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The Mobile Economy Africa 2016
The mobile industry in Africa continues to deliver the required connectivity that enables access to a wide range of services addressing various social and economic issues. But with more than half of the population yet to subscribe to a mobile service, the challenge for Africa is to overcome the barriers to connecting the unconnected and unlock the economic potential of increased connectivity.
Executive summary
Almost half the population of Africa subscribed to mobile services in 2015
At the end of 2015, 46% of the population in Africa subscribed to mobile services, equivalent to more than half a billion people. The region’s three dominant markets – Egypt, Nigeria and South Africa – together accounted for around a third of the region’s total subscriber base. Subscriber growth rates are now beginning to slow and will increasingly converge with the global average, as affordability challenges become a key barrier. Over the next five years, an additional 168 million people will be connected by mobile services across Africa, reaching 725 million unique subscribers by 2020. Eight markets will account for the majority of this growth, most notably Nigeria, Ethiopia and Tanzania, which will together contribute more than a third of new subscribers.
Migration to mobile broadband is accelerating
Subscribers across Africa are increasingly migrating to mobile broadband services, driven by network rollouts and mobile operator device and data strategies. Mobile broadband connections accounted for a quarter of total connections at the end of 2015, but will rise to almost two-thirds by 2020. 4G network launches are gaining traction: by mid-2016, there were 72 live LTE networks in 32 countries across Africa, half of which have launched in the last two years.
The launch of new mobile broadband networks across the region coincides with the growing availability of low-cost devices. The number of smartphone connections has almost doubled over the last two years to reach 226 million, accounting for a quarter of total connections in the region. This reflects strong uptake in the established mobile markets, such as Egypt, Kenya, Nigeria and South Africa, as well as some relatively new 3G markets, notably Algeria, Cameroon and the Democratic Republic of Congo. Over the next five years, the region will add a further half a billion smartphone connections, taking the adoption rate to more than half of total connections.
The migration to mobile broadband and growing levels of smartphone adoption are expected to lead to a further boost in mobile data traffic growth, repeating the trend seen in other regions. Many operators in the region recorded data traffic growth of more than 50% in 2015. As a result, data revenue as a share of total revenue is rising rapidly across the region, reaching 15% on average but considerably higher for mobile operators in the more advanced markets such as South Africa and Egypt.
Mobile generated 6.7% of Africa’s GDP and 3.8 million jobs in 2015
In 2015, mobile technologies and services generated 6.7% of GDP in Africa, a contribution that amounted to around $150 billion of economic value. In the period to 2020 we expect this to increase to more than $210 billion (7.6% of GDP) as countries benefit from the improvements in productivity and efficiency brought about by increased take-up of mobile services.
The mobile ecosystem supported 3.8 million jobs in 2015. This includes workers directly employed in the ecosystem and jobs indirectly supported by the economic activity generated by the sector. The mobile sector also makes a substantial contribution to the funding of the public sector, with $17 billion raised in 2015 in the form of general taxation. The number of jobs supported will increase to 4.5 million by 2020, while the tax contribution to public funding will rise to $20.5 billion.
Mobile is the platform of choice for digital transformation in Africa
Mobile has emerged as the platform of choice for creating, distributing and consuming innovative digital solutions and services in Africa. Many local and global innovators and tech entrepreneurs are now using the expansion of advanced mobile infrastructure in the region and the growing adoption of smart devices to deliver mobile-based solutions that directly appeal to local interests and cultures.
The tech start-up ecosystem in Africa is increasingly active; there are approximately 310 active tech hubs across the region, including 180 accelerators or incubators. The range of tech start-ups funded in recent years and the size of deals reflect the accelerating development of the ecosystem. Moves by some mobile operators in the region to open up their APIs to third-party developers create significant opportunities for tech innovation and further development of the start-up ecosystem. Mobile operator APIs such as messaging, billing, location and mobile money enable start-ups to scale and extend their services to a broader customer base.
Mobile can help address social challenges and the UN Sustainable Development Goals
Mobile technology continues to play a central role in addressing a range of social challenges, including unregistered populations, the digital divide and financial inclusion. In September 2015, the UN introduced its Sustainable Development Goals (SDGs) to the world – a 17-point plan to end poverty, combat climate change and fight injustice and inequality by 2030. Mobile connectivity is essential to the achievement of the SDGs given the power of mobile technology to accelerate inclusive growth and sustainable development in a way no other technology can.
Mobile is addressing the challenge of unregistered populations in Africa, where more than 400 million people lack an official form of identification. Mobile technology is well placed to address the challenge of birth registration, given high penetration levels and geographic coverage, particularly in rural areas, with operators in countries such as Senegal, Tanzania and Uganda already tackling the issue.
Mobile internet adoption in Africa continues to grow rapidly; the number of mobile internet subscribers tripled in the last five years to 300 million by the end of 2015, with an additional 250 million expected by 2020. However, by 2020 60% of the population will still be unconnected. Significant barriers to adoption remain, particularly for underserved groups such as women, rural communities and young people.
Mobile money continues to improve financial inclusion in Africa. The region accounts for 52% of the 271 live mobile money services in 93 countries and 64% of all active mobile money accounts. Six new services were launched in Africa in 2015, with another four in the first half of 2016. Mobile money is having a significant impact in enabling efficient and convenient international money transfer.
Importance of spectrum in delivering greater connectivity
Africa is heavily dependent on mobile networks to deliver the connectivity that its hundreds of millions of citizens and companies need. The capacity and coverage of any wireless network is largely determined by the radio frequencies it is able to use. If policymakers across the region step up efforts to allow mobile operators to gain access to the spectrum they need, Africa will enjoy major social and economic benefits. Spectrum has no intrinsic value, but can be a very valuable resource when put to productive use.
Issues to be addressed include the shortage of appropriate spectrum for mobile operators, caused in large part by the slow progress of the switchover from analogue to digital terrestrial television. Most African governments failed to meet the International Telecommunication Union’s (ITU) deadline for the switchover (June 2015) despite the urgent need to release this spectrum for mobile broadband services. African governments also need to begin preparing for the World Radiocommunication Conference (WRC) in 2019, where they will identify bands to allocate for the next generation of mobile technologies. These 5G technologies will further increase wireless throughput speeds and network responsiveness, enabling a broad range of new services for businesses and individuals.
In Africa, as elsewhere in the world, governments cannot afford to let spectrum lie idle. Radio frequencies need to be employed as efficiently and effectively as possible. In practice, that means releasing spectrum in a way that ensures that the licence holder will invest in mobile broadband networks.
In particular, policymakers in Africa need to ensure that the low-frequency spectrum below 1 GHz is employed to extend mobile broadband coverage across their countries. Reducing the digital divide between urban and rural areas will boost economic activity, help to alleviate poverty, improve healthcare and education, expand financial inclusion and enhance agriculture. There is no time to lose.
Related News
14th Session of the United Nations Conference on Trade and Development: Resource box
The fourteenth session of the United Nations Conference on Trade and Development (UNCTAD 14) was held in Nairobi, Kenya, from 17 to 22 July 2016. The theme of the event was From decision to action: moving toward an inclusive and equitable global economic environment for trade and development.
The Conference brought together Heads of State and Government, ministers and other prominent players from the business world, civil society and academia to tackle global trade and economic development issues. The Conference featured ministerial debates, high-level round tables, thematic events, a World Investment Forum, a Global Commodities Forum, a Youth Forum and a Civil Society Forum, among other events.
The Conference saw concrete progress including the launch of a new e-trade initiative, the first UN statistical report on the SDG indicators, the launch of a multi-donor trust fund on trade and productive capacity, and the commitment of more than 90 countries for a roadmap on fisheries subsidies. It also saw the launch of this year’s Economic Development in Africa Report and the highlighting of issues around non-tariff measures, debt, and illicit financial flows.
In the news
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UNCTAD welcomes discussion, transparency on commodities and misinvoicing
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Even as the West turns its back on the world, Africa must embrace free trade
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UNCTAD warns on debt: Africa should find new ways to finance development
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UNCTAD14 sees 90 countries sign up to UN roadmap for elimination of harmful fishing subsidies
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Developing countries lose 10 percent of exports on non-tariff measures
Nairobi Consensus
From decision to action: Moving towards an inclusive and equitable global economic environment for trade and development
The Conference ended on Friday, 22 July 2016 with the adoption of two crucial documents aimed at strengthening the mandate of UNCTAD to effectively deal with matters affecting trade, foreign investments and the fight against poverty.
Prepared under the responsibility of the Kenyan government, the first document agreed by negotiators, the political declaration called the ‘Nairobi Azimio’ by its Swahili translation, represents a broad expression of the social and economic state of the world and calls for increasing financial, infrastructure and development support to the world’s least developed countries and vulnerable nations. The second document, the Nairobi Consensus or ‘Nairobi Maafikiano’, proposes a way forward for trade and investments.
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Nairobi Azimio | Political Declaration
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Nairobi Maafikiano | Nairobi Consensus
Ministerial documents
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Ministerial Communiqué of the Landlocked Developing Countries | 18 July 2016
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Declaration of the Least Developed Countries Ministerial Meeting to UNCTAD XIV | 18 July 2016
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Declaration of Civil Society to UNCTAD XIV | 18 July 2016
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Ministerial Declaration of the Group of 77 and China to UNCTAD XIV: From decisions to actions | 19 July 2016
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Pre-Conference Negotiating text | 16 June 2016 revision
Civil society statements
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Civil Society Statement on the outcome of UNCTAD14: Delivered by Aldo Caliari, Center of Concern | 22 July 2016
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Letter from 331 Groups of Global Civil Society on UNCTAD’s Role and Mandate towards UNCTAD 14 | 14 July 2016
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Recommendations to the UNCTAD 14 on Illicit Financial Flows – Financial Transparency Coalition | 14 June 2016
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SEATINI’s Position on UNCTAD XIV session Pre-Conference negotiating text | 14 April 2016
Summaries prepared by the UNCTAD Secretariat
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High-level event: Promoting a global environment for prosperity for all
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High-level event: Fostering Africa’s structural transformation
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High-level event: Bolstering public policies for vibrant and inclusive markets
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High-level event: Building economic resilience for the most vulnerable
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High-level event: Transforming economies for sustainable and inclusive growth
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High-level event: Implementation of the sustainable development goals: Opportunities and challenges
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Ministerial round table: Unleashing the power of e-commerce for development
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7th Global Commodities Forum: Breaking the chains of commodity dependence
Featured publications
Economic Development in Africa Report 2016: Debt Dynamics and Development Finance in Africa
Africa has major development aspirations in the broader context of a global and continental economic development agenda. This calls for substantial financial resources at a time when the global development finance landscape is changing, from a model centred on official development assistance and the coverage of remaining financing needs through external debt, to a framework with greater emphasis on the mobilization of domestic resources. This report examines some of the key policy issues that underlie Africa’s domestic and external debt, and provides policy guidance on the delicate balance required between financing development alternatives and overall debt sustainability.
Development and Globalization: Facts and Figures 2016
The 2016 edition of the UNCTAD Development and Globalization: Facts and Figures is dedicated to the Sustainable Development Goals that were adopted by the United Nations in September 2015. The indicators for measuring progress towards these Goals that have been proposed by the Inter-agency Expert Group on Sustainable Development Goal Indicators (IAEG-SDG) and accepted by the United Nations Statistical Commission have not yet been endorsed by the General Assembly. Nevertheless, it is useful to give an early or preliminary assessment of progress for a selection of the 17 SDGs and 169 targets.
The problem of trade misinvoicing has generated increasing attention in the research and policy communities. It is an issue that has gained particular traction through the current debates on illicit financial flows, since trade misinvoicing continues to be used as a key mechanism of capital flight and illicit financial flows from developing countries. This study aims to contribute to research and policy debates by providing empirical evidence on the magnitude of trade misinvoicing in the particular case of primary commodity exports from five natural-resource-rich developing countries.
Background documents
Secretary-General Ban Ki-Moon’s Report for UNCTAD 14: From Decisions to Actions
As the first United Nations ministerial conference of the post-2015 era, the fourteenth session of the United Nations Conference on Trade and Development (UNCTAD XIV) will represent a starting point to translate the heightened ambitions and commitments of the international community into concrete plans of action. This report underscores four action lines needed to fulfil the ambitions of the post-2015 development agenda: building productive capacity to transform economies; more effective States and more efficient markets; tackling vulnerabilities, building resilience; and strengthening multilateralism, finding common solutions.
