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A review of the UNCTAD report on trade misinvoicing, with a focus on South Africa’s gold export
In July 2016, the United Nations Conference on Trade and Development (UNCTAD) published a report titled “Trade Mis-invoicing in Primary Commodities in Developing Countries: The cases of Chile, Cote d’Ivoire, Nigeria, South Africa and Zambia.”
This report contained serious accusations. The report asserted, among other things, that South African miners of silver, platinum group metals, gold and iron ore had systematically and fraudulently indulged in mis-invoicing in order to evade taxes and other legal obligations.
In respect of gold, specifically, the report stated: “Between 2000 and 2014, under-invoicing of gold exports from South Africa amounted to $78.2 billion, or 67% of total gold exports” and that this “does not appear to be a simple matter of undervaluation of the quantities of gold exported, but rather a case of pure smuggling of gold out of the country.”
The Chamber at the time disputed the veracity of the report and its conclusions – as did SARS and Statistics SA. The Chamber went further, and commissioned an independent inquiry by economic consultants Eunomix.
The final report is now available in full on the Chamber website.
Given the lack of rigour and unreliable methodologies used in UNCTAD’s report which the Chamber previously pointed out to the UN agency, the Chamber of Mines again calls on UNCTAD to withdraw this report and acknowledge its shortcomings.
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Chamber of Mines releases final independent report on trade misinvoicing
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UNCTAD welcomes discussion, transparency on commodities and misinvoicing
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Trade mis-invoicing – South Africa’s Chamber of Mines response to UNCTAD-sponsored report
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Some countries losing up to 67% of commodity exports to misinvoicing
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tralac’s Daily News Selection
The selection: Tuesday, 13 December 2016
President Paul Kagame yesterday hosted the fourth AU Reform Advisory Group meeting: update
An assessment of the short term impact of the ECOWAS-CET and EU-EPA in Senegal (World Bank)
In recent years, there have been major changes in the trade policy landscape in West Africa that will affect Senegal. When initially designed in the mid-2000s, the CET was organized in four tariff bands: 0 percent for essential social goods, 5% for goods of primary necessity, raw materials and specific inputs, 10% for intermediate goods and 20% for final consumption goods. Since then, Nigeria has obtained the introduction of a fifth band at 35% for ‘specific goods for economic development’ (essentially agricultural goods and some consumer goods). The first section of the paper presents an analysis of the impact of the CET and EU-EPA on protection levels, trade flows and state revenues, changes in the price of the consumption bundles for households and impact on firm’s profits. The second section underlines some key elements of an accompanying policy agenda and a third section concludes.
Nigeria: ECOWAS’ sweet poison (The Nation)
I understand the old debate about the unfriendliness of our ports, the crippling bureaucracy and the mind-boggling corruption said to make doing business such hell and how this makes the neighbouring ports attractive. No doubt, there is a lot to be said of the need to streamline our port operations and procedures to make the more competitive and business friendly. After cycles of interminable reforms, they are legitimate arguments to make now and for all time. At issue is whether these concerns should be allowed to obviate mounting concerns about duplicity of our ECOWAS neighbours, particularly when their activities are injurious to us. We must of course understand that none of these goods are produced in the sub region, which of course raises the unlikelihood of their ban being seen as a violation of the ECOWAS protocol on free movement of goods and services. Moreover, the idea that a supposedly friendly neighbour will deliberately set itself up as a transit camp for goods destined for a third party country in brazen violation of its own domestic policies would seem far beyond the pale of modern trade protocols. That, unfortunately is the terrible situation which the sub regional body has found itself. [The author: Sanya Oni] [Related: Ports hurdles may hamper policy on imported vehicles, Nigerian lawmaker seeks free-float rollback via currency bill, NEPC: Nigeria ready for AGOA]
Benin: 16 economic policy notes to better inform decision making (World Bank)
Fourteenth Replenishment of the African Development Fund: update (AfDB)
A global coalition of donors pledged to support the structural transformation of African economies and the African Development Bank’s High Five priorities by agreeing on $7.06bn over the next three years to support development projects and programs in the 38 lower income African countries supported by the African Development Fund. The African Development Fund will shift more resources to support the private sector in the region, even as it helps countries dealing with fragility to address their most pressing developmental challenges. The increased resources devoted to these countries reflect their strong need for concessional funding. Recognizing the private sector’s key role in the transformation of African economies, the Fund will allocate over $280m to the Private Sector Credit Enhancement Facility. This Facility will leverage approximately $840m of private sector financing, of which at least 50% will be in higher risk countries. The Fund will continue to promote financial instruments that crowd in resources from the private sector, such as financial guarantee products.
Africa must act now if it is to feed itself in 2050 – scientists (Thompson Reuters Foundation)
Africa will be able to grow enough cereals to feed its growing population by 2050, but only if it breaks a culture of complacency and starts now to invest more in agriculture, scientists said on Monday. Sub-Saharan Africa currently imports about 20% of its cereal needs, and this could rise to at least 50% by 2050, researchers said in a report published on Monday in the Proceedings of the National Academy of Sciences.
Knowledge management crucial for Africa’s growth (SciDev)
The observation was made last month (14-16 November) during information and knowledge management training workshop on nutrition security and trade organised in Kenya jointly by the Africa Union Commission, NEPAD Agency and the COMESA Secretariat. It brought together technical experts from 11 COMESA member states - Burundi, Egypt, Ethiopia, Kenya, Madagascar, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe - working in trade, agriculture and nutrition security.
SADC Development Finance Institutions’ Chief Executive Officers’ Forum: update (The Chronicle)
The two-day workshop, at Victoria Falls, was attended by 31 development finance institutions in Africa and 25 chief executive officers and was held under the theme: “How to effectively use PPPs to enhance service delivery and development infrastructure.” The workshop sought to discuss PPPs in light of slow uptake by countries where only South Africa and Mauritius have active PPPs despite the concept being adopted by the region in 2013. [Peter Leon: What are the expectations of foreign and domestic investors for a welcoming investment climate in the SADC community? (Politicsweb)]
EAC borrows leaf from Japan, Vietnam for automotive industry (New Times)
According to Jean-Baptiste Havugimana, the EAC director for productive sectors, experts from partner states and the Secretariat travelled to Tanzania, Kenya and Uganda “to compile baseline information on the status of automotive industry,” and to Vietnam and Japan for a benchmarking exercise. “These missions took place from September 20 to October 7. Thereafter, the team will visit other countries in East Africa (Burundi, Rwanda) for in-depth analysis, and to others in Africa such as Ethiopia, Nigeria and South Africa for benchmarking,” Havugimana told The New Times at the weekend.
EAC must double efforts if Monetary Union is to be achieved, officials say (New Times)
Despite the apparent concern, however, Njoroge remains firm that preparatory work is still going on. The governors of the central banks, he assured, are following up on issues that were supposed to be implemented by the EAMI. “And, a lot of work is being done. A lot of monitoring mechanism as well as the n implementation of the convergence criteria has been developed. And it is being used in monitoring how we are doing in the implementation of the convergence criteria,” he said. Other than Burundi, it is said, Rwanda, Kenya, Uganda and Tanzania have prepared the medium term convergence programme and ministers of finance approved. The approved plans provide a trajectory on how the bloc moves from 2016 to 2021.
East Africa: One-stop border posts, axle-load laws set for January (The East African)
The laws were due to take effect on 1 October but for a failure to secure the signature of the new Heads of State Summit chairman, Tanzania President John Pombe Magufuli, in time. Alfred Kitolo, director of infrastructure services at Kenya’s Ministry of East African Community Affairs, said the EAC Council will now have the gazette notice with the two laws signed during the EAC Summit in January, whereupon implementation can start.
Zimbabwe: Government in drive to boost export growth (The Herald)
Government has launched the Rapid Results Approach for ease of doing export business as part of its efforts to close competitiveness gaps and halt negative export growth. According to the 2017 National Budget, the country’s export performance is expected to further decline by 6,9% to $3,3bn. Last year, total imports were $6bn against exports of $3,6bn resulting in an average monthly deficit of $275m. The 100-day RRA is expected to help enhance the country’s export earnings by tackling the key impediments to the export process, Industry and Commerce Minister Mike Bimha said in a speech read on his behalf by his permanent secretary Abigail Shonhiwa.
Botswana: Ghost town chronicles meltdown of Botswana’s metals industry (IOL)
The streets of Selebi Phikwe in northeastern Botswana no longer teem with trucks, and once-busy shop assistants and bank tellers wait for the rare customer. Since state-owned mining company BCL closed its loss-making copper and nickel operation that was the economic lifeblood of the area two months ago, the settlement of 50 000 has become a virtual ghost town. The government says it can’t afford the 8 billion pula ($748m) needed to recapitalize the mine. Instead, it’s asked former central bank Governor Linah Mohohlo to oversee a plan to rescue the region.
Revealed... most Tanzanians ignorant of EAC protocols (IPPMedia)
Interviewed, different government officials and other stakeholders said that the presence of numerous ‘panya’ routes, absence of security in many parts of Kigoma Region pose a big challenge in the East Africa Customs Union and Common Market protocols. Generally, Kigoma residents, farmers and business community do not know how the EAC common markets and customs union works. In an exclusive interview by this paper Kigoma residents and businessmen said they don’t know the opportunities accrued from the EAC community at large. Kigoma regional government officials and law enforcers who sought anonymity said that the government must wake up because generally many Tanzanians don’t know what EAC mean to them, its functions and protocols. That’s why some of them are being easily lured and then used by foreign businessmen and tax evaders.
DHL Global Connectedness Index: globalization surpassed pre-crisis peak, advanced modestly in 2015
In addition to a comprehensive overview on the state of globalization, the 2016 report also provides detailed insights into the connectedness of individual countries and regions. The index ranks countries on their depth (intensity of international flows) and breadth (geographical distribution of flows), which combine for an overall connectedness score between 0 and 100. Countries in South & Central Asia and Sub-Saharan Africa suffered a drop in their average levels of global connectedness.
$56bn and growing: it’s time India addressed the trade deficit with China (The Wire)
India’s trade deficit with China in 2015-16 stands at $52.69 billion. And it is expected that this will go up even further this year. This by itself should not be a cause for worry, as India runs deficits with 16 out of its top 25 trade partners. The fact is that India buys more than it sells worldwide. But the real problem is that there is no obvious solution in sight as yet and therefore the question that arises is, for how long can this huge deficit with China be maintained? India’s trade relations with China have had a checkered history and, unfortunately, continue to remain hostage to political developments between the two countries, albeit much less now than earlier. [The author, R.S. Kalha, is a former secretary at the Ministry of External Affairs] [Indo-China trade volume to touch $65 billion during 2016]
Perspectives on Global Development 2017: international migration in a shifting world (OECD)
The 9th Global Forum on Migration and Development meeting was held in Dhaka, Bangladesh (10-12 December) under the overarching theme “Migration that works for Sustainable Development of all: Towards a Transformative Migration Agenda”. This year’s Forum is focused on three main pillars: economics, sociology and governance of migration and development. The overarching theme is based on a ‘SDG Plus’ approach, i.e. to incorporate and advance, in the context of deliverables, a range of migration specific issues. [Various downloads available]
Africa’s climate: Helping decision-makers make sense of climate information (Future Climate for Africa)
The report has 15 factsheets covering specific regions including East Africa, Southern Africa, Central Africa and West Africa and six countries – Malawi, Rwanda, Senegal, Tanzania, Uganda and Zambia. The FCFA, a five-year, £20 million (almost $25m) programme with funding from the UK Department for International Development and the UK’s Natural Environment Resource Council, began in 2014 and has groups of researchers creating climate change data to aid policymaking in Africa. [Mauritius: Commonwealth Climate Finance Access Hub update, Small states’ resilience to natural disasters and climate change: role for the IMF]
Innovative research helps Rwanda raise $9m in tax revenue (IDS)
The study was conducted by the International Centre for Tax and Development in partnership with the African Tax Administration Forum, and in collaboration with the RRA. It was largely funded by UK Aid from the UK government, which highlighted the project as “high impact” in a recent Research Review. Not only did the project help raise additional revenue, it also catalysed innovations in the RRA’s operations (such as automatically personalising communications and expanding the functionality of its SMS platform), helped build research capacity within the RRA, and provided practical policy recommendations. [Various downloads available] [Botswana: BURS adopts new systems to broaden tax base]
President Sirleaf leads high-level ECOWAS delegation to The Gambia
EAC, development partners’ high level dialogue: update
IGAD, EU commit to drought resilience, free movement of persons in IGAD region
Zimbabwe: Diaspora remittances to drop 17% on firming US$
Safaricom in talks with five firms on M-Pesa’s future
‘Pressure on’ for African govts in 2017 in ICT
Tanzania: 2017 Finscope survey gets underway
Calestous Juma, Sujata Bhatia: If we develop Africa’s bioeconomy it will be as transformative for us as digital has been
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EAC must double efforts if Monetary Union is to be achieved, officials say
The East African Community (EAC) is behind schedule as regards establishment of the East African Monetary Institute, a key body meant to carry out preparatory work for the East African Monetary Union (EAMU), officials have said.
When regional leaders approved the EAMU Protocol, in 2013, it provided for gradual establishment of four institutions, including the East African Monetary Institute (EAMI), a transitional institution responsible for laying the foundation for the EAMU.
“We are already lagging behind. It was supposed to be in place by 2015,” said Peter Njoroge, deputy director for economic affairs in Kenya’s Ministry of EAC Affairs.
Establishing the EAMI; initiating the pertinent legal instruments, identifying the host partner state, signing host country agreements and operationalising the institute were activities for 2015.
“However, even the legal framework for establishing these institutions has to be negotiated. We have to go through the normal process of negotiating how it is to be structured, and, you know, issues of negotiations take some time,” Njoroge added.
“That partly explains why we took longer and why we are yet to have the institution in place”.
By 2018, three other institutions: the East African Surveillance, Compliance and Enforcement Commission; the East African Statistics Bureau; and the East African Financial Services Commission, are supposed to be in place, according to the EAMU road map. Other activities to be concluded by 2018 include coordination and harmonization of fiscal policies, as well as coordination and harmonization of the monetary and exchange rate policies during the transition to the Monetary Union.
Luckily, the legal framework for EAMI and the statistics bureau have been developed. Regional ministers of finance who convene under the Sectoral Council on Finance and Economic Affairs cleared the requisite Bills, he said.
But there is a dilemma. The Bills were supposed to be considered by the EAC Sectoral Council on legal and judicial affairs which comprises regional Attorneys General, Solicitors General and justice ministers, but this has not happened.
It is the sectoral council that must ultimately check whether Bills meet the necessary legal requirement for EAC institutions.
Njoroge said: “Unfortunately, our Attorney Generals rarely meet and they have kept on postponing meetings.
Two Bills were supposed to be discussed by the sectoral council in a meeting earlier scheduled last month, but unfortunately the Attorney Generals were not available.
Until the sectoral council on legal and judicial affairs meets, there will be very little that will be happening about the Bills”.
Innocent Safari, Permanent Secretary at Rwanda’s Ministry of Trade, Industry and East African Community Affairs, also acknowledged that the delay “is basically caused by non meeting of the sectoral council on judicial and legal affairs which is supposed to clear the legal instruments establishing EAMU.”
Safari said: “It was last held, up to ministerial level, in November 2014. It has become very difficult for the attorneys general to meet and this has culminated into continuous postponement of this sectoral council.”
Preparatory work unconstrained?
Despite the apparent concern, however, Njoroge remains firm that preparatory work is still going on. The governors of the central banks, he assured, are following up on issues that were supposed to be implemented by the EAMI.
“And, a lot of work is being done. A lot of monitoring mechanism as well as the n implementation of the convergence criteria has been developed. And it is being used in monitoring how we are doing in the implementation of the convergence criteria,” he said.
Other than Burundi, it is said, Rwanda, Kenya, Uganda and Tanzania have prepared the medium term convergence programme and ministers of finance approved.
