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IMF Executive Board 2017 Article IV Consultation with Somalia
On February 21, 2018, the Executive Board of the International Monetary Fund concluded the Article IV consultation with Somalia.
Despite a severe drought and sporadic terrorist attacks, Somalia avoided a significant economic slowdown in 2017 with support from the national and international community.
The authorities’ commitment to the staff-monitored program is strong and they are implementing difficult reform measures.
In 2017, Somalia faced a severe drought and sporadic terrorist attacks. These developments hurt economic activity, particularly in the north of the country and in rural areas, and temporarily impacted the tax collection efforts of the Federal Government of Somalia. However, the authorities have navigated through these challenges and, with sustained national and international community support, the country avoided a severe humanitarian crisis and a significant economic slowdown.
Despite the challenging environment, the Somali authorities remain committed to reform implementation under their program. On June 21, 2017, IMF management approved a second 12‑month SMP covering the period May 2017 – April 2018, following Somalia’s successful completion of its first SMP. The program is designed to help economic reconstruction efforts and assist the country in establishing a track record of policy and reform implementation. We are encouraged by the authorities’ commitment and the pace of reforms to restore key economic and financial institutions, and welcome their efforts to keep the program on track.
The IMF is helping Somalia reach debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative as soon as feasible within established HIPC procedures. The HIPC process is designed to help countries avoid slipping back into arrears while putting them on a path to sustainable debt and reducing poverty. The authorities are normalizing relations with the international community and establishing track record of reform implementation, developing adequate policy instruments, tackling Somalia’s low institutional capacity and fragile security situation to help the country to achieve arrears clearance and debt relief. During this period, Somalia can continue to receive substantial grants from donors. The IMF is also assisting the authorities in addressing outstanding concerns by major creditors, such as weak governance and institutional capacity, and establishing a track record of implementing strong economic policies. Somalia is among the largest beneficiaries of the IMF’s technical assistance (TA) and training work, with 87 TA missions since late 2013.
The authorities are continuing to improve Somalia’s fiscal framework, including its revenue collection performance. They have taken steps to reform the national currency and developing the country’s financial sector. The authorities are also making progress on addressing significant shortcomings in economic data, and making efforts to develop coherent social programs and address corruption.
Staff Report
Economic developments
Economic activity in 2017 is expected to have slowed. The drought that hit the country since late 2016 has receded, but it took a large toll on economic activity, particularly in the remote areas. Reflecting continued slowdown in the agricultural sector, GDP growth is projected to remain subdued at 1.8 percent in 2017 (down from 2.4 percent in 2016). Driven by higher food prices, year-on-year inflation increased to 5.2 percent (4 percent annual average) at the end of December 2017. Reflecting increased food imports and lower exports of livestock, the trade deficit is expected to have widened by 4.3 percentage points of GDP.
At end-September, a small budget surplus was achieved. While domestic revenue fell short of the program target at end September 2017, fiscal operations showed a small surplus ($3.8 million), in part due to a slower-than-expected pace of budget execution. For end-December 2017, based on preliminary information, the implementation of critical tax measures since September together with the higher-than-programmed bilateral grants are expected to have resulted in a budget surplus of about $1.8 million and to have lifted domestic revenue to achieve the program target.
Somalia’s central bank’s balance sheet expanded in the second half of 2017, reflecting mainly a one-off revaluation effect of its property. The SOS/U.S. exchange rate was stable in 2017 at around an average of 23,100.
The financial sector is underdeveloped, but its activities have been increasing. At end-September 2017, the commercial banks’ total assets and credit to the private sector were about 4 percent and 1.3 percent of GDP, respectively. Nonetheless, banks’ assets have continued to improve since 2015, and their capitalization remains broadly adequate. The loan-to-deposit ratio reached 40.1 percent, up from 33.3 percent in September 2016, and credit to the private sector increased to 31.2 percent (as a share of total assets), from 24.8 percent in the previous year. Mobile money and money transfer businesses (MTBs) play a crucial role in providing financial services in Somalia. In 2017, MTBs provided trade finance amounting to about $2.1 billion.
Outlook and risks
Economic activity is expected to recover, and fiscal performance is projected to improve. The drought is receding, and with the support of the international community efforts to contain terrorist attacks have been stepped up. These developments, along with the improved momentum of reforms, are boosting the outlook for economic performance. Growth will recover gradually in 2018-2020 and stabilize at around 2.5-3.5 percent. Inflation will remain low, and the fiscal framework is expected to continue to improve over the near term.
Downside risks are significant. They include the fragile security situation; weak institutional capacity that could result in poor fiscal management and new domestic arrears accumulation; inadequate efforts to tackle serious governance problems; a lack of political consensus among the federal government and the federal member states, which could slow critical reform measures; slow progress in policy and reform implementation, particularly on tax reform and domestic revenue mobilization; and shortfalls in donor support to the FGS. The authorities' continued commitment to the program, and sustained and coordinated international support, would help mitigate these risks.
Policy Discussions
The discussions laid the groundwork for the second and final review under the SMP and were centered on near-term policies to (1) improve the fiscal framework; (2) finish the preparation for the launch of the new national currency; (3) develop the financial sector; and (4) establish the foundations for sustained economic recovery and poverty reduction while strengthening institutions and governance.
Developing Monetary and Financial Institutions
With the launch of the new national currency approaching, stronger resolve to establish proper financial and monetary institutions will be essential.
Currency Reform
The authorities have successfully completed all the measures in the currency reform roadmap, which pave the way for the launch of the new national currency. Among the critical reforms completed, the FGS and the heads of the FMS have agreed – through a signed agreement – to support the reform project, including an effort to combat counterfeiting of the Somali shilling in their regions. The authorities are also preparing an information campaign; a framework for an independent evaluation of the currency reform project; and the budget for the currency reform which will be submitted to donors for funding.
At this stage, currency reform will be limited to Phase I, which involves exchanging the counterfeit currencies in circulation with the new banknotes. The authorities confirmed that there will be no further injection of the new Somali Shillings beyond Phase I and that additional injection of the new currency will only occur during Phase II. They also stressed that: (1) they do not anticipate making any decision about the choice of the future exchange rate regime until Phase II of the currency reform; and (2) they will not intervene in the foreign exchange market which will continue to float freely.
Financial Sector
The financial sector is nascent but plays a critical role in economic activity. Notwithstanding its critical role in the economy, the sector severely suffers from structural problems, including, but not limited to (1) absence of centralized payment and inter-bank payment systems; (2) weak re-licensing, supervision, and regulation of commercial banks and MTBs; (3) shortcomings in the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework and its weak compliance; and (4) a still-weak central bank capacity and widespread SOS counterfeiting.
The authorities are making strong efforts to develop the financial sector. As part of the SMP benchmarks set for end-2017, the authorities prepared a comprehensive financial sector roadmap that highlights the key bottlenecks for financial development and inclusion, and outlines reforms to improve the functioning of the sector, including issues related to the withdrawal of correspondent banking relationships. The Financial Reporting Center (FRC) is now operational and started reviewing suspicious transactions in December 2017. With continued TA from the IMF, progress has been made on developing regulations for financial sector development; building technical capacity in the areas of commercial bank licensing, regulation, and supervision; and improving transparency and sound commercial banking and financial intermediation in Somalia.
The authorities are taking steps to move forward with the needed financial sector reform. They have agreed to (1) fully implement new accounting and financial reporting systems in line with international financial reporting standards (IFRS) and audit functions; (2) make tangible progress on strengthening the governance and organizational structure of the CBS together with its oversight authority; (3) continue to develop the necessary financial regulations and strengthen the annual relicensing process of banks and MTBs; (4) expand on-site examinations of banks and MTBs; and (5) address gaps and overlaps in the AML/CFT framework (Box 2). On the latter, in line with Financial Task Force (FATF) standards, the CBS is planning to finalize the Targeted Financial Sanctions Regulation law. This measure will enable provisions to implement Somalia’s international obligations under UNSCRs 1267, and 1373, and enhance AML/CFT compliance by MTBs. In this context, they will improve the MTBs’ compliance with the AML/CFT regulations and the reporting of suspicious transactions to the Financial Reporting Center (FRC).
Box 2. AML/CFT Regulation and Supervision
Addressing AML/CFT regulatory issues is critical to supporting remittance flows and external financial linkages for Somalia. Remittances make up nearly 40 percent of household income, and the closure of some corresponding accounts has increased costs of transactions over the past several years. Overall, however, costs remain contained and inflows averaged over $1.3 billion per year during 2015-2017.
The authorities have made progress on AML/CFT regulations and supervision over the past few years. The CBS has issued foundational regulations since 2014, including AntiMoney Laundering, Customer Registration, and Operations for MTBs. MTBs’ compliance with AML/CFT regulation is improving and accelerating, supported by regular financial data collection and examination. The CBS is also strengthening the annual MTB relicensing process and on-site examination. In 2017, on-site inspections of the three largest MTBs, representing over 80 percent of transactions, were conducted for the first time.
Despite progress that has been achieved, important gaps remain. Reporting of suspicious transactions needs to improve and the process regularized. Cooperation between the FRC and the CBS needs to be strengthened, and the lack of reliable national identification and business registration systems limits implementing Know Your Customer (KYC). On the legal side, overlaps in the counter terrorism and the AML/CFT Laws, such as the definition of “financial institution” and “property and funds,” need to be streamlined.
The authorities are committed to addressing these gaps. They are strengthening the renewal of MTBs’ annual licenses which will focus on improving MTBs compliance with AML/CFT regulations, including reporting requirements. The authorities are also seeking to improve cooperation between the CBS and FRC, including on effective risk-based AML/CFT supervision. A strategy for a national identification system is being considered with World Bank assistance, and a business registry is under construction.
Establishing the Foundations for Sustained Economic Recovery and Social Inclusion
Complementing the ongoing fiscal and financial sector reform efforts with stronger resolve to tackle bottlenecks to growth will pave the way to sustained economic recovery and social inclusion.
There are pressing needs for developing sustained economic recovery and social inclusion programs for Somalia. The country’s per capita GDP during 2014-2016 was only $515, far below regional peers as well as low-income countries. The following four pillars will remain essential for the country:
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Business environment. The private sector could play a key role in supporting growth and creating jobs, in particular, youth employment which could lower insecurity. However, Somalia’s business environment remains structurally weak as evidenced by the country’s lowest ranking in almost all key pillars of the World Bank Doing Business survey results.
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Governance and corruption. Governance and corruption problems complicate reform and development efforts. The FGS’s efforts to combat corruption are hindered by weak administration and capacity.
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Social spending and safety net. The need for social spending is very large and the FGS’s resources to tackle social needs are very limited. Aside from a small budget to provide for orphans of military personnel and police officers, there is no explicit social safety net program at the FGS level, and budgetary social spending is very low.
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The National Development Plan (NDP). The authorities recognize that the current NDP has several shortcomings, including weak prioritization of development needs and lack of coherent safety net programs; limited sectoral consistency; and poor mapping of costing and financing needs.
A broad-based reform agenda is underway. The authorities have also identified several reform measures, which are listed below, for accelerating economic recovery.
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Business environment. The authorities have stepped up efforts to increase the participation of the private sector role in economic activity. In particular, the recent passage of a foreign direct investment law and adoption of a procurement bill will further accelerate the role of the private sector. While the authorities welcome the inclusion of Somalia in the Global Doing Business Survey in 2017, they recommended that some indicators be treated with caution, given that it is the first time the country is in the survey.
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Governance and corruption. While the authorities took important measures on these fronts, the challenges ahead remain significant. They include weak: (1) tax revenue collection; (2) transparency on fiscal reporting; (3) law enforcement; and (4) compliance with the AML/CFT framework.
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Social spending and social programs. The authorities and staff agreed that the inclusion of social safety net programs in the budget and the development of a medium-term fiscal framework would be essential. This would contribute to poverty alleviation, development of resilience framework against shocks, and contribute to creating jobs.
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The NDP. The update of the NDP will address the weaknesses identified in the current NDP as well as challenges the country faced during the recent drought. It will also include social safety net and job creation programs; and programs on strengthening resilience to natural disasters.
Box 3. Tackling Governance and Corruption
Governance is weak and corruption remains high. Both the corruption perception index of the Worldwide Governance Indicator Control of Corruption Index (WGI CCI) by Daniel Kaufman (Natural Resource Governance Institute and Brookings Institution) and Aart Kray (World Bank) and the Maplecroft Corruption Risk Index (CRI) point to the lowest ranking of Somalia in terms of corruption.
The severity of corruption contributes to the weak economic performance. Somalia’s President was elected, in February 2017, on an anti-corruption platform. While there is a lack of data to adequately assess the scale and the impact of corruption on the Somali economy, the authorities have acknowledged how critical governance and corruption issues are to the country’s economic performance and social cohesion. Greater efforts to address these issues will improve the effectiveness of economic policies, the efficiency of institutions, and the country’s overall economic performance.
The authorities have stepped up efforts to tackle corruption and governance issues. Their efforts include the establishment of a “Delivery Unit “at the Prime Minister’s office to (1) monitor performance of the government’s programs, (2) ensure proper public service delivery, and (3) improve governance at ministers’ levels. Also, the Minister of Finance has initiated several programs to strengthen internal audit functions at the ministry in 2018. An anti-corruption bill has been approved by the Parliament, cash payments have diminished, and electronic payment system has expanded across all FGS agencies. To improve procurement system and government effectiveness, all key government contracts with private enterprises are either under review, canceled, or being renegotiated.
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tralac’s Daily News Selection
The concept note and draft programme for tralac’s 2018 Annual Conference are available to download: The African Continental Free Trade Area – opportunity for Africa
tralac’s Weekly e-Newsletter is posted: Willemien Viljoen discusses how the AfCFTA can contribute towards the realisation of the SDGs
19th Ordinary Summit of Heads of State of the EAC: communiqué
The summit took note of the progress on the development of the automotive industry in the EAC region to reduce importation of used motor vehicles from outside the region and to make the region more competitive and directed the Council to expedite the process and report to the 20th summit. The summit, with regard to promoting the cotton, textile, apparel and leather industries in the region, to make the region more competitive and create jobs, decided to prioritize the development of a competitive domestic textile and leather sector to provide affordable, new and quality options of clothing and leather products to EAC citizens.
The summit directed the Council to implement this decision and put in place a mechanism that supports textile and leather manufacturing in EAC and report to the 20th summit. The summit launched the 5th EAC Development Strategy 2016/17-2020/21 and directed the Council of Ministers to mobilize resources for its implementation.
The summit received a report on European Economic Partnership (EU-EAC EPA) from President Museveni and decided that the EAC continues to engage with the EU for satisfactory clarification of concerns of some partner states on the EPAs. The chair of summit was mandated to follow up on this matter and in the event that an acceptable way forward is not reached, the Community shall explore the use of variable geometry in the implementation of EPAs.
Profiled summit, EAC trade updates:
US threats force EAC to back down on second-hand clothes ban
Museveni: “Integration is good for economics”
Kenya’s EAC trade under threat from India and China
Kenyatta urges regional cooperation to compete with China
East Africa smells the coffee and moves to expand market
Kenya-Uganda Busia OSBP launched
Infographic, @sautiorg: Cereals and Beans make up the majority of cross-border traders’ consignments at Busia and Malaba border crossings
LAPSSET update, @NEPADKenya: A team drawn from Kenya, Ethiopia, South Sudan, @lapsset and @ECA_OFFICIAL is this morning meeting at the @NEPADKenya offices to discuss the progresss made by the 3 countries in the Lapsset corridor project so far and the way forward.
SADC Employment and Labour Sector: update (GCIS)
It is against this concern that the South African Chairship decided to become innovative and creative in terms of how we report. As you may be aware, in the past weeks leading to this meeting, the Secretariat sent a Declaration Document to all member states to prepare for the meeting of SADC Ministers for Labour and Employment and Social Partners, to take place 1-2 May 2018. The member states and social partners were asked to comment and/or give inputs. We thank everybody who responded to improve the document. The Declaration Approach is a departure from the past practices where Member States were required to give updates and report on Protocols, Frameworks and Codes. Documents such as the Regional Indicative Strategic Development Plan, SADC Decent Work Programme and SADC Charter are mere frameworks that are supposed to guide our work as Member States.
However, there was a serious de-link between frameworks and activities performed by Member States, as individuals and/or as a group, in the sphere of labour market governance. There was no mechanism to ensure that what happens within states and between states (bilaterally and multilaterally) gets reported or captured. To facilitate accurate reporting, South Africa deliberately avoided the clutter of reporting on frameworks and codes - starting with the formulating of an overarching theme which was supported by a set of priorities to guide delivery during its Chairship. This is in line with broad goals of regional integration through a creation of a conducive and harmonious labour regime in SADC. [Speech by SA Deputy Minister of Labour, Phathekile Holomisa, at SADC Joint Tripartite Technical Meeting today in Cape Town]
COMESA Technical Committee on Gender and Social Affairs: update
Over 40 gender experts from 15 COMESA Member States began their annual meeting in Sudan yesterday to review the gender policy implementation plan and other policy documents and reports. The reports will be presented to the gender ministers later this week for adoption. On the agenda of the meeting are: The Draft Gender Policy Implementation Plan and Monitoring Tracking Matrix, the Framework for Comprehensive Support for Women and Youth, Cross Border Traders and the Draft COMESA Youth Internship and Volunteer Programme. A progress report on the implementation of the 50 Million Africa Women Speak Platform Project was also presented.
Gauteng’s intra-Africa trade, FDI performance: full text of Premier Makhura’s SOPA 2018 (Mail & Guardian)
We in Gauteng have intensified our work regarding trade and investment activities on the African continent. There is no doubt that our work is bearing fruit. In 2016 alone, we attracted 75 FDI projects into our provincial economy, worth R36bn. These projects have created 9 354 jobs in our economy. Over three years (2014-2016), our province attracted more than 200 FDI projects worth R69bn, which created 19 000 jobs. Gauteng is the leader with regard to intra-Africa trade. As of 2017, Gauteng companies had 169 projects worth R356bn across our continent. Intra-Africa trade generated a total of 46 732 jobs in the Gauteng economy. [Clayson Monyela: Renewed interest in SA’s foreign policy under President Ramaphosa welcomed]
Niger’s President commends ECA’s quality contribution in ECOWAS march towards single currency (UNECA)
According to Mr Issoufou, the study helped ECOWAS in drawing a new roadmap “that is certainly leading us towards the creation of a single currency in 2020. Our single currency will thereby give us the opportunity to build a strong economic space, capable of competing with other economic spaces under construction around the world,” he said, adding this was certain following a review of the conclusions of the meeting of the Ministerial Committee and approval of its proposals. We must take advantage of this historic opportunity, we must not fail for our people have been hoping for this for just too long,” President Issoufou said.
Ghana’s President Akufo Addo said: ”Our quest for a single currency is not intended to boost trading of goods produced in third-party countries. It is meant to encourage the production of goods and services within the region.” For his part, Mr Sanga, Director of the ECA Sub-Regional Office for West Africa, noted: “In this march towards the single currency within the ECOWAS zone, there is more and more of a political convergence as seen, in particular, in the constant renewal, by all countries, of their commitment towards strengthening their economic convergence, based purely on the convergence criteria”.
Lesotho: IMF concludes 2017 Article IV Consultation (IMF)
An expansionary fiscal stance has shielded the economy from external shocks recently, but at the cost of shrinking buffers. A steep decline in SACU transfers, a major source of government revenue, will result in a fiscal deficit that is likely to exceed 6% of GDP for the second year. The government is financing the deficit by using its deposits at the Central Bank of Lesotho, causing a sharp drop in the CBL’s international reserves. The drop in reserves is compounded by weaker remittances and demand for exports, particularly from South Africa. With SACU revenues only expected to recover in FY 2020/21 in line with the cyclical upswing in South Africa, the outlook is fragile. Addressing the fiscal and external challenges remains difficult in an environment of high inequality and weak institutions. While tax revenues are already relatively high, there is scope for expenditure measures, including by reducing the very high public wage bill. However, efforts by the authorities to stabilize the political environment, including by implementing the recommendations of SADC, should contribute to macroeconomic stability.
Mauritius: Japanese business mission explores avenues of cooperation (GoM)
Speaking about the advantages offered by Mauritius, the Minister explained that the situation of the country is quite exceptional as it is a member of all major African organisations, that is, African Union, COMESA, and SADC. The country is now completing trilateral negotiations whereby the EAC-SADC-COMESA will become one organisation and the countries signing this agreement will have access to 600 million consumers, he pointed out. In addition, a free trade zone, Jin Fei, will be launched in Mauritius and the country is part of Africa, offers facilities of ease of doing business, and will be setting up a regional Renminbi clearing centre with China for Southern Africa, he stated. During the meeting, the Minister invited Japanese investors to consider using Mauritius as a regional headquarter for their companies. The Bank of Tokyo and Insurance companies have also been invited to open a branch in Mauritius.
Can agricultural growth poles solve rural poverty in Africa? (IISD)
African governments are deploying a new development tool: growth poles aimed at kickstarting the shift from subsistence to commercial agriculture. Over a dozen agricultural growth poles, or “agropoles,” were established in the past four years, bringing the total to 36 growth poles and 9 corridors since 2002. They cover at least 3.5 million hectares of land in 23 countries, our research has found. [The author: Francine Picard Mukazi]
Fostering agro-industrialization agenda in Uganda: follow @EPRC_official for tweeted highlights from today’s discussion
UNCTAD Manual on Consumer Protection
The UNCTAD Manual on Consumer Protection 2017 edition (pdf) is the first comprehensive international reference in this field, aiming to support developing countries and economies in transition in their choice of policies and providing practical tools to assist policy makers in enhancing capacities while implementing the recently revised United Nations Guidelines for Consumer Protection. UNCTAD, as the focal point for consumer protection issues within the United Nations system, is fully committed to promoting the guidelines and encouraging interested Member States to create awareness of the various ways in which they can promote consumer protection in the provision of public and private goods and services in collaboration with businesses and civil society. This is all the more important since consumer protection is not homogenous around the world. [Related analysis: Achieving the SDGs through consumer protection]
World Trade Monitor: December 2017 (CPB)
2017 turned out to be a remarkably good year for world trade with 4.5% year-on-year growth. The CPB World Trade Monitor shows that the volume of world trade increased 0.3% in December, having increased 2.7% in November (initial estimate: 2.4%) and increased 1.1% in 2017Q4 (1.4% in 2017Q3).
