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Reviews set out UK vision for an open, modern development system
New Bilateral and Multilateral Aid Reviews set out a vision for global development that will tackle the challenges of the 21st century.
The UK will champion an open, modern and innovative approach to development that will effectively tackle the global challenges of the 21st century while delivering the best results for the world’s poorest which is in our national interest, the International Development Secretary Priti Patel set out in two reviews launched on 1 December 2016.
Raising the standard: The Multilateral Development Review 2016 and Rising to the challenge of ending poverty: The Bilateral Development Review 2016 establish how the UK will address the global response to problems that threaten us here at home such as the migration crisis, cross-border conflict, climate change and disease pandemics.
In the reviews, the International Development Secretary makes clear that Britain’s aid contribution is an investment in our future security and national interest.
In an extensive and detailed look at the UK bilateral and multilateral development systems, the reviews confirm the geographic regions of focus for the UK, which multilateral organisations the Department for International Development (DFID) will work with, and the tools that will be used to maximise our impact as we tackle poverty across the globe.
The reviews highlight best practice in the global development system, as well as examples of poor performance that will face urgent action.
The UK is clear in its demand for high performance across the board and will maintain pressure on multilateral organisations and NGOs to ensure results, value for money, transparency and accountability.
International Development Secretary Priti Patel said:
From leading the international response to the Ebola outbreak in Sierra Leone to getting lifesaving humanitarian aid to millions of people in Syria, UK aid supported by the British public has had an incredible impact on helping the world’s poorest people.
But the global approach to development needs to adapt and reform to keep pace with our rapidly changing world. As a world-leader, the UK will be at the forefront of these efforts: promoting pioneering investment in the most challenging and fragile countries, making greater use of cutting-edge technology, and sharing skills from the best of British institutions from the NHS to our great universities.
Improving the way the UK delivers aid along with our multilateral partners is vital to deliver the best results in fighting poverty and value for taxpayers’ money.
Global Britain is outward looking and we will use our aid budget to help build a more stable, more secure, and more prosperous world for us all: this is not only the right thing to do – it is firmly in our interests.
Bilateral Development Review 2016
The Bilateral Development Review 2016 focuses on how the UK can deliver the best results on the ground for the world’s poorest people.
Key features of the Bilateral Development Review include:
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The UK is calling for further transparency and even stronger measures on value for money, for both the UK and its NGO partners. The international aid system as a whole must become more effective, transparent and accountable to the poorest people in the world, and to taxpayers.
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The UK’s bilateral development programmes will focus on security, migration, people with disabilities, health, and ending the reprehensible practices of modern slavery and child exploitation. The UK will ensure these priority areas are consistently considered in all areas of work.
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The UK will tackle the major global challenges of the 21st century by strengthening global health security, creating job opportunities and making the best use of technology and research. As set out in the UK’s Aid Strategy, 50% of DFID’s spending will go to fragile states and regions, including in the Middle East and Africa.
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In the foreword, the International Development Secretary sets out how the UK will continue to speak out against outrages in Syria and harness the spirit of urgency and impact that the UK showed during the Ebola crisis and apply it to the even greater task of eradicating extreme poverty.
Multilateral Development Review 2016
Britain’s support to multilateral development agencies will build on work which in 2014 immunised 56 million children in some of the world’s poorest countries, helped 10.4 million young people living through humanitarian emergencies to access education and provided access to clean water for 27.8 million people.
Key features of the Multilateral Development Review include:
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By encouraging multilateral agencies to collaborate, the UK has helped secure significant results while ensuring value for money. For example, Gavi, the Vaccine Alliance, worked with UNICEF to order vaccines in bulk, which has saved around £900 million over the past 5 years. Gavi’s UK-backed vaccine programmes saved the lives of more than 4 million children between 2011 and 2015.
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Reviewing the multilateral system has real impact. For example, the Food and Agriculture Organization (FAO) was put into special measures after the 2011 Multilateral Aid Review. Since then, they have modernised their management structure and delivered over US$100 million of efficiency savings between 2011 and 2015 and their performance is ranked as ‘good’ in this year’s review.
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The UK government expects and insists that every penny of taxpayers’ money is spent in an efficient, transparent and demonstrably effective way. DFID is therefore introducing improvement plans for poor performing agencies.
UK aid spend will continue to be reviewed and partners will be held to account to make sure the international development system is delivering the best results for the world’s poorest and the best value for the UK taxpayer.
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Globalization resets: The retrenchment in cross-border capital flows and trade may be less dire than it seems
The two decades following the Cold War were celebrated and decried as the era of globalization. Cross-border movement of capital, goods, and people expanded inexorably.
Between the fall of the Berlin Wall in 1989 and the early onset of the global financial crisis in 2007, international capital flows grew from 5 percent of global GDP to 21 percent; trade leaped from 39 percent to 59 percent; and the number of people living outside their country of birth jumped by more than a quarter.
But today the picture is more complex. International flows of capital have collapsed. Trade has stagnated. Only the cross-border movement of people marches on.
Do these developments portend the start of a new era – perhaps one of deglobalization? Such a reversal is possible: the rapid globalization of the late 19th century gave way to the deglobalization of the early 20th. And yet, in the absence of a shock comparable to World War I or the Great Depression of the 1930s, history seems unlikely to repeat itself. A look beyond the headlines suggests that globalization is changing rather than stagnating or reversing.
Capital flows
Consider first the trends in global capital movement – the most compelling area of the deglobalization story. The McKinsey Global Institute (Lund and others, 2013) reports that, in 2008, cross-border flows of capital crashed to 4 percent of global output, a fifth of their peak the previous year (see Chart 1). That collapse, and the even lower level of cross-border financing in 2009, reflected the extraordinary freeze-up of financial markets following the September 2008 bankruptcy of the U.S. investment firm Lehman Brothers. But what is more remarkable is that financial globalization has yet to recover. McKinsey, in an update of the data used in its 2013 study, reports cross-border flows fell to 2.6 percent of global GDP in 2015 and over the period 2011–15 averaged just 5.4 percent of global GDP – a quarter of the 2007 level.
What might explain this? The first clue can be found by separating cross-border finance into four categories (see Chart 2). One of these – portfolio equity investment, that is, investors’ purchases of shares in foreign stock markets – is up slightly in dollar terms since 2007. Two types of flows – bond purchases and foreign direct investment – have fallen, but not dramatically. It is the fourth – bank lending – that has collapsed. In 2015, net cross-border lending was actually negative, as banks called in more international loans than they extended. Taking these figures together, McKinsey calculates that the evaporation of cross-border bank lending explains three-quarters of the overall fall in cross-border finance since 2007.
To some extent – indeed, probably to quite a large extent – the retreat from cross-border lending represents a healthy correction. In the years before 2007, two parallel manias boosted international lending unsustainably: European banks were loading up on U.S. subprime mortgages, and banks in northern Europe were lending prodigiously to the Mediterranean periphery. It is therefore not surprising that the collapse of cross-border lending has been concentrated among banks in Europe. According to the Bank for International Settlements, euro area banks reduced their overseas claims by almost $1 trillion annually in the eight years following the Lehman Brothers bankruptcy, a far more dramatic contraction than occurred in other regions.
Getting it right
Seen in this light, the years leading up to the financial crisis are not a useful guide to how much financial globalization is normal or desirable. Cross-border capital flows peaking at 21 percent of global output reflected a toxic mix of ambition and credulity, notably among European banks. But if 2005-07 was an aberration, what is the appropriate benchmark for global integration?
One way to answer this question is to consider the period from 2002 to 2004, a relatively calm interlude between the early 2000s crash of internet-based companies (the so-called dot-com collapse) and the U.S. subprime borrowing and euro area bank lending mania later in the decade. In those three years, cross-border capital flows averaged 9.9 percent of global GDP. Judging by that benchmark, the new normal of 2011-15 is just over half the old normal of the previous decade. By this measure, financial deglobalization may have overshot.
There is, however, a second way of answering the question, for what was normal even in the calm years of the early to mid-2000s may not necessarily have been desirable. Since that time, there has been a reappraisal of the case for cross-border finance. For one thing, some of its theoretical advantages appear to be just that: theoretical. In principle, financial globalization allows savers in rich countries to reap high returns in fast-growing emerging market economies, thus easing the rich-country challenge of paying for retirement. Meanwhile, it supplies foreign capital to emerging market economies, allowing them to invest more and thereby catch up faster with the rich world. But in reality, many large emerging markets have grown by mobilizing domestic savings, exporting capital rather than importing it. The textbook case for financial globalization exists mostly in textbooks.
If the upside of financial globalization has been elusive in practice, the downsides have grown more obvious. First, global capital tends to rush into small open economies during good times, aggravating the risk of overinvestment and bubbles; it flees in bad times, exacerbating recession. That has led middle-income nations to experiment with capital controls. Second, cross-border banking involves large, complex, and hard-to-regulate lenders, which poses risks to society that became evident during the 2008 bust. Because of those risks, regulators in the rich world have discouraged banks from foreign adventures, which has added materially to deglobalization. Forbes, Reinhardt, and Wieladek (2016) show that, in the case of Britain, regulatory discouragement of foreign lending can be remarkably powerful, accounting for about 30 percent of the attrition in cross-border lending by U.K. banks during 2012-13.
Although there is no denying that finance is less international than it used to be, it is debatable whether this retrenchment is best described as “deglobalization,” with its connotations of retreat, or as something more positive – “sounder global management.” After all, the new regulatory restrictions are at least partly a response to the risks of cross-border financing, which suggests a desirable level of flows considerably lower than the 9.9 percent of global output during 2002–04. If the optimal ratio were, say, around 5 percent, today’s degree of financial globalization might be just about right.
Trade retreat
Now consider the second form of globalization: trade. Here, there is less doubt about the benefit of cross-border activity. The great development success stories of east Asia were built on exports. From Africa to Latin America to south Asia, autarky, in which states prefer self-sufficiency to trade, has fared badly as a formula for poverty reduction. According to economists Gary Hufbauer and Euijin Jung (2016), progressive trade expansion since World War II has added more than $1 trillion a year to U.S. national income, and the global gains are commensurately larger. Although it is true that trade, like technological advances, can skew the distribution of income, the benefits of globalization to the overall economy far outweigh the losses to workers hurt by imports. So the right response to inequality is not protectionism. It is taxing and spending policies that redistribute some of the overall gains to those who are hurt by trade. That this redistribution has so far been inadequate is a failure of politics rather than of globalization.
Because trade is so beneficial, the current backlash against it is damaging. The Doha Round of global trade talks has failed; the Trans-Pacific Partnership faces an uncertain path to ratification; efforts to conclude the Transatlantic Trade and Investment Partnership have stalled. By opting to leave the European Union, British voters demonstrated indifference to the benefits of Europe’s single market – or at least their unwillingness to accept migration as the price of membership. In the United States, the recent presidential campaign showed how support for trade has withered. Republican presidential candidate Donald Trump promised to impose punitive tariffs on trading partners. Democratic candidate Hillary Clinton abandoned her support for the Trans-Pacific deal.
This backlash mirrors a sharp deceleration in the growth of trade relative to GDP. Between 1990 and 2007, global trade grew at about twice the rate of global output; since 2008, it has lagged global growth. As with financial globalization, this setback has outlasted the immediate aftermath of the Lehman crisis. Measured as a share of global GDP, trade crashed in 2009, then recovered sharply in 2010-11. But starting in 2012, it drifted sideways and then down (see Chart 3).
And yet, as with finance, this seeming shock to the project of constructive globalization is not as bad as it looks. A small part of the slowdown reflects the erection of myriad subtle trade barriers – what Hufbauer and Jung term “microprotectionism.” The IMF recently examined the effects of this uptick in protectionism and called them “limited.” So a larger part of the trade slowdown reflects statistical factors that should not be interpreted as setbacks to globalization. Some part may even reflect shifts that prove how effectively globalization is working.
Take, for example, the decline in trade from 60 percent of global GDP in 2014 to 58 percent in 2015 – a fall equivalent to $4.5 trillion. A good chunk of this decline is a statistical illusion: the dollar was stronger and commodity prices were lower, so the dollar value of trade went down. Most obviously, the oil price was 48 percent lower in 2015 than in 2014, causing an $891 billion drop in the value of oil traded, even though the number of barrels traded actually increased (BP, 2016). This effect alone explains a fifth of the shortfall in trade relative to GDP in 2015. Meanwhile, the price of iron ore was down 43 percent, and wheat was down 24 percent. These price adjustments make trade look anemic, but they tell us nothing about the health of globalization.
Trade can also be affected when production moves closer to consumers, even when this is not prompted by protectionist impediments to cross-border commerce. For example, a breakthrough in drilling technology, called fracking, has reduced the U.S. need to import oil and gas. The maturation of manufacturing supply chains in Asia may be having a similar effect. China used to assemble products such as the iPhone, importing such complex components as semiconductors. Today, China’s increasing sophistication allows it to make components domestically, reducing imports. In this way, ironically, China’s trade-based development model, which is a prime example of the success of globalization, has allowed it to reduce some aspects of its trade dependence.
Two final considerations encourage the conclusion that trade’s apparent stagnation is not a grave setback – at least, not yet. First, as the world economy becomes richer, it shifts naturally from manufacturing to services, and services are traded less, partly because of higher protectionist barriers in service industries. Second, to the extent that current account imbalances shrink, trade may decelerate, even though smaller imbalances are a sign of healthier globalization. In 2007, according to the World Bank, China ran a current account surplus equivalent to 10 percent of its economy – meaning that a shortfall in domestic spending required it to generate net exports worth a tenth of output. But by 2015, China’s current account surplus had shrunk to just 3 percent. China is now spending more of its income, so it is no longer compelled to ship so much of what it makes abroad. Of course, China could theoretically trade more even while avoiding a trade surplus. But reductions in savings imbalances may be a factor behind sluggish trade data. Savings deficits have shrunk in the United States and Mediterranean Europe even as China’s savings surplus has fallen.
In sum, trade is a clearly beneficial aspect of globalization. A world with minimal trade barriers allows producers in each country to concentrate on its comparative advantages, learn through global competition, and reap economies of scale. The policy backlash against trade is therefore troubling, especially since a less open and competitive world will mean slower gains in productivity, adding to the squeeze on middle-class incomes that trade’s critics lament. But the trade data, sometimes cited to support the view that we are deglobalizing already, do not justify despondency – at least, not yet.
Migration grows
The third aspect of globalization, the movement of people, has been growing of late. During the 1990s, there was almost no increase in economic migration relative to global population: at the start of the decade, economic migrants accounted for 2.5 percent of the world’s people; in 2000 the share was 2.6 percent (see Chart 4). Since the turn of the century, however, migration has gained momentum, rising to 3 percent of global population by 2015. Some 222 million people now live outside their native countries, suggesting that expatriate opportunities outweigh the psychological benefits of rootedness – proximity to family and a sense of cultural affinity.
Tragically, trends in flows of refugees fleeing wars and other instability have followed a similar pattern, according to the World Bank. From 1990 to 2005, refugees declined as a share of global population, from 0.37 percent to 0.20 percent. But that trend has since reversed, with the refugee share rising to 0.29 percent in 2015 – still lower than the proportion in the first half of the 1990s, when millions fled the fighting in the former Yugoslavia, but bigger in absolute numbers. In 2015 there were 21 million refugees, more than the peak of 20 million in 1992. Moreover, the number of internally displaced people is higher now. The global problem of war and disaster-driven displacement is now at a record.
More positive than negative
If globalization is the process of sharing ideas and resources across borders, the evidence reviewed here is more positive than otherwise. Financial globalization has reversed, but the new level may be healthier. What’s more, foreign direct investment – the most stable, knowledge-intensive, and productive form of cross-border capital flow because it gives those in recipient countries a direct role in running a business – now accounts for a far larger share of total cross-border flows. With respect to trade, the political climate is damagingly hostile, but recent trade data are less worrisome than they appear. Meanwhile, the movement of people, perhaps the most important of the three traditional forms of globalization, continues to outpace global population growth. If globalization is ultimately about freeing individuals to seek inspiration and opportunity beyond their borders, or even just to escape harsh circumstances at home, there is little sign of a slowdown.
But the most compelling ground for optimism lies elsewhere. During the past 15 years or so a fourth channel for globalization has emerged, one that was barely recognized when the Berlin Wall came down. Ideas, data, news, and entertainment are now shared globally on the internet, in volume that dwarfs the traditional channels of interaction across borders. The McKinsey Global Institute (Manyika and others, 2016) reckons that this digital globalization now exerts a larger impact on growth than merchandise goods trade. Millions of small businesses that lack the scale to venture abroad physically have turned themselves into exporters by participating in online marketplaces. Some 900 million people use social media to connect with friends or colleagues across borders. Millions of students study in virtual classrooms, taught by people on the other side of the world.
The progress of globalization depends on two forces: technology, which eases travel and communication, and politics that underpin an open world. The remarkable thing about the 1990s was that both forces operated together: cheaper travel and telephony were reinforced by the opening up of China and by a series of breakthroughs in trade liberalization – the North American Free Trade Agreement, the European single market, and the Uruguay Round of global trade negotiations.
There is no denying that the world finds itself in a new era: technology still drives integration forward, but political resistance is growing. And yet, for the moment, the drag from politics seems weaker than the thrust from technology. Absent some truly cataclysmic shock – something akin to a world war or a depression – the best bet is that globalization will march on.
Sebastian Mallaby is the Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations and author, most recently, of The Man Who Knew: The Life & Times of Alan Greenspan.
Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.
References
British Petroleum (BP), 2016, Statistical Review of World Energy (London).
Forbes, Kristin, Dennis Reinhardt, and Tomasz Wieladek, 2016, “The Spillovers, Interactions, and (Un)Intended Consequences of Monetary and Regulatory Policies,” NBER Working Paper 22307 (Cambridge, Massachusetts: National Bureau of Economic Research).
Hufbauer, Gary, and Euijin Jung, 2016, “Why Has Trade Stopped Growing? Not Much Liberalization and Lots of Microprotection,” Peterson Institute for International Economics report (Washington).
International Monetary Fund (IMF), 2016, World Economic Outlook (Washington, October).
Lund, Susan, Toos Daruvala, Richard Dobbs, Philipp Härle, Ju-Hon Kwek, and Ricardo Falcón, 2013, Financial Globalization: Retreat or Reset? (Washington: McKinsey Global Institute).
