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Developing an inclusive South Africa: World Bank Group releases its Systematic Country Diagnostic
South Africa can achieve more inclusive and sustainable development with coordinated reforms across a broad range of areas that maximize development impact and address constraints to reduction in poverty and inequality, according to the World Bank Group’s new Systematic Country Diagnostic for South Africa, released on 14 May 2018.
Prepared in close consultation with government and other key stakeholders, this Diagnostic, An Incomplete Transition: Overcoming the Legacy of Exclusion in South Africa, looks at the interplay between history, social, economic, financial, fiscal and environmental issues, and their impact on poverty and inequality. It acknowledges the progress made since 1994 and suggests a selected range of policy options to eliminate poverty and boost shared prosperity.
“The Government of South Africa has done much to address its most pressing development challenges, the triple challenge of high unemployment, poverty and inequality, but much still remains to be done,” said Paul Noumba Um, World Bank Country Director for South Africa. “As the World Bank we stand ready to support South Africa in its efforts to tackle the triple challenge.”
The SCD places special emphasis to the need for large-scale job creation. The diagnostic says that while South Africa underwent a successful and peaceful political transition in 1994, too many South African remain excluded from participating in the economy, rendering the transition incomplete. The persistent legacy of exclusion makes it difficult to build the post-apartheid social contract, the diagnostic says, resulting in contestation over resources and undermining investment and economic growth as well as financial, fiscal, and external sustainability. In addition, climate change poses shocks that further undermine the country’s its sustainability, according to the SCD.
“With this Diagnostic, the World Bank Group has identified five binding constraints to addressing the legacy of exclusion which persist despite South Africa’s progress in granting political and civil rights to its citizens and in increasing access to basic services and social assistance,” said Paul Noumba Um.
The five binding constraints and policy recommendations are:
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Insufficient skills: This Diagnostic finds that due to continued historical disadvantage entrenched in the education system, insufficient skills, are among the most binding constraints to fighting unemployment, poverty and inequality. Identified policy interventions focus on children and young adults as the most critical. It recommends focusing on children and young adults as the most critical. Policy options expected to have the most impact include strengthening nutrition and early years development, training school teachers, expanding affordable university access to poor students, reforming the Technical and Vocational Education and Training (TVET) system, and active labor market policies.
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Skewed distribution of land and productive assets and weak property rights, is the second binding constraint. The SCD suggests reforms that can strengthen the asset base of the poor, while also increasing property security for investors and strengthening capacity for land reform.
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Low competition and low integration in global and regional value chains. The Diagnostic proposes implementing sustainable mechanisms to embed competition principles in policy formulation. Reform of transport-related state-owned enterprises, including greater private sector participation; attracting foreign direct investment, linking small-medium enterprises (SMEs) with lead firms to connect them with international value chains, are among suggested policies.
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Limited or expensive connectivity and under-serviced historically disadvantaged settlements: Policy options include fostering strategic densification of cities and diversifications of land use, as well as expanding basic services in underserviced settlements. Other interventions are better integrated transport planning and land use, as well as strengthening regulatory framework in support of competition in the minibus taxi sector.
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Climate shocks: Disruptions to the economy and jobs as South Africa transitions to a low-carbon economy will need to be mitigated carefully, the Diagnostic suggests. Climate change also puts further pressure on the country’s scarce water resources which require long-term planning and strategic adaptation.
“It would be easy to assume that addressing South Africa’s biggest constraints is the responsibility of government alone. That would be a mistake. We hope all stakeholders can embrace the contribution business can make in tackling these issues. The private sector has a huge role to play in creating jobs, growth, and a more equal economy,” said Saleem Karimjee, International Finance Corporation Country Manager for Southern Africa.
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Ethiopia Economic Update: The inescapable manufacturing-services nexus
Services & Manufacturing Linkages: Exploring the Potential of Distribution Services
This Ethiopia Economic Update focuses on the connection between services and manufacturing, to help advance the government’s export development agenda. Although the importance of services for development is widely recognized, the role of services, tradable and non-tradable, in growth and structural transformation is generally less understood.
Services not only offer promising opportunities for export diversification, but also are key inputs in the production of most goods, for export and domestic consumption. Services imports are equally important, as they can improve the availability and quality of services through increased competition, better technologies, and access to foreign capital. This, in turn, can have a strong impact on the domestic business environment and lead to productivity increases through broader access to essential services inputs.
A dynamic services sector is a necessary condition for manufacturing and agroprocessing to thrive. Access to quality services as inputs to production is important for manufacturing performance. Lack of quality services as inputs can impede the emergence of a competitive manufacturing sector, which matters for the quality and value addition of goods. Manufacturing and agroprocessing cannot be competitive without accessing good quality and varied inputs from the services sectors. At this stage, however, Ethiopia seems to lack adequate access to necessary services inputs, such as finance, electricity, and water, as evidenced by several studies.
The objective of this Economic Update is to invigorate and deepen the discussion about the role of services as tradable activities, and as intermediate inputs in Ethiopia. The analysis is conducted in the context of the debate on growth and structural transformation in Ethiopia. World Bank (2015) shows that Ethiopia did not follow the conventional path of economic development through export-oriented industrialization, with workers moving from agriculture to high-productivity manufacturing.
The analysis contrasted this “premature deindustrialization,” characterized by a shift of labor from agriculture to services, with the potential of services becoming the new growth escalator for Ethiopia. The report concluded that rather than following one approach or another, Ethiopia would need to move forward across all sectors, focusing on agricultural productivity improvements, manufacturing growth to support the strategy of industrialization, and development of services.
At the government’s request, emphasis will be placed on distribution services, with individual case studies on the role of distribution services as inputs in the dairy, teff, sesame, and textiles value chains complementing the analysis.
Setting the Stage: Services in Ethiopia’s Economy
Services are a large and dynamic sector, but manufacturing remains a relatively small and stagnant part of Ethiopia’s economy. As shown in World Bank (2015), “Ethiopia’s Great Run,” the services sector was one of the driving forces behind the country’s growth acceleration. Recent data confirm that services continue to contribute considerably to economic growth and structural change. Services remain not only the largest sector in economic output, accounting for 41 percent of GDP in 2016, they also accounted for about 50 percent of economic growth over the past decade.
Over the past years, Ethiopia’s output more than tripled in real terms, taking over agriculture as the sector contributing the most to GDP.18 Since 2005, the sectoral drivers of growth have shifted further toward services, and more recently, industry. However, as noted in World Bank (2015), the recent rise of industry is due to a construction boom rather than being driven by a rise in the manufacturing sector, which has been largely stagnant at about 4 percent of GDP.
Although the structure of output shifted from agriculture toward services, the corresponding employment shift was modest. Despite the shift of output from agriculture to services, agriculture continued to dominate employment, although its employment share declined from 80.2 to 77.3 percent between 2005 and 2013. Although workers moved mainly into services (1.8 percentage points), Ethiopia’s services sector still absorbs only a small share of the population. In high-income countries, where services tend to explain the largest share of GDP, compared with agriculture and manufacturing, services employ 74 percent of the workforce on average (40 percent in upper-middle-income countries and 33 percent in lower-middle-income countries).
By contrast, in Ethiopia, in 2005 the services sector employed only 14.7 percent of the workforce even if it accounted for about 40 percent of value added,and in 2013 it was estimated to employ about 20 percent of the workforce. This share lies significantly below the average for countries at similar levels of development with a similar share of services in GDP, and is lower than all comparators.
Fast labor productivity growth in services may explain the gap between the composition of employment and output changes. Labor productivity in most services grew much faster than in agriculture and manufacturing, pointing once again to the dynamism of services. Labor productivity levels are the highest in sectors such as distribution (commerce), finance, utilities, mining, and transport, and lowest in agriculture and manufacturing. For instance, labor productivity in distribution was twice as high as in manufacturing and construction.
Distribution (or commerce), other services, and the public sector are the most important services subsectors for services output and employment in Ethiopia. These three sectors account jointly for 85 percent of sector value added and 92 percent of services jobs. Specifically, each sector accounts for roughly a half, a quarter, and a fifth, respectively, of value added and jobs in the services sector.
The remaining services sectors are transport (10 percent of services output and 6 percent of services jobs) and finance (5 percent of services output and 2 percent of services jobs). Output shares have hardly changed over time, although the employment shares have increased in “other services” and public services and declined in commerce.
A striking feature of the Ethiopian services sector is its significant role as an exporting branch of the economy. Not only did services exports account for more than 50 percent of Ethiopia’s total exports between 2005 and 2015, but the share of services exports in the sector’s output (fluctuating between 17 and 26 percent over the past decade) was comparable to the export-to- output ratio of Ethiopia’s traditional export products.
For example, Taffesse and Ferede (2004) reveal that in 2000 the “other services” sector’s exports-to-output ratio was marginally higher than that of the “traditional agricultural exportables” sector, which includes tea, flowers, fruits, and vegetables. Furthermore, despite relatively underdeveloped infrastructure, Ethiopia’s services trade has registered dynamic growth rates over the past 10 years. Recent data reveal a compound annual growth rate for services exports of 16 percent over 2011-13.
Services exports and imports are higher than expected from an average country at Ethiopia’s level of development. A cross-country regression based on the International Monetary Fund Balance of Payments Statistics shows a positive picture, indicating that Ethiopia’s services exports were slightly higher than expected for an average country at its level of development.
It is important to point out that although exports of services are critical to the efficient functioning of an economy, services imports are equally important. Imported services, especially from developed countries, often enhance the total factor productivity of domestic firms. Ethiopia seems to be taking advantage of cheaper and higher quality services from abroad. Ethiopia’s services imports are again higher than what would be expected for a country at its level of development.
Ethiopia’s exports and imports are concentrated heavily in traditional services activities; the country’s modern services exports remain among the lowest of its comparators). “Modern services” include communication, banking, insurance, business, and remote access services; transcription of medical records; call centers; and education.
These services differ from “traditional services,” such as transport or travel, which demand face-to-face interaction. In addition to being important inputs into production, modern services exhibit higher productivity and generate high-skilled and better-paid jobs. However, many modern services sectors have relatively low employment intensity and require higher educational levels.
Ethiopia’s exports and imports of traditional services as a share of GDP reached 7 percent in 2010-12, significantly overperforming comparator countries (except Tanzania and Kenya) and other countries at a similar level of development. Instead, Ethiopia significantly underperforms in modern services exports and imports, which measured close to 2 percent of GDP in 2010-12.
The expansion of Ethiopia’s services exports was mainly driven by transport and travel. Jointly, they accounted for 90 percent of total services exports in 2012, up from 75 percent in 2002. This is attributed to Ethiopian Airlines, which is Ethiopia’s largest export earner (three times as big as coffee) and accounts for 60 percent of Ethiopia’s services sector.
Ethiopia’s services export structure is very similar to that of Zambia or Kenya, with high shares of transport and travel. It contrasts with that of Korea, a substantially more developed economy, where, even if transport is one of the largest subsectors, modern services such as insurance play an important role. Modern services exports have been growing slower and inconsistently for some sectors, including financial and other business services. China and Korea, as well as Tanzania and Uganda, have been successful in exporting other business services.
Although important, the contributions of services to GDP and gross trade data ignore the links that services have with other sectors of the economy. Indicators such as forward and backward linkages, gross exports, direct value-added exports, and total value-added exports can be used to assess the role of services in the domestic economy and in relation to international trade.
Linkages exist primarily with traditional rather than modern services, with distribution services, such as wholesale and retail activities, seemingly the most important services inputs for manufacturing production in Ethiopia. The structure of services-manufacturing linkages in Ethiopia’s domestic economy is very similar to that observed in its exports. The following key findings emerge from the linkages analysis:
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The most important services inputs for manufacturing production in 2011 were distribution and trade, transport, and business and information and communications technology (ICT). These three sectors combined accounted for more than 90 percent of all intermediate services inputs for manufacturing production; 60 percent is from distribution and trade services alone.
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Although, in general, manufacturing in Ethiopia uses few modern services as inputs, business and ICT services are an exception. Business and ICT services represent about 20 percent of total services inputs in manufacturing in Ethiopia. Exporting firms appear to be far ahead of non-exporting firms in adopting modern business processes.
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The linkages between financial services and manufacturing are particularly weak. Access to finance has been flagged as a serious constraint in Ethiopia. In 2011, financial services represented only about 3 percent of total services inputs in manufacturing. The percentage of investment that is financed through firms’ own funds, or the ratio of collateral to the total loan, is very high in Ethiopia, suggesting difficulties in access to finance. This is not an issue of demand, but one of supply; the Government of Ethiopia operates a rationing scheme whereby credit is allocated to the highest need (public investment, export priority sector, critical imports, and others). The negative real interest rate leads to excess demand and quantity rationing, such that many firms are completely excluded from access to finance.
Distribution services are the most important input for 11 of 14 manufacturing sectors. Key findings based on a disaggregated analysis by manufacturing sector reveal that distribution services continue to be the most important services input for nearly all of Ethiopia’s manufacturing activities except paper and publishing and beverages and tobacco). When considering all inputs (not just services), distribution services are the most important input for 11 of 14 manufacturing sectors, and in nine manufacturing sectors distribution services contribute more value added than the manufacturing sector directly contributes.
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AUC holding workshop series to develop next phase of PIDA
The African Union Commission is organizing a series of regional workshops in the continent to prepare and deliver the next phase of the Programme for Infrastructure Development in Africa (PIDA) Priority Action Plan (PAP) for 2020-2030.