Today’s Quick Links: Technical Note: Next steps upon the entry into force of the WTO Agreement on Trade Facilitation President Akufo-Addo appeals to US Governors: “Do not ignore Africa” Swaziland successfully implements ASYCUDA Tanzania: Shilling depreciates 3% in seven weeks Zambia-South Africa Business Forum Board appointed Djibouti Ports and Free Zones Authority statement about Doraleh Container Terminal dispute. UAE jumps to DP World’s defence in Djibouti port dispute An agreement allowing the Egyptian private sector to import Israeli gas is creating controversy |
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Joint Communiqué: 19th Ordinary Summit of Heads of State of the East African Community
Theme: Enhancing Socio-Economic Development for Deeper Integration of the Community
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The East African Community Heads of State, their Excellencies President Yoweri Kaguta Museveni of the Republic of Uganda, President Uhuru Kenyatta of the Republic of Kenya, President Salva Kiir Mayardit of the Republic of South Sudan, President Dr. John Pombe Joseph Magufuli of the United Republic of Tanzania, First Vice President Gaston Sindimwo of the Republic of Burundi, Hon. James Musoni, Minister of Infrastructure Republic of Rwanda representing President Paul Kagame held the 19th Ordinary Summit of the East African Community Heads of State at the Speke Resort, Munyonyo, Republic of Uganda on 23rd February, 2018. The Heads of State and the Government Officials met in a cordial environment.
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The Summit received the report of the Council of Ministers covering the period 19th May, 2017 – 22nd February, 2018 and commended the Council for progress made in the implementation of the programmes and projects of the Community.
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The Summit considered a report of the Council on the implementation of previous decisions of the Summit and expressed concern over the slow implementation of decisions. The Summit directed the council to implement all outstanding decisions and report to the 20th Summit.
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The Summit assented to the East African Community Customs Management (Amendment) Bill 2016, the East African Community Supplementary Appropriation Bill, 2016, the EAC Appropriation Bill 2016, which had been partially assented to. The Summit also assented to the EAC Appropriation Bill 2017 and the EAC Supplementary Appropriation Bill 2017.
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The Summit noted and endorsed nine key investment priorities areas for Health and directed the Partner States to mobilize resources required to support the implementation. With regard to Infrastructure, the Summit directed the council to mobilize resources required for implementation of new and on-going priority infrastructure projects in the region.
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The Summit gave impetus towards achievement and objectives of the EAC by directing the Council and Partner States to fully implement the Single Customs Territory by rolling out all products and all customs regimes. The Summit directed the Partner States to expedite the amendment of their national policies, laws and regulations to comply with the Common Market Protocol.
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Concerning the Monetary Union, the Summit directed the Council to expedite the establishment of the Monetary Institute and other institutions according to the Roadmap of the East African Monetary Union. The Summit directed the United Republic of Tanzania and the Republic of Burundi to ratify the EAC Double Taxation Agreement and deposit the instruments of ratification by July 2018.
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The Summit noted the report of the Council on the implementation of the EAC Institutional Review and directed the Council to expedite It.
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The Summit noted the report on the review of the East African Development Bank (EADB) Charter to streamline it into the EAC main structure. The Summit directed the Council of Ministers to follow up on the matter and report at the next Summit.
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The Summit received a report on the on-going initiative of the Council on a sustainable financing mechanism for the East African Community.
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The Summit noted a report of the Council on fast-tracking the integration of the Republic of South Sudan into the East African Community and directed the Council to finalise this work and report to the next Summit.
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The Summit noted the report of the Council that the verification exercise for the admission of the Republic of Somalia into the EAC has not been undertaken and directed the Council to conclude this matter and report to the next Summit.
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The Summit received a report of the Council of Ministers on the progress of the constitution-making process of the EAC Political Confederation and directed Partner States to nominate constitutional experts and directed the Council to fund the process of the constitutional making.
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The Summit took note of the progress on the development of the automotive industry in the EAC region to reduce importation of used motor vehicles from outside the region and to make the region more competitive and directed the Council to expedite the process and report to the 20th Summit.
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The Summit, with regard to promoting the cotton, textile, apparel and leather industries in the region, to make the region more competitive and create jobs, decided to prioritize the development of a competitive domestic textile and leather sector to provide affordable, new and quality options of clothing and leather products to EAC citizens. The Summit directed the Council to implement this decision and put in place a mechanism that supports textile and leather manufacturing in EAC and report to the 20th Summit.
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The Summit launched the 5th EAC Development Strategy 2016/17-2020/21 and directed the Council of Ministers to mobilize resources for its implementation.
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The Summit decided that there shall only be two Deputy Secretaries General at the EAC who shall be recruited competitively on rotational basis. The Summit directed the Council to follow up this matter and fast-track the restructuring.
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The Summit, pursuant to Article 24 of the Treaty for the Establishment of the EAC, appointed Hon. Mr. Justice Charles Ayako Nyachae from the Republic of Kenya as a Judge in the First Instance Division of the East African Court of Justice and witnessed the swearing-in into office.
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The Summit designated Hon. Dr. Justice Faustin Ntezilyayo as the Deputy Principal Judge of the East African Court of Justice with effect from 1st July, 2018.
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Their Excellencies the EAC Heads of State commended Hon. Jesca Eriyo, outgoing Deputy Secretary General, and Hon. Justice Isaac Lenaola, outgoing Judge of the First Instance Division of the East African Court of Justice, for their outstanding service to the East African Community.
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The Summit received a report on European Economic Partnership (EU-EAC EPA) from H.E. Yoweri Kaguta Museveni and decided that the EAC continues to engage with the EU for satisfactory clarification of concerns of some Partner States on the EPAs. The Chair of Summit was mandated to follow up on this matter and in the event that an acceptable way forward is not reached, the Community shall explore the use of variable geometry in the implementation of EPAs.
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The Summit appreciates the work done by the facilitator, H.E. President Benjamin Mkapa, former President of the United Republic of Tanzania, and the mediator H.E. President Yoweri Kaguta Museveni in the Inter- Burundi Dialogue. The EAC will undertake as much as possible to fund the Dialogue process. The EAC should continue leading the process of ensuring convergence in the Republic of Burundi. The Summit calls upon all the Burundi parties to expeditiously conclude the Dialogue under the facilitator and mediator. The Summit appreciates the support of partners and international organisations.
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Their Excellencies President Uhuru Kenyatta of the Republic of Kenya, President Salva Kiir Mayardit of the Republic of South Sudan, President Dr. John Pombe Joseph Magufuli of the United Republic of Tanzania, First Vice President H.E Gaston Sindimwo of the Republic of Burundi, and Hon. James Musoni, Minister of Infrastructure Republic of Rwanda, representing President Paul Kagame, thanked their host for the hospitality extended to them and their delegations during their stay in Kampala.
Done at Kampala, this 23rd Day of February, 2018.
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Department of Labour hosts SADC Employment and Labour Sector Tripartite Technical Meeting
The South African Department of Labour is hosting the Southern African Development Community (SADC) Employment and Labour Sector Tripartite Technical Meeting at the Cape Town International Conference Centre in Cape Town from 26 to 28 February 2018.
The meeting will review the implementation of the decisions taken by the Ministerial and Social Partners in 2017; adopt a declaration affirming their decisions towards effective implementation of the Employment and Labour Sector (ELS) Programme of Action in accordance with the SADC Regional Indicative Strategic Development Plan (RISDP) 2015-2020; discuss current labour market developments and adopt a new programme under the next chair.
The meeting, held under the theme “Horizon Decent Work: advancing connectivity, coherence and inclusivity” is aimed at paving the way for the SADC assembly of Ministers of Employment and Labour, and Social Partners which will be hosted by Minister Mildred Oliphant at the same venue from 1 to 2 March 2018.
Expected at the meeting are delegates from Angola, Botswana, Democratic Republic of Congo, Malawi, Mozambique, Namibia, Seychelles, Swaziland, United Republic of Tanzania, Zambia, Zimbabwe as well as representatives from the International Labour Organisation.
Official opening speech by the Deputy Minister of Labour of the Republic of South Africa, Honourable Nkosi Phathekile Holomisa, on the occasion of the Second SADC Joint Tripartite Technical Meeting
Our region faces numerous challenges ranging from crippling poverty and unemployment to desperate young people. All these socio-economic problems result in lack of faith and pessimism on the part of our citizens about their future, and everything that we, as governments and employers, say to them.
The hope for a better future where people can live in peace and raise their children to become better persons is quickly getting eroded, if not eroded already. Sometimes we wait for researchers and other groups to write reports about the situations that our citizens are confronted with before we react.
Nevertheless, I wish to provide two graphical stories involving two fictional characters, taking place in South Africa, Zimbabwe, and Malawi. This is to illustrate the plight our citizens face so that we are all able to appreciate the depth of the problem. This is also with a hope that all of us in this room can use the next five days in scenic Cape Town to mull over them. And, upon returning to our air-conditioned offices in Dar es Salaam, Lusaka, Victoria Falls, Maputo and Port Louis, we can appreciate why we are discharged with the duties we have.
Imagine a young recently married 33-year old man with two little kids, let us call him Rutendo, leaving his village outside Mutare to search for work in Bulawayo; but suddenly finds himself in the streets, destitute and without a job. His family waits back home – they expect money from him to buy food, clothing and other necessities. But he is unable to provide because jobs are scarce, and those that are available are temporary or pay slave wages.
Rutendo resides in the township of Mbare which is 7 km outside the city, where there is crime and no running water. He occasionally finds himself in fights with gangs who want to rob him. He has been searching for the job for a while without success.
Every day he contemplates going abroad but he cannot leave his family behind. He once worked in neighbouring Mozambique as a bilingual translator since he is fluent in his native Ndau, Shona, English and Portuguese.
After he returned back to his homeland, he started a small business in Sakubva, one of poorer suburbs in Mutare. His business at the “Musika weHuku” (or the chicken market) did not do well and Rutendo trekked to Harare, with a hope that he would either land in London or Gaborone where some of the family members now reside.
The second story concerns a young woman, Philisiwe who is 23 years old. She works 18 hours a day in a shoe factory in Bloemfontein. The company she works for is unregistered and has shoddy working standards. Almost three years ago, Philisiwe had a painful miscarriage, a result of rape by her employer.
The owner prides himself to be the smartest and richest without paying a cent towards the tax office. Indeed he makes more than 17 million dollars a year and drives around in flashy cars. He and his friends regularly drug and physically abuse Philisiwe and fellow employees (mainly from Butha-Buthe, Mafeteng and Leribe areas in Lesotho) by demanding sex in exchange for a few rands.
This gentleman gets away with murder because Philisiwe’s annual wages amount to a mere R8,500 (or a mere 700 United States dollars). She is one amongst many people across the globe that work but live in extreme poverty – the working poor. It is important to note that our Government now introduces a minimum wage of R20 per hour in order to tackle poverty and inequality. The minimum wage will seek to complement other wage-setting mechanisms, especially collective bargaining, in the South African labour market.
Programme Director, plans are afoot to hold a National Dialogue on Informal Economy in Pietermaritzburg next month. Most people take up informal employment to earn income when formal work is unavailable. With the 27 percent unemployment rate in South Africa, it means that there are people in a similar situation as Philisiwe. Although we try to formalise the informal sector, it continues to persist, and is responsible for ‘decent work deficits’ – where there is low income, less job security and no rights.
In our continent, according to the ILO, 74 percent of women’s non-agricultural employment is informal, compared to 61 percent for men.
Nevertheless, Philisiwe takes whatever pay she is offered in order to assist her unemployed, single mother in rural Eastern Cape to raise her two brothers and one sister. The nature of poverty is that it has a knock-on effect.
Philisiwe’s mother does not work since she suffers from silicosis after many years spent in gold mining town of Carletonville in the west of Johannesburg. This is where she met her boyfriend who died eight years ago from what is believed to be an unknown illness, which was aggravated by lack of requisite health care in the village of Mzuzu in Malawi.
It is said that both Philisiwe’s mother and boyfriend are part of global statistics of people who work or worked under dangerous and harmful conditions to their health. International Labour Organisation (ILO) figures indicate that more than 2.78 million workers die every year because of occupational accidents or work-related diseases – one every 11 seconds. The problems of occupational health and safety affect employees and their families.
The poor girl Philisiwe had to temporarily suspend her dream of becoming a mechanical engineer in order to enable her mother and siblings to survive. Always joyful and optimistic, Philisiwe looks forward to seeing her brothers and sister complete their schooling. Unfortunately, Philisiwe, like all young people, is employed in a job where she not only has lower wages and fewer rights but also less access to social protection.
I am not storyteller nor a bearer of bad news but just an elected public representative. The narration of the stories of Rutendo and Philisiwe is aimed at making this esteemed gathering to appreciate the extent of vulnerability of youth and women as well as the desperate economic conditions in the region.
In its report titled: Reward Work, Not Wealth released last month, Oxfam is emphatic that as society we need “to end the inequality crisis, we must build an economy for ordinary working people, not the rich and powerful.” This means, we cannot afford to have few extremely wealthy individuals, while the majority of our citizens, particularly women and young people, live in abject poverty.
It is through platforms such as this one, the SADC Regional Engagements where we jointly attempt to create a more equal society by prioritizing ordinary workers and end poverty and inequality.
With poverty threatening livelihoods, it appears that we do not quite fully understand that young people and women constitute majorities in our countries. Women continue to earn significantly lower pay than men. Irrespective of whether women are educated or not, they face way too many barriers that hold them back at work.
In all parts of the world, evidence suggests that women consistently earn less than men and are concentrated in the lowest-paid and least secure forms of work. The story of Philisiwe gave us a glimpse of what women go through at work.
We seem to be running away from the obvious fact that women and youth will take over the workplace of the future in a few years from now.
We also forget that no one will remain forever young. As developed countries struggle with inverted or upside population pyramids, African countries are said to enjoy huge advantages brought about by their younger populations. This may be the case today but since we are not doing as much as we possibly can to educate, train and appropriately skill young men and women in our countries, we are heading for a disaster.
Failure to harness the young population will result in us losing the potential gains from the population dividend, and also lead to weak economic performance and even more social problems.
Our efforts as a region, continent and the world to contribute to the well-being of our citizens, such as the SADC-Decent Work Programme, the SADC Youth Employment Policy Framework, Agenda 2030 of the United Nations and the African Union’s Agenda 2063, would be meaningless if our collective efforts do not contribute to reducing social strife, and increasing quality jobs for our citizens.
It is against this concern that the South African Chairship decided to become innovative and creative in terms of how we report. As you may be aware, in the past weeks leading to this Meeting, the Secretariat sent a Declaration Document to all Member States to prepare for the Meeting of SADC Ministers for Labour and Employment and Social Partners taking place from Thursday 1st to Friday, 2nd May 2018. The Member States and Social Partners were asked to comment and or give inputs. We thank everybody who responded to improve the document.
The Declaration Approach is a departure from the past practices where Member States were required to give updates and report on Protocols, Frameworks and Codes. Documents such as the Regional Indicative Strategic Development Plan, SADC Decent Work Programme and SADC Charter are mere frameworks that are supposed to guide our work as Member States.
However, there was a serious de-link between frameworks and activities performed by Member States, as individuals and/or as a group, in the sphere of labour market governance. There was no mechanism to ensure that what happens within states and between states (bilaterally and multilaterally) gets reported or captured.
To facilitate accurate reporting, South Africa deliberately avoided the clutter of reporting on frameworks and codes – starting with the formulating of an overarching theme which was supported by a set of priorities to guide delivery during its Chairship. This is in line with broad goals of regional integration through a creation of a conducive and harmonious labour regime in SADC.
The Sector wishes to play an important role in facilitating full employment, fundamental principles and rights at work, social protection, as well as social dialogue in our countries. Thus, the four priorities, including Employment Creation, Youth Employment, Promotion of Decent Work, and Enterprise Development, were formulated to be in sync with the programmes on Decent Work and Future of Work, as well as international conventions.
Thus far, we hosted up to seven workshops, namely labour inspections, dispute resolution, public employment services, informal economy (Recommendation 204), labour standards, social security and protection, as well as collective bargaining in the public service. In addition, the Ministerial Meeting will take place over two-days because we have arranged a Symposium on Global Value Chains in order to capacitate Ministers on matters pertaining to our sector.
We are proud that this feat will take some doing to emulate. With the workshops and the symposium we have managed to deliver, based on the resolutions of the Ezulwini Meeting of Ministers, particularly the establishment of three forums on labour inspections, dispute resolution and public employment services. All this work is reflected in the Declaration that is due to be adopted by the Ministers at the end of this week.
For the first time, specific activities with regards to the mandate of the SADC Employment and Labour Sector (ELS) have been executed and reported on. This is important for the Sector in that its work will hopefully move from the peripheral position to gain credence like issues of trade and commerce, as well as politics and security. This multilateral work should not be seen in isolation and be treated as a stand-alone, but must enhance and deepen bilateral collaboration between the Member States.
In this regard, I personally urge Member States to undertake bilateral activities as a base for the work of the SADC-ELS. Without active programmes in and amongst countries the Sector will always be treated as a poor cousin of some of the prominent sectors within the SADC Secretariat.
Unfortunately, the Secretariat has also not taken labour and employment issues as part of its core functions. This contributed to the generally low support and leadership during our tenure as Chair. Notwithstanding the fact that the Secretariat has recently appointed a person to handle labour and employment, I have decided to bring this matter to the attention of Ministers. As a result of lack of capacity and support on the side of Gaborone – our Chairship was fraught with challenges, where we had to commit officials from the Department of Labour to perform duties that should otherwise have been provided by the Secretariat.
Mr. Thobile Lamati, the Director General of the Department of Labour, will deliver the outgoing Chairperson’s report to this meeting, as well as to the Ministers, so that we can boast of our achievements and also outline some of the key issues and challenges that frustrate the optimal functioning of the SADC-ELS platform.
At this point I wish to thank fellow troika members, Swaziland and Namibia, without whose support our Chairship would not have been a success. Furthermore, I wish to congratulate the Republic of Namibia on the assumption of the chairmanship role for the SADC-ELS. We will continue to be part of the troika to ensure continuity.
To conclude, I wish you fruitful and progressive discussions and hope that by the time the Ministerial Meeting starts we will be ready to provide good reports. Please enjoy Cape Town!
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COMESA Gender experts’ meeting underway in Khartoum
Over 40 gender experts from 15 COMESA Member States began their annual meeting in Sudan yesterday to review the gender policy implementation plan and other policy documents and reports. The reports will be presented to the gender ministers later this week for adoption.
This is the 12th meeting of the COMESA Technical Committee on Gender and Social Affairs. It brought together Principal Secretaries and Technical Officers from gender ministries in the Democratic Republic of Congo, Djibouti, Egypt, Ethiopia, Kenya, Libya, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
On the agenda of the three days meeting are: The Draft Gender Policy Implementation Plan and Monitoring Tracking Matrix, the Framework for Comprehensive Support for Women and Youth, Cross Border Traders and the Draft COMESA Youth Internship and Volunteer Programme. A progress report on the implementation of the 50 Million Africa Women Speak Platform Project was also presented.
The Permanent Secretary in the Ministry of Social Development and Security in Sudan, Dr. Mohammed Khair opened the meeting. He underscored the significance of strengthening gender management and accountability mechanism at various levels to ensure the success of domestication of legal instruments such as the COMESA Social Charter.
“We all know the challenges bedeviling Member States as they make frantic efforts to address gender and social development issues,” he said. “This is exacerbated by lack of gender management and accountability. However, Secretariat needs to step up efforts in supporting Member States.”
According to the 2015 United Nations statistics, there are 1.2 billion youth aged 15-24 globally, accounting for one out of every six people (17%) worldwide. This is predicted to increase to one out of every four people, thus there would be 1.3 billion youth by 2030.
In his remarks, COMESA Assistant Secretary General for Programmes Ambassador, Dr. Kipyego Cheluget, said the commitment and support of the member States will go a long way in achieving gender equality, the empowerment of women as well as the integration of social development into the COMESA regional integration agenda.
In his speech presented by the COMESA Director of Gender and Social Affairs, Mrs. Beatrice Hamusonde, Dr Cheluget observed that Intra COMESA Trade Africa had significantly impacted on the overall growth of regional integration in Africa.
According to UNCTAD reports, 80 percent of intra-Africa trade happens with the regional economic Communities. In 2015, out of the total COMESA’s exports to the world, 22 percent went to Africa.
“However,” Dr Cheluget noted, “Challenges still exist for the regional integration programmes to be gender responsive in the planning, programming and in the monitoring processes.”
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Efficient border crossing to boost trade between Kenya and Uganda with launch of Busia one stop border post
H.E. Uhuru Kenyatta, President of the Republic of Kenya, and H.E. Yoweri Kaguta Museveni, President of the Republic of Uganda, joined by Amb. Liberat Mfumukeko, East African Community (EAC) Secretary General, officially launched the Busia One Stop Border Post (OSBP) located on the Kenya/Uganda border on 24 February 2018.
Construction of the Busia OSBP was carried out with funding of US$11.7million from the United Kingdom through the Department for International Development (DFID) while the systems and other related soft infrastructure equivalent to US$1.2 million was funded by Global Affairs, Canada. The OSBP investment includes office buildings, roads and parking yards, cargo verification bays, scanner shed, passenger sheds, targeting booths, warehouse and canopies, ICT networks and hardware, furniture, and institutional support to the border agencies.
The OSBP ensures effective border control mechanisms are in place. It will boost trade by cutting the time taken to clear goods between the two nations, thus contributing to a reduction in transport cost, whilst increasing volumes of transhipment cargo through the Central Corridor. It is expected that time to cross the border will reduce by at least a third.
An OSBP is a “one stop” form of border crossing point jointly managed by adjoining Partner States, where multiple border agencies cooperate and collaborate with each other, and effectively coordinate their activities to maximise their operational efficiency. OSBP arrangement brings together under one roof, all the Government agencies performing border crossing controls procedures, doing away with need for motorised traffic and persons to undergo clearance twice at both sides of the border. This arrangement expedites movement, release and clearance of goods and persons across borders, by streamlining border procedures, automation of the border processes and simplification of trade documents.
Speaking at the event, Uganda president H.E Yoweri Museveni said, “I want to thank the British government who have supported us through TMEA, in the construction of the one stop border post making it easy to cross the borders and to do business with Kenya. Trade is a means that will help us create prosperity for the people. My government is committed to creating wealth and jobs for the people through creation of enabling environment for services, Information Communication Technology, commercial agriculture and industries.”
Addressing the crowd, Kenyan President H.E Uhuru Kenyatta commended TMEA for its support to the government and underscored the importance of the OSBP saying, “This facility is an important link for ease of trade between our two countries. Uganda continues to be an important trading partner for Kenya. Opportunities for increased trade and investment have been created. I am happy to hear that because of this OSBP here in Busia, our revenue authority has been able to collect more revenues, a clear indication of increased trade flows”
EAC SG Amb. Liberat Mfumukeko said, “Much as the One Stop Border concept may look new to some people, the framers of our integration instruments envisioned the need for these facilities and embedded them in the EAC Customs Union Protocol at the time of its negotiation. The first OSBP operations was at Malaba railway station between Uganda and Kenya over ten years ago.