The approved plans provide a trajectory on how the bloc moves from 2016 to 2021.
The EAMU Protocol lays groundwork for a monetary union within 10 years and allows Partner States to progressively converge their currencies into a single currency.
In the run-up to achieving a single currency, Partner States aim to harmonize monetary and fiscal policies; harmonize financial, payment and settlement systems; harmonize financial accounting and reporting practices; harmonize policies and standards on statistical information; and, eventually establish an EAC Central Bank.
Whenever EAC finance ministers convene, Njoroge said, they also review progress in implementation of EAMU.
The Monetary Union which comprises three sectors – financial; trade; along with investment promotion and private sector development – aims to promote and maintain monetary and financial stability. This is also aimed at facilitating economic integration to attain sustainable growth and development of the region.
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Fourteenth Replenishment of the African Development Fund
Donors agree on US $7.06 billion to the African Development Fund (ADF); increased financing for fragile countries; and scaled up support to the private sector
A global coalition of donors pledged to support the structural transformation of African economies and the African Development Bank’s High Five priorities by agreeing on US $7.06 billion over the next three years to support development projects and programs in the 38 lower income African countries supported by the African Development Fund (ADF).
“We are appreciative of the support of the donors of the African Development Fund, especially in the difficult global economic environment,” said the President of the African Development Bank Group, Dr. Akinwumi Adesina.
“I also appreciate the strong support of our donors for the vision, direction and ongoing reforms of the Bank Group to deliver greater developmental impacts for Africa. The African Development Fund will continue to play a significant role to build resilience for the economies of low income countries in Africa, especially those experiencing conditions of fragility or vulnerability,” added Adesina.
The African Development Fund will shift more resources to support the private sector in the region, even as it helps countries dealing with fragility to address their most pressing developmental challenges. The increased resources devoted to these countries reflect their strong need for concessional funding.
Recognizing the private sector’s key role in the transformation of African economies, the Fund will allocate over US $ 280 million to the Private Sector Credit Enhancement Facility. This Facility will leverage approximately US $ 840 million of private sector financing, of which at least 50% will be in higher risk countries. The Fund will continue to promote financial instruments that crowd in resources from the private sector, such as financial guarantee products.
The ADF is the concessional window of the African Development Bank Group, which contributes to poverty reduction and economic and social development in low-income African countries. The funding will support the five key priorities of the African Development Bank Group: Light up and Power Africa, Feed Africa, Industrialize Africa, Integrate Africa, and Improve the quality of life for the people of Africa. In addition, it will address four critical cross-cutting areas: fragility, governance, climate change and gender.
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East Africa: One-stop border posts, axle-load laws set for January
East African Community laws on the one-stop border posts (OSBPs) and the vehicle axle load control will not take effect until January over a technical lapse.
The laws were due to take effect on October 1 but for a failure to secure the signature of the new Heads of State Summit chairman, Tanzania President John Pombe Magufuli, in time.
Alfred Kitolo, director of infrastructure services at Kenya’s Ministry of East African Community Affairs, said the EAC Council will now have the gazette notice with the two laws signed during the EAC Summit in January, whereupon implementation can start.
The two laws were passed in 2013. Previously, after passage, a law would be moved to each of the five capitals (minus South Sudan which joined recently) to be signed by the president of the each member country.
As the EAC partner states wait for the January meeting to get the gazette notice signed, stop-gap measures are being implemented.
“The delay did not affect business because the partner states were operating OSBPs based on bilateral agreements which were consistent with the OSBP Act,” said Dennis Kashero, the communications director at TradeMark East Africa (TMEA).
The existence of these OSBPs has made it possible for TMEA’s investments in the electronic single window and tracking system to become operational. These mean the Single Customs Territory (SCT) is also working in the EAC.
“As a result of SCT implementation and OSBP clearance process, transit of cargo destined to Uganda from Mombasa has been reduced from 18 days in 2012 to 4-5 days,” said Mr Kashero.
Mr Kashero added that OSBP infrastructure made it possible for immigrations officials to be in one office. Thus, immigration officials are able to clear passengers once and much faster on either side of the border.
The assertion that there are bilateral agreements temporarily working, as the countries wait for operationalisation of the EAC laws is backed by Mr Kitolo. He highlights the case of Kenya, where the national laws that puts the maximum axle load at 48 tonnes have been repealed.
Before the passing of East African Community Vehicle Load Control Bill in 2013, Kenya’s axle load limit was 48 tonnes. But according to Mr Kitolo the vehicle load limit has been increased to the Tanzania and Uganda standard of 56 tonnes.
“It is just that the transporters have not yet adopted the new rules,” says Mr Kitolo.
While the axle load limit appears not to have changed, the existence of OSBPs has eased the movement of goods and services in East Africa. There is however a challenge for non-customs officials. The OSBP project only covered the integration of information and communications technology for customs systems like Asycuda (for Uganda and Rwanda) and Simba (for Kenya).
According to Mr Kitolo, in this case, an immigration official will have to physically move with the documents he worked with across the border, and feed them into the computers of the respective countries.
Lost time
Ronah Sserwadda, the director of trade and integration at Uganda’s Ministry of EAC Affairs added that time is lost when government officials have to ask each other what the other has done.
“We want systems to talk to each other, so that officials from the different countries don’t have to spend time asking what the other did,” she said.
Currently, added Ms Sserwadda, the EAC countries have different border control systems.
But TMEA officials say these challenges won’t be solved by operationalisation of the laws.
According to Mr Kishero, immigration is independent of the OSBP arrangement. TMEA is only handling customs related systems and immigration departments would have to look elsewhere for support.
This is the same problem with the agriculture ministries. Since most of the exports are agricultural products, having agriculture officials actively talking each other would ease trade.
Mr Kitolo said implementation in this area has been slow, the exception being with the traders who cross with goods worth less than $2,000. For such traders, the rules of origin forms are found at the border. Traders with a lot more goods are forced to go to the different capitals of the EAC to confirm the origin of the commodities.
Ms Sserwadda however said that having presidents sign the laws represents acknowledgement, and this can set the stage for starting the implementation and national investment in the case of each partner state.
African policymakers get new, reliable climate data
Climate change in Africa is least-researched and poorly understood, but a new report could help decision-makers get reliable scientific information about it to aid planning.
The report, from Future Climate for Africa (FCFA), has new information that could be used in decision-making, leading to great potential benefits for millions of Africans affected by climate change.
Julio Araujo, FCFA research officer based in South Africa, says that scientific literature on climate change in Africa is significantly low.
The FCFA, a five-year, £20 million (almost $25 million) programme with funding from the UK Department for International Development and the UK’s Natural Environment Resource Council, began in 2014 and has groups of researchers creating climate change data to aid policymaking in Africa.
A statement released by the FCFA on the report last month (9 November) says: “Climate modelling indicates that east Africa is expected to warm in the next five to 40 years, although changes in rainfall are much less certain,” adding that extreme events such floods and droughts could increase in the future.
However, lack of scientific data makes the region to be severely understudied.
According to the report, Southern African economies are exposed to weather and climate vulnerabilities, and sectors such as agriculture, energy, and water management are most effected.
Essential resources, therefore, are at great risk but most government departments still depend on planning based on a three-to five-year time horizons, ignoring that climate projections are based on decades-longer timeframes.
The report explains that past data being applied by ministries could be inaccurate because of wrong assumptions, noting that climate change could negatively impact African economies, especially in the future if it is not addressed.
The report has 15 factsheets covering specific regions including East Africa, Southern Africa, Central Africa and West Africa and six countries – Malawi, Rwanda, Senegal, Tanzania, Uganda and Zambia.
“In order to effectively influence relevant policies in a country or region, you will need to engage with the relevant decision makers at that scale,” Araujo tells SciDev.Net. “Working with decision-makers to produce appropriate information that is usable will lead towards positive changes in the policies and investments, which will in turn benefit the smallholder farmers who are adversely impacted by climate change.”
Daniel Olago, an environmental geoscientist at the Institute for Climate Change and Adaptation, University of Nairobi, Kenya, concurs and attributes low research on Africa’s climate change to challenges such as widely spaced weather stations and missing data, few meteorological scientists in research and a more “chaotic” climate system.
According to Olago, there is a need for reliable scientific information about the continent’s changing climate because sectors such as agriculture and pastoral livestock depend largely on rainfall and support the livelihoods of many people.
“The changing climate is… resulting in changes in the timing, distribution, intensity, and amounts of rainfall during the seasons relied upon for planting or natural replenishment of pasture,” he tells SciDev.Net.
This has resulted in major crop and livestock losses, depressed and variable productivity, with concomitant adverse impacts on people’s livelihoods and well-being, Olago adds.
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Better international co-ordination could lead to more worldwide benefits from migration
Despite growing economic dynamism in many developing regions, international migration flows are not being diverted towards these new alternative poles but rather are concentrating in advanced economies, according to a new OECD Development Centre report.
Perspectives on Global Development 2017: International Migration in a Shifting World shows that while the share of global migrants originating from developing countries has remained fairly stable at around 80% over the last 20 years, the share of developing country migrants heading to high-income countries has jumped from 36% to 51% of the world total. The report documents the impact of migration on developing countries and discusses policies that can help maximise gains from it and foster development.
Various factors influence today’s migration patterns. Notwithstanding rapid economic growth in many developing economies, the average per-capita income differential between developing and advanced economies has increased from around USD 20,000 in 1995 to more than USD 35,000 in 2015, making the latter even more attractive for migrants. While well-being in developing countries has improved in areas like life expectancy, security, health and education, the disparity with advanced countries remains high. The presence of migrant networks (family, friends and community) already living in destination countries facilitates migration, reinforcing the concentration in a few preferred destinations.
Other factors affecting migration patterns include immigration policies, rising education levels in developing countries, and changing demographics and labour market needs worldwide.
The share of the world population living outside their country of birth has risen from 2.7% in 1995 to 3.3% in 2015, an increase of about 85 million people in two decades to roughly a total of 245 million international migrants.
“Migration is a natural result of economic development that can benefit both countries of origin and destination. This trend is here to stay, so it has to work for all countries,” said Angel Gurría, the OECD Secretary General. “Improved co-operation would help developing, emerging and advanced economies better manage migration to the benefit of all, making sure that there are more winners and fewer losers from migration.”
Migration can have both positive and negative impacts on countries of origin as well as those of destination. For the countries migrants are leaving, the loss of labour can relieve pressure in over-crowded labour markets, propping up wages and easing unemployment. Moreover, migrants send home remittances and bring knowledge and ideas as they return. But emigration also can come with economic and social costs, such as labour shortages, a loss of educated and skilled workers and social repercussions for family members left behind. Public authorities in countries of origin need to address such costs while putting in place conditions to maximise the benefits.
Countries of destination can benefit from migration to make up for worker shortages, especially in specific sectors. Immigrants also contribute more than just their labour: they also invest in their host country and help create jobs. Besides, immigrants are less likely than native-born citizens to receive government transfers. However, immigrants are less likely to have formal labour contracts than native-born workers. Public policies in developing countries of destination need to invest in immigrants’ economic and social integration and address the potential impacts that large inflows can exert on the capacity of public services, notably at the sub-national level.
As the number of people migrating is likely to continue to increase, the need is growing for greater international co-operation to manage migration flows as well as a framework for handling refugee crises – which are a separate and smaller phenomenon than economic migration. Even with the current crisis, refugees represent less than 10% of total migrants worldwide.
Better international co-operation should span areas such as the protection of migrants’ rights, visa agreements, recruitment and remittance costs, as well as qualifications and skills partnerships.
To reach these ambitious objectives, the successful inclusion of migration-related targets in the Sustainable Development Goals is a key step towards establishing commitments that can be monitored multilaterally, regionally and nationally. The United Nations’ proposed Global Compact for Safe, Orderly and Regular Migration is a positive development towards promoting more effective international co-operation. The Global Compact on Refugees will be another important component towards creating a robust framework to deal with future refugee crises.
Highlights from the report were discussed on 11 December 2016 at the Global Forum on Migration and Development in Dhaka, Bangladesh during a session on the future for international migration in a shifting world, with the participation of experts from the OECD Development Centre, including Federico Bonaglia, Deputy Director.
Global Forum on Migration and Development (GFMD)
The Global Forum on Migration and Development is a series of activities throughout the year that culminate in a week-long programme of government and civil society meetings that have been taking place since 2007.
The Forum emerged from the first UN General Assembly High Level Dialogue on International Migration and Development in 2006, as a process outside of the UN system where policymakers and stakeholders from countries all over the world come together to discuss about migration and development.
To this day, it remains the only global mechanism available to discuss migration and development with the full range of actors involved in migration – from grassroots organisations all the way to national governments and international organizations.
The 9th meeting was held in Dhaka, Bangladesh on 10-12 December 2016 under the overarching theme “Migration that works for Sustainable Development of all: Towards a Transformative Migration Agenda”. This year’s Forum is focused on three main pillars: economics, sociology and governance of migration and development.
The overarching theme is based on a ‘SDG Plus’ approach, i.e. to incorporate and advance, in the context of deliverables, a range of migration specific issues, ideas and elements that have already been recognized inter alia in the two UN General Assembly High level Dialogues on International Migration and Development (2007, 2013) and in various other dialogues/platforms, global consultative processes and outcome documents over the past decade.
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Innovative research helps Rwanda raise $9m in tax revenue
In North America and Europe, substantial research has been conducted to evaluate the effectiveness of various communication strategies for improving the compliance of taxpayers. For the first time, a similar study has been carried out in Africa, generating important research findings and helping to raise an additional $9 million USD in tax revenue for Rwanda.
On the whole, studies in the West have found deterrence messages about the penalties taxpayers will face if they do not declare or under-declare their income to be the most effective. In contrast, the new study reveals that Rwandan taxpayers are generally more responsive to friendly messages, either gentle reminders of deadlines or information related to the importance of tax revenues for funding public services.
The effectiveness of non-deterrence strategies is good news for low-income countries, where enforcement is severely limited by lack of financial and human resources. It also fits with the Rwanda Revenue Authority (RRA)’s vision of a modern tax administration, as Commissioner General Richard Tusabe said at the research presentation in Kigali on Monday, “Encouraging voluntary compliance is at the core of the RRA’s customer-oriented approach.”
The study also found that non-traditional and low-cost channels of communication, such as emails and SMS messages, were very effective in the Rwandan context. This is also an important finding for low-income countries, which must find cost-effective ways of generating revenue.
The study was conducted by the International Centre for Tax and Development in partnership with the African Tax Administration Forum, and in collaboration with the RRA. It was largely funded by UK Aid from the UK government, which highlighted the project as “high impact” in a recent Research Review. Not only did the project help raise additional revenue, it also catalysed innovations in the RRA’s operations (such as automatically personalising communications and expanding the functionality of its SMS platform), helped build research capacity within the RRA, and provided practical policy recommendations.
By using the RRA’s administrative data and experimental methods, the project is not only ground-breaking, but also highlights the importance of embedding rigorous evaluation in the design and implementation of new policies. As Mick Moore, the CEO of ICTD said, “Governments are constantly experimenting with new measures to improve tax compliance, but often don’t know which ones work. This kind of research can help them answer those questions so they can adopt the most effective strategies.”
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EAC borrows leaf from Japan, Vietnam for automotive industry
East African Community experts have concluded consultative missions in Vietnam and Japan, a benchmarking exercise aimed at borrowing a leaf on how the Asian nations developed their automotive industries.
According to Jean-Baptiste Havugimana, the East African Community (EAC) director for productive sectors, experts from partner states and the Secretariat travelled to Tanzania, Kenya and Uganda “to compile baseline information on the status of automotive industry,” and to Vietnam and Japan for a benchmarking exercise.
“These missions took place from September 20 to October 7. Thereafter, the team will visit other countries in East Africa (Burundi, Rwanda) for in-depth analysis, and to others in Africa such as Ethiopia, Nigeria and South Africa for benchmarking,” Havugimana told The New Times at the weekend.
