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African tourists emerge as powerhouse for tourism on the continent, says UNCTAD report
Four out of 10 international tourists in Africa come from the continent itself, according to the new UNCTAD Economic Development in Africa Report 2017: Tourism for Transformative and Inclusive Growth.
In sub-Saharan Africa, this number increases to two out of every three tourists whose travels originate on the continent. Data backing this key finding show that, contrary to perception, Africans themselves are increasingly driving tourism demand in Africa.
Tourism in Africa is a flourishing industry that supports more than 21 million jobs, or 1 in 14 jobs, on the continent. Over the last two decades, Africa has recorded robust growth, with international tourist arrivals and tourism revenues growing at 6 per cent and 9 per cent, respectively, each year between 1995 and 2014.
Focusing on tourism for transformative and inclusive growth, this year’s report encourages African countries to harness the dynamism of the tourism sector.
By collecting and comparing data from two different periods, 1995-1998 and 2011-2014, the report reveals that international tourist arrivals to Africa increased from 24 million to 56 million. Tourism export revenues more than tripled, increasing from $14 billion to approximately $47 billion. As a result, tourism now contributes about 8.5 per cent to the continent’s gross domestic product (GDP).
The First Ten-Year Implementation Plan of the African Union’s Agenda 2063 aims at doubling the contribution of tourism to the continent’s GDP. To meet this target, tourism needs to grow at a faster and stronger pace.
“Tourism is a dynamic sector with phenomenal potential in Africa. Properly managed, it can contribute immensely to diversification and inclusion for vulnerable communities,” said Mukhisa Kituyi, the Secretary-General of UNCTAD.
To realize the potential of intraregional tourism for the continent’s economic growth, African Governments should take steps to liberalize air transport, promote the free movement of persons, ensure currency convertibility and, crucially, recognize the value of African tourism and plan for it. These strategic measures can have relatively fast and tangible impacts. In Rwanda, the abolition of visa requirements for fellow members of the East African Community in 2011 helped increase intraregional tourists from 283,000 in 2010, to 478,000 in 2013.
Another important theme highlighted in the report is the mutually beneficial relationship between peace and tourism. Peace is of course fundamental for tourism. The mere appearance of instability in a region can deter tourists, leading to devastating, long-lasting economic consequences. However, the perception of danger does not always correspond with reality.
The 2014 Ebola outbreak in Western Africa had a very high cost in terms of tourism numbers and revenue lost across the entire continent. Despite being limited to relatively few countries in the western part of the continent, tourist arrivals and bookings fell in countries as far from the outbreak as South Africa and the United Republic of Tanzania.
The report notes that the economic impacts of political instability can be quite significant and long-lasting. For example, following political instability in Tunisia, total tourism receipts in 2009-2011 declined by 27 per cent on average, from $3.5 billion in 2009 to $2.5 billion in 2011.
Addressing safety and security concerns and swift responses to crises by African Governments and regional institutions are paramount to the growth of tourism in Africa. Promoting strategies aimed at improving Africa’s image in the global media are also critical in ensuring the sector’s recovery after conflict or political unrest.
During the next decade, tourism’s continued growth is expected to generate an additional 11.7 million jobs in Africa. Furthermore, where tourism thrives, women thrive. In Africa, more than 30 per cent of tourism businesses are run by women; and 36 per cent of its tourism ministers are women, which is the highest share in the world.
Creating firm links between tourism, the agriculture and infrastructure sectors, ecotourism and the medical and cultural tourism market segments can foster diversification into higher value activities and distribute incomes more broadly. To unlock this potential, African Governments should adopt measures that support local sourcing, encourage local entities’ participation in the tourism value chain and boost infrastructure development. This continued investment into the tourism sector in Africa could lift millions out of poverty, while also contributing to peace and security in the region.
Facts and Figures
Tourism sector in Africa: Stylized facts
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Since 1995, the tourism sector has expanded significantly, with the number of international tourist arrivals in Africa doubling from 24 million in 1995-1998 to 48 million in 2005-2008, and increasing to 56 million in 2011-2014.
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Tourism export revenues, which include inbound tourism expenditures and international passenger transport services, have experienced a similar growth trajectory. Tourism export revenues more than tripled, increasing from $14 billion in 1995-1998 to $41 billion in 2005-2008, and rising to $47 billion in 2011-2014. Moreover, tourism export revenues per arrival increased from an average of $580 in 1995-1998 to $850 in 2005-2008, and remained unchanged in 2011-2014.
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The countries with the highest average annual rates of growth in tourism export revenues in
1995-2014 were Angola, 26 per cent; Cabo Verde, 18 per cent; and Ghana, 18 per cent.
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Africa’s tourism sector has shown strong growth, doubling from 6 per cent in 1995-1998 to 13 per cent in 2005 -2008, but with more volatility following the global financial crisis (2008/09). Tourism export revenues peaked in 2012 and also appear to be more resilient to shocks than other financial flows such as foreign direct investment or remittances.
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In 2011-2014, the highest average numbers of international tourist arrivals were recorded in Egypt (9.9 million), Morocco (9.8 million), South Africa (9.2 million) and Tunisia (6.8 million). These four countries accounted for 64 per cent of all international tourist arrivals in Africa in 2011-2014, highlighting the high degree of concentration of arrivals.
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Morocco was the only African country to surpass 10 million international tourist arrivals in 2015.
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Africa in 2015 held a 4.4 per cent share in worldwide tourism arrivals, and accounted for a 2.3 per cent share of worldwide tourism receipts.
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In 2011-2014, Northern Africa was the main tourist destination in Africa, registering the highest number and share of international tourist arrivals (47 per cent), followed by Southern Africa (22 per cent) and Eastern Africa (20 per cent).
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The East African Community and the Economic Community of Central African States are the regional economic communities with the strongest growth rates in arrivals in 1995-2014, at 8 per cent per annum.
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The number of international tourist arrivals in Africa is forecast to grow to 134 million by 2030, at an expected growth rate of 5 per cent between 2010 and 2030.
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In Africa, domestic tourists are likely to greatly outnumber international tourists, a reflection of global trends.
Tourism’s contribution to economic growth
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Tourism’s total contribution to Africa’s gross domestic product (GDP), which includes direct and indirect contributions, increased from an average $69 billion in 1995-1998 to $166 billion in 2011-2014, that is, from 6.8 per cent of GDP to 8.5 per cent of GDP. While the contribution of tourism to GDP has been increasing, it is still below the global average (10 per cent of GDP).
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Tourism’s direct contribution to GDP primarily reflects the economic activity generated by industries such as hotels, travel agencies, airlines and other passenger transportation services and restaurants, and related leisure industries. Tourism’s direct contribution to Africa’s GDP was $30 billion in 1995-1998 (2.9 per cent of real GDP), increasing to $70 billion in 2011-2014 (3.5 per cent of real GDP).
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By 2015, the sector’s direct contribution to the continent’s GDP had increased to $73 billion and is forecast to rise to $121 billion by 2026. In terms of growth, the annual average rate of growth of tourism’s direct contribution to real GDP was 2.6 per cent in 2011-2014.
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In 2011-2014, tourism attracted on average capital investment of $26 billion (1.8 per cent of GDP), rising to about $30 billion in 2016.
Tourism is a driver of growth in small island developing States
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Tourism is a key sector in African small island developing States. In fact, the three most tourism-driven countries in terms of the sector’s contribution to national GDP – Seychelles (62 per cent), Cabo Verde (43 per cent) and Mauritius (27 per cent) – all belong to this category.
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These mostly relatively small economies are also among the most dependent on the export of services.
Tourism and international trade in services
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The share of the services sector in Africa’s GDP was 50.5 per cent on average in 2011-2014, making it the biggest contributor to output.
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In 2011-2014, tourism export revenues accounted for 46 per cent of services exports and 7 per cent of total exports. However, in 2005-2008, tourism export revenues accounted for 53 per cent of services exports.
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Tourism export revenues grew strongly at 8.9 per cent per year in 1995-2014, while services exports grew at 8.3 per cent per year in the same period.
Tourism and employment
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Tourism’s total contribution to employment in 2011-2014, generated more than 21 million jobs, or roughly 1 out of 14 jobs in Africa (7.1 per cent of total employment). While this is a considerable number of jobs and a large share, the share is below the global average (1 out of 11 jobs generated by tourism).
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Tourism generated 8.8 million jobs directly; this is forecast to rise to 11.7 million jobs, an increase of 2.5 per cent per year, between 2016 and 2026.
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Destinations with the strongest growth in tourism employment in 2014 compared with 2013 were Egypt (+89,000), Madagascar (+84,000), Nigeria (+79,000) and South Africa (+59,000).
Tourism and gender
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On a global level, women make up between 60 and 70 per cent of the tourism labour force, and 50 per cent of the sector’s employees are aged 25 or younger.
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This trend is also reflected in Africa, as women comprise 47 per cent of employees of the hotels and restaurants sector; at the management level, the tourism sector in Africa has a higher percentage of female employers (31 per cent) than any other sector (21 per cent overall).
Strengthening intersectoral linkages and tackling leakages
- South Africa’s higher degree of leakages, compared with Tunisia, Indonesia and Thailand, is striking. In South Africa, foreign value added sources account for roughly half of the final demand by the hotels and restaurants sector (taken as a proxy for the tourism sector), compared with only 20-25 per cent in the three comparators.
Intraregional tourism in Africa
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Four out of 10 international tourists in Africa originate from within the continent, and this share has been rising (from 34.4 per cent in 2010 to 40.3 per cent in 2013).
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Despite this increase, the share is still below the global average. Globally, about 4 out of 5 international tourists originate from the same region, suggesting that in Africa, the share is likely to rise further.
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In Northern Africa, 2 out of 10 international tourists come from within the continent; in sub-Saharan Africa the figure is about 2 out of 3; in both subregions these flows are growing steadily.
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Intraregional tourism (tourism within regional economic communities) matters, especially in the Southern African Development Community and the East African Community. In the former, about 64 per cent of all international tourist arrivals come from fellow member States, compared with about 33 per cent in the latter. This share was stable from 2010 to 2013 in the Southern African Development Community, compared with the East African Community, Arab Maghreb Union and Common Market for Eastern and Southern Africa, whose share expanded during that period.
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If 12 African countries were to implement the 1999 Yamoussoukro Decision, Open Skies for Africa could create an extra 155,000 jobs, result in an increase of almost 5 million passengers, contribute almost $1.3 billion to the continent’s GDP and generate $1 billion in consumer benefits.
Tourism and sectoral targets of the African Union
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In the First Ten-Year Implementation Plan 2014-2023 of Agenda 2063, full implementation of an African tourism strategy and the establishment of an African tourism organization were envisaged, with a target to at least double the contribution of tourism to GDP in real terms from 2014 to 2023.
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Given that the total contribution of tourism to GDP increased from 6.1 per cent in 1995 to 8.3 per cent in 2015, with a peak of 9.9 per cent in 2007, it will be challenging to achieve the target by 2023. The sector would need to grow much faster than GDP and more rapidly than it has since the global financial crisis, implying that Africa should continue to raise levels of investment in tourism if it is to achieve the target.
Tourism as a vehicle for promoting structural transformation
Due to its cross-sectoral nature, tourism can play a role in the promotion of structural transformation in Africa:
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Tourism can serve as a critical driver of inclusive growth, job opportunities and wealth creation, through industry and services trade and strengthening intersectoral linkages.
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Tourism can foster greater economic diversification and enterprise development, which can increase resilience to external economic shocks.
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African countries can implement national long-term economic diversification plans, including tourism, within the context of the structural transformation of the economy.
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African countries can reduce and remove visa constraints to foster deeper regional integration.
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Regional economic communities should enhance efforts to foster joint marketing, packaging and promotion of cross-border attractions.
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Regional economic communities must build on existing efforts to foster joint projects for infrastructure development and investment, such as promoting cross-border investment in hotels, airports and roads, for example, and at the national level engage multiple stakeholders in capacity-building for those working in the tourism industry (Sustainable Development Goals 8, 12, 14 and 17).
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Africa must optimize the role of tourism as an engine and catalyst for regional integration and inclusive growth through deeper regional cooperation.
» Data visualisations: Key statistics of EDAR 2017: “Tourism for transformative and inclusive growth”
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New plan for Africa called ‘best EU initiative ever’
Members of the European Parliament are expected to pass on Thursday, 6 July the new European Fund for Sustainable Development (EFSD), a key element to a plan to raise as much as €88 billion, blending EU funds with national and private financing, bringing African development to a new level.
MEP rapporteurs, Slovak SKS lawmaker Eduard Kukan (EPP), Romanian PSD MEP Doru-Claudian Frunzulică (S&D) and Spanish PSOE legislator Eider Gardiazabal Rubial (S&D) drafted the parliament resolution, which contains more than a hundred amendments, compared to the text, proposed by the Commission. Before going to plenary, the EFSD was approved by a “historic” vote in three parliamentary committees with a huge majority.
The key objective of the EFSD is to provide an integrated financial package to finance investments starting in regions of Africa for countries that are signatories to the Cotonou agreement of June 2000.
The EFSD is a key element of the European External Investment Plan (EEIP), an innovative approach to boost investments in Africa and EU neighbourhood countries. The EEIP consists of three pillars: the first provides improved access to finance. At its heart lies the EFSD, which combines existing investment facilities with a new guarantee. This guarantee will be passed on to intermediary financing institutions, which in turn will lend support – via loans, guarantees, equity or similar products – to final beneficiaries, such as private companies.
This guarantee will be passed on to intermediary financing institutions, which in turn will lend support – via loans, guarantees, equity or similar products – to final beneficiaries, such as private companies.
With an input of €3.35 billion from the EU budget and the European Development Fund (EDF), the EEIP will support innovative guarantees and similar instruments in support of private investment, enabling it to mobilise up to €44 billion of investments.
If member states and other partners match the EU’s contribution, the total amount could reach €88 billion. The scheme has often been compared to the Juncker Plan to boost the ailing European economy.
The bolder approach with Africa is largely motivated by the need address some root causes of migration, with more and more people attempting the perilous journey with economic motivations. MEPs insisted however that the primary aim of EFSD was to combat poverty, not to stem migration.
A large number of MEPs took the floor in a plenary debate on Wednesday, in a rare show of support for the initiative. Luxembourgish Green lawmaker MEP Claude Turmes called it the “best EU initiative ever”.
