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Tanzania: Formal financial sector could follow mobile money success to expand credit – World Bank
For Tanzania, bringing even more money within everyone’s reach is key
In less than eight years, there has been extraordinary progress in bringing the majority of Tanzanians into the mobile money revolution, mostly by adopting an efficient, low-cost mobile money transfer system. Doing more to support the much larger, formal financial system is now critical for the growth of the country’s business sector and its ability to mobilize savings and gain access to affordable credit, according to a new World Bank Group report, “Money Within Reach: Extending Financial Inclusion in Tanzania.”
“The mobile money revolution has made a tremendous impact on the lives of millions of people who can now send and receive money and thus save at low cost,” says Bella Bird, the World Bank Country Director for Tanzania, Somalia, Burundi, and Malawi. “With more effort, the remaining one-third of Tanzanians could also have access. Access to credit through the formal financial sector, however, remains a critical constraint to the growth of the domestic private sector, and thus a constraint on growth and to poverty reduction.”
The ninth edition of the Tanzania Economic Update analyses the country’s extraordinary progress in bringing financial services to 62% of its population today compared to 11% in 2006, making it a regional leader in the use of digital financial services and putting it on a solid footing to achieve Universal Financial Access by 2020.
Tanzania has 58 banks and a per capita reach of 2.5 bank branches and 6.4 ATMs per 100,000 adults. While most of the population live in rural areas, Bank operations are concentrated in the country’s three largest cities and largely serve better-off city dwellers and formal businesses.
“Financial development can make an important contribution to Tanzania’s development. Supportive government policies and access to affordable credit are necessary to crowding in private investment, especially for the micro, small, and medium size enterprises vital for inclusive growth and poverty reduction,” says William Battaile, the World Bank Lead Economist, who authored the report.
The report shows the Tanzanian economy has continued to record relatively strong performance, with low inflation and growth above its regional peers. Real GDP growth for 2016 is estimated near 7%. The short- to medium-term macroeconomic outlook remains stable, though emerging risks need to be carefully managed, including budget implementation and private sector development. To maintain and increase the momentum, Government will need to focus on three key growth enablers: continued macroeconomic stability; the effective implementation of public investments; and supportive policies to promote private sector investment and growth.
Financial Inclusion is an area of significant success, and the mobile money revolution has played a major role in it. These are operated by a network of agents across the country offering a range of services and products, whereas the traditional bank-dominated financial system remains mostly urban-based and is still unaffordable for the vast majority of Tanzanians and their businesses.
From less than 200,000 subscribers in 2008, the total number of registered mobile money user accounts grew rapidly to 53.3 million by the end of February 2016, with 17.6 million active users conducting at least one transaction within a window of 30 days.
Where ordinary citizens once had to enter into risky arrangements to send money urgently to their families, the mobile money services have almost eliminated this risk and drastically reduced the time and cost transactions used to take. They have moved further to offer products at affordable cost, such as insurance and credit, as well as offering platforms for paying utility bills.
Despite these significant developments, full financial sector integration continues to elude Tanzania, and the 9th Economic Update argues it is vital for promoting and sustaining growth in several ways, including by mobilizing savings to allocate them to households, businesses, and government for productive investments.
“What the dynamic mobile services sector has done is create new opportunities for individuals that never existed before,” says Andrea Mario Dall’Olio, co-author of the 9th Tanzania Economic Update. “However, there is now a need to support the gradual upgrading of those mobile service customers from transactional services to savings and credit services, which are still the domain of the traditional banking sector.”
About 56% of Tanzanians borrow money to meet their consumption and access social services. The primary source of loans for 63% of Tanzanians remains informal networks, such as friends and family, while 17% of Tanzanians use mobile network loans, and only 7% of people have obtained credit from banks.
To further illustrate the formal banking sector’s central role in savings and credit, at the end of 2015, the value of mobile money stocks – money deposited in trust accounts by mobile operators in commercial banks – accounted for less than 3% of total bank deposits. Loans extended through mobile money products were estimated to make up less than 1% of the total value of bank credit.
More than 40% of formal Tanzanian enterprises have identified access to finance as the most significant constraint to doing business. And with a 17.1% ratio for credit to the private sector to GDP, Tanzania is in fact lagging behind in the region and urgently needs reforms to improve access to bank credit for its micro, small, and medium-sized enterprises, which can be a conduit for accelerated poverty reduction.
According to the Update, Tanzania can build on its recent achievements in mobile money by expanding financial inclusion and increase access to credit to enterprises. This would involve:
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Extending access to finance to the 40% of Tanzanians still excluded from the financial system. This requires tackling demand and supply-side constraints, such as channeling government payments, such as the conditional cash transfers from the Tanzania Social Action Fund, through electronic channels; accelerating the universal coverage of the national ID system; and strengthening financial education programs to develop citizens’ financial and digital skills and literacy.
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Ensuring a level playing field to reduce barriers to the use of financial products and services. This entails designing a deposit insurance mechanism for mobile financial services and improving the consumer protection framework; and facilitating the sharing of infrastructure and the achievement of full scale interoperability between banks and other retail payment service providers.
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Lowering the cost of risk through a better selection of borrowers and improved recovery, and by reducing disincentives for lending to the private sector. Increasing the number of individuals and businesses that have access to credit is critical for informal micro-entrepreneurs to access investment and working capital to formalize for expanding their operations.
The Tanzania Economic Update (TEU) is issued twice a year by the World Bank, with each edition describing the current state of the economy and providing in-depth coverage of a topic of strategic significance to the country to stimulate policy analysis and debate.
» Download: Money Within Reach: Extending Financial Inclusion in Tanzania | Tanzania Economic Update, April 2017 (PDF, 6.55 MB)
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South Africa’s retail sector: An overview of 2016 trade
South Africa’s retailers performed robustly in 2016, despite the country seeing its weakest growth in seven years. This is according to EY’s analysis of the 12 largest retailers in South Africa, which account for nearly R600b in annual sales.
EY’s analysis focused on three major retail categories; grocers, speciality and clothing.
In 2016, return on equity’s (ROE’s) were particularly strong for specialty retailers, at 51.6%, while grocery retailers averaged 22.3% and clothing ROE’s were 41.1%.
The grocery retailers had a 62% share of total retail spend, specialty retailers had 23% and clothing retailers achieved 15%. In terms of share of profits, grocery retailers achieved 66%, while speciality and clothing retailers had lower shares at 18% and 16% respectively.
Despite the above, the outlook for South Africa’s retail sector remains sombre, as the retailers try to recover from weak and declining GDP growth, low credit growth, low investment levels and the drought.
What does this mean for retailers in 2017?
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Retail spend continues to recover but it remains fragile.
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Store growth has been marginal as new shopping centres impact trading density, placing a damper on the development for new space requirements.
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Food and pharmaceutical net margins rise, while an overtraded clothing market results in squeezed or flat margins and falling volumes.
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Grocers outperform other retailers, typical of a weak environment.
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Rising inflation, coupled with slow volume and like-for-like sales, along with marginal store growth, is pinching margins and returns.
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Africa’s growth slowed to a two decade low in 2016, but retailers are also extending globally.
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Retailers are responding to the weak environment by focusing on two pillars; customer is pivotal and technology as a key enabler.
Where to from here?
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Rising interest rates and currency depreciation will further strain consumers’ disposable income.
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Retailers with more diversified geographic earnings will be better positioned to withstand the pressures.
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Grocers will face squeezed margins, but are better positioned to report sustainable profit growth.
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Clothing retailers face a multitude of challenges – increasing foreign competitor presence and scale; renewed price pressures as the currency depreciates, and changing consumer expenditure.
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Semi and non-durables remain challenging – being subject to currency depreciation, leading to price increases.
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More expensive consumer finance costs will further depress demand.
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tralac’s Daily News Selection
A rebalancing act for China and Africa: the effects of China’s rebalancing on Sub-Saharan Africa’s trade and growth (IMF)
How does China’s new growth model affect sub-Saharan Africa? To address this question, this paper is structured as follows: It first looks at the growing ties between China and Africa; it then attempts to estimate more precisely the impact on growth through the trade channel, since trade dominates the economic ties between China and Africa. Finally, it draws some policy implications and the discussion reflects on whether this means an end of the Africa Rising narrative or merely the beginning of a new chapter. South Africa (Box 1): In South Africa, rising trade links and a reliance on commodities has increased spillovers from China. China absorbs 10% of South African exports, the most absorbed by any individual country. It also plays a key role in determining global demand for South Africa’s commodity exports. IMF staff analysis suggests China’s growth now matters more for South Africa than does growth in the United States and the European Union. The impact of lower commodity prices is amplified by links between sectors (Figure 1.1). An analysis of input-output tables in South Africa suggests that links between the commodity sector and the rest of the economy are significant. Uganda (Box 2): China’s rebalancing does not directly affect Uganda through trade, but other countries that rely on China as a major importer do, in turn, affect Uganda. Ugandan exports to China are small at only 2.5% of total exports. However, more than 40% of Ugandan exports (including informal exports) go to commodity-exporting countries, particularly South Sudan, an economy largely dependent on oil. Slow growth in commodity-exporting countries in 2015 significantly dampened growth in Uganda’s main trading partners, and the weak performance is estimated to have continued in 2016 (Figure 2.1). [The analysts: Wenjie Chen, Roger Nord]
Structural transformation in employment and productivity: what can Africa hope for? (IMF)
Could sub-Saharan Africa develop a growth pattern that transforms the economy more rapidly? This is possible if the movement from agriculture into services can generate large improvements in value addition. Benchmarking the projected structural employment shift in sub-Saharan Africa against what east Asia achieved historically shows that sub-Saharan Africa falls short in terms of the development of manufacturing employment. But it remains an open question whether structural transformation can be speeded up with a continuation of the movement of labor from agriculture to services with a small role being played by the manufacturing sector. [The analysts: Alun H. Thomas, Cleary Haines, Louise Fox], [TICAD VI follow-up event: Achieving the SDGs in Africa through structural transformation]
Regional integration and the Continental Free Trade Area: policy brief (ATPC/UNECA)
This policy brief was prepared to highlight the fact that the CFTA that is currently under negotiations will be more than a traditional free trade area and will contain several elements of a single market. [The analyst: Lily Sommer]
Fostering regional value chains and policy coordination in Southern Africa (UNCTAD)
UNCTAD and SA’s Department for Trade and Industry jointly organized a regional workshop (27-28 March) on regional value chains and policy coordination in Southern Africa. This represents the first activity of a four-year UNCTAD development project in the region. The workshop benefitted from the participation of delegations from Mauritius, Mozambique, Tanzania, Zambia and Zimbabwe. Nigel Gwynne-Evans, Director of the African Industrial Development Department of the DTI, stressed the importance of the regional dimension and the need for the economies of the region to come together and coordinate their industrial policies in order to exploit the potential production complementarities. The OECD Development Centre took also part to the initiative reinforcing the existing cooperation with UNCTAD on the structural transformation agenda. A second regional workshop aiming at identifying (and agreeing upon) specific policy measures in support of agro-processing and capital equipment value chains will take place in Tanzania at the end of 2017.
African food manufacturers to improve packaging, better compete in markets (ITC)
The ‘Improving Food Packaging for Small and Medium Agro-Enterprises in sub-Saharan Africa‘ project will be implemented in Cameroon, Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal, Tanzania and Zambia. The project is jointly implemented by the FAO and ITC and is funded by Industria Macchine Automatiche, an Italian manufacturer of automatic packaging machines. The objective this year is to make the business case to set up packaging centres by conducting needs assessments. Another priority is to conduct feasibility studies, to find the specific business model for each country. The next stage is to secure funds to finance the implementation of the national food packaging centres. At the same time, there will also be train-the-trainer sessions in East and West Africa.
Country trade and development postings:
Botswana: Eleventh National Development Plan (Ministry of Finance and Economic Development): Taking into account the development challenges facing the country, and the need to align the focus of the Plan with global, continental and regional initiatives such as; the UN’s Sustainable Development Goals, AU Agenda 2063, and the Revised SADC Regional Indicative Strategic Development Plan, NDP 11’s theme is “Inclusive Growth for the Realisation of Sustainable Employment Creation and Poverty Eradication”. This theme will be realised through the implementation of six national priorities, namely:
Lesotho’s textiles, apparel and footwear manufacturing industry (Ministry of Trade and Industry): The combined, textile, apparel and footwear manufacturing industry remains Lesotho’s largest formal private sector employer – employing around 46 500 workers. Its current employment is below its early-2003 peak of about 54 000 workers. The industry suffered large declines in employment in the period after the phase-out of the Multi-Fibre Arrangement; and, in the aftermath the 2008 global financial crisis. As with other garment industries about 82% of all industry jobs are occupied by women. The contribution of the industry to Lesotho’s economy goes beyond the sector itself – there are important employment and economic multipliers. A range of formal/informal sector activities occur that feed into/off the industry, e.g. a small packaging industry, road freight transporters, courier services, clearing agents, security, passenger transport, traders that sell food to workers, residential accommodation, water, electrical and telecommunication utilities, etc. [OTEXA data: Lesotho’s textile exports to the USA (January/February), Sub-Saharan Africa data]
Trade opportunities between Mauritius and Zambia (COMESA): Mauritius is increasingly pivoting its commercial diplomacy into Africa and vigorously seeking business opportunities, as the Honourable Mr Vishnu Lutchmeenaraidoo, the Mauritius Minister of Foreign Affairs and International Trade passionately informed the business community on 17 March 2017 in Port Louis. Zambia has for some time now prioritised diversification of the economy and of export markets away from copper exports. There is, then, room for mutually supportive economic engagements between the two member states of COMESA, which, with increasing trade and investment, will assist in jobs and wealth creation, and therefore peace and prosperity. In making the best of all available opportunities, the two member states can fully utilise the COMESA rule-based Free Trade Area, trade facilitation programs, industrial and infrastructure programs, as well as the financial institutions. [The analyst: Dr Francis Mangeni, COMESA Director of Trade and Customs]
Zimbabwe awaits SADC on import duties (The Herald): Industry and Commerce Minister Dr Mike Bimha said in an interview that Zimbabwe had written to the regional body and officially made the request for assistance to be able to apply for derogation. “In our last discussions at SADC, in Swaziland, we made a commitment that Zimbabwe would want to be able to come up with the list of products that we want to apply for derogation. There is a particular way of putting the data together and we said we wanted to enhance our capacity to do so, and made a request to get the SADC secretariat to assist with that capacity. They (SADC) promised to do that, we have written officially to the SADC Secretariat to avail us that resource and we are still waiting.”
West African intra-regional trade hampered due to lack of single window systems in many countries (Graphic): The lack of a single window for trade facilitation in many West and Central African countries has become an impediment to intra-regional trade, the Secretary General of the Port Management Association of the West and Central Africa (PMAWCA), Mr Michael Luguje, has said. According to him, out of the 20 countries within the PMAWCA zone, only Ghana, Togo and Benin have national single window systems that cover everything about port clearance procedures, as well as all other public agencies involved in the certification of products and payment of fees within a trade hub.
