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Some implications of Brexit for UK-African relations
The UK All-Party Parliamentary Group on Trade Out of Poverty (APPG-TOP) is undertaking an inquiry into the UK’s Africa Free Trade Initiative (AFTi). The Inquiry has been extended to incorporate the potential implications of Brexit for UK-Africa trade relations.
A second Inquiry Hearing was held in Parliament on Tuesday 12th July. The timeline for submission of Written Evidence has now been extended to 31st July 2016. The Inquiry Committee will then seek to present and publish its Final Report in September 2016, when a new UK Prime Minister and ministerial team will be in post.
tralac has made a formal submission focusing the implications of the UK’s withdrawal from the European Union (EU) for southern Africa and for the Southern African Development Community-EU Economic Partnership Agreement (SADC EPA). Download the full submission below.
Some Implications of Brexit for UK-African Relations
The immediate post referendum challenge is to contain the consequences of uncertainty: about the UK-EU relationship, developments in financial markets, and with respect to formal trade relations between the United Kingdom and its many trading partners, including Africa.
This is a difficult and multifaceted task for which strong political leadership and clearly stated objectives are necessary. Even if a definite decision to withdraw from Europe is announced soon, it will take a long time for the practicalities of the divorce to be worked out. There should, in the meantime, be a basic plan about future relations with Africa.
Africa’s challenge is to respond through constructive engagement about its present and future relationship with the UK (and the EU) and how to ensure that the consequences of Brexit will not derail its own regional and global integration and economic development plans.
Existing market access arrangements for goods from Africa in terms of pre-Brexit agreements, including those soon to be implemented, should go ahead. If the latter requires special mechanisms or interim steps, they should be adopted. All relevant parties should work together in order to prevent the disruption of mutual trade.
Context and Responses
When Her Majesty’s Government (HMG) designs its responses to the recent referendum result and how to prioritize matters, the implications of Brexit for relations with Africa merit the necessary attention. Future UK-Africa relations need a sound platform to ensure stability, predictability, and to serve as a basis for conducting commercial transactions. The UK-African dimension is an important element of the UK’s new foreign relations and goes beyond trade and commerce; to include security and immigration aspects too.
The issues to be addressed are inter-related and involve many technical questions. New trade arrangements with African nations will e.g. have to be WTO compatible; while Free Trade Agreements (FTAs) require their own customs administration, rules of origin and measures to prevent trade deflection. FTAs also contain regional MFN clauses; in order to accommodate other trade agreements and future trade liberalization schemes with third parties. Choices regarding the benefits/costs of bilateral versus regional trade agreements will have to be made. New intergovernmental institutions may become necessary.
Additional factors need to be considered; that time is of the essence and that all affected parties (including African Governments) should become involved in the efforts to re-establish new and long-term bilateral and regional relationships. The challenges ahead require new national policy responses but also mutuality. Lasting structures and arrangements capable of promoting the interests of all the parties involved cannot come about through unilateral action.
The interests of investors and the private sector are also at stake. Major investment and other company decisions are in limbo pending some indication as to the direction that the negotiations on which the UK must now embark, may take.
Practical and legal Consequences of Brexit
Negotiations in terms of Article 50 of the Lisbon Treaty will be primarily about the withdrawal process but should not be conducted without proper consideration of the content of future UK-ACP relations.
Exit from the EU poses several simultaneous challenges. The costs involved in undoing well integrated integration arrangements (with ramifications over a wide spectrum) must be contained; while essential aspects of existing arrangements will have to be renegotiated. More than only direct UK-EU relations will now need new foundations. The UK has for decades interacted with third parties (including African, Caribbean and Pacific (ACP) countries) and the WTO community as an EU member and through the services provided by the Commission.
Those ongoing EU trade negotiations (with e.g. the USA under the Transatlantic Partnership, the EPAs, and new ones mooted in respect of China and others) will now exclude the UK. HMG will eventually have to secure separate deals with such parties; complete with offers for tariff liberalization, services schedules, rules of origin, standards etc.
A new policy framework for UK-ACP relations is required to replace trade and development arrangements presently governed by EU agreements. The UK’s deals could end up being similar to those which the EU has now, but this is not a certainty. It may want to promote its own special interests and respond differently to contemporary global challenges.
It should not be assumed that the EPA framework is still the optimal foundation for ACP-UK relations. The 2030 Agenda for Sustainable Development, major changes in global trade, and disappointment about the post Cotonou results pose the need for a critical analysis of EU development policies and how to design better arrangements. More attention to tailor made agreements with smaller configurations might be called for. There is an opportunity now for the UK to investigate these issues and to contemplate more appropriate outcomes and a new foundation for its own initiatives.
African governments may also emphasize the unique historical ties with the UK. Aid for trade considerations will figure prominently. The 2018 Commonwealth Heads of Government Meeting will be in the UK. The UK may face demands that the special relationship with former colonies be protected.
There is a certain urgency now but new agreements will have to be properly prepared. Sufficient time should be allowed to conclude negotiations and for new agreements to enter into force; they will have to be ratified in terms on national constitutional requirements. Their implementation will require domestication of international instruments to the extent necessary, or the adoption of national laws and regulations. Brexit will have several implications for national governance in the UK.
Most trade agreements involving African states lack proper implementation assistance and a clear plan for post ratification action. This particular aspect could become a more prominent feature of a new generation of agreements with and among African states. Trade facilitation, regulatory bodies (e.g. for service providers) agencies to oversee the enforcement of standards, trade remedy procedures and investigators, enabling legislation and proper training are examples of present deficiencies.
The withdrawal agreement under Article 50 of the Lisbon Treaty should allow the space to pursue new post exit goals and a comprehensive UK-Africa strategy. This makes the sequencing of diplomatic initiatives quite important. Article 50 of the Lisbon Treaty mentions a two year period (from the moment of notification of a withdrawal decision) but vital decisions should be taken soon in order to ensure continuation in trade in the interim, securing investments already made, to prevent legal uncertainty, and to allow for uninterrupted interaction with third parties. The latter should include African Governments, African Regional Economic Communities (RECs) and the African Union (AU). Interim arrangements could be required and dedicated technical and diplomatic staff might have to be deployed.
It is also important to note that two separate sets of negotiations with the EU seem to be required before a comprehensive new EU-UK framework will be in place. Withdrawal under Article 50 of the Lisbon Treaty is the first aspect; to be followed by the “future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union”. These negotiations will obviously not be conducted as separate deals but it is necessary to recognise the different aspects which will have to be addressed and how they will impact on future UK-Africa relationships.
The UK will have to adopt WTO compatible polices for developing countries and LDCs. That will need to be cleared by WTO members. It is not possible to predict the format and content of such accommodations because the EU withdrawal agreement will impact on and determine the nature of new arrangements.
Brexit will unravel important benefits of deep regional integration with the EU, the most integrated market in the word. The costs are not, in all respects, immediately obvious. This factor requires sound legal frameworks capable of allowing adjustment and dispute settlement if required. There will be consequences as private companies factor the changed landscape into their own decisions. It is said that new opportunities (e.g. to conclude bilateral trade deals) will arise; but only in terms of sound and comprehensive policy frameworks.
Many commentators have pointed out that the least disruptive outcome would be for the UK to secure an EEA (European Economic Area – like Norway) type arrangement with the EU; retaining many of the present EU benefits. If this happens it should be easier to ensure continuity with respect to post-Cotonou relations with the ACP countries. However, this type of UK-EU arrangement will have to be “paid” for, in terms of budget contributions, recognition of EU law and standards, and the free movement of persons. If, on the other hand, an FTA between the EU and the UK is agreed, the relationship will be more “distant” and be akin to e.g. the EU-Canada trade deal concluded recently. A standard FTA for trade in goods with the EU (and other third parties) will require WTO compatibility, tariff schedules and rules of origin. Border controls and measures to prevent trade deviation will have to be imposed. Separate deals for trade in services and trade-related matters will become necessary.
An FTA type EU-UK relationship will also mean that all those trade agreements concluded by the EU while the UK was a member will eventually cease to apply to Britain. Trade with e.g. Canada will require a new deal or will take place under MFN rules. The SADC EPA falls in the same category.
Future UK-African Relations
Brexit will not leave UK-African relations untouched. The new scheme which the UK, an important African trading partner and a major donor, has to develop also offers opportunities to cement old ties and to forge new relationships. This could be assisted by factors such as Commonwealth membership, the fact that the legal systems of several African nations are based on the Common Law, and that national administrations have followed British examples.
We do not know how Brexit and post Brexit deals are officially perceived in Africa. There is generally a ‘wait and see’ approach but also signs of uneasiness. Tanzania has just announced that it will no longer ratify the EAC EPA. The true reasons may involve protectionist concerns about the effects on domestic producers and traders (which is a well-known issue) but the announcement did refer to new facts being caused by Brexit.
The one specific aspect which London should emphasize in assuaging African fears is the elimination of uncertainty about preferential access for African goods to UK markets. How can this be done? There can be general guiding principles on how future UK-African relations are officially viewed (an official statement and policy initiative could be a useful starting point) but for the most part there will have to be specific responses. A one size fits all promise will be vague and without focussed action. The SADC EPA serves as an example – to emphasize the specifics of a particular relationship and to design a strategy for the parties involved.
Implications for the SADC EPA
Trade between the EU and SACU as well as between the UK and SACU has always been important. In certain areas (e.g. the export of table grapes, beef and wine) there are special and longstanding market arrangements which benefit SACU. There are also important investment linkages.
The SADC EPA, which took about ten years to negotiate, is officially known as “The Economic Partnership Agreement between the European Union and its Member States, of the one Part, and the SADC EPA States, of the other Part”. It is a comprehensive trade in goods agreement and holds the promise of further negotiations to include trade in services and trade related matters. The EU wants the EPAs to be rules-based and comprehensive partnership agreements which should cover all trade and trade-related matters. As it now stands future trade between the African SADC EPA members (primarily SACU) with the 28 EU member states will be conducted in terms of this agreement.
Technically the SADC EPA is an FTA (about trade in goods) and is governed by Article XXIV GATT. Once in force it will finally replace the TDCA (Trade, Development and Cooperation Agreement), the bilateral trade agreement between the EU and South Africa, which applies since 2000. The SADC EPA was signed on 10 June 2016 and will formally enter into force once all parties have deposited their instruments of ratification. The implementation of the agreement has been announced to be from October 2016.
How will Brexit impact on the fortunes of this agreement and what should SACU strive for? The best scenario for SACU would be if the UK ratifies and starts implementing the SADC EPA while it is still an EU member. It is technically possible because the UK has not yet given notice of its intention to activate Article 50 of the Lisbon Treaty. Up till the final moment when it does withdraw the UK remains part of the EU and is bound by EU law. Even if London does formally notify the EU of its intention to withdraw, it will take a considerable period of time before exit officially happens.
Under the scenario suggested here SACU trade with the UK (and the EU) will not be disrupted and there will be time to start working on a separate UK-SACU trade agreement and to provide for transitional arrangements if necessary. For Mozambique too there can be the same approach and a separate agreement with the UK later. It can be prepared in the interim; before the UK finally leaves the EU.
After the UK has left the EU trade between SACU and an EU of 27 members should continue as agreed in the SADC EPA. What cannot be predicted with any degree of certainty now is what the effect of the UK withdrawal arrangements will be on EU-UK trade with respect to goods imported from SACU members. The answer depends on the nature of the future trade relationship between Brussels and London.
Would London find this idea politically acceptable? We do not know – the idea has not been mooted. HMG may not consider this particular issue as one of its urgent priorities, but is vital for SACU. It could also send a signal that the UK is concerned about its relationships with African nations. The EU would not want this EPA to flounder and would therefore presumably also support an outcome which will restore stability in important trade relations.
Could the TDCA be revived? This seems unlikely. The UK would not conclude a separate deal with South Africa only, SACU’s integrity as a customs union must be protected. Whatever agreements the UK concludes with the SADC EPA members states should be harmonized with its future EU trade relations. The EU has worked hard to conclude the SADC EPA; which South Africa has signed and which offers improved benefits.
Conclusion
It will take a considerable period of time before the UK exit deal will be finalized and a comprehensive and predictable new arrangement between the UK and Africa will be in place. This is not ideal. Interim measures to cope with disruption caused by Brexit and delays in the entry into force of agreements (some of which will have to be negotiated de novo) should be part of the official post Brexit strategy. The EU should support this objective.
The SADC EPA has to be implemented soon and the EU internal legal arrangements for doing so should not be suspended. This requires expeditious action to ensure that the SADC EPA will be implemented as foreseen; Brexit is not a fact yet and this EU arrangement will continue as binding EU law. Such a strategy, in addition to being legally possible, will also provide time to start working on a SACU-UK trade agreement.
SACU should take its own initiatives to prevent post Brexit disruptions and loss of market access. It should do so rather soon and preferably as part of a joint UK initiative.
The SADC EPA is also a case study. The same objective (to prevent disruption of trade and market access) should, mutatis mutandis, guide discussions with other African trading partners and regional arrangements.
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AU says trade, industry critical for Africa’s development
Africa should prioritise trade and industrial sectors to address most of the prevailing challenges the continent faces, including the high rate of unemployment, to ensure sustainable development, Fatima Haram Acyl, the African Union (AU) commissioner for trade and industry, has said.
“While everyone should work to ensure peace, food security, and creating more jobs for the youth, I believe all these can happen if we invest in trade and industries. Industrialisation is critical to Africa’s development because it addresses issues like productive capacity, value-addition, and movement of people which translates into creation of jobs that would spur the continent’s development,” she said.
Acyl was on Wednesday addressing the media on the AU’s Trade and Industry Agenda as a catalyst for Africa’s development during the ongoing 27th African Union Summit at Kigali Convention Centre.
Acyl said there is also a need to examine the role of intra-Africa trade, noting that it is critical to make trade and industrial growth catalysts in Africa’s transformation agenda.
She also recalled that the AU Heads of State and Government adopted the African Mining Vision (AMV) in February 2009, with a view to making the mining sector more responsive to Africa’s economic and social development needs.
With regard to boosting intra-Africa trade and building a continent wide free trade area, the commissioner stated that African leaders launched negotiations in June 2015 which are expected to conclude in 2017.
“A continental free trade area, which will create a single market for goods and services of over a billion people and a GDP of over $3 trillion provides a good reason to invest and partner in Africa,” she said.
Continental free trade area
Last year, at the 25th Summit of the African Union (AU) in South Africa, African Heads of State and Government agreed to create the Continental Free Trade Area (CFTA) by 2017 through negotiations on liberalisation of trade in goods and services. The initiative is part of the AU summit agenda that African leaders are discussing. The Heads of State and Government and the high-level African trade committee, including the trade ministers and ambassadors, are also expected to deliberate on what opportunities are presented by this initiative, and how it can improve intra-African trade.
If implemented, the free trade area will enable members realise their potential to expand and accelerate their dynamism, especially increasing trade among African countries by 50 per cent by 2022. The continent’s GDP is also estimated to rise from $1.7 trillion in 2010 to $2.6 trillion in 2020, which is expected to push up consumer spending from $860 billion in 2010 to $1.4 trillion in 2020, according to AU’s trade and industry department.
Acyl said the continent is looking to this ambitious initiative to address issues like trade in goods and services, as well as competition and investment policies, among others. “The CFTA, therefore, offers African producers and investors a unique opportunity to exploit this huge market it presents,” said the commissioner.
Acyl, however, said there is a need for African industry players to increase production to satisfy demand, noting that CFTA will dismantle trade barriers and help reduce cost of doing business while engaged in intra-African trade, as well as boost productivity and competitiveness.
Intra-African trade currently stands at 12 per cent compared to 70 per cent for Europe, 50 per cent for Asia, or 21 per cent of Latin America.
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Strengthening Côte d’Ivoire’s financial sector to ensure sustainable growth
Financial services in Côte d’Ivoire: Banks set aside in favour of mobile money
Côte d’Ivoire has been enjoying an economic upturn since the return of political stability in 2012, with an average growth rate of 9% per year. The country is viewed as a “champion” in a region where the economic climate is morose. The latest World Bank Economic Update on Côte d’Ivoire notes, however, that a more effective and more inclusive financial system will facilitate business development and improve the living conditions of the Ivorian people.
The report, entitled “The Race to Emergence: Why Côte d’Ivoire Must Adjust its Financial system,” examines the development of the Ivorian financial market. With the arrival of new regional banks, microfinance institutions, the mobile money phenomenon, the country saw an increase in bank loans and improved access to banking services. Nevertheless, its financial system continues to lag behind those of other middle-income African countries, as well as countries such as Senegal and Togo.
“Ivorians remain reluctant to deposit their savings in financial institutions. The poor prefer to keep their money under their mattress or in community savings arrangements (tontines). The more affluent invest directly in real estate or have accounts abroad,” explains Jacques Morisset, World Bank Lead Economist and author of the report.
In Côte d’Ivoire, only one in eight people who save money chooses to deposit his or her savings in a bank or financial institution, a rate that is nearly two times lower than those observed elsewhere in Africa, and close to three times below the average in low-income countries. It seems that most Ivorians prefer to keep their money tucked under the mattress, while the more affluent invest in real estate or save in accounts abroad. This constitutes a significant loss in revenue for a country that, since the return of peace in 2012, has high hopes of joining the ranks of emerging countries by 2020.
