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G20 countries show restraint in new trade restrictions, despite economic uncertainties
The WTO’s eighteenth monitoring report on Group of 20 (G20) trade measures, issued on 9 November 2017, shows that G20 economies introduced fewer trade-restrictive measures compared to the previous review period.
The estimated trade coverage of these restrictions recorded during the period of mid-May 2017 to mid-October 2017 slightly exceeded the coverage of trade-facilitating measures.
A total of 16 new trade-restrictive measures were adopted by G20 economies during the review period (mid-May 2017 to mid-October 2017), including new or increased tariffs, export restrictions and local content measures. This is an average of just over three restrictive measures per month compared to six during the previous review period (mid-October 2016 to mid-May 2017).
G20 economies also implemented 28 measures aimed at facilitating trade during the review period, including eliminated or reduced tariffs and simplified customs procedures. At an average of almost six trade-facilitating measures per month, this represents a similar level compared with the previous review period and for the whole of 2016.
The estimated trade coverage of import-facilitating measures implemented by G20 economies (US$27 billion) is slightly lower than the estimated trade coverage of import-restrictive measures ($32 billion). This is a reversal from the previous report where the estimated trade coverage of import-facilitating measures was more than three times larger than that of import restrictive measures.
Commenting on the report, Director-General Roberto Azevêdo said:
“The G20's continued support for open and mutually beneficial trade is essential and I hope that we will see this leadership once more at 11th WTO Ministerial Conference in December. This meeting will be an important opportunity to continue improving the global trading environment.
“Our last two ministerial conferences have delivered major trade reforms such as the Trade Facilitation Agreement, the elimination of agricultural export subsidies, and the expansion of the Information Technology Agreement. Indeed, this report highlights the impact of this work, finding that the additional import-facilitating measures implemented in the context of the expanded Information Technology Agreement amounted to around US$300 billion.”
The initiation of trade remedy investigations in the review period represented more than 50% of trade measures recorded. However, the amount of trade covered by these is relatively small (US$29 billion for trade remedy initiations and US$1 billion for terminations). Initiations of trade remedy actions outpaced terminations by a ratio of three to one, marking the highest gap between initiations and terminations since 2012. The main sectors affected by trade remedy initiations during the review period were electrical machinery and parts thereof, organic chemicals and paper products. The main sectors where trade remedy duties were terminated were organic chemicals, iron and steel and man-made filaments.
The G20 economies are Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, the Russian Federation, the Kingdom of Saudi Arabia, South Africa, Turkey, the United Kingdom and the United States.
Key Findings
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G20 economies applied 16 new trade-restrictive measures during the review period (mid May 2017 to mid-October 2017), including new or increased tariffs, export restrictions and local content measures. This equates to an average of just over three restrictive measures per month compared to six during the previous review period.
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G20 economies also implemented 28 measures aimed at facilitating trade over this review period, including eliminated or reduced tariffs and simplified customs procedures. At almost six trade-facilitating measures per month, this remains broadly equivalent to the previous period and to the trend observed for the whole of 2016.
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It is nevertheless worth noting that the trade coverage of trade facilitating measures during the review period (US$27 billion) is markedly lower than the previous period (US$163 billion). The coverage of trade-restrictive measures also fell during the review period, reaching US$32 billion, down from US$47 billion in the previous period.
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Therefore, despite the low number of trade restrictions recorded, their estimated trade coverage (US$32 billion) actually exceeded the estimated trade coverage of import facilitating measures by a slight amount (US$27 billion). This is a reversal of the findings of the previous report where the estimated trade coverage of import-facilitating measures was more than three times larger than that of import-restrictive measures.
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The import-facilitating measures implemented during the review period in the context of the ITA Expansion Agreement are estimated at around US$300 billion or 2.5% of the value of G20 merchandise imports.
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On trade remedy measures, the review period saw a moderate decline in initiations of investigations by G20 economies and a significant decline of terminations, compared to the previous review period and to the whole of 2016. Initiations of trade remedy actions outpaced terminations by a ratio of three to one, marking the highest gap between initiations and terminations since 2012. Initiations of trade remedy investigations represent over 50% of all trade measures recorded during the review period.
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Transparency and predictability in trade policy remains vital for all actors in the global economy. The G20 should show leadership in reiterating their commitment to open and mutually beneficial trade as a key driver of economic growth and a major engine for prosperity.
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Faced with continuing global economic uncertainties, the G20 should seek to continue improving the global trading environment and including through working together to achieve a successful outcome at the 11th WTO Ministerial Conference in December.
Eighteenth Report on G20 Investment Measures
The joint UNCTAD-OECD Report indicates that investment policy measures taken by G20 Members were mostly geared towards greater openness for foreign investment. At the same time, there has been an increase in policies related to national security.
During the reporting period (from mid-May to mid-October 2017), six G20 Members – Australia, Canada, China, India, Mexico, and Saudi Arabia – amended their investment-specific policies, with most of changes directed at liberalizing, promoting or facilitating foreign investment. Three G20 Members (Germany, Japan and the Russian Federation) took investment policy measures related to their national security.
Three G20 Members (Australia, China and Turkey) concluded four IIAs. Australia concluded the Pacific Agreement on Closer Economic Relations Plus (PACER Plus) with New Zealand and eight Pacific island countries; and China concluded the Closer Economic Partnership Arrangement (CEPA) Investment Agreement with China (Hong Kong SAR). In addition, Turkey concluded two BITs with Burundi and Ukraine.
The findings for this reporting period testify that G20 Leaders are committed to promoting an open, transparent and conducive policy environment for investment, while the investment flows remain volatile. Regular policy monitoring and public reporting in this area are important and should be continued.
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Key characteristics of African tourism GVCs
Africa’s tourism GVCs are notable for many features, including the durability of package booking channels, low domestic demand for tourism, the presence of global – rather than regional – lead firms and the corresponding implications for leakages from the local economy as well as the importance of business travel.
This paper examines some of the most significant aspects of African tourism that influence the economic upgrading that is available to local stakeholders. It then concludes by identifying policy initiatives that may facilitate those upgrading trajectories.
Tourism is a dynamic source of economic growth throughout the world. The industry indirectly supported an estimated 292 million jobs in 2015 and indirectly accounted for 10.2 per cent of global gross domestic product (GDP). Its direct contribution to global GDP was estimated at 3.1 per cent, and tourism’s growth rate (also 3.1%) was higher than those of healthcare (2.8% growth rate), construction (2.8%), agriculture, forestry and fisheries (2.7%), financial services (2.5%), manufacturing (2.4%) and retail (2.3%). Because of this expansion, tourism generated close to 7 per cent of the world’s total exports in 2015. Moreover, the vitality of the industry is not confined to any one region; while Europe remains the most visited continent in the world, accounting for 51 per cent of all international tourist arrivals in 2014, Asia Pacific and Africa had the highest growth rates in terms of visitors over the decade from 2005 to 2014.
Africa affords international visitors a diverse array of potential attractions. While the continent is perhaps best known for its opportunities to see flora and fauna, there is an increasing variety of experiences to be had, from beach packages to urban explorations to cultural connections. Although visitor arrivals decreased from a historical apex of 55.7 million in 2014 to 53 million in 2015, tourism remains a significant component of economic growth. Visitor spending as a proportion of total exports is higher in Africa than in any region in the world, and tourism investments as a proportion of total investments exceed the global average.
Tourism’s economic profile is not uniform across Africa. South Africa has the largest national industry of anywhere on the continent, with nearly US$19 billion in total tourism spending in 2016. Egypt (US$12.4 billion), Nigeria (US$12.2 billion), Morocco (US$11.7 billion), Algeria (US$8 billion) and Kenya (US$4.3 billion) have the next largest economic footprints. At a regional level, East African tourism is driven by foreign visitor spending to a degree that is not replicated elsewhere on the continent – 56 per cent of its tourism receipts were generated by international arrivals in 2016, compared with the global average of 28 per cent. West Africa, on the other hand, is locally oriented, with domestic visitors generating 83 per cent of tourism receipts in 2016. West Africa is also unusually reliant on business tourism (50 per cent of all tourism spending, the highest proportion of any region in the world), while North Africa is geared towards leisure tourism (80 per cent of total receipts). While tourism will continue to be an economic engine, there are characteristics of the global industry that may impede Africa’s development if policy-makers do not recognise them and design strategies to alleviate constraints on firms and other stakeholders.
Policy recommendations
The tourism industry has been a popular topic among international organisations and academics, which has led to a wide range of recommendations for policy interventions that focus on various areas. Employing a GVC perspective in an analysis provides insights that both reinforce the traditional orthodoxies and offer unique perspectives. Holistic approaches that improve the position of distribution intermediaries and service providers can be prioritised. Although service providers frequently offer the greatest opportunities for employment in each chain, it is the distribution intermediaries that often control the sector’s upgrading potential, as they can facilitate links with end markets. Policy-makers can play a role in helping to overcome barriers that inhibit the kind of upgrading described in the previous section. Broad categories of constraints include the following:
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Access to consumers: distribution intermediaries in many regions in Africa are dependent on foreign consumers; travellers in these regions are likely to use global tour operators to arrange packages in the region. This obstacle can be partly mitigated by facilitating product upgrades that appeal to African travellers, such as those employed by African Parks at Akagera National Park, and by reaching out directly to consumers in critical markets. Tourism boards can also play a role in boosting the communication skills of domestic tour operators or travel agents through professional development events and other training.
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Skills training: management, organisation, communication and computer skills are critical for distribution intermediaries and service providers that seek to upgrade their position in the chain. There are international programmes designed to teach these skills to students, with the UNWTO.TedQual certification programme being perhaps the most prominent example. However, Africa has only two institutions that have earned certification: Utalii College in Kenya and the Hotel and Tourism Training Institute Trust in Zambia. Governments can play a role in either exploring the creation of hospitality programmes at existing institutions or providing funding mechanisms such as scholarships to enable domestic students to study in Kenya or Zambia.
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Concession, investment and management policies: as Christian (2015) noted in her study of Kenyan and Ugandan tourism investment regimes, government policies can allow for varying governance models to take root. Minimal investment regulation has been observed in Kenya; this has encouraged overdevelopment in certain locations, thereby weakening the negotiating position of domestic service providers with distribution intermediaries. Kenya’s approach to tourism investments and concession areas contrasts with those of EAC peers such as Uganda and Rwanda. In Uganda, the Uganda Wildlife Authority exerts significant control over development in and around national parks, limiting the number of concession agreements that are disbursed. While this reduces overall employment, it empowers service providers that are active in the country. In Rwanda, the government takes an aggressive approach to cultivating PPPs with conservation-focused organisations that have allowed Rwandan distribution intermediaries to functionally upgrade through agreements with global lead firms.
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Institutionalisation: formal institutions such as ministries of tourism and tourism boards can encourage co-ordination that ensures that stakeholder interests are aligned. Rwanda provides an illustrative example of the benefits of formalising institutions to attract large-scale meetings. The RDB used a loan from the World Bank to enter into a contract with the Business Tourism Company, a firm based in South Africa, and develop a MICE strategy, which was completed in 2014. That document led to the creation of the Rwanda Convention Bureau (RCB). The RCB has helped attract more events by joining ICCA, the industry association that provides public and private sector actors with access to the marketplace for worldwide MICE events.
This paper was written by Jack Daly of Duke University’s Center on Globalization, Governance & Competitiveness. The views expressed here are those of the author and do not necessarily represent those of the Commonwealth Secretariat.
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One-Stop Border Posts to pilot MoveAfrica’s Traffic Light System
The Southern African Development Community (SADC) Committee of Ministers of Transport have endorsed Beitbridge, Kazungula, Kasumbalesa and Chirundu One-Stop Border Posts for the piloting of the NEPAD Agency MoveAfrica’s Traffic Light System (TLS), as well as the roadmap for implementation of the TLS on the selected pilot border posts.
The SADC Committee of Ministers meeting which took place in Lilongwe, Malawi from 30 October to 3 November, endorsed the selection of four one-stop border posts to pilot the Traffic Light System. The piloting will look at performance ranking and take necessary corrective action where applicable. It will also contribute to the documentation of lessons learnt to enable the development of good practices which can be replicated to other border posts in the movement of goods, people and services.
This phase of the MoveAfrica’s Traffic Light System completes the Institutionalisation Process which began in January 2017, with the first milestone being met in July 2017, when the SADC Ministers of Transport for the Beira Development Corridor and North South Corridor countries, endorsed it as the tool to monitor and evaluate the performance of trade corridors. This is in a bid to unlock the transport and logistics bottlenecks identified in various reports that look at logistics and trade in Africa.
