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Vision Document for the Asia Africa Growth Corridor: Partnership for Sustainable and Innovative Development
The idea of Asia Africa Growth Corridor (AAGC) emerged in the joint declaration issued by Prime Minister Narendra Modi and Prime Minister Shinzo Abe in November 2016. The AAGC will envisage a people centric sustainable growth strategy, details of which would be evolved through a process of detailed consultations across Asia and Africa, engaging various stakeholders.
The AAGC will be raised on four pillars of Development and Cooperation Projects, Quality Infrastructure and Institutional Connectivity, Enhancing Capacities and Skills and People-to-People partnership. The centrality of people to people partnership would be the unique feature of this initiative. The strengths of AAGC will be aligned with the development priorities of different countries and sub-regions of Africa, taking advantage of simultaneous homogeneity and heterogeneity among them. This would be undertaken to improve growth and interconnectedness between and within Asia and Africa for realizing a free and open Indo-Pacific region.
The AAGC will give priority to development projects in health and pharmaceuticals, agriculture and agro-processing, disaster management and skill enhancement. The connectivity aspects of the AAGC will be supplemented with quality infrastructure. The AAGC led growth in Africa and Asia will be responsive to the collective commitment for the Sustainable Development Goals (SDGs). The AAGC Vision Study will use Geographical Simulation Model (GSM) to bring out the economic gains for Africa through its integration with India, South Asia, Southeast Asia, East Asia and Oceania. The AAGC will contribute to develop institutional mechanisms and models for connecting businesses, people and think tanks that represent, and contribute to, the integration efforts in Asia and Africa.
The Research and Information System for Developing Countries (RIS), New Delhi, the Economic Research Institute for ASEAN and East Asia (ERIA), Jakarta, and Institute of Developing Economies (IDE-JETRO), Tokyo, have developed the Vision Document based on consultations with Asian and African think-tanks.
Introduction
Africa has tremendous scope for growth and requires development partners to achieve it. While its participation in regional and global value chains is important for its growth, the development priorities among countries, regions and subregions vary substantially. The development cooperation and infrastructure and connectivity development programme under AAGC would have to be aligned with these needs at national, regional and sub regional level.
Asia Africa Growth Corridor
In view of the above-mentioned background, the AAGC will deliberate on the following aspects:
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The existing mechanisms for cooperation between Asia and Africa.
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The broad based agenda for synchronised growth of Asia-Africa for sustainable and innovative development.
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Establishment of optimum linkages and cooperation among the sub-regions of Asia and Africa.
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Establishment of industrial corridor and industrial network.
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Improved partnership for infrastructure development between the two continents, and their sub-regions to address the current demands of trade, investment, and services in a sustainable manner.
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Complementary ways through which infrastructure and connectivity complement the development of industrial corridor and industrial network.
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Coordination between institutional and infrastructure partnerships.
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The role of people-to-people partnership to strengthen the Growth Corridor.
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Ways to ensure better and freer institutional and people-to-people partnerships between Asia and Africa.
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Identification of priority projects, which can be optimized and which are economically and financially feasible.
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Mechanisms that can result in exchange of best practices of growth, governance and partnership between Asia and Africa, including their sub-regions.
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Technical, economic, and institutional barriers.
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Specific recommendations for AAGC, and for the larger global periphery around Asia and Africa for sustainable and innovative development.
Proposed Elements of AAGC
The AAGC foresees Africa’s integration with India, South Asia, Southeast Asia, East Asia and Oceania. The AAGC contemplates four major pillars to bring peoples, goods, services, capital and institutions closer together, realizing the objective of Asia Africa partnership for sustainable and innovative development. The four pillars of AAGC are:
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Development and Cooperation Projects
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Quality Infrastructure and Institutional Connectivity
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Enhancing Capacities and Skills
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People-to-people Partnership
These will facilitate and enhance economic growth by linking economies in Asia and Africa through development of institutional and human capacity, connecting institutions and people, capacities for planning and execution of projects, trade facilitation, human resource development and technology improvement, and infrastructure (port, airport, industrial park, telecommunication, IT, etc.) of the two continents. The emphasis of the AAGC is on capacity building and expanding the manufacturing base and trade between Africa and Asia. The idea is to transform the region into a Growth Corridor which would embed the development processes and value chains in Africa and Asia. It will enable these economies to further integrate and collectively emerge as a globally competitive economic bloc. In order to align with Agenda 2030, green projects would get priority funding and implementation.
Asian businesses are participating extensively in the global production network and supply chains and are spread between East Asia, Southeast Asia up to South Asia. The AAGC will provide a rich opportunity for these production networks to expand and spread into Africa.
Way Forward
The complementary nature of Asia and Africa for comprehensive growth and sustainable development needs to be studied and explored further for deeper understanding. People would have to be at the center of AAGC to transform these regions into a growth corridor which ensures win-win for all. This will also be relevant and insightful in order to evolve these regions into a model for trans-regional partnership. India-Japan Joint Statement during the Annual Prime Ministerial Summit meeting in Tokyo on 11 November 2016 contemplates this idea. The joint statement calls upon both countries to draw on the strength of shared values, convergent interests and complementary skills and resources, to promote economic and social development, capacity building, connectivity and infrastructure development in the Indo-Pacific region, covering Asia-Africa and beyond. The Vision Document on AAGC envisages this idea to be taken forward through a joint study, which will be based on a profound consultative process among all stakeholders.
Download: Asia Africa Growth Corridor: Partnership for Sustainable and Innovative Development – A Vision Document (PDF, 5.03 MB)
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ECOWAS, IDEA and ACPF host RECs on the implementation of AU’s 2063 Agenda
A strategic planning and capacity development retreat on the role of African Regional Economic Communities (RECs)s in the Implementation of the First Ten Year Action Plan of the African Union (AU) Agenda 2063 has ended in Abuja, Nigeria.
The two-Day retreat which held at the ECOWAS Commission headquarters from the 8th and 9th of June 2017 was organized by the ECOWAS Liaison Office to AU in conjunction with the International Institute for Democracy and Electoral Assistance (IDEA) and the African Capacity Building Foundation (ACBF).
A roadmap was developed at the end of the retreat to galvanize the capacity building of the RECs as well as to guide and govern their partnership with IDEA and ACBF towards filling observed institutional, organizational and human capacity gaps to ensure proactive contribution to the structural transformation and deeper Integration of the Continent.
When finalized, the Abuja RECs Roadmap (ARR) will also enhance inter-RECs cooperation through joint planning, programming and execution to better equip the RECs to individually and collectively implement their specific agenda and that of the AU 2063.
The Roadmap covers the identification of joint Strategic priorities of RECs, IDEA and ACBF, areas for programmatic, technical and substantive assistance, common institutional, organizational, human resource, knowledge learning and management programmes. It also has a Work plan and Statement of Declaration of Commitment to implement joint activities around the identified priorities including the Joint Resource Mobilization Plan.
Earlier while declaring the retreat open, the ECOWAS Commissioner for Political Affairs, Peace and Security (PAPS), Mrs. Halima Ahmed reiterated the need for AU to involve and consult RECs as it undertakes its current reforms.
The Commissioner noted that she was elated about the timeliness of the retreat in ‘repositioning the RECs as building blocks of the African Union against the background of the on-going President Kagame-led AU Reforms’.
She expressed concern that in spite of the claim that RECs are the building blocks of the AU, the RECs have so far not been consulted or involved in the on-going AU Reforms. She assured participants that ECOWAS stands ready to sign the declaration of commitment to the partnership and the implementation of the Roadmap emanating from the retreat.
The Regional Director of IDEA’s Africa and Western Asia Programme (IDEA AWA) Professor Adebayo Olukoshi and the Executive Secretary of ACBF Prof Emmanuel Nnadozie both reiterated the central role of RECs in the social and economic transformation of their respective regions and the continent at large. They were optimistic that the tri-lateral partnership between their organizations and the RECs had great potentials not only to strengthen RECs capacities to contribute substantially to the implementation of AU Agenda 2063 but also to promote Inter REC cooperation. They both pledged their organizations’ commitment and support in meeting their regional and continental obligations.
The Retreat had in attendance, representatives and officials of the Common Market for Eastern and Southern Africa (COMESA), Intergovernmental Authority on Development (IGAD), Economic Community of Central African States (ECCAS), the Community of Sahel-Saharan States (CEN-SAD) and the host organization ECOWAS, Nigeria’s National Institute for Legislative Studies (NILS), as well as Dukes Transnational Consult and Integrated Services.
The ten year AU action plan is meant, among others, to facilitate the socioeconomic transformation of Africa. The RECs Roadmap is expected to be finalized on the margins of the January 2018 AU Summit in Addis Ababa, Ethiopia after further engagement with the RECs by Chief Executives of all concerned partnering organizations.
» Download: Agenda 2063: First Ten-Year Implementation Plan 2014-2023 (PDF, 2.04 MB)
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African public finance networks sign a Good Financial Governance Declaration to affirm their commitment to curbing IFFs
Two-hundred and fifty delegates from 42 countries attended an international conference on the theme “Tackling Illicit Financial Flows: An African approach to a global phenomenon” in Yaoundé, Cameroon, from 24-26 May 2017.
Among the participants were representatives from African Ministries of Finance, Tax Authorities, Supreme Audit Institutions and Public Accounts Committees. International organisations such as the African Union, NEPAD, OECD, Global Financial Integrity, Tax Justice Network, Action Aid and ARINSA were also present.
The conference resulted in four African Good Financial Governance (GFG) networks, as organisers of the conference, and several delegates signing the GFG Declaration. The Declaration lists agreements of joint and individual actions to be carried out by the networks and its members in the fight against IFFs. It optimises the mandate of these GFG networks in combatting IFFs and pledges to cooperate with the African Union (AU) Commission at a technical level to continue the leading work of the AU High Level Panel led by former South African President Thabo Mbeki.
The conference was opened by the Prime Minister, Head of the Government of Cameroon and the Head of Delegation of the European Union in Cameroon as well as the Ambassador of Germany. Throughout the three-day event, delegates discussed various topics such as social and economic impacts of IFFs in African countries and the importance of a communication strategy in the fight against IFFs. It was agreed that the illegal outflow of money (at least 50 billion USD annually) strongly impedes development in Africa.
On the second day, the participants divided themselves into three breakaway groups to more intensely discuss challenges, gaps, good practices and ways forward to curb IFFs. The breakaway sessions were organised around the main drivers of IFFs: commercial activities, corruption and criminal activities. The results of each group discussion were presented to the plenary. Thereby, capacity building, awareness, interagency cooperation and law enforcement were identified as key focus areas for lessening the illegal movement of money and will be included in the activities of the GFG networks.
The conference was hosted by the African Organisation of Supreme Audit Institutions (AFROSAI), and organised in partnership with the African Organisation of Public Accounts Committees (AFROPAC), the African Tax Administration Forum (ATAF), the Collaborative Africa Budget Reform Initiative (CABRI) with support from the German Development Cooperation (GIZ) on behalf of the European Union and the German Federal Ministry for Economic Development and Cooperation.
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tralac’s Daily News Selection
A selection of updates on the G20 Africa Partnership: Investing in a Common Future
Merkel calls for greater investment in Africa ahead of G20 summit. Underscoring the pressure African countries face, Merkel contrasted Germany’s average age of 43 with the average age in Niger and Mali of 15. “If we don’t give young people any prospects, if we don’t invest in education and qualifications, if we don’t strengthen the role of girls and young women, the development agenda won’t succeed,” she said. Merkel pledged German support for a French plan to authorize a West African force to battle terrorism in the Sahel region in Mali and other neighbouring countries.
B20: 10 High-Level Recommendations for an Upgraded G20-Partnership with Africa. In a B20 Survey on the CWA Initiative, conducted late 2016/early 2017, a large majority of survey participants indicated they were expecting increasing and strong business activities on the African continent.9 At the same time, respondents pointed out the many impediments to investment, primarily corruption, followed by regulatory and political barriers, lack of infrastructure, legal uncertainties, and a lack of skilled labor. Being asked to identify the most promising measures to address these barriers, respondents pointed at good regulation, improvement of administration through one-stop shops for investors, capacity building, financial sector development and regulation as well as better PPP processes. Recommendation 5: Fostering Open and Inclusive Trade – The G20 should, in cooperation with the Compact countries, foster open and inclusive trade by reducing trade barriers, implementing trade facilitation measures, and scaling up capacity building. Recommendation 6: Improving Good Governance and Responsible Supply Chains – The G20 should, in cooperation with the Compact countries, foster responsible global and regional supply chains and anti-corruption measures by supporting the comprehensive set of existing international initiatives and by encouraging the African partners to develop strong national institutions. [Video: Interview with the Nigeria’s Minister of Industry, Okechukwu Enelamah]
Paul Kagame: ”We are at the limit of what government-to-government action alone can achieve. I take this, in fact, as a welcome indicator of progress. A strong private sector is absolutely central to prosperity. The time is right to put commercial and investment relations at the centre of our joint agenda. A broader relationship is therefore necessary between Africa and higher-income countries, together with the international financial institutions that serve us all.”
Akinwumi Adesina: ”The Compact with Africa is very important because of the changing lens through which we are looking at Africa. We are no longer looking at Africa through the perspective of just development. We are looking at Africa as an investment destination, and unlocking its huge potential. This is a great shift in mindset. Africa is a growth frontier.”
Christine Lagarde: ”We are committed to increasing our engagement with countries participating in the Compact, building on our long-term relations with each country. Let me give you three examples:”
Commentaries: Mo Ibrahim, Aliko Dangote and Donald Kaberuka: Germany’s initiative on Africa must be seized, ONE’s Jamie Drummond: The scramble to empower Africa’s youth boom
Nigeria: Trade Policy Review (WTO)
Extract from report by WTO Secretariat: During the review period, the United States ceased to be the primary destination of Nigerian exports due to its production of fracking shell oil. With the United States reducing its energy imports, Nigeria has lost a major export destination for its crude oil. For instance, during the first three quarters of 2015, only 3.2% of Nigeria’s crude reached the United States. However, this drop in oil exports to the United States was partially offset by increased exports to India, the Netherlands and Spain, which collectively imported 37.8% of crude in the same period. In 2010, 34.4% of Nigerian exports were destined for the United States, compared to 12.1% in 2016.
Europe, in particular the European Union, has become the largest market for Nigeria’s exports since 2011. In 2016, 36.6% of Nigerian exports went to Europe, up from 23.5% in 2010. More than 90% of Nigerian exports to Europe were destined for the EU. The share of exports to India also increased from 10.5% in 2010 to 18% in 2016, making India the second-largest export market for Nigeria (Chart 1.2). ECOWAS is Nigeria’s second-largest non-oil export market, generating earnings of $2.3bn in 2016. Just as exports to the United States have fallen since 2010, imports from the United States have also dropped during the same period, from 17.9% of total imports in 2010 to 8% in 2016. Since 2010, imports have increasingly originated from the EU and China. The share of imports from the EU significantly increased in the five years from 21.8% in 2010 to 43.4% in 2016, whereas China raised its share of products imported to Nigeria from 16.6% to 19.7% over the same period (Chart 1.2).
Kenya hires lobby firm to prevent ejection from AGOA (Business Daily)
More than 66,000 jobs in Kenya are in “imminent danger and threat of being lost” due to a move by a US trade association to have all the East African Community member-states barred from continued participation in the African Growth and Opportunity Act, the embassy warned. The Secondary Materials and Recycled Textiles association (Smart), which represents US-based used-clothing companies, urged a US government trade agency in May to review the EAC states’ eligibility for AGOA. Smart took that action in response to the EAC’s decision in February to phase out imports of second-hand clothing by 2019.
Carlos Lopes: Africa’s Stake in Brexit (Project Syndicate)
It is up to African businesses and governments to refocus Britain’s attention. With the right incentives, Africa could come to play a more central role in UK economic planning. For that to happen, though, African leaders must help their British counterparts see that with change comes opportunity. As the UK readies to turn away from the EU, Africa must be ready to pick up the slack.
EAC: WCO supports development of new five year risk management strategy (WCO)
The WCO successfully conducted a five day workshop (22-26 May, Nairobi) to review and develop a new regional risk management strategy pack for the EAC Customs Region. The workshop was conducted under the WCO EAC CREATe Project, financed by the Government of Sweden. The Regional Risk Management Strategy pack which outlines a strategy for the region, risk management criteria and templates for regional risk register draws from the objectives of the EAC Customs union and the EAC Customs Union Strategy. The implementation of the 5 year Strategy will see the EAC adopt a harmonized approach to Risk Management which will include common definitions of risks, harmonized risk criteria, and the sharing of intelligence information among Partner States Customs administrations.
High tax rates fuel corruption in customs (Independent)
Recently, Uganda hosted members of the World Customs Organisation hailing from 24 countries of East and Southern Africa for a two-day 22nd governance council to discuss matters tax administration. The Independent’s Julius Businge jointly interviewed the organisers – WCO Secretary General Kunio Mikuriya and Uganda Revenue Authority Commissioner General Doris Akol about the relevance of the meeting and other global tax issues.
Cotton value chain in West Africa: update (Afreximbank)
The African Export-Import Bank will explore ways to support the development of the cotton value chain across the West Africa region to connect cotton processing activities and proposed fabric production in Burkina with garment manufacturing plants the Bank is assisting to set up in the West Africa region, Bank President Dr Benedict Oramah has announced in Cairo. The Bank would also support increased trade exchanges between Burkina Faso and Egypt in line with discussions held between the Burkinabe delegation led by President Kaboré and the Egyptian public and private sectors during President Kabore’s visit to Cairo, continued Dr Oramah.
Exploring the trade and gender nexus: the case of manufacturing in COMESA countries (Bridges Africa)
This article first presents the employment patterns in the export processing zones operating in the manufacturing sector of some COMESA countries from a gender perspective, and goes on to illustrate the broader impacts of trade integration in the manufacturing sector within the COMESA region. [Related Bridges Africa resources: Looking at trade from a gender perspective]
Partnership Investment Policy and Promotion: SA, Lesotho, Zimbabwe workshop (dti)
The four-day seminar (12-15 June, Sandton) is intended to enable representatives of governments from South Africa, Lesotho and Zimbabwe to learn and become familiar with global best practices in investment policy formulation in order to support ongoing efforts to generate and harness FDI. “There will also be roundtable discussions and brainstorming on specific challenges in generating new investment or retaining current investments in the country. The said sessions will also be used to determine the scope of any further assistance on investment policy and promotion strategies that the country will require from the World Bank Group” said the Acting Head of Invest SA, Mr Yunus Hoosen.
