Search News Results
tralac’s Daily News Selection
Underway, in Sandton: The Japan-Africa Public-Private Economic Forum. The keynote address was delivered by President Cyril Ramaphosa.
AfCFTA updates, analysis:
(i) The AfCFTA Ratification Barometer now stands at 3 states after Kenya’s National Assembly yesterday endorsed the report of the Defence and Foreign Relations committee recommending ratification of the African Continental Free Trade Area. The MPs also approved the ratification of the Comesa, EAC and SADC Tripartite Free Trade Area agreement.
(ii) The Nigerian Office of Trade Negotiations continues to convene domestic consultations over the AfCFTA. At yesterday’s North-West Stakeholders Forum in Kano, participants recommended Nigeria sign the AFCFTA agreement.
(iii) Nigerian Institute of Advance Legal Studies sensitisation workshop. The DG of the Nigerian Office for Trade Negotiations, Ambassador Osakwe, delivered a lecture on the topic “Trade negotiations and update on the continental free trade area”. Osakwe said the AfCFTA will help to expand market access for Nigerian exporters, increase Nigerian industrial and competitive policies through negotiations and agreements, ease of doing business, increase productivity. The representative of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Mr Sanusi, called on Nigerians to embrace AfCFTA negotiations, saying that Nigerian trade policy is outdated and needs improvement and it is on this that fears of the unknown comes in, based on the manners businesses are being carried out.
“Business men are not protected, but with this new innovation, AfCFTA is here to put things in right places to see that it is well implemented and that both manufacturers and traders are protected. Nigeria has no other continent than the African continent and therefore it cannot stand aside in the face of the transformations that are sweeping across the continent. It must not only cash in and ensure most things if not everything are in her favour. Nigeria’s endorsement of the agreement must however take on all the concerns of the stakeholders’ seriously and attend to them, swiftly. NACCIMA is in support of AfCFTA and recommends that adequate fund be provided by the Govt for the negotiations to enable negotiators make adequate preparations. Capacity training be carried out by NOTN members to succeed in their process, subcommittee be set up to conduct or oversee Baseline and Sectoral Studies to enable them utilize the outcome.”
(iv) A dedicated session of the AfCFTA Negotiating Forum began on 30 April in Addis Ababa. It is scheduled to continue until 14 May.
(v) Will the African Free Trade agreement succeed? (pdf, OCP Policy Centre, Rabat). Another way of assessing the effect of trade agreements on African countries is to compare their trade-weighted WTO Most-Favored-Nation applied tariffs with their trade-weighted effectively applied tariffs. The latter take into account the preferences countries accord to each other under bilateral or regional trade agreements. The MFN and effectively applied measures of tariffs are high and essentially the same in most African countries, a reflection of limited preferences and the small amount of trade that occurs under regional partnerships. By contrast, Morocco’s trade-weighted effectively tariff, 3.8%, is far lower than its MFN applied tariff, 10.8%, reflecting its trade agreements with the EU, other Arab countries, and the United States, which together account for over 70% of its trade. Another notable exception are countries that trade heavily with South Africa under the South African Customs Union, such as Botswana and Namibia, and whose effectively applied tariffs are under 1% while their MFN applied tariffs are 5.8% and 7.5% respectively.
A more detailed examination of African trade and tariff policies is best carried out at the country level. We have selected a sample of four of the largest African countries that are signatories of the ACFTA, namely Morocco in North-Africa, Ethiopia and Kenya in East Africa, and Cote d’Ivoire in West Africa. We believe this sample is sufficiently large and diverse to give a good sense of trade policies and relations in the region. All four countries have high average MFN applied tariffs in the 11% to 17% range, and, while Morocco has bound 100% of its tariffs in the WTO, it has only done so at very high levels (40% plus). Cote d’Ivoire, Ethiopia and Kenya have bound less than 1/3 of their tariff lines. Moreover, in all four countries tariff peaks (tariffs in excess of 15%, which are often in practice prohibitive) are applied to over half of agricultural imports and between one quarter and one half of non-agricultural imports. [The authors: Rim Berahab, Uri Dadush]
Industrialisation and African diaspora investment are key to boosting Africa’s capital stock, says Afreximbank President
President Oramah told the Africa Leaders Speak Forum at Harvard University’s Kennedy School, that Africa’s low levels of capital accumulation was largely result of African economies not capturing a good share of the value chain of agricultural commodities and natural resources. He noted, for instance, that in the global cocoa sector, which generated $120bn annually, African farmers, who delivered 77% of the cocoa supply, retained only 3% to 8% of the value while a few foreign traders and chocolate manufacturers earned between 32% and 50% of the global cocoa value chain. Similarly, in the oil sector, Africa received only 3% of the $3 trillion from the petroleum products market although it accounted for 10% of crude oil reserves, and in other sectors like the gold, Africa accounted for 50% of the world’s deposits but received only 4% of the over $300bnglobal gold earnings, Dr. Oramah added. He announced that Afreximbank had the Afreximbank Market Asymmetry index to measure the distribution of revenues to various actors in the commodity value chain.
Infrastructure development in Sub-Saharan Africa: a scorecard (World Bank)
This paper provides a scorecard on infrastructure development in Sub-Saharan Africa over the past decades along four sectors (telecommunications, electric power, transportation, and water and sanitation) and three dimensions (quantity, quality, and access). First, it documents the existence of a large gap in infrastructure in the region - although the magnitude of the gap depends on the sector, dimension, and country/group. Second, the potential growth benefits from closing the infrastructure gap are large. Third, the infrastructure financing needs are very large, and the public sector so far is unable to meet these needs. Other options that involve the private sector may be available for the region. Finally, there is room for improving the efficiency of public infrastructure spending (that is, the quality of public investment management systems and procurement methods), which, in turn, may increase the output multiplier of investment spending.
Benchmarking the performance of infrastructure sectors in Sub-Saharan African countries involves the assessment of economic infrastructure across three dimensions: quantity, quality, and access. To place the infrastructure trends in Sub-Saharan Africa in context, the report uses a comparative perspective. First, the analysis uses different comparator regions, namely, South Asia, the Middle East and North Africa, Latin America and the Caribbean, and East Asia and the Pacific. Second, it examines infrastructure trends across income groups in the region - including low-income countries (LICs), lower- middle-income countries (LMCs), and upper-middle-income countries (UMCs). The full list of countries is presented in Annex 1. [The authors: César Calderón, Catalina Cantú, Punam Chuhan-Pole]
Cairo to Cape Town road boosts cross-border economies, links Tanzania to rest of Africa (AfDB)
Until its completion, the Dodoma-Babati road was a critical missing link in the 10,228-kilometre Trans-Africa Highway, linking Cairo to Cape Town, connecting nine African countries from South Africa to Egypt, through Zimbabwe, Mozambique, Zambia, Tanzania, Kenya, Ethiopia and Sudan. With the completion of the road, traders and travelers now conduct immigration procedures on only one side of the border, reducing time and costs. Thanks to these efforts, the volume of trade between Tanzania and the rest of Eastern and Southern Africa has risen to US $1.1 billion in 2016, a level both Adesina and Magufuli described as historic. The Dodoma-Babati road project was commissioned last Friday.
Angola: Laúca Hydropower Plant update (IPPMedia)
The company executing the Laúca Hydropower Plant project on the Kwanza River said in a statement last week that the third power generation group, which brings the total installed capacity at the mega facility to over 1,000 MW, was completed last month. Apart from overseeing execution of the project, Odebrecht of Brazil is also responsible for the engineering, procurement and construction services of the plant, including the supply, assembly and commissioning of all electromechanical equipment. “With the commissioning of the third power generation group in April this year, the total current installed power will be over 1,000 MW. With these three generation groups in full operation, out of a total of six, Laúca will have already consolidated its position as the largest hydropower plant in Angola, surpassing the installed capacity of Capanda (520 MW) and of Cambambe (960 MW) Hydropower plants,” it said in the statement. According to Odebrecht, the sixth generator is being assembled, and once it comes into operation Laúca will reach an installed capacity of 2,070 MW, becoming one of the largest hydropower plants in Southern Africa, alongside the Cahora Bassa Hydropower plant, in Mozambique.
Nigeria: Economic challenges, anti-competition shrinking number of telcos (ThisDay)
To address the situation, the Nigeria Communication Commission, at a stakeholder’s forum on the study of the level of competition in the telecoms industry, said it has commissioned a study that will address the situation. President of the Association of Licensed Telecoms Operators of Nigeria, Gbenga Adebayo: “We were 35 active members, but as I am speaking with you, we are only left with 16 members. We have supposedly lost the rest to economic challenges, anti-competition, multiple taxation, vandalism and theft, among others.” NCC Director of Commission and Economic Analysis, Josephine Amuwa: “NCC has engaged the services of Messer’s CT Worx. Limited to conduct a study on the ‘Level of Competition in the Nigerian Telecommunications Industry,’ using the 2013 as baseline year.”
South Africa: Yunus Carrim calls for co-ordinated effort to stub out illicit cigarette market (Business Day)
Finance committee chairman Yunus Carrim has called on Finance Minister Nhlanhla Nene to co-ordinate a team that would help the committee on illicit financial flows to do its work. On Wednesday, Carrim highlighted the need for effective co-ordination to combat the illicit tobacco trade because money was being lost to the fiscus. He said a structure with a clear strategy was needed. Carrim made the comments at a meeting about the issue held by the finance committee and attended by industry and various state agencies. Tobacco Institute chairman Francois van der Merwe told MPs that at least a quarter of the cigarette market in SA was illicit, resulting in significant losses to the fiscus. [Legal tobacco industry could disappear in two years, Parliament hears]
Kenya: Uhuru pushes Big Four agenda in key House speech (Business Daily)
President Uhuru Kenyatta on Wednesday pleaded with Parliament to help anchor his second term’s economic agenda with speedy passage of the legislation that is needed to roll out its pillars commonly known as the ‘Big Four’. Mr Kenyatta said the dream of transforming Kenya riding on the Big Four agenda that includes Universal Healthcare, Manufacturing, Affordable Housing and Food Security, would only come true with concerted action aimed at eliminating the numerous barriers on the path of execution. Full text of speech: extract on AfCFTA. For years, all sorts of barriers, legal and customary, have delayed Africa’s progress and prosperity. In the African Continental Free Trade Agreement, we have, at last, a real chance of opening up the continent’s trade, once and for all. If we succeed, then trade, goods and services will flow across Africa, not outside it, bringing jobs, skills, and unity. That we are so close to a final agreement shows the vision of our generation of African leaders, among whom we must count you, Hon. Members of this House, for ratifying the agreement without delay. I can only hope that every African nation will show the same foresight that you, our Hon. Members, displayed. [Bitange Ndemo: How to finance Uhuru’s Big Four agenda without raising taxes]
Today’s Quick Links: Understanding the characteristics of regionally extensive droughts over Southern Africa AFD provides €8m to support ecological transition in five ECOWAS nations Malaria Free Africa: WHO calls for more resources, cross-border collaboration Nigeria, EU trade volume rises to €25.3 billion in 2017 Kenya: Sugar imports fall 54% in Q1 after duty free window shut Kenya: Revenue from sin taxes down by Sh4bn in only nine months IATA: Air freight growth slows to 22-month low as restocking cycle ends India notifies food subsidies to WTO, says it’s within the 10% limit Vietnam’s manufacturing miracle: lessons for developing countries |
Related News
SA, Japan to fast-track economic growth
The Japan-Africa Public-Private Economic Forum is expected to accelerate the promotion of private sector-led economic growth by encouraging networking among African and Japanese companies.
President Cyril Ramaphosa this evening delivered the keynote address at the forum, currently underway in Sandton, Johannesburg. Hosted by South Africa, the forum is organised by the government of Japan and the Japan External Trade Organization (JETRO).
The forum, which is attended by business executives and representatives of government from African countries and Japan, further seeks to assist and strengthen investment between Japan and Africa within the public and private sectors.
Plenary and thematic sessions tackling key issues in Africa’s development will form the core program of the forum. It will be accompanied by several side events including business networking.
In addition, the Japan Fair will showcase Japanese products and other events, including special sessions focusing on specific themes such as investment promotion and technology transfer and entrepreneurship.
In South Africa, Japan remains a major trading partner, with more than 140 companies active in the country and over 150 000 jobs created.
The South African government is committed to initiating measures towards economic recovery and creating employment opportunities.
Address by President Cyril Ramaphosa at the Japan-Africa Public-Private Economic Forum
It is my distinct pleasure to begin our celebration of Africa Month by addressing the Japan-Africa Public-Private Economic Forum here on African soil.
This year, 2018, is an auspicious year both for the continent and for Japan’s relationship with the continent. This year marks the centenary of the birth a great African leader, Nelson Rolihlahla Mandela. It is also 100 years since Japan established its first diplomatic mission on the African continent in the form of the consulate in Cape Town.
Over the last century, we have witnessed Japan’s quest to overcome the hardships of post-war reconstruction and the transformation of its economy, while we in Africa too are striving to achieve just, equitable and inclusive social and economic development to combat the scourge of poverty, unemployment and under development.
We are confident that this Forum will enable us to break new ground in further advancing the relationship between the countries of Africa and Japan.
This Forum is about cooperation and collaboration, not only between different countries, but also between the public and private sectors in those countries.
The social and economic challenges on the African continent will not be effectively addressed if governments and business do not work together.
Similarly, we will not be able to expand trade and investment relations between Japan and African countries unless our respective governments, state owned entities and other public institutions are aligned with the work of the private sector.
For Africa to grow and for its people to flourish, its economies need to be more effectively integrated into the global economy.
They need to attract capital, technology, expertise and best practice from advanced economies and use that to take full advantage of its plentiful natural resources.
Strategic relationships with countries like Japan are critical to this effort.
Trade ties between Africa and Asia have grown significantly in recent years.
In 2017, Africa’s exports to Asia as whole were worth around $64 billion, of which Japan accounted for around $8.3 [billion].
However, the current basket of exports is very much commodity-based, exposing African countries to price fluctuations and denying them the opportunity to extract additional value from these commodities.
African economies therefore need to diversify and shift towards greater production of intermediate and final consumer and industrial products.
These countries then need to ensure that their manufacturing capabilities feed into regional and global value chains.
As it stands, Africa is the second fastest growing region in the world and has the largest number of developing countries.
In the past decade it has grown at a rate of 2 to 3 percentage points faster than global GDP.
Regional growth is predicted to reach 4.3 percent in 2018, up from the 3.4 percent projected for 2017 and 2.2 percent achieved in 2016.
This upward trend is driven by increasing foreign direct investment flows, public investment in infrastructure and higher agricultural production.
In the near future, Africa’s youth will contribute significantly to the competitiveness of the continent.
With as much as 60 percent of Africa’s population under the age of 25, the continent has a massive opportunity for a revolution in productivity and growth.
However, this opportunity will only be realised if enough jobs are created.
This requires a fundamental change in approaches to job creation and skills development and a renewed focus on the continent’s economic capacity.
Africa’s ability to be globally competitive is undermined by poor and inefficient infrastructure.
The African Union’s Agenda 2063, which serves as the basis for Africa’s long term social and economic transformation, aims to address these challenges.
It aims to position Africa as a supplier of beneficiated resources by prioritising labour intensive manufacturing, doubling agricultural productivity and expanding the contribution of the ocean economy.
This effort provides an opportunity for Japan to collaborate with countries across the continent as we venture towards balanced, equitable and sustainable integration into the global economic system.
As a country that has an advanced infrastructure backbone, Japan can share best-practice models of infrastructure development with the African continent.
The relationship that Africa wants to have with Japan is built on what Mr Satoshi Miyamoto, the Executive President of the Japan External Trade Organization, refers to as the dual principles of ‘African ownership and international partnership’.
It is these principles that we find manifest in the Tokyo International Conference on African Development – or TICAD – process, which is a valuable platform for cooperation and collaboration.
In pursuing its economic development, Africa can learn much from Japan’s Kaizen philosophy, with its emphasis on productivity improvement, efficiency, support for SMMEs and skills development.
A necessary condition for all these efforts to succeed is a massive increase in investment in the continent.
As a country, we have realised that we will not be able to grow our own economy and reduce unemployment and inequality without a massive increase in both domestic and foreign direct investment.
We have therefore embarked on ambitious investment drive that aims to generate at least $100 billion in new investment over the next five years.
This drive will culminate in an Investment Conference later this year, which will bring together investors both from within South Africa and from other parts of the world – including from Japan.
There is a compelling case for investment in South Africa.
The country has stable institutions, a thriving democracy, an independent judiciary and a strong commitment to the rule of law.
South Africa boasts an advanced and competitive financial and professional services sector, backed by a sound regulatory and legal framework.
The country has been investing significantly in its economic infrastructure to expand its productive capacity and improve its ability to export its products.
Through the establishment of special economic zones and the use of incentive programmes, South Africa is increasingly attracting investment into manufacturing and related sectors.
We have established a ‘one stop shop’ service, which brings together key government departments in a single location to provide specialist advisory services, fast track investment projects and unblock and reduce red tape in government.
We are addressing outstanding regulatory issues, such as the finalisation of the Mining Charter in consultation with stakeholders.
