which leads to improvements in competitiveness and consequent opportunities for agglomeration and specialization among countries, could be another driver for integration. Finally, advances in technology and its falling costs are likely to be another driver of integration – for example, falling costs of renewables could benefit all countries equally if diseconomies of scale are addressed or availability of improved Internet connectivity could potentially revolutionize distance education and help address chronic challenges such as poor quality of teachers.
Possible future scenarios of integration in Africa: While it is hard to predict the pace of regional integration going forward, it is very likely to remain in positive territory. Three possible scenarios for the status and depth of integration in Africa during the next decade can be identified: (a) the integration agenda gets into high gear, among others, with a strong agreement and effective implementation of the CFTA, and a rapid scale-up of regional infrastructure through leveraging private financing; (b) a more likely scenario of continuation of selective approach to integration where collective and sovereign interests overlap, but with greater engagement of the private sector and deepening in certain sectors such as power trade, financial integration, and removal of some barriers to trade; and (c) an unlikely downturn in the overall climate and support for integration due to rising domestic sovereignty considerations and a growing disbelief among people and policy makers about achieving tangible benefits from integration.
pdf
Four Strategic priorities
(1.91 MB)
Strategic Priority 1: Generate economic dynamism along regional economic corridors. What will we do? Identify 8-10 economic corridors during FY18–FY20 – either along transport trunk routes or along production centers for major agricultural commodities (for example, livestock, or cash crops). Along these corridors, use a combination of WBG instruments to support countries to address policy issues (including standardization of norms and regulations) that affect productivity and promote trade and private investments, along with financing the remaining infrastructure gaps and promoting skills development to take up the job opportunities.
Strategic Priority 2: Develop functioning regional markets in identified priority sectors. What will we do? In the spirit of the MFD approach, during the initial years of the strategy, work will focus on laying the foundations of regional markets in priority sectors – agriculture, energy, digital and telecom markets, financial sector, and technical skilled labor.
Strategic Priority 3: Scale up access to quality public services and entrepreneurship through complementary regional solutions. What will we do? In areas such as off-grid energy access and small-scale irrigation, there are economies of scale benefits that are possible by harmonizing standards and regulations and providing regional lines of credit to scale up access. Opportunities would be explored for facilitating greater uptake of improved technologies, including through private sector channels.
IGAD adopts cross-border trade policy (Prensa Latina)
IGAD trade ministers yesterday approved the Trans-border Informal Trade Policy and Cross-Border Security Governance, which is expected to promote business in the region. Authorities from Kenya, Uganda, South Sudan, Djibouti, Somalia, Sudan and Ethiopia signed the document in Mombasa . Kenya’s Cabinet Secretary for Industry, Trade and Cooperatives, Adan Mohamed, stated that the measure would boost small-scale traders in border areas, which mainly include women and young people, to improve food security. Mohamed added that as conflicts flow across borders, there would be an awareness campaign to ensure that communities adopt the new policy of sustainable peace and security.
EACJ orders Tanzania minister to annul order banning publication of local newspaper (EAC)
The Court in its judgment found that the Respondent having failed to establish how the publication in the Mseto newspaper violated the public interest, or the interest of peace and good order of the people, lead to the conclusion that the impugned order was made in violation of the right of freedom of expression provided in Article 18(1) of the Constitution of Tanzania, or as provided for in Articles 19(3) of the ICCPR and 27(2) of the African Charter as a measure of universally accepted human rights standards. Further, the order derogates from the principles of democracy and adherence to the principles of good governance, the rule of law and social justice. Court also found the order failed to conform with and adhere to the principles of accountability and transparency. By issuing orders whimsically and which were merely his “opinions” and by failing to recognize the right to freedom of expression and press freedom as a basic human right which should be protected, recognized and promoted in accordance with the provisions of the African Charter, the Minister acted unlawfully.
Namibia’s EU exports surpass SACU (The Namibian)
Namibia’s exports to the European Union increased to N$6,3bn in the first quarter of 2018, bypassing the country’s exports to the Southern African Customs Union. The EU took up 35% of Namibia’s total exports, the largest share relative to other economic regions such as Sacu. This 35% share is much more than the 23% accounted for in the first quarter and 26% in the fourth quarter of 2017, respectively. Related perspective: China has overtaken South Africa as the largest export destination for Namibian products, making up 18.3% of total exports in the first quarter of 2018, data from the statistics office showed on Tuesday. South Africa was ranked second with 18%, followed by Belgium with 13% of total exports. Botswana and Italy absorbed 10% and 8%, respectively, of Namibia’s total exports.Namibia Statistics Agency: Quarterly Trade Statistics Bulletin Q1 2018 (pdf)
BRICS tax officials put heads together to curb evasion, illicit financial flows (Fin24)
SARS Acting Commissioner, Mark Kingon said the member states had committed to identifying loopholes in tax compliance and adopting best practices from other member states. Cooperation would include the design of new tax policies, tax administration strategies and practices, as well as privacy and cyber security concerns and new avenues for fraud, which they say require international cooperation and coordination, as information flows increase. China’s Deputy Commissioner of the State Administration of Taxation, Sun Ruibiao, said his country had adopted a simplified tax collection system that is digitally based, in a bid to improve compliance and boost collection. “These initiatives have shown results, and I can say we have noticed an improvement in tax collection,” he said.
Inaugural Electricity Regulatory Index for Africa launched (AfDB)
Nigerian logistics and development updates
FG inaugurates aid working group to plug funding gap (ThisDay)
The Budget and National Planning Minister, Senator Udoma Udo Udoma, has inaugurated the Technical Working Group for the Nigeria Aid Transition Plan, with a mandate to develop a comprehensive strategy for addressing the funding gap that may arise with the scaling down of development partner funding to Nigeria. The ministersaid the initiative was in line with the resolve of the current administration to drive effective planning as the bedrock of its developmental strategy and be pro-active in the face of emerging challenges. Members of the TWG are drawn from the Ministry of Budget and National Planning, Ministry of Finance, Ministry of Health, Ministry of Education, Ministry of Agriculture, National Bureau of Statistics and Debt Management Office. [Related: FG to borrow N1.64trn for 2018 budget deficit, President Buhari’s speech at signing of the 2018 Appropriation Bill into law, DMO publishes Q1 2018 debt data]
FG urged to reform import, export regulatory procedures (ThisDay)
Following Nigeria’s poor showing in trading across borders on Ease of Doing Business ranking by the World Bank, customs agents have called on the federal government to urgently address the challenges encountered by Nigerians on the process of import, export and transit regulatory procedure that affected the country on the ranking. The National Council of Managing Directors of Licensed Customs Agents, the umbrella body of customs agents, stated this in a letter addressed to President Muhamadu Buhari. However, the custom agents pointed out that Nigeria’s import, export, regulatory and transit procedures have lengthy, cumbersome process associated with unnecessary delays, high transaction cost and increase of cargo dwell time, which make our port the most expensive in the globe based on verifiable information. They called on the federal government to, as part of the reforms, address the issue of breakdown of scanners at the ports.
Physical examination increases cargo dwell time by over 100% (Vanguard)
Vanguard investigation revealed that about 40 to 60 containers are physically examined at Apapa port daily while between 50 and 70 are examined daily at Tin-can Island port presently. But Vanguard gathered that about 150 containers could be examined with the use of one scanner at Apapa and the number could even double should both scanners be operational. Vanguard findings show that some port users are in agreement that the scanners are broken down and non-functional while others are of the opinion that the one at Apapa is functional but that officers and men of the Service are deliberately refusing to deploy them because they want to continue performing 100 percent physical examination of goods coming into the country.