In October, a three-day meeting of a broad spectrum of stakeholders and experts from the automotive industry, finance, customs and trade sectors as well as vehicle manufacturers from EAC was held in Nairobi, Kenya.
It was aimed at reviewing and validating progress report on the comprehensive study on automotive industry.
The stakeholders would then provide inputs toward its finalisation and inform the EAC and potential investors on policy options and modalities to promote and develop the motor vehicle industry.
The initial benchmarking study missions revealed that usage of local content was one of the drivers for the growth of the automotive sector.
“This is an area that EAC needs to explore further and adopt appropriate measures that will consequently spur the development of the sector,” reads part of an EAC statement.
The experts also noted the need for policy coherence within different sectors for the progress of the automobile sector.
‘Need for volumes’
It was observed that for the industry to grow, there is need for volumes that can lead to economies of scale and, therefore, a regional approach to develop the sector and leverage on the EAC, Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Community (SADC) tripartite free trade area.
The EAC industrialisation policy and strategy (2012-2032), now under implementation, aims at transforming the bloc’s manufacturing sector through higher value addition and product diversification based on comparative and competitive advantages of the region.
In 2015, the 16th Ordinary EAC Summit directed the Council to study modalities for promotion of motor vehicle assembly in the region and to reduce importation of used motor vehicles from outside the Community.
The 17th Ordinary Summit, in March, took note of progress and the roadmap towards finalisation of the comprehensive study on EAC’s automotive industry.
It directed the Secretariat to expedite the process and report to the 18th Ordinary Summit, which is expected next month.
In line with the policy directives, the EAC Secretariat, with financing from Japan International Cooperation Agency (JICA), commissioned a study to be finalised in April next year.
A draft progress report outlining the initial policy issues emerging from the benchmarking missions was prepared.
During the benchmarking missions, Japanese academicians shared their global best practices of promoting the automotive industry in the region, while the EAC delegation made presentations on the status and challenges facing the automotive industry in their countries.
Accordingly, it was observed that the motorcycle sector is growing rapidly in across EAC. With the rise in number, it was noted, the sale price drops due to economies of scale.
The EAC Secretariat and JICA say, along with the increase of production volumes, local production is gradually initiated for parts and materials that meet the effective minimum production scale.
In addition to complete build-up unit sales itself, they say, demands are increased for repair services.
The motorcycle sector is, thus believed to offer opportunity for rapid development of the region’s automotive industry.
According to Richard Ndahiro, a regional financial services professional, for an EAC auto industry to take off, a regional approach to the manufacturing sector is the right way to go so as to reach the economies of scale that allow competition with established global manufacturers.
“On the demand side, key drivers for uptake will be: quality of the automotives. The perception that local products are of lower quality remains a barrier,” Ndahiro told The New Times.
“Access to asset financing is key to unlock affordability for a larger segment of EAC population to acquire these automotives.”
Potential boost to agriculture
The Rwandan economist added that the bloc’s automotive industry would be “a big boost in the mechanisation of agriculture and other productive sectors in the EAC.
For example, he said, by providing automotive tools and equipment that are well customised to the “realities of our rural setting” and farmers.
He said the ability to move people, goods and services across the region, remains a big huddle partly due to poor infrastructure, “which is now being tackled,” but also because vehicles remain a luxury.
After noting the potential since Kenya and Uganda already have promising motor vehicle assembly plants, it is said that EAC leaders decided to nurture the automotive industry in the Community.
Their objective is to phase out imported old vehicles so that new ones are assembled in the region thus creating jobs and cutting on pollution from the imported used vehicles.
The automotive industry, one of the world’s most lucrative economic sectors by revenue, is a wide range of companies involved in design, development, manufacturing, marketing, and selling of motor vehicles.
Kenya, the region’s leader in motor vehicle assembly, boasts three plants: Kenya Vehicle Manufactures, Association Vehicle Assemblers, and General Motors East Africa Limited, which focus on assembly of pick-ups and heavy commercial vehicles.
Uganda’s Kiira Motors Corporation this year unveiled its Kayoola prototype electric bus.
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tralac’s Daily News Selection
The selection: Monday, 12 December 2016
Kenya’s Amina Mohamed: It is time to unleash Africa’s full potential
Starting tomorrow: In Brazzaville: UNECA-convened meeting on the implementation of the African Mining Vision in Central Africa; In Ouagadougou: WAEMU Commission and Ferdi conference Regional integration in West Africa – progress and challenges
New uploads from the recent UNU-WIDER, SA National Treasury conference: presentations, poster sessions
African Continental Free Trade Area: policy and negotiation options for trade in goods (UNCTAD)
In the case of the CFTA, the current timetables and time targets may need to be reviewed. This basically stems from the fact that African economies are at such level of variation in terms of development, macro-economic policy regimes, infrastructural development, and others which may not allow the conclusion of the negotiations in 2-4 years. This will certainly require a serious introspection by the Heads of State and Government at their earliest convenience. Given all of the above, it may be more realistic to expect the CFTA negotiation in goods to take about 2-4 years to complete. This time period would be more in tune with experience and best practices from the field. [The analyst: Magdi A. Farahat]
‘Regional banks are vital to connect Africa to the global economy’ (City Press)
An ever-increasing regulatory burden has severely constricted the global banking sector, with dire consequences for trade flows and development in emerging markets. Deputy chief executive of Barclays Africa Group, David Hodnett, said that “There is no doubt in my mind that if regulatory reform continues to follow the trajectory we have seen so far, there will be no banks left that are truly global.” With the pull back of global banks in the region, Hodnett said regional banks would need to become a bigger feature on the financial services landscape in Africa, as these are vital to ensure the continued connectedness of Africa to the global economy.
SADC Brokers discuss ways to boost cross border trading (Namibian Economist)
The Committee of the SADC Stock Exchanges (CoSSE) hosted its inaugural SADC brokers’ networking session, at the Johannesburg Stock Exchange [last] week. Vice Chairman of CoSSE and the CEO of the Namibian Stock Exchange Tiaan Bazuin, who oversaw the session said: “Now, the idea is to have all SADC brokers signing associate agreements with brokers in each SADC country with the aim of trading each other’s stocks; they would have to share information and allow foreign investors to have a broader range and view of the happenings in other African markets. This is the first step towards more harmonisation, regionalisation and integration. It is about how to interconnect markets and how to grow other African markets outside the massive South African markets. Most importantly it will help us to keep African capital in Africa instead of shipping it off overseas,” he added.
Donor coordination and transport in West Africa: towards people, partnership and prosperity? (ECDPM)
West Africa is not to be left behind, with a recent workshop in Abidjan, Côte d’Ivoire about moving “Towards a more coordinated approach to corridor development in West Africa” and a further donor meeting on how to improve their coordination around trade facilitation in Accra last week. In the swirl of thoughts and debates following those discussions, four key points keep coming back that might help shape further progress in ECDPM work and beyond: [The analyst: Bruce Byiers]
How Nigeria’s economic challenges affect West Africa – ECOWAS (Premium Times)
The depreciation of the naira and other economic challenges affecting member states have slowed down ECOWAS economic integration and the adoption of a single currency, the News Agency of Nigeria reports. This was one of the main issues discussed at the technical meeting of the ECOWAS Macroeconomic Policy Committee on Multilateral Surveillance in Abuja on Thursday. The out-going Chairperson of the committee, Ommy Sar Ndaiye, said that it was pertinent for member states to develop strategies to address the prevailing economic challenges. The ECOWAS Commissioner, Macroeconomic Policy and Economic Research, Mamadou Traore: “The deadline for the adoption of single currency is fast approaching. This committee should set an agenda to look into the progress made so far and identify challenges that may hinder its smooth operation.” [Dip in Nigeria’s currency a blow to ECOWAS agenda]
Automobile import ban through land borders: threat or trophy? (Nigeria Today)
On Monday, December 5, the federal government announced the prohibition of importation of vehicles, new and used, through land borders. The statement said there was a presidential directive restricting all vehicle imports to Nigerian Sea Ports only and the order would take effect from 1 January 2017. According to Adeniyi: “The restriction on importation of vehicles follows that of rice, whose imports have been banned through the land borders since April 2016. Importers of vehicles through the land borders are requested to utilise the grace period up till December 31, 2016 to clear their vehicle imports landed in neighbouring ports.” The government may have, with this restriction, acceded to one of the requests made by Nigerian Automotive Manufacturers Association to ease their operations.
Nigeria’s ban on ‘tokunbo’ cars, rice cripples Benin economy (New Telegraph)
The Federal Government’s ban on rice imports to Nigeria through the land borders has taken a heavy toll on the economy of neighbouring Benin Republic as its seaport, Cotonou Port, patronised over the years by Nigerian and Asian importers in their bid to either totally evade Customs Duty or avoid the high port charges by Nigerian seaports, has seen a drastic reduction in its use. The multi-billion dollar imports which the port normally handles, have always either been smuggled into Nigeria or entered into the country through approved border stations, but the port charges, freight forwarding charges and the labour charges go to Benin Republic, making the country parasitic on Nigeria as 95% of the cargoes the Cotonou Port handles in a year is consumed by Nigerians.
Experts to Buhari: Don’t succumb to blackmail on EPA treaty (Daily Trust)
A coalition of livestock rearer, farmers and other agricultural experts have urged President Muhammadu Buhari not to succumb to pressures and blackmails on the contentious Economic Partnership Agreements between the EU and ECOWAS countries. They made the call in Abuja at a stakeholders meeting jointly organised by the Association for the Promotion of Livestock in the Sahel and Savannah (APESS), the Confederation of Traditional Livestock Organisation (CORET), the Network of Breeders’ Organisation and Pastoralist in Africa ‘Reseau Billital Marrobe’ (RBM) and the Network of Farmers’ and Producers Organisations in West Africa (ROPPA).
5th Ministerial Retreat of the Executive Council: statement by Dr Nkosazana Dlamini Zuma
As citizens become more aware of their rights, including the programmes of Agenda 2063, we are likely to see more such mobilization around these aspirations. On governance, as we implement our national, regional and continental frameworks, we are also rebuilding the planning and implementation capacity destroyed primarily during the dead decades of structural adjustments. This process is uneven, but we must build the capacity of our institutions as we implement our programmes. The 5th Retreat will also consider the draft Commodities strategy, looking at oil and gas, minerals and agricultural products, so that these natural resources contribute towards job creation, industrialization, our collective food security and transformation.
Tanzania: Coal debate lingers despite Dangote’s assurance to JPM (The Citizen)
The owner of the Mtwara-based Dangote cement factory, Mr Aliko Dangote, says he is against his company’s decision to import coal and gypsum for use at the factory. “We will utilise whatever we have locally, and already we have been assured of getting the amount of coal that we want. I also gave the President my firm commitment for further investments, and we are looking into other areas like agriculture and coal,” the Nigerian billionaire said after holding talks with President John Magufuli at State House on Saturday. President Magufuli reiterated at the meeting what his ministers had been saying in the wake of the controversy surrounding cement manufacturers’ energy needs. “It is unthinkable for the country to allow the importation of coal while quality stocks that can last for over 200 years are available,” he said. However, Mr Dangote’s assurance did little to dismiss concerns on the quality and quantity of local coal, which were recently revealed by a government-commissioned report. [Dangote, Tanzania government reach natural gas supply deal]
Mozambique Economic Update: Facing hard choices (World Bank)
According to the report, the policy response has picked up pace in the second half of 2016. A revised budget for 2016 was a first step in adjusting the fiscal framework to the new realities. The Central Bank of Mozambique, stepped-up its monetary tightening regime. There are now signs that pressures on the external position are easing as imports have declined and the metical has remained relatively stable since October 2016. In addition, the initiation of an independent audit of the Empresa Moçambicana de Atum (EMATUM), Mozambique Asset Management (MAM), and Proindicus loans is a key step in rebuilding confidence. However, a sharper focus on fiscal adjustment in the medium term is still needed to restore fiscal sustainability. The Economic Update notes that Mozambique’s gas production prospects shape expectations for a recovery in growth to 6.6% by 2018. In the meantime, existing megaprojects are showing resilience and may benefit from a boost in the near term from an improving outlook for key commodity prices.
Spar Zambia to be sold off (Lusaka Times)
Innscor Africa Chief Executive Officer Julian Schonken said on Wednesday during the presentation of the company’s results that he expects the selloff Spar Zambia to be concluded by end of this year. Mr Schonken said: “Once the disposal of Zambian operations is concluded, we are essentially a Zimbabwe centric. We do need to look abroad but before we do that, we have a lot of work to do in Zimbabwe. We have had too many instances of good Zimbabwean businesses ourselves included outside out in the region and really battling because educational levels are completely different, the infrastructure is not what we are used to, there is bureaucracy. So we are going to be careful about how we do business before we go to other geographies,” Mr Schonken said.
Falling exports take their toll on SA’s current account deficit (Business Day)
SA’s current account deficit widened more than expected in the third quarter, as the value and volume of exports fell amid weaker output data from the productive sectors of the economy. The surplus on the trade account in the second quarter — when GDP growth also lifted to a surprise 3.5% — swung to a small deficit in the third quarter, which led the current account deficit to expand to 4.1% of GDP, the Reserve Bank said on Friday. That is up one percentage point from a deficit of 3.1% in the second quarter, and compares with economists’ forecasts of between 3.3% and 4% of GDP.
Rwanda’s dairy exports generated over Rwf9bn in 2016 (New Times)
Rwanda’s earnings from export of dairy products increased from $85,000 in 2012 to $11.5 million in 2016, Rwanda Dairy Competitiveness Programme II Impact Report shows. By 2016, according to the report, 78,000 additional litres of milk were being processed per day in Rwanda, helping meet a growing need for milk used in value added products. This move brought the quantity of milk processed daily to 110,000 litres. The report was released last week during the closure of dairy programme which ran from 2012 to 2016. [Kenya: Costly levies on farm produce open window to cheap imports]
Study shows food safety regulations will promote agriculture exports (AfDB)
Despite concerns over acceptance of African agricultural produce in the EU, a study on Tuesday revealed that the adoption of food safety regulations will promote inter-regional trade of agriculture commodities to the EU. The study, “Food safety regulations and export responses of developing nations: lessons from South Africa and Namibia’s fresh and frozen fish exports to the EU” was presented by Shingirirai Mashura, a Certified Economist from the University of Zimbabwe. Mashura delivered the paper during a session on agricultural trade, at the ongoing 11th African Economic Conference in Abuja
IFAD’s Kanayo Nwanze: Africa is squandering its potential
David Bennett: African agriculture needs trade not aid
Uganda: Experts warn government on Tripartite pact
AU to publish “The African Factbook”
Madagascar: World Bank Group commits $1.3bn support
Overview of developments in the international trading environment: annual report by the WTO Director-General
India’s trade grows 10% in Q3, currency ban to hit agri exports: Maersk Line (The Hindu)
From Bhutan’s red rice to goat meat from Mozambique: unique products can boost exports from the poorest countries
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African Continental Free Trade Area: Policy and negotiation options for trade in goods
Introduction
Trade has been the motor of economic, social and political integration of African countries for many centuries prior to the establishment of Africa’s first regional body, the Organization of African Unity (OAU), in 1963. The OAU strived towards boosting intra-African cooperation and integration in the economic field at the continental level. It saw the formation of several regional economic communities that were created first with a view to consolidating the economic space of a particular region to harness potential benefits of such integration; and secondly, these would serve as the pillars or building blocks for eventual formation of a continental economic community. In 1980, the OAU adopted the Lagos Plan of Action for the Economic Development of Africa 1980-2000, articulating a regional development plan for Africa that included the formation of an African Common Market.
