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Tanzania, Uganda survive as Rwanda is removed from Agoa beneficiaries list
Rwanda has been suspended from accessing the American market under the African Growth and Opportunity Act (Agoa), following Kigali’s refusal to rescind a decision to lock out second-hand clothes and shoes.
This decision leaves Kigali as the fall guy over a decision that was penned by all the regional Heads of States in Arusha in 2016, agreeing to impose a ban on imports of used clothing and leather products over a three-year period beginning 2019.
Kenya, Tanzania and Uganda have abandoned the joint position, choosing instead, to save the economic benefits that accrue under Agoa.
Agoa is a trade deal that allows beneficiary countries in sub-Saharan Africa to export their products to the US duty-free. It was enacted in the US in 2000 to run to 2015 and renewed to 2025.
Rwanda’s suspension, if approved by the US Congress, will in the next two months apply to Kigali’s Agoa-eligible apparel products, the US Trade Representative’s office said.
The verdict was reached after a review of eligibility for Agoa for Rwanda, Uganda and Tanzania.
The American used clothing industry had in March last year applied for the review after the three countries announced they would in phases ban imports of used clothing and shoes.
Beneficiary criteria
“The review found that this import ban harms the US used clothing industry and is inconsistent with Agoa beneficiary criteria for countries to eliminate barriers to US trade and investment.
“Based on the results of the review, President Donald Trump determined that Rwanda is not making sufficient progress toward the elimination of barriers to US trade and investment, and therefore is out of compliance with eligibility requirements of Agoa.
“Consequently, the president notified Congress and the government of Rwanda of his intent to suspend duty-free treatment for all Agoa-eligible apparel products from Rwanda in 60 days,” the US Trade Representative said in a statement.
Washington said the suspension of the benefits, instead of termination of Rwanda’s status as an Agoa beneficiary, would allow for continued engagement with the aim of restoring market access and thereby bringing Rwanda into compliance with the Agoa eligibility requirements.
Last month, Rwanda said it will not bow to pressure by the US to reduce taxes and lift the ban on used clothes.
“The decision we took as the East African Community (EAC) still stands. We want to implement the rules of origin, after finding out that items are made in China, used in the US and dumped in East Africa,” said Olivier Nduhungirehe, the State Minister at Rwanda’s Ministry of Foreign Affairs, Regional Co-operation and East African Community, adding that they were still open to dialogue with the US to mitigate any adverse effects that could hamper the ease of business between the two countries.
In its submission during the out of cycle review, Rwanda had argued that its 2016 increase of tariffs from $0.20 to $2.50 per kilo would be in effect for only one year.
It also argued that the decision was informed by a market analysis study of garment industry in Rwanda and the impact of second-hand clothes and footwear on the infant garment industry.
“While we agree that the increase in duty applied to the second-hand clothes and footwear many result in reduction of imports of these products to Rwanda, the impact on the US second-hand clothes industry is negligible.
“In fact, the imports of second-hand clothes from USA reached only $2 million in 2015, the year before the increase in duty. This amount represents only 0.2 per cent of the $1 billion second-hand clothes industry in USA,” Rwanda’s Ministry of Trade submitted.
Action plan
Rwanda also said it had developed the 2017-2019 action plan for the transformation of textiles, apparel and leather industrial sectors in order to increase the quality and quantity of textile, apparel and leather products for both local and foreign markets.
“It is estimated that, if everything is implemented, this could create 25,655 jobs, increase the exports to $43 million and decrease the imports of these products to $33 million by 2019 from $124 million in 2015.
“The impact on the trade balance will result in saving of $76 million over the three-year’s period. So far, the implementation of the action plan since July 2016 has led to a sector growth of 18 per cent over the first three quarters of 2016-2017, substantially above the 6 per cent industrial sector average growth rate,” Kigali argued.
The latest determination by the Donald Trump administration spared Uganda and Tanzania after they undertook steps towards eliminating prohibitive tariff rates on imports of used clothing and footwear and committed not to phase in a ban of these products.
“The President’s determinations underscore his commitment to enforcing our trade laws and ensuring fairness in our trade relationships. I commend Tanzania and Uganda for taking corrective steps to address the United States’ concerns. We have and will continue to work with Rwanda to resolve this situation,” Deputy US Trade Representative C.J. Mahoney said.
Economic hardship
Last year, the Secondary Materials and Recycled Textiles Association (Smart), said EAC’s 2016 decision to phase in a ban on imports of used clothing and footwear imposes significant economic hardship on the US used clothing industry, and was inconsistent with Agoa beneficiary criteria for countries to establish a market-based economy and eliminate barriers to US trade and investment.
The Smart petition had requested an out-of-cycle review to determine whether Kenya, Rwanda, Tanzania, and Uganda, members of the EAC, are meeting Agoa eligibility criteria.
The US Trade Representative accepted the petition filed by Smart and initiated an out-of-cycle review of Rwanda, Tanzania, and Uganda’s Agoa eligibility on June last year.
A public hearing was held in July in Washington, at which officials from the governments of Rwanda, Tanzania, Uganda and EAC Secretariat made their submissions.
The US Trade Representative determined that an out-of-cycle review of Kenya’s Agoa eligibility was not warranted due to the government’s commitment to reverse the tariff to pre-2016 levels, effective July 1, 2017, and a commitment not to ban imports of used clothing through other policy measures.
Tanzania and Uganda also made similar commitments during the course of the out-of-cycle review.
Watch list
However, Dar es Salaam and Kampala will still be on the US watch list with the latter saying it will monitor whether the two countries implement the commitments and demonstrate compliance with all of Agoa’s eligibility requirements.
Uganda’s Finance Minister Matia Kasaija in 2016 had increased the rate of the environmental levy imposed on used clothes from 15 per cent to 20 per cent of the cost, insurance freight (CFI) value in a cocktail of taxes in the post-election budget.
This was done after the altering of the Excise Duty Act 2014 to increase taxes in the Finance (Amendments) Bill, 2016.
In their submissions at the review, Tanzania and Uganda argued that the doubling of levies on used clothing imports, from $0.20 to $0.40 per kilogramme was instead realignments with the current value rather than prohibitive tariff increases.
Former permanent secretary in the Ministry of Trade in Tanzania Adolf Mkenda in his submission said that question of an increase or a decrease in tax, duties, fees is a fiscal decision, which has been implemented as part of annual fiscal measure during budget submission and it is a sovereign legitimate budget decision.
Tanzania also argued that the EAC decision is yet to be implemented thereby Smart’s loss of jobs claim cannot be justified.
Statement on suspension of Rwanda’s AGOA eligibility for apparel exports, in response to restrictions on second-hand clothing
The notification by the United States on suspension of duty-free status for Rwandan apparel products under the African Growth and Opportunity Act (AGOA) follows a decision by East African countries to raise tariffs on second-hand clothing imports, in order to promote local manufacturing capacity in garment and other industries.
AGOA is a commendable unilateral gesture to African countries, including Rwanda, meant to promote trade and development through exports. The withdrawal of AGOA benefits is at the discretion of the United States.
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Kenya, Mozambique to revive cooperation
Foreign Affairs Cabinet Secretary Amb Monica Juma and her Mozambique counterpart H.E. Jose Condungua Pacheco on 30 March held bilateral talks on the sidelines of President Uhuru Kenyatta state visit to Mozambique.
The two Ministers held bilateral talks on a wide range of issues of cooperation. The meeting was a follow up to earlier discussions between President Kenyatta and his host President Filipe Nyusi which directed the Ministers to fully engage in the areas of cooperation between Kenya and Mozambique.
During the meeting, it was observed that the Joint Cooperation Commission (JCC) entered into and signed in 1991 had not taken off. The State Visit had provided a new opportunity to operationalise areas of cooperation between the two countries earlier discussed. The joint JCC will now translate into Joint Technical Committees (JTC) that will commence work immediately in preparation for talks to be held in Nairobi in June 2018.
Minister Pacheco thanked Kenya for the pledge to open a consulate in Maputo to further deepen the ties that exist between the two countries, and giving citizenship to Mozambicans who lived in Kenya and now form the 43rd tribe of Kenya.
On Defence pact, it was agreed that Kenya will provide training opportunities for the Mozambican army through the National Defence College (NDC) and National Staff College. On their part, Mozambique said that they were ready to cooperate and share their experiences on defence matters.
On mineral resources, Minister Pacheco disclosed that they have huge deposits and reservoir of natural gas in the southern region of the country most of which is exported to South Africa. Mozambique invited Kenya to consider importing the gas. Mozambique also has huge deposits of coal and is ready to export it to Kenyan through Beira Port.
As part of President Uhuru Kenyatta’s Big 4 Agenda, Amb Juma said the President has made a commitment for the government to increase the GDP share of mining from 7 to 15 percent in the next five years. Through cooperation in mining, therefore, Kenya will borrow best practices from Mozambique.
On the issue of correctional services, Mozambique expressed interest in learning the best practices on Kenya’s Justice Reforms system. Mozambique seeks training on how to manage the reintegration process practised in Kenya.
The two Ministers also discussed areas of cooperation in infrastructure, culture and tourism, youth and sports, bilateral air services and food security. Mozambique invited Kenya investors in Agribusiness to take advantage of the available vast tracts of land for floriculture, apiculture and horticulture farming and processing within the value chain.
To increase the volume of trade between the two countries, CS Juma, urged Mozambique to take advantage Kenya’s scrapping of visa requirements for Mozambicans travelling to Kenya which takes immediate effect.
Presidents Kenyatta, Nyusi root for a strong private sector partnership
Presidents Uhuru Kenyatta and Filipe Nyusi have assured their commitment to facilitate the private sector to thrive in Kenya and Mozambique.
Addressing a joint Kenya-Mozambique business forum in Maputo, President Kenyatta and President Nyusi voiced their support to grow the private sector in the two friendly countries.
President Kenyatta acknowledged that the private sector was the true driver of economic growth, saying his administration has taken the necessary steps to streamline rules and procedures to ease business operations.
“And we, in Kenya, are doing everything we can to ensure we create an enabling environment. We are keenly focused on improving our ease of doing business index. We have simplified the procedures and the rules to make it easier for businesses to operate because we believe if businesses succeed, Kenya succeeds,” President Kenyatta said.
President Nyusi encouraged members of the Kenya business community to set shop in Mozambique as a step towards deepening relations between the two countries.
Rooting for increased intra-Africa trade, President Kenyatta called for increased partnership between Kenyan and Mozambican business communities.
He expressed the need for African countries to look at themselves as a continent of potential and a market of over 1.2 billion people instead of seeing themselves in isolation as small countries.
“And if we did this, this would facilitate large investments, it would facilitate job creation because today we are exporting our jobs. We are exporting our jobs to China and to other markets because we, ourselves, have not been able to open up our markets in order to attract the kind of capital that we need to be able to create those jobs here on the continent,” President Kenyatta said.
The Head of State said the signing of the African Continental Free Trade Area (AfCFTA) treaty by 44 African nations in Kigali, Rwanda, last week was a landmark step towards making it easier for business people to freely move with their goods and services across the continent.
“I believe this presents a great opportunity for our private sectors to grow as we aim to push and to deepen both investment and trade across the African continent,” President Kenyatta said.
He said closer partnerships between members of the private sector in Africa were key to helping countries to achieve their social and economic dreams.
“The private sector is the key for people to people exchange. It is the key to economic growth and through the private sector, you help us deliver jobs and prosperity for our respective nations,” the President said.
President Kenyatta singled out the extractive industries, the blue economy, tourism and agriculture as some of the key areas that the Kenyan and Mozambican private sectors could set up joint ventures.
“Kenya stands to benefit greatly from your understanding of the extractive industries. Kenya stands to benefit considerably from importing coal and natural gas to power our energy sector,” President Kenyatta told the Mozambican captains of industry.
He added: “Kenya also stands to benefit from your experiences and your investment in our growing mining sector – you are well ahead of us in that area and we believe we can gain a lot from the investment that can be obtained from Mozambique in these sectors in Kenya.”
President Kenyatta said while the continent’s forefathers struggled for independence, the new generation of leaders have an obligation to turn the political self-determination into economic liberation.
“And, that I believe, can only come through the same partnership that existed when our forefathers struggled for political independence. It is our partnership as the new generation of leaders that will bring the economic independence that Africa so greatly desires,” President Kenyatta said.
Cabinet Secretaries Amb. Monica Juma (Foreign Affairs and International Trade), Adan Mohamed (Industrialization and Enterprise Development) and the head of the Confederation of Business Associations of Mozambique (CTA), Mr Agostinho Vuma, were among the key speakers at the business forum.
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Access to education, skilled jobs creation can accelerate poverty reduction and inequality in South Africa
Accelerating poverty and inequality reduction will require a combination of policies that promote inclusive growth through boosting access to education and skilled jobs creation, according to a recently released report produced jointly by the World Bank, South Africa Department of Planning, Monitoring and Evaluation (DPME) and Statistics South Africa (Stats SA).
The report, Overcoming Poverty and Inequality in South Africa: An assessment of Drivers, Constraints and Opportunities, documents the progress the country has made in dealing with poverty and inequality since the dawn of democracy in 1994. It provides an analysis of the different forms of poverty and inequality drivers and constraints, as well as opportunities presented particularly by the labor market. Where applicable, South Africa is compared to peers in terms of income levels.
“Government has a huge interest in finding effective and sustainable solutions to the problems of poverty and inequality in our country,” Dr. Nkosazana Dlamini-Zuma, minister in the Presidency for Planning, Monitoring and Evaluation, said during the recent report launch.
The report comes at a time where the country is facing the triple challenge of persistently high poverty, inequality and unemployment, despite much progress made by the government in tackling this challenge since 1994. In 2015, 55% of the population South Africans were poor, living below the national upper-bound poverty line of ZAR 992 per person/per month. In addition, with a per capita consumption Gini coefficient of 0.63 in 2015, South Africa is one of the most unequal countries in the world. Furthermore, unemployment reached 27.7% in the third quarter of 2017.
The report finds that although poverty in South Africa has fallen since 1994, it remains high for an upper middle-income country at 18.8% in 2015, when using the international poverty line of $1.90 per day. In contrast, per capita consumption inequality is stubbornly high and has increased since 1994.
Not only does South Africa lag its peers on levels of inequality and poverty, the report notes that it also lags peers on the inclusiveness of consumption growth. The consumption expenditure growth of the bottom 40% of the population between 2006 and 2015 was lower than that of the total population and below growth in other middle-income countries.