Apapa traffic hikes container transport fee by 1100% (Vanguard)
The chaotic traffic situation at the seaports in Lagos has resulted in about 1100% hike in the cost of transportation of imported goods from the ports in Apapa to surrounding towns in Lagos. Vanguard’s finding revealed that transportation of a 20 feet container from Apapa to Ikeja which used to be N25,000 has now risen to about N300,000. Confirming the above, President/CEO of NICSOL Worldwide Investment Limited, Mr. Nicodemus Odolo, said the bad roads have affected the movement of goods to and from the port as well as the cost of movement of consignments to and from the port.
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World Bank Group increases support for regional integration in sub-Saharan Africa
Titled “Supporting Africa’s Transformation”, the World Bank’s new Africa Regional Integration and Cooperation Assistance Strategy for the period FY18-FY23 will promote economic diversification and strengthening of regional value chains, build sub-regional energy and digital markets, help create productive jobs for youth, and tackle cross-border health and climate change risks.
“The World Bank Group brings a unique combination of financing, policy support, and convening power that can help facilitate collective action to address regional infrastructure gaps and policy and regulatory barriers to integration. We are buoyed by the high level of commitment of African leaders towards promoting the regional integration agenda,” said Makhtar Diop, World Bank Vice President for Africa.
The World Bank Group remains an important financier of regional integration initiatives in Sub-Saharan Africa, with existing commitments of over $10 billion. Over the next three years, financing will increase by over $6 billion to assist the continent in addressing barriers to integration. In addition, the provision of technical assistance and better analytics will help facilitate collective action by countries in priority areas. The strategy has benefited from wide-ranging consultations with policy makers, regional bodies, and the private sector in Africa.
“Regional integration is Africa’s most important task and infrastructure is its backbone. The World Bank Group’s Regional Integration Strategy, developed in consultation with the African Union, comes at a critical time when Africa is making steady progress on its economic integration instruments, namely the African Continental Free Trade Area, the Protocol on Free Movement of People, and the Single African Air Transport Market,” said Moussa Faki Mahamat, Chairperson of the African Union Commission.
The private sector has a large role to play in the regional integration agenda. “The World Bank and the International Finance Corporation will bring together both public and private sector solutions to tackle integration challenges. Our joint efforts will notably target the expansion of regional markets and the diseconomies of scale which are holding back rapid development of the private sector,” said Sergio Pimenta, Vice President of the International Finance Corporation for the Middle East and Africa.
Introduction
Context of Regional Integration in Africa
The case for integration in Africa rests on several premises and these have largely remained the same over the years. The political geography of Africa was mostly determined by the colonial powers and in many cases, national borders have little relationship with ethnic and cultural homogeneity. The small size of many countries and fragmentation of domestic markets results in various diseconomies of scale, which pulls down the economic potential of the entire continent. Over 70 percent of Sub-Saharan African countries have a population of less than 20 million, and about half the countries have a gross domestic product (GDP) of less than US$10 billion in 2016 (nominal terms). About one-third of SubSaharan African countries are landlocked and crucially dependent on their neighbors for access to global markets. The fact that the resource base may often be in countries far removed from where the markets are makes it imperative to seek regional solutions to some of the common challenges. There are over 50 transboundary river basins and several regional subsurface aquifers in Africa, which again demonstrates the need for collective action in management of these natural resources. There are also the ‘global public bads’ such as conflicts, natural disasters, and epidemics that do not respect national borders.
The African experience of integration does not demonstrate a clear sequential process but shows a diversity of approaches and attempts. The classical thinking on regional integration sets out a sequence of having common markets and customs unions before moving to common currency and full integration of factor markets, eventually leading to a possible political union. Despite any rhetoric, the experience in Africa bears little resemblance to this classical model. There are long-established monetary unions such as Central African Economic and Monetary Community (CEMAC) that have not become real customs unions. In fact, there have been numerous attempts toward creating common markets which have not borne fruit. However, there is renewed expectation around the recent agreement establishing a Continental Free Trade Area (CFTA), and swift follow-up would be critical in fulfilling the expectations. Then, there is the long-standing issue of overlapping membership and mandates of Regional Economic Communities (RECs) which makes it impossible for them to function like true regional communities in its classical form (some countries are members of multiple RECs). All this shows that a flexible and opportunistic approach toward integration has been the practical reality in Africa. Whether this remains the approach going forward would depend on the resolve of African countries to address deeper issues around the balance between sovereignty and integration, recognizing that there would be short or medium-term winners and losers from integration and addressing these differentiated impacts.
Context for this Strategy
Going forward, the nature and pace of integration in Africa would also be defined by wider economic opportunities and challenges. In particular, there are likely to be four key economic drivers of regional integration. First, nature of economic growth and macroeconomic stability could be an important factor for integration. The past decade has seen the continent grow largely on the back of a commodity price boom and largely sustainable debt levels. With the recent retreat of the commodity super-cycle, there is an opportunity to push ahead with greater intra-African trade as a potential driver for increasing productivity and economic diversification. Second, the ongoing demographic boom and rapid urbanization could be another important factor for integration. For instance, how is Africa going to take advantage of its burgeoning youth cohorts to meet the growing food needs and rising purchasing power of its urban population? Third, an accelerated pace of structural reforms, which leads to improvements in competitiveness and consequent opportunities for agglomeration and specialization among countries, could be another driver for integration. Finally, advances in technology and its falling costs are likely to be another driver of integration – for example, falling costs of renewables could benefit all countries equally if diseconomies of scale are addressed or availability of improved Internet connectivity could potentially revolutionize distance education and help address chronic challenges such as poor quality of teachers.
Strategic framework for WBG’s support for regional integration in Africa
Possible Future Scenarios of Integration in Africa
While it is hard to predict the pace of regional integration going forward, it is very likely to remain in positive territory. Three possible scenarios for the status and depth of integration in Africa during the next decade can be identified: (a) the integration agenda gets into high gear, among others, with a strong agreement and effective implementation of the CFTA, and a rapid scale-up of regional infrastructure through leveraging private financing; (b) a more likely scenario of continuation of selective approach to integration where collective and sovereign interests overlap, but with greater engagement of the private sector and deepening in certain sectors such as power trade, financial integration, and removal of some barriers to trade; and (c) an unlikely downturn in the overall climate and support for integration due to rising domestic sovereignty considerations and a growing disbelief among people and policy makers about achieving tangible benefits from integration.
Consultations during preparation of the strategy brought out a shared positive assessment of the benefits to be had from deeper integration, but stakeholder views on the prospects of realizing these benefits ranged from some very optimistic to rather pessimistic assessments. Neither of those extremes is realistic and/or warranted, but most feedback was in line with systematically working through the barriers to integration. This WBG strategy has been drafted on the basis that Scenario (b), that is, continuation of an opportunistic approach with pockets of deepening of integration, is more likely to play out over the coming years. Strong and meaningful results are possible under this scenario. But the WBG will continue to support willing governments and regional organizations to push the boundaries and move into a possible high-gear phase reflected under Scenario (a).
Strategic Priorities: ‘What’ will we do?