While several programmes and institutional creation proliferated, the level and rate of implementation of trade integration programmes of many regional economic communities (RECs) faltered. Weak implementation at the RECs level meant that efforts towards building up the continental community also wavered. With a view to reviving and launching the continental integration project, the OAU Abuja Treaty Establishing the African Economic Community was adopted in June 1991. It articulated the formation of a continental free trade area as a stepping stone toward the realisation of the African Economic Community. Momentum towards implementing this objective gathered speed with the formation of the African Union (AU) in 2002, replacing the OAU. AU member States paid greater attention to continental integration. In fact, Article 3 in the AU’s Constitutive Act, establishes that the third objective of the AU is to “accelerate the political and socio-economic integration of the continent”.
Subsequently, the AU decided to concentrate the process of fostering continental economic integration through trade integration. At the 2012 AU Summit, Heads of State and Government adopted a Decision on the Establishment of a Continental Free Trade Area (CFTA) by the indicative date of 2017 and endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven areas of cooperation namely trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration. Then in June 2015, at the twenty-fifth Summit of the African Union, held in South Africa, African Heads of State and Government agreed to launch negotiations on the creation of the CFTA by 2017 through negotiations on the liberalization of trade in goods and services. This initiative presents major opportunities and challenges to boost intra-African trade.
In order to multiply the benefits of the CFTA and promote developmental regionalism in Africa, a comprehensive vision of trade and development needs to be in place. Expanded markets for African goods and services, unobstructed factor movements and the reallocation of resources should promote economic diversification, structural transformation, technological development and the enhancement of human capital. The CFTA must be ambitious in dismantling barriers and reducing costs to intra-African trade and in improving productivity and competitiveness. It must provide for governments to involve nonstate actors, especially private sector, civil society and academia, in the discussions on the intent, content and design of CFTA so that the resulting agreement can create opportunities for businesses to exploit and bring about benefits to ordinary citizens.
Key Considerations for Accelerated CFTA Negotiations
The Negotiating Mandate
Usually the first step to be addressed by States in any negotiating process leading to an FTA is for the countries to secure a negotiating mandate, through national consultative processes, and convey that to their negotiators. This mandate describes the objectives, scope and content of the agreement from the perspective of the country or regional body. In most cases, the initial mandate is defined fairly broadly since economies usually aim for comprehensive FTAs. In any case, the mandate informs the negotiators whether they can negotiate on goods, services and investment, and what their broad objectives in each of these areas should be.
Once the negotiations are under way and the ambit of possible outcomes becomes clearer, these negotiating objectives are then often refined through the repeat of the mandate process. In the course of a complex negotiation, this process may be repeated several times. In this way, the negotiating mandate gets redefined from time to time. Sometimes it gets broader as the negotiations proceed. What seems difficult at the start can turn out to be quite manageable later on. Most countries have processes of this kind, though the details will differ.
The national consultations are particularly important in gathering the views and interests of non-States actors such as the private sector, civil society and academia and workers. The non-State actors are, by virtue of their status, are not included in trade negotiations processes which are mainly intergovernmental (or government-to-government). Hence the importance of national consultative processes to garner the views of non-States actors is a prerequisite for them to own the outcomes of negotiations. Likewise, the negotiations conducted among member States could involve occasions or platforms where non-State actors are informed of progress made and provided an opportunity to provide suggestions on the draft agreement.
The Negotiating Team
The negotiating mandate is promoted by a country negotiating team that is assembled by the Government body responsible for trade negotiations. This can be done in more than one way. However, the overall approach taken by States tends to show many similarities. For example, they usually appoint a chief negotiator, drawn from the department or ministry responsible for that country's trade negotiations. This person then becomes responsible for progress on negotiating the entire agreement. He or she may also be the main conduit for contact with ministers, senior representatives of the private sector and heads of nongovernmental and intergovernmental organisations.
Whether the chief negotiator also takes charge of one or more subject areas, such as market access for goods, will depend on the magnitude and complexity of the negotiations and on the customary way of the country's management of negotiations. It is usual to appoint a deputy chief negotiator, especially when it is clear that the negotiations will be substantial.
The chief negotiator is usually assisted by lead negotiators who will look after one or more of the chapters of the proposed agreement. Services and investment sometimes have separate lead negotiators, partly because of the complexity of the subjects, and partly because domestic responsibility for these areas often does not lie with trade ministries. Services negotiations especially may impinge on the responsibilities of many ministries, such as education, justice, finance, communications and transport. An issue to be considered, however, is that an FTA is an instrument promoting international economic relations, and its contents have to be approached from that perspective.
National ministries in most cases have well-established channels of communication with the private sector which can be used to support the efficient conduct of the negotiations. No two negotiations are the same, and the number of lead negotiators and their responsibilities will depend largely on the substance of the negotiations.
Preparing for the negotiations and ensuring that positions are understood and the right arguments developed requires a major effort. This places considerable demands on the chief negotiator and his or her communications skills. Negotiating teams will need to be arranged around the lead negotiators. These teams usually consist of experts in their areas as well as generalist officers. The number and composition of these teams will probably change during the negotiations. This is because negotiations on some chapters finish early. In other cases, the teams have to deal with quite specific issues which call for the use a different kind of expert.
Regardless of the necessity of such changes, a negotiating party should aim to keep the core members of negotiating teams unchanged as much as possible. This applies especially to leaders. Their ability to recall the negotiating history of the agreement will always be welcome, and at times it will be essential. The chief negotiator’s position should change only when this becomes absolutely unavoidable. Achieving this desirability is made easier by the fact that free trade negotiations are typically concluded within two to four years, or longer.
Another important aspect of assembling a team is the need to ensure that it has funding for the conduct of the negotiations. Money will be required for intensive domestic and international travel by sometimes quite large teams. It may also be necessary to hire negotiating venues and to employ interpreters and translators. The budget cycle in most negotiating parties is, however, usually one year only. If this is the case, the negotiators must therefore ensure that their requirements are included in relevant funding bids.
In the case of regional FTAs, like the CFTA, which is supported by the AUC, there is need within the Commission to set up a CFTA negotiation team with a lead official to support the Commissioner of Trade and Industry in mobilizing the Commission to support member States in the negotiations. Such a structure already exists in the AUC which is an important achievement.
The Negotiating Process
Most negotiating processes consist of plenary (formal) meetings and many informal meetings. The plenary is normally used to adopt decisions and to keep the various teams informed of progress in other parts of the negotiations. Plenaries are not suitable for resolving difficult problems, but they can be used to explain to all participants in the negotiations where difficulties remain and what are the possible solutions to address them. The plenary discussions promote transparency of the negotiations. Plenaries could accordingly be kept focussed and take place as and when the need for arises. Plenaries occur less frequently than informal meetings.
It is usually much more convenient to have the specific of issues of negotiations discussed in small groups of countries with a real interest in resolving them. Many issues in the negotiations will be difficult. Some will arise in the first meeting, and remain till the end of the negotiations.
Adequate time should be provided to negotiators to produce a quality agreement. If the timetable is too compressed, the danger exists that some important issues will not be considered adequately. The other side of the coin is that the expectation of ample time tends to encourage a feeling that there is plenty of time to negotiate hence delays occur. Experience has shown that the important negotiation issues to all parties need to be addressed for negotiations to proceed smoothly to a conclusive end with a balanced agreement.
As noted above, in addition to the formal negotiations process, opportunities need to be provided for involving non-state actors to inform negotiators of their concerns and interest.
The Negotiation Content
The parties to the negotiations usually start with developing a reasonable timetable for the negotiating sessions and a set of principles which will broadly govern the conduct and content of the negotiations. These principles have to be detailed enough to offer genuine guidance. At the same time, they have to be flexible enough to be able to accommodate easily any changes to plans may have been formed and adopted.
Where there is a disagreement over including an issue in the negotiations, it is almost invariably better to start with agreeing that everything is on the table. It may well be that in some cases agreement to complete negotiations on a given issue is in the end not possible, and that the parties then decide to leave things for resolution at a higher (political) level. Such a body is the High-Level African Trade Committee (HATC) in the case of the CFTA. That decision should, however, be made only after other available options have been explored thoroughly. This is where chief negotiators play a key role.
The CFTA as a “supra-regional” agreement
In many ways the CFTA is to be an innovative and ground-breaking supra-national and supraregional arrangement. It is a mega-regional agreement of over 50 countries. It is thus proposed that a more direct approach is applied to the CFTA negotiations; an approach that would, in some ways, start from a clean slate, with a clear directive as to the level of ambition. This is particularly important in view of the results of trade impact studies reviewed previously.
Given the short time available for negotiating and implementing the CFTA, within the indicative date of 2017, it is proposed that:
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The negotiating mandate issued by the AU Heads of State and Government could endorse a comprehensive and deep liberalization agreement covering substantially all the trade in goods, trade in services, and complementary supportive policy areas. The mandate should include the removal of customs/border obstacles, including the adoption of unified customs documentation and clearance process based on the single window approach. It should institute the enhancement of trade facilitation measures as an essential back-up support to liberalization of trade.
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The mandate should also address specifically technical barriers to trade and sanitary and phytosanitary barriers. Greater convergence on these policies will help to mollify their potential trade distorting effects, and instead bring about a positive impact on intra-African exports in agriculture, food and industrial products.
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Services trade in the CFTA has to be included from the start, not only to allow for potential trade-offs in market access all parties in agriculture and industry, but also to allow a more efficient use of the continent’s resources in critical areas such as road building, financial services, transport and logistics, and ICT. It is also important to include services in the CFTA, to facilitate further work on the issue of labour mobility within the continent.
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In order for the CFTA to play a deep economic integration role, African states should look into incorporating investment and competition regimes into the mandate. This will provide not only clarity for the relevant national business communities, but will also provide a safety-net against potential negative abuses of the CFTA by transnational corporations,
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As RECs would form the basic pillar from which the CFTA would be constructed, the inclusion of RECs in CFTA negotiations is necessary.
Inclusiveness and Transparency of Negotiations
Citizens, businesses and organisations outside the government will be affected by the CFTA. It is, therefore, important that in line with best practices in the field, the negotiating mandate should include direction on the processes of inclusiveness and transparency. This is to guarantee the maximum engagement by all parties affected by the negotiation, and minimise potential resistance by them and by parliaments at the conclusion of negotiations. Some of the bodies that will have to be consulted or may wish to be consulted, and who is included in negotiating teams depends on the conditions in a particular country. The following are some, in alphabetical order, that should be consulted:
- Agricultural producer and farming associations.
- Chambers of commerce and industry.
- Consumer bodies.
- Education and training providers.
- Importer and exporter associations.
- Specific-industry associations.
- Intellectual property associations.
- Professional associations.
- Standard-setting bodies.
- Parliaments, their committees and members.
- Media and information resources.
- State/Departmental/County institutions.
- Special-interest NGOs, particularly those working in the field of environment, labour rights, and women/youth.
- Academia.
The range of groups approached in this way will obviously depend on the countries concerned and the type of agreement envisaged. If, for example, the aim is an agreement limited to goods, the range of services providers that need to be consulted is narrower than would be the case in an agreement covering goods and services. But in the case of a genuinely comprehensive agreement, as is the case with the CFTA, the range of possibly interested organisations and individuals will be large, and will require an important effort to manage.
It is also advisable that a public-relations/media/information effort is deployed throughout the negotiation process, with frequent updates to keep interested parties “in the loop”. It also requires that a feedback process is instituted to allow negotiators to have a “feel” for potential pressures from local parties.
Indeed, and in the CFTA context, the African Trade Forum, one of the organs of CFTA architecture adopted by the AU Summit, is already operational. At its Second Session that was jointly organized by the AUC and UNECA in Addis Ababa in September 2012, it made important recommendations on the implementation of the consultative processes within the CFTA that are line with the proposals above.
Leadership Roles and the AU
The AU and its secretariat, the African Union Commission, have been given the role of managing the CFTA process, with little available resources; human, financial and legal. The AUC is thus both the organiser and the arbiter of technical success in the CFTA process, and thus substantial new resources will need to be furnished by member States and development partners to the AUC. The AUC in turn will have to review its current structures to address the expected new load of managing the CFTA negotiations.
This issue becomes of great importance in view of the proposed oversight structure approved by the Heads of State and Government in the “Strategic Framework for the Establishment of the CFTA”. The HATC, being composed of Heads of State and Government, is not expected to be available on a regular-enough basis to resolve expected conflicts in the negotiations. This role will fall, by default, to the AU’s Trade and Industry Commissioner and the secretariat team; the latter requiring substantial support from new, experienced and knowledgeable personnel.
Retaining Policy Space for Regional Development
There is no doubt that intra-African movement of goods and persons have been ongoing for many years, and that they have produced new production and trade structures, built over a period of time. It is also clear that these efforts predate the creation of the current RECs, and that these structures, mostly trans-border in nature and built on traditional relations among families and tribes, are a positive building block for regional integration efforts.
The entry of the CFTA will have to provide some “policy space” and special and differential treatment at the regional level to allow these structures to be accommodated by its rules, but also to allow CFTA-plus regional efforts to continue. Indeed, it is hoped that this extra-REC integration could pave the way for the entry into force of a real economic community of African States. Many of projects at the level of RECs may or may not be fully part of the larger pan-African projects, but can add a critical sub-regional development, integration and peace-making component which benefit the AU.
This may be particularly useful for trans-state agriculture and irrigation projects, as well as industrial and infrastructure ones. The latter must, however, benefit from a harmonisation effort in macro-economic policy reform, so as not to create distortions in the private sector investment markets.
Negotiations Timetables and Targets
FTA negotiations can last from two to four years or more. The WTO Doha Round of negotiations, which includes further liberalization of trade in goods, started in 2000 and has not yet concluded in 2016. The Trans-Pacific Partnership agreement took about 10 years to negotiate and though concluded, it remains to be ratified by all parties. Negotiations on the Free Trade Area of the Americas took over 9 years and ended in failure. The negotiations of ambitious South-South FTA indicate a minimum of 4-5 years of negotiations. So negotiations may take longer due to the level of ambition of the original negotiating mandate, and the number of countries involved.
In the case of the CFTA, the current timetables and time targets may need to be reviewed. This basically stems from the fact that African economies are at such level of variation in terms of development, macro-economic policy regimes, infrastructural development, and others which may not allow the conclusion of the negotiations in 2-4 years. This will certainly require a serious introspection by the Heads of State and Government at their earliest convenience. Given all of the above, it may be more realistic to expect the CFTA negotiation in goods to take about 2-4 years to complete. This time period would be more in tune with experience and best practices from the field.
This report was prepared for UNCTAD by Mr. Magdi A. Farahat under the framework of a Development Account Project on “Strengthening Capacities of African Countries in Boosting Intra-African Trade”. The views expressed in this publication reflect solely the views of the author.
Previous reports in the series are available below:
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Mozambique Economic Update: Facing hard choices
Following three consecutive quarters of slowing economic activity in 2016, Mozambique’s GDP growth for 2016 is estimated at 3.6 percent down from 6.6 percent in 2015.
The country is navigating a complex crisis. An ongoing economic downturn, brought about by low commodity prices, drought, and conflict, has been compounded by the fallout from the discovery of hidden debts in April 2016, according to the second edition of the Mozambique Economic Update (MEU): Facing Hard Choices, released today.
High public debt levels, coupled with the revelation of $1.4 billion in previously undisclosed borrowing, make Mozambique one of the African countries with the highest public debt-to-GDP ratios. The country has faced successive downgrades by credit ratings agencies, which have further weakened investor confidence. Foreign direct investment and exports are declining, projected to fall by 17 percent and 8 percent respectively in 2016. Fiscal consolidation and monetary tightening are also contributing to the slowdown in growth.
The metical depreciated by 42 percent against the US dollar in the first ten months of the year, faring worse than other African commodity exporters including Angola and Nigeria. The weaker metical accelerated the pace of inflation, which reached 25 percent in October, making a higher cost of living the symptom of the downturn most acutely felt by Mozambicans.
