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G20 to focus on balanced growth
Summit set to chart economic direction
The G20 summit, to be held in the East China city of Hangzhou, will focus on international cooperation in the face of economic risks and challenges to achieve sustainable and balanced growth, officials said Monday.
Vice Foreign Minister Li Baodong said this summit hopes to give the G20 group a leading role in charting the right direction for the world economy. The group members will also strengthen their partnership to deal with risks and challenges, he said at a media briefing in Hangzhou.
The 11th summit will be held from September 4-5 in Hangzhou.
Vice Finance Minister Zhu Guangyao said that the financial crisis’ impact still lingers and impedes growth, resulting in the slow and uneven recovery around the world.
Therefore, the G20 summit’s goal is to facilitate a policy consensus. Countries that still have fiscal space should take more measures, he added.
President Xi Jinping will attend and chair the G20 summit with the theme, “Toward an Innovative, Invigorated, Interconnected and Inclusive World Economy,” Ministry of Foreign Affairs spokesperson Lu Kang announced on Monday.
Xi will also attend an informal BRICS leaders meeting and deliver a keynote speech at the opening ceremony of the G20 business forum, which will be held in Hangzhou from September 3-4.
“The theme concentrates on the two most pressing problems facing the world economy: uneven recovery after the financial crisis and relatively low economic growth,” said Zhang Haibing, director of the Institute for World Economy Studies at the Shanghai Institutes for International Studies, told the Global Times.
“Innovation and invigoration represent growth, meaning that innovation and structural reforms may help the world economy find new sources of momentum,” Zhang said.
Interconnection and inclusiveness indicate development through infrastructure interconnection, the strengthening role of multilateral development banks and implementation of the 2030 UN Agenda for Sustainable Growth, she said.
The G20 summit in Brisbane, Australia in 2014 set the global economic growth target at 2 percent in five years.
Sustainable development
The G20 summit will also for the first time issue a report on green financing, said People’s Bank of China deputy governor Yi Gang.
“The report will be drafted by the G20 Green Finance Study Group, which was established under the Chinese G20 presidency to show China’s concern for green and sustainable development,” Zhang said. “In keeping with global demand, the move could be seen as a very positive response to the global fight against climate change.”
Yi also said the G20 will strive to promote financial sector reform, which will be a key topic of the summit.
“The summit will focus on discussions of international financial reforms so as to ensure a relatively stable global financial market, which may cover coordinating macroeconomic and monetary policies among different countries,” said Huo Jianguo, vice chairman of the China Society for WTO Studies.
From China’s perspective, since the Chinese yuan’s inclusion in the Special Drawing Rights takes effect in October, domestic financial regulators may need to make certain adjustments to the foreign exchange policies, Huo told the Global Times on Monday.
Zhu said the G20 members this year have been making progress on issues like financial reform, international taxation cooperation, green financing, climate funding and counter-terrorism fundraising.
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Improving aviation safety in Africa: The key is integration
On 16 June 2016, the European Commission seven-year-ban on all Zambian registered carriers into European Union (EU) airspace was lifted.
This ban was imposed following several findings, and a significant safety concern in the air operator certification process, revealed through an ICAO (International Civil Aviation Organization) audit on the Zambian civil aviation sector.
The European Commission, under Regulation (EC) No. 2111/2005, has powers to ban operators registered in particular states, that fail to meet international safety and regulatory oversight standards, from entering the airspace of all EU member states. Non EU members like Lichtenstein, Norway and Switzerland would not grant landing permission either, because they are committed to EU aviation safety standards, and further, inbound flights into their territories have to transit through airspace controlled by other EU member states.
Zambia was finally cleared after taking corrective action over a seven year period, which addressed the findings and significant safety concern.
Why should Zambia – with more than half of its population living below the poverty line – invest in aviation safety and regulatory oversight, to match the standards of a developed EU member state like Germany? According to the July 2016 World Bank development indicators database, the total nominal GDP of Zambia is 22 billion U.S dollars, while that of Germany is 3.3 trillion U.S dollars.
Article 37 of the Convention on International Civil Aviation mandates all contracting states to ensure uniformity in regulations, standards, procedures and organization in relation to aircraft, personnel, airways and auxiliary services. This implies that standards should be the same in all contracting states, regardless of level of economic development. Zambia, being a contracting state, is bound by the provisions of article 37.
Regulators, service providers, and airport operators have to comply with the same international minimum requirements regardless of flight frequency, cargo or passenger statistics. Countries with a small aviation industry and ultimately, less resources, always find difficulty complying with the requirements of Article 37.
Regional integration is the best option for contracting states without adequate resources to satisfy the requirements of Article 37 above.
Under Article 77, states may come together, pool resources and form regional integration projects or joint operating organizations. This can be achieved by setting up common infrastructure like:
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Training academies; like Euro Control, which provides air traffic control and air traffic management training for EU member states. Before breakup of the East African Community in 1977, EACAA (East African Civil Aviation Academy) provided training for pilots, instructors, maintenance engineers and flight operations officers for all East African states.
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Airlines; like Scandinavian Airlines, which is owned by Denmark, Norway and Sweden. Air Afrique was partly owned by Air France and Benin, Burkina Faso, Cameroon, Central African Republic, Republic of Congo, Gabon, Mauritania, Niger and Senegal. East African Airlines was owned by Uganda, Kenya and Tanzania.
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Regional safety oversight organizations; like ACSA (Central American Agency for Aviation Safety), EASA (European Aviation Safety Agency), EAC CASSOA (East African Community Civil Aviation Safety, Security and Oversight Agency) established in 2007 under the revived East African Community.
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Air Navigation Service Providers; like Euro Control which provides air navigation services to Belgium, Luxembourg, Netherlands and North West Germany through its Maastricht upper area control center.
Common infrastructure provides an excellent framework for pooling of technical expertise and cost sharing on regional projects like aviation safety oversight organizations. For example, EAC CASSOA hosts the East African civil aviation personnel licensing examination databank. This ensures uniformity in the region as all personnel (pilots, air traffic controllers, instructors, flight operations officers, cabin crew and maintenance technicians) are examined at the same standard prior to licensing.
All East Africa Community states have adopted aviation regulations, technical guidance materials, forms and checklists drafted by EAC CASSOA. Enforcement is left to the national civil aviation authorities.
CASSOA periodically dispatches technical teams to inspect facilities in EAC states, to advise on how the same can be improved and bring them in line with ICAO standards and recommended practices. Burundi, the smallest East African state is a recent beneficiary. In March 2016, Burundi requested, and CASSOA sent a team of experts to evaluate and advise on rehabilitation of aerodrome movement areas, and erection of a modern control tower at Bujumbura international airport. CASSOA undertook to assist Burundi by supervising the project up to completion, train technical staff at Bujumbura airport and equip them with the necessary skills for future construction projects at the airport. Burundi could not have achieved this on its own due to lack of resources and expertise.
In Europe, EASA sets standards for EU members, and also for airlines of non EU members that fly into the EU.
Common infrastructure ensures harmonization of regulations, policies, technical procedures and standards for the benefit and safety of all countries in the regional integration project.
The updated EU list as of 16 June 2016 is dominated by African states namely; Angola, Benin, Comoros, Republic of Congo, Democratic Republic of Congo, Djibouti, Equatorial Guinea, Eritrea, Republic of Gabon, Liberia, Libya, Republic of Mozambique, Sao Tome and Principe, Sierra Leone, and Republic of the Sudan. The EU has totally banned or imposed operational restrictions on airlines registered in these states. The irony is that most of them are located in regions, or share borders with states, which meet international safety and regulatory oversight standards, and whose carriers fly into the EU. Possible assistance for the listed states, is a border crossing away.
Aviation is a small industry in Africa, is expensive and ICAO standards will always haunt many African states. Regional integration is the best way to ensure compliance with the requirements of article 37. None of the East African states is on the EU list, thanks in part, to the EAC CASSOA.
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Ethiopia has staved off worst of El Niño, but possible impacts of La Niña looming large
$45 million additional funding urgently needed to support Ethiopian agriculture
With this year’s main planting season winding down in Ethiopia, there is still a small window of opportunity in September for farmers to plant the last set of crops this year and grow food for millions facing hunger, provided the necessary support arrives on time.
The newly released Mid-Year Review of the Ethiopia Humanitarian Requirements Document (HRD) – developed jointly by the Government of Ethiopia and UN agencies, non-governmental organizations and other development partners – indicates that 900 000 additional households need urgent agricultural support bringing the total number to 2.9 million in August. Meeting additional agricultural sector needs will require $45 million bringing the total requirement for the agriculture sector to $91.3 million for 2016.
The overall food security situation has improved only slightly, with the number of people requiring emergency food assistance having decreased from 10.2 million to 9.7 since the beginning of the year.
The El Niño-induced drought caused a wide-scale failure of crops and loss of livestock critical to the livelihoods of farmers and agropastoralists. The drought is being followed by seasonal floods, which have already led to crop damage and the inundation of pastures and may be further exacerbated by a phenomenon called La Niña, expected from October onwards.
“If floods worsen later this year, there could be outbreaks of crop and livestock diseases, further reducing agricultural productivity and complicating recovery,” said Amadou Allahoury, FAO Representative to Ethiopia.
“The situation is critical now. We must make sure that farmers will be able to plant between now and September and grow enough food to feed themselves and their families thus avoiding millions of people having to rely on food assistance for another year. Ethiopia needs urgent global support to respond to its humanitarian needs, we have no time to procrastinate,” Allahoury added.
The meher season is Ethiopia’s main agricultural season and produces up to 85 percent of the nation’s food supplies. If the farmers do not plant enough now, Ethiopia may face significant food shortages, which may further exacerbate food and nutrition insecurity in the country.
To ensure the last remaining planting window of the year is met, an estimated $8.8 million is needed to provide root crop planting materials, legumes, vegetable and cereal seed to 530 000 households.
FAO estimates that households who lost small ruminants such as sheep may need at least two years to return to pre-drought levels, while cattle-owning households may need up to four years to recover. Animals that survived the recent drought are still weak and susceptible to diseases during the rainy periods; $36.2 million is required to undertake the necessary interventions to support 2.4 million livestock-dependent households (or 12 million people).
Preparing for La Niña
According to meteorological reports, a La Niña event is 55 percent likely for October to November and will have two major impacts on Ethiopia: flooding in the dominantly highland areas and additional drought in the lowland livestock-dependent areas of Oromia and Somali regions. FAO is supporting the Government to prepare a contingency plan to address the upcoming needs.
FAO’s response to the crisis
With resources received, FAO has already provided agricultural inputs to 127 000 households (635 000 people) in drought-affected regions including Amhara, Afar, Oromia, Tigray, Somali and SNNP. So far, nearly 3 700 metric tons of seed and 5.8 million potato cuttings have been delivered to affected communities. Additional vegetable and late season crop seed are being purchased and will be distributed between August and September 2016.
FAO has provided critical support to livestock-owning families. The organization provided livestock feed, fodder seed to rejuvenate pasture, and rehabilitated water points for livestock. FAO has supported the government to vaccinate and treat some 1.4 million animals. However, large numbers of animals has been weakened by the drought and are exposed to diseases as the result of the recent floods. The organization is planning to expand the vaccinations and treatment campaigns.
In order to increase the coverage of both farmers and livestock keepers affected by the drought and current floods, FAO requires $10 million by the end of September 2016.
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Develop mobile money infrastructure to raise financial inclusion, EAC told
East African Community states need to develop rural infrastructure (especially electricity and ICT) to enhance mobile phone penetration and facilitate its use.
The call was made by experts in reaction to the 2016 Brookings Financial and Digital Inclusion Project Report, which, despite showing substantial progress toward advancing financial inclusion in regional countries, indicates there is room for improvement.
The report, released last week, evaluates commitment to and progress toward financial inclusion across 26 countries.
It says Kenya retained its position as the highest-ranked country in the study by a five percentage point margin.
Of four East African Community (EAC) countries in the study, Kenya scored an overall 84 per cent followed by Uganda and Rwanda at 78 per cent and 76 per cent, respectively, with Tanzania trailing at 68 per cent.
Kenya, South Africa, Brazil, and Uganda held their places in the top five-ranked countries between 2015 and 2016.
Country scores are hinged on four dimensions: country commitment, mobile capacity, regulatory environment, and adoption. The lowest income economy among the countries ranked at the top of the FDIP scorecard was Uganda driven in part by its strong levels of mobile money adoption.
Rwanda, which ranked among the top 10 countries overall, is the other low-income country that demonstrated “a particularly strong performance” on the FDIP scorecard.
“Rwanda provides an effective example of how country commitment to advancing financial inclusion and the promotion of digital financial services can lead to a more inclusive financial ecosystem,” the report says.
Rwanda jointly topped for the highest regulatory environment score among the FDIP countries and earned a strong score of 94 per cent on the country commitment dimension.
Rwanda’s 2016 FinScope survey – which assesses access to and usage of financial services in addition to financial capability, behavior, and trust in financial institutions – found that financial exclusion dropped by 17 percentage points since 2012.
This drop was caused by increase in the proportion of adults who have or use a product or service from a formal financial institution.
“Mobile money has contributed to enhanced adoption of formal financial services in Rwanda, which ranks fourth among the FDIP countries in terms of mobile money account ownership,” the 2016 Brookings Financial and Digital Inclusion Project Report says.
The mobile capacity dimension indicates the existence of opportunities for enhanced adoption of mobile money and other digital financial services that leverage mobile infrastructure.
Interestingly, it is noted, top-scoring countries in terms of mobile money adoption – Kenya, Uganda, Tanzania, and Rwanda – are not among the top-scoring countries with respect to mobile capacity.
“This suggests that the increasingly thriving financial inclusion ecosystems present in Kenya, Uganda, Tanzania, and Rwanda can be made even stronger with increased build-outs of mobile capacity,” the report says.
To be fully realised, the authors note, this capacity must be supplemented with an enabling regulatory environment, appropriate product development, and awareness of and trust in products and services that accelerate utilisation.
