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Africa investors eye niche markets as biggest economies slip
Investors targeting Africa are broadening their horizons in their search for yield as sluggish growth and policy uncertainty in Nigeria and South Africa, the continent’s biggest economies, weigh on returns.
Ivory Coast, Senegal, Ghana, Rwanda and Ethiopia are among countries featuring on the radar screens of investors attending the World Economic Forum’s annual gathering of the continent’s business and political leaders being held in Durban on South Africa’s east coast.
All five economies should grow at more than the double the sub-Saharan region’s average forecast rate of 2.6 percent this year, the International Monetary Fund said last month. It expects both Nigeria and South Africa to expand 0.8 percent.
“There is a more nuanced story in Africa,” Razia Khan, Standard Chartered Plc’s head of Africa macro research, said in an interview at the forum. “There are pockets of strength and turnaround. Local factors matter much more than they did in the past.”
Senegal and Ghana are set to benefit from recent oil discoveries. Both their governments, along with those of Rwanda, Ivory Coast and Ethiopia, have also implemented policy changes to attract investment and made it easier for businesses to operate.
Africa attracted $94.1 billion of foreign direct investment last year, up from $71.3 billion the year before, accounting firm EY said in its 2017 Africa Attractiveness report, released on Wednesday. South Africa, Egypt, Morocco, Kenya and Nigeria accounted for 58 percent of the foreign direct investment projects.
Capital Inflows
Fewer than 10 of Africa’s 54 nations probably have sufficiently developed and big-enough economies with the potential to attract significant capital flows and transactions, said Martin Kingston, the chief executive officer of N.M. Rothschild & Sons Ltd. in South Africa.
“We all recognize that we need to be very selective about the markets we focus on and the size of those markets,” he said. “We have seen pockets of real opportunity but also seen substantial concerns about the short-term direction and the ability for policy makers to give effect to the policies that they’ve articulated.”
South Africa’s investment appeal has been dented by an intensifying battle for control of the ruling African National Congress and President Jacob Zuma’s March 31 decision to fire Pravin Gordhan as his finance minister -- a move that prompted S&P Global Ratings and Fitch Ratings Ltd. to downgrade the nation’s credit rating to junk.
Nazmeera Moola, co-head of fixed income at Cape Town-based Investec Asset Management, sees South Africa’s economy growing 1 percent or less this year and doesn’t anticipate a significant improvement under the current political leadership. The ANC is due to hold internal elections at a Dec. 16-20 conference in Johannesburg.
‘Bare Minimum’
“Business is going to be doing the bare minimum in terms of investment until there is clarity in terms of the political outlook,” Moola said in an interview in Durban. “Given the improvement we’ve seen in commodity prices, given the improvement we’ve seen in exports, we really should see investment growing and I fear that’s not going to happen.”
While Nigeria, which has Africa’s biggest population and vies with Angola as the continent’s largest oil producer, was an investor darling when crude prices were high, it fell out of favor as commodity prices slumped and the economy contracted last year. The nation’s appeal has been further eroded by the central bank’s restriction of access to foreign exchange and its intervention in determining the exchange rate.
“There is a fairly long road ahead for Nigeria to reform its institutions, get itself back on its feet, broaden the economy to the extent that its no longer so reliant on oil,” said Chris Newson, Investec Asset Management’s director of private markets. “There are aspects that are looking a bit more encouraging but I wouldn’t be unrealistic. It’s going to take a long time for this to really start moving.”
While investors are seeking opportunities in Nigeria, Kenya and especially Ethiopia, French West Africa is a “region of interest,” particularly Ivory Coast and Senegal, Gary Senior, a corporate partner at Baker & McKenzie LLP’s London office, said in Durban. It was the top law firm for developing market M&A last year in terms of deal count, according to data compiled by Bloomberg.
To realize their full investment and growth potential, African economies need a sustained period of structural transformation, according to Khan.
“What you really need is a period of several decades where 6 to 7 percent growth can be sustained,” she said. “We are not seeing that anywhere in the region yet. ”
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EU proposes enhanced partnership with Africa on peace and security, and job creation for youth
The European Commission and the High Representative/Vice-President have set out the EU’s political priorities and concrete proposals for a stronger strategic partnership with Africa.
The European Commission and the High Representative/Vice-President presented on 4 May 2017 a revitalised framework for joint action, to build a stronger strategic partnership between Europe and Africa for more prosperity and stability in the two continents. The Communication presents innovative proposals in a number of key areas – such as peace and security, migration, job creation or energy – based on priorities defined by African countries and stepping up the existing fruitful cooperation between the two continents. This comes ahead of the Africa-EU Summit in November this year, which will put a specific focus on youth.
At this occasion, High Representative/Vice President Federica Mogherini said: “2017 is the year for a new impetus of the partnership between Europe and Africa: every obstacle we may face is a common challenge, and Africa’s hope is our hope. A strong Africa matters to Europe; our friendship matters to our people. Only by joining forces and working in partnership can we provide our youth with a more hopeful and peaceful future. Today, we don’t simply look at what we can do for Africa but what we can do with Africa, together”.
Neven Mimica, Commissioner in charge of International Cooperation and Development, added: “We propose several ideas and concrete measures on how to translate our priorities for the years to come into action, notably to foster growth and to create more jobs, especially for youth. We have a solid offer on the table and we now want to discuss it further with EU Member States and with African partners so that this offer materializes into something concrete and visible. More than ever citizens on both sides of the Mediterranean need to see that the Africa-Europe strategic partnership is a reality which goes beyond words.”
The proposal identifies three objectives for building an EU-Africa alliance to address common global and regional challenges:
- a stronger mutual engagement and increased cooperation bilaterally and in the international arena, based on common values and shared interests,
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security, on land and on sea, and the fight against transnational threats
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sustainable and inclusive economic development in Africa, in order to create the jobs that the continent needs.
Concrete actions are proposed around two mains strands.
The first one aims to achieve more resilient states and societies, through closer cooperation and action in order to prevent conflicts, improve conflict management; strengthen governance systems, and manage migration and mobility.
The second strand will aim to create more and better jobs, especially for youth. It develops concrete proposals for attracting responsible and sustainable investment, for example with the recently proposed External Investment Plan, which is expected to leverage up to €44 billion of private investment. Further proposals concern the cooperation in renewable energy, agriculture, agribusiness and the blue economy as well as advancement of knowledge and skills. For example, the Commission proposes to launch an African Youth Facility, which will expand the scope of Erasmus+, or to support digital innovation in Africa.
The Joint Communication will now be presented to the Council and the European Parliament.
On Thursday, the Commission also presented its Digital4Development approach, outlining ideas on how to promote information and communication technologies in developing countries and mainstream digitalisation into EU development policy.
Background
The EU is Africa’s closest neighbour and main partner. Collectively, the EU is Africa’s main foreign investor, main trading partner (offering free access to the EU market via Economic Partnership Agreements (EPA), Free Trade Agreements and the Everything But Arms initiative), a key security provider (through the African Peace Facility alone, the EU channelled substantial funding amounting to over EUR 2 billion since 2004), and its first source of remittances and ODA (€21 billion 2015 EU collectively). An ever closer network of human contacts and exchanges strengthens the bonds between the peoples.
The policy priorities and initial set of concrete initiatives set out today, to be coordinated and implemented with EU Member States and further developed jointly with African partners, come in response to Africa’s own Agenda 2063 and build on the EU Global Strategy for Foreign and Security Policy.
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Brics bank at advanced stage
Plans to set up the Africa Regional Centre of the New Development Bank (NDB), formerly referred to as the Brics Bank, are at an advanced stage, Minister of International Relations and Co-operation Maite Nkoana-Mashabane said on Wednesday.
Speaking at a Brics Business Council dinner, Nkoana-Mashabane said: “Brics Bank is no longer a dream. It is a reality.” She said the African Regional Centre of the Bank would initially focus on infrastructure funding. The centre would be based in Johannesburg. “We already have an address,” she said.
She said the bank would compete with the Development Bank of Southern Africa.
Speaking at the same event, Trade and Industry Minister Rob Davies said Africa had to move towards industrialized and diversified economies.
“That is absolutely fundamental,” he said. He said digitised technologies could be tools to solve the continent’s problems “and bring in people to production. We have to make the journey as a continent together.”
He said there were lessons that Africa could learn from China, which he said was undergoing reforms which would culminate in that country focusing on its domestic market.
“It has turned to domestic consumption. It is trying to move beyond manufacturing. It has turned into an innovator of technologies of the Fourth Industrial Revolution. That is our journey. That is what where we need to be going. We need to accompany that with much more energetic tools deployed to open up opportunities for our people,” said Davies.
He said being part of the bloc of emerging economies was important, as the Brics economies accounted for 22.5 percent of global output and 40 percent of the global population.
“The global output is expected to rise in the next five years to about a quarter of global output. So it is a significant grouping of countries. What was important for South Africa is that South Africa became part of it. Brics needed an African economy. They were missing this continent. Our membership of Brics has borne an understanding and a responsibility that we must bring the relationship with the African continent into the Brics family.”
Davies said South Africa had strong economic and trade relations with its Brics partners. On trade, China was South Africa’s largest trading partner as an export destination and a source of imports. India was the country’s sixth largest trade partner.
He said trade with Russia and Brazil had also increased. The problem with South Africa’s trading relationship with its Brics partners was that the country exported primary products and imported finished goods.
“But there has been willingness in the context of the Brics partnership to support more value adding and to support this through practical interventions,” said Davies.
Meanwhile, Dr Iqbal Survé, the chairperson of the Brics Business Council, said by 2030, the combined gross domestic product of the Brics countries was expected to reach R50 trillion.
“We are very fortunate to be at that table. But being at that table does not guarantee that we will benefit easily. We will have to work hard,” said Survé.
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tralac’s Daily News Selection
CFTA: Zambia may consider “a Brexit” (ZNBC)
President Edgar Lungu says the Continental Free Trade Area will only succeed if African countries enhance infrastructure development and regional trade. President Lungu also says the African Union and all economic blocks on the continent need to ensure equality so that CFTA benefits member countries. The President said this during a WEF panel discussion on fast tracking economic unification in Durban. President Lungu warned that some member counties like Zambia may consider a “Brexit” approach if the benefits of the CFTA are not shared equally. He however noted that the CFTA will make Africa an attractive investment destination and that countries should at all cost embrace the CFTA. President Lungu also advised African countries to be a part of the CFTA because at the moment most countries have nothing to protect.
Ghana’s Akufo-Addo wants Ghana-Togo borders open 24hrs (MyJoy)
President Nana Akufo-Addo said opening of the borders will give true meaning to the ECOWAS Protocols on Free Movement of Goods and Persons and will spur on progress and prosperity for both nationals. “The time for West African integration is now. Ghana and Togo should take the lead in converting ECOWAS into a true regional market, and, indeed, in helping to facilitate the wider efforts at continental integration and unity,” he added. [Nigeria may lift foreign currency restrictions on 41 imports]
African leadership and priorities debated in opening of WEF Africa (Devex)
The opening plenary of the WEF on Africa took the continent’s leaders to task for a raft of failures and laid out a set of policy priorities from education, to job creation and poverty alleviation that should drive development efforts and seek to address rising inequalities. Four out of five of the most unequal countries in the world - Swaziland, Nigeria, Namibia and South Africa - are in Africa, said Winnie Byanyima, the executive director of Oxfam International, at the panel. Tony Elumelu, a billionaire banker, investor and philanthropist from Nigeria, put it this way: “How can you even talk about development if you can’t feed yourself?” [Top stories from Day One]
Africa Competitiveness Report 2017: Which are Africa’s most competitive countries? (WEF)
According to the Africa Competitiveness Report 2017 (pdf), published today, African leaders have a choice. They can either put into effect structural reforms that improve people’s livelihoods or allow current, not-quite-adequate constitutional policies to unravel towards inequality and civil unrest. First, a little perspective: although Mauritius ranks first among African countries, it is still only at No 45 in the global index, a sober nod towards Africa’s slowing productivity levels after a decade of sustained growth. If Mauritius consistently outperforms its continental peers, it’s because its leaders have removed the hurdles that prevent so many other countries from achieving prosperity; in this case, streamlining its goods market, building solid infrastructure and promoting a healthy workforce. South Africa and Rwanda also do well and have improved their global ranking since the last index was released in 2015. Their continued growth can be attributed to the uptake of technology, efficient financial markets and a focus on strengthening institutions.
Starting with people: a human economy approach to inclusive growth in Africa (Oxfam)
A new Oxfam report, ‘Starting with people,’ sets out how Africa’s political and business leaders can use economic and taxation policy and social spending to build economies that work for all. Winnie Byanyima, Executive Director of Oxfam and co-chair of WEF Africa 2017: “Oxfam is not advocating a return to Africa’s economic past – we are championing economies that are fit for the future.”
NEPAD reprioritizes focus on intra-African trade via regional transport corridors (Devex)
NEPAD’s focus on regional trade facilitation will primarily target three corridors this year, including the North-South corridor (South Africa to Tanzania), the Central corridor (Tanzania to Burundi) and the Abidjan-Lagos corridor (Nigeria to Ivory Coast). There is also an ambition to have the Abidjan to Dakar (Ivory Coast to Senegal) corridor also come on board in the near future. In concrete terms, the agency has been instrumental in assisting the North-South corridor in formulating a memorandum of understanding of participating countries to help deregulate the movement of goods across southern Africa. And in West Africa, it helped recruit consultants to see how to expand the coastal Abidjan-Lagos highway project as a way to spur trade potential in the region. “We are working with ECOWAS to look at a multi-modal complex corridor for ground, sea and air cargo as a sort of first generation set of corridors that could work for Africa by looking at the movement of cargo and goods across West Africa,” Grey-Johnson said.
New Atlas shows energy potential of Africa and opportunities for investment (ICA)
Energy consumption in Africa is the lowest in the world, and per capita consumption has barely changed since 2000 shows a new Atlas released today (pdf) by the UN Environment and the AfDB at the World Economic Forum being held in Durban. Prepared in cooperation with the Environment Pulse Institute, United States Geological Survey and George Mason University, the Atlas consolidates the information on the energy landscape in Africa. It provides information in the form of detailed ‘before and after’ images, charts, maps and other satellite data from 54 countries through visuals detailing the challenges and opportunities in providing Africa’s population with access to reliable, affordable and modern energy services.
Leveraging digital to unlock the base of the pyramid market in Africa: waves of digital innovation in financial services (Deloitte)
New market entrants have started to disrupt traditional business models by introducing digital technology at various parts of the value chain. They leverage mobile technology to bring down costs, achieve reach and increase trust. This is a game changer for the financial services industry and is helping to unlock Africa’s mass market. This report looks at how these new entrants, through partnerships, mobile, data analytics and cloud technology, have made financial products and services available for previously excluded markets. Key takeouts from this report:
Inaugural Africa Data Revolution Report is launched (UNECA)
The first ADRR (pdf) focuses on mapping the data ecosystem in Africa with reference to the production, distribution and use of data by public, private and civil society actors, as they relate to the 17 UN Sustainable Development Goals. It draws from in-depth case studies of national data ecosystems in 10 African countries: Côte d’Ivoire, Ethiopia, Kenya, Madagascar, Nigeria, Rwanda, Senegal, South Africa, Swaziland and Tanzania. The ADRR assesses the infrastructure requirements and the nature and impacts of prevailing protocols governing data production on the continent, openness, analysis, privacy and ethics in Africa, focusing on open data systems, big data and innovations.
Enabling the Digital Revolution in Sub-Saharan Africa: what role for policy reforms? (World Bank)
A report on the economies of countries in Africa’s Sahel focuses on a lack of access to information and communications technology, and comes up with ways of remedying it. AFCW3 countries urgently need to address the unfinished first wave of ICT sector reforms. These aim at affordable universal access to mobile voice and text services as a key enabler in the successful development of mobile money and broadband internet services. Aside from mobile internet access, our Regional Country Update also focuses on Malian agriculture and how it can reach its full potential in “dryland agriculture.”
Next week: Addis Ababa to host 6th World Hydropower Conference
The biennial conference, which is coming to Africa for the first time, will emphasise environmental and social aspects to look into during hydroelectric project planning stages, and a commitment to better hydro in an age when resource management is more important than ever.
