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SA, DRC push for strengthened trade relations
South Africa and the Democratic Republic of the Congo (DRC) have reaffirmed their willingness to improve and strengthen their economic relations.
This will be done through facilitating trade and removing all impediments constraining bilateral trade and investment.
As such, President Jacob Zuma and President Joseph Kabila’s treaty on the avoidance of double taxation should be implemented soon as all legal requirements have been fulfilled.
This emerged on Sunday at the end of the tenth session of the Bi-National Commission (BNC) between South Africa and DRC. The session which was co-chaired by the two Presidents in Pretoria.
The BNC received a report of the Ministerial Commission on the implementation of the signed agreements and the commitments and recommendations made during the 9th Session of the BNC.
These commitments and recommendations concern cooperation projects in politics and governance; defence and security; economy, finance and infrastructure; and social and humanitarian affairs.
The BNC saw the signing of the Memorandum of Understanding between the Cross Border Road Transport Agency and the Office for the Management of Multimodal Freight.
“The two Heads of State noted the positive developments with regard to an immigration agreement, which would facilitate movement of diplomats and officials of the two countries. They urged Ministers, within whose mandate this matter resides, to make the necessary arrangements to sign this agreement expeditiously as all legal requirements have been complied with,” a communiqué issued after the session said.
Grand Inga Project
President Zuma expressed his satisfaction with the progress in identifying a contractor for the implementation of the Grand Inga Project.
The Grand Inga Project will seek to harness the power potential of the Congo River, sub-Saharan Africa's greatest waterway – with the potential to power half of the continent.
Political stability in DRC, elections
The session also looked into the political stability in the DRC.
The two sides expressed satisfaction with the successful conclusion of the political dialogue initiated by President Kabila which resulted in the appointment of Bruno Tshibala as Prime Minister, the establishment of a Government of National Unity, saying this would strengthen democracy and pave the way for the holding of elections in the DRC.
The two sides called on the electoral bodies to work together to enhance the quality and credibility of this year’s elections.
Polls were not held last year because of budgetary constraints.
This sparked violent protests where civilians were killed by police as they tried to maintain order.
Critics have voiced concern over the delay of election, saying President Kabila who came to power after the 2001 assassination of his father, deliberately delayed elections in order to remain in power.
DRC's conference of Catholic bishops (CENCO) helped to negotiate a December 31 deal aimed at avoiding a political crisis by ensuring an election this year to elect Kabila's successor.
Regional, continental and international issues
Turning to regional, continental and international issues, South Africa and DRC expressed their commitment to African unity and integration within the framework of the Constitutive Act of the African Union and to the peaceful resolution of conflicts, as well as African renewal, specifically through the implementation of the African Union’s Agenda 2063.
“The two Heads of State reflected on the need to peace, security and stability in the region and the continent to end the suffering of the local populations.
“To this end they agreed that it was imperative for Africa to draw on its own resources and capabilities to achieve its objective of a prosperous Africa at peace with itself. In this regard, they expressed concern with the interference of some actors outside of Africa in domestic affairs, which threatens to undermine the sovereignty of African countries.”
The two countries reiterated their common view on the need for the reform of multilateral institutions particularly the Bretton Woods Institutions and the Security Council to include the interests of the developing countries.
In addition, to this they expressed concern about the recent withdrawal by the United States of America from the Paris Agreement on climate change.
Joint Communiqué
on the Occasion of the Tenth Session of the Bi-National Commission between the Republic of South Africa and the Democratic Republic of the Congo held from 21 to 25 June 2017 in Pretoria, RSA
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At the invitation of His Excellency, Mr Jacob Gedleyihlekisa Zuma, President of the Republic of South Africa (RSA), His Excellency, Mr Joseph Kabila Kabange, President of the Democratic Republic of the Congo (DRC), visited the Republic of South Africa on 25 June 2017 on the occasion of the Tenth Session of the Bi-National Commission (BNC) between RSA and the DRC. Both Heads of State were accompanied by delegations of Ministers and Senior Government Officials. The meeting of the two Heads of State was preceded by a Ministerial Meeting which took place on 24 June 2017 and Senior Officials’ Meetings which were held from 21 to 23 June 2017.
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The two Heads of State received a report of the Ministerial Commission on the implementation of the signed agreements and the commitments and recommendations made during the 9th Session of the BNC. These commitments and recommendations concern cooperation projects in the following fields: Politics and Governance; Defence and Security; Economy, Finance and Infrastructure; and Social and Humanitarian Affairs. This report was used to review the bilateral cooperation between the two countries.
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The Heads of State expressed their satisfaction with the successful conclusion of the political dialogue initiated by HE Joseph Kabila Kabange, having resulted in the appointment of a Prime Minister, the establishment of a Government of National Unity and the strengthening of democracy, which would pave the way for the holding of elections in the DRC. The Heads of State urged their electoral bodies to work together to enhance the quality and credibility of the upcoming elections.
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HE President Jacob Gedleyihlekisa Zuma expressed his satisfaction with the progress achieved by HE President Joseph Kabila Kabange and the Government of the DRC in identifying a contractor for the implementation of the Grand Inga Project. Both Heads of State called for the full implementation of the Grand Inga Treaty that was signed in Kinshasa on 29 October 2013 between DRC and South Africa. In this regard, they encouraged the African financial institutions to assist in the implementation of the Grand Inga Project.
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The two Heads of State noted the positive developments with regard to an immigration agreement, which would facilitate movement of diplomats and officials of the two countries. They urged Ministers, within whose mandate this matter resides, to make the necessary arrangements to sign this agreement expeditiously as all legal requirements have been complied with.
-
The two Heads of State witnessed the signing of the Memorandum of Understanding between the Cross Border Road Transport Agency and the Office for the Management of Multimodal Freight.
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The two Heads of State reiterated their willingness to improve and strengthen economic relations between the two countries by facilitating trade and removing all impediments constraining bilateral trade and investment. In this connection, the Heads of State directed that the Treaty on the Avoidance of Double Taxation should be implemented now that all legal requirements have been fulfilled.
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The two Heads of State also used the occasion of the 10th Session of the BNC to exchange views on regional, continental and international issues. On regional issues, they noted with appreciation the ongoing work by the Southern African Development Community regarding regional integration. On continental issues, the two Heads of State expressed their commitment to African unity and integration within the framework of the Constitutive Act of the African Union and to the peaceful resolution of conflicts, as well as African renewal, specifically through the implementation of the African Union’s Agenda 2063.
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Within this context, the two Heads of State reflected on the need to peace, security and stability in the region and the continent to end the suffering of the local populations. To this end they agreed that it was imperative for Africa to draw on its own resources and capabilities to achieve its objective of a prosperous Africa at peace with itself. In this regard, they expressed concern with the interference of some actors outside of Africa in domestic affairs, which threatens to undermine the sovereignty of African countries.
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The two Heads of State reiterated their common view on the need for the reform of multilateral institutions particularly the Bretton Woods Institutions and the Security Council to include the interests of the developing countries; and expressed concern about the recent withdrawal from the Paris Agreement on climate change by the United States of America.
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At the conclusion of the BNC, His Excellency, Mr Joseph Kabila Kabange, expressed to his South African counterpart, His Excellency, Mr Jacob Gedleyihlekisa Zuma, President of the Republic of South Africa to the people and the Government of the Republic of South Africa, his sincere appreciation and gratitude for the warm, friendly and fraternal welcome and hospitality accorded to him and his delegation.
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In conclusion, both Leaders agreed that the 11th Session of the BNC will be held in the DRC in 2018 on a date to be mutually determined through the diplomatic channels.
Done in Pretoria on 25 June 2017
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Fiscal consolidation to accelerate growth and support inclusive development: Ghana Public Expenditure Review
Ghana has experienced an extended period of robust growth since the early 2000s, supported by a favorable external environment and large investment inflows, particularly in the extractive industries. In 2011, as the start of oil production drove a surge in per capita income, Ghana graduated from low-income to lower-middle-income status. Despite the key role of the extractive industries, recent growth has been relatively inclusive, and Ghana achieved its Millennium Development Goal of halving the poverty rate by 2015.
However, macroeconomic conditions have deteriorated since 2012, giving rise to substantial domestic and external imbalances. Although external shocks have underscored Ghana’s vulnerability to global commodity and financial markets, the recurring nature of its imbalances reflects deeper structural deficiencies in its macroeconomic policies and public financial management (PFM) framework. A heavy focus on commodity exports has accelerated Ghana’s recent growth, but the country’s economic outlook increasingly hinges on a narrow range of volatile commodity prices. Sustained increases in education and health spending have enabled the government to make important progress in improving key social development indicators, but steadily rising public expenditures in a context of persistently weak revenue performance has undermined the stability of the fiscal accounts. Intensifying global headwinds have revealed the extent to which recent macroeconomic and public expenditure trends have exposed the country to unsustainable fiscal and current-account deficits.
In an effort to stabilize the economy and shore up the public finances, the government adopted a multiyear fiscal stabilization plan in mid-2015, with support from the International Monetary Fund (IMF), the World Bank, and Ghana’s other development partners. After achieving a substantial degree of fiscal consolidation in 2015, Ghana missed its 2016 fiscal target by a large margin. The budget numbers indicate that the fiscal slippage was due to the public revenue shortfall and rising expenditure pressures in the run-up to the December 2016 elections, which also caused the government to accumulate large amount of new arrears. The consolidation program is expected to get back on track in 2017 and continue through 2018, with further fiscal adjustments focused on both public revenue and expenditures. Progress on the structural reform agenda has been uneven, and in order to achieve its objectives the government will need to refocus its attention on measures to improve PFM. Lessons learned from previous reform efforts underscore the critical importance of a credible and enduring political commitment to the full implementation of the reform agenda.
Ghana’s recent transition to lower-middle-income status complicates its fiscal consolidation efforts, as the county now faces diminished inflows of external assistance and limited access to concessional borrowing. Meanwhile, the emerging oil sector presents both opportunities and challenges, as it is projected to provide a strong but temporary boost to economic growth and fiscal revenue. These factors highlight the critical importance of macroeconomic management and structural fiscal reform. Addressing Ghana’s macroeconomic vulnerabilities while sustainably expanding the available fiscal space for capital investment and social spending will be pivotal to broad-based growth, job creation, and the achievement of the government’s development objectives.
This Public Expenditure Review (PER) focuses on the policy areas most relevant to Ghana’s ongoing fiscal consolidation and medium-term macroeconomic outlook. Its subject areas are designed to reflect and complement the government’s commitment to strengthen PFM in preparation for the anticipated surge in oil revenues. Chapter 1 assesses options for sustainably reducing non-discretionary expenditures and enhancing the efficiency of public investment. Chapter 2 explores strategies for improving domestic revenue mobilization by streamlining tax exemptions and other fiscal incentives. Chapter 3 analyzes the government’s wage bill, its largest recurrent budget item, and considers measures to better manage the size and compensation structure of the public sector workforce. Chapters 4 and 5 focus on policies that will enable Ghana to leverage its positive medium-term economic prospects – including rising oil revenues – to achieve a more sustainable and inclusive development pattern. As a healthy, educated labor force is crucial to meet the evolving demands of a dynamic economy, Chapter 4 evaluates public spending in the education and health sectors and its impact on human capital formation. Finally, Chapter 5 examines public spending in the agriculture sector, which despite its diminishing economic size will remain crucial to employment and poverty reduction over the long term, particularly after the anticipated boom in oil production runs its course.
Tax expenditures
Ghana provides a wide range of tax exemptions and incentives designed to reduce the tax burden on certain economic sectors and income groups. These “tax expenditures” are not fully recorded in the budget and are far less visible than more traditional forms of public spending, yet they impose a steep fiscal cost. The foregone revenue from Ghana’s tax expenditures amounted to an estimated 5.2 percent of GDP in 2013. Value-added tax (VAT) exemptions and preferential VAT treatment alone reached 4.2 percent of GDP, while customs exemptions represented another 0.9 percent. While statistical issues complicate comparisons between years, similar data for 2014 suggest that the foregone revenue from tax expenditures has remained broadly stable at about 5 percent of GDP. Moreover, as their purpose is to realign incentives in favor of certain types of firms and taxpayers, tax expenditures inevitably create economic distortions and give rise to vested interests. Once established, tax expenditures often prove difficult to eliminate, as their beneficiaries will strive to defend and expand them regardless of their social or economic value.
Accurate cost estimates are essential for effective oversight and the analytical basis for reforming tax expenditures. The government needs to build its capacity to estimate regularly all foregone revenues arising from tax exemptions and incentives by improving the data collection in all areas of tax administration and closing significant gaps in the data on income-tax expenditures for mining firms and free-zone enterprises. Accurate cost estimates are essential to assess the cost effectiveness of the tax exemptions and to form the analytical basis to improve the tax-expenditure policies.
Ghana’s tightening fiscal envelope presents a critical opportunity to assess the cost-effectiveness of its tax expenditures and evaluate potential policy alternatives. Reforming tax expenditures could enable the government to boost domestic revenue generation and enhance the efficiency of fiscal policy without compromising its expenditure priorities. Tax-expenditure policies that advance worthwhile social or economic objectives should be reformed to enhance their effectiveness, while those that serve no clear policy purpose should be eliminated.
Some tax expenditures are designed to alleviate the tax burden on lower-income households, while others attempt to incentivize the consumption of goods and services that generate positive externalities. When reviewing tax expenditures targeted to low-income households, policymakers should evaluate the impact of VAT exemptions and zero-rating, as some of these tax benefits also go to middle and high income consumers who could afford to pay the VAT. A socially optimal option would be to collect the VAT on all consumption and use the revenue to directly subsidize consumption of the poor through cash transfers. However, such consumption that results in significant externalities such as preventive health care like bed nets and vaccines and primary education may be relieved of any VAT burden ideally through zero-rating. Tax expenditures on consumer goods that produce no significant positive social or economic spillovers should be identified and eliminated.
Trade-related tax expenditures should be consolidated into a holistic export-promotion strategy. While this strategy may include a narrow range of tax incentives, it should focus on measures to promote domestic competition and foster regional integration. Tax expenditures can bolster the export competitiveness of targeted sectors, but they can also prop up industries that are structurally uncompetitive. Moreover, tax expenditures frequently accrue to industries and sectors that would be viable without them. Customs exemptions on manufacturing inputs and capital goods may be retained if they contribute to a clear sectoral development strategy, but exemptions on most consumer goods should be phased out. The special exemption permits approved by Parliament should also be eliminated, and exemptions should not be applied to individual firms, but only to classes of goods and services.
Policymakers should evaluate the impact of tax holidays and location-based incentives such as “free zones,” as both policy types are inherently inefficient and prone to abuse. The government should investigate the behavior of businesses that benefit from these policies and develop a strategy to reduce economic distortions and curb tax avoidance. All commercial and industrial tax expenditures should be routinely evaluated to determine which firms and sectors are benefitting from preferential tax treatment and to assess the extent to which supporting these industries is consistent with Ghana’s strategic development goals.
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Chokepoints and vulnerabilities in global food trade
Physical ‘chokepoints’ along trade routes are critical to global food security. The importance of these chokepoints and the risks of closure or disruption are increasing, but such risks and their potential impact remain largely overlooked.
Why chokepoints matter
Supply chains are only as strong as their weakest links. In global food trade, the most vulnerable links consist of a handful of ‘chokepoints’: physical points along trade routes that handle high volumes of important commodities. There are maritime chokepoints (straits and canals), coastal chokepoints (ports) and inland chokepoints (roads, railways and waterways) and global food trade depends heavily on these.
The Panama Canal, for example, handles 22 per cent of global soybean shipments annually, while each year the Mississippi River moves 20 per cent of global maize trade from the grain fields of the US Midwest to ports on the US Gulf Coast. Ukrainian and Russian ports along the Black Sea coast transfer 19 per cent of globally traded wheat on to ships bound for the Turkish Straits, the Mediterranean and beyond.
