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Kenya and Ghana deposit instruments of African Continental Free Trade Area ratification
The pdf AU Assembly Decision (138 KB) that all Member States of the African Union sign and ratify the Agreement establishing the African Continental Free Trade Area (AfCFTA) in order to usher its entry into force as expeditiously as possible was made during the 10th Extra-ordinary Summit on the AfCFTA on 21 March 2018.
During the Summit, the Agreement establishing the AfCFTA was presented for signature, along with the Kigali Declaration and the Protocol on Free Movement of Persons, Right to Residence and Right to Establishment. In total, 44 of the 55 AU Member States signed the pdf Consolidated draft text of the AfCFTA Agreement (2.83 MB) , 47 signed the Kigali Declaration and 30 signed the Protocol on Free Movement.
On 10 May 2018, Kenya and Ghana became the first countries to deposit the instruments of ratification of the AfCFTA. The Chairperson of the African Union Commission received the Special Envoy of the Republic of Kenya and the Ambassador of the Republic of Ghana during a special ceremony in Addis Ababa to mark the occasion.
The following statement was delivered by AUC Chairperson H.E. Moussa Faki Mahamat:
Depositing of the instruments of ratification of the African Continental Free Trade Area (AfCFTA) by Kenya and Ghana
Today is indeed a historic day in the annals of the African Union. We warmly welcome you and would like to thank you as the two first countries who deposited the instrument of ratification of the Agreement establishing the African Continental Free Trade Area (AfCFTA), following the ratification of the Agreement by your Parliament.
I congratulate both countries (Kenya and Ghana) for being the first AU Member States to deposit their instruments of ratification with the African Union Commission.
The speed with which your countries ratified the AfCFTA Agreement is a testament to the commitment that you have always shown, not only to Africa in general but also to the African Union.
Your leadership role also presages the role played by your respective RECs in the African Union and therefore the AfCFTA. So this moment should not be underestimated.
Your countries have led the way in signalling to the rest of the AU Member States that the process of our integration is irreversible and will benefit all citizens of Africa.
We encourage other Member States to follow your action. We note with greatest appreciation the fact that other Member States have ratified the AfCFTA Agreement.
We congratulate the governments and people of both countries and we appreciate your commitment to the landmark achievement of the legal foundation of the African integration agenda. We expect to receive more instruments of ratification anytime from now.
I look forward to you encouraging other signatories to the AfCFTA Agreement to ensure that a minimum of twenty-one (21) additional instruments of ratification are deposited with the Commission before the end of 2018. That is the expectation of our Heads of State and Government.
Once again, on behalf of the African Union Commission, many congratulations to the People and Government of Ghana and Kenya. We wish your people the very best in obtaining the most from the implementation of the AfCFTA once the Agreement comes into force.
I thank you.
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The future of work in African agriculture: Trends and drivers of change
This ILO report synthesises available evidence 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: i) 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; ii) consider the relevance and feasibility of smallholder-led agricultural development in Africa in light of emerging changes in the economic landscape; iii) examine the evolving role of agriculture in Africa’s on-going economic transformation; and iv) discuss key entry points for policy and investments towards inclusive, competitive and productive agriculture that will improve livelihoods for agricultural workers.
Executive summary: Extract
There is an important balance to be struck while transforming agriculture in the region. In the long term, a successful economic transformation in Africa is likely to shift low-productivity workers progressively out of agriculture and into higher-productivity jobs in the non-farm sector, as has been the case in most other regions of the world. Inclusive agricultural growth will support a stable and effective economic transition. Since a large proportion of the workforce in most African countries remain engaged in agriculture, agricultural development strategies that enable millions of smallholder households to participate in and benefit from these strategies will result in stronger multiplier and growth linkage effects that will expand job opportunities in the rest of the economy.
The challenge, however, will be how to generate the broader economic growth processes and expenditures in local rural economies that expand off-farm work opportunities. It is not just the rate at which agricultural productivity grows but also how inclusive it is that will influence the strength of growth multipliers in the non-farm economy, the rate at which work opportunities in the non-farm economy are created, and the returns to labour from those opportunities. Agricultural productivity growth is therefore crucial not only to improve the livelihoods of people who remain fully or partially engaged in agriculture but also to expand the pace of employment and income growth in the off-farm segments of the economy, including at various other stages in agri-food systems, and promote economic transformation.
The future of work in Africa will hinge on the enabling environment created and the quality of public spending by African governments and their development partners in the agricultural sector. African governments currently spend on average around six times more on agriculture and related rural development than all of their international development partners combined. Their role is therefore decisive. Evidence points to four strategic priority areas.
First, governments must implement inclusive smallholder development policies that increase the incomes of millions of rural people engaged in agriculture and thereby generate the multiplier effects that expand employment opportunities in the rest of the economy. Government actions that have the most significant impacts on agricultural productivity growth and poverty reduction are: agricultural research and development; physical infrastructure (rural electrification, road, rail and port infrastructure); policies that reduce the costs of private sector investment and promote competition, and agricultural service delivery and extension systems that facilitate farmers’ access to productivity-enhancing technologies.
Second, in coming years, innovative forms of public investment will be necessary to promote resilient and sustainable growth in agricultural productivity in the face of climate change. Integrating community resilience and climate-smart agriculture into broader employment strategies would afford opportunities for African governments to achieve sustainable agricultural intensification and employment objectives.
Third, owing to continued population growth, increasing demand for land, and rising land prices, median farm sizes are declining and driving many households to seek work outside their own farms, as agricultural wage workers and in non-agricultural informal businesses. This is especially true for young people between the ages of 15 and 34 years, who account for almost 60 per cent of the labour force in sub-Saharan Africa. In the context of increasing land subdivision, fragmentation, and concentration, programmes to promote access to land for young people will become ever more important.
Governments could promote long-term employment and livelihood objectives by mobilizing more resources for education and skills development in agriculture and related agri-food systems. Contrary to popular perceptions, the average age of people engaged in farming is not rising, and more than 30 per cent of the agricultural work force is under 35 years of age. Successful agricultural production is increasingly knowledge-intensive. Well-functioning agricultural training colleges can enhance workers’ productivity and enable young “agripreneurs” to take advantage of emerging opportunities and promote inclusive forms of agricultural productivity growth.
Download the full Research Department Working Paper on the ILO website.
Thomas S. Jayne is University Foundation Professor at Michigan State University. Felix Kwame Yeboah is an Assistant Professor of International Development at Michigan State University. Carla Henry is a Senior Specialist in the ILO Research Department.
© International Labour Organisation, 2018.
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IMF Executive Board 2018 Article IV Consultation with Malawi
On April 30, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Malawi. At the same time, the Board also approved a new three-year Extended Credit Facility Arrangement for Malawi and a press release on this was issued separately.
The economy recently rebounded from two years of drought. Growth picked up from 2.3 percent in 2016 to an estimated 4.0 percent in 2017 owing to a recovery in agricultural production. Inflation has been reduced below 10 percent – from high double digits in recent years – due to the stabilization of food prices, prudent fiscal and monetary policies, and a stable exchange rate. The current account deficit narrowed to 10.0 percent of GDP in 2017 from 13.6 percent in 2016, following lower maize imports and higher prices for some exports. The banking system remains stable though vulnerabilities have somewhat increased.
While the authorities regained control over the budget during FY16/17, this proved challenging during FY17/18. Revenue shortfalls and expenditure overruns, including the bailout of maize purchase loans by a parastatal exerted significant pressures on the budget. The authorities are implementing remedial measures to improve the fiscal position in FY18/19. These measures will also help contain public debt which has doubled over the last decade, reaching 55 percent of GDP in 2017, after the withdrawal of donor budget support, securitization of arrears, and recapitalization of the Reserve Bank of Malawi and two public commercial banks.
Economic growth is expected to increase gradually, reaching over 6 percent in the medium term. Growth will be supported by enhanced infrastructure investment and social services as well as an improved business environment, which will boost confidence and unlock the economy’s potential for higher, more broad-based, and resilient growth and employment. Downside risks to growth include political pressures in the run-up to next year’s elections that could weaken policy discipline and reform efforts, weather-induced shocks, and declines in agricultural commodity prices.
Staff Report
Article IV Discussions: A new path for growth and debt sustainability
Fostering Higher, More Inclusive, and Resilient Growth
The authorities have adopted a new Malawi Growth and Development Strategy (MGDS) III for 2018-23. Finalized in 2017 Q4, MGDS III aims at building productivity, competitiveness, and resilience mainly through stepped-up investment in infrastructure and social sectors but also with reforms to improve financial market development and the business environment – including governance – against a sound macroeconomic backdrop. These areas coincide with staff’s recommendations on key reforms to ignite higher, more inclusive, and durable growth as well as job creation (Selected Issues Paper). Staff and the authorities concurred on the need to advance reforms on multiple fronts while prioritizing the agenda. The authorities plan to prioritize improving low quality and coverage of infrastructure (especially electricity, roads, telecommunications, water, and irrigation) and social spending (particularly, education, healthcare, and gender issues.
Governance reforms (related to PFM, procurement, and broader governance areas) are expected to catalyze concessional financing in these areas. Staff emphasized gains could be achieved by, in parallel, improving the quality and efficiency of public spending and raising access and affordability of credit. The authorities also plan to implement deep agricultural market reforms to foster growth and ensure food security. These include a strategic review of ADMARC, aligning export and import control systems with the WTO norms, further FISP reforms, and implementing the new land reform bills (MEFP ¶33). Once these are underway, measures related to reducing regulatory burdens and strengthening the judiciary will be considered. Staff noted that progress in removing trade barriers, exchange rate flexibility (especially during 2012-16), and liberalization of fuel prices supported moderate growth, and adaptive policies should continue being implemented.
Preserving Debt Sustainability
Malawi’s risk of external debt distress is moderate. The debt sustainability analysis (DSA) update carried out jointly by staffs of the IMF and the World Bank (Annex V) indicates that all baseline external debt burden indicators are below their policy-dependent debt burden thresholds. Stress tests highlight vulnerabilities to exogenous shocks, especially export revenues and exchange rate – reflecting the country’s narrow export base and heavy reliance on rain-fed irrigation. However, rising domestic debt has increased vulnerabilities. Domestic financing increased sharply after the withdrawal of donor budget support, securitization of arrears, and recapitalization of the RBM and two public banks. As a result, total public debt more than doubled since HIPC and MDRI debt relief in 2006 – projected to reach 55 percent of GDP in 2018. Staff and the authorities agreed that future borrowing for large infrastructure needs to be balanced against elevating the risk of debt distress (MEFP ¶24).
To maintain debt sustainability, the authorities agreed to suspend contracting of new non-concessional loans. However, under the program, exceptions can be considered on a case by case basis for new loans backing priority growth-enhancing projects – accompanied by fiscal measures that offset the debt impact of the non-concessional portion of the loan. The authorities concurred with staff on the importance of developing a comprehensive medium-term debt strategy, including prioritizing investments based on rigorous cost-benefit analysis, absorptive capacity, growth, poverty reduction, and debt sustainability considerations. To this end, they have requested FAD Technical Assistance (a Public Investment Management Assessment) with a mission planned for mid-2018. In addition, state-owned enterprise reforms, beginning with enhanced oversight, aim to reduce contingent liabilities.
Annex III. External Sector Assessment
The external position of Malawi in 2017 was broadly consistent with the level implied by medium-term fundamentals and desirable policies. The current account is expected to improve gradually over the medium term, reflecting higher export growth but also persistent need for investment-related imports. Policies should strive to enhance macroeconomic resilience, preserve fiscal and debt sustainability, and advance growth-friendly structural reforms.
Current account
The current account deficit narrowed last year – to an estimated 10 percent of GDP, down from 13.6 percent in 2016, but still about one percentage point higher than the 2011-15 average. The improvement reflects a large base effect in 2016 from increased imports of maize and related services in response to the humanitarian crisis, which more than offset the impact of deteriorating terms of trade (-4.6 percent). The persistent current account deficit reflects a narrow export base (with three products – tobacco, sugar, and tea – accounting for over three-quarters of total exports), heavy reliance on investment-related imports, and strong population growth. Going forward, the current account balance is projected to improve gradually, on the back of stronger export growth and resilient investment-related import demand.
Capital and Financial Flows
Net financial inflows in the past year recovered from low levels in 2016 to the 2011-15 average (relative to GDP). Medium- and long-term loan disbursement doubled, thanks to the agricultural support funds from the World Bank and stronger project support. Capital account balance, reflecting project, dedicated, and off budget grants, stood at 5.2 percent of GDP last year, steadily improving from the 2015 level, though lower than the temporary spike (9.1 percent of GDP) in 2016 reflecting the humanitarian support in response to the drought. Foreign direct investment flows (2 percent of GDP) disappointed last year, amid investor concerns over power shortages and rising factor costs. Capital and financial flows more than fully financed the current account deficit, leading to a positive overall balance.
Reserves
International reserves improved to an adequate level last year. At end-2017, gross international reserves stood at US$757 million, reflecting strong capital and financial inflows. This is equivalent to 3.3 months of prospective imports of goods and services, up from 2.9 months in 2016. The IMF’s metric to assess reserve adequacy in credit-constrained economies, which explicitly weighs the cost and benefits of holding reserves, indicates that a reserve level of 3.2 months of imports would be adequate for Malawi, assuming a low opportunity cost of holding reserves.
Two traditional approaches – with broad money coverage at 52 percent (against a 20 percent threshold) and short-term debt coverage at 360 percent (against a 100 percent threshold) – also indicate that the current reserve stock is adequate. However, the rise in reserves in 2017 reflects largely the agricultural support funds from the World Bank ($80 million, equivalent to 0.4 months of imports), which is soon expected to be fully spent. Moreover, the country has been vulnerable to multiple shocks historically (especially to international commodity prices and weather shocks), while import needs are persistently strong. Over 2001-17, the reserve import coverage averaged 1.8 months, with a standard deviation of 0.9 months. Going forward, reserves are expected to rise to about 3.8 months by 2021 and reach 4.5 months over the medium term.
Selected Issues paper
Supporting growth through increased credit to the private sector
A sound and inclusive financial system lays the foundation for sustained and broad-based growth. Financial deepening increases a country’s resilience and boosts economic growth by mobilizing savings, promoting information sharing, improving resource allocation, and facilitating diversification and management of risk.
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. Other measures of financial depth, such as the ratio of broad money to GDP exhibit a similar pattern. Only 16 percent of the population have accounts at a financial institution, compared to averages of 29 percent for the Sub-Saharan African (SSA) region and 22 percent for Low Income Countries (LICs). Raising credit growth across the population will benefit broad-based economic growth.
Role of Public Policy in Facilitating Deepening
Promoting higher credit growth and financial inclusion requires a detailed Financial Sector Development Strategy. Key elements of this strategy are outlined below.