New report details progress made by power pools in Africa, and challenges ahead (ICA)
A new report, Updated Regional Power Status in Africa Power Pools (pdf), from the Infrastructure Consortium for Africa has noted the progress made by Africa’s five regional power pools, and highlights the challenges ahead. The new publication provides a comprehensive update to the report first prepared by the ICA in 2011, which provided an overview of the status of Africa’s power pools. The new report includes analysis of updated data to detail the progress made in each of the power pools and identifies findings, trends, challenges and possible solutions for the respective regions of the pools, and the potential to build effective power markets in the regions. While commending the progress made, the report urges African countries to:
The art of laying bricks: infrastructure as an asset class (World Bank)
To meet this challenge, our two institutions – the IFC and the Asian Infrastructure Investment Bank - co-hosted a session moderated by AIIB’s Vice President Joachim von Amsberg at the recently-held 2017 Global Infrastructure Forum. The objective was precisely to discuss how to construct and promote infrastructure as a tradable asset class.
South African citrus industry appeals to Putin (Fresh Plaza)
The trade in citrus between Russia and South Africa has been under strain for the last three years. From 2014 to 2015 there was a 40% decrease in trade and over the period 2013 to 2016 the drop is dizzying: from 129,000t to 66,000t last year. The reduction in volumes is attributed to various factors, among them the Rouble-Rand and Rouble-US Dollar exchange rates (which some regard as the principal reason for the decrease), lower demand from Russia and also to the controversial foodstuff import labelling demands instituted by the Euro-Asian Economic Commission in 2011; applicable worldwide and fully enforced since February 2015. The Citrus Growers’ Association has now, after various fruitless attempts to raise their concerns with the Russian and EAC authorities, sent a letter directly to President Vladimir Putin as well as to the Russian Embassy in Pretoria.
The AfDB has posted a suite of reports on Sudan and South Sudan trade and development issues: Sudan: Darfur infrastructure development report (1.7 MB), Promoting bilateral trade between Sudan and South Sudan (1.7 MB), Private sector-led economic diversification and development in Sudan (18.4 MB), Sharing African Experiences: Challenges and opportunities for arrears clearance, debt relief and donor coordination in Sudan (861 kB)
Business recommendations on rules of origin in preferential trade agreements (ICC)
The new recommendations (pdf) were issued this week as customs and business representatives from all over the world convened in Addis Ababa, Ethiopia, to discuss the complexities behind rules of origin at the WCO Global Origin Conference. With limited progress being made in the Doha round of multilateral trade negotiations, countries are increasingly looking to bilateral and regional PTAs as an alternative. As a result, PTAs have multiplied, with over 400 such deals currently in existence, including “mega-regional” PTA negotiations such as the Trans-Pacific Partnership or the Transatlantic Trade and Investment Partnership. This proliferation of agreements has led to confusing and inconsistent market entry arrangements, which are particularly felt by small and medium enterprises that have fewer resources. As new PTAs increasingly overlap existing ones, diverging rules of origin regulations and procedures are becoming a trade barrier along the whole supply chain.
As a result of these fruitful discussions, the SVEs where able to identify specific challenges they face when linking into Global Value Chains in Trade in Goods and Services, and where able to gather some recommendations on how to mitigate such challenges. The following is a document that presents a summary of the outcomes of the discussions. With this basis, the group will continue its work and present proposals or support existing initiatives in the different committees in WTO, in order to facilitate the implementation of some of the recommendations contained in the document.
UNCTAD’s E-commerce week 2017: Consumer protection remedy, how to increase trust in e-commerce?
During a session themed “E-commerce and Consumer protection”, UNCTAD stressed the importance of consumer protection in creating an enabling environment for inclusive e-commerce. Key stakeholders identified areas where national and regional consumer protection frameworks and institutional capacities should be strengthened. Key outcomes and follow-up actions identified by participants:
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Which are Africa’s most competitive countries?
Africa is full of brilliant, educated young people. Troublingly full.
The number of working-age people in the continent is expected to grow to 450 million over the next couple of decades. But Africa’s engines of job creation aren’t keeping up. If enough new positions aren't created by 2035, Africa may be sailing towards a crisis of youth unemployment.
According to the Africa Competitiveness Report 2017, published today, African leaders have a choice. They can either put into effect structural reforms that improve people's livelihoods or allow current, not-quite-adequate constitutional policies to unravel towards inequality and civil unrest.
The chart below, taken from the report, shows the rise in the number of working-age Africans since the 1950s, with the soaring red line plotting the expected rise in sub-Saharan numbers over the next 30 years.
Sub-Saharan Africa in red
Image: Africa Competitiveness Report 2017
It’s a dramatic demographic forecast. But what can Africa do to avoid it turning into disaster? Progress at raising competitiveness and productivity has been slow – yet without those two desirable traits, economies will struggle to provide more employment opportunities.
In fact, unless current policies change, there’ll only be a quarter of the required jobs by 2035.
The solution may lie in competitiveness, in pushing forward structural reforms that boost productivity, create jobs and determine how prosperous a country can become. This can be anything from affordable housing to clean water, better transport and sharper training initiatives – anything that helps people learn and connect and thrive.
The top performers
So which countries are getting it right? Below is a list of the 10 best-performing African nations, as measured by the World Economic Forum’s annual Global Competitiveness Report. Mauritius, South Africa and Rwanda come out on top.
First, a little perspective: although Mauritius ranks first among African countries, it is still only at No 45 in the global index, a sober nod towards Africa’s slowing productivity levels after a decade of sustained growth. If Mauritius consistently outperforms its continental peers, it’s because its leaders have removed the hurdles that prevent so many other countries from achieving prosperity; in this case, streamlining its goods market, building solid infrastructure and promoting a healthy workforce.
South Africa and Rwanda also do well and have improved their global ranking since the last index was released in 2015. Their continued growth can be attributed to the uptake of technology, efficient financial markets and a focus on strengthening institutions.
These are just some of the factors that contribute to a country’s prosperity. But the most important are those that enable people to find employment, travel to work and carry out their jobs. If they can do that, then disaster is not only averted, it is turned inside out, into an economic revival that may yet sweep Africa to prosperity.
Anna Bruce-Lockhart is Editor at the World Economic Forum. The views expressed in this article are those of the author alone and not the World Economic Forum.
» Download: The Africa Competitiveness Report 2017 (PDF)
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Launch of ICC Statement: Business recommendations on rules of origin in preferential trade agreements
The International Chamber of Commerce (ICC) has released recommendations on rules of origin in preferential trade agreements (PTAs), highlighting the challenges traders and suppliers face due to the lack of coherence among preferential rules of origin requirements across the globe.
The new recommendations were issued this week as customs and business representatives from all over the world convened in Addis Ababa, Ethiopia, to discuss the complexities behind rules of origin at the World Customs Organisation (WCO) Global Origin Conference. With limited progress being made in the Doha round of multilateral trade negotiations, countries are increasingly looking to bilateral and regional PTAs as an alternative. As a result, PTAs have multiplied, with over 400 such deals currently in existence, including “mega-regional” PTA negotiations such as the Trans-Pacific Partnership (TPP) or the Transatlantic Trade and Investment Partnership (TTIP).
This proliferation of agreements has led to confusing and inconsistent market entry arrangements, which are particularly felt by small and medium enterprises (SMEs) that have fewer resources. As new PTAs increasingly overlap existing ones, diverging rules of origin regulations and procedures are becoming a trade barrier along the whole supply chain.
Speaking at the event on behalf of the ICC, Brian Staples said: “Taking concrete steps to standardize the procedural requirements associated with rules of origin in PTAs represents a true win-win trade facilitation initiative. Building on established foundations such as the Revised Kyoto Convention, streamlined origin procedures will lower costs and increase predictability for all parties, especially for SMEs, in developing and developed countries alike.”
WCO Secretary General Kunio Mikuriya said: “WCO welcomes the ICC policy statement on rules of origin in Preferential Trade Agreements that highlights the need to set common standards and procedures for cross border transactions. This goes in line with the recommendations of the Revised Kyoto Convention (RKC) in relation to simplification and harmonization of customs procedures. WCO will pursue its efforts to facilitate legitimate trade through the implementation of WCO instruments and tools.”
Donia Hammami, Head, Customs and Trade Facilitation, International Chamber of Commerce concluded: “Businesses of all sizes find themselves unable to manage the complexity and administrative burden of origin requirement procedures, which gradually form a behind-the-border barrier to trade. Streamlining the certification of procedures will go a long way towards making this easier for traders.”
ICC sets forth eight recommendations calling for global horizontal cohesion through streamlining certification procedures:
- Follow the WCO Revised Kyoto Convention
Governments party to PTA negotiations should streamline rules of origin and origin procedures by following the provisions of the WCO Revised Kyoto Convention, in line with the principles of the World Trade Organisation’s (WTO) Trade Facilitation Agreement (TFA).
- Enable ‘extended cumulation’ or ‘cross cumulation’ between common agreements
Countries should insert provisions into PTAs allowing common bilateral parties to differing regional agreements to share or cumulate origin across trading regions and agreements.
- Develop common procedural standards for customs verification of origin documentation
The WCO, in close cooperation with the private sector, should develop common procedural principles under PTAs in the spirit of the provisions of the WTO TFA.
- Insert provisions for the resolution of minor origin disputes in PTAs
Origin disputes under PTAs should not be decided unilaterally by the customs authority of a single trade agreement partner. Instead, PTAs should contain provisions for resolution of such disputes within commercially responsive timeframes.
- Consider the customs capacity of trading partners
Governments preparing to enter a PTA should ensure there are capacity building programmes in place prior to entry into force of the Agreement, particularly when dealing with developing and emerging markets.
- Aim for horizontal global cohesion of PTA rules of origin
Standardising procedural requirements across PTAs makes trade easier, increasing transparency and predictability. It also allows business processes along the whole supply chain to be replicated and automated, further reducing trading costs.
- Align on the starting point for PTA negotiations
Governments should align on the starting point from which to commence negotiations on trade agreements. This would help streamline international trade and ultimately reduce costs for business and consumers.
- Consider PTAs as steps towards a multilateral agreement
The streamlining of mega-regional PTA negotiations could create momentum towards broader trade liberalisation.
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ECA unveils inaugural Africa Data Revolution Report
The African Centre for Statistics at the United Nations Economic Commission for Africa (ECA) has launched the Africa Data Revolution Report 2016, the first edition in a biennial series highlighting developments in African national data ecosystems.
This inaugural Africa Data Revolution Report (ADRR) is published by the ECA in collaboration with the United Nations Development Programme (UNDP), the Open Data for Development and the World Wide Web Foundation.
The first ADRR focuses on mapping the data ecosystem in Africa with reference to the production, distribution and use of data by public, private and civil society actors, as they relate to the 17 United Nations Sustainable Development Goals.
It draws from in-depth case studies of national data ecosystems in 10 African countries: Côte d’Ivoire, Ethiopia, Kenya, Madagascar, Nigeria, Rwanda, Senegal, South Africa, Swaziland and Tanzania.
“We are very excited about the report because harnessing the on-going data revolution in Africa is crucial to accelerating sustainable development on our continent, among many other things,” said African Centre for Statistics Director, Oliver Chinganya.
“There is definitely a need for us as Africa to boost the capacity of national data ecosystems fairly early in the implementation cycle of the sustainable development goals, that is why the ECA and its partners have produced this report and will continue to do so.”
The report identifies and describes key actors, communities and systems, their capacities, interactions and ‘rules of the game’, the enabling environment, and the laws, regulations and principles that govern the production, dissemination and use of data in Africa.
Empirical evidence is mounting that data enables citizens to make more effective decisions in their daily lives, entrepreneurs to create new business opportunities, and institutions to make the governing process more efficient, responsive, inclusive and transparent, making data an enabler of development, going beyond just being a tool for monitoring and evaluation.
The ADRR 2016 reviews seven key data communities in terms of their historical development, interaction with other data communities, strengths and limitations, and showcases data innovations in Africa.
“It will help readers to better understand the changing data landscape in Africa and the increasingly important role of various data communities and new technology,” said Mr. Chinganya.
The ADRR assesses the infrastructure requirements and the nature and impacts of prevailing protocols governing data production on the continent, openness, analysis, privacy and ethics in Africa, focusing on open data systems, big data and innovations.
Based on the analysis of data ecosystems in Africa, the ADRR identifies challenges to the data revolution in the legal, legislative and policy frameworks or principles; financial investments; technology and infrastructure; and data governance areas.
African countries are making considerable efforts to strengthen quality, accessibility and timeliness of data production and use by revitalizing national statistical systems, open data policies and platforms, greater generation and use of non-government generated data, especially citizen- and private sector-generated data.
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New Atlas shows energy potential of Africa and opportunities for investment to meet Africa’s energy needs
Energy consumption in Africa is the lowest in the world, and per capita consumption has barely changed since 2000 shows a new Atlas released today by the UN Environment and African Development Bank at the World Economic Forum being held in Durban, South Africa.
Current energy production in Africa is insufficient to meet demand. About a third of the total African population still lacks access to electricity and 53 per cent of the population depends on biomass for cooking, space heating and drying. A kettle boiled twice by a family in the United Kingdom uses five times as much electricity as a Malian uses in a year.
Prepared in cooperation with the Environment Pulse Institute, United States Geological Survey and George Mason University, the Atlas consolidates the information on the energy landscape in Africa. It provides information in the form of detailed ‘before and after’ images, charts, maps and other satellite data from 54 countries through visuals detailing the challenges and opportunities in providing Africa’s population with access to reliable, affordable and modern energy services.
“The Atlas makes a strong case that investments in green energy infrastructure can bolster Africa’s economic development and bring it closer to achieving the Sustainable Development Goals. It is therefore an important policy guide for African governments as they strive to catalyze national development by making use of their energy resources,” said Juliette Biao Koudenoukpo, Director and Regional Representative, UN Environment, Africa Office.
The Atlas shows both the potential and the fragility of the continent’s energy resources which are at the heart of Africa’s socio-economic development. It highlights some success stories of sustainable energy development around the continent, but it also puts the spotlight on major environmental challenges associated with energy infrastructure development.
“This Atlas will be instrumental to ease access to information and data in the energy sector for all stakeholders, including the donor community, African governments and the private sector,” said Amadou Hott, Vice-President in charge of power, energy, climate and green growth, African Development Bank.
Reserves of coal, natural gas and oil represent 3.6 per cent, 7.5 per cent and 7.6 per cent of global reserves respectively. A growing population, sustained industrialization and rising urbanization mean that energy demand in Africa is increasing. Only an insignificant fraction of the existing energy potential has been tapped into – leaving the continent lagging behind in the production and manufacturing sectors due to low and unreliable access to energy.
Main findings and key concerns in the Atlas
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Africa has the world’s lowest per capita energy consumption: with 16 per cent of the world’s population (1.18 billion people out of 7.35 billion) it consumes about 3.3 per cent of global primary energy.
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With current trends, it will take Africa until 2080 to achieve full access to electricity.
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Of all energy sources, Africa consumes most oil (42 per cent of its total energy consumption) followed by gas (28 per cent), coal (22 per cent), hydro (6 per cent), renewable energy (1 per cent) and nuclear (1 per cent).
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South Africa is the world’s seventh largest coal producer and accounts for 94 per cent of Africa’s coal production.
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Africa’s renewable energy resources are diverse, unevenly distributed and enormous in quantity – almost unlimited solar potential (10 TW), abundant hydro (350 GW), wind (110 GW) and geothermal energy sources (15 GW).
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Nearly 60 per cent of refrigerators used in health clinics in Africa have unreliable electricity, compromising the safe storage of vaccines and medicines; half of vaccines are ruined due to lack of refrigeration.
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Energy from biomass accounts for more than 30 per cent of the energy consumed in Africa and more than 80 per cent in many sub-Saharan African countries. Indoor pollution from biomass cooking – a task usually carried out by women – will soon kill more people than malaria and HIV/AIDS combined.
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Sub-Saharan Africa has undiscovered, but technically recoverable, energy resources estimated at about 115.34 billion barrels of oil and 21.05 trillion cubic metres of gas.
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More women than men suffer from energy poverty.
