Search News Results
Updated macro poverty outlook for select sub-Saharan African countries
The Macro Poverty Outlook is jointly produced by the Poverty & Equity and Macroeconomics & Fiscal Management Global Practices of the World Bank. This semi-annual report, which analyses macro and poverty developments in developing countries, is released for the Spring and Annual Meetings of the World Bank and IMF.
Botswana
Improvement from the 2015 downturn in Botswana’s growth is expected over the medium term. Real GDP should advance by 4 percent by 2017, as commodity prices improve and fiscal buffers are used for counter-cyclical stimulus. Structural reforms remain critical to manage volatility and sustainability risks, including reforms in the water and energy sectors and addressing labor market distortions to spur private sector job creation. With recovery to low per capita growth, poverty-reduction gains can be expected to be only modest.
Recent developments
Weak global demand for rough diamonds and relatively low prices of metals caused real GDP to contract by 0.3 percent in 2015, down from a gain of 3.2 percent in 2014. Mining plummeted by 21 percent for the year. Continuing electricity and water supply disruptions have impacted manufacturing, whereas the regional drought adversely effected agriculture. In contrast, services and retail led the non-mining sectors to overall growth of above 3 percent. The first half of 2016 showed encouraging signs of improved economic conditions. Most importantly, rough diamond sales started recovering and helped deliver a welcome boost to exports and government revenues.
The fiscal position moved sharply into deficit in FY2015/16 after three years of consecutive surpluses. The fiscal balance swung from surplus of 3.7 percent of GDP in FY2014/15 (the fiscal year starts April 1) to an estimated deficit of 6.3 percent of GDP in FY2015/16, largely due to much lower than expected revenue. Government relies mainly on two volatile sources of revenue inflows, mineral revenues (which accounts for almost 40 percent of total revenue) and SACU customs revenues (over one-quarter of total revenue). Both have declined, the former due to weak global demand and the latter from decline in South Africa’s economic growth. Total revenues dropped by 7.8 percent of GDP in 2015, while expenditures increased by 2.2 percent of GDP due to counter-cyclical fiscal stimulus including the start of the Economic Stimulus Program.
The Government has substantial fiscal savings from diamond revenues (i.e., the Pula fund), and international reserves stand at about 12 months of imports, which provides Botswana ample space to gradually adjust expenditures to the SACU shock in the long run, and to provide counter-cyclical stimulus in the near term. Weaker performance across the mining sector will tend to narrow the current account surplus. In 2014, Botswana achieved a substantial surplus of 15.6 percent of GDP. But external factors noted above adversely affected exports in 2015, and the current account surplus narrowed to 7.2 percent of GDP.
Economic growth has been pro-poor, leading to significant and rapid poverty reduction. Between 2002/03 and 2009/10, the share of the population living on less than $1.90 a day at 2011 PPP exchange rate, declined steadily from 29.8 percent to 18.2 percent thanks to a combination of equitable growth, demographic changes (e.g. decreasing fertility rates and dependency ratios), increased credit, and expansion of social assistance schemes (especially direct transfers to rural households), and employment expansion (especially of agricultural employment in rural areas by 5.6 percent). Progress in rural poverty reduction has been especially rapid, as it was almost halved (from 45.2 percent in 2002/03 to 23.7 percent in 2009/10). However, inequality in Botswana remains high with a Gini coefficient of 60.5 in 2009/10, slightly down from 64.7 in 2002/03. Given the recent real GDP contraction, poverty is estimated to have remained stagnant between 2013 and 2015, at 13.2 percent and 13.4 percent of the population respectively.
Outlook
The economy is expected to rebound to real growth near 3 percent this year and 4 percent by 2017, driven mainly by improved diamond sector conditions and continued fiscal stimulus that will propel non-mining activity. Lower fuel and commodity prices, slower credit growth and weakening economic activity will keep CPI inflation at the lower end of the Central Bank’s band of 3-6 percent. The fall in mining revenue is expected to gradually recover as developed economies stabilize. However, SACU transfers are expected to remain soft mainly due to a weak nearterm economic outlook for South African growth. The combination of strong expenditure growth and lower revenue is expected to keep the fiscal balance in the red for the next few years. The current account surplus should continue to narrow in 2016 and 2017 on continued softness in the mining sector before gradual improvement.
The country is expected to make modest progress toward poverty reduction over the medium-term. Poverty is projected to decline from 13.2 percent in 2016 to 11.9 percent in 2018. Achieving further poverty reduction will be challenging with the pace of progress constrained by limited private sector job creation, particularly in urban areas, and reliance on low productivity agricultural jobs in rural areas, combined with reduced credit growth and high levels of household indebtedness.
Lesotho
The easing of GDP growth since 2013 is expected to continue through 2016 due to persistent drought effects and weak regional conditions, leading to a decline in SACU revenues and associated fiscal pressures. The drought will likely translate into only a moderate decline of 1.36 percentage points in the poverty rate ($1.9 PPP a day) to 55.4 percent by 2018.
Recent developments
Following average growth of 4.7 percent in 2012 and 2013, the advance in real GDP softened to 3.6 percent in 2014 and slackened further to 1.7 percent in 2015. The main drivers of growth deceleration include shrinking agricultural production due to El-Nino, a slowdown in industrial output due to uncertainty of AGOA extension, and slippage in mining production.
Services remain a brighter spot, growing at 2.6 percent in 2015. Net exports declined due to supply reductions and weak demand from trade partners. Investment growth was modest due to the shortfall in the government’s capital budget, uncertainty over AGOA and the completion of the Metelong Dam. Although government consumption remained high as the wage bill increased to 21.8 percent of GDP, government investment was limited due to under-execution of the capital budget (65 percent).
Fiscal balances are likely to deteriorate over the next years due to lower SACU revenues-which amounted to 30 percent of GDP in 2014/15. The overall fiscal balance registered a modest surplus of 0.6 percent of GDP in 2015, while the non-SACU fiscal deficit is estimated to stand at 24 percent of GDP in 2015/16, improving from 28.6 in FY2014/15. The current account deficit widened to 9.4 percent of GDP; while Lesotho’s public debt increased to 59.5 percent of GDP in 2015 due to depreciation of the local currency.
Due to the severe drought, year-on-year inflation increased to 7.5 percent in June 2016, tied in large measure to increasing food prices. Food prices surged by 14 percent in June 2016 contrasted with levels for the same period a year earlier. CPI inflation registered 6 percent in 2015 and is likely to rise to 8.5 percent in 2016. International reserves were the equivalent of 6.1 months of imports in 2015, similar to year earlier ratios.
Between 2002 and 2010 Lesotho made little progress in reducing extreme poverty. The headcount poverty rate was 57.1 percent in 2010 (national poverty line), accompanied by high inequality, measured at 53.8 percent by the Gini coefficient – such inequality itself an obstacle to poverty reduction. Lesotho’s economic structure and poorly targeted social protection policies are at the heart of high and stagnant poverty and inequality. Low-productivity agriculture remains the main source of income for over 1 in 3 households. The benefits of a well-paid public sector mainly flow to the most affluent households. Most social protection transfers do not target the poor.
Outlook
Growth is expected to increase slightly to 2.4 percent in 2016 – a downward revision from the last forecast (2.6 percent). Weaker growth prospects in South Africa, and uncertainty due to the sustainability of the exchange rate peg are key factors in the markdown to growth. Over the medium term growth is expected to pick up gradually to 3.7 percent in 2017/18 driven by the commencement of operations at the Liqhobong mine in the 4th quarter of 2016, and accelerate further to 4 percent by 2018/19 supported by construction activity tied to the Second Phase of the Highlands Water project.
Fiscal balances will come under increasing pressure over the next years due to lower SACU revenues. Such revenues are projected to fall to 15.9 percent of GDP in FY2016/17 – almost halving from earlier levels – driven by a slowdown in the South African economy, and are expected to remain low into the medium term. Still, the fiscal shortfall is anticipated to ease from 9.4 percent of GDP in 2016 to 3.2 percent by 2018. Lesotho is expected to finance this deficit by drawing down reserves. Limited commercial bank interest in government bonds and potential additional spending needs arising from a mid-term budget review have the potential to exacerbate the fiscal stance. And significant deterioration in the current account deficit is expected (to 19 percent of GDP in 2016) due to the sharp falloff in SACU revenues.
Inflation is anticipated to bounce back to 6 percent over the medium term, while private consumption should advance only modestly in 2016 due to lower wage increases. Investment has dropped considerably following completion of the Metelong Dam and increased uncertainty regarding AGOA. Capital outlays should grow once more in 2016 due to commencement of mine operations, and remain strong in 2017 and 2018 due to the second phase of the Lesotho Highlands Water Project.
Tied to persistent effects of drought, the poverty rate ($1.9 PPP a day) is projected to fall only moderately by 1.36 percentage points from 56.7 to 55.4 percent between FY2016 and FY2018. This is attributable to the sectoral composition of growth. Adverse weather conditions led to lower agricultural production during FY 2015 with persisting effects through FY 2016. The decline in production and corresponding increases in food prices will carry a more negative impact among the poor, deriving most of their income from agriculture. Though mining will grow quickly, the sector will not generate many jobs due to its capital intensity.
Namibia
As new mining investment winds down and production begins, Namibia’s current account deficit should narrow, while government works toward fiscal consolidation. GDP gains are expected to reach 5.5 percent by 2018, grounded in extractive industries. Strong growth and spending on social programs have contributed to impressive reductions in poverty. But further progress will require structural reforms to generate more jobs for the unskilled. Persistent drought poses food and water security risks; and as agriculture employs 70 percent of the population, poverty reduction will be pressured in coming years.
Recent developments
Growth of the Namibian economy moderated in 2015 to 4.5 percent from 6.4 percent in 2014. Growth was driven by ongoing massive extractive sector investments and continued government stimulus, offsetting in part the effects of lower commodity prices, slower private sector credit growth (9.5 percent in 2015, down from 16.5 percent in 2014) and weaker agricultural production and exports stemming from drought and foot and mouth disease.
Namibia has maintained an expansionary fiscal stance since 2011, with government pursuing a stimulus program to support job creation and poverty reduction. The overall deficit was 6.6 percent of GDP in 2015, higher than the budgeted deficit of 5.4 percent due to over-optimistic income tax revenue projections. The deficit was partially financed by a US$750 million Eurobond in 2015 (5.375 percent coupon with 10-year maturity), with proceeds bolstering reserves and financing investment projects. Total government debt now stands at around 36 percent of GDP up substantially from 12 percent in 2010.
Inflation remained low and stable during 2015, at 3.4 percent down from 5.3 percent in 2014, with easing energy prices partly offsetting the effects of depreciation and increased food prices arising from drought. Monetary policy has tightened, however, to maintain alignment with South African interest rates and avoid capital outflows, and in response to incipient inflationary pressures arising from depreciation, continued credit growth, and increasing food prices. The repo rate has been increased five times since June 2014, including a 25 bps increase to 6.75 percent in February 2016.
The current account deficit remains substantial, registering some 14.3 percent of GDP in 2015,reflecting low prices for mineral exports and elevated imports for both mining investment and consumer products – the latter driven by fiscal stimulus and credit growth. International reserves reached a low of just 1.5 months of import cover during 2015, but have since recovered to 3.5 months, primarily due to SACU receipts and currency depreciation.
Relatively strong economic growth has not been sufficient to deal with poverty, inequality, and unemployment. And this has recently been exacerbated by persistent and deepening drought, conditions that have hit agricultural production hard, as crops failed and livestock deaths surged. About 19.5 percent of the population lived on less than $1.9 a day in 2015 compared to 20.0 percent in 2014. 42.8 percent lived below the $3.1 per day international poverty line in 2015 compared to 43.2 percent in 2014. Namibia remains one of the most unequal countries in the world, with a consumption Gini coefficient of 0.597 in 2010.
High unemployment is of particular concern. The 2014 Labor Force Survey reports an unemployment rate of 28.1 percent in 2014, down slightly from 29.6 percent in 2013. At 39.2 percent, unemployment is highest among youth and is higher among women (31.7 percent) compared to men (24.3 percent). Most employment (31.4 percent) is in low productivity sectors, including agriculture, forestry and fishing. While a full 47.1 percent of employment is in the informal sector, contributing to income insecurity and vulnerability.
Outlook
The economy is expected to grow by 4.2 percent in 2016, with weak prices for mineral exports and continuing negative drought effects partially offset by increased exports from new extractive projects. Over the medium-term, growth is expected to reach 5.5 percent, with spillovers of declining investment and fiscal consolidation offset by recovery in extractive sector export prices and increasing volumes, as new projects reach capacity.
Responding to downward revision in revenue figures, the government expects expenditure cuts averaging 1.7 percent of GDP per year over 2016-2018, bringing the deficit down to around 3 percent of GDP by 2018. Fiscal consolidation is welcome but may prove difficult to implement, with a history of slippage against expenditure targets set under successive MTEFs.
Inflation is expected to remain moderate, at around 5 percent, as monetary measures constrain credit growth, fiscal consolidation restrains domestic consumption, and recovery of agricultural production helps to ease food prices. The current account is expected to deteriorate further in 2016, widening to 16.6 percent of GDP, as imports for investment projects gain momentum and mineral prices remain weak. Over the medium-term, however, the current account deficit is expected to narrow to around 9.3 percent of GDP as export prices strengthen and completion of extractive projects reduces imports and increases mineral production and exports.
Steady yet moderate progress in poverty reduction is expected due to both stronger GDP gains and public social sector outlays. 19.2 percent of the population will be living below the $1.90/day international extreme poverty line in 2016, 18.8 percent in 2017, and 18.3 percent by 2018. Using the $3.1/day poverty line, 42.5 percent of Namibians are expected to be poor in 2016, declining to 41.6 percent by 2018.
The on-going drought is expected to put a damper on poverty reduction. The 2014/15 and 2015/16 harvests were the worst in 80 years, prompting the President to declare in June 2016, the country to be in a state of emergency. Adverse effects are expected for the rural poor who rely on subsistence farming as well as the urban poor via upward pressure on food prices. Spending on transfers and grants will provide a degree of relief for the affected population.
South Africa
For South Africa, 2016 may mark the trough of the business cycle, and a recovery from 2017 – although modest and fragile – is expected to improve the odds for reducing high levels of poverty, inequality, and unemployment. As fiscal space is exhausted, and with a possible bond-rating downgrade to ‘junk’ status looming, ambitious structural policies are vital to support the recovery. Policy uncertainty is arguably the biggest risk to turning the page on three years of falling per capita growth.
Recent developments
2016 may mark a turning point for South Africa’s slowing economy. Following a contraction in the first quarter (Q1), a strong rebound in manufacturing, and sustained performance in commerce and finance prevented a technical recession in Q2. The decline in agricultural output is easing, as 2015 El-Niño drought-related effects begin to dissipate. And though mining has been contracting, momentum has improved in Q2. On the demand side, recovery in industry and mining was reflected in rising exports of 1.9 percent y/y in Q2, while imports contracted by 2.6 percent. Yet in spite of green shoots in the economy, growth in the first six months of 2016 remained at 0.3 percent, which points to a third year of falling GDP per capita growth, estimated to raise poverty by 0.25 percentage points compared to 2015.
Investment is declining for a third quarter, as the end of the commodity boom – but also policy uncertainty surrounding extractives-related legislation – discourages mining investment. Policy uncertainty extends into other structurally important areas, including the introduction of a national minimum wage, the auctioning of band-width spectrum to roll out broadband communications, expropriation legislation, and concern regarding opaque reshuffles of the cabinet, which all contribute to keeping investor confidence low. Better news emerges from the energy sector, where load-shedding has not occurred in a year. It is also good news that the government has strengthened dialogue with the private sector and has been carefully managing labor relations.
South Africa’s foreign-currency denominated debt is rated one notch above ‘junk’ by S&P (with a negative outlook) as well as by Fitch. The 2016/17 budget introduced fiscal measures to stay the consolidation course. Slower upward revisions to tax brackets, an increased fuel levy, and higher tobacco and alcohol tax collections have supported revenues this fiscal year, while a new sugar ‘sin tax’ – currently hotly debated – is to be introduced in April 2017. In an environment of weak economic growth, demands to loosen fiscal policy are strong but the government’s commitment to fiscal consolidation is credible. While some future revenue measures are yet to be identified, the budget deficit is expected to ease to 2.4 percent of GDP in FY2018/19 from 3.9 percent in FY2015/16, whereas the government expects net public debt to stabilize at 46.2 percent of GDP in 2017/18, two years earlier than previously anticipated.
The rand has been depreciating, by a substantial 35 percent between December 2010 and January 2016. In spite of relatively rigid factor and product markets, this has resulted in some economic restructuring with exports, from vehicles to tourism, countering some of the weakening of domestic demand. Yet the rand strengthened once more over 2016, partly supported by a cumulative 75 basis-point rate increase by the South African Reserve Bank to limit exchange rate pass-through on prices, while aiming to bring inflation back below the 6 percent upper target.
As exports outgrew imports, the trade deficit narrowed and swung into balance in the middle of the year. Yet other outflows through the current account, including FDI-related dividend payments, and weaker factor income from operations of South African companies continued to keep the current account deficit at 4.2 percent of GDP during the first half of 2016. The shortfall continues to be financed by volatile and unreliable capital flows.
While South Africa made progress in reducing poverty in the past decade, close to 36.9 percent of the population lived below the lower bound national poverty line of R501 per month in 2011. Extreme poverty, based on the international poverty line of $1.9 per day (PPP, 2011), was 16 percent in 2011. Given low economic growth, estimated progress in poverty reduction since 2011 is limited. South Africa’s Gini coefficient of 0.634 is one the highest globally.
South Africa’s high and rising unemployment remains the key challenge for poverty reduction, averaging 25.3 percent from 2000 to 2016. The unemployment rate remained near 25 percent in 2015, and increased to 26.6 percent in Q2-2016. Construction and manufacturing, both labor intensive, were hit by sluggish growth, with quarterly employment declines of 88,000 and 80,000, respectively. And the “wide” unemployment rate, which includes discouraged workers, increased to 36.3 percent, above the previous quarter’s 33.8 percent.
Outlook
The recovery is expected to be slow. 2016 growth has been revised down to 0.4 percent (from 0.8 percent in the last MPO). This is consistent with heightened policy uncertainty dampening investor sentiment. Private consumption remains constrained by unemployment, high household indebtedness, and inflation. And belt-tightening by the government will provide little impetus to growth. Though the recent strengthening of the rand provides less of an impetus for exports, the significant depreciation compared to 2011 may continue to foster a restructuring of the economy. In addition, the recent stabilization of the rand has reduced imported inflationary pressures, which may serve to reduce the central bank’s bias toward further tightening. This paves the way for a cautious economic rebound, to 1.1 percent in 2017 and 1.8 percent in 2018, as the economy restructures, commodity prices rise, and electricity capacity improves. Yet this will be insufficient to make a major dent in poverty and inequality: growth in consumption of the poorest 40 percent of South Africans is projected to be essentially flat, while there is some increase at the top of the income distribution.
Risks and challenges
Policy uncertainty is one of the greatest challenges for South Africa, as investment is urgently required to support the restructuring of the economy against a weaker rand, and to raise potential output growth. Municipal elections in which opposition parties captured major South African cities are seen as a testament to South Africa’s strong institutions. Continued demonstration of their integrity will be crucial to bring investment. Given a tight fiscal position, structural reforms, hinging on political will, can be good value for money and should focus on the rollout of broad-band networks, improvements to the education system, strengthening the governance of State-Owned Enterprises and continued efforts to build bridges with organized labor. While the FY2016/17 budget kept fiscal consolidation on track, structural policies to foster growth are what will be needed to avert downgrade of South Africa’s credit rating to sub-investment grade in the near term.
