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10 COMESA member states in a study to address customs’ clearance bottlenecks
A report on a study conducted in 10 COMESA member states to establish the time taken for Customs Clearance during import and export of goods and the causes of delays has been presented to the country delegates for adoption.
The Time Release Study (TRS) was carried out in the main ports of entry and exits of Djibouti, the Democratic Republic of the Congo, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Sudan, Uganda and Zambia. The findings and recommendations of the study were presented to the country delegates during a two-day regional workshop in Lusaka, on 24th and 25th May 2017.
The TRS is a tool for measuring the actual performance of the customs and other border agencies in facilitating the movement of goods and services and the means of transport across borders. The study measures aspects of effectiveness of operational procedures that are carried out by customs and other regulatory border agencies concerned with processing of imports, exports and goods in transit.
The objective of the workshop was to enable member states understand the details of Customs Clearance time and adopt trade facilitation measures that will reduce the cost of trade and deepen regional integration.
Speaking at the workshop, the African Development Bank, Zambia Country representative Mr. Damoni Kitabire said many challenges face cross border trade in the region:
“Unless Africa addresses the challenges facing cross border trade, the potential from international trade will remain elusive,” he cautioned.
He urged the COMESA member states to implement trade facilitation programmes and invest in hard and soft infrastructure if the region is to gain from regional trade.
“We need to work together in implementing these reforms in the regulatory environment so as to bring down the cost and help improve the competitiveness of member countries,” he said. “Our hope is that once the final report is available, COMESA countries and the Bank will work together on implementing follow up activities to improve trade facilitation.”
He said the AfDB has allocated 60 percent of its loans and grants to hard infrastructure projects, but more needs to be done in order to bring down the cost of doing business further.
Some of these projects include the construction of transport and border infrastructure, establishment of One Stop Border Posts, support to the EAC-COMESA-SADC tripartite capacity building programme and the implementation of governance reforms in regional member countries.
Secretary-General Sindiso Ngwenya said COMESA has adopted several trade facilitation instruments aimed at improving trade and reducing the cost of doing business.
They include; the Harmonized Road Transit Charges, COMESA Carrier’s License, Harmonized Axle Loading and Maximum Vehicle Dimensions, COMESA Yellow Card Scheme, COMESA Customs Transit Bond Guarantee Scheme, Advance Cargo Information System and One Stop Border Posts.
His speech was presented by the Customs Expert Mr. Zerezghi Kidane.
The recommendations of the workshop will be incorporated in the 2018-2020 COMESA Customs Work Program for the Trade and Customs sub-Committee.
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Thirteen African countries seal agriculture industrialization deal with India
Thirteen (13) African countries have signed a series of partnership agreements with India to enhance the supply of agricultural machinery, credit advancement to farmers and scientific cooperation.
Among other deals, the farm machinery suppliers from the Indian state of Gujarat signed agreements with their counterparts in Ghana, Zambia, Mozambique and Togo for the supply of farm machinery, training on the use of the machinery in mechanized agriculture and cooperation in the use of the machinery in the mining.
These partnerships were announced as African Ministers of Agriculture, private sector associations and industry representatives from India and Africa, converged for crucial sessions of deal-making at the 52nd session of the African Development Bank (AfDB) Annual Meetings in India, on May 24, 2017 to rapidly advance cooperation.
“We feel the areas identified for cooperation could raise agricultural productivity in Africa because these include our support to the Pan African University Institute of Life and Earth Sciences in Ibadan, Nigeria. We want to ensure that capacity building is given full priority,” said Gujarat State Minister of Agriculture Chimanbhai Dharamshibai Shaparia.
“This opportunity is very rare. I am here to ensure that India-Africa cooperation reaches new heights. Africa can feed the world. The Feeding Africa initiative has pointed Africa’s agriculture towards a specific direction. It is all about feeding the world,” he stated.
The Indian Government is currently preparing an aide memoire – an informal diplomatic communication to all African countries – indicating proposed negotiating texts on identified fields of agriculture cooperation, he said at a session on “Africa-India Cooperation: Partnerships for Green Revolution”
India has made a proposal to provide vaccines to enable West African countries to deal with foot and mouth disease – an illness that affects livestock production. The Indian Government also spoke of its eagerness to advance cooperation through rapid expansion of agricultural trade between the two regions.
To ensure a trade balance, the Indian Government is also ready to accept imports of key cereals and grains from African producers. One key import from Africa is expected to be pigeon peas, which the New Delhi-based Indian Government hopes to assist farmers in cultivating.
The Indian Government believes both sides could exchange key commodities through trade – with India availing markets for millet produced from Africa, while India would look for opportunities to sell its wheat to the continent.
Indian officials said there was a huge potential of doing business with African States, considering that most countries are vulnerable to the risk of climate change. The availability of the large Indian market for crops produced from climate adaptation farming would therefore be crucial to saving lives.
The proposals to invest in Africa’s climate-smart future in farming, providing high quality but low-cost farm machinery and opening avenues for cooperation between Indian and African industry group representatives, stood out as one of the most practical highlights of the 52nd session of the AfDB Annual meeting in the outskirts of the Gujarat capital, Ahmedabad.
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Zimbabwe govt loses out on mining tax
Zimbabwe needs to design a proper mining taxation regime to establish an appropriate royalty system that ensures the economy realises optimal revenues during a commodity boom and bust period, a report has said.
According to an African Forum and Network on Debt and Development (Afrodad) report entitled The Impact of Fluctuating Commodity Prices on Government Revenue in the Sadc region – The Case of Platinum in Zimbabwe, the country’s tax system was susceptible to transfer pricing.
“Currently, Zimbabwe uses ad valorem based tax system, which is not optimal since it is based on export values, which are not only lower than production values, but also subject to transfer pricing by the mining companies and their sister companies in South Africa,” the report reads.
“This indicates that a hybrid approach royalty system, incorporating both the unit-based method and value-based method would achieve better results in the platinum sector.”
Afrodad said minerals beneficiation in Zimbabwe was mainly being pushed through the mining sector policies rather than through the industrial policy, as the case in Japan and China.
The report said that the approach was inefficient and ineffective, as the firms have mining expertise, but do not have the requisite technical capacity to beneficiate minerals.
“Therefore, the policy might need to identify beneficiation as a secondary industry, which needs not necessarily be undertaken by the mining firms, but through investment and other policy incentives to attract the development of a beneficiation industry, where any player can participate,” the report said.
Afrodad said Zimbabwe needs to intensify the finalisation of the platinum refining policy, otherwise it will not realise the full benefits from its platinum resources in raw form.
The organisation said the government needs to consider possibilities of exploiting the industrial policy in pushing for the beneficiation of minerals, through encouraging the establishment of a secondary industry that is competent to beneficiate minerals.
This comes as Zimbabwe signed a deal with Australia’s Kelltech Ltd for the construction of a platinum refinery at a cost of $200 million.
“Zimbabwe needs to undertake mining sector regime reforms by developing a country mining vision (CMV) that domesticates the Africa Mining Vision (AMV),” Afrodad continued.
“Specific strategies, which Zimbabwe needs to adopt as a way of ensuring that it realises maximum benefits from mineral resources, include those that are captured by the Action Plan to Implement the AMV.”
Afrodad urged the country to develop systems to evaluate components of tax regimes for leakages, losses and tax avoidance and evasion (for example transfer pricing), and reviewing terms of double taxation agreements and bilateral investment treaties (BITs) with host countries of mining companies.
“In Zimbabwe, the impact of platinum price fluctuations on government tax revenues tends to be muted because the contribution of platinum to total tax revenue is small – less than 3,5% of total tax revenue,” the organisation said.
“In addition, platinum mining companies have adjusted their procurement policies to effectively exploit VAT refunds on local procurement, thus, effectively reducing tax revenue due to the government.
“The other reason for the low contribution to total government revenue is that platinum produced in Zimbabwe is not fully processed, hence, fetches less on the market.”
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tralac’s Daily News Selection
Think 20 Summit: Global Solutions (29-30 May, Berlin). Input by PwC’s Bob Moritz: The forces of globalisation, technology, and financial growth need to be reset for the future
Africa and the SDGs - forthcoming UNECA workshops: Implementing Africa’s development agenda: experts to review baseline report (30 May — 1 June, Victoria, Seychelles), Mainstreaming SDGs in national development plans (28-30 June, Abuja)
On Sunday, 4 June: 51th Ordinary Summit of the ECOWAS Authority of Heads of State and Government
Action Plan for SADC Industrialization Strategy and Roadmap (SADC)
The fundamental issue is not whether or not SADC countries are integrated into global value chains; rather, it is where the SADC countries are integrated in GVC’s. The key objective of the Action Plan is to facilitate the movement of SADC participation up the value chains where the highest value is derived. This will be accomplished by working with and supporting industry players and investors to diversify into higher value-addition activities. This needs to be supported by the application of well-harmonised industrial policies at both a member state level that is supported by a strong regional integration agenda. In light of the above, the Action Plan proposes an approach that calls for very decisive actions by SADC Member States to promote investment, trade, and industrial regionalisation. This requires national policies that, as a collective, are coherent and support the growth of productive capacities of the regional economy and achieve regional industrial integration for a more effective participation at higher levels within RVC’s and GVC’s. This will depend on a functional free trade area which facilitates export diversification, enhanced competitiveness, inclusive growth (with greater participation of women, youth and persons with disabilities), movements of goods and services and macroeconomic convergence within the regional integration arrangements and promote economies of scale.
Experience suggests that the best development outcome for SADC countries will be achieved by a combination of increased value chain participation with simultaneous upgrading. Participation in value chains may start at regional level and graduate to the global level. Within this context, the key challenge for corporate and government policy makers is to identify and prioritize entry points into value chains, as well as tasks that can be undertaken competitively and how they might be shared within value chains in the region. Deeper regional integration is an essential pre-requisite for the development of regional value chains and integration in global value chains. Close public-private collaboration is pivotal. The industry ‘discovery’ process in value chain policy making is heavily reliant on close collaboration between the two main actors to remove the infrastructural, institutional and financial constraints to value chain development, and to encourage investment by private sector players.
Central to attracting more targeted investment is the access which a regional market will provide, supporting – as it must – a far greater advantage in its economies of scale. SADC Member States have committed themselves to investment-led trade and regional economic and industrial integration. This also requires addressing the many physical and soft barriers to investment-led trade. From an implementation perspective, the emphasis therefore needs to shift to some of the microeconomic elements underpinning future growth, with a particular emphasis on moving up regional and global value chains supported by regionally coordinated procurement; targeted domestic and foreign investment; technology transfer; skills development; and the development of a friendly investment and regulatory environment.
East African Manufacturing Business Summit: 12 resolutions (EAC)
(iv) EAC should develop supply capacity to be able to participate in supply of materials for infrastructural projects and other mega projects among others taking note that this is a long-term course. EAC should develop a regional local content policy and strategy for better coordination of local content initiatives. To guide this development, the EAC is to undertake baseline studies on local content in all lead economic sectors to guide review of policies, legal and regulatory frameworks for a regional local content policy development. (v) Noting that the current EAC CET structure does not work effectively for manufacturing in the region, EAC in partnership with EABC; to detail in a comprehensive, evidence-based, and consolidated way priority for the CET review proposing four to five bands as appropriate. (vii) Regional national policies/regulations are pursued, as opposed to having single/common policies segmenting and fragmenting the market which limits the scope for economies of scale and escalates the cost of doing business. The region to develop and adopt common sectoral policy and visions to ensure stability and create uniform business environment for manufacturing-.
Promoting West African Trade Integration: ECOWAS partners private sector on regional customs code
Opening a three-day consultation workshop with the private sector on the Draft ECOWAS Customs Code, the ECOWAS Commissioner for Trade, Custom and Free Movement, Mr Laouali Chaibou, noted that it is very important for the sector to be heard as the region seeks a harmonised legal infrastructure which addresses all the issues affecting customs legislation. The President of Federation of West Africa Chambers of Commerce and Industry, Mr Germain Essouhouna Meba, stressed that the Workshop on common Custom code is coming at the right time for according to him, without free movement of people and goods, integration is jeopardised.
ECOWAS Free Movement and Migration Project: launch update (GoG)
The ECOWAS Free Movement and Migration Project is a one-year project which will target the Greater Accra, Western, Ashanti and Northern Regions to promote free movement and migrant rights in West Africa. The project’s activities include the organization of training workshops on investigative journalism on free movement and migration, establishment of a network of journalists for migrant rights and the implementation of a public radio campaign on free movement.
Intelligence chiefs rally behind Africa’s visa-free movement (New Times)
The heads of intelligence and security services met in Kigali over the weekend to mull interventions toward the ambitions of having unrestricted movement of Africans across the continent. Meeting under the umbrella body, Committee of Intelligence and Security Services of Africa (CISSA), they underscored that involvement of intelligence and security services is largely due to concerns and fears of security challenges once the move is operationalised.
EAC tables $110m budget to EALA
The 2017/2018 Budget themed ‘Áccelerating Implementation of the EAC Integration Agenda’is a step-up from $101,374,589 presented to the House in the previous financial yYear. The Budget speech prioritizes on the consolidation of the Single Customs Territory to cover all imports and intra-EAC traded goods, infrastructure development in the region and further liberalization of free movement of skilled labour across the Partner States. Other key areas Hon Maganda said, include enhancement of regional industrial development through investment in key priority sectors and improvement of agricultural productivity with an aim to enhancing food security. Also of essence is the promotion of regional peace, security and good governance, on the one side and institutional transformation to spearhead the Community’s agenda on the other. The Budget is allocated to the Organs and Institutions of the EAC as follows:
ECOWAS Administration and Finance Committee: update
ECOWAS Commission President, Marcel de Souza, alluded to the issues relatin,g to the Commission organogram, which had been a major discussion point during last December 2016’s AFC meeting in Abuja, Nigeria, and ECOWAS’ precarious cash flow situation, which requires that measures are taken to ensure payment of the Community Levy. “The Community Levy is the backbone of financing ECOWAS programmes and activities”, Marcel de Souza emphasised. Obstacles to the free movement of persons, goods, services and capital, promotion of the right of entry, residence and establishment of Community citizens, corruption, youth unemployment, and low trade volume in the region, also constitute key challenges that need to be addressed.
North-South Rail Corridor study: an example of what Africans can achieve when working together (NBF)
The North-South Rail Corridor project showcases the cooperative efforts of five rail operators in SADC, working together to increase intra-African trade in the region. The North-South Rail Corridor study being developed will be used as a blueprint to grow the freight and passenger volumes transported on the corridor and to reduce the cost of rail transportation through better pricing and service strategies. A memorandum of understating has been signed between the rail operators on the North-South Rail Corridor which includes Zambia Railways Limited, Grindrod/Beitbridge - Bulawayo Railways, Société Nationale des Chemins de fer du Congo, National Railways of Zimbabwe, Swaziland Railway, Transnet SOC and Botswana Railways. [EALA: Report of the Committee on CTI on the Oversight of Railway Infrastructure Development]
South Africa: Cabinet approves the Road Freight Strategy, Draft Comprehensive Maritime Transport Policy 2017 (pdf)
Uganda: Trade sector gets meagre funds in budget allocations (Daily Monitor)
The 2017/18 National Budget will see the ministry of Trade, Industry and Cooperative (MTIC) docket relegated to the periphery yet again. This is evidenced by the shoestring budget allocated to the sector the government expects to play a critical role in delivering the much-talked about middle income status. In an interview last week, technocrats at the ministry said if the sector is not properly funded, it will be difficult for the country’s transformational agenda to be implemented to the fullest. Furthermore, the 2017/18 ministry’s budget has been slashed by Shs2.6 billion, further distressing the implementers of the sector programme.
Robert Kappel: New horizons for Germany’s Africa policy (GIGA)
Africa is becoming increasingly differentiated, and developing a joint strategy with individual countries or groups of countries that reflects the varying speeds at which changes are occurring would be a decisive step. The plan does not cover sufficient ground on this issue. In order to develop a coherent Africa concept for the German federal government, the participation of the most important ministries needs to be improved, and the chancellor needs to be in charge of the overall management. The paper (pdf) concludes that Germanyʹs Africa policy needs to be redesigned. The Marshall Plan has generated a shift, but it does not provide sufficient guidance to new horizons and away from the well‐beaten track of traditional development cooperation. The departure to a new age that is defined by increased cooperation with democratic African countries which are capable of reform, and by a courageous and consistent stance in relation to non‐democratic countries, has not yet taken place.
G20 and Africa: Sectoral policies and delivering on African citizens’ demands
Based on evidence from Afrobarometer public-attitude surveys across 36 African countries, this policy brief shows that (a) Africans prioritize paid employment, social services, infrastructure, and food security; (b) poverty reduction is associated with access to reliable development infrastructure; and (c) beyond specific sector investments, sustainable development requires public trust in institutions built on good governance and political accountability. [The analysts: E. Gyimah-Boadi, Michael Bratton, Julia Leininger], [G20 Summit in Hamburg: IASS and partners publish policy recommendations]
Today’s Quick Links Kenya: PS Njoroge rallies African countries to harmonise energy standards President Kenyatta: input to G7 Africa Outreach meeting Paul Collier: How to make Lagos a 21st century city ODI Briefing Paper: Aid, exports and employment in the UK India Development Update: unlocking women’s potential India not keen to put e-commerce under FTA with Russia-led group Henry Sherrell: The India-Australia FTA’s impossible road ahead |
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Competition Commission Investigation into mobile data charges in South Africa
Following recent public complaints and a social media campaign on twitter (#DataMustFall), the South African Government decided to investigate the concerns through the Competition Commission.[1]
On 23rd May 2017, Telecommunications Minister Siyabonga Cwele, in his budget presentation, signalled his department’s intention to ask the Competition Commission to conduct an investigation in cellphone and telecommunications industry.[2]
The telecoms minister last year issued a policy directive to the Independent Communications Authority of South Africa (ICASA) to prioritise an inquiry and regulations to ensure “effective competition in broadband markets”.
Cwele said the cost of data was not about to drop anytime soon due to a lack of competition in the telecommunications market‚ which is dominated by four big operators – Vodacom‚ MTN‚ CELL C and Telkom.
Economic Development Minister Ebrahim Patel made a further announcement in his budget speech, that the Competition Commission will conduct the investigation[3] complementary to the existing inquiry being conducted by ICASA.
“To promote the new data-driven economy and address high data costs, and following discussion with Minister Cwele, I will request the Competition Commission to conduct a market inquiry into this sector and to work with other regulators to establish the facts, identify measures to reduce data costs and make recommendations to government,” he said.
However, these inquiries take a long time and the ICASA inquiry is expected to be completed in 2-3 years.[4]
To view a comparison of 1GB data costs in African countries, please click here.
[1] http://www.enca.com/south-africa/datamustfall-demands-cellular-providers-to-lower-their-prices
[2] http://www.timeslive.co.za/local/2017/05/24/Competition-Commission-probe-on-high-cost-of-data-on-the-cards
[3] http://www.enca.com/money/competition-commission-to-probe-high-data-costs; https://www.businesslive.co.za/bd/national/2017-05-26-competition-watchdog-to-probe-sas-high-data-costs/
[4] https://www.businesslive.co.za/bd/national/2017-05-29-low-priority-for-high-data-price-probe/
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North-South Rail Corridor study: An example of what Africans can achieve when working together
Movement of people and cargo by rail in the SADC region has been on a decline over the last decade due to a significant under investment in infrastructure and rolling stock.
Most corridors in the region move less than 10% of surface transport freight volumes on rail with the majority being moved by road. This imbalance between road and rail has resulted in significant road rehabilitation costs, environmental impact including pollution and major externalities such as road accident deaths.
A single coordinated corridor development plan was thus envisaged as a solution to address the modal imbalance between road and rail on the North-South Rail Corridor which is one of the major transport spines that moves people and freight in the SADC region.
“In commemoration of Africa Day and the in the spirit of African cooperation, the NBF is pleased to share the North-South Rail Corridor story of collaboration to increase the movement of people and goods in the SADC region. Africa’s growth, development and success hinges on Africans connecting with each other and the North-South Rail Corridor is an excellent example of Africa’s integration and what can be achieved through cooperation,” said Ms Lynette Chen, CEO of the NEPAD Business Foundation.
