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Africa is open for business: The African Development Bank calls on African private sector
Africa’s private sector will continue to lead the continent towards economic transformation, African Development Bank President Akinwumi Adesina said Monday at the launch of the fourth Africa CEO Forum in Abidjan.
Addressing some 500 CEOs from 43 African countries and 20 more worldwide, he said, “The ‘Africa rising’ story remains strong. Yes, African economies face economic headwinds from the significant decline in the price of commodities ... but African economies remain resilient. While the global economy is projected ... to grow at 3% this year, Africa is projected to grow at 4.4% in 2016, and to accelerate ... to 5% in 2017.”
Welcoming the President and Prime Minister of Côte d’Ivoire and the Deputy President of Kenya, Adesina described Heads of Government as “the CEOs of their national corporations”. He set out a clear vision of the work that governments must do to allow the private sector to reach its maximum potential: ensuring macroeconomic stabilization and fiscal consolidation, broadening the tax base, and deepening domestic capital markets. In addition, he said, governments need to continue to address infrastructure deficits, break down barriers to regional integration, and fast-track key reforms.
He described efforts to deepen financial integration and increase liquidity, citing an AfDB project to link four African stock exchanges, and a joint venture with Bloomberg to facilitate the issuance of sovereign and corporate bonds on African markets. He pointed to a growth in remittances and a rise in sovereign wealth funds in Africa, and said, “With all these resources, Africa can finance its own development, and doing so enables it to decide its own direction and pace of growth.
“The formula for the wealth of nations is clear,” he said. “Rich nations add value by transforming raw materials into finished goods, while poor nations merely export their raw natural commodities. Africa only accounts for 1.9% of global added value in manufacturing.”
He called on the private sector to lead in doubling efforts to transform African commodities locally, and in diversifying African economies, particularly into areas like services and tourism. The private sector accounts for 80% of total production, 90% of employment, and two-thirds of total investments. “In the face of global economic challenges, it is those African countries with diversified economies that are succeeding in weathering the economic storm. While the current situation is challenging, it also presents great opportunity, especially for resource-rich countries, to diversify their economies away from the export of raw commodities .... Now is the time, the time for Africa to move up the value chain,” he said.
Adesina concluded by setting out the vision of the African Development Bank going forward, enshrined in its ‘High 5’ priorities which focus and refresh its current 2013-2022 Ten Year Strategy. He set out the context and goals for each of the High 5s: ‘Light up and power Africa’; ‘Feed Africa’; ‘Industrialize Africa’; ‘Integrate Africa’; and ‘Improve the quality of life for the people of Africa’. “We will only succeed in realising the objectives of the High 5s if we work in public-private partnership,” said President Adesina. “Let us think big, act big and deliver big for Africa.”
Amir Ben Yahmed, Vice-President of Paris-based Groupe Jeune Afrique and the Founder and President of the Africa CEO Forum, had earlier introduced the theme of the conference – ‘New reality, new priorities’ – in the context of Africa adjusting to falling commodity prices and creating new opportunities out of economic diversification.
Concluding the opening ceremony, Alassane Ouattara, President of the Republic of Côte d’Ivoire, also stressed Africa’s resilience, and its need to add economic value. “It is you – it is the private sector – which will do the most to create jobs for the young people of this continent,” he said, pointing to a ‘win/win partnership’ if the public and private sectors work together. He called on the private sector to step up and fund Africa’s growth, and to make concrete proposals within the Africa CEO Forum.
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Africa – the next clean energy powerhouse?
Can Africa be the next clean energy powerhouse? That was the question posed by the second plenary panel at the Africa CEO Forum – and panelists reached the conclusion that the answer was yes, if the right policies and the requisite political will are in place. As Siyanga Maluma, CEO of the Copperbelt Energy Corporation, said, “The money is there: so we need the policy, the enabling environment, and the right tariff structure.”
Moderated by Pascal Agboyibor, the Monday session began with an overview from Adam Kendall, Managing Partner at McKinsey & Company. “The backdrop to our discussion today is that 621 million Africans don’t have access to electricity, and that 600,000 of them a year die from the effects of using biomass for cooking. No matter which figures you read, it’s clear that we have a funding challenge – we need US $40-50 billion a year to spend on energy infrastructure, and thus far we’re investing nearer $8 billion. The three energy areas with the biggest potential for Africa are gas, hydro, and – potentially the biggest winner of them all – solar energy. Our collective challenges lie in getting the regulatory policy right, raising the financing resources, optimizing the role and capacity of the energy utilities, securing rural electrification, and above all securing political will.”
Kevin Urama, an Adviser at the AfDB, set out the aims of the New Deal on Energy for Africa, a Bank-led initiative to ensure universal access to energy on the continent by 2025, and based on a transformative partnership spanning public and private sector actors ... and funding. Our twin challenges, he said, are ramping up energy access to ensure that we can deliver on our development goals, and finding the right mix of renewable and traditional sources of energy.
Elizabeth Littlefield, President and CEO of the Overseas Private Investment Corporation (OPIC), said, “US businesses are waking up to the investment opportunities presented by renewable energy in Africa, and particularly West Africa.” OPIC’s renewable energy portfolio has grown ten-fold in two years, she said.
Oliver Andrews, Chief Investment Officer of the Africa Finance Corporation, was clear that a big challenge lay in the readiness – or not – of fully bankable energy projects. “But we do not view climate finance as a new fad,” he said. “It reminds us of the mobile telephony revolution that swept across Africa – it’s the next real thing. But we have to make it happen, and we have to take the risk out of it. Right now, it’s slow and it needs new financing instruments – for instance with credit enhancement for energy utilities, which aren’t always seen as credit-worthy.”
Ahmed Nakkouch, CEO of Nareva, Africa’s largest domestic independent power producer, which specializes in wind energy, spoke of the energy trilemma of safety, security and supply. He stressed the paramount importance of developing national power networks as the optimal way of serving and reaching the maximum number of people. He cited Nigeria, where only 10% of national energy is on the network.
Siyanga Maluma, the CEO of the Copperbelt Energy Corporation, was clear that a renewable energy revolution in Africa can only be led, managed and funded by Africans. In order to ensure this happens, he made a strong case that African governments and businesses need to start trusting and collaborating more with their fellow Africans.
Audience questions raised the issue of financing. The financing is there, said Oliver Andrews, but we need to look at the avenues we use to make it available, especially through other models than project finance. “Greater concerns lie in uncertainty and lack of incentive,” added Elizabeth Littlefield. Andrews continued: “We need a blend of financing and policy, marrying initiatives like the Green Climate Fund, which can accept lower margins, with the higher returns expected by traditional investors, for whom energy tariff pricing must work.”
The consensus among the panel was that actually there is a significant amount of money available for financing. The fundamental challenge is having the transparent regulations, the credible off-takers, and above all, the political will to make this happen.
The fourth edition of the Africa CEO Forum, the foremost international meeting for African CEOs, bankers and investors, is taking place March 21 and 22, 2016, in Abidjan, Côte d’Ivoire.
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Boost to manufacturers as EAC relaxes rules on goods produced in the region
Local industries have received a major boost after the East African Community relaxed the rules on goods made in partner states.
According to the revised rules of origin, goods made in partner states will now be sold duty-free.
The more accommodating rules of origin have been under discussion for a year, and are expected to promote locally manufactured goods to increase intra-regional trade.
The biggest beneficiaries of the revised rules of origin are steel companies, East African Breweries Ltd, General Motors, Kenya Vehicle Manufacturers, Kensalt Ltd and Mikoani Traders, whose products will now benefit the preferential tariff treatment.
The products will be required to have a certificate of origin issued by the originating country, showing that they have a local content input of at least 30 per cent, unlike previously when the threshold was set at 35 per cent.
Under the old rules, 25 per cent duty was imposed because certain parts or ingredients used in their assembly or production were imported from outside the economic bloc.