“At the same time Customs Departments having realized that multiple examination of goods at our internal borders was wasteful and caused unnecessary costs to business, started joint examination of cargo of which Busia Border was a pioneer. These pilot programs provided a practical justification for upscaling the One Stop Border program in the entire region.”
UKAID has provided over USD 52million to the East African Transit Improvement Programme (EATIP) through TMEA, as a contribution to the World Banks’ East Africa Trade and Transport Facilitation Project (EATTFP).
The Head of DFID Kenya, Pete Vowles, said, “The UK government is proud to have made such an important contribution to improving regional trade in East Africa through our establishment and leadership of Trade Mark East Africa. By cutting red tape, reforming customs processes and improving roads, ports, and border posts, the UK is supporting the creation of an environment essential for businesses to grow and trade with each other. The completion of the Busia border post marks an important milestone towards our goal of reducing by a third the time to import from the EAC and the rest of the world.”
Over the years, delays in cross border clearance were attributed to duplication of handling procedures on either side of the border, poor institutional arrangement and cargo management systems inadequate physical infrastructures and services and immigration management. The new established OSBP has already addressed some of these challenges. Surveys indicate that since operationalisation of the OSBP early this year, the average time to cross the Busia border has reduced by 84%.
TMEA CEO Frank Matsaert said, “The completion and operationalisation of the Busia OSBP is a crucial milestone in increasing access to markets and the facilitation of the movement of cargo along the Northern Corridor. When initially investing $12 million with our donors, the United Kingdom and Canada, greater access to markets, increased efficiency that would reduce costs by reducing time and improved infrastructure were just a few of our end goals.
“Ultimately, our projects in physical infrastructure and automation of key government trade processes like customs, have complemented each other to reduce the cost of doing business and boost trade volumes, increasing both Kenya’s and Uganda’s overall trade competitiveness. Most importantly, they have contributed to governments being businesses being able to expand thus creating jobs.”
TMEA through its donors and in partnership with the East Africa Community has since 2010 to date supported 15 OSBPs in East Africa including South Sudan and has invested about US$117 million in OSBPs and access roads. They are: Kenya and Uganda’s Busia/Busia, Kenya and Uganda’s Malaba/Malaba, Rwanda and Uganda’s Kagitumba/Mirama Hills, Tanzania and Uganda’s Busia border happens to be one of the busiest in East Africa handling transit to and from Great Lakes region of Rwanda, Burundi, DRC and South Sudan.
Based on a recent TMEA independent Time and Traffic Survey, total weekly traffic count Busia Kenya is 3324 vehicles and 1784 for Busia Uganda. Most importantly, this border handles the largest number of informal cross border traders in the EAC.
Mutukula/Mutukula, Kenya and Tanzania’s Holili/Taveta, South Sudan and Uganda Nimule/Elegu, Burundi and Tanzania’s Kobero/Kabanga and lastly Tunduma on the Tanzanian side.
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Achieving the Sustainable Development Goals through consumer protection
New publication aims to provide policymakers and enforcers with a basis for reflection on the positive impacts that protecting consumers bears in promoting a more inclusive and sustainable development
Consumer protection is at the heart of UNCTAD’s contribution to the sustainable and inclusive development rights for all. The 17 Sustainable Development Goals require the participation of responsible and empowered consumers if they are to achieve their targets.
The only way to unleash the potential transformative power that consumers have in domestic and international trade is by ensuring a high level of consumer protection as well as to foster good business practices which seek the same goal.
Consumers can play an important role in a country’s economic growth and development. Consumer trust is crucial for the expansion of economic activities. Consumers should be empowered and encouraged to make informed, sustainable and healthy choices. They are increasingly aware of the environmental impact of their acquisitions and should be educated towards a more sustainable consumption behaviour.
The participation of consumers is, hence, paramount to ensure a more sustainable and inclusive development. Governments should consider improving their consumer protection laws and policies to better fulfil their commitments of Agenda 2030 and, in turn, consider the consumer protection dimension while devising and implementing their development strategies.
This publication aims to provide policymakers and enforcers with a basis for reflection on the positive impacts that protecting consumers bears in promoting a more inclusive and sustainable development. This approach will help them improve the consumer protection framework while also devising and implementing development strategies. Equally, it underscores the close link between Agenda 2030 and the United Nations Guidelines for Consumer Protection.
As this publication shows, consumer protection can be a major contribution to meeting the SDGs. This is particularly true for developing countries and economies in transition where efforts to empower consumers can help leapfrog development stages. Sustainable consumption and health-care delivery are two of the consumer protection domains that are more closely related to development policies.
The role of consumer policy in meeting the sustainable development goals
Consumers’ trust is a crucial factor for economic growth and development. Therefore, consumer protection is a very important tool by which to promote these goals, aiming to empower consumers to stand up for their rights and to make informed and sustainable choices. It also enables law enforcement against rogue traders as well as providing channels for disputes, resolutions and redress.
Consumer protection allows consumers to play an active role in the marketplace which, in turn, will stimulate a more dynamic and competitive economy. Equally, this asserts the rights of consumers, either individually or collectively, and through nongovernmental organizations, leading towards a more inclusive and balanced society.
According to UNCTAD’s Manual on Consumer Protection, consumer protection addresses the intrinsic disparities found in the consumer-supplier relationship such as bargaining power, knowledge and other resources. Furthermore, nations throughout the world, having enacted laws that include newly drafted national constitutions, recognize these rights based on the need to provide consumer protection on a number of grounds. Example are economic efficiency, individual rights, distributive justice and the right to development while ensuring through State intervention that suppliers behave responsibly and that aggrieved consumers have access to remedies.
Of note, consumer protection measures contribute to equity and social justice by enhancing the bargaining equality between both the interests of the consumer and producer. The effects of this go a long way towards alleviating the problems of those who are particularly vulnerable in the marketplace such as children, the economically disadvantaged, and others who are illiterate and with specific needs, or disabilities.
As recognized by the General Assembly, the United Nations Guidelines for Consumer Protection are “a valuable set of principles for setting out the main characteristics of effective consumer protection legislation, enforcement institutions and redress systems and for assisting interested Member States in formulating and enforcing domestic and regional laws, rules and regulations that are suitable to their own economic and social and environmental circumstances, as well as promoting international enforcement cooperation among Member States and encouraging the sharing of experiences in consumer protection.”
UNCTAD Manual on Consumer Protection
The UNCTAD Manual on Consumer Protection 2017 edition is the first comprehensive international reference in this field, aiming to support developing countries and economies in transition in their choice of policies and providing practical tools to assist policy makers in enhancing capacities while implementing the recently revised United Nations Guidelines for Consumer Protection.
UNCTAD, as the focal point for consumer protection issues within the United Nations system, is fully committed to promoting the guidelines and encouraging interested Member States to create awareness of the various ways in which they can promote consumer protection in the provision of public and private goods and services in collaboration with businesses and civil society.
This is all the more important since consumer protection is not homogenous around the world. Indeed, as the General Assembly noted “although significant progress has been achieved with respect to the protection of consumers at the normative level since the adoption of the guidelines in 1985, such progress has not been consistently translated into more effective and better-coordinated protection efforts in all countries and across all areas of commerce.”
With this manual, UNCTAD is contributing to spreading good practices and enhancing the capacities of developing countries and economies in transition to step up the protection of their consumers.
The twenty-first century consumer is a global consumer. Today’s consumers have the largest choice of goods and services, while the digital revolution has propelled them to the forefront of international trade. This also comes with greater risks, such as unsafe products, unfair business practices, inadequate dispute resolution and redress, breaches to consumer data privacy and lack of coordinated action among member States. More than ever, the welfare of any consumer is affected by the welfare of all consumers around the world, and we are witnessing the eve of global consumer protection.
Consumers need to be empowered for them to play their role as agents for change in achieving the Sustainable Development Goals. This can only happen when appropriate laws, policies and institutions are in place and all stakeholders, particularly businesses and consumer groups, participate in upholding consumer protection in the marketplace.
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tralac’s Daily News Selection
Featured tweet, @AERCAFRICA: How can we best accelerate regional integration in Africa? Share your ideas as we build up to the AERC Senior Policy Seminar XX (pdf) in Entebbe, Uganda on 12-13 March.
Featured interactive tool, from ACET: In the first Who Said What statement, Professor Joseph E. Stiglitz challenges the notion that Africa’s development can follow Asia’s growth model of manufacturing export-led growth.
EAC budgets Shs282 trillion for infrastructure projects (Daily Monitor)
The EAC needs $78bn (about Shs282 trillion) in the next 10 years to fund more than 200 infrastructure projects in the five-member states. Under the projects, the key ones including the Standard Gauge Railway, hydropower, oil and gas projects across the region, are to cost $62.2bn (about Shs224 trillion). Leaders from Uganda, Tanzania, Kenya, Rwanda, Burundi and South Sudan, who met yesterday in Kampala, said the revenue will be internally and externally raised through borrowing and also Public Private Partnership. However, the leaders disagreed on which projects the PPP model should be used for.
East African countries to improve cross border health care (The Independent)
The EAC heads of state have resolved to expand access to specialized health care and cross border health services in the region to preserve the region’s human capital base. The leaders also agreed to strengthen the network of medical reference laboratories and the regional rapid response mechanism to protect the region from health security threats including pandemics, bio-terrorism and common agents. This, they said, would ensure sustainable socioeconomic development. In a joint communiqué (see below), the leaders stressed the importance of strengthening health systems and preparedness to address both current and emerging challenges such as non-communicable disease like cancer and communicable diseases like HIV/ AIDS, malaria which pose significant challenges to regional development. This during the first day of the two-day retreat for East African Community heads of state at Commonwealth resort Munyonyo.
AU, REC communiqués:
(i) Joint EAC Heads of State Retreat on Infrastructure and Health Financing and Development. On infrastructure: considered and approved 17 flagship projects for championing at the heads of state level; on infrastructure: (i) mainstream innovative financing options including leveraging private sector financing, to supplement available partner state budgetary allocations for implementation of infrastructure projects; (ii) formalize regular and structured engagement coordinated by the secretariat between the partner states, development partners and investors to enhance the rollout of the heads of state priority infrastructure and energy projects;
(ii) Fifth Meeting of the Presidential Task Force on the ECOWAS Single Currency Programme. After deliberating on the agenda items, the Presidential Task Force: (i) reaffirmed their political will to meet the ECOWAS Single Currency Programme deadline by 2020; (ii) reaffirmed Member States commitment to ratify and implement all relevant ECOWAS protocols and conventions; (iii) reaffirmed the gradual approach where Member States which meet the convergence criteria can start the monetary union while the other countries can join later; (iv) welcomed the progress made by the Member States and encouraged them to continue the efforts toward meeting the convergence criteria and strengthening the multilateral surveillance mechanism; (v) adopted the revised roadmap for accelerating of the creation of the ECOWAS single currency by 2020; (vi) instructed all the stakeholders to implement the revised roadmap; (vii) reaffirmed their commitment to fund the ECOWAS Single Currency Programme by Member States and their Central Banks; (viii) invites the Committee of Governors and Convergence Council to hold quarterly meetings on the progress of implementation of planned activities and to regularly report at their biannual sessions.
(iii) Visit of the Chairperson of the AUC to Zimbabwe. The discussions with the Zimbabwean authorities also covered the institutional reform of the African Union. The Chairperson underlined the urgency of ensuring financial self-reliance through the implementation, by all Member States, of the 0.2% levy on eligible imports. President Mnangagwa expressed his country’s full support to the reform process. Discussions also covered how to boost tourism on the continent, as a driver for socio-economic development, growth and integration. Zimbabwe is currently chairing the sub-Committee on Tourism of the African Union Specialized Technical Committee on Transport, Transcontinental and Inter-regional Infrastructure, Energy and Tourism. The Commission is planning a number of activities in this respect, including a continental Conference on Infrastructure for Tourism Development in Africa.
Turkey eyes more business with West African trade bloc (Anadolu Agency)
Turkish economy minister suggested Thursday a free trade agreement will be a key step to boost business ties between Ankara and the Economic Community of West African States. “Trade volume with the bloc increased 10 fold to over $2bn in the last decade from $200m,” Nihat Zeybekci told an opening ceremony of a business and economic forum meeting between Turkey and ECOWAS in Istanbul. “Our aim is to bring it up to $bn in the short term and to $10bn in the long term on a win-win approach. The only way to achieve this is a free trade agreement between Turkey and ECOWAS,” he said. Also speaking at the ceremony, Kalilou Traore, the bloc’s commissioner for industry and private sector, said cooperation with Turkey played an important role for the development of the region.
Buy Kenya, Build Kenya: preserving EAC regional integration (pdf, CUTS Geneva)
This briefing paper (pdf) aims to inform the finalization of the Buy Kenya, Build Kenya strategy by proposing provisions to ensure regional integration agenda is not lost in strategies aimed at promoting development of local industries. Regional integration is one of the tools that Kenya can leverage to ensure development of the country. However, national strategies such as Buy Kenya, Build Kenya offering prospects for developing local industries may come as a perceived risk to EAC regional integration. Promoting consumption of goods and services from EAC, developing local content for EAC goods and services and enhancing market for EAC products will ensure the regional agenda is kept alive. [Related analysis: How can trade help agro-processing development in East Africa?, pdf]
Botswana: Tourist spend hits P14.5bn mark (Mmegi)
International and domestic tourists spent a total of P14.5 billion in the country in 2016, or one and half times more than the amount in 2009, which was the last time a comprehensive survey was conducted. The results are contained in the 2016 Tourism Satellite Account (TSA) launched in Gaborone earlier this morning. The TSA, the third conducted in Botswana starting with a pilot in 2006, is a research project designed to accurately gauge the contribution of tourism to the national economy. According to data shared during the launch, spending by tourists in 2016 was 150% higher than the 2009 TSA, driven by higher volumes of tourists, longer stays and greater spending. The latest TSA shows that tourism directly contributed 4.9% to the economy in 2016, up from 3.7% in 2009. Indirectly, the sector’s contribution in 2016 was estimated at 7.6%. [Related: Travel and tourism economic impact 2017 - Botswana (pdf), WAVES Botswana Country Report 2016 (pdf)]
Latest edition of WCO News is posted (WCO)
The WCO has published the 85th edition of WCO News (pdf), the Organization’s flagship magazine aimed at the Customs community, which provides a selection of informative articles that touch the international Customs and trade landscape. Profiled articles:
Revisiting the “Trading Across Borders” category of the World Bank’s Doing Business index. In the 2017 edition of the index, Brazil ranked 149th in the “Trading Across Borders” category among the 190 countries surveyed. Despite efforts to modernize its foreign trade, the country has not managed to improve its ranking over the last few years. Was the world moving faster than Brazil or was the information used on Brazil “noisy”? To answer that question, Procomex took up the challenge, in 2016, to replicate the World Bank survey when it comes to Brazil’s foreign trade, and then investigate whether the Bank was measuring indicators correctly and if those responding to the questionnaire were the best positioned to do so, i.e., whether they had the practical knowledge to provide the correct answers.
Customs systems interconnectivity: the challenges and opportunities for Customs administrations in the SACU region. As a result of these challenges, the region now realizes the need for a “single Customs legislation” to govern SACU as a whole. The current arrangement, where each Member State has its own legislation, is yielding minimal benefits toward efficient trade facilitation and regional integration. Thus, it is high time that SACU Member States’ policy makers urgently consider developing a single Customs legislation, which will bring tangible trade facilitation benefits to traders, while promoting further regional integration.
Ghana, Burkina Faso make headway towards implementing railway project (GhanaWeb)
Ghana and Burkina Faso have agreed to engage the services of a transaction advisor to assist in the implementation of the Railway Interconnectivity Project. Mr Joe Ghartey, the Minister of Railways Development, signed the communique on behalf of Ghana, while Mr Vincent Dabilgou, the Minister of Transport, Urban Mobility and Road Safety, initialed on behalf of Burkina Faso. The communique said the Transaction Advisor would assist the Governments of the two countries to review and undertake various studies, including survey works and procurement processes in line with applicable laws of the two countries. It said the terms of reference for the Transaction Advisory services was drafted by the Ghanaian side and presented to the Burkinabe team at the meeting, which the latter agreed to in principle. It said the Advisor would engage a private sector investor to develop a railway interconnectivity project between the Port of Tema and Ouagadougou on a Build, Operate and Transfer basis.
Djibouti ends Dubai’s DP World contract to run container terminal (Reuters)
Djibouti has ended a contract with Dubai’s DP World, one of the world’s biggest port operators, to run its Doraleh Container Terminal, the president’s office said on Thursday. “The Republic of Djibouti has decided to proceed with the unilateral termination with immediate effect of the concession contract awarded to DP World,” the office of President Ismail Omar Guelleh said in a statement. Last February, the London Court of International Arbitration cleared DP World of all charges of misconduct over a concession to operate the terminal, Dubai’s government said at the time. In 2014, the government of Djibouti lodged claims accusing DP World, majority-owned by the Dubai government, of illegal payments to secure a 50-year concession for the Doraleh Container Terminal, the Dubai government said. The president’s office said the contract was ended after the failure to resolve a long-running dispute between the two parties that started in 2012.
President Sisi says dream of turning Egypt into regional energy hub is becoming reality (Ahram)
Egypt’s President Abdel-Fattah said on Tuesday that the dream to turn Egypt into a regional energy hub is becoming a reality, referring to a number of gas deals recently signed in the country. The president made the comments while opening a number of investor service centres across the country. El-Sisi commented on the controversial $15bn gas deal brokered between two Israeli companies and private Egyptian company Dolphinus, saying that Egypt has “nothing to hide about this deal.” “Egypt is now one of the few countries in the Mediterranean region that owns facilities fully capable of providing all oil-related services,” El-Sisi said, adding that Egypt will use these facilities to liquefy the imported gas for later export or for use in industry.
IATA releases 2017 Airline Safety Performance report: SSA update (IATA)
Sub-Saharan Africa continued to make strong progress on safety. Airlines in the region had zero jet hull losses and zero fatal accidents involving jets or turboprops for a second consecutive year. Both the turboprop hull loss rate and the all accident rates declined against the average of the previous five years. However, the turboprop hull loss rate increased compared to 2016 (5.70 vs. 1.52). In turn, this largely was responsible for causing an increase in the all accident rate compared to 2016 (6.87 vs. 2.43). In parallel, African governments must accelerate the implementation of ICAO’s safety-related standards and recommended practices (SARPS). As of year-end 2017, only 25 African countries had at least 60% SARPS implementation,” said de Juniac.
Today’s Quick Links: Zimbabwe: 2018 Economic Outlook Symposium presentations Uganda: Govt to construct border post warehouses Nigeria’s Council of State tells Buhari to pump $1bn in agriculture Nigeria: FG promises $100bn to boost oil, gas investment Kenya losing billions over poor quality leather, Kebs says Kenya Revenue Authority loses Sh2.5bn tax claim from sugar importing firm How tax collaboration could change global development: a Devex interview with Jan Walliser (World Bank’s vice president for equitable growth, finance, and institutions) |
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EAC Partner States to maintain high budgetary allocation for infrastructure development
East African Community Partner States will maintain high budgetary allocations geared towards financing infrastructure development within their national borders.
Hon. Monica Azuba Ntege, Uganda’s Minister for Works and Transport and Chairperson of the EAC Sectoral Council of Ministers for Transport, Communications and Metereology, said that the ongoing infrastructure development projects were meant to interlink the Partner States and create a strong Common Market in the region with sights on the Tripartite Grand Free Trade Area.
Hon. Ntege said that the development of efficient, interlinked and modern infrastructure and energy systems will positively impact on trade, movement of persons, industrialization, value chains, employment, investments that would prepare the regional economies for socio-economic take-off.
Hon. Ntege was speaking during the opening session of the Infrastructure Roundtable on Day One of the EAC Heads of State Joint Retreat on Infrastructure and Health Financing and Development at the Speke Resort Munyonyo in Kampala, Uganda.
Hon. Ntege disclosed that in their previous three Retreats focusing on Infrastructure Development and Financing the Heads of State had prioritized for implementation a total of 72 projects, split into 286 sub-projects over a 10-year period, ending in 2025.
“The projects span roads, railways, maritime ports, inland waterways, electrical power generation and transmission, and oil and gas infrastructure,” she said.
The Minister said that upon the full implementation of the prioritized projects, the region will among other things have improved 7600 km of road surface, laid 4000 km of standard gauge railways, and increased the combined installed capacity of electrical power generation from 4245 MW to 6734 MW.
“We also hope to have constructed 3000 km of oil pipeline and an oil refinery, and (v) enhanced the performances of Mombasa and Dar es Salaam seaports and opened up new maritime and inland ports,” she said.
On road safety, Hon. Ntege said that East Africa had worrying statistics in terms of road fatalities as compared to the Africa and the rest of the world.
“According to the WHO, the average rate of global road fatalities in 2015 was 17 deaths for every 100,000 inhabitants. In Europe, this figure was 9.2 while in Africa it was 26.5 and current trends show that it is rising every year. For example, compared with the 2.9 road fatality rate of the United Kingdom, the countries in East Africa have rates higher than even the African average, with Tanzania at 32.9, Rwanda at 32.1, Kenya at 29.1 and Uganda at 27.4. This means that concerted efforts need to be made both on the physical and non-physical causative factors,” she said.
“It is reassuring to note that on the side of user behaviour, the EAC has recently developed standardized curricula for the training of commercial drivers which aims at instilling virtues like courtesy, speed perception and environmental awareness skills,” she added.
The Minister, however, said that Partner States should do more to instill and sustain proper behavioural competencies on all road users, including even law enforcement personnel, adding that percentage of accidents could be attributed to poor pavement and geometric road conditions and these should be addressed through infrastructure upgrading.
Hon. Ntege urged the EAC Secretariat to expedite the adoption of harmonized standards for road design and construction, by all the Partner States as directed by the Council and provide separations between motor cycles and vehicles.
“Resources should be mobilized to support the Partner States in the area of road safety to stem the tide of unnecessary deaths on our roads and reduce pressure on our hospital bed capacities now occupied by a large number of accident injury patients,” said Hon. Ndege.
In his remarks, the EAC Deputy Secretary General for Planning and Infrastructure, Eng. Steven Mlote, said that infrastructure development was recognized as the prime mover of socio-economic development in the region and would therefore continue to receive the highest level of political support from EAC Heads of State.
Eng. Mlote said the Joint Retreat would assess the progress of implementation of previously prioritized projects and consider and approve new infrastructure projects for joint/coordinated development.