A disruption at one or more of these chokepoints could have major impacts. Global food prices, supply in local markets, the livelihoods of traders and farmers, and the provision of food aid to vulnerable communities all depend on the continued movement of goods across borders and oceans. Crucially, chokepoint disruptions may also add to political instability. Governments rely on the functioning of chokepoints to ensure sufficient supplies of affordable food for their populations. A poor wheat harvest in the Black Sea region, for example, contributed to protests across North Africa in late 2010 and early 2011; these protests became the Arab Spring.
Major disruptions are rare but not unprecedented. Of the 14 chokepoints of systemic global importance, all but one (the Strait of Gibraltar) have seen at least one interruption to transit over the past 15 years.[1] These incidents have ranged in duration from just a few hours to over a month. The most common disruptions are weather-related. Hurricane Katrina struck US Gulf Coast ports in 2005. Heavy rains have rendered Brazil’s poorly maintained roads impassable on numerous occasions, preventing the transportation of food shipments from farms in the interior to the country’s seaports. Other chokepoint disruptions – Russia’s official and de facto restrictions on exports, for example – are political in nature, or are related to armed conflict and insecurity. Most recently the Strait of Bab al-Mandab – one of three systemically important Middle East chokepoints, along with the Strait of Hormuz and the Suez Canal – has been the site of attacks on vessels, a spill-over effect of the ongoing conflict in Yemen.
The impacts of most of these disruptions have been largely localized to date. But as the global food system becomes ever more connected,[2] the impacts of supply stoppages and high transport costs are likely to have knock-on effects along international supply chains. Populations in low-income food-deficit countries (LIFDCs) in North Africa increasingly rely on the movement of wheat out of Russia and Ukraine via that region’s congested ports and through the Turkish Straits. Although the Black Sea chokepoints are over 1,500 miles away from North Africa, the latter’s food-insecure communities would almost certainly feel the effects of a prolonged disruption to grain shipments along Russia’s railways.
The growing importance of chokepoints
The importance of food trade chokepoints is increasing. Transport infrastructure is coming under greater pressure as trade volumes grow. In 2000, the global transport system moved 354 million tonnes of grain; by 2015, that figure stood at 615 million tonnes.
What’s more, our reliance on international trade is increasing. Currently, four out of five people live in countries that depend on imports to feed their populations.[3] Many countries around the world are almost wholly dependent on imports from the world’s breadbasket regions to meet domestic grain demand. Take Honduras, which sources 77 per cent of its maize imports and 88 per cent of its wheat imports from the US; a blockage of grain exports along the Mississippi or out of the Gulf Coast ports could have serious implications for the country’s food security. An even starker example is Djibouti. It depends on imports for virtually all of its cereal supply, and ultimately on the Black Sea region for almost three-quarters of those imports.
Despite their criticality, chokepoints have received minimal attention. Current assessments of food security focus on conditions at household or national level that influence exposure to supply or price shocks. Import dependence is typically considered a source of price risk, with little consideration of the potential for physical supply disruptions. Data on patterns of transportation of grain and fertilizer are lacking, as is analysis of the systemic importance of trade chokepoints to food markets. This stands in contrast to analyses of energy security, where the risk of disruptions at chokepoints has long been a key consideration. A new Chatham House report aims to fill this gap. Mapping trade data from resourcetrade.earth onto physical shipping routes, the report identifies vulnerable locations along trade routes and explores the potentially disastrous consequences of severe disruption at critical chokepoints. It highlights the need for governments to act now to mitigate the heightening risk of chokepoint disruption.
Increasing vulnerability
As climate change takes hold, the risk of disruption to food trade chokepoints will increase. The small-scale disruptions we see today will become more common, as will extreme weather events such as the drought that struck the US Midwest in 2012-13, causing water levels on the Mississippi River to drop and prompting restrictions on barge movements. Rising sea levels will lead to more frequent flooding, as seen at the Black Sea ports several times in recent years, and make coastal infrastructure more vulnerable to damage. An expected increase in the incidence of tropical cyclones, high winds and fog will likely bring interruptions to shipping through narrow straits and canals.
As well as direct impacts on food trade infrastructure, climate change will exacerbate resource stresses and threaten harvests, multiplying the risk of trade interruptions and infrastructure damage owing to conflict, insecurity and protectionism.
And climate change raises the risk of multiple disruptions occurring in different locations at the same time, compounding the impact of localized supply shocks on international markets. A worst-case scenario – one in which the Gulf Coast ports in the US were shut down due to a hurricane at the same time as key roads in Brazil were swamped owing to heavy rains – would cut off up to half of global soybean supply in one fell swoop.
Who’s most at risk?
Countries depend on chokepoints to different degrees. The importance of a chokepoint to a particular country depends not only on the share of that country’s imports that pass through it, but also on how easily alternative supply routes or sources of the commodity in question can be found. Another key factor is the vulnerability of a given country. The more food-insecure or fragile a state is, the larger the impact of a chokepoint disruption is likely to be.
The Gulf Cooperation Council (GCC) countries are especially exposed to chokepoint disruption. The region has some of the most food import-dependent countries in the world. These consumer markets rely heavily on grain exports from the Black Sea region, transported via a succession of chokepoints: the Russian and Ukrainian railways and ports, through the Turkish Straits and down through the Suez Canal. Gulf importers also rely on shipments coming northwards through the Strait of Hormuz and Strait of Bab al-Mandab. Over a third of GCC food imports pass through at least one chokepoint for which no alternative route exists. Historical links between food insecurity and political and social instability make the region’s high dependence on chokepoints a cause for concern.
Inadequate policy responses
Investment in infrastructure in producer countries has been woefully lacking. The US’s inland waterways and railways are old, congested, and vulnerable to droughts and floods; its Gulf Coast ports are exposed to hurricanes and storm surges. Brazil’s roads are in poor condition and often blocked in poor weather. The Black Sea railways and ports urgently require investment, but regional instability stands in the way. Each of these regions must mobilize investment in the coming decades to avoid infrastructure problems worsening, but all face challenges in doing so.
Similarly, few import-dependent countries have taken action to address infrastructure risks. For many, addressing these risks presents a challenge because responsibility for chokepoints often lies with producing countries. The exception to this is China, which actively invests in overseas infrastructure to relieve pressure on existing chokepoints, diversify supply routes, and increase its operational footprint along its supply chains.
No international mechanism exists to manage the risk of a major food supply disruption. In oil markets, the International Energy Agency (IEA) manages supply risk through an emergency response system under which member countries agree to coordinate measures in the event of a disruption. Despite the significant risk posed by chokepoint disruptions, there is no coordinated international strategy for managing food chokepoint risk or responding to a major supply shock.
Five areas for action
Although addressing chokepoint risk is a long-term project, work must begin now for the necessary measures to be in place before climate change becomes a major source of disruption.
The report recommends five major areas for action:
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Integrate chokepoint analysis into mainstream risk management and security planning; e.g. governments in food-importing countries should undertake assessments of exposure and vulnerability to chokepoint risk at the national and subnational level.
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Invest in infrastructure to ensure food security; e.g. the G20 should establish a taskforce on climate-compatible infrastructure, establishing common principles and guidelines for critical infrastructure resilient to future climate impacts.
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Enhance confidence and predictability in global food trade; e.g. the WTO should strengthen rules to make it harder for governments to introduce ad hoc export restrictions on key agricultural commodities.
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Develop an emergency sharing mechanism and smarter strategic storage; e.g. strategic stock sharing and emergency response mechanisms should be agreed at regional level among exposed countries to coordinate actions and share the costs of risk management.
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Build the evidence base around chokepoint risk; e.g. the Agricultural Market Information System (AMIS) should work with governments to harmonize nationally reported, macro-level transport infrastructure and asset data.
» Read and download Chokepoints and Vulnerabilities in Global Food Trade.
This article was originally published by Chatham House on http://resourcetrade.earth/. Johanna Lehne is a Research Assistant and Laura Wellesley is a Research Associate, Energy, Environment and Resources, Chatham House.
[1] Authors’ own analysis. For full details and sources, see Annex 2 in Bailey, R. and Wellesley, L. (2017), Chokepoints and Vulnerabilities in Global Food Trade, Chatham House Report, London: Royal Institute of International Affairs.
[2] See Benton, T. (2017), Food security, trade and its impacts, resourcetrade.earth.
[3] MacDonald et al. (2015), ‘Rethinking Agricultural Trade Relationships in an Era of Globalization,’ BioScience, 65(3): 275-289.
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tralac’s Daily News Selection
Kenya: Draft Investment Policy (GoK)
Up to now, Kenya has not had a single and clearly defined policy solely focusing on investment generation and retention. The Government of Kenya has however formulated various strategies and policies that focus on investment growth and support, stipulated in various policy documents such as National Development Plans, Sessional Papers and Master Plans, including the new Constitution 2010. These programs and initiatives have had limited impact. They also led to the adoption of various fiscal and non-fiscal incentives, changes in investment related regulations and the creation of several government agencies tasked with responsibility for investment promotion and facilitation, some with overlapping mandates leading to duplication of efforts and unnecessary strain on limited government resources.
To address the limited impact of investment and a number of other challenges relating to the entry and treatment of investment, the Government developed the Kenya Investment Policy. The policy development process took a holistic approach to gain an understanding of Kenya’s context as well as international best practices to inform the policy’s proposals. The policy is guided by six core principles, which emphasise the need for openness and transparency, inclusivity, sustainable development, economic diversification, domestic empowerment, and global integration. The KIP addresses private investments at the national and county levels. It is a comprehensive and harmonized policy to guide attraction, facilitation, retention, monitoring and evaluation of private investment. [Download: Revised Draft, 21st June 2017 (pdf)] [Related: Ease of Doing Reforms Presentation, 19 June 2017 (pdf)]
Accelerating sustainable development through inclusive business in Kenya (BCtA)
The report (pdf), produced by BCtA with support from Sustainable Inclusive Business Kenya, outlines key opportunities and challenges facing inclusive businesses in Kenya, and makes recommendations on key improvements needed to enable these models to grow, such as more supportive regulations, better coordination between educational institutions and the private sector to ensure students are work-ready upon graduation, and improved coordination between development actors and businesses to reduce duplication of efforts and ensure sustainability of interventions, particularly in relation to skills building.
Nigeria, Morocco and the future of ECOWAS (ThisDay)
However, recently Nigeria’s influence in ECOWAS began to wane as a result of lackadaisical foreign policy. Although Abuja hosts the Commission, fundamental decisions are often taken without Nigeria’s leadership input, or with very inconsequential contributions by some Nigerian apparatchiks. This was evident from the absence in Monrovia of any Nigerian government official in a high leadership position. If President Muhammadu Buhari couldn’t attend on health grounds, and the Acting President because of the likely political implications of leaving the country in the absence of the President, why couldn’t the Foreign Minister or the Minister of State for Foreign Affairs represent Nigeria? This was the first time such a thing has happened in the 42 years’ history of ECOWAS. Sadly, this was a Summit in which the Heads of State in attendance took some critical decisions, which if upheld would seriously harm our national interest! [The author, M.K. Ibrahim, is a retired Nigerian ambassador], [Acting President Yemi Osinbajo: We can build a new Nigeria; A response: Jibrin Ibrahim]
SACU Heads of State and Government: summit communiqué
The Summit commended the Council of Ministers for establishing two Ministerial Task Teams on Trade and Industry, and on Finance, including the approval of their Terms of Reference, to facilitate the urgent implementation of the Work Programme. The Summit emphasized that SACU economies experience similar economic challenges, which can be better dealt in an integrated manner within the region. In this regard, the Summit directed the Ministerial Task Teams to prioritize industrial development and develop concrete cross-border projects to promote industrialization to ensure that the region is able to optimise economic benefits to withstand global economic shocks. The Summit noted and endorsed the Work Programme, based on the outcomes of the 3rd Ministerial Retreat, which outlines detailed activities, key deliverables and the timelines within which the proposed activities will be undertaken. The following is a summary of the main focus areas of the Work Programme: [Swaziland Observer: 2-year wait for revenue sharing review]
Business advice for US companies in Africa: do what you do best (Newsweek)
Rather than competing in areas like transportation infrastructure or manufacturing, where they are at a competitive disadvantage, American firms need to double down in the sectors in which the US dominates globally - consulting, finance, data, entertainment and agricultural technology. As African businesses grow increasingly sophisticated, American expertise in both finance and professional services can help them grow and navigate the challenges that complexity brings. To deepen the American presence in African markets - particularly the nearly 28 million American SMEs that provide the bulk of American jobs - there must be targeted sectoral policies to help them unleash their power and reach their potential. Using US government outreach programs in the Department of Commerce and the Small Business Association to ensure that SMEs are aware of African opportunities is a good place to start. Funding the Overseas Private Investment Corporation and Export Import Bank, which support American businesses abroad, is also critical. [The author, Aubrey Hruby, is co-founder of the Africa Expert Network and co-author of The Next Africa] [A reminder: Anthony Carroll’s testimony on US interests in Africa]
Kagame stands firm, Kenya retreats in US used clothes row (The EastAfrican)
The EastAfrican has also learnt that the EAC secretariat has already completed its study on how the phase-out of importing used clothing will be implemented. “A meeting is slated for later this month in Arusha, where this will be the main agenda. We will also meet to discuss and approve a detailed plan on how the region’s textile and leather industry is to be developed so as to be self-sustaining,” a source told The EastAfrican.
Norad country evaluation briefs from CMI:
(i) Malawi: This Country Evaluation Brief reviews and synthesises findings from a selection of evaluations and reports on development interventions in Malawi produced mainly since 2010. None of the evaluations and reports can demonstrate that donors have been able to make significant changes at the political system level. Donor support to good governance and government efficiency has not transformed Malawi politics into an effective instrument of service delivery, strategic policy formulation, and efficient implementation of development-oriented policies. [The analyst: Inge Amundsen]
(ii) Somalia: Progress on the political and security fronts since 2012 has led to substantial increases in development aid, exemplified by the adoption of the Somali Compact in 2013. Total aid flows are ten times the level of government’s own resources, three times higher than any other country. Yet Somalia still receives less development aid per person than many other post-conflict countries. General lessons for donors from this review include: [The analysts: Marcus Manuel, Raphaelle Faure, Dina Mansour-Ille]
Rwanda: Financing manufacturing (SET)
The report aims to analyse Rwanda’s financial backdrop, and the composition of its investment flows into manufacturing, with a view to exploring constraints and opportunities in manufacturing. In analysing financial and economic challenges, this paper concludes that high transport and utility costs, the elevated real effective exchange rate and weakness in bank lending are key challenges to be tackled. Looking ahead, special economic zones should continue to be a focus alongside export-oriented investments; prudential measures could target manufacturing finance and disincentivise overly high levels of real estate lending. [The analysts: Linda Calabrese, Phyllis Papadavid, Judith Tyson]
Tanzania: White elephants under spotlight (Daily News)
President John Magufuli has expressed anger towards individuals who rushed to purchase industries and other parastatal firms, promising to develop them but ended up abandoning them. Now, the President wants all of them repossessed before giving to other individuals who are willing and ready to develop them. According to the President, there were 197 industries sold to individuals for the purpose of developing them. But, survey and investigations conducted revealed that some of them were rendered redundant or had their original purposes changed. The President intoned that all individuals who either abandoned the industries they bought or changed their original purposes were curtailing his government’s industrialisation drive.