Four strategic priorities for the WBG’s RI program are being proposed for FY18-FY23 (also the IDA18 and IDA19 periods). These priorities have been guided by the criteria mentioned in the previous paragraph, continental priorities, and feedback from external consultations. African countries and regional institutions (that is, AU and RECs) will continue to set the overall framework for regional integration and determine its pace and sequencing. The WBG support will be within that overall framework and prioritized based on the following strategic priorities:
Strategic Priority 1: Generate economic dynamism along regional economic corridors
Identify 8-10 economic corridors during FY18-FY20 – either along transport trunk routes or along production centers for major agricultural commodities (for example, livestock, or cash crops). Along these corridors, use a combination of WBG instruments to support countries to address policy issues (including standardization of norms and regulations) that affect productivity and promote trade and private investments, along with financing the remaining infrastructure gaps and promoting skills development to take up the job opportunities. Together, this support is expected to make these corridors more dynamic and deepen regional integration. It would also involve using WBG financing and advisory services for leveraging further private investments for improving regional connectivity and developing sub-regional infrastructure, using appropriate WBG instruments to support policy change to address the ‘soft’ areas and use higher-level convening functions to bring multiple countries to take coordinated actions and attract private investments. Success would be measured by increases in productivity, value addition, intra-regional trade volumes, and job creation.
Strategic Priority 2: Develop functioning regional markets in four priority sectors
In the spirit of the MFD approach, during the initial years of the strategy, work will focus on laying the foundations of regional markets in priority sectors – agriculture, energy, digital and telecom markets, financial sector, and technical skilled labor. In these areas, the focus would be on increasing supply and quality of the product or service; addressing regulatory, policy, and institutional barriers toward development of functioning regional markets; enabling business reforms aimed at improving access to finance; facilitating cross-border trade and investment; and harmonizing policies and regulations. For example, improving agricultural productivity requires scaling up regional solutions, especially to address training, equipment, and technical support, as well as access to finance. Regional approaches are particularly critical for the introduction of irrigation and integration of development interventions between permanently located agriculturalists and migratory pastoralists. The WBG would continue to align its ongoing programs such as the Sahel Regional Pastoralism Support Project (PRAPS) and the Sahel Irrigation initiative to mitigate internal and cross-border conflicts. The objective is to develop regional migration corridors of livestock to reduce the risks associated with competition for water and land resources. In addition, in WAPP, completion of all planned cross-border interconnectors is expected by 2021, making it possible to have a ‘seamless flow’ of electricity between the 14 member countries of WAPP.
Going forward, the physical infrastructure investments would be complemented by building trust in power trade through payment securitization and addressing off-taker risks. The power trade should eventually lead to a regional spot market. In the area of regional market for skills, WBG support would involve features such as increasing the supply of trained skilled labor from technical and vocational institutions to meet the requirements of the evolving job market, allowing mutual recognition of degrees and addressing other barriers to labor market movement (where countries are committed to such labor movement). Within the financial sector, it would involve developing trade finance and financial infrastructure as well as long-term financing through capital market development and deepening the market in areas such as SME finance, agriculture finance, and housing finance. In the telecom/ICT sector, there are opportunities for sub-regional harmonization of telecom regulations and roaming policies, cross-border digital payment integration, e-trade, and examining options for regional data centers and ‘cloud platforms’ and for multi-currency, multi-country settlement platforms for cross-border financial transactions. In the real sectors, the WBG will support the integration of supply chains across countries/sub-regions, including through the emergence of regional champions and capacity-building and product-upgrading solutions. Success would be measured by progress made in laying the foundations of these markets, increase in supply, reduction in cost, and improved quality of supply, all of which should ultimately benefit the end users.
Strategic Priority 3: Scale up access to quality public services and entrepreneurship through complementary regional solutions
In areas such as off-grid energy access and small-scale irrigation, there are economies of scale benefits that are possible by harmonizing standards and regulations and providing regional lines of credit to scale up access. Opportunities would be explored for facilitating greater uptake of improved technologies, including through private sector channels. In areas, which have multiplier regional benefits such as through R&D support, technology adoption, provision of identity systems (ID4D), building institutional capacity, or promoting entrepreneurship, complementary regional solutions would be explored. In parallel, the WBG will contribute to the dynamism of regional entrepreneurship with dedicated disruptive technology solutions and investment funds. Prioritize the introduction of ICT and mechanization to modernize agricultural production and increase its competitiveness.
Strategic Priority 4. Promote collective action to address risks of regional economic contagion, fragility, epidemic, and climate ‘hot spots’
There is a large body of existing WBG operational engagement in this area. Many of the regional priorities in the World Bank’s ACBP18 would be pursued further. As mentioned elsewhere, this area of work would require long-term engagement. The focus going forward would be on deepening the cooperation and collective action efforts, making them more sustainable both institutionally and financially. There are also opportunities for innovation and developing the next generation of regional solutions in complex areas of providing public goods.
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African Development Bank launches first Electricity Regulatory Index for Africa
Stronger regulatory independence required, says new report
Though the majority of African countries have developed relatively robust institutional frameworks for the regulation of their electricity sectors, much work remains in strengthening regulatory independence, says the Electricity Regulatory Index for Africa (ERI) – a crucial new report by the African Development Bank.
The Report, released on the sidelines of the 2018 Africa Energy Forum (AEF) in Mauritius, measures the level of development of regulatory frameworks in 15 African countries and examines their impact on the performance of their respective electricity sectors. ERI also identifies areas in which improvement is most needed in Cameroon, CÔte d’Ivoire, Gambia, Ghana, Kenya, Lesotho, Malawi, Namibia, Nigeria, Senegal, South Africa, Tanzania, Togo, Uganda, and Zimbabwe.
“The main goal with the ERI is to incite key stakeholders in the African power sector to address regulatory performance and the gaps identified in the study,” said Amadou Hott, Vice President, Power, Energy Climate and Green Growth Complex at the African Development Bank.
The ERI is expected to become a benchmarking tool that will track progress made by African countries as they align the regulatory frameworks governing their electricity sectors with international standards and best practices.
The African Forum for Utilities Regulators (AFUR) described the Index as a useful tool for improving electricity regulation and pledged to work with the Bank to sustain the initiative.
Debbie Roets, Executive Secretary of AFUR said: “We are glad that the African Development Bank has indicated that it will produce new, updated Index results on an annual basis, and will seek to encourage more countries to participate in subsequent editions. AFUR will provide the needed support.”
The Index pointed to how the past two decades had witnessed a transformation of the electricity market in Africa following the gradual opening, liberalization, and reform of national electricity markets.
It was observed that regulators have a fundamental role in attracting private investment into national energy and power assets. Investors seek transparency, predictability, and good governance in sectors in which they operate, all of which well-developed regulators are expected to provide.
Periodic evaluation of regulators as practiced in many developed countries is important as it enables early identification of problems or gaps so that corrective actions can be implemented as soon as possible.
“Significant progress has been made in each of the areas covered by the study. However, more efforts are required to facilitate the type of environment in which private sector actors would feel comfortable investing. The African Development Bank will work together with its partners in regional member countries to provide the support, advice and assistance required to align regulation in the energy sector to international best practice,” said Wale Shonibare, the Bank’s Director, Energy Financial Solutions, Policy and Regulation Department.
The Report noted: “On average, well developed electricity regulatory governance systems exist in all fifteen sample countries. However, there is room for improvement with respect to accountability and independence to align with international best practices often necessary to attract future investment into the sector.
“Although many sample countries had established the legal and institutional frameworks for electricity sector regulation, regulators are yet to build an adequate level of capacity and develop appropriate mechanisms to effectively carry out their mandates and make decisions under key aspects of regulatory substance.
“In spite of falling well short of international best practices, regulators in the sample countries have a moderately positive impact in the sector, especially when it comes to measures being instituted to promote energy access and enhance commercial quality of electricity to consumers; however on average, regulators faltered most with respect to instituting cost-reflective tariffs.”