NGOs, however, pointed at risks related to the new scheme. EURACTIV obtained a letter, signed by an alliance of NGOs, to the Commission services, pointing out at their numerous concerns. The campaigners see a risk that billions of euros of tax payers’ money will benefit big multinational corporations at the expense of the people in poverty that it is meant to support.
“This fund risks becoming a mechanism more focused on subsidising European multinationals than helping developing countries,” said María José Romero, policy and advocacy manager at Eurodad, the European Network on Debt and Development.
Hilary Jeune, Oxfam’s EU development policy advisor also pointed out that when development money is used to subsidise private investors, European companies are actually more likely to profit than are the domestic businesses that contribute most to poverty alleviation.
“The new EU plan’s focus on migration could risk diverting aid away from poverty eradication. Development cooperation must focus on the actual needs of people, not on stopping them from moving,” Jeune stressed.
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No time to stand still: Strengthening global growth and building inclusive economies
Nearly sixty years ago, a little-known band called the Beatles arrived in Hamburg, got a haircut, recorded their first song, and found their sound.
Taking a cue from the Fab Four, world leaders gathering for the Group of Twenty Summit this week can make the most of their time in Hamburg – and leave Germany with a sound plan to strengthen global growth.
Recovery on track
This summit opens with a sense of optimism. The upbeat mood stems from a global recovery that is now one year old and represents a welcome change from previous G20 meetings, where unsteady growth and downward revisions regularly cast a shadow.
But it should be cautious optimism that prevails – policy efforts are still needed to strengthen the recovery and build more inclusive economies.
What’s behind this growth momentum?
A recent pickup in global manufacturing and investment activity signals that the recovery we projected in April remains on track. Our new forecast will be published in late July but we expect global growth to be around 3 and a ½ percent this year and next.
However, as our most recent G20 Surveillance Note explains, the regional composition of growth has shifted.
In the United States – where the expansion is in its ninth year and cyclical unemployment has all but disappeared – a soft patch in early 2017 and policy uncertainty have tempered our outlook.
The euro area – led by monetary stimulus and domestic demand – has exceeded expectations, and conditions in emerging economies have been boosted by robust growth in China and stabilizing conditions in Russia and Brazil.
So yes, we have momentum. But we cannot rest easy – both old and new risks threaten our goal of creating higher growth that is shared by all.
Clouds on the horizon
The risks are not limited to one region or one type of economy and, in some cases, reflect the downside of forces that are driving the recovery.
Financial vulnerabilities present an immediate concern. After a long period of favorable financial conditions, including low-interest rates and easier access to credit, corporate leverage in many emerging economies is too high. In Europe, bank balance sheets still need repair following the crisis. In China, a faster-than-projected expansion – if it continues to be fueled by rapid credit and increased spending – would potentially lead to unsustainable public and private debt in the future.
Left alone, this constellation of concerns could be a recipe for sudden financial distress, when the world’s economies also continue to struggle with several longer-term problems.
Think of excessively high economic inequality, low productivity growth, population aging, and gender gaps. As our research shows, these challenges put a ceiling on potential growth, making it harder to raise incomes and living standards.
How should the G20 respond?
A call to action
The best place to start is by sustaining the current economic momentum. Monetary and fiscal policies can be used to support demand where needed and feasible.
In Japan, for example, while output remains below potential, fiscal and monetary support, combined with favorable global economic conditions, has contributed to particularly strong growth in recent quarters.
Yet these measures will only go so far. Countries need to look for ways to guard against risk, accelerate growth, and leverage the power of international cooperation. No country is an island, and policies taken by any nation can resonate stronger and last longer with coordination from the other G20 members. Our priorities should include:
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Reinvigorating productivity growth. In many economies, increased resources for education, training, and incentives that encourage R&D would stimulate investment and unleash entrepreneurial energy. This would give a much-needed boost to how fast economies can sustainably grow.
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Safeguarding the financial sector. The current period of growth can be used to address corporate and bank vulnerabilities by building up capital and strengthening balance sheets. Sustained growth also means that now is the time to improve – not roll back – oversight and regulatory systems implemented in the aftermath of the crisis.
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Addressing excessive current account imbalances. Both surplus and deficit countries should confront this problem now to avoid larger corrections down the road. This summit is also a chance to strengthen the global trading system and reaffirm our commitment to well-enforced rules that promote competition while creating a level playing field.
Above all, we need to focus on building inclusive economies. This calls for structural reforms to lift incomes and for more support to those who face disadvantages from technological changes and global economic integration.
It also calls for new efforts to empower women and close gender gaps.
In the G20 advanced economies, the difference between the number of men and women in the paid workforce is about 15 percentage points. The gap is even wider in the G20 emerging economies.
If the G20 nations can meet their target of increasing female labor participation by 25 percent by the year 2025, it could create an estimated 100 million new jobs for the global economy.
The substantial gains from closing the gender gap are just one example of what can be achieved if we act together.
Another example, the Compact with Africa, initiated under Germany’s leadership of the G20 and designed primarily to boost private investment, can serve as a blueprint for stronger growth and economic diversification across the continent.
I would also emphasize the coordination required to tackle global humanitarian crises – whether it is epidemics, natural disasters, or famines. The G20 has taken a significant step by committing over $1 billion in aid to the millions facing famine in Somalia, South Sudan, Yemen and North-East Nigeria. In the months ahead, we must do more to address the underlying causes behind these devastating events.
Taken together, these challenges underscore the bottom line: the global recovery remains on track, but it will take tangible policy actions and stronger international cooperation to sustain and broaden the momentum.
Like the band from Liverpool that went on to change the world, I hope that the G20 finds its groove in Hamburg. It should use this moment to come together – not only to achieve higher growth but also to ensure that the benefits of growth can be shared by all.
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Malawi: Economic Development Document
Malawi faces various economic challenges including: low productivity; narrow and raw export base with high reliance on few commodities; lack of alternative energy sources; and poor transport network and ICT facilities.
This, in addition to natural disasters that hit the country in 2015 and 2016, affected implementation of the Malawi Growth Development Strategy (MGDS) II – the medium-term development strategy guiding development policies from 2012 to 2016. This affected the achievement of the goals proposed in the strategy document. A review of MGDs revealed that most of the targets that were achieved were linked to Millennium Development Goals. The review identified 9 gaps that need to be addressed in successor development strategies.
In order to address these gaps, there is need to identify game changers which will accelerate the pace of economic growth and development. This will call for a properly sequenced development plan that addresses the most binding constraints first. The Economic Development Document (EDD), whose goal is to highlight the development areas that Malawi will emphasise over the planning period in order to promote economic performance and attain the GDP growth rates of over 7.2 percent, is a reflection of the intervention areas for the national development strategy in the next five years.
Assessment letter for the IMF
Country context
Malawi is a small open economy in Sub-Saharan Africa with a per capita GNI of just US$320 in 2016, one of the lowest in the world. Per capita income has grown at an average of little more than 1.5 percent between 1995 and 2014, below the average of 2.8 percent for non-resource-rich African economies. Malawi remains an outlier even compared to its peers that are geographically and demographically similar and were at a similar stage of development in 1995.
While not strictly a fragile state, Malawi displays many of the characteristics of fragile and conflict affected countries, particularly in terms of the way that its governance institutions function. The economy is dominated by the agricultural sector, which accounts for about a third of GDP, and drives livelihoods for two thirds of the population.
Over past decades, the country’s development progress has been negatively affected by shocks leaving the country in a cycle of vulnerability. Both climate-related external shocks, and domestic political and governance shocks, have collectively contributed to economic stagnation and a low pace of poverty reduction.
Malawi’s Development Plan
The Malawi Growth and Development Strategy (MGDS) is the country’s overarching medium term development tool designed to lead the country towards attainment of the MDGs and the nation’s long term aspirations as spelt out in its Vision 2020. The first MGDS (MGDS I) was in operation from 2006-2011. It built on consolidated lessons from the Malawi Economic Growth Strategy of 2004 and drew its focus areas from the country’s first medium-term development strategy, the Malawi Poverty Reduction Strategy that was in operation from 2002-2005. The second MGDS (MGDS II) aimed to guide Malawi’s development and growth path during 2012-2016.
Both the MGDS I and II shared the same objective of reducing poverty through sustainable economic growth and infrastructure development. However, the key priority areas of the MGDS have been changed over the years to reflect lessons learnt from previous development strategies. Weaknesses in the planning and implementation of MGDS I, necessitated rethinking of its successor, MGDS II, to give emphasis to the need to diversify the economy, improve governance and promote human capital development.
Implementation of MGDS II saw major challenges, with very limited progress towards the attainment of the strategy’s targets and goals. Major governance shocks, including a policy-induced recession in 2012 accompanied by fuel and foreign exchange shortages, followed by the “cashgate” corruption scandal of 2013 where a large amount of resources were stolen from government accounts, not only undermined growth but also dented Malawi’s international reputation. Since 2013, Malawi has struggled to restore macroeconomic stability, as fiscal imbalances and weaknesses in public finance management, compounded by a shift of a significant share of donor aid to off-budget mechanisms, have resulted in a vicious cycle of rising debt, high inflation, high interest rates and poor business confidence.
Malawi’s Economic Development Document presents an interim picture of the country’s medium-term development plan, as the successor strategy – likely to be called MGDS III – is prepared. Disappointing results with respect to implementation of MGDS II have triggered a qualified rethink in Malawi’s development planning process. There is a growing recognition that Malawi needs a more realistic development plan, in terms of both the underlying assumptions and resource availability, as well as with fewer priorities and a greater emphasis on implementation. Climate change has also become a major new factor in this process. The recent formation of a quasi-independent National Development and Planning Commission will also help to improve the independence of the planning process in Malawi.
Key policy priorities for poverty reduction
As articulated in the Economic Development Document, the overarching policy objective of the Government of Malawi is to improve national economic development and reduce poverty among the Malawian population. Five priority areas have been identified through a consultative process, including: agriculture and climate change management; education and skills development; energy and industrial development; transport and ICT infrastructure development; and health and population management. These priorities correspond well to Malawi’s underlying development challenges of reducing poverty and various forms of inequality, boosting agricultural performance, and achieving structural transformation coupled with demographic transition – while necessitating an additional focus on macroeconomic stability. The following paragraphs set out a summary assessment of the key associated challenges as Malawi seeks to achieve sustainable reductions in the level of poverty.
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Achieving robust agricultural growth. Agriculture constitutes the backbone of the Malawian economy and agricultural performance has more significant implications for economic growth and poverty reduction, especially in rural areas, than any other sector. However, agricultural sector growth has been volatile and frequently surpassed by population growth. To date, agricultural growth has been achieved through factor accumulation – primarily through inputs such as land cultivated and labor. However, given one of the highest population densities in Africa and shrinking farm sizes, the gains from continuing such practices are approaching their limit. In addition, most farmers in Malawi rely on rain-fed agriculture, which is highly risk prone, particularly to price and weather shocks, and suffers from low productivity. And many of Malawi’s agricultural institutions and past policy choices have served to exacerbate price volatility and undermine incentives for investment in commercial agriculture. Boosting agricultural productivity will require the reallocation of resources to provide more comprehensive and targeted support to the rural poor, including efforts through introducing climate-smart agriculture, investing in irrigation and water management, and transitioning subsistence agriculture to more diversified, commercial agriculture.
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Managing rising climate risks. The impact of flooding and drought in Malawi has intensified over recent years and is likely to worsen with climate change. In the past four decades, droughts have become more frequent, widespread, and intense. As a result of the most recent drought in 2015/16, around 40 percent of the population experienced food insecurity. This calls for further interventions to increase resilience to climate related shocks focused on modernizing institutions and policies, expanding social safety nets and investing in resilient infrastructure.
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Facilitating structural transformation. Although urbanization has been an important catalyst for growth and poverty reduction in many countries in sub-Saharan Africa, Malawi has seen a very slow pace of urbanization in recent years. Within rural areas, the labor force has started to move from the agricultural sector to the non-farm sector, contributing to poverty reduction. But, the opportunities for the non-farm sector are volatile and the life-span of the non-farm businesses is very short. Furthermore, the business environment for the non-farm sector is challenging in that access to finance, access to markets, and access to electricity are all highly restricted in rural areas and the human capital of the rural labor force remains low. Stimulating growth in the non-farm sector will require investment in education and skills, complementary investments in critical infrastructure (such as power, connectivity and access to finance) and smarter policies to facilitate faster, but sustainable, urbanization.
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Strengthening macroeconomic stability and the improving the allocation of scarce public resources. Macroeconomic instability, driven mostly by fiscal slippages and governance failures, has been a persistent challenge for Malawi, undermining growth and investment. High inflation hits the poor disproportionately by reducing their purchasing power and ability to maintain food security. It also contributes to high costs of finance and exchange rate instability, making it harder for businesses to invest and create jobs. Furthermore, to bring fiscal deficits and debt under control the government has frequently needed to undertake measures to reduce public spending and increase revenue collections, which can have adverse impacts on the poor. Making this challenge worse, is the fact that evidence increasingly points to very little impact on growth or poverty from Malawi’s major public expenditure programs such as the FISP (Farm Input Subsidy Program). Stronger macroeconomic and fiscal management is a necessary prerequisite for sustainable growth, job creation and poverty reduction in Malawi. Improving the effectiveness of key public expenditure programs will also be necessary to maximize the impact on the poor of the country’s finite resource envelope.
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Addressing social inequality, especially gender inequality. Female headed households face unfavorable conditions in both agricultural production and the non-farm sector businesses compared with male headed households. In the agricultural sector, women tend to have smaller land lots, deploy fewer inputs, benefit from less extension and investment, resulting in significantly lower productivity (by 28 percent on average) compared to their male counterparts. Also, in the non-farm sector, they tend to have less access to finance, capital and new technology. Closing the gender gap will improve agricultural productivity and growth opportunities, and investing in girls’ education is a pathway to both higher long-term growth and a lower fertility rate.
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Addressing population growth. Malawi’s fertility rate has remained persistently high and the country’s population is expected to double in approximately two decades. For a country that is already one of the most densely populated in Africa, existing levels of population growth will put enormous pressure on limited land resources, service delivery, and make poverty reduction that much harder. Furthermore, the high fertility rate lowers productivity because it impairs women’s ability to engage in more productive farming or non-farm work. Addressing rapid population growth and building productive human capacity requires increased investments in the education and skills of the youth so that Malawi can benefit from a demographic dividend.
