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Scoping report: Improving the perspective for regional trade and investment in West Africa
The key to food security, economic development and stability in the region
Increasing international concern about instability, population pressure, migration and chronic food insecurity in West Africa and growing awareness of the potential of enhanced intraregional trade and investment to contribute to sustainable and inclusive economic development, has prompted a number of development partners including The Netherlands to increase their efforts to support West African integration and cooperation.
Support for regional integration and cooperation in West Africa by The Netherlands fits well within its policy framework for Aid, Trade and Investment and aligns with key Dutch policy objectives to promote sustainable and inclusive economic development and to enhance food security. Furthermore, there is increased interest of Dutch businesses to invest in and trade with West Africa and growing recognition of the opportunities for Dutch businesses, knowledge institutes and civil society to contribute to sustainable economic development in West Africa.
In order for support to regional integration and cooperation in West Africa to be effective and calibrated to the specific needs of the region, there is a need to build a more comprehensive understanding of the diverse and complex regional dynamics and to gain insight into the opportunities and challenges to regional integration in West Africa.
Commissioned by the Food & Business Knowledge Platform, the overall objective of the study underlying this scoping report was to contribute to a more contextualized comprehensive picture of The Netherlands’ government's ongoing cooperation with West Africa and the perspective in terms of policy options for strengthening its effectiveness and coherence by giving more emphasis to the promotion of intraregional trade and investment.
The study has been carried out by a consortium of knowledge institutes comprised of the African Studies Centre Leiden (ASCL), the Agro-economic Research Institute of Wageningen University and Research (LEI-WUR) and the European Centre for Development Policy Management (ECDPM).
In addition to this scoping report, the scoping study has also resulted in an annotated bibliography based on an inventory of literature on regional integration in West Africa, prepared by the Library, Documentation and Information Department of the African Studies Centre Leiden.
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Transport and ICT projects financed by the AfDB in 2015 to create thousands of jobs, increase mobility and improve the lives of millions
The impacts arising from investments made by the African Development Bank Group in 2015 will collectively improve mobility of at least 1.2 million users of public transport, result in employment generation of about 200,000 jobs in the ITC sector and benefit almost 18 million people from improvements in road infrastructure.
These are the findings of the AfDB’s 2015 Annual Report on Transport and Information and communications technology (ICT) released July 1, 2016.
“The expected impacts over the next few years in integrating Africa, boosting agriculture, and facilitating industrialization will be tremendous,” noted Amadou Oumarou, AfDB Director for the Transport and ICT Infrastructure.
The report sharply highlights the Bank’s continued support for the development of efficient transportation and telecommunication infrastructure to promote regional integration, support agriculture development, and facilitate the industrialization of Africa. The publication underscores the Bank’s multi-faceted financing and advisory services in support of Africa’s development.
According to the report, the contribution of transport and ICT as enablers of economic development cannot be overstated. Efficient transport and ICT systems minimize transaction costs, transit times and uncertainties and can facilitate the participation of African countries in agriculture and manufacturing value chains. In addition, transport contribute to improving livelihoods and inclusiveness by providing access to social services and job opportunities. Similarly, investment in ICT support spinoffs in information access, innovation, skills, and job creation.
During the course of 2015, the Bank invested in a total of 17 transport and ICT operations for a value of US $2 billion. Lending was 50% above target mainly due to increased access by African Development Fund (ADF) countries to African Development Bank financing instruments and greater leverage of co-financing facilities such as the Africa Growing Together Fund (AGTF). Roads and highway corridors represented the largest share of the lending. However, the portfolio is gradually being diversified with increased share of investments in other transport modes particularly urban transport, aviation and ports which collectively accounted for at least 30% of total lending.
Investments in regional transport infrastructure continued to feature strongly in the Bank lending, with regional highways linking Brazzaville (Congo) and Yaoundé (Cameroon), and Bamako (Mali) and the port of San Pedro (Côte d’Ivoire) as typical examples of cross-border corridors to promote regional integration and intra-African trade. Additional support to regional integration included the financing of the Central Africa Fiber Optic backbone project and a US $12-million grant to support the Economic Community of Central African States and the Economic Community of West African States to improve regional air transport safety and security in West and Central Africa.
The financing of the Bus Rapid Transit Project in Tanzania re-affirmed the Bank’s involvement in developing sustainable cities and improving the quality of life of people. The project will not only reduce urban congestion and increase mobility and accessibility for city-dwellers but also promote green growth and improve quality of health resulting from reduced emissions.
The US $127 million lending provided for the Nador West Med Port Project in Morocco and the $140-million Sharm El-Sheikh Airport Development project in Egypt strongly signalled Bank’s support for the continent’s industrialisation. The investments are expected to support growth of efficient global value chains and promote competiveness of the countries’ economies.
In support of agriculture, investments in the Tanzania Transport Support Program and Project to Rehabilitate the National Road N°2 and facilitate access to Morphil Island in Senegal aim to provide a catalytic effect in unlocking the agriculture potential of the regions. The road improvements will support efficient movement of agriculture commodities and contribute to reduced post-harvest losses.
The year’s impressive lending added to the Bank’s growing active transport and ICT project portfolio. There are currently 114 transport and ICT projects under implementation in 44 countries valued at more than US $11 billion.
» Download: Transport and ICT Annual Report 2015 (PDF, 4.9 MB)
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EA loses $2bn in generous tax incentives to investors every year
Kenya, Uganda, Tanzania and Rwanda are losing about $2 billion in revenue every year to foreign investors through generous tax incentives.
Tax Justice Network-Africa and ActionAid International figures show Kenya loses $1.1 billion, Tanzania $790 million, Uganda 370 million and Rwanda $176 million in unnecessary tax holidays, capital gains tax allowances and royalty exemptions.
On its part, Burundi lost $52 million to firms or officials who were given tax exemptions to import goods to build infrastructure and instead sold the materials.
TJN-A and ActionAid said policymakers in the region have spoken about revising tax policies but questions abound on how these tax incentives will be revised, costed and phased out, and the government’s resources and expertise to carry out the exercise.
The report by TJN-A and ActionAid titled “Still racing towards the bottom? Corporate tax incentives in East Africa,” reveals tax incentives are fuelling competition for investors and derailing harmonisation of policies, thereby undermining integration.
“Though there have been improvements in recent years in addressing the issue, governments continue to give away domestic resources in tax incentives,” said ActionAid Tanzania’s country director Yaekob Metena.
The report said the real cost of incentives remains hidden in all five EAC countries as there are neither mechanisms nor demands for accountability to reveal the huge revenue losses happening.
Mr Metena said there is a need for a shift in policy as political, financial national and institutional authorities admit tax incentives harmful to revenue mobilisation need to be revised if not altogether eliminated.
Reduce tax incentives
To their credit, East African governments have pledged steps to reduce tax incentives relating to value added tax by increasing tax collection and providing vital extra revenue that can be spent on providing critical services.
“Many leaders are promising to take measures but there is a need for tangible actions to be taken towards that end,” said TJN-A deputy executive director Jason Braganza.
He said the region must improve harmonisation of its tax legislation by ratifying the East African Code of Conduct on Harmful Tax Competition and implementing it at national levels. The code includes the recommendations of the African Union High Level Panel on Illicit Financial Flows, adopted at the AU Summit in January 2015.
The region has to grapple with tax treaties and special economic zones. At the national level, new legislation like VAT laws and tax administration seeks to redress numerous incentives.
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South Africa seeks end to Zimbabwe’s ban on product imports
South African Trade and Industry Minister Rob Davies wants Zimbabwe to reverse a decision to ban imports of goods from the continent’s most-industrialized economy.
“The minister is engaging through SADC structures and in his capacity with his counterparts,” Sidwell Medupe, a spokesman for the department, said by phone on Monday, referring to the Southern African Development Community. “Engagements are still at an early stage. We hope that an amicable solution will be found.”
In June, Zimbabwe announced a ban on imports of many goods, saying the steps are needed to develop local industries. Products banned include cosmetics, cereals, cheese, canned goods and furniture.
South Africa is one of the biggest investors in Zimbabwe and companies including Impala Platinum Holdings Ltd. and Nedbank Group Ltd. own units there. South Africa’s exports to Zimbabwe amounted to 24.8 billion rand ($1.7 billion) in 2014, while imports stood at 2 billion rand, President Jacob Zuma’s office said in a statement last year.
Statement
South African government engages Zimbabwe on the latest trade restrictive measures
The Department of Trade & Industry (the dti) notes with concern the range of trade restrictive measures that the government of Zimbabwe has introduced. These measures include import bans, surcharges, increases in import duties, requirements for import permits and other forms of restrictions that have negative implications on intra-regional trade.
The position of the government of Zimbabwe is that these trade restrictions are necessary to support the development of local industries and to relieve the pressure of economic sanctions, which have led to balance of payments challenges.
The recent ban of imports or requirement for import permits in a number of products such as cosmetics, cereals, coffee creamer, mayonnaise, cheese, canned fruits and vegetables, second hand tyres, iron and steel products, furniture and woven cotton fabrics June 2016 by Zimbabwe is in addition to these previously instituted measures. The adverse impact on South African exporters cannot be underestimated and the dti continues to be responsive to affected exporters and to make representations to the government of Zimbabwe.
At the recent meeting of the Southern Africa Development Community (SADC) Committee of Trade Ministers South Africa and Zimbabwe were requested to report to SADC on the implications of these measures for the coherence of the SADC Trade Protocol.
On behalf of the South African government, Minister of Trade and Industry, Dr Rob Davies has been engaging the Zimbabwean government bilaterally and through the SADC structures to find an amicable solution that is in accordance with Zimbabwe’s obligations of the SADC Protocol on Trade, while at the same time being sensitive to Zimbabwe’s industrial development and balance of payments challenges.
Issued by the Department of Trade and Industry
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tralac’s Daily News Selection
The selection: Friday, 8 July 2016
#UNCTAD14 takes place in Nairobi, 17-22 July: online document repository.
Profiled UNCTAD14 uploads (pdfs): Impact of cotton GVC on Africa and farm gate activities: contribution from the Government of Kenya, Sustainable transportation for the 2030 Agenda: boosting the arteries of global trade
Profiled tweets: @DrTaxs: 7 July: Committee of Ministers of Finance approves an Agreement to operationalize the SADC Development Fund; @martinslabber: SA's trade with the Philippines up 19% between 2015 and 12 months to April 2016. Now at US$241mn.
‘Modi in Africa’ updates: @IndianDiplomacy: Here's the link to the Press Statement of PM @narendramodi during his Mozambique visit. [Commentaries: Gopalkrishna Gandhi: 'What we must learn from Africa' (The Hindu), ASSOCHAM: Investment and capacity building agreements imperative to fructify unity b/w India & Africa, Shannon Ebrahim: 'Modi a wizard of foreign policy' (IOL), Nic Dawes: 'Modi's first visit to South Africa comes as old friendship fades' (Hindustan Times)]
South Africa: 2016 Article IV Consultation report (pdf, IMF)
Box 1 ‘Spillovers from global transitions’: This box explores spillovers from the ongoing global transitions - China’s rebalancing, lower commodity prices, and tighter global financial conditions - on South Africa. The results suggest China’s growth matters more for South Africa than U.S.’ and Europe’s growth, with commodity prices and financing conditions the main transmission channels. The impact of commodity prices is amplified by inter-sectoral linkages. Tighter global financial conditions have a significant impact on South Africa, mainly though bond yields and equity prices. China absorbs 10% of South African exports, the most of any country. More importantly, it plays a key role in determining global demand for South Africa’s commodity exports, which account for 34% of total goods exports (51% including manufactured commodities), and commodities imports including oil, which account for 16% of total goods imports.
Box 2 ‘Outward spillovers to Sub-Saharan Africa’: Past research suggests that, apart from its immediate neighbors, South Africa has limited spillovers to the rest of Africa, but these are likely to have increased. Several studies have shown that South Africa’s growth has limited spillovers on SSA, once global growth is controlled for. However, SSA’s share in South Africa’s imports has more than doubled over the last decade. South African companies in retail, banking, and telecommunications have established large networks in several sub-Saharan African countries. South Africa now represents an important export destination and source of FDI, especially for neighboring countries. South African firms have many subsidiaries in SSA, which could dampen their profitability going forward. About 75% of African subsidiaries are in services, trade, and financial sectors. The 10 firms with the highest number of subsidiaries are some of the top listed companies. While African subsidiaries have contributed to South African corporates’ high profitability in the past decade, the deteriorating performance of SSA could adversely affect profitability.
Article IV companion paper: The impact of China's growth slowdown and lower commodity prices on South Africa (pdf, IMF)
This paper estimates the impact of China’s growth slowdown and the recent large decline in commodity prices on South Africa. It seeks to identify the key channels through which a shock to China’s economy is transmitted to South Africa, as well as the propagation of this shock within the economy.
National Treasury response to IMF analysis (pdf)
National Treasury forecast is more positive compared to the IMF. We recognise, as articulated in the IMF report, that a comprehensive package of structural reforms is necessary to increase growth, create jobs and lower income inequality. An IMF/G20 guiding framework for structural reforms recommends that emerging market economies should focus on fiscal reforms, business regulations, labour market, infrastructure, banking/capital markets and product market regulations. South Africa’s structural reforms implementation package is anchored by the Nine-Point Plan, which entails:
Mozambique sees growth slowing, austerity measures needed (Club of Mozambique)
Mozambique, reeling from a sovereign debt crisis, sees 2016 economic growth slowing to 4.5% from initial forecasts of 7% and needs to bring in austerity measures in an amended budget, Finance Minister Adriano Maleiane said on Thursday. “This means that revenue that we should have will also go down,” the minister told journalists after an extraordinary meeting of the Council of Ministers which approved an amended budget which will be put before parliament on Monday. [Carlos Lopes: Mozambique needs “rapid and spectacular” measures to solve debt problem]
Ethiopia Public Expenditure Review (World Bank, GoE)
“Ethiopia’s investments in key sectors have had a positive impact on poverty reduction, now the key is for the country to develop a more effective budget allocation in order to maximize the returns on investment,” said Carolyn Turk, World Bank Country Director for Ethiopia, Sudan and South Sudan. According to the report, Ethiopia’s investment in infrastructure has increased the country’s road network five-fold, reaching 100,000km in 2015. Investment in education has also helped to increase net primary enrollment from 77.5% in 2006 to 92.6% in 2015, according to the report, and education has been extended from 10 million to more than 23 million students in the past decade. Through smart investments in the health sector and only an additional $5 in per capita health spending, the GoE reduced child mortality by more than half from 72 to 31 per 1,000 between 2005 and 2015. This is a record, as no other country has achieved such results for the same level of spending, the report notes.