Developing rural infrastructure
Dr Ildephonse Musafiri, deputy head of Rwanda’s Strategy and Policy Unit (SPU) in the Office of the President, said considering the criteria the authors used to measure financial inclusion, all EAC countries need is to develop rural infrastructure (electricity and ICT), which would enhance mobile phone penetration and facilitate use of mobile money services.
Rwanda, Kenya, Uganda made tremendous achievements in terms of country commitments and regulatory framework, Musafiri said, but for sustainable financial inclusion, several things still need much attention.
One, he said, is shifting to the non-traditional use of financial services for saving and payments: most rural people are still using “tontines” and other informal means for financial services.
“Increase preconditions for mobile phone adoptions: adult literacy, rural infrastructure development; mostly rural electrification, enhance fair competition among mobile service providers, invest in income generating activities since income (asset) is the major driver of mobile use adoption,” he said.
Musafiri explained that connectivity of local micro-finance institutions which are mostly used by rural population, changing the mindset regarding women’s rights (including involvement in financial decision making at household level), and reducing costs of mobile financial services and ensuring safety of such services, among users, are also important elements.
In general, the report says, while there is no single path to facilitating financial inclusion, engagement in multinational knowledge-sharing networks and investing in digital financial services can help countries develop successful and sustainable approaches to making progress toward inclusive finance.
Richard Ndahiro, a regional financial services professional, emphasised the importance of access, awareness and affordability in boosting financial inclusion.
Ndahiro said mobile money has proven to boost access but it has mainly been a payments channel and, as such, further product development (loans, savings, and others) on the channel are needed.
Also crucial, he said, is banks embracing digital financial services, either independently or riding on mobile network operators (MNOs).
Ndahiro said: “This also goes with solving all the issues around the smooth functioning of the mobile money ecosystem; agent liquidity, connectivity, and others.”
When it comes to awareness, Ndahiro said, the biggest barrier to advancement will always be “people’s mindset.”
“Why should the rural folks join the formal options if they are not comfortable with technology, or regulation? They continue to use the informal options,” Ndahiro said.
On affordability, he noted, banks are not pro-poor, considering their charges.
“MNOs are coming in, but are also targeting transfer fees. Mobile loans are currently very costly. So it’s just too costly for the ordinary citizen to go formal, even though the informal option has its high risks too,” he said.
Ndahiro remained optimistic that the confluence of banks, MNOs, credit bureaus, and financial technology companies are “going to improve this space.”
“Regulation is another big hurdle since MNOs and other non-banking institutions are quickly entering this space, but are central banks ready to regulate them without stifling innovation?”
Marginalised groups
Authors of the 2016 report were repeatedly struck by the challenges in obtaining financial services facing traditionally marginalised groups, including women.
As such, they call for stronger country action on data gathering and analysis.
“We firmly believe that the financial access challenges faced by women and other marginalised groups merit particular consideration,” they say.
“Addressing this gender gap would yield benefits not only for women, but also for their families, communities, and beyond. From a provider standpoint, the gender gap presents a market opportunity.”
The report lists six action items for addressing the gender gap in financial inclusion, including: promoting data collection to identify usage of financial products among women and develop and market products accordingly.
Besides developing specific targets, initiatives, and strategies for advancing women’s financial inclusion, they are also efforts to promote development and implementation of digital identity programmes; leverage digital channels to promote convenient access to financial services; and ensure products are convenient for customers, and customers are comfortable accessing them.
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New rules to allow more foreign direct investment in Kenya
In the new arrangement, counties will be empowered to allocate land to investors.
The government has ratified new rules allowing foreign direct investment (FDI) in the establishment of special economic zones (SEZ), where products will be manufactured for the export market.
In a Kenya Gazette notice, Industry Trade and Co-operatives Cabinet Secretary Adan Mohamed said county governments were also at liberty to allocate land to any local or foreign investor planning to put up an SEZ.
The identified facilities will also enjoy a one-stop regulatory regime manned by officers from the Special Economic Zones Authority (SEZA) who will help foreign investors acquire all documentation that will allow them to launch their operations within the shortest possible time.
The 2016 Special Economic Zones Regulations state that SEZA must maintain an open investment environment to facilitate and encourage business via the setting up of “simple, flexible and transparent procedures for registration of the investor”.
The new regulations also seek to enable foreign investors to put up plants within the shortest possible time, as the SEZA will be required to establish a resident office that will help investors have all their architectural designs and environment impact assessment audits approved quickly.
Online services
The one-stop shop facility will be connected online to all regulatory agencies, enabling investors to get visas and work permits for their expatriate workers within the SEZ facilities with the assistance of officers seconded from relevant government agencies.
To facilitate the development of manufacturing plants, the minister said all environmental permits will be processed on site thereby discarding the age-old tradition where regulatory agencies delayed applications for construction for up to two years.
The gazette notice comes hardly a month after Israeli Prime Minister Benjamin Netanyahu, Turkey’s President Recep Tayyip Erdoğan and India’s Prime Minister Narendra Modi led business delegations to Kenya and expressed interest in setting up shop in Kenya.
World Leaders visit
The world leaders said this would help improve the trade imbalance where they exported more to Kenya and imported less.
The visits saw a raft of agreements signed with President Uhuru Kenyatta aimed at enhancing trade links.
The new rules also empower county governments to set aside public land for establishment of industrial zones and to collect levies on behalf of the government from operators, developers and factory owners.
The move will also help increase access to SEZ-processed products on the Kenyan market via a 20 per cent window while the rest must be exported to foreign markets.
The move promotes the government’s intention to lure foreign direct investment in manufacturing and especially companies seeking access to affordable labour with an eye on establishing markets in Europe and America.
Under the African Growth and Opportunities Act (Agoa), the American government gave special treatment to African-based companies to process and export the goods to their markets on preferential terms.
The new regulations are a departure from past practice where the government, which owns the land, funds the construction of necessary infrastructure before allowing investors to put up factories.
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Banks scramble for lucrative SMEs with juicy funding deals
Small and medium-sized enterprises (SMEs) in Kenya are entering a new era as financial institutions heighten the scramble for this lucrative sector with all manner of tactics and juicy deals.
The sector is the “engine room of growth” according to Aly Khan Satchu, chief executive at Rich Management, a financial advisory firm. The Business Daily spoke to several bank executives and they share this belief.
If anything, the recent proposal to set up a Sh30 billion, preferentially-rated SME fund as part of their push to divert a lending rates cap, goes to prove just how pivotal this sector is to the economy.
Financial experts say banks are increasingly turning to SMEs as they constitute perhaps the largest single of pool of bankable clients, as opposed to say corporate businesses, NGOs, or other niches whose numbers count much less.
Small businesses are also viewed as agile and fast in decision making, improving their attractiveness. Processes such as decision-making by SMEs are rapid and efficient, largely because many are owned and managed by sole proprietors, family or close associates.
Their operations, therefore, attract much less regulatory and compliance oversight relative to large corporates, thereby reducing process costs both for the SME and bank.
“Banks have increasingly seen this segment as an opportunity for growth. International institutions are also making funds available in order for banks to chase this opportunity,” said Mr Satchu.
It is for this reason that almost all lenders have turned their attention to setting up a departments tailored for SMEs.
Equity Bank, KCB Group, Cooperative Bank of Kenya, Barclays Bank, Family Bank are just a few of the lenders that have extended the service scope for SMEs to trade services, financial services and cash management.
The Co-op Bank, for instance, has a client base of more than 1.8 million MSMEs countrywide, for whom it has set up a business division to take care of their banking needs.
The bank has a loan book to this particular class of borrowers in excess of Sh36 billion advanced to 35,000 borrowers and a deposit base of Sh55 billion from this customer segment.
Biashara Club
“We don’t measure success of our SME offering purely on the returns we make, but also on the growth our clients have been able to achieve,” said Maurice Matumo, Co-op Bank director for retail and business banking.
In addition to having a dedicated SME unit, the KCB operates Biashara Club, a networking platform for entrepreneurs in the seven markets that the lender operates.
Through such initiatives, the lender aims to increase the contribution of MSMEs to a fifth of its loan book in two years. Its loan book is currently in excess of Sh347.4 billion.
In March, KCB launched a five-year Sh50 billion youth entrepreneurship programme to nurture and support small businesses, with an eye at creating at least 2.5 million jobs in the next five years.
“In our approach to serve SMEs better, we have tailored a wide range of products and services for the segment, specifically to address their needs,” said Annastacia Kimtai, KCB’s retail director in the country.
“This range from business accounts, working capital loans, trade finance and supplier financing facilities among others. This is also informed by our conviction that today’s SMEs are Africa’s conglomerates of the future.”
Sidian Bank CEO Titus Karanja says the lender has restrategised from being an SME-focused bank to introducing units that will cater to these business when they expand.
“SMEs of today are the large corporates of tomorrow. So a bank that builds a wide client base of solid SMEs will be in good business with large corporates in the future,” he said.
“Many banks have leaving us after transition into big corporates. With our reorganisation, we will be able to nurture them young but still be with them as they become corporates.”
Barclays Bank of Kenya has not been left behind either. The lender has set aside close to Sh30 billion to offer existing and new enterprises cheap loans through a campaign dubbed Wezesha Biashara, Swahili for ‘Enable Business.’
The lender targets more than 10,000 new and existing businesses nationwide. Equity Bank too plans to lend SMEs up to Sh100 million to expand their businesses.
Housing Finance Group has also adopted training sessions as a way of empowering its SME clientele and engaging these business at their places of work, however remote.
“By visiting the business and understanding their concept, we are able to finance them from as little as Sh10,000 to as high as Sh2 million before graduating the customer to SME for higher funding,” said HF managing director Sam Waweru.
Given the fact that SMEs are a “sellers’ market”, banks, which have pricing power over them, will continue targeting this sector as one of their key growth opportunities.
tralac’s Daily News Selection
The selection: Monday, 15 August 2016
UNECA/UNITAR e-learning course on industrialization in Africa via trade: registration details (26 Sept - 4 Nov)
SADC endorses Venson-Moitoi for second try at AU hot seat (Botswana Guardian)
2015 African Gender Scorecard (African Union)
The present report provides an analytical snapshot of the results of selected indicators to measure progress between women and men, to create a scorecard for African countries. It also discusses critical policy issues and outlines some policy recommendations to support member States in their efforts to achieve gender equality and women’s empowerment. Section 1 provides the background to the scorecard; section 2 discusses the sectors considered for scoring and the methodology; section 3 presents the main findings of the scorecard, with an analysis of the progress and achievements made by African countries in tackling gender inequality; and lastly section spells out some of the policy measures and actions needed to reverse inequality trends, and ways to accelerate greater change in the lives of African women and girls. [Downloads also available in French, Portuguese, Arabic]
Kenya in last-ditch efforts to woo its regional partners to sign EPA with EU (The East African)
Kenya, which stands to lose the most from a delayed EPA because it is ranked as a developing country – its partners are least developing countries – sees the meeting scheduled for Dar es Salaam from August 17 to 20 as an opportunity to lobby partners to join its corner. “Kenya has been talking to its neighbours to reach an agreement that will ensure that everybody gets on board and signs the agreement,” said Betty Maina, Kenya’s Principal Secretary for EAC Affairs. If the Council of Ministers reaches a consensus, an extra-ordinary heads of state meeting will be called to sign the EAC-EU EPA to give regional exports duty-free access to Europe.
The inherent dangers for the EAC signing the EAC-EU EPA (SEATINI-Uganda)
Kenya’s loss as a result of increase of tariffs on flowers will be real and immediate. However, this needs to be balanced with the long term losses the EPA will inflict on the region in terms of loss of revenue, negative impact on industrialisation and intra-regional trade, and on overall development. It should be recalled that right at the beginning of the negotiations, the EU had promised that as per the Lomé Acquis, no country will be worse off whether or not it signs an EPA. We therefore call upon:
Profiled trade-related commentaries: Moono Mupotola: 'The single African passport: a turning point for an integrated and prosperous Africa' (AfDB), Niti Bhan: 'Will cross border mobile money boost intra African trade and regional integration?', Lyal White and Liezl Rees: 'Fruitful businesses tap into continent at ground level' (Business Day)
On Brexit and African trade: commentaries by Daniel Knowles, Edward George, David Hannay
Making the most of ports in West Africa (World Bank)
This report is an assessment of private sector engagement (concessions) in the container terminal and ports market of West Africa, lessons from this experience and recommendations for the way forward. With the growth of port traffic and the upcoming renewal of existing concessions, it is critical to revisit now the concession process to better manage the next wave of concessions. Adequate resources need to be set aside to access the necessary expertise to supplement public capacity to negotiate concession agreements, to conduct transparent bidding processes which allow fair competition for the market and offer equal opportunities to new entrants, and to recalibrate the criteria for contract award towards economic impact as opposed to pure financial returns. In certain circumstances a negotiated process could be warranted notably when TOCs and shipping lines join forces to promote a transhipment terminal. [The analysts: Kavita Sethi, Olivier Hartmann, Antoine Coste, Gözde Isik]
Overview of trade and barriers to trade in West Africa: insights in political economy dynamics, with particular focus on agricultural and food trade (ECDPM)
This paper gives a general overview of trade figures and dynamics in the ECOWAS region with a focus on agricultural and food products. The study points to some of the overarching actors and factors that shape these regional trade flows at a broad level, in order to inform relevant stakeholders and guide more in-depth policy research. Key messages: [The analysts: Carmen Torres, Jeske van Seters]
Liberia: trade facilitation project launched (Daily Observer)
The EU funded project, which has a value of €2.1m, will continue until October 2018. The project will facilitate Liberia's international and regional trade, generate customs revenue and improve the accountability, transparency, effectiveness and efficiency of customs in Liberia. Capacity to tackle smuggling and fraud will be enhanced and the project will support Liberia's compliance with WTO obligations and the objectives of the EU's Economic Partnership Agreement with West Africa.
Sudan: Improving stakeholder engagement and establishing a trade facilitation roadmap (UNCTAD)
This will be the fourth event (14-18 August) organized within the framework of the UK-funded project to assist in the implementation of the WTO Trade Facilitation Agreement, in close cooperation with the WCO. The objectives: to strengthen engagement of stakeholder in trade facilitation reforms, draft a 3-5 year trade facilitation implementation roadmap with key performance indicators.