Key products, on which duty has been scrapped are East African Breweries Ltd’s Smirnoff Vodka (Red and Blue), Smirnoff Ice (Black and Red), and Gilbeys.
Motor vehicles manufactured from completely knocked down kits (CKDs) by General Motors; vehicles manufactured by Kenya Vehicle Manufacturers; wheat flour made by Mikoani Traders in Tanzania, salt manufactured by Kensalt Ltd and steel products (nails, chain links, welded wire mesh) will be exempted from the duty.
According to Adrian Njau, trade economist at the East African Business Council (EABC), the revised rules of origin are trade friendly, simpler and support value chain in the EAC region compared with the old ones.
This, he said, will ensure uniformity among partner states in the application of rules of origin. The rules will also ensure that the clearance of goods is transparent, accountable, fair, predictable and consistent with the provisions of the Customs Union Protocol.
“Under the old rules of origin, those products could not qualify as being of EAC origin, but under the new rules those products now qualify and can enjoy Community Preferential Tariff Treatment, which is zero per cent import duty only,” said Mr Njau.
“Motor vehicle assemblers and local manufacturers, who sourced parts from any of the EAC member states were allowed to enjoy the 15 per cent tax waiver. But the new rules will eliminate duty on vehicles wholly produced in the region,” he said.
Rita Kavashe, managing director of General Motors East Africa Ltd, said even though the EAC rules of origin were reviewed granting duty -free market access to all locally assembled CKD vehicles, there has been slow implementation.
“There is a continued stay of application of the 25 per cent common external tariff (CET) to apply lower duties for imported trucks and buses, yet these are locally available products. The strict application of the CET would ensure that locally assembled vehicles are competitive in terms of prices compared with imported ones,” said Ms Kavashe.
“It is for this reason that those who import fully manufactured vehicles are able to make inroads into the market against local competition, which has to cope with expensive energy, inefficiencies in transport and power, time to market and poor local infrastructure,” she added.
The revised EAC rules of origin will address the NTB on lack of preferential treatment on the motor vehicles assembled in Kenya when exported to Tanzania.
Emphasis on promoting local industries in the region has been a key agenda for the partner states since the beginning of this year.
The EAC heads of state recently endorsed a ban on the importation of used clothes and footware during the Heads of State Summit held in Arusha on March 2.
They also passed stringent rules on importation of motor vehicles to promote local manufacturing and assembling.
The application of rules of origin have been controversial, with traders claiming it is selectively applied by Customs officials to bar Kenyan products from entering Tanzania, Uganda, Rwanda and Burundi.
Last year, Kenyan manufacturers lost a bid to have the EAC Council of Ministers stop Uganda and Tanzania from charging full duty on imports.
The Kenya Association of Manufacturers had in June 2014 written to the Ministry of EAC Affairs, Commerce and Tourism requesting that under the EAC Common Market Protocol, Kenyan firms be allowed access to Ugandan and Tanzania markets without paying full duty as demanded by the two countries.
The revised rules are expected to prepare the region for an eventual merger with the Common Market for Eastern and the Southern Africa and the Southern African Development Community under the Free Trade Area regime.
The regulations apply in all the EAC partner states with each having varied duty remission rates.
The duty remissions scheme, introduced eight years ago, allowed export-oriented manufacturers of commodities in the EAC bloc to pay reduced rates for imported inputs instead of paying in full the 25 per cent common external tariff rates in line with the Customs Union Protocol.
This is on top of the requirement that manufacturers of the goods produced using inputs shipped in under the duty remissions scheme sell up to 80 per cent of their products outside the EAC.
This means that only 20 per cent of the goods manufactured using inputs that have benefited from the duty exemptions can be sold in the region.
The EAC has also introduced a rule for goods sold in sets. In this case, the tax on such goods will be lower than that on goods sold separately.
A central database of registered exporters will be developed at the EAC Secretariat to track the type and number of goods traded within the partner states.
A rule has been introduced on approved exporters, where the competent authorities of the exporting partner states may authorise any exporter who makes frequent shipments of products.
Under the new rules, proof of origin shall be valid for six months from the date of issue in the exporting country.
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Assessment of African Sub-Regional Development Banks’ contribution to infrastructure development
This study, commissioned by the Infrastructure Consortium for Africa, assesses the current and past contributions of African Sub-Regional Development Banks (SRDBs) to infrastructure development in Africa.
The study reviews four out of the six African SRDBs that have been established by African Regional Economic Communities: the Eastern and Southern African Trade Development Bank (commonly referred to as the PTA Bank), the East African Development Bank (EADB), the West African Development Bank (BOAD – Banque Ouest Africaine de Développement) and the Ecowas Bank for Investment and Development (EBID).
Their operations cover three separate regional economic communities (RECs) although some have overlapping boundaries. These RECs are the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Economic Community of West African States (ECOWAS) respectively. The study also looks at other SRDBs from Asia, Latin America and the Caribbean regions for comparison purposes.
The study was designed primarily to provide answers to questions relating to the relevance of African SRDBs in bridging the infrastructure financing gap and the enhancement of these sub-regional banks, taking into account their strengths, challenges and the opportunities facing them in meeting their infrastructure financing mandates and assesses their level of interest in networking among themselves, as evidenced by their willingness to share information, best practice and lessons learned. It also looks at the expected outcome of the proposed networking.
The study makes a number of recommendations around issues such as the mandate of African SRDBs, their capital and financing, their role in supporting regional development and integration, governance & institutional processes and capacity building.
Main findings of the review
Historically, African SRDBs have been established and are used by regional member countries to promote economic development especially through supporting regional economic integration activities, in particular financing the construction of roads and highways, energy plants, dams and telecommunication infrastructure, and to foster the development of embryonic industries, such as small and medium enterprises (SMEs), in support of industrialisation.
SRDBs usually constitute the main source of long-term credit, loan guarantees, and other essential financial services in the infrastructure, industry, finance and agriculture sectors. Across the world, these institutions are prevalent in regions where private financial institutions and capital markets have limited capability in bridging the financing gap of longterm resources required for development.
Financing gap for infrastructure projects
Access to development finance is one of the most important issues that RECs around the world, including those in Africa, face today. The effectiveness of financial markets is one of the biggest differentiating factors between developed and developing countries. As has been noted in development economics literature, “the financing gap for infrastructure and industrial projects is not so pronounced in developed countries compared to developing countries”. This study finds that in all three sub-regional groupings reviewed, the financing gap for infrastructure projects is huge. For instance, it is estimated that the sub-Saharan Africa, Latin America and the Caribbean, and Asia sub-regions will require a total of US$700 billion to bridge the infrastructure financing gap.
Implications of the financing gap
The excessively large financing gaps faced by the sub-regions constrain growth potential and add to the failure of most RECs to adequately contribute to the regional integration agenda and specifically, to the funding of infrastructure projects. The study finds that most RECs have, for the most part, relied on multilateral and bilateral institutions to fund regional projects. This limits their full potential and leads to a lack of political ownership and diminished growth.
For the reasons outlined in the preceding section, shareholders and in particular member countries of sub-regional groupings need to ensure that African SRDBs are developed, well capitalised, and have well-defined mandates, so that they can contribute positively to the regional integration agenda of the regional economic community.
Size of African SRDBs
At the end of 2013, the African SRDBs in the study reported total assets of US $6.2 billion dollars. The largest share of the assets was held by BOAD (US$2.8 billion), followed by PTA Bank (US$2.5 billion), EBID (US$0.62 billion) and finally EADB (US$0.24 billion). This trend in asset values partly reflects the failure of African SRDBs to mobilise enough resources to bridge the financing gap of US$48 billion.
Ownership and funding
African SRDBs are institutions owned, administered, and controlled by regional member countries (States), which provide the strategic direction of the SRDBs and appoint their senior management and board members. The extent of government ownership in African SRDBs is very similar in all the four sampled SRDBs, with (almost all the four) SRDBs being majority owned by borrowing member countries. The other striking feature about the SRDBs is that even though these banks reserve a certain percentage of shares for nonborrowing members, very few of these shares have been subscribed to.