This will provide clarity and certainty in an industry that has a huge potential for job creation, growth, beneficiation, transformation and empowerment.
A major part of South Africa’s economic drive is to accelerate the process of economic integration in the Southern African region and across the continent.
The agreement in Kigali in March on the establishment of an African Continental Free Trade Area will create a single continental market for goods and services, with free movement of business persons and investment.
It is expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for production at scale, continental market access and better reallocation of resources.
We are also pursuing other initiatives to promote intra-African cooperation on investment, infrastructure development, tourism and agriculture.
Africa is an investment destination with significant unrealised potential.
Many Japanese companies are perfectly positioned to become part of Africa’s inclusive growth story.
Several Japanese companies have a keen understanding of Africa’s ambitions to become an industrialised continent.
As South Africa, we have seen the participation of Japanese companies in the productive sectors of our economy such as automotive, components electronics, mining and infrastructure.
Japan is among the top 10 investors in South Africa with 280 companies – such as Toyota, Isuzu and NGK – operating in South Africa.
This forms a firm foundation for Japan’s stated intention to further strengthen partnerships with the African continent.
In line with TICAD VI pledge of $30 billion in investment for 2016 to 2019, Japanese companies need to scale up and accelerate investment in Africa.
The increase in digitisation and use of cutting edge technology and innovation are critical factors for Africa to ensure it takes advantage of the fourth industrial revolution.
There are many opportunities for Japanese companies in areas such as the use of smart irrigation in water scarce areas, small scale embedded generation and off-grid solutions for rural electrification, and the provision of broadband for rural development.
There is also great potential in financial services.
African economies need capital and Africa’s people need banking.
We therefore invite Japanese banks to expand their presence on the African continent, which, among other things, would greatly facilitate trade and investment between Japan and Africa.
A century after Japan formally established a diplomatic presence on the African continent, the time is now right for Japan to establish an even more significant economic presence.
Africa is a continent on the move.
It is entering a new era of growth and development.
To sustain this progress, Africa will need to deepen its relationships with countries like Japan through greater trade, investment and technological exchange.
This Forum is a critical and valuable opportunity to further such ties.
It makes the bold statement that Japanese companies and its government are committed to the realisation of Africa’s potential.
It makes the bold statement that the African continent is open for business.
I thank you.
Related News
President Kenyatta presents scorecard, rallies support for Big Four Agenda
President Uhuru Kenyatta on 2 May presented to Parliament a comprehensive scorecard of his Government’s achievements on areas of national values, security and Kenya’s obligations to the international community.
The President, who addressed a joint sitting of both houses of Parliament, also urged all arms of government to work in tandem to achieve the ambitious objectives of his Big four Agenda.
The President said the country currently stands on a focused trajectory of prosperity, freedom and safety.
“It is quite clear that Kenya today is freer, safer, more prosperous, and held in higher regard than it has ever been,” the President told an attentive bicameral sitting of Parliament during the State of the Nation address.
The President is required by the Constitution to report to the nation, once every year, on all the measures taken and progress achieved in the realization of national values, international obligations and security.
The President talked at length about the Big Four Agenda, saying he will rely on the MPs to pass the requisite legislation upon which the programme depends.
He said the Big Four Agenda was conceptualized after discussions he held with Kenyans.
“Kenyans want their families kept safe from catastrophic bills for medical care; they want skilled jobs, especially in manufacturing; they want to be food secure, and they want dignified, affordable homes. The “Big Four” Agenda serves each of these,” said the President.
Turning to security, the President reported that Kenya is now safer and stronger than when he addressed the last joint sitting of Parliament on March 15, last year.
He said Kenya’s alliances with other nations are stronger and the country has become indispensable to the international community’s pursuit of stability and security.
“My Administration continues to treat its responsibility to protect Kenyans and their property from crime, terrorism, and other forms of insecurity as its core obligation,” said the President.
He said the last General Election was conducted in a more secure environment but added that the government was forced to respond firmly to deliberate disruptions of the electoral process, destruction of property and isolated attempts to block voting.
“In every case, the disciplined services did their duty. I commend all our disciplined services for their dedication,” he said.
The President said going forward, the Government will strengthen the capacity of the disciplined services to keep Kenya peaceful because, “without peace, our desire for a better Kenya will remain a mere wish”.
The President announced the empowerment of the National Administration Service to supervise security operations and coordinate the work of national government in the counties and improve their engagement with county governments across the country.
President Kenyatta called on Kenyans to be patriotic and united, saying that a country that is not united opens itself to external security threats.
But he added that terrorism presents a constant threat and Kenyans cannot rest on their laurels.
President Kenyatta also called on agencies tasked with fighting graft to put extra effort in ensuring perpetrators are punished.
“And I expect the new officials now in office in prosecution and investigations to bring cases against the most powerful and privileged, to show Kenyans that none of us are above the law,” said the President.
He called on the Legislature and Judiciary to play helpful roles in fighting corruption. He said judges must ensure that the corrupt do not misuse courts for protection.
“The private sector and members of the public have a big part to play in protecting whistleblowers and reporting all economic crimes they have knowledge of,” said the President.
Speaking on the economy, the President said Kenya’s economy has been resilient even in the face of last year’s prolonged drought and General Election.
“Our real Gross Domestic Product (GDP) grew by 4.9 percent in 2017, much higher than 3.6 percent for World Real GDP and 2.6 percent for sub-Saharan Africa real GDP,” said President Kenyatta adding that the 20 per cent growth in the tourism sector was very encouraging.
The President also addressed himself to the expansion of the infrastructure including the SGR, the Jomo Kenyatta International Airport, roads and power connectivity.
President Kenyatta gave an impressive scorecard on health saying the country has witnessed increased health facilities from 9,000 in 2013 to 11,000 in 2017. The NHIF coverage has also widened from a membership of 3.8 million Kenyans in 2013 to 7.2 people currently.
The government has also expanded the NHIF coverage to expectant mothers while access to anti-retroviral drugs to these mothers has significantly increased.
“Today, 94% of HIV-positive expectant mothers attending antenatal clinics access the ARVs; mother-to-child HIV transmission has consequently fallen sharply,” said President Kenyatta.
Remarks by His Excellency Hon. Uhuru Kenyatta during the State of the Nation Address at Parliament Buildings
Nairobi, 2nd May, 2018
Today, it is a profound honour for me to deliver the first State of the Nation Address of my second term in office.
However, Mr. Speaker, before I proceed any further, let me pay tribute to the late Kenneth Matiba, whose patriotism inspired greatly the constitution under whose authority we meet today.
Let us all resolve to emulate the example he set, his desire for a strong, prosperous and inclusive Kenya.
It is right and fitting to look back on the achievements of the Eleventh Parliament before setting out our plans for this Parliament.
The 11th Parliament was charged with the task of implementing our new constitution; making enabling laws to create institutions, which the new constitutional order called for.
There is no doubt walking this part of the journey has not been easy. But what is encouraging is that we have made significant progress in implementing the new constitution: the laws were passed, the counties were established; and as such the new constitutional order is in place.
I thank your predecessors for discharging their duty so well.
Now, Mr. Speaker, let me congratulate your members, both the newly elected and the returning ones, for winning the trust of the Kenyan people. Hon. Members, you and I owe our presence here today to Kenyans who chose us to represent them.
The trust they have bestowed on us is sacred. But we must always remember that, as leaders, we do not serve only those who voted for us; we serve all Kenyans as required by our constitution.
The Constitution that brings us here for this address is a guide, an instruction and a tool to help us craft a Kenya freer, fairer, wealthier and more united. Let us consider whether we have preserved, protected, and honoured it. Indeed, we have.
Our constitutional order is stable, secure, and growing in strength. Devolution is no longer a baby; it is now an established framework for governing and delivering public services.
Five years of establishing the county governments have taught Kenyans what they want of devolution, and how to get it. Overall, the Government is becoming more responsive to the needs of Kenyans, as we all hoped it would when we passed the new law.
There is no doubt there have been some challenges in the use of public resources, with some individuals fraudulently and corruptly diverting public resources to benefit themselves.
But, we are building preventive tools and ways for citizens to become more involved in reporting graft.
My Administration, I must emphasize, despite these challenges, has remained committed to the implementation of Devolution. We are far above the 15% threshold for resource allocations to the counties provided for by the Constitution. From an allocation of Ksh. 210 billion in the 2013/14 financial year, we now stand at Ksh. 327 billion for the financial year 2017/18: an increase of 56% in five years.
I also recently signed the Division of Revenue Bill, 2018, which sets aside Ksh. 372 billion for counties in the coming financial year 2018/19. The national government complemented county service delivery in the reporting year by injecting Ksh. 9.6 billion for the Managed Equipment Services, Ksh. 5.2 billion for free maternity, and Ksh. 900 million for user fees.
Moreover, two (2) billion shillings was disbursed to 11 counties from the Equalisation Fund to improve services.
In addition, and in the spirit of upholding Devolution, my Administration further decentralized service delivery by initiating the “Huduma Mashinani Programme”. This programme brought vital services – from registration services such as identity cards to the NSSF and NHIF Services – closer to the people.
Kenyans believe in devolution, and my Administration has matched that belief with strong and tangible support for it.
I now turn to the urgent matter of how we live our constitutional values as a people, before I report on their expression in governance. Kenya is a country of God-fearing and generous people. In our moments of need, we are kept going by the compassion and empathy of our countrymen.
In our dealings, most of us are honest to a fault, and intolerant of the fraudulent. In our private lives, we live together, whatever corner of the country we call home, whatever language we speak, and whatever faith we subscribe to. In other words, the Kenyan people are ahead of you, their leaders.
That must change. Leaders at every level of government must demonstrate a desire and commitment to serve; and in particular we must maintain highest degree of integrity. Those days when you could enjoy public goods without fear that action may not be taken against you, are gone. To demonstrate this point, last year, ill-gotten public assets valued at about Ksh. 500 million were recovered; and civil proceedings were instituted for the preservation and recovery of other assets valued at more than Ksh. 6 billion.
To deepen good governance, we have continued to digitize key services to seal loopholes used for fraud. And I expect the new officials now in office in prosecution and investigations to bring cases against the most powerful and privileged, to show Kenyans that none of us are above the law.
I urge the Judiciary to do its part to ensure that orders are not frivolously used by the wealthy and corrupt individuals to avoid justice; I urge you, Hon. Members, to give us the legal tools we need to win the war against the lords of graft.
Having made all these efforts, I want to repeat what every Kenyan in their heart of hearts knows: we must all come together to fight this vice, if we are to conquer it. The Government and the private sector also, must report fraud and protect whistleblowers without the slightest hesitation.
Kenyans, on their part, must report any crimes they may come across. Families must feel ashamed by one of their member becoming involved in corruption; they must insist on the upholding of their name as a family.
Teachers and parents must explicitly teach children the value of honesty and the concept of honour. It is only by coming together as a people that the values in our constitution will take life in the governance of Kenya. And that is how we will manage to position Kenya to join the league of prosperous nations.
These constitutional advances must, of course, be paid for, so it is natural to turn our attention to the economy.
Where goals are concerned, Hon. Members, we are all in broad agreement: Kenyans want to see lower cost of living; they want jobs for their sons and daughters; and affordable food on their table. Kenyans want to see broad prosperity.
These goals are reasonable; some of them are constitutional requirements in their own right. Let us consider whether we have lived up to them.
None of us in this August House today will have forgotten that last year was election year, or that the region was affected by severe drought.
It is encouraging to note that, despite these challenges, our economy remained resilient. Our real Gross Domestic Product (GDP) grew by 4.9 percent in 2017, much higher than 3.6 percent for World Real GDP and 2.6 percent for sub-Saharan Africa real GDP.
Even more encouraging was the performance of our tourism sector; tourism earnings grew twenty per cent – proof that even when our politics is at its hottest, Kenya keeps its visitors’ confidence.
We remain on course to meet the tests that Kenyans set for us, but we must admit that we still have a long way to go. Deeper reflection is, therefore, called for.
If we are to create the jobs for which Kenyans long, we need investment. When I took office in 2013, my Administration promised and delivered the most aggressive surge of infrastructure development in Kenya’s history.
We knew that without radical renewal and improvement of our infrastructure and connectivity, we could not hope to attract the investment we needed to create jobs and prosperity, and to beat poverty.
Many of you will recall the success of that first phase of development: we started to build the SGR after the 11th Parliament was sworn in, and by the time members returned home to ask voters to renew their mandate, we had brought the SGR to Nairobi.
As I speak to you today, less than a year since that first train left Mombasa for Nairobi, nearly 700,000 passengers have taken the Madaraka Express. On the cargo side, I am pleased to state that as promised, the SGR cargo services were up and running on the 1st of January, 2018 with an initial monthly load of 22,345 metric tonnes rising to an impressive 213,559 metric tonnes per month as of the end of April, 2018.
But that is not all. I have already launched the second phase of the SGR project, which runs from Nairobi to Naivasha; and negotiations are in progress for the financing of the Naivasha-Malaba line. In short, Hon. Members, I can report that last year we completed the most ambitious infrastructure development in Kenya’s history.
It was not, of course, the only ambitious work in infrastructure that we undertook. Hon. Members will remember that we opened Terminal 2A at Jomo Kenyatta International Airport some time ago; we would almost certainly have earned less revenue from tourism this year had we not made that investment.
You might also recall the expansion of Last-Mile Connectivity, which has brought electricity to 71% of households, up from 27%in 2013.
I am particularly proud of this success, for I know its transformative power: I have seen for myself that on the day a family first switches on a bulb, their entire lives change.
When I assumed office as President, we promised to tarmac 10,000 kms roads across the country; we are on target having completed 3,000 kms to-date and with a further 5,000 kms under construction. Among the many roads we have constructed,I want to mention one, that is, the Isiolo-Moyale Road, part of the Trans Africa Highway Corridor, running to our border with Ethiopia. This road is transforming the economy of this region, for the better of our people.
Our people from that part of the country can now easily travel to their national capital, Nairobi, in a matter of hours, contrary to the past when they used to take days. They now feel they have reason to be proud to be Kenyans.
These investments in infrastructure laid the firmest of foundations for the broad and shared prosperity that Kenyans expect. This term, Hon. Members, we must deliver it.
I have already spoken about the “Big Four” Agenda in other forums but it deserves me talking about it to you, Hon. Members, not least because I will rely on you to pass the legislation upon which it depends; but, more importantly, to convince you to join me as agents of the desired change. I wish today to speak on the reasoning that informs this agenda.
If you Hon. Members leave the House today with a clearer idea of your role as leaders in this development programme, then I will be the happiest man.
I conceptualized about the “Big Four” from discussions I held with Kenyans about their problems and prospects, particularly as we went about seeking their support.
The priorities they would want us to focus on are clear. Kenyans want their families kept safe from catastrophic bills for medical care; they want skilled jobs, especially in manufacturing; they want to be food secure, and they want dignified, affordable homes. The “Big Four” Agenda serves each of these.
By providing affordable universal healthcare, we will, quite simply, save lives. Already, extensive work has been done to bring access to quality and affordable health services.
We have increased health facilities from 9,000 in 2013 to 11,000 in 2017. The NHIF coverage widened from a membership of 3.8 million in 2013 to 7.2 million currently. We expanded NHIF coverage for expectant mothers and raised deliveries by skilled attendants from 44% in 2013 to 66% in 2017.
Access to anti-retroviral drugs to expectant mothers has significantly increased: today, 94% of HIV-positive expectant mothers attending antenatal clinics access the ARVs; mother-to-child HIV transmission has consequently fallen sharply.
As a result of our various health intervention programmes, including the mosquito net programme, incidences of malaria have dropped from 11% to 8%; infant mortality has fallen from 52 per 1,000 to 39 per 1,000 live births; under five years mortality came down from 74 per 1,000 to 52 per 1,000. Maternal mortality dropped from 488 per 100,000 to 362 per 100,000.
Despite the improvements we have recorded, there is no doubt we still have a way to go. We need to, in particular, take steps to improve immunization which has dropped from 90% to 70%. Hon. Members, I am happy to inform you the county governments are keen and willing to work with the national government towards putting together a programme to up our immunization to where we were, if not better.
We also addressed the medical needs of our older persons and persons with severe disability by extending NHIF coverage to 42,000 of them.
And while we are working to deliver food security, we are taking steps to help Kenyans impacted by a long drought that had hit the country. The Hunger Safety Net Programme is cushioning Kenyans against hunger. Through it, cash was transferred to vulnerable households in arid and semi-arid areas giving them the choice where and how to spend the stipend.
This method aids farmers and markets, while restoring the dignity of Kenyans who might once have been asked to line up in the hot sun to be given a few “goro goros” of pre-determined foods.
With respect to housing, it is worth noting that demand for decent homes far outstrips supply, particularly in the low-cost and affordable segment. A decent roof over one’s head is the most tangible symbol of a decent life, and it should be a critical part of a family’s wealth.
This new housing programme has been designed to incorporate the private sector so as to properly respond to the demand. We expect hundreds of thousands of affordable new homes to follow, across the country, accompanied by a surge in jobs and incomes.
