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Exploring Malawi’s export potential (ITC)
Regional integration is the key to Malawi’s trade success, according to a new ITC report (pdf) that uncovers the country’s greatest untapped export potential in agro-processing. This report is a roadmap for Malawian exporters and policymakers to identify higher value-added products and markets with growth potential, as well as giving guidance to realize these opportunities and overcoming production challenges. These are the key findings:
(i) The future of Malawi’s trade performance hinges on its effective integration within the region. SADC is the natural market for Malawian exporters where 39% of the country’s untapped export potential ($154.4m) lies. Realizing these opportunities should help create a solid export basis for the country while also enabling to acquire the experience needed to reach more distant markets.
(ii) Untapped export opportunities in the SADC region comprise a mix of Malawi’s traditional and novel export sectors. Among traditional exports, raw cane sugar, black fermented tea, groundnuts, maize seeds for sowing, dried peas, and wood-related products offer room for export growth, ranging from $30.6m to $3.7m. Among non-traditional exports, Malawi recently increased its exports of chicken eggs to Mozambique dramatically (353% annual growth between 2011 and 2015), a performance that opens the door to further regional opportunities valued at $29.7m for chicken eggs. Plastic products also have an unrealized potential for intraregional trade, amounting to $8.9m.
(iii) Regional markets will be at the heart of future competitiveness. Malawian exporters remain generally competitive vis-à-vis other suppliers in the regional market. Other SADC countries offer a natural testing ground for diversification opportunities, in particular for processed products based on raw materials currently exported. The development of an oil processing industry seems to be the most natural path for the country’s industrial development.
Malawi’s export potential is concentrated in eight sectors (see Figure 5: traditional ones like sugar, tea, oilseeds, wood and vegetable products, pulses and other cereals, and non-traditional ones like animal products and plastics). These sectors represent 91.7% of the country’s total export potential and 91.9% of its total unrealized potential. Two traditional products – raw cane sugar and black tea in bulk –, together account for 49.4% of Malawi’s total export potential, and enjoy high demand worldwide. The country has not yet managed to develop any significant export potential in other products within the sugar or tea sector. The remaining six sectors account for 42.3% of total export potential. [Malawi 2017 external debt rises to record $2.06bn]
CHOGM week: selected trade policy, trade facilitation updates
Theresa May’s speech at the Commonwealth Business Forum: Greater use of these international standards across the Commonwealth will reduce the costs of trade between members, as well as with partners beyond the Commonwealth, for greater global benefit. That is why the UK will be funding an all-new Commonwealth Standards Network, which will support developing countries in particular to better meet existing international standards. The network will provide a significant opportunity for national standards experts to collaborate and share best practice.
Cyril Ramaphosa’s speech at Commonwealth Business Forum Banquet: The establishment of the free trade area in Africa will revolutionise economic activity on the continent, enabling the transfer of goods, services, skills and technology, and access to a market of over a billion people. However, the creation of a free trade area alone it is not enough. It needs to be accompanied by the development of the infrastructure that is going to carry these goods and generate the power that is going to enable their production. It needs to be accompanied by investments in universities, schools, hospitals and clinics, communication technology and water reticulation. For South Africa, continental integration is fundamental to the advancement of our national agenda. It is only through greater investment and trade between African countries that we will be able to address our own challenges of poverty, inequality and unemployment.
Uhuru Kenyatta’s speech at Chatham House: London is the global centre of banking and investment; it is a city that urgently seeks out more investment opportunity and higher yields. Kenya and East Africa is full of energetic and ambitious young people who can build goods and services for a rapidly growing middle class and population. We need to do more to lower the cultural, bureaucratic and communication barriers to that investment. You can do more to support British investors making bets on big opportunities in Kenya. You can make it easier for Kenyan businesspeople to travel to the UK. You can be ambitious in crafting a trade deal with Kenya that will be a shining example to the rest of the Commonwealth and the world. We will walk with you each step of the way. On our part, as Kenya, we can do much more to lower the barriers to investment at scale. You will have noted that we made aggressive reforms in the ease of doing business during my first term. We will do even more. Our infrastructure will be ready for investors and sharply increased trade.
Muhammadu Buhari’s speech at Commonwealth Business Forum: If there is a collective Commonwealth commitment to the ease of doing business, we shall spur growth, multiply wealth and expand employment opportunities. These objectives will be accelerated by trade and investment facilitation.
Liam Fox’s speech at the Commonwealth Business Forum: Both the UK and India have benefited greatly from the Joint Trade Review process and agreed at the Joint Economic and Trade Committee in January 2018 that we should seek to share the experience with other Commonwealth countries. To that end, the Review guide will be posted on the Commonwealth Secretariat website and Commonwealth members can - if they wish - use the same methodology to improve trade with other member states. We want the trade elements of this CHOGM to become a process and not an event.
Bangladesh Prime Minister Sheikh Hasina: 7-point proposal to promote intra-Commonwealth trade
Cyril Ramaphosa tells the Financial Times: “I’m approaching it with a private-sector lens”
Rob Davies, Liam Fox statement: UK and South Africa welcome progress on trade relationship
New Delhi pitches for trilateral trade between India, UK, Africa
Jitesh Gadhia, Tom Tugendhat: Delhi and London can leverage this forum to unleash an agenda of trade and prosperity
The UK and India: bilateral trade relationship
Mutharika tells Commonwealth Business Forum: Malawi guarantees security for investors
Russian investors express difficulties accessing African markets (Business Post)
Russian business lobbying groups together with about 40 business and industry heads have shown interest in exporting Russian products to African markets but said they were faced with difficulties in accessing market facilitation procedures with a number of African countries. Deputy Director of the Department of Asia, Africa and Latin America of the Ministry of Economic Development of the Russian Federation, Alexander Dianov, spoke about the non-financial support measures for Russian companies operating within the department, informed that “currently, there are 10 intergovernmental commissions between the Russian Federation and African countries.” At the same time, he said that “there are trade missions only in four African countries, and if you take sub-Saharan Africa countries, the trade mission operates effectively only in South Africa. It is obvious that there is something to work on in terms of developing the infrastructure to support Russian business. If there is a serious request from the business community, we are ready to expand the geography of our presence.”
Startup and innovation hub leaders are going to shape digital policy for the AU (Quartz)
The next stop is the AU as the body’s commission for trade is convening the “largest-ever gathering of community innovation hubs” on the continent next month in Kigali in partnership with i4Policy. To ensure widespread representation, i4Policy is calling for applications from hub representatives across the continent and hopes to have at least 75 startup and innovation hubs represented. Leading hubs including Nigeria’s Co-Creation Hub, Ghana’s Kumasi Hive and Rwanda’s Impact Hub have already confirmed participation. Policy recommendations will be passed on to the AU’s Head of States Summit.
WTO members submit proposals aimed at advancing exploratory e-commerce work (ICTSD)
Over the past few weeks, a host of submissions have been put forward by WTO members as part of exploratory work to support future talks among interested parties on the trade-related aspects of e-commerce. The submissions show indications of potential overlapping interest in exploring several specific areas, including market access commitments, trade facilitation, consumer protection, and data flows. The coalition working on the next steps for the joint statement will reconvene next month and again in June, followed by a stocktaking exercise in July, sources said.
Blockchain is about to revolutionize the shipping industry (Bloomberg)
Globalisation has brought the most advanced trading networks the world has seen, with the biggest, fastest vessels, robot-operated ports and vast computer databases tracking cargoes. But it all still relies on millions and millions of paper documents. That last throwback to 19th century trade is about to fall. AP Moeller-Maersk and other container shipping lines have teamed up with technology companies to upgrade the world’s most complex logistics network. The prize is a revolution in world trade on a scale not seen since the move to standard containers in the 1960s — a change that ushered in the age of globalisation. But the undertaking is as big as the potential upheaval it will cause. To make it work, dozens of shipping lines and thousands of related businesses around the world — including manufacturers, banks, insurers, brokers and port authorities — will have to work out a protocol that can integrate all the new systems onto one vast platform.
Global economy sprinting ahead but trade war could end the race: Reuters poll
The global economy will race further ahead this year, expanding at its fastest pace since 2010, but trade protectionism has the potential to quickly tire it out, the latest Reuters polls of over 500 economists worldwide suggest. Just three months ago, most economists said threats to the global economy from protectionist policies, particularly President Donald Trump’s “America First” trade policy, was slowly fading. That changed after Trump imposed import tariffs on certain commodities and China retaliated. The dispute is going to damage economies across the world from the Americas, to Europe and across Asia, according to nearly 90% of 230 economists who answered a separate question on the regional impact from the ongoing trade spat.
Today’s Quick Links: IMF’s Tao Zhang on Angola: ”We have received a letter from the Angolan authorities for IMF staff to initiate discussions on an economic program that could be supported by the Policy Coordination Instrument.” Financial Times: Reputation for stability lures new foreign investors to Senegal Afreximbank Research: Trade Update March 2018 (pdf) Cabo Verde: IMF’s 2018 Article IV Consultation, Selected Issues Paper Working group on measuring e-commerce and the digital economy: note by the UNCTAD secretariat (pdf) New York Times: Trump wants to close trade gap, but leaves export agency in limbo |
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Commonwealth Business Forum: Dr Fox announces measures to strengthen commonwealth trade ties
International trade secretary sets out new measures supporting strong Commonwealth trade ties at Heads of Government Summit
As the Commonwealth Heads of Government Meeting (CHOGM) starts this week, the Prime Minister and International Trade Secretary, Dr Liam Fox, on Monday, 16 April 2018 set out new measures to improve trade between the Commonwealth countries, as well as announcing a range of commercial deals worth more than £1.5 billion.
Speaking at the Commonwealth Business Forum, Dr Fox also set out the UK’s ambition to become the foremost global champion of free trade across the world, driving economic growth and prosperity in the process.
The focus of Monday’s CHOGM activity was centered on trade and prosperity, and the Prime Minister has announced several initiatives to make it easier for Commonwealth businesses to forge trading ties with their overseas counterparts.
One of the key initiatives will see the first Commonwealth Standards Network launched, bringing together a group of national experts to provide a range of assistance designed to boost standards in developing countries.
Speaking on Monday afternoon, the Secretary of State also showcased more than 40 commercial deals, worth more than £1.5 billion, that have been signed between the UK and Commonwealth partners in the run up to CHOGM.
At the event, he met with representatives from Wadhawan Global Capital whose desire to grow their presence in the UK’s financial service and fintech sectors will see £300 million worth of investment pumped into the UK’s economy over the next 3 years, creating or safeguarding more than 1,000 jobs in the process.
Dr Fox also announced progress with transiting Economic Partnership Agreements (EPAs) covering 30 developing countries, including 24 Commonwealth members. The EPAs seek to replicate existing arrangements, ensuring continuity in trading practices as the UK leaves the European Union.
The Commonwealth is a key trading partner for the UK with total trade in goods and services increasing by 2.1% £94.4 billion in 2016. Canada is the largest trading partner in the group accounting for 16.4% of total trade, followed by India (16.3%) and Australia (13.9%).
Dr Fox said: “This summit offers a fantastic opportunity to promote the important value of free and fair trade within the Commonwealth. Our shared bonds of history, culture language and laws have the potential to increase trade drastically over the coming years, whilst also reducing the cost of doing business between member countries by up to 19%.
“This government will continue to champion global trade, which has driven prosperity at home and abroad. As we leave the EU the UK is ready thrive and adapt to a rapidly changing world. That is our ambition for all Commonwealth members, and it is the message I will share with our friends and allies throughout this week.”
The UK’s credit agency, UK Export Finance have also doubled their support for Commonwealth markets, supporting the likes of the Cleveland Bridges project in Sri Lanka, by offering a $128 million guarantee to finance the construction of 537 steel bridges to improve infrastructure in rural areas. The agency had the total capacity of more than £20 billion to support new business.
DIT also announced support for the Commonwealth Small States (CSS) Office in Geneva to build its human rights and trade capacity with a £1.3 million investment. This will boost CSS participation in the international human rights community as well as those that are unable to independently negotiate trade agreements at the WTO.
With over 2.4 billion people, the Commonwealth is home to one third or the world’s population, 60% of which are under the age of 30. It contains some of the world’s fastest growing economies and accounts for one-fifth of global trade. The Commonwealth’s largest members – India, South Africa, Canada, Australia and the UK – make up a quarter of the G20.
Global economic outlook: trade, growth and the Commonwealth
Speech by International Trade Secretary Liam Fox at the Commonwealth Business Forum
One of the core stated aims of this Commonwealth Heads of Government Meeting is to build a more prosperous future for the Commonwealth, its member states and all our citizens.
Prosperity is, of course, a key marker for human progress.
It is obvious to all that an increase in prosperity – or alleviation from poverty – at an individual level engenders personal liberty.
But prosperity on a national basis can create freedom on a far greater scale, providing the means for states to realise the wider aims of this meeting.
I have said many times before that trade is not an end in itself. Trade is a means by which we spread prosperity. Prosperity is the means by which we create and underpin social cohesion. Social cohesion contributes to political stability, and political stability is the essential building block of our collective security. It is a continuum that cannot be affected at one point, without affecting the whole. You cannot choose to have protectionism rather than free trade without there being consequences.
If you choose not to have global free trade do not be surprised if you get increased mass migration. Or increased radicalisation.
But prosperity is also the means by which nations can build a fairer and more sustainable future.
So, although it may be a view that you expect from the Secretary of State for International Trade, I believe that building our prosperity is the most important issue of this CHOGM, underpinning our other aims.
I would even go further and say that prosperity and its economic foundations offer a blueprint for the future direction of this organisation.
Its members would be the first to acknowledge that the Commonwealth of Nations is unlike any other intergovernmental organisation.
It is not a military alliance like NATO, nor is it simply a political entity.
It is not an alliance based on geographical proximity, or an international rule-setting body like the WTO.
Rather, it is a group of nations brought together by the ties of history, culture, friendship, family, and sometimes language.
These ties were not created by design. But the Commonwealth is an acknowledgement that, as much as our countries have been part of one another’s past, we will also be an essential part of one another’s future.
In many ways, this is an approach that stands us in good stead as we meet the challenges of an increasingly globalised world.
Increasingly, challenges, opportunities and solutions are multinational affairs, requiring co-operation that extends beyond the borders of nations or continents.
I firmly believe that the strength of the Commonwealth lies in its diversity. Our members range from some of the largest and most populous countries on earth, to the smallest.
Such variety presents disparate challenges, but also a wide range of experience.
Likewise, the different levels of development of our members should not be seen as detrimental.
Instead, it is an opportunity – a chance to use our collective strengths to support our fellow members and help to unlock our collective economic potential.
The UK believes that free and open trade is the greatest catalyst for poverty elimination and lasting economic development.
Development in the modern era must be about developing economic and commercial capacity – nurturing new industries in less developed countries and creating lasting opportunity.
The Commonwealth, with all of our rich experience and expertise, can lead the world in unlocking this approach.
Development should no longer be focussed simply on giving and receiving aid, but on commercial partnership, and working together to realise our economic potential.
Make no mistake – that potential is vast.
According to the Commonwealth Secretariat, intra-Commonwealth trade is currently estimated at around $560 billion. An impressive figure but, as the Prime Minister said earlier, it is projected to grow rapidly, to over $700 billion by 2020.
And, as the United Kingdom leaves the European Union, we have the opportunity to re-invigorate our Commonwealth partnerships and usher in a new era, harnessing the movement of expertise, talent, goods, and capital between our nations in a way that we have not for a generation or more.
Yet beyond this obvious economic advantage, I believe that the Commonwealth has the potential, and the responsibility, to take a principal role in the defence of global commercial freedoms.
In an era when free trade is increasingly threatened by the siren call of protectionism, we have the opportunity to reject insularity in favour of economic openness and co-operation.
It is the United Kingdom’s ambition to become the foremost global champion of free trade, using our economic and diplomatic influence to support free trade.
This will mean leading by example, and where better to begin than with our friends and partners in the Commonwealth?
Earlier today, the Prime Minister outlined a range of commitments that the United Kingdom is making to liberalise intra-Commonwealth trade and investment.
Foremost among these is the Commonwealth Trade Facilitation Agreement Programme – a decisive show of support for the rules-based international system that will reduce trade costs and boost economic activity across the Commonwealth.
The Prime Minister also outlined the creation of a Commonwealth Standards Network, an exciting initiative which will create a new platform for dialogue and co-operation between national experts, and work directly with developing countries to build standards capacity to ensure those benefits are felt by all.