Kenya: Trade deficit narrows as car imports drop Sh21bn (Business Daily)
Reduced demand for vehicles and lower fuel prices cut Kenya’s trade deficit 21.4% in the first four months of the year, helping ease pressure on the shilling. Data from the Kenya National Bureau of Statistics shows that in the first four months of this year, the trade deficit stood at Sh246bn compared to Sh314bn in a similar period last year.
Middle Africa FICC Guidebook 2016: fixed income, currency and commodities (pdf, Ecobank)
However, the medium to long term outlook appears good; African governments are likely to accelerate their ambitious investment plans as risks to the global economy subside over the medium- to long-term. Meanwhile, most Middle African banking sectors remain largely insulated from global financial strains due to limited financial integration of Middle Africa’s banking sector into the global system (bar the trade channel). However, improvements in portfolio quality, liquidity, and revenues would be welcome. The overall positive scenario for Middle Africa in 2016 is beset by numerous risks. External factors continue to pose the largest threats to the region as a whole, but domestic risks are more significant in some countries. Although nearly all countries grew in 2015, some were adversely affected by weakness in the eurozone. Currency pegs to the euro and/or strong trade links to Europe highlight some of the direct links that will remain a major concern for the continent in 2016. Moreover, weak global growth is likely to moderate growth in Middle Africa’s export sector, which in turn could increase pressure on some currencies following relatively strong depreciation in 2015. Some of the more specific risks facing Middle Africa include:
Catalysing impact investing in East Africa: recommendations for development of the services market (FSG)
Based on consultations with over 80 stakeholders in Kenya, Tanzania, Uganda, and Rwanda, the report proposes a market-responsive intervention that helps to scale access to capital raising and associated capacity building services for enterprises. To achieve this, the report recommends the creation of a donor-funded ‘Facility’ to help service providers reach deeper into the pool of enterprises that need support, and to develop a more vibrant impact investing market overall.
G20 trade: Davies to attend G20 in China (IOL)
South Africa’s Minister of Trade and Industry Rob Davies has left for Shanghai, China, to attend the G20 Trade Ministers meeting to be held over the weekend, the dti said on Thursday. A G20 Trade and Investment Working Group (TIWG) was establish this year following a decision by the G20 leaders to better coordinate efforts to reinforce trade and investment. The Trade Ministers will consider the outcomes and recommendations from the TIWG. [G20 an opportunity to promote NZ’s trade agenda]
South Africa: Watchdog probes Transnet for excessive pricing and preferential treatment (Business Day)
The Competition Commission is investigating Transnet for "excessive pricing" in port charges and the preferential treatment of some clients to the exclusion of others. SA’s port charges are excessive by global standards and have long been identified as an impediment to business. Port regulator Mahesh Fakir said the charges being probed by the commission were those levied by Transnet Port Terminals — the operator of the ports — and were not regulated. Tariffs charged by Transnet’s National Port Authority, which owned and managed the eight commercial ports in the country, were determined by the regulator and have been regulated since 2009.
Isabelle Ramdoo: ‘Can local content policies provide a transformative solution for Africa?’ (AfDB)
Implemented in a smart way and in partnership with mining companies, LCPs are thus a powerful tool to stimulate the creation of upstream linkages by capitalising on companies’ own procurement needs as well as labour requirements. Similarly, using LCPs to foster downstream linkages are critical to develop industrial activities: the case of cement in Nigeria is a case in point. It is estimated that 90% of resource-rich countries apply one form of local content policy or another and that 40 and 80% of the revenue created in extractive sector (oil, gas, mining) is spent on the procurement of goods and services. In Ghana for instance, it is reported that 80% of procurement expenditure stays in the country. Although the definition of ‘local’ and ‘content’ is not universally agreed, the scope of procuring domestically nonetheless represents a unique opportunity to supply the extractive sector.
Boosting the power sector in Sub-Saharan Africa: China’s involvement (IEA)
This report analyses China’s engagement in the sub-Saharan Africa power sector, including the key drivers underlying Chinese investments. An overview of Chinese projects (generation, transmission and distribution) during the 2010-20 period is provided in this first-ever consolidated effort to map them. The report identifies the key Chinese stakeholders and assesses their impact on policies affecting energy access, economic development and financing modalities. Two case studies examine Chinese investment at the country level in Ghana and Ethiopia.
Transfer pricing and tax base erosion in Africa: NRGI report, case studies from Zambia, Tanzania, Sierra Leone, Ghana, Guinea
'Beyond AGOA': These new [USTR] reports reveal some promising steps on trade with Africa (ONE)
Trade performance of Asian Landlocked Developing Economies: state of play and the way forward (ESCAP)
Aid for trade and the Trade Facilitation Agreement: what they can do for LDCs (FERDI)
Yesterday’s UNSC briefings on African governance issues: AU Mission in Somalia, briefing on DRC
Land dynamics in Africa: what is the potential for expansion? (pdf, Agbiz)
Global Food Security Act of 2016: Gayle Smith commentary (USAID)
India continues to lead China in pharma exports (Livemint)
Govt aims to make India design hub, new national policy likely (Livemint)
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South Africa: Latest IMF outlook shows urgent need for policy reforms
South Africa faces significant challenges and needs decisive action to revive growth, the IMF said in its latest annual assessment of the country’s economy.
South Africa has made considerable economic and social progress since its first democratic election in 1994, but many citizens have not sufficiently benefited from the improvements. The report shows income inequality and unemployment remain among the highest in the world, and growth has waned in recent years.
In 2015, South Africa was hit by a number of economic shocks. China’s slowdown and rebalancing, weak commodity prices, and U.S. monetary policy normalization all weighed on growth (Chart 1). On the domestic front, leadership changes at the National Treasury last December and other political developments shook confidence, heightened governance concerns, and increased policy uncertainty. A severe drought in the region also significantly reduced agricultural output.
And while electricity supply has improved, growth continues to be held back by deep-rooted structural problems such as poor education outcomes, and product and labor markets that are out of reach for too many people.
The report shows growth slowed to 1.3 percent in 2015, the lowest since the global financial crisis and below most emerging market economies and commodity producers. The IMF projects 2016 growth at 0.1 percent, which would mean a second year of falling per capita incomes. A muted recovery is expected from 2017, approaching 2-2½ percent in the outer years as shocks dissipate and more power plants are completed; with these projections, unemployment will likely rise over the medium term.
Risks of further deterioration
Downside risks dominate and stem mainly from China, heightened global financial volatility, and domestic politics and policies that may reduce confidence (Chart 2).
Shocks could be amplified by linkages between capital flows, the sovereign, and the financial sector, especially if combined with sovereign credit rating downgrades to speculative grade. The United Kingdom’s recent decision to leave the European Union (EU) has further increased risks, as there are extensive financial linkages between the United Kingdom and South Africa and sizable trade linkages with the EU as a whole.
The report notes, however, that the authorities are making progress in the recent dialogue between government, businesses, and labor, which could catalyze reform implementation and invigorate growth.
Urgent need for more reforms
Besides addressing infrastructure bottlenecks, the report said structural reforms should be a priority in order to boost growth and jobs. Greater competition, labor market policies and industrial relations that work for a greater portion of the population, better quality of government services – especially in education – and improved governance and efficiency in state-owned enterprises would all help increase growth.
Job creation, especially in small- and medium-sized enterprises that are more labor-intensive and hire a relatively high share of low-skilled workers, is the best way to ensure a sustainable reduction in unemployment and inequality. Advancing these reforms will require building trust among stakeholders, ideally via a social bargain.
To generate reform momentum, the report suggests government should implement a focused set of tangible measures with a priority on boosting private sector employment. Clarifying the regulatory environment in the mining sector and reforming state-owned enterprises, for example, would reduce policy uncertainty and increase confidence and trust even in the short term.
Elevated vulnerabilities
Sources of resilience include strong institutions and policy frameworks, the flexible exchange rate regime, strong private corporate balance sheets, a high share of rand-denominated external debt, well-capitalized banks, and the large domestic institutional investor base.
Nevertheless, vulnerabilities remain elevated. The current account deficit, though it has started adjusting, remains among the highest in emerging markets. Rising government debt, due to a large extent to low growth, and financially-weak state-owned enterprises have increased fiscal vulnerabilities, and sovereign downgrades could trigger capital outflows (Chart 3).
Limited macroeconomic policy space
The 2016 budget envisaged significant deficit reduction this year and next to stabilize debt. However, the budget targets could be challenging to achieve if IMF staff’s less-optimistic growth projections materialize. The report suggests that any additional fiscal consolidation needs to be carefully designed to minimize the negative growth impact and protect the poor. State-owned enterprise reforms are also essential to limit fiscal risks, as well as to support growth. Greater private participation and effective regulators could help improve state-owned enterprise performance and free up resources for investment.
Making a strong push on structural reforms is the absolute, urgent priority to put the South African economy on a path to improving living standards and create jobs, the report said.
Context: Confluence of shocks on top of existing structural challenges and vulnerabilities
The global transitions – China’s slowdown and rebalancing, weak commodity prices, and the U.S. monetary policy normalization – are taking a heavy toll on South Africa. China’s key role in the world economy and South Africa’s high reliance on mining exports result in significant spillovers from China’s transitions and the commodity price fall, despite the country being an oil importer (Box 1). China’s growth now matters more for South Africa than the E.U.’s and the U.S.’s growth.
Commodities are the main channel, closely followed by global financing conditions likely capturing confidence effects. The commodity channel is also likely operating via Sub-Saharan Africa (SSA) – now absorbing 30 percent of South Africa’s exports and a major destination of South African corporates’ large expansion abroad – and is reducing corporate profitability and incomes across the economy. In addition, South Africa’s financing conditions are closely tied to those in the United States, though the two economies are moving in opposite directions. Outward spillovers to South Africa’s immediate neighbors will be significant. Spillovers to the rest of SSA are rising but remain muted (Box 2).
Box 1. Spillovers from Global Transitions
Spillovers from China and lower commodity prices
Rising trade linkages and reliance on commodities have increased spillovers from China. China absorbs 10 percent of South African exports, the most of any country. More importantly, it plays a key role in determining global demand for South Africa’s commodity exports, which account for 34 percent of total goods exports (51 percent including manufactured commodities), and commodities imports including oil, which account for 16 percent of total goods imports.
Staff analysis suggests China’s growth now matters more for South Africa than that of the U.S. and the E.U. Using quarterly data from 2000, a VAR suggests that a one percentage point decline in China’s real GDP growth would lower South Africa’s growth by 0.3 percentage point (q/q sa annualized) after one quarter. This is smaller than the impact of a shock to the U.S. and the E.U. growth, and broadly consistent with estimates found in previous studies, including the World Bank’s June 2015 Global Economic Perspectives. However, the impact of a shock to China’s growth rises to 1 percentage point in the postcrisis sample, significantly exceeding the impact of shocks originating in the U.S. and the E.U. Though data limitations preclude a full analysis, the impact of a decline in China’s secondary sector could be even greater.
Commodity prices and global financial conditions are the main transmission channels. A decomposition following Swiston and Bayoumi (2008) suggests the decline in South Africa’s export commodity prices following a shock to China’s growth has a large and persistent impact. Financial spillovers (proxied by U.S. financial conditions), which likely capture global confidence effects, are also important. Spillovers through trade are small and positive, suggesting the impact of exchange rate depreciation on competitiveness outweighs the fall in global demand. Declining import commodity prices (mainly oil) provide a partial offset.
The impact of lower commodity prices is amplified by sectoral interlinkages. An analysis of input-output tables in South Africa suggests linkages between the commodity sector and the rest of the economy are significant. A sectoral structural VAR identified using multipliers from the input-output table suggests a 10 percentage point decline in export commodity prices would reduce real GDP growth by nearly 0.2 percentage points (q/q sa annualized) after two quarters, with most of the impact coming from downstream (e.g., construction) and upstream (e.g., transport) sectors including manufactured commodities. A Swiston and Bayoumi decomposition suggests that the main transmission channels are changes in corporate profitability and employment in the non-mining sector.
A shock to China’s growth worsens South Africa’s external and fiscal balances, but the impact on inflation is ambiguous. Mineral export growth declined to -7 percent in 2015 from an average of 19 percent in 2011-13 on lower demand and prices. The lower oil import bill is a partial offset, and the terms of trade are expected to remain negative over the next few years.3 Fiscal revenues are affected mainly through growth, with corporate income tax growth down from an average of 10 percent between FY11/12-FY13/14 to an estimated 2.2 percent in FY15/16. Lower oil prices are fully passed through to retail prices, with petrol prices in early-2015 27 percent below their 2014 peak. However, this effect has been partly offset by depreciation. Anecdotal evidence points to a significant deflationary impact from overcapacity in China, which South Africa has partly offset through increasing tariffs by 10 percent on some steel imports (within the WTO bound rates). The overall impact on inflation in South Africa is therefore ambiguous.