My dream is one day, in the not-too-distant future, owning a decent home will be within reach of every Kenyan of median and modest incomes.
Families will retire in the evenings to clean, well-organized and hygienic houses, and Kenya will go to sleep knowing that all its citizens have a sound roof over their heads. This dream is going to become a reality if we all join hands to eliminate the barriers to its realization, through legislation and new policies to incentivize the private sector.
Turning to security, I can say without fear, we are a safer and stronger nation than we were when I last spoke to this House.
Our alliances are strong, and growing stronger. Kenya has become indispensable to the international community’s pursuit of stability and security, environmental protection, and of a global community able to respond to large-scale crises when they come.
My Administration continues to treat its responsibility to protect Kenyans and their property from crime, terrorism, and other forms of insecurity as its core obligation. In the year under review, the country beat back challenges to security.
The general election was more secure than most in the past. Regrettably, we had to respond, firmly, to deliberate disruptions of the process, to the destruction of property, and to isolated attempts to block voting. In every case, the disciplined services did their duty. I commend all our disciplined services for their dedication.
Going forward, I commit to strengthening their capacity to keep the peace, because without peace our desire for a better Kenya will remain a mere wish.
I have further empowered the National Administration Service, from the Regional Commissioner to the chief, to supervise security operations, to coordinate the work of national government in the counties, and to improve our engagement with the county governments as we serve Kenyans right across the country.
The concerted and coordinated response by our disciplined service means that terrorists have less room to target our people.
There are fewer and less lethal attacks in Kenya today, even as terrorist groups elsewhere damage democracies. I commend the diligent men and women from multiple agencies who detect and prevent attacks: they have kept Kenya safe, and sometimes paid the highest price for our safety. May God comfort the families of the men and women we have lost, not just in the fight against terrorism, but in every effort to defend Kenya’s sovereignty and security.
We however, cannot rest; the threat is ever present and all Kenyans must constantly be on the alert.
At this moment, I also recall with great sadness, the tragic loss of Principal Secretary, Mariamu el Maawy, to the consequences of a terrorist attack. I pray that her family, friends, and colleagues may be comforted; and I pray, too, that this nation never forgets the selfless public service she gave it.
For all that, I repeat here what I have said elsewhere: ultimately, security will be found and sustained largely by transforming our politics, and in revitalizing the spirit of patriotism and of responsible citizenship.
For even though our democracy has become more competitive, and Kenyans have grown freer in the multiparty era, that liberty has come with a price. All of us have endured an almost permanent state of political campaigning, which has divided Kenyans, sometimes tragically, as in 2008.
That disunity is a direct threat not just to our freedom, and not just to our prosperity, but also to our nation.
Beyond terrorism, we remain vulnerable to other security threats; many of them, from terrorism to trafficking, across borders. So we cannot be self-absorbed: we must be our neighbour’s keeper no less than our brother’s. The same principles that guide us at home govern relations with our neighbours.
We defend democracy abroad as we do at home; we want for others the peace that we enjoy here; we are grateful for the solidarity extended us by our brothers and sisters on the continent, so we offer it to others in return. Last year’s events showed the soundness of these principles.
The region is not at peace. Somalia remains troubled, largely by foreign agents who weaken its government, who divide its peoples, and who threaten to reverse the gains we have so painfully won under AMISOM.
Through it all, we remember that if our brothers and sisters in Somalia prosper, we prosper; if they are safe, so are we. It has been our policy, then, to help them regain the peace and prosperity they once knew.
We worked, and continue to work, to secure foreign funding and support commensurate to Somalia’s challenges; we helped, and will continue to help, the people of Somalia build a strong and stable government.
Indeed, that is why, only a few days after I spoke to this House last year, it was my pleasure to welcome President Mohamed Abdullahi Mohamed to State House in March, 2017, when we laid plans for a renewal of relations between our two nations. An early outcome of our agreements that day was the resumption of flights between Nairobi and Mogadishu; members may be sure that more will follow.
I cannot resist mentioning a visit to Somalia in the first quarter of last year, during which I spoke to our soldiers deployed in Somalia. Their courage and their devotion to their mission were extraordinarily inspiring. I ask you, Hon. Members, to keep them in your prayers and in your deliberations; and to devote yourself as wholeheartedly as they have to our region’s peace and the security.
If Somalia remains unsettled, let us admit that South Sudan nation remains in crisis.
Thousands have died while hundreds of thousands more have been displaced. In the year since I last spoke to the House, we have hosted hundreds of thousands of South Sudanese refugees; and we have joined friends and partners to help those still suffering inside the country. Equally, we have lent our support to the multilateral peace process, and we continue to urge the leaders of South Sudan to put the interests of their people and motherland above their own. As we have in the past year, Kenya stands with the people of South Sudan in their search for lasting peace.
Elsewhere in the region, there is better news to report. In the East African Community, we grow closer by the day. Last year, I opened our borders to our brothers and sisters from the region: they can now live and work in Kenya more easily than they ever have, and they can now partner with us in the task of building a free, united and prosperous African nation.
That openness to our brothers and sisters is proof of our commitment to the unity not just of the region, but also of the continent.
For years, all sorts of barriers, legal and customary, have delayed Africa’s progress and prosperity. In the African Continental Free Trade Agreement, we have, at last, a real chance of opening up the continent’s trade, once and for all. If we succeed, then trade, goods and services will flow across Africa, not outside it, bringing jobs, skills, and unity. That we are so close to a final agreement shows the vision of our generation of African leaders, among whom we must count you, Hon. Members of this House, for ratifying the agreement without delay.
I can only hope that every African nation will show the same foresight that you, our Hon. Members, displayed. Asanteni.
It remains to remind members that in the last year, Kenya has earned her designation as a United Nations Service Centre. Isingle out for your attention two consequences: first and simply, it means jobs and training for a number of our young people; second, it brings the UN closer to Kenya and to Africa.
And this development, Mr Speaker, is a good example of Kenya’s continued recognition in the family of nations. The truth is that in 2017, we defended the values we cherish – African solidarity; peace and prosperity; the rule of law between nations – and we grew in the respect of our partners and friends abroad.
So, Mr Speaker, it is quite clear that Kenya today is freer, safer, more prosperous, and held in higher regard than it has ever been.
We give thanks for these achievements, but we also recall that the truest measure of a nation’s strength is the character and unity of its people. The framers of our constitution were wise to ask us to reflect, annually, on the character of our people, and on our adherence to the precepts of the constitution.
And the precept of precepts, the animating value of our constitution, is unity. We take pride in our diversity, as we say in the very preamble of our constitution, and we are determined to live as one sovereign people, undivided.
These are words of great beauty. Whether we have let them guide us throughout the last year is the big question.
Cast your minds back to last year’s political competition. Kenyans twice cast their votes in peace; in the end, the result reflected the will of the people, and respected the law of the land.
Our institutions held firm.
To the Judiciary, we ask only that your independence be joined to even greater effort on your part to ensure that your arm of government attains the highest standards of conduct and integrity, and that it never loses sight of the interdependence of all arms and levels of government.
We also learned, again, a hard truth. Neither peace nor unity are a given; we have to work for them. I say so because last year taught us that if we don’t put an end to unrestrained political competition, it will put an end to Kenya.
You saw what happened. In the heat of the campaign, words of anger, malice, and hatred were spoken. Politics was no longer a debate between opponents on issues; it was a clash of irreconcilable enemies.
You saw the consequences: lives lost, property destroyed, our unity sapped.
I want to be clear here: never again should Kenyan life be lost for politics’ sake; never again should Kenyans’ property be destroyed on account of politics. But that will not just happen on its own.
All of us, and in particular we leaders here, will have to admit that last year, we failed in our duty to preserve the unity of this country. And we must make amends.
First, I pray that all of us will spend the days and weeks after this address repairing the bonds that frayed last year. Let us apologize for our words, and for the anger and malice that Kenyans heard.
From Mandera to Maseno, from Mbita to Mvita, from Lodwar to Lunga Lunga, let us shake hands and embrace our neighbours, and let us celebrate the diversity that is God’s gift to us.
Let every leader in the country reach out to our sons and daughters, and remind them that they have it in them to forge a Kenya that speaks gently, that criticizes constructively, and that embraces and respects dissent and competition as healthy and civilized ways of collaboration.
And since leadership is best done not by exhortation but by example, let me do as I have asked you to do.
If there was anything I said last year that hurt or wounded you, if I damaged the unity of this country in any way, I ask you to forgive me, and to join me in repairing that harm.
I am not the only leader who deeply felt the need to restore unity: the Right Hon. Raila Odinga, did so too. So let me praise the statesmanship he showed when, on 9 March this year, he and I publicly committed to reconciliation, with the Kenyan people as our witnesses.
When he and I met earlier in the year, we agreed to work together to strengthen the unity of our country. We hoped to emphasize then that collaboration, comprises both competition and disagreement. We did not immediately solve all Kenya’s most pressing problems, nor did we see eye-to-eye on every proposed answer. It is important to emphasize that unity doesn’t mean unanimity.
Rt. Hon. Raila and I stood together not because we agreed on every item of politics or policy, but because we agreed that Kenya belongs to all of us.
None of us is less – or for that matter, more – Kenyan than his brother or sister. All of us are entitled to be heard; all of us are entitled to our fair share of Kenya’s resources; and all of us are entitled to a government that honours these commitments.
Kenyans reacted with a surge of optimism to our meeting, because they wanted a return to unity. Our handshake invited Kenyans to rediscover what they had known all along: when all the politics is said and done, we are each other’s keeper.
But if Kenya is to remain strong, we must change our approach to political competition. We are proud, and rightly so, of our cultural heritage, but it does not follow that our ethnic identity is our political identity.
We have done that for half a century, and it has brought us very close to complete ruin. Too many of our leaders have manipulated our ethnicities to seize power, and then exploited it to avoid accountability.
We cannot afford another fifty years of farmers struggling to make a living, of families without proper sanitation, or of families bankrupted by healthcare costs. We need change now, in this generation, so that our children grow to adulthood in a totally different Kenya.
We must demonstrate we are truly Kenyan citizens. We must do this for our country; not for self. That, Hon. Members, has been, and remains, my vision throughout my time as President.
That vision is within reach: all we have to do is to look up, and grasp it. To see it, the leaders seated here can help. Show us all a better way.
Teach us to criticize constructively; teach us to adore hard work and reject the easy shilling; and teach us always to preserve the Unity of the House we have inherited from our fathers and founders of this Great Nation.
If you do that, Hon. Members, then you will have the eternal gratitude of the Kenyan people; and of those born years from now into a Kenya whose politics revolve around service delivery.
Finally, Mr. Speaker, it is now my honour to present three reports to this House as obligated by our Constitution, namely: (i) Report on All the Measures Taken and the Progress Achieved in the Realization of National Values; (ii) Progress made in fulfilling the International Obligations of the Republic; and (iii) the State of Security.
Thank You and God Bless Kenya.
Related News
Kenya: MPs approve Africa free trade zone pact
Parliament has approved the continental free-trade zone pact, making Kenya the first African country to offer legal backing to the continental trading bloc.
The National Assembly endorsed the report of the Defence and Foreign Relations committee that recommended ratification of the African Continental Free Trade Area (AfCFTA) after it was tabled in the House by Industrialisation Cabinet Secretary Adan Mohamed early this month.
The MPs at the same time approved the ratification of the Common Markets for East and Central Africa (Comesa), East Africa Community (EAC), Southern Africa Development Community (SADC) and Tripartite Free Trade Area (TFTA) agreements.
“The committee recommends that, pursuant to Section 8 of the Treaty Making Ratification Act, the House approves the ratification of the African Continental Free Trade Area (AfCFTA) and the Comesa-EAC-SADC Tripartite Free Trade Agreement (TFTA) as they are in Kenya’s national interest,” Katoo ole Metito, who chairs the Foreign Affairs committee said in the report that was unanimously approved.
Similarly, the TFTA deal seeks to provide an expanded market for both manufactured and primary goods for Kenyan products within a single economic space of the three regional economic communities with a population of 625 million people.
For further details, see tralac’s resources pages:
Related News
African Continental Free Trade Area will enhance the ease of doing business – Amb. Chinedu Osakwe
Director General of the Nigerian Office for Trade Negotiations (NOTN), Ambassador Chinedu Osakwe, said the African situation is the basis for economic operations and integration. The statement was made at a Stakeholder’s Sensitization Workshop organized by the Nigerian Institute of Advance Legal Studies (NIALS) in Abuja on Monday.
While delivering his lecture on the topic “Trade Negotiations and Update on the Continental Free Trade Area”, Amb. Osakwe said that for years, the African Continental Free Trade Area (AfCFTA) negotiations had not made any head way, but that the negotiation progress started with Nigerian leadership in 2017.
“The stages of AfCFTA negotiations will cover trade in goods and services, intellectual property, competition and investment. AfCFTA will regulate trade in a common rules-based system for increasing trade in goods and services through reduction of tariffs and Non-Tariff Barriers. Disputes will be resolved through agreed rules and procedures. Consultation and sensitization will commence in Kano,” he added.
Speaking further Osakwe said: “AfCFTA will help to expand market access for Nigerian exporters, increase Nigerian Industrial and competitive policies through negotiations and agreements, ease of doing business, increase productivity etc.”
The representative of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Mr Usman Sanusi, called on Nigerians to embrace the AfCFTA negotiations, saying that Nigerian trade policy is outdated and needs improvement and it is on this that fears of unknown comes in, based on the manners businesses are being carried out.
“Business men are not protected, but with this new innovation, AfCFTA is here to put things in right places to see that it is well implemented and that both manufacturers and traders are protected.
“Nigeria has no other continent than the African continent and therefore it cannot stand aside in the face of the transformations that are sweeping across the continent. It must not only cash in and ensure most things if not everything are in her favour. Nigeria’s endorsement of the agreement must however take on all the concerns of the stakeholders’ seriously and attend to them, swiftly.
“NACCIMA is in support of AfCFTA and recommends that adequate fund be provided by the Govt for the negotiations to enable negotiators make adequate preparations. Capacity training be carried out by NOTN members to succeed in their process, subcommittee be set up to conduct or oversee Baseline and Sectoral Studies to enable them utilize the outcome,” he added.
In delivering his speech, Prof. Jonathan Aremu, Head of the Trade Policy Commission at the Nigeria Economic Summit Group (NESG), stated that the opportunity of AfCFTA in Nigeria will enhance economic and political reform, security, increase performance, investment efficiency, intra-regional trade and investment.
According to him: “Cooperation and integration among African members state in the economic, social and cultural field are indispensable for continental development aspirations.”
He made this statement based on the fact that Africa is currently infested with lower share of world trade, deepest level of poverty and weakest development of human capital and infrastructure opportunities.
“Nigeria can both gain and lose from AfCFTA, it is important that the country enter the continental economic integration cognizant of these dynamics so as to minimize the losses while simultaneously maximizing the benefits,” he said.
Nigerian Bar Association’s Section on Business Law (NBA-SBL) Chairman Olumide Akpata was one of the panelists while Prof. Peter Akper, first Senior Advocate of Nigeria (SAN) was the moderator.
View Nigeria’s schedule of AfCFTA Sensitization and Consultation activities.
Related News
Infrastructure development in Sub-Saharan Africa: A scorecard
Infrastructure is viewed as a crucial ingredient to foster growth and productivity. Amid the post-global financial crisis slowdown, Sub-Saharan Africa is in dire need to continue the growth momentum it experienced during the period of the Africa Rising narrative.
An emerging consensus in the empirical literature is that, under the right circumstances, an adequate supply of infrastructure can help foster growth in the region.
This paper provides a scorecard on infrastructure development in Sub-Saharan Africa over the past decades along four sectors (telecommunications, electric power, transportation, and water and sanitation) and three dimensions (quantity, quality, and access).
First, it documents the existence of a large gap in infrastructure in the region – although the magnitude of the gap depends on the sector, dimension, and country/group. Second, the potential growth benefits from closing the infrastructure gap are large. Third, the infrastructure financing needs are very large, and the public sector so far is unable to meet these needs. Other options that involve the private sector may be available for the region.
Finally, there is room for improving the efficiency of public infrastructure spending (that is, the quality of public investment management systems and procurement methods), which, in turn, may increase the output multiplier of investment spending.
Introduction
After two decades of strong growth that outpaced that of rich countries, economic activity in the SubSaharan Africa region has decelerated. There is an urgent need to regain the growth momentum amid an external environment characterized by lower global trade and commodity prices that may stay lower than pre-crisis levels for a longer period of time. Experts in academic and policy circles are advocating a “big push” to help the region escape poverty and narrow the income per capita gap vis-à-vis the rest of the developing world. These calls for action propose a wide array of policy agendas; however, virtually all of them list infrastructure development among the top priorities in the region.
An adequate supply of infrastructure services has long been viewed as a key ingredient for economic development in the academic literature as well as in policy debate. Over the past quarter century, academic research has devoted considerable effort to theoretical and empirical analysis of the contribution of infrastructure development to growth and productivity. More recently, increasing attention has also been paid to the impact of infrastructure on poverty and inequality. An emerging consensus from the literature is that, under the right conditions, infrastructure development can play a major role in promoting growth and equity – and, through both channels, help reduce poverty.
