Search News Results
Afreximbank urges use of factoring to expand Africa’s regional value chains
African countries should take make use of factoring in order to take advantage of the opportunities for expanding the continent’s regional value chains, participants at a regional factoring conference held in Dakar have heard.
Kanayo Awani, Managing Director of the Intra-African Trade Initiative at the African Export-Import Bank (Afreximbank), said on Wednesday at the opening of the two-day Regional Conference on Factoring that, in spite of the potential upside, Africa’s small and medium-sized enterprises (SMEs) continued to face difficulties in accessing finance.
Ms. Awani, who is also Chairperson of FCI’s Africa Chapter, noted that in other regions, such enterprises accounted for the largest shares of trade finance transactions concluded through factoring, noting that in Europe, for instance, factoring represented 10.4 per cent of GDP at 1.5 trillion Euros.
Africa only accounted for one per cent of global factoring transactions, stated Ms. Awani who explained that the low volumes of factoring in Africa was largely attributable to lack of information and awareness.
She said that the conference, co-organized by Afreximbank and FCI, the global representative body for the factoring and receivables finance industry, was to equip participants with relevant tools to tap into the opportunities available to grow factoring in the continent, especially in the context of intra-regional trade.
Ms. Awani added that the event would provide a regional view on factoring and offer attendees opportunity for discussions on the current state of the industry, new challenges, products and markets development. It would also create new skills and networking opportunities for the participants and give them practical information on successfully setting up factoring businesses.
Earlier, Peter Mulroy, Secretary General of FCI, said that despite the low factoring level in Africa, the continent had achieved important milestones that could help develop it further in the years to come.
“Today we are witnessing the birth of numerous initiatives at the government, ministerial and central bank levels in such markets as Cameroon, Nigeria, Ghana and others. This is, in part, thanks to the development of the model law on factoring by Afreximbank, the removal of burdensome stamp duty tax, the development of inclusive policies at the central bank level to promote and support financing to SMEs through factoring, and the push for development of cross-border factoring,” he added.
Also speaking, Ismaila Gueye, Coordinator at the Directorate of Financial Sector and Competitiveness at the Ministry of Economy and Planning of Senegal, who represented his Minister, said that African exporters were encountering a loss of competitiveness due to the fact that factoring and open account trade were not commonly used in Africa as was the case in all other regions of the world. He commended Afreximbank and FCI for promoting such financial practices, saying that it would help put local SMEs on a level playing field with their global competitors.
The conference brought together more than 80 representatives of central banks, regulatory bodies, government agencies, legislative authorities, commercial banks, law firms, entrepreneurs, exporters and factoring companies from West Africa and beyond.
The presentations delivered by Ms. Kanayo Awani of Afreximbank and Mr. Peter Mulroy of FCI are available to download courtesy of Afreixmbank.
Managing Director of the Intra-African Trade Initiative, Afreximbank
We are excited that this Conference which we have dubbed “Domestic and International Factoring: Alternative Tools for Developing SME Financing in Africa” is taking place in this historic and beautiful resort city of Dakar. The vibrancy of this country, most importantly, is etched in the hospitality of its people (Teranga), which we have enjoyed since arriving here.
There couldn’t have been a better location for the Conference!
Today’s workshop is a continuation of the Bank’s capacity building activities aimed at developing the skills of African factors, creating awareness on the potential benefits of the product and ultimately, promoting the emergence and development of factoring businesses across the continent. This particular workshop is however, unique in that it will look concretely at the importance and effectiveness of factoring in developing SME financing in Africa.
There is overwhelming evidence that regional cooperation and integration remain the key instruments through which an African economic renaissance can be attained and marginalization mitigated.
Indeed intra-African trade and deeper regional integration provide impetus for the expansion of value chains through industrialization. This presents new market opportunities for enterprises, in particular SMEs. This is because Senegal’s Industrial Park on the outskirts of Dakar can be the processing hub for Mali’s cotton, yarn or even fabrics. Senegal can also process its groundnuts and those of the region; as well as its fish and those of its neighbours such as Mauritania. However, in spite of the potential upside, small and medium sized enterprises, and in fact whether in terms of regional or domestic supply chains, continue in Africa to face a large number of constraints chiefly the lack of access to finance.
Taking learnings from other regions, such as Europe, where SMEs account for the largest share of factoring volume which is the equivalent of 10.4% of the GDP for EU or 1.5 Trillion Euros, the opportunity exists for Africa to expand its regional value chains through factoring.
The paradox however is that Africa, a continent exceptionally endowed with both human and natural resources, presently accounts for a paltry 1 percent of the global factoring turnover.
It is within this context that the Bank is leading efforts to develop factoring in Africa. The Bank has a dedicated line to support factors in Africa. The Bank also sponsored the development and promotion of a Model Law on Factoring in Africa that was launched in October 2016. The Bank partners key institutions across the continent to advocate for reforms in financial regulations to facilitate growth of factoring in Africa case in point being the collaboration with Nigerian Export Import Bank (NEXIM) in pushing for changes to the foreign exchange regime in Nigeria to admit Factors as dealers of foreign exchange in a bid to expand the modes of payment to include Open Account.
The Bank is also working with the Organization for the Harmonization of Business Law in Africa (OHADA) to institute and harmonize Factoring law among its 17 West and Central African member countries, using Afreximbank’s model law as guide.
Government of the Republic of Senegal, through the Emerging Senegal Plan (Plan Sénégal Émergent), emphasizes financial inclusion and SME support as a critical pillar for structural transformation. The food and beverage industries in Senegal, for instance, which are already playing a critical role across regional value chains in West Africa, presents a blueprint for empowering SMEs through factoring as a tool for accelerating regional integration.
We believe that this Conference is an integral part in the journey to transform Africa. The knowledge we will garner in the next two days will be instrumental in equipping participants with relevant tools to support the growth of factoring in the continent.
As I close, please permit me, Honourable Minister, distinguished Ladies and Gentlemen, to use this opportunity to thank the Government of Senegal for supporting this Conference. I also thank our partner, FCI, as well as our event Sponsors, who have helped make this Conference possible. Our gratitude also goes to all Resource Persons. We also welcome attendees, some of whom have travelled from far distances. We will be pleased to meet and engage with you all and look forward to continuing dialogue into the future.
I trust that you will all find this Conference a rewarding learning experience.
I thank you.
Related News
Three East Africa states in US crosshairs over mitumba ban
East African nations that are en-route to stopping importation of used clothes may soon pay a price for it following the US State Department’s announcement that Washington will impose trade penalties in retaliation to what they see as a blockage of free trade.
Harry Sullivan, the acting head of the economic and regional affairs unit in the department’s Africa Bureau, said Rwanda, Tanzania and Uganda have until next week’s meeting of their leaders to reverse the decision or face the penalties.
The leaders are expected to decide whether they will move ahead with the ban on importation of used clothing from the US or walk back on the decision.
“I believe the results of the meeting next week will determine how we proceed,” Mr Sullivan said in a conference call with reporters.
East African Community (EAC) member states agreed two years ago to impose phased ban on used clothing imports (known as mitumba) over a three-year period beginning 2019.
Kenya subsequently withdrew from that agreement following US threats to end its eligibility for duty-free clothing exports to the US market under the African Growth and Opportunity Act (Agoa).
US trade officials maintain that the mitumba ban violates an Agoa stipulation requiring beneficiary countries to eliminate barriers to trade with the US.
Loss of the Agoa duty-free allowance would prove devastating to Kenya’s budding apparel industry that earned the country more than $400 million worth of textiles and clothing exports to the US last year.
Rwanda, Tanzania and Uganda – each of which earns far less through Agoa than Kenya – jointly affirmed last July that they intend to proceed with the mitumba ban. The three countries argued that the action was essential to their efforts to develop domestic clothing manufacturing industries.
The Trump administration disputes that reasoning.
“While we understand the East African Community’s desire to build a domestic textile sector, we firmly believe the EAC ban on imports of used clothing will not achieve that,” Mr Sullivan told reporters.
Making inexpensive mitumba unavailable will adversely affect many people in the three countries, he suggested.
“Leaders or the EAC are saying to consumers of used clothing we are going to take this choice away from you and you will not have access to this market anymore,” he said.
“We question whether consumers of used clothing will be able to afford the new apparel being made in the East African Community market.”
A more effective way of developing domestic clothing industries would entail encouraging middle-class consumers to buy locally made apparel, Mr Sullivan proposed.
An East African fashion industry could “build its brand and market to the growing middle class, which prefers to buy its apparel in shopping malls and other places anyway,” he said.
Related News
Cargo scanners give KRA Sh131m more daily at the ports
Increased use of cargo scanners at the port of Mombasa and the Jomo Kenyatta International Airport largely helped the taxman to grow daily non-oil revenue by Sh131 million in six months ended last December compared to the similar period in 2016, fresh data shows.
The Kenya Revenue Authority said collections from non-oil imports averaged Sh1.257 billion daily in the July-December 2017 period compared with Sh1.126 billion a year earlier.
Commissioner-general John Njiraini also attributed the growth in daily revenue flows at the Customs to “benchmarking of cargo values to address undervaluation” and “stricter application of cargo auction processes”.
“Customs recorded overall growth of 7.7 per cent, with non-oil collections, which account for about 70 per cent of revenue growing at 8.1 per cent,” Mr Njiraini, whose second three-year expires on March 3, said in a statement.
“Customs performance, however, continued to be adversely impacted by sluggish import growth with container volumes in H (first half) recording marginal growth of 2.8 per cent compared to growth of 4.9 per cent in H1 of FY (financial year) 2016-17 (which ended last June).”
The Scanner Integration Project, which connects all readers at border entry points to a command centre at Time Tower, has been largely funded by the Chinese government.
The integration started last October and was initially set to be completed by March.
The integration is expected to help customs officials monitor and analyse contents of cargo entering and leaving the country from the command centre.
About Sh1 billion was invested in the project last year, comprised of Sh900 million the Chinese government spent on acquiring additional scanners and a further Sh100 million for their installation.
The project is expected to clamp down on smuggling of goods into the country by rogue traders and reduce collusion by various actors at border points to defraud the taxman revenue through corrupt deals.
“Previously scanning operations were localised at the point of scanning, meaning that Customs leadership did not have ongoing visibility about scanning operations,” Mr Njiraini said in an interview on December 15.
“[With new development], our experts are able to perform the necessary image analysis that would previously only have been possible in Mombasa.”
KRA introduced the cargo readers as part of a major strategy to tame tax cheats who usually made false declaration of goods handed for processing.
It has scanners at key ports of entry, including Kilindini port, Jomo Kenyatta International Airport (JKIA), Moi International Airport, Mombasa, Eldoret International Airport, the Inland Container Depot in Embakasi and a few Container Freight Stations (CFSs).
Related News
tralac’s Daily News Selection
Starting today, in New York: The Platform for Collaboration on Tax global conference
Diarise: The 6th edition of the Africa CEO Forum in Abidjan (26-27 March) on the theme African Champions: powering competitiveness
SACU has issued a tender for the development of an online harmonized customs and excise tariff database and reference tool: details (pdf)
Africa’s top 500 companies: time to tighten up (The Africa Report)
For the fourth year running, the turnover of Africa’s 500 largest companies fell in our exclusive rankings. And though the drop was less steep – 6.7% for the companies’ 2016 financial year results compared to 12.6% the previous year – it means turnover is back to where it was in 2008. Back then, Africa’s corporate titans made $566.9bn. After a neat parabola of African corporate rise and fall, the 2016 turnover was $569.2bn. [The author: Nicholas Norbrook]
FOCAC trade preview: Of China’s 15 fastest-growing export markets since 2009, 10 are in Africa (Standard Bank)
Perhaps more startling is that 10 of China’s 15 fastest-growing export markets since 2009 are in Africa. These are Djibouti, Kenya, Ethiopia and Tanzania in East Africa; Senegal, Ivory Coast, Guinea, Ghana and Cameroon in West Africa; and Mozambique in southern Africa. These now account for over one-fifth of China’s total sales to Africa, from one-tenth seven years ago, together consuming nearly $25bn of Chinese goods in 2017. This reinforces our view that Beijing and, more importantly, Chinese firms – both SOEs and private owned firms – are continuing their focused and nuanced approach to Africa. However, Africa needs to step up to the plate to ensure Beijing’s further commitment.
China’s exports to Africa reached $95bn for a second consecutive year in 2017. Overall, Africa has proved a resilient market for China, with exports rising by an average 14% y/y each year since 2010 — five percentage points faster than China’s sales elsewhere. Fast growth in Africa has managed to offset demand softness in Africa’s largest economies – Nigeria and South Africa – in recent years. Promisingly, there has also been an up-turn in demand in both Nigeria and South Africa, with sales to both countries increasing in 2017 for the first time since 2015, by 17% y/y and 13% y/y respectively.
Also, the recovery in commodity prices – especially metals and hydrocarbons – resulted in Chinese imports from Africa rising 32% y/y last year, to $75bn. Total China-Africa trade has now returned to growth, increasing by 11.4%, from $151bn in 2016, to $169bn in 2017— the fastest rate since 2012. This recovery in trade growth is good news, laying a positive foundation for the sixth Forum on China and Africa Cooperation (FOCAC) which will be held in Beijing in September this year.