Spillovers from tighter global financial conditions
High external financing needs and a large share of bond and equities held by foreign investors make South Africa vulnerable to spillovers from tighter global financial conditions. Almost half of South Africa’s portfolio liabilities are held by U.S. investors. Estimates in Caceres et al. (2016) suggest a 100bps increase in the U.S. policy rate would increase South African long-term rates by 73bps after one year, above the EM average, but short-term rates are not significantly affected. 4 South Africa-specific estimates underlying the 2014 Spillover Report suggest a 0.2 percent decline in growth after one year following a 100bps rise in U.S. bond yields, with most of the spillovers coming from a 79bps increase in long-term bond yields and declining equity prices. Simulations using a broader set of countries in the 2015 Spillover Report and in Buitron and Vesperoni (2016) suggest that an unexpected tightening of monetary conditions that pushes up U.S. bond yields by 100 bps would spill over to bond yields in EMs and non-systemic advanced countries, result in capital outflows, and lower industrial production growth by 3½ percent per annum after one year. Most EMs would also experience significant exchange rate depreciation, though South Africa is relatively shielded from negative balance sheet effects given low corporate leverage and limited FX mismatches.
Box 2. Outward Spillovers to Sub-Saharan Africa
Past research suggests that, apart from its immediate neighbors, South Africa has limited spillovers to the rest of Africa, but these are likely to have increased. Several studies have shown that South Africa’s growth has limited spillovers on SSA, once global growth is controlled for. However, SSA’s share in South Africa’s imports has more than doubled over the last decade. South African companies in retail, banking, and telecommunications have established large networks in several sub-Saharan African countries. South Africa now represents an important export destination and source of FDI, especially for neighboring countries.
Other countries of the Southern African Customs Union (SACU) will be the most affected by South Africa’s slowdown. Besides the growth impact, SACU countries rely heavily on South Africa in their shared customs receipts, as South Africa accounts for about 85 percent of total SACU imports. With imports having declined in 2015 and low growth expected going forward, combined with the lags built in the SACU revenue formula, this vital source of revenue will decline markedly.
South African firms have many subsidiaries in SSA, which could dampen their profitability going forward. About 75 percent of African subsidiaries are in services, trade, and financial sectors. The 10 firms with the highest number of subsidiaries are some of the top listed companies. While African subsidiaries have contributed to South African corporates’ high profitability in the past decade, the deteriorating performance of SSA could adversely affect profitability.
Selected Issues Paper
The impact of China’s growth slowdown and lower commodity prices on South Africa
This paper estimates the impact of China’s growth slowdown and the recent large decline in commodity prices on South Africa. It seeks to identify the key channels through which a shock to China’s economy is transmitted to South Africa, as well as the propagation of this shock within the economy. Our findings suggest that China’s growth slowdown is likely to have a significant impact on South Africa’s economy, with commodity prices and global financial conditions the main transmission channels. Sectoral interlinkages are found to play an important amplifying effect, notably through employment, corporate profitability, and wealth effects.
Increasing trade linkages have made China the most important single-country destination for South African exports. China now absorbs 10 percent of South African exports compared to around 2½ percent in the mid-2000s. This trend reflects not only rapid growth in China and the associated rise in China’s demand for commodities, but also weak demand from the Euro Area whose share of South Africa’s exports has declined to 15 percent from more than 20 percent over the same period. Sub-Sarahan Africa (SSA) remains the most important regional destination for South African exports
China’s impact on the South African economy is magnified by China’s role in the global economy and commodity markets.
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China accounts for around 17 percent of global output in PPP terms compared to 16 percent for the US. In terms of imports, China accounted for approximately 16 percent of the world total compared to 14 percent for the U.S.
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More than 60 percent of the world’s traded iron ore – South Africa’s main mineral export – is absorbed by China. China also plays a large role in other commodities that South Africa exports including coal, gold, and platinum. As a result, China plays a key role in determining global demand and prices of South Africa’s main commodity exports, which now account for 34 percent of total goods exports (51 percent when manufactured commodities are included). China is also one of the world’s largest oil importers, and therefore plays an important role in setting the price of South Africa’s oil imports (though supply factors have been key for prices), which account for around 16 percent of total goods imports.
Capital flows into South Africa from China are modest, but financial spillovers are increasing. Both direct investment and portfolio flows from China are increasing, but remain modest relative to capital flows from the UK and the US. However, as noted in the April 2016 Global Financial Stability Report, financial conditions in China are now increasingly affecting global financial conditions, mainly through equity and FX markets.
China’s growth has been found to have large spillover effects on South Africa, transmitted mainly through commodity prices and global financial conditions, and amplified by sectoral interlinkages. The analysis in this paper suggests that rising trade and financial linkages with China, as well as China’s large role in the global economy and commodity markets, has increased the impact of a growth slowdown in China, which now exceeds that of a growth slowdown in the U.S. and the E.U. Commodity prices and tighter global financial conditions are the main international transmission channels. Domestically, the impact of a fall in commodity export prices is amplified by linkages between the mining and non-mining sectors, and is transmitted to the economy through large falls in mining sector employment, corporate profitability, and wealth effects.
Macro-financial linkages: capital flows, sovereign ratings, and the financial sector nexus
This paper discusses key macro-financial linkages and related risks in the South African economy focusing on downside scenarios that are not part of the baseline. South Africa’s high reliance on external finance, with banks intermediating a larger share of capital flows in recent years, exposes it to the risk of capital flow shocks. Low growth, rising interest rates, and fiscal risks could generate negative feedback loops among lower capital flows, heightened sovereign risk, and a weaker financial sector. The confluence of these factors could raise financial institutions’ funding and credit costs, and widen the fiscal deficit given the high reliance of tax revenues on the financial sector.
While so far the financial sector has not hampered growth, a weaker financial sector could reduce lending, and in turn lower growth. Sovereign rating downgrades are a possible trigger of capital outflows. A downgrade of the sovereign foreign currency (FX) debt to speculative grade seems to be mostly priced in and is likely to have a limited impact on the sovereign given the low level of government FX debt. A potential downgrade of the local currency (LC) sovereign debt rating to speculative grade is not in staff’s baseline, as the latter is currently two to three notches above non-investment grade. If it were to happen, however, it could trigger sizable capital outflows and generate some of the feedback loops described above, given large non-resident holdings of government debt, about a fifth of which are estimated to require investment grade rating. The floating exchange rate regime and South Africa’s deep capital markets are likely to mitigate such shocks.
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Ethiopia’s investments in health, education and social protection yield positive results
Ethiopia’s investments in health, education, social protection, and infrastructure have had a positive impact on economic development and promoting shared prosperity in the country, says the 2015 Ethiopia Public Expenditure Review, a new World Bank Group report released on 6 July 2016.
The report, which evaluated the effectiveness of public finances, states that the country is moving in the right direction, despite rising economic pressure. The positive steps taken by the Government of Ethiopia (GoE) over the past decade to reorient expenditure from recurrent to capital, the decentralization of resources from federal to regional governments, and the focus on infrastructure have led to broad-based growth.
By leveraging external resources to boost spending in pro-poor sectors, the GoE has created the largest social safety net program in Africa benefiting 8 million people. The country has also achieved remarkable health and education outcomes using cost effective approaches. However, the report points out the urgent need to ensure equity in access to services to address major differences at household level.
For example, neo-natal mortality reduced significantly for wealthier populations, but increased for the poorest. Out-of-pocket spending accounts for about one-third of health expenditure, which is high compared to other low-income countries and undermines access for low income households. In education, while the poorest children are enrolling in primary school, they are increasingly dropping out at higher levels. Only 1% access technical and vocational training and 2% higher education.
“Ethiopia’s investments in key sectors have had a positive impact on poverty reduction, now the key is for the country to develop a more effective budget allocation in order to maximize the returns on investment,” said Carolyn Turk, World Bank Country Director for Ethiopia, Sudan and South Sudan.
According to the report, Ethiopia’s investment in infrastructure has increased the country’s road network five-fold, reaching 100,000km in 2015. Investment in education has also helped to increase net primary enrollment from 77.5% in 2006 to 92.6% in 2015, according to the report, and education has been extended from 10 million to more than 23 million students in the past decade.
Through smart investments in the health sector and only an additional $5 in per capita health spending, the GoE reduced child mortality by more than half from 72 to 31 per 1,000 between 2005 and 2015. This is a record, as no other country has achieved such results for the same level of spending, the report notes.
In addition, more people now have access to improved water and sanitation services than ever before, according to the report. By leveraging external resources to boost spending in pro-poor sectors, the GoE has created the largest social safety net program in Africa benefiting 8 million people.
Despite the progress, Ethiopia’s poverty challenges remain deep-rooted and require sustained efforts. In order to ensure that new investments translate into enhanced service coverage and delivery, the report underscores the importance of supplementing the current public investment-led strategy with increased budgetary provisions for operations and maintenance. This is especially essential in key sectors such as transport and communication, education, health as well as water and sanitation.
Notwithstanding the progress in critical aspects of human development, as Ethiopia strives to become a middle income country by 2025, it needs to address several challenges including:
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The declining share of recurrent spending for operations and maintenance, especially in the transport and communication, education, health and water and sanitation sectors because improvements in service delivery cannot be achieved without adequate budgetary provision.
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Enhancing revenue mobilization: Significant effort will be required to improve revenue mobilization to match operation & maintenance needs for ongoing investments
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Equity in access: targeting the bottom 40%: Positive results have been achieved in the health and education sector however there are important differences in access to services at household level that require urgent attention.
Beyond service coverage the report underscores the need to increase technical and allocative efficiency, said Jane Kiringai, World Bank senior economist and lead author of the report.
“If we look at the health sector, more than half of current health spending is on primary care, the most cost-effective level of health care however, in some regions investments in the sector have exceeded the standard norms, creating idle capacity and undermining technical efficiency,” she said. “So more needs to be done to improve efficiency as the average number of outpatient visits per health worker per day which varies currently between two and nine and the average inpatient case per health worker per day is only one.”
While spending on primary education remained stable, secondary education increased, TVET share declined slightly and higher education is now the biggest sub-sector by spending. Higher education accounts for almost 80% of the education capital budget, taken up mostly by the construction of universities. On the supply side, classroom shortage and high pupil teacher ratio remain binding constraints to technical efficiency of primary schools in about a quarter of all districts.
The report also pointed out the need to increase efficiency and coverage of social protection programs, through consolidation of existing programs (food aid, workfare and targeted cash transfers) along with reforms and elimination of inefficient and regressive general subsidies.
As Ethiopia lays the foundation to become a middle income country, and the changing global environment implies declining external assistance, the report suggests that Ethiopia needs to focus on domestic revenue mobilization to support this transition. This will help create the much-needed fiscal space to increase funding for operations and maintenance and support fiscal sustainability. At 12% of gross domestic product (GDP), the country’s tax ratio is low compared to peer countries. According to the report more efficient tax administration stimulated by tax reforms, improved capacity and quality of tax administration as well as expanded tax bases could be a major sources of additional revenue. This will address the funding gap for future investments.
“Domestic resource mobilization will lay the foundation for Ethiopia’s journey to middle income status,” said Kiringai.
The Ethiopia Public Expenditure Review is produced by the World Bank Group in collaboration with the Government of Ethiopia. The policy note is intended to make a contribution toward how the government and development agencies design and implement their policies and programs.
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Aid for Trade and the Trade Facilitation Agreement: What they can do for LDCs
The Aid for Trade (AFT) initiative, launched in 2005 to help developing and especially the Least Developed (LDCs) countries integrate the rules of the World Trade System adopted in the Uruguay Round turned out to be more about mobilizing support for the stalled Doha Round negotiations.
A decade later, a broadened AFT agenda has eluded effective evaluation. The recently concluded Trade Facilitation Agreement (TFA) provides an ideal opportunity to narrow the scope of AFT activities to heed the call for “managing for Development results” (MfDR).
The paper reviews the evidence on trade costs distinguishing between Least Developed Countries (LDCs) and Landlocked LDCS (LLDCs). The paper also includes new estimates of time in transit for international parcel data that is measured relatively accurately.
New estimates provide support for allocating a greater share of AFT funds towards LDCs and particularly towards LLDCs, both groups showing higher trade costs than comparators and less progress in reducing trade costs since 1995. On average, time in customs for imports and exports are also significantly higher for both groups than for their respective comparators. LDCs and LLDCs have systematically lower scores for the components in the new OECD Trade Facilitation Indicator (TFI). These new estimates suggest that a successful implementation of the TFA, defined as moving halfway towards the frontier value of the TFI for the respective country grouping could reduce trade costs for imports of LDCs by 2.5% and by 4.5% for LLDCs.
Even though there is more to trade costs than customs management, monitoring implementation of the TFA would be part of the IPoA and a stepping stone towards the concrete trade performance targets that have lacked in AFT activities so far.
Aid-for-Trade: Where do we stand?
The role of foreign aid in developing countries’ strategies has gone through stages. In the early days of independence in the 1960s, when enthusiasm about the liberation from the colonial powers was strong, much hope was placed on foreign aid which would provide the necessary ingredient to reach Rostovian ‘take-off’ growth. As countries were then following a state-led industrialization strategy behind high trade barriers, this period could be described as one of ‘aid but not trade’ as pessimism about the prospects of developing countries’ exports was great. As evidence of resource misallocation and corruption appeared, deception set in, and the pendulum shifted towards what one could describe as ‘trade but not aid’ as it was becoming increasingly evident that, apart from East Asia, the disappointing industrialization performance was largely due to countries’ own trade policies rather barriers to access in export markets that were falling. Once trade barriers – especially tariffs – were slashed across developing, aid entered a third phase as, once more, performance was not improving as much as expected – especially among the Least Developed Countries (LDCs), ushering in the current phase of ‘Aid For Trade’ (AFT).
The AFT initiative launched in 2005 was part of the MDGs (goal 8 ‘developing a global partnership for development’) with as objectives, a rules-based, open, multilateral trading system, improved market-access including duty-free, quota-free (DFQF) market access for LDCs, and above all to reduce poverty by half in 2015 relative to 1990 level, a target that has been reached in most countries. Now that the Sustainable Development Goals (SDGs) have been adopted by the UN General Assembly in September 2015, the main trade performance objective is a doubling of the global share of LDC exports by 2020 (already part of the Istanbul Program of Action (IPoA)). Now that WTO members have endorsed the TFA agreement signed in Bali in 2013, what is the role of AFT? In Melo and Wagner (2015), we focused on the trade-enhancing and poverty-reducing effects of AFT that were an objective of the MDGs. Here we focus on the benefits from a successful application of the TFA: a move towards results-based AFT and an evaluation of the benefits from reduced trade costs with a focus on LDCs and Land-locked Least Developed Countries (LLDCs).