Manyika, James, Susan Lund, Jacques Bughin, Jonathan Woetzel, Kalin Stamenov, and Dhruv Dhingra, 2016, Digital Globalization: The New Era of Global Flows (Washington: McKinsey Global Institute).
Using aid for structural change in fragile states could help curb rising instability
The world has grown more violent over the last decade, interrupting a long-term trend of increasing peace and disproportionately impacting civilians. This is despite rising financial flows to the most vulnerable places, according to a new OECD report.
States of Fragility 2016: Understanding Violence calls for more development aid to be used to tackle the root causes of fragility and instability, including building legitimate and inclusive political systems and institutions, strengthening security and access to justice, supporting economic growth and ensuring the availability of basic services..
Analysis of multiple data sources shows that global violence is at its worst level since the end of the Cold War, with nearly half the world’s population, or 3.34 billion people, living in proximity to or feeling the impact of political violence. Conflict is one cause of violent deaths, but in 2015 more people died violently in countries not afflicted by conflict. Central America is the region that suffers the most lethal violence, followed by Southern Africa, the Caribbean and South America.
Low- and Middle-Income countries bear a disproportionately high share of the burden of political and social armed violence, which often impedes development gains.
“If the challenges faced by these countries are not met, progress on combating climate change and achieving the Sustainable Development Goals will be stalled and millions of people will remain mired in poverty and conflict, the migration crisis will not be resolved, and violent extremism will continue to increase,” said OECD Deputy Secretary-General Doug Frantz, presenting the report during the 2nd High-Level Meeting of the Global Partnership for Effective Development Cooperation in Nairobi.
Defining fragility as the combination of exposure to risk in five areas – economic, environmental, political, social and security – and the insufficient capacity of the state or system to manage, absorb or mitigate those risks, the OECD estimates that more than 1.6 billion people, or 22% of the global population, live in fragile areas. While the number of people living in extreme poverty is falling, the number of extremely poor people living in fragile places is set to increase to 542 million in 2035 from 480 million in 2015.
The report notes that while the global economic impact of violence has been estimated at USD 13.6 trillion for 2015, or 13.3% of GDP, only a tiny amount of development aid is invested in violence reduction outside of conflict situations.
Total financial flows to fragile places, including official development assistance (ODA), foreign direct investment and remittances increased by 206% between 2002 and 2014 in constant terms to more than USD 2.04 trillion. ODA represents 32% of that total. While ODA remains an important tool for fragile states, some of it tends to be unevenly distributed and targeted at the symptoms rather than the real drivers of fragility.
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New Great Lakes Trade Facilitation Project rolls out
The implementation of Great Lakes Trade Facilitation Project (GLTFP) has begun with earnest with the launching of recruitment for Trade Information Officers to be based at selected locations in the eastern borderlands of the Democratic Republic Congo and the neighboring countries of Rwanda and Uganda.
The GLTFP is financed by the World Bank and implemented by COMESA. Its objective is to facilitate cross-border trade by increasing the capacity for commerce and reducing the costs faced by small-scale traders, majority of who are women.
The project will build on existing Trade Information Desks (TIDs) established by COMESA in the selected border region including Goma in DRC and Rubavu in Rwanda, Kasindi (DRC) and Mpondwe (Uganda), Bunagana (DRC) and Bunagana (Uganda).
A total of 20 additional TID Officers will be recruited to complement the existing capacity as well as for the new desks that will be identified through the on-going assessment mission mounted by the COMESA Secretariat in the Great Lakes region. Additional Officers (TIDO) will be added to the posts where there is one.
In meeting with the COMESA team, the regional government authorities in Rusizi and Rubavu (Rwanda) and their counterparts in Bukavu and Goma in DR Congo have welcomed the initiative and pledged to support it to ensure the largely informal trade is gradually formalized.
The new desks are expected to be at Mahagi in DRC and Goli in Uganda and Bukavu (DRC) and Rusizi (Rwanda) border regions. The new Trade Information Desk Officers will help traders apply the COMESA Simplified Trade Regime (STR) whose objective is to facilitate cross border traders by providing general information about applicable duty and documentary requirements, taking complaints and reports of incidents, and assisting with conflict resolution.
Besides working with traders, the desk officers will work with various border agencies such as immigration, Customs and security officials, local cross-border traders associations, as well as with local government authorities.
tralac’s Daily News Selection
The selection: Monday, 5 December 2016
Starting today, in Abuja: the African Economic Conference 2016 on the theme ‘Ending hunger and enabling food security in Africa’. Twitter updates: #2016AEC
A guide to last week’s UNU-WIDER conference in Pretoria: ’Regional growth and development in Southern Africa: new data, new approaches, and new evidence’
Part I (pdf): The Republic of South Africa faces the imperative of escaping economic stagnation. The broad-level economic ills besetting South Africa are well known but bear brief repetition: real GDP per capita has hardly grown for nine years; productivity growth has been slow and appears to be slowing; the unemployment rate has recently been increasing from already extraordinarily high levels; and inequality remains stubbornly very high. Part II (pdf) considers southern Africa as a whole. It takes stock of the experience of the past two decades and seeks to chart realistic paths forward from a regional growth and development perspectives. It is structured as follows. Section 2 provides background and motivation including a discussion of the philosophy of the research programme undertaken within the framework of this project. Section 3 considers six specific areas where a regional growth and development perspective may have particular promise. These areas are: the spread of regional supermarket chains; the poultry value chain; trucking; mining equipment and related services; energy including bio-energy; and confronting climate change. [Downloads: research outputs and project documentation, tralac’s participation]
Intra-African trade and investment updates:
In Algiers: Business investment forum calls for action to improve intra-Africa trade (New Times)
Delegates at the three-day African Business and Investments Forum held over the weekend in the Algerian capital, Algiers, have once again urged business and political leaders in Africa to remove barriers that limit countries across the continent from trading with each other. Described by organisers as the first of its kind in the country and elegantly called the ‘Algiers Rendezvous’, the meeting attracted about 1000 participants from more than 40 African countries. “It took me about 20 hours to come to Algeria. We need to be better connected in order to work together,” said Amina Mohamed Jibril, Kenya’s Cabinet Secretary for Foreign Affairs. “Yogurt is imported at 83% in Africa. What is complicated in making yogurt?” wondered former Executive Secretary of the United Nations Economic Commission for Africa, Dr Carlos Lopes, essentially challenging his fellow Africans to explore the economic benefits of manufacturing. He also accused African financial institutions of being “lazy”, saying that they aren’t doing enough to support small businesses while they sit on an $80-billion capital that remains non-invested and sits idle in the banks’ coffers as they fear to invest it on the continent.
Egypt-COMESA: New customs tariffs on luxury goods aim at reducing imports – Egypt ministers (Ahram)
Minister of Finance Amr El-Garhy and Minister of Trade and Industry Tareq Kabil said on Sunday that the recent decision to raise tariffs on a number of luxury goods aims to support local industry and reduce imports. Last week, Egypt raised tariffs on 320 different luxury goods, including some fruits, cosmetics, stationary and electronic gadgets, between 40 and 60%. The increase was the second such hike in taxes on imported luxuries this year. The two ministers said in a joint statement that the rise in the rate of imports during recent years had put a huge burden on the nation’s economy, leading to a $49bn deficit in the public budget. This situation required critical decisions to limit imports and support local industry in a way that preserves Egypt’s international trade agreements, according to the statement. The ministers added that imported goods from parties that have free trade agreements with Egypt such as the EU, the COMESA African grouping, the Arab region and Turkey would not by affected by the new decision. [Egyptian government’s decision to exempt poultry from import taxes angers local producers]
@Trade_Kenya: Egypt-Kenya Business Council meeting in Cairo. @Kiptoock & chair Hossam Farid
Nigeria, Morocco agree to promote gas project to foster regional integration (Premium Times)
Nigeria and the Kingdom of Morocco have agreed to promote a regional gas pipeline project that would connect Nigeria’s gas resources, those of several West African countries and Morocco. The Minister of Foreign Affairs, Geoffrey Onyema, said the pipeline project would be designed with the participation of all parties involved to create a competitive regional electricity market with the potential to be connected to the European energy markets. He said Nigeria and Morocco also agreed to develop integrated industrial clusters in the sub-region in sectors such as manufacturing, Agro-business and fertilizers to attract foreign capital and improve export competitiveness. The News Agency of Nigeria reports that at the end of the 3-day official visit of King Mohammed VI to Nigeria, 21 bilateral agreements were signed between Nigeria and the Kingdom of Morocco. [Nigeria, Morocco and new levels of intra–African bilateral relations]
Dangote, Moroccan Group sign MoU on fertiliser production (Vanguard)
Nigeria’s agricultural sector has received a major boost as the Dangote Group and the OCP Group of Morocco signed an agreement to boost fertiliser production and business in the country. The partnership is expected to lead to the creation of an integrated African platform and a global leader in fertiliser production, A statement from the Dangote Group announced this on Sunday in Abuja. It said that the collaboration between the two African conglomerates would help the Dangote mix the mass deposit of phosphate in Morocco with the gas potential in Nigeria to produce fertiliser for the development of the agriculture sub-sector in Africa.
We want more trade with Egypt: Tunisian investment minister (Ahram)
Tunisia hopes for trade growth with Egypt, Tunisian Minister of Investment, Development, and International Cooperation Mohammed Fadel Abdel Kafi told Ahram Online at Tunisia’s 2020 investment conference. Abdel Kafi said in exclusive statements to Ahram Online that the size of economic cooperation was still tenuous, adding that he met Egypt’s minister of international cooperation, Sahar Nasr, in November to discuss economic cooperation between the two countries. In November, Nasr and her Tunisian counterpart discussed means to enhance cooperation between the two sides in the upcoming period, especially in the international, regional and Arab financial institutions, to obtain optimum benefit from both countries’ development partners.
Zambia-South Africa: Lungu dates South Africa (Times of Zambia)
President Edgar Lungu is this week expected in South Africa for a three-day State visit at the invitation of his South African counterpart Jacob Zuma. The President would be accompanied by Foreign Affairs Minister Harry Kalaba, Energy Minister David Mabumba, Tourism and Arts Minister Charles Banda and Commerce, Trade and Industry Permanent Secretary Kayula Siame, among other Government officials. "President Lungu and President Zuma will also address a gathering of Zambian and South African captains of industry, business entities and executives organised under the auspices of the Zambia-South Africa Business Forum," Mr Mwamba said.
Sixth SA-China Bi-National Commission: communique (The Presidency)
The Commission received and deliberated on reports of the Sectoral Committees on foreign relations, trade and investment, science and technology, mining, energy and education. They also reviewed the progress made with regard to the South Africa-China relations over the past three years and identified the way forward for the continuously expanding bilateral relations. The BNC witnessed the signing of the following Agreements: (i) MoU between the Department of Trade and Industry and the Ministry of Commerce regarding Co-Operation on Special Economic Zones and Industrial Parks; (ii) Framework Agreement between the National Development and Reform Commission of the People’s Republic of China and the Department of Trade and Industry of Republic of South Africa for Developing Cooperation on Production Capacity.
Profiled, recently published African trade statistics:
Nigeria: foreign trade statistics, 3rd quarter 2016 (National Bureau of Statistics): Nigeria’s import trade by direction showed the country imported goods mostly from China (with an import value of ₦478.7bn or 19.8% of total imports). This was followed by Belgium (₦331.3bn or 13.7%), Netherlands (₦299.7bn or 12.4%), the US (₦165.5bn or 6.9%) and India (₦121.3bn or 5.0% of total imports). Imports by economic region revealed that the country consumed goods largely from Europe, with import value of ₦1,158.4bn or 48.0%. The country also imported goods largely from Asia, with import goods valued at ₦843.27bn or 34.9%. Goods valued at ₦294.5bn, or 12.2% of total import trade, was imported from America. Import trade within the continent of Africa totalled ₦87.9bn or 3.6%, while imports from the region of ECOWAS amounted to ₦8.5 billion (see Table 4).
Mauritius trade deficit widens as exports drops (Statistics Mauritius): Mauritius’ trade deficit widened by 15.9% in the third quarter from the same period last year, as exports from the Indian Ocean island nation tumbled, the statistics office said on Tuesday. The deficit, at 21.17 billion Mauritius rupees ($590 million), was 11.7% higher than the second quarter, Statistics Mauritius said in a statement. The value of exports fell 12.6% to 20.71 billion rupees after exports of machinery and transport equipment tumbled by 47.1%. Imports dropped 0.2% to 41.88 billion rupees. [Detailed Trade Data by HS/Country Year 2005-2016]
South Africa: October merchandise trade statistics (SARS): Data from the SA Revenue Services showed that the trade balance switched to a R4.41bn deficit in October from a revised R6.9bn surplus in September. SARS said exports fell 11.1% on a month-on-month basis, while imports were up 0.4%. Profiled regional highlights: The Africa trade balance surplus was R20 086 million – a 4.0% increase in comparison to the R19 322 million surplus recorded in September 2016. BLNS trade recorded a trade balance surplus of R9.51bn in October, a result of exports of R12.49bn and imports of R2.98bn.
Intra-SACU trade data analysis (tralac): The objective for this paper is to examine intra-SACU trade with a special emphasis on the position of Botswana in this trade and the role of re-exports. The latter has become possible with the publication by the International Trade Centre of this re-export data, although we hasten to add that there is not a comprehensive coverage of the SACU in this data. Botswana’s data is available for 2015, but re-export data is only available for 2014. Namibian trade data is available for 2015 as mirror data, but re-exports are only available for 2013, while overall data for Swaziland is also available for 2015 in mirror data but re-exports are only until 2007. South Africa, the partner of most interest, does not have reported re-export data, and this is a significant omission from SACU’s trade data. Finally, Lesotho does not have re-export data either. Thus, we found that there was limited data to work with if we wanted to examine re-exports. [The analysts: Maria Nthebolan, Carla O Tema, Ron Sandrey]
Madagascar economic update (World Bank): Non-mining exports performed well in 2016. Exports recorded between January and October 2016 are estimated at $1,687 million, a 17% increase compared with the same period last year. However, the fall in nickel prices since 2015 and declining production volumes has adversely affected exports. In the first ten months of 2016 Madagascar exported $410 million worth of mining products, a decline of 10% compared to the same period the year before. The value of non-mining exports increased by 22.3% in 2016, largely driven by higher revenues from vanilla and cloves. Exports from free zone companies also increased from $434 million in 2015 to $546m in 2016, mainly resulting from textiles and shrimps exports to the Euro zone area. Under the Africa Growth and Opportunities Act the value of Madagascar’s exports is estimated to have tripled in 2016. [The analysts: Natasha Sharma, Faniry Razafimanantsoa]
Profiled trade policy postings:
Rwanda: Govt waives tax on leather, textile raw materials (New Times): The decision announced at the weekend was taken in collaboration with local leather and textile manufacturers in the face of government’s policy to ban second-hand leather and footwear products. The decision became effective Friday, 2 December 2016. Innocent Safari, the Permanent Secretary Ministry of Trade, Industry and EAC Affairs, explained at the weekend that the exemption applies to both import duties and Value Added Tax (VAT). The tax exemption applies to local investors recognised by MINEACOM; with no limitations on the quantity of leather and textile raw materials to be imported as the country seeks to satisfy the local market demands and export fine products abroad.
Tanzania: Private sector to shape EPA deal (Daily News): Tanzania’s Industry, Trade and Investments Minister Charles Mwijage told members of the private sector at the CEO Roundtable gala dinner in Dar es Salaam on Saturday that the government would take on board their views in reaching a position on the protracted negotiations of the trade deal with the EU.
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African Economic Conference 2016: Ending hunger and enabling food security in Africa
Researchers, policy-makers and development partners converge in Abuja, Nigeria, for the 11th African Economic Conference (AEC) from December 5-7, 2016, to share ideas on topical African development issues including how to end hunger and ensure food security in Africa.
About 300 participants are expected to attend the annual event co-organised by the African Development Bank (AfDB), United Nations Development Programme (UNDP) and the United Nations Economic Commission for Africa (ECA), on the theme “Feed Africa: Towards Agro-Allied Industrialization for Inclusive Growth.”
The meeting will be officially opened by Nigeria’s President Muhammadu Buhari, AfDB President Akinwumi Adesina; Acting ECA Executive Secretary, Abdalla Hamdok; UN Assistant Secretary General and Director of UNDP Regional Bureau for Africa, Abdoulaye Mar Dieye.
This central theme is in line with the current African and global development agenda. Tackling poverty, hunger and food insecurity are central concerns of the Sustainable Development Goals (SDGs). The theme also builds on the African Union Agenda 2063 which underscore the right of Africans to be well-nourished and lead healthy and productive lives.
Furthermore, the Comprehensive Africa Agricultural Development Programme (CAADP), as well as the June 2014 Malabo Declaration emphasise the centrality of a structural transformation of African agriculture to growth and poverty eradication on the continent. In consonance with these goals, agriculture and industrialization are at the heart of the core activities of AfDB, ECA and UNDP and their vision and long-term strategy for a prosperous and inclusive Africa.
Participants at the African Economic Conference will be challenged to investigate the situation in which, despite overall macroeconomic growth and improved broad governance across the continent, Africa still has the highest rates of poverty and hunger in the world. No fewer than 230 million of the 795 million people suffering from chronic undernourishment globally live in Africa, resulting in the highest prevalence of undernourishment worldwide.
The African Economic Conference provides a unique platform to assess these challenges and the impact of current growth strategies in Africa; focusing on the agricultural and industrial sector.
Participants will discuss successes, lessons learned and identify remaining gaps, challenges and emerging issues on the topic. The conference will encompass in-depth presentations of policy-oriented research by both established academics and emerging researchers from the continent and beyond, who will debate and recommend policy options on how to accelerate Africa’s agricultural and industrial transformation.
After three days of intensive deliberations and brainstorming, the Conference is expected to come up with mechanisms for a sustainable inclusive green and scale agro-industry appropriate for a continent which is home to 600 million hectares of uncultivated arable land, roughly 60 percent of the global total.