Sub-Saharan Africa ranks at the bottom of all developing regions in virtually all dimensions of infrastructure performance. The region, which houses almost one-seventh of the world’s population, has a score of 2.91 in the infrastructure category of the World Economic Forum’s (WEF’s) Global Competitiveness Report. This score clearly states that there is a severe infrastructure bottleneck to be addressed. The region has some inherent characteristics that may enhance the potential role of infrastructure for its economic development – notably, the large number of landlocked countries, which are home to a major proportion of the region’s total population (about 40 percent), and the remoteness of most of the region’s economies from global market centers.
The geographic disadvantages of the region result in high transport costs that hinder intra- and interregional trade. Limited openness to trade is the main factor behind the stylized fact that, ceteris paribus, landlocked countries tend to grow slower than others. However, adequate transportation and communication facilities can help overcome these geographic disadvantages. The region’s problem is that poor infrastructure adds to its geographic disadvantage.
The main findings of this paper can be summarized as follows: first, there is a large gap in terms of quantity, quality and access to infrastructure. Our scorecard shows that the magnitude of this gap depends on the country, sector, and dimension under analysis. For instance, the region exhibits a dismal performance in the provision of reliable electricity and the length and quality of roads – especially among low-income-countries (LICs) and lower-middle-income countries (LMCs). Second, narrowing the infrastructure gap has potentially large growth benefits – and the growth benefits are the largest in the sectors with the greater gaps relative to global benchmarks. Third, meeting the infrastructure financing needs of the region is not trivial. It requires not only more efficient domestic resource mobilization from SSA governments but also innovative solutions to crowd-in private financing (e.g. the Cascade approach). Finally, strengthening the institutions governing public investment management systems and government procurement would increase the output multiplier of investment spending.
Section B compares the trends in infrastructure development along different sectors and dimensions from an international perspective.5 We compare the performance of the region (as well as selected groups/countries) vis-à-vis selected world geographic/income region/sub-regions. This analysis provides a scorecard of the magnitude of infrastructure gaps in Sub-Saharan Africa. At the country level, it conducts a benchmarking analysis of SSA countries vis-à-vis their level of development while simultaneously accounting for potential demographic and geographic drivers of infrastructure.
This paper is a product of the Office of the Chief Economist, Africa Region. It forms part of the background analysis for the Africa’s Pulse, Volume 15 (April 2017). The views expressed in this paper are those of the authors, and do not necessarily reflect those of the World Bank or its Boards of Directors.
Related News
tralac’s Daily News Selection
A New Times interview with Donald Kaberuka: Reforming the AU is not a choice of the few, but an imperative for all
A reposting, from tralac: The consolidated draft text of the AfCFTA Agreement (pdf) – including 9 Annexes, Protocol on Trade in Services, and Protocols on Rules of Origin and Settlement of Disputes
African trade newsletters: (i) Borderless Alliance – Ghana: 2nd edition of 2018 (ii) African Cotton, Textiles & Apparel Monitor: 7th edition
WCO-Africa updates: (i) West, Central Africa conference of Directors General of Customs (ii) Eastern and Southern Africa chapter meeting
South Africa’s Department of Trade and Industry: statement on Section 232 duties implemented by the US on steel, aluminium products
South Africa is therefore not a cause of any national security concerns in the US nor a threat to US industry interests and is not the course of the global steel glut. Instead, South Africa finds itself as collateral damage in the trade war of key global economies. South Africa is concerned by the unfairness of the measures and that it is one of the countries that are singled out as a contributor to US national security concerns when its exports of aluminium and steel products are not that significant. SA acknowledges the adverse effects of global steel overcapacity. The domestic steel sector has been severely impacted by low priced steel and steel product imports and as a result SA has implemented a number of trade remedy measures. In addition, SA supports and participates in the OECD and G20 multilateral processes to achieve outcomes of a fair, sustainable and viable steel industry in the future.
The imposition of the duties will have a negative impact on productive capacity and jobs in a sector already suffering from global steel overcapacity. In addition, SA notes with concern the different treatment of trading partners which will have an effect on the competitiveness of SA steel and aluminium products in the US and is likely to displace SA products out of the US market in favour of the exempted countries. South Africa is also concerned that the measures are implemented in a way that contravenes some of the key WTO principles. The Department of Trade and Industry continues to engage the industry on the matter.
South Africa: Trade statistics for March 2018 – a trade balance surplus of R9.47bn
ISABS 2018: Trade expansion, direct India-South Africa flights mooted
The two-day India-South Africa Business Summit 2018 (ISABS 2018) saw scores of noted speakers and distinguished experts and diplomats from the two countries participating in parallel discussions on startups, automobile industry, healthcare and pharma, mining, agro-processing, women entrepreneurs in business and the fourth industrial revolution. Cautioning against the summit becoming just another talkshop, Prabhu has tasked a team led by the India-South Africa CEOs Forum to present an action plan to implement all the suggestions at the summit by the time he comes back for the BRICS summit in July. Related: South Africa expects India fruit export boost. The acceptance of in-transit cold treatment for South African fruit shipments to India by the Indian authorities is imminent, according to news emanating from India, where a delegation from Fruit South Africa has been visiting New Delhi and Mumbai this week. The Citrus Growers’ Association said exports to India have been constrained by a requirement that does not allow in-transit cold treatment. “After two successful pilot shipments of both pears and oranges, the final acceptance to allow in-transit cold treatment is imminent,” said the CGA. “Apple and grapefruit trial shipments have also been conducted, and once two such trials have been successfully cleared, they to could be granted clearance for in-transit treatment.”
Trump-Buhari press conference: extracts
Trump: I’m pleased that Nigeria is one of our largest trading partners in the region, and we look forward to growing our trade relationship based on the principle of fairness and reciprocity. But we give Nigeria well over $1bn in aid every year. And we have already started talking with the President about taking down the trade barriers — very substantial barriers to the US trading with Nigeria. So we think that we are owed that. President Buhari has also taken several steps to fight corruption and improve the Nigerian business climate. And most of all to me — and again — is ripping down those trade barriers. These measures will make it easier for Nigeria and US companies to invest. And we will be investing substantially in Nigeria if they can create that level playing field that we have to very much ask for, and maybe demand.
Buhari: Our aim is to diversify our own economy by focusing on agricultural and food security, power and infrastructure. We have cut the importation of rice by 90%, thereby saving a significant amount of money. We very much welcome increased United States investment in Nigerian economy, especially the non-oil sector. Economic relations between Nigeria and the US are anchored on three major instruments, namely the Bi-National Commission, Trade and Investment Framework Agreement, and the Africa Growth and Opportunity Act. Nigeria’s trade volume with the US stood at $6.07bn according to 2016 statistics, and comprised $4.76bn, also, of Nigerian exports to the United States, and $1.894bn exports to Nigeria. We urge greater effort to increase these figures substantially.
Tweet, @AsoRock: “By September latest, Nigeria would be the highest, biggest African country in terms of export of fertilizer. Things have actually changed” – @AlikoDangote, after President @MBuhari’s meeting with a group of agrobusiness executives yesterday in Washington.
USTR releases 2018 Special 301 Report on Intellectual Property Rights
The Office of the United States Trade Representative has released the 2018 Special 301 Report, identifying trading partners that do not adequately or effectively protect and enforce intellectual property rights or otherwise deny market access to U.S. innovators and creators that rely on protection of their IP rights. The Report calls on US trading partners to address IP-related challenges with a special focus on the countries identified on the Watch List and Priority Watch List. Extract (pdf):
In Nigeria, localization policies in the form of local content requirements protect and favor local companies at the expense of foreign firms and investors. In particular, the 2013 Guidelines for Nigerian Content Development in Information and Communications Technology require local production or utilization of Nigerian material and labor across a broad range of information communications technology goods and services. Requirements of particular concern include server localization mandates, requirements for all ICT hardware to contain at least 50% of local value-added content or to outsource production to domestic firms, cross-border data flow restrictions, mandates for all hardware to be assembled in Nigeria, programs to support only local data hosting firms, and provisions that impose burdens on foreign firms by requiring in-country research and development departments and the disclosure of source code and other proprietary information.
Manufacturing sector and Nigeria’s economic growth pattern (Nigerian Economic Summit Group)
Although Nigeria’s manufacturing sector has experienced growth in output in the last 10 years prior to the recession of 2016, its contribution to GDP at 9% and meagre contribution to employment calls for concern. Despite government intervention, the sector is bedevilled with several structural challenges, ranging from multiple taxation to infrastructure deficit, power supply shortages, high reliance on imported manufactured products and the absence of an up-to-date coordinated policy framework, which charts a clear path for the sector.
Rwanda: National budget set to increase by 16% (New Times)
The Government plans to spend over Rwf2.4 trillion in the upcoming financial year (2018/19), which starts in July, representing a 16% increase from the current 2017/18 budget (over Rwf2.1trillon). The Minister for Finance and Economic Planning, Dr Uzziel Ndagijimana, made the disclosure to a joint parliamentary session yesterday as he presented the Budget Framework Paper. Ndagijimana said next fiscal’s budget will be domestically financed to the tune of 84%, which takes the country a step closer to fully financing its own budget. Ndagijimana added that the implementation of the Made-in-Rwanda policy will continue to play a key role in narrowing the current account deficit in the short- to long-run and help to consolidate private sector domestic activities. The minister said the economy is expected to grow by 7.2% next year.
The challenge for Ethiopia’s new leader: unleash the economy (Bloomberg)
Hailemariam said he last year introduced a proposal to the ruling coalition’s 180-member decision-making council to partially liberalize all but the financial sector of the economy, including the state telecommunications monopoly EthioTelecom. While the debate isn’t finished, Hailemariam said he’s laid the foundations for partial liberalization. “I am sure Abiy is going to complete it,” he said in an interview in the capital, Addis Ababa. Two weeks into office, Abiy told local business leaders that what he described as a foreign-currency crisis could last two decades. Hailemariam said he expects the problem to last “maybe a decade or a decade and a half as experience shows elsewhere,” citing China at an earlier stage of its development. “It is export-led industrialization that helps to bring more foreign currency and on the other hand helps the forex problem to be resolved,” he said. “Our structural transformation into industrial development, especially in manufacturing, has been a little bit delayed.” [Ethiopia to take stake in Port of Djibouti, its trade gateway]
Profiled papers prepared for the OECD’s Best practice roundtables on competition policy (4-8 June, Paris):
(i) Blockchain technology and competition policy: issues paper by the Secretariat (pdf). The OECD is currently developing work on how to: a) facilitate the efficient adoption of blockchain technology by governments; b) help governments identify effective policy responses to the risks and opportunities arising from use of blockchain by business; and c) help governments to prevent the misuse of blockchain for illicit activities. In this Hearing, the Competition Committee will consider whether the rise of blockchain technology is relevant to the work of competition authorities, and if so how. Below we set out a number of potential topics for discussion, and pose a number of questions to aid the discussion.
(ii) Competition assessment in light of digitalisation: a synthesis (pdf). This document assesses potential areas of focus for competition assessment of regulations in light of digitalisation. The purpose is to identify fruitful priorities for such reviews at a time of major technical change. The paper draws on findings from a survey conducted in the summer of 2017, initial survey analysis from the fall of 2017, a G20 discussion on competition and digitalisation in October 2017 and examples discussed at an OECD Workshop on Regulation and Competition in Light of Digitalisation on 31 January, 2018.
Today’s Quick Links: Tighten entry points to check counterfeits, China tells Africa SA envoy targets $1tn Nigeria-South Africa trade volume Nigeria’s Manufacturing Index expands for 13th consecutive month Why the GCC states think Africa is worth fighting over Regional Economic Outlook Update: Middle East, North Africa, Afghanistan, Pakistan Kenyan businessmen urged to trade with Dubai Mauritius to host First Session of the Joint Commission with Madagascar (14-16 May) Why Australian small businesses are outsourcing to South Africa IMF approves $191m disbursement for Ghana, $112.3m under the ECF arrangement for Malawi |
Related News
SA disappointed at US steel tariff decision
South Africa has expressed disappointment at not being granted exemption from the US Section 232 steel and aluminium tariff duties.
On Monday, US President Donald Trump signed Proclamations granting permanent country-exemptions to a select number of countries and extended by one month the Section 232 steel and aluminium tariff duty exemptions for some.
“South Africa is disappointed that it was not granted an exemption from the duties,” the Department of Trade and Industry said on Tuesday.
Monday’s proclamation follows on the 8 March proclamation signed by President Trump to impose a 10% ad valorem tariff on imports of aluminium articles and a 25% ad valorem tariff on imports of steel articles. These excluded select countries including Canada, Mexico, the European Union, South Korea, Australia, Argentina and Brazil.
The Proclamation followed reports from the Secretary of Commerce that imports of these products threaten to impair US national security.
South Africa, through the Minister of Trade and Industry Rob Davies, made representations to the US, including two written submissions. In addition, South African Ambassador to the US Mninwa Mahlangu also engaged with the White House National Security Council staff, State Department, the Office of the US Trade Representative (USTR) and Commerce Department.
Minister Davies also had teleconferences with Ambassador CJ Mahoney, the Deputy USTR for Investment, Services, Labor, Environment, Africa, China and the Western Hemisphere on 22 March 2018 and again on 30 April 2018.
SA’s submissions
In the submissions, South Africa argued that it itself is grappling with the consequences of the global steel glut and that it has stringent customs control measures and that there is no risk of circumvention or transhipment of steel from third countries.
South Africa further emphasised that its exports of aluminium products per annum are equivalent to about 1.6% of total US aluminium imports. According to the US Census Bureau data, in 2017 the US imported a total of 33.4 million tons of steel, of which imports from South Africa were approximately 330 000 tons or 0.98% of total US imports and 0.3% of total US steel demand of 107 million tons.
The 330 kilo tons exported from South Africa represents 5% of South Africa’s production equating to roughly 7 500 jobs in the steel supply chain.
“As such, SA does not pose a threat to US national security and to the US steel and aluminium industries but is a source of strategic primary and secondary products used in further value added manufacturing in the US contributing to jobs in both countries. However, due to these measures, South Africa will be disproportionately affected both in terms of jobs and productive capacity.”
The country also offered to restrict exports to a quota based on 2017 exports level.
“However, despite these assurances, the United States has decided not to exempt South Africa from the duties. It is important to note that some of the exempted countries are the biggest exporters of steel and aluminium to the United States,” said Trade and Industry Department.
For steel imports collectively, countries granted exemption accounted for 58% of total steel imports into the United States in 2017 while for aluminium imports collectively, countries granted exemptions accounted for 49% of total aluminium imports into the United States over the same period.
Concern about unfairness
“South Africa is therefore not a cause of any national security concerns in the US nor a threat to US industry interests and is not the course of the global steel glut. Instead, South Africa finds itself as collateral damage in the trade war of key global economies.”
South Africa also expressed concern by the unfairness of the measures and that it is one of the countries that are singled out as a contributor to US national security concerns when its exports of aluminium and steel products are not that significant.
“South Africa acknowledges the adverse effects of global steel overcapacity. The domestic steel sector has been severely impacted by low priced steel and steel product imports and as a result the country has implemented a number of trade remedy measures.”
In addition, the country supports and participates in the Organisation for Economic Co-operation and Development (OECD) and G20 multilateral processes to achieve outcomes of a fair, sustainable and viable steel industry in the future.
Negative impact on industry
The department said the imposition of the duties will have a negative impact on productive capacity and jobs in a sector already suffering from global steel overcapacity.
“In addition, South Africa notes with concern the different treatment of trading partners which will have an effect on the competitiveness of South African steel and aluminium products in the US and is likely to displace South African products out of the US market in favour of the exempted countries.”
South Africa said the measures are implemented in a way that contravenes some of the key World Trade Organisation principles.
“The Department of Trade and Industry continues to engage the industry on the matter,” it said while also encouraging domestic exporters to engage their US buyers to consider applying for product exemption under a process conducted by the US Commerce Department for products.
South Africa Disappointed With the Section 232 Duties Implemented By the United States (US) on Steel and Aluminium Products
On 30 April 2018, President Trump signed Proclamations granting permanent country-exemptions to a select number of countries and extended by one month the Section 232 steel and aluminium tariff duty exemptions for some. South Africa is disappointed that it was not granted an exemption from the duties. On 08 March, President Trump had signed a Proclamation imposing a 10 percent ad valorem tariff on imports of aluminium articles and a 25 percent ad valorem tariff on imports of steel articles that excluded select countries including Canada, Mexico, European Union, South Korea, Australia, Argentina and Brazil. The Proclamation followed reports from the Secretary of Commerce that imports of these products threaten to impair United States of America (US) national security.
South Africa has through the Minister of Trade and Industry, Dr Rob Davies made representations to the US, including two written submissions. The Ambassador of South Africa (SA) to the US, Mr. Mninwa Mahlangu has also engaged with the White House National Security Council Staff, State Department, the Office of the US Trade Representative (USTR) and Commerce Department in this regard. In addition, Minister Rob Davies had teleconferences with Ambassador Mahoney, the Deputy USTR for Investment, Services, Labor, Environment, Africa, China and the Western Hemisphere on 22 March 2018 and again on 30 April 2018.