And, of course, the Prime Minister highlighted the launch of the SheTrades Commonwealth Programme, an ambitious venture to boost the role of women from across the Commonwealth in international trade, unlocking the economic potential of hundreds of millions of people.
But SheTrades is only one part of the UK’s ambitions for gender-responsive trade.
As we establish an independent trade policy, we will ensure that we create a framework that delivers for female exporters and upholds gender equality.
What the Prime Minister also touched on is the need for more and better data to help drive inclusive policy making across the Commonwealth. We need to understand the barriers that women may face in trade.
That is why we are working with the International Trade Centre to launch the ‘Global Outlook’ on trade and gender.
The first of its kind, this index will provide member governments with the data needed to understand how they can improve opportunities for women, identifying good practice and tracking progress over time.
These formal mechanisms are only part of our approach.
I have spoken already about how the Commonwealth can take a leading role in shaping the future of global trade.
What better way to signal our intention than by taking positive action to increase women’s role in global commerce and ensure that trade delivers prosperity for all our citizens?
And what better way to counter rising anti-globalisation sentiment than by ensuring that everyone has an equal stake in the global economy?
Linked to this is our work on trade and human rights.
I am pleased to announce that the UK is supporting the Commonwealth Small States Office in Geneva to build its human rights and trade capacity.
Our twofold approach will see technical human rights expertise made available to Commonwealth Small States, facilitating their effective participation in the work of the Geneva-based international Human Rights mechanisms.
We will also provide dedicated trade advisers to increase the meaningful participation of CSS in international trade and facilitate their fuller integration into the multilateral trading system.
The flagship programmes that the Prime Minister and I have touched on rightly have pride of place in our steps towards realising this CHOGM’s ambition to build a more prosperous future for the Commonwealth.
But as Secretary of State for International Trade, I know that we are doing far more to promote trade, investment and wealth creation between our member states.
I lead a department that was created not only to design a favourable legislative and policy framework to govern UK trade, but also to support British businesses operating overseas, encouraging exports, and attracting investment into this country from abroad and promote outward investment from the UK.
In the first instance, we are taking decisive action to strengthen our post-Brexit trade relationships with our Commonwealth partners.
India and the UK, for example, have collaborated closely to produce a Joint Trade Review of bilateral trade.
This ground-breaking work has enabled both countries to clearly identify and understand the trade barriers for key sectors, as well as building relationships between us, laying a foundation for a possible future trade agreement.
Both the UK and India have benefited greatly from the Joint Trade Review process and agreed at the Joint Economic and Trade Committee in January 2018 that we should seek to share the experience with other Commonwealth countries.
To that end, the Review guide will be posted on the Commonwealth Secretariat website and Commonwealth members can – if they wish – use the same methodology to improve trade with other member states.
We want the trade elements of this CHOGM to become a process and not an event.
We are proud of the early success of our inter-governmental work. But as we all know, trade is not conducted between governments, but between businesses.
That is why the Department for International Trade is making a concerted effort to improve and expand the commercial links that already exist between the UK and our Commonwealth Partners.
Our extensive programme of overseas investment support is designed to make it easier than ever before for UK firms to invest in Commonwealth countries.
In developing economies particularly, Britain has the expertise to guide key industries, from infrastructure to education and healthcare, that will in future drive future economic growth.
Creating these commercial partnerships is clearly mutually beneficial. My department’s work involves exploring overseas opportunities on behalf of UK firms, and connecting them with potential customers.
But we also offer important practical support. UK Export Finance offers support to UK exporters, and to those Commonwealth companies who buy goods or services from the UK.
With a total capacity of some £20 billion to support new businesses, buying from the UK offers a certainty no other nation can offer.
In the last year, UK Export Finance has almost doubled its ability to finance projects across Commonwealth markets, facilitating trade and supporting growth and development across all our members.
Their support is also available in a wide range of Commonwealth currencies, from the Australian Dollar to the Zambian Kwacha, helping buyers to ‘buy British, pay local’.
We have a formidable offering for Commonwealth businesses. But our proactive support here is mirrored by wide-ranging investment promotion by the UK within our Commonwealth partner nations.
The Investment Promotion Programme is a proposed four-year initiative to build the capacity of 4 national governments, including Nigeria, India and South Africa, to attract and manage more foreign direct investment.
Its primary purpose is to bring the broader benefits of trade that I’ve spoken about – economic growth, jobs, infrastructure and education.
It will also, of course, serve to strengthen the commercial ties between the UK and some of our key Commonwealth trade partners, creating opportunities for UK exporters in these high-growth economies.
Such programmes hold the key to future prosperity. As we meet to decide the direction of the Commonwealth, those countries with the power to shape must not forget the key role that prosperity plays.
The Commonwealth may be moulded by its history, but our vision is fixed firmly on the future, and all the opportunities it will bring.
For the opportunities are great, and the prizes historic.
There will be challenges ahead, but we have the talent, the resources, and the will to overcome them.
Truly, there is no limit to what we can achieve. It is our level of ambition that determine our future together.
Thank you.
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Action on trade and inclusivity to benefit all Commonwealth citizens
UK Prime Minister to use Commonwealth Summit to boost trade, economic growth and opportunities for the organisation’s young people
Already accounting for one fifth of global trade, with intra-Commonwealth trade valued at $560 billion and estimated to rise to $700 billion by 2020, the organisation holds vast potential for future growth. New initiatives announced on 15 April 2018 will help make this happen.
As Commonwealth partners, we have a lot to offer each other. And at home there is a gain by tapping into new markets and new talents.
Speaking ahead of the Heads of Government Meeting, the Prime Minister also called for the Commonwealth to be a beacon of free and inclusive trade at a time of fragile growth and continuing protectionism.
To help make the most of the Commonwealth’s potential, Prime Minister Theresa May will unveil new programmes to free up trade, boost women’s participation in business and to upskill young people whom make up two thirds of the Commonwealth’s 2.4 billion citizens.
The new SheTrades programme will offer £7 million in Commonwealth-wide support to increasing the presence of women-owned businesses to operate internationally from countries where being female is a professional barrier.
Indeed, it has been estimated that if women played the same role as men in labour markets, as much as $28 trillion could be added to global GDP by 2025.
The UK will work with the International Trade Centre (ITC) to deliver this, while also compiling the world’s first ‘Global Outlook’ on trade and gender in the Commonwealth. This will provide information needed to help Commonwealth countries implement more inclusive trade policy.
UK Prime Minister Theresa May said: “Our Commonwealth family already accounts for one-fifth of global trade, and we must continue to work together to build further upon this solid foundation by building on our existing trade links and establishing new ones.
“I firmly believe that regardless of which corner of the Commonwealth you are from, we all will benefit from the jobs created by doing so. Every one of those new jobs will mean another family seeing their hard work rewarded, and the spread of greater opportunity.
“The initiatives I have announced will see the Commonwealth being better able to respond to its youth, rise to the challenges they face and answer their ambitions for a better life. In taking decisive action today, we have begun a positive change which will echo through the generations.
“I am also proud that important action taken at this summit will mean that more women will be able to overcome barriers which keep them from participating in trade.”
The Prime Minister announced UK funding for a new Commonwealth Standards Network which helps harness the benefits of existing international standards. These will be a shared language for trading partners across the globe to enhance trust and create innovation.
This will boost intra-Commonwealth trade and support developing countries to produce goods and services to internationally recognised standards and access new markets. The effective use of existing international standards will reduce trade costs between members.
International common standards act as a common language that will help the UK forge new, and deepen existing trading relationships with our Commonwealth partners, which will bring benefit to both businesses and consumers in the UK.
While this action will help, to truly tap into the Commonwealth’s potential there needs to be dedicated programmes for its young. The issue of youth unemployment has been raised as a key issue at this year’s summit, which is why Theresa May will announce action to help.
Boosting trade will in turn boost jobs; tackling the youth unemployment which the Commonwealth knows is a real problem for its youngest citizens. Of the organisation’s 2.4 billion citizens, 60% are under 30.
And young people looking to move into the workplace will benefit from a new £3.4 million apprenticeship and training programme in the Commonwealth, which will help promote and share best practice across the Commonwealth.
Remarks by Prime Minister Theresa May at the 11th Commonwealth Business Forum
We are here today to discuss how best to make this a more prosperous Commonwealth for all, with contributions from leading figures in some of the world’s top businesses.
And this is just one of four such fora running this week ahead of the Commonwealth Heads of Government Meeting, giving a voice to hundreds of people who, in so many different ways, do so much to make our Commonwealth the amazing institution it is.
There is the People’s Forum, providing a platform for the Commonwealth’s incredible Civil Society groups. The Women’s Forum will look at ways of overcoming the challenges still faced by a great many women and girls. And, perhaps most important of all, there is the Commonwealth Youth Forum.
It is so important because, while the Commonwealth itself is a venerable institution, its citizens are much younger: almost two thirds are under the age of 30.
The young people of today are the Commonwealth of tomorrow, its business leaders, its innovators, its heads of government.
They have incredible potential, and we as a Commonwealth have a duty to help them reach it. That is why I have put youth at the heart of this week’s agenda, and why I began this morning by meeting with some of the Youth Forum’s delegates.
As we talked about their ideas and aspirations, about their vision for the future of the Commonwealth, I was struck by the vital role that businesses like yours have in tackling their concerns and giving substance to their ambitions.
They called for cleaner oceans and greater sustainability.
You can help deliver that by changing business practices and creating innovative new products and solutions. They called for action on youth unemployment.
You, as entrepreneurs and business leaders, create the jobs and opportunities our young people need and, by driving our economies, you fund the schools and colleges that equip them with the skills they need.
And the members of the Youth Forum called for an inclusive Commonwealth where greater prosperity is enjoyed by everyone.
That is something that simply cannot be achieved without strong, successful businesses. Because the best way to raise living standards for all is through economic growth based on free enterprise operating in inclusive, fair and open rules-based markets.
A key part of that, one that has become more important in the years since the Commonwealth was founded, is international trade – and it is an area in which the Commonwealth is flourishing.
The 2018 Commonwealth Trade Review predicted that trade between member states will be worth $700 billion by 2020. Here in the UK, for example, the value of our exports to fellow members is roughly double what it was 20 years ago.
Yet risks remain. Global growth is fragile. The challenges posed by protectionism are all too clear. And the world economy is changing, as new technology creates new jobs in some industries while supplanting them in others.
If Commonwealth businesses are to flourish in such times, if we are to deliver and secure the prosperous future our young people want and deserve, then the Commonwealth and national governments must not be afraid to act.
Because although the system of international commerce has done much good for the world, it can always be improved. Playing fields can be levelled, barriers removed, the benefits opened up to all.
So while we should be unapologetic in our support for free and inclusive trade, we should also work hand in hand with businesses to make it more efficient and effective, for example by supporting the use of international standards.
Shared standards have huge potential to stimulate trade.
They create a common language for trading partners across the globe, enhance trust in supply chains and stimulate innovation.
Greater use of these international standards across the Commonwealth will reduce the costs of trade between members, as well as with partners beyond the Commonwealth, for greater global benefit.
That is why the UK will be funding an all-new Commonwealth Standards Network, which will support developing countries in particular to better meet existing international standards.
The network will provide a significant opportunity for national standards experts to collaborate and share best practice.
And it will empower developing countries to have a stronger voice in the international standards community – something that has benefits on a global scale.
We will also be funding a Trade Facilitation Programme, supporting and providing technical assistance to selected Commonwealth countries in implementing the World Trade Organisation’s Trade Facilitation Agreement. Full implementation of the WTO agreement is estimated to reduce trade costs by up to 16 per cent for the less-developed countries.
It will cut the average time needed to import goods by 47 per cent, and the time taken to export by as much as 91 per cent, a huge boost for businesses across the Commonwealth.
But no amount of action on these fronts will truly be successful if half the Commonwealth’s citizens continue to face significant barriers to participation in the economy.
If our family of nations is to realise its full potential, then we must take action to boost women’s access to economic opportunity, and empower them to create and build their own businesses.
Many members have already signed up to the Buenos Aires Declaration on Trade and Women’s Economic Empowerment, which seeks to remove barriers to, and support, the participation of women in trade.
It is an impressive start, but I believe we can go further.
So, over the next two years, the UK will work with the International Trade Centre to deliver a new programme: SheTrades Commonwealth.
SheTrades will offer Commonwealth-wide support to help countries break down gender barriers in international trade.
It will provide a forum for member states to work collectively and share best practice.
And will compile the data needed to identify what works and track progress over time.
The programme will also deliver targeted interventions in a number of countries, providing training for women entrepreneurs, connecting them to market and investment opportunities, and helping firms overcome barriers to engaging with women-owned businesses.
Boosting women’s participation is the right thing to do, but business equality is not just about doing what is right – there are real economic benefits.
It has been estimated that if women played the same role as men in labour markets, as much as $28 trillion could be added to global GDP by 2025.
If Commonwealth members are not giving women an equal opportunity to succeed in business and in trade, they are trying to take on some of the biggest economies in the world with one hand tied behind their backs.
That will not change overnight. But SheTrades represents an important step in the right direction – one that, like the other initiatives I have talked about today, will deliver benefits across the Commonwealth and beyond.
When we all work to the same standards, when we break down barriers to trade and when we empower women to take their rightful place in the economy, the benefits are felt not just by countries and individuals involved.
Freer, easier trade means stronger economies, more jobs, more choice and lower prices – and that is true here in the UK, across the Commonwealth and around the world.
With its unique scope and global voice, such a Commonwealth can set a powerful example to the world, one that demonstrates and underlines the importance of protecting free trade and the rules-based international order.
Today’s initiatives are an example of what can be done to make that happen, of how governments can lay the groundwork for growth. But you in business also have a vital role to play.
The discussions here will feed into the full summit, so I hope you take the chance to share ideas and insights, to identify new challenges and new opportunities, to highlight where Commonwealth governments can step up and do more and even where, perhaps, we should step back and do a little less.
The Commonwealth has never just been about heads of state and government.
It has always been an organisation in which people and businesses from around the world can come together and work together to improve all our lives.
This is your forum, and this is your Commonwealth.
So let us make it an organisation that works for all of us, and shape a future of which we can all be proud.
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Commonwealth Business Forum Banquet: Keynote address by President Cyril Ramaphosa
London, 17 April 2018
More than 20 years ago, Nelson Mandela asked me to come to attend the Commonwealth Business Forum and today I am overjoyed once again to be here and the privilege and the honour is doubly enhanced because this year we celebrate 100 years since Nelson Mandela’s birth.
He would have been 100 years old this year on the 18th of July. This is a year of great remembrance for us as South Africans as we remember the father of our nation and a global icon.
Just over this past weekend we buried his wife Winnie Mandela. There was a great outpouring of grief and sorrow in our country and indeed in a number of countries as we buried her. But there was also great recognition for the role that she played in the struggle as she was subjected to detention without trial in jail, to banishment, to torture, to separation from her children and her husband just because she was Nelson Mandela’s wife and also because she was a strong leader in her own right.
If there was ever a woman who suffered immensely in our country because of our struggle it was Winnie Mandela. But she was strong enough to say even as they subjected her to great torture and all the suffering she endured as he went to prison:
“They think because they have put my husband on an island that he will be forgotten, they are wrong, the harder they try to silence him the louder I will become.”
And indeed, she became the loudest advocate for his release and she kept his name alive and this past weekend the whole nation thanked her for the contribution that she made to our struggle.
There are not many countries that have had the great fortune and benefit of having a married couple contribute so much to the future of their country as we did have the fortune of having Nelson Mandela and Winnie Mandela and we said may her soul rest in peace.
Coming here once again to the Business Forum, for me it is a journey down memory lane, for me it has made me remember Nelson Mandela keenly in the wake what has happened in our struggle.
I was able to share a few memories, this morning, with the Queen as she too fondly remembered Nelson Mandela and gave me a framed letter that he wrote her in 1994 as South Africa was readmitted to the Commonwealth. She and Nelson Mandela had a rather special relationship.
As Heads of Government, we are meeting in London to chart a course towards a common future for the 2.4 billion citizens we collectively represent.
For us, the Commonwealth provides a platform to forge common approaches to matters of global importance, underpinned by a commitment to democracy, human rights, good governance and prosperity for all.
It is also a platform to promote trade, investment and the exchange of skills and knowledge between countries.
As the Commonwealth Business Forum demonstrates, the Commonwealth is also a valuable forum to promote linkages between companies and business organisations from around the world.