Nigeria: 2017 Article IV Consultation (IMF): Nigeria is vulnerable to global inward spillovers, but can itself generate significant regional outward spillovers. The key inward spillover is via oil prices, which has both a direct impact on FX availability and budget financing and an indirect impact through capital inflows. Outward spillovers arise through trade and financial channels (Annex II): (i) With Nigeria accounting for an estimated 70% of ECOWAS exports and 17% of imports in Sub-Saharan Africa, the trade and remittance channels are particularly strong to neighbouring countries, some of which have raised concerns about Nigeria’s recession and the effect of the naira devaluation and FX restrictions on their exports. However, staff analysis indicates that overall activity in Nigeria’s neighbours has held up well recently, with the oil price shock representing a positive terms-of-trade dividend for all neighbouring countries except Chad. (ii) About a dozen Nigerian banks have significant operations in Sub-Saharan African countries, with Nigerian subsidiaries holding more than 20-30% of deposits in Benin, Gambia, and Sierra Leone (Figure 2). However, risks to operations of subsidiaries arising from a slowdown in Nigeria are limited, since activities of subsidiaries are in part ring-fenced from their parent banks and direct cross-border positions are not typically large relative to their host economies, and subsidiaries are mostly locally funded (Annex II). [Selected Issues report: Explaining the impact of the oil price decline on Nigeria], [Nigeria’s Economic Recovery and Growth Plan 2017-2020]
Djibouti: 2016 Article IV consultation (IMF): The remarkable investments in ports and railways - started in 2015 and mostly debt-financed by financial institutions from China - presents opportunities as well as risks. With public debt rising from 50 to 85% of GDP in just two years, the authorities need to advance rapidly with critical reforms. Such reforms would aim at translating the investment boom into strong, inclusive, and job-creating growth to reduce poverty and return to a sustainable debt trajectory given the current high risk of debt distress. While there is strong ownership of such reforms under the authorities’ Vision Djibouti 2035, close government coordination will be needed to ensure their effective implementation.
Can Cameroon become an upper-middle income country by 2035? (World Bank): The Cameroonian economy’s limited competitiveness at the domestic, regional, and global level points to the distortive role of a heavy-handed state. Widespread state involvement in the productive sector limits domestic competition. Cameroon ranks 109 out of 144 countries in terms of local competitive intensity, 65 in terms of the extent of market dominance, and 78 in terms of the effectiveness of competition policy. Only a few large firms operate in most sectors and subsectors of the economy: 31% of manufacturing firms operate in oligopoly, duopoly, or monopoly markets, whereas in Kenya and Ghana, only 25% and 22%, respectively, operate in such markets. In subsectors that are key inputs for other activities—telecommunications, transport, and electricity—only one firm is in operation. The Cameroon Economic Memorandum proposes a series of concrete actions and measures to promote growth, foster competitiveness and refocus the State on its core functions to ensure that Vision 2035 is within reach. Some of them are:
REC updates:
Lack of support to regional communities may stifle Africa’s transformation – ACBF/AfDB study: Africa’s regional economic communities have key coordinating roles to play in support of the continent’s industrialization and transformation agenda but they are faced with acute capacity challenges to do this, warns a new report by the ACBF (pdf). The report, launched at the 4th African Think Tank Summit, establishes that while notable progress have been recorded in certain areas, capacity interventions over the past years have been largely fragmented and reactive, and have therefore not been as effective as desirable in addressing RECs’ capacity needs. Training approaches for example, are often ad-hoc in nature, without a clear comprehensive understanding of the actual expected impact. In terms of internal management of RECs, the study notes the lack of coordination with divisions and units tending to operate in silos.
SADC and Free movement of persons and implementation of the African Passport: SADC Member States convened a First Consultative Meeting of Experts on free movement of persons in the SADC Region and in Africa in Botswana (28-29 March). The meeting came at an opportune time to reflect on how SADC can enhance facilitation of movement of persons in the region, pursuant to the SADC Protocol on Free Movement of Persons, and also to support implementation of the African Union Agenda 2063, in relation to free movement of persons in Africa and the African Passport.
EAC to start issuing EA e-passport in January 2018: The 35th EAC Council of Minister’s meeting has directed Partner States to commence issuance the New EA e-Passport by 31st January 2018, after the consideration of the different status of preparedness by the Partner States during their recent meeting in Arusha. According to the 35th EAC Council of Minister’s report, Republic of Burundi reported that through Public Private Partnership (PPP) arrangement had completed the process of procuring the EA e-Passport booklets and is ready to commence issuance by 3 April 2017. Kenya, Uganda and Rwanda reported to commence issuance of the New International EA e-passport not later than April 2017 while the United Republic of Tanzania will be ready to commence the issuance of EA e–Passport by 1st January 2018. [Regional training on Malabo Declaration begins in Arusha]
COMESA Bank Governors push for regional payment and settlement system: In their 22nd Meeting that took place in Bujumbura (29-30 March), the Governors appreciated the progress that has been achieved in the implementation of the system with nine countries now live on the Regional Payment and Settlement System (REPSS). During the forum, the Governors discussed the activities that were undertaken by CMI and the COMESA Clearing House (CCH), the progress made and challenges encountered in the implementation of the COMESA Monetary Integration Programme.
IMF concludes consultation with West African Economic and Monetary Union
In advance of the 2017 Spring Meetings (21-23 April): World Economic Outlook advance chapters - Growth in emerging market and developing economies in a complicated external environment), Understanding the downward trend in labour income shares
Making trade an engine of growth for all: the case for trade and for policies to facilitate adjustment (IMF/World Bank)
From data blur to slow-mo clarity: big data in trade and competitiveness
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WTO-IMF-World Bank report calls domestic policies critical in aiding displaced workers
Trade leads to productivity gains and significant benefits for consumers, especially the poor, but can also be responsible for job displacement that must be addressed through sound domestic policies that can help the unemployed get back on their feet, say economists from the World Trade Organization, the International Monetary Fund and the World Bank.
In a study released on Monday entitled “Making Trade an Engine of Growth for All”, the economists argue that the benefits from opening trade are broad and deep. Trade liberalization has generated higher living standards through greater productivity, increased competition, more choice for consumers and better prices in the marketplace. At the same time, it is clear that some parts of the world have suffered from the impact of import competition. This requires a policy response – but that response should also recognise that trade is just one factor contributing to economic change and labour market disruption, alongside other drivers such as technology and innovation.
To address these issues, economists from the three organizations, have called on governments to pursue both “active” and “passive” labour market policies. Well-structured active labour policies, such as training programmes, job search assistance and wage insurance, can facilitate the reintegration of displaced workers into the job market. Passive labour market programmes, such as unemployment benefit and income support, can also stabilize working families in the short term until those who have lost their jobs can get back to work.
The economists stressed that programmes must be tailored to the specific circumstances of each country to ensure that they produce the desired results. Moreover, the policy response must extend beyond labour market policies. For example, effective education and skills policies will be essential in preparing workers for the changing demands of the modern economy.
Director-General Roberto Azevêdo said:
“The challenge before us is to support the workers of today and train the workers of tomorrow, while also ensuring that the trading system is more inclusive. Trade has had a very positive impact on the lives and livelihoods of many millions of people in recent decades. I recognise that there are very real concerns, but the answer is not to turn against trade, which would harm us all. Instead, trade must be part of the solution, and we must ensure that its benefits reach more people. As part of the right policy mix, trade will continue to create new jobs and support continued growth and development. This report is a welcome contribution to the debate.”
The report also argues that a strong global trading system with the WTO at its core “remains” critical. The WTO has a unique role to play in fostering stable, predictable and equitable trading relations across the world, the economists said. These benefits are underpinned, the report says, by common rules agreed by all WTO members, by a well-respected, independent and effective dispute settlement system and by the many WTO forums for discussion and information sharing.
DG Azevêdo was joined by IMF Managing Director Christine Lagarde and World Bank President Jim Kim at an event to launch the report on Monday, 10 April 2017 at the Association of German Chambers of Commerce and Industry in Berlin.
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COMESA Director of Trade and Customs Dr Francis Mangeni: Trade opportunities between Mauritius and Zambia
Keynote speech by Dr. Francis Mangeni, COMESA Director of Trade and Customs, at the Enterprise Mauritius’ Buyer-Sellers Forum of 23-24 March 2017 at the Intercontinental Hotel in Lusaka
Mauritius and Zambia have complementary trade visions
Mauritius is increasingly pivoting its commercial diplomacy into Africa and vigorously seeking business opportunities, as Honourable Mr Vishnu Lutchmeenaraidoo, the Mauritius Minister of Foreign Affairs and International Trade passionately informed the business community on 17 March 2017 in Port Luis; find out more here. Zambia has for some time now prioritised diversification of the economy and of export markets away from copper exports. There is, then, room for mutually supportive economic engagements between the two member states of COMESA, which, with increasing trade and investment, will assist in jobs and wealth creation, and therefore peace and prosperity.
In making the best of all available opportunities, the two member states can fully utilise the COMESA rule-based Free Trade Area, trade facilitation programs, industrial and infrastructure programs, as well as the financial institutions.
COMESA is the largest regional market in Africa
COMESA is the largest regional economic community in Africa, offering the business community the best bet for overcoming the diminutive size of national economies. In fact COMESA is one third of Africa as a whole. Table 1 below shows this.
Table 1: Comparing African regional economic communities
Tunisia has applied to join COMESA, a process expected to be concluded this October 2017. Somalia and South Sudan too are expected to be members; indeed the COMESA Summit has already decided, at its Summit in October 2016, that these two countries are eligible for membership and that membership negotiations with them should commence. Algeria has signalled its strong interest as well.
Making up a third of Africa, the vastness of COMESA should be complemented with its dynamism and high trade growth. Intra-COMESA export of goods has risen from $1.5 Billion in 2000 to about $10 Billion in 2016, excluding small scale (informal) trade estimated by UNCTAD and ECA to be about 40% of total trade. These figures are still not impressive in absolute terms, but the growth is remarkable. What is even more remarkable is the potential as well as the possibility of introducing wholly new products and industries through innovation.
If M-Pesa is anything to go by, new products and industries can span whole new economies and achieve social economic transformation. Kenya’s ICT sector contributed 12.1% to its GDP in 2014. And by May 2015, M-Kopa had connected 200,000 homes in Kenya, Uganda and Tanzania to a solar power system which is purchased with a deposit of Kenya Shillings 50, about half a dollar, and paying the rest of the price in weekly little installments. New high technology content products will be critical in social economic transformation through increasing intra-regional trade, creating jobs and wealth, and addressing overarching public policy objectives of universal access to basic needs.
The private sector will need to work closely with innovators and academia, to commercialise usable inventions with industrial application; and this can be up-scaled and streamlined where Henry Etzkowitz’s Triple Helix approach is used in policy formulation and implementation, to ensure that government, the private sector, and academia work coherently. Bongo Hive in Lusaka is a good start as a technology and innovation hub.
The Tripartite as half of Africa is a lucrative trade and investment destination
According to the Mckinsey Global Institute’s Lions on the Move 2.0, of September 2016, Africa yields the highest returns on investment in the world, and consumer and business-to-business spending is already estimated at $3.9 Trillion, and projected to grow to about $5.6 Trillion within the next eight years by 2025. COMESA is part of this good news. The COMESA-EAC-SADC Tripartite Free Trade Area, launched on 10 June 2015 in Sharm-el-Sheikh has a combined GDP of $1.3 Trillion. Both Mauritius and Zambia are, in effect, in the Tripartite already, because they belong to both COMESA and SADC, two blocs which together cover the Tripartite. The Tripartite makes up half of Africa in geographical, demographic and economic terms.
Besides, most of the world’s fastest growing economies are in Africa, as shown in Table 2 below.
Table 2: Fastest Growing Africa’s Economies
Cote d’Ivoire -8.5% Tanzania – 6.9% Senegal – 6.6 % Djibouti – 6.5% Rwanda – 6.3 % Kenya – 6.0% Mozambique -6.0% Central Africa Republic – 5.7% Sierra Leone – 5.3% Uganda – 5.3%
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Source: AfDB, Africa Economic Outlook 2016
Opportunities – the bilateral trade potential is huge
A cursory look at Zambia’s leading imports from Mauritius and the rest of the world shows the indicative scale of potential trade.
Intra-COMESA trade potential is equally huge in a range of products
A survey the Secretariat has undertaken, in 2015, indicated that total potential for intra-COMESA trade in goods alone already stands at $82.4 Billion. Intra-COMESA trade in services is currently estimated at $38 billion. In addition to both Mauritius and Zambia being in the COMESA FTA, both countries have completed negotiations and submitted schedules of specific commitments in four priority sectors, namely, transport, communication, financial and tourism services. This means that trade and investment in these four sectors is now facilitated through the possibility of internet supply of the services, or supply through physical investment or by natural persons.
The COMESA FTA is rule-based, enabling long-term business planning
The COMESA Free Trade Area has been in force since 1 November 2000. Mauritius and Zambia are members. Under the Treaty, members of the FTA are to eliminate duties and quota restrictions to goods originating in other members, and to ensure that non-tariff barriers are eliminated when they occur – Articles 46 to 49. The COMESA Court of Justice has reconfirmed that the FTA rules are binding and breach of them can be corrected, in the case of Polytol v Mauritius, where the Court specifically went ahead to decided that customs duties collected in breach of the FTA provisions should be refunded. The FTA is indeed rule-based, and provides predictability and certainty for good business.
Rules of origin are flexible
The Protocol on COMESA Rules of Origin sets out five criteria on the basis of any of which a good can be considered to be originating – wholly produced, foreign material not exceeding 60%, value addition of 35%, change in tariff heading, and good of particular economic importance. The Protocol is supplemented by a comprehensive manual. The Treaty and the Protocol together with the Manual is available on the COMESA Website (and on tralac’s COMESA resources page).
Non-tariff barriers are speedily removed when they occur
COMESA as a region has been very successful in addressing non-tariff barriers. Out of a total of 202 reported since the year 2008, 195 non-tariff barriers have been removed. Two of those that remain have been outstanding since the year 2003, while the rest are new and should be eliminated easily. What is more is that on a daily basis, the Secretariat receives enquiries and assists to address potential non-tariff barriers to assist ensure that consignments at ports or borders are cleared, and that products are produced with a view to being properly traded on the COMESA market. The Secretariat routinely provides information on market opportunities and regimes that apply in given member states. This is done over email, phone or skype, or through letters and formal communication.
Non-tariff barriers can be reported by anyone online at tradebarriers.org or by SMS, or by a letter to the Secretary General of COMESA. The Secretariat will then quickly intervene to assist, through technical advice, arranging consultations, organising on-the-spot verification missions, and preparing discussion at formal technical and ministerial level meetings.
Trade facilitation instruments have reduced the cost of doing business
COMESA has prioritised trade facilitation. In addition to simple and flexible rules of origin as well as a dynamic system for elimination of non-tariff barriers, instruments for trade facilitation include the Single Administrative Document/Customs Document, Automated System for Customs Data, the Yellow Card, Regional Customs Bond Guarantee Scheme, Carriers Licence, among others. For more on this, please see Francis Mangeni, Trade Facilitation in Eastern and Southern Africa, in Key Issues in Regional Integration, Volume 3.