Why are Ivorians turning their backs on local banks? According to the report, the explanation is both historic and practical. “The reluctance of Ivorians can be explained in part by the political crisis, which weakened the trust between banks and their clients. It can also be attributed to the historic failures of several public banks that are likely to be closed, restructured, or privatized,” explains Morisset.
Currently, there is little incentive to open and manage a bank account for a number of reasons, notably costly transport to get to a bank, lost time standing in line, and expensive bank transaction fees. Moreover, possessing a bank account does not guarantee access to credit, as Ivorian banks prefer to deal with large businesses, purchase government securities, or build liquidity reserves.
More and more, Ivorians are abandoning banks in favor of mobile phone companies. In 2014, more people had mobile money accounts (24%) than had bank accounts (15%). Indeed, the percentage of adults with a mobile money account in Côte d’Ivoire is the fifth highest in the world, after Kenya (58%), Somalia (37%), Uganda (35%), and Tanzania (32%). Fewer than five years after its arrival in Côte d’Ivoire, mobile money has become one of the population’s most frequently used means of conducting financial transactions. The Côte d’Ivoire Telecommunications Regulatory Authority (ARTCI) estimates that of the 24 million mobile phone subscribers in June 2015, 7.2 million have mobile money accounts. In the first six months of 2015, revenue from withdrawals, transfers, and bill payments totaled 17 billion West African francs, or about $28 million.
The World Bank report notes that while these mobile accounts facilitate payments and money transfers, they do not provide access to credit, one of the main functions of a financial system. The Ivorian authorities are therefore urged to take two steps to reverse the current trend and strengthen financial intermediation in Côte d’Ivoire.
The first step consists of encouraging banks, including microcredit institutions, to develop closer ties with their customers through innovations and partnerships, with the aim of reducing their transaction fees. The success of countries such as Kenya, Tanzania, and Brazil shows that banks can lower their transaction fees by diversifying their distribution network, making better use of communication tools, and introducing financial instruments better suited to the needs of potential customers, such as capital leases and factoring. The report also recommends the establishment of shared information systems to better assess the quality of credit applicants to reduce risk.
The second step consists of promoting the creation of financial institutions other than commercial banks. For example, mobile phone companies could grant loans, as they do in Kenya, where the carrier Safaricom opened a credit department in 2013 in partnership with a bank (M-Shwari). Today, it has more than 10 million customers.
Finally, the report stresses the importance of a financial market regulatory framework that is able to adapt to future innovations. Supervision and the imposition of sanctions by authorities are necessary to avoid slippages and excessive risk-taking. While there have been positive developments in Cote d’Ivoire’s financial system, the banking sector and the authorities must work together to expand access to financial services and further strengthen the system as a whole.
Strengthening the financial system is essential if Côte d’Ivoire wishes to continue on the path to emergence. By raising its financial development index to the level observed in Cabo Verde or Namibia, its economic growth could increase by 2.4%. If it equaled that of South Africa, its growth could expand by more than 5%.
“The Ivorian economy should maintain a growth rate of around 8% in the coming years. One of the greatest challenges going forward will be to better distribute the benefits of this growth. This will require an effective and inclusive financial system,” explains Pierre Laporte, World Bank Country Director for Côte d’Ivoire.
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Four East African countries set to sign trade pact with EU next week
Four East African countries are set to sign economic partnership agreement with the European Union (EU) next week in Nairobi, a senior Kenyan official said on Wednesday.
Kenya’s Deputy President William Ruto said Burundi, Kenya, Uganda and Rwanda will ink the Economic Partnership Agreement (EPAs) that allows these countries to export their agricultural products to Europe without attracting tax.
The deal will however be signed without Tanzania which said last week it will not sign the trade pact between East Africa Community (EAC) and EU following Brexit.
The announcement caused shock at the EAC countries. Aziz Mlima, Tanzania’s Permanent Secretary in the Ministry of Foreign Affairs, said the country had decided to halt the signing because of “turmoil” that the EU is experiencing following Britain’s exit.
Mlima said signing the pact would risk exposing young EAC countries to harsh economic conditions given the prevailing conditions in Europe.
The official said Tanzania’s Parliament would first peruse and advise the government before committing to the deal.
“Our experts have established that the way it has been crafted, the EPA will not benefit local industries in East Africa. Instead it will lead to their destruction as developed countries are likely to dominate the market,” Mlima said.
Ruto had travelled to Burundi to meet President Pierre Nkurunziza on Wednesday over the EPAs deal set to be signed on Monday next week. All four partner states, except Tanzania, participated and agreed to sign the agreement.
A statement issued in Nairobi after the visit to Burundi said the development (Tanzania refusal) poses a great threat to the EAC Customs Union which requires all Partners States to sign the EPA in order to safeguard against the perforation of the Common External Tariff.
“In the event that the EAC does not sign the EPA as a bloc, all EAC partner states stand to lose generous market access terms negotiated under the EU market,” Ruto said.
The decision by Tanzania not to sign the agreement leaves the region, and specifically Kenya, at a great risk of losing a lot of revenue when exporting goods to the EU.
This essentially means Kenya’s exports to the European Union-mainly flowers and vegetables-will attract tax. Kenya exports produce worth 1.2 billion U.S. dollars to the European market.
The EAC partner states negotiated EPA as a bloc since 2007 and Ruto said Kenya stands to lose more because its exports to the EU will attract import duties thereby threatening jobs, revenue, and relocation of industries to less developed neighboring countries.
According to the statement, Ruto and Nkurunziza said stability of the region was important for economic growth and welfare of the people.
The economic agreement is due for signing by East African countries after the Sectoral Council of Trade, Industry, Finance and Investment (SCTIFI) EAC agreed.
An extra-ordinary council meeting of ministers responsible for East African Affairs met on June 30 and proposed that the countries sign the agreement on July 18.
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Africa’s tax gap needs fixing – Gordhan
Finance Minister Pravin Gordhan said yesterday that illicit financial flows, tax evasion and transfer pricing were major contributors to South Africa’s and Africa’s tax gap.
Gordhan told delegates from more than 30 countries at the high level two-day conference on Illicit Financial Flows: Inter-Agency Co-operation and Good Tax Governance in Africa, held at the University of Pretoria, that illicit flows were a threat to the continent’s development agenda.
“Tax evasion, illicit financial flows and transfer pricing are contributors to the tax gap in any country and the extent to which they are uncontrolled undermines the fiscal capacity of the various countries,” he said. Last year former president Thabo Mbeki told the Pan African parliament that the illicit flows cost Africa $1 trillion (R14trln) over 50 years.
Prime suspects
Mbeki, who first investigated the illicit financial flows for the AU in 2012, said multinational corporations were the prime suspects in the trade and that illegal drug trafficking accounted for almost 30 percent of the money.
In his Budget speech delivered in February, Gordhan said with effect from next year international agreements on information sharing would enable tax authorities to act more effectively against illicit flows and abusive practices by multinational corporations and wealthy individuals.
Capital flight not only drains domestic wealth, but it also exacerbates inequality and facilitates crime and corruption. In 2014, French bank BNP Paribas was fined $8.9 billion after being found guilty in 2014 for transferring billions of dollars on behalf of Sudan and other countries blacklisted by the US in one of the biggest financial illicit cases to date.
A research by the Global Financial Integrity, which used Ghana, Kenya, Mozambique, Tanzania and Uganda as case studies, found that trade misinvoicing was a significant source of illicit outflows and inflows of capital in each country. The International Monetary Fund said governments should significantly boost customs enforcement by providing appropriate training and equipment to better detect the intentional misinvoicing of trade transactions.
Gordhan said Africa lost about $50bn annually to illicit financial flows and this compromised the continent’s ability to provide economic and human development.
High Level Conference on Illicit Financial Flows: Inter-Agency Cooperation and Good Tax Governance in Africa
Extracts from the Address by Minister of Finance, Mr Pravin Gordhan
Ladies and Gentlemen, welcome to all of you who have travelled from all corners of our continent and thank you for the invitation to address this High Level Conference on Illicit Financial Flows and Good Tax Governance.
Tax crimes, money laundering and illicit flows are part of a complex phenomenon which is undermining good governance, ethical politics, government and civil society programs intended to promote inclusive growth, reduce inequality and improve the standard of living of the poor and lower middle classes on this continent and elsewhere in the world.
I am pleased that you are looking at this matter from an African continental perspective, because our continent is one where illicit flows from and between African countries pose a significant threat to the developmental agendas of our countries. Indeed, in recognition of the matter, the African Union prioritised the need to identify, stop and eliminate these flows out of Africa, giving effect to the sterling work done by the Mbeki High Level Panel on Illicit Financial Flows from Africa.
This project recognises the link between tax crimes and the proceeds gained from all manner of criminal activities – organised crime, money laundering and corruption being amongst them. Good tax governance and strong cooperation between law enforcement agencies and tax authorities are essential elements in effectively countering corruption, bribery, and illicit flows.
But this requires society to nurture and sustain strong, capable and independent institutions led and operated by public officials who are ethical, public-service oriented and allowed to act without fear or favour against these crimes and those committing these crimes.
The program that you are initiating must ensure that, both in Africa and outside of Africa, in the public but also in the private sector, there is an unimpeachable effort to build ethical, resilient institutions and officials whose integrity is beyond question. A task, I admit, easier to articulate and talk about but difficult to implement.
Nonetheless, we can never relent in our efforts, we must all ensure that the right things are done whatever the evil and extractive forces in the private and public domain might be doing in order to sabotage genuine people-oriented democracies and just and fair development across the world.
Background
The danger of illicit flows and money laundering is not new to South Africa. It was in fact identified as a priority integral to a tranche of laws which were passed by Parliament almost immediately after the birth of our democracy and was seen as critical.
These laws were to enable our integration into the world economy and to ensure that the integrity of the South African financial system was protected from being abused for criminal objectives.
The first administration of President Mandela and the first Minister of Justice of the democratic South Africa, the late Dullah Omar, recognised that illicit flows and money laundering pose a “danger that should be taken very seriously by all countries” and failure by countries “to take action against it face not only massive potential financial losses, but a terrible threat to the entire fabric of society.”
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For UNCTAD Ministerial, NGOs call for development focus, not trade rules enforcement
Days before a major meeting of the governing body of the United Nations Conference on Trade and Development (UNCTAD), over 100 non-governmental organisations worldwide are calling for the organisation to maintain its development role and not help implement international and regional trade rules.
The 14th quadrennial ministerial Conference of UNCTAD is taking place from 17-22 July in Nairobi, Kenya. The theme for this 14th edition is “From decision to action: moving toward an inclusive and equitable global economic environment for trade and development.”
The ministerial conference is the highest decision-making body of UNCTAD and sets UNCTAD’s mandate and work priorities for the next four years. The programme of the conference is here.
A letter written by a network of non-governmental organisations (NGOs) called Our World Is Not for Sale, and endorsed by a large number of international, regional and national organisations, voiced concerns about UNCTAD becoming an “implementation mechanism for trade agreements concluded elsewhere.”
“While a multilateral system of trade rules is preferable to a fragmented system, the rules must be fair and balanced, taking into account the various levels of development across the UN membership, rather than focused on trade liberalization or simply increasing trade flows,” the letter said.
The group refers to a Pre-Conference negotiating text of 3 June. The text compiles the textual proposals put forward by various groups and individual delegations in connection with the first reading of the draft negotiating text for the quadrennial conference, according to the document, which also signals different contributions.
The original “zero draft Pre-Conference negotiating text” from February 2016 is here.
In particular, the letter refers to an addition by the Group of 77 developing countries in paragraph 8 stating that UNCTAD should contribute to “promoting a more just, fair, and equitable global economic environment,” in particular through the implementation of the new UN 2030 Agenda for Sustainable Development.
The letter also supports the proposal by the G77 in paragraph 5.bis calling for special and differential treatment for developing countries. The G77 also proposed in paragraph 8 that UNCTAD should also support the strengthening of a development-oriented multilateral trading system which is universal, rules-based, predictable, more inclusive, open, non-discriminatory and equitable.
“Common but Differentiated Responsibilities (CBDR) and SDT [special and differential treatment] are long-standing multilaterally-negotiated principles that recognize that developed and developing countries cannot be treated in the same manner because of their differing development and economic circumstances,” the NGOs said in the letter.
On technology transfer, the letter says it “is essential to the enabling of sustainable development in developing countries and UNCTAD should continue to take a lead role in supporting these efforts by developing countries (Paras 48, 60 (l), 82 (dd)) rather than in enforcing intellectual property rules that benefit protectionist patent – and copyright – holders in developed countries (Para 60 (q)).”
“We believe that the further UNCTAD moves toward seeing developing countries mainly as engines to increase trade – and thus deviating from its mission to support the use of trade for development, the more it risks redundancy and irrelevancy,” the letter concludes.
As of 7 July, the letter had been endorsed by some 15 international steering groups, such as Public Services International and Third World Network Africa; 11 international and regional organisations, such as ActionAid International, and over 80 national organisations from developing and developed countries.
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Christine Lagarde: “Doubling down on development”
In a speech at the Center for Global Development on 14 July, IMF Chief Christine Lagarde discusses the mix of strong policies and robust external support needed to enable the 1.3 billion people living in low-income developing countries to benefit more from the world economy – and contribute more to global growth in the years ahead.
I am delighted to return to the Center for Global Development (CGD), which this year marks its 15th anniversary. Combining idealism with realism, CGD has significantly enriched the global dialogue on development. And Nancy Birdsall – your founding president – has used her outstanding intellect and passion to spearhead this important agenda.
Let me mention a few contributions. When the global financial crisis hit, you advocated for a comprehensive support package to help developing countries cope. You pushed relentlessly for increased aid effectiveness and accelerated vaccine development. You advocated practical measures to support fragile countries – from Haiti, to Liberia, to South Sudan.
And – I cannot help but mention this one – you strongly and consistently supported the approval of the IMF’s quota and governance reforms.
Nancy: as you step down, I would like to thank you for your exceptional leadership. CGD is not just a “think-tank” – under your leadership, it has become a “think-and-do-tank.”
Ladies and gentlemen, it did not take the Brexit vote to understand that low growth, rising inequality, and a lack of jobs have combined with social and geopolitical concerns to fuel the rise of populism and inward-looking forces. The greatest challenge we face today is the risk of the world turning its back on global cooperation – the cooperation which has served us all well.
There is one group of countries that would be particularly affected by a breakdown of cooperation. Ironically, it is precisely those countries that offer promise to the future global economy as populations in advanced and emerging markets are aging, limiting their future role in global growth.
Of course, I am talking here of the group of low-income countries – which includes about 60 countries that together account for about one-fifth of the world’s population. Last year, the global community made historic commitments to achieve sustainable development goals in which “no one is left behind” – with the poorest countries needing greatest support to strengthen their development efforts.
Today, we must ensure that these commitments are becoming reality – even as we are facing challenges in many other areas.
1. Challenges for Low-Income Countries
Our mission to improve living conditions in developing countries has come a long way over the last fifteen years. One billion people escaped extreme poverty, helped by growth in China and India.i Child mortality was drastically reduced. Inroads were made to tackle AIDS, malaria and tuberculosis.
And economic growth in most low-income countries was strong – averaging 6 percent, up from 3½ percent during the 1990s.ii
And yet, millions of people are being left behind. Growth in some fragile states has averaged just 2-3 percent since the turn of the millennium.iii Of the 60 low-income countries, just 16 met the target for extreme poverty reduction. Without a sharp improvement in growth, 20 of them are unlikely to meet it even by 2030.iv
This leaves the global community with a task expressed most clearly by Nelson Mandela:
“As long as poverty, injustice and gross inequality persist in our world, none of us can truly rest.”v
So our main objective is clear. It has been defined and shaped by the Sustainable Development Goals that were agreed last year.
It may be tempting to think that we will make further progress if we simply continue down the steady path we have been following in the past. But existing obstacles evolve and new ones arise, and so we need to be ever mindful of the challenges in front of us. Let me mention three of them:
- First, demographic change. By 2035, the number of sub-Saharan Africans reaching working age will exceed that of the rest of the world combined.vi This can be a demographic dividend that could increase per capita incomes and drive growth in Africa and around the world.
But there is also a potential downside. If we are not able to provide this coming generation with a livelihood and a chance to share in global welfare, we should be prepared for migration and political strife at an unprecedented level. And let us have no illusions that this would stop at the water’s edge, or at borders secured by a wall or chain link fence.
- Second, climate change. Natural disasters overwhelmingly affect poorer countries. Between 2006 and 2015, they hit low-income countries one and a half times more often than more developed countries.vii
And more than three-quarters of low-income countries are either highly or extremely vulnerable to climate change.viii These stresses could also translate into migration pressures and heightened risk of conflict.