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Fostering macroeconomic stability. Continued disinflation would support macroeconomic stability, in turn, lowering uncertainty and the cost of funds, reducing the costs of opening and maintaining an account in financial institutions, and expanding demand for financial services. Reducing crowding out – through better fiscal and government debt management – would help credit growth, reduce risks to financial stability, and increase competition across banks for new lending opportunities.
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Addressing information gaps. Strengthening collaboration across banks, the RBM, and the government to offer financial literacy education and training would facilitate better targeting these efforts and expanding them to those at the bottom of the income pyramid.
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Enabling legislation for microfinance and savings and credit cooperatives (SACCOs). Enabling these institutions that traditionally serve lower-scale operations could spur access to financial services. The benefits of greater microcredit penetration should be balanced with concerns over the lack of regulatory oversight, potential distortions from extensive government support (e.g., discouraging private incentives to mobilize savings), and directed lending.
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Promoting mobile technology. Supporting technological innovation by promoting the role of the private sector and creating infrastructure to encourage participation would reduce the cost of providing financial services and broaden access of payment services to under-served segments of the population (e.g., in rural areas). Introduction of digital identification (ID) can enhance the reach of mobile banking and deepen financial inclusion. Applying biometric technologies (fingerprinting, for instance, already practiced by two microfinance institutions) to credit approval helps build financial transaction history, allows banks to identify good borrowers, and increases overall efficiency. With adequate coverage, the low transaction costs of the mobile platform could facilitate payments for state benefits such as the FISP and social cash transfers.
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Managing risks. Proactive oversight, continuous risk monitoring, and mitigating of systemic risks will be critical to supporting a healthy process of financial deepening. For example, regulatory and supervisory frameworks should keep up with market deepening to avoid creating new sources of risk and instability. Stronger regulation and enforcement of connected and insider lending and encouragement of micro-credit would also reduce risks.
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Strengthening financial frameworks. Improving informational and contractual frameworks would lower financial transactions costs. For example, building or upgrading credit registries. Well-targeted partial credit guarantee schemes could address market failures and promote access in environments with weak credit information and creditor rights. The effectiveness of commercial courts and insolvency regimes could be improved with a commercial courts arbitration mechanism and training for judges to professionalize financial and economic justice systems. Reducing high overhead, personnel, and loan loss provisioning costs would also contribute to lower borrowing costs.
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Improving property rights. Better titling, registration, and security of land tenure would broaden the use of land as collateral. Responding to the challenges in this area, the government passed 10 new Land Laws in 2016 that strengthen smallholders’ tenure security and gender equity by registering customary estates in participatory and low-cost ways. Initial steps have also been taken towards better land administration service delivery, establishing a fully electronic land information system, and modernizing estate leasehold management and ground rent collection. Effective implementation of these laws together with registration and documentation of land rights will facilitate the emergence of functional land markets and the use of land for collateral.
Malawi has made progress toward financial deepening but considerable efforts are still needed to promote entrepreneurship development by addressing the structural challenges constraining SMEs. Alleviating the various structural barriers to financial deepening, both in terms of depth and access to financial services, will bring substantial benefits for the economy in terms of growth, poverty alleviation, resilience to shocks, and effectiveness of monetary and fiscal policies.
A path toward higher and more inclusive growth
Over the past decade, Malawi's economic growth has been weak and not as inclusive as in peers. Malawi's real GDP growth dropped from 7.5 percent in 2007-11 to 3.6 percent in 2012-16. As a result, per capita GDP is far below that of regional peers and other fragile states. The average poverty rate was around 70 percent in 2016 (the World Bank’s World Development Indicators (WDI) estimates based on international poverty line of US$1.90 per day) and rural poverty is on the rise due to high population growth (3 percent) and density. These pressures will only continue to build with nearly half the population below the age of 15.
Malawi’s growth trends reflect a lack of both economic diversification and resilience – raising Malawi's vulnerability to external and weather-related shocks. Two thirds of the population are employed in agriculture (primarily maize farming). However, this sector's share of GDP has declined from 40 to 30 percent of GDP over the past decade due to its low productivity and vulnerability to weather-related shocks – reflecting low coverage of engineered irrigation systems, high transport costs, insufficient services, and limited access to credit. The two-year El-Niño-induced drought (2015-16), for example, dented maize production and adversely affected parts of manufacturing and retail trade closely linked to agriculture. It also reduced hydroelectricity generation (Malawi's main source of electricity), which increased operating costs and lowered capacity utilization in manufacturing and trade. In addition, Malawi is vulnerable to shocks in global tobacco, tea, and sugar prices – altogether about 80 percent of Malawi's exports. Over the past decade, policy uncertainty, governance challenges and high inflation have also taken a toll on confidence and economic activity.
This paper examines these challenges and policies to overcome them and, ultimately, achieve higher and more inclusive growth.
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tralac’s Daily News Selection
Underway in Cape Town: tralac’s first training workshop for journalists who write on trade and integration matters.
The workshop includes practical exercises, reviewing case studies (including reports on the AfCFTA and SACU), the use of data, infographics/visualisation and the use of different channels of information dissemination (including social media). Download the draft programme (pdf).
AfCFTA updates
Namibia to sign N$50 trillion Africa trade deal (New Era)
President Hage Geingob yesterday confirmed that Namibia will soon sign up to the AfCFTA, which will give the country easier access to the African market currently valued at nearly N$50 trillion. Namibia has always been pro-AfCFTA but delayed signing the actual agreement to first ensure all its bases were covered through an inclusive consultative process, said Geingob during a meeting with AU Commission Chairperson Moussa Faki Mahamat. “Africa’s advancement remains first and foremost a matter for Africans. Namibia reiterates her commitment to the AfCFTA and the Protocol to the Treaty Establishing the African Economic Community Relating to the Free Movement of Persons, Right of Residence and Right of Establishment, and will expedite internal processes to sign and ratify these instruments. We might have sent missing or confusing signals but we are committed to the reform. We will be part and parcel of that reform. We would like things to be done in a consultative and inclusive way so we follow all the steps, so there is no way to say I was not part of it once it is implemented. We will implement Agenda 2063 and its first 10-year implementation plan in order to achieve the Africa we want.”
David Luke, a CFTA architect: No way Nigeria will abandon trade pact (African Business Magazine)
Similarly, Luke believes that Nigeria’s withdrawal is due to domestic pressures, but, like the Wallonia region, eventually, Nigeria will sign up to the agreement. “There is no way Nigeria will walk away from this deal,” he says. “ATPC analysis shows that Nigeria will be one of the major beneficiaries of the CFTA and the government knows that. So, they will have to bring the different groups together and allay their fears, which is what they are currently doing. The agreement gives larger economies access to a market of 1.2bn people with no added duty.”
From RECs to a CFTA: strategic tools to assist negotiators and agricultural policy design in Africa (UNCTAD)
Despite farming being the primary source of food and income in the region and providing up to 60 per cent of all jobs on the continent, the share of agricultural commodities in intra-regional trade is less than 30%. Meeting the standards required for integrating into global value chains will be a gradual process. In the interim, gains can be made from integration of regional value chains. Since agriculture accounts for 25% of African GDP, developing regional value chains for strategic agricultural commodities is essential to CFTA’s success, as they can help exploit economies of scale, lower production and marketing costs. Better agriculture directly correlates to improved livelihoods, given the sectors importance as a job-creator in Africa.
To maximize the opportunities offered by RECs in agriculture, it is necessary to deal with the overlapping memberships that hinder harmonization and standardization, as well as the enforcement of rules of origin. Looking exclusively at the strategic commodities 32% of all traded volumes flow through channels in which trade partners present two or three overlapping memberships. Unless a good dispute settlement mechanism exists, some disputes can threaten the continued operation of RECs and hinder the CFTA’s success.
Gender and trade in the EAC: two new reports from UNCTAD, TradeMark East Africa
The report East African Community Regional Integration: trade and gender implications (pdf) – analyses the impact of EAC regional integration on women’s wellbeing in five of the six EAC countries: Burundi, Kenya, Rwanda, the United Republic of Tanzania, and Uganda. UNCTAD also released an advocacy document called Advocating for gender-sensitive trade policymaking in the East African Community (pdf), which makes concrete recommendations to better guide trade policies to the benefit of women across the bloc, based on the findings of the report. Embedded with specific objectives and monitoring indicators, UNCTAD’s recommendations target eight areas:
Tariff liberalization in the EAC export markets led to an increase in women’s employment share in manufacturing firms in Kenya, Tanzania, and Uganda, while women workers in Burundi were negatively affected. Production workers – those performing simple tasks such as maintenance and assembly line work – benefited the most, with little improvement for women in white-collar jobs. There has been a shift in economic activity away from agriculture towards services, and to a lesser extent, to industry. The shift in employment structure was relatively weak, however, especially for women: 96% of women in Burundi, 76% in Kenya, 84% in Rwanda, 71% in Tanzania, and 77% in Uganda are still employed in agriculture. In the EAC, women are predominantly self-employed or are contributing family workers, the two forms of vulnerable employment: this applies to 97% of women in Burundi, 73% in Kenya, 84% in Rwanda, 80% in Tanzania, and 83% in Uganda. Women also account for a higher share of informal employment. “Gender equality is not a natural outcome of the development process and there is a need to proactively promote gender equality policies,” Dr. Kituyi said.
Uganda: Company perspectives on non-tariff measures (ITC)
The results presented in this report (pdf) are based on a business survey implemented by ITC, in collaboration with the Ministry of Trade, Industry and Cooperatives of Uganda. The survey was conducted from August 2015 to August 2016. The survey found that 226 of the 493 interviewed companies (46%) struggle with regulations imposed by Uganda and partner countries, with agricultural exporters facing more difficulties than exporters from the manufacturing sector. Companies that export coffee and processed foods are among the most affected.
Almost one-third of exporters’ difficulties are due to regulations imposed by members of the EAC, which is also Uganda’s top export market (buying 49% of its exports). This means the share of NTMs applied by EAC countries is proportionally lower than their export share. Conformity assessment and rules of origin are the toughest NTMs applied by EAC countries. Rwanda and Kenya imposed the greatest percentage of these regulations. EU countries impose a proportionally higher share of NTMs than their share of Ugandan exports. EU countries buy 21% of Ugandan exports but apply more than 27% of the reported NTMs. The United Kingdom and Belgium apply the most NTMs among EU countries, with technical requirements and conformity assessment being the biggest challenges for Ugandan exporters. Sanitary and phytosanitary requirements and technical barriers to trade together comprise 46% of the difficult cases reported by Ugandan exporters. A quarter of the cases involve problems with technical requirements and 21% concern difficulties with conformity assessment.
UNCTAD has posted two reports on key statistics and trends in international trade:
The status of world trade. This report is structured into two parts. The first part presents an overview of the status of international trade using statistics up to 2017. The second part provides illustrative statistics on international trade in goods and services covering the last decade. The second part is divided into two sections. Section 1 provides trade statistics at various levels of aggregation illustrating the evolution of trade across economic sectors and geographic regions. Section 2 presents some of the most commonly used trade indicators at the country level, so as to illustrate trade performance across countries.
Trade imbalances. This report is structured in two parts. The first part presents a discussion on trade balances. The second part discusses trends in selected trade policy instruments including illustrative statistics. The second part is divided into five chapters: tariffs, trade agreements, non-tariff measures, trade defence measures, and exchange rates. Trade trends and statistics are provided at various levels of aggregation illustrating the use of the trade policy measures across economic sectors and geographic regions.
Water and sanitation, energy and food-related logistics services. More presentations from UNCTAD’s Multi-year Expert Meeting on Trade, Services and Development (which ended yesterday in Geneva):
(i) Note by the UNCTAD secretariat (pdf). Evidence suggests that liberalization alone is not sufficient to promote trade flows in energy services among partners. The liberalization of trade in electricity in the Andean Community has not led to an expansion of such trade, owing to a lack of interconnection; differing pricing practices associated with cross-border distribution and differing environmental, accounting and tax regulations. These factors can only be addressed through regulatory harmonization or cooperation among the parties concerned.
The logistics services category does not exist in the WTO classification. However, there is a category for transport services classified by modes – maritime, air, rail, road and other modes (pipeline, space and internal waterway transport). Within each of these groups are services such as equipment rental, pushing and towing services and generic supporting services, There is also a separate category called services auxiliary to all modes of transport (cargo-handling services, storage and warehouse services, freight transport agency services and others). The dispersion of logistics services throughout the sectoral classification list may be due to changes in business practices.
As experiences in some regions have demonstrated, it is necessary to address both market access issues and regulatory divergences. Regulatory divergences can be tackled, for example, through regulatory cooperation or convergence. Furthermore, data on water and sanitation, energy and logistics services, as well as trade data in these sectors, are difficult to collect. Better data remains critical for the development of these sectors. More steps should be taken to improve data collection in these sectors, as better data remains essential for evidence-based policymaking.
(ii) Trade in logistics services and food losses reduction: enhancing trade in food-related logistics and exporting opportunities in Africa (Donat Bagula, Permanent Secretary, Ministry of Transport and Communications, DRC)
(iii) Energy trade in Africa and achievements of SDG7: an African perspective (Mosad Elmissiry, Head of Energy Programmes, NEPAD)
East African nations can help empower women economically by harnessing trade policies
New United Nations report spotlights gender-sensitive trade policymaking in the East African Community
East African nations can harness their trade policies to help empower women economically in the region, thanks to improvements in education, employment and other key areas, according to new research released by UNCTAD and funded by the Netherlands through TradeMark East Africa, a trade promotion agency.
In a new report, East African Community Regional Integration: Trade and Gender Implications, UNCTAD analyses the impact of East African Community (EAC) regional integration on women’s wellbeing in five of the six EAC countries: Burundi, Kenya, Rwanda, the United Republic of Tanzania, and Uganda.
UNCTAD also released an advocacy document, Advocating for gender-sensitive trade policymaking in the East African Community, which makes concrete recommendations to better guide trade policies to the benefit of women across the bloc, based on the findings of the report.
Embedded with specific objectives and monitoring indicators, UNCTAD’s recommendations target eight areas:
- education
- employment
- access to resources
- unpaid care and domestic work burden
- decision-making
- gender policy at the national and regional level
- gender mainstreaming in trade policy
“This new analysis is another UNCTAD contribution to the debate on how we, together, can make trade policy more gender-sensitive, and pave the way for more inclusive prosperity that leaves no one behind,” UNCTAD Secretary-General Mukhisa Kituyi said.
Trademark East Africa Chief Executive Officer, Frank Matsaert, said: “We will continue facilitating women’s empowerment through support of delivery of practical solutions to challenges that affect women entrepreneurs who trade across borders in East Africa.”
Policy and practical ideas
The report looks at gender and trade issues in five EAC countries (the sixth, South Sudan, joined in September 2016) to assess the impact of regional integration on women’s employment and quality of life. It underlines the importance of putting in place policies to address gender inequalities and ensure that women fully benefit from international trade.