Capitalisation of DFIs
The capital structures of SRDBs in Africa are similar, though options for funding their business operations differ. The capital structures of all four sampled African SRDBs are made up of authorised, subscribed, callable and paid-in capital. However, the size of the capital varies significantly among the four SRDBs – from US$1.1 billion for EADB to US$3.0 billion for PTA Bank. The difference can also be seen in their ratios of paid-in to subscribed capital, and the ratio of long-term resources to total external resources mobilised by each SRDB. For example, in the case of the ratio of paid-in capital to total subscribed capital, only two African SRDBs (PTA Bank and EBID) had their ratios above 20%. Furthermore, in terms of resource mobilisation, the study finds that three out of the four sampled SRDBs were able to mobilise more long-term to total external resources. The study also found that, taking into account their broad mandates, all four of the sampled SRDBs were not adequately capitalised.
Financial performance and sustainability
Financial sustainability refers to the capability of the SRDBs to generate sufficient income from their operations to enable them to continue operating at a stable and increasing rate. African SRDBs are expected to be profitable and financially self-sustainable, and not dependent on government subsidies or transfers to (partially) fund their operations. The study found that, with the exception of EBID, all the sampled SRDBs were financial sustainable. The study also found that of the three SRDBs which are sustainable, their return to equate and return to asset ratios were positive.
Mandates of African SRDBs
The study found that all the sampled African SRDBs have been established with a wide range of policy or developmental mandates. While all the four African SRDBs have been established with a broad mandate, there are no easy answers as to whether a bank should be narrowly focused (and therefore small) or multi-sectoral (and large). Although most ‘successful’ development banks are multi-sectoral (Diamond, 1996), each form has both advantages and disadvantages. For instance, multi-sectoral banks run the danger of being ineffective and unfocused, and are more prone to mission shrink or drift. They may present more problems of corporate governance, be less transparent and be more susceptible to political interference. Because of the broad mandate of African SRDBs, the study found that most of these banks may have drifted away from supporting regional projects (which are more difficult to implement) to supporting more national projects.
Corporate governance arrangements
The issue of governance is very sensitive in all of the sampled SRDBs, where borrowers hold a majority of the voting power. The regional ownership of these SRDBs is fundamental to their sense of identity and ‘character’. To this end, the move towards more openness and accountability (or any other initiatives of this nature) in these SRDBs must respect their regional character. Furthermore, and despite the fact that all the sampled African SRDBs have strong boards, there is still room for improvement. These boards, which are appointed mainly by member countries, are critical to the good performance and survival of the institutions.
Coordination of African SRDBs
While SRDBs may not be homogenous, they may face similar problems in their quest to meet their developmental mandates, especially in financing infrastructure projects. It is vital for these institutions to work together to address common challenges including credit enhancement and acquisition of better credit ratings, resource mobilisation of funding with long tenor and capacity building.
Overall assessment and conclusion
Despite having a niche position in financing infrastructure projects, African SRDBs’ contribution to infrastructure financing has been rather weak (with the exception of BOAD and EBID which have allocated approximately 79% and 67% of their funding respectively to infrastructure projects). In addition, the study found that the commutative total value of investments in infrastructure projects for all four sampled African SRDBs has been relatively small compared to their peers.
Apart from BOAD and EBID, the African sub-regional banks have contributed little to both regional integration and regional infrastructure projects. In addition all four African SRDBs have struggled to mobilise adequate long term external resources. For instance, at the end of 2014, the four African SRDBs managed to mobilise only US$4.6 billion compared to US$19.6 billion raised by CAF in the same year.
Capacity is another serious issue which has impacted negatively on the funding of infrastructure projects. For instance, due to lack of capacity, these banks have been unable to package some of the projects.
The study found that the size of the African SRDBs by asset size and capitalisation is relatively small compared to their peers.
There also appear to be a lack of clarity about the mandates, objectives, roles and functions of SRDBs vis-à-vis those of national and regional development banks in their respective areas of operation.
From the study of African SRDBs, it can be concluded that these institutions are an appropriate means of funding infrastructure projects as well as supporting the process of regional integration. The major challenge however remains the modest size, strength, capacity and mandate clarity of these institutions, all of which limits their impact.
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Improving all forms of cooperation and partnership for trade and development with a view to accomplishing the internationally agreed development goals
This note, prepared by the UNCTAD Secretariat for the fourth session of the Multi-year Expert Meeting on Promoting Economic Integration and Cooperation (14-15 April 2016), reviews the prospects for improving all forms of international cooperation and partnership for trade and development with a view to accomplishing the Sustainable Development Goals and the post-2015 development agenda.
It first takes stock of the challenging global economic climate and how developing countries and countries with economies in transition face serious threats to their economic stability, resilience and prospects for inclusive growth. The note then explores how macroeconomic policies can help build resilience and enhance development in both the short and long terms, better enabling countries to weather economic crises, ensure macroeconomic stability and use industrialization to enhance long-term resilience in ways that generate inclusive development.
A central focus of the discussion is on how collaboration, particularly among countries of the South, can enhance these capacities and directly contribute to achieving the Sustainable Development Goals, particularly Goals 8, 9 and 17.
Introduction
Given the increasingly volatile economic conditions that have characterized the global economy and the continuing failure of developed countries to fully emerge from the great recession, developing countries face serious threats to their economic stability and resilience. These threats could compromise long-term growth prospects as well, and seriously challenge the viability of the Sustainable Development Goals and the post-2015 development agenda.
The fourth session of the Multi-Year Expert Meeting on Promoting Economic Integration and Cooperation will be invited to consider these threats and challenges from the perspective of South-South cooperation and how collaboration and the identification of best practices can help build capacity to weather economic crises, ensure macroeconomic stability and enhance long-term resilience in ways that also generate inclusive growth and end poverty.
Macroeconomic policies can help build resilience in both the short and long terms. In the short term, countercyclical monetary and fiscal policies, as well as financial policies designed to blunt the destabilizing effects of capital flows, are essential tools for countering external shocks. In the long term, industrialization and diversification can serve to increase both macroeconomic stability and resilience, but require industrial policy and the building up of institutional capacities to fulfil the development promises of structural transformation. In this context, there are a wealth of lessons to be drawn from past experiences in developing countries, both successful and not. There are also many opportunities to collaborate in ways that substantially raise the likelihood of success.
While traditional North-South and multilateral cooperation have been fundamental for many developing countries since the end of World War II, South-South and triangular cooperation have been increasing in importance and potential. Experiences and opportunities exist with regard to both finance and trade, as well as the coordination of domestic policies for investment and the expansion of public infrastructure. All told, despite the challenging global economic circumstances developing countries face in the current era, there is tremendous potential to draw from best practices and build cooperation in order to support and even speed up inclusive and sustainable development.
Such issues are important components of the 2030 Agenda for Sustainable Development. While macroeconomic stability and resilience are an explicit part of target 13 (enhance global macroeconomic stability, including through policy coordination and policy coherence) of Sustainable Development Goal 17 (strengthen the means of implementation and revitalize the global partnership for sustainable development), the questions that may be addressed by the fourth session of the Multi-Year Expert Meeting contribute to the achievement of many of the Goals including, most directly, Goal 8 (promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all), Goal 9 (build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation) and the wider scope of Goal 17 by identifying promising opportunities for international collaboration.
The external economic environment
Many of the targets of the Sustainable Development Goals are affected by the state of the external economic environment. Robust growth of external demand and trade, as well as productive channelling of global financial flows, are essential tools for generating economic growth, decent work and pathways towards industrialization and innovation. Moreover, the level and volatility of global prices and financial flows are key to successfully implementing the global partnership for sustainable development.
Trade continues to falter
In the recent past, trade has been cited as an engine of global growth, growing at double the pace of gross domestic product (GDP) in the past decade. External demand from advanced countries has been central to growth and export earnings for many developing countries, while the relatively high prices of commodities have also generated significant export revenues for a large number of countries. However, the relative strength of external demand from advanced countries was to a large extent based on credit creation and asset appreciation, a shaky foundation that ultimately fell apart with the financial crisis.