Background
The theme for the 2016 African Economic Conference (AEC) is “Feed Africa: Towards Agro-Allied Industrialization for Inclusive Growth”. This theme is timely and in line with the current African and international development agenda. Ending poverty and overcoming hunger and food insecurity permanently come first and second, respectively, in the Sustainable Development Goals (SDGs) endorsed in September 2015 by UN member States. This commitment is also stressed by the African Union Agenda 2063 that recognizes the right of all Africans to be well-nourished and lead healthy and productive lives. Furthermore, the Comprehensive Africa Agricultural Development Programme (CAADP), as well as the June 2014 Malabo declaration, highlight that a structural transformation of African agriculture is central to growth and poverty eradication on the continent. Consistent with these goals, agriculture and industrialization are at the heart of the work by the African Development Bank (AfDB), the United Nations Economic Commission for Africa (ECA) and the Nations Development Programme (UNDP) and their vision and long-term strategy for a prospered and inclusive Africa.
Global experiences suggest that the attainment of food security requires high and sustained growth, underpinned by enhanced agriculture productivity and a sustainable structural change that includes the broader engagement of people. In particular, African countries need to revisit their agricultural policies and practices, while paving the way for an agro-allied industrial development. The AEC will bring together policy-makers, researchers and development practitioners from Africa and from around the world to make strategic contributions for accelerating agro-allied industrial development. The Conference will provide an opportunity to assess the impact of current growth strategies in Africa; focusing on the agricultural and industrial sector. In addition, the conference will discuss successes, lessons learned and identify remaining gaps, challenges and emerging issues on the topic. It will encompass in-depth presentations of policyoriented research by both established academics and emerging researchers from the continent and beyond who will debate and recommend policy options on how to accelerate Africa’s agricultural and industrial transformation.
Challenges and opportunities of the theme
Despite the overall macroeconomic growth and improved governance enjoyed broadly across the continent, Africa still has the highest rates of both poverty and hunger in the world. Out of about 795 million people suffering from chronic undernourishment globally, 230 million live in Africa; resulting in the highest prevalence of undernourishment worldwide, at around 20%. Even in abundant regions, food shortages can happen according to the period of the year, mostly due to poor conservation techniques or post-harvest losses. In Sub-Saharan Africa, up to 150 kgs of food produced per person is lost every year; and depending on the crop, between 15% and 35% of food may be lost before it even leaves the field.
How can Africa feed Africa, and the rest of the world? A partial response appears straightforward: Africa needs to increase food production away from subsistence production and weak productivity. There is little justification that Africa, which has about 2/3 of all the arable land left in the world, is unable to feed herself; spending around US$35 billion per year on food imports, putting additional strain on scarce foreign exchange reserves. In addition to increasing food supplies, Africa needs to better manage and integrate the entire food chain from the farm to storage, transport, processing and marketing. In the current policy and research environment, there is significant momentum behind developing and promoting the agricultural sector as a catalyst to industrialization. Developing an industrial agri-businesses would raise productivity in the sector and ultimately support economic growth and structural transformation by enabling the labor force to move from the agriculture sector into manufacturing and services.
A comprehensive transformation of the agriculture sector in Africa towards agro-allied industrialization requires investments in technology and innovation in order to improve the productivity of land and especially labor (e.g. new tools, improved seed, water control, fertilizers) including innovation in the commercialization of agriculture products. Farmers should be given incentives to adopt new technologies by making them affordable, to raise their productivity and expand their output. Land reforms would not only increase production scale but also enhance security of tenure and thus encourage investment, as well as adequate insurance and financial instruments suited to the agricultural production cycle that would support the adoption of technological innovations and expand the use of intermediate inputs, agricultural extension services, and appropriate pricing mechanisms.
More globally, structural transformation requires that industry be leveraged in the agriculture sector. Further efforts are necessary to encourage the development of large commercial farmers and to connect them with small-scale farmers through mutually beneficial contract farming (out-grower schemes) such as to support larger agriculture production in an inclusive way. Agribusiness initiatives will constantly seek value addition to agriculture products to be better connected with regional and global agriculture value chains. To enter into contract with agribusiness farmers and get the guarantee to supply leading firms, smaller-scale farmers will also get the incentives to meet required production standards within the value chain. Ultimately, an agro-allied industrialization will enhance the efficiency and value addition in the agriculture sector by connecting farmers to markets. In the form of skills and capital to produce in larger quantity while meeting higher quality standards, it will facilitate commercialization of Africa’s agriculture through more effective integration in agriculture value chains.
Providing adequate institutional and business environment as well as supporting trade finance are also key in encouraging private sector participation and investment in the agro-business industry and raising the comparative advantage of exporters in this sector. Ultimately, agro-allied industrialization is expected to reduce the export of raw material and diversify national economies in Africa. Developing competitive trade services through the provision of infrastructure and financing will support large-scale farmers in their marketing and export activities.
Developing an agro-allied industrialization in Africa requires to advance an inclusive growth agenda given that half of the labor force in the continent works in the agriculture sector in rural areas, of which 80 percent are smallholder farmers and a significant share are female workers. Land reform, better tailored and more accessible financing and insurance schemes are necessary for small-scale farmers not only to raise productivity but also to provide the most vulnerable with mitigation measures and enhance their resilience to the growing risks related to climate, market and political shocks. Land access based on customary rights, in particular, disadvantage women and favor unequal distribution of the arable land. There remains significant research and policy gaps regarding the pathways that would lead to such transformations with the view to alleviate high poverty rates in rural spaces, smooth transitory income, and enable food insecure households to meet their food and nutritional needs as well as link smallholder farmers to larger agro-business firms. It is also important to recognize the key role played by women through gender-specific policies as a core strategy. In this regard, adequate policies are needed to overcome multiple market failures and imperfections and to improve an inclusive access to modern inputs, labor, land, finance, and other agricultural factors of production and markets in order to enable a dual structural transformation of agriculture and industry.
Last but not least, Africa must endorse a green agriculture to industrialize in a sustainable way, in order to avoid long run stagnation in crop production and rising cost of inputs. Governments need to establish a sound regulatory and institutional framework to take advantage of technology in promoting a green agriculture. Information and communication technology, for instance, increasingly support in a green and sustainable way the diffusion of market information, production knowledge and geographical information among the various stakeholders in the agriculture sector. Developing skills in biotechnology would also improve yields and make them more resistant to weather shocks while ensuring health and environmental safety. Besides to larger scale agriculture production, further efforts should be devoted to the improvement of water management in such a way as to intensify irrigation to reduce Africa’s dependence on rain-fed agriculture while strengthening resilience to climate change.
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Feed Africa: Strategy for agricultural transformation in Africa 2016-2025 (7.93 MB)
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Business investment forum calls for action to improve intra-Africa trade
Delegates at the three-day African Business and Investments Forum held over the weekend in the Algerian capital, Algiers, have once again urged business and political leaders in Africa to remove barriers that limit countries across the continent from trading with each other.
Described by organisers as the first of its kind in the country and elegantly called the ‘Algiers Rendezvous’, the meeting attracted about 1000 participants from more than 40 African countries.
Its discussions have focused on how to stimulate and promote intra-African trade and partnerships, good governance for pro-growth public-private partnerships, and promoting continental integration through joint infrastructure projects and human capital development.
But with current global economic fortunes dwindling, the delegates have called for more intra-Africa trade and more African solidarity to unleash the continent’s economic potential and prosperity.
Ali Haddad, president of the Algerian CEOs’ forum which co-organised the summit with the Algerian government, said that the current turn of events in the global world should inspire Africans to work more collectively for their development and self-reliance.
“Against the backdrop of current geostrategic upheavals, the need for exchanging with our closer friends is overwhelming. Each one of our nations chooses its path depending on its experiences but we are convinced that no state in Africa can alone address the looming future challenges on its own,” he said at the launch of the forum on Saturday.
Describing the current political changes in Europe and America where nationalist sentiments are growing, with the United Kingdom having voted to leave the European Union, Haddad called for more solidarity in Africa to end food insecurity and heavy reliance on imported manufactured goods.
“We are bound to unify ourselves for the good of our continent and people,” he said, urging African leaders to embrace Pan-Africanism ideals of solidarity and warning them that mobilisation of foreign development aid is likely to be more and more difficult in the future.
With the share of formal intra-continental trade in Africa measured at around 10 per cent of the continent’s global trade today, delegates at the meeting pushed for a better rate and urged African governments to create a better environment to ease internal trade across the continent, starting with a functional transport infrastructure.
“It took me about 20 hours to come to Algeria. We need to be better connected in order to work together,” said Amina Mohamed Jibril, Kenya’s Cabinet Secretary for Foreign Affairs.
At 10 per cent, the rate of trade between African countries is considered very low if compared with over 80 per cent for inter-European trade and 60 per cent in Asia.
While experts speaking at the ‘Algiers Rendezvous’ over the weekend urged African governments to create a good environment for intra-Africa trade, they also called upon African entrepreneurs to be more creative and move into industrialisation and big cash investments.
“Yogurt is imported at 83 per cent in Africa. What is complicated in making yogurt?” wondered former Executive Secretary of the United Nations Economic Commission for Africa, Dr Carlos Lopes, essentially challenging his fellow Africans to explore the economic benefits of manufacturing.
He also accused African financial institutions of being “lazy”, saying that they aren’t doing enough to support small businesses while they sit on an $80-billion capital that remains non-invested and sits idle in the banks’ coffers as they fear to invest it on the continent.
“It’s a paradox that people outside Africa see it as an investment opportunity but Africa-based operators keep talking about perceived risks for investments,” he said.
The meeting, which kicked off on Saturday and ends today (Monday), was organised by the Government of Algeria and the country’s business leaders with partners that include the African Development Bank (AfDB) and the Arab Bank for Economic Development in Africa (BADEA).
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Ministers commit to integrate biodiversity into key economic sectors in order to achieve global biodiversity targets
Ministers from around the world committed to working together to save biodiversity and take urgent action to achieve the Aichi Biodiversity Targets, and backed this with a host of specific commitments.
In the “Cancun Declaration,” agreed on 3 December 2016 as part of the UN Biodiversity Conference, ministers dealing with environment, agriculture, forestry, fisheries and tourism, declared that they would make the additional efforts needed to ensure the effective implementation of the Convention on Biological Diversity and its Cartagena and Nagoya Protocols, including the Strategic Plan for Biodiversity 2011-2020 and its Aichi Biodiversity Targets.
Braulio Ferreira de Souza Dias, Executive Secretary of the Convention on Biological Diversity, said “The Cancun Declaration, and the powerful commitments made here at the High Level Segment send a strong signal that countries are ready to increase efforts to achieve the Aichi Targets. I look forward to this momentum carrying through the next two weeks, and then the coming years of the United Nations Decade on Biodiversity.”
H.E. Rafael Pacchiano Alamán, Secretary of Environment and Natural Resources of Mexico, said “I thank all the participating countries for showing political will and achieving this Ministerial Declaration that ensures your commitment to the mainstreaming of the conservation and sustainable use of biodiversity for well-being.”
“I’m optimistic because in the Ministerial Declaration we are all committing to raise the level of our ambition to ensure mainstreaming. The best investment that we can make for the well-being of our people is stopping the loss of biodiversity.”
UN Environment Executive Director Erik Solheim said, “UN Environment welcomes the Cancun Declaration as a timely and absolutely critical commitment to meeting the Aichi Biodiversity Targets. For the first time, through the efforts of all parties, we are really speaking meaningfully to one another about the real value of biodiversity to tourism, to agriculture, to forestry, to fisheries – to the very lifeblood of our economies.”
“We call on countries to use the momentum of this declaration to lay out in practical steps over these next two weeks how they will meet the Aichi Biodiversity Targets. Biodiversity makes business sense. Biodiversity makes common sense. It’s the food we eat, the water we drink, and the air we breathe. Let’s follow this declaration with action.”
Naoko Ishii, CEO of the Global Environment Facility, said “The continued loss of biodiversity is part of a broader pattern of unsustainable pressure on our global commons such as the climate, forests, water, land and oceans. We have reached a dangerous point, and we now need a fundamental transformation in our key economic systems if we are to avoid devastating consequences in the future.”
“We need to continue our efforts to strengthen biodiversity mainstreaming, and the Cancun Declaration on Mainstreaming Biodiversity can serve as an important guidepost in that regard” she said.
Agriculture
Participants recognised the importance of mainstreaming and enhanced policy coherence for environmental protection as well as for the vitality and profitability of agricultural sectors. The 2030 Agenda for Sustainable Development, through its integrated nature, was seen to be a major driver of the transformation needed to make agriculture more sustainable and to achieve the Aichi Biodiversity Targets.
Tourism
Delegates discussed the importance of reducing adverse impacts of tourism development on ecosystems and local communities while also leveraging the capacity of tourism to be a unique tool for financing conservation, and for raising awareness and educating travellers on the value of nature and culture.
Fisheries
Fisheries discussions looked at ways that legislation and policies could resolve issues of overfishing in small-scale and large scale fisheries, and emphasised the important role of regional fisheries organizations in coordinating responses. Ensuring sustainable fisheries and aquaculture is possible through commitment to work together, and with various stakeholders, including industry, consumers, retailers and trade, academia, and various other civil society groups.
Forestry
Effective mainstreaming of biodiversity into the forestry sector will need continued strengthening of technical capacities, and enhanced partnerships among stakeholders. The need for new and additional resources for sustainable forest financing was also noted, as well as the role of international cooperation. Several participants expressed support for the collaborative work between CBD and other organizations and agencies. Some noted the role of organizations in raising awareness of mainstreaming approaches and drew attention to reports on forest genetic diversity.
This declaration will be forwarded to the United Nations General Assembly, the High-level Political Forum on Sustainable Development 2017 and the Third United Nations Environmental Assembly.
The Cancun Declaration was supported by strong commitments from countries representing all United Nations regions, and a variety of Aichi Biodiversity Targets, including:
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Presented by Guatemala, a commitment by the Like Minded Mega-Diverse Countries, which harbour over one third of all terrestrial biodiversity, to carry out over 200 priority actions to support actions that will enhance implementation of Aichi Target 11.
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France and other participants in the International Coral Reef Initiative agreed to a variety of targets and actions to in support of Aichi Target 10 to protect coral reefs and their ecosystems, including actions to reduce pollution from plastic microbeads and sunscreen, actions to harmonize monitoring and other long-term management activities and actions which encourage financing for projects and initiatives which help protect and restore coral reefs, mangroves and sea grasses.
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Netherlands and 11 other European Countries, inspired by the IPBES report on pollinators, announced the creation of a “coalition of the willing” to protect pollinators, contributing to Aichi Targets 7 and 14.
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For Target 9, Brazil committed that at least three invasive alien species will be brought under control and an early warning system will be designed by 2020. Brazil also committed that 100% of threatened species will be under conservation tools by 2020, and 10% of them shall have their conservation status improved by the same date, contributing to Aichi Target 12.
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Germany announced support for Aichi Target 20 with the continuation of funding for climate change mitigation and adaptation projects through its International Climate Initiative (IKI) for 500 million euros per year.
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Japan will continue its support to capacity-building activities in developing countries through to the end of the Decade with a multimillion dollar commitment through to 2020 and will mobilise individuals to take action to support achievement of all the Aichi Targets.
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New Zealand committed to bring together a broad coalition of actors from all levels to develop new initiatives, methodologies and techniques to increase the effectiveness control of invasive alien species in support of Aichi Target 9.
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In support of Aichi Target 16 on the Nagoya Protocol for Access and Benefit Sharing, South Africa will develop and implement species management plans for high value plant species through its BioPANZA programme and will set milestones for the cultivation of indigenous biological resources and community participation in product development.
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Peru, Mexico, Ecuador and Guatemala, together with FAO, the Darwin Initiative and Biodiversity, in support of implementation of Aichi Biodiversity Target 13. The initiative is entitled “Towards the Implementation of Aichi Target 13 in centers of origin Coalition For food and agriculture countries”. It encourages countries to take action to preserve genetic diversity and safeguard both native varieties of crops and their wild relatives. The commitment proposes a roadmap of collaborative engagement and action to be implemented before 2020.
The High Level Segment closed yesterday. The UN Biodiversity conference continued on 4 December 2016, with the opening of the Conference of the Parties to the Convention on Biological Diversity and the Meetings of the Parties to the Cartagena and Nagoya Protocols. The conference continues until 17 December 2016.
The Convention on Biological Diversity (CBD)
Opened for signature at the Earth Summit in Rio de Janeiro in 1992, and entering into force in December 1993, the Convention on Biological Diversity is an international treaty for the conservation of biodiversity, the sustainable use of the components of biodiversity and the equitable sharing of the benefits derived from the use of genetic resources. With 196 Parties so far, the Convention has near universal participation among countries. The Convention seeks to address all threats to biodiversity and ecosystem services, including threats from climate change, through scientific assessments, the development of tools, incentives and processes, the transfer of technologies and good practices and the full and active involvement of relevant stakeholders including indigenous and local communities, youth, NGOs, women and the business community.
The Cartagena Protocol on Biosafety and the Nagoya Protocol on Access and Benefit Sharing are supplementary agreements to the Convention. The Cartagena Protocol, which entered into force on 11 September 2003, seeks to protect biological diversity from the potential risks posed by living modified organisms resulting from modern biotechnology. To date, 170 Parties have ratified the Cartagena Protocol. The Nagoya Protocol aims at sharing the benefits arising from the utilization of genetic resources in a fair and equitable way, including by appropriate access to genetic resources and by appropriate transfer of relevant technologies. It entered into force on 12 October 2014 and to date has been ratified by 90 Parties.
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Zambian President Lungu dates South Africa
President Edgar Lungu is this week expected in South Africa for a three-day State visit at the invitation of his South African counterpart Jacob Zuma.
The two heads of State will hold a series of bilateral meetings aimed at strengthening cooperation between countries.
Zambian High Commissioner to South Africa, Emmanuel Mwamba, who announced the occasion, said Mr Lungu, is expected in that country on Wednesday.
The President would be accompanied by Foreign Affairs Minister Harry Kalaba, Energy Minister David Mabumba, Tourism and Arts Minister Charles Banda and Commerce, Trade and Industry Permanent Secretary Kayula Siame, among other Government officials.
“On Thursday, President Lungu will hold meetings with President Zuma in Pretoria, during which important decisions are expected to be made by the two leaders.
“President Lungu and President Zuma will also address a gathering of Zambian and South African captains of industry, business entities and executives organised under the auspices of the Zambia-South Africa Business Forum (ZSABF),” Mr Mwamba said.
This is according to a statement issued in Lusaka yesterday by Press Secretary at Zambia’s High Commission in South Africa, Nicky Shabolyo.
Mr Mwamba said Mr Lungu’s visit will be preceded by the signing of a Joint Commission for Cooperation (JCC) between the two countries, through which issues of common interest and concern will be addressed.