“The analytical work in this report is accompanied by practical ideas,” Dr. Kituyi said.
Among the key recommendations are closing the gender gap in secondary and tertiary education and putting in place skill development programmes to enable women to match what is needed to work in higher-value-added sectors.
A regional credit mechanism could be established to support women entrepreneurs across EAC countries, the report says, since existing country-level mechanisms have proved insufficient and not uniform.
Gender chapters could be included in any future free trade agreements the region will engage in. UNCTAD experts recommend the establishment of a regional platform to exchange best practices among EAC member countries as well as a uniform monitoring tool to check the implementation of the 2017 pdf EAC Gender Equality and Development Bill (5.32 MB) , an important piece of regional legislation on gender equality.
Women and regional integration
Home to 150 million people, the EAC was founded in 2000 by Kenya, Tanzania and Uganda. Rwanda and Burundi joined in 2007, and South Sudan in 2016. The UNCTAD report examines the impact of regional integration and overall trade openness on women’s employment patterns.
Tariff liberalization in the EAC export markets led to an increase in women’s employment share in manufacturing firms in Kenya, Tanzania, and Uganda, while women workers in Burundi were negatively affected. Production workers – those performing simple tasks such as maintenance and assembly line work – benefited the most, with little improvement for women in white-collar jobs.
There has been a shift in economic activity away from agriculture towards services, and to a lesser extent, to industry. The shift in employment structure was relatively weak, however, especially for women: 96% of women in Burundi, 76% in Kenya, 84% in Rwanda, 71% in Tanzania, and 77% in Uganda are still employed in agriculture.
In the EAC, women are predominantly self-employed or are contributing family workers, the two forms of vulnerable employment: this applies to 97% of women in Burundi, 73% in Kenya, 84% in Rwanda, 80% in Tanzania, and 83% in Uganda. Women also account for a higher share of informal employment.
“Gender equality is not a natural outcome of the development process and there is a need to proactively promote gender equality policies,” Dr. Kituyi said.
Education, land and credit
For example, the two largest economies in the region – Kenya and Tanzania – registered the highest levels of gender inequality among the five EAC members studied, according to the 2015 edition of the Gender Inequality Index issued by the United Nations Development Programme (UNDP).
Adult literacy and primary education enrolment rates have increased in the region since the creation of the EAC in 2000, with women’s literacy reaching 90% of men’s in 2015, outstripping the sub-Saharan average of 77%. However, access to secondary and tertiary education continues to be limited, especially for women.
The introduction of equal property rights has not sufficiently reduced the gender gap in land ownership. Only 51% of women in Burundi, 35% in Kenya and Uganda, and 46% in Rwanda are landowners.
Access to credit through a financial institution remains limited. Family or friends continue to be the most widespread source of loans. In Kenya and Uganda, for example, around 18% of men and only about 14% of women borrowed from a financial institution.
Building partnerships
Women also shoulder a higher share of unpaid care work than men. This, in turn, limits the number of hours they can devote to paid work, constrains their mobility and limits their access to market resources and information.
“Building partnerships is indispensable for bridging information gaps which we have seen hinder women in participating in trade,” Lisa Karanja, TradeMark East Africa’s Senior Director for Business Competitiveness, said.
“We have simplified information and partnered with public and private institutions to create information communication technology (ICT) platforms whereby women can access information through their phones or in physical information centres located at border crossings across East Africa.”
The research was conducted by UNCTAD’s Trade, Gender and Development Programme. UNCTAD is committed to using trade and development policies to tackle inequalities worldwide. Addressing gender inequality and promoting women’s empowerment is a critical part of its work.
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Key Statistics and Trends in International Trade and Trade Policy 2017
Key Statistics and Trends in International Trade: The Status of World Trade
After strongly rebounding from the Great Recession of 2009, international trade has grown at a sluggish pace that turned dramatically negative in 2015. Trade statistics for 2016 have been also following a negative trend, but at a more moderate pace (a decline of about 3 per cent in value terms). These statistics have been at odds not only with previous trends but also with respect to the overall economic environment.
Negative trade growth during a period of economic expansion has not been recorded since 2001, when the decline in the value of international trade was only marginal (not even 1 per cent). The magnitude of the decline in the trade of goods and services observed in 2015 and 2016 was a reflection of low commodity prices and of a change in the dynamics behind the process of international integration.
The most commonly used index to gauge globalization trends – the ratio of the value of world trade over global output – indicates a decline in economic interdependence. This index stalled at about 30 per cent between 2011 and 2014 (a level first reached in 2007), and then fell by about 5 percentage points during 2015 and 2016.
On a positive note, preliminary statistics for 2017 and the forecast for 2018 depict a less alarming picture. According to most international agencies, global output growth is expected to be between 3.2 and 3.6 per cent for 2017, with 2018 expected to register a similar increase. Global growth should positively influence world trade, which is expected to grow in 2017 between 3.5 and 4 per cent (in volume terms). A similar performance is forecasted for 2018.
The trade downturn of 2015 and 2016 was due to several factors. Primarily, a substantial part of the fall in the value of world trade was just nominal rather than a real contraction. In other words, while many exporters had to cope with lower prices, they saw no decline in export volumes. In particular, the fall in commodity prices and the appreciation of the United States dollar greatly contributed to the fall in the value of international trade. The appreciation of the US dollar has affected the value of international trade because the same volumes of goods can be purchased with fewer dollars. Still, deflationary factors can explain only some of the trade weakness of 2015 and 2016.
The statistics on the volumes of trade for 2015 and 2016, although positive, were also below historical standards, especially for developing countries. This has seldom happened in the last few decades and only during economic downturns, as in 2001 and in 2009. Two other factors contributing to the decline in global trade were a weak demand in major developed economies and the transition of East Asian economies from a trade oriented strategy towards a more domestically focused development path. Moreover, the weakness of international trade can also be partly explained by the ongoing decline in the vertical specialization process across countries.
An informative statistic for this trend is the reliance of the manufacturing sector on imported inputs (measured by the share of intermediate imports over the exports of manufacturing goods). This indicator has declined in many countries during the last decade. For example, in the case of China this statistic fell from almost 50 percent in 2007 to about 30 percent in 2016.
Geographically, the trade downturn of 2015 and 2016 was quite widespread. Developing countries were hit hard by the collapse in trade, and in most cases harder than developed countries. The value of international trade tumbled the most in commodity exporting regions. Sub-Saharan Africa's exports earnings declined by an average of about 20 per cent per year (about 30 percent in 2015 and an additional 10 percent in 2016). Lower oil prices contributed to the collapse of exports earnings in the transition economies and the region comprising West Asia and North Africa. Especially in those regions the lower exports earnings contributed to lower demand and reduced governments' budgets, negatively affecting imports. Lower export earnings also contributed to recessions and often resulted in the depreciations in the exchange rates, which ultimately further reduced demand for imported goods.
Other regions have fared relatively better, but still registered significant declines. Latin American and South Asian trade fell by about 10 percent per year, both in relation to imports and exports. For the region of East Asia, imports fell substantially more than exports (about 10 per cent vs 5 per cent). The resilience of East Asian exports is not surprising, as East Asian manufacturing exporters are highly competitive and therefore were better able to weather the unfavourable economic environment. For developed countries, trade declined at a yearly rate of about 6 per cent in relation to imports and about 7 per cent in relation to exports.
During the last two years, the decline in export earnings was severe for many countries, especially for those whose exports are oriented towards oil and fuels. Most countries registered a trade decline with the exception of Kuwait, Thailand and Vietnam and a number of smaller countries. The largest declines are those of the largest economies, with the European Union's exports decreasing the most in value terms, China second and the United States third. Also of significance was the drop in the value of exports in a number of oil exporting countries such as Russia, Canada, Norway and most of the countries in the West Asia and North Africa regions. Export earnings also declined substantially in the cases of India, Japan, Korea and Singapore.
A cautionary tale
Although international trade fared substantially better in 2017 than in the previous two years, it is still too early to gauge whether this positive trend will continue in the foreseeable future. There is still significant uncertainty affecting the global economy, and there are numerous elements which may negatively affect international trade in the coming years. Moreover, one statistical consideration is that the rebound that clearly shows in the data for 2017 is largely driven by the dismal performance of the two previous years. The value of international trade for 2017 is still expected to be well below 2014, by at least 2 trillion US$. On a positive note, most forecasts indicate that global economic growth is expected to be sound in 2018, at about 3.5 percent, and trade growth should therefore follow suit, at least in volume terms.
Still, there are several reasons to be cautious. Primarily, trade growth in value terms (and therefore export earnings) may be dampened by stagnating commodity prices. This will be problematic for a large number of developing countries, especially in Africa. The strong increase of commodity prices in 2017 is not generally expected to continue in 2018. The IMF forecasts its commodity price index to fall by 0.1 per cent in 2018. Second, monetary policy is expected to tighten in many developed countries. This may have a negative effect on demand in developed countries while increasing the value of the US dollar, and therefore reducing the value of international trade.
Moreover, international trade could also face increasing headwinds from policy factors. In particular, the debate on the uses and abuses of trade policy has grown more prominent over the last few years. And there is a real risk that the ongoing protectionist rhetoric will eventually materialize into restrictive policies. Developing countries were particularly active in the use of WTO dispute settlement mechanisms, with about 220 cases initiated in 2016. In 2015 the number of cases was about 160. Anti-dumping measures initiated by developed countries also were on the rise. About 80 investigations were initiated 2016, in contrast to about 50 in 2015. The use of anti-dumping measures is expected to have remained strong during 2017.
Overall, it is still unclear whether 2018 will see a continuation of the positive trends of 2017, or whether international trade will return to the weakness of the recent past. Definitively, in the coming years much of the fortune of international trade will depend on whether the skepticism over the benefit of trade and international collaboration will persist. As 2017 draws to a close, there are conflicting signals. While many of the factors that negatively influenced the debate on international trade in the past will likely persist, there are also a number of initiatives that could bring some momentum to international trade and multilateral cooperation.
The main reason to be pessimistic about the future of international trade is that the global trade regime has become increasingly unpopular in some countries. Moreover, the difficulties facing international trade are also evident from the outcome of the recent WTO ministerial. Finally, there are signs of mounting tensions about the persistence of trade imbalances and on the fairness of export promotion practices among the major economies.
More in general, a number of governments find it increasingly difficult to combine their domestic agenda with international commitments. In this context, the present difficulties of the multilateral trading system may bring reforms possibly by reducing its scope. This will likely have negative implications for international trade and international cooperation.
Still, there are also reasons to be optimistic about the future of international trade and international cooperation. The scope for further economic interdependence is still strong for many countries, trade costs have substantially declined in many parts of the world and there is still a large potential for an increase in economic integration within South Asia, Latin America and especially within Sub-Saharan Africa. Moreover, broader approaches such as the One Belt One Road initiative or a possible revival of a Trans-Pacific Partnership agreement without the United States will contribute to economic integration. Although there is going to be lot of uncertainty surrounding the evolution of world trade in the coming years, one thing is certain: for trade and international cooperation to resume and to succeed, governments need to advance an economic agenda that is not only outward looking but also fair and equitable.
Key Statistics and Trends in Trade Policy: Trade Imbalances
During the last decade international trade has been characterized by a progressive shift in the use of trade policy instruments. Tariffs have remained substantially stable during the last few years with tariff protection remaining a critical factor only in certain sectors in a limited number of markets. On the other hand, the use of regulatory measures and other non-tariff measures such as anti-dumping has become more widespread. Recent years have also been characterized by substantial movements in some of the major currencies.
As of 2016, developed countries' import restrictiveness was at an average of about 1.2 per cent. However, import restrictiveness remained higher in many developing countries, especially in South Asia and sub-Saharan African countries. Although low on average, tariffs remain relatively high in some sectors. Moreover, tariff peaks are present in important sectors, including some of key interest to low income countries such as agriculture, apparel, textiles and leather products. Tariffs also remain substantial for most South-South trade.
As of 2016, international trade is subject to and influenced by a wide array of policies and instruments reaching beyond tariffs. Technical measures and requirements regulate about two thirds of world trade, while various forms of sanitary and phytosanitary measures (SPS) are applied to almost all of agricultural trade. The past few years have also seen a general increase in the use of trade defence measures within the World Trade Organization (WTO) framework.
In spite of the current debate on trade agreements, the process of deeper economic integration has remained strong at the regional and bilateral level even in 2016, with an increasing number of preferential trade agreements (PTAs) being negotiated and implemented. Most of the recent PTAs address not only goods but also services and increasingly deal with rules beyond reciprocal tariff concessions to cover a wide range of behind the border issues. As of 2016, about half of world trade has occurred under some form of PTAs.
The economic turbulence of recent years has been reflected in exchange rate markets, both for developing and developed countries’ currencies. Exchange rate movements are playing an important role in shaping international trade in the last few years as they have influenced countries’ external competitiveness. The value of the United States dollar remained strong, continuing to appreciate against a large number of currencies.
These publications are a product of the Trade Analysis Branch, Division on International Trade in Goods and Services, and Commodities (DITC), UNCTAD secretariat. The publications monitor the trends of international trade in goods and services in the medium term, and inform on the use and effects of a wide range of trade policies influencing international trade, respectively.
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tralac’s Daily News Selection
Eckart Naumann: Trump’s steel and aluminium tariff action – putting America first? (tralac)
This paper includes an overview of the recently published trade policy agenda to provide additional policy context, background developments to the steel and aluminium remedies, an overview of the legislative context and specifically the Section 232 investigation, as well as its key findings relating to steel and aluminium, details of the remedial action articulated through various presidential proclamations, and a review of trade patterns in categories covered by this remedial action (including how AGOA beneficiaries are impacted). [Note: An accompanying infographic is available for download] [@bbaschuk: 36 WTO members said they’re concerned about “increased trade tensions” and “risks of escalation”]
Posted earlier today: The IMF’s latest Sub-Saharan Africa Regional Economic Outlook. Chapter 1: Slow recovery amid growing challenges; Chapter 2: Domestic revenue mobilisation in SSA - what are the possibilities?; Chapter 3: Private investment to rejuvenate growth
Updates from the Transform Africa Summit 2018 and its side event, Transform Africa Economic Forum
Opening speech by President Kagame at the Forum. The idea I wish to share is that technological integration should be seen as the vanguard of economic integration more generally. Regional cooperation on technology has produced good results to some extent on our continent in recent years. Meanwhile, other urgent integration projects have languished on the African agenda, sometimes for decades. We surely can find ways of speeding that up. It is beginning to change, and with a forum such as this, bringing together so many people with diverse backgrounds, I think we can make it happen faster. Technology cooperation is part of that story. But behind it there has to be political will in real terms. Political will is not confined to the public sector. I think business leaders need that political will as well because it comes with the thinking and what you connect with, in the interest of our continent and our people.