For instance, it now takes 20 minutes for accredited clients (approved economic operators) to cross the Chirundu one-stop-border post between Zambia and Zimbabwe which is a valve for transit trade through Zambia, with eight neighbouring countries, or two hours where advance declaration is used, or up to two days where documents are lodged on arrival; whereas before, it used to take anything up to nine days to cross that border.
Or take another example, it used to take up to 22 days for cargo to move from Mombasa in Kenya to Kigali in Rwanda; it now takes four to six days with the removal of roadblocks and the introduction of automation and integration of customs procedures and documentation covering the Regional Customs Transit Bond Guarantee and pre-clearance, and the administrative arrangement of positioning customs officials of Uganda/ Rwanda in Mombasa as the port of arrival into the region under the Single Customs Territory initiative.
It is to be noted that a sitting truck costs $250 to $400 per day, a cost that has been saved through this much reduced dwell time on the roads and at borders.
COMESA Institutions are continental and facilitate trade and investment
One of the trail blazing successes of COMESA as an organisation has been its superb institutions and specialised agencies, established over the years to facilitate trade and investment.
The Trade and Development Bank provides trade and project finance
These include a trade and development bank providing trade and project finance to governments and the private sector. The Bank has financed the purchase of aircrafts (Rwandair and Ethiopian Airlines), hotels (The Radisson Blue in Lusaka), and energy and a raft of other projects indicated here.
The Africa Trade Insurance Agency covers terrorism and other political risks
The African Trade Insurance Agency provides cover for non-commercial risks such as political risk, political violence terrorism and sabotage, as well as surety bonds and reinsurance. The Re-Insurance Company provides re-insurance and facilitates the operations of the Yellow Card Scheme. The Regional Payment and Settlement Scheme overseen by the COMESA Clearing House, with the Central Bank of Mauritius serving as the Settlement Banks, facilitate intra-regional payments to be completed within 24 hours.
Other institutions include the Competition Commission, which addresses anti-competitive practices and facilitates acquisitions and mergers in the COMESA region. The COMESA Regional Investment Agency facilitates investment into the COMESA region, including through providing information on investment opportunities to investors within and beyond the region. The COMESA Business Council is the voice of the private sector and mobilises economic operators in the region, and links them up through virtual and physical buyer-seller fora.
Way forward – create a standing virtual market and a data base for continuous business
The upshot of all these many words is that there is merit in this business-to-business forum and a promise of prosperity for the two countries through trade and investment. Why this be a one off? Without a single reason for this, the potential trade and investment opportunities argue for a continuous and standing forum, virtual, for business taking into account the dynamic and continuous nature of business; or at least regular physical business-to-business meetings.
Trade and investment opportunities in Mauritius and Zambia and in COMESA at large through value chains, should be vigorously pursued by the private sector, utilising COMESA rules and programs as enablers. In addition, every effort should be deployed to create new high technology content products through innovation. Government, innovators and academia, and the private sector would do well to work as a coherent team, to achieve the much required social economic transformation of our societies, in order to achieve the public policy goals of creating jobs and wealth, and ensuring peace and prosperity in our communities.
This document has been published with permission from COMESA.
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Fostering regional value chains and policy coordination in Southern Africa
UNCTAD and the Department for Trade and Industry of the Republic of South Africa jointly organized a regional workshop on regional value chains and policy coordination in Southern Africa. This represents the first activity of a four-year UNCTAD development project in the region.
In the last two decades, industrial growth, especially in the manufacturing sector, has been lower in Southern Africa than in other parts of the continent. Services are absorbing most of the people moving out of agriculture, with employment in industry stagnant, at well below 10 per cent of the labour force. As a consequence, most of the economies of the region are insufficiently diversified and dependent on a few, and unsophisticated, commodity exports.
Recognizing the importance of revitalizing the industrial sector to spur economic growth and transformation, the Southern Africa Development Community (SADC) has recently adopted a common industrial strategy with the goal to “promote development of an integrated industrial base within SADC through the exploitation of regional synergies in value-added production and enhancement of export competitiveness,” including via “collaboration in the development of regional value chains with targeted interventions.”
In an attempt to support this regional integration agenda, UNCTAD has recently started a new project that aims at the identification of regional value chains (RVCs) and at the coordination of supportive industrial policy in Southern Africa.
The first workshop in the context of this initiative, jointly organized with the Department for Trade and Industry of the Republic of South Africa (DTI), took place in Pretoria on the 27th and the 28 of March.
“No country has made the arduous journey from widespread rural poverty to post-industrial prosperity without employing targeted and selective government policies that seek to shift the production structure towards new types of activities and sectors,” said Richard Kozul-Wright, Director of UNCTAD’s Division on Globalisation and Development strategies.
And he added that: “The key lies in the State’s efforts to help build the linkages that can sustain a process of structural transformation, guiding resources towards activities with higher productivity, better paid jobs and greater technological potential. This will involve linking up with regional and global supply chains that already exist and exploring new possibilities.”
Also Nigel Gwynne-Evans, Director of the African Industrial Development Department of the DTI, stressed the importance of the regional dimension and the need for the economies of the region to come together and coordinate their industrial policies in order to exploit the potential production complementarities.
He further indicated that “the fundamental need is for member states to strengthen their capacity in key trade and industry departments in order to better understand and engage with the private sector and to put in place the appropriate policies for re-enforcing and building key private-sector led activities. As described in the SADC Industrial Strategy that will entail a long-term transformation and modernisation of the economy and the development of a coherent system of key institutions that will underpin this development. Without the strengthening of strategic policy making capacities in key governmental units relating to the economic system however, it will be a considerable challenge to overcome the critical co-ordination failures between government departments, the private sector and key institutional players such as higher education, state owned enterprises and the finance sector”.
The workshop benefitted from the participation of delegations from Mauritius, Mozambique, Tanzania, Zambia and Zimbabwe. The OECD Development Centre took also part to the initiative reinforcing the existing cooperation with UNCTAD on the structural transformation agenda.
A second regional workshop aiming at identifying (and agreeing upon) specific policy measures in support of agro-processing and capital equipment value chains will take place in Tanzania at the end of 2017.
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COMESA Banks’ Governors push for Regional Payment and Settlement System
COMESA Committee of Governors of Central Banks wants all COMESA member countries to fully utilize the Regional Payment and Settlement System.
In their 22nd Meeting that took place in Bujumbura, Burundi 29-30 March 2017, the Governors appreciated the progress that has been achieved in the implementation of the system with nine countries now live on the Regional Payment and Settlement System (REPSS).
REPSS is a Multilateral Netting System with end-of-day settlement in a single currency that provides a single gateway for Central Banks within the region to effect payment in a multi-currency environment. Importers and exporters are therefore able to pay and receive payment for goods and services through an efficient and cost effective platform thus increase intra-regional trade.
Governor of Central Bank of Burundi Mr. Jean CIZA, while speaking at the meeting, appreciated the success that has been achieved by COMESA in monetary cooperation and urged member countries that went live on REPSS to fully utilize the system.
“I urge those countries that are not in the system to put more effort to go live,” Mr Ciza said while commending the COMESA Monetary Institute (CMI) for its capacity building initiatives that have helped Central Banks’ staff to get practical skills in macroeconomic management and assessment of financial system stability.
During the forum, the Governors discussed the activities that were undertaken by CMI and the COMESA Clearing House (CCH), the progress made and challenges encountered in the implementation of the COMESA Monetary Integration Programme.
They agreed that pursuing appropriate macroeconomic policies and accelerating regional integration are crucial to address the development deficit in the structural transformation in COMESA region.
“Macroeconomic convergence and financial system development and stability, which are within mandates of the COMESA Committee of Governors of Central Banks, will make trade and investment as easy as possible,” the governors noted.
In his remarks, the Secretary General of COMESA, Mr. Sindiso Ngwenya described the CMI and CCH as important instruments for developing a policy and institutional framework to enhance monetary integration in the region.
“Modern economies are increasingly based on knowledge,” he stressed. “As a knowledge, learning and innovation-based organization; COMESA needs to make a paradigm shift in order to ensure that there is more focus on results rather than on processes.”
Mr. Ngwenya underscored the importance of business to business linkages, the diversification of member countries’ economies, focusing on agro-led industrialization, green growth through greening the financial system and using of online trading platforms. He said that Central Banks have a big role to play given the enormous investment needs to bring these transformations in our economies.
Madame Niyonkuru Pelate, the Burundi Minister of Trade, Industry and Tourism, in her statement, emphasized the importance of continuing to implement measures to boost domestic demand, diversify production and trade and promote rapid expansion in intra-COMESA trade.
She said: “Monetary integration is critical for the establishment of a dynamic common market and hence the importance of speedy implementation of REPSS in order to achieve significant increase in intra-COMESA trade.”
Governors and Experts from the Central Banks of Burundi, DR Congo, Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Swaziland, Uganda, Zambia and Zimbabwe attended the meeting. Also in attendance were chief executives of the CMI, CCH and the Association of African Central Banks (AACB).
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A rebalancing act for China and Africa: the effects of China’s rebalancing on Sub-Saharan Africa’s trade and growth
China and Africa have developed close economic ties over the past 20 years. China’s rapid growth has boosted its demand for raw materials, many of which come from Africa, and trade has risen more than 40-fold over the period.
More recently, the growing strength of Chinese enterprises has also led to rapid expansion of Chinese direct investment in Africa. At the same time, China’s competitive manufacturing has provided consumer goods that were previously out of reach to low-income households across the continent.
But now China’s growth is slowing and the drivers of its growth are shifting from investment and exports to domestic consumption. This shift is affecting the global economy (see the IMF’s October 2016 World Economic Outlook) but is having a particularly large impact on commodity exporters, many of which are in Africa. Overall, Africa’s commodities exports have fallen as a result of the decline in Chinese demand and the precipitous fall in world commodity prices, putting pressure on the fiscal and external accounts of many African countries. After expanding by 5-6 percent over the past two decades, economic growth in sub-Saharan Africa is expected to reach barely 1.5 percent in 2016.
How does China’s new growth model affect sub-Saharan Africa? To address this question, this paper is structured as follows: It first looks at the growing ties between China and Africa; it then attempts to estimate more precisely the impact on growth through the trade channel, since trade dominates the economic ties between China and Africa. Finally, it draws some policy implications and the discussion reflects on whether this means an end of the Africa Rising narrative or merely the beginning of a new chapter.
Growing Integration between China and Africa
China Has Become Sub-Saharan Africa’s Single Largest Trading Partner
China’s rapid growth over the past 40 years has turned it into a major trading hub for most countries in the world, whether directly or indirectly through other trading partners.
Sub-Saharan Africa, where a remarkable shift in trade patterns has taken place in the past 20 years, is no exception. Advanced economies accounted for close to 90 percent of sub-Saharan Africa’s exports in 1995, but 20 years later new partners, including Brazil, China, and India, account for more than 50 percent, with China accounting for about half of that. The story is similar on the import side. Total exports and imports have declined significantly in 2015, though the proportion of trade by destination and origin countries have remained fairly similar. By 2014, China was the single largest source of sub-Saharan Africa’s imports. Fuel and metal and mineral products account for 70 percent of sub-Saharan African exports to China whereas the majority of sub-Saharan Africa’s imports from China are manufactured goods, followed by machinery.
What has been the economic impact of sub-Saharan Africa’s growing engagement with China? Access to new markets for its raw materials has spurred Africa’s exports, which quintupled in real value over the past 20 years (1995-2015). But maybe even more important, by diversifying its trading partners, sub-Saharan Africa has reduced the volatility of its exports. This combination of trading partners helped cushion the impact of the global financial crisis in 2008-09, when advanced economies experienced a deep economic contraction that curbed their demand for imports. At the same time, China actually increased its contribution to the growth of sub-Saharan African exports, allowing most of sub-Saharan Africa to sustain robust economic growth during the Great Recession. Trade has also boosted living standards in Africa through access to cheap Chinese consumer goods, from clothing to mopeds, and has contributed to lower levels of inflation in many countries.
China Is a Growing Investor and Lender in Africa
Sub-Saharan Africa has also diversified its sources of capital. China’s outward foreign direct investment (FDI) to sub-Saharan Africa has increased significantly since 2006. Official statistics indicate that it remains small as measured by its share of total FDI to sub-Saharan Africa – less than 5 percent in 2012. But anecdotal evidence suggests that in reality the figure may be much higher, with a large number of small Chinese entrepreneurs establishing themselves in Africa. In addition, Chinese loans to sub-Saharan Africa – many of them financing public infrastructure projects – have risen rapidly, and China’s share of total external debt in sub-Saharan Africa has risen from less than 2 percent before 2005 to about 15 percent in 2012. These loans have provided many African countries with a welcome new source of project financing, particularly attractive for countries with low levels of external debt following comprehensive debt relief under the Heavily Indebted Poor Countries Initiative. And Africa is becoming increasingly important for China as well. By some accounts, by 2013 about a quarter of all Chinese engineering contracts worldwide were in sub-Saharan Africa. Most of these contracts were awarded in energy (hydropower) and transport (roads, autos, ports, aviation).
China and Africa – The New Balance
China’s investment-heavy, export-oriented growth model made it a growing importer of commodities. Between 2010 and 2014, China accounted for more than 40 percent of the world’s metal consumption, more than 10 percent of demand for crude oil, more than 20 percent of agricultural crops consumption, and more than 20 percent of primary energy demand. In the first decade of the century, base metal and energy prices rose by more than 160 percent, precious metals rose more than 300 percent, and agricultural commodities more than 100 percent. Sub-Saharan Africa’s many commodity exporters benefited enormously from this boom. But now, oil prices and many mineral prices have fallen by more than half from their peaks of the past few years, and many other commodities have suffered sharp declines Futures markets suggest little recovery in prices by 2020. Moreover, lower investment in China has curbed the country’s appetite for raw materials, resulting in a sharp swing in its trade balance with sub-Saharan Africa.
FDI is less cyclical and driven more by medium-term considerations. But a string of recent Chinese mining closures in sub-Saharan Africa (copper mines in Zambia, iron ore mines in South Africa, and the cancellation of an iron ore project in Cameroon) suggests that returns on investment in the traditional commodity sectors are falling. Data from China’s Ministry of Commerce corroborate this: the number of approved projects has been falling since 2014. In May 2015, the Ministry estimated a 45.9 percent drop in China’s FDI flows to Africa in the first quarter of 2015 compared with the same period in 2014. The impact extends beyond China, of course. Major planned investments in natural resources, such as the gas fields off Tanzania and Mozambique, may now need to be reevaluated.
Painful Adjustment Ahead
The immediate impact on commodity exporters has been severe. Oil-exporting countries, in particular, are experiencing sharp declines in exports, putting pressure on reserves and exchange rates. Many commodity exporters also rely on significant government revenue from natural resources and are now facing growing budget deficits and pressures to reduce spending. In Angola, for example, the fall in oil prices wiped out about half of the country’s revenue base, with a loss of more than 20 percent of GDP. Lower spending levels, in both the public and private sectors, have led to sharply lower growth rates for oil-exporting countries, now expected to average less than 1 percent in 2015-16, compared with an average of greater than 7 percent in the preceding decade.