In the post-great recession world, many advanced economies have experienced sluggish job recovery and little wage growth, and the external demand that raised growth in many developing countries has been severely weakened. In addition, spending by Government is generally still below pre-crisis trends, as austerity-type approaches to economic recovery remain the dominant policy choice. After the initial recovery period, the combination of lower private and public demand in advanced countries has been associated with declining or stagnant trade volumes across regions. In the past three years, world trade growth has slowed significantly, and is now at par with global GDP growth. Although imports seem to have gained some traction in advanced countries over the past 18 months, they have barely reached pre-crisis levels.
Declining external demand and stiff international competition are further apparent when the export unit values of different regions and product groups are considered. Export unit values for all developing countries remain well below pre-crisis peaks. Asia’s relatively better performance stems from its large share of low-cost manufactures exports; the exports of other developing regions are heavily skewed towards raw materials and commodities. The most affected regions remain Africa and the Middle East, where export unit values fell to levels reached during the worst of the great recession. This highlights the continued vulnerability of many poor countries, especially the least developed countries, and threatens progress accomplished to date under the Millennium Development Goals, let alone achievement of the Sustainable Development Goals.
During the years leading up to the financial crisis and directly after, a large number of developing countries, particularly in Africa and Latin America, relied extensively on the continuing expectation of high or even increasing commodity prices. Many directed resources to their primary sectors, expecting to increase productive capacity and export revenues. However, the reversal of the rising trend in commodity prices beginning in 2011 – widely considered to mark the end of the upward phase of the latest commodity super cycle – threatens both short-term macroeconomic stability and the viability of commodity-dependent development strategies. In addition, the significant role of financial speculation in the determination of commodity prices portends continuing volatility, regardless of the state of commodity market fundamentals. In both the short and long terms, macroeconomic stability and resilience significantly depend on an economy’s productive structure. Narrow productive structures, such as those based on extractive sectors or primary commodities, increase the depth and length of a recession and expose countries to large swings in exchange rates and other key macroeconomic indicators.
Industrial policy for long-term resilience
The central importance of industrialization for sustainable development is reflected in Sustainable Development Goal 9, which calls for promoting inclusive and sustainable industrialization in addition to building resilient infrastructure and fostering innovation. However, externally generated economic shocks and crises not only threaten short-term macroeconomic stability, but may also compromise prospects for long-term industrialization and growth, as development is fundamentally path dependent. The building up of productive capacities and institutions may be seriously compromised or redirected as a result of macroeconomic shocks and ongoing fragility, as when cutting investments in public infrastructure to service external debt lowers the profitability of private investment or when volatile exchange rates driven by volatile capital flows lower export competitiveness and hamper industrialization. Fortunately, this cause and effect works both ways; industrialization and diversification into higher productivity activities can lower an economy’s vulnerability to external shocks, strengthening the developmental case for industrial policy.
A key feature of most successful development paths is diversification out of agriculture and the production of traditional goods. Labour and capital progressively shift into manufacturing, services and modern economic activities, favouring increases in productivity and the expansion of income. Advanced economies also produce a vast spectrum of goods and services and generally do not depend on any specific industry. Diversification is also crucially related to economic resilience, that is, the capacity of an economy to successfully recover from shocks that throw it substantially off its growth path and cause an economic downturn. Economic resilience may exist because an economy can simply bounce back (for example due to favourable shifts in demand for its products) or as a result of an economy undergoing changes in its industry or occupational structure (with productive factors moving towards more productive sectors) or less radical economic changes (for example, existing firms adopt better technologies or organizational forms or produce new products). In a sufficiently diversified economy all of these reactions are more likely to take place effectively, as follows:
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With a vaster production and export base, it is more likely that negative economic shocks will be compensated for by favourable price variations affecting other industries operating in the country
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A wider production base would also facilitate the relocation of jobs and capital away from the industries most affected from a shock
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Diversified economies are generally populated by dynamic firms able to adapt quickly to the changing conditions of the market by adopting new technologies or organizational forms.
Recent empirical research confirms that countries with more diversified production structures tend to be more resilient and to display a lower volatility in output, consumption and investment. Papageorgiou and Spatafora (2012) studied the link between diversification and volatility in the context of large diversification spurts and identified a total of 61 spurts in the last 50 years, including the well-known examples of Chile, Malaysia and Thailand in the 1970s and 1980s. As shown in the study, such spurts were associated with a 17 per cent average reduction in the volatility of output growth in developing countries. Geographic diversification also helps reduce volatility. Countries whose exports are geographically concentrated are more likely to import volatility from their trading partners and be exposed to external shocks. Conversely, if fluctuations in different countries or regions are not highly correlated, geographically diversifying an economy’s external linkages reduces exposure to external shocks.
In the current context, characterized by increasing trade and productive integration across the world, the fundamental policy challenge faced by developing economies is to ensure that participation in global trade and production networks is one of several complementary components of a development strategy that focuses on a rapid pace of capital formation, economic diversification, technological upgrading and high-quality employment generation. Significantly, in the first-tier East Asian newly industrializing economies, this included import substitution industrialization (in conjunction with export orientation) in an effort to move from the assembly of imported components to their domestic production.
Active policy responses are now under consideration in many developing countries as industrial policies are once more on their agendas. While simple imitation is ruled out by country-specific constraints and challenges, a number of broad policy lessons may be drawn from successful industrializers.
First, a broader pro-growth macroeconomic stance is essential. This requires adopting a full range of macroeconomic instruments to both stimulate investment and counteract any damaging effects on social welfare and capital formation from economic shocks and volatility. For example, in China, the second half of the reform era (from the early 1990s onwards) was characterized by high levels of investment in infrastructure and industrial upgrading. This led to a path of “capital-deepening, investment-led industrialization, carried out mainly by State-owned enterprises in a number of basic industries and by transnational corporations in higher technology industries. Combined with a ready supply of low-cost labour, these investments propelled a strong export drive. Around 1998-2002, China’s State leadership adopted a policy shift under the new policy line known as ‘constructing a harmonious society’, which widened the previous narrow focus on market reform and growth to pay more attention to social and environmental outcomes, in particular growing inequality and worsening social polarization”.
Second, given the strong links between investment and diversification, and the importance of financing investment from retained earnings, States need to raise enterprise profits to levels above those that would likely emerge from the workings of the market, and ensure that such profits are used to support an agenda of diversification and productive transformation. The acceleration of growth in East Asia since the start of the 1980s has been underpinned by a Government–business relationship in which Governments have created conditions for higher business profits than would otherwise have been possible under normal market conditions and firms have delivered by investing a large part of their profits instead of distributing them as dividends.
Third, while most fiscal and other instruments may be applied deliberately to specific industries at specific times, investment should be especially promoted in industries with the greatest potential for upgrading skills, reaping economies of scale and raising productivity growth, thereby increasing the rates of return on investment. The selection of the relevant sectors and industries for industrial policy support varies from country to country according to areas of strength and potential for dynamic comparative advantages.
In South America, for example, Brazil – a country with an already large industrial base – prioritizes sectors such as capital goods, electronics and pharmaceuticals; Uruguay – in recognition of the limitations imposed by its small domestic market – promotes biotechnology, information and communications technologies and cultural industries.
Finally, it is important to note that effectively implementing such a diversification strategy depends on the creation of an appropriate structure of public and private institutions and, not least, the development of a strong and competent bureaucracy. Successful economies of the past have practiced what has been called adaptive efficiency, developing institutions that provide a stable economic environment for existing activities to flourish while at the same time allowing room for, and providing support to, new lines of activity and the promotion of technological upgrading.
Economic Insight: Africa – What lower commodity prices mean
This issue of Economic Insight: Africa aims to provide insight on the dynamics influencing growth in sub-Saharan Africa over the past few years and explores the continent’s prospects over the rest of the decade.