Nevertheless, the trade balance of most African countries has continued to deteriorate materially. Only five African countries have a trade surplus with China. Kenya – East Africa’s most developed economy – is a case in point. [The author, Jeremy Stevens, is an international economist for the Standard Bank Group, based in Beijing], [Update: Angola, Mozambique’s 2017 exports to China]
Kenya: Budget options for 2018/19 and the medium term (PBO)
Medium term economic growth prospects: Baseline Scenario. Assuming no significant change in policy, Economic growth is projected at 5.0% in 2018, picking to 5.6 in 2019 and 5.9 in 2020. In fiscal years, this translates to 4.4% growth for financial year 2017/18, 5.5% in 2018/19 and 5.8% in 2019/20. External Sector Outlook component to Baseline Scenario: The trade deficit is likely to continue expanding on account of stagnating exports and increasing imports. Reported increases in Kenya’s exports are mostly due to increase of exports in value terms, not volume terms. Structural competitiveness or quality of exports is still wanting and Kenya’s export market share in sub-Saharan Africa has been declining. On the other hand, given continued huge government investment projects, imports are likely to continue increasing. [Anzetse Were: Key concerns with Kenya’s new Eurobond issue]
Nigeria: Senate wants importation of palm oil, kernel banned (Premium Times)
The Nigerian Senate on Tuesday resolved to urge the Federal Government to ban the importation of palm oil/kernel, and inject funds to aid its local production. The senators also urged the private sector to partner state governments to embark on the transformation of palm oil production, and on creation of allied industries through “backward integration.” The lawmakers also resolved to mandate the Committee on Agriculture and Rural Development to invite the Nigerian Institute for Oil Palm Research on why it has failed to deliver on its mandate. Francis Alimikhena (APC, Edo North) explained that since 2017, Nigeria has imported 450,000 tons of palm oil to the tune of N116.3billion, adding that “it is as grim a reality as it is worrisome.” “With an ever increasing population, a steady decline in palm oil production, and a proliferation of the uses of various products from palm oil, it is an economic fact that there is high demand for palm oil in Nigeria”, he said. [NEPC to sustain intervention in $60bn leather industry]
Nigeria’s external reserves rise to 5-year high of $41.09bn (Leadership)
The apex bank noted that the rising exports in the country as well as increased confidence and inflow of foreign exchange through the Nigeria Autonomous Foreign Exchange window were also factors contributing to the accretion of the external reserves. The reserves this year rose by $2.18bn, or 5.6%, from $38.91bn it was as at 2 January 2018. The reserves, which had dropped to below $24bn at the height of the oil price crash in 2016, has been accruing crossing $41bn, a level it last achieved in December 2013. Analysts project that the reserves will continue to accrue this year, rising to almost $50bn. [Ecobank’s Nigeria downstream oil 2017 review, 2018 outlook (pdf)]
South Africa: National Planning Commission strategy session outcomes (GCIS)
We received a briefing on the outcomes of research and dialogues on the transformation of township and rural economies, with a particular focus on the promotion of small and medium-sized businesses and black-owned enterprises. We remain deeply concerned that the marginalisation of small, medium-sized and black-owned enterprises continues, due to various barriers and the persisting high levels of concentration in the economy. Government SMME policies are not achieving the desired transformative impact especially as a pathway out of unemployment and poverty. We agreed to undertake further engagements with relevant stakeholders on the specific recommendations emerging from the research and dialogues. In particular, we plan to engage with Development Finance Institutions about their role and mandate in stimulating development.
Africa is an ‘enormous’ market for Irish agri-food sector, according to ibec (RTE)
Ireland exports around €1.3bn a year to Africa as a whole, which is comparable with what the country exports to Poland or Mexico individually. Mr McAuley said around a third of Irish exports to Africa comes from the agri-food sector. “Dairy is particularly successful with over €200m going to Africa.” One such company who successfully exports to Africa is dairy group, LacPatrick. Gabriel D’Arcy, Chief Executive of LacPatrick, said their brand is a brand leader in 15 to 20 African countries stretching from Mauritania to Angola in West Africa. Africa has 54 countries with a population of 1.5 billion.
George Wachira: Critical success factors for SGR (Business Daily)
It is the ICD import/exports consignee model that presents the biggest potential for early SGR success. The test for SGR is to make ICDs work flawlessly by substantially improving cargo and truck turnaround times by eliminating documentation and operational delays. Cargo clearance and forwarding paperwork will need to be effectively transferred from Mombasa to Nairobi and Naivasha, by integrating the Kenya Ports Authority, the Kenya Revenue Authority and SGR systems into efficient real time systems that work 7x24 hours. Times from ship to loaded trucks at ICDs should reduce and approximate global benchmarks. To encourage the exporters from Western Kenya and Uganda to use the ICDs, especially at Naivasha, it is important to make available back-load cargo for return journeys to avoid empty return journeys.
RwandAir to start flights to Abuja, Cape Town (New Times)
RwandAir, the national carrier, is set to expand its wings to Abuja in Nigeria and Cape Town in South Africa. According to airline officials, RwandAir will operate four weekly flights from Kigali to Cape Town with a stopover in Harare, Zimbabwe. However, the officials did not give timeframe during which they intend to start flying to the new destinations, but hastened to add that this will not take long. The Abuja route will be tagged to the existing Accra destination, where the flight will stop in Abuja before heading to Accra in Ghana and is expected to be operated four times a week. [KZN could soon have direct flights between Durban and London]
Bharti Airtel’s holding company for Africa explores IPO (Livemint)
Bharti Airtel International (Netherlands) BV said the discussion on feasibility of listing its shares on an “internationally recognized” exchange was still in preliminary stage. Bharti Airtel owns telecom assets in 14 African countries. For the quarter ended 31 December, Airtel’s African operations reported a 5.3% growth in revenue over last year on constant currency basis.
Food prices must drop in Africa: how can this be achieved? (SWAC/OECD)
Third, strengthening and facilitating regional trade will also help reduce transaction costs and achieve economies of scale. In West Africa, the high price differential – from -28% in Mauritania to +14% in Ghana relative to the regional average – reflects the inefficiencies of the regional food market. [The author, Thomas Allen, Sahel and West Africa Club Secretariat]
Unlocking India’s logistics potential: the value of disaggregated macroscopic freight flow analysis (World Bank)
India is one of the fastest growing major economies. However, at 14% of GDP, its logistics costs are high relative to the 8 to 10% that is typical of most advanced economies. High logistics costs and poor logistics performance impact the competitiveness of the economy on multiple levels: (i) firms deliver less competitive goods and services; (ii) consumers pay more than peers for goods; and (iii) the cost of achieving improvements in GDP is excessive. The development of a national transport and logistics network to facilitate competitiveness and sustainable development and uplift rural regions will play an increasingly important role in shaping spatial organization in emerging economies. An element that is absent, yet critically important for national logistics issues in emerging economies, is sufficiently detailed freight-flow analysis to facilitate targeted infrastructure investments and enable transformational change to improve national logistics performance. [Express delivery: use drones not trucks to cut carbon emissions, experts say]
WTO: anti-multilateral attacks and a mini-trade ministerial in Delhi (Livemint)
Against this backdrop, India’s decision to host an informal ministerial meeting of around 40 countries on 19 March in New Delhi seems like an audacious move. It is not the first time that India is hosting such a meeting. The previous United Progressive Alliance government led by the Congress party convened two meetings in 2005 and 2009.
Today’s Quick Links: Access to justice in Africa: the fight for an effective SADC tribunal Somalia rejects IGAD free movement, trade proposal Kagame, Bongo discuss AU and ECCAS development Tanzania: NGOs want government to protect women in border trade Tanzania: Bureaucracies in government scaring away investors, says TPSF Africa needs to invest more in its water professionals EALA to push for more resource allocation for Mombasa Port WEF’s Kris Broekaert: How can policy keep pace with the Fourth Industrial Revolution? South Africa: Quarterly Labour Force Survey, 4th Quarter 2017 Tanzania: Highlights for Third Quarter (July – September) GDP , 2017 (pdf) UN Special Committee on Peacekeeping Operations: meeting summary |
Related News
Food prices must drop in Africa: How can this be achieved?
After the 2007-08 crisis, we got into the bad habit when discussing food prices of focusing almost exclusively on volatility and overlooking the question of the level of prices.
Of course, reasons were good for this; between February 2007 and February 2008, world food prices jumped 60%. These increases combined with local factors had dramatic effects, particularly in West Africa, where millions of households already had insufficient income to cover their basic nutritional needs. Today, according to OECD and FAO projections, food prices are expected to remain stable in the medium-term. This is a good time to re-examine some important questions.
Are food products cheap in sub-Saharan Africa?
The question may seem surprising, as food is no doubt cheaper in the poorest countries. This is the first thing that any tourist would tell you, and it is confirmed by statistics. Sub-Saharan countries do indeed have the lowest prices in absolute terms (see figure). African food products are therefore much more affordable…for the European consumer. What about for the African consumer?
Economists know households in rich countries pay more (per unit) for food but also benefit from better incomes. Any measure of affordability must therefore relate prices to income levels. Only then is it possible to assess whether sub-Saharan consumers are really better off than European consumers.
Again, we know the answer to this question. It is indicated by the shape and slope of the curve in the graph, and above all by common sense; they are worse off, and the proof is that they are forced to spend a large proportion of their income on food. In West Africa, households spend an average of 55% of their budget on food. But what may come as a surprise is that they are particularly badly off. In fact, they are worse off than expected when looking at the experiences in other countries.
30% to 40% higher than prices in the rest of the world at comparable GDP levels per capita
When differences in income are taken into account, our econometric estimates reveal that food prices in sub-Saharan Africa are 30% to 40% higher than prices in the rest of the world at comparable levels of GDP per capita. In other words, food is particularly expensive for sub-Saharan households relative to their income. This can also be seen from the figure: for the same level of per capita income, sub-Saharan countries are higher up in the graph than Asian countries (and, for that matter, much of the rest of the world).
If you are not yet struck by the figures, try a comparison with India. Although very different in demographic terms, India and West Africa have a similar GDP per capita. If West African households bought their food at Indian prices, they would save between 19% and 33% of their income, depending on the country. This loss in purchasing power is automatically reflected in the composition of the food basket and in non-food expenditures, with consequences for nutrition and access to basic services such as health or education.
Is this really a problem?
But is this really a problem? After all, aren’t Africans primarily producers? The effect of prices on household welfare varies; they represent income for producers, but costs for consumers. The overall net effect depends on the structure of the economy. In subsistence economies, the majority of households benefit from high food prices, in that they consume what they produce and sell their surplus. However, because of the dynamics of urbanisation and the diversification of the rural economy, fewer and fewer households depend just on their own food production. In West Africa, our estimates show that markets provide at least two-thirds of household food supply. Producers themselves are dependent on the markets for their food, due to both seasonal effects and the ongoing transformations in agricultural systems. These structural changes suggest that it is time to revise perceptions of the net impact of food prices and revisit agricultural policy. However, this should not be done indiscriminately.
We know that lowering consumer prices must not be achieved at the expense of producers’ incomes, as the majority struggle to meet their basic requirements at a time when investment needs are immense. It must not be achieved by resorting to large quantities of aid or cheap imported products. We know from Théodore Schultz[1] that this would penalise the primary income-generating force in developing economies, namely agriculture and the food sector as a whole. The solution to the high cost of food in Africa is endogenous, and will involve a transformation of the food economy.
Transforming the food economy is key to lowering prices
First, productivity gains are needed to drive down prices. For example, Africa is the region with the lowest share of irrigated land in the world (5% compared to more than 40% in Asia). Irrigated agricultural land, particularly in Southeast Asia, produces several crops per year and enables farmers to work all year round. Good quality seeds, agricultural extension services, and the use of fertilisers and modern equipment have also played an important role in increasing productivity. The most effective mix of investments is of course specific to each context, but improving labour productivity in the food sector is a prerequisite for a sustainable fall in prices.
Second, food prices reflect the sum of a series of activities throughout a value chain. Their levels are determined by the costs and constraints encountered at each step. What is now important is to address the challenges in the downstream segments of food value chains, i.e. in food processing, logistics and marketing. These activities also offer an opportunity to move upmarket to meet consumers’ new expectations. Processed foods have become an important part of food consumption in all income classes, even the poorest, and are expected to grow the fastest in the coming years. We therefore need to reconsider the value chains on which policy makers and investors should focus their attention. For example, our simulations show that, in some countries, interventions in emerging value chains such as fruits and vegetables rather than cereals result in greater decreases in the consumer food price index.
Third, strengthening and facilitating regional trade will also help reduce transaction costs and achieve economies of scale. In West Africa, the high price differential – from -28% in Mauritania to +14% in Ghana relative to the regional average – reflects the inefficiencies of the regional food market.
Finally, reinvesting in price monitoring systems is needed. Non-cereal commodities are not adequately covered by the systems in place in many countries. More than three-quarters of the price series in existing monitoring systems focus on cereals, which prevents comprehensive monitoring of consumer prices and food affordability. The lack of recognition of the relative unaffordability of food in Africa is also due to a lack of data. It is time to tackle this problem.[2]
Thomas Allen is from the Sahel and West Africa Club Secretariat (SWAC/OECD). The original article was published in French on the Fondation Farm blog.
[1] A specialist in development and agricultural economics and winner of the Nobel Prize in Economics in 1979.
[2] See Allen, T. (2017), ‘The Cost of High Food Prices in West Africa’, West African Papers, No 08, OECD Publishing, Paris. Link to the study: http://dx.doi.org/10.1787/c2db143f-en
Related News
RwandAir to start flights to Abuja, Cape Town
RwandAir, the national carrier, is set to expand its wings to Abuja in Nigeria and Cape Town in South Africa.
According to airline officials, RwandAir will operate four weekly flights from Kigali to Cape Town with a stopover in Harare, Zimbabwe.
However, the officials did not give timeframe during which they intend to start flying to the new destinations, but hastened to add that this will not take long.
The Abuja route will be tagged to the existing Accra destination, where the flight will stop in Abuja before heading to Accra in Ghana and is expected to be operated four times a week.
“This is yet another big milestone for RwandAir as we continue to expand our network. Our aim is to provide our customers with seamless and better connections on the continent and beyond,” said Chance Ndagano, RwandAir’s acting chief executive.
According to Ndagano, destinations to Abuja and Cape Town will help boost the economies of the three countries in terms of tourism and trade on one hand, and enhance bilateral partnership between Rwanda, Nigeria and South Africa.
