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SA losing out in Francophone Africa
South African companies are hardly represented in Francophone Africa, despite the significant opportunities present in these countries.
During the Co-invest in Francophone Africa Forum held in Johannesburg this week, Khanyisile Kweyama, Business Unity SA CEO, said infrastructure was the biggest challenge being faced in Francophone Africa.
In the Democratic Republic of Congo, it took days to get equipment to its final destination, Kweyama said. “And language is also a barrier.”
George Sebulela, Black Business Council chair, said there was a limited South African presence in Francophone Africa because of the French dominance in these countries.
“Political stability is also a key challenge in Ivory Coast,” Sebulela added.
The private sector in Francophone Africa was weak, countries were dependent on donors for funding and the cost of doing business in these countries was high, Sebulela said.
There was poor corporate governance and the perception of a high level of corruption. A key issue was the ability to get funding, said Sebulela.
Yunus Hoosen, acting head of investment promotion at the department of trade and industry, said a key issue for Africa was a lack of infrastructure. For instance, to access Francophone African countries, you often needed to fly via France.
“South Africa is a strong investor in sub-Saharan Africa, while France is strong in Francophone Africa,” Hoosen said.
Duncan Bonnett, an Africa House director, said the major countries within Francophone Africa included the Democratic Republic of Congo, Cameroon and Ivory Coast.
All three countries have economies of similar size. The Democratic Republic of Congo’s gross domestic product (GDP) is valued at $41 billion (R615 billion), Ivory Coast’s at $35 billion and Cameroon’s is at $30 billion.
All three countries also have high growth rates. The Ivory Coast is forecast to grow by 11% this year; the Democratic Republic of Congo, Africa’s largest copper producer, is set to expand by 7%; and Cameroon, where MTN has a presence, is expected to grow at 6%.
Last year, the three countries’ total imports were $25 billion.
South Africa is the Democratic Republic of Congo’s largest source of imports at 20%. On the other hand, it makes up only 1% each of Cameroon and the Ivory Coast’s imports.
“Cameroon and Ivory Coast offer excellent opportunities... and are gateways to broader regions,” Bonnett said.
Last year, South Africa exported more than R14 billion of exports to the three countries. In Cameroon, South African wines now feature on hotel menus, Bonnett said.
A key issue raised by South African companies operating in Francophone Africa was logistical.
“But South African companies that have made the effort in these countries are slowly succeeding,” he said.
If a company wanted to make a long-term investment in Francophone Africa, it needed to speak French and understand the nuances of Francophone Africa.
Josue Tandoum Waffo, JM Capital Africa CEO, said there were opportunities for South African companies in Cameroon if they did their homework properly and chose their local partners carefully.
Cameroon’s natural resources include petroleum, bauxite, iron ore, timber, hydropower, fish, rubber, diamonds and gold. Infrastructure was by far the largest strategic opportunity in the country, he said.
In 2014, Standard Bank indicated its intention to expand into Francophone Africa by opening an office in Abidjan. “Save for a few South African companies such as MTN, SAA and Tiger Brands, South Africa is largely absent from central Africa,” Waffo said.
Alassane Ndiaye, Rayon Investments managing partner, said Ivory Coast wanted to grow its economy to $50 billion by 2020 and was projected to grow by between 8% and 10% over the next four years.
Ivory Coast, the world’s largest producer of cocoa beans and cashew nuts, was one of the world’s fastest-growing economies, he added. In 2015, it grew by 8.2%.
The country was also a major player in coffee, and in palm oil production. The government of Ivory Coast would like to increase the processing of local raw materials from 30% to 50% by 2020.
Ivory Coast was forecast to receive $20 billion worth of foreign direct investment over the coming years, Ndiaye said.
“South Africa can be a lot more active in Ivory Coast... South African companies have not ventured into Ivory Coast agriculture at all,” Ndiaye said.
Infrastructure development was a key driver of Ivory Coast’s economy, with massive investments over the past five years, especially in highways, bridges and ports. South African companies, such as AngloGold Ashanti, were exploring for gold in the country.
A key risk for Ivory Coast was that it was a fragile “post conflict” state, Ndiaye said.
“The main country risk is the national security situation, which has improved significantly over the past five years, but there is still sporadic unrest like soldiers’ strikes, road banditry and ethnic clashes over agricultural land ownership,” he added.
Another risk in the country was corruption, Ndiaye said.
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Four lessons from Brexit and EU fallout for East African Community
Now that the immediate turmoil of Britain’s exit vote from the European Union has somewhat subsided, it is a good time to ask what lessons that vote holds for the East African Community. Four stand out.
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One, a community must be based on values shared by all.
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Two, a community won’t endure if it is not built on the consent of the people.
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Three, integration is fragile and it takes but the opportunism of a few leaders in a member state to wreck it.
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Four, the youth must be given voice in integration; if not, the future – complete with its uncertainties and challenges – will be shaped by those with the least stake in it, the old.
The first, second and fourth are lessons for the Community as a whole and the third, though a lesson for all, is particularly important for Kenya, which has ruined the EAC once before. Let’s flesh out each one of these lessons.
For the most part, the United Kingdom has never been one with core EU values. Rather, the UK prides itself in its exceptionalism and pursues a foreign policy that is defined more by what the country is against rather than what it stands for.
Little wonder then that Anglo-European relations have often been characterised by mutual antipathy. Britain, in the words of its former Prime Minister Harold Macmillan, is “insular” with “very special, very original, habits and traditions.” That insularity contrasts sharply with Europe’s self-conscious cosmopolitanism. And so, even though the UK is Europe’s second largest economy, Europe sees it as a difficult partner.
In economics, this ‘nation of shop-keepers’ – as Napoleon Bonaparte famously called it – is often too pro-market for Europe. In diplomacy, it pivots too often and too strongly towards the US. In Union affairs, it is a miserly penny-pincher and a veto-wielding curmudgeon, constantly complaining and slowing down important aspects of greater European cohesion, by refusing to join the Euro and the Schengen area, for instance.
Many Europeans are not surprised by the UK’s exit vote. The UK has always been deeply eurosceptic. Euro-barometer, a Public Opinion Research Service of the European Commission, has surveyed public opinion in Europe since 1973, asking nationals of member states whether the Union was a good thing; a bad thing or neither a good nor a bad thing.
Just before the Brexit vote, Danish Broadcasting Company DBR summarised forty years of these surveys and concluded that Britain was consistently the most eurosceptic country of all the large European economies.
Kenya’s attitude is insufferable
Many East Africans will recognise Kenya’s stance in Britain’s European “exceptionalism.” Although Kenya is the region’s largest economy – and boasts its most educated population – it is strangely disconnected from the Community.
The intelligentsia in Rwanda, Uganda and Tanzania closely follow Kenyan politics. It is not an interest reciprocated by the Kenyan intelligentsia, which is strangely incurious and embarrassingly ignorant about its neighbours. Yet visitors to Kenya remark on its worldly and globally oriented elite.
The disinterest in fellow community members arises not from an innate provincialism but from a deeper malaise: Kenya is in but not of East Africa. Its regional ambitions are rather modest: a market for its goods and expansion room for its companies. A few Kenyans may even go to school in Uganda, in the main, the movement is the other way. Kenya has nothing to learn from her community neighbours, it is rather a tutor to them.
We have learnt from Brexit that this mindset won’t do. And if we occasionally detect a flash of xenophobia towards Kenya in Tanzania and, to a small extent, in Rwanda, it is because Kenya’s attitude, like that of Britain in the EU, is insufferable.
The Community’s future lies in a convergence of values. That, in turn, depends on deepening cultural exchange and building common standards in education. The EAC has taken baby steps towards aligning professional standards and practices but without more, this is woefully inadequate.
Integration must work for majority
The second lesson from Brexit is that integration must work for the majority of the people or it does not work at all. The British ruling elite misread the public mood, missing out the national feeling on hot button issues like immigration and identity.
In a pre-Brexit survey by Prof Paul Whiteley of the University of Essex and Prof Harold Clarke, of the University of Texas, 52 per cent of the respondents thought that Britain could best control immigration outside the EU. Only three per cent thought immigration controls would be worse once Britain left the EU.
How could the elite be so wrong? Part of the answer lies in popular perceptions that the EU itself is in fact an elite project. Whiteley and Clarke’s survey reported that 64 per cent of graduates would vote to remain in Europe while only 25 per cent of those without formal qualifications would.
Comparable numbers showed up amongst the professional classes as against the unskilled. The jury is unanimous: those with higher education and globally marketable skills want a borderless world; those without want immigration barriers raised higher.
Would it be any different in the EAC? Would the Community survive a popular vote? Unlikely. A majority of the population lives far from the Community’s borders. With the exception of Rwanda and Burundi, both small countries with large populations close to international borders, few East Africans have crossed an international border and fewer still will cross one in their life.
At best, most East Africans are indifferent to their neighbours and, at worst, hostile to them as ‘foreigners.’ Consider a country like Malawi in contrast: 23 of its 28 districts have an international border. This means that the average Malawian will cross an international border many times in her life.
Thousands of Malawians live or have married from Mozambique, Tanzania, Zambia and even further afield from South Africa, Zimbabwe, Botswana and Namibia. Would Malawians vote to expel Mozambicans and Zambians from their country? Unlikely.
So far East Africa’s big idea is the push for political integration: one or two of current presidents are even thought to harbour ambitions of retiring to a future regional presidency. But there is a warning from Brexit here too: a headlong rush to political union without proper democratisation of regional institutions will be seen as elite-bargaining and, almost certainly, will unleash angry nationalism in member states. That would permanently damage the EAC.
Dangers of political opportunism
The third lesson is a warning about the dangers of political opportunism. The crisis unleashed by Brexit is of David Cameron’s making. Under pressure from Nigel Farage’s xenophobic United Kingdom Independence Party, UKIP, the eurosceptic wing of the British Conservative Party lurched further to the right, becoming even more virulently anti-Europe, at least in its rhetoric.
There were two reasons for this: it was partly to outflank UKIP and beat back Nigel Farage’s inroads into the Conservative’s constituencies and partly to mobilise the burgeoning anti-immigration sentiment amongst conservative voters, many of whom were especially angry about the influx of cheap labour from places like Poland.
In 2013, faced with hardening anti-Europe sentiment, a split in his party and with an eye on the 2015 election, David Cameron made an opportunistic and craven deal with the eurosceptics. In exchange for their support, he would offer them an “IN” or “OUT” referendum on the UK’s membership in the EU. His cynical deal won him the 2015 election but it has just cost him his career.
Here, too, are important lessons for the EAC. In a fit of hubris in 2013, Kenya, Uganda and Rwanda decided that Tanzania was a crimp on faster integration. They argued that it was time for ‘multi-speed EAC,’ code for the idea that Community members need not integrate at the same speed.
Laggards could take their time and the nimble, while the christened “the coalition of the willing” should be free to accelerate their own integration.
In quick succession Kenya, Uganda and Rwanda announced a series of huge infrastructure deals that excluded Tanzania but also included non-members, Ethiopia and South Sudan. The first of these was the ambitious Lamu Port – Southern Sudan-Ethiopia Transport (Lapsset) corridor project. The second project would be a new standard gauge railway linking the port of Mombasa to Kigali through Uganda.
President Jakaya Kikwete complained that this “coalition of the willing” was a claw-back on EAC integration but was ignored. Tanzania then said that under these conditions, everything – including exit of the EAC – was back on the table.
Kenyan leaders must remember that when the Community failed before, in 1977, it is they who engineered it. If they detect a certain hesitation or distrust from other EAC members, they should appreciate that neighbours, especially Tanzania, has only now begun to rebuild trust.
Youth exclusion
The final lesson speaks both to the nature of regional democracy and the role of the youth in it. Brexit was a revolt of the old: Britain left the EU because the old – who had the least stake in the future of Europe and need not live with the consequences of exit – lost faith in the future that Europe held out.
Among 18-24-year-olds, 75 per cent voted for Europe. Given that voter turnout increased with age and that Britain has an aging population, the youth sold their future short by staying away and letting their fathers and grandfathers shape a future they won’t have to live with.
Given the margin of the Brexit victory – 52 per cent to 48 per cent – it is almost certain that the ‘remain’ voters would have won if young voters had turned out in larger numbers.
It is a sobering thought: East Africa, unlike Britain, has a young population: on average, between 25 to 30 per cent of the population of the Community is between 15 and 30 years old. Like Britain though, the youth have not been turning out to vote and so, they are leaving decisions that shape the future to those who have the least stake in it.
In these lessons lies a grim message: The EAC should look to Brexit and see that a lack of common values; a growing democratic deficit; self-serving nationalism and political opportunism coupled with youth exclusion will eventually sap and ultimately destroy regional integration.
Pausing to gloat rather than learn from Britain’s woes is exactly the kind of complacency the EAC does not need right now.
Wachira Maina is a constitutional lawyer.
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Netanyahu heads for Africa to find deals, mark Entebbe rescue
Prime Minister Benjamin Netanyahu will try this week to generate new business in Africa for Israeli companies while making an emotional journey to Uganda, where his brother died 40 years ago in the daring Entebbe hostage rescue.
Netanyahu left Monday on a five-day tour that also includes Kenya, Ethiopia and Rwanda in the first trip by an Israeli prime minister to sub-Saharan Africa in 29 years. With a delegation of 70 business executives, the African excursion is part of the Israeli leader’s effort to cultivate growth markets while economies languish in the country’s biggest trade partners, the U.S. and European Union.
“This has very important implications for diversifying our international alliances and international relations and expanding our powers to Asia, Russia, Latin America, and of course now, the African continent,” Netanyahu told cabinet members on Sunday. Before departing Monday, he called the trip “historic” and added, “Israel is coming back to Africa, big time.”
While Netanyahu touts Israeli technology, particularly in the fields of anti-terrorism, desalination and solar energy, he also has a clear diplomatic agenda. The prime minister is pushing for open political support from African countries that have largely sided with Arab nations on resolutions critical of Israel in the United Nations and African Union. He made the point directly in February to visiting Kenyan President Uhuru Kenyatta.
Military Allies
“Many of these countries can be said to be military allies of Israel because they also have the threat of radical Islam and terrorist attacks,” said Emmanuel Navon, a political scientist at Tel Aviv University. “They are very fond of Israeli military technology and anti-terrorist expertise but that doesn’t mean at the UN in terms of votes, we’ll reap any benefits.”
Last July, Kenya and Ethiopia both abstained in a UN Human Rights Council vote condemning Israel for alleged war crimes in the Gaza Strip.
Israel has a long history of ties with African nations built on export of arms and agricultural products while importing oil, diamonds and other natural resources.
Companies sending executives with Netanyahu include Elbit Systems Ltd., the country’s biggest publicly traded defense contractor; Netafim Ltd., which makes irrigation systems; Magal Security Systems Ltd., a specialist in perimeter security at airports; Israel Chemicals Ltd., a fertilizer producer; and dronemaker Aeronautics Ltd.
Entebbe Ceremony
The prime minister will attend two gatherings for his business delegation and potential local partners in Kenya and Ethiopia. He said last week that Israel is allocating about $13 million to strengthen economic ties with the four African countries, including training programs in health and security techniques and the signing of an agreement on space satellite technology in Ethiopia.
Netanyahu’s first stop will be a ceremony Monday at Entebbe airport marking the hostage rescue on July 4, 1976.
The prime minister’s older brother, Yonatan Netanyahu, led the commando rescue of about 100 passengers and crew members on an Air France flight seized by Palestinian and German hijackers. The Ugandan president at the time, Idi Amin, openly supported the hijackers demanding the release of Palestinian militants in Israeli prisons and prisoners in other countries.