The North-South Rail Corridor project showcases the cooperative efforts of five rail operators in SADC, working together to increase intra-African trade in the region.
The North-South Rail Corridor consists of a rail network that stretches over 3000 km, from Durban in South Africa through Zimbabwe and Botswana and links to the Democratic Republic of Congo passing through Zambia. It is SADC’s main international rail gateway for transporting inbound and outbound cargo. The North-South Rail Corridor study being developed will be used as a blueprint to grow the freight and passenger volumes transported on the corridor and to reduce the cost of rail transportation through better pricing and service strategies.
A memorandum of understating has been signed between the rail operators on the North-South Rail Corridor which includes Zambia Railways Limited (ZRL); Grindrod/Beitbridge-Bulawayo Railways (BBR); Société Nationale des Chemins de fer du Congo (SNCC); National Railways of Zimbabwe (NRZ); Swaziland Railway (SR); Transnet SOC and Botswana Railways (BR).
The North-South Rail Corridor infrastructure and logistics study will focus on the rehabilitation and upgrade of the rail corridor and is being financed by the SADC Infrastructure Project Preparation Fund, managed by the Development Bank of Southern Africa (DBSA). Most rail operators in the SADC region have been struggling to meet the government’s expectations for efficient, reliable and competitive railway services. This has been due to limited working capital as the main cause for poor reliability of rolling stock and dilapidated rail infrastructure.
The NBF is acting as project manager, facilitating the engagement between the rail operators and appointed technical consultants who are expected to complete the study within the next nine months.
Through the support of the SADC Secretariat, the NBF has also secured regional and political support for this North-South Rail corridor project from the SADC Ministers of Transport and regional bodies such as Southern Africa Rail Association (SARA).
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Action Plan for SADC Industrialization Strategy and Roadmap
Executive summary
At its Extra-Ordinary Summit, held on 29 April 2015, in Harare, Zimbabwe, the SADC Leaders adopted the pdf SADC Industrialization Strategy and Roadmap 2015-2063 (2.34 MB) . The Summit also directed the SADC Secretariat to develop a detailed and costed Action Plan for the implementation of the Strategy, and design and develop an appropriate institutional framework to implement the Strategy. Pursuant to these decisions it was resolved that the Costed Action Plan should cover Phase I and II of the Strategy, with specific focus on the first fifteen years (2015-2030). It is within this context that the Costed Action Plan is hereafter elaborated.
The Industrialization Strategy was developed as an inclusive long-term modernization and economic transformation scheme that enables substantive and sustained raising of living standards, intensifying structural change and engendering a rapid catch up of the SADC countries with industrializing and developed countries. It is anchored on three interdependent and mutually supportive strategic pillars – industrialization as champion of economic transformation; enhancing competitiveness; and deeper regional integration. The Strategy sets out three potential growth paths – agro-processing; mineral beneficiation and downstream processing and industry- and service-driven value chains. The paths are mutually supporting and inclusive, encompassing the combination of downstream value addition and backward integration of the upstream provision of inputs, intermediate items and capital goods.
The central challenge facing Africa is how to transition from the commodity-dependent growth path in which African countries find themselves to value-adding, knowledge-intensive and industrialised economies. The goal is to occupy a higher place in the global division of labour. Africa at present is predominantly viewed as a producer and exporter of primary commodities and an importer of value-added manufactured goods.
There are deep structural fault-lines in the economies of the SADC countries that remain entrenched, characterised by resource-dependence, low value-addition and low levels of exports of knowledge-intensive products. This is reflected in the low levels of private sector investment into the manufacturing sector of the economy. The concern of policymakers is that if the declining share of manufacturing (11.3% in 2014 across SADC, down from 15.9% in 2004), is not reversed, the “ladder” to address the deep structural problems in these economies will be effectively removed.
A key focus of the SADC strategy is to develop targeted and selected industrial policies that create conditions that will enable higher rates of investment by the public and private sectors into economic infrastructure, which in turn will enable crucial sectors of the economy, particularly value-adding manufacturing, to grow. The policy toolkit should include a review of existing trade, investment and industrial policies, with a view to these being deepened and broadened. This will, amongst others, entail the more strategic use of tariffs, incentives and industrial financing, targeted foreign direct investment, stronger customs controls, compulsory specifications and standards, public procurement policies and other measures.
Within this context, the Strategy sets out ambitious, but highly feasible growth targets (of 6 percent annual growth in per capita income) and significant transformation of the industrial sector and allied services – through doubling of the share of manufacturing value added (MVA) in GDP to 30 percent by 2030 and to 40 percent by 2050, raising the share of medium-and-high technology from its current level of less than 15 percent to 30 percent by 2030 and 50 percent by 2050. To achieve these targets, the share of manufactured exports in total exports should rise from the present 20 percent to at least 50 percent by 2030, and the share of industrial employment in total employment increase to 40 percent. This should be underpinned by a strong industrial diversification drive, the development of viable and competitive regional value chains capable of interacting with global value chains, as well as supporting measures to enhance capital and labour productivity and efficiency.
Emphasis on value chains promotion arises from the desirability of moving development perspectives from a national to a regional focus. Secondly, the greater share of global exchange is currently carried out through value chain participation, reflecting the profound structural changes in modern manufacturing systems and their complex product and geographical interdependencies.
The fundamental issue is not whether or not SADC countries are integrated into global value chains (GVCs); rather, it is where the SADC countries are integrated in GVCs. The key objective of the Action Plan is to facilitate the movement of SADC participation up the value chains where the highest value is derived. This will be accomplished by working with and supporting industry players and investors to diversify into higher value-addition activities. This needs to be supported by the application of well-harmonised industrial policies at both a member state level that is supported by a strong regional integration agenda.
Experience suggests that the best development outcome for SADC countries will be achieved by a combination of increased value chain participation with simultaneous upgrading. Participation in value chains may start at regional level and graduate to the global level. Within this context, the key challenge for corporate and government policy makers is to identify and prioritize entry points into value chains, as well as tasks that can be undertaken competitively and how they might be shared within value chains in the region.
Deeper regional integration is an essential pre-requisite for the development of regional value chains and integration in global value chains. Close public-private collaboration is pivotal. The industry 'discovery' process in value chain policymaking is heavily reliant on close collaboration between the two main actors to remove the infrastructural, institutional and financial constraints to value chain development, and to encourage investment by private sector players.
Central to attracting more targeted investment is the access which a regional market will provide, supporting – as it must – a far greater advantage in its economies of scale. SADC Member States have committed themselves to investment-led trade and regional economic and industrial integration. This also requires addressing the many physical and soft barriers to investment-led trade. From an implementation perspective, the emphasis therefore needs to shift to some of the microeconomic elements underpinning future growth, with a particular emphasis on moving up regional and global value chains supported by regionally coordinated procurement; targeted domestic and foreign investment; technology transfer; skills development; and the development of a friendly investment and regulatory environment.
Specific investment and industrial opportunities emerge from integrating value chains and ensuring specialisation across the region. Judicious and strategic development of domestic and regional value chains will also allow supply companies to increasingly explore higher value-added export opportunities and enter into global value chains. The investment opportunities that arise from the regional value chain work will need to be underpinned by a significantly ramped-up focus on industrial finance and incentives, particularly with the strengthening of the role of national and multilateral development finance institutions (DFIs) to leverage and secure investment in the productive sectors of national economies, and in catalytic projects that facilitate regional trade and industrial integration.
A significant focus of the past decade has been on expediting investment into major infrastructure projects. The focus moving forward should also emphasise ensuring that private sector investment is leveraged in key economic infrastructure (with strong conditional reciprocal conditions) and unlock major economic activity in the productive sectors of the regional economy. State Owned Enterprises (SOEs) also have a major role to play in supporting infrastructure development and enabling economic infrastructure (energy, rail, road and port, and telecommunications) and crowding in investment. To achieve this, strong support for localisation and support for regional supplier development is essential.
To encourage the entry of domestic players into new industrial activities, particularly into higher value-added activities, will require the application of smart and responsive trade measures to create a dynamic regional market. This for example, would require the rapid response to the dumping of sub-standard products in the region or the flooding of markets of second hand clothing and vehicles. Without protection against these forms of market penetrating strategies it would be exceptionally challenging for emerging producers to be able to compete in what is an unequal playing field.
There should also be a deliberate policy to promote national and regional clusters as vehicles for developing the SMEs sector, enhance competitiveness and innovation and facilitate interface and complementarily between firms and value chains. A critical mass of competitive enterprises with high aptitude and readiness to operate regionally and globally is a precondition for successful interface between clusters, SMEs and regional and global value chains. To strengthen capabilities and interfaces, the Action Plan proposes two linkage programmes: (i) action programme to strengthen SMEs, clusters and regional value chains; and (ii) a business linkage programme.
Capabilities and capacities development require massive investments especially in education, innovation, institution building and physical assets to create strong knowledge economies in SADC countries, and raise productivity and competitiveness. The Action Plan therefore indicates important areas for capabilities and capacities development, comprising of: i) a business environment and competitiveness programme; and ii) a programme for enhancing the quality of education, training and innovation and related support institutions including the strengthening/creation of Centres of Excellence and Centres of Specialization. The policy focus should target raising productivity and competitiveness, laying emphasis on research and development (R&D) and the science, technology and mathematics (STEM) education and leveraging them to support industrialization.
Focus areas for value chain policymaking should be on facilitating: i) entry into regional/global value chains; ii) expanding and strengthening cross-border value chain participation, and iii) embedding value chains in the domestic economy. This requires strong cooperation between governments, the private sector and other critical role-players to address the medium-term challenge of building consensus among Member States to determine which policy functions should be prioritized and to what extent. Policy must also be value chain-specific and maximize national gains rather than those of a specific sector or industry or firm.
The implementation of the Action Plan would require significant financial, technical and logistical resources, which for the sake of greater economic and social prosperity, should be situated within a long-term macroeconomic equilibrium path. Analysis for the Plan suggests that the SADC region has a financing gap amounting to 11.3 percent of GDP in 2014. Resource needs projections for the period 2015-2030 reveal that investment will need to rise substantially to 41.3 percent as compared to 23.6 percent of GDP (2014), in line with the targeted high growth rate of 6 percent in per-capita income and the assumed improved capital efficiency. Assuming that savings rates, FDI and ODA remain at their historical averages for the period 2000-2014, the financing gap will rise to 18.2 percent of GDP. These projections have important implications for resource mobilization. To close the financing gap, action will be needed across the policy spectrum. To this effect:
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Efforts will be needed to boost savings rates, enhance FDI flows and ensure fiscal consolidation
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Specific measures to increase the flow of risk capital to SMEs
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Institutional reforms and incentives
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Governments will need substantial funding for infrastructure development, notably energy, transport, skills and technological development
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SMEs will need large amounts of capital for output expansion, technology upgrading and the replacement of obsolete plant and equipment, and
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Special provisions will also have to be made for financing start-ups.
The relative importance of these sources of demand for finance will naturally vary according to the stage of a country's development, its resource endowments, macroeconomic challenges and the sophistication of the private sector. Given the funding constraints, the Action Plan prioritizes those activities most crucial to the successful implementation of the Industrialization Strategy.
The implementation of the Strategy also requires a strong, capable, cohesive and accountable governance body. The Action Plan is of the view that this structure should consist of four interdependent tiers, namely: SADC statutory bodies; national structures; private sector associations; and industry-related Centres of Excellence and Centres of Specialization. A new dispensation is needed, functionally and institutionally. The Strategy and its Action Plan recognize the critical role of the private sector in industrial development. Efforts to create knowledge economies across the region also underscore the role of technological and scientific inputs. The Strategy also calls for efficient functioning and inclusiveness of the industrialization decision-making process. It is therefore imperative that these singular and complementary roles be formalized and institutionalized.
The Action Plan outlines the specific functions of these bodies. In particular, it calls for the reconfiguration of the Industrial Development Forum to consist of Member States, the private sector, think tanks and other stakeholders. The technical capacity of the Secretariat should be substantially enhanced to cope with the heightened coordination and monitoring responsibilities. To this effect, the Action Plan strongly recommends the establishment of an Industrial Development and Trade Directorate within the Secretariat to provide guidance to implementation. In line with this, the industry related functions currently residing in different units would need to be structurally aligned.
The Action Plan Framework (Part II) outlines the numerous actions and policy interventions embodied in the goals and objectives of the Strategy. Without such framework and direction, there is obvious risk that the interventions, while competing for financial, technical and time resources, may not impact synergistically or result in unpredictable outcomes that will inhibit industrial and overall development of the region. To this end, the Action Plan utilizes a number of guiding principles on form and content.
Among the most important principles are:
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A developmental state perspective as an essential driving force for advancing industrialization, while recognizing the critical role of the private sector.
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The strengthening of trade and industry capacity across Member States to support and manage the application of cohesive industrial policy tools.
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Strong complementarity and interdependence of the three strategic pillars of the Industrial Strategy.
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The recognition that targeted outcomes are a function of the quality of deployed assets (physical, human and technological) and policies.
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Prioritization of actions embracing the three growth paths identified by the Strategy, namely: agro-processing, minerals beneficiation and manufacturing value chains development.
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The Action Plan also attaches equally high priorities to removing the three binding constraints indicated in the Strategy (i.e. infrastructure, skills and finance). The prioritization of these focus areas arises from their combined positive impact on deepening regional integration and speeding up the tempo of industrialization.
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The critical need for initiation and sustainability of industrial clusters and regional value chains and their integration into global value chains, including upgrading and deepening of existing value chains.
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The recognition that value chain development and sustainability will depend on a number of parameters, notably: the nature of value chain positioning (raw material, low-tech, high-tech, etc), the extent of value addition; upgrading potential; the willingness of Member States to accept deeper integration; and necessity of longer-term up-scaling from regional to global levels.
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Recognition of the stage of development, size and geographic location of Member States and the need for inclusive industrialization and development.
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The importance of the private sector as wealth creator and policy partner.
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Clarity of requisite responsibilities of the various development agents involved in the development and implementation of the Action Plan.
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The necessity of establishing a coherent and effective industrial development-supporting environment, for the public as well as for private involvement.
The Action Plan templates (in Part II) detail the key actions, organized with reference to the three pillars of the Strategy, and the requisite activities as well as the key enablers needed to unlock industrial potential. Whilst some of these measures and interventions need to be undertaken immediately, the majority target the medium to long term.
Built in the Action Plan is the flexibility of implementation of the Strategy, where beyond collective action on regional projects, national development (a preserve of the countries) would take into consideration the capacities and constraints they face individually. Ultimately, the far-reaching changes and the long-term transformations envisaged in the Strategy (production, distribution, policies, institutions and the global and regional engagements) would assist Member States to converge into the unified and developed SADC economy of the future by 2063. By then SADC countries would be readier to operate and compete at the demanding developed country standards of high business and economic sophistication and innovation.
The total indicative public coordination cost for the Action Plan over the period 2016-2020 is estimated at about 102 million US dollars.
Visit the SADC Resources page for additional legal and policy documents.
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2nd East African Manufacturing Business Summit: The Kigali Resolutions
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The 2nd East African Manufacturing Business Summit was held in Kigali, Rwanda at Kigali, Serena Hotel on 23-25 May 2017. The Business summit was officially opened by Rt. Hon Anastase Murekezi Prime Minister of the Republic of Rwanda.
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The Summit was attended by Rt. Hon. Dr. Ali M. Kirunda Kivejinja, Second Deputy Prime Minister and Minister for EAC Affairs, Republic of Uganda who is also Chairperson of the East African Community Council of Ministers; H.E. Dr. Mukhisa Kituyi, UNCTAD Secretary General; Amb. Liberat Mfumukeko, Secretary General of the EAC; Hon François Kanimba, Minister of Trade, Industry and EAC Affairs, Republic of Rwanda; Mr. Patrick Nduati Mwangi, representing Cabinet Secretary for Industrialization and Enterprise Development, Republic of Kenya; Mrs. Edith Mwanje, Permanent Secretary, Ministry of East African Community Affairs, Republic of Uganda; Amb. Dr. Aziz Ponary Mlima, Permanent Secretary Ministry of Foreign Affairs and East African Cooperation, the United Republic of Tanzania; Ms. Betty Maina, EBS, Principal Secretary, Ministry of East African Community (EAC), Labour and Social Protection, Republic of Kenya; Ms. Rosemary Mbabazi, Permanent Secretary, Ministry of Trade, Industry and EAC Affairs, Republic of Rwanda; Hon. Jesca Eriyo, Deputy Secretary General, in charge of Finance and Administration, East African Community; Hon. Christophe Bazivamo, Deputy Secretary General, in charge of Productive and Social Sectors, East African Community; Mr. Denis Karera, EABC Vice Chairman; Ms. Lilian Awinja, Executive Director of the East African Business Council; private sector foundations; manufacturers from across East Africa and beyond; EAC Institutions; Development Partners; Regional Economic Communities (RECs); and other international organizations including: EASTECO, IUCEA; CASSOA, EACHRC UNIDO,UNECA, TMEA, GIZ, PTB, BDI JICA, IGAD, COMESA, ICGLR, ARSO, OECD, IGCLR, PTB, EAC Staff among others. In attendance were also exhibitors from the EAC region and beyond.
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The 2nd Manufacturing Business Summit was jointly organized by East Africa Community Secretariat and East Africa Business Council and hosted by the Government of Rwanda. The summit themed, ‘Harnessing the Manufacturing Potential for Sustainable Economic Growth in East Africa’ aimed at deepening the gains made in developing the manufacturing sector following the holding of the first Summit in September 2015.
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The forum made the following resolutions on this date of 25th May 2017:
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Both the public and private sectors are key to driving industrialization in the region. However noting the capital intensive nature of most of the large scale industrialization projects, there is a need for partnerships that are government led. The region to develop regional policy frameworks for government led industrialization mega projects that can drive up manufacturing in the region. EAC Partner States to commit to a percentage of national budgets allocated for industrial development.
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Deployment of appropriate skills to suit industry remains a challenge of enhanced productivity in industry. EAC Partner States to develop national policy and law that make industrial internship mandatory, especially for engineers, technologists and scientists. Further Partner States academia to work closely with private sector associations to formulate regional skills development programmes targeting specific skills required by the private sector schools, TVET and university curriculum.
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For purposes of item no. II on appropriate skills to suit industry and to enable the various sectors of manufacturing to effectively advocate their various sector issues in one voice, EAC and EABC to facilitate establishment of regional sectoral private sector platforms to promote dialogue and interactions among public, private sector and development partners on policy matters in each of the sub sectors, as well as to promote business partnerships, and information and knowledge exchange. (EAC Secretariat / EABC to establish Web Portals).
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EAC should develop supply capacity to be able to participate in supply of materials for infrastructural projects and other mega projects among others taking note that this is a long-term course. EAC should develop a regional local content policy and strategy for better coordination of local content initiatives. To guide this development, the EAC is to undertake baseline studies on local content in all lead economic sectors to guide review of policies, legal and regulatory frameworks for a regional local content policy development.
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Noting that the current EAC CET structure does not work effectively for manufacturing in the region, EAC in partnership with EABC; to detail in a comprehensive, evidence-based, and consolidated way priority for the CET review proposing four to five bands as appropriate. The overall aim is to address degree of processing and encourage backward and forward value addition linkages in the total value chain of the manufacturing sector as EAC Partner States embark on comprehensive review of EAC CET. Comprehensive tariff anomalies assessment should be undertaken targeting sectors such as cotton, textiles, and apparels; motor vehicles, wood & furniture among others, dairy, edible oils, cereals, leather. Further the region is to put in place web portals for the sectors to facilitate information sharing.
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Noting the unique role of the EAC Diaspora to contribute to skills in the region and to amplify and sustain economic development through the volume of remittances as an important source of external development finance; EAC and EABC to put in place a Framework for engaging the diapsora to enable manufacturers tap into diaspora funds in the region. EAC to conduct a comprehensive study on the innovative financing instruments to be deployed to promote investment in manufacturing. Including the options of creating diaspora investment vehicles.