In the submissions, SA has argued that it is in itself grappling with the consequences of the global steel glut and that SA has stringent customs control measures and that there is no risk of circumvention or transhipment of steel from third countries. Furthermore, SA emphasized that SA exports of aluminium products per annum are equivalent to about 1.6% of total US aluminum imports. Similarly, according to the US Census Bureau data, in 2017 the US imported a total of 33.4 million tons of steel, of which imports from SA were approximately 330 000 tons or 0.98% of total US imports and 0.3% of total US steel demand of 107 million tons. The 330 kilo tons exported from SA represents 5% of SA production equating to roughly 7500 jobs in the steel supply chain. As such, SA does not pose a threat to US national security and to the US steel and aluminium industries but is a source of strategic primary and secondary products used in further value added manufacturing in the US contributing to jobs in both countries. However, due to these measures, SA will be disproportionately affected both in terms of jobs and productive capacity. Furthermore, SA offered to restrict exports to a quota based on 2017 exports level. However, despite these assurances, the United States has decided not to exempt South Africa from the duties.
It is important to note that some of the exempted countries are the biggest exporters of steel and aluminium to the United States. For steel imports: collectively, countries granted exemption accounted for 58% of total steel imports into the United States in 2017. For aluminium imports: collectively, countries granted exemptions accounted for 49% of total aluminium imports into the United States over the same period.
South Africa is therefore not a cause of any national security concerns in the US nor a threat to US industry interests and is not the course of the global steel glut. Instead, South Africa finds itself as collateral damage in the trade war of key global economies. South Africa is concerned by the unfairness of the measures and that it is one of the countries that are singled out as a contributor to US national security concerns when its exports of aluminium and steel products are not that significant.
SA acknowledges the adverse effects of global steel overcapacity. The domestic steel sector has been severely impacted by low priced steel and steel product imports and as a result SA has implemented a number of trade remedy measures. In addition, SA supports and participates in the Organisation for Economic Co-operation and Development (OECD) and G20 multilateral processes to achieve outcomes of a fair, sustainable and viable steel industry in the future.
The imposition of the duties will have a negative impact on productive capacity and jobs in a sector already suffering from global steel overcapacity. In addition, SA notes with concern the different treatment of trading partners which will have an effect on the competitiveness of SA steel and aluminium products in the US and is likely to displace SA products out of the US market in favour of the exempted countries. South Africa is also concerned that the measures are implemented in a way that contravenes some of the key WTO principles. The Department of Trade and Industry continues to engage the industry on the matter.
In the meantime, Department of Trade and Industry encourages the domestic exporters to engage their US buyers to consider applying for product exemption under a process conducted by the US Commerce Department for products.
South Africa remains open to engage US authorities towards finding a mutually acceptable outcome.
Related News
India-South Africa Business Summit 2018: “United by Legacy, Unified for Prosperity”
The much anticipated India-South Africa Business Summit 2018 (ISABS 2018) concluded on 30 April 2018 at the Sandton Convention Centre, Johannesburg with a session on ‘India South Africa Relations – The Way Forward’.
Noted speakers and distinguished experts / diplomats from India and South Africa including those from the South African Institute of International Affairs (SAIIA), DIRCO, DTI, and business leaders sought to chart out the way forward for the India-South Africa relationship.
The second day of the two-day ISABS 2018 started with the “Report back to the Ministers by the India-South Africa CEOs Forum” wherein key issues concerning trade, investment, promotion of business, which were identified by the CEOs, were compiled into a report and placed before the two Ministers for action.
The Opening Plenary session was graced with keynote addresses delivered by Shri Suresh Prabhu, Hon’ble Minister of Commerce & Industry and Civil Aviation, Government of India; Dr. Rob Davies, Hon’ble Minister of Trade and Industry, Government of South Africa and Mr. Pravin Gordhan, Hon’ble Minister of Public Enterprises, Government of South Africa.
The Summit also saw the participation of the Hon’ble Premier of Gauteng Province Mr. David Makhura, as well as Ministers and representatives from SADC Countries including Lesotho, Botswana, Mozambique and Zambia, top government officials, CEOs and industry specialists from India and South Africa.
These included Mr. Anil Agarwal, Chairman & Founder, Vedanta Resources (largest Indian investor in Africa); Mr. Sipho Maseko, CEO, Telkom; Mr. Deepak Bagla, MD & CEO, Invest India; Mr. Yunus Hoosen, Acting Head InvestSA; Mr. Rakesh Bharti Mittal, President, CII & VP of Bharti Enterprises; Mr. Adi Godrej, Co-chair of India-SA CEO Forum & Chairman Godrej Group; Mr. Vuyani Jarana, CEO, South African Airways; Mr. Colin Coleman, Partner Goldman Sachs and Mr. Vivian Reddy, Co-chair of India-SA CEO Forum, Founder of Edison Group SA.
Mr. Suresh Prabhu, Hon’ble Minister of Commerce & Industry and Civil Aviation, Government of India, lauded the efforts of the High Commission of India and various South African government departments including the DTI and GGDA in organizing this Summit in the run up to the BRICS Summit in July 2018 and stated that this Summit was a harbinger of good things to come, conveying as well that South Africa and India were poised to take off in the next few years on a higher growth trajectory.
Mr. Pravin Gordhan, Hon’ble Minister of Public Enterprises, Government of South Africa, underscored the need for old friends India and South Africa to be a part of each other's growth story as together they stepped into a new era of friendship and cooperation.
In her remarks, High Commissioner Ruchira Kamboj observed that the India-South Africa partnership was not just about the undeniable unbreakable ties of solidarity that have linked the peoples and the liberation movements of India and South Africa. This partnership was also about a shared future. Through synergies, through shared strengths and through membership in multilateral settings where the two countries sought constantly to engage, deliberate and collaborate.
The main Plenary Session was followed by 7 Breakaway Sessions on Start Ups, Automobile industry, Health Care & Pharma, Mining, Agro Processing, Women Entrepreneurs in Business and the Fourth Industrial Revolution, all of which are sectors which have scope and potential for growth in a bilateral context. The Summit also witnessed the signing of an MoU between InvestSA and Invest India, strengthening a rapidly growing economic and trade partnership between two strategic partner countries.
Additionally, there were an interface between India and SADC countries, with SADC Ministers and representatives from Lesotho, Botswana, Zambia and Mozambique attending the Business Summit.
Earlier, the first day of the event opened on Sunday with the India-South Africa CEOs’ Forum, Curtain Raiser Dinner and a unique ‘Tribute to Nelson Mandela and Mahatma Gandhi: Khadi Couture’ produced by UNICEF Goodwill Ambassador Gavin Rajah and South African designer Stephen van Eeden using India’s hand-woven fabric Khadi associated with Mahatma Gandhi.
Other notable aspects of the two-day Summit was the display of Indian and South African fusion dance forms – “Pulse” (A fusion of Bharatnatyam and Zulu) – performed by local artists and also the fusion of Indian and South African cuisine served to the guests manifesting the historical, cultural and people to people connect of the two countries.
The performance by the Grammy Award-winning South African flautist, producer and composer Wouter Kellerman mesmerized the audience. The event also saw the launching of a book “The Red Fort Declaration – The Legacy 20 Years on, Commemoration of 20 years of Strategic Partnership,” authored by noted journalist Mr. Fakir Hassen.
The India-South Africa Business Summit 2018, which has the tag line “United by Legacy, Unified for Prosperity,” was organized by the High Commission of India in Pretoria in partnership with the Ministry of Commerce and Industry-Government of India, the Department of Trade & Industry (the dti)-Government of South Africa, the Gauteng Growth and Development Agency (GGDA), South Africa, Invest India, the Confederation of Indian Industry, and the Federation of Indian Chambers of Commerce and Industry.
India and South Africa share a strategic partnership that is over 200 years old. 2018 marks a significant year in India-South Africa relations, being the 25th year of establishment of diplomatic relations; 125 years of the Pietermaritzburg train ‘incident’ and the centenary of President Nelson Mandela.
There are over 130 Indian companies in South Africa which have invested about US $ 8 billion into South Africa, employing approximately 18,000 South Africans. South African investment into India is approximately US $1 billion.
Related News
Manufacturing sector and Nigeria’s economic growth pattern
Redesigning Policy Intervention for Inclusive Growth
Since the year 2000, Nigeria’s economic growth has not delivered significant poverty and unemployment reduction. While GDP growth increased from 6.7% in 2006 to 9.5% in 2010, unemployment rate moved from 12.3% to 21.4% in the same period. By the year 2015 prior to the economic recession, unemployment and under-employment rate had reached a peak of 29%. That same year, life expectancy was 53.1, lower than those of Brazil (74.7) and Ghana (61.5). In addition, 46% of the country’s population lived below the national poverty line, according to the World Bank’s Human Development Indicators (HDI) Report.
Failure to achieve inclusiveness is largely as a result of the fact that economic growth has not been broad-based. A major reason why GDP growth has not translated into improved living standards can be found in the pattern and dynamics of economic growth over the last two decades. Nigeria’s economic growth pattern can be simply explained by the phrase “service-led growth.” From 2000 to 2015, the services sector contributed 61% to real GDP growth. This growth was led by key subsectors such as trade, telecoms, real estate and financial services. The productive sectors such as manufacturing, construction and agroprocessing only accounted for 15% of overall growth during the same period.
The growing services sector and rising unemployment rate suggests that value addition in the service sector is low, relative to the productive sector. This, therefore, brings to the fore three key policy considerations:
First, to achieve economic growth that delivers unemployment and poverty reduction, efforts are required to alter the pattern of GDP growth by developing the productive sectors. Nigeria needs to implement reforms that will open up and attract investments into key subsectors within the manufacturing and agro-processing sector, thus, creating opportunities along value chains. Macroeconomic stability, good governance and provision of infrastructure are supporting factors that will improve productivity and output across sectors.
Second, to address poverty and unemployment, GDP growth must be led by the productive sectors. The growth pattern in 2018 and beyond must be different from that of the pre-recession era. Inclusive growth embraces the need for a strong industry-led economy. For instance, industrial sectors such as manufacturing, agro-processing, and construction should be the engine of economic transformation. Rapid expansion of the manufacturing and agro-processing sectors will lead to massive job creation, diversification of export earnings and reduction in importation of foods and other items that can easily be produced locally.
Third, growth within productive sectors must be widespread and include major subsectors. This emphasises the need for diversification within manufacturing, agriculture, construction and other key sectors. In manufacturing, only 3 subsectors (food & beverage, cement and textile) account for 77% of manufacturing output. Similarly, in agriculture, crop production accounts for 91% of agricultural output, leaving the remaining 9% for fishery, forestry and livestock. To move a step closer to achieving inclusiveness, deliberate policy interventions are required to open up these subsectors.
This brief aims to review the manufacturing sector by identifying key structural bottlenecks, highlighting their implications, explore recent government interventions and proffer workable policy interventions.
Download the full policy brief on the NES Group website.
Related News
South Africa Merchandise Trade Statistics for March 2018
South Africa’s trade surplus beats expectations
South Africa’s trade balance shifted to R9.47 billion surplus in March of 2018, from an upwardly revised R0.60 billion deficit in the previous month, and well above market expectations of a R3.7 billion surplus. It was the smallest trade surplus since October last year. Considering the first quarter of the year, the country recorded a trade deficit of R18.6 billion.
Exports increased 9.2 percent month-over-month to R98.3 billion in March of 2018, mostly due to higher sales of base mineral (+12 percent); precious metals and stones (15 percent); base metals (19 percent) and machinery and electronics (10 percent). The most important export partners were: China (10.2 percent of total exports), the US (7.1 percent), Germany (7.0 percent), Japan (4.7 percent) and India (4.7 percent).
Imports dropped 2.0 percent month-over-month to R88.8 billion, mainly due to a fall in purchases of vegetable products (-31 percent) and mineral (-14 percent). In contrast, purchases increased for base metals (13 percent) and machinery and electronics (6 percent). Main import partners were: China (18.1 percent of total imports), Germany (10.1 percent), the US (6.3 percent), Saudi Arabia (4.9 percent) and Thailand (3.8 percent).
Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country posted a trade surplus of R1.9 billion in March.
The South African Revenue Service (SARS) on 30 April released trade statistics for March 2018 recording a trade balance surplus of R9.47 billion. These statistics include trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
The year-to-date (01 January to 31 March 2018) trade balance deficit of R18.63 billion is a deterioration on the surplus for the comparable period in 2017 of R4.22 billion. Exports year-to-date grew by 0.4% whilst imports for the same period showed an increase of 9.1%.
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R9.47 billion trade balance surplus for March 2018 is attributable to exports of R98.28 billion and imports of R88.81 billion. Exports increased from February 2018 to March 2018 by R8.27 billion (9.2%) and imports decreased from February 2018 to March 2018 by R1.80 billion (2.0%).
Exports for the year-to-date (01 January to 31 March) grew by 0.4% from R267.76 billion in 2017 to R268.77 billion in 2018. Imports for the year-to-date of R287.40 billion are 9.1% more than the imports recorded in January to March 2017 of R263.54 billion, leaving a cumulative trade balance deficit of R18.63 billion for 2018.
On a year-on-year basis, the R9.47 billion trade balance surplus for March 2018 is a deterioration from the surplus recorded in March 2017 of R11.81 billion. Exports of R98.28 billion are 3.1% less than the exports recorded in March 2017 of R101.48 billion. Imports of R88.81 billion are 1.0% less than the imports recorded in March 2017 of R89.67 billion.
February 2018’s trade balance surplus was revised downwards by R1.03 billion from the previous month’s preliminary surplus of R0.43 billion to a revised deficit of R0.60 billion as a result of ongoing Vouchers of Correction (VOC’s).
Trade highlights by category
The main month-on-month export movements (R’ million) |
||
Section:
|
Including BLNS:
|
|
Mineral Products
|
+R2 432
|
+12%
|
Precious Metals & Stones
|
+R2 188
|
+15%
|
Base Metals
|
+R1 976
|
+19%
|
Machinery & Electronics
|
+R 724
|
+10%
|
Vegetable Products
|
+R 715
|
+19%
|
Vehicles & Transport Equipment
|
-R1 069
|
- 9%
|
Total
|
+R6 966
|
84%
|
Total Movement |
+R8 274 |
100% |
The main month-on-month import movements (R’ million) |
||
Section:
|
Including BLNS:
|
|
Mineral Products
|
-R2 457
|
-14%
|
Vegetable Products
|
-R 674
|
-31%
|
Precious Metals & Stones
|
-R 454
|
-38%
|
Footwear & Accessories
|
-R 332
|
-26%
|
Textiles
|
-R 281
|
- 7%
|
Base Metals
|
+R 566
|
+13%
|
Vehicles & Transport Equipment
|
+R 813
|
+12%
|
Machinery & Electronics
|
+R1 121
|
+ 6%
|
Total
|
-R1 698
|
94%
|
Total Movement |
-R1 804 |
100% |
Trade highlights by world zone
The world zone results from February 2018 (revised) to March 2018 are given below.
Africa:
Trade Balance surplus: R16 871 million – this is an improvement of R2 354 million in comparison to the R14 517 million surplus recorded in February 2018.
America:
Trade Balance deficit: R 109 million – this is an improvement of R 464 million in comparison to the R 573 million deficit recorded in February 2018.
Asia:
Trade Balance deficit: R9 153 million – this is an improvement of R5 357 million in comparison to the R14 510 million deficit recorded in February 2018.
Europe:
Trade Balance deficit: R4 959 million – this is an improvement of R2 072 million in comparison to the R7 031 million deficit recorded in February 2018.
Oceania:
Trade Balance deficit: R1 095 million – this is a deterioration of R 993 million in comparison to the R 102 million deficit recorded in February 2018.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for March 2018 recorded a trade balance surplus of R1.99 billion. This is a result of exports of R87.51 billion and imports of R85.52 billion.
Exports increased from February 2018 to March 2018 by R7.97 billion (10.0%) and imports decreased from February 2018 to March 2018 by R1.71 billion (2.0%).
The cumulative deficit for 2018 is R39.38 billion compared to R16.66 billion deficit in 2017.
Trade highlights by category
The main month-on-month export movements (R’ million) |
||
Section:
|
Excluding BLNS:
|
|
Mineral Products
|
+R2 404
|
+12%
|
Precious Metals & Stones
|
+R2 333
|
+16%
|
Base Metals
|
+R1 984
|
+20%
|
Chemical Products
|
+R 694
|
+14%
|
Vegetable Products
|
+R 665
|
+20%
|
Vehicles & Transport Equipment
|
-R1 124
|
- 10%
|
Total
|
+R6 956
|
87%
|
Total Movement |
+R7 971 |
100% |
The main month-on-month import movements (R’ million) |
||
Section:
|
Excluding BLNS:
|
|
Mineral Products
|
-R2 447
|
-14%
|
Vegetable Products
|
-R 673
|
-31%
|
Footwear & Accessories
|
-R 331
|
-26%
|
Textiles
|
-R 290
|
- 9%
|
Plastics & Rubber
|
-R 226
|
- 5%
|
Miscellaneous Manufactured Articles
|
-R 196
|
-14%
|
Optical Photographic Products
|
+R 243
|
+10%
|
Base Metals
|
+R 524
|
+13%
|
Vehicles & Transport Equipment
|
+R 800
|
+11%
|
Machinery & Electronics
|
+R1 091
|
+ 6%
|
Total
|
-R1 505
|
88%
|
Total Movement |
-R1 713 |
100% |
Trade highlights by world zone
The world zone results for Africa excluding BLNS from February 2018 (Revised) to March 2018 are given below.