UNCTAD Toolbox for LDCs: Specializing Smartly
Thematic Note on Trade and Employment | UN Inter-Agency Cluster Multi-partner Trust Fund
Thematic Note on Trade and Value Chain | UN Inter-Agency Cluster Multi-partner Trust Fund
Thematic Note on Trade Facilitation | UN Inter-Agency Cluster Multi-partner Trust Fund
Breaking the Chains of Commodity Dependence | Background note for the Seventh Global Commodities Forum
Evidence-informed development cooperation and management of South-South and Triangular Cooperation in the context of the Sustainable Development Goals | Background document
The Trillion Dollar Question: How to Kick-Start Trade and Output Growth? | Policy Note
Collaborative Strategies for In-Country Shared Value Creation framework for Extractive Projects | OECD Development Policy Tools
Good Governance Guidelines – Independence and Transparency | UNCTAD MENA Programme
Competition Guidelines – Leniency Programmes | UNCTAD MENA Programme
Contributions
Servicification, Trade Facilitation: A Policy Agenda for Africa | Dominique Njinkeu and Sekou Doumbouya, African Trade and Sustainable Development (AFTSD)
The development of commodity derivatives markets in Africa | Government of Kenya
Impact of Cotton GVC on Africa and Farm Gate Activities | Government of Kenya
The economic lives of smallholder farmers: An analysis based on household data from nine countries | UN Food and Agriculture Organization
The Role of Green Energy in Achieving Sustainable Energy for All in Africa | Government of Kenya
How can international trade in services be made more efficient? | Dr. Vidal Ibarra-Puig, University of Cancun, Mexico
Trade Implications of Climate Policy after the Paris Outcome | The Commonwealth Secretariat
The Paris Climate Agreement: What Implications for Trade? | The Commonwealth Secretariat
A methodological framework to capture the various economic impacts of competition enforcement (Draft Report) | Steve Davies and Peter Ormosi, University of East Anglia, United Kingdom
Conference statements
Statement by International Lawyers Organization | 21 July 2016
Statement by World Bank Group | 21 July 2016
Statement by Food and Agriculture Organization (FAO) | 21 July 2016
Statement by Botswana | 20 July 2016
Statement by Zimbabwe | 20 July 2016
Statement by Swaziland | 20 July 2016
Statement by Mauritius | 20 July 2016
Statement by Uganda | 19 July 2016
Statement by Bangladesh on behalf of the LDCs | 19 July 2016
High-level Event on Promoting a Global Environment for Prosperity for All | Statement by Mr. Joakim Reiter, Deputy Secretary-General of UNCTAD
High-level Event on Looking Beyond Emergencies: Creating Opportunities in Migrant Sourcing and Transiting Countries | Statement by Joakim Reiter
Round Table on Lowering Hurdles for Trade: Trade Costs, Regulatory Convergence and Regional Integration | Statement by Joakim Reiter
Round Table on Building Economic Resilience for the Most Vulnerable | Statement by Joakim Reiter
Delivering as one: Launch of Multi-Donor Trust Fund for UN Inter-Agency Cluster on Trade and Productive Capacity | Statement by SECO
World Investment Forum 2016: High-Level Tripartite Conference on Investment Promotion in SDGs | Statement by Joakim Reiter
2016 Development and Globalization – Facts and Figures | Presentation by Steve MacFeely, UNCTAD
Developing natural ingredients sectors in nine Southern African countries | Presentation by Cyril Lombard, CEO, PhytoTrade Africa
Breaking new ground for biodiversity-based products | Presentation by Martha K Kangandjo, Eudafano Women’s Co-operative in Namibia
Innovative business models to connect farmers to markets | Presentation by Maarten van der Kamp
Global Services Forum: 21 July 2016
Leveraging infrastructure services as key enablers of the 2030 Agenda focus on Transport Services | Statement from Fatima Haram Acyl, Commissioner for the Department of Trade and Industry, AUC
Facilitating Trade in Services | Statement from Dongwei Shi, Vice President, Alibaba Group, China
Promoting tourism as an engine of inclusive growth and sustainable development in Africa
Statement from Vincent Oparah, Senior Adviser, Climate Change and Tourism, NEPAD
Statement from Najib Balala, Cabinet Secretary for Tourism, Kenya
Statement from Márcio Favilla, Executive Director for Operational Programmes and Institutional Relations, World Tourism Organization (UNWTO)
Global Commodities Forum: 15-16 July 2016
Keynote session: Trade misinvoicing in commodity dependent developing countries | Presentation by Léonce Ndikumana, Professor of Economics, University of Massachusetts
Keynote session: Breaking the Chains of Commodity Dependence: Exploiting the Agriculture Value Chain in Africa | Speech by Dr. Agnes Kalibata, President, Alliance for a Green Revolution in Africa (AGRA)
Building Productive Capacity to Transform Economies | Talking points for Hon. Minister of Trade and Industry, Joshua Setipa
Export Diversification and Linking into Global Value Chains: Tangible Solutions and Strategies | Presentation by Rashmi Banga, Head and Advisor, Trade Competitiveness Section, Trade Division, Commonwealth Secretariat
Local Content Realities in Extractive Industries | Presentation by Mwendia Nyaga, CEO, Oil and Energy Services, Nairobi
The Role of Natural Gas in the Transition to Achieving Sustainable Energy for All in Africa | Presentation by Taylor V. Ruggles, Regional Energy Counselor for Africa, U.S. Department of State Bureau of Energy Resources
Energy Challenge for Africa | Presentation by Thierry Bros, Senior European Gas and LNG Analyst, Société Générale
The Transformational initiative of Africa’s Leather Sector Dependence from Commodity to Value Created Agro-based Products | Presentation by Prof. Mwinyikione Mwinyihija, Executive Director, COMESA – Leather and Leather Products Institute (LLPI)
Related News
tralac’s Daily News Selection
The selection: Tuesday, 26 July 2016
Launching today: The State of East Africa Report. Twitter updates: #SOEAR16
AfDB Group’s Industrialisation Strategy for Africa 2016-2025 is approved
The strategy aims to: (i) Develop industrial sector and policy framework, (ii) Enhance trade and integrate Africa into the regional and international value chains and (iii) Boost competitiveness and value creation by expanding supply of business services to maximize impact on the performance of industries and vice-versa. It would also increase its level of funding and crowding-in third party resources to the tune of USD 35 to 56 billion over the next decade.
Trade Monitoring Report (WTO)
The report, discussed at a 25 July meeting of the WTO’s Trade Policy Review Body, shows that 22 new trade-restrictive measures were initiated by WTO members per month during the mid-October 2015 to mid-May 2016 review period. “The report shows a worrying rise in the rate of new trade-restrictive measures put in place each month — hitting the highest monthly average since 2011,” Director-General Roberto Azevêdo said. “We hope that this will not be an indication of things to come, and clearly action is needed."
South Africa’s Chamber of Mines responds to UNCTAD trade mis-invoicing report
The Chamber of Mines notes with concern the report published by the United Nations Conference on Trade and Development on Trade Mis-invoicing in Primary Commodities in Developing Countries. The report asserts systematic under-invoicing of South Africa’s commodity exports. The Chamber disputes the veracity of the data, the assumptions on which the research is based and the conclusions drawn as a result. A cursory review of the dataset referred to indicates significant gaps and errors. The assumption that companies are mis-pricing rather than that this ‘data’ is simply under- or over-reported is astounding. The Chamber has drawn the report to the attention of relevant local authorities and will engage with the author of the report in this regard. [Developing countries protest tax agreement]
Tanzania Local Content Forum: stakeholders urged to make local content concept a reality (IPPMedia)
Talking during the Tanzania Local Content Forum over the weekend, Prime Minister Kassim Majaliwa said local content concept is new, hence the need for concerted efforts to make it clear to a wide range of stakeholders and Tanzanians at large. “The idea of local content should be clearly understood from local government stage up to the central government level,” said the premier. The two-day meeting was organised by the National Economic Empowerment Council. Majaliwa said if local content concept will be clearly understood, it will significantly help to solve conflicts that sometimes happen between investors and citizens.
Namibia’s trade policy, trade diplomacy issues:
Fuming farmers urge government to intervene in export dilemma (New Era)
Fuming farmers from the length and breadth of the country have now accused South African authorities of using an animal health issue as an excuse to create a trade barrier for Namibian livestock, calling it nothing short of bullying tactics. Irate farmers at an open day of the Meat Board last week expressed their frustration with the new livestock import rules implemented by South Arica on July 1 and they urged the Namibian government to immediately address the situation. This comes three weeks after the border with SA was for all practical purposes closed for Namibian exports on July 1. The NNFU and producers across the country have now raised their voices, demanding that government brings the new import regulations of South Africa to the attention of the World Trade Organisation and put it on the agenda of the WTO Committee in October so that the world can see what SA is doing to Namibian producers. Namibia was set to present its case before the Sanitary and Phyto Sanitary Committee of the WTO in a bid to mitigate the new stringent livestock import restrictions by South Africa in March this year already but it did not materialise.
Dr Hage Geingob: speech at opening of Namibia’s Foreign Policy Review Conference
However, governments alone cannot resolve these deficits. We need the full participation of the private sector and all stakeholders. It is imperative for diplomats to engage private sector players abroad. Nothing prevents you from organizing inward or outward trade and investment missions. Here I would like to single out our mission in the United States, which over the past few years has been successful in arranging trade and investment events in the USA and facilitating numerous USA business and investment visits to Namibia. I encourage other missions to emulate this excellent example. Recently we had an excellent experience in business-to-business interaction during my State visit to Botswana. Whenever I visit another country, I would like a trade and investment event to be incorporated in the program. I expect to see more trade and investment facilitation from all our missions, especially from our main trading partners, like South Africa.
South Africa: Customs legislation is changing for the future (Reuters)
The current Customs and Excise Act 91 of 1964 is over 50 years old, and is getting a long overdue overhaul. The new Customs and Excise Acts aim to establish a world-class customs control system that meets international standards and best practices, while optimizing trade facilitation. The focus on technology and modernization in the way customs and global trade operate in a borderless world are aligned with the Constitution. This change also takes into consideration the revised Kyoto convention and the World Customs Organization’s Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework). Its aim is to harmonize, secure and facilitate the international trade framework.
Moving money across borders in the SADC region (tralac)
This briefing will explore two alternative (to traditional bank transfers and money transfer operators (‘MTOs’) such as Moneygram and Western Union) channels of remittances that rely on existing networks for funds transmittal – mobile money, which uses the mobile phone network, and retailer remittances, which use the networks of retail stores. These channels not only offer potential competition in the space occupied by banks and traditional MTOs, but potential to reach further – in both a geographical and socio-economic sense – than traditional providers. This trade brief therefore also considers what else SADC could do to play a leadership role in encouraging an environment to better facilitate the cross‑border movement of money through these channels in the region to enhance competition and thereby potentially reduce prices. [The analyst: Ashly Hope]
The rise of mobile money in West Africa (CPI Financial)
Zooming in on the WAEMU [also known as UEMOA] region comprised of Francophone West Africa (Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Togo, Senegal), one could see it as one of a kind success story when it comes to conducive regulation triggering increase of financial services for the poor. At end September 2015, users’ performance revealed that 347 million transactions valued at $8.5 billion were accounted for in the region, of which Côte d’Ivoire, Burkina Faso and Mali are the most dynamic markets. On average more than 1.2 million transactions were processed every day during that period. Strikingly, today, digital cross border remittances are increasingly dominating the traditional rapid money transfer services, particularly on corridors between Côte d’Ivoire and Burkina, Mali and Senegal, Togo and Benin. In addition, microfinance services and government services are progressively being processed on digital wallets. [The analyst, Maimouna Gueye is a digital finance expert attached to the AfDB] [WAEMU stays afloat on trade]
Can the internet reboot Africa? (The Guardian)
By 2020 there will be more than 700m smartphone connections in Africa – more than twice the projected number in North America and not far from the total in Europe, according to GSMA, an association of mobile phone operators. In Nigeria alone 16 smartphones are sold every minute, while mobile data traffic across Africa is set to increase 15-fold by 2020. Internet penetration in Africa jumped from very low levels in 2009 to 16% of individuals in 2013 and over 20% in 2015. But the proportion of people online is still far behind the global average – 17.4% of individuals have access to mobile broadband, while fixed broadband connections remain very low. Countries will have to keep up with rising demand for bandwidth in order to drive innovation and enable the shift to digital across all sectors. [The authors: Mark Rice-Oxley, Zoe Flood]
The good, the bad and the ugly of African capital markets (IPPMedia)
The above indicates that African pension funds are growing rapidly and have the legislative ability to invest into listed equities, particularly, in their own jurisdictions. The increased availability of local capital for development should lead to an increase in the number of African initial public offerings (IPOs) and listings, which in turn, should contribute to an increase in the liquidity of the African stock exchanges. What is needed is more sizable local businesses coming to market in their local jurisdictions. There have been 39 new primary listings in various African countries (including 22 primary listings in South Africa) during the past two years and many of these new listings have included an IPO which has been fully subscribed and in some cases oversubscribed. [The author, Robbie Cheadle, is attached to KPMG]
Financial systems in new middle-income African economies: the opportunities and the risks (UNU-WIDER)
This paper examines the possible implications for the financial systems of low-income African economies and in particular Tanzania of their stated aspiration to achieve middle-income status. In doing so it finds little evidence that the mere increase of gross domestic product per capita will lead necessarily to financial systems that are larger, deeper, or more inclusive. The paper examines both theoretical and econometric evidence to pin down this central conclusion. It also identifies a number of critical structural features that retard progress with financial sector development in some countries and advances a set of plausible hypotheses about the likely sequencing of development in different parts of the financial system—banks, capital markets, pensions, etc. [The author: Alan Roe]
Will robots ravage the developing world? (Bloomberg)
Today, many developing countries are still counting on this model. The problem is that robotics may fundamentally upend it. Even as global growth slowed, industrial robot sales grew 12% between 2014 and 2015, and have grown fourfold since 2009. As robots get cheaper and better, the advantage of employing a low-skilled labourer starts to fade. In other words, where poorer countries could once use their cost advantage to lure manufacturers, now all cost advantages are disappearing in the robotics age. A robot costs the same to employ whether in China, the U.S. or Madagascar. That's why Adidas is now making shoes in Germany -- in a largely automated factory, closer to its customers and free from the risks, costs and complexities of a lengthy supply chain. It's not alone. The implications of this shift shouldn't be underestimated. The days of international trade growing at near double-digit rates might be over. Trade has historically grown at twice the rate of gross domestic product, but in the past few years it has stagnated, leaving it 15% lower than would be expected, according to the Peterson Institute for International Economics. It may well have permanently stagnated.
COMESA Adjustment Facility: seventh call for submissions
This current call is the seventh Call for Submissions and is being made for continued support to eligible countries that have established Regional Integration Implementation Programmes (RIIPs). The financing modalities under which each Member State is eligible to receive RISM financial support in 2016 will be determined by the EU at the point of assessment of the submissions and at the point of disbursement. The COMESA Secretariat will provide the necessary guidance to Member States about their respective eligible status when the EU provides its assessment.
Mauritius to establish an air corridor with India, says Prime Minister (GoM)
“Mauritius is envisaging to establish an air corridor with India similar to that of the Asia-Africa air corridor launched earlier this year. Our ambition is to transform Mauritius into an important regional aviation hub that will connect Africa and Asia and we are determined to promote all possible opportunities for trade and investment between these continents”. The Prime Minister, Sir Anerood Jugnauth, spoke at the opening of the India-Mauritius Global Partnership conference. Over 200 delegates from India namely Ministers, eminent intellectuals, successful businessmen, potential investors and prominent artists of the Indian diaspora are attending the conference.
Reshaping India's trade policy (The Hindu)
Trade data for June 2016 brought cheers as India’s merchandise exports showed positive growth after 18 excruciating months. However, in their effort to take exports to the next level, India’s trade policymakers face four major challenges: How to encourage foreign investments, obtain a balanced outcome of Free Trade Agreements, improve ease of doing business, and reduce dependence on export promotion schemes? Coincidentally, all four concerns can be addressed by just one action: carrying out a selective reduction in basic custom duties
Okonjo-Iweala: ‘Diversification cannot happen over four years’ (Naija)
Kenya: Monetary Policy Committee statement (Reuters)
Ethiopian leader’s visit now gives Lapsset project renewed impetus (Daily Nation)
Rwanda: AGOA Action Plan submitted to the Ministry of Trade and Industry (East Africa Trade and Investment Hub)
Cananda’s internal trade: Premiers reach 'unprecedented' internal free-trade deal, ‘Tear down these walls’ (pdf, Senate Committee on Banking, Trade and Commerce)
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Report urges WTO members to resist protectionism and “get trade moving again”
WTO members need to avoid putting up barriers and “get trade moving again” in order to address slow global economic growth, according to the Director-General’s mid-year report on trade-related developments issued on 25 July. The Trade Monitoring Report concludes that the “best safeguard we have against protectionism is a strong multilateral trading system”.
The report, which was discussed at a 25 July meeting of the WTO’s Trade Policy Review Body (TPRB), shows that 22 new trade-restrictive measures were initiated by WTO members per month during the mid-October 2015 to mid-May 2016 review period. This constitutes a significant increase compared to the previous review period, which recorded an average of 15 measures per month, and is the highest monthly average since 2011.
During the same period, WTO members adopted 19 new measures per month aimed at facilitating trade, a slight increase compared to the previous review period. The stockpile of trade-restrictive measures in place grew by 11 per cent during the review period.
“The report shows a worrying rise in the rate of new trade-restrictive measures put in place each month – hitting the highest monthly average since 2011,” Director-General Roberto Azevêdo said. “We hope that this will not be an indication of things to come, and clearly action is needed. Out of the more than 2,800 trade-restrictive measures recorded by this exercise since October 2008, only 25 per cent have been removed.
“In the current environment, a rise in trade restrictions is the last thing the global economy needs. This increase could have a further chilling effect on trade flows, with knock-on effects for economic growth and job creation.”
The WTO will continue to monitor trade policy trends and developments in WTO members’ policies and provide a platform of inclusiveness and transparency for addressing challenges facing the global trading system today.