He said the session of the JCC would be held in Pretoria today and tomorrow, after which a ministerial session would follow on Wednesday.
Mr Mwamba said additional cooperation agreements in agriculture, tourism, infrastructure, trade and energy between the two countries were also earmarked for assent.
“Mr Kalaba and South African Minister for International Relations, Maite Nkoana-Mashabane, will sign the memorandum of understanding of the JCC on behalf of their countries.
“Ms Siame will lead the senior official delegation from Zambia to the JCC session that will consider areas of cooperation under political and diplomatic, economic, social, security and defence segments,” he said.
Mr Mwamba said President Lungu will, on Friday visit an energy project as part of the quest to find solutions to the power deficit that has befallen Zambia.
He said Mr Lungu would also meet Zambians living in South Africa and visit Freedom Park in Pretoria, where he will lay a wreath.
Freedom Park is the memorial site for the people killed in the first and second wars and the apartheid era.
Meanwhile, Patriotic Front Kasama Central Member of Parliament Kelvin Sampa has urged lawmakers to revisit the Law Association of Zambia (LAZ) Act and ascertain if the organisation is still functioning within its original mandate.
Mr Sampa alleged that LAZ has veered away from its mandate of providing guidance to the nation on legal matters owing to its current style of operating like a Non-Governmental Organisation (NGO).
He alleged that the association is peddling the agenda of the opposition United Party for National Development (UPND), a situation which had compromised its relevance in the country.
“I am calling on our seasoned lawyers in this country to stand up and salvage the image and the crucial role of LAZ which is on the verge of being compromised under the current leadership.
“Society looks up to LAZ to provide unbiased and non-politically inclined guidance and should demand that the original LAZ is brought back,” Mr Sampa said in Lusaka yesterday.
He said it was important to interrogate whether or not LAZ was designed to serve as a political pressure group, hence his interest in consulting the parliamentary statute that enshrines its existence.
Mr Sampa also warned UPND president Hakainde Hichilema and his vice Geoffrey Mwamba to desist from taking politics to places such as markets because such maneuvers were detrimental to effective service delivery.
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Madagascar Economic Update: Agriculture and rural development
This edition of the Madagascar Economic Update is part of a series of short economic updates produced by the World Bank on a biannual basis. The first part of this brief has the World Bank’s assessment of recent economic developments and the outlook over the short to medium term. The second part of this update focuses on Agriculture and Rural Development.
Part One: Recent Economic Developments
International and Regional Developments
The global economy is evolving in a context of low commodity prices, weak global trade and reduced capital flows. The 2016 global growth forecast has been revised downward to 2.4 percent against an initial forecast of 2.9 percent at the beginning of the year. This revised outlook is driven by weaker demand in the more advanced economies, where sluggish growth in China in particular has impacted global trade and the demand for commodities.
These global conditions, combined with political uncertainty and drought in certain parts of the region are affecting economic activity in sub-Saharan Africa. Overall, the growth forecast for the continent has been reduced to 1.6 percent, the lowest level in 20 years. The growth trajectory diverges significantly between countries. Major exporters of natural resource commodities such as Nigeria, Angola and Chad have been most affected, while economic activity in importing countries such as Mauritius, Rwanda and Kenya has remained strong.
The Malagasy economy may be subject to changing demand from trading partners and commodity price volatility. Madagascar’s largest trading partner is France, although trade levels have been declining. Other important trading partners include the United States, China and European Union countries such as the Netherlands and Germany. Lower commodity prices have presented mixed fortunes for Madagascar. On the one hand, as a net fuel importer lower oil prices have benefitted the economy. On the other hand, lower nickel prices have affected production and export values. These trends highlight the importance of Madagascar continuing with reforms and policies to promote competitiveness, while also improving sources of internal growth through enhancing productivity in key sectors such as agriculture.
External Sector
In 2016 the current account balance continued to improve. Foreign direct investment (FDI) flows have contributed to an improvement in the current account balance. Foreign currency reserves have increased the months of import cover from 2.9 months in 2015 to an estimated 3.3 months in 2016. Following the completion of investments for the two major mining operations in 2011, FDI flows related to the extractive industries have declined. The most recent data available suggests that FDI is increasingly oriented toward financial sectors, telecommunications and manufacturing activities.
Broader changes in the economy have improved the current account balance. The completion of the investment phase of mining operations in 2011 moderated capital intensive imports. The effects of lower commodity prices for imports such as petroleum products and rice, and the intensification of exports from the mining sector since 2013 has further strengthened the current account balance.
Non-mining exports performed well in 2016. Exports recorded between January and October 2016 are estimated at US $ 1,687 million, a 17 percent increase compared with the same period last year. However, the fall in nickel prices since 2015 and declining production volumes has adversely affected exports. In the first ten months of 2016 Madagascar exported US$ 410 million worth of mining products, a decline of 10 percent compared to the same period the year before. The value of non-mining exports increased by 22.3 percent in 2016, largely driven by higher revenues from vanilla and cloves. Exports from free zone companies also increased from US$ 434 million in 2015 to US$ 546 million in 2016, mainly resulting from textiles and shrimps exports to the Euro zone area. Under the Africa Growth and Opportunities Act the value of Madagascar’s exports is estimated to have tripled in 2016.
The cost of imports has been moderated as global petroleum prices remain favorable. Imports in 2016 are estimated at US$ 2,337.7 million. The main components of these imports are raw materials with a large proportion destined for free zone enterprises, petroleum products and foodstuffs, where the latter cost more in 2016. However, crude oil prices are forecasted to rise in 2017 from US$ 53 per barrel to US$ 55 per barrel, which will affect the cost of imports and subsidy provision to JIRAMA.
Economic Outlook
The medium-term economic growth outlook is positive. Based on current projections, economic growth is expected to surpass the performance of recent years. The intensification of public works activities is a key growth driver, which may also spur activity in related sectors, provided investments are carefully selected on the basis of their expected economic and social returns. Madagascar’s participation in the African Growth and Opportunities Act should also invigorate growth as production accelerates. Provided climatic conditions remain favorable the agriculture sector should continue to contribute to growth. If much anticipated reforms to Air Madagascar are implemented the tourism sector can expect to grow. And finally, over the medium term, there may be opportunities to expand mining activity, particularly if commodity prices for nickel and other raw materials rise. Such prospects may be further boosted by the revision of the Mining Code, which could enhance investor confidence.
However, this positive growth trajectory is dependent on maintaining political and macroeconomic stability, and implementing key reforms. The positive growth period presents opportunities to benefit broad sections of the society. Madagascar’s history has shown that in the past positive growth periods have been followed by political crises. Avoiding this outcome requires commitment from all stakeholders to respect democratic processes and commit to stability. Ensuring that the benefits of growth are felt more inclusively will be critical in this endeavor. Concretely, this requires scaling up pro-poor expenditures including in those areas which are the least well-served, improving the productivity of sectors such as agriculture which engage a large proportion of the poor, and generating jobs through private sector led growth. To achieve this, it is critical to maintain the momentum for implementing key reforms, particularly increasing fiscal space to spend in line with policy priorities, and improving the performance of JIRAMA to enhance access to affordable electricity supply.
Part Two: Special Focus Section on Agriculture and Rural Development
Introduction
Improving the productivity of the agriculture sector is critical for promoting rural development and livelihoods. Rural households are far more likely to live in poverty. The great majority of poor households are engaged in the agriculture sector, which provides the main source of income, primarily for subsistence purposes. And while agricultural production has increased, the pace has not kept up with population growth. Realizing the untapped potential in the agriculture sector would increase food security, promote growth, and improve the well-being of those who are least served. This special focus section provides a background to agriculture and rural development, discusses key constraints facing the sector, and opportunities for overcoming these.
Agriculture is Closely Linked with Rural Economic Development
Poverty and food insecurity are predominantly a rural phenomenon. Madagascar has a very high poverty rate, with 70 percent of the population living in absolute poverty in 2012. There remains a sharp contrast in urban and rural development indicators. 78 percent of the absolute poor live in rural areas compared with 35 percent in urban areas. Rural areas are characterized by lower life expectancy rates, illiteracy being more widespread, a higher malnutrition prevalence, and a greater proportion of households without access to safe drinking water and improved sanitation.
The majority of poorer households are engaged in the agricultural sector. Agriculture is the main sector of employment for the household head for the poorest 80 percent of the population. Only the richest 20 percent of the population are engaged in other sectors such as services, manufacturing, and public administration.
Agricultural activity provides the main source of income for rural households. Approximately 50 to 90 percent of total household income comes from agriculture depending on the regions and years. The importance of rice for household incomes is increasing and the crop is harvested on approximately 85 percent of farms (Agricultural census 2004/05). Over 10 million people from agricultural households depend on rice farming for income generation, and the subsector is estimated to provide 70,000 regular jobs. Cassava is the second most cultivated crops, on approximately 70 percent of farms, although half of the production comes from the South.
There has been limited real growth in the agriculture sector. The growth of the agriculture sector is subject to volatility, particularly due to exogenous, climatic-related effects. Agricultural growth peaked to 8 percent in 2009 largely due to favorable rainfall conditions (even though real GDP growth took a significant downturn) but registered negative 7 percent outturn in 2013. Over the period 2004 to 2014 the agricultural contribution to GDP growth was 1.3 percent, far below peer countries and the average for sub-Saharan Africa.
Agricultural production output is struggling to keep up with population growth. Over the last 30 years, the total production index has been increasing. However, the net per capita production index decreased significantly during the same period, meaning that production cannot keep pace with the population growth rate. Further, agricultural production has increased mainly through the expansion of cultivated areas rather than from the use of improved technologies or inputs, putting pressure on Madagascar’s natural resource base.
Agriculture remains predominantly a subsistence activity. Approximately 60 percent of farming produce is consumed within the farming household. From the surplus that is marketed, 47 percent comprises of maize, 20 percent is cassava and 20 percent is rice. However, there is a large untapped export potential. Madagascar is already the world’s leading exporter of cloves and vanilla, which alongside lychee and shellfish have dominated the agricultural export basket. There is significant potential to increase these exports and to develop other promising industries such as sea cucumber aquaculture and inland aquaculture, which are relatively underdeveloped.
Constraints and Opportunities in the Agriculture Sector
The agriculture sector is affected by a number of constraints. The three most commonly ranked constraints by community groups include: access to seeds and fertilizer, inadequate land area, and a low selling price, which are discussed in detail below. These factors are intensified by low levels of human capital, dilapidated production and transport facilities (particularly rural roads), high exposure to climatic effects, and lack of improved water management to facilitate irrigation.
Increasing the use of fertilizers
Madagascar’s fertilizer consumption is one of the lowest in the world. Fertilizer consumption is approximately 5 kg/ha of arable land per year, compared with a sub-Saharan African average of 15kg/ha. In comparison, otherrice growing countries have a much higher consumption of fertilizers, such as 160 kg/ha for Thailand, 203 kg/ha for Indonesia, 253 kg/ha for Bangladesh, and about 327 kg/ha for Vietnam in 2011-13. Only an estimated 15 percent of Madagascar’s cultivated land receives mineral fertilization (Agricultural census 2004/05).
Affordable access to fertilizersis an issue. At current price levels the cost-benefit ratio of utilizing mineral fertilizers is subject to exogenous conditions, such as climatic variations. Farmers usually do not have sufficient cash and therefore have to rely on credit to finance the supply of inputs. However, given the high interest rates charged by microfinance institutions, the expected net profits are negated in the absence of insurance against technical and climate risks. Therefore, with the exception of highly profitable intensification operations such as in high value added subsectors, farmers are unlikely to use credit to finance fertilizer use.
Government fertilizer supply programs have had limited success. A National Fertilizer Strategy was initiated in 2006 to improve domestic agricultural production. However, the programs were characterized by massive subsidization that had limited lasting impact on production. The programs were affected by cumbersome procurement procedures, lack of capacity of farmers’ organizations responsible for implementing the programs, mismatch between supply and diversity of local needs, low involvement of inputs distribution networks, and lack of an exit strategy. Massive direct subsidies programs have now been suspended.
Notable examples of success are worth mentioning. Fertilizer and seeds programs that proved most effective are characterized by strong involvement of the private sector in distribution, consideration of the vulnerabilities of small family farms in targeting, availability of technical support to transfer knowledge on inputs, multi-year support, the gradual introduction of local structures such as farmers organizations, and a beneficiary contribution to the cost of inputs to promote ownership and sustainability. Reflecting on the lessons learned in the implementation of fertilizer programs, a number of key recommendations have been identified to improve the use of fertilizers.
Ensuring secure access to land
Ownership rights to land can only be validated through a land title. These land titles are delivered by the land administration. However, in rural areas customary authorities also have a prerogative on the management of access to land, although their powers have no legal value. The decentralization of land management through ‘Local Land Offices’ has improved the affordability and time required to obtain a formal acknowledgment of land rights. The average cost and time needed to obtain an official document has been reduced from six years and US$ 500 for a land title to six months and US$ 14 for a land certificate, which has virtually the same legal value as land titles. These reforms allowed for 120,000 land certificates to be delivered in nine years, although the reform momentum slowed following the 2009 crisis.
There is considerable scope to improve land management. Current estimations suggest that 50 land certificates are distributed annually in the communes. Given the demand for land titles at this pace it is estimated that 75 years are needed to complete this process. Other restricting factors include cost, the education level of the household (female illiteracy in particular limits willingness to pay), and the perceived usefulness of the certificate to protect rights. The decentralized system needs refining, including local capacity building and reinforcement of communal governance.
Obtaining higher prices: contract farming and developing high value products
Contract farming practices can bring significant benefits to farmers. Contract farming has existed in Madagascar since the 1980s. All regions have some contract farming, but they are dependent on the specific production conditions sought by companies. Contract farming offers the prospect of more stable income, and can be a mitigation measure of the lean season when households have to reduce their consumption of staple food.
Contract farming is mainly implemented in export-oriented subsectors or subsector segments. It mainly covers agricultural products with high value added, specific production methods, or niche products. Such products benefit from higher unit prices and high added value, giving farmers opportunities for additional income. Contract farming can potentially be applied to all types of agricultural products, but is generally regarded as more suitable for horticultural or cash crops, including for export markets.
There are some important prerequisites for contract farming. Contract farmers have access to paved roads to transport products and are usually better equipped in terms of production factors such as land surface area and/or herd. Beyond this, there is limited comprehensive information on the characteristics of producers that are most likely to enter high-potential value chains. Firms involved in contract farming are very diverse in terms of size, structure, target markets and activities.
There is the potential to develop high value products and promising value chains. In the agriculture sector, high value products such as hand-picked green beans, artemesia, cocoa or organic subsectors offer opportunities to improve smallholders’ access to global markets. Fishing and aquaculture could also provide opportunities for smallholder producers to integrate into the national market under contract farming or other models of marketing organization, to increase their income. In particular, sub-sectors such as seaweed; sea cucumbers (fisheries and aquaculture development); octopus (traditional fishing), and crab (traditional fishing and aquaculture development) offer great potential for development.
Conclusion
Even though a large majority of poor households are engaged in agriculture, per capita productivity and real levels of sectoral growth remain low. Cultivation practices are based on extensification strategies with implications for Madagascar’s fragile natural resource base, rather than improving the productivity of existing farms and land use. This section has discussed three major constraints facing the sector: low utilization of fertilizers, land insecurity, and low prices. A number of common themes have been identified to address these challenges. Firstly, in terms of institutions, local land offices, farmer’s organizations and extension services should be enhanced. The governance of foreign land acquisition should also be improved. Secondly, an enabling environment for the private sector should be facilitated, through working on agribusiness strategies and increasing access to financing for investments. Thirdly, production and marketing infrastructure needs to be improved including through the maintenance of roads, and the development of alternative energy sources. And finally, there is scope for building the capacity of producers, extension services, production techniques, and safeguards. Focusing on these key areas of intervention can help to address constraints to agricultural productivity, improve the lives of the poor, and promote the inclusiveness of Madagascar’s growth path.
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tralac’s Daily News Selection
The selection: Friday, 2 December 2016
Germany’s G20 Presidency began yesterday: the Africa focus. A Tony Elumelu commentary: Germany’s new ‘Marshall Plan’ must treat Africa as an equal partner. For updates: the official G20 website went online this morning.
Looking ahead: International Forum for National Trade Facilitation Committees (23-27 January 2017, Geneva). The meeting is open to members of the National Trade Facilitation Committees from all African countries that have been nominated to attend the meeting. Donors, international agencies and regional organisations are also invited to attend.
ATW2016 highlights:
ECA urges Africa to push ahead with Continental Free Trade Area: The Africa Trade Forum ended in Addis Ababa on Wednesday with Economic Commission for Africa’s Coordinator, David Luke, of the African Trade Policy Centre urging participants to act on conclusions reached in discussions as the continent seeks to meet its October 2017 deadline for the implementation of the CFTA. Mr Luke, in various interventions and presentations over the week, including one on the CFTA and Structural Transformation, made a case for the need for Africa to move with speed to deal with outstanding issues standing in the way of the CFTA. Earlier Mr Luke officially opened a Research and Capacity Building side meeting at the Africa Trade Week on behalf of Deputy Executive Secretary Giovannie Biha. He said ATW2016, through its many sessions and networking opportunities, was providing a comprehensive, integrated and inclusive platform for policy dialogue between various trade constituencies on the aspirations of African people as articulated in Agenda 2063. Mr Luke said the success of Agenda 2063 going forward will depend to a major extent on whether rigorous research and analysis become critical elements of the decision-making process at national and regional levels, adding the workshop was therefore an essential step forward.
Nigeria makes strong case at CFTA negotiations in Ethiopia (Leadership): Nigeria’s negotiating team was led by the Minister of Industry, Trade and Investment, Dr Okechukwu Enelamah, who pushing for a CFTA that would support and promote structural reforms in Nigeria and across the continent rather than undermine it. Nigeria urged the 54-member AU block to pay attention to the technical work that was required for the adoption of the CFTA by the AU Summit rather than focus solely on the expected date of adoption which is December 2017. Given its experience on other agreements, the Nigerian team also pointed out the necessity for negotiators to consult with domestic authorities and stakeholders. As a consequence, the Nigerian trade team argued for “flexibility” that allows it to safeguard the economy from a flood of imports even as it remains an open economy.