Africa:
Trade Balance surplus: R9 384 million – this is an improvement of R1 961 million in comparison to the R7 423 million surplus recorded in February 2018.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for March 2018 recorded a trade balance surplus of R7.49 billion. This is a result of exports of R10.78 billion and imports of R3.29 billion.
Exports increased from February 2018 to March 2018 by R0.30 billion (2.9%) and imports decreased from February 2018 to March 2018 by R0.09 billion (2.7%).
The cumulative surplus for 2018 is R20.74 billion compared to R20.88 billion in 2017.
Trade Highlights by Category
The main month-on-month export movements (R’ million) |
||
Section:
|
BLNS:
|
|
Prepared Foodstuff
|
+R 86
|
+ 8%
|
Machinery & Electronics
|
+R 72
|
+ 5%
|
Vehicles & Transport Equipment
|
+R 55
|
+ 5%
|
Vegetable Products
|
+R 50
|
+10%
|
Textiles
|
+R 50
|
+10%
|
Animal & Vegetable Fats
|
+R 36
|
+40%
|
Plastics & Rubber
|
+R 29
|
+ 6%
|
Mineral Products
|
+R 28
|
+ 2%
|
Live Animals
|
+R 27
|
+10%
|
Wood Pulp & Paper
|
-R 33
|
-13%
|
Precious Metals & Stones
|
-R 145
|
-29%
|
Total
|
+R 255
|
84%
|
Total Movement |
+R 302 |
100% |
The main month-on-month import movements (R’ million) |
||
Section:
|
BLNS:
|
|
Precious Metals & Stones
|
-R 287
|
-46%
|
Machinery & Electronics
|
+R 30
|
+10%
|
Base Metals
|
+R 42
|
+33%
|
Prepared Foodstuff
|
+R 66
|
+18%
|
Live Animals
|
+R 67
|
+16%
|
Total
|
-R 82
|
91%
|
Total Movement |
-R 90 |
100% |
Related News
tralac’s Daily News Selection
AfCFTA Ratification Barometer: Rwanda, Ghana (with Kenya’s ratification imminent)
AfCFTA commentaries:
(i) Success of AfCFTA depends on creation of traded goods by private sector. The success of the AfCFTA will rest significantly on the ability of the continent’s private sector to generate or create the goods that will enter the trade, Dr Benedict Oramah, Afreximbank’s president said today. Addressing Egyptian business leaders, Dr Oramah said that it would also depend on how the private sector in one market was able to identify and realize opportunities in other markets. He highlighted the need for the private sector to take advantage of the opportunities that the CFTA would offer, arguing that Egypt, with its relatively advanced industrial base, could serve as a viable manufacturing hub and major source of technologies for most of the continent. Its nearness to major markets in Africa also offered a tremendous opportunity for accessing the abundant raw materials and other intermediate goods from other African countries for further processing and export at competitive rates to other markets. According to Dr Oramah, the AfCFTA has the potential to increase Egypt’s trade with the rest of Africa by at least five fold.
(ii) Wanja Wanjiru: What is at stake for consumers in Africa free trade area? Much like other Free Trade Agreements, the AfCFTA will be largely producer-oriented with a focus on small and medium enterprises (SMEs) and the larger private sector. The prevailing sentiments around it reflect this. For instance, the Kenyan cabinet specifically called upon the private sector to leverage the opportunities presented by the AfCFTA in relation to Kenyan exports. Though its Protocol on Trade in Services recognises consumer protection, it is only within the preamble and not the substantive text. As Africa embarks on its AfCFTA journey, this is the opportune moment to ensure that it builds up a robust consumer protection framework.
(iii) African Corridor Management Alliance moves towards AfCFTA implementation. The African Trade Policy Centre hosted, in collaboration with the Walvis Bay Group, the second African Corridor Management Alliance board meeting on 11 April in Addis Ababa. Stressing the need to address one of ACMA’s challenge of ensuring long-term sustainability, ATPC coordinator David Luke said: “Developing strategic partnerships is fundamental to driving our agenda of converting transport corridors into economic corridors, thereby enhancing value chains to boost intra-African trade”. The need to build stronger strategic partnerships with RECs, regional and continental agencies and private sector players was noted as a priority for ACMA. The need to improve efficiency, performance monitoring along corridors and collective fine tuning of various performance indicators was discussed. Harmonizing current efforts for data collection was agreed as a measuring tool for all Corridor Management Institutions. The meeting also highlighted the need to support CMIs that were weakly developed, and agreed to explore a CMI link to the Sahel countries with Northern Africa. The Walvis Bay Corridor Group will continue the role of Interim Secretariat for ACMA.
(iv) Olu Fasan: Integrating Africa’s economies – the Osakwe factor. International trade negotiations are a function of technical expertise, diplomatic efforts and political will. The first two were fully covered by Dr Osakwe, who is also an ambassador, and the trade minister, Dr Enelamah, who was the chairman of the African Union Ministers of Trade, with responsibility for the AfCFTA negotiations at the ministerial level. The AfCFTA treaty and two annexes on goods and services were agreed at the technical level and approved at the ministerial level by African trade ministers. Of course, the political end of the spectrum proved more difficult. Obviously, Dr Osakwe could not effectively be, simultaneously, Nigeria’s chief negotiator and chairman of AfCFTA’s Negotiating Forum. But, apparently, while he was building consensus across Africa for AfCFTA, none in NOTN was managing the domestic political side of the negotiation in Nigeria. Any serious trade negotiating body must have political strategists, who actively manage the domestic politics through proactive public outreach and engagement with critical stakeholders, including the media. According to the famous negotiation theorist, Robert Putnam, every international negotiation is a “two-level game”, played at the domestic and international negotiating tables. And, as another negotiation expert, John Odell, puts it: “If negotiators take the domestic political landscape for granted, they can step on a landmine”. Nigeria’s AfCFTA negotiators took the domestic political landscape for granted! [Update from the Nigerian Office for Trade Negotiations: Happening now. Amb. Osakwe speaking at the Stakeholders’ Sensitization Workshop on AfCFTA organized by Nigerian Institute of Advanced Legal Studies]
Diarise:
Japan-Africa Public Private Economic Forum (3-4 May, Sandton)
pdf Annual Report of the African Union and its Organs, 2017 (1.33 MB) : profiled extracts:
para 215: On its part, and with a view to ensuring that customs procedures are consistent with the AfCFTA, the Commission carried out a study of customs procedures and cooperation, trade facilitation and transit instruments in member states. The study provided the status of implementation of customs instruments in Africa and highlighted existing gaps with respect to custom cooperation, trade facilitation and transit. It also identified areas of convergence and divergence while providing necessary information on areas of focused interventions.
para 229-230: Deepening the engagement with the African private sector remains a strategic priority for the African Union. In this regard, the Commission worked with various private sector stakeholders on the establishment of the African Business Council. The first Trade Policy Dialogue took place in Addis Ababa in November 2017, as part of the process of establishing the BIAT/AfCFTA architecture currently under development. The Commission also reached out to the Pan African Chambers of Commerce and Industry and the Afro-Champions Club. A draft concept note was prepared with the support of the International Trade Centre to facilitate development of a resource mobilization strategy for the Pan African Trade Observatory, which will serve as a repository of information about trade and industry in Africa. We anticipate the establishment of the Pan-African Trade Observatory in 2018.
Anzetse Were: Implications of the Kenya Economic Survey (Business Daily)
Fourthly, data of exports paints an interesting picture in that top export earners were tea, horticulture, articles of apparel and clothing accessories, coffee and titanium ores and concentrates. Thus Kenya’s exports continue to be dominated by agricultural products and products with limited value addition. Further, Africa remained the leading destination of Kenya’s exports, accounting for 37.7% of total exports in 2017, with East African Community accounting for more than half of total exports to Africa. What this means is that Kenya’s exports mainly go to countries with low GDP per capita that informs spending power and aggregate demand. It is important that the country restructures exports such that they are more sophisticated and target countries with higher incomes so that exports become a stronger engine for job creation and income growth. [Posted: Kenya Economic Survey 2018]
Mozambique: Essential that bulk cargo moves by rail (Club of Mozambique)
If the port of Maputo is to reach its ambitious target of handling 20 million tonnes of cargo a year by 2020, rising to 30 million tonnes by 2033, then it is essential that more of the bulk goods heading for the port travel by rail rather than road. Speaking at the 6th Maputo Port Conference, the managing director of the Maputo Port Development Company, Osorio Lucas, said: “Although this is mostly a port for bulk cargo, about 80% of the traffic for Maputo port is still moved by truck, which is not the most efficient or ecologically sound way of moving cargo.” This was imperative, if the port’s targets are to be reached, Lucas stressed, since there is simply not enough capacity on the roads to and from the port to move 33 million tonnes a year.
Mauritius Declaration on Maritime Security (GoM)
In the wake of the ministerial meeting (pdf) of the Indian Ocean Commission on maritime security issues, Ministers agreed on Regional Maritime Security Mechanisms, adopting the Declaration on Maritime Security in Western Indian Ocean. The Conference called for the establishment of the legal framework to effectively guarantee the confidentiality of information sharing and the coordination of joint actions at sea.
ECOWAS conference on pastoralism, cross-border transhumance: HLM update (ThisDay)
Proposals and recommendations for peaceful resolution of conflicts between farmers and herders in the Community will be submitted to the Heads of State and Government of ECOWAS at their next session in Lomé, Togo. This was stated by the Nigerian President, Muhammadu Buhari, in a statement by his Vice President, Prof Yemi Osinbajo, at the opening on Thursday 26 April 2018, in Abuja, Nigeria, of the joint high-level meeting of Ministers of Security and Agriculture/Animal Resources from ECOWAS, Cameroon, Chad, Mauritania and the Central African Republic on pastoralism and cross-border transhumance. [South Sudan, Uganda, Kenya strengthen implementation of cross-border disease surveillance]
World Public Sector Report 2018 (UN DESA)
The World Public Sector Report 2018 aims to inform efforts by countries to foster policy integration for implementing the SDGs. It asks, what are the challenges to and opportunities for policy integration across the different stages of policy cycle at the national level? What are some innovative examples of institutional and administrative arrangements that can foster integrated approaches to the 2030 Agenda? The report illustrates the importance of integrated approaches for three topical issues: international migration, health, and sustainable development in post-conflict contexts.
Today’s Quick Links: The EAC’s Sectoral Council on Finance and Economic Affairs is meeting this week in Arusha Somalia to host Horn of Africa conference on illegal charcoal trade Africa’s startup funding deals are entering the million-dollar era ‘Cashew into cash’ is Mozambique’s new mantra to boost the economy India’s non-basmati exports rise 34% on Africa’s import demand Team up for SGR transport, Kenya Railways urges small-scale importers Kenya: Chinese bank cuts Sh32bn SGR funds Southern Africa Price Bulletin: April 2018 Craig Atkinson: Disruptive trade technologies will usher in the ‘internet of rules’ Chinese leasing firms a new force in global shipping How realistic is India’s dream of becoming a global arbitration hub? |
Related News
What is at stake for consumers in Africa’s continental free trade area?
In the past month, there have been detailed critiques and appraisals of the African Continental Free Trade Area (AfCFTA) from different corners.
Indeed the agreement is an embodiment of the Pan African dream towards economic, political and social integration.
Effective implementation of the AfCFTA will bring about much desired industrialisation, infrastructural growth, economic diversification, job creation, food security, regional value chain development and ultimate continental development.
Much like other Free Trade Agreements (FTAs), the AfCFTA will be largely producer-oriented with a focus on small and medium enterprises (SMEs) and the larger private sector.
The prevailing sentiments around it reflect this. For instance, the Kenyan cabinet specifically called upon the private sector to leverage the opportunities presented by the AfCFTA in relation to Kenyan exports.
Similarly, the African Union Commission (AUC) urged the private enterprise to wield the AfCFTA development agenda for greater opportunities and sustainable growth.
Conspicuously missing from the AfCFTA discussions is the aspect of consumer protection. Though its Protocol on Trade in Services recognises consumer protection, it is only within the preamble and not the substantive text.
Ironically, while Free Trade Agreements (FTAs) are ultimately designed to benefit consumers, trade interests take precedence at the expense of consumer interests. A 2016 study by audit firm KPMG found that a majority of the 1.2 billion plus Africans, especially those in sub-Saharan Africa, are extremely poor consumers.
Consequently, it is vital that the AfCFTA is inclusive of this significant group. In line with economic theory, the AfCFTA is expected to create a wider market that will ultimately translate into consumer welfare gains.
These gains include enhanced consumer choice, lower prices and improved quality of goods. Nonetheless, the AfCFTA should go beyond that and protect consumers through safeguarding their rights.
Generally, consumers enjoy several rights such as the right to information, the right to safety protection, the right to the protection of economic interests and the right to redress. These rights are designed to protect consumers from unscrupulous vendors who may prey on consumers’ lack of knowledge or low bargaining power.
As Africa embarks on its AfCFTA journey, this is the opportune moment to ensure that it builds up a robust consumer protection framework. Globally, the European Union (EU) enjoys the most advanced consumer protection regulatory regime.
Primarily, the union’s membership is predicated on, amongst others, the acceptance of this regulatory regime.
Additionally, the EU imposes this regime on other countries through its international trade agreements. Other regional blocs in Asia (ASEAN and APEC) or in Latin America (OAS) also have elements of consumer protection within their framework but to varying degrees.
Further, the UN Guidelines for Consumer Protection provide a good source regarding consumer welfare and protection. Africa should import the best practices exercised by these institutions.
Wanja Wanjiru is attached to the Trade and Competition Department at CUTS International Nairobi.
Related News
Ghana eyes AfCFTA secretariat
The Ghanaian parliament has ratified the African Continental Free Trade Area (AfCFTA) agreement, a move the country said will enhance its chances of being selected to host the AfCFTA Secretariat.
Analysts point out that the process leading to the final selection of the host country had already begun and a formal decision on the matter is to be taken at the next summit of the heads of African state and government in July 2018.
The agreement creates a single market for goods and services facilitated by the free movement of persons in order to deepen the economic interest of the African continent in accordance with the pan African vision.
It is expected to come into force when the parliaments of at least 22 out of the 55 African countries ratify the agreement.
Ghana’s parliament was recalled from recess last Thursday to among other things, consider and ratify the agreement as Ghana lobbies to host the Secretariat for the AfCFTA.
African heads and governments in 2012 agreed to the establishment of a continental free trade but only started negotiations in 2015.
Expected to be signed by all the 55-member states of the African Union, the agreement will bring 1.2 billion people with a combined Gross Domestic Product (GDP) of more than $2 trillion.
Interestingly, Nigeria, the continent’s biggest economy failed to sign the framework for the agreement due to major concerns raised by the country’s labour unions.
The Nigerian government explained the move was “to allow more time for input from Nigerian stakeholders”.
The draft agreement commits countries to removing tariffs on 90 per cent of goods, with 10 per cent of “sensitive items” to be phased in later.
The agreement will also liberalise services and aims to tackle so-called “non-tariff barriers” which hamper trade between African countries, such as long delays at the border.
This will eventually ensure free movement of people and possibly a single currency could become part of the free trade area.
Related News
Success of AfCFTA depends on creation of traded goods by private sector, says Afreximbank President
The success of the African Continental Free Trade Area (AfCFTA) will rest significantly on the ability of the continent’s private sector to generate or create the goods that will enter the trade, Dr. Benedict Oramah, President of the African Export-Import Bank (Afreximbank), said on Sunday.
Addressing Egyptian business leaders at a breakfast organized in Cairo, Dr. Oramah said that it would also depend on how the private sector in one market was able to identify and realize opportunities in other markets.
He highlighted the need for the private sector to take advantage of the opportunities that the AfCFTA would offer, arguing that Egypt, with its relatively advanced industrial base, could serve as a viable manufacturing hub and major source of technologies for most of the continent.
Its nearness to major markets in Africa also offered a tremendous opportunity for accessing the abundant raw materials and other intermediate goods from other African countries for further processing and export at competitive rates to other markets.
Afreximbank was working actively with the African Union Commission to ensure the realization of the goals of the AfCFTA, he said, telling the business leaders that the Bank could “assist you with information, market intelligence and financing, which will enable you take advantage of the opportunities that are emerging as a result of the AfCFTA”.
According to the President, the AfCFTA has the potential to increase Egypt’s trade with the rest of Africa by at least five folds.