Centre for Trade and Regional Industrialisation: update (dti)
SA’s Department of Trade and Industry and the UNDP have signed a MoU aimed at establishing a strategic collaboration in the implementation of programmes of the Centre for Trade and Regional Industrialisation. ”Our collaboration will also enable the Centre to develop tools, methodologies and knowledge for strengthening the implementation and monitoring of regional integration, promote intellectual exchange among multiple stakeholders and across disciplines. We will also promote the dissemination of policies and best practices in the sub-region to support the development of policies at national level,” said UNDP Resident Representative in South Africa, Mr Gana Fofang.
China joins Namibia and Zimbabwe in efforts to curb illegal wildlife trade (TRAFFIC)
Ministerial level workshops raising awareness against wildlife trafficking amongst Chinese nationals living and working in Namibia and Zimbabwe were jointly hosted by China’s State Forest Administration, China’s CITES Management Authority, TRAFFIC and WWF last weekend, supported by the respective Chinese Embassies. More than 160 local Chinese nationals from State-owned enterprises, private businesses and residential communities attended the workshops held in Windhoek and Harare respectively. Local NGOs and both local and international media were also present.
Today’s Quick Links: Julia Lipowiecka: The gender dimension of services IGAD: Communique of the 31st Extra-Ordinary IGAD Summit on South Sudan (pdf) Improved Namibia-India economic cooperation in pipeline: govt awaits draft MoU Elected yesterday: Africa’s representatives on ILO’s Governing Body, 2017–20 (pdf) New Blue BioTrade initiative announced at the UN Ocean Conference |
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Trade Policy Review: Nigeria
The fifth review of the trade policies and practices of Nigeria takes place on 13 and 15 June 2017. The basis for the review is a report by the WTO Secretariat and a report by the Government of Nigeria.
Report by the Secretariat: Summary
Nigeria is the 26th largest economy in the world, and the biggest in Africa where it is the leading oil exporter, with the largest natural gas reserves. As a result of its 2014 rebasing exercise, Nigeria’s GDP almost doubled from US$270 billion in 2013 to US$510 billion in 2014, and its economy has become more services driven (about 61% of GDP in 2016). This GDP increase by about 90% resulted from, inter alia, re-estimation of the contributions of certain sectors of the economy such as telecommunications, entertainment, and retail, which were previously not captured or underreported; the informal sector was re-estimated to account for about 44% of GDP.
Nigeria’s economy recorded strong growth of about 7% per year in the decade leading up to 2015, thanks to high world prices of oil and natural gas. However, the sharp decline in oil prices since the third quarter of 2014 has posed major challenges to the economy, which significantly slowed down to 2.7% in 2015 and further went into recession in 2016 with a growth rate of -1.5%. Exports declined by 45%, led by a sharp fall in revenue from oil from 23.4% of GDP in 2011 to 3.7% in 2015. Low export receipts (mainly from oil) subsequently induced lower domestic demand that has impacted the non-oil sector. Weaknesses in the business environment (e.g. unreliable and expensive electricity supply, and governance issues, including in the oil sector) have also played their part.
The economic recession and the subsequent devaluation/depreciation of the Nigerian naira (pegged to the US dollar until June 2016) somehow contained imports dominated by manufactured products. In June 2015, restrictions were introduced on access to foreign exchange from the Central Bank of Nigeria (CBN) for 41 categories of imports (ranging from rice, soap, and private jets to personal travel for education and healthcare), with a view to containing outflows of international reserves and “resuscitating” domestic industries. The current account shifted from a surplus of US$10.8 billion in 2011 to a deficit of US$15.4 billion in 2015, and international reserves significantly dropped from a peak of US$43.8 billion in 2013 to US$28.3 billion in 2015.
Overall, the economic crisis and the various measures taken to address it have more significantly reduced exports than imports, and the importance of trade for Nigeria has decreased, with a trade (in goods and services) to GDP ratio of 21.1% in 2015, down from 52.8% in 2011. The United States has been replaced by the European Union (EU) as the largest market for Nigeria’s exports, while the EU remains the primary source of its imports. Nigeria is a net importer of services.
Despite its current modest contribution to GDP (10% in 2015), oil still accounts for about 90% of export earnings and 70% of government revenue. Therefore, in line with its Vision 20:2020 and its Economic Recovery and Growth Plan (ERGP) 2017-2020 aiming to make the country one of the top 20 leading global economies by 2020, Nigeria identified four priority sectors for its economic diversification efforts: agriculture, solid mineral mining, construction materials, and manufacturing.
Nigeria intends to diversify its economy away from oil by building a competitive manufacturing sector, which should facilitate integration into global value chains (GVCs) and boost productivity; as well as a strong services sector to be supported by an enabling environment for private-sector-led growth, industrial competitiveness and sustainable development. The recent merging of trade, industry and investment under the ambit of the Federal Ministry of Industry, Trade and Investment (FMITI) reflects Nigeria’s intention to effectively coordinate between these three key areas to improve its trading and investment environment.
Domestic inflation has generally been above the 9% annual target set by the CBN, with a peak of 15.7% in 2016. It has been fuelled by devaluation/depreciation of the naira accumulatively by about 100%. However, due to generally lower inflation in partner countries, this weakening of the naira has resulted in an appreciation of its real effective exchange rate (REER) by 25%. The Government’s recent expansionary fiscal policy is likely to lead to further appreciation of the REER and to further jeopardize the competitiveness of Nigeria’s goods and services. This may lead to pressure for more protection and increase the instability of the trade regime.
Nigeria’s trade-related legislation has remained largely unchanged with many outdated laws still in place. Several bills, including on competition, the metallurgical industry, postal services, and transport (eight bills), are awaiting approval by the National Assembly. New mining legislation was enacted in 2011 and new petroleum legislation is under consideration.
Nigeria’s investment regime is largely liberal, with 100% foreign ownership allowed in all but the petroleum sector where investment is limited to joint-ventures or production-sharing agreements and a minimum share of 55% must be owned by the Government. It is compulsory for foreign investors to be locally incorporated as limited-liability companies. As part of the Government’s efforts to improve Nigeria’s competitiveness, the registration fee for setting up a company was reduced from ₦50,000 to ₦15,000 in 2013.
Nigeria is an original Member of the WTO and actively participates in the activities of the organization. However, despite its efforts to ensure compliance with its WTO obligations, Nigeria still lags behind with some 20 notifications. Nigeria is also a founding member of the Economic Community of West African States (ECOWAS) and is fully engaged in negotiations to establish a continental free trade area (CFTA) under the African Union by 2017. Negotiations between the EU and the West African States on an Economic Partnership Agreement (EPA) were concluded on 30 June 2014; Nigeria has not yet signed this agreement. Under the African Growth and Opportunity Act (AGOA), Nigeria benefits from preferential access for its petroleum to the US market.
As a member of ECOWAS, Nigeria has applied the five-band (zero, 5%, 10%, 20%, and 35%) Common External Tariff (CET) since April 2015, albeit with a certain flexibility. In 2017, Nigeria’s average applied MFN tariff rate is 12.7%, up from 11.9% in 2011. Its final bound tariff rates average 117.3% and the tariff binding coverage remains low at 19.2% of total lines. Low binding coverage and high average bound rates leave ample margins for tariff changes, thus rendering the tariff regime less predictable.
Under ECOWAS, Nigeria also applies the Import Adjustment Tax (IAT) available to member States that consider flexible application of the CET (higher or lower protection of selected products) to be necessary during the five year transition period; and a 0.5% community fee. The IAT applied by Nigeria ranges from 5-60%, with the highest rate charged on cereals (60%). A Supplementary Protection Tax is also available under ECOWAS as a safeguard measure; Nigeria has not used it. Moreover, a myriad of additional taxes and levies are unilaterally collected by Nigeria on imports and exports.
Nigeria grants customs duty concessions to imports of, inter alia, agricultural inputs such as fertilizer, seeds and machinery to improve agricultural productivity. Duty-free imports of plants and machinery for the mining sector are allowed. All goods imported into export processing zones are also exempt from customs duties and other taxes. The companies income tax (CIT) holiday is the primary tax incentive accorded to investors, notably to companies with “pioneer status”. Nigeria maintains some industrial policies to promote local raw materials utilization, and local value added/manufacturing. Measures in this regard include CIT holidays, and preferences for bidders with “Nigerian content”, mainly in the oil and gas sector. However, Nigeria notified to the WTO in 1996 that it did not have local content laws or regulations.
In addition to the 41 categories of imports for which access to foreign exchange from CBN is banned, Nigeria also maintains import prohibitions and restrictions on various grounds, including protection of domestic industries. In fact, Nigeria has two lists of import prohibitions; moreover, it also prohibits imports of specified goods (rice since 2013 and vehicles since 2016) through land borders in order to combat smuggling.
All standards in Nigeria are mandatory, and are, therefore, technical regulations. A total of 222 new standards were developed during the review period. Goods subject to technical regulations require certification. Nigeria maintains two certification programmes: the Standards Organization of Nigeria Conformity Assessment Programme (SONCAP) for imported goods, and the Mandatory Conformity Assessment Programme (MANCAP) for domestically produced goods. SONCAP certification is required for each container and each product; consequently the cost of certification increases with the number of containers or products.
Nigeria’s regime on sanitary and phytosanitary (SPS) measures has remained largely unchanged. Imported food, drugs, cosmetics, medical devices, packaged water, detergents and chemicals must be registered with the National Agency for Food and Drug Administration and Control (NAFDAC). Each registration is specific to the individual product and the individual operator. Importation of animals and animal products is subject to controls through an import permit system. Imports of meat (including beef, pork, mutton, and frozen chicken) remain prohibited.
Nigeria has progressed in implementing its privatization programme. Most of its state-owned power generation companies were privatized in November 2013, but power transmission remains under state monopoly. Nigerian Telecommunications Plc and its subsidiary, Nigerian Mobile Telecommunication Limited, were privatized in April 2015. Nigeria still has no legislation on competition. It has terminated price controls/regulations on most products except for, inter alia, petroleum products, electricity, and postal and compulsory insurance services. The legal and institutional framework for government procurement has remained largely unchanged.
The Nigerian Customs Service (NCS) undertook several reforms in 2013 with a view to expediting the release and clearance of goods. These include: establishing a pre-arrival clearance system called Pre-Arrival Assessment Report (PAAR); setting up a trade hub/portal for traders to access information; and terminating the pre-shipment inspection system which resulted in NCS being responsible for conducting scanning and risk management services in lieu of private operators. However, the PSI charge, i.e. the Comprehensive Import Supervision Scheme (CISS) fee of 1% on the f.o.b. value of imports, continues to be levied. In 2011, NCS also set up a pseudo authorized economic operator (AEO) programme called Fast Track. Plans were announced to reduce the number of government agencies at Nigerian ports from 14 to 7 with a view to facilitating goods clearance. Nigeria ratified the WTO Trade Facilitation Agreement on 20 January 2017.
Despite these efforts to facilitate trade, the cost of doing business in Nigeria is rather high. Customs procedures and documentation requirements remain burdensome and, according to the World Bank’s Doing Business Report 2017, Nigeria is ranked 181th out of 190 countries for trading across borders. Between 2011 and 2016, the numbers of consignments physically inspected and of the related documents checked by NCS almost doubled, accounting for 70% of the total cleared in 2016.
Nigeria’s regime on intellectual property rights (IPRs) has remained largely unchanged. Most of its IPR laws date back to before 1995. Geographical indications (GIs) are protected as certification marks under the Trademark Act. In 2015, Nigeria set up a Joint IPR Action Plan Committee to combat IPR infringements. On 16 January 2017, Nigeria notified the WTO of its acceptance of the Protocol Amending the TRIPS Agreement.
Agriculture is crucial to the economy and farming provides a livelihood to over 60% of the Nigerian population, although only 40% of the arable land is cultivated. Nigeria’s agricultural sector has been in decline over the past four decades. In 2011, the Government embarked on two new policies – the Agricultural Transformation Agenda (ATA) and the Agricultural Promotion Policy (2016-2020) – to transform agriculture from a development-oriented to an agribusiness-focused industry based on integrated value chains. To this end, several programmes are in place; incentives are available to farmers to increase domestic production of certain commodities (such as cassava, rice and wheat); and several import prohibitions and restrictions are imposed on agricultural products. Nonetheless, the sector still faces various challenges, including shortages of feedstock as inputs; poorly maintained drainage systems; and poor transport networks which prevent timely transfer of agricultural goods to markets.
Given the central role of the gas and petroleum sector to Nigeria’s economy, and despite the country’s wealth of oil and gas, the sector continues to face many challenges, including sporadic supply disruptions; oil thefts leading to severe pipeline damages, production losses, pollution, and disruption of production; aging infrastructure; and poor maintenance and the resulting oil spills. Nigeria has one of the lowest rates of net electricity generation per capita in the world. Despite holding Africa’s largest oil reserves, Nigeria imports almost all of its refined petroleum products largely due to low capacity utilization rates and security problems at its refineries. The drop in global crude oil prices in recent years allowed Nigeria to slowly phase out its contentious fuel subsidy programme that it began reforming in early 2012. The subsidy was completely removed in 2016. Investors in the oil and gas sector are subjected to an array of taxes, charges and local content requirements.
Nigeria is trying to diversify away from oil by building a competitive manufacturing sector, especially in automotive assembly, cement, and textiles and clothing. The main challenges to the manufacturing sector include poor electricity supply and infrastructure; competition from mainly smuggled imports; and poor access to credit.
The services sector, especially telecommunications which have benefited from increased competition, continuously grew over the review period. Nigerian banks in general remain adequately capitalized; however, rising non-performing loans (NPLs) and reduced creditworthiness of borrowers remain a concern. Although Nigeria’s transportation matrix is one of the best in West Africa, the sector suffers from underinvestment and poor maintenance, with the majority of roads, railways, airports and ports in need of modernization. Entertainment emerged from the 2014 rebasing exercise as a key sector of the Nigerian economy; it comprises the third-largest film industry in the world in terms of production. However, a high piracy rate prevents the industry from generating optimal revenue.
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B20 Compact with Africa Recommendations
Africa is a continent of vast opportunities. Despite the high volatility of commodity prices as well as geo-political and geo-economic uncertainties, the continent’s average real GDP growth is forecasted to pick up to 3.4 percent in 2017. Africa thus remains the second fastest-growing economic region after East Asia.
At the same time, there are many challenges including poverty, hunger, poor education, ill health, unemployment and inequality, bad governance and corruption. Just to absorb new entrants into the labor force, around 20 million jobs need to be created every year until 2035.
The G20 Compact with Africa (CWA) Initiative aims to increase investment in Africa, in particular in infrastructure, by improving the macroeconomic, political, and financial environment. The B20 calls on the G20 to upgrade its partnership with Africa and to build on existing initiatives such as the Agenda 2063 of the African Union. The initiative needs to be demand-driven. Compacts need to be signed with individual African countries and should be tailored to the needs and interests of the respective country.
The B20 has published its policy recommendations for the Compact with Africa. We, the Business 20 (B20), strongly welcome the G20 Africa Partnership launched by the German G20 Presidency and the “Compact with Africa” (CWA) initiative in particular to promote investment in African countries. The B20 has developed 10 high-level recommendations for an upgraded G20-partnership with Africa:
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Strengthening the Environment for Foreign Direct Investment: The G20 should, in partnership with the Compact countries, improve the environment for FDI by jointly working on investment facilitation plans and more strongly supporting public-private partnerships.
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Boosting Investment in Infrastructure: The G20 should, jointly with the Compact countries, enhance investment in infrastructure by providing better information about infrastructure project pipelines, further expand risk mitigation instruments, and increase regulatory certainty.
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Enabling Reliable and Affordable Energy: The G20 should, in cooperation with the Compact countries, enable reliable and affordable energy by promoting the development and further expansion of bankable and investment-ready energy investment pipelines with a larger number of high-quality energy infrastructure Projects.
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Increasing Digital Connectivity: The G20 should, in cooperation with the Compact countries, bridge the digital divide between and within countries by enabling investment in ICT infrastructure as well as scaling up capacity building and skills programs.
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Fostering Open and Inclusive Trade: The G20 should, in cooperation with the Compact countries, foster open and inclusive trade by reducing trade barriers, implementing trade facilitation measures, and scaling up capacity building.
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Improving Good Governance and Responsible Supply Chains: The G20 should, in cooperation with the Compact countries, foster responsible global and regional supply chains and anti-corruption measures by supporting the comprehensive set of existing international initiatives and by encouraging the African partners to develop strong national institutions.
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Enabling Small and Medium-Sized Enterprises: The G20 should, in cooperation with the Compact countries, enable an environment that promotes SMEs as a pillar for inclusive growth and development.
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Improving Financial Inclusion: The G20 should, in cooperation with the Compact countries, advance financial inclusion to create a broader basis for sustainable economic growth and development.
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Advancing Health: The G20 should, in cooperation with the Compact countries, support measures that aim to expand access to essential healthcare services to their citizenry by applying best practices, building improved and sustainable policies, as well as incentivizing private sector involvement.
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Advancing Employment and Education: The G20 should, in cooperation with the Compact countries, advance employment and education, in particular by promoting open, dynamic, and inclusive labor markets, and by harnessing technological change through education.
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Exploring the trade and gender nexus: The case of manufacturing in COMESA countries
How did the setting up of export processing zones (EPZs) in COMESA countries affect women? How did tariff changes affect female employment in the manufacturing sector?
The Common Market for Eastern and Southern Africa (COMESA) was formed in 1994 to replace the former Preferential Trade Area for Eastern and Southern Africa, which had been in place since 1981.[1] COMESA is currently the largest operational free trade area in Africa, and 16 of its members have gradually moved towards the free trade regime established in 2000, providing duty-free and quota-free market access for COMESA-originating products. As discussed in the article by Simonetta Zarrilli in this issue, trade policy is not “gender neutral”, and its distributional outcomes may vary according to the different economic roles played by women and men as workers, producers, and consumers.
The manufacturing sector can play a significant role in the shift to higher value-added activities, the expansion of exports, as well as in the technological upgrading of an economy. Liberalisation of trade in manufactured goods has often been associated with significant gendered outcomes, particularly in women’s role as workers. Indeed, the female share of employment expanded in many developing countries following the expansion of labour-intensive production under trade liberalisation policies – a phenomenon known as the “feminisation of labour.”[2]
More recent shifts from labour-intensive to capital-intensive production in the manufacturing sector, along with consequent increases in wage levels, have begun to attract more men in manufacturing, hence contributing to a decline in the share of female employment. This phenomenon has been defined as the “defeminisation process”.[3] Yet, as explained here, the impact of trade liberalisation on women’s employment is largely country- and context-specific. This article first presents the employment patterns in the export processing zones (EPZs) operating in the manufacturing sector of some COMESA countries from a gender perspective, and goes on to illustrate the broader impacts of trade integration in the manufacturing sector within the COMESA region.