When I used to attend the Commonwealth Business Forums then we used to say this was a place where you moved from contact to contract as a business person.
I hope it still has that great alloy to it, that great potential where you are able to do real good business deals.
For I as the President of South Africa I am here to do good business deals to attract investment to South Africa and indeed to Africa our continent.
Most Commonwealth countries have historical trade and investment ties, similar legal systems and forms of government, and a common language of commerce.
This provides advantageous conditions for greater investment and trade across the Commonwealth.
It is our responsibility, as government and business leaders alike, in the interests of shared prosperity and sustainable economic development, to make effective use of these advantages.
Since its return to the Commonwealth in 1994, South Africa has worked together with its fellow members to promote the value, relevance and effectiveness of the association.
We have encouraged businesses in our country to reach out to their Commonwealth counterparts across the globe to forger closer ties and create avenues for greater trade and investment.
It is significant that the majority of Commonwealth members are developing countries, which experience similar social and economic challenges, including poverty, inequality and under-development.
Many of these country face infrastructure shortages, have limited manufacturing capacity and often have poor educational outcomes.
The Commonwealth has a critical role to play in forging common responses to these challenges – in forging a common future.
Through the Commonwealth, we need to develop approaches to some of the most important global developments of our time.
We need to grapple with the impact the fourth industrial revolution is likely to have on our economies – many of which are already vulnerable to external shocks – and our people – many of whom do not have the skills required in a rapidly changing workplace.
The challenges and opportunities of the fourth industrial revolution should feature prominently on the agenda of the Commonwealth.
In responding to the challenges of technological change, we need as the Commonwealth to focus greater attention on the development of our human potential.
Just as the machine becomes ever more capable of performing tasks that only humans could previously undertake, there is an ever greater need for people to expand their knowledge and acquire new skills.
Many Commonwealth countries have young populations, with the potential to significantly increase economic productivity.
The Commonwealth should assist these countries in redesigning their education systems to ensure equitable access to quality education that prepares young people for the new economy.
In working towards a common future, we also need to consider the potential effects – both negative and positive – of the United Kingdom’s withdrawal from the European Union.
As both government and business leaders, we need to be having a serious discussion about what this means for the members of the Commonwealth.
What are the risks, and where are the opportunities?
These are questions to which we should seek answers together because that is the way of the Commonwealth.
Our experience on the African continent confirms that the most effective way of addressing challenges of economic growth and social development is through cooperation across borders.
This approach lies at the heart of the efforts to promote greater economic integration across the continent.
Africa achieved a milestone last month, when the continent’s leaders met in Kigali under the auspices of the African Union to agree on the establishment of an African Continental Free Trade Area.
The establishment of the free trade area in Africa will revolutionise economic activity on the continent, enabling the transfer of goods, services, skills and technology, and access to a market of over a billion people.
However, the creation of a free trade area alone it is not enough.
It needs to be accompanied by the development of the infrastructure that is going to carry these goods and generate the power that is going to enable their production.
It needs to be accompanied by investments in universities, schools, hospitals and clinics, communication technology and water reticulation.
For South Africa, continental integration is fundamental to the advancement of our national agenda.
It is only through greater investment and trade between African countries that we will be able to address our own challenges of poverty, inequality and unemployment.
South Africa has entered a new era of confidence and hope.
Our people are working together towards a common future.
After several years of poor growth, limited investment and constrained public finances, the South African economy is starting to show signs of revival.
This is taking place alongside a process of political renewal, which aims to restore the credibility of our public institutions, tackle corruption and wastage and strengthen the capacity of the state.
This week we announced an 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.
I have appointed four investment envoys to go right across the world, to go and campaign for investments for our country because once again South Africa is truly open for investment.
We expect that investors from other Commonwealth countries will be prominent among those participating at the conference – and that it will include several of the people attending the Commonwealth Business Forum.
The South African government is working alongside its social partners in business, labour and civil society to build a new and inclusive growth path for South Africa.
We are improving the investment environment by, among other things, ensuring policy certainty and consistency, improving the performance of state owned enterprises and consolidating fiscal debt.
As it embarks on this new era of renewal, South Africa is determined to be a meaningful partner in the regeneration of the African continent.
It is determined to play its part in strengthening the Commonwealth as an instrument of growth, development and good governance.
We are certain that by strengthening trade ties, by significantly increasing the levels of foreign direct investment and by working together to develop our economic capabilities, the citizens of our countries will indeed achieve inclusive and sustained prosperity.
We will indeed build a common future for all our people.
I thank you.
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Exploring Malawi’s export potential
Regional integration is the key to Malawi’s trade success, according to a new ITC report that uncovers the country’s greatest untapped export potential in agro-processing.
This report is a roadmap for Malawian exporters and policymakers to identify higher value-added products and markets with growth potential, as well as giving guidance to realize these opportunities and overcoming production challenges.
Executive summary
Over the course of the past 15 years, there has been a marked slowdown in the growth of Malawi’s major traditional exports, such as sugar, tea and groundnuts. This has been accompanied by strong growth in imports, creating an overall trade imbalance.
The country’s trade also tends to be concentrated in a few markets and products. The 2014 update of the Diagnostic Trade Integration Study concluded that a lack of product diversification resulted in Malawi’s inability to plug into regional or global value chains. In response to these challenges, the country’s Second Growth and Development Strategy aims at expanding and diversifying exports.
This paper draws ITC data, customized methodologies for product and market prioritization, desk research, and consultations with local stakeholders to identify products that could help Malawi achieve the following three objectives:
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Expansion of existing exports;
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Diversification of the export bundle;
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Identification of possibilities for adding value to existing export products.
The paper’s findings highlight the importance of regional integration for Malawi’s trade development and export growth. Its analysis demonstrates that most of the potential for the country’s export growth and diversification lies in the Southern African Development Community (SADC) region.
The paper also presents a new analysis on opportunities for upgrading to transformed products, taking into account the existing export structure and available inputs. It reviews the current trade challenges that Malawi faces and provides guidance on targeted avenues for enhancing export growth, diversification and product upgrading by moving towards higher value added products within a value chain.
Finally, it identifies a number of promising export products for the country, including raw cane sugar, macadamia nuts, black tea, eggs, oil products, groundnuts and various legumes.
These are the key findings:
(i) The future of Malawi’s trade performance hinges on its effective integration within the region.
SADC is the natural market for Malawian exporters where 39% of the country’s untapped export potential ($154.4 million) lies. Realizing these opportunities should help create a solid export basis for the country while also enabling to acquire the experience needed to reach more distant markets.
(ii) Untapped export opportunities in the SADC region comprise a mix of Malawi’s traditional and novel export sectors.
Among traditional exports, raw cane sugar, black fermented tea, groundnuts, maize seeds for sowing, dried peas, and wood-related products offer room for export growth, ranging from $30.6 million to $3.7 million. Among non-traditional exports, Malawi recently increased its exports of chicken eggs to Mozambique dramatically (353% annual growth between 2011 and 2015), a performance that opens the door to further regional opportunities valued at $29.7 million for chicken eggs. Plastic products also have an unrealized potential for intraregional trade, amounting to $8.9 million.
(iii) Regional markets will be at the heart of future competitiveness.
Malawian exporters remain generally competitive vis-à-vis other suppliers in the regional market. Other SADC countries offer a natural testing ground for diversification opportunities, in particular for processed products based on raw materials currently exported. The development of an oil processing industry seems to be the most natural path for the country’s industrial development.
Exports of wooden furniture constitute yet another opportunity for building on the export performance of key inputs, such as fibreboards. Other diversification opportunities in the sugar and poultry sectors could lead to exports of cane molasses, refined sugar, and fresh and frozen poultry products. In addition, the country’s climate conditions appear suitable for diversification of production into palm oil tree and sunflower seed.
(iv) Export competitiveness in international markets needs to be sustained.
Some Malawian agricultural products, such as macadamia nuts (shelled and in shells), dried shelled common peas, chickpeas, and raw cane sugar, are already reaching overseas markets. This presence allows exporters to acquire specific market knowledge that could be useful also for the exporters of other products wishing to expand their sales internationally. Cashew nuts and frozen common peas seem to be promising options for market diversification.
(v) A coherent framework of domestic and sectoral policies is needed for realizing opportunities and overcoming production challenges.
Ensuring widespread access to finance for national producers, reducing transport costs through improved connectivity to regional markets, and implementing an attractive and effective taxation system are overarching policies that will have a positive impact on the general business environment.
A business-friendly environment is also important for attracting investment and increasing competition in the Malawian economy. However, more coordination between public and private stakeholders would help increase the impact of sectoral policies along the production chain (farmers, processors, exporters).
Download the full paper on the ITC website.
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WTO Members submit proposals aimed at advancing exploratory e-commerce work
Over the past few weeks, a host of submissions have been put forward by WTO members as part of exploratory work to support future talks among interested parties on the trade-related aspects of e-commerce.
This preparatory process builds on the “Joint Statement on Electronic Commerce,” signed by a diverse group of 71 members at the Eleventh WTO Ministerial Conference (MC11) last December in Buenos Aires, Argentina.
“[We] reaffirm the importance of global electronic commerce and the opportunities it creates for inclusive trade and development. We share the goal of advancing electronic commerce work in the WTO in order to better harness these opportunities,” members said in the joint statement last year.
“We also recognise the important role of the WTO in promoting open, transparent, non-discriminatory, and predictable regulatory environments in facilitating electronic commerce,” the statement continued.
The new proposals, tabled by Argentina, Colombia, and Costa Rica; New Zealand; Brazil; Japan (two communications); the United States; Singapore; Japan; Russia; and Chinese Taipei seek to organise exploratory work and identify potential elements that could form the basis of a future agreement.
The submissions show indications of potential overlapping interest in exploring several specific areas, including market access commitments, trade facilitation, consumer protection, and data flows. The coalition working on the next steps for the joint statement will reconvene next month and again in June, followed by a stocktaking exercise in July, sources said.
Discussing rationale, vision
Various submissions underlined the importance of developing new rules in this area, such as how it could demonstrate the WTO’s ability to adapt to the technological changes reshaping the global economic landscape.
Argentina, Colombia, and Costa Rica together emphasised that progress on the e-commerce agenda would represent a “milestone on the road towards reviving the negotiating function of the WTO.”
Japan noted that the present WTO framework was “developed before the technological evolution of the Internet” and “may not fully take into account the implications of the latest technologies,” emphasising the need to make WTO obligations more relevant to the digital economy.
“Achieving consensus on such provisions would also demonstrate the WTO's ability to respond to transformations in the global economy,” the US communication stated.
Various submissions also set out to define the role of existing WTO disciplines that apply to e-commerce, with many noting that these should serve as the point of departure. Some, such as Japan, New Zealand, and Singapore, also suggested that it would be valuable to draw on lessons learned from free trade agreements.
New Zealand suggested that discussions draw on existing resources under the WTO’s 1998 E-Commerce Work Programme, urging members not to duplicate the work already accomplished but instead to use this new exploratory work to focus on specific policy issues that can be addressed through potential trade rules.
Argentina, Colombia, and Costa Rica proposed clarifying existing disciplines and establishing new rules only where necessary to address new developments or gaps in the system.
The communication from Russia divided e-commerce issues into matters that fall under the WTO legal framework but require further clarification and those that are not covered by the existing WTO rules but concern e-commerce. The work structure proposed by Russia prioritised the examination of gaps in existing WTO agreements in relation to barriers to e-commerce as a first step to understanding the potential gains of a future agreement.
“We suggest that the future discussions cover all aspects of e-commerce without splitting topics on e-commerce for separate discussions,” says Russia’s proposal.
The joint submission from Argentina, Colombia, and Costa Rica, also underlined the importance of a “coherent negotiating agenda” and a “holistic approach” when structuring exploratory work given the complexity and cross-cutting nature of e-commerce.
Various submissions also referred to the importance of highlighting the development dimension in these discussions, and thus help ensure the maximum contribution of new e-commerce rules to inclusive growth. This commitment is enshrined in the text of the joint statement, which says that signatories “recognise the particular opportunities and challenges faced by developing countries, especially [least developed countries], as well as by micro, small and medium-sized enterprises, in relation to electronic commerce.”
Brazil highlights the promotion of the participation of women as consumers and traders in e-commerce as a crucial aspect of any outcome on e-commerce in the WTO, and emphasises the imperative of addressing challenges to small businesses. New Zealand also noted the significance of e-commerce for women, micro, small, and medium enterprises, and rural communities.
The Brazilian non-paper further underlines development as a core and “cross-cutting” element in exploratory work, calling for a dialogue on the challenges and opportunities faced by developing countries with regard to e-commerce and in-depth needs assessment.
The communication proposes a flexible approach allowing developing and least developed country (LDC) members to choose which components they are prepared to consider in future talks, which could lead to the creation of tiered timetables for the implementation of specific components.
“The flexible combination of different outcomes might ensure a level of ambition that is tailor-made to each developing and least-developed member, without necessarily reducing the overall level of ambition on electronic commerce negotiation as a whole,” it says.
The communication from Argentina, Colombia, and Costa Rica underscores the need for “flexibility for developing countries in binding market opening and undertaking new obligations on regulatory issues.” It also suggests exploring potential synergies with the Aid for Trade initiative or drawing on the experience of the staggered implementation schedules of the WTO’s Trade Facilitation Agreement (TFA).
Several communications reaffirm that negotiations must stay open to all members in line with the joint statement, including the proposal by Argentina, Colombia, and Costa Rica, as well as submissions from New Zealand and Russia, respectively.
“We are convinced that the success of the above-mentioned exploratory work depends on the active participation of all WTO members, without which the elaboration of universal rules on effective regulation on e-commerce issues at the international level is not deemed possible,” reads the Russian communication. “We therefore encourage WTO members that signed the joint statement to put in their best efforts to involve as many members into the exploratory work as possible.”
Market access, trade facilitation
Many countries included market accessibility and improved market access commitments for e-commerce-related sectors of goods and services trade as part of the agenda for exploratory work, including Argentina, Colombia and Costa Rica; Brazil; the US; Japan; Chinese Taipei; and Singapore.
For example, Singapore focused on market access for goods and services as a means to promote infrastructure development in developing countries and overcome infrastructure gaps obstructing the widespread adoption of e-commerce in LDCs.
Members including the US, Singapore, and New Zealand also noted the value of the current practice of not imposing customs duties on electronic transmissions, with Singapore and New Zealand suggesting that this could be made permanent in order to create a more predictable business environment for business and consumers.
“The most important value that the Internet brings to international trade is that suppliers are enabled to reach potential overseas customers direct across great geographical distances and strict political or state boundaries instead of relying solely on physical contacts, and consequently to gain access to the markets,” Chinese Taipei’s communication states. “It is our belief that such measures should be disciplined and restrained, otherwise the primary merit of improving market accessibility of electronic commerce vanishes.”
Meanwhile, Brazil said e-commerce facilitation “could be readily translated into rulemaking provisions,” citing the issues’ “technical, specific and rather uncontroversial nature.”
In guiding efforts to create an enabling environment for e-commerce, members noted the key role of interoperability between domestic regulatory frameworks to eliminate hurdles for cross-border business operators. Japan in particular pointed to a role for the WTO in promoting intergovernmental activities at the regional and international levels in order to encourage harmonisation in regulations.
Various submissions also referred to the need to make administrative documents available electronically, known as paperless trading, in order to lower the costs of participating in e-commerce for small and medium-sized enterprises.
Members including New Zealand, Brazil, and Japan also referred to electronic authentication methods and/or access to online payment solutions as a means to enable online transactions. Brazil and Singapore encouraged members to ensure that their legal systems permit contracts to be concluded electronically.
Several proposals referred to other measures to improve trust and foster a secure environment, including towards the protection of online consumers from deceptive business practices; safeguarding personal information of e-commerce users; identifying threats to cybersecurity; and addressing spam and unsolicited electronic messages.
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Startup and innovation hub leaders are going to shape digital policy for the African Union
Leaders in several African tech ecosystems are living by the words of Charles-Guillaume Étienne, the 19th century French playwright: “If you want something done right, do it yourself.”
Since tech and innovation hubs began popping up across the continent over the last decade, an obvious gap has been the absence of enabling digital and business policy. While a few countries, like Tunisia which has just passed a Startup Act”, are making strides, most African governments still appear uncertain about how to boost local tech ecosystems. In their stead, local players in the tech space are taking the lead.
i4Policy, a pan-African group focused on digital policy in Africa, is leading hackathons aimed at getting ecosystem insiders to discuss policy options with government representatives. The big hope is that the policy recommendations are formally adopted. It’s a tactic that appears to have worked in Rwanda where the ministry of commerce is adopting a policy document from a hackathon held in Kigali. Similar hackathons have now been held in Lagos, Abuja and Kumasi.