» Download: Malawi: Economic Development Document, May 2017 (PDF, 410 KB)
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NEPAD Agency and partners launch 2016 Global Hunger Index: Africa Report
The NEPAD Agency, in collaboration with the African Union Commission (AUC), International Food Policy Research Institute (IFPRI), the Regional Strategic Analysis Knowledge Support System (ReSAKSS), Concern Worldwide and Welthungerhilfe has launched the Global Hunger Index: Africa Report.
The report tracks and reports hunger levels in Africa. It builds on previous related efforts, and is calculated based on four indicators, namely undernourishment, child wasting, child stunting and child mortality.
Speaking during the launch, the NEPAD Agency CEO, Dr Ibrahim Mayaki reminded guests that the the launch of the Global Hunger Index: Africa Edition report presents a ray of hope in the fight against the scourge of hunger on the continent.
“We have made progresses regarding the implementation of the Malabo Declaration, but we are still far away from achieving the goals. We are still facing issues of extreme hunger, and hence we need to think about strategic frameworks that allow for accelerated implementation. This will be an important lever in fostering transformation on the continent. “For 6 decades, policy makers have left implementation in the hands of experts; this has to change. Our leaders must get involved in implementation, as this is the only way that transformation can be assured,” he said.
The launch, held on the margins of the 29th African Union Summit, aimed to secure buy-in and commitment among policy makers and other stakeholders on the Zero Hunger campaign by promoting the generation and application of GHI data. This commitment from the various stakeholders will aid in fostering evidence-informed interventions, and boost investments in food security and nutrition on the continent. The launch of the GHI provides enhanced impetus in the pursuit towards the continental target of Zero Hunger by 2025 in Africa.
The Zero Hunger by 2025 in Africa is a the target set by African Union in Agenda 2063 and the 2014 Malabo Declaration on agriculture transformation. The GHI study puts the magnitude of the task into perspective and highlights the major levers in policy, investment, technology as well as human and institutional capacity required for addressing hunger on the continent.
This is what some of the speakers at the launch had to say:
Mrs Amira Elfadil, African Union Commission, Department of Social Affairs Commissioner: “Africa has all the strategies and frameworks to curb hunger in the continent. The challenge however, remains the implementation of these frameworks and strategies. The challenges include lack of commitment in implementation, and budgetary and financial constraints especially because of dependency on donor support. African countries must support each other. We must focus on training and capacity building.”
Dr Namakolo Covic, IFPRI Representative: “We are aware that while under-nutrition is reducing, we are also facing the challenge of obesity increasing. We look forward to working together with the NEPAD Agency and the AU to developing targeted interventions in the fight against hunger on the African continent. I challenge those in this room to work together to monitor progress in the continent, to make sure that we implement the policies and strategies that have been developed for the continent and thereby ensure that we achieve the vision as set out in the Agenda 2063.”
Dr Getaw Tadesse Gebreyohanes, ReSAKSS Representative: It is possible to achieve what the Zero Hunger by 2025 vision proposes. This notwithstanding, we cannot overlook major issues in many countries that if not addressed will impede realization of this vison. We will never be able to achieve zero hunger by doing business as usual. There has to be change.”
Mrs Angeline Rudakubana, Director WFP, Africa Office: “The report has given us clear programme with action plans for everyone of us, Let’s go back to the drawing board and look at what ways of accelerating implementation of the programmes geared at achieving zero hunger. The momentum is high and we should capitalize on this. Let’s talk about hunger in Africa, lets think about our actions, write them on paper, go out in the field and make the change happen.”
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Trump’s US still lacks an Africa policy – but that might be about to change
When Donald Trump looks at Africa, what does he see?
When Donald Trump was elected, almost no one in the US was thinking about Africa. People knew the swingeing State Department and foreign aid cuts the new president promised would hit Africa the hardest, but whereas the US is too embedded in the woes of the Middle East to scale back its costly operations there, Africa simply can’t match it for strategic value or public profile.
On the sidelines, however, serious thinkers were contemplating the future of the US in Africa, and as always happens in the jostling for position that accompanies new presidents in the US, people began to lay out their wares in the hopes of earning an appointment. And at the end of 2016, one in particular stood out: J Peter Pham of the Atlantic Council, a foreign affairs think tank, who published a paper widely taken as an Africa policy manifesto for the new administration.
Entitled A Measured US Strategy for the New Africa, it uses the sober language of deliberate realism. Examining both the US’s interests and global security, it affirms that the US still has a mission to undertake in Africa, but not the one it has embarked on previously. Judging by what I heard on a recent visit, the Washington rumour mill now seems convinced Pham will be nominated as the US’s assistant secretary of state for Africa, a vital state department post that’s gone unfilled since Trump took office. So what does Pham’s “manifesto” for American Africa policy say about him?
Old and new
As his choice of title implies, Pham is apparently determined to upend old American perceptions of Africa; the tired old “dark continent” is nowhere to be seen in his paper. But while Pham doesn’t exactly say what the “new Africa” looks like, he does emphatically suggest that the US rein in its dealings with African states that can’t act like states – that can’t or don’t build structures to benefit their citizens, or earn proper legitimacy as both states and governments.
Pham also emphasises that the US should not look only to states, but to Africa’s rapidly developing private sector. The state, he says, cannot and should not do everything – a core Republican tenet of domestic policy transposed onto African affairs.
The paper is laden with such “selling points”. One, clearly calculated to appeal to an administration disinclined to rely on the state department is the open admission that that department needs “rationalisation” – in other words, cuts. How this is to be done is another question. So, it is being done by not nominating anyone to fill key posts, and by what the British courts would call “constructive dismissal”. But plenty of very real talent and experience is being lost.
And in a White House where the president’s son-in-law has become a high-level envoy to the Middle East with no obvious experience in anything but real estate, the state department needs every bit of countervailing expertise it can muster.
On this front, Pham’s paper is a worrying document. It implies that the US’s approach to African conflicts might best be left solely to the Pentagon, a move which would do terrible damage. Abandoning civilian oversight would hollow out the US’s understanding of these highly complex wars and insurgencies. The State Department needs conflict experts more than anything else. As anyone who’s witnessed US foreign policy since 9/11 knows, the causes of war are not addressed by dropping bombs.
The lie of the land
Perhaps this is purely academic. After all, when (more likely than if) Pham is appointed, he’ll have little political or budgetary heft to work with. But notwithstanding the diminishment of the State Department in which he may soon be serving, he is undeniably an impressive figure.
Of all the rumoured finalists for the position, he stands head and shoulders above the rest; a Vatican-trained theologian with immense historical knowledge, he worked for the Vatican’s diplomatic service in conflict zones in Africa. He speaks and writes knowledgeably about the crucial importance of northern Nigeria; he is very well connected and well travelled.
If he can use the assistant secretary position to its fullest, he might be better placed than the UK’s new minister of state for Africa, Rory Stewart, a young adventurer who wound up administering much of Iraq and who went on to philanthropic work in Afghanistan. Unlike his predecessor Tobias Ellwood, who was simultaneously minister for both Africa and the Middle East, Stewart will at least be devoted to Africa – but he will also be split between two ministries, the Foreign Office and the Department for International Development.
It seems that on the British side of the Atlantic, Africa is too often still viewed as a single patient in need of foreign remedies rather than a cluster of very different emerging diplomatic and economic players. On that, chalk up at least one preliminary point for Pham in what might end up a sideways-glancing competition between two relatively young men who suddenly find themselves serious world players in the service of equally hapless governments.
Stephen Chan is Professor of World Politics, SOAS, University of London.
This article was originally published on The Conversation. Read the original article.
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tralac’s Daily News Selection
Starting tomorrow, in Dar es Salaam: SADC DFI Network bi-annual meetings
Presentations, documents: UNCTAD’s Intergovernmental Group of Experts on Consumer Protection Law and Policy (3-4 July, Geneva)
29th Summit of the African Union closes after concentrating on three major continental issues. [Related: Mauritius: AU Agenda 2063 already mainstreamed within our National Development Plan; President Adama Barrow’s speech to AU Summit]
India to assure African countries on services trade (Economic Times)
India plans to allay the fears of African countries which have dismissed its proposal for a global agreement on trade in services that includes easing travel for work across borders. African nations, led by South Africa, had red flagged India’s proposal fearing it would open the doors for e-commerce in the name of easing cross border flow of information in services. India wants to build consensus on a comprehensive agreement to ease global trade in services and the support of African countries is critical as they have been New Delhi’s traditional ally in trade negotiations.
Afreximbank announces global facility for Intra-African Trade Champions
To build robust domestic and continental supply chains and facilitate seamless flow of goods and services across Africa’s borders, the African Export-Import Bank is introducing a programme to support companies with proven intra-African trade experience and operations and with value chains spanning across countries, Bank President Dr. Benedict Oramah, has announced in Kigali. Dr Oramah said the unique group of African companies, which have been branded Intra-African Trade Champions or Intra-Champs, would receive interventions from Afreximbank that would include financing, enabling of market access and technical assistance initiatives. Kanayo Awani, MD of Afreximbank’s Intra-African Trade Initiative, highlighted the impact of multinational corporations in developed and developing economies and outlined facts about the performance of African multinational corporations, saying that those fortified the belief that the strategy for Africa’s transformation should be anchored by the continent’s “regional champions”. She noted that African multinational corporations, such as the Dangote Group, Export Trading Group, El Sewedy and MTN, had been increasingly investing across borders and contributing to growth in intra-regional investment flows.
The impact of Economic Partnership Agreements on the development of African value chains: case studies of the Kenyan dairy value chain and Namibian fisheries and horticulture value chains (ECDPM)
Overall, this analysis suggests that while EPAs provide some opportunities and pose some challenges, their direct impacts, both positive and negative, on many African value chains are likely to be limited and should not be overstated. It also suggests that although EPAs are meant to support the development of African value chains, their implementation alone (i.e. in the absence of accompanying support, for example capacity building) will not be sufficient to ensure such development occurs. If EU development partners and other actors are serious in their desire to support the development of African value chains, they should complement efforts to implement the EPAs with: [The authors: Sean Woolfrey, San Bilal]
African lawyers seek tougher penalties against fake drug imports (VOA)
Lawyers from around Africa gathered in Cameroon this week to call for tougher legislation against counterfeit medicine. Sixty tons of counterfeit medicine was burned after being seized by customs officials in Cameroon, who say the stockpile had an estimated value of $80,000. Customs official Marcel Kamgaing said the imitation medicine was being used to treat everything from diabetes and hypertension to cancer and erectile dysfunction. He said the forged drugs were destined for sale at shops and roadside pharmacies. Jackson Ngnie Kamga, president of the Cameroon Bar Association, says the current penalties are not enough of a deterrent. He said traffickers should face jail time.
Zambia: Oil importing companies and SADC certificates of origin (ZNBC)
Zambia’s High Commissioner to South Africa, Emmanuel Mwamba, has urged the Zambia Revenue Authority to expedite investigations concerning allegations of tax evasion by some petroleum and energy importing companies based in Zambia. Mr Mwamba says the decision by ZRA to dishonour SADC certificates of origin of oil importing companies, has created an impression that Zambia is not complying with the SADC trade protocols. Mr Mwamba was speaking at the Zambian Mission in Pretoria, when a delegation from the ZRA paid a courtesy call on him following their verification mission to South Africa for fuel imported into Zambia with SADC certificates of origin. ZRA Deputy Commissioner, Reuben Kunda said the risk of revenue leakage is high among oil importers as some are taking advantage of the SADC protocol to smuggle petroleum and energy products into Zambia.
Zimbabwe: Cooking oil industry regains capacity (NewsDay)
The cooking oil industry is operating at between 50 and 60% of capacity following import restrictions imposed by government in the past three years, an industry official has said. Oil Expressers Association of Zimbabwe president, Busisa Moyo, told NewsDay that the industry had regained capacity following import restriction measures put by government in the past three years. However, he lamented that raw material shortages on the local market were presenting a challenge, forcing the industry to import crude oils.
Ghana: Govt seeks to lighten importers’ burden (Graphic)
The Ministry of Finance wants to reduce the contribution of customs revenue to the nation’s tax revenue from 40% to 20%. The Head of Tax Policy at the Ministry of Finance, Mr Anthony Dzadzra, disclosed this in an interview on the sidelines of a forum which was organised by the American Chamber of Commerce Ghana on the country’s fees and charges for import, export and transit trade.
EAC removes waivers on ‘sensitive goods,’ imposes common tariff (The EastAfrican)
East African countries have agreed to remove the special treatment given to “sensitive goods” and impose a Common External Tariff on them starting from 1 July 2018. According to EAC countries, such preferential treatment is not anchored in the law and is stifling intra-regional trade. The region’s Council of Ministers has also resolved that goods manufactured from raw materials that are granted country-specific duty remission should attract duties, levies and other charges provided in the existing EAC-CET, effective 1 July 2017.
EAC Partner States’ 2017/18 Budget Analysis: tax changes (EABC)
In order to spur growth of industries, employment creation increased revenues and enhanced equity and fairness in tax administration, the Governments of the 4 EAC Partner States of Tanzania, Kenya, Uganda and Rwanda came up with various tax changes as follows:
Open Rwanda cargo transport for low costs, more growth (The EastAfrican)
EAC member states have to open the domestic cargo transport business to competition for costs to come down and allow growth of the logistics industry. Ring fencing the domestic cargo transport business to locals only, according to a new study, has led to underutilisation of freight capacity and compromised the competitiveness of the industry. This requires the region to amend or repeal Article 28 of Northern Corridor Transit and Transport Agreement, which restricts foreign registered trucks to transport goods on foreign markets. Uganda, Kenya and Rwanda consented to the 2007 agreement, as they sought to protect the local operators from competition. The study, commissioned by Rwanda Private Sector Federation and sponsored by TMEA, says the restriction costs Rwanda transporters about Rwf22.7bn ($27m) annually. The same restrictions apply to the Central Corridor, which means Tanzania and Kenya with bigger transit fleet could be losing about $100m each annually. But Kassim Omar, chairman Uganda Freight Forwarders/East Africa Business Council, says opening up domestic cargo business space to regional competition would edge out Uganda, Rwanda and Burundi.