Swaziland
GDP is expected to contract by some 0.9 percent in 2016, the weakest performance in 34 years, and a falloff from 1.7 percentage growth in 2015. The decline in output during the year is tied to persistent drought, currency depreciation, and weak regional economic conditions. 2016 wage increases in the context of declining revenues threaten fiscal sustainability. And the persistence of drought poses further significant food and water security risks, and is expected to increase poverty given that the majority of the population depend on agriculture for their livelihood.
Recent developments
Swaziland’s economic growth declined to 1.7 percent in 2015 from 2.7 percent in 2014. This was driven by declining SACU revenues, adverse weather conditions caused by the El Nino phenomenon, and poor regional economic performance, especially in South Africa. The 2015 economic decline in South Africa, the major export destination for Swaziland, weighed negatively on textile exports.
The weak economic environment, together with persistent drought conditions slowed poverty reduction in the country. Three in four Swazis live in rural areas making agriculture their main source of livelihood. As a result, the adverse weather conditions have limited poverty reduction, with the poverty rate at the international extreme poverty line of $1.9 per day in 2015 stagnating at 39.4 percent, compared to 39.5 percent in 2014. Further, with a Gini coefficient of 49.5, inequality is high and indeed rising in rural areas. The labor force participation rate is lower among women (46 percent) compared to men (55.3 percent). And at 28.1 percent, the unemployment rate is high, exacerbated by skills mismatch and a high HIV/AIDS prevalence rate of 27.7 percent among adults. The bulk of employment is in low value added activities, particularly in subsistence agriculture, contributing to relatively high poverty rates.
The fiscal deficit has been on an upward trend, from 1.4 percent of GDP in FY2014/15 to 6.8 percent in FY2015/16, amid falling Southern African Customs Union (SACU) revenues. The July 2016 salary review resulted in a minimum 17 percent salary increase for civil servants and 32 percent for politicians; an additional E850 million to government expenditure in 2016. Total public debt stood at 16 percent of GDP for the second quarter of 2016- up from 14 percent in the first quarter of the year.
The current account surplus narrowed by 1.4 percent of GDP in the first quarter of 2016, from 4.2 percent in the third quarter of 2015. This development is driven mainly by a decline in exports (falling 15.3 percent in the first quarter), linked to a drop in soft drink concentrates and textiles. Overall, the BOP registered surplus during the first quarter of 2016, at about 0.5 percent of GDP. International reserves averaged 4.1 months of import cover from January to July 2016, slightly above 3.6 months estimated for the whole of 2015. However, current international reserves are lower than the regional target of six months.
Swaziland’s monetary policy is closely interlinked with that of South Africa. The lilangeni is pegged at par to the South African rand, which is also legal tender in the country. The scope to use monetary and exchange rate policy is therefore limited by its membership in the Common Monetary Area. In May 2016, the Central Bank increased the bank rate from 6.5 percent to 7 percent, matching the repo rate of South Africa, and helping to mitigate capital outflows to South Africa. However, the increase further pushed the prime lending rate to 10.5 percent in the second quarter from 10 percent in the first quarter of 2016. Private sector credit growth at the end of 2015 was -0.2 percent and averaged 0.7 percent in the first six months of 2016. Swaziland’s inflation rate remained the highest among the Common Monetary Area members at 7.5 percent on average. Inflation pressures are driven by rising food prices as a result of the prevailing drought and depreciating exchange rate.
Outlook
Swaziland’s economic outlook is weak, as drought and depressed regional prospects continue to weigh on growth. GDP is expected to decline by 0.9 percent in 2016, as sugar production, one of the major export earners, is viewed to drop by 25 percent; maize by 64 percent, and electricity generation by 23 percent. Swaziland’s main trading partner, South Africa, is projected to grow by only 0.4 percent in 2016, a rate that presents risks to already declining SACU revenues and Swaziland’s textile exports. The fiscal situation is expected to deteriorate further, as the impact of the 2016 salary review and falling SACU revenues take stronger effect, with the budget deficit widening to 15.3 percent of GDP in 2016. SACU revenues are projected to decrease to E5.3 billion, representing a significant 25 percent decline between FY2015/16 and FY2016/17.
The current account surplus should continue to compress during the remainder of 2016, amid an increase in grain imports, and a decline in exports-especially of textiles. The falloff in exports is expected to be cushioned by the depreciating exchange rate. Further, the manufacturing sector continues to suffer from the loss of the country’s African Growth and Opportunity Act (AGOA) trade benefits since January 2015.
As a result of these weak economic prospects, poverty and inequality are expected to remain critical challenges as growth of disposable income and job creation slows. The international extreme poverty ($1.9 per day) rate is projected to remain near 39 percent through to 2018. The 2016 Swaziland Drought Assessment Report concluded that water sources declined by 50 percent which resulted in a reduction of 64 percent in crop production in the FY2015/16 season and an increase in the number of vulnerable people by 68 percent in 2016. Further, the drought is expected to exert more inflationary pressure on food prices: the inflation outlook is expected to continue at an elevated level, averaging 8 percent in 2016, and easing to below 6 percent only by 2018. This will affect the poor who spend a very high share of their total expenditures on food.
Zambia
The economy has come under recent strain as external headwinds and domestic pressures have intensified. GDP growth slowed to 2.8 percent in 2015 from 5.0 percent in 2014. External headwinds have included slower regional and global growth, lower copper prices and the strengthening of the U.S. dollar against the kwacha. Domestic pressures include a power crisis affecting all sectors of the economy and repeat fiscal deficits that have weighed on investor confidence. Growth in 2016 is expected to remain sluggish at 2.9 percent, leading to only a marginal decline in poverty.
Recent developments
The Zambian economy has come under strain since mid-2015. Real GDP growth slowed to 2.8 percent in 2015, well below its historical average. Weaker growth has been tied to both global headwinds and domestic pressures which have intensified. Zambia is sensitive to slower regional and global growth and a sharp fall in the price of copper, given that copper typically contributes about 75 percent to exports. Domestically, a power crisis has affected all sectors of the economy as well as low and poorly-timed rains that dented the agricultural incomes of 61.3 percent of the population living in poverty. Accordingly, poverty rates in rural areas likely went up in 2015 relative to past years.
Lower, El Nino-influenced rainfall led to 2015 agriculture output falling, while lower copper prices suppressed the mining and quarrying sector, which grew by only 0.3 percent. Over the course of 2015 copper exports fell, leading to a current account deficit of 3.4 percent in 2015. The industrial sector (which includes mining) was supported by strong growth in construction (18.9 percent), driven by public infrastructure investment. Services gained at a slower 2.3 percent pace in 2015.
Lower copper prices are typically followed by a depreciation of the Kwacha. This pressure on the currency was worsened by ebbing investor confidence related to the power crisis, repeat fiscal deficits, a widening trade deficit and large external borrowing. The Kwacha lost 41 percent of its value against the US$ in 2015. Weakness and volatility in the Kwacha was more severe compared to other emerging market currencies.
The depreciation, together with an increase in food prices and a loose fiscal position lifted annual inflation to a peak of 22.9 percent in February 2016. To mitigate this, the Bank of Zambia reduced liquidity severely through a variety of measures. The central bank also intervened in the foreign exchange market, impacting the level of reserves. These interventions helped to tame annual inflation to 19.6 percent by August 2016 and to bring stability to the Kwacha-US$ exchange rate. However, this achievement has not been without cost and has led to a reduction in private sector investment and growth.
Recent fiscal expansion has been financed by external borrowing, including large Eurobond issues beginning in 2012 which nearly tripled the size of external debt relative to GDP. Both domestic and external financing has been more challenging to source during 2016, and revenue has fallen short of budget projections for the first half of the year. At the same time expenditure has not been curtailed, leading to a build-up in arrears, and forcing the Government to borrow from the Central Bank. Current pressures on expenditure include the import of emergency power, a fuel subsidy, debt service costs and spending in the build-up to the August 2016 elections. The 2016 fiscal deficit (cash basis) is likely to register almost twice its target of 3.6 percent of GDP.
The benefits of GDP growth have accrued mainly to the richer segments of the population in urban areas. Despite gradual poverty reduction over the past decade, poverty in Zambia remains high with 54.4 percent of households at incomes below the national poverty line in 2015. Poverty is estimated at 57.5 percent in 2015 when measured by a $1.90/day (2011 PPP).
Overall, the level of inequality is also very high in Zambia. In 2015, the Gini coefficient was 0.559, an indication that expenditure has continued to be unevenly distributed among the population. Many of the gainful economic activities in the country are concentrated along the economic corridor that runs from the highly urbanized Copperbelt region to Lusaka.
Outlook
The medium-term outlook has been revised downward from the previous MPO, mainly following slower regional and global growth and lower copper prices. On the upside however, is the likely realization of stronger agricultural sector growth following late but not reduced rains as earlier feared in the second of the El Nino influenced agricultural seasons.
GDP growth for 2016 is projected at 2.9 percent, before improving in 2017 (4.0 percent) and 2018 (4.2 percent), assuming that copper prices stabilize and domestic pressures ease. Per capita GDP growth of 0.5 percent in the current year is expected to keep the proportion of people living under the $1.90/day poverty line in 2016 at 57.5 percent, which is the same as in 2015. However, at the existing population growth rates the actual number of poor is expected to increase from 9.32 million people in 2015 to 9.61 million in 2016.
Tough action is required in the second half of 2016 and 2017 to curb runaway fiscal expenditures, with inflation close to 20 percent and persisting twin deficits. The outlook is also subject to down-side risks, both domestic and external. A further slowing in China’s economy could weigh on demand for Zambia’s exports by further reducing copper prices. While main domestic risks are two-fold: first that the power crisis will continue to worsen (this could occur via continued reduced capacity at the main hydropower plants); and second, that a falloff in confidence in the economy re-occurs, following recent improvement tied to expectations that there will be a post-election IMF program and World Bank support.
Zimbabwe
Zimbabwe has been severely affected by a financial crisis and drought; the economy is projected to grow by only 0.4 percent this year. An expansionary fiscal policy has cushioned the slowdown so far. Going forward, external payment arrears may lead to a further contraction in imports and a decline in GDP. The financial crisis continues to have a significant impact on incomes, while the drought has disproportionately affected the rural poor.
Recent developments
The first half of 2016 indicates weakening economic activity compounded by a liquidity crisis that has intensified since May 2016. The El Niño induced drought coupled with a decline in agricultural productivity, adversely affected the agricultural sector leading to growth of 1.1 percent in 2015, down from 3.8 percent in 2014. While declining agricultural growth was more than offset by continued growth in services (at over 3 percent per year on average), poverty increased. This was particularly pronounced in rural arears. The number of extremely poor people are estimated to have increased by 100,000 during 2015 to 3.2 million.
During 2015-16, aggregate demand was supported by an expansionary fiscal policy. From March 2015 to June 2016, government borrowing from the banking sector increased by US$1.4 billion or about 10 percent of GDP. Most of the increase in public borrowing was to pay Reserve Bank of Zimbabwe (RBZ)-and selected State-Owned Enterprises arrears. In turn, this was financed primarily by Treasury Bills (T-Bills), which were purchased by the commercial banks at a discount.
Bank’s purchases of T-Bills and other public sector borrowing may have contributed to liquidity shortages and crowded out bank lending to the private sector. Faced with cash shortages, banks were unable to honor demand deposits. Quantitative limits on cash withdrawals (supported by the RBZ) were imposed. To address liquidity shortages, the RBZ announced on May 4, 2016 that it would issue “bond notes”, triggering increased demand for US dollars. At present, demand for imports is constrained by liquidity shortages as well as restrictions introduced to protect domestic producers.
The domestic-interbank payment system continues to function, but cash payments command a premium, complicating the measurement of inflation. Officially, inflation at end July 2016 year-on-year was reported to be -1.6 percent. However, discounts for US dollar cash payments exist and complicate the effective monitoring of price developments.
The external position remains difficult. The current account deficit narrowed by 4½ percentage points of GDP in 2015, due to the rising cost of financing options. In June 2016, the government imposed temporary restrictions on imports of basic goods that compete with local production, contributing to a further narrowing of the current account deficit. During January – July 2016 imports declined by US$568 million (16 percent) compared to the same period in 2015. And despite a fall in exports (a decrease of 10 percent) the current account narrowed by US$420 million, 3 percentage points of annual GDP.
The Central Government deficit widened for the first six months of 2016 as revenues contracted and expenditures increased. Revenues from January to June 2016 fell by 3.6 percent year-on-year, while total expenditure increased by 21 percent. As a result, the deficit increased to US$623 million, up from US$57 million during the same period last year. Expenditures are dominated by the wage bill which accounted for over 97 percent of revenues and 70 percent of total expenditures during January to June 2016. This wage bill leaves little for non-wage expenditures, which have become increasingly financed by user fees and extra-budgetary funds.
Outlook
The economic outlook remains challenging. Agriculture is projected to shrink by 4.2 percent in 2016 due to the drought, while growth in services is expected to slow in the wake of the financial crisis. Industry continues to expand thanks to a recovery in gold and platinum production. While imports and exports are viewed to contract by 18 percent and 9 percent, respectively. As supply compresses, investment is projected to fall by two-thirds and private consumption by 0.3 percent. Fiscal revenues are seen to fall by 4 percent, driven mainly by a fall in import-based fiscal revenues, such as customs duties and value added tax. Government borrowing from the banks and non-bank financial institutions has reached its limit, and hence the fiscal deficit is projected at 4.2 percent of GDP, implying dramatic narrowing of the deficit during the remainder of the year.
The fall in agricultural output will increase poverty. The number of extremely poor people is expected to increase to 3.28 million in 2016 up from 3.16 million in 2015. Moreover, the number of food insecure people will increase to over 4.4 million people by end 2016 and early 2017.
In response to the crisis, the Government announced a fiscal adjustment program in the Mid-Year Fiscal Statement presented on September 8, 2016. The program involved measures to limit the wage bill. However some of these were subsequently reversed. The Mid-Term Monetary Policy Statement published on September 16, reiterated the authorities’ commitment to issuing “bond notes” later this year.
Related News
Expert panel finds that greener, more efficient and sustainable transport can save trillions and help achieve SDGs
Greater investment in greener, more sustainable transport systems is essential for propelling the economic and social development that is essential for achieving the Sustainable Development Goals, according to an expert panel report delivered to UN Secretary-General Ban Ki-moon on 28 October 2016.
Finding that global, national and local transport systems are hobbled by inefficiencies and a lack of sustainable investments, the expert panel issued a report entitled “Mobilizing Sustainable Transport for Development”, which provides 10 recommendations on how governments, businesses and civil society should re-direct resources in the transport sector to advance sustainable development.
The experts, members of the Secretary-General’s High-Level Advisory Group on Sustainable Transport, include representatives from aviation, road, rail, public transport and maritime industries and associations. The recommendations address issues of policy, technology and financing and grew out of the diverse perspectives and practical experience of the panel.
The report found that a transformational change to sustainable transport can be realised through annual investments of around US$2 trillion, similar to the current ‘business as usual’ spending of US$1.4 trillion to US$2.1 trillion.
Investments in sustainable transport, the experts found, could lead to fuel savings and lower operational costs, decreased congestion and reduced air pollution. Additionally, it is estimated that efforts to promote sustainable transport can deliver savings of up to US$70 trillion by 2050.
A move to sustainable freight and passenger transport that includes integrated port terminals, well-planned airports and harmonized standards and regulations for efficient border crossings, could produce a global GDP increase by US$2.6 trillion.
Writing in the report’s foreword, UN Secretary-General Ban Ki-moon noted that sustainable transport was essential to efforts to fight climate change, reduce air pollution and improve road safety.
“Sustainable transport supports inclusive growth, job creation, poverty reduction, access to markets, the empowerment of women, and the well-being of persons with disabilities and other vulnerable groups.”
Focusing on important issues such as road safety, traffic congestion and climate impacts, the expert panel’s 10 specific actions include the establishment of monitoring and evaluation frameworks, the promotion of sustainable transport technologies and the increase of international development funding. The report calls for robust engagement by all stakeholders to ensure all members of society have access to jobs, markets, education and health care, through sustainable transport.
At present, the transport sector is responsible for approximately 23 per cent of energy-related greenhouse gas emissions, and 3.5 million premature deaths result from outdoor air pollution annually, mostly in low and middle income countries. About 10 to 15 per cent of food is lost during processing, transport and storage given a lack of modern facilities, trucks, access to refrigeration, and poor roads. Nearly one billion people worldwide still lack adequate access to road networks, which increase isolation and marginalization and deepen social inequities. Over 1.2 million people are killed annually in road traffic accidents, causing in addition to human loss and suffering, billions of dollars of associated costs which amount, in some countries, to 1-3 per cent of GDP.
“Transport can build prosperity in the broadest sense, enhancing the quality of life for all while protecting the environment and fighting climate change,” said Martin Lundstedt, CEO of Volvo and co-chair of the High-Level Group. “We need bold innovation and a true partnership among governments, civil society and the private sector.”
“Sustainable Transport is crucial for the improvement in the quality of life of people both in cities and rural settings, at a national and international level,” stated Carolina Tohá, Mayor of Santiago, Chile and the other co-chair of the Group.
“Sustainable Transport enables people to access better services, jobs, opportunities and family connections. It is also a space where people spend a significant amount of time every day, and therefore it needs to consider safety issues as well as conditions of dignity for users. Leaving no-one behind in the context of Sustainable Transport means that in the coming decades we are able to build transport systems that are inclusive, integrated, gender-sensitive and that have people’s needs at their core.”
The report is also meant to serve as a contribution to the first-ever Global Sustainable Transport Conference, which Mr. Ban will convene in Ashgabat, Turkmenistan, on 26-27 November 2016.
High-Level Advisory Group on Sustainable Transport
On 8 August 2014, United Nations Secretary-General Ban Ki-moon appointed members of a High-level Advisory Group on Sustainable Transport to provide recommendations on sustainable transport actionable at global, national, local and sector levels.
The Advisory Group, established for a period of three years, will work with Governments, transport providers (aviation, marine, ferry, rail, road, and urban public transport), businesses, financial institutions, civil society and other stakeholders to promote sustainable transport systems and their integration into development strategies and policies, including in climate action.
Global Sustainable Transport Conference
Ashgabat, Turkmenistan, 26-27 November 2016
Recognizing the fundamental role of sustainable transport in fighting climate change and achieving the sustainable future we want, Secretary-General Ban Ki-Moon will convene the first ever global conference on sustainable transport, on 26 and 27 November 2016 in Ashgabat, Turkmenistan. In resolution 70/197 titled “Towards comprehensive cooperation among all modes of transport for promoting sustainable multimodal transit corridors”, the General Assembly welcomed the initiative of the Secretary-General to convene the Conference.
The Conference will build on the intergovernmental discussions on sustainable transport. The outcome document of the United Nations Conference on Sustainable Development (Rio+20), held in 2012, stresses that transportation and mobility are central to sustainable development. It recognizes the need to promote an integrated approach to policymaking at the national, regional and local levels for transport services and systems to advance sustainable development.
Transport drives development – enabling trade, tourism, and economic growth and allowing people to access jobs, services, education and the interactions that help create fulfilled lives. Sustainable transport, by extension, drives sustainable development, advancing the people-centered goals at the heart of the 2030 Agenda for Sustainable Development while protecting and preserving the planet and its resources for generations to come. For example, access to sustainable and safe transport allows young people to attend school. It facilitates women’s opportunities for employment and empowerment, and provides persons with disabilities and elderly people improved access to mobility. Sustainable transport systems enable access to markets and basic services, generate jobs and contribute to human well-being by reducing emissions and improving air quality. A move towards more sustainable transport practices will have a considerable impact on the health of our oceans, seas and terrestrial ecosystems, and will help us tackle climate change.