Growth after commodities
In summary, the authors find that:
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the Chinese slowdown, and consequent effects on commodity prices, are resulting in changes in the structures of African economies;
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net energy importers, especially in East Africa, begin with an advantage on this score;
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the services sector in particular is an important driver of growth; and
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foreign direct investment (FDI) and innovation in these sectors are leading to some exciting business developments.
What lower commodity prices mean
The world economy is shaping up to look very different in the second half of this decade than it did in the first half, and the difference will have particularly important ramifications for economic development in Africa. Old models of growth driven by exports of unbeneficiated raw materials are obsolete, so Africa’s economies will increasingly need to create a hospitable environment for companies in the manufacturing and services sectors to drive growth. The rest of this report will examine the changes underway, and what these changes will mean for economic growth in Africa over the next five years.
From 2010 to the first half of 2015, growth in the developed world was modest. These economies were only able to soften the hit to the demand side of the economy through quantitative easing (QE), which channelled artificial liquidity into asset markets. At the same time, China’s economy was growing by an average of 8.5% per year in 2010-14 and its stateowned companies kept buying raw materials and building up reserves, especially metals. These processes propped up African economies. QE funds found their way into African asset markets, boosting capital inflows and allowing countries to balance trade account deficits.
Still-strong Chinese demand, meanwhile, kept commodity prices high. In the more resource-dependent economies this demand resulted in trade surpluses and abnormally strong currencies, which meant that consumers could buy from abroad and domestic manufacturing stagnated.
Weighted real GDP growth on the continent averaged 3.7% over the 2010-15 period, with several strong performances (such as Ethiopia, Mozambique, Rwanda and Tanzania) being offset by lacklustre growth by some of the larger economies (such as South Africa). That average was also dragged down by Libya’s staggering 61% contraction in output in 2011.
The generally benign picture changed drastically in 2014-15, when sudden deleveraging in China removed the support for commodity prices, which essentially collapsed. This dynamic will be examined in more detail in another section of this report but, to summarise, the effect was seen in sharply reduced export revenues, sliding currencies, inflation and lower fiscal revenues.
Looking ahead, Africa’s weighted real GDP growth is projected to average 4.3% during 2015-20, accelerating slightly from 3.6% in 2015 to 4.9% by 2020. Nigeria, the largest economy on the continent, is projected to contribute significantly to Africa’s economic expansion – the West African powerhouse s forecast to expand at an average real rate of 4.8% p.a. between 2015 and 2020, contributing over 25% to the continent’s forecast growth in this timeframe. The second-largest economy, South Africa, is only expected to grow by an average 2.4% p.a. over the same period, which is why its contribution to overall growth, at 8.3%, will be just over half its share of the continent’s output.
Stagnating or slowly rising commodity prices
Africa is the most commodity-dependent continent on earth, partly because manufacturing still accounts for a relatively small share of output. Most goods are exported in a raw state without being processed, refined or having had value added to them in other ways (unlike, for example, several Middle East oil exporting economies, which have extensive petro-chemicals sectors).
Africa is, therefore, especially susceptible to swings in global commodity prices. The commodity price boom of 2000 and the early-2010s ensured an influx of cash for Africa’s main commodity exporters, as well as a boom in foreign investment in a range of natural resources.
As with other regions, the commodity that has the biggest impact on African countries’ finances is oil: Africa is home to some major oil exporters, including Angola, Gabon, Nigeria and Algeria. During the boom years, plentiful oil revenues permitted governments in these countries to significantly increase public sector wages and infrastructure. Unfortunately, easy money meant that these governments had little incentive to implement structural economic reforms to boost private sector development; indeed, Africa’s main oil exporters operate in the most challenging business environments in the world.
On the upside, the majority of African countries are net oil importers; their current accounts have therefore benefited significantly from the drop in oil prices. This dynamic is most pronounced in East Africa, as petroleum attributes a significant share of total imports for these economies – for example, oil accounts for a third of all imports in Tanzania. Oil importers in other parts of the continent are also benefitting − one North African economy gaining from the fall in energy prices is Morocco, where the current account deficit narrowed from 7% of GDP in 2013 to an estimated 2.2% in 2015. Consumers are also benefiting from lower global oil prices, although some of these benefits are being eroded by rapidly-depreciating currencies across the continent. Furthermore, even when denominated in Zambian kwacha, the worst-performing currency over the past year, global oil prices have still halved since mid-2014.
Sectoral rebalancing towards services
Africa stands at the threshold of a large-scale rotational shift towards the services and manufacturing sectors, driven by a rising middle class, government policies, greater integration into the global economy and technological advancement. The services and manufacturing sectors’ rising contribution to GDP are both a natural extension of economic maturity and born out of necessity. The prolonged commodity price slump has provided the impetus for sectoral rebalancing away from the extractive sector, towards a greater diversification of the economic base.
A sectoral rebalancing from investment-driven capital goods as a primary driver of economic growth, towards a domestic consumption-based growth model offers significant upside potential and first-mover advantage to the private sector. This will be driven by a broad-based shift towards improved investment attractiveness on the back of increased government incentives, low penetration levels, continued development of transport, power and social infrastructure and (to a lesser extent) increased consumer disposable income.
The role of government support and institutional reform in sectoral rebalancing cannot be overstated. Government support of infrastructural and human skills development forms the cornerstone of inclusive economic growth and includes policies aimed at lifting the standard of education and improved female labour force participation. These innovations ultimately underpin the rotational shift towards enhanced formal sector development from subsistence farming and artisanal mining.
For the foreign investor, this socioeconomic shift opens the door to a wide spectrum of services and manufacturing opportunities. Although growing at a fast pace, the contribution of the manufacturing sector to GDP in Africa remains minimal. A retraction in extractive sector opportunities, due to low global commodity prices, therefore could provide scope for development of downstream activities. Moreover, development of the manufacturing sector will provide a country with the means to increase the direct benefit derived from its natural resources, including improved tax potential and a larger set of job opportunities.
Recognising this potential, African countries have stepped up support of manufacturing sector development by increasing free trade zones and offering a menu of fiscal incentives. Multinational companies have taken note: retail giant H&M sources materials from Ethiopia, while General Electric tapped Nigeria for the manufacturing of electrical goods. In turn, multinational companies that have set up manufacturing facilities in Ghana include consumer goods producer Unilever, health care product manufacturer PZ Cussons, Demark-based dairy and fruit juice maker Fan Milk, as well as Indian vehicle manufacturer Mahindra.
While institutional reform has laid the groundwork for investment attractiveness and labour force skills development, private funding is a key catalyst of sectoral rebalancing in Africa, which is particularly true of private equity (PE). Whereas previously, African PE fund managers expertly manoeuvred the growth-capital and natural resource wave over the past two decades, a new set of opportunities has opened up on the back of the changing face of the African consumer.
Innovation in financial services – popularised as FinTech – has erupted as a primary global investment opportunity and has recorded rapid growth over the past five years as technological innovation allowed digitally-active consumers to streamline and improve on traditional banking services. The online financial sector has also taken off in Africa, answering a need for quality financial services and tailormade solutions to structural challenges including frequent power disruptions and poor rural infrastructure. FinTech significantly contributed to the ease of transferring money and remitting earnings, acquiring insurance and attaining credit. Mobile banking has enabled peer-to-peer lending on a larger scale, extending on a traditional saving and credit scheme known as stokvels in Southern Africa.
Trends, challenges and selected countries
As in anything, an opportunity is sometimes difficult to distinguish from a crisis. Despite growth in the secondary and tertiary sectors examined in this report, it should be expected that urban job creation will grow at a slower pace than urban populations in most cities and that a major problem in Africa – that of large underemployed and poor populations living in slum conditions – will persist. There are also of course, particularly difficult challenges in a number of countries related to security and terrorism that undermine business and consumer confidence and economic activity. These will both remain major challenges for governments for some years to come.