About 100 commandos landed at the airport at night after flying 2,500 miles from Israel, bringing along a black Mercedes similar to the one the Ugandan leader used to try to fool troops guarding the airport. Bursting into the terminal, the Israelis killed the hijackers along with 45 Ugandan soldiers. Yonatan Netanyahu, the only Israeli commando killed, has become a symbol of bravery in his country. The prime minister refers to his brother’s death as a painful turning point that projected him into politics.
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tralac’s Daily News Selection
The selection: Friday, 1 July 2016
SADC finance and economy ministers in Gaborone for peer review meetings (Channel Africa)
Trade, industry, finance and investment ministers from SADC have started a series of regional development peer review meetings which will run from 28 June to 8 July. "The Committee of Ministers of Trade meeting will take place on 5 July 2016. The Ministerial Task Force on Regional Economic Integration comprising, Ministers responsible for Finance, Trade and Infrastructure will meet on 6 July, while the Ministers of Finance and Investment and the Peer Review Panel will be from the 7-8 July" said Botswana Finance and Development minister Kenneth Mathambo.
South Africa: 2016 merchandise trade statistics (SARS)
The R18.73bn trade balance surplus for May 2016 is due to exports of R104.68bn and imports of R85.95bn. Exports for the year-to-date of R451.62bn are 10.2% more than the exports of R409.98bn recorded in January to May 2015. Imports for the year-to-date of R452.28bn are 3.4% more than the imports recorded in January to May 2015 of R437.56bn. The cumulative deficit for 2016 of R0.65bn is 97.6% less than the deficit for the comparable period in 2015 of R27.58bn.
The impact of Brexit: presentation by SA National Treasury (pdf, AgBiz)
Regarding total trade (i.e. both imports and exports), the UK ranked 6th largest trading partner. In 2015, SA exported R41.6bn worth of products into the UK and imported R35bn with a R6.6bn trade balance in favour of SA. Critical to negotiate trade and investment treaties sooner rather than later: SA is largest African trading partner but Africa is a very small part of the UK trade.
Gerhard Erasmus: ‘Some implications of Brexit for Southern African trade relations’ (tralac)
This Trade Brief discusses the trade implications of Brexit for the SADC EPA and will mention some of the related predicaments which the UK now faces. This episode serves as a lesson too of the costs involved in undoing well integrated regional integration arrangements. Southern African governments should ensure that their needs and the continuation of certainty in reciprocal market access arrangements will get the urgent attention which they merit. This will be a difficult task but these are matters which cannot be left to decisions of Her Majesty’s Government alone. We need well thought-through responses and diplomatic initiatives of our own. Technical issues need to be clarified in order to support such initiatives. [J. Peter Pham: 'Africa and Brexit: not all bad news' (Atlantic Council)]
Kenya: Q1 GDP, Balance of Payments report (pdf, KNBS)
In the first quarter of 2016, international merchandise trade balance improved by 25.4% to a deficit of KSh 167,251 million. Domestic export earnings increased by 13.4% to KSh 130,650 million in the quarter under review boosted by growth in earnings from horticulture and tea exports. Overall balance of payments improved to a surplus of KSh 26,318 million from a deficit of KSh 17,063 million in the corresponding quarter of 2015 as shown in Table 5. The current account balance improved by 30.1% from a deficit of KSh 101,539 million in the first quarter of 2015 to a deficit of KSh 71,018 million in the quarter under review. The narrowing of the current account deficit could be explained by the decline in import expenditure and a considerable increase in the value of exports. Cross border services receipts declined by 7.1% while payments increased by 9.0% translating into a surplus of KSh 14,265 million in international trade in services during the first quarter of 2016. Remittances from the diaspora continued to grow in the first quarter of 2016, increasing by 28.4% to KSh 42,777 million from KSh 33,328 million in the first quarter of 2015.
Nigeria-India trade hits $16bn (The Sun)
The trade volume between the Federal Republic of Nigeria and India has hit $16bn, the Indian High Commissioner-designate to Nigeria, B.N. Reddy has revealed. The Indian envoy who spoke in Abuja during the launch of the India-Nigeria Business Promotion Council, said as biggest trading partners in Africa, both countries must share experiences and assist each other in areas of interests. Former Education Minister, Oby Ezekwuesili who also spoke, bemoaned the trade imbalance between Africa and India. She called for its review, while urging the Federal Government to create an enabling environment so that investors can come into the country. “India’s trade with Africa is about $300 billion. Out of that, Africa accounts for about $32 billion,” she added.
Mauritius expects 46% jump in foreign investment in 2016 (Bloomberg)
Mauritius's government expects foreign direct investment to increase as much as 46% this year, even as the United Kingdom’s decision to leave the European Union may curb inflows to the Indian Ocean island nation. Foreign investors are expected to commit 14 billion rupees ($395 million) by the end of 2016, compared with 9.6 billion rupees last year, Board of Investment Chief Executive Officer Ken Poonoosamy said in a phone interview Tuesday from the capital, Port Louis.
Mozambique’s foreign investment slumps 35% in first quarter – Finmin (Club of Mozambique)
Investors brought in $650m in the first three months compared with $1bn a year ago, Finance Minister Adriano Maleiane told members of the ruling Mozambique Liberation Front, or Frelimo, on Wednesday in the capital, Maputo. “Foreign direct investment used to be an important source of foreign exchange, but it’s falling,” Maleaine said. [Minister Tonela appoints 12 new names for Industry and Trade]
Zimbabwe: Cargo stuck as importers struggle for permits (The Herald)
Commercial cargo has been stuck at Beitbridge Border Post for the past seven days as importers struggle to get permits to ship goods that are restricted from Open General Import Licence under Statutory Instrument (SI) number 64 of 2016. The SI tightens screws on the import of basic commodities including food items, building material, furniture, toiletries and cooking oil among other things. Several trucks are stuck on the South African side since the Zimbabwe side has no adequate space to accommodate them. The Herald is reliably informed that the Zimbabwe Revenue Authority has resorted to requesting for a surety of $2 000 from importers.
Zimbabwe: Police roadblocks threat to ease of doing business (The Herald)
National Assembly Speaker Advocate Jacob Mudenda yesterday said there was need for the police to reduce the number of roadblocks as recently pronounced by national police spokesperson Senior Assistant Commissioner Charity Charamba. “We have debated in Parliament and said there is no law that says there should be X number of roadblocks on the road,” he said. “Tourists driving from Beitbridge to here, Victoria Falls, on average must go through 20 roadblocks, why? They have been checked at the border for whatever imagined misdemeanours they might have and they came through Customs and Immigration.”
Tazara: Sh94 billion debt casts dark shadow over Tazara revival (The Citizen)
Outstanding payments amounting to Sh94 billion could stand in the way of plans to revamp the Tanzania-Zambia Railways Authority, The Citizen has learnt. Documents seen by The Citizen show that Chinese investors interested in taking over Tazara want the debt cleared before meaningful investments can be made. This includes delayed payments to suppliers, unpaid pensions for retirees, salary arrears and contributions that have not been remitted to pension funds.
Tanzania: Govt suspends TBS boss (The Citizen)
Tanzania Bureau of Standards Director General Joseph Masikitiko was dramatically suspended yesterday, with the government saying the move was aimed at paving the way for an investigation into unspecified matters. The suspension was announced by the Industry, Trade and Investment Permanent Secretary, Prof Adolf Mkenda, in a statement sent to newsrooms last night. Also suspended alongside Mr Masikitiko was TBS Finance, Planning and Administration Manager Emmanuel Ntely. The communication was issued a few hours after Industry, Trade and Investment minister Charles Mwijage made an unannounced visit to TBS offices in Ubungo, Dar es Salaam.
Akinwumi Adesina: opening speech at 2nd negotiations meeting of the African Development Fund (AfDB)
The Industrialise Africa strategy has just been sent to the Board for approval, and the Integrate Africa strategy will also follow. I am very pleased that in Lusaka we set up a Special Panel – led by former UN Secretary-General Kofi Annan and former German President Horst Köhler, and including other global development luminaries from the public and private sector – which will help us as we roll out the High 5s.
Competitive manufacturing sector can solve issues in SA (IOL)
South Africa is not de-industrialising, but manufacturing is changing. The manufacturing sector is today 15% bigger than it was 10 years ago, 51% bigger than 20 years ago, and 64% bigger than 30 years ago. However, employment numbers have declined alarmingly: 14% fewer people are employed today than in 2005, 23% fewer than in 1995 and 27% fewer than 1984. Confusion arises when the size and share of the economy is mentioned in the same breath. Manufacturing constitutes a diminishing share of the economy simply because other sectors, primarily services, have been growing faster over the same period. According to the SA Reserve Bank, manufacturing’s contribution to the economy has declined from 19.7% in 1995 to 13.7% last year. [The author, Henk Langenhoven, is chief economist of the Steel and Engineering Industries Federation of Southern Africa]
South Africa: Green Paper on International Migration (pdf, Dept of Home Affairs)
Given the policy shortcomings of the current White Paper and much of the legislation based on it, this Green Paper argues that South Africans need to adopt a paradigm that sees international migration as enabling their own development and that of their country and region. In the new paradigm, South Africans would see themselves as responsible citizens of SA, Africa and the world and support efficient, secure and humane approaches to managing international migration. The current paradigm exposes SA to many kinds of risk in a volatile world and by default strengthens colonial patterns of labour, production and trade. It also serves to perpetuate irregular migration, which in turn leads to unacceptable levels of corruption, human rights abuse and national security risks. The current draft of the Green Paper raises issues that require policy interventions in seven broad policy areas. Some of the policy areas are more fully developed than others. [Speech by Home Affairs Minister Malusi Gigaba]
Alan Hirsch: 'Institute will equip future leaders to beat inequality' (Business Day)
Finally, Africa’s growth has not been equal. The income and wealth gaps between countries — as well as the gaps within many countries — are growing. Southern Africa tends to have the most inequality within countries. SA, Namibia, and Botswana are among some of the most unequal countries in the world, and Angola and Zambia are not far off. The average Gini coefficient for Africa is 0.43, which is significantly greater than the coefficient for the rest of the developing world at 0.39. On average, the top 20% of earners in Africa have an income that is more than 10 times that of the bottom 20%. Recently, the London School of Economics established the International Inequalities Institute to identify and support innovative interdisciplinary research and teaching that addresses inequalities, and to create a structure that was agile and flexible enough to accommodate this vision over generations. With generous funding from Atlantic Philanthropies, the Atlantic Fellowship Programme has just been announced, based at the institute. UCT is a collaborating partner.
Alan Roe: 'Like it or not, poor countries are increasingly dependent on mining and oil and gas' (UNU-WIDER)
The UNU-WIDER project on managing natural resources seeks to examine how poor and middle-income countries can best use their natural resource wealth to promote development. It is well understood that minerals, metals, oil or gas (collectively known as ‘extractives’) have for some years been significant in the economies of low- and middle-income countries. What perhaps is less well known is:
Malaysia Economic Monitor: leveraging trade agreements (World Bank)
Sahel and West Africa Club: newsletter, 21-27 June
Innovation prize for Africa 2016: keynote address by President Ian Khama (Mmegi)
World Bank's annual classification of nations by GNI per capita
Asean-5 Cluster Report: evolution of monetary policy frameworks (IMF)
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New meeting in Abidjan for ADF-14: Financing the development of a winning Africa
This week sees the opening of the 2nd meeting for the fourteenth replenishment of the African Development Fund (ADF-14) under the aegis of African Development Bank President Akinwumi Adesina, following the first replenishment meeting in March.
The gathering, held behind closed doors on June 30 and July 1, will be attended by the Deputies – representatives of donor countries to the Fund – as well as those of the governments of regional member countries, the AfDB Group and observers from peer institutions, all under the coordination of Richard Manning, Senior Research Fellow at the Blavatnik School of Government at Oxford University.
The African Development Fund (ADF) is one of the three distinct entities that make up the African Development Bank Group, along with the AfDB itself and the Nigeria Trust Fund (NTF). It is, above all else, its financial award section, that is, the heart of the sources of the AfDB Group’s funding. These sources enabling the Group to continue to financially assist those of its 54 regional member countries who need help most. To date, the ADF has 38 countries in receipt of support[1] and 29 donor countries.
ADF-13, drawing to its end, is intended with ADF-14 to mobilize resources to be used for funding awarded in the three-year period 2017-2019.
A delicate situation
Nevertheless, this resource mobilization process, a sort of “call for funds” to donors, is taking place at a difficult moment when the global economic and financial situation is far from positive and official development assistance is being cut. Donor countries are having to address the headwinds of the current international situation and stronger budgetary constraints while at the same time recipient countries, the most vulnerable, are seeing their needs growing and becoming more pressing, only sharpened by domestic and external economic pressures. This means that conduct of ADF-14 is a delicate matter, particularly in view of the ambitions of the new Sustainable Development Goals (SDGs) adopted in mid-2015 after the great Addis Ababa international conference on financing for development held in July of the same year, the global climate deal reached at COP21 and the High Five priorities the Bank has subsequently set itself to accelerate the development of the continent.
ADF-14: Focus on the High 5s to finance inclusive development
The majority of people living in ADF countries live in extreme poverty, on less than US$ 1.90 a day. On average, only 25% of them have access to electricity – and even less than that in 19 of the 38 ADF countries. Average electricity consumption in these countries is less than 200 kW/h per year, in comparison with the 12,954 kW/h used in the United States or the 6,520 kW/h in Europe. In ADF countries, energy shortages are estimated to cost between 2% and 4% in annual growth, on top of their consequences for employment, health, education, security and so on. This situation is intended to be tackled by the first of the AfDB’s High 5s: Light up and power Africa. With ADF-14, AfDB is planning to invest nearly US $2.9 billion in energy in ADF countries between early 2017 and late 2019 in order to install up to 4,600 MW of capacity – enough to connect 23.6 million Africans to the power grid.
According to estimates, nearly 158 million people suffer from undernutrition (particularly leading to delayed growth) in ADF countries. And this is despite enormous agricultural potential. Agriculture is a sector that is still too inefficient, as emphasized in the second of the Bank’s High 5 priorities: Feed Africa. AfDB invested US $4.3 billion in ADF countries in agricultural and agribusiness projects between 2006 and 2014 and this ADF-14 will make it possible to further invest up to US $2.1 billion by the end of 2019, given the Bank’s planned projects in this sector (the creation of agricultural development clusters and infrastructure in rural areas, water management and improved irrigation, capacity building, technology transfer, etc.) This will lead – among other benefits – to improved agricultural production, growing incomes for rural populations, reduced poverty and lower import bills.
The countries of the continent, and particularly ADF countries, need to diversify and strengthen their economic frameworks and thereby develop their private sectors. As of now, Africa’s only has a 1.5% share of the global value chain and only 19% of its exports are in manufactured goods. In several ADF countries, industrial GDP is only US $100 per capita.
Industrialise Africa is, therefore, the third of the Bank’s High 5. However, given the profile of the ADF countries and especially the most vulnerable of them, the role of the ADF is even more crucial in this area: in granting concessional funding, the ADF provides viable budget resources to the public sector while supporting the financing of the private sector through a range of risk mitigation instruments, guarantee products and mixed funding mechanisms intended to attract other finance to fill the funding gap. For ADF-14, operations targeting the industrialization of the ADF countries amount to more than US $1.7 billion. The Bank is also planning for ADF-14 to particularly strengthen support for the development of the private sector by increasing allocations to the credit enhancement facility for the private sector, which provides guarantees for non-sovereign operations conducted by countries eligible for ADF.