Kenya: Tender billions beckon in parties infrastructure plans (Business Daily)
The high profile tenders that have dominated public sector contracts are set to continue as key political formations pledge to pump billions of shillings into transport and energy. Both the ruling Jubilee and the National Super Alliance (Nasa) have pledged to continue investment in basic infrastructure despite a subtle difference in approach. The big question is where the tender billions will come from.
Tanzania mining, industrial policy updates:
(i) Not so fast, Acacia tells Parliament as it heads to arbitrator. One day after Parliament passed new laws on natural resources, Acacia Mining which is entangled in a dispute with the government over export of gold concentrates amid tax evasion accusations yesterday served the government with notices of taking the matter to an overseas arbitrator.
(ii) No more exportation of mineral concentrates. The government has officially announced that there will be no more exportation of mineral concentrates whose smelting will henceforth take place in the country. Tabling the recommendations of the draft bill to review various laws in the National Assembly yesterday Justice and Constitutional Affairs Prof Palamaganda Kabudi said that as per the recommendations the Tanzania Minerals Audit Agency will be annulled.
(iii) Magufuli: ‘We erred in 1990s sell-offs’. President John Magufuli yesterday admitted that the country made mistakes during the privatisation process resulting in at least 197 firms to remain dormant. Launching the Sengerema Town Water Supply and Sustainable System, President Magufuli said he was putting blame on his predecessors for mistakes but that he had the right to speak about the errors and take action to correct them. Dr Magufuli emphasised that it was crucial for strategic institutions to be owned by the public. He said the 197 privatised firms have never been operational ever since they were privatised over a decade ago. At least 274 industries were privatised by 2012 as part of the structural reforms that were aimed at removing the government from engaging in business. “We privatised even strategic institutions like the railways corporation. It’s like we decided to leave each and everything to investors, which was wrong,” he emphasised. The Tanzania Railways Corporation, whose management was handed to an Indian firm, did not deliver, according to President Magufuli.
African consultation on child labour and forced labour: taking forward Alliance 8.7 in sub-Saharan Africa (ILO)
With some 3.7 million victims of forced labour and 59 million children aged 5-17 years in child labour, the African continent needs to urgently operationalize Alliance 8.7 to achieve the set targets of combating effectively these scourges, said high-level participants to the regional dialogue held in Addis Ababa. The AU pledged for a regional initiative in collaboration with the ILO as well as involving other key development partners such as the UNICEF, to eliminate child labour in the continent by 2025. [Downloads: keynote speeches]
Importing an export problem: India is becoming a high cost economy in agro-related items (Financial Express)
There is a rise of 30% in value of imports of three essential agro items, namely wheat, pulses, vegetable/edible oils—indicative of substantive demand pull in the country (see accompanying graph). Data analysis of India’s seven select but vital agro-related items of exports reveals that there is a sharp slump - 40% in their overall value - during last four years. Commodities are wheat, rice, sugar, cotton, soy meal, guar gum and beef and fish.
End of the road for fossil fuel vehicles by 2030, says Stanford study (Mint)
Purchase of vehicles run on fossil fuel will stop completely by 2030, according to a study by Tony Seba, an economist with Stanford University. Reason: Seba believes that electrification and transport as a service will sweep across transportation industry. In his report, Rethinking Transportation 2020-2030 (pdf), which is the talk of board room meetings in the auto industry and green energy enthusiasts, Seba said that some of the key stakeholders will face sudden demise. “We are on the cusp of one of the fastest, deepest, most consequential disruptions of transportation in history,” Seba said.
Today’s Quick Links: Stratfor Worldview: South Africa prioritizes populism at the cost of competitiveness Kenya plans fresh port tender after abortive first bid Kenya: Putting off oil export wise but more should be done UN Working Group on Business and Human Rights: 10 key recommendations to governments, businesses (pdf) South Sudan: Economic chaos fuels gold mining rush |
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Afreximbank announces Global Facility for “Intra-Champs” as it hosts top African multinationals
To build robust domestic and continental supply chains and facilitate seamless flow of goods and services across Africa’s borders, the African Export-Import Bank (Afreximbank) is introducing a programme to support companies with proven intra-African trade experience and operations and with value chains spanning across countries, Bank President Dr. Benedict Oramah, has announced in Kigali.
Dr. Oramah said on 30 June that the unique group of African companies, which have been branded Intra-African Trade Champions or Intra-Champs, would receive interventions from Afreximbank that would include financing, enabling of market access and technical assistance initiatives.
Speaking during the first Roundtable of the Intra-Champs, on the sidelines of the Bank’s 24th Annual General meeting, the President said that intra-African trade held the key to sustainable growth and that its promotion would “improve Africa’s dynamic comparative advantage in the export of light manufactures, act as absorbents to global shocks, create jobs, facilitate transfer of technology and promote regional peace and security”.
In her address, Kanayo Awani, Managing Director of Afreximbank’s Intra-African Trade Initiative, highlighted the impact of multinational corporations in developed and developing economies and outlined facts about the performance of African multinational corporations, saying that those fortified the belief that the strategy for Africa’s transformation should be anchored by the continent’s “regional champions”.
She noted that African multinational corporations, such as the Dangote Group, Export Trading Group, El Sewedy and MTN, had been increasingly investing across borders and contributing to growth in intra-regional investment flows. Such flows averaged about 24 per cent of total foreign direct investment flows in Africa and were creating an important source of capital formation for some African economies.
Ms. Awani said that the Global Facility for Intra-Champs that had been developed by the Afreximbank would identify the main players in intra-African trade and support their operations.
The specific tools to be used by the Bank included omnibus lines of credit to finance trade and project-related transactions and investment needs; twinning services to facilitate contract awards by African governments to Intra-Champs; contract awards by Intra-Champs to small and medium-scale enterprises and feeder groups; and partnerships among “actors” in intra-African trade, she explained.
The Bank would also provide trade information and advisory services to the Intra-Champs as well as develop partnerships to drive innovation, added Ms. Awani.
In his contribution, former Nigerian President Olusegun Obasanjo, who was a special guest at the roundtable, spoke of the need for African countries to encourage the emergence of strong companies that could compete effectively on the global scene.
He noted that, as President of Nigeria, he implemented policies to encourage the emergence of such companies, some of which had gone on to become multinational in their operations.
The roundtable was organised to introduce the Intra-Champs concept, understand the needs of the companies and provide a platform for networking and development of business opportunities among them. Participants included some of Africa’s most prominent and high-profile business leaders and entrepreneurs.
The Afreximbank AGM Activities, which lasted from 28 June to 1 July, included two days of seminars, a meeting of the Afreximbank Advisory Group on Trade Finance and Export Development in Africa, an investment forum hosted by the Rwandese Government, a trade exhibition, the formal AGM and a conversation session with President Paul Kagame of Rwanda. More than 100 speakers, including ministers, central bank governors, academics, African and global trade development experts, and business leaders, participated.
The keynote presentation and welcome remarks delivered at the First Roundtable Discussion for Intra-African Trade Champions have been made available to download courtesy of Afreximbank.
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29th Summit of the African Union closes after concentrating on three major continental issues
The 29th Ordinary Session of the Summit of the African Union has come to a close after 9 days, during which various statutory organs of the Union met to get status updates and make decisions on issues of importance to the continent. At the final press conference held in Addis Ababa yesterday, the AU Commission (AUC) Chairperson H.E. Mr Moussa Faki Mahamat said the summit focused on three main issues:
Institutional reform of the African Union – H.E. President Paul Kagame of Rwanda, who is the leader of the reform team presented a report to his fellow Heads of State and Government. In its decisions, the Assembly agreed to expedite the reform process, taking into account the inputs received from member states.
Theme of the year 2017 “Harnessing the Demographic Dividend through Investments in Youth”. Strong commitments were made to promote the youth. The summit also discussed migration and employment. In this regard, a presentation was made by H.E. President Idris Deby Itno of Chad, who is the Leader on the AU theme of the year. His Excellency updated the summit on the various initiatives undertaken across the continent in line with theme.
Peace and security – the AUC Chairperson, H.E. Mr Moussa Faki Mahamat said that Africa would continue to do its best to Silence the Guns by 2020 and to speak with one voice on major peace and security issues, especially through agreed common positions. Throughout the summit, which started on the 27th of June, the AUC Chairperson emphasised on the need for the continent to give priority to conflict prevention and anticipation. He called upon the regional groupings and mechanisms to intensify their actions, in close cooperation with the relevant bodies of the African Union.
During the closing ceremony, two Commissioners of the AUC were sworn into office. They are H.E. Ms. Agbor Sarah Mbi Enow Anyang of Cameroun who was elected to the post of Commissioner for Human Resources, Science and Technology and H.E Mr Victor Harison of Madagascar who was elected as Commissioner for Economic Affairs. In addition 3 members were elected to the African Union Advisory Board on Corruption and another 4 were elected as members of the African Commission on Human and People’s Rights.
Liberia’s President H.E. Ms. Ellen Johnson Sirleaf gave her final address to the African Union Assembly before her country proceeds to elections to elect a new head of state. She thanked the African Union for its support in the fight against Ebola. “In challenging times when we were faced with the Ebola virus, the solidarity of the African Union was phenomenal,” she said. Her Excellency highlighted the role played by the 855 African health workers from various African nations who went to provide support in the three affected countries of Liberia, Guinea and Sierra Leone.
Decisions from the summit will be posted on the AU website in due course.
29th Assembly of the African Union highlights the achievements of the Commission and goals for 2018
H.E. Mr Moussa Faki Mahamat, Chairperson of the African Union Commission (AUC), has used the opportunity of his first address to the Assembly of Heads of State and Government to highlight actions undertaken since his Commission assumed office in March this year.
He reported that as a first step, a review of programmes was initiated by all departments, followed by a retreat of the Commission to prioritise and align on the objectives for 2017 and 2018.
The launch of the AU reforms was the Commission’s second task. In this respect, he paid tribute to the wisdom and Pan African commitment of the current Chairperson of the Union, H.E. President Alpha Conde of Guinea and President Idris Deby Itno, the immediate past Chairperson of the Union and to H.E. President Paul Kagame of Rwanda who is leading the AU reform process and providing concrete recommendations and guidance for implementation.
The AU Chairperson was speaking at the opening of the two-day Assembly of the AU Heads of State and Government, which took place on 3-4 July 2017 at the AU headquarters in Addis Ababa.
The AU Commission Chairperson also projected the work to be done by the January 2018 summit. The first issue is to implement the relevant decisions to be taken by the Assembly in light of the report of President Paul Kagame of Rwanda, on the implementation of the reform of the African Union.
The second area is that of peace and security, with the objective of silencing the guns by 2020. Humanitarian action in solidarity with the victims of drought, famine and forced displacement would be the third area of action. The fourth priority would be strategic development issues i.e. executing some integral projects for the benefit of African people. The Chairperson also highlighted the imperative to speak with one voice as the fifth course of action.
H.E. Mr Moussa Faki Mahamat spoke about the partnership between the African Union and the United Nations, especially the cooperation in peace and security, as well as the partnership with the European Union on issues of peace and security and the fight against terrorism and radicalism; economic, democratic and electoral governance issues.
On peace and security, the AUC Chairperson said, in order to deal with all conflicts, the AUC has decided to give priority to prevention and anticipation. He called upon the regional groupings and mechanisms to intensify their actions, in close cooperation with the relevant bodies of the African Union.
H.E Mr Moussa Faki Mahamat went on to call for better alignment between the decisions made by the AU and their implementation.
Speaking at the opening ceremony H.E. Mr. Alpha Condé, President of the Republic of Guinea and Chairperson of the African Union, called for a new era of self-reliance to drive development and end poverty on the continent.
The Deputy Secretary-General of the United Nations, Mrs. Amina Mohammed, while addressing the Assembly noted the importance of the youth agenda and commended on the theme of the year 2017 saying that “Investing in our youth will reap dividends for our future”. She also commended African countries for welcoming and integrating refugees, into local communities saying this should be emulated throughout the world.
H.E. Mr. Mahmoud Abbas, President of the State of Palestine and Chairperson of the Palestine Liberation Organization’s (PLO) Executive Committee thanked the African Union for the continued support to achieve a Palestinian state living side by side with the state of Israel as an independent state with distinct borders. He appealed to African countries to continue their strong stand with people of Palestine to achieve lasting peace in the region.
The Assembly of the AU had a full two-day programme, including reviewing the report of H.E Paul Kagame, President of the Republic of Rwanda on the Institutional Reform of the AU; discussions on the theme of the summit, i.e. ‘Harnessing the Demographic Dividend through Investments in the Youth’; deliberating on reports on peace and security, implementation of Agenda 2063; and the 2018 budget of the African Union.
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EAC removes waivers on ‘sensitive goods,’ imposes common tariff
East African countries have agreed to remove the special treatment given to “sensitive goods” and impose a Common External Tariff on them starting from July 1, 2018.
According to EAC countries, such preferential treatment is not anchored in the law and is stifling intra-regional trade.
The region’s Council of Ministers has also resolved that goods manufactured from raw materials that are granted country-specific duty remission should attract duties, levies and other charges provided in the existing EAC-CET, effective July 1, 2017.
They agreed that removal of frequent stays of applications and duty remissions should inform the comprehensive review of the three-band CET that is expected to be completed in September with an implementation of July 1, 2018. Initially, the revised CET was scheduled to go live on July 1 this year.
The Council of Ministers yielded to requests by the partner states to grant special tax to over 80 product lines in the 2017/2018 budgets.
Among the goods are raw sugar, wheat, barley, motor vehicles, liquefied petroleum gas cylinders, iron and steel products, crude edible oil, clothes, inputs for the assembly of ships and raw materials and industrial inputs for the manufacture of textile and footwear.
Kenya and Uganda received a stay of application on a duty of 25 per cent instead of 0 per cent on LPG cylinders for a period of one year. Rwanda, Burundi and Uganda were allowed to apply a duty of 25 per cent instead of 10 per cent on road tractors for semi-trailers for one year.
Burundi and Uganda will charge duty rate of 10 per cent instead of 25 per cent on buses for transportation for a period of one year while Kenya has been granted duty remission on raw sugar at a duty rate of 0 per cent for one year on condition that the finished product is not sold in the EAC Customs Territory otherwise it will attract duty.