Box 1. South Africa: Spillovers from China and Lower Commodity Prices
In South Africa, rising trade links and a reliance on commodities has increased spillovers from China. China absorbs 10 percent of South African exports, the most absorbed by any individual country. It also plays a key role in determining global demand for South Africa’s commodity exports. IMF staff analysis suggests China’s growth now matters more for South Africa than does growth in the United States and the European Union.
The impact of lower commodity prices is amplified by links between sectors (Figure 1.1). An analysis of input-output tables in South Africa suggests that links between the commodity sector and the rest of the economy are significant. A sectoral structural vector autoregression identified using multipliers from the input-output table suggests a 10 percent decline in export commodity prices would reduce real GDP growth by nearly 0.2 percentage points (quarter over quarter, seasonally adjusted, annualized) per year after two quarters, with most of the impact coming from downstream (for example, construction) and upstream (for example, transport) sectors, including manufactured commodities.
![Commodities linkages and price shocks IMF April 2017](/images/News/Commodities_linkages_and_price_shocks_IMF_April_2017.jpg)
The African Departmental Paper Series presents research by IMF staff on issues of broad regional or cross-country interest. The views expressed in this paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Lack of support to regional communities may stifle Africa’s transformation – ACBF/AfDB study
Africa’s regional economic communities (RECs) have key coordinating roles to play in support of the continent’s industrialization and transformation agenda but they are faced with acute capacity challenges to do this, warns a new report by the African Capacity Building Foundation.
The Report, launched at the 4th African Think Tank Summit, is titled “Survey of the Capacity Needs of Africa’s Regional Economic Communities and Strategies for addressing them.”
It establishes that while notable progress have been recorded in certain areas, capacity interventions over the past years have been largely fragmented and reactive, and have therefore not been as effective as desirable in addressing the Regional Economic Communities’ (RECs’) capacity needs. Training approaches for example, are often ad hoc in nature, without a clear comprehensive understanding of the actual expected impact.
In terms of internal management of RECs, the study notes the lack of coordination with divisions and units tending to operate in silos.
A more worrying finding is the RECs’ over-reliance on external resources for funding not just for capacity building activities, but even for the overall activities of the organizations, making their development coordination interventions precarious.
It is against this backdrop that the report recommends that the Regional Economic Communities pay serious attention to enhancing their internal capacities by devising innovative resource planning, mobilization and utilization strategies. In this regard, the book advises African RECS to establish a trust fund with contributions drawn from member States and development partners – a model which is already working well for ECOWAS, where a levy of 1.5 percent of customs duty is applied for the collection of such funds, resulting in a pot of more than US$630 million a year to finance integration programs in West Africa.
The study also suggests that RECS streamline training for their staff and collaborators in all projects they are implementing, in order to squarely deal with capacity gaps of personnel working on specific projects.
Calls for strategic partnerships
Addressing heads of the Regional Economic Communities in question, members of various think tanks from across Africa as well as Ivorian officials during the launch, ACBF’s Executive Secretary – Prof Emmanuel Nnadozie said “the findings of this study, show a clear need for a well-structured capacity development program for all RECs.”
“This can be best achieved though strategic partnerships among development partners, think tanks, public sector, private sector around coordinated capacity building for the economic communities by institutions such as the ACBF.”
The ACBF, he said, has demonstrated its experience and expertise in assisting States, the RECS and institutions unpack capacity needs previously unperceived by them and in proposing solutions for meeting such challenges.
He urged the Governments from across Africa and their partners to take a careful look at the report and consult with ACBF, AfDB, UNDP, AUC, NEPAD, ECA and the RECs in jointly mobilizing the required political and financial resources to implement the various capacity development programs and initiatives proposed in the book.
With plaudits from the Think Tank and RECs representatives at the launch, Prof. Nnadozie handed copies of the Report (in English and in French) to the Executive Secretary of SADC – Dr Stergomena Tax, who received it on behalf of all AU-recognized RECS in Africa.
Institutions covered/background
The study focuses on the needs of seven of the eight main RECS under the African Union, namely: the Arab Maghreb Union (AMU), Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), Economic Community of Central African States (ECCAS), Economic Community of West African States (ECOWAS), the Intergovernmental Authority on Development (IGAD) and the Southern African Development Community (SADC).
Prepared by ACBF with support from the African Development Bank (AfDB), this report is a second in a series commenced in 2006.
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Botswana’s eleventh National Development Plan (NDP 11)
The eleventh National Development Plan (NDP 11) is the first medium term plan towards the implementation of the country’s second vision – Vision 2036. The Plan will run from 1st April 2017 to 31st March 2023.
Taking into account the development challenges facing the country, and the need to align the focus of the Plan with global, continental and regional initiatives such as; the UN’s Sustainable Development Goals, AU Agenda 2063, and the Revised SADC Regional Indicative Strategic Development Plan, NDP 11’s theme is “Inclusive Growth for the Realisation of Sustainable Employment Creation and Poverty Eradication”. This theme will be realised through the implementation of six national priorities, namely: developing diversified sources of economic growth; human capital development; social development; sustainable use of national resources; consolidation of good governance and strengthening of national security; and implementation of an effective monitoring and evaluation system.
As part of the preparation of NDP 11, a review of the performance of the domestic economy during NDP 10 was undertaken. The review showed that the actual average rate of growth for the NDP 10 was 3.9 percent per annum. While this growth rate is slightly above the NDP 10 target of 3.3 percent, it is substantially below the Vision 2016 average target of 7.5 percent. This lower growth was mainly the result of low performance of the mining sector, stemming from global uncertainties and low commodity prices, faced during NDP 10 period. On the positive side, the review showed that the domestic economy withstood the adverse effects of the global financial crisis, due to the resilience of the non-mining sector. In the event, the domestic economy contracted by 3.0 percent in 2009/2010, compared to the potential decline of 16.5 percent had it not been cushioned by the non-mining sector.
This underscores the crucial importance of economic diversification to reduce the country’s heavy reliance on diamond production. Another achievement during NDP 10 was that the reduction in the cumulative budget deficit from P31.9 billion projected in the Plan to P8.4 billion. Thus, the overall budget balance outturn for NDP 10 was better than projected, despite the global financial and economic crisis during the early part of the Plan period.
It is on the basis of the performance of NDP 10, and taking into consideration the development challenges facing the country that NDP 11 advocates for various policies and strategies to promote growth and create employment opportunities in the economy. Among the broad strategies to be pursued during NDP 11 are: (i) developing diversified sources of economic growth through initiatives such as beneficiation, cluster development, special economic zones, economic diversification drive, and local economic development; (ii) the use of domestic expenditure as a source of growth and employment creation by ensuring that domestic aggregate demand, including Government expenditure, is employed to support growth and employment creation; and (iii) pursuing an export-led growth strategy given the limited size of the domestic economy. The export-led growth strategy will draw from the cluster model, where the initial focus will be on diamonds, tourism, finance and mining, among others.
The implementation of these strategies and other sub-strategies is expected to promote domestic and foreign direct investment to grow the economy and create employment opportunities. This is because increased aggregate demand generates business confidence to invest more in productive activities. In addition, Government will continue to reform the country’s regulatory environment with a view to easing doing business and fostering global competitiveness for local businesses.
However, the efficacy of these strategies during NDP 11 will require a stable macroeconomic environment, whose main elements will include low inflation, sustainable budget balance, supportive monetary policy, and competitive exchange rate. In addition to ensuring macroeconomic stability during the Plan period, the country will also continue to work on improving the microeconomic environment. In this regard, Government will ensure that programmes aimed at eradicating poverty, and promoting sustainable livelihoods of the poor and people living with disabilities will be implemented during the Plan.
Furthermore, the Small Medium Micro Enterprises and Informal Sector models, as well as Local Economic Development approach will remain an essential part of NDP 11 strategy for promoting inclusiveness. Social protection programmes, especially the provision of social safety nets and other poverty related measures, will be strengthened to complement existing productive activities.
The Plan also gives the estimated financial resources that are likely to be available to Government, as well as their proposed allocations between the recurrent and development budgets. Under the Base Case scenario, total revenues and grants are estimated at P365.08 billion for the NDP 11 period; of which, 34.2 percent will be Mineral revenue, and 26.1 percent will be Customs and Excise. This means that over 60 percent of the projected revenues during the Plan will come from mineral and customs and excise, which are volatile and susceptible to regional and global economic trends. It is therefore imperative that, efforts to diversify the sources of Government revenues through the expansion of the domestic revenue base should be intensified during the course of NDP 11. The projected total expenditure for NDP 11 on the other hand amounts to P364.03 billion, comprising P262.40 billion, or 72.0 percent as recurrent budget, while P101.42 billion or 27.9 percent is earmarked for development expenditure.
Given the estimated total revenues and projected expenditures for the NDP 11 period, budget deficits are projected for the first half of the Plan period, while modest surpluses are expected for the second half, resulting in a small cumulative surplus of P1.05 billion. However, this modest surplus will only be realised, provided that the anticipated global, regional and domestic economic environment does not turn out to be worse than expected. This, therefore, calls for continued vigilance and prudence in spending, as the revenue outturn may turn out to be lower than expected during NDP 11, due to continued uncertainties in the performance of the global economy.
» Download: National Development Plan 11: Volume 1, April 2017 – March 2023 (PDF, 4.47 MB)
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Nigeria’s new economic recovery plans: The road ahead
The federal government finally launched the Economic Recovery and Growth Plan 2017-2020 in Abuja last Wednesday (5 April), raising expectations of economic recovery, if fully implemented.
The Council Chamber of the Presidential Villa was filled with excitement and grinning expressions on Wednesday when President Muhammadu Buhari formally launched a four-year economic plan. Tagged Economic Recovery and Growth Plan 2017-2020, the plan was meant to put to rest the protracted criticism of the president for failing to come up with a national economic blueprint for almost two years after his inauguration.
The document, which spells out government’s roadmap for security improvement, war against corruption, and economic revitalisation, is also a compendium of government’s sectoral plans for agriculture and food security; energy and transport infrastructure; and industrialisation and social investments. It also consists of plans to drive economic growth and achieve a seven per cent growth rate in 2020.
The ERGP was launched by Buhari ahead of the take-off of the day’s weekly Federal Executive Council meeting with the chamber accommodating unusual guests, such as the Senate President, Bukola Saraki, Speaker of the House of Representatives, Yakubu Dogara, and Chairman of the Nigeria Governors’ Forum and Zamfara State Governor, Abdulaziz Yari.
At the formal launch of the plan, Buhari was joined by Vice President Yemi Osinbajo, Saraki, Dogara, Yari, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, and the Minister of Finance, Mrs. Kemi Adeosun, who all brandished copies of the plan with grinning expressions on their faces.
Reservation
Even though the plan contains well thought-out initiatives, the major concern of watchers of the event is whether the government actually possesses the political will and commitment to bring the plan to fruition.
The cynicism towards the plan arose from Nigeria’s age-long tradition of drawing up laudable initiatives without the will to execute them.
It is against this background that many seek to know whether this plan would indeed achieve its aims and objectives, despite the assurance by the government that a monitoring unit will be established to allay such fears.
Assurance
Before the formal launch of the plan on Wednesday, the president had in his speech highlighted various components of the ERGP, assuring that his government would deploy the same commitment it had employed to fight corruption and insecurity to improve local content and transform Nigeria from an import-dependent nation to a producing economy where the country will consume what it produces. He also said the plan would serve as a veritable platform for the economy to thrive.
Buhari said the plan was driven by his administration’s commitment to his electoral promise to change the way things were done in Nigeria and consequently change Nigeria for good. He challenged the state governors to draw inspiration from the plan to articulate economic programmes for their respective states.
He also appealed to Nigerians to cooperate with the government in its drive to achieve the objectives of the plan and called on the National Assembly, the business community and the civil society organisations to embrace the plan.
Buhari, who commended the economic team led by Osinbajo for coming up with the plan, reiterated the government’s plan to improve security, tackle corruption and grow the economy. He also listed other objectives of the plan to include agricultural revolution, infrastructural development and social interventions, reiterating that the ERGP 2017-2020 would provide the roadmap for economic breakthrough. He added that the plan did not only seek to take the economy out of recession but to also place it on a path of sustained, inclusive and diversified growth
The president stated, “As we all know, this administration inherited numerous challenges. Our political campaign was based on a recognition of the difficult situation Nigeria was in and the need to bring positive and enduring change. And we remain committed to our electoral promise to change our way of doing things and to change Nigeria for good.
“We are committed to delivering on the three key areas that we promised. That is, improving security, tackling corruption and revitalising the economy. Security in the North-east and other parts of Nigeria is significantly better today than when we came in. With regards to our fight against corruption, as you all know, our law enforcement agencies are prosecuting very many cases of corruption. Our successes in these two areas are clear for all to see.
“I want to assure all Nigerians that we are approaching the solution to our economic challenges with the same will and commitment we have demonstrated in the fight against corruption and in the fight against terrorism and militancy. The Economic Recovery and Growth Plan brings together all our sectoral plans for agriculture and food security, energy and transport infrastructure, industrialisation and social investments together in a single document. It builds on the strategic implementation plan and sets out an ambitious roadmap to return the economy to growth; and to achieve a seven per cent growth rate by 2020.
“Our aim simply put, is to optimise local content and empower local businesses. We seek not just to take the Nigerian economy out of recession but to place it on a path of sustained, inclusive and diversified growth. We are determined to change Nigeria from an import-dependent country to a producing nation. We must become a nation where we grow what we eat and consume what we produce. We must strive to have a strong naira and productive economy.”
While introducing the plan earlier, Udoma said the ERGP had three cardinal objectives, namely, to restore security, fight corruption and guarantee economic recovery. The minister, who described the plan as the fulfilment of Buhari’s electoral campaign promise to promote and reinvigorate the economy, added that the plan would restore economic growth, invest in Nigerians, guarantee a competitive economy and build a self-reliant economy where Nigeria will consume what it produces and also export same to foreign countries.
Udoma added that the plan consisted of 60 interventions meant to touch various spheres of the nation, make the market function better and promote discipline, integrity, social justice, national cohesion and inclusion. He enumerated other features of the plan to include stabilising the economy, expanding the economy, improving energy consumption, boosting transportation infrastructure and driving industrialisation. He said even though the plan was being formally launched on Wednesday, its implementation actually actually preceded the launch.
According to Udoma, “The broad objectives of the ERGP are to restore growth, invest in our people and build a globally competitive economy. As our president has repeatedly said, ours is to build a self-reliant economy – a country in which we can grow what we eat, use what we make and produce what we consume. A country, which embraces the world of technology, ideas and investment from everywhere but domesticates these ideas for the use of our people. A country which produces high quality goods, not just for our own consumption but enough to export to our neighbours and, indeed, the world.