Use of different dimensions of inequality shows that, by any measure, South Africa is one of the most unequal countries in the world. Wealth inequality is very high in South Africa, even higher than consumption inequality, and has been growing over time, the report shows. The richest top 10%account for 71% share of household wealth, while the bottom 60% account only for 7% of the net wealth, according to the report.
Similar statistics for Organisation for Economic Co-operation and Development (OECD) countries suggest that, on average, the top 10% of the wealthiest households own 50% of total wealth, while the bottom 60% own only 13%. Ownership of financial assets features prominently among the factors that influence wealth inequality, the report says, and race and human capital (education) have very high returns for wealth generation, even higher than in the case of income or consumption inequality.
The report also finds that wage inequality is also very high, compounded by heavy polarization between two extremes. South Africa’s obstinately high wage gaps are associated with the skills premiums and differences between unskilled, semi-skilled, and high-skilled workers.
The report argues that South Africa has a skills mismatch and a structural unemployment problem with many workers who do not possess the skills employers demand. This has resulted in high demand for high-skilled workers and the subsequent increase in their wages while the wages for semi-skilled workers has stagnated, leading to a tremendous wage polarization and the emergence of a “missing middle” which has contributed to the increase in wage inequality.
According to simulations done in this study, at the current economic growth trajectory of 0.3% in 2016/2017, South Africa will not create sufficient jobs to reach its target outlined in the National Development Plan to eliminate poverty and inequality by 2030. The report calls for interventions that simultaneously stimulate growth and reduce inequalities, arguing that they are likely to have much more impact than interventions that only stimulate growth or only reduce inequalities.
“We see from this report that improving the lives of the poor could be achieved through creating quality jobs and providing better earning opportunities through developing skills and raising labor productivity,” said Paul Noumba Um, World Bank Country Director for South Africa. “As the World Bank we stand ready to support South Africa in its efforts to tackle the triple challenge of high poverty, high inequality, and high unemployment.”
The report also shows that the nature of drivers of poverty and inequality has changed over time with the role of skills and labor market factors growing in importance while the role of gender and race, though still important, having declined. Labor market incomes were an important source of poverty reduction between 2006 and 2015 with 58.3% of the poverty falling due to the labor income increase.
Furthermore, the report notes an improvement in skills and education were instrumental for poverty reduction in South Africa, although returns to education, especially to the semi-skilled occupations, have been decreasing in recent years.
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tralac’s Daily News Selection
Africa’s partnerships with the EU, India: key updates
(i) AU Executive Council adopts the African Common Position for negotiations of a new cooperation agreement with the EU. In the same spirit, another highlight of the AfCFTA week was the Executive Council’s unanimous decision to adopt the African Common Position (pdf) for negotiations of a new agreement of cooperation with the European Union on the future of AU/EU post 2020. As the expiry date of the Cotonou Partnership Agreement approaches in February 2020, reflections between Africa and the EU have been under way to determine the nature, outline and configuration of a more appropriate framework for future post-2020 relations. As such, the adopted African Common position recommends that the new agreement with the European Union should be separated from the ACP context and based on a strong and sustainable continent-to-continent partnership that revolves around the AU and the EU.
The new agreement should also reaffirm the interdependence between Africa and Europe, as well as the development of modern political dialogue, based on equality, equity, mutual respect and the shared responsibility of both continents. It should be based on African priority development pillars and revolve around the following seven elements: structural transformation of economies and inclusive growth; people-centred development; migration and mobility; peace and security; science, technology and innovation; the environment and climate change; governance, human rights and natural resource management, while also not failing to consider the already existing bilateral agreements between the EU and Africa, including those of North Africa, South Africa and other African countries. [Downloads: Decisions of the 18th Extraordinary Session of the Executive Council]
(ii) Deepening Africa-India Trade and Investment Partnership: a joint African Trade Policy Centre, Confederation of Indian Industry report. In the present report (pdf), the effects of mega-regional trade agreements, particularly the Regional Comprehensive Economic Partnership – a proposed free trade agreement involving India – on Africa-India trade relations, are examined. There is a legitimate concern about market loss and trade diversion. RCEP, is expected to erode preferences and increase competition for African countries in the Indian market, which in turn, could undermine the benefits for them stemming from the Duty Free Tariff Preference Scheme. Meanwhile, our analysis clearly demonstrates that the establishment of the AfCFTA would be critical to mitigate the negative effects expected to be brought about by RCEP on African economies. Moreover, AfCFTA would provide a strong basis for the industrialization and structural transformation efforts in Africa as it would boost intra-African trade and the continent’s industrial content. The establishment of AfCFTA also offers important opportunities for Indian firms and investors, as it would provide a potentially larger, unified, simplified and more robust African market to tap into.
As a matter of fact, only after the establishment of AfCFTA would Africa and India be in a position to effectively enter into an economic integration partnership implying market access reciprocity. It is explicitly illustrated in the report that deepening integration between Africa and India would generate significant benefits for both partners. Such gains could even help to rebalance the composition of traded products by presenting opportunities to exploit value chains and enhance the structural transformation. Also, in the report, disablers and enablers to India’s trade and investment with Africa are further elaborated.
(iii) Connecting Africa: role of transport infrastructure. According to the ICA, India’s commitment to African infrastructure projects more than doubled to $1.2bn in 2016 from $524m in 2015. The largest portion of Indian commitments went to transport ($513m), followed by energy ($422m) and water ($262m) projects. The Export-Import Bank of India has been among the principal agents for supporting India’s development partnership with the African continent in the infrastructure sector. India’s transport network is among the largest and densest in the world. In order to support its rapidly growing economy, the Government of India has implemented a number of mechanisms in terms of new funds, institutions and agreements for upgrading its transport network. These mechanisms could be useful for transport infrastructure upgradation in Africa’s case, as both regions has similar features like a growing population, increasing economic growth, and huge land area, among others. [Note: The Working Paper, March 2018, can be downloaded from the Working Paper tab, here]
What investors want: perceptions and experiences of multinational corporations in developing countries (World Bank)
Through interviews with 754 executives, the survey finds that political stability and a business-friendly regulatory environment are the top two factors influencing multinational corporations’ investment decisions in developing countries. Investors seek predictable, transparent, and efficient conduct of public agencies. The survey results also show that investors are heterogeneous, and their perceptions vary with motivation and size. Multinational corporations that are involved in efficiency-seeking investment are more selective than investors motivated by other considerations, and that relatively smaller multinational corporations are more sensitive to host country characteristics and investment climate factors than large firms.
AfCFTA updates from Harare, Kampala:
(i) Confederation of Zimbabwe Industries: insights from a AfCFTA briefing. Speaking at a breakfast meeting hosted by the CZI yesterday, AU trade advisor, Brian Mureverwi said South Africa and Egypt wanted stricter rules of origin: “Rules of origin are a stumbling block. South Africa and Egypt want strict rules of origin.” Basically, if the threshold is increased, import-dependent countries like Zimbabwe would lose out as that would mean most of the products would have to be locally manufactured in order to be duty free if traded within Africa. While this would force the country to increase production, at the current state of local industry it is nowhere near having capacity to manufacture locally for a large part of the goods traded in the continent.
Industry, Commerce and Enterprise Development ministry permanent secretary, Abigail Shonhiwa said certain countries wanted to increase the 35% threshold. “The lower the threshold, the easier it is and the higher the threshold the harder it is. If you now set the threshold at 50% where 50%, of the product has to originate from the country that exports, then it sets a higher threshold and it is usually much more difficult to reach a higher threshold than a lower threshold if you see what I mean,” she said.
(ii) Uganda and the AfCFTA: Private sector fear for future as govt defends Africa trade area deal. Presenting the government position on AfCFTA in Kampala yesterday, the minister of Trade, Ms Amelia Kyambadde, said: “With the integration of the African continent, Uganda stands to benefit from expanded trade, increased production capacity and creation of employment. We are immediately targeting livestock products notably dairy and beef, coffee, tea, iron and steel, while in the services sector we shall target education, tourism, business services and infrastructure services.”
However, in an interview yesterday, Mr Gideon Badagawa, the Private Sector Foundation Uganda executive director, said the deal was not only ambitious, but its success and failure will demand more than just signing documents. The chairman of the Kampala City Traders Association, Mr Everest Kayondo, said Uganda and other EAC member countries risked becoming supermarket. Uganda Manufactures Association manager policy and advocacy, Mr Lawrence Michael Oketcho, said there was need for a strategy that will give clear guidelines on how to go about this ambitious agreement. [Global Trade Review : Lack of trade finance will limit benefits of Africa free trade deal]
South Africa: Tripartite Free Trade Agreement to be tabled before Parliament (SAnews.gov.za)
International Relations and Cooperation Deputy Minister Luwellyn Landers says government is in the process of submitting documentation and the Tripartite Free Trade Agreement to Parliament for ratification. Deputy Minister Landers said on Tuesday [with respect to rules of origin]: “The danger we face, which we have to guard carefully against, is when a product purportedly comes from Zambia but it comes from another country outside the African continent, let’s say from England, from Canada or France or Russia or China, then the rule of origin kicks in because that product does not come from an African country, the provisions of the agreement does not apply to that product. The danger to the labour movement is not only here in South Africa, but to countries in Africa – I have referred to the Zambian example. Zambian workers would lose because that product comes from another country outside the continent. They would not have participated in the manufacture of that product and therefore, you will find that job losses would occur and as a consequence, the Free Trade Area Agreement would fall apart. So I would strongly urge people in the labour movement to become involved in the discussion in Parliament when the agreement is tabled in that fashion.”
South Africa: Listeria takes a bite out of trade as countries ban SA’s processed meat (Fin24)
The Department of Trade and Industry told a joint sitting of Parliament’s portfolio committee on health and portfolio committee on agriculture, forestry and fisheries that more than six countries have banned products from South Africa in light of listeriosis concerns. Chief director of international trade and economic development Niki Kruger told Parliament WTO countries under the Sanitary and Phytosanitary measures were entitled to ban products from a country in light of concerns for infection. “We have been exporting $18m or R210m to countries like Lesotho, Mozambique, Namibia and Swaziland. There are R100m worth of exports in sausages alone that have been affected as a result of countries banning our products,” said Kruger. [Download the presentation, pdf]
Bitange Ndemo: Sour facts that blight local sugar industry (Business Daily)
The committee’s findings were startling. Their report revealed that “the average cost of producing one tonne of cane in Kenya is $22.5 while that of the region’s is as low as $13 per tonne. The average cost of producing a tonne of sugar in Kenya is $870 compared to $350 in Malawi and $400 in Zambia, Swaziland and Egypt and $450 in Sudan. The cost of production in Brazil is $300, up from $270 three years ago.” With the signing of the historic African Union free trade agreement, the odds of producing sugarcane in Kenya are simply against the country. There is a need to rethink a new path. Perhaps we could consolidate the factories and change the business model. As it stands, it is an exercise in futility to consider reforms within the current state of affairs. Certainly, Governor James Ongwae should abandon his dream of hiving off forestland to build a sugar factory.
Jordanian-Kenyan Business Forum: Jordan should exercise caution as it forges new trade partnerships (Jordan Times)
Establishing a Jordanian-Kenyan free zone in Aqaba would boost trade exchange with many African countries; however, the project has to be well studied to avoid unfavourable fallouts, Jordanian economists said. State Minister for Investment Affairs Muhannad Shehadeh said that the zone aims to create Kenyan and joint investments to boost trade exchange with Kenya and other African countries. Shehadeh said that the two countries were negotiating customs incentives agreements to increase the trade volume, which is still low at $14m a year. The agreement would help the Kingdom enter Kenya, which, in turn, would be a gateway to other African countries, the minister was quoted by Petra as saying. Reaching out to African trade partners has been part of a plan to open new markets after Jordan’s traditional markets and trade routes have become almost blocked due to regional political instability.
Today’s Quick Links: South Africa’s merchandise trade statistics for February 2018: trade balance shifts to R0.43 billion surplus Introducing the EU-SADC EPA: download the presentations from a recent workshop on Maseru Singapore-based Olam: ”There’s a strong growth pipeline for the next 20-30 years that we can see in Africa, as it has happened in Vietnam or Indonesia, or China. We think that as the African population grows and the economics improves, we could really shift to higher protein.” South Africa-based Massmart to open 20 stores in pan-African expansion: ”This year alone we will be opening eight new stores on the African continent. In the next three years we’ll be expanding our retail trading space by 35.6%...When we talk about growing our business across sub-Saharan Africa, that definitely includes Francophone Africa.” French phone carrier Orange, which invests about 1 billion euros in Africa each year, will focus on markets where it already has a presence rather than expand to new countries. It will also concentrate on bedding down recent acquisitions, such as those in Sierra Leone, Burkina Faso and Liberia, which represent 8% of Orange’s revenue, account for about a third of its global growth. The Brazil Africa Institute opens its first African office – in Ghana: It will draw up a strategic plan for the potential opportunities for Brazilian companies with the African continent, and vice versa, in different areas and facilitate socio, political and cultural rapprochement between Brazil and the African continent. |
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South Africa Merchandise Trade Statistics for February 2018
South Africa’s trade balance swings to surplus in February
South Africa’s trade balance shifted to R0.43 billion surplus in February of 2018, compared to a downwardly revised R27.1 billion deficit in the prior month, and above market consensus of a R3.0 billion deficit. It was the smallest trade surplus since November of 2015.
Imports declined 16.5 percent month-over-month to R90.2 billion in February of 2018, mainly due to lower purchases of machinery and electronics (-25 percent); mineral products (-16 percent); vehicles and transport equipment (-17 percent); chemical products (-12 percent); base metals (-24 percent) and original equipment components (-13 percent). The most important import partners were: China (18.6 percent of total imports), Germany (10.8 percent), the US (5.5 percent), Saudi Arabia (5.3 percent) and Nigeria (4.9 percent).
Exports rose 12.0 percent month-over-month to R90.6 billion, mostly due to higher sales of vehicles and transport equipment (117 percent); precious metals and stones (14 percent); machinery and electronics (25 percent) and prepared foodstuff (18 percent). Main export partners were: China (9.3 percent of total exports); Germany (7.7 percent); the US (6.4 percent); Japan (4.8 percent) and Botswana (4.6 percent).
Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country posted a trade deficit of R6.6 billion in February.
The South African Revenue Service (SARS) today released trade statistics for February 2018 recording a trade balance surplus of R0.43 billion. These statistics include trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
The year-to-date (01 January to 28 February 2018) trade balance deficit of R26.69 billion is a deterioration on the deficit for the comparable period in 2017 of R7.59 billion. Exports year-to-date grew by 3.1% whilst imports for the same period showed an increase of 14.0%.