At around $40 billion disbursed a year, AFT is about 30% of Official Development Assistance (ODA) financial flows to developing countries (remittance flows are more than the combined ODA and FDI flows) and what is entered as Trade Facilitation in the OECD’s Credit Reporting System (CRS) only accounts for about one percent of AFT disbursements.
In the haste to garner support for the stalling negotiations at the Doha round, the objective to raise funds rapidly took precedence over the more fundamental objectives of providing assistance, financial and technical, to help developing countries, particularly LDCs, to build the needed supply-side capacity to ‘implement and benefit from WTO agreements’ they had signed up to in the Marrakech agreement under the ‘Single Undertaking’. In the end, beyond winning the argument on mainstreaming trade in national development strategies, the biennial OECD-WTO AFT reviews turned out more about expanding the agenda than about conducting an evaluation of the effectiveness of AFT. This led to the criticism that to facilitate evaluation, the scope of AFT activities should be considerably reduced.
The many evaluations of the AFT initiative have reached the conclusion that the objective of arresting the decline in the share of AFT in ODA disbursements has been met and that trade has been mainstreamed in national development strategies. However, trying to isolate the effects of AFT from other financial flows is like looking for a needle in a haystack. This is why the attempts at detecting the effects of AFT, especially when it comes to aggregate outcomes like export growth and GDP growth have encountered attribution difficulties so that biennial OECD-WTO evaluations have focused on the rationale for AFT.
The scope of the reviews evolved with two ‘landmarks’: the adoption of a ‘results chain’ approach (i.e. a shift towards management based disbursement of ODA along the lines suggested by the Development Assistance Committee at the OECD) at the third biennial review in 2011 and the fifth biennial review of June 2015 on “Reducing Trade Costs for inclusive Sustainable Growth” in the wake of the TFA. Now, the TFA presents the opportunity for AFT to move beyond the narrow focus on accountability (was the road built?) towards a management framework that can track better the results of AFT interventions. Equally important, the TFA provides the focal point needed for narrowing the scope of AFT. Implementing the TFA commitments should therefore be targeted towards countries with the highest trade cost that would benefit the most. The evidence discussed here suggests that a shift in trade facilitation disbursements towards LDCs and LL-LDC would provide the highest returns for AFT funds.
Successful implementation of the TFA would reduce uncertainty related to trade, streamline market access procedures and would provide greater transparency at customs, all factors leading to lower transaction costs. Higher trade volumes would then be an engine of growth and poverty reduction.
» See also the tralac Trade Brief by Henry Kibet Mutai: The WTO’s Aid for Trade Initiative at 10: An Overview | December 2015
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Mozambique sees growth slowing, austerity measures needed – finance minister
Mozambique, reeling from a sovereign debt crisis, sees 2016 economic growth slowing to 4.5 percent from initial forecasts of 7 percent and needs to bring in austerity measures in an amended budget, Finance Minister Adriano Maleiane said on Thursday.
“This means that revenue that we should have will also go down,” the minister told journalists after an extraordinary meeting of the Council Of Ministers which approved an amended budget which will be put before parliament on Monday.
The new government forecast is in line with a recent one by the International Monetary Fund, which in April said the southern African nation had borrowed more than $1 billion previously undisclosed, throwing into doubt its ability to meet mounting debt obligations.
Mozambique, one of the world’s poorest countries which has huge untapped gas reserves, has been thrown into economic turmoil by revelations of financial malfeasance.
These include an $850 million Eurobond issued in 2013 to finance a tuna-fishing fleet. Subsequently, it emerged that $500 million of the cash was actually spent on defence equipment and has since been re-allocated to the defence budget.
Under its austerity plan, the government aims to reduce spending on goods and services by 40 percent, saving overall 24 billion meticais ($370 million) out of a budget of 243 billion meticais.
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New IEA report maps Chinese investments in Africa’s power sector
Massive investments still needed to achieve universal energy access in sub-Saharan Africa
Chinese companies are playing an increasingly significant role in the development of the power sector in sub-Saharan Africa, and accounted for 30% of new capacity additions in the region over the last five years, according to a new study published by the International Energy Agency.
This publication, Boosting the Power Sector in Sub-Saharan Africa: China’s Involvement, is part of the IEA Partner Country series and offers the first pan-regional overview of the involvement of Chinese companies in the region’s electricity supply system.
The African continent faces major electrification challenges. More than 635 million people live without electricity in sub-Saharan Africa. As part of a strategy to expand international investments and gain access to foreign markets, the People’s Republic of China and its state-owned companies have invested substantially in Africa in recent years.
The new IEA report provides a comprehensive analysis of these projects, which include investments of around $13 billion between 2010 and 2015 from China. These projects are financed largely through public lending from China.
“African countries have relied heavily on China to support the expansion of their electricity systems, to enable growth and improve living standards,” said Paul Simons, the IEA’s Deputy Executive Director.
Greenfield power projects contracted to Chinese companies have become widespread in the region. Over half of all projects are based on renewable energy, mainly hydropower.
Training of local technicians is essential to maintain efficiency and performance of newly built plants, In 2014, a special report from the IEA’s World Energy Outlook on sub-Saharan Africa showed that the lack of energy access and the shortage of electricity supply were severe constraints to better living conditions and hampered economic growth. In line with its policy to open its doors to emerging economies and become a global hub for clean energy technologies, the IEA is dedicated to supporting Africa’s electricity sector development.
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tralac’s Daily News Selection
The selection: Thursday, 7 July 2016
Inquiry into UK’s Africa Free Trade initiative: extension to deal with Brexit issues (APPG)
We are now extending the Inquiry to incorporate the potential implications for UK-Africa trade relations from the UK leaving the European Union (Brexit). Specifically, a second Inquiry Hearing will be held in Parliament on Tuesday 12th July. In addition, 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. The following questions are being used to guide the Inquiry’s taking of evidence in relation to Brexit:
Trade policies: How would the existing trade arrangements (both non-reciprocal trade preference arrangements and reciprocal trade preference arrangements such as the Economic Partnership Agreements) between the UK and African countries look immediately after Brexit? What steps would need to be taken by the UK Government to ensure Africa’s exports to the UK were not interrupted upon the UK’s withdrawal from the EU? What are the potential risks and opportunities for UK-Africa trade relations arising from Brexit?
Aid-for-trade: Should the UK’s aid-for-trade programmes evolve to reflect the new trading relationships between the UK and African countries post-Brexit? Does Brexit potentially open up new channels through which the UK can use trade and investment as a vehicle to reduce poverty in Africa?
Inclusive trade: Are there specific potential implications from Brexit for small-scale traders and farmers in Africa? If so, are there ways for the UK government to ensure that post-Brexit trade policies would be pro-poor and equitable for men and women in Africa?
Less aid money, less influence: Brexit’s likely hit to the UK’s development role (The Guardian)
The first signs of the Department for International Development’s immediate priorities may come in the outcomes of the bilateral and multilateral spending reviews, which Greening told parliament should be released “in the early summer”. An EU spokesperson said it was too early to speculate on how Brexit would affect Britain’s role in the international aid community. “That will be addressed in due course, once negotiations with the UK begin on its withdrawal agreement as well as on the agreement concerning its future relationship with the EU. For the time being, nothing changes.”
Botswana: Diamonds safe from Brexit (Daily News)
The divorce between the UK and European Union, called Brexit, would not have an impact on diamond market. Head of Operations at Diamond Trading Company Botswana Mr Joseph Ikotlhaeng said major market for Botswana diamonds are the United States of America, Japan, India and China. Mr Ikotlhaeng said the USA represents 40% of the world market while Belgium is the only important European market.
The President’s Advisory Council on Doing Business in Africa: Rwanda/Nigeria trip recommendations report (USTR)
Over four days in Nigeria and Rwanda, we focused on key issues for African development and areas of interest from the American business community. Throughout the trip, we also focused on access to capital, skills training, and the importance of women’s participation in the labor force and entrepreneurship. On the basis of these conversations, and our continued consideration of African economic trends, this report contains recommendations in five areas:
‘Modi in Africa’ – selected updates on trade and investment issues:
India has had trade relations with Africa from first century CE (Indian Express)
PM Modi has touched down at the Mozambique airport, kickstarting his four-nation tour of the African continent. In the next five days, as he visits South Africa, Tanzania and Kenya, the agenda on his mind would be to enhance trade and maritime cooperation along with increasing collaboration in matters of energy and food security.
India takes its contract farming model to Mozambique (Hindustan Times), Modi keen to forge new ties with SA (IOL), India-Africa ties: pitching higher (Gateway House), Can PM make India an alternative for China? (First Post)
BRICS Bank: Maasdorp on BRICS bank's 'openness' (Devex)
The New Development Bank - a financial institution founded by the so-called BRICS emerging economies, Brazil, Russia, India, China and South Africa - will open its membership to other countries in the next few years, the bank’s vice president and chief financial officer told Devex in an exclusive interview. The opening of membership, likely to happen in the next three years or earlier, will also see the shareholding of the five member countries of the $100bn institution significantly reduced. That could help placate some critics, who have argued that the Shanghai-based bank is a dedicated political and economic tool of the five countries currently involved. The bank has so far approved around $811m in loans.
The GIBS Dynamic Market Index 2016 (pdf, GIBS)
The GIBS DMI 2016 is a global study of six enabling ‘pillars’ of market dynamism across 144 countries measured between 2007 and 2014. The GIBS DMI is a toolkit that measures which countries have undergone change and improvement (or deterioration) in six enabling pillars (comprising institutions and society measures). The six pillars include:
SADC member states urged to establish more joint investments on energy, water (Daily Mail)
The workshop, 20-21 June, held under the theme: “Accelerating energy delivery and access to water resources in the SADC region – a collective approach”, facilitated exchange of ideas and proposed recommendations towards the energy and water crisis in the region. After deliberations, the workshop recommended, inter alia: (i) The SADC Secretariat should as a matter of urgency initiate a study on transferring water from the water-rich basins to the water stressed parts of the region expeditiously, through inter/intra basin transfers. (ii) Member States must be encouraged to embark on intensive energy and water demand side management strategies which combine the use of high efficiency technologies, methodologies and better awareness creation as a matter of urgency. (iii) Member States who are not connected in the Southern African Power Pool (SAPP) transmission network must be encouraged to get connected to accelerate the respective on-going interconnector projects to enable them to benefit from trading among the Member States. Though SAPP was established more than 20 years ago, three mainland SADC Member States are still not connected.
Energy-water nexus in Southern Africa: background paper to support dialogue in the region (World Bank)
The value of this paper is in bringing together the latest knowledge work and other key information relevant for energy-water nexus dialogue in Southern Africa. This information has been derived from a number of fragmented sources, and an effort has been made to present the information in a logical framework, in one document that can help initiate discussions in the region. The issues and implications that surround the energy-water nexus are numerous. For the five focus countries - South Africa, Lesotho, Botswana, Namibia, and Swaziland - the paper considers national water sector priorities, energy sector priorities, the extent of coordination between the two, and how these priorities fit into a broader agenda of regional coordination.
SADC Transfrontier Conservation Areas Network: update (Daily News)
In an effort to complement the region’s ongoing efforts to address natural resources management challenges, the SADC Transfrontier Conservation Areas (TFCA) Network held a three-day symposium in Gaborone from 3-5 July. Officiating at the symposium, the permanent secretary in the Ministry of Environment, Wildlife and Tourism, Mr Elias Magosi said biodiversity loss as characterised by dramatic wildlife declines in some key hotspots around the world, was now considered a grand challenge on par with climate change, food security, energy security and public health, among others. For this reason, he said “embracing TFCAs will go a long way towards also addressing these grand challenges.”
Regional MPs discuss security in Great Lakes region: FP-ICGLR update (New Times)
Parliamentary leaders meeting in Kigali for a two-day 14th Ordinary Session of the Executive Committee of the Forum of Parliaments in member states of the International Conference on the Great Lakes Region (FP-ICGLR) have made regional security and political situation a focus of their discussions. At the sessions which kicked off yesterday at the Rwandan Parliament, members of the committee gave presentations and debated on the security and political situation in ICGLR member countries, especially focusing on Burundi, eastern Democratic Republic of Congo, the Central African Republic, and South Soudan.
The institutionalisation of mediation support within the ECOWAS Commission (ACCORD)
The PPB identifies the uniqueness of ECOWAS’s experiences in interventions in the 1990s, and the subsequent importance accorded to preventive diplomacy and mediation as a key factor that informed the decision to establish a mediation support structure – in contrast to using an ad hoc arrangement to backstop its mediation efforts in the past. This new arrangement, the PPB argues, will ensure that mistakes such as the marginalisation of ECOWAS in mediation processes in the region, the disconnect between the ECOWAS Commission and its appointed mediators, facilitators and special envoys, are remedied.
ECOWAS Regional Center for Disease Control: update (TODAY)
Nigeria's Minister of Health, Prof Isaac Adewole, has flagged off the ECOWAS Regional Center for Disease Control with a view of increasing the surveillance and information system for early detection, strengthening of laboratory capacity, preparedness and emergency response and retention of trained healthcare workforce in West Africa. The Director General of the West African Health Organisation, Dr. Crespin Xavier, said that the governing council has difficult task of supervising the activities of the centre in strict compliance with ECOWAS rules and regulations. [Regional Disease Surveillance Systems Enhancement (REDISSE) Project update (World Bank)]
Failure to prepare for and adapt to the 'new normal' of increasing climate-linked emergencies such as El Niño could put global development targets at risk and deepen widespread human suffering in areas already hard hit by floods and droughts, top United Nations officials said in Rome today. According to the UN, scientists are predicting an increasing likelihood of the opposite climate phenomenon, La Niña, developing. This will increase the probability of above average rainfall and flooding in areas affected by El Niño-related drought, whilst at the same time making it more likely that drought will occur in areas that have been flooded due to El Niño. The UN estimates that without the necessary action, the number of people affected by the combined impacts of the El Niño/La Niña could top 100 million. [Southern Africa's silent food crisis: CSIS report]
The State of World Fisheries and Aquaculture 2016 (FAO)
Fishery products accounted for 1% of all global merchandise trade in value terms, representing more than 9% of total agricultural exports. Worldwide exports amounted to $148bn in 2014, up from $8bn in 1976. Developing countries were the source of $80bn of fishery exports, providing higher net trade revenues than meat, tobacco, rice and sugar combined.