The next stop is the African Union (AU) as the body’s commission for trade is convening the “largest-ever gathering of community innovation hubs” on the continent next month in Kigali in partnership with i4Policy.
This will take place on May 6-7 and on the sidelines of the Transform Africa Summit (May 8-9). All participants of the hub gathering will be invited to participate in the Transform Africa program, and several hub manager participants will have the opportunity to speak before the Summit in panel discussions.
To ensure widespread representation, i4Policy issued a call for applications from hub representatives across the continent and hopes to have at least 75 startup and innovation hubs represented. Leading hubs including Nigeria’s Co-Creation Hub, Ghana’s Kumasi Hive and Rwanda’s Impact Hub have already confirmed participation. Policy recommendations will be passed on to the AU’s Head of States Summit.
Getting diverse input to discuss digital and startup policy on a continental level is crucial given that tech communities have become more dispersed across the continent and face different challenges. Last month, GSMA, the global telecoms industry body, pegged the number of active incubators, accelerators, and co-working spaces in Africa at over 400.
Over 100 of those hubs opened in the past two years sprouting in Senegal, Ghana, Uganda, Zimbabwe and Côte d’Ivoire. Within major markets like Kenya and Nigeria, hubs are also popping up outside capital cities.
Allowing the people closest to technology to be involved in digital policy formation is necessary for proper representation, according to organizers. It’s an approach that’s in contrast to last year when key players across startup communities on the continent led a #NotOurManifesto campaign to protest being sidelined in the process of developing “Start4Africa manifesto” – a document prepared by Startup Europe and presented at the EU-Africa Summit of Heads of States and Government.
tralac’s Daily News Selection
Next week, in Libreville, Gabon: Building Africa’s negotiating capacity for improved terms of engagement with the rest of the world (23-27 April)
Africa’s Pulse: Boosting access to electricity in Africa through innovation, better regulation (World Bank)
With Sub-Saharan Africa’s household electrification rate at the lowest in the world, boosting access to electricity is a key development issue for the region, according to Africa’s Pulse, a World Bank bi-annual analysis of the state of African economies. The latest issue of the report (pdf) includes a section exploring the role of innovation in accelerating electrification in the region. “Access to electricity will lift productivity within and across sectors,” said Albert G. Zeufack, World Bank chief economist for the Africa region. “African governments must fully embrace technology and leverage innovation to ensure quality, affordable and sustainable electricity.”
The region’s household electrification rate averaged 42% in 2016. There is wide variation in electricity access across countries, with some fragile countries having rates less than 10%. There are also huge disparities in electricity access between rural and urban households; the report notes access rates among urban households are about 71%, compared to 22% among rural households. Aside from low access, the region is also facing issues such as low consumption, low reliability, high per kilowatt cost, and utilities running at loss.
African Ministers of Finance, Economy and Integration call for more efficient, transparent institutions to fight corruption, illicit financial flows (AU)
The 2nd AU Specialized Technical Committee meeting emphasized that in order to accompany the AfCFTA and speak of African integration, certain tools such as the African Monetary Fund (whose host agreement was recently signed with the Government of Cameroon), and the African Investment Bank will play a major role in the operationalization of the continental free trade area through the elimination of trade restrictions, increased monetary integration, financing of development projects, and development of multilateral payment systems for current transactions on the continent. Also, member states need to strengthen transparency in the public sectors, in management and budgetary control as well as transparency in the financial system; the Commission needs to call upon Member States that have yet to sign and ratify the protocol and statutes of the African Financial Institutions to do so; and finally, AUC needs to request Member States to develop policies to mobilize domestic resources and curb illicit financial flows.
Enhancing COMESA’s regional integration programme: Lusaka workshop update
Participants (10-13 April) considered the results of the four sets of interventions and related studies. Experts from CESO Development Consultants were tasked to carry out various studies on support to implementation of the COMESA Trade in Services Programme. They included the review of COMESA rules of origin, including the design of an electronic certificate of origin; Study on COMESA member states positioning to benefit from the emerging economies; and mainstreaming gender/women and youth in COMESA’s regional trade integration. The project, “Targeted support to the COMESA Secretariat to enhance its regional trade integration agenda’ was launched in May 2017 with financial support from the European Union through Tradecom II.
A step forward for free trade in the ECCAS sub-region (UNECA)
The UNECA is launching a campaign to have all countries of the ECCAS sub-regional bloc operationalize the ECCAS Preferential Tariff – one of the instruments for easing trade in the zone. This is within the framework of the ECCAS Free Trade Area which should lead to the full integration of the countries of this zone into the AfCFTA – a market that promises to boost the economies of the countries of the entire continent. The first step in the process involves contributing to the establishment and operationalization of national committees responsible for examining applications for approval of made-in-Central-Africa finished products to be included in Preferential Tariff grid of the Community, in accordance with the clauses establishing the ECCAS Free Trade Area. To date, only four countries out of the 11 ECCAS member States have set up such committees.
Seychelles begins domestic consultations on AfCFTA ratification (Seychelles Nation)
The government of Seychelles has set up a committee to conduct internal consultations with key stakeholders regarding the AfCFTA. The committee held its first meeting in Mahe with various agencies and organizations, including the Central Bank of Seychelles, department of Foreign Affairs, the Seychelles Chamber of Commerce and Industry, the National Assembly of Seychelles. The meeting was led by the local chief negotiator on commerce, Charlie Morin. Seychelles was among the 44 out of the 55 AU member states that signed the consolidated text of the AfCFTA agreement. To become legal, the agreement first needs to be ratified by the National Assembly of Seychelles.
Air travel and Africa’s economic integration (BusinessDay)
It is perhaps ironic that Nigeria, few weeks after it rejected to sign the AfCTA agreement in Kigali, will be hosting the 59th Airports Council International Africa Board and Committees Meetings and Regional Conference and Exhibition. It is ironic because after staying out of an Africa-wide agreement to free trade, Nigeria is hosting 47 African countries that belong to the trade body for the world’s airports that promotes greater economic integration amongst African economies. Unlike our absence in Kigali, the conference, holding over a six-day period in Lagos, provides a good platform to re- engage Africa on a broader agenda for Nigeria’s relations with the continent and the global economy in general. It is also a good platform to argue that trade in goods and services, and even immigration, which drive aviation business and economic growth, is never a zero-sum game, but the platform on which advanced countries have made economic progress, improved standards of living, and reduced poverty. [The author, Dr Ogho Okiti, is CEO of Time Economics, an economics consulting firm, based in Abuja], [Air Tanzania plans regional flights to Kenya, rest of EAC]
COMESA to collaborate with the China-Africa Business Council
COMESA has signed an MoU with the China-Africa Business Council to provide a framework for promoting economic cooperation between the two organizations. Secretary General Sindiso Ngwenya and CABC Executive Secretary, Mr Bai Xiaofeng, signed the MoU in Hangzhou on 9 March. The agreement seeks to promote and facilitate trade, investment and encourage industrial development, research, technology transfer, skills development, financial services, shipping services and logistics between the two parties. [A preview of China Trade Week: 13-15 June, Nairobi]
Nzimande touts the idea of a Sanral for SADC region (Fin24)
A road agency for SADC could help support the development of infrastructure in the region as well as economic integration, Transport Minister Blade Nzimande suggested. Nzimande briefed Parliament’s portfolio committee on transport on his department’s annual performance plans for the 2018/19 year. In his closing remarks Nzimande raised the possibility of a Sanral for the SADC, but did not get into too much detail as not to “excite” the media, as he put it. He said that the department is considering its role and initiatives it can implement in this respect. [Bid to block Beitbridge border hits brick wall]
Zambia, Zimbabwe to expand Zambezi River Authority board, Council of Ministers (The Chronicle)
Zambia and Zimbabwe have resolved to expand the Zambezi River Authority board as well as the Council of Ministers as both countries show commitment to kick-start implementation of the Batoka Gorge Hydro-Electric Scheme. Speaking in Victoria Falls recently, ZRA board secretary corporate services Mr Peter Kapinga said a resolution had been passed to include Ministers of Water and their permanent secretaries for the Council of Ministers and board respectively. Viewed as the panacea to electricity problems facing Zimbabwe and Zambia, the Batoka Gorge project will see two power stations being constructed to produce a combined 2 400MW to be shared by the two countries. The dam wall, to be located 54km downstream from Victoria Falls, will be 181 metres high.
Ethiopia courts foreigners for sugar project as army sidelined (Bloomberg)
Ethiopia’s government plans to hire foreign companies to help develop the country’s sugar industry, after canceling a military-industrial conglomerate’s contract on a key project. Prime Minister Abiy Ahmed, in office since April 2, has signaled he plans to reduce “favoritism” toward the security forces when awarding contracts and ensure development projects are “more inclusive for the people.” The state-run Ethiopia Sugar Corp. is looking for a new contractor to develop Tana Beles II in Ethiopia’s Amhara region, which has been hit by protests over the past two years by residents who say they’re being excluded from economic power.
What sells in e-commerce: new evidence from Asian LDCs (ITC)
Cross-border e-commerce can help least developed countries to become more competitive and diversify their exports – and this is especially true for Asia-Pacific, the most dynamic region in global e-commerce. To capture that potential, small businesses in these countries need more market intelligence. This paper (pdf) fills that gap, using market data from Alibaba.com to identify which products from five Asian LDCs – Bangladesh, Cambodia, Lao People’s Democratic Republic, Myanmar and Nepal – can generate the most demand abroad.
UNCTAD’s E-commerce Week: Regulation must steer not stifle innovation. Protecting consumers without stifling innovation will require governments to strike a delicate balance, UNCTAD Secretary-General Mukhisa Kituyi said at the week’s main event. “The honeymoon where there was a blind embrace of technology as a panacea of human problems is over. As we learned from our very unquestioning embrace of unequal, flawed globalization, we are at a time, it is true, when we must ask ourselves challenging questions. How can we find sufficient balance between incentivizing innovators, players, to continue driving inclusion while not sacrificing the responsibility of regulators to keep away illegal commercialization of confidential and personal data, abuse of privacy rules? So this balancing act becomes our major challenge.” According to Nick Srnicek, a lecturer on the digital economy at Kings College in London, this makes digital platforms such as Facebook the new oil rig. The metaphor is fitting, he said, because they’re “designed basically to siphon off as much data as possible. The very nature of a platform business model is that it is an intermediary between a number of different groups. Facebook, for instance, positions itself as an intermediary between users, on one hand, and advertisers, developers – all sorts of different groups,” he said, adding that such a role puts it in a position to capture all the data from the interactions between those groups. [Digital skills, not connectivity, drive women’s empowerment, experts say; Fostering effective trade logistics in a digital world]
Mauritius to host SIDS Forum and Regional Preparatory Meeting (GoM)
Mauritius together with the UN will co-host the Small Island Developing States Global Business Network Private Sector Partnership Forum and a SIDS Regional Preparatory Meeting for the Africa, Indian Ocean, Mediterranean and South China Sea region (21-25 May). The Forum will forge collaboration among SIDS regional private sector organisations for a better exchange of experiences and best practices.
Today’s Quick Links: Rwanda: Government rolls out new Doing Business reforms Nigeria records steady improvements on ideal business environment: Minister Enelamah SADC opens a liaison office in the DRC ECOWAS summit adopts significant decisions to resolve the protracted political crisis in Guinea Bissau ECOSOCC Sectoral Clusters: Cairo meeting update Future of food: maximizing finance for development in agricultural value chains Fiscal adjustment in Latin America and the Caribbean: short-run pain, long-run gain? |
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Africa’s Pulse: Boosting access to electricity in Africa through innovation, better regulation
Economic growth in Africa rebounds, but not fast enough
Sub-Saharan Africa’s growth is projected to reach 3.1 percent in 2018, and to average 3.6 percent in 2019-20, says Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank, released today.
The growth forecasts are premised on expectations that oil and metals prices will remain stable, and that governments in the region will implement reforms to address macroeconomic imbalances and boost investment.
“Growth has rebounded in Sub-Saharan Africa, but not fast enough. We are still far from pre-crisis growth levels,” said Albert G. Zeufack, World Bank Chief Economist for the Africa Region. “African Governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth.”
The moderate pace of economic expansion reflects the gradual pick-up in growth in the region’s three largest economies, Nigeria, Angola and South Africa. Elsewhere, economic activity will pick up in some metals exporters, as mining production and investment rise. Among non-resource intensive countries, solid growth, supported by infrastructure investment, will continue in the West African Economic and Monetary Union (WAEMU), led by Côte d’Ivoire and Senegal.
Growth prospects have strengthened in most of East Africa, owing to improving agriculture sector growth following droughts and a rebound in private sector credit growth; in Ethiopia, growth will remain high, as government-led infrastructure investment continues.
“For many African countries, the economic recovery is vulnerable to fluctuations in commodity prices and production,” said Punam Chuhan-Pole, World Bank Lead Economist and the author of the report. “This underscores the need for countries to build resilience by pushing diversification strategies to the top of the policy agenda.”
Public debt relative to GDP is rising in the region, and the composition of debt has changed, as countries have shifted away from traditional concessional sources of financing toward more market-based ones. Higher debt burdens and the increasing exposure to market risks raise concerns about debt sustainability: 18 countries were classified at high-risk of debt distress in March 2018, compared with eight in 2013.
“By fully embracing technology and leveraging innovation, Africa can boost productivity across and within sectors, and accelerate growth,” said Zeufack.
This issue of Africa’s Pulse has a special focus on the role of innovation in accelerating electrification in Sub-Saharan Africa, and its implications of achieving inclusive economic growth and poverty reduction. With Sub-Saharan Africa’s household electrification rate at the lowest in the world, boosting access to electricity is a key development issue for the region.
The report finds that achieving universal electrification in Sub-Saharan Africa will require a combination of solutions involving the national grid, as well as “mini-grids” and “micro-grids” serving small concentrations of electricity users, and off-grid home-scale systems. Improving regulation of the electricity sector and better management of utilities remain key to success.
“Access to electricity will lift productivity within and across sectors,” said Zeufack. “African governments must fully embrace technology and leverage innovation to ensure quality, affordable and sustainable electricity.”
The region’s household electrification rate averaged 42% in 2016. There is wide variation in electricity access across countries, with some fragile countries having rates less than 10%. There are also huge disparities in electricity access between rural and urban households; the report notes access rates among urban households are about 71%, compared to 22% among rural households. Aside from low access, the region is also facing issues such as low consumption, low reliability, high per kilowatt cost, and utilities running at loss.
Leveraging technology and better governance to boost electrification
Substantial cost reductions from rapid technological improvements in home-scale solar power production offer opportunities to improve the lives of people without access to electricity in more lightly populated rural and remote areas of Sub-Saharan Africa, according to the Pulse. But home systems in themselves cannot do much to increase incomes and employment, the report says, given the limited quantities of electricity they provide compared with the electricity needed for most productive uses.
According to the analysis, mini-grids are a viable possibility for scaling up electricity availability in areas where grid extension is costly or can only be accomplished some ways into the future. Although there has been limited investment in mini-grids so far in Sub-Saharan Africa outside Tanzania, several other countries, including Nigeria and Rwanda, have been undertaking regulatory reforms to lower barriers to mini-grid investment.
The report notes that a major challenge for inducing private sector mini-grid investment is confidence with respect to cost recovery, and what happens to mini-grid assets when the grid begins to penetrate the service territory.
“Leapfrogging over the traditional stages of national grid-based electrification will require a combination of different systems to answer diverse needs,” said Chuhan-Pole. “Leveraging the private sector will be critical to scaling-up electrification.”
According to the report, improved governance of the electricity sector is a prerequisite, regardless of the technical configurations used to expanding access to electricity in Sub-Saharan Africa. Report recommendations include rationalizing electricity pricing, reducing regulatory barriers that limit private sector investment in grid or off-grid power production, making utility operations more efficient and transparent, and fostering more independent sector regulation.
This report was prepared by the Office of the Chief Economist for the Africa Region. by a team led by Punam Chuhan-Pole.
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AU Ministers call for more efficient and transparent African institutions and tax systems to fight against corruption and illicit financial flows in Africa
The Ministerial segment of the 2nd African Union (AU) Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration opened in Addis Ababa on Monday, 16 April 2018. The meeting was preceded by Expert Meetings from 12-14 April 2018.