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Africa payments: Insights into African transaction flows (SWIFT)
In 2013, SWIFT published the white paper “Africa Payments: Insights into African Transaction Flows”, which attempted to frame the cross-border banking context in the midst of regional initiatives, international regulatory pressures and the reconfiguration of trade corridors. Supported by some unique market data on payment routes, we identified various trends that summarised transaction flows in Africa at this time and explored the drivers for change. In 2018, we are updating and reviewing this data to explore how transaction banking has changed in Africa over the last five years, what external conditions are driving these changes, and look at possible evolution scenarios that will impact banking in Africa in the years to come.
The data reveals that intra-Africa payments and clearing is increasing in importance, and points to an increase in the use of African currencies for cross-border payments. SWIFT data highlights a significant increase in intra-African commercial payments, with almost 20% of all cross-border commercial payments being credited to an African beneficiary. This indicates that more goods and services are being bought and sold within Africa. This is up from 16.7% in 2013. Intra-African clearing of payments has also increased, from 10.2% in 2013 to 12.3% in 2017. This indicates that an increasing number of payments are being routed through Africa instead of via a clearing bank outside of Africa. While North America remains the main payment route of financial flows from Africa, its dominance is declining. Banks in North America (mainly the United States) now receive 39.5% of all payments sent by Africa, down from 41.7% in 2013.
Use of the US dollar has also decreased as a share of payments originating in Africa from more than 50% in 2013 to 45.1% in 2017. The use of local currencies such as the West African franc and South African rand is increasing. Use of the franc for cross-border payments has overtaken the rand and the British pound, accounting for 7.3% of payments in 2017, up from 4.4% in 2013. The rand has seen a smaller increase in cross-border payments from 6.3% to 7.2%.
Europe’s significance as a clearing and trading partner for Africa is increasing. Commercial flows directed to clients based in Europe have increased from 26.4% in 2013 to 28.6% in 2017. In contrast, SWIFT data suggests that both the British pound and UK clearing banks are losing share of African imports with commercial flows dropping to from 10.4% in 2013 to 9% in 2017 and financial flows from 11.7% to 9.3%. Financial flows do not reflect the magnitude of commercial flows between Africa and the Asia Pacific region. While 21.7% of commercial flows are destined for Asia Pacific, only 5% of financial flows are routed through the region. [Note: the full text of the SWIFT report can be accessed after registration]
Cutting money transfer fees could unlock $15bn for developing countries: here’s how (WEF)
But the cross-border payments industry remains a fragmented legacy sector beset by inefficiencies, long settlement times, where payments can take days to arrive at the destination account, and high transaction fees. Additionally, the payments’ landscape is devoid of meaningful competition. Western Union and the three other largest money transfer operators (MTOs) account for approximately 25% of global remittance volumes. The remaining 75% is processed by thousands of small to mid-size MTOs which are hampered in their ability to scale owing to resource and latency constraints, illiquidity and a growing reluctance from banks to service smaller MTOs due to compliance overheads and moves to reduce the risk of their portfolios. So what is preventing small to midsize MTOs from scaling successfully? ZED Network has identified three primary factors: banking compliance, cash flow restrictions and technology challenges: [The author, Alan Safahi, is CEO of the ZED Network]
Towards an African e-commerce strategy: AU’s Nairobi e-commerce conference (23-26 July, Nairobi)
The main objective of the conference (pdf) is to provide a platform to enhance understanding of the current state of e-commerce in Africa, the challenges and opportunities building on the experience of actors on the ground as well as other regions of the world, and to discuss key elements of a roadmap for the development of a African Strategy of E-commerce with a view to promoting the emergence of African e-commerce champions and ensuring that African countries maximize the opportunities of e-commerce and the digital economy.
AU targets 30 countries to ratify AfCTA by December (New Times)
Trade law, regulation highlights
Dr Mukhisa Kituyi: The costs of trade war (UNCTAD)
Even worse, a global trade war might jeopardize the multilateral trading system itself. It would no doubt result in tariff increases greater than anything we have seen in recent history. UNCTAD research shows that average tariffs could rise from negligible levels to as high as 30% for US exporters and 35% and 40% for EU and Chinese exporters, respectively. So, even if the “elephants” have sufficient economic weight to withstand a trade war, they would not benefit from one. And, of course, developing countries that played no role in starting the conflict would be even less able to afford it. On average, tariffs applied on developing countries’ exports could rise from 3% to 37%. But whereas average tariffs affecting countries like Nigeria and Zambia probably would not go above 10%, those against Mexico could reach as high as 60%. Likewise, countries like Costa Rica, Ethiopia, Sri Lanka, Bangladesh, and Turkey could face average tariffs of 40-50%. [UNCTAD: See below the potential tariff increases by country]
Africa now has its own arbitration association: will disputes be resolved on the continent? (New Times)
President’s Advisory Council on Doing Business in Africa: US Commerce Secretary to lead delegation to Ghana (pdf)
US Secretary of Commerce Wilbur Ross will lead a delegation from the President’s Advisory Council on Doing Business in Africa (PAC-DBIA) on a fact-finding mission to Ghana later this month. Under Secretary of Commerce for International Trade Gilbert Kaplan will head the delegation on stops in Ethiopia, Kenya and Côte D’Ivoire as well as accompany Secretary Ross in Ghana. PAC-DBIA members have prioritized the four markets based on the potential to improve the U.S. trade relationship with each nation. The government of Ethiopia is making significant investments in infrastructure and is open to foreign investment. The government ofKenya is progressive in promoting business and actively seeks more U.S. companies in its power, aviation, healthcare, transportation, and agribusiness sectors. Côte D’Ivoire’s pro-business government seeks more U.S. companies in the country’s transportation and energy sectors. Members selected Ghana due to the country’s stable political environment and pro-market government focused on rail, road, mining, and manufacturing development.
UK’s Trade Commissioner for Africa appointed
International Trade Secretary Dr Liam Fox MP has appointed Ms Emma Wade-Smith OBE as HM Trade Commissioner for Africa. Wade-Smith is a senior diplomat and trade expert of 20 years, and has served in Brussels, Chile, Mexico, Washington and more recently in Africa as DIT’s regional trade director. More than £28 billion of goods and services were traded between the UK and African countries in 2016.