International regulatory co-operation: the role of international organisations (pdf, OECD)
This report compiles the information collected from 50 IOs and provides an analysis of their governance, operational modalities and tools in support of international rule-making. It identifies key lessons and messages on how IOs are organised to deliver on IRC and areas of challenges that may weaken their role. This work confirms the wide diversity of IOs involved in standard-setting and rule-making activities. The traditional model of inter-governmental organisation (IGOs) has flourished along with the development of new forms of organisations with different legal standing and memberships. As a result, the OECD survey respondents cover a range of different types of organisations: inter-governmental (with either closed or open membership), supra-national, trans-governmental and private. [Building regulatory policy systems in OECD countries: draft analytical paper (pdf)]
Global Forum on Competition: update: The 15th OECD Global Forum on Competition will take place in Paris on 1-2 December 2016. High-level competition officials from more than 100 delegations worldwide will come together to discuss:
Obasanjo calls for single currency for West Africa (TODAY)
Sahel and West Africa Club: weekly newsletter
US international trade in goods and services: May 2016 statistics (pdf, UN Census Bureau)
Lungu targets turning Zambia into manufacturing hub (Daily Mail)
DRC's illegal gold trade is benefiting foreign companies (Global Witness)
Mauritius: Removal of items under the list of controlled goods at export (GoM)
Port performance: linking performance indicators to strategic objectives (pdf, UNCTAD)
China Railway Rolling Stock Corporation wants to increase business in Mozambique (MacauHub)
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Meeting of the President’s Advisory Council on Doing Business in Africa: Recommendations report
On 29 June, Deputy Secretary of Commerce Bruce Andrews, on behalf of U.S. Secretary of Commerce Penny Pritzker, attended the President’s Advisory Council on Doing Business in Africa (PAC-DBIA) in Washington.
The PAC-DBIA brought together business leaders and government officials to discuss strategies designed to strengthen commercial engagement between the United States and Africa. In the final meeting of its inaugural term, PAC-DBIA adopted five new recommendations to drive sustainable growth and investment in Africa.
Members of the Council shared their findings from a trip to Nigeria and Rwanda in January 2016. In fulfilling its ongoing mission, the PAC-DBIA identified high-potential African countries where there is significant room to advance U.S. interests in solidifying existing business relations and cultivating new initiatives for U.S. companies.
Members of the PAC-DBIA chose to travel to Nigeria and Rwanda and organized a fact-finding trip to engage in extensive dialogue with key public and private sector actors in both countries. The goal was to identify barriers and find paths to improve opportunities for doing business in Africa.
In his remarks, Deputy Secretary Andrews noted the PAC-DBIA’s impact on the Obama administration’s work, and announced the Council’s next steps to even the playing field for U.S. companies and encourage foreign direct investment into Africa. Deputy Secretary Andrews stressed the importance of events such as the upcoming 2016 U.S.-Africa Business Forum to highlight commercial opportunities in Africa.
Findings from the Trip to Nigeria and Rwanda and Related Recommendations
Message from the Chair and Vice Chair
The President’s Advisory Council on Doing Business in Africa is pleased to present a report on our January 2016 trip to Africa and our third set of recommendations on how to strengthen commercial engagement between the United States and Africa. These recommendations extend and refine our previous recommendations, based on our continued analysis of opportunities and challenges for U.S. businesses in Africa.
In particular, the recommendations reflect the invaluable input we received from our travels and conversations in Nigeria and Rwanda. While every member of the Council has experience doing business in Africa, the opportunity to travel together – meeting key leaders in government, business, finance, and civil society – was immensely valuable in understanding the U.S. Government’s resources on the ground, testing the assumptions underlying our previous work, and unearthing new opportunities for the U.S. Government to play a transformational role in supporting new business and partnerships.
Over four days in Nigeria and Rwanda, we focused on key issues for African development and areas of interest from the American business community. In Nigeria, we spent time with top members of the new government and discussed the agenda for accelerating growth, security, and development in Nigeria. In particular, we focused on the ease-of-doing-business and held a lengthy roundtable discussion on infrastructure (which has been a priority of the Council), drawing on our collective experience executing and financing African infrastructure projects.
In Rwanda, we focused on issues of regional integration and governance, drawing lessons from the Rwandan experience for other countries. Throughout the trip, we also focused on access to capital, skills training, and the importance of women’s participation in the labor force and entrepreneurship.
On the basis of these conversations, and our continued consideration of African economic trends, this report contains recommendations in five areas:
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Accelerate Power Africa and Energy Infrastructure: Pursue a detailed action plan to achieve 10,000 MW in Nigeria over the next five years, including financing solutions, achievable targets for public access to electricity, and a framework for prioritizing gas supply.
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Strengthen Vocational and Skills Training: Deepen skills training components of important U.S. Government programs like the Young African Leaders Initiative; work with U.S. experts in the Departments of Education and Labor to inform technical and vocational curricula design for African institutions to align market needs and teaching; elevate and expand workforce training programs offered by the U.S. Trade and Development Agency.
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Deepen U.S. Commercial Dialogue and Engagement: Start a commercial dialogue with Nigeria to elevate discussions and convene key government and private sector stakeholders; establish annual sector forums to accelerate investment in priority sectors like agriculture and infrastructure; use fora like the U.S.-Africa Business Forum and Presidential trips to highlight commercial opportunities in Africa.
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Improve Travel Routes and Transportation Infrastructure within Sub-Saharan Africa: Address the lack of connectivity across the Continent by improving rail and air travel. This should include: financing for rail locomotive upgrades and rail infrastructure and rehabilitation; developing robust air route networks; improving aviation safety; training an upskilled workforce; and encouraging adoption and implementation of the Cape Town Convention on International Interests in Mobile Equipment.
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Negotiate Harmonized Tax Treaties: Encourage the Department of the Treasury to pursue tax treaties with key African markets (including Nigeria and Ethiopia) to even the playing field for U.S. companies and encourage foreign direct investment.
Since we last reported to you, Africa continues to be on a dynamic journey of development and growth. At the time of our October report, turmoil in global markets threatened to lead to crises in emerging markets including massive capital flight. While these risks are still present (and Africa has indeed experienced some capital flight and slower growth), some of the worst volatility has momentarily abated and Africa continues to be one of the world’s fastest growing regions.
The slump in commodity prices has slowed, and hopefully, African economies will emerge from recent stresses with stronger, more diversified economies that are less dependent on extractive industries. In addition, your Administration has made progress in key areas. In particular, Congressional passage (and your signature) of the Electrify Africa Act in February marks an important step in elevating and institutionalizing your commitment to Power Africa and energy infrastructure development. As we have highlighted in previous reports, we believe this is a critical foundation for economic growth in Africa.
Finally, we believe you and your Administration have an important opportunity at the upcoming U.S.-Africa Business Forum (USABF) in September 2016. This global forum should be used to push forward critical initiatives, from capital and skills to energy and infrastructure, and to ensure there are sustainable mechanisms to support progress beyond your tenure. In fact, this Council originated at the inaugural USABF in 2014, so it is fitting that the Forum be used to accelerate and extend our recommendations.
In addition, we urge you to make this year’s USABF more inclusive by broadening it to small and medium-sized businesses and other stakeholders and more focused on key sectors and concrete business opportunities. As a likely capstone for your Administration’s involvement in Africa, we believe this could be a unique moment to announce or expand a legacy initiative that will symbolize the United States’ enduring commitment to Africa.
Remarks by Deputy Secretary of Commerce Bruce Andrews
As you know, President Obama issued an executive order to create this council following the 2014 U.S.-Africa Business Forum here in Washington – when American companies announced over $14 billion in investments in Africa.
The President charged Secretary Pritzker with assembling a council that could offer advice on how to create jobs in the United States and Africa through trade and investment, connect American businesses with potential African partners, and keep the private sector engaged in policymaking and our investment strategy in Africa.
Everyone on this Council brings extensive experience in Africa and unique private sector perspectives to the table. You represent companies of every size and sector – from finance to agriculture to health care. Your recommendations have helped us develop new strategies for increasing commercial engagement, creating jobs, and expanding economic opportunity throughout the United States and Africa.
For example, your input helped us launch an Institutional Investor Roadshow, and we’ve already held two successful events. Our first event brought delegations from six African nations to New York City to meet with 20 top U.S. investors. And earlier this spring, we held another event here in Washington following the U.S.-Nigeria Binational Commission meeting.
Your recommendations were also instrumental to our ongoing development of a U.S.-Africa Infrastructure Center pilot project and our first-ever cold-chain symposium on the East Africa region, which included the release of an assessment report on the Kenyan market. Additionally, your recommendations were instrumental in the Department of Commerce’s continued efforts to find digital solutions that address expansive and complex transportation challenges.
Your recommendations also influenced our decision to organize a fact-finding trip to Nigeria and Rwanda led by Secretary Pritzker earlier this year. I look forward to hearing some of your insights from that trip later today.
I know that the she considers that visit to be one of the most significant trips she has taken while at the Department of Commerce – and this is from a Secretary who has traveled to more than 40 countries.
Still, our work is far from complete. We must continue seeking solutions to build modern infrastructure, build more jobs and opportunity for young people, and expand access to education and the internet.
President Obama believes – as do we – that increasing collaboration between U.S. business leaders and the African business community is essential to overcoming these challenges. At the 2014 U.S.-Africa Business Forum, the President made clear that he does not want to simply sustain our current trade and investment relationship – he wants to build on it.
In other words: we all have a mandate to strengthen our engagement with Africa.
Our sustained focus on Africa is not just strategically important. It is also good business. According to the United Nations, Africa has a fast-growing middle class and the fastest-growing population of any continent. By 2050, 25 percent of the world’s population will be African, and this will increase to nearly 40 percent by 2100.
Despite this tremendous growth, only a small percentage of U.S. companies do business in Africa. Together, we must do more to ensure our businesses, investors, and entrepreneurs capitalize on the extraordinary opportunities that await them on the continent.
We are pleased that the Department of Commerce and Bloomberg Philanthropies will co-host a second U.S.-Africa Business Forum in New York City on September 21. We are excited that President Obama and several African Heads of State will attend. We plan for this year’s forum to be even more successful than the last. We look forward to facilitating meetings and discussions at this year’s forum that will spark new interest among investors and spur new business-to-business partnerships.
In 2014, we answered the question, “Why Africa?” This year, we will answer the question, “How?” How do you effectively do business in Africa? How can we grow partnerships between U.S. and African companies? How do we spur trade, investment, and job creation between our two continents?
All current PAC-DBIA members are invited. You have spent over a year and half working on these issues. We know that you have solutions to share. That’s why we need you there.
In 2012, before the creation of this Council, President Obama announced his groundbreaking U.S. Strategy toward Sub-Saharan Africa. Four years later, our Administration is as committed as ever to Africa’s future. That’s why President Obama has directed the Department of Commerce to renew the PAC-DBIA for another term.
The Department of Commerce is committed to this council and to the continuation of its mission: to increase trade and investment and to build prosperity throughout the United States and Africa.
Thank you for the time and effort you have devoted to the PAC-DBIA. I look forward to hearing your observations and recommendations today – and to your continued engagement in the years to come. Thank you.
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UN seeks to boost response to El Niño’s dire impact in Africa and Asia/Pacific, urges La Niña preparedness
Over 60 million people affected by El Niño, many more highly vulnerable to La Niña’s likely knock-on effect
Combined efforts to prevent further human suffering, strengthen resilience and safeguard livelihoods in the wake of El Niño’s devastating effects worldwide must be rapidly ramped-up by governments and the international community, United Nations (UN) leaders said on 6 July.
More than 60 million people worldwide, about 40 million in East and Southern Africa alone, are projected to be food insecure due to the impact of the El Niño climate event.
The heads of the three Rome-based UN agencies urged greater preparedness to deal with the possible occurrence later this year of a La Niña climate event, closely related to the El Niño cycle that has had a severe impact on agriculture and food security.
The Horn of Africa, Southern Africa, Central America’s Dry Corridor, Caribbean islands, Southeast Asia and Pacific islands have been hit the hardest.
Scientists are predicting an increasing likelihood of the opposite climate phenomenon, La Niña, developing. This will increase the probability of above average rainfall and flooding in areas affected by El Niño-related drought, whilst at the same time making it more likely that drought will occur in areas that have been flooded due to El Niño.
The UN estimates that without the necessary action, the number of people affected by the combined impacts of the El Niño/La Niña could top 100 million.
To coordinate responses to these challenges and to mobilize the international community to support the affected governments, UN agencies and other partners met at the Rome headquarters of the Food and Agriculture Organization of the United Nations (FAO) on 6 July. The meeting included the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP).
Minister in the Prime Minister’s Office of Lesotho, Kimetso Henry Mathaba, Minister for Livestock, Forestry and Range of Somalia, Said Hussein Iid, and Minister of Public Service, Labour and Social Welfare of Zimbabwe, Priscah Mupfumira, also attended. Keynote speakers included World Meteorological Organization Secretary-General, Petteri Taalas, and UN Special Envoy for El Niño and Climate, Ambassador Macharia Kamau.
Participants noted that almost $4 billion is required to meet the humanitarian demands of El Niño-affected countries and that almost 80 percent of this is for food security and agricultural needs.
The meeting called for action to recover agricultural livelihoods that have been severely damaged by the droughts associated with El Niño. Acting now will ensure that farmers have sufficient levels of agricultural inputs for upcoming planting seasons.