Integrate Africa is the fourth of the Bank’s High 5 and its justification can be found in these figures: at 15%, regional trade in Africa is the weakest in the world and this lack of integration is estimated to cost the continent between 1% and 1.5% in GDP every year. ADF countries are among the most fragmented and isolated markets. The African Development Fund, therefore, has a budget dedicated to regional integration whose investments are targeted at the elimination of non-tariff barriers that impede trade, material infrastructure (roads, rail, transport corridors), and cross-border water management, in addition to building the capacities of Regional Economic Communities (RECs), harmonizing investment codes, quality standards and certifications, overhauling the visa regime to facilitate free movement of people, the implementation of trade facilitation agreements made under the aegis of the WTO, and more. ADF-14 already has regional integration projects in the pipeline to a value of US $2.7 billion. Among other benefits of ADF-14, 73 million people will have better access to transportation by the end of 2019.
Although the ADF countries have had somewhat higher growth rates over the past decade, their poverty rates also remain high, as do inequality between men and women and between rural and urban areas. In some vulnerable ADF countries, youth unemployment is at 50%. In these countries, nearly 333 million people lack access to clean, safe water and some 772 million do not have sanitation facilities worthy of the name. To foster inclusive development in this context there is, therefore, a need to create jobs (made all the more acute by the challenges of population growth) and to promote entrepreneurship, provide economic opportunities to meet the expectations of the people and curb migration, to strengthen health systems using lessons learned from the recent Ebola crisis and to build capacities for resource optimization in social spending, to develop safety nets and, lastly, to increase access to clean water and sanitation services. And these are precisely the objectives of the fifth of the Bank’s High 5 priorities: Improving the quality of life for the people of Africa.
Under ADF-14, the Bank is, therefore, planning to invest around US $1.9 billion in the ADF countries, through which 9.5 million school textbooks and teaching materials will be produced, 5,000 health workers will be trained and 17 million people will receive better access to health services. The Bank’s new Jobs for Youth in Africa initiative (JfYA) is also intended to create 17.5 million jobs in ADF countries and provide 50 million young Africans with economic and professional skills by 2050.
US $45 billion invested over 40 years
At their first meeting, held in March 2016, the plenipotentiaries agreed that the ADF was “anchored in the Ten Year Strategy of the Bank“ and that the accent would be on the five key priorities, the High 5s, that the Bank has set itself. Three innovative financing instruments were endorsed: donors’ concessional loans, bridge loans and buyback mechanisms. This was also the case for the new model for development and service provision that the AfDB Group has begun deploying to accelerate the pace of Africa’s transformation and to promote a results culture.
Debate at this second meeting will centre on implementation of the AfDB’s High 5s, the framework for measuring the AfDB Group’s results by 2025, the role of ADF-14 in specific support for fragile states and for the development of the private sector, the proposed new financial instruments, the ADF liquidity policy and the ADF-14 funding and resource allocation framework.
A third and final meeting to be held in late November 2016 will conclude the ADF-14 replenishment process. Forty-two years after the very first replenishment of ADF resources in 1974, ADF-14 is not only maintaining but developing its ambitions. ADF-13, agreed in September 2013 and devoted to financing the Fund’s activities for the period 2014-2016, achieved the equivalent of US $7.3 billion.
The cumulative investments of the Fund on the African continent over its 40 years of existence amount to approximately US $45 billion.
[1] Eligibility for ADF is determined by a country’s gross national income per capita (GNI per capita) and its solvency.
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South Africa Merchandise Trade Statistics for May 2016
South Africa’s trade balance swings to record surplus as commodities boost exports
South Africa in May recorded its biggest monthly trade surplus since the revenue service introduced a revised series in 2010 to incorporate trade with neighbouring states, as firmer commodity prices boosted exports.
The data points to a narrowing in South Africa’s longstanding current account deficit, which widened to 5 percent of GDP in the first quarter of the year, and has traditionally been a source of vulnerability for the rand.
Exports rose 14 percent to 104.68 billion rand on a month-on-month basis, while imports were down 6.6 percent to 85.95 billion rand, the South African Revenue Service said in a statement.
This resulted in a bigger-than-expected trade surplus of 18.73 billion rand ($1.3 billion) for May, compared with a revised 127 million rand shortfall in April.
Analysts polled by Reuters had expected a trade surplus of 3.1 billion rand.
The rand, which was down 0.4 percent on the day against the dollar just before release of the data, turned firmer, and was trading 0.64 percent stronger at 14.6900 by 1336 GMT.
“This (trade) performance bodes in favour of our current forecast for SA’s current account deficit to narrow back towards 4.0 percent of GDP in Q2,” BNP Paribas Securities economist Jeffrey Schultz said.
He however warned of risks to the trade outlook later in the year from possible wage strikes in the auto, platinum and steel and engineering sectors, as well as increased concerns over the global economy after Britain voted to leave the European Union last week.
The South African Revenue Service (SARS) has released trade statistics for May 2016 that recorded a trade surplus of R18.73 billion. This figure includes trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R18.73 billion trade balance surplus for May 2016 is due to exports of R104.68 billion and imports of R85.95 billion. Exports for the year-to-date of R451.62 billion are 10.2% more than the exports of R409.98 billion recorded in January to May 2015. Imports for the year-to-date of R452.28 billion are 3.4% more than the imports recorded in January to May 2015 of R437.56 billion. The cumulative deficit for 2016 of R0.65 billion is 97.6% less than the deficit for the comparable period in 2015 of R27.58 billion.
April 2016’s trade balance was revised downwards by R0.56 billion from the previous month’s preliminary surplus of R0.43 billion to a revised deficit of R0.13 billion. Exports increased from April 2016 to May 2016 by R12.82 billion (14.0%) and imports decreased from April 2016 to May 2016 by R6.04 billion (6.6%).
On a year-on-year basis, the R18.73 billion surplus is an improvement from the surplus recorded in May 2015 of R4.44 billion. Exports of R104.68 billion are 18.5% more than the exports recorded in May 2015 of R88.31 billion. Imports of R85.95 billion are 2.5% more than the imports recorded in May 2015 of R83.87 billion.
Trade highlights by category
The month-on-month export movements (R’ million):
Section: | Including BLNS: | |
Precious Metals & Stones | + R8 141 | + 49.1% |
Mineral Products | + R1 695 | + 10.4% |
Vegetable Products | + R1 263 | + 27.4% |
Base Metals | + R 711 | + 6.3% |
Chemical Products | + R 525 | + 10.4% |
The year-to-date export movements (R’ million):
Section: | Including BLNS: | |
Precious Metals & Stones | + R12 348 | + 16.3% |
Vehicles & Transport Equipment | + R9 373 | + 18.8% |
Vegetable Products | + R5 441 | + 29.4% |
Base Metals | + R5 098 | + 9.9% |
Machinery & Electronics | + R4 762 | + 12.4% |
The month-on-month import movements (R’ million):
Section: | Including BLNS: | |
Machinery & Electronics | - R2 803 | - 11.7% |
Mineral Products | - R1 812 | - 14.5% |
Original Equipment Components | - R 862 | - 10.2% |
Animal/Vegetable Fats | - R 453 | - 43.0% |
Precious Metals & Stones | - R 380 | - 34.8% |
The year-to-date import movements (R’ million):
Section: | Including BLNS: | |
Machinery & Electronics | + R8 648 | + 8.1% |
Original Equipment Components | + R6 102 | + 18.3% |
Vegetable Product | + R4 611 | + 49.8% |
Vehicles & Transport Equipment | - R3 176 | - 6.7% |
Mineral Products | - R21 415 | - 27.3% |
Trade highlights by world zone
The world zone results from April 2016 (Revised) to May 2016 are given below.
Africa:
Trade surplus: R15 733 million – this is a 0.7% decrease in comparison to the R15 847 million surplus recorded in April 2016.
America:
Trade deficit: R 977 million – this is a 55.7% decrease in comparison to the R2 204 million deficit recorded in April 2016.
Asia:
Trade deficit: R5 472 million – this is a 61.0% decrease in comparison to the R14 028 million deficit recorded in April 2016.
Europe:
Trade deficit: R1 087 million – this is a 87.0% decrease in comparison to the R8 391 million deficit recorded in April 2016.
Oceania:
Trade surplus: R 71 million – this is a 68.8% decrease in comparison to the R 228 million surplus recorded in April 2016.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for May 2016 recorded a trade surplus of R10.70 billion, with exports of R93.95 billion and imports of R83.25 billion.
Exports increased from April 2016 to May 2016 by R14.03 billion (17.6%) and imports decreased from April 2016 to May 2016 by R6.36 billion (7.1%).
The cumulative deficit for 2016 is R42.62 billion compared to R69.71 billion in 2015.
Trade highlights by category
The month-on-month export movements (R’ million):
Section: | Excluding BLNS: | |
Precious Metals & Stones | + R8 695 | + 54.5% |
Mineral Products | + R2 040 | + 14.2% |
Vegetable Products | + R1 300 | + 32.7% |
Base Metals | + R 693 | + 6.6% |
Chemical Products | + R 520 | + 12.7% |
The month-on-month import movements (R’ million):
Section: | Excluding BLNS: | |
Machinery & Electronics | - R2 780 | - 11.7% |
Mineral Products | - R1 817 | - 14.6% |
Original Equipment Components | - R 862 | - 10.2% |
Animal/Vegetable Fats | - R 457 | - 43.5% |
Precious Metals & Stones | - R 627 | - 58.5% |
Trade highlights by world zone
The world zone results for Africa excluding BLNS from April 2016 (Revised) to May 2016 are given below.
Africa:
Trade surplus: R7 711 million – this is a 22.5% increase in comparison to the R6 295 million surplus recorded in April 2016.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for May 2016 recorded a trade surplus of R8.02 billion. The R8.02 billion surplus for May 2016 is as a result of exports of R10.73 billion and imports of R2.71 billion.
Exports decreased from April 2016 to May 2016 by R1.21 billion (10.1%) and imports increased from April 2016 to May 2016 by R0.32 billion (13.4%).
The cumulative surplus for 2016 is R41.97 billion compared to R42.13 billion in 2015.
Trade highlights by category
The month-on-month export movements (R’ million):
Section: | BLNS: | |
Precious Metals & Stones | - R 554 | - 91.0% |
Mineral Products | - R 345 | - 17.0% |
Machinery & Electronics | - R 146 | - 8.0% |
Vehicles & Transport Equipment | - R 107 | - 7.7% |
Prepared Foodstuff | + R 91 | + 9.3% |
The month-on-month import movements (R’ million):
Section: | BLNS: | |
Precious Metals & Stones | + R 247 | + 1164.3% |
Chemical Products | + R 133 | + 28.6% |
Vehicles & Transport Equipment | - R 18 | - 39.3% |
Machinery & Electronics | - R 23 | - 7.7% |
Textiles | - R 32 | - 7.9% |
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Lesotho’s new Partnership Framework supports improved public sector, private sector job creation
The World Bank Group Board of Executive Directors on 30 June 2016 endorsed a five-year Country Partnership Framework (CPF) for Lesotho, expected to deliver US $154 million over 2016 to 2020 to projects in support of the Mountain Kingdom’s efforts to improve public sector efficiency and effectiveness and promote private sector job creation.
The World Bank Group CPF is aligned with the goals of the Lesotho Vision 2020 and the National Strategic Development Plan 2012 to 2017. The framework outlines proposed investment projects, technical assistance and analytical and advisory services that are aimed at assisting the Government of Lesotho in tackling its priority challenges in line with the World Bank Group’s twin goals of ending extreme poverty and promoting shared prosperity by fostering the income growth of the bottom 40% in every country.
“Through this framework, we will support the Government of Lesotho in its transition to a new growth model driven by private sector investment which will require a reduction in the size of the public sector and improved public sector effectiveness,” said Guangzhe Chen, World Bank Country Director for Lesotho. “We will assist the Government of Lesotho to create space for the private sector to become an engine of growth and employment, in a challenging economic environment with very high unemployment.”
Lesotho’s public expenditure is above 60% of its gross domestic product (GDP) driven largely by a wage bill which is among the highest in the world at 23.1% of GDP. Along with a domestic private sector which is dependent on the state and non-tradable sectors, and several mutually reinforcing volatile events in the last 18-months such as the global commodity price slump rand the severe drought in Lesotho have exacerbated the country’s economic situation.
The proposed program of engagement seeks to achieve results in two strategic focus areas. Firstly, improving efficiency and effectiveness of the public sector through support aimed at helping the Government of Lesotho to improve public sector and fiscal management; improve equity of the social protection system; improve basic education outcomes; and improve health outcomes.
Secondly, promoting private sector job creation through support aimed at improving the business environment and diversifying the economy; improving smallholder agricultural productivity; increasing transport connectivity to facilitate private sector growth; and increasing water and renewable energy supply for industry, agriculture and export opportunities.
“Our partnership with Lesotho strives to help improve the business environment for the private sector, which is critical for job creation,” said Saleem Karimjee, IFC Country Manager. “Building a dynamic and competitive private sector through a sustained effort to diversify the economy is key to private sector growth.”
The CPF was shaped by a series of consultations with key stakeholders including government, development partners and civil society organizations and the private sector. It recognizes the importance of collaborating with other development partners, and elaborates plans to continue to increase efforts to promote communication and transparency between development partners and the government.
The two focus areas include eight strategic objectives expected to lead to strong development results. These priorities emerged from the Lesotho Systematic Country Diagnostic, an evidence based and comprehensive assessment carried out by the World Bank Group on the country’s key challenges, the South Africa Custom’s Union revenue crisis and the severe drought, as well as the Lesotho’s own strategic objectives. These eight priorities are:
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Improving public sector and fiscal management – to achieve a capital budget that is fully derived from the public investment plan, and elimination of irregular HR and payroll cases in the civil service and non-eligible beneficiaries from the Old Age Pension.
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Improving equity of the social assistance system – to increase the percentage of households receiving an expanded Child Grant Program that are in the poorest forty percent of the population.
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Improving Basic Education Outcomes – to reduce drop-out rates in the 300 lowest performing primary and junior secondary schools most of which are located in mountainous and hard to reach poor rural areas.
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Improving health outcomes – to increase average Health Facility Quality – to improve contract management of the Queen Mamohato Memorial Hospital, and improve TB treatment success rate nationwide for new and relapse TB cases.
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Improving the business environment reform and diversifying the economy – to increase progress in the investment climate reform agenda and increase the number of domestic enterprises registered and operating in the non-textile sectors.
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Improving smallholder and MSME agricultural productivity – to increase the household commercialization level in select districts.
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Increasing transport connectivity to facilitate private sector growth – to improve transport connectivity for local agricultural markets and tourist sites and create jobs through road construction and maintenance jobs, and
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Increasing water and renewable energy supply for industry, agriculture and export opportunities – to ensure that bulk water supply works are underway or completed in priority water demand zones, i.e. those with significant industrial, commercial and/or agriculture water demand, identify new viable renewable energy generation projects and complete a feasibility study of the hydropower component of Phase II of the highlands water project.
In addition to financial and technical assistance support, the WBG will also provide advisory services and analytics focusing on understanding the links between jobs, education, growth and competiveness, Under the CPF, the WBG will also undertake a poverty and inequality analysis, private sector diagnostic and, jointly with the government, a review of public expenditure. It will also support financial inclusion and strengthening the pension and insurance sectors, and analyze the impacts of the demographic dividend for Lesotho.
* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 77 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change to the 1.3 billion people who live in IDA countries. Since 1960, IDA has supported development work in 112 countries. Annual commitments have averaged about $19 billion over the last three years, with about 50 percent going to Africa.
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SADC finance and economy ministers in Gaborone for peer review meetings
Trade, industry, finance and investment ministers from the Southern Africa Development Community (SADC) have started a series of regional development peer review meetings which will run from June 28 to July 8.
In a statement, Botswana’s Ministry of Finance and Development Planning said the meetings, which are also set to review progress made on regional economic integration, will be held at the Gaborone International Convention Centre (GICC).