Sudan welcomes inclusion of Chinese and Indian currencies in COMESA Clearing House (COMESA)
The Governor of the Bank of Sudan, Mr Abdelrahman Abdelrahman has welcomed the decision of the Bureau of Central Bank Governors of COMESA Member States to include the Chinese Yuan and the Indian Rupee as part of the settlement currencies for the COMESA Clearing House. Mr Abdelrahman made the remarks when he held talks with the Secretary General of COMESA Mr Sindiso Ngwenya in his office in Khartoum, Thursday 11 August 2016. The discussions between the two focused on ways and means of strengthening the COMESA integration arrangement. The decision to include the Yuan and the Rupee was made during the meeting of the Governors of Central Banks of COMESA Member States that took place on 3rd August 2016 in Kinshasa, DR Congo. This means that the two currencies can be used to transact business on the Regional Payment and Settlement System.
Relief as Tanzania ports authority moves to open liaison office in Kigali (New Times)
Rwandan importers and exporters will no longer need to travel to Dar es Salaam port, Tanzania to clear their shipments, thanks to a move by the Tanzania Ports Authority to open a liaison office in Kigali in October. Deusdedit Kakoko, the TPA director general, said the move aims at bringing services near to the Rwandan business community, “which will help cut the cost of doing business, and reduce the hurdles within the logistics and supply chain”. Rwandan importers say the development is an important milestone that will help address some of the challenges they face while using the Central Corridor.
Workshop on local content in the African extractives sector: insights for new producing countries (AfDB)
When well managed, natural resources wealth, including extractives, can accelerate Africa’s economic transformation and create jobs and opportunity for present and future generations. The challenge is finding ways to capitalize on extractive industries projects. Local content policies potentially offer countries and communities an effective pathway. In order to generate debate for increasing positive outcomes from extractives through local content policy, the AfDB's African Natural Resources Centre, King Abdullah Petroleum Studies and Research Centre and OCP Policy Centre will co-host a workshop in Rabat on 5-6 September.
Malawi aligns its mining policy to the Africa Mining Vision (UNECA)
The Malawi Government, through Ministry of Natural Resources, Energy and Mining with the support of African Minerals Development Centre, hosted a three-day stakeholder consultative meeting to review its 1981 Mines and Minerals Act and to align its Mining Regulations and new Petroleum Policy to the Africa Mining Vision. The meeting kicked off on 10 August 2016 at the UN Conference Centre in Addis Ababa and brought together the government, civil society representatives, industry operators, and other private sector actors to discuss the mineral governance frameworks.
Zimbabwe: Draft mining bill says foreign firms must list locally (Reuters)
Zimbabwe will only issue mining rights to companies listed on the local stock exchange and will not allow the export of raw minerals without ministerial approval, according to a draft mining bill published on Friday. The bill, which has been in the works for more than a decade, will now be sent for debate in parliament. Anglo American Platinum, Impala Platinum and Aquarius Platinum are some of the foreign mining firms operating in Zimbabwe but they are not listed on the local stock exchange.
The commodity price downturn and trade: finding solutions for Africa (tralac)
When a commodity-exporting country’s terms of trade fall, this involves a loss of economic welfare and a worsening of development prospects, as the capital goods required to finance development become more costly to the commodity exporter. For this reason the phenomenon of deteriorating commodity prices is important for the commodity-focused exporters of Africa. This paper explores the nature of the problems around commodity prices, the specific issues faced by African countries and the specialist producer groups within Africa, and the potential policy responses by the commodity producing nations. [The analyst: John Stuart]
DRC: Ivanhoe says copper find may be Africa’s most notable (Bloomberg)
The find at Kakula, in the southern portion of Ivanhoe’s Kamoa project, is “enormous,” Ivanhoe Mines DRC Managing Director Louis Watum said at a conference in the capital, Kinshasa. Discussions are under way on how to adjust the development strategy to allocate sufficient funds to bring the new discovery into production as soon as possible, he said in an interview afterward. “Earlier discoveries already have established Kamoa as the world’s largest, undeveloped, high-grade copper discovery,” the company said in a separate statement. Kakula “could prove to be Africa’s most significant copper discovery,” it said.
South Africa: PIC pressures Anglo American to hive off South African arm (The Australian)
Tanzania: Govt earns Sh331m royalties from tanzanite auction (IPPMedia)
Mauritius, Korea sign tax information exchange agreement (GoM)
Finance Minister Pravind Jugnauth, pointed out that the signing of the TIEA will further cement trade and bilateral relations between the two countries in various spheres. He also reaffirmed the intention of Mauritius to initiate negotiations on a Double Taxation Avoidance Agreement with the Republic of Korea. Both Mauritius and Korea are looking into other possible avenues of cooperation so as to promote trade and investment and further develop economic cooperation between the two countries.
Botswana: SA retailers urged to support local SMEs (Mmegi)
The local chamber of commerce, Business Botswana (BB) has called on locally based South African retailers to support and empower local entrepreneurs especially the small and medium-sized enterprises. The call was made at a workshop held by BB and retailers from the neighbouring country operating in Botswana on trade regulatory issues affecting local entrepreneurs. BB chief executive officer, Racious Moatshe, said they decided to engage the South African Business Forum after it emerged through their consultations with local retailers that most of their South African counterparts do not empower local entrepreneurs.
Nigeria spends $4bn annually on textile importation (Today)
The director-general of the Nigerian Textile Manufacturers Association, Mr Hamma Kwajaffa, has said that Nigeria spends $4bn annually importing textiles and ready made clothing. “Despite government’s intention to revive the sector, the reality on ground continues to be worrisome. The prevailing unprecedented harsh environment has no doubt dealt a serious blow to the already fragile industry. Unless urgent steps are taken by the government to address key issues raised by the industry, the ray of hope that had arisen from the recent government initiatives may get extinguished.”
Australia–China Joint Economic Report 2016 (EABER)
The Australia–China Joint Economic Report is the first major independent joint study of the bilateral relationship and has the blessing of both national governments. The Report is an academic policy study by leading researchers in both Australia and China. It draws policy conclusions to guide the development of bilateral economic relations that include an Australia–China Comprehensive Strategic Partnership for Change, an Australia–China Commission, and an Australia–China Basic Treaty of Cooperation. [Rebalancing in China: analytics and prospects (pdf, IMF)]
Mozambique: Nampula province triples exports (Club of Mozambique)
Botswana to have an energy regulator (Botswana Guardian)
Egypt: 50% decrease in tourists in first half of 2016 (Ahram)
South Arica: Trade conditions take a turn for the worse (Business Day)
Steel protectionism goes global (Bloomberg)
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Kenya in last-ditch efforts to woo its regional partners to sign EPA with EU
Ministers responsible for regional integration will hold talks this week in a last-ditch effort to get the East Africa Community to continue negotiating for an international treaty with the European Union.
Exports to the EU will from October 1 be subject to duty unless the five member states agree on the Economic Partnership Agreement, which Tanzania and Uganda have refused to sign in its current form.
Rwanda and Kenya are keen to sign the agreement, while Burundi has had reservations ever since the European Union imposed sanctions on it in the wake of President Pierre Nkurunziza’s controversial re-election for a third term last year.
The EU accounts for 31 per cent of Kenya’s export market, especially for cut flowers, tea, vegetables and coffee. Kenya’s total annual exports to the EU amount to about $1.2 billion.
Kenya, which stands to lose the most from a delayed EPA because it is ranked as a developing country – its partners are least developing countries – sees the meeting scheduled for Dar es Salaam from August 17 to 20 as an opportunity to lobby partners to join its corner.
“Kenya has been talking to its neighbours to reach an agreement that will ensure that everybody gets on board and signs the agreement,” said Betty Maina, Kenya’s Principal Secretary for EAC Affairs.
If the Council of Ministers reaches a consensus, an extra-ordinary heads of state meeting will be called to sign the EAC-EU EPA to give regional exports duty-free access to Europe.
Brexit
Ms Maina said that signing the agreement as a region would remove the administrative obstacles the traders face in manoeuvring various trade regimes.
The EU has kept its position on the matter closely guarded, only saying that it will abide by the decision of the EAC member states.
“We are working very closely with all EAC member states to address in the best possible way the outcome of their decisions. But their deliberations are not yet complete. We need first to let them reach their decision in order to respond to it for the mutual benefit of all, especially the millions of producers and exporters in the region,” said Stefano Dejak, the EU ambassador to Kenya.
Although the EPA was initialled in 2014 after nine years of talks, the exit of Britain from the European Union threw a spanner in the works, with Tanzania saying it did not see value in an agreement that excluded its major trading partner in Europe. Tanzania also had issues with the impact of the agreement on its industrialisation, especially with regard to the export of sensitive raw materials.
Uganda adopted a similar position, with President Yoweri Museveni saying that the heads of state had not been fully briefed on the agreement.
Even if a revised EPA is agreed upon at the meeting, it is unlikely to forestall exports from East Africa attracting duty of between 8.5 and 14.5 per cent in seven weeks’ time. A revised agreement would have to be initialled afresh and taken to the European Parliament for ratification before signing. An expedited process would take about four months.
“Kenyan exports to the EU market will start attracting duty unless the EU grants a tax waiver, which is unlikely, given our previous experience,” a government official who did not want to be quoted said.
GSP tariffs
Article 139 of the EPA Treaty provides for provisional application of the agreements based on the resolutions by the Council of Ministers pending ratification by member states’ parliaments.
The Kenya Flower Council estimates that the price of Kenya’s flower exports to the EU could rise by between five and eight per cent when exports are placed under the Generalised System of Preference (GSP) tariffs. This would cost the industry $13 million per month.
The duty would depend on the product, with roses and cut flowers attracting import duty of between five and 8.5 per cent, and roasted coffee 2.6 per cent. GSP, the fallback regime if the EPA is not concluded, is a preferential market access scheme for developing countries that the EU grants unilaterally.
Mr Dejak declined to comment on whether the EU would grant temporary duty waivers to imports from the EAC come October 1.
“After nine long years of very detailed negotiations by each of the five member states of the East African Community on every aspect of the Economic Partnership Agreement as well as the initialling by all EAC members of the text in 2014, the European Union will respect the decision that the EAC reaches,” he said.
Failure to conclude EPA negotiations would see EAC partner states operating under different trading regimes, undermining regional integration efforts.
The Council of Ministers meets twice a year, and its directives and decisions are binding on the partner states and all other organs and institutions of the EAC. The Dar es Salaam meeting is the second this year.
Failure to agree on the EPAs would see Kenya’s exports to the EU start attracting duty under the GSP granted to developing countries. Uganda, Tanzania Rwanda and Burundi will however continue enjoying duty-free and quota-free access to the EU market under the “Everything but Arms” arrangement for least developed countries.
Hardline positions
With less than two months to the deadline set by the EU Secretariat, Uganda and Tanzania are yet to soften their hardline positions. Last month, Tanzania said it would not sign a trade agreement with the EU, arguing that, in its current form, the EPA would not benefit local industries but would instead lead to their destruction, with developed countries controlling the market.
Uganda said it was not going to sign the agreement until the bloc had reached a common position on all issues.
Stakeholders in Kenya’s horticulture sector are concerned about the economic impact of not signing the trade agreement.
“Unfortunately, it is very difficult to predict what will happen in this meeting. We just want to tame our expectations,” said Jane Ngige, chief executive of Kenya Flower Council. The EU is the main export market for Kenya’s cut flowers
According to Ms Ngige, the floriculture sub-sector has experienced a steady growth in volume and value of cut flowers exported, with Kenya attaining lead supplier status to the EU.
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Overview of trade and barriers to trade in West Africa: Insights in political economy dynamics, with particular focus on agricultural and food trade
This paper gives a general overview of trade figures and dynamics in the ECOWAS region with a focus on agricultural and food products. The study points to some of the overarching actors and factors that shape these regional trade flows at a broad level, in order to inform relevant stakeholders and guide more in-depth policy research.
ECOWAS exports show little product diversity, with a heavy reliance on extractive products (e.g. petroleum, natural gas) and a few agricultural commodities (e.g. cocoa, rubber, cotton). Official ECOWAS food exports represent only 10% of total exports, and almost 60% of this 10% is represented by cocoa. ECOWAS imports are more diversified, with a high share of industrialised products (e.g. refined petroleum, vehicles, ships, telecommunications equipment) and food products (e.g. rice, wheat). Hence, ECOWAS main trading partners are highly industrialised countries such as China, India, USA, EU countries and Brazil, which mainly buy raw materials and sell industrialised products from/to the region.
Trade figures differ considerably between West African countries. Nigeria accounts for 73,5% of total registered ECOWAS exports, primarily as a result of its petroleum exports but also due to its larger economy. The country also dominates total ECOWAS imports (52%) as well as food imports specifically (51%). The second and third economy of the region, i.e. Ghana and Côte d’Ivoire, are the main ECOWAS food exporters, largely due to cocoa, followed by Nigeria.
West Africa has a positive (overall and agricultural) trade balance, but it faces a negative food trade balance, which has been deteriorating rapidly over the last decade. Export earnings have given the region the resources to finance a growing share of imported food products (in order of importance, according to official UNCTAD statistics: rice, wheat, processed food, fish, sugar, milk products, vegetable fats and oils, tobacco, meat and vegetables). This has created a paradoxical situation where a region with an exceptional potential for food production is importing more and more food items. This trend can be mainly explained by the increasing purchasing power of several countries in the region as a result of commodity booms, a fast growing population that needs to be fed and changing consumption patterns following a strong urbanization movement and growing middle class. This increased and changing food demand is not met by sufficient and adequate local food supply. Even if production of main food staples has increased, it hasn’t matched the faster growth in demand. This increasing food import dependency is one of the major concerns of regional and national policymakers in ECOWAS.