Increased requests
The EAC Secretariat noted that the increased requests for stays of application are undermining the CET and intra-regional trade.
In addition, the stays of application do not have a legal foundation in the EAC Customs law.
Tanzania said the increasing requests for stay of applications and duty remissions have defeated the logic of the Customs Union. The list of goods has been expanding and thus creating trade distortions and impeding intra-region trade.
The review of the current EAC CET is under way. A team of consultants from the partner states has already endorsed the criteria for the classification and categorisation of goods within the EAC CET.
The ministers for finance in April 2014, decided to do away with stays of applications and directed that a phase out proposal be developed, which was subsequently adopted by Sectoral Council of the ministers of trade, industry, finance and investment in May 2014.
According to the EAC Secretariat, the intra-regional trade is declining since 2015, which could be attributed to the increasing restrictions imposed by partner states on country specific stays of application and duty remission.
» Download: pdf EAC Common External Tariff 2017 (5.29 MB) (PDF, 1.33 MB)
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African lawyers seek tougher penalties against fake drug imports
Lawyers from around Africa gathered in Cameroon this week to call for tougher legislation against counterfeit medicine.
Sixty tons of counterfeit medicine was burned after being seized by customs officials in Cameroon, who say the stockpile had an estimated value of $80,000.
Customs official Marcel Kamgaing said the imitation medicine was being used to treat everything from diabetes and hypertension to cancer and erectile dysfunction. He said the forged drugs were destined for sale at shops and roadside pharmacies.
He says illicit drugs are very dangerous to the health of consumers and may even kill due to poor packaging and preservation. He says importers should be informed that Cameroon’s customs laws give them the authority to destroy all fake drugs.
Counterfeit drugs conference
The burning was scheduled to coincide with an international conference this week in Yaounde on the problem of phony drugs in Africa.
Jackson Ngnie Kamga, president of the Cameroon Bar Association, says the current penalties are not enough of a deterrent. He said traffickers should face jail time.
He says because of its deadly consequences, it is high time for Cameroon to join African states to start considering the transportation and commercialization of bogus drugs as a major crime, not a simple offense punishable by fines and seizure of the illicit goods. He says the number of people who die because of such drugs makes them consider it another form of homicide, which the international community should help Africa tackle.
The World Health Organization says falsified medical products may contain no active ingredient, the wrong active ingredient or the wrong amount of the correct active ingredient. The WHO says about 100,000 deaths-a-year in Africa are linked to counterfeit drugs.
Asian source
Issouf Baadhio, an attorney from Burkina Faso, represented the International Association of Lawyers as its vice president. He said the counterfeit drugs are primarily manufactured in Asia, especially in China, and so African countries need to focus on stopping importation.
He says besides the fact that this trade is illegal, importing fake drugs has disastrous economic consequences and as such civil society organizations and professional groups like the International Association of Lawyers should join states and make sure that markets are protected and custom controls are set up at entrances to all states to detect and stop the sale of all dangerous drugs.
Identifying counterfeit medicines can be difficult. The WHO urges officials and consumers to look for signs like misspelled words on the packaging and to check that the manufacture and expiration dates inside and outside packaging match.
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The impact of Economic Partnership Agreements on the development of African value chains
The Economic Partnership Agreements (EPAs) concluded by the European Union (EU) with regional blocs of African countries (and certain individual African countries) are supposed to do more than just boost trade between the EU and African countries.
They are meant to promote sustainable development and poverty reduction, including through supporting regional integration processes in Africa, promoting the gradual integration of African economies into global markets and enhancing African countries’ ability to leverage trade opportunities for economic growth.
Given the internationalisation of production processes, with 70% of global trade involving intermediate goods or services, increased participation in regional and global value chains has become a crucial part of African countries’ economic transformation and sustainable development strategies. It is therefore relevant to consider how EPAs might affect the ability of African producers and services providers to integrate into such value chains.
Key messages
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The Economic Partnership Agreements (EPAs) negotiated between the EU and regional blocs of African countries are meant to promote the gradual integration of African economies into global markets, including by supporting African businesses to increase their participation in regional and global value chains.
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However, these EPAs do not significantly alter market access conditions relevant to many African producers and services providers, and are thus unlikely to have major direct impacts, either positive or negative, on their prospects for participating in regional and global value chains.
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EPAs could have beneficial indirect impacts on African producers and services providers by encouraging investment and by facilitating support to interventions and initiatives that boost the capacity of African businesses to participate in regional and global trade, but such support will not automatically materialise through the conclusion of EPAs.
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There is thus need for development partners and other actors to complement EPA implementation with support for value chain development initiatives and awareness-raising and capacity building to ensure African business can take advantage of EPA-related opportunities, and for the establishment and use of effective mechanisms to monitor EPA impacts.
» Download the Discussion Paper: The impact of Economic Partnership Agreements on the development of African value chains (PDF, 1.11 MB)
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tralac’s Daily News Selection
Ban on Dar’s products in Nairobi sparks trade, diplomatic dispute (The EastAfrican)
Presidents John Magufuli and Uhuru Kenyatta have stepped in to stem an escalating trade war that has seen Tanzania and Kenya exchange import bans on several commodities. The EastAfrican has learnt that President Magufuli wrote to his counterpart in Nairobi early last week to complain about Kenya’s ban on its gas and wheat exports and other trade barriers. “The Tanzania presidency has officially complained to Kenya. However, we have received communication from them banning our exports of tyres, margarine and fermented milk products. We hope this trade war is nipped in the bud before it gets out of hand,” a source said. Kenya is digging in, saying it will only allow wheat flour and other products that are milled from grain wholly produced in Tanzania, or whose full Common External Tariff rate has been applied.
US urges Tanzania to lift ban on chicken (The EastAfrican)
Tanzania has maintained a hardline position on its ban on imports of chicken and poultry products from the US, which it imposed in 2006, and now Washington is pushing discussions on the matter to the regional level, demanding that Dar give a justification for the ban through a process that is above board. The US says Tanzania’s reasons for the ban should be consistent with Word Trade Organisation requirements. But the EAC’s Sectoral Council of Ministers Of Trade, Industry, Finance And Investment (SCTIFI), meeting in Arusha early last month, resolved that the US pursue the matter on a bilateral basis with the concerned partner states. The US government officials said that despite correspondence with Tanzanian government institutions, there has been no light shed on the matter. [Related: Togo to host 2017 AGOA Forum (8-10 August); Trump administration invites public comment for review of existing trade agreements]
Determining capacity needs in Kenya’s tea sub-sector value chain (pdf, KIPPRA)
Tea plays an important role in Kenya’s socio-economic development. Tea is the leading industrial crop in terms of its contribution to the GDP. In 2016, tea accounted for 40% of the marketed agricultural production and contributed 25% of total export earnings amounting to $1.25bn. In addition, tea provides livelihoods to approximately over 600,000 smallholders who contribute approximately 60% of total tea production. This notwithstanding, only 14% of tea exported is value added and the remaining is sold in bulk form. The low level of value addition results to an estimated loss of $12 per kilogram of tea. As a result despite Kenya being the leading exporter of tea in terms of volumes, the country receives low earnings compared to other exporting countries due to low value addition. For instance, in 2013, Kenya’s exported 131 metric tonnes more than Sri Lanka but it earned $0.3bn less.
The objective of this study therefore was to identify capacity challenges that are critical in agribusiness and trade to enhance the competitiveness of the tea sub-sector. Specifically, to review national strategies, policies, practices and challenges with respect to agribusiness, trade and leadership. Secondly, provide sound situation analysis of the Kenya agri-business sector in relation to trade and leadership capacity. Thirdly, provide baseline data for assessing Kenya’s capacity development progress and finally, assess and analyse the status and gaps of Public Sector Transformation Division and other relevant institutions’ capacity to implement the reforms in the tea value chain.
Kerala eyes diplomatic push by Sushma Swaraj led MEA for cashew nut boost with African countries (Financial Express)
The idea of having a common Kerala-Africa brand, jointly owned by Kerala and cashew-growing African nations, for cashew products to move together in the value chain was also mooted. Both Africa and Kerala are keen on exploring the possibility of technological collaboration, which would help in increasing the productivity in African countries. “Both sides have decided to explore the best value-chain results for all stakeholders in the cashew industry – producers, farmers and sellers (co-operatives and boards) in Africa, and buyers (the state of Kerala), processors and consumers,” said the MEA officials. It was agreed that a detailed proposal will be prepared by the state government on the price agreement and transportation of raw nuts. Then it will be submitted to the external affairs ministry which will discuss with Kerala and the African nations to take it forward.
Tanzania’s parliament passes laws on renegotiation of mining, gas contracts (Reuters)
Tanzania’s parliament passed two laws on Monday allowing the government to force mining and energy companies to renegotiate their contracts, despite pleas from the mining association for more time. Businesses have complained that they feel President John Magufuli is unfairly squeezing them through a strict interpretation of tax laws, increased fines and demands they rapidly list on the local stock markets. Magufuli has said the reforms will increase transparency and revenues. There are three bills in total covering natural resources contracts, sovereignty and amendments to existing laws and they could allow the government to renegotiate or dissolve contracts.
Australia: Tanzania’s mining agreements plan rocks Cradle (The West)
Sovereign risk fears in Tanzania have torpedoed a $55m takeover bid for Ian Middlemas’ Cradle Resources and yesterday forced a swag of other ASX-listed companies into trading halts. Cradle advised yesterday that a deal under which its joint venture partner, private equity-backed Tremont Investment, would acquire the company had been terminated. Tremont had sought the takeover to get full control of the Panda Hill niobium project in Tanzania but was spooked by proposed legislative changes around mining to be debated in the country’s Parliament this week.
Mining’s contribution to low- and middle-income economies (UNU-WIDER)
Using the detailed data available for the minerals sector, an analysis is carried out of the current situation for 2014, and of trends in mining’s contribution to economic development for the years 1996–2014. The contribution of minerals and mining to gross domestic product and exports reached a maximum at the peak of the mining boom in 2011. Although the figures for mining’s contribution had declined for most countries by 2014, the levels were still considerably higher than in 1996. The results of this survey contradict the widespread view that mineral resources create a dependency that might not be conducive to economic and social development. [The authors: Magnus Ericsson, Olof Löf]
Tanzania: Success as Sagcot initiative expands (The Citizen)
The government plans to roll out the Southern Agricultural Growth Corridor of Tanzania (Sagcot) initiative countrywide to ensure agriculture plays a pivotal role in the country’s industrialisation process, a senior government official has said. Sagcot Centre chief executive officer Geoffrey Kirenga said during the past seven years of implementing the first phase of ASDP – from which the Sagcot initiative was born – Tanzania managed to remain a relatively hunger-free nation. “Much as there have been some challenges, this is quite unusual to most African countries. So, there have great strides to be proud of.”
IGAD launches negotiations on Protocol on Free Movement of Persons (IGAD)
The participants in the workshop (3-4 July) are drawn from the governmental authorities of IGAD Member States with mandates relating to immigration, legal affairs, and legislative bodies including selected international partners and stakeholders. According to the Ambassador of Ethiopia to Djibouti, H.E. Amb Shamebo Fitamo Adebo, “free movement of persons is one of the basic tenets for regional economic integration process”. The Director of Health and Social Development-IGAD, Ms Fathia Alwan, clarified that the This Protocol was aimed at ensuring that migration in IGAD region was safe, orderly and beneficial to the citizens of this Region. “A Free Movement Regime will facilitate higher volume of regional trade, improved access to basic social services, access by governments to unreached marginal communities as well as improved governance of rural areas”.
Addressing trans-boundary cooperation in the Eastern Nile through the water-energy-food nexus: insights from an e-survey and key informant interviews (IFPRI)
Respondents also identified a wide range of desirable cross-sectoral actions and investments - both national and regional - chiefly, joint planning and operation of multipurpose infrastructure; investment in enhanced irrigation efficiency; joint rehabilitation of upstream catchments to reduce sedimentation and degradation; and investment in alternative renewable energy projects, such as wind and solar energy.
Uganda: Shs140b logistics master plan awaits Cabinet approval (Daily Monitor)
Cabinet is yet to endorse Uganda’s first logistics master plan that will take effect this month. According to the director of transport at the ministry of Works and Transport, Mr Benon Kajuna, Cabinet is eager to endorse the $39m (Shs140b) logistic master plan which the ministry has finalised. He said the approval of the 15-year logistic master plan will pave way for its funding and implementation. The 15-year logistics master plan prepared by the government of Uganda, with support from Japan International Cooperation Agency.
2017 Africa-China Poverty Reduction and Development Conference: update (GoM)
Mauritius will host the 2017 Africa-China Poverty Reduction and Development Conference, on the theme “Joining hands to meet new challenges in poverty reduction”, in September 2017. Some 100 participants from African countries are expected to attend the Conference. The Conference, organised by the State Council Leading Group Office of Poverty Alleviation and Development of the People’s Republic of China, in collaboration with the Ministry of Social Integration and Economic Empowerment, will address the following issues: poverty reduction challenges, strategies and practices in African countries, and progress and challenges of poverty alleviation in Africa. It will also address the role of local governments in promoting China-Africa cooperation and the role of society engagement (businesses and civil societies) for China-Africa poverty reduction cooperation.
Trade between China and Portuguese-speaking countries grows 40.41%, January-April (Macauhub)
In the first four months of the year, China exported $9.755bn (+19.56%) to the eight Portuguese-speaking countries and imported goods worth $24.416bn (+50.93%), leading to a trade deficit of S$14.661bn. China’s trade with Angola increased 61.83% to $7.602bn, with the country buying goods worth $597m (+ 27.71%) and placing products with Chinese companies worth $7.005bn (+65.60%). Trade with Mozambique reached $564m (-0.80%), following Chinese exports of $377m (-8.03%) and imports of $186m (+17.99%).
Investing in skills for inclusive trade (ILO/WTO)
The authors of the report point to four main mechanisms through which trade affects the relative demand for skills: (i) Trade raises demand for products in which countries have a comparative advantage. In countries with a comparative advantage in skill-intensive sectors, trade thus increases the demand for skilled workers; (ii) International trade leads to the expansion of the most productive firms, which tend to employ relatively more skilled workers; (iii) As the costs of offshoring fall, the least complex stages of production tend to relocate from high income to low-income economies; (iv) Lower trade costs may be a catalyst for changes in production technology, including automation, which increase productivity and favour high-skilled labour in exporting and import-competing firms in both developed and developing countries. Addressing the need for developing a more competitive workforce is a long-term process, according to the study (pdf).