» Download: Atlas of Africa Energy Resources (PDF, 31.4 MB)
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tralac’s Daily News Selection
Underway, in Brussels: the 105th session of the ACP Council of Ministers. The ACP Council of Ministers will deliberate in plenary on 3-4 May, before meeting with counterparts from the EU during the ACP-EU Joint Council of Ministers on Friday.
Now available: the decisions, declarations, resolutions from the 28th AU Assembly (January, Addis Ababa); Report on the Proposed Recommendations for the Institutional Reform of the AU (pdf)
Underway, at the WTO: Mozambique’s trade policy review
Extracts from the Secretariat report, pdf: Mozambique’s applied MFN tariff has remained largely unchanged over the review period. Mozambique’s simple average tariff rate is 10%, with a higher simple average tariff on agricultural products (WTO definition, 13.4%) than on non-agricultural products (9.5%). International tariff peaks affect one third of Mozambique’s tariff schedule. Mozambique does not apply tariff quotas. Mozambique has only bound 686 tariff lines out of its schedule of 5,063 tariff lines (just over 13%). 19 tariff lines at the 8-digit HS level are bound for non-agricultural products; and for three of these lines, applied rates exceed their respective bound rates. Mozambique’s tariff shows mixed escalation overall: it is negative from raw materials to semi-processed products and then positive from semi-processed to finished products. Such a tariff structure tends to discourage investment in processing industries because the heavy taxation of imported inputs adds to production costs or reduces the competitiveness of products manufactured in Mozambique. Thus the tariff structure may not be conducive to diversification of economic activity through manufacturing. It also contributes to investors’ arguments in favour of duty and tax concessions, including under the Industrial Free Zone and Special Economic Zone regimes.
Taking out exports associated with megaprojects, exports have remained steady at around $1bn per year since 2011. The only other significant export expansion during the review period was in the sugar sector, resulting from new investment to rehabilitate the industry. Depressed demand for commodity exports, as well as delays in ramping up coal export infrastructure, resulted in a significant fall in the value of exports from $4.7bn in 2014 to $3.2bn in 2015, with decreases registered across the board. At around S$3.3bn, services imports are roughly the same size as Mozambique’s total merchandise exports. Throughout the review period, Mozambique has remained a large net importer of services, in particular of freight transport services, construction, and consulting, professional and trade-related services (see Table 1.2). The strong growth in services imports was partly counteracted by improvements in the services balance in 2015 which noted a reduction in construction and professional services, a side effect of lower investment. Tourism is a significant services export for Mozambique, albeit at a modest level.
World Economic Forum on Africa: selected commentaries, resources [#WEFAfrica2017]
The future of jobs and skills in Africa: preparing the region for the Fourth Industrial Revolution (WEF). While a number of African economies are relatively under-exposed to labour market disruptions at present, this picture is changing rapidly. This window of opportunity must be used by the region’s leaders to prepare for tomorrow. Extract (pdf): While it is predicted that 41% of all work activities in South Africa are susceptible to automation, as are 44% in Ethiopia, 46% in Nigeria and 52% in Kenya; this is likely moderated by comparatively low labour costs and offset by new job creation. Despite this longer window of opportunity, the region’s capacity to adapt to further job disruption is a concern, although there are important nuances at the country level. Employers across the region already identify inadequately skilled workforces as a major constraint to their businesses, including 41% of all firms in Tanzania, 30% in Kenya, 9% in South Africa and 6% in Nigeria. This pattern may get worse in the future. In South Africa alone, 39% of core skills required across occupations will be wholly different by 2020.
EY’s Attractiveness Program Africa: connectivity redefined. Foreign investors into Africa continue to seek the “next wave” of sectors beyond consumer-facing ones. With a 20.9% increase in FDI projects, transport & logistics became the fifth largest sector in 2016. The sector also ranked second by FDI investment and was the fourth largest contributor to FDI jobs. By source, the US directed more than 23% of the projects. Morocco was the largest destination, with 12 FDI projects, up fourfold from 3 in 2015, followed by South Africa, Mozambique and Egypt. Global transport and logistics providers see an opportunity to act as “connectors” for Africans and markets, considering the relatively underdeveloped state of infrastructure.
Devex WEF commentaries: Adva Saldinger, Christin Roby: 5 things to watch at the WEF on Africa; Raj Kumar: Should Africa ‘hurry up and wait’ amid development crisis?
Selected South African commentaries: Minister Rob Davies: New global deal needed to rid world of social ills; Minister Malusi Gigaba: address to the Black Business Council WEF roundtable; William Gumede: Social enterprise sector is missing link in Africa wealth-creation chain
News SMS tool to address trade barriers launched (COMESA)
A newly designed Short Messaging Service for reporting trade barriers within the tripartite regional economic blocs has been launched. The SMS will supplement the current web based online system for reporting, monitoring and elimination of NTBs used by COMESA, EAC and SADC. The Tripartite online reporting system is a real-time, mechanism for reporting, processing, monitoring and resolving NTBs and is available on www.tradebarriers.org. It was operationalised in November 2010. The SMS tool is now being rolled out to COMESA Member States as part of capacity building and empowerment to manage NTBs and fast tracking their removal. Economic operators who encounter NTBs will be able to send an SMS to the central number which will in turn relay messages to identified Focal Points numbers and the current online reporting system. The Union of the Comoros is the first country to launch the new NTB SMS tool on 21 April. [How the real-time tracking of market prices in Somalia helps us respond to drought (World Bank)]
Specialized Technical Committee on Social Development, Labour and Employment: key outcomes (AU)
The Ministers decided (24-28 April, Algiers) that the AUC should coordinate and harmonize the African Common Position on the Future of Work in Africa in collaboration with the ILO regional office and involve the Pan African Parliament for necessary legislative reforms. The Ministers decided to also fast track the entry into force of the Protocol to the African Charter on Human and Peoples’ Rights on the Rights of Older Persons in Africa and in this regard, the African Union Commission should accelerate sensitization of Member States on the existence of the Protocol on the Rights of Older Persons. The Ministers acknowledged that the handicraft sector needs to be formalized and governments and decided to take measure for extending social protection coverage for the workers in the sector. The Ministerial Panel on Employment, Social Development and the Demographic Dividend emphasized that an African Common Position should be developed to address the harassment and modern slavery that is afflicting irregular migrants and decided that AUC should assist with the dialogue for a multi- lateral agreement on labour migration, in particular with the Middle East and Europe.
Conference of Directors General of Customs of West and Central Africa: key outcomes (WCO)
There was particular focus during the conference (26-28 April, Dakar) on: (i) The developments, challenges and experiences in respect of the re-appropriation by Customs administrations of Customs functions previously assigned to inspection companies; (ii) Progress with the interconnection of transit systems in the region including through the regional groupings, particularly ECOWAS. In this connection, the Secretary General urged Members of the region to attend the Global Transit Conference which would be held at WCO Headquarters immediately after the Council sessions in July; (iii) Progress achieved with the “Sécurité par Collaboration (SPC++)” project aimed at combating growing insecurity in the region, the project being led by Nigeria and primarily involving the countries in the Lake Chad area.
South Africa trade and investment postings:
Challenges facing the poultry industry: EU submission to parliamentary hearing. Extract (Slide 9, pdf): Since December 2016 – sharp decrease in EU imports. Overall, EU imports’ share in domestic SA poultry consumption has not exceeded 10% in 2016. According to Country Bird, imports account for 26% of SA poultry consumption – less than 1/3 of market. This is against a background of growing poultry consumption and demand globally (Econex). Consumption of white meat expected to expand by 34% by 2023 – need to supplement domestic supply by imports. Domestic supply not enough – EU imports replaced by USA/Brazil imports.
Modernised SARS systems a treasure trove of data for policy makers (Business Day). Their use in research at micro level is relatively new, but in a joint National Treasury-SARS project, supported by UNU-Wider, the value that can be derived from analysis of integrated tax and trade data at unit record level, including PAYE data, has been demonstrated. To date, a dozen working papers have been published by South African and international academic researchers using sets of anonymous tax returns. The availability of anonymous tax and trade records through this initiative has enabled researchers to undertake studies that were not previously possible. [The authors: Elizabeth Gavin, Michelle Smit, Randall Carolissen]
Defining high-growth firms in South Africa (UNU-WIDER): Using new South African firm-level data, the study hypothesizes that the identification of high-growth firms is highly sensitive to the measure of firm growth, such that different firm growth measures will return samples of firms with significantly different demographic characteristics. These differences will then have an impact on the findings of analyses based on these growth measures. They will also have implications for public policy recommendations that seek to encourage the emergence of high-growth firms. [The analyst: Mulalo Mamburu]
A belated boom: Uganda, Kenya, South Sudan, and prospects and risks for oil in East Africa (Oxford Institute for Energy Studies)
Extract, pdf: The largest political risks facing oil industries in East Africa are associated with regional politics and pipeline infrastructure. Without access to regional pipelines, the largest oil reserves in the region, dwindling resources in South Sudan and still untapped in Uganda, cannot be monetised. Even oil resources in Sudan and Kenya are located inland and require functioning pipeline systems. For Uganda and Kenya, the regional pipeline debate is not only about finding the most efficient economic route, it is entrenched in the interplay between domestic politics and regional relations in the East African neighbourhood. [The analyst: Luke Patey]
Illicit financial flows to and from developing countries: 2005-2014 (GFI)
Illicit financial flows from developing and emerging economies kept pace at nearly $1 trillion in 2014, according to a study released by Global Financial Integrity. The report pegs illicit financial outflows at 4.2-6.6 percent of developing country total trade in 2014, the last year for which comprehensive data are available. The report is the first global study at GFI to equally emphasize illicit outflows and inflows. Each is found to have remained persistently high over the period between 2005 and 2014. Combined, these outflows and inflows are estimated to account for between 14.1 and 24.0 percent of developing country trade, on average. [The analysts: Joseph Spanjers, Matthew Salomon]
Today’s Quick Links: Lily Kuo: The best days of selling cheap Chinese goods in Africa are over Roberto Azevêdo’s B20 address: Trade can help energize economic recovery Kenya’s CS Sicily Kariuki takes over as chair of AU Public Service committee AUC workshop: A collaborative partnering approach towards African Geodata Malabo Montpellier Panel: membership update |
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Trade Policy Review: Mozambique
The third review of the trade policies and practices of Mozambique takes place on 3 and 5 May 2017. The basis for the review is a report by the WTO Secretariat and a report by the Government of Mozambique.
Report by the Secretariat: Summary
Mozambique shares many of the problems of resource-rich countries, with a fragile development model excessively focused on extractives and major projects. It has undoubted potential but faces considerable challenges: a lack of qualified workers; a limited internal market; infrastructure insufficiencies; a costly business environment; limited economic diversification; a high dependency on imports; increasing debt levels; a narrow tax base; and limited capacity for domestic resource mobilization.
Mozambique’s economy has grown rapidly since the end of the civil war in 1992. Real annual GDP growth averaged around 8% over the past two decades and around 7% during the current review period. Robust growth was made possible by sound macroeconomic management, a number of large-scale foreign investment projects, relative political stability and significant donor support.
For most of the review period, Mozambique appeared to be enjoying a natural gas-fuelled boom until the disclosure in April 2016 of secret loans to the Government, which resulted in the IMF and other donors suspending financial support. The Mozambican authorities are currently engaged in discussions to resume financial support.
Strong growth has been supported by FDI inflows in extractive industries. Major discoveries of coal and gas may transform Mozambique into a significant player in global energy markets and the country’s medium-term reform agenda emphasizes the need to focus on strengthening capacity to better manage the country’s extractive industries.
There has been relatively limited structural transformation: the share of manufacturing, which grew from 13% in the early 1990s to 16% in the early 2000s, had fallen to 10% in 2010-15. The share of the agricultural sector, which initially fell from 35% before the end of the war to 24% in the early 2000s, has averaged around 26% since 2010. Extractive industries represented over 5% of GDP in 2015 with most investment still geared towards exploration. Tertiary activities accounted for 54% of GDP; in addition to expanding financial services, the tertiary sector has a growing number of micro-scale retail businesses with tiny profit margins and few opportunities for saving and investing.
Mozambique’s traditionally small current account deficits widened during the review period as the value of imports significantly exceeded the value of exports. Large-scale megaproject-related imports have driven this trend, starting with investments in aluminium production and followed by the expansion of the mining and gas sectors financed by FDI. The current account deficit (CAD) has widened from an average of around 11% of GDP from 2004 to 2010 to around 40% from 2012 to 2015.
FDI reached between US$5 billion and 6 billion in 2012 and 2013 and was estimated at US$4.9 billion in 2014, or around one third of GDP, and financed 85% of the current account deficit. This trend compares favourably to most of the last decade, when FDI financed 35% of the deficit.
Trade in goods and services (exports + imports) accounted for over 100% of GDP in 2015, up from 68% in 2008. The pick-up in investment and FDI inflows since 2008 has been linked to strong import growth particularly in consumption and capital goods imports.
Mozambique’s export basket is rather limited, reflecting the narrow scope of the economy: in 2015, four items (aluminium, coal, gas and electricity) accounted for almost 63% of exports. Coal exports rose from zero in 2010 to over US$520 million in 2013, ranking second only to aluminium exports. Mozambique’s main imports are manufactured goods (67% of imports, especially machinery and equipment for use as megaproject inputs), foodstuffs and other agricultural products (13%), and fuel and mining products.
Services imports are roughly the same size as Mozambique’s total merchandise exports. The strong growth in services imports was partly counteracted by improvements in the services balance in 2015 which noted a reduction in construction and professional services, a side effect of lower investment that year.
Over the review period various development strategy documents were released. Although they differ in focus, a common thrust is the priority attached to changing the structure of the economy through industrialization with a view to ensuring economic growth, reduced unemployment and improved living standards. The promotion of economic zones and development corridors, and the upgrading of transport, energy, water and communications infrastructure, is seen as being central to achieving this vision. It is against this background that various legislative and regulatory changes have been made, inter alia, in the areas of rules on public–private partnerships as well as incentives.
Mozambique’s stated trade policy objective is to create an environment conducive to promoting the competitiveness of Mozambican products in international markets, especially those of the developed economies of Europe, America and Asia, without prejudice to regional trade. While external commentators have suggested that Mozambique could do more to encourage public–private sector dialogue on trade policy issues and be more transparent in the way that laws and regulations are developed, the recent institutionalization of a formal mechanism for public–private dialogue on economic and business issues is a positive step.
Mozambique is a founding Member of the WTO and grants MFN treatment to all of its trading partners. In January 2016, Mozambique ratified the Trade Facilitation Agreement. It has never been engaged in any dispute settlement activity. Over the review period, Mozambique has taken steps to improve its record on making notifications to the WTO, which was the subject of concern during its previous TPR. However, notifications still remain outstanding in various areas and this is an area where Mozambique has signalled that it needs technical assistance.
Mozambique has regional trade agreements in force with its South African Development Community (SADC) partners, as well as with Malawi and Zimbabwe (who are also SADC members). With respect to SADC, a key development was the completion of the transition period for full implementation of the free trade area in 2015; 99.6% of duties on goods imported into Mozambique from SADC members are now at zero. Mozambique ratified the SADC Protocol on Trade in Services in 2012 and approved the SADC Protocol on Employment and Labour in 2014. Negotiations to establish a customs union are ongoing, as are broader regional integration efforts. An EU–SADC EPA was signed in June 2016, but has not yet been ratified by Mozambique; this provides for asymmetric liberalization of goods and leaves the door open to enter into future negotiations in a variety of areas including services, investment, intellectual property rights, competition policy, and public procurement. Mozambique is eligible to benefit from unilateral preferences offered by various WTO Members.
Guarantees and incentives for investment are set out in the 1993 Investment Code and its 2009 implementing regulations, as well as the 2009 Code of Fiscal Benefits. Foreign investment must be of a certain value in order for investors to be able to remit profits outside the country and re-export domestic capital; otherwise foreign investors must meet targets related to annual sales volumes, exports or direct employment of a certain number of Mozambican citizens. There are few foreign investment restrictions in the areas covered by this report, namely with respect to the profession of customs brokers and the export of cashew nuts.
Over the review period various steps have been taken to facilitate trade, these include the launch of a single window system for customs clearance and other functions; the launch of an authorized economic operator scheme; liberalized transit regulations; and the creation of a one-stop border post with South Africa.