Rwanda: Industrialization and job creation among priorities of the 2018-19 budget
Government expects to finance 67.5% of the 2018-19 budget through domestic resources, 16% through loans and expects 16% to come from grants. Total domestic resources are estimated at FRW 1,645.1 billion, which accounts for 67% of the total budget and this shows an increment of FRW 232.3 billion compared to FRW 1,412.8 billion in the 2017/18 revised budget. [Downloads: Rwanda Budget Framework Paper 2018-2021, Rwanda Budget Speech 2018-2019]
South Africa’s current account deficit widens in Q1 as exports slump (Reuters)
South Africa’s current account deficit widened more than expected in the first quarter to register its largest shortfall in two years as the trade balance swung to a deficit after a steep decline in exports, the central bank said on Thursday. The South African Reserve Bank said in its quarterly bulletin the current account deficit widened to 4.8% of gross domestic product in the first quarter from 2.9% in the fourth quarter of last year. The deficit was the largest since the first quarter of 2016 and wider than the average forecast by economists surveyed by Reuters, who had expected it at 3.8 percent of GDP. The quarterly trade balance swung to a deficit of R25bn ($2bn) from a surplus of R74bn as the value of exports fell sharply, the central bank said. “The value of merchandise exports was affected by both lower export volumes and lower rand prices as the external value of the rand strengthened,” the bank said. [SARB: Full Quarterly Bulletin]
Tanzania: How can we unlock the potential of household enterprises? (World Bank)
Due to the growing importance of non-farm household enterprises, our team conducted a study to understand why household enterprises are not growing and what their major constraints are to productivity gains. We used two methodologies to look into these issues: a qualitative analysis including focus group discussions, key informant interviews, life stories, and a community mapping exercise with 385 individuals from different districts across Tanzania; and a quantitative survey that was carried out to more than 7,400 poor households. The study (pdf) identified four main bottlenecks for household enterprises in Tanzania. Access to finance was the major constraint to starting or growing a household enterprise. The majority of respondents identified it as the biggest constraint to day-to-day operations and an additional 24% identified it as the second largest obstacle. Here are some interesting facts:
The challenges urbanization in West Africa: World Bank Economic Update for Guinea, Mali, Niger
Focusing in particular on the three capitals, Bamako, Niamey and Conakry, the report, titled “The Challenges of Urbanization in West Africa,” considers how the cities could harness and develop their potential for productivity growth and livability. These three cities contribute significantly to the national economy, with Bamako accounting for 34% of Mali’s GDP, and Conakry and Niamey contributing approximately 27% of the GDP of Guinea and Niger. “Despite their importance to the national economy, Bamako, Niamey and Conakry are not true drivers of growth: in the three cities, labor productivity, calculated as gross value added per capita, is low and has not risen in the last fifteen years, in contrast to the average of 15 other sub-Saharan African cities,” said Meskerem Brhane, Task Team Leader of the World Bank urbanization programs in those countries and co-author of the report. Extract (pdf): Owing to their post-colonial legacy, Bamako, Niamey, and Conakry are less chaotic in their urban planning compared to their East African counterparts. This provides them with an opportunity to make early investments in connective infrastructure closely synchronized with land use planning. To achieve this goal, sub-national policy makers will need to build coalitions across jurisdictions and with their national governments while finding ways to expand their sources of revenues. Urban investments are long-lived and path-dependent. The time to act is now.
pdf An assessment of the New Alliance for Food Security and Nutrition: Synthesis report (2.06 MB) (NEPAD)
The report is based on the findings of four separate country case studies carried out in Benin, Burkina Faso, Ghana, and Nigeria (see the annexures). Overall, the findings suggest that, in general, NAFSN has espoused the NEPAD and CAADP values and principles of alignment, inclusivity and mutual accountability, even if there is room for improvement in their implementation. In all participating countries, the initiative helped bring together major players in the food system, especially governments, development partner agencies, farmers associations, and the private sector. Commitments by individual development partners were found to be aligned with country priorities as spelled out in the respective National Agricultural Investment Plans. The review and dialogue processes were among the weakest aspects of NAFSN, as established modalities for accountability and reporting did not allow for full participation of the private sector or broad and sustained engagement among all stakeholders and beneficiary communities. The findings also indicate that stakeholders made real progress with respect to the implementation of commitments that are set out in the various Country Cooperation Frameworks, although many commitments were not fully realized. [The authors: O. Badiane, J. Collins, B. Dimaranan, J. Ulimwengu]
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Rwanda: Industrialization and Job creation among priorities of the 2018-19 Budget
Government will increase spending by FRW 328.2 billion from FRW 2,115.3 billion compared to the 2017/18 revised budget FRW 2,443.5 billion in the 2018/19 fiscal year, the Minister of Finance and Economic Planning has said.
Presenting the 2018-19 National budget to the joint parliamentary session, Dr. Uzziel Ndagijimana, the Minister of Finance and Economic Planning pointed out that generally, economic plans enshrined in the 2018-19 budget as well as medium term will focus on job creation through rapid industrialization to drastically reduce the current high rate of unemployment among the youth hence the theme: “Industrialization for Job Creation and Shared Prosperity”, that was agreed upon by all EAC Finance Ministers to demonstrate the region’s total commitment to job creation.
Resources
Government expects to finance 67.5% of the 2018-19 budget through domestic resources, 16% through loans and expects 16% to come from grants. Total domestic resources are estimated at FRW 1,645.1 billion, which accounts for 67% of the total budget and this shows an increment of FRW 232.3 billion compared to FRW 1,412.8 billion in the 2017/18 revised budget.
Tax revenue collections are projected at FRW 1,351.7 billion, which show an increment of FRW 151.4 over the revised budget figure of FRW 1,200.3 billion. The non-tax revenue is projected at FRW 155.7 billion, which is FRW 17.5 billion higher than the FRW 138.2 billion in the revised 2017/18 budget.
Minister Ndagijimana also mentioned that the total grants are estimated at FRW 396.3 billion compared to FRW 352.9 billion in the revised budget of 2017/18 and the total external loans are estimated at FRW 402.2 billion in 2018/19 compared to FRW 349.7 billion in the 2017/18 revised budget. He reiterated Government’s continued intention to downscale reliance on donor support but noted its importance towards Rwanda’s development plans. He noted: “Government’s objective is to reduce reliance on external donor support especially where grants are concerned. However, this support remains vital for our development.”
Expenditure
Government expenditure policies in fiscal year 2018/19 are guided by NST-1 priorities and objectives while ensuring appropriate allocation to enhance service delivery across sectors. To this end, recurrent expenditure is expected to increase by FRW 135.4 billion from FRW 1,130.7 billion in the revised budget of 2017/18 to FRW 1,226.1 billion in 2018/19 fiscal year.
Development budget and Net Lending is estimated at FRW 1,126.6 billion in 2018/19 from FRW 960.5 billion in the 2017/18 revised budget representing FRW 166.1 billion increase. Domestically financed development projects expenditure is set to increase by FRW 68.3 billion from FRW 481.3 billion in 2017/18 revised budget to FRW 549.6 billion in 2018/19. This increase, the priority is to complete ongoing projects that will promote growth and job creation in the region.
The 2018/19 draft finance law conforms to the 2018/19 – 2020/21 Budget Framework Paper that was presented to Parliament on April 30, 2018 and was amended to reflect the recommended actions by the Parliament as submitted on May 30, 2018.
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AU targets 30 countries to ratify AfCTA by December
December 20 is the target to have at least 30 African countries to have ratified the African Continental Free Trade Area (AfCTA), members of the Senate heard on Tuesday.
Updating the Senators on where Rwanda stands since it ratified the agreement in April, the Minister of Trade and Industry; Vincent Munyeshyaka said that though only 22 countries are required to sign before the agreement comes into force, the target is to have 30.
Rwanda is the current chair of the African Union.
“The threshold is normally 22 countries but we are targeting 30 by December. We know it’s ambitious but are hoping that by end of the July African Heads of State summit, we will have seen some improvements,” he said.
So far, just four countries – Rwanda, Kenya, Ghana and Niger, submitted their instruments of ratification to Treaty to the African Union Secretariat in Addis, Ethiopia.
Munyeshyaka said that to achieve this, he was lobbying other Ministers of trade but there was also support from the African Union Commission and the AfCFTA both which had their lobbying campaigns.
He pointed out that all the concerned institutions were working tirelessly to create a continent that would be viewed as a global competitor on the world market.
“To do that, we have to prioritize some things such as the service sector, beating non-tariff barriers and open borders,” he said.
Several offices like foreign affairs, presidency and others were working tirelessly to see that annexes of the agreement and protocols were ready by July.
“We are working day and night on the annexes, regarding trade and goods, rules and protocols for conflict resolution and others and we are hoping that by July when the Heads of States meet in Mauritius, they can sign them off,” he said.