In recognition of the negative impact of corruption and Illicit Financial Flows on the development of African countries, the African Union dedicated the year 2018 to the fight against corruption. In the same spirit, the STC discussed the theme “Mobilisation of domestic resources: fighting against corruption and Illicit Financial Flows”.
This conference is being held at a critical time for Africa. It must be recognized that Africa has an economic potential with a growth of real output strengthened and stabilized at 3.6% in 2017 compared to 2.2% in 2016. The latest outlook from the African Development Bank (AfDB) predicts an acceleration of continental growth which will culminate at 4.1% in 2018 and 2019. Growth is not inclusive enough in Africa.
In her opening remarks, the Commissioner for Social Affairs of the African Union Commission, H.E. Mrs Amira Elfadil, who delivered the opening remarks on behalf of H.E. Moussa Mahamat Faki, thanked all delegates in attendance and noted that “the holding of this meeting after the historic signature of the legal instruments establishing the Continental Free Trade Area (AfCFTA) is another step towards accelerating the implementation of Agenda 2063, our new strategy for stronger, inclusive and sustainable growth over the next five decades.”
Throughout the STC meeting, it has been recalled and emphasized that in order to accompany the AfCFTA and speak of African Integration, certain tools such as the African Monetary Fund, whose Host Agreement was recently signed with the Government of Cameroon, and the African Investment Bank will play a major role in the operationalization of the continental free trade area through the elimination of trade restrictions, increased monetary integration, financing of development projects, and development of multilateral payment systems for current transactions on the continent.
On his part, H.E. Ato Admasu Nebebe, State Minister of Finance and Economic Cooperation of Ethiopia, in his keynote speech, shared Ethiopia’s experience and lessons learned in their ongoing DRM initiatives and Fight against Corruption and Illicit Financial Flows.
Prof. Victor Harison, Commissioner for Economic Affairs, reiterated the Commission’s willingness to work in close cooperation with Member States, Regional Economic Communities (RECs) and the entire development community to define and implement the policies necessary for sustainable development in Africa, that is, economically efficient, sociably equitable and ecologically sustainable for development; and to contribute to mobilizing domestic resources necessary to the fight against corruption and illicit financial flows.
He underscored that these were not only the major causes of overreliance on Official Development Assistance (ODA), but also an impediment for the development of Africa and for the implementation of Agenda 2063.
Meanwhile, the STC Ministerial segment chaired by the State Minister of plan of the DRC, Prof. Modeste Bahati Lukwebo, included multiple panel discussions on the theme of the STC which was followed by a review and adoption of the report and recommendations of the Experts meeting to close out the activities of the STC.
In conclusion, Experts and Ministers present have recommended that in order to fight against corruption and illicit financial flows and mobilize sufficient financial resources on our continent, the AUC needs to call upon:
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Member States to implement strategies for more efficient and fair taxation systems, to establish more effective legal and regulatory frameworks and to strengthen the capacities of institutions involved in DRM and combating corruption and IFFs;
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the AU Chart on good governance and the AU Board on Corruption need to be reinforced and translated into facts and should take into consideration realities of each African country;
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Member States need to strengthen transparency in the public sectors, in management and budgetary control as well as transparency in the financial system;
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the Commission needs to call upon Member States that have yet to sign and ratify the protocol and statutes of the African Financial Institutions to do so; and finally,
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AUC needs to request Member States to develop policies to mobilize domestic resources and curb illicit financial flows.
The Report of the outcomes of the STC will be submitted for consideration at the AU Assembly of Heads of State and Government in June 2018.
A background paper on “Mobilization of Domestic Resources: Fighting against Corruption and Illicit Financial Flows” has been prepared by Dr Ligane J. Massamba Sène, Economic Affairs Department, Economic Policy and Research Division. Additional background material can be downloaded here.
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COMESA holds workshop to enhance regional integration programme
The final activity of a project that aims at contributing to COMESA’s overall goals of having sustainable economic development and poverty reduction in the region was held in Lusaka from 10th to 13th April 2018.
The project titled ‘Targeted Support to the COMESA Secretariat to Enhance its Regional Trade Integration Agenda’ was launched in May 2017 with financial support from the European Union through Tradecom II.
The objective of the event in Lusaka is to consider the results of the four sets of interventions and related studies and provide requisite training on inputs to the negotiations of the second tier of the named areas. The project goals are expected to be achieved through closer regional integration and increased participation in the global economy.
Experts from CESO Development Consultants were tasked to carry out various studies on support to implementation of the COMESA Trade in Services Programme. They included the review of COMESA Rules of Origin; Study on COMESA Member States Positioning to Benefit from the Emerging Economies; and Mainstreaming Gender / Women and Youth in COMESA’s regional trade integration.
TradeCom II had been requested for technical assistance to undertake analytical work that would enhance the region’s trade integration. The assistance sought was on: analytical work on trade in services covering the three additional priority services sectors of Business Services; energy services as well as construction and related engineering services and frameworks on Mutual Recognition Agreements as well as on Movement of Persons.
Others were, the review of the COMESA Rules of Origin, including the design of an electronic certificate of origin; developing a COMESA Strategy to engage the emerging economies; and mainstreaming gender and youth in regional integration.
During the meeting, Permanent Secretary in the Ministry of Commerce, Trade and Industry, Zambia, Mrs. Kayula Siame called on the participants to thoroughly interrogate the issues raised in the studies and provide the necessary comments and guidance that would assist the consultants to enrich the reports and make them more relevant.
Equally, the Director of Trade at COMESA Secretariat Dr Francis Mangeni called on the participants to objectively examine the outputs and provide further inputs that would guide the consultants as they finalized the reports.
A representative of the European Delegation to Zambia, Mr Joseph Silavwe indicated that the EU was following keenly on the studies. Further, EU appreciated the synergies with the programmes that itwas developing with COMESA under the EDF 11.
Ms Maura Nunziatini, from TradeCom II PMU, pointed out that TradeCom II was pleased to be part of the process and expected the study outputs to stand the test of time for years to come. The project was viewed as a best practice and was featured at a Knowledge Sharing event held in Brussels in February 2018.
Participants at the Lusaka meeting were drawn from Comoros, Eritrea, Ethiopia, Madagascar, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Zambia and Zimbabwe. The European Delegation in Zambia, Tradecom II Project Monetary Unit, FEMCOM and CUTS were also represented.
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Seychelles begins domestic consultations on AfCFTA
A national committee set up to discuss the Seychelles’ intention of joining the African Continental Free Trade Area (AfCFTA) held its first meeting recently.
The committee consists of various agencies and organisations concerned such as the Central Bank of Seychelles (CBS), department of Foreign Affairs, the Seychelles Chamber of Commerce and Industry (SCCI), the National Assembly of Seychelles and others.
The meeting, held at Liberty House, was led by the local chief negotiator on commerce, Charlie Morin, who said the committee was formed to assist the government so that Seychelles is prepared and has a national position when formal negotiations begins with the AU.
Seychelles was among the 44 out of the 55 African Union (AU) member states which signed the consolidated text of the AfCFTA agreement. To become legal, the agreement first needs to be ratified by the National Assembly of Seychelles.
The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union.
It will also expand intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation and instruments across the RECs (Regional Economic Communities) and across Africa in general.
The AfCFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources.
“Different ministries, organisations, private sectors have met so they can be informed on what the agreement is all about. They will deliberate on the works that other committees will do once they have been set up. They will also lead decisions and position of the government of Seychelles, through the department of Trade, while negotiating this agreement with the AU,” said Mr Morin.
AfCFTA is the biggest free trade agreement since the establishment of the World Trade Organisation (WTO).
The agreement is set to bring together 1.2 billion people with a combined gross domestic product (GDP) of more than $2 trillion. The draft agreement commits countries to removing tariffs on 90 percent of goods, with 10 percent 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. Eventually, free movement of people and even a single currency could become part of the free trade area. By creating a single continental market for goods and services, the member states of the African Union hope to boost trade between African countries.
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A step forward for free trade in the ECCAS sub-region
The United Nations Economic Commission for Africa (ECA) is launching a campaign to have all countries of the ECCAS sub-regional bloc operationalize the ECCAS Preferential Tariff (known for short in French as TP/CEEAC) – one of the instruments for easing trade in the zone.
This is within the framework of the ECCAS Free Trade Area which should lead to the full integration of the countries of this zone into the African Continental Free Trade Area (AfCFTA) – a market that promises to boost the economies of the countries of the entire continent.
With the guidance of the Director of the ECA Subregional Office for Central Africa, Mr. Antonio Pedro, and under the technical coordination of the Chief of Subregional Initiatives in Central Africa of that Office – Mr. Tidjani Chetima, activities are underway to accompany officials in charge of trade and customs issues as well as entrepreneurs and representatives of civil society in the countries of the sub-region in mastering the said Preferential Tariff to ensure its full implementation with a view to increasing intra-community trade.
The first step in the process involves contributing to the establishment and operationalization of national committees responsible for examining applications for approval of made-in-Central-Africa finished products to be included in Preferential Tariff grid of the Community, in accordance with the clauses establishing the ECCAS Free Trade Area. To date, only four countries out of the 11 ECCAS member States have set up such committees.
Through this campaign, therefore, ECA will train the relevant administrators and field workers as well as representatives of the private sector in these and other countries of the area.
In concrete terms, the Commission is designing the training content for public administrators and private sector operators in the procedures surrounding applying for, and approving finished products to benefit from the harmonized preferential tariff of Central Africa as a whole.
Thereafter, the Commission will conduct training workshops in eight countries of the ECCAS community (Cameroon, Central African Republic, Congo, Democratic Republic of Congo, Gabon, Equatorial Guinea, Chad and Sao Tome & Principe). ECA will also produce a guide for the preparation and submission of applications for accreditation to the preferential tariff grid.
This campaign is rolled out within the framework of the European Union’s support agreement signed with ECA for the harmonization of ECCAS-CEMAC trade policy instruments. It is in this context that ECA recently had a working session with the experts of the Technical Secretariat of the Steering Committee for the Rationalization of Regional Economic Communities (RECs) in Central Africa (COPIL/CER-AC), based in Yaoundé, Cameroon and coordinated by M Patrice Libong Badjan.
The experts of both the Technical Secretariat and ECA reiterated the urgent need to consolidate the Central African Free Trade Area by carrying out all the actions mentioned above to enable the subregion fit comfortably into the AfFCTA. They decided to maintain frank collaboration through regular consultations to consolidate and advance the issues of sub-regional integration in Central Africa.
Background
The 13th Conference of Heads of State and Government of ECCAS, held in Brazzaville in October 2007, had taken a decision calling on ECCAS and CEMAC to set up a Committee for the Rationalization of RECs in Central Africa (COPIL/CER-AC).
The Committee was to include the two main RECs in Central Africa, the African Union (AU), the ECA, and the African Development Bank (AfDB) in view of harmonizing the integration policies, programs and instruments of these two RECs to eventually lead to a single regional economic community in Central Africa.
Ever since, ECA’s Subregional Office for Central Africa has been making technical and financial contributions that have contributed to the progress of the sub-regional integration dossier, particularly the free movement of people and goods in the CEMAC zone, which should subsequently be extended to the whole of ECCAS.
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Regulation must steer not stifle innovation, UN e-commerce event hears
Governments must strike the right balance between pushing innovation in the digital economy and regulating a sector which has lost people’s trust
The internet is a powerful tool for development, and governments must not let the dark side of the digital economy overshadow the opportunities, global thought and business leaders have told UNCTAD’s E-Commerce Week.
Protecting consumers without stifling innovation will require governments to strike a delicate balance, UNCTAD Secretary-General Mukhisa Kituyi said at the week’s main event.
“The honeymoon where there was a blind embrace of technology as a panacea of human problems is over,” Dr. Kituyi said to a packed room in the Palais des Nations, the UN’s European Headquarters.
“As we learned from our very unquestioning embrace of unequal, flawed globalization, we are at a time, it is true, when we must ask ourselves challenging questions,” he said.
“How can we find sufficient balance between incentivizing innovators, players, to continue driving inclusion while not sacrificing the responsibility of regulators to keep away illegal commercialization of confidential and personal data, abuse of privacy rules?”
“So this balancing act becomes our major challenge,” he added.
Digital platforms are the new oil rig
Data has been called the new oil because it has overtaken petrol as the most traded commodity.
And according to Nick Srnicek, a lecturer on the digital economy at King’s College in London, this makes digital platforms such as Facebook the new oil rig.
The metaphor is fitting, he said, because they’re “designed basically to siphon off as much data as possible.”
“The very nature of a platform business model is that it is an intermediary between a number of different groups,” Mr. Srnicek said.
“Facebook, for instance, positions itself as an intermediary between users, on one hand, and advertisers, developers – all sorts of different groups,” he said, adding that such a role puts it in a position to capture all the data from the interactions between those groups.
Admitting to be the bearer of bad news, he said that platforms have several key problems – the most important being their tendency to monopolize and stifle competition.
Platforms lead to monopolies, he said, because of the network effect. The more people that use a platform, the more valuable it becomes. And this leads to a winner-takes-all effect.
“You may hate what Mark Zuckerberg is doing. You may be really worried about privacy issues. But if you’re going to join a social media network, it’s going to be Facebook because all your family and friends are already on it,” he said.
“That’s the power of network effect.”
Another serious problem is the dependency such platforms create.
“You have, for instance, journalism and media organizations who have completely redesigned their businesses to orient towards the Facebook newsfeed,” he said, adding that this leads to such companies cutting investigative reporting and prioritizing video.
“And this make them reliant upon Facebook as a way to get their news out,” he said.
But for him, the really worrying aspect is that platforms are invading the non-tech world.
“Uber’s a really good example,” he said. “Ten years ago, nobody would have thought taxi driving was a fascinating industry. Suddenly Uber has turned it into this fashionable, trendy industry that’s worth billions…because they’ve turned it into a platform.”
“We’re seeing this now in agriculture, we’re seeing it in manufacturing. We’re seeing this across the entire economy,” he added.
50% more profitable
But we must find a way to address the shortcomings of the digital economy without “slaying that same phenomenon that is going to create the world that we are aspiring to,” Dr. Kituyi said, recalling that e-commerce is a key tool for creating business opportunities in developing countries, and thus for fighting poverty.
In the world’s least developed countries, just 2% of business is currently done online, compared to 70% in the European Union, for example. Getting more businesses in these countries to go digital would connect them to opportunities beyond their local marketplace, he said.
Dinesh Agarwal, founder and CEO of IndiaMART.com, India’s largest online marketplace, agreed with the UNCTAD Secretary-General, saying that e-commerce platforms played a critical development role in his country, especially for rural communities.
“Without them, rural consumers and businesses were deprived of the information, the access to goods and services that are available to them because of these digital platforms,” Mr. Agarwal said.
“These digital platforms have enabled small businesses from towns and villages across India and across the world in rural locations to market their products beyond their local bazaars,” he said, adding that a survey showed that small businesses in India that use the internet for marketing purposes are likely to grow 50% more than those who remain offline.
While he recognized the pitfalls of digital monopolies and data breaches, Mr. Agarwal said he is a firm believer that, overall, the internet has been a driver of positive change, empowering farmers, and improving health care and education.
“The internet is not about only entertainment and commerce. It has a lot more dimensions,” he said.
A clean slate
In Africa, there are tens of millions of small businesses, yet they barely contribute to gross domestic product.
Digital platforms could change that by providing access to markets and to finance, according to Omobola Johnson, former Nigerian ICT minister and a senior partner at TLcom Capital, a venture-capital firm focused on technology-enabled services.
In addition to providing the infrastructure to access markets beyond their community, digital platforms can help bring small businesses into the formal economy and get them access to much needed finance, Ms. Johnson said, providing the example of a small company that trades fruits and vegetables.
“One the companies we’ve invested in is a platform for small retail traders that trade fruits and vegetables in Kenya. It provides a platform for them to, first of all, order their vegetables [online],” she said.
“As they do this every day, what it beings to show is a financial pattern,” she said. “You’re able to use that data to create a credit score for these small retailers.”
“And by doing a credit score, you then are able to lend them money. They can then increase the size of their businesses, and you bring them into the formal economy,” she added.
Ms. Johnson said that developing countries have the advantage of being able to learn from the mistakes more advanced economies may have made while building their digital economies.
“We can do things on a clean slate,” she said.