Rethinking trade and finance (ICC)
The International Chamber of Commerce Banking Commission has released its 2017 report entitled Rethinking Trade and Finance (pdf). Based on the Global Survey on Trade Finance – with 255 responses from banks located in 98 countries, as well as insight and commentary from expert contributors – the report is the most comprehensive gauge of the trends and outlook of the global trade finance industry. It focuses on the state of the trade finance market; trade and supply chain finance; policy, advocacy and inclusiveness around global trade; and digitalisation and the state of FinTech. The 2017 Survey’s findings show that:
Today’s Quick Links: Tunisia: AfDB’s country strategy paper 2017-2021 (pdf) The drought impact on fruit harvests and jobs in Western Cape Africa Carbon Forum: summary of outcomes India: GST set to transform face of Indian logistics industry |
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US urges Tanzania to lift ban on chicken
Tanzania has maintained a hardline position on its ban on imports of chicken and poultry products from the US, which it imposed in 2006, and now Washington is pushing discussions on the matter to the regional level, demanding that Dar give a justification for the ban through a process that is above board.
The US says Tanzania’s reasons for the ban should be consistent with Word Trade Organisation requirements.
But the EAC’s Sectoral Council of Ministers of Trade, Industry, Finance and Investment (SCTIFI), meeting in Arusha early last month, resolved that the US pursue the matter on a bilateral basis with the concerned partner states.
Tanzania has used the ban to protect its poultry farmers from what it sees as unfair competition posed by cheap imports of chicken from the US, whose farmers are supported by the government through subsidies.
The US government officials said that despite correspondence with Tanzanian government institutions, there has been no light shed on the matter.
“The US requested that a justification for the ban be provided based on a risk analysis and scientific reasons, which would be consistent with WTO obligations. In this regard, the US called for transparency in the process,” reads a report by SCTIFI.
Detailed information
US government officials informed the EAC Sectoral Council of Ministers that it had provided detailed information to Tanzania on the ban on poultry imports from the US and shared it with the EAC Secretariat.
Washington further told the meeting that the same information was also shared with Kenya through the veterinary services agency and the Ministry of Agriculture.
But the EAC requested that this information be shared with the ministry responsible for trade in Kenya.
The EAC-US trade has been on a rocky path since the EAC member states agreed to fully ban imported secondhand clothes and shoes from the US by 2019 to protect local manufacturers. The decision was reached during the EAC Summit in March 2016.
The EAC expressed concerns that some used clothes and foot wear were originating from Asia through the US that could not be used and therefore increasing incidence of dumping.
In return, the US-based Secondary Materials and Recycled Textiles Association filed a petition on March 21 to review Kenya, Uganda and Tanzania’s Africa Growth and Opportunity Act eligibility.
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Banking Commission Survey confirms trade finance supply/demand imbalance
The International Chamber of Commerce (ICC) Banking Commission has released its 2017 report entitled Rethinking Trade and Finance. Based on the Global Survey on Trade Finance – with 255 responses from banks located in 98 countries, as well as insight and commentary from expert contributors – the report is the most comprehensive gauge of the trends and outlook of the global trade finance industry.
Now in its ninth year – 2017’s Survey marks a significant change in both emphasis and presentation. The aim is to provide both enhanced context – highlighting the potential strategic and tactical implications for the industry – and to be more forward looking. The approach is aided by the launch of a new Editorial Board comprising senior specialists and practitioners, supported through contributions from a wider range of partners across global trade.
The Report – emphasising ICC’s and the Banking Commission’s support of open, rules-based and inclusive multilateral trade – encompasses four major sections of content linked to the pillars of the Banking Commission’s strategy. It focuses on the state of the trade finance market; trade and supply chain finance; policy, advocacy and inclusiveness around global trade; and digitalisation and the state of FinTech. The 2017 Survey’s findings show that:
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Some 61% of banks report more demand than supply for trade finance in the global market. ICC Banking Commission and the Asian Development Bank estimate the level of unmet demand for trade finance stands at over US$1.6 trillion a year – a figure now officially recognised by the United Nations General Assembly.
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Only a minority (21%) see traditional trade finance showing growth in the future. However, overall trade finance revenues have increased, with ICC partner The Boston Consulting Group’s trade finance model (included in the report) predicting revenue growth of around 4.7% a year.
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Over 68% of respondents point to compliance and regulatory requirements as having the highest adverse impact on trade finance in the short-term, while only 11% pointed to capital constraints as a matter of significant concern.
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Some 50% expect most of trade flow processes to be digitised by 2027 – while an almost equal portion expect the evolution to take from 10-25 years. In addition, nearly 44% of respondents identify digitalisation and technology as priority areas of focus – including FinTech and fast-emerging platforms.
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While there is optimism with respect to the digitalisation of trade finance, only 12% of respondents perceive a degree of market uptake and nearly 40% see limited progress in this area – with almost 18% reporting that technical capabilities and technology are ahead of trade finance business practice.
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The discourse around FinTechs is evolving from competition to collaboration, with only 1.4% of respondents viewing the competitive offering of FinTechs as a threat to banks’ positions as the key providers of trade finance.
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More than one-third of respondents consider supply chain finance a high priority and predict significant growth, and over 21% view it as under analysis and consideration.
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Over 57% report an improvement of their operational risk management and reduced error rates, while only 2.7% note a slight deterioration.
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Some 46% identify multinational and large corporates as the highest priority client segment for their trade finance business, with a quarter favouring middle market clients and less than 20% identifying Micro, Small and Medium Enterprises (MSMEs).
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Some 57% of respondents believe traditional trade finance will exhibit little or no growth – while 22% think it will decline outright year-on-year.
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Cost control pressures are considered the biggest challenge facing trade finance units. These are cited by 23% of respondents, followed closely by the availability of specialist skills (21%), and limits posed by traditional technologies (18%).
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The report highlights the key role that correspondent banks play in global trade and economic activity, with IMF data indicating that the volume of correspondent banking relationships grew by almost 30% between 2011 and 2015.
John Danilovich, ICC Secretary General, said of the Survey: “Results of the survey underscore the chronic shortfall of trade finance for small business – as recently recognised by the United Nations. Addressing the trade finance gap must be a central priority for the G20 to deliver on its commitment to support inclusive growth and enhanced job creation.”
Daniel Schmand, Chair of ICC Banking Commission, added: “Championing trade and ensuring access to adequate levels of financing for SMEs is more critical now than ever before. Free trade generates economic growth and jobs across the world, while also maintaining a consistently low-risk profile across products. Taken together, these factors make trade stand out as one of relatively few areas capable of producing positive a global impact through effective policy measures and private sector business initiatives.”
Alexander Malaket, Chair of ICC Banking Commission Market Intelligence, said: “ICC’s and the Banking Commission’s championing of open, rules-based and inclusive multilateral trade is supported by the Report, which now includes the explicit intent to provide editorial context and to be forward looking. Thanks to the dedicated work of our Editorial Board, the latest edition of the Report builds on our strong tradition of quality analysis, global collaboration and effective advocacy in support of international trade and trade financing.”
Download the 2017 Rethinking Trade & Finance report on the ICC website.
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ILO, WTO launch study on investing in skills for inclusive trade
Enhancing the skills of a country’s workforce lifts the export performance of its enterprises and better prepares them to meet foreign competition in the domestic market, according to economists from the International Labour Organization (ILO) and the World Trade Organization (WTO).
A joint ILO-WTO study, Investing in Skills for Inclusive Trade, shows that boosting core work, technical and management skills can help countries and businesses meet the challenges of an ever more competitive global economy by reducing costs, improving quality of products.
The authors point to evidence that countries with responsive skills development systems tend to be more successful in putting skills to use in tradable activities and thereby improving that country's competitive position in the global economy.
“While trade has helped lift hundreds of millions of people out of poverty and been a crucially important tool for growth, development and job creation there are those who have been left behind. Improving the capacity of our workers and managers to respond to these changes is clearly is the best way to foster more inclusive trade,” said WTO Director-General Roberto Azevêdo.
“Providing the right skills is essential to reap the benefits of trade in increased productivity and better jobs, and to ensure that trade contributes to inclusive development. In a fast changing world of work it is more important than ever that skills development responds to current and emerging skills needs, enhancing outcomes for workers and firms both now and in the future,” said ILO Director-General Guy Ryder.
The need for improving skills is present in both developed and developing countries as they seek to adapt to and find opportunities in a global economy which is going through a profound transformation, driven by political changes and the forces of trade integration and technological progress.
The authors point to four main mechanisms through which trade affects the relative demand for skills:
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Trade raises demand for products in which countries have a comparative advantage. In countries with a comparative advantage in skill-intensive sectors, trade thus increases the demand for skilled workers.
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International trade leads to the expansion of the most productive firms, which tend to employ relatively more skilled workers.
-
As the costs of offshoring fall, the least complex stages of production tend to relocate from high income to low-income economies.
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Lower trade costs may be a catalyst for changes in production technology, including automation, which increase productivity and favour high-skilled labour in exporting and import-competing firms in both developed and developing countries.
Addressing the need for developing a more competitive workforce is a long-term process, according to the study. In countries at all stages of development, continuing education and training, both at universities and in the form of technical and vocational education and training (TVET), and on-the-job training, can help workers and manager cope with the big changes in demand for skills which are in varying degrees triggered by globalization.
The authors find evidence of a range of policy approaches which have helped countries in responding effectively to these challenges, including:
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Policy coherence: Enhancing skills and improving national competitiveness requires a range of policies and it is vital that they be coherent.
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Social dialogue between government and the social partners: This is central to making skills systems responsive to the needs of industry, including those industries producing tradable goods and services.
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Broad access to education, skills development and lifelong learning: Low-skilled workers, workers who lack transferable skills, workers whose learning skills are weak, and workers whose skills are at risk of obsolescence benefit less from trade and are vulnerable to technological change or to a trade-connected employment shock.
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Targeted training for displaced workers and/or workers at risk of displacement: Reskilling may be required to allow workers to move to a different occupation or a significantly different job, whether because their original job became unnecessary or because change offers a good opportunity.
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Investing in training for employed workers: Training for workers at all skill levels is a necessary part of implementing effective strategies, in order to underpin the capabilities needed in markets for tradable products and services.
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Core work skills: Strong core work skills, such as team working and problem-solving, complement technical skills and are a vital underpinning for employability, and for business performance.
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Skills needs analysis and anticipation: Forward-looking skills needs analysis and skills anticipation are needed to inform policy coherence and social dialogue, and to inform decision-making by all relevant partners.
The full ILO-WTO study can be downloaded here or on the WTO website.
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Ban on Dar’s products in Nairobi sparks trade, diplomatic dispute
Presidents John Magufuli and Uhuru Kenyatta have stepped in to stem an escalating trade war that has seen Tanzania and Kenya exchange import bans on several commodities.
The EastAfrican has learnt that President Magufuli wrote to his counterpart in Nairobi early last week to complain about Kenya’s ban on its gas and wheat exports and other trade barriers.
“The Tanzania presidency has officially complained to Kenya. However, we have received communication from them banning our exports of tyres, margarine and fermented milk products. We hope this trade war is nipped in the bud before it gets out of hand,” a source said.
Kenya is digging in, saying it will only allow wheat flour and other products that are milled from grain wholly produced in Tanzania, or whose full Common External Tariff (CET) rate has been applied.
“The conclusion that wheat imported at a reduced rate of 10 per cent within Kenya, Tanzania and Uganda can be subjected to a preferential regime is not accurate. Not all importers in Kenya are allowed to import wheat at 10 per cent and millers are also subjected to restrictions on the limit they can import under the duty remission scheme,” a brief prepared in response to President Magufuli’s reads.
President Uhuru is expected to study the brief before responding to his Tanzanian counterpart. The trade spat comes just days after Kenya started enforcing work permit rules along its border, with Tanzania, rendering many workers jobless.
It also underlines uneasy diplomatic relationship between Nairobi and Dar es Salaam since President Magufuli came to power in October 2015, forcing a review of the Economic Partnership Agreement with Europe and persuading Uganda to opt for an oil pipeline through Tanzania.
Effect the ban
On Wednesday, Dar in a statement protested Nairobi’s move to totally ban gas and wheat imports from its territory despite an agreement reached between the two countries. Kenya said it would effect the ban this month because of safety concerns over the gas coming through from Tanzania.
Trade Principal Secretary Dr Chris Kiptoo said Kenya would not allow Tanzanian wheat if a 25 per cent CET tariff is not paid.
“We import our wheat under duty remission at 10 per cent instead of the 35 per cent. Our neighbours were granted a stay of application on the CET rate and therefore import theirs too at the same percentage as ours. The reason they got a stay was to allow them to plug their deficit, but we are seeing their traders trying to sell the same to us at no duty cost. That’s against the EAC rules,” Dr Kiptoo said.
Tanzania cited the same trade rules in its protest.
“We believe that decisions made in the official meetings between EAC member states must be implemented by concerned parts,” Permanent Secretary in Tanzania’s the Ministry of Industry, Trade and Investment Adolf Mkenda said.
Already, the EAC Secretariat has written to Kenya over the trade dispute.
A wheat deficit
The EastAfrican, however, understands that Kenya’s reservations with the wheat imports stem from the fact that Dar es Salaam is a wheat deficit country.
“The reason Tanzania asked for a stay is because they have a deficit. If then you don’t have enough supply, then how can you have enough to export? They were told that goods under remission of CET cannot be profitably traded,” EAC Principal Secretary Betty Maina told The EastAfrican.
Uganda and Tanzania have a stay of application of CET rate and import wheat at 10 per cent instead of 35 per cent. Rwanda and Burundi were last year granted stay of application of the CET.
Tanzania argues that even Kenya applies the 10 per cent CET stay but the governance structures for the two countries under this programme are different. Kenya requires its millers to stack up all the domestic wheat before applying for any import but Dar on the other hand does not.
Mr Mkenda said that Kenya’s decision was against the East Africa Community agreement reached between the two countries.