The two additional routes will take the national carrier to 26 destinations.
The IOSA certified airline was recently recognised as one of the safest and best on time performer by world aviation body, the International Air transport association (IATA).
RwandAir was recently granted fifth freedom right by Nigerian authorities to fly without any limitations along Abuja-Yaoundé route in West Africa.
This bilateral airspace service agreement means that RwandAir is now able to operate another route into Nigeria to Abuja.
Rwanda also recently signed a bilateral air service agreement with Cape Verde, opening more potential market opportunities for the national carrier and the country’s private sector.
Business community welcomes new routes
Meanwhile, traders have welcomed the move by RwandAir to start operating these two new routes calling it an opportunity to further boost intra-regional trade.
“The new routes mean that we, as exporters, can now move our goods to these new destinations much more easily but also be able to forge trade deals with our counterparts in both Abuja and Cape Town,” said Ritha Ngabire a Kigali based trader.
Other planned routes
The Rwandan carrier is also planning to launch flights to New York in the US and other Asian destinations, including China soon.
On the African front, the airline plans to introduce routes to Conakry in Guinea, Bamako in Mali as well as Dakar, Senegal and Addis Ababa in Ethiopia
Other planned destinations include Lilongwe in Malawi and Durban in South Africa.
In 2016, the airline acquired its first A330 series (A330-200 and A330-300 Airbus aircraft) to boost its fleet and capacity so as to compete globally.
The airline carried more than 650,000 passengers last year and projects to transport over three million travellers in the next five years.
Last year, RwandAir launched its commercial flights to Mumbai, Harare, London (Gatwick) and Brussels.
Related News
Outcomes from National Planning Commission Strategy Session (Lekgotla) – Signalling a shift in gear
Department of Planning, Monitoring and Evaluation on outcomes from National Planning Commission Strategy Session
The National Planning Commission (NPC) under the leadership of its Chairperson, Jeff Radebe, Minister in the Presidency for Planning, Monitoring and Evaluation and its Deputy Chairperson, Professor Malegapuru Makgoba, convened for the third annual NPC Lekgotla held from 9 to 11 February 2018, at Kopanong Conference Centre in Benoni.
The Lekgotla, timed midway through the second term of the NPC, provided an important opportunity for the Commission to review its work to date; take stock of progress made in the implementation of the National Development Plan: Vision 2030 (NDP) by Government and other sectors of society; reflect on the key challenges facing the country that have impacted on the implementation of the NDP, and to make recommendations that would urgently help get the delivery of the NDP back on track.
The Commission is deeply concerned that the trends pertaining to key objectives of the NDP, namely, to reduce poverty, inequality and unemployment have seen a backward slide. Having registered GDP growth rates of average 3% between 2010 and 2013, the economy is currently in a low growth trap, sitting at average GDP growth of 1% since then. The result is that poverty rates have increased from 36.4% in 2011 to 40% by 2015; unemployment has increased to 27.7% as of the 3rd quarter of 2017, and inequality remains high.
“There is an urgent imperative to turn around the situation. The immediate priority is to restore confidence which will enable us to undertake specific measures to reignite economic growth. In this regard, raising the level of investment is critical, and at World Economic Forum in Davos we succeeded to generate renewed investor interest in our economy,” said Minister Radebe.
Since the appointment of this second Commission in September 2015, the NPC has undertaken various engagements within and outside Government on pathways and challenges to facilitate implementing the NDP, pursuant to our mandate. The Lekgotla resolved to spend the remaining two and half years of our five-year term towards restoring confidence in and ownership of the NDP and promoting accelerated implementation to address poverty and social inequalites. These priorities are essential for social cohesion and human development.
To this end the Lekgotla made the following key decisions:
On the Economy
The NPC reflected on the current political economy and the economic crossroad facing the country and the impacts on the lives of the poorest people. This has been identified as the single most important challenge for South Africa. We have been working on a series of research papers on pathways out of the current economic slump. These papers will shortly be released for public and stakeholder engagement. The first set of papers deal with short-term actions to revitalise the economy, SMME development and on Energy and Water Security.
On Spatial Planning
The NPC received a briefing on the status of the development of the National Spatial Development Framework to redress the legacy of apartheid spatial injustice and promote equitable spatial development through targeted investment and other measures. We resolved that the finalisation of this Framework is urgent and should be integral in the legislation currently under development by the Department of Planning, Monitoring and Evaluation aimed at strengthening coordinated planning and implementation across the whole of government.
On Township and Rural Economies
We received a briefing on the outcomes of research and dialogues on the transformation of Township and Rural economies, with a particular focus on the promotion of small and medium-sized businesses and black-owned enterprises. We remain deeply concerned that the marginalisation of small, medium-sized and black-owned enterprises continues, due to various barriers and the persisting high levels of concentration in the economy. Government SMME policies are not achieving the desired transformative impact especially as a pathway out of unemployment and poverty. We agreed to undertake further engagements with relevant stakeholders on the specific recommendations emerging from the research and dialogues. In particular, we plan to engage with Development Finance Institutions (DFI’s) about their role and mandate in stimulating development.
On Crime, Corruption, and State Capture
The NPC reflected on the current developments with regard to allegations of criminality of top members of the police force, as well as the ongoing exposure of acts of corruption in the public and private sectors. We welcome the establishment of the Commission of Enquiry into State Capture. State Capture, Crime and Corruption are symptomatic of a muddled leadership and a weak developmental State. The NPC considers strong leadership and a capable state as critical preconditions for the proper implementation of the NDP.
We agreed to request an opportunity to make representations to the Commission on State Capture with a view to ensuring that the outcome restores the country back on the path that the NDP has set for us. We recommend that Government also adopts a similar standard of transparency in the establishment of the Commission as regard the appointment to top positions in key law enforcement agencies such as the National Directorate of Priority Prosecutions and the South African Police Service and others.
On Prioritising Implementation of the NDP
Furthermore, to provide direction and impetus in the implementation of the NDP, the NPC identified 54 priorities, drawn from each of the chapters of the Plan, which we recommend for adoption by Government and all stakeholders and actors in the private sector and society at large. These priorities were identified on the basis of their impact on the NDP’s apex targets of reducing of unemployment, poverty and inequality, and we believe that they will ensure that the country makes the required progress towards achieving the goals of the Plan. The specific performance indicators for each of the 54 priorities will enable improved monitoring of implementation of the NDP across all sectors. These indicators will be measured and assessed periodically to assess progress in the implementation. As Government transitions into the next cycle of medium-term planning for the country, we will be engaging on these matters with leadership in the Executive, in particular with the Department of Planning, Monitoring and Evaluation, and other key stakeholders within and outside Government.
We also received a briefing by the Mapungubwe Institute of Strategic Reflection (MISTRA) in partnership with University of South Africa on their project on South Africa’s Scenarios to the year 2030 initiative, premised on the NDP: Vision 2030. The NPC considers this initiative to be aligned to our work and we have agreed to collaborate with the project going forward.
The Commission had a productive meeting with concrete and practical outcomes which will focus our work over the next two years. The NPC will carry out its work through active stakeholder engagements and wider and enhanced platforms of communication.
Related News
Kenya: Budget Options for 2018/19 and the Medium-Term
Stimulating Economic Growth for Prosperity
The year 2017 was quite an eventful one for the economy, characterized by intense political activity which culminated in two elections between August and October. As a result of the prolonged uncertainty, businesses failed to thrive and there was a marked decline in private sector activity; worsened by the declining availability of credit to the private sector. In addition, the country endured the effects of a prolonged drought which led to food and water scarcity. The focus for 2018 should therefore be to set the country back on a positive growth trajectory targeted at creating jobs, reducing poverty and generally improving the quality of life for all Kenyans.
The theme for the ninth edition of the Budget Options is, “stimulating economic growth for prosperity”. This entails policy directions and strategic initiatives for the government to consider that will best address the prevailing challenges in the economy and transform livelihoods in line with the government’s economic transformation agenda. The ‘Big Four’ Plan is one direction that if implemented in an environment that is conducive for fostering economic growth, will lead to a reduction in poverty and general improvement in various aspects of wellbeing such as food, shelter and health.
This Budget Options reviews the state of the economy, analysing the country’s productive capacity and how this can be scaled up as well as the dynamics of fiscal policy and how this can be streamlined in order to limit borrowing while ensuring value for money. The document also reviews the place of the interest rate capping law in the economy including the perceived benefits and challenges and addresses the imbalances in the external sector. In addition, the Budget Options proposes measures to enhance equity and efficiency in allocation of resources as well as options for achieving higher revenue growth.
The purpose of the Budget Options is to engage, enhance and enrich discourse on the economy and development matters; proposing viable options in policy making to inform the next medium-term budget.
Restoring Balance in the External Sector
Though the current account deficit appears to have improved in 2015 and 2016 following nine years of sustained expansion, it is likely to worsen in 2017. The improvement in the current account balance in 2016 was because of decline in merchandise imports as well as increased net inflows. From 2015 to 2016, net inflows increased by 32.7 percent occasioned by improved foreign earnings from tourism supported by conference tourism as well as increase in remittance inflows. By the end of 2016, remittance inflows stood at USD 160.9 million (CBK). Going forward, the likely deterioration of the current account deficit is due to lackluster performance of the export sector even as imports increase.
Exports grew at a slow pace over the past decade before experiencing stagnation and eventually a gradual decline whereas imports have steadily declined over the past three years. In the last decade, the trade balance of the country averaged 13 percent with the country’s exports having grown on average by 9 percent while imports grew at an average rate of 11 percent before experiencing a slowdown. Domestic exports declined from Kshs. 581 billion in 2015 to Kshs. 578.1 billion in 2016. This is attributed to a decrease in re-exports of Kenya’s petroleum products as well as manufactured goods that may have been occasioned by increased cheap imports of manufactured goods from china within East Africa.
On the other hand, imports have declined over the past three years, from Kshs. 1.6 trillion in 2014 to Kshs. 1.43 trillion in 2016. The decline was attributed to lower global oil prices as well as reduced transport equipment acquisitions. Despite the decline however, it is worth noting that there has been a steady rise in nonfood industrial supplies as well as food items relative to total expenditure on imports. The increase in importation of food items can be attributed to the prevailing drought conditions for the better part of 2016 and 2017.
Going forward, the import bill may face upward pressure due to global rise of crude oil as well as likely increased importation of machinery and equipment as key infrastructure projects continue to be implemented.
A review of the recent trend of exports shows a decline in both value and volume terms. Kenya seems to be losing grip on its East African export market as available data indicates a decline in Kenya’s exports to the region. Exports to Uganda decreased by Kshs. 6 billion in 2016 compared to 2015 whereas exports to Rwanda decreased to Kshs. 17.5 billion in 2016 from Kshs. 18 billion in the previous year. In volume terms, it is noted that there is a steady decline in the volume of the main export products, namely, coffee, tea and horticulture in the course of 2017. Though this is attributed to unfavorable weather conditions, it is noted that the decline in volume of Kenyan exports to Europe by 3 percent in 2016 is partly due to the European Union placing Kenya’s exports on their watch list due to quality concerns. This is a concern as it compromises the image of the country as a key exporter and may generate a lack of confidence in Kenyan products going forward.
It is also indicated that weak global demand and fall in prices led to temporary closure of local firms and a decline in exportation of Soda Ash and Fluorspar. It is important therefore, for the country to expand its export base and diversify goods as well as value addition in order to be protected from such vulnerabilities.
On the other hand, there has been an increase of exports to Asia with export earnings having increased by 7.4 percent to earn the country Kshs. 140.5 billion in 2016. Similarly, there has been an upward trend in volume of exports to North America namely USA and Canada. Export earnings to USA have risen by on average of 14 percent while exports to Canada have risen by 46 percent in the last five years as shown in the figure below. This could be partly explained by the expansion of Export Processing Zones (EPZ) being supported by Africa Growth Opportunity Act (AGOA).
On the other hand, though the capital account is at a surplus, it has been on a declining trend and this may adversely affect the country’s balance of payment position.The decline in the capital account is occasioned by a decrease in Foreign Direct Investments (FDIs) as well as increased foreign interest payments. Net financial inflows increased to Kshs.420 billion from Kshs. 384 million in 2015 because of short term capital inflows occasioned by ongoing foreign financing for government infrastructure projects. The financing of the country’s capital account primarily through loans is not reliable as this is money that has to be repaid. A sustainable improvement in the current account balance will typically require higher national savings which will ultimately lead to higher investment levels and therefore boost growth levels in the country.
Policy Options
-
Revamp the manufacturing industry: In order for Kenyan goods to compete successfully in the international arena, there is need to bring down the cost of production by lowering the electricity tariffs as well as increase value addition to the products produced especially agricultural products. As indicated in the Budget Watch 2017, the focus should be on increasing exports in value as well as volume terms through diversification of the export base as well as value addition to export products; improved competitiveness
-
Support Private Credit growth: The government should formulate policies that are geared towards supporting private sector credit. With increase in access to credit, companies may be more innovative hence invest in the latest technology which are energy efficient as well as increase efficiency in the production of goods and services.
-
Institutional and governance reforms to attract Foreign Direct Investment: this entails measures to reduce cost of doing business in the country such as energy and transportation costs as well as easing licensing processes to make it easy for businesses to set up in Kenya. Some reforms such as easing construction costs and reliability of electricity supply, enhanced tax compliance systems. Further reforms can be done still on energy reforms and improving process of registering a business and obtaining licenses.
-
Linking infrastructure development with exports: Any strategy of upscaling infrastructure development must be geared towards supporting export of goods and services.