Employment patterns, wages, and working conditions in EPZs: Examples from COMESA
Since the 1960s, EPZs have played a key role in improving the export competitiveness of many developing countries thanks to their special incentives which provide a competitive business environment for firms. Export-oriented industrialisation can have significant gender-specific effects, as very often, employment opportunities available to women have been linked to the expansion of production for export. Women have indeed constituted the majority of workers employed in EPZs in developing countries, ranging from 50 percent up to 90 percent in some cases.
EPZs have been instrumental in providing formal employment and a stable source of income to women who held informal jobs or were outside the labour market. The improvement in women’s economic situation and the acquired financial independence certainly had positive repercussions on women’s empowerment and bargaining power within their households and the society at large. Nevertheless, employment in the EPZs has proven to be double-edged for women: even when basic labour standards are respected, working conditions in EPZ factories can be harsh, particularly for women who are typically found in the most vulnerable positions. In terms of occupation, women tend to be concentrated in low-paid and unskilled jobs. For instance, in segments such as packing, sewing, and cutting, female workers are the vast majority of the workforce (up to 90 percent in some countries in Sub-Saharan Africa). Occupational segregation by gender, which typically confines women to unskilled and labour-intensive activities, hinders any possibility for skill development and advancement in the workplace. Moreover, wages in EPZs are often low and barely sufficient to cover basic living expenses such as food and housing, and thus do not enable workers to build up any savings or improve their life standards.
Within COMESA, seven countries have created EPZs, particularly in the textile and clothing industry: Egypt, Kenya, Madagascar, Malawi, Mauritius, Namibia, and Zimbabwe. Trends in female employment in EPZs in COMESA countries confirm the pattern that EPZs tend to employ more women than men – resulting in a “feminisation” of labour. For instance, in Mauritius, the number of female workers in manufacturing increased from 18,400 to 61,200 between 1983 and 2001, owing mainly to the creation of new jobs in EPZs. The role of female workers in the textile factories is indeed considered to have been crucial in the so-called “Mauritius success story”. Likewise, in Kenya, the number of women employed in the manufacturing sector has increased by 76 percent over the period 1990-2000, and in Kenyan EPZs, women constituted 60 percent of the total workforce in 2006. Madagascar experienced a remarkable expansion of about 150,000 jobs in the apparel sector during the period 1997–2003, with more than 80 percent of the new jobs filled by female workers.[4]
Regarding the recent trend of “defeminisation” of labour, existing statistics do not offer sufficient evidence on whether defeminisation has also taken place in the COMESA region. Yet, the limited data available suggests that, since the early 2000s, female employment has indeed lost ground in the broader manufacturing sector of some COMESA countries. Additionally, the economies of low-income African countries that were heavily relying on textile exports were hit by the phasing out of the Multi-Fiber Arrangement (MFA) in 2005, which had previously shielded them from more competitive Asian suppliers. Countries such as Madagascar and Mauritius experienced an absolute decline in their textile and garment exports, with female jobs being especially affected.
As far as wages are concerned, the impact of EPZs on women’s earnings is not always clear-cut, as it is usually linked to country-specific differences in terms of labour markets, economic structures, and EPZ characteristics. For instance, research conducted in Madagascar during the period 1995-2001 has shown no significant gender gap in the hourly wages of male and female workers, as opposed to other sectors of the economy where men earn more than women. Wages in Malagasy EPZs were in average lower than those in the public sector or in non-EPZ firms, but nonetheless higher than wages in the informal sector. This suggests that formal employment in the EPZs has offered possibilities for improvement in salary conditions as compared to informal jobs. In addition, female workers’ shift to formal occupations in the EPZs has prompted an upward pressure on wages in the informal sector, and this has indirectly benefited informal female workers. Overall, it can be said that increased employment opportunities in the free zones have led to greater gender earnings equality in Antananarivo during the period surveyed.[5]
Turning to working conditions in the free zones, despite the new opportunities for formal employment for women, the quality of jobs created has been widely questioned. For instance, in Madagascar, while the expanding textile industry hired equally qualified men and women, female workers were concentrated in the lower segments of the textile production, with lower wages and low-skilled positions. In addition, the setting up of EPZs is often correlated with a weak enforcement of national labour laws or with the prohibition of collective bargaining and freedom of association. Overtime is the norm and EPZs workers are often found to be working longer hours compared to workers in the broader private sector or the public sector. Of course, this has important implications for women’s burden in terms of care work. Also, turnover rates are often high, raising questions about the quality of employment. For instance, in Madagascar, the annual turnover rate of EPZs’ employees is estimated to be around one fifth, while this proportion falls to one out of ten in the private sector. Another recurring criticism of EPZs has to do with the precariousness of employment and the absence of long-term employment opportunities. In Kenya, 85 percent of female workers are employed on short-term contracts, while in Malagasy EPZs women are less likely than men with similar qualifications to be promoted.[6]
Overall, EPZs appear to have been instrumental in integrating women in the formal sector in COMESA countries, and they contributed in some cases to the reduction of the gender wage gap. However, evidence from the COMESA region has also confirmed that working conditions may not always be favourable to women, and will even likely worsen their work burden, similarly to what has been witnessed in EPZs in other developing countries.
The link between trade and female employment in manufacturing in COMESA
UNCTAD analysed the impact of trade policy on female employment in the manufacturing sector in COMESA countries.[7] Specifically, the study estimated the impact of tariff changes on the female-to-male ratio in the manufacturing sector, using firm-level data for five COMESA countries – the Democratic Republic of Congo, Egypt, Kenya, Uganda, and Zambia – and looking at the tariffs faced in the European Union (EU) market and in the market of member states of the future Tripartite Free Trade Area (TFTA) that is being negotiated among members of COMESA, the East African Community (EAC) and the Southern African Development Community (SADC). The findings of the study are informative about the expected impact of future trade agreements with the EU (the Economic Partnership Agreements, EPAs) as well as EAC and SADC (the TFTA).
The results show that the reduction of the tariffs faced by COMESA exporters when entering the EU market and the markets of future TFTA member countries is expected to have a negative effect on women employed in production tasks.[8] Specifically, it is predicted that a one percent decrease in the tariffs faced in the destination markets – both under EPAs and the TFTA – will result in a 5 percent decrease in the female-to-male labour ratio in exporting firms. This suggests that further trade liberalisation between COMESA countries and the EU and TFTA members states may lead to the expansion of male-intensive, export-oriented production activities at the expense of women, contributing to the defeminisation of labour force in production tasks in the manufacturing sector. It may also be the case that technological upgrading reduces the opportunities for production workers, of whom women constitute the most vulnerable segment.
On the contrary, the reduction of tariffs in the EU market and in the markets of TFTA members is estimated to have a positive effect on women in non-production tasks.[9] Precisely, it is predicted that a one percent decrease in tariffs faced in the destination markets will result in a 3.4 percent increase in the female-to-male ratio in non-production tasks. The implications of technological upgrading for the need for physical versus cognitive skills seem to be at work in COMESA countries as well. Technological upgrading is expected to benefit women in non-production tasks by reducing the relative need for physical skills. Reduction of average tariffs imposed on imported products into COMESA countries is found to have only a marginal effect on the female-to-male employment ratio in both production and non-production tasks.
As an illustration, in Zambia for example, for whom the average tariffs faced in the European market are 4 percent, the signing and implementation of the EPA is expected to translate into a 20 percent decrease in the female-to-male ratio in production tasks in the manufacturing sector’s exporting firms. The EPA would, on the contrary, work to the advantage of women in non-production tasks, increasing the female-to-male employment ratio in the exporting firms by 13 percent. Overall, it seems like the EPA and TFTA would imply a feminisation process in non-production tasks and a defeminisation process in production tasks in the manufacturing sector of the COMESA countries that are being investigated.
Policy recommendations
The example of COMESA countries shows that trade policy can play a catalytic role in job creation for women, providing opportunities for women’s empowerment and wellbeing through formal employment and stable incomes, as in the case of EPZs. However, it can also concurrently generate new patterns of inequality and vulnerability.
In the context of increased international competition, which is likely to cause both gains and losses for different segments of the population, measures aimed at making the trade environment more gender sensitive and supporting the women involved in those most vulnerable segments should be encouraged. They include the following:
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Promoting programmes aimed at developing women’s human capital and skills, so as to reduce or mitigate the possible adverse effects of trade liberalisation on women in the labour market, but also to enable workers to shift between industries when the trading environment or trade policy changes;
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Taking steps to integrate women into new and expanding industries through on-the-job training and skills development programs;
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Incentivising both horizontal and vertical gender mobility, particularly in EPZ, to curb female segregation in low-skilled occupations, integrate them into technical, high-skilled, or traditionally masculinised work, and close the gender wage gap;
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Ensuring protection of EPZ workers’ rights, including against various forms of gender-based discrimination that women workers face;
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Ensuring adequate safety nets and the provision of basic public services such as education, health, and social protection services that contribute to reduce and redistribute women’s burden of unpaid work.
Nursel Aydiner Avsar is a Consultant in the Trade, Gender and Development Programme, UNCTAD. Mariangela Linoci is an Economic Affairs Officer in the Trade, Gender and Development Programme, UNCTAD.
This article is published under Bridges Africa, Volume 6 - Number 4, by the ICTSD.
[1] As of June 2017, COMESA was comprised of Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe.
[2] Standing, Guy. “Global Feminization Through Flexible Labour: A Theme Revisited.” World Development 27, no. 3 (2009): 583-602.
[3] Kucera, David, and Sheba Tejani. “Feminization, defeminization, and structural change in manufacturing.” World Development 64 (2014): 569-82.
[4] UNCTAD. Trade and gender linkages: An analysis of COMESA. United Nations: Geneva, 2017.
[5] Ibid.
[6] Ibid.
[7] Ibid.
[8] The “production” category coincides with the traditional blue collar category.
[9] The “non-production” includes white-collar-type of activities.
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tralac’s Daily News Selection
Featured tweet, @AfricaSweMFA: 26 countries represented at the Nordic-African FM meeting in Nigeria [this weekend]. Great discussions on peace and security, trade and gender equality.
CFTA update: The 3rd Meeting of Senior Trade Officials starts today in Niamey, in preparation for the Ministers of Trade and Industry meeting (15-16 June).
Today in Addis: 31st IGAD Summit of Heads of States will address the deteriorating situation in South Sudan.
Starting today, in Berlin, Germany’s G20 Africa-Conference. The keynote speech will be delivered Federal chancellor Angela Merkel. Finance minister Wolfgang Schäuble will then welcome counterparts from Côte d’Ivoire, Morocco, Senegal, Rwanda and Tunisia as well as the President of the AfDB, Akinwumi Adesina, the MD of the IMF, Christine Lagarde and the President of the WBG, Jim Yong Kim. Tomorrow, German Central Bank Governor, Jens Weidmann, will open the Investment Symposium.
Starting today, in Libreville: 16th Session of the African Ministerial Conference on the Environment. Downloads: conference documentation
Starting tomorrow, in Geneva: Nigeria’s Trade Policy Review (13, 15 June)
Starting tomorrow, in Washington: the 2017 US-Africa Business Summit. Wilbur Ross, US Secretary of Commerce, will deliver a keynote address. The overarching conference theme, The US stake in Africa: a call for greater economic engagement, is explored through three main topics on each day: (i) Navigating the African market, (ii) Africa in a globalizing economy, (iii) Regional integration and the impact on trade and investment. [Explore: conference programme for daily sessions]
Cross-border co-operation networks in West Africa (OECD)
Long seen as artificial barriers inherited from decolonisation, West African borders now lie at the heart of policies designed to encourage regional trade and combat political instability. This rediscovery of the peripheries of the nation state has fostered a proliferation of institutional initiatives that aim to cultivate co-operation between countries, regions and municipalities while ensuring the protection and promoting the interests and rights of the people living in border regions. Despite these regional initiatives, the effective functioning of cross-border co-operation still remains largely unknown across West Africa. The purpose of this paper is to fill that gap, with an analysis of both the social structure and the geography of West African governance networks. On the basis of this structural and geographic analysis, policy recommendations are formulated aimed at implementing policies that are more place-based, more attentive to relations between the actors at play in co-operation, and more specifically adapted to the constraints and opportunities of the West African region. [The analyst: Olivier J. Walther]
Zimbabwe: Zimra cargo tracker cuts smuggling, fraud (The Herald)
Entry into cargo in transit declined by 62% since Government introduced the electronic cargo tracking system in a bid to curb smuggling and transit fraud of goods at border posts. Finance and Economic Development Minister Patrick Chinamasa officially commissioned the country’s first anti-smuggling, transit fraud detection and curbing electronic system on 15 May 2017 in Harare. The system has been fully operational since 2 January 2017 and covers 18 transit routes, geo-fenced, under real time monitoring and tracking from the national revenue collector’s command centre.
Rwanda to adopt new system to curb delays of transit cargo (New Times)
Rwanda Revenue Authority is primed to adopt a multi-lateral transit framework that allows goods in transit to be cleared by customs, with the payment of duties and taxes suspended until they are cleared at final destination.The Transport Internationaux Routiers (TIR) system, officials at RRA said, will greatly boost the drive toward regional integration. According to Raphael Ugirumuremyi, the commissioner for customs services at RRA, Rwanda has since realised commendable progress in trade facilitation since the removal of non-tariff barriers by the East African region—but “some challenges” still exist, hence the need to further look into “possible solution”.
Trade facilitation: SADC approve R40m grants to Madagascar, Seychelles (Southern Times)
SADC has approved to give R20m each to Madagascar and Seychelles to improve their participation in regional and international trade. The grants were approved by the SADC Trade Related Facility programme steering committee, during its 7th meeting held in Gaborone last month. SADC has approved the funding for Madagascar to strengthen border agency capacity by developing and implementing guidelines for border agency coordination. SADC also wants Madagascar to improve the One-Stop-Shop for exporters through technical assistance towards its efficient operation and capacity building; to develop and implement a national trade promotion strategy; stakeholder capacity development; market research to identify tourism opportunities in the SADC region, especially targeting South Africa; and undertaking a number of trade promotion activities.
South Africa: Moody’s downgrades South Africa’s rating to Baa3, assigns negative outlook
The key drivers for the downgrade are: (i) the weakening of South Africa’s institutional framework; (ii) reduced growth prospects reflecting policy uncertainty and slower progress with structural reforms; and (iii) the continued erosion of fiscal strength due to rising public debt and contingent liabilities. The negative outlook reflects Moody’s view that the risks to growth and fiscal strength arising from the political outlook are tilted to the downside. It is unlikely that a political consensus will emerge which supports investment in the economy and reinvigorates the reform effort sufficiently quickly to reverse the expected negative impact on growth and on the government’s balance sheet. The opposite scenario, of heightened political dysfunction, continued gradual institutional weakening and diminished clarity over policy objectives, has a higher likelihood. [National Treasury statement (pdf)]
Ethiopia: Fitch affirms Ethiopia at ‘B’, outlook stable
Ethiopia’s average GDP growth in 2012-16 was 9.5%, much higher than the ‘B’ category median of 3.9%. GDP growth has been little impacted by two severe drought episodes in 2016-2017, reflecting an improvement in macroeconomic stability. This is attributable to a more efficient crisis management framework, higher agricultural productivity and lower dependence on agriculture due to the solid expansion in construction and to a lesser extent, services. Consequently, GDP growth slowed only moderately to 8% in FY16 (ending 7 July 2016) and has recovered to 10% in FY17, according to authorities’ estimates. Inflation has also remained contained below 8%. Lifted by high public investment aiming at bridging wide infrastructure gaps and a gradual pick-up in manufacturing, growth is expected to average around 8% over the next three years, below the 11% target set in the authorities’ Growth and Transformation Plan II but still much higher than peers. General government finances remain sound.
Tanzania: Dar Port savours double delight (Daily News)
The government through Tanzania Ports Authority, has signed a 36-month contract with a Chinese firm for the designing, construction, deepening and strengthening of the Dar es Salaam Port. According to the contract, China Habour Engineering Company Limitedwill design, construct, deepen and strengthen Dar es Salaam Port’s berths numbers 1 to 7. The upgrading of the berths will enable the Port to receive large cargo ships, hence it will be able to compete with the rest of the ports along the Indian Ocean coast. According to the Minister, the seven berths will be deepened from the current depth of eight metres up to 15 metres. “These measures will enable the Port to receive large vessels capable of carrying up to 19,000 containers.”
Tanzania: Domestication of Sustainable Development Goals: progress report by National Bureau of Statistics
Anzetse Were: How to develop light manufacturing in Kenya
Last week I attended a meeting organised by the ODI, ACET, and the Government of Ethiopia aimed at analysing and sharing lessons on the development of light manufacturing in Africa. The development of light manufacturing is an important part of Kenya’s plan for industrialisation as articulated in the Kenya Industrial Transformation Programme developed by the Ministry of Industry. The Special Advisor to the Prime Minister of Ethiopia, Arkebe Oqubay, made some interesting points about key features of light manufacturing of which countries should be cognisant as they implement industrialisation plans. Kenya can build on the successes being registered in infrastructure development and expedite the creation of SEZs, learning from countries like Ethiopia. However, the country needs a sharper focus on improving agricultural productivity, a more coherent skills development strategy, vastly improve investment facilitation and more effectively encourage public-private dialogue on the development of light manufacturing in the country. [ACET PACT Manufacturing Chapter launch]
Zambia: IMF concludes visit
The near-term outlook for the economy has improved in recent months, driven by good rains and positive sentiments in the financial markets as evidenced by increased foreign investor participation in the government securities market. A bumper harvest and increased hydroelectricity generation are expected to boost economic activity by more than previously projected.
Duty hurts Kenya’s flower export plan to China (Business Daily)
“The four per cent duty has made our flowers more expensive in China market compared to the EU countries where we sell duty-free,” Kenya Flower Council chief executive Jane Ngige at this year’s International Flower Trade Expo that was opened in Nairobi on Wednesday. “We are calling upon the Kenyan government to negotiate the removal of the tariff with China the same way flowers from Ethiopia access its market duty free,” Mrs Ngige said.
Kenya: Diaspora remittances rise to Sh44.7bn in Q1 (Business Daily)
Latest Central Bank of Kenya data shows that the remittances in the first three months of the year totalled $432.6m (Sh44.7 billion) compared to $415.6m in quarter one of 2016 (Sh42.1 billion at the March 2016 exchange rate). Last year, Kenyans abroad sent home a total of $1.72bn (Sh178 billion), making the remittances the largest source of foreign exchange for the country ahead of tourism and horticulture. “Remittances continue to do well and are now at just a little less than 2.5% of our GDP. They have grown even as remittances to sub-Saharan Africa fell by 6% in 2016,” said CBK governor Patrick Njoroge last week.