As with the challenges posed by the sectoral rebalancing, responsible and far-sighted policymaking is the only thing that can make a difference here and even where it is present, issues will persist. The essential difference between the first half of the decade and the second is one of scale: future growth in Africa will be concentrated in fewer places, different countries and different sectors than before. As such, business opportunities in Africa will increasingly become a local or sectoral story, rather than a continental or regional one, based on external drivers. Good policymaking will, therefore, become ever-more important.
The South African economy has come under severe strain of late as the economic transformation in China has dampened demand for the country’s premier export commodities. These factors have combined to send the currency crashing to all-time lows.
We expect real GDP growth to slow to 1% this year and average about 2% p.a. during 2017-20. In this context, faced with uncertain revenue prospects and capacity problems in the power sector, the government has opened up the energy supply business to independent power producers, and this looks set to be a profitable venture in Africa’s biggest consumer of electricity.
The weak rand can be expected to boost other sectors, too. Many companies in South Africa’s creative economy, including advertising and the film industry, successfully compete against rich-world rivals; these companies’ offerings now look even more competitive on price. As imported manufactured goods become more expensive, it might be that some entrepreneurs will take advantage of the country’s skilled workforce and generally good infrastructure environment to start up factories.
In Nigeria, crude oil accounts for roughly 80% of total exports. The sharp decline in global prices for the commodity adds severe pressure on the nation’s external and fiscal balances. The Central Bank of Nigeria (CBN) has introduced capital controls as part of an importsubstitution strategy. Meanwhile, President Muhammadu Buhari has highlighted that the expansionary 2016 fiscal budget will prioritise interventions aimed at diversifying Nigeria’s economy, with agriculture and mining identified as strategically important industries. For the moment, however, the tight forex liquidity conditions associated with the CBN’s stance on the naira have already deterred foreign investment and foreigners will continue to tread cautiously until the naira is devalued.
In Kenya, the East African giant’s relatively diversified economy and comparatively low commodity dependence bode well for the country’s economic growth outlook. However, Kenya continues to face its own idiosyncratic challenges. More specifically, the country’s precarious fiscal situation is the primary reason why both Standard & Poor’s and Fitch Ratings downgraded the country’s outlook from stable to negative last year. That being said, the Kenyan Government has taken some important steps towards fiscal consolidation by preparing a supplementary budget that plans to reduce both development and recurrent public spending (relative to the original budget) in the current fiscal year.
While fiscal consolidation still needs to be actualised, and elections in 2017 could lead to some fiscal slippages, the government’s recognition of economic concerns and explicit will to address these issues instil confidence in the country’s economic outlook. Overall growth prospects remain positive, with the Kenyan economy expected to expand by around 6% p.a. during the 2017-20 period.
ICAEW’s Economic Insight: Africa is a quarterly economic forecast for the economies of the sub-Saharan Africa region prepared directly for finance professionals whose work focuses on Africa. This edition was produced by Oxford Economics, ICAEW’s partner and acknowledged expert in global economic forecasting, and NKC African Economics
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tralac’s Daily News Selection
The selection: Monday, 21 March 2016
Starting today, in Abidjan, the Fourth Africa CEO Forum. For twitter updates follow @africaceoforum, #ACF2016
Starting tomorrow, in Abidjan, an AfDB workshop on the promotion of agropoles and agro-processing zones
Spatial growth strategies have been gaining increasing attention among policy makers and businesses across Africa to correct market and governance failures within and across industries. When implemented correctly, such an approach can lead to increased private sector investment directed to areas of excellence and higher productivity in select industries that, with proper linkages, will result in positive spill-overs to the broader economy and significant sustainable job growth. Spatial growth strategies include the establishment of growth poles, growth corridors, and special economic zones. While these approaches share certain characteristics, their relevance and impact depend on the specific country and regional context. The event will consist of two parts: i) Policy level: A ministerial panel discussion and ii) Operational level: Learning and sharing sessions among practitioners. The seminar is expected to achieve the following results: [Concept note] [Tanzania: Agro-sector change via roads, market access – ole Nasha]
New 2016 Conference of Ministers documentation: Report, recommendations of AU Sub-Committee of Directors General of Customs on 'Coordinated border management enhancing security and trade facilitation', Accra Declaration, from the Fourth Congress of African Economists
Southern Africa: illustrating the extent and severity of the 2015-16 drought (FewsNet)
This report presents a series of maps which illustrate the extent and the severity of the drought as well as its impacts on water availability, crop and rangeland conditions, food prices, and food security.
ECOWAS countries to strengthen migration data management (ILO)
The Lome workshop ( 15-18 March) was an opportunity for ILO to share the Recommendation 19 on migration statistics, databases on labour migration statistics in ASEAN, Arab States and African countries as well as data collection tools. A representative from the African Union Commission presented the data component of the joint labour migration programme, an AU/ILO/IOM/ECA initiative, adopted by the African Heads of State and Government in January 2015 on establishing coherent, accurate, and up-to-date data and statistics on migration in Africa.
Regional integration stalled in Central Africa (VOA)
The six nations that make up the Central African Economic and Monetary Community wrapped up their eighth annual 'CEMAC Days' event with a dismal assessment: Central Africa is failing its efforts to achieve regional integration. CEMAC consists of Cameroon, Chad, Equatorial Guinea, Republic of Congo, Gabon and the Central African Republic.The regional bloc was formed in 1994. Since then, CEMAC President Pierre Moussa said, little has been achieved to improve daily lives in the region. Besides CEMAC, the region is also part of a larger economic bloc, the Economic Community of Central African States. ECCAS shares many of the same objectives as CEMAC and also includes Angola, Burundi and Sao Tome and Principe. Gabonese analyst and integration expert Emmanuel Bimbo said there has been a misallocation and duplication of resources. [As elections near, Congo seeks to diversify its economy beyond oil (EurActiv)]
Kenya: Counties eye spot in regional trade bloc (Daily Nation)
A consortium of counties under the North Rift Economic Bloc caucus is fast-tracking plans to ensure that they claim a spot in the East African. The counties are said to strategising on how to kick-start export of cash crop products besides marketing their tourism sectors to the region.
Two perspectives on African integration policy issues: The trials, restrictions and costs of traveling in Africa if you’re an African (Quartz Africa), Why borderless economies are best for Africa — Tonye Cole, Sahara Group CEO (Premium Times)
Rwanda: Services sector grows 7% (East African Business Week)
Rwanda’s economy registered 6.9% growth in 2015 (RwF 5,837 billion up from RwF 5,395 billion in 2014) according to GDP numbers released by the National Institute of Statistics of Rwanda last week. The 2015 growth is slightly lower than the 7% registered in 2014. Announcing the growth figures, Yusuf Murangwa, the Director General of NISR said services and industry grew by 7% respectively while Agriculture registered 5% growth. He said services continue to lead in terms of shares to GDP with 47% compared to 33% and 14% for agriculture and industry respectively. [Download: GDP - National Accounts, 2015]
Zambia: IMF staff conclude visit (IMF)
The mission and the authorities reached a shared understanding of the challenges and risks associated with the current economic situation. The authorities stressed that, notwithstanding the upcoming general elections, they are committed to addressing the budgetary pressures, including moving to cost-reflective energy pricing, and scaling back on discretionary spending while safeguarding social protection programs. They indicated that strong near-term measures are being evaluated and that, at the IMF/World Bank Spring Meetings in mid-April, they would provide further guidance on the policy direction and reforms, and their plans for an IMF-supported program. [Zambia says budget deficit unsustainable, started IMF talks (Reuters)]
DRC orders mining and oil companies to pay taxes in US dollars (Reuters)
Mining and oil firms in Democratic Republic of Congo must pay taxes and import duties in US dollars from Saturday rather than in the national currency, the Central Bank of the Congo said. The decision is part of an attempt by authorities to increase reserves of foreign currency, weakened by a slump in global mining and oil prices that has hit government revenue. It reverses a policy established in 2014 to require companies to pay taxes in francs as part of a drive to wean the central African country off dollars.