Following the endorsement of the TLS in Beira, Mozambique, a technical meeting was held with the Development Bank of Southern Africa, the SADC Secretariat and private sector to develop the roadmap for piloting the tool. The technical team selected four border posts (Beitbridge – between South Africa and Zimbabwe; Kazungula between Botswana and Zambia; Kasumbalesa, Democratic Republic of Congo and Zambia; and Chirundu between Zambia and Zimbabwe) for piloting.
The four border posts were selected based on volumes and their high levels of activity, as well as their strategic locations in the region.
The roadmap for the implementation of the TLS on the pilot border posts will be done in a 3-phase approach as follows:
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Phase 1, will look at the reporting of different indexes and sources.
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Phase 2, will look deeper into the market dynamics, investment potential vis-à-vis risk assessments to ascertain the type and level of effort needed in a particular corridor by classifying the One-Stop Border Posts into A, B or C categories.
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Phase 3 will give the overall ranking based on the variables in the first two sections to arrive at the traffic light categories of Green, Orange and Red.
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China’s ambitions in sub-Saharan Africa: efforts to rebalance bilateral relations still needed
Risky trade dependence for sectors and countries that export commodities
Almost twenty years after the launch of the first Forum on China-Africa Cooperation, China-Africa relations remain unbalanced. Bilateral trade has leaped over the past ten years (a total of $123 billion in 2016), driven, up to 2014, by exports, which have fallen by 51% since the peak. The region now has a trade deficit with China.
While exports remain mainly concentrated on natural resources (90% of exports to China), imports are more diversified and include manufactured goods, transport equipment, and machinery (51% of the total) before minerals and precious metals. This trade imbalance also reinforces the risk of “Dutch disease” which, in economics, links the decline of the local manufacturing sector to the economic development of raw materials.
The slowdown in the Chinese economy and the reorientation of its growth model towards private consumption are reflected in a weakening of demand for commodities from Africa. This will have inevitable consequences for exporters. According to Coface economists’ calculations, sub-Saharan Africa had a significantly higher export dependency ratio (on a 0-to-1 scale) than other emerging countries in 2016, at 0.24 compared to 0.16 for South-East Asia (one of China’s largest trading partners) and 0.19 for Russia, Brazil, and India. The differential is even greater with the European Union (0.07) and the United States (0.12).
Unsurprisingly, the countries that have benefited the most from China’s expansion and those with a less diversified economy are likely to feel the effects of lower demand more acutely. The strongest trade dependency is concentrated around crude oil exports and, according to the index established by Coface, South Sudan has been at the top of the ranking since its independence was declared in 2011, followed by Angola and Congo. The Gambia, which produces wood, is not far behind. Eritrea, Guinea, and Mauritania are also among the most dependent countries because of their exports of metal ores (iron, copper, aluminium).
Diversification, the watchword for a sustainable win-win relationship
Despite this strong dependence on exports to China, the China-Africa relationship could turn into a win-win cooperation. Africa’s export basket is gradually diversifying, incorporating higher value-added processed raw materials, raw wood, and, to a lesser extent, some agricultural products (tobacco, citrus fruit, seeds, and oleaginous fruit), matching the needs of China’s emerging middle class. Even if such a change maintains the vulnerability of commodity-rich countries to international price developments, this could increase local incomes and foster employment and technology transfers.
Diversification also includes FDI flows and loans from China. Chinese investments in Africa are no longer extractive in nature and now extend to services, processing industries, transportation, and utilities. Existing initiatives, such as the One Belt, One Road, will ultimately boost regional connectivity and reduce export costs.
However, since FDI and financing flows are much lower than trade flows, African countries that are heavily dependent on China remain highly vulnerable to weakening demand or a further decline in the prices of raw materials. Moreover, the risk for African governments would be to increase their vulnerability to changes in China’s foreign policy and to those of its demand because Chinese interests in the region are, first and foremost, based on a complex network of political and economic objectives.
“The latest developments seem to be moving in the right direction but efforts are still needed to move from a marriage of unbalanced convenience to a partnership based on win-win cooperation,” said Ruben Nizard, Coface’s economist in charge of sub-Saharan Africa and co-author of the study, “China-Africa: will the marriage of convenience last?”.
Download publication: China-Africa: will the marriage of convenience last? (PDF)
Infographic: New Chinese ambitions in sub-Saharan Africa (PDF)
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tralac’s Daily News Selection
African trade and development policy events underway in Abuja:
(i) Fourth Meeting of the Technical Working Groups of the Continental Free Trade Area (6-17 November). It will be followed by the 8th Meeting of the CFTA Negotiating Forum (20-25 November, also in Abuja).
(ii) 9th Steering Committee and Experts Meeting for the Abidjan-Lagos Highway Corridor Development Programme: road infrastructure experts from Benin, Cote d’Ivoire, Ghana, Nigeria and Togo will review progress on the implementation of the Technical Design and Preparatory Studies for the corridor.
(iii) The 2017 CEO Forum of African DFIs
In Kampala today: EASSI workshop on enhancing the capacity of CSOs to advocate for gender responsive trade policies. The workshop is based on the EAC Gender Equality and Development Pilot Barometer, released earlier this year.
In Brasilia today: The Fifth BRICS Competition Conference. The conference marks the culmination of the first cycle of competition policy conferences held under the BRICS banner.
Featured African trade commentaries, from the latest Bridges Africa compendium on the theme The WTO’s Buenos Aires Ministerial – what is at stake for Africa and LDCs?:
(i) Chiedu Osakwe: Strengthening the WTO – on the strategic and welfare necessity of addressing “new” and “traditional” issues. Ahead of the WTO’s Eleventh Ministerial Conference in Buenos Aires, some WTO members have expressed interest in including aspects of the so-called “new economy,” in particular investment facilitation and e-commerce, in multilateral trade talks. Why should African countries engage on those topics? [The author is Chief Trade Negotiator for Nigeria, Director-General of the Nigerian Office for Trade Negotiations, and Chairman of the Negotiating Forum for the CFTA]
(ii) Carlos Lopes: Give Africa policy space for structural transformation. Ahead of the WTO’s Eleventh Ministerial Conference in Buenos Aires, some WTO members have expressed interest in including aspects of the so-called “new economy,” in particular investment facilitation and e-commerce, in multilateral trade talks. Why should African countries engage on those topics? [The author is Professor, Graduate School of Development Policy and Practice, University of Cape Town, and Visiting Fellow, Oxford Martin School, Oxford University]
Ten years on, ICBC Standard deal starts to show its worth (Euromoney)
In the 10 years since ICBC’s $5.5bn acquisition of a 20% stake in South Africa’s Standard Bank Group, there has still been no bigger single China-Africa investment. Looking back now, the deal was remarkable for the speed and relative ease with which it came together. But has it worked? [The author: Chris Wright]
Mozambique: Sharp fall in imports during 2016 (Club of Mozambique)
The economic crisis that hit Mozambique in 2016 was so severe that the country’s foreign trade declined by more than 27%. According to the latest trade data, published on Wednesday by the National Statistics Institute, the total value of trade declined from $11.747bn dollars in 2015 to $8.334bn in 2016, a fall of 27.35%. Despite the fall in commodity prices, Mozambican exports were not that badly hit, falling from $3.413bn in 2015 to $3.328bn in 2016, a decline of 2.49%. The steep fall came in the country’s imports, which declined by an enormous 37.53%, from $8.334bn to $5.206bn. When the foreign investment mega-projects are excluded from the figures, the fall is even sharper – 38.46%, a fall from $7.372bn to $4,537bn. [Downloads: INE report Volume 1 - Imports, Volume 2 - Exports]
Zimbabwe: Import bill drops 11,2% June-Sept (The Herald)
The country’s import bill has dropped by 11.2% between June and September to $439,6m, trade figures from the Zimbabwe National Statistics Agency show. According to latest figures released by Zimstat, the import bill during the period under review has been on a downward trend from $495,1m in June. In July, the import bill went down to $482m before going down further to $448m in August. Since last year, the country’s import bill has been dropping largely driven by tight policy interventions the Government adopted to control imports. Despite the drop on the import bill, the country was still affected by a trade deficit as exports amounted to $326,5m in August. In January, the value of exports was $292m. Zimbabwe largely exports goods such as minerals and agricultural produce to countries such as Singapore, China, Zambia, South Africa, Belgium, Mozambique and the United Arab Emirates. [Export incentive set to increase]
Kenya’s sugar imports rise threefold as cane harvests drop (The East African)
Kenya’s sugar imports increased by more than 300% in the first nine months of this year, at a time the country’s cane production has fallen to its lowest in nine years. The latest market data from the Sugar Directorate shows that the volume of imported sugar rose to 933,844 tonnes from 219,118 over the corresponding period last year – a 3%. “The increase in table sugar imports is attributed to an amplified shortfall due to low production in the country and the drought,” the directorate said. According to the latest figures from the Kenya National Bureau of Statistics, the country’s production has fallen to 2.1 million tonnes over the past six months compared with 3.2 million tonnes over the same period last year. May’s production of 231,000 tonnes was the lowest the country has recorded in nine years.
Ghana records $7.4m in exports to Morocco (Business Ghana)
Ghana’s exports to Morocco stood at $7.4m as of 2016, representing less than 1% of the country’s total exports, the Deputy Minister of Trade and Industry, Mr Carlos Kingsley Ahenkora, has said. However, imports from Morocco for the same period amounted to $87.9m, he said. “It is obvious that the trade potential of the two countries remains largely untapped, hence there is the need to deepen bilateral relations to reverse the less than satisfactory trend,” Mr Ahenkora said at the first Africa Power Road Symposium in Accra. “Ghana and Morocco have had trade relations with trade and investment countries visiting both countries at various times. However, trade flows between our two countries have not been favourable over the past five years,” Mr Ahenkora said.
South Africa: IMF statement
“South Africa’s slow growth and inefficiencies in public enterprises have taken a toll on public finances by generating a substantial revenue shortfall and prompting unplanned expenditure, as described in the 2017 Medium Term Budget Policy Statement. Against this background, IMF staff welcomes the National Treasury’s candid acknowledgement of the challenges and its call to the Presidential Fiscal Committee to implement reforms to unlock the economy’s potential. Specifically, IMF staff urges the Presidential Fiscal Committee to approve, in a timely fashion, fiscal measures to avoid undue increases in the debt-to-GDP ratio, including by strengthening tax revenue compliance and cutting unproductive outlays. The economy will also benefit from expeditious action from the Presidential Fiscal Committee to signal the political will to tackle long-standing issues that have led to deteriorating market sentiment. Reforms to improve governance and procurement practices and remove any obstacles to investment are essential.”
Mozambique: Chinese companies worried about limits on wood processing and exports
Chinese entrepreneurs involved in the purchase, processing and export of timber in Sofala province are worried about the extent to which activity will only be carried out by forest concessionaires from next week. About 30 companies affiliated with the Chinese Merchants Association in Sofala expressed concern yesterday during a meeting with provincial governor Maria Helena Taipo to discuss the operation and the contribution of firms to the Government’s Five Year Programme, especially to economic growth in this part of the country. Figures indicate that 80% of milling and timber exports are concentrated in Sofala and involve around 5,000 Mozambican workers, hence their importance to the national economy. Other concerns presented by the Association of Chinese Merchants in Sofala related to delays in licensing processes, which, they said, jeopardised activities.
Ghana: Heavy duty truck drivers cautioned on excess loads (Ghana News)
Mr Emmanuel Adongo Awuni, the National Coordinator of Axle Load of the Ghana Highways Authority, has commended heavy duty truck drivers for their effort to reduce the weight of goods being conveyed to acceptable levels. He said a recent survey has revealed that out of ten trucks weighed, only two or three of them would be found to have excess load which ranged between one to five tonnes as compared to the previous period where over ten tonnes of excess load were even found on some trucks.
Food Outlook: Biannual Report on Global Food Markets (FAO)
While food commodity prices have been generally stable, the cost of importing food is set to rise in 2017 to $1.413 trillion, a 6% increase from the previous year and the second highest tally on record according to FAO’s latest Food Outlook report (pdf) published today. The higher import bill is driven by increased international demand for most foodstuffs as well as higher freight rates. Of particular concern is the economic and social implications of the double-digit increases in the food import bills for Least-Developed Countries and Low-Income Food-Deficit Countries.
Accelerating climate-resilient and low-carbon development: second progress report on the implementation of the Africa climate business plan (World Bank)
This report provides an overview of the progress made in 2017 in implementing the Africa Climate Business Plan (ACBP), a blueprint for climate action in Sub-Saharan Africa that the World Bank launched during the 21st meeting of the Conference of the Parties (COP21) to the UN Framework Convention on Climate Change in Paris in November 2015. This report provides an update on resource mobilization, describes the climate co-benefits provided by the ACBP portfolio, and detail implementation progress by ACBP cluster and component. In addition, to better measure and monitor results and inform future project design, it reports on two new pieces of analysis undertaken this year: a review of the ACBP contribution to implementation of the Nationally Determined Contributions of Sub-Saharan Africa’s countries; and a review of the ACBP portfolio from the perspective of its contribution to resilience building (following the resilience pathways approach). [AfDB approves its second Climate Change Action Plan for 2016-2020]
Ghana to host third Green Financing for Sustainable Development conference (ITC)
The conference (21 November) will provide an opportunity to review the current status of green finance in Ghana and the country’s efforts to green its economy. Ministers and representatives from the Ghanaian public sector will share their experience and lessons learnt from implementing the ‘Ghana Shared Growth and Development Agenda II’, and the ‘National Climate Change Policy’. Participants from other countries will explore the perspectives of regulators and finance providers and the changes required to spur the development of new products and services.