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DG’s Report: Overview of developments in the international trading environment (pdf)
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Director-General Roberto Azevêdo speech to the Trade Policy Review Body meeting
Key findings
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Between mid-October 2015 and mid-May 2016 (“review period”), WTO Members applied 154 new trade-restrictive measures, amounting to 22 new measures per month.
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This constitutes a significant increase compared to the previous review period, which recorded an average of 15 measures per month. It is the highest monthly average registered since 2011, when WTO recorded a peak in the monthly average of new trade‑restrictive measures.
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A total of 132 measures aimed at facilitating trade were taken during the review period, amounting to 19 measures per month. Although this shows a slight increase compared to the previous review period, the figure is lower than the recorded monthly average of trade‑restrictive measures.
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WTO Members initiated a higher number of trade remedy investigations per month during this review period compared to the previous period. The overwhelming majority of these were anti-dumping measures.
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The overall stockpile of restrictive measures introduced by WTO Members grew by 11% during the review period. Of the 2,835 trade-restrictive measures, including trade remedies, recorded for WTO Members since 2008 by this exercise, only 708, or 25%, had been removed by mid-May 2016. The rate by which WTO Members have been eliminating trade restrictions remains too low to make a dent in the stockpile. The total number of restrictive measures still in place today stands at 2,127.
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General economic support measures implemented by WTO Members are on the rise. A monthly average of 14 such measures were recorded for this review period, thus confirming an upward trend since the end of 2013 and edging closer to the highest monthly average of such measures recorded immediately after the onset of the global financial crisis.
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World trade remained volatile in 2015 as diverging outlooks for developed and developing economies unsettled global financial markets and prompted sharp movements in commodity prices and exchange rates. The volume of world merchandise trade grew 2.8% last year as trade fell sharply in the first half of the year before recovering in the second half.
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World trade prospects for 2016 and beyond remain uncertain. The most recent WTO trade forecast of 7 April 2016 predicted merchandise trade volume growth of 2.8% in 2016, at a rate unchanged from 2015. Despite a number of positive developments, the global economic environment remains challenging and continued vigilance is required.
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In the midst of this uncertainty, WTO Members must individually and collectively resist protectionist pressures. The best safeguard we have against protectionism is a strong multilateral trading system.
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Board approves AfDB Group’s Industrialisation Strategy for Africa 2016-2025
A road Map for scaling up Africa’s economic transformation
Africa’s industrialization agenda, one of the Bank Group’s top priorities for the continent’s economic transformation, received a boost this week with the approval of the Bank Group’s Industrialisation Strategy for Africa 2016-2025.
The Strategy, approved by the AfDB’s Board on Thursday, 14 July 2016, represents a roadmap for implementing priority programs to scale-up the industrial transformation of Africa. It addresses key issues such as: (i) Why we need to industrialize Africa; (ii) What it will take to industrialize Africa; and (iii) How AfDB will help to industrialize Africa.
In designing the strategy, the Bank underscored the vital roles that industrialization plays in development as it leverages all the value chains of economic activity ranging from raw materials to finished products. It catalyzes productivity by introducing new equipment and new techniques, increases the capabilities of the workforce, and diffuses these improvements into the wider economy. It generates formal employment, which in turn creates social stability. It improves the balance of trade by creating goods for export and replacing imports.
The strategy aims to (i) Develop industrial sector and policy framework, (ii) Enhance trade and integrate Africa into the regional and international value chains and (iii) Boost competitiveness and value creation by expanding supply of business services to maximize impact on the performance of industries and vice-versa.
To achieve these goals, the strategy would rely on five enablers which the Bank will mainstream into flagship programs. These are: (i) Supportive policy, legislation and institutions; (ii) Conducive economic environment and infrastructure; (iii) Access to capital; (iv) Access to markets; and (v) Competitive talents, capabilities, and entrepreneurship.
“In successful industrializing countries, these enablers have typically been integrated into a comprehensive industrial policy that has enabled businesses, both large and small, to develop along the value chains of selected, high-potential industrial sectors,” according to the strategy document.
The Bank will support countries by championing six flagship programs: (i) Foster successful industrial policies; (ii) Catalyze funding in infrastructure and industry projects; (iii) Grow liquid and effective capital markets; (iv) Promote and drive enterprise development; (v) Promote strategic partnerships; and (vi) Develop efficient industry clusters.
It would also increase its level of funding and crowding-in third party resources to the tune of USD 35 to 56 billion over the next decade. The Bank will also leverage additional resources through partnership with other DFIs, relevant UN agencies, AUC, RECs, and special purpose vehicles providing seed funds. In addition, substantial amounts will be mobilized through syndication and co-financing in support of phased programs that would be specific to local contexts and in line with the countries’ development goals.
“Industrialize Africa” will build on synergies across the other H5’s – Light up and power Africa, Feed Africa, Integrate Africa, and Improve the quality of life for the people of Africa – by virtue of its cross-cutting agenda.
Prepared in consultation with the relevant UN organisations such as UNIDO, UNECA as well as internal multi sectoral and external consultations, the African Industrialization Agenda is grounded on (i) the SDGs which recognize that industrialization is the right path to accelerate growth (ii) the Action Plan for Accelerated Industrial Development of Africa (AIDA (iii) Regional Economic Communities (RECs) industrial policies.
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Trade mis-invoicing – South Africa’s Chamber of Mines response to UNCTAD-sponsored report
The Chamber of Mines notes with concern the report published by the United Nations Conference on Trade and Development (UNCTAD) on Trade Mis-invoicing in Primary Commodities in Developing Countries. The report asserts systematic under-invoicing of South Africa’s commodity exports.
The Chamber disputes the veracity of the data, the assumptions on which the research is based and the conclusions drawn as a result. A cursory review of the dataset referred to indicates significant gaps and errors. The assumption that companies are mis-pricing rather than that this ‘data’ is simply under- or over-reported is astounding.
The Chamber has drawn the report to the attention of relevant local authorities and will engage with the author of the report in this regard.
Chamber members undergo regular, stringent audits in accordance with international accounting standards, and report in compliance with legislation and listing requirements. The Chamber is confident that the South African gold export statistics reported by the companies over the past few decades match the average rand gold prices and production numbers.
South Africa boasts a world-class regulatory and tax enforcement regime and the opportunity for mis-pricing is small. SA tax authorities apply the OECD Transfer Pricing Guidelines for Multinational and Tax Administrations (which South African officials helped develop) and the UN’s Practical Manual on Transfer Pricing. South Africa is acknowledged to be leading implementation of the OECD transfer pricing, base erosion and profit shifting guidelines.
Last year, the Chamber commissioned independent research into South Africa’s transfer pricing regime and specifically how it measures up to international standards. The report notes that South Africa has kept pace with the best international standards since the mid-1990s with respect to its transfer pricing rules. Recent reviews by the Davis Tax Committee reached a similar conclusion.
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Developing countries protest tax agreement
Despite playing host to the United Nations Conference on Trade and Development (UNCTAD) conference for the first time in three decades, African delegates left the summit deflated after failing to push through a new order for monitoring tax dodging by multinationals.
The 70 ministers holding the talks failed to come to an agreement as JUSCAN (Japan, the US and Canada), the European Union, and former Soviet Union countries (Group D) rejected proposals from the Group of 77, led by China with African and other developing countries in tow.
Contentious issues on taxation and debt management led to a stalemate: A section of the civil society protested outside the Kenyatta International Convention Centre when it became apparent that developed countries had gotten their way on the tax, trade, investment and debt texts in the draft documents that were to be adopted at the end of the meeting.
In the pre-conference negotiating text, UNCTAD had proposed joint global action on illicit financial flows, tax evasion and avoidance.
The G77 wanted the text to exclude tax avoidance, which under most jurisdictions is legal.
In debt management, UNCTAD had sought to widen its mandate to offer technical assistance and formulate policies for prudent sovereign borrowing. Developed countries, however, did not want to be restrained from taking in more debt, but to be encouraged to focus on better management of the debt.
The developed nations said having UNCTAD play a role in global taxation rules would conflict with the recent mandate given to the Organisation for Economic Co-operation and Development Base Erosion and Profit Shifting (BEPS) rules that aim to save the G77 countries an estimated $150 billion in tax losses.
African and developing countries had banked on the conference in Nairobi to push for a consensus on how to deal with tax evasion that has seen them lose more than $100 billion through dubious actions by multinationals.
UNCTAD Secretary General Dr Mukhisa Kituyi said there was consensus that the organisation would continue to have advisory roles on international economic co-operation outside of the taxation role.
On the sidelines of the conference, Tax Justice Network Africa Executive Director Alvin Musioma said that developed countries appeared keen not to allow a stronger mandate for UNCTAD.
“This shows their non-commitment in helping Africa address the tax evasion leaks, which is costing these countries a lot of revenue,” Mr Musioma said.
In a statement, a caucus of 400 civil society groups said that the developed nations were reluctant to address Africa dependency.
“The hypocrisy of their efforts is intended keep developing countries in a debt trap without escape. After this conference, no country from the EU or US or other members of JUSCAN can claim to be in favour of developing countries’ escaping the debt treadmill,” the group said.
Dr Kituyi said that Africa’s external debt ratios appear manageable. “Borrowing can be an important part of improving the lives of African citizens, but we must find a balance between the present and the future, because debt is dangerous when unsustainable,” he said.
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EAC bank governors agree to mitigate risks
The EAC central bank governors have unanimously reiterated the need to rebuild foreign currency reserves and the strengthening of financial sector regulatory frameworks to ensure stability.
Central Bank governors have underscored the need to put in place safeguards to mitigate imminent risks facing emerging economies in the wake of the of unconventional monetary policies by the US Federal Reserve Bank and Britain’s exit from the European Union (Brexit).
According to a statement, the governors agreed to the suggestions during the 20th ordinary meeting of the EAC Monetary Affairs Committee (MAC) in Kampala, recently.
The meeting was hosted by the Bank of Uganda and chaired by the Governor of Bank of Tanzania, Prof Benno Ndulu who is the current chair of MAC.
Other governors present included Uganda’s Emmanuel Tumusiime Mutebile, Central Bank of Kenya Patrick Njoroge, Bank of the Republic of Burundi Jean Ciza, and National Bank of Rwanda Governor John Rwagombwa.
Prof Ndulu said: “The global demand dynamics and the risk of isolation of EAC financial systems are likely to adversely impact partner states, capital flows, trade and investment, exchange rates and overall macroeconomic stability.”
The meeting among other things reviewed the progress on the implementation of the decision of the 19th ordinary MAC meeting held in Zanzibar, in August on the exchange rate developments and one on required policy response that took place in Arusha in December last year.
Prof Ndulu said the governors are committed to the EAC integration process and noted that commendable progress has been made in implementing previous MAC decisions.
He cautioned that while the legal frameworks for establishing institutions to support the establishment of the EAC monetary Union have advanced there is still a need for the process to be fast tracked if the monetary union is to be achieved by 2024.
He added that that the Central Bank governors have commended the progress achieved in other areas of harmonisation of Monetary Policy Frameworks.
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Financial systems in new middle-income African economies: The opportunities and the risks
This paper examines the possible implications for the financial systems of low-income African economies and in particular Tanzania of their stated aspiration to achieve middle-income status. In doing so it finds little evidence that the mere increase of gross domestic product per capita will lead necessarily to financial systems that are larger, deeper, or more inclusive.
Introduction
Several African countries including Tanzania have defined ‘visions’ for their medium term economic futures in which they anticipate achieving ‘middle-income status’ by, for example 2025 or 2030. The paper sets out to establish what this transition may mean for the financial sectors of those economies in terms of both the size of those sectors but also for the broadened range of assets and financial services that these sectors may offer once middle-income status is achieved.
These implications have already been spelled out ex ante in some of the African Vision statements with which we are familiar. For example, in the Kenyan case, the financial services sector is seen as one of six key sectors for the achievement of the country’s vision. Specific policy aims for the sector include: the transformation of the banking sector with fewer but larger banks; the development of a comprehensive model for pension reform; development of a comprehensive strategy for (international) remittances; formulation of a new policy for the issuing of benchmark sovereign bonds; and the implementation of institutional and legal reforms to help Kenya become a regional financial centre. This paper seeks to set such aims into a somewhat broader context and then use this to comment on the likely shape of African financial systems when and if middle-income status is achieved.
Box 1: Middle-income status
Middle-income status is a big and also a somewhat ambiguous target. At present – 2014 data (World Bank 2016) – the average per capita income (GNI) in all low-income countries globally is US$630 per annum. In Sub-Saharan Africa (SSA) where some countries such as South Africa, Mauritius, and Namibia are already middle-income, the average income is higher at US$1,650 per annum. But this is still equivalent to only 35 per cent of the corresponding average income in all middle-income countries globally: currently US$4,700. For the lower-income countries of SSA such as Kenya, Tanzania, Uganda, and Rwanda where per capita incomes are currently between US$600 and US$1,300, even 7 per cent growth for the next 16 years (2014 to 2030) would still leave many of them below an income level of US$2,000 and so well below the global middle-income average of US$4,700. What this means for the lower-income countries is that their 2030-type visions must in practice refer to attaining and slightly surpassing the present status of lower-middle-income economies where the present global average income is just over US$2,000 per annum. For these countries the relevant middleincome comparator countries of today (in income terms) are countries such as India (current income US$1,600), Sri Lanka (US$3,400), Bhutan (US$2,300), Bolivia (US$2,900), and not the majority of middleincome countries of Latin America such as Brazil (average income US$11,800) and Mexico (US$10,000), or the majority of the countries of East Asia such as Thailand (US$5,800) and Malaysia (US$11,100). The paper reflects that reality in the comparisons that it draws.
The task of anticipating the future shape of African financial systems needs to be undertaken against the background of the significant changes that many of these systems have seen during the past two decades. Hence, the paper begins in Section 2 with a brief résumé of some of the main features of that past record. Section 3 then provides a definition of financial sector development and uses it to provide some simple statistical comparisons as between today’s financial systems in low-income Africa and in a selection of middle-income countries in Asia and Latin America. In essence the question posed is – are the financial systems of middle-income countries systematically different/better? Section 4 examines and seeks to account for some of the differences seen in our selective comparisons by reference to some recent econometric and theoretical literature about the multiple influences on financial sector development. Section 5 selectively relates the analytical evidence to the current Tanzanian situation. Section 6 examines two particular opportunities that are also potential dangers. Section 7 offers a few main conclusions.
Africa – the recent past
Financial systems in Africa have undergone significant changes in the past 15-20 years. In the 1970s and 1980s most such systems were dominated by government-owned banks which themselves had been set up in response to the much criticized colonial banking systems of earlier periods. But the experiments with state-controlled banking had led to many difficulties that were progressively resolved – not least by widespread re-privatization – during the 1980s and 1990s. This has resulted in a situation where many African countries now see an ownership structure for banking dominated by foreign banks – initially mainly European but now increasingly African – with a far lower incidence than previously of state-owned banks. This privatizing reform was accompanied by a general move to more liberal policy approaches to banking and financial activity. In many countries this included the abandonment of restrictive regulations – including administrative controls on interest rates and the use of sector-based or other directed credits. At the same time, regulatory standards have become much improved with most African countries moving towards higher levels of compliance with Basel core standards for banking regulation and supervision, and the parallel standards for capital markets and insurance.