Fewer countries signed
Munyeshyaka explained to the Senators that bureaucracy and lack of proper collaboration continued to slow most governments’ determination to ratify the agreements.
“Just like us, they have processes that these agreements have to go through for scrutiny and approval. While some governments are keen to expedite the process, there is an issue of collaboration between their institutions and the process has been slowed down by that,” he said.
The Minister in the Office of the President, Judith Uwizeye, said that as of today, the country was working on harmonizing its laws with the agreements.
“We already started the process of harmonizing our laws with the articles in these agreements. Some that we have found contradictory are being tweaked so that we avoid any issues in future,” she said.
She particularly talked about the free movement instrument which she said had 37 articles in total.
“This particular instrument stipulates a non-segregative clause, the requirements for one to live in another country and what it takes to own assets in that country, among others,” she said.
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SWIFT data shows intra-Africa payments clearing and trade is increasing
Use of US dollar declining while West African franc and South African rand increasing
SWIFT has published a new white paper mapping commercial payment flows against financial flows in Africa. The data reveals that intra-Africa payments and clearing is increasing in importance, and points to an increase in the use of African currencies for cross-border payments.
SWIFT data highlights a significant increase in intra-African commercial payments, with almost 20% of all cross-border commercial payments being credited to an African beneficiary. This indicates that more goods and services are being bought and sold within Africa. This is up from 16.7% in 2013. Intra-African clearing of payments has also increased, from 10.2% in 2013 to 12.3% in 2017. This indicates that an increasing number of payments are being routed through Africa instead of via a clearing bank outside of Africa.
While North America remains the main payment route of financial flows from Africa, its dominance is declining. Banks in North America (mainly the United States) now receive 39.5% of all payments sent by Africa, down from 41.7% in 2013. Use of the US dollar has also decreased as a share of payments originating in Africa from more than 50% in 2013 to 45.1% in 2017.
The use of local currencies such as the West African franc and South African rand is increasing. Use of the franc for cross-border payments has overtaken the rand and the British pound, accounting for 7.3% of payments in 2017, up from 4.4% in 2013. The rand has seen a smaller increase in cross-border payments from 6.3% to 7.2%.
Meanwhile, Europe’s significance as a clearing and trading partner for Africa is increasing. Commercial flows directed to clients based in Europe have increased from 26.4% in 2013 to 28.6% in 2017. In contrast, SWIFT data suggests that both the British pound and UK clearing banks are losing share of African imports with commercial flows dropping to from 10.4% in 2013 to 9% in 2017 and financial flows from 11.7% to 9.3%.
Financial flows do not reflect the magnitude of commercial flows between Africa and the Asia Pacific region. While 21.7% of commercial flows are destined for Asia Pacific, only 5% of financial flows are routed through the region.
Since 2013, almost all African regions have experienced a significant drop in the number of foreign correspondent banking relationships. The Maghreb region has seen the largest reduction, of 47.25%, since 2013, while the East African Community is the only region to see an increase in relationships.
The report also identifies several forces that are driving change in cross-border transaction flows. These are re-shaping cross-border banking in Africa and leading to more intra-African trade.
The report opens with a foreword by the African Development Bank and features contributions from the Bill & Melinda Gates Foundation, the South African Reserve Bank, Ecobank, Standard Chartered Bank and BankservAfrica.
Download the White Paper Africa Payments: Insights into African transaction flows on the SWIFT website.
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African Union E-Commerce Conference to take place in Nairobi in July
Towards an African e-commerce strategy
The African Union E-Commerce Conference will take place in Nairobi, Kenya from the 23-25 July 2018. The main objective of this Conference is to provide a platform to enhance understanding of the current state of e-commerce in Africa, the challenges and opportunities building on the experience of actors on the ground as well as other regions of the world, and to discuss key elements of a roadmap for the development of a African Strategy of E-commerce with a view to promoting the emergence of African e-commerce champions and ensuring that African countries maximize the opportunities of e-commerce and the digital economy.
The Specific objectives of this Conference are: 1) Enhance understanding of recent developments in the digital economy, focusing on e-commerce; 2) Share country and regional experience in the area of e-commerce; 3) Explore the merits and scope of using the AfCFTA as a platform for advancing e-commerce and digital trade in Africa; and 4) Discuss and build consensus on the main elements of a roadmap for the development of an African e-commerce strategy.
The main expected outputs of the Conference are: (1) Roadmap for the development of an African e-commerce strategy, which will be recommended for adoption by the relevant policy organs of the African Union; and (2) inputs to inform the development of the Assessing Regional Integration in Africa (ARIA) IX report under preparation by UNECA, which will consider the case for e-commerce and digital trade as a topic for the Phase II negotiations in the AfCFTA.
Background
pdf Agenda 2063: The Africa We Want (333 KB) , envisions Africa as a continent on equal footing with the rest of the world as an information society, an integrated e-economy where every government, business and citizen has access to reliable and affordable ICT services by increasing broadband penetration and providing venture capital to young ICT entrepreneurs and innovators.
ICT innovations and the digitization of economic activities are transforming trade and other social and economic aspects of life at an incredible pace offering new opportunities and opening the doors to several risks and challenges. The OECD defines an e-commerce transaction as the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders. The payment and the ultimate delivery of the goods or services do not have to be conducted online.
In terms of opportunities, the WTO and OECD (2017) report Promoting Trade, Inclusiveness and Connectivity for Sustainable Development identifies several main ones: firstly, e-commerce is associated with reduced transaction costs, shorter customs clearance times and better supply chain management which offers firms the possibility of reaching new markets and new customers, enhanced productivity, increased inclusiveness, and greater consumer choice. From this perspective, e-commerce has the potential to boost exports when the domestic enterprises are able to break into the foreign markets to connect with the international supply chains. This potential is said to be even greater for the Landlocked Developing Countries which face geographical constraints.
In addition, e-commerce can lead to better allocation of resources and improve the competitiveness of businesses in general. Also, e-commerce and digital trade can support entrepreneurship, creativity and innovation and encourage the formalization and growth of micro, small and medium enterprises (MSMEs), especially in developing countries, landlocked developing countries and least developed countries. Moreover, e-commerce can promote the integration of MSMEs into value chains and markets, including by reducing the investment required for a company to become visible in the global market.
Overall it appears that e-commerce has the potential to boost firms and countries’ participation in regional and global trade. This potential is even greater for Least Developed Countries and Landlocked Developing Countries which face additional constraints, including among others location and small size of their markets. E-commerce can help to bridge the distance to international markets for LLDCs particularly in the services sector, as this form of trade is less susceptible to the constraints of being landlocked. In this regard, e-commerce can contribute to the realization of Sustainable Development Goals (SDGs) 17.
From an African perspective, this means that e-commerce has the potential to contribute towards increasing intra-African trade which currently stands at around 18% and therefore help realize the objectives of the pdf Boosting Intra-African Trade Action Plan (928 KB) and most important, of the recently launched African Continental Free Trade Area (AfCFTA), which is one of the flagship projects of Agenda 2063. It can also help boost Africa’s share of global trade, which is currently estimated at less than 3%.
Despite the above potential gains and the fact that e-commerce continues to grow exponentially ($25 trillion in 2015, up from $16 trillion in 2013 according to UNCTAD, 2017), the participation of developing countries, in particular African countries, in e-commerce remains limited although it has been growing recently. McKinsey and Co (2013) estimated e-commerce in the African continent at US$8 billion in 2014 and predicted that it could reach US$75 billion by 2025, with Nigeria as the leader of e-commerce on the continent. McKinsey and Co also show that e-commerce now contributes to more than 1% to the GDP of a number of African countries: Senegal (3%), Kenya (2.9%), Morocco (2.3%), Mozambique (1.6%), Nigeria (1.5%), South Africa (1.4%), and Ghana (1.1%). The top seven are followed closely by Egypt, Tanzania, and Cameroon, where e-commerce contribution to the national GDP is around 1%. Hence, it appears that even in Africa, e-commerce is dominated by a handful of countries and that special consideration should be given to LDCs as well as LLDCs.