EU trade agreements deliver tangible benefits (Europa)
The EU has today published a report assessing the implementation of its existing trade agreements. This horizontal report is the first of its kind and sheds light on what happens after trade agreements are negotiated and have entered into force. Overall, EU agreements are shown to lead to more EU exports and growth, with major export increases to, for example: Mexico (+416% since 2000), Chile (+170% since 2003), South Korea (+59% since 2011), Serbia (+62% since 2013). The report shows that it is often the EU agricultural and motor vehicles’ sectors that benefit the most. For example, exports of cars to South Korea have increased by 244% since 2011, and in the case of the agreement with Colombia and Peru there was a 92% and 73% increase, respectively, in the exports of EU agricultural goods. [Various downloads are available]
Today’s Quick Links: South Africa delays decision on LNG imports to next year Namibia eyes power self-sufficiency via leveraging private investment Tana Forum conference proceedings: The African Union - self-reliance process through institutional reform (pdf) ECOWAS seeks the cooperation of development partners in addressing infrastructural deficit Lessons from the Gulf: how Kenya can manage its oil resources |
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African Union Member States meet for the last round of the Continental Free Trade Area (CFTA) negotiations
The Department of Trade and Industry of the African Union Commission is organizing the fourth Meeting of the Technical Working Groups (TWGs) of the Continental Free Trade Area (CFTA) from 6-17 November 2017.
The objective of the meeting is to consider the draft Texts of the CFTA Agreement, its Protocols and its Annexes.
The Meeting is being attended by Chief Negotiators and Trade experts from AU Member States, Trade Experts from the eight Regional Economic Communities (RECs) recognised by the AU (CEN-SAD, COMESA, EAC, ECCAS, ECOWAS, IGAD, SADC and UMA), Members of the CFTA Continental Task Force (CTF), African Development Bank (AfDB), United Nations Economic Commission for Africa (UNECA) and United Nations Conference on Trade and Development (UNCTAD).
While welcoming participants, Mr. Edet Sunday Akpan, Permanent Secretary at the Federal Ministry of Industry, Trade and Investment of the Federal Republic of Nigeria, pointed out that the CFTA is a priority agenda for the African Union Assembly.
“It is of vital importance to continue to keep in mind that the CFTA is a significant mandate to the African Union Summit. It is the hope of the leaders that significant achievements are recorded in the near future,” he said.
He reminded the Meeting that the timeline for concluding the CFTA is next month and he quoted H.E. Muhammadu Buhari, President of Federal Republic of Nigeria supporting the establishment of the CFTA while addressing his D-8 Summit counterparts last month in Turkey: “In Africa, we are on the threshold of finalizing negotiations to establish the first ever Single Market for Trade in Goods and Services on our Continent, in the Continental Free Trade Area for Africa. This will be a win-win for all, including member countries of the D-8”.
The Permanent Secretary also highlighted the advantages of the establishment of the CFTA and urged participants to do all that is required to be done to finalize their work as the Technical Working Groups. “I am confident that you are up to the task,” he concluded.
In her opening remarks on behalf of the Commissioner for Trade and Industry, H.E. Amb. Albert M. Muchanga, Mrs. Treasure Thembisile Maphanga, Director for Trade and Industry of the African Union Commission thanked the Government and the people of the Federal Republic of Nigeria for their hospitality and their outstanding generosity.
She recalled the achievements of the last Session of the CFTA Negotiating Forum in Addis Ababa, in October 2017 and expressed her appreciation for the commitment of the Member States in moving the CFTA forward.
“We have witnessed the CFTA Chief Negotiators confirming their commitment to conclude the CFTA Agreement by end of 2017. They have clearly outlined the benefits that will accrue from the establishment of the CFTA,” she underscored.
She announced that African Union Ministers of Trade are expected to meet in Niamey, Niger from 1-2 December 2017 to consider the Draft Texts on the Agreement Establishing the CFTA, Protocols and annexes. The Director for Trade and Industry acknowledged that the assignment ahead of the participants is very critical to the conclusion of the CFTA Negotiations by end of this year.
Mrs Maphanga indicated that the Draft Agreement Establishing the African Continental Free Trade Area should be ready by end of this month together with three protocols namely the Protocol on Trade in Services, the Protocol on Trade in Goods and the Protocol on Dispute Settlement Mechanism. According to her, the Protocol on Trade in Services will have two Annexes, namely, Schedules of Commitments and Regulatory Frameworks.
And the Protocol on Trade in Goods will have the following Annexes:
- Tariff Liberalization Schedules;
- Rules of Origin;
- Customs Procedures and Cooperation;
- Trade Facilitation;
- Transit and Transit Facilitation;
- Non-Tariff Barriers;
- Technical Barriers to Trade;
- Sanitary and phytosanitary Measures; and
- Trade Remedies.
Before she concluded, Mrs. Treasure Maphanga emphasized that the journey before Member States is to create One Africa with One Market and One Strong Voice, in line with the AU Agenda 2063’s vision of “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in global arena”.
“We owe it to ourselves and future generations to create an integrated market that expands opportunity for our socio-economic progress,” she concluded.
In his opening remarks, Amb. Chiedu Osakwe, Nigerian Chief Trade Negotiator and Director-General of Nigerian Office for Trade Negotiations (NOTN) paid tribute to the African Union Commission (AUC) under, he said, the competent and able leadership of Ambassador Albert M. Muchanga, Commissioner for Trade and Industry.
“The AUC is working hard and providing technical leadership in partnership with the Regional Economic Communities (RECs), UNECA, UNCTAD and a number of other institutions are at work to complete the construction of our Single Market. So, our gratitude to the AUC and all our partners,” he acknowledged.
He pointed out that the Continent’s best chance to address the dual pressure of the dramatic increases in Africa’s population and associated unemployment pressures, is to create the Single Market for Trade in Goods and Services on the legal and policy framework of the African Continental Free Trade Area (CFTA).
“On the basis of the CFTA Africa can grow intra-African trade, expand investments, modernize our economies, integrate our businesses into regional and global supply chains and hence (create) more jobs for Africans,” he underlined.
He went on and quoted Professor Yemi Osinbajo, Vice-President of the Federal Republic of Nigeria who opened last week the High-Level Forum on Trade and Investment Facilitation for Development, and reaffirmed the core position that: “On the CFTA, there is no plan B for us. We absolutely must succeed!”
“The final stretch is always the hardest part. I am confident that we shall get it done. The stakes in the CFTA are very high and it is a win-win for all our countries,” he concluded.
The 8th Meeting of the Continental Free Trade Area Negotiating Forum (CFTA-NF) will kick off from 20-25 November, 2017 in Abuja, Nigeria to undertake negotiations on the text of the Agreement Establishing the CFTA, undertake negotiations on the Protocols on Trade in Goods, complete negotiations on the Protocol on Trade in Services, and conclude work on several Annexes.
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Give Africa policy space for structural transformation
The World Trade Organisation (WTO) may have celebrated its 20th anniversary in 2015 with an African-flavoured “Nairobi package”, but has the continent really benefited from current trade negotiations?
The policy debate in Africa has centred over the last few years on the exact policy mix required for structural transformation. Many argue that industrialisation should be at the heart of such a process, while others nuance this ambition with warnings about the threatening clouds gathering over the future of manufacturing and the continent’s lateness for such a venture. Beyond the conceptual discussion, the political realities of the continent may rather call for a choice between rent-seeking behaviour versus more ambitious strategic state intervention. We may think that in a post-Washington-Consensus world the role of the state in creating the conditions for real structural transformation is uncontested. Nothing is further from the truth.
African economies may be emerging and demonstrating greater ambition, but the recent few years have demonstrated the quality and the limits of their growth model, as observed since the turn of the century. Thanks to reduced debt, better macro-economic management, and higher demand and prices for commodities, the last decade and a half has certainly positioned the debate beyond restrictive policies. More than any factor, demographic shifts, and with them growing internal demand, have been the key driver of growth. But commodity dependence continues to drive fiscal policies, investment perceptions, and trade negotiations.
Preferential schemes have not helped industrialisation
It is true that Africa already produces the equivalent of half a trillion US$ of manufactured goods a year. The continent is not a desert dreaming of a 19th century Manchester-like industrial makeover. What is needed is an acceleration of industrial change that will only be viable with grounded policies. Policies that should protect Africa’s infant industries in a context that has only deteriorated since the industrial revolution. Every other region has benefited from conditions for their industrialisation that are no longer there.
The common wisdom sustains that a system of preferences, as championed by many at the WTO, will address Africa’s lateness. The evidence is proving the opposite. Preferential schemes have not helped industrialisation for several reasons. They tend to frame trade relations on current unfavourable patterns, partly because Africa has not been able to take advantage of what is offered, with difficult rules of origin imposing minimum levels of local production.
Trade preferences cannot build regional value chains, a fundamental step to integrate complex global production systems, dominated by skewed intellectual property regimes. Little attention to backward and forward linkages, increased worker productivity, upgraded skills, as well as to the development of reliable infrastructure networks are amongst the most illustrative examples of why preferences alone are unlikely to produce results. The quicker African countries realise their narrow windows of opportunity, the faster their industrialisation acceleration may occur.
Boosting intra-Africa trade
Africans have been talking about regional integration for a long while, without conclusive outcomes.[1] The current efforts for the establishment of a Continental Free Trade Area (CFTA) may change the picture. The CFTA would create the single market with the largest country membership in the world, within the fastest-growing region both in terms of population and consumption. If it comprehends ambitious reforms, synchronised infrastructure development, particularly in the areas of transport and energy, and trade facilitation favouring cross-border exchanges, the CFTA will easily offset the expected declines in country-specific tariff revenues produced by such liberalisation.
Because Africa’s demand for processed food, low-value manufactured goods and less complex consumption necessities is booming, the potential to increase industrial output responding to those needs will be significant. The road to more sophisticated knowledge-intensive industrial production may be distant, but what is needed now is within reach.
The main obstacle for such an industrial drive may well be the straightjacket Africa finds itself in when it negotiates trade agreements. The CFTA is constantly being placed at the back of a multitude of bilateral and multilateral agreements pressured on Africa, such as the EU-led Economic Partnership Agreements (EPAs). These agreements fragment Africa, divide it in different parcels with diverse conditions and preferences, undermining the continental intra-Africa trade prospects requiring harmonisation. The right sequencing for pursuing Africa’s major interests is constantly disturbed by such interferences.
Africa needs to take cognizance of the asymmetric protection structures that influence the positions taken by its trading partners. Uneven trade gains are being overlooked because of constant pressure, or apparently nice temptations. Financial compensations, for instance, may look good in the short term, but they are a devil that hides its tail.
WTO relevance
The saga around the Doha Round and the public plea by some WTO members that it may require a rethink are the best demonstrations of how little the WTO has delivered on the promise to approach trade as a means for development, rather than an end in itself – a lack of results often camouflaged with unchecked spectacular projections about the benefits brought by trade liberalisation.
Becoming a WTO member automatically restricts a country’s policy space, although for least developed countries there is room to manoeuvre. It is true that proposals for agricultural and non-agricultural market access do not imply any cuts to be made by the latter in the near future. However, the story is definitely very different for African countries in the middle-income category. The impacts of current WTO rules on trade-related investment measures and intellectual property rights are also uncertain.
If EPAs are considered, the limitations increase. Although WTO rules do not preclude import taxes, the EPAs will monitor and restrict them. Any concession made by African countries to other major trading partners would automatically be applicable to the EU, limiting the freedom allowed by WTO rules. The typical demonstration of these policy constraints is the popular contracts African countries negotiate with the likes of China and India for furnishing them with natural resources against favourable investment and aid packages. That type of deal will no longer be treated the same way after EPAs are implemented. The EU will have the right to request, against vague (non-committal) aid promises, the same treatment.
So far, many WTO members pay lip-service support to the CFTA, without demonstrating their commitment for the creation of the conditions that would protect Africa’s policy space, which is indispensable for the continent to pursue vigorous industrialisation. With just a few more weeks left before the end-of-the-year deadline established by the African Union to conclude the CFTA agreement, time is evaporating fast. Whoever believes in a stronger African performance as a sign of valuing global public goods better rush. Africans first, to protect what is left of their policy space in trade negotiations.