African banks and other financial institutions have also been quick to adopt and adapt new technologies and especially those relating to mobile phone payment and agency banking. Both mainstream banks and more specialized access institutions such as those engaged in micro finance have together achieved major improvements in the numbers of people having reasonable access to financial services. Part of this has been due to institutional changes that have seen a considerable expansion in, for example, the number and range of activities of Micro Finance Institutions (MFIs) – borrower numbers served by African MFIs increased from 1.6 million in 2003 to 8.5 million by 2009.
Certainly there has been a sea change in attitudes towards financial access and inclusion and numerous important policy initiatives have been designed to improve this. Finally, some opening up of traditionally closed national borders combined with the broader globalizing tendencies of this period have seen several African banking systems developing cross-border activities. This too has extended to the region’s stock markets with cross-listing across two or more exchanges becoming increasingly common. A few African countries such as Nigeria and Kenya are seeking to take this one step further by creating international financial centres.
The overall result is that today, most African countries have deeper and more stable financial systems than was the case some 20 years ago. Greater macroeconomic and financial sector stability has in turn given African economies greater and more favourable access to fund-raising on the international capital markets. In relation to the subject of this present paper, it is debatable whether the very significant reforming and deepening changes that we have seen have depended on higher levels of per capita income. Indeed most of the evidence suggests that the much better growth rates of per capita income seen in African economies in recent years are the consequence of the liberal reforms in finance and elsewhere in these economies and not the cause. So when looking ahead, one question that logically arises is whether the future move to middle-income status will lead automatically to further improvements in the financial sectors or whether such improvements will have to be hard fought through further challenging reforms.
Alan R. Roe is non-resident Senior Research Fellow, UNU-WIDER, Helsinki, Finland; Associate Fellow, University of Warwick, Warwick, UK; and Senior Associate, Oxford Policy Management, Oxford, UK. This study has been prepared within the UNU-WIDER project ‘Jobs, poverty and structural change in Africa’ as part of UNU-WIDER’s collaboration with Policy Research for Development (REPOA) on socio-economic transformation.
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tralac’s Daily News Selection
The selection: Monday, 25 July 2016
Starting today, in Kigali: the first Kenya-Rwanda women trade and business forum (25-28 July)
Tomorrow, in Accra: Ghanaian businesses to discuss BREXIT impact
UNCTAD 14 ends with adoption of two crucial documents
The two documents – Nairobi Maafikio and Nairobi Azimio – are aimed at ensuring fair trade between developing countries and developed nations as well as ensure action is taken on previous agreements. The Nairobi Maafikiano, which has focussed on four main areas and how UNCTAD is supposed to help its members in moving towards an inclusive and equitable global economic environment for trade and development. The Maafikiano document has also stated several roles UNCTAD is supposed to play in promoting inclusive and sustainable economic growth through trade, investment, finance and technology to achieve prosperity for all. [Mukhisa Kituyi: Even as the West turns its back on the world, Africa must embrace free trade]
G20 Finance Ministers and Central Bank Governors meeting: communiqué
Furthermore, to strengthen our efforts, we are updating our growth strategies to include new and adjusted macroeconomic and structural policy measures that can provide mutually-supportive benefits to growth. Our updated growth strategies and an accountability report on progress against our growth ambition will be finalized before the Hangzhou Summit. We underscore the role of open trade policies and a strong and secure global trading system in promoting inclusive global economic growth, and we will make further efforts to revitalize global trade and lift investment. We will also strive to reduce excessive imbalances and promote greater inclusiveness in our pursuit of economic growth. [IMF’s G20 inputs: Global prospects and policy challenges, Priorities for structural reforms in G20 countries, Reinvigorating trade to support growth: a path forward]
TICAD2016: over 20 African leaders expected to attend (CapitalFM)
Over 20 African leaders are expected to attend this year’s Tokyo International Conference on Africa’s Development in Nairobi. The event set for 27-28 August will have three main themes: promoting structural economic transformation through economic diversification and industrialization, promotion of resilient health systems for quality of life and promotion of social stability. President Uhuru Kenyatta will open the event, alongside Japan Prime Minister Shinzō Abe. UN Secretary General Ban Ki Moon will also attend the conference. About 5,000 delegates are expected to attend the forum. [Ghana to host 2017 Russian-African Forum in February]
The Afreximbank Annual General Meeting took place last week in the Seychelles. Selected updates: Visa system obstructing intra-African trade, Afreximbank announces 2015 performance, shows 25% income growth, Speech by Dr Benedict Oramah (President and Chairman of the Board of Directors, Afreximbank)
Prof Joseph Stiglitz, in a presentation to the Afreximbank AGM titled, ‘Can intra-African trade unlock Africa’s industrial potential’ (pdf), said that intra-regional trade could help African countries achieve necessary economies of scale. He said that Africa’s priority should be trade and the implementation of appropriate industrial and trade promotion policies to take advantage of the window of opportunities presented by the major changes occurring in the global economic landscape. The changes included the emergence of China as a very large and rapidly growing market for African exports, and not just for its natural resources, and the rising wages in that country which was creating “space” in for labour-intensive, simple manufactures that Africa could easily occupy, and eventually, for less labour-intensive and more complex manufacturers, he said.
It would also cover logistics that facilitate intra-regional trade, such as shipping equipment, railways and rolling stock, and trade facilitating infrastructure, such as power. Under the terms of a separate cooperation agreement, signed between Afreximbank and the Made in Africa initiative during the same ceremony, Afreximbank and the Initiative will also pursue the facilitation of investment flows into Africa by working with African governments to create, develop, and improve “soft” and “hard” infrastructure required for industrialization. Afreximbank will, in addition, work with the Initiative on the establishment of a pan-African equipment leasing platform to supply heavy duty and manufacturing equipment to support local content in the various sectors of the African economy.
States adopt new funding model for AU (The East African)
A technical committee composed of Finance ministers and central bank governors was also selected and is expected to come up with a roadmap in the next three months to ensure that by fiscal year 2017, the new funding model is executed. It will be included in the finance law of the respective member states. “We are not going to change the regulations (Customs) and rules of each country. We are simply going to adopt them to ensure that they provide 0.2% of that money to AU account located at the national central bank,” Dr Kaberuka said, adding that the model has been tested and proven to be successful as it is currently implemented by Economic Community of West African States for the past 12 years.
Africa50 AGM: update (AfDB)
The Chairman of Africa50, Akinwumi A. Adesina, presented to shareholders the many milestones reached by Africa50 in its first five months of operations together with the outlook for 2016, including a target to reach the $1bn mark within the next 6 to 9 months, and committing its first investments within a short timeframe. Africa50 now has a total of 25 shareholders consisting of 22 African countries, the African Development Bank, and two African Central Banks (Bank Al Maghrib of Morocco, and the Central Bank of West Africa States - BCEAO).
Ecowas Industrial Summit: update (GoG)
In an address delivered on his behalf at the opening of the meeting, President Mahama expressed optimism that the four thematic areas of the West African Common Industrial Policy (WACIP), namely agro-industry, pharmaceuticals, automotive and textiles, and garments, would impact positively on the social and environmental dimensions of industrialization as well as on the creation of quality jobs for the youth. The President of the Association of Ghana Industries (AGI), James Asare-Adjei, in a statement, noted that intra-regional trade among ECOWAS states had not been encouraging enough, citing 46%, 8% and 6% of Ghana's exports to the European Union, Chinese and ECOWAS markets respectively. [Ghana-China Investment Forum: update, Ghana becomes China's biggest trading partner in W/A: trade volumes hit $1.8bn in Q1]
Nigeria: Agriculture Promotion Policy 2016-2020 (Federal Ministry of Agriculture)
Second, FMARD will prioritize for export markets the production of the following crops and activities: cowpeas, cocoa, cashew, cassava (starch, chips and ethanol), ginger, sesame, oil palm, yams, horticulture (fruits and vegetables), beef and cotton. FMARD will also work with a network of investors, farmers, processors and other stakeholders to deepen the supporting infrastructure to ensure that quality standards are defined and maintained across the value chain. That will involve adding more testing laboratories, improving traceability of crops, disseminating intelligence on export markets and consumer preferences, etc. Our goal is to build a high quality brand for Nigerian foods based on rigorous data and processes that protect food safety for both domestic and export market consumers. [Olawale Ogunkola: How can trade policy promote sustainable agricultural development in Nigeria? (ICTSD)]
Northern Corridor: EOI for the implementation of a regional electronic cargo tracking system (pdf, AfDB)
The AfDB has secured funding from the Africa Trade Fund for undertaking a study on implementation of a Regional Electronic Cargo Tracking System and its use for Corridor Performance Monitoring on the Northern Corridor. The Bank invites suitably qualified Consultancy firms to express their interests in the following assignment: A study on the implementation of Regional Cargo Tracking System and its use for Performance Monitoring on the Northern Corridor. The Northern Corridor consists of six countries, namely; Burundi, Democratic Republic of Congo, Kenya, Rwanda, South Sudan and Uganda. The corridor also services Northern region of Tanzania and Southern region of Ethiopia.
North-South Corridor: Chinese engineers on ground for multi-billion Harare-Beitbridge road project (BH24)
Engineers from two Chinese firms awarded the $2bn tender to dualize the Harare-Beitbridge-Chirundu highway are in the country to initiate the project design, a cabinet Minister said on Friday. The highway is Zimbabwe’s busiest and is the gateway to neighbouring countries such as South Africa, Zambia as well as Malawi and the DRC. Geiger International in association with China Harbour Engineering Company Limited was awarded the tender for the dualization project. Transport and Infrastructure Development Minister Joram Gumbo said the project design would be completed by next month. [Govt to plug Beitbridge border leakages (The Herald)]
Zim, SA in bilateral talks over imports ban (The Standard)
Industry and Commerce minister Mike Bimha told Standard Business last week that Zimbabwean and South African officials met for a “routine meeting” on Wednesday to discuss bilateral issues and Zimbabwe explained the reason behind the promulgation of Statutory Instrument (SI) 64 of 2016. He said his ministry impressed upon their South African counterparts that the restrictions were necessary to grow the local manufacturing sector. “It’s not a big issue; they have to understand that we are simply taking back our jobs,” Bimha said. [SA mall investor to assess bond notes impact]
South Africa: Eastern Cape shows off trade pedigree in Africa (DEDEA)
The Eastern Cape, one of only three provinces to experience economic growth higher than the national average, continues to play a significant role in South Africa's trade, particularly with the rest of Africa. Its trade deficit, however, increased from R1.3bn in 2011 to R11bn in 2015 as the value of imports grew 14.8% a year against exports' 10%, according to the Eastern Cape Economic Review for the second half of 2015. Trade between the Eastern Cape and Africa has been positive, with the trade surplus from Africa increasing from R1bn in 2011 to R2.6bn in 2015. However, this might not last in the long term if imports continue to grow faster than exports, as they have over the past five years. The SADC region remained the major export destination, with exports growing 9% to R4.8bn over the past two years. [Provincial Review 2016: Eastern Cape (pdf, TIPS)]
Dar port stakeholders petition govt over VAT on transit cargo (IPPMedia)
In their latest attempt to convince the government of President John Pombe Magufuli who has ruled out any possibility of abolishing value added tax imposed on transit cargo ancillary services, three major players of the country’s prime port are now talking numbers. The statement by Tanzania Truck Owners Association, Tanzania Shipping Agents Association and Tanzania Freight Forwarders Association further noted that the TRA analysis also overlooked the Dar-es-Salaam Port to Uganda route whose cost per tonne is US$ 4,435 compared with Mombasa Port route which charges US$ 2,712 or less US$ 1,723. “This is why Mombasa Port is enjoying five million metric tonnes of goods as compared to Dar-es-Salaam Port which has 200,000Mt only to the same destination,” the statement argued.
Uganda: Stop political arrests or lose US trade – Obama (Daily Monitor)
The United States government has warned that Uganda risks being kicked out of the Africa Growth Opportunity Act partnership if the government does not stop abusing human rights of its citizens, and harassment and persecution of the Opposition. “As you know, the African Growth and Opportunity Act requires an annual review of compliance with eligibility criteria for each country. As we approach the Agoa country eligibility review for Uganda for 2017, I wanted to make you aware that the US government has identified some serious concerns related to the government of Uganda’s adherence to certain Agoa criteria,” President Obama’s adviser on trade, Ambassador Michael B.G. Froman, wrote to Uganda’s minister of Trade and Industry, Ms Amelia Kyambadde, on 17 June. Uganda's Minister for Information and ICT, Mr Frank Tumwebaze, said the Uganda government will not be bothered by the US statements, which he dismissed as subjective judgments.
Mauritius-European Free Trade Association: update (GoV)
Development Cooperation Forum: downloads (ECOSOC)
Negotiating natural resources contracts: AfDB capacity building workshop
Ethiopia suspends medicine import from 11 Egyptian manufacturers (The Independent)
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UNCTAD 14 ends with adoption of two crucial documents
The 14th United Nations Conference on Trade and Development (UNCTAD) has finally come to a close with the adoption of two crucial documents that will guide the mandate of the agency for the next four years.
“I would like to invite the conference to adopt the text… are there any objections? I don’t think there can be any. And because there are none the Nairobi Maafikiano is hereby adopted,” President of the UNCTAD 14 Ambassador Amina Mohamed said during the conference.
The two documents – Nairobi Maafikio and Nairobi Azimio – are aimed at ensuring fair trade between developing countries and developed nations as well as ensure action is taken on previous agreements.
The Nairobi Maafikiano, which has focussed on four main areas and how UNCTAD is supposed to help its members in moving towards an inclusive and equitable global economic environment for trade and development.
The first area will include the role of UNCTAD in dealing with challenges and opportunities in multilateralism for trade and development.
For example, in the next four years, UNCTAD is supposed to continue its work on the impact of non-tariff measures on trade and development prospect of developing countries.
“UNCTAD should continue to help developing countries to participate effectively in international discussion on technology and knowledge sharing,” part of the document states.
The Maafikiano document has also stated several roles UNCTAD is supposed to play in promoting inclusive and sustainable economic growth through trade, investment, finance and technology to achieve prosperity for all.
This will be mainly aimed at eradicating poverty, job creation, technological upgrading, economic diversification and reduction of income inequality.
The third area of focus for UNCTAD in the next four years will be advancing economic structural transformation and cooperation to build economic resilience.
The fourth area of focus will be contributing to the effective implementation of, and follow-up to the 2030 Agenda for Sustainable Development and relevant outcomes from global conferences and summits as related to trade and development.
“I’m delighted that our 194 member states have been able to reach this consensus, giving a central role to UNCTAD in delivering the sustainable development goals,” UNCTAD Secretary-General Mukhisa Kituyi said.
On the other hand the ‘Nairobi Azimio’ document is a political declaration representing a broad expression of the social and economic state of the world.
“We the member states of the United Nations Conference on Trade and Development agree on the following declaration herein referred to as the ‘Nairobi Azimio’ that is firmly anchored in the heritage of achievements of UNCTAD since its creation in 1964,” the document reads.
Among others, the members commit to uphold the decisions taken at UNCTAD 14 as well as urge members states to fully implements the Nairobi Maafikiano, achieve gender equality and promotion of the youth.
The declaration has reiterated that each member country has a primary responsibility for its own economic and social development.