Food production remains constrained by issues such as poor access to key inputs, lack of secure land rights, water access limitations under erratic weather and poor development of irrigation, weak production technologies, fragmentation of smallholder producers, limited credit, and technical constraints in processing. Market access obstacles faced by West African producers and processors further hampers their competitiveness, while some imported food may flow more easily through corridors to reach main West African markets, moved by powerful importers/trading corporations. Indeed, these issues face complex challenges that relate to finance and capacity, but also political interests and incentives of the actors involved, particularly those with economic or political power.
Intra-regional trade in ECOWAS represents 8 to 13% of total ECOWAS trade according to official data, but it is estimated that approximately 75% of intra-regional trade is not accounted for in official statistics, as it takes place on an informal basis. Evidence further suggests that intra-regional trade has considerable room to grow further. This fits the ambitions of the region to step up intra-regional trade and value chain development (through increased production and value addition), with particular emphasis on agricultural and food products, for poverty reduction and food security.
Nevertheless, the quality of trade data poses serious challenges for designing and implementing effective policies. Due to the informality of trade, official statistics hide many important features of the real trade patterns and dynamics in the region, which deserve to be taken into account. Official data not only give a distorted picture on the size of intra-regional trade, but also on its composition. Informal intraregional trade is dominated by staple foods, in particular livestock, maize, millet and sorghum, while official intra-regional trade statistics feature crude and refined petroleum, as well as cement and other construction materials in the top-three of intra-regionally traded goods. Furthermore, women are over-represented in informal trade, compared to formal trade. While ad-hoc surveys and case studies covering informal trade provide useful insights, comparison and compilation of their results is complicated by the fact that different studies try to assess the magnitude and nature of undocumented intra-regional trade in the region, for different groups of countries and commodities. More comprehensive information on informal trade, and its drivers, is required for effective policy-making.
It is impossible to get a comprehensive overview of spatial dimensions of intra-regional trade from existing statistics and literature, not least because of its informality, but a limited set of studies indicate that part of intra-regional trade flows through main regional corridors. This main West African transport network (i.e. the West-East Trans-Sahelian Highway between Dakar and Ndjamena and the Trans-Coastal highway between Dakar and Lagos, and the interconnecting North-South corridors) serves extra-regional, intraregional and national trade. The good functioning of these corridors is therefore of great importance.
However, studies also indicate that considerable intra-regional trade flows outside these main regional corridors. This applies to trade that occurs around border areas, where national borders separate producers and the nearby markets they serve. Furthermore, production basins of intra-regionally traded goods are not always in the direct vicinity of a corridor, as these were conceived to connect port cities with the hinterland (and not production basins with cities/markets). Therefore, policies and programmes seeking to support intra-regional trade and food value chain development will need to take that broader perspective into account, in order to achieve objectives related to poverty reduction, food security and inclusive development. This implies improvement of strategic secondary roads and market infrastructure in rural areas.
To explain the above dynamics of intra-regional trade in West Africa, particularly for agricultural and food products, this paper provided insights into actors and factors that drive these dynamics. Such political economy factors will need to be taken into account when designing and implementing policies to effectively promote intra-regional trade and value chain development. Trade differs considerably depending on the value chain concerned, with regard to the patterns and size of flows, the actors involved and their incentives, the potential impact of policy change and/or formalization of the value chain for different value chain actors, among other factors. Therefore, deeper understanding of strategic/relevant value chain dynamics would be important to further inform policy dialogues and guide effective interventions.
To contribute to this, ECDPM, together with its partners, will conduct further value-chain specific analytical work and facilitate multi-stakeholder policy dialogue, with due attention for political economy factors and particular focus on rice, livestock and horticulture. Amongst other things, this will be key to understand the key actors and factors and their potential role in driving or undermining regional efforts to turn ‘transit corridors’ into ‘transformation and development corridors’. Given that this study has pointed out that regional infrastructure corridors currently only connect ports with the hinterland, mostly serving imports into West African (and exports of few agricultural commodities), how can connections with the food production basins be improved to strengthen intra-regional food trade? Given the need and ambition in the region to enhance processing, how can this be promoted through corridors? Given the importance of informal trade, how can corridor initiatives promote gradual formalisation, to the benefit of vulnerable value chain actors, in particular those operating currently in the informal sector?
Political economy analysis and facilitation of frank policy dialogue are needed to answer these questions and move forward these important debates. ECDPM is keen to continue working with West African and international partners, to provide further insights and contribute to coherence and coordination across trade, agriculture, infrastructure and value-chain initiatives to promote sustainable and inclusive development.
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The inherent dangers for the EAC signing the EAC-EU EPA
Statement prepared by SEATINI-Uganda for the extra-ordinary meeting of EAC partner states to take a decision on the EPA, to be held on 18 August 2016
Introduction
There are numerous efforts in all African countries including the EAC to structurally transform their economies in order to promote industrialization, facilitate backward and forward linkages, create employment and subsequently reduce poverty. At national level, Uganda’s vision of achieving middle income status by 2021 is anchored through such aspirations while at the EAC level, there have been efforts to promote structural transformation through several policies and frameworks like the EAC Treaty and EAC Vision 2050. Furthermore there have been moves to deepen integration at sub-regional and continental level through the SADC-COMESA-EAC Tripartite Free Trade Area and the Continental Free Trade Area (CFTA). However, the EPA text being presented for signing will compromise these efforts, despite the fact that the ostensible reasons for negotiating the EPAs was to promote regional integration and sustainable development.
Since the launch of the EPA negotiations in 2002, the Ministry of Trade, Industry and Cooperatives, and Ministry of EAC Affairs have done their best endeavor to secure the regions’ interests, consulted stakeholders, and taken on board some of their concerns. However, it is our considered view that a careful reading of the agreement arrived at and which we are being pressed to sign and ratify falls far short of securing the regions’ overall development interests and maybe inimical to achieving our aspirations for structural transformation. It is critical to appreciate that the EPA is essentially a Free Trade Agreement. What is more revolutionary is that for the first time, the EAC, a relatively poor region, is being required, albeit in a phased manner, to enter into a full reciprocal Free Trade Agreement with a much more developed partner with its attendant negative consequences.
As SEATINI and as part of the wider civil society fraternity, we have consistently highlighted the negative implications of the proposed text. We wish to reiterate hereunder some of our concerns.
The extensive liberalization
According to the agreement, the EAC has offered to liberalize 82.6% of her imports from the EU over a 25 year transition period by initially liberalizing 65.4% on entry into force of the agreement. The rationale is that some of these products are currently zero rated because they are either industrial inputs or capital goods i.e machinery and pharmaceuticals. The EAC has also agreed to liberalize 14.6% in the 7th–15th and 2.6% in the 13th–25th year of entry into force of the agreement. This sums up to a total of 4006 tariff lines to be liberalized under the agreement. Only 17.4% (1432 tariff lines) have been excluded from liberalization to presumably cater for the protection of the sensitive products and infant industries.
This liberalisation seems to be taking a static approach to development which does not envisage Uganda and the East African region graduating to producing either industrial inputs or the capital goods. While we may need to zero rate pharmaceuticals at this stage because we need cheap and affordable medicines, we should be looking forward to producing these pharmaceuticals in future. The zero rating and the Standstill clause (Article 12) effectively constrains the policy space for the region to achieve this aspiration. It should also be noted that the 25 years provided for the completion of liberalisation process may appear long in the life of an individual but it is actually a short period in the life of a nation.
In addition, the liberalization schedule, on the face of it, caters for the protection of infant industries and sensitive products. However, a careful examination of the schedules brings out clear contradictions. For example, on one hand, the EAC has protected maize (corn) flour (HS Code, 6 digits 110220) at a duty rate of 50% yet on the other hand, maize (corn) starch (HS Code, 6 digits 110812), which is a bi-product of maize flour has been liberalized. These contradictions equally apply to other products like cassava (manioc) and potatoes. With such a liberalization schedule, promoting value addition through agro-processing will be very much constrained and will also compromise food security given the supportive linkages between agriculture and manufacturing.
The combination of the extensive liberalisation, the contradictions within the schedules, the weak multilateral and bilateral safeguards on the one hand; and the subsidies in the EU on the other, will further negatively impact on industrialisation and food security in the EAC region. Notwithstanding Article 68(2) whereby the EU undertakes not to grant export subsidies to all agricultural exports to EAC Partner States, the real challenge to the EAC’s agricultural production and industrialisation is the ever increasing domestic subsidies in the EU. It is worth recalling that the EU has refused both in the EPA and in the WTO to reduce domestic subsidies, and has continued to engage in shifting their prohibited (red) subsidies into allowable (green) subsidies. Therefore, what is offered in Article 68 (2) as a significant concession is actually miniscule. In any case the EU has already committed to eliminate export subsidies in the WTO.
The agreement provides for multilateral safeguards (Article 49) and bilateral safeguards (Article 50). But, they are very cumbersome to invoke as a party has to prove import surges and injury, and establish a causal relationship between the surges and injury to the whole industry. The country must also have in place an investigative mechanism which is difficult to establish. This is why developing countries have not invoked these remedies in the WTO and are also demanding for a special safeguard mechanism for agriculture which is user friendly.
Regional Integration
The extensive liberalization with the EU will adversely impact on the efforts by the EAC region to enter into other regional agreements. As most of the tariffs are zero rated, they will hardly leave any room for offering better margins to our partners in the African region. Regional integration will be further compromised by the pursuing of open regionalism which entails deeper liberalisation with third parties.
Export taxes, Rendez-vous clause and MFN
There are other critical Articles which will have far reaching consequences on regional integration and industrialisation in the region. These include inter alia; Export duties and Taxes (Article 14), the Rendez-vous Clause (Article 3), the More Favourable Treatment (MFN) resulting from a free trade agreement (Article 15).
For example, Article 14 constrains the usage of export taxes by imposing stringent conditionalities i.e. notification to the EU, limited product coverage, limited period of time, and subject to review by the EPA council. As is well known, export taxes are very critical for industrialisation. The logic of export taxes is to encourage producers to enter into value-added processing, hence encouraging diversification and the upgrading of production capacities. Export taxes are permissible under the WTO. Unfortunately, the EU under their global strategy (the raw materials initiative) has consistently insisted on including in their negotiations a clause that prohibits the use of export taxes. Article 14 is framed as if it is a concession by the EU in the agreement. In actual fact, it is the EAC which is conceding and giving up their right to use this very critical tool by making its use subject to the EU’s permission.
Under the rendez-vous (Article 3) the parties undertake to conclude within five years upon entry into force of the agreement, negotiations in areas of services, investment, government procurement, trade and sustainable development, intellectual property rights and competition policy. This is unfortunate!
According to the EU’s global strategy, EU’s consistent position is to negotiate bilateral and multilateral binding rules in these areas. It should be noted that these are the very areas which contain instruments that governments often use to direct development, promote local industries and nurture the private sector. Binding rules in these areas will constrain the policy space for governments to promote industrialisation and sustainable development. It should be noted that investment agreements contain very onerous clauses which make it difficult for governments to successfully regulate investments with a view of promoting sustainable development. Government procurement can be used by governments to nurture local industries and strengthen the local private sector through initiatives like Buy Uganda Build Uganda (BUBU). However, a binding government procurement agreement will make it difficult, if not impossible for governments to carry out such measures.
It is important to appreciate the fact that while the EU market is important, the EAC market is of paramount importance for all partner states as it constitutes the largest market for the EAC Partner States and also offers better prospects for industrialisation and development of regional value chains. While the exports originating from the region to the EU are mostly primary products, those traded within the region include value added products. In 2015, Uganda’s exports to other EAC partner States totaled to $771.6 million[1] compared to exports valued at $443 million to the EU[2]. It should be noted that the EU exports both industrial and value added agricultural products to the EAC. It is also a fact that the preferences and the market that the EU is offering to the EAC are illusive as they are constantly being eroded by the Free Trade Agreements that the EU is entering into with all other regions in the world and also by the proposed tariff reductions in the ongoing negotiations under the WTO Doha Round. Therefore, preserving and consolidating the EAC market should be of priority to all the EAC Partner States. Moreover, the promotion of regional integration was one of the major original objectives of the EPA as articulated in the Cotonou Agreement and reemphasized in the EU-EAC EPA text Article 2 (b).
The Case of Kenya
Kenya’s loss as a result of increase of tariffs on flowers will be real and immediate. However, this needs to be balanced with the long term losses the EPA will inflict on the region in terms of loss of revenue, negative impact on industrialisation and intra-regional trade, and on overall development. It should be recalled that right at the beginning of the negotiations, the EU had promised that as per the Lomé Acquis, no country will be worse off whether or not it signs an EPA. The Cotonou Agreement 2000 Article 37(6) provided that “In 2004, the community will assess the situation of the non LDC which, after consultations with the community decide that they are not in a position to enter into EPAs and will examine alternative possibilities, in order to provide these countries with a new framework for trade which is equivalent to their existing situation and in conformity with WTO rules”.
We therefore call upon:
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The EAC governments, before deciding to sign, to do a deeper analysis of the EPA text, the liberalisation schedules, and assess its impact on the EAC’s development objectives.
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The EU not to pressure the EAC Partner States into prematurely signing the agreement before the above analysis.
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The EU to live up to their promise of ensuring that the EPA will help EAC eradicate poverty and promote regional integration.
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Kenya should explore the alternative options available, i.e. the Generalized System of Preferences plus (GSP+) where her top 27 exports to the EU including the much cited flower and horticulture exports will access the EU market duty free and quota free.
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The EU should consider the African Union proposal that EAC region should be treated as an LDC region given that 4 out of 5 partner States in the EAC Customs Union are LDCs.
[1] EAC facts and figures 2015
[2] Statistics extracted from an article by Uganda’s Minister of Trade, Industry and Cooperatives, Published in the New Vision of 10th June 2016.
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2015 African Gender Scorecard
Africa has made remarkable progress in implementing global and regional gender equality and women’s empowerment commitments.
Gender equality and women’s empowerment have been defined as priority goals in the new discourse and narrative for Africa’s structural transformation and sustainable development. Investing in these goals is also recognized as a cost-effective pathway to achieving inclusive and broad-based growth, as well as sustainable development of the continent. Moreover, African Heads of State and Government recently declared 2015 as the Year of Women’s Empowerment and Development towards Africa’s Agenda 2063. Concomitantly, they adopted Agenda 2063, a development framework that aims to achieve a continent “that is integrated, peaceful, prosperous, people-centred and representing a dynamic force in the global arena”.