The Arab and the Maghreb Union (AMU/UMA) and the Intergovernmental Authority on Development (IGAD) were the first of the eight Regional Economic Communities to kick-start a continental consultative process from 8 to 10 May in Tunis, Tunisia to work together on a 60-question face-to-face consultation in a bid to assess the progress achieved so far in PIDA and highlight the strengths and success stories as well as the weaknesses of the processes and instruments put in place for achieving the 2020 targets set in the PIDA-PAP.
Delivering his opening remarks, the Secretary-General of the Arab Maghreb Union, Dr. Taieb Baccouche referred to the fundamental role of Regional Economic Organizations in the continent to ensure the success of economic integration, infrastructure development and coordination of development policies and programmes, namely PIDA.
“At the Maghreb level,” the Secretary-General stated, “member States of the Arab Maghreb Union had made enormous investments in infrastructure over the past few years.”
On his part, the Director for Economic Cooperation at the IGAD, Mr. Elsadig Abdalla stated the IGAD member states have invested heavily, estimated at US$7 billion, in infrastructure linking the capitals of the region, including railway lines, power lines and roads. He confirmed IGAD’s support and full involvement in the formulation of the next phase of PIDA.
Speaking on behalf of the African Union Commission, Mr. Yagouba Traoré, PIDA Data Analyst, explained that AU member States have been concentrating on ensuring the delivery of the short-term priorities and objectives of PIDA referred to as the PIDA Priority Action Plans (PIDA PAP), which comprises 51 programmes and projects.
“Due to strong political advocacy and sensitization work of the AUC and NEPAD, 34 programmes are now included in national development plans of 42 AU Member States,” Mr. Traoré noted. He explained that this reinforced political commitment is a key reason for the improvement in implementation of the first phase of PIDA-PAP.
Mr. Traoré made reference to the key deliverables that include the PIDA Mid-Term Review and the development of the second Phase of the PIDA Priority Action Plan, which is imminent.
He went on to say that one crucial lesson learnt for the development process of the next phase of PIDA-PAP is to closely engage not only with the RECs, but also with AU Member States in order to ensure ownership of the strategic framework and the selected priority projects.
Mr. Traoré explained that, as the first in a series of consultations, the Tunis meeting was to “set the tone and pace”. “We look forward to the fruitful discussions with such a diverse list of participants, both in terms of geography and areas of expertise,” Mr. Traoré concluded.
Also speaking during the opening session on behalf of the NEPAD Agency, Mr. George Murumba, Monitoring and Evaluation Expert, stated that the meeting will yield project data that will update where the UMA and IGAD regions are with regards to PIDA, and lay the ground for the PIDA Mid-Term Review.
“But most importantly,” Mr. Murumba uttered, “the meeting will make necessary formative thoughts and recommendations on the process and selection criteria that will be integrated in the development of the next phase of the PIDA PAP 2020 and beyond on how to select national and regional priority projects that are aligned and can be sustained.”
He concluded by stating that this meeting marks the early steps of the process of developing the next phase of the PIDA PAP strategic framework. “Through the usual joint stewardship, we hope that we can use what we have learned to get the PIDA programme to be a success,” Mr. Murumba opined.
The overall objective of the workshop was to continue to engage the Regional Economic Communities in PIDA, to exchange national experiences at the regional level, and input was sought from workshop participants in a form of a questionnaire on the next phase of PIDA.
The Consultation is a three-day meeting full of reports, presentations, discussions on a questionnaire that brought together more than 30 representatives of the AMU/UMA and IGAD, national stakeholders from Tunisia, Morocco, Mauritania, South Sudan, Uganda and Libya and experts from the African Union Commission and the NEPAD Agency.
The consultation in Tunis is expected to be followed by consultations in Nairobi, South Africa, Tanzania and Ghana ahead of a continental presentation on the results in October 2018.
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tralac’s Daily News Selection
tralac Intra-African trade analysis, in the news: Namibia’s exports to Africa at N$24,5b
The Conference of African Ministers of Finance, Planning and Economic Development ended today in Addis Ababa. Profiled perspectives on AfCFTA implementation from Monday’s sessions:
Stephen Karingi: E-commerce is also being mooted as a possible additional topic; Pan-African Investment Code provides basis for investment chapter of AfCFTA.
Donald Kaberuka: “For the AfCFTA we need to get it out of the high level conference halls to the people at all levels. This is critical to the success of this historic enterprise. Part of the problem is that we do not mobilize the African citizenry enough. We can’t afford to slide back. It is sincerely my hope that every country in this room should make it a solemn pledge that the AU, the only continental political instrument we have and need, should be a top priority.”
ACBF: Insufficient capacities among AfCFTA implementers could pose a real threat to African trade ambitions as only 25 out of some 42 treaties and agreements signed by the OAU and the AU between 1963 and 2014 have been ratified so far, possibly due to the lack of national capacities to facilitate their ratification and implementation.
Emmanuel Nnadozie: “Ratification of the AfCFTA is only the beginning. To make sure countries benefit from the maximum outcomes, it means that implementation will have to be accelerated through a strong strategy”
pdf African Statistical Yearbook 2018 (5.14 MB)
The African Statistical Yearbook (ASYB) 2018 is the tenth edition jointly produced by the AfDB, the AUC and the UNECA. As our collective efforts to build the capacity of national statistical systems bear fruit, we are able to use more national data for the country tables, in some cases even to source data directly from online dissemination facilities of national statistical offices - as the custodians of countries’ official statistics and coordinators of the National Statistical Systems. Invariably, there are some data sets that have to be sourced from international organizations that have been designated to compile comparable statistics on specific themes for the whole world, including Africa. Still it is important that such series are confirmed by the countries so that any variations resulting, for instance from methodological differences, are reconciled before compiling the final figures in the ASYB. We have therefore continued to emphasize the importance of involving our member states in the validation process. [Related: AfDB Statistics Pocketbook 2018, Compendium of Statistics on AfDB Group Operations – 2018]
Mauritius hosts WTO Regional Trade Policy Course for African delegates (GoM)
Kenya trade policy updates:
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Kenya rejects China-EAC trade pact. Kenya will not sign a free trade agreement that China has been negotiating with EAC partner States since 2016, Trade principal secretary Chris Kiptoo has said. Mr Kiptoo, Monday, said the decision, which could trigger diplomatic unease between Nairobi and Beijing, is intended to protect Kenya’s nascent manufacturing sector from being over-run by China’s cheaper and more efficient producers. “China already accounts for 25% of Kenya’s import bill under the current common external tariff structure of zero per cent, 10% and 25% for raw materials, intermediate goods and final goods respectively. This means that China is likely to get even a larger share of Kenya’s market once we enter into a free trade arrangement. China accounts for less than two per cent of our exports currently. An FTA with China might improve our export share but not significantly. A preferential trade agreement with China is what we prefer…an AGOA type of trade.”
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Kenya mulls incentives to boost exports. Peter Biwott, CEO of the Export Promotion Council, told a media briefing that the growth of exports has been declining in the past five years. “In order to reverse the trend of slowing growth of export earnings, we shall soon roll out incentives to enable local producers to penetrate international markets,” Biwott said during a trade forum organized by EPC. Biwott said that the incentives include the formation of export fund, Export Import Bank as well as export guarantee schemes. Current incentives for manufacturers include the Export Processing Zones as well as manufacturing under bond. According to the export agency, the incentives in place are not sufficient to enable exports to grow at the desired pace. Biwott said the incentives will enable small and medium enterprises to play a role in the export trade.
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Kenya warns Tanzania in sweets tax row. Tanzanian authorities have been given up to the end of the month to visit the Kenyan firms to find out if imported industrial sugar is being used in the products at the centre of the trade spat which remains unresolved since March. Dar slapped a 25% import duty on Kenyan firms in confectionery business, citing use of imported zero-rated industrial sugar in the goods. “Tanzania Verification Mission to visit Kenya on use of duty free sugar imports on confectioneries to be completed in two weeks (May 31, 2018). Failure to adhere will result in implementation of retaliatory measures,” said the report of a presidential roundtable. All manufacturers (have been) requested to comply and co-operate with the Tanzania Verification Mission.”
Uganda Economic Update: options for raising more domestic revenues (World Bank)
In the special section of the Update (pdf), the report analyses how Uganda could raise more domestic revenues to support its development. Uganda’s tax system is one of the most modern in the region, but revenue collections, at 14 percent of GDP, are low, and way below its tax potential. Tax avoidance and evasion, partly resulting from generous tax exemptions to investors, weak tax administration, and a large informal sector (now at 80%), pose challenges to increasing revenues. Up to 5% of GDP is lost annually in tax leakages. Personal income tax contributes roughly 18% of GDP compared to up to 40% in developed countries. VAT collections amount to 4% of GDP, but would rise to 6% if there were no exemptions.
South Africa: Industrial policy action plan 2018/19 – 2020/21 (dti)
African integration and industrial development (extracts, p. 85 onwards): At over R300bn, the rest of Africa (RoA) now represents 26.2% of South Africa’s total goods exports; marginally behind exports to Asia. The significant difference, however, is that exports to Africa comprise a high percentage (over 50%) of finished and intermediate products. If one includes trade in services (which will be proportionally higher for Africa than other regional trading blocs) the African region is arguably South Africa’s most important regional market. The regional trading relationship is, however, highly skewed in South Africa’s favour (at an approximate ratio of 3:1) with South African imports (of just over R100 billion) being mostly composed of raw materials, particularly oil. This has led to increasing concern in many countries that South African imports have had a detrimental impact on small and micro players, who are being squeezed out of their domestic market positions while big South African firms do little to invest in skills and local capacity-building.
Pointers: As indicated in Figure 2, the most important RoA export markets for South Africa are Botswana and Namibia, which are part of SACU – followed by Mozambique, Zambia and Zimbabwe. In total these countries absorb nearly 65% of total exports to the RoA. All these markets (except perhaps Namibia) are still heavily dependent on agricultural or mineral commodities and are therefore exposed to risk when markets turn. Figure 3 shows the dramatic rise in the importance of SADC as a regional bloc relative to the other blocs in West, North, Central, East and the Indian Ocean islands. The strategic question moving ahead is whether this trend will continue or whether opportunities are now saturated, and better growth prospects could be found in the other blocs. The challenge is that while exports are still rising to SADC countries, market share in several areas such as capital goods is now in decline, with increasing competition from Asian exporters in particular. Figures 6 and 7 indicate where the majority of the SA outward investment projects have been taking place [in Africa], and in which major sectors. [Rob Davies instructs Standards Bureau board to fast-track turnaround strategy]
2018 International Arbitration Survey: the evolution of international arbitration
International arbitration remains the preferred form of global dispute resolution for cross-border commercial disputes. London and Paris are still the most preferred seats, and the leading Asian hubs cement their positions in the top tiers of arbitral centres. The 2018 International Arbitration Survey (pdf) conducted by the School of International Arbitration, Queen Mary University of London, is the fourth survey carried out in partnership with White & Case. A pointer: Respondents believe that the use of international arbitration is likely to increase in the Energy, Construction/Infrastructure, Technology, and Banking and Finance sectors.
Seeking the best forum for regional trade agreement disputes (ICTSD)
Many proposals have been put forward to address the problematic nature of dispute settlement mechanisms found in regional trade agreements. This piece discusses two of them: using dispute settlement mechanisms under mega-regional agreements and resorting to existing arbitration and investment tribunals. The author argues that these proposals will amplify rather than solve existing problems, and concludes by suggesting that the World Trade Organization’s dispute settlement mechanism is the best forum for regional disputes. [The author: Henry Gao]
The ILO’s World Employment and Social Outlook 2018: greening with jobs
Its forecast that 24 million new posts “will be created globally by 2030”, contains the caveat that “the right policies to promote a greener economy” must also be in place for this to happen, along with better social safety nets for workers. The ILO report predicts that the transition to a green economy will also lead to the loss of six million jobs in industries that are heavily reliant on carbon-based production. ILO Deputy Director-General, Deborah Greenfield, insisted in a statement that the green economy “can enable millions more people to overcome poverty and deliver improved livelihoods for this and future generations”. But she warned that jobs also “rely heavily on a healthy environment”, something that is at risk from rising global temperatures which ILO believes will lead to a two per cent global loss in hours worked by 2030. “Most sectors” of the economy will benefit - out of 163 analysed in total, according to ILO - but 14 will face losses of more than 10,000 jobs worldwide. Two sectors, namely petroleum extraction and refining, are set to see job losses of one million or more.
The IMF’s new Global Debt Database: a note on methodology and sources
This paper describes the compilation of the Global Debt Database, a cutting-edge dataset covering private and public debt for virtually the entire world (190 countries) dating back to the 1950s. The GDD is the result of a multiyear investigative process that started with the October 2016 Fiscal Monitor, which pioneered the expansion of private debt series to a global sample. It differs from existing datasets in three major ways:
Today’s Quick Links African integration bodes well for China-Africa trade and investment cooperation: Chinese envoy World Bank identifies relevance of Nigeria’s Economic Growth, Recovery Plan to regional integration Kenya, Rwanda, Tanzania, Uganda: briefing notes on country, regional analysis of youth demographics East African countries seek to promote effective electronic waste management IGAD Drought Disaster Resilience and Sustainability Initiative communiqué Liberia’s delegation reports to ECOWAS Parliament Nigerian seaports are the least efficient in West Africa OECD roundtable (6 June): Implications of e-commerce for competition policy UNCTAD: Rapid technological change threatens to outpace public policy World Bank: Using satellite imagery to revolutionize creation of tax maps and local revenue collection |
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New IPAP to help South African government raise the bar
Trade and Industry Minister, Dr Rob Davies, says the department will use the lessons learned over the past few years as a game changer for the Industrial Policy Action Plan (IPAP).