The conference was opened on Sunday by UN Secretary-General Ban Ki-moon in the presence of President Uhuru Kenyatta and the vice-President of Uganda, Edward Kiwanuka Ssekandi, before running for five days in Nairobi from July 17 to 22.
More than 5,000 delegates from 149 countries attended.
President Kenyatta closes UNCTAD 14, hails increased mandate for the organisation
President Uhuru Kenyatta on Friday evening closed the 14th session of the United Nations Conference on Trade and Development (UNCTAD 14).
The conference came to a close with a global statement of unity on issues of trade and development following the adoption of the Nairobi consensus documents – Nairobi Azimio and Nairobi Maafikiano.
The Nairobi Azimio outlines the important role of UNCTAD as the focal point within the United Nations system for the integrated treatment of trade and development in the areas of finance, technology, investment and sustainable development.
Nairobi Maafikiano brings together new consensus in the work programme, which UNCTAD will undertake in the next four years.
“I note that the Nairobi Azimio upholds the decisions taken at previous UNCTAD Conferences. I urge all member States to implement the Nairobi Maafikiano. I am confident that the implementation of the Azimio and Maafikiano declarations will enable us to accelerate progress towards shared prosperity,” said President Kenyatta when he addressed the closing ceremony.
President Kenyatta used the opportunity to underscore the growing importance of UNCTAD in promoting balanced trade to spur development and reduce inequalities.
“The convergence of the world in Nairobi is a clear sign of our shared commitment to the mandate of UNCTAD and the significance of the role that it plays in trade and development,” said President Kenyatta.
When he opened the conference on Monday, President Kenyatta had urged the participants and member countries of the UN to expand the mandate of UNCTAD so that it plays a bigger role in achieving the Sustainable Development Goals.
The President thanked Cabinet Secretary Amina Mohamed, who is the President of UNCTAD 14 for the role she played in overseeing the successful negotiations that led to the agreements. He also expressed his gratitude to the Secretary General of UNCTAD Dr Mukhisa Kituyi and other officials of the organisation for the resounding success of the conference.
The Head of State, who was attending the UNCTAD 14 for the third day since it kicked off on Sunday, also thanked the President of the Republic of Namibia, Hage Geingob, the Vice President of Uganda, Edward Kiwanuka and the Vice President of Comoros, Djaffar Ahmed Said Hassan, for attending the conference.
President Kenyatta also thanked the more than 7,000 delegates who attended the conference.
“CEOs, investment advisers and entrepreneurs have all been involved in vibrant discussions during the Global Investment, Commodities, Youth and Women forums that have combined to make UNCTAD 2016 a really truly memorable, inspirational, innovative and fruitful experience,” said the President.
The involvement of women and youth is particularly important in realizing SDGs, and particularly in deepening trade that ensures growth that leaves no one behind, added the President.
Ambassador Amina and Dr Kituyi thanked President Kenyatta for his support in ensuring a successful conference.
Dr Kituyi said the successful manner in which the conference was organised shows that Nairobi’s conferencing facilities are world class.
In his closing remarks, President Kenyatta also announced that Kenya will host the second High Level Meeting of the Global Partnership for Effective Development Co-operation (GPEDC) from November 28 to December 1. The meeting is an inclusive multi-stakeholder partnership. It sustains Global political momentum for more effective development cooperation based on shared principles of country ownership, focus on results, inclusive partnership and transparency and accountability in support of SDGS.
“Given that this is the first time the high level meeting on GPEDC is going to happen in Africa under the leadership of Kenya we request for your kind support to make it a success,” the President said at the Kenyatta International Convention Centre.
Meanwhile, on the sidelines of the UNCTAD 14 closing ceremony, Ambassador Amina and the Executive Director of Oxfam International, Winnie Byanyima, signed an agreement that will see Oxfam relocate its global headquarters from Oxford, UK, to Nairobi.
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Even as the West turns its back on the world, Africa must embrace free trade
How fast the world changes. There was once a time when global financial institutions pushed neo-liberal policies on African economies, even as my organisation, Unctad, repeatedly warned of the potential dangers of opening up to globalised markets. And we were right.
Unregulated capital markets eventually wrought enormous damage in Latin America, Southeast Asia and Africa. No wonder this period produced the phrase “casino capitalism.”
But now the tables have turned. The global North is fast emerging as the heart of resistance to globalisation. It has seen how free markets widen social inequality and learnt that effective regulation makes markets work better for people.
But these lessons have not been learnt fast enough. Economic uncertainty and the decline of the middle classes have brought us Brexit, isolationism, and the worrying growth of protectionism.
Many Africans, on the other hand, have come to embrace the benefits of global trade. This is especially true for commodity-exporting countries, which, in the space of a decade, have helped to move our continent from “the hopeless continent” to “Africa rising.” Some African countries saw double-digit growth for more than a decade.
But our world is now deeply interconnected. As economic growth has slowed in the North, it has in turn slowed in China, then in Africa too.
The global commodities boom may have felt good to many in Africa. But it has finally run out of steam. Tumbling currencies and mounting debt suggest that many African countries are in for a period of stagnation in growth.
Part of the reason for this is that African countries have still not managed to diversify their economies and continue to spend too much of their commodity cash on consumption. They should have built capacity to produce and manufacture instead. As commodity prices have dropped, economic growth has also slowed.
The dangers should be evident. Indeed, the Middle East has shown us all how dangerous young populations can be when suffering unemployment and frustrated expectations. African policy makers must learn the lessons quickly, because if we want to achieve the Sustainable Development Goals, political and social stability are essential.
Conflict, on the other hand, extracts a disproportionate cost. Civil war undercuts a country’s trade volumes by as much as 12-25 per cent in the first year of conflict alone. And it can take 25 years to return to pre-crisis levels.
Consider, for example, that between 1960 and 2000, sub-Saharan Africa suffered an average of 20 coups per decade, then six in the 2000s, then just four so far this decade. With this extra political stability, governments have been better able to focus on the task in hand: Governing for the people.
Countries such as Angola, Rwanda, Ethiopia, and more recently Liberia and Sierra Leone, offer tangible evidence that peace brings many benefits. This stability creates its own cycle of virtue.
The continent must protect that virtuous cycle of peace and growth. If we want to generate enough jobs and business opportunities for the 17 million Africans who join the labour market every year, nearly 70 per cent of them under the age of 25, then we need political stability to get back on track with sustainable growth and development.
Globalisation offers excellent opportunities in this respect. And even if Northern governments come under popular pressure to turn their backs on the rest of the world, we must demand that our African leaders turn their backs on narrow rejectionism and maintain the spirit of inclusion.
This can be tricky. Globalisation produces losers as well as winners, but the examples of Rwanda and Ethiopia show us that by making the right policy choices, governments can grow their economies and societies even when a slowdown in global growth makes conditions hard for many.
These countries have been using evidence-based policy to unlock trade and boost productivity. This ensures that the maximum number of people benefit, giving rise to a positive collective spirit.
As Africans, and as part of a wider global community, we must all of us maintain this collective spirit. Unctad can certainly help.
As a UN agency, one of our greatest strengths is our extraordinary convening power, such as the ability to organise a conference whose participants include a wide and healthy diversity of governments as well as civil society and private business - exchange ideas and experiences of evidence-based solutions that benefit us all.
This past week’s Unctad 14 meeting in Nairobi was an important moment for us, not just because it was about technical ideas.
In this complex, globalised world, we will need partnerships to propel us on the long, uphill road to enhanced global trade, productivity and prosperity for all.
Dr Mukhisa Kituyi is secretary-general of Unctad, the United Nations Conference on Trade and Development.
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G20 ‘breakthrough’: finance chiefs agree to keep tabs on economic reform
Broad consensus on framework to assess structural improvements, but differences remain between US and China
The world’s top economic policymakers have agreed upon a set of indicators to monitor progress in structural reforms, a move that could lead to a mechanism to name and shame laggard nations on the global stage.
The deal was revealed at the end of a two-day meeting of finance ministers and central bank governors from the world’s top 20 economies, including the US, China, Japan, Germany and Britain, held in Chengdu in Sichuan province.
In light of the fragile world economic recovery and fresh uncertainties over Brexit, G20 officials reiterated that member countries would use monetary and fiscal policy tools – as well as structural changes – on an individual and collective basis to keep growth on track. They also reaffirmed they would refrain from competitive currency devaluations.
Finance Minister Lou Jiwei described the agreement on structural reforms as a “landmark” breakthrough for the G20. Every member had virtually agreed to a review system that would assess domestic reforms in areas from free trade to the labour market. Indicators agreed upon included workforce productivity, he said.
“Every country is putting pressure on itself [in the area of structural reform], and it shows a sense of responsibility and accountability,” Lou said after the meeting.
The meeting, the final ministerial gathering before the G20 leaders’ summit in Hangzhou in Zhejiang province in early September, is one of the biggest gatherings of leading economic policymakers.
China, which holds the G20 presidency this year, is trying hard to ensure the meetings generate real results and aren’t just talk shops. The grouping came into its own as a policy coordinating force in 2008 when nations worked together to avoid a global depression after the financial crisis.
But as the threat of disaster ebbed, the sense of urgency to align policy responses weakened.
At the Brisbane summit in 2014, world leaders set an “ambitious goal” to lift the G20’s gross domestic product by at least an additional 2 per cent by 2018. Talking about that goal now was “a bit awkward”, Lou said.
“It’s talking about ‘extra’, but what’s the basis? What’s the baseline? So, if the benchmark is changing, the meaning of ‘extra’ will change,” he said.
World growth was now 1 per cent higher than if G20 nations had not adopted any recommended polices to spur growth, he said.
They would continue to work to achieve the additional 1 per cent, he said.
Members also agreed to finalise a report on updated growth strategies and accountability before the Hangzhou meeting.
Although every member had endorsed structural reforms, differences over what should be done and how remained wide, especially between the world’s two biggest economies.
Lou said priority reforms in China were different from those in the United States.
“The US is... emphasising more the demand side,” Lou said. “But China is seeing the key problem on the supply side.”
US Treasury Secretary Jack Lew said in a separate press briefing that growth and reform could go together, and were not trade-offs. Washington had always pressed China to stick to market-oriented reforms, he said.
“Issues and concerns about China’s economy when we met in Shanghai were more in the news then than it might be today,” he said, referring to a G20 meeting of finance ministers and central bank governors held in February.
“But the concern we have over China’s level of commitment... of implementing reforms it pledged... has been consistent throughout.”
Communiqué: G20 Finance Ministers and Central Bank Governors Meeting
Chengdu, China, July 24, 2016
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We met in Chengdu to review our efforts in responding to key economic challenges, as well as the progress we made since the beginning of this year. We worked closely in the spirit of cooperation and solidarity and achieved tangible outcomes on our agenda, which will be delivered for our Leaders’ review at their Hangzhou Summit.
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The global economic recovery continues but remains weaker than desirable. Meanwhile, the benefits of growth need to be shared more broadly within and among countries to promote inclusiveness. The global economic environment is challenging and downside risks persist, highlighted by fluctuating commodity prices, and low inflation in many economies. Financial market volatility remains high, and geopolitical conflicts, terrorism, and refugee flows continue to complicate the global economic environment. In addition, the outcome of the referendum on the UK’s membership of the EU adds to the uncertainty in the global economy. Members of the G20 are well positioned to proactively address the potential economic and financial consequences stemming from the UK referendum. In the future, we hope to see the UK as a close partner of the EU.
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We are taking actions to foster confidence and support growth. In light of recent developments, we reiterate our determination to use all policy tools – monetary, fiscal and structural – individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth. Monetary policy will continue to support economic activity and ensure price stability, consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth. Underscoring the essential role of structural reforms, we emphasize that our fiscal strategies are equally important to support our common growth objectives. We are using fiscal policy flexibly and making tax policy and public expenditure more growth-friendly, including by prioritizing high-quality investment, while enhancing resilience and ensuring debt as a share of GDP is on a sustainable path. Furthermore, we will continue to explore policy options, tailored to country circumstances, that the G20 countries may undertake as necessary to support growth and respond to potential risks including balance sheet vulnerability. We reiterate that excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will consult closely on exchange markets. We reaffirm our previous exchange rate commitments, including that we will refrain from competitive devaluations and we will not target our exchange rates for competitive purposes. We will resist all forms of protectionism. We will carefully calibrate and clearly communicate our macroeconomic and structural policy actions to reduce policy uncertainty, minimize negative spillovers and promote transparency.
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As regards structural reform, we endorse the Enhanced Structural Reform Agenda prepared by the Framework Working Group (FWG), and commend the OECD, the IMF and other relevant international organizations (IOs) for their valuable inputs. We take note that the choice and design of structural reforms are consistent with countries’ economic conditions. Based on the nine priority areas of structural reforms agreed in April, we have developed and agreed upon a set of guiding principles, which will provide high-level and useful guidance to members, while allowing them to account for their specific national circumstances. We have also agreed upon a set of indicators which will be further enhanced over time to help monitor and assess our efforts and progress with structural reforms and challenges. We are committed to implementing and improving over time the Enhanced Structural Reform Agenda, and call on the IOs to provide continuous support. We are making further progress towards the implementation of our growth strategies, as is indicated by the preliminary assessment of the IOs as well as results from our enhanced peer reviews, but much more needs to be done. Swift and full implementation of the growth strategies remains key to support economic growth and the collective growth ambition set by the Brisbane Summit. Furthermore, to strengthen our efforts, we are updating our growth strategies to include new and adjusted macroeconomic and structural policy measures that can provide mutually-supportive benefits to growth. Our updated growth strategies and an accountability report on progress against our growth ambition will be finalized before the Hangzhou Summit. We underscore the role of open trade policies and a strong and secure global trading system in promoting inclusive global economic growth, and we will make further efforts to revitalize global trade and lift investment. We will also strive to reduce excessive imbalances and promote greater inclusiveness in our pursuit of economic growth.
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We recognize that the structural problems, including excess capacity in some industries, exacerbated by a weak global economic recovery and depressed market demand, have caused a negative impact on trade and workers. We recognize that excess capacity in steel and other industries is a global issue which requires collective responses. We also recognize that subsidies and other types of support from governments or government-sponsored institutions can cause market distortions and contribute to global excess capacity and therefore require attention. We commit to enhance communication and cooperation, and take effective steps to address the challenges so as to enhance market function and encourage adjustment. The G20 steelmaking economies will participate in the global community’s actions to address global excess capacity, including by participating in the OECD Steel Committee meeting scheduled for September 8-9, 2016 and discussing the feasibility of forming a Global Forum as a cooperative platform for dialogue and information sharing on global capacity developments and on policies and support measures taken by governments.