Such high-level regional development frameworks present greater opportunities for accelerating progress in the implementation of gender equality commitments. In the global context, two main conducive policy processes have occurred, namely the 20-year review of the implementation of the Beijing Declaration and Platform for Action, more commonly referred to as the Beijing+20 review, which was undertaken in 2014, and the drafting of the post-2015 development agenda. It is noteworthy that both document calls for greater action towards a transformational change in the lives of women and girls.
On the whole, Africa’s economic outlook is promising. The continent’s economic performance has been strong over the past decade, with average growth rates of 5 to 7 per cent. Moreover, 6 of the 10 fastest growing economies in the world are in Africa (Economic Commission for Africa, 2015). While growth on the supply-side has been buoyed by agriculture, extractive industries, construction and services, the demand-side has been bolstered by private consumption and capital-intensive infrastructure investments. This favourable outlook is expected to continue into 2016, with Africa’s overall gross domestic product growth set to rise from 3.9 per cent in 2014 to 4.5 per cent by the end of 2015. Despite such progress, however, the continent continues to show significant inequality in income and wealth distribution, with a Gini coefficient estimated at 43.9.
Women and young people, in particular, have borne the brunt of gender inequality and marginalization on the continent. It is important to note that the other six Aspirations of Agenda 2063 cannot be realized unless the empowerment of women and the youth under Aspiration 6 is achieved; by instituting gender-responsive and accountability mechanisms and indicators to enable the delivery of the promises made by African leaders.
The present report provides an analytical snapshot of the results of selected indicators to measure progress between women and men, to create a scorecard for African countries. It also discusses critical policy issues and outlines some policy recommendations to support member States in their efforts to achieve gender equality and women’s empowerment.
Introduction
In view of rising gender inequality in certain development sectors in Africa, a Gender Scorecard has been designed. The scorecard is intended to be a simple, quick and user-friendly tool that member States can use to measure their performance against key ratified equality gender commitments.
Objectives of the scorecard
By developing the scorecard, the African Union Commission aims to achieve the following objectives:
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Support member States to accelerate the implementation of their commitments in Africa as spelled out in Agenda 2063 and other commitments;
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Provide member States with an easy and quick instrument to assess their progress in achieving equitable growth and transformative development;
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Take comprehensive steps and actions towards a transformational change in the lives of women and girls.
The scorecard is informed by the Economic Commission for Africa’s pioneering index, the African Gender and Development Index, which is an in-depth measure of the gaps in the status of women and men in Africa, and assesses progress made by Governments in implementing gender policies (Economic Commission for Africa, 2011). The scorecard seeks to complement the index as a simpler and quicker assessment tool informed by Agenda 2063 and other regional frameworks such as the Solemn Declaration on Gender Equality in Africa, the Constitutive Act of the African Union and the Protocol to the African Charter on Human and Peoples’ Rights on the Rights of Women in Africa.
Selected sectors
The scorecard focuses on key sectors that have positive multiple and intergenerational effects on the lives of women and girls. These are: health; education; politics and decision-making; access to and ownership of land; access to credit (financial resources and services); business; and employment. Not only do these sectors reinforce each other in terms of achieving full and sustainable development for Africa, but also gender equality in these sectors produces positive externalities, which reverberate throughout the whole African economy.
These key sectors are further clustered under three overarching themes of development: economic empowerment (employment, business, access to land and access to credit); social empowerment (education and health); and political empowerment (women in parliament and in ministerial positions). The clusters are interlinked, such that progress in one is often closely associated with progress in another.
Methodology
The African Gender Scorecard is made up of 7 sectors with an average of 3 sub-dimensions per sector and a total of 23 indicators. Data from international sources have been used to ensure relevance and comparability across countries. For each indicator, the latest available data for each country have been used. Consequently, the year of data for each indicator may vary from country to country. A few exceptions to this rule are indicated in the detailed description of all the indicators. A complete list of indicators with sources and definitions, as well as ranges of years of data used for each indicator, is provided in annex 1.
Achieving equitable transformative development: Where does Africa stand?
Transformative development is a process of empowerment and self-reliance, which suggests that development cannot be transformative or sustainable unless it is equitable, and indeed there are many studies and plenty of evidence to support such positive linkages in Africa. The findings of the scorecard are evidence of the important progress made by African countries over the past few decades in some of the sectors. However, there are variations between countries because of the different developmental stages attained by countries. Additionally, the pace and path of progress are not sufficient to fast-track the move towards gender equality, as suggested by the figures in this section.
Key results on the economic empowerment cluster
The economic empowerment cluster comprises four sectors – employment, business, access to land, and access to credit – all of which are critically important for women to have an equitable share in Africa’s remarkable economic growth. Despite the strong economic performance registered by Africa over the past decade, the economic status of most women has not changed drastically. In fact, women are yet to benefit fully from Africa’s economic growth. Structural barriers impede the participation of women in economic activities with sub-optimal returns, such as the industrial sectors (i.e. extractive industries at the artisanal and small-scale levels) and agri-business. Although women are key actors in African economies, they remain overrepresented in the informal sector, which is characterized by low wages and difficult working conditions.
Business sector
In the business sector, women’s participation has been captured using two indicators: women and men in senior-level positions in firms and the percentage of firms with female participation in ownership. No country has yet achieved gender equality in senior-level positions. In fact, most countries are far from achieving gender parity, with only 4 countries out of the 37 for which data are available nearing the middle parity of 5 (Benin, Liberia, Madagascar and Namibia). The picture looks more positive for the second indicator (percentage of firms with female participation in ownership). The results for this indicator reveal a median score of 4, with 16 countries above the middle parity of 5, out of which 7 countries (Angola, Botswana, the Central African Republic, Côte d’Ivoire, Liberia, Mali and Zimbabwe) with a score of more than 10, which means that more than 50 per cent of firms have women among the owners (the definition of “firm” here also includes informal firms).
Of the 37 countries for which data are available, enabling the calculation of an overall score for the business sector, 4 countries (Benin, the Central African Republic, Madagascar and Kenya) have above-average scores of 6, 4 others have scores of 7, while two – Liberia and Mali – are leading with scores of 8, suggesting that they are close to parity. However, the majority of African countries are still far from parity, which calls for urgent action to achieve women’s economic empowerment in this sector. Indeed, promoting women’s equal participation in the upper echelons of management is key to influencing positive change. It could also result in handsome economic and business returns for firms in Africa: studies suggest that companies perform best when women are strongly represented at senior levels.
Access to credit
To measure parity between women and men’s access to credit, the study used two indicators – having an account at a financial institution and borrowing from a financial institution. Overall Africa has made some progress with regard to women’s access to credit, with a significant number of women borrowing from a financial institution. However, progress is slow, as only 8 out of the 43 countries for which data were available demonstrated equal access for women and men or easier access for women to credit facilities.
In a number of African countries, an increased proportion of women have an overall access to credit. The Central African Republic has surpassed parity, while Ghana and South Africa have achieved perfect parity. A further 10 countries (Botswana, Burundi, Ethiopia, Gabon, Kenya, Madagascar, Mauritius, Namibia, Swaziland and Zambia) are close to parity with a score of 9. Nevertheless, these figures should not conceal the challenge facing women in their access to substantial financial instruments and loans essential to grow businesses and improve livelihoods. There is a tendency in formal financial institutions to provide marginal or lower forms of credit instruments to women in comparison to men.
Key policy messages
The rising growth trends on the continent indicate that “Africa is rising” and this new momentum can be turned into opportunities for empowering women and girls, if greater actions are taken to shorten the long journey towards transformative change.
African countries have made important strides towards achieving gender equality but the pace and path of progress should be accelerated in order to achieve lasting change in women’s and girls’ lives.
The commitment to structural transformation made by African Heads of State and Government opens up a window of opportunity for better gender-responsive policies and programmes, especially in non-traditional sectors such as mining and agribusiness.
Progress has been more significant in the social development (both health and education) and political empowerment clusters than in the economic cluster.
One pervasive policy challenge in addressing gender issues is the lack of accurate data. Many countries are still failing to invest in the institutionalization of the collection, analysis and use of genderresponsive statistics to inform policymaking and programming.
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Single African Passport: A turning point for an integrated and prosperous Africa
To all those who are convinced that regional integration requires strong political will and committed leadership, African Heads of State showed just that when they were presented with a single African passport at the 27th African Union Summit in Kigali, Rwanda. The proposal to implement a single passport for Africa and ensure free movement of people is part of the African Union’s 2063 Agenda.
While skeptics may continue to doubt, the African Development Bank shall remain focused on delivering on our plan to transform Africa and work towards building a continent with seamless borders. We have reasons to be optimistic with the strong signal sent by Heads of State in Kigali.
Indeed, we are optimistic because, even if we are still at the very early stages of a complex process, holding a single African passport will mean that our leaders’ aspirations to see their citizens travel throughout the continent without being confronted by the usual administrative constraints are attainable.
Meeting these aspirations is critical if we want to achieve our vision for an integrated economic space where opportunities are shared among the people of Africa. Labour mobility is highly beneficial, and can help fill Africa’s labour needs in the education, health and industrial sectors. Rwanda has seen a 22% increase in African tourism and business travellers since 2013 when it allowed Africans to obtain visas on arrival. The East African region has made great progress in overcoming the challenges associated with free movement of labour by encouraging mutual recognition of professional and academic qualifications, starting with engineers, architects, and accountants.
The African Development Bank’s Human Capital Strategy indicates that Africa needs about four million more teachers and one to two million more health workers. These shortages can partly be addressed by improving workers’ mobility and opening borders to allow health personnel, including nurses, midwives and biomedical engineers to practice elsewhere on the continent.
The education sector can also profit from a borderless continent. In July 2013, the AfDB announced the creation of a US $154.2-million Pan African University of science, innovation and technology within the next five years. This initiative, coupled with a number of inter-university associations such as the francophone Conseil Africain et Malgache pour l’Enseignement Superieur (CAMES); Inter-University Council of East Africa (IUCEA); Southern African Regional Universities Association (SARUA); and inter-university cooperation under the Arab Maghreb Union (AMU), should be strengthened and encouraged to facilitate cross-border inter-university mobility for students and lecturers. Ultimately, this should also address the technical skills deficit that is prevalent on the continent.
Just recently, on July 14, 2016, the Bank’s Board approved an Industrialisation Strategy, whose key objective is to encourage development of regional value chains and high value-added activities and products for Africa’s commodities and exports. The diamond industry is an example, as the Southern African Development Region (SADC) produces an estimated 60% of the world’s rough gem diamond. But to date, of the estimated 800,000 jobs in the cutting and polishing industry worldwide, only 8,000 are in the SADC region, representing less than 1% of the global workforce. This indeed is a lost opportunity for the 200 million youths in Africa, comprising over 20 percent of the continent’s population, and who make up about 60 percent of total unemployment in Africa. The question we should ask ourselves is what skills, labour policies and training facilities are needed at regional level to enable SADC to bring the estimated 800,000 diamond cutters jobs back to the region?
The efforts that the AfDB has made on the infrastructure front are commendable, with US $3.4 billion having been approved for Multinational Operations in 2015 alone. While we all agree and understand that regional economic integration goes beyond building “hard” infrastructure, it is also fundamental that we work on the “software” which includes easing the movement of skills to make our continent a destination of choice for investors.
The Bank is supporting a number of key initiatives that seek to harmonise regulations and policies with a view to facilitating labour mobility, an important enabler for regional integration and economic development on the continent. One such initiative is the drafting of a new migration policy for the Economic Community of West African States (ECOWAS), which is expected to enhance talent mobility in the region.
In view of all of these, I am hopeful that together, united in our diversity, we Africans can paint a picture of what we desire for ourselves and for future generations. The single African passport is yet another milestone, and we should not shy away from a little celebration. As Nelson Mandela once said, “Remember to celebrate milestones as you prepare for the road ahead.”
Moono Mupotola is the Director of the NEPAD, Regional Integration and Trade Department at the African Development Bank.
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Zimbabwe’s draft mining bill says foreign firms must list locally
Zimbabwe will only issue mining rights to companies listed on the local stock exchange and will not allow the export of raw minerals without ministerial approval, according to a draft mining bill published on Friday.
The bill, which has been in the works for more than a decade, will now be sent for debate in parliament.
Anglo American Platinum, Impala Platinum and Aquarius Platinum are some of the foreign mining firms operating in Zimbabwe but they are not listed on the local stock exchange.
“No mining right or title shall be granted or issued to a public company unless the majority of its shares are listed on a securities exchange in Zimbabwe,” the Mines and Minerals Amendment Bill said.
Under the proposed law, holders of mining rights would also be required to use banks registered in Zimbabwe as the government seeks to have greater oversight on finances generated in the mining sector.
The government would no longer allow the export of raw minerals unless with written approval of the mines minister, the draft law said.
Minerals like gold and silver would only be exported in refined form as Zimbabwe seeks to get more local involvement and jobs from the mining sector.
Zimbabwe introduced a platinum export tax in January last year but suspended it seven months later after mining companies, including Amplats, Implats and Aquarius, agreed to support local metal processing.
The draft bill also said platinum metals, iron ore, chrome and coking coal would be among 19 commodities designated as “strategic minerals” considered important for the economic, social and industrial future of the country.
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Making the most of ports in West Africa
The West African port landscape has evolved rapidly since the turn of the century despite a slow start in adjusting to the requirements of modern liner shipping and containerized trade.
Ports have always played an essential role in this highly trade-dependent region and have long suffered decrepit infrastructure and poor management. While there are still wide disparities in terms of throughput volumes and capacity, traffic has been growing rapidly in most countries over the last decade. Overall, total throughput in West Africa has grown from around 105 million tons in 2006 to 165 million tons in 2012. Likewise, containerized traffic remains comparatively limited in West Africa but has grown faster than in any other region in the world over the last five years. The combined throughput of container terminals in the region reached almost 5 million twenty-foot equivalent units (TEUs) in 2013, twice as much as a decade ago, and is expected to keep growing fairly rapidly.