Fast-tracking the CFTA: Regional Economic Communities as building blocks (AU): Since one of the aims of the CFTA is to resolve the challenges of multiple trade regimes and overlapping memberships and expedite the continental integration processes, a political decision is required for the CFTA negotiations to be prioritised over all other intra-African trade negotiations including the TFTA. Such a decision would be justified not only in view of rationalising the capacity but also financial resources. Moreover, the 2012 AU Summit Decision was very clear that Tripartite and regional FTAs should be consolidated into the CFTA. It is therefore mandatory to prioritize the CFTA over all other all intra-African trade negotiations, with view of establishing a single economic space and common trade rules. In order to achieve a pan-African FTA, all pre-existing FTAs will be superseded by the CFTA once in place.
As the CFTA negotiations have started, the integration process of the different RECs has reached different levels of advancement. Therefore, there is a possibility for the CFTA to be established before the RECs have established their CUs. In this context, should the negotiation of the tariff offers be made on an individual basis, there is a risk that the reconciliation of the individual tariff structures and the tariff structures of the proposed CUs be divergent. It is to be noted that the Abuja Treaty provides that in no case, a preferential trade arrangement concluded with non-African parties will grant better terms to the latter than those granted to the African countries. For this purposes, transparency is to be observed when those arrangements with non-African States are concluded (Cf. Art. 37 Abuja Treaty). The terms provided for under the Economic Partnership Agreements should thus serve as benchmarks for intra-African liberalisation, together with REC FTAs. [The analyst: Prudence Sebahizi, Chief Technical advisor on the CFTA and Head of CFTA Negotiations Support Unit]
Competition policy in Africa and the CFTA: report of a CUTS side event during ATW: The session was moderated by Dr Joy Kategekwa (Head, UNCTAD Regional Office for Africa). Panellists included Mr Pradeep Mehta (Secretary General of CUTS International), Prof Gerhard Erasmus (founder and Associate, TRALAC) and Mr Rashid Kibowa (Director of Trade, East African Community). Meeting summary:
Featured ATW tweets: @Trade_Kenya: The African Ministers of Trade (AMOT) meeting is discussing among others - CFTA negotiations, EPAs, BREXIT implications and Africa’s future trade arrangements with the US. @heiniesuo: CFTA and gender at #ATW216 - need more evidence on gender impacts on the ground to inform negotiations. Civil society and academia have a role.
Selected ATW news postings: CFTA and foreign investments regulation: Bilateral Investment Treaties do not necessarily translate into increased investment - Rob Davies, SA’s trade minister: African countries should align AGOA and their developmental integration agenda, Lord Paul Boateng: Britain won’t turn its back on Africa following Brexit
How can Africa kill the red tape and improve trade? (WEF)
As the Global Enabling Trade Report 2016 points out, improving the efficiency of process and reducing the red tape around cross-border trade remains an easy win for international trade. While progress on multilateral trade talks looks dim and overall infrastructure investment lags, focusing on regulatory efficiency can help governments enable trade quickly, doing more with less. A number of countries across Africa have made important strides on the efficiency front. Botswana leads the region on the Enabling Trade Index’s border administration pillar, seen below. Its compliance with import procedures requires only eight hours on average, on a par with major global traders such as South Korea and the United States. On the cost side, Kenya has managed to radically cut the price of import compliance, from an average of $550 to $115 per container. These types of efficiency drivers – reducing time and cost for red tape – are critical when it comes to enabling trade, especially for small and medium-size companies, which often face the most significant hurdles. [The analyst: Ilmari Soininen]
One Stop Border Posts: EAC develops training curriculum to facilitate their operationalization
The main objective of the consultative workshop (in Dar es Salaam) is to create a platform of interaction at the technical level between relevant stakeholders with a view to develop a training curriculum on OSBPs to enhance and accelerate their smooth operationalization. The workshop will also look at how best to allow the different agencies to play their roles at the OSBPs and work together. Mr Wambugu informed participants that with JICA support, the EAC developed the OSBP Law to support and anchor the operationalisation of the OSBPs. That law has since been assented to and the development of regulations and operational manuals is in the final stages. The EAC OSBP Law, which commenced operations on 1 October 2016, largely informed the development of the continental OSBP Sourcebook launched by the CEO of NEPAD on the side-lines of the 6th TICAD Summit in Nairobi, Kenya in August, 2016.
ECOWAS customs officials review draft community customs code
To this end, a three-day regional validation meeting at the Nigeria Customs Command and Staff College, began on 28 November 2016 to accelerate and simplify customs procedures in the region, among others. Welcoming delegates to the workshop, the ECOWAS Commissionner for Trade, Customs and Free Movement, Mr Laouali Chaibou, described the review and validation meeting as another positive step in the building of a customs union in accordance with the objectives of the Treaty establishing the ECOWAS. The Assistant Comptroller General of the Nigeria Customs Service Dr. Patience Iferi harped on the need for a harmonized customs operations in the region stressing that Trade Facilitation had become an issue to be talked about in years to come while the adoption of the Trade Facilitation Agreement in Bali, Indonesia in 2012 has changed the dynamics of management of international trade.
Implementing the WTO Trade Facilitation Agreement in SADC: promise and pitfalls (tralac)
This Trade Brief provides an overview of the TFA process and the obligations that will be implemented by SADC countries when the TFA becomes operational. It goes on to consider the relationship between the TFA and other trade facilitation processes already underway in the region, identifying the major hurdles to improving trade facilitation and thus to full implementation of the TFA. [The analyst: David Christianson]
Ministers from Central Africa determined to build quality infrastructure (UNIDO)
Ministers from seven countries in Central Africa (Cameroon,CAR, Chad, DRC, Gabon, Congo, São Tomé and Príncipe) today voiced their determination to implement a regional strategy of norms standardization and quality policy, and create a regional quality award. This is part of a Quality Infrastructure Programme for Central Africa (PIQAC) funded by the EU and implemented by UNIDO, in close collaboration with the Economic and Monetary Community of Central African States and the Economic Community of Central African States. [ECCAS leaders discuss security, trade]
EAC automotive industries update: calls for fast-tracking of modalities study (EAC)
The EAC Deputy Secretary General in charge of Productive and Social Sector, Christophe Bazivamo, has called for fast-tracking of the study on automotive industry in EAC region and have in place the final study report with policy recommendations possibly before the expected submission in April 2017. “This exercise and the overall study is therefore crucial as it is intended to inform the EAC and potential private sector investors on policy options and modalities that should be adopted to drive automotive industry to the next level”.
Rwanda launches online system to monitor compliance with EAC laws (New Times)
The Rwanda Law Reform Commission has launched an online tool that will help the country’s legal fraternity and other stakeholders in monitoring how Rwandan laws comply with legal obligations to which Rwanda is party within the EAC. Dubbed “the East African Community Legislative Compliance Tool (EAC-LCT)”, the application was inaugurated Thursday evening in Kigali.
From the WCO: Updated Trade Facilitation Guidance now available, Ethiopia: Reforms of the Revenues and Customs Authority under the WCO Mercator Programme
Malabo Declaration: AU biennial reporting mechanism launched in Nairobi (New Vision)
The mechanism, which will involve biennial reporting from the member countries was launched on Tuesday by the AU Commission’s Department for Agriculture and Rural Economy together with the NEPAD Planning and Coordination Agency. Speaking at the launch, Augustin Wambo (CAADP Head at the NPCA) pointed out a set of 44 indicators, categorized in 22 performance categories under seven themes for reporting on the Malabo Declaration. The country reporting process is set to go deeper from January 2017 and produce a report for the January 2018 AU Summit.
Plan to align UK aid with trade policy could sideline poor countries (The Guardian)
The reviews published by DfID offered a twofold evaluation, the first focusing on funding for multilateral organisations such as the World Bank as well as smaller organisations, while the second examined bilateral aid to individual countries (pdf). The review of multilateral agencies (pdf), which account for more than 40% of DfID’s funding over the past five years, said the system as a whole was “falling short” of its potential, because agencies and the “wider UN family” are not working together. The review said the UN Educational, Scientific and Cultural Organisation was in need of “dramatic improvement”, while the Commonwealth Secretariat also required “urgent organisational reform”.
Nairobi Civil Society Forum outcomes
We assert that the starting points of the HLM2 should be the four development effectiveness principles (democratic ownership, focus on results, inclusive partnerships, and transparency and accountability); the aid and development effectiveness commitments made in Rome, Paris, Accra, Busan, and Mexico; and the documented progress to date of all actors in implementing these principles and commitments. We emphasise that CSOs are key partners in inclusive and effective development co-operation.
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Fast-tracking the Continental Free Trade Area: Regional economic communities as building blocks
Extracts from the presentation made by Mr. Prudence Sebahizi, Chief Technical advisor on the CFTA and Head of the CFTA Negotiations Support Unit, during the Africa Trade Forum at Africa Trade Week 2016
Introduction
A key feature of Africa’s regional integration landscape is overlapping membership, which exists among the Regional Economic Communities (RECs). It is important to recall that one of the specific objectives of both the Continental Free Trade Area (CFTA) and Tripartite Free Trade Area (TFTA) was to resolve the challenges of overlapping memberships.
It is expected that the CFTA shall build on and improve upon the progress that has been made in the trade liberalization and integration programs of the RECs: the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC), The Economic Community of West African States (ECOWAS), the Economic Community of Central African States (ECCAS), the Intergovernmental Authority on Development (IGAD), the Community of Sahel-Saharan States (CENSAD) and the Arab Maghreb Union (AMU). The CFTA negotiations are ongoing and they shall be guided by best practices in the Regional Economic Communities, bilateral agreements and international conventions binding AU Member States.
Africa at Glance
Despite, the challenges facing the continent, Africa’s future looks very positive. As the second largest-continent in the world it contains 1/8 of the world’s population, characterized by a large and growing youth-bulge. Economically, this translates to a projected GDP of $2.6 trillion, consumer spending of $1.4 trillion and 128 households with discretionary income, by 2020.
In addition, Africa accounts for: around 60% of the world’s uncultivated arable land; over 50% of the world’s production of platinum, cobalt, tantalum & diamonds; 11% of the world’s oil, 6% of the world’s natural gas and 4% of the world’s coal, with more reserves being discovered at a rapidly increasing rate.
The Role of Integration in Africa
Creating Regional Value Chains to better penetrate Global Value Chains
Between 1995 and 2010, Africa has faced significant difficulties participating effectively in international trade. As a result, during that same time period African trade was stuck at 2% of the world total. In addition, raw commodities account for over 50% of sub-Saharan Africa’s exports and only less than 10% of Asian exports. Asia’s success is largely accredited to regional integration that allowed it to create efficient regional value chains that strengthened its position and enabled it to become a key player in global value chains. As the world’s most fragmented region, it takes almost twice as long to trade across borders in Africa (particularly sub-Saharan Africa) than it does in other regions such as Latin America and the Caribbean and South-East Asia.
Implementing the New Global Frameworks
In addition, Integration will be vital to the successful implementation of both Agenda 2063 and Agenda 2030. Agenda 2063, which absorbs the Abuja Treaty, is not only designed to be implemented within the framework of integration – with its National/Member States, Regional/REC, and Continental/AU levels of implementation – but it also aims to enhance and accelerate African integration efforts as evidenced by its 12 continental Flagship Programmes whose focus areas include regional plans and continental frameworks such as the CFTA.
Agenda 2030 also relies heavily on regional integration identifying “regional and sub regional dimensions, regional economic integration and interconnectivity” as important aspects of sustainable development, and stating that “regional and sub regional frameworks can facilitate the effective translation of sustainable development policies into concrete actions at the national level.” In addition, several SDGs are to be implemented explicitly through integration structures and frameworks.
Continental Integration Agenda
The Treaty Establishing the African Economic Community (AEC)
The ‘Treaty Establishing the African Economic Community (AEC)’ (The Abuja Treaty) lays out a detailed time-bound schedule for African economic and political integration. Article 6 of the Abuja Treaty has set modalities for achieving the continental integration. These modalities provide for a 6-steps process to achieved within 34 years, as follows:
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Step 1: Strengthening of existing regional economic communities (within a period not exceeding 5 years);
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Step 2: Harmonisation of intra-REC economic policies, notably through: stabilising tariff barriers and non-tariff barriers, customs duties and internal taxes; strengthening of sectoral integration; and, coordinating and harmonizing activities among the existing and future economic communities (within a period not exceeding 8 years);
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Step 3: Establishing REC FTAs and CUs (within a period not exceeding 10 years);
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Step 4: Coordination of continental level of the REC CET in order to establish a Continental CU (within a period not exceeding 2 years);
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Step 5: Establishment of a Continental Common Market (within a period not exceeding 4 years); and
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Step 6: Establishment of a single domestic market and a Pan-African Economic and Monetary Union (within a period not exceeding 5 years).
Although, the CFTA is not specifically referred to under the modalities, this is a prerequisite for the establishment of a customs union. The CFTA is therefore an implicit pre-requirement prior to Phase 4.
Status of Integration in Regional Economic Communities
East African Economic Community (EAC)
EAC has established a Common Market and Monetary union, and is moving towards becoming a political federation. It comprises of 6 Member States: Burundi, Kenya, Rwanda, Tanzania, South Sudan and Uganda; and encompasses: 1.82 million square kilometers, 145.5 million people and a combined GDP of $147.5 billion.
Economic Community of West African States (ECOWAS)
ECOWAS has established a Customs Union and is moving swiftly towards establishing a Common Market. It comprises of 15 Member States: Benin, Burkina Faso, Cabo Verde, Cote d’Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Sierra Leone, Senegal and Togo; and encompasses 5 million square kilometers, 304.11 million people and a combined GDP of $1.07 trillion.
Common Market for Eastern and Southern Africa
COMESA has established an FTA to which 17 of its 19 Member States have acceded and it is now concentrating efforts to overcome challenges to the domestication of its Customs Union. It comprises of 19 Member States: Burundi, Comoros, DRC, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe; and encompasses 12 million square kilometers, 470.26 million people, and a combined GDP of $638.6 billion.
Southern African Development Community (SADC)
SADC has established an FTA that seven countries are yet to fully implement and it is facing significant challenges implementing its Customs Union. It comprises of 15 Member States: Angola, Botswana, DRC, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe; and encompasses 5.54 million square kilometers, 277 million people and a combined GDP of $575.5 billion.
Economic Community of Central African States (ECCAS)
ECCAS has established an FTA but on average, its Members have only reduced 34% of intra-ECCAS tariff lines to zero. It comprises of 11 Member States: Angola, Burundi, Cameroon, Central African Republic, Republic of Congo, Gabon, Equatorial Guinea, DRC, Sao Tome & Principe, Chad and Rwanda; encompassing 6.6 million square kilometers, 130 million people and a combined GDP of $170 billion.
Community of Sahel-Saharan States (CEN-SAD)
CEN-SAD has fallen behind schedule in the integration schedule of the Abuja Treaty and is on stage two, eliminating TBs and NTBs within the REC. It comprises of 21 Member States: Djibouti, Cote d’Ivoire, Egypt, Eritrea, Gambia, Burkina Faso, Comoros, Libya, Central African Republic, Guinea, Tunisia, Togo, Nigeria, Senegal, Mali, Benin, Niger, Sudan, Chad, Mauritania, and Somalia. It encompasses 11.3 million square kilometres, 551 million people and a combined GDP of $974 billion.
Inter-Governmental Authority on Development (IGAD)
IGAD has fallen behind schedule in the integration schedule of the Abuja Treaty and is on stage two, eliminating TBs and NTBs within the REC. It comprises of 8 Member States: Djibouti, Somalia, Eritrea, Ethiopia, Kenya, South Sudan, Sudan and Uganda; encompassing; 4.9 million square kilometers, 236 million people and a combined GDP of $175 billion.
Arab Maghreb Union
AMU has fallen behind and is also at stage two of the Abuja Treaty, eliminating TBs and NTBs within the REC. It comprises of 5 Member States: Algeria, Libya, Morocco, Tunisia and Mauritania; encompassing 5.8 million square kilometers, 92 million people and a combined GDP of $414 billion.
COMESA-EAC-SADC Tripartite Free Trade Area (TFTA)
On 10 June, 2015, the TFTA was launched during the Third Tripartite Summit held in Sharm-el-Sheikh, Egypt. The TFTA will combine 3 RECs, 26 countries (over have of the AU Membership), about 632 million people and about $1.3 trillion in combined GDP. Moreover, in the three RECs, between 1994 and 2014: trade has increased from $2.3 billion to $36 billion, with intra-regional trade increasing from 7% to 25%. It is anticipated that the TFTA will significantly boost and strengthen the gains made thus far.
The Continental Free Trade Area (CFTA)
In January 2012, the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union (hereafter referred to as the Summit), held in Addis Ababa, Ethiopia, adopted a decision to establish a Continental Free Trade Area (CFTA) by an indicative date of 2017. The Summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven clusters: Trade Policy; Trade Facilitation; Productive Capacity; Trade Related Infrastructure; Trade Finance; Trade Information; And Factor Market Integration.
Reaffirming its commitment to continental market integration as provided under the Abuja Treaty, the AU Assembly launched the CFTA negotiations at the 25th Ordinary Summit of Heads of State and Government on 15 June 2015 in Johannesburg, South Africa, a week after the launch of the TFTA. At the same time, it adopted a set of Objectives and Guiding Principles (GP) for negotiating the CFTA. The Summit also adopted the indicative roadmap for the CFTA negotiations that reiterated the indicative finalization date of 2017. The CFTA will bring together fifty-four African countries with a combined population of more than one billion people and a combined gross domestic product of more than USD 3.4 trillion.
UNCTAD (2015) estimated that the removal of tariffs alone would increase trade from 10.2% in 2010 to over 15% by 2022 and enhanced trade facilitation measures could more than double gains, causing an increase of 21.9%. Moreover, in addition to stimulating intra-African trade by more than $35 billion per year, it could also decrease imports from outside Africa by $10 billion, boosting agricultural exports by $ 4 billion and industrial exports by $21 billion by 2022.
Since the June 2015 launch of the negotiations, much progress has been made to prepare the ground. In particular, four meetings of the CFTA Negotiating Forum (CFTA-NF) were held in February, May, October and November 2016 at the AU Headquarters in Addis Ababa, Ethiopia. The CFTA-NF adopted the Rules of Procedure for the CFTA Negotiating Institutions as well as definitions of the CFTA negotiations guiding principles that were subsequently approved by the African Ministers for Trade in May 2016. The CFTA NF also considered the Terms of Reference (ToR) for the Technical Working Groups (TWGs) as well as the work plan and schedules of negotiations for trade in goods and trade in services. Discussions on Modalities for tariff and Trade in Services negotiations are underway.