The 2030 Agenda for Sustainable Development, adopted in 2015, also recognizes the global need to adopt policies which enhance sustainable transport systems. It is clear that advances in sustainable transport will contribute to the attainment of several, if not all, of the Sustainable Development Goals (SDGs), outlined in the 2030 Agenda. Some SDGs are directly connected to sustainable transport through targets and indicators such as SDG 3 on health, which includes a target addressing deaths and injuries from road traffic accidents (3.6), and SDG 11 sustainable cities which includes a target on providing access to safe, affordable, accessible and sustainable transport systems for all and on expanding public transport (11.2).
In this spirit, the Global Sustainable Transport Conference will bring together key stakeholders from Governments, UN system and other international organizations, the private sector, and civil society to engage in a dialogue that emphasizes the integrated and cross-cutting nature of sustainable transport and its multiple roles in supporting the achievement of the SDGs. All modes of transport – road, rail, aviation, ferry and maritime – will be addressed. The concerns of developing countries, including least developed countries, landlocked developing countries and small island developing States, will receive particular focus. Developing countries and their expanding cities face urgent challenges, but they also have opportunities to bypass unsustainable transport practices and find fast tracks to a new paradigm of sustainability. The Conference will shine a spotlight on these opportunities.
The programme of the Conference reflects the diversity and complexity of the transport sector and will provide a platform for forging partnerships and initiatives to advance sustainable transport objectives.
Related News
Highlights from the EABC’s first East African Business and Entrepreneurship Conference
The East African Business Council (EABC’s) 1st East African Business and Entrepreneurship Conference and Exhibition was successfully held from 10th to 13th of October, 2016 at Safari Park Hotel in Nairobi, Kenya.
More than 300 participants from 14 countries joined in this event, which aimed at bringing together high level political decision makers from the EAC and the EAC Partner States with high level executives and representatives of the regional and international private sector.
Among the East African dignitaries in attendance were personalities like, Dr. Mukhisa Kithuyi, Secretary General of UNCTAD as well as Amb. Juma V. Mwapachu and Amb. Dr. Richard Sezibera, both former Secretary General of EAC.
Kenya’s government was well represented by Hon. Adan Mohamed, Hon. Phyllis Kandie and Hon. Sicily Kariuki, Cabinet Secretaries for Trade, EAC and Gender Affairs. Burundi had sent Amb. Jean Rigi, Permanent Secretary for EAC Affairs while Uganda was represented by Hon. Maganda Julius Wandera, Minister for EAC Affairs.
With the Federation of German Industries (BDI) as important partner, a selected delegation from Germany leads by Dr. Stefan Mair, Member of the Executive Board of BDI, was also present throughout the event.
Together with the National Investment Promotion Agencies, namely Kenya Investment Authority, Burundi Investment Promotion Agency, Rwanda Development Board, Tanzania Investment Centre, and Uganda Investment Authority, EABC managed to demonstrate the large variety of investment opportunities especially in the manufacturing, the infrastructure, the textile & leather, the energy and the ICT sector.
Regional heavyweights from the private sector could be found looking for new investment opportunities and sharing their long term experiences. As this conference and exhibition was specifically targeting entrepreneurs; several young entrepreneurial businesses also shared their success stories, explaining their business models and approaches to get financing as start-ups.
A special emphasis was put on women entrepreneurs, as they are seen as the group of entrepreneurs with the highest growth potential. A special “Ladies Dinner” was held to celebrate their achievements and to encourage further steps to be taken by the governments to support this special interest group.
As a tangible result, the conference came up with a matrix of ten recommendations, which shall be followed up at the next edition: 2nd East African Business and Entrepreneurship Conference and Exhibition 2017 that will be held in Dar es Salaam, Tanzania.
Broad summary of key outcomes from the East African Business and Entrepreneurship Conference & Exhibition 2016
-
There is clear indication that the EAC is a region full of investment opportunities, in many sectors, including but not limited to infrastructure, agri-business, ICT, Cotton and Textiles, Leather, Manufacturing, Energy, Services and the education sectors. It is also clear that the region is open and ready for business and investment and our governments consistently reforming the business environment to attract more investments. We heard that over the past 5 years, the EAC governments have made 65 key reforms to improve the business environment.
-
There is a need to promote EAC as one market/one investment destination as this presents investors with a large consolidated market. The EAC Partner States, through the EAC Secretariat/EABC should in collaboration with IPAs, compile a list of regional projects which will be marketed by Investment Promotion Agencies (IPAs) along national projects. This should also be supported by a harmonised investment framework for the EAC.
-
EAC Partner States should have a clearly thought out investment strategy that outlines the key sectors the region wants to attract investment into, both local and FDI. This should be supported by an enabling regulatory and operating framework that facilitates trade through affordable and reliable energy and transport systems, among others.
-
As part of improving the EAC investment framework, the challenges impeding the realisation of the full potential of the Customs Union and Common Market should be addressed. These include ensuring the single customs territory is fully in place, addressing non-tariff barriers, harmonising domestic tax regimes, allowing free movement of labour and services including service providers, and defining local to mean EAC, among others.
-
To internationalise SMEs and medium income companies, regional value chains, especially for imported inputs, should be developed in EAC and across Africa, as a first step to integrating companies into global value chains.
-
The EAC Partner States should sign the EPA in order to safeguard the EU Market, especially considering that Tanzania and Uganda will soon reach low middle income country status given their current growth trajectories. However, the failure of all Partner States to sign the EPA together should not be seen to denote the collapse of the EAC integration. There is more to the EAC than the EU market.
-
The education curriculum should be better suited to match the needs of the business community, including addressing the current skills gaps, including at the technical level. Furthermore the education system must be suited to the current times, in terms of use of technology, utilisation of available resources such as water and the sun.
-
In terms of financing for entrepreneurs, the key factors that make providing finance to entrepreneurs risky should be addressed. These include preparing bankable projects grounded on correct/updated market intelligence and clear company systems in place, including in financial and human capital management, and linkages to markets among others.
-
Given the current and expected growth in the cotton, textile and leather industries, the EAC Partner States should put in place strategies to develop them in order to promote the sector. Partner States should also promote local sourcing by ensuring that 50% percent of their government procurement is local and with a special consideration for women entrepreneurs.
-
EAC Partner States should embrace information technology and available resources to solve the developmental challenges that the region faces. This includes but is not limited to using innovative technologies such as tunnelling; embracing technology in healthcare, education, communications and financial systems and harnessing the free resources that is water and the sun, among others.
Related News
tralac’s Daily News Selection
The selection: Tuesday, 1 November 2016
Abdalla Hamdok has been appointed the Acting Executive Secretary of the UNECA
African industrial policy: three profiled workshops
UNCTAD: 1st international meeting on promoting pharmaceutical sector investments in the EAC region (2-4 November, Nairobi)
TIPS seminar: The automotive value chain in Africa and the motorcycle industry (2 November, Pretoria)
tralac Roundtable: A Continental Free Trade Area to support Africa’s industrial development objectives? tralac will host a roundtable, 17-18 November in Cape Town, to consider the continent’s most ambitious integration initiative, the CFTA, from the perspective of Africa’s quest for industrial development and diversification. We will discuss the scope of the CFTA agenda, priorities for industrialization and development, sequencing of the negotiations and accommodating the challenges of integrating unequal partners in the CFTA, and how these will impact industrial development options and choices.
Namibia: Trade Minister tables Namibia Industrial Development Agency Bill (Xinhua)
Namibia’s Minister of Industrialization, Trade and Small Medium Enterprise Development, Immanuel Ngatjizeko said the bill seeks to develop key industrial and business infrastructure, promote investment, facilitate trade as well as the introduction of new technologies. "The bill also aims to support schemes contributing to industrialization efforts, while acting as an agent in making equity investments on behalf of the Namibian government and its institutions," Ngatjizeko said. The bill seeks to repeal the Namibia Development Corporation Act. It also incorporates the mandate of the Namibia Development Corporation while also amending the Development Bank of Namibia Act.
Zimbabwe: President signs Special Economic Zones Bill (The Herald)
President Mugabe yesterday finally signed into law the Special Economic Zones Bill in a move that is expected to see the country attracting foreign direct investment. The special economic zones are also expected to establish an appropriate regulatory and policy infrastructure to enable local and regional trade to flourish. This comes as President Mugabe yesterday met some members of a visiting 20-member Chinese delegation at State House. The delegation is in Zimbabwe to speed up the operationalisation of the mega-deals agreed between the Governments of China and Zimbabwe. The delegation is headed by Mr Fan Hengshan, deputy secretary-general of the National Development and Reform Commission.
Does the elimination of export requirements in special economic zones affect export performance? Evidence from the Dominican Republic (World Bank)
Special economic zones, one of the most important instruments of industrial policy in developing countries, often feature export share requirements. That is, firms located in these zones are obliged to export more than a certain stated share of their output to enjoy the wide array of incentives available there, a practice prohibited by the World Trade Organization. This paper exploits the staggered removal of export requirements across products and over time in the special economic zones of the Dominican Republic to evaluate whether the importance of exports originating from the zones was affected by the elimination of export requirements.
AfDB, partners urge companies to actively tackle corruption (AfDB)
The AfDB has reiterated during the two-day workshop in Abidjan the critical importance of cutting the channels of IFFs, a key to unlocking the continent’s development potential. The workshop brought together some 70 financial intelligence experts and representatives from government, civil society organizations, regional anti-corruption agencies and the private sector, to discuss the extent of illicit financial flows in Africa and innovative ways to combat them. The AfDB reviewed the Bank’s Group Strategic Framework and Action Plan on the Prevention of Illicit Financial Flows in Africa (2016-2020) (pdf), to ensure it adequately addresses the priorities of the continent in the fight against IFFs. The Bank also engaged participants on some of its findings on illicit finances contained in a forthcoming report of the Bank’s African Natural Resource Center, on Illicit Trade in the natural resources sector. [Various downloads available]
TFTA updates:
EAC SG Liberat Mfumukeko takes over COMESA-EAC-SADC Tripartite Task Force Chairmanship: The Secretary General noted that there were many hurdles to be overcome in meeting the clear priorities the Tripartite Council had set and he prioritized resource mobilization: finalization of studies for phase II negotiations whereby EAC will work closely with COMESA Secretariat on the necessary actions to be taken; Tariff Offer Negotiations to always be on the agenda of the relevant Policy Organs; and lastly Ratification of Tripartite Free Trade Area. He disclosed that EAC has pledged to ratify and deposit instruments of ratification by the end of February 2017 and urged all Member/Partner States to ratify the Agreement before the end of June 2017.
Uganda looks to break into COMESA, SADC markets (The Independent): Uganda’s Minister of Trade Amelia Kyambadde has said the country is ready to ratify the EAC-COMESA-SADC Tripartite Trade Agreement before June 2017 and start implementation so as to benefit from a proposed free trade arrangement. This has prevented Uganda’s tea, coffee, vegetable oils, fresh juices and many other products from entering the South African market because they cannot compete. The tripartite will unlock this market allowing Ugandans to export under duty free quota free arrangement. Kyambadde gave the example of South Africa, a member of SADC currently charging 10% tax on vegetable oils and fats like sun flower oils, soya bean oils, 20% on raw coffee, 400 cents per kilo of tea, 25% on fresh juices.
EAC-EU-IMF Conference on Regional Integration: updates
Benchmark with the best in the world, EAC partner states urged: Hon. Amanya Mushega, a former EAC Secretary General, said the EAC needs to revisit and do away with the standard way of judging itself by Sub-Saharan African standards. “India, Singapore and South Africa, just to mention but a few refused to treat themselves that way. They aimed high, looked at the way the USA, Japan, Germany, UK and the USSR developed their human resources, copied them with the view to competing with them and not fellow third world countries and the results are out,” said Hon. Mushega. “Our problem of remaining poor and beggars is not lack of money or natural resources, it is our mindset. We have put the bar too low. We are not going to be competing with Gambia or Haiti but with Korea, Japan and China, first for our own EAC market and secondly, for the world market,” he added. [No easy feat to attain monetary union, EU envoy tells EAC, The conference programme (pdf]
Tanzania-Kenya – selected postings:
Magufuli, Uhuru dispel claims of Tanzania-Kenya ‘tensions’ (IPPMedia), Africa has potential to be donor continent, Magufuli says (Daily Nation), Visit revives agreement to build two link roads (Bagamoyo-Malindi highway (Daily Nation), States must boost cooperation in EA (editorial comment, Daily Nation)
South Africa-Zimbabwe – selected postings:
Zimbabwe, SA Bi-National Commission kicks off (The Chronicle): The inaugural session of the Bi-National Commission between Zimbabwe and South Africa started in Harare yesterday amid calls for officials to ensure all outstanding agreements are finalised and implemented. The BNC kicked off with a meeting of senior officials, which will be followed by a ministerial session tomorrow ahead of official opening on Thursday. President Mugabe and his South African counterpart Mr Jacob Zuma, will open the commission. President Zuma is bringing with him a delegation of eight Cabinet ministers. The BNC, agreed during President Mugabe’s visit to South Africa last year — elevates the two countries’ political and economic relations to presidential level from the ministerial rank where they reposed for years.
Zim, SA must consolidate economic relations (editorial comment, The Herald)
Liesl Louw-Vaudran: ‘Looking beyond Zuma and Mugabe’ (ISS)
South Africa: Merchandise trade statistics for September 2016 (SARS)
Data by the South African Revenue Service yesterday showed a trade surplus of R6.7bn in September from a revised R8.9bn deficit in August. Exports rose to 10.1% month-on-month while the import bill fell by 6.6% month-on-month to R92.2bn in September, mainly due to decreases in imports of mineral products (-30%), precious metals & stones (-66%), and vegetable products (-20%). The Africa trade balance surplus of R9 690 million is an 89.9% increase in comparison to the R5 102 million surplus recorded in August. [Infographic, @NKCAfrica: post-August 2014 monthly surplus/deficit]
Mauritian-South African banking collaboration key to growing intra-African trade finance volumes (Africa Business)
Zambia-South Africa: on Thursday, in Johannesburg: the ‘Invest in Zambia Business Forum’
@NamTradeForum: SACU collects less than 10% of the 45% tariff on clothing and textile due to under declaration by importers - Michael Lawrence
Chinese businesses in Zim flouting tax laws (NewsDay)
Chinese businesses in Zimbabwe have come under the spotlight following claims they are flouting the country’s tax laws by failing to issue out tax invoices when conducting business. This was revealed by captains of industry who attended the Association for Business in Zimbabwe and Zimbabwe Revenue Authority (Zimra) workshop in Bulawayo on Friday.
Zambia: Traders welcome ‘dollarisation’ of trade on the Zambia/DRC border (Lusaka Times)
In a bid to curtail the illegal exchange of foreign currency, which results in the country losing out, Government is considering introducing a statutory instrument (SI) that will allow traders and companies at Kasumbalesa border to transact in United States dollars. Minister of Finance Felix Mutati says government is soon expected to introduce an SI that will allow transactions to be conducted in dollars at Kasumbalesa border which will lead to channelling of about $40,000 from the black market into the formal system. “[For instance] Zambeef has an outlet at Kasumbalesa border but the challenge is that under the current law, the company is not allowed to transact in dollars. So the buyers from DRC have to change money from the black market worth $30,000 to $40,000 being sold on the black market daily,” Mr Mutati says. Most Congolese nationals move with US dollars when conducting businesses, and Mr Mutati believes that allowing transactions in dollars at the border will help Zambian businesses. [Cashew Infrastructure Development Project: GPN]
Tanzania: selected updates
IMF staff holds review mission (IMF): “The mission held discussions on how to address these macroeconomic challenges. In particular, it noted the importance of mobilizing external financing to step up the pace of planned capital spending. Tanzania is at low risk of external debt distress and has room to borrow externally on concessional and nonconcessional terms to meet its financing needs."
Govt forms ‘ease of doing business’ desk (IPPMedia): The government has formed a special desk in the Ministry of Industry, Trade and Investments that will handle complaints of the business community in a bid to improve the investment climate. The Minister, Charles Mwijage, said businesspersons should not fear to report to him agencies making it difficult for them to operate smoothly since that would be against the spirit of the fifth phase government whose development through industrialisation agenda cannot be attained without them.
Where to next on e-trade at the WTO? (World Bank)
Last month, the World Trade Organization held its annual Public Forum, with over 2,000 participants joining discussions on how to make trade more inclusive. At the Public Forum, with the McKinsey Global Institute, we organized a session that highlighted developments in e-trade and the implications for international trade policy. More than 20 other sessions were held on different aspects of e-trade. From our perspective, some of the key ideas that emerged from the discussions included the following:
Togo 2016-2020 Country Strategy Paper (AfDB)
Mozambique: Frozy manufacturer reacts to Malawian ban (Club of Mozambique)
An update on India’s Eastern Dedicated Freight Corridor Project (World Bank)
Various updates from the WTO’s Dispute Settlement Body
The EU has proposed to restart WTO negotiations on the issue of fisheries subsidies
Tanzania hosts ICGLR conference on insecurity in Great Lakes region
IGAD’s inaugural ministerial meeting on migration (7-10 November)
RwandAir expansion not aimed at taking on regional carriers (The Standard)
tralac’s Daily News archive
Catch up on tralac’s daily news selections by following this link ».
SUBSCRIBE
To receive the link to tralac’s Daily News Selection via email, click here to subscribe.
This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 350 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome.
Related News
South Africa Merchandise Trade Statistics for September 2016
Trade balance swings to unexpected surplus
South Africa’s trade balance swung to an unexpected surplus in September, signifying a recovery in commodity exporting countries in line with the World Bank’s projections.
Data by the South African Revenue Service yesterday showed a trade surplus of R6.7 billion in September from a revised R8.9bn deficit in August.
Exports rose to 10.1 percent month on month while the import bill fell by 6.6 percent month-on-month to R92.2bn in September, mainly due to decreases in imports of mineral products (-30 percent), precious metals & stones (-66 percent), and vegetable products (-20 percent).
In turn, export revenues climbed by 5.6 percent on the back of increases in exports of precious metals and stones stones (37 percent), mineral products (11 percent), vehicle and transport equipment (13 percent), and chemical products (15 percent).
Hanns Spangenberg, an analyst at NKC African Economics, said the switch to a trade surplus was widely unexpected, particularly the size of the surplus, with the poll median coming in at a deficit of R1.1bn.
He said as a result, the domestic cumulative merchandise trade balance during the first nine months of 2016 amounted to a deficit of only R9.95bn, compared to a deficit of some R37.1bn during the same period last year.
“Looking ahead, the local unit remains vulnerable to a reversal of positive emerging market sentiment should the US Federal Reserve elect to recommence its interest rate tightening cycle in December and the possibility of a credit rating downgrade to sub-investment grade status,” Spangenberg said.
Annabel Bishop, chief economist at Investec, said as global growth and demand improves, demand for commodities would likely improve, raising prices, and so boosting export growth.
“The expected improvement in commodity prices in 2017 implies some strengthening in exchange rates for commodity exporters, and so some moderation in inflation in the next few years.
“The rand is expected to strengthen mildly, barring further political volatility.”
Standard Bank said: “The country has endured a number of tests this year, but has continued to persevere. We are committed to working through the current challenges to come out stronger in the end.”
The South African Revenue Service (SARS) has released trade statistics for September 2016 recording a trade balance surplus of R6.70 billion. The year-to-date deficit (01 January to 30 September 2016) of R9.95 billion is an improvement on the deficit for the comparable period in 2015 of R37.19 billion. These statistics include trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
In line with international statistical best practice, the Trade Statistics published by the South African Revenue Service (SARS) are subject to revisions as new information becomes available on an ongoing basis. The February 2016 to July 2016 export figures have been adjusted by R23.9 billion resulting in the year- to- date trade balance being revised downwards from a R7.41 billion trade surplus published in August 2016 to a R9.95 billion trade deficit in September 2016.
The R23.9 billion adjustment is as a result of revisions to the gold exports by the South African Reserve Bank (SARB) which supplies the gold export data to SARS. These gold revisions (for the first half of 2016) have been disclosed by SARB in the September 2016 Quarterly Bulletin. The revisions relate mainly to adjustments made for gold that was moved to facilities outside South Africa but with ownership of the gold retained by South African entities.