Mozambique continues to require the use of customs brokers for all commercial imports, exports and goods in transit; this profession is reserved for qualified Mozambicans and, recently, for citizens of SADC member States under certain conditions. However the authorities have noted that this requirement will be removed upon Mozambique’s implementation of the WTO’s Trade Facilitation Agreement. Pre-shipment requirements also remain in place, albeit on a reduced list of goods; since 2011, exporters of used vehicles have been required to pay a PSI inspection fee.
There have been no changes to Mozambique’s rules on customs valuation over the review period. Reference prices are applied to sugar, various horticultural products and certain products supplied by grocery stores.
Mozambique’s applied MFN tariff has remained largely unchanged over the review period. Mozambique’s simple average tariff rate is 10%, with a higher simple average tariff on agricultural products (WTO definition, 13.4%) than on non-agricultural products (9.5%). International tariff peaks affect one third of Mozambique’s tariff schedule. Mozambique does not apply tariff quotas. Mozambique has only bound 686 tariff lines out of its schedule of 5,063 tariff lines (just over 13%). 19 tariff lines at the 8-digit HS level are bound for non-agricultural products; and for three of these lines, applied rates exceed their respective bound rates. Mozambique’s tariff shows mixed escalation overall: it is negative from raw materials to semi-processed products and then positive from semi-processed to finished products. Such a tariff structure tends to discourage investment in processing industries because the heavy taxation of imported inputs adds to production costs or reduces the competitiveness of products manufactured in Mozambique. Thus the tariff structure may not be conducive to diversification of economic activity through manufacturing. It also contributes to investors’ arguments in favour of duty and tax concessions, including under the Industrial Free Zone (IFZ) and Special Economic Zone (SEZ) regimes.
Import surtaxes continue to affect ten tariff lines and are applied to sugar, cement, and certain iron and non-alloy steel items. Raw and processed sugar are subject to variable surtaxes which depend on the differences between the Mozambican reference prices and world market prices. Over the review period reference prices were significantly increased in order to protect the domestic industry from cheap imports, such that surtax rates have occasionally exceeded 100%, which is Mozambique’s bound rate for “other taxes and charges”. Surtaxes on cement and iron/steel items are ad valorem (ranging from 10.5 to 20%) and remain unchanged since Mozambique’s previous review.
Other taxes and charges affecting both imports and domestic production are VAT (levied at a general rate of 17%) and excise taxes on certain goods such as alcohol, tobacco and luxury goods. Various exemptions apply to provide incentives to particular activities. A special inspection regime applies to alcoholic beverages and processed tobacco whereby a seal provides proof of the tax payment, with associated fees being applied at a higher rate to imports than domestic production.
A chicken import quota mechanism, introduced in 2009, protects the national poultry industry from cheap imports of chicken. There is no legal basis for this mechanism; rather it is based on an agreement between the Government, the Association of Poultry Farmers (AMA) and importers. Quotas are set annually by a working group, and are allocated to a group of large importers based on historical performance and distribution capacity criteria.
Mozambique has no legislation in place relating to safeguard, anti-dumping and countervailing measures.
Over the review period, various new laws have been enacted with respect to technical barriers to trade and sanitary and phytosanitary measures, inter alia to ensure Mozambique’s conformity with treaty obligations and to update its regulations according to the authorities. These include laws relating to: metrology; standardization and conformity assessment; animal health; plant health; GMOs; seeds; pesticides; and, food of aquatic origin. Mozambique’s SPS measures are based on international standards drawn up by the OIE, IPPC and Codex Alimentarius; it has no purely national SPS measures per se. The importation of animals fed with hormones (or their products) is not permitted.
As at the time of its previous review, Mozambique continues to impose an export tax of 18% of the f.o.b. customs value on raw or unprocessed cashews, which was in place to encourage domestic processing of cashew nuts and promote employment. New export taxes have been introduced on raw and processed timber. The Government does not provide any export finance, insurance or guarantee services. The objective of these measures is to encourage domestic processing and promote employment, and in the case of timber, to protect the environment.
In 2009, the Government introduced a new Code of Fiscal Benefits which moves away from a one-size-fits-all approach to providing benefits to a more tailor-made approach, with different incentive packages designed for different sectors. Fiscal incentives include customs duty and VAT exemptions, corporate income tax exemptions, reductions and deductions; investment tax credits; accelerated depreciation and reintegration; and personal income tax deductions. The new Code eliminates the possibility of exceptional authorization of fiscal benefits; grants more incentives for tourism promotion; and extends the corporate income tax exemption period for Industrial Free Trade Zones (IFZs) to 10 years.
Mozambique continues to operate an IFZ regime; under which incentives are offered to all industrial activities with a few exceptions. IFZs are closed physical areas which must have security systems in place. Seventy per cent (previously 85%) of annual production must be exported. In 2007, Mozambique introduced a new type of zone, the Special Economic Zone (SEZ); SEZs are a geographic area of economic activity, rather than a physically-closed space, and SEZ fiscal and other incentives are available to all types of legal economic activity. Under both IFZ and SEZ regimes, if manufactured goods produced therein are sold to the domestic market, they are considered as an export to the domestic market and subject to the applicable duties. The encouragement of SEZs and IFZs are considered to be central to the Government’s industrialization strategy.
In 2013, Mozambique promulgated its first historic Competition Law (Law No. 20/2013 of 20 March 2013). This law was the first step in Mozambique’s efforts to establish a modern legal framework on competition. A Competition Regulatory Authority (ARC), once operational, will have authority to supervise, regulate, investigate and sanction, and will also be required to coordinate its activities with other regulatory authorities in the application of the law. The Competition Law applies to all economic activities undertaken in Mozambique or having an effect on it by private and public enterprises, with a few exceptions. Under the Law, prohibited anti-competitive practices include: horizontal agreements between competitors which aim to, or have the effect of, impeding, distorting or restricting competition; vertical agreements between companies and their customers and suppliers; and the abuse of dominant position by a dominant enterprise.
The National Sugar Distributor (DNA) has exclusive rights to export sugar. With respect to state-owned enterprises, the State has continued to gradually divest itself of various assets. By 2016, there were 122 enterprises in which the Government has either a full or partial share. A comprehensive privatization strategy is being implemented with consideration being given to further privatizing non-strategic companies.
The Government of Mozambique has continued to reform its procurement regime with new Procurement Regulations being introduced in 2010 and in 2016. While new legislation has not changed the overall institutional structure for government procurement, it has introduced changes in order to, inter alia, increase transparency in procurement processes; reduce the use of direct procurement; introduce a new contracting modality; increase business opportunities for foreign competitors; remove barriers to complaints by competitors; increase the thresholds for the application of certain tendering modalities; and strengthen the intervention powers of the supervisory agency. Preferences given to national competitors remain in place.
In the area of intellectual property rights, a new Industrial Property Code entered into force in 2016; legislative amendments are designed to promote competitiveness, industrialization and modernization of the economy and to increase exports. Parallel imports of various forms of industrial property are prohibited under the new Code. Provisions allowing compulsory licensing under certain conditions are in place; these have been invoked once, but not yet used. In 2013, Mozambique acceded to the Berne Convention for the Protection of Literary and Artistic Works and in the same year it signed the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled.
Agriculture accounts for a quarter of GDP and is a driver of Mozambique’s robust growth. It remains the core economic activity for most Mozambicans, with an estimated 86% of the people depending on agriculture as their primary means of subsistence. However, the sector is dominated by low-productivity subsistence farming which is in need of new technology and investment. The country still imports a significant share of its food, mainly rice to supply urban centres.
Agricultural exports have grown steadily, encouraged by a liberalized trade regime. Although cash crops, including sugar cane, tobacco, cotton and cashew, account for a small proportion of total area cultivated, they represent the majority of agricultural exports. Government intervention in these subsectors remains significant. Agriculture remains the most protected sector with an average tariff of 12.4%. The highest average tariffs are applied to basic food products such as meat, fish, fruits and vegetables.
Despite being a growing activity, extractive industries represented only 3.9% of GDP in 2014 with most investment still geared towards exploration. Mining in Mozambique plays a significant role in the world’s production of coal, gold, graphite and limonite, with massive coal reserves in Tete Province. Large reserves of natural gas were discovered in the Rovuma Basin in 2012. Currently, most of Mozambique’s mining and mineral processing operations are privately owned, including cement plants, aluminium smelters and gas processing plants.
Coal mining began in 2011 and is becoming a major export, although infrastructure constraints and declining coal prices may affect development prospects. Ultimately, natural gas is projected to dominate the export mix toward the end of the current decade.
During the review period, Mozambique’s mining sector has attracted significant attention from international mining companies. Recognizing this potential, the Mozambique Parliament approved a new Mining Law (Law No. 20/2014 of 18 August) repealing the previous Mining Law (Law No. 14/2002).
Manufacturing, which accounts for 10% of GDP, is dominated by the Mozal aluminium smelting plant, while the rest of the sector has significantly under-performed over the last decade. Mozal contributed 48% of Mozambique’s industrial output and further represents 75% of manufacturing exports.
Mozambique is characterized by a weak fixed telecoms network and a relatively strong mobile network. The fixed network, with 81,000 subscribers or just 0.3 fixed-telephone subscribers per 100 inhabitants, has been unable to compete against mobile providers, struggling with poor infrastructure due to a prolonged period of under-maintenance and insufficient investment. The mobile segment has been more successful, expanding from 436,000 subscribers in 2003 to an estimated 18 million subscribers in 2015. The new Telecommunications Law (Law No. 4/2016), which entered into force in June 2016, addresses some of the sector’s challenges and technological changes, including: unified licensing, enhancing competition, assuring network interoperability and interconnection, promoting infrastructure investment and sharing, and quality and affordability of service. The aim of this law is to stimulate competition in the telecommunications market, improve its functioning and ensure the protection of basic rights of consumers.
There has been a significant level of liberalization in the Mozambican banking services market, but this has not translated into increased affordability and availability of banking products. Access to finance remains an obstacle to improving Mozambique’s investment climate. Cross-border lending by banks and acceptance of deposits is allowed, but lending is subject to restrictions on the period, size, and interest rate of the loan. Financial services are both a key sector in services trade and a necessary prerequisite for foreign direct investment in other goods and services sectors. The Financial Sector Development Strategy 2013-2022 aims to maintain financial stability, improve financial access and support inclusive growth, and increase the supply of long-term private capital to support development.
Mozambique has poor quality transport infrastructure compared to other countries in the world: in 2013 it was ranked 124th out of 144 countries by the World Economic Forum (WEF) in the “quality of transport infrastructure” index. The country fares even worse when it comes to the quality of roads, where it ranked 135th out of 144 countries. Transport by road accounts for nearly all of passenger traffic in Mozambique and over half of freight traffic. The condition of the road network is poor, in particular in rural areas. The quality of its railroads is deemed more adequate, with a ranking of 89th. Air transport services constrain the growth of the tourism industry as only the Portuguese carrier TAP operates an intercontinental direct flight to Mozambique and all other long-haul flights to Maputo are routed through Johannesburg.
Mozambique accounts for 70% of SADC’s transit traffic, with logistics corridors linking the deep water coastal ports with neighbouring countries. It therefore plays a major role in regional trade as it provides important transportation corridors for cross-border businesses as well as exporters and importers of goods.
Mozambique has significant potential in tourism based on its range of beach holiday products, ecotourism, cultural diversity, and extensive coastline. The Government has made tourism a development priority since 2000. The relevance of tourism to economic growth and poverty reduction is also acknowledged by the Strategic Plan for the Tourism Sector, 2004-2014.
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Africa presents a mixed foreign direct investment (FDI) picture
Connectivity redefined
According to EY’s latest Africa Attractiveness report, heightened geopolitical uncertainty and “multispeed” growth across Africa present a mixed FDI picture for the continent.
The report provides an analysis of FDI investment into Africa over the past ten years. The 2016 data shows Africa attracted 676 FDI projects, a 12.3% decline from the previous year, and FDI job creation numbers declined 13.1%. However, capital investment rose 31.9%.
The surge in capital investment was primarily driven by capital intensive projects in two sectors, namely real estate, hospitality and construction (RHC), and transport and logistics. The continent’s share of global FDI capital flows increased to 11.4% from 9.4% in 2015. This made Africa the second-fastest growing FDI destination by capital.
Ajen Sita, Africa CEO at EY says:
“This somewhat mixed picture is not surprising to us. Investor sentiment toward Africa is likely to remain somewhat softer over the next few years. This has far less to do with Africa’s fundamentals than it does with a world characterised by heightened geopolitical uncertainty and greater risk aversion. Investors with an existing presence in Africa remain positive about the continent’s longer-term investment attractiveness, but they are also cautious and discerning.”
Asia-Pacific investors are bullish on Africa
In a sign of ongoing diversification of Africa’s FDI investors, more than one fifth of FDI projects and more than half of capital investment into Africa came from Asia-Pacific in 2016, an all-time record. Most notably, Chinese FDI into Africa increased dramatically, making the country the single largest contributor of FDI capital and jobs in Africa in 2016.
Foreign investors refocus on Africa’s hub economies
Egypt, Kenya, Morocco, Nigeria and South Africa (the key hub economies) collectively attracted 58% of the continent’s total FDI projects in 2016.
South Africa remains the continent’s leading FDI destination, when measured by project numbers, increasing 6.9%. Morocco regained its place as Africa’s second largest recipient with projects up by 9.5%, followed by Egypt, which attracted 19.7% more FDI projects than the previous year.
New investment hubs appear in East and West Africa
Although foreign investors still favour the key hub economies in Africa, a new set of FDI destinations is emerging, with Francophone and East African markets of particular interest.
Despite having a 31.7% decline in FDI projects in 2016, and weak growth in recent years, West Africa’s second largest economy, Ghana, remains a key FDI market. The country’s improving macro-economic environment and strong governance track record has seen Ghana rise to fourth position in the EY Africa Attractiveness Index (AAI). The index was introduced in 2016, to measure the relative investment attractiveness of 46 African economies based on a balanced set of shorter and longer-term metrics.
Staying in West Africa, Cote d’Ivoire also features in the top 10 of the AAI, and with a 21.4% jump in FDI projects in 2016, this illustrates that it’s becoming a country more favoured by investors.
Also in the west, Senegal has emerged as a potential major FDI destination although this is not reflected in its current FDI numbers. It does however rank strongly on the AAI 2017, taking eighth position, due to its diverse economy, strong strides in macro-economic resilience and progress in improving its business environment.
Sita concludes, “By 2030, Africa remains on track to be a US$3t economy. However growth needs to become more inclusive and sustainable to eradicate poverty at the levels that are required. If we accept the reality that physical connectivity – enabled by regional integration and the development of physical infrastructure – will remain a key stumbling block to inclusive growth across Africa for at least the next decade, then the need to actively embrace digital connectivity becomes critical. However, efforts to harness the potential of digital technologies as a fundamental driver of inclusive growth are still far too piecemeal and fragmented.
What is required is a far more collaborative effort between governments, business and non-profit organisations to adopt technological disruption, and create digitally enabled offerings with a particular focus on health, education and entrepreneurship.”
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World Economic Forum needs to move beyond spin if it’s going to help Africa
Africa needs to improve governance, build infrastructure, and reduce trade barriers to achieve inclusive growth.
Set against the backdrop of low growth, dire unemployment figures, and a huge infrastructure deficit – the theme of this year’s African World Economic Forum (WEF) is “inclusive and sustainable growth”.
This is a familiar subject for policymakers. On both the regional and global stage it’s natural to speak in terms of market integration among groupings of nations to stimulate economic growth. Reducing bottlenecks to trade often serves as the focal point, with Free Trade Agreements (FTAs) typically the formal means of implementing these initiatives.
The idea behind all of this is that connected markets provide a larger base of customers into which companies can sell their products and services. And that, for their part, customers benefit from greater product diversity and value. This in turn creates a virtuous cycle in which a growing economy makes investment in the region more bankable. With greater access to funding, investment in needed capital projects can be accelerated, in turn reducing Africa’s sizeable infrastructure gap and stimulating inclusive growth.
Admittedly, this orthodox take on markets and growth is not firmly embraced across Africa. Rather, what remains prevalent is an emphasises on government intervention and the role of the ‘developmental state’ as seen in South Africa’s National Development Plan.