Tanzania: Government accuses Acacia of mining gold illegally (Bloomberg)
“The committee has established that Acacia Mining Plc has been conducting its mining business here in Tanzania contrary to the law,” Nehemiah Osoro, chairman of a committee ordered by President John Magufuli to conduct an audit of mineral exports over the past 19 years, said Monday in Dar es Salaam. Acacia’s shares dropped as much as 14% and were 5.8% lower at 282.60 pence by 9:34 a.m. in London. The company, which is majority owned by Barrick Gold Corp., said in an earlier statement that it has “fully cooperated” with the audit committee’s work.
Ghana: President Akufo-Addo announces new tax to support African Union (GBN)
“Indeed, Cabinet just approved a 0.02% deductions in all imports outside AU as a fund to support the activities of AU, so that AU will not go begging other countries for its citizens,” President Nana Akufo-Addo stated in a speech read on his behalf at the closing ceremony of a five day orientation workshop for newly appointed envoys in Accra. He reminded the envoys, who would be heading towards African countries that Africa remained a focal point of Ghana’s Foreign Policy objectives.
Oceans Conference: Call for Action
The week-long conference, where some 6,000 people participated, was the first time that the UN brought everyone together to discuss the challenges facing the world’s oceans. “When it comes to the ocean, it’s the common heritage of humankind. There’s no North-South, East-West when it comes to the ocean,” Mr. Thomson said. “If the ocean is dying, it’s dying on all of us.”
Today’s Quick Links Top WTO judge says trade dispute system is clogged up Mzukisi Qobo: How the G20 can support African countries Pritish Behuria: The cautious return of import substitution in Africa Africa aims to learn from Chile’s success in mining sector Proposed: An EU Electrify Africa Hotspot FAO/WFP update for UNSC: Monitoring food security in countries with conflict situations (pdf) |
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Merkel’s G20-Africa meet aims to reduce poverty, migrant influx
German Chancellor Angela Merkel hosts African leaders Monday for a G20 conference aimed at fighting the grinding poverty driving the mass migrant influx to Europe.
The idea is to team up African nations willing to reform with the world’s biggest economies and private investors to bring business and jobs to a continent where instability and corruption often scare off foreign companies.
“The global community has an interest in the better economic development of Africa,” German Finance Minister Wolfgang Schäuble said.
Growing population
Merkel is hosting the initiative as part of Germany’s presidency of the Group of 20 biggest economies, whose leaders meet in the northern port of Hamburg a month later.
Invited to Berlin are the leaders of Egypt, Ghana, Ivory Coast, Mali, Niger, Rwanda, Senegal and Tunisia, as well as the heads of the World Bank, IMF and African Union.
In Africa – whose population is set to double by mid-century – economies need to grow equally fast “and promise a future for young people, which would also help to ease migratory pressures,” Merkel’s spokeswoman Ulrike Demmer said.
Immigrants
Germany, Europe’s largest economy, has taken in more than one million asylum seekers since 2015 – more than half from war-torn Syria, Iraq and Afghanistan, but also many thousands from Ethiopia, Nigeria and elsewhere in Africa.
Hundreds of thousands more have trekked through the Sahara into lawless Libya, hoping that traffickers there will take them in rickety boats across the Mediterranean Sea to Europe.
IMF chief Christine Lagarde said that “having people flee from many sub-Saharan countries to reach better shores is not a sustainable response”.
“Creating the economic circumstances where people can live, grow, be educated and create value for themselves and their families at home is the way to go,” she told business daily Handelsblatt.
Financial aid
Merkel last year visited major migration transit countries Mali and Niger as well as Ethiopia, the seat of the African Union, and pledged 27 million euros ($30 million) in aid aiming to stop migrants heading for Europe in the first place.
“The well-being of Africa is in Germany’s interest,” Merkel said at the time.
Critics have dismissed the latest multilateral Africa initiative as a half-hearted effort without a major aid commitment, but organisers say it could help boost prosperity and reduce the mass flight and brain drain, especially of young people.
Investment
Under the G20 “compact” plan, an initial seven African nations will pledge reforms to attract more private sector investment.
Those countries will then receive technical support from the IMF, World Bank, other development institutions and their G20 partner country, which will also promote the effort to its own industrial sectors.
More than 100 banks, companies and other potential investors are expected at the two-day conference.
“This is not about hand-outs or just money or cheap money, but about the opportunity to attract investment, profits and jobs,” said a German finance ministry official.
Corruption
Germany will team up with Ghana, Ivory Coast and Tunisia, while other G20 members will support efforts by Ethiopia, Morocco, Rwanda and Senegal.
Germany is offering an additional 300 million euros in support for countries that fight corruption, set up transparent accounting and tax systems and protect human rights, Development Minister Gerd Mueller said.
Non-government groups have criticised that the G20 club – whose only member on the continent is South Africa – is offering no bigger financial commitments of its own, and that international trade often hurts African farmers and producers.
About 1,000 anti-globalisation protesters marched through Berlin on Saturday, waving signs that said “Africa is not for sale” and decrying the conference as a neocolonial grab for African resources at a time Europe wants to slam the door on its migrants.
» See also: The G20 Compact with Africa: A Joint AfDB, IMF, and WBG Report (PDF, 1.7 MB)
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Cross-border cooperation networks in West Africa
Long seen as artificial barriers inherited from decolonisation, West African borders now lie at the heart of policies designed to encourage regional trade and combat political instability.
This rediscovery of the peripheries of the nation state has fostered a proliferation of institutional initiatives that aim to cultivate co-operation between countries, regions and municipalities while ensuring the protection and promoting the interests and rights of the people living in border regions. Despite these regional initiatives, the effective functioning of cross-border co-operation still remains largely unknown across West Africa.
The purpose of this paper is to fill that gap, with an analysis of both the social structure and the geography of West African governance networks. On the basis of this structural and geographic analysis, policy recommendations are formulated aimed at implementing policies that are more place-based, more attentive to relations between the actors at play in co-operation, and more specifically adapted to the constraints and opportunities of the West African region.
Executive summary
A great quantity of research has covered the legislative and institutional principles of co-operation, but the structure of the governance networks connecting the organisations and individuals involved in cross-border projects have not yet been discussed in any systematic analysis. Similarly, the geographical character of border zones and the manner in which borders affect the operation of governance networks have also been somewhat neglected, despite their crucial significance in the implementation of cross-border projects.
The purpose of this paper, produced from research conducted by the OECD Sahel and West Africa Club into cross-border co-operation and governance networks in West Africa, is to fill that gap, with an analysis of both the social structure and the geography of West African governance structures. Three political recommendations have been formulated on the basis of an analysis of 137 actors involved in local and regional co-operation.
The analysis suggests, first, that cross-border policies should draw on the considerable diversity of West African regions. These place-based policies should take account of the range of needs, institutional systems and level of development of West African regions and provide public goods adapted to the specific socio-economic challenges of each region. The considerable degree of heterogeneity in West African border zones suggests that investment should be focused on regions which boast the greatest potential, have already set up governance networks or are acknowledged as priority areas by political decision-makers.
The next finding is that the political vision of cross-border co-operation in West Africa draws on two broad integration models: a model inspired by the EU which gives priority to institutional structures, and a model shaped by American influences and focused on interactions between socio-economic actors. In a context typified by both the proliferation of intergovernmental organisations and a preponderance of informal interactions, it is by no means certain that either model is really suited to the opportunities and constraints faced by co-operation actors in West Africa. In the long term, the success of cross-border co-operation will be determined by the adoption of an integration model that is more closely bound to the socio-economic and political specificities of the region.
Last, the research shows that cross-border co-operation ought to be more systematically broached from the point of view of relationships, i.e. by considering the interactions that take place between its actors (information and power networks). Focusing attention solely on the institutional characteristics of regional organisations, countries and local authorities will fail to reveal the way in which cross-border co-operation actually works, whereas its effectiveness often relies on interpersonal relations between actors of very different kinds. The analysis of social networks is therefore a research tool adapted to the understanding of fluid social structures such as the decision-makers involved in cross-border co-operation. The ability to visualise the connections that actually exist in a social group also provides local communities and non-governmental organisations with an empowerment tool and an intervention tool for international organisations and governments.
This kind of approach remains underutilised in development, but could lead to new applications in other fields that are relational in nature, such as trade, migration and conflict, provided that data recording the relationships between social actors are more systematically collected.
This Working Paper is available to download in English and in French.
Olivier J. Walther is Associate Professor in Political Science at the University of Southern Denmark and a Visiting Professor at the Division of Global Affairs at Rutgers, The State University of New Jersey. OECD Working Papers do not represent the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author.
The West African Papers series explores African socio-economic, political and security dynamics from a regional and multidisciplinary perspective. It seeks to stimulate discussion and gather information to better anticipate the changes that will shape future policies.
SADC approve R40m grants to Madagascar, Seychelles
SADC has approved to give R20 million each to Madagascar and Seychelles to help the two island nations improve their participation in regional and international trade.
The grants were approved by the SADC trade related facility (TRF) programme steering committee, during its seventh meeting held in Gaborone last month.
The facility is a mechanism for financial and technical support given to SADC member states to help them implement commitments made under the regional Protocol on Trade and Economic Partnership Agreement (EPA) between the European Union and the SADC EPA group.
SADC has approved the funding for Madagascar to strengthen border agency capacity by developing and implementing guidelines for border agency coordination.
SADC also wants Madagascar to improve the One-Stop-Shop for exporters through technical assistance towards its efficient operation and capacity building.
A one-stop shop is a company or a location that offers a multitude of services to a client or a customer.
SADC has also asked Madagascar to develop and implement a national trade promotion strategy; stakeholder capacity development; market research to identify tourism opportunities in the SADC region, especially targeting South Africa; and undertaking a number of trade promotion activities.
As for Seychelles, part of the money will help the country build its capacity in the application of the Automated System for Customs Data system.
This system is earmarked to improve the country’s functionality for valuation, risk assessment and cargo tracking and automation of the excise tax system, especially for domestic producers of excisable products.
The funds will also cover Seychelles’ development of a national legal framework and capacity building for trade remedies, particularly investigations related to anti-dumping.
Several countries have already signed financing agreements with the SADC secretariat to release the funds to the two islanders.
These are Lesotho, Malawi, Mauritius, Swaziland and Zambia.
Botswana, Namibia, Mozambique, Tanzania and Zimbabwe are however yet to sign financing agreements.
According to SADC communications department these countries are currently reviewing their financing agreements under the Facility and are all expected to have their contracts finalized by the end of June 2017.
The overall objective of the Trade Related Facility is to improve the participation of SADC Member States in regional and international trade in order to contribute to sustainable development in the SADC region.
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tralac’s Daily News Selection
Continental Free Trade Area Negotiating Forum updates
(i) Extract from an AU statement: Niger’s Minister of Trade and Private Sector, Mr. Sadou Seydou, underscored that the CFTA is a political exercise in order to reinforce African fragmented markets for the well-being of the African people. “It is a political declaration and affirmation of the idea of African Unity. Without the CFTA and the African Economic Integration, the rhetoric about African Unity will remain empty words with no importance. However, if the agreement is well crafted and implemented, its huge advantages will be profitable to future generations”, he said. Mr. Seydou also pointed out that it is important that the CFTA benefits to all countries in Africa whether they are Small, Big, Landlocked or Least Developed countries.
(ii) Election of CFTA Bureau: Nigeria’s Ambassador Chiedu Osakwe has been elected chairman of the CFTA Negotiating Forum. Other Bureau members are: First vice chairman (Swaziland); Second vice chairman (Ethiopia); Third vice chairman (Chad); Rapporteur (Algeria).
(iii) UNCTAD’s support to CFTA Negotiating Forum: A team consisting of the Head of the Regional Office for Africa as well as representatives from UNCTAD’s Statistics Division and the Trade Negotiations and Commercial Diplomacy Branch will be in Niamey for the next two weeks, providing technical input to support the process in areas such as mapping of intra African trade flows in both goods and services, analyses of regulatory frameworks that support pro-sustainable development engagements in trade in services and a dispute settlement model adaptable to the African context.
Mauritius: Budget Speech 2017-18 (GoM)
We are also setting up a National Economic and Social Council under my chairmanship to address key socioeconomic issues and strengthen dialogue with the private sector and civil society. The Council will meet on a quarterly basis. To boost up growth we will equally act on the demand side. Our embassies and consulates will channel more of their resources to export and investment-driven diplomacy in strategic markets. As Africa offers great prospects for our export sector and cross-border investments, we are consolidating our diplomatic footprint in Africa. Thus, a number of joint commissions will be held with countries such as Cote D’Ivoire, Ethiopia, Ghana, Kenya, Madagascar and Zambia. Our aim is to further enhance bilateral cooperation with these countries in various sectors, including trade, investment and capacity building.
This month, the first Special Economic Zone in Senegal will be inaugurated. Mauritius-Africa Fund is a partner in that venture. In fact, Phase 1 of the development of that Zone is completed and will give Mauritian companies access to warehouses and office spaces totalling 31,000 square meters on 13 hectares. Phase 2 of the development will be on 40 hectares. As regards Ivory Coast, the Mauritius-Africa Fund has secured access to land, on preferential terms, in the “Zone Franche de la Biotechnologie et des Technologies de l’Information et de la Communication” for Mauritian enterprises to undertake development projects.
Tanzania: Budget Speech 2017-18 (GoT)
Notwithstanding the aforementioned achievements, there have been some issues that dominated public debates regarding the stability of our economy, which I would like to elaborate. The issues include: liquidity squeeze, business shutdown and diminishing private sector confidence. [Related: Finance Minister’s speech on the Economic Survey Report 2016 (pdf) and the National Development Plan 2017-18]
Uganda: Budget Speech 2017-18 (Daily Monitor)
Uganda’s external and domestic Public debt amounted to $8.7bn as of 31st December 2016. In nominal terms this is equivalent to 33.8% of our GDP. However, when future debt payment obligations are discounted to today’s value, our Public Debt to GDP ratio stands at 27%. This is much lower than the threshold of 50% beyond which public debt becomes unsustainable. Uganda’s public debt therefore, is sustainable over the medium to long term. International reserves at end December 2016 stood at $3bn, equivalent to 4.2 months of imports of goods and services. This is close to the target of 4.5 months of import cover to be achieved in 2021, as agreed in the EAC Monetary Union protocol. [Background to the Budget Fiscal Year 2017-18]
Rwanda: 2017/18 Budget lays the ground for key infrastructure, manufacturing schemes (New Times)
The Government expects to finance 66% of the 2017/18 Budget domestically through tax and non-tax revenues, while it expects 17% of the Budget to come from both domestically and externally generated loans, and the remaining 17% obtained from foreign grants. Gatete noted the country’s positive direction toward self-reliance as the 66% rate in the Proposed Budget is an improvement from the current fiscal year’s 62% of domestically secured revenues for Budget funding. The boost in domestic revenues is attributed to a projected Rwf118.9 billion increase in tax revenue collection for the next fiscal year, hence the government has targeted to collect Rwf1,200.3 billion in taxes, up from the current fiscal year’s Rwf1,081.4 billion.
Social dimensions of the New Partnership for Africa’s Development: Economic and Social Council adopts five texts, including on Africa’s development
By the resolution titled “Social dimensions of the New Partnership for Africa’s Development”, the Council called on the international community to enhance support and fulfil its commitments in areas vital to Africa’s economic and social development. Calling inclusive and sustainable industrialization a critical engine of such development, the Council stressed the importance of taking measures to promote the dynamic diversification of African economies.
South Africa: National Assembly adopts controversial border authority bill (Business Day)
The National Assembly has voted to adopt the controversial Border Management Authority Bill at the third attempt. The bill was initially voted on in May and again earlier this week. However, on both occasions, opposition parties walked out in protest, leaving the house short of the quorum of 201 needed of the 400 MPs. On Thursday, ANC MPs turned out in droves, ensuring a quorum.
SA suspends all trade in birds and chicken products from Zimbabwe (pdf, DAFF)
The Department of Agriculture, Forestry and Fisheries’ Veterinary Services was, on 2 June 2017, notified of an outbreak of highly pathogenic avian influenza in one of the commercial chicken flocks in Zimbabwe. The virus has been typed as H5N8. South Africa keeps a close eye on the notifications reported to the World Organisation for Animal Health by trade partners. South Africa immediately suspended all trade in live birds and poultry, meat, table eggs and other unprocessed poultry products and communicated this to the Zimbabwean Chief Veterinary Officer. South Africa imports very little from Zimbabwe. All importers were immediately notified that their import permits were cancelled.
Zimbabwe: President rejects insurance Bill (The Chronicle)
President Mugabe has rejected the ZEP-Re (Membership of Zimbabwe and Branch Office Agreement) Bill, which sought to pave the way for one of Africa’s leading insurance firms to extend its business into the country. Speaker of Parliament Advocate Jacob Mudenda on Wednesday announced in Parliament that the President had reservations on the Bill because it was not clear.
Rising shipping costs set to lift global food import bill to more than $1.3 trillion (FAO)
“Global food commodity markets are well-balanced, buoyed by ample supplies of wheat and maize and rebounding production of oilseed products. However, rising shipping costs and larger import volumes are set to lift the global food import bill to more than $1.3 trillion this year, a 10.6% increase from 2016,” said the Food and Agricultural Organization today in its biannual publication entitled Food Outlook. Rising import bills are forecast for all food categories except for fish, for which growing domestic market demand in many developing countries is being increasingly met by robust growth in their local aquaculture sectors.
OECD Ministerial Council: Chair’s Statement on International Trade, Investment and Climate Change, Ministerial Council Statement, USTR statement
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Sixth Meeting of the Continental Free Trade Area Negotiating Forum (CFTA-NF) kicks off
The African Union Commission (AUC), in collaboration with the Government of Niger, is organizing the sixth Meeting of the Continental Free Trade Area (CFTA) Negotiating Forum from 5-10 June 2017 in Niamey.
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 6th CFTA Negotiating Forum (CFTA-NF). Commissioner Muchanga pointed out in this regard that negotiations need to be owned by Member States not by the Commission.
He underscored the importance of the work that has been undertaken so far by the Negotiating Forum and mentioned that the outcomes of the Meeting will allow the Senior Trade Officials, and African Ministers of Trade to reach consensus and have a smooth landing zone.
He urged Member States to provide relevant contributions to the process. He mentioned that the AUC Department of Trade and Industry (DTI) continues to be grateful for the technical support it has received from its partners to the CFTA Negotiating Structures and the overall CFTA negotiation process.