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R6.70 billion trade balance surplus for September 2016 is attributable to exports of R98.92 billion and imports of R92.22 billion. Exports for the year-to-date (01 January to 30 September) grew by 5.8% from R770.20 billion in 2015 to R815.24 billion in 2016. Imports for the year-to-date of R825.19 billion are 2.2% more than the imports recorded in January to September 2015 of R807.39 billion.
On a year-on-year basis, September 2016’s R6.70 billion trade balance surplus is an improvement from the deficit recorded in September 2015 of R2.20 billion. Exports of R98.92 billion are 8.8% more than the exports recorded in September 2015 of R90.93 billion. Imports of R92.22 billion are 1.0% less than the imports recorded in September 2015 of R93.13 billion.
August 2016’s trade balance deficit was revised upwards by R0.32 billion from the previous month’s preliminary deficit of R8.56 billion to a revised deficit of R8.88 billion as a result of ongoing Vouchers of Correction (VOC’s). Exports increased from August 2016 to September 2016 by R9.05 billion (10.1%) and imports decreased from August 2016 to September 2016 by R6.53 billion (6.6%).
Trade highlights by category
The main month-on-month export movements (R’ million)
Section: | Including BLNS: | |
Precious Metals & Stones | + R 4 833 | + 37% |
Mineral Products | + R 1 900 | + 11% |
Vehicles & Transport Equipment | + R 1 609 | + 13% |
Chemical Products | + R 763 | + 15% |
Vegetable Products | - R 875 | - 13% |
The main month-on-month import movements (R’ million)
Section: | Including BLNS: | |
Mineral Products | - R 4 813 | - 30% |
Precious Metals & Stones | - R 1 552 | - 66% |
Vegetable Products | - R 746 | - 20% |
Vehicles & Transport Equipment | - R 359 | - 4% |
Base Metals | + R 487 | + 10% |
Misc. Manufactured Articles | + R 357 | + 20% |
Equipment Components | + R 355 | + 5% |
Trade highlights by world zone
The world zone results from August 2016 (Revised) to September 2016 are given below.
Africa:
Trade Balance surplus: R19 437 million – this is a 32.9% increase in comparison to the R14 624 million surplus recorded in August 2016.
America:
Trade Balance deficit: R650 million – this is an 85.9% decrease in comparison to the R4 608 million deficit recorded in August 2016.
Asia:
Trade Balance deficit: R12 196 million – this is a 27.0% decrease in comparison to the R16 709 million deficit recorded in August 2016.
Europe:
Trade Balance deficit: R3 812 million – this is a 43.1% decrease in comparison to the R6 702 million deficit recorded in August 2016.
Oceania:
Trade Balance surplus: R 11 million – this is an 86.7% decrease in comparison to the R83 million surplus recorded in August 2016.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for September 2016 recorded a trade balance deficit of R3.05 billion. This was a result of exports of R86.32 billion and imports of R89.37 billion.
Exports increased from August 2016 to September 2016 by R9.01 billion (11.7%) and imports decreased from August 2016 to September 2016 by R6.34 billion (6.6%).
The cumulative deficit for 2016 is R89.22 billion compared to R115.72 billion in 2015.
Trade highlights by category
The main month-on-month export movements (R’ million)
Section: | Excluding BLNS: | |
Precious Metals & Stones | + R 4 767 | + 38% |
Mineral Products | + R 2 056 | + 13% |
Vehicles & Transport Equipment | + R 1 753 | + 16% |
Chemical Products | + R 806 | + 19% |
Vegetable Products | - R 855 | - 14% |
The main month-on-month import movements (R’ million)
Section: | Excluding BLNS: | |
Mineral Products | - R 4 809 | - 30% |
Precious Metals & Stones | - R 1 426 | - 70% |
Vegetable Products | - R 741 | - 20% |
Vehicles & Transport Equipment | - R 374 | - 4% |
Base Metals | + R 494 | + 11% |
Trade highlights by world zone
The world zone results for Africa excluding BLNS from August 2016 (Revised) to September 2016 are given below.
Africa:
Trade Balance surplus: R9 690 million – this is an 89.9% increase in comparison to the R5 102 million surplus recorded in August 2016.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for September 2016 recorded a trade balance surplus of R9.75 billion. This was a result of exports of R12.59 billion and imports of R2.84 billion.
Exports increased from August 2016 to September 2016 by R0.04 billion (0.3%) and imports decreased from August 2016 to September 2016 by R0.19 billion (6.2%).
The cumulative surplus for 2016 is R79.27 billion compared to R78.53 billion in 2015.
Trade Highlights by Category
The main month-on-month export movements (R’ million)
Section: | BLNS: | |
Prepared Foodstuff | + R 117 | + 10% |
Plastics & Rubber | + R 65 | + 13% |
Precious Metals & Stones | + R 65 | +11% |
Vehicles & Transport Equipment | - R 144 | - 9% |
Mineral Products | - R 156 | - 8% |
The main month-on-month import movements (R’ million)
Section: | BLNS: | |
Precious Metals & Stones | - R 126 | - 42% |
Live Animals | - R 102 | - 35% |
Chemical Products | - R 78 | - 12% |
Vehicles & Transport Equipment | + R 15 | + 36% |
Textiles | + R 89 | + 19% |
Related News
EAC Secretary General, Amb. Liberat Mfumukeko takes over COMESA-EAC-SADC Tripartite Task Force Chairmanship
The Secretary General of the East African Community, Amb. Liberat Mfumukeko, took over the Chairmanship of the COMESA-EAC-SADC Tripartite Task Force (TTF) on 31 October 2016 for the next year from Dr. Stergomena Tax, the SADC Executive Secretary, who oversaw the work of the Tripartite from July 2015 to October 2016.
Addressing Hon. Members of the Council, Directors and senior officials from the COMESA, EAC and SADC Member States at the hand-over ceremony held at the Hilton Hotel in Nairobi, Kenya, Amb. Liberat Mfumukeko commended Dr. Stergomena Tax for the exemplary leadership during the period of the Tripartite, especially given the resource constraints which have delayed the launch of Phase II negotiations and the implementation of other important activities.
The Secretary General noted that there were many hurdles to be overcome in meeting the clear priorities the Tripartite Council had set and he prioritized resource mobilization: finalization of studies for phase II negotiations whereby EAC will work closely with COMESA Secretariat on the necessary actions to be taken; Tariff Offer Negotiations to always be on the agenda of the relevant Policy Organs; and lastly Ratification of Tripartite Free Trade Area.
He disclosed that EAC has pledged to ratify and deposit instruments of ratification by the end of February 2017 and urged all Member/Partner States to ratify the Agreement before the end of June 2017.
At the hand over ceremony, which was also attended by Dr. Stergomena Tax, the SADC Executive Secretary, Dr. Kipyego Cheluget, the COMESA Deputy Secretary, and Mr. Peter Kiguta, the EAC Director-General, Customs and Trade, the Secretary General pledged to work towards the attainment of the Tripartite Free Trade Area by June 2017.
The main focus during the SADC Chairmanship (July 2015 to October 2016) was to lead the TTF to facilitate Member/Partner States implement the directives of the 3rd Tripartite Summit following the launch of the Tripartite Free Trade Area on 10th June 2015 in Sharm el Sheikh, Egypt, namely: expeditious operationalization of the COMESA-EAC-SADC Tripartite Free Trade Area; finalization of outstanding issues on the COMESA-EAC-SADC Tripartite Free Trade Area Agreement in relation to Annex 1 on Elimination of Import Duties, Annex 2 on Trade Remedies and Annex 4 on Rules of Origin and the legal scrubbing of completed Annexes; and commencement of Phase II negotiations covering trade in services, cooperation in trade and development, competition policy, intellectual property rights and cross border investments.
» Visit tralac’s TFTA Resources page for further info.
Related News
AfDB, partners urge companies to actively tackle corruption
Côte d’Ivoire has joined the Partnership on Illicit Finance. The announcement was delivered by Fiacre Adopo, Adviser to the Minister of Budget, who represented the Ivorian Government during a workshop on tackling corruption, illegal trade and other forms of illicit financial flows (IFF), hosted by the African Development Bank (AfDB).
The AfDB has reiterated during the two-day workshop in Abidjan the critical importance of cutting the channels of IFFs, a key to unlocking the continent’s development potential.
The workshop brought together some 70 financial intelligence experts and representatives from government, civil society organizations, regional anti-corruption agencies and the private sector, to discuss the extent of illicit financial flows in Africa and innovative ways to combat them.
“For the African Development Bank, illicit financial flows are a matter of major concern, because they divert resources away from priority sectors such as energy and power, agriculture, infrastructure, health, and education,” said AfDB Vice-President Alberic Kacou.
The AfDB reviewed the Bank’s Group Strategic Framework and Action Plan on the Prevention of Illicit Financial Flows in Africa (2016-2020), to ensure it adequately addresses the priorities of the continent in the fight against IFFs.
The Bank also engaged participants on some of its findings on illicit finances contained in a forthcoming report of the Bank’s African Natural Resource Center, on Illicit Trade in the natural resources sector.
“The illicit trade in Africa’s natural resources costs the continent billions of dollars and deprives African economies of millions of jobs every year. It is particularly damaging as it steals from the people of Africa the benefits that are supposed to arise out of natural resources management, and in essence robs entire countries of their wealth,” said ARNC Director Sheila Khama.
Participants also discussed a study on IFFs in West Africa, conducted in partnership with the Organisation for Economic Co-operation and Development (OECD), the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), the New Partnership for Africa’s Development (NEPAD) and the World Bank.
Liberia, Senegal and the USA presented their national action plans for the fight against IFFs, developed through the Partnership on Illicit Finance that has as members AfDB, the USA and many African countries.
The flagship event of the workshop was the official launch by AfDB and OECD of their joint “Anti-Bribery Policy and Compliance Guidance for African Companies”. This guidebook for companies in Africa informs and supports their anti-corruption initiatives.
“Bribery increases the cost of doing business: This is unsustainable for companies operating in Africa’s increasingly competitive and globalised markets,” said Patrick Moulette, Head of the Anti-Corruption Division at the OECD.
Engaging the private sector in combatting corruption is critical, also affirmed Anna Bossman, Integrity and Anti-Corruption Director at the AfDB.
“Businesses are on the supply side of the corrupt act and therefore have a key role to play in improving corporate integrity and accountability, while promoting growth through an environment conducive to attracting foreign investment,” she said.
AfDB and OECD launch powerful tool to help African companies prevent bribery
New guidance from the African Development Bank and the Organisation for Economic Cooperation and Development will help African companies of all sizes set up measures to prevent bribery and improve the quality of corporate compliance and anti-bribery policies.
Many African companies have yet to establish effective internal control mechanisms to ensure compliance with the law and prevent bribery in their business transactions. The OECD-AfDB Joint Initiative to Support Business Integrity and Anti-Bribery Efforts in Africa has developed the Anti-Bribery Policy and Compliance Guidance for African Companies to serve as a practical, concise guide to help African companies ensure adequate controls are in place to prevent bribery.
“Transparency and accountability provide the pillars for good economic governance which itself forms the foundation for real economic transformation. It is the duty of all actors on the continent, both public and private to break the chain of corruption,” said Akinwumi Adesina, President of the African Development Bank.
“Companies can prevent bribery, a corrosive crime that erodes the strength of our economies and the trust of citizens in our private and public institutions. By working together to foster transparency, compliance and accountability, we can fight bribery and promote stronger, cleaner and fairer economies throughout the African continent,” said Angel Gurría, Secretary-General of the Organisation for Economic Cooperation and Development.
The guidance will not only assist companies to get started with drawing up corporate anti-bribery policy and related compliance measures, it will also provide key insights on how to put them into practice.
The guidance offers a detailed compliance checklist enabling African companies to monitor their progress on areas relating to raising awareness of anti-bribery legislation among employees; developing anti-bribery policies; supporting the implementation of anti-bribery policies; industry collective action measures; specific bribery risks for state owned enterprises; and overcoming challenges confronted by SMEs.
Related News
Benchmark with the best in the world, EAC partner states urged
East African Community Partner States have been challenged to benchmark themselves with the world’s most advanced economies if they are to grow their economies.
Hon. Amanya Mushega, a former EAC Secretary General, said the EAC needs to revisit and do away with the standard way of judging itself by Sub-Saharan African standards.
“India, Singapore and South Africa, just to mention but a few refused to treat themselves that way. They aimed high, looked at the way the USA, Japan, Germany, UK and the USSR developed their human resources, copied them with the view to competing with them and not fellow third world countries and the results are out,” said Hon. Mushega.
“Our problem of remaining poor and beggars is not lack of money or natural resources, it is our mindset. We have put the bar too low. We are not going to be competing with Gambia or Haiti but with Korea, Japan and China, first for our own EAC market and secondly, for the world market,” he added.
Hon. Mushega called for heavy investment by the Partner States in human resource development, and urged the Community to compare the number and quality of local skills with those countries that have prospered rather than the comfort zone of Sub-Saharan Africa.
“For EAC to develop, exploit its resources, build industries, not cutting and wrapping imported products for it to build and maintain roads, railways, airports and dams, compete in local and world markets, it must put maximum efforts on the quality of education and skills of its population. Don’t say but we are ok. We are not. The EAC is not yet our market,” said the retired diplomat.
Hon. Mushega was giving a keynote address titled The Hidden Challenges to Integration and the Way Forward during the opening of the two-day EAC-EU-IMF Conference on Regional Integration in Arusha, Tanzania. The theme of the conference is “Regional Integration in the EAC: Making the most of the Common Market on the Road to a Monetary Union.”
Speaking at the forum, Mr. Abebe Aemro Selassie, disclosed that at six (6) per cent, real GDP growth in the EAC in 2016 was expected to be well above the average for Sub-Saharan Africa, adding that prospects for 2017/18 also remain strong.
Mr. Selassie said that the challenge for the EAC as for other fast growing countries in Sub-Saharan Africa was how to sustain this growth over the medium term, how to ensure that scaled-up public investment and borrowing translates into durable growth and not unserviceable debt, and how to make this growth more inclusive.
“Faster economic growth within the EAC is therefore a potential “game changer” as it holds the promise of improved productivity, competitiveness and welfare gains,” said the IMF official.
He noted that while significant progress had been made since the inception of the EAC Customs Union and the Common Market including the establishment of a Single Customs Territory with a Common External Tariff and effective elimination of internal tariffs for goods meeting Rules of Origin – there is still work to be done.
“Customs valuation procedures have also varied across the region, despite the approval of the EAC Customs Valuation Manual,” he observed.
In her remarks, Hon. Jesca Eriyo, the EAC Deputy Secretary General (Finance and Administration), said that the Community had made significant progress in the areas of trade, financial and macroeconomic integration as well as building institutions necessary to support the integration process.
“The integration process is benefiting the East African people through increased trade, efficiency and productivity and enhanced financial integration. The recently established Single Customs Territory continues to deliver significant benefits to East Africans, including reduced transit times from port to destinations and fewer documentary requirements,” said Hon. Eriyo.
Hon. Eriyo revealed that financial integration in the EAC was deepening and that free movement of labour was becoming a reality, partly aided by the Mutual Recognition Agreements among professional associations including those for architects, accountants and veterinary officers.
She said that to ensure macroeconomic convergence ahead of the monetary union, convergence criteria pertaining to inflation, foreign exchange reserves, fiscal deficits and public debt would have to be achieved and observed.
“The purpose of the convergence process is to ensure that countries enter the monetary union without major disequilibria that could threaten its stability. However, convergence is not an automatic process. The experience of the Euro area shows that a set of mechanisms involving institutions and the use of incentives and corrective procedures to deal with deviations from pre-determined paths, have been needed to achieve convergence and keep union members aligned,” said the DSG.
The conference is being attended by international economists, leading policy makers from the region, ministers of finance, central bank governors, and senior treasury/finance officials, regional capital markets regulators, academics, senior staff from international financial institutions, senior representatives from other monetary unions and civil society organizations, and private sector leaders from the region.
Related News
Trade Minister tables Namibia Industrial Development Agency Bill
Namibia’s Minister of Industrialization, Trade and Small Medium Enterprise Development, Immanuel Ngatjizeko tabled the Namibia Industrial Development Agency Bill in the National Assembly on Wednesday.
According to Ngatjizeko, the bill seeks to develop key industrial and business infrastructure, promote investment, facilitate trade as well as the introduction of new technologies.
“The bill also aims to support schemes contributing to industrialization efforts, while acting as an agent in making equity investments on behalf of the Namibian government and its institutions,” Ngatjizeko said.
The proposed legislation is further aimed at entering into public private partnerships to foster economic transformation and exercising effective control over its investment for the agency.
Some Parliamentarians have however expressed concerns over how the bill has been drafted, arguing that the bill is one of the indications of an increasingly poor draftsmanship of laws seen since last year.
Parliamentarian Tommy Nambahu said the bill is not clear what its functions and base would be, whether it will be an investment, research or development agency.
“In addition, the bill does not allude or provide clarity on the budget allocation and its core function. This is some of the components that I would like to see addressed before this bill is passed,” said Nambahu.
The bill seeks to repeal the Namibia Development Corporation Act. It also incorporates the mandate of the Namibia Development Corporation while also amending the Development Bank of Namibia Act.
Related News
Traders welcome ‘dollarisation’ of trade on the border between Zambia and DRC
Kasumbalesa one-stop border post is located about 18 kilometres north-east of the Chililabombwe central business district and is mostly a congested place, thanks to the huge volume of trade between Zambia and the Democratic Republic of Congo (DRC).
Other goods that enter the DRC from various southern African countries also pass through this border.
About 400 to 900 heavy trucks laden with various goods cross over either side of the border point every day, thereby making it one of the busiest entry points of the country.
On the other hand, smuggling of goods into the DRC, which was too rampant in the past, seems to have reduced following the construction of a trade corridor on the DRC side.
And the bustling business activities at the border have attracted a number of firms to set base at Kasumbalesa.
This also is as a result of a yawning market in the DRC, which has resulted in a good number of companies establishing their presence at the border.
These firms include millers, bakeries, those dealing in beef, agro products and other companies that export or conduct different business activities at the one-stop border post.
A number of warehouses have been constructed at Kasumbalesa market that act as storage sheds for exporters of goods into the DRC.
A South African firm, Fruit and Veg City, is also planning to set up a wholesale centre at Kasumbalesa, the move which has been welcomed by the people of Zambia and those in the DRC.
The Cross Border Traders Association (CBTA) is also looking forward to establishing an agricultural storage facility at the border to store perishable goods in transit to the DRC.
CBTA chairman general Charles Kakoma says storing perishable goods at the border has been difficult and traders end up losing out on both their goods and capital.
“We’re looking forward to constructing an agricultural centre for storing perishable goods such as vegetables, fruits and other agricultural produce,” he says.
However, the busy state of the border has also attracted some illegal activities that include a black market for foreign exchange dealers.
Despite the presence of registered financial institutions at the border post, foreign currency vendors are very active as they take advantage of the high number of traders and the travelling public to conduct their business.
In a bid to curtail the illegal exchange of foreign currency, which results in the country losing out, Government is considering introducing a statutory instrument (SI) that will allow traders and companies at Kasumbalesa border to transact in United States (US) dollars.
Minister of Finance Felix Mutati says Government is soon expected to introduce an SI that will allow transactions to be conducted in dollars at Kasumbalesa border which will lead to channelling of about US$40,000 from the black market into the formal system.
“[For instance] Zambeef has an outlet at Kasumbalesa border but the challenge is that under the current law, the company is not allowed to transact in dollars. So the buyers from DRC have to change money from the black market worth US$30,000 to US$40,000 being sold on the black market daily,” Mr Mutati says.