“Therefore, this roundtable avails EAC Partner States an opportunity to showcase to our development partners and potential investors the major investment opportunities in infrastructure spanning railways, ports, roads, inland waterways, energy and civil aviation sectors,” said Eng. Mlote.
A separate EAC Roundtable on investing in Health Infrastructure, systems, services and research was held at the same venue.
The two-day Joint Retreat was held under the theme Deepening and Widening Regional Integration through Infrastructure and Health Sector Development in the EAC Partner States.
Joint EAC Heads of State Retreat on Infrastructure and Health Financing and Development
Communiqué
1. The East African Community Heads of State, their Excellencies President Yoweri Kaguta Museveni of the Republic of Uganda, President Uhuru Kenyatta of the Republic of Kenya, President Salva Kiir Mayardit of the Republic of South Sudan, President Dr. John Pombe Joseph Magufuli of the United Republic of Tanzania, 1st Vice President His Exellency Gaston Sindimwo Representing President Pierre Nkurunziza of the Republic of Burundi, Hon. Musoni James, Minister of Infrastructure Representing President Paul Kagame of the Republic of Rwanda, held the Joint EAC Heads of State Retreat on Infrastructure and Health Financing and Development on 22nd February, 2018 at Speke Resort Munyonyo, Kampala, Uganda.
2. The Joint Retreat was also attended by several high-ranking participants including: Honourable Ministers/Cabinet Secretaries; Members of Parliament; Ambassadors and High Commissioners; Representatives of UN Agencies, the African Union Commission; Regional Economic Communities, Cooperating and Development Partners; the Private Sector; Civil Society; and EAC Organs and Institutions.
3. The Heads of State and Government met in a warm and cordial atmosphere.
4. The Heads of State received opening remarks from Amb. Liberat Mfumukeko, Secretary General of the East African Community.
5. The Heads of State received addresses from Dr. Mukhisa Kituyi, Secretary General of UNCTAD and Dr. Delanyo Dovlo, The Africa Regional Director for Health Systems and Services Cluster for the World Health Organization. Dr. Kituyi emphasized the importance of resilient infrastructure and energy systems in accelerating EAC’s industrialization drive, while Dr. Dovlo urged partner states to invest in.
6. The Heads of State received presentations on the outcomes of the Infrastructure and Health Sector Roundtables. The presentations noted the status of implementation of the Heads of State priority infrastructure projects, highlighting successes and challenges and outlined the health sector investment priorities.
6.1 On Infrastructure, the Heads of State:
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Received updates on the implementation of directives of the 3rd Retreat and the Priority Projects;
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Considered and approved new projects from the Republic of South Sudan;
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Considered and approved new projects including projects under civil aviation as directed during the 3rd Retreat;
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Considered and approved 17 flagship projects for championing at the Heads of State level; and
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Noted with concern the poor status of road safety in the Partner States and the urgent need for deliberate and concerted efforts to address the challenges;
6.2 On Health, the Heads of State considered and approved the following investment priorities:
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Expansion of access to specialized health care and cross border health services;
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Strengthening the network of medical reference laboratories and the regional rapid response mechanism to protect the region from health security threats including pandemics, bio-terrorism and common agents;
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Expansion of capacity to produce skilled and professional work force for health in the region based on harmonized regional training and practice standards and guidelines;
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Increase access to safe, efficacious and affordable medicines, vaccines, and other health technologies focusing on prevalent diseases such as malaria, TB, HIV/AIDS, non-communicable diseases (NDCs) and other high burden conditions;
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Upgrading of health infrastructure and equipment in priority national and sub national health facilities/hospitals;
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Establishment of strong primary and community health services as a basis for health promotion and diseases prevention and control;
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Expansion of health insurance coverage and social health protection;
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Improvement of quality of healthcare, health sector efficiency and health statistics; and
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Strengthening of health research and development
7. On Infrastructure, the Heads of State directed the Council to:
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Enhance capacity in infrastructure projects coordination, preparation and development at the national and regional levels to accelerate the realization of prioritized projects;
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Mobilize resources required for implementation of new and ongoing priority infrastructure projects;
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Mainstream innovative financing options including leveraging private sector financing, to supplement available partner state budgetary allocations for implementation of infrastructure projects;
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Formalize regular and structured engagement coordinated by the secretariat between the partner states, development partners and investors to enhance the rollout of the heads of state priority infrastructure and energy projects;
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Establish regional frameworks to consistently and effectively address road safety challenges both at national and regional levels including but not limited to harmonization of road safety laws and regulations, enhancement of road safety data collection and management systems, driver training and post trauma management systems; and
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Inclusion in the Heads of State Priority Projects of soft infrastructure components under information and communications technology systems.
8. On Health, the Heads of State directed the Council to:
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Mobilize resources to support implementation of the health sector investment priority projects;
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Strengthen the region’s capacity to effectively prepare and implement the priority projects;
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Develop comprehensive strategies to combat cross-border health challenges; and
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Convene Heads of State Retreats on Health every two years.
9. Their Excellencies, President Uhuru Kenyatta of the Republic of Kenya, President Salva Kiir Mayardit of the Republic of South Sudan, President Dr. John Pombe Joseph Magufuli of the United Republic of Tanzania, 1st Vice President His Excellency Gaston Sindimwo Representing President Pierre Nkurunziza of the Republic of Burundi and Hon. James Musoni, Minister of Infrastructure representing President Paul Kagame of the Republic of Rwanda thanked their host, President Yoweri Kaguta Museveni of the Republic of Uganda, for the warm hospitality extended to them and their respective delegations during their stay in Kampala and the excellent facilitation of the Joint Retreat.
Done at Kampala, this 22nd day of February, 2018
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Africa’s prosperity also lies in creating decent and attractive jobs for rural youth
FAO Director-General: explore opportunities along the food chain, including urban food markets
Agriculture will continue to generate employment in Africa over the coming decades, but opportunities should be explored beyond agriculture throughout the food chain in order to create enough jobs for young people, especially those in rural areas, FAO Director-General José Graziano da Silva said on Thursday.
“Countries need to promote a rural and structural transformation that fosters synergies between farm and non-farm activities and that reinforces” the linkages between rural areas and cities, he added. This includes processing, packaging, transportation, distribution, marketing and service provision, especially financial and business services.
Graziano da Silva made the remarks at FAO’s Regional Conference for Africa which is primarily dedicated to the theme of creating decent and attractive employment in the continent, the world’s “youngest” in terms of the average age of its population.
Estimates suggest that up to 12 million new jobs will have to be created every year to absorb new labour market entrants over the next 20 years. Today some 54 percent of Africa’s working force relies on the agricultural sector for livelihoods, income and employment, especially in family farming.
With more people moving to cities, demand on urban food markets will grow, which in turn can generate job opportunities in all agriculture-related activities. But FAO believes that more must be done to create non-agricultural employment in rural areas, including agro-tourism and other services.
Graziano da Silva pointed to FAO’s regional programme, “Youth Employment: enabling decent agriculture and agri-business jobs”, which goes beyond farm jobs and seeks to develop capacity and scale up successful approaches through programme formulation and partnerships.
“More than ever, strategic partnerships are needed to bring together the African Union, the African Development Bank and the UN system and other development partners,” the FAO Director-General said.
He warned however that more profitable urban markets can lead to a concentration of food production in large commercial farms, and also the creation of value chains dominated by large processors and retailers.
“In this contest, smallholders and family farmers need specific policies and regulations. This includes providing access to inputs, credit and technology and improving land tenure,” Graziano da Silva added, stressing how social protection programmes, including cash transfers can link public food purchase to family farmer’s production.
Hunger, overweight and obesity
Achieving Zero Hunger remains FAO’s highest priority, one that it shares with African leaders who through the Malabo Declaration have committed to eradicating chronic undernourishment in their continent by 2025 – in sub-Saharan Africa almost one person in four currently suffers from undernourishment.
In his address, Graziano da Silva underscored that in line with Sustainable Development Goal 2, achieving Zero Hunger needs to go together with ending all forms of malnutrition, a consequence of which is the current global overweight and obesity epidemic.
“The situation is also worrisome here in Africa,” Graziano da Silva said, citing a World Health Organization estimate that obesity-related diseases may become the biggest killer in Africa by 2030.
Rapid urbanization and consumption of highly processed foods are the major drivers behind the increase in overweight and obesity. Yet many people in Africa are unaware that certain foods are unhealthy, or that being overweight presents a health risk, the FAO Director-General said.
He urged for the need to “act on two fronts” focusing on both the production and consumption of healthy food, and called for ensuring more responsible advertising and information campaigns on food products. “People must be aware about the pros and cons of what they are eating, and also be encouraged to eat healthy food.”
FAO assists countries on climate change
Graziano da Silva also referred to climate change and other pressing issues in Africa and how FAO, together with its partners, is addressing them.
FAO is working closely with a wide range of countries around the world that have formally requested the Organization’s assistance to tap into financing from the Green Climate Fund. In Africa to date, FAO is currently supporting the development of six full project proposals – in Benin, Gambia, Kenya, Republic of Congo and Tanzania – several other “readiness” proposals.
Hunger uptick in Africa can be reversed
FAO Director-General José Graziano da Silva on Thursday expressed optimism that the recent uptick in global hunger levels will be reversed and that Zero Hunger remains attainable – but added that doing so will hinge on boosting the resilience of communities in Africa, where current hunger trends are particularly worrying.
The most recent UN global report on world hunger found that, after decades of decline, the number of hungry people on the planet went back up in 2016, largely due to conflict, climate-related shocks and economic slowdowns.
Trends in Africa helped drive that increase. Some 23 percent of people in sub-Saharan Africa suffered from chronic hunger in 2016, while in East Africa, 34 percent of people did, according to the report.
“Even in some countries that have been successful at reducing food insecurity faced a setback, especially due to prolonged drought caused by the impacts of El Niño,” Graziano da Silva noted in a speech at an event on Zero Hunger held during the FAO Regional Conference for Africa.
However, the FAO Director-General also expressed optimism that an already-emerging and energetic response by the international community to recent negative hunger trends will help turn the tide.
“I firmly believe that 2016 was a point outside the curve, and not a reversal tendency,” he argued.
Causes for optimism
One reason for optimism is that political will to redouble anti-hunger efforts is running higher than ever, Graziano da Silva said, as evidenced by the issue’s high prominence during the recent African Union Summit attended by the continent’s top leaders as well as UN Secretary-General António Gutteres – FAO launched “Achieving Zero Hunger in Africa by 2025. Taking stock of progress”, which contains the proceedings of the African Union High-Level Meeting on the topic.
Two other factors provide additional cause for optimism, according to the FAO Director-General.
For one, the Green Climate Fund has become operationally and is now channelling funding to developing countries to help them respond to climate change, including its impacts on food insecurity. Additionally, there are strong signs that the world economy is recovering, which will create favorable conditions for development.
“Zero Hunger is attainable. It depends on us,” the FAO Director-General exhorted his listeners. “It is time to redouble our efforts, and push for political commitment and timely, concrete actions such as never seen before,” he said.
In her statement to the FAO Regional Conference, African Union Commissioner of Rural Economy and Agriculture, Josefa Sacko, said that on the Commitment of Ending Hunger by 2025, “we are lagging behind and there is still a lot of work to be done going forward on ending hunger by 2025,” however also noting there was cause for optimism.
“We have the opportunity to pick out some key lessons, exchange views on what might impede our progress in achieving food and nutrition security and continue to strengthen coordination and partnerships among us,” Sacko said. She mentioned the Africa Solidarity Trust Fund as a way to help move things forward.
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ECOWAS single currency to be in circulation by 2020
The Presidential Taskforce on the ECOWAS Single Currency Programme has adopted a revised roadmap for accelerating the use of the common Currency by 2020.
The Presidential Taskforce, who met in Accra, Ghana, on Wednesday, also re-affirmed the political will to meet the deadline by 2020.
The meeting, which is the 5th of such meetings to fast track the process, was attended by members of the Presidential Taskforce, comprising President Alassane Ouattara, La Cote d’Ivoire; President Mahamadou Issoufou, Niger; and President Nana Addo Dankwa Akufo-Addo, Ghana, who was the host.
Also in attendance were Governor of the Central Bank of Nigeria, Godwin Emefiele, who represented President Mahamadu Buhari; and the Governor of the Central Bank of Guinea, Mr. Lockney Babe,who represented Professor Alpha Conde, of Guinea. The meeting was graced by President Faure Essozimna Gnassingbe of Togo.
In a Communiqué issued at the end of the meeting, Wednesday, the Taskforce adopted the report of the Ministerial Committee of Ministers and Governors.
The purpose of the Ministerial Committee meeting was to propose a revised roadmap to fast track the use of the Single Currency to begin by 2020.
The Taskforce acknowledged the quality of the conclusions as well as the relevance of the recommendations made by the Ministerial Committee.
Additionally, the Taskforce re-affirmed the gradual approach where Member States which attained the convergence criteria, could start the monetary union while the other countries joined later.
The Communiqué among others, re-affirmed Member States commitment to ratify and implement all relevant ECOWAS protocols and conventions.
It welcomed the progress made by the Member States and encouraged them to continue the efforts toward meeting the convergence criteria and strengthening the multilateral surveillance mechanism.
The Taskforce, however, expressed concern over the situation in the Democratic Republic of Congo. It urged the African Union to take measures and institute workable mechanism to move towards a peaceful solution in that country.
The Members of the Presidential Taskforce agreed to hold their next meeting in Niamey, Niger, in May 2018.
Background
At the Extraordinary Summit of Heads of State and Government on 25th October, 2013, the Presidents of Ghana and Niger were appointed to oversee the creation of the single currency in a timely manner.
The two Presidents constituted a Task Force, whose membership included representatives of the President of Ghana and Niger; Ministers of Finance of Ghana and Niger; Governors of the eight Central Banks of ECOWAS member States; ECOWAS and UEMOA Commissions; West African Monetary Agency (WAMA) and the West African Monetary Institute to advise them periodically on the monetary integration programme.
The membership of the taskforce was reviewed in 2015 to include the Presidents of Cote d’Ivoire and Nigeria, as well as the Ministers of Finance of the two countries.
The inaugural meeting of the Presidential Taskforce was held on 20th and 21st February, 2014 in Niamey. Subsequently, two other meetings were held in Accra on 7th and 8th July, 2014, with the last meeting held in Niamey from 4th to 6th February, 2015.
The main objectives of the third meeting were to examine the revised roadmap on the realisation of the ECOWAS single currency by 2020; a proposal from the ECOWAS Commission on the creation of an ECOWAS monetary Institute by 2018; and the concern raised by the WAMZ Convergence Council on the revised macroeconomic criteria adopted by the 45th Ordinary Summit of the Heads of State and Government held in Accra on 10th July, 2014.
After the third meeting, it was agreed, amongst others that the Central Bank financing criterion be reclassified as a primary criterion because of its strategic importance to monetary and price stability. The revised roadmap on the realisation of the ECOWAS single currency by 2020 was to be costed and sources of funding identified.
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tralac’s Daily News Selection
Featured interactive: NEPAD’s impact on the continent
The CSAE Conference 2018 (18-20 March, Oxford) includes four trade panels: the preliminary papers have been posted
Selected preview of today’s EAC Heads of State Summit in Kampala: All is set for Somalia to join EAC fraternity. The inclusion of Mogadishu will make the East African Community to now own ‘The Horn of Africa,’ and boast the longest coastline of the Indian Ocean on the continent. The joint population of Kenya, Rwanda, Uganda, Tanzania, Burundi, South-Sudan and (if admitted) Somalia, will be close to 190 million in total, which is essentially the same number of people as Nigeria.
Francis Mangeni: RECs experience provides vital lessons for faster implementation of the Continental FTA (EA Business Week)
The presidents of Africa will meet in Kigali on 21 March 2018, hosted by President Paul Kagame, in an extra-ordinary Summit, to sign the framework Agreement establishing the African Continental Free Trade Area. This follows protracted negotiations over a record period of about two years and two months, since the launching of the negotiations on 15 June 2015 which effectively started in February 2016. Attached to the CFTA Agreement will be the protocols on trade in goods, trade in services, and dispute settlement. The protocol on trade in goods will have a number of annexes, covering rules of origin, non-tariff barriers, technical standards, health standards, customs, trade facilitation, transit trade, and trade remedies. A few outstanding issues remain to be sorted out, and legal scrubbing has to be done: but there should be enough time up to 21 March to get all this done.
Practical application of regional integration programs reveals areas for creativity and innovation, which continuously results in new pathways at REC levels. Realism would therefore suggest that REC policy formulation and programs should continue full blast, for it is unlikely that continental frameworks would move as fast as those of smaller coherent RECs. The CFTA long transition periods of 10 to 15 years and lower thresholds for market opening of around 90% of total product lines, mean that the Tripartite and the RECs, which are more ambitious, have the responsibility of keeping the continental market integration agenda functional; for it will be long before the CFTA regime fully kicks in. Experimental learning has been the ethos of African Economic Integration. Beginning with unique entry points, the RECs got the African regional integration programs off the ground from different vantage points that reflected specific critical developmental challenges at the time in the region. Positioning the RECs as learning organisations remains an important strategic orientation.
Africa growth prospects for 2018 (Afreximbank)
But the resilience of African economies is also attributed to a number of other factors, most notably growing cross-border trade and investments which are reducing the exposure of the region to adverse global volatility and external shocks. A growing number of African industrialists are playing an increasingly important role in the process of economic growth and investment. In particular, they are injecting the patient capital which is required to drive the process of structural transformation and mitigate the risk of sudden stop and capital outflows triggered by the challenging global environment of rising uncertainty and volatility. Most recent estimates place annual intra-regional investment at $15bn, over 24% of total foreign direct investment to the region. Moreover, cross-border investment undertaken by African entrepreneurs and industrialists is directed primarily towards labour-intensive manufacturing industries which are both growth and welfare-enhancing. [The author: Dr Hippolyte Fofack, Chief Economist of the African ExportImport Bank]
Poverty, welfare and income distribution implications of reducing trade costs through deep integration in Eastern and Southern Africa (Journal of African Economies)
We examine regional and unilateral policies to reduce three kinds of trade costs in Eastern and Southern Africa. Our article is the first CGE-microsimulation model to assess the impacts of the reduction of trade costs on poverty and income of the poorest 40% of the population. We estimate significant reductions in the poverty headcount and increases in income for the poorest 40%. We find that trade facilitation would increase the ‘share’ of income of the poorest 40% of the population, however, services reform decreases the share. We find and explain why our three types of trade costs have very diverse impacts across the countries. [The authors: Edward J Balistreri, Maryla Maliszewska, Israel Osorio-Rodarte, David G Tarr, Hidemichi Yonezawa] [Note: This article is available to subscribers only]
Will Ghana lead Anglophone West Africa to a single currency? (Deutsche Welle)
What’s behind the new push to introduce a West African single currency, the Eco? A statement by Ghana’s finance minister indicates Accra may be making one last attempt to realise this elusive goal. “The single currency for 2020 vision is: let’s find two, three or four countries that are ready. Once they meet up, we follow through with the others cascading in,” said Ken Ofori-Atta, Ghana’s finance minister, at a meeting of West African ministers in Accra on Wednesday. Ofori-Atta’s statement appears to be clearly directed at Nigeria, the West African region’s economic powerhouse that has put up stiff resistance to the Eco. Nigeria, however, is not convinced about the benefit of a single currency to its mega economy, whose GDP quadruples the rest of the others combined, with the exception of Ghana.
Kenya embraces IGAD Regional Protocol on Free Movement of Persons (IGAD)
Kenya’s Cabinet Administrative Secretary in the Ministry of Interior, Hon. Patrick Ole Ntutu launched the National Consultative Workshop towards the development of the Regional Protocol on Free Movement of Persons in Naivasha yesterday. “Some of key benefits that we will enjoy by facilitating free movement of persons and opening up our borders to the world include among others higher tourism and trade volumes, competitive economy, skilled labour exchange and education opportunities as well as social and cultural integration,” the newly appointed government official stated, adding that there is need to put in place mechanisms for better migration management, mobility and free movement of persons in the region. Speaking on behalf of Amb Dr Monica Juma, who was recently promoted to Cabinet Secretary for Foreign Affairs of Kenya, Amb Anthony Andanja pointed out that the New York Declaration on Refugees and Migrants was an affirmation by global leaders at the highest level of their unequivocal political commitment. He however added that the issue of refugees and migrants is manifestly divisive – while some see it through the lens of moral obligations to assist fellow humans at risk, others views migration as a threat to security and national identity. “The difficulty as a whole is not the overall capacity to absorb refugees, but the politics of how to share the burden,” Amb Andanja concluded.
Rail cargo movement increases in East Africa (Daily Monitor)
Latest report from the Kenya Ports Authority published this month shows that containers delivered up-country by rail from the Port of Mombasa recorded 671 twenty-foot equivalent unit (TEUs) registering an increase of 233 TEUs compared to the previous week. Imports population breakdown indicated that there were 3,170 TEUs locally bound (Kenya) and 4,873 TEUs for transit destinations. Uganda bound containers recorded 3,825 TEUs, out of the 4,873 TEUs making it the biggest customer. This was followed by Tanzania bound containers that registered 444 TEUs, South Sudan with 233 TEUs, and Democratic Republic of Congo with 162 TEUs and Rwanda with 157 TEUs.
COMESA to introduce seed labels and certificates to boost regional trade (COMESA)
Dr Cheluget added that although COMESA is home to some of the major seed producing countries in Africa such as Egypt, Zambia, Zimbabwe, Kenya, Malawi and Uganda, the levels of supply remain stagnant with each country differing in the laws, procedures and systems applied to the seed value chain. He said: “Companies are left to focus only on the domestic markets and thus unable to supply other markets in the region that may have greater demand.” Once operational, the COMESA Regional Seed Certificate will be issued by national seed authorities upon verification that a seed lot registered on the COMESA Variety Catalogue was inspected, met COMESA field standards and underwent laboratory analysis. Speaking at the same forum, the Permanent Secretary in Zambia’s Ministry of Agriculture Mr Julius Shawa said the country is committed to introducing harmonized seed trade regulations.
South Africa: Trade Probe, February edition (NAMC)
This issue of Trade Probe (pdf) covers the following topics: (i) Trade profile of water, include natural water; (ii) Confronting climate change: understanding and addressing the hotspots; (iii) Trade profile of live goats; (iv) Trade analysis of grain sorghum; (v) Market profile of the South African macadamia nuts industry; (vi) Assessing trade performance of oranges destined for Asian markets.