Related News
tralac’s Daily News Selection
African trade policy events to diarise:
(i) With the Extraordinary AU Summit scheduled for the signing of the CFTA now taking place in Kigali, tralac’s Annual Conference will take place in Kigali (22-23 March)
(ii) The 4th WCO Global AEO Conference will take place in Kampala (14-16 March)
(iii) The Commonwealth Africa Summit 2018 will take place in London (12-15 March)
(iv) Afreximbank’s 2018 Annual Meetings will take place in Abuja (9-14 July)
Mozambique: Nacala Corridor and Port Performance Assessment Report (SPEED+)
The objective of the Nacala Corridor and Port Performance Assessment is to report on transport, logistics, and production bottlenecks along the Nacala Corridor, and provide recommendations for improvement of the corridor that could lead to development of the region’s economy. The study provides analysis of the Port of Nacala, the Nacala Special Exports Terminal (TEEN), railway and road networks, and nodes (inland terminals, weighbridges, etc.) and storage facilities, with an emphasis on transport and logistics services bottlenecks. Extracts (pdf):
A recent study by JICA has shown that the cost of transporting cargo from the port of Nacala to Blantyre in Malawi is 78% less expensive than bringing cargo to/from Beira, 40% less expensive than to/from Dar es Salaam and 39% less expensive than to/from Durban. This clearly illustrates that the Nacala Corridor railway is the most cost-effective option for Malawi based shippers.
Road-related transport costs in Mozambique can be six times higher than in Malawi and should be addressed. Road node costs are significant. For example, when traveling from Beira to Blantyre, road users will pay $132 in road user fees in Malawi and an estimated $370 in road user and weighbridge fees in Mozambique. Traveling the Nacala corridor to Blantyre road user fees are estimated at $64 in Malawi and over $400 in Mozambique. Traveling from Nacala to Lichinga, road users noted informal checkpoint fees and charges including 1,500–2,000 MT at a non-functional weighbridge on the Cuamba-Lichinga road, 2,500 MT at the weighbridge near Nacala, and 2000–3000 MT for bribes at various checkpoints along the corridor
The main production-related and value chain bottlenecks are characterized by low, inefficient production, and lack of seamless supply chain functioning. Inadequate use of inputs and agricultural growing techniques; deficiency of consolidation centers near production points, so as to reduce the number of middle men and post-harvest loss; and lack of adequate storage facilities. Another finding pointed to lack of sufficient coordination between regional governments on transport, infrastructure and trade facilitation policies. Provided that the influence area of the Nacala Corridor covers three countries, harmonization of those policies would be an important factor in increasing regional trade.
The potential economic impacts for Mozambique are large: $28m on costs savings and 30,000 new jobs. In 2020, by shifting 535,000 tons of exports onto the Nacala Corridor railway system and removing the direct and indirect costs associated with the compulsory use of TEEN, it is estimated that $28m in costs savings can be achieved. If these savings are directed into investment, an additional 116,000 tons of export product will be generated, creating a further 30,000 jobs, either as employment or livelihood opportunities, and an additional $17min income, at an average per worker/smallholder producer of $580 per year. Malawi may also benefit by 2020, receiving $4.2m in cost savings and the creation of 12,390 jobs.
EALA commences oversight tours of Northern, Central corridors (EALA)
Fresh from the 2nd Meeting of the 1st Session of the Assembly that concluded in Kampala last week, regional legislators have hit the road on mission to assess progress on the institutions, installations and facilities of the bloc. The on-spot assessment, by two groups, commenced yesterday (Monday) and will conclude on23 February. The first group, led by Hon Mathias Kasamba, is touring the Northern Corridor while the second group, led by Hon Wanjiku Muhia, will tour the Central Corridor.
Dar now plans higher learning on transportation (Daily News)
Tanzania will soon establish a university of transportation, courtesy of $62m grant (about 138.2bn/-) from the government of China. The Tanzania government had requested the Chinese for a grant with which to construct the university, whose details are expected to be revealed next week, according to reliable government sources. The Chinese Ambassador in Tanzania, Ms Wang Ke, made the revelations in Dar es Salaam yesterday shortly after she delivered a special message to President John Magufuli from Chinese President Xi Jinping. At present, Tanzania has the National Institute of Transport, a public higher learning institution which was established in 1975 as a training wing of the then National Transport Corporation.
Trade facilitation and paperless trade implementation (UNECE)
According to the report, the average rate of implementation of trade facilitation measures including in paperless trade for UNECE member States is about 69%, which is 7 percentage points higher than in the 2015 survey. The global average stands at about 60% in 2017. Most of the advanced economies have a rate of above 75% while most of the transition economies in Central Asia and Eastern Europe have an implementation rate of below 60%. This survey included a new set of measures, which attempted to gauge if trade facilitation reforms are inclusive, or not. These were trade facilitation for small and medium-sized enterprises, agriculture, and women in trade. A limited analysis of the data received shows moderate implementation (above 60%) for measures related to agriculture and SMEs but very low (17%) implementation related to women in trade, which warrants greater efforts from countries.
An interview with the EABC’s CEO, Lilian Awinja: Harmonise tax regime to attract more foreign investors into the region (New Times)
South Africa: Doing Business in Africa handbook (dti)
The booklet Doing Business in Africa (pdf) is a publication of the dti, developed in consultation with Government and the private sector to facilitate South African business across the continent by increasing awareness of the Government’s offerings. There is a general perception that South African companies go it alone, without a “team SA” approach. This booklet aims to provide the connections that will allow a coherent approach between private sector players and the South African Government. [KZN trade delegation to jet off to Zambia]
Tanzania among Africa’s top safe havens for dirty money (IPPMedia)
Tanzania has some of the most attractive secrecy policies in the world that make it one of the leading safe havens for dirty money in Africa, the recently released Financial Secrecy Index by the Tax Justice Network has revealed. Tanzania is ranked 75th in the FSI 2018 report polling a financial secrecy score of 73.4%, the fifth highest in Africa, which is above the marks of most countries in the world that are in the top 10 dirty money blacklist. However, TJN says the country’s 0.1% share of the global market for offshore financial services makes it a tiny player in the illicit industry compared to other secrecy jurisdictions. In Africa, Kenya tops the list of countries whose economic systems most contribute to global financial secrecy, a measure that TJN says encourages crimes such as money laundering and tax evasion. Its score of 8% is the sixth highest in the world after Vanuatu, Bahamas, Paraguay, Maldives and Bolivia which scored 88.6, 84.5, 84.3, 81.1 and 80.3 respectively.
Kenya: China takes up lion’s share of debt spend (Business Daily)
Beijing gobbled up nearly half of cash Nairobi spent on external debt repayment in three months ended September 2017, hinting at the cost of loans China has been injecting into the country’s infrastructure development. The Treasury spent Sh12.72 billion on servicing loans from China in the July-September period its statistics show, accounting for 48.26% of what the country used on servicing foreign debt. The amount paid to Nairobi’s largest bilateral lender represented 70.69% of the Sh17.99 billion total repayments to bilateral creditors in that period, Treasury data indicates. Repayments to China were second to World Bank Group’s International Development Association, the country’s largest multilateral lender, which got Sh3.906 billion, while commercial banks were paid a cumulative Sh3.120 billion. [Adan Mohamed: Plan to make Nairobi more attractive to global firms]
East Africa arrivals lift Kenya’s tourism under open travel (Business Daily)
Visitor arrivals into Kenya from East Africa have grown substantially in the past three years, official data shows, partly signalling the benefits of an open visa scheme for the region. Kenya last year recorded a combined arrival of 95,845 visitors from Uganda, Tanzania and Rwanda, up from 80,841 in 2016. In 2015, some 58,032 visitors arrived from these countries. “Uganda topped the list of Kenya’s top source markets in Africa, growing by 20.6% to 61,542 arrivals,” Kenya’s Tourism ministry said in its sector performance report for 2017. Arrivals from Tanzania also grew by an impressive 21.8% last year to 21,110, compared to 2016. Visitors from Rwanda increased to 12,193 in 2017 from 11,658 the previous year.
Structural change in west Africa: a tale of gain and loss (World Bank)
In a nutshell, the paper seeks to address the following main questions: What were the overriding trends underlying output, employment, and labor productivity in BBC? How do these trends compare with those of Asian economies (both when they were at BBC’s stages of economic development and during their respective growth spurts) and SSA comparators? What has been the pace and nature of structural change in BBC and what similarities and differences would stand out from comparisons with Asian and SSA benchmark countries? How much of productivity growth and overall economic growth in the three West African counties can be traced to structural change and within-sector productivity gains/losses? Has structural change been growth-enhancing (with labor moving from low- to high-productivity sectors) or growth-reducing? Has structural change been driven by static or dynamic reallocation effects? What are the relative contributions of demographic changes and employment rate to per capita growth?
G20 seeks greater collaboration with Africa (UNECA)
“We are here to listen and learn about what you consider as relevant for Africa and the African Union at the G20,” said Ambassador Pedro Villagra Delgado, Argentina’s Sherpa for the G20. ECA’s Chief Economist and Deputy Executive Secretary, Abdalla Hamdock, described G20’s effort to reach out to African countries as “a step in the right direction.” He highlighted trade and regional integration; illicit financial flows; climate change; technology; natural resources for development; macroeconomic policy; and migration as some of Africa’s priority areas where collaboration with the G20 will be helpful.
Beijing Declaration on cross-border e-commerce (WCO)
The First Global Cross-Border E-Commerce Conference, co-hosted by the WCO and the General Administration of China Customs has concluded in Beijing. Over 2,000 high-level policy and decision makers, as well as operational experts, from Customs administrations, other government agencies, e-commerce operators, international organizations, regional economic communities, civil society, academia and other stakeholders from over 125 countries deliberated on various aspects of cross-border e-commerce. The conference emphasized the need for an international standard, and supported the expeditious development of the WCO Framework of Standards on Cross-Border E-Commerce, the first guiding document on how the world Customs community and relevant border agencies can better regulate and provide enhanced facilitation to cross-border e-commerce. At the end of Conference, a Beijing Declaration, summarizing the discussions and outlining the future way forward, was adopted. [ICC update: E-commerce can make trade more inclusive, but greater coordination is needed]
Anabel Gonzalez: Brexit, the US, China and the future of global trade (WEF)
Some years ago, the distinguished economist Richard Baldwin said: “Regional trade liberalisation sweeps the globe like wildfire”. He was right. Preferential trade agreements (PTAs) increased from 20 in 1990 to close to 300 today, and have become a key feature of the international trade policy landscape. Every country in the world is party to at least one PTA, with Mongolia the last to join the pack when it signed a deal with Japan in 2016. But Brexit, the US withdrawal from the Trans-Pacific Partnership, and the renegotiation of the North American Free Trade Agreement have been a major shock for the world trade system. What will the outcome of this shock be? Are we in for a recess, retreat or revamp of regional trade integration?
Today’s Quick Links: ‘Every harvest of SA abalone could be its last’ UNIDO: Virtual reality training in Southern Africa DHL has grown tremendously in Africa Uganda: Monetary Policy Statement for February 2018 (pdf) IGAD holds Somalia national consultative workshop on free movement of persons OECD’s Economic Outlook for Southeast Asia, China and India: fostering growth through digitalisation |
Related News
China takes up lion’s share of debt spend
Beijing gobbled up nearly half of cash Nairobi spent on external debt repayment in three months ended September 2017, hinting at the cost of loans China has been injecting into the country’s infrastructure development.
The Treasury spent Sh12.72 billion on servicing loans from China in the July-September period its statistics show, accounting for 48.26 per cent of what the country used on servicing foreign debt.
The amount paid to Nairobi’s largest bilateral lender represented 70.69 per cent of the Sh17.99 billion total repayments to bilateral creditors in that period, Treasury data indicates.
Repayments to China were second to World Bank Group’s International Development Association (IDA), the country’s largest multilateral lender, which got Sh3.906 billion, while commercial banks were paid a cumulative Sh3.120 billion.
Kenya’s debt obligations to France amounted to Sh1.88 billion with Japan getting Sh1.28 billion in the review period, Treasury secretary Henry Rotich says in the latest quarterly Economic and Budgetary Review report for the period ended last September.
President Uhuru Kenyatta’s administration has largely contracted debt from China as well as international capital markets and multilateral lenders such as African Development Bank since 2014 to build much-needed roads, bridges, power plants and the standard gauge railway.
Total public debt hit nearly Sh4.59 trillion last November, Central Bank of Kenya statistics show, from Sh3.75 trillion a year earlier, Sh3.08 trillion in November 2015 and Sh2.39 trillion 12 months before.
The bulk of the debt accumulated in recent years has been foreign loans, which made up 51.4 per cent of the total debt last November at Sh2.36 trillion – Sh140 billion shy of the Sh2.5 trillion limit passed by the National Assembly in December 2014.
The Treasury has budgeted for Sh658.2 billion, or 45 per cent, of projected Sh1.44 trillion tax revenue for payment of domestic and external loans in the current financial year which ends in June. The space for Nairobi to borrow through World Bank’s IDA’s long-term, low-cost credit window for Least Developed Countries (LDC) has been diminishing since 2015.
“Kenya continues to record declining levels of concessional debt and build-up of commercial and semi-concessional borrowing since its elevation to a lower middle income economy status in September 2014,” the Central Bank of Kenya has reiterated in its latest Quarterly Economic review report for the July-September 2017 period.
Loans from IDA and International Fund for Agricultural Development (IFAD), which are usually long-term and concessional, stood at $5.13 billion (Sh517.05 billion) last September, 18.22 per cent growth over $4.34 billion (Sh437.43 billion) the year before.
There has been sharp rises, however, in loans procured from foreign commercial banks and China since the economic rebase in September 2014.
The debt that Kenya owed banks abroad was $6.86 billion (Sh691.42 billion) in September 2017, reflecting a 230.98 per cent jump over $2.07 trillion (Sh208.64 billion) three years ago when the IDA’s concessional credit door started shutting for Nairobi.
Debt contracted from Beijing climbed more than four folds to $4.733 billion (Sh477.04 billion) from $922.30 million (Sh92.96 billion) in the review period three years earlier.