“The meetings will also comprise the SADC Peer Review Panel, which is constituted by regional Ministers of Finance and Central Bank Governors. The meetings will be attended by Senior Officials from the respective Ministries, as well as the officials from the Bank of Botswana.
“The Committee of Ministers of Trade meeting will take place on the 5th July 2016. The Ministerial Task Force on Regional Economic Integration comprising, Ministers responsible for Finance, Trade and Infrastructure will meet on the 6th July 2016, while the Ministers of Finance and Investment and the Peer Review Panel will be from the 7th to 8th July 2016,” said Botswana Finance and Development minister Kenneth Mathambo.
Further, the ministry said the meetings would provide input for regional integration topics set to be discussed at the next SADC Council of Ministers meeting, which is due to be held in Mbabane, Swaziland, in August.
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Mauritius expects 46% leap in foreign investment this year
Mauritius’s government expects foreign direct investment to increase as much as 46 percent this year, even as the United Kingdom’s decision to leave the European Union may curb inflows to the Indian Ocean island nation.
Foreign investors are expected to commit 14 billion rupees ($395 million) by the end of 2016, compared with 9.6 billion rupees last year, Board of Investment Chief Executive Officer Ken Poonoosamy said in a phone interview Tuesday from the capital, Port Louis. The country received 3 billion rupees in the first quarter, Bank of Mauritius data shows. FDI slumped last year from 18.5 billion rupees in 2014, when the $12 billion economy saw several hotel acquisition deals, according to the BoI.
“With uncertainties like Brexit, we need to be very cautious in terms of figures,” Poonoosamy said. The board has some visibility “on projects that have been already been secured,” he said, without elaborating.
The U.K. is the third-biggest source of FDI flows into Mauritius, accounting for about 9 percent of the total, according to a U.S. State Department report. The country is the easiest place in Africa to do business, according to the World Bank, while the African Development Bank ranks it as the most competitive economy in sub-Saharan Africa. The sugar- and textile-exporting nation is targeting becoming a high-income country, which is defined as an economy with a gross national income per capita above $12,735, by 2025. It’s currently $700, according to the World Bank.
Real estate attracts the largest share of FDI in Mauritius, with 80 percent of the amount received in the first quarter of this year invested in the sector. In 2015, 84 percent was plowed into similar projects. The Integrated Resort Scheme and Residential Estate Scheme introduced in 2002 facilitates the acquisition of resort and residential property by non-citizens on the island. International buyers can become Mauritian residents once they acquire a luxury property with a minimum investment of $500,000.
The government has introduced a Property Development Scheme, which will require future developments to contribute social amenities and facilities that benefit the community.
The sugar- and textile-exporting island nation that attracts about 1 million tourists every year projects earning 55 billion rupees from foreigners who will visit this year, compared with 50.2 billion rupees in 2015.
“We are aware of the concentration of FDI in real estate and the BoI is doing everything possible to make sure there is diversification and that we attract investment in other sectors, mainly in manufacturing,” Poonoosamy said, adding that there are several plans by investors to build factories.
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Agriculture powers Kenyan economy to 5.9pc quarter one growth
The economy recorded the highest first quarter growth in five years, helped by good weather, improved security and continued investment in public infrastructure, according to newly released data.
The Kenya National Bureau of Statistics (KNBS) on Thursday said the economy expanded by 5.9 per cent in the first three months of the year compared to five per cent in the same period last year.
The growth – second only to the 7.6 per cent that was recorded in the first quarter of 2011 – is attributed to growth in all segments of the economy.
The KNBS data shows that agriculture, which accounted for 34 per cent of the total production expanded by 4.8 per cent in the first quarter compared to 2.9 per cent in the previous period.
“Agriculture showed marked improvement in the first quarter, mainly buoyed by considerable growth in value addition for key crops such as tea and horticultural crops,” the KNBS said in a statement
Agriculture employs up to 80 per cent of Kenyan workers in rural areas, feeds majority of citizens and provides raw material for agro-based industry.
The economy has also gained from improved security that has encouraged Kenyans to engage in local tourism and buoyed source markets to lift travel bans.
“The most notable improvement was the rebound in accommodation and food services at 12.1 per cent compared to a contraction of 11.4 per cent during the same quarter in 2015,” the KNBS said.
While accommodation and food services accounted for a paltry one per cent of the first quarter production, improved security may have had a multiplier effect as tourist arrivals grew significantly.
The number of international visitors increased 16.8 per cent to stand at 206,978 between January and March compared to a similar period of 2015, much to the relief of hoteliers.
The hoteliers had earlier cut jobs, slashed pay and closed shop in the wake of 2014 travel alerts issued by American and European governments in response to the then frequent terrorist attacks.
“We are optimistic, things are looking up,” said Mohamed Hersi, the chief executive of Heritage Hotels.
The January-March boom extends to electricity generation, transport and mining segments which also recorded significant growth in the first quarter.
The KNBS data shows electricity generation grew by 8.3 per cent in the first quarter of 2016 from 2,235.43 Kwh in the first quarter of 2015 to 2,241.18 Kwh.
The rainfall-linked hydro production expanded by 26.5 while the capital-intensive geothermal generation grew by 4.4 per cent.
Over the same period, diesel-fired power production declined by 17.5 per cent during the period. The KNBS said: “The decline was mainly due to favourable weather conditions experienced during the quarter that necessitated the scaling down of the more expensive thermal generation in favour of hydro and geothermal generation.”
Sectors such as construction, manufacturing and finance however registered slowed growths in the first quarter.
The construction industry – mainly driven by implementation of government’s flagship projects – expanded by 9.9 per cent which was a slowdown when measured against an expansion of 12.6 per cent in a similar period of 2015.
Similarly, the manufacturing defied drop in international oil prices when it registered a slow growth of 3.6 per cent in the first quarter of 2016 compared to 4.1 per cent in 2015.
“The growth of the sector was partly supported by production of beer and stout but dampened by production of soft drinks as well as wheat and maize flour,” KNBS said.
Other segments that pulled down manufacturing activities are the textiles and clothing which declined by 22.0 and 8.8 per cent, respectively, in the first quarter as well as assembly of motor vehicles which dropped by 35.3 per cent.
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tralac’s Daily News Selection
The selection: Thursday, 30 June 2016
Later today: the release of South Africa’s May 2016 trade statistics. The ‘Bloomberg consensus’ is for another trade surplus in May, at R4.1bn, from R0.4bn in April. Standard Bank, however, expects a trade balance of R10.1bn.
Today, in Abidjan: the launch of the ACBF’s 2017-2021 Strategic Plan, Pledging Conference
The ACBF’s new five-year strategy will focus on four ambitious and mutually supportive strategic pillars. Strategic Pillar 1 - Enabling effective delivery of continental development priorities: this pillar targets the capacity development of pan-African institutions - the African Union, NEPAD Agency, and African Peer Review Mechanism - and of regional economic communities to increase their delivery capacities. The expected result by 2021 is increasing the delivery capacities of institutions leading Africa’s transformational agenda. To support these institutions, ACBF will achieve three intermediate results: i) improve its provision of integrated capacity development advisory services to pan-African institutions and RECs, ii) support pan-African institutions and RECs in prioritizing capacity development in their intervention strategies, iii) increase the effectiveness of pan-African institutions and RECs in implementing the continental transformation agenda. [Strategy synopsis, pdf]
Beyond AGOA: the 2016 Biennial Report on the implementation of the African Growth and Opportunity Act (USTR)
The US Trade Representative presented to Congress (Wednesday) a comprehensive report on implementation of the African Growth and Opportunity Act – the cornerstone of the US trade and investment relationship with sub-Saharan Africa. The report is statutorily mandated by Congress under the Trade Preferences Extension Act of 2015 to be submitted one year following the enactment of the Act, and biennially thereafter. Even as the United States works with African partners to maximize AGOA utilization, we are examining ways to enhance the US-Africa trade relationship beyond AGOA. Some countries – including Kenya and Mauritius – have expressed an interest in establishing more mature, long term trade relationships with the United States, including by entering into free trade agreements. The issue of a US-Africa trade relationship that expands beyond AGOA will be a focus of the AGOA Forum in September 2016 and our engagement with sub-Saharan African trading partners going forward. Table of contents (pdf):
Chapter I: The US - Sub-Saharan Africa trade and investment relationships
Chapter II: Country reports
Chapter III: Status of regional integration
Chapter IV: Status of trade capacity building assistance to Sub-Saharan Africa
Chapter V: Potential Free Trade Agreements with Sub-Saharan Africa
USTR report on impact of trade preferences on poverty and hunger
The report’s major conclusions (include): i) Economic research and available data also suggest that preferences are only one element in the larger set of trade policies that help promote development. Addressing supply-side constraints including slow and expensive port transits, costly telecommunications, the time and expense of managing overly complicated trade paperwork, inefficient internal transport and logistics bottlenecks, and other challenges is essential to success in trade, and tariff preferences cannot substitute for policy reforms in these other areas; ii) Preferences are of crucial importance to a number of least-developed countries which do not as yet have the capacity to negotiate and implement comprehensive FTAs.
IGAD, USAID sign agreement to strengthen collaboration on regional development (IGAD)
The activities supported by USAID are in the categories of Agriculture, Natural Resources and Environment; Economic Cooperation, Integration and Social Development; Peace and Security and Corporate Development Services within the IGAD region for the promotion of sustainable economic growth and resilience as well as improvement of management of risks in transcended borders in the IGAD region. The $17m is to strengthen the collaboration relationship and partnership between the two organizations, to outline a common understanding of how the U.S government supports IGAD priorities and to implement programs that will contribute to common goals of USAID and IGAD over the next 5 years. Ms Karen Freeman (USAID Mission Director of Kenya and East Africa) acknowledged the efforts that IGAD has made for some of the region‘s most remote regions to access trade, adding that this has not only promoted prosperity in those regions, but has also delivered better livelihoods to their communities thus putting IGAD in the forefront as a model for Integration as a partner and driver towards the achievements of USAID’s strategy in Africa.
East Africa Business Council in new push for countries to sign EPAs (New Times)
Further delay in signing the Economic Partnership Agreement will hamper East African Community partner states’ export to the European Union market, the East African Business Council (EABC) chief executive, Lilian Awinja, has said. EAC partner states earlier proposed that EPA signing ceremony be held in the first week of August, but the apex body of business associations of the private sector and corporates from EAC countries now recommends July 18, as an apt moment to take advantage of the EU Commissioner for Trade, who will be in Nairobi attending an upcoming United Nations Conference on Trade and Development conference. The EABC expectations are that all EAC partner states’ Ministers of Trade will also attend the conference in Nairobi in July and, therefore, be able to sign the EAC-EU-EPA on the same date to project the region as a functional Customs Union.
Improving the trading environment across the EAC: institutionalising the TIR initiative (Commonwealth)
Through the Export Promotion Council of Kenya, the Government of Kenya requested technical assistance from the Commonwealth Secretariat to develop a strategic action plan to institutionalise the Convention on International Transport of Goods Under Cover of TIR Carnets (TIR Convention), an international transit system. TIR appears to be feasible in Kenya and would also be beneficial to the region if implemented. Transit times and border procedures for exports out of the region via the coastal ports would be reduced thereby lowering costs and increasing export competitiveness. Institutionalising the TIR initiative in Kenya will likely prompt neighbouring countries, particularly EAC and Northern Corridor Member States, to also consider ratification. It is anticipated that the EAC Secretariat will recognise the advantages of the system for exports through transit countries to African continental and global destinations. [The analyst, Sujeevan Perera, is an adviser in the Trade Division, Commonwealth Secretariat]
Electronic SPS certification conference: presentations (Standards and Trade Development Facility, WTO)
The seminar, 28 June, i) reviewed existing international SPS and electronic data exchange standards and considered outstanding standard-setting gaps; ii) reviewed relevant initiatives aiming to streamline the automation of trade procedures and facilitate implementation of paperless trade to identify synergies and good practice; and iii) presented countries’ experiences in the area of exchange of electronic SPS certificates, shared lessons learned, discussed challenges faced and considered capacity building needs for developing countries. [Profiled presentation (pdf): 'Lessons learned from implementation of electronic phytosanitary certification in Kenya']
Geneva Ministerial Declaration: fifth meeting of trade ministers of Landlocked Developing Countries
We urge those LLDCs, which have not done so, to ratify the Multilateral Agreement on the establishment of the International Think Tank for the LLDCs in order to bring the Think Tank to full operation, and invite the Office of the High Representative and relevant organizations of the United Nations system, Member States, including development partners, and relevant international and regional organizations to support the think tank, as it will play an important role in enhancing the analytical capability of LLDCs and provide home-grown research to cater for our specific needs.
South Africa: Understanding the poultry trade (IOL)
Not many countries are involved in poultry trade and not all that many are the recipients of that trade. This is not truly a global production problem, but it is very much a problem for all the developing world markets as most trade is directed at these developing markets. As I will explain below, this impacts the existing industries in those countries and inhibits the establishment and growth of local poultry industries. [Kevin Lovell is chief executive of the SA Poultry Association] [Biosecurity key to ASF control in South Africa]
Uganda-Tanzania oil pipeline project now to begin 2017 (IPPMedia)
TPDC managing director Dr James Mataragio told The Guardian in an exclusive interview on Monday that prerequisite technical and commercial agreements for the $4bn project are in the process of being prepared and everything should be ready by December this year. The much-awaited pipeline project to be implemented by TPDC will enable Uganda to start exporting its sizeable reserves of crude oil via the port of Tanga in Tanzania by 2020. According to Mataragio, two particular documents - the “host government agreement” and “inter-governmental agreement” - will outline the roles of both countries in relation to the project. The pipeline company (PipeCo), whose registration is expected to be completed by the end of the year, will comprise the two governments (Uganda and Tanzania) and the three international oil companies with stakes in the project - Total SA (France), Tullow Oil (UK), and Cnooc Ltd (China – as the main shareholders, he explained. [Uganda to secure Shs8 trillion loan for Malaba-Kampala SGR route]
President Kenyatta wraps up his visit to Botswana (Daily Nation)
President Uhuru Kenyatta has wrapped up his three day State visit to Botswana where he pushed for a review of regulations that limited business and employment opportunities between Kenya and the southern African country. Top on the agenda during the talks was a review of immigration rules that made the obtaining of work permits restrictive. President Khama agreed to review the rules so that Kenyans can continue accessing employment and work opportunities in the country. Kenya and Botswana have agreed to collaborate to develop Kenya’s mining sector where the southern African country’s experience will help.
Botswana: Diamond sales fall again in June (Mmegi)
De Beers yesterday reported that the June sight sales fell for the second consecutive time to $560 million, which the miner regards as a typically slower period of the year. Although the decline in fifth sight sale represented a second straight downward trend, diamond sales this year are still significantly higher than in 2015, a development that would be a boost for Botswana.
Rail the key to unlock growth in Africa (Business Day)
We need to build on that proven maintenance capacity by devising innovative ways to control the value chain. This is where African governments need to make use of regulation. Supply chain industrialisation and growth must be the area of focus; policies must maximise local value-add, and spillovers from foreign direct investment, as well as tackle the fickleness of original equipment manufacturers. The nexus between global industrial networks and African economic growth must not be lost due to inability to control the supply chain of rail investments. [The author, Bongani Mankewu, is CEO of the Rail Road Association of SA]
Innovation in electronic payment adoption: the case of small retailers (WEF/World Bank)
A new study from the World Bank Group and the World Economic Forum estimates the global value of micro, small and medium retailers’ transactions. The total value of these transactions is estimated at $34 trillion, of which $19 trillion is paper-based transactions. Global estimates were extrapolated based on key markets including Colombia ($145bn), France ($950bn), Kenya ($63m), Lithuania ($8bn), Morocco ($96bn), Pakistan ($183bn) and Turkey ($410bn). The study proposes five key insights for companies and governments to move this $19 trillion from cash and checks to electronic payments, as it is safer, reduces the risk of corruption, and enables economic growth. [MIKTA workshop on electronic commerce, McKinsey Global Institute: Digital Europe - realizing the continent’s potential]
Why isn’t there more agribusiness investment in Mozambique? (SPEED)
UNECA's Carlos Lopes appointed Commissioner for the Global Commission on the Economy and Climate (UNECA)
South Africa to launch international migration Green Paper (GCIS)
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Launch of the African Capacity Building Foundation (ACBF)’s Strategy for 2017-2021
Skilled People and Strong Institutions Transforming Africa
Most African countries have engaged deep reforms towards transformation of their economies through the domestication of Agenda 2063 especially its first 10-year Plan and the Sustainable Development Goals (SDGs). Capacity is a defining factor of success in the implementation of these agendas. Capacity development is a defining parameter for a successful implementation of this continental development agenda, to be delivered through a national and continental architecture comprising countries, regional and continental institutions.