- Third, the risk of violent conflict indeed remains present, including from civil war or terrorism. The World Development Report – another seed sown by Nancy – has found that for every three years a country is affected by major violence, poverty reduction lags behind the average by almost 3 percentage points.ix
The impact on growth is also sobering. Since the turn of the millennium, real per capita GDP in fragile states has risen only by 15 percent or less – compared with 70 percent in other low-income countries.x
2. Policy Recipes
In addition to these long-term challenges, the global economic environment is not helping much at the moment. I had hoped that our July WEO Update would be more optimistic than our April projection for 3.2 percent growth in 2016. As previously mentioned, however, Brexit has added even greater uncertainty to the outlook.
And specifically for low-income countries, slowing demand from China and the commodity price drop has hurt exporters of raw materials while not providing the expected consumption boost for importers. So where does this leave us?
I am sure I will not surprise you: first and foremost, our advice is to maintain resilience through sound macroeconomic management.
The reason is simple: a big part of low-income countries’ relative success in recent years is owed to sound macroeconomic policies – by which I mean low inflation, manageable fiscal deficits, competitive exchange rates and low public debt levels.
The experience of the last financial crisis clearly demonstrated the value of preparing for a rainy day through prudent policies. In 2009, for instance, while others were left reeling, growth remained positive in over 80 percent of low-income countries – thanks in part to measures implemented in the years before.xi
Indeed, we estimate that as much as three-fifths of a country’s economic performance depends on domestic policies as opposed to changes in the external environment.xii
Now, you will rightly ask whether all the IMF has to offer is grandmotherly advice to maintain low inflation and prudent public finances.
Indeed, I would like to focus your attention on three strands of work that we have engaged in with our member countries in recent years. They focus on (i) raising resources for development, (ii) promoting efficient infrastructure investment, and (iii) inclusive growth – key ingredients for successful development.
Resources
Preparing for the challenges of the future costs money. Low-income countries increasingly have the tools to mobilize it themselves by broadening tax bases and strengthening tax administration. Given that half of these countries have tax ratios below 15 percent, there is ample room to boost domestic revenue mobilization.xiii
At the same time, the international community also needs to prevent artificial shifting of business profits to low-tax locations and tax evasion by high net-worth individuals. We are working closely together with the OECD and the World Bank on this in the so-called BEPS project.
Official aid accounts for a more modest share of flows to developing countries these days, but it remains important. Official ODA has risen by 7 percent in real terms in 2015, but the statistics are a little misleading – much of the increase reflects domestic spending on refugees. The bottom line is that ODA as a share of gross national income remains at just about 0.3 percent – well below the 0.7 percent target.xiv
Clearly, there is room to lift both the level and the effectiveness of aid – and I encourage all countries to raise their game in this area.
One more point on resources: workers’ remittances are a growing source of revenues for poorer countries, but transaction costs are high – averaging 8 percent.xv It is time to get serious on the G-20 commitment to reduce these costs.
I will also be in New York next week to give a speech on the importance of maintaining correspondent banking relationships with low-income countries – access to financial markets remains imperative for development.
Infrastructure
These resources, of course, have to be put to good use. Our main focus has been on improving public infrastructure.
Consider this: the 48 countries in sub-Saharan Africa together generate only the same amount of electricity as just one advanced economy – Spain.xvi Clearly, if the continent is to realize its potential, better infrastructure is needed.
The price tag, however, is significant. UNCTAD estimates that total infrastructure investment needs in developing countries range from $3.3 trillion to $4.5 trillion a year.xvii Striking the right balance between scaling-up spending and maintaining sustainable debt is therefore critical, and our revised debt policies toward low-income countries reflect this tradeoff.
Moreover, to make sure that any new investment has a lasting positive impact, we at the Fund have expended considerable efforts in providing member countries with the tools and know-how to scale up public investment in a transparent and cost-effective way.
Inclusion
Beyond resources and infrastructure, we have worked with our membership on ways to make growth more inclusive. Lowering inequality is not just a social imperative – it makes growth more robust and sustainable.
We probably all agree on the need to develop human capital – especially by investing in health and education. These investments yield high returns – boosting both productivity and human well-being. In particular, educating girls is probably the single best investment that a developing country can make.
More broadly, improving gender equity – particularly access to health and finance – is a “safe bet” to promote inclusive growth. I am quite encouraged by the results of a new Working Paper by our staff: it finds that empowering women can also support economic diversification!
The paper – which is being published today – goes so far as to suggest that increasing gender equality has the potential to lift a country from the lowest rank for export diversification to about average.xviii This message should ring especially loudly for many commodity-exporting countries.
Finally, let me note the importance of promoting financial inclusion. “Financial development” – by which I mean widening the use of existing financial instruments and adopting new ones – can pay big dividends. In sub-Saharan Africa, for example, we estimate that growth could be about 1½ percentage points higher if we were able to bring the level of financial development closer to the international average.xix
3. The Role of the Bretton Woods Institutions
Dear Nancy, there is quite an agenda left as you step down from the helm at CGD. I trust the Center will continue in the same exemplary way that you have built it. But I would also like to assure you that the IMF and – if they allow me to speak for them at this occasion – our friends and colleagues at the World Bank will continue to carry the work forward.
Like CGD, the Bretton Woods sisters have a proud history of supporting our low-income member countries. Just to highlight a few:
- Through the Heavily Indebted Poor Countries (HIPC) Initiative, we have delivered over $76 billion of debt relief for the world’s poorest countries since 1996.xx Since 2005, the Multilateral Debt Relief Initiative (MDRI) delivered an additional $50 billion.xxi
By alleviating these debt burdens, recipient countries managed to increase poverty-reducing expenditure, on average, by almost 3 percentage points of GDP.xxii
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Following the global financial crisis, the IMF provided $13 billion in concessional financing. Last year – in the context of the Financing for Development effort – we expanded access to concessional lending by 50 percent and retained zero percent interest rates.
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In addition, and importantly, we have increased our capacity development efforts – in areas such as domestic revenue mobilization and public financial management. I just listed these two areas as key priorities for our work going forward, and that is where we are stepping up capacity building efforts in a significant way.
Indeed, we have a major fundraising effort currently underway to allow us to provide this service to our members at the required scale.
And of course, Fund staff are collaborating closely with our colleagues across 19th Street. I very much welcome the Bank’s initiatives on helping refugees, fighting infectious diseases, and of course their goal on ending extreme poverty by 2030.
Much has been written lately about the Bank trying to expand its lending business in areas that are normally covered by the Fund. I can assure you that we are closely in touch on those operations, and both institutions are well aware of the Fund’s mandate in the area of economic stability and growth-friendly macro policies.
Conclusion
This brings me to my conclusion.
As I said at the outset, we stand at a critical moment. We know that globalization – and increased integration – over the past generation has yielded many economic benefits for many people. But at the same time, large groups of people have been left behind.
Unless we get it badly wrong in the next few years, I firmly believe that the 1.3 billion people living in low-income developing countries have greater opportunities than ever before to benefit from, and contribute to, the global economy. This is good news for them, and also for the other 6 billion citizens who will benefit from this global good.
With the right policies to reap its demographic dividend, for instance, per capita income in sub-Saharan Africa could be – I ought to say “should” be – 50 percent higher by 2050.xxiii
Reaching this target, however, requires strong external support and major investment in human and physical capital. Around 18 million new jobs will be needed each year between now and 2035, alongside a major shift from informal to formal work.xxiv
This is a tall order and I wish, Nancy, that we could continue to count on your leadership in this effort. But we will carry on in your spirit, doubling down on the quest for economic development.
By way of closing, let me return to Nelson Mandela:
“When people are determined, they can overcome anything.”xxv
Thank you.
[i] United Nations, The Millennium Development Goals Report 2015
[ii] World Economic Outlook
[iii] World Economic Outlook
[iv] IMF, Macroeconomic Developments in Low-Income Developing Countries, October 2014, p.17
[v] Address by Nelson Mandela for the “Make Poverty History” Campaign, London, United Kingdom, February 3, 2005.
[vi] IMF, Regional Economic Outlook for Sub-Saharan Africa, April 2015, p. 25
[vii] IMF, Macroeconomic Developments and Prospects in Low-Income Developing Countries, November 2015, p.32
[viii] Ibid
[ix] World Development Report 2011, p. 4
[x] IMF, Financing for Development – Revisiting the Monterrey Consensus, July 2015, p.10
[xi] IMF, Macroeconomic Developments in Low-Income Developing Countries, October 2014, p.12
[xii] IMF, World Economic Outlook, Chapter 4, October 2012
[xiii] IMF, Financing for Development – Revisiting the Monterrey Consensus, July 2015
[xiv] OECD-DAC
[xv] IMF, Financing for Development – Revisiting the Monterrey Consensus, July 2015
[xvi] Vivien Foster and Cecilia Briceño-Garmendia (eds.), 2010, Africa’s Infrastructure: A Time for Transformation. A copublication of the Agence Française de Développement and the World Bank
[xvii] UNCTAD, World Investment Report 2014
[xviii] IMF Working Paper: Gender Equality and Economic Diversification, July 2016
[xix] IMF Regional Economic Outlook, Sub-Saharan Africa – Time for a Policy Reset, April 2016, p. 52
[xx] IMF Factsheet: Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative
[xxi] IMF and World Bank, Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI) – Statistical Update, March 2016
[xxii] IMF and World Bank, Public Debt Vulnerabilities in Low-Income Countries: The Evolving Landscape, December 2015
[xxiii] IMF, Regional Economic Outlook for Sub-Saharan Africa, April 2015, p. 25
[xxiv] Ibid
[xxv] Interview, Johannesburg, South Africa, November 14, 2006
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Unique challenges of countries in special situations must remain central to sustainable development strategies
The unique challenges of countries in special situations needed to stay at the forefront of efforts to achieve the 2030 Agenda on Sustainable Development Agenda speakers said on Thursday, 14 July 2016, as the High-level Political Forum on Sustainable Development continued.
The Forum held three panels exploring the need for statistics in the monitoring and evaluation of the future development agenda, as well as the particular needs of those countries. The panels’ themes were “National mechanisms for monitoring progress and reporting on implementation for the achievement of the Sustainable Development Goals”; “Making the 2030 Agenda deliver for small island developing States, building on the SAMOA Pathway”; and “Countries in special situations”.
A profound strategic shift would be needed to fulfil the goal of “leaving no one behind” said David Steven, Senior Fellow and Associate Director at the Centre on International Cooperation, New York University, United States. “We must do this work urgently”, he stressed, noting that the 2030 Agenda singled out, in particular, African countries, least developed countries, landlocked developing countries, small island developing States and conflict- and post-conflict countries, as well as middle-income countries. The new agenda was both a promise of what could be achieved and a warning against failing to act now, he emphasized.
Many countries were facing unfulfilled development expectations, said Youba Sokona, Special Adviser on Sustainable Development of the South Centre Least Developed Countries Independent Expert Group. “The window for action is rapidly closing,” he said, adding that there was room for each country, no matter its condition, to take on the 17 Sustainable Development Goals.
As the world pursued a more sustainable future, small island developing States had every potential to be left behind, warned Anote Tong, former President of Kiribati. Climate change put those countries at particular risk, and without concrete action on climate issues, every other development objective would be meaningless. In that context, he was pleased that climate change and ocean preservation were included as stand-alone elements within the Sustainable Development Goals.
Recalling that the Millennium Development Goals were a “set it and forget it” exercise, Justina Langidrik, Chief Secretary of the Marshall Islands, said that the Sustainable Development Goals were an opportunity for all to do better and should be seen as a benefit and not a burden at the implementation level. With a population of 60,000 people spread over an area the size of Mexico, the Marshall Islands grappled with unique data reporting challenges. Moreover, the islands were almost entirely dependent on bilateral assistance, she said, stressing the need to urgently review those arrangements in the context of the development framework.
David Smith, Coordinator at the University of Consortium for Small Island States and the Institute for Sustainable Development at the University of the West Indies, said there was a need to push forward with an economic transformation to a green economy with more focus on increased markets for goods, services and labour. The private sector and civil society involvement should be promoted. Human capital development through education and training should be undertaken, while science and technology should be mainstreamed into policies.
Make sustainable development goals relevant to citizens, speakers tell High-level Political Forum, as discussions centre on reaching successful 2030 Agenda results
National-level implementation of the 2030 Agenda for Sustainable Development must be country owned and context specific, with its goals closely linked to national values and priorities, stressed speakers on Wednesday.
The Forum held four panels exploring early national implementation efforts as well as future plans, with panellists and other participants pinpointing examples of good practices and identifying challenges. The panels’ themes were “Creating ownership at the national level”, “Mainstreaming Sustainable Development Goals into national policies, plans and strategies and integrating the three dimensions of sustainable development”, “Vertical cooperation: Local authorities and national Governments working together for the implementation of the 2030 Agenda”, and “Challenges in mobilizing means of implementation at the national level (financing, technology, capacity-building)”.
“We need to begin by making the Sustainable Development Goals relevant and as close to our countries and people as possible,” said Stine Lise Hattestad Bratsberg, Chief Executive Officer of PURE Consulting, who served as a lead discussant. While many countries had made early strides, there was still much work to do in implementing the 2030 Agenda, she said, including raising public awareness of that collective journey.
The notion of public support and the importance of including diverse stakeholders in the implementation process were echoed by a number of speakers throughout the day. Adolfo Ayuso, Deputy Director General for International Affairs in the Office of the President of Mexico, said that his Government had worked to get the message out about the 2030 Agenda to ensure that people understood its purpose and objectives, particularly at the local level. The ability to achieve national ownership would be directly related to the ability to understand the new development framework. There must also be a willingness to participate in implementing the 2030 Agenda through the recognition that it was not only about rights, but also obligations.
Along similar lines, many speakers stressed the need to avoid imposing a “one-size-fits-all” approach on countries as they worked to implement the 2030 Agenda and the Sustainable Development Goals. Indeed, some said, while those targets were universal in nature, they must be balanced with national priorities and achieved in ways that made sense on the ground.
Underscoring the importance of striking that balance was Louis Meuleman, Senior Fellow at the University of Massachusetts Boston and Wageningen University, Netherlands. He emphasized that creating national ownership of the 2030 Agenda would only be possible if the Sustainable Development Goals appealed to what people knew, understood and found logical. One could not create ownership by telling stakeholders to forget everything they believed in. Balancing the universal goals with national values and traditions would be vital, he said, stressing that external blueprints – including so-called best practices – should not be applied.
Wardarina Thaib, Programme Officer from the Asia-Pacific Forum on Women, Law and Development and Co-Chair of the Asia Pacific Regional CSO Engagement Mechanism, who also represented the major group for women, described promising early implementation efforts taking place across the region. However, there were also many warning signs that the 2030 Agenda’s ambitions would be undermined, including failures to address systemic exclusion and to involve civil society in development planning. Larger and more far-reaching trade treaties had been agreed upon, States were engaging in proxy wars and land-grabbing and there were increasing attacks on human rights defenders, she said.
Along with challenges, panellists also discussed a number of solutions. Joseph Enyimu, economist at the Ministry of Finance, Planning and Economic Development of Uganda, emphasized that the 2030 Agenda’s implementation would require mature institutions within countries and adequate policy space. Fiscal discipline would be critical, as funds for the various dimensions of sustainable development often came from the same source and the international community must rally around country-led statistical development.
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How eight cities succeeded in rejuvenating their urban land
The single most crucial component in rejuvenating decaying urban areas around the world is private sector participation, according to a report released on 13 July 2016 from the World Bank and the Public Private Infrastructure Advisory Facility (PPIAF) during the World Cities Summit taking place in Singapore this week.
“Urban regeneration projects are rarely implemented solely by the public sector. There is a need for massive financial resources that most cities can’t meet,” said Ede Ijjasz-Vasquez, Senior Director for the World Bank’s Social, Urban, Rural and Resilience Global Practice. “Participation from the private sector is a critical factor in determining whether a regeneration program is successful – programs that create urban areas where citizens can live, work, and thrive.”
Every city has pockets of underused land or distressed urban areas, most often the result of changes in urban growth and productivity patterns. In developing countries, which are absorbing 90 percent of the world’s urban population growth, decaying inner cities are home to an increasing number of poor and vulnerable citizens. These areas marginalize and exclude residents, and can have a long-term negative effect on their upward mobility.
Regenerating Urban Land: A Practitioner’s Guide to Leveraging Private Investment looks at regeneration programs from eight cities around the world – Ahmedabad, Buenos Aires, Johannesburg, Santiago, Singapore, Seoul, Shanghai, and Washington DC – documenting the journeys they have faced in tackling major challenges in this area.
Building on the experience of cities from different regions around the world, the report looks at projects for inner cities, former industrial or commercial site, ports, waterfronts, and historic neighborhoods. While the cases vary in many aspects, what they have in common is significant private sector participation in the regeneration and rehabilitation of deteriorating urban areas.
The report singles out successful policy and finance tools in each city case study, and points out issues and challenges the city faced during the process. It identifies four distinct phases for successful urban regeneration: scoping, planning, financing, and implementation. Each phase includes a set of unique mechanisms that local governments can use to systematically design a regeneration process.
For example, in Singapore, the polluted Singapore River was no longer used for trading activities as large-scale container ports gained prominence.