Loans from China largely have concessional and commercial portions. The spike in debt contracted from China underlines the active participation of the East Asia’s powerhouse in Kenya’s infrastructure development-led growth strategy.
China’s influence on the country’s infrastructure development started in earnest with construction of the Thika Superhighway between January 2009 and November 2012 at a cost of nearly Sh32 billion during the last term of President Kibaki.
The deal by Exim Bank of China to fund 90 per cent of the $3.6 billion (Sh362.84 billion), 485-kilometre Mombasa-Nairobi standard gauge railway (SGR) – cash which were disbursed in phases – saw Beijing overtake Tokyo as Kenya largest bilateral lender.
There has been no looking back ever since with China’s State-run firms bagging the lion’s share of Kenya’s mega construction projects such roads and bridges.
The deals included the extension of SGR to border town of Malaba at a cost of $5.4 billion (Sh544.27 billion) under the Kenya SGR Developments Project signed in March 2016, which was topped up with $240 million (Sh24.19 billion) pact to electrify the Mombasa-Nairobi line.
Consultancy and audit firm Deloitte said in Africa Construction Trends Report 2017, released in Nairobi on February 6, that China was the “most prolific funder of large-scale” projects, building one in four projects in East Africa.
“I think there is also an element of a political statement behind it. They may be filling a vacuum from traditional western powers which may be withdrawing, and the Chinese have decided that East Africa is an important investment destination,” Deloitte Africa infrastructure and capital projects leader Jean-Pierre Labuschagn said.
Kenya’s continued reliance on foreign debt to finance her mega infrastructure projects to support economic growth has seen the Treasury procure a three-year $1.5 billion (Sh151.19 billion) standby facility from the IMF as a precaution against foreign exchange risk – the possibility of the shilling becoming adversely volatile.
The precautionary money, which was to be drawn in case there were elevated pressure on the shilling, expires in March and is likely to be renewed. The International Monetary Fund extended the cash on, among others, a condition that the Treasury institutes spending cuts which would result in reduced borrowing to fill the hole in the budget.
“We believe that the fiscal deficit is too high and, therefore, also debt accumulation has been too fast,” IMF resident representative Jan Mikkelsen said on February 7.
“We are happy that the government in the Budget Policy Statement (BPS) do indeed target a lower deficit in the coming years. And now we just need to discuss the specific measures to get this.”
A section of economists have, however, suggested that the State should cut its heavy investments in infrastructure development in favour of agribusiness and manufacturing.
This, Stanbic Bank economist for East Africa Jibran Qureishi argued on January 18, will ensure infrastructure capacity created over the years is put to efficient use.
“We are not saying that infrastructure is bad. What I mean by this is that we have to form an industrial policy that will seek to improve the productivity of labour in sectors such as agriculture and manufacturing,” Mr Qureishi said.
Related News
Department of Trade and Industry’s Doing Business in Africa Guide
The Department of Trade and Industry (the dti) has introduced a new guide on doing business in Africa. South African’s trade with the region has grown significantly over the past two decades to overtake both Europe and Asia as our more important trading bloc. Manufactured exports to the region also represent more than 50% of total exports, reflecting high value-added activities.
The pace of business should pick up further with the adoption of the Southern African Development Community (SADC) Industrialisation Action Plan, which emphasises the structural transformation of the region based on the pillars of industrialisation, regional integration and enabling infrastructure. The emphasis on developing value chains offers a focus on key opportunities in the mining, agro-processing and pharmaceutical sectors.
An important shift in thinking will be to encourage deeper relationships between South African companies and partners in our neighbouring countries. In that regard, the dti has created an important entity, Trade Invest Africa (TIA), which focuses on supporting and creating connections in the region. This will provide support to traders and investors to increase market access and facilitate higher levels of productive investment in the region.
This booklet aims to provide companies with useful contacts to be able to access the complete range of services available from the South African Government, its partners and key agencies.
Introduction
The booklet Doing Business in Africa is a publication of the dti, developed in consultation with Government and the private sector to facilitate South African business across the continent by increasing awareness of the Government’s offerings.
There is a general perception that South African companies go it alone, without a “team SA” approach. This booklet aims to provide the connections that will allow a coherent approach between private sector players and the South African Government.
South Africa Highlights
-
ranked the largest economy in Africa and 33rd largest in the world (World Bank, 2016)
-
ranked 75th in the world in the 2014 Index of Economic Freedom
-
ranked 53 out of 148 countries in the World Economic Forum’s (WEF) Global Competitiveness Report 2013/14
-
increased its tax revenue from R100 billion in 1994 to R1 trillion in 2014
-
is the second largest exporter of fruit in the world (The Economist)
-
ranks first in platinum, second in palladium, third in gold, sixth in coal and ninth in wool outputs (The Economist)
-
ranked 24 out of 192 countries in the Largest Gold Reserves Index 2013 (The Economist)
-
is the economic powerhouse of the African continent and was named fDi Magazine’s African Country of the Future 2013/14
-
ranked 10 out of 189 countries for good practice in protecting investors in business (World Bank Doing Business Report 2014)
Background and Purpose
Since 1994, Africa has risen dramatically in importance as a trading bloc to South Africa, overtaking Europe in 2013 and on par with Asia since 2014. This has gone hand in glove with the required integration agenda, both at an economic community level via SADC, and the tripartite and continental free trade agendas. South Africa’s exports to the region comprise a high proportion of manufactured goods and value-added services, with a trade balance heavily in the country’s favour, while its imports are largely commodity-based (oil and minerals).
A new priority is to encourage South African companies to establish more substantial positions in their key markets through joint ventures and investments that contribute to expanding the productive base of our key trading partners and ensuring a more sustainable growth path. This aligns closely with the objectives of the continent’s industrialisation agenda, which has taken centre stage.
The structural transformation of Africa’s economies is seen as resting on regional integration and the building of critical infrastructure to provide the means and economies of scale to facilitate industrialisation. Regional integration includes implementation of the SADC Free Trade Area to cover all member states; a gradual phase-down and abolition of rules of origin by 2025; liberalisation of exchange controls to allow free movement of capital within SADC by 2030; and ratification of the SADC Protocol on Trade in Services for implementation by 2020.
The Tripartite Free Trade Area (TFTA) is aimed at fostering integration in the three regional economic communities (RECs), namely the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and SADC.
The Continental Free Trade Area negotiations are well under way and focused on drawing together the continent of more than one billion inhabitants into a single free-trade area.
Africa’s transformation is to be centred on commodity-based industrialisation through agro-industries, minerals and pharmaceuticals, which will encourage the creation of regional value chains and participation in global processes. The African Union (AU), United Nations Industrial Development Organisation (UNIDO) and United Nations Economic Commission for Africa (UNECA) continue to address the industrialisation challenges of the continent, particularly the need to shift from a dominance of commodities/extractives goods towards higher value-added and more complex goods and services.
South Africa’s position at the southernmost tip of the continent provides access to the other 14 countries in SADC with a combined market of more than 250-million people, and can be considered the economic powerhouse of the continent. The fast-growing emerging economies and work on the continental and tripartite free trade areas will provide further opportunities for South African businesses.
South Africa’s Position in Africa
Africa is on track to establishing a continental free trade area and it is in South Africa’s interest to ensure that it remains a major player within this expanding market. SADC accounts for more than 86% of South Africa’s exports to Africa.
African countries have a concentration of unprocessed (raw material) commodities that are exported, resulting in low levels of intra-African trade of approximately 12%. It is for this reason that the focus is on adding value to exports and diversifying products to enhance both regional and global integration.
In terms of manufactured products, there is a low market share in agro-based manufactured products, with significant players such as Egypt, Kenya and Nigeria competing for the African market. South Africa is in an unique position to benefit from a larger and integrated African community.
Summary of main trade agreements between South African and the rest of Africa
South Africa, via its established agreements led by the dti, utilises strong government-to-government relations and mechanisms to advance a developmental agenda in Africa that focuses on:
-
identifying and establishing joint investment projects in partner countries;
-
promoting two-way trade;
-
coordinating South African technical cooperation and assistance to support policy and institutional development in partner countries;
-
promoting cross-border infrastructure development, notably on the basis of the SDI methodology;
-
promoting regional integration through the strengthening and consolidation of the Southern African Customs Union (SACU) and SADC free trade agreement; and
-
Negotiating agreements on investment protection and economic cooperation.
Of greater importance, will be the accelerated conclusion of enabling agreements under negotiation, and the implementation measures of those that have been ratified.
Related News
G20 seeks greater collaboration with Africa
“We are here to listen and learn about what you consider as relevant for Africa and the African Union at the G20,” said Ambassador Pedro Villagra Delgado, Argentina’s Sherpa for the G20.
He was speaking during a meeting with representatives of the United Nations Economic Commission for Africa (ECA), the United Nations Office to the African Union (UNOAU), and the United Nations Resident Coordinator (UNRCo) for Ethiopia on Monday, 12 February 2018 in Addis Ababa.
G20 (Group of Twenty) is a forum that seeks to strengthen the global economy, reform international financial institutions, improve financial regulation and implement economic reforms that are needed in each member economy. It is made up of 19 countries plus the European Union. South Africa is the only African member-country of the G20.
Mr. Delgado said, ”From the moment Argentina took over the G20 presidency, we wanted to reach out to all, including non-members of the G20.” He noted that besides continuing with the agendas of previous G20 presidencies, Argentina will lay emphasis on areas such as gender parity; education and digital technology; food security; investment for infrastructure; and fighting corruption, among others.
UNOAU Chief, Haile Menkerios, commended Mr. Delgado for seeking the views of African countries, adding “I salute G20’s commitment to Africa’s Agenda 2063.” He urged the G20 to encourage Africa’s ownership of Agendas 2030 and 2063 and to “remain conscious of the partnership between the United Nations and the African Union,” which aims to ensure peace and security on the continent.
ECA’s Chief Economist and Deputy Executive Secretary, Abdalla Hamdock, described G20’s effort to reach out to African countries as “a step in the right direction.” He highlighted trade and regional integration; Illicit Financial Flows (IFF); climate change; technology; natural resources for development; macroeconomic policy; and migration as some of Africa’s priority areas where collaboration with the G20 will be helpful.
For her part, the UNRCo, Ahunna Eziakonwa-Onochie, deplored the fact that Africans reap much less for their hard work, compared to people in other parts of the world. She asked, “How can we ensure that the hard work of Africans yields proportionate result?”
The Resident Coordinator expressed hope that collaboration with the G20 can help change the narrative about Africa.
“The story about Africa needs to change because Africans are very hard-working people,” said Ms. Eziakonwa-Onochie. “They are not these people who just sit and wait for aid.”
She added that Africa needs to be “acknowledged and supported” for its global leadership role in hosting and supporting refugees. Countries like Ethiopia and Uganda, said Ms. Eziakonwa-Onochie, are amongst the top refugee-hosting nations.
G20’s South Africa Desk Director, Cedrick Crowley, applauded the fact that “we are having this meeting in Addis Ababa, the seat of the African Union where African voices can easily be heard.” He expressed satisfaction with Argentina’s G20 priorities, adding that fighting Illicit Financial Flows and tuberculosis (TB) are some of the areas where South Africa and Africa as a whole would like to mobilize international support for.
At the end of the meeting, Mr. Delgado said he was pleased with the input from ECA, UNOAU and the UNRCo, stating “This is exactly why we needed to come here and I hope Argentina can count on you during its G20 presidency.”
The G20 delegation also met with officials of the African Union.
Related News
First Global Cross-Border E-Commerce Conference concludes with the Beijing Declaration
The First Global Cross-Border E-Commerce Conference, co-hosted by the World Customs Organization and the General Administration of China Customs (GACC), concluded in Beijing, China on 10 February 2018.
Over 2,000 high-level policy and decision makers, as well as operational experts, from Customs administrations, other government agencies, e-commerce operators, international organizations, regional economic communities, civil society, academia and other stakeholders from over 125 countries deliberated on various aspects of cross-border e-commerce with a view to adopting new strategies and approaches that should be beneficial to all, and in particular to micro, small and medium enterprises and consumers.
Under the overall theme, “An Innovative, Inclusive, Strategic and Collaborative Approach to Sustainable Cross-Border E-Commerce”, participants discussed trends in the development of cross-border e-commerce and explored innovative solutions and regulatory procedures over the course of the two-day event.
Over 100 Ministers, Vice-Ministers, Directors General/Deputy Directors General of Customs administrations, Tax authorities and relevant government agencies, as well as CEOs of e-commerce operators, postal operators, express service providers and other business entities joined in this first-ever high-level dialogue and shared their ongoing initiatives and strategic foresight with respect to collectively addressing current and emerging challenges in cross-border e-commerce.
The Conference emphasized the need for an international standard, and supported the expeditious development of the WCO Framework of Standards on Cross-Border E-Commerce, the first guiding document on how the world Customs community and relevant border agencies can better regulate and provide enhanced facilitation to cross-border e-commerce.
In addition, through a range of breakout sessions, the Conference provided valuable suggestions and recommendations with regard to facilitation, control, safety and security, revenue collection, and measurement and analysis.
It called for setting out a standardized and harmonized regulatory framework for cross-border e-commerce, establishing mechanisms for the exchange of advance electronic data with appropriate data privacy and security safeguards, enhancing connectivity to bridge the digital divide, building capacities and infrastructures, and promoting inclusivity.
At the end of Conference, a Beijing Declaration, summarizing the discussions and outlining the future way forward, was adopted. It sets out a vision for boosting sound, secure, balanced and sustainable development of cross-border e-commerce.
“The Conference has helped enhance consensus among all relevant parties on upgrading regulation principles, promoting trade security and facilitation and achieving balanced development of global cross-border e-commerce,” said GACC Minister Mr. YU Guangzhou.