To respond to the continent’s capacity development requirements over the next five years, President Alassane Ouattara and the Government of Côte d’Ivoire in cooperation with the African Development Bank will host on 30 June – 01 July 2016 at the Hôtel Ivoire in Abidjan, the launch of the African Capacity Building Foundation (ACBF)’s Strategy for the period 2017-2021 and the 25th Regular Meeting of the ACBF Board of Governors. The Conference will include a Donor Pledging Session and will attract African governments and the continent’s development partners.
The ACBF Strategy for 2017-2021 is anchored on the Foundation’s vision of an Africa Capable of Achieving its Own Development, and aims to produce skilled people and strong institutions that will transform Africa. The Strategy builds on the experience accumulated and the lessons learned by the Foundation over the past 25 years as a leading institution in capacity building and its deep rooting in Africa’s development realities.
Africa’s evolving capacity development landscape
Despite good progress since the turn of the century, capacity deficits remain a major challenge facing African countries in their quest for sustainable development. Those deficits continue to prevent them from implementing their development strategies and policies and from achieving their desired development outcomes. According to the Africa Capacity Report 2015, produced by the African Capacity Building Foundation (ACBF), weak capacity in its various dimensions is still a problem of the continent. Indeed, ACBF’s consultations with a broad cross-section of African governments, private sector, civil society, and development partners show that capacity constraints are most visible in addressing the continent’s major problems.
According to the 2015 Africa Capacity Index, 73% of 45 African countries have medium capacity and 9% have low capacity, while only 18% have high capacity. An ACBF study on the capacities needed to implement the African Union’s Agenda 2063 shows serious gaps in critical technical skills to implement the Agenda’s first 10-year plan. For instance, Africa could have a projected gap of as many as 4.3 million engineers and 1.6 million agricultural scientists and researchers. The study also shows that leadership capacity is particularly important for implementing global, continental, and national strategies – but that it is woefully lacking across the continent. Without an urgent and concerted effort to address this conundrum, Africa will not achieve the Sustainable Development Goals, Agenda 2063, or national development strategies.
Other impediments to achieving the continent’s long-term strategic goals and realizing the ambitious targets in Agenda 2063 include the lack of a systematic approach to creating, using, and retaining capacity. Such an approach would encompass individual, institutional and organizational capacity and an enabling policy, legal, and regulatory environment.
To address this challenge in the next five years, ACBF proposes to build on its strong track record of achievement as the leader in capacity development – and to intensify, in its Strategy for 2017-2021, efforts to fulfill its vision of “an Africa capable of achieving its own development.” For this, ACBF would accelerate and scale up:
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Developing critical technical skills – emphasizing in equal measure, capacity development, capacity retention, and capacity utilization.
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Building key institutions of development – to ensure greater effectiveness, implementation, and sustainability.
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Developing leadership capacity and changing the mindset – to implement global, continental, and national strategies.
ACBF’s Strategy for 2017-2021 builds on the experience it has accumulated and the lessons it has learned over the past 25 years as a leading institution for capacity building. As a pan-African organization, ACBF must continue its journey of moving beyond “simply” providing grants to durably establish itself as a trusted advisor, facilitator, and broker to support capacity development in Africa.
The Foundation will realize this strategic aspiration by providing substantive advisory and capacity development services. This constitutes a major shift from ACBF’s being perceived mostly as a “go-to place for funding” to being the “go-to place for capacity development support.”
Message from the Chairperson of the AU Commission on the occasion of the Pledging Conference for the ACBF
Delivered by the AU Representative, H.E. Madame Josephine-Charlotte Mayuma Kala
It gives me a great pleasure to read to you this message of support and solidarity from the Chairperson of the African Union Commission Dr. Nkosasana Dlamini Zuma, who due to preparations of the upcoming African Union Summit scheduled for 10-18 July 2016, in Kigali, is unable to attend this very important meeting.
She has nonetheless requested me to actively participate in your deliberations and to report back to her as she is keenly interested in the outcome of this exercise, given that the African Capacity Building Foundation is a strong and highly valued partner, particularly in the new context generated by the adoption and implementation of Africa’s long-term vision for social and economic transformation, Agenda 2063.
As we all know, 9th February 2016 marked the 25th anniversary of the establishment of the African Capacity Building Foundation by African countries, bilateral and multilateral development partners.
During the last two decades and a half, the ACBF has provided innovative and cutting edge support on capacity development in Africa. Its work has been exemplary and we take this opportunity to commend its current and past leadership for all that has been achieved. ACBF has done sterling work within its terms of reference.
With the resolute support of some 40 African countries, members of ACBF, a significant number of bilateral and multilateral development organizations, the achievements of ACBF spans many areas in capacity development which were well documented during the 3rd Pan-African Capacity Development Forum held in Harare, Zimbabwe 3-5 May 2016.
Since its inception 25 years ago with the mandate to lead in the building of sustainable human and institutional capacity for good governance and development management in Africa, the ACBF can be said to have accomplished her mission with such a short time. Its key achievements include:
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Designing and implementing capacity development programmes in support of the continent’s public sector with focus on development management, including macro-economic and financial management
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Designing and implementing capacity development programmes in support of the growth of Africa’s science and technology institutions
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Developing the African Capacity Indicator Tool – which is used to assess the capacity levels of African countries
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Provision of funding through the Africa capacity building fund to African think tanks- as of date, such support has nurtured or contributed to the existence of about 25 think tanks. That is these think tanks owe their existence to the African capacity building foundation. ACBF enjoys the confidence of the African think tanks and has been entrusted in being their secretariat.
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Organizing of Pan African Capacity Development fora where practitioners, scholars, the private sector, civil society organizations meet to review and chart out the strategies for Africa’s socio-economic development.
As mentioned earlier, the African continent is now implementing agenda 2063 and its first ten year implementation plan. This is a bold forward looking vision and framework to guide the socio-economic transformation of the continent over the next 50 years. Agenda 2063 represents an Africa confident in itself, and one convinced that by taking ownership of its own development it can create a future free of disease, want, hunger, civil strife and one based on expanded freedoms for all her women, men, youth and children.
Indeed the vision of ACBF: “Africa capable of achieving its own development” is compatible with the spirit and thrust of agenda 2063.
It is therefore not surprising that ACBF played a seminal role in helping the African Union define the capacity imperatives for agenda 2063, an area identified as one of the critical success factors for agenda 2063. The ACBF has facilitated the preparation of capacity building needs for AU organs and the regional economic communities for the implementation of the roles assigned them. In addition, it has prepared a report on the division of labor between the AU organs and the Regional Economic Communities (RECs) with respect to the implementation, monitoring and evaluation of the African agenda.
We take this opportunity to thank the executive secretary for this very important support and contribution.
As we embark upon the challenging task of implementation, I would like to mention also that ACBF has now joined African Union Commission (AUC) and the NEPAD Agency, together with the traditional partners AfDB and UNECA, to work along-side the RECs and in the Bahir Dar Agenda 2063 Ministerial Follow-up Committee, tasked by African Union Heads of State and Government to oversee implementation, monitoring and evaluation of Agenda 2063.
To conclude, it is clear that greater demands are henceforth being placed on ACBF to fulfill its role in this partnership in support of Agenda 2063. ACBF will need to intensify its support to creating the requisite capacities for the joint implementation of agenda 2063 and the SDGs through the first ten year implementation plan, and do so with innovation and sustained action.
Going forward, the ACBF has been tasked with the responsibility of coordinating the efforts to develop the institutional and human capacities for the implementation of Africa’s Agenda 2063 and its first ten year implementation plan.
It goes without saying that not only will additional resources be needed by ACBF, but crucially also sustained partnerships with African countries and bilateral and multilateral organizations. We therefore urge all partners to respond positively to enable ACBF to rise up to the new challenges.
We wish you all a very successful meeting.
Thank you.
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USTR releases 2016 Report on AGOA Implementation to Congress
The U.S. Trade Representative on 29 June presented to Congress a comprehensive report on implementation of the African Growth and Opportunity Act (AGOA) – the cornerstone of the U.S. trade and investment relationship with sub-Saharan Africa.
The report is statutorily mandated by Congress under the Trade Preferences Extension Act of 2015 to be submitted one year following the enactment of the Act, and biennially thereafter.
The 2016 Biennial Report on the Implementation of the African Growth and Opportunity Act details the U.S.-sub-Saharan African trade relationship, analyzes country compliance with eligibility criteria, highlights regional integration efforts, and summarizes the trade capacity building assistance that various U.S. government agencies provide to Africa. The report also provides information, requested by Congress, regarding out-of-cycle AGOA eligibility reviews and potential trade agreements with sub-Saharan Africa.
“This report highlights the important and growing U.S. trade and investment relationship with our sub-Saharan African partners,” said U.S. Trade Representative Michael Froman. “AGOA is a vital part of that relationship and, with the historic ten-year renewal of the program now in place we look forward to working with sub-Saharan African countries to maximize AGOA utilization and to begin exploring a path for a long term, predictable, and mutually beneficial U.S.-Africa trade relationship beyond AGOA.”
AGOA has continued to support non-oil exports and the diversification of African trade with the United States. Sub-Saharan non-oil exports to the United States under AGOA have nearly tripled from $1.4 billion in 2001 to $4.1 billion in 2015, mainly due to increased exports of autos and parts, apparel, fruits and nuts, cocoa, prepared vegetables, footwear, and cut flowers. However, total SSA exports to the United States declined slightly in 2015 due to falling oil and other commodity prices. U.S. exports to sub-Saharan Africa totaled $17.8 billion in 2015, up 202 percent compared to 2000, and U.S. investment stock in sub-Saharan Africa stood at $34.4 billion in 2014 compared to $9 billion in 2001.
Highlights from the 2016 report include:
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Thirty-eight of the 49 sub-Saharan African countries are eligible for AGOA. During the most recent review, Burundi’s eligibility was terminated effective January 2016 due to its failure to meet rule of law, human rights, and political pluralism eligibility criteria.
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South Africa’s AGOA eligibility was reviewed in an out-of-cycle review in July 2015, due to concerns about several longstanding trade barriers, including with respect to U.S poultry, beef, and pork imports. The review resulted in a determination that South Africa was failing to meet the AGOA eligibility criteria, and the issuance of a proclamation suspending AGOA benefits for agricultural products from South Africa. Prior to the effective date of the suspension, however, South Africa took actions to resolve the concerns raised by the Administration, avoiding suspension of its AGOA benefits.
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As African leaders intensify efforts to increase regional integration and link together their markets, U.S. companies are taking advantage of these larger markets that make trade and investment more attractive on the continent. Under African Union leadership, a number of African regional economic communities are moving toward regional and Africa-wide trade and economic integration to promote both continent-wide trade as well as greater engagement in the global trading system.
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A number of U.S. government agencies are supporting African economic development through a range of trade capacity building programs. These include, among others, bilateral and regional initiatives of the Departments of State, Commerce, Agriculture, and Labor, as well as programs of the U.S. Agency for International Development, the U.S. Trade and Development Agency, and the Millennium Challenge Corporation.
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Even as the United States works with African partners to maximize AGOA utilization, we are examining ways to enhance the U.S.-Africa trade relationship beyond AGOA. Some countries – including Kenya and Mauritius – have expressed an interest in establishing more mature, long term trade relationships with the United States, including by entering into free trade agreements. The issue of a U.S.-Africa trade relationship that expands beyond AGOA will be a focus of the AGOA Forum in 2016 and our engagement with sub-Saharan African trading partners going forward.
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E Africa business council in new push for countries to sign EPAs
Further delay in signing the Economic Partnership Agreement (EPA) will hamper East African Community partner states’ export to the European Union market, the East African Business Council (EABC) chief executive, Lilian Awinja, has said.
EAC partner states earlier proposed that EPA signing ceremony be held in the first week of August, but the apex body of business associations of the private sector and corporates from EAC countries now recommends July 18, as an apt moment to take advantage of the EU Commissioner for Trade, who will be in Nairobi attending an upcoming United Nations Conference on Trade and Development conference.
The EABC expectations are that all EAC partner states’ Ministers of Trade will also attend the conference in Nairobi in July and, therefore, be able to sign the EAC-EU-EPA on the same date to project the region as a functional Customs Union.
According to Awinja, the suggested July 18 signing will give partner states ample time to ratify the agreement before October 1, the deadline earlier set by the EU.
Awinja said: “Failure to meet EU deadline on ratification will see EAC exports to EU attract import duty, especially for Kenya which is considered as a developing country, while other four countries (Tanzania, Uganda, Rwanda and Burundi), that are considered Least Developed Countries (LDCs), may be forced to opt for everything but army trade arrangement that has more complicated rules of origin.
The EABC has indicated it intends to petition EAC partner states to sign the deal.
Meanwhile, come January 1, 2017, according to EABC, Kenya is expected to be removed from the EU’s generalised scheme of preferences trade regime for live plants and floriculture products, hence attracting even more duties under the ‘most-favoured nation’ rates.
EABC says this scenario – which Kenya wishes to avoid – implies that Kenyan exporters would be subjected to import duties of between 5 per cent and 8.5 per cent.
According to Awinja, the economic and social loss to Kenya will be catastrophic, worsening the consequences of missing the deadline for EAC- EU EPA ratification.
Interacting with an EABC delegation in Brussels, this week, the Director-General of Business Europe, Markus Beyrer, said, on June 20, the Council authorised, on behalf of the EU, the signature and provisional application of the EPA between the EU and the EAC.
Business Europe is a business lobby agency.
The EPA, an agreement based on the principle of asymmetrical market opening, meaning that it provides a better access to the EU market for ACP partners, intends to enhance regional integration and economic development in African, Caribbean and Pacific (ACP) countries.
The deal, which is expected to replace the previous market access regime of unilateral preferences for ACP countries, offers unprecedented market opportunities for agricultural and fisheries products.
Tough times for Kenya
EABC says Kenya faces a tough choice as the clock ticks towards the October 1 deadline for the ratifying of the EPA with EU.
It is not clear whether it is possible for Kenya to ratify the agreement on its own so that its exporters can benefit from duty-free exports to the EU market or whether it must be ratified collectively with other partner states.
Burundi, Rwanda, Uganda and Tanzania have an option to rely on the ‘everything but army trade’ regime, where they have duty-free market access to the EU.
But Kenya, the biggest economy and the only non-Least Developed Country in the EA region, heavily relies on the EU – which represents 30 per cent of its export market – for selling its cut flowers, tea, vegetables and fish.
This was among the key trade issues that featured prominently during the EABC engagement with the Kenya’s deputy President William Ruto in Nairobi last week.
It was decided that EABC should engage all EAC partner states to enlighten them on the importance of ratifying the comprehensive EPA.
“The EABC will write to EAC partner states respective trade and industry ministers’ to underline the urgency of signing the deal, well before July 18,” Awinja said.