“Capitalizing on the Singapore River’s historical importance and potential for redevelopment, the government launched a transformational program that preserved cultural heritage, improved the environment, and opened the area for recreational pedestrian use. Similar efforts elsewhere can rejuvenate cities and regional economies,” said Jordan Schwartz, Director of the World Bank’s Infrastructure & Urban Development Hub, based in Singapore.
Yet there is no “one size fits all” approach when looking for solutions to cities’ declining areas. The report stresses that while the tools presented in the report yielded successful results in many cities around the world, no one solution is universally applicable to all cities and situations. The report also emphasizes that with strong political leadership, any city can start an urban regeneration process, but the successful use of land-planning and finance tools depend on sound and well-enforced zoning and property tax systems.
“No two cities are alike, so to meet this challenge, the World Bank created an online decision tool, based on the specific issues the city faces and its current regulatory and financial environment,” said Rana Amirtahmasebi, author of the report. ”Local governments can use the information curated in this report to begin to reverse the process of economic, social, and physical decay in urban areas, moving toward the sustainable, inclusive development of their cities.”
Illustrating the transformation, other case studies from the new report include:
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The city of Santiago (Chile) lost almost 50 percent of its population and 33 percent of its housing stock between 1950 and 1990. But the city turned this around, using a national housing subsidy to specifically target the repopulation of the inner city. The private investment reached USD 3 billion throughout the life of project, stimulated by a USD 138 million subsidy.
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Buenos Aires (Argentina) found itself on the verge of becoming unsustainable, when urban sprawl moved away from downtown leaving prime waterfront land, with significant architectural and industrial heritage, vacant and underused. To tackle this problem, the city used a self-financing urban regeneration initiative in Puerto Madero to redevelop the unused 170-hectare land parcel to an attractive mixed-use waterfront neighborhood. The total investment reached USD 1.7 billion, with USD 300 million invested by the city through the sale of land.
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Seoul (Republic of Korea) experienced a major decrease in residential and commercial activity in its downtown, where small plots, narrow roads, and high land prices made development too costly. From 1975 to 1995, Seoul lost more than half its downtown population, while substandard housing for mostly squatters and renters was more than twice the city’s average. Seoul launched the Cheonggyecheon revitalization project to redevelop an 18-lane elevated highway into a revitalized stream with green public space totaling 16.3 hectares, dramatically increasing real estate values and the variety of uses for the downtown areas.
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In Ahmedabad (India), the closure of mills along the Sabarmati Riverfront caused unemployed laborers to form large informal settlements along the riverbed, creating unsafe and unclean living areas and reducing the flood management capacity. In response, the city created a development corporation to reclaim 200 hectares of riverfront land on both sides and paid the project costs through the sale of 14.5 percent of the reclaimed land, while the rest of the riverfront was transformed into public parks and laborers resettled through a national program.
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In the 18-square kilometer inner city of Johannesburg (South Africa), a series of targeted regeneration initiatives achieved a decline in property vacancy rates from 40 percent in 2003 to 17 percent in 2008, and a similar jump in property transactions. Since 2001, for every rand (R) 1 million (about USD 63,000) invested by the Johannesburg Development Authority, private investors have put R 18 million into the inner city of Johannesburg, creating property assets valued at R 600 million and infrastructure assets valued at R 3.1 billion.
» Download: Regenerating Urban Land: A Practitioner’s Guide to Leveraging Private Investment (PDF, 7.85 MB)
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China’s engagement with Africa: From natural resources to human resources
Throughout the 2000s, Chinese demand for primary goods like oil, iron, copper, and zinc helped Africa reduce poverty more than it had in decades. Even so, China’s total investment in the continent’s natural resources has been smaller than many imagine, and, with growth moving away from manufacturing and toward consumption, China’s appetite for raw materials will continue to diminish.
China’s shifting economic growth model aligns with Sub-Saharan Africa’s imminent labor force boom, presenting a significant opportunity for both sides. Maximizing mutual gain will depend on China and Africa cooperating to address a host of challenges: Can African countries limit the flow of Chinese migrants and foster domestic industries? Will Chinese investors adopt global norms of social and environmental responsibility? Where does the West fit in?
This study aims to objectively assess China’s economic engagement on the African continent, the extent to which African economies are benefiting, prospects for the future, and ways to make this relationship more productive. David Dollar marshals evidence about the scale of trade, investment, infrastructure cooperation, and migration between China and Africa, all of which are relatively recent phenomena. In addition, Dollar addresses the question of whether and how China’s involvement differs from that of Africa’s other economic partners. The concluding chapter provides some tentative recommendations for African countries, China, and the West.
Executive summary
While China’s deepening engagement with Africa has largely been associated with better economic performance, its involvement is not without controversy. This is particularly true in the West, as typical headlines portray an exploitive relationship: “Into Africa: China’s Wild Rush”; “China in Africa: Investment or Exploitation?”; and “Clinton warns against ‘new colonialism’ in Africa.” This study aims to objectively assess China’s economic engagement on the African continent. The surge in Chinese involvement is relatively recent, so one simple objective is to marshal evidence about the scale of China’s trade, investment, and migration. Beyond that is the question of whether China’s involvement differs from that of Africa’s other economic partners.
China’s economic engagement with Africa is a complex issue with numerous facets. It is usually difficult to find good and comprehensive data on low-income countries, and much of Africa is low-income. This general problem is compounded by a tendency toward non-transparency on the part of the Chinese government and China’s state-owned enterprises (SOEs). In general, China’s engagement with Africa is a win-win scenario for both sides, so it would make sense to be more forthcoming with information. Still, there is enough available information on and research into China’s trade, investment, and migration vis- à-vis Africa to draw some tentative conclusions and to make some recommendations for African countries, China, and the West. Specifically, this study draws six main conclusions.
The first tentative conclusion relates to the scale of China’s activities in Africa. The media often portrays China’s involvement as enormous, potentially overwhelming the continent. To be fair, China does not always help its image in this regard. When Xi Jinping participated in the latest China-Africa summit in South Africa in December 2015, he pledged US$60 billion of support for African development. This is a big, general commitment covering many different areas and potentially disbursing over many years. Almost certainly, some of the plans will never pan out. In terms of realized Chinese investment in Africa, the amounts are significant enough to contribute to African growth but not at the huge scale that some media coverage suggests. According to data from China’s Ministry of Commerce (MOFCOM), the stock of Chinese direct investment in Africa was US$32 billion at the end of 2014. This would represent less than 5% of the total stock of foreign investment on the continent. However, about half of Chinese outward investment is reported as going to Hong Kong, even though much of this transits to other locations. In other words, MOFCOM’s figures for Chinese investment in different countries may be lower than in reality. But even if one doubled the estimate of Chinese outward direct investment (ODI) in Africa, China’s share of overall ODI would still be modest.
Stocks naturally change slowly. But the World Investment Report 2015 similarly finds that China’s share of inward direct investment flows to Africa during 2013 and 2014 was only 4.4% of the total. Of course, direct investment is not the only form of foreign financing. The Export-Import Bank of China and China Development Bank have also made large loans in Africa, mostly to fund infrastructure projects. In recent years, Africa has received about US$30 billion annually from outside sources for infrastructure projects, and China has provided about one-sixth of that financing. In short, Chinese financing is substantial enough to contribute meaningfully to African investment and growth, but the notion that China has provided an overwhelming amount of finance and is buying up the whole continent is inaccurate.
The second main finding from the study concerns China’s direct investment and governance. China has drawn attention by making large resource-related investments in countries with poor governance indicators, such as DR Congo, Angola, and Sudan. These deals are certainly part of the picture when it comes to China’s engagement with Africa; MOFCOM data show large stocks of Chinese investment in those countries. But the more general relationship between Chinese direct investment and recipients’ governance environments is different. After controlling for market size and natural resource wealth, total foreign direct investment is highly correlated with measures of property rights and rule of law, as one might expect. This is true both globally and within the African continent. China’s ODI, on the other hand, is uncorrelated with measures of property rights and the rule of law after controlling for market size and natural resource wealth. In this sense, Chinese investment is indifferent to the governance environment in a particular country. Again, this is true both globally and across the African continent. While China has investments in DR Congo, Angola, and Sudan, those are balanced by investments in African countries that have relatively good governance environments. South Africa, for instance, is the foremost recipient of Chinese investment. But because Western investment tends to avoid the worst governance environments, Chinese investment is relatively high in those locations.
A third main finding emerges from examining MOFCOM’s database on Chinese firms investing in Africa. In the aggregate data on Chinese investment in different countries, the big state enterprise deals naturally play an outsized role. MOFCOM’s database on Chinese firms investing in Africa, on the other hand, provides a snapshot of what small and medium-sized Chinese firms – most of which are private – are doing in Africa. Unlike the big SOE investments, these firms are not focused on natural resource extraction. The largest area for investment is service sectors, with significant investment in manufacturing as well. Many African economies are interested in attracting Chinese investment in manufacturing and services and welcome this development.
The fourth finding relates to infrastructure finance. Africa has well-known infrastructure deficiencies, but in recent years infrastructure financing has expanded and helped many African countries begin to rectify these deficiencies. Much of the funding for this will have to come from domestic sources, but foreign financing can play a useful, complementary role. As noted above, in the past few years Africa has received about US$30 billion annually in external finance for infrastructure. China is providing about one-sixth of this amount. Chinese financing is a useful complement to other sources, particularly as traditional finance from multilateral development banks and bilateral donors is concentrated on water supply and sanitation. Likewise, private participation in infrastructure is primarily aimed at telecommunications. China has filled a niche by focusing on transportation and power.
Chinese financing of infrastructure has also enabled Chinese construction companies to gain a firm foothold on the continent. Evidence suggests that Chinese companies have become highly competitive, crowding out African construction companies. This is an area where a tradeoff seems to exist between, on the one hand, getting projects completed quickly and cheaply and, on the other, facilitating the long-term development of a local construction industry.
This point leads to the fifth finding of the study. There are many Chinese workers in Africa; the total is disproportionately high when compared to the amount of financing that China has provided and compared to migrants from other continents. This is a tentative conclusion because the data on this issue are particular weak. But estimates of Chinese migrants in Africa exceed one million. Many migrants initially move to Africa as workers on Chinese projects in infrastructure and mining and then, perceiving good economic opportunities, stay on. Similar to the dilemma confronting the continent’s construction industry, African countries face a tradeoff here: Chinese workers bring skills and entrepreneurship, but their large numbers limit African workers’ opportunities for jobs and training. The popular notion that Chinese companies only employ Chinese workers is not accurate, but the overall number of Chinese workers in Africa is large, and it is not clear that all of these workers are on the continent legally.
A final important finding of the study is that the foundation for the Africa-China economic relationship is shifting. China’s involvement in Africa stretches back decades, but the economic relationship accelerated after 2000, when China’s growth model became especially resource-intensive while its domestic supplies of energy and minerals were dwindling. In the early 2000s, China was poor in natural resources but boasted a rapidly growing labor force that gave the country comparative advantage in manufactures. By contrast, Africa was relatively resource-rich, with a labor force significantly smaller than China’s. It was logical for China to import natural resources from Africa, and demand from China drove up prices and trade volumes. It was also natural for China to export manufactures to Africa.
These patterns of trade and investment are now likely to gradually shift in response to changing demographics. The working-age population in China has peaked and will shrink over the coming decades. This has contributed to a tightening of the labor market and an increase in wages, which benefits Chinese people. Household income and consumption are also rising. At the same time, China’s old growth model, which focuses on exports and investment, is running out of steam. China is already the largest exporter in the world, and it is unrealistic to expect its exports to grow faster than world trade, so exports have become a lagging sector for China. And after years of high investment, China now faces excess capacity in real estate, manufacturing, and infrastructure. Chinese growth has entered a phase in which consumption is growing faster than investment, and the expansion of consumption primarily benefits services, not industry. Compared to past trends, China’s changing pattern of growth is less resource-intensive, so China’s needs for energy and minerals are relatively muted. At the same time, China is likely to be a steady supplier of foreign investment to other countries, and part of that will involve moving manufacturing value chains to lower-wage locations.
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tralac’s Daily News Selection
The selection: Thursday, 14 July 2016
Featured infographic, @InvestEAfrica: the state of EAC exports to the US
Now available: David Dollar’s study ‘China’s engagement with Africa: from natural resources to human resources’
Luke Warford: ‘Africa is moving toward a massive and important free trade agreement’ (Washington Post)
Given the CFTA’s potential and size, the United States and other international actors have reason to support the completion of the CFTA, and then to pursue new opportunities created by the agreement. This type of support might include directing resources to the African Union’s CFTA Unit, for example, as well as training and equipping trade negotiators. Moving forward, there will also be a need for existing U.S. trade policies, including the African Growth and Opportunity Act (AGOA), to coordinate with the CFTA in order to minimize barriers to trade across the African continent. By breaking down barriers between African countries and creating a single African market, the CFTA has the potential to reshape the continent, with implications for actors both within and outside of Africa.
AU Executive Council: highlights
Carlos Lopes: ‘Africa and the immigration conundrum’ (pdf)
One in every six university graduates finds a way out of their country of origin, making Africa’s migrants surprisingly educated. The highly skilled account for only 3% of Africa’s labour force but 35% of the new migrants leaving the continent. That partly explains why remittances continue to rise, last year attaining US$71bn or over 4% of the continent’s combined GDP. [Abridged version]
Dr Nkosazana Dlamini Zuma’s speech (pdf)
Many of these capacities for the implementation of Agenda 2063 are within our power and of our choosing. It includes the choice to be Pan African in our outlook and actions, as we collectively reflect on the African paradox: of a continent that is rich in natural resources, and yet its people are poor. The resolution of this paradox is indeed the mission of current generations of leaders and peoples of Africa. Some of the actions to resolve the paradox will have regional dimensions: as we strengthen integration, build common regional markets, develop infrastructure that connects us and harmonized policies so that we strengthen free movement of people, goods and services. We also have responsibilities at national levels. [AU appeals to countries to increase contribution (New Times), Dr Kazibwe AU election in balance (Daily Monitor)]
Tanzania's U-turn sparks calls for rethink of EU trade deal (New Times)
It is imperative for East African Community to listen carefully to the issues Tanzania is raising related to the Economic Partnership Agreement the bloc concluded with the European Union, a regional lawmaker has said. MP Abubakar Zein Abubakar, a Kenyan representative in the East African Legislative Assembly, stressed this during an interview with The New Times on Monday. On Monday, EABC chief executive Lilian Awinja told The New Times that Tanzania, as current chair of EAC, should take a “leadership role” in signing the agreement as it has been committed to the negotiations since the formation of EAC-EU EPA configuration in 2007.
EU downplays Tanzania's decision to opt out of EPA (The Citizen)
The head of the EU Delegation to Tanzania, Mr Roeland van de Geer, said the decision to sign or not to sign the already negotiated agreement was for the EAC to determine. Mr van de Geer spoke as the EAC technocrat behind the 14 years of negotiations said he was still optimistic Tanzania would come along. Elsewhere, reports in Kenya said the country's Foreign Affairs minister, Ms Amina Mohammed, was due in the country to hold talks with the government over its decision. Kenya's exports to Europe would be hardest hit should the EAC fail to sign the EPA. A top EAC official in Arusha said Tanzania's failure to sign the EPA would adversely affect the bloc's trade arrangements with the outside world, and eventually undermine the integration process. It would cause more inconsistencies for the region that will have to employ different trade regimes with the EU and complicate enforcement of the common external tariffs for goods entering the region from outside the bloc.
Africa-UK trade and investment agreements after Brexit (20 July, APPG, Royal African Society)
Following the Brexit vote on the 23rd June, the Africa APPG is carrying out an inquiry into the future of trade & investment agreements between the UK and African states. This is an initial exploratory meeting to begin reflecting on the EU Economic Partnership Agreements with African Regional Economic Areas and the UK's Bilateral Investment Treaties with African countries. What lessons can be learnt from their negotiation and implementation to date? Does Brexit provide an opportunity for bettering our trade and investment relationships with African countries? [Brexit won’t stop globalization (Bloomberg)]
Namibia's trade policy: three updates
Chicken import limit survives challenge (The Namibian)
South African poultry producers' legal challenge of the chicken import restriction which was introduced in Namibia as an infant industry protection measure three years ago has failed in the Windhoek High Court. Judge Ueitele said in his opinion, the applicants unreasonably delayed instituting the review application. Since the notice on the import restriction relates to the industrial policy of Namibia, it "cries out for finality in respect of those who have to plan the economic direction of the country, and those who have to make a decision whether they will or not invest in a given industry", he stated.
Government planning to simplify doing business (The Namibian)
The government plans to make it easy for doing business in Namibia by cutting the current red tape and reducing the time it takes to apply for business permits among many other things. The first phase of the Namibia National Single Window project is intended to be operational by April 2018, in line with the schedule set in the Harambee Prosperity Plan, trade permanent secretary Gabriel Sinimbo said this week. Sinimbo is confident that the project will be implemented within five years. “I am absolutely confident that Namibia will be able to implement the first phase of the National Single Window in less than three years, and a more comprehensive National Single Window solution in five years."