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To support our common growth objectives and the 2030 Agenda for Sustainable Development, we reaffirm our commitment to promote investment with focus on infrastructure in terms of both quantity and quality. Multilateral Development Banks (MDBs) have a unique role in supporting infrastructure investment. We have had effective communications with MDBs and called on them to take joint actions to support infrastructure investment as well as catalyze private investment. In this regard, we welcome the commitments made in the “Joint Declaration of Aspirations on Actions to Support Infrastructure Investment” by 11 MDBs which includes their announcements of quantitative ambitions for high-quality infrastructure projects within their respective institutional mandates as well as their efforts to maximize the quality of infrastructure projects, strengthen project pipelines, collaborate further among existing and new MDBs, strengthen the enabling environment for infrastructure investment in developing countries, as well as catalyze private resources. We stress the importance of quality infrastructure investment, which aims to ensure economic efficiency in view of life-cycle cost, safety, resilience against natural disaster, job creation, capacity building, and transfer of expertise and know-how, while addressing social and environmental impacts and aligning with economic and development strategies. We welcome the MDB Response to the G20 MDB Balance Sheet Optimization Action Plan and call for further implementation of the Action Plan. Greater inter-connectivity is a defining demand of the 21st century global economy and key to promote sustainable development and shared prosperity. We launch the Global Infrastructure Connectivity Alliance to enhance the synergy and cooperation among various infrastructure connectivity programs in a holistic way. We ask the World Bank Group (WBG) to serve as the secretariat of the Alliance, working closely with the Global Infrastructure Hub (GIH), OECD, other MDBs, and interested G20 members to support its activities. We endorse the G20/OECD Guidance Note on Diversification of Financial Instruments for Infrastructure and SMEs and we welcome the Annotated Public-Private Partnership (PPP) Risk Allocation Matrices completed by the GIH to help developing countries better assess infrastructure risks. We support the effective implementation of the G20/OECD Principles of Corporate Governance and G20/OECD High-level Principles on SME Financing. In particular, we look forward to the revision of the assessment methodology of the G20/OECD Principles of the Corporate Governance, which will be informed by an FSB peer review on corporate governance.
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We support the ongoing efforts undertaken by IOs to provide a coordinated and effective response that will support refugees and their host communities in developing and middle-income countries across all regions and income levels, building on existing and proposed facilities, and consistent with their mandates and comparative advantages. We look forward to further steps in the near future. We note the ongoing discussion within the WBG on considering a global crisis response platform. We call for strengthening humanitarian and development assistance, refugee resettlement and scaling up the support through relevant IOs for refugees and their host communities.
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We endorse the recommendations towards further strengthening the international financial architecture (IFA) developed by the IFA Working Group. Building on the ongoing work by relevant IOs, we will continue to improve the analysis and monitoring of capital flows and management of risks stemming from excessive capital flow volatility. We look forward to the IMF’s review of country experiences and emerging issues in handling capital flows by year-end. We note the ongoing work on the review of the OECD Code of Liberalization of Capital Movements. We support work to further strengthen the Global Financial Safety Net (GFSN), with a strong, quota-based and adequately resourced IMF at its center, equipped with a more effective toolkit, and with more effective cooperation between the IMF and Regional Financing Arrangements (RFAs), respecting their mandates. In this respect, we welcome the upcoming CMIM-IMF joint test run and call for further work regarding the IMF’s lending toolkit. We look forward to the completion of the 15th General Review of Quotas, including a new quota formula, by the 2017 Annual Meetings. We reaffirm that any realignment under the 15th review in quota shares is expected to result in increased shares for dynamic economies in line with their relative positions in the world economy, and hence likely in the share of emerging market and developing countries as a whole. We support the WBG to implement its shareholding review according to the agreed roadmap and timeframe, with the objective of achieving equitable voting power over time. We underline the importance of promoting sound and sustainable financing practices and will continue to improve debt restructuring processes. We support the continued effort to incorporate the enhanced contractual clauses into sovereign bonds. We support the Paris Club’s discussion of a range of sovereign debt issues, the ongoing work of the Paris Club, as the principal international forum for restructuring official bilateral debt, towards the broader inclusion of emerging creditors, and welcome the admission of the Republic of Korea to the Paris Club. We welcome China’s regular participation in Paris Club meetings and intention to play a more constructive role, including further discussions on potential membership. We support examination of the broader use of the SDR, such as broader publication of accounts and statistics in the SDR and the potential issuance of SDR-denominated bonds, as a way to enhance resilience. We call for further work by the IOs to support the development of local currency bond markets, including intensifying efforts to support low-income countries. We will extend the IFA Working Group’s mandate into 2017.
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Recent market turbulence and uncertainty have once again highlighted the importance of building an open and resilient financial system. To this end, we remain committed to finalizing remaining critical elements of the regulatory framework and the timely, full and consistent implementation of the agreed financial reforms, including Basel III and the total-loss-absorbing-capacity (TLAC) standard as well as effective cross-border resolution regimes. We reiterate our support for the work by the Basel Committee on Banking Supervision (BCBS) to finalize the Basel III framework by the end of 2016, without further significantly increasing overall capital requirements across the banking sector, while promoting a level playing field. We look forward to the BCBS comprehensive quantitative impact study that will inform the final design and calibration of the framework. We will continue to enhance the monitoring of implementation and effects of reforms to ensure their consistency with our overall objectives, including by addressing any material unintended consequences. We look forward to the FSB’s second annual report on the implementation and effects of the financial regulatory reforms to be presented to our Leaders at the Hangzhou Summit. We will continue to address the issue of systemic risk within the insurance sector. We welcome the work towards the development of an Insurance Capital Standard (ICS) for internationally active insurers. We welcome the ongoing joint work by the IMF, FSB and BIS to take stock of international experiences with macroprudential frameworks and tools, to help promote effective macroprudential policies, and look forward to the report to be published ahead of the Hangzhou Summit. We welcome the FSB consultation on proposed policy recommendations to address structural vulnerabilities from asset management activities. We continue to closely monitor, and if necessary, address emerging risks and vulnerabilities in the financial system, including those associated with shadow banking, asset management and other market-based finance. We look forward to the report to the Hangzhou Summit on progress of the FSB-coordinated four-point action plan to address, as appropriate, the decline in correspondent banking services. The G20 looks forward to further efforts to clarify regulatory expectations, as appropriate, including through the consideration in October by the FATF of the guidance on correspondent banking. We call on G20 members, the IMF and WBG to intensify their support for domestic capacity building to help countries improve their compliance with global anti-money laundering and countering the financing of terrorism (AML/CFT) and prudential standards. We encourage members to close the gap in the implementation of the Principles for Financial Market Infrastructures and accelerate their actions on over-the-counter derivatives markets reforms. We look forward to the consultation papers under the agreed work plan on central counterparties’ (CCPs) resilience, recovery planning and resolvability to be published ahead of the Hangzhou Summit. We endorse the G20 High-level Principles for Digital Financial Inclusion, the updated version of the G20 Financial Inclusion Indicators, and the implementation framework of the G20 Action Plan on SME Financing, developed by the Global Partnership for Financial Inclusion (GPFI). We encourage countries to consider these principles in devising their broader financial inclusion plans, particularly in the area of digital financial inclusion.
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We welcome the first meeting of the G20/OECD Inclusive Framework on BEPS held in Kyoto, particularly its broad membership which will be a key asset in supporting a timely, consistent and widespread implementation of the G20/OECD BEPS package, as well as in tackling the specific challenges faced by developing countries. We call upon all relevant and interested countries and jurisdictions that have not yet committed to the BEPS package to do so and join the framework on an equal footing. We also welcome the recent progress made on effective and widespread implementation of the internationally agreed standards on tax transparency. We reiterate our call on all relevant countries including all financial centers and jurisdictions which have not yet done so to commit without delay to implementing the standard on automatic exchange of information by 2018 at the latest and to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. We support the Global Forum’s monitoring of the implementation of automatic exchange of information and look forward to its report before the end of the year. We endorse the proposals made by the OECD working with G20 members on the objective criteria to identify non-cooperative jurisdictions with respect to tax transparency. We ask the OECD to report back to us by June 2017 on the progress made by jurisdictions on tax transparency, and on how the Global Forum will manage the country review process in response to supplementary review requests of countries, with a view for the OECD to prepare a list by the July 2017 G20 Leaders’ Summit of those jurisdictions that have not yet sufficiently progressed toward a satisfactory level of implementation of the agreed international standards on tax transparency. Defensive measures will be considered against listed jurisdictions. We encourage countries and IOs to assist developing economies in building their tax capacity and accordingly we acknowledge the establishment of the new Platform for Collaboration on Taxation by the IMF, OECD, UN and WBG, and their recommendations on mechanisms for effective technical assistance in support of tax reforms. We look forward to receiving a progress update by mid-2017. We support the principles of the Addis Tax Initiative. We recognize the significant negative impact of illicit financial flows on our economies and we continue to take forward the work of the G20 on this theme.
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We recognize the important role of tax policies in our broader agenda on strong, sustainable and balanced growth and of a fair and efficient international tax environment in diminishing the conflicts among tax systems. As highlighted in our discussion at the G20 High Level Tax Symposium, we emphasize the effectiveness of tax policy tools in supply-side structural reform for promoting innovation-driven, inclusive growth, as well as the benefits of tax certainty to promote investment and trade. In this regard, we ask the OECD and the IMF to continue working on the issues of pro-growth tax policies and tax certainty.
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We reiterate our call on the FATF and the Global Forum to make initial proposals by our October meeting on ways to improve the implementation of the international standards on transparency, including on the availability of beneficial ownership information of legal persons and legal arrangements, and its international exchange.
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We condemn, in the strongest possible terms, the recent terrorist attacks. We reaffirm our solidarity and resolve in the fight against terrorism in all its forms and wherever it occurs. We will tackle all sources, techniques and channels of terrorist financing. We welcome the progress achieved by the FATF in the implementation of its new Consolidated Strategy on Combating Terrorist Financing and call for effective implementation of its operational plan. Swift and effective implementation of FATF standards worldwide is a priority. This calls for strengthening of the traction capacity of the FATF and enhanced effectiveness of the network of FATF and FATF-style regional bodies. We call on the FATF to reflect on ways to progress in those areas by March 2017.
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We recognize that, in order to support environmentally sustainable growth globally, it is necessary to scale up green financing. We welcome the G20 Green Finance Synthesis Report submitted by the Green Finance Study Group (GFSG), and welcome the voluntary options developed by the GFSG to enhance the ability of the financial system to mobilize private capital for green investment. In particular, we believe that efforts could be made to provide clear strategic policy signals and frameworks, promote voluntary principles for green finance, expand learning networks for capacity building, support the development of local green bond markets, promote international collaboration to facilitate cross-border investment in green bonds, encourage and facilitate knowledge sharing on environmental and financial risks, and improve the measurement of green finance activities and their impacts.
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We welcome the domestic steps already undertaken by some countries, and encourage others to do so, to help bring the Paris Agreement on Climate Change into force as soon as possible. We reiterate our call for timely implementation of the Paris Agreement on Climate Change and the commitments made by developed countries and IOs and announcements made by other countries on climate finance. We welcome the Climate Finance Study Group’s (CFSG) Report on “Promoting Efficient and Transparent Provision and Mobilization of Climate Finance to Enhance Ambition of Mitigation and Adaptation Actions” and take note of the Outlook on “Mainstreaming Climate Change Considerations into Development Assistance and Climate Finance Programs”. We will continue working on climate finance in 2017 under the working arrangement of next year’s G20 Presidency, in consultation with other members, with the objective to contribute to the discussions held under the United Nations Framework Convention on Climate Change (UNFCCC) and by building on G20 fora expertise and knowledge and experiences sharing.
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We reaffirm our commitment to rationalize and phase out inefficient fossil fuel subsidies that encourage wasteful consumption, over the medium term, recognizing the need to support the poor. Further, we encourage all G20 countries to consider participation in the voluntary peer review of inefficient fossil fuel subsidies that encourage wasteful consumption.
Issues for further action
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We ask the FWG to conduct assessment of G20 structural reform progress in line with the Enhanced Structural Reform Agenda, and ask the OECD to help assess G20 progress and challenges within the structural reform priority areas by producing a technical report, with input from other international organizations, using the common set of indicators.
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We invite the OECD and the IMF to continue the work on the composition of budget expenditure and revenue to support productivity, inclusiveness and growth.
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We ask the MDBs to report back to us on the status of their “Joint Declaration of Aspirations on Actions to Support Infrastructure Investment”, including catalyzing private investment, on a regular basis.
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We ask the MDBs to report again in 2017 on continued progress against the MDB Balance Sheet Optimization Action Plan.
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We ask the WBG to reach out to potential members of the Global Infrastructure Connectivity Alliance to confirm their membership of the Alliance and expect the inaugural conference of the Alliance to be held within one year after our endorsement.
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We ask the Global Infrastructure Hub to work with the MDBs to assess internal incentives with regard to crowding in private finance and to report to our Deputies in December 2016.
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We look forward to the IMF’s work on capital flow management, including taking into account the joint work of the FSB, BIS and IMF on taking stock of country experiences on macroprudential policies.
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We look forward to the upcoming IMF/FSB progress report on the second phase of Data Gaps Initiative, including the finalized action plans.
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We ask the IMF to explore and report on the cost and feasibility of the incorporation of the enhanced clauses in the existing stock of sovereign debts.
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We call on the WBG and the IMF to explore further options for an enhanced and coordinated effort on technical assistance tailored to debtor countries and challenges to enhance their debt management capacities, and ask them to report back to G20 Finance Ministers and Central Bank Governors in 2017.
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We call for further analysis of the technicalities, opportunities, and challenges of state-contingent debt instruments, including GDP-linked bonds, and ask the IMF, working with interested members, to report back on these issues to G20 Finance Ministers and Central Bank Governors in 2017.
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We look forward to the IMF’s paper on examining ways in which the SDR can contribute to strengthening the international monetary system by January 2017.
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We ask the FSB, in consultation with other standard setters and international committees, to undertake further monitoring and analysis of market liquidity conditions, and to report on cross-jurisdiction developments in repo markets.
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We ask the Global Partnership for Financial Inclusion, working with relevant organizations, to report back to us in 2017 on the actions being taken to promote digital financial inclusion at the country level.
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We look forward to considering the phase II report and recommendations of the FSB’s Taskforce on Climate Financial Disclosures in early 2017, which will present its recommendations for better climate related disclosures.
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We will continue working on climate finance in 2017 under the working arrangement of next year’s G20 Presidency, in consultation with other members, with the objective to contribute to the discussions held under the United Nations Framework Convention on Climate Change (UNFCCC) in accordance with the principles, provisions and objectives of the UNFCCC and by building on G20 fora expertise and knowledge and experiences sharing.
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We look forward to further discussions on the toolkit prepared by invited international organizations for the CFSG on promoting efficient and transparent provision and mobilization of climate finance.
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We will support the ongoing G20 work on Antimicrobial Resistance (AMR) under the working arrangement of next year’s G20 Presidency to explore measures to address the potential market failure.
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We look forward to the G20/OECD Report on the Development of Effective Approaches to Support the Implementation of the G20/OECD High Level Principles on SME Financing.
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Afreximbank’s Advisory Group on Trade Finance and Export Development in Africa: Speakers blame visa regime for impeding African trade
Speakers at activities marking the 23rd Annual General Meeting of Shareholders (AGM) of the African Export-Import Bank (Afreximbank’s) on 22 July 2016 in Mahe, Seychelles, said that the visa regime operating across Africa was one of the greatest impediments to the growth of intra-African trade.
Wale Tinubu of Oando Group of Nigeria, Tony Elumelu of Heirs Holdings, former Nigerian President Olusegun Obasanjo, Dr. Paul Fokam of Afriland First Bank, and Jean-Paul Adam, Minister of Finance, Trade, and Blue Economy, of Seychelles, among others, were almost unanimous in arguing that the requirement for visas for travel by Africans to other African countries made it extremely difficult for business people to travel around the continent to conduct business.