In line with international statistical best practice, the Trade Statistics published by the SARS are subject to revisions as new information becomes available on an ongoing basis. The January 2013 to January 2018 export figures have been adjusted by R16.67 billion resulting in the revision of the trade balance for the affected years as shown in the table below.
The R16.67 billion adjustment is as a result of revisions to the gold exports by the South African Reserve Bank (SARB), which supplies the gold export data to SARS. These gold revisions have been published by the SARB in the March 2018 Quarterly Bulletin.
Cumulative Trade Balance after SARB adjustments
Calendar Year
|
Exports (R’bn)
|
Imports (R’bn)
|
Trade Balance (R’bn)
|
SARB Adjustment (R’m)
|
Adjusted Exports (R’bn)
|
Adjusted Imports (R’bn)
|
Adjusted Trade Balance (R’bn)
|
2013
|
929
|
998
|
-69.19
|
1 275
|
930
|
998
|
-67.92
|
2014
|
1 001
|
1 083
|
-82.70
|
9 287
|
1 010
|
1 083
|
-73.41
|
2015
|
1 036
|
1 088
|
-52.20
|
-8 142
|
1 028
|
1 088
|
-60.34
|
2016
|
1 100
|
1 099
|
1.03
|
16 177
|
1 116
|
1 099
|
17.20
|
2017
|
1 187
|
1 107
|
79.86
|
-2 299
|
1 185
|
1 107
|
77.56
|
2018
|
171
|
198
|
-27.06
|
371
|
171
|
198
|
-26.69
|
Total
|
5 424
|
5 574
|
-150
|
16 670
|
5 440
|
5 574
|
-134
|
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R0.43 billion trade balance surplus for February 2018 is attributable to exports of R90.59 billion and imports of R90.16 billion. Exports increased from January 2018 to February 2018 by R9.74 billion (12.0%) and imports decreased from January 2018 to February 2018 by R17.82 billion (16.5%).
Exports for the year-to-date (01 January to 28 February) grew by 3.1% from R166.28 billion in 2017 to R171.45 billion in 2018. Imports for the year-to-date of R198.14 billion are 14.0% more than the imports recorded in January to February 2017 of R173.88 billion, leaving a cumulative trade balance deficit of R26.69 billion for 2018.
On a year-on-year basis, the R0.43 billion trade balance surplus for February 2018 is a deterioration from the surplus recorded in February 2017 of R4.12 billion. Exports of R90.59 billion are 4.6% more than the exports recorded in February 2017 of R86.58 billion. Imports of R90.16 billion are 9.3% more than the imports recorded in February 2017 of R82.46 billion.
January 2018’s trade balance deficit was revised downwards by R0.54 billion from the previous month’s preliminary deficit of R27.66 billion to a revised deficit of R27.12 billion as a result of ongoing Vouchers of Correction (VOC’s).
Trade highlights by category
The main month-on-month export movements: R’ million |
||
Section:
|
Including BLNS:
|
|
Vehicles & Transport Equipment
|
+R6 716
|
+117%
|
Precious Metals & Stones
|
+R1 844
|
+14%
|
Machinery & Electronics
|
+R1 493
|
+25%
|
Prepared Foodstuff
|
+R 589
|
+18%
|
Base Metals
|
-R1 122
|
- 9%
|
Total
|
+R9 520
|
98%
|
Total Movement |
+R9 739 |
100% |
The main month-on-month import movements: R’ million |
||
Section:
|
Including BLNS:
|
|
Machinery & Electronics
|
-R6 053
|
- 25%
|
Mineral Products
|
-R3 209
|
-16%
|
Vehicles & Transport Equipment
|
-R1 438
|
-17%
|
Chemical Products
|
-R1 359
|
-12%
|
Base Metals
|
-R1 339
|
-24%
|
Original Equipment Components
|
-R1 004
|
-13%
|
Total
|
-R14 402
|
81%
|
Total Movement |
-R17 815 |
100% |
Trade highlights by world zone
The world zone results from January 2018 (revised) to February 2018 are given below.
Africa:
Trade Balance surplus: R15 074 million – this is an improvement of R5 800 million in comparison to the R9 274 million surplus recorded in January 2018.
America:
Trade Balance deficit: R 528 million – this is an improvement of R1 655 million in comparison to the R2 183 million deficit recorded in January 2018.
Asia:
Trade Balance deficit: R14 303 million – this is an improvement of R10 442 million in comparison to the R24 745 million deficit recorded in January 2018.
Europe:
Trade Balance deficit: R6 951 million – this is an improvement of R8 671 million in comparison to the R15 622 million deficit recorded in January 2018.
Oceania:
Trade Balance deficit: R 107 million – this is an improvement of R 955 million in comparison to the R1 062 million deficit recorded in January 2018.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for February 2018 recorded a trade balance deficit of R6.69 billion. This is a result of exports of R80.09 billion and imports of R86.78 billion.
Exports increased from January 2018 to February 2018 by R8.31 billion (11.6%) and imports decreased from January 2018 to February 2018 by R18.29 billion (17.4%).
The cumulative deficit for 2018 is R39.98 billion compared to R20.45 billion deficit in 2017.
Trade highlights by category
The main month-on-month export movements: R’ million |
||
Section:
|
Excluding BLNS:
|
|
Vehicles & Transport Equipment
|
+R6 514
|
+134%
|
Precious Metals & Stones
|
+R1 380
|
+ 10%
|
Machinery & Electronics
|
+R1 318
|
+ 28%
|
Prepared Foodstuff
|
+R 581
|
+ 27%
|
Mineral Products
|
-R 474
|
- 2%
|
Base Metals
|
-R1 345
|
- 12%
|
Total
|
+R7 974
|
96%
|
Total Movement |
+R8 309 |
100% |
The main month-on-month import movements: R’ million |
||
Section:
|
Excluding BLNS:
|
|
Machinery & Electronics
|
-R6 153
|
- 25%
|
Mineral Products
|
-R3 220
|
- 16%
|
Chemical Products
|
-R1 490
|
- 14%
|
Vehicles & Transport Equipment
|
-R1 437
|
- 17%
|
Base Metals
|
-R1 381
|
- 25%
|
Original Equipment Components
|
-R1 004
|
- 13%
|
Total
|
-R14 685
|
80%
|
Total Movement |
-R18 292 |
100% |
Trade highlights by world zone
The world zone results for Africa excluding BLNS from January 2018 (Revised) to February 2018 are given below.
Africa:
Trade Balance surplus: R7 955 million – this is an improvement of R4 848 million in comparison to the R3 107 million surplus recorded in January 2018.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for February 2018 recorded a trade balance surplus of R7.12 billion. This is a result of exports of R10.50 billion and imports of R3.38 billion.
Exports increased from January 2018 to February 2018 by R1.43 billion (15.8%) and imports increased from January 2018 to February 2018 by R0.48 billion (16.4%).
The cumulative surplus for 2018 is R13.29 billion compared to R12.86 billion in 2017.
Trade Highlights by Category
The main month-on-month export movements: R’ million |
||
Section:
|
BLNS:
|
|
Precious Metals & Stones
|
+R 464
|
+1118%
|
Base Metals
|
+R 222
|
+ 41%
|
Vehicles & Transport Equipment
|
+R 202
|
+ 23%
|
Machinery & Electronics
|
+R 175
|
+ 13%
|
Textiles
|
+R 131
|
+ 35%
|
Total
|
+R1 194
|
84%
|
Total Movement
|
+R1 429
|
100%
|
The main month-on-month import movements: R’ million |
||
Section:
|
BLNS:
|
|
Chemical Products
|
+R 131
|
+ 25%
|
Textiles
|
+R 126
|
+ 33%
|
Live Animals
|
+R 120
|
+ 38%
|
Machinery & Electronics
|
+R 100
|
+ 48%
|
Prepared Foodstuff
|
+R 44
|
+ 13%
|
Precious Metals & Stones
|
-R 108
|
- 15%
|
Total
|
+R 413
|
87%
|
Total Movement |
+R 476 |
100% |
Related News
Tripartite Free Trade Agreement to be tabled before Parliament
International Relations and Cooperation Deputy Minister Luwellyn Landers says government is in the process of submitting documentation and the Tripartite Free Trade Area Agreement to Parliament for ratification.
The Deputy Minister said this when he fielded oral questions during the Peace and Security Cluster’s question and answer session at the National Council of Provinces on Tuesday.
This comes after President Cyril Ramaphosa led a South African delegation to the African Union Extra-Ordinary Summit in Rwanda, where he signed the Kigali Declaration on the establishment of the African Continental Free Trade Agreement.
Addressing the Fourth Annual Ubuntu Awards last week, the President said the South African government has, after signing the Kigali Declaration, undertaken to ratify all related instruments in accordance with the country’s domestic laws and process.
Deputy Minister Landers said on Tuesday: “South Africa signed the Tripartite Agreement during the sixth Tripartite Sectorial Ministerial Committee meeting in July 2017.
“So far, 22 countries have signed the TFTA agreement. For the TFTA to be implemented, it requires 14 countries to ratify it and so far, only two countries – Uganda and Egypt – have ratified.
“South Africa is in the process of submitting the relevant documentation and agreement to Parliament for its ratification,” he said.
The Minister said South Africa participates in trade-related multi-lateral organisations with the objective of promoting South Africa’s National Development Plan, the United Nations Sustainable Development Goals, or agenda 2030 and the African Union Agenda 2063.
“This involves strengthening of mutually beneficial, regional and international relations and negotiating structures aimed at advancing South Africa’s global competitiveness and its trade industrial and economic development objectives,” he said.
The Tripartite Free Trade Area Agreement is the initiative between three regional economic communities in the Eastern and Southern Africa.
The TFTA is anchored on three pillars – market integration, infrastructure development and industrial development.
“This was based on the recognition of the importance of a developmental integration approach which does not only focus on market access, but also addresses the productive capacity and infrastructure constraints of both the region and the continent,” the Minister said.
Calls for labour movement, stakeholders to make Parliamentary submissions
The Deputy Minister said, meanwhile, that what the agreement seeks to do is liberalise trade between countries on the African continent to cut back on things like tariffs.
He said one of the strong points that the Minister of Trade and Industry Rob Davies has emphasised strongly is what he calls the rule of law of origin.
What this means is that partner countries would need to ensure that localisation is prioritised and that they guard against products from countries outside the African continent from being traded under the agreement as this could lead to job losses.
“The danger we face, which we have to guard carefully against, is when a product purportedly comes from Zambia but it comes from another country outside the African continent, let’s say from England, from Canada or France or Russia or China, then the rule of origin kicks in because that product does not come from an African country, the provisions of the agreement does not apply to that product.
“The danger to the labour movement is not only here in South Africa, but to countries in Africa – I have referred to the Zambian example. Zambian workers would lose because that product comes from another country outside the continent. They would not have participated in the manufacture of that product and therefore, you will find that job losses would occur and as a consequence, the Free Trade Area Agreement would fall apart.
“So I would strongly urge people in the labour movement to become involved in the discussion in Parliament when the agreement is tabled in that fashion.”
AU Executive Council adopts the African Common Position for Negotiations of a new cooperation agreement with the European Union
March 21st, 2018 marked a historical day for Africa in its vision to build an integrated, prosperous and peaceful Africa with the signing of the African Continental Free Trade Agreement (AfCFTA) by 44 African countries. This was a strong and loud message to the World that Africa is able to come together as One and speak in One Voice.
In the same spirit, another highlight of the AfCFTA week was the Executive Council’s unanimous decision to adopt the African Common Position for Negotiations of a New Agreement of Cooperation with the European Union on the future of African Union/European Union relations Post-2020. As the expiry date of the Cotonou Partnership Agreement approaches in February 2020, reflections between Africa and the EU have been under way to determine the nature, outline and configuration of a more appropriate framework for future post-2020 relations.
In this context, an adhoc working group composed of the Permanent Representatives’ Committee (PRC) in Addis Ababa, Ethiopia; the African Group of Ambassadors in Brussels, Belgium; the African Group of Ambassadors in Geneva Switzerland and the African Union Commission’s technical Department of Economic Affairs was put in place by H.E. Moussa Mahamat Faki to lead efforts in drafting and presenting a Common African Position proposal to the Executive Council for the upcoming negotiations with the European Union.
The revision of the partnership with the European Union is an opportunity for Africa to capitalize on the experiences of the past and to define a single, strong and sustainable cooperation policy framework for continent to continent cooperation with Europe, based on values, interests and aspirations that unite us and actively participate together in global discussions.
This new agreement must reaffirm the vision of the African continent to build an integrated, prosperous and peaceful Africa, led by its own citizens and representing a dynamic force on the international political scene through the effective implementation of Agenda 2063.
As such, the adopted African Common position recommends that the new agreement with the European Union should be separated from the ACP context and based on a strong and sustainable continent-to-continent partnership that revolves around the AU and the EU.
The new agreement should also reaffirm the interdependence between Africa and Europe, as well as the development of modern political dialogue, based on equality, equity, mutual respect and the shared responsibility of both continents.
It should be based on African priority development pillars and revolve around the following seven elements: structural transformation of economies and inclusive growth; people-centred development; migration and mobility; peace and security; science, technology and innovation; the environment and climate change; governance, human rights and natural resource management, while also not failing to consider the already existing bilateral agreements between the EU and Africa, including those of North Africa, South Africa and other African countries.
Africa has devoted to negotiate South-South partnership on a sovereign basis with the Caribbean and the Pacific based on existing partnership models.
Building on a longstanding cooperation and with a view of deepening high-level dialogue and cooperation on a citizen-driven pan-African agenda of integration and transformation, the adoption of the African Common Position for negotiations of a new Agreement with the European Union is the first step towards a win-win discussion with the European Union.
Following the adoption, it was convened by the meeting that the next steps will consist of establishing a Group of Negotiators; developing a negotiation strategy by the African Union Commission by May 2018. An official presentation of the African Common Position will be made at the 107th Session of the ACP Council of Ministers in Lomé, Togo on 29 May 2018.
Background
The ACP-EU Partnership Agreement, more commonly known as the Cotonou Partnership Agreement, is a partnership agreement between African, Caribbean and Pacific developing countries and the EU which was signed in Cotonou on 23 June 2000 for a 20-year period from 2000 to 2020. Since its adoption, it has been the framework for relations with 79 countries from Africa, the Caribbean and the Pacific (ACP) and the European Union and was based on three development three pillars such as Development cooperation, Political cooperation, Economic and trade cooperation. In 2010, ACP-EU cooperation was adapted to new challenges such as climate change, food security, regional integration, State fragility and aid effectiveness.