At the closing ceremony, Dr. Kunio Mikuriya, WCO Secretary General, noted the significance of the Conference and its recommendations, stating that “the WCO is ready to deliver inclusive global standards and provide all necessary support to meet the expectations of all stakeholders towards further supporting cross-border e-commerce in a harmonized and efficient manner.”
Given the acknowledged value of this forum, the Global Cross-border E-Commerce Conference is expected to be held every two years in different regions.
Related News
Brexit, the US, China and the future of global trade
Some years ago, the distinguished economist Richard Baldwin said: “Regional trade liberalisation sweeps the globe like wildfire”. He was right. Preferential trade agreements (PTAs) increased from 20 in 1990 to close to 300 today, and have become a key feature of the international trade policy landscape.
Every country in the world is party to at least one PTA, with Mongolia the last to join the pack when it signed a deal with Japan in 2016. But Brexit, the US withdrawal from the Trans-Pacific Partnership (TPP), and the renegotiation of the North American Free Trade Agreement (NAFTA) have been a major shock for the world trade system.
What will the outcome of this shock be? Are we in for a recess, retreat or revamp of regional trade integration? Much depends on how other key players will respond to this shock.
Though PTAs tend to be a tough political sell, governments pursue them because they increase productivity and benefit consumers; promote economic policy reform; underpin supply chains; and have other positive implications in terms of regional peace and security. Also, though estimates of the trade impact of PTAs vary, economists agree that they boost trade among members and hence, have positive effects on growth.
Back in 2016, negotiations on the TPP, encompassing the US, Japan and 10 other countries in the Americas and the Asia Pacific region, and on the Trade and Investment Trans-Atlantic Partnership (TTIP) between the US and the European Union, dominated the headlines.
Expectations were high, as these agreements would cover a significant part of world trade. There were also concerns. A report from the World Economic Forum Global Agenda Council on Trade & Foreign Direct Investment addressed them early on.
How would these mega-regional agreements shape the global trading system? Would they be game changers or costly distractions? How would they impact non-members and how would they react?
Fast forward to 2018 and the situation is very different. There has been a shock to the system, in the form of the repositioning of the US and the UK. The US has withdrawn from TPP, suspended TTIP negotiations, launched the renegotiation of NAFTA – with threats to withdraw – and initiated the revision of some specific commitments of the Korea-US PTA.
The UK post-Brexit repositioning involves undoing a very deep trade integration scheme with the EU, and agreeing on new rules of engagement for a future economic partnership, while replicating or renegotiating some 40-odd PTAs that came with EU membership – not a small task.
How will other countries reposition their policies to respond to the current shocks? Is the world in for a recess, a risk of retreat, or a revamping of PTAs? These are the questions of today – very different from those of barely a year and a half ago.
Among the challenges, there is some interesting news. The EU is leading a broad expansion and modernisation of its already extensive PTA network with recent agreements with Vietnam, Canada, Japan and maybe soon, Argentina, Brazil, Paraguay and Uruguay (Mercosur), among the most prominent. Under the strategy that the best defence is a good offence, the EU is bringing greater predictability to global trade.
In Asia, countries are also moving forward. Japan has taken the leadership role in what seemed the unlikely resurrection of TPP after the US withdrawal. With just the suspension of a few provisions, the TPP, now renamed the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), will be signed next March by all 12 of the original members minus the US, delivering de facto 18 new PTAs between CPTPP members.
At the same time, the EU-Japan PTA – also to be signed in March – is a very significant economic cooperation commitment between these two leaders of world trade. Other negotiations are on the way, including the Regional Cooperation Economic Partnership (RCEP), the Japan-China/Korea PTA, and others.
China’s Belt and Road Initiative (BRI) is beyond and above PTAs. It is the most ambitious initiative to improve regional economic integration and connectivity on a transcontinental scale: involving “hard” infrastructure along six overland corridors, and the 21st Century Maritime Silk Road; “soft” infrastructure, such as the financial system, to enhance efficiency and facilitate economic flows; and policy reforms and institution-building to promote trade and foreign direct investment among the 70 or so BRI countries. There is talk now of expanding it to Latin America or to shipping routes across the Arctic, dubbed the “Polar Silk Road”. RCEP, the Japan-China-Korea PTA and other agreements are also moving forward.
Other regions are also actively engaged. African countries will be signing the Continental Free Trade Agreement (CFTA) next March, building on the regional economic communities to liberalise trade.
Asia continues to upgrade and deepen existing PTAs and engage in new agreements with non-Asian partners; while in Latin America, there is great excitement around the potential Mercosur-EU agreement and the continued strengthening of the Pacific Alliance, encompassing Colombia, Chile, Mexico and Peru, who are now negotiating “associate membership” with Australia, Canada, New Zealand and Singapore.
In light of the above, the world is not in for a full retreat on PTAs. While some negotiations have been suspended, important trade agreements are being undone, and uncertainty underpins US involvement in the negotiation of trade agreements; the EU, Japan, China and others have picked up the baton and are leading the world to greater trade cooperation.
This is a sign of the new times. Their leadership is welcome. It is doing a lot of good in itself, but it is also instrumental in keeping the door open for when others may be ready to come back. In addition, the cost of being left out is greater in a cooperative rather than a divided world, so they are increasing the likelihood that others may be willing to re-engage tomorrow.
Anabel Gonzalez is a Member of the World Economic Forum's Future Council on Trade & Investment and former Trade Minister of Costa Rica. The views expressed in this article are those of the author alone and not the World Economic Forum.
Related News
tralac’s Daily News Selection
Starting today, in Tunis: AfDB workshop on staple crop processing zones in Africa
Building on the analyses and findings of a Bank-led study on a sample of 10 African countries, the seminar aims at drawing lessons and good practices from various African experiences in designing and operating staple crop processing zones. In particular, the seminar will help in the development of national master plans for the agro-industrial sector. It should facilitate the conclusion of South-South cooperation agreements based on knowledge sharing, export and adaptation of good practices. [Concept note, pdf]
United States International Trade Commission: post-hearing submissions on recent developments on US trade and investment with Sub-Saharan Africa. African submissions: South Africa’s Department of Trade and Industry, South African poultry producers, ESQUAL Mauritius. American submissions: American Sugar Alliance, Robert Kirk (IDG LLC), US Pork Producers, US Footwear Importers, US Wheat Producers (1), (2)
Featured tweets, @Trade_Kenya: For more than two decades, EAC States have wrestled with NTB’s, reducing them from 39 to 6. The EAC Secretariat has now been tasked to find out, in quantitative terms, the impact of NTB’s on trade in the EAC block. The Extra-Ordinary Council on Trade, Industry, Finance and Investment wants EAC Secretariat to dig out the extent which national policy actions, local content requirements and domestic taxes distort trade in the EAC. [Latest EAC Gazette]
Kenya: Manufacturing priority agenda 2018 pdf, (KAM)
Extracts: (i) 3.6 Contribution to exports. An estimated 18% of Kenyan manufactured goods are exported of which 6.1% exported to the EAC and 12% to the rest of world. Kenya’s export products are overwhelmingly primary in nature with tea alone constituting about 25% of total value of exports (Table 3.1). Other than being primary in nature, Kenyan exports are also low in technology component. Some of the manufactured exports include food products, on-metallic mineral products, chemical and chemical products, metals, pharmaceutical and botanical products, textiles and apparels. According to KNBS 2017 data, food and beverage, the largest manufacturing sub-sector, dominated the category of export accounting for 45.2% of total domestic exports in 2016 while industrial supplies (non-food) accounted for 27%. (ii) 3.7 Export markets. Kenya’s export markets are relatively concentrated and in need of diversification. Ten countries accounted for 61% exports in 2016. Five out of the top ten markets; and seven out of top twenty markets in 2016 are in Africa (Figure 3.7). Over 70% of Kenya’s total exports are destined to 12 countries globally. Kenya’s exports share in the global market remains dismal at 0.03% of total global trade. Kenya has been experiencing declines and market losses in key traditional markets.
South Africa: Large and medium manufacturing firms in eThekwini – constraints to growth and employment generation (PSPPD)
Extract (pdf): The export orientation of firms is important for many reasons but includes the fact that firms report both, a lack of insufficient demand and the need to grow exports as important element of labour expansion. CEOs/MDs are consistent on this and when specifically asked what they would specifically need to increase their workforce by 10%, sustained increase in demand is frequently listed: 84% of firms reported on it. Given moreover, that as shown in Figure 3, 58% of establishments report needing more export capacity in order to grow their workforce, the demand would need to emanate not only from the domestic but also from the export markets. The importance of demand for firms is not new but exports now play a stronger role than before for employment growth. Generally, and as is expected from the literature, the firms that are exporting are the larger firms (around twice as large on average than non-exporters). Focusing on export data however revealed that a relatively small share of production and sales is exported – 17% and 20% respectively for firms that provided the relevant information. Moreover, most exporting firms export to SADC countries. Besides that region, firms only have a small share of their exports destined to other markets. Table 2 illustrates this. There is clear scope to expand exports outside the SADC region. [Synthesis report prepared by Myriam Velia, Glen Robbins]
Shanta Devarajan: Wrong criticisms of Doing Business (World Bank)
While I welcome criticism and comments on the Doing Business report - or any other data and research product of the World Bank, for that matter - I find Justin Sandefur’s and Divyanshi Wadhwa’s recent blog posts on DB in Chile and India neither enlightening nor useful.
Triggering the trade transition: the G20’s role in reconciling rules for trade and climate change (ICTSD)
There is an inescapable nexus between trade and climate change. Trade activities affect the climate. Climate measures affect trade. Economically, environmentally, and legally under international law, the two are intertwined. Yet this essential realisation is not yet reflected in the agendas of either the WTO or the United Nations Framework Convention on Climate Change. Extract (pdf): During the presidency of Argentina, the G20 should initiate actions to prevent this legal collision between trade and climate change and, moreover, to move the WTO and the UNFCCC towards more affirmative actions to reimagine trade rules to support increased trade while also furthering the fight against climate change. These G20 actions should point towards a WTO waiver to help facilitate and further national and international climate actions. Topics of the needed reimagining of WTO rules through the adoption of a climate waiver and through other actions could include border tax adjustments, carbon markets and climate clubs, environmental goods and services, disciplines on fossil fuel subsides, renewable energy and other green subsidies, and a sustainable energy trade agreement. [The author: James Bacchus]
Catherine Grant Makokera, Faith Tigere: Sustainable development in Africa and the role of the G-20 (Tutwa)
Storm clouds in Geneva: The building crisis over the WTO dispute settlement system
Strengthening civil society in developing countries? Development aid and Norwegian organisations (CMI)
More than 250 Norwegian organisations have received support from Norad’s civil society grant in the 2006–2016 evaluation period. The evaluation assessed Norwegian civil society support to Ethiopia, Nepal and Uganda – three of the main recipients of civil society support. More than 60 Norwegian organisations have received funding from this grant for support to local organisations in these three countries. In addition, there is significant financial support from other funding sources in the Norwegian aid budget. A significant share of Norwegian aid to these three countries is channelled through Norwegian and other NGOs – 47% in Ethiopia, 30% in Nepal and 33% in the case of Uganda. The purpose of the evaluation is to provide Norad and the Norwegian Ministry of Foreign Affairs with information that can be used to improve future efforts to strengthening civil society in developing countries. The objectives are to assess and document effects of Norwegian aid through Norwegian civil society organisations and their local partners. This includes the effects of using Norwegian civil society organisations as intermediaries. The evaluation covered the 2006-2016 period. Data was collected from interviews with nearly 500 persons, a survey among staff of Norwegian organisations and project documents from selected partnerships together with an extensive review of scholarly studies and evaluation reports. [The author: Elling N. Tjønneland]
Norwegian aid to food security, nutrition and agriculture (CMI)
The report discusses constraints on agricultural growth, both external constraints, such as roads and other infrastructure, institutional constraints that may reflect market failures, and more immediate constraints such as lack of modern seeds, fertilizers and irrigation. At all levels underlying market failures are identified, and relevant policy interventions are discussed. [The author: Magnus Hatlebakk]
The International Finance Corporation’s approach to engaging clients for increased development impact (World Bank)
This IEG evaluation assesses how the IFC has implemented its strategic approach to client engagement since the early 2000s, and its effects on IFC’s clients and the development impact of its operations.
Patrick Bond: New evidence of Africa’s systematic looting, from an increasingly schizophrenic World Bank (CADTM)
Britain to add Naira to list of accepted trade currencies (ThisDay)
Britain’s Export Finance Agency will add the Naira to its list of “pre-approved currencies”, allowing it to provide financing for transactions with Nigerian businesses denominated in the local currency. The Naira will become one of three West African currencies that UK Export Finance has pre-approved for its programme of funding transactions that promote trade with Britain, it said.
Nigeria: N550bn credit available to support SMEs (Premium Times)
The Nigerian Export-Import Bank, NEXIM, on Tuesday asked export-oriented small and medium entrepreneurs in the Southeast and Delta States to take advantage of its credit facilities to expand their potentials. The bank said the SMEs in the region could access the N500bn Export Stimulation Facility, and the N50bn Export Development Fund it manages to boost their businesses, create more jobs, and contribute to the country’s foreign exchange revenue earnings. The Federal Government made the credit facilities available to NEXIM Bank last December for lending to SMEs at interest rate not exceeding 9%. The funds were designed to redress the declining export credit to SMEs and reposition the non-oil sector to boost its contribution to the country’s revenue generation and economic development.
South Africa: Cape merger to create agriculture powerhouse (Business Day)
A new agribusiness powerhouse is heading for listing on the JSE after proposals by Western Cape-based Overberg Agri and Acorn Agri to merge. Overberg chairman Douw de Kock said the proposed merger would drive growth by creating synergy between the assets and business models of both companies. “The combined business will hold an attractive blend of local and export-orientated busin-esses with exposure to export earnings, which hedges shareholders against rand devaluation and local economic and political challenges,” he said.