Carlos Lopes is Professor, Graduate School of Development Policy and Practice, University of Cape Town, and Visiting Fellow, Oxford Martin School, Oxford University.
This article is published under Bridges Africa, Volume 6 - Number 8, by the ICTSD.
[1] Lopes, Carlos. 2016. Inching toward Integration, Finance & Develoment, IMF, June, Vol. 53, No. 2.
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Accelerating climate-resilient and low-carbon development in sub-Saharan Africa
Second Progress Report on the Implementation of the Africa Climate Business Plan
This report provides an overview of the progress made in 2017 in implementing the Africa Climate Business Plan (ACBP), a blueprint for climate action in Sub-Saharan Africa that the World Bank launched during the 21st meeting of the Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) in Paris in November 2015.
Since the launch of the ACBP at COP21 in November 2015, significant progress has been made:
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The World Bank has worked with client countries, development partners, and the private sector to flesh out the ACBP’s program of work.
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As of June 30, 2017, the number of projects contributing to the ACBP reached 204, a net increase of 57 over 2016.
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The World Bank’s Board had approved $8.8 billion for 107 projects by June 30, 2017.
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The implementation of projects started generating concrete results and outcomes.
This report provides an update on resource mobilization, describes the climate co-benefits provided by the ACBP portfolio, and details implementation progress by ACBP cluster and component. In addition, to better measure and monitor results and inform future project design, it reports on two new pieces of analysis undertaken this year: a review of the ACBP contribution to implementation of the Nationally Determined Contributions (NDCs) of Sub-Saharan Africa’s countries; and a review of the ACBP portfolio from the perspective of its contribution to resilience building (following the resilience pathways approach).
Context and scope of this update
The Paris Agreement entered into force on November 4, 2016. As of October 31, 2017, 169 parties had ratified it, marking the first time governments agreed to an overarching framework to combat climate change. Countries and observers around the world hailed the passage of the accord – the fruit of more than two decades of often tortuous international negotiations on combating climate change.
Forty-eight countries in Sub-Saharan Africa communicated their post-2020 climate commitments and priority areas through their (I)NDCs, demonstrating their resolve to address climate change. Their commitment is critical, because resilience to climate variability and change is vital to the region’s ability to reduce poverty and protect the hard-earned development progress made in recent decades.
Indeed, climate drivers are involved in most of the shocks that keep or push African households into poverty. The funding needed to address climate change, particularly adaptation, in the region is massive, and it will increase as climate change unfolds in the coming years. According to the World Bank Group Climate Change Action Plan (CCAP), more than 60 percent of countries in Africa have estimated and reported adaptation financing – more than twice the share in other regions – suggesting national policy makers’ recognition of the urgency of adaptation action.
The ACBP aims to build a pipeline of innovative and transformational projects to tackle climate change across sectors and establish a platform to mobilize investments, thereby contributing to filling the climate financing gap in the region. Including the transport component, which was added after the Paris launch, the plan’s goal is to raise $19.3 billion by 2020, for investments that will strengthen, power, and enable resilience in the region.
The plan focuses on more than a dozen priority areas, clustered in three groups. The first cluster (strengthening resilience) includes selected initiatives aimed at boosting the resilience of the region’s assets, including its natural capital (agricultural land, landscapes, forests, inland bodies of water, and oceans); physical capital (cities, physical assets in coastal areas, and roads); and human and social capital. The second cluster (powering resilience) relates to opportunities for scaling up low-carbon energy sources in Sub-Saharan Africa, thereby contributing to increasing access to energy (a key ingredient for resilience) and mitigating climate change. The third cluster (enabling resilience) provides data, information, and decision-making tools for promoting climate-resilient development across sectors, by strengthening the region’s hydro-meteorological systems at the regional and country levels and building the capacity to plan and design climate-resilient investments.
Fundraising targets of the ACBP
The ACBP is expected to mobilize $19.25 billion by 2020, including $8.48 billion in World Bank funding. According to the results framework included in the original plan, one indicator of the plan’s financial performance is the share of resources mobilized at various stages of implementation. The targets are for 25 percent of funding to be mobilized by June 2017 (end of the IDA17 cycle), 50 percent by December 2018 (mid-term of the IDA18 cycle), and 75 percent by June 2020 (end of IDA18). Applied to the World Bank’s share of the financing plan, these shares yield targets of $2.11, $4.22, and $6.33 billion, respectively.
ACBP contribution to NDC implementation
As of October 30, 2017, 169 parties to the United Nations Framework Convention on Climate Change had ratified the Paris Agreement, thereby formalizing their commitment to pursue the goal of the agreement through Nationally Determined Contributions (NDCs). In Sub-Sharan Africa, 48 countries have communicated their post-2020 climate commitments and priority areas through (I)NDCs. As one of the most vulnerable regions to climate change impacts, Sub-Saharan Africa has shown remarkable ambition in setting up its NDC commitments, particularly in adaptation.
To assess the extent to which the ACBP provides support to NDC implementation and to identify opportunities for further assistance, this progress report reviewed the development objective and components of every ACBP project; assessed whether they align with one or more NDC sectoral and sub-sectoral commitment (policies, targets, plans, actions) at the country and regional level; and determined whether the project directly contributes to NDC implementation. The analysis covers all 38 countries in which ACBP projects are being implemented. It does not include Botswana, Eritrea, Equatorial Guinea, Mauritius, Namibia, Somalia, Swaziland, and Zimbabwe, where no ACBP projects have yet been launched.
In any given country, ACBP projects are considered to contribute to NDCs if their development objectives correspond to priority areas identified in that country’s NDCs. As of October 2017, 163 of 204 ACBP projects (80 percent) met this criterion. Commitments for these projects totaled $18.3 billion – 83 percent of the Bank’s total financial commitment under the ACBP. The number of projects that contributed to NDC implementation rose from 101 in October 2016 to 163 in October 2017, an increase of 63 percent. Financing of these projects more than doubled, from $9.1 billion to $18.3 billion.
The ACBP project makes contributions to NDCs in the following sectors: agriculture; cross-cutting areas (capacity building and knowledge transfer, disaster risk management, and climate services); energy; the environment; land use; land-use change and forestry (LULUCF); social development; transport; urban; and water. It shows that the ACBP portfolio contributes to a significant percentage of Sub-Sahara African countries’ NDC implementation efforts in the following sectors: transport agriculture, cross-cutting areas, energy, social development, LULUCF, and the environment.
The ACBP portfolio supports NDC commitments in the transport sector in 90 percent of countries. It supports NDC commitments in agriculture in more than 80 percent of countries. It contributes to NDC sectoral commitments in cross-cutting areas and energy in more than half of the countries in which it has projects (57 percent in cross-cutting areas, 53 percent in energy).
At the subsector level, the ACBP portfolio makes important contributions to NDC implementation and targets related to development of infrastructure and roads (ACBP presence in 20 countries, i.e. 91 percent of all countries identifying the subsector as an NCD priority), climate-smart agriculture practices (22 countries or 85 percent of all countries), establishment of social safety nets (9 countries or 75 percent of the total), enhanced capacity building and knowledge transfer (16 countries or 73 percent), sustainable land management practices (11 countries or 69 percent of the total), and deployment of solar power initiatives (18 countries or 55 percent).
Opportunities for future progress
Current ACBP projects already provide significant support to the implementation of NDC commitments in Sub-Saharan Africa, and there is significant potential for enhancing efforts to scale up NDC implementation at both the country and regional level.
Current and upcoming ACBP projects will continue to make explicit linkages to NDC sectoral / subsectoral priorities at critical stages of the project planning and design process. New projects will take into consideration country-specific NDC implementation support needs, including the need to establish an institutional framework and coordination mechanism; develop Measuring, Reporting, and Verification (MRV) systems; craft NDC implementation and investment plans; and mobilize climate finance.
Note: The full progress report will be posted on-line by the World Bank before the end of 2017.
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The world’s food import bill is rising despite large production and robust supply
FAO concerned about economic impact on poor countries
While food commodity prices have been generally stable, the cost of importing food is set to rise in 2017 to USD 1.413 trillion, a 6 percent increase from the previous year and the second highest tally on record according to FAO’s latest Food Outlook report published today.
The higher import bill is driven by increased international demand for most foodstuffs as well as higher freight rates. Of particular concern is the economic and social implications of the double-digit increases in the food import bills for Least-Developed Countries (LDCs) and Low-Income Food-Deficit Countries (LIFDCS).
“Higher bills do not necessarily translate into more food being bought by them as the cost of importing has greatly escalated,” said FAO economist Adam Prakash.
The higher import costs come at a time when inventories are robust, harvest forecasts are strong and food commodity markets remain well supplied.
The food commodity outlook, issued twice a year, takes a close look at the markets of key food categories, including cassava, the livestock and dairy sectors, fish, vegetable oils and the main cereal grains.
While production trends are broadly strong across the board, average prices in international transactions can mask more specific trends.
For example, while international wheat prices have been flat, U.S. Hard Red Spring wheat, a popular high-quality variety with enough protein content to make noodles and pasta, was 40 percent higher in July 2017 than a year ago. Aromatic rice varieties have risen eight times faster than the FAO All Rice Index, which is up 4 percent on the year. Likewise, the FAO Butter Price Index has risen 41 percent so far in 2017, more than three times as much as the Dairy Price Index of which it is a component.
The livestock and dairy sectors are particularly dynamic. The meat import bill is set to reach an all-time high of USD 176 billion this year, up 22 percent from 2016. World milk production is predicted to grow by 1.4 percent, led by a robust 4 percent expansion in India, even as more stringent environmental regulations and quality controls in China may lead to a contraction there.
World output of oilseeds oils – vegetable oils and animal fats are the largest items in the LIFDC import bills – is expected to increase slightly this year after last year’s strong season. But global soybean production, despite a planting boom in the Northern Hemisphere, is set to decline as yields return to normal levels after last year’s nearly optimal weather.
Opportunities loom for tropical fruits
Tropical fruits are increasingly stars in global trade, with export volumes of mango, pineapple, avocado and papayas on course to achieve a total combined value of USD 10 billion this year, according to the Food Outlook.
Their popularity is promising for poverty relief and rural development as almost all production takes place in developing countries, usually through smallholder farmers with fewer than five hectares.
FAO estimates that total production of the four fruits could reach 92 million tonnes this year, compared to 69 million tonnes in 2008. Currently 95 percent of that output is consumed locally, but rising incomes and changing consumer preferences will likely boost export volumes, especially if freer trade and better market access stimulates further technological gains in distribution.
Major producers of tropical fruits include India, home to around 40 percent of global mango production, Costa Rica, which supplies a large share of the world’s pineapples, China and Brazil – and also Mexico, which is the largest exporter.
Africa may set record for cassava output
As well as providing detailed analyses of the production, trade and demand for major cereal and oilcrops, the Food Outlook updates trends for cassava, which has been one of the fastest-expanding staple crops at the global level and is the third most important source of calories in the tropics, after rice and maize.
Production in sub-Saharan Africa may reach a record high this year of 156 million tonnes, buoyed by various commercial expansion programmes aimed at curbing reliance on food imports in the region.
Still, global production of this root will likely contract slightly in 2017 – to 278 million tonnes – after two decades of uninterrupted growth, due to a combination of drought conditions, depressed prices and policy changes, FAO says.
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Kenya’s sugar imports rise threefold as cane harvests drop to lowest level ever in nine years
Kenya’s sugar imports increased by more than 300 per cent in the first nine months of this year, at a time the country’s cane production has fallen to its lowest in nine years.
The latest market data from the Sugar Directorate shows that the volume of imported sugar rose to 933,844 tonnes from 219,118 over the corresponding period last year – a 376 per cent increase.
“The increase in table sugar imports is attributed to an amplified shortfall due to low production in the country and the drought,” the directorate said.
According to the latest figures from the Kenya National Bureau of Statistics (KNBS), the country’s production has fallen to 2.1 million tonnes over the past six months compared with 3.2 million tonnes over the same period last year. May’s production of 231,000 tonnes was the lowest the country has recorded in nine years.
The production woes are further compounded by the July opening of import channels from Brazil that have seen factories stuck with the more costly locally produced sugar.
Data from the Sugar Directorate shows a 50-kilogramme bag of imported sugar is selling at $36.05 while the one produced locally is trading at $38.92.
Local stocks
“As at mid-October, stocks held by millers recorded the highest rise over the past one year. Currently, factories are holding over 8,000 tonnes of the commodity, up from a low of about 2,900 tonnes at the start of the year,” the Kenya sugar regulator said.
The directorate’s head, Solomon Odera, said that when compared with the Common Market for Eastern and Southern Africa (Comesa), the sugar imported from South America is cheaper.