This will help government in its bid to reindustrialise the economy and double exports.
Minister Davies on Monday briefed the media on the launch of the 10th iteration of IPAP at the Imbizo Centre in Parliament. He used the briefing to highlight the challenges and successes of IPAP 2018/19, which is the 10th iteration of a rolling annual action plan.
“Under the promising conditions that we see lying ahead, we expect to continue to draw on these lessons, build on the platform of this first decade of IPAP and raise the game...
“This is the basis of the new IPAP. The new IPAP focuses on transversal and also specific sectorial programmes,” he said.
The Minister said IPAP was first launched just after the global economic meltdown, where South Africa’s economy lost about one million jobs amid continuous threats of deindustrialisation globally.
He said what IPAP did was to reindustrialise the economy and also helped the country to survive the headwinds that came with the global meltdown, effects of which can still be felt today.
Successes under government industrial policy plan
Minister Davies spent some time unpacking a Legacy Review, which provides a high level summary of the achievements of industrial policy over nine years.
He said under the sectorial support, the automotive sector, which contributes 33% to manufacturing GDP and about 6% to the overall GDP produces approximately 600 000 vehicles and supports 113 000 jobs annually.
Exports have doubled over the review period, which has also seen R45 billion worth of investment by the majority of the world’s leading global vehicle manufacturers.
The clothing, textiles, leather and footwear sector, which currently contributes 8% to the manufacturing GDP and 2.9% to the overall GDP, is one of the sectors that suffered the most during the economic meltdown. With the conditional support measures offered under the Clothing and Textile Competitiveness Programme, the sector now employs 95 000 workers.
Minister Davies said similar successes were recorded in other sectors, including metal fabrication, capital and rail transport equipment sector; mining capital equipment sector; agro-processing; plastics and cosmetics sector and the plastics and cosmetics sector, among others.
He said, however, that these successes were recorded during challenging times, both locally and globally.
South Africa was not immune to the effects of the global crisis. Domestically, policy uncertainty, weakened intergovernmental coordination and sub-optimal performance of certain State-owned entities, among others, has meant that the successes “are but an appetizer of what could be better achieved under more favourable conditions,” Minister Davies said.
The Minister said the latest iteration of IPAP puts emphasis on stronger interventions to support transformation, led by the flagship Black Industrialists Programme, which is inclusive of a bouquet of new and creative incentive measures set out in the incentive section.
The plan also outlines a stronger emphasis on a stronger export effort, focusing on existing lead and dynamic national export champions and new, especially black owned entrants.
IPAP 2018 also includes new, significant interventions to gear up and respond to the challenges and opportunities posed by the Digital Industrial Revolution.
Minister Davies said procurement reform and rolling-out incentive offerings that can help attract more investment will be among some of the cross-cutting focus areas going forward.
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Increasing tax flow key to financing Uganda’s growth, development
Improving tax revenue is essential to sustaining economic growth in Uganda, according to a recent economic analysis for the country.
The 11th Uganda Economic Update, Financing Growth and Development: Options for Raising More Domestic Revenues, says that while economic growth has rebounded from 4.5% to 5.5% this financial year, tax collections currently account for 14% of the country’s gross domestic product (GDP), lower than regional peers, and short of the government’s target of 16%. This hinders the country’s capacity to finance investments in infrastructure and deliver essential services.
“Tax is an important source of domestic revenue for a government, and central to spurring growth and opportunity for Uganda to attain its development goals,” said Rachel Sebudde, World Bank senior economist and lead author of the economic update. “Without it, citizens would not be able to have good roads, or access to quality and affordable health care and education.”
The improvement in performance, following two years of sluggish growth, is driven by agriculture and the services sectors. Agriculture, which accounts for 25 percent of Gross Domestic Product (GDP), grew by 6.3 percent, up from a decline of 1.9 percent in the previous year, due to good weather and pest control. Growth of services, 47% of GDP, more than doubled to 8.8 percent growth, and industry, 20% of GDP, accelerated to 6.4 percent. Low inflation, down to 2 percent by March 2018, and a relatively stable exchange rate, supported further easing of monetary policy.
As a result, growth of private sector borrowing increased by 5.5 percent in the first eight months of FY 2017/18, despite the high costs of credit. Good weather and government investments in energy, roads and other oil-related infrastructure will be key to sustaining this growth outlook.
Taxes are one of three main sources of government revenue. Borrowing from the local financial markets, and overseas development assistance, while important sources of development finance, are declining steadily and are often not sufficient, the report notes. Loans from the domestic market tend to have higher interests than foreign borrowing, and often have shorter repayment periods, which sometimes reduces government spending on key priorities.
Uganda’s modern tax system is regulated by the Uganda Revenue Authority (URA), which oversees tax administration, offers 24-hour online tax services through eTax, and undertakes regular tax education for clients. This one-stop center has brought together all the local tax authorities under one roof, easing tax payments. At the same time, the Tax Appeals Tribunal has been instrumental in resolving tax disputes. URA’s customs department has automated cargo-tracking, and extended tax handling services to the Kenyan seaport of Mombasa, which handles the bulk of Uganda’s exports and imports.
Despite these innovations, the report says a small percentage of Uganda’s citizens pay taxes. In addition, about 80%of businesses are informal and transact in cash, making it difficult to track and assess them for tax, according to the update.
Naluggya Hanifa, a hairdresser in Kawempe, does not pay taxes. She is self-employed and attends to clients in their homes. Naluggya has dreams of starting her own hairdressing business and is willing to pay taxes as a business owner – if her business is profitable.
“If I am making money, I have no problem paying taxes,” Hanifa said. In her view, everyone should pay taxes, regardless of size of business, because the government needs taxes to deliver on services.
On the other hand, Adong Winnie, a tailor in Gulu, Northern Uganda, said her tax bill is too high. She pays a local service tax of UGX 70,000 (US$20) and UGX 135,000 (US$40) annually for a trading license.
“I am in this tailoring business only for survival, and I feel cheated paying all that money,” she said. “I will just close my shop.”
Within the formal sector, many businesses evade or avoid paying taxes by under-declaring their income, while many foreign firms and organizations enjoy generous tax exemptions, according to the report. Total Value Added Tax (VAT) collections, a tax imposed on the consumption of domestic and imported goods and services, are currently at 4% of GDP, the report says, but without VAT exemptions, the government could collect up to 6.5% of GDP. Personal income tax currently contributes 10% of the country’s total revenue, far below the 40% regional average.
In the special section of the Update, the report analyses how Uganda could raise more domestic revenues to support its development. Uganda’s tax system is one of the most modern in the region, but revenue collections, at 14 percent of GDP, are low, and way below its tax potential. Tax avoidance and evasion, partly resulting from generous tax exemptions to investors, weak tax administration, and a large informal sector (now at 80 percent), pose challenges to increasing revenues. Up to 5 percent of GDP is lost annually in tax leakages. Personal income tax contributes roughly 18 percent of GDP compared to up to 40 percent in developed countries. VAT collections amount to 4 percent of GDP, but would rise to 6 percent if there were no exemptions.
The report suggests that Uganda could raise up to 23% of GDP annually and widen its tax base by tapping into hard-to-reach economic activities that are outside the tax net; applying tax instruments correctly and fairly; improving efficiency, transparency and accountability in tax administration; delivering better public services; and undertaking tax reforms to reduce leakages
“Making more people and firms pay their taxes rests on improving delivery of public services, and requires Government to close loopholes and stop doling out discretionary tax exemptions. Citizens are more likely to pay tax if they see public services improve,” said Christina Malmberg Calvo, World Bank Country Manager for Uganda.
“If everyone played their part, total collections would rise dramatically and the country would be able to meet a larger part of its spending obligations, currently met through borrowing,” added Sebudde.
The Economic Update also recommends:
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The use of credit and debit cards, improved regulation of businesses, and simpler and publicly accessible tax procedures to potentially bring taxable entities and hidden transactions into easy reach.
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Improving efficiency of existing instruments and applying them correctly could rationalize tax exemptions to ensure that the criteria is defined and properly enforced.
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Reducing tax expenditures to minimize revenue foregone arising from tax exemptions
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Improving efficiency and effectiveness of revenue administrations such as the Uganda Revenue Authority, local governments (for own source revenue), state owned enterprises (for investment income) and ministries, departments and agencies (non-tax revenue).
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Enhancing public awareness, transparency, and civil society engagement to increase voluntary tax compliance.
“A strong social contract which encourages tax compliance exists when citizens relate tax payment to actual services delivered by their central or local governments,” said Moses Misach Kajubi, World Bank senior public sector specialist and co-author of the update. “Greater accountability and transparency can also enhance greater confidence by tax payers that their taxes are and will be spent well.”
The report further recommends strengthening the capacity of tax institutions, particularly the Uganda Revenue Authority, as well as local governments to enhance own source revenue. Raising awareness of citizen tax obligations and tax spending would lead to greater accountability and improve tax compliance. But this will not happen unless government enhances the transparency of revenue mobilization and improves public sector service delivery.
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African Statistical Yearbook 2018
The African Statistical Yearbook series is a result of joint efforts by major African regional organizations to set up a joint data collection mechanism of socioeconomic data on African countries as well as the development of a common harmonized database.
The Yearbook is meant to break with the practices of the past where each regional/subregional organization was publishing statistical data on African countries of the continent in an inefficient way, leading to duplication of efforts, inefficient use of scarce resources, increased burden on countries and sending different signals to users involved in tracking development efforts on the continent.
Background
This is the tenth edition of the Yearbook, jointly produced by the African Development Bank (AfDB), the African Union Commission (AUC) and the United Nations Economic Commission for Africa (ECA). It is a result of the fruitful collaboration that exists among the three pan-African organizations within the field of statistics.
This synergistic collaboration has two principal benefits: (1) it minimizes the risk of inconsistent information being produced by the three organizations, and (2) it reduces the reporting burden on member states, who might otherwise be obliged to submit data separately to each institution.
As collective efforts to build the capacity of national statistical systems bear fruit, the three organisations are able to use more national data for the country tables, in some cases even to source data directly from online dissemination facilities of national statistical offices (NSOs) – as the custodians of countries’ official statistics and coordinators of the National Statistical Systems.
Invariably, there are some data sets that have to be sourced from international organizations that have been designated to compile comparable statistics on specific themes for the whole world, including Africa. Still it is important that such series are confirmed by the countries so that any variations resulting, for instance from methodological differences, are reconciled before compiling the final figures in the Yearbook.
The importance of involving African Union member states in the validation process is therefore emphasized. In that regard, each country received a draft of the country tables to review and correct as necessary. Thereafter, representatives of selected NSOs were convened in a validation workshop for further discussion and clarification of outstanding issues.
Users of this publication may observe differences between figures published here and those published elsewhere. These are unavoidable as a result, for instance, of different release dates and associated stages of the datasets in the compilation process at the time of the respective releases.
As a result of these differences, one may observe apparent discrepancies between values published in the 2017 edition of the ASYB, as member states or international data providers recompute data series based on improved or otherwise revised data points and/or models. Differences may also be observed between data from national sources and those published and disseminated by international organizations due to the fact that the latter may have been adjusted for comparability among countries.
The Yearbook continues to serve the intended purpose of bringing together, in one volume, data on African countries for policy-makers, researchers and other users. Bearing in mind that the original collection of the statistics takes place at the national level, the ECA, AfDB and AUC commit to continue their joint efforts to continuously reinforce the capacities of the national structures to produce quality and credible statistics, first for their development needs, and then to feed into appropriate continental and global databases and repositories.
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tralac’s Daily News Selection
AfCFTA Ratification Barometer: Niger has completed domestic ratification processes and is expected to deposit the ratification instruments shortly with the AU; Rwanda inches closer to formal AfCFTA ratification
Makhtar Diop, the World Bank’s Vice President for Africa, has been appointed as the World Bank’s new Vice President for Infrastructure
ECA Conference of Ministers calls for bold action to drive AfCFTA
Vera Songwe, Executive Secretary of the ECA, stated that realising the promise of the AfCFTA and its development goals required the continent to take ‘bold actions’ on many fronts. She told the 51st session of the Conference of Ministers: ‘Now we must seize the momentum at hand, to focus on how to operationalize the agreement in a manner that realises its potential to the benefit of the average African.’ Her address also acknowledged concerns that the AfCTA may cause tariff revenues losses leading to ‘holes’ in national budgets. The AFCFTA’s impact upon taxes applied to imported and exported goods, however, would be ‘small and gradual’ according to the Executive Secretary who explained: ‘These tariff revenue losses may be outweighed by the additional revenues from growth to be generated by AfCFTA.’
Africa’s governments were also urged to take a broader review of macroeconomic policies, especially fiscal measures, in order to ensure they are ‘fit for purpose’ to make the most of the AfCFTA. Vera Songwe remarked: ‘We need to improve our levels of fiscal space. This includes boosting tax revenues, improving the efficiency of public expenditure management, tackling illicit financial flows and making use of private finance for public projects.’
Aia-Eza Nacilia Gomes Da Silva (Secretary of State for Budget, Angola) at today’s High-level Ministerial Dialogue on the AfCFTA: “Free trade is not just a matter of being together, it’s a matter of changing internal structures, having uniform policies, and preparing agendas that are not conflicting with international commitments”
AfCFTA, intra-African trade commentaries, updates
Francis Mangeni: Making African trade work (Project Syndicate; registration required)
Still, the need for a pan-African trade area is clear. Consider a startling statistic: hidden charges such as corruption, road blocks, and time-related costs arising from delays at border crossings account for 90% of total transportation costs on the continent, whereas freight and insurance account for just 1%. Moreover, Africa is divided among many national economies, most of which are host to smaller, fewer, and less sophisticated companies than in other parts of the world. Its level of technological development lags behind that of many other regions, and it suffers from market information and credit shortages. And a significant amount of intraregional trade that does occur goes unrecorded, owing to the continent’s large informal sector.