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Regional national policies/regulations are pursued as opposed to having single/common policies segmenting and fragmenting the market which limits the scope for economies of scale and escalates the cost of doing business. The region to develop and adopt common sectoral policy and visions to ensure stability and create uniform business environment for manufacturing.
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Observed that economic and special zones generate additional economic activity leading to promotion of exports of goods; promotion of investment from domestic and foreign sources; and development of infrastructure facilities; to attract large investments. In this regards EAC and EABC were urged to develop cross country coordination and collaboration platforms for efficient competitive value chains (platforms) and to undertake learning missions to enable design of effective Special Economic Zones (SEZs). The development of such infrastructure to also take into account development of facilities for small and medium enterprises.
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The role of science, technology and innovation should be given priority in the discourse on manufacturing. Considering that entrepreneurship drives science, technology and innovation EAC and EABC to develop an Entrepreneurship policy as a platform for anchoring an entrepreneurial culture.
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Considering the effect of plastics and chemicals on the environment and on industrial development; Partner States need to put in place environmental safeguards for plastics and chemicals in order that environmental sustainability is not an opportunity cost to industrial development.
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EAC, EABC, National Bureau of Standards and ARSO to work hand in hand and to take appropriate measures to widen awareness and enforce standards compliance in all industrial businesses towards facilitating intra EAC trade and trade in general.
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EAC and EABC to fast track implementation of mutual recognition agreements between EAC Bureaux of Standards.
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EAC tables US$110m budget to EALA
The EAC presented for consideration Budget estimates for the Financial Year 2017/2018, totaling $110,130,183 to the East African Legislative Assembly Sitting in Arusha on 25 May 2017.
Uganda’s State Minister for EAC, Hon Julius Maganda, presented the Budget Speech to an attentive House on behalf of the 2nd Deputy Prime Minister and Minister for EAC, Uganda and Chair of the EAC Council of Ministers, Hon Dr. Ali Kirunda Kivenjija.
The 2017/2018 Budget themed: “Accelerating Implementation of the EAC Integration Agenda” is a step-up from $101,374,589 presented to the House in the previous Financial Year. The Budget speech prioritizes on the consolidation of the Single Customs Territory (SCT) to cover all imports and intra-EAC traded goods, infrastructure development in the region and further liberalization of free movement of skilled labour across the Partner States.
Other key areas Hon Maganda said, include enhancement of regional industrial development through investment in key priority sectors and improvement of agricultural productivity with an aim to enhancing food security. Also of essence is the promotion of regional peace, security and good governance, on the one side and institutional transformation to spearhead the Community’s agenda on the other.
The Budget is allocated to the Organs and Institutions of the EAC as follows; East African Community Secretariat ($60, 183, 201), East African Legislative Assembly ($17, 996, 959) and the East African Court of Justice ($4,140,166).
The Inter-University Council for East Africa shall receive ($6,766,928), Lake Victoria Basin Commission ($11,960,643) while $ 2,466,655 is earmarked for the Lake Victoria Fisheries Organization. On their part, the East African Science and Technology Commission shall receive ($ 1,500, 164), East African Kiswahili Commission ($ 1,553,098) and the East African Health Research Commission ($ 2,225,324). The East African Competition Authority is to benefit from $1,337,045 in the Financial Year 2017/18.
The 2017/2018 Budget is to be financed by Partner State contributions through the Ministries of EAC Affairs ($50,226,522); Ministries responsible for Education – ($ 4,848,431) and Ministries responsible for Fisheries ($ 1, 549,254). Development Partners will support the Community to the tune of ($52, 868,638) while Member Universities will inject in to the kitty $ 303, 435. The miscellaneous revenue is pegged at $ 333,903.
The Minister cited a number of assumptions on which this year’s budget is pegged on to include the continued and consolidated political support of the EAC integration and the availability of adequate financial resources and remittances. Political stability and good governance as well as safe and stable security across the region are other areas of consideration.
The Minister informed the House of challenges the Community will have to address. “Mr. Speaker, the key anticipated challenges during the implementation of Community programmes and projects may include: persistent delays in remittance of funds from Partner States and Development Partners and limited financial resources (overall budget declining yet the demand is increasing on the Community to deliver more services to East Africans), occasioned by reduced support from Development Partners,” the Minister said.
“Delayed harmonization of national laws that impact on the implementation of the EAC Common Market Protocol and understaffing, which is seriously impacting on effectiveness and efficiency in implementation of projects and programmes are other challenges, we need to address”, the Minister added.
The Minister however reiterated mitigation strategies to address the challenges. “Mr. Speaker, the Community will closely follow-up on the remittances by Partner States to facilitate timely implementation of programmes and implement the institutional review as per the directive of the 17th Summit of the Heads of State,” he said.
The EAC Political Federation is yet another key priority area on the agenda in the coming Financial Year. In a bid to promote good governance, the EAC will dispatch Election Observer Missions to observe general elections in the Republic of Kenya and Republic of Rwanda in August 2017. The Minister also affirmed that the Community will continue to hold the annual EAC University Debates. The debates which lead to the appointment of the Youth Ambassadors have been critical in promoting the agenda of integration among the University student community.
On Peace and security, the Minister succinctly called for measures to ensure effective policing to counter terrorism and crime.
“The success of the EAC integration process must be supported by a predictable security environment. During the reporting period, the Peace and Security sector continued regular consultations towards joint action against Terrorism and other transnational and cross border organized crimes. The next Financial Year will see Standing Operating Procedures in Policing function developed as well as operationalization of the Police Regional Centres of Excellence in the Partner States,” he said.
On the global economic performance outlook, the Minister informed the House the global economy had expanded by 2.9% in 2016 compared to a revised growth of 3.1% in 2015. The slowed growth was occasioned by constrained global trade, subdued investment and heightened policy uncertainty associated with the United Kingdom’s decision to leave the European Union (EU) and elections in the United States of America (USA).
“The real GDP in the EAC is estimated to have grown by 6.1% compared to 5.8% growth recorded in 2015. The growth was largely supported by investment in public infrastructure, buoyant private consumption and low oil prices. Tanzania recorded the highest real GDP growth in the region, expanding by 7.2% in 2016, compared to a growth of 7.0% in 2015. Kenya and Uganda recorded improved economic performance of 5.8% and 4.8% respectively in 2016, compared to 5.7 and 4.8% in 2015. Rwanda recorded a decelerated growth of 6.0% compared to 6.9% in 2015. Real GDP in Burundi contracted by 0.5% in 2016 compared to a contraction of 4.0% in 2015,” he said.
The Minister highlighted a number of achievements registered in the Financial Year 2016/2017, notably, the upscaling of the Single Customs Territory (SCT) through finalisation of operational instruments of the business manuals, deployment of SCT Monitoring and Evaluation tools and deployment of staff in some Partner States.
Hon Maganda maintained the consolidation of the Customs Union remained a key priority during the period under review. The operationalization of the Single Customs Territory, the establishment of One Stop Border Posts and the development of the regional Customs instruments underpinned the drive to promote conducive trade and investment in the region.
Following the successes registered during the initial stages of the Single Customs Territory, the roll out of goods cleared under the Single Customs Territory was expanded both on the Northern and Central Corridors.
On legislation, the Minister informed the House the One Stop Border Posts (OSBPs) Act was fully assented to and gazetted for its commencement. The OSBP Regulations were finalized by the Sectoral Council on Legal and Judicial Affairs and adopted during the 35th Meeting of the Council of Ministers.
The Chair of the Council of Ministers further stated that the EAC Elimination of Non-Tariff Barriers Bill (NTB), 2015, passed by EALA was undergoing assent and would spur business and enhance the free movement aspects. The United Republic of Tanzania, the Republic of Kenya and the Republic of Uganda have assented to the Act. The Act, according to Hon Maganda, has been sent to remaining Partner States for assent.
The EAC Non-tariff Barriers (NTBs) Act is expected to address outstanding NTBs in the EAC Time Bound Programme (TBP) in pursuit of promotion of Intra-EAC Trade and to curtail the proliferation of NTBs in the region. According to Hon Maganda, the status of NTBs in EAC region as at the end of December 2016, indicated that sixteen (16) NTBs are unresolved, four (4) new NTBs had been reported, and one hundred and thirteen (113) NTBs had been cumulatively resolved since 2009.
The Minister informed the House the Secretariat was undertaking the acquisition of Infrastructure to support the payment and settlement systems in the region. He said a number of payment systems had been procured with the support of the African Development Bank (AfDB). The Minister said automated clearing house systems (ACHs) to accommodate cheque truncation system for National Bank of Rwanda was in place with disaster recovery sites and business continuity infrastructure for Central Bank of Kenya, National Bank of Rwanda and Bank of Tanzania now secured.
“At the same time, an upgrade of the large value payment system-UNISS is ongoing in Uganda and the bidding documents for the upgrade of Central Bank of Kenya and Bank of Tanzania large value systems have been submitted to AfDB for consideration and approval,” he added.
Hon Maganda said bids to procure and implement disaster recovery and business continuity infrastructure equipment for Bank of the Republic of Burundi were successfully evaluated and the contract to for SWIFT connectivity to enable the Burundi integrate to the East African Payment System (EAPS) signed in March 2016.
On Infrastructure, the Minister informed the House of the completion in May 2017 of the 90 Km long Taveta – Mwatate road, itself, a part of the multinational Arusha – Holili/Taveta – Voi road.
In addition, the Minister said feasibility studies and detailed designs of two key links for the Republics of Rwanda and Burundi to the Central Corridor commenced in April, 2016.
“One project is the 250-km long Nyakanazi – Kasulu – Manyovu road in Tanzania linking to the 78-km long Rumonge – Bujumbura road in Burundi. The other is the 92-km long Lusahunga – Rusumo road in Tanzania linking to the 70-km long Kayonza – Kigali road in Rwanda” Hon Maganda said.
On railways, the Minister informed the House of the near completion of the Mombasa-Nairobi Standard Gauge Railway line in Kenya, adding that its inauguration was scheduled for June, 2017. Similarly, construction of the new Standard Gauge Railway of the Kampala-Malaba section in Uganda, is expected to commence during FY 2017/18. For the Central Corridor, the construction of the Dar-es-Salam-Morogoro section commenced in April, 2017.
On agriculture and food security, the EAC is strongly committed to support implementation of the June 2014, African Heads of State Malabo Declaration on Agriculture Growth and Transformation in Africa.
The Minister remarked the 34th Council of Ministers had adopted the EAC Food and Nutrition Security Policy and the EAC Livestock policy. “The process of developing an implementation strategy for the food and nutrition security policy has commenced, whereas the development of the implementation strategy for the livestock policy will commence in the early days of the new financial year,” he added.
On energy, the Minister remarked that all efforts were underway to increase production and to reduce costs, saying it was expensive in the region.
“Energy in EAC region remains expensive with a regional average cost of 15US Cents at the grid three times higher than 5 US cents in Ethiopia. He remarked that shared hydropower plants and interconnectors were some of the initiatives been used to reduce costs,” he said.
The Minister informed the House of implementation of projects under the Power Master Plan, which had raised the region’s installed capacity from 4,635MW in 2015 to 4,893.3MW in 2016, against a peak demand of 3,587.3MW in 2016 for the interconnected system.
The Minister also presented the priorities for the Tourism and Wildlife sector to include exploring innovative ways to brand EAC as a Single Tourist Destination and development of more diverse promotional materials. He further remarked that the region would be undertaking awareness programmes and other initiatives geared towards full implementation of the Single Tourist Visa by all Partner States.
In the area of EAC Health Systems and Health Policies Harmonization and Integration, the Council had in the financial year 2016/17, approved and officially launched several documents including the EAC Regional Health Policy (2016) and the EAC Health Sector Strategic Plan (2015-2020).
In order to strengthen the Monetary Union, the Minister said the Council will initiate Bills to establish, key EAC Institutions. He outlined them as the East African Monetary Institute Bill, 2017 and The EAC Statistics Bureau Bill, 2017 to establish the EAC Statistics Bureau.
The House is next week expected to debate on the presented Budget.
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tralac’s Daily News Selection
Featured newsletters: tralac, Pan African Chamber of Commerce and Industry, West Africa Brief
Finishing today, in Mauritius: The Commonwealth’s African Regional Consultation on multilateral, regional and emerging trade issues
Next week: 1st India-Commonwealth Small and Medium Enterprises trade summit (30-31 May, Delhi). Among the topics to be discussed: Brexit, deepening intra-Commonwealth trade, trade facilitation in services and cross-border e-commerce. The 2017 Development Finance Forum: unlocking private investment in African markets (31 May - 1 June, Accra). The forum is organized by the World Bank Group and the African Center for Economic Transformation. Provisional programme (pdf)
Profiled commentaries: US Commerce Secretary, Wilbur Ross: Most Favored Nation rule hurts importers, limits US trade (a letter to the WSJ); President Uhuru Kenyatta: Kenya an ambassador for Africa and partner to powerful nations (Daily Nation)
The new self-financing mechanism of the African Union: can the proposed AU levy be a step towards financial independence? (tralac)
The new formula is a forward-looking proposal to finance the AU’s own agenda but questions around modalities of implementation, transparency and compliance by Members must still be worked out. Rationalization and prioritizing of existing projects seem to be necessary. The AU’s challenges are to be met against the background of bigger picture issues; such as the fact that some are of the view that “the classic system of financing regional integration in Africa has reached its limit”. [The analyst: Gerhard Erasmus], [The AU’s Financing of the Union website]
Tanzania: Gold output at 10-year high in 2016 (Daily News)
Full-year gold output rose 4.4% to 1.42 million ounces in 2016, government data showed on Tuesday, as the government moved to claim to a bigger share of revenue from mineral exports. Tanzania is Africa’s fourth-biggest gold producer after South Africa, Ghana and Mali and gold exports are a key source of foreign exchange. “Gold production from gold bars and copper concentrate products by six major gold mines increased by 4.4% from 1.36 million troy ounces in 2015 to 1.42 million troy ounces in 2016,” the state-run Tanzania Minerals Audit Agency said in a report (pdf). The increased output - the highest since 2007 - was buoyed by improved production at three of the six large-scale gold mines, the mining audit watchdog said.
South Africa: Economic Development Dept Budget Vote 2017/18. Highlights from speech by Minister Ebrahim Patel:
Last year, the competition authorities and government worked together on opening up markets and placing development at the top of their agenda. Through these efforts: (i) some 58 000 workers have been covered by job-protection commitments and 6 500 new jobs will be created through merger proceedings; (ii) R4,8bn has been raised to support small business development and job-creation through competition-linked measures; (iii) 120 000 spaza shops and retail outlets will have the freedom to open a part of their sponsored fridge space to products that compete with the near-monopoly large suppliers.
Africa’s relationship with China will need to be managed carefully. China is now Africa’s largest economic partner country. A new research report by McKinsey ranks China as (i) Africa’s largest trade partner [with more than $188bn in goods trade], (ii) the biggest investor in infrastructure [at $21bn], (iii) the fastest growing source of FDI [rising by 25% per annum with FDI stock of $49billion, placing China at number four on the continent}; and (iv) the 3rd biggest aid donor [with $6bn in grants]. It estimates there are more than 10 000 Chinese-owned firms on the continent, ranging from small family-owned shops to large multi-national corporations. Our job as government is to ensure we protect South Africa’s national interest and sovereignty, that Chinese investment and market access is directed at creating local jobs, ensuring technology transfers and local supply-chains are built and exporting more manufactured goods and value-added products to China and global markets. In other words, Africa is not only a market; it should be developed into a world-class manufacturing centre. [SEZ practitioners are off to China]
SA faces stiff maize export competition (Business Day)
The South African maize industry has made a remarkable rebound and it is expecting a bumper crop this season. However, new developments have compelled me to revise parts of my recent maize export market analysis, particularly regarding maize export opportunities within the African continent. The dynamics in African agricultural markets have changed dramatically. [The analyst: Wandile Sihlobo], [Western Cape an exception amid signs of recovery in agriculture]
India: Government plans talks with African cashew exporting countries (The Hindu)
The government will convene talks with ambassadors of 12 raw cashew exporting African countries in Thiruvananthapuram to explore ways for direct purchase of cashew by the proposed Cashew Board. The aim is to avoid exploitation by traders involved in import of raw nut, Minister for Cashew Industry J. Mercykutty Amma told the media here on Thursday.
Gujarat inks MoUs with three African entities in agriculture, power, infrastructure sectors (Times of India)
Gujarat on Wednesday signed MoUs with business entities from three African countries, namely, Ghana, Zambia and Mozambique. The state government also entered into an MoU with the Republic of Togo as part of the ongoing AfDB annual meetings being held in Gandhinagar. The pacts were signed by Gujarat Agro Industries Corporation with Zambia’s Fidanna Limited, the Association of Ghana Industries and Limpopo Agricola e Desenvolvimento Lda of Mozambique for areas such as agriculture and agri-productivity, power generation, automobiles, technology transfers and tourism.
Kenya: US polls fever cuts apparels export 2% (Daily Nation)
The annual performance report for the Export Processing Zones shows the apparels exported declined from 84.6 million pieces in 2015 to 74.0 million pieces in 2016. “This could be attributed to market uncertainty in US towards the general election in the course of year 2016,” the authority says. In the year under review EPZ Authority says it oversaw market diversification on apparel exports to include Europe and Canada. [Data: Kenya’s US exports, via OTEXA], [The AfDB’sFashionomics Africa initiative]
Uganda: Fiscal Transparency Evaluation (IMF)
Uganda meets at least the standard of good or advanced practice in 13 of the 36 dimensions of the first three pillars of the IMF’s Fiscal Transparency Code, while 23 of the 36 dimensions are scored as basic or not met, reflecting issues with the coverage, quality, and reliability of some information. Addressing these issues will assume greater importance, as additional fiscal policy challenges emerge. In particular: (i) From 2020, it is expected that there will be new revenues from oil, estimated at up to 3% of GDP at peak production; (ii) Uganda is a signatory of the East African Monetary Union Protocol, which targets the adoption of a single currency in the region by 2024.
Afreximbank urges DFI partnerships to push Africa’s industrialisation
Speaking on Monday during a panel discussion organized by the Association of African Development Finance Institutions on the sidelines of the Annual Meetings of the AFDB, Kanayo Awani, MD of Afreximbank’s Intra-African Trade Initiative, said opportunities for such partnerships existed in the areas of capacity building and project preparation. Partnerships were also needed in the mobilization of long term financing required to develop industrial parks and export processing zones that had required infrastructure “inside” and “outside the fence”, especially for projects in the countries those institutions operated.
Botswana: CAAB decries restrictive African air agreements (Mmegi)
The growth and development of air services in Africa could be undermined by restrictive bilateral agreements of most intra-African aviation markets, the Civil Aviation Authority of Botswana has warned.
Today’s Quick Links: EABC conference: How region’s Diaspora community can spur the manufacturing sector Zimra boss pleads for immunity A game changer: the prospects and pitfalls of mobile money in Somalia Where are Africa’s biggest markets? (pdf) Deodat Maharaj: The Caribbean’s weak trade High hopes for single digital platform for Asean e-commerce Brazil/China Fund to start operating next week Nancy Birdsall, Scott Morris: Five innovations at the AIIB |
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Minister Ebrahim Patel: Economic Development Department Budget Vote 2017/18
Budget Vote Speech delivered by Minister of Economic Development, Ebrahim Patel, in the National Assembly, 25 May 2017
It is my pleasure with Deputy Minister Masuku to table the Budget for Economic Development on Africa Day today.
The global and domestic economic context shapes the work of the Department and agencies that make up the economic development portfolio.
In its latest World Economic Outlook, the IMF projects global growth at 3,5% for this year and it devotes a detailed discussion on the decline in worker’s share of national incomes across the world.
Political economy is taking centre-stage, with the rise of economic populism in parts of the developed world, the backlash against globalisation, the continued rise of China and the impact of the 4th industrial revolution, all which very directly affect the South African economy and jobs. We need a coherent strategy to deal with them.
Our economy is trade exposed, with exports accounting for almost R1 in every R3 of the wealth we create annually.
Technological innovation, dubbed the Fourth Industrial Revolution, is reshaping the future of work, industrial production and social interaction. The rise of robotics and artificial intelligence will have a profound impact on South Africa too.