What’s not in dispute is the continent’s infrastructure gap. Road and rail transport costs in Africa are estimated to be about 50% greater than comparable regions in other parts of the world. And over 600 million people across the continent lack access to electricity while even greater numbers make do with sub-standard levels of drinking water and sanitation.
Estimates suggest that the continent needs as much as $1 trillion in invested capital over the next ten years to close the infrastructure gap.
The question is whether the WEF gathering can make a dent in this problem. In reading background studies to this year’s meeting, the forum seems more attuned to the world it would like to see, rather than the one at hand. To move beyond the “spin” the forum should address impediments to inclusive growth.
New solutions to old problems?
The WEF is not the first to have focused on market integration as a way to promote economic growth. The African Union Summit has recently taken steps to establish a continental Free-Trade Area (FTA) that would include all 54 African countries. This is on top of an alphabet soup of long established sub-regional groupings such as the East African Community, West African Community, Southern African Development Community (SADC). A grouping of these three FTAs stands as a Tripartite Free Trade Area covering a combined population of almost 600 million people.
Yet trade between African nations still represents only 12% of the continent’s total trade. This is far below levels seen in North America (40%), Asia (50%) and Western Europe (70%), and is often cited as an impediment to Africa’s economic development.
SADC’s recent history provides a useful perspective to the successes and failures of African FTAs. SADC was established in its modern form in 1992, having a mandate to promote integration of economic development programmes among member states. At its 2003 Dar es Salaam Summit it adopted an ambitious 15 year programme in which a free trade arrangement, customs union, common market and ultimately a regional monetary union were to be established.
While piecemeal progress has been made since then, the plan’s more ambitious aspects have been largely set aside. Post mortems cite a range of protectionist measures that are defeating its objectives. These include the reluctance of member states to wind back tariffs on goods and services, provisions promoting local content, subsidised industry assistance and visa restrictions.
The WEF has replaced the language of FTA’s and customs unions with the call for “connecting markets, revitalising manufacturing, and integrating innovation”. The practical side of this focuses on industrial corridors in transport, energy markets and financial services and e-commerce.
Here too the SADC was ahead of the curve in terms of planning and adopting a regional infrastructure master plan in 2012. This sector based “corridor” approach to development is meant to be rolled out across energy, transport, water and telecommunications.
But where the SADC has been quick to plan – it has fallen down in implementation.
Old problems stand in the way of new solutions
A report by the Development Bank of Southern Africa concludes that few measures to facilitate trade have yielded measurable results. National interests have tended to override regional objectives. Local and global protectionist trends have only made this more pervasive.
The SADC Energy Plan may become the next non-starter in infrastructure development. So far, it has identified power generation and transmission projects costing between US$ 90 billion to over US$ 200 billion. No doubt some development finance will be allocated to these projects, but the bulk of the required investment is unlikely to move beyond countless feasibility plans.
Obtaining the hundreds of billions needed in power markets alone will require improved standards of governance and regulation. But member states often struggle in these areas, and comprehensive reform across the region seems an unlikely outcome until these fundamental issues are addressed.
Is rhetoric better than reality?
It seems incongruous that the WEF talks about the region as the least competitive globally, but follows with the observation that “fortunately, there are regional clusters of global manufacturing excellence”.
This is not to discount clusters of excellence. But the WEF’s reference to an African Outer Space Programme within the context of growing a manufacturing base, and pointing to drones as a solution to the continent’s transport woes, is, at best, naive.
Hopefully the meeting will rise above the spin, and make a meaningful attempt at addressing the dire economic conditions affecting the lives of hundreds of millions of people across Africa.
Stephen Labson is Director, Trans African Energy, and Senior Research Fellow, University of Johannesburg.
This article was originally published on The Conversation. Read the original article.
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28th African Union Summit: Decisions and Declarations
The 28th Ordinary Summit of Heads of State and Government of the African Union, held on the theme ‘Harnessing the Demographic Dividend through Investments in the Youth’, concluded on 31 January 2017 at the AU Headquarters in Addis Ababa, Ethiopia.
At the closing ceremony, during which new leadership was elected, outgoing AU Commission Chairperson H.E. Dr. Nkosazana Dlamini-Zuma noted that the 28th AU Summit took a historic decision to reunite the African community states with its decision to readmit into the Union The Kingdom of Morocco and said she was satisfied with the strong foundations in place for Africa’s success.
In his remarks, incoming Chairperson H.E. Mr. Moussa Faki Mahamat, President of Guinea, highlighted some of the various decisions that were discussed during the Summit, including the adoption of the Report on the proposed Institutional reform of the African Union which was presented by H.E. Mr. Paul Kagame, President of the Republic of Rwanda. He mentioned that Member States of the African Union are committed to financing the operations of the Union with their own resources, saying ‘it is important for Africa’s independence and self-respect.’
The summit also renewed the leadership of the AUC and took steps towards financial independence of the Union. Albeit the lack of strong country/context related decisions on Peace and Security issues, the Assembly adopted the Master Plan towards Silencing the Guns by 2020. The summit also adopted the so-called ‘collective withdrawal strategy’, a misnomer of a document which provides member states with a roadmap for eventual individual withdrawal from the ICC in case AU’s claims and proposals regarding the court and some of its on-going operations are not taken in consideration.
A summary of key decisions is available here. We highlight two decisions below.
30th Ordinary Session of the African Union Executive Council
The African Union Executive Council emphasised the need for Africa to boost investment in Africa’s youth by promoting transformative and inclusive development agendas aimed at recognising the efforts by the youth in entrepreneurship and innovation.
Addressing the distinguished delegates at the opening ceremony, the Chairperson of the AU Commission, H.E. Dr. Nkosazana Dlamini-Zuma said that for Africa to succeed in its integrated and inclusive development agenda “it requires that we revive and strengthen the spirit of Pan Africanism, unity and solidarity to successfully steer our way towards agenda 2063”.
To meet the first target in Agenda 2063 of commencing the Continental Free Trade Area by the end of 2017, the Chairperson stressed the need to unlock the potential, the energy, the creativity and the talent of Africa’s young men and women. She said that this can be achieved only through the African Skills revolution, by creating jobs and economic opportunities, through diversification, agricultural modernisation and industrialisation so that Africa’s youth can be the drivers of agenda 2063.
Dr. Abdullah Hamok, Acting Executive Secretary of the UN Economic Commission for Africa (UNECA), noted that unlike other regions of the world, the proportion of youth in Africa’s total population was rising and this growth presented great opportunities as relates to the continent’s demographic dividend as well as challenges derived from the risks associated with soaring rates of youth unemployment.
The Executive Council meeting was the second of three statutory meetings held under the 28th Summit of the African Union. The first meeting was that of the Permanent Representatives Committee which was held from 22 to 24 January. The final meeting of the summit was that of the Heads of State and Government which took place from 30-31 January.
For three days, the Ministers of External Affairs and other ministers or authorities designated by the governments of AU Member States deliberated on the different reports of the Specialized Technical Committee (STCs) ministerial meetings organised by the AU Commission during the last six months.
Decision on the Continental Free Trade Area
The Assembly,
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TAKES NOTE of the Report on implementation of Assembly/AU/Dec.608(XXVII) on the Continental Free Trade Area and Update on the proposed mechanism for the elimination of non-tariff barriers (NTBs) in the Continental Free Trade Area (CFTA);
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CALLS UPON Member States to secure funding for the activities of the Eminent Persons Group on the Continental Free Trade Area;
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REQUESTS the Commission to:
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Mobilise funding for the implementation of the NTBs Elimination Program on the CFTA;
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Undertake consultations and capacity building assistance to Member States and relevant stakeholders, including civil society and the private sector, to ensure timely conclusion of the CFTA negotiations;
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Report on the implementation of this decision to the next Ordinary Session of the Assembly in July 2017;
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- MANDATES H.E Mahamadou Issoufou, President of the Republic of Niger to champion the process of the CFTA to ensure that the deadline of the end of 2017 is reached and report on measures taken to the next ordinary session of the Assembly in July 2017.
Decision on the Outcome of the Retreat of the Assembly of the African Union on the Institutional Reform of the African Union
The Assembly,
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TAKES NOTE of the Report on “The Imperative to Strengthen our Union: Proposed Recommendations for the Institutional Reform of the African Union” submitted by H.E. Mr. Paul Kagame, President of the Republic of Rwanda, to the 2nd Retreat of Heads of State and Government at the AU Headquarters, Addis Ababa, Ethiopia held on 29 January 2017;
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COMMENDS H.E. Mr. Paul Kagame, President of the Republic of Rwanda, and the High Level Team of Experts for the excellent study undertaken on the institutional reform of the African Union (AU) and the proposals for a system of governance for the AU to enable it address the challenges facing the continent, and for submitting his report in a timely manner, as mandated by Decision Assembly/AU/Dec.606 (XXVII) adopted in Kigali, Rwanda in July 2016;
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ALSO TAKES NOTE of the recommendations for the proposed reforms to further strengthen the African Union, in the following five (5) areas:
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Focus on key priorities with continental scope;
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Realign African Union institutions in order to deliver against those priorities;
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Connect the African Union to its citizens;
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Manage the business of the African Union efficiently and effectively at both the political and operational levels;
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Finance the African Union sustainably and with the full ownership of the Member States.
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WELCOMES the comments and observations made by Member States aimed at reinforcing the proposals and identifying the way forward with special emphasis on Pan-African values of unity, solidarity, freedom and equality, and the vision of our Founders of a political and economic Union. We reiterate the importance of African Common Positions as the most effective way of advancing Africa’s voice and representation in the world;
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ADOPTS the recommendations in the Report as amended by Member States during the Retreat’s deliberations contained in Annex I to this Decision and, in particular, the following:
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On realigning African Union institutions in order to deliver against those priorities
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The Commission should initiate, without delay, a professional audit of bureaucratic bottlenecks and inefficiencies that impede service delivery and the recommendations thereof;
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The Permanent Representatives Committee’s (PRC) Rules of Procedures should be reviewed and be in line with the mandate provided for in the Constitutive Act of the African Union. The PRC should facilitate communication between the African Union and national capitals, and act as an advisory body to the Executive Council, and not as a supervisory body of the Commission.
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On connecting the African Union to its citizens
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The Commission should establish women and youth quotas across its institutions, and identify appropriate ways and means to ensure the private sector’s participation;
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The Commission should establish an African Youth Corps, as well as develop programs to facilitate cultural and sports exchange among Member States.
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On managing the business of the African Union efficiently and effectively, at both political and operational levels - On political management of the Union
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The African Union Assembly shall handle an agenda of no more than three (3) strategic items at each Summit, in line with the Me’kelle Ministerial Retreat recommendations. Other appropriate business will be delegated to the Executive Council;
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The Assembly shall hold one Ordinary Summit per year, and shall hold extraordinary sessions as the need arises;
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In place of the June/July Summit, the Bureau of the African Union Assembly shall hold a coordination meeting with the Regional Economic Communities, with the participation of the Chairpersons of the Regional Economic Communities, the AU Commission and Regional Mechanisms. Ahead of this meeting, the AU Commission shall play a more active coordination and harmonisation role with the Regional Economic Communities, in line with the Treaty establishing of the African Economic Community (the Abuja Treaty);
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External parties shall only be invited to Summits on an exceptional basis and for a specific purpose determined by the interests of the African Union;
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Partnership Summits convened by external parties shall be reviewed with a view to providing an effective framework for African Union partnerships. Africa will be represented by the Troika, namely the current, incoming and outgoing Chairpersons of the African Union, the Chairperson of the AU Commission, and the Chairpersons of the Regional Economic Communities as well as the Chairperson of the NEPAD;
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To ensure continuity and effective implementation of Assembly decisions, a troika arrangement between the outgoing, the current, and the incoming African Union Chairpersons shall be established. In this regard, the incoming chairperson shall be selected one year in advance;
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Heads of State shall be represented at Summits by officials not lower than the level of Vice President, Prime Minister or equivalent3;
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The current sanctions mechanism should be strengthened and enforced. This would include consideration of making participation in the African Union deliberations contingent on adherence to Summit decisions.
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On Financing the African Union sustainably and with the full ownership of the Member States
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The Kigali Decision on Financing of the Union (Assembly/AU/Dec.605 (XXVII) should be implemented in full and without undue delay;
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The Committee of Ten Finance Ministers will assume responsibility for oversight of the African Union budget and Reserve Fund (in para D(iii)), and develop a set of ‘golden rules’, establishing clear financial management and accountability principles;
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After funding of the budget of the African Union and the Peace Fund, the balance of the proceeds of the 0.2% AU levy on eligible imports, the Committee of Ten Finance Ministers will look into placing surplus in a Reserve Fund for continental priorities as decided by the Assembly;
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The current scale of contributions should be revised based on the principles of ability to pay, solidarity, and equitable burden-sharing, to avoid risk concentration.
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FURTHER DECIDES as follows:
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Mandate H.E. Mr. Paul Kagame, President of the Republic of Rwanda in his capacity as the lead on the institutional reform of the Union, in collaboration with H.E. President Idriss Deby Itno, President of the Republic of Chad in his capacity as the outgoing Chairperson and H.E. Alpha Conde, President of the Republic of Guinea in his capacity as the current Chairperson, to supervise the implementation process;
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The Incoming Commission elected at the January 2017 Summit shall put in place a Reform Implementation Unit at the AU Commission, within the Bureau of the Chairperson, responsible for the day-to-day coordination and implementation of this Decision;
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H.E President Paul Kagame shall make recommendations on a mechanism to ensure that legally binding decisions and commitments are implemented by Member States;
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H.E. President Paul Kagame shall also report at each Ordinary Session of the Assembly on progress made with the implementation of this decision.
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- REQUESTS H.E. President Paul Kagame to report on the implementation of this Decision to the next ordinary session of the Assembly in July 2017.
ANNEX
to Assembly Decision on the Outcome of the Retreat of the Assembly of the African Union on Institutional Reform of the AU
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On focus on key priorities with continental scope:
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The African Union should focus on a fewer number of priority areas, which are by nature continental in scope, such as political affairs, peace and security, economic integration (including the Continental Free Trade Area), and Africa’s global representation and voice;
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There should be a clear division of labour and effective collaboration between the African Union, the Regional Economic Communities (RECs), the Regional Mechanisms (RMs), the Member States, and other continental institutions, in line with the principle of subsidiarity.
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On realigning African Union institutions in order to deliver against those priorities
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The Commission’s structures should be re-evaluated to ensure that they have the right size and capabilities to deliver on the agreed priorities;
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The Commission’s senior leadership team should be lean and performance-oriented;
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NEPAD should be fully integrated into the Commission as the African Union’s development agency, aligned with the agreed priorities and underpinned by an enhanced results-monitoring framework;
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The African Peer Review Mechanism (APRM) should be strengthened to track implementation and oversee monitoring and evaluation in key governance areas of the continent;
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The roles and functions of the African Union judicial organs and the Pan-African Parliament should be reviewed and clarified, and their progress to date assessed;
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The Peace and Security Council (PSC) should be reformed to ensure that it meets the ambition foreseen in its Protocol, by strengthening its working methods and its role in conflict prevention and crisis management;
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The Permanent Representatives Committee’s (PRC) Rules of Procedures should be reviewed and be in line with the mandate provided for in the Constitutive Act of the African Union. The PRC should facilitate communication between the African Union and national capitals, and act as an advisory body to the Executive Council, and not as a supervisory body of the Commission.
-
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On connecting the African Union to its citizens
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The Commission should establish women and youth quotas across its institutions and identify appropriate ways and means to ensure the private sector’s participation;
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The Commission should establish an African Youth Corps, as well as develop programs to facilitate cultural and sports exchange among Member States;
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Member States should make the African passport available to all eligible citizens as quickly as possible, in line with the Assembly decision Assembly/AU/Dec.607(XXVII) adopted in Kigali, Rwanda in July 2016;
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The Commission should identify and provide a set of new capabilities or ‘assets’ in the form of common continent-wide public goods and services valued by Member States and citizens. Such services could include the provision of neutral arbitration and competition services, or a common technical platform for the data and analysis needed to assess Africa’s progress toward its development goals;
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Member States should engage their Parliaments and citizens, including civil society, on the African Union reform process.