The Niger’s Minister of Trade and Private Sector, Mr. Sadou Seydou recalled the Heads of States and Governments’ Decision to conclude the CFTA by the indicative date of 2017 and pointed out that the establishment of the CFTA is a priority for them and stressed that the completion of the process is an immediate and important step in moving forward the AU Agenda 2063. According to the Hon. Minister, the CFTA is not only about Trade Liberalization.
He noted that it’s also about political will of the Leaders. He underscored that the CFTA is a political exercise in order to reinforce African fragmented markets for the well-being of the African people. “It is a political declaration and affirmation of the idea of African Unity. Without the CFTA and the African Economic Integration, the rhetoric about African Unity will remain empty words with no importance. However, if the agreement is well crafted and implemented, its huge advantages will be profitable to future generations,” he said.
Mr. Seydou also pointed out that it is important that the CFTA benefits to all countries in Africa whether they are Small, Big, Landlocked or Least Developed countries. He reminded participants the urgent need to conclude the CFTA by December 2017 and urged them to work hard in order to stick to the deadline indicated by the Assembly of Heads of States and Governments.
The objectives of the Meeting are to conclude the draft Modalities for Tariff Liberalization and Trade in Services negotiations, consider the draft Texts of the CFTA Agreement and receive the reports from the second meeting of Technical Working Groups. The meeting will commence with sessions on presentations on, among others, Trade Mapping and the Trade Analysis Tool.
The meeting is being attended by relevant experts, in the technical areas as determined by each African Union Member States together with the relevant experts from the Regional Economic Communities (RECs), other members of the Continental Task Force (CTF) namely, the United Nations Conference on Trade and Development (UNCTAD), the United Nations Economic Commission for Africa (UNECA), the African Trade Policy Centre (ATPC) and the African Development Bank (AfDB).
The Meeting takes 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 the indicative date of 2017.
The 3rd Meeting of Senior Trade Officials (STO) will commence from 12th – 14th June 2017 in Niamey, Niger and its objective is to consider the outcomes of the 5th and 6th Meetings of the CFTA Negotiating Forum, the Progress Report on World Trade Organization (WTO) MC11 Preparations, as well as the Report on AGOA. Ministers of Trade and Industry will meet on 15th and 16th June 2017 to receive the report of Senior Trade Officials.
For legal texts and other documents from the CFTA negotiations, please visit our CFTA resources page.
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Mauritius Budget Speech 2017-18
Rising to the challenge of our ambitions
Budget Speech delivered by Hon. Pravind Kumar Jugnauth, Minister of Finance and Economic Development, on 8 June 2017
When this Government took office in December 2014, we made a pledge to shape a new destiny for our country and our population.
We said we would put the economy back on track, reduce the unemployment rate, take families out of absolute poverty and achieve development that is environmentally sustainable and more inclusive.
Economic Achievements and Progress
Today, as we look at our economy at the dawn of our country’s 50th independence anniversary, I am pleased to report to the House that we are making good progress on our pledges.
The thrust of last year’s Budget has allowed us to build a strong framework for economic revival. It has propelled our economy to a higher growth rate of 3.9 per cent in 2016/17, compared to 3.2 per cent in the previous year.
We are expecting the growth rate to rise further to 4.1 per cent in 2017/18.
The unemployment rate has fallen to 7.3 per cent in 2016 and the inflation rate was one per cent in that same year. The real growth rate of private investment, which has been negative since 2012, has picked up with a positive growth of 5.7 per cent in 2016.
But we should not rest on our laurels.
We have high ambitions for our country, as spelled out in Vision 2030.
Our aim is for Mauritius to be a high income country by 2023, with an income per capita of around USD 13,600 against the current level of USD 9,740.
Last year, in my Budget Speech, I spoke about my vision of a new era of development – a vision of a society without any families living in absolute poverty, where there will be a narrower gap between the rich and the poor, no gender bias, better opportunities for all, with modern infrastructure and a quality of life that will meet the standards reached by advanced countries. This Budget which I am presenting today reflects my deep resolve to lead our nation to realise these ambitions.
Indeed, Budget 2017/18 is about Rising to the challenge of our ambitions.
This Budget focuses on five central challenges.
First, fostering higher growth for more and better jobs.
Second, investing massively in the infrastructure of the future.
Third, further improving the quality of life of our people.
Fourth, ushering in a New Social Paradigm.
And fifth, consolidating macro-economic fundamentals.
To succeed, we need to be clear on the path we have to follow.
I am, therefore, introducing a three-year rolling plan to support our medium-term and long-term objectives. This budget is cast within the context of the first Three-Year Strategic Plan 2017/18 to 2019/20, copies of which will be included among the budget documents.
We will also circulate an Annex as an integral part of the Budget Speech to provide greater details on measures, schemes and legislative amendments in the Budget.
Before elaborating on the policies and measures in the Budget, let me highlight that this year again, we are getting an exceptional financial support from the Government of India to implement several key development projects and programmes.
I am pleased to announce that the Government of India is offering a financial support envelope of USD 500 million, that is, around Rs 18 billion, through a line of credit.
Another tranche of USD 130 million, that is, Rs 4.5 billion, which was approved in February 2012 is also available, thus adding up to a total of Rs 22.5 billion. This support from India is over and above the grant of Rs 12.7 billion that was given to us last year, making a total of Rs 35.2 billion.
The line of credit of USD 500 million, bearing an annual interest rate of 1.8 per cent, will be made available to the SBM (Mauritius) Infrastructure Development Company Ltd for investment in redeemable preference shares. These shares will be issued by public sector entities implementing infrastructure projects and will have a redemption period of 20 years, with an initial grace period of 7 years.
Fostering Higher Growth for More and Better Jobs
I will now articulate our policies on the first challenge of this Budget, which is to foster higher growth for more and better jobs.
We need to imperatively strengthen institutional capacity to support our growth objectives. To that end, an Economic Development Board (EDB) will be established to ensure greater coherence and effectiveness in implementing our policies and actions. The EDB will have three main directorates.
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The first directorate will be responsible for national and sectoral economic development planning.
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The second directorate will be in charge of investment and export promotion. The various functions of the existing promotion organisations, namely, the BOI, Enterprise Mauritius, the Financial Services Promotion Agency and the Mauritius Africa Fund will be integrated in the Economic Development Board.
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And the third directorate will manage the elicensing business platform. The EDB will thus be the main business licensing agency in Mauritius – no more office hopping to obtain a business license.
We are also setting up a National Economic and Social Council under my chairmanship to address key socioeconomic issues and strengthen dialogue with the private sector and civil society. The Council will meet on a quarterly basis.
To boost up growth we will equally act on the demand side. Our embassies and consulates will channel more of their resources to export and investment-driven diplomacy in strategic markets.
As Africa offers great prospects for our export sector and cross-border investments, we are consolidating our diplomatic footprint in Africa.
Thus, a number of joint commissions will be held with countries such as Cote D’Ivoire, Ethiopia, Ghana, Kenya, Madagascar and Zambia. Our aim is to further enhance bilateral cooperation with these countries in various sectors, including trade, investment and capacity building.
This month, the first Special Economic Zone in Senegal will be inaugurated. Mauritius-Africa Fund is a partner in that venture. In fact, Phase 1 of the development of that Zone is completed and will give Mauritian companies access to warehouses and office spaces totalling 31,000 square meters on 13 hectares. Phase 2 of the development will be on 40 hectares.
As regards Ivory Coast, the Mauritius-Africa Fund has secured access to land, on preferential terms, in the “Zone Franche de la Biotechnologie et des Technologies de l’Information et de la Communication” for Mauritian enterprises to undertake development projects.
To facilitate the implementation of joint projects by Mauritian enterprises in Africa, the Mauritius-Africa Fund will establish a Business and Investment Platform for Africa (BIPA).
We will also pursue negotiations on Free Trade Agreements (FTA) with China and the European Free Trade Association. And we will step up efforts to finalise the Comprehensive Economic Cooperation and Partnership Agreement (CECPA) with India.
Building Innovative Mauritius
I now turn to our plan to build Innovative Mauritius. This will be crucial to global competitiveness, higher valueadded production and to creating better jobs.
As research and development is the bedrock of innovation, our plan is to put an unprecedented focus on encouraging research.
We are fundamentally reviewing and restructuring the Mauritius Research Council to transform it into the Mauritius Research and Innovation Council (MRIC). The Board of the MRIC will include wider representations of the private sector and relevant stakeholders.
It will manage a National Innovation and Research Fund to finance research in public and private institutions.
It will also set up a Mauritius Research Repository to which the public will have access.
And the Industrial Property Office will eventually be integrated in the MRIC.
Moreover, a Bio-Technology Institute will be set up under the aegis of the Ministry of Agro Industry and Food Security.
We will also promote academic research in all our universities. To that end, Government is injecting Rs 50 million in a Research Fund to be managed by the Tertiary Education Commission (TEC). An Innovator Occupation Permit will be introduced for innovative start-ups with a minimum operational expenditure of 20 per cent for R&D purposes.
In the same vein, I am allowing accelerated depreciation of 50 per cent per annum, in respect of capital expenditure incurred on R&D.
Companies will be allowed to claim a double deduction in respect of qualifying expenditure on R&D. This will apply until income year 2021-2022.
Doing more to facilitate business
We must have, at all times, an environment that is conducive and efficient for businesses to operate and to be globally competitive.
We have recently passed the Business Facilitation Act. Today, we are introducing more measures to improve the doing business environment.
We are significantly decreasing the cost for businesses to connect to the electricity network:
Firstly, the cost of extension of high tension networks for commercial projects will be reduced by 50 per cent.
Secondly, we are eliminating the processing fee for new applications in respect of all categories of customers, including domestic customers, but excluding parceling of land and Property Development Schemes projects.
Plan approvals from CEB, CWA or the WMA will not be required anymore when applying for a Building and Land Use Permit in zones which are well networked and serviced, as well as in morcellements.
To eliminate inefficiencies and duplications in the licensing processes, BOI will carry out a business process reengineering on more than 125 licenses and permits where some 14 Ministries are involved.
To further attract foreign investment, high tech machines and equipment brought by an investor from abroad will now be considered as part of the minimum investment of USD 100,000 required to obtain an Occupation Permit. This will be subject to complying with set criteria.
Stimulating growth and employment in key productive sectors
I will now elaborate our actions to boost investment, growth and job creation in the main sectors of our economy, starting with manufacturing.
First, I am introducing a major tax reform to encourage our domestic enterprises to expand their export capacity and seek new markets, especially the SMEs. Their profits from exports of goods will be taxed at the lower rate of 3 per cent, instead of 15 per cent.
Second, to encourage the development of new growth poles, we are introducing an 8-year income tax holiday for new companies engaged in the manufacturing of pharmaceutical products, medical devices and high tech products.
Third, to address the threats from Brexit, we established last year a Speed to Market Scheme for the textile and apparel exports on the European markets. I am extending that scheme to the export of jewellery, medical devices, fruits, flowers, vegetables and chilled fish.
Fourth, I am introducing the Innovation Box Regime for Intellectual Property assets which are developed in Mauritius. New companies involved in innovation-driven activities will benefit from a tax holiday of 8 years on the income derived from the totality of Intellectual Property Assets.
Fifth, as there is good potential for the production of medical devices, the existing Clinical Trials Act will be amended to allow for the testing of such devices.
Sixth, I am extending the 8-year work permit policy for expatriate workers in the export-oriented enterprises to all manufacturing activities.
Seventh, the issuance and renewal of work permits will be made within the reduced timeframe of 15 working days, instead of 40 working days.
Eighth, the Fashion and Design Institute will be reengineered to focus on training in areas where skills mismatch in fashion and design are most severe and will include training in jewellery. To this end, the jewellery centre will be transferred from the MITD to the Fashion and Design Institute.
Ninth, we are setting up two 3D Printing Service Centres at the National Computer Board to support manufacturing firms, university students and start-ups.
Tenth, Mauritas, which is currently established as a department under the Ministry of Industry, Commerce and Consumer Protection, will be given full autonomy to offer accreditation services locally. This should result in lower costs of accreditation for our exporters.
Eleventh, I am eliminating Registration Duty and Land Transfer Tax on any transfer of immovable property for the setting up of a business for high-tech manufacturing.
Ocean Economy: building a future pillar
I now turn to the ocean economy which holds tremendous potential to boost exports and create good quality employment opportunities.
First, the validity of the fishing rights permit will be extended from one year to five years for fishing vessels flying the Mauritian flag, subject to all their catch being unloaded and processed in Mauritius. This should make it easier for them to access finance.
Second, I am making provision to upgrade and equip the Maison des Pêcheurs at Cap Malheureux, Tamarin and Mahebourg. Our aim is to provide the fishermen cooperatives with the facilities to transform their fish catch into value-added fish products.
Third, the scheme that we launched last year for fishermen cooperative societies to acquire semi-industrial vessels will be extended for another year.
Fourth, I am providing for grants to the fishermen cooperative societies for the acquisition of refrigeration vehicles.
Fifth, to promote coral farming by fishermen and SMEs, I am making provision for the setting up of sea-based coral farms for developing ornamental corals for the tourism sector, aquarium market and high-end jewellery manufacturing.
Sixth, appropriate amendments will be made to the Maritime Zone Act to cater for marina development.
Seventh, the Mauritius Shipping Corporation Ltd, in collaboration with the Royal Institution of Naval Architects, will set up a new Maritime Training Institute that will focus on training our youths for jobs on cruise ships and in the maritime sector.
Financial services
I now turn to the financial services industry which holds good potential for growth and employment.
This industry is facing numerous challenges from the international community, not least from the OECD and the European Union.
At the same time, there are opportunities arising from the new global economic order which need to be tapped.
Our response will therefore be to consolidate the sector, gear up to face the emerging challenges and ensure that international norms, standards and compliance requirements are respected.
Our strategy is to take our global business sector to a new level, based on quality of product offerings rather than only on non-sustainable fiscal advantages.
I am therefore announcing that a blueprint will be elaborated by the Ministry of Financial Services, Good Governance and Institutional Reforms, in collaboration with the EDB, the Bank of Mauritius, the Financial Services Commission and all stakeholders in the financial services sector. This blueprint will focus on the vision for the sector over the next 10 years and will also take on board the forthcoming international requirements with regards to taxation without undermining the competitiveness of our jurisdiction.
We are also taking measures to further enhance the reputation of Mauritius as a jurisdiction of substance. Currently, a GBC1 company must fulfil at least one of six criteria established by the FSC to demonstrate substance. They will henceforth be required to fulfil at least two of the criteria – thus making the guidelines more stringent on the substance requirement.
Government is also amending the Companies Act 2001 to allow for Islamic Financial Institutions and Islamic Banks to adopt accounting standards issued by the Accounting and Auditing Organisation for Islamic Financial institution.
The Stock Exchange of Mauritius will engage with Euroclear to transform the local debt market and set up an international capital market which would attract Governments and Corporates from Africa and other regions to issue multi-currency bonds in Mauritius.
The legal obligations on Special Purpose Funds will be aligned with those of GBC1 companies.
We will also reform our tax regime for global business companies so that it evolves and meets the new international requirements.
Mauritius must also harness the benefits of the fintech revolution the more so that there is good potential for making of Mauritius a Fintech Hub for Africa.
In this respect, the EDB will engage with stakeholders to create a Regional Fintech Association. The Association will act as a think-tank, advise on necessary regulatory and business climate amendments and create network and tieups with international institutions such as Innovate Finance London and the Fintech Circle.
The FSC will set the rules for regulating the Fintech activities such as peer-to-peer lending and funding, as well as mobile wallet.
Furthermore, the minimum capital requirement of banks will be raised from Rs 200 million to Rs 400 million. Existing banks will be given two years to adjust their capital to the new level. The Banking Act will be amended accordingly.
Making further strides on our ambition of a fully-fledged digital economy
Last year I spoke about our strategy to move towards a fully-fledged digital society. This year we will make further strides to realise this ambition.
Our strategy is to provide the right ecosystem for this sector to grow above 10% in the years ahead.
I am therefore introducing measures that will encompass all enablers to drive this transformation.
First, I am pleased to announce that in line with the Government’s strategy to boost the ICT and BPO sector, the prices of International Private Leased Circuits (IPLC) and Global Multiprotocol Label Switching (MPLS) services will be lowered by at least 15% as from 1st of July 2017.
Second, the Data Protection Act will be amended to comply with the new EU data protection regulation which will come in force in May 2018. This will encourage companies in the ICT sector to use Mauritius as a platform for their services.
Fourth, to enable the development of the right environment to nurture the growth of digital entrepreneurs, Government will build capacity in new technologies like robotics, Big Data and Internet of Things at the Réduit Polytechnic.
Fifth, I am providing for a cloud computing integrated platform to offer a ‘Mauritius ICT plug and play platform’ to attract digital nomads.
Sixth, Mauricloud will be created to offer a platform for issuance and verification of documents & certificates in a digital way.
Seventh, a Digital Youth Engagement Programme will be set up by the NCB to provide introductory courses on coding to youngsters.
Eighth, Government is setting up an Open Data Portal as a single point of reference for public datasets.
Ninth, as scarcity of skill remains a severe constraint on investment and growth in the ICT sector, I am announcing a new policy to encourage firms to allow their employees to work at home. The Employment legislation will be amended accordingly. This policy will attract more women into the labour force, reduce cost for the enterprises and raise productivity nationally.
Supporting Micro, Small and Medium Enterprises and Cooperatives
As we consolidate our various industries, we will also strengthen the SME sector and cooperatives. I am therefore announcing the following measures:
First, SMEs and cooperative societies will be given dedicated space in four new market fairs that will be built at Goodlands, Bel Air, Chemin Grenier and Mahebourg to market their products.
Second, an SME e-platform will be set up to provide more visibility to SME products.
Third, to further help SMEs and cooperatives improve the marketing of their manufacturing products, Government will contribute Rs 5,000 towards the costs of membership in the ‘Made in Moris’ label.
Fourth, an Export Financing Facility will be introduced to assist manufacturing enterprises in the SME and cooperative sectors. This will include, amongst others, loans at concessionary rates.
Fifth, the SME Venture Capital Fund which was established last year is now operational. It will provide equity financing in projects by local SMEs.
And Government will continue to guarantee the loans made to SMEs under the two financing schemes which are operated by commercial banks. Since 2015, banks have disbursed a total amount of Rs 3.2 billion under these schemes.
Sixth, DBM will provide finance to SMEs at the interest rate of 6 percent. In addition, the interest rate on its loans to micro enterprises is being brought down from 6 per cent to 3 percent.
Seventh, an amendment will be made to the Code Civil Mauricien and the Code de Commerce to allow the use of all movable assets as loan collaterals.