“We have expressed concern over Nairobi’s refusal to allow Tanzanian exporters to transport cooking gas to Kenya through Kenya-Tanzania land border. We decided at the EAC sectorial meeting, which brought together ministers of trade, industry, finance and investments from the EAC that Kenya should lift the ban. During the meeting, Kenya agreed to lift the ban on importation of cooking gas and wheat through Tanzania-Kenya borders,” Mr Mkenda said.
Cooking gas
Kenya’s Petroleum Principal Secretary Andrew Kamau said that it will not allow the imports of gas via trucks starting July over safety concerns.
“We have designated Mombasa as the only point of import for LPG. So if you want to play in this game, come and invest in Kenya, import through Mombasa and then we can follow up who is supplying unlicensed dealers. But now this whole thing about Tanzania is a thing of the past,” Mr Kamau said.
Ms Maina said that Kenya will be purchasing a gas testing facility to be stationed at the border Custom points of Namanga and Voi but in the meantime, the ban will stay in effect.
“Before the testing facility is installed in these Customs border points, Mombasa will remain as the only entry point for gas for the country to track the quality of LPG imports into the country. This isn’t a ban but an issue of the point of entry of the product.
What we have told Tanzania is that they should pass it through our designated gas facility in Mombasa where we will be able to test the product on its quality and safety, rather than through Namanga where we don’t have facility to test the product,” Ms Maina said.
Safety and quality
It is understood that at the Council of Ministers meeting, Tanzania insisted on its traders trucking their gas products through Namanga back into Kenya, with the latter arguing that given the region imports its LPG products through Mombasa, it made no sense in trucking it from Mombasa into Tanzania, then Dar re exporting it via Namanga.
“We have recently promoted the use of gas, and we would like to champion safety and quality of the same product. Unfortunately, we cannot vouch for the same product that is being trucked because we don’t know how it was handled and repackaged.
That’s the reason we aren’t allowing the gas imports through our inland ports,” Ms Maina said.
The EastAfrican understand that Kenya has already communicated its intention to have the ban stay for a period of up to four months as it seeks to purchase and install the new testing facilities at in the border points.
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tralac’s Daily News Selection
President Kagame: Report on the implementation of the institutional reform of the African Union
The Implementation Matrix already handed [today] to you leaders in this room is offered as a realistic guide to what it will take to deliver the reform in a timely manner. The reform can be substantially complete by our Summit in January 2019, which would adequately reflect the urgency of seizing the narrow window of opportunity before us. This target is ambitious, but also achievable, if we work together with the same spirit of openness and conviction that has brought us this far. Maintaining this pace requires a very strong and capable Reform Implementation Unit. Since the structure and mandate of this group was often raised during our consultations, allow me to say a few words about it...
There is enough flexibility built in to the Financing Decisions to deal with any challenges that might arise. We have been here before in the past, only to retreat. We should maybe not want to repeat the same. We should look at this process as the last best chance for the African Union to fix its finances and enhance its capabilities and finally secure the esteem of the people we serve, of this continent. The fact that many countries, almost one-fifth of our Members, have already begun to implement the 0.2% levy on eligible imports shows that it can be done. Even more Member States are actively preparing to do so. They are all to be commended.
Boosting intra-Africa trade requires political will – Kagame (New Times)
President Paul Kagame has said that boosting intra-Africa trade should go beyond financial investments to political will. President Kagame was speaking at the closing of the Afreximbank Annual General Meeting 2017. “Trade depends on more than finance, many trade facilitation efforts require little more than political will. We have examples in some regions where removal of barriers to trade has greatly improved the business environment. This needs to be shared widely across the continent so that Africans can reap the full benefits of integration,” he said. [Afreximbank announces stellar 2016 results]
Ratification updates:
(i) Tripartite Free Trade Area. A paltry eight African have so far ratified the Tripartite Free Trade Area more than two years after it was launched in Egypt, raising fears of a failed continental effort to create an expanded trade barrier free market. COMESA’s secretary general Sindiso Ngwenya confirmed in an interview last week that only eight countries have ratified the TFTA while several were still undertaking formalities with respective authorities before ratifying. But Ngwenya regrets the delays by members states over ratification fearing that most countries may have veered off course the ‘spirit’ under which they signed agreement. Many countries had actually pledged during the summit to expedite the ratification before the end of 2015 after finalising formalities from their respective parliaments. “The member states spoke in unison that they would all fulfill all formalities and ratify the TFTA before the end of 2015 or by mid 2016, but we have only seen a paltry eight ratifying it despite repeated reminders for them to hasten the process so that we can integrate as one Africa under a common market.”
(ii) EAC Cooperative Societies Act. Kenya plans to ratify the EAC Cooperative Societies Act before the end of 2017 to help boost regional integration, a senior official said Saturday. Cabinet Secretary in the Ministry of Industry, Trade and Cooperatives Adan Mohamed told journalists that all the heads of state of EAC member states will also assent to the regional law as soon as possible. The EAC Cooperative Societies Act was passed by the East African legislative Assembly in 2015. Once all trading bloc nations ratify the law, cooperatives in one member states will be able to draw membership from other partner states.
BRICS: New Development Bank’s General Strategy 2017–2021 (NDB)
On 30 June 2017, the Board of Governors of the New Development Bank approved the Bank’s General Strategy document for 2017-2021. The General Strategy of the Bank lays out how the NDB intends to fulfill its mandate of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development. Extract (pdf): NDB operates in a very different world from that in which existing multilateral financial institutions operated when they were created. The economic, political and social realities that shaped the second half of the 20th century have shifted markedly, and a new set of relations are now being built - between individuals, firms, countries, and between humanity and the physical environment. In many ways, the current global context is defined by non-linear, disruptive technological changes. Conventional infrastructure - energy, transportation, urbanization - will continue to be critical. Demand will be driven by the rate of economic growth, per capita income, demographics and urbanization - what can be called linear trends. But a non-linear trend has begun where infrastructure is becoming green at an exponential rate. Costs of solar and other renewables, for instance, have reached parity with those of fossil fuel-based energy in many countries. This trend is bound to accelerate as more and more countries commit to renewables, pushing costs down. Green energy is the present - not the future. The world will see many more non-linear trends beyond green. It used to be that productivity enhancements meant vast investments in new plant and machinery. This is no longer the case. Companies are generating enormous productivity gains while undermining traditional ways of doing business in many areas, such as accommodation provision, retail sales and transport services.
Mozambique creates new agency to promote investment and exports (Macauhub)
The leaders of Mozambique’s newly created Investment and Export Promotion Agency (Apiex) are expected to approve investment projects estimated at US$9 billion by the end of the year, according to the local press. Apiex is the result of the merger of three institutions – the Investment Promotion Centre, the Office of Economic Zones for Accelerated Development and the Institute for the Promotion of Exports.
Tanzania: Mining lobby asks govt to delay passage of new laws (IPPMedia)
The Tanzania Chamber of Minerals and Energy has asked for more time to review three landmark bills submitted to parliament last week for the overhaul of the legal, regulatory and fiscal framework of the country’s extractive industry, citing a lack of stakeholder engagement. The government wants the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms), the Natural Wealth and Resources (Permanent Sovereignty) and the Written Laws (Miscellaneous Amendments) bills to be passed by parliament this week under a certificate of urgency. But TCME warned that the proposed legislation would have far-reaching consequences on Tanzania’s mining sector and urged the government to rethink its decision of rushing the bills through parliament. A parliamentary source told The Guardian yesterday that the mining lobby’s pleas for the legislative process to be delayed will likely fall on deaf ears.
Dar es Salaam Maritime Gateway Project: updates from World Bank
(i) The capacity of the Port of Dar es Salaam will be increased to 25 million tons over the next seven years following the World Bank Board of Executive Directors’ approval of a $345 million credit and a $12m grant to the new Dar es Salaam Maritime Gateway Project. The investments in the port will also improve waiting time to berth from 80 hours to 30 hours as well as overall productivity. The port handled 13.8 million tons in 2016, up from 13.1 million tons in 2013, and 10.4 million tons in 2011, reflecting an average growth of 9 percent per year over the last five years. While recent numbers indicated a slowdown, the respite is likely to be short lived as projections for the long term suggest the Port’s volumes could double, from the current 14 million tons to 38 million tons by 2030, in an unconstrained scenario.
(ii) Trade from Zambia, Burundi, Uganda, Rwanda, and the DRC accounted for up to 35% of the Port of Dar-es-Salaam’s volume of cargo in 2015 - the equivalent of over 5.1 million tons. Forecasts suggest this component alone could almost double to 9.7 million tons by 2030. [Fact Sheet]
Railway projects in Africa, by Africa (Business Report)
WBHO, the listed construction and engineering group, is targeting rail construction projects on the African continent. This emerged at a Competition Tribunal hearing last week about the proposed merger between WBHO Construction and Faku Family Enterprises with Grindrod Rail Construction South Africa and Grindrod Rail Construction Company, which are part of the listed integrated logistics service supplier Grindrod. The tribunal approved the merger without conditions. David Colman, the divisional financial director at WBHO Construction, highlighted that they were currently working in 12 or 13 African countries but had more than 50 to 60 rail opportunities throughout Africa that they were tracking. Colman said these opportunities could lead to WBHO Construction expanding into 20 to 30 other countries in Africa. However, he said only one or two rail opportunities were closed each year.
A suite of bilateral trade updates:
(i) Zambia, DRC sign Kasumbalesa trade deal. Zambia and the DRC have signed a bilateral trade agreement to begin operations on the one-stop border post at Kasumbalesa in Chilabombwe District on the Copperbelt Province. The agreement was signed by Zambia’s Minister of Commerce, Trade and Industry Margaret Mwanakatwe and DRC’s External Trade Minister Jean Lucien Bussaa Tongba in Ndola yesterday. The governments agreed to form a joint-border post committee to facilitate cross-border trade and construct trade centre zones at Kasumbalesa and to officially launch the Simplified Trade Regime. Zambia and DRC will request COMESA to support the implementation of the STR through the construction of trade information desks to facilitate cross-border trade.
(ii) Zambia’s trade deficit with South Africa continues to widen. Zambia’s trade deficit with South Africa has continued unabated with South Africa exporting goods worth ZMW1.91bn to Zambia in May alone. A look at the Central Statistics Office monthly bulletin for June 2017 (pdf) shows that Zambia only exported goods worth ZMW 320m to South Africa. Efforts to lower the deficit seems not to be bearing fruit as Minister of Trade Magerate Mwanakatwe and Zambia’s Ambassador to South Africa, Emmanuel Mwamba in 2015 and 2016 organized a series of meetings by the business councils of both Zambia and South Africa to operationalise some of the bilateral agreements that would remove the impediments to Zambian businesses accessing the South African market. The recent upsurge of shopping malls mostly promoted by South African businesses which house a lot of South African consumer goods traders and supermarkets have even led to further increase in the trade deficit. These supermarkets have ended up importing even fresh fruit and vegetables products and other simple products which they could easily develop a local supply chain.
(iii) SA, Tanzania must even out trade imbalance. Economic Counsellor for the South African High Commission in Tanzania, Frans van Aardt, says South Africa and Tanzania must work to address the trade imbalance between the two countries. ”Currently, the trade balance is skewed in South Africa’s favour and efforts should be doubled to address the imbalance. Tanzania is an emerging economy with high growth potential, relatively diversified economy and a number of opportunities remain untapped in many sectors,” said Van Aardt on Thursday. A delegation of 21 business people arrived in Dar Es Salaam in Tanzania on Thursday to participate in the second leg of the Outward Selling Mission being led by the Department of Trade and Industry.
(iv) Avenues exist for Nigerian investments in South Africa, says envoy. The Nigerian High Commissioner to South Africa, Martin Cobham, has called for more Nigerian investments in that country, to enhance the balance of trade between the two countries. Cobham told the News Agency of Nigeria in Pretoria that the Federal Government should use the Nigeria-South Africa Bi-National Commission to open up avenues for more of such investments. “For a start, we can have Mr Biggs, or a Nigerian bank to cater for the Nigerian community in South Africa. The South African banks have stringent measures,” he said. The high commissioner suggested that relevant bodies like the Nigerian Economic Summit Group and the Nigerian-South African Chamber of Commerce, could also be used to open up avenues for such Nigerian investments.
(v) Egypt wants to increase trade and investments with Zambia. Egyptian Foreign Affairs Minister Sameh Shoukry has said his country desires to increase trade and investments with Zambia. Speaking during a bilateral meeting with his Zambian counterpart Harry Kalaba in Addis Ababa, Ethiopia, on Saturday, Mr Shoukry said his country was looking for more investment opportunities in Zambia. He hailed the excellent relations existing between the two countries, and renewed Cairo’s invitation for President Edgar Lungu to undertake a State visit to that country.
(vi) Rwanda, Congo sign finance cooperation deal. Rwanda’s Minister for Finance and Economic Planning, Claver Gatete, said the agreement will facilitate collaboration in entire planning and finance process. Ingrid Olga Ebouka Babakas, the Congolese minister for planning, statistics and regional integration, said: “This step started a year ago during the meeting of AU Heads of State. Beyond the words, we have to proceed with actions.”
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President Kagame: Report on the Implementation of the Institutional Reform of the African Union
Address at the 29th Summit of the African Union, Addis Ababa
I would like to begin by expressing my appreciation to their Excellencies, President Conde and President Deby, for their leadership and support in the task assigned to us of supervising the implementation of the reform.
I also congratulate Chairperson Moussa and his team for the progress that has been made.
I am grateful to the many Heads of State who have found the time to share their ideas, both in person and in writing, all the while re-affirming their unwavering commitment to following through on our decision.
Finally, we honour the foresight of the former Heads of State whose hard work and wisdom left us with a strong foundation for continental unity.
In short, we are as committed and united as we were at the outset. This fact is the first and most important item which I have to report to you today.
There is another critical point to be aware of. As evidence mounts that this reform is real and irreversible there have been expressions of polite surprise, bordering on discomfort, from external parties.
Accommodating an articulate and effective African Union in the world order challenges entrenched interests and assumptions. Even those who wish us well may have reason to discourage a more independent and organised Africa. We should be prepared to react accordingly.
Download the January 2017 report:
We are off to a good start in implementation. There are fewer obstacles than might have been expected. The African Union is an organisation of enormous complexity and significance, integrating the interests and aspirations of more than a billion people in 55 countries on the world’s second-largest continent.