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Deepening Africa-India trade and investment partnership
Africa and India are increasingly becoming more prominent partners in each other’s trade with significant growth in the market shares of their respective imports and exports. The advent of globalization and increased trade integration has strengthened trade between the two partners. There is recognition on both sides of the importance of the other as a market and as a long-term trade partner, especially with regard to global value chains.
Trade and investment between India and Africa is hampered by structural and institutional problems ranging from bureaucratic hurdles to limited infrastructure. In multiple reports, various bottlenecks that Indian investors face in Africa and vice versa have been identified. Those obstacles, however, have not stood in the way of efforts to keep up the momentum for strengthened India-Africa trade and investment partnerships. India has become one of the largest investors on the African continent, as a result of the country’s efforts to make trade and investment an integral part of diplomatic policies that guide relations between the two partners.
Data indicate that there is a concentration of exports from both sides to the other in particular sectors. Whereas exports from India to Africa are dominated by manufactured goods and to a lesser extent by refined petroleum products, African exports to India are essentially primary products.
Precisely, the latter are largely concentrated in fuels (particularly crude oil), which also had been the case throughout the period 1995-2015, with the trend becoming more pronounced after 2005 and even more so following the economic and financial crisis of 2008. The share of exports of fuels from Africa of total exports to India averaged 45 per cent annually for the period 1995-2005 and jumped to an average of 77 per cent for the period 2006-2015 on the back of a strong increase in crude oil prices and the dramatic growth in fuel demand in India.
India has introduced the Duty Free Tariff Preference Scheme, a comprehensive scheme for African least developed countries, which, as shown in this report is underutilized. This is not to say that it has not had a positive impact, but there are hurdles that are preventing the countries specified under the scheme to take full advantage of it. Notably, non-tariff barriers, such as technical standards, constitute important constraints. As such, there is an identified need to increase capacities in those countries so they can meet international standards and therefore access these markets more successfully.
In the present report, the effects of mega-regional trade agreements, particularly the Regional Comprehensive Economic Partnership (RCEP) – a proposed free trade agreement involving India – on Africa-India trade relations, are examined. There is a legitimate concern about market loss and trade diversion. RCEP, is expected to erode preferences and increase competition for African countries in the Indian market, which in turn, could undermine the benefits for them stemming from the Duty Free Tariff Preference Scheme.
Meanwhile, our analysis clearly demonstrates that the establishment of the African Continental Free Trade Area (AfCFTA) would be critical to mitigate the negative effects expected to be brought about by RCEP on African economies. Moreover, AfCFTA would provide a strong basis for the industrialization and structural transformation efforts in Africa as it would boost intra-African trade and the continent’s industrial content. The establishment of AfCFTA also offers important opportunities for Indian firms and investors, as it would provide a potentially larger, unified, simplified and more robust African market to tap into.
As a matter of fact, only after the establishment of AfCFTA would Africa and India be in a position to effectively enter into an economic integration partnership implying market access reciprocity. It is explicitly illustrated in the report that deepening integration between Africa and India would generate significant benefits for both partners. Such gains could even help to rebalance the composition of traded products by presenting opportunities to exploit value chains and enhance the structural transformation.
Also, in the report, disablers and enablers to India’s trade and investment with Africa are further elaborated. Notably, it has been found that Indian forays into the African market have been aided and abetted by the country’s private sector. While the presence of Indian industries in Africa is not new, some issues have persisted over time. Lack of information is recognized as one of the chief issues followed by lack of basic infrastructure. To overcome those bottlenecks, a few large-scale enablers of Africa–India trade have been identified. African regional integration and the Asia Africa Growth Corridor are the non-traditional enablers noted in addition to the Export-Import Bank of India lines of credit and development assistance extended by the country.
Some of the serious issues that Indian industries face in Africa have been identified based on an internal survey conducted by CII of more than 200 Indian companies. Some of the companies have identified poor regional market integration in Africa as a problem. In particular, poor integration has made it difficult to move products across borders. Based on this, India would likely be supportive of any integration efforts on the African continent, as they would result in various advantages, especially with regards to trade facilitation and the development and upgrading of value chains. Integration would facilitate movement of goods no matter what stage of production the industries are at. In the long run, this would also result in greater value addition within Africa and lower transaction costs as moving products across borders would become cheaper.
The non-traditional enablers are particularly significant because they have political backing at the highest level on both sides. The Asia-Africa Growth Corridor is noteworthy as India and Africa are not the only players involved in the initiative, Japan is also a partner country. In addition, the initiative is open ended in that other interested countries can also participate in it. Under this initiative, there is greater focus on domestic accountability and ownership of projects. Furthermore, the risks are spread across at least three government entities and any other business players involved, making investment in Africa more attractive. It should be noted that as the initiative is supported by the Governments of Japan and India, the adverse effects associated with political risk are alleviated, which have been identified by Indian companies as a hindrance to trading in Africa. Under the Asia-Africa Growth Corridor, risk is spread out and therefore shared, thus the burden of loss on any single entity is reduced. The initiative also fits the bill of development for “mutual benefit”, the line adopted by the Government of India for all its development cooperation projects.
On the Indian side, suggestions have also been made regarding how the Export-Import Bank of India lines of credit can be better used. The availability of lines of credit is viewed as an important tool for development finance. A study completed by the Observer Research Foundation provides an explanation on how the lines of credits are demand-led loans. This implies that the country to which the loan is being extended identifies the project or industry that will receive this transfer. The projects are meant to enhance the “developmental process in the host country”. They are intended to draw on the experience of India while increasing the country’s presence in Africa as a partner in development. Accordingly, more efficient use of the lines of credit is in the best interests of all stakeholders involved. This implies that there is urgent need to ensure that information on the lines of credit is correctly disseminated, as a better understanding of how to apply for and use them would ensure that productivity losses are kept at a minimum.
Another point of discussion in the report is on how to make development aid from India more focused and therefore more feasible and relevant. This, as noted in the report, needs to be done by setting up stronger bilateral ties rather than trying to address the issue at the multilateral level. Many experts have identified areas of cooperation for India and Africa, ranging from infrastructure to energy security. In that regard, a lot of ground has been covered but a lot more can be done. Some experts have noted the potential of civil society in efforts to encourage more policy dialogue. The scope for diversification is linked to the possibility of increasing the role that small and medium-sized enterprises play. This would include readdressing the framework for private investment on both the Indian and the African side.
The report also contains three case studies on the following topics: the potential for cooperation in agriculture in Zambia; the need for reform in the telecom sector in Africa, discussing the case of Airtel; and the importance of building basic infrastructure as seen through the experience of Kirloskar in Africa.
Based on the case studies, some general and specific conclusions have been reached. Foremost is the recognition that addressing the basic infrastructural lacuna is necessary in order to realize the true potential of Africa-India trade. African countries have limited productive capacity and suffer from a significant infrastructure deficit, which limits exploitation of their trade preferences. One approach to help overcome this would be for African countries to develop and apply strategies aimed at identifying and resolving binding constraints on exports by offering targeted policy options in selected sectors.
Generally speaking, there is no doubt that there is much more potential in Africa-India trade than what is currently realized. To overcome the hurdles identified, a concentrated response is needed from governments and regulators. Knowledge asymmetry has been created because of inefficient dissemination of information. This has resulted in unnecessary hindrances to trade and investment between India and Africa, which stems from the incomplete understanding that the two sides have about each other’s markets. There is also the matter of harmonizing standards and easing regulations to lower transaction costs of doing business with Africa. Greater levels of government involvement on both sides are also necessary to reduce risks.
All in all, more collaboration between governments and industry is necessary to enable Africa-India trade to be further galvanized and offer a viable model for enhanced South-South cooperation looking forward.
This report has been prepared by the African Trade Policy Centre (ATPC) of the Economic Commission for Africa (ECA) and the Confederation of Indian Industry (CII). It was written by Simon Mevel, Economic Affairs Officer, ECA and Jhanvi Tripathi, Associate Researcher, International Trade Policy, CII.
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Connecting Africa: Role of transport infrastructure
Africa, the world’s second largest and second most populous continent in the world, with a land area of 30.4 mn sq km, is a market of 1.2 billion people and an estimated GDP of US$ 2 trillion in 2017. According to the African Economic Outlook 2018, real GDP in Africa is estimated to have increased to 3.6 percent in 2017, from 2.2 percent in 2016, reflecting sound macroeconomic policies, and progress in structural reforms.
Africa also has the advantage of a young and growing population and is projected to have the fastest urbanization rate in the world. Africa also has a huge potential to develop a strong manufacturing sector, which could play a significant role in the economic development of the continent, which include creating employment opportunities, catering to domestic demand, and generating exports surplus, among others.
However, Africa is yet to climb the value chain of mineral processing and manufacturing, which would help the region to unlock its full potential of natural resources. One of the major factors that restrict Africa from reaching the global value chain is the huge deficit in infrastructure sector.
Growth, Trade and Infrastructure in Africa
According to the Office of the Special Advisor on Africa, the United Nations, approximately 60 percent of the continent’s population lacks access to modern infrastructure, which isolates communities, prevents access to health care, education and jobs, and impedes economic growth. Inadequate infrastructure is a major deterrent for Africa to achieve its full growth potential. Hence, meeting the demand for key infrastructure, both physical and social is a priority area for the countries in the region.
Various reports indicate that inadequate transport infrastructure adds around 30-40 percent to the costs of goods traded among African countries. Since Africa is home to 16 landlocked countries, poor and underdeveloped transport infrastructure limit accessibility to consumers, hamper intra-regional trade and drive up import and export costs. A better transport and logistics infrastructure provide efficient transport services to other sectors apart from mining and natural resources, resulting in a better standard of living for its citizens by bringing agricultural and manufacturing products to market.
Although African Governments, financial institutions and the private sector have played instrumental role in boosting regional integration, the levels of continental integration have remained relatively low. Intra-regional exports stood at 17.7 percent of the total exports of Africa in 2016, increasing from 11.7 percent in 1996. This is almost insignificant compared to 55.2 percent of intra-regional exports in case of America, 59.4 percent in Asia, and 68.7 percent in Europe. Infrastructure insufficiencies play a major role in hindering Africa from fully reaching its potential – trade and growth.
Transport and Insurance Cost in Africa
According to UNCTAD, low-income economies, landlocked developing countries and small island developing states face relatively higher transport costs than other economic groupings. Average transport costs represent around 21 percent of the value of imports for LDCs, 19 percent for landlocked developing countries and almost 22 percent for small island developing states, against the world average of 15 percent in 2016. According to OECD, there is a strong case for promoting intra-continental trade visà-vis inter-continental trade from cost perspective. Inter-continental trade increases transport and insurance costs by 2-4 percent as compared to comparable intra-continental trade. This supports the role of a better transport infrastructure to facilitate this trade.
Transport Demand in Africa
Total trade of Africa has increased three-fold to US$ 830.9 billion in 2016 from US$ 235.5 billion in 2001, with 2.2 percent share in global exports and 2.9 percent share in global imports. Total international freight demand in Africa is based on its international trade which has grown at a CAGR of 8.2 percent during 2001 to 2016. The increase in global trade depends on smooth, fast, and less costly mode of transportation. The African gateways have grown substantially both for freight and passengers, supported by growing international trade of the region. This requires African transport network to expand to handle the increased traffic growth.
Current Infrastructure Investment Requirements in Africa
Annual infrastructure requirement estimates for Africa by various institutions vary from US$ 93 billion by the World Bank, US$ 100 billion-US$ 150 billion estimates by JICA, US$ 174 billion by G-20 and US$ 130 billion - US$ 170 billion by the African Development Bank. All the estimates suggest that maximum requirement would be in power and transport sectors.
Infrastructure Financing Trends in Africa
During 2016, US$ 62.5 billion new commitments were made to Africa’s infrastructure sector- both at national and regional level, a decline of around 21 percent compared to US$ 78.9 billion committed in 2015. Budget allocations from African national Governments accounted for the bulk of infrastructure financing commitment at US$ 26.3 billion (42.1 percent share) in 2016. External finance commitments witnessed by Africa in 2016 is the lowest since 2010, mainly due to a US$ 14.5 billion reduction in reported Chinese funding and a US$ 4.9 billion fall in private sector investment. The members of Infrastructure Consortium for Africa (ICA) comprising the AfDB, Development Bank of South Africa (DBSA), European Commission (EC), European Investment Bank (EIB), G8 countries, the Republic of South Africa and the World Bank Group accounted for 29.8 percent of the financing in 2016.
Out of the US$ 62.5 billion committed to Africa’s infrastructure in 2016, West Africa received US$ 16.3 billion of commitments, followed by East Africa with US$ 13.1 billion and North Africa with US$ 12.9 billion. Southern (excluding the Republic of South Africa) and Central Africa received US$ 6.5 billion and US$ 6.3 billion, respectively, while the Republic of South Africa received US$ 5.9 billion. Intra-regional and pan-African commitments amounted to US$ 1.4 billion in 2016. In 2016, the largest financial commitments in Africa were in the transport sector (share of 39.1 percent), followed by energy sector (31.9 percent), water (16.8 percent), multi-sector (4.5 percent), and ICT (2.6 percent).
Investment commitments to the transport sector fell sharply in 2016 to US$ 24.5 billion, compared with US$ 32.4 billion and US$ 34.4 billion recorded in 2015 and 2014, respectively. In 2015, transport sector benefitted from strong Chinese support, whereas budget allocations to transport sector from national governments peaked in 2014. African national governments continued to be the prime funders of the transport infrastructure in 2016. Out of the US$ 24.5 billion committed to the sector in 2016, 59.6 percent was provided by national governments, followed by ICA members (20 percent). Chinese funding to the sector fell considerably from 28 percent in 2015 to 4.1 percent in 2016. India’s financing of African transport sector recorded a significant increase in 2016, with a commitment of US$ 513 million, which is roughly 2.1 percent of the total commitments to the sector.
Across the regions, West Africa received the highest level of transport commitments in 2016 (26.9 percent of the total), compared with 2015, when East Africa was the top region for transport with US$ 11.8 billion, or more than one-third of commitments.
Public Private Partnership in Infrastructure Financing
A PPP project involves financing from various sources, in some combination of equity and debt, and the ratios of these different contributions depend on negotiations between the lenders and the shareholders. The main forms of financing include equity contributions, debt contributions, bank guarantees/ letters of credit/ performance guarantees, bond/capital markets financing and mezzanine/subordinated contributions.