Western Cape exports of cherries show tremendous potential (GCIS)
The Western Cape Government has to date invested R6.916m in the development of alternative crops such as berries, cherries, fynbos, pomegranates, and honeybush. These are smaller, export-oriented crops with high market-value, and greater potential for job creation. Total exports of the fruit in 2012 were valued at R2.6m, and reached R28.18min 2016. South Africa’s export market share, while still small, has quadrupled from 0.019% in 2012 to 0.080% in 2016. The primary market for locally produced cherries is the United Kingdom, with Hong Kong, the Netherlands and Malaysia forming the remainder of the top four export markets. [UK’s Department for International Trade and Wesgro sign new cooperation agreement]
Kenya: Governors oppose Mombasa’s bid to charge tax at tea auction (The Star)
Governors from tea growing areas yesterday termed the move to tax tea at the Mombasa auction unconstitutional and an extra burden. Mombasa county issued a circular on January 12 reintroducing Sh32 per packet of tea cess, introduced for the first time in 2014 but was suspended. This was about about Sh12,000 per lorry. Kericho Governor Paul Chepkwony said tea farmers are already suffering from rising cost of production, uncertainties of climate change and disharmonised collection of cess. “The introduction of tea cess in the Mombasa tea auction centre at the rate of Sh32 per pack is unlawful,” he said. “Cess can only be from the point of production. If you do not produce the goods, you have no right to tax them,” he said, adding that if all counties were to tax all the goods on transit, it would be a big burden to Kenyans.
SADC looks to tourism to boost regional economic growth (Southern Times)
SADC member states have agreed to fast-track the review of the Protocol on Tourism Development as part of efforts to boost economic growth in the region. A joint meeting of SADC ministers responsible for Environment and Natural Resources, Fisheries and Aquaculture and Tourism held in South Africa recently emphasised the protocol’s importance to the economies of member states and its interconnectedness with other sectors. Only the DRC, Malawi and Seychelles voted against the review being brought forward.
Today’s Quick Links: IMF to review Kenya’s debt, deficit reduction measures Tanzania: Cotton production to quadruple this season Billions needed to revive Kenya’s coffee industry Rwanda: Horticulture exporters eye new markets in Europe Jacob Zuma, South Africa’s $50bn burden? China’s cobalt conundrum in DR Congo African Forest Landscape Restoration Initiative: NEPAD resource |
Related News
Trade growth to sustain momentum in first quarter of 2018, latest trade indicator suggests
The WTO’s latest World Trade Outlook Indicator (WTOI), released on 12 February, suggests that the trade recovery of 2017 should continue, with solid trade volume growth in the first quarter of 2018.
The WTOI’s current value of 102.3 is little changed from the 102.2 recorded last November, indicating steady merchandise trade volume growth. Strong results for air freight, container shipping and export orders in particular suggest that, while the trade recovery may moderate in due course, it will likely continue in the coming months and remain above trend.
Component indices of the WTOI are mostly favourable. Container port throughput (104.3) and air freight (103.2) are firmly above trend, indicating strong current shipments of goods. Meanwhile, export orders (102.8) have reached their highest level since 2011, pointing to sustained recovery. Weaker results are observed for automotive products (101.0), agricultural raw materials (100.8) and electronic components (94.1), which could indicate a weakening of consumer sentiment.
Overall, these results are somewhat stronger than the WTO’s most recent trade forecast issued on 21 September 2017, which forecast merchandise trade volume growth of 3.6% for 2017 and 3.2% in 2018. The next WTO trade forecast update is anticipated in early April.
Designed to provide “real time” information on the trajectory of world trade relative to recent trends, the WTOI is not intended as a short-term forecast, although it does provide an indication of trade growth in the near future. Its main contribution is to identify turning points and gauge momentum in global trade growth. As such, it complements trade statistics and forecasts from the WTO and other organizations.
Readings of 100 indicate growth in line with medium-term trends; readings greater than 100 suggest above trend growth, while those below 100 indicate the reverse. The direction of change reflects momentum compared with the previous month. The WTOI has recorded readings of 102 or higher since February 2017, which coincided with a strengthening of global trade flows.
Resilience in Africa: “Providing solutions is an act of justice and an indicator of global progress”
The second edition of the Africa Resilience Forum organized by the African Development Bank opened on Thursday, February 8, 2018 in Abidjan, Côte d’Ivoire. More than 300 people were expected to attend the opening of the Forum, held on the theme “Building Resilience at the Bottom of the Pyramid.”
The Forum, an effective platform for the exchange of experiences and knowledge on fragility and resilience, brings together development partners and institutional actors in the sector, as well as about 15 start-ups that will present innovative and concrete solutions for strengthening people’s resilience.
“The 2018 Resilience Forum also introduces an additional element, the ‘Market Place’. We have invited providers of new and innovative ways for the delivery of energy and water. The exhibition of these technologies provide an opportunity for participants to interact and engage with the providers and to appreciate the possibilities that innovations bring to the neediest communities,” said the African Development Bank’s Senior Vice-President, Charles Boamah, during the opening session.
The Bank’s Vice-President, Regional Development, Integration and Business Delivery, Khaled Sherif, called for participants to go beyond mere discussions and explore concrete actions that can be taken, especially on behalf of the most vulnerable populations.
“We must,” he urged, “provide solutions that are adapted to the needs of communities at the bottom of the pyramid, not just because it is an act of justice, but also because it is an indicator of global progress for everyone, including those at the top of the pyramid. To achieve this, we must mobilize the necessary resources wherever possible.”
The African Development Bank is committed to strengthening resilience on the continent. Of the 36 countries considered fragile around the world, 21 are in Africa. To combat pockets of fragility, the Bank launched initiatives in January 2017 to transform 10,000 fragile communities in Africa in 1,000 days. This is in line with the Bank’s five strategic priorities, known as the High 5s.
Welcome remarks by Khaled Sherif at the Second Africa Resilience Forum
This year’s Forum is held under the theme Building Resilience at the Bottom of the Pyramid. The theme was drawn from the recommendations made in last year’s event.
Those of you who were here in January 2017 when the African Development Bank launched this Forum will recall that we focused on the theme Building a Partnership for Resilience.
Allow me to highlight the recommendations from the inaugural Forum, which were:
-
Forging stronger partnerships as the foundation for a more effective delivery in insecure environments through leveraging the various partners’ comparative advantages;
-
Paying closer attention to the increasingly complex fragility challenges in the context of the security-humanitarian-development nexus in view of the recent large scale forced human displacements;
-
Scaling up delivery of the High 5s and planning for sequenced engagement in fragile situations to ensure greater impact of AfDB’s activities in particular countries or regions; and
-
Collaboratively responding to the needs of those at the bottom of the poverty pyramid by delivering quick community level interventions in fragile situations to ensure enhanced inclusiveness while also giving hope to the most vulnerable populations.
So let me now turn to the purpose and objectives of this Forum. The primary purpose of this event is to share knowledge and to think outside the box for innovative solutions for reaching the people at the bottom of the pyramid. Our endeavor is to leverage this knowledge and technological innovation for the betterment of the lives of the people we serve.
Given the theme for this Forum that focuses on delivering basic services to vulnerable communities, our objective is to contribute to the Sustainable Development Goals, with particular attention on ensuring that no one is left behind.
We recognize that governments play a critical role in delivering services to their citizens and ensuring its sustainability will require enhancing fiscal space. Currently, many countries on the continent are facing challenges in that regard, which is a hindrance to what governments could do. In that regard, there is going to be a special lecture delivered on improved domestic resources mobilization. In addition, we will interrogate the role of technology in enhancing domestic resource mobilization in Africa, with particular attention on transition countries.
In responding to the needs of these vulnerable communities there is need for speed, ensuring affordability of the services and doing so in a sustainable manner. Some of the immediate questions that we will need to address are the following:
-
What opportunities exist for reaching the isolated, forgotten and vulnerable communities in Africa?
-
How can we better deliver community-level interventions?
-
Are these interventions sustainable financially, institutionally and organizationally?
As you will notice from our Agenda, the Forum is organized such that all parallel sessions follow initial discussions during plenary sessions. This is meant to allow for deeper and wider discussions that would ensure that we draw useful conclusions.
Finally, I want to acknowledge the diversity of the participants in this Forum who come from different backgrounds and professions. We should exploit this diversity to draw on the experiences and knowledge that it presents.
Thank you.
Related News
Seminar on staple crop processing zones in Africa: From vision to action
The African Development Bank organised a seminar on “Enhancing Knowledge on the Challenges and Opportunities of Developing and Implementing Staple Crop Processing Zones in Africa”, from 12-14 February 2018 in Tunis.
Building on the analyses and findings of a Bank-led study on a sample of 10 African countries, the seminar aims at drawing lessons and good practices from various African experiences in designing and operating staple crop processing zones (SCPZ). More broadly, it will explore how SCPZs can contribute to achieving socio-economic development goals in Africa.
The analyses, conclusions and recommendations of the study will guide discussions among public sector decision makers on actions to remove barriers and promote agribusiness development on the continent.
Agriculture in Africa provides employment to 61% of the population but only accounts for 25% of its GDP. This gap is mainly due to lack of modernization of the sector, which results in low productivity and reduce the avoidable impoverishment of millions of people. For example, although the continent is home to over 65% of the world’s arable land, it spends nearly US$35 billion annually on food imports.
In addition, Sub-Saharan countries suffer from huge post-harvest losses of up to 35-50% of total production for perishable agricultural products such as fruits and vegetables. The lack of processing of agricultural products is a heavy burden on Africa. This is the case in Côte d’Ivoire, the world’s largest producer of cocoa (40% of world production), which produces little chocolate. Similarly, Tunisia produces 180,000 tons of olive oil annually, but less than 10% of the production is packaged in the country, with the rest being exported in bulk.
Developing agro-industry, one of the priorities of the African Development Bank’s “Feed Africa” strategy, can provide answers to many development challenges facing the continent, particularly in terms of job creation, nutrition, rural development, market access and competitiveness.
The seminar will bring together about 100 representatives from Agriculture and Industry Ministries, particularly from Burkina Faso, Cameroon, Côte d’Ivoire, Guinea, Mali, Mozambique, Tanzania and Togo.
A visit to the Bizerte Technopole is scheduled on the second day of the conference.
Background
With the approval of its pdf Feed Africa Strategy (7.93 MB) , the Bank has saddled itself with the onerous task of transforming the African agriculture. The transformation of the African agriculture sector is long overdue and it is the only way to unlock Africa’s enormous potential. The agricultural sector in Africa perfectly illustrates the importance of public policies in macroeconomic modelling and sustainable development. It unquestionably represents the sector that employs the most Africans, what Arthur Lewis referred to “disguised unemployment”.
Agriculture in Africa provides 61% of jobs but accounts for only 25% of GDP, a gap explained mainly by lack of modernization of the sector (little or no mechanization of the sector, poor utilization of inputs, lack of value addition etc.) which culminates into low productivity, consequently leading to impoverishment of the people that is avoidable. For example, despite the fact that over 65% of the world’s arable land is found in Africa, the continent annually spends nearly USD 35 billion in food imports to counter food insecurity.
This situation illustrates a context of a planned failure when one considers that the low level of efforts made for the development of the sector constitutes a missed opportunity for meeting the various development challenges targeted in the UN’s Sustainable Development Goals (SDGs) and the Bank’s High-5s, to name just a few. With the youngest population in the world and an unemployment rate exceeding 10%, Africa has no choice but to undertake the necessary transformation of its agricultural base, to reverse the current economic trends of the continent. This means that the agricultural sector must become the first investment area in the continent, hence the need for clear policies to attract investment from both the public and private sectors, including foreign investors.
The Bank’s Sector Strategy – Feeding Africa – has largely demonstrated the added value of investing on all fronts in agriculture. It estimates the need for funding at nearly US$400 billion for the next 10 years, and expects that a sustained investment of US$32 billion to US$40 billion per year would generate an estimated US$85 billion in revenue from 2025, an estimate that would continue to grow if one considers the incremental effect of knowledge gains. In practice, investment rates fall well below these estimates (about US$7 billion per year instead of 25 to 33), making resource mobilization crucial for successful transformation.
One of the key areas targeted by the Bank’s strategy is the development of agribusiness, which revitalization would provide answers to the many development challenges the continent is facing, among which are issues of job creation, nutrition, rural development, market access and competitiveness, etc. Unfortunately, agribusiness is still at an embryonic stage in Africa, particularly in sub-Saharan countries, which consequently suffer huge postharvest losses of up to an average of 35 to 50% of the total achievable production for perishable agricultural commodities such as fruits and vegetables, and between 15 and 25% for cereals.
The economic cost Africa pays due to the missing links in agricultural value chains such as the processing of agricultural products is challenging, as illustrated by Côte d’Ivoire, the world’s leading cocoa producer (accounting for 40% of world cocoa bean production), hardly produces chocolate. At the same time, the French giant Cémoi set up a plant in 2015 to produce between 2,000 and 3,000 tons of chocolate per year. In fact, only 33% of Côte d’Ivoire’s cocoa production undergoes a first transformation (crushing of beans) in the country.
In the same vein, Tunisia produces 180,000 tons of olive oil annually, of which less than 10% is packaged in Tunisia, the rest being exported in bulk. Cameroon produces about 2,000,000 tons of plantain, which is almost totally sold unprocessed or lost after harvest (40%). The Bank’s agricultural transformation goals target these important margins in the agricultural value chains, as well as the multiple job creation opportunities resulting from a dynamic agribusiness sector.
Among the agribusiness development initiatives, the Bank is promoting the development and implementation of SCPZs as a promising approach to inclusive and participatory financing, including marketing of agricultural products in the RMCs. SCPZs are Feed Africa Flagship initiatives which are “agro-based spatial development initiatives, designed to concentrate agro-processing activities within areas of high agricultural potential to boost productivity and integrate production, processing and marketing of selected commodities consisting of geographical areas with a high concentration of companies involved in the range of activities of production, processing and marketing of agricultural products”.