“Regional sugar is quite expensive at $700 a tonne compared with countries like Brazil whose product costs $400 a tonne,” said Mr Odera.
Millers have raised the red flag noting that their local stock has become uncompetitive following the increase in imports, which incidentally they are part of, after they were allowed to ship in the commodity.
In August, the Sugar Directorate issued private millers with permits to import 150,000 tonnes of sugar ahead of the expiry of the Comesa duty-free window.
“The millers have been operating below capacity due to the low cane supply; we allowed them to import sugar to cover the shortfall and remain in business. We estimate the shortage in supply will persist over the next year,” said the director-general of the Agriculture and Food Authority Alfred Busolo.
Only 162 distributors and millers were given the green light to import sugar with an allowable maximum of 2,000 tonnes per importer.
Scrapped duty
In May, Kenya’s Treasury scrapped duty on imported sugar from outside Comesa, allowing millers and distributors access to sugar from South America.
In August it extended the waiver by another three months, but limited it to millers only in a bid to tighten the imports on a “need to basis.”
“The millers who will import the sugar will be required to brand it with their trade names, with the other rider being a clear indication on the packaging on the country of origin,” said Mr Busolo.
Agriculture Cabinet Secretary Willy Bett said the move aimed at tackling the production deficit, which currently averages half a million tonnes.
Import window
“We want to see our millers remain in operation. So far key millers like Mumias Sugar Company and Nzoia Sugar have had to temporarily halt operations due to an acute shortage of cane. The importation will give them a lifeline until the cane production stabilises,” said Mr Bett.
Kenya is facing a sugar shortage as a result of the long-drawn out drought that has hit parts of the country and the underperformance of the largest sugar miller, Mumias, which is facing a financial meltdown.
According to the Sugar Directorate, the imports amassed by August this year should be enough to last the country till the end of January 2018, as it seeks to stabilise prices at the current $1.06 per kilo from a high of $2.1 in April this year.
Tanzania, Uganda and Rwanda also face deficits as their production fell short of the consumption demands, pushing the price up. Cane prices have almost doubled, from $23.8 per tonne in April 2016 to $44.8 per currently, with production dropping from an average 500,000 tonnes to 410,000 tonnes.
Tanzania, whose factories have a production capacity of 320,000 tonnes, has relied on imports from South Africa and Brazil to meet the annual demand of 420,000 tonnes, through a strict import permit system overseen by President John Magufuli.
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tralac’s Daily News Selection
Underway in Moroni, Comoros: the 21st Meeting of Intergovernmental Committee of Experts – Eastern Africa on the theme Transformative growth in Eastern Africa – catalysts and constraints.
Profiled meeting reports:
The East African Monetary Union: ready or not? (pdf, draft report), Macroeconomic and Social Developments in Eastern Africa 2016-17 (pdf), Private sector development and manufacturing jobs in Eastern Africa (pdf), Background study on institutions, decentralization and structural transformation in Eastern Africa (pdf). Explore the full set of conference inputs here
Diarise: Promoting growth and economic transformation in Southern Africa: the challenges and implications of declining commodity prices (16-17 November, Walvis Bay, organised by the UNECA Office for Southern Africa, in collaboration with Walvis Bay Corridor Group)
Chirundu OSBP: improvement plan imminent (MoF Zambia)
Minister Mutati has noted that although Zambia and Zimbabwe were Africa’s pioneers in the establishment of the One Stop Border Post “we have not only been overtaken by other jurisdictions and regions in terms of the effectiveness of border operations, our inception target of eight hours clearance time for trucks has deteriorated to a dismal eight days or more.” He said: “We are going to take critical steps to address the problem and ensure that our regional and international competitiveness is escalated through reduction in cost of logistics and transport. In 2018, the Government will focus of domestic resource mobilisation; enhancing tax compliance; minimising revenue leakages; promoting a value for money mind-set; and, improving our general service delivery. The Government will implement service enhancement systems by the end of the year to improve monthly revenue collection targets,” and further added that “improved domestic resource mobilisation will enable the Government to effectively finance development programmes and service the public debt.”
Tanzania, Uganda one-stop border post to cut clearance time (Business Daily)
A second OSBP to be launched by the East Africa Community at Mutukula Town on the Uganda-Tanzania border will cut clearance time by one third, an official said. TMEA communications manager Ann Mbiruru cited a time and traffic survey at the Mutukula border which shows time spent crossing the border has reduced by over 50% after the first OSBP was opened. [George Wachira: Pipeline pact marks major milestone in success of LAPSSET]
Ghana: Police checkpoints still prevalent; 61 on Tema-Paga corridor (Graphic)
A recent fact-finding and advocacy trip on the Tema-Paga corridor by private and public sector stakeholders in the trade facilitation business showed that police checkpoints on the 766 kilometres road have risen from 42 in 2015 to 61 in the first week of November, this year. Organised under the theme “Promoting Ghana as a regional gateway; keeping goods and people moving”, the week-long event was a collaboration effort between the Borderless Alliance and West Africa Food Markets Program with support from USAID ADVANCE Project, Ghana Ports and Harbours Authority, the USAID West Africa Trade and Investments Hub, and the and Ghana Shippers Authority.
The Caravan team observed that beyond delaying the movement of goods, mostly transit trade meant for Ghana’s landlocked neighbours, the checkpoints are conduits for bribe-taking by security officers, who demand and take an average of GH¢10 to GH¢100 at every checkpoint. Mr Bright Senam Gowonu, a trade facilitation specialist at Borderless Alliance, said the team found that Burkinabe truck drivers hauling clinker from the Takoradi Port to that country pay the most bribes at the various police checkpoints. Unlike their counterparts, he said the clinker haulers, who are the new economic operators on the Ghanaian corridor, are mostly made to pay between GH¢50 and GH¢100 per police checkpoint, making them “an easy target for extortion and harassment”. Of the 61 checkpoints on the road, Mr Gowonu said 31 were found to be fixed while 30 were mobile. Seven are within the Accra-Kumasi Highway, nine on the Kumasi-Techiman Highway with 46 being on the Techima-Paga corridor, he added.
Malawi: From falling behind to catching up – a country economic memorandum (World Bank)
The book places a strong emphasis on assessing Malawi’s growth experience since independence from a comparative international perspective. This book first discusses Malawi’s macroeconomic situation and challenges in fiscal management, reviewing and drawing lessons from the instability, slippages, and shocks experienced since independence. Second, it explores the current state of agricultural markets, given the critical role of this sector in poverty reduction. Third, looking at the factors that may constrain higher growth in the future, challenges in private sector development and job creation are discussed. Building on the analysis of challenges, the book concludes with a summary of policy recommendations to help Malawi to begin catching up with its peers. Extract (pdf):
Malawi’s trade volumes are relatively small and highly imbalanced between imports and exports, which drives up trade costs. Despite impressive growth in the volume of Malawi’s trade, trade remains small by international standards at around 3 million tons a year. Trade is highly imbalanced between imports and exports, and this imbalance is exacerbated by Malawi’s narrow basket of products, as discussed in chapter 3. Most products traded undergo seasonal fluctuations, so large volumes are traded during the harvest season with moderate volumes throughout the remaining months (figure 4.4). Seasonal demand for transport leads to price spikes if the supply of transport services cannot adjust.
Trade imbalances are also exacerbated by the geographical trade pattern, as only a few trade routes are being used for Malawi’s cargo (figure 4.5). Certain goods have preferred corridors, and the segmentation of trade leads to further trade imbalances among the different corridors, especially because transport equipment is not always suitable for the return cargo (for example, fuel imports enter on tankers while agricultural exports exit in containers). Empty backhauls (as a result of imbalanced trade) are one of the key drivers of high international transport costs. Malawian transporters face a range of difficulties in competing with foreign transporters on international corridors. For a landlocked country like Malawi, efficient transit operations and procedures are of vital importance. However...: [ The authors: Richard Record, Praveen Kumar, Priscilla Kandoole]
Nigeria seeks to narrow budget gap with more non-oil revenue (Bloomberg)
Nigerian President Muhammadu Buhari is projecting the nation’s budget shortfall will narrow next year as revenue from non-oil sources increases. Buhari asked lawmakers on Tuesday to approve the 2018 budget with a deficit of 2 trillion naira ($5.6 billion), compared to this year’s estimated fiscal gap of 2.4 trillion naira. Non-oil revenue is projected to triple to 4.2 trillion naira and will include funds raised from “restructuring of government’s equity in joint ventures,” he said in his budget speech in the capital, Abuja, without providing more details. Lawmakers are required to approve the budget before spending can start. In the last two years delays of as much as six months in signing the budget into law held back spending on projects and weighed on economic growth. Africa’s biggest oil producer is rebounding after the economy contracted by 1.6 percent in 2016, the first such performance since 1991. [Related: Full text: President Buhari’s 2018 budget speech, Remarks of Senate President Dr Bukola Saraki at the 2018 Budget Presentation, Kemi Adeosun: Offshore tax havens, avoidance schemes not illegal, Moody’s downgrades Nigeria’s sovereign issuer rating to B2 with a stable outlook: statement]
Cape Verde aims for global trade hub status (Afreximbank)
Prime Minister Jose Correia e Silva of Cape Verde opened the Advanced Structured Trade Finance Seminar and Workshops organized by Afreximbank, saying the country was determined to become an international trade hub. “Cape Verde intends to be an international market,” the Prime Minister told Seminar participants. “We have developed a specific agenda to achieve that objective.” He stated that, in order to address the challenge of inadequate transportation lines among African countries, Cape Verde had initiated a plan to connect Africa and the rest of the world, using Cape Verde Island as a hub. That plan involved the inauguration of flights to Lagos and Accra next month and to Abidjan, Dakar and many other African cities thereafter, in order to increase intra-African trade. [AFREXIM to harness over $100bn investible funds for intra-African trade]
Gender and enterprise development in Sub-Saharan Africa: a review of constraints and effective interventions (World Bank)
Female participation in entrepreneurial activities is higher in Sub-Saharan Africa than in any other region. However, women-owned businesses significantly underperform those owned by men. In Sub-Saharan Africa, entrepreneurship is very important for women’s livelihoods, representing almost 50% of women’s non-farm labor force participation. Women are equally represented among entrepreneurs as men (Hallward-Driemeier, 2013). This sets Sub-Saharan Africa apart from all other regions in the world, especially the Middle East and North Africa, where there is a large gender gap in participation in entrepreneurship (Hallward-Driemeier, 2011; Kelley et al., 2012). However, even in Sub-Saharan Africa there are still important differences between businesses owned by women and those owned by men. Women entrepreneurs are very likely to work alone, while men are more likely to have employees, which is a reflection of the different sizes of their businesses. Moreover, firms owned by women tend to underperform those owned by men on a number of dimensions including profitability, survival rates, average size, and growth trajectory.
‘African disputes should be arbitrated in Africa’ (ThisDay)
The Chartered Institute of Arbitrators Nigeria Branch, held its 2017 Annual Conference in Lagos last week on the theme Strengthening the building blocks of arbitration in Africa. The Chairman of the Institute, Adedoyin Rhodes-Vivour, discussed frontline issues in Arbitration and ADR in Africa, and soliciting the support of the three arms of Government, to enhance Arbitration in Nigeria.
Assessment of laboratory competencies in the SADC region (pdf, UNIDO)
Recognizing the value of quality infrastructure for economic development, many Southern African countries requested UNIDO’s assistance for facilitating global trade and regional integration. As the quality culture improves in Africa, tested and certified products are winning consumers’ confidence and they demand better and safe products. To prove and verify the quality of goods, conformity assessment certificates are sought for. However, these certificates from the SADC region are often not nationally/internationally recognized, creating a barrier to trade. From the 175 laboratories assessed, only 31 are accredited against ISO/IEC 17025. 138 laboratories are not accredited, meaning they cannot provide internationally recognized services. Although 67% of the laboratories claim that they use the laboratory management standard ISO/IEC 17025, 73% of those laboratories have not been appropriately trained to deploy these standards. Thus, there is a need to increase the capacity of Southern African countries to verify compliance to standards and quality requirements.
Roadmap to accreditation: enhancement of laboratory competencies in Nigeria (pdf, Nigeria)
Over 60 of the original 78 laboratories remain committed and are continuing to strengthen their systems in preparation for accreditation some 18 months after the initial training. Approximately 20 of them are ready for accreditation and it is expected that many of the remaining 40 will achieve the same status. Laboratories representing other sectors in the Nigerian economy have indicated interest in this initiative. Labs, particularly, in the mineral sector, are coming forward to participate. [Related: Directory of Accredited Conformity Assessment Bodies in West Africa: August 2017 (pdf), ECOWAS holds consultative meeting towards Regional Quality Infrastructure]
Zambia launches its first National Financial Inclusion Strategy (World Bank)
The Government of Zambia has launched its National Financial Inclusion Strategy, as well as its Financial Sector Development Policy, and Financial Capability Survey Report with support from the World Bank Group. The strategy’s implementation is expected to hit several targets by 2022, including: (i) an increase in overall financial inclusion (formal as well as informal) from 59% now to 80% in 2022, and an increase in formal financial inclusion from 38% now to 70% then; (ii) and improved physical access to high-quality financial services, including bank branches, agents, and ATMs, so that the number of financial access points will increase from approximately 7 to 10 per 10,000 adults.