“Our aim is to create a culture where Nigeria continuously seek ways to add value to the resources we have been blessed with. In short, our aim is to change Nigeria, and change for good. Even though the ERGP outlines up to 60 initiatives, it focuses on five execution priorities, which are central to achieving the seven per cent growth projected by the end of the plan period.
These are namely, stabilising the macro-economic environment; achievement of food security; expansion of energy infrastructure and driving industrialisation principally through local and small business enterprises.”
Implementation
He said in the bid to ensure effective implementation, a special delivery unit would be established in the Presidency to monitor the implementation process with a view to ensuring that the objectives are implemented “with vigour, focus and success.”
“How does government intend to ensure that this plan is well implemented? I can assure you that under the leadership of President Muhammadu Buhari, this plan will be effectively implemented. Whilst the Ministry of Budget and Planning will be coordinating the plan, the president has approved that a special delivery unit be created in the Presidency to monitor its implementation and remove all bottlenecks to plan implantation. This is one plan that will be implemented with vigour, with focus, and with success,” Udoma added.
Udoma also told THISDAY after the FEC meeting that the plan as launched on Wednesday was only the first phase of the economic recovery growth plan, disclosing that the second phase of the plan was on its way.
In his own remarks, Yari described the plan as a significant landmark which provides the basis for inclusive growth and development. He assured that state governments would cooperate with the federal government to achieve the objectives of the plan.
Also speaking, Dogara expressed concern about the will to thoroughly implement the plan, pointing out that the plan sets out to address all aspects of development in Nigeria. Recalling that the plan drew inputs from relevant stakeholders across the country including the National Assembly, Dogara recalled how at various times in the nation’s history, good and strategic development agenda had been drawn but failed at the level of implementation.
He expressed delight over Udoma’s disclosure that a unit will be created to ensure its implementation and pledged the cooperation of the House of Representatives to ensure the plan is well implemented.
In the same vein, Saraki described Wednesday as a day of restoration of hope. He said the proposal for the establishment of an implementation unit was cheery in view of several unimplemented goals in the past. He also said besides the unit, everyone had the responsibility to ensure that the plan was well implemented.
Saraki disclosed that some bills currently before the Senate, including the bills on ease of doing business and Made-in-Nigeria goods, were initiated to serve as impetus for the ERGP’s success.
» Download: Economic Recovery and Growth Plan 2017-2020 (PDF, 6.59 MB)
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Brief on Regional Integration and the Continental Free Trade Area
This policy brief was prepared to highlight the fact that the CFTA that is currently under negotiations will be more than a traditional free trade area and will contain several elements of a single market.
1. Stages of regional economic integration
The degree of regional economic integration can be divided into five main stages.
-
Preferential Trade Area (PTA) – A trading bloc that gives preferential access to certain products from the participating countries. This is done by reducing tariffs but not by abolishing them completely. The goal of any PTA is to become a Free Trade Area (FTA).
-
Free Trade Area – A trading bloc that eliminates tariffs and quotas among members but each member keeps its own third-party tariff structure. The general goal is to develop economies of scale and comparative advantages.
-
Customs Union (CU) – A trading bloc composed of a FTA with a common external tariff (CET) and no or common quotas in trade with non-members. They are particularly useful to address the problem of re-exports.
-
Single Market (SM) – A trading bloc with the free movement of factors of production (capital and labour) and services, in addition to the free movement of goods. This will likely include the harmonization of related norms and regulations. An SM is also sometimes referred to as a Common Market (CM).
-
Economic Union (EU) – A trading bloc which is composed of a CM with a CU and also has common economic policies (monetary, fiscal and other), including a single currency. This type of economic integration does not truly exist but the European Union is the closest example.
Since countries are free to negotiate regional economic agreements as they wish, in practice, formal agreements rarely fall neatly into one of these five stages. In some cases, this can lead to confusion in terminology and on the state of regional economic integration of a specific bloc.
2. Africa’s roadmap for regional economic integration
African Heads of State signed the Abuja Treaty in 1991, which entered into force in 1994, and established a roadmap towards an African Economic Community (AEC) to be completed by 2028. It was agreed that the Community shall be established gradually in six stages of variable duration not exceeding thirty-four years.
Figure 1: Roadmap towards an African Economic Community
Source: Adapted from the Treaty Establishing the African Economic Community.
The first stage has now been completed, with eight RECs formally recognized by the African Union. These are the Arab Maghreb Union (AMU/UMA), Economic Community of West African States (ECOWAS), East African Community (EAC), Intergovernmental Authority on Development (IGAD), Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA), Economic Community of Central African States (ECCAS) and the Community of Sahel-Saharan States (CENSAD). The second stage has not been fully completed because progress by the RECs and by members within the RECs has been uneven. The third stage is underway in a number of RECs but not all.
Only three of the eight recognized RECs have both a FTA and CU (ECOWAS, EAC and COMESA), although with varying degrees of implementation. While a continental free trade area (CFTA) does not feature explicitly in the AU roadmap, in accordance with the sequential stages of regional economic integration, it is a stepping to stone to the creation of a continental CU. The AU Assembly launched the CFTA negotiations at the 25th Ordinary Summit of Heads of State and Government on 15 June 2015, adopting an indicative finalization date of 2017.
3. Status of regional economic integration by REC
The table below summarizes the status of regional economic integration in each of the eight AU recognized RECs. The RECs are progressing at different speeds across the various components of the Abuja Treaty. The EAC has made the most progress across the board.
Table 1: Status of regional economic integration by REC
REC |
FTA |
CU |
SM |
Countries having implemented freedom of movement protocol |
EMU |
EAC |
√ |
√ |
√ |
3 out of 5 |
X |
COMESA |
√ |
√ |
X |
Only Burundi has ratified |
X |
ECOWAS |
√ |
√ |
X |
All 15 |
X |
SADC |
√ |
X |
X |
7 out of 15 |
X |
ECCAS |
√ |
X |
X |
4 out of 11 |
√ |
CENSAD |
X |
X |
X |
Unclear |
X |
IGAD |
X |
X |
X |
No protocol |
X |
AMU |
X |
X |
X |
3 out of 5 |
X |
Source: Adapted from Assessing Regional Integration in Africa VII: Innovation, Competitiveness and Regional Integration, ECA, 2016.
4. CFTA: beyond a traditional FTA
The scope of the CFTA agreement covers trade in goods, trade in services, investment, intellectual property rights and competition policy. This wide scope moves beyond the requirements of a traditional FTA which only requires the elimination of tariffs and quotas on trade in goods. Therefore, similar to other trading bloc arrangements, it is difficult to neatly place the CFTA under one of the five stages of regional economic integration identified in Section 1 of this brief. The wide coverage of the CFTA is expected to ease the subsequent process of further regional economic integration in Africa.
The harmonization of norms and regulations related to services typically takes place with the establishment of a SM. It is however important that trade in services is negotiated alongside trade in goods, since services are inputs into the production of trade in goods and the sector contributes a substantial share to the output of most African economies. The CFTA agreement will therefore include a sub-agreement on trade in services on the basis of progressive liberalization, consolidating and building on the RECs’ achievements.
Some common investment rules are typically covered under the free movement of capital required by a SM, whereas an EU would usually contain a fully-fledged common investment policy. Investment issues are rarely covered in FTAs. The CFTA agreement however is expected to include a sub-agreement on investment that is broad in scope, covering both goods and services. The provision of common rules for state parties in introducing incentives would help to encourage investment into African countries to accelerate development, and would also help to avoid any race to the bottom. A continent-wide dispute settlement system for investment disputes to be settled among state parties will also be key.
Intellectual property and competition policy would typically only be required under a EU, the fifth and final stage of regional economic integration. Since few African countries have the institutional capacities and expertise to utilize trade remedy instruments such as anti-dumping, safeguards and countervailing measures, the scope of the CFTA however also covers these areas. Competition policy is a particularly important instrument for regulating unfair trade practices and providing clarity to businesses. Inclusion of a mechanism for regulating competition and facilitating dispute settlement early on will also help to build confidence in the CFTA.
The CFTA agreement is also expected to include an appendix on the movement of natural persons involved in services and investment, an area of cooperation that is usually not covered until the establishment of a SM. This is needed to transform the opportunities provided through the liberalization of trade in goods, services and investment.
Finally, the CFTA project is being rolled out in parallel with the implementation of the Action Plan for Boosting Intra-African Trade (BIAT), which was adopted by the AU Heads of State in January 2012. This initiative goes significantly beyond the requirements of a traditional FTA and is aimed at addressing the constraints and challenges of intra-African trade which are organized under the clusters of trade policy, trade facilitation, productive capacity, trade-related infrastructure, trade finance, trade information and factor market integration. Effective implementation of the BIAT initiative will be crucial to minimizing the challenges and maximizing the gains of tariff liberalization, and ensuring that all African firms and countries are able to take advantage of the CFTA.
This policy brief was shared by David Luke, Coordinator of the African Trade Policy Centre (ATPC) at the UN Economic Commission for Africa (UNECA), at tralac’s 2017 Annual Conference on 6-7 April in Cape Town.
» Download: Brief on Regional Integration and the Continental Free Trade Area, March 2017 (PDF, 418 KB)
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Lesotho’s textiles, apparel and footwear manufacturing industry
Africa’s inspired apparel sourcing hotspot
Employment, wages & working conditions
The combined, textile, apparel and footwear manufacturing industry remains Lesotho’s largest formal private sector employer – employing around 46 500 workers. Its current employment is below its early-2003 peak of about 54 000 workers. The industry suffered large declines in employment in the period after the phase-out of the Multi-Fibre Arrangement (MFA); and, in the aftermath the 2008 global financial crisis. As with other garment industries about 82% of all industry jobs are occupied by women.
The contribution of the industry to Lesotho’s economy goes beyond the sector itself – there are important employment and economic multipliers. A range of formal/informal sector activities occur that feed into/off the industry, e.g. a small packaging industry, road freight transporters, courier services, clearing agents, security, passenger transport, traders that sell food to workers, residential accommodation, water, electrical and telecommunication utilities, etc.
The wages earned by employees engaged in Lesotho’s textiles, apparel and footwear industry are of vital importance to Lesotho’s economy. It is estimated that sector production workers alone could collectively earn basic wages of about US$50m per annum – incomes would be higher taking into account that some firms pay wages above the minimums (e.g. to workers with special skills; and, for over-time payments).
With effect from April 2016 skilled garment workers are paid a monthly minimum wage of about US$94, and an unskilled worker’s monthly minimum wage would be approximately US$86.
Lesotho’s labour laws enshrine all aspects of the ILO’s core conventions (no child or forced labour; non-discrimination; freedom of association), regulate maximum working hours (45 normal & 11 hours overtime per week); and guarantee minimum paid leave.
While the application of Lesotho’s labour laws is regulated by the inspectorate of the Lesotho Ministry of Employment & Labour, many retailers/brands (including Levi Strauss, The Children’s Place, the Gap, etc) that source garments from Lesotho also monitor factory conditions in their Lesotho vendors. Recently (in 2016) a donor driven ILO programme “Betterwork Lesotho” wrapped-up an eight year programme involving factory compliance with the local and global standards. Currently six Lesotho factories (all US exporters) have Worldwide Responsible Apparel Production accreditation.
Sub sectoral value chain producers – firms, jobs & production volumes
|
Firms
|
Jobs
|
Approximate Units of Basic Garments Produced Per Annum
|
Textile
|
1
|
1 220
|
Yarn - 18 000t
Fabric – 15.6m linear meters
|
Denim (woven bottoms)
|
9
|
13 124
|
23 304 000
|
Non–denim Woven Fashion
|
4
|
1 580
|
6 360 000
|
Industrial Workwear
|
6
|
4 696
|
11 003 800
|
Knit Garments
|
33
|
24 513
|
115 143 600
|
Footwear
|
2
|
1 253
|
7 200 000 pairs
|
Supporting Industry
|
11
|
218
|
-
|
TOTAL
|
66
|
46 604
|
155 811 400
(typical clothing units)
7 200 000
(pairs of typical shoes)
|
Source: Lesotho’s textiles, apparel and footwear manufacturing industry (2017)
Textile manufacturing in Lesotho
Lesotho has a single vertically integrated spin-yarn dye-weave textile mill that specialises in the manufacture of denim fabrics. Formosa Textiles (headquartered in Taipei; established in 2004; current employment about 1 200 people) sources cotton lint (in 2015 105 000 bales) from a range of Southern African countries including: Zimbabwe, Zambia, South Africa, Mozambique and Malawi. It uses this cotton to make about 700t of open end (OE) yarns per month (typical counts 6-12Ne), and 800t per month of ring spun (RS) yarns (generally 40% combed; 60% carded; with an average count of 25Ne (it does make blended yarns).
100% of the OE yarns are utilised in-house to make denim fabrics; 30% of the RS yarns are used in-house and 70% are sold in South Africa (mainly), Swaziland and Mauritius. Much of the fabric (typically the plant makes about 1.3m yards per month; 40% are 8-10oz fabrics; 60% are 13oz fabrics) is used by the parent company’s related jeans manufacturing operations that are located in Maseru. Limited quantities of fabrics are sold in the Southern Africa marketplace. Formosa has the space to install additional spinning equipment and looms.
Denim jeans manufacturing in Lesotho
Lesotho’s jeans manufacturers make approximately 23.3m pairs of typical (average styled) jeans a year (9 firms employing about 13 100 workers).
The industry is dominated by the Nien Hsing corporation’s three garment plants. The Nien Hsing group also owns Formosa Textiles which makes denim textiles in Lesotho. These garment plants export >98% of their production to North America – mainly to the United States, but limited volumes also enter Canada. The plants make jeans for well-known brands such as: Levis Strauss, the VF Corporation (Lee and Wrangler); and, The Children’s Place – two of the plants are accredited Gap Inc. suppliers.
The remaining jeans manufacturers concentrate on supplying the South African market place. The largest of these is the CGM group (comprising two manufacturing units). For four of these South African orientated plants wet finishing is not undertaken in Lesotho due to the fact that there are no publicly accessible effluent treatment plants that can reprocess denim water wastes. From time to time some of these plants also make limited volumes of cargo pants, chinos and industrial workwear.
Most of the jeans orders are managed via the brands/retailers themselves.
Woven garments manufacturing in Lesotho (non-denim; non-workwear)
There are four Lesotho garment plants which specialise in making woven garments – that do not fall into the categories of denims or workwear. One firm makes higher end garments destined for two of South Africa’s premium apparel retailers; another two only make shirts typically worn by school students in Southern Africa. The owners of all of these plants, all headquartered in South Africa, collectively make approximately 6.3m clothing units per annum; and they employ about 1 580 workers.
It must be noted that a number of Lesotho’s traditional knit garment manufacturers occasionally make limited amounts of woven workwear (e.g. Shinning Century, CMT Trading, Leo Garments). Long River has the ability to make knit garments too.