Most Congolese nationals move with US dollars when conducting businesses, and Mr Mutati believes that allowing transactions in dollars at the border will help Zambian businesses.
The DRC market remains one of Zambia’s largest markets and facilitating smooth trade at Kasumbalesa border will go a long way in growing the market for Zambian firms.
Economist Lubinda Haabazoka, who is also Copperbelt University senior lecturer in the School of Business, says allowing business transactions to be conducted in dollars will beef up foreign exchange on the local market.
“What Government is doing is to bring sanity to the market because the issue of dealing in foreign exchange is always associated with confusion at the border,” he says.
Mr Haabazoka says the governments of Zambia and the DRC should come up with measures to ensure that Zambian traders do not just end up doing business at Kasumbalesa border but also reach Lubumbashi.
Noel Mubanga, 44, a poultry farmer, is happy with the development as he believes it will be easy to do business once the proposed SI is introduced.
Mr Mubanga says Government should be commended for the move and that it should quickly introduce the SI as it is beneficial to Zambian businesses and the nation as a whole.
“It will be easy to do business because our friends use US dollars in their country when transacting,” he says.
Mr Mubanga, who has been a poultry trader for five years, says poultry products have a ready market in the DRC.
That is why he cannot wait for the introduction of an SI which will enable traders at Kasumbalesa border to transact in dollars.
Related News
tralac’s Daily News Selection
The selection: Monday, 31 October 2016
South Africa’s September trade data will be released later today
Pointers: A two-day EAC Regional Integration Conference starts today in Arusha, as does Global Trade Development Week 7.0, in Dubai, on the theme ‘The global future of AEO, customs and trade’
From the 4th Meeting of the Tripartite Council of Ministers in Nairobi: "The Ministers considered progress made, and provided guidance on outstanding issues towards the operationalization of the Tripartite Free Trade Area"
Remarks by Dr Stergomena Lawrence Tax (SADC Executive Secretary, Chairperson of the Tripartite Task Force) to the Tripartite Council of Ministers:
Significant progress has also been made on outstanding issues on rules of origin, where Member/Partner States have agreed on most of the applicable definitions and rules, which were unresolved during your meeting in June 2015. With the understanding reached, the Annex on Rules of Origin will be submitted for legal scrubbing, and will provide an interim arrangement to determine origin and confer the necessary preferential treatment on goods originating from the Tripartite Member/Partner States as soon as the Agreement enters into force. It is nonetheless important to note that sectors such as Textiles and Clothing, which could boost manufacturing, expand industrial activity and job opportunities in the Tripartite, remain on the list of unfinished business. Efforts must therefore be made by the negotiators to expedite the remaining work, in order to ensure a comprehensive, fully functional and beneficial Tripartite trade regime.
Regarding tariff negotiations, although no offers have been finalized so far, it is encouraging to note that there is high level of commitment by Member/Partner States to complete negotiations on tariff offers. While acknowledging that progress has been inordinately slower than expected, with the renewed vigor, there is hope that the Tripartite Free Trade Area will soon be operational. At the stage now reached, dedicated efforts must be placed on the finalization of exchange of offers, signing and ratification of the TFTA Agreement, and in doing so operationalize the TFTA.
Why Magufuli’s visit to Kenya is crucial (Daily Nation)
Tanzania’s President John Magufuli’s state visit to Kenya (today) is a high stakes affair for both countries with Nairobi expected to roll out the red carpet as it seeks to reset relations with Dar es Salaam. Top on the agenda will be trade relations between the two neighbours. A series of high-profile incidents have strained ties between the countries since Dr Magufuli came to power last year.
EALA team impressed by harmonisation of laws in Rwanda (New Times)
Shortly before he left Kigali on Friday, Martin Ngoga, who led the team from EALA’s Committee on Legal, Rules and Privileges, told Sunday Times that the progress in Rwanda is partly explained by the prevailing political will to get things done. While Ngoga and his team were in Kigali, other members of the committee were in other Partner States conducting the same exercise and, he said, the task ahead now is for them to put notes together with their colleagues “for deliberations and then determine the way forward.” In a report adopted by EALA in March, the Committee cited challenges including lack of monitoring mechanisms to ensure Partner States comply with the adopted approximation proposals, frequent changes in the membership of the Task Force, and conflicting commitments by members. More than 600 laws need to be harmonised to facilitate the EAC realize its common market goals. [Lack of common policy delays use of clean fuel in East Africa]
Kenya Economic Update: Beyond resilience – increasing public investment efficiency
While Kenya is set for further medium-term growth, the report recommends (pdf) reforming the systemic weaknesses of the country’s Public Investment Management system, to see stronger growth. PIM is currently characterized by low execution and cost escalation of infrastructure projects. “There is also urgent need to streamline the process of land acquisition, compensation and resettlement which lead to significant delays and cost escalation in the design and execution of public infrastructure projects,” said Sheila Kamunyori, World Bank urban specialist one of the co-authors of the report. In addition to complex, long-term PIM reform recommendations, the report recommends several quick, high-priority actions that can help achieve higher levels of growth, such as:
EU tops Tanzania’s trading partner list (Daily News)
The EU has maintained its position as Tanzania’s largest trading partner, with $2bn over 4trn/-) trade volume last year, a new report has revealed. According to European Investment in Tanzania: how European investment contributes to industrialisation and development in Tanzania 2016 (pdf), European companies account for 68% of the total FDI in Tanzania. Launching the report in Dar es Salaam yesterday, EU Head of Delegation to Tanzania and EAC, Ambassador Roeland van de Geer, noted that EU companies were also the largest taxpayers, paying $1.1bn (over 2tri/-) in domestic tax in 2014, about 25% of the total taxes paid by large taxpayers in the country. "This goes to show that the over 1,000 European companies and individuals from large multinational corporations to small individual tourism ventures play a significant part in the development of the Tanzanian economy," he said.
Petro-governance in Tanzania: opportunities and challenges (CMI)
Recent significant natural gas discoveries have pushed Tanzania into the international spotlight as a new petroleum producer. How can the country ensure that its newfound wealth is translated into economic development? Much depend on the way in which the petroleum resources are governed by the country’s new petroleum legislative framework. In this brief, we review the most important provisions of the new legislative framework, and argue that gaps and conflicts within and across laws must be resolved to ensure that Tanzania’s petroleum riches become a blessing rather than a curse. [The analysts: Bryan Lee, Kendra Dupuy]
Indian Ocean Rim Association: Bali Communique
We, the Ministers of the Member States of IORA (Australia, Bangladesh, Comoros, India, Indonesia, Iran, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Oman, Seychelles, Singapore, Somalia, South Africa, Sri Lanka, Tanzania, Thailand, United Arab Emirates and Yemen):
We note with appreciation the progress made in preparation for the IORA Commemorative Leaders’ Summit and its related meetings to be held in Jakarta – Indonesia on 7 March 2017. We encourage Members States, Dialogue Partners, and all stakeholders to collectively cooperate and collaborate to ensure the success of the event. We agree to hold the IORA Business Forum during the Commemorative Leaders’ Summit in 2017 aiming at enhancing partnership with the private sector to ensure sustainable growth and development of the region. We commit to deepen our cooperation with the Dialogue Partners and take note of the outcomes of the first post CSO dialogue for which the Dialogue Partners have been constructively engaged at senior officials’ level in identifying areas of cooperation as well as exploring joint project s, programmes, and capacity building activities of mutual interest. We are encouraged by the progress made in the Blue Economy as one of the priority area s of IORA and we look forward to the convening of the the second Blue Economy Dialogue in India in November 2016, the third Blue Economy Core Group workshop and the second Ministerial Blue Economy Conference (BEC–II) in Indonesia in 2017. [IORA declaration: Gender equality and women’s economic empowerment, Somalia’s Federal Minister signs the new IORA Charter]
IORA statement by South Africa: Minister Nkoana-Mashabane is looking forward very much to welcoming you all to South Africa in 2017 when she will take up the Chair. IORA should focus on important priority areas, and South Africa views the Ocean Economy as a Strategic Focus area for the foreseeable future. In this regard our preliminary priorities include the Blue Economy; promoting Innovation, Research and Development; and a deepened and broadened interaction with the Dialogue Partners and regional organisations. Women’s empowerment will be an important cross cutting theme that South Africa will continue to prioritise during our Chairship tenure. As Chair, we will also have an African perspective as we will seek to align the activities of IORA to the “2050 Africa’s Integrated Maritime Strategy” (the AIM Strategy) in areas such as maritime security, capacity building, skills development, and technology transfer in the ocean economy.
The inaugural SWIFT Business Forum West Africa: innovation, collaboration and regional transformation
This event (Eko Hotel, Lagos, 8 November) will look at the key trends facing the financial services community in West Africa and how innovation and collaboration can help promote economic growth. In 2015, SWIFT opened its West African office in West Africa with an aim to further improve our solution and services offering, support local communities and the development of regional initiatives. Despite challenging times, including the downturn of the commodities cycle that has significantly impacted many countries in the region, there are still plenty of exciting opportunities. The programme for this event will address a number of key topics for the region.
Profiled session – Regionalisation and trade corridor evolution in West Africa: The sustained growth of African economies is well reflected in SWIFT payments volumes. In the year to date, SWIFT traffic volumes have increased 13.4% in Africa, far higher than SWIFT global growth of 6.4%. What still needs to be done to fully realise the region’s integration aims? This session will look at the role of central banks in improving infrastructure in the banking sector and what can be done to strengthen West Africa’s financial markets and assist the development of intra-African trade corridors.
Related, from SWIFT: RMB usage rises in September, overtaking key metrics, SWIFT data show, SWIFT’s RMB Tracker reports
SA, China working on improving trade volumes (SAnews)
The Minister held a meeting with a high-level Chinese delegation from the National Development and Reform Commission of China at the Union Buildings on Friday afternoon. The objective of the meeting was to exchange views on issues of mutual concern relating to trade and industry agreements signed between South Africa and China during the 2015 Forum on China Africa Cooperation held in Johannesburg and the 2015 Chinese State Visit to South Africa. Minister Radebe said total imports from China in 2015 were valued at R199.4bn compared to the total value of South African exports into China of R94.4bn, resulting in a trade deficit of R105bn. South Africa’s agricultural exports amounted to R1.1bn while agricultural imports from China amounted to R1.7bn in 2015. Meanwhile, the trade balance for the mining sector remained positive. Both South Africa and China have committed to increasing direct investment in agriculture, fishery, energy and manufacturing, among others. [China issues first big data report on B&R Initiative]
Zimra to lose $1bn in revenue this year (Sunday Mail)
The Zimbabwe Revenue Authority is expected to lose $1bn in potential revenue this year as the number of companies applying for concessions to import capital goods duty free increases. Government has been agreeable to the facility as it bets on increased investment in the productive sectors of the economy. Worryingly, Zimra has not been able to meet its revenue targets. The tax authorities managed to meet and exceed their targets during the third quarter to September when revenues at $920m were 6%above the target. Zimra board chairperson Mrs Willia Bonyongwe believes that duty-free concessions, zero-rated goods and some regional treaties are a threat to a sustainable tax base. “What we are now having are small interest groups going to lobby the Ministry of Finance to say ‘for us to be able to do this and that, can you please give us these concessions’ and they are piling up. “And per quarter right now, they are costing us over $300m,” said Mrs Bonyongwe.
Mobilizing Sustainable Transport for Development: UN expert report makes 10 recommendations (UN)
Finding that global, national and local transport systems are hobbled by inefficiencies and a lack of sustainable investments, the report, Mobilizing Sustainable Transport for Development (pdf), provides 10 recommendations on how governments, businesses and civil society should re-direct resources in the transport sector to advance sustainable development. At present, the transport sector is responsible for some 23% of energy-related greenhouse gas emissions, and 3.5 million premature deaths result from outdoor air pollution annually, mostly in low and middle income countries. About 10-15% of food is lost during processing, transport and storage given a lack of modern facilities, trucks, access to refrigeration, and poor roads. The report is also meant to serve as a contribution to the first-ever Global Sustainable Transport Conference , which Mr Ban will convene in Ashgabat, Turkmenistan, 26-27 November 2016. [Ban welcomes steps by UN maritime agency to limit carbon emissions from international shipping]
Kenya, South Africa agree to monitor mergers and acquisitions (Business Daily)
Kenya’s Competition Authority orders mobile cash firms to reveal fees (Business Daily)
Dennis Karera (Chairman of the EABC, MD of Kigali Heights, CEO of Park View Courts): Private sector ‘now an integral part of the regional governmental body’
Dubai Chamber opens first trade office in China (Gulf Today)
tralac’s Daily News archive
Catch up on tralac’s daily news selections by following this link ».
SUBSCRIBE
To receive the link to tralac’s Daily News Selection via email, click here to subscribe.
This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 350 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome.
Related News
4th Meeting of the Tripartite Council of Ministers: Remarks by SADC Executive Secretary Dr Stergomena Lawrence Tax
The 4th Meeting of the Tripartite Council of Ministers took place in Nairobi, Kenya. The Ministers considered progress made, and provided guidance on outstanding issues towards the operationalization of the Tripartite Free Trade Area.
This meeting came approximately eighteen months after the last Tripartite Sectoral Ministerial Committee meeting held in May, 2016 in Dar-es-Salaam, Tanzania, and the June Tripartite Council, where important decisions were taken, leading to the launch of the Tripartite Free Trade Area in Sharm El Sheikh, Egypt in June 2015.
Her Excellency Dr. Stergomena Lawrence Tax, SADC Executive Secretary and Chairperson of the Tripartite Task Force, tweeted: “We need to walk the talk & operationalize the FTA, and allow the private sector & citizens enjoy its benefits.”
“Tripartite citizens, the continent & international partners await to see [whether] our political ambitions [will be] matched with practical & timely actions,” she said in a separate tweet.
Remarks by SADC Executive Secretary Dr. Stergomena Lawrence Tax
On behalf of the Tripartite Task Force, and indeed on my own behalf, I take this opportunity to express sincere gratitude to the Government and the people of the Republic of Kenya for hosting these Tripartite Meetings taking place here in this beautiful city of Nairobi. We are grateful for the generosity and hospitality of the Government and the people of Kenya which has enabled us to conduct our meetings in a productive manner.
I also take this opportunity to extend a warm welcome to the Ministers attending this 4th Meeting of the Tripartite Council of Ministers, which will consider progress made, and in doing so provide guidance on outstanding issues towards the operationalization of the Tripartite Free Trade Area.
This meeting comes approximately eighteen (18) months following your last Tripartite Sectoral Ministerial Committee meeting held in May, 2016 in Dar-es-Salaam, Tanzania, and the June Tripartite Council, where important decisions were taken, leading to the launch of the Tripartite Free Trade Area in Sharm El Sheikh, Egypt in June 2015. A built-in agenda was adopted at the time, which was to be expeditiously finalized in order to fully operationalize the Free Trade Area. Since then, negotiators and experts have met several times, at Technical Working Group, Tripartite Trade Negotiations Forum and Senior Officials meetings, guided by the Tripartite Sectoral Ministerial Committee, specifically focusing on outstanding Phase 1 issues, with a determination to address outstanding issues on the built-in agenda, and ensure the TFTA is fully operational. These negotiations and meetings have resulted into substantial progress.
Although the report covers the three pillars of the Tripartite developmental agenda: Infrastructure Development, which is aimed at enhancing connectivity and reduction of costs of doing business, as well as the Industrial Development pillar, which is aimed at addressing productive capacity constraints in Tripartite Member/Partner States, specific attention is placed on the market integration pillar with a deliberate intention to expeditiously operationalize the TFTA.
Since the launch of the TFTA in June 2015, progress has been made in the following areas:
-
Six Annexes on Non-Tariff Barriers; Trade Facilitation; Customs Cooperation and Mutual Administrative Assistance; Transit Trade and Transit Facilitation; Technical Barriers to Trade and Sanitary and Phyto-Sanitary Measures, which define the scope and elements of cooperation in the respective areas, have been finalized and legally scrubbed. Once adopted by your Council, these become an integral part of the Tripartite Free Trade Area Agreement;
-
The Framework for Cooperation and Work Programme on Industrial Development have also been completed. These instruments are the basis for cooperation within the Industrial Development Pillar, and a result of concerted efforts that have taken into account key elements of regional industrial policies and strategies in the three RECs, while ensuring complementarity, in order to achieve the intended goal of industrializing our region and ultimately, the African continent. The Framework and Work Programme will be presented for your approval during this meeting;
-
Significant progress has also been made on outstanding issues on rules of origin, where Member/Partner States have agreed on most of the applicable definitions and rules, which were unresolved during your meeting in June 2015. With the understanding reached, the Annex on Rules of Origin will be submitted for legal scrubbing, and will provide an interim arrangement to determine origin and confer the necessary preferential treatment on goods originating from the Tripartite Member/Partner States as soon as the Agreement enters into force.
-
It is nonetheless important to note that sectors such as Textiles and Clothing, which could boost manufacturing, expand industrial activity and job opportunities in the Tripartite, remain on the list of unfinished business. Efforts must therefore be made by the negotiators to expedite the remaining work, in order to ensure a comprehensive, fully functional and beneficial Tripartite trade regime.
-
Regarding tariff negotiations, although no offers have been finalized so far, it is encouraging to note that there is high level of commitment by Member/Partner States to complete negotiations on tariff offers.
While acknowledging that progress has been inordinately slower than expected, with the renewed vigor, there is hope that the Tripartite Free Trade Area will soon be operational. At the stage now reached, dedicated efforts must be placed on the finalization of exchange of offers, signing and ratification of the TFTA Agreement, and in doing so operationalize the TFTA.
While Member States continue with the signing and ratification of the Agreement, the Task Force will undertake the necessary preparatory work to ensure that all the administrative requirements necessary for the functioning of the TFTA are in place, so as to avoid any delays in granting preferential market access to Tripartite goods when the Agreement enters into force.
It is almost a year and half since the Tripartite Free Trade Area was launched. We therefore need to walk the talk, operationalize the FTA, and allow the private sector and Tripartite citizens in particular, enjoy the benefits of this new creation. With commitment and deliberate efforts, the TFTA can be operational in less than a year from now. The Tripartite region, the African continent and the international partners await to see if our political ambitions for cooperation and integration can matched with practical and timely actions. Completing the Tripartite FTA negotiations will also be key in defining our positions for the Continental Free Trade Area negotiations which will soon be gaining momentum to comply with the AU Heads of State Summit decision, regarding the conclusion of the negotiations establishing the Continental Free Trade Area in 2017.
The Task Force also continues to coordinate implementation of work under the Infrastructure Pillar, and as you will note, a number of projects are currently taking place with the support of our partners. We acknowledge that there is need to improve coordination of this critical pillar, and we shall endeavor, as a matter of urgency, to take necessary steps to convene a meeting of the Tripartite Sectoral Committee on Infrastructure to streamline the Work Programme under this pillar.
In conclusion, allow me to extend my sincere gratitude to my colleagues, Members of the Task Force, Dr. Sindiso Ngwenya, Secretary General of COMESA, and Amb. Liberat Mfumukeko, Secretary General of the EAC and our Teams for the dedication to the process and support extended to me during my tenure as Chairperson of the Task Force. As I am about to handover to Ambassador Mfumukeko, allow me to wish him success and assure him of my unwavering support.
I greatly thank Honourable Ministers for your continued guidance and commitment, and the Senior Officials for your diligence and hard work.
I thank you.
» Visit tralac’s TFTA Resources page for further info.
Related News
Kenya defies global economic headwinds to register solid GDP growth
Kenya’s overall economic performance has remained robust over the past eight years, and it is expected to continue into the medium term at a rate of 6% 2017, according to the latest economic update for the country.
The Kenya Economic Update (KEU): Beyond Resilience – Increasing Public Investment Efficiency, says the country’s positive forecast is driven by a vibrant services sector, enhanced construction, currency stability and low inflation, low fuel prices, a surge in remittances and a growing middle class characterized by rising incomes.