Furthermore, FAO, IFAD and WFP are redoubling efforts to mitigate the negative impacts and capitalize on positive opportunities of a likely La Niña phenomenon in the coming months. This means acting decisively to prepare for above-average rainfall in some areas and potential drought conditions in others.
FAO Director-General José Graziano da Silva warned that the impact of El Niño on agricultural livelihoods has been enormous and with La Niña on the doorsteps the situation could worsen.
“El Nino has caused primarily a food and agricultural crisis”, Graziano da Silva said. He announced that FAO will therefore mobilize additional new funding to “enable it to focus on anticipatory early action in particular, for agriculture, food and nutrition, to mitigate the impacts of anticipated events and to strengthen emergency response capabilities through targeted preparedness investments.”
Mobilizing resources for rapid action now can save lives and minimize damage while reducing costs in the future, said WFP Executive Director Ertharin Cousin.
“The massive impact of this global El Niño event, exacerbated by persistent poverty and chronic hunger in many countries, threatens the food security of millions of people who are the least able to cope,” she said.
“Farms have failed, opportunities for work have evaporated, and nutritious food has become increasingly inaccessible for many communities,” Cousin added. “But new humanitarian crises are not inevitable if we invest in support for communities and provide the tools and skills required to endure climate-related shocks.”
IFAD Associate Vice President, Lakshmi Menon, reminded the global community not to forget about small-scale farmers, who are the most vulnerable to these extreme weather events. “Small-scale farmers in rural areas are disproportionally impacted by these natural disasters because many of them depend on rainfed agriculture for their lives and livelihoods, and they do not have the capacity to bounce back from shocks. We need to invest in building their long-term resilience so when the next El Niño and La Niña cycles hit, they are better prepared and can continue to grow food for their families,” she said.
UN Special Envoy for El Niño and Climate, Ambassador Macharia Kamau said: “It is clear that these types of extreme weather events are stressing already-vulnerable communities, threatening to undermine development gains of recent decades and impede achievement of the Sustainable Development Goals.”
He noted that the humanitarian community in partnership with governments and regional authorities have developed a number of plans in order to respond to the current El Niño event, and that these plans are multisectoral and require longer-term, predictable funding in order to ensure they are fully implemented.
Responding to El Niño, preparing for La Niña
Drought has gripped large swathes of east and southern Africa and has also hit Indonesia, Papua New Guinea and Viet Nam, while El Nino-associated storms have wiped out harvests in Fiji and some of its neighbouring island states.
Participants noted that in southern Africa a three-month “window of opportunity” exists before the 2016/17 planting season begins and that adequate interventions, including agricultural input distributions are urgently needed to avoid the dependence of millions of rural families on humanitarian assistance programmes well into 2018.
In Southeast Asia, drought and saltwater intrusion are threatening the livelihoods of farmers in Viet Nam and also seriously impacting household food security and cash availability. With the monsoon season fast approaching, most farmers need to purchase inputs for their upcoming agricultural and animal production activities. While in the Pacific region the Federated States of Micronesia, Marshall Islands and Palau have already declared a state of emergency and below-normal rainfall is forecast to continue across the northern and western Pacific areas threatening the livelihoods and well-being of 1.9 million people.
Working in partnership
FAO’s work
In Southern Africa, FAO is supporting more than 50 000 households including in Zimbabwe with livestock survival feed and drought-tolerant sorghum and cowpea seeds, and in Malawi, by vaccinating small livestock and providing drought-resistant cereals and irrigation support. In Lesotho and Mozambique, FAO has been strengthening national response and providing coordination support.
Throughout the Horn of Africa, in partnership with governments NGOs and other UN agencies, FAO is coordinating drought-related interventions, providing agricultural inputs, helping to rehabilitate water structures and animal health and production, and plant and animal disease surveillance and control.
In the Asia Pacific region, FAO’s El Niño response includes a detailed assessment of the situation in Viet Nam where it is also on standby to provide emergency seeds and tools. In Fiji, FAO is currently providing emergency assistance to 1 050 households as part of the Cyclone Winston response. FAO is working with partners in Papua New Guinea to support farming families in the worst affected provinces with drought-tolerant seeds and smart irrigation material (e.g. drip-irrigation systems). In Timor-Leste, additional maize and cover crop seeds are being distributed to farmers affected by El Niño.
IFAD’s work
Building climate resilience to drought and other extreme weather events is a priority in IFAD-supported projects and this is helping vulnerable families cope with the impacts of El Niño. For example, in Ethiopia small-scale irrigation schemes have ensured farmers are less dependent on rainfed agriculture. This is coupled with training in more sustainable water usage, water harvesting techniques and rehabilitation of degraded soils. In the Mekong Delta of Viet Nam, IFAD-supported projects are helping farmers to access saline-tolerant rice varieties and to diversify their incomes into small-scale aquaculture, so they are not solely dependent on rice and can continue to earn incomes during the drought.
WFP’s work
World Food Programme has rapidly scaled-up relief operations to assist communities grappling with El Niño’s impacts, providing emergency food where needed or cash to buy food where markets are functioning. In Ethiopia, more than 7.6 million people have received food assistance from WFP and more than 200 000 people have also received cash transfers.
In Swaziland, WFP has launched emergency food distributions and in Lesotho, has begun cash-based transfers. In Malawi, WFP will scale up its new lean-season food assistance programme to reach more than 5 million people by November. In Papua New Guinea, over 260 000 people affected by El Niño-related food insecurity are receiving WFP food assistance.
Resilience-building is integrated into emergency responses when possible. In Zimbabwe, a grains production pilot supported by weather-based financing facility FoodSECuRE trains smallholder farmers in climate-smart agriculture and the use of drought-tolerant grains. The Rural Resilience risk management Initiative (R4) has provided El Niño-related payments to affected farming families in Ethiopia, Malawi and Senegal. WFP also works closely with African Risk Capacity (ARC), an insurance pool to lower the cost of the response to disasters before these become humanitarian crises.”
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Global per capita fish consumption rises above 20 kilograms a year
FAO’s new State of World Fisheries and Aquaculture report urges more work to rein in overfishing
Global per capita fish consumption has risen to above 20 kilograms a year for the first time, thanks to stronger aquaculture supply and firm demand, record hauls for some key species and reduced wastage, according to a new FAO report published today.
Yet despite notable progress in some areas, the state of the world’s marine resources has not improved, the latest edition of the UN agency’s The State of World Fisheries and Aquaculture (SOFIA) says that almost a third of commercial fish stocks are now fished at biologically unsustainable levels, triple the level of 1974.
Global total capture fishery production in 2014 was 93.4 million tonnes, including output from inland waters, up slightly over the previous two years. Alaska pollock was the top species, replacing anchoveta for the first time since 1998 and offering evidence that effective resource management practices have worked well. Record catches for four highly valuable groups – tunas, lobsters, shrimps and cephalopods – were reported in 2014.
There were around 4.6 million fishing vessels in the world in 2014, 90 percent of which are in Asia and Africa, and only 64,000 of which were 24 meters or longer, according to SOFIA.
Globally, fish provided 6.7 percent of all protein consumed by humans, as well as offering a rich source of long-chain omega-3 fatty acids, vitamins, calcium, zinc and iron. Some 57 million people were engaged in the primary fish production sectors, a third of them in aquaculture.
Fishery products accounted for one percent of all global merchandise trade in value terms, representing more than nine percent of total agricultural exports. Worldwide exports amounted to $148 billion in 2014, up from $8 billion in 1976. Developing countries were the source of $80 billion of fishery exports, providing higher net trade revenues than meat, tobacco, rice and sugar combined.
“Life below water, which the Sustainable Development Agenda commits us to conserve, is a major ally in our effort to meet a host of challenges, from food security to climate change,” FAO Director-General José Graziano da Silva. “This report shows that capture fisheries can be managed sustainably, while also pointing to the enormous and growing potential of aquaculture to boost human nutrition and support livelihoods with productive jobs.”
Aquaculture
That the global supply of fish for human consumption has outpaced population growth in the past five decades – preliminary estimates suggest per capita intakes higher than 20 kilograms, double the level of the 1960s – is due in large measure to growth in aquaculture.
The sector’s global production rose to 73.8 million tonnes in 2014, a third of which comprised molluscs, crustaceans and other non-fish animals. Importantly in terms of both food security and environmental sustainability, about half of the world’s aquaculture production of animals – often shellfish and carp – and plants – including seaweeds and microalgae – came from non-fed species.
While China remains far the leading nation for aquaculture, it is expanding even faster elsewhere, the report notes. In Nigeria, aquaculture output is up almost 20-fold over the past two decades, and all of sub-Saharan Africa is not far behind. Chile and Indonesia have also posted remarkable growth, as have Norway and Vietnam – now the world’s No. 2 and No. 3 fish exporters.
Aquaculture’s strengths and challenges are also influencing what fish end up on our plates. The report shows that, measured as a share of world trade in value terms, salmon and trout are now the largest single commodity, an honor that for decades belonged to shrimp.
The state of sustainability
Some 31.4 percent of the commercial wild fish stocks regularly monitored by FAO were overfished in 2013, a level that has been stable since 2007.
FAO’s methodology is consistent with international agreements stating that fish stocks should be maintained at or rebuilt to a size that can support Maximum Sustainable Yield (MSY). Thus, stocks are classified as being fished at biologically unsustainable levels – overfished – when they have an abundance lower than the level that can produce the Maximum Sustainable Yield.
Decreased fish landings have been observed in some regions due to the implementation of effective management regulations, like in the Northwest Atlantic, where the annual catch is now less than half the level of the early 1970s. Halibut, flounder and haddock stocks in that area are showing signs of recovery, although that is not yet the case for cod.
Management measures also appear to be working for the highly-priced Patagonian toothfish – a type of whitefish from Antarctica often marketed (in U.S. restaurants) as Chilean sea bass – as the catch of that fish in Antarctic waters has been stable since 2005. Catches of Antarctic krill, which feed directly on phytoplankton, jumped substantially to levels not reached since the early 1990s, while being maintained at sustainable levels.
The report described the situation in the Mediterranean and Black Sea – where 59% of assessed stocks are fished at biologically unsustainable levels – as “alarming”. This is especially true for larger fish such as hake, mullet, sole and sea breams. In the Eastern Mediterranean, the possible expansion of invasive fish species associated to climate change is a concern.
FAO continues to work with all countries to improve the quality and reliability of annual landing figures. The doubling since 1996 of the number of species in the FAO data base – now 2,033 – indicates overall quality improvements in the data collected, according to the report.
Supply-chain and other improvements have also raised the share of world fish production utilized for direct human consumption to 87 percent or 146 million tonnes in 2016, according to the report. That’s up from 85 percent or 136 million tonnes in 2014.
The growing fish-processing sector also offers opportunities to improve the sustainability of the fish supply chain, as a host of byproducts have multiple potential and actual uses, ranging from fishmeal for aquaculture, through collagen for the cosmetics industry to small fish bones humans can eat as snacks.
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SADC member states urged to establish more joint investments on energy, water
Southern African Development Community (SADC) Member States must establish more joint investments on strategic energy and water projects to promote region energy and water security.
This is one of the recommendations from the high-level workshop on the energy and water crises in the regional which was held on June 20, 2016 in Gaborone, Botswana. The workshop was followed by a meeting of SADC ministers responsible for energy and water on June 21 at the same venue.
The workshop also recommended that Member States and the SADC Secretariat “should ensure that the energy, water and food security sectors avoid working in sectoral silos, but plan and work jointly in a nexus approach to maximise benefits and accelerate delivery”.
The workshop, which is the second in a series of meetings called by President Lt General Dr Seretse Khama Ian Khama of Botswana in his capacity as Chairperson, noted that the tendency to work in sectoral silos, and to focus on national sufficiency as opposed to regional sufficiency by some Member States, contributed to the Energy and Water insecurity in the region.
About 160 delegates including ministers and senior officials from the ministries responsible for energy and water sectors in the SADC Member States, representatives of national energy and water regulators and utilities, international cooperating partners, SADC energy and water thematic group members and implementing partners; academic research and training institutions, development finance institutions, members of the diplomatic corps and independent power producers attended the workshop.
The workshop, held under the theme: “Accelerating energy delivery and access to water resources in the SADC region – A collective approach”, facilitated exchange of ideas and proposed recommendations towards the energy and water crisis in the region.
In his keynote address, President Khama called on the delegates to discuss the regional crisis and recommend sustainable solutions.
President Khama noted that “if the status of energy and water supply services situation in the region does not improve, the SADC industrialisation strategy and roadmap could remain a pipe dream”.
In her opening remarks to the workshop, the SADC Executive Secretary Dr Stergomena Tax highlighted the vital role of energy and water resources to regional economic growth, and added that insufficient access directly impacted on the quality of lives of people in the region.
After deliberations, the workshop recommended that:
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The SADC Secretariat should as a matter of urgency initiate a study on transferring water from the water-rich basins to the water stressed parts of the region expeditiously, through inter/intra basin transfers.
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Member States must be encouraged to embark on intensive energy and water demand side management strategies which combine the use of high efficiency technologies, methodologies and better awareness creation as a matter of urgency.
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Member States must be encouraged to promote and invest in alternative energy sources for power generation such as hydro, solar and wind power including coal and gas using appropriate and efficient technologies and thereby promote optimal energy mix.
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Member States should promote conjunctive use of groundwater and surface water and invest more in rainwater harvesting, recycling, and desalination depending on the circumstance.
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Member States and SADC Secretariat must be encouraged to accelerate efforts to prepare bankable water and energy infrastructure projects, as well as implementation of the priority infrastructure projects for hydro-power and multi-purpose dams as identified in the Regional Infrastructure Development Master Plan in order to accelerate regional industrialisation.
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Member States must be encouraged to allocate resources for rehabilitation and maintenance on energy and water infrastructures.
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Member States who are not connected in the Southern African Power Pool (SAPP) transmission network must be encouraged to get connected to accelerate the respective on-going interconnector projects to enable them to benefit from trading among the Member States. Though SAPP was established more than 20 years ago, three mainland SADC Member States are still not connected.