“The increase in prices is particularly sharp for the poor. Since April, inflation is estimated to have been approximately 9 percent higher for the poorest 40 percent of the population than for the average Mozambican,” said Shireen Mahdi, World Bank Senior Country Economist for Mozambique.
Rebuilding confidence and restoring stability
According to the report, the policy response has picked up pace in the second half of 2016. A revised budget for 2016 was a first step in adjusting the fiscal framework to the new realities. The Central Bank of Mozambique, stepped-up its monetary tightening regime. There are now signs that pressures on the external position are easing as imports have declined and the metical has remained relatively stable since October 2016.
In addition, the initiation of an independent audit of the Empresa Moçambicana de Atum (EMATUM), Mozambique Asset Management (MAM), and Proindicus loans is a key step in rebuilding confidence. However, a sharper focus on fiscal adjustment in the medium term is still needed to restore fiscal sustainability.
The Economic Update notes that Mozambique’s gas production prospects shape expectations for a recovery in growth to 6.6 percent by 2018. In the meantime, existing megaprojects are showing resilience and may benefit from a boost in the near term from an improving outlook for key commodity prices.
However, the report highlights the wide agenda that lies ahead in restoring confidence and economic stability. In the short term, much rests on the outcome of the debt negotiations initiated by the Government of Mozambique and the transparent handling of the independent audit. Beyond this, key items on the agenda include setting a medium-term framework for restoring fiscal sustainability, anchored by a target for reducing debt and a credible fiscal deficit.
Enhancing financial sector surveillance and the strengthening of crisis management instruments is also a priority, particularly if further monetary tightening is in the pipeline in the near term. Moreover, the current economic circumstances highlight the need to manage fiscal risks and contingent liabilities better. In this regard, the MEU emphasizes the need for reforms to develop effective oversight over state-owned enterprises and other public entities, along with reforms to overhaul the framework for managing guarantees.
The World Bank’s biannual Mozambique Economic Update (MEU) series is designed to present timely, concise assessments of current economic trends in Mozambique in light of the country’s broader development challenges. Each edition includes a section on recent economic developments and a discussion of Mozambique’s economic outlook, followed by focus section(s) analyzing issues of particular importance. The focus sections for this edition address debt, inflation and fiscal risk from public corporations.
The MEU series seeks both to inform discussions within the Bank and to contribute to a robust debate among government officials, the country’s international development partners, and civil society regarding Mozambique’s economic performance and key macroeconomic policy challenges.
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DHL Global Connectedness Index: Globalization surpassed pre-crisis peak, advanced modestly in 2015
The State of Globalization in an Age of Ambiguity
DHL, the global logistics leader, recently released the fourth edition of its Global Connectedness Index (GCI), a detailed analysis of the state of globalization around the world. The 2016 report shows that global connectedness, measured by cross-border flows of trade, capital, information and people, surpassed its 2007 pre-crisis peak during 2014. In 2015, globalization’s post-crisis expansion slowed, but the data indicate that it did not go into reverse. Currently available evidence – still preliminary in some areas – suggests that the world was about 8% more connected in 2015 than in 2005.
The information pillar – measured by international internet traffic, telephone call minutes and trade in printed publications – showed the strongest growth over the reporting period (2013-2015). The gains in capital and people flows have been more modest, while the decline in the proportion of goods traded across borders – which began in 2012 – accelerated in 2015.
“Globalization has served as the world’s engine of progress over the past half century,” commented Deutsche Post DHL Group CEO Frank Appel. “The GCI documents that globalization has finally recovered from the financial crisis, but faces an uncertain future. It is imperative that policymakers and business leaders support an environment in which globalization can continue to flourish and improve the lives of citizens around the world.”
The research on the GCI was led by internationally acclaimed globalization expert Pankaj Ghemawat, who highlighted how emerging economies still lag behind on global connectedness. “Advanced economies are about four times as deeply integrated into international capital flows, five times as much on people flows, and nine times with respect to information flows,” Ghemawat commented. The GCI also notes that if emerging economies become more similar to advanced economies in terms of their connectedness levels, this would provide a powerful boost to overall connectedness.
The 2016 edition also documents a rising proportion of internet traffic crossing national borders, even as international trade and information flows lag their potential. “This underscores the tremendous headroom available for international e-commerce to boost business activity and expand the options available to consumers around the world,” commented Jürgen Gerdes, CEO Post – eCommerce – Parcel, Deutsche Post DHL Group.
The 2016 Country and Regional Index Results
In addition to a comprehensive overview on the state of globalization, the 2016 report also provides detailed insights into the connectedness of individual countries and regions. The index ranks countries on their depth (intensity of international flows) and breadth (geographical distribution of flows), which combine for an overall connectedness score between 0 and 100.
The Netherlands retained its top rank as the world’s most connected country and Europe is once again the world’s most connected region. All but two of the top 10 most globalized countries in the world are located in Europe, with Singapore and the United Arab Emirates as the standouts. North America is the second most globally connected region and leads on the capital and information pillars, with the United States as the most connected country in the Americas.
Overall the US is ranked 27th out of the 140 countries measured by the GCI. North America had the largest gain in overall global connectedness during the past two years, followed by South & Central America & the Caribbean. Countries in South & Central Asia and Sub-Saharan Africa suffered a drop in their average levels of global connectedness.
Suriname, Jamaica and Fiji were the biggest gainers in terms of rank changes from 2013 to 2015, moving up 23 (112th to 89th), 22 (107th to 85th) and 20 (94th to 74th) places respectively. Suriname’s rise was driven by a substantial broadening of its international interactions, whereas Jamaica and Fiji increased on both the depth and breadth dimensions of their global connectedness. Nigeria, Togo and Nicaragua experienced the largest decreases in terms of overall rank, dropping 28 (67th to 95th), 21 (72nd to 93rd) and 19 (71st to 90th) places respectively.
New City Indices on Globalization Giants and Hotspots
The twin trends of globalization and urbanization have prompted rising interest in global cities. The 2016 edition of the DHL Global Connectedness Index introduces two new city indices. The “Globalization Giants” index compares the size of cities’ international interactions. The “Globalization Hotspots” index parallels the depth dimension of the country-level GCI and ranks the cities with the most intense international flows of trade, capital, people, and information compared to their internal activity. Singapore leads both of the new city-level globalization indices.
“Even after controlling for Singapore’s structural advantages, the Lion City still outperforms on the depth of its international flows,” commented Ghemawat. “Credit must be given to policies aimed at growing Singapore’s connections beyond its immediate neighborhood,” he added.
London and New York, perennial leaders on rankings of global cities, place 3rd and 4th on the Globalization Giants index, but only 47th and 76th on the Globalization Hotspots index. Many smaller cities are far more intensively focused on international activity than these two megacities, according to the report. Unexpected high performers in the Hotspots index include Manama (2nd), Tallinn (6th) and Mumbai (13th).
The world’s overall level of global connectedness finally surpassed its precrisis peak during 2014 and continued to increase, but more slowly, in 2016.
Ten key take-aways
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The world’s overall level of global connectedness finally surpassed its precrisis peak during 2014 and continued to increase, but more slowly, in 2015.
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While international trade remained under pressure in 2015, increases were reported on the depth (intensity) of capital, people, and especially information flows.
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Actual levels of global connectedness are still only a fraction of what people estimate them to be, suggesting an opportunity to correct misperceptions and apprehensions.
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Distance still matters – even online. Most international flows take place within rather than between regions.
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Europe remains the world’s most globally connected region, with 8 of the 10 most connected countries – which reminds us what its disintegration might put at risk.
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The Netherlands is the top-ranked country overall; Singapore tops the rankings in terms of depth and the United Kingdom in terms of breadth.
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Emerging economies trade as intensively as advanced economies, but advanced economies are four to nine times as deeply integrated into international capital, information, and people flows.
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Globalization and urbanization combine to prompt strong interest in global cities, but prior research on them is subject to numerous shortcomings.
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Singapore tops both of our new city-level globalization indexes: Globalization Hotspots (cities with the most intense international flows) and Globalization Giants (cities with the largest absolute international flows).
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Looking forward, the future of globalization is shrouded in an unusual amount of ambiguity, and depends critically on the choices of policymakers around the world.
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‘Regional banks are vital to connect Africa to the global economy’
An ever-increasing regulatory burden has severely constricted the global banking sector, with dire consequences for trade flows and development in emerging markets.
Deputy chief executive of Barclays Africa Group, David Hodnett, said that “There is no doubt in my mind that if regulatory reform continues to follow the trajectory we have seen so far, there will be no banks left that are truly global.”
While there is no doubt that enhanced regulation of the financial sector is well intentioned, a number of competing priorities have shaped the future of the financial services industry in Africa.
These include a decline in global banking and a reduction in correspondent banking relationships, which play an integral role in facilitating trade and investment and connecting Africa to the global economy.
The regulatory burden – deconsolidation and risk reduction
“The global financial crisis will remain a scar for years to come,” Hodnett told a gathering at the Gordon Institute of Business Science (Gibs).
Regulatory reform has forced substantial change on the sector in a relatively short space of time, and is not yet at an end.
“Many banks have become more resilient as a result, painful as it might have been.”
In response to new regulatory regimes, requiring banks to strengthen their capital and liquidity positions so as to reduce the risk of a recurrence of the 2008 financial crisis, global banks have reduced total assets and have shed non-core businesses.
Some were forced to sell assets as a condition for state aid, while “some see even tougher legislation down the road and are scaling back in anticipation.”
Barclays Plc is in the process of reducing its stake in Barclays Africa Group in order to achieve regulatory deconsolidation, and is also selling assets in Asia, Italy, Spain and Portugal.
Hodnett explained that the phenomenon is not unique to Barclays, as other global banks reduce their balance sheets and retreat from countries previously considered core to their strategy.
“If the ultimate aim is that no bank should be too big to fail, then there certainly has been progress in this regard,” he said.
Simultaneous regulatory measures have also been introduced to stop the illicit flow of funds for money laundering and terrorism.
This has lead to a decline in correspondent banking, as organisations look to reduce their risk in line with the guidelines.
“Africa is among the regions worst affected by the decline in correspondent banking, which raises concerns about financial exclusion on a continent where many remain excluded anyway,” Hodnett said.
Implications for African trade and development
Dr Leyland Hazlewood, chief executive of Dimpex and author of The Ultimate Guide to Doing Business in Africa said the simple financial transactions we now take for granted are still relatively rare in many parts of Africa:
“The global banking system is a symbol of globalisation and seeks to enable us all to benefit from its advantages. Global banking is a civilising force; to contemplate is demise is tragic.”
Trade has the power to be an important driver of development, when combined with the right form of financing, Hazlewood added.
With the pull back of global banks in the region, Hodnett said regional banks would need to become a bigger feature on the financial services landscape in Africa, as these are vital to ensure the continued connectedness of Africa to the global economy.
After the Barclays disinvestment, Barclays Africa will be a stand-alone African bank with 12 operations across sun-Saharan Africa.
The cumulative regulatory burden, although well intended, could have a detrimental effect on trade flows and development in Africa.
Legislation created in developed markets with more sophisticated lending environments can disproportionately disadvantage emerging regions, which are compelled to comply or damage their risk profiles.
Where regional banks are seen as “too big to fail” they might eventually have to follow the course of the global banks and make a strategic retreat where regulation proves too much of an economic obstacle.
While Hodnett explained that technological disruptions such as mobile and Blockchain “will absolutely change banking,” he believes the key to exploiting the potential of disintermediation will be through banking and FinTech partnerships to protect consumers and investors.
“It is important to ensure among all these competing priorities that policy makers and bankers find an equilibrium between managing systemic risk and allowing banking to responsibly facilitate economic activity.
"To grow, the African economy needs fewer, not more hurdles, however well-intentioned,” he concluded.
Top five points
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A decline in global banking and a reduction in correspondent banking relationships, which facilitates trade and investment and connects Africa to the global economy, have shaped the future of the industry on the continent.
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Global banks have reduced total assets and have shed non-core businesses in response to capital and liquidity regulations, selling off operations around the world.
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Measures introduced to stop the illicit flow of funds and the subsequent decline in correspondent banking raises concerns about financial exclusion in Africa, where many consumers are already excluded.
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Legislation created in developed markets with more sophisticated lending environments can disproportionately disadvantage emerging regions, which are compelled to comply or damage their risk profiles.
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Policy makers and bankers must find an equilibrium between managing systemic risk and allowing banking to responsibly facilitate economic activity.
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From Bhutan’s red rice to goat meat from Mozambique, unique products can boost exports from the poorest countries
Natural, heritage products, if protected and marketed well, could become a bigger source of revenue for many Least Developed Countries. Many of these countries are dangerously dependent on commodity exports and must diversify their economies.
High in the Himalayas between India and Tibet lies the ancient kingdom of Bhutan, one of the world’s most remote nations. Trade is difficult for this landlocked country, which relies on sales of hydroelectro power to India for more than 40% of its exports.
But its high-altitude environment endowed Bhutan with a wealth of natural wonders, including a crop that grows virtually nowhere else – Bhutanese red rice.
The ruby-red grain is cultivated some 2,400 meters above sea level in valleys irrigated with 1,000-year-old glacier water, rich in minerals.
And Bhutan is not alone. Many of the world’s other 47 Least Developed Countries (LDCs) also possess unique foodstuffs that could find lucrative export markets.
“Natural, heritage products, if protected and marketed well, could become a bigger source of revenue for many LDCs,” UNCTAD expert Stefano Inama said. “Many of these countries are dangerously dependent on commodity exports and must diversify their economies.”
A new UNCTAD report, launched on 12 December, discovered a wealth of irreplaceable products waiting for better organized commercialization such as unusual coffee varieties and aromatic volcanic honey from Ethiopia, salted mullet roe from Mauritania, and goat meat from Mozambique.
A key instrument in both the protection and marketing of such goods is “Geographical Indication”, a standard obtained for products that are uniquely tied to where they are made, grown or harvested.
GIs are part of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) run by the World Trade Organization (WTO).
“LDCs face considerable challenges when implementing GIs because of still precarious institutions and regulatory frameworks,” the report explains. But “a number of LDCs have requested UNCTAD to examine the option of using GIs as a tool to enhance trade and reduce poverty.”
An UNCTAD feasibility project requested by Senegal, for example, looked at improving the livelihoods of women that process and market fruit juices, syrups, and marmalades in the Lower-Casamance region.
The study found that, while the women have been able to upgrade their buildings and machinery to raise standards, more needs to be done to verify compliance, identify niche markets and speed up the granting of GI status.
Producers and policymakers need look no further than Kampot pepper in Cambodia for a successful example of how GIs bring benefits to LDCs. This spice, renowned for its fresh flavour, was granted GI status in 2010 and the Kampot Pepper Promotion Association was set up to manage and market the crop.
“Our peppercorn sells at a high price and has been recognised as the finest quality pepper because we follow the association’s guidelines,” Phok Ly, a farmer with 3,000 pepper trees, told The Phnom Penh Post. He said the association’s efforts to maintain quality have resulted in higher incomes for its members.
In February 2016, the European Union officially entered the name “Kampot pepper” into its register of protected designations of origin, largely because its success has led to a rise in fake Kampot pepper being sold.
Book Launch: Why Geographical Indications in Least Developed Countries?
The UNCTAD study, Why Geographical Indications for Least Developed Countries?, will be launched in Geneva, Switzerland, on 12 December. The book contains lessons learned in using Geographical Indications (GIs) to promote traditional product in selected LDCs.
GIs are a trade-related intellectual property right under the WTO TRIPS Agreement. The link between the territory and the uniqueness of the product is the distinctive developmental nature of GIs.
Limited export diversification and low value added of LDCs exports have been identified as a long standing factor affecting the economic growth and poverty reduction strategies of LDCs.
Yet, thanks to their rich biodiversity a valuable array of products and preparations is available in selected LDCs with a potential to graduate into “excellence” products and compete globally.