Throughput at West African ports comprises containerized trade generated by coastal and landlocked countries, plus the additional port movements created by transshipment at regional hub(s). Trade-related demand is forecast based on the historical elasticity of container trade with respect to GDP in the region and projections for GDP growth, with assumptions on the allocation of coastal and landlocked countries to various maritime ports (domestic ports handling domestic traffic for coastal countries, and for landlocked countries, allocation is based on current corridor efficiency). Transshipment is more difficult to predict, as it ultimately depends on the global strategies of the shipping lines and the organization of their liner networks, i.e. whether they rely on a transshipment hub outside of the region (e.g. Algeciras/Tangier Med/Valencia in the Mediterranean for the north option, or the South African ports for the southern option) or decide in favor of a West Africa hub.
The spread of container terminal concessions over the last decade has arguably been the most transformative change for West African ports. By the early 2000s, ports had become obstacles to the integration of trade in their respective countries with degraded infrastructure, inadequate facilities and equipment, inefficient operations and prohibitive tariffs. Despite comparatively low traffic, most ports were reaching saturation and shipping lines were levying congestion surcharges. Given the absence of sufficient public resources to invest in container terminal upgrades and improve productivity, concessions to specialized Terminal Operating Companies (TOCs) were seen as “silver bullets” to modernize West African ports, notably through better equipment and management. This followed a global trend started in the 1990s towards increased private sector participation in port operations and investment, and the transition from the public service port to a landlord port model. Between 2003 and 2010, concessions for container terminals were signed for all major West African ports. This has been followed in recent years by a new wave of concessions for large green field projects in several countries in the region.
Concessions have brought about major positive changes. The West African port landscape has changed substantially since the first concessions came into effect, and real container terminals now exist in most West African ports. TOCs have invested in modern handling equipment and revamped facilities, resulting in productivity gains and reducing congestion. Concessions have also provided Governments with millions of dollars in revenue through entry tickets, annual fees and royalty payments on traffic handled by concessionaires. Greenfield projects which are now being contracted are expected to further increase capacity at the regional level to meet future demand.
At the same time, results of port concessions are diluted by a combination of factors. Former public monopolies at the national level have to a large extent been replaced by a region-wide quasi-duopoly of two TOCs, which compete or cooperate in different ports and together control around 80 percent of West African container throughput. This raises fundamental questions in terms of intra- and inter-port competition and market power, especially given the weak governance framework and regulatory capacity across the region. The productivity gains realized by the TOCs pale in comparison to the results achieved by concessionaires in, for example, Latin American countries. The latter concessions have also been accompanied by contractually agreed tariff reductions which ensure that benefits from private participation are shared with end-users of port services. Unfortunately, no such benefit sharing is currently seen in the concessions in West Africa.
The natural monopoly features of the port industry are exacerbated by the market conditions prevailing in West Africa. Ports are “naturally” monopolistic industries where large sunk investments in infrastructure facilities or unique locational advantages constitute a barrier to the entry of competitors. The thin markets of the individual countries in this region further challenge profitable operation by more than one firm in the provision of container terminal services. The monopoly position of service providers, whether public or private, can lead to a variety of economic performance problems such as excessive prices, production inefficiencies, and poor service quality. Creating competition for the market (of container terminals), via a competitive process, could address the need for regulation and government intervention but only if the process meets certain requirements for transparency and equal opportunity for bidders. While some governments have attempted to award concessions on a competitive basis, the processes followed put into question the competitiveness of the outcomes. The continuance of the very high tariffs seen prior to the advent of the concessions cause further doubts on the reliability of the process to mimic competitive outcomes and benefit the endusers of the ports.
Competition alone cannot be relied on for effective regulation of container terminal services, although the two types of port users – shipping lines and shippers – are not exposed to risks to the same degree. Without effective public policies and regulation, port authorities and terminal operating companies (TOCs) may not have adequate incentives to provide high levels of service, adequate facilities, or guarantee the lowest price. While global terminal operators and major shipping lines have more or less equal market power, leading to negotiated outcomes (when TOCs are not part of the same group as the shipping lines they serve), shippers have far less service options and far less bargaining power. Unless governments step in to safeguard their interests, shippers face extraction of monopoly rents through arbitrarily high tariffs.
The experience to date suggests that West Africa countries may not have obtained the best deals possible for their port concessions. For brownfield terminals, concession have sometimes been attributed on a negotiated rather than competitive basis, often to the advantage of operators who were already present as licensed stevedores prior to the concessions. Likewise, recent greenfield projects were for the most part negotiated directly with the TOCs which originated the projects. Concerns about the transparency of the process and legitimacy of the outcome have been raised for a number of ports, sometimes in court. Bids have tended to be assessed, explicitly or implicitly, on the basis of their promise to maximize the direct financial benefits for Governments, rather than the economic benefits for the countries. Concession agreements tend to emphasize concessionaires’ commitments in terms of investment level, more rarely in terms of performance, and have arguably excessive durations.
The weaknesses of negotiated concessions have resulted in mixed outcomes in terms of prices and quality of services. Generally speaking, productivity has not improved as much as could have been expected. Given the high capital intensity and level of fixed costs in the terminal operating business, efficiency gains and continuously growing traffic volumes would have been expected to create margins for tariff reductions. However, prices for end users have not gone down and have increased significantly in some cases, generating substantial profits for TOCs. While shipping lines have countervailing power or vertical links with TOCs, West African shippers are in most cases much more exposed to the risk of market power abuses. In the absence of strong competition in and for the market, regulatory and oversight mechanisms have been insufficiently equipped to mitigate this risk to date. Regarding productivity, the available data suggests that the undeniable gains realized under concessions were primarily linked to the investments in modern container handling equipment and to increasing returns to scale, rather than to an intrinsic superiority of private over public management as far as operational efficiency is concerned.
Despite the recent dampening of economic growth in the region, projected growth of container throughput in West Africa indicates that activity at port terminals will likely be up fourfold by 2025, compared to 2011 levels. Such growth in container trade is expected to strain existing capacities and even though productivity is low by international standards, capacity reserves that could be unlocked by improved performances would be insufficient to accommodate growth of this magnitude. Accommodating future demand will not only require expanding terminal capacity in existing ports but also the development of new ports, thus justifying the pipeline of port projects already announced by port authorities and terminal operating companies.
Despite clear benefits, the transformation of the West African ports remains incomplete. The bulk of the benefits have been realized from relatively easy modifications implemented by operators while governments have skirted the structural reforms necessary for deeper and longer lasting change. Operators have relied on scale efficiencies or technological progress (e.g. increase in capacity and upgrades or purchase of new equipment) for productivity improvements with few advances in organizational and operational efficiency at the terminal level. Importantly, TOCs have seen a reduction in unit costs linked to the combination of growth in traffic and a high proportion of fixed costs in their cost structures. These reductions have not, however, been passed on to the final customers, the shippers, of the container terminals and sparingly shared with the conceding authorities. Cargo handling tariffs in West Africa remain amongst the highest in the world.
The arrested transformation of the ports sector can be traced to the West African institutional and governance framework as well as the economic characteristics of the CT industry. There is a double asymmetry between (i) the countries of West Africa which lack deep experience, tools and frameworks for managing and regulating private sector firms and international TOCs, and (ii) atomistic shippers and TOCs in an industry which is naturally monopolistic. The poor governance frameworks and inadequate regulation exacerbate the concentration of market power and help explain the situation in West Africa.
Policies which harmonize regulatory oversight of monopolistic activities with fostering competition will do much to improve the economic outcome of private sector involvement in the port sector. In other parts of the world, the potential market power of TOCs is checked through a combination of inter and intra- port competition. Ex-post, inter-port competition in West Africa is currently hindered by barriers to inland transport and cross-country movement of traffic and goods which impact the availability of contestable hinterlands while ex-ante, intra-port competition is possible only in a few ports where traffic is high enough to support more than one operator.
These limitations may be overcome if there is, for example, sufficient competition for the market (by auctioning the right to operate a port or operate within a port) which allows transfer of any monopoly rents to the state through the tendering process. Equally, depending on the criteria for the award of the concession, the conceding authority could decide to limit tariffs rather than maximize revenue to the state again improving the outcome. Competition for the market occurs at discrete points in time while performance improvements can also be built into, and enforced via, good contract documents and management through the life of the concession. To obtain these results, the focus has to be on (i) improving the concession process, (ii) getting the competition framework right, and (iii) strengthening the concession contract documents. In addition, competitive outcomes can be achieved through an assessment of the relative and absolute performance of each port, that is, (iv) yardstick competition.
With the growth of port traffic and the upcoming renewal of existing concessions, it is critical to revisit now the concession process to better manage the next wave of concessions. Adequate resources need to be set aside to access the necessary expertise to supplement public capacity to negotiate concession agreements, to conduct transparent bidding processes which allow fair competition for the market and offer equal opportunities to new entrants, and to recalibrate the criteria for contract award towards economic impact as opposed to pure financial returns. In certain circumstances a negotiated process could be warranted notably when TOCs and shipping lines join forces to promote a transhipment terminal.
There has to be clarity in who is responsible for regulating the CT concessions. There are alternative options to dedicated competition authorities: at regional and national level several existing institutions have some form of mandate in transport and corridor performance (regional economic communities, corridor institutions, industry associations, facilitation committees etc.). Countries and RECs which established them should expand their mandate to include port terminal concession oversight and tariff regulation.
Irrespective of the process employed to contract a concessionaire, revision of current contracts documents – as part of the renegotiation clauses if and when they exist, is necessary to reduce port tariffs, improve competitiveness, and allow meaningful monitoring of performance. Such revisions should improve the distribution of benefits amongst stakeholders: reduction in tariffs could reduce government revenues but would benefit shippers and generate positive spill over effects into the local economy. Since there is an inherent asymmetry of power and negotiating capacity between the ultimate clients of the ports and the TOCs, systematically disclosing operational and cost information to the general public provides an opportunity to bring together the virtual constituency of regional port users. Generalizing the publication of tariffs and key performance indicators is the first step to improve transparency and facilitate policymaking. Then one could think of ways to formalize customer feedback loops by including specific provisions to this effect in concession agreements, complemented by mandatory disclosure provisions. The data collected through these systematic feedback processes at the local port level could then form the basis for a region-wide database that would allow meaningful comparisons between facilities and also hopefully nurture some emulation between them.
Currently productivity measures included in contract documents are ad hoc, partial and ill-defined and can often be misleading in their ranking of ports. Explicit and standardized measures of efficiency such as productivity (output versus time) and cost effectiveness (output versus cost) have to be developed. Collecting and publicizing data on these indicators over a period of time will permit benchmarking the relative and absolute performance of each concessionaire and further competition through comparison.
This report is an assessment of private sector engagement (concessions) in the container terminal and ports market of West Africa, lessons from this experience and recommendations for the way forward. The introductory chapter sets the scene for West African ports while Chapter 2 discusses the implications of the ‘natural monopoly’ features of the port and container terminal industry in the markets of West Africa. Chapter 3 presents the transformation of the port landscape under the trend of container terminal concessions, analyzing the main challenges related to the concession process, the contractual provisions, and the regulation of the concession contracts during the operational phase. The next two chapters focus on whether container terminal concessions have delivered on their goal to address capacity constraints resulting from poor performance and outdated terminal characteristics: Chapter 4 focuses on the short term perspective, assessing the impact of concessions on capacity, efficiency and prices, whereas Chapter 5 focuses on the longer term, assessing the adequacy between container traffic growth and terminal capacity development. The concluding chapter offers recommendations on how to address identified weaknesses of ongoing contracts and improve the outcomes of the next wave of container terminal concessions.
Agriculture, import rules deadlock slows super Africa trade bloc creation
Sharp differences over agricultural safeguards and the rules of origin have slowed efforts to create a super continental trading bloc lumping up 26 African countries, integration officials have said.
A push by a number of countries to protect their sugar, maize and rice production have delayed the formation of a bloc bringing together the East African Community (EAC), the Common Market for East and Southern Africa (Comesa) and the South African Development Community (SADC).
Negotiators from the countries are asked for safeguards for “sensitive” agricultural segments and a strict rule of origin that will keep cheap goods from industrialised countries out of the shared market.
The 26 heads of States had ratified a tripartite free trade area of 640 million people bringing together the three trading blocs in June last year.
Positively impacted
“Our analysis shows that sugar, maize and rice production will initially be affected negatively while production of meat, dairy products and tea would be positively impacted in the initial stages of integration,” Dr Adama Ekberg, a senior economist at the United Nations Economic Commission for Africa (UNECA) told a regional stakeholder forum in Nairobi earlier in the week.
Integration experts are however pushing for an adaptation fund, financed by member states, to help break the deadlock.
The UNECA estimates that Africa already has $1.2trillion held in its stock markets and $400 billion in reserves held in foreign banks.
“The fund should be set up to compensate for negative impact including loss of revenue and drop in productivity, that are inevitable in the short term,” Dr Ekberg said.
Experts have said the formation of the super bloc would see the region’s economy expand by six per cent annually and end the perception of Africa as fragmented market.
“Were it to be a state, the envisaged bloc with a combined gross domestic product (GDP) of $1.3 trillion would be the 13th largest economy in the world,” EAC director-general of trade and customs Peter Kiguta said.
The UNECA is however pushing for inclusion of all the 54 states of Africa saying such a move would see the continental free trade area’s GDP expanding annually by 11 per cent.
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Uruguay’s victory over Philip Morris: a win for tobacco control and public health
In a landmark decision that has been hailed as a victory of public health measures against narrow commercial interests, an international tribunal has dismissed a claim by tobacco giant company Philip Morris that the Uruguay government violated its rights by instituting tobacco control measures.
The ruling had been much anticipated as it was the first international case brought against a government for taking measures to curb the marketing of tobacco products.
Philip Morris had started proceedings in February 2010 against Uruguay at the International Centre for Settlement of Investment Disputes (ICSID) under a bilateral investment treaty (BIT) between Uruguay and Switzerland. The decision was given on 8 July 2016.