A new UK policy on trade and development post-Brexit: a good first step (Center For Global Development)
But we can do even better for the world’s poorest and help our own people too. Here are some ways we would like to see the British government build on this welcome first step. [The analysts: Owen Barder, Ian Mitchell]
Matchmaking finance and infrastructure (HuffPost)
The world economy – and emerging market and developing economies in particular – display a gap between infrastructure needs and its finance. On the one hand, infrastructure investment has fallen far short of what would be necessary to support potential growth. On the other hand, abundant financial resources in world markets have been facing very low and decreasing interest rates, whereas opportunities of higher return from potential infrastructure assets are missed. Here we approach how a better match between private sector finance and infrastructure can be obtained if properly structured projects are developed, with risks and returns distributed in accordance with different incentives of stakeholders. [The analysts: Otaviano Canuto, Aleksandra Liaplina]
BRICS Ministers of Agriculture: joint declaration (China MOA Information Office)
We are committed to agricultural product safety and quality through the implementation of international standards developed by international standard-setting bodies in the sanitary and phyto-sanitary and technical barriers to trade issues, such as the Codex Alimentarius, OIE and IPPC. We are committed to expanding the trade of crops, livestock, fisheries and particularly agricultural products with high added value. We also welcome suggestions from the business fora to governments in order to enhance trade and improve investment environment. We will promote in-depth cooperation in agricultural investment. Recognizing the broad prospects for cooperation in the comprehensive development of agricultural products, farming and transportation infrastructure, and the establishment of agro-trade zones and logistics centers, we will promote in-depth agricultural cooperation between BRICS and other countries.
China: Vision for Maritime Cooperation under the Belt and Road Initiative (Xinhua)
The Global Blue Economy Partnership Forum will be launched to promote new concepts and best practices of the blue economy, and to boost marine industrial integration and capacity cooperation. Efforts will also be undertaken to jointly develop international blue economy classification standards, and to release reports on blue economy development. Ocean-related public finance products will be explored to support the development of the blue economy. Cross-border marine spatial planning for blue growth will be promoted, common principles and technical standards implemented, and best practices and evaluation methods shared. China is willing to provide technical assistance in marine spatial planning for countries along the Road, and to jointly build an international forum on marine spatial planning. [Nigeria: Maritime transport policy underway]
Today’s Quick Links: The Incubator for Integration and Development in East Africa (IIDEA) has been launched in Bujumbura. Download the concept note. Ugandan traders turn to Dar port as Kenya elections close in Lake Victoria Basin Commission: update EAC Partner States sign CAADP Compact Tanzania: Over 30% of imported goods evade tax, says TIC chief Drought halves Mozambican sugar exports Beyond income poverty: World Bank report on non-monetary dimensions of poverty in Uganda |
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5th Summit of the SACU Heads of State and Government: Communiqué
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The 5th Summit of the Heads of State and Government of the Member States of the Southern African Customs Union (SACU), was held on Friday, 23rd June 2017 in Lozitha, Swaziland.
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The purpose of the Summit was for the Heads of State and Government to consider the Report of the Council, on the progress made on the implementation of the Roadmap to reinvigorate the SACU Work Programme that was endorsed by the Heads of State and Government, on 12th November 2015, in Windhoek, Namibia.
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The Summit was chaired by His Majesty, King Mswati III of the Kingdom of Swaziland, and was attended by, His Excellency Jacob Gedleyihlekisa Zuma, President of the Republic of South Africa, His Honour, Mokgweetsi Eric Keabetswe Masisi, Vice President of the Republic of Botswana, Honourable Carl-Hermann Gustav Schlettwein, Minister of Finance of the Republic of Namibia, and a representative of the Kingdom of Lesotho.
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The Summit noted with appreciation that in accordance with the Roadmap, the SACU Council of Ministers convened its 3rd Ministerial Retreat on 19-20 June 2016, in Muldersdrift, South Africa, where the Council discussed and agreed on broad principles that are crucial to enhancing the SACU Work Programme.
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The Summit reaffirmed the importance of SACU as an organisation in deepening regional economic integration, industrialisation and economic diversification of SACU economies as a common goal, as well as positioning SACU to take advantage of regional and global economic developments.
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The Summit noted and endorsed the Work Programme, based on the outcomes of the 3rd Ministerial Retreat, which outlines detailed activities, key deliverables and the timelines within which the proposed activities will be undertaken.
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The following is a summary of the main focus areas of the Work Programme:
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the review and development of a suitable architecture for tariff-setting, rebates, duty drawbacks and trade remedies;
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a review of the Revenue Sharing Formula and the long-term management of the Common Revenue Pool;
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the establishment of a Stabilisation Fund and exploring the feasibility of a financing mechanism for regional industrialisation;
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identifying financing options for regional projects; and
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the development of public policy interventions to promote and align industrial development and value chains.
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The Summit noted that the Council has agreed to review aspects of the SACU Agreement, 2002, to facilitate the development of SACU economies.
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The Summit commended the Council of Ministers for establishing two Ministerial Task Teams on Trade and Industry, and on Finance, including the approval of their Terms of Reference, to facilitate the urgent implementation of the Work Programme.
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The Summit emphasized that SACU economies experience similar economic challenges, which can be better dealt in an integrated manner within the region. In this regard, the Summit directed the Ministerial Task Teams to prioritize industrial development and develop concrete cross-border projects to promote industrialization to ensure that the region is able to optimise economic benefits to withstand global economic shocks.
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The Summit noted that the Republic of Botswana will be the Chair of SACU, effective 15 July 2017 to 14 July 2018, taking over from the Kingdom of Swaziland.
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The Heads of State and Government therefore commended His Majesty, King Mswati III, for the able leadership and guidance rendered during his term. In the same vein, the Heads of State and Government congratulated His Excellency Lieutenant General Dr. Seretse Khama Ian Khama, on assuming the Chair of SACU, from 15 July 2017.
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The Heads of State and Government expressed their appreciation to the Government and the people of the Kingdom of Swaziland, for the warm hospitality extended, and for hosting a successful 5th Summit of the SACU Heads of State and Government.
DONE AT LOZITHA IN THE KINGDOM OF SWAZILAND, ON FRIDAY, 23 JUNE 2017.
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Businesses breaking the cycle of poverty in Kenya
How private sector can help achieve Sustainable Development Goals across the country
With almost half of all Kenyans living below the poverty line, efforts to tackle poverty and improve living, working and health conditions must be stepped up if the East African nation is to achieve its Sustainable Development Goal (SDG) commitments by 2030.
A new report, New Horizons: Accelerating Sustainable Development through Inclusive Business in Kenya, outlines the role that private sector can play in meeting these targets and improving the lives of poor Kenyans.
“Enormous potential lies in aligning private sector approaches with the sustainable development goals, and nowhere is this more relevant than Kenya. With almost half the population living below the poverty line, there is both great need and great potential for businesses to include this demographic as customers, clients, employees, suppliers and more,” said UN Resident Coordinator and UNDP Resident Representative Siddharth Chatterjee.
The report, launched on 22 June 2017 by inclusive business advocacy platform Business Call to Action (BCtA) hosted by the United Nations Development Programme, examines how businesses can be more ‘inclusive’ by providing employment, goods, services and livelihoods in a commercially viable manner to people living at the base of the economic pyramid (defined as those earning less than USD 8 a day). By doing so, they are directly contributing to a range of SDGs, including SDG 1: No Poverty, SDG 3: Good Health and Well-Being, and SDG 8: Decent Work and Economic Growth.
Globally, the 4.5 billion people living at the base of the economic pyramid (BoP) are estimated to spend over US$5 trillion per year (in terms of 2005 purchasing power parity), making this a bigger consumption segment than middle- and higher-income earners combined. In Kenya, the BoP market segment accounts for 84 percent of yearly household consumption.
Basing its findings on input from 50 companies already using inclusive business models in Kenya, the report finds that Kenya’s vibrant inclusive business community is already tapping into this market.
For example, solar energy provider Mobisol has expanded its client base by providing affordable solar energy to families who could not previously afford it, enabling children to study at night and perform better at school, while avocado oil producer Olivado is working directly with farmers to reliably trace the quality and source of its fruit, ensuring that farmers receive a consistent income and better working conditions.
“Inclusive businesses are flourishing across the country in a range of sectors and people living at the base of the economic pyramid are accessing high-quality training and skills development along with better healthcare and insurance, and establishing more sustainable sources of incomes,” said Business Call to Action Programme Manager Paula Pelaez.
The report, produced by BCtA with support from Sustainable Inclusive Business Kenya, outlines key opportunities and challenges facing inclusive businesses in Kenya, and makes recommendations on key improvements needed to enable these models to grow, such as more supportive regulations, better coordination between educational institutions and the private sector to ensure students are work-ready upon graduation, and improved coordination between development actors and businesses to reduce duplication of efforts and ensure sustainability of interventions, particularly in relation to skills building.
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Draft Kenya Investment Policy: Investment growth for sustainable development
Through the leadership of the Ministry of Industry, Trade and Cooperatives (MITC), an inter-ministerial task force has developed a draft Kenya Investment Policy. The policy is aimed at enhancing the conduciveness of the environment for investment growth, though a harmonized approach to investment promotion, facilitation and retention.
In addition, the policy provides for revision of legislations affecting the overall investment network. The development of the Kenya Investment Policy has involved a consultative process covering the national and county governments, including the private sector stakeholders.
Executive summary
To achieve the twin targets of Kenya’s Vision 2030 – 10% growth per annum and middle income industrializing country status – the Government of Kenya recognizes the critical role played by private investment and has put measures in place to attract and retain foreign investment while encouraging the expansion of domestic investment, with the aim of increasing private investment to 24 per cent of GDP by 2030.
Up to now, Kenya has not had a single and clearly defined policy solely focusing on investment generation and retention. The Government of Kenya has however formulated various strategies and policies that focus on investment growth and support, stipulated in various policy documents such as National Development Plans, Sessional Papers and Master Plans, including the new Constitution 2010. These programs and initiatives have had limited impact. They also led to the adoption of various fiscal and non-fiscal incentives, changes in investment related regulations and the creation of several government agencies tasked with responsibility for investment promotion and facilitation, some with overlapping mandates leading to duplication of efforts and unnecessary strain on limited government resources.
To address the limited impact of investment and a number of other challenges relating to the entry and treatment of investment, the Government developed the Kenya Investment Policy. The policy development process took a holistic approach to gain an understanding of Kenya’s context as well as international best practices to inform the policy’s proposals. The policy is guided by six core principles, which emphasise the need for openness and transparency, inclusivity, sustainable development, economic diversification, domestic empowerment, and global integration.
The KIP addresses private investments at the national and county levels. It is a comprehensive and harmonized policy to guide attraction, facilitation, retention, monitoring and evaluation of private investment. The KIP further recognizes the central role of Kenya’s Constitution (2010) which clearly delineates the complementary roles that national and county governments play in investment promotion. The KIP also creates an institutional framework that fosters coordination for efficient investment attraction, facilitation, and a favourable investment climate. The policy actions proposed in the KIP are designed to support and stimulate private sector development and improve the overall ease of doing business and competitiveness in the economy, with the ambition that Kenya becomes the premier destination for at least 50% of multinationals establishing their continental headquarters in Africa.
The KIP addresses some of the fundamental requirements for establishing a well-coordinated investment environment that will attract high-quality FDI into the country while upscaling local SME capacity. These include: a harmonized regulatory and institutional framework for investment; an effective investment promotion and facilitation government function; an active focus on attracting beneficial, high quality foreign investment; building a critical mass of domestic investors including strengthening their capacities; a targeted approach to offering incentives by aligning them to development priorities; significant resources devoted to investor aftercare and increasing national savings.
These objectives are to be achieved through the implementation of critical measures stated by this Policy, including the following:
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Investment oversight. Operationalization of the National Investment Council, which will be responsible for formulating the country’s overall investment strategy and implementing the KIP to ensure that investment contributes to the country’s development goals, and approving Bilateral Investment Treaties and investment related chapters in treaties.
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Investment promotion and facilitation. The primary responsibility of investment promotion and facilitation falls on the Investment Promotion Agency. Counties, through County Investment Units play a major role by developing bankable projects, outlining their competitive positions, and preparing marketing materials aligned to their areas of strategic focus. Officials at the county level also play an important role in investment facilitation, including securing community approval, providing land where needed, and participating in investment promotion activities for specific investment projects in collaboration with the IPA.
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Investment entry and establishment. Various government agencies are involved at different levels along the investment entry and establishment process. The IPA plays a facilitation role among these entities through the One-Stop Centre to minimize the administrative burden on investors and government agencies.
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Investment retention and aftercare. Counties play a major role in ensuring that investments located within their territory are given the highest level of attention. The Government is responsible for ensuring that the overall investment climate remains attractive to potential and existing investors. The IPA is responsible for taking the lead to provide effective aftercare services by working with counties and national government actors.
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Investment assessment. Ensuring that investments are contributing to the country’s economic, social and environment sustainability objectives is important. Measuring investment impact with respect to community engagement, development objectives, and supplier linkages between investors and small and medium sized enterprises is a shared responsibility among the different actors. While the NIC will spearhead this process, it must work closely with other national and county institutions to ensure that the country continues to target and attract beneficial investment.
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Establish a promotion and facilitation fund resourced by both the exchequer and grants from development partners, to be used for the purposes of targeted investment promotion and facilitation.
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Establish land banks which could be used for large projects, including encouraging counties to establish a savings scheme where a percentage part of their budget allocation goes to purchasing land to be set aside for investment purposes.
» Download: pdf Kenya Investment Policy, revised draft June 2017 (1.08 MB) (PDF, 1.08 MB)
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Government pledges to help improve access to UK markets for world’s poorest countries post-Brexit
The Government commits to protect current trading relationships, keep prices in check and help build our trading partners of the future.
The Government will use Brexit to cement Britain’s standing in the world and meet our commitments to the world’s poorest by securing their existing duty-free access to UK markets and providing new opportunities to increase trade links.
The commitment means that around 48 countries across the globe, from Bangladesh to Sierra Leone, Haiti and Ethiopia will continue to benefit from duty-free exports into the UK on all goods other than arms and ammunition, known as ‘everything but arms’.
On leaving the EU, the UK Government will also explore options to expand on relationships with developing countries such as Jamaica, Pakistan and Ghana – all of which currently benefit from a mixture of reduced or zero tariffs on the goods they export to the UK – as well as maintaining existing trading arrangements and avoiding costly tariffs.
The Government continues to deliver improved support to these countries by helping them break down the barriers to trade, supporting critical trade infrastructure like ports and roads, and building trade skills in those countries, so that they can take better advantage of trading opportunities.
International Trade Secretary Liam Fox said:
“Our departure from the EU is an opportunity to step up to our commitments to the rest of the world, not step away from them.
Free and fair trade has been the greatest liberator of the world’s poor, and today’s announcement shows our commitment to helping developing countries grow their economies and reduce poverty through trade.
Behind the ‘duty-free exports’ are countless stories of people in developing countries working hard to provide for themselves and their families by exporting everyday goods such as cocoa, bananas and roses, resulting in lower prices and greater choice for consumers.”
International Development Secretary Priti Patel said:
“The UK is using its position as a great, global trading nation to seize opportunities to lift countries out of grinding poverty. This will generate the wealth, prosperity and investment needed to create millions of jobs and help the world’s poorest people stand on their own two feet.
Helping developing countries harness the formidable power of trade means we are not only creating trading partners of the future for UK businesses, but supporting jobs at home too. Building a more prosperous world and supporting our own long-term economic security is firmly in all our interests.”
Around £20 billion a year of goods are shipped to the UK from these developing countries, accounting for around half of our clothing, a quarter of our coffee and other everyday goods such as cocoa, bananas and roses.
Without these trading arrangements, clothing, for example, from some of the poorest countries could face tariffs of over 10% - which could be passed on to UK consumers through higher prices at the till.
Access to the markets of developed countries also provides vital trading opportunities for the world’s poorest people and creates jobs. For example, 2 million women work in Bangladesh’s garment sector, which is a significant exporter of clothing to the UK. These opportunities help people to work their way out of poverty and build our trading partners of the future.
In 2015, the UK imported the following from developing countries:
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£19.2 billion of goods
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79% (or £186 million) of all tea imports – enough for 34.9 billion cups of tea
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Over 22% of all the UK’s coffee imports, valued at around £131 million. Both Indonesia and Vietnam exported more than £30 million into the UK, and Ethiopia exported over £15 million
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£7.8 billion in textiles – accounting for 45% of all the UK’s textile and apparel imports
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Bangladesh, India, Indonesia, Sri Lanka and Vietnam combined exported 34 million dresses – one dress for every woman in the UK.