According to the World Bank, in 2016, Africa recorded 17 PPP infrastructure projects amounting to US$ 4.2 billion, lower than the US$ 8.0 billion in 2015 for 27 projects. The Sub-Saharan Africa received 14 infrastructure deals totaling US$ 3.9 billion. This include nine projects in energy sector, two in transport sector and three in ICT. Uganda was the most active country with four projects, followed by Ghana with three projects, and Senegal with two projects. Similarly, North Africa recorded 3 PPP projects amounting to US$ 246 million in 2016. Egypt got investment commitment towards two projects in energy sector, with Djibouti getting investment for an ICT project in 2016.
Aid for Trade in Promoting Infrastructure in Africa
Africa remains one of the key recipients of Aid for Trade funds. A major share of disbursements under Africa’s Aid for Trade have been made towards economic infrastructure and productive capacity. In 2015, global Aid for Trade disbursements stood at US$ 39.8 billion and disbursements to African countries reached a record high of US$ 14.1 billion. Given the large infrastructure needs of the continent and the cost-intensive nature of infrastructure projects, economic infrastructure sector dominates Africa’s Aid for Trade Projects. It accounted for 55 percent of total disbursements to Africa, followed by building productive capacities (42 percent) and trade policy and regulations sectors (3 percent). At sub-sectoral level, economic infrastructure funding is almost evenly divided between transport and storage (26 percent of total) and energy (27 percent).
Project Finance for Financing Infrastructure
Project finance is a financing structure that is used by the capital markets to finance large, risky projects or initiatives. Project finance is commonly used to finance long term projects such as infrastructure. Global Project Finance amounted to US$ 230.9 billion from 765 deals in 2016, lower than US$ 277.5 billion from 799 deals recorded in 2015. Africa’s project finance totaled US$ 5.8 billion from 23 deals in 2016, lower than US$ 11.3 billion from 25 deals recorded in 2015. Africa recorded a marginal 2.5 percent share in global project finance in value terms.
Other Modes of Financing
African countries attract new financing into infrastructure sector through various modes including PPPs and local and international capital markets. There are various innovative routes to finance the regional infrastructure in Africa, and the continent has already adopted several of these in its efforts towards infrastructural upgradation. Some of the prominent financing mechanisms are: infrastructure bonds, international bonds, loan guarantees, private equity and investment banks, pension funds, sovereign wealth funds, and financing by regional economic communities. AfDB has suggested other innovative methods of financing in Africa including project puttable bonds, debenture structure, outputbased long-term PPP agreements and managed colending portfolio program.
AfDB‘s Role in Transport Sector Financing
Between 1967 and 2017, AfDB has financed over 450 transport projects amounting to more than US$ 30 billion. Morocco and Tunisia were the countries with the most financing for transport, receiving US$ 2.7 billion and US$ 2 billion, respectively. At the sub-regional level, East Africa received the maximum finance, with more than a billion dollars of transport project financing being provided to Kenya, Tanzania and Ethiopia. It was followed by West Africa, with Côte d'Ivoire receiving the maximum financing with the recent urban transport megaprojects. Among the sub-sectors, maximum number of financing went to road projects, with more than 40,000 km of roads having been paved with the Bank's financing. African ports have also received significant financing for creation, expansion or modernization of ports and for shipyard development.
India’s Role in Africa’s Infrastructure Sector
According to the ICA, India’s commitment to African infrastructure projects more than doubled to US$ 1.2 billion in 2016 from US$ 524 million in 2015. The largest portion of Indian commitments went to transport (US$ 513 million), followed by energy (US$ 422 million) and water (US$ 262 million) projects. The Export-Import Bank of India (Exim India) has been among the principal agents for supporting India’s development partnership with the African continent in the infrastructure sector.
EXIM Bank’s Working Paper Series is an attempt to disseminate the findings of research studies carried out in the Bank. The results of research studies can interest exporters, policy makers, industrialists, export promotion agencies as well as researchers. However, views expressed do not necessarily reflect those of the Bank.
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South Africa: Update and responses on the listeriosis outbreak
The Departments of Agriculture, Forestry & Fisheries, Health, and Trade & Industry briefed the Joint Portfolio Committee Meeting on the Listeriosis Outbreak on 28 March 2018.
While meat legally placed on the market has been inspected and passed as safe for human consumption at abattoirs and processing plants, care must be taken by consumers to ensure that there is no post-production contamination of the meat and that the meat is properly cooked and kept in a hygienic environment and correct temperatures. Consumers are urged to observe the sell-by and use-by date for ready-to-eat products.
As communicated previously by the Minister of Health: Dr Aaron Motsoaledi, three (3) meat processing facilities have been implicated in the current outbreak and therefore several actions have been undertaken at these facilities, which include closure of the facilities, suspension export certification and recalling of the implicated products.
The Minister of Trade and Industry, Dr Rob Davies, confirmed that immediately upon being informed of the affected products, the necessary notice to recall the affected products were issued by Government through the National Consumer Commission. Samples have been taken at these facilities, and confirmatory tests conducted to determine whether or not Listeria found is in fact the sequence types which are of public health concern at the moment.
The affected facilities will be monitored for implementation of corrective actions and once all the relevant regulatory authorities are satisfied with the measures taken, they will be permitted to continue their operations.
Further investigation on the origin, including Mechanically Deboned Meat (MDM), of the Listeria sequence types of concern is underway. The Minister of Trade and Industry highlighted that if imported products are found to be the origin of the current Listeriosis outbreak, swift action will be taken to protect the food safety in South Africa. Currently, imported MDM is being sampled for microbial contamination and since the beginning of March 2018 the testing regime also includes Listeria.
The Minister of Agriculture, Forestry and Fisheries, Mr Senzeni Zokwana, stated that he was informed by the National Agricultural Marketing Council (NAMC) that it is still early days to fully assess the impact of listeriosis on the food basket and that the impact of product recalls might only be evident within the next three to four months.
Government remain concerned about agricultural commodities, including meat and meat products unrelated to the current outbreak of listeriosis and even fruits and vegetables from South Africa that are being banned from being imported and taken off the retail shelves in countries to which South Africa export such products. This is a concern since these products do not pose any risk to the consumers and have been certified safe for human consumption by our competent certifying official veterinarians.
The safety of meat produced in South Africa was clarified by the Minister of Health, to his SADC counterparts at a meeting of SADC Ministers of Health held in Kempton Park in Gauteng on the 15th March 2018 to update them on the Listeriosis outbreak in the country and to develop a common approach to combatting this illness across the region. We continuously provide the relevant information to our trade partners and therefore implore them not to instate unfair bans on South African products.
As a collective we want to express our support for the leadership of the Department of Health in interventions to protect human health from unsafe food products. We will continue our participation in the Public Health Emergency Coordinating Committee (PHECC) and the Multi-Sectoral National Outbreak Response Team (MNORT).
We appeal to all the role players involved in the value chain, from primary producers, processors and retail distributors to continue to work with government to ensure that this outbreak is brought under control.
Issued jointly by the Departments of Agriculture, Forestry & Fisheries; Health; and Trade & Industry.
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tralac’s Daily News Selection
AfCFTA updates:
(i) Posted by the AU: pdf Decision on the draft agreement establishing the African Continental Free Trade Area (138 KB)
(ii) Kenya’s Cabinet has approved the Africa Continental Free Trade Area treaty and the Tripartite FTA for ratification by parliament
(iii) Dr Francis Mangeni: Africa’s free trade bloc – challenges, road ahead
Forty-four countries signed the agreement, establishing ACFTA. Eleven countries did not, including Nigeria and South Africa, which was a setback, but the two big economies are expected to sign in due course. The 44 countries, who include Kenya and Egypt, account for 38% of intra-Africa exports and 47.2% of intra-Africa imports, according to current figures from the COMTRADE data base. South Africa accounts for 34% and Nigeria 9%. Of Africa’s total GDP at purchasing power parity in dollar terms of $6.7 trillion (nominal GDP is $3.3 trillion), the 44 countries that signed the ACFTA account for 65.1%, of which Egypt accounts for 18.9%. South Africa and Nigeria account for 11.9% and 17.6% respectively.
Evidently then, the absence of Nigeria and South Africa from ACFTA, together accounting for 43% of intra-Africa imports and 29.5% of Africa’s GDP, remains a matter of some concern. A first challenge for the ACFTA then is to get Nigeria and South Africa to sign the Agreement. Nigeria is undertaking internal consultations among stakeholders. What might be important is to clearly explain the flexibilities in the agreement and the 10% list of excluded and sensitive products, amounting to about 600 products, as adequate to protect domestic industries; as well as the vast export and investment opportunities in Africa to follow up and utilise.
(iv) Dr Ibrahim Assane Mayaki, CEO of NEPAD Agency: The AfCFTA is another significant milestone towards Africa’s integration
(v) Former President Olusegun Obasanjo comments on the failure of President Muhammadu Buhari to sign the AfCFTA agreement. “That President Buhari didn’t sign the free trade agreement in Kigali is disappointing; I hope he signs it before it is too late. Egypt started the discussion on the formation of the Organisation of African Unity but didn’t conclude it and Nigeria took over. Nigeria was also central to the discussion of the free trade agreement, but I am surprised that the country withdrew from signing.”
(vi) Tope Babalola on Nigeria and the AfCFTA: An epic tale of developing cold feet
(vii) Peter Sinkamba, president of Zambia’s Green Party asks of the AfCFTA summit: Is the PF government participating legally or illegally?
Next Einstein Forum in Kigali: Circular economy will spur Africa’s transformation – experts (New Times)
At a panel discussion at the ongoing Next Einstein Forum in Kigali, experts reiterated the need for African economy to build industrial synergy that facilitates efficient resource use. The panel explored Africa’s low carbon circular economy. “Circular economy is not only about job and economic growth, it’s also about our environment and our health,” said Ana Therese Ndong-Jatta, Regional Director of the UNESCO Eastern Africa. Rocio Diaz-Chavez, Deputy Director of the Stockholm Environment Institute Africa Centre, noted that there are many assessment tools, such as life cycle analysis, which can support Africa’s wide scale transition to the circular economy, which should be utilised more. Rwanda, South Africa, and Nigeria - along with the World Economic Forum - are the pioneers of the African Circular Economy Alliance, which was launched on the sideline of Climate Change conference in Bonn last year. [Related: African leaders push for knowledge-based economy; The Scientific African launched to increase research output; African governments accused of underestimating continent’s tech capability]
Quantum Global Research Lab posts its Africa investment Index 2018 (pdf). An African Business interview with Mthuli Ncube.
Gridlock at Kasumbalesa: COMESA steps in
In the past two weeks, cross border trade at the busy Kasumbalesa border crossing between Zambia and the DRC has been slowly heading to a standstill. This follows delays in transit clearance procedures at both sides of the border causing a massive congestion of trucks including those carrying hazardous cargo. By Friday, 23 March, when COMESA intervened to unlock the impasse, queues at Kisanga on the DRC side stretched for about 70km from the border to the outskirts of Lubumbashi, a situation exacerbated by heavy rains and poor state of the road. Traffic flow had reduced from 1,500 trucks to as low as 350 trucks daily, a situation the COMESA Secretary General, Sindiso Ngwenya described as detrimental to the development of the economies for both countries and the region. “The problem we have here, is simply nonexistence of integration of Customs systems. Once you integrate your systems, these problems will be a thing of the past,” he assured as he constituted a team of experts from the COMESA Secretariat to work with the respective authorities to resolve the current crisis which has caused huge loss of revenue to business people and governments. [East Africa: an overview of recent UNCTAD support to the Central and Northern corridors]
Zambia reviews its trade policy (ZHC, Pretoria)
Zambia’s Commerce, Trade and Industry Minister Christopher Yaluma says his ministry has finished a review of the trade policy, which has now been submitted to ministries for consultations. He said government was developing the revised and stand alone trade policy in order to bring it into tandem with among others, the aspirations of the AfCFTA which Zambia is expected to sign once consultation processes were finished. Once the revised trade policy was approved, it would prevent the dumping of goods and services onto the Zambian market from other countries but enable Zambia become an equal trade partner both at regional and continental level.
Zambia, Senegal’s services sector: case studies in a new UNCTAD report Effective market access for LDC services exports – is the LDC services waiver being implemented?
Why preferential treatment matters: The services sector is a central component of the development aspirations of LDCs, accounting for major contributions to output and export value added. The share of services in direct exports is lower than that of goods, yet the sector remains a key avenue for diversification, as direct exports of services have been more dynamic and resilient than direct exports of goods. In LDCs, between 2008 and 2016, the share of services in total exports rose from 11 to 19%. However, the share of LDC services exports in global exports remains at less than 1%. Extract from the executive summary (pdf): Zambian accountants generally find their neighbouring target markets relatively open, their qualifications recognized. Zambia’s flagship training institution for accountancy (and now many other fields), ZCAS, has a long history of not only training Zambian but also many foreign students, who obtain ACCA-certified qualifications that are widely recognized. However, relevant exceptions apply, not least in one of the most important markets in the region – South Africa. [Note: the Zambia case study begins on p81 of the report]
Growth, safety nets and poverty: assessing progress in Ethiopia from 1996 to 2011 (World Bank)
This paper exploits variation in sectoral growth and public goods provision across zones and time, to examine whether poverty reduction was driven by growth and provision of public goods and what type of growth - growth in agriculture, manufacturing, or services - was more effective at reducing poverty.