Knit garments manufacturing in Lesotho
The Lesotho knit garment industry is the largest component of Lesotho’s apparel industry – with 33 firms currently employing approximately 24 500 workers. This employment is set to grow as newly established manufacturing enterprises are scaling up their production. A diverse range of products are made. From commodity cotton t-shirts, dresses, tracksuits, through to sportswear,
12 firms (employing approximately 6 200 workers) concentrate on supplying the South African market place. Most of these orders are given to Lesotho plants by a number of garment design/sourcing houses based in (mainly) Durban or Cape Town; only a limited number of orders are given directly by the Southern African retailers.
21 firms (employing about 18 600 workers) focus on the United States’ (US) market place. US orders are generally secured via sourcing agents based in the east (mainly Taiwan). An important feature of the knit garment manufacturing industry focused on the US market is that there is a core of firms that are able to secure orders from the agents – should they have excess orders they share this production with a number of plants (who have Asian origin owners) that only undertake CMT work.
In the past five years there has been a significant shift away from producing cotton knit garments for export to the US; now many firms tend to concentrate on making commodity garments whose fabrics are mainly composed of man-made fabrics (i.e. chief value synthetic – “CVS”). The reason for this switch is that CVS type garments typically attract US Most Favoured Nation (MFN) customs duties of between 25-35%; as opposed to cotton commodity type garments whose US MFN duties are much lower.
Many of the US orientated knit garment manufacturers have in-house laundry and embroidery facilities (e.g. Tai Tuan/J&S Fashions, Lesotho Precious Garments, Shinning Century and TZICC). Six knit garment manufacturers have obtained Worldwide Responsible Accredited Production (WRAP – Eclat Evergood, Hippo Knitting, Lesotho Precious Garments, Supper Knitting, Tai Yuan and TZICC) certification.
Two of Lesotho’s knit garment manufacturers are directly connected to textile (spin/knit/dye) manufacturing operations located in South Africa – Basotho Leisurewear (linked to Tradelink Industries – a vertically integrated knit fabric mill located in South Africa’s Western Cape province), and Fantastic Clothing (linked to Tai Yuen – a spin-knit-dye fabric mill based in South Africa’s KwaZulu-Natal province).
It must be noted that some of the predominantly knit garment manufacturers are versatile enough to undertake the production of woven garments (e.g. CMT Trading, Leo Garments, Shinning Century), while some of the woven manufacturers do undertake knit garment manufacture (e.g. Jonsson Manufacturing, Long River Garments, Middle Sky Lesotho, etc).
Industrial workwear manufacturing in Lesotho
The Lesotho industry currently comprises six firms that collectively employ about 4 700 workers; who make about 11m units of workwear per annum.
The workwear produced in Lesotho is typically used by workers in the mining, agricultural and manufacturing; and some retail operations. For example: one/two piece overalls/boiler suits, hi-visibility products, freezer-wear; as well as products used by fast food restaurant staff, retail store assistants, etc).
Aside from two small producers that focus on supplying the domestic Lesotho workwear market, most of the firms concentrate on supplying the South(ern) Africa marketplace. Jonsson Manufacturing employs 2 800 people and is a fully supported by a substantial in-house design centre which develops Jonsson’s branded products. Jonsson’s exports mainly into South Africa, but to a number of destinations within Southern and Eastern Africa; as well as into Australia.
Footwear manufacturing in Lesotho
Lesotho’s footwear industry currently consists of two footwear manufacturers; industry employment is approximately 1 253; and these firms produce about 7.2m pairs of (typical) shoes a year. Jaguar Shoes (formally “Springfield Footwear” used to make branded pool sandals for Puma – until Puma decided to exit this market niche) is now establishing itself with other retailers and scaling up production.
Lesotho’s textile-clothing-footwear industry support firms
The garment industry is supported by: two commission embroidery firms and two commission garment screen-printers; a limited packaging industry exists (two firms make corrugated cartons for garment exporters); and one coat hanger factory makes hangers for garments destined to be exported to the US. There are no commission laundries (although some firms have their own in-house laundries which can be rented), garment dye facilities, garment label printers, zip manufacturers, thread dye firms, etc. Most garment trims are imported into the country – from South Africa and the East.
This synopsis publication was shared by Mark S Bennett, Advisor in the Lesotho Ministry of Trade and Industry, at tralac’s 2017 Annual Conference on 6-7 April in Cape Town.
» Download: Lesotho’s textiles, apparel and footwear manufacturing industry: Synopsis publication (PDF, 795 KB)
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tralac’s Daily News Selection
Starting tomorrow, in Cape Town: tralac’s Annual Conference, International Trade Governance – quo vadis?
It is clear there are significant shifts in global political economy and power relations underway; and that these require a rethink of global trade and more generally, economic governance models. What are the implications of these developments for the multilateral trading system, as manifested in the rules-based regime of the WTO? What are the implications of the apparent preference of a Trump administration for bilateral trade deals? How will other WTO members respond? Could this undermine the multilateral trade governance regime, recognising that the enthusiasm for enhancing and augmenting this governance regime has for some time already been decidedly muted. How should we in African respond to these developments, and very importantly, what is influencing our own policy, political economy and governance discourse for trade and integration? What opportunities do the Continental Free Trade Area negotiations offer for taking a fresh look at the challenges around us? Note: To follow discussions on Twitter, use #tralacConf17
Keynote perspectives will be delivered by H.E. Albert Muchanga (AUC Commissioner Trade and Industry) and Minister Rob Davies (SA’s Minister of Trade and Industry). Downloads (pdf): Background note, Final programme, What considerations may guide a new American policy for Africa?, Brexit implications now that Article 50 has been triggered
Please note: Due to the tralac Annual Conference, the next selection will be posted on Monday
Brexit and economic deceleration in China pose risks for Africa’s growth says ECA director (UNECA)
Mr Adam Elhiraika (Director, UNECA’s Macroeconomic Policy Division) said although Africa’s medium-term growth prospects remained positive despite risks and uncertainties, growth continued to decline regardless of a sluggish recovery in global commodity prices. He said weather-related shocks remained a regional risk, in particular in parts of eastern and southern Africa and could lead to poor harvests and heightens the risk of inflation. Ultimately Africa’s growth is expected to rebound despite global headwinds even after feeling the effects of Brexit and all but Mr Elhiraika said also of concern was the fact that security remained a risk in some African countries affecting economic growth in the process.
EAC Heads of State summit shelved (Daily News)
Presidents of the six countries making up the East African Community who were to gather here for the 18th EAC Ordinary Heads of State Summit Meeting, have postponed their schedule. The EAC’s head of corporate communication and public affairs, Mr Richard Owora Othieno, said summit which was to be held in Arusha on 6 April, under the Chairmanship of President John Magufuli, will now be convened at a later date. “The 6th of April is a special day for Burundi and therefore the Chairman of the Heads of State Summit agreed to push forward the meeting to a later date,” said Mr Othieno.
Uganda takes over Chairmanship of EAC from Tanzania (EAC)
Speaking after taking over, the new Chairman of the EAC Council of Ministers, Hon. Dr Ali Kirunda Kivenjija, Uganda’s Second Deputy Prime Minister and Minister of East African Affairs, said that the Council of Ministers meeting came at a time when there was growing demand by the East African citizens to see, touch and feel the tangible benefits of the regional integration especially following the launch of the Customs Union in 2005, the Common Market in 2010, and the Monetary Union in 2013. “At this critical period, the Council’s contribution towards the regional integration process therefore cannot be overemphasized,” Hon. Kivenjija. He urged EAC Partner States to enhance the visibility of the tangible benefits of the integration by implementing fully the Customs Union and Common Market protocols. Hon. Kivejinja said that since the operationalization of the Customs Union and Common Market protocols, Partner States have not fully allowed the citizens to enjoy the anticipated benefits.
Northern Corridor initiative is well and alive, says Mushikiwabo (New Times)
Despite slowdown in frequency of Summit level meetings of the Northern Corridor Integration Projects, the initiative is well and alive, the Minister for Foreign Affairs and Cooperation, Louise Mushikiwabo, has said. At the onset, Heads of State Summits [of Rwanda, Kenya, Uganda] would be held quarterly. The last summit was held in April 2016 in Kampala. Addressing a news conference yesterday, Mushikiwabo said: “I think that what has happened since last year is that there has been a lot of political activity in the region and that has not allowed us, as a bloc, to hold our regular meetings as we had done since the beginning of the initiative.” Mushikiwabo further explained that due to what has been happening, there has just been a “slowdown” of NICP activities but “the spirit of the Northern Corridor initiative is well and alive.” Recently, South Sudan graduated from observer status to an active member of the initiative.
Kenya: RVR’s 25-year deal to run rail line is terminated (Business Daily)
The Business Daily has learnt that Kenya Railways terminated the contract last Thursday citing RVR’s failure to meet set operating targets, including payment of concession fees. RVR, whose ownership is controlled by Egyptian private equity firm Qalaa Holding, was informed of the decision through a letter delivered to its bosses on Thursday morning — a day after the operator moved to court seeking orders to stop it. The termination of the contract leaves RVR shareholders, including Qalaa, Uganda’s Bomi Holding, the Kenyan government and the international finance institutions (IFIs) that invested millions of dollars in the rail firm with 180 days to sell it to a strategic investor or return it to Kenya Railways.
Ethiopia: Trade logistics project (World Bank)
The development objective of Trade Logistics Project for Ethiopia is to enhance the performance of the Ethio-Djibouti corridor through improvements in operational capacity, efficiency, and range of logistics services at the Modjo Dry Port. This project has three components. [AfDB approves Sh26bn for key roads in Kenya, Uganda]
Dar-Addis hub deal doesn’t augur well with ATCL future prospects (Daily News)
Ethiopian Prime Minister Hailemariam Desalegn flew back home after his two-day state visit last week with a bag full of goodies, one being a deal for Ethiopian Airline to establish a cargo hub in Dar es Salaam. President John Magufuli said the deal will enable Addis Ababa to expand alternatives, linking its ports for imports and exports through Dar es Salaam. For the Ethiopians, the envisaged cargo hub is a big score, because the facility will enable the horn of Africa nation to continue strengthening its muscles in Africa’s airline business. As of 2013, Ethiopian Airline already had the largest dedicated cargo fleet in the continent with eight freighters.
State makes fresh bid to grow Kenya’s FDI flows (Star)
Kenya Investment Authority started the consultative process for the revised draft Kenya Investment Policy in a bid to grow domestic and trade flows. Through the proposed policy, the country is targeting to double private sector investment to 24% of the gross domestic product and manufacturing to 20%. The draft, presented to the private sector yesterday, seeks to consolidate various laws and regulations into one. The draft also seeks to address issues on local content, community participation in projects, regional integration, investor protection and set rules on how foreign firms will conduct their business in Kenya. It also touches on movement of labour, access to land, incentives and facilitation.
Western, Central Africa workshop on transfer pricing (WCO)
At this 6th regional Workshop on Transfer Pricing and Customs Valuation (20-24 March, Ouagadougou), 25 specialists from Customs and Tax authorities met to learn about their respective approaches when dealing with related parties engaged in international trade and the information they hold when dealing with such transactions. The participants were updated with the latest tools and instruments developed in relation to Transfer Pricing and in particular the instruments issued by the Technical Committee on Customs Valuation and the WCO Guide on Customs Valuation and Transfer Pricing. [WCO conducts research on cross-border e-commerce in China]
Angola, New Zealand discuss strengthening trade links (Xinhua)
New Zealand Foreign Minister Murray McCully said the visit by Angolan Minister of External Relations Georges Rebelo Pinto Chikoti was an opportunity to deepen the relationship with the southwest African nation. “Angola had one of the fastest-growing economies of the past decade, and appointed its first ever ambassador to New Zealand, resident in Singapore, last year,” McCully said in a statement. Chikoti would also meeting Trade Minister Todd McClay and Minister for Primary Industries Nathan Guy to discuss business opportunities with the fisheries sector.
Zimbabwe importing $400m steel annually (NewsDay)
Zimbabwe is importing $40m worth of steel annually, bleeding the country of foreign currency, Reserve Bank of Zimbabwe governor John Mangudya has said. “The government has worked hard to clean the balance sheet of Ziscosteel, we all know that Kwekwe was built by Ziscosteel and Zimasco. We want Ziscosteel to start on clean slate so that the debts will not suffocate the business, we are importing $400 million of steel, yet we have our own steel plant,’’ he said.
Nigeria: FG provides update on Ease of Doing Business Index effort (ThisDay)
Speaking at the March edition of the business dialogue organised by the Nigerian-American Chamber of Commerce in Lagos with the theme “Improving the ease of Doing Business in Nigeria”, Coordinator PEBEC and Senior Special Assistant to the President on Industry Trade and Investment, Dr. Jumoke Oduwole said the council has already swung into action and is being backed by the political will of President Muhammadu Buhari. According to her, the council early this year gave the secretariat a task of coming up “with things that could be done within a short time to make an impact on our ranking at least 20 spaces this year. On 21st February, the council approved a 60-day national action plan.” On what has been done so far, she said:
Data residency laws tracked in USTR trade barriers report (Bloomberg)
Barriers to digital trade have spread to such an extent that the Office of the US Trade Representative analyzed how the topic is playing out in dozens of countries in its 2017 annual report on foreign barriers to trade. The 492-page report (pdf, released 31 March) defined digital trade barriers as “restrictions and other discriminatory practices affecting cross-border data flows, digital products, Internet-enabled services, and other restrictive technology requirements.” The 32nd annual USTR report highlighted a range of foreign barriers to U.S. exports, including foreign import policies, lack of intellectual property protections, export subsidies and barriers to investment.
Geographic market definition across national borders: summary of roundtable discussion (pdf, OECD)
Working Party No. 3 held a roundtable discussion on 28 November 2016 to discuss geographic market definition across national borders. Considering the roundtable discussion, the delegates’ written contributions, presentations from the expert panellists and the Secretariat’s background note, the following key points emerge: [Executive summary, pdf]
2017 report on the DAC untying recommendation (pdf, OECD)
The share of DAC bilateral ODA that was reported as untied peaked at 78.6% (Table 6) in 2014, exceeding slightly the 2013 figure of 78.5%, before receding to 76.2% for 2015. Both values exceed the 74.2% baseline from 2010, when providers endorsed in the Busan Partnership Agreement to “accelerated efforts to untie aid”, a commitment that was carried forward into the Global Partnership for Effective Development Co-operation. Individual country performance again varies significantly.
Perspectives: five G’s that define the world (pdf, Brunswick)
To explore this issue for our clients, we surveyed almost 43,000 citizens in 25 languages across 26 countries, including South Africa. This has turned out to be the largest research study undertaken by an advisory firm that looks into global perspectives of national well-being, critical issues facing society and attitudes to business. We dug deeper and cut the data five ways – in what we call the 5 G’s: Geography (developed vs emerging market), Global mega-cities, Generation, Graduation (university degree vs no degree), Gender.