The 27th Ordinary Summit of the AU Heads of State and Government that took place in Kigali, July 2016, reaffirmed its earlier decisions to fast track the establishment of the CFTA by 2017.
Existing Trade Regimes amongst African Countries
Currently, African countries are trading under various trading arrangements in each regional economic community. RECs are at different stages of development in terms of the extent to which regional trade arrangements are being implemented. Some regions have achieved the level of a Common Market while others are yet to establish functional free trade areas. There are countries that have achieved a Customs Union and are enjoying free circulation of goods produced within the customs union. Examples of RECs that have functional Customs Union are EAC, ECOWAS, UEMOA and SACU. Some countries are already participating in Regional FTAs. Examples of regional FTAs that are functional include: SADC and COMESA FTAs.
Although the Tripartite FTA was launched in June 2015, work is still on going on tariff liberalisation schedules. There are also cases where some countries are trading under bilateral trade agreements that they have with each other including within the same region. Finally, there are countries that are currently not participating in any regional free trade arrangements. They are currently trading on the Most Favoured Nation (MFN) basis with most African countries save for instances where bilateral trade agreements exist.
RECs as Building Blocks
The progress made with the regional integration programmes of each of the eight RECs, and progress to-date with the Tripartite negotiations, is an indication of how ready each of the regions are to facilitate progress towards the conclusion of the CFTA negotiations. This is in line with the recommendations of the Extraordinary Session of the AU Conference of Ministers of Trade in April, 2014 which emphasized that “There is need for more coordination between AUC and RECs including the exchange of information on integration so that the regional processes will feed into continental processes … [and for] consolidating regional free trade arrangements as a basis for building a strong CFTA.”
The TFTA which negotiations under Phase I have not been completed and which negotiations under Phase II are on-going was expected to consolidate the COMESA, SADC and EAC FTAs into a single market. However, the TFTA does not explicitly refer to the relationship between the FTAs of the COMESA, SADC and EAC and the TFTA itself. It can thus be considered that the TFTA does not preclude the existence of the pre-existing FTAs. In this context, the TFTA creates an additional layer of preferential scheme. Therefore, – where FTAs overlap – depending on the most advantageous tariff, the producers will be able to cherry-pick the most beneficial tariff applicable to their products. In addition, – where FTAs overlap – should the preferences be the same, the producers will also be able to choose using one set of rules of origin rather than the other.
Conclusion
As the CFTA aims at creating an economic community, stage 4 of Abuja Treaty explicitly provides for the “coordination and harmonisation of tariff and non-tariff systems among the various regional economic communities with a view to establishing a Customs Union”.
Since one of the aims of the CFTA is to resolve the challenges of multiple trade regimes and overlapping memberships and expedite the continental integration processes, a political decision is required for the CFTA negotiations to be prioritised over all other intra-African trade negotiations including the TFTA. Such a decision would be justified not only in view of rationalising the capacity but also financial resources.
Moreover, the 2012 AU Summit Decision was very clear that Tripartite and regional FTAs should be consolidated into the CFTA. It is therefore mandatory to prioritize the CFTA over all other all intra-African trade negotiations, with view of establishing a single economic space and common trade rules. In order to achieve a pan-African FTA, all pre-existing FTAs will be superseded by the CFTA once in place.
As the CFTA negotiations have started, the integration process of the different RECs has reached different levels of advancement. Therefore, there is a possibility for the CFTA to be established before the RECs have established their CUs. In this context, should the negotiation of the tariff offers be made on an individual basis, there is a risk that the reconciliation of the individual tariff structures and the tariff structures of the proposed CUs be divergent. It is to be noted that the Abuja Treaty provides that in no case, a preferential trade arrangement concluded with non-African parties will grant better terms to the latter than those granted to the African countries. For this purposes, transparency is to be observed when those arrangements with non-African States are concluded (Cf. Art. 37 Abuja Treaty). The terms provided for under the Economic Partnership Agreements should thus serve as benchmarks for intra-African liberalisation, together with REC FTAs.
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ECA urges Africa to push ahead with Continental Free Trade Area
The Africa Trade Forum ended in Addis Ababa Wednesday with Economic Commission for Africa’s Coordinator, David Luke, of the African Trade Policy Centre (ATPC) urging participants to act on conclusions reached in discussions this week as the continent seeks to meet its October 2017 deadline for the implementation of the Continental Free Trade Area (CFTA).
Mr. Luke, in various interventions and presentations over the week, including one on the CFTA and Structural Transformation, made a case for the need for Africa to move with speed to deal with outstanding issues standing in the way of the CFTA.
The CFTA, which is expected to be in place by October 2017, will bring together fifty-four African countries with a combined population of more than one billion people and a combined gross domestic product of more than US $3.4 trillion.
With the CFTA, African leaders aim, among other things, to create a single continental market for goods and services, free movement of business persons and investments and expand intra-African trade. The CFTA is also expected to enhance competitiveness at the industry and enterprise levels on the continent.
“We have had great discussions over the past three days on a number of critical issues for African trade that will have implications and follow-up actions for all of us,” Mr. Luke said.
Discussions over the past three days centred on critical issues that need to be addressed for African trade and regional integration, among others.
Participants, among them ministers of trade, senior government officials, representatives of the private sector CEOs, civil society, international development agencies academia and others, pondered on how the CFTA can contribute to structural transformation in Africa; how to ensure that the CFTA is effectively implemented; how to make the agreement gender inclusive; the CFTA’s potential impacts on critical economic and social human rights, and mitigation strategies where there is a risk of negative impacts; how Africa can make the most of potential relationships with Asia, Europe, the United States and emerging markets; and the importance and practicalities of trade facilitation and start-up incubators in Africa, among others.
Mr. Luke said intra-African trade was important compared to Africa’s trade with other trading partners because African export markets are more diversified and sophisticated, adding in 2015, manufactured goods accounted for 42.8 percent of intra-African exports compared to only 19.0 percent of Africa’s exports outside the continent.
“Boosting intra-African trade through the CFTA is therefore crucial to accelerating structural transformation in Africa,” he told participants.
ECA modelling exercises, Mr. Luke said, indicate that establishing the CFTA has the potential to boost intra-African trade by 52.3 percent between 2010 and 2022.
Trade in industrial products is expected to receive the largest boost, with an additional increase of 53.3 percent over the same period.
Supportive trade facilitation measures, he said, could more than double intra-African trade, stimulating industrial products the most and create jobs for the millions of Africa’s youth who are currently unemployed.
Earlier Mr. Luke officially opened a Research and Capacity Building side meeting at the Africa Trade Week on behalf of Deputy Executive Secretary Giovannie Biha.
He said ATW2016, through its many sessions and networking opportunities, was providing a comprehensive, integrated and inclusive platform for policy dialogue between various trade constituencies on the aspirations of African people as articulated in Agenda 2063.
“Liberalization of intra-African trade, encompassing adequate reduction of tariffs and dismantling of cross-border barriers to trade and investment is essential for engineering Africa’s structural transformation. There is need to design and implement sound and comprehensive policy framework for such liberalization,” he said.
Mr. Luke said the success of Agenda 2063 going forward will depend to a major extent on whether rigorous research and analysis become critical elements of the decision-making process at national and regional levels, adding the workshop was therefore an essential step forward.
He told participants the ECA is positioning itself as Africa’s premier think tank on the current development agenda.
“We have put in place knowledge platforms for consistently generating top quality, thoroughly researched products that reflect the latest thinking on issues relating to Africa’s transformative agenda,” Mr. Luke said.
“It is my hope that researchers and think-tanks gathered at this workshop will continue in the short, medium and long-term support the work of the ECA and other development agencies such as the development banks and bilateral donor agencies in the context of the negotiation and implementation of the CFTA.”
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Second High-Level Meeting of the Global Partnership for Effective Development Cooperation: Nairobi Outcome Document
Based on an inclusive consultation that concluded in Kenya at the Global Partnership’s Second High-Level Meeting (HLM2), the Nairobi Outcome Document was released on 1 December 2016. This document will help to shape how existing and new development actors can partner to implement Agenda 2030 and realise the SDGs.
Nairobi Outcome Document
Summary
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We, the participants of the second High-Level Meeting of the Global Partnership for Effective Development Cooperation, are committed to effective development cooperation as a means to achieve the universal and inter-related Sustainable Development Goals (SDGs). We met in Nairobi, Kenya, on 28 November-1 December 2016 to reaffirm the spirit of partnership in which we recognized our unity of purpose, inter-dependence and respective responsibilities.
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We believe that effective development cooperation can arise from inclusion, trust and innovation, founded on respect by all partners for the use of national strategies and country results frameworks.
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The universality of the 2030 Agenda for Sustainable Development means that the donor-recipient relationships of the past have been replaced by approaches that view all as equal and interdependent partners in development. The Global Partnership champions this approach, and seeks to maximize the effectiveness and impact of all forms of cooperation for development. We do this in partnership to achieve the broad vision of people, planet, prosperity and peace.
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Our vision is consistent with agreed international commitments on environmental sustainability, human rights, decent work, gender equality and the elimination of all forms of discrimination.
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Our Monitoring Framework is a unique instrument for mutual accountability. We will continue to use it to monitor implementation of our commitments through country-led and country-based processes. This monitoring will contribute directly to the United Nations High-Level Political Forum follow-up and review of the implementation of the SDGs. We will evolve and strengthen our monitoring to deepen mutual learning, mutual benefit and mutual accountability.
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To deliver on this vision, We will collectively and individually take urgent action in line with our four principles that are applicable to all partners – ownership of development priorities by developing countries, focus on results, inclusive development partnerships, and transparency and accountability.
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We embrace the diversity that underpins our partnership and recognize the complementary contributions of all. While our principles and commitments are common to all members of the Global Partnership, each partner will deliver on its respective commitments, specific to their constituency.
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We reaffirm all previous commitments taken at the High Level Fora for Aid Effectiveness in Paris (2005), Accra (2008), Busan (2011) and the GPEDC High Level Meeting in Mexico City (2014). We commit to energize the implementation of commitments and the Global Partnership with a pledge of leaving no one behind.
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To accelerate progress in our joint commitments we will strengthen country ownership of development priorities. We will:
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work with parliaments to improve their scrutiny of all development cooperation; We will empower local governments to localize the SDGs, and support communities to interact with them;
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develop and support transparent, accountable and inclusive national development strategies, and encourage alignment of all partners to those strategies where feasible; and
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strengthen and use country systems, improve harmonization of providers of development cooperation, and support the inclusion of local business sector and civil society in procurement processes.
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To strengthen focus on results, we will:
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further develop, support and use country-level results frameworks, and progressively adapt results frameworks to reflect the targets and indicators of the SDGs, and make results data publicly available; and
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further develop, support and use national statistical systems, and generate disaggregated data to report on progress.
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To promote inclusive development partnerships, we will:
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increase our efforts to ensure an enabling environment for all partners, including parliaments, local governments, civil society, the business sector, philanthropy and trade unions, and will support country-level platforms for collaboration;
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foster enabling policy environments for the business sector to support responsible, inclusive and sustainable business practices, and support structured dialogue and partnership to promote these approaches;
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support civil society to play its full role as an independent development actor in its own right, and to ensure its own operations are as effective as possible; and
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work with philanthropy to maximize their specific contribution to sustainable development, including through public-philanthropic partnerships.
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To strengthen transparency and accountability to each other, we will:
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improve publication of open data on development cooperation, and support the use of this data by all relevant stakeholders;
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update mutual accountability arrangements at country level to include all relevant development partners, in an inclusive and transparent manner;
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improve the capacity of local authorities and parliaments to provide transparent information to citizens on the use of resources; and
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support the business sector to adopt transparent and accountable management systems of public and private funds, and to account for the social, environmental and economic impacts of its value chain.
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We are committed to ensuring that no one is len behind by the development process and by development cooperation specifically.
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We will invest in science, technology and innovation as a driver of effective development cooperation.
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We will support fragile and conflict-affected countries to access the resources and partnerships needed to advance specific development priorities. Building on the New Deal for Engagement in Fragile States, we will work to enhance engagement between development, peacebuilding, security and humanitarian partners and efforts. We will promote peer learning between fragile and conflict-affected environments.
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We recognize that women’s and girls’ rights, gender equality and the empowerment of women and girls are both a stand-alone goal and a cross-cutting issue to achieving sustainable development. We will accelerate efforts to achieve these aims by deepening multi-stakeholder partnerships and tracking resource allocations for these aims, strengthening capacity for gender responsive budgeting and planning and the participation of women’s organisations.
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We reiterate our commitment to invest in the development of children and youth. We will urgently improve reporting on child-focused development cooperation and domestic resources, and strengthen capacity for youth to participate in accountability exercises.
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We recognize the specific issues facing Middle Income Countries (MICs) and will ensure that development cooperation addresses these. We will also promote effective South-South Cooperation and Triangular Cooperation.
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We will further improve our ways of working together, to offer a voice to all stakeholders in the spirit of partnership. In order to do so, we will:
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broaden our partnership to include all interested stakeholders;
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support effective cooperation at country level, including through inclusive country-level partnerships;
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improve the practical utility of regional mechanisms and platforms, and make better use of the experience of Global Partnership Initiatives;
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place demand-driven knowledge sharing and learning at the heart of our work, including through bringing together communities of practice to find solutions to specific challenges; and
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continue to update our governing arrangements to ensure that all partners are heard and can steer the work of the Global Partnership.
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How can Africa kill the red tape and improve trade?
“There are so many processes, so much documentation. A centralized place of clearance could solve anything.” These are the words of Sharon Kimanini, head of logistics for a Kenyan garment exporter. Her message is clear.
As the Global Enabling Trade Report 2016 points out, improving the efficiency of process and reducing the red tape around cross-border trade remains an easy win for international trade. While progress on multilateral trade talks looks dim and overall infrastructure investment lags, focusing on regulatory efficiency can help governments enable trade quickly, doing more with less.
According to UNCTAD and OECD estimates, the implementation of the WTO Trade Facilitation Agreement costs between $4 to $20 million per country, while the impact on exports, and hence jobs, would be many times greater. The WTO estimates it could boost developing country exports by up to $730 billion per year.
A number of countries across Africa have made important strides on the efficiency front.
Botswana leads the region on the Enabling Trade Index’s border administration pillar, seen below. Its compliance with import procedures requires only eight hours on average, on a par with major global traders such as South Korea and the United States. On the cost side, Kenya has managed to radically cut the price of import compliance, from an average of $550 to $115 per container. These types of efficiency drivers – reducing time and cost for red tape – are critical when it comes to enabling trade, especially for small and medium-size companies, which often face the most significant hurdles.
However, more needs to be done. Governments must work hand-in-hand with the private sector to identify key bottlenecks and agree on ambitious roadmaps for reform. Governments must also coordinate with regional counterparts to ensure coherent and coordinated implementation, which can support regional integration, including those at the continental level, such as the African Union’s Boosting Intra-African Trade agenda. These reforms can also help to better position economies as attractive destinations for foreign investment, particularly as manufacturing opportunities open up with increasing costs in Asia.
The Global Alliance for Trade Facilitation is engaging with companies, government agencies and private-sector organizations in Ghana and Kenya to support this critical joint process, and plans to explore future partnerships with other countries in the region in 2017.
From speaking with traders such as Sharon Kimanini, it appears there are a number of concrete solutions that can address these bottlenecks. Although these solutions may not call for big financial investments, they will require champions from both government and business to ensure they are fit for purpose and sustainable. With momentum picking up with the imminent entry into force of the Trade Facilitation Agreement, we look forward to seeing continued progress and finding out which economies will lead the way in 2018, when the next Enabling Trade Index comes out.
Key message: Harvest that low-hanging fruit
Among the myriad measures to enable trade, reforming border administration deserves special attention. It requires little money and can be done relatively quickly. OECD estimates that implementation of the Trade Facilitation Agreement (TFA) would require between $4 to $20 million by country, on average, with fairly low direct annual operating costs. UNCTAD’s cost analysis echoes the OECD’s, and finds that three quarters (28 out of 37) of TFA measures would require, on average, three years or less for implementation, with the remaining measures needing five years or less. Furthermore, reforms in this area are mostly uncontroversial and therefore require only limited political capital, as confirmed by the adoption of the Trade Facilitation Agreement in 2014 amid a very difficult international context. Moreover, proposed TFA reforms can support government revenue collection and provide a boost for business. Significantly, they can mostly be done unilaterally, although some aspects require international cooperation (e.g. in matter of transit). Finally, adoption of the TFA, and its upcoming entry into force – most likely in 2017 – provides not only momentum for reforms, but also resources to developing countries to help them implement the Agreement. Yet, reforming border administration is not an easy task and therefore requires strong political and bureaucratic will; close cooperation among a myriad agencies, bodies and actors; and, sometimes, direct assistance.
The combination of political feasibility, affordability, promises of additional revenues, momentum and resource availability suggests that border administration is the low-hanging fruit of trade facilitation. Yet the ETI results show that the potential of streamlining border administration remains largely untapped. Trade-enabling performance remains strongly correlated to the level of development (Figure 4). Worse, there has been no sign of convergence among development levels since 2014. In fact, the gap between developing and advanced economies has actually widened by 0.1 points from 1.22 to 1.32 on a 1-to-7 scale. Yet, there are some bright exceptions, notably in Sub-Saharan Africa (see Trade facilitation performance in Africa below).
Conversely, the performance of commodity exporters is particularly mediocre: the vast majority of them trail their respective peer income groups by a wide margin. Among high-income economies, for instance, the average score of commodity-rich countries on the third pillar is one full point lower than the average score of other countries in that income group (see Figure 5). In light of these results and in a prolonged episode of low commodity prices, the fact that improved trade facilitation, and in particular improved customs efficiency, is associated with higher export diversification bears particular significance.
From a practical standpoint, improving border administration consists to a large extent of improving policies and regulations, although it also requires adopting or upgrading IT infrastructure, building capacity, and additional investment. The success of TFA implementation will be measured in terms of the existence of adequate regulation on matters such as information availability, formalities, advance rulings, appeal procedures, fees and charges. Currently, the best information on the state of implementation of the TFA is compiled by the OECD, using proprietary data and other sources, including the Global Expression Association. However, the OECD indicators provide little information about the actual enforcement of the regulations, let alone their effectiveness, which is what ultimately matters.