Emmanuel Hategeka, the permanent secretary at the Ministry of Trade and Industry, said Rwanda is still going by the previous decision of the Sectoral Council.
Hategeka said: “We haven’t been petitioned yet. We haven’t received any particular request to fast-track the signing. But the good thing is that all of us are ready to sign as per the earlier agreed on dates of signature. I think the EU is also still struggling with Brexit and we are monitoring events as they unfold.”
EPA negotiations
Negotiation for EPA between EAC and EU started in 2007 initialing the framework on November 27 that year. But the two blocs failed to agree, resulting in postponement of the deadline several times.
In October 2014, after nearly one decade of grueling negotiations, the EAC finalised negotiations for a region-to-region comprehensive EPA, covering trade in goods and development cooperation, with European Union.
The deal, which is in line with the EAC Common External Tariff, supports the EAC’s ambitious regional integration project and is expected to be signed and ratified by October 2016.
In signing it, the EAC committed to liberalise up to 82.6 per cent of all its imports from the EU by 2033.
According to the EABC, extensive liberalisation is based on the argument that the region needs cheap intermediate goods to be used as inputs in production processes, and finished products whose availability at lower costs is deemed to have consumer welfare-enhancing effects.
Beyond the elimination of customs duties, the agreement covers such issues as free movement of goods, cooperation on customs and taxation, and trade defence instruments, which mirror EAC efforts to strengthen its customs union and set up an effective internal market.
Those who oppose the deal, including East African Legislative Assembly (EALA) MP Dr James Ndahiro, a Rwandan economist, are of the view that the agreement is “lopsided” as EAC countries do not have the requisite competitive edge given their small industrial base, among others.
According to Ndahiro, for example, EU countries spend more than Euro 90 billion on agricultural subsidies and, as such, EAC agricultural products, that are not equally heavily subsidised, cannot compete fairly.
But PS Hategeka insists “we all benefit” since it is all about removing the unilateral Cotonou Agreement, a treaty between the EU and the African, Caribbean and Pacific Group of States signed in June 2000 in Cotonou, Benin, by 78 ACP countries (Cuba did not sign) and the then 15 EU Member States.
The Cotonou Agreement, Hategeka said, is not compatible with the reciprocity that is required by World Trade Organisation.
“The EPA is going to be a reciprocal agreement that clearly takes into account the stage of development at which EAC countries are at present. That’s why there is a big development chapter in it. We aren’t opening up our markets immediately,” Hategeka said.
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Small retailers transact $19 trillion in cash annually, new WEF-World Bank Group study shows
The World Bank Group and the World Economic Forum estimated for the first time ever the value of transactions from micro, small and medium retailers globally. It totals $19 trillion in cash and checks and $15 trillion in electronic payments.
A new study from the World Bank Group and the World Economic Forum estimates the global value of micro, small and medium retailers’ transactions. The total value of these transactions is estimated at $34 trillion, of which $19 trillion is paper-based transactions. Global estimates were extrapolated based on key markets including Colombia ($145 billion), France ($950 billion), Kenya ($63 million), Lithuania ($8 billion), Morocco ($96 billion), Pakistan ($183 billion) and Turkey ($410 billion).
Findings from the study will help companies, government and nonprofits understand the barriers and incentives for people to pay electronically. Acceptance of electronic payments by micro, small and medium retailers is essential to expanding financial access. A basic transaction account for payments and deposits is an entry point to the formal financial system and acts as a gateway for people to use other relevant financial services they need to smooth their consumption and manage income shocks. The case for payment services becomes increasingly compelling as individuals gradually move to a cashless economy, where electronic payments are widely accepted for regular and frequent purchases.
Gloria Grandolini, Senior Director, Finance & Markets, World Bank Group said: “While many foundations and drivers exist for achieving financial access and inclusion, the potential impact of extending the use of digital financial services through a more widespread acceptance of electronic payments among small retailers is substantial.”
Global transactions from customers to micro, small and medium retailers
Matthew Blake, World Economic Forum, Head of Banking and Capital Markets said: “Moving away from cash toward electronic payments can have substantial socioeconomic benefits. Moreover, substantial business opportunities and avenues for public-private cooperation exist in better serving the micro, small and medium segment.”
The study is part of an ongoing collaboration between the Promoting Global Financial Inclusion initiative, World Economic Forum and the World Bank Group. Support for the study comes from the Netherlands’ Ministry of Foreign Affairs and the Bill and Melinda Gates Foundation provided through the World Bank Group’s Financial Inclusion Support Framework (FISF) program as well as from the SME Finance Forum.
» Download: Innovation in Electronic Payment Adoption: The case of small retailers (PDF, 8.75 MB)
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Fifth Meeting of Trade Ministers of Landlocked Developing Countries: Geneva Ministerial Declaration
We, the Ministers and officials responsible for trade of the Landlocked Developing Countries (LLDCs), have met in Geneva, Switzerland on 23 and 24 June 2016 and have held our deliberations under the theme – Harnessing the trade potential of the LLDCs to accelerate the implementation of the Vienna Programme of Action and the 2030 Agenda for Sustainable Development,
Recognizing that the lack of territorial access to the sea, aggravated by remoteness from world markets and high transit costs and risks, impose constraints on export earnings, private capital inflow and domestic resource mobilization of landlocked developing countries and therefore adversely affects their overall growth and socioeconomic development,
Emphasizing the potential benefits of a fair and balanced multilateral trading system for achieving a rules-based, open, predictable, inclusive, non-discriminatory and equitable trade environment, which would provide every country, regardless of its territorial size, population, or level of development the opportunity to effectively and beneficially participate in global trade;
Underlining the importance of addressing the trade-related challenges of the LLDCs that includes reducing trade costs at the border, between borders and behind borders, and addressing other supply-side constraints in order to increase the LLDCs’ trade competitiveness; improving the market access for their products; and enhancing structural transformation in order to help diversify their product and markets.
Underlining the need to adopt general and specific support measures for LLDCs in the WTO, as well as in other relevant trade fora, taking into account the particular needs and special problems of these countries, and stressing that full attention should be given to the interests of Landlocked developing countries on the remaining Doha issues.
Recalling the Vienna Programme of Action for Landlocked Developing Countries for the Decade 2014-2024, adopted in November 2014, which provides a comprehensive plan of action for the next decade to address the special challenges and needs of landlocked developing countries,
Recalling the Livingstone Call for Action for the Accelerated Implementation of the Vienna Programme of Action adopted at the High-Level Follow-up Ministerial Meeting to the Vienna Conference held in Livingstone, Zambia, in June 2015 that highlights key measures and initiatives required to accelerate implementation of the Vienna Programme of Action,
Underlining the thrust and the momentum created by the United Nations outcome document of the Post-2015 Development adopted on 25 September 2015, entitled “Transforming our world: the 2030 Agenda for Sustainable Development”,
Recalling also the Addis Ababa Action Agenda of the Third International Conference on Financing for Development, that is an integral part of the 2030 Agenda for Sustainable Development,
Recalling also the Paris Agreement arising from the twenty-first session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC),
Recalling further the Ministerial Meetings of the Group of LLDCs at the margins of the 10th Ministerial Conference of the WTO held in Nairobi, Kenya on 19 December 2015 and 9th Ministerial Conference held in Bali, Indonesia, on 6 December 2013, in which LLDC’s Ministers adopted Ministerial Communiques that raised outstanding issues concerning the participation of LLDCs in the multilateral trading system,
Have adopted the following Ministerial Declaration:
Development Objectives
1. The 2030 Agenda for Sustainable Development acknowledges that international trade is an engine for inclusive economic growth and poverty reduction, and contributes to the promotion of sustainable development for countries. The structural transformation, including modernization and specialization of the productive sectors and improving physical infrastructure has to be done in order to harness the potential of international trade, to support national development objectives and to achieve United Nations Sustainable Development Goals.
2. We stress that the implementation of The 2030 Agenda for Sustainable Development through the revitalized Global Partnerships based on a spirit of strengthened global solidarity, focused in particular on the vulnerabilities and special needs and challenges facing landlocked developing countries. Thus we urge international community to facilitate an intensive global engagement in support of implementation of the sustainable development goals and targets, mobilizing all available resources to that end.
3. We recognize that the increased frequency and intensity of disasters generated by climate change is exacerbating the economic and social vulnerability of LLDCs and jeopardizing the achievement of sustainable development by severely disrupting trade and investment, as main engines of growth and development. We call for more coherence with the Sendai Framework for Disaster Risk Reduction adopted at the Third UN World Conference on Disaster Risk Reduction (May 2015, Sendai, Japan) that urges Governments to integrate disaster risk reduction into national policies and programmes as a key tool to ensure the sustainability of development gains and the achievement of resilience, and to enhance LLDCs’ implementation capacity and capability through the mobilization of support and international cooperation based on their national priorities; with the same goal we also call governments for the compliance of the principles and provisions of the UNFCCC.
4. Comprehensive, coherent and coordinated policies are needed at all levels in the areas of investment, infrastructure (production, transport, telecommunications and energy), logistics (transport and trade facilitation), technology, to support efforts of LLDCs towards mitigating the adverse development impact of landlockedness,
5. We call upon the international community to assist with the design and development of studies and indicators on the impact of landlockedness and vulnerability of landlocked countries that would serve as early warning mechanism to assess external shock vulnerability.
6. There is a need for concerted measures and actions to support LLDCs’ efforts to reduce commodity dependence, including through the diversification of their export base, and enhanced processing of the commodities. We call upon the international community to enhance efforts to support LLDCs including through the EIF and other programs, in diversifying their exports, through - inter alia - the transfer of relevant technologies, support to developing and strengthen their productive capacities, and capacity building in developing relevant policies;
7. We underline that the development and maintenance of transit transport and information and communications technology infrastructure are crucial for landlocked developing countries in order to reduce high trading costs, improve their competitiveness and become fully integrated in the global market;
8. We emphasize that a strong energy infrastructure in LLDCs is needed to advance the development of domestic productive capacity and to better connect to the regional and international markets. We call on the international community to enhance its support to create such infrastructure in our countries. In this context, we also reemphasize that resources should be mobilized for the production, distribution and marketing of clean energy;
9. We stress that the magnitude of the resources required to invest in infrastructure development and maintenance remains a major challenge and requires forging international, regional, subregional and bilateral cooperation on infrastructure projects, allocating more from national budgets, effectively deploying international development assistance and multilateral financing in the development and maintenance of infrastructure and strengthening the role of an accountable private sector, Public-Private Partnerships as well as other innovative means of finance;
10. We welcome the launch of the Global Infrastructure Forum, led by the multilateral development banks (MDBs), on 16 April 2016 in Washington, DC. We stress that the Forum should address the infrastructure needs of the landlocked developing countries in a focused manner;
11. We welcome the fact that the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda recognize the special needs of the landlocked developing countries and emphasize the importance of strong synergy in their implementation and the Vienna Programme of Action and encourage coordination and coherence in the follow-up of their implementation;
World Trade Organization
12. We call upon the WTO membership to continue to strengthen the negotiation function of WTO to make it more transparent, inclusive, and participatory, in order to deliver meaningful outcomes for landlocked developing countries. We insist that the post Nairobi work should be fair, balanced and development-centered.
13. We call for a rapid ratification and implementation of the Trade Facilitation Agreement. We urge members to continue to provide technical, financial and capacity building assistance to LLDCs, on a sustainable basis, for the effective implementation of the Agreement. We also call for the constructive cooperation of transit countries for the effective and early application of disciplines that contribute to reducing transit time and costs, simplifying procedures and enhancing certainty in trans-border trade.
14. We call upon international organizations to establish special facilities and dedicated programmes, with predictable resources, for the LLDCs, such as the WTO’s Trade Facilitation Agreement Facility, to assist LLDCs in scaling-up trade facilitation initiatives and implementing the Trade Facilitation Agreement and other important international conventions and regional agreements;
15. We emphasize the critical importance of Agriculture to the LLDCs economies. In this context, we attach importance to the continuation of the reform process in order to promote market access, and reduce or eliminate all distortive domestic support measures. We reiterate the importance of the decision of the WTO Nairobi Ministerial Conference on Export Competition and we call upon for its rapid implementation.
16. We reiterate our support to the Sectorial Initiative in favour of Cotton (C4) that calls for the ambitious reduction of the agricultural domestic support which distorts the international cotton market. We urge Members to implement the Ministerial Decisions on Cotton in all its aspects: Market Access, Domestic Support, Export Competition, and Development.
17. We recognize the growing role of the services sector in modern economies, in particular, the importance of the tourism sector, finance and ICT, and that an efficient and productive services industry will contribute significantly to productivity growth and for the overall competitiveness of landlocked developing countries’ economies. In that regard, we affirm our commitment to develop the service sector and call on Members and international organizations to support landlocked developing countries’ to develop their services sectors. Also, special attention should be given to the development of the manufacturing sector as a critical catalyst for technological change and structural transformation of LLDCs economies.
18. We believe that the principle of Special and Differential (S&D) treatment represents one of the cornerstones of the WTO Agreements and that the reaffirmation of this principle should be an integral part of WTO's work, as well as, any future agreements and decisions.
19. Aid for Trade, including EIF, is essential for our countries to meaningfully benefit from the multilateral trading system. We reiterate our request that development assistance provided in the context of the Aid for Trade initiative should consider the special needs and requirements of LLDCs, including capacity-building for the formulation of trade policies, participation in trade negotiations and implementation of trade facilitation measures, development of trade-related infrastructure as well as the diversification of export products and strengthening of productive capacities with a view to increasing the competitiveness of LLDCs’ products in export markets;
20. We also urge Members to take into account the special needs and problems caused by the geographical disadvantage of being landlocked that during the accession process of LLDCs to the WTO. As such, the accession process for LLDCs should be further simplified and these countries should be provided with adequate technical and financial assistance.
21. We recognize the significant contribution to the strengthening of the multilateral trading system of the LLDCs that acceded under Article XII of the Marrakesh Agreement Establishing the WTO. For a balanced outcome of trade liberalization negotiations, we stress the need to take into account the extensive commitments undertaken by the Article XII Members upon their accession to the WTO.
Partnership and International Support
22. Partnership between landlocked developing countries and transit countries is mutually beneficial for the improvement and constant maintenance of their multi-modal transport infrastructure connectivity and of technical and administrative arrangements in their transport, customs and logistic systems. Collaboration must be promoted on the basis of the mutual interests of both landlocked and transit countries. We underscore the importance that transit countries guarantee free and unrestricted transit through their territories for landlocked developing countries allowing the enjoyment of a free and direct access to high seas.
23. Efficient transit transport systems, strong collaborative efforts in infrastructure development and interlinkage, the promotion of an enabling legal environment and institutional arrangements, and strong national leadership on cooperative arrangements between landlocked developing countries and transit countries are also crucial for achieving structural transformation and sustainable economic growth and development.
24. We call upon our bilateral and multilateral partners to increase their technical and financial assistance to LLDCs to support their efforts to overcome the obstacles imposed by geography and to integrate them into the multilateral trading system. Official Development Assistance remains the main source of international financing for many landlocked developing countries as a catalyst for development, facilitating the achievement of national development objectives, including achieving sustainable development goals and the objectives of the Vienna Programme of Action; This assistance should complement our national efforts aimed at diversifying the domestic production structure and ensure a better integration into the global economy with competitive goods and services that minimize transaction costs related to the specific geographical situation of LLDCs.