Meatco’s beef exports exceed N$1.28bn (New Era)
“The value of our international markets increased by 29.9, while the volume sold there also increased by 8.5%, confirming how important our high-value international markets are to the success of our business,” says Meatco executive for marketing and sales Cyprianus Khaiseb. Meatco’s international markets (the EU, Norway and UK), accounted for 74.07% of the company’s sales volume, compared to the local market, which accounted for 9.91%.
Tanzania: New ports boss pledges to end corruption, delays in 2 months (IPPMedia)
The Tanzania Ports Authority yesterday revealed a grand plan to solve its problems of bureaucracy, corruption, delays and theft of cargo at the port of Dar es Salaam within the next two months, asserting that the revamp - once complete - will put the port ahead of its commercial competitors along the Indian Ocean coastline. TPA director general Eng Deusdedit Kakoko revealed this during a public-private dialogue organized by the East African Business Community Council in the city. Kakoko said a team of IT experts specializing in port operations will deploy a customized surveillance and monitoring system aimed at doing away with such problems as identified at the port and related points of business. [TIC boss: Tanzania poised to double current FDI amount]
Abidjan-Ouagadougou transport corridor: funding update (World Bank)
The development objective of the Transport Sector Modernization and Corridor Trade Facilitation Project for Cote d'Ivoire is to improve the efficiency and safety of transport services on the Ivorian section of the Abidjan (Ivory Coast) - Ouagadougou (Burkina Faso) road transport corridor. The project has five components.
The Gambia: transport sector diagnostic study (pdf, AfDB)
In order for The Gambia to reap the economies of scale, which regional integration within ECOWAS offers, it has to develop part of the ECOWAS regional road corridors of Trans-Sahelian (Dakar – Ndjamena) and the Trans Coastal (Dakar – Abidjan – Lagos) within its territory and in addition strategically develop coastal shipping for effective trading within ECOWAS. But this should not only be about infrastructure but putting in place trade and transport facilitation measures and harmonization of cross border customs and immigration barriers that affect the level of and efficiency of regional transport services and trade. The capacity of the Gambia transport system to service regional trade however depends on the first hand on Senegalese authority’s willingness to facilitate transit and re-export trade and, on the second hand, on the political will of member states of ECOWAS to implement the existing transport and trade facilitation conventions that provide the framework for transport and trade facilitation along regional trade corridors and the bilateral and tripartite Road Transport Agreements with The Gambia; viz: [Related reports (pdf, in French): Problem associated with transport facilitation in West Africa and Action Plan, Opening road corridors study in Guinea and Senegal]
Need to increase direct flights between India and Africa, says Rwandan diplomat (LiveMint)
But one area that needs urgent attention is direct air connectivity, said an African diplomat in India, considering the rise in the number of people travelling between Africa and India. “An opportunity that is under exploited is connectivity between India and Africa. If you look at the Indian population in Africa and... you look at the traffic of African students coming to India, the patients coming for high-end treatment in some of the major hospitals here, I think we need to look at how to maximize connectivity, especially air connectivity,” Rwandan high commissioner to India, Ernest Rwamucyo, said.
Agri firms see hurdles in investing in Africa (Business Standard)
Prime Minister Narendra Modi's tour to Africa has revived enthusiasm over agriculture in African continent. Indian companies have started looking at African continent as the potential destination for investment in agriculture to meet deficit in India and elsewhere in the world. However, past experience suggests that the road is not free of hurdles.
African governments undermining corruption fight, AU body says (Business Daily)
Africans continue to face increasing risks of being short-changed in dubious and poorly negotiated oil deals between governments and multinational corporations involved in the extraction industry, the African Union's advisory board on corruption said at the side-lines of the ongoing summit in Kigali. “The kind of contracts made by our governments with these multinationals have not met the transparency standards needed, our people are short-changed in these contracts by multinationals, this needs to be addressed” said Daniel Batidam, the chairperson AU anti-corruption body said.
ACP Group, UN join forces to advance South-South cooperation (ACP)
The African, Caribbean and Pacific Group of States and the United Nations Office for South-South Cooperation (UNOSSC) today agreed to embark on concrete joint initiatives to foster South-South cooperation and triangular cooperation amongst their mutual constituencies. The agreement outlined the key areas of cooperation, including: fostering South-South cooperation and triangular cooperation among their mutual constituencies, as well with other developing countries to support intraregional and regional integration; deepening institutional partnerships to scale up knowledge-sharing, showcasing and scaling up of development solutions, and technology transfer;
US initiates WTO dispute proceedings against Chinese export duties on raw materials (WTO)
Angola spends over $1bn on road repairs, financed by China LoC (MacauHub)
China Wu Yi firms grip on Kenya roads with Sh16bn Waiyaki Way contract (Daily Nation)
Angola consolidates its position as Africa’s biggest oil producer (MacauHub)
Africa for Results Forum: update (Daily Nation)
China-Africa Industrial Capacity Cooperation: update (FOCAC)
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Africa and the immigration conundrum
Migration debates are becoming illogical and indecent
The last joint AU-ECA Conference of Ministers of Finance, Economic Development and Planning, held in March, was extremely rich.
It reviewed our macroeconomic progress, the latest headwinds facing the continent in its transformation and industrialization path, and the perennial issues tormenting us such as illicit flows, corruption, insufficient value addition or the limited progress in the final Millennium Development Goals assessment.
It approved a number of important proposals, one of which relates to the need for Africa to have a wellthought out and justified approach to the issue of migration. I will therefore focus my intervention on that topic.
So far this year, the Italian coast guard has rescued more than 30,000 people from the Mediterranean Sea, acting with courage, compassion and efficiency. They deserve recognition from Africa because many of those souls are from the continent.
Last year, more than 1 million people crossed the Mediterranean to reach Europe, many through Italy. This is a much larger number than in previous years. Of that number, about 68 per cent were from Syria, Afghanistan, Iraq and Pakistan.
Of the top ten nationalities represented, only one in ten was African. The European agency dealing with the issue, Frontex, acknowledges that the number of irregular migrants from Africa pales in comparison with regular arrivals.
The humanitarian dimension associated with these latest developments has unfortunate similarities with boat people phenomena in the direction of South America, Australia, South China, Adaman, Aegean or Red Sea. Throughout history, ships were not only used for exploring new territories or to trade. Migration is a very old user of ships.
Stocks of migrants are normally accounted for in terms of nationalities and ID papers. But the phenomena precedes the modern territorial boundaries; indeed, many migration movements helped shaped them. A sense of history is therefore essential to understand the complexity of people’s mobility.
According to official statistics, 250 million people currently live outside their countries of origin. However, between 1846 and 1940 alone, about 50 million Europeans moved to the Americas.
More Europeans have moved to other parts of the world since. It is therefore interesting to place in perspective just how many Africans are associated with the current perception of a tidal wave.
According to data from the United Nations, the stock of Africans in those 250 million is 8.5 percent. In Europe, that stock is slightly above 9 million people. For a population of around 1 billion that means the equivalent of 0.9 per cent of the continent’s population.
In fact, most Africans who migrate do so to other African countries. The continent has the highest intra-continent migration levels in the entire world. Human mobility, despite the many limitations that impede regional integration, is progressing well in Africa.
In the light of new demographic shifts, young Africans communicate, have better access to transport and feel less of a sense of territorial rigidity then their parents. This is a universal trend.
In the United Kingdom’s recent “Brexit” vote, like in many other industrialized countries where populists push for anti-migrant positions, young people voted massively for diversity and integration.
Unfortunately in those countries older people have been convinced that their lifestyles are under threat by migrants. Any specialist or well-informed citizen knows the opposite is true.
Let me focus first on why people leave Africa, before turning to an assessment of the benefits of migration.
Every successful experience of industrialization has provoked movements of population. Mostly in the direction of the new production centres, but not always. Many factors influence human behaviour and a sociological context can determine parts of the population looking for exchange and interaction beyond their borders.
China has produced close to 10 million migrants in the recent economic boom period. According to this week’s edition of The Economist, “the extraordinary outflow of people from China is one of the most striking trends of recent decades”.
They have left for a variety of reasons, like others did before them. Like Africans will certainly continue to do, despite high growth. Indians moving to the United Arab Emirates are no different. Mexicans go the United States of America, Indonesians to Australia, also despite high growth. Why would Africa be any different?
Not all seek migration due to ambition alone. Many are compelled to leave because they are in a situation of desperation. Conflicts provoking heavy casualties have risen significantly in the last six yearsonthe continent.
They are mostly associated with terrorism. Attacks by radical religious movements have increased 300 percent since 2009. Exclusion of social groups has become the most pervasive governance problem Africa has to confront.
Pastoralist societies are particularly hard hit as they struggle to adapt to fast urbanization and growth of services in the economy. UNHCR has around 14 million Africans listed as “people of concern”, the highest number since statistics started being kept.
Opportunities in Africa itself have also proven elusive for some, as they got expelled by other fellow Africans. Since independence African countries have expelled other Africans 35 times. This lack of acceptance makes the journey elsewhere,across the waters, hazardous but potentially more attractive.
There are also educated Africans, who take planes, rather than pick-ups in the desert or small rafts in the sea. One in every six university graduates finds a way out of their country of origin, making Africa’s migrants surprisingly educated.
The highly skilled account for only 3 per cent of Africa’s labour force but 35 per cent of the new migrants leaving the continent. That partly explains why remittances continue to rise, last year attaining US$71 billion, or over 4 per cent of the continent’s combined GDP.
In general, Africans do not look at migration negatively. In the collective psyche the 12 million slaves forcibly moved to the Americas, as well as the less known but also significant movements of slaves to Arabia and India, have not been forgotten.
In comparison they expect current flows to be handled with the solidarity promised in the human rights proclamations. Given that the current number of African migrants is relatively small, how to explain the growing concern, almost hysteria, around it?
World demographics are changing so fast that it is not possible to maintain the wealth distribution patterns we have become familiar with. It is difficult to demonstrate to the polity that austerity is not going to solve the twin problems of large debts and population ageing. The majority of countries with high debt have also a structural challenge of population ageing.
In about two months, on 21 September, Japan will hold its “Respect for the Aged Day”, when over 30,000 citizens will be applauded for their 100th birthday. They will join a further 31,000 centenarians fêted before them.
The acceleration of the age curve is so dramatic in Japan that by 2025 health-care spending will rise 70 percent, home nursing by 160 percent, pensions by 40 percent. Currently one in every four Japanese is over 65.
The labour force – despite the increase in the age of retirement – will diminish in the next 40 years to the levels of 1950. However,a bigger challenge looms on the horizon: the national debt is already 240 percent of GDP.
Country after country in Europe is confronted with a similar deficit of labour, and therefore of potential contributors to social security and consumption. In Europe the average debt to GDP ratio is way above 100 percent.
This amount of debt confronts a population that will have an excess of deaths in relation to births of 63 million between now and 2050. Even if the net projection of migrants going to Europe is maintained at 31 million during the said period, the population will still shrink by 32 million.
As in Japan, a quarter of the population is already over 65. In 2050, if trends are maintained, the number of people over 65 years will be precisely 65 per cent. Who believes austerity on its own will diminish with current crisis?
In the Republic of Korea, the most robotized society in the world, the demonstration that robots will not resolve ageing has sunk in. The mentality of “one blood” is giving way to the embrace of migration.
After all, robots do not contribute to social security. Jasmine Lee, born in the Philippines, is the first non-ethnicKoreanmember of parliament elected to the Korean National Assembly, breaking barriers that lasted for a very long time.
China will also have to deal with the challenge of an ageing population. China’s wealth per capita is equivalent of that of Japan in the early 1970s, yet its labour force is already declining.
In contrast to many of their partners, Africa and India will be the repository of youth. The Malthusian pessimists have to look into the future with the characteristics it is likely to have, not the ones they are familiar with today.
The demographic boom in Africa should be seenas part of its potential. African leaders should, nevertheless, be warned that the faith of Africans will depend on investments on human capital. There is no promised land anywhere without work and strategy.
To say international migration is to say cross-border connections: the ties linking sending and receiving countries are a significant aspect of the migration experience, appearing during present as well as past eras of migration. Once called “the uprooted”,migrants are now often called “transnationals”.
This sensitivity is a result of studies underscoring the ways in which international migration cuts across national borders to produce a range of dynamic cross-border connections. No walls being erected in many parts of the world will deter such a trend.
Improvements in literacy rates, transport, ICT and public infrastructure in the last century have significantly influenced migration and transnational social connectivity and vice-versa.
Remittances sent by migrants to developing countries are large (second largest sourceof development finance after foreign direct investment); rising (increase of almost 100 per cent between 1999 and 2004), stable (with less volatility than capital market flows or development assistance), and do not require interest or capital payments.
However, remittances alone cannot remove the structural constraints to economic growth.
A more hopeful view sees migrants serving as bridges or connectors, providing access to markets, sources of investmentand expertise, while also helping to shape public debate, articulate reform plans and help implement reforms and new projects.
The model of the migrants that would lose the links with theiroriginal identity is being replaced by the new reality of individuals aggregating new identities to their original ones. Migrants are acquiring cosmopolitan competences. They live in the era of Skype, Viberand WhatsApp.
The overwhelming majority of the global population get their citizenship by virtue of having been born in one particular place. There is no doubt that, in today’s unequal world, having one particular citizenship offers privileges and opportunities for some that are denied to others.
Gaining privilege with such a strange arbitrary criteria runs against the practice in almost any other form of organized social life. There are many examples of legislation being implemented across the world to ensure equal opportunity. Are birthrights a sort of entitlement like inheritance, or rather a lottery?
From what I have just shared, you can see that migration seems to be boxed in a category that does not respond to logic, rights, or even decency. There is a need to get out of this conundrum.
This article is extracted from the remarks of Carlos Lopes, the Executive Secretary of UNECA, at the opening of the AU Executive Council in Kigali on Wednesday, 13 July 2016.
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Tanzania’s U-turn sparks calls for rethink of EU trade deal
It is imperative for East African Community (EAC) to listen carefully to the issues Tanzania is raising related to the Economic Partnership Agreement (EPA) the bloc concluded with the European Union, a regional lawmaker has said.
MP Abubakar Zein Abubakar, a Kenyan representative in the East African Legislative Assembly (EALA), stressed this during an interview with The New Times on Monday.
“It is important for us to listen to the issues Tanzania is raising and also look at the implications of Brexit. We, as Africans, cannot afford not to act together as a bloc,” Zein said.
“We must always consider working together as a unit and take into consideration whatever unfolding situations.”
Tanzania’s foreign affairs permanent secretary Aziz Mlima said his country will not sign the EPA between EAC and EU.
Dr Mlima told reporters in Dar-es-Salaam, last week, that Tanzania decided to halt signing because of the “turmoil” that the EU is experiencing following Britain’s exit.
“Our experts have established that the way it has been crafted, the EPA will not benefit lead industries in East Africa, but instead to their destruction as developed countries are likely to dominate the market,” said Dr Mlima.
Like Mlima, Rwandan economist and EALA member, James Ndahiro, opposes the EPAs on grounds that “it is one-sided” and that EAC economies do not have a competitive edge given their small industrial base.
Ndahiro said that, for example, EU countries spend more than Euro 90 billion on direct farm payments (subsidies) and, as such, agricultural products from the EAC which are “not equally subsidised” cannot compete fairly.
Nonetheless, the East African Business Council (EABC) is advising Partner States to sign the deal earlier than previously agreed as further delay will hamper EAC export to the EU.
Partner states previously proposed the signing ceremony be held in the first week of August. But, last month, the EABC recommended July 18, as the date of signing to coincide with the visit of the EU Commissioner for Trade, who will be in Nairobi attending the United Nations Conference on Trade and Development conference.
Failure to meet EU deadline on ratification could see EAC exports to EU attract import duty, especially for Kenya that is considered as a developing country.
Tanzania, Uganda, Rwanda and Burundi, are considered Least Developed Countries (LDCs), and may be forced to opt for an ‘everything but arms’ (EBA) trade arrangement with its more complicated rules of origin, the EABC warns.
On January 1, 2017, Kenya is expected to be removed from the EU’s generalised scheme of preferences trade regime for live plants and floriculture products, hence attracting even more duties under the ‘most-favoured nation’ rates. This implies Kenyan exporters would be subjected to import duties of between 5 per cent and 8.5 per cent, says EABC.
On Monday, EABC chief executive Lilian Awinja told The New Times that Tanzania, as current chair of EAC, should take a “leadership role” in signing the agreement as it has been committed to the negotiations since the formation of EAC-EU EPA configuration in 2007.
Awinja said the UK exit from EU should not be a reason to back out as signing with the remaining 27 EU countries presents the EAC bloc with clear opportunities for export development.
“The agreement gives the EAC an opportunity to grow its industries to better compete globally due to the progressive nature of the EU access to EAC market. I urge Tanzania to observe the deadline set by the EU (October 1) for ratification,” Awinja said.
By October 1, if Tanzania will not have finalised ratification of EPA, Awinja said, it will, among others, lose Duty-Free Quota-Free Access to EU market, leaving it with the option of ‘everything but arms’ which is not a better option as it has more stringent rules of origin requirements.
The knowledge hitch
Zein also stressed that people in the region know little about what is contained in the EPAs deal and this is a critical setback.