This distinction between the de jure and the de facto is still difficult to establish, precisely due to the lack of indicators about the latter. This is the gap that the Global Alliance for Trade Facilitation’s work on data aims to fill. Already the results of the World Economic Forum’s Executive Opinion Survey (EOS) suggest that good regulation does not imply good performance. Figure 6 shows the positive, but very loose relationship between the level of customs services and the perceived efficiency of customs (6a), and slightly closer relationship between customs transparency and perceived bribery in customs (6b). In fact, many countries achieve the maximum score of 1 for regulatory transparency, including Nigeria, which has earned the worst score–1.9 on a 1-to-7-scale–on the bribery indicator (derived from the EOS) among the 136 economies included in the ETI. It is difficult to establish whether this disconnect is due to a lack of enforcement of transparency rules, the lack of anti-graft rules, or both, but it is a cautionary tale.
Trade facilitation performance in Africa
Although Sub-Saharan Africa remains, on average, one of the weaker performing regions on the Border administration pillar, a number of countries in the region are making progress to facilitate trade. Botswana and Rwanda, two small landlocked countries, have become the top performers in this pillar for 2016, taking over from Mauritius and South Africa, with Kenya rounding out the top 5.
Documentation and border clearance for imports into Botswana requires only eight hours on average, on par with South Korea and the United States. On the export side, compliance times are longer, though still performing above the global average. In 2016, Botswana launched its national Trade Portal, providing a streamlined online platform for access to all necessary information on import and export procedures.
Rwanda, with an annual GDP per capita of just $500, has invested significantly in improving its border procedures, including through the implementation of the electronic single window system. The Rwanda ESW has helped to cut the cost of border clearance dramatically, thereby reducing costs for trade. At the same time, businesses surveyed report low levels of irregular payments, while rating the time predictability of import procedures as high.
Neighboring Kenya recorded an over 70 percent reduction in the cost of import documentation clearance (from $550 to $115) in 2016, while the cost of border clearance remains relatively high. Similarly, in the overall perceptions of the efficiency of the clearance process as measured by the World Bank’s Logistics Performance Index, Kenya has improved dramatically among countries in the ETI dataset (from 128th to 39th). Here, too, the single window has been an important component, although the prevalence of irregular payments remains a concern.
Two additional significant improvers are Ghana (8th) and Ethiopia (10th). Ghana, an economy hit by macroeconomic and foreign exchange shocks in 2015, significantly reduced the time required for border and documentation compliance by two-thirds. Time and cost for border compliance in Ethiopia are high, but it has made significant improvements in the Time predictability of procedures according to businesses surveyed, moving from 125th to 77th on this indicator.
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Growth and development policy – new data, new approaches, and new evidence
Economies in the southern Africa region face thorny challenges when it comes to the transformation of their economies, job creation, and the need to share the benefits of growth. For the past three years, more than 100 researchers have engaged in a collaborative research programme with the ultimate aim of spurring economic growth and improving development prospects in the southern Africa region.
This UNU-WIDER and National Treasury conference was organised to interrogate these research findings and vigorously debate their implications. The conference featured two major themes. The first theme focused on South Africa with an emphasis on positive policy steps for rekindling growth with equity. The second theme focused on regional growth and development with an emphasis on “win-win” responses to regional challenges and opportunities. In addition to conference presentations, the event featured special poster sessions in the afternoons of both conference days.
The conference brought together researchers, technical experts and policy makers from UNU-WIDER, the National Treasury and several other partners. It took place at the Protea Hotel Fire & Ice! in Pretoria on 30 November-1 December 2016.
Regional growth and development in southern Africa project
This project aims to develop, in conjunction with important research/policy institutions in the region, regional growth and development initiatives that generate economic transformation and widely shared development benefits.
The project focuses on two principal elements: (i) firm-level analysis with initial focus on South Africa and (ii) regional growth and development with particular focus, at least initially, on two identified opportunities: agricultural trade including bioenergy and leveraging natural resource investments for inclusive growth.
New insights are generated with new data including a time series of real and nominal social accounting matrices from 1993-2013, comprehensive administrative tax record data compiled in collaboration with SARS, and original data on regional trade.
Growth and development policy: New data, new approaches, and new evidence
The Republic of South Africa faces the imperative of escaping economic stagnation. The broad-level economic ills besetting South Africa are well known but bear brief repetition: real GDP per capita has hardly grown for nine years; productivity growth has been slow and appears to be slowing; the unemployment rate has recently been increasing from already extraordinarily high levels; and inequality remains stubbornly very high. This first note of a two part series focuses on domestic policies that take the external economic environment largely as given.
A series of broad implications emerged:
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Openness, without doubt, poses challenges; nevertheless, openness also provides substantial growth opportunities through links to global demand and technical advances. Democratic elections in 1994 initiated a still ongoing process of re-engagement with the global community pushing up demand for imports and opening opportunities for export. Secular stagnation in mining placed the onus on other exporting sectors to grow. This onus remains as mining still represents around 30 per cent of exports. To exploit the opportunities present in international markets and to facilitate transition away from dependence on mining exports, export oriented policies are required. Access to high-quality imported intermediate inputs is an important component of an export orientation. There also appears to be space for enhanced competition from imports to reduce markups and spur firm productivity and growth.
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In manufactures, South Africa’s most productive firms are larger and much more likely to engage in direct importing and/or exporting. In terms of breaking out of the current economic malaise, large, productive firms with existing links to international markets likely have the highest near term growth potential.
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South Africa has a revealed comparative advantage in services exports. The past two decades also illustrate that South Africa has done relatively well in supplying rapidly growing African markets more generally (see Part II of this note series). These two features interact as in the examples of servicing mining equipment and the sale of consumer goods in South African supermarkets located abroad.
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Economic growth in South Africa appears to be powerfully skills-constrained. Wage trends strongly indicate that demand for skilled labour has chronically exceeded supply causing highlyskilled wages to rise dramatically. Part of this rise can be explained by global forces, notably skillsbiased technical advance. However, the extraordinary rapidity of the rate of change in highly-skilled versus lower-skilled wage ratios over the past two decades points to local factors as well. Growth in services exports and high-quality manufactures, both of which frequently require substantial inputs of highly-skilled labour, has almost surely contributed to the relative rise in highly-skilled wages. The post-apartheid expansion of government provided public services and concomitant skilled labour requirements to design and manage these services within the public sector are a second likely contributing factor.
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The skills constraint is pernicious. As noted, it constrains growth, most obviously in sectors that require substantial inputs of skilled labour. Because exporting requires skills, the skills constraint applies with particular force to exporters, who have already been identified as particularly important. The skills constraint is likely a part of the explanation for the coexistence of increased productivity and declining employment in manufacturing firms since 1994. Skills constraints are currently limiting services exports to rapidly growing markets in Africa and beyond.
In addition, the very high degree of formality of the South African economy implies a need for skilled labour in management, supervisory, technical, and administrative capacities in order to employ unskilled labour. Hence, the paucity of skilled labour is very plausibly constraining broad employment growth and thus playing a part in sustaining very high rates of unemployment.
In contrast to South Africa, most of the other economies in the southern Africa region have grown reasonably rapidly over the past two decades. Recent experience has, however, highlighted the vulnerability of these economies to shocks, sometimes external and sometimes of their own making. For example, for two decades, Mozambique posted one of the fastest economic growth rates in the world. In 2016, a combination of governance failures, political instability (not unrelated to the governance failures), and lower commodity prices for coal and natural gas has generated an ongoing macroeconomic crisis. Per capita GDP growth in Mozambique is expected to be close to zero in 2016.
This note takes stock of the experience of the past two decades and seeks to chart realistic paths forward from a regional growth and development perspectives. It considers six specific areas where a regional growth and development perspective may have particular promise. These areas are: the spread of regional supermarket chains; the poultry value chain; trucking; mining equipment and related services; energy including bioenergy; and confronting climate change.
Background and motivation
Improved growth dynamics in Africa in general and the Southern African Development Community (SADC) in particular combined with an improved political and economic environment within the region has led to rapid growth in trade in the region. Beginning from very small volumes in the immediate post-apartheid period, regional trade has grown rapidly and has now reached levels that imply considerable macroeconomic significance. Africa, driven principally by SADC, has become the largest destination for diversified manufactured exports from South Africa, surpassing the European Union in 2011. This growth in trade is consistent with the objectives of the SADC free trade area (FTA) and the success that member states have realized in the implementation of the tariff phase downs agreed to within the framework of the FTA (Hartzenberg and Kalenga 2015).
As noted in Part I of this series of notes, the growth in trade in goods has been accompanied by rapid growth in trade in services alongside very significant foreign direct investment in Africa in general and SADC in particular (notably by South African firms) in sectors such as retail, banking, insurance, transport, and business support services. Despite this growth, a series of concerns emerge with respect to the regional integration agenda.
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South Africa Merchandise Trade Statistics for October 2016
SA’s trade account swings to a deficit
South Africa’s trade account swung to a deficit in October, but the shortfall was lower than forecast as exports performed better than expected.
Data from the SA Revenue Services (SARS) showed on Wednesday that the trade balance switched to R4.41 billion in October from a revised R6.9 billion surplus in September. But SARS said exports fell 11.1 percent on a month-on-month basis, while imports were up 0.4 percent.
The news rattled the rand with the currency dropping from an opening of R13.8667 to R14.0331 by 5pm.
The year to date deficit of R14.35 billion is an improvement from the comparable period last year of R59.5 billion.
John Cairns at Rand Merchant Bank said October saw the worst trade balance of the year thanks to Christmas-related imports.
Nedbank said these figures suggested the weaker rand supported exports while dampening imports. “The rand faces pressures from both the global and domestic fronts, with the US interest rate hike and the uncertain policies of the incoming administration likely to put emerging markets under pressure.”
The bank said imports of capital equipment would also remain weak as the private sector remained cautious about committing to large expansion projects.
“Global conditions remain lacklustre, which with low commodity prices, will hamper export performance in the short term,” Nedbank said. “Import growth is also likely to be modest as household demand will be hurt by weak confidence, as well as high inflation and debt service costs.”
Trade performance
Elize Kruger, an analyst at NKC African Economics, said monthly trade statistics were volatile, but the cumulative picture suggested an improved trade performance in the first 10 months of this year.
“The narrower trade deficit reflects the benefit from a weaker rand exchange rate during the past 12 to 18 months, the moderate recovery in commodity prices, as well as the dismal domestic demand that inhibits imports during 2016.”
She said an improving trade balance would feed into a lower current account deficit this year. “We forecast a current account deficit of 4 percent of (gross domestic product) for 2016 compared to 4.3 percent in 2015.”
Investec economist Kamilla Kaplan said subdued domestic economic activity suppressed import growth. She said although export demand had been comparatively stronger, there were downside risks to South Africa’s potential export growth trajectory.
“Depressed business confidence has been reflected in the retrenchment in private sector investment rates. On a quarter-on-quarter seasonally adjusted annualised basis, private investment fell by 3.1 percent, following a decline of 13.3 percent in the first quarter of 2016,” Kaplan said.
She said similarly, household consumption expenditure contracted 1.7 percent in the first quarter and rose by just 1 percent in the second quarter, compared with the increase of 1.7 percent last year.
“The Reserve Bank expects consumers to remain under pressure for some time.”
She said these risks were associated with the modest global growth outlook and weak global trade momentum.
The South African Revenue Service (SARS) has released trade statistics for October 2016 recording a trade balance deficit of R4.41 billion. The year-to-date deficit (01 January to 31 October 2016) of R14.35 billion is an improvement on the deficit for the comparable period in 2015 of R59.50 billion. These statistics include trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R4.41 billion trade balance deficit for October 2016 is attributable to exports of R88.19 billion and imports of R92.60 billion. Exports for the year-to-date (01 January to 31 October) grew by 5.6% from R855.25 billion in 2015 to R903.42 billion in 2016. Imports for the year-to-date of R917.76 billion are 0.3% more than the imports recorded in January to October 2015 of R914.75 billion.
On a year-on-year basis, October 2016’s R4.41 billion trade balance deficit is an improvement from the deficit recorded in October 2015 of R22.35 billion. Exports of R88.19 billion are 3.7% more than the exports recorded in October 2015 of R85.04 billion. Imports of R92.60 billion are 13.8% less than the imports recorded in October 2015 of R107.39 billion.
September 2016’s trade balance surplus was revised upwards by R0.25 billion from the previous month’s preliminary surplus of R6.70 billion to a revised surplus of R6.95 billion as a result of ongoing Vouchers of Correction (VOC’s). Exports decreased from September 2016 to October 2016 by R10.97 billion (11.1%) and imports increased from September 2016 to October 2016 by R0.39 billion (0.4%).
Trade highlights by category
The main month-on-month export movements (R’ million)
Section: | Including BLNS: | |
Precious Metals & Stones | - R 4 511 | - 25% |
Vegetable Products | - R 2 789 | - 48% |
Vehicles & Transport Equipment | - R 1 416 | - 10% |
Chemical Products | - R 420 | - 7% |
Mineral Products | - R 419 | - 2% |
The main month-on-month import movements (R’ million)
Section: | Including BLNS: | |
Machinery & Electronics | + R 1 188 | + 5% |
Mineral Products | + R 534 | + 5% |
Chemical Products | + R 398 | + 4% |
Plastics & Rubber | + R 248 | + 6% |
Vegetable Products | - R 776 | - 26% |
Vehicles & Transport Equipment | - R 394 | - 5% |
Equipment Components | - R 375 | - 5% |
Base Metals | - R 280 | - 5% |
Footwear & Accessories | - R 152 | - 11% |
Trade highlights by world zone
The world zone results from September 2016 (Revised) to October 2016 are given below.
Africa:
Trade Balance surplus: R20 086 million – this is a 4.0% increase in comparison to the R19 322 million surplus recorded in September 2016.
America:
Trade Balance deficit: R2 165 million – this is a deterioration in comparison to the R636 million deficit recorded in September 2016.
Asia:
Trade Balance deficit: R16 712 million – this is a 42.1% increase in comparison to the R11 759 million deficit recorded in September 2016.
Europe:
Trade Balance deficit: R9 788 million – this is a 151.2% increase in comparison to the R3 896 million deficit recorded in September 2016.
Oceania:
Trade Balance deficit: R149 million – this is a deterioration in comparison to the R10 million surplus recorded in September 2016.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for October 2016 recorded a trade balance deficit of R13.92 billion. This was a result of exports of R75.70 billion and imports of R89.62 billion.
Exports decreased from September 2016 to October 2016 by R10.87 billion (12.6%) and imports increased from September 2016 to October 2016 by R0.26 billion (0.3%).
The cumulative deficit for 2016 is R103.12 billion compared to R147.81 billion in 2015.
Trade highlights by category
The main month-on-month export movements (R’ million)
Section: | Excluding BLNS: | |
Precious Metals & Stones | - R 4 647 | - 27% |
Vegetable Products | - R 2 864 | - 55% |
Vehicles & Transport Equipment | - R 1 185 | - 9% |
Chemical Products | - R 565 | - 11% |
Wood Pulp & Paper | - R 391 | - 23% |
The main month-on-month import movements (R’ million)
Section: | Excluding BLNS: | |
Machinery & Electronics | + R 1 170 | + 5% |
Mineral Products | + R 507 | + 4% |
Plastics & Rubber | + R 244 | + 6% |
Prepared Foodstuff | + R 207 | + 8% |
Vegetable Products | - R 762 | - 26% |
Equipment Components | - R 375 | - 5% |
Vehicles & Transport Equipment | - R 356 | - 4% |
Base Metals | - R 293 | - 6% |
Trade highlights by world zone
The world zone results for Africa excluding BLNS from September 2016 (Revised) to October 2016 are given below.
Africa:
Trade Balance surplus: R10 574 million – this is a 10.4% increase in comparison to the R9 576 million surplus recorded in September 2016.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for October 2016 recorded a trade balance surplus of R9.51 billion. This was a result of exports of R12.49 billion and imports of R2.98 billion.
Exports decreased from September 2016 to October 2016 by R0.10 billion (0.8%) and imports increased from September 2016 to October 2016 by R0.13 billion (4.7%).
The cumulative surplus for 2016 is R88.77 billion compared to R88.30 billion in 2015.
Trade Highlights by Category
The main month-on-month export movements (R’ million)
Section: | BLNS: | |
Vehicles & Transport Equipment | - R 230 | - 16% |
Mineral Products | - R 218 | - 12% |
Chemical Products | + R 145 | + 15% |
Precious Metals & Stones | + R 137 | + 21% |
Vegetable Products | + R 75 | + 11% |
The main month-on-month import movements (R’ million)
Section: | BLNS: | |
Chemical Products | + R 214 | + 37% |
Mineral Products | + R 27 | + 65% |
Prepared Foodstuff | + R 25 | + 5% |
Wood & Articles thereof | + R 23 | + 19% |
Precious Metals & Stones | - R 145 | - 82% |
Vehicles & Transport Equipment | - R 38 | - 65% |
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Universal effective development cooperation towards a peoples’ agenda: Nairobi Civil Society Forum outcomes
The CSO communiqué is the culmination of the joint effort of civil society organisations from around the world at the Nairobi Civil Society Forum. Speaking many languages but with one voice, CSOs call for universal effective development co-operation that is accountable to people and to all partners in development in the lead up to HLM2.
CSO Statement
We, civil society organisations (CSOs) from around the world, have gathered in Nairobi on the occasion of the Nairobi Civil Society Forum and the Second High-Level Meeting (HLM2) of the Global Partnership for Effective Development Cooperation (GPEDC).
Speaking many languages but with one voice, we call for universal effective development co-operation that is accountable to people and to all partners in development.
In line with this vision, we strongly uphold the value of the GPEDC as a unique multi-stakeholder platform for mutual accountability in development co-operation.
We assert that the starting points of the HLM2 should be the four development effectiveness principles (democratic ownership, focus on results, inclusive partnerships, and transparency and accountability); the aid and development effectiveness commitments made in Rome, Paris, Accra, Busan, and Mexico; and the documented progress to date of all actors in implementing these principles and commitments.
We emphasise that CSOs are key partners in inclusive and effective development co-operation. We further underline that free and guaranteed civic space at all levels, consistent with agreed international rights, is essential for CSOs to contribute to development, globally and locally, and join as equal partners in helping people realise their rights.
We acknowledge the critical role of the development effectiveness principles, effective development co-operation and multi-stakeholder partnerships in the delivery of the 2030 Agenda. Effective development co-operation is an essential and stand-alone complement to the Sustainable Development Goals.