The future of blockchain technologies in Africa. At the event, experts indicated that there are endless possibilities that this technology can create in Africa, from bringing efficiency in voting systems, to registering land titles, and to finally enabling seamless transactions online. Norbert Haguma, the head of Blockchain Hub in Rwanda, said that blockchain has the potential to dramatically change how Africans trade, removing unnecessary middlemen and commissioners. The Blockchain Hub, which is under Smart Africa, is a month old and the hub’s activities will be exploring the wider applications of the technology and form the basis to which a roadmap to adopting Blockchain technology in Africa will be created. [Africa lags on blockchain due to undeveloped infrastructure]
Experts call for inclusive policies, infrastructure to drive Africa’s connectivity. The experts were speaking Monday at the Transform Africa Economic Forum, in a panel discussion dubbed Digital Connectivity, an enabler and Foundation. MTN’s Rob Shuter said telecommunication operators in Africa are ready to play their role in the achievement of a single regional market and enable digital transformation on the continent, but infrastructure and policy frameworks remain a challenge. “Cyber Security and fraud are a big concern in the digital world. The more harmonisation of policies, implementation and innovations, the smoother the integrations will be.”
A suite of related, digital trade policy postings:
(i) Uganda to host Africa Blockchain Conference. The Blockchain Association of Uganda will host the Africa Blockchain Conference (23-24 May, Kampala) on the theme “The role of Blockchain technology in Africa’s transformation”. Discussion will include governance, regulation and policy, cryptocurrencies and digital assets, cyber security, innovation and technology, and risk and investment opportunities.
(ii) Blockshipping’s plan to improve shipping across East Africa. A Danish company, Blockshipping, plans to change all that by creating the Global Shared Container Platform. Powered by blockchain technology it has 14 features to improve performance. “The shipping industry today is under tremendous financial pressure,” said Peter Ludvigsen, CEO. “We have more than 25 million freight containers in the world used for transporting all types of goods. However, there is no central registry which means a large number of thesm are being moved around the oceans unnecessarily.” GCSP plans to save the global industry $5.7bn every year and cut CO2 emissions by more than 4.5 million tons. Blockshipping want to achieve 60% market coverage in three to four years which would mean having 16 million container units in their registry.
(iii) International data flows and privacy: the conflict and its resolution. The free flow of data across borders underpins today’s globalized economy. But the flow of personal data outside the jurisdiction of national regulators also raises concerns about the protection of privacy. Addressing these legitimate concerns without undermining international integration is a challenge. This new World Bank research paper describes and assesses three types of responses to this challenge:
Nairobi to host seminar on trade in digital currency, 22-24 May
Bloomberg: Africa’s e-commerce giant Jumia sets sights on Egypt’s promising market
Stears Business: Rise of the Nigerian Instapreneurs
Harvard Business Review: As cryptocurrencies rise, who needs banks?
World Economic Forum: Six charts that show how to get the most out of digital investment
World Bank’s Europe and Central Asia Economic Update: Cryptocurrencies and blockchain
Reviewing Africa’s strategic partnerships: Retreat of the PRC Sub Committee on Multilateral Cooperation (GoM)
The Retreat of the Permanent Representatives Committee Sub Committee of the AU Commission on Multilateral Cooperation, concludes today in Mauritius. The meeting focuses on cooperation with multilateral institutions as well as with several countries at the multilateral level. Discussions are converged on the review of the evaluation report of the nine strategic partnerships that the AU has with the European Union, China and India, amongst others. The meeting is also examining the contribution of these partnerships within the AU and what can be done in addition to further extend these partnerships so that it is mutually beneficial that is for the African continent and the countries involved.
Bilateral African trade and investment updates:
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Zambia, Angola to improve trade, investment relations. The countries last week signed five bilateral agreements which, among other things, provide for visa exemption for ordinary passport holders from either country to enter the territory of the other. Other agreements are on security and public order, reciprocal visa exemption on diplomatic and official passports, agreement on mutual cooperation and administrative assistance on customs matters and protocol of cooperation in the area of agriculture. Under the visa agreement, citizens of either country, who hold valid ordinary passports will be allowed to enter the territory of Angola or Zambia for official or private business as well as transit without a visa. The protocol of cooperation on agriculture is aimed at establishing and strengthening bilateral relations, specifically in agro-production, hydraulic and agro-research, processing technologies and farm block development. The agreements were signed on the side-lines of Zambia-Angola Business Forum.
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South Africa, Kenya commit to resolving outstanding bilateral issues. The Director-General of Trade and Industry, Mr Lionel October together with the Kenyan Principal Secretary for the State Department of Trade in the Ministry of Industry, Trade and Cooperatives, Dr Chris Kiptoo have committed to resolving outstanding bilateral issues between South Africa and Kenya in preparation for the upcoming 6th Session of the Joint Trade Committee which will be held in Mombasa in September, 2018. Director-General October undertook to hosting the first ever Kenya-South African Trade Week in South Africa in October 2018 and to also share a list of the Top 40 Investment Projects in South Africa that Kenyan businesses can invest in. The meeting agreed on the following action plan on trade and investment activities:
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Kenya, Ethiopia look at mega link projects afresh. President Uhuru Kenyatta and Ethiopian Prime Minister Abiy Ahmed, on his first tour of Kenya since he became premier, announced they will focus on the development of the Lamu Port South Sudan Ethiopia Transport (Lapsset) corridor. “They committed to the development of Lapsset, the Northern Corridor including road network between Isiolo, Moyale through to Addis Ababa and the railway from Addis Ababa to Nairobi,” a joint statement said. “Both sides agreed to finalise the Ethiopia-Kenya interconnection transmission line. Both sides agreed to jointly supervise and inspect the Lamu-Garissa-Isiolo-Moyale and Moyale-Hawassa-Addis Ababa road networks.” Both leaders announced they will allow their national airlines, Kenya Airways and Ethiopian Airlines, unfettered marketing on each other’s soils, in the interests of enabling growth in aviation. This could be positive, especially since Ethiopia has traditionally locked up its local market to protect Ethiopian Airlines.
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Cape Verde aims for free trade zone with Atlantic islands. The Atlantic island nation of Cape Verde hopes to create a zone of free circulation for people and goods with the nearby Spanish Canary Islands and Portugal’s Madeira and Azores, Prime Minister Ulisses Correia e Silva said on Monday. Cape Verde, made up of 10 islands off the West African coast, hopes to boost economic growth and tourism with such a deal, which could be helped further by plans to scrap all visa requirements for European travellers from the start of 2019. “Our objective is to reinforce our links with Macronesia,” Correia e Silva told business leaders and politicians at a conference in the Portuguese coastal resort town of Cascais.
East Africa to harmonize vehicle inspection standards to enhance road safety (New Times)
Gerald Wangai, director of Motor Vehicle Inspection at Kenya’s National Transport and Safety Authority, told Xinhua that currently each of the six EAC partner states have different vehicle inspection standards. “All the road safety agencies in the EAC have agreed to adopt a single vehicle inspection standard to ensure road traffic accidents are reduced,” Wangai said during the stakeholders’ forum of truckers on self regulation on the axle load limit.
SADC Senior Trade Adviser, Malcolm McKinnon Trade in logistics services and food losses reduction (pdf): a presentation to the UNCTAD Multi-year Expert Meeting on Trade, Services and Development:
Today’s Quick Links: Maputo to host first CPLP Economic Conference, starting on tomorrow Regional integration: what it means for Busia residents Uhuru says Kenya losing billions in fake goods racket Kenya: SGR loan payments to triple to Sh83bn next year Subsidized FX rate as major downside to Nigeria–China $2.5bn swap deal IMF urges Nigeria to expand tax base, streamline currency policy The culture and policy of arbitration is still in its infancy in Nigeria Key messages from the 14th CAADP PP |
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TAS 2018: The future of blockchain technologies in Africa
As Transform Africa Summit 2018 kicks off in Kigali, different experts from across the continent and beyond are deliberating on a number of technology issues and how Africa can reap benefits from them.
At ‘The Workshop’, a side-line event which took place at the Kigali Serena Hotel, experts once again reiterated the power and potential that lies within blockchain technologies. Participants indicated that blockchain technologies can enable the continent’s transformation.
Don & Alex Tapscott, authors of ‘Blockchain Revolution’ described the blockchain as an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.
One common application which was originally devised for blockchain technology is the digital currency known as bitcoin, but the technology community is now finding other potential uses for the technology.
At the event, experts indicated that there are endless possibilities that this technology can create in Africa, from bringing efficiency in voting systems, to registering land titles, and to finally enabling seamless transactions online.
Jimmy Nguyen, the chief executive officer of nChain, a blockchain research and development company, strongly believes that blockchain technologies can disrupt any industry by making processes more efficient.
Tunde Ladipo of Stellar, a payment network, highlighted that the way internet allowed anyone to send an email or create a blog, blockchain technology can allow people to easily send, save, and receive money, without large fees or hassle.
“This is what we are doing at Stellar Development Foundation. With all the infrastructure challenges faced by the continent where many people have no access to electricity, internet and smartphones, such a technology can help bypass all these challenges,” he said.
There is currently high cross-border and domestic transaction costs in Africa than anywhere else, and Ladipo noted that blockchain technology can address all these issues only if African countries see value in it.
Different studies place intra-African trade at around 14 per cent, but the recent signing of the African Continental Free Trade Area (AfCFTA) aims to double this by 2021, and ultimately reach 60 per cent in the long run.
Norbert Haguma, the head of Blockchain Hub in Rwanda, said that blockchain has the potential to dramatically change how Africans trade, removing unnecessary middlemen and commissioners.
“Trust has always been the cornerstone of trade, but blockchain achieves trust amongst Africans and with the world. It can create better supply chain management, reduce environmental degradation, and better use of resources,” he noted, arguing that Africa needs to make more investment in this technology.
The Blockchain Hub, which is under Smart Africa, is a month old and the hub’s activities will be exploring the wider applications of the technology and form the basis to which a roadmap to adopting Blockchain technology in Africa will be created.
Already, players like DLT Labs, the global group of blockchain experts are building applications in Africa. Loudon Owen, the chairman of DLT Labs said that they are building systems in different parts of the continent that are changing doing business.
“We are providing blockchain-based solutions in Africa like land registry, intellectual property registry, car ownership registry, we have asset tracking systems, and we are creating digital wallets. All this is coming to allow organisations to use blockchain technology to change their business,” he noted.
Digital currency
Currently, there are thousands of people trading in cryptocurrencies like bitcoins and ethereum. But the cryptocurrency market has not been working well as the bitcoin prices have been falling lately.
There has been a lot of push backs from many central banks when it comes to trading cryptocurrencies, but Craig Wright, the chief scientist at nChain said that most governments’ negative perceptions and assumptions when it comes to digital currencies are based on misinformation.
“The problem is misinformation. Bitcoin doesn’t stop banking, bitcoin doesn’t stop central banks. The reality is that there is a high level of transparency in cryptocurrencies, because people are in charge of their transactions since there is no intermediary,” he noted.
Address by President Paul Kagame at the 4th Transform Africa Summit
Good morning. It is a pleasure to welcome you all to Kigali for this fourth Transform Africa Summit.
There is no doubt that technology is the foundation of modern, high-income economies. That is why we are investing so much in physical infrastructure and in the education required to use it.
These efforts are already bearing fruit. However, even the most advanced technology cannot compensate for shortcomings in other areas which are essential for economic competitiveness.
Let me highlight a few of these, beginning with regional integration and cooperation, which is absolutely central.
As discussed at the Economic Forum yesterday, political will, both from governments and the private sector, is essential in implementing the African Continental Free Trade Area. This agreement will transform Africa, but only if we translate its provisions into reality on the ground.
Secondly, a favourable investment climate is critical in order to build trust in African economies, attract the right partnerships, and spur innovation.Indeed, many African countries are already among the leaders in business-friendly reforms.
But achieving good rankings is not an end in itself. The goal is to attract more and better investment, and that requires effectively communicating these facts to global markets, and even to our own investors right here in Africa.
That brings me to the third point, which is that we must work harder to ensure that African private capital is mobilised to participate fully in major projects on our continent.
There is this myth that we always have to look outside the continent to fund major initiatives. But this simply cannot be true when Africa is losing billions every year through lost taxes, sending private assets abroad, and other factors.
We are not poor, not at all.
The issue has more to do with the mindset, that it is normal to use our money for consumption, while we leave strategic, long-term investing to others. It means that no matter how much we earn, we would remain poor.
Whether this comes from colonialism or not, is irrelevant. It is up to us to identify mindsets that hold us back as a continent, and change how we do business.
What these few elements remind us is that the application of technology and innovation takes place in a wider context. We must harness all these factors together holistically to achieve the results that our people expect and deserve.
One example I might mention is the effort by the African Union and the International Telecommunications Union, together with the private sector, to bring broadband to under-served communities by harmonising spectrum and standards.
Let me conclude by commending the prominent participation of youth and women in Transform Africa, including through the pitching platform “Face the Gorillas”, and the Smart Women Summit, taking place tomorrow. Our strategic investments in technology and education will only have their full impact if they are matched by efforts to ensure all sectors of our society can access the benefits.
I thank you for your kind attention and wish you productive discussions, and an enjoyable stay in Rwanda, as well as I welcome you back to Rwanda anytime for different engagements.
Thank you very much.
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IMF sets out policy steps to reduce vulnerabilities and raise sub-Saharan Africa’s medium-term growth
Growth in sub-Saharan Africa is projected to pick up modestly from 2⅔ percent in 2017 to 3½ percent in 2018, the IMF said in its latest Regional Economic Outlook for sub-Saharan Africa report.
Behind these headline figures, there is wide diversity in growth outcomes and prospects across countries in the region. Several economies (such as Côte d’Ivoire, Ethiopia, Ghana, Senegal) are expected to maintain robust growth at about 6 percent or faster. At the other end of the spectrum, many countries that saw per capita incomes fall in 2017 could witness a further decline this year.
“The growth pickup has been largely driven by improved policies in some countries, and a more supportive external environment, including stronger global growth and higher commodity prices” said Abebe Aemro Selassie, Director of the IMF’s African Department. He added “these factors have supported high volumes of capital inflows into the region, facilitating external adjustment and a buildup of reserves in some countries.”
However, Mr. Selassie noted that “macroeconomic vulnerabilities are rising in many countries as the required fiscal adjustment keeps getting delayed. 15 of the region’s 35 low income countries are now rated to be in debt distress or at high risk of debt distress”.
In addition, he highlighted that “in some countries, higher debt levels have translated into a sharp increase in debt service, diverting resources from much needed spending in areas such as health, education, and infrastructure.”
Looking ahead, Mr. Selassie noted that the “based on current policies, average medium-term growth for the region is expected to plateau below 4 percent, falling far short of the levels envisaged five years ago, and below what is needed for countries to achieve their Sustainable Development Goals.”
Mr. Selassie stressed that “policy makers need to seize the opportunity provided by favorable external conditions to turn the current recovery into durable strong growth by taking domestic policy steps to reduce fiscal imbalances and raise medium-term growth potential. Prudent fiscal policy, especially domestic revenue mobilization, is critical to make room for key infrastructure and social spending.