“I am happy to see Kenya’s economy demonstrate resilience in the face of regional and global economic slow-down,” said Diarietou Gaye, World Bank Country Director for Kenya.
“We are happy that Kenya remains one of the bright spots in Sub-Saharan Africa with its economic growth approaching 6 percent and outpacing the 2016 regional average of 1.7 percent,” he said. “Kenya’s growth has outperformed the average for the Africa region for over eight consecutive years. The prevailing macroeconomic stability means that Kenyans can now enjoy more stable prices for essentials like food, fuel, housing and transportation.”
Kenya’s overall economic performance has remained robust over the past eight years and this is expected to continue into the medium term with projected economic growth above 6 percent in 2017 and 2018. The key drivers for this growth include; a vibrant services sector, enhanced construction, currency stability, low inflation, low fuel prices, a growing middle-class and rising incomes, a surge in remittances, and increased public investment in energy and transportation.
This positive trend was reinforced by the latest World Bank Group’s Ease of Doing Business report which pegged Kenya as a top global improver for 2 consecutive years. Kenya moved up to the 92nd spot compared to 113 in the previous year and is now among the top 5 economies in Sub-Saharan Africa where it is easiest to do business. This improvement in the country’s business climate is largely due to the implementation of reforms to ease the process of doing business.
The report argues that nonetheless, the economy remains vulnerable to both external and domestic risks ranging from adverse weather that could curtail agricultural growth, uncertainties around the 2017 elections that could unduly dampen investor confidence, to weaker than expected global demand which could subdue the country’s exports.
“To sustain Kenya’s growth momentum over the medium term, it will be important to manage risks that may arise such as a subdued global economy, volatility in global financial markets, and domestic shocks such as adverse weather conditions,” noted Jane Kiringai, Senior Economist and Lead Author of the KEU. “Rebuilding fiscal buffers will provide the necessary policy space to mitigate such potential shocks.”
While Kenya is set for further medium-term growth, the special focus of the 14th edition of the KEU recommends reforming the systemic weaknesses of the country’s Public Investment Management (PIM) system, to see stronger growth. PIM is currently characterized by low execution and cost escalation of infrastructure projects.
“There is potential for Kenya to enhance growth prospects beyond the prevailing levels by increasing the productivity of public investments,” said Jens Kromann Kristensen, Lead Public Sector Specialist and co-author of the report. “Public investment in a range of infrastructure projects is generating strong returns, but the weak execution of some others holds back what could be an even greater catalytic impact of public investment on economic growth.”
“There is also urgent need to streamline the process of land acquisition, compensation and resettlement which lead to significant delays and cost escalation in the design and execution of public infrastructure projects,” said Sheila Kamunyori, World Bank urban specialist one of the co-authors of the report.
In addition to complex, long-term PIM reform recommendations, the report recommends several quick, high-priority actions that can help achieve higher levels of growth, such as:
-
Establishing a minimum criteria for project preparation, appraisal and inclusion of a project in the budget
-
Gradually strengthening the National Treasury role to include providing an independent review of project proposals, and enhancing capacity to undertake this role
-
Improving transparency and accountability for management of the portfolio of public investment projects
Quick win recommendations related to land acquisition include:
-
Providing payment assurance for financing land acquisition and resettlement to ensure immediate availability of funds for compensation when needed
-
Evaluating the current proposal to amend the legislation on compensation in land acquisition against international good practice to balance fairness, timeliness and the public interest
-
Developing a policy on involuntary resettlement with supporting legislation which reflects the principles of international good practice
The KEU was prepared by the World Bank Group in consultation with the Kenya Economic Roundtable.
Related News
EU tops Tanzania’s trading partner list
The European Union (EU) has maintained its position as Tanzania’s largest trading partner, with two billion US dollar (over 4trn/-) trade volume last year, a new report has revealed.
According to the “European Investment in Tanzania: How European investment contributes to industrialisation and development in Tanzania 2016,” report, the European companies also account for 68 per cent of the total Foreign Direct Investments in Tanzania.
Launching the report in Dar es Salaam on 26 October 2016, EU Head of Delegation to Tanzania and EAC, Ambassador Roeland van de Geer, noted that the EU companies were also the largest taxpayers, paying 1.1 billion US dollars (over 2tri/-) in domestic tax in 2014, about 25 per cent of the total taxes paid by large taxpayers in the country.
“This goes to show that the over 1,000 European companies and individuals from large multinational corporations to small individual tourism ventures play a significant part in the development of the Tanzanian economy,” he said.
“This publication discusses the competitive edge that Tanzania has in trade, investment and production and the challenges that are currently faced. It also contains clear recommendations on the way forward. EU is committed to continue working with Tanzania and strengthening ties between our regions.
“The European companies have invested in energy, tourism, transport, banking, oil and gas, agriculture, mining, retail and trade, ICT, manufacturing and construction sectors. The envoy said the European private sector is well represented in almost all sectors of the Tanzania’s economy, with crucial impact on revenue collection and job creation.
“These are the best long term solutions for poverty reduction,” he said. EU Business Group Chairman, Mr Morten Juul, noted at the launching ceremony that Tanzania offers peaceful and stable environment, abundant natural resources and favourable geographical location.
“There are ample opportunities for European investors to work alongside local investors to create an active and successful private sector and continue to build the economy,” he said.
“We hope that through continued dialogue we can build an environment that further supports the EU investments in the country and we are willing to share our skills and experiences to address the current business impediments,” said Mr Juul.
Background Note
The Report describes the European investment in 11 sectors of the economy (agriculture, mining, upstream oil and gas, manufacturing, construction and real estate, power sector, information and communication technology, banking and finance, transport and logistics, tourism, retail and trade).
The countries in scope for this Market Study of European investment in Tanzania include the 28 member states of the European Union (EU), plus the affiliated European Free Trade Association (EFTA) countries of which Norway and Switzerland (EU+SN) are active in Tanzania.
For the purposes of this study, our definition of an 'EU+SN investor in Tanzania' draws directly on the OECD Benchmark Definition of Foreign Direct Investment. Following the OECD definition, a European investor in Tanzania is therefore any Tanzanian-registered business entity whose Ultimate Investing Country (UIC) is one of the EU+SN countries.
Launch of the European Investment in Tanzania Study
Speech by H.E. Roeland van de Geer
Today we have done what is arguably the very best we can do for economic development in Tanzania. We have exchanged, open, free and well informed.
Professor Mkenda drove the whole night from Dodoma, showing great commitment and making the point for the future that Dodoma – Dar is not so far as we think!
All 12 EU missions in Tanzania were yesterday in Tanga, we visited the very place where the pipeline from Uganda will eventually reach the coast. There is a lot of European investment involved there.
When we moved on to the port, we were shown one of the oldest railway lines in East Africa, the Tanga Arusha line. Also there a lot of European investment involved, but in a totally different time under totally different circumstances in a period that is now far behind us. It is behind us due to the efforts and hard work of many millions of Tanzanians, led by five remarkable Presidents, the Presidents Nyerere, Mwinyi, Mkapa, Kikwete and today our President Magufuli.
Today, Africa and Europe are partners, we are building a relationship for the 21st century, a forward looking relationship. This relationship is broad and deep. It is a political relationship, with wide ranging cooperation in the international field, including in the UN, but is also an economic relationship, which development cooperation is and will remain an important element and in which trade and investment play also a decisive role as we have seen here today.
The discussion about the study was a fascinating one and it showed it was the perfect illustration of where Tanzania and EU stand today.
The work behind this study has been immense, as you can imagine. So first things first, I would like to extend my personal gratitude to all of those who have been involved in bringing this document alive, starting with Ashley Elliot, the consultant, for leading the analysis; all the European companies for feeding the study with detailed information on their respective sectors and the EUBG board and executive director for facilitating the research; to Government authorities for providing official statistics and responding positively to this initiative; and finally to my team in the EU Delegation for their motivation and perseverance along the entire process. The hard work has paid off!
I am pleased to see the interest aroused by the study and even more so by the debate that has just taken place. I optimistically trust that this is only the beginning of a dynamic and lasting process of further research and more discussions, feeding into a trusted and fruitful partnership between the public and private sector in Tanzania, in particular the European private sector.
The EU Investment study launched and presented today is intended to serve as a catalyst for more open debates on a way forward for strengthened interaction between public authorities and private sector. As demonstrated this morning, the private sector plays a key role in the future economic development in Tanzania, and specifically the European private sector has made a major economic and social contribution to the well-being of Tanzanian society.
As the Government of Tanzania and international partners join forces to lift millions of Tanzanians out of poverty, the role of trade and investment in the fight against poverty is now widely recognised. How foreign direct investments can maximise the effectiveness of selected poverty-alleviating policies by creating jobs, employment and training opportunities, how European investment can contribute to industrialisation of the country, these are the core of the debate we wish to engage in as development partners.
The European Union, and I trust I can speak on behalf of my fellow Swiss and Norwegian ambassadors, remains fully committed to close development cooperation with Africa. However the Private Sector in Tanzania is taking on a more prominent role in terms of investment, and as actor of development. The spill over effects on employment and revenue collection of foreign and local investment in Tanzania are numerous and beneficial. Therefore, it is crucial to integrate the private sector in the planning of national development policies and revising of a cooperation framework.
Against this background, last September, the European Commission presented an ambitious “European External Investment Plan” to promote investments in the African continent, to strengthen our partnerships and to promote a new model of participation of the private sector in development cooperation, as to ultimately contribute to achievement of the Sustainable Development Goals. The instruments available under the Plan will be accessible to investors, and all of us present here, collectively, need to ensure that Tanzania benefits from this Investment Plan.
The European Union Business Group is an initiative to praise within this evolving framework. Established to serve as a single voice of the European private sector and to connect with the Tanzanian private sector for joint actions. The EUBG provides a single platform for European investors already operating in Tanzania or willing to do business in the country, and as such, the EUBG can potentially become a strategic and trusted partner to support Government authorities in promoting further European investments into Tanzania as part of the GoT’s Five-year development plan.
This report, by presenting the challenges, but above all the opportunities to invest in Tanzania, will become an instrument of promotion for Tanzania to attract further European investment in the country. I also hope that it will feed the debate to reinforce an enabling business environment in Tanzania for European and local companies.
We are in 2016. The future is ours.
Let us learn from history. Colonialism, exploitation, violent conflicts, we all have witnessed it. Today, we need to look forward, globally, but also in the EAC region.
Tanzania, the EAC and the EU are working closely to promote peace and security in the Great Lakes region. And, ladies and gentlemen, imagine what peace and stability in Burundi, in the DRC and in South Sudan, can do for Tanzania, for the port in Dar es Salaam, and for trade and industry in Tanzania in general.
Let us be optimistic, let us join forces and let us move forward together.
We have seen today how much work lies ahead of us, in the port, at the borders, in Government, but also in the private sector.
The EU stands with the EAC, it stands with Tanzania. We have a long history, mostly for better, sometimes for worse. But we can choose to have a great future together and I feel that today’s meeting here was a main contribution to our joint and better future.
Let me once more warmly thank our guest of honour, PS Mkenda and also Mrs Blandina Kilama for moderating the session.
Thank you also to the panellists for their commitment and contribution to this debate: Mr Clifford Tandari, Acting Director of TIC; Mr Godfrey Simbeye, Executive Director of TPSF, Mr Raymond Mbilinyi, Executive Secretary of TNBC and Mr Morten Juul, Chairman of the EUBG.
I am looking forward to receive you tonight in the EU residence to toast on a better tomorrow.
Asanteni sana!
Related News
Indian Ocean countries adopt Bali communiqué to bolster cooperation
Countries bordering the Indian Ocean adopted a communiqué aimed at joint efforts to tackle various problems, ranging from maritime threats to economic inequality, at a meeting hosted by Indonesia.
The 21 member states of the Indian Ocean Rim Association (IORA) completed a draft late on Wednesday, 26 October 2016, during a meeting by senior officials in Nusa Dua, Bali.
The “Bali Communiqué” was adopted during a ministerial meeting, opened by Indonesian Foreign Minister Retno Marsudi on Thursday.
“We welcome the initiatives to promote economic cooperation and continue to explore all the possibilities and avenues to establish a work program for enhanced cooperation,” the communique states.
Ambassador K.V. Bhagirath, secretary general of the IORA, said on the sidelines of Wednesday’s meeting that it is “a very important document encapsulating the intent for cooperation in various sectors.”
He said the communique mainly addresses six issues that have long been prioritized by the regional grouping of the world’s third-largest ocean.
Those are maritime safety and security, trade and investment, fisheries management, disaster risk management, tourism and culture, as well as science and technology.
“The communique is already very clear. It surely tells you the steps to be taken,” Bhagirath, who is from India, told the Jakarta Globe. “The IORA secretariat will carry out those programs, consulting with the member states.”
“We’ll meet regularly to assess progress of the communique in the months to come. We’ll be reviewing how much we have implemented in upcoming meetings, which will probably be held early next year,” he added.
A series of meetings scheduled for March next year will conclude with the inaugural IORA summit led by Indonesian President Joko “Jokowi” Widodo in Jakarta.
Southeast Asia’s largest country is chairing the association of Indian Ocean rim countries, which have a combined population of more than two billion people, for the period of 2015-17. IORA has observer status at the United Nations.
The member states are Australia, Bangladesh, the Comoros, India, Indonesia, Iran, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Oman, Seychelles, South Africa, Singapore, Somalia, Sri Lanka, Tanzania, Thailand, the United Arab Emirates and Yemen.
Indonesia succeeded Australia as IORA chair and will be replaced by South Africa late next year.
Bali Communiqué
We, the Ministers of the Member States of the Indian Ocean Rim Association (IORA), Australia, Bangladesh, Comoros, India, Indonesia, Iran, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Oman, Seychelles, Singapore, Somalia, South Africa, Sri Lanka, Tanzania, Thailand, United Arab Emirates and Yemen met in Bali, Indonesia, for the 16th meeting of the Council of Ministers (COM) on 27 October 2016. The meeting was held in a collaborative spirit and shared responsibility responding to common challenges to unleash the region’s potential for a more peaceful, stable and prosperous Indian Ocean region.
We welcome the signing of the IORA Charter by Somalia and the signing of Memorandum of Understanding on Search and Rescue by Sri Lanka and Tanzania.
We note the significant progress made towards the finalization of the IORA Concord and the Action Plan developed at the three Ad hoc Committee Meetings, which took place in March, May and October 2016 respectively in Indonesia. We look forward to the adoption and signing of the IORA Concord as well as the endorsement of IORA Action Plan in 2017.
We note with appreciation the progress made in preparation for the IORA Commemorative Leaders’ Summit and its related meetings to be held in Jakarta – Indonesia on 7 March 2017. We encourage Members States, Dialogue Partners, and all stakeholders to collectively cooperate and collaborate to ensure the success of the event.
We agree to hold the IORA Business Forum during the Commemorative Leaders’ Summit in 2017 aiming at enhancing partnership with the private sector to ensure sustainable growth and development of the region.
We commit to deepen our cooperation with the Dialogue Partners and take note of the outcomes of the first post CSO dialogue for which the Dialogue Partners have been constructively engaged at senior officials’ level in identifying areas of cooperation as well as exploring joint project s, programmes, and capacity building activities of mutual interest.
We affirmed our commitment to gender equality and empowerment of women by adopting a Declaration on Gender Equality and Women’s Economic Empowerment.
We take note of the outcomes of IORA Women in Business Symposium: Implementing the IORA Women in Business Symposium (WIBS) in Jakarta, on 11-12 October 2016.
We support the deliberations held during the 18th IORA Committee of Senior Officials, the 16th IORA Working Group on Trade and Investment, the 22nd Indian Ocean Rim Business Forum, and the 22nd Indian Ocean Rim Academic Group Meeting and thanked these groups for their productive recommendations.
We express our appreciation to the IORA business delegation for their participation in the 31st Trade Expo Indonesia in Jakarta in October 2016 as a continuous effort to open business opportunities.
We take note of the outcome of the International Symposium for IORA’s 20th Anniversary on “Learning from the Past and Charting the Future”, that was held in Yogyakarta, Indonesia on 14-15 September 2016 as well as the track-two Regional Workshop on Intersection of Culture in Indian Ocean Region held by the IORA Academic Group in Jakarta on 10-11 October 2016. Both forums served as an ideal vehicle to exchange views on the challenges, opportunities and the strategies on how IORA should develop its cooperation in the future.
We welcome the initiatives to promote economic cooperation and continue to explore all the possibilities and avenues to establish a work programme for enhanced cooperation.
We note the progress since our last meeting in Padang in 2015 and appreciate the success of events held in 2015-2016 and take note with appreciation of their outcomes, namely the Second Ministerial Economic Business Conference (13-14 April 2016, Dubai, UAE) and the First Free Trade Zone Authorities (19-20 May 2016, Chabahar, Iran).
We are pleased to note the increase of IORA activities under the IORA Special Fund and encourage Member States and Dialogue Partners to continue supporting the Fund. We welcome the consideration of the possibility to establish the IORA Development Fund (IDF) as a funding mechanism to support the implementation of projects, studies, and capacity building programmes.
We are encouraged by the progress made in the Blue Economy as one of the priority area s of IORA and we look forward to the convening of the the second Blue Economy Dialogue in India in November 2016, the third Blue Economy Core Group workshop and the second Ministerial Blue Economy Conference (BEC–II) in Indonesia in 2017.
We express appreciation to the implementation of the IORA Sustainable Development Program (ISDP) in Bangladesh, Comoros, Madagascar, and Tanzania respectively. We note with interest the preparation of the second phase of the ISDP program me for LDCs as an effort to develop capacities and skill development in fostering regional economic development.
We support the ongoing efforts by the Association to pursue follow-up actions with regional/international organization as well as related organs and believe that such engagement should be continued.
We welcome the ongoing efforts to strengthen the IORA Secretariat by Member States. We wish to extend our appreciation to the Secretary-General and the IORA Secretariat, as well as IORA’s Specialized Agencies namely the Regional Center for Science and Technology Transfer (RCSTT) and the Fisheries Support Unit (FSU), for their tireless efforts in supporting IORA meetings and program mes and for ensuring the smooth management of the Association.
We extend our deep appreciation to the Government of the Republic of Indonesia for hosting the 16th Council of Ministers Meeting and related meetings, and for the excellent hospitality extended to us in Jakarta and Bali.
Related News
SA working on improving trade volumes
South Africa is working to improve the promotion of competitive products in order to expand trade volumes and improve its trade structure.
“We are working towards the promotion of competitive products in order to expand trade volumes, improve trade structure and promote balanced and sustainable development of bilateral trade volumes on the current basis.
“This includes China giving favourable consideration in expanding its imports of the top ten value-added products from South Africa,” Minister in the Presidency for Performance Monitoring and Evaluation Jeff Radebe said.
The Minister held a meeting with a high-level Chinese delegation from the National Development and Reform Commission (NDRC) of China at the Union Buildings on Friday afternoon.
The objective of the meeting was to exchange views on issues of mutual concern relating to trade and industry agreements signed between South Africa and China during the 2015 Forum on China Africa Cooperation (FOCAC) held in Johannesburg and the 2015 Chinese State Visit to South Africa.
Minister Radebe said total imports from China in 2015 were valued at R199.4 billion compared to the total value of South African exports into China of R94.4 billion resulting in a trade deficit of R105 billion.
South Africa’s agricultural exports amounted to R1.1 billion while agricultural imports from China amounted to R1.7 billion in 2015. Meanwhile, the trade balance for the mining sector remained positive.
Both South Africa and China have committed to increasing direct investment in agriculture, fishery, energy and manufacturing, among others.
South Africa wants to encourage the support of investment and cooperation into fuel cell technology for small scale power generation, human resource development as well as in the area of energy which includes nuclear, renewables and bio-fuels.