US Commerce Secretary releases steel and aluminum report: potentially impacting on South African steel exports? (AGOA.info)
Secretary Ross has recommended to the President that he consider the following alternative remedies to address the problem of steel imports: (i) A global tariff of at least 24% on all steel imports from all countries, or (ii) A tariff of at least 53% on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam) with a quota by product on steel imports from all other countries equal to 100% of their 2017 exports to the United States, or (iii) A quota on all steel products from all countries equal to 63% of each country’s 2017 exports to the United States. Each of these remedies is intended to increase domestic steel production from its present 73% of capacity to approximately an 80% operating rate, the minimum rate needed for the long-term viability of the industry. Each remedy applies measures to all countries and all steel products to prevent circumvention. The President is required to make a decision on the steel recommendations by 11 April 2018.
China in Africa: Much ado about investment - Part 2 (China Africa Research Initiative)
Keeping in mind this difference, these two activities each illustrate, in their own way, China’s presence in Africa; they show clearly that China is a services provider rather than an investor, that Africa is rather a customer than a partner. This conclusion would be even more evident if the services were to be added to the Chinese goods bought by African countries or, more accurately, to the growing African merchandise trade deficit with China. In my final post, using examples from Algeria, I will explain how the many kinds of “Chinese” enterprises in Africa further complicate efforts to understand Chinese FDI. [The author, Dr Thierry Pairault, is research director at France’s CNRS]
A multidimensional approach to trade policy indicators (IMF)
We present and discuss a set of indicators to help assess countries’ trade policies. The indicators relate to three policy areas – trade in goods, trade in services, and FDI. Given concerns about the direction of global trade policy, we also consider a set of more granular measures that reflect the evolution of countries’ policies since the 2008 financial crisis. We propose a simple approach to present the multidimensional aspects of trade policy that, by shedding light on relative openness across areas, can facilitate policy discussions. [The authors: Diego A. Cerdeiro; Rachel J. Nam]
Today’s Quick Links: South Africa’s 2018 Budget: speech, downloads. Profiled budget votes: Department of Trade and Industry, Vote 34 (pdf), Economic Development, Vote 25 (pdf) Tony Carroll: Renewing US - South Africa relations under Ramaphosa Peter Fabricius: SA returns to the UN Security Council with a new leader Carlos Lopes on the AfCFTA: Acordo de livre comércio quer África a resistir às potências que a exploram President Lungu backs AU reforms: calls for ‘urgent’ implementation Kenya: Import cover hits four-month high Incubator for Integration and Development in East Africa: call for proposals ECOWAS to open business incubator centres for women entrepreneurs in rural areas of West Africa Australia’s trade: by state and territory 2016-17 (pdf) JETRO’s annual survey on business conditions for Japanese companies in the US World Bank: Wider economic benefits of investments in transport corridors and the role of complementary policies |
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2018 Budget Speech: Restoring South Africa’s public finances on a sustainable path
In the current economic climate, spending priorities and the sequencing of programme implementation are subject to a number of trade-offs. The focus of the 2018 Budget has solely been on the reprioritisation of existing baseline funding.
For some time, the South African government has been spending more than it can afford, leading to rising debt. The economy has also been growing at a slow pace as a result of low business confidence and falling private investment. At the time of the October Medium Term Budget Policy Statement government presented an unsustainable debt outlook. The 2018 Budget presents proposals to rebuild confidence and put the public finances on a more sustainable path.
South Africa has an opportunity to build on the positive developments that have emerged in recent months. The economy has performed slightly faster than expected, with economic growth now projected to be 1 percent cent in 2017, 1.5 per cent in 2018 and 2.1 per cent by 2020. This pace of economic growth is welcome, but is still too slow to address unemployment and poverty. This will make it difficult for government to achieve its targets for public finances.
The central budget proposals involve boosting the public finances by raising taxes, reducing spending and reprioritising. Government will raise taxes by R36 billion through a one percentage point increase in the VAT rate to 15 per cent, and adjustments to other taxes. Raising VAT is estimated to have the least harmful effects on growth over the period ahead. Spending will also be reduced in other areas and reallocations will be made to other priorities mostly free higher education and training over the next three years.
Despite these changes, national government will still need to borrow R191 billion in 2018/19. However, the national debt outlook is now on a sustainable path. A sustainable budget is the first step in getting the economy back on track and growing more quickly.
Government will work to deliver on important policy reforms as well as working on improving the governance and performance of state-owned-companies (SOCs) which is also key in supporting the growth of the economy.
Although the economic situation has improved, the risks are still significant. The possibility of government collecting less revenue than it budgeted for, low economic growth and severe financial weakening at several major SOCs, still remain a factor.
Boosting confidence, the economy and creating jobs
Private investment in South Africa has been declining since 2015 as a result of low levels of business and consumer confidence. The 2018 Budget is being introduced during a period that provides an opportunity to restore confidence and boost economic growth.
Government is expected to finalise outstanding policy reforms, act decisively against corruption in the public and private sectors, and move swiftly to resolve governance and operational failures at SOCs.
To spur growth and boost employment, government is working collaboratively with different stakeholders on a number of initiatives.
Delivering policy certainty is vital to restore trust and create a supportive environment for investment growth. Government is addressing barriers to investment in the telecommunications, mining and energy, and transport sectors.
Improving spending efficiency on infrastructure projects
The National Development Plan identifies that in order to overcome unemployment, poverty and inequality, there needs to be significant infrastructure investment.
The Budget Facility for Infrastructure (BFI) is a reform introduced by government aimed at improving the efficiency of spending on infrastructure projects across the public-sector. The first phase of the BFI has begun to address weaknesses in project preparation and the next phase will continue to support quality public investments through better planning, financing, procurement and implementation of infrastructure projects.
The 2018 Budget makes provision for funds that will be used to provide assistance for projects that require further work before they can be considered for funding.
2018 Budget Speech
Delivered by Malusi Gigaba, Minister of Finance, on 21 February 2018
As I begin, let me first table before this august House:
- The Budget Speech,
- The 2018 Budget Review, including
- Fiscal Framework,
- Revenue Proposals, including customs and excise duties,
- Estimates of national revenue and replies to the Budgetary Review and Recommendation Reports,
- The Division of Revenue Bill,
- The Appropriation Bill, and
- The Estimates of National Expenditure
At the very advent of our democracy, as the nation was emerging from more than three centuries of colonial oppression, which President Nelson Mandela described as an “extraordinary human disaster that [had] lasted too long”, he urged that out of that experience had to be born a society of which all humanity would be proud.
To our highly expectant nation, he addressed the following words, that:
“Our daily deeds as ordinary South Africans must produce an actual South African reality that will reinforce humanity’s belief in justice, strengthen its confidence in the nobility of the human soul and sustain all our hopes for a glorious life for all.”
Almost twenty-four years later, President Ramaphosa captured the moment and mood aptly, in delivering his inspirational inaugural State of the Nation Address, when he said that a new dawn was upon us and urged us to renew our nation’s promise.
Declaring this a year of change, renewal and hope, he urged us to honour both Madiba and Mama Albertina Sisulu “not only in word, but, more importantly, in direct action towards the achievement of their shared vision of a better society.”
This was a profound statement, echoing the hopeful and unifying sentiments of the founders of our democracy and the living dreams of the peoples of our country.
The President proceeded to outline an abiding vision for our country that has resonated with all our people, fired all of us with hope and enthusiasm, and ignited a sense of renewal.
Towards the realization of this vision, the Budget we present today is an opportunity to reflect on the state of our nation’s finances, and the economy more broadly, but most importantly, to understand how these support our social and economic objectives.
This is the challenge of our time, to build a South Africa in which all people have a decent standard of living, access to economic opportunities and opportunity to pursue their dreams.
It is these core aspirations which the Budget must speak to, enable and indeed, advance. We stand before you with a profound sense of optimism, purpose and resolve.
All of us should heed the President’s call echoing the late, great Hugh Masekela, to lend a hand in addressing society’s most pressing challenges.
Fellow South Africans, we have the opportunity to achieve faster and more inclusive growth, to create jobs for our people and a better life for all South Africans.
That opportunity comes from a favourable global economic outlook, with many of our trading partners doing well, and from improved prices for our exports.
That opportunity comes from a fiscal framework which has improved markedly since the October medium-term budget policy statement.
That opportunity comes from a stronger rand and favourable inflation outlook.
That opportunity comes from the strong partnership which has been forged between all the social partners to prevent further ratings downgrades, and remove obstacles to investment, growth and job creation.
That opportunity comes from improving confidence, as business and consumers have responded positively to political developments over the last three months, and are anticipating progressive, ethical and decisive leadership from government.
To take advantage of these opportunities, we must act with urgency to make tangible progress on issues of public governance, inclusive growth and economic transformation.
Our resolve to ensure the sustainability of the nation’s finances will become evident today, as we table a budget which carefully balances a variety of important priorities, including social investment and protection, economic investment, and the need to stabilize the growth in public debt.
After several years during which economic growth undershot our projections, we now see the improved growth projections for 2018 and subsequent years as a floor, rather than a ceiling.
We are convinced that as business and consumer confidence return, and as government follows through on its commitments to enable growth with prudent, fast and decisive action, we can exceed our growth projections.
With purpose and resolve, we can take advantage of these opportunities, and achieve the faster growth which is needed dramatically to reduce unemployment, poverty and inequality, and relieve pressure on our fiscal framework.
This is a tough, but hopeful budget.
It required us to make difficult but necessary trade-offs, important to ensure that this budget is a platform for renewal, inclusive growth and job creation.
It directs spending to our most pressing national priorities: educating our youth, protecting the vulnerable and investing in enablers of inclusive growth.
It moderates spending and raises the revenues required to contain the growth in national debt, whilst trying to minimize negative effects on growth.
It presents a budget outlook which is markedly improved since the Medium-Term Budget Policy Statement in October; it now projects debt stabilizing as a share of GDP over the medium term.
Budget 2018 charts a path out of economic stagnation, anticipating a steady increase in economic growth which will create a path to prosperity for our people, and improve our nation’s finances over time.
There are risks and spending pressures we will need to navigate carefully, but this Budget presents a roadmap to maintaining the integrity of our public finances, while protecting social services.
Economic Outlook
We remain committed to the goals we set ourselves in the Freedom Charter, the Constitution and the National Development Plan (NDP).
These goals are ultimately aimed at addressing the triple challenges of poverty, inequality and unemployment. To achieve these goals, we have to implement radical socio-economic transformation.
It would be remiss of me not to acknowledge that last year was particularly difficult for our economy.
The year was characterised by slow economic growth, recession, ratings downgrades, and heightened concerns regarding the governance and sustainability of key state-owned companies.
Despite this, the country’s economic growth outlook has improved over the past few months because of strong growth in the primary sector of the economy – particularly agriculture – as well as a welcome recovery in investor sentiment and business confidence.
Over the medium term, the growth outlook is higher than projected in last year’s MTBPS.
The cyclical recovery is matched by a renewed sense of optimism that the government can and will do its work effectively.
This presents an opportunity for us to do the things required to reignite growth and chart a course towards meeting the objectives of the NDP and fulfilling our constitutional obligations.
Our responsibilities in translating this renewed energy into tangible and sustainable economic benefits for all our people include:
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Creating the right environment for investment,
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Partnering with the social partners to create sustainable employment,
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Dealing decisively with governance and financial failures at state owned companies; and
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Addressing the concentrated and inequitable structure of the economy.
Achieving these objectives will require us to forge a new compact between the social partners. We need to provide investors with the certainty required to increase investment.
Raising the level of investment and improving the ease of doing business in the country will support job creation.
Private sector investment and job creation are critical to reducing unemployment which remains stubbornly high at 26.7 per cent.
Investment opportunities are occasioned by the following global developments in our main trading partners:
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Stronger domestic demand in the US and the euro area has supported an improved growth outlook.
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The recovery in commodity prices has also supported developing countries growth prospects.
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Sub-Saharan Africa is expected to grow at 3.3 per cent in 2018
Seizing the opportunity for inclusive growth and economic transformation
By harnessing these opportunities, we can move our economy towards the targets we have set ourselves in the NDP.
South Africa needs to be bold and coordinated in building sectors where we have comparative advantage and can be truly world class.
These include, but are not limited to: mining, agriculture, tourism, as well as manufacturing and service exports to the rest of Africa and globally.
The 2017 GDP growth projection has been revised upward to 1 per cent, which is higher than the 0.7 per cent expected at the time of MTBPS last year.
We are anticipating growth of 1.5 per cent in 2018, rising to 2.1 per cent in 2020.
While this is a good start, there are immediate policy interventions that we need to make to ensure that we create the right environment for investment, growth and employment.
The first is to finalize the 14 confidence-boosting measures that we committed to in July last year.
I am pleased to announce that good progress has been made in this regard, as detailed in Chapter 1 of the Budget Review.
The gains from progress made by government action are important but insufficient to achieve transformation and inclusive growth.
Together, government, labour, the private sector and civil society have the ability and responsibility to grow the economy inclusively.
The enormous potential of our partnership has been demonstrated by the CEO initiative, which has established a business-led fund committing about R1.4 billion to support high potential SMMEs.
Work is being done to provide crucial funding to innovative small businesses when they need it most.
A fund with an allocation of R2.1 billion over the medium term is being developed between the Departments of Small Businesses, Science and Technology and the National Treasury to benefit small and medium enterprises during the early start-up phase – this is an area that has historically had limited support because of the risks involved.
By enabling new businesses with new ideas to emerge and thrive, we are radically transforming patterns of production in the economy.
Another important constraint for small business is lack of market access and barriers to entry. To resolve this, our competition authorities continue to do the necessary and important work of addressing barriers to entry and rooting out anti-competitive behaviour which slows economic growth and dynamism.
As the President indicated, the Competition Commission’s market inquiry to investigate data prices will be completed by the end of August 2018. This will support the work being done by the government to improve competition in the telecommunications sector.
By deconcentrating our economy, we are radically transforming the structure of our economy.
Furthermore, there is continued collaboration with our social partners at NEDLAC to improve the country’s investment ratings and accelerate economic growth.
While this represents much needed progress, it is inadequate to get the economy growing at the rate we need.
More needs to be done.
We are inspired by the President’s commitment in the SONA to convene investment and jobs summits, to bring all stakeholders together around practical initiatives to catalyse inclusive growth and job creation.
Transformation calls for more than growth alone, it requires a fundamental shift in the way that wealth is created and shared.
The structure of the economy needs to be transformed to allow for new ideas, businesses and economic activities to emerge and thrive.
South Africa cannot be so fixated on our domestic circumstances that we ignore fundamental global economic trends, dynamics and debates that will shape the future.
We must continue to chart a path for ourselves that is responsive to global change but equally tailored to addressing the specific needs of our society that will result in truly better lives for all.
Tax proposals
The tax proposals for the 2018 Budget are designed to generate an additional R36 billion in tax revenue for 2018/19.
The main tax proposals for the 2018 Budget are:
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An increase in the value-added tax rate from 14 per cent to 15 per cent,
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A below inflation increase in the personal income tax rebates and brackets, with greater relief for those in the lower income tax brackets,
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An increase in the ad-valorem excise duty rate on luxury goods from 7 per cent to 9 per cent,
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A higher estate duty tax rate of 25 per cent for estates greater than R30 million,
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A 52 cents per litre increase in the levies on fuel, made up of a 22 cents per litre for the general fuel levy and a 30 cents per litre increase in the Road Accident Fund Levy, and
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Increases in the alcohol and tobacco excise duties of between 6 and 10 per cent.
In developing these tax proposals, government reviewed the potential contributions from the three major tax instruments which raise over 80 per cent of our revenue; personal and corporate income tax and VAT.
The National Treasury, in close cooperation with the Reserve Bank, the Financial Intelligence Centre and the South African Revenue Service, is taking several steps to detect, disrupt and deter illicit financial flows.
These measures include increasing capacity, coordinating a national risk assessment and improving information sharing between various agencies.
In line with G20 recommendations, policy measures to deal with transfer pricing and base erosion by multinational companies are been implemented and continue to be tightened.
Having a sustainable tax base is important to ensure that government has enough revenue to meet its spending needs.
Companies can structure affairs to reduce their tax base in South Africa and shift their profits to low-tax countries. This threatens the sustainability of our tax base and is a challenge that most governments are struggling with.
The implementation of country-by-country reporting will enable SARS to ensure that companies pay their fair share of tax in SA.
We are also investigating options to further curb the practice of excessive interest deductions by companies in order to reduce their tax liability.
The realisation of taxes from the off-shore wealth of taxpayers, as highlighted in the Panama and more recently the Paradise Papers, was evidenced in the over 2000 applications for disclosure by South African taxpayers under last year’s Special Voluntary Disclosure Programme.
It is anticipated that by the end of March 2018 over R3 billion will have been collected in respect of the SVDP that have been processed, with work on remaining applications continuing into the new fiscal year.
Measures to approve material cross-border transactions involving state-owned entities will be put in place.
The digital economy brings about many technological advances that have led to changes in business models. Today, we update draft VAT regulations to cover foreign businesses selling electronic services to South African consumers.
Working closely with the Department of Trade and Industry, I have approved six special economic zones that will make qualifying companies subject to a reduced corporate tax rate, and enable them to claim an employment tax incentive for workers of all ages.
These measures will promote investment in those manufacturing and tradable services sectors that encourage exports, job creation and economic growth.
Working with the Minister of Science and Technology, Government has streamlined the administration of the research and development tax incentive.
Aside from raising revenue, the tax system is increasingly required to play a role in protecting the natural environment and promoting sustainable use of limited resources.
Parliament is currently considering the draft Carbon Tax Bill, which will assist South Africa to meet its climate change commitments to reduce our carbon emissions.
The tax will be implemented from 1 January 2019.
As with greenhouse emissions, the polluter-must-pay-principle must also apply to other activities which harm the environment, like the dumping of plastics into our oceans and threatening of marine life.
Working with the Department of Environmental Affairs, we will shortly publish a policy brief to broaden the scope of environmental fiscal reform, to explore fiscal and regulatory measures to improve water resource management, mitigate the emission of pollutants and encourage recycling to reduce waste, such as plastic, which is polluting our oceans.
Tax morality is a crucial component of a healthy democracy. It has taken many years and lots of effort to build the foundation of trust that supports our tax morality. We have seen how quickly that citizens’ trust can be eroded by perceptions of poor public governance.
At the SONA, the President has announced his intention to establish a commission of inquiry into tax administration and governance at SARS.
This year, government will respond to the Davis Tax Commission’s report on tax administration and introduce draft legislation to give effect to some of its recommendations, including those on the accountability of SARS to the Minister of Finance, and the establishment of a supervisory board, as well as measures to strengthen the Office of the Ombud.
Government will also take steps to implement the customs modernisation programme currently implemented by SARS, to give effect to the new customs and excise legislation passed in 2014.
Medium term expenditure and the division of revenue
Consolidated spending will increase from R1.67 trillion in 2018/19 to R1.94 trillion, representing a nominal annual average growth of 7.6 per cent, or 2.1 per cent in real terms.
In aggregate, government will be spending R792 billion on basic education, R668 billion on health and R528 billion on social grants, over the medium term.
This coming fiscal year alone, government has allocated over R200 billion for peace and security and another R200 billion for economic development to build a safer country and to grow our economy inclusively.
The largest reallocation of resources towards government’s priorities was on higher education and training, amounting to additional funding of R57 billion over the medium term.
Government continues to support South African companies to grow and to become more competitive through incentives in the form of grants, loans and tax allowances.
R18.8 billion is allocated for industrialisation incentives over the medium term of which an additional allocation of R3.3 billion is allocated for the Economic Competitiveness and Support Package to support growth and job creation in support of the Industrial Policy Action Plan.
Government is spending a significant amount on small business support in the medium term.
Of the incentives budget, R4.9 billion is allocated for industrial infrastructure projects over the medium term for special economic zones, government-owned industrial and critical infrastructure projects to promote industrial development and increase investment and exports of value-added commodities.
To strengthen global market access for South African agricultural products, the Department of Agriculture, Forestry and Fisheries received an additional allocation of R40 million over the MTEF to upgrade infrastructure and equipment for analytical services laboratories.
This will provide assurance to global trading partners that South African agricultural products meet internationally recognized standards for human safety, thereby facilitating our ability to export unhindered.
In line with the outcomes of Operation Phakisa on Agriculture, Rural Development and Land reform, the Department of Agriculture, Forestry and Fisheries aims to create and support 450 sustainable and profitable black commercial producers participating in prioritised value chains over a five-year period.
An estimated R581.7 million is expected to be reprioritised for the black producer commercialisation programme. By creating opportunities for black agricultural producers, we are radically transforming the agricultural sector of our economy.
The Judicial Commission of Inquiry into State Capture is ready to commence with its work. Budget allocation for the Commission will be considered during the 2018 Adjustment Budget once its costing is finalised.
Financial sector regulation
Financial sector transformation
Transformation of the financial services sector is critical, as the allocation of capital greatly influences patterns of ownership and production in the economy.
In financial services, government has gazetted the Financial Sector Codes and a R100 billion Black Business Growth Fund has been created through the code.
The fund will assist black entrepreneurs to finance big deals – an intervention that is crucial to transforming capital allocation in the economy.
The Financial Sector Summit will also take place in April 2018.
All of these efforts serve to extend access to South Africans who were excluded from the financial system.
Strengthening the regulatory system
South Africa has a strong financial regulatory system and deep and liquid capital markets. These are critical ratings strengths.
The two new Twin Peaks authorities will be established on or soon after 1 April 2018, and their powers will be phased in to ensure a smooth transition to the new and tougher regulatory system.
Further steps will be taken to strengthen the system, including introducing deposit insurance and introducing a new way of resolving banks that are in financial distress. Draft legislation will be published shortly.
Work will continue on reforming the legislation for financial markets and the payment system, to ensure that our infrastructure remains globally competitive.
The Treasury is working with the Reserve Bank, Financial Services Board and other government entities towards a regulatory framework for all types of FinTech.
For instance, the emergence of cryptocurrencies is a major development to which our regulatory regime must respond.
Conclusion
Given the difficult circumstances we have been in and the choices we had to make in order to steer the course, maintain the trajectory of our policy objectives and sustain our public finances, we have made the tough calls and decisions that affirm our nationhood.
Let this be the year of renewal, revitalization and a step change in progress in fostering inclusive economic growth which rolls back unemployment, poverty and inequality.
The opportunity is before us. To take advantage we need to be able to see beyond our individual interests to the national interest, as Madiba so often did, and to find common ground.
Let us work together to create a better life for every citizen and inhabitant of our beloved country.
Let each of us lend a hand.