None of these countries can defeat poverty without sustained economic growth – jobs and investment opportunities are vital to helping the world’s poorest people stand on their own two feet. Without these jobs, a whole generation could be consigned to a future where opportunities are out of reach; potentially fuelling instability and mass migration, which could in turn have direct consequences for the UK.
Further information
The world’s Least Developed Countries are calculated by the UN using criteria which is based on income criterion, the Human Assets Index and the Economic Vulnerability Index. Further information can be found here.
Under current EU arrangements, the UK offers Duty Free Quota Free access for Least Developed Countries on all goods which they are exporting to the UK, other than arms and ammunition. For the next tier of developing countries, largely classed as lower middle income, the EU offers a mix of reductions on tariffs.
DFID’s first Economic Development Strategy, launched by Ms Patel earlier this year, sets out how private sector investment will help developing nations speed up their rate of economic growth, trade more and industrialise faster, and ultimately lift themselves out of poverty.
The UK is committed to ensuring that when companies source from developing countries, they do so in a way which protects the human rights of workers and their health and safety.
Case studies
Textiles, preferences and development
The UK imported £7.8 billion in textiles and apparel from countries which benefit from preferential access to UK markets in 2015, 45% of all the UK’s textiles and apparel imports. Preferential trade arrangements not only created jobs for people in developing countries, but also benefitted customers and businesses in the UK by keeping prices lower and offering greater choice of goods.
The UK imported 34 million dresses from Bangladesh, India, Indonesia, Sri Lanka and Vietnam in 2015 – enough for one dress for every woman in the UK. Women in Bangladesh often lack opportunities to work outside the home. The growth of the ready-made garment industry is changing this.
Vast numbers of young Bangladeshi women are leaving their villages to work in garment factories where, in earlier generations, young women were rarely seen outside their homes. In Bangladesh, women make up the majority of workers in the ready-made garment sector as a whole, with around 2 million women currently working in this sector. Women in garment factories are pushing back the social limits on their life options by redefining the norms of female propriety.
The textile industry often has wider spill overs to industries other than textiles. For example, India’s textiles sector uses 7% of India’s agricultural products, chemical and computer related services sectors, whilst nearly 8% of the transport and storage output goes to the textile industry. Therefore one industry creates multiple demands in others.
Tea and coffee exports supporting jobs in developing economies
Promoting agricultural exports from developing economies supports DFID’s agricultural programme which by 2018 could help over 900,000 people to earn better livings from agriculture.
In 2015, 79% of tea in the UK came from beneficiary countries of trade preferences (£186 million). £129 million of this came from African economies – £111 million from Kenya. In total the UK imported 103,000 tonnes of tea from beneficiary economies; enough for 34.9 billion cups of tea.
In 2015 countries which benefit from preferential access to the UK imported over 22% of all the UK coffee imports. These countries imported nearly £131 million worth of coffee into the UK in 2015. Both Indonesia and Vietnam imported more than £30 million into the UK and Ethiopia imported over £15 million.
Bananas
The UK imports 6% of the world’s dried and fresh banana exports, and we eat around six billion bananas every year. Countries such as the Dominican Republic, Cote d’Ivoire, Cameroon and Ghana are an important source of this trade to the UK, contributing to 30% of total banana imports.
DFID is a committed Fairtrade partner and is providing £18 million over six years to help Fairtrade International have a greater impact in their work and make the global Fairtrade system stronger.
The Fairtrade Foundation highlight that one in three bananas bought in the UK is Fairtrade. Fairtrade plays an important role in helping to improve the lives of poor people, such as by ensuring farmers receive fair prices for their products, workers receive better wages to help them support their families and agricultural practices are made more sustainable.
The UK imported over 105,000 tonnes of bananas from Sub-Saharan Africa in 2015. The amount of bananas the UK imports from Sub-Saharan beneficiary economies has almost doubled since the start of the millennium.
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Secondhand clothes ban shelved to save Agoa trade agreement
Kenya has retreated from a proposed ban on used clothes, reversed tariff increases and held confidential meetings with US officials ahead of a decision by Washington to review duty-free access for Rwanda, Tanzania and Uganda to markets under the African Growth and Opportunity Act (Agoa).
The EastAfrican has learnt that the retreat occasioned after a US lobby filed a petition accusing the four East African countries of violating Agoa rules by proposing the ban and increasing the tariffs on secondhand clothes.
Lobby group Secondary Materials and Recycled Textiles Association (Smart) has filed a petition for an out-of-cycle review of the countries’ Agoa eligibility and duty-free access to the US market.
Kenya’s Trade and Industrialisation Principal Secretary Dr Chris Kiptoo said the country had decided to enforce the policy changes to comply with the Agoa conditions.
“When we saw the petition filed in March, we knew that the lobby group had strong arguments,” he said.
Instead of following through with the proposed ban on imports of used clothes, Nairobi pushed for the sale of clothes made at the Export Processing Zones.
The review would have led to the country possibly losing its duty-free and quota-free access to the US, its third largest market.
“We have determined that an out-of-cycle review of Kenya’s Agoa eligibility is not warranted at this time due to recent actions it has taken, including reversing tariff increases and committing not to ban imports of used clothing through policy measures. We will continue to monitor its actions to ensure that it follows through on its commitments,” said Edward Gresser, the chair of the Trade Policy Staff Committee at the United States Trade Representative (USTR).
He added that, through the review, USTR and trade-related agencies will assess the allegations in the Smart petition and review whether Rwanda, Tanzania, and Uganda were adhering to Agoa’s eligibility requirements.
Review of legislation
Agoa, which was reviewed last year, allows exporters from African countries that qualify under certain principles to export their goods to the US without tough restrictions.
In turn, the US gets preferential treatment for its exports to Africa, including acceptance of its secondhand goods. After completing its initial 15-year period of validity, the Agoa legislation was extended in 2015 by a further 10 years, to 2025.
Last year, Agoa imports to the US from Rwanda, Tanzania, and Uganda totalled $43 million, up from $33 million in 2015, according to the USTR. US exports to Rwanda, Tanzania, and Uganda were $281 million in 2016, up from $257 million the year before.
In the petition, Smart is seeking to have the three countries temporarily suspended from duty-free access for eligible apparel exports to the US under Agoa, until they reverse the increased duties and stop any other activity aimed at implementing the ban.
“We believe this review is warranted due to these countries’ recent decision to begin phasing in a ban on imports of secondhand clothing (Harmonised Tariff Schedule heading 6309, commonly referred to as “used clothing”), which our industry exports to the region. In their effort to phase in this ban, these four countries also recently dramatically increased import duties on these goods, which is part of their plan to fully ban imports of used clothing by 2019,” said Jackie King, the executive director of Smart, in a March 21 letter to the USTR.
If the petition is approved, US President Donald Trump will be expected to act on the review recommendations and either withdraw, suspend, or limit the duty-free status of items from the three countries. Rwanda, Tanzania and Uganda are now expected to participate in a public hearing on July 13 in Washington.
Permanent Secretary in the Uganda’s Ministry of Trade and Industry Julius Onen told The EastAfrican that they are still studying the matter and will issue a formal position next week.
Used clothes tax
Already Uganda and Rwanda have raised taxes for used clothing and offered incentives to manufactures to invest in their local textile sectors.
Last year, Rwanda’s Finance Minister Claver Gatete increased the taxes on used garments by 12 per cent and shoes by 15 per cent.
“The used clothes tax will be increased from $0.2 to $2.5 per kilogramme. These taxes will increase as a way of supporting locally made products and industries, while also minimising the health risks that come with the used product. I don’t know if there is any trade in secondhand clothes between European countries among themselves,” Mr Gatete said.
Uganda’s Finance Minister Matia Kasaija also increased the environmental levy imposed on used clothes, from 15 per cent to 20 per cent of the cost, and freight insurance (CIF) value in some taxes during the post-election budget. This was done after altering the Excise Duty Act 2014 to increase taxes in the Finance (Amendments) Bill, 2016.
The EastAfrican has also learnt that Kenya applied for a stay in the application of duties on EPZ-manufactured clothes if sold locally, in a bid to promote its local textile market. Under the stay, Kenyans will now be allowed to access up to 20 per cent of goods and apparel manufactured by EPZ companies, tax-free.
“It is true that we applied for this stay of application of import duty and exempt-from-VAT garments and leather footwear procured from the EPZ to enable Kenyans to buy new clothes and shoes at affordable prices. This was granted by the EAC and that is how we have been able to hold the sales in Nairobi and Mombasa,” Dr Kiptoo said.
“There was no way we were going to appear like we were escalating the tariffs. When we met the US officials, we told them that we had actually applied for a stay in these tariffs on the used clothes from the EAC-proposed specific rate of $0.4 per kilogramme to the original $0.2 per kilogramme effective from the beginning of next month.”
Textile
In the 2016/17 budget, Kenya introduced a $0.4 per kilogramme duty on secondhand clothes. This has since been repealed.
It is also understood that Kenya lobbied the regional countries to replace the word “ban” with “phase out” in its future communications on the used clothes, rallying the region to promote the domestic textile market.
“If you look at the communique from the 18th Ordinary Summit of the EAC Heads of States held in Dar es Salaam, Tanzania, we didn’t have any reference to a ban instead, we were talking about the region’s commitment to build a competitive local textile industry. That is the new position, with Kenya at the forefront,” Dr Kiptoo said.
“The Heads of State Summit received a progress report on the review of the textile and leather sector with a view to developing a strong and competitive domestic sector that gives consumers better choice than imported used textiles and footwear, and directed the Council to finalise the matter and report to the 19th Summit,” reads the communiqué of the 18th Ordinary Summit of the EAC Heads of State.
Kenya’s proposal at the summit was for the region to set up its own production structures and capacity to make clothing and shoes, while also pushing for the strict implementation of sanitary and phytosanitary measures (SPS) under the EAC SPS Protocol.
In June last year, Kenya joined Uganda and Rwanda as the EAC partner states that complied with a ratification approval. The EAC hopes to use the SPS protocol to call for better quality used clothes that are fit for human use and dignity.
The EastAfrican has also learnt that the EAC secretariat has already completed its study on how the phase-out of importing used clothing will be implemented.
“A meeting is slated for later this month in Arusha, where this will be the main agenda. We will also meet to discuss and approve a detailed plan on how the region’s textile and leather industry is to be developed so as to be self-sustaining,” a source told The EastAfrican.
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tralac’s Daily News Selection
A reminder that the SACU Summit takes place today in Swaziland.
tralac’s Weekly Newsletter is posted. Talkmore Chidede examines investment policy reforms in Africa: How can they be synchronised?
Peter Fabricius: Anthony Carroll, potential Trump pick for US ambassador to SA is ‘a good friend of South Africa’
President Kagame speaks out on US threat over used clothes ban (New Times)
President Paul Kagame has said that Rwanda will proceed with the planned phase-out of importation of second-hand clothes despite the threats that it could lead to a review of eligibility to access duty-free access to the American market. He said that despite the consequences of being locked out of AGOA, Rwanda is keen on developing its local textile industry. “Rwanda and other countries in the region that are part of AGOA, have to do other things, we have to grow and establish our industries,” Kagame said. “We are put in a situation where we have to choose; you choose to be a recipient of used clothes with a threat hanging or choose to grow our textile industries, which Rwandans deserve at the expense of being part of AGOA. This is the choice we find that we have to make. As far as I am concerned, making the choice is simple, we might suffer consequences. Even when confronted with difficult choices, there is always a way,” he added. [Background: USTR announcement]
Related commentaries on the out-of-cycle review:
New Times editorial comment: The Office of the United States Trade Representative must be aware that last year the US exported $281m worth of goods to the three mentioned countries. How can a mere $24m derived from second hand exports to the whole EAC region be an issue to the extent of damaging trade relations between the US and the EAC? Why should we agree to be dumping grounds for used things? How come no noise was made when the government banned the importation of used electric appliances such as refrigerators because of environmental reasons?
Tanzania: EAC urged to go ahead with plans to ban second-hand clothes imports (Daily News). Mr Salum Shamte, the Vice-Chairman of the Tanzania Private Sector Foundation said yesterday that the plan by Tanzania and other EAC member states to ban second-hand clothes imports came at the most opportune time of promoting textile industries. “The government and the others in the EAC should maintain its position of banning imports of used clothes and shoes in favour of domestic manufacturing,” he told the ‘Daily News’ in an interview. Mr Shamte said EAC member states should be concerned with protection and promoting interests of their countries and the community just like what the US President, Donald Trump, does with ‘America first’ policy.
Inter-regional collaboration on mining policy: an interview with Dan Kazungu (Kenya’s Cabinet Secretary, Ministry of Mining)
We have agreed with ministers for mining from Sub-Saharan Africa to plan a forum for African Mining Ministers so we can always have an agenda for African mining and create jobs and opportunities for our people. It’s in it’s infancy stage. We’re still trying to put it together. Kenya will be the convener for the meeting of African Mining Ministers so we can see how we can confront issues that are not country specific together. We want to see how we can collaborate to resolve these issues for the betterment of our peoples.
Simonetta Zarrilli: The case for mainstreaming gender in trade policy (UNCTAD)
Trade has an impact on women’s empowerment and wellbeing, and gender inequality has an impact on countries’ trade performance and competitiveness. Let us have a closer look at the two sides of the equation. Trade has an impact on gender through three main channels. UNCTAD is developing a toolbox for the ex-ante gender assessment of trade measures to support countries to carry out this task. While many developing countries are shifting their production and export strategies towards services, agriculture remains women’s main employer in many of them. This means that policies aimed at making agriculture more commercial and more technology- and export-oriented cannot ignore the implications for women. Let’s zoom in on some specific country experiences (Rwanda, Angola, Lesotho, Kenya). [The author is Chief of the Trade, Gender and Development Programme, UNCTAD]
Afreximbank’s support to Egypt: update
“Presently, the Bank’s exposure to Egypt amounts to $4.4bn, representing 37% of our portfolio,” he said, adding that Afreximbank’s non-funded support to the country, in the form of letters of credit confirmation and guarantees, exceeded $1bn. On support for Egypt’s trade with the rest of Africa, the President said that the Afreximbank was helping large Egyptian entities to become continental and global champions by supporting them to export to other African countries. Presently, such support amounted to no less than $1.5bn.
Kenya joins Africa’s big projects funder AFC (Daily Nation)
AFC chief executive Andrew Alli welcomed Kenya’s membership saying it was a critical step to AFC’s strategic positioning to inject funds into infrastructural development in the country. Other members are Rwanda, Uganda, Cape Verde, Chad, Cote d’Ivoire, Djibouti, Gabon, the Gambia, Ghana, Guinea-Bissau, Guinea, Liberia, Nigeria and Sierra-Leone. “By improving Kenya’s infrastructure, AFC is making it a regional hub that promotes intra-regional trade links with better transport, telecommunications networks and power supply,” he said.
Namibia: Gross Domestic Product, Q1 2017 (pdf, Nambia Statistics Agency)
Year-on-year, the GDP for the first quarter of 2017 continues to contract by recording 2.7% compared to an increase of 4.1% registered in the corresponding quarter of 2016 (Figure 1). The poor performance was mainly attributed to construction and manufacturing, wholesale and retail and hotels and restaurants sectors that contracted by 44.9%, 10.7%, 7.4% and 9.3%, in real value added, respectively. The trade deficit continues to decline, recording N$1.3bn during the first quarter when compared to N$4.1bn recorded in the corresponding quarter of 2016. (Figure 3).