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Member States should provide incentives that promote the renewable energy investments which may lower capital expenditure.
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Member States should explore other options such as competitive bidding to facilitate development of renewable energy projects.
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Innovative funding mechanisms should be identified to effectively finance implementation of infrastructure projects.
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Ongoing efforts to develop regional funding mechanisms to support Member States’ efforts to fund energy and water projects as well as to improve resilience of SADC communities against impact of climate change and variability must intensify.
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Centres of excellence must be established and existing ones strengthened to undertake research and training to improve capacity for maintenance and operation of systems as well as job creation.
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Inquiry into UK’s Africa Free Trade initiative extended to cover implications of Brexit for UK-Africa trade relations
Extension of Call for Evidence
The All-Party Parliamentary Group on Trade Out of Poverty (APPG-TOP) is undertaking an inquiry into the UK’s Africa Free Trade Initiative (AFTi), which was launched by the Prime Minister five years ago.
AFTi focused on providing political, financial and technical support to cut tariffs, reduce red tape and improve infrastructure in Africa, with the aim to boost trade between African countries and African countries with the world.
We are now extending the Inquiry to incorporate the potential implications for UK-Africa trade relations from the UK leaving the European Union (Brexit). This follows the UK’s referendum on 23 June 2016, on whether the UK should leave or remain in the EU. With 72% turnout, the ‘leave’ vote won by 52% to 48%.
Specifically, a second Inquiry Hearing will be held in Parliament on Tuesday 12th July from 10:30 to 12:30. In addition, 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.
The Inquiry Committee is interested to take written evidence and hear different views on the implications of Brexit for UK-Africa trade relations. There will be challenges and opportunities, some of which are obvious, but many more are unknown and have yet to be explored. The following questions are being used to guide the Inquiry’s taking of evidence in relation to Brexit:
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Trade policies: How would the existing trade arrangements (both non-reciprocal trade preference arrangements and reciprocal trade preference arrangements such as the Economic Partnership Agreements) between the UK and African countries look immediately after Brexit? What steps would need to be taken by the UK Government to ensure Africa’s exports to the UK were not interrupted upon the UK’s withdrawal from the EU? What are the potential risks and opportunities for UK-Africa trade relations arising from Brexit?
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Aid-for-trade: Should the UK’s aid-for-trade programmes evolve to reflect the new trading relationships between the UK and African countries post-Brexit? Does Brexit potentially open up new channels through which the UK can use trade and investment as a vehicle to reduce poverty in Africa?
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Inclusive trade: Are there specific potential implications from Brexit for small-scale traders and farmers in Africa? If so, are there ways for the UK government to ensure that post-Brexit trade policies would be pro-poor and equitable for men and women in Africa?
» View the guidelines for submission of written evidence here.
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DR Congo’s illegal gold trade seen benefiting foreign companies
Foreign companies and armed groups are profiting from an illegal trade in gold in eastern Democratic Republic of Congo despite international regulations intended to clean up the sector, Global Witness said.
One Chinese company that operates gold-dredging boats in the region smuggled as much as $17 million worth of the metal out of the country during a 12-month period between 2014 and 2015, the London-based advocacy group said in a report published Tuesday. Armed groups made as much as $25,000 a month in illegal taxes extorted from artisanal diggers and received at least two assault rifles and $4,000 from the company over a two-year period, it said.
Since 2010, international regulations including Organisation for Economic Cooperation and Development guidelines on responsible mineral-supply chains and the U.S. Dodd-Frank Act have sought to curb the trade in so-called conflict minerals. Due diligence and traceability programs have reduced opportunities for armed groups, of which at least 60 continue to operate in eastern Congo, to profit from trade in tin, tantalum and tungsten. No comparable program has been introduced for gold, which is more transportable and more valuable, leading to an increase in illegal gold mining.
Requirements ‘Ignored’
Last month, the United Nations said that Congolese exporters were ignoring due-diligence requirements to source gold from validated, conflict-free mining sites and described the lack of a functioning traceability system for gold as a “particular area of concern”.
Gold production has increased exponentially in Congo from almost nothing in 2011 to 25.5 metric tons (820,000 ounces) last year, as commercial mines run by London-listed Randgold Resources Ltd. and Toronto-based Banro Corp. have started up. Officially, only 583 kilograms of gold was produced by artisanal and small-scale miners last year, but Congo’s Chamber of Mines in February said that as much as 400 kilograms of illegal gold leave the South Kivu province alone every month.
Much of the smuggled gold is sold to buying houses in Dubai, Global Witness said. In other cases, provincial authorities in South Kivu falsified documents to obscure the link between gold and non-validated mining sites, it said.
“States have a responsibility to ensure that companies do no harm, including checking supply chains for links to conflict and human rights abuses – Congo and the United Arab Emirates have dramatically failed in this respect,” Sophia Pickles, senior campaigner at Global Witness, said in an e-mailed statement.
Congo is also Africa’s top producer of copper and the world’s largest source of cobalt, which is used to make rechargeable batteries.
River of Gold
How the state lost out in an eastern Congo gold boom, while armed groups, a foreign mining company and provincial authorities pocketed millions
An estimated $28 billion worth of gold lies under the soil in eastern Democratic Republic of Congo (hereafter Congo). But the country’s gold wealth, the majority of which is artisanally mined, has long been ill-used. Preyed upon by armed groups, bandits and corrupt elites the revenues generated by eastern Congo’s artisanal gold sector have all too often funded corruption or fuelled abuses and violent conflict rather than helping to relieve the region’s poverty.
Global Witness’ investigation into a recent gold rush along the Ulindi River in Shabunda territory in eastern Congo reveals the extent of the problems that beset the region’s artisanal gold sector. The Ulindi boom generated more than a tonne of gold per year, worth around $38 million, whose beneficiaries included armed groups and a predatory Chinese-owned company, Kun Hou Mining, rather than the local population.
Global Witness research reveals that Kun Hou Mining paid Raia Mutumboki armed groups operating along the banks of the Ulindi $4,000 and gave them two AK-47 assault rifles in order to secure access to rich gold deposits on the river bed. Kun Hou Mining ran four semi-industrial river dredging machines along the Ulindi in the boom. Members of the same armed groups also earned up to $25,000 per month by regularly taxing the workers on locally-made dredgers who were doing the dangerous job of manually sucking up gold from the river bed. Up to 150 of these manually operated dredgers worked along the river at the height of the rush. South Kivu officials charged with oversight of the province’s artisanal gold sector appeared to defend Kun Hou Mining rather than enforce Congolese law and hold the company accountable for its illegal activity.
In some cases, the same authorities worked hand-in-hand with armed men and women from Raia Mutumboki armed groups to illegally tax artisanal gold diggers, in violation of Congolese law. Mining authorities in Bukavu, the regional capital, falsified declarations of origin for the small quantities of Shabunda’s artisanal gold that were officially exported in order to obscure its origins, which are considered “high risk” by international standards.
Global Witness has seen documents that show that at least 12kg of Ulindi gold that had benefited armed groups was exported by a South Kivu gold trading house to its sister company in Dubai. But the majority of the boom’s gold – and taxes levied on it – have disappeared, almost certainly smuggled out of the country. South Kivu’s provincial accounts for 2014 and 2015 show no evidence of a gold rush. The gold boom left Shabunda town almost as it found it: a deprived enclave with no roads, running water or electricity and its people suffering grinding poverty.
Gold booms are not uncommon in Congo and Shabunda is not an isolated case: four-fifths of eastern Congo’s artisanal miners work in the gold sector. Semi-industrial dredging companies, often Chinese-owned, have been accused by Congolese provincial officials and others of not paying taxes and smuggling gold out of the country in other parts of eastern Congo. Hundreds of millions of dollars of artisanally produced gold from the country’s east – which may have fuelled human rights abuses and violence – end up on global markets each year, often passing through transit countries such as Uganda, United Arab Emirates (UAE) and Switzerland. Ultimately the gold ends up in products like jewellery and electronic circuit boards sold around the world.
Shabunda’s gold rush could have played out very differently. Since 2010 companies all along gold supply chains have had access to international guidance developed by the Organisation for Economic Cooperation and Development (OECD) and the United Nations (UN). This guidance helps them source and trade gold from high-risk areas like Shabunda in a responsible way. Companies operating in Congo’s gold sector have been legally required under Congolese law to implement the OECD guidance since 2012. Recent Chinese industry due diligence guidelines for responsible mineral supply chains, based on the OECD guidance, provide directions and advice for companies like Kun Hou Mining to help ensure that their operations are not linked to abuses. Guidelines introduced in the UAE in 2012 make clear that all Dubai Multi Commodities Centre members and non-members should manage their supply chains according to the OECD principles. In order for these reforms to translate into meaningful changes in conflict-affected and high risk areas like Shabunda, governments must hold companies and public officials involved in abuses to account.
Companies either producing or internationally trading Shabunda’s gold did not implement these supply chain due diligence standards. Those companies operating in Congo acted in direct contravention of Congolese supply chain due diligence laws, which Congolese authorities failed to enforce. As a consequence, gold that benefitted armed men and a company operating illegally was left unchecked and traded internationally. Meanwhile the boom and its accompanying huge influx of gold diggers put pressure on already scarce resources in Shabunda town, pushing up food prices and leaving many local people unable to make ends meet. At the same time, mining authorities in Shabunda town ran an illegal taxation racket and, where gold was officially taxed, failed to deposit revenues with the Provincial government. This money is badly needed: in 2014 the town’s only hospital recorded 535 cases of malnutrition.
Eastern Congo’s artisanal gold production should benefit Congolese people and the state rather than armed men and predatory companies. For this to happen:
The Congolese government must hold provincial officials to account where they neglect their duties related to the artisanal gold sector or operate illegally. Companies operating illegally in Congo, such as Kun Hou Mining, should be investigated, and where evidence of wrongdoing is found, prosecuted.
Companies at all stages along global gold supply chains must implement the OECD due diligence guidance on responsible mineral supply chains. This includes publishing an annual report detailing the risks found in their supply chain and the measures taken to reduce these.
States have an obligation under international law to ensure companies respect human rights. As such, they must legally require companies under their jurisdiction to undertake OECD standard supply chain due diligence, and must effectively monitor its implementation. Companies that fail to meet international supply chain due diligence standards laid out by the OECD must be held to account.
Artisanal miners operating in eastern Congo must be properly supported by the Congolese government. SAESSCAM, the Congolese state agency charged with oversight of the artisanal sector, must be urgently reformed or else disbanded.
Finally, donor governments should support diplomatic and development initiatives to promote responsible sourcing and support the Congolese government in establishing sustainable livelihoods for communities in areas where natural resources are extracted. Nascent and still localised efforts to formalise and manage artisanal gold supply chains should be supported and encouraged by governments and the private sector.
Global Witness engages with companies, governments and other partners around the world to tackle the issue of natural resource-funded conflict. For the past 15 years they have reported on the links between the trade in minerals and armed conflict in eastern Democratic Republic of Congo, working with Congolese civil society, policy-makers and business leaders to develop practical solutions.
An excellent August 2015 publication by the Great Lakes civil society platform COSOC-GL (the Coalition of Civil Society Organisations in the Great Lakes Region) raised several important and unanswered questions about the Ulindi gold boom and proved a comprehensive resource.
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tralac’s Daily News Selection
The selection: Wednesday, 6 July 2016
Profiled regional integration, development cooperation updates:
Strategy for Sweden’s regional development cooperation in Sub-Saharan Africa 2016-2021
Within the framework of this strategy, Swedish development cooperation with sub-Saharan Africa is to contribute to increased regional integration and strengthened capacity to face cross-border challenges and opportunities at regional level.
Incubator for integration and development in East Africa: call for applications
The East African Community Secretariat, in collaboration with the Regional Dialogue Committee, in partnership with GIZ proposes the Incubator for Integration and Development in East Africa (IIDEA) - an initiative which incubates small-scale regional integration projects, proposed and implemented by civil society, private sector and other interest groups in East Africa. It is cross border in nature, with projects expected to involve at least two EAC Partner States in the following areas: health, education, agriculture, trade, ICT, art and culture, security. Deadline for submissions: 31 July 2016.
Profiled conference alerts:
Ministerial Conference on Ocean Economy and Climate Change in Africa (World Bank)
The African Ministerial Conference and Investment Forum (1-2 September in Mauritius) will be a decision-forcing event that will: (i) muster international political leadership and elevate the international political discourse, narrative and momentum on the interconnectedness of the ocean economy and climate change agendas; (ii) place Mauritius as an African international center of ocean economic forum to attract African leadership, as well as institutional investors and donors in the area of ocean economy and climate change; (iii) prepare the grounds for the announcement of an ‘African Oceans Finance Package’ for the benefit of African countries in the region that will be carried through to COP-22 (Marrakesh).
On Friday, in Geneva: ‘From LDC services waiver to GSPs: follow-up’ (UNCTAD)
The recent services Waiver for LDCs that was adopted at the Eighth WTO Ministerial Conference in 2011 and extended in Nairobi in 2015 could potentially serve as a stepping stone towards further services liberalization. Aimed at least-developed countries only, the waiver has a potential to provide a comparative advantage so much needed to kick-start LDCs services trade on international markets. However, while estimating real life benefits of the preferences generated by the Waiver, one has to consider the following issues: [Downloads include: draft review of The LDC Services Waiver – operationalized?, pdf]
Global value chains and trade in value-added: an initial assessment of the impact on jobs and productivity (pdf, OECD)
This report contributes to a better understanding of the impact of global value chainson jobs and productivity by providing new evidence based on employment data collected within the Trade in Value Added (TiVA) project. Linking jobs data to TiVA indicators first highlights that a large share of employment in OECD and key partner countries relies on consumption taking place abroad and for most countries this share has increased between 1995 and 2011. If for a large country like the United States, 10% of the workforce is involved in production for foreign final consumption, the share goes up to 20% for France, 29% for Germany and 47% for a small open economy like Ireland. Based on a value-added approach, the calculation includes both the employees of exporting firms and the workers of all the domestic firms providing inputs to exporters. In the People’s Republic of China, there are more workers ‘indirectly’ involved in exports (i.e. working in the supplying industries) than in the exporting industries. These figures are however still underestimating the number of persons involved in global value chains as activities of foreign-owned firms producing for domestic consumers are not taken into account. [Spatial development and agglomeration economies in services: lessons from India (World Bank), Collaboration is key to the South African supply chain (Global Trade)]
Middle Africa & Brexit: a leap into the unknown (pdf, Ecobank Research)
The key to transforming the UK’s trade and investment flows with Africa will be the negotiation of new bilateral deals. The UK is likely to start with boosting bilateral ties with its strongest African partners in Anglophone Africa, led by South Africa, Nigeria, Kenya & Ghana. These new deals could be tailored to fit the make-up of each bilateral trade relationship, focusing on particular flows of goods and services in mutually beneficial trade-offs, rather than the one-size-fits-all EU deal. The UK could also seriously step up its investment in Francophone West Africa, home to the intra-regional trading & commodity giants, Côte d’Ivoire and Senegal. This region has long been ignored by British companies who have left business opportunities to French companies while they focus on Anglophone African markets. Francophone African markets are ripe for disruption and innovation, and many local businesses are dissatisfied with the deals they receive from French companies and would be keen to find new international partners.