Nigerian exports slumped 40% last year as oil prices plunged (Reuters)
The total value of Nigeria’s merchandise trade during the Fourth Quarter of 2015 stood at N3,653.1bn, 9.2% lower than the value of N4,021.4bn recorded in the preceding quarter. For the 2015 calendar year, the country’s total trade was recorded at N16,426.8bn, amounting to N7,251.6bn or 30.6% less than the total trade value recorded for 2014. This development arose largely due to sharp decline the value of exports; from N16,304.0bn in 2014 to N9,728.8bn in 2015, a decline of 40.3%. A decrease of N676.4bn or 9.2% in the total imports in 2015 helped to mitigate the declining trade balance, which stood at N3,030.8bn, N5,898.9bn less than the value in 2014. The crude oil component of total trade decreased by N4,945.9bn or 41.6% as against the level recorded in 2014 (Table 1). [Download Nigeria Foreign Trade Statistics: Fourth Quarter, 2015]
Nigeria: The ‘zero oil’ plan and an export revolution (The Nation)
We are not starry-eyed optimists, as moving to a Nigeria with Zero Oil will not be easy. But we should remember that we once had a country that was Zero Oil. The questions to ask are: What happened to our proud history in palm oil, cocoa, groundnuts, cotton? We were the toast of the world, where are these products now? We know in good days Nigeria typically makes over $70bn annually from crude oil exports, but the world is bigger than oil. Only three of the top 20 exporters in the world depend heavily on oil exports, and today even those three are fast diversifying. Indonesia makes over $18bn from only palm oil exports (we understand the Indonesians took their first palm seed from Nigeria over 50 years ago); Brazil makes $17bn from soybeans; Saudi Arabia makes over $30bn from petrochemicals, and Bangladesh makes $5bn from T-shirts. [The author, Olusegun Awolowo, is CEO, Nigeria Export Promotion Council]
Ghana: 'Evidence-based, stakeholder-informed approach to competition reforms' workshop
The second national orientation workshop on Competition Reforms in Key Markets for Enhancing Social and Economic Welfare in Developing countries (CREW Project) has taken place in Accra. The CREW Project aims to address the challenge of weak competition enforcement and to attract attention to competition reforms in the developing world, including Ghana. It is being implemented by the Consumer Unity and Trust SocietyInternational in four countries — Ghana, India, Philippines and Zambia — with support from the British Department for International Development and BMZ of Germany, and facilitated by the German Development Co-operation.
Tanzania: CTI calls for cut in number of regulatory bodies, levies (IPPMedia)
The Confederation of Tanzania Industries has requested the government to reduce the number of regulatory authorities and tax charges for local products in order to protect and boost the industrial sector. It claimed that often times agro products delay to reach the market place due to lack of approval from the Tanzania Bureau of Statistics, Tanzania Food and Drugs Authority, Tanzania Revenue Authority and ministries. CTI Chairman Leodegar Tenga espressed the concerns on Friday to the parliamentary committee on industry, trade and environment in Dar es Salaam. [TCRA's Traffic Monitoring System earns Treasury billions (IPPMedia)]
Ethiopia: an agrarian economy in transition (UNU-WIDER)
This study explores the impact of the high economic growth and slow but unmistakable structural change on a number of economic outcomes working through the labour market. The growth opportunities and challenges of the Ethiopian economy are also discussed.
Alex De Waal: 'Africa’s $700bn problem waiting to happen' (Foreign Policy/South Sudan News Agency)
Back in 2002, Meles Zenawi, then prime minister of Ethiopia, drafted a foreign policy and national security white paper for his country. Before finalizing it, he confided to me a “nightmare scenario” — not included in the published version — that could upend the balance of power in the Horn of Africa region. The scenario went like this: [Ethiopia's Renaissance Dam: what options are left for Egypt? (Ahram Online)]
Kenya: State steps up bid to add value to leather products (Daily Nation)
In an announcement in the Daily Nation on Friday, the Kenya Leather Development Council said it urgently requires a comprehensive analysis on the entire state of the leather subsector within the next five months ahead of the planned launch of a Sh17bn leather industrial park at Kinanie area in Machakos County. The park is currently under development. [A resurgent textile industry would benefit Kenya’s value-chain (Standard)]
China Development Forum: speech by Sri Mulyani Indrawati (World Bank)
This brings us to the policy question: What needs to be done to revamp trade as an engine of growth? We should avoid new protectionist trade measures and unwind trade-restrictive measures enacted since 2008. For example, the number of product lines subject to import restrictions by G-20 members has increased by half since 2007. Regional trade agreements should remain open and inclusive, and focused on trade creation rather than trade diversion. Reforms should include reducing barriers to merchandise trade including agriculture, services liberalization, and addressing “at-the borders” constraints, such as congestion at customs. Logistical obstacles to trade have risen and, in all developing country regions, are significantly greater than in high-income countries.
WTO: India-US fight over short-term service providers escalates (Livemint)
Nigeria: Stakeholders canvass for economic policy, expanded management team (ThisDay)
Egypt’s foreign exchange market and the need for a different economic policy (Ahram Online)
Namibia, DRC gets contrasting Fitch ratings (Southern Times)
Mozambican transport minister reviews cooperation projects in Japan (Club of Mozambique)
Tanzania: Chinese nationals face 35 yrs in prison for elephant tusk trade (IPPMedia)
India mulls private financing agencies for industrial corridors (The Hindu)
Cisco's John Chambers backs India move to take up H1-B issue at WTO (Livemint)
Angola establishes regime to report non-compliant taxpayers (EY Africa)
Taxation and revenue mobilization in developing countries: conference programme (UNU-WIDER)
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Nigerian exports slumped 40% last year as oil prices plunged
Nigerian exports slumped 40.3 percent last year after a fall in crude prices slashed government revenues, weakened the currency and caused the economy to grow at its slowest pace in decades, the national bureau of statistics (NBS) said.
Nigeria, Africa’s biggest economy, faces its worst economic crisis in years, triggered by the fall in the value of its exports, mostly crude, which brings in hard currency it uses to finance imports.
With limited manufacturing capacity, Nigeria imports most of what it consumes. Last year imports fell 9.2 percent, the NBS said adding that the decline helped mitigate a trade balance.
The balance of trade for 2015 was 3.03 trillion naira, down from 8.93 trillion naira a year earlier ($15.2 billion – $44.9 billion).
“This development arose largely due to sharp decline the value of exports. The structure of Nigeria’s exports is dominated by crude,” the NBS said.
Nigeria’s exports fell by 29.7 percent in the fourth quarter from a year ago and imports declined 22.4 percent, the NBS said. The fall in crude oil exports, which accounted for 71.4 percent of total domestic exports last year, hit the economy the most.
Nigeria’s economic slowed in 2015 to grow at 2.8 percent, its slowest growth in decades, down from 6.2 percent in 2014, as currency controls introduced by the central bank last year to support the naira, as oil prices plunged start to hurt growth.
The dollar restrictions caused inflation to spike in February, rising to almost a three-and-half-year high while forcing lenders to delay hard currency loan and trade repayments to foreign bank.
The IMF has called on Nigeria to lift the curbs and let the naira reflect “market forces” more closely, as the restrictions had significantly affected the private sector. The naira trades on the unofficial market some 40 percent below the official rate to the dollar.
President Muhammadu Buhari has rejected calls to devalue the naira, backing the central bank, arguing that dollar curbs were necessary as Africa’s top oil producer could no longer afford to import as much as it had in the past due.
Nigeria exported mainly to Asia and Europe last year while imports were dominated by machinery, petrol and foods products from Asia, Europe and Americas. Imports within Africa grew by 6.3 percent.