Kenya: SGR extension to cover 10 berths at the Mombasa port (Business Daily)
Chinese contractor China Road and Bridge Corporation is set to extend the standard gauge railway line deeper to cover its 10 berths at the Mombasa port. The move is aimed at facilitating easier movement of bulky and heavy goods such as clinker, steel, iron and cement into the SGR. The Kenya Port Authority have been offloading goods via cranes once they land at various berths at the Port of Mombasa and transporting them via trucks to the SGR line. [Container freighters’ plan to ride on SGR to remain in business]
Kenya: Governors cement regional economic bloc agreement (The Standard)
Fourteen governors in the western region have launched an economic bloc to help spur growth. Ten governors who attended the Lake Region Economic bloc meeting on Monday signed draft legal instruments and county assembly bills in Kakamega. The bills and legal documents will be tabled before a summit made up of the 14 governors, awaiting eventual adoption in the respective county assemblies. The British ambassador to Kenya, Nic Hailey, welcomed the initiative as did representatives from the United Bank of Africa and Africa Health and Development International (Ahadi). [George Wachira: Rural counties can spur growth of new industries]
A Nigerian debate on Nigeria, ECOWAS and Morocco: a commentary by Reuben Abati; responses by Okponyia Onyedikachi and Chidi Anselm Odinkalu
Groundswell: Preparing for internal climate migration (World Bank)
This report, which focuses on three regions (Sub-Saharan Africa, South Asia, Latin America that together represent 55% of the developing world’s population) finds that climate change will push tens of millions of people to migrate within their countries by 2050. It projects that without concrete climate and development action, just over 143 million people - or around 2.8% of the population of these three regions - could be forced to move within their own countries to escape the slow-onset impacts of climate change. [UN forum examines role partnerships play in tackling global migration challenge]
Agro-food, tourism and creative industries: an integrated cluster approach (UNIDO)
The relationship between tourism and food as well as the relationship between tourism and the creative economy is well known and has been widely analysed in economic literature. What is less studied is the huge potential of linkages and synergies among agro-food, tourism and the creative industries and how to develop a cohesive policy approach in order to enable integration and convergence among these sectors to take place. The aim of this report (pdf) is to define a theoretical framework to support an ‘integrated cluster’ approach involving agri-food, tourism and the creative industries, which could be replicated in different geographical contexts. [Executive summary, pdf]
Today’s Quick Links: Namibia and the SADC Trade Related Facility project: launch update Angola has ended its two-year currency peg to the US Dollar: an Afreximbank briefing note of the new currency regime (pdf) PIDA Steering Committee meeting was held last week in Nouakchott: an update The GDI annual meeting was held last week in Addis: some of the presentations on the theme, infrastructure development, have been posted A regional dialogue on curbing illicit financial flows from Africa was held last week in Kigali: Financial flows cost Uganda Shs2 trillion SEATINI Uganda workshop to review the Tax Administration Diagnostic Assessment Tool UNCTAD’s Daniel Poon discusses the AIIB’s experiments in scaling-up development finance IMF Note on Global Prospects and Policy Challenges: prepared for the recent G20 Finance Ministers and Central Bank Governors’ Meetings in Buenos Aires |
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Kenyan Cabinet approves Africa free trade treaty for ratification
Cabinet on Tuesday approved the African Continental Free Trade (AfCFTA) treaty for ratification
The Bill for ratifying the treaty, which was signed in Kigali, Rwanda, by 44 African nations, will be presented to Parliament within the next few days following its approval by Cabinet in its first sitting.
The treaty will come into effect after it is ratified by 22 countries and Kenya will be one of the first countries that will adopt the agreement.
The Cabinet which was chaired by President Uhuru Kenyatta and attended by Deputy President William Ruto, urged the private sector to take full advantage of the business opportunities presented by the AfCFTA deal to extend Kenya’s foothold into all the 54 African nations.
“It is a great opportunity to export goods and services to the region and the continent,” the Cabinet said.
The AfCFTA will establish a single liberalized market that will spur industrialization, infrastructural development, economic diversification and trade across the continent that is home to more than 1.2 billion people.
The pact also seeks to promote industrial development through diversification, regional value chain development, agricultural development and food security.
When fully implemented, the treaty is expected to enable residents of all member countries to enjoy the convenience of a single passport and currency.
The trade deal also binds all State parties to eight objectives including the progressive elimination of tariffs and non-tariff barriers to trade in goods.
The signatory State parties are also expected to progressively liberalize trade in services.
Under the agreement, African countries will establish a mechanism for the settlement of disputes concerning their rights and obligations.
The Cabinet also approved for ratification the tripartite free trade agreement bringing together the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC) and the East African Community (EAC).
Cabinet also approved a supplementary budget that continues with austerity measures to control expenditure.
The proposed revision to the financial year 2017/2018 will regularise approved expenditures and ensure micro-economic stability. Further borrowing will be contained and a fiscal deficit of 7.2 percent of GDP will be maintained.
The Cabinet said it was necessary to continue to implement austerity measures in order to ensure Kenya continues to operate within its means.
The Cabinet said more focus will be placed on priority areas especially the Big Four plan for Kenya’s growth.
Also approved by Cabinet was the County Retirement benefits Bill which will establish an umbrella pensions scheme for county employees.
The proposed Bill which will give legal backing to the the defined contribution scheme was also approved for forwarding to Parliament.
Cabinet also discussed the recently released Kenya Integrated Budget Household Survey and agreed to discuss the results in order to determine where special interventions are required.
The survey is undertaken to provide parameters for a wide range of national and county-specific indicators necessary for assessment of the living standards of the population.
It also provides updated parameters for the sharing of national resources as provided in the Constitution.
IGAD congratulates Kenya for approving a bill to ratify the Africa free trade area
The IGAD Secretariat congratulates the Government of Kenya for being one of the first countries to approve the framework establishing the African Continental Free Trade Area (AfCFTA) on 27th March 2018. The quick approval of the bill to ratify the AfCFTA demonstrates the strong political will of the Government and people of Kenya to strengthen inter-African linkages on trade through the elimination of trade barriers to foster a liberalised single continental market.
The AfCFTA framework was signed by 44 African countries, during the 10th Extraordinary Session of the Assembly of the African Union held on the 21st of March 2018 in Kigali, Rwanda with the express goal of creating a single continental market for goods, services and investments. The African Continental Free Trade Area which requires ratification by 22 countries before entering into force seeks to increase intra-African trade by 52%, leading to an increase in industrialisation, job growth, and economic diversification.
The IGAD Secretariat also welcomes the signature of the African Continental Free Trade Area by all Member States of IGAD (Djibouti, Ethiopia, Somalia, South Sudan, Sudan and Uganda) and will endeavour together with the African Union to work alongside its Members States to facilitate efforts to enhance free trade within its respective region and across the continent.
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Gridlock at Kasumbalesa: COMESA steps in
In the past two weeks, cross border trade at the busy Kasumbalesa border crossing between Zambia and the Democratic Republic of Congo has been slowly heading to a standstill. This follows delays in transit clearance procedures at both sides of the border causing a massive congestion of trucks including those carrying hazardous cargo.
By Friday, March 23, 2018, when COMESA intervened to unlock the impasse, queues at Kisanga on the DRC side stretched for about 70 km from the border to the outskirts of Lubumbashi town, a situation exacerbated by heavy rains and poor state of the road. Traffic flow had reduced from 1,500 trucks to as low as 350 trucks daily, a situation the COMESA Secretary General, Sindiso Ngwenya described as detrimental to the development of the economies for both countries and the region.
“The problem we have here, is simply nonexistence of integration of Customs systems. Once you integrate your systems, these problems will be a thing of the past,” he assured as he constituted a team of experts from the COMESA Secretariat to work with the respective authorities to resolve the current crisis which has caused huge loss of revenue to business people and governments.
Speaking after fact finding visit the border accompanied by government officials from both sides, the COMESA Secretary General (SG) appealed to the respective authorities to begin integrating their ASYCUDA World (Automated System on Customs Administration) to resolve the problem.
The border post handles international traffic to and from sea ports in Mozambique, Namibia, Tanzania and South Africa. Five transport corridors; from Beira (Mozambique) Dar es Salaam (Tanzania), Walvis Bay (Namibia) and North South corridors converge at Kasumbalesa, making it one of the busiest border posts in the region. Due to the high traffic volumes, and the absence of a comprehensive Transport and Trade Facilitation programme, delays have become a perennial problem at the border post.
The current congestion is unprecedented and has stretched facilities at the border beyond their limits with crews caught up in the long queues surviving under extreme conditions as there are no facilities on the road sides. Besides, their own safety and that of their vehicles and cargo is compromised.
In 2014, a tragic fire accident involving two fuel tankers led to a fireball that consumed about 50 trucks and deaths of at least four people at Kasumbalesa.
During the visit, it was proposed that all tankers exiting DR Congo, including the empties that transport acid and fuel, should in the interim period use the Mokambo border post in Mufulira district into Zambia to relieve pressure from Kasumbalesa.
Mr Ngwenya observed that the implementation of COMESA Trade facilitation instruments will go a long way in improving performance of Kasumbalesa whose impact in terms of corridor efficiency and competitiveness will benefit the entire region.
Since inception, COMESA has been developing and implementing a number of trade facilitation instruments, some of which have been adopted by other regional economic communities like the East African Community. They include the COMESA Carriers’ License, the COMESA Yellow Card, the Regional Customs Transit Bond Guarantee and COMESA Virtual Trade Facilitation System.
Interview
On Saturday 24th March 2018 the Secretary General of COMESA (SG) during the tour of the Kasumbalesa Border Post conducted interviews with different stakeholders. The objective of the interviews was to find out from the stakeholders the kind of trade facilitation measures they recommended for speedy clearance at the border post.
The most remarkable response was received from, Mr. Jeremiah Mandangu (JM), a driver of a transport company that was taking cargo to D.R. Congo whose comprehensive understanding and technical articulation of the solutions during a two-minute interview was an eye opener in that it exploded the myth that it is only policy makers and technocrats who can come up with solutions.
Below is a transcript of what the driver proposed as a trade facilitation solution which will be broad cast on YouTube and other electronic media in the coming days.
SG: What do you think are the causes for delays at this border post?
JM: Here at Kasumbalesa Border Post there is a big delay, usually about seven days when you are crossing into Congo DR because the Customs authorities on the D. R. Congo side always wait for the Clearing Agents to submit scanned documents which are already on the ASYCUDA system. And this scanning process is usually done at Whisky Customs station which is about 10 kms from the Kasumbalesa Border Post.
I wonder why there seem to be a problem here at Kasumbalesa because when we are leaving South Africa we know that the customs documents are already uploaded on the system and these documents can be easily accessible by all customs authorities in the transit countries. For example, we don’t have a problem when crossing into Zambia from South Africa because the Customs System helps with the pre-clearance procedure even before the arrival of the truck at the border post like Chirundu or Livingstone.
But here at Kasumbalesa, it is strange because there seems to be no pre-clearance procedure for transit goods which I think is not correct, because the system in itself should allow the customs authorities to see the documents online on web-based platform as long as they are connected.
These people here should understand that there is no need to download the documents once it’s uploaded on the system and shall finish every necessary clearance process before the arrival of trucks at the border because that’s what creates the delays. By the way, these delays cost the governments and companies a lot of money. If you delay a truck it means you are delaying revenue collection and adding more cost to the business.
They should understand that the more they facilitate cross border trade, the more they can collect on revenue to grow the economy.
SG: What is the Solution?
JM: To solve this problem, the customs authorities should ensure that this customs data is shared between or amongst the border authorities on the transit corridor through a web based approach. I think it’s simple and applicable.
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Circular economy will spur Africa’s transformation – experts
Adoption of circular economy practices will go a long way in delivering economic growth, jobs and positive environmental outcomes needed for Africa, experts said yesterday.
A circular economy is a reformative system in which resource input and waste, emission, and energy leakage are minimised.
This, according to science, can be achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling.
According to Kathryn Toure, Regional Director for Canada’s International Development Research Center (IDRC) for sub Saharan Africa, circular economy is a concept of reduce, reuse, recycle, remanufacture, repair and continually renew.
At a panel discussion moderated by Toure, at the ongoing Next Einstein Forum in Kigali, experts reiterated need for African economy to build industrial synergy that facilitates efficient resource use.
The panel explored Africa’s low carbon circular economy.
“Circular economy is not only about job and economic growth, it’s also about our environment and our health,” said Ana Therese Ndong-Jatta, Regional Director of the UNESCO Eastern Africa.
Rocio Diaz-Chavez, Deputy Director of the Stockholm Environment Institute Africa Centre noted that there are many assessment tools, such as life cycle analysis, which can support Africa’s wide scale transition to the circular economy, which should be utilised more.
The Minister for Environment Vincent Biruta mentioned that Rwanda is at the forefront of fostering circular economy in the region and beyond.
Rwanda, South Africa, and Nigeria – along with the World Economic Forum – are the pioneers of the African Circular Economy Alliance, which was launched on the sideline of Climate Change conference (COP23) in Bonn last year.
“In order to make effective use of the circular economy, there is a need to build connections between industries to close the production loop. This industrial symbiosis will be key for efficient resource use,” Biruta reiterated.
“Rwanda is working with South Africa, Nigeria, the United Nations Environment Programme and World Economic Forum to develop a continent wide alliance that will spur Africa’s transformation to a circular economy which delivers economic growth, jobs and positive environmental outcomes,” Biruta added.
At the national level, Biruta also noted that Rwanda is “very positive” about the prospects of the circular economy, not only to address environmental issues, but to foster economic growth and job creation.
Coletha Ruhamya, Director General of Rwanda Environment Management Authority (REMA) called on stakeholders to invest in Africa’s scientists and engineers to conduct research for Africa and in Africa if the advancement of the circular economy is to bear sustainable fruits.
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Illicit financial flows cost Uganda Shs2 trillion
African economies, including Uganda, will continue to bleed unless governments plug loopholes that enables illicit financial flows (IFFs) to easily leave the continent, experts have warned.
Global Financial Integrity defines IFF as money that is illegally earned, transferred or utilised. And the High Level Panel report defines it as money illegally earned, transferred or used.
Africa as a whole is estimated to be losing more than $50b in illicit financial flows every year, according to the High Level Panel on Illicit Financial Flows from Africa report.
Uganda alone is estimated to be losing in the excess of Shs2 trillion annually and it is feared that this could get worse once commercial production of oil and gas begins.
Magnitude of loss
The amount lost in illicit financial flows every year is nearly an equivalent of the budget allocated to the Ministry of Works and Transport, which accounts for the lion’s share of the national budget.
The same estimates is also nearly the amount of budget committed to paying off interest accrued on loans that the country has since borrowed.
As for the continent, the High Level Panel report, which was chaired by the former South African President, Thabo Mbeki, indicates that over the last 50 years, Africa is estimated to have lost in excess of $1 trillion in illicit financial flows.
This sum, according to the report is roughly equivalent to all of the official development assistance received by Africa during the same timeframe.
How money is lost
Mostly, IFFs are being perpetuated by the multinational companies in Africa, which through illegal and immoral actions, deny the continent its due share of revenue.
It is normally done through tax evasion, money laundering and false declaration.
Other illegal methods used include overpricing, transfer pricing, tax evasion, money laundering, corruption and false declarations, hampering economic growth and resulting in billions and in some cases trillions in lost tax revenue.
“Commercial activities are by far the largest contributors to IFFs, with more than 60 per cent,” policy, tax and investment expert at Tax Justice Network Africa, Mr Jared Maranga told participants attending the Regional Dialogue on Curbing Illicit Financial Flows from Africa in Kigali, Rwanda.