Fitch expects Brexit to have limited effect on SA (Business Day)
Brexit will have limited effect on the sovereign credit ratings of SA and other countries in the Middle East and Africa region, ratings agency Fitch said in a research note released on Monday night. "Short-term effects could come via market volatility, while a slowdown in British and European growth could weigh on MEA economies at a time of already heightened strains," Fitch’s senior director of sovereign ratings, Jan Friederich, wrote in the note.
Brexit has no long-term effects on EAC - capital markets chief (New Times)
Robert Mathu, the executive director of Capital Market Authority in Rwanda, said the loss of value in the Pound Sterling has effects on the commodities, where regional countries are exporting tea, coffee, will gradually decrease because exchanging into dollars also requires purchasing other needed commodities from China and other counties. “These are short-term; I hope that the long term effects will not be realised since the UK is going to review and discuss the agreement on the trade that she had with the EU and other worldwide partners especially the agreements she had with the member countries of the EU,” Mathu said. What regional countries can do to minimise the effects of Brexit, the capital markets chief added, is to reduce the trade done in Pound Sterling and preparing new agreements with the British.
Commentaries by Joseph Stiglitz, 'From Brexit to the future' (Project Syndicate), and Xhantyi Payi, 'Africa must learn lessons of unification pitfalls' (Business Day)
Selected updates on Zimbabwe's trade policy:
Over 3 000 import licences issued (The Herald)
Government has so far issued over 3 100 import licences for goods worth around $23 million since 20 June, three days after gazetting of import control regulations on various grocery and building material products. However the removal of the goods from the Open General Import Licence has been misconstrued as a ban on the importation of the products, triggering violent protests from cross-border traders and South African businesses who are resisting its implementation. Industry and Commerce Minister Mike Bimha reiterated that the intended purpose of the measures is not to ban the importation of the listed products but to regulate their influx into Zimbabwe. [Statement: Concerned Church and Christian Leaders]
Traders hit hard by new import restrictions (NewsDay)
Nyatanga’s echoes the sentiments of other cross-border traders who said they “cannot allow the government to mess with their lives when there are no jobs.” Residents in separate interviews said they cannot be forced to buy expensive groceries and goods from local shops when “we can easily buy them at half the price or less from cross border traders.” The import bans will also affect many families that rely on goods and groceries sent through omalayitsha every month-end, a Mpopoma resident, Gilbert Sibanda, said. “It made a lot of sense to buy groceries in South Africa and send them via omalayitsha than to send Rands through money transfer agencies which will not buy much owing to the exchange rate,” Sibanda said. [French envoy tears into import ban (NewsDay)]
‘Delays affecting export earnings’ (The Herald)
Zimbabwe could lose hundreds of millions of dollars in revenue if Government does not urgently eliminate cumbersome processes delaying the efficient movement of exports. Addressing a Public Private Dialogue on Simplification of Zimbabwe’s Export Processes yesterday, the chief of Trade Facilitation and Policy for Business Section, International Trade Centre Rajesh Aggarwal said delays in processing exports have a negative on exports. “If you delay your exports by one day you can actually make one day loss in export profits,” said Mr Aggarwal. ZimTrade chief executive officer Sithembile Priscilla Pilime told the dialogue that punitive penalties charged by Reserve Bank of Zimbabwe for late acquittals were also affecting exports. [Africa Confidential's London conference: Zimbabwe 2016, Rebuilding and Rebooting]
EAC govts urged to train technocrats in negotiation of trade agreements (New Times)
According to Henry Kimera of Consumer Food Education Trust (Uganda), with commercial oil and gas deposits being confirmed in almost all the six EAC countries, government must sharpen negotiation skills of technocrats so that they are able to negotiate better deals to ensure maximum benefit for countries. Kimera added that most regional technocrats negotiate from a point of weakness since they are not well-versed with international trade negotiation and other economic agreements, including oil deals. He was speaking during a two-day regional conference on how EAC can achieve structural transformation and sustainable development that was organised by Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI-Uganda) in Kampala last week.
Tanzania: Record 13.371tri/- tax collection (Daily News)
The Tanzania Revenue Authority has registered a milestone record in tax collection for the 2015/16 financial year, collecting 13.371 trillion/-; hence surpassing the 13.366 trillion/- target. The achievement is a huge boost to TRA, which failed to meet its revenue collection targets for the past five years or so. For instance, during the 2012/13 financial year, TRA was required to collect 8.05tri/- but the target was missed by about three per cent. Similarly, the authority missed its target of Sh10.395tri/- by a massive 10% for the entire 2013/14 financial year. The move to plug tax loopholes has also seen the revenues from customs at the Dar es Salaam port going up despite significant drop of cargo volume since end of the last year. Mr Kidata said they were usually collecting between 200bn/- and 300bn/-annually from the port. However, for last April and June, the authority pocketed 458bn/- and 517bn/- respectively. [Foreign body wades into tourism tax row, Coffee exports earn Tanzania 294.4bn/- (Daily News)]
India, Mozambique to sign MOU on import of pulses (Business Standard)
The Cabinet on Tuesday cleared a proposal to enter into an agreement with Mozambique for import of 100,000 tonnes of pulses in 2016-17. The decision comes just ahead of Prime Minister Narendra Modi’s proposed visit to African nations. The proposal also has an option to scale the import up to 200,000 tonnes by 2020-2021. The agreement will promote production of pigeon peas, or tur, in Mozambique by encouraging progressive increase in trading. The pulses would be imported either through private channels or through state agencies, an official statement issued after the Cabinet meeting said.
Taveta OSBP boosts transit cargo through port of Mombasa (Business Daily)
Customs officials are betting on the efficiency at the Taveta one-stop border post to boost transit cargo and increase cross-border trade. The Kenya Revenue Authority border post manager Daniel Nyambaka said the OSBP has already started paying dividend, saying trucks take 30 minutes to cross the border compared to up to five hours previously. Mr Nyambaka said they expect trucks transporting goods to Burundi, the DRC and Rwanda to use the route since it cuts the distance between Mombasa to DRC by up to 400 kilometres. The Mwatate-Taveta road which is being tarmacked is also expected to be completed by end of the year, heightening expectation that there will be increased traffic when the road is completed. The development comes at a time when the Kenya Ports Authority (KPA) has announced its plan to construct an Inland Container Depot (ICD) at Taveta to leverage on increased business at the border post.
Floods deal ‘staggering’ blow to pastoralists recovering from Ethiopia’s long drought (UN)
EAC targets $8m from South Sudan (The Citizen)
Facilitating e-commerce can stimulate growth and development – DG Azevêdo (WTO)
The politics of commercial diplomacy, Ex-Im and beyond (Brookings)
Helmut Reisen: 'How China’s rebalancing affects Africa’s development finance' (OECD)
Africa meeting assesses Hub and Spokes Programme (Commonwealth)
African cities may be able to leapfrog challenge of rapid growth, says Sisulu (Business Day)
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EAC govts urged to train technocrats in negotiation of trade agreements
Regional governments have been urged to invest in capacity building of technocrats involved in international trade negotiations to enhance their skills and ensure they bargain for deals that will benefit citizens.
According to Henry Kimera of Consumer Food Education Trust (Uganda), with commercial oil and gas deposits being confirmed in almost all the six East African Community (EAC) countries, government must sharpen negotiation skills of technocrats so that they are able to negotiate better deals to ensure maximum benefit for countries. Kimera added that most regional technocrats negotiate from a point of weakness since they are not well-versed with international trade negotiation and other economic agreements, including oil deals.
He was speaking during a two-day regional conference on how EAC can achieve structural transformation and sustainable development that was organised by Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI-Uganda) in Kampala last week.
The conference, under the theme “Achieving Structural Transformation in the context of Regional Integration and the EU-EAC EPA: Implications and way forward for the EAC” attracted government officials and the private sector players, as well as East African Legislative Assembly MPs, and academia from across the region.
Commenting on the EPAs, Kimera said EAC governments alone cannot guarantee the success of the deals, the reason why other stakeholders should be involved in the negotiation process.
“We are the consumers, we work with the citizens, and know what’s best for them and the challenges they face mostly. This is why the signing and the ratification of this deal would have been meaningful and more beneficial if they involved all the parties.” He said it was essential for private and concerned public institutions to participate in the EPAs negotiations so that they understand and are able to explain it to the ordinary people, who are major beneficiaries, and how they will gain from the market created by the deal.
In 2014, the EAC and European Union concluded the negotiations for the EPAs after nearly 12 years. Currently, the EPAs are being ratified by regional states, with the final deal signing scheduled to take place in the first week of August. However, various regional stakeholders are still skeptical on the benefits, especially since they were not involved in the process.
The objectives of the EPAs include bringing about sustainable development of the African Caribbean and Pacific (ACP) countries, facilitation of ACPs smooth and gradual integration into the world economy, contributing to eradication of poverty, enhancing the production and supply capacity, fostering the structural transformation and diversification of the economies, and support of regional integration initiatives, among others.
Geoffrey Idelphonce Mwambe, the director for trade, investment and productive sectors at Tanzania’s Ministry of Foreign Affairs and East African Co-operation, argued that these objectives would be realised if EAC states involved all the stakeholders in the negotiation process.
“The EPA objectives can be realised if EAC governments work with other stakeholders to advance the social and economic needs of ordinary people in the region. I am confident that we can achieve more, including structural transformation and sustainable development, if governments worked with all stakeholders,” he said.
Most of the participants at the conference said the EAC bloc may not gain much from the EPAs, arguing that the region still faces challenges of low industrialisation and export of primary products, besides the limited forward and backward linkages in the economy, which affects the bloc’s competitiveness.
However, Peace Basemera, a trade negotiation and cooperation specialist at the ministry of trade and industry, said Rwanda has tried to engage different stakeholders in the EPAs process, adding that the country conducted campaigns to create more awareness about the deal.
“We have been working closely with stakeholders, including the Private Sector Federation and civil society organisations, to raise awareness about the opportunities presented by EPAs,” she said.
Basemera said the challenges in the process would be addressed with time. “The only challenge now would be countries failing to invest in building their capacities to ensure that when the agreement is implemented we are able to benefit,” she added.
Related News
Uganda exit raises cost of pumping oil from Lokichar to Mombasa by 68pc
The cost of moving crude oil by pipeline from Lokichar to Mombasa seaport is set to go up by 68 per cent after Uganda pulled out of a joint infrastructure deal with Kenya, a new technical report shows.
The analysis, compiled by regional consultancy firm KPMG, shows that pipeline tariff will rise to at least $12.94 (Sh1,294) per barrel if Kenya builds its own pipeline.
A joint crude pipeline running the 1,300 kilometres from Hoima through Lokichar to Lamu would charge a lower tariff of $7.70 (Sh770) per barrel, the analysis shows.
In March, Uganda pulled out of the joint crude pipeline deal with Kenya and signed a deal with Tanzania to route its exports through Tanga port. The move by Uganda followed months of concern over security, land acquisition, inflation of costs, and Kenya’s ability to deliver the project on time.
“This situation (building own pipeline) precisely reflects the inefficiency of a zero sum world view,” KPMG says in its analysis.
“Forging ahead separately is nearly inevitable because undeveloped petroleum reserves are not quite as useful to a nation seeking to achieve double digit growth… but the economics have to work.”
The analysis, titled East Africa Regional Cooperation in Oil and Gas: Possible Reality? shows that shipping oil through Tanga would cost Uganda 36 per cent more, Sh1,130 per barrel, compared to Sh830 per barrel that the landlocked state would pay by routing it through Kenya.
As a result of the increased shipping charges, KPMG says, Kenya’s crude must be sold at a higher export price of between Sh4,500 and Sh4,900 per barrel to make economic sense.
Before Uganda’s pull out it was estimated that Kenya’s oil business could break-even at relatively lower export prices of between Sh3,700 and Sh4,200 per barrel.
Going it alone also cuts the expected rate of return on Kenya’s oil from 13 per cent to 10 per cent.
Under the two scenarios, however, Uganda remains the overall loser as its break-even point rises to an export price of at least Sh5,100 while the expected rate of return shrinks to 10 per cent, down from 13 per cent in a joint deal with Kenya. That means Uganda would make a loss at yesterday’s Brent crude price of Sh4,764 per barrel.
Kenya has since signed a joint crude pipeline deal with Ethiopia. It also hopes to tag South Sudan along since it has shown willingness to invest in a pipeline connection through Lokichar to Lamu Port or to the Port of Djibouti through Ethiopia.
“In the case of pipeline infrastructure, the benefit is in creating a network that would allow shared costs among users,” KPMG says.
As the regional pipeline takes shape, Kenya hopes to transport the first 2,000 litres of its crude by trucks and trains to an export terminal in Mombasa.
The move is part of the Jubilee administration’s race to get Kenya’s crude in the market before the General Election scheduled for August next year.