He said that, over the last few years, Afreximbank had championed the growth of trade and investment flows between Egypt and the rest of Africa, providing about $5 billion in trade financing to Egyptian entities in the last three years and launching a $500-million Egypt-Africa Trade Promotion Programme in 2015, partly in response to the strategic move by the Egyptian Government to expand trade with Africa and promote regional integration under the Tripartite Free Trade Area.
The Bank also, recently, signed a $500-million financing package with the Export Development Bank of Egypt for financing Egyptian exports into Africa, he continued.
Afreximbank had made it possible for an Egyptian exporter of heavy infrastructure equipment to compete effectively with global players in African markets, enabling it to export equipment worth hundreds of millions of dollars to more than five African countries in the past three years, added Dr. Oramah. It had also supported Egyptian engineering firms to win construction contracts in Nigeria, Kenya, Togo and Angola, despite stiff competition from international players.
In his own remarks, Amr Kamel, Executive Vice President, Business Development and Corporate Banking, discussed the role of Afreximbank in promoting African trade and talked about the programmes and facilities which the Bank had put in place to support African businesses engaged in trading activities.
Kanayo Awani, Managing Director, Intra-African Trade Initiative, informed the business leaders about the Intra-African Trade Fair being organized by the Bank in Cairo in December 2018.
Ms. Awani, who announced that the trade fair would hold from 11 to 17 December, said that it was being organized in collaboration with the African Union, and being hosted by the Government of Egypt, to support the development of intra-African trade.
The business breakfast was organized by AfroDev, a Cairo-based consulting and training firm that works on promoting economic development and business links among African countries.
Related News
African Corridor Management Alliance (ACMA) moves towards AfCFTA implementation
The African Trade Policy Centre (ATPC) hosted in collaboration with the Walvis Bay Group, the second African Corridor Management Alliance (ACMA) board meeting on the 11th of April in Addis Ababa, Ethiopia.
Johny Smith, the out-going interim Chair of ACMA expressed his appreciation to the ECA for the unwavering support offered to the ACMA interim Secretariat and ACMA’s role in fostering collaboration among Corridor Management Institutions (CMIs).
He noted that this was accomplished by sharing best practices on corridor development from various sub regions on the continent and combining resources “in order to find a common purpose on how to collectively grow our economies.”
He stated that transport corridors are vehicles for economic transformation and the CMIs enhance trade facilitation and infrastructure development through various platforms, debates, discussions and meetings to fast track corridor linkages, value chains, poverty reduction and development of regional economies.
“They therefore play a crucial role in stimulating the economic growth on the African continent,” he said, adding that with ACMA’s support, the CMIs must be formalized to allow a structured progression of development on the corridors.
For his part, David Luke, Coordinator of ATPC, said: “the meeting came at an opportune time when the African Union member states endorsed and signed the African Continental Free Trade Area (ACFTA). As a continental body, it is important for ACMA to ensure representation from all regions on the continent and look at long-term initiatives to build capacity and traction in linking African sub-regions through corridors”.
Stressing the need to address one of ACMA’s challenge of ensuring long-term sustainability, he said, “Developing strategic partnerships is fundamental to driving our agenda of converting transport corridors into economic corridors, thereby enhancing value chains to boost intra-African trade”.
The need to build stronger strategic partnerships with Regional Economic Communities (RECs), regional and continental agencies and private sector players was noted as a priority for ACMA to focus on. The need to improve efficiency, performance monitoring along corridors and collective fine tuning of various performance indicators was discussed.
Harmonizing current efforts for data collection was agreed as a measuring tool for all CMIs. In this respect, the meeting also highlighted the need to support CMIs that were weakly developed, and agreed to explore a CMI link to the Sahel countries with Northern Africa.
The meeting also adopted the ACMA website and logo design, and stressed the need to undertake resource mobilization with the African Union (AU), New Partnership for Africa’s Development (NEPAD), AUC-African Business Council, and the African Development Bank (AfDB) among others who have expressed interest in supporting the work of ACMA.
The Walvis Bay Corridor Group will continue the role of Interim Secretariat for ACMA with Mr. Clive Smith, Acting Chief Executive Officer of the WBCG, taking over the role of Interim Chair of the ACMA Board.
The meeting was attended by the ACMA Secretariat, Walvis Bay Corridor Group, ECA staff, Arab Maghreb Union and prominent CMIs; Maputo Corridor Logistics Initiative, Dar es Salaam Corridor, Abidjan-Lagos Corridor and the Northern Corridor.
Related News
tralac’s Daily News Selection
African CEOs: AfCFTA will boost business sentiment (New Telegraph)
Although the implementation of the CFTA agreement could be hindered by challenges and its benefits likely to take a long time to be felt, the deal will further boost business sentiment on the continent, African CEOs have said. The CEOs’ position is part of findings contained in the launch edition of the Business Barometer: Africa CEO Survey carried out by the Oxford Business Group.
Related AfCFTA commentaries: OBG’s Souhir Mzali: How effective will Africa’s Continental Free Trade Area be?; NANTS’ Ken Ukaoha: Eight lessons on imperatives of private sector-driven AfCFTA
More currencies to be introduced to the SADC regional payment system (SARDC)
The introduction of the United States dollar as a trading currency on the southern African regional payment system is expected to improve the settlement of transactions among banks within the region. According to the SADC Secretariat, the US dollar is expected to be added as a trading currency by October, while other currencies including SADC currencies will be considered as the payment system progresses. The current settlement currency for the SADC Integrated Regional Electronic Settlement System is the South African Rand. The system is housed at the South African Reserve Bank. According to the SARB, around 60% of cross-border transactions in SADC are denominated in US dollars, 35% in ZAR and the rest in other currencies. SADC Executive Secretariat, Dr Stergomena Lawrence Tax told the SADC Council of Ministers, held in late March in South Africa, that “to-date over a million transactions representing ZAR 4.09 trillion have been settled using the system.”
West African Economic and Monetary Union: common policies for member countries (IMF)
Policy recommendations: (i) Fiscal and monetary policy. Growth-friendly fiscal consolidation is essential to lower public debt, lift pressures on international reserves, and preserve external viability over the medium term. The regional central bank should stand ready to further tighten monetary policy in case pressures persist on the money market and on foreign exchange reserves. (ii) Financial sector. The short-term refinancing of sovereign bonds has constrained monetary policy in 2017 and it will be important to restore room for monetary policy to backstop financial stability. To this end, the authorities should use bank supervision and resolution tools to improve bank balance sheets and resolve fragile banks. (iii) Competitiveness and diversification. Structural policies aimed at improving competitiveness and fostering regional integration are critical to making the growth momentum sustainable and more inclusive. Selected Issues Paper, on the theme Growth acceleration in the West African Economic and Monetary Union (pdf):
Sector in focus: Cocoa
Fourth World Cocoa Conference: Berlin Declaration (ICCO)
On sustainable industry: Supply chain traceability should be recognised as a necessity for a sustainable value chain. A sector wide consensus on traceability should be developed. Efforts must be undertaken to ensure that this does not lead to additional costs and other burdens being transferred to the farmers without sufficient remuneration. Sector sustainability efforts should be transparent and publicly accountable in both efforts and impacts, including through appropriate monitoring and evaluation frameworks.
On sustainable consumption: Engage the sector in dynamic activities to stimulate processing in origin countries and healthy cocoa consumption in origin countries and emerging cocoa markets. Complying with SPS requirements is in the interest of consumers and producers alike. It is essential to ensure that the necessary assistance (technical, financial, or otherwise) is provided to enable producers to comply with these requirements.
On sustainable management: Producing country governments to coordinate national and regional cocoa policies, specifically being mindful of the impact this can have on cocoa prices. Producing country governments should strengthen National Cocoa Development Plans (NCDPs); including a strengthening of infrastructure, extension services, farm diversification, tenure security, etc, making efforts to ensure a transparent, inclusive and participatory approach in the development and implementation of the NCDPs. [Conference daily newsletters]
World Cocoa Conference: Low prices still hurt African farmers (DW)
There’s a tense mood at this year’s meeting. “The future of the cocoa sector as a whole is at stake,” explains Jean-Marc Anga, director of the International Cocoa Organization. The reason is the low prices. Cocoa currently stands at around €2,200 ($2,680) per ton. In 2016 prices were even lower. For African farmers and governments, that is simply too little. “We need prices from which the farmers can make a living,” complains Souleymane Diarrassouba, trade minister of Ivory Coast. The country is the world’s largest cocoa exporter. The farmers, however, make less than €0.50 euro cents per day on average. African delegates warn of the consequences – the use of child labor, for instance, because the farmers cannot employ paid laborers. Environmental destruction is another consequence as farmers burn forests to expand their plantations. The resentment over the attitude of the main cocoa importer in Europe and the US is palpable at the meeting. The global prices are totally non-transparent, African delegates say. Some governments would like to see the creation of a global alliance based on the model of the Organization of the Oil Exporting Countries. In this way they could exert more influence on the global market.
US cocoa buyers to get a taste of Africa on record premium (Bloomberg)
Traders said this week that they’re preparing to ship cocoa from the new West African crop to the U.S. as New York futures trade at the highest premium to London in at least three decades. The unprecedented arbitrage window has opened as some funds prefer to bet on U.S. futures and as the London bourse is plagued with supplies from Cameroon that traders don’t want to buy. The price gap -- now at more than $200 a metric ton -- allows traders to make a huge profit even after accounting for the cost of shipping, importing and storing in American warehouses. There are also big premiums for contract months further out, which may encourage demand for beans from top producers Ivory Coast and Ghana when the next crop starts in October. “This has never happened before, this is extraordinary,” said Jonathan Parkman, co-head of agriculture at London-based brokerage Marex Spectron Group and who has been in the market more than 30 years. “In my entire career, I have never seen anything like this. We have an arbitrage a year forward which is not just a record, but it’s a record by a wide margin.”
Gum Arabic: Growing demand means new opportunities for African producers (UNCTAD)
UNCTAD is now spotlighting the huge potential of revenue growth that lies in transforming the commodity into processed export goods in a special gum arabic-themed issue of its Commodities at a Glance series. “In a highly concentrated sector, UNCTAD proposes reforms from the micro to the national institution levels,” Mario Jales, an economist at UNCTAD’s Commodities Branch, said. “The objectives are to ensure that all stakeholders get a fair share of the total value generated along the gum-arabic global value chain.” Exports of unprocessed and semi-processed gum arabic have almost tripled in the last 25 years, from an annual average of 35,000 tonnes in 1992–1994 to an annual average of 102,000 tonnes in 2014–2016. In addition, exports of processed gum arabic more than tripled, from 17,000 tonnes to 53,000 tonnes in the same period. The three largest exporters of crude gum arabic are Sudan, which accounts for 66% of the total, Chad with 13%, and Nigeria with 8.5%, in 2014–2016. “But paradoxically, many African countries that export crude gum arabic at low prices re-import processed gum at substantially higher prices to meet local manufacturing demand,” Mr Jales said.
pdf The future of work in Africa: regional perspectives on the future of work (6.09 MB) (AfDB)
One of the impacts of 4IR is increased productivity. For African countries, this probably means increased productivity of the modern sector. Growth driven by automation may create jobs to support new business lines that may be enabled by the 4IR technologies. On the other hand, growth may stem from more production of the same things the firm has been producing through efficiencies enabled by 4IR, and may thus eliminate some jobs. For now, the evidence seems to point to elimination of jobs through automation. However, 4IR offers many opportunities to support transformation strategies that are job-creating growth pathways. This is especially true for agriculture and services, where applications are numerous. Nascent areas of local content provision can also create many opportunities, though much capacity will need to be built. Indeed, a major concern is the low level of preparedness of countries to take advantage of opportunities. Thus, while Africa will surely face the disruptions associated with 4IR, the region currently is ill-prepared to take advantage of the unique opportunities that will come with those challenges.
Yet there is no doubt that Africa has the potential to accelerate its development using 4IR platforms. In less than 15 years, the continent has grown to become the world’s second-largest mobile phone market, offering millions of families access to financial services, public health information, and the internet. Even more impressive is how young people have used this technology as a platform to unleash their entrepreneurial potential. This has led to the emergence of a growing pool of mostly young, successful entrepreneurs. With the right support, Africa’s success with mobile platforms can be replicated on increasingly powerful 4IR platforms and can drive transformation of African economies. This underscores the need to revisit job creation and growth strategies so that they can address the opportunities and challenges presented by 4IR. [Note: This extract from Chapter 2 in the new publication issued jointly by the African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank] [Duncan Green: The World Bank’s flagship report this year is on the future of work – here’s what the draft says (Oxfam)]
Nigeria: Apapa gridlock delays N85m solid minerals export (Punch)
The persistent difficulty in accessing the nation’s major seaport, Apapa, is taking its toll on movement of non-oil exports and may affect the earnings for this year, investigation by our correspondent has revealed. It was gathered that on the average, 15-container load of solid minerals, valued at $18,500 each is expected to be exported every month. But since the beginning of April, half of the containers have been in the queue along the road to Apapa, unable to access the port. The situation, according to the Chairman of the Export Group, Lagos Chamber of Commerce and Industry, Mr Bamidele Ayemibo, has affected loading of fresh cargoes because the trucks that are supposed to pick the cargoes are in the queue waiting to enter the port and discharge the cargoes. Agricultural and other fragile exports are said to be faring very badly as the length of time spent in the queue to get into the ports does a lot of damage to the freshness and market value of the products.
Nigeria: Stakeholders harp on standards to harness trade relations (Guardian)
Stakeholders in the manufacturing and importation sectors have been advised to ensure that their products meet the regulatory standards set up by the Standard Organisation of Nigeria. With the production and importation of substandard goods into the country that has caused more havoc, the Republic of China is collaborating with SON to ensure that products imported reached safety measures. This was the thrust of discussions a seminar organised by the Consulate-General of the People’s Republic of China and SON, in Lagos, yesterday.
Today’s Quick Links: UNIDO unveils $50m programme to drive industrial devt in Nigeria SA team’s absence deals Zimbabwe International Trade Fair a blow Namibia Transport Infrastructure Improvement Project: GPN update (pdf) Lobito Corridor Trade Facilitation Project: update Can MTN become Africa’s biggest bank? African Women Leadership Fund: update Washington Post: A new ‘resource curse’ is fueling riots around the world Responsible Mining Index: an interview with Dutch diplomat Prince Jaime de Bourbon de Parme WBG, IMF to hold 2021 annual meetings in Marrakech Judicial perspectives on competition law: executive summary of discussion at Session II, 16th Global Forum on Competition (7-8 December 2017) |
Related News
More currencies to be introduced to the SADC regional payment system
The introduction of the United States dollar as a trading currency on the southern African regional payment system is expected to improve the settlement of transactions among banks within the region.
According to the Southern African Development Community (SADC) Secretariat, the US dollar is expected to be added as a trading currency by October, while other currencies including SADC currencies will be considered as the payment system progresses.
The current settlement currency for the SADC Integrated Regional Electronic Settlement System (SIRESS) is the South African Rand (ZAR). The system is housed at the South African Reserve Bank.
The SIRESS is a regional electronic payment system developed by member states to settle cross-border transactions faster without having to rely on intermediary banks from outside the region.
For example, where transactions previously took two to three days to clear, now they are cleared within 24 hours and fees paid to non-SADC clearing banks are saved.
The SIRESS was established in July 2013 and piloted in four countries – Lesotho, Namibia, South Africa and Swaziland. The system has now been extended to 10 other SADC countries.
According to the South African Reserve Bank, around 60 percent of cross-border transactions in SADC are denominated in US dollars, 35 percent in ZAR and the rest in other currencies.
The US dollar transactions are currently settled through correspondent banking arrangements using USD correspondent banks.
Since the launch of SIRESS in 2013, the volume of transactions traded on the system has increased significantly, and reached the R1 trillion (about US$81 billion) mark in April 2015.
Another milestone was achieved in April 2016 when the volume reached the ZAR2 trillion mark, while the ZAR3 trillion worth of transactions was attained by March 2017.
SADC Executive Secretariat, Dr Stergomena Lawrence Tax told the SADC Council of Ministers held in late March in South Africa that “to-date over a million transactions representing ZAR 4.09 trillion have been settled using the system.”
The main benefits of the system are its efficiency and reduction in costs because previously the transactions would go through a correspondent bank.
The elimination of an intermediary – often a United States or European correspondent bank – means money stays in the region and payments are processed faster.
Most banks in SADC member states, except Madagascar and the newest member the Union of Comoros, are part of the SIRESS.
Madagascar has indicated its intention to join SIRESS soon, while admission of Comoros as a SADC member state is expected to increase the number of participating banks on the platform.
The development of SIRESS is in line with the SADC Protocol on Finance and Investment which aims to improve the regional investment climate through enhanced cooperation among member states on payment, clearing and settlement systems in order to facilitate trade integration.
How effective will Africa’s Continental Free Trade Area be?
Last month, 44 African nations gathered in Kigali to sign an agreement establishing a framework for the world’s largest free trade area (FTA) since the creation of the World Trade Organisation in 1995 – but how ready is Africa for such a deal? And to what extent will the Continental FTA (AfCFTA) be able to enhance intra-regional trade?