“There isn’t enough knowledge and information available even to some senior people in the Community,” Zein said, adding: “My concern also touches on our ability to grow our manufacturing sector. Then, there are issues of policy space. The agreement reduces space for policy making in EAC.”
The existing draft of the EPAs is such that EAC countries cannot offer “any other party” preferential treatment without offering the same terms, automatically, to the EU, Zein observed.
In a situation where, for example, EAC is negotiating with the Common Market for Eastern and Southern Africa (COMESA) and the Southern Africa Development Cooperation (SADC), the EPA in its current format, “will limit” the type of preferential treatment with other blocs.
In 2015, the third COMESA-EAC-SADC Summit signed a new trade pact creating a common market spanning half of the continent as a critical step in opening up opportunities for business and investment within the 26-member bloc.
Zein also underscored the danger that even then, “the paper [EPA] must be first be approved by the European parliament yet here, there is no such requirement for the EPAs to come to EALA.”
In June 2010, EALA passed a resolution urging partner states to delay signing with view to urging the EU to cooperate with the EAC to revise the agreement and include “interests of both parties.”
The Assembly also wanted the draft framework of the agreement subjected to parliamentary approval processes at both partner state level and at regional level.
The EABC says the main reason for initialing the EPA was to avoid trade disruption between EU and EAC partner states.
According to Awinja, if all partner states sign the agreement on the same date, it will project the EAC region as a functional Customs Union.
Emmanuel Hategeka, the permanent secretary at thes Ministry of Trade and Industry, recently said “we all benefit” since EPAs will do away with the unilateral Cotonou Agreement, a treaty between the EU and the African, Caribbean and Pacific Group of States signed in June 2000.
The Cotonou Agreement, Hategeka said, is not compatible with the reciprocity required by the World Trade Organisation.
A chapter on agriculture guarantees that the EU will not apply exports subsidies, even in times of market crisis.
Article 83 stipulates that the Parties acknowledge the importance of the agricultural sector to the economies of the EAC partner states and agree to cooperate in promoting its transformation and facilitate the adjustment of agriculture and rural economy to accommodate the effects of implementation of the Agreement “with special attention to small scale farmers.”
The EABC maintains that, under EPA, EU market access offer of 100 per cent duty-free and quota-free access to EAC exports, while the European Union access to EAC market provides for a “gradual liberalisation of tariffs” over three phases spanning 25 years, eventually reaching 82.6 per cent of imports from the EU by 2028.
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tralac’s Daily News Selection
The selection: Wednesday, 13 July 2016
Today, in Dar es Salaam: SG CEO Forum and EABC Public Private Dialogue
Today, in Washington: launch of the Commission on Global Poverty's interim report on measuring poverty
Ongoing in New York: High-Level Political Forum on Sustainable Development, 11-20 July
Next week, in Washington: the White House Global Development Summit, 20 July
Liberalization of African economies will spur further growth suggest African Union envoys (Coastweek)
African economies need to lessen regulations and restrictions of markets in order to allow intra-Africa trade and induce greater structural change of the continent, say participants at the ongoing 27th summit in Kigali. Cherif Mahamat Zene, Chad’s ambassador to Ethiopia and permanent representative to the AU said: “We want to see liberalized African economies because they have the potential to change the economic geography of the region. Low intra-African trade and limited integration pose a serious challenge to boosting the global competitiveness of African economies."
Sebade Toga, Togo’s ambassador: “We want our leaders to address the issue of restricted economies in Africa. Many initiatives to enhance Africa integration and trade have been taken into consideration but not followed through.”
Hope Tumukunde, Rwanda’s ambassador: “Restricted economies is one of the key factors hindering the successful integration of the African continent into the global trading system due to high trade costs. Liberalization result in increased aggregate regional demand which in turn would lead to higher industrial production in the region.”
Stephen Lande and Dennis Matanda: Economic Partnership Agreements – a case of unfortunate timing? (Manchester Trade)
Today, just as African countries work frantically to meet an October 2016 deadline for acceding to their respective EPAs, the recent Brexit vote justifies a moratorium; one in which both Africans and the EU reflect on Brexit’s impact on Africa, and agree upon (i) measures to stave any negative repercussions to the progress Africa has made on integration, and (ii) measures that avoid any loss of preferential access into those third countries giving Africa preferential access for her exports.
While its becoming clearer that in light of Brexit, Brussels intends to play ‘hard ball’ to enforce key tenets such as EPAs, it is, perhaps, now more incumbent upon the African Union to hold a high-level political meeting to request that the EU extend for a 2 to 5-year period, the earlier-mentioned October EPA deadline. Putting this stay request on record is especially critical because some provisions of fully-implemented EPAs could have an adverse effect a nascent African Economic Community. If the EU granted a delay, they would have helped advance the freer movement of goods throughout sub-Saharan Africa; of course, allowing a recently renewed non-reciprocal AGOA to reach its true potential for the congressionally-mandated 10-year period.
UK firms could get trade boost with rapidly developing African nations thanks to Brexit (Daily Express)
Pound's Brexit plunge unlikely to bring boost exports at 1992, 2008 rate (Reuters)
UK exit from EU won't affect EU-South Africa trade: Hollande (China Post)
David Dollar: Setting the record straight on China’s engagement in Africa (Brookings)
My study [launching today], China’s engagement with Africa: from natural resources to human resources, aims to objectively assess this important new development in the world. It has six main findings. Extract: It is unrealistic to expect the China-Africa economic relationship to change overnight. Nor would it be reasonable to expect large volumes of Chinese manufacturing to move to the continent in the near future; it would be more natural for value chains to migrate from China to nearby locations such as Vietnam and Bangladesh. But if even small amounts of manufacturing shift, this could make a significant difference for African economies, which are starting out with an extremely low base of industrialization. And it is useful to have a long-term vision that an economic relationship that started out very much centred on natural resources should shift over time to a greater focus on human resources.
Harsh Pant: Towards a continental shift (The Hindu)
It is a fallacy to pit India against China in so far as their ties with Africa are concerned. With its annual trade of around $200bn with Africa, China is a much bigger player, but India has its own strengths in its dealings with Africa. Its democratic traditions make it a much more comfortable partner for the West compared to China in cooperating on Africa-related issues. India is viewed as a more productive partner by many in Africa because Indian companies are much better integrated into African society and encourage technology transfers to their African partners. New Delhi will have to leverage its own strengths in making a lasting compact with Africa and regain its lost presence on the continent.
Implications of the Trade in Services Agreement for developing countries (DIE)
We argue that the most substantial impact of TiSA on developing countries will likely come indirectly from the high regulatory standards that will need to be met by all services exporters, including third countries in trade agreements with TiSA members, as well as through the diversion of investment flows and global value chain operations to the TiSA area. We show that accession may represent a notable challenge for many emerging economies due to the high degree of regulatory heterogeneity between them and TiSA participants. However, we argue that there are ways of making the agreement more development-friendly. [The analysts: Sherry Stephenson, Alexandros Ragoussis, Jimena Sotelo]
Tourism sector highlighted as important contributor to trade and development (WTO)
WTO members, on 12 July, recognized tourism as an important services export which can help small economies with their economic development. Members discussed tourism’s “value chains” at a meeting of the Committee on Trade and Development’s Work Programme on Small Economies. Tourism is now the third largest export in terms of global earnings after fuel and chemicals, according to a representative from the United Nations World Tourism Organization. Tourism is responsible for one out of 11 jobs and 10% of the world’s economic output.
Canadian International Development Platform: Data Report 2016
International trade component (pdf): Key trends and patterns in international trade, focusing on Canada’s trade with developing countries. How Canada performs on select measures including share of trade with developing countries, policy coherence from a development perspective, what Canada sells and buys from poorer developing countries, balance of trade, growth etc.
COMESA: new strategy to focus on structural transformation of regional economies
The final review of the 2016-2020 COMESA Medium Term Strategic Plan began yesterday with representatives of Member States making their final input into the plan. The new strategy focuses on entrenching trade facilitation, market integration, infrastructure development, industrialization, institutional and regulatory policies, capacity development and resource mobilization. The Secretary General of COMESA Mr Sindiso Ngwenya told the representatives of member States to take ownership of the strategy to enable it contribute to structural transformation of their economies. “Member States should entrench ownership through funding of regional integration programmes in order to reverse reliance of external funding for regional integration programmes.” Currently, over 80% of the COMESA programmes are funded by cooperating partners making sustainability of programmes under such funding arrangements difficult.
Kenya: Fiscal Transparency Evaluation (IMF)
The evaluation was carried out at the request of the government of Kenya by a team from the Fund’s Fiscal Affairs Department in September 2014, using information for the fiscal year 2012/13. It is important to note that, since the FTE was carried out, the government has undertaken steps in several areas to improve practices. The impact of these changes against the specific principles of the Code has not been assessed but could result in improved assessment ratings. The attached annex provides a summary of progress made.
Tanzania: Government announces big shake-up to make energy sector contracts more transparent (IPPMedia)
In what appears to be a new policy reversal, the Minister for Energy and Minerals, Prof Sospeter Muhongo, told journalists yesterday in Dar es Salaam that from now on all new government contracts involving national power generation will be negotiated and entered into in a fully transparent manner. Acknowledging that some of the power generation contracts entered by his predecessors in the ministry were ‘bad’, Muhongo said: "We want to do away with this practice where (international) companies come here, lock themselves inside an office with government officials, and we end up with these bad contracts that we currently have." [Energy sector boost as Dar launches SE4ALL initiative]
Guidelines for good governance in emerging oil and gas producers 2016 (Chatham House)
The updated Guidelines for Good Governance in Emerging Oil and Gas Producers 2016, compiled under the auspices of the New Petroleum Producers Discussion Group, review common challenges facing emerging producer countries in the phases of exploration, recent discoveries and early production. The following are the Guidelines’ broad recommendations for addressing these challenges:
MIKTA's electronic commerce workshop: downloads (WTO)
The workshop analysed trends in trade and trade policy in electronic commerce and the digital economy and highlighted the relationship between e-commerce, development, and small and medium-sized enterprises. It also addressed a broad range of regulatory topics, including data flows, privacy, cloud computing, data localization and consumer protection.
FAO urges implementation of accord to tackle illegal fishing (UN)
An international agreement (pdf) aimed at tackling illegal fishing “marks the dawn of a new era,” but rapid action is needed to ensure that its implementation is effective, the head of the United Nations Food and Agriculture Organization has said. The FAO Director-General acknowledged that implementation of the agreement may prove challenging for some nations – especially developing and small island States – due to resource and capacity constraints.
IGAD: Regional disease surveillance and response mechanism
At the end of the meeting, a Final Declaration (pdf) was made in which IGAD Ministries of Health committed themselves to maintain political will and mobilize resources while working in partnership with the UN agencies and other stakeholders to prevent epidemic outbreaks and if they occur, to respond jointly. The Final Declaration will enable the development of a contingency plan with specific strategies aiming at responding, and adequately controlling the current Cholera crisis, and preventing any other epidemic outbreaks in the region.
Sahel: UNSC briefing on Secretary-General’s report on the activities of UNOWAS (UN)
The Head of the United Nations Office for West Africa and the Sahel told the Security Council that he was setting up a regional task force on the prevention of violent extremism in the region, as he appealed for greater efforts to counter the spread of terrorism and associated lawlessness. In Nigeria, Africa’s biggest economy, he said, falling oil prices had undermined Government efforts to revamp the economy amid community tensions, disputes over resources and renewed militant movements in the north-east, the Biafra area and the Niger Delta, he said. With the Central Bank unpegging the national currency from the United States dollar likely to trigger price rises and socioeconomic hardship, deeper reforms were needed. Examples from Côte d’Ivoire, Senegal and other places demonstrate the strength of policymaking to develop more balanced and resilient economies, he said.
Mauritius aims for top 10 ranking in Ease of Doing Business (GoM)
Implementing the trade facilitation agenda in East, Southern Africa: WCO, Finland sign agreement
China's June exports, imports both fall more than forecast (Reuters)
UNCTAD Annual Report 2015: delivering on a sustainable agenda (pdf)
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Opening of the 29th Ordinary Session of the Executive Council of the African Union
The Executive Council is meeting from 13-15 July to prepare the agenda of the AU Summit with appropriate recommendations for consideration by the Heads of State scheduled to take place from 17-18 July 2016 in Kigali, Rwanda.
The Ministers of External Affairs and other ministers or authorities designated by the governments of AU Member States will deliberate on the different reports of the Specialized Technical Committee (STCs) ministerial meetings organised by the AU Commission during the last six months. They will also adopt the report of the PRC.
The opening ceremony of the Executive Council featured the following speeches: welcome remarks by the Representative of the host Government (Rwanda); Welcome remarks by the Chairperson of the Executive Council (EC); Statement by the Chairperson of the African Union Commission (AUC); and Opening statement by the Chair of the EC.
Welcome Remarks of the Chairperson of the African Union Commission, HE Dr. Nkosazana Dlamini Zuma
A warm welcome to the 29th Ordinary Session of the Executive Council of the African Union, and a special welcome to all the new members of the Executive Council who join us for the first time.
We thank our hosts – the President, Government and People of Rwanda – for the warm reception and excellent organization in the beautiful city of Kigali.
The city is testimony not only to the resilience of the human spirit, but an example of how African cities can become nodes of transformation: as centers of commerce, education and culture; as productive hubs for industries, as vibrant markets for consumers and as inclusive, safe, green and peaceful spaces for all inhabitants.
It is with grave concern that we start this Executive, as over the past few days we see the resurgence of the conflict in South Sudan, after more than two years of talks. Hardly two months after the formation of the Government of National Unity, the belligerents seem to back in the trenches, and the people of South Sudan, instead of celebrating five years of independence, once again are barricaded in their homes or must flee like sheep before the wolves.
As a continent, we must respect the lives of our people.
Governments and leadership are there to protect the vulnerable, to serve the people; not to be the cause of the people’s suffering. What is happening again in South Sudan is totally unacceptable. The continent cannot stand by and witness the suffering inflicted on the children, women, men and young people of South Sudan, inflicted on fellow Africans.
We continue to count the cost of conflict management and peace operations as the largest single budget item of the African Union, resources that should be spent on promoting the African skills revolution, on supporting young entrepreneurs, on building roads, houses and provide capital, land and technology to women and smallholder farmers.
Most importantly, we count the cost in civilian and peacekeepers lives lost, in homes destroyed when they were rebuilt not too long ago, in our girls abducted, in leadership and opposition that have resources to purchase ‘tanks, helicopter gunships, mortars and rocket-propelled grenades’ which are used against the people; when there are no resources to buy food as our people go hungry or medicines as children die of malaria.
I hoped this Summit will say, “Enough is Enough!”
We made a Solemn pledge during the 50th Anniversary that we shall not bequeath wars and violent conflicts to future generations of Africans, and to silence the guns by 2020. We must all do more to honour this pledge.
Our 2016 theme on Human rights must be a spur to action: to intervene in conflict situations before they spiral into violence, and to ensure that we strengthen democracy, human rights, promote unity in diversity and inclusive governance in all our countries.
Our Human rights institutions that we created have the obligation to report, and to identify challenges, because none of us have impeccable records on human rights, it is a journey and we have not yet reached our destination. As countries, we must work with our institutions to ensure that we improve on the specific areas identified.
Silencing the guns requires a different approach to peace and security. Since the majority of our countries are stable and peaceful, we must continue to resolutely focus on the Agenda 2063 priorities such as building energy, road, rail and ICT infrastructure, to power and connect homes and industries; expanding agriculture and agro-processing; investing in the health, skills and education of our people, especially Africa’s children, and young men and women, and building inclusive, democratic and tolerant societies.
We must put the African people first.
During the four years of the term of this Commission, the Executive Council has played an important role in driving the mission of our Union.
It has done this through regular reflections on challenges facing the continent. It had robust discussions on what must be done by the African Union, regions and countries to move our transformation agenda forward.
Indeed, the Executive Council sought to live up to the entreaty of Julius Malimu Nyerere, who said:
Unity… can make it difficult for Africa and the African peoples to be disregarded and humiliated. And it will increase the effectiveness of the decisions we make and try to implement for our development.
My generation led Africa to political freedom, he said.
The current generation of leaders and peoples of Africa must pick up the flickering torch of African freedom, refuel it with their enthusiasm and determination, and carry it forward.
Indeed, as we reflected on how to create conditions for the implementation of Agenda 2063, the Executive Council at its Bahir Dar Ministerial Retreat in 2014, noted that ‘the dream of an Africa that is integrated, peaceful and prosperous is achievable, provided that we construct this future, based on actions taken now.’
Many of these actions occupied our minds during this period: such as the need for an African Commodities Strategy, to consolidate and rapidly expand the small gains in beneficiation, including critical sectors such as agro-processing as we work to eliminate hunger.
Without a relentless focus on value addition and manufacturing, Africa will fail to create the jobs needed to absorb the millions of young men and women joining its labour markets each year, and to reap the demographic dividend of a young and growing population.
We must therefore continue to strengthen our capacities to take the actions needed today, as urged by the Bahir Dar Retreat. Many of these capacities for the implementation of Agenda 2063 are within our power and of our choosing.