No holding back
Learning from possible mistakes will be key in steering the digital economy in the right direction, World Trade Organization Director-General Roberto Azevêdo said, adding that e-commerce is here to stay.
“Just between 2013 and 2015, e-commerce grew by 38%. And that kind of pace is going to continue. And the degree of pervasiveness is going to increase,” Mr. Azevêdo said.
He added: “Only 10% of e-commerce is business-to-consumer. Of that 10%, only 7% – so 0.07% overall – is crossing borders. The rest is domestic.”
“So potential for growth is tremendous. And it is going to happen, and there is no holding back,” he said, adding that we have time to avoid the distortions and overcome the challenges.
“If we cross our arms, then the scenario that Nick [Srnicek] just painted is the one that is going to prevail.”
The event was moderated by Catherine Fiankan-Bokonga, correspondent at the United Nations in Geneva and vice-president of the Swiss Press Club.
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tralac’s Daily News Selection
Press coverage of the first day of the Trade Law Centre, Zimbabwe National Chamber of Commerce, Zimbabwe Network of Customs and Excise Experts AfCFTA awareness workshop
The African free trade dividend: editorial comment in today’s New Times, Kigali
Report of the 10th session of the Committee on Regional Cooperation and Integration (UNECA)
The tenth session of the Committee on Regional Cooperation and Integration was held in Addis Ababa (1-2 November 2017) on the theme Implementation of the continental free trade area and shared gains. The main objective of the session was to examine the efforts being made to fast track the implementation of the Action Plan for Boosting Intra-African Trade and an agreement to establish a continental free trade area. Extract from the Session VI A: Surveying developments in Africa’s regional integration with a view to influencing policy. In regard to investment issues, it was noted that data collection on intra-African investments remained a challenge for African countries. There was a need to collect and compile data on intra-African investments, including, in particular, on foreign direct investment originating from and heading to African countries. Also stressed was the need to identify key financial challenges faced by the continent and the importance of investments in infrastructure aimed at unlocking the regional trade potential.
Extract from the Session VI F: Sharing best practices - boosting intra-African investment. It was pointed out that the establishment of a continental free trade area would significantly boost intra-African trade. It was very important to ensure, however, that once the trade area was established, African countries would undertake not to participate in discriminatory practices. In addition, any international agreements and protocols, including trade facilitation and customs agreements, must be localized in order for the continent to reap the greatest benefits from such an area. Deeper regional integration in Africa was also called for, based on the view that it was a critical factor in supporting intraregional trade and investment. The importance of investment for Africa ‘s development, as a source of both finance and productive assets, was also stressed. It was noted that the establishment of a continental free trade area would serve as an effective tool in dealing with the numerous challenges and bottlenecks associated with efforts to boost intra-African investment. [Note: This report is one of the submissions to the Conference of African Ministers of Finance, Planning and Economic Development, 11-15 May, Addis Ababa]
South Africa’s investment drive: statement by President Ramaphosa (The Presidency)
Investment in our economy has declined in recent years. While total fixed investment in our economy stood at 24% of GDP in 2008, it has declined to around 19% last year. The National Development Plan says we need to increase this to at least 30% of GDP by 2030. Foreign direct investment declined from around R76bn in 2008 to just R17.6bn last year. This has been driven by low business confidence and regulatory uncertainty; and has resulted in slow growth, along with poor growth in employment. In line with our commitment in the State of the Nation Address, we are therefore launching an ambitious new investment drive. This drive will culminate in an Investment Conference to be held in August or September 2018. The Investment Conference, which will involve domestic and international investors in equal measure, is not intended merely as a forum to discuss the investment climate. Rather, we expect the Conference to report on actual investment deals that have been concluded and to provide a platform for would-be investors to seek out opportunities in the South African market. I am therefore pleased and grateful that the following South Africans have accepted our invitation to be the President’s Special Envoys on Investment:
Zimbabwe: Chinese delegation jets in after ED visit (The Herald)
China has sent an 11-member delegation to Zimbabwe as a follow-up to President Mnangagwa’s State visit to the Asian economic giant early this month where several business deals were signed, while relations between the two countries were elevated to the highest status. The latest Chinese delegation to arrive in the country on a week-long exploratory mission is led by China Trade Promotion Centre director Mr Tan Wenbao. The group yesterday met Zimbabwe Investment Authority chief executive officer Mr Richard Mbaiwa before meeting Zimbabwe Energy Regulatory Authority officials. [Zimbabwe wants global investments says RBZ’s Mangudya]
India focuses on Africa as US tightens trade policy (The Week)
India has considerably improved its trade relations with Africa. Subsequent to a number of India-Africa trade summits held in New Delhi, India will now seek out investors and markets in the entire African continent over the coming few months, trade and civil aviation minister Suresh Prabhu said on Tuesday. “We are going to South Africa and other nations in the vicinity by the end of this month,” Prabhu told reporters on the sidelines of the launch of Federation of Indian Export Organisation’s exporter’s business networking portal. An Indian Commerce ministry delegation, headed by Prabhu and commerce and industries secretary Rita Teotia, had visited East Africa last month. The visit is said to have received considerable success with a lot of interest for doing business with India. The minister will also lead similar trade delegations to north, west and central Africa to boost domestic trade with the African continent.
Financing for development: progress and prospects (UN)
While a moderate upturn in the world economy led to more development financing in 2017, a new United Nations report says the vast majority of investment is still short-term oriented, putting global commitments to create sustainable economies at risk. The report cites ‘short-termism’ - an excessive focus on projects that will yield quick profit at the expense of long-term interests like infrastructure improvement and job training – as among the major funding challenges to implementing the 2030 Agenda on Sustainable Development. The UN chief warned: “The choices we make now on financing will be pivotal.” Extract from the Overview (pdf): The remainder of the report (chapters III.A to III.G and IV) discusses progress in the seven action areas of the Addis Agenda: domestic resource mobilization, private finance, international development cooperation, trade, debt, systemic issues and science, technology and capacity-building, as well as data issues. Each chapter begins with a summary that highlights key messages and presents policy options. The necessarily concise assessments in the report are complemented by and should be read in conjunction with the comprehensive online annex of the Task Force report. The annex provides data and analysis for each of the more than 100 clusters of commitments and actions across nine areas covered in the Financing for Development outcomes.
Global Financial Development Report 2017/2018: bankers without borders (World Bank)
Blog, by Claudia Ruiz, Bob Cull: The Global Financial Development Report 2017/2018: Bankers without Borders contributes to the policy dialogue on international banks by summarizing what has been learned so far about: (i) the risks and opportunities posed by foreign banks when entering developing countries and (ii) under what circumstances host economies can reap most benefits from the entry of international banks. One key message from the report is that foreign banks, through their brick and mortar operations, can improve the performance of local banks, increase competition in the banking sector and raise overall credit access in the host economy. However, for these benefits to materialize, host and home countries need to have in place the proper regulatory and supervisory frameworks, and the entry of foreign banks must be accompanied by institutional and legal reforms that strengthen the information environment and contract enforcement of the host economy. Extract from the report (pdf): This report, the fourth in its series, comes at a critical time when the global reform agenda is shaping financial globalization - in particular, banking. The Global Financial Development Report 2017/2018 offers new research and data that help fill gaps in the knowledge of international banking and contributes key insights to the policy discussion. The report provides stylized facts and examines existing and new evidence of the causes and effects of bank globalization - in particular, for economic growth, shared prosperity, and poverty reduction.
South-South digital cooperation for industrialization: a regional integration agenda (UNCTAD)
Disruptions in the existing patterns of production, consumption and investments are invariably affecting international trade and FDI patterns and governments are under increasing pressure to act in order to sustain economic growth, preserve jobs and ensure their firms retain shares in global production, investments and trade. This paper discusses the various components of digital infrastructure to de-mystify digital economy and examines the reasons for growth of big-tech firms and the source of their rent-seeking powers. The extent of digitization of manufacturing is estimated for identified developed and developing countries using world input-output database. The estimated value-added by digital services to manufacturing exports show wide variation between developed and developing countries, indicating the growing digital divide in manufacturing exports. The paper proposes a ten-point South-South digital cooperation agenda (pdf) which can help the developing countries to build their digital capacities and digital skills.
Distributed ledger technology: opportunities for Africa’s trade (tralac)
This Trade Brief introduces the reader to the DLT concept, particularly its application in the blockchain, and provides an overview of how this technology works, a brief history of its adoption, prospects for future use, and its relevance in the trading economy of Africa. The paper then highlights the challenges, applications and opportunities for adopting this technology in the African economy as well as its potential in simplifying the value and supply chain in trade. Adopting regulations for blockchain and DLT technology should lend a certain degree of credibility and further encourage its uptake as a reliable and secure medium of exchange. [The author: Gavin van der Nest]
Digital technologies provide fertile ground for Africa, EU says (UNCTAD)
Mindful of its own experience in building a single digital market, the EU is dedicated to helping Africa do likewise and help unleash the transformative power of e-commerce on the continent, the EU’s digital economy and society commissioner, Mariya Gabriel, said on the opening day of UNCTAD’s E-Commerce Week in Geneva. “Creating a single digital market was the EU’s response to the challenges posed by the digital transformation in our society and in our economies. However, as you know, the digital revolution doesn’t stop at the borders of the EU. Our expertise and our experience can be put to the benefit of development cooperation between the EU and Africa,” Ms Gabriel said, adding that the digital economy was identified as a priority during the November 2017 European Union-African Union Summit in Abidjan.
Sharing the benefits of innovation-digitization: a summary of market processes and policy suggestions (World Bank)
Developing country governments, having lower institutional capacity and usually fewer resources, will likely find it even more difficult to manage these changes. Global production patterns are likely to continue shifting. These shifts will depend on a combination of factors: the direction of technological change, trade agreements, global demand patterns, policies, and endowment shifts. Developing countries may not follow the same structural route of the past, through manufacturing, to higher income, but with appropriate investments, they can develop high-productivity service sectors. The policies that are needed to harness the benefits of digitization span a wide range of sectors: finance, competition policy, public support to innovation, fiscal and regulatory incentives for innovation, macroeconomic frameworks supporting demand growth, public support to education and reskilling, infrastructure provision for the digitization age, and sustainable fiscal insurance and redistribution systems.
Electricity provision and tax mobilization in Africa (World Bank)
Using data from the most recent World Bank Enterprise Surveys and under conservative assumptions, the paper estimates that countries in the region could in total generate additional tax revenues of more than $9.5bn (4.3% of total tax revenue) per year solely by resolving issues related to electricity shortages. Put together, the paper concludes that the financial returns associated with public investments toward improving access to and reliability of electricity are substantial and could be harnessed to augment the financing gap in the sector.
Today’s Quick Links: Africa’s new debt binge: what are the risks? WTO launches new version of the Analytical Index AfDB releases highlights of 2018 African Economic Outlook in Arabic, Hausa, Kiswahili Middle East and North Africa Economic Monitor: economic transformation |
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Digital technologies provide fertile ground for Africa, EU says
EU Commissioner Mariya Gabriel says Europe is dedicated to helping Africa build a single digital market, so that e-commerce can pave the way to better jobs and greater equality on the continent.
Mindful of its own experience in building a single digital market, the European Union is dedicated to helping Africa do likewise and help unleash the transformative power of e-commerce on the continent, the EU’s digital economy and society commissioner, Mariya Gabriel, has said on the opening day of UNCTAD’s E-Commerce Week in Geneva.
Information and communications technologies (ICTs) have boosted economic development worldwide, with estimates showing that, for example, a 10% increase in internet access gives a 1.2% push to per capita gross domestic product (GDP).
Getting more people affordable and reliable connections in Africa, where broadband penetration is as low as 16% in some parts of the continent, is therefore key to growing the economy and fighting poverty.
Better connectivity will also be an important step to increasing the ICT sector’s contribution to Africa’s GDP, which currently stands at just 5%. The African Union aims to triple this figure by 2040.
“As we all know, the digital revolution has changed the way we manufacture goods, provide services, buy products, obtain information and interact with each other,” Ms. Gabriel told a packed room in the Palais des Nations, the UN’s European Headquarters.
“Creating a single digital market was the EU’s response to the challenges posed by the digital transformation in our society and in our economies,” she said.
“However, as you know, the digital revolution doesn’t stop at the borders of the EU. Our expertise and our experience can be put to the benefit of development cooperation between the EU and Africa,” Ms. Gabriel said, adding that the digital economy was identified as a priority during the November 2017 European Union-African Union Summit in Abidjan, Côte d’Ivoire.
UNCTAD Secretary-General Mukhisa Kituyi hailed the leadership that the EU has shown in “pathbreaking” work improving internet governance and consumer protection and taking on major online platforms, “to hold them to the fire on their responsibilities”.
“This is not only exemplary but also, in a way, an inspiring understanding of how to balance between the critical importance of this digital space but also the responsibility of regulators for the protection of consumers, for sustainability of new initiatives,” Dr. Kituyi told the Geneva meeting.
A marginal role in European aid
The European Union provides more than half of global development aid. Traditionally, however, the EU’s efforts have focused on energy, agriculture, education, health, transport and governance.
“Digitalization only plays a marginal role in [official development assistance] programmes,” Ms. Gabriel said, citing one figure to illustrate the point. “Of the 30 billion euros of official development assistance given by the European institutions, digitalization covered only 250 million euros,” she said.
Yet the development potential of digital technologies is clear. Getting government services online improves their quality and reach and putting mobile phones in the hands of young entrepreneurs gives them a tool to create tailor-made solutions for local problems, she said.
And this conviction that digitalization is a driver of development led the European Commission in May 2017 to publish its first strategy on digitalization for development – the Digital 4 Development (D4D) policy. The policy is dedicated to mainstreaming digitalization across development policy and promoting the principles of the European digital single market in developing countries.
The D4D policy focuses on four main priorities: assuring affordable broadband connectivity, improving digital literacy and skills, promoting digital entrepreneurship and using digitalization as an enabler for sustainable development by deploying e-government, e-commerce, e-health, e-education and e-agriculture.
Towards a Pan-African digital market
But the EU’s vision doesn’t stop there, Ms. Gabriel said.
“We want to support our African partners with the goal of creating a Pan-African digital market, allowing citizens and businesses to fully benefit from the opportunities offered by the digital revolution.”
And such work is already underway, according to Amani Abou-Zeid, the African Union Commissioner for infrastructure, energy, ICT and tourism.
Ms. Abou-Zeid said: “Since February 2018, we have been implementing in collaboration with the European Commission the launch of the policy and regulation initiative for digital Africa, PRIDA, to foster universal, accessible and affordable broadband across the continent.”
“I’m quite confident that his three-year project…will improve the quality of the internet and support continental integrating projects including the Single African Air Transport Market, launched in January 2018, but also the Continental Free Trade Area, CFTA, launched a few weeks ago in Kigali,” she said.
A priority for the African Union, she said, is to ensure that new technologies bring about inclusive growth, helping to reduce inequalities and lower unemployment on the continent.
“All technology can also result sometimes in joblessness, and we want to make sure this does not happen when we transform our economies,” Ms. Abou-Zeid said.
Youth unemployment is of considerable concern for Africa, where about 65% of the total population is below the age of 35. The 2017 EU-AU Summit therefore also identified job creation for young people as a key objective for the continent’s digital economy.
Separating the winners from the others
In discussing how to create opportunities, it’s important to get the views of “those on the ground”, Dr. Kituyi said, referring to private companies trying to grow e-commerce in Africa.
According to Jérémy Doutte, co-CEO of Jumia, one of the most successful digital platforms in Africa, e-commerce is important because it helps level the playing field.
“I think the beauty of e-commerce and of the internet is that it is a great equalizer,” Mr. Doutte said.
He added: “Today if you want to start a shop, let’s say in Casablanca... real estate is expensive. You need a lot of authorizations from the administration to open a shop. And then every small administration is going to make you comply with the rules.”
Mr. Doutte therefore called on government representatives in attendance to avoid putting in place policies that unnecessarily make e-commerce less attractive for small businesses.
For example, offline informal businesses rarely pay value-added taxes on the continent. However, because they become more visible to governments when they start selling online, they may be forced to start paying if they go digital. This could discourage them from becoming e-commerce retailers, Mr. Doutte said. He encouraged countries to therefore put in place incremental taxes for online transactions.
“After that, I would encourage everyone to unleash [digital] entrepreneurship within your countries, so that everyone can move at the speed of the internet,” he said.
“This is what will differentiate the winners from others.”