All of this helps to explain why intra-African trade as a share of the continent’s total trade in 2016 was just 21.2%. The corresponding share in the European Union is 61.7%. Among the members of the North American Free Trade Agreement, the share is 50.3%, and it is 24.3% within the Association of Southeast Asian Nations. True, intra-African trade as a share of total trade is now higher than in other developing regions such as Mercosur (13.6%) in Latin America and CARICOM (9.7%) in the Caribbean. But this is largely owing to the COMESA-EAC-SADC Tripartite free-trade area, which accounts for 72% of intraregional trade, and encompasses most of the eastern half of the continent, from Egypt in the north to South Africa in the south. As it happens, Africa itself is the Tripartite region’s top export market.
Olu Fasan: Still on AfCFTA – the imperative of good faith fulfilment (BusinessDay)
By contrast, AfCFTA’s dispute settlement provisions are the same as those set out in the WTO’s Dispute Settlement Understanding, a system described by one scholar as “more far-reaching than any multilateral arrangement for resolution of disputes among states in history”. It would involve the establishment of dispute panels and an appellate body, as well as the authorisation of trade sanctions where a party fails to comply with the ruling of the dispute settlement body. While the Abuja Treaty establishing the African Economic Community provides that disputes would be settled by a putative African Court of Justice, the AfCFTA creates a WTO-style multi-layered dispute settlement system. Yet, it’s instructive to note that, in the nearly 25 years of the WTO, no African country has been a complainant in a WTO dispute.
It would be ironic if African countries that are not challenging China, the EU and the US at the WTO, despite their anti-Africa trade policies, are dragging each other before the AfCFTA dispute panels and imposing trade sanctions against each other in a free trade zone that is expected to morph into one African market. But, let’s face it, enforcement and sanctions will play no significant role in inducing compliance with the AfCFTA agreement. Rather, three factors would be central to the success or otherwise of AfCFTA. The first is national will, the second is state capacity and the third is regime type. Let’s briefly consider each in turn. [Economists advise Nigeria to sign AfCFTA]
No big shock for Zimbabwe in AfCFTA (NewsDay)
EAC chief justices pledge faster trade dispute resolution (New Times)
The judicial bosses from Kenya, Uganda, Tanzania, Rwanda, South Sudan and Zanzibar met in Nairobi last week to draft a framework where judiciaries in the region will cooperate, share experiences and expertise, harmonise jurisprudence and jointly confront challenges to the administration of justice in the region. “The process of regional integration, by its very nature, generates disputes between states, states and citizens and the judiciaries have stepped in to solve these peacefully and amicably,” said Uganda Chief Justice, Bert Katureebe. Whereas trade disputes take long to settle, the EAC summit of the Heads of State has recognised the problem and signed a protocol on extended jurisdiction. This allows the EACJ to receive and decide cases involving trade and investment matters emanating from the implementation of the Customs Union Protocol and the Common Market Protocol. The protocol is at various levels of ratifications in the partner states.
Botswana: International merchandise trade statistics, February 2018 (pdf, Statistics Botswana)
February 2018 total imports were valued at P4,535 million while total exports were valued at P3,480.6 million, resulting in a trade deficit of P1,054.3 million. Diamonds contributed the most to total imports at 35.1% followed by machinery and electrical equipment; food, beverages and tobacco and fuel at 12%, 11.8% and 11.3%. Diamonds constituted 86% (P2,992.6 million) of total exports during the period under review. SACU was the main source of imports into Botswana during February 2018, with South Africa alone contributing 60.6% of total imports during the month. Asia, as a block, was the major destination for Botswana exports with a share of 52.2%, mainly constituted by diamonds. Singapore and India received most of exports destined to Asia, respectively receiving 18.7 and 12.7% of total exports during the month.
New panel to reboot SA’s African Renaissance status (Mail and Guardian)
Two senior government officials confirmed to the Mail & Guardian this week that the international relations minister, Lindiwe Sisulu, has appointed the panel, comprising experts in foreign policy and economics. It has been set up to move South Africa’s foreign affairs approach from a focus on continental peace and security towards economic diplomacy. The panel members include ANC head of economic transformation Enoch Godongwana, former deputy foreign affairs minister Aziz Pahad, former South African ambassador to Germany Lindiwe Mabuza, former international relations director general Ayanda Ntsaluba and economist Xhanti Payi.
Inside the World Bank’s gamble on ‘digital economies’ in Africa (Devex)
As the proliferation of technologies risks leaving Africa further behind, the World Bank is betting on “digital economies” as a way for the continent to leapfrog over old development pathways. But as the world grapples with the potential consequences of rapid technological change, even insiders say the strategy is a gamble. Launched by the World Bank and International Finance Corporation last month, the new strategy seeks to help African governments follow in the footsteps of countries such as India and China, by capitalizing on the billions of online interactions that take place every day. While investment in the area has historically been weak, a Devex analysis found that as of March 2018, approximately $2bn worth of projects awaiting approval in the World Bank’s pipeline could fall into the category of Africa’s digital economy, including projects focused on public policy, service delivery, and skills development. Discussions are already underway with a number of African governments — and pilot projects are set to be announced at the World Bank meetings in October. [The author: Sophie Edwards]
Atlas of Economic Complexity: East African pointers (Harvard)
Countries that have diversified their economies into more complex sectors, like India and Vietnam, are those that will grow the fastest in the coming decade. That is the conclusion of new growth projections presented by researchers at the Center for International Development at Harvard University. India and Uganda top the list of the fastest growing economies to 2026, predicted at 7.9 and 7.5 percent annually, respectively. The growth projections are based on Economic Complexity, a single measure of each country’s economy which captures the diversity and sophistication of the productive capabilities embedded in a country’s exports. After a decade of growth driven by record oil and commodity prices, the researchers find a landscape that has shifted in favor of more diversified economies.
In sub-Saharan Africa, growth is shifting eastward from commodity-driven West Africa to East Africa, with Uganda, Tanzania (4th), and Kenya (10th) in the top 10 predicted fastest growing countries globally for the coming decade. These East African countries have seen labor shift out of farming into limited manufacturing sectors, as expressed in a more diversified export basket. Far from an industrial revolution, structural change has been partial and piecemeal across these economies. Notably, a significant share of expected growth is driven by rapid population growth. This contrasts with Southeast Asia where growth has been realized in countries that have engaged in full structural transformation by diversifying production into more complex sectors. [Note: The Growth Lab at CID also released new country rankings of the 2016 Economic Complexity Index (ECI), the measure that forms the basis for much of the growth projections. The ECI ranking finds the most complex countries in the world are, in order:]
Today’s Quick Links: Underway, in Johannesburg: SADC Regional Task Team for Teacher Standards Underway, in Dar es Salaam: National Implementation Committee on the EAC Common Market Protocol; training of the East African Monitoring Systems Common Market Module Tomorrow, in Accra: Morocco’s accession to ECOWAS – towards a strengthening of the West African community Mauritius: Promoting green industry workshop Nigeria: 5 things we know about the Petroleum Industry Bill Kenya: 400 tonnes of illegal sugar destroyed and dumped at sea in Mombasa Port Kenya: Uhuru appoints ex-Rift Valley regional coordinator to lead fight against fakes Tanzania: Former Prime Minister, Dr Salim Ahmed Salim counsels on effective exploitation of Sino-Africa DR Congo: UN prepared for ‘all scenarios’ despite low risk of Ebola spreading Ebola in the DRC: How a global and local response has been mobilised |
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Given the right conditions, smaller countries could benefit more from AfCFTA
ECA’s Executive Secretary Vera Songwe led a High-level Ministerial Dialogue on “The African Continental Free Trade Area: creating fiscal space for jobs and economic diversification” in Addis Ababa today, following the launch of the Ministerial segment of the 51st Conference of African Ministers of Finance, Planning and Economic Development.
The debate took place with the participation of several high-level officials, and covered a variety of topics related to the implementation of the African Continental Free Trade Area (AfCFTA) such as the various stages of its implementation, including internal reforms needed for member countries to fully benefit from the AfCFTA, the strategic decisions needed to maximize countries’ competitiveness, or taxation issues and the importance of international cooperation in this field.
“Free trade is not just a matter of being together, it’s a matter of changing internal structures, having uniform policies, and preparing agendas that are not conflicting with international commitments,” said Aia-Eza Nacilia Gomes Da Silva, Secretary of State for Budget, Republic of Angola.
To ensure countries benefit from a free trade zone, they need to fulfill a number of key requirements including the setting up of a complex governance framework, structural reforms, a homogenous legal framework, stable macro-economic policies, said Eswar Prasad, Tolani Senior Professor of Trade Policy and Professor of Economics at Cornell University and Senior Fellow at the Brookings Institution.
“We, as a nation, agree we cannot indefinitely depend on oil, but we believe that we are now on the right path thanks to diversification. Diversification is a process that needs important, structured and strong financial systems, which we certainly still don’t have at this point.
“The burden is on the government to make this happen,” said Minister of Finance Ken Ofori-Atta of Ghana, who also urged African countries to ratify the AfCFTA instruments to enable Africa to start implementing the agreement for the benefit of its people. “Ghana always felt that a much more united Africa will benefit all of us,” he said.
“Greater trade is certainly beneficial, as long as implementers get the conditions right,” said Ireland Central Bank Governor Philip Lane. “Trade is only possible if you know you'll get paid when you export. Central Banks need to cooperate with one another. Everyone then benefits, but small countries benefit more”, he said, also adding that while economic crises can happen anywhere, “areas of the world that are open to trade recover faster."
“The challenge we face is that not all of us in Africa believe the AfCFTA can be made to deliver. We need to ensure that all of us change our mindsets and believe we can do it,” said AU Commissioner for Trade and Industry Albert Muchanga, who mentioned that the feedback given by the 11 countries who haven’t signed the AfCFTA is promising.
The AfCFTA was launched in Kigali, Rwanda, on 21 March 2018 with the hope of opening the way to free trade throughout Africa, facilitate member countries’ industrialisation and economic diversification and ensure sustainable, employment generating growth for the whole region.
At this stage, the agreement is yet to be ratified by at least 22 member countries.
Mobilize African citizens for a successful continental free trade area, says Kaberuka
The people of Africa need to be mobilized for the success of the AfCFTA and the ongoing African Union (AU) reforms, former African Development Bank (AfDB) President, Donald Kaberuka, said on Monday.
Speaking during the high-level roundtable, Mr. Kaberuka said the continental free trade area and AU reforms were both critical for Africa’s future, adding, nothing should be taken for granted.
“For the AfCFTA we need to get it out of the high level conference halls to the people at all levels. This is critical to the success of this historic enterprise,” the former AfDB Chief, who gave the lead presentation in the high-level panel said.
“Part of the problem is that we do not mobilize the African citizenry enough. We can’t afford to slide back. It is sincerely my hope that every country in this room should make it a solemn pledge that the AU, the only continental political instrument we have and need, should be a top priority.”
Mr. Kaberuka said the AfCFTA was much more than a tariff elimination exercise, adding it should be “a quantum jump in how our continent repositions in the context of a weak multilateral system and a time of a potential demographic cliff for us, for a lack of a better word”.
But for that to happen, he said, Africa has to deal with fears expressed by countries that are still to sign-up to the AfCFTA, convince doubters, or even cynics who think the agreement is utopia.
Mr. Kaberuka said AfCFTA negotiators should address the fears and come up with a package tackling all matters being raised.
“This package should in principle bring everyone to the zone of comfort. However, even with all these guarantees, success depends on a shift in the mindset,” he said, adding the continent needs to understand that trade today is not what it was thirty years ago.
“The AfCFTA is a lot more than goods and merchandise; the services sector are probably as important, from logistics, telecommunications, to trade, finance and non-bank financial services,” Mr. Kaberuka said, adding tariffs were only one part of the problem.
“At the end of the day it is by promoting economic growth through trade and investment that fiscal space will emerge - that is the promise of the AfCFTA,” said Mr. Kaberuka, adding through the AfCFTA, “we will boost intra-Africa trade, increase market size, depth and diversity increase opportunities for business, consumers, producers, diversify our economies to complex products thereby expanding fiscal possibilities”.
He said it was only by so doing that the continent can build resilience in the current global systems and avoid the demographic cliffs.
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ECA Conference of Ministers calls for bold action to drive AfCFTA
AfCFTA: Creating fiscal space for jobs and economic diversification
The potential for the African Continental Free Trade Area to become a powerful tool for driving industrialisation, economic diversification and development was highlighted at the start of the UN Economic Commission for Africa’s (ECA) 2018 Conference of Ministers in Addis Ababa, Ethiopia.
The 4-day event (11-15 May) aims to advance the ambitious initiative to form a regional common market which the ECA believes could boost intra-African trade from its current level of 16% to 52% by 2022.
Addressing the gathering, Vera Songwe, Executive Secretary of the ECA, stated that realising the promise of the African Continental Free Trade Area (AfCFTA) and its development goals required the continent to take ‘bold actions’ on many fronts.
She told the 51st session of the Conference of Ministers: “Now we must seize the momentum at hand, to focus on how to operationalize the agreement in a manner that realises its potential to the benefit of the average African.”
The Executive Secretary also observed the most important and urgent action is to create the ‘fiscal space’ to foster public and private investment, while ensuring economic diversification with the view to creating jobs.