At a domestic level, our rate of economic growth and job creation need to be enhanced.
Last year the economy grew by 0,3% and is projected to grow by 1% this year. The total income produced by the economy every year is now R 4,3 trillion. Net foreign direct investment worth R33bn flowed into South Africa, a growth of 50%.
But employment grew by only 51 000 over the past 12 months.
These modest gains are well below what South Africa needs to address the challenges of poverty, inequality and unemployment. But they were gains, made at a difficult time, when we faced a significant drought, weak economic performance in the rest of the continent, recessions in Nigeria, Russia and Brazil and sharply slower growth on the African continent. During 2016 we worked hard with business and labour to avoid a recession, and we succeeded.
Taking the long view, since the adoption of the New Growth Path in October 2010, the economy has created 2,4 million new jobs and total employment rose from 13,7 million to 16,1 million people.
I am pleased to note that the labour-intensity of growth improved: jobs grew faster than the economy as a whole, with employment growth of 1,5% for each 1% of GDP growth.
We need to build on this to deepen a jobs-rich growth path.
However, prospects in the year ahead for GDP growth and jobs are uncertain as a result of the recent ratings down-grade and slower growth on the rest of the continent.
The ratings downgrade is bad news for the economy and jobs.
It makes our borrowing more expensive and will impact on:
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The poor
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Workers
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The urban middle-class.
Owners of capital will expect a higher return to compensate for the perceived higher risk. It will cost the economy many billions of rands in additional costs and lost investment opportunities.
It is crucial that we stave off any further downgrades and regain our investment-grade as a country.
We are vulnerable because we must continue to rely on global capital markets to fund some of the difference between our income and spending. In the long run we must address this by improving our domestic savings rate.
The roadmap back to investment grade and crucially, to address the needs of our people requires that we develop a new “national deal” that includes the following:
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One, develop a credible growth story, that places emphasis on sectors and market-opportunities with high growth and job-creation potential, attracts investment and ensures effective implementation of the nine-point plan.
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Two, transform the economy to make it more inclusive, bringing black South Africans, young people, the rural poor and the urban unemployed into the economy with speeded-up actions against high levels of economic concentration, inequality, social exclusion and joblessness
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Three, ensure integrity in governance and decision-making, manage our fiscal policies responsibly and sustainably, to inspire confidence among our people
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Four, deepen partnerships, with greater efforts to pursue a social compact between government, business and labour.
These actions will increase overall confidence in the economy and are the key to improving investment and demand and growth and inclusivity.
Honourable members, before elaborating on aspects of this roadmap, I want to highlight a few areas of progress made in the economic development portfolio.
The Industrial Development Corporation, Africa’s largest industrial bank showed strong performance in tough market conditions.
It facilitated R47 billion of fresh investment, of which R15,3 billion is from its own funds and the rest from private investor partners. This is the largest yet in its history.
IDC approvals to 77 Black industrialists totalled R4,7 billion, a growth of 60% on the previous year.
Black-empowered companies approvals totalled R10,8* billion for the year.
Funding for youth has almost doubled, to R2,4 billion.
Funding for women-empowered businesses grew sharply by 178% to R3,2 billion.
IDC investment will create or save 20 877 jobs.
This is solid, practical radical transformation.
The competition authorities had one of their busiest and most successful years.
Last year, the competition authorities and government worked together on opening up markets and placing development at the top of their agenda.
Through these efforts,
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some 58 000 workers have been covered by job-protection commitments and 6 500* new jobs will be created through merger proceedings;
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R4,8 billion has been raised to support small business development and job-creation through competition-linked measures and
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120 000 spaza shops and retail outlets will have the freedom to open a part of their sponsored fridge space to products that compete with the near-monopoly large suppliers.
Appletiser now has significant black shareholding and has already been buying more local grapes for their Grapetiser product.
We are tackling cartels and price-fixing in a number of product markets. Last year the authorities fined Arcellor Mittal R1,5 billion for its abuse of dominance in the steel market.
We are busy with market Inquiries that will help to lift the lid off practices in private healthcare, the grocery retail sector, public transport and the liquid petroleum industry, whose report has been tabled in parliament.
We are developing new models of empowerment. The construction industry, through the seven largest companies, has embarked on a major transformation programme, with four major companies selling a large block of their shares to black South Africans. In all, the deal will place construction turnover of more than R130bn in the hands of black South Africans over the next seven years.
Turning to trade, Africa remains the key to our future progress.
On Africa Day we note that the continent accounts for R320 bn worth of exports of SA-made goods, supporting about 250 000 direct jobs in our economy and about 900 000 jobs in total. We must deepen economic relations with the rest of the continent, in trade, infrastructure development and investment.
Africa’s relationship with China will need to be managed carefully.
China is now Africa’s largest economic partner country. A new research report by McKinsey ranks China as
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Africa’s largest trade partner [with more than $188 billion in goods trade],
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the biggest investor in infrastructure [at $21 billion],
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the fastest growing source of FDI [rising by 25% per annum with FDI stock of $49billion, placing China at number four on the continent}; and
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the 3rd biggest aid donor [with $6billion in grants].
It estimates there are more than 10 000 Chinese-owned firms on the continent, ranging from small family-owned shops to large multi-national corporations.
Our job as government is to ensure we protect South Africa’s national interest and sovereignty, that Chinese investment and market access is directed at creating local jobs, ensuring technology transfers and local supply-chains are built and exporting more manufactured goods and value-added products to China and global markets.
In other words, Africa is not only a market; it should be developed into a world-class manufacturing centre.
One example of our local relationship with China is the agreement to invest R4,3 billion in the setting up of a new car-making plant, involving the Beijing Auto Industrial Corporation and the IDC. We expect construction to start by July.
Infrastructure
Investment in infrastructure has grown in the past year, with R300bn in investment in the National Infrastructure Plan by the public and private sector. This is more than R1 billion per working day spent to improve the foundations of the economy and service-delivery to our people.
The Presidential Infrastructure Coordinating Commission, whose technical work is done by the Department and the IDC, monitored build programmes across the state.
It reported progress for the year including:
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New energy generation that will add additional energy to the grid equal to the total electricity consumption of a city double the size of Joburg
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More than a million South Africans getting electricity for the first time last year
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13 000 new taxis assembled in SA
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90 000 new houses build under the RDP housing programme
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Accommodation with 3 700 new beds for university students
together with new schools, roads, bus lanes, rail lines, clinics, water pipelines and fibre-optic infrastructure built or refurbished.
However, we still have many challenges in the economy and I spoke earlier about the need for a roadmap to address these.
As South Africans, working together as investors, workers, communities and their democratic government, we can turn the national mood away from despair to one of hope, optimism and action. This needs a capable, honest state and social partners who each bring important parts of what is needed for a broader deal involving all South African patriots.
The foundation of this is the South African constitution. It is an empowering framework, not a shoddy compromise as some would have it. The constitution is not a constraint to radical and bold actions. In fact, a purposive implementation of the constitutional vision and a bold use of the enormous legal and fiscal toolkit that we have available in the state, can truly drive the transformation of our society.
So what should we do?
First, we must ignite the growth potential of the economy, increase job creation and deepen the impact of industrial funding
In the year ahead, the IDC will target new investments of between R15bn and R18bn and bring in a further R30bn in private sector investment.
Infrastructure spending in the next year is expected to be R330 billion.
A R1,5 billion Steel Competitiveness Fund will be set up, with seed funding of R95 million in the EDD Budget over the next three years, and additional funds by the IDC, to provide support to smaller competitors and downstream players. The Fund will be available to foundries, valve and pump manufacturers, steel fabricators and capital equipment manufacturers including black industrialists, to help the core of our manufacturing industry to survive difficult global economic conditions.
SCAW Metals will have new private sector equity partners, including foreign investors and black South African investors.
To address obstacles to investment projects, the Department will target 22 investment and infrastructure projects it will help to unblock.
To enforce our trade policies, ITAC will do 1 000 inspections of import and export shipments, sites or documentation.
Honourable Members
The Economist newspaper recently ran a cover story that describes data as the world’s most valuable resource, being ‘to this century what oil was to the last one: a driver of growth and change’.
Yet the growth of this data-driven economy is constrained by high data costs, which affect users of cell-phones and laptops and businesses who require high volumes of data. To promote the new data-driven economy and address high data costs, and following discussion with Minister Cwele, I will request the Competition Commission to conduct a market Inquiry into this sector and to work with other regulators to establish the facts, identify measures to reduce data costs and make recommendations to government.
Our 2nd focus is to make the economy more inclusive and transform it.
Inclusion requires changes to the rate of job-creation, entrepreneurial opportunities for young people and socio-economic transformation that is bold, radical and brings millions of people into ownership and economic inclusion.
It means faster growth, more inclusive growth and jobs-rich growth.
Greater inclusion, like reducing unemployment and addressing poverty, is itself a source of growth, as more citizens enter markets as consumers and savers.
In the year ahead, we will explore better models for broad ownership in the economy.
We must build our own economic ‘co-determination model’ in which workers and investors cooperate in growing the economy, creating more jobs and ensuring that the wealth generated in the economy is more fairly and equitably distributed. Among the models to look at is greater opportunities for workers to participate as shareholders in companies and having worker representatives on company boards.
High levels of economic concentration and racially-skewed ownership profiles stunt economic growth, prevent entry of new players, reduce consumer choice, limit the levels of innovation and dynamism in the economy and feed a growing resentment among black South Africans of the failure to realise the vision of the constitution.
To address this, we will be finalising proposed changes to the Competition Act as announced during SONA. We released a framework earlier today and will work with a Panel of experts to complete recommendations within six weeks.
To deepen our information base on the extent of transformation, we will work with other departments to quantify the extent of black citizen participation in the economy.
To improve actions against collusion and corrupt corporate practices, the Commission will investigate about 100 cases of cartels behaviour in different sectors of the economy, including food, infrastructure, chemicals, financial services and car-parts.
To improve resources for the competition authorities, we will gazette an adjustment to the filing fees for mergers.
To improve African regional integration, the economic development agencies will explore ways of deepening industrialisation on the continent and we will work with Minister Rob Davies on the trade integration and with Minister Radebe on infrastructure development on the continent.
To strengthen job creation, the IDC will target creating and saving between 24 000 and 30 000 jobs this year.
To bring more black South Africans in the productive economy and contribute to bold and radical socio-economic transformation, the IDC will target R7bn for black industrialists and R2,5bn for women and youth-empowered companies this year.
More than R4 billion will be put into localisation initiatives.
Our 3rd focus is to address the rapid levels of urbanisation
Urbanisation is a potentially transformative development for the economy, an opportunity for growth and a driver for infrastructure investment
Every year, roughly 400 000 new households are added to the nation’s cities. In the short-term, this places enormous pressures on cities and large towns, to improve water, electricity, housing and schools and of course to create jobs to absorb the new entrants to our cities. In the long-run, this can energise the economy and deepen the level of development.
This year, through the PICC, we will focus on a country-response to urbanisation. This brings together work being done in a number of departments and cities. A number of actions will be taken to align planning, infrastructure provision, industrial development and human settlements to the rapid urban population growth. We will bring this presentation to Parliament and keep Members informed on progress with this exciting and important work being undertaken across government.
We are building a new Technical Project Management Unit for the PICC, with the first two engineers appointed and the first dedicated R10 million provided for in this budget.
Our 4th focus must be to ensure a more effective state, improved governance and deeper partnerships
The National Development Plan identified the need for a capable developmental state as a centre-piece to achieve higher economic growth and deeper levels of social equity. We face the growing perception and reality of corruption and attempts to capture public institutions for the benefit of private individuals and families.
Public power in a constitutional democracy can only be effectively exercised for development through deeper levels of trust, collaboration and partnership.
When there are real and legitimate concerns about corruption and state capture, about the diversion of the people’s money to improperly benefit individuals, our ability to forge a partnership between the state and the rest of society is seriously undermined.
Cabinet recognises that State-owned companies will have to improve governance and economic performance.
One of the institutions responsible to my portfolio is the Industrial Development Corporation. It is responsible for the approval of large sums of money and must always be subject to high levels of probity in its decisions. The IDC has extensive systems of corporate governance in place and its Board and management places a high priority on integrity in decision-making. To further enhance transparency and accountability, the IDC will from June this year, publish details of all the investors to whom it provides industrial funding.
As we build real, deep partnerships in the country, business will need to accept the need to work differently, create more jobs and invest more. Organised labour will be asked to bring resources of union investment companies and the sweat equity of workers. Communities can bring the creative spirit of youth. Government must bring an effective and capable machinery to the compact. In this way we can build confidence in the future of the country. And we can build on the number of successful efforts to forge unity.
Conclusion
The Economic Development Budget of R797 million can make a major difference in the lives of ordinary people. It unlocks and guides about R20 billion
Many, many thousands of South Africans do in fact benefit from the work of the Economic Development entities. We will release a social and jobs report later this year which provides more information of the South Africans who are empowered, supported and partnered by government.
In the year ahead, we will step up efforts, working with colleagues in the Economic Cluster, to radically change the lives of our people; to ensure deep and meaningful socio-economic transformation.
I wish to thank the Deputy Minister, heads of agencies and staff for the work done to get South Africa working.
It is now my pleasure to table the Economic Development Budget before this august house.
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Kenya an ambassador for Africa and partner to powerful nations
Kenya has been pivotal in global relations for a thousand years.
In 1963, two years after I was born, Kenya gained its independence under my father Jomo Kenyatta.
But Kenya has been at the centre of global commerce for centuries, through networks of Arab, Persian, Indian and European merchants.
As the nexus of the transit of goods between three continents, Kenya became the heart of Indian Ocean trade.
Regional cooperation
We served not only as a base for foreign servicemen, but gave our own lives in the two World Wars, helping to secure global peace.
As the next chapter of Kenya’s story begins, the world must hear our voice.
I want to see Kenya take it rightful place on the world stage.
As chair of the EAC, we spearheaded greater regional and Pan-African cooperation as a basis for the benefit of over 150 million East Africans.
G7 Summit
Only by opening up developing nations to the possibilities presented by markets around the world can we elevate Africa to a status of equity with international partners.
The invitation to address the world’s most powerful leaders at the G7 Summit recognises the critical role Kenya now plays as that leading voice in Africa.
I am both honoured and inspired, but also very aware of the weight of responsibility that comes with this opportunity to represent Africa to the leaders of the seven most powerful nations.
Since becoming President in 2013, my administration has worked with leaders across the world to reposition Kenya as a go-to destination in which the world can invest.
Employment
We have welcomed Kenya’s son Barack Obama, Indian Prime Minister Narendra Modi, Israeli Prime Minister Benjamin Netanyahu, former South Korean President Park Geun-hye and Turkey’s President Tayyip Erdogan.
When I visited Chancellor Angela Merkel last year, we explored how best to deepen our trade partnership.
Last December, Volkswagen opened the very first car manufacturing plant in Kenya after an absence of over five decades, providing employment to a new generation of Kenyans.
I also discussed with UK Prime Minister Theresa May the many ways our two nations can strengthen relations post-Brexit.
Global trade
It is through such positive and deep friendships that Kenya will be elevated to a middle–income country.
This also shows the role Kenya has assumed as an ambassador for Africa, providing solutions to global trade and security issues across the continent.
This is not the time to be protectionist. My vision for the nation’s enhanced role in the world will ensure the economy is grown through crucial foreign investment.
Business environment
In 2015 alone, Kenya saw a 50 per cent rise in FDI projects.
Foreign investment was $500 million in 2013, but rose to $990 million in just one year.
Last year, Kenya lept 28 places on the World Bank’s ranking for Ease of Business.
My message is clear – Kenya is open for business, and friendship, for the benefit of all.
Africa needs foreign powers to invest directly into our economies that crucially enables both sides to grow exponentially and ensure economic parity in our global relations.
Prosperous nation
Our vital role as a mediator in the South Sudan peace process helped to end a 17-month civil war that had killed 50,000 people and displaced two million more, shows a maturity of outlook and leadership prerequisite to be a credible voice at the top table.
As Donald Trump has repeatedly stated about his role as President of America, as the President Kenya, it is my duty to put Kenya first, Africa second but also embrace the world.
Modernity has taught us to recognise the interdependence of the three.
My dream of continuing Kenya’s journey of transformation to build a peaceful, prosperous and competitive country will lay the foundation to support Kenyans, and our African cousins, for generations to come.
Adding Kenya’s voice to the rich tapestry of global cooperation gives hope that we can not only elevate our own country, but also show countries around the world the great gains that can be harvested through a spirit of partnership.
Mr Kenyatta is the President of Kenya
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tralac’s Daily News Selection
To mark Africa Day 2017 why not explore the trade-related sections in the archives of the AU/OAU and the UNECA
Underway, in Kempton Park: inaugural Joint Administration Committee of the MERCOSUR-SACU PTA
The key recommendations from this week’s PACCI/ATPC Single Window workshop
Selected updates from the AfDB Annual Meetings:
(i) AfDB Annual Meetings end with call to see the potential of African agriculture
(ii) Annual Development Effectiveness Review 2017: Transforming Africa – Unlocking agriculture’s potential. This ADER (pdf) presents the contribution of the African Development Bank (AfDB, or the Bank) to Africa’s development. It outlines recent economic and social trends across the continent, particularly those relating to the Bank’s “High 5” priority areas. It analyses the opportunities and challenges facing Africa in the coming years, assesses how well the Bank has performed against its objectives, and discusses how the Bank will support Africa in achieving the inclusive and sustainable development that is highlighted in the Bank Strategy. This year the spotlight is on the Bank’s Feed Africa priority, as the ADER explores the theme of agricultural transformation. Extract from Chapter 4 Integrate Africa: This chapter sets out Africa’s progress on regional integration, using indicators from Level 1 of our new Results Measurement Framework (RMF). We also review the results of the Bank’s efforts on regional integration (from Level 2 of the RMF) and highlight lessons learnt from our work. We present our plans to rapidly scale up our programmes to address the challenges ahead, and also discuss how regional integration will support agricultural transformation across the continent. Under our Integrate Africa Strategy, which will be finalised in 2017, we are scaling up our operations to Integrate Africa by supporting regional economic integration. We will bolster talent mobility and improve the business climate to attract foreign direct investments.
(iii) AfDB Annual Report 2016 (pdf, 14.2 MB), AfDB Group Financial Presentation
(iv) India-Japan partnership to play key role in Asia-Africa corridor (Mint). India’s alliance with Japan is set to play a key role in the proposed ‘Asia Africa Growth Corridor’ as the island country looks to invest close to $200bn in the proposed project, according to two officials close to the development. One of these officials did not want to be named. “Japan is ready to commit about $200bn in the proposed growth corridor. An announcement on the same is expected to be made in the month of September this year. Japan has already invested about $32 billion in infrastructure projects in Africa. India is working on its investment plans and should be able to decide in the next few months. A detailed plan for the corridor should also be in place by then,” said Sachin Chaturvedi, director general of Research and Information System for Developing Countries (RIS), a New Delhi-based think tank. The four main components of AAGC listed in the vision document include development and co-operation projects, quality infrastructure and institutional connectivity, capacity and skill enhancement and people-to-people partnership. Further, AAGC include human resource training, setting up pan Africa E-network, developing capacities to sustain infrastructure, greenfield projects, investment opportunities, renewable energy, power grids, agriculture and agro processing, disaster management, joint venture projects and private sector financing.
2nd East African Business Manufacturing Summit: updates
(i) Highlight from keynote speeches: Rwanda’s Prime Minister, Rt. Hon Anastase Murekezi, said the average contribution of the manufacturing sector to GDP of EAC is about 10%. It is planned that this contribution will reach 25% by 2032. It is also expected that by the same year 2032, EAC will have diversified the manufacturing base and raised the value of the local content of manufactured exports to at least 40% from the currently estimated value of 8%. To be able to achieve these targets, EAC must focus on full implementation of the Common Market Protocol as well as on value addition for export products. The Executive Director of the East African Business Council, Ms Lilian Awinja, called for the EAC region to formulate Regional Local Content Policy with the aim of boosting the domestic value-add in the region.