Botswana: State of the Nation Address 2017 (GoB)
Inflation, Trade and Foreign Exchange Reserves: According to Statistics Botswana, total imports for 2016 were valued at P66.9 billion, against P73.2 billion recorded in 2015, representing a fall of 8.6%. Total exports for the same period were valued at P80.3 billion, an increase of 26.5%, compared to P63.5 billion recorded in 2015. As a result, our trade balance was in surplus of P13.5 billion in 2016, resulting in a balance of payments surplus of P2.8 billion, in contrast to the deficit of P0.57 billion that was recorded for 2015. As of the end August 2017, our foreign exchange reserves were valued at P 76.6 billion, which is equivalent to 17 months of import cover. Of the total reserves, the Government Investment Account amounted to P32.1 billion. Our exchange rate policy continues to support competitiveness of local industries in both domestic and international markets by maintaining the stability of the Pula against a basket of leading currencies.
Today’s Quick Links: Preview: Joint EAC Heads of State Retreat on Infrastructure and Health Financing and Development EAC, EABC meet to discuss areas of collaboration IGAD Operational Plan 2018: workshop update World Bank: Small firm death in developing countries 5 things you may have missed from the ICC Banking Commission’s 2017 Technical Meeting UN Security Council urges ‘comprehensive response’ to piracy off Somali coast |
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Experts to discuss the challenges and implications of declining commodity prices in Southern Africa
The Economic Commission for Africa (ECA) Office for Southern Africa, in collaboration with the Walvis Bay Corridor Group (WBCG), will organize the Ad-hoc Expert Group Meeting (AEGM) on the theme “Promoting Growth and Economic Transformation in Southern Africa: The Challenges and Implications of Declining Commodity Prices” on 16 and 17 November 2017 at Walvis Bay, Namibia.
The recent call for accelerated industrialization in Southern Africa through the SADC Industrialization Strategy and Roadmap and attendant national industrial policies has elevated the need for diversification.
As such, there is wide recognition that the sub-region needs to diversify its economic structure, but obstacles and challenges remain. Whether Southern Africa will be able to turn the current commodity price downturn into an opportunity remains to be seen.
Given that high dependence on primary commodities is not sustainable and population growth is between 2 and 3 per cent per year in most Southern African nations, adequate jobs will need to be created to keep pace with the growing number of people.
Additionally, the negative effects of the El Nino and other weather-related phenomena have compounded the adverse effects of the commodity price decline putting food security at risk.
The meeting will review the consequences of dependency on primary commodities in Southern Africa in the face of low and declining prices, and explore policy options and recommend strategies towards addressing the associated challenges.
It will also discuss the opportunities for economic diversification from commodities and the risks posed by low commodity prices; explore options for participation in regional and global value chains and proffer recommendations on how Southern Africa can better prepare for future commodity super-cycles.
Participants will review the report on “Promoting Growth and Economic Transformation in Southern Africa: The Challenges and Implications of Declining Commodity Prices” and provide recommendations to improve the draft.
The meeting will be attended by experts in the areas of development economics, international development, trade and regional integration, academia, government, regional economic communities, development partners, private sector and civil society.
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East Africans discuss how to pave the way for transformative growth
Industrial-led growth is an important driver in achieving national development targets. This was underscored at the 21st meeting of the Intergovernmental Committee of Experts (ICE) of Eastern Africa that opened this Tuesday at Retaj Moroni Hotel in Comoros.
Over 200 participants from 14 countries have gathered to discuss catalysts and constraints to transformative growth in Eastern Africa. Among the constraints, the lacklustre performance of the manufacturing sector was highlighted.
The three-day meeting was jointly organized jointly by the Economic Commission for Africa, through its regional office, and the Government of Comoros.
Speaking at the opening of the meeting, Mr. Djaffar Ahmed Said Hassani, the Vice President in charge of Economy, Planning, Industry, Crafts, Investments, Private Sector and Land Affairs of the Union of Comoros, said that the meeting happens at an opportune time when the Union has reaffirmed its vision to make the Comoros an emerging country by 2030.
“Growth in the region has been picking up, we can now hope put an end to afro-pessimism,” said the Vice President.
For the last 5 years, the ECA has been urging African countries to match their developmental ambitions with manufacturing and industrialization efforts that generate more employment opportunities. The meeting is set to take stock of the progress made on that journey towards transformation.
In his opening speech, Mr. Andrew Mold, the Acting Director of ECA in Eastern Africa, stressed that “the main objective of this meeting is to discuss catalysts and constraints for attaining a more sustainable and inclusive growth, and the meeting is intended to allow member states to exchange experiences to avoid the more obvious pitfalls.“
The meeting is also a platform to share best practices. The Governor of Ngazidja speaking on behalf of the Minister of Finance, Mr. Hamadi Hassani said he was pleased to bring together policymakers and experts from across the region to discuss development challenges and potential solutions. “Our country is progressing rapidly, and we are delighted that the neighbouring countries have trusted us to host such a great event,” said Mr. Hassani.
Matthias Naab, the Resident Coordinator of the United Nations System and the Representative of UNDP in Comoros, added that the meeting is a “great opportunity for the country economic integration”.
Tourism, private sector development, infrastructure and the blue economy are among the topics to be discussed during the meeting.
ECA appeals for stronger growth in Eastern Africa
The economic performance of Eastern Africa has been impressive over the past decade and a half. Yet economic growth moderated markedly in 2016 and 2017, with an average growth rate of 5.6% compared to 6.8% between 2012 and 2015.
For this reason, it is essential to unlock the full potential for economic transformation in the region, insisted the participants of the 21st session of the Intergovernmental Committee of Experts (ICE), in Moroni, Comoros.
During the first session focusing on Macroeconomic and Social Developments in Eastern Africa, Andrew Mold, the Acting Director of ECA in Eastern Africa, stressed the need to identify the principal catalysts and constraints to growth in the region. He argued that growth has been stimulated by investments in infrastructure (the level of investments in the region has increased from 22% in 2015 to 26% in 2016), and the dynamism of the services sector.
The region also achieved impressive some results with respect to the Millennium Development Goals: for instance, the poverty rate halved in Uganda and Ethiopia, while in Rwanda maternal mortality declined by 78%. Average incomes have also significantly improved. In the region, per capita income has doubled over the past decade, from 350 USD in 2006 to 740 USD in 2016.
However, growth has slowed down in recent years, mainly due to droughts that have affected agricultural production. More than 30 million people are currently suffering severe food insecurity in Eastern Africa.
The stagnating or declining share of the manufacturing sector in GDP has been limiting progress towards economic transformation and job creation. Another impediment to growth is the cost and poor access to credit for private sector development.
The ECA supports governments in the region to foster the structural transformation of their economies. The Moroni meeting is a platform to share best practices towards more efficient policies.
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Zambia makes steady progress in financial inclusion but many women still excluded
Almost 40 percent of Zambia’s adult population are formally financially included, or over 3.5 million people. This is according to the FinScope Zambia 2015 survey, which says the levels of formal financial inclusion have gradually increased in Zambia – from 23 percent of Zambian adults in 2009, to 38 percent in 2015.
This is due to more financial access point coverage and concerted government efforts to create an environment conducive to greater inclusion. Women are still more financially excluded, though, with only 2 out of 5 having access to formal financial services.
“Women must not fear banks,” says Mary Banda, who runs a small restaurant in Kamwala market, one of Lusaka’s oldest markets. “It is very important to save money because the informal sector where we operate has no social security.”
“Financial services must bring their services closer by opening banking kiosks,” she added. “Many women in markets are discouraged from saving in banks, because it is time consuming and they cannot leave their businesses unattended for a long time.”
World Bank support
The World Bank is helping the Zambian government to advance financial inclusion through the Financial Inclusion Support Framework Country Support Program (FISF-CSP). “The Bank’s support will contribute to increasing the usage, access, and quality of financial services for individuals and enterprises,” said Ina Ruthenberg, World Bank Country Manager for Zambia.
This support from FISF-CSP involves: the development of the National Financial Inclusion Strategy and its early implementation; the development of financial infrastructure; the strengthening of financial consumer protection and financial capability; and the promotion of diversified financial services.
And now Zambia has joined more than 30 countries to launch strategies for financial inclusion.
On November 8, 2017, the Government of Zambia disseminated three documents – the National Financial Inclusion Strategy, the Financial Sector Development Policy, and Financial Capability Survey Report. The three documents will help strengthen the development of the financial sector in Zambia.
The strategy, policy and the survey report are a product of extensive stakeholder consultations with members of the public sector, private sector, civil society organizations, and academia led by the Government’s National Financial Inclusion Drafting Committee. The strategy will guide Zambia in its plan to achieve the universal access and use of a broad range of affordable financial products and services.
“Enhancing the financial sector will enable all Zambians to reap the full benefit of financial inclusion,” said Zambia’s Finance Minister, Felix Mutati. He said these improvements included helping individuals find the right savings, credit, payment, insurance, and investment services to plan and manage their risks, and helping firms access affordable financing to facilitate innovation, growth, and employment.
“The strategy will provide a detailed roadmap and concrete actions to build an inclusive and competitive financial sector in Zambia,” said Uzma Khalil, the Bank’s Country Senior Financial Sector Specialist. “Successful implementation of the strategy requires strong commitment and concerted efforts from all stakeholders – the government, private sector, civil society and the academia.”
Among the many challenges identified in Zambia’s financial sector, low financial capabilities and little willingness to use formal financial products and services are key to increase usage of formal financial services. In response to these challenges, the Government of Zambia requested the World Bank Group’s support in its efforts to increase financial inclusion. By launching the strategy, Zambia has joined more than 30 countries that have launch similar strategies.
“Financial inclusion is a priority for the World Bank for achieving universal financial access by 2020, and is vital to help overcome the challenge of eradicating extreme poverty and increasing shared prosperity,” said Paul Noumba Um, World Bank Country Director for Botswana, Lesotho, Namibia, South Africa, Swaziland, Zambia, and Zimbabwe.
The strategy’s implementation is expected to hit several targets by 2022, including: i) an increase in overall financial inclusion (formal as well as informal) from 59 percent now to 80 percent in 2022, and an increase in formal financial inclusion from 38 percent now to 70 percent then; ii) and improved physical access to high-quality financial services, including bank branches, agents, and ATMs, so that the number of financial access points will increase from approximately 7 to 10 per 10,000 adults.
The capability survey report launched alongside the strategy and policy reveals the relationship between financial capability and financial inclusion. One of the findings shows that Zambians with low financial literacy tend to be less financially included and to use more informal products than those with higher levels of financial literacy.
Download
pdf Zambia National Financial Inclusion Strategy 2017-2022 (3.45 MB)
pdf Zambia National Financial Sector Development Policy 2017 (1.71 MB)
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Cape Verde aims for global trade hub status, participants in structured trade finance event hear
Prime Minister Jose Correia e Silva of Cape Verde on 6 November 2017 in Sal, Cape Verde, opened the Advanced Structured Trade Finance Seminar and Workshops organized by the African Export-Import Bank (Afreximbank), saying that the country was determined to become an international trade hub.
“Cape Verde intends to be an international market,” the Prime Minister told Seminar participants. “We have developed a specific agenda to achieve that objective.”
He stated that, in order to address the challenge of inadequate transportation lines among African countries, Cape Verde had initiated a plan to connect Africa and the rest of the world, using Cape Verde Island as a hub. That plan involved the inauguration of flights to Lagos and Accra next month and to Abidjan, Dakar and many other African cities thereafter, in order to increase intra-African trade.
Earlier, Dr. Benedict Oramah, President of Afreximbank, said that the structured trade finance training was meant to equip participants with the skills to structure bankable trade and supply chain finance deals of varying levels of complexity and to prepare them as agents for driving intra-African trade and structural transformation of the continent. It was also intended to bring to the fore the rapid changes affecting trade financing and what they might mean for the way deals were originated and structured.
Dr. Oramah said that there was growing realisation of the urgent need for Africa to become more integrated, trade more with itself and create the necessary environment to drive intra-regional investments as a means to accelerating development. Intra-African trade could only expand if Africa produced more diversified products and risks associated with financing of such trade could be adequately mitigated, he said.
“The role of financing in all of these cannot be overemphasized,” said the President. “Due to novelty of regional markets, there is the need to create instruments that will mitigate payment risks, including country risks, for traders.”