Her address also acknowledged concerns that the AfCTA may cause tariff revenues losses leading to ‘holes’ in national budgets. The AFCFTA’s impact upon taxes applied to imported and exported goods, however, would be ‘small and gradual’ according to the Executive Secretary who explained: “These tariff revenue losses may be outweighed by the additional revenues from growth to be generated by AfCFTA.”
Africa’s governments were also urged to take a broader review of macroeconomic policies, especially fiscal measures, in order to ensure they are ‘fit for purpose’ to make the most of the AfCFTA. Vera Songwe remarked: “We need to improve our levels of fiscal space. This includes boosting tax revenues, improving the efficiency of public expenditure management, tackling illicit financial flows and making use of private finance for public projects.”
This year’s conference follows the signing of the AfCFTA by 44 countries earlier this year, while a total of 50 signed either the agreement or the Kigali declaration underscoring their commitment to the visionary, pan-African project. On Thursday (11 May), Kenya and Ghana handed over to the African Union Commission the documents ratifying the continental free trade, becoming the first two countries to do so.
In addition to the ministerial proceedings, expert sessions and parallel side events will address the conference theme ‘Creating fiscal space for jobs and economic diversification’. These will highlight the importance of accompanying taxation measures to support and fully take advantage of the AfCFTA while also strengthening fiscal sustainability in Africa.
Other topics include agriculture’s role in economic growth; financing infrastructure; tackling illicit financial flows; and an integrated strategy for the Sahel. There will also be the launch of the 5th African Governance Report; the Global Education Monitoring Report; and the 2018 Assessing Regional Integration Report.
The ECA’s annual Adebayo Adedeji Lecture (named in honour of the body’s longest-serving executive secretary who passed away in April) will be given by Prof. Mary Teuw Niane, Senegal’s Minister of Higher Education, Scientific Research and Innovation. It will pay also tribute to Prof. Calestous Juma, a renowned supporter of harnessing innovation and technology to advance Africa’s development, who died last month.
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EAC chief justices pledge faster trade dispute resolution
Chief justices from the East African Community have resolved to speed up cases involving trade disputes in order to support the regional process.
The judicial bosses from Kenya, Uganda, Tanzania, Rwanda, South Sudan and Zanzibar met in Nairobi last week to draft a framework where judiciaries in the region will cooperate, share experiences and expertise, harmonise jurisprudence and jointly confront challenges to the administration of justice in the region.
“The process of regional integration, by its very nature, generates disputes between states, states and citizens and the judiciaries have stepped in to solve these peacefully and amicably,” said Uganda Chief Justice, Bert Katureebe.
Whereas trade disputes take long to settle, the EAC summit of the Heads of State has recognised the problem and signed a protocol on extended jurisdiction.
This allows the EACJ to receive and decide cases involving trade and investment matters emanating from the implementation of the Customs Union Protocol and the Common Market Protocol. The protocol is at various levels of ratifications in the partner states.
“As judiciaries in East Africa, we are making interventions in our court processes that would also improve our countries’ ranking in the Ease of Doing Business Index,” said Kenyan Chief Justice, David Maraga
Among the bottlenecks to the administration of justice in the region are limited access to justice; limited resources for expanding courts which limits access to justice; lack of understanding on the workings of courts, which sometimes erodes public faith and confidence.
Others are heavy case backlog; poverty in the population and insufficient coordination of the justice sector actors which results in inefficiencies.
There is also need to increase budget allocations to the judiciary to establish more courts and improve access to justice beyond courts.
The meeting observed that one of the leading challenges is limited funding of the judiciary in all the six partner states while the EAC Treaty provides that each country to set aside 2.5 per cent of their national budgets for the judiciary to improve access to justice.
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Managing Africa’s resources: Time to stop the ‘dig and export’ model, improve governance, create linkages
The UN Economic Commission for Africa (ECA) has just released the fifth edition of the African Governance Report (AGR V), which urges countries endowed with abundant natural resources, to strengthen institutional and regulatory frameworks around the exploitation and use of these endowments.
A highly charged debate, moderated by ECA’s Deputy Executive Secretary and Chief Economist, Mr Abdalla Hamdok, characterized the launch, at events of the 51st Session of the Commission and Conference of African Ministers of Finance, Planning and Economic Development.
Eight resource-blessed countries studied
Building on the four previous reports, AGR V is themed around Natural Resource Governance and Domestic Revenue Mobilization for Structural Transformation. It is hinged on fact-finding studies in eight countries with a wide range of diversity with regards to their resource-base and their experience in resource management. These are: Botswana, Cameroon, Côte d’Ivoire, Egypt, Madagascar, Nigeria, Uganda Tanzania.
It interrogates why resource-rich countries seem unable to transform their economies and examines the functioning of institutions overseeing these resources. It quizzes how much impact development planning has had in the sectors concerned, and unpacks the degree to which natural resources are used to raise domestic revenue.
Findings border on gaps in transformation, accountability issues
Through the above method, the study arrives at the following findings:
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Economic transformation remains very limited in resource-rich countries spite of impressive growth in the last two decades
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The management of the resources is not optimal (governance inadequacies)
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States over-depend on natural resources for their exports
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Institutions overseeing the exploitation of these resources are weak, transparency in management is low, accountability is frail and the functioning of the sector itself is unpredictable
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There is weak linkage between long-term development and plans and natural resource development plans in most of the countries studies, except for Botswana which has a long-term development plan especially in use of diamond resources.
The Head of ECA’s Macroeconomic Policy Division, Mr. Adam Elhiraika, pinpointed the main recommendations of the report which address the challenges mentioned. These are a call on the states concerned to: strengthen their institutional and regulatory framework, enhance transparency and accountability in resource-based sectors, prioritize resource-based development planning and make it more inclusive, develop links for structural transformation through value addition and route-in the private sector in planning process.
Eye-opener on outdated resource exploitation models
“This model of dig and export needs to stop!” exclaimed Mr Hamdok, who followed-on saying “we need to add value to the exploitation of our natural resources in the interest of the development of our continent.”
Mr. Kojo Busia, Head of ECA’s African Minerals Development Center couldn’t agree more and hailed the findings of the report which supports the case put forth by the African Mining Vision. It is a case for mineral-endowed countries to move from being structurally enclaved economies to much more integrated, diversified economies with upstream, downstream, side-stream and spatial-stream linkages that can broaden their tax base and enhance states’ accountability to citizens.
While Prof Annet Oguttu of the University of South Africa sized-up the work as “a wonderful report with a rigorous review process,” Nigeria’s Ambassador to Ethiopia, the AU and ECA – H.E. Bankole Adeoye concurred with the recommendations of the publication. He however added that it was time for Africa to ditch the ‘grand illusion’ about being resource rich. “We are endowed, not rich. Until we make natural resources work for us, we can’t say we are rich,” he argued.
Meanwhile, Ms. Bience Gawanas, UN Under-Secretary-General and Special Advisor to the Secretary General on African Affairs, gave merits to the work put in the report. She said it was indeed timely, in the context of the UN Secretary General’s reform which lays emphasis on the prevention rather than the management of conflict – a phenomenon which is common place in resource-blessed countries.
She noted that with the prevailing situation of illicit financial flows from Africa, there is great reason to advocate effective governance in the continent’s natural resource sectors, as AGR V contends.
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tralac’s Daily News Selection
Starting today, in Addis: Conference of African Ministers of Finance, Planning and Economic Development. Pointers: Agenda and programme, Side events, Documents.
Highlighted document: A note by the Executive Secretary on new strategic directions for the Economic Commission for Africa – putting ideas into action for an empowered and transformed Africa
The last restructuring exercise, undertaken in 2013, refocused the Commission’s programmes to make them more responsive to the transformative agenda of Africa. Since 2013, however, there have been significant developments at the global and regional levels that warrant further reforms by ECA to ensure that it can effectively implement its mandate and respond to the evolving needs of its member States. In the light of the above aspirations, the ECA sub-programmes will accordingly be recalibrated, taking due account of the Commission’s comparative advantages and programmatic priorities. The overall ECA programme of work will, therefore, be organized around the following nine interdependent and complementary sub-programmes...:
The following programme-related changes will be instituted: Sub-programme 1: The previous focus on macroeconomic policy is to be broadened to include economic governance matters; Sub-programme 3: The focus on innovations, technologies and the management of natural resources will be shifted to climate change, environment and natural resources management and repositioned as sub-programme 5. The focus on innovations and technologies as facilitators of development will be recalibrated to support all programmatic areas;
A new sub-programme 3 on private sector development and finance is to be introduced; The sub-programme on social development will be redesigned as sub-programme 9, with a special focus on poverty, gender and social policy; The capacity development work of the Commission will be mainstreamed as a core function across all sub-programmes, delivering knowledge through policy dialogue, advisory services and technical assistance; The five components of sub-programme 7 on sub-regional activities for development will cover selected thematic areas in line with sub-regional priorities.
On the AfCFTA ratification process: The AU Commissioner for Trade and Industry, Albert Muchanga, hopes that the threshold of 22 ratifications can be reached in 9-12 months.
Countering IFFs and money laundering in Africa: updates
Defining, estimating and disseminating statistics on illicit financial flows in Africa (UNCTAD)
This project (2018-2021) to be implemented by UNCTAD and ECA in collaboration with UNODC and ECLAC, will focus on developing a statistical methodology to estimate IFFs with an aim to: Gain knowledge on the size of IFFs and their origins; Provide evidence for a targeted and effective policy response; Improve the participating countries’ capacity to measure IFFs over time, and monitor the impact of policies put in place to reduce these flows. The statistical methodology and the insights from its pilot testing in nine African countries will be published as part of the project. The pilot testing will provide feedback to the development of a globally-agreed methodology to measure IFFs and the related SDG indicator 16.4.1, for which UNCTAD and UNODC are custodian agencies. [Maya Forstater: Why illicit financial flows and multinational tax avoidance are not the same thing]
From this week’s HLM on the Consortium to Stem Illicit Financial Flows from Africa: statement by AUC Deputy Chairperson Kwesi Quartey (AU)
Indeed, as we can all agree, the AU continent is taking tangible steps towards a coherent approach to curb IFFs. Non-African governments are doing the same which calls for a collaboration anchored on voicing common but differentiated responses – a coordinated collaboration underpinning the necessity to make the global financial architecture more transparent and to strengthen accountability towards improved government, societal and corporate responsibilities, further paving the path for an inclusive and sustainable development. The key task is to dismantle the system extracting wealth from Africa. This requires action by African civil society organisations to press for change in their countries, and action by civil society organisations in the countries that are enabling this wealth extraction to take place, such as the UK. Global elites have no intrinsic interest in changing a system that benefits them. It is critical for civil society organisations to expose the role of multinational corporations and Northern governments in impoverishing Africa and to step up their work in building coalitions to end tax dodging and other unfair resource transfers out of Africa. Recommendations of way forward:
Tanzania records sharp decline in exports in 2017: trade minister (Xinhua)
Minister for Industries, Trade and Investment Charles Mwijage told the National Assembly on Thursday that exports of goods to China dropped to $142.3m in 2017, from $355.9m in 2016. Tabling his ministry’s budget estimates for the 2018/19 financial year, Mwijage said Tanzania’s exports to EAC countries also declined to $349.6m in 2017, from $437.7m in 2016. “Exports to the United States dropped from $139.2m in 2016 to $75.7m in 2017.” He added that exports of goods to SADC member states fell from $1,017.9m in 2016 to $877.8m in 2017.
Nigeria exports N29.146bn worth of agricultural produce, Jan-March 2018 (ThisDay)
The federal government’s initiative on export, especially agricultural commodities, is yielding results as a total of 45, 462 metric tons with free on board (FOB) value of N29.146 billion of agricultural produce were exported out of Nigeria between January and March 2018. Nigeria Customs Service official, Musa Abdulahi, said agriculture products export was responsible for 38, 517 metric tons with FOB value of N22.435 billion while processed and manufactured goods exported was 6,945 metric tons valued at N6.711 billion. This, he stated, represents an appreciable improvement of 558.46% in terms of volume and 402.24% in terms of FOB value when compared with the 8,140 metric tons valued at N7.246 billion recorded between January and March 2017.
Nigeria: Manufacturers canvass protection for products (The Nation)
Despite the ECOWAS trade liberalisation policy and other conventions to ensure free trade in the sub-region, there is a need for Nigeria to protect products. Manufacturers Association of Nigeria President Dr. Frank Udemba Jacobs canvassed this position at the unveiling of Oxytocin injection manufactured by an indigenous pharmaceutical firm, Juhel Nigeria Limited, which he described as the first of its kind in Africa. He said the country owed it to itself to protect exclusive industries producing products that have intrinsic quality, irrespective of ECOWAS conventions, such as the Common External Tariff and the African Continental Free Trade Area agreement. He said this was necessary to protect jobs and grow the economy.
Egypt: More local car components (Ahram Weekly)
Trade and Industry Minister Tarek Kabil issued a decree on 30 April increasing the local-component requirement for local car manufacturing to 46%. It also increased assembly-line contributions to local manufacturing to 28% from 17%, reducing it by one per cent each year. The decision gives companies a year to comply with the new criteria and adjust their operations accordingly. Kabil said the decision aimed to deepen the car-manufacturing industry in Egypt in line with fair and transparent criteria, adding that the previous target for local components had not reflected reality and had not helped achieve the ministry’s objective of establishing a car industry based on manufacturing and not just assembly in the country.