The limited participation of the African countries, is attributed to several challenges which were recently summarized by ICTSD (2018) in Bridges Africa, Volume 7, Issues 2, and are additional to existing traditional trade barriers. The limitation factors include among others: inadequate infrastructure and use which continues to perpetuate the digital divide; underdeveloped financial and payment systems; poor ICT literacy, in particular skills related to e-commerce; low purchasing power and consumer confidence; and imperfect national legal systems and policies, in particular in African LLDCs (UNCTAD, 2015), suggesting that a lot remains to be done to achieve a supportive legal environment as well as the requisite infrastructure to effectively use e-commerce. This situation is more exacerbated in the case of African Least Developed Countries and Landlocked Developing Countries, with a few exceptions such as Rwanda.
In addition to the above challenges, there are also risks associated with e-commerce, including inter alia: job losses associated with automation, market concentration leading to reduced competition and monopoly; revenue loss by governments due to the ability for companies to circumvent financial regulations, the competitiveness of African companies and most importantly the risk of a structural gap, which will maintain African countries at the periphery of the new economic system in the 4th industrial revolution era.
Other than the challenges and risks that exist at the national level, there are also regional and continental issues in the case of Africa, which are likely to hinder the development of cross-border e-commerce across Africa. In effect, whilst a number of regional and continental legal frameworks have been established to address some of the e-commerce related issues such as cyber security, personal data protection and the harmonization of cyber legislation in Africa, and that a number of countries have started regional collaboration in some areas of e-commerce, there is presently no comprehensive African e-commerce policy/ strategy or governance regime. These are issues of concern which deserve careful consideration, in particular in the context of the boosting intra-African trade through the Agreement establishing the African Continental Free Trade Area (AfCFTA) which was signed on March 21, 2018 in Kigali, Rwanda by African Heads of State and Government during their X Extraordinary Summit. In this regard, just like in the case of trade in goods and trade in services, the AfCFTA may help achieve the economies scales in the case of e-commerce. For example, a startup or SME making intangible goods such as widgets in Benin or Rwanda, which is presently constrained by the size of its national market, and the level of tariff or non-tariff barriers plus absence/cost of good logistics to reach other markets.
At the international level, discussions on e-commerce at the multilateral level have gained traction since the Second Ministerial Conference of the WTO which adopted a Declaration on Global Electronic Commerce in May 1998 urging the WTO General Council to establish a comprehensive work programme to examine all trade-related issues arising from global e-commerce. However, there is still no mandate to discuss e-commerce at the WTO, even though a group of developed and developing countries issued Joint Ministerial Statements during the 11th WTO Ministerial Conference in Buenos Aires, Argentina, announcing the establishment of a Group to “initiate exploratory work together toward future WTO negotiations on trade related aspects of electronic commerce.” Here also, there is a need for a conversation on the best approach moving forward in light of the recent developments.
It appears from the above that a global digital order is gradually taking shape driven by innovations in ICT. In this context, e-commerce and digital trade is rapidly transforming the world economy; disrupting old business models and replacing them with new ones; shaping the future of labour and transforming industrialization; raising new concerns and challenges; and making it difficult for governments to keep-up the pace with appropriate regulatory and policy frameworks both at the national and regional levels.
In this context, and considering the current African trade and regional integration agenda, which has gained momentum and is progressing smoothly with the recently launched AfCFTA, a comprehensive and holistic African e-commerce strategy, which is practical and geared towards addressing Africa’s unique specificities, appears to be necessary. It will support African countries and the African Private Sector, in particular SMEs, in enhancing their readiness and maximizing their participation in e-commerce and digital trade with a view to further enhancing intra-African trade and facilitating the integration of the continent into the global economy.
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African trade and regional integration event listings:
(i) Underway, in Nairobi: AU experts meeting on the Services Sector Development Programme. The UNECA’s Jamie Macleod: “Key outcomes of these meetings for ECA include identifying where and how best we can target resources to build capacities for the effective negotiation of schedules of commitment in the AfCFTA services protocol”
(ii) The COMESA Connect Industry Dialogue (21-22 June, Kigali) Smart technologies for sustainable businesses will seek to establish collective understanding and strategic focus on the potential of blockchain and other technologies for supporting trade and trade facilitation as well as the other business and industry within the African region and address constraints that affect business competitiveness in the region and promote positive interaction between industry and IT to promote the use of technology and growth of African private sector among others.
(iii) UNECA, Government of Benin experts meeting on the Implications of ECOWAS potential expansion and the AfCFTA (25-26 June, Cotonou). Participants will examine economic implications relating to trade flows and public revenues, identify and discuss the main challenges and stakes for ECOWAS and make recommendations for an economic and socio-economic expansion that is beneficial for the different parties, especially for an effective AfCFTA.
(iv) Zimbabwe Customs Network, Global Economic Governance Africa stakeholder workshop (28 June, Harare): Beitbridge, Chirundu case studies on the linkages to the development of trade corridors and regional value chains in SADC. Enquries: This email address is being protected from spambots. You need JavaScript enabled to view it.
(v) The 6th SACU Summit, in Gaborone (preparatory meetings start on 23 June, the summit on 29 June). The summit will consider progress made on the implementation of the Ministerial Work Programme, which was approved by the SACU Council of Ministers and endorsed by the June 2017 summit.
Tripartite Sectoral Ministerial Committee for Trade, Customs, Finance, Economic Matters and Home/Internal: report of the 7th meeting held in Cape Town
South Africa’s trade and industry minister, Dr Rob Davies, pointed out that most of the RECs have plans on how to advance the regional value chains hence there is need to identify where the comparative advantage lies in terms of industrial development. In addition, he highlighted that many of the AfCFTA Annexes are based on the TFTA Annexes which underscores the importance of the TFTA negotiations. He further urged the TTF to continue attending the AfCFTA negotiations to assist the Member/Partner States in their consultations at the AfCTA negotiations. He urged the need for the Tripartite region to continue fighting for the product specific rules with a view to advancing the regional value chain development.
The Secretary General of COMESA, Mr Sindiso Ngwenya, emphasized that the TFTA has been a building block to the AfCFTA and underscored the need for urgency to conclude the TFTA negotiations with a view to consolidating and preserving the gains made, for the benefit of Tripartite Member/Partner States. The Executive Secretary of UNECA, Dr Vera Songwe, pointed out that the synergies between the TFTA and AfCFTA had already been demonstrated and there is need to agree on how to take it forward. She emphasized the need for a well resourced Tripartite Secretariat with a robust institutional framework and committed that the ECA would provide support where appropriate. She urged the Member/Partner States to advantage of the prevailing political momentum in CFTA to push the Tripartite agenda forward.
On the exchange of tariff offers: The TSMC (i) urged EAC and SACU to finalise their tariff negotiations by December 2018; (ii) urged Egypt and SACU to finalise their tariff negotiations by December 2018; (iii) Urged other Member States to who have not shared their offers to do so by December 2018; (iv) noted that those negotiating groups that have concluded their negotiations will share their Schedules with the TTF when ready for circulation to all Member/Partner States; and (v) directed the TTF to recirculate the negotiating modalities
On the signature and ratification of the TFTA Agreement: TSMC agreed that all Member States to ratify by April 2019.