The deal aims to establish a single continental market for goods and services, allowing the free movement of businesspeople and investments across Africa. According to the UN Economic Commission for Africa, the AfCFTA has the potential to see trade volumes rise by 50% over the next five years.
Its primary purpose is to promote intra-African trade and accelerate regional integration, but potential spillover effects include better market access, aligned trade regimes, job creation and increased investment. Importantly, the deal could lead the way for economic diversification and structural transformation as markets shift trade away from traditional commodities and move towards developing a robust and modern industrial base, boosting value added and creating new avenues for wealth generation.
Making this a reality, however, will not be an easy task, and the full benefits will take time to manifest.
Mixed views about the potential implications of the AfCFTA
Opinions about how successful the AfCFTA will be have mostly diverged between those who see it as a crucial move to fostering regional economic integration, and those who deem African markets unprepared for heightened levels of competition.
The deal certainly comes at an interesting time, as some of the world’s largest and most developed economies look to disengage from similar blocs and adopt a more protectionist stance.
But unlike those economies, Africa lacks many of the fundamentals that led to the expansion of those markets in the first place. The continent remains plagued by a number of tariff and non-tariff barriers, from poor infrastructure and transportation networks, to heavy bureaucracy and corruption.
As a result, trade within Africa has so far been a missed opportunity. Recent data from the African Union revealed intra-African trade accounted for a mere 16% of the continent’s total trade volumes, falling behind that of Asia and Latin America, where regional trade accounts for 51% and 19%, respectively.
It’s worth noting that this does not mean Africa has performed poorly. The continent has experienced significant economic expansion since the turn of the century, with sub-Saharan Africa’s economy growing from $300bn in 2000 to $1.6trn in 2017, according to the International Finance Corporation (IFC), driven primarily by the burgeoning tertiary sector.
As the continent’s middle- and high-income groups continue to expand, services are poised to develop further. Household spending is expected to rise in a range of areas, particularly in ICT, transportation, education and housing. Consequently, the IFC expects the region’s economy to exceed $2trn by 2020, paving the way for new trade opportunities.
However, some doubt the success of the deal, because as it currently stands, one the region’s largest economies is notably absent. While the deal was initially intended to comprise all of the continent’s nations – representing 1.2bn people and a combined GDP of over $3.5trn – Nigeria has opted to stay out of it for now.
Find out more about the Business Barometer: OBG in Africa CEO Survey.
© Oxford Business Group. Souhir Mzali is Africa Regional Editor at Oxford Business Group. This blog post was first published on the OBR website. Read the full article here.
Related News
IMF regional consultation with the West African Economic and Monetary Union
On March 26, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with WAEMU.
Economic activity remains strong but vulnerabilities persist. Despite lower terms of trade, social tensions, and security challenges within the region, real GDP growth is estimated to have exceeded 6 percent in 2017, underpinned by strong domestic demand. Inflation remained subdued. However, external and internal imbalances widened. Preliminary data point to an increase in the fiscal deficit to 4.7 percent of GDP in 2017 from 4.5 percent in 2016, and the external current account deficit to 6 percent of GDP in 2017 from 5.6 percent in 2016. International reserve coverage rebounded somewhat to 4.2 months at end-2017, helped by sizable Eurobonds issuances by Côte d’Ivoire, Senegal, and the West African Development Bank.
The tightening of monetary policy since end-2016 stimulated the interbank market, reduced banks’ appetite for government debt, and contributed to Eurobond issuances by the two largest WAEMU sovereigns. However, since September 2017, renewed liquidity pressures have pushed up the interbank market rate and maintained the average refinancing rate at the ceiling of the BCEAO’s policy corridor. An ambitious set of reforms were also undertaken in 2017 to modernize financial sector regulations, including a gradual increase in minimum capital requirements in line with the Basel II/III principles. Other reforms include introducing a new accounting plan, moving to consolidated supervision of bank groups, strengthening the resolution framework, and setting up a deposit guarantee fund.
The outlook remains positive but hinges critically on the planned fiscal consolidation and implementation of structural reforms by member countries. Growth is projected to stay above 6 percent with continued low inflation over the medium term. Risks are tilted to the downside and stem from potential delays in fiscal consolidation, slow progress in the implementation of the structural reforms, persistent security concerns in the region, higher international oil prices, as well as tightening of international financial conditions and a slowdown in world growth.
Staff Report
Policy Discussions
Sustaining the growth momentum and the currency peg will require continued macroeconomic stability, anchored on credible fiscal consolidation, appropriate monetary policy, and accelerated structural reforms to promote financial stability and competitiveness.
Macroeconomic policies: Sustaining the growth momentum while preserving debt sustainability and external stability
The growth momentum of recent years has been accompanied by an erosion of policy buffers. Growth has been largely driven by domestic demand, particularly public investment. As a result, internal and external balances have been widening. Securities challenges within the region combined with wage demands have increased pressures on government spending, while the fiscal space has remained limited and public debt service has increased in several member countries. The persistence of large fiscal and external current account deficits has maintained pressure on foreign exchange reserves.
Staff’s Recommendations
International reserves should increase to provide higher buffers against shocks. The recovery in reserves in 2017 masks continued underlying pressures on reserves, which would have continued their slide that started in 2016 were it not for the extraordinary level of Eurobond issues in 2017. This warrants a reinforced effort to strengthen external competitiveness through structural reforms and reduce fiscal imbalances to build reserves towards at least 5 months of import cover.
Growth-friendly fiscal consolidation is needed to lower public debt and lift pressures on monetary policy and reserves. Effective fiscal consolidation is essential to preserving external viability over the medium term. It must also be supported by a more comprehensive accounting for risks to fiscal and debt sustainability, stronger regional surveillance efforts, and improved debt management. Staff urged the authorities to pursue the following policy priorities:
-
Building fiscal space: Governments should bolster revenues and prioritize spending to meet the WAEMU fiscal deficit criterion of 3 percent of GDP by 2019 and beyond while creating fiscal space for priority infrastructure and social spending. In the event of deviations from current program targets, additional fiscal measures would be needed. Tax policy measures could include hiking rates on excises, VAT on exempted products and real property tax, and reducing the scope for tax exemptions. Spending measures could include bringing wage bills within 35 percent of domestic revenue (WAEMU convergence criterion) and better targeting subsidies and social assistance to protect the most vulnerable. Several key WAEMU convergence criteria remain unobserved, and current projections suggest that breaches will persist for second-order criteria in most countries over the medium term. The mission encouraged the WAEMU Commission to increase dissemination of the Union countries’ convergence criteria efforts and bring its views of fiscal risks to the attention of the next meeting of the WAEMU Head of States.
-
Capturing fiscal risks: Governments should expand the fiscal account coverage and implement the WAEMU Directive on the transition to the GFSM 2001 fiscal reporting standards. There is also a need to better capture contingent liabilities arising from troubled public entities, including banks, and from increasing recourse to PPPs.
-
Increasing the efficiency of public investment: WAEMU member governments should improve public investment management, focusing on priority areas identified by recent PIMA missions, such as the planning and selection of public-private partnerships, the preparation of multiyear budgeting, the effectiveness of project appraisal and selection, the monitoring of project during implementation, and the accounting of infrastructure assets.
-
Strengthening debt coverage and management: With rising public debt in recent years, the authorities should closely monitor all public contracted and guaranteed debt, including by widening coverage to state-owned enterprises and refraining from pre-financing operations. WAEMU sovereigns should continue to seek the best possible terms on new borrowings, with a view to limiting debt service costs and FX risks. Issuing Eurobonds in euros (to which the CFA franc is pegged), including for liability management, would lower FX risks. While not a substitute for the criticality of lowering the fiscal deficits to improve the regional FX reserves, Eurobonds could contribute to the latter.
Promoting financial stability and inclusion
Progress has been made by WAEMU countries on financial development and inclusion, although they still lag their peers. Mobile payments have picked up in recent years and should help large segments of the population participate in the market economy. Monitoring committees were put in place at the national and regional levels in 2017 for implementation of the regional strategy for the promotion of financial inclusion approved in June 2016 by the WAEMU’s Council of Ministers. The implementation of this strategy is expected to benefit from financial support from bilateral and multilateral donors starting in 2018, as well as technical assistance from the World Bank.
The banking system is stable and profitable overall, though there are pockets of vulnerabilities. The overall capital adequacy ratio (CAR) for the sector under Basel I was 11.4 percent at mid-2017, indicating that large groups are stable and sound. However, some banks remain under-capitalized, while several smaller banks had not met the minimum social capital of FCFA 10 billion required at end-June 2017. The authorities have asked banks to comply with their capital obligations at end-June 2018, and are closely monitoring some of these banks, expected to rebalance their assets and resources by raising additional capital and/or deleveraging.
Fostering sustainable growth
Sustaining the growth momentum will require efforts to improve competitiveness and promote diversification. Medium-term growth will continue to be driven by domestic demand but with an increasing role of private investment as fiscal consolidation takes hold and the business climate improves with structural reforms.
-
Background. Survey-based indicators show that regional structural competitiveness improved in 2017, but less than in other African and Asian benchmark countries with strong growth. The WAEMU region scores low in business climate and global competitiveness indicators with significant obstacles persisting in, for instance, registering property, dealing with construction permits, getting credit and electricity, paying taxes, and the availability of infrastructure, technology, and specialized labor. In addition, governance indicators remain weak while logistics performance needs improvements. Despite high public investment spending during the past decade, the infrastructure gap remains important compared to other regions, reflecting large initial gaps as well as low public investment efficiency.
-
Policies. Improving competitiveness and resilience to shocks and sustaining the recent growth performance in the WAEMU would require efforts to maintain macroeconomic stability, improve trade performance, promote efficient public and private investments, and lower costs of inputs such as transport and electricity. The national authorities should take steps to improve the efficiency of public investments as well as the investment climate by easing the above-noted impediments to doing business. At the regional level, the WAEMU Commission is taking steps to enhance the effectiveness of regional structural funds in cross-border infrastructure projects.
Selected Issues
Growth acceleration in the West African Economic and Monetary Union
The West African Economic and Monetary Union (WAEMU) member countries have experienced growth acceleration since 2012. Relative to an earlier reference period in the 1990s, the WAEMU’s recent strong growth has coincided with an increase in macroeconomic stability and investment, improvement in political institutions, improvement in the terms of trade, and increase in productivity.
The WAEMU has experienced its longest episode of rapid economic growth since 2012 and member states’ national development plans stress the importance of sustainable growth. Achieving the latter objective calls for an understanding of the factors that have likely contributed to WAEMU’s recent strong growth performance.
This paper examines the fundamentals behind WAEMU’s recent economic growth acceleration in comparison to the group of low income developing countries (LIDCs). The paper first presents some stylized facts on growth performance in the WAEMU before providing a survey of the literature on growth regressions and growth accelerations models. It then undertakes a benchmarking exercise to compare changes in key macroeconomic variables in the WAEMU and in its peers during the last six years relative to an earlier reference period in the 1990s. Finally, the paper explores the empirical relationship between the same variables and average GDP growth during growth acceleration episodes.
Growth experience in the WAEMU: Some stylized facts
The growth performance in WAEMU countries has been variable. The average growth rate (growth volatility) during the period 1960-2017 has been 3.4 percent (4.1 percent) in the WAEMU, compared to 4.0 percent (3.6 percent) in LIDCs. The WAEMU has experienced distinct phases of peaks and troughs in economic growth and growth turning points have been abrupt. Growth fell sharply in 1972, 1983, 1992, 2000 and 2011, corresponding to the periods preceding and following the two oil price shocks of 1974 and 1981, the period preceding the CFA franc devaluation in 1994 and the more recent period of civil conflict in Côte d’Ivoire. The region has experienced a short-term peak in growth in the years 1970, 1976, and 1996. Since 2012, the WAEMU’s real GDP has grown by more than 6 percent a year, that is well above the average growth rate in Sub-Saharan-Africa (SSA) and other developing countries.
Real GDP per capita in WAEMU countries has remained mostly stagnant while it has increased in other LIDCs. Income per capita in the WAEMU was close to that of the group of low and middle-income countries or low income developing countries or SSA in the early 1960s.3 However, since then, in terms of per capita income, WAEMU’s countries have experienced a widening gap relative to other LIDCs. While the share of the WAEMU income per capita in purchasing power parity (PPP) was 108 percent of that of the group of low-income developing countries in the early1960s, it dropped to 65 percent in 2017.
The average per capita income growth in WAEMU hides some heterogeneities across member-countries since the 1960s. A close look at WAEMU’s countries suggests that per capita income increased in Benin, Burkina Faso, and Mali, improved slightly in Guinea-Bissau and Senegal, and decreased in Côte d’Ivoire, Niger, and Togo.
Côte d’Ivoire is WAEMU’s largest economy. Côte d’Ivoire accounts for more than 40 percent of the currency union’s GDP, followed by Senegal with about 15 percent. Mali, Burkina Faso and Benin have approximately similar contributions of about 10 percent individually.
A Benchmarking Approach
This section compares the WAEMU to the group of LIDCs. LIDCs are defined following the World Economic Outlook (WEO) classifications. This group constitutes 60 countries, including the WAEMU countries. Examining LIDCs allows focus on the development challenges faced by these countries, thereby strengthening the quality of the benchmarking.
The benchmarking analysis looks at changes in macroeconomic fundamentals before and during the WAEMU’s recent rapid growth episode. WAEMU member countries are benchmarked against LIDCs peers during two different time periods: 1997-99 and 2012-17. The period 2012-17 corresponds to the recent growth acceleration episode in the WAEMU. The period 1997-99 was chosen to avoid capturing the effects of civil conflict and the 1994 CFA franc devaluation. Using these two points in time may help an understanding of WAEMU’s recent growth acceleration episode, compared to the previous period.
Key macroeconomic fundamentals examined are factors highlighted in the literature as important determinants of a growth acceleration. These fundamentals include (i) macroeconomic stability, (ii) trade performance, (iii) investment, (iv) polity score, (v) terms of trade, and (vi) total factor productivity.
Macroeconomic stability: Macroeconomic stability is an important driver of growth acceleration. Countries with macroeconomic stability are better able to anchor expectations and promote high and longterm investment decisions that may help growth to be sustainable. This finding is confirmed by the Arizala and others (2017). Macroeconomic stability in this paper is captured by the inflation rate and volatility, and exchange rate depreciation and volatility. Data show that the WAEMU region has benefitted from greater macroeconomic stability than its peers in LIDCs
Trade Performance: Trade openness grew less in the WAEMU than on average in LIDCs. On average, the trade openness (measured by the sum of exports and imports-to-GDP) was about 65 percent in WAEMU countries during 2012-17, compared to 96 percent in LIDCs during the same period. In addition, trade openness increased by 12.6 percentage points in the WAEMU, compared to 14.8 percentage points in LIDCs between the two periods of comparison. The level of trade openness in 1997-99 in the WAEMU was 52 percent, compared to an average of 81 percent in LIDCs.
Investment: Growth accelerations are correlated with an increase in investment. Hausmann, Pritchett, and Rodrik, (2005) found that the transition period to a growth acceleration coincides with an increase of the investment ratio, which continues to increase during the growth acceleration episode. Evidence suggests that investment has increased more in the WAEMU than in LIDCs during the recent period of acceleration, compared to the earlier benchmark period. On average, the ratio of total investment-to-GDP increased by 6.7 percent of GDP during 2012-17 compared to 0.6 percent in LIDCs. At the WAEMU’s individual member level, investment increased particularly in Niger, Togo, Senegal and Burkina Faso well above the average level of 6.7 percent in the WAEMU. The increase in investment in the WAEMU was partly driven by the public sector. Public investment-to-GDP increased by 3.4 percentage points of GDP in the WAEMU during the two periods of comparison, compared to 1.4 percentage points in LIDCs. This increase in public investment was particularly important in Togo, Niger, Côte d’Ivoire and Senegal
Terms of Trade: Growth accelerations can be influenced by favorable terms of trade. As highlighted by Singer (1950), terms of trade changes affect funds available to developing countries for capital formation and hence growth. The average change in the terms of trade was 1.2 percent in the WAEMU in 2012-17, compared to -0.3 percent in LIDCs during the same period. Moreover, the terms of trade have somewhat improved between 1997-99 and 2012-17 in the WAEMU. The terms of trade improved particularly in Guinea-Bissau, Burkina Faso, Mali, and Côte d’Ivoire.
Productivity Gains: Productivity gains have been identified as important engines of growth acceleration. This subsection uses a standard growth accounting framework with a Cobb-Douglas production function to disentangle the sources of growth in the WAEMU and LIDCs, looking particularly at the contribution of total factor productivity (TFP). The analysis uses data from Penn World Table during the period 1960-2014 to estimate the contributions of TFP, physical capital, and labor to real economic growth.
TFP contribution was important to economic growth in the WAEMU. The average contribution of TFP for the WAEMU was 1.03 points in 2012-17 compared to 0.57 points in 1997-99. While the contribution of TFP to LIDCs’ economic growth was higher than that of the WAEMU in 1997-99, in 2012-17, TFP contribution turned to negative in this broader group. At the WAEMU’s individual countries level, TFP contribution particularly increased in Togo, Côte d’Ivoire, Niger, and Guinea Bissau.