“On average, there is scope to raise tax revenues by 3-5 percentage points of GDP over the next few years. Reforms to nurture a dynamic private sector are needed to provide the foundations to raise the low level of private investment, for example by boosting intra-Africa trade and deepening access to credit.”
Mr. Selassie further reiterated that sub-Saharan Africa remains a region with strong potential to harness its demographic dividend in the medium term – provided strong domestic policy measures are implemented.
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Kenya, Ethiopia look at mega link projects afresh
Kenya and Ethiopia on Monday revisited the building of major link infrastructure projects between the two countries.
This comes two years after the two sides signed a similar Memorandum of Understanding (MoU) that was not implemented.
President Uhuru Kenyatta and Ethiopian Prime Minister (PM) Abiy Ahmed, on his first tour of Kenya since he became premier, announced they will focus on the development of the Lamu Port South Sudan Ethiopia Transport (Lapsset) corridor.
“They committed to the development of Lapsset, the Northern Corridor including road network between Isiolo, Moyale through to Addis Ababa and the railway from Addis Ababa to Nairobi,” a joint statement said.
“Both sides agreed to finalise the Ethiopia-Kenya interconnection transmission line. Both sides agreed to jointly supervise and inspect the Lamu-Garissa-Isiolo-Moyale and Moyale-Hawassa-Addis Ababa road networks.”
Punitive
And while Dr Ahmed is new in his position, President Uhuru Kenyatta had announced a similar thing in June 2016, when then PM Hailemariam Desalegn made a state visit to Nairobi.
At the time, President Kenyatta told reporters at a joint press briefing that projects within Lapsset would be “fast-tracked.” They included link roads between the two countries, an international airport in Isiolo town and a sea port in Lamu.
Launched in 2012, the Lapsset project was estimated to cost at least Sh2 trillion. But the cost of the projects was always going to be punitive and each country was to source financing, which meant further delays.
The seven portions of the project require an estimated $24.5 billion (Sh2.4 trillion) with $3.1 billion footing the bill for the Lamu Port.
In 2016, Ethiopia and Kenya also signed an MoU on an oil pipeline. Yesterday, both countries did not mention it, but said each side will have specific responsibilities on ensuring Lapsset project continues.
“The Kenyan side will facilitate the formal acquisition of land in Lamu Port given to the Ethiopian government and the Ethiopian side reiterated its commitment to develop the land for logistical facilitation,” the MoU said.
Weaknesses
But the countries also admitted weaknesses in funding, instead calling on the private corporates to take a hand in the projects.
“The two leaders strongly encouraged members of their respective private sectors to identify potential areas for engagement and pledged to continue improving the business environment and create maximum incentives for successful commerce.”
Already, the Isiolo Airport as well as the highway up to Moyale on the Kenyan side is complete.
The problem however remains with the political situation on both countries.
Dr Ahmed is new and has to rebuild his country’s stability following years of violence from regions on the south of the country, claiming oppressions.
The two leaders identified cross-border security challenges, exacerbated by vulnerable communities, as obstacles to sustainable peace.
Economic growth
They agreed to focus on inclusive economic growth of the border regions, such as the one contemplated by the Special Status Agreement, affirming that cross-border trade between the border communities could greatly elevate their quality of lives.
Both leaders announced they will allow their national airlines, Kenya Airways and Ethiopian Airlines, unfettered marketing on each other’s soils, in the interests of enabling growth in aviation. This could be positive, especially since Ethiopia has traditionally locked up its local market to protect Ethiopian Airlines.
They also agreed on a prisoner-exchange programme, which could start as soon as next month and which could mean Kenyans languishing in jails in Ethiopia could be brought back.
With South Sudan’s participation in Lapsset hampered by war, the two leaders said they were disappointed there had been slow progress to bring peace there. They urged the leaders of South Sudan to place the interests of their people above their own to give peace a chance.
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Trade in services for inclusive and sustainable development: Water and sanitation, energy and food-related logistics
Experts met in Geneva from 7-8 May 2018 to examine how to facilitate and expand services trade to achieve the relevant Sustainable Development Goals under the 2030 Agenda, with a focus on water and sanitation, energy and food-related logistic services.
As a major contributor to output, jobs, investment and trade value added, services are key to economic and human development, and hence to the achievement of the inclusive and Sustainable Development Goals set out in the 2030 Agenda for Sustainable Development.
United Nations Member States will conduct a thematic review of progress on the 2030 Agenda at the High-Level Political Forum on Sustainable Development from 9 to 18 July 2018.
The forum, whose theme is “Transformation towards sustainable and resilient societies”, will examine progress achieved in relation to specific goals, including:
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Goal 6: ensure availability and sustainable management of water and sanitation for all
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Goal 7: ensure access to affordable, reliable, sustainable and modern energy for all
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Goal 12: ensure sustainable consumption and production patterns
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Goal 17: strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development
The sixth session of the Multi-year Expert Meeting on Trade, Services and Development examined ways and means to facilitate and expand services trade with respect to achieving the relevant SDGs under the 2030 Agenda.
Background note by the UNCTAD Secretariat
Role of services in the Sustainable Development Goals
Services contribute to equality and poverty reduction. First, productivity improvements in the services sector contribute to overall productivity increases through the sector’s direct importance in the economy and its effects as inputs to all economic sectors. A forthcoming UNCTAD study suggests that the services sector is responsible for two thirds of total productivity growth in developing countries.
Second, services are particularly relevant for microenterprises, and small and medium-sized enterprises. By improving the productivity of these enterprises, services promote opportunities for them to join value chains – and for many such enterprises and workers – to enter the formal economy. As services activities may be less dependent on economies of scale and less capital intensive, they could facilitate the integration of microenterprises, and small and medium-sized enterprises in value chains.
Moreover, services can be providers of atomized inputs for different stages of broader productive processes. Microenterprises, and small and medium-sized enterprises can concentrate on producing inputs of such atomized services rather than facing the challenge of producing the whole final product.
Dynamics of services relating to water and sanitation, energy and food-related logistics
Services have become a major contributor to output, jobs, investment and trade in all economies. In 2015, the share of services in gross domestic product (GDP) increased across all income levels, reaching 76 per cent in developed economies, 55 per cent in developing economies and 47 per cent in the least developed countries. The services sector accounts for over half of GDP in all developing regions: Latin America and the Caribbean, 65 per cent; Africa, 54 per cent; and Asia, 53 per cent. The increase in services output is accompanied by a decrease in industrial GDP in developed economies and a reduction mainly of agricultural output, but also of industrial GDP, in developing economies.
The prevalence of the services sector is also reflected in employment, where it is estimated to account for 59 per cent of jobs globally, 82 per cent in developed economies and 54 per cent in developing economies. Jobs have grown more in this sector, registering 2.8 per cent annual growth between 2000 and 2017. This trend is more pronounced in developing economies, reaching 3.4 per cent in the same period. The employment-creating effect of services implies that services are central for inclusiveness, particularly as global unemployment is expected to remain high at more than 201 million unemployed in 2017, equivalent to a global unemployment rate of 5.8 per cent. This represents an increase of 3.4 million people over the previous year.
Research and data suggest that the services sector contributes to gender equality and empowerment. Women’s employment is mostly concentrated in services (58 per cent in 2017), followed by agriculture (31 per cent) and manufacturing (10 per cent). In the developed economies, the share of women’s employment in services is even larger (89 per cent), owing to their important contributions to health, education and other business services. In the developing economies, services represent a smaller, yet still significant share of women’s employment (51 per cent), owing to the large contribution of agriculture (37 per cent) to women’s employment.
The importance of trade in services is revealed by greater dynamism of services exports over goods exports in both the developed and developing economies. The contribution of services to total exports increased from 25 to 29 per cent in the developed economies and from 14 to 17 per cent in developing economies between 2005 and 2016. Services exports have been growing faster in developing economies than in developed economies, recording an 8 per cent annual increase between 2005 and 2016. Services were relatively resilient during the 2009 global economic and financial crisis and again in 2016, when unlike goods exports, global services exports resumed growth after the recent downturn in trade.
Statistics on these services per se are unavailable and difficult to obtain. Among the reasons for this is the lack of a separate category of these services in classifications established for statistical purposes.
The level of access to water, sanitation and energy and the logistics performance level in developing and least developed countries may illustrate the development of these services. While these services have become basic services readily available to residents of developed countries, they are in serious shortage in many developing countries and least developed countries
International trade is playing an increasingly important role in the provision of these services. Again, it is difficult to obtain direct data from current trade statistics. In the energy sector, one option for measuring energy provision through trade may be consideration of the relevance of imports in the supply of energy. Energy provision through imported energy sources has become relevant in most energy types. International markets have a longstanding importance for crude oil, natural gas liquids and feedstocks, with imports accounting for over 30 per cent of global supply. In 2015, imports also represented meaningful shares of supply in coal (17 per cent), oil products (23 per cent) and natural gas (23 per cent). Imports of electricity and renewable sources only account for 3 per cent and 1 per cent, respectively, of the corresponding global supplies. However, between 2010 and 2015, the global share of imports of renewable sources of energy increased 7.5 per cent annually.
Trade in water and sanitation, energy and logistics services mainly occurs through commercial presence (mode 3) and can be roughly inferred from greenfield investment levels. The electricity, gas and water sector is the largest receiver of foreign direct investment, representing 15 per cent of total greenfield investment in 2016. The sector recorded the second-fastest growth, behind textiles, with an annual growth rate of 9 per cent between 2006 and 2016. Renewables are capturing two thirds of global investment in power plants, as they are often the least costly source of new power generation.
Likewise, trade in logistics services mainly occurs through mode 3. As companies are focusing more and more on core business competency, there is a growing preference for outsource logistics operations. The third-party logistics market is set to benefit from a better use of technology to improve processes and lower costs, which is likely to result in a year-on-year growth rate of 4.4 per cent of third-party logistics between 2015 and 2022. Despite its importance, the provision of other supporting and auxiliary transport services does not contribute greatly to services exports captured by the balance of payments, remaining around 0.6 per cent of total services exports in the European Union in 2016, growing only 1.4 per cent annually between 2010 and 2016.
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tralac’s Daily News Selection
The two-day Ministerial Session of the EAC Council starts today in Arusha. The meeting will, inter alia, consider the Status of Implementation of the EAC Brand Architecture Strategy, and the Report of the 7th Meeting of the Sectoral Council on Interstate Security.
The fourth Transform Africa Summit starts today in Kigali on the theme, Accelerating Africa’s Single Digital Market: a New Times preview
President Kagame opened the Transform Africa Economic Forum which deliberated on the vision for a smart Continental Free Trade Area.
Diarise: The 2018 Africa Transport Policy Program Annual Meeting is scheduled to take place in Abuja (2-6 July). SSATP’s DP3 programme is structured around three thematic pillars: Pillar A: Integration, connectivity and cohesion; Pillar B: Urban transport and mobility; and Pillar C: Road safety. Download the draft conference agenda (pdf)
SADC consultancies: (i) Assessment of current practices on poverty and inequalities measurement and profiles in SADC; closing date is 11 May; (ii) Development of a SADC tourism programme; closing date is 25 May
Whose responsibility is it to scale up arbitration in Africa? (New Times)
Commentaries on the AfCFTA
Africa’s free trade agreement hinges on commitment and implementation (Africa Renewal)
Trudi Hartzenberg, the executive director of Trade Law Centre, a South Africa-based think tank, tells Africa Renewal that while the free-trade zone could significantly enhance competitiveness and foster intra-African trade, it also requires “strong leadership and technical capacity to assist member states in the negotiations that lie ahead. We are also witnessing strong streams of protectionism in the global economy.” Africa does not need to embrace protectionism (taxing imports as a strategy to shield domestic industries from foreign competition), advises Ms Hartzenberg. “It may be tempting to retreat behind protective barriers, but there is ample evidence that this is not conducive to economic growth, especially for small economies. And by global standards Africa’s economies are small, and the continent is fragmented.”
The AU’s commissioner for trade and industry, Albert Muchanga, tells Africa Renewal that Africa’s free trade area agreement will not be a traditional trade agreement that focuses on reducing tariffs. Instead, the Kigali agreement will aim to liberalise the services sector. “This is crucial as services constitute roughly 60% of Africa’s GDP and in 2014, for example, services accounted for 30% of world trade…. domestic services markets are to be opened for service suppliers from other African countries,” says Mr Muchanga. Businesses frustrated by trade barriers could take advantage of a “non-tariff barrier mechanism” in the agreement to report and demand solutions to trading problems, explains Mr Muchanga.
Olu Fasan: The long, hard road to one African market (BusinessDay)
But, key question remains: Is AfCFTA a credible forerunner of a Single Market for Africa? Well, Yes and No! Yes, because many aspects of the instruments point in the direction of a single market. No, because some aspects don’t. First, on the former...Yet, despite the above, there are some aspects of the AfCFTA instruments that appear to undermine the goal of a future single market. For space constraint, I will briefly discuss three potential obstacles inherent in the agreement. The first is the contradictions between the stated aims of AfCFTA and some of the principles set out in the AfCFTA Agreement. It is stated in Art 3 that the objectives of AfCFTA are, inter alia, to “create a single market” and to “lay the foundations for the establishment of … a Continental Customs Union”. Yet, one of the principles under Article 5 is “variable geometry”, that is, differentiated integration. Another critical issue is the legal relationship between the RECs and the AfCFTA. The second disincentive to the emergence of one African market is the unwillingness of African countries to embrace economic and trade liberalisation. The third limitation is that the AfCFTA agreement is based almost entirely on the WTO system.
Carl Manlan: An Amazonian trade strategy for Africa (Project Syndicate)
AGOA capacity building and skills development workshop (UNECA)
Over 40 delegates from 33 AGOA countries were joined by representatives from RECs, the private sector, US government officials, the AUC, the AfDB and trade experts in Accra last week for the AGOA Capacity Building and Skills Development Workshop. The workshop was organized by the ECA African Trade Policy Center, the African Union Commission, and the Government of Ghana. On behalf of ECA David Luke, Coordinator of the African Trade Policy Center noted the considerable opportunities offered by AGOA and underscored the workshop as a “call to action” for African countries to step up and strategically take advantage of AGOA for promoting trade, investment, and contributing to industrial development in Africa. He urged the US private sector to step up its investment in the AGOA beneficiary countries as the evidence shows that investment is closely tied to the effective utilization of the preferential trade regime.