In presentations during the meeting of Afreximbank’s Advisory Group on Trade Finance and Export Development in Africa, they noted that only a handful of countries, including Seychelles, had removed the requirement for visiting Africans to obtain visas before traveling in. They stressed the urgency for all African countries to abolish visa requirements for short-term travels.
Chief Obasanjo said that the reasons often adduced for the visa requirement did not stand scrutiny as such short term travel for business posed little security risk. There had also been no evidence that countries that had implemented visa-free travel had been overrun by any mass influx of people.
He commended the recent introduction of a common African passport by the African Union, saying that “it will help movement of people and, consequently, intra-African trade”.
The speakers also stressed the need for African governments to support local entrepreneurs and to create champions to drive trade across the continent, heaping credit to Chief Obasanjo for his support to the private sector during his tenure as President of Nigeria when he encouraged many entrepreneurs to participate in the country’s economic development.
In a presentation titled “Can Intra-African Trade Unlock Africa’s Industrial Potential”, Prof. Joseph Stiglitz, a Nobel Prize winner in economics and Professor at Columbia University in the United States, said that intra-regional trade could help African countries achieve necessary economies of scale.
“The development of regional value chains can pave the way for ease of entry into global value chains and enhance the integration of the region into the global economy,” argued Prof. Stiglitz.
He said that Africa’s priority should be trade and the implementation of appropriate industrial and trade promotion policies to take advantage of the window of opportunities presented by the major changes occurring in the global economic landscape.
The changes included the emergence of China as a very large and rapidly growing market for African exports, and not just for its natural resources, and the rising wages in that country which was creating “space” in for labor-intensive, simple manufactures that Africa could easily occupy, and eventually, for less labor-intensive and more complex manufacturers, he said.
Earlier, in an opening statement, Dr. Benedict Oramah, President of Afreximbank, said that greater intra-African trade would foster unity and put Africa on the path to industrialization, sustained economic growth and structural transformation and greater relevance in global affairs.
“Boosting intra-African trade will also reduce the exposure of the region to recurrent commodity price shocks,” he said, adding that Afreximbank had decided to promote intra-African trade to serve as the pivot around which the continent’s developmental aspirations would revolve.
The AGM activities began on Wednesday with the seminars of the Advisory Group on Trade Finance and Export Development in Africa, which lasted through Thursday and were followed, also on Thursday, by a trade exhibition and an investment forum focused on investment opportunities in Seychelles. The activities will end on Saturday with the formal Annual General Meeting of Shareholders of the Bank.
Afreximbank supports African trade with over $15 billion of annual financing, AGM participants hear
With the more than $15 billion provided annually to African businesses, the African Export-Import Bank (Afreximbank) is achieving its mandate of financing, promoting and expanding intra and extra-African trade, participants heard today in Mahe, Seychelles, at the opening of activities marking the 23rd Annual General Meeting of Shareholders of the Bank.
Danny Faure, Vice President of Seychelles, said during the opening of three days of seminars and meeting of the Advisory Group on Trade Finance and Export Development in Africa, that Afreximbank’s services were reaching beneficiaries from all sectors of the African economy, varying in size from small and medium enterprises to large conglomerates.
According to Mr. Faure, the seminar theme of “Intra-African Trade and the Blue Economy as Catalysts for Economic Transformation” highlights the importance that governments have placed on intra-African trade as well as the call by the United Nations for the conservation and sustainable development of the Blue Economy.
He said that the potential for trade in Africa was vast but that the Blue Economy should not just be for providing cheap raw materials to more industrialised countries. It should also boost the local production of value added goods and services.
Dr. George Elombi, Afreximbank’s Executive Vice-President for Corporate Governance and Legal Services, said that the Blue Economy could serve as an important channel for diversifying the African economy and could be a key pillar for national economic growth and sustainable development
Auxiliary industries associated with the Blue Economy offered opportunities to boost Africa’s intra-regional trade, he continued.
Dr. Elombi argued that Africa should be the world’s next frontier for industrialization, especially with the ongoing process of delocalization and manufacturing outsourcing in China. In his view, Africa must resolutely address the challenges of industrialization in order to facilitate the continent’s integration into global value chains.
In a plenary presentation, Prof. Ibrahim Gambari, a former Under-secretary-General of the United Nations, reiterated the importance of pursuing economic integration in Africa in order to achieve economic development.
He said that through integration, Africa would achieve the creation of larger markets, noting that with their relative small size, many African countries were just too small to be able to stand as viable markets on their own.
In introducing the seminars, Dr. Hipolyte Fofack, Afreximbank Chief Economist, said that they had been planned to provide opportunity for reflection on the challenges facing African economies in a context of increased global volatility and weakening global growth and to explore options for taking full advantage of opportunities.
Among those scheduled to address participants during the four days of activities are former President Olusegun Obasanjo of Nigeria; Prof. Joseph Stiglitz, a Nobel Prize winner in economics; Prof. Justin Lin, a former World Bank Chief Economist and Director, New Structural Economics and Honorary Dean of the National School of Development, Peking University, China; Liu Liange, President of the China Exim Bank; Arni Mathiesen, an Assistant Director-General of the FAO and former Minister of Finance of Iceland; Tony Elumelu, Chairman of Heirs Holdings ltd., Nigeria; Ahmed El Sewedy, President of El Sewedy Industries, Egypt; and Dr. Paul Fokam, Chairman of Afriland First Bank Group.
Speakers stress Development Cooperation Forum’s role in allowing for fresh policy perspectives
Ministerial Declaration pledges concrete action to implement 2030 Agenda
The Development Cooperation Forum was a neutral and impartial space that allowed for fresh perspectives and discussions of new development cooperation paradigms, the Economic and Social Council heard on 22 July 2016, as its high-level segment ended with the adoption of a ministerial declaration.
By the text, ministers and high representatives pledged that no one would be left behind in implementing the 2030 Agenda for Sustainable Development, a plan of action for people, planet and prosperity. While reaffirming that eradicating poverty in all its forms was the greatest global challenge and an indispensable requirement for sustainable development, they welcomed early efforts to address unfinished business from the Millennium Development Goals.
“Over the last two years, the Development Cooperation Forum has produced a wealth of inputs on the importance and tremendous potential of development cooperation as a lever for the effective implementation of the 2030 Agenda,” said the Council President Oh Joon (Republic of Korea), in closing remarks.
Throughout the high-level segment, participants had looked closely at the links between sectors and policy domains, and had worked to break down silos, he said. For longer-term durability, efficiency and attaining three-dimensional development objectives, it was essential to involve local communities, scientists, the private sector and other groups in investment decisions on sustainable development, he added.
Wu Hongbo, Under-Secretary-General for Economic and Social Affairs, said that follow-up and review of implementation of the 2030 Agenda was instrumental towards achieving its high ambitions. “We are off to an excellent start,” he said, emphasizing that the high-level segment called for attention to key areas, including a strong sense of national ownership, an integrated policy response, revitalized global partnerships, inclusive follow-up and review, and continued alignment of the United Nations development system.
The past two days had seen focused and forward-looking discussions, he continued, stressing that the future direction of the Forum had been reaffirmed. Participants had underscored the need to work with those in deepest poverty, urged for the fulfilment of official development assistance (ODA) commitments, and exchanged ideas around the complementary contribution of South-South cooperation.
The Council took note of several reports of the Secretary-General, namely “Implementing the post-2015 development agenda: moving from commitments to results”, “Trends and progress in international development cooperation” and “Infrastructure for sustainable development for all”.
The Council’s two-day Development Cooperation Forum came to an end with three panel discussions, titled, respectively, “Monitoring and review of development cooperation in the 2030 Agenda: quality, effectiveness and impact for sustainable development”, “Development cooperation by the private sector, other non-State actors and blended development cooperation”, and “Development cooperation perspectives on capacity-building and the role of technology development and facilitation in implementing the SDGs”. The Council also held a wrap-up session on “Key messages from the 2016 Development Cooperation Forum”.
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Nigeria: Agriculture Promotion Policy 2016-2020
Building on the Successes of the ATA, Closing Key Gaps
Starting in 2010-2011, the Government of Nigeria, after years of benign neglect, began to reform the agriculture sector. To refocus the sector, the Government implemented a new strategy (the Agricultural Transformation Agenda, ATA) built on the principle that agriculture is a business and therefore policy should be about supporting it. The main priority of policy was to “restart the clock” and reintroduce the Nigerian economy to sustainable agriculture centered on business-like attitude driven by the private sector. That strategy was in place from 2011-2015.
The ATA was a good platform to re-engage key stakeholders in Nigerian agriculture to shift focus towards how a self-sustaining agribusiness focused economy could be built. The ATA focused on how to make Nigeria’s agriculture more productive, efficient and effective. It set a target of creating 3.5 million jobs by 2015; generating foreign exchange, and reducing spending on food imports. Among its key achievements was a restructuring of the federal fertilizer procurement system.
ATA however also faced challenges and did not deliver on all the targets identified. For example, Nigeria still imports about $3 to $5 billion worth of food annually, especially wheat, rice, fish and sundry items, including fresh fruits. As a result, Nigeria is not food secure. Wastage levels remain high in production areas, reducing supply of feedstock to processing factories, requiring them to keep importing supplies. The net effect is limited job growth across the agricultural value chain from input production to market systems, and continued use of limited foreign currency earnings to import vast quantities of food.
On balance, the ATA was an important first step towards rediscovering agriculture. As a result, many companies, individuals and donors are now keen to invest in Nigerian agriculture once again. Agriculture is viewed as a business that can provide a reasonable basis for further wealth and job growth in Nigeria.
With that in mind, the policy and strategic focus is now on how to build on the initial progress made, and transition Nigeria to a new plane In terms of agribusiness performance. That will be the focus of the proposed new policy regime. That new policy’s primary focus will be on closing the demand – supply gaps between crop and livestock production. Gap closing will also include tackling related input, financing, storage, transport and market access issues present in key value chains.
Executive summary
Nigeria is facing two key gaps in agriculture today: an inability to meet domestic food requirements, and an inability to export at quality levels required for market success. The former problem is a productivity challenge driven by an input system and farming model that is largely inefficient. As a result, an aging population of farmers do not have enough seeds, fertilizers, irrigation, crop protection and related support to be successful. The latter challenge is driven by an equally inefficient system for setting and enforcing food quality standards, as well as poor knowledge of target markets. Insufficient food testing facilities, a weak inspectorate system in FMARD, and poor coordination among relevant federal agencies serve to compound early stage problems such as poor knowledge of permissible contaminant levels.
Putting Nigeria’s agriculture sector on a path to growth will require actions to solve these two gaps: produce enough fresh, high quality foods for the Nigerian market; and serve the export market successfully and earn foreign exchange. The new federal Agricultural Promotion Policy (APP) is a strategy that focuses on solving the core issues at the heart of limited food production and delivery of quality standards. As productivity improves domestically and standards are raised for all Nigerian food production, export markets will also benefit impacting positively on Nigeria’s balance of payments. Given limited resources and the importance of delivering sustainable results, the Federal Ministry of Agriculture & Rural Development (FMARD) in consultation with partners has identified an initial pool of crops and related activities that will be Nigeria’s path to tackling the aforementioned gaps.
First, FMARD will prioritize improving productivity into a number of domestically focused crops and activities. These are rice, wheat, maize, fish (aquaculture), dairy milk, soya beans, poultry, horticulture (fruits and vegetables), and sugar. Nigeria believes that the gap can be closed by partnering closely with private investors across farmer groups and companies to develop end to end value chain solutions. These chains will receive facilitated government support as they make deep commitments to engaging a new generation of farmers, improving supply of specialized fertilizers and protection chemicals, as well as wider scale use of high yielding seeds. In addition, Nigeria expects to work with investors to sharply improve the distribution system for fresh foods so as to reduce time to table, reduce post-harvest losses, and overall improve nutritional outcomes e.g. lowering of diabetic risk, stunting risk, etc.
Second, FMARD will prioritize for export markets the production of the following crops and activities: cowpeas, cocoa, cashew, cassava (starch, chips and ethanol), ginger, sesame, oil palm, yams, horticulture (fruits and vegetables), beef and cotton. FMARD will also work with a network of investors, farmers, processors and other stakeholders to deepen the supporting infrastructure to ensure that quality standards are defined and maintained across the value chain. That will involve adding more testing laboratories, improving traceability of crops, disseminating intelligence on export markets and consumer preferences, etc. Our goal is to build a high quality brand for Nigerian foods based on rigorous data and processes that protect food safety for both domestic and export market consumers.
To ensure that the strategy is executed as intended, FMARD is working closely with states and other federal MDAs e.g. Power, Transportation and Trade. FMARD will also evolve itself to become a more focused policy maker and regulator to ensure accountability for results. FMARD will use its convening and related powers to ensure that the enabling system is in place to support agribusiness. From investments in rural roads to reduce transport time to improved security of farming communities to reduce incidence of criminality to reduction in intra-state taxes and levies, FMARD will intensify oversight. That oversight will ensure that farmers and investors are working in a market that is safe, competitive, and capable of enabling wealth creation in the coming years and decades.
Finally, FMARD will periodically publish metrics to track performance against the strategy e.g. tonnage of rice paddy produced, or yields/milking cow. The systems to repeatedly collect accurate data and integrate these into policy making, as well as investor planning will be refined over the next few months as part of this next wave of reform. We anticipate that if successful, key gaps such as Nigeria’s continued imports of rice will disappear, while Nigerian produce e.g. beans and cocoa will once again become a quality benchmark across the globe. Reaching that point will require significant investments in people, processes and systems. Nigeria is committed to taking the necessary stepsin order to move Nigerian agriculture from “a business” to a commercial ecosystem that can produce the capabilities necessary to create sustainable jobs and wealth.
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States adopt new funding model for AU
The African Union faces a litmus test in its quest to be self-reliant as it moves to implement a new funding model that will see member states fund the organisation using a share of their international tax collections beginning next year.
Under the new model approved during the recently concluded 27th Heads of States AU Summit in Kigali, member states are expected to surrender 0.2 per cent levy on eligible imports to fund operations of the organisation with a hope of making its funding sustainable and predictable.
Considered the most ambitious undertaking of the organisation in recent years, AU hopes to raise approximately $1.2 billion beginning 2017 under the new funding model crafted by a team led by former African Development Bank president Dr Donald Kaberuka.
In the current financial year, of AU’s $416 million budget, the lion’s share is funded by external donors to a tune of $247 million or 59 per cent while it also faces difficulty in mobilising member states’ contributions which are based on the country’s total output (gross domestic product) to a tune of $169 million or 40 per cent.
For instance, as of May this year, The EastAfrican has learnt that member states had contributed less than 30 per cent.
The initiative also comes at a time when the Union has been under scrutiny for failing to implement agreed key resolutions and not doing enough to improve the welfare of its citizens.
“When there is political will you can have a whole range of technical solutions but the opposite is true – if there is no political will no technical solution works,” Mr Kaberuka told The EastAfrican, underscoring that the initiative has strong political backing.
A technical committee composed of Finance ministers and central bank governors was also selected and is expected to come up with a roadmap in the next three months to ensure that by fiscal year 2017, the new funding model is executed.
It will be included in the finance law of the respective member states.