It includes the choice to be Pan African in our outlook and actions, as we collectively reflect on the African paradox: of a continent that is rich in natural resources, and yet its people are poor.
The resolution of this paradox is indeed the mission of current generations of leaders and peoples of Africa.
Some of the actions to resolve the paradox will have regional dimensions: as we strengthen integration, build common regional markets, develop infrastructure that connects us and harmonized policies so that we strengthen free movement of people, goods and services.
We also have responsibilities at national levels. Foreign Ministers as Members of the Executive are in the strategic position with a view of the Pan African perspective as well as national priorities.
They have a bird’s eye view of how movement on national development contributes to the continental agenda, and to therefore promote cooperation amongst their neighbours and countries, and drive the Pan African agenda.
This role of the Executive Council, as a catalyst and enabler of the Pan African agenda, has found expression in a range of issues over the last four years: in reflections during the 50th Anniversary of the OAU in 2013, the development of Agenda 2063, the response of the AU to the Ebola crisis in 2014, on the Integration agenda, on issues such as wildlife conservation and tourism, and the monitoring of Agenda 2063 Ten Year Implementation Plan and Flagship projects.
It is as a direct result of this Pan African catalyst role of the Executive Council that we are able to move a step forward at this Summit, to present the African passport, and we hope to also move forward on the Continental Free Trade Area.
The response from African citizens from all parts of the continent on the idea of an African passport has been overwhelming. They want to study, trade, do business, invest, visit the tourists and heritage sites in their own continent, and experience its rich and beautiful diversity.
The Executive Council has thus been seized with this continental agenda for social and economic transformation, deeply aware that the resolution of the African paradox requires united and deliberate action, and that united we are stronger.
As Kwameh Nkrumah said:
If we are to remain free, if we are to enjoy the full benefit of Africa’s resources, we must be united to plan for our total defense and the full exploitation of our material and human means in the full interest of all our people.
To go it alone will limit our horizons, curtail our expectations and threaten our liberty.”
This august body during the past four years has also worked with the Commission and the PRC to improve the working methods of the African Union, and commissioned a comparative study of other regional organisations to this effect.
This resulted in the decision of the Assembly in July 2015, which is being implemented – to ensure that our Summits focus on the strategic matters critical to the well-being of the African people and continent.
The process also saw the operationalization of the AU Specialised Technical Committees of Ministers, with powers to take decision on matters pertaining to their respective mandates. This means that Ministers across different sectors – from justice to health, environment, mining, tourism, social development and gender to finance have become more active, and can do more to move forward the Pan African agenda in their areas of competence.
The approach to working methods of the Union also informed the reforms of the Commission, which we’ve undertaken over the four years, including review of staff rules and regulations and our performance management system; revitalizing administrative structures; strengthening our internal and external audit processes and finalizing key policies on travel, procurement and ethics, to ensure that we use resources effectively and prudently. We also implemented measures to improve the regional and gender spread of staff in the Commission and Organs, but more needs to be done.
It includes the work still in progress on the restructuring of the AU Commission and other Organs, which we presented to the Summit in January 2016, to become fit for purpose for the implementation of Agenda 2063.
Moreover, the decision on streamlining work of the AU also called for review of the Constitutive Act and Statutes, so that our Union and its organs are also fit for purpose for the continental integration agenda. This work needs to be continued.
The adoption of Agenda 2063 also meant a much more strategic approach towards Africa’s global partners and partnerships, laying the foundations for our common African positions on the SDGs and on climate change.
More importantly, we consolidated continental partnerships with the UN Economic Commission for Africa, the African Development Bank and the African Capacity Building Foundation, with Regional Economic Communities, as well as with youth, women and civil society organisations and other continental institutions, based on the common agenda of transformation.
The words of Gamal Abdel Nasser, one of the founders of the OAU, rings true today, when he said: He who cannot support himself, cannot take his own decisions.
Pertinent words indeed. Self-reliance is a cornerstone of Pan Africanism, and fifty-three years later, remains a challenge for current generations.
Over the last four years, we’ve made some progress, and this Summit must consolidate efforts, so that we finalise our decisions on sustainable financing and the Peace Fund.
As we discuss Human rights with a particular emphasis on the rights of Women, it is appropriate that we are doing so here in Rwanda.
Rwanda is a leader in the world and in Africa on the issues of the empowerment of women and girls. It does this through the critical mass of women in its parliament (64%) and in government (39%), as well as in the judiciary and local councils. It also has deliberate programmes to ensure equal access to productive assets such as land, property and capital, and access to education and health.
The impact of these policies are visible, in the progress the country has made over the last two decades, rising out of the ashes of the 1994 Genocide, especially on key human development indicators such as reducing household poverty, access to health care and insurance, as well as to education.
A few days ago, the African women’s movement presented President Paul Kagame and myself with awards as Gender Champions. On that occasion, I made the remark that we should stop the saying that behind every successful man, there is a woman. That is not right.
What we need and want today is for men and women to work side by side.
Side by side for the eradication poverty, hunger and disease.
Side by side to resolve conflicts and build peaceful societies.
Side by side to make our continent great.
Let me take this opportunity to thank the Executive Council for the guidance, the cooperation and being always responsive whenever called upon by the Commission during the past four years.
The Retreats ensured common purpose, robust engagements and a focus on the strategic challenges of the continent. Moreover, the establishment of the Bahir Dar Ministerial Follow-up Committee on Agenda 2063 means stewardship and monitoring by the Executive Council of our continental agenda.
We are confident that you will lend the same support, in fact even more, to the incoming Commission. They have the task to build on the foundations we laid in the adoption of Agenda 2063, and as implementation moves to the next level.
As the Commission’s term draws to an end, thank you again for your support, as we bow out gracefully.
I thank you.
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Kenya: Fiscal Transparency Evaluation
The International Monetary Fund (IMF) on 12 July 2016 published a Fiscal Transparency Evaluation (FTE) report for Kenya. The evaluation was carried out at the request of the government of Kenya by a team from the Fund’s Fiscal Affairs Department in September 2014, using information for the fiscal year 2012/13.
It is important to note that, since the FTE was carried out, the government has undertaken steps in several areas to improve practices. The impact of these changes against the specific principles of the Code has not been assessed but could result in improved assessment ratings. The attached annex provides a summary of progress made.
Kenya is undergoing a substantial restructuring of its public sector which imposes new challenges and increases the importance of fiscal transparency. The 2010 Constitution introduced two levels of government – the national government and 47 county governments with significantly increased expenditure responsibilities. It created a presidential system of government, and significantly enhanced the powers of parliament. In addition, a new Public Financial Management (PFM) Law was enacted in 2012. In 2013, autonomous agencies and state enterprises were rationalized and improvements made to their oversight. A public sector accounting standards board has also been established. In the longer term, further improvements in fiscal transparency will be required as Kenya and its partner states in the East African Community move towards a currency union by 2024.
Kenya performs well against many of the standards set by the IMF’s Fiscal Transparency Code. Across its three pillars, 13 of the Code’s 36 principles are rated as either “good” or “advanced”, while 16 principles are rated as “basic”.
The report finds that the production and dissemination of annual fiscal statistics meets the Code’s advanced practice, while most other aspects of pillar I on fiscal reporting are in line with the Code’s basic practices. There is no reporting of the government’s balance sheet in fiscal reports, although basic information on public debt and cash deposits is provided. The 2012/13 audit of national government entities resulted in 42 percent of expenditures being subject to adverse and disclaimer audit opinions, though many of these were cleared before the report was adopted by the parliament.
Most aspects of pillar II on fiscal forecasting and budgeting are in line with good or advanced practices. The annual budget policy statement (BPS), which is adopted by parliament, is the main instrument for economic and fiscal policy making and resource allocation. Based on the BPS, the Parliamentary Budget Office produces a budget options report, with alternative macro-fiscal forecasts. Significant public participation takes place during budget preparation and a people’s guide to the budget is also produced. The Controller of the Budget publishes regular in-year reports on central government and counties. Areas that require improvement include the credibility of forward estimates of spending, the management and oversight of investment projects, publication of revised budgets, and the alignment of spending programs with medium-term sectoral priorities.
The evaluation of fiscal risk practices against pillar III of the Code shows mixed results. A range of macroeconomic and fiscal risks are disclosed, discussed and at times quantified in the annual budget policy statement. Budgetary contingencies and environmental risks are being adequately addressed and managed. However, more than three-quarters of the government’s contingent liabilities, estimated to be about 12 percent of GDP, go unreported. Risks arising from government guarantees to the National Social Security Fund, estimated at 6.2 percent of GDP, are also not adequately monitored.
This FTE report made a number of recommendations to strengthen fiscal transparency, including:
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Expanding the coverage of the key fiscal reports to include at a basic level the direct expenditure and revenues of extra-budgetary funds and parastatals;
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Beginning to prepare a balance sheet for the central government, using data that are available from existing systems and reports;
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Improving the quality and timeliness of audited financial statements in line with international standards;
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Clarifying institutional roles and responsibilities in managing public investment projects and programs;
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Improving the presentation and reconciliation of variations in macro-fiscal forecasts arising from new policy decisions, changes in the economic outlook, and accounting and technical changes; and
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Preparing a consolidated annual financial report on public corporations.
The Annex – Progress against the Fiscal Transparency Evaluation since September 2014 – indicates areas of the Code in which the government has made progress in implementing some of the report’s recommendations.
Further information about the IMF’s Fiscal Transparency Code and the Kenyan FTE report can be found here.
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Economic Partnership Agreements: A case of unfortunate timing?
In preparing this paper, Stephen Lande and Dennis Matanda leverage their extensive first-hand experience with both the African Union and Africa’s regional economic communities. They also spent countless hours rehashing Lande’s recollection of negotiations around the 1974 period when Britain joined the European common market. At that time, a major bone of contention between the U.S. and Europe was the European Commission’s attempts to foist reverse preferences on former African colonies – actions eerily similar to what’s going on today with the European Union’s economic partnership agreements (EPAs) in Africa.
Synopsis
Today, just as African countries work frantically to meet an October 2016 deadline for acceding to their respective EPAs, the recent Brexit vote justifies a moratorium; one in which both Africans and the EU reflect on Brexit’s impact on Africa, and agree upon (i) measures to stave any negative repercussions to the progress Africa has made on integration, and (ii) measures that avoid any loss of preferential access into those third countries giving Africa preferential access for her exports.
While its becoming clearer that in light of Brexit, Brussels intends to play ‘hard ball’ to enforce key tenets such as EPAs, it is, perhaps, now more incumbent upon the African Union to hold a high-level political meeting to request that the EU extend for a 2 to 5-year period, the earlier-mentioned October EPA deadline. Putting this stay request on record is especially critical because some provisions of fully-implemented EPAs could have an adverse effect a nascent African Economic Community. If the EU granted a delay, they would have helped advance the freer movement of goods throughout sub-Saharan Africa; of course, allowing a recently renewed non-reciprocal AGOA to reach its true potential for the congressionally-mandated 10-year period.
Introduction
Although James Duddridge, UK’s Minister for Africa promised that relations between Britain and Africa would improve once Britain voted to leave the 28-member European Union, Africa’s largest economies have experienced a whole host of difficulties since the recent infamous Brexit vote. And Brexit comes at a time when the European Centre for Policy Development Management (ECPDM) says the political value of a Cotonou Partnership Agreement (CPA) of 28 EU Member States and 79 ACP countries is rooted in a colonial past that, today, is both ‘diluted’ & ‘diminished.’
Back to effects of the British referendum, Brexit caused South Africa’s currency to perform worst after the British pound. The rand has, as at July 8, recovered. Then, even if Nigeria adheres to EPAs, its $ 8.3 billion trade volume with Britain will suffer as the UK repeals, re-enacts or negotiates up to 5,000 regulations, directives and decisions relating to the international market. Also, whereas the process may wane, Kenya faces the real prospect of capital flight as investors seek safer havens like U.S. Treasuries.
Alternatively, Brexit has exposed a crack in a Europe that has, thus far, acted as a fortress when it comes to EPAs. Unless the EU extends its arbitrary October deadline, Africa’s non-LDCs like Kenya, Ghana and Namibia have something akin to a Sword of Damocles hanging over them in a 3-month period within which to ratify and then implement their respective EPAs.
If these three countries, for instance, cannot fully accede to their respective regional EPAs, they will – like Kenya experienced in 2014 – lose the preferential entry their products currently have into Europe’s lucrative markets. Perhaps even worse, a small LDC like Lesotho, which is primarily benefiting from the AGOA third-country fabric provision, could find its duty-free access to the U.S. reduced or rescinded if its EPA business forces it to discriminate against American imports in favor of those from the EU.
What Must Be Done?
Under present circumstances, Africa and everyone else may have no choice but to accept whatever consequences Brexit have on the world’s poorest continent. But with the present flux in Brussels and the EU, the African Union could slow the headlong rush into EPAs by urging Europe to withdraw the October deadline for the Africa’s non-LDCs to ratify and implement EPAs or lose preferential entry into the EU. Research shows that the pressure of the deadline is, first and foremost, forcing Africa’s non-LDCs and some of their LDC colleagues to sacrifice their long-term interest in continental integration, concurrently putting their relationships with key trading partners such as China, India and the United States into jeopardy.
Seminally, while Africa has held a plethora of EPA meetings, the time has come for the African Union to convene a continent-wide frank discussion on being forced to enter into permanent EPAs with a fracturing Europe versus Africa’s relations with third countries, and the progress to graduate the Tripartite Arrangement of COMESA, EAC and SADC into the Continental Free Trade Agreement (CFTA).
Consequences
Apart from affecting regional integration in Africa, EPAs will also impact third country flagship programs like AGOA. Here, although the U.S. has, ostensibly, been reluctant to comment on the EPA negotiation process, Brexit may be an opening for the U.S. to seek a pause; a momentary halt that should give Obama’s successor the space needed to transition AGOA from its current non-reciprocal status to reciprocity once the program has run its course. Our argument is that EPAs must be done without the U.S. having to retaliate against any specific preferences Africa has, in the meantime, granted to the EU.
In our estimation, a 2 to 5-year delay in the deadline will help both Africa and the EU – plus other stakeholders to dig deep into the current European configuration: Is the EU much too diminished? Could other countries seek to leave the EU? Doesn’t a crack in the EU suggest an opportunity for Africa? To put it simply, Africa should not enter into a contractual agreement with the EU when it is unclear what countries will hold membership 5 years from now. Unfortunately, Africa’s immediate concern for loss of preferences seems to cloud the long-term implications of EPAs.
Possible Solutions to the EPA
Like the Brookings Institution noted in their June 21, 2016, article on the implications of Brexit on Africa, bilateral trade agreements between the EU and other parties should be delayed to allow careful analysis and even possible EPA modification. So, while technical work on Africa’s regional integration continues, it is incumbent upon Africa’s leaders to come up with a blueprint for responding to EPAs in the light of Brexit.
In this case, even though the African Union Commission is in the process of voting in a new leadership team for 2016 to 2020, a key meeting would have to be held late July/early August to develop options and scenarios to present to the EU. Even if time before a high-level meeting is short, Africa has more than adequate expertise within the AU itself, at the UN Economic Commission for Africa (UNECA), and in the African Development Bank (AfDB) to carry out studies and present their results to Africa’s leadership on a timely basis.
In the meantime, we’d suggest that the EU make generous overtures such as showing flexibility on the EPA implementation date and even reinstating duty-free privileges for Nigeria, Gabon, and the Democratic Republic of Congo. This market access was revoked for, among other things, failing to meet earlier arbitrary deadlines. And as South Africa agreed to modify its EPA/TIDCA as part of the EU-SADC EPA, specific tariff provisions applicable to South Africa should be implemented.
The Ideal Scenario
If the EU were to delay EPA implementation for a 5-year period, for instance, a continental free trade agreement (CFTA) and even a possible common external tariff (CET) or customs union would have better prospects of being in place by the end of the decade; preparing the continent for future mega free trade agreements with trading blocs from a unified and so, stronger standpoint. In fact, although the Trade Facilitation Agreement (TFA) shall have a positive impact on Africa’s regional trade, its impact will pale significantly when juxtaposed with potential results of a CFTA and/or CET.
Misgivings
Even before Brexit, Africa had a number of misgivings about EPAs. For instance, countries were uncomfortable with the EU’s threats to withdraw duty-free access from more advanced African countries and reduce assistance to the less advanced ones. Africa also felt that EPAs would disrupt regional integration. Hence, if EPAs were so good for Africa, it was befuddling for the EU to strong-arm Africa into discriminating against key trade partners outside Europe.
The fact is that operational EPAs give the EU a right to challenge agreements they deem more beneficial to third countries. Interestingly, with Brexit, these non-EPA member countries will include the UK, since it’d have to sign separate FTAs with African countries that would ceteris paribus, be under the EPA regime. Adding to their inopportune timing, EPAs seek to be implemented just as much of sub-Saharan African faces severe budgetary shortfalls. Africa is, rightly, concerned that EPAs require duty reduction on EU’s exports to Africa sans specific commitments to offset tax deficits. In tandem, the Brexit vote necessitates a call for a balance of concessions where the EU commits not to harm Africa through use of the very agricultural subsidies the UK was stridently against. Brexit weakens opposition to increased subsidization.