South Africa: Cars make up 14% of SA’s total exports (IOL)
South Africa’s automotive industry achieved total export sales of vehicles and components worth R164.9 billion in 2017, which represented almost 14% of total South African exports. This enabled the domestic automotive industry to register its third consecutive annual trade surplus at R10.3bn despite a 3.6% decline in the total export value from R171.1bn in 2016. Germany, at R46.7bn, followed by the US, at R18.8bn, were the South African automotive industry’s top export markets. Automotive Industry Export Council executive manager Norman Lamprecht said Africa remained a priority focus for the South African automotive industry and highlighted the enormous potential for growing vehicle demand in Africa. Automotive exports to 40 African countries amounted to R29.7bn, or 18% percent of the country’s total automotive exports of R164.9bn in 2017.
South Africa’s patent system is failing to encourage innovation (Business Day)
We considered and analysed a data set consisting of 4,064 patents, about 10% of those granted domestically to South African individuals and bodies from January 2005 to July 2015. Our analysis is in a paper, pdf Innovation and intellectual property in South Africa: the case for reform (587 KB) , recently published by the accessibsa project and enabled by the Shuttleworth Foundation. Surprisingly, the single largest category of local patentees is made up of individuals, accounting for 44.8%. This is closely followed by companies, with 39.5%. The remaining patentees are universities (6.1%) and research organisations such as the CSIR and Mintek (1.6%). Our paper comes to the conclusion that the data indicate that the majority of patents being granted to South Africans may not be valuable in other countries. If these patents are not valuable outside SA, it is more than likely that they are also not valuable within the country. [The authors: Jonathan Berger, Andrew Rens]
Egypt: Inclusive growth and job creation conference
Extract from remarks by IMF First Deputy Managing Director David Lipton: In Egypt, there are several immediate reasons to press ahead with reform. Public finances certainly are on a firmer footing, but public debt remains very high. A strong effort is needed both to consolidate and to make room for spending in key areas such as health and education. Delays in following through on the reform of energy subsidies could again leave the budget at risk from higher global oil prices. But more than anything else, Egypt cannot delay on jobs. By 2028, Egypt’s working age population will increase by 20 percent. That works out to a labor force of 80 million Egyptians just 10 years from now. Creating jobs for all those people has to be Egypt’s biggest economic challenge. For the purpose of this discussion, let’s look briefly at three countries [Indonesia, Mexico, India] that have surmounted several of the hurdles that Egypt now confronts. [Egypt plans to cut deficit by 2020: Minister of finance]
The UN Inter-Agency Cluster on Trade and Productive Capacity: delivering aid for trade (pdf, UNCTAD)
Trade and trade-related policies, activities, institutional and legal frameworks have direct implications on all the domestic aspects of development. The Cluster aims at highlighting that the insertion of developing countries in the international economy and trading system has wide and profound impact on all aspects of their social, economic, cultural life and development processes. The Cluster emphasizes the need for greater focus on the ability of developing countries to derive development gains from the opportunities offered by the international trading system. It intends to raise the awareness at national level with regard to the development potential of trade policies and activities. One important objective to be achieved through greater interagency cooperation within the Cluster is the improvement of institutional and human capacity constraining the ability of many developing countries to undertake in-country trade policy formulation and prioritization, and building of trade infrastructure. [The Cluster www]
India’s Commerce ministry to prepare action plan on trade with Africa (Economic Times)
The commerce ministry has decided to formulate a comprehensive action plan to boost India’s trade with Africa which is relatively small at present, Union Minister Suresh Prabhu said. A series of engagements have been lined up in different parts of Africa to discuss ways to promote trade and investments between the two regions, he said.
Today’s Quick Links: Museveni looks for new BOU Governor Namanga one-stop border post aims at easing Kenya-Tanzania frosty trade relations SSATP/WCO/IRU/ALCO: key outcomes of the April 2018 transit workshop for West and Central Africa Anzetse Were: How local firms will find Big 4 a challenge Kingori Choto: Kenya should complete transition to seamless mobile money platform Kenya: Coffee prices drop 21% on poor quality The Nigeria and China currency swap: how much room? Ethiopia: China Trade Week update Ghana Mine Workers Union calls for forum on contract mining policy |
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President Kagame co-chairs Broadband Commission Meeting, addresses Transform Africa Economic Forum
President Paul Kagame this morning co-chaired the opening of the 2018 Broadband Commission for Sustainable Development Annual Spring Meeting alongside Co-chair, Carlos Slim, and Co-Vice Chair and ITU Secretary General Houlin Zhao.
The broadband commission brings together leaders from the private sector, policy makers, government representatives, international agencies and academia to provide a variety of perspectives with the aim of developing a joint approach to promote broadband for public benefit.
Speaking at the opening of the commission’s working group meeting, President Kagame noted that Africa’s economic transformation requires broadband infrastructure with an emphasis on both access and affordability.
“The reality is that all other digital services whether in commerce or education or healthcare run on top of broadband. Africa’s size, geography and settlement patterns mean that we must rely on a variety of different technologies to deliver broadband including satellite, fibre optic and mobile. It is up to us to lead the way in driving innovation both in policy and business models in order to speed up the provision of broadband where it has been slowest to reach,” President Kagame said.
President Kagame also delivered a Keynote Address at the opening of the Transform Africa Economic Forum which deliberated on the vision for a smart Continental Free Trade Area.
President Kagame highlighted the need for continental integration as a solution to many problems faced by Africans.
“The idea I wish to share is that technological integration should be seen as the vanguard of economic integration more generally. If you look at the purpose of integrating technology, it is to serve all of us and our businesses and other things. Then people have complained that if you are moving from Kigali, as a passenger on the plane, and you want to go, let’s say, to one part of West Africa.
“I go to Conakry, to Abidjan, to Lagos, to Accra, to Dakar… I’m sure in this audience there are people who have had close to a dozen stopovers, half of them maybe on our continent. Sometimes to fly home here, you have to go to Europe, maybe from one city to another in Europe, then to another city in Africa, and then another one in Africa as well.”
The Economic Forum aims at highlighting potential cross-border initiatives for investment and partnership opportunities relevant to African Continental Free Trade Area. The Agreement was signed by 44 African countries during the 10th Extraordinary Summit of the African Union held in Kigali on 21 March 2018.
The Transform Africa Economic Forum precedes Transform Africa Summit 2018, which runs from 8-9 May 2018.
In its fourth edition, Transform Africa Summit is a leading annual continental forum that convenes global and regional leaders from government, business and international organizations to collaborate on new ways of shaping, accelerating and sustaining Africa’s on-going digital revolution.
Opening remarks by President Paul Kagame at the Transform Africa Economic Forum
Kigali, 7 May 2018
The idea I wish to share is that technological integration should be seen as the vanguard of economic integration more generally.
If you look at the purpose of integrating technology, it is to serve all of us, our businesses and other things as well.
People have complained that if you are moving from Kigali, as a passenger on a plane, and you want to go, let’s say, to one part of West Africa, you would go to Conakry, to Abidjan, to Lagos, to Accra, to Dakar…
I’m sure in this audience there are people who have had close to a dozen stopovers, half of them maybe on our continent. Sometimes to fly home from here, you have to go to Europe, maybe from one city to another in Europe, then to another city in Africa, and then another one in Africa as well.
So when people talk about one common digital market or one common air transport market, I think the purpose is to solve some of these problems.
When you are integrating technology, I think it must be looked at holistically. When you are integrating our regions and countries, the whole continent, all these things should be coming to mind.
I’m sure people here know it very well, better than me, how even when we are communicating by phone, the traffic follows the same route as the planes I was talking about. Doesn’t it?
Sometimes it has to go some places outside of Africa and then back to us. What are you integrating, if you don’t include this? Why don’t we have that happening on our continent without having to pay for a visa for the traffic to first go out of our continent and then receive it back. It requires a visa, which comes in the form of how much you pay.
Is this something we can’t address? We are supposedly very proud Africans, businesses and governments, and I think we need to work hard on that. It’s one of the things people should be looking at so that we are able to have results as soon as we can. We still have a long way to go.
Regional cooperation on technology has produced good results to some extent on our continent in recent years.
Meanwhile, other urgent integration projects have languished on the African agenda, sometimes for decades. We surely can find ways of speeding that up. It is beginning to change, and with a forum such as this, bringing together so many people with diverse backgrounds, I think we can make it happen faster.
Technology cooperation is part of that story. But behind it there has to be political will in real terms. Political will is not confined to the public sector. I think business leaders need that political will as well because it comes with the thinking and what you connect with, in the interest of our continent and our people.
Technology comes with a common set of standards, and a shared vocabulary as well, which is another positive. Our people, especially our youth, have to eagerly embrace the digital economy and expect to play a full part in it.
Innovation is also anchored in the private sector in terms of both research and distribution of products and services.
On the government side, there has been a positive trend of entrusting professional regulatory agencies with the mission to encourage this sector and regulate it in the public interest. That helps prevent politics from slowing things down.
In other words, there is a natural ecosystem that facilitates cooperation among governments and partnership with the private sector, which of course you can’t take for granted. We have to work hard at it with everybody playing their part, so that what we see in the results and outcomes reflects what has been behind it.
Examples of successful regional integration, such as Smart Africa’s focus on One Africa Network, have helped lay the groundwork for even more ambitious projects, such as the African Continental Free Trade Area.
It has helped simply by providing practical confirmation of the truth that we have everything to gain from working together, and also being more connected. Today’s discussions are therefore very welcome.
We will continue to advance on the digital transformation agenda championed by the African Union, Smart Africa, the Broadband Commission, as well as the many external partners here with us supporting these efforts.
At the same time, let’s build on that momentum to stay on course with implementing the African Continental Free Trade Area, which will unlock tremendous opportunities for our region and our world.
I wish you a successful meeting and look forward to being with you again at the Summit tomorrow morning. Thank you very much for your kind attention.
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Africa’s free trade agreement hinges on commitment and implementation
Forty-four African countries recently signed a framework protocol for the African Continental Free Trade Area (AfCFTA), inching the continent closer to becoming one of the world’s largest free trade areas.
In Kigali, Rwanda, where the framework protocol was signed last March, African leaders were in an upbeat mood. If – or when – all 55 African countries ratify the free trade area, it would amount to over $4 trillion in combined consumer and business spending and a market size of 1.2 billion people.
Signing the framework protocol does not straight-away establish a free trade area. Countries have yet to finalize negotiations on protocols on Trade in Goods and Services, Intellectual Property Rights and Investment and Competition.
The free trade area can only take effect when all protocols are finalized and ratified by at least 22 countries.
The framework itself states that participating countries will need to remove tariffs on 90% of goods they produce by 2022 and eliminate non-tariff barriers to trade, such as long customs delays at the borders, import quotas, subsidies, regulatory bottlenecks and so on.
In the short term, countries can protect or impose tariffs on 10% of goods deemed “sensitive items,” but such protections will be removed in the future.
Intra-African trade is currently only 16%, compared with 19% intra-regional trade in Latin America, 51% in Asia, 54% in North America and 70% in Europe.
“As well as boost GDP and trade figures, this [the African Continental Free Trade Area], in a very practical sense, helps to create jobs for Africa’s bulging youth population,” says Vera Songwe, ECA’s executive secretary, in an interview with Africa Renewal.
Ms. Songwe adds that, “This is because the types of exports that would gain most are those that are labour-intensive, like manufacturing and agro-processing, rather than the capital-intensive fuels and minerals, which Africa tends to export.”
She maintains that a free trade agreement could help “diversify Africa’s exports, which in turn reduces the volatility of Africa’s economies and leads to more sustainable economic growth.” In other words, the agreement could decrease Africa’s dependence on extractive commodities such as oil and minerals, whose prices often fluctuate in the international market.
Between 2012 and 2014, over 75% of the continent’s exports were extractives; yet, less than 40% of intra-African trade were extractives during the same period, according to the African Union (AU), underscoring the need to boost trade within the continent.
The AU’s commissioner for trade and industry, Albert Muchanga, tells Africa Renewal that Africa’s free trade area agreement will not be a traditional trade agreement that focuses on reducing tariffs. Instead, the Kigali agreement will aim to liberalise the services sector.
“This is crucial as services constitute roughly 60% of Africa’s GDP and in 2014, for example, services accounted for 30% of world trade…. domestic services markets are to be opened for service suppliers from other African countries,” says Mr. Muchanga.
Businesses frustrated by trade barriers could take advantage of a “non-tariff barrier mechanism” in the agreement to report and demand solutions to trading problems, explains Mr. Muchanga.
Notwithstanding its historic significance, more work must be done before countries can benefit from a free trade area. Countries committing to the agreement are expected to submit by next year their schedules of concessions for trade in goods and services. The schedules of concessions outline the products and services that countries will cease to tax.
Countries must also provide information on the “rules of origin” to ensure that products are produced exclusively in Africa.
Ms. Songwe says that, “The tremendous show of political commitment at the March Summit helps fuel optimism in a speedy process, ideally within the space of a year.”
To ensure effective implementation, the AU will establish an AfCFTA Secretariat, which will consist of an African business council, a trade observatory and a dispute settlement body.
The free trade area will not unravel the “good work” of Africa’s regional economic communities, including in facilitating regional trade liberalisation and integration in Africa, assures Ms. Songwe. Instead, it will allow for regional economic blocs with high-levels of integration to maintain such levels.
Trudi Hartzenberg, the executive director of Trade Law Centre (tralac), a South Africa-based think tank, tells Africa Renewal that while the free-trade zone could significantly enhance competitiveness and foster intra-African trade, it also requires “strong leadership and technical capacity to assist member states in the negotiations that lie ahead…. We are also witnessing strong streams of protectionism in the global economy.”
Africa does not need to embrace protectionism (taxing imports as a strategy to shield domestic industries from foreign competition), advises Mr. Hartzenberg. “It may be tempting to retreat behind protective barriers, but there is ample evidence that this is not conducive to economic growth, especially for small economies. And by global standards Africa’s economies are small, and the continent is fragmented.”
Yet 11 countries, including economic giants Nigeria and South Africa, did not sign the framework protocol in Kigali, although both countries indicated they are likely to join the bandwagon after further consultations with domestic stakeholders.
The Manufacturers Association of Nigeria (MAN) praised the Nigerian government for not signing the framework protocol because, it claims, the proposed agreement is vague on market access and enforcement of rules of origin.
MAN’s president Frank Jacobs told the Nigerian press that the country’s private sector was not consulted on AfCFTA, and warned that the agreement could kill Nigerian industries and stoke unemployment. He said the government must explain its plan to protect 10% of products and to enforce the “rules of origin” provision.
Despite MAN’s concerns, Ms. Songwe insists the agreement has in-built protections for vulnerable sectors. “The agreement also explicitly recognises and provides for special protections for any threatened infant industries as well as for essential security interests or circumstances of critical balance of payments difficulties,” she explains.
The strongest protections are in the form of “trade remedies,” one of which is that countries can apply anti-dumping duties on imports priced at below fair market value to offset the effect of duties on unfairly subsidized imports.
Nigeria’s former President Olusegun Obasanjo told the media in Kigali that, “This [AfCFTA] is where our salvation lies: trading amongst ourselves and consequently developing our economies. The agreement will inspire a change in perception of the continent by the rest of the world.”