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On managing the business of the African Union efficiently and effectively, at both political and operational levels - On operational management
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The election of the Chairperson of the AU Commission should be enhanced by a robust, merit-based, and transparent selection process;
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The Deputy Chairperson and Commissioners should be competitively recruited in line with best practice and appointed by the Chairperson of the Commission, to whom they should be directly accountable, taking into account gender and regional diversity, amongst other relevant considerations;
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The Deputy Chairperson role should be reframed to be responsible for the efficient and effective functioning of the Commission’s administration;
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The title of Chairperson and Deputy Chairperson may also be reconsidered;
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A fundamental review of the structure and staffing needs of the organisation, as well as conditions of service, should be undertaken to ensure alignment with agreed priority areas.
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On Financing the African Union sustainably and with the full ownership of the Member States
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The Kigali Decision on Financing of the Union (Assembly/AU/Dec.605 (XXVII) should be implemented in full and without undue delay;
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The Committee of Ten Finance Ministers should assume responsibility for oversight of the African Union budget and Reserve Fund (in para D(iii)), and develop a set of ‘golden rules’, establishing clear financial management and accountability principles;
-
After funding of the budget of the African Union and the Peace Fund, the balance of the proceeds of the 0.2% AU levy on eligible imports, the Committee of Ten Finance Ministers should look into placing surplus in a Reserve Fund for continental priorities as decided by the Assembly;
-
The current scale of contributions should be revised based on the principles of ability to pay, solidarity, and equitable burden-sharing, to avoid risk concentration.
-
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Challenges and opportunities experienced by small economies when linking into global value chains in trade in goods and services
Introduction
At the Ninth Ministerial Conference in Bali, Ministers reaffirmed their commitment to the Work Programme on Small Economies and instructed the WTO Secretariat to provide relevant information and factual analysis for discussion among Members in the CTD’s Dedicated Session on “The challenges and opportunities experienced by small economies when linking into global value chains in trade in goods and services”.
At the Tenth Ministerial Conference in Nairobi, Kenya, Ministers instructed the WTO Secretariat to continue its work on this subject.
In accordance with this mandate, the Secretariat prepared the Background Note contained in document WT/COMTD/SE/W/31. The Committee of Trade and Development agreed to discuss the background document in different sessions that would deal with the different sectors discussed in the paper, mainly: agrifood, seafood, textiles and apparel in the goods value chains; and Tourism, IT, business process outsourcing and trade logistics in the services value chains.
Five meetings were organized throughout years 2015 and 2016, to discuss these topics. International organizations, such as UNCTAD and ITC, participated in the discussions. SVE representatives also made several presentations on the topics and substantial discussions and exchange of experiences took place during the meetings.
As a result of these fruitful discussions, the SVEs where able to identify specific challenges they face when linking into Global Value Chains in Trade in Goods and Services, and where able to gather some recommendations on how to mitigate such challenges. The following is a document that presents a summary of the outcomes of the discussions. With this basis, the group will continue its work and present proposals or support existing initiatives in the different committees in WTO, in order to facilitate the implementation of some of the recommendations contained in the document.
Outcomes of discussions
In this section, the SVEs group presents the results of the discussions during the CTD Dedicated Session on Small Economies, emphasizing the challenges that SVEs face when linking into global value chains, and making some recommendations that the group sees as necessary to overcome such challenges.
Agrifood and Seafood value chainsChallenges
Recommendations
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Textiles and Apparel value chainsChallenges
Recommendations
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Tourism Value ChainsChallenges The following challenges were identified in the Secretariat’s report and by presenters:
The following additional challenges were identified by Member States:
Recommendations
Possible Multilateral Solutions
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Trade Logistics and Business Processing Outsourcing Services Challenges Regarding logistics services, some challenges were identified such as:
Recommendations
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tralac’s Daily News Selection
Starting today, in Berlin: B20 Germany 2017 Summit. Featured preview
Underway, in Addis: IPCC meeting to draft Sixth Assessment Report outline
Featured tweets: (i) @AUTradeIndustry: The 2nd Meeting of the CFTA Technical Working Groups is still going on, 1-5 May, Sarova Panafric Hotel in Nairobi. Media are VERY Welcome; (ii) @markApriest: Moyale OSBP. Road and infra done on Kenya side, Ethiopia will finish in June. Exciting progress on the Nbo Addis corridor
Integration along the Abuja road map: a progress report (UNU-WIDER)
This paper reviews integration among the eight African RECs by comparing their characteristics and progress with three other South–South Regional Integration Arrangements. Three conclusions emerge: (i) slow progress towards meeting overly ambitious objectives; (ii) small changes in the destination of trade across all Regional Economic Communities, indicative of persistent high trade costs and few new manufactures products destined for geographically close markets; and (iii) compared with other South–South Regional Integration Arrangements, the RECs include a high number of provisions not covered in WTO negotiations, but these have low legal enforceability. From the conclusion (pdf): From a broader perspective, this progress report questions Africa’s ‘old regionalism’ approach where the building of RECs still continues to be built around an exchange of market access seeking to build vertically integrated production chains on a regional basis rather than participating in the growth of trade in tasks where integration takes place on a horizontal basis. With the worldwide reduction in trade costs and the subsequent horizontal fragmentation of production, logistics, and services, activities have become necessary to participate in the rapidly expanding exchange of intermediate goods (i.e. trade in tasks). Participation in ‘value chains’ requires not only access to imported intermediates at world prices, but also access to the services (transportation, accounting, ICT, consulting, financial) that are essential in the production of intermediate and final goods. [The analysts: Jaime de Melo, Mariem Nouar, Jean-Marc Solleder]
South Asia’s missing intra-regional trade (Mint)
The latest edition of the World Bank’s South Asia Economic Focus is well worth reading. Titled Globalization Backlash, the report examines whether South Asia stands to lose from the protectionist tendencies currently on the rise. It concludes, optimistically, that the region does not have much to lose from the turn away from globalization. How convincing is this claim? Exports currently constitute only around 10% of South Asia’s GDP. This is the lowest of all regions barring sub-Saharan Africa. In fact, the contribution of exports to GDP has come down across the region in recent years.
Tripartite Free Trade Area: EAC puts off ratification of tripartite trade deal (The EastAfrican)
The EAC has postponed ratification of the Tripartite Free Trade Area from March to December this year, after failing to agree on the contentious rules of origin and tariffs. “The Tripartite Ministers during the Nairobi meeting had agreed to complete the entire process by July this year while the EAC had agreed to ratify it by March. Given that there is still work to be done on rules of origin and tariff offers that are still outstanding, the EAC agreed to extend the deadline to December 2017,” said Dr Chris Kiptoo, Principal Secretary in Kenya’s State Department of Trade. “The other regional economic communities have not pronounced [their stand] on a new deadline but it is clear that it will go beyond June 2017,” added Mr Kiptoo.
West African Economic and Monetary Union: IMF staff report
The regional current account deficit (including grants) is estimated at 6.1% of GDP in 2016, about 0.3 percentage point of GDP more than last year, reflecting continued public investment efforts and less favourable terms-of-trade. The trade and service deficit increased by 0.7 percentage point to 9.6% of GDP, reflecting a decline in exports of goods - especially cocoa and uranium - and an increase in imports of specialized services. Current official transfers are estimated to have increased by 0.4 percentage point to 2.7% of GDP in 2016 compensating for slightly lower private transfers (e.g., dividend payments). The current account deficit is expected to gradually decline to 5.3% of GDP by 2021, assuming fiscal consolidation and improved external competitiveness.
Ghana: Trade liberalisation in West Africa important – Akufo-Addo (GhanaWeb)
With ECOWAS having been established some 42 years ago, and trade liberalization agreements being in existence for nearly 40 years, West Africa is yet to reap the benefits if intra-regional trade because, in the view of the President, “the political will to make ECOWAS a functioning reality is not there.” Statistics indicate that intra-regional trade between members of the EU and ASEAN amount to some 60% to 70% of GDP, whereas intra-regional trade in West Africa and the African continent amount to a paltry 10% to 11%.
Rwanda: Performance and learning review of the country partnership strategy, FY14 - FY18 (World Bank)
The PLR proposes a two-year extension of the on-going CPS to the end of FY20. This will allow time to fully anchor the new Country Partnership Framework in the EDPRS3, which will be published in January 2019. It will also enable the Systematic Country Diagnostic to be informed by the results of the 2018 fifth integrated household living conditions survey, and the 2019 Demographic and Health Survey. The World Bank will be one of the key development partners providing inputs to the EDPRS-3 including existing analytical work, an on-going Country Economic Memorandum and emerging lessons from the SCD work which is due to start in late FY18. Extract (pdf): Strong leadership and effective coordination of multiple stakeholders have been central to the successful implementation of reforms in Rwanda. Of the 54 Investment Climate Programs in place across Sub-Saharan Africa, Rwanda, together with Mauritius, has demonstrated particularly good progress since 2009. Key success factors include: (1) strong commitment to reforms at the highest level; (2) effective government coordination of teams involved; (3) an ability to understand changes in methodology, to own these and to put forward a solid work-plan; and (4) an ability to learn from the World Bank’s global and regional Doing Business teams and to take a lead role in the engagement.
Mozambique: Country partnership framework for the period FY17 - FY21 (World Bank)
Mozambique’s gas production prospects shape expectations for a recovery in growth to over 7% by 2020. Recent developments indicate progress with the Rovuma basin gas megaprojects, which bring the final investment decisions for these multibillion projects closer. In the meantime, ongoing projects are showing resilience and may benefit from a boost in the near term from an improving outlook for key commodity prices as coal, aluminum, and gas, three of Mozambique’s largest exports, are expected to begin recovering in 2017. This supports the prospects for a recovery in growth, but the challenge remains for Mozambique to ensure that future wealth from these sectors is deployed transparently to spur growth in the non-resource economy and lift the poor to prosperity. Extract (pdf): Mozambique is currently in debt distress. Almost two decades ago, Mozambique was among the first round of countries which proved itself as an economic reformer in return for debt relief. Under the HIPC initiative, the external debt stock reduced from 160% of gross national income in 1998 to a far more manageable 33% ten years later. Soon after the HIPC initiative, the stock of debt began rising again, coinciding with the Government’s plans to pursue an ambitions public investment program, and by 2016, revelation of hidden debt reversed Mozambique’s post-HIPC gains. The debt revelations pushed public debt to 127% of GDP in 2016 (of which 112% is external) and shifted the country to an unsustainable position. Public debt levels are now expected to exceed 100% of GDP until 2020. Total public debt service, which stood at 7.3% of revenue in 2012, is now estimated at 46% of revenue, of which 25% is external, and is projected to consume over 40% of revenue until 2020.
Botswana: Standard and Poor’s affirms Botswana’s A-/A-2 sovereign credit rating (Bank of Botswana)
We expect Botswana to maintain current account surpluses. We assume diamonds, constituting close to 80% of exports, will continue to dominate and the value-added from the diamond-cutting and polishing industry in Gaborone will increase. The 2016 current account surplus is now estimated higher at 13% of GDP against our previous estimate of 3% of GDP six months ago. This is mainly due to a combination of increased diamond sales as Debswana sold past stock levels on increased demand, and a marginal contraction of imports. We estimate the current account should remain in surplus through 2020, albeit at lower levels than in 2016. This is due to what we consider as a one-off increase in sales when Debswana reduced stockpiles, as international diamond prices and production have not significantly firmed up. Service exports, which constitute around 20% of total exports, are supported by tourism inflows. SACU inflows remain relatively stable although declining. The SACU formula, which is used to distribute customs revenues among the members, is unlikely to be changed in the medium term. We expect the country’s gross external financing needs through 2020 will remain above 50% of current account receipts and usable reserves. We anticipate Botswana’s net external asset position will average close to 60% of current account receipts over 2017-2020. [Download, pdf]
Reduce reliance on imports, says President Geingob (The Herald)
Visiting Namibian President Cde Hage Geingob yesterday implored African governments and the private sector to aggressively champion industrialisation in their economies and curb over-reliance on raw commodity exports. In his address to mark the official opening of the 58th edition of the Zimbabwe International Trade Fair in Bulawayo, President Geingob said the challenges facing the continent and rising youth unemployment could only be addressed by harnessing regional linkages and pursuing a robust regional industrialisation agenda anchored on value addition and beneficiation. He bemoaned the low intra-regional trade and reliance on imports from developed economies, which he blamed for the continued use of economic models that serve colonial interests. While Namibia recorded trade in goods worth about $13bn in 2016, President Geingob said his country’s trade with Zimbabwe in the same period was only $24m.
Nader Noureddin: Russia’s trade failures on Egypt (Ahram)
Egypt imports 11 million tons of its total imports of wheat per year at a price of $200 per ton, meaning that Egypt pays Russia $2.2bn a year for wheat alone. Egypt also imports yellow maize and edible oils from Russia and Ukraine. Last year, the country imported 8.5 million tons of maize from Russia, in addition to its imports of soy and sunflower oils, which means that Egypt pays Russia at least another $2bn a year for these goods, making Egypt’s volume of trade with Russia worth about $5bn a year. Russia would lose a lot if Egypt decided to diversify its sources of wheat, maize, edible oils and fish, as it did earlier with US imports. This should have made Russia keener on trade with Egypt, as the balance is in Russia’s favour. However, the opposite has been the case. [The author is attached to the Faculty of Agriculture, Cairo University], [Egypt exports up, trade deficit down 46% year-on-year in Q1 2017]
West Africa: Regional supply and market outlook, April 2017 (ReliefWeb)
Between 7 Feb and 18 March, a series of joint market assessments were conducted across West Africa. At the regional level (pdf), production is above-average, driven by a third consecutive year of favorable production conditions in key surplus-producing areas and a large supply response in Nigeria to favorable production and marketing conditions (high prices and government support programs). There are nevertheless localized instances of below-average production within Niger, Mali, and Burkina Faso (due to erratic rainfall) and northeastern Nigeria (due to protracted conflict and displacement). [Related: East Africa Cross Border Trade Bulletin, April 2017]
Southern Africa: Assessing the competencies of laboratories to support trade facilitation and regional integration (UNIDO)
UNIDO, in cooperation with the SADC Regional Laboratory Association, and with funding from the Ministry of Foreign Affairs of Finland, conducted a survey in 2016 (pdf) in 11 Southern African countries to assess laboratory competencies. From the 175 laboratories surveyed, the results clearly indicate that many laboratories require technical assistance in terms of developing physical and human capacity, test methods, management systems and overall business plans. In order to efficiently overcome the identified gaps, starting in May 2017 UNIDO will strengthen the Regional Laboratory Association; provide strategic support to the National Laboratory Associations to offer sustainable services for their members; and upgrade and strengthen the capacity of food and water laboratories.
ECOWAS ministers of Trade and Agriculture: meeting outcomes (Daily Observer)
The objective of the meeting was to present to the Ministries in charge of Quality and Agriculture the key proposals of the study on the operation of the ECOWAS Quality Infrastructure and the resolutions on cocoa and cashew for their approval. In addition, the ECOWAS Commission will establish an independent technical body to assist in the implementation of the decisions of the Community Quality Council. This body, known as the ECOWAS Agency for Quality, will serve as the Executive Secretariat of the ECOWAS Quality Infrastructure Scheme.
Uganda: Shs31bn logistics hub to be constructed in Gulu (Daily Monitor)
Government has secured funding for the construction of the first logistics hub at the Gulu Railway station, targeting the markets in South Sudan through Alegu and the DRC through West Nile. South Sudan and DRC are Uganda’s largest export markets. According to Mr Benon Kajuna, the director transport in the ministry of Works and Transport, the hub will be constructed on at least 24 acres - provided by the government. The project will cost $8.6m (Shs30.96b) of which $5.6m (Shs20b) is available with funding from DFID and TradeMark East Africa. According to Mr Mark Pearson, a consultant with TradeMark East Africa, that construction will not only require logistics services but will also promote logistics services in Uganda. He said that Uganda could even reach the markets as far as the Central African Republic if the hub is commercially viable.
India should be a standard setter, not follower: Nirmala (The Hindu)
Addressing the 4th National Standards Conclave in New Delhi, she called on the industry to produce quality products at an affordable price so that import of cheaper products can be contained. “India should be setting standards rather than following the standards which are being set,” Ms. Sitharaman said, adding that the country should have active participation in any global debate on setting standards. Launching a portal of standards developed jointly by the commerce ministry and industry body CII, Ms. Sitharaman said this website will be providing all the information relating to standards and conformity assessment.