136th IPU Assembly, Africa-related reports: Kampala seminar on Sustainable Development Goals for the parliaments of the Sub-Saharan Africa (pdf), Resolution: Promoting enhanced international cooperation on the SDGs, in particular on the financial inclusion of women as a driver of development (pdf), Dhaka Communiqué (pdf)
ECOWAS reaffirms commitment to addressing the problem of statelessness (ECOWAS)
Abidjan Declaration on the eradication of statelessness: update
SADC: Consultancy to develop a regional disaster risk reduction strategic plan 2016-2030
Robert Z Lawrence’s presentation Donald Trump: Errors in diagnosis and cure (pdf) from a recent TUTWA seminar From trade rules to trade deals
Inclusive green economy in Mauritius: what skills do we need?
Eun Joo Allison Yi: How can green growth benefit Africa?
UN: Recent attacks show pirates off Somalia’s coast still a potent threat
A ‘different’ Darfur has emerged since 2003; exit strategy for AU-UN mission being considered
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tralac’s Daily News Selection
Underway, in Nairobi: IDEV AfDB event on private sector-led growth, sharing evaluative knowledge to enhance the relevance, effectiveness, and impact of future private sector development activities
Underway, in Geneva: Plenary of the UN Centre for Trade Facilitation and Electronic Business
Starting tomorrow, in Accra: Establishing a trade facilitation roadmap in Ghana
AFD prepares a new Africa strategy: One Africa: challenges of a continent-wide approach (12 April, Paris)
Companies to inspire Africa 2017 (London Stock Exchange Group, partners)
The companies we list and profile boast an impressive average compound annual growth rate of 16%. On average, each firm employs nearly 400 people. While industry (including, for example, construction and mining) is the biggest sector to be represented (at 23% of companies in the report), it is also encouraging that financial services is the second biggest sector (at 16%), demonstrating that the continent holds great promise for both traditional and more recent economic success stories. And with sectors ranging from agriculture to healthcare and pharmaceutical, the composition of companies featured clearly shows a community of businesses that is richer and more varied than previously identified. It also highlights the unique role of female entrepreneurship, with approximately 12% of these high-growth companies led by female entrepreneurs, three times the average for companies across Africa. [58 Nigerian companies among fastest growing in Africa]
2017 – Africa at a tipping point (Mo Ibrahim Foundation)
The focus of the 2017 Forum is “Africa at a tipping point” and what needs to be done to ensure that Africa’s progress continues to rise rather than fall back. The result of this defining moment depends more than anything else on our ability to harness the energy, and meet the expectations, of Africa’s young people. 60% of the continent’s population are under 25 years of age. In 2050, Africa will be home to 452 million people between the ages of 15 and 24. Their drive, ambition and potential provide African countries with an extraordinary asset. But today, too many of them feel devoid of economic prospects and robbed of any say on the future of their own continent. The commodity cycle of the past decade may have super-charged many African GDPs but it created almost no jobs.
Brendan Vickers: African trade and integration in a post-Brexit world (CTRI, Commonwealth Secretariat)
For some SSA countries, like Botswana, Seychelles or Mauritius, the UK market is extremely important for their overall world exports; for others, the UK is a niche export market for specific goods: beef, coffee, tea, fish, flowers or vegetables. This presentation (pdf) outlines some policy options to avoid any trade disruptions post Brexit. For example, the UK could extend and improve EBA-type preferences for LDCs and provide transitional arrangements for SSA countries while paving the way for building a long-run trading relationship. Having now triggered Article 50 of the Lisbon Treaty, the UK should reassure SSA countries and LDCs that their market access into the UK after the two-years of withdrawal negotiations from the EU will be just as favourable as existing arrangements. Given Brexit-related uncertainties, such reassurances of trade continuity are imperative for investment decisions and future planning. [Rob Davies at CTRI launch: Enlarging free trade areas is key]
Related: San Bilal: After Article 50 - trade implications of Brexit for developing countries (video, ECDPM), The Commonwealth in the Great Global Trade Slowdown (pdf), The UK and Africa in the International System: priorities and engagement post-Brexit (20 April, Chatham House), Daniel Mminele, Andreas Dombret: Globalisation and free trade are not enemies
Enhancing intra-African trade: how will Nigeria’s service sector fare? (Nigerian Economic Summit Group)
In this Policy Brief we analysed the potential of Africa’s trade in services and examined Nigeria’s preparedness for gaining market access leveraging on its areas of strength. This report provided some recommendations such as the need for Nigeria to clearly define its proposition as we go into the CFTA agreement; the need for government to continuously engage the private sector to seek technical support and the urgent need for the National Bureau of Statistics to gather data relating to the value of service trade in Nigeria to aid decision making. Recommendation: NBS should commence the gathering of data on service trade. Currently, Nigeria does not have data on the value of services it exports and imports. This is a weak-link in the negotiation given the importance of such data in negotiating a fair deal for the country. The National Bureau of Statistics should expedite action in collecting data on the value of Nigeria’s trade in service (imports and exports) as already being done for trade in goods. Quality data should inform national planning and strategy for trade in services.
Mauritius launches National Export Strategy (ITC)
The launch in Port Louis comes after a series of multi-stakeholder consultations led by the Ministry of Industry, Commerce and Consumer Protection in collaboration with Enterprise Mauritius. Throughout the process, the International Trade Centre has provided technical support to the process. The National Export Strategy identifies seven sectors with high potential for export growth, employment generation and innovation. The strategy also aims to tackle economy-wide constraints for trade growth and in response sets out five key cross-sector focus areas that will support export development and competitiveness: the internationalization of SMEs; skills development; innovation; branding and institutional alignment.
Senegal: Trade policy and performance profile (tralac)
This paper examines the trade profile and performance of Senegal since 1960, with particular emphasis on the period since 2001. Over the course of 2015, Senegal’s macroeconomic performance was strong with a growth rate of 6.5%, making Senegal the second fastest-growing economy in west Africa (behind Côte d’Ivoire). Growth remained strong in 2016. The primary sector is the fastest-growing sector boosted by extractives, fishing, and agriculture, with the latter helped by good rainfall and strong outcomes from government programmes. Industry decelerated somewhat despite strong performances in construction, chemistry and energy, while services – which represent more than half of the total GDP - are still growing rapidly, thanks to advances in the transport and communications sectors. Exports have been growing rapidly, mainly due to stronger output. However, over the past 16 years, Senegal has consistently run a merchandise trade deficit, with imports significantly above exports each year. [The analyst: Ron Sandrey]
The Made in Africa Initiative: Senior Advisory Board launched (UNDP)
With the expected relocation of light manufacturing from China and other emerging market economies to Africa, African nations are perfectly poised to create the next manufacturing hub for global markets on the continent. However, there are a variety of challenges facing African nations as they look to modernize their economic structures. The Made in Africa Initiative looks to ensure that Africa takes full advantage of these opportunities, whilst ensuring that future industrialization follows a sustainable, inclusive model of growth. The Senior Advisory Board will provide intellectual and strategic guidance to assist and promote the universally agreed SDGs. In the long term it will provide a partnership to deepen the impact of production-led growth while ensuring sustainable dimensions in close response to demand from UNDP partner countries.
African Corridor Management Alliance: strategy document
The discussion on the role of economic corridors has intensified over the years. A number of studies and stakeholder sessions have highlighted the opportunities and challenges that must be appreciated in exploring the corridor-based development approach. The challenges include, but not limited to border transit time, infrastructure development, logistics capacity and transaction costs. Based on lessons from on-going economic corridors such as Maputo Development Corridor, Walvis Bay Corridor and ALCO, this approach has gained traction as an instrument to promote development that is rooted in the reliable and efficient creation of production capacity to utilize the natural resource endowment for economic transformation. This is to build on linkages for enhanced value chain to harness competitive and comparative advantages in the continent. [The authors: Luke Wasonga, Johny Smith]
Non-tariff barriers and ‘complaints’ in the EAC’s reporting process (ODI)
The third briefing (pdf) from a project examining the magnitude of NTBs affecting trade in the EAC and assessing the impact of their removal, this paper explores the difference between NTBs and ‘complaints’ identified and reported to the EAC, and suggests a way to streamline the process so that NTBs can be more quickly and easily resolved and intra-regional trade enhanced.
East Africa: Region to adopt new tax rules to protect it from cheap imports (The EastAfrican)
The region’s finance ministers will meet next month meet to agree on a new Common External Tariff on products like sugar, maize, wheat and rice, as well as customs-related taxation measures designed to protect local industries from cheap imports and unfair competition. Kenya’s Cabinet Secretary for the National Treasury Henry Rotich said taxation measures that will be agreed on by the EAC ministers for finance will be communicated through the EAC Gazette Notice and implemented from 1 July. A group of 25 experts from Kenya, Uganda, Tanzania, Rwanda and Burundi has been tasked with the mandate of revising the CET and fine-tuning the existing rules of origin to enhance intra-EAC trade and attract new investments in the bloc.
Rwanda: Local farmers not benefitting from regional rules of origin - experts (New Times)
The issue was highlighted during the Grain Sector Consultative Workshop on the Rules of Origin in the proposed Tripartite Free Trade Area held on Friday in Kigali. It was organised by the Eastern Africa Grain Council. The main purpose of the workshop was to convene grain sector stakeholders in Rwanda to review the existing COMESA, EAC and SADC Rules of Origin for grain-related products and develop a National Grain Sector Position on the harmonisation of the Rules of Origin for the proposed TFTA. [Rwanda’s cross-border traders urge Tanzania to join e-cargo systems]
ECOWAS training workshops for tax auditors: update (ECOWAS)
The training sessions (20-24, 27-31 March in Lome, Togo) were targeted specifically at engendering effective and efficient risk-based audit of Multinational Companies operating in the Oil and Gas as well as the Mining Sectors. The main objectives of the train-the-trainers workshops in the fiscal audit of specialized sectors are to assist participants understand and appreciate the peculiar operations of the specialized sectors and harness their technical audit skills, tools and techniques to undertake efficient and effective professional audits, in addition to maximizing domestic revenue and compensate for any revenue loss that may arise from the trade liberalization schemes and Partnership Agreements in the region.
IGAD consultative meeting on current drought: communiqué (pdf)
Agree to: Strengthen regional, national and sub-national drought response coordination, as well as support integrated cross-border management across the region; Adopt a new way of working to address the underlying causes of vulnerabilities of the populations to recurrent shocks and stresses that focus on building resilience of communities and seeking durable solutions; Harmonise data and information management platforms on drought to improve responsive planning and investment.
Lake Chad Basin Region: UNSC debate, Presidential Statement (UN)
Follow-up: Encourages the Secretary-General, with a view to enhancing collaboration and responsibility among relevant entities and mobilizing resources for the region, to make a high level visit to the region, and invites him to consider undertaking a joint visit with the World Bank, Chairperson of the African Union Commission, the President of the World Bank Group, and the President of the African Development Bank, to strengthen the focus on and commitment to the region of the international community. [DR Congo: Security Council extends peacekeeping mandate, but reduces troop strength]
African bloc junks Indian proposal to ease services trade, movement of professionals (Economic Times)
Citing high compliance cost, the group led by South Africa said provisions on single window, appeals and fast-track were difficult to comply with for many African countries. They also asked whether the proposed Trade Facilitation in Services agreement was “realistic” in the current political climate. India’s paper, however, found support from Brazil, Colombia and Turkey. A senior commerce ministry official said a large number of the WTO member countries supported the proposal .
India may dilute China-championed Asia trade pact (Mint)
A fear of being flooded by Chinese imports and an insistence on global mobility for its IT services workers is behind India reluctance to move forward. While Asia’s third-largest economy may eventually sign on to the Regional Comprehensive Economic Partnership (RCEP), analysts say the end product could be so vague it has little benefit. China as well as RCEP’s chief negotiator have indicated the bulk of the deal could be wrapped up this year. But there’s no real solution to India’s resistance to lowering tariffs for China as well as Delhi’s penchant for caution on trade deals. Some analysts have suggested countries could even sign an agreement without India. The next round of talks is scheduled for the Philippines in May, after which negotiations move to India.
UNU-WIDER: The practice of industrial policy - government—business coordination in Africa and East Asia
Bridges Africa: African experts consider ways to speed up CFTA negotiations
Adesina invites New Development Bank to join AfDB’s Light up and power Africa project (pdf)
How Trump, aides’ choices shape Africa policies
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African Trade and Integration in a Post-Brexit World
After more than four decades of trade being governed by EU policies, Brexit means UK-Africa trading relations are now at a crossroads.
Most Sub-Saharan African (SSA) exports enjoy free access into the UK market under the EU’s Everything But Arms (EBA) scheme for LDCs or the Economic Partnership Agreements (EPAs), where signed (except for South Africa under the SADC EPA). If there is no equivalent treatment post-Brexit, SSA products entering the UK would face higher most-favoured nation duties and greater competition in specific products from more efficient suppliers.
For some SSA countries, like Botswana, Seychelles or Mauritius, the UK market is extremely important for their overall world exports; for others, the UK is a niche export market for specific goods: beef, coffee, tea, fish, flowers or vegetables.
This presentation outlines some policy options to avoid any trade disruptions post Brexit. For example, the UK could extend and improve EBA-type preferences for LDCs and provide transitional arrangements for SSA countries while paving the way for building a long-run trading relationship.
Having now triggered Article 50 of the Lisbon Treaty, the UK should reassure SSA countries and LDCs that their market access into the UK after the two-years of withdrawal negotiations from the EU will be just as favourable as existing arrangements. Given Brexit-related uncertainties, such reassurances of trade continuity are imperative for investment decisions and future planning.
This presentation by Dr. Brendan Vickers, Economic Adviser – International Trade Policy, Commonwealth Secretariat, formed part of the launch of the Centre for Trade and Regional Integration, a joint project of the UNDP and the dti, on 30 March 2017 in Pretoria.
» Download: African Trade and Integration in a Post-Brexit World (PDF)
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South Africa Merchandise Trade Statistics for February 2017
South Africa trade balance swings to surplus in February
South Africa posted a trade surplus of ZAR 5.22 billion in February of 2017 compared to an upwardly revised ZAR 11.22 billion gap in January. Exports advanced 9.4 percent, due to higher sales of vehicles & transport equipment and machinery & electronics while imports went down 9.7 percent, mainly due to lower purchases of machinery & electronics.
Exports rose to ZAR 87.8 billion mainly driven by higher sales of vehicles & transport equipment (79 percent), machinery & electronics (25 percent), base metals (10 percent), plastics & rubber (33 percent) and prepared foodstuff (17 percent). Major destinations for exports were China (8.6 percent of total exports), Germany (7.9 percent), the US (6.7 percent), Japan (5.7 percent) and India (4.6 percent).
Imports declined to 82.6 billion, as purchases went down for: machinery & electronics (-18 percent), chemical products (-10 percent), plastic & rubber (-22 percent), base metals (-15 percent), vegetable products (-25 percent) and vehicles & transport equipment (-6 percent). Imports came mainly from China (18.3 percent of total imports), Germany (11.8 percent), the US (6.4 percent), Saudi Arabia (5.5 percent) and India (4.9 percent).
Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country posted a trade gap of ZAR 1.2 billion in February.
The South African Revenue Service (SARS) on 31 March released trade statistics for February 2017 recording a trade balance surplus of R5.22 billion. These statistics include trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS). The year-to-date trade balance deficit (01 January to 28 February 2017) of R6 billion is an improvement on the deficit for the comparable period in 2016 of R23.62 billion.