Under the BIT, foreign companies can take cases against the host state on various grounds, including if its policies constitute an expropriation of the companies’ expectation of profits, or a violation of “fair and equitable treatment”. These investment treaties and arbitration tribunals like ICSID have been heavily criticised in recent years for decisions favouring companies and that critics argue violate the right of states to regulate in the public interest.
In this particular case, the tribunal gave a ruling that dismissed the tobacco giant’s claims and upheld that the Uruguayan pro-health measures were allowed.
President Tabaré Vázquez of Uruguay, responding to the ruling, stated on 8 July: “We have succeeded to prove at the International Centre for Settlement of Investment Disputes that our country, without violating any treaty, has met its unwavering commitment to defend the health of its people… From now on, when tobacco companies try to undermine the regulations adopted in the context of the framework tobacco convention with the threat of litigation, they (countries) will find our precedent.”
The Award announced by the Tribunal is as follows:
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES (WORLD BANK), WASHINGTON, D.C., 8 July 2016
PHILIP MORRIS BRANDS (THE CLAIMANT) and ORIENTAL REPUBLIC OF URUGUAY (THE RESPONDENT)
(ICSID Case No. ARB/1O/7)
AWARD
“For the reasons set forth above, the Tribunal decides as follows:
(1) The Claimants’ claims are dismissed; and
(2) The Claimants shall pay to the Respondent an amount of US$7 million on account of its own costs, and shall be responsible for all the fees and expenses of the Tribunal and ICSID’s administrative fees and expenses, reimbursing to the Respondent all the amounts paid by it to the Centre on that account.”
Background and Details
Philip Morris International (PMI) started legal proceedings against Uruguay’s government at the International Centre for Settlement of Investment Disputes (ICSID), based at the World Bank, in February 2010. This was the first time the tobacco industry challenged a state in front of an international tribunal.
Philip Morris claimed that the health measures imposed by the Ministry of Health of Uruguay violated its intellectual property rights and failed to comply with Uruguay’s obligation under its bilateral investment treaty (BIT) with Switzerland.
Two specific measures were contested by PMI: The first measure was the Single Presentation Requirement introduced by the Uruguayan Public Health Ministry in 2008, where tobacco manufacturers could no longer sell multiple varieties of one brand. PMI had to withdraw 7 of its 12 products. Philip Morris alleged that the restriction to market only one variety substantially affected its company’s value.
The second measure contested by PMI was the so-called “80/80 Regulation”. Under a presidential decree, graphic health warnings on cigarette packages should cover 80 percent instead of 50 percent, of the packaging, leaving only 20 percent for the tobacco companies’ trademarks and advertisement.
Uruguay adopted strict tobacco control policies to comply with the World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC), in light of evidence that tobacco consumption leads to addiction, illness, and death.
According to the Ministry of Health, since Uruguay introduced its tobacco control programme in 2003, its comprehensive tobacco control campaign has resulted in a substantial and unprecedented decrease in tobacco use.
From 2005 to 2011 per person consumption of cigarettes dropped by 25.8%. Tobacco consumption among school-going youth aged 12-17 decreased from over 30 percent to 9.2 percent from 2003 to 2011. Ministry of Health data also indicate that since smoke-free laws were introduced, hospitalization for acute myocardial infarction has reduced by 22 percent.
Since this was the first international litigation, the case is highly important for similar debates taking place in other forums, like the World Trade Organization, where some states are being challenged by other states for their tobacco control measures. It is a significant victory for a state facing commercial threats by tobacco companies fighting control measures.
The decision is supportive of states that choose to exercise their sovereign right to introduce laws and strategies to control tobacco sales in order to protect the health of their population.
This is a David against Goliath victory. “The annual revenue of Philip Morris in 2013 was reported at $80.2 billion, in contrast to Uruguay’s GDP of $55.7 billion. The international lawyer and practitioner in investment treaty arbitration Todd Weiler stated in a legal opinion that: the claim is nothing more than the cynical attempt by a wealthy multinational corporation to make an example of a small country with limited resources to defend against a well-funded international legal action…”
An important aspect of the case was that the secretariats of the World Health Organization and the WHO Framework Convention on Tobacco Control (WHO FCTC) submitted an amicus brief during the proceedings.
The brief provided an overview of global tobacco control, including the role of the WHO FCTC. It set out the public health evidence underlying Uruguay’s tobacco packaging and labelling laws and detailed state practice in implementing similar measures.
The Tribunal accepted the submission of the amicus brief on the basis that it provided an independent perspective on the matters in the dispute and contributed expertise from “qualified agencies”. The Tribunal subsequently relied on the brief at several points of the factual and legal analysis in their decision.
In accepting submission of the amicus brief the Tribunal noted that given the “public interest involved in this case” the amicus brief would “support the transparency of the proceeding”.
The Tribunal’s ruling upheld that Uruguay could maintain the following specific regulations:
(1) Prohibiting tobacco companies from marketing cigarettes in ways that falsely present some cigarettes as less harmful than others.
(2) Requiring tobacco companies to use 80% of the front and back of cigarette packs for graphic/pictures of warnings of the health danger of smoking.
According to Chakravarthi Raghavan there are several specific legal findings of the panel ruling, including:
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Uruguay did not violate any of its obligations under the Switzerland/Uruguay Bilateral Investment Treaty, or deny Philip Morris any of the protections provided by that Treaty.
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Uruguay’s regulatory measures did not “expropriate” Philip Morris’ property. They were bona fide exercises of Uruguay’s sovereign police power to protect public health.
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The measures did not deny Philip Morris “fair and equitable treatment” because they were not arbitrary; instead, they were reasonable measures strongly supported by the scientific literature, and had received broad support from the global tobacco control community.
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The measures did not “unreasonably and discriminatorily” deny Philip Morris the use and enjoyment of its trademark rights, because they were enacted in the interests of legitimate policy concerns and were not motivated by an intention to deprive Philip Morris of the value of its investment.
Conclusion
This is a landmark ruling because it supports the case that it is the sovereign right not only of Uruguay but of States in general to adopt laws and regulations to protect public health by regulating the marketing and distribution of tobacco products.
It is hoped that many other countries, which have been awaiting this decision before adopting similar regulations, will follow Uruguay’s example. As President Tabaré said, it is time for other nations to join Uruguay in this struggle, “without any fear of retaliation from powerful tobacco corporations, as Uruguay has done.”
Nevertheless, there is still a lot of public concern worldwide about the role that bilateral investment treaties has played in curbing the policy space of countries, including for health policies. There have also been serious concerns about the rulings made by other tribunals of ICSID and other arbitration centres, which have favoured the claims of companies and imposed high monetary awards against states. In the case of Philip Morris versus Uruguay, the tribunal’s ruling was correct in supporting the state’s right to regulate in the interest of public health. But the concerns in general are still valid. Other tribunals in other cases may or may not be so sympathetic to the public interest.
Germán Velásquez is the Special Adviser for Health and Development of the South Centre.
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We will trade with other EAC countries if Burundi ignores us – Kanimba
Following the recent decision made by Burundi to sever trade ties with Rwanda, Rwanda will trade with other regional countries. The remarks have been made by trade minister, Francois Kanimba.
“The Burundian government decided to ban exports to our country but this has little impact on our economy; the products that have been imported from there can be got from Uganda and Tanzania,” Kanimba said.
Kanimba affirmed that Burundi’s decision is a violation of the EAC treaty on common market protocol among member states.
The EAC Common Market protocol was effected on July 1, 2010 following ratification by all the six partner countries.
Rwanda has been exporting manufactured products, maize, cassava flour, milk, potatoes, unprocessed maize flour and wheat flour to Burundi. In turn, it was mainly importing fruits from Burundi such as mangoes and oranges, dried silver fish and palm oil.
Daniel Fred Kidega, the East African Legislative Assembly (EALA) Speaker, said the Communications Trade and Investment Committee shall ascertain facts of Burundi’s decision.
“It is important to add that the region is implementing the customs union and the common market. It would be counterproductive for partner states to deprive citizens of the associated benefits,” Kidega said.
Burundi’s economy
Burundi is one of the poorest, smallest, and most densely populated nations in Africa. Its poor transportation system and its distance from the sea have tended to limit its economic growth.
The economy is almost entirely agricultural, especially subsistence farming. Major crops include corn, sorghum, sweet potatoes, bananas and manioc.
Coffee, the country’s chief export, accounts for 80% of its foreign exchange income. Cotton, tea, sugar, and hides are also exported. Cattle, goats, and sheep are raised.
The country’s industries include food processing, manufacturing of basic consumer goods such as blankets and footwear, assembly of imported components and public works construction. Bigger industries are government-owned.
Burundi relies on international aid for economic development and has incurred a large foreign debt. Nickel, uranium, and other minerals are mined in small quantities; platinum reserves have yet to be exploited.
Burundi’s imports (capital goods, petroleum products, and foodstuffs) considerably exceed the value of its exports.
Germany, Belgium, Kenya, and Tanzania make up its chief trading partners. Most exports are sent by ship to Kigoma in Tanzania and then by rail to Dar-es-Salaam on the Indian Ocean.
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South Africa’s economy regains rank as Africa’s biggest on Rand
South Africa’s economy regained the position of Africa’s largest in dollar terms more than two years after losing it to Nigeria as the value of the nations’ currencies moved in opposite directions.
Based on gross domestic product at the end of 2015 published by the International Monetary Fund, the size of South Africa’s economy is $301 billion at the rand’s current exchange rate, while Nigeria’s GDP is $296 billion. That’s after the rand gained more than 16 percent against the dollar since the start of 2016, and Nigeria’s naira lost more than a third of its value after the central bank removed a currency peg in June.
Both nations face the risk of a recession after contracting in the first quarter of the year. The Nigerian economy shrank by 0.4 percent in the three months through March from a year earlier amid low oil prices and output and shortage of foreign currency. That curbed imports, including fuel. In South Africa, GDP contracted by 0.2 percent from a year earlier as farming and mining output declined.
“More than the growth outlook, in the short term the ranking of these economies is likely to be determined by exchange rate movements,” Alan Cameron, an economist at Exotix Partners LLP, said in e-mailed responses to questions on Aug. 2. Although Nigeria is unlikely to be unseated as Africa’s largest economy in the long run, “the momentum that took it there in the first place is now long gone.”
No Growth
The South African rand rallied as investors turned to emerging markets with liquid capital markets to seek returns after Britain voted to leave the European Union on June 23, even as the central bank forecast the economy won’t expand this year and the nation risks losing its investment-grade credit rating. The ruling African National Congress’s lowest support since 1994 in the Aug. 3 local government vote led to further gains on speculation that it will pressure the party to introduce economic reforms that will boost growth and cut unemployment.
In Nigeria, investors didn’t flock to buy naira-based assets after authorities removed the peg of 197-199 naira per dollar. The Central Bank of Nigeria raised its benchmark interest rate to a record in July to lure foreign money, even as the IMF forecast the economy will contract 1.8 percent this year.
Nigeria was assessed as the continent’s largest economy in April 2014 when authorities in the West African nation overhauled their GDP data for the first time in two decades. The recalculation saw the Nigerian economy in 2013 expand by three-quarters to an estimated 80 trillion naira.
The rand weakened 0.4 percent to 13.3323 per dollar at 7:56 a.m. in Johannesburg on Thursday, ending three days of gains. The naira dropped 0.4 percent to 321.50 per dollar, heading for a record low on a closing basis.
Nigeria’s economy still number one in Africa – Dangote
The President of Dangote Group and Africa’s richest man, Aliko Dangote has said Nigeria remains the number one economy in Africa, despite recent economic challenges.
Speaking at the 2016 Presidential Policy Dialogue session, organised by the Lagos Chamber of Commerce and Industry Dangote said he is optimistic that Nigeria will soon overcome the challenges and remain stronger.
According to him the problem with the economy did not start with this current administration while he maintains faith that the country is still the best place to invest.
On Wednesday, Bloomberg reported that South Africa has now overtaken Nigeria to regain its position as Africa’s largest economy due to the continued depreciation of the naira against the dollar.
The news agency used the data by the International Monetary Fund (IMF) that as at the end of 2015, the size of South Africa’s economy was $301 billion at the rand’s current exchange rate, while Nigeria’s GDP stood at $296 billion.
In dollar terms, South Africa has emerged as Africa’s biggest economy more than two years after losing it to Nigeria largely due to dwindling value of the naira against the dollar.
The rand had gained more than 16 percent against the dollar since the start of 2016, and Nigeria’s naira lost more than a third of its value after the Central Bank of Nigeria (CBN) introduced a foreign exchange liberalisation allowing market forces to determine the value of the local currency against the dollar.
Analysts at the Lagos-based financial services firm, Cordros Capital, said Nigeria’s GDP fell short of South Africa’s primarily as a result of Nigeria’s inability to control the value of the naira.
To reverse the trend in the immediate, the analysts, said the naira would have to reverse its losses against the USD.
“To reverse its loss against the USD, the NGN would have to close N197 by Q4 2016, which is highly unlikely.”
They further said the possibility of naira reversing its losses against the dollar may well broadly depend on the decisions of both the monetary and fiscal authorities.
“In the long term, economic activities would have to return to the pre-recession levels, wherein growth per annum was in excess of 5 per cent,” they said.
Speaking on the development, Dr. Sale Ahmed, blamed the development on Nigeria running an oil-based economy.
“South Africa continues to strengthen its financial regulatory institutions, its production and manufacturing base,” he said.
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tralac’s Daily News Selection
The selection: Thursday, 11 August 2016
The 7th Annual Conference on Regional Integration in Africa (ACRIA 7) was held in Cotonou, 7-9 July: access the presentations
The nomination process for the next AU Commission election has re-opened (AU)
In accordance with the Note Verbale sent to Member States, the schedule for the process is as follows: Chairperson and Deputy Chairperson - Candidatures should be submitted to the Commission (Office of the Legal Counsel, in sealed envelopes) on or before 30 September 2016. Commissioners - (i) Member States should submit candidatures to their respective regions on or before 19 August 2016.