(ii) Kenya has not reneged on ban on used clothing, says official (New Times). Betty Maina, principal secretary in the Kenyan ministry of labour and EAC affairs, told The New Times that Kenya has not made a U-turn on reduction of consumption of used clothing and that East Africans should have the dignity of wearing new clothing. She was emphatic that the communiqué of the 18th Ordinary Summit of the EAC Heads of State, held in Dar-es-Salaam last weekend, “clearly affirmed the commitment of east Africans to build up a competitive local textile industry” and Kenya was part and parcel of the Summit. According to François Kanimba, Rwanda’s minister for Trade, Industry and EAC affairs, the EAC Secretariat has completed a study on a roadmap how the region will implement the phase out and ultimate total ban of imports of used clothing. The EAC study, he said, will be discussed at the end of the month during which they will approve a detailed strategy on how to develop textile and leather industry in the region. Rwanda has already started implementing a phase out of importing used clothing.
(iii) CUTS/FAO report launch: Business-friendly regulations will help formalise cross-border trade (New Times). A business-friendly regulatory environment and a tax regime that favours small-scale traders are some of the incentives that will entice informal cross-border traders to formalise their business. These recommendations are contained in a report dubbed Formalization of informal trade in Africa: trends, experiences and socio-economic impacts, that was conducted by Consumer Unity and Trusts Society with support from the FAO. According to FAO Representative to Rwanda, Attaher Maiga, informal cross-border trade has been contributing about 42% to Africa’s GDP. Alice Twizeye, Director of External Trade at the Ministry of Trade, Industry and EAC Affairs, said that women account for about 80% of informal cross-border traders in Rwanda, adding that the government has been supporting them through capacity building and access to finance. She noted that informal cross-border trade contributed 30 to Rwanda’s total exports.
Tanzania: ‘Çover-up’ uncovered (IPPMedia)
Tanzania’s mining industry appears to have been literally turned on its head in the wake of yesterday’s stunning revelation that well over 1 trillion/- worth of gold, copper and other authentic gemstones were found in just 277 containers impounded at the port of Dar es Salaam in March this year with loads with mineral sand ready to be shipped abroad for processing. The findings are contained in a much-awaited report compiled by a committee of experts appointed by President John Magufuli in March this year to verify the actual amount of real minerals in the ‘sand’ – otherwise known as gold-copper concentrate ores – stored in the containers. Among its key findings, the probe team led by Prof Abdulrahman Mruma reported that the containers impounded at the port had real minerals worth 1.339trn/- in total, which had not been declared for taxation or recorded by the Tanzania Mineral Audit Agency. The government therefore has not seen a single cent in terms of tax from these minerals,” the report said. It added that the minerals found in the concentrates and not declared for taxation included real gold, silver, copper, metal and sulphur, plus other strategic minerals such as helium, nicon, zinc, lithium and ledium. According to the report, the strategic minerals alone from sampled containers were valued at between 129.5bn/- and 261.5bn/-.
Related: Report shows how Tazania lost 13trn/- in mineral royalties, Sombre mood grips dossier presentation, Sacking of Muhongo bares herculian task at ministry, We have nothing to hide, says Acacia amid damning report
Innovative trade finance fund targets African SMEs and producers (GTR)
Africa’s newest trade finance fund, Savia Trade Finance Impact Fund, is set to pilot later this year and will use a pool of concessional funds to support riskier credit structures, commonly found in the agriculture sector and SMEs. Savia will be Africa’s first trade finance impact fund. As a debt fund, Savia will seek to address Africa’s unmet demand for trade finance by utilising blended finance – a combination of concessional and commercial funding – solutions. It will specifically target smallholder farmers and SMEs with sales of less than US$10mn, with a greater focus on those companies involved in intra-African trade.
Zimbabwe: Banks reject rand adoption (Daily News)
Zimbabwean banks say adopting the South African rand will not help solve the country’s economic challenges. Addressing delegates at the two-day Financial Markets Indaba in Harare last week, Barclays Bank Zimbabwe managing director George Guvamatanga said more has to be done to solve the current liquidity crunch. “Adopting the rand is not the solution. The question we must all answer is do we want to be subjected to the South African monetary authorities” he said. [Mineral exports up 27%]
Mauritius: China’s Vice Minister of Commerce strengthens bilateral relations (GoM)
The Vice Minister of Commerce, Mr Qian Keming, emphasised that under the Belt and Road Initiative, Mauritius is called upon to play a strategic role to link China with Africa for forthcoming grand projects. He further stressed for deeper cooperation between Mauritius and China in the fields of aviation, tourism, trade, financial services and agriculture.
How trade with China boosts productivity (IMF)
Our new research shows that for advanced economies: (i) Productivity growth has been faster in countries and industries that have been more exposed to China’s opening to trade, all else equal; and (ii) As much as 12% of the increase in productivity over the 12 years from 1995 through 2007 can be attributed to China’s integration into world trade. Trade improves productivity in three important ways: [The analysts: JaeBin Ahn, Romain Duval]
Today’s Quick Links: EU hooks most of SA’s fish exports EU-EAC trade deal: why has it been a hard sell? Mobilitas-AGS inaugurates multimodal logistics platform in Gauteng Initiative for Global Development’s Frontier 100 Forum (5-6 May, Durban): outcomes In Beijing: ‘African countries restate commitment to digital migration’ To Make in India, Modi govt approves Buy in India India: Concept note for the Mid-Term Review of the Foreign Trade Policy (2015-2020) (pdf) |
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Harnessing rather than suppressing informal trade can give Africa a boost
FAO study offers policy guidance for linking half of all cross-border trade to development goals
Africa’s vast but informal cross-border trade can contribute to improving livelihoods and increasing regional integration across the continent, according to a new report presented at a conference in Kigali.
Informal cross-border trading, in which transactions are not compliant with local tax and other rules, accounts for a large share – between 20 and a hefty 70 percent – of employment in sub-Saharan Africa, and putting it on a regular footing can lift sustainable prosperity and markedly improve prospects for women, says FAO’s new publication, “Formalization of informal trade in Africa”.
Around half of all intra-African cross-border trade is classified as informal, indicating its large if officially invisible role. Proactive policies that recognize such activity, tapping its potential with the aim of steering it towards proper regulatory status, are to be preferred over heavy-handed approaches to eradicate or seek rents from entrepreneurs, according to FAO.
“Facilitating formalization is the only viable policy option for Africa’s transformation agenda to realize its objectives,” says Suffyan Koroma, FAO senior economist and lead author of the report.
“Despite the significant contribution of the informal sector to African economies, the policy makers quite often have no information on ICBT due to lack of quality data, this has hampered the development of supporting policies to the sector,” said Clement Onyango from the Nairobi chapter of Consumer Unity and Trust Society, a non-governmental organization that is co-hosting the conference with FAO.
A huge role for women
Informal cross-border trade activity is largely a second-choice option taken by people in the absence of clearly defined formal alternatives. It consists of trade in goods and services, often agricultural in nature, and in times of food crises and other shocks has proven to be more responsible than legal channels.
Off-the-radar economic activity, not all of it involving international trade, accounts for around 40 percent of GDP in Africa, higher than in Latin America or Asia.
The trade is rarely illegal. In most cases it is informal because practitioners have poor access to all the appropriate business licenses, administrative skills and knowledge of import and custom-tax laws to act otherwise. While such activity is an important source of household income, practitioners are often prey to corruption and their weak access to credit means their activities are rarely stable or sustainable.
Women constitute the largest share of such informal traders, comprising more than half in Western and Central Africa and about 70 percent in Southern Africa, the FAO report found.
Patterns differ by region: In Tanzania, women dominate trade in manufactured products while men handle mostly raw or semi-processed agricultural products, whereas the opposite is the case in Cameroon. Women and men tend to differ in which foodstuffs – fresh produce or commodity staples – they trade as well. Appropriate policies must take such facts into account.
The Kigali conference is part of ongoing FAO-supported work in the country, along with UN Women and other development partners, aimed at enabling women to benefit more from agri-food chains, a project geared to allowing women small traders access useful information as well as start-up capital.
Local agricultural produce and livestock account for two-thirds of Rwanda’s exports, most of which are informally traded, with the bulk going to neighboring countries, notably the Democratic Republic of Congo. Rwanda encourages informal small traders to form cooperatives as a step towards regularization.
Women trading between the border posts of Kenya and Uganda and between Rwanda and Burundi prefer to use brokers who appear to shield them from what they perceive as unprofessional behavior of customs officials, the report notes.
FAO, working with Catholic Relief Service, has also organized open-door events on the Rwanda-Congo border where women cooperatives were invited to learn more about the cross-border tax regime directly from custom officials and government representatives.
“Rwanda has emerged as a model of best practice for cross border trade through its efforts to integrate the informal economy by easing trade channels for small-scale agricultural traders,”said Attaher Maiga, FAO’s Representative in Rwanda.
Policy recommendations
Aware that “ICBT-blindness” in national and regional trade policies and poverty reduction strategies may be hampering progress, African governments are increasingly making efforts to identify dynamics in the sector. In Uganda, both the Bureau of Statistics and the central bank monitor such flows and the government is discussing whether an approach focusing on quality control and value-added potential so that traders can earn more should take priority over a laisser-faire approach or actions aimed at suppression.
Key priorities to facilitate the formalization of informal cross-border trading according to FAO, include the simplification of licensing requirements, tax incentives, fostering partnerships, radio, television and town-hall outreach to participants in the informal economy, and intensifying efforts to tackle official corruption.
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Africa remains world’s second-fastest growing region
In 2016, Africa as a whole maintained its position as the world’s second-fastest growing economies behind South Asia, according to data released during the Financial Presentation at the African Development Bank Group’s Annual Meetings, which entered its third day on Wednesday in Ahmedabad, India.
The report analyzed the continent’s economic outlook, Bank operations, financial profile and capital market activities, noting that the continent recorded an average of 2.2% GDP growth in 2016 compared to 7.1 posted by South Asia powered India against a 2% average for the developed economies.
The report said African economies would improve further to average 3.4% growth in 2017 and 4.3% in 2018, driven largely by growing domestic demand and good performing countries.
“Although natural resources and primary commodities are still major drivers, their importance has declined while domestic factors including consumption demand play an increasing role,” AfDB Senior Vice-President Charles Boamah said during the presentation.
Other factors include improved supply conditions and good business environment, prudent macroeconomic management, favorable external financial flows, and high public spending, he said.
The report notes that, while natural resources and primary commodities remain major growth drivers, their importance has declined, while domestic factors including consumption demand now play a greater role.
Vast differences in country, sub-regional performances
East Africa emerged the best sub-regional performer with a 5.3% real GDP growth average driven by strong performance in Ethiopia, Tanzania and Djibouti.
North Africa followed with an average 3.3% growth driven by recoveries in Egypt (4.3%) and Algeria (3.5%), amidst persistent political uncertainties.
Southern Africa recorded a 1.1% average due to the poor performance of South Africa and Angola, two major commodity exporters in the sub-region hit by drought, persistent power outages and adverse terms-of-trade shocks, while Madagascar and Mozambique were rare bright spots, posted growth rates above 4%.
Central Africa followed with a 0.8% average due to low commodity prices while some countries lime Cameroun proved resilient. Central African Republic and São Tomé and Príncipe improved their economic performances.
West Africa was at the bottom, averaging a 0.4% growth rate despite good performances by Côte d’Ivoire and Senegal, which were cancelled out by recession and socio-political factors that bogged down the economy to 1.5% growth.
Nigeria and South Africa account for the largest share of Africa’s GDP with 29% and 19%, respectively.
Overall, external flows slowed
The report said Foreign Direct Investment increased slightly reaching US $56.5 billion in tune with growing urbanization and cities growing with consumer markets increasingly targeted by foreign investors. Official development assistance (ODA), which remains the most important source of public finance, declined by 1.7%.
Remittances mainly by the African diaspora represent a key source of capital for African countries totaling US $64.6 billion in 2016, the report says.
However, the facts on the ground suggest that these resources are insufficient to fully meet the continent’s development challenges.
An improved outlook
In this regard, the Bank estimates that its High 5 priorities – Light up and power Africa, Feed Africa, Industrialise Africa, Integrate Africa, and Improve the quality of life for the people of Africa – would spearhead Africa’s economic diversification and growth in broad-based economic opportunities that will shield the continent from future commodity shocks and enhance their resilience.
“Growth prospects would further be boosted by expected increases in commodity prices, strong domestic demand, better macroeconomic governance and an improved business environment,” co-presenter and Acting Vice-President for Finance, Hassatou N’Sele, said.
However, the report also cited rising debt, structural weaknesses, power outages, climate change, conflict, political instability and terrorism among some of the downside risks which should not be ignored.
African Development Bank Group Annual Report 2016
Repositioning the Bank Group
Africa has come a long way. Before the turn of the century, poverty was rampant, economies were faltering, infrastructure was in disrepair, and political and economic governance was weak. Africa as a continent was fragile. Things changed as Africa grew rapidly over the next two decades. Extreme poverty in Africa declined from 56 percent of the population in 1990 to 41.5 percent in 2015. Economic policies, political stability, and the business environment all improved, making the region a target for foreign direct investment, which reached USD 56.5 billion in 2016. Africa is on the rise.
Despite these achievements, poverty remains a challenge in Africa, with an estimated 400 million poor, in 2015, up from 350 million in 1990, largely because of rapid population growth. Income inequality remains high, youth unemployment is rising, and gender equality remains elusive. The benefits of growth in Africa have not reached the masses.
More important, Africa continues to be at the mercy of boom-bust cycles dictated by trends in the global economy. Global growth slowed to 3.1 percent in 2016 (from 3.2 percent the previous year). The loss of momentum in the economic recovery of the United States (where growth dipped to 1.6 percent in 2016 against 2.6 percent in 2015), the uncertainty following Brexit and the slowdown in China, where growth is converging to a “new normal” after declining continuously from its 2010 level, are the key factors weighing on Africa’s growth. The weak global environment has hit African economies mainly through low commodity prices and depressed export demand for African goods. Economic growth in Africa plunged to 2.2 percent in 2016, the lowest in over a decade.
The biggest commodity-exporting countries saw a sharp drop in growth, but several oil-importing countries continued to enjoy reasonably rapid growth. Nigeria’s economy, the largest in Africa, contracted in real terms by 1.5 percent. South Africa and Angola narrowly escaped recession. South Sudan suffered a deep economic contraction (of 13.1 percent), while growth in other oil-exporting countries remained negative (Chad and Equatorial Guinea). Only Egypt (4.3 percent) and Algeria (3.5 percent) were able to maintain reasonably good economic performance in the face of declining oil prices. In contrast, non-resource-intensive economies generally fared well, led by Côte d’Ivoire (8.4 percent) and Senegal (6.7 percent) in Western Africa, and by Tanzania (7.2 percent) and Kenya (6.0 percent) in Eastern Africa. Economic growth in Africa is expected to rebound to 3.4 percent in 2017 – but still below the average for the past 10 years.
The diversity of economic performances in the face of global headwinds underpins Africa’s heterogeneity as a region, as illustrated by the resilience of non-commodity-intensive economies. There is also evidence – from Africa’s response to the financial crisis – that the most regionally integrated countries are able to better weather external economic shocks. Together, this points to the need for African countries to diversify their economies in terms of both the basket of goods and services that they produce and the markets. Urgent and bold economic transformation is more than ever a priority for the continent. The opportunities to pursue it abound.
Africa’s enormous development potential – in almost all sectors – has yet to be tapped. In agriculture, African countries remain food insecure, spending billions of dollars on food imports every year to feed their people. Yet Africa has 65 percent of the world’s untilled arable land to meet the food needs of the planet’s 9 billion people by 2050. In energy, Africa has the lowest electrification rate across world regions, with more than 645 million people lacking access to electricity. Yet the continent’s potential in renewable energy is huge, and largely unexploited.
Moreover, many African countries are stuck at the low end of the agricultural value chain, exporting raw commodities that are subject to price and climatic fluctuations. Industrialization efforts have faltered, mainly because of poor policies and a lack of support services. Even so, agriculture can form the basis for industrialization in Africa, and African countries can position themselves to integrate into global value chains and move up along them through agro-processing. Harnessing the private sector – by facilitating access to finance for innovative enterprises, incentivizing entrepreneurship, and providing the right business environment – will be critical to maintaining industrial impetus.
Lastly, Africa’s intraregional trade is among the lowest in the world, held down by fragmented markets owing to poor policies, little economic diversification, and weak infrastructure. Regional integration remains an imperative for a continent where 16 countries, with one-third of Africa’s people, are landlocked, and 19 countries have populations of less than 5 million.
All these challenges have persisted for too long. Therefore, business as usual will not be enough to drive sustainable growth and alleviate poverty in Africa. A new development approach is in order. This is needed because the Bank, as Africa’s leading financial institution, continues to face challenges in meeting the development agenda of its Regional Member Countries (RMCs) – despite its track record of delivering development impacts across the continent for over half a century. While the Bank Group remains financially strong, as confirmed by its AAA/ Aaa and AA+/Aa1 ratings, there is an urgent need to augment its revenues, which have declined significantly in recent years. Moreover, to improve the development impact of its operations, the Bank must get closer to its clients and reform its processes to speed up disbursement and project implementation, all while cutting costs and enhancing productivity. In short, the Bank must transform itself to deliver more effectively. Piecemeal, incremental reforms have not worked.
In 2016, the Bank Group embraced a bold transformation agenda – a promise to transform Africa by transforming itself, by becoming a more efficient and effective institution, by rallying its people and partners behind this cause, and by leveraging and scaling up development finance to catalyze development.
Evolving with the New Business Development Landscape
At the center of the Bank’s transformation agenda are the High 5s – Light Up and Power Africa, Feed Africa, Industrialize Africa, Integrate Africa, and Improve the Quality of Life for the People of Africa – that the Bank Group adopted in late 2015. In 2016, the Bank Group sharpened its focus on the High 5s as it rolled out the strategies needed to implement them. It adopted in April 2016, a new Development and Business Delivery Model (DBDM) to realign its organizational structure with the strategic objectives of the Ten-Year Strategy 2013-2022 for achieving inclusive and green growth and the High 5s priorities to accelerate delivery and development impacts. The new structure also aims to bring the Bank closer to its clients and improve organizational effectiveness to meet the growing needs of RMCs and their private sector.
During the year, the Bank Group initiated several reforms as part of a transformative agenda to restructure the organization to build regional capabilities, change the Bank’s culture, and streamline its processes. It approved The Update of the Decentralization Action Plan with a view to adjusting the ongoing decentralization process with the new DBDM. The Update seeks to strengthen the presence of the Bank at the regional level; right-size offices at country and regional levels; reconfigure the role, functions, and relations of the sector departments at Headquarters; and establish the Regional Development, Integration, and Business Delivery hubs. The strategies to operationalize four of the five priorities were swiftly developed and approved by July 2016, along with initiatives to implement these strategies. For the Integrate Africa priority, the Bank Group has, for now, retained the existing Regional Integration Policy and Strategy 2014-2023 but is working on a new strategy that will reflect emerging priorities.
The new strategies entail major financial commitments and active engagement by the Bank over the next ten years. Their implementation will require investments of about USD 100 billion, and the Bank will leverage several times this amount through strategic partnerships, including those with the private sector.
In 2016 the Bank Group’s operations laid the foundation to unleash an agricultural transformation in Africa, create jobs for thousands of youth, empower young entrepreneurs including many women, and bring electricity to several million Africans – improving their quality of life.
» Download: AfDB Annual Report 2016 (PDF, 14.2 MB)
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Annual Development Effectiveness Review 2017: Transforming Africa – Unlocking agriculture’s potential
Executive summary
This Annual Development Effectiveness Review (ADER) presents the contribution of the African Development Bank (AfDB, or the Bank) to Africa’s development. It outlines recent economic and social trends across the continent, particularly those relating to the Bank’s “High 5” priority areas.
It analyses the opportunities and challenges facing Africa in the coming years, assesses how well the Bank has performed against its objectives, and discusses how the Bank will support Africa in achieving the inclusive and sustainable development that is highlighted in the Bank Strategy. This year the spotlight is on the Bank’s Feed Africa priority, as the ADER explores the theme of agricultural transformation.