Eighth, CEB will implement a new scheme for solar PV for small commercial businesses. Under this scheme, the initial investment cost for the installation of a 2 kw solar PV will be financed by CEB. Fifty per cent of the investment will be paid back by the small enterprises over a period of 24 months through a net metering scheme. Thus, the enterprise will have the benefits of consuming electricity free of charge and exporting any surplus electricity generated to the CEB grid.
Ninth, Government will relax the criteria and speed up the processes for SMEs and cooperatives to employ foreign labour.
Tenth, Government is providing Rs 100 million over the next three years for the implementation of the 10-Year Master Plan for the SME Sector.
Eleventh, we need a fundamental institutional reform to better support the SMEs and as recommended in the 10-year Master Plan for the SME Sector, ‘SME Mauritius’ will be set up to replace SMEDA.
Investing Massively in the Infrastructure of the Future
Let me now turn to the second challenge that this Budget addresses – Investing massively in the infrastructure of the future.
Transforming the Port
Let me now speak about the port which is making good progress in its transition to becoming a regional maritime hub, with investment of some Rs 3 billion this year and a further Rs 1.6 billion in the coming financial year.
The extended Mauritius Container Terminal berth will be fully operational by October 2017, with an increased capacity to handle up to 750,000 TEUs. The objective is to further increase the capacity to 1.5 million TEUs by 2030 through the Island Terminal project.
Moreover, the MPA has finalised its Port Master Plan and will be preparing a Master Plan for the development of a quay for leisure crafts and fishing boats at Vieux Grand Port.
The MPA is also proceeding with the construction of a second breakwater. Works are planned to start in early 2018 and to be completed by mid-2019.
And it will invest around half a billion rupees in a new Passenger Terminal Building at Les Salines to accommodate both Cruise and inter-island passenger traffic.
As we consolidate the competitiveness of the Port, we are also unlocking the growth potential at Riche Terre. The Riche Terre Business and Industrial Park should attract some Rs 4.4 billion of investments over the next three years.
See also: Focusing on priorities: National Budget 2017-18 from PwC (PDF)
Related News
Tanzania Budget Speech 2017-18
Speech by the Minister for Finance and Planning, Hon. Dr. Philip I. Mpango, for the estimates of Government revenue and expenditure for 2017/18
This is the second budget submitted by the Fifth Phase Government under the leadership of His Excellency Dr. John Pombe Joseph Magufuli, the President of the United Republic of Tanzania. The Government presents this Budget with sincere intention of fast trucking realization of the aspirations of the National Development Vision 2025 through implementation of the CCM 2015-2020 Election Manifesto; Five Year Development Plan 2016/17-2020/21; and Long Term Perspective Plan (LTPP); and the Global Sustainable Development Goals (SDGs) 2030.
In his inaugural speech of the 11th Parliament on 20th November, 2015, His Excellency, Dr. John Pombe Joseph Magufuli, the President of the United Republic of Tanzania, laid down the economic priorities of his Government focused on sustaining and strengthening economic principles built by his predecessors. The priorities are as follows:
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To accelerate inclusive economic growth to reach middle income status;
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To increase revenue, curb leakages of government resources, control expenditure and enforce public procurement legislations;
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To improve economic infrastructure such as roads, railways, air and marine transport and energy to with the objective of attracting investors from within and outside the country;
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To ensure that minerals and our natural resources are utilized effectively for the benefit of our nation;
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To emphasize on industrial development bearing in mind that Private Sector plays a key role in building industrial economy. Furthermore, the targeted industries are those which will create jobs, utilize domestically produced raw materials, and produce goods which will be consumed by the majority of the people in the country;
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To improve agricultural produce, livestock, and fisheries focusing more on value addition and modernization through training, provision of inputs, and extension services;
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To emphasize on improving tourism, land use and environment management;
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To improve the quality of education, health services, water and energy;
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To combat rampant corruption, embezzlement and drug abuse; and
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To undertake major reforms in government operations with a view to minimize bureaucracy.
Therefore, the national economic performance review and evaluation of the government budget implementation for 2016/17 aim at providing a reflection on the priorities of the Government of His Excellency, Dr. John Pombe Joseph Magufuli.
In the speech I presented in the morning on the state of the economy for the year 2016 and the first four months of the year 2017, I made it clear that, our economy has continued to register high economic growth whereas Tanzania was among the top five African Countries. According to the recent economic statistics provided in the IMF World Economic Outlook Database, the five countries are: Ivory Coast (7.9 percent); Tanzania (7.1 percent); Senegal (6.6 percent); Djibouti (6.5 percent); and Ethiopia (6.5 percent). The Deputy Managing Director of the IMF, Mr. Tao Zhang also made his evaluation when he visited Tanzania in May, 2017, that Tanzania’s economy has remained stable due to implementation of policy reforms under the strong leadership of His Excellency Dr. John Pombe Joseph Magufuli, particularly in domestic resource mobilization and the fight against corruption.
Similar sentiments were provided by the World Bank through the report on Tanzania Economic Update released in April 2017. According to the Report, the national economy remains stable based on various indicators such as real GDP growth, inflation, trade balance, foreign reserves and the value of the shilling against USD; I beg to quote part of the report as follow:
“Tanzania’s economic performance continues to rank among the highest in the region. The real GDP growth rate has consistently outpaced its EAC peers. The inflation rate remains relatively low. The current account deficit has significantly improved, with gross reserves sufficient to cover four months of imports. The shilling has also remained stable in 2016, following significant depreciation and volatility in 2015.”
Notwithstanding the aforementioned achievements, there have been some issues that dominated public debates regarding the stability of our economy, which I would like to elaborate. The issues include: liquidity squeeze, business shutdown and diminishing private sector confidence.
Business Shutdown
Another issue that has been widely debated by the public and the Members of this House is the concern of the increasing frequency of businesses closure, notably at Kariakoo in Dar es salaam and other cities. According to the information revealed by TRA during the period from July 2016 to March 2017, a total of 7,277 businesses were shutdown in different regions in the country. Generally, this trend is discouraging since residents lose jobs and incomes and the Government loses tax revenue, while the economy slows down. It is important therefore that whenever there is rampant closure of businesses, appropriate action should be taken to identify the type of businesses affected, the underlying factors with a view to take appropriate mitigating measures.
Factors put forward as contributing to business shutdown include, among others, stiff business competition, weak business management, increasing business operating costs attributed to transportation, taxes and levies; and non-compliance to business rules and principles. However, it is worth-noting that, following public awareness campaigns on tax compliance conducted by TRA, business owners have become aware of the need to report to TRA as soon as they cease their business operations in order to avoid accumulation of tax liabilities.
It is worth noting that, business start-up and closure is a common phenomenon in business operations. I would like to inform your esteem House that during the period from July 2016 to March 2017, TRA registered 224,738 businesses. Therefore, the image reflected should not be one sided. It is also important to note that this phenomenon does not happen in Tanzania alone. Historically, this has been happening in various countries in different forms and magnitudes. Many of us have learned about The Great Depression which occurred in Europe and America between 1929-1939. Likewise, many businesses in China encountered great shocks in 1980s whereas some of which could not survive while others managed to grow. This is well explained in the book by Tian Tao, et al, titled, Huawei: Leadership, Culture and Connectivity, 2017. I would like to quote a citation in page XXIV of the book:
“From the 1980s onward, China was swept up in the largest wave of commercial development in human history. Businesses at the time were like ships, each raised up and carried along by the sheer momentum of the wave. Some, however, soon capsized and were swallowed up, while most drifted along, going with the flow. Others crashed against barriers in the sea or got stranded on deserted islands. Only a few rose atop the crest of the wave and survived, eventually sailed towards new lands.”
The Government through the Ministry of Industry Trade and Investment in collaboration with my ministry will continue to monitor closely business trends and will take appropriate measures when needed. The Government appeals to the business community in the country to conduct their businesses confidently by adhering to the country’s laws, regulations and procedures.
Loss of Private Sector Confidence
There have been assertions that business community have lost confidence due to statements given by leaders and steps taken by the government in streamlining business operations. I would like to reassure the business community that the Fifth Phase Government strongly believes that the private sector is an engine of the economy and highly values the contribution of the business community in economic development and the nation welfare in general. It is vivid that the great portion of goods and services for domestic use and exports which earn the country the foreign exchange are produced by the private sector. Similarly, private sector is the main employer and source of government revenue. Therefore, private sector is a great partner of the government in an effort of bringing national development.
In recognition of great importance of the private sector and business community, the government has continued to improve business and investment environment by strengthening macroeconomic stability, minimize bureaucracy, timely decision making, promote peace and security and ensure availability of improved infrastructure and services including access to reliable power and credit to private sector. Those are the areas that the Government focuses on and will continue to get priority. In addition, the Government is still determined to continue dialogue with business community through Tanzania National Business Council (TNBC), Tanzania Private Sector Foundation (TPSF) and other fora.
We have now started to witness improved business environment as reflected through various performance indicators. According to the World Bank Doing Business report of 2017, Tanzania has done better in doing business by moving 12 positions up from 144 in 2016 to 132 in 2017. Moreover, according to the report by Quantum Global Research Lab of UK on Africa Investment Index 2016, Tanzania was ranked as the most attractive investment destination in East Africa and the 8th in Africa up from 19th in 2015.
The Government will sustain dialogue with business community aimed at getting their proposals on policy reforms and consider their concerns for economic development. The Government aspiration is to ensure that businesses are conducted under predictable and conducive environment conducive to economic growth and job creation; revenue generation for financing development projects; and social services delivery. The Government, through TRA, will continue to modernize tax systems, improve procedures and create an enabling business environment to facilitate smooth operations. TRA, in collaboration with other government entities, will continue to conduct public awareness programs on the importance of formalization of their economic activities. I would like to emphasize that, paying taxes is an obligation, which every Tanzanian should adhere to, for national development. Hence, the Government will protect business community but will not tolerate looting of national resources and tax evasion.
Fiscal Policies for 2017/18
The East African Community Partner States agreed that, the 2017/18 budget theme should revolve around ‘industrialization for job creation and shared prosperity’. This is consistent with the industrialization agenda for Tanzania under the Fifth Phase Government of His Excellency, Dr. John Pombe Joseph Magufuli.
Macroeconomic Policy Targets
Implementation of 2017/18 budget is aimed at achieving the following macroeconomic targets:
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Attain real GDP growth of 7.1 percent in 2017 up from the actual growth of 7.0 percent in 2016;
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Continue to contain inflation at single digit in the range of 5.0 – 8.0 percent in 2017;
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Domestic revenue including LGA’s own sources is projected at 16.5 percent in 2017/18 up from the likely outturn of 15.8 percent in 2016/17;
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Tax revenue is estimated at 14.2 percent of GDP in 2017/18 up from the estimate of 13.3 percent in 2016/7;
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Total expenditures are projected at 26.2 of GDP percent in 2017/18 from the estimate of 23.7 percent in 2016/17;
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Narrow the budget deficit to 3.8 percent of GDP in 2017/18 from 4.5 percent in 2016/17;
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The ratio of current account deficit to GDP is projected at 7.0 percent: and
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Maintain gross official reserves sufficient to cover at least 4.0 months of projected import of goods and services (excluding FDI).
Revenue Policies
The Government is committed to increase and strengthen domestic revenue collections by pursuing the following policies:
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Continue emphasizing effective use of electronic devices and systems in revenue collection to contain revenue leakages;
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Continue to widen the tax base including formalization of the informal sector to capture it into the tax net;
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Improve collection and strengthen management of non-tax revenue;
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Continue with mass valuation of properties to increase property tax revenue;
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Formalizing land ownership with a view of increasing revenue; and
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Continue with control measures to minimize abuse of tax exemptions.
In 2017/18, the Government will continue to expand domestic financial market in order to increase number of participants in the market from both internal and external that will enable the Government to raise resources to close the budget deficit at an affordable rate. The Government will expedite negotiation process for external non-concessional borrowing, while safeguarding the national interests and ensuring that proceeds raised are directed to development projects.
The Government, in collaboration with Development Partners, engaged a team of independent consultants in a bid to fostering development cooperation and ensuring that funds committed for various projects and programs are timely released. The Team, led by Dr. Donald P. Kaberuka, the former President of the African Development Bank, was commissioned to assess and recommend on improvement of development cooperation and financing instruments.
The consultants’ recommendations to strengthen development cooperation, amongst others, include:
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Establishing effective dialogue: The focus is to hold annual review and strengthen Public Expenditure Review (PER) process, optimizing impact of sector working groups as well as addressing sensitive issues without affecting budget process;
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Building institutional capacity: The drive is to create a world-class skills across a range of areas such as negotiation skills for exploitation of natural resources, financial sector management, trade policies, external debt management, and research and policy analysis; and
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Financing Development Agenda: The motive is to leverage resources from the Private Sector through Public Private Partnership (PPP) arrangement. Further, the General Budget Support (GBS) can still be used in strategic areas such as clearance of Government’s arrears, which are threatening the growth of our economy.
The Government is currently incorporating the consultants’ recommendations in the Development Cooperation Framework (DCF). The framework will address various issues, including: principles of development cooperation; the dialogue structure; and financing instruments which match the country’s requirements. The Government is optimistic that, these measures will improve cooperation between the parties and enable Development Partners to honour their commitments by disbursing funds timely.
Priority Areas for 2017/18
The 2017/18 Annual Development Plan is part of the implementation of the National Five Year Development Plan 2016/17 – 2020/21. As spelt out in my speech on the State of the Economy for 2016, priority areas reflected in the Plan include:
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Interventions for fostering economic growth and industrialization;
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Interventions for fostering human development;
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Interventions to create a conducive environment for enterprises and businesses to thrive; and
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Interventions to strengthen implementation effectiveness.
The Plan emphasizes successful implementation of Flagship Projects, which include: construction of new standard gauge railway line; revamping the national air carrier; mining of coal and iron ore and construction of iron and steel complex in Mchuchuma and Liganga – Njombe; establishment of Special Economic Zones; construction of a Liquefied Natural Gas (LNG) Plant; establishment of Kurasini Trade and Logistics Centre; development of Mkulazi Agricultural Farm and Sugar Factory; and mass training for development of specialized skills for industrialization and human development and fostering science, technology and innovations.
Policy and Administrative Measures
The Government will continue to undertake various policy and administrative measures in order to strengthen and simplify revenue collection. The measures among others include:
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To strengthen revenue collection systems by applying electronic systems so as to curb revenue leakages. The “Government Electronic Payment Gateway System” is already in place for use by Ministries, Government Departments and Institutions. I am directing all the Ministries, Government Departments and Institutions to start using the system.
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The Government has launched a new system of revenue collection (Electronic Revenue Collection System (e-RCS)) which will ensure proper assessment of taxes and provide assurance to the tax payers on the amount of taxes they are supposed to pay. The system will start operating in this financial year and it will be managed by Tanzania Revenue Authority, Tanzania Communication Regulatory Authority and Zanzibar Revenue Board.
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During the financial year 2017/18 the Government will continue to collect Property Tax (for valued and non-valued houses) in all local government authorities. The collection of Property Tax will be managed by the Ministry of Finance and Planning through Tanzania Revenue Authority. The Government will impose Property Tax on all houses and the property rate will be determined by the Minister for Finance and Planning. For houses which have not been valued, a flat rate of shillings 10,000 per normal house will apply and the rate of shillings 50,000 per each floor of a story house.
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To officially identify informal small businesses and those operating in informal places for example food vendors, small second hand clothes sellers, small agricultural products (vegetables, banana and fruits) sellers, etc by issuing them identity cards.
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To continue with enforcement measures and emphasis on the use of Electronic Fiscal Devices (EFDs) by Ministries, Government Departments and Institutions and to all businesses.
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The Government will open an Escrow Account starting July, 2017 to ease the refund of additional import duty of 15 percent of F.O.B value paid by importers of sugar for industrial use and ensure that the refund is paid on time.
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The Government will not allow direct exportation of minerals from the mines to other countries and instead it will establish clearing houses at the international airports, mining areas and other appropriate areas where the minerals will be verified and issued export permit before being exported. The Government will impose a clearing fee of one percent of the value of minerals.
Reform of the Tax Structure, Fees, Levies and Other Revenue Measures
Together with the policy and administrative measures, I propose to make amendments to the tax structure that will include amendments of tax rates, fees and levies imposed under various laws. These amendments are intended to increase Government revenue, to promote economic growth particularly in the industrial, agricultural and transport sectors and also increase employment opportunities. The proposed amendments are as follows:
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The Value Added Tax Act, CAP 148;
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The Income Tax Act, CAP. 332;
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The Excise (Management and Tariff) Act, CAP 147;
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The Road Traffic Act, CAP 168;
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The Local Government Finance Act, CAP 290;
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The East African Community Customs Management Act, 2004;
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Minor amendments in tax laws and other laws; and
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Amendment of various fees and levies imposed by Ministries, Regions and Independent Departments.
The Excise (Management and Tariff) Act, CAP 147
I propose to make amendments in the Excise (Management and Tariff) Act, CAP 147 as follows:
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To adjust for inflation rate of 5 percent the specific excise duty rates on non-petroleum products. The adjustment is done because when the excise duty is imposed by using specific rates, it doesn’t consider inflation and therefore erodes Government revenue. The best approach is to adjust the specific duty rates in order to keep pace with inflation rate. This is different from the case where the Excise Duty is imposed by using ad valorem rates because the values take account of inflation. According to the Excise Tax (Management and Tariff) Act, CAP 147 Section 124(2), the specific excise duty rates may be annually adjusted in accordance with the projected inflation rate and other key macroeconomic indicators. However, in order to support the National Strategy for building an industrial economy, the Excise Duty for some locally produced products will not be adjusted. The adjustment of specific excise duty rates are as follows:
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Excise Duty on soft drinks from shillings 58 to shillings 61 per litre which is an increase of shillings 3 per litre;
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Excise Duty on imported water including mineral waters containing added sugar or other matter of flavour from shillings 58 to shillings 61 per litre, which is an increase of shillings 3 per litre. The Excise Duty on locally produced water remains at shillings 58 per litre;
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Excise Duty on locally produced fruit juices from shillings 9.5 per litre to shillings 9.0 per litre;
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Excise Duty on imported fruit juices from shillings 210 to shillings 221 per litre which is an increase of shillings 11 per litre;
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Excise Duty on beers made from local unmalted cereals from shillings 429 to shillings 450 per litre which is an increase of shillings 21 per litre;
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Excise Duty on other beers from shillings 729 to shillings 765 per litre which is an increase of shillings 36 per litre;
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Excise Duty on non-alcoholic beers (including energy drinks and non-alcoholic beverages), from shillings 534 to shillings 561 per litre which is an increase of shillings 27 per litre;
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Excise Duty on wine produced with domestic grapes with content exceeding 75 percent from shillings 202 per litre to shillings 200 per litre;
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Excise Duty on wine produced with more than 25 percent imported grapes from shillings 2,236 to shillings 2,349 per litre which is an increase of shillings 113 per litre;
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Excise Duty on imported spirits from shillings 3,315 to shillings 3,481 per litre which is an increase of shillings 166 per litre. The Excise Duty on locally produced spirits remains at shillings 3,315 per litre;
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Excise Duty on cigarettes without filter tip and containing domestic tobacco more than 75 percent, from shillings 11,854 to shillings 12,447 per thousand cigarettes, which is an increase of shillings 593 per thousand cigarettes;
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Excise Duty on cigarettes with filter tip and containing domestic tobacco more than 75 percent, from shillings 28,024 to shillings 29,425 per thousand cigarettes, which is an increase of shillings 1,401 per thousand cigarettes;
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Excise Duty on other cigarettes not mentioned in (k) and (l) from shillings 50,700 to shillings 53,235 per thousand cigarettes, which is an increase of shillings 2,535 per thousand cigarettes;
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Excise Duty on cut rag or cut filler from shillings 25,608 to shillings 26,888 per kilogram which is an increase of shillings 1,280 per kilogram;
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Excise Duty on cigar remains at 30 percent.