African Caucus: 2016 Cotonou Declaration (pdf, World Bank)
The African Governors of the IMF and the World Bank met at Palais des Congres de Cotonou (Benin), 4-5 August, for the African Caucus, chaired by Mr Abdoulaye Bio Tchane, Beninese Minister of State for Planning and Development, Chairman of the African Caucus. The discussions focused on the general theme “Scaling Up Bretton Woods Institutions Support to Address Shocks, Boost Growth and Enhance economic Transformation in Africa”. As outcome of this meeting, the African Governors agreed to the following:
Global Manufacturing Competitiveness Index: SA losing ground in global manufacturing stakes (Fin24)
South Africa and most of its fellow Brics members – and the African continent as a whole – need to take a long, hard look at investing in cutting edge technology to catch up in the global manufacturing stakes, a new study shows. According to the three-year Deloitte 2016 Global Manufacturing Competitiveness Index (pdf), South Africa is losing momentum compared to global leaders, although it remains the most competitive manufacturing country in Africa. Looking at the Brics countries – Brazil, Russia, India, China and South Africa – South Africa occupied 27th position, a drop of three places since 2013. Brazil, Russia, and India all experienced a significant decline in their ranking over the last few years.
Global Africa Investment Summit: Kigali investments summit to ‘demystify’ Africa’s potential (New Times)
In an attempt to demystify the continent and bridge the gap between foreign investors and Africa, COMESA and Rwanda are co-hosting the Global Africa Investment Summit. The summit, 5-6 September, targets over 1,000 delegates comprising of heads of government, industry captains, and representatives of multilateral organisations. “The primary objective of the summit is to engage the private sector on the TFTA initiative, and explore how the public and private sector can work together to help realise the aspiration of Africa’s largest single market,” a concept note of the forum reads in part.
Women Matter Africa (McKinsey)
The Women Matter Africa report highlights that Africa has taken big strides forward in terms of women's representation in the private and public sectors, achieving and in some cases exceeding global averages. Yet it is far from achieving gender equality.
China concerned about South African trade investigation (Tax-news)
On 8 August 8, China's Ministry of Commerce issued a statement expressing concern at South Africa's initiation, on 29 July, of a WTO safeguard investigation into certain cold-rolled steel products. The MOC statement expressed concern over the effect that the safeguard investigation will have on bilateral trade between China and South Africa. The Ministry stressed that China "attaches great importance to both communication and cooperation between trade authorities in the field of trade remedies, [and] hoped that South Africa will act in accordance with WTO rules in a fair, equitable, and transparent manner, and protect the rights of Chinese enterprises."
China the top investor in Mozambique in 1st half-year (MacauHub)
China was the top investor in Mozambique in the first half-year with $154m, nearly 60% of total FDI, indicate figures from the Investment Promotion Centre. Far behind were next-ranked South Africa ($45m), Mauritius ($29m), the UK ($22m) and Portugal ($14m). The other countries on the list of top ten investors are Turkey, Italy, India, Spain and the United States. Almost 80% of foreign investment approved by the CPI is concentrated in the construction and public works, industry, agriculture and agro-industry sector. More than half (55%) is for the provinces of Maputo and Maputo City, followed by 21% for Sofala province.
Trade between China and Portuguese-speaking countries down 13% in 1st half-year (MacauHub)
The value of trade between China and the Portuguese language countries fell 13.34% year-on-year in the first half of the year to $41.691bn, indicate official figures released on Tuesday by Forum Macau. In the first six months of the year China exported to the eight Portuguese language countries goods worth $12.938bn (-33.78%) and imported merchandise worth $28.753bn (+0.63 percent), incurring a trade deficit of $15.815bn. Second-ranked Angola accounted for trade worth $7.165bn (-31.29%), with Chinese exports falling 66.01% to $729m and Chinese imports falling to $6.435bn (-22.29%). Fourth-ranked Mozambique accounted for $855.7m of trade with China (-28.87%). Chinese sales fell 33.74% to $648.9m, while Mozambican exports were down 7.54% to $206.8m. [Angola/China Chamber of Commerce trains entrepreneurs]
Spillovers from China’s growth slowdown and rebalancing to the ASEAN-5 economies (IMF)
This paper studies the potential spillovers to the ASEAN-5 economies through trade, commodity prices, and financial markets. It finds that countries with closer trade linkages with China (Malaysia, Singapore, and Thailand) and net commodity exporters (Indonesia and Malaysia) would suffer the largest impact, with growth falling between 0.2 and 0.5 percentage points in response to a decline in China’s growth by 1 percentage point depending on the model used and the nature of the shock. The impact could be larger if China’s slowdown and rebalancing coincides with bouts of global financial volatility. [China’s Central Bank plans push to increase yuan’s global usage]
Angola joins convention of World Customs Organisation (MacauHub)
Angola has formalised by parliamentary resolution its accession to the International Convention on Simplification and Harmonisation of Customs Procedures of the International Customs Organisation, which aims to facilitate world trade.
The Gambia: ECOWAS must implement trade facilitation measures (The Point)
A two-day trade facilitation dialogue has just been held in The Gambia, under the auspices of the Ministry of Trade and the ECOWAS Commission with support from GIZ Germany Cooperation. The meeting focused on regional agreement to expedite the movement of goods across borders, as well as to set out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.
Africa’s next step should be agricultural reform: Japan trade group exec (Naija247). As a leading producer of oil, copper ore and other natural resources, recent weak prices and sluggish markets have slowed African economies. Growth potential on the continent remains immense, however, with populations growing faster than the world average. What are the economic prospects for Africa, and what challenges does it face? An expert on the subject, Katsumi Hirano, executive vice president of the Japan External Trade Organization, spoke with The Nikkei about these issues and more.
With TICAD, Japan pursues African growth and export markets (Japan Times). Will there be any new pledges by Tokyo? Most likely. At the last TICAD, the Japanese government offered up to ¥3.2 trillion in assistance over five years with an emphasis on infrastructure and human resources. Some 70% has already been provided. Tokyo will probably deliver a new pledge depending on progress. It will also agree a program for the next three years.
TICAD side-event: African industrialization. Prior to the sixth Tokyo International Conference on Africa’s Development (TICAD VI, 27-28 August), UNIDO, the AUC and the Government of Kenya will organize a high-level side event on the theme “Enhancing Africa’s structural economic transformation through Agenda 2063 and inclusive and sustainable industrial development: fostering partnerships between the Government of Kenya, the AUC, UNIDO and the private sector”. [AfDB Group participation in TICAD VI]
Zimbabwe: Passports go to migrants (The Chronicle)
The South African Government has given Zimbabwe the nod to deploy its officers to issue passports, birth certificates and National Identity Cards to locals residing in the neighbouring country. The Deputy Minister of Home Affairs, Cde Obedingwa Mguni, said the documents would be issued from selected points in the neighbouring country as soon as South African authorities identify sites to conduct the exercise. He said his Ministry would approach Botswana with the same request.
Kenya: Planned Machakos leather industrial park inches closer to reality (Business Daily)
Industrialisation Minister Adan Mohamed added that once established at the facility, companies would also enjoy a 20% tax-free incentive to sell their wares locally, thereby giving Kenyans and other members of the East African Community access to newly made and genuine leather products at attractive rates. According to Mr Mohamed, a leather policy to help set standards in the industry and block importation of synthetic products sold to unsuspecting buyers is already being formulated. The Kenya Leather Development Council chairman Titus Ibui said a Leather Inspectorate had been formed to vet all products entering the country at ports and border entry points to keep substandard leather goods off the market. The Inspectorate will also be tasked with ensuring all products exported to overseas markets meet a set required standard that will make Kenyan leather products attractive. [Ethiopia: 'One of the industrial parks can create more than 400000 job opportunities for citizens']
Cameroon ratifies EU trade deal but suspicions remain (DW)
Cameroon's decision to accept an Economic Partnership Agreement EU puts it at loggerheads with the five other members of Central African Economic and Monentary Community (CEMAC), which are Central African Republic, Chad, Republic of Congo, Equatorial Guinea and Gabon. A week ago, CEMAC leaders met in Malabo, capital of Equatorial Guinea, and the consensus was that they would only sign an agreement that was fair and balanced. But on August 4, Cameroon reneged on the deal and ratified its existing draft EPA. [Collapse of EU trade deal: Kenya finds itself isolated for a third time in four months (The Standard)]
Who uses electricity in Sub-Saharan Africa? Findings from household surveys in 22 SSA countries (pdf, World Bank)
This paper is part of a broader study examining the financial viability and related aspects of the power sector in Africa. The broader study focuses primarily on grid electricity for reasons of data availability at the regional level. It asks the following questions: How widely is electricity used? What are the barriers to making electricity the main source of energy in Africa for lighting and powering appliances? Is electricity affordable? Is there potential evidence suggesting that female‐headed households are disadvantaged in some ways with respect to electricity use? Although household expenditure surveys capture spending on all forms of electricity, as with the broader study, detailed analysis is carried out primarily on issues associated with grid connection. [Companion paper: Financial viability of electricity sectors in Sub-Saharan Africa - quasi-fiscal deficits and hidden costs]
Disaggregating the impact of the internet on international trade (World Bank)
The Internet has transformed the way countries trade by reducing the costs of exporting. This paper quantifies the impact of Internet adoption on international trade. It shows that the Internet has a positive, nuanced, impact on international trade: bilateral exports are more affected when Internet adoption increases in the exporter than importer. A 10% increase in the exporter's internet adoption leads to a 1.9% increase in bilateral exports, largely explained by an increase in the number of goods exported. A 10% increase in the importer's internet adoption leads to a 0.6% increase in bilateral exports, explained by an increase in the average value of existing exported goods. The analysis also finds that when both countries have high levels of Internet adoption they are more likely to trade with each other, compared with country pairs with different (high and low) or low levels of Internet adoption.
Anabel González: Globalization is the only answer (Project Syndicate)
SA and Abu Dhabi’s financial regulators sign deal to collaborate (Business Day)
Nairobi city protests: businesses count the costs (pdf, KEPSA, TIFA Research)
India pens tourism MoU with South Africa (Travel Daily)
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SA losing ground in global manufacturing stakes
South Africa and most of its fellow Brics members – and the African continent as a whole – need to take a long, hard look at investing in cutting edge technology to catch up in the global manufacturing stakes, a new study shows.
According to the three-year Deloitte 2016 Global Manufacturing Competitiveness Index (GMCI), South Africa is losing momentum compared to global leaders, although it remains the most competitive manufacturing country in Africa.
The GMCI helps global industry executives and policy makers evaluate the key drivers to company and country level competitiveness. It also identifies those nations expected to offer the most competitive manufacturing environments until 2020.
Looking at the Brics countries – Brazil, Russia, India, China and South Africa – South Africa occupied 27th position, a drop of three places since 2013. Brazil, Russia, and India all experienced a significant decline in their ranking over the last few years.
At No 29, Brazil experienced the steepest fall from eighth position in 2013, while Russia slipped from 28th to 32nd position. India is however expected to improve its rank from No 11 this year to the number five spot by 2020.
China came out on top and was ranked the most competitive country, with the United States, Germany, Japan, and South Korea rounding off the top five.
“Globally, we are seeing manufacturing-related activities evolving very quickly to match the advances in technology. This is seeing countries increase their focus on developing advanced manufacturing capabilities by investing in high-tech infrastructure and education,” said Mike Vincent, Africa industrial products & services sector leader.
The study found that advanced technologies are becoming an essential driver to remain competitive, with technology-intensive sectors dominating the global manufacturing landscape in most advanced economies. These sectors also offer a strong path to achieve or sustain manufacturing competitiveness.
Technological prowess is key
Advanced technologies – such as predictive analytics, the Internet of Things, and smart products and factories – will be instrumental in unlocking future manufacturing competitiveness. Even so, talent is still considered the top driver for manufacturing competitiveness.
However, manufacturers also consider cost, productivity and a good supplier network as vital components to remain competitive.
“In an era of sluggish economic growth, containing costs and increasing productivity to boost profits remains critical, alongside building a strong network and ecosystem of suppliers." This, explained Vincent, means adopting more innovative strategies and developing and taking advantage of integrated manufacturing and technology clusters.
Governments are also becoming aware of the significant benefits a manufacturing industry provides to national economic prosperity. Similarly, manufacturers understand the role government policy can play in their success.
“We are seeing many countries with unfavourable or overly bureaucratic manufacturing policies working to improve and reform these. They are also investing in greater economic development and strengthening the overall manufacturing infrastructure,” said Vincent.
In Africa, Kenya has been aggressive in industrialising its economy and reducing the bureaucratic burden on industry – resulting in a significantly more competitive environment.
Executives throughout the United States, Europe and China have indicated policies that favour key elements which encourage manufacturing competitiveness, with policies specifically focused around technology transfer and science and innovation encouraging manufacturers to use advanced technologies.
Vincent pointed out that countries are increasing their focus on developing advanced manufacturing capabilities by investing in high-tech infrastructure and education.
Africa left out in the cold
The drive to progress to these advanced technologies is seeing a push at both a country as well as an organisational level. Unfortunately for Africa, a look at the top 15 countries in the index shows the continent left out in the formation of three distinct regional clusters of manufacturing strength.
In North America, the United States provides an anchor for both Canada and Mexico. It is a similar story in Europe where Germany plays the anchor role, and the Asia Pacific cluster where China, Japan, and South Korea are leading a group of emerging Southeast Asian nations.
“Executives surveyed clearly expect the most competitive nations in the future to embrace a higher-value manufacturing paradigm characterised by the adoption of advanced technologies. In the wake of this transformation, the days when a country could establish a position of manufacturing dominance on the back of a single point of strength are decidedly gone.
“In fact, leading countries are taking a much more balanced approach to talent, cost competitiveness, and innovation to set themselves apart from the global crowd,” said Vincent.
Several of the top ranked countries are developing policies that encourage investment in highly integrated manufacturing technology and innovation ecosystems. These involve national labs, supplier networks, universities and private equity investors.
All of this makes it vital for South Africa to engage on how to steer manufacturing forward in the light of the country's ailing industry environment and its great potential, said Vincent.