Estimates of National Expenditure 2018
Government sets out its spending plans in a three-year medium-term expenditure framework (MTEF), which is updated annually. This year’s Estimates of National Expenditure (ENE) publications set out spending plans for 2018/19 to 2020/21. They provide explanatory information on government’s expenditure presented in the annual appropriation legislation, through which government seeks authority from Parliament for its spending. The publications include information on how government institutions have spent their budgets in previous years. They explain how these institutions intend to use their allocations over the medium term to achieve their goals, and the outputs and outcomes their spending is expected to lead to.
The publications include tables depicting non-financial performance indicators and targets, departmental receipts, and detailed expenditure trends and estimates by programme, subprogramme and economic classification for each department and for selected entities. Brief explanatory narratives set out the institution’s purpose (and that of its programmes), mandate, programme-level objectives and descriptions of subprogrammes. A more in-depth narrative analyses the institution’s expected expenditure over the MTEF period. A summary table is included at the end of the chapter for votes in which there is significant spending on infrastructure.
In addition, for each vote, a more detailed e-publication is available online. The e-publications contain programme personnel data tables and detailed information for all entities, as well as additional summary data tables on provincial and municipal conditional grants, public-private partnerships, donor funding, and expenditure at the level of site service delivery, where applicable.
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Africa growth prospects for 2018
After successive downward revisions to growth forecasts which followed the contraction in global demand and the end of the commodity super-cycle – raising yet another spectre of global uncertainty and recession, especially in highly oil-dependent economies, Africa’s economic growth rebounded in the second half of 2016 and strengthened further in 2017.
The region as a whole achieved a growth rate of 3.4 percent in 2017, about a percentage point increase from last year. Looking ahead the growth performance of the region is projected to strengthen even more, with an average growth forecast of 4.0 percent in 2018, supported by increasing investment in a context of firming commodity prices, growth acceleration in Eastern and Northern Africa, and rebound in the largest economies in the region.
Strengthening economic expansion and forecast growth acceleration is sustaining the growth momentum enjoyed by the region since the transition into the new millennium, while at the same time pointing to increasing resilience of African economies to global economic headwinds. These improvements also reflect a combination of perfectly aligned external and internal factors. Firstly, on the external front, the global environment of weak inflation which has kept monetary policies on an accommodative path, sustaining the investment drive, is likely to persist in the near future. In addition to the spillover effects of weak commodity prices which have been acting as a major drag on inflation in advanced economies, broader slack in the labour market and inflationary expectations have also emerged as strong predictors of inflation in the medium term. And in a context of a highly correlated interactions between labour market slack and inflation, the former is likely to make it even more difficult to accelerate the process of monetary tightening, especially in a number of OECD countries where stubbornly high unemployment rates suggest that the “Phillips curve” relationship is still in effect.
Furthermore, in the short term the persistence of monetary divergence is also expected to act in favour of continued accommodative monetary policy. Even though the US Federal Reserve has been in a tightening mode, raising the target range of the federal funds rate three times in the course of last year, central banks in other leading economies are still in a stimulus mode, in part reflecting the challenges of attaining the inflation target and full employment objectives. Perhaps sustaining the rate of economic expansion in these countries where inflation is still under-shooting central bank forecasts, in a context of a persistent slack and spare economic capacity, will remain conditional upon the continued easing of monetary policy in the near term.
Reflecting these concerns, the European Central Bank has made the commitment to extend the bond-buying programme it adopted after the global financial crisis to lower longer-term interest rates out on the yield curve and combat the growing threat of deflation across the Eurozone well into 2018, perhaps to cement the region’s ongoing economic recovery. Similarly, as long as inflation is below the institutional target, the Bank of Japan is likely to stick with its yield curve control regime. In the same vein, and despite the risk associated with rising sovereign and corporate debt, the People’s Bank of China is likely to continue with some level of easing of monetary policy in order to remain on a strong growth trajectory if the government is to meet the stated policy objective of doubling the country’s real GPD over the decade ending in 2020.
Secondly, the exceptionally favourable global economic environment of synchronized global expansion is perhaps the most important and direct catalytic driver sustaining the growth momentum enjoyed by the region and supporting the forecast growth acceleration. Global growth which picked up in the second half of 2016 and accelerated last year to reach 3.7 percent (up from 3.2 percent in 2016), firming commodity prices in the process, is forecast to strengthen further. In the short term, the combination of continued easy financial conditions and supportive fiscal policies will probably maintain the world economy on financial steroid, and perhaps sustain it on a self-reinforcing trajectory of accelerating global growth.
Under that favourable global economic and financial environment, global growth is forecast to accelerate to about 4 percent in 2018 and could sustain global demand in the short – and medium term, especially with the expected rebound in leading emerging economies such as Brazil, Nigeria and Russia, but also as a result of the synchronized and broad-based nature of economic expansion. For the first time in more than a decade, growth acceleration has been witnessed in the overwhelming majority of countries around the globe, including both advanced and developing economies. In effect, although emerging markets and developing economies are still the leading drivers of global growth, the strong performance achieved over the last few quarters has been largely due to the synchronized upturn in economic activities and growth acceleration not only in developing, but also advanced economies, especially following the recent cyclical upswing in Europe.
On the internal front, the forecast growth acceleration reflects the increasingly favourable environment of strengthening domestic demand lifted by softening inflation and a supportive macroeconomic environment. The capacity of African governments to undertake difficult economic reforms, including exchange rate adjustments which have stabilized most currencies in real effective terms, large reductions in public spending as well as drastic and permanent cuts in energy subsidies, despite inherent implications for social welfare, has reduced the risks of macroeconomic management challenges and debt overhang which in the past were associated with twin deficits. Despite the growing number of countries taking advantage of the generally accommodative international capital market conditions, including through sovereign bond issuance, debt-to-GDP ratios remain relatively low across the region, significantly below world averages, and current account deficits are narrowing, even in hard-hit oil-exporting economies.
The successful implementation of economic reforms has strengthened the foundation of macroeconomic stability and is driving investment in support of growth. In addition to improving the investment climate, these reforms are enabling countries in the region to either sustain robust rates of economic growth or shorten the length of recessions triggered by the contraction in global demand and exposure to recurrent adverse commodity terms of trade shocks (more recently illustrated by the end of the commodity super-cycle). After the relatively weak performance observed in 2017, especially in some of the leading natural resource-dependent economies, growth is forecast to strengthen in the region’s largest economies – Angola, Egypt, Nigeria and South Africa.
For instance, in Nigeria (Africa’s biggest crude oil producer) where exports of crude oil account for approximately 70 percent of government revenue and 90 percent of foreign exchange earnings, economic growth which contracted by 1.6 percent in 2016 – the country’s first recession in more than two decades – rebounded in the second quarter of 2017. The economy grew at an annualized rate of 1 percent in 2017, after five consecutive quarters of economic contraction, starting in the first quarter of 2016. The country’s growth forecast points to further strengthening, with aggregate output expanding by more than 2.5 percent in 2018, on the back of increasing investments, rising oil production and labour inputs.
The asymmetric nature of external shocks hitting the region is another important driver of increasing resilience of African economies. While the collapse in oil prices has been a negative shock for leading oil-exporting countries, it has also improved the macroeconomic environment and external sector in a number of countries, especially large oil-importing and energy-intensive economies. Some of these countries are drawing on oil windfalls to finance the large-scale infrastructure investments which are driving output expansion and sustaining the region on the path to structural transformation. According to the most recent forecast, two of the top five fastest-growing economies in the world are African. Ethiopia and Côte d’Ivoire, which achieved growth rates of 8.5 percent and 7.7 percent respectively, were the second and third fastest-growing economies in the world in 2017.
But the resilience of African economies is also attributed to a number of other factors, most notably growing cross-border trade and investments which are reducing the exposure of the region to adverse global volatility and external shocks. A growing number of African industrialists are playing an increasingly important role in the process of economic growth and investment. In particular, they are injecting the patient capital which is required to drive the process of structural transformation and mitigate the risk of sudden stop and capital outflows triggered by the challenging global environment of rising uncertainty and volatility. Most recent estimates place annual intra-regional investment at US$15 billion, over 24 percent of total foreign direct investment to the region. Moreover, cross-border investment undertaken by African entrepreneurs and industrialists is directed primarily towards labour-intensive manufacturing industries which are both growth and welfare-enhancing.
Still, the forecast growth acceleration is also a reflection of increasing diversification of both destination of exports and sources of growth as an increasing number of countries in the region take steps to accelerate the process of structural transformation of their economies and boost intra-African trade. It used to be said “when Europe sneezes Africa catches a cold”, in part reflecting the level of structural dependency of African economies which for a long time into the post-independence era were exclusively appended to Europeans’. The rise of developing market economies, especially those in Asia, and expanding intra-regional trade enabled Africa to sustain robust rates of economic growth in the post-great recession even as Europe was undergoing one of the longest deflationary periods, fuelled by fiscal and sovereign debt crisis, on its growth trajectory.
Although the synchronized and broad-based nature of global expansion reduces the risks of sudden contraction, which in the past has been exacerbated by the deficit of diversification both in terms of sources of growth and geographical destination of trade, African economies continue to face a number of downside risks. In particular, accelerating the pace of tightening of global financial conditions could decrease the risk appetite and exacerbate capital outflows. At the same time, a shift towards inward-looking policies could derail the improving global economy through investment and trade channels. In the short and medium term, the materialization of these risks will depend on both the pace of monetary policy normalization and the growth and trade dynamics between the US and China – the two largest economies which together account for about 40 percent of global growth and more than 22 percent of global trade.
Reflecting that shift towards a bipolar world in the global economic arena, sustaining the rate of economic expansion in China, where last year’s unexpected growth reacceleration drove the turnaround in industrial production and trade, leading to the mild recovery in commodity prices and putting the world economy on a path to growth acceleration, is the first challenge. Rising to that first challenge is particularly important, especially for the Africa region where primary commodities continue to account for the lion’s share of trade and growth, with oil-exporting countries alone accounting for more than 50 percent of aggregate gross domestic product. The second challenge, correlated with the first one in that it could affect the growth outlook in China, is geopolitical in nature and relates to the potential implications of protectionist policies for global and African economies.
A shift towards inward-looking policies in advanced economies could reduce crossborder trade and investment flows and in the process exacerbate capital outflow pressures on developing markets. At the same time, it could put downward pressures on commodity prices and weaken the current growth momentum. Although highly unlikely in the short term because economic confidence has been growing across most countries and remains on a rising trend, such a scenario cannot be ruled out completely. The dynamics of commodity prices and global demand still depends largely on China – Africa’s single largest trading partner and global industrial powerhouse which accounts for almost 50 percent of world’s total metal consumption. Should protectionist policies be mainstreamed and lead to a trade war, then the potential implications for African and global economies could be significant if these policies result in sustained contraction in global demand and trade.
The third challenge relates to the dynamics of the business cycle in the US. The increase in wages and steady decline in profit margins off peak levels recently witnessed in the US could well suggest that the US economy is already transitioning from the mid – to the late-cycle phase after a decade of uninterrupted economic expansion. However, the relatively steep yield curve and continued supportive credit conditions in a context of weak inflation suggests that the transition could be slow and even long. This favourable short-term outlook for the US economy is further supported by implied earnings growth estimates from stock prices which point to strengthening growth after the overhauling of the US tax system last December.
In this context, the biggest downside risk to the forecast growth acceleration in the short term is largely geo-political and hinges on the dynamics of the trade relationship between China and the US. Against this background, strengthening the existing framework for bilateral cooperation and policy coordination between the two leading drivers of global growth and trade to ensure a stable flow of goods and services and continued expansion of global value chains will be essential if the world is to remain on the current trajectory of synchronized global expansion and forecast growth acceleration.
Perhaps the synchronized growth acceleration witnessed over the last few quarters has been largely due to the positive externalities inherent with concurrent growth acceleration enjoyed by both the US and China. If a rising tide is destined to lift all boats, then the combined effects of two rising tides are likely to be even more significant and broad-based. In the short term, robust and strong economic growth in both China and the US is good for global growth and will sustain the forecast growth acceleration in Africa and globally. In the medium and long term, deepening the ongoing process of economic integration and the structural transformation of African economies, speeding ongoing efforts to address infrastructure bottlenecks and accelerating the diversification of exports are all essential to sustain the current growth momentum. These will mitigate the exposure of the region to recurrent adverse commodity terms of trade shocks, to global volatility and the reversal in capital flows which could be triggered by monetary policy normalization in advanced economies.
This brief was prepared by Dr. Hippolyte Fofack, Chief Economist of the African Export-Import Bank (Afreximbank), under the supervision of the Research and International Cooperation Department. The document provides the opinions, analyses and conclusions of the Research Department only and does not purport to reflect the views of Afeximbank as a whole.
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South African Treasury predicts growth pickup as confidence returns
With a new leader at the helm and confidence improving, growth in South Africa, Africa’s most-industrialized economy, may accelerate to levels last seen in 2014, according to National Treasury forecasts.
South Africa’s economy is forecast to expand 1.5 percent this year, compared with the previous projection of 1.1 percent and an estimated 1 percent in 2017, National Treasury said in its 2018 Budget Review. Growth will probably accelerate to 2.1 percent in 2020 as measures aimed at creating policy certainty and attracting investment pay off, it said.
The government is battling to return public finances to a sustainable path and stave off another credit-rating downgrade, following years of stagnant growth and policy missteps that left a gaping hole in the budget. It will reconsider mining-sector policies that deterred investment, introduce telecommunications reforms, lower barriers to entry by addressing anti-competitive behavior and provide support for labor-intensive sectors, the Treasury said.
New Leader
Investor confidence started creeping back after the ruling African National Congress elected Cyril Ramaphosa as its new leader in December, paving the way for him to take over from Jacob Zuma when he resigned as the country’s president last week. The rand climbed and bond yields dropped to levels last seen in 2015.
South Africa’s foreign- and local-currency credit ratings dropped to non-investment grade last year as Fitch Ratings Ltd. and S&P Global Ratings lowered their assessments, citing policy uncertainty and concerns about the management and finances of state-owned companies.
Moody’s Investors Service has the country on review for a downgrade to junk and may make an announcement on March 23. Should Moody’s reduce the local-currency debt to non-investment grade, South Africa will exit the Citibank World Government Bond Index, sparking forced sales by investors who track the gauge and leading to outflows of as much as 100 billion rand ($8.5 billion) in the nation’s bond market, according to Citigroup estimates.
“We believe we have done enough, we have taken the tough decisions” to avoid another ratings downgrade, Finance Minister Malusi Gigaba told reporters before his budget speech. “We believe the decisions we took create a positive narrative that will improve the ratings agencies’ outlook for South Africa.”
Charts show the tough decisions taken in South Africa’s Budget
South Africa unveiled a budget that will raise taxes and cut spending as it seeks to fend off a third junk credit rating. These charts show the tradeoffs the National Treasury has had to make to steer the fiscal ship away from a debt downgrade.
A smaller-than-projected budget deficit will mean slower growth in borrowing. Finance Minister Malusi Gigaba forecast in October that gross government debt will exceed 60 percent of gross domestic product from 2022 onward. The Treasury has now trimmed the projection to reach a turning point of 56.2 percent in that year.
The budget shortfall is projected to narrow to 3.5 percent of GDP by 2021, compared with the October estimate of 3.9 percent, due to improved economic growth and revenue collection.
Moody’s Investors Service put South Africa’s debt on review for a downgrade to junk last year, the only major ratings company to still assess the bonds as investment grade. Improved economic growth forecasts and plans to narrow the fiscal deficit may placate Moody’s, which said in November its review would consider the budget plans.
The above charts were prepared by Rene Vollgraaff and Ana Monteiro, with assistance by Michael Cohen. View the full selection on the Bloomberg website.
Budget Review 2018
The 2018 Budget arrives at a moment of opportunity for South Africa. A renewed sense of optimism has provided a much-needed boost to confidence and investment. The economic outlook has improved. And government has expressed a new resolve to strengthen policy coordination.
Yet this positive turn of events should not blind us to the enormous economic and fiscal challenges facing our country. Economic growth is far too low to reduce alarmingly high unemployment and inequality. Revenue collection, on which government depends to fund social and economic spending programmes, will fall short of projections by R48.2 billion in 2017/18. The finances of several stateowned companies are in a precarious state.
The 2017 Medium Term Budget Policy Statement (MTBPS) pointed out that extraordinary measures would be needed to stabilise the public finances. Without such measures, we would only delay the debt reckoning, and a growing share of spending would be absorbed by interest payments.
The 2018 Budget proposals address these concerns with resolve. The budget sets out a programme of expenditure cuts identified by a Cabinet subcommittee amounting to R85 billion over the next three years, and reprioritises spending. Several tax measures, including a value-added tax increase and maintaining the top four tax brackets with no inflationary adjustment, will raise an additional R36 billion in 2018/19, enabling government to narrow the revenue gap. Social grant payments will increase faster than inflation to offset the effect of higher taxes on poor households.
The budget also responds to new policy initiatives. This includes an allocation of R57 billion for fee-free higher education and training over the medium term, as announced in December 2017.
The fiscal measures in this budget entail a difficult adjustment. They will require increased spending discipline in government and resilience from the people of South Africa. Nonetheless, these measures will protect the government’s ability to meet its constitutional obligations over the long term, and ensure that we retain fiscal sovereignty.
As a result of these steps and the improved growth outlook, the budget deficit is projected to narrow to 3.5 per cent of GDP in 2020/21. Gross loan debt, which in the MTBPS projections was set to breach 60 per cent in 2021/22, is now projected to stabilise at 56.2 per cent by 2022/23.
Government is committed to setting the country on a new path of growth, employment and transformation. In the months ahead, we will end policy limbo in key areas and address governance concerns with renewed vigour. We will build a social compact with business and labour to speed up investment and job creation. And we will continue to improve planning for major infrastructure projects to ensure value for money.
Economic overview
South Africa’s economic growth outlook has improved in recent months, following a year marked by recession and policy uncertainty. GDP growth of 1 per cent is expected for 2017, up from 0.7 per cent projected in the 2017 Medium Term Budget Policy Statement (MTBPS), and is forecast to reach 2.1 per cent by 2020. The improved outlook flows from strong growth in agriculture, higher commodity prices and an incipient recovery in investor sentiment.
Although global risk factors remain elevated, the world economy continues to provide a supportive platform for South Africa to expand trade and investment. World economic growth is at its highest level since 2014 and continues to gather pace. GDP growth is rising across all major economies. The International Monetary Fund (IMF) forecasts global growth of 3.7 per cent in 2017 and 3.9 per cent in 2018.
To create large numbers of jobs, build an inclusive and transformed economy and reduce inequality, South Africa needs a strong, sustained expansion. Yet in contrast to many of its developing-country peers, South Africa has experienced a period of protracted economic weakness, mainly as a result of domestic constraints. This is reflected in low levels of private investment, persistently high and rising unemployment, and declining real per capita income. These factors in turn have undermined the sustainability of the public finances and narrowed the scope for economic transformation.
Structural reform, confidence, investment and jobs
Confidence and investment are mutually reinforcing. When businesses are confident about their growth prospects and certain about the policy environment, they invest and hire staff. In South Africa, private investment has been contracting since 2015, mainly as a result of low levels of business and consumer confidence. Growth has remained stuck below 2 per cent and unemployment remains high at 26.7 per cent. The National Development Plan (NDP) outlines the structural reforms required to boost investment, expand employment and remove constraints to economic growth.
The 2018 Budget is introduced as government has an opportunity to reinforce confidence and contribute to a recovery in growth and investment. A renewed sense of optimism is driven by the expectation that government will finalise many outstanding policy reforms, act decisively against corruption, and swiftly resolve governance and operational failures at state-owned companies. Investor sentiment has improved, leading to a strengthening rand exchange rate and lower government borrowing costs.
South Africa’s stable macroeconomic environment provides a strong platform to attract much-needed foreign savings that can fund additional investment. The country’s prudent macroeconomic policies are highly regarded by international investors, as are its well-developed and wellregulated financial markets. Government remains committed to fiscal discipline, a flexible exchange rate and inflation targeting.
While macroeconomic policies provide a stable environment for growth, attracting higher levels of investment that create jobs requires government to finalise outstanding policy reforms.
Domestic outlook
Balance of payments
The current account deficit narrowed to 2.3 per cent of GDP during the first three quarters of 2017, from 3.8 per cent over the same period in 2016. This is largely due to a higher trade surplus, as South Africa’s terms of trade – the ratio of export prices to import prices – improved in the first three quarters of 2017 relative to the same period in 2016. The deficit in 2017 is expected to average 2.2 per cent of GDP – the smallest since 2010. Since 2013, the current account deficit has steadily declined, largely as a result of slower import growth. As import growth accelerates and some terms of trade gains are reversed, the deficit is expected to widen to 3.2 per cent of GDP in 2020 in line with higher economic growth.
The value of total exports increased by 4.8 per cent in the first three quarters of 2017, while the value of total imports fell by 1.2 per cent. Certain agricultural exports have shown encouraging growth in recent years, particularly in new markets. The value of citrus exports to China, for example, increased by 59.2 per cent in 2017 compared with the prior year. Over the same period, the value of citrus exports to Asia as a whole grew 14.1 per cent, while exports to Europe increased 6.1 per cent.
In contrast, the value of manufacturing exports declined by 3.9 per cent in the first three quarters of 2017 compared with the corresponding period in 2016. Exports of vehicles, machinery, and food and beverages contracted.
South Africa relies on foreign inflows to fund investment because of a low domestic savings rate, as shown by a persistent current account deficit. South Africa received capital inflows equivalent to 1.7 per cent of GDP in the first three quarters of 2017, compared with 4.9 per cent in 2016.
In the first three quarters of 2017, net foreign direct investment outflows increased to R65.2 billion, compared with net outflows of R3.3 billion over the same period in 2016. This was driven by a large acquisition of foreign financial assets. Lower foreign direct investment increases the country’s reliance on more volatile portfolio flows, which remained strong through 2017.
Sector performance
South Africa’s muted economic performance over the past year was reflected across all major sectors, apart from agriculture and mining.
Agriculture
Real value added in the agriculture, forestry and fishing sector grew by 21.9 per cent in the first three quarters of 2017 compared with the same period in 2016, contributing 0.5 percentage points to overall GDP growth. Good summer rainfall led to a broad-based recovery in production following a severe drought, which caused agriculture to contract in 2015 and 2016. Maize production is expected to reach 16.7 million tons in 2017 – a 115.3 per cent increase from the 2016 crop. Soybean production is expected to increase by 77.4 per cent to 1.3 million tons.
Growth is expected to continue at a more moderate pace in 2018. Ongoing drought in the Western Cape – which contributes about 22 per cent of agricultural value-added and is a key producer of wheat, horticultural products and wine – will restrict growth in 2018.
Mining
In the first three quarters of 2017, real value added in the mining sector grew by 4.3 per cent. Over this period, the sector contributed 0.3 percentage points to overall GDP growth. After a contraction in 2016, mining output is recovering, supported by higher commodity prices. Improved demand has boosted iron ore, manganese and chromium production.