On the industrial development pillar: The TSMC (i) directed the TTF to recirculate the studies on agro-processing value chains and industrial statistics capacities by the end of June 2018; (ii) urged the TTF to scale up the resource mobilisation effort for implementation of this pillar; and(iii) recommended the establishment of the Tripartite Industrial Development Coordination Unit.
Southern Africa regional report: Assessment of selected trade facilitation measures in five countries (pdf, USAID)
This report is part of an assessment examining the anticipated costs and benefits associated with implementing selected trade facilitation measures in five southern African countries: Botswana, Malawi, Namibia, South Africa, Zambia (pdf links). The report highlights some of the key trade facilitation issues from a regional perspective and summarizes the multi-country concerns expressed in key informant interviews (KIIs) during the five country-level assessments. The first section presents the regional context for trade facilitation in terms of key trade data and the status of trade facilitation indicators for each of the five countries included in the review. It also presents a brief description of the trade facilitation programs being implemented by the three primary RECs in southern Africa, SADC, SACU, and COMESA. The second section presents the key findings and conclusions from the KIIs in the five countries of study about the priority TFMs at the regional level, as well as the related cross-cutting issues and implementation challenges. The third section presents specific recommendations to USAID and other trade facilitation actors and stakeholders in the region. These are a synthesis of many of the recommendations also included in the country assessments.
Recommendations for Tripartite Free Trade Area Member States:
(i) To address the concerns of many KII respondents about the lack of transparency in the application of regional transit procedures and measures, TFTA member states should encourage the development of a regional monitoring and advance notification mechanism among SADC member states. Given the complexity of regional membership, with most countries being members of at least two regional economic configurations, perhaps this agenda can best be tackled as part of the SADC-COMESA-EAC Tripartite negotiations.
(ii) Member states should strengthen the Monitoring and Compliance Mechanism through greater awareness-raising activities, to ensure active participation from the private sector in reporting on barriers encountered. While the removal of barriers largely rests with national governments, the regional economic communities could facilitate the process by providing technical support, arranging discussions between the stakeholders involved, and reporting on progress in a transparent way that enables greater levels of accountability.
(iii) Member states should develop a regional transit and bond guarantee scheme along the major corridors to Beira and Nacala with Mozambique and Zambia. This would lower the risk associated with international transport.
(iv) Donors should coordinate with SADC to facilitate agreement on terms for regional level mutual recognition of AEO status when it is certified by other member states. This intervention should facilitate channels for increased information sharing among agencies in the region. It should also include the development of regional level communication tools to increase the awareness of private sector actors on the incentives for uptake of preferred trader schemes.
(v) Recognizing that ICT will remain an important component of trade facilitation as technology evolves, member states should invest more in the ICT infrastructure to avoid being left behind.
(vi) Member states should ensure that the focus of the infrastructure pillar under the tripartite process includes dialogue on the effective and efficient management of physical transport infrastructure (not just a focus on the development of new projects).
(vii) Member states should constantly monitor the implementation of the Comprehensive Tripartite Trade and Transport Facilitation Program under the Tripartite Free Trade Area. [Download the country reports: Botswana, Namibia, Zambia, South Africa, Malawi]
Swaziland and South Africa successfully establish connectivity and data exchange (WCO)
Under the framework of the WCO-SACU Connect Project, a two-day session (21-22 May, Pretoria) gathered IT experts from the Swaziland Revenue Authority, the South African Revenue Service and external consultants supporting Swaziland in developing their interfacing capabilities. The session aimed at establishing connectivity and data exchange and built on lessons learned from recent pilots and tests. SARS and SRA are now ready to share their experience in establishing customs systems interconnectivity and data exchange, so that it can be replicated regionally and globally.
Zambia launches strategy to boost exports to US (Xinhua)
The National Response Strategy to the AGOA has been developed by the Ministry of Commerce, Trade and Industry with the support from the USAID Southern Africa Trade and Investment Hub as part of efforts to enhance the utilization of trade preferences under the initiative. The strategy will run from 2018 to 2025 in order to synchronize it with the expiry date of the current extension period of AGOA. Christopher Yaluma, Minister of Commerce, Trade and Industry, said during the launch of the strategy that despite the market preference opportunities provided by AGOA, Zambia has failed to take advantage of the offer due to a number of challenges.
Closing the potential-performance divide in Ugandan agriculture
Agriculture accounts for 70% of employment, overwhelmingly on small farms; occupies half of all land area, and provides half of all exports and one-quarter of GDP in Uganda. It is considered a leading sector for future economic growth and economic inclusion in the current National Development Plan. Yet despite having very favorable natural resource and climate conditions for production of a wide variety of crops and livestock, average Total Factor Productivity growth - the difference between aggregate output growth and the growth of all inputs and factors of production that produced it - in Ugandan agriculture has been negative for the last two decades. This suggests that on balance the country is now getting less for equal or greater effort. National agricultural output has grown at only 2% per annum over the last five years, compared to agricultural output growth of 3 to 5% in other EAC members and 3.3% per annum growth in Uganda’s population over the same period. [AfDB: Mozambique agricultural value chain and youth empowerment project – ESMP summary]
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AU services experts meet to develop services sector development program in the context of the AfCFTA
The Department of Trade and Industry of the African Union Commission is organizing from 18-22 June 2018 in Nairobi, the AU Experts Meeting on the Services Sector Development Program.
The main objective of the workshop is to brainstorm with Services Experts from Regional Economic Communities (RECs) and the Private Sector on strategies to develop services trade sectors in order to support inclusive growth and development. The workshop is designed to guide the identification of specific flanking measures within the framework of the SSDP that would assist with trade in services liberalization.
Representing the Economic Commission for Africa, Mr. Jamie Alexander Macleod indicated that services are critical, not just because they represent over half of the GDP of the African continent, but because they also play a vital facilitative role in lubricating the development of the industrial sector, and in turn the structural transformation of Africa's economies.
“Key outcomes of these meetings for ECA include identifying where and how best we can target resources to build capacities for the effective negotiation of schedules of commitment in the AfCFTA services protocol,” he said.
He pointed out that trade in services in the AfCFTA presents tremendous value for African countries, but also tends to be a relatively difficult area of trade negotiations. “For this reason, as we move forward in the AfCFTA services negotiations, this week's workshop is particularly timely and relevant.”
In delivering his welcome address on behalf of the Commissioner for Trade and Industry, Mr. Nadir Merah, Head of Trade Division of the African Union Commission, pointed out that the workshop was taking place against the background of the rise in the contribution of services to most African economies, while agriculture and manufacturing remain an important contribution to their GDP. He indicated that the share of the services sector has continued to growth over the past years.
Mr. Merah mentioned that the role and share of the services sector is expected to grow even further, in particular with the digitization of the economy, which, he said, has led to the creation of new business models and the shift from traditional to innovative services such as telemedicine and e-learning.
Before he concluded, the Head of Trade Division recalled the objectives of the workshop and reminded participants that developing and implementing a robust AU Services Sector Development Programme will contribute immensely towards promoting growth, trade diversification, boosting intra-African trade and help achieve Africa’s structural transformation.
The Meeting is also being attended by the United Nations Economic Commission for Africa (UNECA), the United Nations Conference on Trade and Development (UNCTAD), the International Organization for Migration (IOM), the Pan African Chamber of Commerce and Industry (PACCI), Independent Services Consultants, Academics and Researchers, as well as Representatives of Services Sector Federations and Associations from Africa.