This ADER draws on a new Results Measurement Framework (RMF) structured around the High 5 priorities: Feed Africa, Light up and power Africa, Industrialise Africa, Integrate Africa, and Improve the quality of life for the people of Africa. These are the specific areas in which we are scaling up our pdf Bank Strategy 2013-2022 (844 KB) . Strategies for the High 5s were approved in 2016 and are now being implemented.
To support this ambitious agenda, the Bank is also implementing its new Development and Business Delivery Model, to help us work more effectively and achieve greater development impact. The RMF translates the Bank’s five priority areas, cross-cutting strategic priorities and internal reform agenda into concrete objectives and targets. The ADER therefore presents an assessment of how we have performed against these targets. It includes lessons from recent projects about what has worked well and how we can do better. Using “traffic light” symbols, we present the results data in a narrative form, to promote transparency and accountability to our partners and stakeholders.
The ADER reflects the structure of the results framework. Each of the first five chapters assesses progress against a High 5 area, and Chapter 6 takes stock of progress on the four cross-cutting strategic areas of governance, fragility, climate change and gender. In each of these chapters, we assess trends in Africa (Level 1 of the RMF) and progress made by the Bank’s interventions (Level 2), and we discuss how to accelerate our contribution to Africa’s development. Chapter 7 assesses our progress in improving development impact (Level 3) and our efficiency as a development finance institution (Level 4). The final chapter shares our key objectives for delivering the High 5s and cross-cutting priorities over 2016-2025.
Feed Africa
Africa’s agriculture sector has seen steady improvement in recent years, as farmers have expanded into agribusiness and a number of countries have begun to sell their goods in regional and international markets. Agricultural productivity and cereal yields have increased. However, agricultural yields and the returns to farming remain lower than in comparator regions, trapping many rural households in poverty. Most Africans depend on the land for their food and nutrition.
Although progress is being made, over 211 million people are hungry or malnourished, and nearly a quarter of African children under five years old are stunted. In addition, parts of Africa are once again in the grip of famine – a product of conflict and governance failures.
This ADER highlights two challenges for Africa’s global trade in agriculture. As populations and cities expand and the middle class develops, a sharp increase in the demand for food imports has led to a negative agricultural trade balance – a macroeconomic challenge. Meanwhile, agricultural exports often still consist of raw or semi-processed products, and Africa’s share of market value remains low.
Strategy – Our pdf Feed Africa strategy 2016-2025 (7.93 MB) is designed to eliminate extreme poverty; end hunger and malnutrition; make Africa a net food exporter; and move Africa to the top of certain agriculture-based, export-orientated global value chains in areas in which it enjoys a comparative advantage.
Bank contributions – Our interventions in agriculture over the last year have benefitted 5.6 million people. We met our target in assisting 597 900 people to increase their use of technology. For example, in Nigeria, we trained 733 people and provided irrigation pumps and agro-processing equipment. We built or rehabilitated 520 km of feeder roads, provided farmers with access to 2300 tonnes of inputs and delivered increased access to finance. We supported improved water management on 37 600 hectares. In Gambia, we improved land and water management practices for over 68 400 people, significantly reducing soil erosion, controlling salinity and increasing rice yields above our target. We also increased the yields of a wide range of crops through our assistance to agricultural research networks, training around 17 000 research and extension staff and benefiting an estimated 698 000 farmers.
Lessons – In implementing our operations in this sector we have drawn some lessons: the importance of timing procurement schedules to fit with agricultural seasons; putting beneficiaries in the driving seat to ensure successful results; and defining clear logics of interventions for projects.
Light up and power Africa
Africa’s unprecedented levels of economic activity and growth since 2000 have been underpinned by investments and institutional reforms in the power sector. Investment in new generation capacity, including in renewables, has increased steadily, and transmission and distribution systems have become more efficient.
Whilst the continent has abundant energy resources, it still suffers from a huge power deficit, particularly in sub-Saharan Africa: over 645 million Africans cannot yet access electricity. The agriculture sector needs reliable, affordable energy for irrigation, storage and processing, to enhance productivity and increase the returns to farmers. Replacing biomass with electricity for household fuel prevents deaths and health risks, particularly for women and girls. It also provides more time for women and girls to engage in productive work and attend school. So far, only 1 in 10 Africans has access to clean cooking solutions.
Strategy – Our pdf New Deal on Energy in Africa 2016-2025 (2.24 MB) is driving a major expansion of energy services, in partnership with governments, donors and the private sector, to achieve universal access to electricity across Africa by 2025. The New Deal will increase generation capacity by 160 GW, expand transmission systems and connect 130 million new households and businesses. It will add 75 million new connections through off-grid generation and increase access to clean cooking energy for 130 million households.
Bank contributions – Projects under the New Deal include our $1.34 billion syndicate loan in South Africa, as well as projects building transmission lines to connect 20 000 households to Côte d’Ivoire’s national grid and providing electricity to 36 Ethiopian towns and villages. We also manage the Africa Renewable Energy Initiative, launched at the 2015 Paris climate change conference, which will deliver over 300 GW of renewable energy capacity by 2030.
Last year, the Bank’s energy portfolio exceeded the previous year’s results but fell short of our higher targets. We installed 540 MW of total power capacity and 41 MW of renewable power capacity. We delivered 2830 km of new or improved power and distribution lines and provided 653 100 households with new or improved electricity connections. Our investments reduced carbon dioxide emissions by the equivalent of 69 000 tonnes per year.
Our investment in the Abu Qir Thermal Power Plant in Egypt increased grid capacity by 4%, supporting the government’s plans for a greener economy and meeting growing energy demand from households and businesses. We co-financed the Integrated Solar Combined Cycle project in Morocco, which delivered 472 MW through innovative concentrated solar power technology coupled to a gasfired plant. We supported off-grid and mini-grid innovations, to assist people in rural areas and improve agriculture and agribusiness.
Lessons – We drew lessons from our energy portfolio: the importance of providing sound compensation for those affected by expropriation of land; valuing the inputs from external expertise on innovative technical areas; promoting timely project delivery through realistic scheduling and early market engagement for procurement; and ensuring that local governments allocate funds for the maintenance of facilities.
Industrialise Africa
Africa is making progress in industrialisation, to balance its traditional dependence on unprocessed or semi-processed natural resources and agricultural produce, and the continent is becoming more competitive.
With growing urban markets and regional integration, investors are exploiting economies of scale, boosting productivity and linking to global supply chains. Economies are diversifying, both across natural resources and into medium- and high-technology sectors. However, across sub-Saharan Africa (excluding South Africa), industrial GDP, gross capital formation and value-added from manufacturing remain much lower than in comparator regions.
Nearly half of all Africans can now access financial services, often through mobile telephone services, but a lack of access to finance and capital remains a significant constraint on industrialisation. Africa also needs improved logistics performance if industries are to be efficient and competitive.
Strategy – Under our Industrialisation Strategy for Africa (2016-2025), we are working with governments and other development finance institutions to bring about the structural transformation of African economies. Our aim is to nearly triple Africa’s industrial GDP over the next decade by financing six flagship programmes.
Bank contributions – Over the last year, the Bank’s industrialisation-related projects benefitted 2.22 million people. We provided better access to transport services to 7 million people and constructed, rehabilitated or repaired 2200 km of road. Financial services were provided to 156 000 individuals and small- and medium-sized businesses, helping to improve their turnover from investments.
In Zambia, we worked with partners to strengthen the capacity of small businesses and improve their access to finance from national financial institutions. In West Africa, we supported the cotton and textile sectors in four countries and expanded the textile industry.
Lessons – To improve our effectiveness, we realised the importance of making roads sustainable by ensuring that maintenance is funded; providing guidance as an advisory committee member in private equity funds; measuring the results of lines of credit provided through private sector institutions; and establishing baselines to monitor the performance of investment in private banks.
Integrate Africa
Africa continues to make progress on its integration agenda, to achieve the increases in competitiveness, trade and economic growth that are needed to reduce poverty. Yet intra-African trade is just 15% of Africa’s total trade. Cross-border roads, including regional transport corridors with trade facilitation measures, dramatically reduce the time and costs facing traders. Regional power pools and energy trade enable millions of people in energy-deficit countries to access electricity and reduce energy costs for business. Africa needs substantial investment in infrastructure to attract investment and create larger markets for businesses, including commercial agriculture.
The Regional Economic Communities develop soft infrastructure, strengthen national and regional institutions and support trade facilitation, to help businesses access expanding and integrated regional markets. However, despite these efforts, only 19 of Africa’s 54 countries are considered to be “deeply and broadly integrated”, and just 13 have liberal visa policies for citizens of other African countries.
Strategy – A new regional integration strategy, to be approved in 2017, will emphasise the expansion of regional infrastructure, including soft infrastructure. As Africa’s main financier of regional infrastructure, we work with other partners to catalyse private investment and engage with financial markets to raise capital.
Bank contributions – Last year, the Bank constructed or rehabilitated 540 km of cross-border roads. We rehabilitated the Lomé-Ouagadougou corridor and built a new container terminal at the Lomé port, increasing trade, business activity and jobs.
We constructed or rehabilitated cross-border power transmission lines. We provided eight grants for preparing bankable regional infrastructural projects, and already one of these projects – a major power interconnector project involving Nigeria, Niger, Benin and Burkina Faso – has received financial pledges to cover its full cost of $682 million. We also financed studies and convened workshops to develop consensus on future regional development needs.
Lessons – Some challenges in implementing our regional integration portfolio have highlighted the importance of promoting government commitment to enforcing regional regulations; promoting project activities that target women; ensuring sufficient monitoring and evaluation expertise; and providing high quality-at-entry for regional projects.
Improve the quality of life for the people of Africa
Four in 10 Africans live in poverty. Because of the high population growth rate, Africa’s economic growth per capita is barely increasing, despite strong economic performance since 2000. With 200 million Africans between the ages of 15 and 29, youth unemployment and underemployment are high. Investing in skills through technical and vocational education will be essential to enabling young people to find jobs and enterprise opportunities.
Better health, education, water and sanitation services are instrumental to improving quality of life. Despite good progress in these areas, there is still some way to go: 61% of Africa’s appropriate age population are enrolled in education and 71% of Africans have access to improved drinking water, but just 39% have access to improved sanitation services. Better nutrition is also fundamental to reducing deaths of children under five, preventing stunting and promoting quality of life.
Strategy – The Bank’s pdf Jobs for Youth in Africa Strategy 2016-2025 (1.69 MB) takes a comprehensive and integrated approach to equipping young people for work and enterprise. We are integrating a youth employment component into new Bank projects, and are working closely with regional member countries to develop policies that promote youth employment.
Bank contributions – In 2016, the Bank created jobs and provided social services to improve the quality of life of Africans. We directly delivered 1.6 million jobs and trained 652 000 people, both women and men. In rural Malawi, we provided grants to small- and medium-sized agribusinesses, creating 948 skilled and 2110 unskilled jobs. Our projects in Côte d’Ivoire, Tanzania and Uganda provided access to finance and business advice. We provided new or improved access to water and sanitation to over 3.73 million people, a major accomplishment in this area. In Tanzania and Zimbabwe, we delivered irrigation for over 700 farms, and our support to the Southern African Development Community involved 23 community water-basin management projects, which increased access to irrigation. Our education projects benefitted 477 200 people, of whom 269 600 were women.
Lessons – Significant lessons from our portfolio included the importance of promoting continuity in project management by ensuring a low staff turnover; avoiding measures that need Parliamentary approval as a pre-condition of fast-disbursing aid; and ensuring that a gender strategy, including any needed training, is built into projects.
Cross-cutting and strategic areas
Africa’s unprecedented economic growth since 2000 was accompanied by major changes across the continent, from an expanding urban middle class to increased trade and investment. However, the recent slump in global commodity prices has reduced export revenues, and, although economic growth per capita is still rising, GDP growth has decreased from 3.6% in 2015 to 3.2% in 2016.
Addressing the cross-cutting issues of governance, fragility, climate change and gender is fundamental to achieving sustained development. By various measures, Africa’s governance is improving, though there are wide variations across the continent.
Sound public financial management is needed to fund infrastructure maintenance, and stronger institutions are critical for managing reforms, including those for agricultural transformation. Conflict and fragility severely constrain development and increase people’s vulnerability to hunger, malnutrition, and famine. Thus agricultural development is critical in fragile situations, for resilience and food security.
Climate change can reduce agricultural productivity and increase farmers’ vulnerability, through reduced soil fertility and more frequent and extreme floods and droughts. More countries are pursuing green growth strategies, limiting the growth in carbon emissions. We believe that gender equality is central to inclusive growth and must be promoted throughout agricultural supply chains.
Women in farming and agribusiness often experience serious gender-related constraints – including in land ownership, inheritance rights, adequate time free from household duties, and access to inputs, finance and markets.
Bank contributions – The Bank prioritises these cross-cutting issues throughout our portfolio, recognising that they are central to achieving inclusive and sustainable growth and the High 5 priorities. Last year, we helped countries improve their budgetary and financial management and achieve greater public sector transparency and accountability. We improved public procurement and promoted more effective business environments. For example, our economic governance support in Nigeria includes support to the agriculture sector.
We supported agricultural value chains in fragile situations, including the livestock sector in Somalia and the cotton sector in Northern Uganda, and we are increasing the share of funds for addressing fragility under the new 14th African Development Fund (ADF) replenishment to 17%, up from 14% for ADF 13. In Nigeria, we are promoting food security, employment opportunities and school gardens as part of our multi-sectoral support to address the fragility caused by the Boko Haram insurgency.
The Bank is scaling up and replicating projects that support adaptation to climate change, working closely with the Africa Adaptation Initiative. We blend our resources with funds from the UN Green Climate Fund to mitigate climate change and support adaptation strategies. Over the last five years, we delivered 260 climate change projects, and we are continuing to scale up our support to climate-smart agriculture, to strengthen resilience and promote sustainability.
We support gender equality across our portfolio, and promote economic empowerment for women throughout agricultural value chains. Last year, we delivered improvements to the private sector in Burkina Faso through greater access to finance for women. Our projects tackle insecurity of land tenure, promote the use of technology, and increase access to finance, including through our Affirmative Finance Action for Women in Africa Initiative.
Lessons – Fundamental lessons from our projects on cross-cutting and strategic areas include the importance of aligning with other development partners; having a robust theory of change; and choosing disbursement triggers that are fully under the government’s control.
Conclusion and outlook
Africa is developing at an unprecedented pace, as a result of growing levels of trade and investment and its own self-sustaining growth.
The agriculture sector continues to develop, but transformation into more productive value chains will be needed if it is to be a driver of inclusive and sustainable growth. Overall economic growth has slowed from the high levels of 2000-12, but the outlook for broad and sustained development remains positive, especially as countries diversify their economies, improve competitiveness and strengthen institutions.
Our Bank Strategy and the High 5 priorities give us a clear road map for accelerating our support over the coming years. For agriculture, we know the combination of policies and interventions that is needed to enable a private-sector-led transformation of the sector, leading to higher incomes and jobs, especially for young women and men. We are scaling up our support to sustainable agriculture and creating a conducive environment for investment. We are investing in transport, power, water and IT infrastructure, to improve access to markets, inputs, improved technologies and finance, including for women. We are also investing in value chains and linking farmers to global and regional markets. We are increasing our efforts to mitigate and adapt to climate change, investing in climate-smart agriculture and improving resilience at all levels. We are accessing substantial global finance for climate mitigation and adaptation and matching it with Bank resources.
The High 5 priorities will collectively contribute to Africa’s agriculture transformation. Universal access to energy, a tripling of Africa’s industrial GDP, a more integrated Africa, and a healthy, educated and trained workforce will work together with a transformed agriculture sector to deliver inclusive and green growth, eliminating poverty in Africa.
The 2017 Annual Development Effectiveness Review is a comprehensive report on the performance of the African Development Bank (AfDB). The report reviews development trends across the continent and explores how the AfDB’s operations have contributed to Africa’s development results.
The Bank remains committed to increase transparency of its operations. MapAfrica, its geocoding tool, has been revamped with a focus on five critical areas of the Ten-Year Strategy: Light up and power Africa, Feed Africa, Industrialise Africa, Integrate Africa and Improve the quality of life for the people of Africa. Explore their 7000 project locations through the High 5s here.
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African chambers of commerce discuss best practices in use of single windows in enabling cross border trade
The Pan African Chamber of Commerce and Industry (PACCI), in collaboration with the African Trade Policy Centre (ATPC), concluded a two-day consultative meeting on Tuesday, 23 May, 2017 that discussed ways for African chambers of commerce to utilize single windows in enabling cross border trade.
Solomon Afework, First Vice President of the Pan African Chamber of Commerce and Industry, speaking at the beginning of the meeting, said: “The adoption and use of the single window system as a key component of trade policy provides many benefits to the business community as it reduces the transaction cost of trade.”
He added: “As we know, the entry into force of the World Trade Organisation Trade Facilitation Agreement (TFA) launches a new phase for trade facilitation reforms all over the world and creates a significant boost for commerce and the multilateral trading system as a whole.”
He said it is forecast that full implementation of the TFA will reduce trade cost by an average 14.3 percent.
The coordinator of the ATPC, David Luke, in his opening statement said the elimination of tariffs on the continent will not be enough to bring transformative benefits expected from the Continental Free Trade Area (CFTA) unless aided by the implementation of trade facilitation measures.
Single windows could therefore help in ensuring that the benefits of the CFTA are felt more widely, said Mr. Luke.
Guinea’s Ambassador in Addis Ababa, Sidibe Kaba, stressed the need to mobilize the continent’s governments and private sector in advancing regional integration.
The meeting brought together representatives from the African Chambers of Commerce, EcoBank, African Alliance for E-Commerce, revenue and customs officials, private sector and academia, to share experiences and best practices in trade. They came out with the following key trade policy recommendations towards the implementation of the single windows:
Key recommendations
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Governments in preparing their suite of Single Window products should take into consideration Single Window Interoperability to facilitate interconnectivity and interoperability with national (or regional) Single Windows.
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The business community has diverse interests and is an important partner that needs to be engaged during the whole process in order to verify that the potential gains are realized. The government authorities need to have respect for the diverse interests of different industries and the need of a certain degree of transparency as a minimum condition to allow the business community to coordinate and prepare for consultations.
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In spite of significant effort, border management inefficiencies continue to impact heavily on the competitiveness of African countries. The focus of reform efforts should shift beyond customs to tackle the systems and procedures employed by other border management agencies, such as health, agriculture, quarantine, police, immigration, standards, and myriad other organizations involved in regulating trade flows.
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Business understands that most of the challenges in implementing the Single Window are not associated with technology but rather getting individual agencies to collaborate to achieve a collective goal. The meeting noted the many good deal of practical experience in Africa on what works, what doesn’t and why. It learnt, from trial and error, that certain prerequisites need to be in place to support reformers. Carefully planned and executed preparatory work by the government can greatly improve the probability of success.
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Consultative, formal submission, feedback… be held regularly to present the private sector’s views and ideas and make sure that the strategy being developed meets the needs of the business community.
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tralac’s Daily News Selection
Selected highlights from the AfDB Annual Meeting in Ahmedabad:
Akinwumi Adesina’s keynote speech, commentary by Pankaj Patel (FICCI president), AfDB, IFC to promote investments that benefit African women
Tanzania: President asks mines minister to resign after audit (Bloomberg)
Tanzanian President John Magufuli today asked Mines Minister Sospeter Muhongo to resign after an audit of containers of mineral sands showed exports had been understated. An investigation initiated by Magufuli in March found that 277 containers held as much as 15.5 metric tons of gold, instead of the 1.1 tons that had been declared, the president said Wednesday in a speech broadcast live on state television. Magufuli also disbanded the Tanzania Minerals Audit Agency’s board, fired its chief executive officer and asked authorities to investigate those responsible. [Acacia Mining: statement, Honest Accounts 2017: how the world profits from Africa’s wealth (pdf)]
A set of updates on African customs, border management policy issues:
(i) PACCI/ATPC workshop on use of single window in enabling cross border trade concludes (UNECA). Solomon Afework, First Vice President of the Pan African Chamber of Commerce and Industry, speaking at the beginning of the meeting, said: “The adoption and use of the single window system as a key component of trade policy provides many benefits to the business community as it reduces the transaction cost of trade.” ATPC co-ordiantor, David Luke, said the elimination of tariffs on the continent will not be enough to bring transformative benefits expected from the Continental Free Trade Area (CFTA) unless aided by the implementation of trade facilitation measures. Single windows could therefore help in ensuring that the benefits of the CFTA are felt more widely. Participants developed a set of key trade policy recommendations towards the implementation of the single windows.