Lucy Corkin: Angola’s recurring oil challenges in a new context (Oxford Institute for Energy Studies)
Oil remains the source of approximately 98% of the country’s foreign exchange and 75% of government revenue. As such, it is likely that this time around there will be far more wide-ranging consequences for Angola, its oil industry, and the country’s major foreign investors, the international oil majors. This is particularly because the country’s two constants, which have represented political and economic stability, namely President Eduardo dos Santos and the ubiquitous role of Sonangol in the economy are about to change.
Nigeria foreign investment inflow declines 41%; lowest in 10 years (Premium Times)
The National Bureau of Statistics, NBS, on Wednesday said the total value of capital imported into Nigeria in the first quarter of 2017 was estimated to be $908.27m, the lowest in ten years. According to a new report tagged Capital Importation Report, when compared to the $1.55bn that the economy attracted in the fourth quarter of 2016, the figure represents a decline of $640.61m, representing 41.36%. The decline in investment inflow, the report said, was due to the fall in “other investment” and portfolio investments category made up of equity, which dropped from $176.44m in the fourth quarter of 2016 to $101.99m in the first quarter of 2017.
Nigeria: Investors cheer currency shift, want more (Reuters)
Nigeria’s recent tentative steps to free up its naira currency, particularly via a new trading window, have gone down well with some adventurous stock and bond investors who are cautiously returning to the markets they fled two years ago. Once considered one of the most promising emerging markets, Nigeria was hammered when it introduced draconian foreign exchange restrictions to counter the effects of the 2014 oil price crash. These will take years to unwind, some analysts fear, while others are concerned the new trading facility could come under pressure if oil prices were to take another tumble, or trade through it could slow if Nigeria’s currency reserves run low.
Ethiopian Airlines signs $1.5bn deal with engine maker Rolls-Royce as it expands fleet (Daily Nation)
Ethiopian Airlines has signed a $1.5bn deal with British engine maker Rolls-Royce as it continues to upgrade and expand its fleet to realise the ambition of dominating Africa’s skies. The deal means all the 10 new Airbus A350-900 aircraft that Ethiopian Airlines has recently ordered will run on Rolls Royce’s Trent XWB engines. The order also includes an engine maintenance plan for 14 of Ethiopian Airlines planes already in service or on order.
Africa’s mobile phone market declines in Q1 2017 – IDC (Guardian)
Overall mobile phone shipments for the first quarter of the year in Africa totalled 54.5 million units, down -8.2% from Q4 2016. This is according to the International Data Corporation’s (IDC’s) Quarterly Mobile Phone Tracker, which shows Africa’s mobile phone market started the year off with a drastic quarter-on-quarter decline. The prime driver of this downturn was a stark -17.6% decline in the smartphone segment, with shipments falling from 25.8 million units in Q4 2016 to 21.2 million units in Q1 2017, reveals the report. IDC further found when viewed year-on-year, the overall mobile market in Africa was up 8.4%, primarily due to feature phone shipments growing from 26.6 million units in Q1 2016 to 33.3 million units in Q1 2017.
A complete picture of the economic impact of counterfeiting and piracy: three reports (EUIPO)
Trade in counterfeit and pirated goods: mapping the economic impact is based on data supplied by the WCO, the EC’s Taxation and Customs Union Directorate General and the US Customs and Border Protection to give an accurate picture of the global economic impact of counterfeiting and goods piracy in international trade. Mapping the real routes of trade in fake goods is a follow-up report to Trade in counterfeit and pirated goods: mapping the economic impact. The study assesses the complex routes associated with the global trade in counterfeit goods. The analysis in this study uses a set of statistical filters to go further in clarifying the role of important provenance countries. It identifies key producing economies and key transit points for ten main sectors that are particularly vulnerable to counterfeiting. A Report on infringement of protected geographical indications for wine, spirits, agricultural products and foodstuffs in the European Union supplements the joint EUIPO/OECD report. The impact of these infringements on EU consumers was also estimated, with a loss evaluated at up to EUR 2.3 billion. [Downloads include the sector studies]
Today’s Quick Links: SACU: WCO support for a regional approach on advance rulings South Africa: Competition Commission rejects Japanese container line merger proposal (pdf) Uganda’s first oil ‘may not’ flow by 2020 Uganda gets support for Gulu Logistics Hub construction Acting President Osinbajo receives new ECOWAS chairman in Aso Rock The Platform for Collaboration on Tax: new toolkit to provide guidance to developing countries Côte d’Ivoire: Letter of Intent, Memorandum of Economic Financial Policies (pdf) Benn Steil, Emma Smith: The retreat of the Renminbi |
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Kagame speaks out on US threat over used clothes ban
President Paul Kagame has said that Rwanda will proceed with the planned phase-out of importation of second-hand clothes despite the threats that it could lead to a review of eligibility to access duty-free access to the American market.
President Kagame made the remarks yesterday while addressing a news conference moments after submitting his nomination papers to the National Electoral Commission (NEC).
Rwanda, Uganda and Tanzania’s eligibility to trade with the US is under review, following the region’s move to phase out the importation of used clothes.
The review could see Rwanda and her neighbours lose duty-free access to the American market under the African Growth and Opportunity Act (AGOA).
Kagame, however, said the situation leads Rwanda to make a choice between continued importation of used clothes and developing the local textile industry.
He said that despite the consequences of being locked out of AGOA, Rwanda is keen on developing its local textile industry.
“Rwanda and other countries in the region that are part of AGOA, have to do other things, we have to grow and establish our industries,” Kagame said.
“We are put in a situation where we have to choose; you choose to be a recipient of used clothes with a threat hanging or choose to grow our textile industries, which Rwandans deserve at the expense of being part of AGOA.
“This is the choice we find that we have to make. As far as I am concerned, making the choice is simple, we might suffer consequences. Even when confronted with difficult choices, there is always a way,” he added.
The President noted that this is not the first time that Rwanda has had to make tough decisions in the interest of citizens.
EAC member countries have moved to phase out the importation of used clothes and shoes across the East African region as part of an industrialisation plan to give rise to the growth of the local textile industry.
As part of the move, Rwanda last year increased taxes on used clothes from $0.2 to $2.5 per kilogramme, while taxes on used shoes will increase from $0.2 to $3 per kilogramme.
Budget focus
In the 2017/18 Budget Estimates, the Government also eased taxes on inputs under the Made-in-Rwanda initiative, which is expected to facilitate the growth of the local textile industry.
President Kagame is one of the African heads of state advocating for improved engagement terms between African countries and Western countries for mutual benefit.
Kagame has said several times that it’s time to consider Africa as an equal partner in development as opposed to a beneficiary requiring donations and aid.
As part of the move to make the continent less dependent on external financing, Kagame was last year asked to spearhead the African Union reforms.
He said he will continue playing the role as requested by the African heads of state to support the reforms process.
Kagame is scheduled to present a progress update at a meeting in Addis Ababa, Ethiopia, next month.
The President said that the intention by African leaders to change status quo was a huge step.
“The fact that the leaders of Africa have found it necessary to do things different is a very big step,” he said.
Going forward, he said the move by the continent will reduce the impact of external factors on the continent’s socio-economic progress.
Editorial comment
Phasing out second hand clothes is all in our interests
Under the African Growth and Opportunity Act (AGOA), some selected African countries could export a range of products to the US market duty free.
Under that arrangement, Uganda, Tanzania and Rwanda managed to export goods worth $43 million in 2016. Now the US government has buckled under SMART’s pressure and threatened to rescind AGOA.
For many years, African countries have been the main destination of second hand clothes and shoes, most of them from the US.
But why should we be forced to import second hand clothes? What dignity is there in wearing castoffs? Our textile industries have failed to take off simply because of this kind of arm-twisting.
The Office of the United States Trade Representative (USTR) must be aware that last year the US exported $281 million worth of goods to the three mentioned countries.
How can a mere $24 million derived from second hand exports to the whole EAC region be an issue to the extent of damaging trade relations between the US and the EAC?
Why should we agree to be dumping grounds for used things? How come no noise was made when the government banned the importation of used electric appliances such as refrigerators because of environmental reasons?
Phasing out second hand clothes and shoes is based on sound economic and health grounds. The US is working in the interests of its second hand clothes exporters; EAC should do the same for our textile industries.
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Cape-to-Cairo free trade area closer
The East African Community is getting closer to a deal on tariff offers with Egypt and the South African Customs Union (SACU) that would allow the bloc to ratify the Tripartite Free Trade Area agreement by December.
Egypt ratified the treaty on May 3, becoming the first country of the 18 that have signed the agreement to endorse it.
The EAC partner states pushed the bloc’s ratification date from February 2017 to December 2017 to allow more time to resolve pending issues on rules of origin and tariff offers.
A report by the East African Community Sectoral Council on Trade, Industry, Finance and Investment, from a meeting held in Arusha, Tanzania from May 29 to June 2, shows that the EAC has made strides in reaching an agreement on tariff offers with Egypt and SACU.
According to the report, the EAC has already presented its prioritised request lists of 403 tariff lines, of which 283 are for immediate liberalisation and 120 are on a phase-down basis. SACU has responded “positively” to the 112 tariff lines.
The EAC has requested more time to consult on the remaining tariff lines on SACU’s prioritised request list as it was not submitted on time.
“At the current stage of negotiations SACU has offered to immediately liberalise 66.7 per cent of its tariff lines while EAC’s offer stands at 61.4 per cent of tariff lines.
Reciprocity
“As the negotiations are on a reciprocal basis EAC has identified an additional 158 tariff lines for immediate liberalisation which would lift the offer to 64.25 per cent of tariff lines which is beyond the 63 per cent mandated by East African Community’s Sectoral Council on Trade, Industry, Finance and Investment,” the report says.
Tanzania, which belongs to both the EAC and the Southern African Development Community (SADC) but not the Common Market for Eastern and Southern Africa, has provided a tariff offer to Egypt – a Comesa member – comprising 96.89 per cent for immediate liberalisation and the remaining tariff lines to be gradually phased out in five years.
Although Egypt had initially provided an offer of 100 per cent tariff liberalisation to all the EAC partner states, it is reviewing its offer on the basis of reciprocity.
Fair competition
The EAC Secretariat is seeking a meeting to conclude the EAC-Egypt tariff discussions. Comesa and SADC are pushing their agenda as individual entities.
Under the TFTA Protocol, each bloc is expected to remove duty on between 60 per cent and 85 per cent of the tariff lines. The remaining 15 per cent of its tariff lines are to be negotiated over a period of between five and eight years.
Under the TFTA pact, the members of the three trading blocs are required to ignore sensitive products and subject them to duty and quota restrictions in order to ensure fair competition. Among the products earlier listed for protection until 2017 were sugar, maize, cement wheat, wheat, rice, textiles, milk and cream, beverages and second-hand clothes.
A trade framework agreed upon by the member states requires countries to exchange tariff concessions based on reciprocity.
However, it is understood that the extended discussions on tariff offers had been triggered by South Africa, which is keen on protecting its key markets from competition. The country is cautious of opening up its own domestic market and its export markets in Botswana, Lesotho, Namibia and Swaziland which are members of SACU.
The TFTA was launched by the Heads of State and Government of Comesa, EAC and SADC in Egypt on June 10, 2015.
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Kenya joins Africa’s big projects funder AFC
Pan-African multilateral infrastructural financier Africa Finance Corporation (AFC) has admitted Kenya as its 15th member.
AFC chief executive Andrew Alli welcomed Kenya’s membership saying it was a critical step to AFC’s strategic positioning to inject funds into infrastructural development in the country.
Other members are Rwanda, Uganda, Cape Verde, Chad, Cote d’Ivoire, Djibouti, Gabon, the Gambia, Ghana, Guinea-Bissau, Guinea, Liberia, Nigeria and Sierra-Leone.
“By improving Kenya’s infrastructure, AFC is making it a regional hub that promotes intra-regional trade links with better transport, telecommunications networks and power supply,” he said.
Mr Alli said AFC will step in to complement ongoing infrastructural developments such as the Standard Gauge Railway thereby helping improve services to Kenyans.
AFC through its flagship joint venture with Harith General Partners has interest in Lake Turkana Wind Farm, set to provide Kenya with 300MW of energy upon completion.
The Pan-African Development Financier has also invested Sh5 billion ($50 million) in ARM Cement, which enabled ARM to expand its foothold across east and into southern Africa.
Mr Alli added that Kenya also enjoyed a Sh2.5 billion loan injection for rehabilitating and expanding the power transmission and distribution networks.
“AFC is perfectly placed to help improve the quality of Kenya’s infrastructure making it a regional hub especially after last month’s completion of the SGR project,” said the statement.
Projects underway include power generation and distribution as well as last mile connectivity.
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The case for mainstreaming gender in trade policy
Is trade policy an effective instrument to narrow existing gender gaps? Can more gender-sensitive trade policies hinder the spread of the anti-globalisation backlash? This article attempts to provide answers to these questions with a focus on Africa.
Trade policy is not gender neutral. The distributional outcomes of trade vary between women and men, since they play different roles in society and in the economy, and they enjoy different opportunities. Moreover, women are not a homogenous group and, therefore, they are differently impacted by trade depending on their income, position in the labour market, educational level, race, etc. If trade policies are designed without taking into account their gender-specific outcomes, these policies risk magnifying existing gender gaps. Such an outcome could then be used as an evidence of the undesirability of further market opening.
Gender equality pledges made domestically or in the framework of regional or multilateral covenants can only be implemented if they are embedded in all policies, including trade policy. Taking actions to achieve gender equality and empower women in isolation from a broad spectrum of social and economic policies deprives them of the most effective channels to become operational.
Establishing clear links between trade policy and overarching goals, including gender equality and women’s economic empowerment, would further contribute to making trade a tool for sustainable development. It is important to recall the importance of trade for domestic producers in reaching much larger markets, for increasing the efficiency of domestic production and allowing it to attain economies of scale, for being a complement and a condition of the development of countries’ productive capacities, as well as one of the channels of technology transfer. Undoubtedly, many countries have used and continue using trade as a means of development. However, the benefits of trade have to be assessed against its asymmetries and possible negative consequences. A way of doing so is to complement the assessment of the risks and benefits of trade for a country as a whole with an analysis of its potential impacts on different segments of the population, in particular those who risk being “left behind”, including women and girls. Such an assessment may lead to the re-thinking of planned trade reforms or may point to the need for accompanying measures. The best approach is to conduct such an assessment prior to introducing new trade measures, be they based on unilateral commitments or negotiations.
How are trade and gender linked?
Trade has an impact on women’s empowerment and wellbeing, and gender inequality has an impact on countries’ trade performance and competitiveness.[1] Let us have a closer look at the two sides of the equation.
Trade has an impact on gender through three main channels. First, trade usually leads to changes in the structure of production; some sectors may expand because of new export opportunities, while others may contract because of import competition. Such changes are likely to affect employment opportunities, remunerations, as well as the quality and security of jobs. Second, trade induces changes in the price of goods and services, which in turn have an impact on real incomes. Finally, the reduction or elimination of tariffs due to trade liberalisation diminishes government revenues and therefore may curtail its ability to provide public services.
These various impacts of trade can be examined through a gender lens. In the first case, the differential impact happens because women are usually clustered in some specific productive sectors and face more impediments than men to shift from one sector to another. Due to limited skills and mobility, the contraction of the sectors where they work may lead to jobs losses, with limited opportunities for employment in expanding sectors. Conversely, if women work in sectors that expand thanks to trade opening, the quality of the jobs created and the perspectives for skill development often remain limited because of horizontal and vertical gender segregation.[2] Looking at the second channel of transmission, women are in general poorer than men and spend a larger part of their income on basic consumption goods. A trade liberalisation-induced reduction in the price of goods that form a large proportion of women’s consumption basket has a positive impact on their welfare and on that of the household. The impact is conversely negative if women are also producers and the price of their produce declines because of increased competition from cheaper imports. Moving to the third channel of transmission between trade and gender, since women tend to rely heavily on public services, reducing their provision increases women’s already heavy household burdens. For example, if education and health services are less available, women’s time devoted to the young and elderly household members increases.