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To abolish Annual Motor Vehicle Licence Fee and increase Excise Duty on Petrol (Motor Spirit and Premium), Diesel (Gas Oil) and Kerosene (IK) by shillings 40 per litre from shillings 339 to shillings 379 per litre of petrol, from shillings 215 to shillings 255 per litre of Diesel and from shillings 425 to shillings 465 per litre of Kerosene. The increase of Excise Duty on Petrol, Diesel and Kerosene is intended to compensate the loss of revenue resulting from the abolition of Annual Motor Vehicle Licence Fee which among others, it will address the complaint of imposing fee even if the vehicle is out of use.
The Excise Duty measures altogether are expected to increase Government revenue by shillings 27,801.8 million.
The East African Community Customs Management Act, 2004
The Ministers responsible for Finance from the EAC Partner States held their meeting “Pre- Budget Consultations” in Arusha, Tanzania on 6th May, 2017. During the meeting, they agreed to undertake the comprehensive review of Common External Tariff as a requirement under the Custom Union Protocol. Furthermore they agreed to effect changes in the Common External Tariff (CET) and make amendments to the East African Community- Custom Management Act (EAC-CMA), 2004 for the financial year 2017/2018. The focus was mainly on industrialisation for job creation and shared prosperity.
The changes in Common External Tariff (CET) which were recommended and agreed are as follows:
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Grant duty remission on wheat grain falling under HS Code 1001.99.10 and 1001.99.90 and apply duty rate of 10 percent instead of 35 percent for one year. The measure takes into account that the region has no adequate capacity to produce wheat and satisfy the demand;
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Grant Duty Remission on Linear Alkyl Benzen Sulphuric Acid (LABSA) falling under HS Codes 3402.11.00; 3402.12.00 and 3402.19.00 at duty rate of 0 percent instead of 10 percent for one year. The measure is intended to promote cottage industry particularly the stand alone soap manufacturing industries as this is an input for soap manufacturers;
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Continue to grant duty remission on CKD kits for motorcycles at a duty rate of 10 percent instead of 25 percent for one year. This measure is taken in order to continue promoting local motorcycle assembling in the EAC region while awaiting a team of experts in the region to develop a list of exclusion and inclusion on CKD motorcycle assembly under duty remission and develop the regulation so that the assembly includes locally manufactured inputs;
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To extend stay of application of the EAC CET rate on Crude Palm Oil falling under HS Code 1511.10.00 and apply 10 percent instead of 0 percent for one year. This measure is intended to continue supporting the production of oils seeds and growth of edible oil industries. In order to ensure successful implementation of industrial development strategy, we need to promote oil seeds and edible oil production in the country;
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Grant stay of application of EAC CET rate and instead apply a duty rate of 25 percent or USD 250 per metric ton whichever is higher on Flat-rolled products of iron or non-alloy steel falling under HS Codes 7210.41.00; 7210.49.00; 7210.61.00; 7210.69.00; 7210.70.00; 7210.90.00; 7212.30.00; 7212.40.00; 7212.50.00; 7212.60.00 for one year. The anti-dumping measure on imports of this nature is aimed at protecting the domestic industries against cheap products from outside the region;
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Continue stay of application of EAC CET rate and instead apply a duty rate of 25 percent or USD 200 per metric ton whichever is higher on Steel Rods and Bars and Hot-rolled Angles, Sections, falling under HS Codes 7213.10.00, 7213.20.00, 7214.10.00, 7214.20.00, 7214.30.00; 7214.91.00, 7214.99.00, 7216.10.00, 7216.21.00, 7216.22.00 and 7216.50.00 for one year. This is also aimed at protecting the domestic industries against cheap products from outside the region. Furthermore it promotes further investment and increase employment;
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Grant duty remission on inputs falling under HS Code 7228.20.00 and apply duty rate of 0 percent instead of 25 percent or USD 200 per metric ton whichever is higher for manufacturers of leaf spring. The measure takes into account that during the year 2016/17 there was manufacturers of leaf spring in Tanzania who were adversely affected by the introduction of import duty of 25 percent or USD 200 per metric ton whichever is higher on their raw materials. The duty remission measure is therefore intended to protect domestic production of iron and steel products against unfair competition from imported products while at the same time these are raw materials to manufacturers of leaf spring;
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Grant stay of application of EAC CET rate and instead apply a duty rate of 10 percent or USD 125 per metric ton whichever is higher on Flat-rolled products of iron or non-alloy steel, with a width of 600 mm or more, cold rolled or cold reduced falling under HS Code 7209.15.00, 7209.16.00, 7209.17.00, 7209.18.00, 7209.25.00, 7209.26.00, 7209.27.00, 7209.28.00, 7209.90.00, for one year. This measure is aimed at protecting domestic industries from influx of cheap imports from outside the EAC region;
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Continue to provide duty remission at duty rate of 0 percent on inputs for manufacturers of “air filters” in the region. The measure is aimed at supporting the local manufacturers of the products in the region and create employment;
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Grant stay of application of EAC CET rate on Gypsum Powder falling under HS Code 2520.20.00 and apply a duty rate of 10 percent instead of 0 percent for one year. This measure is intended to protect the local producers and promote production of gypsum powder by using locally available raw materials;
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Grant stay of application on the reduction of remission level on sugar for industrial use under HS Code 1701.99.10 and apply duty rate of 10 percent. During the financial year 2016/17, it was agreed to reduce progressively the import duty remission levels from 90 percent to 75 percent so that the import duty rate moves from 10 percent to 25 percent for the period of three years. However, the EAC Partner States did not implement this measure. This has taken into account that sugar is a key raw material in the foods, beverages and pharmaceutical sectors which are critical sectors for human needs;
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Grant stay of application of EAC CET rates on Electronic Fiscal Devices (EFDs) Machines falling under HS Code 8470.50.90 and apply duty rate of 0 percent instead of 10 percent for one year. This is to encourage the use of electronic devices for accounting of VAT for efficient management control in areas of sales analysis and stock control system;
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To extend the stay of application of the EAC CET rate and apply a duty rate of 25 percent instead of 10 percent on paper products falling under HS Codes 4804.11.00; 804.19.90; 4804.21.00; 4804.29.00; 4804.31.00; 4804.39.00; 4804.41.00; 4804.51.00; 4804.59.00; 4805.11.00; 4805.12.00; 4805.19.00; 4805.24.00; 4805.25.00; 4805.30.00; 4805.91.00; and 4805.92.00 for one year. This measure is intended to protect the local producers of these products and promote production of papers in the region;
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Grant duty remission of on inputs for use in the assembly of equipments specifically designed for use by disabled persons at 0 percent. This measure is intended to promote manufacturing of these essential equipments within the region and therefore increase employment;
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Grant stay of application of EAC CET rate on aluminium structures of HS Codes 7610.90.00 and instead apply duty rate of 25 percent instead of 0 percent for one year. This measure is intended to harmonise duty rates of similar articles of base metal i.e. Steel and aluminium;
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To change a wording of tariff code 4911.99.20 to include examination answer sheets so that the import duty of 0 percent applies for both examinations question papers and examination answer sheets; and
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Grant duty remission on inputs for use in the assembly and construction of ships at 0 percent. This measure is intended to provide relief to the assemblers and promote the fishing industry, marine transport and job creation.
The Ministers responsible for Finance also agreed to make amendments in the EAC-Customs Management Act, 2004 as follows:
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To amend Part B of the 5th Schedule of EAC CMA 2004 by deleting para 25 in order to remove import duty exemption on Compact Fluorescent Bulbs (CFL) and Light Emitting Bulbs (LED). These are finished products;
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To amend Section 203 of the EAC CMA by replacing the USD 10,000 fine with USD 20,000 or 50 percent of the dutiable value of the goods, whichever is higher. The intension is to put a deterrent measure on offences (such as false documents, false declarations, fraudulent evasion of payment of taxes, etc). Currently the maximum fine Customs can charge on such offences is only USD 10,000 which is not punitive enough to deter offenders;
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To amend Section 218 of EAC-CMA 2004 to give the powers of the restoration of seized items to Commissioner of Customs instead of EAC Council of Ministers;
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To amend Para 30 of the 5th Schedule to the EAC-CMA, 2004 to include distribution of Oil and Gas. This measure is intended to provide import duty exemption on projects of Heated Crude Oil Pipeline implemented by Partner States Governments;
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The Import Duty Measures altogether are expected to increase Government revenue by shillings 16,053.9 million.
Budget Structure for 2017/18
Consistent with 2017/18 macroeconomic targets and fiscal policy objectives, the Government plans to mobilize and spend shillings 31,712.0 billion. Domestic revenue, including LGAs own sources, is estimated at shillings 19,977.0 billion, which is 63 percent of the total resource envelope. Out of this amount: tax revenue is estimated to be shillings 17,106.3 billion or 85.6 percent of domestic revenue; non-tax revenue is shillings 2,183.4 billion; and revenue from LGAs own sources is shillings 687.3 billion.
Development Partners are expected to contribute shillings 3,971.1 billion, which is 12.5 percent of the total budget in the form of grants and concessional loans. The amount is comprised of shillings 2,473.8 billion for development projects, shillings 556.1 billion for sector basket funds and shillings 941.2 billion for General Budget Support.
The Government intends to borrow shillings 7,763.9 billion from domestic and external non-concessional sources. Domestic borrowing is estimated at shillings 6,168.9 billion, comprised of shillings 4,948.2 billion for rollover of maturing government securities and shillings 1,220.7 billion equivalent to one percent of GDP is new loans for financing development expenditure. In order to speed up development of infrastructure, the Government expects to borrow shillings 1,595.0 billion from external sources.
In the year 2017/18 the Government will increase efforts in resource mobilisation from domestic and external sources for implementation of development projects. However, implementation of huge projects, including the construction of the subsequent phases of the standard gauge railway and improvement of various ports in the country, will depend on resources availability after mid-year review. In addition, the process of issuing non-cash bond to social security funds will proceed immediately after the approval of the Government in order to settle verified arrears owed to Government.
In 2017/18, the Government plans to spend shillings 31,712.0 billion. Out of this, shillings 19,712.4 billion is for recurrent expenditure, including shillings 7,205.8 billion for wages and salaries, and shillings 9,461.4 billion for public debt and general services. Development expenditure is estimated at shillings 11,999.6 billion equivalent to 38 percent of the total budget, whereby shillings 8,969.7 billion is local funds and shillings 3,029.8 billion is foreign funds. The current level of 38 percent is within the range of 30 to 40 percent of the total budget as stipulated in the Five Year Development Plan 2016/17-2020/21.
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Africa, Europe are not threats to each other – Kagame
African and European countries should work together to foster domestic and global development instead of looking at each other as threats, President Paul Kagame has said.
The Head of State was speaking on Wednesday in Brussels, Belgium, during the opening ceremony of the European Development Days (EDD) summit.
Organised by the European Commission, EDD brings together the global development community to share ideas and experiences in ways that inspire new partnerships and innovative solutions to the world’s most pressing challenges.
Kagame called for more cooperation and mutual respect between Europe and Africa, urging leaders on both sides to work together to address global development challenges.
“Sustainable development rests on a foundation of good politics and respect for rights. While people may draw different lessons from their respective histories about the most suitable form of governance for their situation, there will always be ample room for discussion and exchange of views among friends,” he said.
Kagame called for partnership based on mutual respect in order to solve shared challenges such as migration.
“Our starting point should be that the dignity and safety of migrants, both in their country of origin and destination, is paramount,” Kagame said.
“Yet one can safely say, if very uncomfortably, that the migration crisis is a consequence of policies that have not worked well for a long time, if at all. Compromising stability by seeking to impose one’s values on others will always have adverse outcomes for everyone involved,” he added.
Kagame called for the kind of conversation that highlights the benefits Europe and Africa stand to gain through true partnership.
“If we have an honest and objective discussion, we find that there is actually no basis for Africa and Europe to see in each other any threat, ” Kagame said.
“We can do better. There are responsibilities and opportunities for all of us, working together,” Kagame added.
Thousands of development actors from around the globe gathered in Brussels on Wednesday – and Thursday – have held discussions about how to invest in inclusive development with a focus on strengthening global partnerships to promote private sector development, gender equality, and youth empowerment.
Empowering youth, women
Kagame said the focus of the meeting was relevant to the current world challenges, describing the strengthening of the private sector and empowering youth and women as a key prerequisite for sustainable development.
“At root these goals are tied together by one simple and powerful idea, and that is unleashing all the potential in society in order to build a more equitable and prosperous future for all of us,” he said.
After describing how Rwanda has been investing heavily in empowering members of the private sector as well as women and youth, the President also thanked the European Union for its support to Rwanda’s progress.
“The European Union has been a very good partner in these efforts and the support, I can say, has been put to good use in Rwanda, and is greatly appreciated. We commend Europe’s recognition that economic and social development is a joint enterprise that benefits us all,” Kagame said.
The opening ceremony of the EDD was also marked by the signing of the “New European Consensus on Development,” a blueprint aimed at setting the vision for European development.
The President attended the EDD meeting at the invitation of the President of the European Union Commission, Jean Claude Juncker, and was expected to meet Belgian Premier Charles Michel on the sidelines of the meeting as well as thousands of Rwandans during ‘Rwanda Day,’ scheduled for this weekend in Brussels.
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Uganda: Background to the Budget 2017-18
Industrialisation for Job Creation and Shared Prosperity
Introduction
The Budget for Fiscal Year 2017/18 is themed: “Industrialisation for Job Creation and Shared Prosperity” in line with that of the East African Community. This theme corresponds with that of the second National Development Plan (NDPII): “Strengthening Uganda’s Competitiveness for Sustainable Wealth Creation, Employment and Inclusive Growth”. It is also consistent with the theme of Africa’s Agenda 2063 which is about a prosperous Africa based on inclusive growth and sustainable development.
Fiscal Year 2017/18 is the third implementation year of NDP II and the second budget year of the current NRM Government. Key milestones have so far been achieved in implementation of NDP II core projects and complementary legal reforms. A number of NDP II core projects are on course for timely completion including Karuma and Isimba Hydro Power Projects which are due in FY 2017/2018. Implementation of all the 23 Presidential Guidelines and Directives issued in July 2016 has notably progressed.
Uganda’s mid-year population for FY 2016/17 is estimated at 36.9 million people. The 2016 Uganda Demographic and Health Survey (UDHS) shades new light on the quality of this population. Overall it confirms that there is continuity in the positive trend of Uganda’s development outcomes established by the results of the 2014 National Housing and Population Census. Significant progress has been registered in many demographic and health outcomes. The average number of children born by a Ugandan woman in her life time (fertility rate) declined from 6.2 in 2011 to 5.4 in 2016. Infant mortality also further declined from 54 to 43 deaths per 1,000 live births over the same period while under-five mortality reduced from 90 to 64 deaths per 1,000 live births. There has also been a sustained reduction in maternal deaths with the Maternal Mortality Ratio further declining from 438 deaths per 100,000 births in 2011 to 336 in 2016. This translates to just over 3 maternal deaths for every 1,000 births. These results add to the much needed evidence base for guiding a wide range of policies and investments in human development.
Uganda’s performance on socioeconomic development between 2013 and 2017 will be confirmed by the results of the on-going 2016/17 Uganda National Household Survey (UNHS) whose results are expected within 2017. These national survey datasets coupled with recent administrative data from sectors will go a long way in reinforcing performance measurement and management under the auspices of the National Standard Indicator framework and the newly adopted Programme Based Budgeting approach.
Uganda’s development efforts in FY 2017/18 will face challenges emanating from the continued uncertainty surrounding the recovery in global economic growth, weak commodity prices and geopolitical events in some of the key trading partners. Such developments could continue to have negative effects on the country’s export earnings, FDI flows and remittances.
In FY 2016/17, Government completed the Charter for Fiscal Responsibility, which provides a strategy for operating a fiscal policy that is consistent with sustainable fiscal balances over the medium term and the maintenance of prudent and sustainable levels of public debt. It specifies measurable fiscal objectives for the medium term. The Charter will be key in propelling the country to attain the East Africa Monetary Union (EAMU) convergence criteria in 2021.
At the regional level, the EAC has expanded to a six Partner State bloc following the admission of South Sudan. The Republic of South Sudan deposited the instrument of ratification on the Accession to the Treaty for the Establishment of the East African Community to the Secretary General of the East African Community (EAC) at the EAC Headquarters in Arusha, Tanzania. EAC Partner States produced the second EAC Common Market Scorecard in 2016 (CMS 2016). The scorecard indicated that the EAC is yet to fully implement the Common Market Protocol.
On the global scene, the Trade Facilitation Agreement (TFA) which was opened for ratification by WTO member countries in November 2014 entered into force in February 2017. The total number of ratifications reached 112 countries. These countries met the legal threshold of two-thirds of the WTO membership required for the TFA that was concluded under the Bali Ministerial Conference to come into force. It is estimated that full implementation of the TFA could reduce trade costs by an average of 14.3 percent and boost global trade by up to $1 trillion per year, and the biggest gains are expected in the poorest countries such as Uganda as they usually have a higher level of trade costs.