“This is followed by organised crime, then public sector activities,” he added.
It emerged in his presentation that IFF from Africa is growing at an alarming rate, which is an obstacle to internal revenue mobilisation and subsequently financing development in Africa.
Way forward: Curbing illicit financial flows
Knowledge Management Expert, at the African Capacity Building Foundation, Mr Frejus Thoto in his presentation further emphasised that corrupt practices play a key role in facilitating illicit financial flows.
As a way forward he cited strengthening of technical and human capacity, proper understanding of issues related to IFFs and dealing with financial crimes.
Lack of enough data, he said, and shortage of funding as well as lack of coherence between institutions are the other challenges bedeviling the fight against IFF.
He suggested that capacity to address the drivers of IFFs (poor governance, corruption, weak regulatory structures) be instituted by governments.
The capacity to determine and verify the amount and nature of transactions of revenue officials must also be enhanced.
Escalating the role of Parliament and Civil Society in curbing IFFs from Africa
Promoting increased transparency of decision making on tax and financial transparency
The African Forum and Network for Debt and Development (AFRODAD) in partnership with the Centre for Economic and Policy Priorities (CEPP) held the 2nd Regional Dialogue on Curbing Illicit Financial Flows (IFFs) from Africa from 21-22 March 2018 in Kigali.
Background
United Nations Member States adopted the Sustainable Development Goals (SDGs) in September 2015 as the development blueprint for the next 15 years. SDGs represent a much wider agenda than the original Millennium Development Goals (MDGs), thus the emphasis on the critical need for effective domestic resource mobilization by member states to ensure the attainment of this more ambitious agenda.
The Addis Ababa Action Agenda (AAAA) outcome document identifies domestic public resources as one of the seven action areas under its global framework for financing development post-2015. Furthermore, Agenda 2063 and Agenda 2030 all recommend countries to strengthen domestic resource mobilisation as a means for Africa to become self-reliant and finance its own development.
AFRODAD believes that success in mobilizing domestic resources as a primary source of financing development in Africa hinges on combating illicit financial flows (IFFs) and addressing the ‘natural resource curse’ cataclysm which haunts many mineral resource rich countries in Africa. This is grounded on the AFRODAD 2016-2020 Strategic Plan, whose main goal is to contribute to the development and implementation of transparent, accountable and efficient mechanisms for mobilization and utilization of domestic resources in Africa.
With a view to contribute to the reduction of IFFs from Africa and increase domestic resources for the SDGs, AFRODAD hosts an annual regional dialogue to engage allied Parliamentarians and actors including CSOs from a variety of fields (climate and gender groups, journalists, trade union associations, private sector and religious groups) to share ideas, information, and discuss strategic approaches to halting illicit financial flows from Africa.
AFRODAD efforts are in line with paragraph 23 of the Addis Ababa Action Agenda (AAAA):
“We will redouble efforts to substantially reduce illicit financial flows by 2030, with a view to eventually eliminating them, including by combating tax evasion and corruption through strengthened national regulation and increased international cooperation. We will also reduce opportunities for tax avoidance, and consider inserting anti-abuse clauses in all tax treaties. We will enhance disclosure practices and transparency in both source and destination countries, including by seeking to ensure transparency in all financial transactions between Governments and companies to relevant tax authorities.
We will make sure that all companies, including multinationals, pay taxes to the Governments of countries where economic activity occurs and value is created, in accordance with national and international laws and policies.”
Why combating IFFs from Africa is key?
Volumes of IFFs from Africa are huge and have been increasing over the years. Evidence from literature on the subject of illicit financial flows, including the report of the High Level Panel on illicit financial flows from Africa, argues that if illicit outflows are curbed, and the funds used domestically, the scale of the flows involved will have significant positive impact on development, and reduce Africa’s reliance on aid and external borrowing to finance development.
Currently, illicit financial flows from Africa are estimated to be as much as USD 50 billion per annum. IFFs limit government expenditure on some of the most critical sectors such as health education. Furthermore, IFFs compromises equitable control, access and ownership of natural resources.
It is in this view that combating IFFs remains a prerequisite for effective and efficient domestic resource mobilization and financing sustainable development. There is therefore need to escalate the role of Parliament and Civil society in combating IFFs from Africa.
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AfricaPassportNow! AfroChampions Petition for the creation of a unique African Passport
The petition for the quick creation of a unique African passport is directed to African nationals from the continent and the diaspora and has been launched by the AfroChampions Initiative, as part of its efforts to promote and accelerate Africa’s economic integration.
On 21 March 2018, African Heads of State in Kigali signed the Agreement on the African Continental Free Trade Area. The AfroChampions Initiative considers this reform to be a major step forward for our continent, which will create the free movement of people, goods and investments.
But we want all Africans to benefit as soon as possible from the new opportunities that will come out of AfCFTA – to develop business more quickly across multiple countries, to travel and study across Africa, and to take advantage of opportunities wherever they are on our continent. For this to happen, we need a single African passport – as per the proposal and plan made by the African Union two years ago.
#AfricaPassportNow – this is the name of the campaign launched to accelerate the creation of a single passport for all Africans.
Without regional economic integration, no shared development for our countries. Without possibility for us all Africans to move on the continent, no trade, no knowledge sharing, no joint projects and no economic integration.
Africa’s development requires free movement of Africans!
AfricaPassportNow!
To all Africans,
What we want is:
An African passport to further integrate Africa.
The vision that of the fathers of our independences have outlined for us all is that of an integrated Africa. Today still, our continent remains fragmented, and weakened by prejudices and ideologies resulting from our mutual misunderstanding and lack of knowledge. This African passport will allow us to get closer to each other and become aware of our resources, our talents – and re-join in common hopes. Unity will make us stronger and able to better defeat those political or economic divisions often imposed to us from outside.
An African passport to foster inclusive development.
An African passport means we can each travel freely in each of our countries. It’s about giving a young company the nerve to think bigger and quickly visit potential markets to speed up expansion. It’s about giving our elderly people the opportunity to visit their loved ones elsewhere, or to heal where doctors and good infrastructure are available. It’s about setting up the foundations of a real exchange policy between schools and higher education institutions. It’s about giving an African regional player the ability to become truly “pan-African”. It’s about putting in place the incentives to drive the development of cross-borders and multimodal infrastructures. It’s about giving a boost to many industries – tourism, hotels, road transport, air, services, agroprocessing, education…. The African passport is the strategic tool that make economic development tangible for everyone.
An African passport to send a strong signal to the rest of the world.
The African passport is a message to other regions. To those who regard Africans as a threat, or as a negligible amount or an indistinct group, we will present this passport as a reflection of what we are and what our continent represents. We hope to see this passport eventually recognized at all airports in the world. We will make this passport a tool for transformation. As we helplessly witness our young people risk their lives to settle outside Africa, we must act. The African passport will be a way to make our youth discover the opportunities that exist on the continent, and give it reasons to hope.
An African passport to complement ongoing reforms.
We are launching this petition because the moment has come. The African passport is critical to support on-going pan-African economic policies. Late January, the Open Sky project, which will bring together 23 African countries, was launched. In a few weeks from now the Agreement on the continental Free Trade Area will be signed in Kigali. It is a major economic development for the continent, implementing free movement of goods and capital. Free movement of persons is also planned, starting first with certain categories of economic operators. We want to accelerate this process so that as many people can benefit from it as quickly as possible. Facilitating the movement of those who need to travel to perform their job is necessary – as necessary as opening opportunities for those who do not yet have a job.
Some may express reluctance and highlight the difficulties inherent in the creation of an African passport, including discrepancies between national administrations, which complicate the process, or -heavier- issues resulting from the fight against terrorism. We yet believe that these difficulties can be overcome now – with a clear roadmap, coordination, and ambitious goals in terms of security and traceability of people that the biometric passport can definitely help to achieve.
The African passport will soon become a reality. What we just need is strong political will on this issue – and to that end we are addressing this petition to the African Union and our public decision-makers.
To each and every one of you who feels that the African passport can be a positive instrument for change, we ask to support this project by
- Electronically signing this petition via the form available on this page
- Sharing the link with all your relatives, personal and professional contacts.
- Following and sharing our posts and updates on social media
Until 30 April 2018, 5 weeks of campaign – to exceed, we hope, the bar of a million signatures!
You can make a difference!
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tralac’s Daily News Selection
AfCFTA special selection (2)
Trade and development events to diarise:
2018 Spring Meetings of the IMF, WBG (16-22 April, Washington)
53rd Annual Meeting of the Board of Governors of the AfDB (21-25 May, Busan, Korea)
Annual Bank Conference on Africa: Examining the challenges and opportunities of firms’ productivity in Africa (14-15 June, Stanford)
The 2018 Africa Transport Policy Program AGM (2-6 July, Abuja)
Continuing with our AfCFTA updates:
(i) The Nigerian government is, today, holding multi-stakeholder consultations on the AfCFTA. Follow this @NGRPresident thread for details.
(ii) SA wants more clarity before signing African free trade plan (Fin24). The SA government wants more clarity on details related to the AfCTFA before signing the agreement, says Trade and Industry Minister Rob Davies. He likened the agreement, in its current form, to a circuit board which was missing transistors. At the briefing, Monday, Davies said that several countries signed the free trade document which is about 250 pages long, as well as a protocol on trading goods and services. He pointed out that the agreement was done “remarkably quickly” given the deadline of the summit, and as a result “a lot of work was not completed”, he said. There are a series of annexes and appendices in the agreement which have not yet been legally scrubbed, he said. “We have no problems with the overall broader content of documents. They are a circuit board. You have the board and design, but you do not have transistors and circuits linked up for it to work. Those have to come. There is not a tariff schedule.”
(iii) Kenya: Foreign Affairs CS quells fears over Africa trade deal (Daily Nation). The Foreign Affairs ministry moved to quell fears that a newly signed trade deal could swallow local companies and encourage cross border crimes. Foreign Affairs CS Monica Juma on Monday said the CFTA agreement will be implemented with respect to local laws on investment and security to ensure Kenyans are given priority. “We have been working on robust security frameworks over the last five years. Peace and security is a priority for Kenya, as well as the protection of our territorial integrity,” she told the Morning Show on Capital FM radio. “There should be no fears that foreigners will take our jobs. The department of Immigration has an elaborate system of work permit issuance. No foreigner can own a company 100%. They also can’t get work permits for jobs that can be done by Kenyans.”
(iv) Promoting the AfCTA: AfroChampions Initiative. The AfroChampions Initiative thus becomes an official platform of exchange between the African private sector and the leaders of the AU, in particular its department in charge of Trade and Industry. As part of this roadmap, various awareness-raising and private sector consultation activities will be carried out by the AfroChampions Initiative. This campaign will be structured around 4 projects, including: Research and knowledge sharing to support the African Union’s public policies impacting business. The AfroChampions Initiative’s research center, will share its extensive research work on intra-African investment, trade and African multinationals to inform and support the AU’s interactions and policies.
(v) Irungu Houghton: African common market will boost trade (The Standard). More explicit attention must be placed on the distributional value of the new common market. The interests of South Africa’s MTN, Dangote Cement and Brookside are very different from the millions of small scale farmers, cross-border traders and low skilled workers. These interests combined are very different from China’s Tecno, America’s Google or India’s Bharti Airtel. To industrialise, we must aggressively add value to our crops and raw materials at home. Unregulated market access for non-African companies and countries to dump their finished produce in Africa will betray the real vision of the common market. This market must deliver a prosperous and industrial continent in which all share in the growth. Without this, we will not close the productivity gap between us, the Chinese, Americans and the Europeans. [Houghton is Executive Director, Amnesty International, Kenya]
(vi) EABC moots new strategies to benefit from AfCFTA (New Times). Regional governments should move fast and expedite integration process to give the EAC a competitive edge in proposed continental free trade zone, the East African Business Council leaders have said. However, EABC leaders say the slow implementation of projects expected to improve business climate in the region could put the region at a disadvantage when the treaty finally comes into force. This may leave the region behind if nothing is done to have the projects fast-tracked and late alone cost the region an opportunity to fully participate in the bigger “African market”. Jim Kabeho, the EABC chairman, said EAC states now have no choice, but to fast-track the integration to “ahead of the game”. Felix Mosha, a former EABC chairman, called for research-supported solutions in the integration process. [EABC lauded for championing the private sector at EAC level]
(vii) At a glance: a comprehensive map, via @TradeNewsCentre, of the actors that signed the AfCFTA
(viii) Prof. Landry Signé: African leaders have created the world’s largest free trade area since the WTO. Here’s its potential.
(ix) Financial Times: Pan-African trade bloc faces lengthy obstacle course
(x) Shaping the future of Africa: markets and opportunities for private investors (IFC). The report finds that certain sectors show potential for high growth due to productivity gains or consumer demands. Food production and agriculture stand out in a region that continues to import food while a rapidly urbanizing population requires more choice. Extract (pdf): By 2030, 100 million new people are expected to join Africa’s middle- and high-income groups, boosting them to over 160m across the region. Household spending in Africa is projected to grow at an average rate of 5%, surpassing the 3.8% average growth among other developing countries. The robustness of Africa’s consumption growth potential is present across all sectors (Figure 10). While consumption growth in Africa is expected to exceed 6% in most sectors, spending on transportation and information and communication technologies is expected to grow faster than spending on other sectors. Expenditures on food and beverages - the largest share of total spending for African households - should continue to grow much slower, but will remain the most important component of total household spending. At the country level, Senegal, Mozambique, Rwanda, Niger, and Ethiopia are the leaders in terms of household consumption growth in most sectors (Figure 11). Senegal’s household spending is projected to grow fastest (more than 9%) on transport, education, ICT, and housing, whereas water supply, pharmaceutical products and ICT are the fastest growing sectors in Mozambique.