We have held a series of very fruitful consultations since January with the Chairperson of the Commission, the Supervising Heads of State, and members of the Executive Council and Permanent Representatives Committee.
That team of Heads of State comprises the Chairperson of the African Union, His Excellency President Alpha Conde, and his predecessor, His Excellency President Idriss Deby.
I would like to present some of the topics that have been raised during those consultations for our consideration. But before doing so, I would like to recall the wider context.
For any major institutional change, it is very normal for problems to be identified. Stakeholders are within their rights to do so. And indeed, many of the issues which have been raised are in order, and merit our attention.
The reform process contains the flexibility to improve as we go along, and we will continue to listen to each other and incorporate feedback.
The key principle we must insist on is not to allow political or technical dilemmas to override our strategic imperatives, but rather to address them as they arise. We must work together and find the solutions that allow us to keep moving forward.
The issue of the level of representation at the Assembly meetings was raised, and so I put it to you for consideration.
On the one hand, the decision we took was clear that Heads of State may not be represented by officials below certain levels, and that was Vice President, Prime Minister, or the equivalent.
This was because of the very important principle that this is a leaders’ summit.
On the other hand, from time to time, there may be circumstances justifying representation by Foreign Ministers, who by their very nature are fully empowered to represent their governments. There should be a process to allow that to happen, as necessary.
The problem comes when the exception becomes routine. Soon enough, we are not getting the value out of these Summits that we need and expect.
Without going back on our original decision, we should discuss a formula to prevent this matter from becoming a self-defeating obstacle to our work.
The question of the location of summits was also raised. We might consider two perspectives in our discussion.
First, our starting point should be that our organisation has an established way of doing things, including hosting an annual Ordinary Summit at our Headquarters.
Second, there will be no shortage of major events for other Member States to host, including Extraordinary Summits when necessary, as well as the Coordination Summit between the African Union and Regional Economic Communities, every July.
The Implementation Matrix already handed to you leaders in this room is offered as a realistic guide to what it will take to deliver the reform in a timely manner.
The reform can be substantially complete by our Summit in January 2019, which would adequately reflect the urgency of seizing the narrow window of opportunity before us.
This target is ambitious, but also achievable, if we work together with the same spirit of openness and conviction that has brought us this far.
Maintaining this pace requires a very strong and capable Reform Implementation Unit. Since the structure and mandate of this group was often raised during our consultations, allow me to say a few words about it.
Chairperson Moussa’s vision for the Unit fully meets our needs and expectations. What remains is to ensure he has the necessary cooperation and support for the Unit to discharge its responsibilities.
In this, it must be made clear that the Reform Implementation Unit is part of the Office of the Chairperson and is accountable to him. It has no other reporting lines. The Chairperson, in turn, answers to the committee of Heads of State that I mentioned earlier.
However, it goes without saying that the success of the Unit requires frequent consultation with all concerned organs, structures, and stakeholders.
The Unit cannot be, and will not be, an inaccessible agency that conducts its work in secret. It will be transparent because it works for, and on behalf of, all of us.
Finally, the implementation of the Johannesburg and Kigali Financing Decisions came up repeatedly throughout our consultations.
These measures are the nerve centre of everything else we are doing. The independence and self-reliance of the African Union is an existential question for our continent.
The Financing Decisions imply an increased level of financial commitment from all Member States. There is no way around that. We have agreed to pay or even make sacrifices where necessary. In fact, I am glad to say that around ten countries have already started to implement what we have agreed.
However, the burden must be shared equitably and fairly and we will always listen to each other and find solutions. There is enough flexibility built in to the Financing Decisions to deal with any challenges that might arise.
We have been here before in the past, only to retreat. We should maybe not want to repeat the same. We should look at this process as the last best chance for the African Union to fix its finances and enhance its capabilities and finally secure the esteem of the people we serve, of this continent.
The fact that many countries, almost one-fifth of our Members, have already begun to implement the 0.2 per cent levy on eligible imports shows that it can be done. Even more Member States are actively preparing to do so. They are all to be commended.
The issue of the timing of the budget process was also raised. However, I understand that the Finance Ministers will convene immediately after this Summit and proposals to address this technical matter will be ready for our consideration in due course.
I am very happy to report to you that implementation is well underway, and that none of the problems identified is a serious obstacle.
In the months ahead, a lot will be required of all of us, beginning especially with the Commission, but not forgetting the Heads of State.
And in fact, on this point, let me also remind us that sometimes when Heads of State and Government have made decisions, there have been problems where some lower levels have gone ahead and wanted to review these decisions.
I suggest that where matters are to be reviewed, the best way to do so is to bring the matter back to Heads of State to see what they can do differently. But not changing the decisions of Heads of State when they have pronounced themselves.
We will continue to keep you informed and seek your counsel all along the way. Each of us is needed, personally, to help carry this reform mandate.
It is up to us to drive it forward and keep up the momentum, with constant mobilisation. This is, after all, an undertaking of Heads of State and it must be therefore respected as such.
The stubborn culture, of going back and forth, I think we have spoken about that several times in the past, and maybe we will need to find ways of reining it in, because it comes to a level that shows, if I may say so, indiscipline. We cannot continue to operate like that. We have to do business differently.
When we say, let’s be quick about these things, nobody is being disrespectful and it should not be construed as such. It is just how we should be conducting our affairs, with energy, purpose, and resolve.
We all have serious assignments before us. The next six months are the most intense and consequential period of the entire reform.
Numerous detailed proposals need to be submitted to the Assembly for debate and adoption at the next Summit in January 2018.
This is our window of opportunity. We cannot lose the momentum that has been built or allow the sense of urgency that has been driving us forward to fade away.
These reforms are long overdue. In Africa, too often, we keep promises the way we keep time; even the promises we make to ourselves and to our own future generations.
How is Africa supposed to rise, except by completing this reform? The much bolder initiatives that we envision will remain only dreams until we do so.
Where there is still some hesitation, let’s not get too concerned about it. Most likely, it is the result of misunderstanding and failure to communicate adequately and we will sit as a family and address it, as we always do.
I wish to thank you for listening to me and for the support I have received from all of you. Thank you for your kind attention.
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New financing to improve efficiency and improve capacity at Port of Dar es Salaam
The capacity of the Port of Dar es Salaam will be increased to 25 million tons over the next seven years following the World Bank Board of Executive Directors’ approval of a $345 million credit and a $12 million grant to the new Dar es Salaam Maritime Gateway Project (DSMGP). The investments in the Port will also improve waiting time to berth from 80 hours to 30 hours as well as overall productivity.
“The Port of Dar es Salaam is vital for the economies of Tanzania and neighboring countries,” said Bella Bird, World Bank Country Director for Tanzania who also oversees Malawi, Burundi and Somalia. ”Enhancing its operational potential will boost trade and job creation across the region, and reduce the current cost of $200-400 for each additional day of delay for a single consignment.”
The DSMGP is to be implemented as part of a larger ongoing investment program for the overall development of the Port of Dar es Salaam with the support of several development partners. The Government of Tanzania is contributing about $63 million through Tanzania Ports Authority, while Trade Mark East Africa is supporting improvements in the spatial and operational efficiency of the port currently, through the rehabilitation of access and egress roads and demolition and relocation of sheds. The United Kingdom through its Department for International Development (DFID) are also contributing a $12 million Grant. This support will co-finance the activities in the DSMGP, and further support is available for capacity building programs in institutions like Bandari College, the vocational training facility run by TPA, the Dar Maritime Institute, and the College of Engineering and Technology at the University of Dar es Salaam.
“The UK is committed to supporting Tanzania’s growth and helping to improve the lives of Tanzanians. We’ve been a committed partner to the Tanzanian Ports Authority over the last six years. As well as the $12m grant to the Dar es Salaam Maritime Gateway Project, DFID has funded 100 percent of the work Trademark East Africa has implemented in the port over recent years. We hope that these investments will help Tanzania take advantage of the opportunities that trade offers for future growth and prosperity,” said Sarah Cooke, British High Commissioner.
“TradeMark East Africa commends the World Bank and the UK Government for providing this much needed investment to improve capacity and efficiency of the Port of Dar es Salaam. Funded by the UK Government through DFID, TradeMark East Africa has implemented a number of interventions at the Port over recent years including port access roads, feasibility studies for Berths 1-7, and the Port’s dredging studies to prepare for this major investment,” said John Ulanga, TradeMark East Africa Country Director.
The Port of Dar es Salaam currently has 11 berths, with seven of these dedicated to general cargo (including container, dry bulk, break bulk and RoRo operations) and four to container operations. The Port handled 13.8 million tons in 2016, up from 13.1 million tons in 2013, and 10.4 million tons in 2011, reflecting an average growth of 9 percent per year over the last five years. While recent numbers indicated a slowdown, the respite is likely to be short lived as projections for the long term suggest the Port’s volumes could double, from the current 14 million tons to 38 million tons by 2030, in an unconstrained scenario.
The DSMGP has two main components: the improvements to the physical infrastructure which involve the deepening and strengthening of Berths 1 to 11; the construction of a new multipurpose berth at Gerezani Creek; the deepening and widening of the entrance channel and turning basin; and the improvement of rail linkages and platform in the port.
“Improvement of the port’s infrastructure is long overdue,” said Engineer Deusdedit Kakoko, the Director General of the Tanzania Ports Authority that oversees all Ports in the country including the Port of Dar es Salaam. “We have been performing rather optimally, yet under very difficult conditions.”
The institutional strengthening component will support the restructuring of Tanzania Ports Authority (TPA) and further develop its capacity to act as a landlord, manager and developer of the ports in Tanzania, whilst at the same time building capacity for future private sector participation in port operations.
“The project represents the start of an incremental process towards increasing the capacity of the port of Dar es Salaam, and strengthening its economic role in the region,” said Richard Martin Humphreys, the World Bank’s Lead Transport Economist and Task Team Leader. ”It aims to make the necessary improvements to the current sub-structure, whilst providing a new berth, facilitating the access and egress of larger vessels to the port, and improving the integration with the access modes of road and rail.”
A much-waited refurb for a very busy port
In Abdigi Ramadhani’s 13 years as a truck driver, nothing has been more irksome than the lack of certainty over his itinerary each time he ferries goods between Zambia and Tanzania.
The volume of cargo handled by the Port of Dar-es-Salaam has been growing at an average of 9 percent a year for the past five years: in 2011, the port handled 10.4 million tons and in 2013 it handled 13.1 million tons, which rose to 13.8 million tons in 2016. “Delays have been the norm at the Port of Dar-es-Salaam,” Ramadhani says, “but now the Port is busier than ever, with a lot more cargo coming in.”
There are many more transporters than there used to be, he says, but the port has yet to catch up. It may summon 50 trucks to load up at one go but end up not serving them all, making it impossible for the long-haul truckers who shuttle goods between Tanzania and its landlocked neighbors to plan.
Until now, all this cargo has been distributed between the port’s two terminals: the terminal for general cargo, which is operated by the public sector and handles 70 percent of the throughput, while the rest is handled by the dedicated containerized cargo terminal, currently leased out to a private operator. The port is already considered to be operating above its capacity, yet projections are that the volume of goods handled by it could almost triple to more than 38 million tons by 2030.
Volume may double by 2030
Drivers like Ramadhani are a part of brisk transit operations between global markets and Zambia, Burundi, Uganda, Rwanda, and the Democratic Republic of the Congo. Trade from these countries accounted for up to 35 percent of the Port of Dar-es-Salaam’s volume of cargo in 2015 – the equivalent of over 5.1 million tons. Forecasts suggest this component alone could almost double to 9.7 million tons by 2030.
And it’s not just the waiting or turn-around time that drivers like Ramadhani find bothersome. There’s also theft. “You can’t sleep while you’re waiting,” he says. “If you fall asleep, you wake up to find your battery gone.”
A recent World Bank study estimated that the port suffered an aggregate loss of US$2.4 billion annually from inefficiency and gaps in governance, the equivalent of about 25 percent of the total volume of merchandise imported into Tanzania in 2012.
Built in the 1950s
The Port of Dar-es-Salaam was developed in earnest between 1953 and 1956 during Tanzania’s period of British colonial rule, when the first three, deep-water berths – the mooring spaces allocated to individual ships – were built. This was followed by the construction of a further seven berths in the 1970s.
Over time, these have worn down. Ships are also getting bigger, with longer vessels preferred by shipping companies for their economies of scale. The port was designed to handle vessels of up to 230 meters long, but nowadays it needs to be able to handle vessels of up to 350 meters long. Sediment also means that, beside the berths, its access channel and turning circle need to be dredged.
“Improvement of the port’s infrastructure is long overdue,” says Engineer Deusdedit Kakoko, the Director General of the Tanzania Ports Authority that oversees the Port of Dar-es-Salaam. “At the moment, Berth 10 hosts vessels of up to 10.5 meters deep below their waterline, but sometimes we have four large vessels arriving at the same time and they all queue in the outer anchorage at deep sea, while we have seven berths lying inactive because they’re not deep enough to dock them,” he adds.
“One vessel has to wait for the other to finish discharging before it can also come in.”
Docking larger ships faster
The US$345 million International Development Association credit for the project upgrading the port – the Dar-es-Salaam Maritime Gateway Project – involves paying for strengthening and deepening (to 14.5 meters) the port’s Berths 1 to 7, and the construction of a new multipurpose berth at Gerezani Creek.
It also includes the deepening and widening of the entrance channel to the port, as well as the deepening (to 15.5 meters) of the turning basin at the end of Berth 11; the improvement of rail links and platforms; and the strengthening and deepening (to 14.5 meters again) of Berths 8 to 11, too.
Work on the port is due to start soon and will help it overcome the challenges it has handling high volumes of cargo. “This improvement is going to change the port phenomenally, because we have been performing rather optimally, yet under very difficult conditions,” says Eng. Kakoko.
Adds Ramadhani: “As drivers we earn money per trip, so we look forward to the day when everything will be streamlined, so that instead of making one trip in eight to ten days to Zambia, as we do now, we can do perhaps two or three.
The Government of Tanzania is contributing about US$63 million through Tanzania Ports Authority to the upgrade, and the United Kingdom is giving about US$12 million through its international development agency, DFID. The project is also putting money aside for improving the Tanzania Port Authority’s capacity to act as a landlord, manager, and the developer of other ports in the country.