South Africa: Economic Development Department Budget Vote 2018/19 – speech by Minister Ebrahim Patel
Key aspects for a multilateral outcome on investment facilitation: a Brazilian perspective (ICTSD)
One possible element of a future multilateral outcome regarding investment facilitation could be a single electronic window (SEW). Before elaborating on the usefulness of a SEW, one has to place the issue into a wider perspective and identify what problems a future Investment Facilitation Agreement within the WTO would address. As a starting point, it might be useful to depict a common scenario faced by investors when investing abroad. Some of the practical challenges that the investor will most likely be confronted with are the following.
Banks and cryptocurrencies global evaluation: Africa (Cointelegraph)
Anticipation of a tech-revolution in Africa has been escalating since late 2017. Governments have shown little uniformity in their approach and attitude toward the booming crypto markets on the continent, but the underlying sentiment toward cryptocurrencies and decentralization is that it can provide humanitarian relief and transform the lives of underserved populations. The following assessment of cryptocurrency regulation in Africa is a part of a larger series of pieces evaluating regulation of the flourishing global fintech industry.
Boosting trade and development by tackling Africa’s supply chain challenges: policy recommendations and options (Wilson Center)
This brief (pdf) draws on the discussion to highlight key recommendations for addressing supply chain challenges. The discussion unpacked Africa’s supply chain development and integration at both the regional and global levels, described key structural issues impeding Africa’s role in international trade and intra-African trade, and emphasized a need to prioritize and improve infrastructure development to better support Africa’s supply chains. [Background paper: What are supply chains and why do they matter to Africa?]
7th Tana Forum: documentation on AU reform and 2017/8 responses to complex security challenges
This collection of policy briefs (pdf) seeks to contribute to achieving a homogeneous understanding and to influence ongoing dialogue on the AU’s institutional reforms. The scope covered in this collection ranges from the elements of the institutional reform process to actors, partnerships, financing peace and security and compliance to the reforms. The State of Peace and Security in Africa, a background paper for the 2018 Tana Forum, provides contextual information that should, hopefully, inform the nature, quality and direction of debate on peace and security issues on the continent.
Africa Regional Forum Agrees on over 50 messages for HLPF (IISD)
The fourth Africa Regional Forum on Sustainable Development agreed on key messages to the 2018 session of the UN High-level Political Forum on Sustainable Development (9-18 July, New York). The meeting report includes over 50 key messages pertaining to SDGs 6 (clean water and sanitation), 7 (affordable and clean energy), 11 (sustainable cities and communities), 12 (responsible consumption and production), 15 (life on land) and 17 (partnerships for the Goals). The ARFSD convened in Dakar, from 3-4 May.
Today’s Quick Links: Zambia raises concern to South Africa over attacks on truck drivers Angola looks to services trade for more sustainable growth ECOWAS parliament speaker, deputy differ on Morocco’s membership bid 19 of 35 Nigerian lawmakers absent as ECOWAS Parliament opens China ready to work with African countries on aviation – Ambassador US Congress needs notice of Nafta deal by next week, Ryan says Brookings experts’ trade reading list |
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Commissioner Albert Muchanga: “We are welcoming the concrete beginning of the journey to create one African market”
Dedicated Session of the African Continental Free Trade Area Negotiating Forum (AfCFTA-NF) underway
The Department of Trade and Industry is organizing the Dedicated Session of the African Continental Free Trade Area Negotiating Forum and Legal Experts from 30 April to 12 May 2018 in Addis Ababa, Ethiopia. The objective of the Meeting is to undertake Legal Scrubbing of the Annexes to the Protocol on Trade in Goods, and the Annexes to the Protocol on the Rules and Procedures on the Settlement of Disputes.
Participants are also required to consider and recommend for adoption by the African Union Ministers of Trade, the list of Priority Sectors on Trade in Services. They are further required to consider outstanding issues on Modalities for Tariff Liberalization, including Criteria for Designating Sensitive Products and Exclusion Lists.
The Meeting is being attended by members of the AfCFTA Negotiating Forum and Legal Experts from Member States. Trade experts from the eight RECs recognised by the African Union (CEN-SAD, COMESA, EAC, ECCAS, ECOWAS, IGAD, SADC and UMA), experts from AfDB, UNECA and UNCTAD are also in attendance.
In a statement sent to participants and read by Mr. Karidio Hamadou, Director of Foreign Trade and Economic Partnership and Chief Negotiator of Niger, H.E. Mahamadou Issoufou, President of the Republic of Niger and Champion of the AfCFTA process, commended Chief Negotiators for their availability and determination.
He urged participants to keep the momentum and called on them to see the overall benefit of creating an integrated, prosperous and peaceful Africa, the Africa we want as stated in Agenda 2063.
In the same vein, the Commissioner for Trade and Industry of the African Union, H.E. Amb. Albert M. Muchanga, congratulated Chief Negotiators for the historic achievement. He pointed out that the Kigali Extraordinary Summit is marked as a landmark in African economic history.
“We are welcoming the concrete beginning of the journey to create one African market. We are saying goodbye to the era of small, isolated and fragmented small markets. We are clearly signaling that Africa is not for isolationism or nationalism. Our message to ourselves and to the rest of the world is that we pool our independence and sovereignty to create a higher value of inter-dependency anchored on creating one African Market,” he underscored.
The Commissioner recalled the objectives of the Meeting and called on Member States to deliver the minimum 22 ratifications within 9-12 months from March this year so that the legal instruments establishing African Continental Free Trade Area come into force.
He indicated that Rwanda, Ghana and Kenya have led the way for the AfCFTA’s ratification and urged other Member States to deposit instruments of ratification so that the African Union Commission can have an official record of ratifications.
The Dedicated Session of the African Continental Free Trade Area Negotiating Forum will be followed by Senior Trade Officials and African Union Ministers of Trade (AMOT) meetings planned to take place from 25th May to 2nd June 2018, in Dakar, Senegal.
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South African Government Communications on approved agreement to establish Tripartite Free Trade Area
SADC Statement
At its meeting at Tuynhuys in Cape Town on Wednesday, 9 May 2018, Cabinet approved the agreement establishing the Tripartite Free Trade Area (TFTA) between the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and Southern African Development Community (SADC) be tabled in Parliament for ratification.
The Acting Director-General (ADG) of the Government Communication and Information System (GCIS), Ms Phumla Williams, said: “The establishment of the TFTA has been heralded as one of the most important developments in Africa. It responds to the need for Africa to overcome small fragmented markets and increases prospects of stimulating industrialisation, employment, income generation and poverty reduction. It further addresses the negative impact on industrialisation, economies of scale and competitiveness.”
“The TFTA is a key Africa-led project that is being done through the promotion of intra-African investments and attraction of more foreign investment into the free trade area (FTA). It is an important initiative in accelerating regional integration efforts aimed at improved intra-African trade,” Ms Williams explained.
The TFTA is anchored on the development integration approach that is based on three pillars: market integration, infrastructure development and industrial development. It also forms the basis for the ongoing African Continental FTA negotiations which will unlock trade and investment opportunities in the entire continent.
This is also aligned to South Africa’s National Development Plan objective of an integrated Southern African region with beneficial relations with the rest of the world. “As a result of regional integration efforts and stable economies, there has been strong growth in intra-African investments,” added Ms Williams.
Industrial Policy Action Plan
Cabinet also approved the Industrial Policy Action Plan (IPAP) 2018/19 – 2020/21. This is the 10th iteration of a rolling annual action plan aligned to successive three-year cycles of the Medium Term Expenditure Framework.
Minister Mokonyane said the revised IPAP summarises the achievements of the industrial policy over the past nine years.
“It provides an economic analysis of the global and domestic economy relevant to industrial policy, summarises the challenges and constraints to the optimal implementation of the industrial policy, as well as a range of transversal and sector-specific time-bound key action plans assigned to the respective departments.”
Communiqué Des Médias
Le mercredi 9 mai 2018, lors de sa réunion à « Tuynhuys » au Cap, le Conseil des ministres a approuvé un accord établissant la zone du libre-échange tripartite (TFTA) entre le Marché commun de l’Afrique orientale et australe, la Communauté de l’Afrique de l’est et la Communauté du développement de l’Afrique australe prévu au Parlement, moyennant une ratification.
Mme Phumla Williams, Directrice générale par intérim du Système gouvernemental de la communication et d’information (GCIS), a déclaré que: « La création de la TFTA a été signalée comme l’un des développements les plus importants en Afrique. L’Afrique doit réagir au besoin de surmonter les petits marchés fragmentés et intensifier les prospects, afin de stimuler l’industrialisation, l’emploi, la création moyennant des revenus ainsi qu’une réduction à la pauvreté. Il adresse également, l’influence négative sur l’industrialisation, les économies à plus grande échelle ainsi que la compétitivité. »
« La TFTA est un projet clé conduit par l’Afrique et accompli par l’appui d’investissements intra-africains ainsi que d’avantage investissements étrangers qui sont attirés par la zone de libre-échange (FTA). C’est une initiative importante qui hâte les efforts d’intégration régionale visant à améliorer le commerce intra-africain, » a expliqué Mme Williams.
La TFTA est ancrée sur l’approche d’intégration du développement et centrée sur trois piliers: l’intégration du marché, le développement des infrastructures ainsi qu’industriel. Il constitue également, de la base des négociations en cours sur le FTA continental africain, ouvrant des opportunités sur le commerce et des investissements dans tout le continent.
Ceci est également affilié à l’objectif du Plan de développement national d’Afrique du sud, à savoir, une région intégrée d’Afrique australe, tenant compte, des relations bénéfiques avec le reste du monde. « Résultant des efforts d’intégration régionale et des économies permanentes, des investissements intra-africains ont connu une croissance solide, » a ajouté Mme Williams.
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Protecting privacy and personal data key to digital economy in Africa, says Internet Society
Internet Society and African Union Commission launch guidelines on Personal Data Protection
On 9 May 2018 at the Africa Internet Summit in Dakar, Senegal, the Internet Society and the African Union Commission unveiled a new set of Guidelines that highlight how privacy protection and the responsible use of personal data are critical factors in building greater trust online and in advancing the digital economy in Africa.
The Personal Data Protection Guidelines for Africa were jointly developed by the Internet Society – a global non-profit organization that promotes the open development, evolution and use of the Internet – and the African Union Commission to facilitate the implementation of the pdf AU’s Convention on Cyber Security and Data Protection (13.16 MB) (known as the Malabo Convention), adopted in 2014.
The Guidelines recommend a range of actions for governments, policy makers, citizens and other stakeholders to take at the regional, national, organizational and individual level. Among the key recommendations for governments is that they should respect and protect individuals’ rights to privacy online and offline.
“Recent global events have showed us that the lack of appropriate protection for personal data can have a profound impact not just on individuals but also on society at large, to the point of endangering democratic systems,” said Dawit Bekele, African Regional Bureau Director for the Internet Society.
“These Guidelines explain how people can take a more active role in the protection of their own data as well as the role that other stakeholders, including governments and legislators, have in ensuring the proper use of data.”
Two key principles of the Guidelines urge all AU Member States to: recognize privacy as a foundation for trust in the digital environment and prioritize the sustainable and responsible use of personal data in the digital economy.
In addition, there are recommendations for citizens who are concerned about their data and privacy including:
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Using the Internet and other sources to inform themselves about the risks and benefits of the digital economy or their online activities. This includes being aware of agreements they make when they sign up for “free” services or use social media platforms that may profit off their data.
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Understand and exercise their rights, and act, when needed. There is a corresponding role for governments to empower individuals to do so by ensuring citizens know how to exercise their rights under privacy and personal data protection laws.
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Develop their capabilities to protect their interests online. Supervisory authorities and governments should take steps to ensure that service-providers and product vendors are transparent about their business models and product capabilities, so consumers can make informed choices about the privacy implications of products and services.
“The Malabo Convention is the first step towards developing national legislative frameworks for cybersecurity and data protection in Africa. The guidelines launched today provide a path forward for the member states that have signed the convention, and hopefully encourage more countries to join,” says Moctar Yedaly, Head of Information Society Division, African Union Commission.
About the Internet Society
Founded by Internet pioneers, the Internet Society (ISOC) is a non-profit organization dedicated to ensuring the open development, evolution and use of the Internet. Working through a global community of chapters and members, the Internet Society collaborates with a broad range of groups to promote the technologies that keep the Internet safe and secure, and advocates for policies that enable universal access. The Internet Society is also the organizational home of the Internet Engineering Task Force (IETF).
New strategic directions of the ECA: Putting ideas into action for an empowered and transformed Africa
The year 2018 marks the sixtieth anniversary of the establishment of the Economic Commission for Africa (ECA). The occasion presents an opportunity to reflect on the contribution of ECA, as a key player on the African institutional landscape, to the task of tackling the continent’s development challenges.
This anniversary – a diamond jubilee – also offers an opportunity to take stock of the Commission’s achievements and chart its way forward to a position where it can respond to the priorities and aspirations of its member States.
The repositioning of ECA is being undertaken in response to changing global and regional dynamics, including the new macroeconomic environment in Africa, global and continental development frameworks and United Nations reforms. The proposed strategic directions and programmatic priorities laid out in the present note are the outcome of extensive consultations with a broad array of stakeholders.
The implementation of the proposals will go a long way towards enabling the Commission to move forward in its vision of serving its member States better by putting ideas into action for an empowered and transformed Africa.
Rationale for strategic repositioning of the Commission
A decade after the global financial and economic crisis, Africa finds itself in a new macroeconomic environment. Countries that were attracting huge volumes of foreign direct investments (FDI) are no longer doing so. Oil-rich African countries that benefited from rising oil prices have witnessed serious economic downturns. This macroeconomic environment is being further strained by shifts in the domestic policies of emerging economies such as China, which are rebalancing their sources of growth. African economic growth recovered in 2017 but the rate of growth is still far below the double-digit growth needed for structural transformation.