UNCTAD in collaboration with FAO and Slow Food foundation for biodiversity has assisted selected rural communities and products in LDC to promote their products using geographical indications.
The idea of the UNCTAD initiative is that the success of GIs in Europe and, increasingly, in a number of developing countries, could also be extended to promote the value of the products in LDCs and the link to their territory, a guarantee for their uniqueness, ultimately allowing farmers to remain in their land.
The UNCTAD publication contains the following experiences:
- Buthanese rice
- Kampot Durian, Cambodia
- Kampot Pepper
- Harenna Wild Coffe, Ethiopia
- Wenchi Volcanic, Ethiopia
- Wukro honey, Ethiopia
- Ziama-Macenta robusta coffee, Guinee
- Coffee from the Bolaven Plateau, Laos People’s Democratic Republic
- Pink rice from Amparafaravoly, Madagascar
- Imraguen women’s mullet Bottarga, Mauritania
- White prawn, Mozambique
- Tete Goat, Mozambique
- Fruits from lower Casamance, Senegal
This book launch is organized in cooperation with H.E the Ambassador of Benin as Coordinator of the LDC WTO group and the Delegation of Italy to the UN Organizations in Geneva that co-funded this initiative.
Given the link of the traditional products to their territory the launch will be accompanied by the presentation of the catalogue of the Artist Maurizio Cancelli – Village Earth – that has represented UNCTAD at the UN 70 Anniversary and artist Koffi Gahou, from Benin witnessing the commitment of these artists to represent trough their work the attachment to their territory as a cultural value for the human development.
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“Persistent” economic challenges continued to weigh on trade in 2016
Director-General Roberto Azevêdo’s annual overview of developments in the international trading system highlights the “persistent” global economic challenges in 2016 that continue to weigh on international trade. The report, which was discussed at a 9 December meeting of the WTO’s Trade Policy Review Body, urges members to work together to ensure that the benefits of trade are more widely spread and better understood.
The latest monitoring report shows WTO members introduced 182 new trade-restrictive measures for the reporting period covering mid-October 2015 to mid-October 2016, or an average of just over 15 measures per month. While this represents a decline compared to the average 20 measures per month introduced during 2015, the number of new trade-restrictive measures being introduced remains worryingly high given continuing global economic uncertainty and the WTO’s downward revision of its trade forecasts.
The WTO is projecting a 1.7% increase in world merchandise trade volume in 2016, down from its earlier forecast of 2.8%. If this revised forecast is realized, this would mark the slowest pace of trade and output growth since the financial crisis of 2009.
The report calls on WTO members to work together to ensure that the benefits of trade are spread more widely and are better understood.
DG Azevêdo said:
“Trade restrictive measures can have a chilling effect on trade flows, with knock-on effects for economic growth and job creation. In the context of a challenging economic scenario, it is more important than ever that WTO members adopt policies which will support trade and ensure that its benefits reach as many people as possible.”
The report notes that of the 2,978 trade-restrictive measures put in place by WTO members since 2008, only 740 had been removed by mid-October 2016. The overall stock of measures has increased by almost 17% compared to the previous annual overview, with the total number of restrictive measures still in place now standing at 2,238.
At the same time, WTO members have continued to adopt trade-facilitating measures. Members implemented 216 new trade-facilitating measures during the period under review – an average of 18 measures per month, slightly above the average 2009-2015 trend. These include a number of import-liberalizing measures implemented in the context of the expanded Information Technology Agreement.
Key Findings
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This monitoring report for the reporting period between mid-October 2015 and mid‑October 2016 outlines the persistent challenges faced by the international economy in 2016 that continue to weigh on international trade flows. It shows that the continuing increase in the stock of trade-restrictive measures recorded since 2008 remains of concern.
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The latest reporting period shows a fall in the number of new trade‑restrictive measures introduced at just over 15 per month – a total of 182 for the reporting period. While this represents a reduction in the monthly figure compared to the recent peak in 2015, it is actually a return to the trend level for new trade restrictions since 2009.
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The number of new trade-restrictive measures being introduced remains worryingly high given continuing global economic uncertainty and the WTO’s downward revision of its trade forecasts, predicting 1.7% world merchandise trade volume growth in 2016, from its earlier forecast of 2.8%. If this revised forecast is realized, this would mark the slowest pace of trade and output growth since the financial crisis of 2009.
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Of the 2,978 trade-restrictive measures recorded for WTO Members since 2008, only 740 had been removed by mid-October 2016. The overall stock of measures has increased by almost 17% compared to the previous annual overview, with the total number of restrictive measures still in place now standing at 2,238. The rollback of trade-restrictive measures recorded since 2008 remains too slow and continues to hover just below 25%.
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During the review period, WTO Members also applied 216 measures aimed at facilitating trade. At 18 new trade-facilitating measures per month, this represents a slight decrease over the previous report but remains above the 2009-2015 average. Trade‑facilitating measures recorded by this report include the very first measures implemented in the context of the expanded Information Technology Agreement.
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The monthly average of trade-remedy investigations by WTO Members recorded for this exercise was found to be the highest since 2009. Moreover, the monthly average of trade‑remedy terminations is the lowest since the beginning of the monitoring exercise.
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The continued and persistent challenges faced by WTO Members in the international economy and their consequences for world trade stress the need for WTO Members to work together to resist protectionist pressures. The WTO will continue to provide a predictable, transparent and inclusive framework to assist Members in this endeavour.
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WTO Members must also work together to ensure that the benefits of trade are spread more widely and are better understood. A failure to make the case for inclusive trade could pave the way to increased protectionism in the future.
Trade Policy Review Body: Annual overview of developments in the international trading environment
Remarks by DG Azevêdo
Good afternoon. I am very pleased to join you today, as we take stock of the major developments in the international trading system over the past 12 months.
A key pillar of our work here at the WTO is to help provide transparency and predictability to the trading system. I think that this Annual Overview is an important component of this. It allows us to take stock of what has happened in the trading landscape, and of course, to reflect on the steps ahead.
The report before you today looks at the implementation of trade-related measures across the WTO membership between mid-October 2015 and mid-October 2016. It was circulated to members on 21 November, under my own responsibility.
The report outlines a number of important trade-related developments, as well as an overall assessment of the main trends observed in trade measures recorded over this period. And it presents a comprehensive look at all these issues. It includes a wide range of perspectives, including developments on recent trade policy reviews, on the Trade Facilitation Agreement, and the ITA expansion – to name just a few.
In fact, for the first time, this report includes a separate chapter on recent discussions on intellectual property. In addition to that, the report provides a snapshot of the trade concerns raised in WTO bodies over the past 12 months, including developments in trade remedies, SPS, TBT and services.
As you can see, the report is quite comprehensive and tries to offer you a fairly horizontal view of developments in the trade landscape. Of course, these developments may have positive, negative or neutral impacts on global trade growth. However, the report does not aim to characterize the measures or actions listed therein with any type of subjective analysis.
Therefore, any measure or action mentioned in the report must not be deemed to be protectionist (or not), WTO consistent (or inconsistent), legitimate (or illegitimate), necessary (or not), arbitrary (or not), and so on. It is an objective and factual report; nothing more.
In a moment, I will outline the key findings of the report. But first, as usual, I would like to provide a brief background on the process of preparing this document.
Information for this report has been collected from inputs submitted by members and observers, as well as from other official and public sources.
I would like to thank the delegations that have participated in this exercise by providing relevant information on time, and by ensuring the subsequent verification of this information.
For this Annual Overview, 84 members and 4 observers replied to my request for information. This is a record number of replies! But of course, there is always room for improvement. Transparency requires constant commitment and engagement. I encourage other members to take part as well.
Of course, the Secretariat is available to help increase members’ understanding of this exercise and to help facilitate their participation.
Before I turn to the substance of the report, I would like to say a few words about the broader economic context.
In September the WTO downgraded its forecasts for trade growth in 2016 from 2.8 per cent to 1.7 per cent. If realized, this would mark the slowest pace of trade growth since the financial crisis. This is of course largely due to the lacklustre performance of the global economy – and not the other way around.
To help monitor the situation, the WTO launched a new World Trade Outlook Indicator in July. It was designed to provide real time, immediate information, indicating if trade is likely to slow or accelerate in the near future.
The last update of the WTOI was issued just last month. The indicator rose slightly, signaling a modest acceleration of trade into the fourth quarter. This is broadly consistent with the WTO’s most recent forecast. The secretariat will continuously evaluate the indicator and make adjustments as necessary. The next update of the WTOI is planned for February 2017.
Looking ahead, we need to keep up the hard work to help facilitate trade. And of course, this includes avoiding measures which can hamper and restrict trade flows.
This brings me to the key findings of the report that is before us today.
The document shows that 182 new trade-restrictive measures, excluding trade remedy measures, were put in place in the reporting period. This amounts to an average of just over 15 new measures per month.
This represents a reduction in the monthly average compared to 2015, when we saw an average of 20 new measures per month – the highest level since 2011. However, this does not mean that we are on a downward trend. Rather, it seems to be a return to the somewhat steady levels we have witnessed since 2009.
Of course, the numerical counting of measures does not give an indication of their real trade impact. But it does serve to illustrate the overall trend.
An important parameter to bear in mind is that, out of the 2,978 measures (including trade remedies) recorded by this exercise since it has started, only 740 have been removed.
Evidently, the last thing the global economy needs today is trade restrictive measures. They can have a further chilling effect on trade flows, with knock-on effects for economic growth and job creation.
During the review period, WTO members also applied 216 new measures aimed at facilitating trade.
These include the first measures implemented in the context of the expanded Information Technology Agreement – so this is good news.
The total figure represents an average of 18 new trade-facilitating measures per month. This represents a slight decrease over the previous report, but nevertheless, remains above the 2009-2015 average.
Looking at other findings of the report, the monthly average of trade-remedy investigations was the highest since 2009. In contrast, the monthly average of trade remedy terminations was the lowest since the beginning of the monitoring exercise.
I should again stress, particularly in the case of trade remedies, that the report does not call into question whether or not the measures listed are WTO-consistent or necessary.
The report also indicates a decline in the number of general economic support measures implemented by WTO members. We are, however, cautious about over-interpreting this development as we face considerable challenges in getting members to report on such measures. Also here, like in all other sections, the report does not prejudge WTO-consistency nor necessity or legitimacy of the listed measures.
In the area of trade in services, recent developments show that the sector is seeing further liberalization, especially through the strengthening and clarification of regulatory requirements.
I also want to highlight the section of the report dedicated to providing members with an overview of the issues raised in individual Trade Policy Reviews over the past year. The high number of TPRs can place a significant burden of work on delegations, especially the smaller ones. Therefore, I am particularly pleased to note the increasing active participation of LDCs.
This report also draws attention to the changing technological landscape and to the increasing significance of intellectual property in economic development. It shows that several WTO members have adopted new national and regional policies related to IP and the digital economy.
Finally, I wish to underline the continued commitment of members to notifying SPS and TBT measures for transparency purposes. And we have made important progress here.
SPS and TBT notifications are now accessible through the online alert system ePing. This allows users to receive email alerts on products and markets of interest to them.
Each year the WTO receives more than 3,500 TBT and SPS notifications proposing new measures that may affect international trade. By improving access to this information, ePing will help avoid unnecessary disruptions caused by these measures.
These are some of the principal findings that I wanted to share with you today. I hope it can provide food for thought and some input for your discussions.
So let me conclude by thanking again everyone who has taken part in this important work. I urge others to get involved, and help strengthen this exercise.
I should also stress that I am fully aware of your discussions on ways to improve this trade monitoring exercise and to re-energize our discussions of these reports.
I think this shows your continued commitment and interest in ensuring that transparency remains a cornerstone of our work.
In the context of a challenging economic scenario, I think we should keep in mind the role of the multilateral trading system in providing a stable, predictable and transparent trading environment.
And as we look towards MC11 in Buenos Aires, we should seek to make decisive progress in eliminating remaining trade-restrictive measures, while also delivering new negotiated outcomes.
Thank you for listening. I wish you a very productive meeting.
Download: Overview of developments in the international trading environment: Annual Report by the Director-General, November 2016 (5.4 MB)
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Urgency in closing the digital divide voiced at conclusion of Internet Governance Forum
Access, cybersecurity, transparency and privacy among key issues
New approaches are needed to provide Internet access to all people and close a stubborn digital divide that is exacerbating inequalities among and within countries, according to participants attending the 11th annual Internet Governance Forum which concluded in Mexico on 9 December 2016.
In four days of intense debates and discussions on the future of the Internet, the Forum heard calls for concerted actions to ensure that the benefits of the Internet reach all members of society as well as all countries, both developed and developing, to further enable the achievement of the Sustainable Development Goals.
This year’s Forum is the first since its mandate was renewed for 10 years at the World Summit on the Information Society (WSIS) in December 2015, underscoring the importance of this platform and ensuring that the discussions of this transparent multistakeholder policy forum continue.
“Leading up to the twelfth IGF next year, innovations in programming and intersessional activities will continue to be implemented in a bottom-up manner, based on feedback from the multistakeholder community and in line with our new mandate which calls for greater participation from stakeholders from developing countries and improved working modalities,” emphasized by Wu Hongbo, Under-Secretary-General for Economic and Social Affairs, in a message delivered by Juwang Zhu, Director of the Division for Sustainable Development in the UN Department of Economic and Social Affairs.
Recognising the critical role of the Internet in providing access to opportunities for all, participants at the Internet Forum – governments, the technical community, private sector and civil society – advocated for more capacity-building and training, as well as closer collaboration and partnerships. More than 2,000 participants from over 70 countries participated in the Forum on-site, with more than 10,000 more following live YouTube sessions and joining as remote participants.
The nearly 200 sessions at the Forum addressed a number of critical issues including human rights and freedom of expression online, multistakeholder cooperation and cybersecurity. Particular attention was focused on youth and gender issues and the digital divide – the technological gap that exists between developed and developing countries. In addition to the physical challenges of providing connectivity at affordable rates, experts say there are also difficulties with having more of the Internet economy available in local languages and reaching people who have yet to recognize the benefits that the Internet can provide.
The lowest levels of Internet usage are in sub-Saharan Africa, for example, with less than three per cent of the population using the Internet in a number of countries including Chad (2.7 per cent), Sierra Leone (2.5 per cent), Niger (2.2 per cent), Somalia (1.8 per cent) and Eritrea (1.1 per cent).
Additionally, while connectivity continues to be an economic and infrastructural challenge, further barriers exist in digital literacy. With regard to the gender gap, there are now 257 million more men online than women, and women face a wider variety of online harassment and abuse.
“It’s very important to bring women online because the part of the population that is not online is missing out a lot. They need to enhance their businesses, they need to enhance their lives, and part of that comes with them being online,” said Evelyn Namara, Founder and CEO of !nnovate Uganda, an organization that works toward sustainable technological development. She added that accessibility is particularly problematic for women in rural areas.
Participants reported on a host of new programmes underway that are overcoming the barriers to universal access, including job trainings and public-private partnerships. Still, there is no one solution to the problem and that all situations are unique. The advent of disruptive technologies like the Internet of things and artificial intelligence, while having the potential to bring groundbreaking benefits to mankind and our quality of life, may also lead to more social exclusion.
Delegates reiterated that digital literacy and the development of local and culturally diverse content is fundamental for inclusive growth. An emerging consensus has developed among the IGF community that the Internet’s core values of openness, freedom, resilience, safety and decentralisation are fundamental for enabling sustainable growth.
About the Internet Governance Forum
Each year, the United Nations Secretary General convenes the IGF meeting, bringing together various stakeholders to discuss current and emerging Internet governance issues, as well as related opportunities and challenges in an open, inclusive and transparent forum.
The IGF is recognized as the widest-reaching international multistakeholder policy forum on Internet governance. Its mandate was renewed for 10 years at the World Summit on the Information Society (WSIS) in December 2015. The IGF is at the forefront of identifying and debating critical issues that shape the international agenda, as well as options and solutions for policy makers. It also focuses on giving stakeholders from developing countries the opportunity to consider practical ways to deal with their additional challenges.