We now consider the second side of the equation, i.e. the impact of gender inequality on countries’ trade performance and competitiveness. Using only partially the knowledge, skills, and potential of half of a country’s population curtails its trade opportunities and reduces its competitiveness. Recent studies have quantified the missed growth opportunities due to gender discriminations. A study by McKinsey estimates that in a full-potential scenario in which women play an identical role in labour markets as men, as much as US$ 28 trillion, or 26 percent, could be added to global annual GDP by 2025.[3] A United Nations study estimates that if female farmers in developing countries had the same access to productive resources as men, yields on their farms would grow by around 20-30 percent; total agricultural output would increase by 2.5 to 4 percent in those countries; and the global number of people suffering from hunger would decrease by 12-17 percent.[4] Gender gaps in access to productive resources, skills, training, technologies and knowledge have a high opportunity cost in terms of production and export with detrimental effects on competitiveness. Moreover, development considerations play an important role: since women are mainly responsible for food and children’s education, diminishing women’s opportunities affects not only their living conditions but also those of future generations.
Nevertheless, gender inequality has been used and is still used at present as a competitiveness strategy - for example within global value chains. Gender wage gaps exist in all countries in different degrees. Relying on female workers, who tend to be paid less and are less unionized that men, makes labour-intensive products more competitive in international markets where price competition is fierce and price elasticity of demand is relatively high. This strategy has been defined as a “low road” to international competitiveness. In the long run, it is not sustainable because it deteriorates the terms of trade, contravenes the ILO core labour standards, can become a source of social conflict, and may reduce the appeal of products to “ethical” consumers.
Trade policy implications
Having clarified the links between trade and gender, as well as their development implications, the next question is: What can be done to ensure that trade policy is beneficial for women or at least not detrimental to them? First, policymakers must have a good understanding of where women are in the economy. Second, they must assess how trade reforms may likely affect different productive sectors. Third, they should use these findings to identify the critical sectors where women are likely to be negatively or positively affected by trade. UNCTAD is developing a toolbox for the ex-ante gender assessment of trade measures to support countries to carry out this task.
While many developing countries are shifting their production and export strategies towards services, agriculture remains women’s main employer in many of them. This means that policies aimed at making agriculture more commercial and more technology- and export-oriented cannot ignore the implications for women. Let’s zoom in on some specific country experiences.
Rwanda is repositioning itself in the high-quality tea and coffee export segment. Such a shift may have both positive and negative implications for women. On the positive side, it could create opportunities for women to sell premium-quality products directly to processors, traders, or retailers in the destination markets, who may reorganise the value chain beyond gender stereotypes that assign specific roles to men and women, and be interested in the “story” behind the products they trade. On the negative side, it could favour commercially-oriented farmers and crowd out small and marginal farmers, a segment that includes many women. But even the suitable positive outcomes will not materialise automatically: women need to be provided with the appropriate infrastructure and marketing networks to reap the benefits of the policy shift.[5]
Angola, for its part, is promoting a switch from the production of low-value-added staple crops to more value-added commodities. In order to avoid the risk of women being marginalised or excluded from this process, the domestic staple crops segment – where women are concentrated – also needs to become more dynamic and possibly more export-oriented. For this to happen, women’s improved access to extension services, production techniques, and training in business management is necessary, as well as better enforcement of civil law on land tenure. Though the Constitution draws a clear distinction between customary and civil law and states that customary practices are accepted only if they do not violate constitutional provisions, de facto inheritance and land tenure are largely determined by customary practices that deny women the right to own property on equal terms with men.[6] Women’s traditional knowledge can also complement modern techniques and facilitate reaching foreign niche markets.
Many middle-income developing countries have relied on export-led growth strategies. This in turn has provided huge opportunities for women’s employment in labour-intensive manufacturing sectors, such as textile, clothing, and electronics, where women are supposed to possess gender specific skills. The workforce in Lesotho’s apparel sector is mainly female. The expansion of the industry can be attributed to the preferential treatment that Lesotho’s exports enjoy in the US market thanks to the African Growth and Opportunity Act (AGOA). While AGOA has played a key role in the development of Lesotho’s clothing industry, and this in turn has had a remarkable impact on women’s employment, a change in the terms of AGOA or the dilution of preferences due to preferential treatment being granted to other clothing-exporting developing countries, would jeopardise the competitiveness of Lesotho’s exports and threaten the gains achieved in women’s employment. To avoid dependence on a single trade instrument, export market diversification and product diversification, as well as the creation of a textile cluster, seem appropriate policy steps to take.[7]
Tourism remains one of the main sources of growth and foreign exchange in many developing countries and a sector that employs many women. Moreover, tourism has the potential to improve the livelihood of rural women and households if it is linked to the culture and tradition of a country. As in many other sectors, women face horizontal and vertical segregation. While men typically occupy a broad range of positions, women tend to be clustered into low-skill, low-paid segments. A study on the tourism sector in Kenya showed that not only men have a significantly higher presence than women in the workforce, but they also dominate the most lucrative segment of the market, namely tour operatorship. Moreover, many more women than men are employed as seasonal, part-time, or casual workers. The study also found that cultural and societal norms, heavy household responsibilities, limited mobility, lack of adequate education, and legal obstacles related to land tenure are all elements putting women at disadvantage.[8] Women’s role in tourism should be kept in mind when opening the different segments of the sector. Market opening bears the risk of providing only limited opportunities to women if they have no access to adequate education and training, or if it favours large hotels and resorts and leaves behind small-scale tourism enterprises – which are particularly relevant in the African context and offer opportunities to women. In parallel, gender should be mainstreamed in tourism policy, gender equality promoted in hiring and training, and linkages established between the tourism business and local micro and small enterprises.
A call for action
Gender equality is a human right and most countries are committed to it, but striving to fulfil this fundamental aspiration in isolation from a country’s main strategies has proved quite ineffective. Indeed, economic policies, including trade policy, are powerful instruments to translate gender equality aspirations into reality. For this to happen, they have to be coordinated and convergent. Trade reforms should be based on a thorough understanding of their impacts not only on a country as a whole, but also on specific segments of the population, including women and men. If market opening is expected to have detrimental effects on women (or on other groups), it may need to be postponed or adjusted. In many cases, the new trade environment needs to be accompanied by flanking policies to facilitate the adjustment and absorb shocks. Trade policies developed keeping in mind the wellbeing of all segments of the population and implemented along with corrective measures may greatly contribute to reaffirm the role of trade as a tool for inclusive and sustainable development and resist anti-globalisation movements.
Simonetta Zarrilli is Chief of the Trade, Gender and Development Programme, United Nations Conference on Trade and Development (UNCTAD).
This article was first published under Bridges Africa, Volume 6 - Number 4, by the ICTSD. A version of the commentary was also published on the UNCTAD website.
[1] UNCTAD. Virtual Institute Teaching Material on Trade and Gender. Volume 1: Unfolding the Links. United Nations: New York and Geneva, 2014.
[2] Vertical segregation means that men are concentrated at the top of the occupational hierarchy, while women at the bottom; horizontal segregation means that women and men carry out different tasks across occupations.
[3] McKinsey Global Institute. The power of parity. McKinsey & Company, 2015.
[4] United Nations Inter-Agency Task Force on Rural Women. “Facts & Figures: Rural Women and the Millennium Development Goals.” 2012.
[5] UNCTAD. Who is Benefiting from Trade Liberalization in Rwanda? A Gender Perspective. United Nations: Geneva, 2014.
[6] UNCTAD. Who is Benefiting from Trade Liberalization in Angola? A Gender Perspective. United Nations: Geneva, 2013.
[7] UNCTAD. Who is Benefiting from Trade Liberalization in Lesotho? A Gender Perspective. United Nations: Geneva, 2012.
[8] Christian Michelle, Gamberoni Elisa, and José Guilherme Reis. “Gender in the tourism industry: The case of Kenya.” In pdf Women and Trade in Africa: Realizing the Potential (3.64 MB) , edited by Paul Brenton, Elisa Gamberoni, and Catherine Sear. World Bank: Washington, D.C., 2013.
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tralac’s Daily News Selection
CFTA update: President Issoufou Mahamadou calls upon AU Ministers of Trade to stick to the deadline establishing the CFTA
According to the Champion of the CFTA process (Pres. Mahamadou), negotiations are about “give” and “take”. With that spirit, he expressed his confidence that the draft agreement establishing the CFTA can be delivered by the stipulated deadline. “While my task is to prod you to move with speed while producing tangible and substantive progress, as I am doing now, your task is also to push the Technical Working Groups and the Negotiating Forum to move with speed and produce tangible results. Let us not lose the momentum that we have built” he encouraged. President Mahamadou underscored the issue of Rules of Origin and indicated that they should be kept as simple as possible to enable Africa to compete with the rest of the world. He also urged AU Ministers of Trade to adopt adequate flanking measures and flexibilities within their national and sub-regional contexts that would ensure that the burdens and benefits associated with the CFTA are distributed more equitably among all the AU member states. Amb Albert M. Muchanga, Commissioner for Trade and Industry, recommended that ministers liaise with their respective foreign ministers to be part of national delegations to the July 2017 Summit of the African Union so that they can provide appropriate policy advice to their respective Heads of State and Government when they receive and consider the report of the CFTA’s Champion on 4th July 2017. [A report from Windhoek: Tempers fly at African ministers of trade meeting]
Liberia: Intra-national trade costs and economic isolation (IGC)
In 2011, the Government of Liberia partnered with the World Bank on a 10-year collaboration to build and maintain a road along the main axis of the country. However, intra-national trade costs remain high, and most markets are still isolated. Why do intra-national trade costs remain so high? What are the policy implications for the government? To understand the challenges of the transport industry in Liberia, we interviewed more than 70 companies and 200 drivers based in Liberia’s main transport hubs. [The analysts: Golvine de Rochambeau, Jonas Hjort]
The impact of remittances in Lesotho, Malawi, Zimbabwe (Finmark Trust)
Given these insights, we examined evidence of the impact of remittances on the communities and economies of Lesotho, Malawi and Zimbabwe. The research combined a review of existing literature, primary research among remittance senders and recipients, and original data analysis; and explored the mechanisms by which remittance receipt affects developmental outcomes.
Cross-border remittance pricing: Does market structure drive the prices for cross-border remittances in South Africa?
Using a new approach based on conducting actual cross-border transactions, the report verifies the pricing offered to customers in the market and compares this cost to other studies conducted by the World Bank and Eighty20. The majority of remittance flows from South Africa (90% of all transfers) are destined for neighbouring Zimbabwe, Mozambique and Lesotho, with 85% of all migrants originating from these countries. Estimates by the FinMark Trust suggest that the bulk (almost 70%) of transfers to these countries are conducted informally and that the high cost of formal money transfers is a major barrier to accessing formal remittance bank and non-bank channels. According to the World Bank, as at the end of the second quarter of 2016, the global average cost of $200 remittances was 7.43% of the amount sent by remitting customers. For remittances sent from South Africa, the average cost was 16.71%; more than double the global average. Contrary to World Bank estimates, Genesis found that the total cost of remitting $200 from South Africa to Zimbabwe, Mozambique and Lesotho is lower than the global average, with an average cost of 6.7% of the amount sent.
Scaling up remittances and financial inclusion in Uganda (IFAD)
IFAD, Postbank of Uganda, and Posta Uganda have signed a grant agreement aimed at expanding the role of postal networks in the delivery of remittances and access to financial inclusion across the country. The new project will provide remittances services in poor rural communities as well as in refugee settlements, many of which are taking in those fleeing conflict and food insecurity in neighbouring South Sudan. The project is an outcome originating from the African Postal Financial Services Initiative.
Breaking the pattern: Getting digital financial services entrepreneurs to scale in East Africa, India (CNBC)
A new financial inclusion report from the Bill and Melinda Gates Foundation, carried out by venture capitalist firm Village Capital, with the participation of 55 entrepreneurs and 23 investors has found that wider and deeper support is needed to encourage more mobile money firms to launch in India and East Africa. Not enough other digital financial services firms outside of the big names like M-Pesa are getting early seed investment money or, crucially, scale up investment to allow their fintech-enabled financial inclusion projects to achieve wide scale adoption. According to the Breaking the Pattern report, funded by the Gates Foundation, 72% of venture capital in East Africa for the last two years went to only three start-ups. “The market hasn’t reached any kind of meaningful scale,” said Ross Baird, CEO of Village Capital, in a statement. “We need hundreds of companies to truly improve the financial health of communities in India and East Africa.” [Downloads]
Related: Egypt: Remittances from expatriate Egyptians rise by 11.1% since float; Zimbabwe: Diaspora remittances decline in 2017 First Quarter
Ilan Strauss: Understanding South Africa’s current account deficit: the role of foreign direct investment income (pdf, UNCTAD)
This article highlights the prominence of net investment income payments made to foreign direct investors in South Africa’s current account deficit. After a brief history of SA’s balance of payments, we describe several factors driving the growth of South Africa’s direct investment assets and liabilities, including the roles of China and Africa as investment destinations and the relisting of major South African companies abroad. The slow accumulation of direct investment assets by South African firms before 2006, coupled with the higher returns on South Africa’s direct investment liabilities, has contributed to an imbalance in the country’s net FDI income, while a compositional shift in the stock of non-FDI liabilities has helped to decrease its payments to non-direct investors. If SA firms continue to invest productively abroad, net FDI income may contribute less to SA’s current account deficit in the future. The trade deficit remains a major area of concern. [Posted in the journal: Transnational Corporations]
Nigeria: Only 20% of 69.9m economically active Nigerians pay tax - Adeosun (ThisDay)
Minister of Finance, Kemi Adeosun, has said only 14 million out of the 69.9 million economically active Nigerians pay tax, reflecting a low compliance of 20.03%. Adeosun, who disclosed this at the NSE-Bloomberg CEO Roundtable at the weekend, lamented that, even among the tax payers, there was widespread malpractice that resulted in only part of the actual income being subjected to tax. This, she added, had degenerated to an unfortunate situation whereby out of the 14 million tax payers only 214 individuals in the entire country pay N20 million or more annually. “We must amend Nigeria’s low level of tax compliance. A tax to GDP ratio of just 6%, suggests widespread ignorance of our tax laws. We are working to amend this. Just yesterday, we announced plans to recruit and train 7,500 Community Tax Liaison Officers under the N-Power scheme. These young people will be subjected to a rigorous and intensive education on the tax system, sales, communication skills and civic education before being deployed to their communities to provide tax education and enroll new tax payers.” [Nigerian Gross Domestic Product Report: Expenditure and Income Approach Q3 2016]
Migration Institute in West Africa: update (ThisDay)
The Comptroller General of the Nigeria Immigration Service, Mohammed Babandede, said the NIS is partnering with the National Universities Commission to establish the institute, to be situated in Tuga, Kebbi State, adding that it will be affiliated to universities in Nigeria and few West African countries. He said the service plans to develop the country’s intellectual capacity, adding: “Our idea to reform the NIS is with the support from the NUC on roadmap to start an institute. We are envisaging migration institution for West African countries. Nigeria immigration is committed to tackling the challenges of Migration management in West Africa.”
Tanzania: Cashews boost traditional exports by $120m (The Citizen)
A rise in cashew exports boosted the value of traditional exports by 16.75% in the year ending April 2017. According to the Bank of Tanzania economic review for May, traditional exports improved to $863.6m from $739.7m in the year that ended in April 2016, largely powered by cashew nuts. While the exports of cloves, sisal, tea and tobacco declined, that of cashew nuts improved from $185.9m to $341.1m, the report has shown. The improvement in exports of cashew nuts occurred in both volume and price. Extract (pdf): In the year ending April 2017, the deficit in the current account significantly narrowed by 50.1% to $1,601.8 million from the level reached in the year ending April 2016. (Table 4.1). Total export value of goods and services amounted to $8,753.3 million in the year ending April 2017 compared with $9,333.2 million in the corresponding period in April 2016 (Chart 4.1). Annual import bill for goods declined to %7,834.7 million in April 2017 from $9,305.2 million in the year ending April 2016. Noteworthy, with the exception of food and foodstuff, all categories of goods import declined (Table 4.2 and Chart 4.5).