In other African trade news:
Zimbabwe in $44,4m trade deficit with SA (NewsDay)
Latest data from the Zimbabwe National Statistics Agency shows that Zimbabwe exported goods worth $216,9m to South Africa in February this year against imports of $261,2m, giving a trade deficit of $44,4m. During the same period in 2017, Zimbabwe recorded trade deficit of $14,2m, with imports at $171,2m against exports of $185,4m. South Africa is Zimbabwe’s largest trading partner. [At Africa CEO Forum: ED pledges to remove business restrictions]
Holland overtakes Uganda as top buyer of Kenya goods (Business Daily)
Goods purchased by Ugandan traders fell by nearly Sh1bn in January compared to a year earlier, pushing the country down to third position in the list of top buyers of Kenyan products. Exports to Uganda fell by 21.8% to Sh3.52bn largely on import substitution, data collated by the Kenya National Bureau of Statistics indicate. Uganda, which was last year dethroned by Pakistan as a top buyer of Kenyan goods, was in January overtaken by the Netherlands whose order book is largely made of cut flowers. The order book from the Netherlands rose 10.38% to Sh4.19bn in the month, while those to Pakistan — predominantly black tea — were flat at Sh7.31bn, a 0.02% drop year-on-year. [See Tables 10 to 14c in the KNBS report: Leading Economic Indicator January 2018]
Uganda: Exports to ease as Uganda starts using single customs territory (Daily Monitor)
Clearing exports to various destinations will now take less time as Uganda begins using the Single Customs Territory. The territory was officially rolled out on Monday for the export of commodities via Mombasa Port. The Single Customs Territory was officially launched on Monday, starting with coffee, Uganda’s leading export commodity. Mr Abel Kagumire, the Uganda Revenue Authority manager for customs, said they would start with coffee in the first quarter before moving onto other commodities such tea, fish and skins and hides.
Nigeria signs treaty on acceptable axle load in West Africa (Vanguard)
Minister of Power, Works and Housing, Mr Babatunde Fashola, made this known at a one-day Public Enlightenment on the Developments in the Road Sector, where he presented the Federal Highways (Control of Dimensions, Weights and Axle Load) Regulations 2018. He said: “Sensitising road transporters and imbibing the existing treaty obligations is the only way to optimise the opportunities that lie in road networks like Trans-Saharan highway that connects Nigeria to Chad, Niger, Tunisia, Mali and Algeria; the Lagos- Abidjan Highway through Benin, Togo and Ghana, or the Enugu-Cameroon Highway through Abakaliki – Ogoja, Ikom and Mfum.”
At the global level:
Macro-economic developments and prospects in Low-Income Developing Countries – 2018 (IMF)
The paper examines macroeconomic trends across LIDCs in recent years, contrasting key features of the current situation with the period prior to the 2014 decline in commodity prices. Particular attention is given to the evolution of fiscal positions and public debt levels, including detailed analysis of the drivers of debt accumulation and the current severity of debt vulnerabilities. [IMF Executive Board assessment, Tao Zhang blog]
Assessing the effectiveness of environmental provisions in regional trade agreements: an empirical analysis (pdf, OECD)
The number of RTAs that include environmental provisions has been increasing since the mid-1990s and reached 121 RTAs in force in 2016 with an explicit reference to environmental objectives in the preamble of the agreement. These provisions vary in content and degree of enforcement and have been mainly proposed by developed countries to strengthen stringency of domestic environmental policies of potential RTA Partners. However, despite their increasing importance, the evidence on the impact of including environmental provisions in RTAs on environmental outcomes has been scarce.
UNCTAD has posted the publication Services and Structural Transformation for Development: it reflects the deliberations and results of the fifth session of the multi-year expert meeting on trade, services and development on services, structural transformation and inclusive development. It includes a commentary, Perspective from South Africa, by Sudhir Sooklal (Minister, Economic, Embassy of South Africa to Belgium, Luxembourg, EU)
ITC has launched its e-Trade for Impact strategy: it regroups the focus on digital into three areas and promotes collaboration inside and beyond the organization.
Today’s Quick Links: Uganda spends Shs1.6 trillion to import drugs EU still pushing for EPA deal with EAC South-Sudan finally joins East African Employers’ Organisation South African firms storm Nigeria to shop for business opportunities African energy ministers call for accelerated energy access Mauritius to sign MoU with Zambia Bureau of Standards India, Africa trade can grow 3-fold to $150bn in 5 yrs: Chaudhary Ahmed H Adam: Are we witnessing a ‘new scramble for Africa’? Nigeria: FG signs MoU to enhance return of assets stashed in Switzerland National Economic Council (Special Session): full text of speech by Bill Gates |
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Tribute: Ambassador Tswelopele Cornelia (Connie) Moremi
It is with great sadness that we note the passing of Ambassador Tswelopele Cornelia (Connie) Moremi, the founding Executive Secretary (ES) of the Southern African Customs Union (SACU). Following her two terms as SACU’s Executive Secretary, Ambassador Moremi served as Botswana’s first resident Ambassador in Germany.
Before her appointment to the SACU Secretariat, Ambassador Moremi served her country, Botswana, with distinction in various public service positions. Amongst other senior roles, she served as Permanent Secretary of the Ministry of Commerce and Industry and Chief Policy Advisor to the Ministry. She led the initiative to restructure this Ministry to establish the Ministry of Trade and Industry, and the Ministry of Environment, Wildlife and Tourism.
It was in her capacity as Executive Secretary of SACU that we were privileged to get to know Connie. Her task as the founding ES of the oldest functioning customs union in the world, required strategic leadership. Member States had concluded a new SACU Agreement in 2002, and it entered into force in July 2004. This Agreement provided for a new legal and institutional architecture for the customs union. Connie played a pivotal role in shaping this institutional architecture; and specifically in establishing a functional Secretariat to support the vision of the Member States for the customs union in the 21st century.
Connie’s experience in Botswana had provided her with keen insights into the dynamics of African integration in the 21st century, and the challenges that Member States as diverse as South Africa and Lesotho, face as they work to support their development aspirations in an increasingly integrated sub-region.
The tralac team got to know Connie and to engage with her, on policy and especially international trade law matters, over the decade of her tenure as ES. Connie served our region with commitment and dignity. It’s a great honour to record our appreciation for the role she played and for the privilege of knowing her. We will miss her.
tralac team
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SA keen to sign agreement establishing AfCFTA
South Africa is keen to sign the agreement establishing the African Continental Free Trade Area (AfCFTA), Trade and Industry Minister Rob Davies said on Monday.
“South Africa wants to sign and will sign when this agreement is in a state that enables us to sign,” Minister Davies told a media briefing in Tshwane.
The Minister’s comments come following last Wednesday’s signing by 44 African countries of the agreement establishing the AfCFTA.
The agreement signed by countries, including Niger, Rwanda, Chad and Angola, was signed during the 10th Extraordinary Session of the Assembly of the African Union (AU) on the AfCFTA in Kigali, Rwanda.
South Africa did not sign the agreement but held off on signing until legal and other instruments associated with AfCFTA are processed and ratified by South African stakeholders and Parliament.
At the briefing, Minister Davies said there were a series of annexes and appendices which have not yet been “legally scrubbed”. He said South Africa has no problem with the overall content of the AfCFTA.
“The documents are like a circuit board that is yet to have the transistors in them. They don’t yet have the circuits linked up,” he said, adding that some of the outstanding matters relate to tariff schedules.
“South Africa has a relatively high bar before we can sign an international agreement. That high bar requires that we don’t sign things where there’s a reference to some appendix or annex that is not part of the agreement.”
The work on the annexes is likely to be done by the end of April, after which the documentation will be looked at by lawyers at the Departments of International Relations and Cooperation (Dirco) and Justice and Constitutional Development, among others.
In addition, South Africa wants to participate in the subsequent processes of the AfCFTA, which is aimed at creating a single continental market for goods and services, with free movement of businesses and investments.
The AfCFTA will make Africa the largest free trade area created in terms of the number of participating countries since the formation of the World Trade Organization, according to the African Union (AU).
“We will want to participate in the subsequent processes, which involve important discussion around institutional structure to drive this, the secretariat and how to address the tariff schedule process. The message we want to leave is that South Africa is very much part of this process. We are not holding back. We don’t have reservations or differences,” said the Minister.
Concerns and opportunities
South Africa is concerned that the country does not want to see the agreement becoming a conduit for products coming from outside of the region with low levels of value addition being traded under the terms of the agreement.
Instead, South Africa wants to make sure that the interregional trade it supports is the trade in products that support diversification and industrialisation on the African continent.
The AfCFTA, said Minister Davies, will boost intra-African trade and create a bigger market of 1.07 billion people with a combined nominal Gross Domestic Product of the African continent at US$3.3 trillion.
US tariffs on steel and aluminium products
Turning his attention to South Africa’s position regarding the Section 232 investigation by the US on steel and aluminium products, Minister Davies said South Africa is prepared to engage the US on quotas.
US President Donald Trump signed a proclamation to impose a 10% ad valorem tariff on imports of aluminium products and a 25% ad valorem tariff on steel imports, which took effect on Friday.
The proclamation makes provision for country-based exclusions from the duties, should the US and that country arrive at a satisfactory alternative means to address the perceived threat to national security.
South Africa made its case to the US that its exports of steel and aluminium are a very small proportion of the total imports of these products by the US. In the case of steel this is less than 1% of imports of steel by the US, while for aluminium it’s at 1.6%.
“We are a very small part of the US market. Our products [steel and aluminium] are also not a major part of our overall export basket,” said Minister Davies.
However, he said a number of companies could be significantly affected and that there is a risk of a “few thousand” jobs being lost as a result of the implementation of the tariff measures.
“On the basis of that, we requested that we be exempted. That letter was [sent] on 16 March,” he said.
How exemptions are decided by the US
Last week, Minister Davies held a teleconference on the issue with US Ambassador CJ Mahoney, the Deputy United States Trade Representative for Investment, Services, Labour, Environment, Africa, China and the Western Hemisphere.
Mahoney, who had not yet seen South Africa’s letter, said there are several criteria that the global super power looks at in terms of exemptions that are decided by the US President himself.
Among the criteria is whether or not South Africa is prepared to accept a quota, as well as what South Africa is doing to deal with the global glut of steel in its own market. The US also wants to be assured that if South Africa is given any kind of slack, that it would not be used as a gateway for the trans-shipment of products coming from other third countries.
“This morning, we met with the companies concerned and I can indicate that we are prepared to talk about a quota. Those companies will also be making their own representation,” Minister Davies said.
The Minister, however, would not divulge the names the companies involves.
“What I can say is that we are responding to this to try to ensure that we retain the productive capacity that we already have of companies that are involved in this trade and the jobs in particular that come from this trade,” he said.
A decision on the matter will be taken by the US before the end of April.
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AfroChampions Initiative will work side by side with the African Union to promote the African Continental Free Trade Area
AfroChampions Initiative commits USD 1 million on awareness-raising actions
On the occasion of the AfCFTA Business Forum, the African Union and the AfroChampions Initiative have just released their roadmap for the promotion of the African Continental Free Trade Area. The AfroChampions Initiative thus becomes an official platform of exchange between the African private sector and the leaders of the African Union, and in particular its department in charge of Trade and Industry.
As part of this roadmap, various awareness-raising and private sector consultation activities will be carried out by the AfroChampions Initiative, which announces that it has committed through its members a US$ one million budget for this outreach and advocacy campaign.
This campaign will be structured around 4 projects:
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Enhancing public-private dialogue around the AfCFTA, whose objective is to promote smooth and effective implementation across all the countries and economic actors of the continent. In this context, representatives of the African Union will participate in a series of sensitization meetings with local business communities starting the month of April 2018, to gather questions and concerns about the AfCFTA Agreement. These exchanges will focus on concrete topics of relevance to the private sector including tariffs and non-tariff barriers, rules of origin, free movement of labour and capital, customs clearance, mutual recognition and traceability of products.
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Research and knowledge sharing to support the African Union’s public policies impacting business The AfroChampions Initiative’s research center, will share its extensive research work on intra-African investment, trade and African multinationals to inform and support the AU’s interactions and policies.
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The promotion of intra-African trade and investment, in collaboration with Afreximbank. The African Union Commission and the AfroChampions Initiative plan to work on organizing regular regional meetings to highlight major economic projects that could impact several countries simultaneously.
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Dialogue with civil society. With the conviction that free movement of people is the key to a successful AfCFTA in the long term, the AfroChampions Initiative has just launched the AfricaPassportNow! Campaign, which consists of a citizens’ online petition to Governments speed up the creation of a unique African passport accessible to every African.
“The African Union and the AfroChampions Initiative both share the same mission of Africa’s development,” said His Excellency Mr. Albert Muchanga, Commissioner for Trade and Industry, at the signing of the Memorandum of Understanding. “I believe our collaboration will yield concrete results. I look forward to working alongside these leaders who will bring their rich experience to make the free movement of goods, services and investments a reality and a chance for all Africans.”
“At the AfroChampions Initiative, we’re excited to see that both public and private decision-makers are aligned on the urgency of the continental free trade area,” said Ali Mufuruki, CEO of Infotech Investments group, and vice-chair of the AfroChampions Club Council for Eastern Africa. “We represent businesses and corporate leaders who are committed to working with Governments to make the AfCFTA an instrument of shared growth, capable of strengthening African know-how, creating regional value chains, and facilitating the deployment of African innovations all over the continent.”
About the AfCFTA
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 harmonization and coordination of trade liberalization and facilitation and instruments across the RECs 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.
Under the leadership of the AfCFTA Leader, Mr Mahamadou Issoufou, President of the Republic of Niger, the AfCFTA agreement has been finalised by African Union Ministers for Trade on December 4, 2017. It is expected to be signed and ratified by African Union member states throughout 2018, while discussions will continue on protocol and implementation processes until 2020.
About the African Union and its Department for Trade and Industry
The vision of the African Union is that of: “An integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in global arena.” To help achieving this vision on the economic front, the Department for Trade and industry, under the leadership of Commissioner Albert Muchanga, leads on matters relating to intra-African economic integration, and notably the AfCFTA negotiations in collaboration with other departments in the AUC.
About the AfroChampions Initiative
The AfroChampions Initiative is a public-private partnership designed to galvanize African resources and institutions to support the emergence and success of African private sector multinational champions in the regional and global spheres. The Initiative, driven by the AfroChampions Organization, was founded by the advisory firm Konfidants; and is Co-Chaired by President Thabo Mbeki and Mr. Aliko Dangote, President and CEO of Dangote Group. The Initiative is headquartered in Accra, Ghana, and works with regional and global partners and governments, with the support of other corporate and institutional partners including ADS Group, the Djondo Fellowship, Olusegun Obasanjo Presidential Library and Thabo Mbeki Foundation.
As a strategic platform within the Initiative, the AfroChampions Club, Chaired by Mr Aliko Dangote, seeks to work with African governments to support policies and public-sector innovations that drive African economic integration, regional economic clusters and value chains.
About the AfricaPassportNow! Campaign
The petition for the quick creation of a unique African passport is directed to African nationals from the continent and the diaspora and has been launched by the AfroChampions Initiative, as part of its efforts to promote and accelerate Africa’s economic integration. View the petition here.