“Achieving all of the above will contribute to our own national imperatives which is embedded in our National Development Plan (NDP),” said Minister Radebe.
Referring to the recently concluded BRICS Summit in Goa, India, the Minister said China and South Africa’s economic growth prospects and the increased momentum of the BRICS formation will continue to be a critical engine for growth and development objectives.
For Africa inclusive and interconnected development, industrialisation and curbing illicit financial flows remain crucial goals.
“Both at a national and continental level, infrastructure remains a critical priority focus. Reliable, efficient infrastructure is crucial to economic and social development that promotes inclusive growth.”
Government has established Invest SA, which is a one-stop shop investment centre coordinated by an Inter-Ministerial Committee that is chaired by President Jacob Zuma.
The Minster told the delegation that Invest SA has identified several high impact priority projects in water, energy, ports and rail.
In addition, the Presidential Infrastructure Champion Initiative (PICI) emphasises the importance of infrastructure investment that aims to ensure job creation and the transfer of expertise.
Key projects identified by the PICI, which is also led by President Zuma, include the Grand Inga Hydro Project as well as the Lesotho Highlands Water Project-Phase 2.
SA an important role player says Chinese delegation
Speaking through an interpreter at the meeting, the Chinese delegation said they were glad to be in South Africa to discuss economic cooperation prospects.
“[South Africa] has played an important role in global governance and climate change among others,” said the delegation.
The delegation said relations with mining-rich South Africa over the years has grown.
“The two countries… have gone from a partnership to a strategic partnership. Cooperation between the two countries has become a template for cooperation between China and other African countries.”
China is has become South Africa’s largest trading partner for seven consecutive years.
“In 2015 bilateral trade between the two countries amounted to 46 billion US dollars while about 140 large scale Chinese companies are [operating] in South Africa,” said the delegation that arrived in South Africa on Friday morning.
The meeting on Friday was also attended by Water and Sanitation Minister Nomvula Mokonyane, Economic Development Minister Ebrahim Patel as well as Small Business Development Minister Lindiwe Zulu.
Related News
EAC launches Common Market Scorecard 2016 in Kampala
The second EAC Common Market Scorecard (CMS) 2016 which evaluates implementation of the EAC Common Market Protocol was launched on 27 October 2016 in Kampala, Uganda by the EAC Deputy Secretary General in charge of Finance and Administration, Hon. Jesca Eriyo.
The CMS 2016, which measures Partner States’ compliance to the free movement of capital, services, and goods, was developed by the World Bank Group together with Trade Mark East Africa at the request of the EAC Secretariat.
The Scorecard was developed over a period of 18 months under the supervision of the EAC Secretariat and Partner States. The areas of capital, services and goods were selected for scoping as they are fundamental to the operations of the Common Market.
Addressing the participants at the launching, the EAC Deputy Secretary General stated that “a number of reforms have been undertaken since the 2014 CMS. These have brought the total number of non-conforming measures (NCMs) down from 63 in 2014 to 59 in 2016.’’ While this shows progress it should be noted that all EAC Partner States remain largely non-compliant in their services trade liberalization commitments, added Hon. Jesca Eriyo.
Hon Eriyo disclosed to the participants that In CMS 2016 all Partner States were given full marks for compliance. Subsequent scorecards should consider assessing implementation of these commitments.
The Deputy Secretary General informed the participants that the Scorecard is well aligned with the EAC’s implementation priorities. "It fosters peer learning and facilitate the adoption of best practice in the region”.
“The Scorecard will contribute to strengthen the regional market, grow the private sector and deliver benefits to consumers,” stated Hon. Eriyo.
She said the implementation in terms of recognition of certificates of origin, an issue repeatedly identified as a significant non-tariff barrier (NTB) in 2014, Burundi continues to earn full points and Kenya continues to score 90 percent. Tanzania’s recognition of certificates of origin has improved from 50 to 60 percent; Rwanda and Uganda’s scores have both declined, indicating a worsening performance in terms of recognizing certificates of origin of other EAC Partner States. Most countries improved their score on applying tariff equivalent charges, though such charges persist as barriers to intra-EAC trade, stated the EAC official.
Hon Jesca Eriyo disclosed to the participants that the EAC average of resolution of new NTBs for the 2016 period was about 54 percent, better than the 38 percent rate for CMS 2014. The EAC Deputy Secretary General called for greater information sharing regarding the Treaty and Protocol provisions in the Partner States.
Some members of the private sector, including private sector apex bodies, were unfamiliar with the Protocol or with the commitments affecting their operations. Hon Eriyo urged Partner States to strongly engage and inform the private sector on the implications on these reforms on their day-to-day operations across the region and develop a private sector reform champions who could help push for implementation.
Catherine Masinde, the Practice Manager, East Africa, Trade and Competitiveness, World Bank Group, said EAC Partners have done a commendable effort in removing barriers to free movement of capital, services and goods, but more needs to be done.
She said the EAC Scorecard provides transparent, rigorous, unbiased and client-led data on the key implementation gaps to the integration of the region’s economies. It also highlights possible reform areas to improve compliance to the Common Market Protocol”.
On his part Vice Chairman of East African Business Council Uganda, Kassim Omary, said it is of atmost importance to measure the extent to which the EAC Parter States are translating the Common Market Protocol into policies that support actualization of free movement of people and workers, goods, services and the rights of establishment and residence within the EAC Partner States.
Mr Richard Kamajugo, Senior Director of Trade Mark East Africa in-charge of Trade and Environment, said that the TMEA Program of support to the Common Market Scorecard has been running from 2012 to march 2017,under the EAC Investment Climate Programe. He said the total budget support to the program was $10.4m, through IFC and EAC (technical support), under a 5 component program aimed at increasing inter and intra-regional trade and investment through investment climate reforms supporting the EAC Common Market.
Related News
tralac’s Daily News Selection
The selection: Friday, 28 October 2016
Featured tweets from CFTA/TFTA-focussed discussions held yesterday in Geneva and Lusaka:
@SabineBohlke: Boosting intra African trade should become Africa’s mantra! AU workshop in Geneva on the Continental Free Trade Area; @EKangamungazi: CaritasZambia and @CUTS_Lusaka engaged stakeholders on their position on the TFTA agreement and what it means for Zambia. Sequencing is important.
tralac Newsletter: Trade rules assisting SMEs to compete better
Financing infrastructure in Africa: First STC on transport, intercontinental and inter-regional infrastructures, energy and tourism (AU)
The overall objective of the STC meeting (28 Nov – 2 Dec) is to assess progress and to achieve concrete advances in the financing of major infrastructure, notably those in the Priority Action Plan of the Programme for Infrastructure Development in Africa (PIDA/PAP), through decisions and consensus on investing in the preparation, structuring, implementation and risks mitigation of climate resilient infrastructure projects. The specific objectives include: (i) evaluation of the progress made by regional and international institutions in financing the energy, transport and tourism sectors projects, notably PIDA/PAP and regional projects and other AU flagship projects under the AU Agenda 2063; (ii) analyse constraints and how to strengthen national and regional capacities and to increase the participation of national and regional financial institutions in financing the development of the three sectors (domestic and regional financial resource mobilization); (iii) adoption of strategies on making Africa the preferred destination for tourism under the AU Agenda 2063. [Programme, pdf]
South Africa: Logistics Barometer Report 2016 (University of Stellenbsoch)
The Logistics Barometer provides a numerical analysis of logistics costs trends in South Africa supported by insights from logistics industry specialists and academia. The usefulness of calculating annual data lies in the fact that trends can be identified and applied by both operational and strategic analysts in the public and private sector for future planning, policy development and investment objectives on a macroeconomic level. The calculations in this edition are up to 2014, with an estimate for the 2015 year (2015e), and a forecast for the 2016 year (2016f).
Botswana: Draft National Development Plan (NDP 11) presentation speech
External sector development: The overall balance of payments has been in surplus for the entire NDP 10 period, except in 2010. However, the merchandise trade part of the current account was in deficit for all the years of the Plan, except 2013 and 2014. On the other hand, the Services Account was in surplus for the entire Plan period. A worrisome trend during NDP 10 was a steady decrease in the share of non-traditional exports, as part of total exports. For instance, while in 2009 the share of non-traditional merchandise exports was about 10%, it decreased to 8% in 2010 and reached 3% by 2013. This suggests that limited export diversification has taken place. In order to bolster economic diversification during NDP 11, particular attention should be on creating new and growing non-traditional exports. On the other hand, a modest increase in the share of exports of services was registered during the Plan period.
Kenya-Ethiopia: One-stop post to better trade in Marsabit (The Star)
Kenya is waiting for Ethiopia to complete construction of the one-stop border point between the two countries so they can be linked and start operations, a governor has said. Marsabit Governor Ukur Yatani said the centre will propel grow the county’s economy and promote development. Kenya and Ethiopia signed a bilateral agreement in 2011 to develop the joint border point and road that will enhance bilateral trade. The border post is funded by the African Development Bank at Sh843 million. The project will also link Marsabit to the Trans-Africa Highway that links Nairobi to Addis Ababa. The Sh843 million border project was set to be complete by May, but contractors sought an extension in the contract due to poor terrain that saw construction halting a number of times.
Chinese, French oil firms in talks over Uganda’s pipeline (IPPMedia)
China National Offshore Oil Corporation (CNOOC) and France’s Total are in final talks over the construction of Uganda’s oil pipeline that will run up to Tanga port. Li Yong, Executive Vice-President of CNOOC limited, in a meeting with Uganda’s President Yoweri Museveni said the oil firm was ready to undertake the US$4 billion pipeline project. Li, according to a State House statement issued on Wednesday, said they are in talks with Total regarding the necessary modalities to ensure the take-off of the project. [Bagamoyo port: Uncertainty hits Kikwete’s $11 billion ‘legacy’ project]
South Africa: Exporters encouraged to utilise more of AGOA tariff lines (dti)
According to the Director of Americas Bilateral Trade Relations in the International Trade and Economic Development Division of the Department of Trade and Industry , Mr Malose Letsoalo, South Africa is only utilising 141 tariff lines out of the 1835 that are there under AGOA. He added that with regards to the 3 400 non-reciprocal arrangements, South Africa was only utilising 459. “We have experienced a lot of change and diversification in terms of our exports to the United States of America market from just exporting mainly commodities between 1994 and 2000, to more value-added products since 2001 to date,” said Letsoalo. Export councils as well as provincial departments participating in the workshop expressed the need for collaboration, communication and increasing the partnership between the dti and the exporters. The workshop also resolved that Trade Invest South Africa within the dti leads the process of developing an action plan derived out of the Integrated National Export Strategy to ensure that the objectives are realised.
South Africa completes administrative process for SACU-MERCOSUR PTA (dti)
South Africa has completed all the administrative processes to facilitate the implementation of the SACU and MERCOSUR Preferential Trade Agreement as from 21 October 2016. In accordance with Article 36, the SACU - MERCUSOR PTA entered into force on 1 April 2016, 30 days following SACU’s acknowledgement of the notification from MERCOSUR that it had concluded the necessary legal requirements and South Africa will implement the Agreement retrospectively from the date of entry into force of the Agreement, 1 April 2016. SACU offered concessions on 1 062 tariff lines and MERCOSUR offered concessions on 1 052 tariff lines. In either case, the preference margins range between 100 - 10%. SACU offered a Tariff Rate Quota for four agricultural products, which will be accessible on a first come first serve principle with no permit requirements. The tariffs will be reduced immediately on entry into force of the Agreement. The PTA is the first trade agreement concluded by SACU as a single entity, following the SACU Agreement of 2002.
Zimbabwe: SI64 causes decline in net revenue collections - Zimra (Zimbabwe Independent)
The Zimbabwe Revenue Authority has blamed the introduction of Statutory Instrument 64 of 2016 (SI64) and rampant smuggling for the 6,9% slump in net revenue collections. Zimra’s third quarter revenue performance net collections were pegged at $854,1m, a 6,9% decline compared to the same period last year. The government had targeted to collect $917,3m.his figure was also a 2,7% decrease from the 2015 third quarter revenue collections. “The unsatisfactory performance was mainly due to revenue forgone through concessions, trade agreements and rebates amounting to US$150,7 million, and government policies, which were introduced to curb the influx of imports of designated manufactured products,” Zimra board chairperson Willia Bonyongwe said in a statement.
African Customer Due Diligence Repository Platform: update (Afreximbank)
Dr George Elombi, Afreximbank Executive Vice-President in charge of Corporate Governance and Legal Services, told participants that the high cost of conducting customer due diligence adversely affected the stability of the African financial sector and the productivity of corporate entities. “Financial crimes, compounded by weak corporate governance capacity, have the potential to derail legitimate economic activity and slow down the development of financial markets essential for optimal allocation of capital to support the structural transformation of resource-constrained African economies,” he said. He announced that Afreximbank was preparing to launch an online African Customer Due Diligence Repository Platform to provide a centralized source of primary data required to conduct customer due diligence checks on African counterparties. That platform would allow subscribers to conduct due diligences at a low cost, thereby decreasing the cost of trade finance in Africa.
‘Beef imported from Africa unlikely to meet Northern Irish farm standards’ (CTA)
There is a worrying level of beef being imported from Botswana in Africa, which is unlikely to meet Northern Irish farm standards, according to Ulster Farmers’ Union Beef and Lamb Chairman, Crosby Cleland. The level of Botswana beef imports coming through Belfast port has already reached 333t this year, he said. “Since this trade was first highlighted last year it has continued to grow, while domestic producers remain under pressure. For beef producers hit by poor market prices for much of this year, this is a worrying level of beef coming from a source unlikely to have farm standards equivalent to those in Northern Ireland. “Since food labelling and quality assurance have become big issues for consumers it is surprising so little is known about where this imported meat is sold.”
Abdul Majeed: ‘Africa promises plenty as global car hub’ (PWC/The Hindu)
PwC Autofacts expects light vehicle production to increase from about one million units produced in 2015 to 1.45 million vehicles in 2022 at an annual growth rate of 5.5 per cent. South Africa will continue to lead the surge from 5.84 lakh vehicles to 6.9 lakh in 2022. In the process, its share is expected to contract from over half the production as other regions enter the fray. Nigeria, for instance, is projected to nearly treble its light vehicle production from 27,000 units in 2015 to 75,000 units over the next seven years. Morocco, likewise, is expected to see numbers grow from 2.88 lakh units to 4.23 lakh in 2022 while Algeria will grow from 19,000 to 1.12 lakh units. Egypt is projected to nearly double output from 89,000 to 153,000 vehicles in 2022 while Ethiopia will be the only laggard with no big assembly expected in the coming years.
Trade ministers in Oslo weigh WTO options for Buenos Aires meeting and beyond (ICTSD Bridges News)
The Oslo mini-ministerial also provided the opportunity for some ministers from the WTO group currently negotiating a Trade in Services Agreement to gather in the margins to take stock of the talks, given the current target of concluding those negotiations by early December. Sources familiar with the meeting noted that this event was not a full or formal TISA ministerial, in light of the fact that only some ministers were present – namely those that were already participating in the main Oslo gathering. The TISA talks currently include 23 participants, counting the EU as one, with approximately half of that number present in Norway.
South Africa: trade and industry discussion with China’s National Development and Reform Commission (GCIS)
The Minister in the Presidency for Planning, Monitoring and Evaluation and Chairperson of the National Planning Commission, Jeff Radebe will (today) lead a delegation of Ministers who will host a high level Chinese delegation from the National Development and Reform Commission (NDRC) of China. The main objective of the meeting is to exchange views on issues of mutual concern relating to trade and industry agreements signed between South Africa and China during the FOCAC 2015, hosted in Johannesburg, and the 2015 Chinese State visit to South Africa.
Africa’s youngest billionaire banks on regional integration to boost expansion (The Africa Report)
Tanzanian billionaire Mohammed Dewji, who is head of Mohammed Enterprises Tanzania Limited (MeTL) Group, is spreading his trading, commodities and manufacturing businesses around East and Southern Africa, positioning them to benefit from regional integration. Dewji has his sights set on more than tripling his company’s revenue. “[Seven years from now] our revenue target is $5bn per year. We project that we will be employing 100,000 people,” Dewji tells The Africa Report. To do that, MeTL’s targets are in East and Southern Africa. MeTL executives have identified Burundi, the Democratic Republic of Congo (DRC), Malawi, Mozambique, Rwanda, Uganda and Zambia as countries ripe for investment. The company says investment in these countries will strategically position it to capture opportunities in three regional blocs.
Africa to host, for first time, the Academy on Labour Migration (ILO)
The 2016 ILO Academy on Labour Migration will be held in Johannesburg (5-9 December) to discuss, review and make recommendations on latest trends and development aiming at labour migration governance, strategies, policies and tools. The Regional Office for Africa and the International Training Centre of the ILO are convening this training opportunity to effectively address challenges and opportunities related to protection of migrant workers and their families, migration and development linkages, and strategic partnership for good governance around migration issues. [Regional Conference of International Association of Refugee Law Judges: address by Minister Malusi Gigaba]
Meeting of the PIDA Steering Committee (24-25 October, Nairobi, in French)
AfDB’s regional road safety workshop concludes today
SADC: 2nd newsletter detailing German cooperation (pdf)
Joint communique by League of Arab States, AU, UN on Libya (UNSMIL)
DRC: Government supports Freeport sale of Tenke copper mine
Malawi govt bans soft drink produced in Mozambique over health concerns
Q&A with Adriana Riccardi, head of Uruguay’s competition authority (UNCTAD)
tralac’s Daily News archive
Catch up on tralac’s daily news selections by following this link ».
SUBSCRIBE
To receive the link to tralac’s Daily News Selection via email, click here to subscribe.
This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 350 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome.
Related News
Botswana’s draft 11th National Development Plan: Presentation speech
Presentation on the draft eleventh National Development Plan (NDP 11), delivered by Hon. O.K. Matambo, Minister of Finance and Economic Development, to the National Assembly on 26 October 2016
It is my singular honour this afternoon to present the draft eleventh National Development Plan (NDP 11) to this Honourable House for consideration and adoption. The draft Plan covers a six year period from 1st April, 2017 to 31st March, 2023 and comprises of two Volumes. Volume I deals with Policies and Strategies, while Volume II articulates on Projects and Programmes, earmarked for implementation during the Plan period. The theme for NDP 11 is “Inclusive Growth for Realisation of Employment Creation and Poverty Eradication”. This theme is premised on the fact that, though concerted efforts were made during NDP 10 to achieve the goals and aspirations of Vision 2016, Botswana continues to grapple with three main development challenges of; poverty, unemployment and income inequalities. Specifically, this theme challenges everyone involved in the development of this country to continue striving towards improving the livelihoods of Batswana by ensuring sustainable economic development.
Honourable Members, you may recall that Government has deliberately allowed NDP 10 to run for 8 years to coincide with the end of Vision 2016 and formulation of Vision 2036. The year 2016, is also symbolic in the history of Botswana’s development as it coincides with the 50 years of the country’s independence. The year 2016 also marks the beginning of another 20 years of our next long-term vision, Vision 2036. Hence, Vision 2036 and the onset of NDP 11 are very important milestones in defining our development pathway going forward. As such, we should collectively ensure that we set the right platform necessary for success in achieving our short, medium and long-term development goals.
NDP 11 is commencing under circumstances that existed at the beginning of NDP 10. While some economies have weathered off the recession syndrome that characterised the period of NDP 10, todate, the recovery in the global economy and in many individual economies continues to be slow due to; weak global demand, lack of consumer confidence, and low commodity prices. These major global economic risks have put more restraint and setbacks on the development path of many developing countries, especially those that are heavily dependent on natural commodity resources such as Botswana.