Companies benefit from the Fourth Industrial Revolution, but do countries? (WEF)
Developing countries like Kenya, Argentina, and Brazil have local enterprises that are taking full advantage of innovative business models enabled by advanced technologies. Kenya - often referred to as the ‘Silicon Savannah’ - is home to the influential M-Pesa that has revolutionized sectors like banking and retail in Africa with its use of digital and mobile technology. Yet Kenya as a nation has seen their competitiveness rank fall over the past two years. Similarly, Argentina is home to the majority of Latin America’s tech unicorns. But again, their national competitiveness ranking has gone from 94 in 2013 to 104 in 2017. Brazil is the largest manufacturer of regional jets in the world and among the top five manufacturers globally in this high-tech field. But its national competitive ranking has dropped from 48 in 2013 to 81 in 2017. Even in more mature economies, innovative companies are not necessarily a harbinger of national competitiveness. Korea - where Samsung is considered an innovation leader - has lost national competitiveness over the past few years, going from 19 in 2013 to 26 currently. China, which is home to 6 of the top 50 most innovative companies on Fast Company’s 2017 list, is still having difficulty cracking the top 25 when it comes to the national competitiveness index. [The analyst: Gary Coleman, Deloitte]
World Population Prospects: The 2017 Revision
From 2017 to 2050, it is expected that half of the world’s population growth will be concentrated in just nine countries: India, Nigeria, the Democratic Republic of the Congo, Pakistan, Ethiopia, the United Republic of Tanzania, the United States of America, Uganda and Indonesia (ordered by their expected contribution to total growth). The group of 47 least developed countries (LDCs) continues to have a relatively high level of fertility, which stood at 4.3 births per woman in 2010-2015. As a result, the population of these countries has been growing rapidly, at around 2.4 % per year. Although this rate of increase is expected to slow significantly over the coming decades, the combined population of the LDCs, roughly one billion in 2017, is projected to increase by 33 % between 2017 and 2030, and to reach 1.9 billion persons in 2050. Similarly, Africa continues to experience high rates of population growth. Between 2017 and 2050, the populations of 26 African countries are projected to expand to at least double their current size.
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President Issoufou Mahamadou calls upon African Union Ministers of Trade to stick to the deadline establishing the CFTA
The African Union Commission in collaboration with the Government of Niger organized the third Meeting of African Union Ministers of Trade from 15-16 June 2017 in Niamey. The objective of the Meeting was to consider the report of the 3rd Meeting of Senior Trade Officials as well as the outcomes of the 6th Meeting of the Continental Free Trade Area Negotiating Forum (CFTA-NF).
The meeting was attended by Ministers for Trade and delegates from each AU Member States together with the relevant experts from the Regional Economic Communities (RECs), representatives from the United Nations Conference on Trade and Development (UNCTAD), the UN Economic Commission for Africa (UNECA), the African Trade Policy Centre (ATPC) and the African Development Bank (AfDB).
The Meeting took into account the first aspiration of the 10-year plan of Agenda 2063 whose objective is to see “A prosperous Africa based on inclusive growth and sustainable development”. With this in mind, the Meeting focused on fast-tracking the establishment of the Continental Free Trade Area (CFTA) by 2017.
In his introductory remarks, Amb. Albert M. Muchanga, Commissioner for Trade and Industry of the African Union Commission, expressed his appreciation to the President of Niger, H.E. Issoufou Mahamadou for having offered as Champion of the CFTA process, to host the Meetings of the CFTA Negotiations. Commissioner Muchanga summarized the expected outputs from the Meeting underscored that the establishment of the CFTA is a member states driven process and reaffirmed the African Union Commission’s commitment to facilitating the work of the Member States.
He recommended Honorable Ministers to liaise with their respective Foreign Ministers to be part of national delegations to the July 2017 Summit of the African Union so that they can provide appropriate policy advice to their respective Heads of State and Government when they receive and consider the report of the CFTA’s Champion on 4th July 2017.
The Commissioner for Trade and Industry pointed out that “The CFTA brings to life the ideal of Pan Africanism. Through it, our small and fragmented markets are integrated to create a large market,” he emphasized. Before he concluded, Commissioner Muchanga urged Member States to sensitize the Private Sector, Labour Movements, Citizens, Legislators and other Stakeholders on the contents of the final draft of the legal text and annexes as the establishment of the CFTA, by the end of the year, would be the first significant milestone of the Agenda 2063.
While addressing the Meeting, H.E. Issoufou Mahamadou, the President of Niger and Champion of the CFTA, pointed out that the establishment of the Continental Free Trade Area will attract investments from both Africa and the world at large and create employment opportunities for our young people.
“Assured of a better life at home, our young people will not take the risks of the dangerous migration to Europe or elsewhere. This therefore means we must work tirelessly to make the CFTA a reality,” he emphasized.
The President recalled the work that has already been undertaken by the Technical Work Groups, the Negotiating Forum and the Continental Task Force and Commended Technical Experts for the preparation and discussion of the advanced stage of the draft Agreement Establishing the Continental Free Trade Area.
According to the Champion of the CFTA Process, negotiations are about “give” and “take”. With that spirit, he expressed his confidence that the draft Agreement Establishing the Continental Free Trade Area can be delivered by the stipulated deadline.
“While my task is to prod you to move with speed while producing tangible and substantive progress, as I am doing now, your task is also to push the Technical Working Groups and the Negotiating Forum to move with speed and produce tangible results. Let us not lose the momentum that we have built,” he encouraged.
President Mahamadou underscored the issue of Rules of Origins and indicated that they should be kept as simple as possible to enable Africa to compete with the rest of the world. Before he concluded, the Champion of the CFTA Process urged African Union Ministers of Trade to adopt adequate flanking measures and flexibilities within their national and sub-regional contexts that would ensure that the burdens and benefits associated with the Continental Free Trade Area are distributed more equitably among all the African Union Member States.
“One of the eventual outcomes of the CFTA should be to improve social structures, and bind us closer together in bonds of amity and solidarity within our respective communities as well as among the broader African Community,” he concluded.
The Meeting was chaired by the Nigerian Honorable Minister of State for Industry, Trade and Investment, Mrs. Aisha Abubakar. The Minister of Trade and Industry of South Africa delivered the vote of thanks on behalf of the Ministers of Trade and appreciated the hospitality accorded to all delegations and committed to the Champion in fulfilling his mandate.
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Cross-border remittance pricing: Does market structure drive the prices for cross-border remittances in South Africa?
This report was commissioned by FinMark Trust and carried out through Genesis to assess the cost of cross-border remittances in South Africa. Using a new approach based on conducting actual cross-border transactions, the report verifies the pricing offered to customers in the market and compares this cost to other studies conducted by the World Bank and Eighty20.
The cost of cross-border remittances from South Africa is argued as being among the highest in the world. According to the World Bank, as at the end of the second quarter of 2016, the global average cost of remittances was 7.43% of the amount sent by remitting customers. For remittances sent from South Africa, the average cost was 16.71%; more than double the global average. The high all-in cost of remittances also reflected high foreign exchange margins. Over the same period the average foreign exchange margin on cross-border remittances from South Africa was 4.36% of the amount sent; also well above the global average of 1.83%
The high overall cost of remittances and the exchange rate margin charged by providers is typically attributed to several features of the local market, including limited competition in foreign exchange services, a restrictive licensing regime for money transfer operators, and the adoption of complex and opaque pricing structures by providers. The high cost of remittances is a particular burden on low-value payments and migrant workers in particular.
Given this context, this report was commissioned by the FinMark Trust to confirm whether South Africa is indeed an outlier by international standards. Using a new approach based on conducting actual cross-border transactions, the report verifies the pricing offered to customers in the market. Having identified this pricing and the way it is disclosed to customers, the report provides a supply-side perspective of what drives providers to price money transfers the way they do. Here the report tries to understand the cost and revenue drivers that contribute to the fees and margins charged to remittance customers.
Cross-border remittance flows
The majority of remittance flows from South Africa (90% of all transfers) are destined for neighbouring Zimbabwe, Mozambique and Lesotho, with 85% of all migrants originating from these countries. Estimates by the FinMark Trust suggest that the bulk (almost 70%) of transfers to these countries are conducted informally and that the high cost of formal money transfers is a major barrier to accessing formal remittance bank and non-bank channels.
The South African market for remittances into SADC is largely driven by the large number of migrants working in the country. According to the 2011 Census, roughly 3.2 million people living in South Africa were born outside of the country. This excludes 1.5 million people who did not respond to the Census, as well as asylum seekers (464,000) and refugees (112,000). Research by the FinMark Trust suggests that these migrants face a number of barriers when accessing formal transfer services, including affordability and access to enabling documentation such as proof of address or identification.
Contrary to World Bank estimates, Genesis found that the total cost of remitting USD200 from South Africa to Zimbabwe, Mozambique and Lesotho is lower than the global average, with an average cost of 6.7% of the amount sent. Previous research has shown that the median value of cross-border remittances from South Africa is USD55, for which Genesis estimated the average cost to be 13.6% of the amount sent, as opposed to previous estimates of 13.3%. Genesis results generally support previous findings that the World Bank statistics over-estimate the average cost of transfers across these corridors.
» Download the full report: Cross-border remittance pricing: Does market structure drive the prices for cross-border remittances in South Africa? (PDF)
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tralac’s Daily News Selection
Event pointers:
Southern Indian Ocean Fisheries Agreement: 4th Meeting of the Parties (23-30 June, Mauritius)
OECD Global Forum for Responsible Business Conduct (29-30 June, Paris)
SADC High Level Resource Mobilization Workshop and Energy Investors Conference (12-13 July, Ezulwini)
AGOA: Out-of-cycle review of Rwanda, Tanzania, Uganda (USTR)
On 21 March 2017, the Secondary Materials and Recycled Textiles Association (SMART) submitted a petition to USTR requesting an out-of-cycle review to determine whether the Republic of Kenya, Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda are meeting the AGOA eligibility criteria. The SMART petition asserts that a March 2016 decision by the EAC to phase in a ban on imports of used clothing and footwear is imposing significant economic hardship on the US used clothing industry, and is in violation of the AGOA statutory eligibility criteria to make continual progress toward establishing a market-based economy and eliminating barriers to US trade and investment. In response to the SMART petition, USTR has determined, in consultation with the TPSC, that there are exceptional circumstances warranting an out-of-cycle review of the AGOA eligibility of Rwanda, Tanzania, and Uganda. With respect to Kenya, USTR has determined that an out-of-cycle review of Kenya’s AGOA eligibility is not warranted at this time, due to recent actions Kenya has taken, including reversing tariff increases, effective 1 July 2017, and committing not to ban imports of used clothing through policy measures that are more trade-restrictive than necessary to protect human health. USTR will continue to monitor Kenya’s actions to ensure that Kenya follows through on its commitments. The USTR has consulted with Congress about these determinations. The public hearing will take place on 13 July.
BORDERLESS 2017 conference report: Optimizing trade opportunities: the role of trade facilitation (10-12 May, Ouagadougou)
The meeting was attended by 150 private and public sector players from 12 countries (Benin, Burkina Faso, Côte d’Ivoire, Ghana, Mali, Nigeria, Togo, Senegal, Cameroon, Switzerland, UK, Germany); technical and financial partners (GIZ, USAID, JICA, Global Alliance for Trade Facilitation); and regional and sub-regional organizations (ECOWAS, UEMOA). Several sector ministries (Transport, Trade, Customs, Police and Gendarmerie) and companies from various activity sectors were also represented. Major recommendations: [Downloads: Borderless 2017 presentations]
Zimbabwe Economic Update: The state in the economy (World Bank)
Fiscal adjustment is key to growth but complicated by the absence of consolidated public accounts. The size of the public sector is difficult to determine, precisely. A conservative estimate puts total public spending - including expenditures by the central government, local authorities, and state-owned enterprises and parastatals - at roughly 50% of Zimbabwe’s GDP. Such scale and scope of a public sector are exceptional for a country of its population size (about 16.3 million) and income level, and the state’s extensive role in the economy could be a significant obstacle to growth. Chapter 2 examines the role of local authorities in the Zimbabwean public sector, with a focus on urban councils. Chapter 3 focuses on state-owned enterprises and parastatals and their role in the Zimbabwean economy and public sector. [Zimbabwe Public Expenditure Review: five reports are published]
Africa Tourism Monitor: Urgent policies required for inclusive tourism growth, intra-Africa trade, visa openness (AfDB)
The report called attention to the latest data from 2015, which globally saw the highest level of tourism arrivals to date, but noted that Africa’s international tourism receipts also fell to $39.2bn from $43.3bn during the same period. “A more positive outcome was witnessed in the employment sector for Africa, which grew in line with global trends. Direct travel and tourism employment in Africa in 2015 totalled 9.1 million, rising to 21.9 million jobs if we include direct, indirect and induced employment. In light of the tourism decline in Africa in 2015, it is now more important than ever to draw on the collaboration and expertise of public and private sector practitioners to foster a resilient travel and tourism sector.” The Africa Tourism Monitor also highlighted the place of Africa common passport as a catalyst to boost intra-Africa travel and trade.
South Africa: Air transport supports 490,000 jobs and contributes $12bn in GDP (IATA)
These findings are among the highlights of The importance of air transport to South Africa (pdf) study conducted by Oxford Economics on behalf of IATA. “The study confirms the vital role of air transport in facilitating over $110bn in exports, some $140bn in foreign direct investment and around $9.2bn in inbound leisure and business tourism for South Africa. Now with the country in recession it’s time to re-double efforts to promote South Africa as a destination for business, trade and tourism,” said Muhammad Ali Albakri, IATA’s Regional Vice President for the Middle East & Africa.
Kenya: Air transport supports 620,000 jobs, contributes $3.2bn in GDP (IATA)
These findings are among the highlights of The importance of air transport to Kenya (pdf) study conducted by Oxford Economics on behalf of IATA. “The study confirms the vital role that air transport plays in facilitating over US$10 billion in exports, some $4.4bn in foreign direct investment and around $800,000 in inbound leisure and business tourism for Kenya. However, by adopting policies that ensure a competitive operating environment for the airlines, Kenya could reap even greater dividends from aviation,” said Muhammad Ali Albakri, IATA’s Regional Vice President for the Middle East & Africa, who is making his first visit to Africa in his new capacity.
Related global, African region, country travel and tourism analysis: WTTC Global Benchmarking Report 2017
Kenya: Review of bilateral trade agreements (Xinhua)
Principal Secretary in the Ministry of Industry, Trade and Cooperatives Chris Kiptoo told Xinhua in Nairobi that the review follows the approval of the National Trade Policy by the Cabinet early this month. “We hope to complete the review of bilateral trade agreements by the end of the year,” Kiptoo said on the sidelines of a consultative meeting between Kenya and Commercial Attaches representing foreign countries in Kenya. The East Africa nation has so far signed over 35 trade agreement with other nations.
Mozambican government approves regulation on timber exports (MacauHub)
Exports of timber and logs are banned in Mozambique under a regulatory decree to promote the rational and sustainable use of the country’s forest resources, the Council of Ministers spokesperson said on Tuesday in Maputo. Comoana also said that the measure could stimulate the emergence of new industries, new jobs, and strengthen institutional capacity in the area of forest resource management and control.
Rwanda, Zambia re-commit to strengthen bilateral ties (RNA)
Trade between the two countries has been on an upward trend with imports from Zambia averaging $11.6m (Frw 10bn) last year up from $2.8m (Frw 2.4bn) in 2015. Zambia is among the top exporting countries to Rwanda, ranking 8th, which represents almost three percent of total imports in 2016.