Today’s Quick Links: President Trump signs two executive orders on trade: the texts Chicken issues should not mar trade relationship between EU and SA Policy lessons for Uganda: Does oil revenue crowd out other tax revenues? As India’s new BIT strategy sputters out, transparency is a must FDI round tripping: What to do when foreign direct investment is not direct or foreign OECD: Competition isssues in aftermarkets (pdf) |
Related News
South Africa Merchandise Trade Statistics for March 2017
Trade surplus widens in March
South Africa’s trade surplus widened in March due to a surge in exports, while growth in private sector credit extension moderated on the back of weaker corporate credit demand.
The South African Reserve Bank (Sarb) reported on Friday that the merchandise trade balance recorded a surplus of R11.44 billion last month from a revised trade surplus of R4.79 billion.
Sarb said exports of mineral products, which include iron ore and coal, increased by R1.7 billion during the period. Shipments of precious metals and stones, which include gold and diamonds, increased by R4.2 billion. However imports of textiles decreased R640 million, while vehicles and transport equipment imports increased by R2.9 billion.
An economist at NKC African Economic, Gerrit van Rooyen, said while monthly trade statistics were notoriously volatile, early indications for this year were positive.
“Export growth is supported by a moderate recovery in South Africa’s major trading partners and higher commodity prices, whereas the sluggish economy is keeping a lid on import growth - both developments playing into an improved trade balance, which will also have a positive impact on the current account we forecast a current account deficit of 3.7 percent of gross domestic product (GDP) this year compared to a 3.3 percent of GDP deficit in 2016,” van Rooyen said.
South Africa posted a trade surplus of R 3.5 billion in March, compared to R1.6 billion in February. However, data from the central bank said private sector credit extension growth moderated to 4.95 percent year-on-year in March from 5.29 percent year on year in the previous month.
South African households increased their loans by R3.7 billion, compared to a monthly increase of R7.4 billion in February, while the corporate sector increased loans by R16 billion following a monthly increase of R27.5 billion in February.
Credit growth extended to the domestic private sector, reaching a peak of 10.2 percent year on year in December 2015, averaging 6.9 percent last year. However, it has been on a downward trend ever since.
Investec economist Kamilla Kaplan said the constrained credit growth in the private sector was due to poor business and consumer confidence.
“A credit fuelled recovery in economic growth is not expected for as long as business and consumer confidence levels remain depressed.
“As such, meaningful demand led inflationary pressures should remain absent. This combined with the dissipation of supply side inflationary pressures over the course of 2017 should see inflation return to the 3 to 6 percent target range,” Kaplan said.
The latest Financial Services Index for the first quarter of this year showed that retail banks adopted an easier stance with regard to credit standards applied to both households and corporates, with credit criteria for corporates remaining easier than for households.
The Africa economist at Capital Economics, John Ashbourne, said the available activity data suggested that the economy was in pretty weak shape in February, with mining, manufacturing, and retail sectors all having contracted but expected green shots to filter in.
“We expect price pressures will continue to ease and headline inflation to re-enter the Reserve Bank’s target range in April. The next interest rate move is more likely to be a cut than a hike,” Ashbourne said.
The South African Revenue Service (SARS) has released trade statistics for March 2017 recording a trade balance surplus of R11.44 billion. These statistics include trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS). The year-to-date trade balance surplus (01 January to 31 March 2017) of R4.98 billion is an improvement on the deficit for the comparable period in 2016 of R24.27 billion.
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R11.44 billion trade balance surplus for March 2017 is attributable to exports of R101.23 billion and imports of R89.79 billion. Exports increased from February 2017 to March 2017 by R13.96 billion (16.0%) and imports increased from February 2017 to March 2017 by R7.32 billion (8.9%).
Exports for the year-to-date (01 January to 31 March 2017) grew by 8.0% from R248.72 billion in 2016 to R268.68 billion in 2017. Imports for the year-to-date of R263.71 billion are 3.4% less than the imports recorded in January to March 2016 of R273 billion.
On a year-on-year basis, the R11.44 billion trade balance surplus for March 2017 is an improvement from the deficit recorded in March 2016 of R0.66 billion. Exports of R101.23 billion are 10.4% more than the exports recorded in March 2016 of R91.73 billion. Imports of R89.79 billion are 2.8% less than the imports recorded in March 2016 of R92.39 billion.
February 2017’s trade balance surplus was revised downwards by R0.43 billion from the previous month’s preliminary surplus of R5.22 billion to a revised surplus of R4.79 billion as a result of ongoing Vouchers of Correction (VOC’s).
Trade highlights by category
The main month-on-month export movements (R’ million) |
||
Section: |
Including BLNS: |
|
Precious Metals & Stones |
+ R4 208 |
+ 33% |
Vehicles & Transport Equipment |
+ R2 014 |
+ 19% |
Machinery & Electronics |
+ R1 862 |
+ 27% |
Mineral Products |
+ R1 743 |
+ 8% |
Chemical Products |
+ R 913 |
+ 17% |
The main month-on-month import movements (R’ million) |
||
Section: |
Including BLNS: |
|
Machinery & Electronics |
+ R3 122 |
+ 18% |
Vehicles & Transport Equipment |
+ R2 925 |
+ 41% |
Original Equipment Component |
+ R 852 |
+ 12% |
Optical Photographic Products |
+ R 670 |
+ 30% |
Textiles |
- R 640 |
- 18% |
Trade highlights by world zone
The world zone results from February 2017 (revised) to March 2017 are given below.
Africa:
Trade Balance surplus: R17 222 million – this is a 29.3% increase in comparison to the R13 315 million surplus recorded in February 2017.
America:
Trade Balance deficit: R2 703 million – this is a 30.5% increase in comparison to the R2 071 million deficit recorded in February 2017.
Asia:
Trade Balance deficit: R5 104 million – this is a 24.1% decrease in comparison to the R6 728 million deficit recorded in February 2017.
Europe:
Trade Balance deficit: R5 340 million – this is a 36.7% increase in comparison to the R3 906 million deficit recorded in February 2017.
Oceania:
Trade Balance surplus: R 156 million – this is an improvement in comparison to the R 682 million deficit recorded in February 2017.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for March 2017 recorded a trade balance surplus of R3.47 billion. This was a result of exports of R90 billion and imports of R86.53 billion.
Exports increased from February 2017 to March 2017 by R12.03 billion (15.4%) and imports increased from February 2017 to March 2017 by R6.91 billion (8.7%).
The cumulative deficit for 2017 is R15.87 billion compared to R48.65 billion deficit in 2016.
Trade highlights by category
The main month-on-month export movements (R’ million) |
||
Section: |
Excluding BLNS: |
|
Precious Metals & Stones |
+ R3 604 |
+ 28% |
Vehicles & Transport Equipment |
+ R1 624 |
+ 17% |
Machinery & Electronics |
+ R1 603 |
+ 29% |
Mineral Products |
+ R1 579 |
+ 8% |
Chemical Products |
+ R 864 |
+ 19% |
Other Unclassified |
+ R 786 |
+ 119% |
The main month-on-month import movements (R’ million) |
||
Section: |
Excluding BLNS: |
|
Machinery & Electronics |
+ R3 109 |
+ 18% |
Vehicles & Transport Equipment |
+ R2 922 |
+ 41% |
Original Equipment Component |
+ R 852 |
+ 12% |
Optical Photographic Products |
+ R 672 |
+ 30% |
Textiles |
- R 684 |
- 21% |
Trade highlights by world zone
The world zone results for Africa excluding BLNS from February 2017 (Revised) to March 2017 are given below.
Africa:
Trade Balance surplus: R9 260 million – this is a 34.6% increase in comparison to the R6 878 million surplus recorded in February 2017.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for March 2017 recorded a trade balance surplus of R7.96 billion. This was a result of exports of R11.23 billion and imports of R3.27 billion.
Exports increased from February 2017 to March 2017 by R1.94 billion (20.9%) and imports increased from February 2017 to March 2017 by R0.41 billion (14.5%).
The cumulative surplus for 2017 is R20.84 billion compared to R24.38 billion in 2016.
Trade Highlights by Category
The main month-on-month export movements (R’ million) |
||
Section: |
BLNS: |
|
Precious Metals & Stones |
+ R 604 |
+ 5 325% |
Vehicles & Transport Equipment |
+ R 390 |
+ 44% |
Machinery & Electronics |
+ R 259 |
+ 19% |
Mineral Products |
+ R 164 |
+ 13% |
Textiles |
+ R 128 |
+ 26% |
Prepared Foodstuff |
+ R 87 |
+ 8% |
The main month-on-month import movements (R’ million) |
||
Section: |
BLNS: |
|
Prepared Foodstuff |
+ R 116 |
+ 30% |
Precious Metals & Stones |
+ R 95 |
+ 19% |
Live Animals |
+ R 63 |
+ 22% |
Textiles |
+ R 44 |
+ 10% |
Mineral Products |
+ R 30 |
+ 57% |
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EAC puts off ratification of tripartite trade deal
The East African Community (EAC) has postponed ratification of the Tripartite Free Trade Area (TFTA) from March to December this year, after failing to agree on the contentious rules of origin and tariffs.
The Comesa-EAC-SADC Council of Ministers had given the five-member bloc up to March 31 to ratify the treaty and pave the way for Phase 1 of negotiations to be conducted by June 17 on how an expanded free market of over 600 million people would be implemented.
Negotiations on rules of origin, tariff offers and trade remedies form Phase 1 of the agreement while Phase II covers trade in services and other trade-related matters.
The EAC is negotiating the TFTA as a bloc while Comesa and SADC are pushing for individual countries’ agenda.
“The Tripartite Ministers during the Nairobi meeting had agreed to complete the entire process by July this year while the EAC had agreed to ratify it by March. Given that there is still work to be done on rules of origin and tariff offers that are still outstanding, the EAC agreed to extend the deadline to December 2017,” said Dr Chris Kiptoo, Principal Secretary in Kenya’s State Department of Trade.
“The other regional economic communities have not pronounced [their stand] on a new deadline but it is clear that it will go beyond June 2017,” added Mr Kiptoo.
Implementation of the deal is expected to start once 14 out of the 26 member states ratify the agreement.
But according to Dr Kiptoo, none of the member states have ratified the agreement and only 18 of the 26 have signed the agreement.
The Council of Ministers had extended the negotiations period by one year to give all countries time to sign the TFTA by April 2017 and move faster to ratify the agreement to allow it to come into force.
The TFTA was officially launched by the Heads of State and Government of Comesa, EAC and SADC in Egypt on June 10, 2015 and the Tripartite Summit gave the member states 12 months from the launch to conclude outstanding matters on rules of origin, trade remedies and tariff offers.
Under the agreement, the members of the three trading blocs agreed to ignore sensitive products and subject them to duty and quota restrictions in order to ensure fair competition.
Among the products earlier listed for protection until 2017 were sugar, maize, cement, wheat, rice, textiles, milk and cream, beverages and secondhand clothes.
View tralac’s TFTA resources page for more info.
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President Trump signs two executive orders on trade
Extracts from the remarks by President Donald Trump at the signing of two Executive Orders on Trade in Harrisburg, Pennsylvania, 29 April 2017
“We believe in ‘Made in the USA,’ and it’s coming back stronger and better and faster than even I thought. You can see that by our great, great workers throughout the plant, and plenty of other plants. But for a long time, our government has sacrificed American companies and workers to unfair foreign competition.
“Today, I’m signing two orders to help keep jobs and wealth in our country. First, in fulfillment of a very, very important and major campaign promise I made not far from here last June, I’m directing the Secretary of Commerce... to identify every violation and abuse of our trade agreements, and to use every available measure under the law to end these abuses against our workers. And if they don’t get cleared up, Wilbur will end the trade agreements.
“Second, I’m establishing the Office of Trade and Manufacturing Policy within the White House. Its mission will be to defend American workers and companies from those who would steal our jobs and threaten our manufacturing base.
“We’re only 100 days in. It’s been a lot of work, but we’ve loved it. We’ve loved doing it. You know, when you love something, it’s really easy. And we love it. And we’re helping people. We’re helping our workers. And already we’ve created nearly 150,000 new manufacturing and construction jobs, and over 600,000 jobs have already been created. The National Manufacturers survey found the highest level of optimism in the history of a very, very old survey. It’s been around for a long time. It just last week hit the highest point it’s ever hit in the history of the survey. That means they’re looking for action. And we love that.
“We’ve taken unprecedented action to bring back American jobs, American wealth, and American dreams. And we are just getting started.”
Presidential Executive Order Addressing Trade Agreement Violations and Abuses
By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows:
Section 1. Policy.
Every trade agreement and investment agreement entered into by the United States, and all trade relations and trade preference programs of the United States, should enhance our economic growth, contribute favorably to our balance of trade, and strengthen the American manufacturing base. Many United States free trade agreements, investment agreements, and trade relations have failed, in whole or in part, to meet these criteria. The result has been large and persistent trade deficits, a lack of reciprocal treatment of American goods and investment, the offshoring of factories and jobs, the loss of American intellectual property and reduced technological innovation, downward pressure on wage and income growth, and an impaired tax base. It is the policy of the United States to negotiate new trade agreements, investment agreements, and trade relations that benefit American workers and domestic manufacturers, farmers, and ranchers; protect our intellectual property; and encourage domestic research and development. It is also the policy of the United States to renegotiate or terminate any existing trade agreement, investment agreement, or trade relation that, on net, harms the United States economy, United States businesses, United States intellectual property rights and innovation rate, or the American people.
Sec. 2. Conduct Performance Reviews.
The Secretary of Commerce and the United States Trade Representative (USTR), in consultation with the Secretary of State, the Secretary of the Treasury, the Attorney General, and the Director of the Office of Trade and Manufacturing Policy, shall conduct comprehensive performance reviews of:
-
all bilateral, plurilateral, and multilateral trade agreements and investment agreements to which the United States is a party; and
-
all trade relations with countries governed by the rules of the World Trade Organization (WTO) with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods.
Sec. 3. Report of Violations and Abuses.
-
Each performance review shall be submitted to the President by the Secretary of Commerce and the USTR within 180 days of the date of this order and shall identify:
-
those violations or abuses of any United States trade agreement, investment agreement, WTO rule governing any trade relation under the WTO, or trade preference program that are harming American workers or domestic manufacturers, farmers, or ranchers; harming our intellectual property rights; reducing our rate of innovation; or impairing domestic research and development;
-
unfair treatment by trade and investment partners that is harming American workers or domestic manufacturers, farmers, or ranchers; harming our intellectual property rights; reducing our rate of innovation; or impairing domestic research and development;
-
instances where a trade agreement, investment agreement, trade relation, or trade preference program has failed with regard to such factors as predicted new jobs created, favorable effects on the trade balance, expanded market access, lowered trade barriers, or increased United States exports; and
-
lawful and appropriate actions to remedy or correct deficiencies identified pursuant to subsections (a)(i) through (a)(iii) of this section.
-
-
The findings of the performance reviews required by this order shall help guide United States trade policy and trade negotiations.
Sec. 4. Remedy of Trade Violations and Abuses.
The Secretary of Commerce, the USTR, and other heads of executive departments and agencies, as appropriate, shall take every appropriate and lawful action to address violations of trade law, abuses of trade law, or instances of unfair treatment.
Sec. 5. General Provisions.
-
Nothing in this order shall be construed to impair or otherwise affect:
-
the authority granted by law to an executive department or agency, or the head thereof; or
-
the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
-
-
This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
-
This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
DONALD J. TRUMP
THE WHITE HOUSE,
April 29, 2017.
Presidential Executive Order on Establishment of Office of Trade and Manufacturing Policy
By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows:
Section 1. Establishment.
The Office of Trade and Manufacturing Policy (OTMP) is hereby established within the White House Office. The OTMP shall consist of a Director selected by the President and such staff as deemed necessary by the Assistant to the President and Chief of Staff.
Sec. 2. Mission.
The mission of the OTMP is to defend and serve American workers and domestic manufacturers while advising the President on policies to increase economic growth, decrease the trade deficit, and strengthen the United States manufacturing and defense industrial bases.
Sec. 3. Responsibilities.