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R5.22 billion trade balance surplus for February 2017 is attributable to exports of R87.79 billion and imports of R82.57 billion. Exports increased from January 2017 to February 2017 by R7.57 billion (9.4%) and imports decreased from January 2017 to February 2017 by R8.86 billion (9.7%).
Exports for the year-to-date (01 January to February 2017) grew by 7.0% from R156.98 billion in 2016 to R168 billion in 2017. Imports for the year-to-date of R174 billion are 3.7% less than the imports recorded in January to February 2016 of R180.60 billion.
On a year-on-year basis, the R5.22 billion trade balance surplus for February 2017 is an improvement from the deficit recorded in February 2016 of R5.39 billion. Exports of R87.79 billion are 2.0% more than the exports recorded in February 2016 of R86.04 billion. Imports of R82.57 billion are 9.7% less than the imports recorded in February 2016 of R91.43 billion.
January 2017’s trade balance deficit was revised upwards by R0.41 billion from the previous month’s preliminary deficit of R10.81 billion to a revised deficit of R11.22 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: |
|
Vehicles & Transport Equipment |
+ R4 753 |
+ 79% |
Machinery & Electronics |
+ R1 408 |
+ 25% |
Base Metals |
+ R 996 |
+ 10% |
Plastics & Rubber |
+ R 475 |
+ 33% |
Prepared Foodstuff |
+ R 475 |
+ 17% |
Vegetable Products |
+ R 472 |
+ 11% |
Chemical Products |
+ R 394 |
+ 8% |
Precious Metals & Stones |
- R1 345 |
- 10% |
Mineral Products |
- R1 561 |
- 7% |
The main month-on-month import movements (R’ million) |
||
Section: |
Including BLNS: |
|
Machinery & Electronics |
- R3 885 |
- 18% |
Chemical Products |
- R 998 |
- 10% |
Plastics & Rubber |
- R 989 |
- 22% |
Base Metals |
- R 805 |
- 15% |
Vegetable Products |
- R 669 |
- 25% |
Vehicles & Transport Equipment |
- R 438 |
- 6% |
Trade highlights by world zone
The world zone results from January 2017 (revised) to February 2017 are given below.
Africa:
Trade Balance surplus: R13 405 million – this is a 34.0% increase in comparison to the R10 005 million surplus recorded in January 2017.
America:
Trade Balance deficit: R1 988 million – this is a 18.1% decrease in comparison to the R2 428 million deficit recorded in January 2017.
Asia:
Trade Balance deficit: R6 460 million – this is a 55.7% decrease in comparison to the R14 582 million deficit recorded in January 2017.
Europe:
Trade Balance deficit: R3 920 million – this is a 61.0% decrease in comparison to the R10 054 million deficit recorded in January 2017.
Oceania:
Trade Balance deficit: R 682 million – this is a deterioration in comparison to the R 137 million deficit recorded in January 2017.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for February 2017 recorded a trade balance deficit of R1.20 billion, a result of exports of R78.49 billion and imports of R79.69 billion.
Exports increased from January 2017 to February 2017 by R7.25 billion (10.2%) and imports decreased from January 2017 to February 2017 by R9.21 billion (10.4%).
The cumulative deficit for 2017 is R18.86 billion compared to R38.92 billion deficit in 2016.
Trade highlights by category
The main month-on-month export movements (R’ million) |
||
Section: |
Excluding BLNS: |
|
Vehicles & Transport Equipment |
+ R4 712 |
+ 91% |
Machinery & Electronics |
+ R1 236 |
+ 28% |
Base Metals |
+ R 775 |
+ 8% |
Vegetable Products |
+ R 445 |
+ 12% |
Prepared Foodstuff |
+ R 423 |
+ 23% |
Plastic & Rubber |
+ R 404 |
+ 37% |
Chemical Products |
+ R 309 |
+ 7% |
Precious Metals & Stones |
- R 833 |
- 6% |
Mineral Products |
- R1 397 |
- 6% |
The main month-on-month import movements (R’ million) |
||
Section: |
Excluding BLNS: |
|
Machinery & Electronics |
- R3 940 |
- 19% |
Plastics & Rubber |
- R 992 |
- 23% |
Chemical Products |
- R 868 |
- 9% |
Base Metals |
- R 799 |
- 15% |
Vegetable Products |
- R 662 |
- 25% |
Vehicles & Transport Equipment |
- R 478 |
- 6% |
Trade highlights by world zone
The world zone results for Africa excluding BLNS from January 2017 (Revised) to February 2017 are given below.
Africa:
Trade Balance surplus: R6 991 million – this is a 96.5% increase in comparison to the R3 558 million surplus recorded in January 2017.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for February 2017 recorded a trade balance surplus of R6.41 billion, a result of exports of R9.30 billion and imports of R2.89 billion.
Exports increased from January 2017 to February 2017 by R0.32 billion (3.5%) and imports increased from January 2017 to February 2017 by R0.35 billion (13.9%).
The cumulative surplus for 2017 is R12.86 billion compared to R15.31 billion in 2016.
Trade Highlights by Category
The main month-on-month export movements (R’ million) |
||
Section: |
BLNS: |
|
Base Metals |
+ R 221 |
+ 44% |
Machinery & Electronics |
+ R 172 |
+ 14% |
Textiles |
+ R 124 |
+ 34% |
Chemical Product |
+ R 85 |
+ 11% |
Misc. Manufactured Articles |
+ R 76 |
+ 39% |
Plastics & Rubber |
+ R 71 |
+ 20% |
Optical Photographic Products |
+ R 45 |
+ 41% |
Footwear |
+ R 43 |
+ 44% |
Vehicles & Transport Equipment |
+ R 41 |
+ 5% |
Vegetable Products |
+ R 26 |
+ 5% |
Mineral Products |
- R 164 |
- 11% |
Precious Metals & Stones |
- R 512 |
- 98% |
The main month-on-month import movements (R’ million) |
||
Section: |
BLNS: |
|
Precious Metals & Stones |
+ R 220 |
+ 77% |
Live Animals |
+ R 120 |
+ 70% |
Machinery & Electronics |
+ R 55 |
+ 25% |
Vehicles & Transport Equipment |
+ R 40 |
+ 219% |
Chemical Products |
- R 130 |
- 19% |
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African Corridor Management Alliance: Strategy document
The African Corridor Management Alliance (ACMA) has been established to provide support in boosting intra-Africa trade, transformation and accelerated integration for sustainable development in the Corridor States. This is to be done within the broader framework of the African Union (AU) Agenda 2063 that emphasizes the promotion of unity, solidarity, cohesion and cooperation amongst the Member States.
ACMA aims to support effective and efficient management and coordination of the work of Corridor Management Institutions (MCIs) and their partners to maximize the benefits and added values towards the continent’s development by harnessing its natural resources. To this end, the ACMA has developed a Strategy Document, with the technical and financial assistance from UNECA, to strengthen the operational capacity of the Alliance.
Preface
The discussion on the role of economic corridors has intensified over the years. A number of studies and stakeholder sessions have highlighted the opportunities and challenges that must be appreciated in exploring the corridor-based development approach. The challenges include, but not limited to border transit time, infrastructure development, logistics capacity and transaction costs. Based on lessons from on-going economic corridors such as Maputo Development Corridor, Walvis Bay Corridor and ALCO, this approach has gained traction as an instrument to promote development that is rooted in the reliable and efficient creation of production capacity to utilize the natural resource endowment for economic transformation. This is to build on linkages for enhanced value chain to harness competitive and comparative advantages in the continent.
Despite being a major source of the world’s natural resource commodities such as minerals and agriculture, Africa lacks a systematic management approach to harness this potential for its own benefit. Most of the resources such as ores, concentrates, metals, and agri-products are exported unprocessed. The inputs for primary production are imported. This provides a case to advocate for an alliance among the African States to energize more up and downstream beneficiation. This strategy document contributes to addressing the best approach for the architect of an African Corridor Management Alliance by providing the Corridor States with lessons, practical tools for the design, capacity development and successful implementation mechanisms for economic corridors.
In this strategy document, an economic corridor is understood to be a collection of routes linking several economic centers, countries, and ports. While some are only road transport corridors, most of them include more than one mode of transport. Some corridors place emphasis on the facilitation of cross-border trade along corridors. The strategy document emphasizes that the defining feature of economic corridors is that they integrate investments in infrastructure, policy and regulatory frameworks, industrialization and value chain, institutional strengthening and capacity building. Through creating a dynamic business environment along the corridors for value addition, harnessing sector linkages, and cross-border trade, the Corridor States will maximize economic growth.
The strategy document includes discussions on objectives and tactical interventions required to realize the outcomes. It also highlights issues on beneficiaries, partnership, and concerns on sustainability. Relating to the outcomes, the possible activities are identified to ensure the realization of the expected output targets. The costing and budget levels needed to implement the planned activities are discussed as part of the enabling institutional arrangements, including the funding mechanisms.
The strategy document emphasizes that with effective management, economic corridors will improve physical connectivity between the Corridor States, thereby enhancing access to markets, while expanding economies of scale for value chain. Within the framework of the Alliance, economic corridors will enhance the productivity and value addition to the endowed natural resources. The ultimate objective is to enable the expansion of space for production into various sectors of the economies, leading to increased use of local raw materials and opening up access to new investment opportunities. The strategy document argues that the realization of economic development through the corridor management presupposes that there is a provision of energy, transportation and effective information exchange to drive the economic transformation process. In addition, development of corridor initiatives will require technical, managerial and financial resources for adding value to the raw materials and natural resources.
Central role of ACMA
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Africa’s future depends on its ability to meet the expectations of its young people
The Mo Ibrahim Foundation’s 2017 Forum report, Africa at a Tipping Point, finds the continent still making progress, but faced with a real risk of falling back. The future will depend, more than anything else, on Africa’s ability to harness the energy and meet the expectations of its young people.
Among the key opportunities and threats:
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Today, 60% of the continent population is already under 25 years of age. By 2050, Africa will be home to 452 million people under the age of 25. Their drive, ambition and potential provide African countries with an extraordinary asset. But this demographic dividend is at risk of being squandered.
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Too many young Africans feel devoid of economic prospects and robbed of any say on the future of their own continent.
-
The commodity cycle may have fuelled GDP growth for many African countries but it has created almost no jobs. Over the last ten years, while Africa’s real GDP has grown at an annual average of 4.5%, youth unemployment levels have remained high. Despite being the second-largest African economy, South Africa is not able to provide jobs for more than half of its youth population.
-
Young people have spent more years in school but few have been effectively equipped with the skills the economy needs. Despite having some of the most educated populations, with gross enrolment ratios in tertiary education over 30%, Egypt and Tunisia also have some of the highest youth unemployment rates on the continent, greater than 30%.
-
“Free and fair” elections have indeed multiplied over the last decade, but voter turnout is declining and scepticism about elected representatives is growing, especially among the young people.
-
Disenchantment with democracy and lack of economic opportunity form a “toxic brew”, bound to strengthen the appeal of migration and violent extremism.
-
Terrorism has become a well-organised multi-billion dollar criminal enterprise with growing control over the drugs trade, people trafficking and other parts of the black market. The jobs, status, income and feeling of “belonging” it seemingly offers to young people cut off from the mainstream economy may be more attractive that the ideology itself.
Mo Ibrahim, Chair of the Mo Ibrahim Foundation, said:
“The energy and ambition of Africa’s young people is our greatest resource and best hope for strengthening our continent’s progress. But their expectations could turn into frustration and anger unless they find a job and get a chance to influence their own future. Africa stands at a tipping point. The decisions taken now will decide whether our continent continues to rise or falls back. More than ever, wise leadership and sound governance are key.”
Ahead of the 2017 Ibrahim Forum, which is part of the Ibrahim Governance Weekend, the report sets the stage for high-level discussions between leaders from the public and private arenas, as well as influential partners based outside the continent. Based on this analysis, the Forum will address three priority areas that require leadership and sound governance:
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the appeal of violent extremism and migration
-
the risk of a democratic recession
-
the need for an inclusive economic growth.
» Download: Africa at a Tipping Point: 2017 Forum Report (PDF, 12.8 MB)
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The Made in Africa Initiative: Bringing together a strategic network of top development leaders
Support for industrialization in Africa received a boost last week with the launch of the Made in Africa Initiative (MIAI) Senior Advisory Board, an initiative that will create a strategic network of top development leaders’ minds to help facilitate the sustainable development of industrialization and economic transformation in Africa by drawing experiences from China and other emerging economies, in line with targets set out by the Sustainable Development Goals (SDGs).
With the expected relocation of light manufacturing from China and other emerging market economies to Africa, African nations are perfectly poised to create the next manufacturing hub for global markets on the continent. However, there are a variety of challenges facing African nations as they look to modernize their economic structures. The Made in Africa Initiative looks to ensure that Africa takes full advantage of these opportunities, whilst ensuring that future industrialization follows a sustainable, inclusive model of growth.
“By leveraging the expertise of leading industry experts and influential persons with experience working in China and Africa, the Made In Africa Initiative will ensure that Africa’s economic transition integrate knowledge and advice drawn from three decades of rapid economic development in China. By identifying both opportunities and challenges early on, African nations can customize a development model that suits local development needs and priorities in support of achieving the Sustainable Development Goals!” said Nicholas Rosellini, UN Resident Coordinator and UNDP Resident Representative to China.
The Senior Advisory Board, launched during the backdrop of the International Conference for Emerging Africa (ICEA) in Côte d’Ivoire, consists of a group of up to 15 high-level, influential persons in China, Africa and the World, co-chaired by Professor Justin Yifu Lin, Director of Center for New Structural Economics at Peking University, and Mr. Abdoulaye Mar Dieye, Assistant Administrator and Regional Director for the UNDP Regional Bureau for Africa. Mr. Lin and Mr. Abdoulaye Mar Dieye spoke at the launch alongside other influential persons, including MIAI CEO Ms. Helen Hai, discussing the wider range of opportunities the China-Africa cooperation can present for sustainable industrial development.
“African nations can learn a lot from the successful development experiences of East Asian economies such as China,” noted Professor Justin Yifu Lin, Director, Center for New Structural Economics at Peking University during the discussions.
The Senior Advisory Board will provide intellectual and strategic guidance to assist and promote the universally agreed SDGs. In the long term it will provide a partnership to deepen the impact of production-led growth while ensuring sustainable dimensions in close response to demand from UNDP partner countries. Members of the board fully support industrialization in Africa.
During the launch Helen Hai, CEO of the Made in Africa Initiative (MIAI) & UNIDO Goodwill Ambassador for Industrialization in Africa emphasized that, “ensuring that knowledge sharing accompanies the relocation of light manufacturing industries from these nations to Africa will be central to achieving a successful, sustainable transition.”
Mr. Nicholas Rosellini, UN Resident Coordinator and UNDP Resident Representative to China is visiting Africa (Côte d'Ivoire, Ghana and Ethiopia) between March 27th and April 6th.