25. We emphasize the complementary and catalytic role played by long-term international capital flows, particularly, foreign direct investment. We commit to continue promoting conducive policies to attract foreign direct investment that leads to promote trade as well as sustainable development of LLDCs;
26. We invite developing countries, guided by the spirit of solidarity and consistent with their capabilities, and developed countries to further strengthen partnerships in mutually agreed areas of cooperation within the framework of North-South, South-South and triangular cooperation to enhance diversified trade opportunities, increase foreign direct investment flows that contribute to the sustainable development of LLDCs, as well as increased transfer of appropriate technology;
27. We express our appreciation to the cooperation provided by the organizations of the United Nations system, in particular UNCTAD, UN-OHRLLS, UNDP, UNIDO, UNISDR, UNCITRAL the UN Regional Economic Commissions and other international organizations, especially WTO, WCO, CFC, IRU, ITC, the World Bank and the regional development banks, regional organization, regional economic communities. We appeal further for synergetic approach on the part of all stakeholders and partners.
The Way Forward
28. We emphasize the need to strengthen the participation of LLDCs in the WTO, giving particular attention to the future work programme of LLDCs as well as in the negotiation to eliminate trade distorting measures, increase market access with particular emphasis on our development needs and supporting the accession process of the landlocked acceding countries.
29. We stress the importance to have a specific Work Programme for LLDCs by the 11th Ministerial Conference. This Work Programme will address the special needs, challenges and vulnerabilities of LLDCs in order to increase their participation in the Multilateral Trading System. Key areas of work are Trade Facilitation, Agriculture, Aid for Trade, Services, Accession, among others.
30. We recognize that LLDCs, including through their Missions in Geneva, need to strengthen their substantive cooperation with UNCTAD on matters of particular interest to LLDCs, including trade, development and interrelated issues in the areas of finance, technology, investment and sustainable and inclusive development.
31. We urge those LLDCs, which have not done so, to ratify the Multilateral Agreement on the establishment of the International Think Tank for the LLDCs in order to bring the Think Tank to full operation, and invite the Office of the High Representative and relevant organizations of the United Nations system, Member States, including development partners, and relevant international and regional organizations to support the think tank, as it will play an important role in enhancing the analytical capability of LLDCs and provide home-grown research to cater for our specific needs.
32. We request the relevant United Nations Organizations, particularly UNCTAD, UN-OHRLLS, UNDP, UNIDO, UNISDR, UNCITRAL, the UN Regional Economic Commissions, other international organizations, especially, WTO, WCO, CFC, IRU, ITC, the World Bank, regional development banks, regional organizations, regional economic communities, national parliaments, the private sector, the civil society and other stakeholders to support the implementation of the VPoA;
33. We stress that in accordance with the mandate given by the General Assembly, the Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States should ensure coordinated follow-up to and effective monitoring of and reporting on the implementation of the Vienna Programme of Action, and to undertake advocacy efforts at the national, regional and global levels and we also stress that the Office, in collaboration with other relevant stakeholders, should work on developing relevant indicators for measuring the progress on implementing the Programme of Action in landlocked developing countries, within their existing mandates.
34. We invite partner countries and the international financial and development institutions to make voluntary contributions to the Trust Fund established by the Secretary-General to support the activities related to the follow-up to the implementation of the VPoA.
Acknowledgment
We express our sincere appreciation for the efforts undertaken by Paraguay in its capacity of Coordinator for trade and development issues of the Group of Landlocked Developing Countries in Geneva, and by Zambia in its capacity as the Global Chair of the Group of LLDCs in New York.
We express our gratitude to the Government of the Kingdom of the Netherlands for its generous contribution to the successful organization of the High Level Meeting.
We express our gratitude to the substantive support and financial contribution of the World Trade Organization Secretariat and the Office of the High Representative for LDCs, LLDCs and SIDS to the Meeting.
We also express our appreciation to the Plurinational State of Bolivia that is going to organize the next meeting of ministers of transport of LLDCs in September 2016.
We also note with appreciation the active participation and substantive contributions of other development partners, UN system organizations, other international organizations, the Private Sector, Civil Society, and other stakeholders.
Geneva, 24 June 2016
Related News
USTR releases report on impact of trade preferences on poverty and hunger
The Office of the U.S. Trade Representative on 29 June 2016 released a report to the Congress assessing the contribution of U.S. trade preference programs, including the Generalized System of Preferences (GSP), the African Growth and Opportunity Act (AGOA), and the Caribbean Basin Economic Recovery Act (CBERA), on poverty and hunger, as provided for in the Trade Preferences Extension Act of 2015 (TPEA).
For decades, these preference programs have waived tariffs on thousands of goods sourced from developing countries meeting certain eligibility criteria. In 2015, the three preference programs provided duty-free treatment to about $27 billion of goods from 126 beneficiary countries and territories. This accounted for about 1.3 percent of the United States’ $2.2 trillion in total goods imports, and 13 percent of the $212 billion in all goods sourced from the beneficiary countries.
“President Obama has made promoting development a core objective of trade policy,” said U.S. Trade Representative Michael Froman,“building on a long bipartisan tradition of using trade policy to encourage growth, improve food security, and alleviate poverty. The report we release today shows how GSP, AGOA, and CBERA have contributed to the last decade’s remarkable declines in poverty and undernourishment, and their human impact in countries as diverse as Haiti, Tunisia, Kenya, and Cambodia. But tariff preferences are also only part of the picture. Addressing supply-side constraints to trade, including weaknesses in the business environment, are essential for trade to deliver its full development benefit.”
U.S. preference programs aim to support domestic reforms and economic growth through trade. In renewing the three preference programs in June 2015, Congress requested a review of their contribution to the alleviation of poverty and hunger in the beneficiary countries. The resulting report surveys the data and empirical research on the benefits of trade for higher economic growth, reduced poverty, and the alleviation of hunger. It also evaluates the links between U.S. preference programs and increased trade with beneficiary countries and the effects on reducing poverty and eliminating hunger, and highlights preference successes in seven countries.
The report’s major conclusions are as follows:
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The preference programs have made a valuable contribution to the reduction of poverty, and the alleviation of hunger in beneficiary countries. They remain an important element of American trade and development policy overall, and are important to U.S. relationships with beneficiary countries.
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The impact of duty-free treatment on the reduction of poverty and hunger may begin to wane, however, in light of an overall drop in tariff rates worldwide, including through the negotiation of free trade agreements.
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Economic research and available data also suggest that preferences are only one element in the larger set of trade policies that help promote development. Addressing supply-side constraints including slow and expensive port transits, costly telecommunications, the time and expense of managing overly complicated trade paperwork, inefficient internal transport and logistics bottlenecks, and other challenges is essential to success in trade, and tariff preferences cannot substitute for policy reforms in these other areas.
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Preferences are of crucial importance to a number of least-developed countries which do not as yet have the capacity to negotiate and implement comprehensive FTAs.
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International transit scheme to improve trading environment across the East African Community
By reducing the time and costs of trading, integrated transit mechanisms are important for boosting trade and enhancing competitiveness in landlocked countries. The net impact of reductions in trade costs – including through transit facilitation – on households, firms and governments, can be positive depending on how complementary investments and regulations are at the national and regional levels.
The adoption of the Transports Internationaux Routiers (TIR) system is one viable option to facilitate trade in the East African Community, particularly by increasing transparency in trade facilitation. Through the Export Promotion Council of Kenya (EPC) the Government of Kenya requested technical assistance from the Commonwealth Secretariat to develop a strategic action plan to institutionalise the Convention on International Transport of Goods Under Cover of TIR Carnets (TIR Convention), an international transit system.
Prevailing situation
Landlocked countries experience isolation, lack of territorial access to the sea, remoteness from world markets, and high transport and transit costs. These factors impose serious constraints on socio-economic development including trade competitiveness and the potential for productive integration in the global economy. Of the five countries in the East African Community (EAC), Burundi, Rwanda and Uganda are landlocked. In order to reduce the region’s cargo transit costs and delays, Kenya has taken an initiative to institutionalise international transit regime, TIR. Kenya’s standalone implementation of the TIR would have limited benefit and impact. To be effective, TIR should be rolled out within EAC.
The TIR initiative in Kenya should be a trigger for neighbouring countries, particularly EAC Member States, to also consider ratification. It is anticipated that the EAC Secretariat will recognise the advantages of the system for exports, through transit countries to African continental and global destinations. Intra-regional trade, which is of strategic importance to the East African region, is set to grow with the operationalisation of the Tripartite Free Trade Area (TFTA), the proposed African free trade agreement between the Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC) and East African Community (EAC). The TIR can increase transparency in the freight forwarding and trucking sector but governments might have to support entry in the market (by supporting upgrades to domestic fleets) and enhance competition (by reducing non-tariff barriers to logistic services) to allow the system to substantially increase the efficiency of trade logistics. Importantly, the TIR has the potential to add value to existing road transport instruments.
TIR landscape in East Africa
The geographical location of Kenya, combined with the status of Mombasa as a key transit port for neighbouring economies, particularly EAC Member States, as depicted in the map below, underlines the rationale for ratifying and implementing the TIR Convention. Both the Northern Corridor and the planned LAPSSET Corridor, fed by an enhanced Lamu Port, would derive significant benefit from a transit regime streamlined within a TIR environment. The planned improvements in Mombasa Port and the surrounding infrastructure should affirm the position of the facility as the principal transit port for East Africa, the implementation of TIR can only further support this desire. Additionally, planned multimodal innovation, particularly involving railway modernisation and expansion, would benefit from the TIR environment.
Multimodal operations are just as dependant on sound processes and procedures, of which TIR is one, for success as they are on infrastructure development. New transit regimes such as the Electronic Cargo Tracking System (ECTS), have proved to be important trade and transit facilitation innovations but much more needs to be done to reduce transit times and transport costs in the region. Transit delays are generally due to bureaucratic border formalities, lack of integrated border management and unreliable transport and/or haulage units. Leakage of transit cargoes into the EAC domestic economies is a concern for revenue authorities, which have introduced measures such as ECTS to mitigate this risk. As the only internationally recognised transit facilitation protocol, TIR would clearly enhance regional transit via Kenyan ports. The international guarantee and supply chain security elements would combine to improve cross-border trading systems involving transit.
Findings of feasibility study to institutionalise TIR in Kenya
The Export Promotion Council of Kenya (EPC) worked with the Trade Competitiveness Section of the Trade Division in the Commonwealth Secretariat to develop a strategic plan of action to institutionalise the TIR Convention.
Prior to developing the strategic action plan in 2015 a feasibility study was conducted. Through comprehensive research, discussions and stakeholder interviews it was concluded that significant benefits would accrue from the introduction of TIR as an option for transit arrangements, both in Kenya and in the EAC Region.
Kenya was ranked 74 in the 2014 World Bank Logistics Performance Index rising from 122 in the 2012 survey, and it was placed second in the top 10 low-income performers. The Trading Across Borders section of the International Finance Corporation’s (IFC) Ease of Doing Business Report for 2015 ranks Kenya at 153 against a ranking of 152 in the 2014 report. This slight fall may seem insignificant but it suggests that trade facilitation implementation may be stalling or slowing down. However, the Logistics Performance Index result is encouraging. Taken together these results suggest that appropriate trade facilitation tools may be required to address any slowdown in trade facilitation benefits. In the context of new initiatives the results also indicate the logistics environment has reached a level of maturity that would make the implementation of TIR very feasible.
All key stakeholders were engaged at all stages of the study. Several multi-stakeholder sensitisation and dissemination workshops were held in Nairobi and Mombasa. The TIR concept was well received as stakeholders recognised the trade facilitation implications of the introduction of TIR. There was general consensus on achieving export growth both for Kenya and regionally by facilitating cross-border trade and reducing the cost of transportation to enhance overall competitiveness. The TIR system was recognised as being a potential element of this process.
In order to meet TIR standards transport operators will have to be persuaded that increased investment in their fleets will benefit their businesses. The business case will need to be robustly articulated:
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TIR is seen as a quality guarantee and will attract increased business to the operator.
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Newer vehicles use less fuel resulting in considerable savings in variable costs.
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Newer vehicles will be more reliable, require less maintenance and give better value.
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Reduced border delays will provide for more efficient utilisation of vehicles.
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May be possible to link with Authorised Economic Operators (AEO) accreditation for transport operators.
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There would be sound economic and environmental benefits in encouraging procurement of new units focussing on funding mechanisms to procure TIR compliant vehicles and/or consider a possible leasing option.
Concerns were expressed that TIR could become an additional cost to trade rather than a facilitation initiative. Although this is not the case, it will be important to emphasise and quantify the benefits to trade of faster more efficient and secure transit operations. The key will be to control any tendency for transport operators to pass on the cost of fleet enhancement to the trade, as most traders may be unwilling to pay higher inland haulage costs. Any increase in average inland haulage costs could also adversely impact on Kenya’s rating in the IFC Ease of Doing Business report since it would run counter to the benefits of introducing TIR. Any cost-benefit analysis must be holistic and include savings as a result of elements such as improved supply chain security, reduced transit times, potential for lower insurance premiums and improved supply chain predictability for traders.
What are the advantages for Kenya?
The implementation of the TIR system will be an important catalyst for increased exports from Kenya. The feasibility study identified the following advantages:
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Reduced transit times and thus cost in relation to transit cargoes.
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Facilitation of exports and imports to and from trading partners in Europe, the Middle East and other regions where the TIR Carnet is in use.
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Mitigation of risk to transit cargo entering the domestic market and consequential loss of revenue.
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Adds value to multimodal operations, particularly as railway infrastructure comes on line.
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More competitive exports outside the EAC Region (and inside prior to full Single Custom Territory implementation.)
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Improved road haulage fleet, increased efficiency in road transport and environmental benefits.
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Incentive for regional harmonisation of practice for transit cargoes.
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Improved supply chain security with consequential benefit to Government of Kenya and trade.
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Improved supply chain security with consequential benefit to government and the trade sector.
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The TIR system is highly automated with applications that permit electronic predeclarations to customs authorities, risk management and real time traceability of the Carnet. The eTIR system should be able to link with national customs systems such as AYSCUDA and Single Window.
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Kenya will become the ‘thought leader’ on TIR in the EAC region and a central player in its implementation.
From the Kenya Revenue Authority’s (KRA) perspective initial indications are that TIR, as a trade facilitation measure will enhance risk management in relation to transit cargoes. The international guarantee system will cover leakages of transit cargoes when they do occur so that revenue due will be ultimately protected. Whilst the new system of duty pre-payment in Mombasa also mitigates risk of loss TIR could provide an efficient alternative or parallel system with added value benefits.
Due to the importance of Kenya’s economy in the region and the significance of Mombasa Port, Kenya should be an obvious choice for the first country to ratify TIR in sub-Saharan Africa. Consequential benefits of TIR will be greatly expanded if neighbouring countries follow this lead and ratify the convention.
Outcome of the Commonwealth Secretariat intervention
TIR appears to be feasible in Kenya and would also be beneficial to the region if implemented. Transit times and border procedures for exports out of the region via the coastal ports would be reduced thereby lowering costs and increasing export competitiveness.
Institutionalising the TIR initiative in Kenya will likely prompt neighbouring countries, particularly EAC and Northern Corridor Member States, to also consider ratification. It is anticipated that the EAC Secretariat will recognise the advantages of the system for exports through transit countries to African continental and global destinations.
Intra-regional trade, which is of strategic importance to the region, is set to grow with the operationalisation of the Tripartite. The TIR has the potential to add value to existing road transport and trade facilitation instruments.
Implementation of TIR for the region’s imports, if the regional legal framework allows, could enable goods moving under TIR to be released from the coastal ports very quickly. They would move under customs control with a secure guarantee, paying duties and undergoing final clearance at the final destination. TIR would therefore reduce border delays and help clear the ports. Importantly it would also solve the challenge around repayment of duties to another customs authority should goods disappear in the transit country after duties have already been paid in the destination country.