The OTMP shall:
-
advise the President on innovative strategies and promote trade policies consistent with the President’s stated goals;
-
serve as a liaison between the White House and the Department of Commerce and undertake trade-related special projects as requested by the President; and
-
help improve the performance of the executive branch’s domestic procurement and hiring policies, including through the implementation of the policies described in Executive Order 13788 of April 18, 2017 (Buy American and Hire American).
Sec. 4. General Provisions.
-
Nothing in this order shall be construed to impair or otherwise affect:
-
the authority granted by law to an executive department or agency, or the head thereof; or
-
the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
-
-
This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
-
This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
DONALD J. TRUMP
THE WHITE HOUSE,
April 29, 2017.
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Africa can drive investment to reduce poverty despite uncertain times
Africa can create the right fiscal environment through efficient spending and domestic revenue mobilization that will enable both domestic and private investment to flow.
Despite the current volatile global economy, African economies are modestly rebounding and are expected to grow at a rate of 2.6% in 2017. However, to ensure that this growth continues to rise, it will be critical to create conducive business climates that crowd-in private investment to unlock the investment potential in Africa.
This was the leading message from Saturday’s State of the Africa Region seminar, a flagship event organized by the World Bank’s Africa region. The seminar brings together stakeholders, private sector leaders, and development partners to reflect on the main issues shaping Africa’s economic future.
“Traditional sources of funding are shrinking and there needs to be a paradigm shift that would shift the focus away from conventional financing and increase emphasis on a more sustainable investment model,” said Makhtar Diop, World Bank Vice President for the Africa region, during his opening remarks.
Achieving this shift, along with essential structural reforms and greater regional collaboration, would require strong political will and accountability on the part of African leaders, Diop explained. “We must help Africa achieve the structural transformation we have been talking about for years by de-risking Africa and crowding-in the private sector,” he said.
This remains particularly pertinent given the strong headwinds facing African investment growth. During his presentation on the trends shaping economic development in Africa, Albert Zeufack, Chief Economist for the Africa Region, underlined external risks such as protectionism in large markets like the United States and the United Kingdom; and the normalization of the United States monetary policy, which is tightening financing conditions for Africa. He also mentioned heightened political, and policy uncertainty in major economies – Nigeria, South Africa, Angola – that make up 60% of Africa’s economy; and security issues hedged on terrorism, food insecurity and environmental hazards such as the drought in East Africa, as barriers.
“This is why we need to deepen reforms and continue working hard to maintain macroeconomic stability in our countries,” Zeufack said, noting the need for oil-producing countries to diversify and invest the revenue generated from their production to boost other sectors such as agriculture.
“As a continent, we must come to an understanding that the agricultural sector should be prioritized when it comes to investment,” said Muhamudu Bawumia, the vice president of Ghana who also heads the economic financing team.
Bawumia was sharing his views during the panel discussion segment of the event moderated by Julie Gichuru, a Kenyan television journalist. The panel also featured Henry Rotich, the Cabinet Secretary of Kenya’s national treasury, and Admassu Tadesse, the president and CEO of the Eastern and Southern African Trade and Development Bank, commonly known as the PTA Bank.
Scaling Up Investments in Africa
The seminar was also an opportunity for the World Bank and other development partners to affirm the robust interest of the international community in scaling up investments for Africa, Zeufack noted during his presentation. The G20 Compact with Africa and the World Bank’s record International Development Association (IDA) financing of 57 billion over the next three fiscal years are two windows of opportunity that African leaders are encouraged to seize to crowd-in the investment needed to reverse the decline experienced over the years. Total investment growth in Africa as of 2010 was 8%, however in 2015, that growth plummeted to close to 0%.
According to Kenyan Cabinet Secretary Rotich, what is also critically important is knowing how to blend the financing with loans in a way that would boost the confidence of investors. “We have seen this at work in Kenya, and we were able to increase financing because our developing partners have been able to blend their financing with commercial loans,” highlighted Rotich during the discussion.
In an attempt to increase investment, there can be a tendency to lean too heavily on fiscal incentives as a way of attracting potential investors. However, “empirical evidence from around the world has shown that such practices are not enough to drive investment,” explained Zeufack.
“If your overall climate is not conducive, if your infrastructure is not adequate, if you do not have the right kind of institutions that are nurturing and promoting private investment, the fiscal incentives will not lead to increased investment,” he continued.
The World Bank is committed to financing projects and providing technical assistance in areas where the private sector is less inclined to invest. It is also helping countries develop enabling business landscapes needed to mobilize private investors, de-risk investments, and capitalize on Africa’s ability to leapfrog into the future.
When Africa is in the Driver’s Seat
“There is nothing more inspiring than when people see you leading with the things that are within your control in your environment,” said Admassu Tadesse, President and CEO of PTA Bank.
Creating the right fiscal environment through efficient spending and domestic revenue mobilization can boost both domestic and private investment, both of which are in the power of African countries.
Highlighting the example of the success recorded in the telecommunications sector in the continent, Tadesse said that Africa is able to attract the money it needs should it implement the right reforms and innovations.
“Our telecommunication industry is a shining example of what can be achieved. And now the power sector is poised for a similar revolution in Africa,” he said.
Policy reform in the telecom industry was instrumental in boosting the growth of the telecommunications industry and can do the same for the power sector. “A very simple issue like tariffs – not requiring people or institutions to sell power below the cost of the production – can make a huge difference,” Tadesse pursued.
Africans also need to show investors the impact that local investment is making in Africa. This would boost the confidence of foreign investors. M-Akiba is an example of how domestic resources can be utilised for investment. “In Kenya, we’ve tried to mobilize retail savings from Kenyans by offering a product that allows them to invest in government securities,” Rotich explained. Through M-Akiba, ordinary citizens can invest a minimum of $30 in a government bond rather than keeping their money in a bank that yields zero interest.
Investment in infrastructure can also create a synergy needed to foster intra-Africa trade across regional zones. Next month, Kenya will launch its standard gauge rail that connects Mombasa to Nairobi. Managed by East Africa Community, a regional intergovernmental organization, the project, which cost about $13 billion, would ease trade and integration in the region. Bawumia pointed out the need for more leaders to collaborate in creating policies that emphasize trade logistics and road linkages that would expand the intra-Africa trade and boost growth prospects in the continent.
On practical steps of action beyond the forum, Diop urged African leaders to create incentives for officials to implement policies and challenged them to hold regular consultations between government leaders and the private sector in Africa in all regional economic community zones.
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Adesina addresses need to end rural poverty at One World conference in Berlin
The President of the African Development Bank Group (AfDB), Akinwumi Adesina, has called for urgent action to end rural poverty in Africa at a conference on the future of the rural world in Berlin.
“We must pay particular attention to three factors: extreme rural poverty, high rates of unemployment among the youths and climate and environmental degradation – what I refer to as the ‘disaster triangle’,” Adesina told participants during a keynote speech delivered on Thursday, 27 April at the ‘One World, No Hunger: Future of the Rural World’ conference hosted by the German Development Ministry (BMZ).
Noting that conflicts and terrorism easily take root where these three factors exist, Adesina stressed the imperative of investing heavily in Africa's rural areas and reversing endemic misery to prosperity. “We must create jobs for the youths and disrupt terrorists’ recruitments that are taking root in these rural areas.... We must connect economic security, food security and climate security,” he said.
The AfDB President shared the Bank’s efforts in rural economies including the investment of US $24 billion in agriculture in the next 10 years and in several other domains through its ambitious multi-billion High 5 priorities – Light up and power Africa; Feed Africa; Industrialize Africa; Integrate Africa; and Improve the quality of life for the people of Africa.
He reiterated the Bank’s strong support for Germany’s Compact with Africa and its focus on food security, energy, jobs, infrastructure, peace and security, which are very much in line with the High 5s.
For his part, German Development Minister Gerd Müller noted that “Only strong rural areas will be able to prevent hunger crises in the future and offer truly good prospects to young people.”
He welcomed 150 young people from Germany, Africa and various G20 countries, who were invited to speak at the conference noting that “the future of humankind will be decided in the world's rural areas!”
Germany is using its current Presidency of the G20 to work towards the adoption of concrete agreements on fostering youth employment in rural areas. Participants will endorse the Berlin Charter on Creating Opportunities for the Young Generation in the Rural World at the end of the conference.
Key participants at the forum include Bangladeshi Nobel Peace Prize laureate Muhammad Yunus; Sudanese-British entrepreneur-philanthropist Mo Ibrahim; Nigerian entrepreneur-philanthropist Tony Elumelu; the Head of German Federal Chancellery, Peter Altmaier; and Agriculture Minister Christian Schmidt.
Berlin Charter*
Creating Opportunities with the Young Generation in the Rural World
Call for Action
We, participants of the Berlin conference “ONE World No Hunger. Future of the Rural World”, coming from civil society, private and public sector and academia, express this call for action and encourage governments worldwide, the German Government and G20 as well as the United Nations to identify effective ways to monitor progress, facilitate implementation of these proposals and accept accountability. We underline that many actions require new partnerships between governments, civil society, private sector actors and development partners, and we structure this call for action accordingly. Aiming for transformative change, we call on the G20 governments to commit to significant, quantified and time-bound targets in line with the Sustainable Development Goals (SDGs), and in particular:
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to lift at least 600 million people out of hunger and undernutrition by 2025 with appropriate agricultural, nutrition and anti-poverty policies. At the same time the malnutrition of hidden hunger affecting about 2 billion people because of micronutrient deficiencies is to be significantly reduced, and the investment in capacity for sound monitoring of this malnutrition by the specialised organisations be accelerated. It is noted that G7 had already made a commitment in 2015 to lift 500 Million out hunger and malnutrition; and address rising rates of overweight and obesity
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to take concerted political and humanitarian actions to immediately end the food crises situations in East Africa, the Horn of Africa and other locations of acute suffering; support agriculture actions that address droughts and climate change and the agenda of the African Malabo declaration on agriculture;
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to facilitate access to innovative education and youth training for all by 2025 by increased investments in rural education, including vocational training for young entrepreneurs;
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to cut youth underemployment at least by half by 2025 through increased support of investment in rural infrastructure and services in rural areas combined with job creating active labour market policies at a large scale; as important measures to promote prosperity and reduce rural-urban inequality;
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to provide equitable and affordable access for all, especially youth in rural areas, to information and communication technologies (ICTs) and provide opportunity for peer to peer learning.
Some key issues need to be addressed jointly by all stakeholders. Therefore, we call on all national governments, development partners and finance institutions, the private sector, civil society and youth:
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to jointly draft development strategies with the participation of local stakeholders and communities, in particular youth and women, which implies an effective reinvestment in the knowledge base on changing rural livelihoods and statistical systems to inform evidence-based diagnoses, visions and objectives;
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to respect, protect and fulfil human rights, including the right to food, water and sanitation
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to undertake additional and scalable joint efforts for creating new rural opportunities with a special focus on decent and attractive jobs for the young generation, cutting under-employment of youth at least in half by 2025;
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to pursue a new long-term, enhanced development partnership between Europe and Africa at a large scale through a type of “Marshall Plan with Africa” as presented by the German Government;
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to realise the enormous potential of smallholders, family farms, pastoralists and small-scale fishers and the emerging processing and distribution sectors/small and medium enterprises through improvement of legal frameworks including land rights and rights to genetic resources, innovation, access to skills development, access to markets, infrastructure, services and finance, linkages to value adding processing in rural areas and risk reduction measures such as insurance systems; and acknowledge the transformative power of local organisation;
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to encourage education and media institutions to help improve the social image of farmers, pastoralist and fishers since both have been stamped with backwardness for a long time;
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to make smart and responsible use of appropriate ICTs to realise the potential of digitisation more systematically, without ignoring the challenges of unregulated digitisation. That includes ICT-based service platforms in rural areas for agricultural extension services, open source local innovation and knowledge databases, business connections and mobile banking;
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to reverse on-going trends concerning the loss of biodiversity and the degradation of ecosystems, effectively implement the Paris Agreement with regard to climate change. Drought-affected areas need particular support to overcome food insecurity, irreversible deterioration of the natural resource base and the disintegration of rural communities. Sustainable management of water resources warrants particular attention.
We call on bilateral and multilateral development partners
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to honour the above-cited global commitments as guiding policies, and to monitor and implement plans in line with these commitments;
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to work towards fair trade and agricultural policies that do not undermine the role of small-scale farmers in providing local and global food security;
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to align their technical and financial support with country-led policies and programmes tailored to local diversified needs and risk-taking capacities;
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to increase investments in rural and inter-regional infrastructure, especially transportation, energy, irrigation, and ICTs; and to focus on high-impact investments for innovation and jobs by bilateral and multilateral partners in cooperation with local development organisations; to integrate development efforts and build on existing mechanisms to ensure coherence and sustainability;
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to allocate increased proportions of ODA to rural development, including the promotion of education and jobs and the improvement of rural life, and to develop a common reporting mechanism to track outcomes;
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to massively and immediately increase humanitarian aid and fulfil existing commitments in order to end the current hunger crises and food insecurity in emergency situations;
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to actively reach out to the private sector and non-governmental organisations to tap the innovation potential of the agricultural sector and to jointly work towards pro-poor growth in rural areas.
This call for action is based on our assessment of the challenges and opportunities that are outlined below in this Charter.
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Opportunities and Challenges that Should Drive Action
Preamble
Led by a consultative process culminating in the Berlin conference “ONE WORLD – No Hunger: Future of the Rural World” focusing on innovation, youth, and employment, this Charter was drafted by an international advisory committee composed of experts on rural development, civil society and the private sector. It builds upon the joint vision of shared responsibility across nations and societies for sustainable global development, as set out in the sustainable development goals (SDGs) of the 2030 Agenda for Sustainable Development.
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About 2 billion of the world’s population are under the age of 15. The 1.2 billion young people aged 15 to 24 living today constitute the largest young generation on the planet ever.
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With high and growing global underemployment, young people are disproportionately hit by the lack of decent jobs. Youth unemployment rates are estimated to be 2 to 3 times higher than adult unemployment rates. 440 million young people will be entering the labour market between now and 2030 in Africa alone.
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The youth as agents of change have an essential role to play in achieving the SDGs. Their great potential can improve scale, stability and impact of innovations for the development of the rural space. To unlock the potential of the young generations, their rights and different needs have to be recognised. Youth living in often neglected rural areas need to be linked to the opportunities of innovation and digitisation, and they need job opportunities.
Rural areas are changing as economic growth and broader structural transformation take place. Integrated development strategies that explicitly include smallholder farmers and particularly the young have the potential to offer great developmental prospects for current and future generations. There are no simple solutions: The rural challenges are divers and, therefore, the global agenda for action on rural change and innovation has to be equally diverse and complex, and adjusted to local circumstances.
This Charter shall:
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highlight ways to use the diversity, energy, creativity and innovative capacity of youth to seek local solutions to global challenges, foster inclusive rural transformation and ensure that no one is left behind;
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Stimulate a re-thinking of rural development in a globalising and urbanising world, recognising the costs of inaction in rural areas, including social tensions because of glaring inequalities;
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inspire and equip the young generation to take the initiative to contribute to overcoming the challenging situations created by past and current generations and contribute to more equity and development of the areas they live in – as individuals and collectively organised groups;
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contribute to realising basic human rights of children and youth in particular, and overcoming gender and social inequalities through the implementation and integration of the SDGs;
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remind policymakers and other stakeholders around the globe to live up to the expectations that the young populations naturally have, by investing in and fostering decent employment and other income-earning opportunities in rural areas, and offering the youth opportunities to pursue their dreams, get a fair share of developmental opportunities and to take advantage of entrepreneurial and innovative opportunities;
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stimulate coherent policies, incentives and investments that foster the sustainable use of natural resources, including water, soils, forests, fisheries and livestock, and protect the environment and agricultural biodiversity;
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reconfirm the significant past declarations and commitments, the goals of global regional and national policies and other multilateral agreements, especially fulfilling the promise of food security for all and implementing the commitments to address climate change. We emphasise that all these past commitments must be followed up upon more vigorously with implementation actions so that they do not just remain declarations;
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direct fresh attention to the forthcoming G20 processes towards bold, robust, and specific large scale solutions, advancing the global commitment set out in the 2030 Agenda to build dynamic, sustainable, innovative and people-centred economies, promoting youth employment and women’s economic empowerment.
* This is an extract only. Download the full Berlin Charter above.