Experienced for decades elsewhere in the world including Africa (more particularly North Africa where some countries such as Tunisia and Morocco are well advanced), this approach is now generating renewed interest in the context of the implementation of the Feed Africa strategy where the need for financing is enormous. The seminar is planned in this context to be an opportunity for knowledge dissemination as well as a platform for exchange with and between RMCs on the challenges and necessary conditions for successful transformation proceeding from agribusiness revitalization.
Related News
SADC looks up to tourism to boost regional economic growth
Southern African Development Community (SADC) member states have agreed to fast-track the review of the Protocol on Tourism Development as part of efforts to boost economic growth in the region.
A joint meeting of SADC ministers responsible for Environment and Natural Resources, Fisheries and Aquaculture and Tourism held in South Africa recently emphasised the protocol’s importance to the economies of member states and its interconnectedness with other sectors.
Only the Democratic Republic of Congo (DRC), Malawi and Seychelles voted against the review being brought forward.
Speaking at the meeting, South Africa’s Minister for Tourism Tokozile Xasa highlighted matters affecting the environment, wildlife, forestry, aquaculture and fisheries and tourism. She added that the commitments made at the meeting would strengthen SADC’s contribution to sustainability, inclusive growth and the realisation of the Sustainable Developed Goals and Africa’s Agenda 2063.
Ministers noted progress made in implementation of these programmes and the areas where implementation was lagging due to limited resources and they directed the SADC Secretariat to mobilise resources for their implementation.
They agreed to sign the charter establishing the Fisheries Monitoring Control and Surveillance Coordination Centre in Mozambique.
The ministers also approved the establishment of the Regional Financing Facility for SADC Trans-Frontier Conservation Areas (TFCAs) and directed the Secretariat to finalise implementation modalities in collaboration with the Project Steering Committee. They noted with concern that the SADC Protocol on Environmental Management and Sustainable Development had not entered into force and urged member states to ratify the protocol.
They also discussed the implementation of the Multilateral Environmental Agreements (MEAs) which member states were party to, such as the United Nations Framework Convention on Climate Change (UNFCC), United Nations Convention on Biological Diversity (CBD) and United Nations Convention Combating Desertification (UNCCD).
Member states further directed SADC’s Secretariat to fast-track the review of Regional Tourism Organisation of Southern Africa (Retosa) Charter and the Memorandum of Understanding (MOU) between the two secretariats.
In July 2016, Retosa was integrated into the SADC Secretariat as a full directorate, as a transitional mechanism during a regional summit held in Gaborone following the approval of the proposal made in 2014.
RETOSA is a SADC body responsible for the promotion and marketing of tourism in the region and its 16-member states are supportive of its existence as a means of promoting regional integration.
Meanwhile, the SADC Secretariat has agreed to fully support and actively assist Retosa to establish partnerships and secure resources from international co-operating partners toward a tourism destination marketing strategy.
According to the latest press statement, the strategy aims to move the SADC region’s share of tourism from its current 2% of global tourist arrivals and receipts to 5% within the next decade.
“The SADC governments now have the important task of activating the Tourism Coordinating Unit (TCU) at the SADC Secretariat, which is a key requirement for the completion of the Retosa transformation. It must be remembered that Retosa’s new priority is to secure smart partnerships with the region’s private-sector players toward a focused destination marketing strategy,” said Lily Rakorong,Retosa chairperson.
Related News
tralac’s Daily News Selection
Announced: Abdoulaye Mar Dieye to head UNDP’s Global Policy Bureau
Brazil circulates proposal for WTO Investment Facilitation deal (ICTSD)
Brazil submitted an extensive draft proposal for a potential agreement on investment facilitation to the WTO’s General Council last week, in a bid to jumpstart more “structured discussions” on the subject. In its submission, the Brazilian delegation clarifies that the draft proposal is not intended to serve as a negotiating text, but rather is meant to serve as a “concrete illustration” of what an agreement on investment facilitation could look like. The submission, they say, could help serve as a starting point for a “more focused and text-based discussion” on the subject, along with supporting outreach efforts towards bringing more WTO members on board. The Brazilian text is more extensive and detailed compared to earlier proposals submitted by various delegations in 2017. The scope and the main elements, however, remain the same. [Pacific Alliance, associate members advance trade talks, eye new economic opportunities]
Andrew Elek: How can East Asia defend the WTO? (East Asia Forum)
Defending this dispute settlement mechanism should now take precedence over trade liberalisation. In the face of rising populism, expecting any progress on lowering residual border barriers to trade is unrealistic. Fortunately, trade liberalisation no longer needs to be the top priority for the WTO. Past rounds of WTO negotiations have helped to create an environment where only a few sensitive products face significant traditional border barriers and these products account for a rapidly falling share of international commerce. The performance of the WTO should no longer be judged by the progress of complex negotiating rounds held up by political resistance to trade liberalisation of these few products. How can East Asia defend the WTO? It could build on Chinese President Xi Jinping’s speech at Davos in January 2017, which confirmed China’s commitment to openness and to a rules-based multilateral economic order. All other East Asian governments can join China to make it clear that they will continue to act in line with their WTO commitments in their dealings with other members.
Dani Rodrik: What do trade agreements really do? (pdf, Harvard)
As trade agreements have evolved and gone beyond import tariffs and quotas into regulatory rules and harmonization, they have become more difficult to fit into received economic theory. Nevertheless, most economists continue to regard trade agreements such as the Trans Pacific Partnership (TPP) favorably. The default view seems to be that these arrangements get us closer to free trade by reducing transaction costs associated with regulatory differences or explicit protectionism. An alternative perspective is that trade agreements are the result of rent-seeking, self-interested behavior on the part of politically well-connected firms – international banks, pharmaceutical companies, multinational firms. They may result in freer, mutually beneficial trade, through exchange of market access. But they are as likely to produce purely redistributive outcomes under the guise of “freer trade.”
Rwanda: Bill seeking to ease cross-border movement tabled in parliament (New Times)
A newly proposed law on immigration and emigration in Rwanda would make it easier for people in border communities to cross borders without difficulty, Members of Parliament in the Lower House heard yesterday. Under Article 57 of the draft law, the government has proposed that the Directorate General of Immigration and Emigration be allowed to work in consultation with local leaders and other relevant authorities to establish more crossing points to strictly facilitate movements of border communities. The draft law directs the directorate to put in place instructions governing the management of the crossing points. “It’s important that we make it easy for Rwandans to travel to neighbouring countries, especially those who live near the borders. Some of them would travel long distances to reach a gazetted border post,” Uwizeye told MPs.
EAC Monetary Union Bill in the offing (EALA)
The EAC Monetary Institute Bill 2017 and the EAC Statistics Bureau Bill 2017 tabled by the Chair of the Council of Ministers, Hon Julius Wandera Maganda, sailed through the First Reading and were committed to the respective EALA Committees. The object of the EAC Monetary Institute Bill, 2017, is to provide for the establishment of the East African Monetary Institute as an institution of the Community responsible for preparatory work for the EAC Monetary Union. Closely related to the EAMI Bill is the EAC Statistics Bureau Bill, 2017, which also seeks to establish the Statistics Bureau as an Institution of the Community.
EALA set to operationalise autonomy
The East African Legislative Assembly will operationalize the financial and administrative autonomy granted to it by the council of ministers two years ago. In the wake of this, the Assembly at plenary yesterday passed a resolution directing the EALA Commission to come up with all the necessary instruments to fully achieve the objectives for which it was established including enhancing terms and conditions of service of both members and staff of the Assembly as well as appropriate staffing.
SADC Secretariat hosts cross-border tourism products workshop-cross-border-tourism-products (TBCA)
The SADC Transfrontier Conservation Area Network Steering Committee tasked the tourism committee to provide technical support in developing a guideline on cross-border tourism. As part of the process of consulting stakeholders, a workshop was held, 30-31 January (pdf), with the TBCSA, RETOSA and representatives from the different member countries, SA Tourism, the National Department of Tourism and a number of tour operators in attendance. The workshop touched on various aspects of developing cross-border tourism products including issues of sustainability, governance and destination marketing. A survey is due to be sent out to tour operators for more in-depth information on some of these areas before the guideline can be drafted. More consultation and updates are planned in the course of the year, with the guidelines due for finalization by the end of 2018.
Food and Nutrition Security Working Group Southern Africa: special alert (ReliefWeb)
Large swathes of the SADC region have experienced below-average rainfall since October 2017 compared to the 2016/17 season (Figure 1). In late December, dry conditions intensified in the southern half of the region, causing moderate to severe crop moisture stress in Botswana, southern Malawi, southern and central Mozambique, South Africa, southern Zambia and Zimbabwe. Many farmers planted late, and in some areas of Botswana, southern Mozambique and Zimbabwe did not plant at all. Dry conditions which prevailed resulted in poor germination of the late crop. South Africa, the largest producer of white maize in the region, has reported a 22 percent decline in area planted this season . Continuation of these conditions would have far reaching consequences on access to adequate food and nutrition during the 2018/19 consumption year and ability of farmers to produce in the 2018/19 cropping season. In addition, it will limit income generating opportunities resulting in far reaching consequences. [UN seeks $1.06bn to help fragile countries create ‘firewall against famine’; African Development Bank hostssecond Africa Resilience Forum in Abidjan]
Ban on Nigeria’s beans export still in force – EU (Punch)
The EU has insisted that Nigeria must implement appropriate risk management measures and provide required guarantees before it could export dried beans to Europe. According to the EU, Nigeria must meet specified conditions before the ban will be lifted, but stated that it was supporting the country in the process that would ensure that the lifting of the ban. The EU had banned the exportation of dried beans from Nigeria in June 2015 on the ground that the produce contains high level of pesticide considered dangerous to human health.
Nigeria: Palletisation to cost importers N21.6bn yearly (ThisDay)
Maritime sector stakeholders have expressed concerns over the federal government’s policy on cargo palletisation, noting that it will cost Nigerian importers about $60million (N21.6 billion) annually. The stakeholders were also unanimous in their resolution that the controversial policy will increase the diversion of Nigerian-bound cargoes to the ports of neighbouring countries where the policy is not implemented. The stakeholders made this known at a meeting organised by maritime media consulting firm, Ships & Ports in Lagos to brainstorm on the matter. The federal government had late last year directed all containerised cargoes coming into Nigeria to be on a pallet.
South Africa: Channing Arndt on new data, new approaches and new evidence - a policy synthesis (SAJE)
South Africa faces the imperative of escaping economic stagnation. This article seeks to synthesise results from a series of research efforts, including but not limited to the articles presented in this special issue, and consider policy options for escaping economic stagnation. The focus is on South Africa and South African policies yielding relatively quick dividends in terms of growth and taking the rest of the world as given. Four broad implications are presented. These could form part of a concerted effort to escape from South Africa’s long running economic malaise. Extract: The third principal result relates to trade. The relationships are illustrated in Fig. 3. The figure compares manufacturing firms that engage in international trade relative to manufacturing firms that do not. The mainline result is that firms that engage in international trade employ more people, pay higher wages, have more capital and exhibit higher levels of productivity. While these observations hold for firms that are exporters or importers only, the results are particularly striking for firms that both engage in exports and directly purchase imported intermediates. Similar results hold for export destinations and products: firms that export to developed countries and/or to multiple destinations and/or multiple products tend to exhibit higher levels of productivity (Matthee et al., 2016).
A deep dive into the effects of trade: MIT economist David Atkin looks beneath the surface of global commerce
Take a moment to consider what the following facts have in common. In India, migrants from within the country continue to consume the favored foods of their home regions — even though the relatively high prices mean they eat less. In Mexico, more 9th graders drop out of school when a local manufacturing plant opens to export goods. And in Egypt, rug weavers earn 20 percent more in profits when orders come from foreign buyers. Three countries, three quite different issues. What are the links?
Côte d’Ivoire: Sixth Economic Update
Additionally, the report focuses on how the country can make up its technological lag. “Economic theory has long demonstrated the key role played by technological innovation in a country’s development process,” said Jacques Morisset, Lead Economist, World Bank. “To be successful, Côte d’Ivoire must not only open up to the exterior but also enhance the skills of its labor force and the connectivity of its economy. These two factors play an essential role in the dissemination of new imported technologies and their adaptation to the local economic fabric.” A focus of Côte d’Ivoire’s National Development Plan is to increase FDI and exports. Although some specific initiatives have been launched, particularly in the agri-food processing sector, this strategy has not yet taken off. The weight of FDI and exports in GDP has not increased in recent years. According to the World Bank only 3% of Ivoirien companies use imported technology licenses as against 15% in the rest of Africa. Moreover, Ivoirien companies spend less on research and innovation than their African counterparts. [How can Côte d’Ivoire help its businesses and citizens acquire new technologies?]
The Gambia: President Barrow’s statement at launching of the National Development Plan 2018-2021
The strategic orientation and the overarching framework for the plan draws upon several elements, the key ones being the Manifesto of the Coalition of the political parties that defeated the previous regime and the Government Compact agreed during a retreat of the Cabinet 5-7 May 2017. Through its eight strategic priorities and their critical enablers, my government aspires not only to lay the foundations for a modern democratic state, but also to address the most pressing economic and social ills besetting our society. The plan through its robust accountability framework, responds to my concern to ensure a strong focus on results, strong monitoring and evaluation processes, as well as strengthened engagement between my government and the country’s citizens, including those in the Diaspora. [The Gambia to strengthen role of youth and trade in economic development]
Today’s Quick Links: Barbados ratifies WTO agreement on trade facilitation Aid for Trade in Asia and the Pacific conference ECOWAS imposes individual sanctions for non-implementation of the Conakry agreement in Guinea Bissau WCO provides assistance for Rwanda and Uganda on customs valuation |