Ms. Hartzenberg expects some of the 11 holdout countries to sign the agreement at the next AU Summit, in June 2018. She advises countries to “Subscribe to rules-based governance. They must implement their commitments consistently, and if they don’t, there should be consequences for those countries. This means that dispute resolution is an essential part of a rules-based AfCFTA.”
Africa is building bridges at a time that protectionism and anti-globalism is rising in other parts of the world, posits Ms. Hartzenberg.
The 44 countries that signed the AfCFTA
Angola, Algeria, Benin, Burkina Faso, Cameroon, Cape Verde, Central Africa Republic, Chad, Comoros, Congo, Cote d’Ivoire, Democratic Republic of Congo, Djibouti, Egypt, Ethiopia, Equatorial Guinea, Gambia, Gabon, Ghana, Guinea, Kenya, Liberia, Libya, Madagascar, Malawi, Mali, Mauritius, Mauritania, Mozambique, Morocco, Niger, Rwanda, Saharawi, Sao Tome and Principe, Senegal, Seychelles, Somalia, South Sudan, Sudan, Swaziland, Togo, Tunisia, Uganda, Zimbabwe. Download the full pdf List of AfCFTA legal instrument signatories (323 KB) .
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Whose responsibility is it to scale up arbitration in Africa?
Last week, May 3-4, 2018, I attended the 4th Edition of the SOAS Arbitration in Africa Conference held in Kigali, organised by the Kigali International Arbitration Centre (KIAC).
The purpose was to analyse the role of Arbitration practitioners in Africa and how they can play a pivotal role in settling commercial and business disputes. Besides, it was indeed a momentous occasion to identify challenges inhibiting active visibility of African arbitrators.
But the fundamental question is who has the responsibility (perhaps primary) to change the status quo – which is outwardly short of a desired leverage. The answer is: arbitrators themselves.
Plainly speaking, the arbitration practitioners have duty to make impact and then make a case for governments and other parties to be supportive.
The governments, which have more negotiating power, can be supportive if the arbitration practitioners exert influence in resolving societal problems.
Arbitration practitioners must take a leadership role not only to show that arbitration is one of the most pragmatic approaches to dispute settlement in the contemporary business industry, but also to prove their outstanding prowess.
Undoubtedly, arbitration is widely recognised as the most pragmatic approach in resolving investment-related agreements, namely Bilateral Investment Treaties (BITs) as well as commercial-business-related contracts.
Most of these legal instruments, if not all, contain an arbitration clause. The contracting parties typically agree to seek, in good faith or in a spirit of cooperation, a rapid and equitable solution to any dispute between them concerning the interpretation or application of a particular agreement.
As a consequence, the contracting parties agree to engage in direct and meaningful negotiations to arrive at such solutions. If the parties cannot reach an agreement within prescribed timeframe the dispute would be referred to relevant arbitral tribunal, which reflects the choice of the parties.
Africa isn’t void of arbitration talents. There’s rather a question of perception and mistrust among us – Africans – towards fellow Africans that aren’t as perfect as non-Africans, especially those from the West. This mindset has to be discarded so as to move forward and make impact.
In fact, arbitration in business disputes continues to grow annually across the African continent. Today, there’re six major African arbitration institutions: the Cairo Regional Centre for International Commercial Arbitration (CRCICA), the Kigali International Arbitration Centre (KIAC), the Nairobi Centre for International Arbitration (NCIA), the Arbitration Foundation of Southern Africa (AFSA), the Common Court of Justice and Arbitration (CCJA), and the East African Court of Justice (EACJ).
Broadly speaking, nobody would underestimate significant leverage these arbitration centres can make if the arbitrators themselves were able to convince African governments that they’re in a better position to handle commercial and business disputes than anyone beyond the continent.
As a matter of commitment, the majority of African countries have adhered to the New York Arbitration Convention, which is one of the key instruments in international arbitration.
The New York convention applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration. Additionally, it requires State parties to give full effect to arbitration agreements by requiring courts to deny the parties access to court in contravention of their agreement to refer the matter to an arbitral tribunal.
At least 38 African countries, including Rwanda, have subscribed to it, while 48 African countries have signed the International Centre for Settlement of Investment Disputes (ICSID),which is an international arbitration institution established in 1965 for legal dispute resolution and conciliation between international investors.
The time is ripe for African arbitrators, by support of governments, to practise what they preach. Who can trust African arbitrators if they aren’t given chance to demonstrate their competences?
Though it remains a choice of parties in dispute, who to arbitrate their cases, Africans must understand that Africans are well acquainted with the realities of Africans and thus they’re better positioned to handle them not only professionally but more pragmatically.
A lesson could be drawn from Singapore where a half of arbitral cases adjudicated in Singapore are handled by Singaporeans. Inter-African/intra-African disputes ought to be primarily entertained by competent African arbitrators.
There have been a lot of critism that it’s unthinkable how a continent [Africa] with more than 1.28 billion people cannot offer qualified practitioners and arbitrators. In as much as Africa faces a myriad of problems such as political, economic and social instabilities, a positive course of action must be taken to resolve those issues that are resolvable.
African systems must acknowledge the need to maintain rich-talented arbitrators; and enable them to have many changes to broaden their skills. Arbitrators need to empathise symbiotic cooperation, which would perhaps increase their visibility.
It is equally important to admit the lack of visibility of African arbitrators due to limited pool of their strengths.
African law firms or arbitrators mustn’t be confined to issues concerning Africans, but also to global issues. Why not? Once again, let’s all avoid assumptions that international law firms are far better than local law firms or arbitrators.
Once this wrong presupposition is over, perhaps the visibility of African arbitrators will have a desired leverage in matters that affect Africans.
The writer is a lawyer. The views expressed in this article are of the author.
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tralac’s Daily News Selection
Consultant to support the AfCFTA negotiations process:
The consultant will, inter alia, perform the following key tasks: Assist in the finalization of the annexes to the AfCFTA Agreement, jointly with AUC: attend meetings relating to the AfCFTA (including Continental Task Force) to prepare the annexes and accompanying documents, as well as other documents that may be requested by the AfCFTA negotiating institutions, and make substantive interventions; Assist Member States in the preparation of schedules of tariff concessions and schedules of specific commitments on trade in services in line with the agreed modalities for the AfCFTA agreement; Assist Member States in the ratification process of the AfCFTA agreement; Assist ATPC in its preparation to provide technical assistance to phase two of the AfCFTA negotiations on competition policy, investment and intellectual property rights, and possibly electronic commerce.
The Consortium to stem Illicit Financial Flows in Africa meets in Pretoria, Monday, 7 May, to review progress on implementation of the Thabo Mbeki study and recommendations.
Diarise: The Southern African Structured Trade Seminar takes place at the Avani Victoria Falls Resort, Zambia (26-29 June). Discussions will tackle commodity challenges and outline a viable roadmap for inter-regional trade in Africa.
Mainstreaming trade to attain the SDGs (WTO)
The report looks at the SDGs from economic, social and environmental perspectives and outlines how trade is contributing to making progress in each of these areas, including through reducing poverty, improving health and tackling environmental degradation. It outlines a number of steps (pdf) to help accelerate progress in achieving the SDGs. This includes governments embedding trade policies into their national development plans to spread the benefits of trade more widely and strengthening the multilateral trading system. It also includes action to further lower the costs of world trade, notably by implementing the WTO’s Trade Facilitation Agreement, which establishes procedures for streamlining the flow of goods among WTO members.
Debt warning lights flash for poorest countries, experts say (UNCTAD)
East Africa updates
pdf Macroeconomic and social developments in Eastern Africa 2018 (6.93 MB) (UNECA)
The region has clearly performed well over the last decade, but is beginning to confront a new set of challenges. To sustain the impressive development, this report recommends member states to focus more attention on (i) actively implementing reforms to create a more conducive business environment, especially with regard to providing adequate financing of the private sector; (ii) better leveraging inflows of FDI into the manufacturing sector to facilitate a more rapid technological upgrading and faster job creation; (iii) continuing to invest in infrastructure but in financially sustainable ways; (iv) strengthening domestic resource mobilization and managing external borrowing prudently; and (v) strategically reviewing existing trade agreements. Extracts:
Fourthly, in the context of structural current account deficits, regional economies have to better manage exchange rate fluctuation. Most countries in the region have now adopted either floating exchange rate or ‘managed’ float. Many currencies recorded notable depreciations against the US dollar between 2014 and 2016, although there was some stabilisation in 2017. Currency depreciations together with the spike in food prices due to severe drought conditions exerted upward pressure on inflation. Following a subsequent fall in the value of US dollar and an easing effect of a prolonged dry season, both exchange rate and inflation pressures subsided in mid-2017.
Fifthly, the region is still underperforming in terms of exports, as evidenced by the large trade deficits sustained by most countries. The structure of trade also remains little changed compared to the situation a decade ago. Specifically, exports are still excessively concentrated on primary commodities, leaving the region in the lower rungs of global value chains and highly vulnerable to commodity price shocks. The report highlights the role not only of goods exports, but also of services – and in particular tourism, which is a major foreign exchange earner in a number of countries across the region (e.g. Comoros, Ethiopia, Rwanda and Seychelles).
Profiled contents, Boxes 1-7: Did economic growth meet national targets?, Lessons on implementing industrialization policy from Ethiopia, Contribution of tourism to Eastern African economy, Opportunity from China’s Belt and Road Initiative, Overview of the exchange rate regimes in Eastern Africa, Potential impacts of the EAC-EU Economic Partnership Agreement, An opportunity missed? – The African Growth and Opportunity Act.
EAC adopts Bills to pave the way for monetary union (The East African)
The East African Community has moved a step closer to attaining a monetary union after the Council of Ministers adopted two key Bills that if passed, will enable the partner states to establish a single currency. The Council adopted the Draft East African Monetary Institute Bill, 2016 and the Bill establishing the East African Statistics Bureau. The two draft laws are a precondition for having a single currency by 2024, and will enable the partner states to establish the East African Central Bank. [EAC talks on single tax rate hit deadlock, options on table]
East Africa mulls over fee for mergers and buyouts (The East African)
The East African Community Competition Authority is considering approval fees for companies seeking to expand into the region through mergers and acquisitions. This would raise the cost of cross-border investment and put the region at par with other blocs such as the Common Market for Eastern and Southern Africa, which levy filing fees on such transactions. Already, the competition watchdog is carrying out a study to determine how much firms would be required to pay, insisting that while filing fees are essential to facilitate merger and acquisition investigations, they do not want to discourage investments into the region.
East and Southern Africa (WCO ESA) Governing Council: Customs authorities need more capacity (New Times)
Nigeria’s cargo airports: a tale of broken dreams (BusinessDay)
Adewale’s experience is a generous reflection of the frustration of many exporters who wish to export their products through non-functional Nigerian cargo airports. To them, it has been tales of stagnation, disappointment and frustration. In a bid to investigate these complaints and frustrations by prospective farmers who, largely, do not have the means to first transport their goods to Lagos to make use of the Murtala Mohammed International Airport, I embarked on a visit to five designated airports – Lagos, Uyo, Akure, Port Harcourt and Owerri – to see the infrastructure put in place by the Federal Government to aid cargo services at these airports. Among these five airports, my findings show that only Lagos and Port Harcourt currently import and export cargoes to various countries, while others barely function as passenger airports.
Nigeria Economic Update (World Bank)
Extract from the report’s Special Topic: Connecting to Compete – regional connections and coordination to enhance Nigeria’s competitiveness. With a large population and a growing middle class (from 13% to 19% of population between 2003 and 2013), Nigeria has a big home market. However, the majority of firms identify local markets – same locality, same town/city, same state – as the main sales channels. Under the dominance of local trading, regional economic specialization is less likely to emerge, as local trading leads to a replication of same economic sectors across different locations rather than specialization. Spatial fragmentation of the domestic market is exacerbated by limited connective infrastructure, reducing producers and firms’ ability to reach wider markets. This dampens the potential for scale economies as well as economic collaboration and cooperation among regions. Spatial fragmentation and limited connections also hurts welfare and prospects for poverty reduction. Recent research shows that a 10% reduction in transport costs in rural areas would increase welfare by 13%.
In choosing where to prioritize spatially connective interventions, policymakers may need to manage trade-offs between goals of spatial equity and aggregate economic efficiency. Reduction in transport cost between remote and connected rural areas has a bigger welfare impact than a similar reduction in transport cost between cities and connected rural areas – local welfare gains are higher for investments supporting rural connectivity. But, for aggregate economic efficiency, there are higher gains from focusing on the development of inter-regional corridors, linking the major urban centers. For example, improvements along the LAKAJ corridor would result in estimated annual benefits of over $1.34bn. Furthermore, a recent study showed that the elasticity of local GDP increase to transport investments is higher for the Southern zones.
IGAD signs contract for the development of Regional Infrastructure Master Plan
IGAD has contracted IPE Global Limited, in association with Africon Universal Consulting, to undertake this comprehensive study. The output of this regional study is the formulation of an infrastructure strategic framework, and its concomitant financing strategy. The 18-month study will cost $3.6m. In his remarks during the signature ceremony, Amb Maalim, highlighted that the Master Plan is to cover transport, energy and Information and Communications Technologies. He underlined the commencement of the development of the IRIMP was timely as many African countries have ratified the Continental Free Trade Area and are also working on the open skies for air traffic.
IGAD Member States call for the establishment of a Pastoral Land Governance Platform
Dr Muchina Munyua, Director of the IGAD Centre for Pastoral Areas and Livestock Development, indicated that “80% of conservation areas in the IGAD region are in pastoral areas. If maps were overlaid with conflict and resource maps, it will be clear that no land has been left for pastoralists. That is why it is important to secure their tenure rights in light of the newly discovered natural resources especially minerals, oil and gas as well as the infrastructure developments”. He further called upon Member States to adopt inclusive consultative processes in developing policy frameworks on pastoralism in order to ensure that pastoral communities are involved in decision making on matters that affect their livelihoods.
Taxi, ride-sourcing and ride-sharing services: note by South Africa (OECD)
In line with the OECD’s request, the Competition Commission of South Africa firstly discusses the current regulatory framework in South Africa’s public passenger transport and secondly provides an overview of the taxi industry. Thirdly, a discussion of the traditional metered taxis follows with special focus on their competitive response to the introduction of app-based services. We lastly discuss the engagements that the CCSA has had with various key stakeholders in the public transport market to understand and deal with factors that potentially prevent, distort or restrict competition. [Documentation: Taxi, ride-sourcing and ride-sharing services]
Today’s Quick Links: Japan says economic integration will boost Africa’s investment prospects CBN’s $2.5 bn swap deal with China seen boosting trade, easing FX volatility World Bank grants Kenya $1bn loan for infrastructure projects Kenya reviews ties with African states Sudan and Ethiopia commit to resolve the Nile row with Egypt World Bank: Do demographics matter for African child poverty? Economic impacts of child marriage: Ethiopia synthesis report Tinker, tailor, robot maker: In China, trade war threat casts long shadow |
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Nigeria Economic Update: Connecting to compete
According to the World Bank Nigeria Bi-annual Economic Update released on 2 May, Nigeria emerged from recession in 2017.