The preparation process of NDP 11 has more or less followed the same approach we adopted during NDP 10 and its Mid-term Review. Hence, the Draft NDP 11 document before you today, was prepared under my Ministry’s leadership in collaboration with the four Thematic Working Groups (TWGs) of: Economy and Employment; Governance, Safety and Security; Social Upliftment; and, Sustainable Environment. The Draft Plan was also guided by a multi-sectoral Reference Group comprising of representatives of the: Public Sector, Private Sector, Trade Unions, Academia, Civil Society Organisations, and Parastatal organisations.
The preparation process included: identifying priority areas for implementation during NDP 11; a review of the global and domestic economic fundamentals; formulating strategies for NDP 11; as well as making projections of the resource envelope. Two principal documents were prepared by my Ministry covering these issues; i.e., the Keynote Policy Paper and a Macroeconomic Policy Framework. Other key documents which informed the draft Plan include; Vision 2016, Vision 2036 Framework and the United Nations Sustainable Development Goals.
During the month of May this year, two National Stakeholders Conferences were held, one for General Stakeholders, including Public Sector, Private Sector, Trade Unions, Academia, Civil Society Organisations, Parastatals and Financial Institutions and another one for the Local Authorities. The draft Plan was also discussed by the Economic Committee of Cabinet and formally approved by Cabinet in July this year. A two days’ workshop on the 24th and 25th October, 2016, that is this week, was also held for Members of Parliament to discuss the draft Plan. The purpose of all these consultations was to give stakeholders an opportunity to further interrogate and make refinements to the context and content of the Draft Plan, before it is considered for approval by this House, and subsequent implementation countrywide.
Volume I of the draft NDP 11 contains 10 chapters. The first 5 Chapters cover Macroeconomic issues, while Chapters 6 to 9 address microeconomic level issues in the form of thematic areas grouped according to their complementarity in driving socio-economic development. Chapter 10 is about monitoring and evaluation to ensure effective implementation of NDP 11.
My presentation today will focus mainly on Macroeconomic chapters 1 to 5, on the understanding that Chapters 6 to 10 will be presented later by the respective Ministers in line with the process that was followed in preparing the Plan. I should mention here that, due to the recent creation of some new Ministries and renaming of others, the names of some Ministries in the document before you may be slightly different from the current reality, as the draft Plan was sent to you before these new developments. However, I wish to assure the House that, my Ministry will amend the affected Ministry names accordingly in the final document. I should also indicate that these new developments do not in any way affect the content and context of Volume I, but will certainly require a slight modification to the presentation of Volume II.
I now turn to the individual Chapters 1 to 5, which constitute the main thrust of my presentation.
Chapter 1: Country profile and people
This Chapter provides geographical background information, political structure and physical features of the country for purposes of readers unfamiliar with Botswana. It therefore, does not change much from the previous Plans. Suffice to note that politically, Botswana’s democracy has matured from a few parties at independence to the current status where there are several opposition parties. Climate change has also become a topical issue, with the country periodically experiencing severe droughts that affect both the wildlife and livestock sub-sectors of our economy. The frequent droughts have changed Botswana’s landscape and biodiversity, and I am sure you will be hearing more about some of these developments during the presentation by the Minister responsible for environment and tourism.
Chapter 2: Population and development
The main issue emerging from this chapter is that, most of the key targets of the 2010 Revised National Population Policy (RNPP) have been met. To this end, the reduction in the total fertility rate (i.e., the average number of children born to a woman over her lifetime), declined from 3.3 children per woman in 2001 to 2.8 in 2011, against a target of 3.4 by 2011. This low fertility rate offers the country an opportunity to benefit from the demographic dividend, which is reflected by a significant increase in the ratio of working-age adults relative to young dependents (those aged between 0-14 years). Other benefits include the reduction of pressure for developing infrastructure such as those for health and education, as well as the possibility of a rise in average per capita income resulting from fewer individuals provided that our economy continues to grow.
Significantly, the objective of eradicating absolute poverty during NDP 10 was almost achieved, as the proportion of individuals living in abject poverty or below $1.25 per day, decreased from 24.5 percent in 2002/03 to 6.4 percent in 2009/10. As a result, Botswana has surpassed the Millennium Development Goals target of reducing extreme poverty by half in 2015. In addition, the proportion of people living below the national poverty datum line declined from 30.6 percent to 19.3 percent over the same period.
In terms of the implementation of the Millennium Development Goals (MDGs), Botswana has achieved most of the targets including: eradicating extreme poverty and hunger; achieving universal primary education; reducing the under–five mortality rate by two thirds; reducing the spread of HIV/AIDS; and reducing the number of people without access to safe drinking water and basic sanitation by half. However, there is need to improve on maternal health, to develop a global partnership for development and to ensure environmental sustainability. These will be tackled as part of the implementation of the UN Sustainable Development Goals during NDP 11 and Vision 2036. These were not met due to non-adherence to health issues by some pregnant mothers, limited health facilities and non-existence of certain policies.
Chapter 3: Review of economic performance during NDP 10
Chapter 3 provides an assessment of the performance of the domestic economy during NDP 10 and covers issues of Gross Domestic Product growth, economic diversification, Government budget, external sector development, employment creation and policy environment during NDP10.
GDP Growth
In terms of GDP growth, the NDP 10’s average actual growth rate per annum was 3.9percent against the projected growth rate of 3.3 percent. This means that, the economy performed slightly better than the original forecast. However, the actual average growth rate was below the Vision 2016 target growth rate of 7.5 percent, owing to the; merchandise imports which exceeded merchandise exports, slow growth in domestic final consumption expenditure causing weak aggregate demand in the economy, and slow growth in gross physical capital formation.
Economic Diversification
There are signs that economic diversification occurred during NDP10, with the non-mining sectors of Trade, Hotels & Restaurants, and Banks, Insurance & Business playing a major role in driving the growth of the economy, while Mining sector declined. The Mining sector contracted by an average of 3.4 percent per annum, during the entire Plan period, while the Non-mining sector grew by 5.6 percent per annum. The increased contribution of Non-mining sectors saved the economy from experiencing full-blown recession. This underscores the significance of continued vigorous efforts to diversify the economy and support of the non-mining sector.
Government Budget
The outturn for Government revenues during NDP 10 was higher than the overall NDP 10 projected revenues. For the first four years of the Plan, revenues significantly exceeded the target for NDP 10. However, from 2013/14 onwards, the revenue outturn underperformed the NDP 10 targets. Of significance is that, the Government revenues were still driven by Mineral and Customs and Excise Revenues, (mineral revenues accounting for 35.8 percent of total revenues and Customs & Excise accounting for 26.8 percent). This calls for urgent efforts to increase and diversify the revenue base.
The NDP 10 target was to reduce Government spending as a ratio of GDP from the NDP 9 level of 37.5 percent to 30 percent. The actual outturn is estimated to be 31.1 percent of GDP by the end of the Plan, which is closer to the NDP 10 target.
The accumulated overall Government budget balance for NDP 10 is an estimated deficit of P8.4 billion, against P31.9 billion, which was projected in the Plan. This positive development is attributable to a number of factors such as; prudent management of the budget by Government; low implementation capacity in the economy; and some positive variance in revenues achieved during the Plan period.
It is encouraging to note that, for the entire NDP 10 period, the Government was also able to maintain one of its fiscal rules of funding recurrent expenditure through non-mineral revenues. The fact that mineral revenues were not used to cover recurrent costs is a sign of budget sustainability.
External Sector Development
The overall balance of payments has been in surplus for the entire NDP 10 period, except in 2010. However, the merchandise trade part of the current account was in deficit for all the years of the Plan, except 2013 and 2014. On the other hand, the Services Account was in surplus for the entire Plan period. A worrisome trend during NDP 10 was a steady decrease in the share of non-traditional exports, as part of total exports. For instance, while in 2009 the share of non-traditional merchandise exports was about 10.0 percent, it decreased to 8.0 percent in 2010 and reached 3.0 percent by 2013. This suggests that limited export diversification has taken place. In order to bolster economic diversification during NDP 11, particular attention should be on creating new and growing non-traditional exports. On the other hand, a modest increase in the share of exports of services was registered during the Plan period.
Employment Creation During NDP 10
One of Botswana`s key challenges is employment creation, which will continue to be addressed aggressively during NDP 11. For instance, formal employment grew at an average rate of 1.5 percent per annum during the Plan period; 3.3 percent in 2010, 2.1 percent in 2011 and decelerated further to 0.3 percent in 2015. The private sector as the main employer, absorbed 56.0 percent of the workforce, followed by Central Government at 30.0 percent, and 14.0 percent was contributed by Local Government. The fact that the private sector as the main employer is growing at a small rate of 1.2 percent, is a major concern that should be addressed during NDP11.
Macroeconomic Policy Environment in NDP 10
At the onset of the NDP 10, it was envisaged that the global financial and economic crisis was going to undermine the implementation of some of the then on-going, high return projects that were pivotal to economic growth. Hence, Government increased development expenditure by 27 percent. This expansionary fiscal policy decision was taken to stimulate economic growth. In the same vein, through expansionary monetary policy, the bank rate was reduced several times during NDP 10 and this led to reduction of the Commercial Bank’s prime lending rates from 11.5 percent in 2009 to 7.5 percent by July 2016. During the same period, conducive macroeconomic environment was also created by the decrease in inflation rate from an average rate of 7.4 percent in 2010 to 2.6 in August 2016.
The exchange rate policy, on the other hand, was managed based on the basket mechanism, where the main variables are the currency weights and the rate of crawl. The basket currency weights are based on the country’s trade patterns while the annual rate of crawl is based on the differential between Botswana’s trading partners’ rate of inflation and domestic inflation and these are used to measure competitiveness of Botswana exports in global markets.
Microeconomic Policy
With respect to the microeconomic policy, Botswana has over the years invested heavily in infrastructure. However, requisite skills and technology, particularly ICT and engineering are still lacking. Furthermore, the regulatory framework needs to be improved to facilitate quick and timely investment decisions.
In general, the macroeconomic policy environment was conducive for economic growth during the NDP 10 period, while the microeconomic environment was relatively more constrained. Therefore, strategies for addressing these constraints have been outlined in the various chapters of the Plan.
Chapter 4: Macroeconomic strategies for NDP 11
To achieve the NDP 11 theme of “Inclusive Growth for the Realisation of Sustainable employment Creation and Poverty Eradication” the Draft Plan identifies a number of strategies drawn from the six national priorities, which are: (1) development of diversified sources of economic growth; (2) human capital development, (3) social development, (4) sustainable use of natural resources, (5) consolidation of good governance and strengthening of national security, and (6) Implementation of an effective monitoring and evaluation system. However, in this presentation, I will only focus on the Development of Diversified Sources of Economic Growth, Domestic Expenditure as a Source of Growth and Employment Creation, and Export-Led Growth Strategies. The other critical areas will be covered by other Ministers as they present their respective thematic chapters.
Development of Diversified Sources of Economic Growth
Developing diversified sources of economic growth tackles the twin problems of declining growth and lack of employment opportunities, especially, for the youth. It is for this reason that initiatives such as Beneficiation, Economic Diversification Drive (EDD), Cluster Development, Special Economic Zones, Promotion of Local Economy Development and Research, Innovation and Development, will be given the highest priority during NDP 11. Beneficiation will be targeted in sectors such as Mining, Tourism and Agricultural products in order to develop and establish downstream industries in the economy. In addition, EDD will continue to be bolstered by the high level of research, innovation and development, which will be given paramount attention during the implementation of NDP 11. These initiatives will be supported by Local Economic Development and Special Economic Zones which will be established in various districts and regions. Details on these are given in chapter 6 under Economy and Employment thematic area.
Domestic Expenditure as a Source of Growth and Employment Creation
The review of NDP 10 revealed that domestic absorptive capacity as measured by household consumption has been low. This has resulted in low aggregate demand in the economy and hence low economic growth. In this regard, NDP 11 recognises the need to increase spending in the economy as a strategy for generating economic growth and enhance employment opportunities. An increase in employment opportunities has the potential to boost household consumption and increase domestic demand. To this end, Government has introduced the ESP in order to promote employment opportunities in the; construction industry, agriculture, manufacturing, and tourism sectors. This is the reason why there will be substantial budget deficits for the first three years of NDP 11.
Export-Led Growth Strategy
Export-led growth is critical in promoting sustainable economic growth, as well as in creating sustainable employment opportunities. By definition, the export-led growth strategy is a trade and economic policy, aiming to speed up the industrialisation process of a country by producing and exporting goods and services for which the nation has a comparative advantage. Such a strategy is therefore premised on the notion that export markets can complement the domestic market by generating the needed demand and employment creation. To this end, a detailed Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis will be undertaken in order to identify the country’s comparative advantage. The strategy will draw from the cluster model, with an initial focus on diamonds; cattle; tourism; mining; finance and other services. It must be emphasised that for this strategy to be successful, it should be driven by the private sector.
Chapter 5: Macroeconomic projections for NDP 11
I wish to preface my presentation of the NDP 11 Macroeconomic Projections by referring to the recent development regarding the liquidation of BCL Group of companies, and its likely impact on the domestic economy. Without doubt, the liquidation of the BCL Group of companies will have economic and social implications, especially on employment. However, in terms of growth of the economy, exports, and Government revenues, the placement of BCL Group of companies under liquidation will have minimal direct impact; hence the projections of the macroeconomic variables such as GDP and Government revenues contained in the draft Plan distributed to ourselves remain valid. The Ministry will however be monitoring any developments with respect to the BCL liquidation process closely, with a view to updating if necessary, the macroeconomic projections contained in the draft Plan, before finalising it for printing and publishing.
However, having said this, I must indicate that the amount required to fund the BCL liquidation process will be provided during this financial year. Furthermore, given the challenges with the energy, water and education sectors, there will be need for additional funding during the current financial year. In order to avoid worsening the budget deficit for 2016/17, Government will have to reprioritise, both the recurrent and the development expenditure to cater for these additional funding requirements.
I will now turn to the projections of resources that are likely to be available during NDP 11. I must indicate that projections in the draft Plan are in three scenarios which are the; Base Case, Pessimistic (a situation worse than the Base Case) and Optimistic (a situation better than the Base Case) scenarios. However, I will concentrate on the Base Case Scenario as it is the most likely scenario that will form the basis for formulating the Government budget for the entire Plan period.
Base Case Scenario
As per the Base Case Scenario, real GDP is expected to grow by 4.4 percent per annum, with the mining sector growing at an annual average of 2.8 percent over the NDP 11 period. Non-mining sectors are expected to grow modestly by 4.6 percent annually, mainly driven by; Water and Electricity sector which is expected to grow by 18.4 percent; Trade, Hotels and Restaurants sector is projected to grow by 6.8 percent; the Transport and Communications sector at 6.0 percent; and Banking, Finance and Business at 4.1 percent.
On an annual basis, total revenues at the onset of NDP 11 are estimated to be P52.76 billion, and will grow by an average of 6.7 percent, reaching P70.78 billion in 2022/23. Overall total revenues to be generated for the entire Plan are projected to be P365.08 billion. Mineral revenues are expected to contribute a large share to total revenue of about 34.1 percent during the entire Plan period.
Total expenditure and net lending over NDP 11 is projected to reach P364.03 billion, of which the recurrent budget stands at P262.4 billion and the development budget is estimated to be P101.4 billion, resulting in a modest cumulative estimated budget surplus of only P1.05 billion by the end of NDP 11. It is worth noting that with the ongoing uncertainty in the global economy and declining commodity prices on one hand and the need to create employment opportunities through increased Government spending on the other hand, the Government budget is projected to be in substantial deficits in the first half of the Plan period, but forecast to only record budget surpluses in the last three (3) years.
It is important to note that the projected non-mineral revenues of P240.24 billion are lower than the projected recurrent budget of P262.4 billion. This suggests possible non-sustainability of the projected NDP 11 budget, as the recurrent expenditure will not be fully financed from the non-mineral revenue source. This alone calls for continued measures to strengthen tax administration through simplification and strengthening of tax collection systems, as well as implementation of cost recovery measures.
To ensure that revenues from non-renewable sources are largely invested in physical, financial and human capital that have potential to promote future growth, as well as to take into account the interest of future generations, a Fiscal Rule is being proposed as part of NDP 11. The Rule’s main elements are: to finance the recurrent budget from non-mineral revenues; and to invest 60 percent of mineral revenues in physical and human capital, while the remaining 40 percent will be saved as financial assets for future generations.
Conclusion
In conclusion I wish to reemphasise that the review of NDP 10 clearly shows that the domestic economy is still highly dependent on minerals and customs and excise revenues, while the overall economy remains relatively undiversified. This means that more needs to be done to foster economic growth and to expand revenue sources. It is for this reason that NDP 11, like its predecessors, puts more emphasis on diversification efforts to create employment opportunities, reduce income inequalities and poverty. The private sector and other development partners will have to play a major role in these efforts. Government on the other hand, will spare no efforts in ensuring the continued existence of a facilitative policy environment.
The NDP 11 average GDP growth rate is estimated to be slightly higher than that of NDP 10, and a small cumulative budget surplus of about P1.05 billion is also expected. As policy makers, we are all aware that the economic climate, particularly the global one, can always change for the worse. Therefore, our projections figures suggest that there is an increased need to be more prudent in our expenditures. They also suggest that there is a more urgent need in identifying not only alternative sources of economic growth, but also alternative sources of revenues. It is certainly the time now to closely pay attention to the quality of the projects that Government implements, as well as the efficiency with which they are implemented. Concerted efforts to expand our tax base as well as consolidation of collection of Government fees and levies are needed, and appropriate cost recovery measures will be implemented.
My colleagues who will present the remaining chapters of the Plan will elaborate more on policies and strategies that will assist our economy to grow in the next six (6) years and beyond.
I now move that the draft National Development Plan eleven (NDP 11) be adopted.
Related News
Entry into force of the Preferential Trade Agreement between MERCOSUR and SACU
Preferential Trade Agreement (PTA) between the Common Market of the South (MERCOSUR) and the Southern African Customs Union (SACU)
South Africa has completed all the administrative processes to facilitate the implementation of the SACU (Botswana, Lesotho, Namibia, South Africa, and Swaziland) and the MERCOSUR (Argentina, Brazil, Paraguay, and Uruguay) Preferential Trade Agreement as from 21 October 2016.
In accordance with Article 36, the SACU-MERCUSOR PTA entered into force on 01 April 2016, thirty (30) days following SACU’s acknowledgement of the notification from MERCOSUR that it had concluded the necessary legal requirements and South Africa will implement the Agreement retrospectively from the date of entry into force of the Agreement, 1 April 2016.
The SACU-MERCUSOR PTA was signed in the City of Salvador, Federative Republic of Brazil, on 15 December 2008 on the side of MERCOSUR, and in the City of Maseru, Lesotho, on 3 April 2009 on the side of SACU. MERCOSUR was the last party to notify completion of its internal processes on 19 December 2015.
The Agreement contains the main text, and seven annexes. The main text sets out the principles, legal provisions and procedures for the relations under the Agreement. It also establishes the Joint Administration Committee, to manage the administration of this Agreement. Annex 1 and 2 set out MERCOSUR and SACU respective tariff concessions. Annexes 3, 4, 5, 6, and 7 cover general rules of origin, trade remedies, dispute settlement, Sanitary and Phytosanitary Measures, and cooperation on Customs Administration.
SACU offered concessions on 1 062 tariff lines and MERCOSUR offered concessions on 1 052 tariff lines. In either case, the preference margins range between 100 - 10%. SACU offered a Tariff Rate Quota for four agricultural products, which will be accessible on a first come first serve principle with no permit requirements. The tariffs will be reduced immediately on entry into force of the Agreement.
The PTA is the first trade agreement concluded by SACU as a single entity, following the SACU Agreement of 2002. This agreement is also the first with another developing region, giving meaning to the objectives of South-South cooperation. Thus, the PTA creates a basis for further integration and cooperation including possible further exchanges of tariff preferences, and cooperation on any other area.
The Agreement is being administered by SARS following the approval of the legislation and its publication in the Government Gazette.