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South-South digital cooperation for industrialization: A regional integration agenda
This UNCTAD paper discusses the various components of digital infrastructure to de-mystify digital economy and examines the reasons for growth of big-tech firms and the source of their rent-seeking powers.
The extent of digitization of manufacturing is estimated for identified developed and developing countries using world input-output database. The estimated value-added by digital services to manufacturing exports show wide variation between developed and developing countries, indicating the growing digital divide in manufacturing exports.
The paper proposes a ten-point South-South digital cooperation agenda which can help the developing countries to build their digital capacities and digital skills. The importance of ownership of data by the national governments is highlighted along with developing regional digital strategies for supporting national digitalization efforts of the developing countries.
Introduction
The pace of digitization has picked up with the onset of Industry 4.0 or the fourth industrial revolution and with the growing use of digital technologies in traditional manufacturing and service activities. Decisions along the entire value chain of production and distribution have been affected as well as impacting consumer behavior and factor markets, i.e., what to produce, how to produce, where to sell and who to reward.
Digital linkages are intensifying as digital services add a competitive edge to manufactured products by being bundled into their production as well as being increasingly used in their distribution.
Corporations are transforming their business models – companies are becoming global leaders in providing:
- Car services without owning a single car (UBER)
- Accommodation services without owning a single hotel (AirBnB)
- Retail services without holding any stocks (Alibaba)
Disruptions in the existing patterns of production, consumption and investments are invariably affecting international trade and foreign direct investment (FDI) patterns and governments are under increasing pressure to act in order to sustain economic growth, preserve jobs and ensure their firms retain shares in global production, investments and trade.
To meet the challenge, developing countries will need support and cooperation not only from traditional development partners but also from regional neighbours. South-South digital cooperation for industrialization can boost the ability of the South to digitally industrialize and successfully gain from the new opportunities and avenues that digitization offers. It can also help countries mitigate the downside risks. There is therefore a need to add a digital cooperation agenda to the on-going regional integration initiatives in the South, especially in Africa.
Need for South-South digital cooperation for boosting industrialization
For developing countries, especially least developed countries, it is extremely difficult to enter and adapt to digitized industrialization on their own. They will first have to develop their digital infrastructure and incorporate a new component in their existing industrial policies which focuses on digitization of manufacturing processes.
This digital industrial policy, as a part of the existing industrial policy, needs to focus on building digital infrastructure that includes ICT infrastructure along with digital skills; data infrastructure and cloud computing infrastructure. This will allow the countries to progress towards building AI that can assist them in increasing digitization in their manufacturing as well as help them to develop more efficient and cost effective manufactured products using robots, 3D printers and IoT.
This entire process of industrial digitization in a country cannot happen on its own, especially given the limited existing digital capacities of developing and least developed countries. South-South cooperation, in the form of regional digital cooperation, is essential for digital industrialization of the South. This regional digital cooperation can be an additional element in the on-going regional integration processes.
For South-South digital cooperation within the regional blocs, the following 10-point agenda is suggested, where the sequencing and prioritizing needs to be adapted according to the level and pace of digital development of the countries within the region.
South-South 10-point Digital Cooperation Agenda for boosting Industrialization:
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Building a Data Economy.
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Building Cloud Computing Infrastructure
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Strengthening Broadband Infrastructure
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Promoting E-Commerce in the Region
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Promoting Regional Digital Payments
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Progressing on Single Digital Market in the Region.
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Sharing Experiences on E-Government.
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Forging partnerships for building Smart Cities
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Promoting Digital Innovations and Technologies
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Building Statistics for measuring Digitization
Growing digitization has raised the anxiety of the developing world which stems from lagging digital capacities, weak supportive digital infrastructure and lack of comprehensive knowledge of the digitization process. This study demystifies the digital economy by explaining the various components of digital infrastructure as well as highlighting the unique and inherent features of digital economy that promotes monopolies.
The digital economy is built on digital infrastructure (DI), comprising three closely interrelated components: communication networks; software packages and related capabilities; and data platforms. This digital infrastructure has led to development of artificial intelligence which has enabled the advanced world to produce more efficient and competitiven products, giving rise to big tech firms. Automation, use of robotics, IoT, cross-border e-commerce and remote additive manufacturing (3D printing) are all manifestations of the growing strength of digital infrastructure and rising digital industrialization.
This report was prepared by Unit on Economic Cooperation and Integration among Developing Countries, Division on Globalization and Development Strategies, UNCTAD. The report was authored by Rashmi Banga and Richard Kozul-Wright with helpful comments from Joerg Mayer and Pierguiseppe Fortunato.
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Report of the tenth session of the Committee on Regional Cooperation and Integration
The tenth session of the Committee on Regional Cooperation and Integration was held in Addis Ababa on 1 and 2 November 2017, on the theme, “Implementation of the Continental Free Trade Area and shared gains”.
The main objective of the session was to examine the efforts being made to fast track the implementation of the Action Plan for Boosting Intra-African Trade and an agreement to establish an African Continental Free Trade Area (AfCFTA). Participants also took stock of other developments taking place within the sub-programme on regional cooperation and integration in the following areas: intra-African and international trade, infrastructure, industrialization, food security and agriculture, investment and land policies.
This report is one of the submissions to the 51st session of the Conference of African Ministers of Finance, Planning and Economic Development, taking place on 11-15 May in Addis Ababa on the theme, “African Continental Free Trade Area and fiscal space for jobs and economic diversification”.
Progress in the implementation of the regional integration and trade programme
Surveying developments in Africa’s regional integration with a view to influencing policy
The presentation highlighted the key results achieved by the Regional Integration and Trade Division (RITD) for the period January 2016 to June 2017.
In the area of food security and agriculture, the Division carried out research that contributed to initiatives designed to help Africa rethink agricultural and rural transformation; agricultural production systems; agribusiness and regional value chains; and developing an agriculture sector with a private sector focus. RITD also provided training on developing regional value chains, which contributed to the continental agribusiness strategy and implementation plan aimed at developing a structure and business plan for a continental apex agribusiness.
In regional and international trade, the Division played a significant role in developing the template agreement for the expected establishment of the continental free trade area. That template agreement was being used as the basis for negotiations. RITD undertook research and produced technical papers for African Ministers of Trade on the continental free trade area, African Growth and Opportunity Act, Economic Partnership Agreements, trade and climate change, investment and regional trade agreements.
A key report, the seventh edition of Assessing Regional Integration in Africa (ARIA VII), was published in line with the theme, “Innovation, competitiveness and regional integration”. ECA also launched a report on the Africa regional integration index, which provided data on the status and progress of regional integration on the continent.
Furthermore, the Division delivered trainings on trade and gender, trade policy modelling, and analysis. It also initiated work to develop a Monitoring and Evaluation Framework for Boosting Intra-African Trade Action Plan. In December 2016 and in collaboration with the African Union Commission, the African Development Bank and the African Export-Import Bank, the Division organized Africa Trade Week, a multi-stakeholder platform to discuss topical trade policy issues in Africa.
On industrial and infrastructure development, RITD provided technical assistance on developing industrial policy for member States and regional economic communities. Research was undertaken on the industrial policy landscape in Africa, developing a methodology for the localization of energy technologies to boost the continent’s manufacturing potential and on promoting infrastructure development for Africa’s industrialization. ECA also provided technical support to the African Union Commission, culminating in the launch of the single African air transport market in June 2017. RITD contributed to a better understanding of the role of bioenergy in the energy plans of African countries through a United Nations Development Account project on implementing a biofuel programme for household and transport sectors.
On investment, RITD carried out studies on investment policies and bilateral investment treaties, and provided policy advice on the development of industrial sectors in Namibia, in order to boost trade and foreign direct investment. The Division also conducted policy advocacy in support of the continental dialogue on investment. Two studies were prepared by the Division on the drivers that may support boosting intra-African investment, and on the linkages between double taxation treaties and bilateral investment treaties in Africa. Those studies will support and inform policy processes on the continent, such as the continental dialogue on investment.
The results outlined above were achieved through leveraging strategic partnerships including with Governments, organizations and agencies with the United Nations system, the African Development Bank and the African Union Commission.
During the discussion, concerns were raised about the ability of certain African countries to apply and implement effectively a possible agreement that would establish a free trade area. Similarly, small and landlocked countries in particular expressed concerns that their gains from the regional integration process in Africa would be limited. It was also observed that some other countries have managed to tune their landlocked status to their own advantage. It was noted that the eighth edition of the report, Assessing Regional Integration in Africa (ARIA VIII), provided important insights into how to alleviate such concerns.
Also during the discussion, participants acknowledged that the infrastructure deficit and non-tariff barriers continued to be major challenges that needed to be dealt with in order for African economies to industriali ze, become more competitive in the international market, and be able to export their products under specific trade agreements and arrangements. In that regard, building and upgrading value chains would be critical. One example cited was to develop the required infrastructure and capacities for roasting and blending raw coffee beans in order to be able to export coffee under the African Growth and Opportunity Act.
In regard to investment issues, it was noted that data collection on intra-African investments remained a challenge for African countries. There was a need to collect and compile data on intra-African investments, including, in particular, on foreign direct investment originating from and heading to African countries. Also stressed was the need to identify key financial challenges faced by the continent and the importance of investments in infrastructure aimed at unlocking the regional trade potential.
The discussion focused on the critical need to review infrastructure bottlenecks in Africa and how best to tackle them. It was noted that the Programme for Infrastructure Development in Africa (NEPAD) had developed programmes and projects to build infrastructure and promote industrial development. In that regard, a key issue was to ensure that the infrastructure projects of the Programme for Infrastructure Development in Africa (PIDA) would contribute to industrial development. It was also noted that, at the Dakar Financing Summit (held on 14 and 15 June 2014), for example, proposals for pdf 16 projects (7.93 MB) were introduced and that ECA was working with the New Partnership for Africa’s Development (NEPAD) to find alternative ways to fund those projects, such as through pension funds and other financing sources.
It was emphasized that there was a need to set up regional value chains, which could promote industrialization and which would include raw materials from Africa. However, it was pointed out that the cost of transportation of inputs was impeding the competiveness of African economies. Also, the opportunities provided by ongoing trade corridor projects needed to be reviewed, with the objective of making them competitive. The discussion turned to strategic and integrated planning, which was identified as necessary for effectively addressing development issues in Africa.
The following recommendations were made:
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Member States and regional economic communities are encouraged to adopt sound monitoring and evaluation frameworks to ensure the effective implementation of regional integration commitments;
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ECA, the African Union Commission and the African Development Bank should increase technical assistance in generating and collecting data on trade and regional integration.
Inclusive infrastructure development: the key to promoting Africa’s industrialization
The point was stressed by the secretariat that industrialization was critical for African economies to achieve structural transformation, where resources were shifting from lower to higher productivity, and to value added activities. It was explained that such an approach would ultimately result in sustained growth, job creation and poverty reduction. It was pointed out that numerous opportunities existed for African economies to scale up industrial activities, including large resource endowments, increasing domestic demand, and expanding regional markets driven by trade agreements. If African economies were to tap into those opportunities while promoting value added activities, an inclusive infrastructure development would remain a necessary enabler. Promoting industrialization and infrastructure development was sine qua non to achieving some of the Sustainable Development Goals of the 2030 Agenda and the aspirations of Agenda 2063.
Furthermore, the secretariat indicated that the industrialization of African economies was required in order to find ways that helped the continent address infrastructure bottlenecks. It was noted that such changes would require effective planning and strong coherence through shared strategic plans and policies, similar to the coordination that existed between national and regional infrastructure development programmes. The establishment of special economic zones, under certain conditions, were effective in circumventing the persistent and significant infrastructure constraints on the continent. Ongoing success stories across the continent existed in Egypt, Ethiopia, Kenya and South Africa.
It was pointed out that there was consensus that infrastructure deficits were limiting the full benefits of industrialization for the continent, though countries were moving very slowly towards addressing such deficits. Energy was cited as the most critical infrastructure asset that was posing a serious impediment to the industrialization trajectory in Africa. Emphasis needed to be placed on clean energy production patterns that would ensure that industrial processes were sustainable.
Industrialization also needed to be looked at in the context of a full value chain approach, starting with the production of inputs (e.g. fertilizers), and including products and services. The successful implementation of a continental free trade area would require massive industrialization at the continental level. Another issue that needed to be addressed was the mismatch between most African education systems and the needs of industry.
It was observed that poor governance impacted negatively on infrastructure development on the continent, as the main focus tended to be on building, with less focus on the maintenance of current infrastructure assets.
The following recommendations were made:
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Member States are recommended to improve the governance of the infrastructure sector, taking into consideration issues of repair and maintenance of the existing assets;
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Member States are urged to scale up their efforts in addressing energy deficits and to tap into the vast renewable energy potential of the continent;
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Member States are encouraged to promote the development of Special Economic Zones and Industrial Zones to scale up value added activities;
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Member States are encouraged to allocate priority to the development of quality infrastructure to reduce logistical costs and enhance inter-connectivity.
Sharing best practices: boosting intra-African investment
The secretariat presented the main objectives and key findings of a study that had been undertaken by ECA, “Drivers for boosting intra-African investment flows towards Africa’s transformation, which built on and was a follow-up to an earlier ECA study on investment policies and bilateral investment treaties in Africa. The main objectives of the current study were to analyse the drivers of boosting intra-African investment flows and to provide a solid theoretical and empirical framework aimed at strengthened investment policies in order to boost intra-African investment. In addition, the study also explored the progress made in negotiating the continental free trade area and linked the benefits of such a trade area with the promotion of intra-African investments.
Some continental initiatives that had been undertaken by Governments and some pan-African institutions in promoting investment regulations were also highlighted. The initiatives included: (a) work on establishing the trade area – which was instrumental in creating a single continental market for goods and services; (b) the efforts of regional economic communities in the development of investment regulations; (c) ECA study on bilateral investment treaties and double taxation treaties, which have been an integral part of the work of policymakers to counter the perception of risk and promote foreign direct investment (FDI); and (d) a pan-African investment code aimed at harmonizing existing investment regulations.
Some of the key trends on FDI flows in Africa were also highlighted. A key message on such trends is that the continent remains one of the world’s fastest-growing economic regions. That fact provides incentives for foreign companies to consider Africa as a potential destination for their investment. Factors contributing to the increasing growth in investment include: improved government policies, improved macroeconomic conditions, and reforms on investments. Reference was made to some studies which, among other things, reveal that global investment flows have increased rapidly, from approximately $200 billion at the beginning of the 1990s to $1.75 trillion in 2016.
The results from the study reveal that geographical distribution of FDI in Africa in 2016 remains heterogeneous. A breakdown was provided of investment levels in each of the five regions of the continent. Drivers of intra-African investment were highlighted, focusing on both continental and regional levels. In his summary, the secretariat highlighted key conclusions and policy recommendations, and urged African member States to take crucial steps towards implementation.
It was pointed out that the establishment of a continental free trade area would significantly boost intra-African trade. It was very important to ensure, however, that once the trade area was established, African countries would undertake not to participate in discriminatory practices. In addition, any international agreements and protocols, including trade facilitation and customs agreements, must be localized in order for the continent to reap the greatest benefits from such an area. Deeper regional integration in Africa was also called for, based on the view that it was a critical factor in supporting intraregional trade and investment. The importance of investment for Africa ’s development, as a source of both finance and productive assets, was also stressed.
It was noted that the establishment of a continental free trade area would serve as an effective tool in dealing with the numerous challenges and bottlenecks associated with efforts to boost intra-African investment. One of the highlighted challenges was the high cost of production, a key contributing factor to the low productivity levels. In that regard, it was noted that the establishment of such a trade area would present an opportunity to reduce the cost of factors, underpinned by the free movement of people, goods, services and capital. In addition, it was observed that harnessing internal savings would improve intra-African investment.
Regarding investment challenges, it was pointed out that tapping the potential of intra-African trade and investment depended on the capacity of African countries to do the following: increase the pace of production and industrialization; mobilize domestic resources in order to boost intra-African investment; accommodate trade facilitation; and reduce the costs of doing business. In that regard, the point was made that the promotion of intra-African investment could be done through mobilizing internal savings by strengthening the financial system; Moreover, the it was noted that establishment of a continental free trade area could also be complemented by reforms to the business climate to promote intra-African investment. Another point that was emphasized was the need to consider the risk perception relating to Africa in developing a risk framework.