“Bankers doing business in Africa have to be adaptive and responsive to the needs of the continent and the evolving operating environment,” he said.
Referring to the role of technology in supply chain finance, he stated that block chain technology, artificial intelligence and the spread of mobile payments had implications on the skills, technology and regulatory framework that would govern trade financing into the future. African bankers and banks should, therefore, be prepared for the rapidly changing business environment.
Dr Oramah identified data as an emerging new commodity class and argued that the “entity that controls data is the entity that controls the world”.
He commended the Government of Cape Verde for the bold actions it was taking to achieve economic transformation, including effort to make the island of Cape Verde a major hub for aviation and the implementation of financial sector reforms which could make the country an important financial centre, and pledged Afreximbank’s readiness to be Cape Verde’s trusted ally.
Also speaking, Olavo Correia, Finance Minister of Cape Verde, said that it was critically important to use the Structured Trade Finance seminar to strengthen the link between the financing of trade and fostering of intra African trade.
The seminar and workshops, the 17th in the series, is being attended by more than 200 high-profile participants, including chief executive officers, managing directors and senior managers representing banks, other financial institutions, and entities involved in promoting trade. About 1,600 African trade finance professionals have taken part in the seminars and workshops since they were introduced. This year’s event will end on 9 November.
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Chirundu OSBP improvement plan coming
Africa’s pioneer One-Stop-Border Post, located between Zambia and Zimbabwe at Chirundu, is no longer operating as efficiently as originally intended, Minister of Finance Felix Mutati and Zambia Revenue Authority Commissioner General Kingsley Chanda have both acknowledged.
The world-class trade facilitation establishment was created in 2009 to set the clearing time of commercial vehicles [trucks] to not more than eight hours as indicated in the customs charter between the two sister Republics of Zambia and Zimbabwe. Currently however, trucks are taking as long as two-weeks to be cleared.
Both the Minister and the Commissioner General were speaking when Mr. Mutati visited Chirundu-One-Stop-Border for an on-the-spot-check, following complaints tendered by cross border merchants on the inordinate delays in the clearance of trucks and other commercial vehicles.
While admitting the weaknesses on the customs side, Mr. Chanda paid tribute to the Immigration Department for their speedy and efficient service delivery whereby clients are cleared in less than ten minutes.
And Minister Mutati has noted that, although Zambia and Zimbabwe were Africa’s pioneers in the establishment of the One-Stop-Border, “we have not only been overtaken by other jurisdictions and regions in terms of the effectiveness of border operations, our inception target of eight hours clearance time for trucks has deteriorated to a dismal eight days or more.”
“We are going to take critical steps to address the problem and ensure that our regional and international competitiveness is escalated through reduction in cost of logistics and transport,” said the Minister.
He also explained that, “a component of the cost of doing business is the time that it takes for trucks to be cleared at the border.”
Mr. Mutati expressed confidence that if the clearing challenges at Chirundu border were addressed, there would be a positive impact on the cost of doing business.
“In 2018, the Government will focus of domestic resource mobilisation; enhancing tax compliance; minimising revenue leakages; promoting a value for money mind-set; and, improving our general service delivery,” stated Mr. Mutati to an audience which comprised of members of the media, district officials, inter-agency representatives, clearing agents, and ZRA personnel.
“The Government will implement service enhancement systems by the end of the year to improve monthly revenue collection targets,” he said, and further added that, “improved domestic resource mobilisation will enable the Government to effectively finance development programmes and service the public debt.”
“The less hustle we extend to tax payers by minimising the time they spend at the border, the happier we make them,” lamented Mr. Mutati and then said, “I remain confident that we will turn things around and extend the exercise to Kazungula, Livingstone, Kasumbalesa, and Nakonde borders.”
The Minister further urged the Zambia Revenue Authority to adopt the Seventh National Development Plan approach of working in clusters by engaging other border management agencies in order to optimise operational efficiency.
Mr. Mutati went on to praise the Immigration Department for their efficiency while decrying the slow pace of operations on the commercial side managed by other Government agencies.
“We need to be bullish about this matter; so we will meet in ten days to begin the solution implementation process,” he said.
And the Commissioner General assured the Minister of the Revenue Authority’s capacity to turn things around, stating that, “we have the money to do so.”
“Customs clearing companies are a key stakeholder in the clearing of goods at borders worldwide,” said Mr. Chanda.
He also said, “we will the clearing companies with facilities, where possible, to ensure that they embrace the concept of electronic payment systems and pre-clear goods to improve border clearance operations.”
A week ago, Mr. Chanda said the Zambian Revenue Authority will invest in modernisation, automation, and innovation in order to boost domestic revenue mobilisation; with a special focus on VAT and Excise Duty.
Mr. Chanda made the assurance at the conclusion of the Zambian delegations’ tour of duty at the just ended 2017 Annual Meetings of The IMF and The World Bank held in Washington, DC, United States of America.
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tralac’s Daily News Selection
Underway in Abuja: The 4th, and last, meeting of the Continental Free Trade Area technical working groups
Underway in Lusaka: 1st African Union Symposium on Special Economic Zones and Industrial Development. Inter alia, the symposum will collect ideas for the development of an Africa SEZ Network and an AU-China SEZ study tour programme.
The AfDB is hosting an African pension funds roundtable (7-8 November). @mfw4a update: On Day 1, AfDB Group focuses on identifying recent trends, regulatory frameworks and investment portfolio
@SimnHess: Happening now – Tanzania DTISU validation workshop: bringing private sector, government and donors around a common set of trade priorities. Tanzania DTIS looks at accelerating development through tourism - a sector that generated $2.2bn in revenue; 467000 direct and 1.3m indirect jobs!
Diarise: 2017 PIDA Week (10-14 December, Walvis Bay) on the theme Enhancing trade and economic transformation through regional infrastructure development
Special update on Investor-State Dispute Settlement (UNCTAD)
The new ISDS cases in 2017 were commenced against 32 countries. Five countries and economies – Bahrain, Benin, Iraq, Kuwait and Taiwan Province of China – faced their first (known) ISDS claims. Developed-country investors brought about two thirds of the 35 known cases. Looking at the overall outcomes of some 530 cases concluded as of 31 July 2017, about one third were decided in favour of the State and one quarter in favour of the investor (the remaining cases were settled, discontinued or decided in favour of neither party). On average, a successful claimant was awarded some $522m, corresponding to about 40% of the amount claimed. Claimants alleged breaches of fair and equitable treatment in about 80% of ISDS cases for which such information was available, followed by indirect expropriation with 75%.
Formulating bankable aid for trade projects in Africa: guidance document (ATPC/UNECA)
The guide is not meant to be a blueprint (pdf), nor is it meant to be exhaustive. It aims to enable the systematic analysis of the constraints to trade for countries or regions, the identification of needs, and the formulation of project and programme proposals that are “bankable” and ready to be presented to development partners for funding under the broad umbrella of AfT. The audience is wide, ranging from those preparing project proposals and concept notes (potential beneficiaries, development partners, consultants, etc.) to those reviewing and approving project proposals (the funders).
Nairobi faults Dar ‘hostile’ trade actions (Business Day)
Kenya has formally protested to Tanzania over what Nairobi terms as “a policy shift that condones hostile actions against Kenyan citizens and their business interests.” On Monday, Foreign Affairs Political and Diplomatic Secretary Tom Amollo criticised Dar es Salaam’s decision to burn chicks imported from Kenya as well as auctioning of animals from Kenyan herders, without involving authorities in Nairobi, saying such actions risk soiling historical relations between the countries. The move followed the summoning of Tanzanian High Commissioner to Kenya, Dr Pindi Hazara Chana, by Kenyan officials to protest what they called Tanzania’s unilateral actions on issues affecting the two countries. ”Kenya/Tanzania relations are longstanding, rich and complex and should not be jeopardised by a hardening of positions over minor issues that can be easily resolved through candid and open dialogue,” Mr Amollo told the Tanzanian envoy during a lengthy meeting in Nairobi. “There may be need to urgently convene the Kenya/Tanzania Joint Border Commissioners/Administrators Committee Meeting, (Ujirani Mwema), to address emerging cross border issues.”
Kenya: Tea exports to top markets fall 17% in quarter three (Business Daily)
Tea exports to Kenya’s major markets in the year to September dropped 17% compared with corresponding period in 2016 with some top buyers registering significant cuts. Statistics from the Tea Directorate indicate the volume of exports fell to 320 million kgs, from 387 kgs last year. The September report shows the total volume exported to the UK and Egypt dropped 39% and 14% respectively as the drought bit. Egypt is the second largest buyer followed by UK at number three. Pakistan is the top buyer. Tea was shipped to 39 export destinations compared with 41 markets for the same period in 2016. Pakistan led with 9.91 million kgs, accounting for 28% of the total volume.
EAC border posts for full operations next January (Tanzania Daily News)
All OSBPs along borders separating the East African countries will be fully operational by next January 2018, an official at the EAC Secretariat has confirmed. The East African region has identified 15 border posts in Kenya, Rwanda, Uganda, Burundi and Tanzania for conversion from ‘two-stop’ border posts into single premises entity, or OSBPs, to facilitate movement of people and goods across the region. An official with the EAC Secretariat confirmed here yesterday that two mapped OSBPs in Longido, Tanzania and Kajiado in Kenya are scheduled for official launch by President John Magufuli. Others posts like the Na manga border however still lack installation of modern equipment for speedy and smooth clearance. Ten years after the project initiation, works on 12 OSBPs are complete, with one on the final stage while two others scheduled for completion and full operations by early 2018, according to Senior Public Relations Officer with EAC Secretariat Simon Owaka.
The Moroto Dialogue: Combating cross-border corruption (UNDP Ethiopia)
During the long dry seasons, the cattle keeping people of Karamoja will cross over into Kenya looking for water and pasture for their animals. The same is true for their brothers from the Turkana region of Kenya. This may sometimes result into conflict over the scarce water and pasture. This is one of the challenges that East Africa’s porous borders face. With globalisation, borders are now more open allowing easier movement of people, goods and capital among other things. While this is great for trade, border control authorities also have to deal with the challenges it comes with which include human and drug trafficking and illicit flow of firearms linked to terrorist and extremist groups.
Nigeria trade and development postings:
(i) Note: President Buhari will present the 2018 budget today
(ii) Kemi Adeosun, Nigeria’s finance minister: Nigeria is not an oil economy. Descriptions of Nigeria’s economy often include such phrases as ‘Africa’s largest oil producer’ and ‘the oil rich African nation’. But, oil economies are typically characterised by low population densities and abundant oil resources. Typical of such descriptions are Saudi Arabia, with a 10 million barrels of oil per day output and 30 million people. Kuwait, with 2.7 million barrels of oil per day, has four million people. And Qatar, with 1.5 million barrels of oil per day, has 2.5 million people. These economies pursued an economic model that was built around a large government dependent almost entirely on oil revenue for funding its programmes and activities. Such economies could afford to have low, or in some cases, no domestic revenue mobilisation, in the form of taxes. Tax to GDP ratios of less than 10%, against the OECD average of 34.6%, could be justified, especially in the era of high oil prices. For over three decades, Nigeria pursued this model. But, things have been changing, with the election of President Muhammadu Buhari in 2015, propelled into office under the mantra of ‘change’. That clamour for change, in the areas of good governance, security and economy, coincided with the collapse of global oil prices and a consequent huge deficit in government revenues.
(iii) Financial Times special report: Investing in Nigeria
(iv) Nigeria Investment Promotion Commission launches Compendium of Investment Incentives. The Compendium is a compilation of tax, tariff, export and sector based incentives, approved by Federal Government of Nigeria and supported by various legislation. NIPC, through the Compendium (pdf), aims to provide existing and new investors relevant information on available incentives with the overall objective of promoting new and incremental investments in Nigeria. The Compendium is based on the 2016 Fiscal Policy which cuts across all industries and sectors. However, this first edition covers the following sectors: Agriculture/Agro-allied, Solid minerals, Manufacturing, Tourism/hospitality, Oil and gas.
Lagos Chamber of Commerce and Industry: profiled recent resources. (i) Sahel Capital presentation on Nigeria’s agriculture sector, value chain (pdf); (ii) Federal Ministry of Agriculture and Rural Development presentation (pdf), (iii) LCCI Forum on EU-ECOWAS Economic Partnership Agreement (pdf); (iv) LCCI Oil Producers Trade Section: costs of Nigeria’s oil and gas projects higher by 100%
Nigerian telcos support removal of roaming charges across ECOWAS (Punch)
The Association of Licenced Telecommunications Operators of Nigeria says elimination of call roaming charges in the ECOWAS sub region will drive more traffic for Nigerian telco operators. The President of the association, Mr. Gbenga Adebayo, while speaking with our correspondent, said the plan would reduce the practice of not using Nigerian network lines when people travelled to other African countries.