New ACP policy targets transformation of agricultural commodities sector
The document Investment and transformation in the ACP agriculture sector: a new approach to ACP Group support for the development of agriculture value chains was endorsed by the ACP Council of Ministers during its 105th session in May. It was presented to partners this week in Brussels, at the ACP Secretariat. The new approach focuses on value chain development, targeting small producers including youth and women, as well as other value chain operators, and connecting them to the market. The approach advocates for investment in agriculture, fisheries and livestock farming as well as integration of the agro-industrial sector into national, regional, and international value chains, thereby attaining the goals employment and wealth creation. It is based on four pillars: finance, capacity building, trade and investment and climate change.
Today’s Quick Links: Seychelles: 2017 Article IV Consultation, Selected Issues Paper, Climate Change Policy Assessment Tanzania: JPM outlines ambitious Coast Region projects, including Stieglers Gorge hydroelectric project John Ashbourne: Mozambique should create sovereign fund to manage gas revenues Rwanda: Parliament enacts law setting up inspectorate, competition agency Nigeria’s National Committee on Trade Facilitation: WCO update Nacala Corridor: AfDB to support Mozambique construction sector SMEs Mozambique: Government approves Rovuma Basin LNG maritime terminal concession Rwanda Development Board targets $1.5bn FDI this year Great Lakes cross-border trade facilitation: COMESA recruits 14 officers |
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USTR announces AGOA out-of-cycle review for Rwanda, Tanzania, and Uganda
The Office of the United States Trade Representative on 20 June announced the initiation of an out-of-cycle review of the eligibility of Rwanda, Tanzania, and Uganda to receive benefits under the African Growth and Opportunity Act (AGOA).
The launch of the review is in response to a petition filed by the Secondary Materials and Recycled Textiles Association (SMART), which asserts that a March 2016 decision by the East African Community, which includes Rwanda, Tanzania, and Uganda, to phase in a ban on imports of used clothing and footwear is imposing significant economic hardship on the U.S. used clothing industry.
Through the out-of-cycle review, USTR and trade-related agencies will assess the allegations contained within the SMART petition and review whether Rwanda, Tanzania, and Uganda are adhering to AGOA’s eligibility requirements.
A public hearing will take place July 13, 2017 in Washington, DC. A Federal Register notice containing information related to this review is available to download.
Signed into law in 2000, the African Growth and Opportunity Act promotes trade and investment in sub-Saharan Africa, including through substantial trade preferences. In order to qualify for AGOA trade benefits, partner countries must meet certain statutory eligibility requirements, including making continual progress toward establishing market-based economies, the rule of law, political pluralism, and elimination of barriers to U.S. trade and investment, among others.
U.S. AGOA imports from Rwanda, Tanzania, and Uganda totaled $43 million in 2016, up from $33 million in 2015. U.S. exports to Rwanda, Tanzania, and Uganda totaled $281 million in 2016, up from $257 million in 2015.
Federal Register notice
Request for Comments and Notice of Public Hearing Concerning an Out-of-Cycle Review of Rwanda, Tanzania, and Uganda Eligibility for Benefits Under the African Growth and Opportunity Act
The Office of the United States Trade Representative (USTR), in consultation with the Trade Policy Staff Committee (TPSC), is announcing the initiation of an out-of-cycle review of the eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda to receive benefits under the African Growth and Opportunity Act (AGOA) in response to a petition. The AGOA Subcommittee of the TPSC (Subcommittee) will consider written comments, written testimony, and oral testimony in response to this notice to develop recommendations for the President as to whether the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda are meeting the AGOA eligibility criteria.
Dates
June 30, 2017: Deadline for filing requests to appear at the July 13, 2017 public hearing, and for filing pre-hearing briefs, statements, or comments on the AGOA eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda.
July 13, 2017: The AGOA Implementation Subcommittee of the TPSC will convene a public hearing on the AGOA eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda.
July 21, 2017: Deadline for filing post0hearing briefs, statements, or comments on this matter
Supplementary information
I. Background
AGOA (Title I of the Trade and Development Act of 2000, Pub. L. 106-200) (19 U.S.C. 2466a, et seq.), as amended, authorizes the President to designate sub-Saharan African countries as beneficiaries eligible for duty-free treatment for certain additional products not included for duty-free treatment under the Generalized System of Preferences (GSP) (Title V of the Trade Act of 1974 (19 U.S.C. 2461, et seq.) (1974 Act), as well as for the preferential treatment for certain textile and apparel articles.
The President may designate a country as a beneficiary sub-Saharan African country eligible for these AGOA benefits if he determines that the country meets the eligibility criteria set forth in section 104 of the AGOA (19 U.S.C. 3703) and section 502 of the 1974 Act (19 U.S.C. 2462).
Section 104 of AGOA includes requirements that the beneficiary country has established or is making continual progress toward establishing: A market-based economy; the rule of law, political pluralism, and the right to due process; the elimination of barriers to U.S. trade and investment; economic policies to reduce poverty; a system to combat corruption and bribery; and the protection of internationally recognized worker rights. In addition, the country may not engage in activities that undermine U.S. national security or foreign policy interests or engage in gross violations of internationally recognized human rights. Please see section 104 of the AGOA and section 502 of the 1974 Act for a complete list of the AGOA eligibility criteria.
Section 506 of the Trade Preferences Extension Act of 2015 (TPEA) requires the President to establish a petition process to allow any interested person, at any time, to file a petition with USTR concerning compliance of any sub-Saharan African country listed in section 107 of the AGOA (19 U.S.C. 3706), with the eligibility requirements set forth in section 104 of the AGOA and section 502 of the 1974 Act. On February 26, 2016, the President delegated this authority to the United States Trade Representative. USTR has established a petition process. See 15 CFR part 2017.
II. The Petition
On March 21, 2017, the Secondary Materials and Recycled Textiles Association (SMART) submitted a petition to USTR requesting an out-of-cycle review to determine whether the Republic of Kenya, Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda are meeting the AGOA eligibility criteria. The SMART petition asserts that a March 2016 decision by the East African Community (EAC), which includes the Republic of Kenya, Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda, to phase in a ban on imports of used clothing and footwear is imposing significant economic hardship on the U.S. used clothing industry, and is in violation of the AGOA statutory eligibility criteria to make continual progress toward establishing a market based economy and eliminating barriers to U.S. trade and investment.
In response to the SMART petition, USTR has determined, in consultation with the TPSC, that there are exceptional circumstances warranting an out-of-cycle review of the AGOA eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda. With respect to the Republic of Kenya, USTR has determined that an out-of-cycle review of Kenya’s AGOA eligibility is not warranted at this time, due to recent actions Kenya has taken, including reversing tariff increases, effective July 1, 2017, and committing not to ban imports of used clothing through policy measures that are more trade-restrictive than necessary to protect human health. USTR will continue to monitor Kenya’s actions to ensure that Kenya follows through on its commitments. The USTR has consulted with Congress about these determinations.
Section 506A of the 1974 Act requires the President to terminate the designation of a country as a beneficiary sub-Saharan African country if he determines that the beneficiary country is not making continual progress in meeting the eligibility requirements. As amended by the TPEA, the President may withdraw, suspend, or limit the application of duty-free treatment with respect to articles from the country if he determines that it would be more effective in promoting compliance with AGOA-eligibility requirements than terminating the designation of the country as a beneficiary sub-Saharan African country.
The Subcommittee is seeking public comments in connection with this outof-cycle review of the AGOA eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda. The Subcommittee will consider the written comments, written testimony, and oral testimony in developing recommendations for the President as to whether the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda are meeting the AGOA eligibility criteria.
III. Notice of Public Hearing
In addition to written comments from the public on the matters listed above, the Subcommittee will convene a public hearing at 10:00 a.m. on Friday, July 13, 2017, to receive testimony related to the AGOA eligibility of the Republic of Rwanda, United Republic of Tanzania, and Republic of Uganda. The hearing will be held at 1724 F Street NW., Washington, DC 20508 and will be open to the public and to the press. We will make a transcript of the hearing available on www.regulations.gov within approximately two weeks of the date of the hearing.
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Addressing fiscal imbalances at the core of Zimbabwe’s financial crisis could boost long term development
Resolving the ongoing financial crisis and sustaining growth in Zimbabwe will require bold measures to correct fiscal imbalances, according to a World Bank report released today. In 2016, the fiscal deficit increased sharply to 10% of GDP boosting short term growth, but also depleting resources to support medium- and long-term development.
The second edition of the Zimbabwe Economic Update (ZEU) finds that although GDP is expected to grow moderately by 2.8% in 2017, it may remain too low to improve per capita income levels as exports recover and imports are curtailed by administrative measures. The ongoing financial fragility is expected to hinder long term investments by both large and small companies.
Fiscal imbalances lie at the core of Zimbabwe’s ongoing financial crisis: the central government’s fiscal cash deficit moved to 10% of GDP in 2016, up from 2.3% the previous year. The deficit was largely financed from domestic financial markets as external arrears prevented Zimbabwe from gaining access to international capital markets. Cash shortages followed, financing for imports dried up, and the current account deficit narrowed dramatically.
The fiscal expansion in 2015/16 boosted short-term growth but depleted resources to support long-term development. Growth remained positive in 2016 at 0.7% and is set to rebound to 2.8% in 2017. However, cash shortages are projected to depress Zimbabwe’s medium-term growth prospects as they limit investment for an ongoing structural transformation. Growth rates for 2018/19 are being revised down to less than 1 percent, sharply negative in per capita income terms.
Fiscal adjustment is key to growth but complicated by the absence of consolidated public accounts. The size of the public sector is difficult to determine, precisely. A conservative estimate puts total public spending – including expenditures by the central government, local authorities, and state-owned enterprises and parastatals – at roughly 50 percent of Zimbabwe’s GDP.
Such scale and scope of a public sector are exceptional for a country of its population size (about 16.3 million) and income level, and the state’s extensive role in the economy could be a significant obstacle to growth.
Joint report urges Zimbabwe to consolidate its public accounts
To better understand the fiscal challenges at the core financial crisis, the Government of Zimbabwe and the World Bank jointly conducted a Public Expenditure Review (PER), also released today which examines in detail government spending across a broader range of public sector institutions, than previously considered together. In a series of five volumes, the PER provides new, in-depth information on spending by central and local government, state-owned enterprises, and in education and social protection.
“The joint review of public expenditures offers a good starting point for reducing the fiscal deficit in an equitable manner. A lower deficit, preferable lower than the 7 percent of GDP projected for 2017, is crucial for financial stability and long-term growth. It may require difficult measures to reduce the large public sector wage bill,” said Paul Noumba Um, World Bank Country Director for Zimbabwe.
The PER finds that the dominant role of the state in the economy, while at times critical to addressing short term vulnerabilities, has become a significant obstacle to long term growth. The structure of spending remains constrained by the large public sector wage bill, and the structure of financing in some sectors exacerbates rather than moderate inequality. In particular, social protection spending is dominated by public sector pensions while allocation for safety nets remain small. User fees, which favor wealthier households, are now a crucial source of financing for basic services – in basic education they account for around $800 million annually, equal to the national budget on education.
The PER also finds that in the broader public sector, state-owned enterprises have become a major source of fiscal risk and net transfers from central government, while local authorities face a mismatch between service delivery mandate and their capacity to mobilize and manage spending effectively.
“The PER recommends extending similar levels of oversight, that are currently applied to the national budget, to all elements of broader public sector spending,” said Johannes Herderschee, Senior Country Economist and co-author of the report. “This would allow for a more coordinated fiscal policy and efficient use of government resource”.
Since 2009, Zimbabwe has made major strides in rebuilding its public financial management system – it should go further to publish consolidate public sector accounts and reform local government financing in line with the 2013 Constitution. A new corporate governance bill for state owned enterprises and parastatals under preparation should strengthen oversight and improve performance of this sector. Ultimately, Zimbabwe should examine the role of the state in all its parts, to ensure that it has a public service fit for purpose to create the foundation for long term growth.
The first five volumes of the report are part of an evidence-based series designed to strengthen the basis for public expenditure policy in Zimbabwe:
Volume 1 of the Public Expenditure Review (PER) looks at the overall size of Zimbabwe’s public sector and the composition of the central government’s expenditure between 2011 and 2015.
Conservatively estimated at around 50 percent of GDP, the scale and scope of Zimbabwe’s public sector are exceptional for a country of its population (15.6 million plus), as well as its size and low income status. Revenue generation remains vigorous, with Zimbabwe’s ability to raise taxes and revenues reflecting the fact that citizens and firms are willing to pay for public services.
But, because public spending is dominated by personnel costs, the government’s ability is limited – both in terms of delivering public services and in terms of conducting sound fiscal policy. Both the country’s capital budget and basic operations are underfinanced.
The central government accounts for about half of the country’s total public spending and 25% of GDP. These expenditures are well accounted for in the public financial management system as well as being subject to parliamentary oversight. Public spending by local authorities and state-owned enterprises or parastatals represents over 20% of Zimbabwe’s GDP but has been subject to less oversight. Coordinating spending across these different arms of the state has also been a challenge.
The PER advocates in favor of producing a consolidated set of public sector accounts, seeing them as a key step toward improving the government’s management of its expenditure overall.
Volume 2 of the series examines spending at the subnational level. Zimbabwe’s local authorities provide a range of vital public services, including transport, energy, water and sanitation, healthcare, education, local law enforcement, and public housing.
The 2013 Constitution of Zimbabwe reinforced the administrative and financial autonomy of local governments, but the fiscal space has not kept pace with service delivery needs. The PER’s second volume estimates that total local government spending reached US$1.2 billion or 8 percent of GDP in 2014, the most recent year for which data could be compiled.
These expenditures have exceeded revenues by over 50% since 2013; thus, the fiscal stance of local authorities is neither stable nor sustainable. Service delivery was, however, improved in areas that applied cost-recovery tariffs. Ultimately, ensuring service delivery at the local level will require both improvements in the capacity of local governments to collect local revenues and the implementation of the intergovernmental transfer system envisaged in the Constitution.
Volume 3 examines the financial and operational performance of State-owned Enterprises and Parastatals (SEPs), which play an especially significant role in Zimbabwe’s economy. SEPs are responsible for much of the nation’s core infrastructure and dominate key sectors such as energy, transportation, communications, and agriculture. Aggregate value-added, generated by SEPs, fell from 16.8% of GDP in 2012 to 13.4% in 2014. SEP tax contributions also fell and fiscal transfers increased.
The PER’s third volume finds that the financial and operational performance of SEPs stems from weak corporate governance and fragmented oversight mechanisms. The government has announced plans to prepare a Public Entities Corporate Governance Bill which, if implemented, will apply Zimbabwe’s good practice National Corporate Governance Code to its SEPs.
Volume 4 analyses public, household, and donor spending on primary and secondary education from 2009 to 2015, with a focus on its effectiveness, efficiency, and equity.
In 2014, public and private sources each accounted for just under US$800 million in education spending, while donors contributed another US$50 million. Total spending on primary and secondary education reached over 10% of GDP, which is comparatively high for countries with Zimbabwe’s income level. However, public education spending is dominated by employment costs (a full 99% in 2014) with little to no resources available for capital investment, maintenance, or school supplies.
Schools rely almost exclusively on parents’ contributions to fund non-wage costs. These factors are contributing to a widening infrastructure deficit as the school-age population is expanding. And there are growing inequalities in access to education.
Volume 5 analyzes trends in social protection spending, which are driven by Zimbabwe’s social-insurance systems. Public spending on social insurance rose from 2% of GDP in 2010 to 4.4% in 2015. However, at the same time, spending on social safety nets dropped from 1.9% of GDP to 0.7%. Two-thirds of social protection spending is devoted to civil service pensions, which cover 1.3% of the population. The remaining third includes spending on the Harmonized Social Cash Transfer (HSCT), which is targeted to lower-income households.
The PER’s fifth volume recommends that the government consolidate its social safety net programs and reform the civil service pension system.
This Public Expenditure Review (PER) was prepared jointly by the Government of Zimbabwe and the World Bank. Other volumes of the PER are planned for publication in September 2018.