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tralac’s Daily News Selection
The selection: Friday, 9 December 2016
International trade and integration: the latest research (World Bank Blogs)
What’s the latest research in international trade and integration? Researchers from the World Bank, the IMF and the WTO recently gathered for a one-day workshop to present their latest research on the topic. The papers presented addressed topical questions in areas as diverse as the links between trade, wage inequality and the poor, global value chains, non-tariff measures, preferential trade agreements, FDI restrictions, and migration. We provide a quick roundup on the papers presented during the workshop.
Namibia: 2016 Article IV Consultation documentation (IMF)
Namibia has experienced strong growth and economic stability, but faces significant challenges and structural issues. Public debt is rising and reserve coverage is below safe levels. Banks’ balance sheets appear robust, but rising housing prices and household indebtedness pose macro-financial concerns. Deep-rooted structural problems have kept unemployment and income inequality unacceptably high. [Namibia: Selected Issues Paper, pdf]
Namibia: National Quality Policy update (UNIDO)
UNIDO has helped Namibia formulate a national policy that will help the country develop its quality infrastructure, conformity assessment, international trade and technical regulatory framework. The new policy will improve Namibia’s international competitiveness and lead to enhanced export performance. It will also support small and medium enterprises in conforming to national standards and complying with technical regulations, thus contributing to economic growth. The final document, the National Quality Policy, a result of extensive stakeholder consultations that were supported by UNIDO, was today officially handed over to the office of Immanuel Ngatjizeko, Minister of Industrialization, Trade and SME Development. [Project documentation]
Zimbabwe’s economy to grow by 1,7% in 2017: Chinamasa (NewsDay)
Presenting the $4,1 billion 2017 national budget yesterday, Chinamasa said the economy was projected to grow by 0,6% this year but would improve next year. The growth projection is a sober one after Treasury had earlier forecast a growth rate of 4,8% in its strategic paper. Revenue will be $3,7 billion leaving a financing gap of $400 million, Chinamasa said. [Budget documentation available for download]
South Africa-China Economic and Trade Association report: investment profile (China Daily)
According to the report on the development of Chinese enterprises in South Africa unveiled by the South Africa-China Economic and Trade Association, there are more than 300 Chinese companies including representative offices in South Africa and among them about 140 are large and medium-sized companies. The Chinese companies have been involved in such fields as real estate, mining, automobiles, finance, construction, textile, logistics and household appliances, the report said. By the end of 2015, Chinese investment in South Africa reached about $13bn. The Chinese enterprises employed more than 26,000 people in South Africa, of whom 24,000 were locals, the report said.
Nigeria: FG questions complications on ECOWAS external trade agreements (Business Day)
The Federal Government has raised an alarm, just like the Senate raised recently, on some complications in the ECOWAS external trade liberalisation agreements, which it alleged was being abused to a greater extent by some neighbouring countries. Audu Ogbeh, minister of agriculture and rural development, on Monday, said there were complications in the ECOWAS trade liberalisation agreements, which appeared exploitative to the Nigerian economy with the largest market size among member countries. “From a record I have, there are about 571,000 tons of rice waiting to be smuggled into Nigeria for the Christmas from the borders of Benin Republic. The Republic of Benin doesn’t eat par-boiled rice, they eat white rice, and yet all the rice crossing the Republic borders into Nigeria is par boiled. I have a list now of all the ships that left Thailand in the last seven weeks, and are arriving now. Key of which is 571,000 tons or rice now waiting to enter Nigeria for Christmas. The whole list is on my table.”
The impact of regional integration on Nigeria’s imports: a case of ECOWAS Common External Tariff on agro-processing (tralac)
This study looks particularly at the impact of the ECOWAS regional trade agreement on trade and agro-processing in Nigeria. To complement this, the effect of a possible ECOWAS-European Union Economic Partnership Agreement on trade, revenue and welfare is examined as well. The study defined four tariff liberalisation scenarios: [The analysts: Oluwadamilola O. Oluwusi, Cecilia Punt, Ron Sandrey]
‘Nigeria risks becoming dumping ground if free trade zones don’t function’ (Premium Times)
Nigeria risks becoming a dumping ground for countries in the West African sub-region if the country’s export free trade zones are not allowed to function to meet international standards. The Executive Secretary, African Free Zones Association, Chris Ndibe, said in Abuja on Monday that with most trade zones in the neighbouring West African sub-region, particularly Ghana and Togo thriving, Nigeria will end up being the dumping ground. “Our neighbouring countries, especially in West Africa, are doing very well,” Mr. Ndibe said. “What they are doing is that they have Nigeria as their market, and their free zones. Togo next door is gearing up also. Ghana has the highest number of free zones in Africa. The single factory zones scheme that were frustrated in Nigeria is booming in Ghana."
Nigeria’s non-oil export trade under-reported, says expert (The Nation)
Mr Shehu Abdulkadir, the Managing Director, Casmine Assayer, an export supervisory firm in Lagos, said Nigeria non-oil export trade was under-reported. Abdulkadir told journalists in Lagos that the informal and unreported export trading activities were 50% more than what were reported. He said that 90% of Nigerian products rejected abroad were being shipped through other African countries like Ghana and Cameroon where they were being repackaged and shipped abroad.
Nigeria looks to farming as oil boom fades and hunger sets in (Bloomberg)
The government plans to capitalize the state-owned Bank of Agriculture Ltd. with 1 trillion naira ($3.2bn) so it can lend to farming projects at less than half the commercial rate. It’s also working with the African Development Bank and World Bank to set up staple crop-processing zones with the electricity and roads needed to attract more private-sector money. Nigeria spent more than 1 trillion naira importing food last year, according to the statistics bureau’s data on foreign trade, and an income squeeze caused by the fall in crude prices and output is forcing the government to diversify its economy. Poor yields and war disrupting agriculture in the northeast has left 37% of children in Nigeria malnourished, Minister of Agriculture and Rural Development Audu Ogbeh said.
World Competition Day debate in Accra: Cement market - issue of competition or unfair trade practice? (GhanaWeb)
Justice Date-Bah was of the view that the recent agitations in the cement industry should serve as an indication to policy makers the need for a fully functional competition and unfair trade practice law to regulate the conduct of the market players. A trade policy analyst at CUTS Ghana, Mr Abubakari Zakari, stressed on the important role that the government plays in ensuring affair and competitive market through the application of the WTO measures. He called for the full operationalization of the Ghana International Trade Commission to investigate the claims being made by the local cement manufacturers.
Sahel and West Africa Week (12-16 December, Abuja): Placed under the political and technical leadership of ECOWAS, UEMOA and CILSS, the 32nd annual meeting of the Food Crisis Prevention Network (RPCA) will place strong emphasis on the region’s food and nutrition challenges.
West Africa Regional Energy Co-operation Summit (25-27 January): Conference sessions will focus on regional co-operation and power delivery, the importance of gas in accelerating the pace of regional development, the role of the private sector and innovative methods for project financing. Siengui Ki, Executive Director of West Africa Power Pool and ECOWAS, will showcase successful case studies and present live projects seeking investment.
West Africa Regional Supply and Market Outlook: 7 December (FewsNet)
Crop prospects and food situation (FAO)
Tanzania: Tough conditions for foreigners eyeing land for business (The East African)
Tanzania is working on a new land policy that will reduce leases of land owned by foreigners from 99 years to 33 years. The Draft National Land Policy, seen by The EastAfrican, which has been subjected to public scrutiny by the Ministry of Lands and Settlement Development, is expected to be adopted early next year. [Sh20tr cement investment on the cards: govt]
Central Africa’s industrial transformation need not be cut-and-paste (UNECA)
Today’s dialogue [in Libreville] is one in a series being organised across Central Africa by ECA to encourage countries of the sub-region to stay the course of structural transformation which involves dynamically moving from low-value agrarian economic structures to productive agriculture, manufacturing and quality services. This is seen as the pathway way towards inclusive growth and sustainable development. The next ECA debate on Structural transformation in Central Africa is slated for Brazzaville, Congo, on 15 December 2016. It will dwell on improving transport infrastructure to leverage such a transformation in the country.
SEWA to tap trade linkages with five African cooperatives (Indian Express)
City-based Self Employed Women’s Association (SEWA) is set to explore trade linkages with five African nations (South Africa, Ethiopia, Ghana, Senegal, Tanzania) under the aegis of its six-year-long ‘SETU Africa programmes’ to help strengthen their women cooperatives. This comes in the wake of a delegation of 15 Tanzanian union Self Help Group leaders and NGO coordinators who are in Ahmedabad this week to study SEWA’s organising of informal workers. They will implement the same into their own Membership-Based Organisations like unions and cooperatives.
Crowding the private sector into Africa’s climate action (Premium Times)
At the supra-national level, the African Risk Capacity was founded in 2012 as an agency of the African Union with the mandate to finance climate resilience and crisis response. In line with its mandate, the ARC is planning to create an Extreme Climate Facility, which will issue multi-peril, climate change catastrophe bonds. The securitisation instruments will bring scale and knowhow to Africa’s climate risk management and climate change adaptation efforts, with tremendous benefits to the agriculture sector. XCF’s catastrophe bonds are expected to attract not only investment from indigenous African banks but also from international financial institutions. One hopes that the XCF will soon become a reality, and the rigorous risk modelling it plans to have in place will serve other market initiatives. [The author, Chinedu Moghalu, is head of corporate communication, Nigerian Export-Import Bank]
IMF Work Programme priorities: The following four objectives are set out in the Work Program: how we guide the global policy dialogue; two, how we identify policy space and enhanced resilience. Three, how we assess in promoting global prosperity; and fourth, making multilateralism work for all.
G20 in focus: In this portal (a project of the Heinrich Böll Foundation), you will find infographics and comparative interactive maps that help you learn about the G20 countries, how the G20 works and what is on its agenda. In addition, studies and working papers provide insights into specific aspects of the G20 priorities.
AfDB’s North Africa 2016 Annual Report: This annual report presents for each country and for each Bank financed-project, how the institution supports North Africa to meet these five priorities. Moreover, the report presents in the thematic section progress but also short and medium term issues and challenges that countries face and which influence the progresses made in achieving the objectives of the five priorities set by the Bank [Download (pdf)]
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IMF Executive Board concludes 2016 Article IV Consultation with Namibia
On December 2, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Namibia.
Since the financial crisis, Namibia has experienced remarkable growth and economic progress. Strong policy frameworks and expansionary domestic policies have contributed to macroeconomic stability, robust growth, and rising living standards. Yet, deep-rooted structural impediments have kept unemployment high and unresponsive to growth, contributing to persistently high inequality.
In 2015, growth remained strong, but vulnerabilities increased. Despite a severe drought, real GDP grew by 5.3 percent buoyed by construction in the mining and housing sectors, and expansionary fiscal policy. However, with strong domestic demand and declining Southern African Customs Union (SACU) revenue, the current account registered a double-digit deficit. In combination, the large fiscal deficit, the depreciation of the Namibian dollar along with the South African rand, to which it is pegged, and the issuance of a Eurobond in November 2015 increased public debt to about 40 percent of GDP, close to the median of similarly-rated emerging economies. At the same time, continued rapid credit growth contributed to fast growing residential real estate prices and elevated household indebtedness. Headline inflation rose to 6.9 percent in September, from the 3.4 average in 2015, mostly due to rising food prices caused by the drought.
Fiscal and monetary policies are on a tightening course. The government has revised the FY16/17 budget and announced the intention to reduce the fiscal deficit in the coming years. In the context of the peg with the South African rand, the Bank of Namibia raised its policy rate in 2015 and in 2016 to 7 percent, at par with the South African Reserve Bank’s rate.
The outlook remains positive with considerable vulnerabilities and risks. Growth is projected to temporarily weaken in 2016 to 1.6 percent as the construction of large mines ends and the government starts consolidating; it would then accelerate to about 5 percent in 2017-18 as production from new mines ramps up. However, without further deficit reduction, public debt is projected to increase above 60 percent by 2021. On the positive side, the current account deficit is expected to narrow to around 5 percent of GDP on the back of larger mining exports. Inflation is anticipated to decline to 6 percent by 2017 as food prices normalize.
Downside risks dominate the outlook and stem mainly from possible further declines in SACU revenues and commodity prices, lower growth in mining and construction, and sudden corrections in housing prices and domestic credit. With limited buffers, shocks could be amplified by abrupt policy responses, especially if combined with sovereign credit rating downgrades. Linkages between banks and non-bank financial institutions could further amplify shocks.
Staff Report
Context: Robust growth with growing vulnerabilities
Since the financial crisis, Namibia has experienced robust growth and resilience to shocks, but vulnerabilities have been building up while unemployment remains high. Despite being a small commodity-dependent economy exposed to external shocks, since 2010, average annual real GDP growth exceeded 5 percent. The peg to the South African rand contributed to moderate inflation. However, four years of expansionary fiscal policy have led to a sharp increase in public debt. The current account deficit has widened, and the international reserve coverage has declined below safe levels. At the same time, strong credit growth and supply constraints have contributed to fast-growing housing prices and high household indebtedness. Yet, unemployment remains high and little responsive to growth, contributing to maintain high income inequality, second only to South Africa.
In 2015, growth remained strong, but external and fiscal vulnerabilities gained prominence.
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Despite a severe drought, real GDP grew by 5.3 percent (6.5 percent in 2014) buoyed by construction in the mining and housing sectors, and expansionary fiscal policy. Strong public consumption and investment underpinned growth. Accommodative monetary conditions contributed to further boost bank credit and domestic demand. The economy, however, decelerated in the first half of 2016, with real GDP contracting in 2016Q2 as growth in construction and government services slowed down.
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Strong domestic demand and declining SACU transfers widened the current account deficit to 13.7 percent of GDP (7.6 percent in 2014). On the positive side, the 2015 Eurobond issuance improved reserve coverage to 2.8 months of projected imports (Annex I). However, other external buffers have thinned: external debt increased to about 51 percent of GDP (42¾ percent in 2014); external gross financing needs rose to 31 percent of GDP, well above the average of past years; and, the net international investment position, while still positive, declined to 4 percent of GDP from 15 percent in 2014. Moreover, since December 2015, reserve coverage has fallen, to 2.2 months of imports (August 2016).
- Expansionary fiscal policy caused the fiscal deficit to widen to an estimated 10.2 percent of GDP as subsidies and capital spending increased and SACU revenue declined. The large deficit, combined with the issuance of the 2015 Eurobond and currency depreciation (because of the peg to the South African rand), led public debt to jump to 39.8 percent of GDP (from 25.5 percent), above the authorities’ threshold of 35 percent of GDP and the median of similarly rated emerging market economies. The expansionary fiscal stance also increased government’s gross financing needs, covered in part by the Eurobond and in part by purchases of government securities by domestic financial institutions. These developments led to pressure on sovereign credit ratings, with Fitch revising Namibia’s ratings outlook from stable to negative in September 2016.
Domestic demand has been partly fueled by strong credit growth that has contributed to fast-rising housing prices and high household indebtedness. Since 2010, credit growth to the private sector averaged 13¾ percent (13.8 in 2015), although slowed down in early 2016 (Figure 5). Corporate lending and mortgage loans, particularly to households, drove credit growth and supported rising housing prices that over the period increased on average by 14 percent. At the same time, household indebtedness reached about 90 percent of disposable income in 2015 (81 percent in 2013), higher than in South Africa and close to the level of advanced economies.
Against this background, monetary and fiscal policy have recently turned on a tightening course. After averaging 3.4 percent in 2015, in 2016 headline inflation started rising and reached 6.9 percent in September, mostly due to higher food prices reflecting the drought, and increases in rental costs and administrative prices. In the context of the peg to the South African rand, the Bank of Namibia (BoN) raised the policy rate, both in 2015 and 2016, to reach 7 percent on par with the South Africa Reserve Bank (SARB)’s rate. In addition, with the FY16/17 budget (March 2016) and mid-year revised budget, the government started implementing spending reductions and announced medium-term fiscal consolidation plans to bring public debt on a declining path.