This intervention by the Commonwealth Secretariat has led the East African Community Secretariat to consider incorporating TIR in the EAC Transport Strategy and Regional Roads Sector Development Programme. The EAC Secretariat is also considering TIR as an option in its upcoming study of regional transit schemes, which is due to get underway in 2016. There is a move to propose the ratification of TIR to the EAC Council of Ministers as an option for trade facilitation, subject to any other required studies and stakeholder buy-in, including by the revenue authorities.
Sujeevan Perera is an adviser in the Trade Division. He contributes to the design and implementation of initiatives related to trade facilitation, customs modernisation, supply chain audits, port productivity and market development and leads the section’s work programme on trade facilitation.
Trade Express shares information and lessons learned from recent Commonwealth Secretariat interventions. Articles discuss design and implementation processes; in particular, practical solutions for the perennial problems surrounding appropriate trade policy design, advocacy and strategic trade interventions.
Related News
tralac’s Daily News Selection
The selection: Wednesday, 29 June 2016
Erastus Mwencha: ‘Sino-Africa cooperation: taking stock’ (The Herald)
Justin Yifu Lin: ‘Beyond aid and concessional borrowing: new ways of financing development in Africa’ (pdf, Bank of Tanzania)
‘The State of Economics, the State of the World’: download the presentations (World Bank)
Africa in the next 50 years: revisiting Africa’s economic planning (pdf, AfDB)
To gain deeper insight into the relevance of economic planning as a model of policy making and development in Africa, the Development Research Department seeks to undertake a series of studies on economic planning in Africa, drawing lessons from countries that have successfully used this type of model to accelerate economic transformation and development. One such country is South Korea. Experience from other East Asian countries and those in South Asia and Latin America, as well as African countries with successful planning experiences will also be used as examples. Drawing lessons from South Korea and other countries would therefore provide African policy makers with requisite knowledge to stir their economies onto a sustainable growth path for accelerated poverty reduction and inclusion. The specific roles and contributions of the consultant will cover the following tasks: [Download the EOI]
Six things to consider when doing business in Sub-Saharan Africa (The National Law Review)
Market data deficit makes it harder to do business-as-usual: For an investor, the data deficit in Africa makes decision-making harder. When it comes to market and research analysis, conducting diligence on prospective local partners, or assessing customers’ credit history, investors need to be aware that traditional means of data gathering and analysis are often unavailable, which requires alternative approaches. While the data gap is narrowing thanks to the increasing use of mobile communications to collect information, at this point, on-the-ground presence remains the best way to mitigate this problem. [The authors: Witney Schneidman, Adele Faure, Khadijah Robinson] [2015 Africa Country Policy and Institution Assessment Factsheet (World Bank)]
Brexit updates from Mauritius, Rwanda, South Africa, Namibia, Uganda and Tanzania:
Brexit: Mauritius will need to have a bilateral trade agreement with the UK, PM says (GoM)
Notwithstanding the scenario that will govern the EU/UK trade relations, Mauritius will need to have a bilateral trade agreement with the UK to safeguard its trade interests. In the event UK decides to maintain the EU commitments towards the Member States which have signed the Interim EPA, namely Madagascar, Mauritius, Seychelles, Zimbabwe, there may not be any need for a fresh trade agreement. In the eventuality that the UK would wish a change from the current Interim EPA model, Mauritius would have to enter into consultations with the UK over a new agreement safeguarding our trade interests. This reply was given yesterday in the National Assembly by the Prime Minister, Sir Anerood Jugnauth, to a Private Notice Question pertaining to measures that are now being taken to deal with the impact of BREXIT on Mauritius. He pointed out that the Technical Committee is also examining the five principal options of Economic Partnership which UK may choose as a model for negotiation during the two-year transition period.
South Africa: Western Cape outlines potential Brexit impact (GCIS)
The analysis was conducted by the [Western Cape's] Department of Economic Development and Tourism’s Economic Planning unit and the Department of Agriculture’s Business Planning and Strategy directorate. “There are several factors which will influence the economic impact of the UK’s exit. The vote could preceed two years of negotiations. A comprehensive analysis of the effect will only be clearer once the EU announces how it will relate to the UK, outside of the EU relationship,” said MEC Winde. Key observations and figures on trade with UK and EU highlighted in departments’ analysis include:
Rwanda: Brexit unlikely to affect economy - Rwangombwa (New Times)
Britain’s exit from European Union is unlikely to have any adverse impact on the Rwandan economy, central bank governor John Rwangombwa has said. “The biggest impact would be on our reserves, but the good thing is that we do not have much reserves in the currencies that have been hit such as the Pound Sterling, which has depreciated by about 10%,” he said. Rwanda’s reserves in the Pound Sterling is 1.1%, while with the Euro its only 0.2% of the total reserves. A majority of Rwanda’s reserves are in the US Dollar, at 83.2%. “Our trade with UK directly is about 2% of exports and 1% in imports,” Rwangombwa said. Indirectly, however, the impact could be with the EU as exports to the bloc stand at about 20%.
Brexit not likely to be catastrophic for Namibia (The Namibian)
The vote by Britain last week to leave the European Union is not likely to be catastrophic in the short term, given the declining role of the UK as Namibia's trading partner over the past five years, Namibia Equity Brokers said yesterday. Preliminary 2015 trade statistics from the Namibian Statistics Agency reflected how trade with the whole EU bloc has changed over the last five years, with exports dropping 38% to N$9,5 billion, and imports surging 62% to N$6,5 billion. “We note how trade with the UK has plummeted as exports fell 86% to N$893 million, and imports dropped 75% to N$413 million. Over the same period, exports to the EU (ex-UK) fell by 6% to N$8,6 billion, while imports surged 152% to N$6,2 billion,” the firm said yesterday. [Brexit: Uganda Shilling weakens against the dollar (Daily Monitor), Economic implications of Britain's EU exit for Tanzania (The Citizen)]
The UK's trade and investment relationship with Africa: 2016 (pdf, Office for National Statistics, UK)
Export competitiveness, regional trade integration could spur South Africa’s export growth (dti)
“It is imperative that South Africa leverages the devalued currency and the capabilities that exist to drive a national export effort with a particular focus on Africa. It is a well-documented fact that the economic and employment multipliers which arise from exports are significant. However our export basket remains too small and concentrated on primary products. But the fact that vehicle exports now account for 14.7% of exports demonstrates what can and must be done to ensure that value-added exports break SA’s dependence on commodity exports,” said Minister Rob Davies, speaking at the Manufacturing Indaba in Kempton Park.
Malawi Economic Monitor: absorbing shocks, building resilience (World Bank)
A recovery by Malawi’s external sector remains challenging in the context of a continued global economic slowdown; deteriorating commodity prices; and ongoing volatility in exchange rates. Malawi’s key trading partners have recently tended to record low levels of growth, with this being particularly significant in the case of South Africa, which is Malawi’s largest trade partner, accounting for 70% of external trade. Weak demand in South Africa has acted as a drag on Malawi’s regional export prospects. The decline in commodity prices has also had a mixed impact. [Blog, by Richard Record]
Lesotho: SA extends closing date of applications for Lesotho Special Permits (GCIS)
Home Affairs Minister Malusi Gigaba has acceded to a request by the Lesotho authorities to extend the closing date of applications for Lesotho Special Permits to allow more time for Basotho nationals to apply for permits. The last day for applications was 30 June 2016. The date has now been extended by three months to 30 September 2016. The request for an extension was among the recommendations made at the Consultation of Directors-General of Home Affairs held in Maseru on 01 June 2016 to assess progress on the implementation of the LSP. By Monday, 27 June, close to 40 000 applications had been received.
Zimbabwe: Industrial base is degenerating - CZI (The Herald)
The Confederation of Zimbabwe Industries says between 75 and 80% of the mid-1990's industrial base has been destroyed. The country’s biggest and most influential industrial lobby group said the hard reality has to be confronted to revive the economy, adding industry can recover 5-10 percent annually if corrective measures are taken. This entails, CZI noted, Government and private sector dialogue and consensus on, but not limited to, finality on implementation of indigenisation, concluding the land issue, bankability of land title, confidence in State institutions and economic direction and reform of State entities. CZI president Busisa Moyo said the fact that only a fraction of the manufacturing base that existed around 1995 is still present is disturbing. More worrying, he said, is that output has started to fall sharply.
Zimbabwe: Zimra gets tough on illegal imports (The Herald)
The Zimbabwe Revenue Authority has threatened to seize cross border buses that transport goods banned under statutory instrument number 64 of 2016 into the country. The instrument tightens screws on imports of basic commodities without licences. The parastatal has since written to cross-border transporters warning them against carrying goods, which are restricted under the open general import licence.
Kenya: Agency raises the alarm over fake electronics hitting 80% (Daily Nation)
Eighty per cent of electronics sold in Kenya are counterfeit while 34% of medicines stocked in pharmacies are fake. This is as per a new survey by the Anti-Counterfeit Agency (ACA) on the most counterfeited goods in the country. Manufacturers incur losses of Sh50 billion annually in sales revenue, the study found. Cosmetics are the third most counterfeited goods at 30%, followed by batteries at 28.9%. ACA has established the counterfeiting cartels use normal supply chains delivering with ease the fakes to formal retailers such as supermarkets and pharmacies which are popular with Kenyans.
Tanzania sees economic growth picking up to 7.4% in 2017 (Reuters)
The Tanzanian economy, East Africa's second-biggest, grew 7% last year. "The macroeconomic objectives of the government aim at achieving a real gross domestic product growth of 7.3% in 2016/17 based on the projected growth of 7.2% in 2016 and 7.4% in 2017, while maintaining inflation at single digits," the Bank of Tanzania said in its latest monetary policy statement (pdf). [Massive helium gas field found in Tanzania hailed]
India’s Trade Symposium: linking Indian MSMEs with global value chains (KNN India)
Commerce Secretary, Ms. Rita Teaotia, expressed the importance of linking Indian MSMEs with the global value chains to reverse the downward trend in India’s export. She said this while inaugurating the India’s Trade Symposium at the Hotel Taj Palace, New Delhi, organised jointly by Commonwealth Secretariat, London, and FISME the leading federation of Indian MSMEs. The symposium being held on 29th and 30th June, 2016, is focused towards linking Indian MSMEs with the global value chains leveraging on the availability of inputs at competitive terms from the least developed countries of Asia and Africa. The symposium is being attended by over 35 international delegates from Kenya, Ethiopia, Tanzania, Uganda, Malawi, Zambia, Rwanda, Bangladesh and Sri Lanka, besides leading Indian businesses.
Duty-Free and Quota-Free Market Access for LDCs: draft ToR for clinical examination of its implementation (pdf, WTO)
At the Committee’s session on regional trade agreements, held on 16 March, the Chairperson provided an update on the implementation of the Committee’s decision that the Secretariat would carry out the clinical examination. During this session, the chairman reaffirmed that a written proposal from the LDC Group on the parameters of the secretariat study would help to move the process forward. The delegation of Benin, on behalf of the LDC Group, stated that the Group would submit draft terms of reference for the clinical examination at the July session of the Committee on Trade and Development. The clinical examination will be carried out on the basis of the following parameters:
Tackling illegal fishing in western Africa could create 300,000 jobs (The Guardian)
If governments in western Africa could end illegal fishing by foreign commercial vessels and build up national fleets and processing industries, they could generate billions of dollars in extra wealth and create around 300,000 jobs, according to a new report. The devastating, social, economic and human consequences of overfishing in western Africa’s coastal waters have been well documented but the report, Western Africa’s Missing Fish (pdf), by the Overseas Development Institute and Spanish investigative journalists porCausa, lays bare the extent of lost opportunities across countries including Senegal, Mauritania, Liberia, Ghana and Sierra Leone.
Human Capital Report 2016 (WEF)
The purpose of the report is to help countries assess the outcomes of past and present policies and investments in education and skills and provide guidance on how to prepare the workforce for the future demands of the global economy. In Sub-Saharan Africa, a cluster of countries, including Mauritius (76), Ghana (84), South Africa (88) and Zambia (90) score in the 60-70% range – placing them ahead of the Middle East and North Africa regional average and on a par with the lower half of the Latin American and East Asia and the Pacific regions. Other economies, however, such as Ethiopia (119) and Nigeria (127) face a range of human capital challenges, including low survival rates for basic education. With an overall average score of 55.44, the Sub-Saharan African region is the lowest-ranked region in the Index. In total, the Index covers 26 countries from the region.
Djibouti partners with China to develop local infrastructure and global trade routes (Oxford Business Group)
Sahel: Senior UN relief official warns of demographic challenges and growing humanitarian needs (UN)
Africa Carbon Forum: update (Rwanda Focus)
Business can deliver 60% of Paris pledges to cut emissions (UNFCCC)
TICAD: Africa urged to promote investor friendly policies to spur exports (New Times)
Related News
Export competitiveness, regional trade integration could spur South Africa’s export growth
Boosting competition and promoting deeper regional trade integration are critical for restarting South Africa’s export engine to bolster economic growth, increase efficiency and productivity that would in turn create jobs and reduce poverty. This was said by Minister of Trade and Industry, Dr Rob Davies at the Manufacturing Indaba in Kempton Park on 28 June 2016.
Minister Davies said that the government has identified the export sector as a key driver to of fastrack economic growth. He added that increasing exports, particularly in manufacturing, may be crucial for low-skilled job creation needed to substantially reduce high overall unemployment.
“It is imperative that South Africa leverages the devalued currency and the capabilities that exist to drive a national export effort with a particular focus on Africa. It is a well-documented fact that the economic and employment multipliers which arise from exports are significant. However our export basket remains too small and concentrated on primary products. But the fact that vehicle exports now account for 14.7% of exports demonstrates what can and must be done to ensure that value-added exports break SA’s dependence on commodity exports,” said Davies.
Davies added that the country’s National Development Plan targets export volume growth of 6% a year, and tackling high unemployment is one of South Africa’s priorities.
“Effort should focus on global Original Equipment Manufacturers (OEM), existing exporters and those companies that can achieve export readiness, especially in key value chains such as automotive, rail, electro technical equipment, white goods and so on and so forth. It is why we are retooling our effort to focus on collaboration with export councils and why we are building an Africa Export Council. Our exports of automotives; mining and rail capital equipment; household consumables and agro-processed products and chemicals demonstrate important positive growth,” said Davies.
Minister Davies further stated despite the global economic uncertainty, South Africa will realise the objectives of the National Development Plan.
“Great uncertainty and volatility will continue and a variety of headwinds are likely in the future. But this is a marathon not a sprint and we have to work together for the long haul to propel South Africa towards faster growing exports and help the country realise its goal for the higher, more inclusive, job-intensive growth outlined in the National Development Plan,” stated Davies.
Minister Davies added that South Africa’s export market could benefit from deeper regional integration in goods and services within Africa, including creating production and service value chains that cut across national borders, and draw on all the region’s resources and capabilities.
“We see that with stronger trade relationships comes the right conditions for the emergence of a regional value chain of production that could feed into global production networks. For an example, intra-regional trade has risen from US$6bn to US$24 billion in the recent period. Trade negotiations in the Tripartite Free Trade Area (TFTA) are well on track and the TFTA will combine markets of 26 countries with a population of 625 million and a GDP of US$1.6 trillion. India is now SA’s 6th largest trading partner and trade is valued at R95 billion and exports to India now make up over 4% of exports. It is imperative that in addition to our important traditional trading partners new markets are explored,” indicated Davies.
Minister Davies indicated that red tape reduction is also key to growing exports and promoting innovation.
“Favourable conditions and greater competition at home would stimulate export companies to innovate and to become more productive, drive down the costs of inputs for the export sector, and enhance incentives for more firms to enter the export market. Resolving infrastructure bottlenecks and cutting logistic costs present an opportunity to support export growth. Cutting charges exporters incur for the use of ports, rail and telecommunications would promote competitiveness and benefit small and medium-size exporters and non-traditional export sectors,” indicated Davies.