“We are not going to change the regulations (Customs) and rules of each country. We are simply going to adopt them to ensure that they provide 0.2 per cent of that money to AU account located at the national central bank,” Dr Kaberuka said, adding that the model has been tested and proven to be successful as it is currently implemented by Economic Community of West African States (Ecowas) for the past 12 years.
The financing model is also being implemented by the European Union, where it is collected mainly on Customs duties on imports from outside the EU and sugar levies.
EU governments keep 25 per cent to cover the cost of collection.
However, African leaders are demanding institutional reforms at AU including better accountability, greater value for money, priority setting and rigorous management of the fund.
At the summit, Rwanda’s Paul Kagame was selected to lead the transformation agenda at AU.
“It’s not a blank cheque, they are demanding reforms,” Dr Kaberuka said, adding that leaders are demanding prioritisation and less dependency on supply donor-driven programmes. On the administration budget they are demanding more discipline and rigorous reforms he said.
Insufficient and unreliable contributions from member states as well as internal reliance on a few countries who pay close to 66 per cent of the budget has undermined implementation of key programmes of the Union.
The few countries include South Africa, Egypt, Algeria, Nigeria, Angola and previously Libya before its political crisis.
Yet when there were issues of political transition in North Africa, like the war in Libya, suddenly because of the dependency on a few countries the organisation found itself with limited means. Kenya, Ivory coast and Ethiopia agreed to step in.
“In the past, countries would meet in Addis Ababa vote a budget and they have a formula of sharing the burden but the result is that for instance this year…the organisation by May had only received less than 30 per cent ,” he said.
Currently, funding of the organisation remains unpredictable and unsustainable due to heavy dependency on external donors especially for its peacekeeping operations.
For instance, the 22,000-strong African Union Mission in Somalia (Amisom) created by the African Union on January 19, 2007 as a regional peacekeeping mission with the approval of the United Nations has been fully funded by the European Union African Peace Facility.
However, recently EU cut funding by 20 per cent, a decision that prompted threats of withdraw from some troop-contributing countries specifically Kenya and Uganda.
EU has demanded that the AU should cover the difference.
Peace Fund
During the AU summit, African leaders agreed to operationalise the Peace Fund to finance peace and security operations of the Union through the provision of $65 million by each of the continent’s five regions annually through the import levy.
They plan to increase this to $80 million per region by the year 2020. However, AU is expected to negotiate with the UN in September to raise 75 per cent of the cost of peace support operations since the Union has committed to contribute 25 per cent.
The objective of the Fund is not only peace support missions but also preventive diplomacy which is currently funded by donors.
“It has not yet been concluded, it has to be negotiated, it will not be easy but everyone understands now that supporting peace in Africa requires a combination of different institutional abilities and capabilities,” said Dr Kaberuka who also doubles up as the AU High Representative for the Peace Fund.
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Zim, SA in bilateral talks over imports ban
The recent import restriction by Zimbabwe was under discussion at a bilateral meeting of officials from the ministry of Industry and Commerce and their South African counterparts last week.
Early this month, Zimbabwe removed many products from the Open General Import Licence, saying importation of such products would now require permits. The import licence costs $30 per quarter and is given only after one has managed to satisfy authorities why those products should be brought into the country.
The move has unnerved the South African government and its Department of Trade and Industry has warned that such restrictions would have negative implications on intra-regional trade.
Industry and Commerce minister Mike Bimha told Standardbusiness last week that Zimbabwean and South African officials met for a “routine meeting” on Wednesday to discuss bilateral issues and Zimbabwe explained the reason behind the promulgation of Statutory Instrument (SI) 64 of 2016.
He said his ministry impressed upon their South African counterparts that the restrictions were necessary to grow the local manufacturing sector.
“It’s not a big issue; they have to understand that we are simply taking back our jobs,” Bimha said.
He said local manufacturers were affected by economic sanctions, which made local banks unable to offer lines of credit for retooling. Bimha said the use of obsolete equipment made local products uncompetitive on the regional market.
He said South Africa also had restrictions on pharmaceutical products and said Zimbabwe would begin discussions with its neighbours for the restriction to be lifted.
“South Africa has a requirement that pharmaceutical products have to come by air and not road transport. The moment you use air, costs are higher and your products are uncompetitive. When pharmaceutical products from South Africa come here, they use road, which is cheaper,” Bimha said.
“I have asked Health minister David Parirenyatwa to speak to his South African counterpart to look into the matter.”
The “ban” has sparked disquiet among cross-border traders. The International Cross Border Traders Association has since given government one week to reverse the ban or face more riots at the Beitbridge Border Post.
International Cross Border Traders Association president Dennis Juru was last week quoted by broadcaster eNCA warning government that he would mobilise cross-border traders to shut down the busiest point of entry into Zimbabwe.
Bimha said Zimbabwe was doing the right thing to boost local industries. He said if local manufacturers failed to meet demand, imports would be allowed.
“Some of the cross-border traders are buying on credit and can pay after 90-days or so. How do you promote cross-border traders of other countries if you are not benefitting?”
Government has said it would allow the importation of products that had been procured before the promulgation of restrictions but were still stuck at the border.
The goods included stocks of wheelbarrows so many they would last for years. This, Bimha said, showed that cross-border traders could have been alerted by ministry staffers of the impending ban.
Goods that have been removed from the open general import licence and now require a permit to be brought into the country include coffee creamers (Cremora), camphor creams, white petroleum jellies and body creams.
Goods categorised as builders’ ware like wheelbarrows (flat pan and concrete pan wheelbarrows), structures and parts of structures of iron or steel (bridges and bridges section, lock gates, towers, lattice masts, roofs, roofing frameworks, doors, windows and their frames and threshold for doors, shutters, balustrade, pillars and columns) and plates, rods, angles, shapes section and tubes prepared for use in structures of iron and steel ware, were also on the list of the restricted products.
The list also includes furniture, baked beans, potato crisps, cereals, bottled water, mayonnaise, salad cream, peanut butter, jams, maheu, canned fruits and vegetables, pizza base, yoghurts, flavoured milks, dairy juice blends, ice-creams, cultured milk and cheese. Synthetic hair products that are popular with women were also covered by the Statutory Instrument.
Government later altered the policy to allow individuals to bring into the country goods for personal consumption in small quantities once a month. The move was described as a mockery to Zimbabweans
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Ghana hosts 1st ECOWAS Industrial Summit
The First Economic Community of West African States (ECOWAS) Industrial Summit, which aims to accelerate industrialization and private sector development in West Africa, has taken place in Accra.
The theme for the summit was “Promoting investment to accelerate the industrialization of the West African sub-region”.
In an address delivered on his behalf at the opening of the meeting on 21 July 2016, the President, John Dramani Mahama, expressed optimism that the four thematic areas of the West African Common Industrial Policy (WACIP), namely Agro-Industry, Pharmaceuticals, Automotive and Textiles, and Garments, would impact positively on the social and environmental dimensions of industrialization as well as on the creation of quality jobs for the youth.
The President of the Association of Ghana Industries (AGI), James Asare-Adjei, in a statement, noted that intra-regional trade among ECOWAS states had not been encouraging enough, citing 46%, 8% and 6% of Ghana’s exports to the European Union, Chinese and ECOWAS markets respectively.
Mr Asare-Adjei underscored the importance of technology, skills and efficiency to industrial development and modern business.
He said peace and security were equally necessary for attracting investment and development, and urged political parties and their leaders not to disturb the prevailing peace in the country.
In a welcome address, the Minister for Trade and Industry, Dr Ekwow Spio-Garbrah, noted that in the past few years, industrial policy had experienced a revitalization and re-emerged as a core component of development strategies in Africa, as envisaged in WACIP.
Dr Spio-Garbrah, therefore, urged African governments to effectively promote the transformation of their economies with strategic tailor-made industrial policies that delivered inclusive and sustainable industrial development.
He expressed the hope that the first ECOWAS Industrial Summit would create a platform for dialogue and networking, against the backdrop of WACIP, and also provide an environment for deep thought as well as a solution-based discourse as it brought together all key players in the industrialization sector.
He urged all participants to engage in a purposeful discussion that would bring realistic solutions to the industrial sector challenges.
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tralac’s Daily News Selection
The selection: Friday, 22 July 2016
Featured blog, by tralac’s Trudi Hartzenberg: ‘How can the CFTA facilitate trade in services?’ (UNCTAD)
The trade in services agenda in African integration, compared to the trade in goods agenda, can be described as nascent. African integration has been characterised by a predominant focus on trade-in-goods disciplines, with the import tariff commanding centre stage. Several regional economic communities (RECs) are, however, currently occupied with trade in services negotiations. And there is growing interest in services sector development and trade in services in many African countries. This presents an excellent opportunity to leverage an African services agenda (encompassing services sector development as well as trade in services), to support development outcomes, from the platform of the CFTA. In short, services and especially infrastructure services matter for Africa's sustainable development. How can we start connecting the dots in the CFTA to facilitate trade in services and support development outcomes?
Africa Regional Integration Index: Report 2016 (UNECA)
The Index is made up of five Dimensions, which are the key socio-economic categories that are fundamental to Africa’s integration. Sixteen Indicators (based on available data), which cut across the five Dimensions, have been used to calculate the Index. The Index 2016 report covers Member Countries from the eight Regional Economic Communities recognized by the African Union. The Dimensions and Indicators chosen for the Index are based on the Abuja Treaty and its operational framework. Regional integration is cross-border and multi-dimensional. Indicators that have a cross-border interaction, and where verified, quality data is available, have been used to make up the Index. Future editions of the Index will grow in scope as more data becomes available.
Economic Development in Africa Report 2016: debt dynamics and development finance in Africa (UNCTAD)
Between 2006 and 2009, the average African country saw its external debt stock grow 7.8% per year, a figure that rose to 10% per year in 2011–2013 to reach $443bn or 22% of gross national income by 2013. Several African countries have also borrowed heavily on domestic markets, the report finds. It provides specific examples and analyses of domestic debt in Ghana, Kenya, Nigeria, the United Republic of Tanzania and Zambia. In some countries, domestic debt rose from an average 11 per cent of gross domestic product in 1995, to around 19 per cent at the end of 2013, almost doubling in two decades. “Many African countries have begun the move away from a dependence on official development aid, looking to achieve the Sustainable Development Goals with new and innovative sources of finance,” Dr. Kituyi says. The report argues that African countries should look for complementary sources of revenue, including remittances, which have been growing rapidly, reaching $63.8 billion to Africa in 2014. The report discusses how remittances and diaspora savings can contribute to public and development finance.
Selected declarations (pdf): Declaration of the Least Developed Countries Ministerial meeting, Ministerial Communiqué of the Landlocked Developing Countries, Ministerial Declaration of the Group of 77 and China
Selected summaries (pdf): Global Commodities Forum summary: breaking the chains of commodity dependence, UN Cluster on Trade and Productive Capacity: thematic note on trade facilitation
Selected presentations (pdf): Developing natural ingredients sectors in nine Southern African countries: presentation by Cyril Lombard (CEO, PhytoTrade Africa), Breaking new ground for biodiversity-based products: presentation by Martha K Kangandjo (Eudafano Women’s Co-operative in Namibia)
Kenya launches trade information portal linking investors and trade opportunities (The Standard)
Kenya on Thursday became the first East Africa economy, and latest in Africa after Malawi, to launch a Trade Information Portal which it hopes to link investors to trade opportunities and fix obstacles that impact on its ease of doing business. The portal contains information on which goods are prohibited, restricted, and other non-tariff measures; the entire catalogue of applicable tariffs linked to commodity classification is also available. Procedures and requirements for processing licenses and various permits and samples of application forms will be downloaded on the website. Traders will be able to access legal requirements supposed to meet when importing or exporting respective goods and alert traders on duties, fees and exemptions that are applicable to their commodities.
Twin, TMEA move to make coffee sector a more lucrative business (New Times)
As part of the project, from July 19- 20, 2016, Twin and TMEA held a validation workshop on coffee quality control through best practices at wet mills across East Africa. Participants in the workshop included Coffee Board Representatives from East African countries, coffee buyers from USA and Europe and representatives of coffee cooperatives under the project.
EABC Dialogue: Remove hurdles to trade, Tanzania urged (The Citizen)
The barriers, according to members of the East African Business Council, include delays in clearing goods in Tanzania, corruption and theft of goods at the Dar es Salaam Port, high fees charged by some regulatory agencies, an influx of substandard goods and value-added tax charged on ancillary services on goods. Moreover, different standards by quality assurance agencies within the region also impede trade. "Let's find solutions to the challenges to make our integration fruitful," EABC vice chairman Felix Mosha said at a Public-Private Dialogue. "The long time of clearing cargo in Tanzania is attributed to complicated documentary and compliance activities as business persons require 10 documents to import or export to Tanzania without them it is impossible to clear goods" Mr Omar explains. He argues that these 10 documents attract different costs estimated to be double of the average costs incurred in other sub-Saharan countries. [High taxes to blame for rise in airfares, EAC states told, Why EAC should work as a bloc to negotiate trade deals, The Central Corridor Transit Transport in a nut shell]
East Africa has a lesson for SADC in formalising cross-border trade (Business Day)
Ultimately, regardless of whether the import bans imposed by Zimbabwe continue or are rescinded, informal trade will continue. Governments in Southern Africa should look to counterparts on the continent who face similar conditions and challenges, and have made significant strides in regularising trade across borders. Doing so would allow both governments and traders to reap the benefits.
Zimbabwe to ban haulage trucks to boost National Railways (Nehandara Radio)
Responding to questions during the inaugural Infrastructure Conference at the ongoing Mine Entra expo in Bulawayo yesterday, Transport and Infrastructural Development Minister Joram Gumbo said if allowed to ply the country’s roads, haulage trucks would continue damaging roads. He said if implemented, the S.I. would go a long way in protecting the National Railways of Zimbabwe. [Mining industry expected to recover]
Brexit commentaries: Ana Gallo-Alvarez: ‘Legal aspects of the implications of Brexit for UK Africa trade’, ICTSD: ‘Experts weigh Brexit’s implications for Africa’, Peg Murray Evans: ‘Return to the Commonwealth? UK-Africa trade after Brexit’, Jan Hofmeyer: ‘Brexit and its implications for African integration’
WTO launches new annual statistical publication (WTO)
The WTO launched a new annual statistical publication – the 'World Trade Statistical Review' – on 21 July. The publication contains an in-depth look at the participation of developing economies in world trade, analysing in particular the role of least-developed countries. It also provides a summary of the main developments in trade-policy making, highlighting the latest data on WTO members’ use of trade-restrictive and trade-facilitating measures. These analytical chapters are complemented by over 50 tables providing comprehensive data on various facets of world trade in goods and services.
IMF’s World Economic Outlook Update: uncertainty in the aftermath of the UK referendum
Ethiopia’s road to regional integration (World Policy)
Algeria’s Sellal calls for speeding up the creation of CFTA (Algeria Times)
WTO agriculture talks: Chair urges shift from reflection to action (ICTSD)
India sets up panel for implementing WTO’s trade pact (Economic Times)
Tonnes of dal from Mozambique will reach Indian markets after Modi’s visit (Scroll India)
FDI surges after 'Make in India', up 46% at $62bn (Economic Times)
India’s poultry sector cries foul as US chicken legs loom large (The Hindu)
FACT SHEET: President Obama’s commitment to global development (White House)
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