(ii) New SARS programme smoothes the way for imports and exports (Business Day). Pieter du Plessis, director at XA International Trade Advisors, says the business sector in SA lacks proper knowledge of customs issues. “Historically companies relied on clearing agents, and senior and even middle management’s knowledge of customs has been scant.” The new Customs Duty Act (dealing with monetary matters) and the Customs Control Act (dealing with processes) will change this. “Every business dealing with the customs part of SARS will have to have someone who has passed the SARS examination.”
(iii) Africa can’t remain dumping ground (ThisDay). Nigeria’s Minister of Finance, Mrs Kemi Adeosun, says the African continent cannot remain a dumping ground for vendors of all kinds of goods under the guise of a Free Trade Agreement. The minister stated this in Abuja at an extra-ordinary meeting of Directors-General of Customs of the AU converged with the aim of forging a new position of relevance in the world Customs Organisation. Adeosun tasked the customs administrators to strive to strike a balance between revenue mobilisation, border production, security control, regulatory functions. The African region, she stated remains number one in terms of illicit financial flows and charged governments in the region to do more to ensure strong customs organisation’s capable of checking illicit trade and trans-border crimes. The Comptroller-General of the Nigeria Customs Service, Col. Hameed Ali (rtd), called for a common ground among African countries as they go to the WoCO’s Annual Council Meeting in July. [Nigeria’s Customs attains 75% automation, cuts inspection hour – Ali, Nigeria’s new import process guidelines take effect, 11 July]
(iv) Zambia regional workshop on protection of mineral resources (WCO). Under the sponsorship of the Customs Cooperation Fund of Japan, a WCO workshop on the protection of national mineral resources was held in Lusaka (17-19 May), and it was attended by officers from both Customs Administrations and Mining Control Institutions from the Democratic Republic of the Congo, Nigeria, South Africa, Tanzania, Zambia and Zimbabwe. The project is a part of the WCO activities on protection of mineral resources specified in Phase III of the Revenue Package Action Plan. Participants concluded that optimal monitoring and control mechanisms of the natural resources should be developed, including the identification of gaps in the legislative frameworks, exploring how current controls could be further strengthened and improving cooperation and networking between Customs Administrations and Mining Institutions.
(v) The China-Africa Dialogue for closer collaboration on forestry legality (TRAFFIC). A meeting between forestry representatives from Cameroun, Congo and China took place last month, aimed at strengthening legality within the forestry sector and in particular the international trade in timber. More than 40 delegates included representatives from wildlife Ministries and Customs; Management and Scientific Authorities for the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES); the German Government, the private sector; and local and international NGOs including WWF, IUCN and TRAFFIC. The meeting took place as part of FOCAC’s Johannesburg Action Plan’s commitments for China and African states to collaborate to address illegal trade in wildlife products.
(vi) How soon will Africans have a visa-free regime? (New Times). The African Union committee on free movement of people across the continent is currently meeting in Kigali to review a proposed treaty on the subject. The committee opened its sittings yesterday to look into the possibility of realising age old ambitions of liberalising movement across the continent. Katyen Jackden, the chairperson of the committee on the Free Movement of Persons in Africa, allayed fears that liberalising movement would lead to security or economic challenges. She said it has so far been proven that the benefits of opening up outweigh the negative consequences. Jackden recommended that the process be done using a phased approach considering that different countries were at different stages of readiness.
(vii) African cross-border and regional identity management schemes reach distribution stage (Biometric Update). The AfDB recently introduced its new fingerprint-embedded Laissez-Passer document at ID4Africa 2017 in Windhoek, Namibia. The travel document for regional development is one of a series of regional projects across the continent with the goal of using digital identity and biometrics to enable cross-border travel. Another such project, the ECOWAS Biometric Identity Card, has reached the distribution stage in some countries. While the program is in early stages, it has shown potential to speed border crossing while reducing the problem of fake travel documents, Laouali Chaibou, Commissioner for Trade, Customs, Free Movement and Tourism for the ECOWAS Commission told an audience on day two of the annual event in support of universal digital identity for Africans. While all member states must meet a minimum threshold of security to issue the card, including capturing a fingerprint image, the card also has the capacity to add additional information, to allow its security and use to be extended as the technical capabilities of ECOWAS member states evolve. ECOWAS is supported in the project by a number of international organizations and development agencies, including the World Bank. While regional projects supported by the World Bank in eastern and southern Africa are not as far advanced as the ECOWAS Biometric Identity Card or the African Development Bank’s Laissez-Passer system, they have the opportunity to catch up quickly, utilizing “south-south” information sharing to accelerate planning and implementation.
(viii) The state of identification systems in Africa: a synthesis of country assessments (ID4D, World Bank). The ability to prove one’s identity is a cornerstone of participation in modern life, yet over 1.1 billion people lack proof of legal identity. As a first step in assisting client countries to close this identity gap, the World Bank Group’s Identification for Development (ID4D) initiative conducts Identity Management Systems Analyses (IMSAs) to evaluate countries’ identity ecosystems and facilitate collaboration with governments. This report synthesizes (pdf) the findings of IMSAs carried out in 17 African countries between 2015 and 2016. To date, analyses have been conducted in: Botswana, Chad, Cameroon, Côte d’Ivoire, DRC, Ethiopia, Guinea, Kenya, Liberia, Madagascar, Morocco, Namibia, Nigeria, Rwanda, Sierra Leone, Tanzania, Zambia.
The US-Morocco FTA: exceeding expectations (MACP)
On 1 January 2017, the US-Morocco FTA began its 12th year enforcing liberalized commercial exchange between two historic allies. The FTA has surpassed moderate expectations for its economic impact, and has been a success story for both sides. This paper will describe (pdf) how Morocco became the US’s first free-trade partner in Africa, and evaluate its economic and political impact compared to expectations. Finally, avenues for improving the FTA and general US-Morocco economic cooperation will be evaluated. In addition to generating economic benefits for both countries, the FTA kicked off a series of initiatives further strengthening the US-Morocco bilateral relationship and Morocco’s reform trajectory, “one of the US’s primary goals” for the deal.
South Africa Trade and Industry Department Budget Vote 2017/18: speech by Minister Rob Davies
South Africa is inextricably linked with the continent and in light of this the country’s engagement in promoting developmental regional integration continues unabated. In the short time available, I will mention just two issues. First, we have agreed with a number of our partners in the East African Community to target the completion of the tariff schedule negotiations between SACU and the EAC by July. This will be an important, commercially meaningful step, towards the implementation of the Tripartite SADC-Comesa-EAC Free Trade Area and a significant step towards our eventual goal of a Continental FTA. Second, SADC has developed its road map towards its regional Industrial Development Action Plan. In August this year, South Africa will assume the chair of the SADC and I want to indicate that we will spare no effort to ensure that our Regional Economic Community is actually implementing its regional industrial programme before we hand over the chair next year.
Eliminating deforestation from the cocoa supply chain (World Bank)
While global cocoa production relies almost entirely on 5 – 6 million smallholders, the processing level in the cocoa value chain is highly concentrated among several traders, grinders and chocolate producers. Even though deforestation occurs at the smallholder level, it is the companies, governments, and service providing NGOs that need to work to change policies and practices because the farmers have limited financial means and technical capacity to make the needed changes on their own. The report, released by the BioCarbon Fund and the Forest Carbon Partnership Facility together with the World Cocoa Foundation and Climate Focus, describes overarching principles and key strategies that these stakeholders can implement to lay the groundwork for deforestation-free production in the cocoa sector:
Greening Africa’s cities: enhancing the relationship between urbanization, environmental assets, and ecosystem services (World Bank)
Africa is urbanizing late but fast. This brings many benefits but, as this report shows: thus far, urbanization in Africa, unique in a number of respects, is having deleterious and largely unchecked impacts on the natural environment; the degradation of natural assets and ecosystems within African cities carries tangible economic, fiscal and social costs; there are important opportunities to change the current environmental trajectory of African cities so that they move towards a more harmonious relationship between their natural and built environments. For this to happen, focused action is necessary. [The analysts: Roland White, Jane Turpie, Gwyneth Letley]
UN resilience ‘scorecard’ helps cities curb disaster losses from climate change (UN)
Announcing a major revision to its Disaster Resilience Scorecard, the UN Office for Disaster Risk Reduction said the changes bring the mechanism into alignment with the Sendai Framework for Disaster Risk Reduction, the global plan for reducing disaster losses. Plans are in place to have 200 cities using it by the end of the year. The Scorecard provides a set of assessments that cover the policy and planning, engineering, organisational, financial, social and environmental aspects of disaster resilience.
Today’s Quick Links: Rwanda’s horticulture exports set to soar as airlines cut freight charges Oman SGRF to use Mauritius as platform to invest in Africa and Asia Benedict Oramah, Afreximbank President, named African Banker of the Year Michael Spence: How to be an open economy Europe accepts WTO chicken defeat with China Presentations from an UNCTAD experts meeting: Measuring shipping connectivity and performance - the need for statistics and data The Policy Practice: The evolving role of political economy analysis in development practice (pdf) Chatham House: Central and Eastern Europe and Sub-Saharan Africa - prospects for sustained re-engagement (pdf) |
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Minister Rob Davies: Trade and Industry Department Budget Vote 2017/18
dti Budget Vote Address delivered by Dr Rob Davies, Minister of Trade and Industry, in the National Assembly, 23 May 2017
In an input to the Portfolio Committee earlier this year, I argued that the dti’s contribution to the promotion of a higher level of more inclusive economic growth must involve intensifying our efforts to promote Radical Economic Transformation in two inextricably linked dimensions.
First, it must involve redoubling our efforts to fundamentally change the colonially-defined structure of our economy as a producer and exporter of primary commodities through industrialisation and moving up value chains.
Second, it must mean intensifying efforts to promote greater inclusion of historically disadvantaged black people in positions of ownership, management, leadership and control, particularly but not only in the productive economy.
On May 8 we launched the 2017/18-2019/20 IPAP. This is the 9th iteration of our rolling implementation plan to support industrial development and I sincerely trust that by now we have all accepted the necessity and imperative each financial year to identify the actions we intend to take as government to move progressively to implement higher impact industrial policies.
Key features of this year’s IPAP include:
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Stronger emphasis on the most job-creating sectors and “job-rich” industries such as clothing and textiles, agro-processing, and component manufacturing.
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Re-doubling our efforts to raise aggregate domestic demand for locally manufactured products through localisation of public procurement and persuading the private sector to also support localisation and local supplier development.
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Building a stronger system of industrial finance and incentives to support and secure higher levels of investment in the productive sectors of the economy.
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Beginning to reposition the economy to prepare for the challenges and opportunities arising from the impending disruptive technological changes of the fourth industrial revolution.
One of the flagship programmes within IPAP is the Black Industrialist programme. This we launched in March 2016 when we said we would seek to support 100 black industrialists over the then Medium-Term Expenditure Framework (MTEF) period ending March 2019. I am happy to report that as of now we have approved 46 projects run by black industrialists, with Government agencies – including the dti, IDC, PIC and NEF deploying over R2 billion in financial support on top of R122m in grants from the dti. Our support has allowed these black industrialists to undertake investment projects of R3.7 billion and is projected to create more than 8,000 direct jobs and close to 12000 indirect jobs. As we have indicated earlier we have now decided to accelerate the implementation of the programme to support 100 black industrialists. Instead of reaching this milestone by March 2019 we now intend to reach this target by the end of the current financial year i.e. by March 2018.
I need to stress that those benefitting from this programme have passed through a rigorous test to ensure that they are genuine manufacturing entrepreneurs who have met the identified criteria of ownership and personal leadership and who have placed their own funds at risk in developing their businesses.
These black industrialists are a welcome reminder of South Africans’ tenacity and unbowed entrepreneurial spirit, even in the challenging economic circumstances we find ourselves in. Enterprises benefitting include Yekani Manufacturing, an electronics manufacturing company, represented here today by the CEO Dr Siphiwe Cele; United Industrial Cable, a specialised, industrial cable manufacturer of copper and aluminium cables for industrial, Mining, Transportation and Power Utilities for underground and aerial installations, represented by Managing Director Mr Andy Matakanye; K9 Pet Foods represented by Ms Candice Steward and Micro Finish; manufacturers of valve guides and valve seats to the Automotive, Locomotive, Marine and Aerospace industries represented by Managing Director Brian Naidoo. I welcome to the house today these 4 of the 46 black industrialists we are currently supporting and know they will be happy to tell honourable members about their businesses, the economic opportunities and the business challenges they face.
Honourable speaker, our efforts to achieve more inclusive and higher levels of industrial development take place against the backdrop of continued challenges in the global economy.
According to the International Monetary Fund (IMF), the global economy grew by just 3.1% in 2016, the slowest rate of growth since the onset of the Global Economic Crisis. The global growth outlook for 2017 and 2018 remains modest at best, with growth expected to reach 3.5% in 2017 and to 3.6% in 2018.
As Honourable Members know, the South African economy grew by just 0.3% in 2016 after the modest growth of 1.3% in 2015. In part this was due to the impact of the aforementioned global challenges. On top of that we had in 2016 the impact of the severe drought, the slow recovery in the Mining sector with spillover weakness in key parts of Manufacturing and weak business confidence. Unlike some other peer countries, however, we were fortunate to have avoided a recession.
In 2016, the Manufacturing sector grew by just 0.7% sustained primarily by the food and beverages; automotive; chemicals; electrical machinery; and the radio, TV and communications subsectors. The outlook for the SA economy this year is slightly more positive, with the Agricultural sector recovering from the drought and commodity prices increasing somewhat. However business and consumer confidence remains far too low. This means that if we are to achieve the NDP target of 5% GDP growth by 2030, we will need to be more decisive in implementing policy and resolute in defending our national interest.
With regard to the 9-Point Plan (the government’s programme to promote higher levels of inclusive growth) the Dti is tasked with leading and coordinating the implementation of three components, namely, the Implementation of a Higher-impact Industrial Policy; Advancing Mineral Beneficiation; and Scaling-up Private-sector Investment.
I am pleased to report that significant progress has been made in implementing IPAP programmes, sectorally and transversally. As well as the Black Industrialist programme to which I have already referred; revitalising industrial parks and special economic zones, can both be identified as programmes that can assist in promoting greater inclusion in manufacturing production. Many of these programmes have leveraged significant investments supporting job creation or retention in various manufacturing sub-sectors.
It is important to state that the jobs and investment we managed to create would not have been possible without a deliberate effort by our government to support our industry. This was acknowledged in a recent report by the World Bank entitled “South Africa Economic Update” released in January 2017. This report supported public industrial financing as a tool to strengthen industrial development and it argued that, investment tax incentives had discernibly benefitted South Africa by encouraging investment in agriculture, manufacturing, trade and services sectors. It further states that the investment generated by tax incentives far exceeded government’s foregone revenue. A case in point is Aspen Pharmacare’s investment of around R3 billion in new high tech, manufacturing capability over the last 18 months which has led to the introduction in South Africa of new complex technologies such as high potency oncology production, creating global export platforms. Indeed, this is a good example of how IPAP and our country’s industrialisation programmes are working.
In reporting on the automotive sector we must note that notwithstanding the withdrawal of GM, which has been overwhelmingly due to developments within the Company, the net investment trend has been positive. There are number of reasons for this: In 2014 the Automotive Investment Scheme (AIS) was amended to enable component manufacturers to earn an additional 5% on all qualifying investment as part of deepening and strengthening local component manufacturing, the most job rich part of the automotive value chain. This, together with the certainty we provided to the automotive OEMs through introducing the programme and communicating it in advance are the reasons we have seen higher investment recorded in the automotive sector.
Notable investment initiatives in this sector in the in the last financial year include the following:
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Beijing Automobile International Corporation’s multi-billion rand investment in a vehicle manufacturing plant in Coega, which is set to create 2,500 direct jobs. The plant will manufacture pick-up trucks‚ SUVs and sedans for the African market. The plant will likely have an initial capacity to produce about 50,000 cars, trucks and sports utility vehicles. The BAIC investment is an outcome of the Forum on China-Africa Cooperation (FOCAC) that was held in Johannesburg in December 2015.
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Toyota SA opened a R6.1bn assembly line to produce the Fortuner and Hilux. R1.9bn will go towards supplier tooling, R1.4bn to in-house tooling and the rest will be committed to in-house facilities and buildings to cater for new press machines. The project attracted five new international suppliers, while creating around 2,000 new jobs in the supply chain.
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The tender for Supply, Maintenance and Financing of 150 Commuter Buses to Great North Transport was awarded to Mercedes Benz SA and Marcopolo SA as the bus-body builder. The approved total bid price including repairs and maintenance is R511m over the next five years.
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The current APDP is due to run until 2020 and we are now engaged in an inclusive consultative process with all key stakeholders to develop an automotive Master Plan that will inform our motor industry programme thereafter. In addition to sector-specific incentives such as for autos, for Clothing and Textiles; and for Aquaculture, we also have various open architecture incentives such the Manufacturing Competitiveness Enhancement Programme (MCEP) and the 12i tax incentive scheme.
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In the last financial year, we supported 270 projects in various manufacturing sub-sectors through the MCEP. Our support attracted private-sector investment to the value of R3.4bn with over 62,000 jobs retained. The 12i tax incentive scheme supported 49 projects with a projected private-sector investment amounting to R25.7bn while the Aquaculture Development and Enhancement Programme supported 17 projects with a projected private sector investment of R383m.
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Through our support, we have been able to establish a competitive Business Process Service (BPS) industry in South Africa. The BPS is crucial in our economy as it employs mostly young people and generates export revenue. In the course of the 2016/17 financial year, six (6) new projects were approved with projected export revenue of R4.5bn over the next five years. Critically, about 10,466 jobs were sustained of which 90% are occupied our youth.
Honourable members, since the local content designation of the Clothing, Textiles, Leather and Footwear sector as well as the introduction of the CTCP, significant improvements in terms of jobs, investment and exports have been realised. Indeed recent employment figures confirm an increase in employment in the sector from 137,816 people in 2014 to 143, 719 in 2015, a net increase in 5,903 jobs. While real output grew 13, 9% from R26 bn in 2009 to R40, 67bn in 2015.
Footwear production increased to 2 million pairs in the first half of 2016 and employment creation in that sub-sector has continued to grow. Exports in the leather and footwear sector have also begun to increase.
The Agro-processing sector is an important labour-intensive sector prioritised in the IPAP. Last year we concluded the Economic Partnership Agreement with the EU with the aim of increasing market access for our agricultural produce such as seafood, wine, canned fruit and sugar. Also, our partnership with the BRICS is bearing fruit as we saw our export of apples to China growing by 70%.
On the domestic front, working together with the private sector, the dti participated in the launch of a R100 million tomato processing plant in Tzaneen (Limpopo). The factory will address the increased demand for tomato paste in South Africa while at the same time it will create business opportunities for 15 small commercial farmers in the area.
Given the importance of agro-processing for jobs and enterprise development, I am pleased to announce that we have set aside R1bn to fund a sector-specific incentive for the Agro-processing sector in this financial year. The incentive will support both brown and greenfield investments, encourage investment in up- and downstream support services, and for the expansion of infrastructure to be used by farmers and Agro-processors. I am confident that the Agro-processing incentive will make a positive difference by creating jobs and supporting smallholder farmers, amongst others. Details of the incentive will shortly be available on the dti’s website.
The designation of sectors and products for local procurement remains one of the key policy levers at government’s disposal to reignite local production in manufacturing. To date, the department has designated more than 20 products with varying minimum local content thresholds. Going forward, we are planning to extend the designation of products to include the yellow metals sector, smart water meters: and fire trucks.
I am pleased to report that through local content requirements, almost R2.6bn worth of production value that would otherwise have gone to imports was locked into the local economy Sectors benefitting included textiles, clothing, leather and footwear; furniture; electrical and telecom cables; solar water heaters; and power transformers.