The current pattern and quality of growth in the region are leaving large segments of the population trapped in poverty and vulnerability. The deep and persistent inequalities across the continent have economic, social and political consequences. In the long run, these elements run the risk of undermining economic growth, productivity, and the development of markets, and of creating conditions for open conflict and social unrest, as the recent experience of some African countries, in particular those in North Africa, has shown with the Arab Spring. Increasingly, there is consensus regarding the urgent need to ensure that growth is sustainable and inclusive.
In order for Africa to grow and evolve, it is imperative that it transform structurally and diversify its economies. The current merchandise export structure, dominated by raw and unprocessed commodities, is not conducive to the envisaged level of development. African countries must diversify their sources of growth to reduce the vulnerability of their economies to internal and external shocks.
If Africa is to attain the desired outcomes of both the 2030 Agenda and Agenda 2063, a major change in the understanding, treatment and creation of a growth-enhancing macroeconomic environment is required. This change must look at the interface with development beyond the narrow focuses on stabilization and growth and be conceived in an integrated multisectoral perspective.
Africa must strengthen its own resources to tackle the macroeconomic issues that are undermining more inclusive and sustainable growth. The continent’s ability to deal with new and emerging challenges is predicated on its ability to stabilize and grow its economies, primarily by mobilizing its own resources. To meet this challenge, African Governments need to build robust governance systems to support effective public sector management, to mobilize domestic resources, to combat illicit financial flows and to reform tax policies.
If African countries are to thrive in the constantly changing and dynamic global environment, it is critical that they have a robust governance system in which the authority of the State is perceived as legitimate and there is predictability about how agents are expected to act. The presence of such a governance system would also make Africa an attractive continent in which people are happy to live, work and invest.
The private sector’s role in financing Africa’s development will continue to grow. The private sector can provide innovative and efficient ways of delivering infrastructure and other solutions for the continent. Most important, by mobilizing private sector finance, Africa can raise the trillions of dollars needed to fast-track its development, by diversifying the economy and improving competitiveness. This will require the development of robust capital markets and the creation of an environment conducive to private development, in particular in the areas of land, agriculture, energy and other infrastructure sectors. By leveraging the private sector, Africa can shift the production frontier for both goods and services, create sustainable economies, generate additional jobs and reap the continent’s demographic dividend.
Poverty and inequality, however measured, remain very high in most parts of the continent. Accelerating the pace of poverty reduction and narrowing the persistent inequalities across the continent will contribute to economic growth, higher levels of productivity and improved living standards. Increasingly, there is an urgent need to ensure that public policies in Africa are more inclusive and respond to the needs of young people and women.
The commitment of African Governments to the regional integration agenda through, among other measures, the creation of the African Continental Free Trade Area and the Action Plan for Boosting Intra-African Trade, is at a scale sufficient to attract the private sector. Complemented by other continental flagship programmes and strategies, including the Comprehensive Africa Agricultural Development Programme, the Programme for Infrastructure Development in Africa, the Action Plan for the Accelerated Industria l Development of Africa and the Science, Technology and Innovation Strategy for Africa provide critical frameworks to attract and leverage private sector investment, optimize economic production and close the productivity gaps in African economies.
Climate change, environment and natural resources management are critical leverage points for the continent for implementing the Sustainable Development Goals. Attainment of many of the Goals is directly or indirectly linked to the sustainable management of natural resources for healthy ecosystems, healthy economies and healthy societies. Africa is faced with serious challenges posed by climate change to the attainment of the 2030 Agenda for Sustainable Development. Africa must effectively integrate mitigation and adaptation to climate change into development policy planning processes. This is imperative to reduce vulnerability and strengthen resilience to impacts. Moving forward with the implementation of the intended nationally determined contributions under the Paris Agreement would enable Africa countries to reduce their future emissions and to contribute to global collective efforts to tackle effects of climate change. By harnessing natural resource endowments, new technologies and infrastructure as a means of creating wealth, reversing resource depletion for Africa’s development and as a conduit towards diversifying its economies, African countries also need to pursue policy reforms to foster a green economy while contributing to balanced integration of the economic, social and environmental dimensions of sustainable development.
Data and statistics are central to the development process. There is consensus on the development aspirations that should be pursued by Africa, as captured in the 2030 Agenda and Agenda 2063. In implementing and monitoring the two integrated agendas, there is need for an effective data policy regime and architecture to support the process. An African data revolution that constitutes the lifeblood of policymaking, planning and follow-up, and review of the two agendas will require resources and strengthened capacities for data collection, storage, access and analysis grounded in robust statistical systems.
Putting ideas into action for an empowered and transformed Africa
The vision of ECA is framed around delivering ideas and actions for an empowered, inclusive and transformed Africa and is informed by the 2030 Agenda for Sustainable Development and Agenda 2063 of the African Union. The three core facets of the Commission are its function as a think tank, its convening function and its operational function.
ECA’s overall objective is to support the continent to effectively confront one of its central challenges: jobs creation. With more than half the jobs on the continent in the informal sector, that challenge has particular significance in fiscal terms and in terms of levels of poverty.
To deliver on its vision, ECA will concentrate on five strategic directions:
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Advancing the position of ECA as a premier knowledge institution that builds on its unique position and privilege to bring global solutions to the continent;
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Building sustainable development solutions to accelerate Africa ’s economic diversification;
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Creating innovative solutions to finance sustainable infrastructure, human, physical and social for a transforming Africa;
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Contributing solutions to transboundary issues, with a focus on social inclusion;
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Developing regional solutions as a contribution to global governance issues, and building knowledge to manage the challenges in store for and support Africa’s next-generation.
This report has been prepared ahead of the 51st session of the Conference of African Ministers of Finance, Planning and Economic Development, taking place on 11-15 May in Addis Ababa on the theme, “African Continental Free Trade Area and fiscal space for jobs and economic diversification”.
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High-Level Meeting on the Consortium to Stem Illicit Financial Flows from Africa
Statement of the African Union Commission Deputy Chairperson, H.E. Kwesi Quartey
It is a great pleasure for me to join you at this Consortium meeting which maybe the second of its kind, but is just another key event in a long series of efforts to reduce IFFs from Africa. Efforts which the Chair, the High Level Panel and all present have led or been an active part of since the Panel was inaugurated over six years ago here in South Africa.
You may recall that at that time, in order to significantly improve its domestic resource mobilization efforts, African leaders agreed that the continent had to urgently address the critical challenge of Illicit Financial Flows (IFFs) from Africa. The designation of this year as the African Anti-Corruption Year is further proof that our leaders are still very concerned by this issue and committed to eradicating corruption as well as IFFs altogether.
Almost four years after its establishment, the HLP (the High Level Panel Report on Illicit Financial Flows) was promptly passed as a Special Declaration on Illicit Financial Flows by the African Union Heads of States. This ultimately marked a critical step which demonstrated the concern shared by African governments about illicit financial flows. However, it only marked the beginning of the work ahead.
The declaration also directed for the dissemination of the findings and recommendations of the Panel within the continent and at the global level. The ECA was asked to undertake further research and capacity-development activities in this regard. In addition to this, the AUC, ECA and other pertinent Pan African institutions and partners, were mandated to build the capacities of African Union member States and institutions particularly in contract negotiation, tax management, asset recovery and other areas of importance highlighted by the HLP report.
In order to achieve the mandates delivered by the African Heads of States in the Special Declaration on IFFs, it was clear that there is the need to not only disseminate the findings and recommendations of this report; but also to prepare an actionable plan for these recommendations to be implemented at all levels. Strong collaboration and consistent engagement between various African institutions, particularly those who had been specifically identified within the Special Declaration, was extremely crucial. In line with this, AUC/ECA worked to establish streamlined support to the anti-IFF agenda by creating a forum for these very stakeholders.
IFFs are a huge drain on Africa’s resources, including tax revenues, and hinder the level of savings required to address key development issues. The HLP Report indicated that over 50 billion USD is lost annually in illicit outflows. Given the present momentum that this issue has raised, working together to address these outflows would mean beneficial resources for the continent towards its own development. If we track and recover even a fraction, say ten percent of that 50 billion which has been lost; that is a resource which could inevitably lead to the building of schools and universities which would develop more professionals to help in the fight against these illicit outflows.
Furthermore, recovering lost assets towards STEM education is another key area which should be prioritised. As highlighted in the HLP Report, many African countries are vulnerable to illicit financial practices as a result of their extractive industries. Investing recovered assets into STEM education is key to developing counter measures to this vulnerability. Given that mining is an increasingly technologically intensive industry, requiring skills, knowledge and research and innovation in science, technology and Engineering services, most mineral exporting African countries would need to invest in STEM education due the following reasons:
Natural resources exploitation technologies generally require the ability to determine the quality and classification of the mineral ore which would be used in valuing the price in international markets. While most mining companies possess sophisticated knowledge and equipment in anaylzing ore quality, most African states do not have the capacity (knowledge, skills, and laboratory equipment) to determine what quality of mineral ores they are exporting to the international markets. There are limits to the extent to which they are able to put value on their resources and thus determine the rents that should accrue to the state. A high proportion of illicit outflows of funds from Africa stem from these limited STEM skills available in mineral dependent countries.
The second strategic point about investing in STEM education and stemming IFFs is that adequate supply of STEM skills and R&D capacity are pre-requisite for adding value to mining raw materials or beneficiation (addition value to the mined ore) which in turn will spur industrialization in African countries with abundant mineral resources. Due to the fact that most IFFs occur due to the raw exports of minerals outside of Africa, adding value would reduce the incidence of this phenomenon in the mining sector. The point is exporting raw materials (often due to lack of STEM skills to add value locally) contributes disproportionately to the high incidence of IFFs in the mineral sector in Africa. Thus, investing in STEM skills would contribute greatly in stemming IFFs.
Indeed, as we can all agree, the AU continent is taking tangible steps towards a coherent approach to curb IFFs. Non-African governments are doing the same which calls for a collaboration anchored on voicing common but differentiated responses – a coordinated collaboration underpinning the necessity to make the global financial architecture more transparent and to strengthen accountability towards improved government, societal and corporate responsibilities, further paving the path for an inclusive and sustainable development.
The key task is to dismantle the system extracting wealth from Africa. This requires action by African civil society organisations to press for change in their countries, and action by civil society organisations in the countries that are enabling this wealth extraction to take place, such as the UK. Global elites have no intrinsic interest in changing a system that benefits them. It is critical for civil society organisations to expose the role of multinational corporations and Northern governments in impoverishing Africa and to step up their work in building coalitions to end tax dodging and other unfair resource transfers out of Africa.
Recommendations on Way Forward
Promote economic policies that genuinely lead to equitable development. Africa’s economy has been growing at 5% in recent years but poverty remains deep and is rising, showing how current models of economic growth are not generally benefitting the poor. For decades, Western governments have been encouraging or forcing African governments to promote trade and investment liberalisation and privatisation, as though opening up economies is an end in itself. These policies have mainly enriched foreign investors – but have not tended to benefit Africa’s people.
African governments must be allowed and helped to promote development models that: fairly create and redistribute wealth, create jobs for citizens, promote social welfare, ensure the progressive taxing of the rich, and protect natural resources and ecosystems and the rights and livelihoods of the communities who rely on them. Economic policies that nurture domestic companies over foreign investors are likely to have the greatest development impacts.
In East Asia, which has spectacularly reduced levels of poverty in recent decades, a key policy was state intervention to nurture and develop domestic industries. This often involved imposing protectionist trade barriers to keep out foreign competitors, until the point when those industries were strong enough to compete in world markets.
Reconfigure ‘aid’ as reparations to – at least – compensate for the wealth extracted from Africa. An independent international process is needed to specify the degree to which individual countries are responsible for extracting wealth from Africa. This process must include evaluations of all the resource flows considered in this analysis, including the costs associated with adapting to and mitigating climate change.
African academic and civil society organisations could undertake analyses of the movement of resources between their countries and the rest of the world. Progress should be made towards a true international aid system that is not based on voluntary donations but on reparations for damages caused.
Transform aid into a process that genuinely benefits Africa. Currently, much ‘aid’ from Western governments, which we count here as ‘inflows’, actually contributes more to outflows from Africa: aid that pushes privatisation in key sectors (such as public services), free trade or unfettered private investment can simply open up economies even further to exploitation by foreign companies.
If aid is to benefit Africa, it must be delinked from Western corporate interests and be based on African priorities negotiated through open processes in country. To ensure this, there must be much greater national and international scrutiny over cooperation programmes.
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Policy recommendations and options: Boosting trade and development by tackling Africa’s supply chain challenges
Over the past 15 years, Africa has accounted for several of the fastest growing economies in the world. However, Africa overall accounts for just 2 percent of global trade.
The Brown Capital Management Africa Forum Signature Event “Boosting Trade and Development by Tackling Africa’s Supply Chain Challenges”, which featured African and U.S. policymakers, practitioners, and officials from regional economic communities, sketched an overview of Africa’s supply chain landscape, explored challenges impeding trade and development, and discussed lessons learned and best practices.
Supply chains in Africa: Progress made and recommendations for the way forward
Key recommendations for addressing supply chain challenges to bolster intra-African trade and Africa’s share of international trade include the following:
1. Identify Overarching Entry Points for Addressing Africa’s Supply Chain Challenges
There are five overarching areas of focus that are important to addressing Africa’s supply chain challenges: provide people with more information about trading in Africa, educate vendors about the process and standards required to get goods to the global market, facilitate communication between buyers and consumers, deliver goods in the most time and cost efficient ways, and utilize technology to facilitate trade. Programs such as the Made in Africa Campaign, which seek to connect buyers around the world with sellers in Africa, and the Africa Made Product Standards, are models for programs that can create economic opportunity in Africa. These business models can be expanded and built upon.