It was observed that productive capacity in Africa was impeded primarily by high production costs. It was noted that large-scale industrialization could harness the potential benefits from the continental free trade area. It was also noted that it was an opportune time to consider the impact of business tourism on intra-African investment and particularly within the region of Eastern Africa. To do that, reliable data would be required on bilateral investment disaggregated by country and sector and on trade in value added. It was observed that such data would enable ECA to perform more detailed and in-depth analyses of the investment determinants.
In that regard, it was noted that service-driven foreign direct investment had taken precedence because the data, especially the announced greenfield investment, masked its growth. To attain more balanced growth, investments across the economic sectors must be more evenly distributed. In that regard, it was noted that reliable data on investment by sectors could help to ensure that. Furthermore, it was noted that African countries faced difficulties in producing data on investment owing to the lack of required statistical expertise and vocational trainings.
It was observed that many investors were reluctant to invest in Africa because of the perception of elevated risk. In that regard, it was suggested that harmonization of rules and regulatory investment frameworks within and across African regions, and the establishment of the continental free trade area, could help to mitigate that concern. In addition to the suggestion of a negative perception, it was pointed out that a lack of political stability and policy predictability were also factors that affected adversely investment flows to Africa.
The following recommendations were made:
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Member States are encouraged to give effect to regional and international investment instruments and agreements and to those within the proposed framework for the establishment of the continental free trade area;
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Member States are encouraged to improve the quality of and access to education through targeting specific training and vocational programmes to improve labour skills and scale up the expertise of their labour force;
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Member States are encouraged to improve the quality of and access to education, based on the view that a more educated workforce would increase investment potential, boost intraAfrican investment flows and promote associated innovation, technology and knowledge transfers;
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Member States are called upon to improve the business climate, which is essential to attracting investments;
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Member States are urged to observe the principle of non-discrimination especially in relation to incentives for investors, given that favouring intra-African investors in a discriminatory manner would have a negative impact on sources of investment from outside Africa.
General discussion on the theme of the tenth session, “Implementation of the continental free trade area and shared gains”
General discussion
It was acknowledged that the establishment of the continental free trade area could be an important tool for addressing the continent’s challenges associated with socioeconomic development, unemployment, food security and poverty. At the same time, member States noted that the continental free trade area in itself, once established, would not be enough to ensure a transformational change and inclusive gains, but it would provide a comprehensive platform to address the issues and challenges at stake. It was pointed out that, in order for the free trade area to bring the intended benefits, there would be necessary to implement supporting policies, strategies and measures aimed at, among other actions, building productive capacities, improving trade facilitation, increasing investment and closing infrastructure gaps. In that respect, member States also highlighted the need for special and differentiated treatment when implementing the continental free trade area modalities.
In addition, it was noted that compensation mechanisms would need to be put in place to ensure that potential losses owing to the reforms relevant to liberalization, such as loss in revenue from tariff reductions, could be offset and benefits from the establishment of the continental free trade area could be better shared among member States. Furthermore, the point was emphasized that there was a need for wide consultation with all stakeholders on the negotiations, implementation, and monitoring and evaluation of the agreement to establish the continental free trade area, including with relevant line ministries, women, young people, the private sector and civil society.
Particular emphasis was placed on the key role of the private sector in the process to establish the continental free trade area. During the deliberations, a communication strategy was discussed, which would play a vital role in advocating a free trade area and enhance understanding of the agreement by the private and public sectors. Moreover, structures were called for to support a more unified voice for the African private sector. It also indicated that the implementation of the agreement to establish the continental free trade area must be accompanied by a solid monitoring and evaluation framework to ensure its effectiveness and accountability to stakeholders at national, regional and continental levels. In that regard, it was stated that ECA and the African Union Commission could play a role in that regard, including at the subregional level. It was also discussed that regional economic communities and ministries in charge of economic integration could assume their roles at the regional and national levels, respectively.
In addition, it was noted that trading relations with external partners must also be considered in the implementation of the agreement to establish the continental free trade area. It was pointed out that, in particular, the implications on a continental free trade area of external commitments, such as the Economic Partnership Agreements, must be understood. Member States should make use of the Aid for Trade to finance reforms relevant to an agreement relating to a free trade area. It was also emphasized that it was important to ensure that the establishment of such a free trade area would strengthen the position of Africa vis-à-vis its external partners and would not create new vulnerabilities.
Any study that looked at the interactions between trade agreements (including the Economic Partnership Agreements) and the continental free trade area should be made widely available. In view of the fact that youth unemployment had remained high, the point was stressed that there was a need for African countries to develop curricula better suited to the priorities of the continent and to the needs of the labour market. Moreover, the point was made that offering decent jobs should be a high priority in implementing the 2030 Agenda and Agenda 2063.
Recommendations
The following recommendations were made:
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ECA, in collaboration with the African Union Commission, should take a leading role in monitoring the implementation of the various components of the agreement to establish the continental free trade area;
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Member States are encouraged to enhance the implementation of the Boosting Intra-African Trade Action Plan and African Union Commission and partners should carry out the tracking of progress made in that regard and provide technical assistance for the implementation;
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Member States are encouraged to involve the private sector in the process to establish the continental free trade area to ensure that the design of the agreement addresses their priorities and concerns;
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ECA and the African Union Commission should also enhance their support to the private sector in taking advantage of the continental free trade area and other trade agreements and arrangements. Specifically, more work should be focused on standardization;
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ECA and the African Union Commission are encouraged to collaborate in the organization of annual review meetings for members of the private sector from African Union member States to enable them to take stock of the progress in implementing the agreement to establish the continental free trade area and give recommendations to speed up the process;
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Member States are urged to put in place policies that recognize and enhance the role of FDI (including intra-African investments) as a vehicle for expanding intra-African trade and strengthening the productive capacity of their economies;
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Member States are encouraged to raise the awareness of their respective constituencies of the continental free trade area, in order to inform and better prepare them to harness the potential benefits of such a trade area;
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The chief negotiators are urged to be faithful to the continental free trade area negotiations principles that were originally agreed at the launch of the negotiation process.
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Statement by President Cyril Ramaphosa on launch of new investment drive
President Cyril Ramaphosa on Monday outlined an investment drive on which government and social partners are about to embark to advance investment, growth, job creation and meaningful economic transformation in the South African economy.
Alongside the implementation of necessary economic reforms, this investment campaign will position South Africa as an investment destination with significant unrealised potential.
President Ramaphosa announced various appointments that will reinforce South Africa’s capacity to increase domestic and foreign direct investment.
The President also set out details of the Investment Summit in his address to the media at OR Tambo International Airport, shortly before the departure of the South African delegation to the Commonwealth Heads of Government Meeting in London, in the United Kingdom.
Statement by President Cyril Ramaphosa
16 April 2018, OR Tambo International Airport
In the State of the Nation Address in February, I announced that a central priority for government this year is to encourage significant new investment in our economy.
This is a necessary condition for the growth of our economy and the creation of jobs on a scale that will significantly reduce current levels of unemployment.
New investment in productive sectors of the economy is therefore vital to our efforts to reduce poverty and inequality.
Investment in our economy has declined in recent years. While total fixed investment in our economy stood at 24% of GDP in 2008, it has declined to around 19% last year.
The National Development Plan says we need to increase this to at least 30% of GDP by 2030.
Foreign direct investment declined from around R76 billion in 2008 to just R17.6 billion last year.
This has been driven by low business confidence and regulatory uncertainty; and has resulted in slow growth, along with poor growth in employment.
Economic conditions in the country are changing, however, and we are determined to work with all social partners to seize the opportunities that are opening up for greater investment and faster growth.
In line with our commitment in the State of the Nation Address, we are therefore launching an ambitious new investment drive.
This drive will culminate in an Investment Conference to be held in August or September 2018.
The Investment Conference, which will involve domestic and international investors in equal measure, is not intended merely as a forum to discuss the investment climate.
Rather, we expect the Conference to report on actual investment deals that have been concluded and to provide a platform for would-be investors to seek out opportunities in the South African market.
We are determined that the Conference produce results that can be quantified and quickly realised.
We are aiming through the Investment Conference to generate at least US$ 100 billion in new investments over the next five years.
Given the current rates of investment, this is an ambitious but realisable target that will provide a significant boost to our economy.
In preparation for the Investment Conference, I have decided to appoint four Special Envoys on Investment, who will spend the next few months engaging both domestic and foreign investors on the opportunities that exist in this country.
These are people with valuable experience in the world of business and finance and extensive networks across major markets.
I am therefore pleased and grateful that the following South Africans have accepted our invitation to be the President’s Special Envoys on Investment:
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Mr Trevor Manuel, former Minister of Finance,
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Mr Mcebisi Jonas, former Deputy Minister of Finance,
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Ms Phumzile Langeni, Executive Chairperson of Afropulse Group and a non-executive director of several leading South African companies,
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Mr Jacko Maree, Chairman of Liberty Group and former CEO of Standard Bank.
They will be travelling to major financial centres in Asia, Middle East, Europe and the Americas to meet with potential investors.
A major part of their responsibility will be to seek out investors in other parts of Africa, from Nairobi to Lagos and from Dakar to Cairo.
This is part of a broader push by government to advance economic integration in the Southern African region and across the continent.
In addition to the processes we must undertake within the country to finalise our participation in the African Continental Free Trade Area, we will also be pursuing other initiatives to promote intra-African cooperation on investment, infrastructure development, tourism and agriculture.
I am also pleased to announce the appointment of Ms Trudi Makhaya as my economic adviser. Among her immediate responsibilities will be the coordination of the work of these Special Envoys and a series of investment roadshows in preparation for the Investment Conference.
The engagements that we expect to take place will also be part of a process towards the establishment of a Presidential Council on Investment.
This evening, I will be departing for London to participate in the Commonwealth Heads of Government Meeting.
We will use this opportunity to meet with several major global companies to brief them on recent developments in the country and on our assessment of the economic challenges, risks and opportunities.
We will be communicating a clear and consistent message – that South Africa is an investment destination with significant unrealised potential.
Some of our fundamental strengths are well known. We have a thriving democracy, an independent judiciary and strong institutions. We have an advanced and diverse economy, a sophisticated and well-regulated financial sector, and extensive transport, telecommunications and energy infrastructure.
We also have a youthful population, an improving basic education system and significantly expanded higher education enrolment. In other words, despite the challenges, we are working hard to build our skills base.
We will brief investors on the measures we are undertaking to improve the investment environment.
Further to the announcements we made in the State of the Nation Address, we are making progress in stabilising strategic state owned enterprises, improving the functioning of key institutions like SARS, finalising a new Mining Charter through consultation with all stakeholders, processing legislation for the implementation of the National Minimum Wage and the promotion of labour stability, and launching the Youth Employment Service to increase the employability of first-time job seekers.
In addition, work is underway to rationalise and streamline investment regulations and reduce the cost of establishing and running businesses.
Through the more effective use of industrial incentives, special economic zones and local procurement requirements, we aim to increase investment in manufacturing and related sectors.
We are creating more opportunities for new market entrants through our competition policy, preferential procurement measures and expanded support to small and medium-sized businesses.
After several difficult years, South Africa is emerging as an increasingly attractive destination for investment. We are encouraged by the growth in business confidence over the last few months, the strengthened rand and improved growth estimates.
We welcome the recent assessment by Goldman Sachs that South Africa is at the top of the list of potential candidates to be the “next big emerging market story” of 2018. It notes that the growth cycle is picking up after an earlier downturn in investment growth. It says that improved confidence is likely to lead to a better outlook for growth and investment.
This is confirmed by the South African Economic Update released this month by the World Bank. While the economy’s performance is improving, it notes that higher growth will require ambitious structural policies. It estimates that a successful conclusion of the Mining Charter deliberations, for example, could increase investment in the sector by 25 percent.
It is for these reasons that we are embarking on an ambitious investment drive alongside the implementation of necessary economic reforms.
South Africa has entered a new era of hope and confidence.
The task we have now is to ensure that this becomes an era of investment, growth, job creation and meaningful economic transformation.
I thank you.
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Short-sighted investment endangers development progress for hundreds of millions of people – UN report
While a moderate upturn in the world economy led to more development financing in 2017, a new United Nations report out on 13 April 2018 revealed that the vast majority of investment is still short-term oriented, putting global commitments to create sustainable economies at risk.
“The world has the resources to deliver, but they are not allocated where they are needed most,” said Secretary-General António Guterres in the foreword to the 2018 report, Financing for Development: Progress and Prospects. “The choices we make now on financing will be pivotal.”
The report cites ‘short-termism’ – an excessive focus on projects that will yield quick profit at the expense of long-term interests like infrastructure improvement and job training – as among the major funding challenges to implementing the 2030 Agenda on Sustainable Development.
The prospects of some 800 million of the world’s poorest remain dire, as the annual progress report on how to finance the Sustainable Development Goals (SDGs) revealed that the current system rewards investors, financiers and project managers that prioritize short-term profits – correlating to policy makers’ excessive focus on short-term considerations.
The results are shelved infrastructure projects in favour of short term priorities that leave small businesses and women excluded from the financial system.
“The good economic news in some regions masks the very real risk that the poorest will be left behind,” said Liu Zhenmin, Under-Secretary-General for the UN Department of Economic and Social Affairs. “There is no room for complacency,” he added.
According to the report, an increasing interest in socially responsible investing is no substitute for a broader transformation in the financial system.
Pension funds, insurance companies and other institutional investors hold around $80 trillion in assets. But the majority of their resources are invested in liquid assets, such as listed equities and bonds in developed countries.
Investment in infrastructure still represents less than three per cent of pension fund assets, with investment in sustainable infrastructure in developing countries even lower.
The lack of long-term investment horizons also means that major risks, such as those from climate change, are not incorporated into decision-making.
“If we don’t invest in infrastructure projects like bridges, roads and sewage systems, if the poorest and women are cut off from access to credit and other financial services, we have little prospect of achieving our global goals,” stressed Mr. Liu.
Overcoming the short-term outlook
According to the report, the solution lies in a multifaceted approach. It includes changing payment practices: the compensation of financial advisors and portfolio managers is too often linked to short term results. More transparency also helps: some countries now require all listed companies to disclose financial risks they face from climate change.
Short-sighted policies also result in a lack of access to finance for countries in urgent need. Support for countries affected by disasters is often too little, too late. Innovative financial instruments exist that provide quicker access to funding. Countries can set up insurance-like mechanisms, and the international community can support those that can’t afford premiums. Loans can be set up to reduce repayments automatically during crises. But so far, major funders have not taken up these promising tools.
“We have to reach beyond the quick fix if we are going to create a world that can sustain all of us,” said Navid Hanif, Director of Financing for Sustainable Development Office. “Political leadership and public policies are indispensable.”
It takes leadership to overcome short-term political cycles, devise and enforce rules which have widespread benefits but may face resistance by powerful groups, for example tax reforms and stopping illicit financial flows, the report notes.
The report emphasizes that in donor countries, political leaders must do more to meet their commitment to provide financial assistance to the world’s most vulnerable countries.
Beyond financing, the report highlights several cross-cutting areas that impact sustainable financing and that require policy makers attention. For example:
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New technologies present boundless opportunities. However, in analyzing the potential of new technologies, the report warns that the transformative power of technology raises complex ethical, socio-economic and human rights challenges and risks. In the short-term, technological change could lead to job losses and increased polarization in labour markets. The report argues for adopting a long-term perspective, and calls on governments to make complementary investments, strengthen social protection and urgently develop regulatory frameworks so that benefits of technological change are shared broadly, and risks to privacy and data protection, financial stability and integrity are addressed.
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Gender inequalities persist in access to finance, technology, public services, decent jobs, unpaid care and domestic work, participation in policy-making processes and many other areas. Bank account ownership among women is about 58 per cent, and for men, 65 per cent. In Asia, only 16 per cent of businesses are women owned. Such inequality threatens achievement of the 2030 Agenda, but also weakens inclusive growth prospects by denying women opportunities to fully participate in the economy.
Background
This report is written by the Inter-agency Task Force on Financing for Development and issued under the auspices of the United Nations Department of Economic and Social Affairs, by mandate from the Addis Ababa Action Agenda. The major institutional stakeholders of financing for development process are: the World Bank Group, IMF, WTO, UNCTAD and UNDP, which take a central role in the Task Force. The Task Force includes almost 60 UN agencies and international organizations, including the OECD and the Financial Stability Board.
This Task Force report sets the tone for the spring meetings of the World Bank and IMF in Washington, D.C. to be held on 18-22 April 2018 and is the main input to the ECOSOC Forum on Financing for Development which will be held on 23-26 April 2018.