As a country it is crucial that we develop our own key industrial productive capacity and capability in key sectors. To leverage the massive public infrastructure development programme and improve our competitiveness in the global markets, IPAP has prioritised the development of the metal fabrication, capital and rail transport equipment sub- sector.
Honourable members will be aware our steel sector was negatively affected by the global glut of steel leading to the dumping of low priced steel products in many markets across the world. The circumstances required us as government to intervene decisively to save jobs and the productive capacity that exists in the sector. We established an inter-departmental Steel Task Team which worked closely with the primary steel producers and the downstream industry. A number of measures were put in place in addition to the independent determinations of the Competition Commission to fine Arcelor-Mittal and secure its commitment to investment in plant and equipment. These measures included moderate tariff increases for a range of primary steel products; the introduction of a new steel pricing mechanism monitored by a Committee established under the auspices of ITAC to ensure that price increases for domestically produced steel are moderated as well as commitments on investment and job creation; Support for the downstream industry – which is the biggest job creator within the iron and steel value chain – also includes a tariff review on a range of downstream products and my colleague, Minister Patel will announce further support measures for the downstream industry in the Economic Development Department budget vote debate taking place this coming Thursday.
Our primary steel industry is still not out of the woods and the global steel market is not only very difficult but has led to some OECD countries imposing triple digit tariff and anti-dumping duties to protect their domestic markets.
However we can confidently state that our multi-pronged interventions have gone a long way to ensure that South Africa remains a steel manufacturing country. In 2016, G20 countries established the Global Forum on Steel Excess Capacity facilitated by the OECD. At recent meetings of the G20 and OECD Steel Committee held in March 2017, the Trade Union Advisory Committee to the OECD highlighted that the approach which SA adopted was an exemplary one. SA’s policy intervention during the steel crisis not only included tariff and local procurement measures but also reciprocal commitments for job retention, investment and upgrading. It was indicated that the policy intervention was implemented with good social dialogue between government, industry and labour.
We believe that implementation of Broad-based Black Economic Empowerment (B-BBEE) including the trumping clause will go a long way in addressing economic transformation. The B-BBEE Commission established in terms of the 2013 BEE Act is now up and running to assist in implementing the B-BBEE Act; strengthen the advocacy component; and eradicate fronting.
Honourable members, accelerating economic development in the townships and rural areas is critical in addressing unemployment, poverty and promoting inclusive growth. In this regard, the dti prioritised the revitalisation of industrial parks, the first phase of which focuses on building appropriate infrastructure required to attract and retain investors. Thus far, 6 of the 10 targeted industrial parks have been revitalised at a cost of R278 million, including Seshego (Limpopo), Botshabelo (Free State), Isithebe (KZN), Babelegi (Gauteng), Vulindlela (Eastern Cape) and Komani (Eastern Cape). We are confident that the programme will attract more businesses to locate in the parks thereby increasing the economic growth and employment of these economically depressed regions.
On advancing mineral beneficiation, government is committed to leverage the comparative advantage derived from the abundance of platinum. South Africa has the world’s largest known deposits of the platinum group metals (PGM) estimated at about 80% of total global reserves. Whilst SA is a major supplier into the global market it is mainly at a primary level, with the current beneficiation of PGM’s in SA standing at less than 15%. Government is therefore committed to exploring additional avenues to beneficiate PGMs including the frontier industry in the PGM value chain; development of a fuel cell manufacturing industry.
We know that a number of companies are exploring the opportunities arising and in February this year for instance, Isondo launched its fuel cell plant on the sidelines of the Mining Indaba.
Furthermore the dti, the Gauteng Industrial Development Zone (IDZ) and Impala Platinum are undertaking a feasibility to assess the viability of establishing a fuel cells industrial park in Springs.
Additionally, the dti in partnership with the German government hosted 58 delegates for a fuel cell bus workshop from 20-21 February 2017 in Cape Town. The purpose of the workshop was for German metropolitan municipalities to share fuel cell bus deployment learnings with their South African counterparts. Part of the outcome of the workshop is an undertaking to attract three South African metros to adopt or demonstrate fuel cell driven buses with the intention of using that potential market to secure investment in fuel cell manufacturing in SA. Indications are that fuel cell buses have the lowest emissions amongst public vehicle transport options and as a result global deployment is already on the increase.
Also, working with the industry we are piloting a fuel cells powered bus in one of our townships in the City of Tshwane.
In the titanium beneficiation value chain we can report that Tronox opened the R3.3bn Fairbreeze sands mine in KZN for the production of titanium dioxide creating 250 direct and 1,000 indirect jobs. the dti is supporting work to assess the viability of the proposed establishment of a world scale titanium pigment plant in the Richards Bay IDZ. The R3.9 billion proposed investment by Nyanza Light Metals in the IDZ will create 550 permanent jobs when the plant is operational while 1, 200 indirect and 800 direct jobs will be created during the construction phase.
South Africa is inextricably linked with the continent and in light of this the country’s engagement in promoting developmental regional integration continues unabated.
In the short time available, I will mention just two issues. First, we have agreed with a number of our partners in the East African Community to target the completion of the tariff schedule negotiations between SACU and the EAC by July. This will be an important, commercially meaningful step, towards the implementation of the Tripartite SADC-Comesa-EAC Free Trade Area and a significant step towards our eventual goal of a Continental FTA.
Second, SADC has developed its road map towards its regional Industrial Development Action Plan. In August this year, South Africa will assume the chair of the SADC and I want to indicate that we will spare no effort to ensure that our Regional Economic Community is actually implementing its regional industrial programme before we hand over the chair next year.
Efforts to intensify exports and investment in Africa, has led to the establishment in the dti of Trade Invest Africa to lead our efforts to facilitate exports and investment to Africa across all sectors including Services, while also developing source markets for South Africa’s import demand. Companies that will be supported by Trade Invest Africa will be those that subscribe to the voluntary “Guidelines for Good Business Practice by South African Companies Operating in the Rest of Africa” to ensure that our private-sector subscribe to principles of good corporate citizenship whilst flying the South African flag in the rest of Africa. I must mention, Madam Speaker that this dti initiative has been well received and encouraged by the African Union as a positive framework to be used as a model by other countries.
The final component of the 9-Point Plan that we are responsible for is private-sector investment. A key commitment of the 9-Point Plan was the establishment of an investment one-stop-shop (Invest SA) composed of the relevant regulatory staff across Government. Invest SA already has physical premises in Pretoria and will be rolled-out to three Provinces in this financial year.
In concluding, I wish to use this opportunity to welcome Deputy Minister Magwanishe to the dti family and to thank him for the work he has already done. To the DG and all the staff of the dti, whatever has been achieved has been achieved through our collective efforts.
Finally, the Chairs of the Portfolio Committee and Select Committee have been an invaluable source of support and we will continue to rely on your wisdom as we take forward our journey of steady but continuous improvement.
I commend this budget to the House.
I thank you.
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AfDB Annual Meetings open in Ahmedabad: Deliberations underscore win-win Africa-India cooperation
The 52nd Annual Meetings of the Board of Governors of the African Development Bank (AfDB) and the 43rd Meetings of the Board of Governors of the African Development Fund (ADF) opened in Ahmedabad, India, on Tuesday, May 23, 2017 with calls for greater cooperation between the Bank and India to help drive Africa’s transformation.
Addressing over 3,000 participants at the Mahatma Mandir Conference and Exhibition Center, the President of the African Development Bank Group, Akinwumi Adesina, highlighted the Bank’s efforts in the implementation of its Ten Year Strategy encapsulated in the High 5 priorities. These are, Light up and power Africa, Feed Africa, Industrialise Africa, Integrate Africa, and Improve the quality of life for the people of Africa.
With the ever-increasing need to meet the demands of the High 5s, Bank Group operations went up by over 17% to 305 in 2016. In the same vein, cumulative investments, rose by 19% to US$ 10.45 billion over the figure for 2015.
In real terms, over 22 million people benefitted from Bank finance services ranging from access to water and sanitation to healthcare, electricity, agriculture, and transport, among others; while 630,000 people mainly youth and women benefitted from its “agripreneurs” project aimed at attracting young graduates to agriculture as business.
The central theme of the Annual Meetings, “Transforming Agriculture for Wealth creation in Africa,” underscores the importance of agriculture for Africa’s transformation and the Bank is banking on the continent’s bulging youth population engaging in agriculture as a business for real transformation to take place.
“To develop with pride, Africa must feed itself,” Adesina said noting that the continent’s food imports bill would nearly triple to reach US $110 billion per year by 2025 and disrupt the continent’s macroeconomic and fiscal stability.
Adesina also raised the issue of youth unemployment in Africa and how the Bank has embarked on creating 25 million jobs that would impact 50 million youths within 10 years in which it invested US $800 million in 2016 to support 50,000 young commercial farmers and agribusiness entrepreneurs in eight countries.
Investing in agriculture will enable African economies to grow by 10-20%, he said. It would reduce the one million migrants who travelled from Africa to Europe in 2016 alone, and avoid the loss of over 5,000 young lives, whose future now lies buried at the bottom of the Mediterranean Sea.
Adesina also emphasized the need to bring in the private sector in the Bank’s High 5s projects; with the imminent launch of the Africa Investment Forum, a completely transactional Forum to enable mega deals and fast-track investments in Africa by pension, sovereign wealth, insurance and other institutional investors.
“Our job as Africa’s Bank is to bank on Africa’s future. We will trust the youths, we will support their dreams, we will spark their creativity and we will enable their entrepreneurship,” he said.
Adesina emphasized the fact that to do more for Africa, its economies, its youth and women – the Bank would need more resources. Therefore, there is a need to begin discussions on the recapitalization of the Bank. He cited the plea made by the German Minister for Development and International Cooperation Gerd Mueller who, during his recent tour of some African countries and visit to the Bank said, “The African Development Bank is the voice for Africa. It should be given more resources to do more for Africa.” In this regard, a recapitalized bank will be able to deploy resources to meet the rapidly rising needs of a continent for development.
“Africa’s huge investment opportunities beckons to you, from agriculture and agribusiness to energy, infrastructure and financial services – and the African Development Bank and its partners will be there to help you advance your investments,” Adesina added.
Prime Minister Modi calls for Asia-Africa Growth Corridor
For his part, Prime Minister Modi reiterated the centuries-old strong ties between India and Africa, noting that India’s partnership with Africa is based on a model of cooperation that is responsive to the needs of Africa. “India is the fifth-largest investor in Africa and has invested US $54 billion in the continent in the past two decades,” he said.
He called for an Asia-Africa Growth Corridor for development of Africa, supported by Japan and India.
There is a great deal of development know-how to be gleaned in India – from the development of modern IT systems, to the management of sprawling rail infrastructure – that Africa can benefit from. “By 2018, no village in India will be without electricity,” said Modi, who for 15 years was the Chief Minister for Gujarat, home state of Mahatma Gandhi.
The Prime Minister concluded by saying that while India may never compete with long-distance runners, India would always stand shoulder-to-shoulder with Africa in the great development marathon.
Bill Gates sends message of solidarity
For his part, Bill Gates conveyed his support to the meetings in a video statement emphasizing the importance of partnering with Africa. He said partnership is a powerful way to help Africa move forward.
Presidents Macky Sall of Senegal and Patrice Talon of Benin, as well as Vice-President Daniel Kablan Duncan of Côte d’Ivoire participated in the ceremony alongside India’s Minister of Finance, Arun Jaitley, and the Chief Minister for Gujarat State, Vijay Rupani.
Keynote speech by AfDB Group President Akinwumi A. Adesina
Extracts
I hear that for the people of Ahmedabad, trade and business is in your blood. Prime Minister Modi, who is from Ahmedabad, is so passionate about trade and investments. It is in the blood: your successful India-Africa Forum Summit reinforces the need to boost trade, investment, education and economic partnerships.
Well, Africa is the place to be. Despite challenging times occasioned by the global economic recession, Africa continues to post resilient growth. Growth will pick up from 2.2% last year to 3.4% this year. These averages hide exceptional growth performance of many countries. In 2016, 12 countries grew at over 5% and 20 countries grew by 3-5%. Africa’s head is above waters in rising waters of global recession. Africa is resilient. But we must move quickly to unlock greater growth rates that will substantially drive down poverty and support faster diversification of the economies.
Confidence in Africa and its potential is what drives our work at the African Development Bank. The new kick in our steps for Africa comes from our High 5s: Light up and power Africa; Feed Africa; Industrialize Africa; Integrate Africa; and Improve the quality of life for the people of Africa. The High 5s will accelerate Africa’s development. Don’t just take it from me. The United Nations Development Programme’s (UNDP) independent analysis and report shows that Africa will achieve 90% of the SDGs and 90% of Agenda 2063 by focusing on these High 5s. The distance between vision and reality is action. We need to accelerate actions on these High 5s. Africa’s future must not continue to get postponed into the future.
That’s why the Bank is accelerating its investments in Africa. In 2016, we approved $10.5 billion – the highest ever in Bank’s history. We disbursed US $6.5 billion – the highest ever by the Bank. The Bank is delivering for Africa and we are ready to do more....
The focus of this year’s annual meeting is on our second High 5: Feed Africa. There’s no better place to have that discussion than here in India. The Green Revolution turned India from depending on the largesse of others to a food self-sufficient nation and now a global powerhouse in food. And it took just three years to turn it all around. It was not a miracle, it was political will mixed with a resolve to develop with dignity.
To develop with pride, Africa must feed itself. Africa’s food import bill stands at US $35 billion per year and is estimated to grow to US $110 billion per year by 2025. This has negative consequences on macroeconomic and fiscal stability. Africa must rise up quickly and unlock the full potential of its agriculture.
Africa has 65% of the uncultivated arable land left in the world to feed 9 billion by 2050, so what Africa does with agriculture today will determine the future of food in the world. The key is to turn Africa’s natural comparative advantage in agriculture into a competitive advantage. We must accelerate access to high-quality seeds, fertilizers, irrigation, mechanized services and finance. And agriculture must be taken as a business all across Africa.
Africa needs to industrialize its agricultural sector to unlock wealth. To achieve this, Africa needs to establish Staple Crop Processing Zones and Agro-industrial Zones – fully enabled with physical infrastructure – to attract private agribusinesses to locate in rural areas, create market pull for produce of farmers, and reduce high post-harvest losses in the supply chains. By doing so, we will turn rural areas from zones of economic misery to new zones of economic prosperity.
We will be able to empower African countries to add greater value for what they produce. Our massive cotton production will translate into textile and garments. After all the price of apparels never go down, even when price of cotton declines. That’s why we are pleased to showcase the “Fashionomics” session at this Annual Meeting.
Africa, which produces 75% of the world’s cocoa, receives only 2% of the US $100-billion annual chocolate market. African farmers sweat, while others eat sweets. While the price of cocoa has hit an all-time low, profits of global manufacturers of chocolates have hit an all-time high. It’s time to process Africa’s cocoa in Africa, for we must end Africa being at the bottom of global value chains.
We are taking action. That is why the African Development Bank has rolled out its Feed Africa High 5 and have committed to investing US $24 billion in agriculture over the next ten years. That’s 400% increase of annual lending to the sector. We are investing in companies like East Africa Trading Group, providing market access to millions of farmers. We have developed the Technologies for African Agriculture Transformation (TAAT), a new technology dissemination platform to take agricultural technologies to millions of farmers across Africa. As you’ve just heard from Bill Gates, we’ve jointly launched the African Leaders for Nutrition to help address the high malnutrition and stunting levels in Africa.
But these efforts will only succeed if Africa improves access to electricity. As we solve Africa’s access to electricity, agro-industrialization will take off in Africa, boosting rural economies, creating jobs for the youth, and lifting millions out of poverty.
We are taking action. That’s why the Bank is investing US $12 billion in power in the next five years, and leveraging US $50 billion from the private sector…. In 2016, we invested US $1.7 billion in energy and leveraged US $2.5 billion…. Our support last year provided 22,000 kilometres of distribution lines.
The Bank hosts the Africa Renewable Energy Initiative, co-developed with the African Union, with commitments of US $10 billion by G7 countries and the European Union. We are delighted with Prime Minister Modi’s launch of the International Solar Alliance and look forward to the establishment of the India-Africa Energy Co-Financing Fund between Government of India and the African Development Bank.
Climate change is affecting Africa badly. East and Southern Africa have been hit by droughts, costing many lives and putting over 20 million people at risk of famine. It’s the worst humanitarian disaster since 1945. We are taking action. Our Board of Directors recently approved the framework for our “Say No to Famine” campaign for a comprehensive response, which will provide short-, medium- and long-term support of US $1.1 billion to South Sudan, Somalia, Ethiopia, Kenya and Nigeria. We’ve got to build climate resilience for Africa. The promises made to Africa on climate adaptation must be kept, not dismissed or unpaid. Adaptation to climate change is what is needed, not adaptation to promises made....
Africa’s youth population will rise from 434 million to 840 million by 2050 and Africa will become the youngest region of the world. 38 out of the 40 countries that will be the youngest nations are African. The median age for Africa will be 25 years. If this huge demographic asset is well tapped and well trained, it will make Africa the talent centre of the future.
But today their situation is not prosperous. One third of them are unemployed or discouraged, one third is in vulnerable employment and only one sixth are in wage employment. If we can cut back the unemployment rate of the youth to the same as adults, African economies will grow by between 10-20%....
Africa’s youth unemployment stares us in the face, stirs up our conscience and calls us to action. Africa’s youth don't need handouts; they need support to spark their creativity and unleash their entrepreneurship. We are taking action. That’s why the Bank launched the Jobs for Youth in Africa, designed to support Africa to create 25 million jobs for youths and impact 50 million youth within 10 years. Making agriculture cool for the youth is a key part of our action plan. That’s why we invested US $800 million in 2016 to support 50,000 young commercial farmers and agribusiness entrepreneurs in eight countries. Some of them are in this room today. They are the future for Africa’s agriculture.
Our job as Africa’s Bank is to bank on Africa’s future. We will trust the youths, we will support their dreams, we will spark their creativity and we will enable their entrepreneurship.
We will do more, as our resources expand, for we cannot wait to give hope for millions of Africa’s youth. To do more for Africa – its economies, its youth and women – the Bank needs a lot more resources. That’s why it will be critical to begin discussions on the recapitalization of the Bank. The German Minister for Development and International Cooperation Gerd Mueller got it right when he said: “The African Development Bank is the voice for Africa. It should be given more resources to do more for Africa.” A recapitalized Bank will be able to deploy resources to meet the rapidly rising needs of a continent so thirsty for development. It will allow the Bank to deliver on its High 5s and allow Africa to meet 90% of its SDGs. The High 5s is the best deal for Africa’s development.
But fast-tracking Africa’s development also means fast-tracking private investments. For those of you with “business in your blood”, let me make the case for your investments. Think of a continent that will have the same population as India and China taken together by 2050. Think of a continent with rising middle class, rapid urbanization and that will have the youngest population on earth by 2050. Think of a continent where consumer spending is projected to reach US $1.4 trillion in the next three years and business-to-business spending to reach US $3.5 trillion in the next eight years. Think of the continent that accounted for 30% of global business and regulatory reforms in 2016.
Don’t look far: Think Africa!
To help unlock massive investments in Africa, we are taking action. I am pleased to announce that the African Development Bank will be launching later this year the Africa Investment Forum. This will be a totally transactional Forum that will be all about making deals happen and fast-tracking investments in Africa by pension, sovereign wealth, insurance and other institutional investors.
So, Africa’s huge investment opportunities beckons to you, from agriculture and agribusiness to energy, infrastructure and financial services – and the African Development Bank and its partners will be there to help you advance your investments.
Let’s move forward to a greater Africa. Let’s together accelerate Africa’s development. Africa’s greater future is for the bold. Yes, we have challenges, but we will overcome them. As John Legend said in his song, “If you’re out there”: “The future started yesterday and we’re already late. So, let’s give Africa the High 5s and let’s strongly support the African Development Bank to get the job done!
I wish you a fruitful and enjoyable Annual Meeting.
Thank you very much! Dhanyavaad!