Other major global undertakings included agreements around climate and the environment. Parties to the United Nations Framework Convention on Climate Change, in the 12th Session of the Conference of the Parties, held in Marrakesh, Morocco discussed and agreed that the climate is warming at an alarming and unprecedented rate. The Parties called upon all stakeholders to tackle the issue with urgency so as to benefit and support the 2030 Agenda for Sustainable Development, and the associated Sustainable Development Goals (SDGs). Parties underscored the need to support efforts towards enhancing their adaptive capacity, strengthening resilience and reducing vulnerability. The Parties were also called upon to strengthen and support efforts towards eradicating poverty, ensure food security and to take stringent action in dealing with climate change challenges in agriculture.
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tralac’s Daily News Selection
Featured tweets, @AdanMohamedCS:
Kenya is set to host the 2nd Commonwealth SME Trade Summit in October 2018. [It] will provide a forum to link Kenyan MSMEs to opportunities in the Regional and Global Value Chains.
tralac’s Weekly Newsletter is posted: UK elections and post-Brexit prospects for SACU (and more)
Today is East African Budget Day. Country previews: Rwanda, Uganda, Tanzania
Underway, in Purdue: the GTAP 2017 conference. Profiled African trade and development papers: (i) Lesotho: Trade policy options for a prosperous future (Maryla Maliszewska), (ii) Climate change, agricultural production and trade in Africa(Yodit Balcha, Jamie Macleod,) (iii) Impacts of services trade liberalization between the EU and ACP countries: a dynamic approach (Manitra A Rakotoarisoa), (iv) Policy support to African agriculture: new trends or business as usual (Jean Balié, Signe Nelgen)
World Investment Report 2017: Digital radically changes global investment patterns (UNCTAD)
The World Investment Report 2017 (pdf) includes a new list of the top 100 digital MNEs and their global footprint, and shows that some digital multinationals reached a massive scale in only a few years. Digital MNEs make about 70% of their sales abroad, with only 40% of their assets based outside home countries. This results in the creation of fewer jobs directly in host countries. However, investments from digital MNEs can increase competitiveness and contribute to digital development. The report also lists the top 100 global MNEs, and shows that between 2010 and 2015, the number of technology companies more than doubled. FDI into Africa: Foreign direct investment flows to Africa continued to decline in 2016, by 3% to $59bn. However, inflows to the continent remained unevenly distributed, with five countries (Angola, Egypt, Nigeria, Ghana and Ethiopia) accounting for 57% of the total. Regional variations: East Africa: up by 13%; West Africa: up by 12%; North Africa: up by 11%; Southern Africa: down by 18%; Central Africa: down by 15%.
Multinational enterprises from developed economies remained the largest investors in Africa, although investors from developing economies (such as China, India, and South Africa) are increasingly active. FDI outflows from Africa remained flat, at $18.2bn (up 1% from 2015). The reduced investments from South Africa, the DRC, Ghana and Nigeria, in that order, were more than offset by the rise of outflows from Angola, the region’s largest investor. FDI inflows to Africa are expected to increase in 2017, to about $65bn, in view of modest oil price rises and a potential upturn in non-oil FDI. Growing regional integration should foster Africa’s competitive global integration and encourage stronger FDI flows.
Wolfgang Schäuble: A better investment framework for Africa (Project Syndicate)
Our main job, however, is to bring private investors and African countries together. With the upcoming G20 Africa Partnership Conference in Berlin on 12-13 June, we will provide a platform for these African countries to reach out to investors in order to enhance the continent’s engagement with the private sector. CWA countries will present the key elements of their investment compacts in a roundtable with investors. They will also outline the key industries and infrastructure projects for which they are seeking private funds. After the Berlin meeting, the implementation phase of the CWA initiative will start. The country teams will further specify their compact measures and consider the milestones for their implementation. At this point, dialogue with investors will be particularly significant, because such conversations will help African countries to establish which measures and instruments are crucial for engagement with the private sector.
Helmut Reisen: The G20 ‘Compact with Africa’ is not for Africa’s poor: The Finance Framework (Shifting Wealth Blog)
The CwA makes some important ideological presumptions. First, it is solely driven by the Anglo-Saxon financing model with a focus on direct securities (equity and bond) markets rather than bank-based financial intermediation, which has underpinned (Continental) European and East Asian economic and social development. Second, the CwA Financing Framework is silent on the important role that the public and semi-public sectors may have played in early stages of development via mandatory public pension plans (East Asia) or not-for-profit financial cooperatives (such as agricultural credit unions). Third, it is silent on the “financing gap” (also known as the MacMillan gap), which has come to indicate that a sizeable proportion of economically significant SMEs cannot obtain financing from banks, capital markets or other suppliers of finance.
European Commission: The new European Consensus on Development, Q&A: The new European Consensus on development
AfDB to work with African Central Banks on IFFs, tax collection (AfDB)
The AfDB and the Governors of Central Banks in Africa have resolved to strengthen cooperation on a range of issues to curb illegal financial outflows, bolster measures to improve tax collection and exchange information to improve monitoring of domestic financial markets. The AfDB has also agreed to work with the Governors of the respective Central Banks on incentives to enable them deepen the financial markets using new technologies and innovations. The partnership is also expected to ease access to global markets that would enable more countries to issue long-term sovereign bonds. AfDB’s Senior Vice-President Charles Boamah told a special session of the Central Bank Governors at the 52nd AfDB Annual Meetings in India that measures to curb the illicit outflow of finance from Africa remain weak and should be addressed.
How important are spillovers from major emerging markets? (World Bank)
The seven largest emerging market economies (China, India, Brazil, Russia, Mexico, Indonesia, Turkey) constituted more than one-quarter of global output and more than half of global output growth during 2010-15. These emerging markets, called EM7, are also closely integrated with other countries, especially with other emerging and frontier markets. Given their size and integration, growth in EM7 could have significant cross-border spillovers. The authors provide empirical estimates of these spillovers using a Bayesian vector autoregression model. They report three main results.
ARSO Kigali conference: Experts seek harmonisation of construction standards in Africa (New Times)
Experts in the construction sector drawn from 25 countries across Africa met in Kigali Wednesday to develop and harmonise construction standards. The 5th technical harmonisation committee meeting on building and civil engineering was organised by Organisation for Standardisation (ARSO). Gustave Mukelenge Matayabo (DR Congo) said; “African construction market is flooded by foreign products. It would be great if a product is made in Africa and consumed by other African countries”
4th Paset Forum: Partnerships and innovation skills development in Africa (World Bank)
A knowledge exchange initiative by the Partnership for skills in Applied Sciences, Engineering and Technology, the Forum (5-7 April, Nairobi) convened governments from Sub-Saharan Africa, international policy makers, academia, and the private sector to promote dialogue and an exchange of ideas. The Forum focused on building partnerships between diverse stakeholders and promoting innovation in skills development in Africa. In particular, the objectives of the event were to: (i) mobilize support amongst African countries, private sector, new and traditional donors for PASET objectives and regional initiatives, (ii) share experience from Sub-Saharan African (SSA) countries and Partner countries in approaches/strategies/plans to developing technical-scientific capability specifically on technical-vocational education, and (iii) share innovations in improving the quality of Applied Sciences, Engineering and Technology (ASET) programs for the technical-vocational level.
Renewables 2017 Global Status Report (UNEP)
Additions in installed renewable power capacity set new records in 2016, with 161 gigawatts installed, increasing total global capacity by almost 9% over 2015, to nearly 2,017 gigawatts. Solar photovoltaic accounted for around 47% of the capacity added, followed by wind power at 34% and hydropower at 15.5%. Renewables are becoming the least costly option. Recent deals in Denmark, Egypt, India, Mexico, Peru and the United Arab Emirates saw renewable electricity being delivered at $0.05 per kilowatt-hour or less. This is well below equivalent costs for fossil fuel and nuclear generating capacity in each of these countries.
8th East African Petroleum Conference: EAC states urged to reduce dependence on imported fossil fuels
In his remarks, Dr Ali Kirunda Kivejinja, the Chairperson of the EAC Council of Ministers and Uganda’s Minister for East African Affairs, said that EAC Partner States had over the years invested huge resources – both human and financial – towards petroleum exploration, efforts which have begun to bear fruit throughout the region. EAC Secretary General Amb. Liberat Mfumukeko said that there had been increased investments in the region’s oil and gas sector in recent times with the recent discoveries. Alluding to the oil curse that has been the bane of many oil-producing countries on the African continent, the Secretary General said East Africa has an obligation to learn from other countries and put petroleum resources to good use.
Goran Hyden: President Magufuli and the Development State model (The Citizen)
There is a quiet realignment going on in the relations between development partners in Europe and Africa. It started with the 2005 Paris Declaration on Aid Effectiveness but it has now taken on a momentum of its own. Governments in Africa are increasingly charting their own way forward. Those in Europe realize that their own policy prescriptions aren’t necessarily the most workable in Africa. In short, donors and recipients agree that a new chapter in their relations is needed. This transition has its challenges, not the least in Tanzania, for many years a darling of the donor community and thus a case of especially high level of aid dependence. It has its own trials on the donor side too.
Today’s Quick Links Frances Okosi: Brexit example should not deter efforts to cement trade in Africa Angola: Cabinet adopts trade, mercantile service regulation Madagascar-Zambia bilateral relations: update Mozambique: Tete Infrastructure Forum update from Zitamar Southern Africa has an integration plan, but it’s short of sector specifics OECD: Multilateral convention to implement tax treaty related measures to prevent BEPS New OECD papers: (i) Regulation, institutions and aggregate investment: new evidence from OECD countries (pdf), (ii) Regulation, institutions and productivity: new macroeconomic evidence from OECD countries (pdf) |
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Digital radically changes global investment patterns, says World Investment Report 2017
In the first ranking of its kind, UNCTAD report shows that three countries are home to 75% of the top 100 digital multinationals.
What did not exist in 2007? Instagram, Uber and 30 of the top 100 digital multinationals.
According to the World Investment Report 2017: Investment and the Digital Economy, digital is growing and it is growing fast.
The new report of the United Nations Conference on Trade and Development (UNCTAD) investigates the effect that digital is having on global investment patterns and reveals the top 100 digital multinational companies and their impact.
Digital multinational enterprises (MNEs), such as Internet platforms and electronic commerce (e commerce) and digital content firms, are expanding at a dramatically faster rate than other multinationals.
The World Investment Report 2017 includes a new list of the top 100 digital MNEs and their global footprint, and shows that some digital multinationals reached a massive scale in only a few years.
Digital MNEs make about 70% of their sales abroad, with only 40% of their assets based outside home countries. This results in the creation of fewer jobs directly in host countries. However, investments from digital MNEs can increase competitiveness and contribute to digital development.
The report also lists the top 100 global MNEs, and shows that between 2010 and 2015, the number of technology companies more than doubled. The assets of such companies increased by 65%, and their revenues and employees increased by about 30%, against flat trends for other multinationals in the top 100.
A lack of regional diversity in the ownership of digital firms is creating a concentration in global investment patterns. Over 60 of the top 100 digital MNEs are from the United States of America, followed by the United Kingdom of Great Britain and Northern Ireland and Germany. This concentration is more pronounced among Internet platforms: 10 out of 11 major digital multinationals in the ranking are from the United States.
The presence of top digital MNEs in developing economies remains marginal, with only 4 companies in the top 100 headquartered in developing nations. Furthermore, of the top 100 digital MNEs, only 13% of affiliates are based in developing and transition economies, compared to about 30% for MNEs overall.
“The digital economy has important implications for investment, and investment is crucial for digital development,” said Mukhisa Kituyi, Secretary-General of UNCTAD. “Developing countries cannot be left behind; we need to create enabling policies that close the digital divide in global investment,” he added.
Investment regulations and policies for the promotion of investment must also consider the new cross-border operating models of multinationals. Many industries are being impacted by digitalization; of the top 10 traditional industries most affected, 5 coincide with the top 10 industries in which countries maintain investment restrictions (see figure). Digital MNEs are expanding into other highly regulated sectors, and archaic regulations could become obsolete or an unintended drag on digital adoption.
UNCTAD surveyed more than 100 countries on their digital development strategies. The findings, which are outlined in the World Investment Report 2017, highlight that many strategies fail to adequately address investment needs. Fewer than 25% contain details on investment requirements for infrastructure, and fewer than 5% on investment needs beyond infrastructure, including for the development of digital industries. Furthermore, investment promotion agencies are rarely involved in the formulation of digital development strategies.
Infrastructure investment requirements for achieving adequate digital connectivity for most developing countries could be less daunting than often supposed. UNCTAD estimates put the cost at less than $100 billion.
In the World Investment Report 2017, UNCTAD proposes investment policies that strengthen digital development strategies. This means creating and maintaining a conducive regulatory framework for digital firms, as well as active support measures, which may include establishing technology or innovation hubs; building or improving e-government services; and supporting venture capital funding and other innovative financing approaches.
Foreign Direct Investment to Africa fell by a moderate three percent In 2016
Foreign direct investment (FDI) flows to Africa continued to decline in 2016, by three per cent to $59 billion, according to UNCTAD’s World Investment Report 2017. However, inflows to the continent remained unevenly distributed, with five countries (Angola, Egypt, Nigeria, Ghana and Ethiopia) accounting for 57 per cent of the total.
Robust FDI to Egypt continued to boost inflows to North Africa, which rose by 11 per cent, to $14.5 billion. The flows to Egypt, up 17 per cent to $8.1 billion, were driven mainly by the discovery of gas reserves by foreign firms.
As subdued commodity prices diminished investor interest in Sub-Saharan Africa, its inflows declined by 7 per cent, to $45 billion. FDI flows to Central Africa decreased by 15 per cent in 2016, to $5.1 billion. The Democratic Republic of the Congo saw a decline of 28 per cent to $1.2 billion, as the country attracted investment only in its mineral sector. Nevertheless, flows to some countries rose. The Congo went up by eight per cent to $2 billion, mostly owing to continued investments by Chinese companies.
East Africa received $7.1 billion in FDI in 2016, up 13 per cent from 2015. Flows to Ethiopia rose by 46 per cent to $3.2 billion, propelled by investments in infrastructure and manufacturing.
FDI flows to West Africa grew by 12 per cent to $11.4 billion in 2016, supported by recovering investment in Nigeria, although flows remained well below record levels. FDI inflows to Ghana increased by nine per cent to $3.5 billion, driven by both hydrocarbons and cocoa processing projects.
In Southern Africa, FDI inflows fell by 18 per cent to $21.2 billion, as flows declined in eight of the ten countries in the subregion. In Angola, FDI flows declined by 11 per cent to $14.4 billion as reinvested earnings shrank. South Africa, the economic powerhouse of the continent, continued to underperform, with FDI at a paltry $2.3 billion, up 31 per cent from 2015’s record low, but still well below its past average.
Multinational enterprises (MNEs) from developed economies remained the largest investors in Africa, although investors from developing economies (such as China, India, and South Africa) are increasingly active.
FDI outflows from Africa remained flat, at $18.2 billion (up 1 per cent from 2015). The reduced investments from South Africa, the Democratic Republic of the Congo, Ghana and Nigeria, in that order, were more than offset by the rise of outflows from Angola, the region’s largest investor.
FDI inflows to Africa are expected to increase in 2017, to about $65 billion, in view of modest oil price rises and a potential upturn in non-oil FDI. Growing regional integration should foster Africa’s competitive global integration and encourage stronger FDI flows.
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Record ‘green’ energy capacity added in 2016 as cost for renewables plunges – UN-backed report
The world is now adding more green energy capacity each year than it adds in new capacity from all fossil fuels combined, a United Nations-backed report revealed on Wednesday, showing that the “renewables train has already left the station” and those who ignore this will be left behind.
Last year, renewable power installments increased by nine per cent over 2015 to nearly 2,017 gigawatts. Solar photovoltaic accounted for around 47 per cent of the total additions, followed by wind power at 34 per cent and hydropower at 15.5 per cent, according to the report.
“We all want a healthy environment and healthy people, and clean energy is central to the solution,” said Erik Solheim, head of the UN Environment Programme (UNEP), responding to the REN21 Global Status Report 2017 launch.
As the shift to clean power continues, renewables are becoming the least costly option as recent examples in Denmark, Egypt, India, Mexico, Peru and the United Arab Emirates show that energy has been delivered well below the equivalent costs for fossil fuel and nuclear energy in each of these countries.
“The world is adding more renewable power capacity each year than it adds in new capacity from all fossil fuels combined,” said Arthouros Zervos, Chair of the Renewable Energy Policy Network for the 21st Century (REN21).
The UNEP-hosted multi-stakeholder network reported that for the fifth consecutive year, investment in new renewables (including all hydropower) was roughly double the investment in fossil fuel generating capacity, reaching about $250 billion dollars.
“As the share of renewables grows we will need investment in infrastructure as well as a comprehensive set of tools,” Mr. Zervos pointed out. To enable further growth he calls for integrated and interconnected transmission and distribution networks, measures to balance supply and demand, sector coupling (for example the integration of power and transport networks) as well as the deployment of a wide range of enabling technologies.
A slowdown in investment in renewables
A world that does not run on fossil fuels is no longer a far distant dream with the recorded exponential growth in solar and wind – although investments in renewables are diametrically different.
The UN agency warned that the energy transition is not happening fast enough to achieve the goals of the Paris Agreement on climate change.
When it comes to the bottlenecks to ensure modern energy for all, projections show that global energy access progresses too slowly. “A global transition to renewable energy technologies like solar and wind are key ingredients of delivering on the Paris Agreement, keeping the global temperature rise below 2 degrees Celsius and avoiding catastrophic climate change,” said Mr. Sondheim, pointing out that “this new report shows where we are on this journey, and the data is clear: we need to move faster.”
The global cost for the newly added renewable energy capacity is set at about $242 billion. Compared to the previous year, it is actually a 23 per cent reduction in investment, with the biggest falls among developing and emerging market countries.
At the same time, nuclear and fossil fuel subsidies continue to dramatically exceed those for renewable technologies. These subsidies continue to impede progress, said UNEP.
By the end of 2016, more than 50 countries had committed to phasing out fossil fuel subsidies, and some reforms have occurred, but not enough. In 2014 the ratio of fossil fuel subsidies to renewable energy subsidies was 4:1. For every dollar spent on renewables, governments spent four dollars on perpetuating the dependence on fossil fuels.
“The world is in a race against time,” says Christine Lins, Executive Secretary of REN21. “The single most important thing we could do to reduce CO2 emissions quickly and cost-effectively, is phase-out coal and speed up investments in energy efficiency and renewables. [The] withdrawal of the United States from the Paris Agreement is unfortunate. But the renewables train has already left the station and those who ignore renewables’ central role in climate mitigation risk being left behind.”
Energy is crucial for achieving almost all of the Sustainable Development Goals (SDGs), from its role in the eradication of poverty through advancements in health, education, water supply and industrialization, to combating climate change.