Acknowledging long-term challenges, the government elected in 2015 has devised plans to boost growth and increase employment, while preserving macroeconomic stability. In the context of their 2030 vision, authorities are articulating a new national development plan (NDP), and implementing industrial policies to support labor-intensive sectors. However, the impact of some past initiatives, including tax incentives, has been limited, particularly on job creation and economic diversification, and a review is ongoing. At the same time, macroeconomic stability has been maintained, with the latest economic policies broadly reflecting recent Fund’s advice.
Outlook and Risks
The economy will slow down in 2016 and vulnerabilities are rising. As the construction of large mines comes to an end and the government starts consolidating, real GDP growth is foreseen to slow temporarily to 1.6 percent in 2016. Inflation is expected to decline to 6 percent only by end-2017 as food prices normalize. Growth is projected to accelerate to above 5 percent in 2017-2018, as production from the new Husab uranium mine ramps up, before converging to a long-term rate of about 4 percent. However, because of low SACU revenue over the medium-term, future fiscal deficits are expected to remain large and public debt to increase to above 60 percent of GDP by 2021. Financing the government would require significant shifts in asset allocations of domestic financial institutions, possibly crowding out private sector credit. On the positive side, larger mining exports and tighter domestic policies would halve the trade deficit to about 12⅓ percent of GDP, with the current account deficit stabilizing at around 5 percent of GDP. In this context, SACU transfers and capital and financial flows will continue playing a key stabilizing role in the Namibian economy and in financing future trade deficits.
Risks to the outlook are tilted to the downside. The main external risks to the Namibian economy arise from further commodity price declines as China rebalancing proceeds, accelerated fall in SACU revenue as the South African economy continues to slow, and lower demand for exports and domestic services as growth in the European trade partners and Angola remains sluggish. Domestic risks are equally prominent and weigh heavily on the outlook, especially from slower growth in the mining and construction sectors, sudden correction in overvalued housing prices and domestic credit, and possible funding risks from the government’s large financing needs and slower fiscal adjustment.
The limited buffers could potentially force abrupt policy responses that would amplify the adverse impact of shocks. Should risks materialize, exports and growth would decrease, creating further pressure on fiscal and external accounts, and international reserves. Given the limited buffers, shocks could prompt an abrupt fiscal adjustment that would exacerbate the negative short-term impact on the economy, as the effects of appropriate fiscal and structural reforms would take time to materialize (Annex II). The impact would be particularly damaging if accompanied by downgrades of the sovereign credit rating, which could prompt further increases in interest rates for both the public and private sector. In addition, sharp reversals in housing prices, coupled with elevated household indebtedness, could negatively affect financial intermediation through a deterioration in banks’ asset quality and profitability, and in turn growth.
Policy Discussions
Namibia’s key challenges are to preserve macroeconomic stability and make inroads in reducing high unemployment and income inequality. With recent expansionary fiscal policy contributing to rising public debt and external vulnerabilities, discussions focused on the need for: (i) anchoring additional fiscal adjustment in a credible medium-term plan that minimizes the negative impact on growth; (ii) managing risks from overvalued housing prices and the large non-bank financial sector; and (iii) advancing structural reforms to generate sufficient jobs to reduce unemployment and inequality.
Annex I. External Sector Assessment
External Sector Imbalances and Long-Term Vulnerabilities
Since 2006, Namibia’s current account (CA) balance has been constantly deteriorating, raising the possibility that structural vulnerabilities are building up. Following stable surpluses in the first half of the 2000s, the CA balance turned negative in 2009 and reached a deficit of 13.7 percent in 2015. The deterioration has been mainly driven by a widening trade deficit (25 percent of GDP in 2015), despite a REER depreciation, only partially offset by higher SACU transfers that have smoothed the impact on the current account. The larger CA deficits have been largely financed by increased FDI and lower portfolio outflows.
The recent CA deterioration is explained mainly by changes in volumes with price variations playing a minor role. With the Namibian economy recovering fast from the global financial crisis, over 2012-15 import volumes grew on average 7 percentage points faster than export volumes, contributing negatively to the CA. Changes in terms of trade (on average 1 percent per year) and in other non-trade flows played only a minor role, with the exception of 2012 when SACU transfers temporarily increased absorbing part of the trade deficit.
On average, fast-growing private investment and declining public savings have underpinned the CA deterioration. While there are significant fluctuations across years, the widening CA deficit has been driven by a rapid increase in private investment (rising on average 0.9 percentage points of GDP per year over 2010-15), particularly in 2012 and 2014. However, at the same time, public savings have on average declined by 1.3 percentage points of GDP per year, reaching a lower point in 2015, as the fiscal deficit peaked.
A sizable component of the trade deficit appears to be structural rather than cyclical, suggesting that CA deficits should be expected in the future. Different methods can be used to isolate the structural and cyclical components, including the Hodrick-Prescott (HP) and the Baxter-King’s Band-Pass (BP) filters, and informed identification of one-off imports (e.g., machinery, fuel) related to the construction of new large mines, and other cyclical components.
All these methods suggest that in 2015 the structural component of the CA deficit was about 8½ percent of GDP, comparable to the CA norm estimated under the IMF’s EBA-lite CA model (see below). In this context, SACU transfers and financial flows will continue to play a key stabilizing role in the Namibian economy to finance future trade deficits.
Selected Issues
Calibrating “growth-friendly” fiscal consolidation in Namibia
The authorities in Namibia have embraced ambitious fiscal consolidation plans, and the key challenge is to minimize the negative effects on growth. Depending on the size, pace and composition, fiscal consolidation can negatively affect growth both in the short and long term. In the short term, consolidation reduces domestic demand and, depending on short-term multipliers, growth. Fiscal consolidation could also introduce or exacerbate distortions and negatively affect potential growth. Minimizing the negative impact of consolidation on growth is especially important in Namibia where unemployment is close to 30 percent (with more than 40 percent of youth unemployed), and income inequality is the second highest in the world.
This paper assesses the impact on growth of alternative fiscal consolidation strategies using model simulations. With the 2016-2018 Medium-Term Fiscal Framework (March 2016), the authorities embraced a three-year fiscal consolidation plan, focusing on reducing current expenditure and containing capital spending growth. Additional consolidation efforts for FY16/17 were envisaged in the 2016 Mid-Year Budget Review. However, recent macroeconomic projections suggest that an additional cumulative adjustment of about 5 percent of GDP is needed to put public debt on a declining path and secure sustainability. Given the significant size of the additional adjustment, two issues are important for growth: the pace and the composition of the adjustment. This paper assumes that the additional adjustment is equally split over the next three fiscal years, and focuses on how to design the composition of the correction to minimize the impact on growth.
To gain insights on what would be a growth-friendly composition of the fiscal adjustment, the paper relies on the DIGNAR model developed at the IMF (Debt, Investment, Growth and Natural Resources). The model is calibrated to reflect the main features of the Namibian economy. DIGNAR is a dynamic general equilibrium macroeconomic framework that encompasses a set of policy variables. On the revenue side, it includes changes in income and consumption taxes. On the expenditure side, it includes changes on current expenses and capital spending. Moreover, the model allows assessing the impact of fiscal structural reforms of revenue administration and public investment management.
Alternative Fiscal Consolidation Options
Three alternative fiscal consolidation scenarios are considered given the baseline. The baseline reflects measures already announced in the 2016 Medium-Term Fiscal Framework for the period 2016/17-2018/19, and recent revisions to the FY16/17 budget. These measures focus on: reducing non-wage expenditures in real terms, and containing the growth rate of government investment (with suspension of several capital projects in FY16/17), with very limited changes on the revenue side. However, as the macroeconomic outlook has deteriorated, despite consolidation plans, public debt would be non-sustainable. In line with Fund’s advice, about 5 percent of GDP in additional measures is needed over the next three years to bring public debt on a declining path. This paper considers three possible strategies (scenarios) to achieve such an adjustment:
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Scenario 1: Expenditure-based consolidation. This strategy foresees an additional permanent reduction in current expenses by 1.7 percent of GDP per year over the period FY17/18-FY19/20.
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Scenario 2: Revenue and expenditure-based consolidation. This “balanced” strategy achieves the same fiscal adjustment as in scenario 1 (1.7 percent of GDP adjustment per year over three year), but assumes that a quarter of the adjustment is achieved by increasing indirect taxation. In this context, the additional benefits from improving tax collection efficiency are also considered.
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Scenario 3: Investment-friendly consolidation. This strategy follows scenario 2, and, in addition, assumes a change in the composition of expenditures. In particular, the strategy entails an additional one-percent-of-GDP reduction in current expenses to finance a corresponding increase in public investment. In this context, the growth benefits of structural reforms in public investment management are also considered.
Growth Impact of Alternative Consolidation Plans
Additional consolidation through spending reductions (scenario 1) is expected to have substantial cumulative negative effects on growth. Under this scenario, public debt would decline and reach about 43 percent of GDP by 2021/22. However, over the three-year consolidation period, the cumulated negative effects on growth is almost 1.2 percent, relative to the baseline scenario (Figure 1, red lines). The effect of adjustment on growth is partly contained by the significant openness of the economy, with large shares of imports in government purchases, and the assumption that spending reductions occur in unproductive current expenditures.
A combined strategy of revenue and expenditure measures (scenario 2) has lower negative effects on growth than a pure expenditure-based adjustment. Combined revenueexpenditure measures would result a public debt path similar to scenario 1. However, the negative impact on growth, relative to the baseline scenario, is smaller than under scenario 1. This result is mainly due to the combined effect of two factors: (i) the increase in revenue is attained through increasing consumption taxes, characterized by a lower distortionary impact than income taxation; and (ii) the model includes a significant share of financially-constrained agents, who are “hand-tomouth” and do not increase savings in response to the increase in taxes.
Improving revenue administration has the potential to limit further the negative impact on growth. Revenue administration in Namibia has substantial room for improvement (see IMF, 2016). We consider the impact of improving tax collection efficiency to achieve a one percent of GDP increase in tax revenues. In the DIGNAR model, better collection efficiency is assumed not to have substitution effects for saving and labor decisions (only income effects), thus allowing to reduce the overall spending adjustment at limited macroeconomic costs. In this context, an adjustment that includes improvements in tax collection efficiency has in general smaller negative effects on GDP. In the case of scenario 2, it would reduce the cumulative growth loss by a fifth to less than 0.8 percent, compared to the case with no revenue efficiency gains.
The investment-friendly consolidation strategy (scenario 3) is the most pro-growth adjustment strategy of all. In the DIGNAR model, public investment feeds into the accumulation of public capital, which in turn is assumed to raise the productivity of private factors, thus boosting overall growth. As a result, freeing resources to increase capital spending can yield significantly improved growth paths. Starting with scenario 2, increasing investment by one percent of GDP (financed through lower current expenditures) is estimated to mitigate the growth effects of adjustment to around 0.4 percent over 2017/18-2019/20. In addition, as public capital accumulates over time, the differences in the growth impact between the two scenarios widen over the medium term and by 2021, the cumulated growth effect for scenario 3 is positive and one percentage points higher than under the combined revenue and expenditure consolidation strategy. Better growth outcomes also benefit the fiscal performance, with improvements, albeit small, in the public debt ratio path.
Structural reforms improving the efficiency of public investment can further reduce the negative effect of consolidation on growth, and potentially strengthen growth. Not every dollar of capital expenditures usually translates into a one-dollar increase in productive public capital. Structural reforms improving project design, selection, implementation and governance can, therefore, significantly reduce wastes and enhance the quality of public infrastructure. This means that a greater fraction of investment expenditures turns into productive public capital.
Overall, minimizing the negative impact of fiscal consolidation on growth requires to combine revenue and expenditure measures, together with fiscal structural reforms. Although multipliers in Namibia seem to be low, the needed additional fiscal adjustment to bring public debt on a declining path can have significant cumulative effects on growth. To minimize these effects, combining reductions in current expenditure with increases in indirect taxes appears to be the best strategy because such a combination better exploits the relative low distortionary impact of indirect taxation on investment and labor decisions, and allows to sustain essential public services. Even better growth outcomes can be attained if this strategy is accompanied by: (i) a change in the expenditure composition in favor of public investment, (ii) structural reforms in public finance management that raise the level of investment efficiency, and (iii) reforms improving tax collection efficiency. In fact, unlike current expenditures, public investment increases the stock of public capital in the economy, which in turn raises the productivity of private factors for production. A greater investment efficiency translates into a larger part of each dollar of investment expenditures being effectively turned into public capital. Finally, improving the tax collection efficiency, by enlarging the tax base, raises government revenues and ease pressures on public debt, allowing the government to set tax rates at a relatively lower level.
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Chinese enterprises help improve living standards of South Africans
A report released Thursday shows that Chinese enterprises in South Africa are making positive contributions to the socio-economic well-being of the country.
According to the report on the development of Chinese enterprises in South Africa unveiled by the South Africa-China Economic and Trade Association, there are more than 300 Chinese companies including representative offices in South Africa and among them about 140 are large and medium-sized companies.
The Chinese companies have been involved in such fields as real estate, mining, automobiles, finance, construction, textile, logistics and household appliances, the report said.
By the end of 2015, Chinese investment in South Africa reached about $13 billion. The Chinese enterprises employed more than 26,000 people in South Africa, of whom 24,000 were locals, the report said.
“Over the years, the Chinese enterprises have devoted themselves to South Africa’s economic and social development,” Chinese Ambassador to South Africa Tian Xuejun said at a ceremony to launch the report.
The Chinese companies “have strictly abided by laws and regulations, maintained sound relations with local communities, earnestly fulfilled their social responsibilities and been actively engaged in the development of South Africa’s education, health and social charity,” Tian said.
Tian said despite the sluggish global economic growth, the Chinese enterprises are working hard to maintain investment and production, and keep jobs in South Africa.
The Chinese enterprises are now working with their South African partners to deepen cooperation in fields such as infrastructure construction, development of special economic zones and industrial parks, equipment manufacturing, industrial capacity, marine economy, exploration of energy resources, and finance, Tian said.
“Both sides are energetically pushing forward the reindustrialization and the social and economic transformation of South Africa. Those efforts once again prove that the Chinese enterprises have taken roots in the Rainbow Nation and their future has been closely connected with South Africa and its people,” he added.
The report shows that Chinese investment has improved the living standards of South Africans by improving the level of science and technology, the development of local economies and job opportunities.
Mogokare Richard Seleke, director-general of South Africa’s Department of Public Enterprises, said the report is a fair assessment of the South African environment.
While promising to address the concerns and challenges the Chinese enterprises face in South Africa, Seleke urged them to consider investing in rural areas, saying that “there are untapped opportunities in the countryside.”
Cheng Jun, chairman of the South Africa-China Economic and Trade Association and CEO of the Bank of China in Johannesburg, said that the Chinese enterprises have integrated themselves well with local communities and improved people’s livelihood.
“While the Chinese enterprises continue to grow and develop, they have faced a series of social and economic challenges such as security risk, legal risk, labor risk, operational risk and exchange rate risk,” Cheng said.
Aptserv Consulting Chairman Michael Paketh, who has worked with China’s Sinosteel in South Africa, Cote d’Ivoire and Ghana, told Xinhua that the Chinese enterprises are doing a good job in Africa.
Paketh said the Chinese are honest and friendly, and have high standards of business ethics. “They are good partners. They have given Africa opportunities for development... They focus on business and do not interfere in the politics of other countries and I respect them for that.”
Chinese official data shows that bilateral trade between China and South Africa exceeded $46 billion in 2015.
The South Africa-China Economic and Trade Association, established in 2011, is a non-governmental organization launched by Chinese enterprises and some companies owned by ethnic Chinese in South Africa, with more than 120 members.