Mineral sales increased by 9.4 per cent in the first nine months of 2017 compared with the same period in 2016, driven largely by coal and iron ore. Gold and platinum sales fell by 11.6 per cent and 3.4 per cent respectively over the same period, weighed down in part by a strong US dollar.
Manufacturing
Real value added in manufacturing declined by 1.2 per cent during the first three quarters of 2017, reducing GDP growth by 0.2 percentage points. Poor performance was the result of weak domestic demand and low levels of business confidence. Production decreased by 1.4 per cent over the first three quarters of 2017. This was true across most subsectors, apart from food and beverages, and metals, which respectively grew by 0.8 per cent and 4 per cent over the year.
Investment and transformation for inclusive growth
Government’s economic policy is focused on inclusive growth. The benefits of a growing economy should be shared more widely and more equitably through transformation and job creation. Government, the private sector and organised labour all play a part in creating decent and sustainable employment, supporting transformation and boosting productivity. In outlining a range of structural reforms needed to raise long-term economic growth, the NDP identifies three priorities:
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Raising employment through faster economic growth
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Improving the quality of education, skills development and innovation
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Building the capability of the state.
Progress in these areas requires a long-term coordinated effort, complemented by a number of steps being taken over the medium term.
Eliminating policy uncertainty to catalyse investment
Immediate measures are needed to establish policy certainty in key areas to rebuild trust and create an enabling environment for investment.
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In telecommunications, government will end the delay in licensing spectrum, which limits access to stable, affordable information and communications technology.
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Bottlenecks in finalising the Mineral and Petroleum Resources Development Act and the Mining Charter will be addressed to improve the attractiveness of the mining sector for investment.
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The Interim Rail Regulator is an important first step in building regulatory capacity. Government is finalising the Single Transport Economic Regulator Bill, which will improve efficiency in the transport sector.
Government’s approval of six special economic zones to benefit from lower corporate tax rates for qualifying firms, and employment tax incentives for all workers, will encourage investment and help overcome inefficient spatial legacies in production. Recent amendments to the venture capital company tax incentive have resulted in investment of R650 million in qualifying small businesses – increasing the pool of funding available to support enterprise development.
Strengthening competition law to promote economic transformation
South Africa’s economy has historically been characterised by concentration, cartels and price fixing in major sectors, making it difficult for small and new businesses to compete. Competition authorities have been successful in tackling anti-competitive practices covering a wide range of products, including bread, steel, cement, concrete, plastic pipes and HIV/AIDS drugs. Anti-competitive practices in banking and telecommunications have also been penalised. The World Economic Forum’s Global Competitiveness Report 2017-2018 ranks South Africa 28th of 137 countries on the effectiveness of its anti-monopoly policy.
From its inception in 1999 to 2017, the Competition Commission has levied administrative penalties of about R6.4 billion against various firms. According to a 2016 World Bank report, the authorities’ success in breaking up cartels in white maize, poultry, wheat and flour, and pharmaceuticals resulted in a reduction in overall poverty of 0.4 percentage points.
Proposed amendments to the Competition Act (1998), which would strengthen the competition authorities’ powers, have been published for public comment. The amendments would enable the authorities to investigate the general state of a specific market, rather than the conduct of particular firms. In addition, they would obligate the authorities to consider structural issues of economic concentration and transformation when considering mergers and acquisitions, and in adjudicating abuse of dominance complaints.
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Kenya embraces the IGAD Regional Protocol on Free Movement of Persons
Kenya’s Cabinet Administrative Secretary in the Ministry of Interior, Hon. Patrick Ole Ntutu launched the National Consultative Workshop towards the development of the Regional Protocol on Free Movement of Persons in Naivasha yesterday.
He called on the participants drawn from relevant government ministries and authorities, civil society organizations, academic institutions, the private sector and the media to put every effort necessary in order to achieve the ultimate goal of free movement of persons in IGAD region.
“Some of key benefits that we will enjoy by facilitating free movement of persons and opening up our borders to the world include among others higher tourism and trade volumes, competitive economy, skilled labour exchange and education opportunities as well as social and cultural integration,” the newly appointed government official stated, adding that there is need to put in place mechanisms for better migration management, mobility and free movement of persons in the region.
In agreement the Executive Secretary of IGAD, H.E Amb (Eng) Mahboub Maalim mentioned that through this Protocol, IGAD will be able to operationalize and implement the AU Movement of Persons Protocol as a REC at a regional level for the benefit of the citizens in the IGAD region.
Amb Maalim reminded the experts that Free Movement is inevitable hence important for the IGAD MS to embrace it by cooperating and collaborating on mechanisms with other Member States to have people move freely, safely and legally. He emphasized that free movement of person will bring deeper integration which will contribute to peace and stability in IGAD Region.
Speaking on behalf of Amb Dr Monica Juma, who was recently promoted to Cabinet Secretary for Foreign Affairs of Kenya, Amb Anthony Andanja pointed out that the New York Declaration on Refugees and Migrants was an affirmation by global leaders at the highest level of their unequivocal political commitment. He however added that the issue of refugees and migrants is manifestly divisive – while some see it through the lens of moral obligations to assist fellow humans at risk, others views migration as a threat to security and national identity.
“The difficulty as a whole is not the overall capacity to absorb refugees, but the politics of how to share the burden,” Amb Andanja concluded.
On her part, the IOM Representative to the AU, IGAD and UNECA, Ms. Maureen Achieng reiterated that migration is a force for good, if well managed. “Migration as we all know has been a constant since the beginning of time,” she stated, pointing out that the profound revolutions in transportation and communications are today making it easier and cheaper to know about and to access opportunities abroad.
Ms. Achieng who is also the UN Migration Agency Chief of Mission to Ethiopia cited a 2016 study that the World Economic Forum entitled, Africa Must Trade with Itself to demonstrate how migration has brought numerous macro-level benefits to the regions of the world that were quick to realize its benefits and moved to facilitate the free movement of both people and goods.
She further pointed out that free movement of persons and free trade are two sides of the same coins, adding that free movement has the potential to facilitate movement of a number of economic factors, such as skilled labour, SMEs, tourists, among others.
The three-day workshop aims at getting inputs from national stakeholders and experts on benefits and barriers to free movement of persons and deriving national recommendations towards the Provisions of the Protocol. The workshop will also develop a roadmap for the negotiation and adoption of the Protocol on Free Movement of Persons in the IGAD Region.
Similar workshops have already been conducted in Uganda, South Sudan, Sudan and Somalia. After the Kenya workshop, similar ones will be organized in Djibouti and Ethiopia before the regional level validation workshop of the Protocol on Free Movement of Persons in the IGAD Region at a later date.
The Protocol on Free Movement of Persons and Transhumance in the IGAD Region is supported by the European Union.
COMESA to introduce seed labels and certificates to boost regional trade
COMESA is set to become the first Regional Economic Community in the world to introduce the use and distribution of seed labels and certificates as a way of improving access to quality seeds in the region.
This development is expected to impact positively on approximately 130 million people in COMESA who are currently food insecure and experiencing chronic poverty and hunger for failure to get quality and improved seed.
According to the Assistant Secretary General in charge of Programmes at COMESA Dr Kipyego Cheluget, out of 80 million small-holder farmers in the COMESA region, only 20% have access to quality and improved seed.
He was speaking in Lusaka yesterday during the opening of a regional meeting to discuss modalities of rolling out COMESA Seed Labels and Certificates.
“The potential total seed market in COMESA is at two million metric tonnes of quality and improved seed,” said Dr Cheluget who was represented by Senior Investment Officer Mr Joseph Mpunga.
“However, the region is currently producing and accessing less than 520, 000 metric tonnes of quality and improved seed. This has continued to impact negatively on the people.”
This challenge is attributed to the fact that, the regional seed market is fragmented into small national markets, whereby each country operates its own seed policies and regulations different from other COMESA Member States.
As a result, seed companies enter any of the national seed markets available. This is not only costly to the private sector but also results in prolonged delays before good quality seed can find its way to the farmers.
Dr Cheluget added that although COMESA is home to some of the major seed producing countries in Africa such as Egypt, Zambia, Zimbabwe, Kenya, Malawi and Uganda, the levels of supply remain stagnant with each country differing in the laws, procedures and systems applied to the seed value chain.
He said: “Companies are left to focus only on the domestic markets and thus unable to supply other markets in the region that may have greater demand.”
Once operational, the COMESA Regional Seed Certificate will be issued by National Seed authorities upon verification that a seed lot registered on the COMESA Variety Catalogue was inspected, met COMESA field standards and underwent laboratory analysis.
Speaking at the same forum, the Permanent Secretary in Zambia’s Ministry of Agriculture Mr Julius Shawa said the country is committed to introducing harmonized seed trade regulations. Mr Shawa who was represented by the Director at the Seed Control and Certification Unit Mrs Mable Simwanza said the draft document will soon be signed off.
The one-day meeting was attended by Seed companies that operate in the region including Monsanto, MRI/Syngenta, Seedco, Pioneer Dupont, HZP, East African Seed and Pannar. Government representatives from Egypt, Rwanda, Kenya, Malawi, Uganda, Swaziland, Zambia and Zimbabwe participated in the meeting.
Background
COMESA through its specialized agency the Alliance for Commodity Trade in Eastern and Southern Africa came up with the COMESA Seed Harmonisation Implementation Plan (COMSHIP) to expedite implementation of the harmonized regional seed regulations.
The overall goal of COMSHIP is to implement the COMESA Seed Trade Harmonisation Regulations to enhance seed production, reliability, seed trade including increasing the competitiveness of the seed industry in the Southern and East African Region.
So far, five COMESA countries namely Burundi, Rwanda, Kenya, Uganda and Zimbabwe have completely aligned their national seed laws to the COMESA Seed System. Ethiopia, DR Congo, Malawi and Zambia have draft aligned seed regulations that require gazettement at national level.
COMSHIP has been launched in seventeen COMESA countries; Burundi, Comoros, Djibouti, DR Congo, Egypt, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
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tralac’s Daily News Selection
Egypt’s fourth Trade Policy Review is underway at the WTO: access the documentation prepared by the WTO Secretariat and the Government of Egypt.
Extract from the executive summary report by the WTO Secretariat: Egypt is a relatively active user of trade remedy measures: between January 2005 and 30 June 2017, it initiated 31 anti-dumping investigations, 16 of which resulted in the imposition of definitive anti-dumping duties. Three anti-dumping measures were extended. During the same period, Egypt initiated 14 safeguard investigations, imposed provisional measures in all and final safeguard measures on three products: blankets, steel rebar, and cotton and mixed yarns. Although few final measures were adopted, the application of provisional measures could have acted as a deterrent to trade. There are currently no countervailing measures in place.
Contemporary issues in African trade and trade finance: November 2017 edition (pdf, Afreximbank)
Stringent regulatory regimes, especially in major money centres have substantially raised compliance costs for internationally active banks. In developing economies with small fragmented markets and where the marginal costs of compliance are seen as disproportionately higher than marginal revenues, most global financial institutions, with weakened absorption capacity in the post-crisis environment, have opted for de-risking - essentially exiting relationships and closing the accounts of clients based in countries considered “high risk”. In this global environment of decreasing risk appetite, which has characterized the transition from the old rule-based towards risk-based systems, Africa has become a victim. In addition to increasing costs of financial services to African entities, a large number of multinational banks have withdrawn from correspondent banking relationships with wide-ranging consequences for trade finance and economic growth in the region. For the continent as a whole, the inherent costs associated with the adoption and rollout of de-risking strategies were magnified by a number of factors.
First, the rather unexpected timing of large-scale withdrawals of international banks from the African financial landscape made it difficult for countries to adjust and evolve towards new mechanisms and solutions. Second, the costs associated with the unexpected withdrawal were further exacerbated by the structure of the African financial system which is still largely dominated by foreign banks and financial institutions. Volume 3 Issue 1 of Contemporary Issues in African Trade and Trade Finance (pdf), looks at the challenges of promoting African trade and investment in a difficult global and financial environment where an increasingly stringent regulatory environment has decreased the willingness and capacity of global financial institutions to absorb risk. It brings together articles assessing the potential implications of rising costs of compliance and globalization of corporate governance for African economies and financial institutions, papers exploring alternative sources of financing available to corporate entities within the region, and those examining the legal requirements for regional trade agreements as African governments pursue the Continental Free Trade Area (CFTA).
Table of contents: (i) Changing regulatory frameworks, rising costs of compliance and implications for financial institutions in Africa (Benedict O. Oramah) (ii) The globalisation of corporate governance in a world of institutional inertia (Hippolyte Fofack); (iii) The emergence of supply chain finance and implications for Africa (Anthony Kyereboah-Coleman, Abdelaziz Elmarzougui); (iv) Factoring - a financing alternative for African small and medium-scale enterprises (Robert L. Tomusange); (v) Regional trade agreements and the World Trade Organization (Yusuf Daya).
African Trade Report 2017: Bridging Africa’s trade finance gap through domestic resource mobilization (pdf, Afreximbank)
Intra-African trade champions (extract from Section 8.1, pdf): Of the top 10 contributors to intra-African trade, 3 accounted for 40% of the total US dollar value: South Africa (23.3%), Nigeria (8.5%) and Namibia (8.1%) in 2016 (Figure 8.3). Seven - Botswana, Zambia, Côte d’Ivoire, Ghana, Mozambique, Democratic Republic of Congo, Zimbabwe - account for around 30% of the total. The remaining 44 African countries account for around 30%. South Africa dominated intra-African trade in 2016, accounting for just over 23% of the total, down from 26.4% in 2014 and 24.4% in 2015. The moderation was steeper in 2015, with exports falling more than 14% and imports falling more than 15%. While exports to the rest of the region have recovered, South Africa’s imports from other African countries remained sluggish, trending downward from $13.7bn in 2014 to $11.64bn in 2015 to $9.9bn in 2016. South Africa therefore widened its trade surplus with the rest of Africa from $13.8bn in 2014 to $11.9bn in 2015 to around $17bn in 2016.
Indian investments in Africa: scale, trends, and policy recommendations (Observer Research Foundation)
Indian investments in Africa, from both public and private sector entities, have increased considerably in the last decade. Yet despite the growing importance of Indian investments in Africa, only a few empirical studies have been carried out on the subject. This paper undertakes a disaggregated analysis of Indian foreign direct investment outflows to Africa from 2008 to 2016, and presents three main findings. Extract (pdf): To determine the relationship between India’s development cooperation and its commercial interests, Figure 7 ranks African countries according to the total value of lines of credit, a major instrument of India’s development cooperation, and the total FDI outflows from India between 2008 to 2016. The figure suggests that there is a weak positive association between the total concessional credit received by a country and the FDI in that country. The spearman rank correlation between Indian lines of credit and FDI flows is only 0.44.
Countries in the first quadrant – Mozambique, Kenya, Ethiopia, Tanzania, Ghana, Mali, Rwanda, Gambia, and Sudan – are those that have been favoured destinations for both Indian investments as well as credit lines. Of these, five countries (Mozambique, Kenya, Ethiopia, Tanzania, and Rwanda) are in East Africa, a region with which India has historically enjoyed close economic and cultural relations. The presence of a large diaspora in those countries also helps Indian businesses, besides fewer regulatory hurdles, and the fact that English is widely spoken in the region. This region also occupies a special place in India’s foreign policy due to its strategic location in the Indian Ocean. Countries in the third quadrant such as Djibouti, Swaziland, and Benin have not been major beneficiaries of either lines of credit or investments from India.
Countries in the second and fourth quadrants represent a disassociation between development cooperation and FDI flows. Countries in the second quadrant – Burkina Faso, Sierra Leone, Niger, Malawi, and Senegal – have been major beneficiaries of Indian lines of credit but these countries have received scant FDI flows. This signifies the failure of Indian credit lines in stimulating private sector investments in these countries. For their part, countries in the fourth quadrant (Zambia, Mauritania, Liberia, Nigeria, and Gabon) have received high volumes of FDI but have not been major beneficiaries of Indian lines of credit. In this case, it is clear that India’s credit lines are not aligned with the priorities of the private sector. Here, investments have not followed development cooperation. Private-sector companies have found it profitable to invest in these countries anyway. Zambia’s case is particularly interesting because as observed earlier, not only has it been the fifth largest recipient of Indian investments, these investments are also spread across various sectors of the economy. This is largely due to the Zambian government’s efforts in attracting Indian investments.
Tea and potatoes show potential of intra-Africa agricultural trade (UNCTAD)
Basic crops grown in Africa can be made into higher-value products, whether it’s by bagging tea or turning potatoes into frozen French fries, creating jobs and fueling growth in the continent, according to a recent UNCTAD assessment of the continent’s food trade. The potential of basic crops to form such agricultural “value chains” remains untapped in several sectors, the assessment said. The assessment, part of the report From Regional Economic Communities to a Continental Free Trade Area, also looked at highly-traded commodities in Africa such as avocados, cashews, onions, pineapples, beef and poultry. The findings provide useful insight for trade negotiators ironing out agricultural policies for Africa’s Continental Free Trade Area ahead of a March 2018 summit of African leaders in Kigali, Rwanda, where the deal is due to be signed. [Deloitte’s report on agricultural opportunities in Africa: crop farming in Ethiopia, Nigeria, Tanzania]
Public-private partnerships key for gas infrastructure development in SADC region (Club of Mozambique)
Public-private partnerships are key to developing gas supply projects in SADC, Nepad Business Foundation Africa infrastructure programme manager Peter Varndell said on Monday. Speaking at the Africa Gas Forum, in Johannesburg, he said there was strong gas supply potential in the SADC region, but a weak market to deliver to within SADC’s borders. He noted that a multi-stakeholder platform for public-private sector dialogue would enable and support the monetisation of natural gas resources in the region. He pointed out that if SADC were to develop a natural gas master plan, it would assist in shifting market dynamics to attract investment and develop natural gas resources. “There is an estimated 600-trillion cubic feet of natural gas reserves in Southern Africa and the SADC region. A master plan would be a useful blueprint to enhance economies of scale, help transform the regional economy and leverage regional value chains,” he said.
Rwanda: Tax body, civil society join hands to fight illicit financial flows (New Times)
According to Pascal, Bizimana Ruganintwali, the Rwanda Revenue Authority (RRA) deputy commissioner general and commissioner for corporate services, the tax body supports all efforts geared at crackdown on those involved in illegal movements of money to protect Rwanda from fraudsters. “RRA will never relent it its efforts to apprehend multinationals or individuals involved in illegal financial activities designed to deplete Rwanda of its resources,” Ruganintwali said. He was speaking at the launch of the drive last week in Kigali. Spearheaded by Action Aid Rwanda, Governance for Africa and Tax Justice Network Africa and the taxman, the campaign is being conducted under the theme, “Tackling illicit financial flows; the Rwandan perspective.”
The economic impact of local content requirements: a case study of heavy vehicles (ECIPE)
The use of local content requirements (LCRs) has been growing for a long time. Used by developed as well as developing countries, they aim to promote the use of local inputs and serve the purpose of fostering domestic industries. Argentina, Brazil, China, India, Indonesia, Russia, Saudi Arabia and the USA are very frequent users of LCRs. India is by far the most prominent user, followed by Brazil. While LCRs might have perceived benefits related to specific policy goals in the short term, the damaging impacts of LCRs evolve over time and outweigh short term benefits. This study estimates the economic impact of LCRs in a selected sub-sector of motor vehicles, where they are frequently used, i.e. the heavy duty vehicles subsector. ECIPE collected LCRs which affect the selected subsector in a database, classifying them by three different dimensions: their different types, their scope, and their level of impact. This database is used as a basis for the assessment of the economic costs of these LCRs for BRICS countries.
The OECD-WTO Balanced Trade in Services Database (pdf, OECD)
The first edition of the Balanced Trade in Services (BaTIS) dataset provides annual data from 1995-2012, covering 191 economies, broken down for the 11 main EBOPS 2002 service categories. This paper accompanies the dataset and describes its compilation methodology in detail, including the collection and cleaning of the reported data, the different methodologies used to estimate missing information, and the final balancing of the exports and imports flows.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership: selected updates
(i) What is the CPTPP? Full text, FAQs (Government of Canada)
(ii) Eonomic impact of Canada’s participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (Office of the Chief Economist, Global Affairs Canada)
(iii) CPTPP vs TPP (Government of New Zealand)
Today’s Quick Links: Rwanda to issue mining licenses to attract $2bn of investment in 2018 The African countries implementing the African Medicines Regulatory Harmonization Initiative SA government remains committed to intra-African investment Kenya: Statement by the IMF Resident Representative in Nairobi Jean-Claude Maswana: Revisiting the growth effects of Sino–African bilateral trade on African economies (pdf) European Commission: 2017 another record year for EU agri-food exports |
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South African government remains committed to intra-African investment in the African continent
Head of Trade Invest Africa (TIA), Ms Lerato Mataboge, mentioned engagements between government, private sector and the business fraternity as imperative to the realisation of Africa trading with itself
The South African government through Trade Invest Africa (TIA), an Initiative of the Department of Trade and Industry (the dti), remains committed to the agenda of intra-African investment. This was said by the Head of TIA, Ms Lerato Mataboge.
Mataboge was speaking during the networking session where the dti in partnership with the South African Electrotechnical Export Council (SAEEC) hosted a high level delegation from several African countries to participate at the annual Africa Energy Indaba Conference that is set to take place at the Sandton Convention Centre, from 20-21 February 2018.
Mataboge assured delegates of South Africa’s support and commitment to the realisation of high level intra-African trade and investment. She mentioned engagements between government, private sector and the business fraternity as imperative to the realisation of Africa trading with itself. According to her, working together by African countries is a key to addressing energy deficiencies.
“While opening up conversations to address the energy deficiency, the Continent need not miss out on the digital industrial revolution. This is a new wave that we need to apply our minds on while coming up with solutions,” said Mataboge.
According to Mataboge, bringing such a delegation from the continent present an opportunity for showcasing South African energy infrastructure capabilities that can be tapped into to benefit the energy infrastructure roll-out in those countries. She added it represents an opportunity for concrete investments partnerships to be forged among Africans.
The Chief Executive Officer of the South African Electrotechnical Export Council (SAEEC), Ms Chibone Evans expressed satisfaction on the arrival of the high delegation from Kenya, Mozambique, Nigeria, South Sudan and Zambia in the country. She cited that it was paramount for government and private sector from all these countries to be in the same room and have honest discussions and share information. The session on Tuesday in welcoming the delegates was not about South Africa trading with the rest of the continent, rather about Africa trading with itself.