Titled Connecting to Compete, the report says that Nigeria’s GDP growth reached 0.8 percent, driven by an expansion in oil output and continued steady growth in agriculture. The decline in the non-oil, non-agriculture sector however continued, as aggregate demand remained weak and private sector credit low.
The rates of unemployment and underemployment increased in 2017 and poverty is estimated to have increased slightly. GDP growth in 2018 is expected to hover just over 2 percent, largely oil sector-driven.
Nigeria has a big home market which is constrained by limited connective infrastructure thereby reducing producers and firms’ ability to reach wider markets. This lack of connectivity dampens economic collaboration and cooperation among the country’s regions, limiting market integration and reducing producers and firms’ ability to reach wider markets. Spatial fragmentation and limited connections also hurts welfare and prospects for poverty reduction.
“Spatial integration and sub-national specialization are key for creating a nationally-integrated market for goods and services as well as attracting much-needed private investment, which in turn could enhance productivity though scale and specialization,” said Somik Lall, Global Lead, Territorial Development at the World Bank.
Nigeria would benefit from policies to promote spatial integration and sub-national specialization which would stimulate diversified, long-term growth. This can be achieved through market specialization and differentiated positioning strategies for industrial clusters across the country, according to the report.
The key challenge for policymakers at the federal and state level is to identify interventions (policy, regulatory, institutional and investment, etc.) that are best suited to realize development potential of sub national regions and integrate domestic markets.
For Nigeria to tap its spatial drivers of development, policymakers may want to focus on investments that reinforce clusters and economies of scale; optimize the connectivity between rural areas and the major urban markets; and address structural and land management issues in major urban nodes and along major growth corridors to remove or alleviate barriers that undermine the growth potential.
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Eastern Africa has doubled its income per capita in a decade: ECA
Eastern Africa continues to grow rapidly. As a result, the region’s average per capita income reached 740 USD in 2016, double the figure ten years earlier.
“Albeit from a very low base, this is the result of sustaining rates of economic growth considerably higher than African or global averages over the period,” says Mr. Andrew Mold, Acting Director the Office for Eastern Africa of UN Economic Commission for Africa (ECA).
“We should not fool ourselves – the region still needs to confront some serious developmental challenges if it is to attain the Sustainable Development Goals in 2030 – but in general the people of Eastern Africa now live longer and healthier, receive better education, and enjoy an improved quality of life compared with just a generation ago,” stressed Mold.
A policy dialogue was organised yesterday by the Office for Eastern Africa of ECA at Kigali Conventional Centre to exchange views on progress and challenges in the region.
According to new ECA report entitled Macroeconomic and Social Developments in Eastern Africa 2018, despite the marked improvements, growth in the region is still fragile. In particular, the development of the manufacturing sector in Eastern Africa has been lagging behind, limiting job creation and holding back technological progress.
The report notes that other than in Ethiopia, which has implemented an ambitious programme of export-oriented industrial parks, government policies have not thus far managed to promote robust growth in the manufacturing sector.
Another important theme highlighted in the report is the need to improve the business environment in Eastern Africa. Private sector development has been relatively lackluster and the bulk of productive investments are still accounted for the public sector. Growth would be stronger and more resilient if policies were implemented to bolster private sector activity, the report argues.
The Eastern Africa region comprises: Burundi, Comoros, D.R Congo, Djibouti, Ethiopia, Eritrea, Kenya, Madagascar, Rwanda, Seychelles, Somalia, South Sudan, Tanzania and Uganda.
About the report
This report provides an overview of the key macroeconomic and social developments in Eastern Africa in recent years. With the aim of setting the scene for more in-depth policy discussion, it has also reviewed the major structural changes in the regional economies over the past 10 to 15 years.
Countries have been benchmarked against the average regional performance, highlighting their main achievements, challenges and opportunities for future growth and development. Where relevant, examples of different policy initiatives have been discussed to promote peer-learning.
Eastern Africa is still growing at a healthy pace compared with the rest of Africa, principally due to the robust growth of the construction sector and parts of the services sector (particularly transport and finance). However, the economic performance of Eastern Africa has weakened during the last two years, principally due to drought, a decline in commodity prices, and (in some cases) growing political instability and/or civil conflict. In addition, the region has had to confront numerous humanitarian crises.
The authors also stressed the importance of policymakers addressing several emerging social problems to mitigate their negative impacts, such as high levels of alcohol abuse, road traffic deaths and low survival rates from chronic diseases like cancer.
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Debt warning lights flash for poorest countries, experts say
Top economists from UNCTAD and the International Monetary Fund agree it’s time to sound the alarm on rising public debt in many low-income countries but disagree on how loudly the bell should be rung.
Mounting public debt in some of the world’s poorest countries has leading economists worried. But where the International Monetary Fund (IMF) sees orange flashing lights, UNCTAD sees red.
The differing opinions of the gravity of the situation surfaced on 2 May when a senior IMF official presented in Geneva the organization’s recent report on macroeconomic developments and prospects in low-income developing countries – nations whose per capita gross national income is less than $2,700.
The group currently includes 59 countries accounting for about one-fifth of the world’s population and 4% of global output.
According to the report, presented by Séan Nolan, deputy director of the IMF’s strategy, policy and review department, almost three quarters of low-income developing countries faced higher government deficits in 2017 than during 2010-2014. The group’s median public debt-to-GDP ratio now hovered around 47%, up from about 33%, he said.
Although such a ratio pales in comparison to the situation in some eurozone countries – Portugal’s debt-to-GDP ratio is 125%, for example, and Italy’s is even higher – the situation in many low-income developing countries is more troubling, he said, because their governments have a significantly smaller tax base to help shoulder the burden.
“Countries such as Mozambique, such as Chad, such as the Republic of Congo, have begun to default because the debt situation is unfinanceable,” Mr. Nolan said.
In fact, in just four years the share of low-income developing countries at high risk of debt distress or already unable to service their debt fully has almost doubled to 40%.
But although Mr. Nolan sees reason for concern, he’s not ready to hit the panic button just yet, saying the situation in low-income countries has deteriorated but isn’t “charging off the cliff at 100 miles per hour”.
“The lights are flashing orange. Not red, but orange,” he said.
For UNCTAD director Richard Kozul-Wright, however, the figures presented in the report paint a starker picture. He pointed to the report’s own assessment that “the combination of sluggish per capita income growth and falling investment levels, observed across a sizeable number of [low-income developing states], represents a significant set-back in the first years of pursuit of the Sustainable Development Goals (SDGs).”
“Given that the Sustainable Development Goals are framing the development narrative, that’s a statement that I think merits to be more than orange flashing. It’s a red flashing statement,” said Mr. Kozul-Wright, who directs UNCTAD’s division on globalization and development strategies.
“And to some extent we think some of these countries have dodged a bullet,” he added, saying that several key external factors have been more favorable than anticipated, including a dollar that hasn’t increased as expected, a relatively benign bump in interest rates, and commodity prices that “have essentially been positive over this period”.
“The worry for us is that despite [these favorable conditions] there is still a surprising number of countries in this group that have moved towards or are in debt distress,” Mr. Kozul-Wright said.
An overly optimistic forecast
One reason the IMF sees orange flashing lights instead of red is the report’s forecast that the situation will stabilize in many low-income developing countries over the coming years.
But such a prediction, Mr. Nolan admitted, shouldn’t necessarily be taken at face value.
“Debt sustainability assessments have a positive bias,” he said. “They’re usually overly optimistic because of assumptions about policy – because you assume, for example, significant fiscal adjustment is going to occur.”
Mr. Nolan said the assessment of Ghana in 2013 provided a good example of positive bias.
At the time, the country was assessed as having only a moderate risk of distress despite a heavy debt burden because analysists assumed that the government would follow through on their commitment to cut the primary deficit by four or five points, he said.
“Well, what actually happened was they didn’t do it and they did have a debt distress problem in 2015,” Mr. Nolan said.
For Mr. Kozul-Wright, such a poor track record at predicting the economic future makes UNCTAD even more nervous about what the future holds for these countries.
“Over the last 27 years, the IMF has predicted every October that an average of five economies will contract the following year. In practice, an average of 26 have contracted. This suggests that the six countries that the IMF predict will be in recession for 2018 could rise to as many as 31,” he said, quoting a recent Financial Times article.
“So, I think we need to be skeptical of that rather benign projection of the external environment in which these countries find themselves,” he said.
Mr. Kozul-Wright added: “The possibility for external shocks, I think, is significant. And if that happens, there may not be a kind of universal debt crisis that we saw in the 1980s and to some extent at the end of the 1990s. But any country that gets hit by such a shock is guaranteed not to be able to make the SDGs by 2030.”
A changing creditor landscape
A point on which the two economists agreed was that the changing landscape of creditors will make any future debt restructuring processes more difficult.
“The costs of entering into debt distress will be significantly higher than was the case in the 1990s,” Mr. Nolan said. “And it wasn’t much fun in the 1990s.”
For Mr. Nolan, the reason it will be “even messier the next time around” is that borrowers have moved away from traditional official creditors, such as multilateral institutions like the World Bank and members of the Paris Club – a group of major creditor countries.
Instead, many low-income developing countries are now turning more to non-Paris Club official bilateral creditors, sovereign bond markets, and other foreign commercial lenders.
Such evolutions are important, he said, because although a wider range of creditors offers more choice to governments, the new forms of private credit often entail higher interest rates and shorter maturities, making them more burdensome.
Even more worrying is that the new creditors are much less coordinated, so future debt resolutions could be more troublesome.
“In the old creditor structure, where most of the creditors were bilateral creditors in the Paris club, there was a coordination mechanism that facilitated debt restructuring,” Mr. Nolan said, adding that such a mechanism is needed to ensure “that a whole group of official creditors step up to the table and give debt relief on similar terms.”
“We don’t have that structure anymore,” he said. “And so, resolution is going to be more difficult going forward.”
The right principles
So, what needs to be done? Although Mr. Kozul-Wright agrees with the IMF’s recommendation for both debtors and creditors to subscribe to global principles for sustainable lending, he disagrees with the endorsement of the G20’s operational guidelines for sustainable financing.
“You redeem yourself slightly by referring to the UNCTAD principles in your presentation, but it’s not referenced in the report itself,” he said to Mr. Nolan.
“I think the principles of responsible borrowing and lending that we have, and which have been noted by the G24 and the [Financing for Development process], are actually better than the G20’s,” Mr. Kozul-Wright said.
“There was a serious process of four or five years of research and consultation that went into the UNCTAD principles which I don’t think you can say actually about the G20 principles,” he added.
And while the UNCTAD director didn’t have much against the main market-based responses the report proposes – the need for more transparency, for better data and more monitoring of the data – he strongly disagreed with the report’s failure to mention the need for a statutory workout mechanism, preferably at the multilateral level.
“I think your discussion of the emergence of new creditors actually would underscore the importance of that case,” he said, adding that UNCTAD has been pushing for such a workout mechanism since the mid-1980s, after the Latin American debt crisis.
“Most of the damage is done because the current system is not efficient, it’s not timely, and it’s not fair,” he said.
“And the only way that we think that you can really address those problems is through a more statutory kind of process, and so that’s something that UNCTAD, I think, will continue to push in the work that we do.”
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DG Azevêdo launches report on role of trade in advancing the Sustainable Development Goals
WTO Director-General Roberto Azevêdo met UN Secretary-General António Guterres on 3 May 2018 to present him with a new WTO report on how trade is contributing to achieving the United Nations’ Sustainable Development Goals (SDGs).
The meeting took place at the UN Chief Executives Board session in London. The Director-General addressed the meeting on the current challenges faced by the international community in achieving the SDGs, including the need to resolve the current tensions between some trading partners.
The new publication – entitled “Mainstreaming trade to attain the SDGs” – looks at how engaging in international trade can help countries gain access to new markets and new investments, therefore boosting growth, raising living standards and promoting sustainable development.
The Director General said: “Trade has proved itself to be a powerful force for growth and development around the world. It played a crucial role in the early achievement of the Millennium Development Goal to halve the number of people living in extreme poverty. Now we are working to ensure that trade contributes again in meeting the Sustainable Development Goals.
“WTO members took a big step forward with the 2015 agreement to abolish agricultural export subsidies, which delivered a key target of the SDG on Zero Hunger. This new report examines a wide range of other ways that trade can contribute to this global mission – from tackling harmful fisheries subsidies to boosting the economic capacity of least-developed countries to maintaining and strengthening the multilateral trading system in order to provide the platform of stability and certainty upon which growth and development will continue to rely.”
The report looks at the SDGs from economic, social and environmental perspectives and outlines how trade is contributing to making progress in each of these areas, including through reducing poverty, improving health and tackling environmental degradation.
It outlines a number of steps to help accelerate progress in achieving the SDGs. This includes governments embedding trade policies into their national development plans to spread the benefits of trade more widely and strengthening the multilateral trading system. It also includes action to further lower the costs of world trade, notably by implementing the WTO's Trade Facilitation Agreement, which establishes procedures for streamlining the flow of goods among WTO members.
Mainstreaming trade to attain the Sustainable Development Goals
The WTO is central to achieving the 2030 Agenda for Sustainable Development and its Sustainable Development Goals (SDGs), which set targets to be achieved by 2030 in areas such as poverty reduction, health, education and the environment.
This publication looks at the role played by the WTO in delivering the SDGs and identifies a number of steps that would help to ensure that international trade contributes to accelerating progress in achieving these goals.
The publication shows that by delivering and implementing trade reforms which are pro-growth and pro-development and by continuing to foster stable and fair trading relations across the world, the WTO is playing an important role in delivering the SDGs, just as it did with the Millennium Development Goals before them.
The book examines the SDGs from economic, social and environmental perspectives and outlines how trade is contributing to making progress in each of these areas, including through reducing poverty, improving health and supporting efforts to tackle environmental degradation. It also recommends a number of steps to help accelerate progress in achieving the SDGs.
Recommendations on ways to accelerate progress in achieving the SDGs
The publication makes the following recommendations:
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Mainstream trade into national and sector strategies to achieve the SDGs.
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Strengthen the multilateral trading system so that it can continue supporting inclusive growth, jobs and poverty reduction.
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Continue reducing trade costs including through full implementation of the WTO’s Trade Facilitation Agreement.
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Build supply-side capacity and trade-related infrastructure in developing countries and least-developed countries.
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Focus on export diversification and value addition.
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Enhance the services sector.
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Apply flexible rules of origin to increase utilization of preference schemes.
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Ensure that non-tariff measures do not become barriers to trade.
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Make e-commerce a force for inclusion.
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Support micro, small and medium-sized enterprises to engage in international trade.