An Illustration
If the various African countries fully implemented their EPAs under their present set up, there’s no doubt that timing would be a debilitating liability. On the other hand, Africa’s non-LDCs face dire straits, if they don’t sign along an EPA dotted line this October. When Kenya’s market access to the EU was suspended in October 2014, Kenyan flowers, fish, fruit, and vegetables were taxed upwards of 15 percent. Thus, a country already grappling with all manner of developmental challenges was subjected to levies of up to USD $1.09 million a week. Simply: Alongside other non-LDCs, Kenya can’t afford another suspension. The EU only reinstated Kenya’s market access benefit to Europe in December 2014; after Burundi, Rwanda, Uganda, and Tanzania were cajoled into acceding to an EAC road map to signing their EPA. In fact, EPAs make it almost impossible for the continent to agree on a CET. A CET cannot be operationalized where some countries subject imports from a major supplier to MFN tariffs and others allow the same country to import under preferential duties.
EPAs will also require FTA partners to maintain additional restrictions in an already messy African border situation. In an EPA regime, non-EPA signatories have to levy duties on imports entering into their domestic commerce where the product entered the FTA through an EPA signatory and thus paid no or preferential duties. In fact, in cases where a product incorporates some EU value-added and the African value-added is not enough to qualify for origin status, customs authorities have to determine the EU content before subjecting it to MFN duty rates. Related concern is: countries incorporating EU inputs into products with sufficient African content to satisfy origin rules would have a competitive advantage over similar products produced in other African countries where the EU component paid full duties.
Penultimately, it’s important to note that while trade pacts such as EPAs, or non-reciprocal programs AGOA are valuable development tools, they really ought to be aligned, first and foremost, to Africa’s trade and development agenda. Today, Africa has placed a premium on its continental integration – a process that will ensure that the entire continent can negotiate with the EU or U.S. from a better position than today. At the expense of a conglomerate of African economies, EPAs just give Europe a leg up vis-a-vis Africa’s other trading partners. Like USTR Ambassador Michael Froman stated, the U.S. will not sit idly by – providing unilateral preferences to Africa – if American exports suffer because Africa has granted preferences to others.
First Hand Experience with EPAs
While African countries have reported the coercive nature of negotiating with Europe, the authors’ direct experience with how the EU deals with EPAs was illustrative:
At a regional summit in Kinshasa, we pointed out that EPAs might be untimely for Africa, and would, perhaps, affect Africa’s already uneven road to progress and industrialization. We were swiftly removed from a panel to discuss economic cooperation and private sector development with Sandra Gallina, currently Director of Sustainable Development, European Commission. The pretext was that Ms. Gallina wished to focus on the industry and not EPAs. Treasure Maphanga, Director of Trade at the African Union Commission replaced us on the panel and vigorously opened a discussion on EPAs. Like Mrs. Maphanga pointed out in her discussion with Ms. Gallina, there’s value in Africa’s integration, and EPAs have negative consequences to Africa’s unity.
This direct example – among the many we could describe – is why a united voice must emerge from an African Union meeting. If two or three African leaders approached their European counterparts to request an EPA deadline postponement, they’d garner support from both German Chancellor Angela Merkel and former British Prime Minister David Cameron – both leaders’ key advisors have expressed misgivings about EPAs.
Additionally, citing the recent AGOA report statement on EPA implications, U.S. President Obama should be approached to join the delay request by citing the need to protect U.S. interest in American exports and assuring that an arbitrary EU deadline is not allowed to threaten one of Obama’s legacy accomplishments – the smooth operation of one of his signal accomplishments; a ten-year AGOA extension; one of the few trade initiatives that has received almost unanimous bipartisan support.
A Case for EPAs
But perhaps, we’re being totally unfair to the EPAs and the EU. EPAs may be a good thing for Africa given that they solidify duty-free entry into Europe at a time of uncertainty. Being contractual, they are promoted to break the old rules of trade by creating bound obligations on the EU to provide duty-free access for Sub-Saharan African imports. Such access is designed to encourage Africans to rely less on raw materials and more on adding value to products at home before exporting them; spurring them to join global supply chains.
EPAs are also meant to encourage Europeans to invest in Africa and ensure that Africans acquire new technology for much less, and growing their respective economies. Sunil Boodhoo of the Mauritius Ministry of International Trade sees EPAs as a ‘formidable instrument [that can] build a globally competitive and diversified economy.’
But there are other ways to bring development to Africa. The U.S. model of continuing unilateral duty-free treatment until a certain date is one such model. By extending AGOA for a 10-year period, sufficient time was provided for Africa to complete its CFTA and possibly a common external tariff before one begins negotiating reciprocal agreements, including a replacement for AGOA. African must, thus, call for a delay in implementing EPAs so that the African Union and its member states can appropriately replace the current dynamic between a united Europe and a fragmented Africa.
Post Script
As we learn that Tanzania may not accede to the EPA as the EAC had planned for July 18, 2016, one mustn’t continue to blame colonialism for all that ails Africa, one cannot focus on a glorious future of a united Africa negotiating as one under an EPA regime. That’s why Africa’s voice must emerge from an African Union meeting – with a blueprint for a scenario where even if the EU does not postpone its deadline, Africa is on record saying that EPA implementation must neither interfere with African efforts to achieve a CFTA, nor cause serious enough discrimination against U.S. exports to threaten Africa’s benefits under AGOA. EPAs may seek to bring progress, but are, ultimately, mis-timed.
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Opening High-level Political Forum, delegates share successes, challenges in leaving no one behind while advancing 2030 Agenda
The High-level Political Forum (HLPF) on Sustainable Development began its 2016 annual session on Monday, 11 July, with a focus on its role as a central global platform for ensuring the world would meet its most critical development objectives.
Calling the 2030 Agenda for Sustainable Development a global blueprint for action to end poverty and build an inclusive, sustainable and prosperous world, Oh Joon, President of the Economic and Social Council, said the Forum would provide an opportunity to explore ways to achieve the Agenda’s overarching objective of leaving “no one behind”. Focus would be placed on how to enhance national ownership around the Sustainable Development Goals and how to mainstream them into development plans, while addressing challenges in mobilizing the means of implementation, he continued.
Scheduled to continue through 20 July, the Forum would also allow for an assessment of progress for ensuring that the 2030 Agenda delivered for countries in special situations and those facing specific challenges, Mr. Oh reported, pointing to the particular needs of small island and landlocked developing States, least developed and middle-income countries and those in conflict and post-conflict situations.
The Forum would play a central role in the long-term success of the 2030 Agenda, he said. National reviews would be presented, including challenges and gaps encountered by the 22 volunteering countries from all regions of the world, representing varying development levels. Exchanging country experiences and best practices not only benefited individual Member States, but also the long-term implementation of the 2030 Agenda. In an effort to go beyond business-as-usual approaches, countries had been encouraged to employ various ways to structure their national reviews, based on their own views and preferences and to share lessons learned. Building on the path of inclusiveness and transparency, major groups and other stakeholders would be engaged in the discussions and their contributions to the implementation of the 2030 Agenda would be considered, he said.
Delivering opening remarks, Wu Hongbo, United Nations Under-Secretary-General for Economic and Social Affairs, said the Forum had a clear mandate to provide for robust, voluntary, effective, participatory, transparent and integrated review and follow-up of the future development agenda. Work was just beginning, he noted, expressing his commitment to stand beside Member States “every step of the way”.
Interlinkages and coordination in action were crucial, he said. The 2030 Agenda was an “action plan for people, planet, peace and prosperity” to be implemented through a global partnership. While countries’ circumstances varied, many were taking action to implement the Sustainable Development Goals, mindful of those interlinkages and the need for coherence in national action. Underscoring the importance of monitoring, from which countries were drawing important lessons, he also stressed the need for all stakeholders to play a role. International development cooperation was shaping up to respond to the transformative 2030 Agenda.
Across the global landscape, there were rising tensions and economic uncertainties, the degradation of ecosystems and increasing consequences of climate change. “We must tackle these challenges together,” he stressed, noting that global well-being should be assessed based on the state of the world’s most vulnerable.
The Forum heard from experts during four panel discussions on the following themes: “Where do we stand at year one?”, “Envisioning an inclusive world in 2030”; “Lifting people out of poverty and addressing basic needs”; and “Fostering economic growth, prosperity, and sustainability”.
Presenting the Secretary-General’s first report on the Sustainable Development Goals, Mr. Wu described the 2030 Agenda as a pact for present and future generations that embodied a promise to set the world on a different, sustainable path. That report provided the first account of the current global situation relative to the 17 Sustainable Development Goals and was based on the proposed global indicator framework, he said, adding that it offered an overview of the significant progress that had been made in many areas while also presenting a comprehensive picture of the many challenges that remained in the implementation of the 2030 Agenda.
The 2030 Agenda, he said, recognized that eradicating extreme poverty was a global challenge and an indispensable requirement for sustainable development. From 2002 to 2012, the proportion of the world’s population living below the extreme poverty line dropped by half, to 13 per cent from 26 per cent. While significant progress had been made, there was a need for bolder actions to be taken to eliminate poverty entirely. Although progress was undeniable in the fight against hunger, there were still nearly 800 million people worldwide that suffered from hunger. The achievements made in reducing the preventable deaths of women and children worldwide were also notable. From 2000 to 2015, the global maternal mortality ratio declined by 37 per cent, while the mortality rate of children under age five fell by 44 per cent. Universal primary education still had not been achieved, he noted, also highlighting the persistent difficulties associated with child and early marriage.
Women’s participation in parliaments worldwide was on the rise, although gender equality still posed a challenge for many countries, he said. Meanwhile, many people were suffering from the effects of weak institutions and a lack of access to justice, information and other fundamental freedoms, including birth registration. Reaching the world’s sustainable development objectives would require a revitalized and enhanced global partnership that brought together all stakeholders and mobilized all available resources, including commitments made through the Addis Ababa Action Agenda on financing for development, he said.
2030 Agenda requires collective, cross-sector approach, speakers urge as High-level Political Forum on Sustainable Development continues
Meeting the broad goals laid out in the 2030 Agenda for Sustainable Development would require collaboration and commitment across all relevant sectors, speakers said as the High-level Political Forum on Sustainable Development continued into its second day.
Achieving the Sustainable Development Goals would require a comprehensive, interlinked approach, participants stressed. Under the Forum’s theme of “Ensuring that no one is left behind”, panel discussions were held on “Food security and sustainable agriculture, climate action, sustainable oceans and terrestrial ecosystems: Adopting a nexus approach”, “Creating peaceful and more inclusive societies and empowering women and girls” and “Science-policy interface: New ideas, insights and solutions”.
Together, panel participants highlighted the inextricable nexus between the various elements of sustainable development. Addressing such wide-ranging issues as hunger, climate change, gender inequality and education, among others, would be critical to the overall success of the future development agenda, underscored representatives of Governments, intergovernmental organizations and civil society, many of whom warned against the risks of working in silos.
Indeed, if no one was to be left behind in 2030, the notion of inclusiveness could not be treated as an afterthought, emphasized Wu Hongbo, United Nations Under-Secretary-General for Economic and Social Affairs, as he presented the 2016 Global Sustainable Development Report.
During the day, panellists pointed out areas that needed critical attention and action. If world leaders were to fulfil their development commitments, hunger must be tackled as a critical priority, said Deborah Fulton, Secretary of the Committee on World Food Security, pointing to the more than 790 million food insecure people worldwide. Poverty, weather impacts, unstable markets, unemployment, protracted crises and political instability all contributed to hunger, profoundly affecting the most vulnerable, she continued.
Echoing that point, Evelyn Nguleka, Secretary-General of the World Farmers’ Organization, said it was a shocking irony that many of the millions of people around the world who went to bed hungry were farmers. “Something is going wrong,” she went on to say, noting that farmers were being forced to produce more food with less support, despite the fact that the population was growing.
Other speakers brought up obstacles that only exacerbated such pressing challenges. Climate change increased both the intensity and frequency of extreme weather events, compromising food security, underscored Omoyemen Lucia Odigie-Emmanuel, President of the Centre for Human Rights and Climate Change Research. Emphasizing the linkages between climate change and the 2030 Agenda, she said “we must make these Goals work for people.”
Gender equality and women’s empowerment were at the heart of many of the 17 Sustainable Development Goals, recalled Lakshmi Puri, Assistant Secretary-General of the United Nations and Deputy Executive Director of the United Nations Entity for Gender Equality and the Empowerment of Women (UN-Women). Elements that were critical to the achievement of the Development Goals were ensuring women’s economic empowerment, universal access to sexual and reproductive health, redistribution of unpaid care work, equitable participation in political leadership and ending all forms of discrimination, violence and harmful practices. Meeting those aspirations would require the active engagement of all stakeholders – Governments, civil society, women’s movements, youth, indigenous peoples, faith-based organizations and the private sector, she said.
» Download the Secretary-General’s January 2016 report: Critical milestones towards coherent, efficient and inclusive follow-up and review at the global level
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New COMESA Strategy to focus on structural transformation of regional economies
The final review of the 2016-2020 COMESA Medium Term Strategic Plan began on 12 July with representatives of Member States making their final input into the plan. The new strategy focuses on entrenching trade facilitation, market integration, infrastructure development, industrialization institutional and regulatory policies, capacity development and resource mobilization.
At the opening of the review meeting, the Secretary General of COMESA Mr Sindiso Ngwenya told the representatives of member States to take ownership of the strategy to enable it contribute to structural transformation of their economies.
“Member States have a responsibility to domesticate the Strategic Plan through alignment with their National Development Plans (NDPs) and take on ownership of the implementation process,” Mr Ngwenya said.
He said the speed towards attaining regional integration agenda will come about when Member States and nonstate actors fulfill their roles and responsibilities.
Consultative Approach
The development of the new strategy used a wide consultative approach with key stakeholders internally and externally. Consultations were undertaken at different levels including African Union Commission under Agenda 2063, Centre for the Sustainable Development Goals (SDGs) as well as with partner Regional Economic Communities. As a result, alignment has been established at the Global, Continental, Regional and subject specific levels.
The Secretary General described the new Strategic Plan as a useful tool to engage strategic partners in the pursuit of Regional Integration to marshal both financial and non-financial resources to build on successes and override the prevailing challenges.
“Member States should entrench ownership through funding of regional integration programmes in order to reverse reliance of external funding for regional integration programmes,” Mr Ngwenya stressed.
Currently, over 80% of the COMESA programmes are funded by cooperating partners making sustainability of programmes under such funding arrangements difficult.
Market Integration
On market integration, he said the challenges towards attaining the seamless flow of goods, free movement of persons, capital and other objectives are still daunting.
“Intraregional trade remains low – below 10 percent, transaction costs are still very high and huge obstacles exist to the free movement of goods, capital, investments and people in form of non-tariff and technical barriers to trade,” he said.
He lamented that immigration laws and policies in many member countries are still harsh and discriminatory. Yet, the free movement of business persons remains a recurrent theme in policy discourse for the desired goal as stated in the strategy for achieving the Common Market.
With regard to industrialization, Mr Ngwenya observed that most COMESA Member States’ economies still rely on the production and exportation of a few primary products without any value addition.
“The need to transform our economies from an overreliance on primary commodities and low value added products will continue to drive COMESA’s planning and execution agenda,” he said.
Such pursuits, he observed should involve developing the necessary strengths and resilience, as well as the capacity to enhance competitiveness, innovation and growth through industrialization and Trade Facilitation.
After the current review, the 2016-2020 Strategic Plan will be presented to the Council of Ministers meeting in October this year for adoption and thereafter implementation.
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Value addition key in Africa’s growth story
Africa must invest in technology transfer models to strengthen value addition of its products to move away from selling raw materials, experts have said at the ongoing AU summit in Kigali.
Despite talk of Africa’s critical need to strengthen its industrialization to create jobs and move millions out of poverty, the bloc has continued to export raw materials something that has left many African economies behind, although many are endowed with natural resources.
“Africa must focus on technology transfer models to close the existing gaps in value addition, we incur losses in export of raw materials, there is need for technological partnerships with developed countries so we can transform our raw materials into finished goods,” said Dr Darlington Muzeza, an expert from the Zimbabwean Ministry of tourism and hospitality industry.
A continent which still has agriculture as the biggest employer of the population still imports up to $40 billion of food every year, with the number likely to increase.
To be able to covert its raw materials into finished goods, Africa also needs to close its huge skill gap and accelerates investments in energy and infrastructures, if it’s to achieve double digit growth every year by 2030.
He said, as AU addresses policy issues, it needs to also deal with “the pessimism that comes with nationalistic interests of member states”.
“AU must not be a talk show, but a platform to interrogate issues and come up with practical solutions to people’s problems; it needs to revisit its founding principles of a united Africa, the vision of Kwame Nkurumah,” he said.
AU was also called upon to strengthen regional blocs which can address the multi-faceted challenges faced by the continent, and to advance economic development.
“Africa has not established its own CNN, why does Africa lack its own currency, we continue facing foreign exchange risks, we need to strengthen our systems,” said Muzeza at the side-lines of AU.