2. Improve Trade Facilitation Processes
One of the major barriers to trade is the thickness of the borders and the degree of red tape associated with getting goods through customs in many African countries. Cumbersome processes and associated delays in processing goods through customs discourage businesses trying to work in Africa, and stymie intra-African trade and development.
3. Invest in Improving Technology for Trade
Technology can play a key role in mitigating some of the challenges afflicting supply chains in Africa, such as the difficulties associated with selling, tracking, and delivering goods. For example, technological platforms on smart phones or computers can be tools that help connect local suppliers to the global market, making their goods available to consumers and companies all over the world, 24 hours a day, and seven days a week. Access to these platforms can be a game-changer for small and medium enterprises (SMEs) operating in Africa which could gain access to the global market through technology.
Technology can also help with the logistics of shipping goods to, from, and within Africa. Especially considering the fact that many African businesses and homes lack formal addresses, digital tracking of shipments is especially important in the African context to reduce the risk and increase the certainty involved in shipping goods.
The commercial use of drones for delivery in Rwanda is an example of technology overcoming another important issue – weak, insufficient, and disconnected infrastructure in many parts of the continent – which has been an impediment to development for years. Although no substitute for long-term infrastructure development, technological solutions can be stop-gaps that help promote trade, provide lifesaving services to populations, and ultimately further development.
4. Prioritize Infrastructure Development
Without a reliable and connected infrastructure network, the movement of goods to, from, and within Africa becomes an incredible logistical challenge.
African countries are beginning to make a concerted effort to address infrastructure and logistics challenges. East Africa is one region that has done particularly well at improving infrastructure and logistics, decreasing port dwell times, and increasing transportation efficiencies; it could provide lessons learned for other regions. For example, despite being landlocked (a status that typically presents more transportation challenges), Rwanda and Uganda have shown massive improvement in recent years, according to the World Bank’s Logistics Performance Index.
However, significant infrastructure challenges remain across the continent. For example, according to the African Development Bank, the effective speed of road transport in the Southern African Development Community is between 6 and 12 kilometers per hour (3.72 and 7.45 miles per hour), which is indicative of wider infrastructure challenges that hinder trade throughout the continent. Rural areas generally face increased challenges with logistics, infrastructure, and access to technology.
Infrastructure and other supply chain challenges can be especially debilitating for the movement of perishable goods. For example, it is estimated that 60 to 80 percent of perishable good are lost during transit within Africa mostly due to a lack of consistent refrigeration and the slow speed of ground transport.
The preponderance of seasonal roads and the overall lack of year-long passable roads, the weak regional railway networks, as well as transport-related inefficiencies – including the long dwell times at ports – all serve to increase the cost of doing business in Africa and add volatility into the supply chain equation. For example, it was noted that ports in Nigeria have dwell times of between 15 and 20 days, while the Durban Port in South Africa has dwell times of only four days, which is closer to the global standard. Average dwell times in Sub-Saharan Africa (excluding Durban) are over two weeks, while the average in Asia, Europe, and Latin America is less than a week.
5. Harmonize National and Regional Trade Integration Frameworks
All African countries are a part of at least one Regional Economic Community (REC), sometimes more than one. Many of these RECs have robust regional integration strategies, some of which include supply chain development. However, implementation of the strategies often varies within and across RECs. In some countries, the strategies and underpinning regional integration policies have not been domesticated or prioritized at the national level.
6. Expand the Scope and Lengthen the Timeframe of Regional Trade Agreements
Many regional trade agreements in Africa are made for the short to medium-term, which creates uncertainty for investors, government administrators, and consumers alike. Lengthening the timeframe of trade agreements will make engagement more stable and cost-effective in the long-term and minimize risk for investors. In addition, trade agreements in Africa are often focused on raw materials and resources rather than on finished goods. Establishing regional trade agreements with long-term views and that include provisions for the production of finished products is an important piece of facilitating trade, improving regional coordination, and supporting the production of value-added, finished goods in Africa.
7. Mitigate Risk and Increase Opportunity for Stakeholders along the Supply Chain
Download the Policy Recommendations and Options brief and the related paper Boosting Africa’s Trade and Development by Tackling Some Supply Chain Challenges by Tielman Nieuwoudt on the Wilson Center website.
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tralac’s Daily News Selection
From tralac’s recent high-level dialogue on SACU: the workshop report (pdf). Discussions centred on SACU revenue sharing, SACU’s external relations, and the future of SACU. Updates were provided by the SACU Secretariat and member states.
Kenya and Ghana formally submitted their instruments of AfCFTA ratification this morning to the African Union. @AUTradeIndustry: “I look forward to you encouraging other signatories to the AfCFTA Agreement to ensure that a minimum of 20 additional instruments of ratification are deposited before the end of 2018. That is the expectation of our Heads of State and Government” – @AUC_MoussaFaki
World of work
The future of work in African agriculture: trends and drivers of change (ILO)
This report synthesises available evidence (pdf) regarding how salient demographic and economic trends in sub-Saharan Africa are influencing the future of work in agriculture. It also identifies some of the major policy challenges that African governments are facing, which may influence future work in agriculture. Specifically, the report seeks to: document major social, economic, demographic and environmental changes in Africa’s economic landscape and examine their potential effects on agricultural growth and the livelihoods of agricultural workers; consider the relevance and feasibility of smallholder-led agricultural development in Africa in light of emerging changes in the economic landscape; examine the evolving role of agriculture in Africa’s on-going economic transformation; and discuss key entry points for policy and investments towards inclusive, competitive and productive agriculture that will improve livelihoods for agricultural workers. [The authors: Thomas Jayne, Felix Kwame Yeboah, Carla Henry] [African agri-tech startups boom with 110% growth since 2016]
Related “world of work” updates:
(i) SA’s President Ramaphosa has been invited by the ILO Governing Body to co-chair the Global Commission on Future of Work
(ii) Atlas of Work: facts and figures about jobs, employment and livelihoods. All diagrams in the report, published by the German Federation of Trade Unions and the Hans Böckler Foundation, can be individually downloaded.
US-Africa trade policy: pdf Recommendations from the President’s Advisory Council on Doing Business in Africa (741 KB)
On 29 November 2017, the President’s Advisory Council on Doing Business in Africa, under the leadership of Secretary of Commerce Wilbur Ross, adopted its pdf Issues Report (598 KB) , identifying the top obstacles US companies face when approaching, competing in, and operating in African markets. The Council was then tasked with developing a set of recommendations for the US government on how to diminish the obstacles highlighted in the Issues Report. The members of the PAC-DBIA have spent the last three months examining the tools at the US Government’s disposal, the gaps in capacities and programming, the existing resources that could be improved, and what new platforms might spur more opportunity for US exports and business expansion across the African continent. The Recommendations Report we are now submitting focuses on some of the obstacles we identified that are of particular pressing concern in Ethiopia, Kenya, Côte d’Ivoire, and Ghana – the four countries that Council members and U.S Government representatives will visit with Secretary Ross this summer on a fact-finding trip. [Background]
Exporting, importing and wages in Africa: evidence from matched employer-employee data (ILO)
We find that exporters pay on average higher wages to their workers than non-exporters. It is gains from economies of scale that explain the positive wage premium of exporters, rather than differences in skill utilization, the employment of certain types of workers, or technology transfers. In contrast, there is no evidence for a positive firm-level wage premium of importing, at least after controlling for firm age, and the wage premium of importing at the employee-level is estimated to be negative. The paper also finds indirect evidence for a weaker bargaining power of workers employed by importers. These results fit into the African context, where the comparative advantage of firms in export markets is mainly based on low costs than on quality, and where firms import predominantly out of necessity than out of choice. Finally, the paper provides evidence that a gender wage gap is absent within trading firms, while we find evidence for a gender wage gap in non-trading firms. [The authors: Marta Duda-Nyczak, Christian Viegelahn]
COMESA, EU signs €15m cross-border trade programme
The beneficiaries are primarily small-scale traders, in particular women traders, that regularly cross the borders in the COMESA/tripartite region to sell and buy goods, as well as the associations who represent them and defend their interests. Under the programme, gender disaggregated statistical data and analysis on small-scale cross-border trade shall be systematically collected, compiled, harmonized and disseminated. The aim is to increase evidence-based knowledge on the topic and inform better trade policy-making processes at national and regional level as well as ensuring that adequate and gender sensitive basic border infrastructures for small-scale traders are built/upgraded at selected border areas.
Angola to join SADC free trade zone by 2019 (ANGOP)
Angola’s final accession to the SADC free trade zone is expected to take place next year, according to the Angolan trade minister. Jofre Van-dúnem said that the country formally acceded to the free trade zone in February 2003, but its roadmap was only approved on Monday by the Cabinet Council. According to the minister, the roadmap to the SADC secretariat should be presented in June, and Angola’s negotiating strategy should be drafted. The minister reported that there were 5000 tariff items to negotiate, depending on the consensus to be reached, but not losing the sight of the national interest. The effective accession process will be gradual and may last for more than a decade, with the escalation of categories of tax exemption or restraint in some cases in the interest of protecting domestic production
Malawi: 2018 Article IV Consultation
Annex III: External Sector Assessment. Malawi faces a moderate risk of external debt distress and remains vulnerable to shocks. The net foreign assets stood at -35% of GDP as of end-2015.1 External liabilities (at 53% of GDP) consisted mostly of debt liabilities (36% of GDP) and inward FDI stock (17% of GDP). The former consists mostly of concessional loans from multilateral and bilateral official sectors. Public sector loans accounted for most of the external debt, equivalent to 33% of GDP as of end-2017. FDI stock, concentrated in agriculture and manufacturing, is expected to help improve the current account balance through higher export growth and productivity. The accompanying update on debt sustainability analysis indicates that Malawi faces a moderate risk of debt distress based on an assessment of public external debt, whose trajectory remains vulnerable to exogenous shocks, notably shocks to export revenues and exchange rate, pointing to the continued need for rebuilding external buffers. External sustainability is expected to improve as the current account deficit narrows and the economy becomes more resilient. Selected Issues report (pdf):
Malawi is one of the least banked countries in the world. The banking system’s credit to the private sector (relative to GDP) is low compared to peers (Figures 1 and 2). Other measures of financial depth, such as the ratio of broad money to GDP exhibit a similar pattern. Only 16% of the population have accounts at a financial institution, compared to averages of 29% for the Sub-Saharan African region and 22% for Low Income Countries.
Mozambique trade, business and investment pointers: Netherlands Embassy newsletter
De Beers tracks first gems from mine to shop using Blockchain (Bloomberg)
De Beers, which is piloting a scheme using blockchain to create a virtual ledger of diamond sales, said that 100 high-value stones were tracked through the cutting, polishing and manufacturing process to a final retailer. The company plans to roll out the platform later this year. The technology allows De Beers to show transactions to all participants while keeping their identities and the values hidden. It is meant to give buyers confidence that the stones they are buying aren’t fakes or so-called conflict diamonds -- gems used to finance war, terrorism or tyranny. It could also reassure bankers, who’ve been stung by fraud in a business cloaked in secrecy.
50% of containers in West Africa coast are unfit (Punch)
The Shippers Association of Lagos State has said many of the containers coming into the West African coast from Europe and Asia are old, leaking and rusted and cannot be accepted back into Europe. According to the group about 50% are unfit, adding that this is the reason why there are so many empty containers at the seaports.
UNCTAD has begun posting Secretariat Notes for the Trade and Development Board session (4-12 June, Geneva):
New ways in which the UN could address the crisis of multilateralism and trade and its development machinery, as well as what the contribution of UNCTAD would be (pdf). Section 1 of this note discusses the crisis in multilateralism and international trade. Section 2 delineates approaches to maximizing the contribution of trade to inclusive and sustainable development. Section 3 discusses stronger UNCTAD intergovernmental consensus-building and soft-law approaches, to complement hard rule-making. The note concludes with several suggestions and questions for discussion with a view to revitalizing multilateral approaches to trade and sustainable development.
Industrial policies and productive capacity policies for a digital economy (pdf). To harness the development benefits that these impacts of digitalization on the production process may provide, developing countries may need to rebalance their traditional innovation and industrial policies oriented to the supply side, shifting towards greater attention to demand considerations. For innovation policies, this might imply complementing the traditional focus on building capabilities that support and accelerate the diffusion and adoption of imported technology, as well as the technology’s adaptation to local circumstances, towards greater emphasis on generating newly designed goods and services with entirely new functionalities and features that are customized for local consumers. These more proactive approaches emphasize the importance of interaction between all actors who contribute to innovation.
Today’s Quick Links: The ECOWAS Parliament convenes today, in Abuja, for its 2018 First Ordinary Session: an overview of its agenda The 8th SADC River Basin Organisations workshop concluded yesterday in Windhoek: an overview of discussion, meeting concept note (pdf) Nigeria’s Senate to investigate Gambia-Nigeria trade facilitation MoU Kenyatta urges EALA to strengthen its Secretariat Enhancing rural road access in Mozambique’s Zambezia and Nampula provinces: World Bank approves $150m loans Nigeria now has 19 million active taxpayers, up from 14 million in 2017 – Osinbajo World Bank: Investment in emerging and developing economies – accelerating but still subpar IMF: Are remittances good for labor markets in LICs, MICs and fragile states? Wharton: Why India’s online grocery battle is heating up India merges anti-dumping, import safeguard bodies India giving rice and wheat production vast support, US tells WTO |