“Site visits are important to showcasing capabilities, for this reason, delegates will also have an opportunity to visit some of the leading South African manufacturers and suppliers of energy-related products that will showcase their capabilities and capacities in the energy sector. This will assist them in knowing were to source energy-related products and services for their own projects within the continent itself,” stated Evans.
Evans emphasised that Africa is capable of developing its own energy infrastructure.
The overall objective of the mission is to support and facilitate intra-African trade and investments to address the continent’s energy requirements. Delegates will also participate on focused and strategic meetings programme which compliments the Indaba agenda that fits both the profile and requirements of each delegate.
The Africa Energy Indaba Conference is a signature event on the African business calendar focussing primarily on convening relevant and strategic international and local stakeholders to discuss and explore solutions for Africa's energy challenges. The solutions emerge from a combination of discussion and debating platforms provided by the Indaba to participating African governments and companies.
African delegation attends the 2018 Africa Energy Indaba
The African delegation to the 2018 Africa Energy Indaba Conference, hosted by the dti and SAEEC, hailed from Kenya, Mozambique, South Sudan and Zambia.
South African Minister of Trade and Industry, Dr Rob Davies, outlined that support for these delegates to participate is in recognition of the diverse audience provided by the Indaba. He added that these delegates will meet with leading South African manufacturers and suppliers of energy-related products and services.
“This delegation will comprise high ranking officials from state-owned enterprises such as energy regulators and commissioners and will visit leading South African manufacturers and suppliers of energy-related products and services as part of the mission. The overall objective is to support and facilitate intra-African trade and investments to address the continent’s energy requirements,” said Davies.
It is estimated that $40.8 billion a year is still needed to meet Africa’s power sector needs and the 2018 Indaba will highlight solutions involving major urban and rural energy projects, urbanisation and related energy needs, and renewable and sustainable energy programmes aligned to the continent’s power needs.
Furthermore, the Indaba will expose new project opportunities in renewable and thermal technologies and South Africa’s Renewable Energy Power Producer’s Procurement Programme, the latter being a significant stimulant of investment in various technologies across the continent.
The Indaba audience will consist of African ministries, utilities and regulators, financiers, development finance institutions, banks, investors, project developers and project owners, energy supply companies, service providers and renewable technology providers, law and consulting firms, business development managers as well as economists and policy makers.
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Trade Policy Review: Egypt
The fourth review of the trade policies and practices of Egypt takes place on 20 and 22 February 2018. The basis for the review is a report by the WTO Secretariat and a report by the Government of Egypt.
Report by the Secretariat: Summary
Egypt’s real GDP expanded at an annual average rate of 4.5% over the 2005/06-2016/17 period, although growth began to decelerate in 2011 in the aftermath of political turmoil. Annual average GDP growth slowed down to 3.2% over the 2010/11-2015/16 period, but has accelerated in recent years on the basis of an expansionary fiscal policy that led to strong consumption and investment expenditure, and an economic reform programme aimed at fostering growth. GDP per capita increased from US$1,514 in 2005/06 to US$3,462 in 2015/16, although it is estimated to have declined to US$2,508 in 2016/17 due to the depreciation of the Egyptian pound. Despite the recent acceleration of growth, Egypt’s unemployment rate remains at around 12%, with rates higher among young persons and women. Furthermore, despite an increase in per capita income, the share of the population living under the poverty line has increased in the last few years and poverty alleviation continues to be one of Egypt’s major challenges.
Egypt’s economy is diversified. The services sector constitutes the mainstay of the economy in terms of GDP share (55.3% in 2015/16), employment, and exports. The share of agriculture in GDP has been declining over the last few decades and reached 11.9% in 2015/16 (14.5% in 2010/11), although the sector is still important for employment and merchandise export earnings; while the contribution of manufacturing to GDP was 17.1% in 2015/16 (16.5% in 2010/11).
In 2014, the Government began to implement a reform programme aimed at stimulating economic growth and improving the business environment. The first wave of reforms focused on rebalancing the macroeconomic situation, and included various fiscal, monetary and exchange rate policy measures: introduction of the value-added tax (VAT) at a rate of 13% in September 2016 (increased to 14% as from July 2017); a shift in the exchange rate regime from a peg to the US dollar to a full float of the Egyptian pound in November 2016; broadening of the tax base; reduction of energy subsidies; and containment of public sector salary increases. A second wave of reforms is currently under way to improve governance and the investment climate. Egypt’s economic programme has been supported by the IMF: a three-year US$12 billion Extended Fund Facility (EFF) loan was granted in November 2016, with the aim of helping restore macroeconomic stability, correcting external and fiscal imbalances and restoring competitiveness.
Egypt’s fiscal deficit has exceeded 10% of GDP since FY2010/11 as a result of the implementation of an expansionary fiscal policy. The deficit reached 12.5% of GDP in 2015/16, which prompted the authorities to introduce, starting in FY2016/17, a three-year fiscal consolidation plan aimed at lowering the budget deficit to between 8% and 8.5% of GDP by 2018/19. As a result of various fiscal consolidation efforts, including streamlining expenditure by reducing subsidies and containing the public wage bill, and increasing revenue by replacing the 10% general sales tax with the VAT, the deficit declined to 10.8% of GDP in 2016/17.
The presence of the State in the economy remains strong. The productive structure of the Egyptian economy is skewed towards large public-sector enterprises, which may result, on occasions, in a sub-optimal allocation of resources. In this respect, Egypt could benefit from adopting a more market-oriented approach to economic policy implementation. This has been recognized by the authorities and a more participatory role of the private sector in the economy is one of the objectives of Egypt’s Sustainable Development Strategy (SDS) “Egypt Vision 2030”, a comprehensive development plan introduced in March 2015 that seeks to foster GDP growth and employment and gradually reduce the budget deficit.
Remittances from Egyptians overseas (US$17.1 billion in 2015/16), as well as travel and tourism and Suez Canal revenues, continue to be of primary importance for the Egyptian economy. The introduction of a flexible exchange rate has led to an increase in capital and financial inflows, particularly foreign direct investment, which have partly countered the decline in transfers and the growing merchandise trade deficit. Nonetheless, the current account deficit widened to 5.9% of GDP in 2015/16 from 3.6% the year before, reflecting a fall in exports and strong import demand, a weakening of services exports, notably in tourism, limited growth in Suez Canal receipts due to weak global trade, and a drop in remittances. Although it declined in US dollar terms, the current account deficit increased as a share of GDP to 6.7% in 2016/17 due to the depreciation of the Egyptian pound.
Egypt’s export base has become more diversified during the review period: the share of exports of fuel products declined from 43% of total exports in 2005 to 14.3% in 2016. Despite this, fuel remains Egypt’s single most important export product, followed by vegetables, which represented 12.5% of total merchandise exports in 2016 (8.7% in 2011), precious stones and metals (11.8%), chemicals (11.3%), and textiles (11.2%). Egypt’s merchandise exports declined in US dollar terms between 2011 and 2016, to US$22.5 billion. In 2016, the European Union was Egypt’s main export destination, followed by the United Arab Emirates, Saudi Arabia and Turkey. Merchandise imports (c.i.f.) amounted to US$58.1 billion in 2016. Machinery and electrical equipment is the single most important import group, accounting for 16.1% of total merchandise imports in 2016, followed by mineral fuels (14.2%) and base metals (11.4%). In 2016, 32.4% of Egypt’s merchandise imports came from the European Union; China and other Asian countries were the source of 27.3% of Egyptian imports.
Egypt’s Constitution was amended several times during the review period. The current Constitution, which was approved in January 2014, provides for the separation of powers between the executive, the legislature and the judiciary, and reformed the legislative branch by making it unicameral. The next presidential election is scheduled for May 2018.
Egypt’s trade policy objectives are set out in the Industrial Development Strategy (IDS) for 2016-2020, in accordance with Egypt’s SDS “Egypt Vision 2030”. The aim is to help Egypt become a leading industrial economy in the Middle East and North Africa region and a main export hub for medium-technology manufactured products by 2025. The IDS covers the following areas: industrial development for micro, small and medium enterprises (MSMEs); export promotion and import rationalization; innovation promotion; energy conservation; the development of technical and vocational education; and improvement of the business climate. The main goals are to accelerate industrial growth, increase the contribution of MSMEs to GDP, spur export growth and create productive jobs.
Egypt participates actively in the multilateral trading system, both in the regular work of the WTO and in the Doha Development Agenda negotiations. It grants at least MFN treatment to all WTO Members. Egypt is a party to the Agreement on Trade in Civil Aircraft, and to the Information Technology Agreement (ITA), but not to the Agreement on Government Procurement GPA). In June 2017, Egypt ratified domestically the Trade Facilitation Agreement (TFA), but has still to submit to the WTO its instrument of acceptance of the Agreement. Egypt notified its category “A” commitments, in January 2015, and the authorities are currently working on category “B” and “C” commitments. Egypt submitted numerous notifications to the WTO during the period under review. Some lagging notifications, for instance with respect to agriculture, were submitted to the WTO during the review process. Under the WTO Dispute Settlement Mechanism, Egypt has been involved in four trade disputes as a respondent and seven as a third party during the review period. This is the fourth Trade Policy Review of Egypt; its previous one was in 2005.
Egypt participates in several preferential trade agreements, which play an increasingly important role in its trade policy. In addition to preferential agreements with the European Union, the European Free Trade Association (EFTA), Turkey and MERCOSUR, Egypt is party to the Pan Arab Free Trade Agreement (PAFTA), the Common Market for Eastern and Southern Africa (COMESA), and the Agadir Agreement. Egypt benefits from the Generalized System of Preferences (GSP) schemes of several countries. On the other hand, Egypt offers improved market access to least developed countries (LDCs). Egypt also participates in the Framework Agreement on the Trade Preferences System of the Organization of Islamic Cooperation (TPS-OIC), which is still to enter into force.
There have been important changes to Egypt’s investment regime since its last Trade Policy Review in 2005. In May 2017, the new Investment Law No. 72/2017 entered into force. Investment incentives under the new law include deductions on taxable profits and preferential import duty rates. Exemptions from stamp duty, and notarization and registration fees are provided for up to five years from registration in the Commercial Register. In October 2017, the regulations to implement the law were approved and published in the National Gazette. The new law and regulations aim at updating Egypt’s investment regime and incentives schemes to attract more investment. Egypt’s foreign direct investment (FDI) inflows averaged some US$6 billion per year during 2013-16, below the US$9 billion annual average in 2005-07. The European Union is the main foreign investor in Egypt, followed by the United States and some Arab countries.
During the period under review, Egypt continued its reform process, with a view to making its customs administration more efficient and transparent, by reducing the number of documents required for import and export processes and allowing their presentation electronically. Egypt’s customs regime is still based on the Customs Law of 1963 as amended, although a new Draft Customs Law is currently being examined to incorporate, among others, the amendments needed to implement the TFA and the Kyoto Convention. However, some changes have already been introduced to facilitate trade. These changes include activating the Authorized Economic Operator (AEO) system, introducing x-ray devices in most customs posts to facilitate customs control and reduce release times, and implementing an e-freight import and export system for air freight. A Ministerial Steering Council for Egyptian Trade Facilitation (EgyTrade) has been established, aiming at the creation of an Egyptian National Single Window (ENSW) system.
Egypt’s simple average applied MFN tariff rate was 19.1% in 2017, slightly down from 20% in 2005, but higher than 16.5% in 2012. Some two thirds of all tariff lines face rates of 10% or lower. The 51.6% average tariff in agriculture reflects tariff peaks for alcohol and tobacco, which can be as high as 3,000%. Egypt has bound 99.3% of its tariff lines; the general simple average bound tariff is 37.2%. In 2017, some 46 lines exceeded their bindings. Despite recent reforms, Egypt’s tariff system remains somewhat complex, with a number of exemptions, reductions, and concessions. All tariff rates are ad valorem, with the exception of 21 lines. In addition to tariffs, imports are now subject to a value-added tax of 14% which also applies to domestically produced goods; exported goods are exempted and services are zero-rated. Egypt also applies excise taxes on some products in addition to the general VAT rate.
Import prohibitions and restrictions are maintained for economic, environmental, health, religious, safety, sanitary, and phytosanitary reasons. They are applied equally to all trading partners. Import prohibitions apply to chicken offal and limbs, fowl livers, goods bearing marks considered sensitive to religious beliefs, and various hazardous chemicals and pesticides, among others. There are also restrictions on the importation of used products, which must meet certain conditions. A number of products are subject to quality control inspections when imported. Additionally, the importation of a relatively large number of items is subject to “special conditions” and requires a licence, including passenger cars; shoes; apparel; home textiles; carpets; car parts; household appliances; eyeglasses and watches; petroleum products; milk and milk products; oils and fats; pasta; and soaps. The importation of certain products is subject to specific administrative formalities and requires government approval; such is the case for wheat grains, corn used for the feed industry, and soya bean seeds for oil extraction. Egypt has not submitted any notifications to the WTO with respect to its import licensing regime.
Egypt is a relatively active user of trade remedy measures: between January 2005 and 30 June 2017, it initiated 31 anti-dumping investigations, 16 of which resulted in the imposition of definitive anti-dumping duties. Three anti-dumping measures were extended. During the same period, Egypt initiated 14 safeguard investigations, imposed provisional measures in all and final safeguard measures on three products: blankets, steel rebar, and cotton and mixed yarns. Although few final measures were adopted, the application of provisional measures could have acted as a deterrent to trade. There are currently no countervailing measures in place.
Egypt imposes export taxes on a number of products, including sugar, waste plastic, some fertilizers, fish, sand, some skins, marble, and raw granite, among others. Egypt introduced an export tax of LE 3,000 per ton of sugar for an unlimited duration effective end-March 2017. According to the authorities, the rationale for applying export taxes is, in all cases, to ensure a sufficient domestic supply of those products. Exports of rice of any kind have been banned since August 2016; this measure has unlimited validity and was imposed due to the lack of water resources. In addition, Egypt bans the exportation of raw or tanned hides, skins or leather in its wet state. Exports can be prohibited or restricted in order to meet local demand or for environmental purposes.
New regulations for the establishment of free zones are contained in Law No. 72/2017. The incentives offered in free zones are meant primarily to attract investment, to provide employment for Egyptians, and to encourage exports. There are two types of free zones: public and private. Public free zones are established for several projects, whereas private free zones are confined to one specific project or company, and must meet certain conditions, inter alia with respect to minimum capital (US$10 million) and exports (they must amount to no less than 80% of the production value). Enterprises in free zones benefit from complete exemption from import tariffs, income taxes and the VAT. They are charged, however, a fee of 1% or 2% in lieu of taxes. Freezone investors may sell all or part of their products on the Egyptian market after payment of the relevant customs duties. There are currently nine public free zones in operation. Egypt also has one Special Economic Zone, which benefits from special and simplified customs procedures, tarifffree imports of inputs and equipment, and lower taxes.
Egypt implements a number of incentives programmes, which can be general or sectorspecific. There are also regional support programmes, and programmes for MSMEs, which include facilitating access to credit at preferential conditions. There are currently 13 investment zones specialized in various fields; they enjoy the same benefits as free zones in terms of facilitation of licence issuance but are not granted tax exemptions. A new governmental agency was created in 2017 to provide support to MSMEs; its budget for this purpose was about LE 5 billion in 2017. Under the new Investment Law, Egypt also provides regional incentives in the form of a discount on taxable net profits, depending on the region.
Egypt has accepted the WTO Code of Good Practice for the Preparation, Adoption and Application of Standards. Technical regulations are issued by the different ministries. As at December 2016, Egypt had in place some 860 technical regulations covering five sectors, with the largest number pertaining to engineering and chemical products, food, textiles and measurement products. All imported goods subject to technical regulations are inspected to verify conformity with each regulation. The Egyptian Accreditation Council (EGAC) is the sole national body for the assessment and accreditation of conformity assessment bodies and laboratories in Egypt performing testing and calibration, inspection, and certification activities for products, systems and personnel. Egypt submitted its first TBT notification in 1997; between then and late October 2017, it submitted 221 notifications including addenda and corrigenda.
There are various controls and inspection procedures for food products, live animals, and animal and plant products, implemented by the corresponding responsible agency. Importers of plants must obtain an import permit prior to importation and are also required to notify the exporting trading partner of the corresponding import regulatory requirements, which are set according to the potential risk associated with pests. Imports of live animals require an import permit from the Central Administration of Veterinary Quarantine. Importers of meat products and chicken must provide a number of certificates before the product is accepted, including a slaughter certificate proving that the animal was slaughtered in accordance with the Islamic ritual (halal), a veterinary certificate, and a certificate of origin. Egypt submitted it first SPS notification in September 2005; between then and November 2017, it submitted 80 notifications to the WTO.
During the period under review, the legal framework for Egypt’s competition policy underwent far-reaching changes. Competition policy is mainly regulated by the new Constitution of 2014, and the Egyptian Competition Law of 2005, its Executive Regulations, and their amendments. The Competition Law sets out prohibitions in respect of the abuse of dominant position and provides a list stating nine different prohibited acts. It also prohibits vertical agreements or contracts between a person and its supplier or clients if they are intended to restrict competition. The Law applies to all types of persons or enterprises carrying out economic activities, be they public or private. This includes state-owned enterprises, except for public utilities managed directly by the State. Recent amendments to the Competition Law gave the Egyptian Competition Authority (ECA) the power to initiate criminal lawsuits and to settle with violators, and in general strengthened its enforcement faculties. Between its inception in 2006 and April 2017, the ECA completed 109 investigations, 37 studies and 13 advisory opinions. During this period, the ECA proved 36 violations of the law, 28 of which were during the 2012 to 2016 period.
Egypt is not a party to the GPA. The two main procedures for public procurement of goods and services in Egypt are public tender and public reverse auction. Both procurement methods may be open to both Egyptian and foreign suppliers, and must be advertised in at least two daily newspapers of major circulation. A 15% price preference is given to Egyptian products in all government procurement. Egyptian subsidiaries of foreign companies can benefit from the preference. Additionally, MSMEs must be given an extra 10% preference in any tender. The presence of the State in the economy is important in Egypt, which has about 150 state-owned enterprises engaged in activities in a number of sectors, including petroleum, transportation, telecommunications, post and industrial activities. Three state-owned banks own some 40% of the banking sector’s assets.
Egypt is a member of most of the main international treaties on intellectual property rights (IPRs). In April 2008, Egypt notified the WTO that it had accepted the Protocol Amending the TRIPS Agreement. The Intellectual Property Law No. 82/2002 is a unified Law that covers the major areas referred to in the TRIPS Agreement. There are no provisions in Egypt’s IPR legislation that expressly allow or prohibit parallel imports. According to the authorities, Egypt’s IPR policy recognizes the importance of IPR protection as a key factor in economic growth and development; through it, the Government aims to promote the effective use of the IPR system and to fully utilize inventions, and attract FDI. The enforcement of IPR legislation is handled by various specialized authorities, some of which are entitled to act ex officio regarding IPR crimes. Border measures may be applied on all forms of intellectual property.
Egypt’s agricultural policy is primarily aimed at meeting the rising demand for food at reasonable prices; to this end, Egypt has made more land available for crops where it has a relative comparative advantage such as fruits and vegetables, and has resorted to subsidies. It has also discouraged the production of crops that use water intensively, such as cotton and sugar. Although Egypt provides state support for both production and consumption of agricultural goods, actual spending for direct farming support is much lower than for food subsidies. The fishing industry remains of moderate importance to Egypt, which is a net importer of fish and fish products, though aquaculture is a growing business.
Manufacturing continues to be of considerable importance for the Egyptian economy and the sector is relatively diversified. During the period under review, the contribution of the manufacturing sector (excluding petroleum) to Egypt’s GDP has averaged around 17% and it has represented about 30% of employment. The State continues to play an important role in Egypt’s manufacturing sector. Food, textile, cement and basic metallurgy are the main subsectors.
The Government is pursuing its efforts to solve the electricity supply crisis by raising electrical generation and distribution capacity through a combination of new investments and of regulatory reforms, opening and partially unbundling the sector. Egypt has adopted a number of measures to promote renewable energies and to facilitate public-private partnerships in them. It has also undertaken measures recently to diminish energy subsidies granted to consumers, which weigh heavily on Egypt’s budget.
The financial services sector is well supervised and open. Egypt has a large banking sector, though during the period under review the number of banks has declined somewhat as Egypt has not delivered any new banking licences since 2009. Banks, both domestic and foreign-owned, must register with, and obtain a licence from, the Central Bank of Egypt. A number of conditions must be met prior to registration, including a minimum capital requirement of LE 500 million, or US$50 million for a foreign bank branch. There are no legal limitations to the number of licences that can be granted, but there is a policy of consolidation of existing banks. Licences are openended. Despite a rather low rate of penetration, Egypt has a well-developed insurance sector. Insurance companies must take the form of joint stock companies and have a minimum capital of LE 60 million. Foreign companies applying for a licence in Egypt must have been granted a licence in their home country. Branches of foreign insurance companies are not allowed.
Egypt is an important market for telecommunication services in view of the size of its population. The fixed telecommunications penetration rate is relatively low while the coverage of mobile telephony already surpasses the population, a result achieved during the period under review. Internet usage is also on the rise and reaches more than a third of the population. Mobile telecommunications services are open to foreign investment, though state ownership remains present in two of the four licence holders. Fixed-line services have been gradually liberalized since 2009, but the effects of this liberalization have not materialized yet.
Egypt has a liberal aviation policy with few restrictions. All domestic airlines are privately owned and foreign investment plays a large role in some of them. Except for two management contracts, airports remain publicly owned and managed and third-party handling is not allowed. Maritime transport is the main means of transportation used for Egypt’s international trade. Cabotage in maritime transport is reserved for national flag carriers. However, waivers can be granted to foreign vessels to practice cabotage in case of the breakdown of an Egyptian vessel and when a supplier terminates its service. Three such waivers were granted in 2015. The bilateral and plurilateral agreements signed by Egypt do not grant any reciprocal preferential treatment to partner States for cargo sharing. There are no restrictions for the exercise of onshore maritime transport activities and auxiliary services (except for maritime agency services). There are no foreign ownership restrictions for cargo handing/maritime terminal activities or for specialized ports. Egypt grants no preferential treatment for national flag vessels’ access to ports and port services. The Suez Canal is of a vital economic importance for Egypt, as it generated US$5.12 billion in revenue in fiscal year 2015/16, accounting for 9.8% of total external account receipts; its enlargement is the most significant development regarding inland waterways transport in Egypt during the period under review.
Despite being severely affected by events in the past few years, tourism continues to be a key service in Egypt as it employs, directly and indirectly, 12.6% of the total work force and is one of the main earners of foreign exchange. The sector is largely open to foreign investment and the authorities are trying to promote it through the incentives contained in the new Investment Law.