We believe that effective development co-operation must be applied universally.
This means:
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addressing poverty and inequality, which are faced especially by the most vulnerable and those whose rights are least upheld, through a whole-of-systems approach and inclusive partnerships that ensure the delivery of meaningful results to people;
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ensuring self-determination and decolonisation linked to the continued displacement of indigenous peoples as a result of militarisation and trade agreements for development; natural resource exploitation; climate change; lifestyle diseases; and conflict;
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upholding participatory methods; mutual accountability; feminist, gender, intergenerational and human rights-based approaches; and democratic ownership, using a variety of development co-operation policies and tools, including the establishment of two inclusive multi-stakeholder taskforces to address commitments for effective development co-operation to (a) gender equality and women’s rights, and (b) the rights of children and youth, in partnership with feminist and women’s rights advocates and the youth sector from civil society respectively; and
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governance and accountability mechanisms that meaningfully include and engage different stakeholders, and strengthen the capacities of all actors to participate on an equal footing.
We recognise the work that still needs to be done. We commit to continuously work on our own effectiveness and accountability as independent development actors, to better enable people to claim their rights. We remind all development actors of their shared commitment in implementing effective development co-operation. All actors must translate effective development co-operation commitments into action at the level of countries and local communities, which are most affected by challenges to sustainable development, and to direct development co-operation where it is most needed, including contexts of human insecurity, conflict and fragility, noting that these situations particularly affect women and girls as well as children and youth.
It is vital that the HLM2 set a path for progress.
Specifically, we call for the parties to the HLM2 to take the following steps to further their commitment, action, and progress towards effective development co-operation:
Effective Development Co-operation and Accountability in the 2030 Agenda
We welcome progress towards some key principles of effectiveness like greater transparency of aid. However, this is insufficient to compensate for the trend towards increased (negative) conditionality, a focus on donors’ own national interests at the expense of effective development co-operation, and the undermining of democratic ownership.
We call on all parties to the HLM2 to advance the implementation of an effective development co-operation framework, particularly in relation to the implementation of Agenda 2030, recognising that growth is not the same as development and the existing model of development must be reviewed. We recognise that the GPEDC cannot address all aspects of Agenda 2030, and should focus on ways that effective development co-operation can support the achievement of the Sustainable Development Goals.
Specifically, we call for:
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The universal application of a framework of effective development co-operation, subject to regular assessments through an inclusive monitoring framework with clear indicators that recognise the multidimensionality of development, that will hold stakeholders accountable for commitments they have made, including through agreements in Rome, Paris, Accra, Busan, Mexico, and Nairobi.
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The comprehensive implementation of human rights-based approaches at all levels of development and development co-operation, including through compliance with international legal commitments such as those concerning anti-human trafficking efforts and the promotion and protection of decent work and social dialogue.
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The use of evidence-based decision-making, including through the use of disaggregated data and gender- and age-responsive tracking, to identify the most vulnerable people – including refugees, migrants, and indigenous peoples – and to leave no one behind.
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The use of country systems, recognition of national realities, and respecting national realities and priorities as underscored by the Addis Ababa Action Agenda.
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Reasserting the notion of countries’ responsibility for and ownership of their development, and the acknowledgement and protection of their policy space by the international community.
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The integration of effective development co-operation principles in the planning, monitoring, evaluation, and implementation framework of Agenda 2030 at the country level.
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A continued focus of Official Development Assistance on poverty reduction and sustainable development.
Accountability and the Private Sector
We urge all stakeholders to ensure business and corporate accountability and transparency in the context of development co-operation programmes, to better achieve effective, positive and significant development outcomes. Recognising that an increasing role for the private sector in development presents inherent risk, and must therefore be combined with appropriate engagement criteria, the role of the private sector in development co-operation should be consistent and accountable with the Busan principles and labour, environmental and other human rights.
Specifically, we call for:
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The elaboration of criteria to assess and regulate private-sector interventions in development co-operation at the country level, in order to evaluate their compliance with international human rights, the UN Guidelines on Business and Human Rights, the OECD Guiding Principles for Multinational Enterprises, the FAO Voluntary Guidelines on the Governance of Tenure, and development effectiveness principles. These criteria must be based on a framework that clearly addresses the following areas:
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illicit financial outflows;
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tax justice, anti-tax evasion policies, and domestic capacity-building for revenue collection bodies, and domestic resource mobilisation;
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land grabs, whereby the poorest, most vulnerable and marginalised groups in rural and urban areas, particularly those without formally recognised land rights, lose their customary and legitimate rights to land and thereby their livelihoods, without alternative economic opportunities or adequate compensation;
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peace- and state-building and the prevention of violence;
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accountability of Development Finance Institutions; and
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respect for social, labour, and environmental rights, including social dialogue to ensure inclusiveness, transparency, and accountability.
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Support from provider and partner countries for the establishment of a United Nations Treaty for Transnational Corporations and Human Rights.
South-South Co-operation
We recognise that development will only be achieved through solidarity across peoples and sectors. We call for the development of a global accountability framework for South-South cooperation that is multidirectional, transparent and consistent with the principles of horizontal development co-operation, i.e. solidarity, mutuality, equality, respect for sovereignty, inclusion, human rights, non-interference, and non-conditionality.
Specifically, we call for:
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The development of a framework for horizontal development co-operation that can be used by civil society and non-traditional Southern partners, including diverse constituencies such as diaspora communities, in assessing the quality and impact of South-South co-operation, and to strengthen regional integration.
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The adoption of rights-based approaches and principles for effective development co-operation in global accountability frameworks for South-South co-operation.
Countries/Regions in Situations of Conflict and Fragility
We urge effective development co-operation approaches that deliver peace and security for people in situations of conflict and fragility, including situations with climate-induced vulnerability.
Specifically, we call for:
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A commitment to inclusive, accountable partnerships using human rights-based approaches to development in all activities in situations of conflict, including resource-based conflicts, and in states in post-conflict and fragile situations.
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Full alignment of foreign and security policies to principles and commitments to human rights and development co-operation, including through support for inclusive governance and peacebuilding, demilitarisation, comprehensive psycho-socio and social protection, and innovative and inclusive alternatives for youth.
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The full application of development effectiveness principles in fragile and conflict affected states, as well as in situations where people are marginalised.
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Support from provider countries for inclusive governance at the country level, with an empowered civil society at the core, as an essential means to address the root causes and drivers of fragility, conflict, and violence in fragile and conflict-affected states.
Enabling Environment for Civil Society
We note with concern the global closing and shrinking of civil society spaces, and increasingly limited access in many countries to funding for civil society organisations, including feminist and women’s rights organisations, children’s and youth organisations, and faith-based organisations. Furthermore, human rights defenders, including women human rights defenders and those defending the human rights of rural people, indigenous peoples and other marginalised groups, are under attack and face constant threat of stigmatisation, violence and criminalisation in many parts of the world. A worrying trend further undermining the legitimacy of independent civil society is the increasing number of government-organised non-governmental organisations (GONGOs). These restrictions on CSOs, public participation, and the realisation of human rights diminish the quality and legitimacy of democracy.
We urge the comprehensive alignment of country-level legal and regulatory frameworks with human rights standards, and the facilitation and effective institutionalisation of space for CSOs in development policy dialogue, planning, and monitoring.
Specifically, we call for:
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A shared commitment from CSOs and governments in both provider and partner countries to locally-designed legal and regulatory frameworks, including mechanisms to expand democratic space and ensure freedom of speech and association, as well as free, prior and informed consent for indigenous peoples; institutionalised spaces for policy dialogue and participation; and funding, education, or other support mechanisms that facilitate CSOs’ coherence with the Istanbul Principles for CSO Development Effectiveness.
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The creation of institutionalised partnerships, such as country partnership frameworks, between national governments, local governments, and CSOs, which recognise CSOs as development actors in their own right and equal partners in development co-operation. These partnerships should provide space for accessible and meaningful participation of civil society, with specific attention to including marginalised and vulnerable groups.
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The creation of a permanent and independent complaint mechanism at the international level, to which civil society organisations can appeal when their country’s legal and regulatory framework is not in line with international human rights standards.
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The creation of permanent multi-stakeholder structures at the country level to establish and monitor legal and regulatory reforms based on human rights standards.
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Measures to support the political, economic, and social empowerment of youth as key contributors to effective development, including their inclusion and participation in decision-making processes.
Development Effectiveness of CSOs
CSOs across the globe have committed to improve their own development effectiveness as development actors, in accordance with the eight Istanbul Principles for CSO Development Effectiveness. Accountability is an essential part of this commitment, and of the broader effectiveness of CSOs as independent development actors.
Specifically, we will:
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Adhere to the Istanbul Principles, which incorporate the Busan Principles, as an expression of mutual accountability with other stakeholders in the GPEDC.
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Take pro-active actions to improve and be fully accountable for our development practices, including by expanding CSO accountability frameworks and in particular encouraging the development of national and sectoral CSO effectiveness compacts.
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Continue to engage with the GPEDC monitoring process, and with stakeholders inside and outside of the GPEDC, to evaluate, document and communicate the contributions of CSOs to effective development.
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Be guided by country-led results frameworks as relevant to our work as independent development partners in our own right.
Civil society is united in supporting development that is based on human rights and supports the empowerment of people, especially the poor and marginalised and those in situations of vulnerability. We remain committed to engage and contribute meaningfully, at local, national and global levels, to the Global Partnership for Effective Development Cooperation and to the core principles of development effectiveness. In doing so, we will continue to assert our rightful space as independent development actors and as core partners in effective development co-operation, and to work in partnership with all stakeholders to advance viable solutions and options for a sustainable world.
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Groups fault push for public-private partnerships to drive economic growth
Civil society organisations attending the second High-Level Meeting (HLM2) of the Global Partnership for Effective Development Corporation in Nairobi Thursday have raised the red flag in the push for public-private partnerships in promoting economic growth.
The 400 organisations were particularly concerned by the drive for PPPs as key avenues to achieve growth as had been fronted in the draft outcome document would lead to misuse of public funds to grow private firms.
On Thursday, the group, under the umbrella of the CSO Partnership for Development Effectiveness (CPDE), held peaceful protests inside the venue of the final plenary session at the Kenyatta International Convention Centre.
The group claimed the push for public-private partnerships would not lead to inclusive growth hence not in line with the principle of the HML2 of leaving no one behind.
Directed to the poor
CPDE founding leader Antonio Tujan Jr said the focus of development aid should be directed to the poor and the marginalised since they are the proper target of development.
“CSOs warn that development cooperation may be progressively reduced to being catalysts for private forms of financing, and that the use of public funds – and the accompanying standards of accountability and inclusiveness-will be weakened.
“Private capital has consistently shown itself to fail to substantively reduce inequality but further aggravates them. This is the experience of communities on the ground,” MR Tijuan said.
The groups dismissed any emphasis laid on the use of private firms, saying there has been little evidence showing that private investments can effectively raise public revenue, or make goods and services more accessible.
Lesotho experience
They cited the Lesotho experience in building the Queen Mamohoto Memorial Hospital to replace a public hospital through a PPP.
The government reportedly subsidised management inefficiencies in the privately-run hospital, costing half the Ministry of Health’s budget, while the private partner had gained high returns under this arrangement.
The group was also worried that the final outcome document would weaken the mandate of the global partnership corporation (GPEDC) by limiting its value to providing country-level data to the United Nations.
“This would constitute a rejection of GPEDC’s distinctive traits, especially its inclusive multi-stakeholder character,” a statement by the corporation warned.
The civil society organisations warned that the growing emphasis on the private sector and diminishing emphasis on the inclusive nature of the GPEDC would present a difficult future in ensuring that development is channeled to the poorest segment of the population.
The Nairobi meeting, which began on November 28 and concluded on Thursday, was meant to track efforts taken to realise the 2030 Agenda for Sustainable Development requires through mobilisation and effective use of all types of development resources.
Download
Making Development Co-operation More Effective: 2016 Progress Report (3.7 MB)
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Africa Trade Week: Report of CUTS side event on Competition Policy in Africa and the CFTA
Final report of the Africa Trade Week side event by ‘CUTS’ held on the 30th November 2016
Introduction
African leaders launched negotiations to create a Continental Free Trade Area (CFTA) after key stakeholders recognised the role of competition policy in guiding the market activities. The CFTA could potentially be marred with anti-competitive practices which pose a threat to market efficiency, unless Africa begins discussions for incorporation of competition policy deliberately.
CUTS International organised a side event during the Africa Trade Week in Addis Ababa to enable exchange of views on how African countries can use competition policy as a tool to foster economic integration and secondly to provide a platform for African stakeholders to define the contribution of competition policy to the CFTA as well as reflect on how to mobilize support for competition policy to be integrated in the CFTA process.
The session was moderated by Dr Joy Kategekwa, Head, UNCTAD Regional Office for Africa. Panellists included Mr. Pradeep Mehta, Secretary General of CUTS International. Prof. Gerhard Erasmus, Founder and Associate, TRALAC and Mr. Rashid Kibowa, Director of Trade, East African Community (EAC)
The Session
Mr. Pradeep Mehta
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CUTS International has many years of experience through its competition work in Africa and has seen the evolution of competition from traditional anti-competitive practices across borders like cartels and abuse of dominance to emerging competition related issues like abuse of Government discretion.
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Many FTAs have incorporated competition related provisions thus recognizing competition policy as an integral part for regional trade, liberalisation, cooperation and integration. The CFTA negotiations including on competition principles will need to conclude in Phase 2.
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There is the need for the Continent to adopt a competition regime that will ensure one basic law is followed to avoid the risk of adopting different approaches for similar cases across the countries.
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The CFTA objectives align very well with the role of a harmonised competition policy in promoting efficient utilisation of resources and checking non-tariff measures which act as barriers to free trade. This will further ensure optimum distribution and utilisation of resources to help foster Intra-African trade as well as checking cross border anticompetitive practices
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Among the specific recommendations include:
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Inclusion of model competition chapter for CFTA that recognizes the different levels of individual country competition regimes. This is to ensure provisions are acceptable to all and easily implementable
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Provision for Competition Impact Assessment that will evaluate previous and upcoming policies regularly from a competition lens thus assess distortions caused by regulatory and policy measures and also ensure consistency amongst policies vis-à-vis competition principles
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Inclusion of a model chapter that will have provisions to check common anticompetitive practices such as abuse of dominance, cartelisation and anticompetitive agreements
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Provision for competition advocacy towards development of a culture of competition across the region that will ensure collective and active participation of state and non-state actors to further effective implementation of competition policy
Prof. Gerhard Erasmus
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The CFTA remains an ambitious undertaking by African states; at the centre is the question of how the chapter of competition will be approached. The new proposal to deal with competition and IP policy after completing negotiations on trade in goods and services, and investment is not right. There’s need for an integrated approach even as we phase the negotiations owing to linkages within the different chapters of the CFTA.
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It is important to learn how experts have handled it in other RECs, such as COMESA.
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RECs have adopted different approaches like co-operation among individual countries; this has not been very successful owing to extra-territorial and jurisdictional complications. The problem is made worse by the problem of overlapping membership issues across RECs. Part of the solution towards a harmonised policy is correction of this scenario. There are currently no modalities on the scope and thus design issues will remain a key challenge in discussing this chapter.
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COMESA is having challenges of domesticating a supra-national law. There is reference on the need of a model law and harmonisation as a possible option, challenge is whether countries with functional competition laws be willing to go back to the model law? There is therefore the need to exploring new insights on the subject beyond what we know. The good news is that competition has been identified by the CFTA process unlike in the TFTA negotiations.
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Capacity of government representatives on the subject remain a challenge hampering its prioritisation hence the need for advocacy as among the building blocks towards phase-2 negotiations.
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The challenge of flexibility in the negotiations pose yet another challenge. Unfair trade practice like dumping is technically not a negative situation in a customs union like SACU.
Rashid Kibowa
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The EAC has a regional Competition Act 2006. At the operational level, five commissioners from the five partner states have since been appointed and took oath in November 2016. It was quite delayed. The commission is independent of other organs of the EAC but draws funding from the secretariat. The council of ministers have directed to have national competition laws for all countries.
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Among the lessons to be drawn include differential levels of competition regimes, from a consensus principle in negotiation it means that the partners have to move at the level of the slowest member. A second lesson is the level of awareness among policy makers, politicians and experts, this challenge will impact on the pace and depth of negotiation at the CFTA level. There is a wanting political will and a general lack of technical capacity are the other lessons from EAC. There will be need to train experts on the subject before phase-2. Funding will also remain a key challenge in pushing the agenda forward.
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Some key sectors in the EAC that are subject to cross border trade that will need to be looked at deeply include cement, power, air transport, steel, railways, telecoms and banking.
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There is need for complementarity of phase 1 and phase 2. Allowing goods and services to move is primary; however there is need to relook on why the negotiation seems to be picking almost all aspects of negotiations. As we negotiate there will be need to prioritise and properly phase certain aspects of the CFTA negotiations to avoid slowdown.
Plenary and Conclusion
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There’s a need to critically look at how the national, regional and continental competition regimes will relate will each other on the discussions around cooperation.
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The history of RECs and their failures inform that there’s need to put certain fundamentals in place. On competition an assessment of the potential benefits to countries adopting the policy will be necessary.
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Vested interest remains an impediment in adopting competition policy across many developing countries.
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There is need to define who the “we” is if the bar is to be raised in competition advocacy. Lots of success will be realised from sobriety and incremental gains through engagement of key stakeholders including think tanks and civil society groups i.e. thus going beyond while complementing the technocrats.
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Realisation of competition benefits will only be assured if other manifestations like good governance are sustained.
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The question of design remains controversial and an area of potential conflict which include jurisdictional issues of administration like merger fees and also the interplay of egos among the leaderships of these national and regional institutions.
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Funding is likely to be big challenge at the continental level just as it was and has remained at the regional level. Options for funding regional integration activities and operations on competition need to be explored.
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Competition remains critical in bringing fairness and economic democracy in the CFTA. It will help promote consumer protection in our markets. The question of readiness is paramount, the reality is that there will need to be incremental steps; building onto what we already know from other blocs like COMESA, WAEMU, ECOWAS and EAC. Learning from the challenges, this will help in addressing the question of design of not only the options of law to take but also institutional options.
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The process remains linear and not parallel. This fits very well within the conversations around the preparedness of stakeholders on what would be the best framework to adopt moving forward.