Trade finance: Afreximbank Guarantee Programme launched
The AFGAP programme, which offers a variety of credit enhancement solution to clients in Africa, is part of Exim-plus, a broad strategy developed by Afreximbank to position itself as a comprehensive trade facilitation and financing solution centre in Africa. Under Exim-plus, Afreximbank is offering a broad array of instruments that are often associated with export credit agencies and other specialized trade and development finance institutions, thereby differentiating itself from normal commercial banks and development financial institutions. Afreximbank’s Executive Vice President in charge of Business Development and Corporate Banking, Amr Kamel, said AFGAP would bring “additionality” to Africa, by mobilizing financing that would otherwise not have been possible, to support the economic development of the continent
Tanzania Economic Update: Raising the watermark in Tanzania’s growth and poverty reduction picture (World Bank)
This example illustrates one of the key challenges of water resource management: the need for proactively managing trade-offs in water use across many different stakeholders. Water is a multifaceted resource, critical not only to human welfare and the environment, but also for a country’s economic fortunes. It is against this backdrop that the latest Tanzania Economic Update describes the urgent need for better water resource management to ensure that water does not put a brake on Tanzania’s development.
Poor policy slowing Kenya’s ICT sector as neighbours take lead (The Standard)
Today, much of the traction witnessed in the last seven years has slowed to a crawl. Growth in Kenya’s ICT sector has petered out and the country is now struggling to attract fresh technology financing and prove its competitiveness amidst competition from new emerging markets such as Rwanda and Ethiopia. A recent report looking into startup financing in the region found that local e-health startups barely managed to take two per cent of Sh1.9 billion in funding that went to the sector in the last three years. At face value, the numbers paint the picture of an industry that is doing well.
IMF’s Abebe Aemro Selassie: Sustaining high growth in Sub-Saharan Africa (IMF)
As Lant Pritchett has noted, the development process occurs across a number of dimensions; political, administrative, economic and social. And Africa has seen progress across each of these dimensions to varying degrees. On the political front, an increasing number of countries have moved from unconstrained leaders to systems with more checks and balances. In some cases, we are home to some of the world’s most boisterous democracies. Administratively, many countries now have reasonably independent central banks, are able to provide basic services and regulatory and judicial frameworks are developing. By no means are these political and administrative institutions ideal, but they are no longer as inimical to growth as they used to be. And playing off this, we’ve seen many more episodes of sustained growth accelerations, replacing the episodes of boom and bust. Since 1990, three quarters of the countries in the region have registered at least 10 years of uninterrupted growth, and over one-third of the countries have registered 20 years or more of uninterrupted growth. This has occurred alongside much improved human development outcomes.
A preview of the World Bank’s Innovating Bureaucracy conference, starting tomorrow
Although we may think of bureaucrats as a largely entrenched “old guard”, the dataset shows otherwise. In fact, the mean age of public sector employees is a mere 41 years old, just 5 years older than the private sector average (36). In the developing world, public sector workers are actually younger, on average, than public servants in high-income countries. For example, in Ethiopia, public servants are generally around 35 years old, while their equivalents in the US are over 44 years old. Overall, lower-income public servants are about 2 years younger across the globe. [The author: Daniel Walker]
Today’s Quick Links: Pakistan: `Look Africa’ plan prepared to boost trade Irene Yuan Sun: Africa will take China’s place as the next factory of the world Uganda’s coffee meets Sudan’s new export standards ECOWAS Regional Customs Training Strategy: WCO update World Bank: State and trends of carbon pricing 2017 |
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1st AU Symposium on Special Economic Zones and Industrial Development
The first African Union Symposium on Special Economic Zones and Industrial Development takes place at the Best Western Plus Lusaka Grand Hotel in Lusaka, Zambia from 7-10 November 2017.
The objective of the Symposium is to provide a platform for policy-makers, practitioners, financial institutions, multilateral organizations and academia to exchange views and experiences on how special economic zones (SEZs) can be utilized as vehicles for sustainable industrialization in African countries.
The Symposium is guided by the African Union’s Agenda 2063 and its First 10-year Implementation Plan, the Action Plan for the Accelerated Industrial Development of Africa (AIDA), the Programme for Infrastructure Development in Africa (PIDA) and the United Nations Sustainable Development Goals (SDGs).
In particular, the Symposium will:
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Share African SEZ success stories and foster the exchange of lessons learned;
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Identify SEZ development and management needs of African governments;
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Facilitate the exchange of experiences among African SEZ policy-makers, developers and managers as well as interaction with their international counterparts;
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Showcase how SEZs can drive sustainable development in Africa;
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Collect ideas for the development of an Africa SEZ Network and an African Union-China SEZ Study Tour Programme.
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Formulating bankable Aid for Trade projects in Africa
This document introduces broad guidelines on how to develop bankable Aid for Trade (AfT) projects and programmes and successfully position these within the AfT initiative, taking into account current perspectives and requirements of key AfT development partners.
The guide is not meant to be a blueprint, nor is it meant to be exhaustive. It aims to enable the systematic analysis of the constraints to trade for countries or regions, the identification of needs, and the formulation of project and programme proposals that are “bankable” and ready to be presented to development partners for funding under the broad umbrella of AfT.
Why are these guidelines needed?
There are very large disparities in AfT per capita in Africa and a low level of correlation between potential demand and supply. Karingi and Fabbroni (2009) find that countries most in need are those showing the worst values across a selection of trade-related performance indicators.
In financial terms, a bankable project would usually refer to a project that lenders are willing to finance since there will be a financial return on the investment. However, in the aid context, a bankable AfT project is one which development partners are willing to fund since they are confident of a positive and sufficient effect on the capacity of the beneficiary (e.g. greater regional integration, increased trade capacity, growth, poverty reduction, etc.). A bankable project could be described as a “good quality project [expected to deliver the desired results] addressing relevant needs and falling inside the development partner priorities at the right time”. However, this does not translate into higher levels of AfT supply. In fact, there is an extremely weak relationship between need or demand and supply of AfT in per capita terms.
Many developing countries face substantial difficulties in developing bankable projects and programmes based on their identified needs. According to the results of the 2011 Organization for Economic Cooperation and Development (OECD)/World Trade Organization (WTO) AfT questionnaire, 65 per cent of respondents stated difficulties in designing bankable projects as one of the “most important” or “important” challenges in accessing trade-related funding. Recent survey results confirm this remains the case and show that both African countries and regional economic communities face difficulties in developing bankable project proposals and clearly identifying needs and associated priorities. These challenges are ranked as “the most critical in hampering an adequate resource mobilization through AfT”.
Preparing the case for funding
As with any finite resource, there is competition for AfT resources. Priorities need to be established and choices made. Securing support requires a carefully considered and well argued “business case” or “pitch” that appeals to the funder. As discussed by the World Bank (2011), the case needs to demonstrate that allocating resources to any particular programme, project or activity is an investment rather than merely a cost, not just to the funder but also the wider constituency. Naturally, the more complex the programme the greater the effort required to prepare the business case. Economic analysis is useful in setting the context and calculating costs and benefits of new investments. It is important to contextualize the evidence and demonstrate relevance to a particular country or region.
In summary, the best proposals are comprehensive yet concise, tailored to a specific funder (in terms of priorities, formats and approach), evidence-based, demonstrate credibility and track record, and are realistic in terms of what can be achieved.
This guideline document is a key output of an assignment to provide technical support for enhancing the formulation of bankable AfT projects in Africa, which is part of a larger project to provide technical support for the successful implementation of the UN Development Account project on “Facilitating the effective integration of developing countries in the global economy through Aid for Trade schemes” led by ECA.
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Managing water wisely: The urgent need to improve water resources management in Tanzania
The tenth edition of the Tanzania Economic Update contains the World Bank’s regular review of Tanzania’s economy and near term outlook, and a special focus chapter on the pressing issue of water resource management.
The report comes at a critical juncture in the country’s development history: the Fifth Phase Government has outlined an ambitious vision for the country, in which it envisages Tanzania becoming a semi-industrialized nation by 2025. Eighteen months on from the plan’s inception, this report provides an update on the state of the economy and aims to make a positive contribution to the challenges encountered.
Part One presents a discussion and analysis of Tanzania’s recent macroeconomic and fiscal performance, with an updated outlook for the near term. Part Two presents an analysis of Tanzania’s management of its water resources, showing that the management of these resources has massive implications for Tanzania’s people, its economy and its environment, and that there is an urgent need for improvements.
Raising the watermark in Tanzania’s growth and poverty reduction picture
Tanzania is relatively blessed with its water resources.
Yet over the past 25 years, the country’s population has doubled to about 53 million and the size of its economy has more than tripled. As a result, Tanzania’s per capita amount of renewable freshwater has declined, from more than 3,000m3 to about 1,600m3 per person today – below the 1,700m3 level that is internationally considered to be the threshold for water stress.
Perhaps the most poignant picture that captures the scale of the stress would be the Great Ruaha river, which flows through the Usangu wetlands and the Ruaha National Park into the Rufiji River. To call it “Great,” as its name suggests, might be something of a misnomer today.
The river is a shadow of its former self, running dry for 2-4 months each year. With its wet season water flow now also under threat, communities and industries downstream – including hydropower generation – are under increasing stress.
The situation is also endangering wildlife in the Ruaha National Park, and the tourist income that comes from it. The primary cause of this change is the expanding amount of informal irrigation upstream. For the individual farmers concerned, irrigation provides much needed economic opportunities, but the cumulative effect on the river system is unsustainable.
Finding trade-offs
This example illustrates one of the key challenges of water resource management: the need for proactively managing trade-offs in water use across many different stakeholders.
Water is a multifaceted resource, critical not only to human welfare and the environment, but also for a country’s economic fortunes. It is against this backdrop that the latest Tanzania Economic Update, published by the World Bank on 6 November 2017, describes the urgent need for better water resource management to ensure that water does not put a brake on Tanzania’s development.
Around 89 percent of Tanzania’s water is used for agriculture (compared to a global average of 70 percent), about 10 percent for domestic consumption (on a par with global averages), and about one percent by the industrial sector (which is very low by global standards).
Tanzania’s path of economic growth will require a lot more than 1 percent of its water for industry, and so one key challenge will be working out how to reduce the large quantity of water consumed by agriculture, while increasing food production and protecting rural livelihoods.
Droughts cause shocks
Water is also a cause of economic shocks: in the past 15 years, there have been seven significant droughts in Tanzania. The country’s agricultural productivity suffers an estimated annual loss of about $200 million because of weather-related risks, especially drought.
Earlier in 2017, aggregate food prices increased by 12 percent, due to drought-related food shortages. Hydropower production, which accounts for around 42 percent of energy generation in Tanzania, also declines during droughts, creating major additional generation costs.
Tanzania has made progress toward increasing household access to water supplies, with 63 percent of the population now having access to a basic water supply. On the other hand, only 27% of the population has access to basic and improved sanitation.
While the absolute amounts of water required for domestic water and sanitation are not great, ensuring water sources are sustainable, not polluted, and properly managed is critical. Tanzania’s major cities, including Dar es Salaam, Arusha, and Morogoro take their water from stressed rivers with inadequate source protection, while Dodoma – site of the country’s political capital – relies almost entirely on groundwater.
Managing solutions
The challenge is how to manage water better.
One key step is to allocate water to uses that maximize the economic, social, and environmental benefits for the country. Trade-offs in water use, such as between agriculture and hydropower production, are already taking place, but it is not clear that they are happening in ways that maximize benefits for Tanzania. Such trade-offs will require clearer institutional mandates, stronger coordination across sectors, strong enforcement, and better prioritization of water-related investments. In short, it requires political as well as technical leadership.
Another key part of managing water better is to value it appropriately. Tanzania needs to value and price water in ways that reflect its growing scarcity, and to create disincentives to wasting water, as well as recognizing its differing values to households, farmers, cities, and industrialists. Subsidizing small amounts of household water for the poor is reasonable; subsidizing large amounts of water for industry, farmers, and utilities is not.
Bulk raw water prices (that is, the cost prior to water treatment and its delivery to houses) in the Wami-Ruvu basin are so low that running a tap for an entire year would cost around $2.60.
Finally, it’s often said that you can’t manage what you can’t measure. This is particularly true for water, where good information can make trade-offs easier to manage, reduce loss and waste, and help minimize the social and economic impact of droughts and floods. Data on water is relatively scarce in Tanzania, particularly data on groundwater, the quality water, and its use. Investing in better data collection, including in new technologies, as well as in stronger institutions and prioritized infrastructure should be an economic priority for the current government.
Water does not have to become a significant constraint to growth and prosperity. Tanzania still has a reasonable water endowment compared to many other countries in the region and the world. Prudent water resource management policies, strengthened institutions, better data, and a collective commitment to sharing this scarce resource will ensure that Tanzania can reach its development goals with the water it has at hand.