Merchandise Trade Declines in Q4, 2015
Declining Trade Balance due to falling exports
Total External Merchandise Trade
The total value of Nigeria’s merchandise trade during the Fourth Quarter of 2015 stood at N3,653.1 billion, 9.2% lower than the value of N4,021.4 billion recorded in the preceding quarter. For the 2015 calendar year, the country’s total trade was recorded at N16,426.8 billion, amounting to N7,251.6 billion or 30.6% less than the total trade value recorded for 2014. This development arose largely due to sharp decline the value of exports; from N16,304.0 billion in 2014 to N9,728.8 billion in 2015, a decline of 40.3%. A decrease of N676.4 billion or 9.2% in the total imports in 2015 helped to mitigate the declining trade balance, which stood at N3,030.8 billion, N5,898.9 billion less than the value in 2014. The crude oil component of total trade decreased by N4,945.9 billion or 41.6% as against the level recorded in 2014 (Table 1).
*Crude oil figures for this quarter are provisional
Imports Classified by Standard International Trade Classification and Country of Origin
The value of Nigeria’s imports stood at N1,576.4 billion at the end of Q4, 2015. This was 6.6% less than the value (N1,688.2 billion) recorded in the preceding quarter. Comparison with the corresponding quarter of 2014, showed a decrease of N454.6 billion or 22.4%. The structure of Nigeria’s imports according to SITC was dominated by the imports of “Machinery and transport equipment”, “Mineral Fuel”, and “Food and Live Animals”, which accounted for 32.4%, 18.5%, and 15.0% respectively in 2015. These commodities contributed the most to the value of import trade in 2015, whereas commodities such as “Crude inedible materials”, “Oils, fats & waxes”, and “Beverages & tobacco”, contributed the least; accounting for 1.6%, 1.0%, and 0.5% respectively.
Imports by section were dominated by the imports of “Boilers, machinery and appliances”, which accounted for N1,580.0 billion or 23.6% of the total value of imports in 2015. Other commodities which contributed noticeably to the value of imports in 2015 were “Mineral Products” at N1,273.4 billion (19.0%), “Vehicles, aircraft and associated parts” at N608.5 billion (9.1%), “Products of the chemical and allied industries” at N578.9 billion (8.6%) and “Base metals and articles of base metals” at N574.1 billion (8.5%).
In 2015, imports classified by Broad Economic Category revealed that “Industrial supplies not elsewhere classified” ranked first with N1,824.1 billion or 27.2%. This was followed by “Capital goods and parts” with the value of N1,516.7 billion or 22.6%, and “Fuels and Lubricants” with the value of N1,210.7 billion or 18.1%. The value of Premium Motor Spirit stood at N288.6 billion.
Nigeria’s imports by Economic region revealed that the country consumed goods largely from Asia with an import value of N2,833.5 billion or 42.3%. The country also imported goods valued at N2,501.6 billion or 37.3% from Europe, and N871.3 billion or 13.0% from The Americas. Imports from within the continent of Africa totalled N420.4 billion or 6.3%, while imports from the region of ECOWAS amounted to N213.8 billion.
Exports Classified by Standard International Trade Classification and Country of Destination
The value of the nation’s exports totalled N2,076.7 billion in Q4, 2015, showing a decrease of N256.5billion, or 11.0%, over the value recorded in the preceding quarter. On an annual basis total exports from Nigeria stood at N9,728.8 billion at the end of 2015, representing a drop of N6,575.2 billion or 40.3% over levels recorded in 2014. Notwithstanding a steep decline in crude oil exports by N4,945.9 billion or 41.6% in 2015, the structure of Nigeria’s exports is still dominated by crude oil exports. The contribution of crude oil to the value of total domestic export trade amounted to N6,945.3 billion or 71.4% in 2015 (estimate figures).
Exports by Section, revealed that the largest product exported by Nigeria in 2015 was “Mineral products” which accounted for N8,574.3 billion or 88.1%. Other products that contributed noticeably to Nigeria’s exports include “Vehicles, aircraft and parts thereof; vessels etc.” and “Prepared Foodstuffs; beverages, spirits and vinegar; tobacco” whose values stood at N681.6 billion or 7.0%, and N167.1 billion or 1.7% respectively, of the total exports of Nigeria for the year.
Exports by continent, showed that Nigeria mainly exported goods to Europe and Asia, which accounted for N3,866.6 billion or 39.7% and N2,945.8 billion or 30.3% respectively, of the total export value for 2015. Furthermore, Nigeria exported goods valued at N1,400.4 billion or 14.4% to the continent of Africa while export to the ECOWAS region totalled N608.3 billion.
Rwanda services sector grows 7%
Rwanda’s economy registered 6.9% growth in 2015 (RwF 5,837 billion up from RwF 5,395 billion in 2014) according to the Gross Domestic Product (GDP) numbers released by the National Institute of Statistics of Rwanda (NISR) last week.
The 2015 growth is slightly lower than the 7% registered in 2014.
“In agriculture, food crop growth was 4% in 2015 down from 6% during 2014, especially due to vegetables and fruits that dropped by -6.3%. Export crops grew by 13%, mainly boosted by coffee whose output increased by about 11%. However, output for tea dropped by -4%,” Yusuf Murangwa, the Director General of NISR said.
GDP is the monetary value of all goods and services produced within a country in a specific time period.
Announcing the growth figures, Yusuf Murangwa, the Director General of NISR said services and industry grew by 7% respectively while Agriculture registered 5% growth.
He said services continue to lead in terms of shares to GDP with 47% compared to 33% and 14% for agriculture and industry respectively.
Industry growth was mainly due to a 10% growth in construction. However, mining and quarrying dropped by -9% as value and quantity of cassiterite, coltan and wolfram dropped. Information and communication grew by 16% mainly boosted by information technology that grew by 28% while printing services dropped by -17%.
Reacting to the negative growth in the mining sector, the finance minister, Amb. Claver Gatete attributed the poor performance to the fall in commodity prices on the international market.
He however noted that government was working on value addition to its minerals so as to fetch better foreign exchange.
On the agriculture sector performance, Gatete stressed the government was working on increasing the absorption capacity of all the programs it has initiated to boost growth.
“We may not have control over weather but we are supporting the sector through irrigation, fertilizer subsidies, post-harvest management and strengthening linkages between agriculture, markets and industries all of which will positively impact growth in the sector,” Gatete said.
The fourth integrated household living conditions survey (EICV4) indicates that, agriculture is growing at twice the pace of the population which according to Mr. Murangwa is a positive trend.
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Regional integration stalled in Central Africa
The six nations that make up the Central African Economic and Monetary Community wrapped up their eighth annual “CEMAC Days” event with a dismal assessment: Central Africa is failing its efforts to achieve regional integration.
CEMAC consists of Cameroon, Chad, Equatorial Guinea, Republic of Congo, Gabon and the Central African Republic. The regional bloc was formed in 1994. Since then, CEMAC President Pierre Moussa said, little has been achieved to improve daily lives in the region.
He said central African states have been working at regional integration since they gained independence in the 1960s but are still not able to ensure the free movement of people and goods. This has kept the countries among the least developed in Africa. He said member nations are preoccupied by self-interest and a belief that each state can develop on its own. He thinks that is the major obstacle to integration. He also cited security issues as keeping the region from concentrating on economic development.
The CEMAC chief offered a dismal report card: 30 percent of people in the region go hungry, he said, while 70 percent live on less than $1 a day.
Experts say the conflict in the Central African Republic and the regional spillover of the Boko Haram insurgency have diverted attention from development.
Ambitious plans to create a regional airline, to build roads linking regional capitals and to create a regional stock exchange have remained just that: plans and aspirations.
Only Cameroon and Gabon have started issuing biometric passports, despite a January 2014 deadline.
The region is not yet a visa-free zone. So far only Cameroon and Chad allow their citizens to travel between the two countries without visas, following a bilateral agreement.
Member states have however reached agreements on reduction of customs duties of up to 70 percent for some basic goods like sugar and farm produce.
Besides CEMAC, the region is also part of a larger economic bloc, the Economic Community of Central African States (ECCAS). ECCAS shares many of the same objectives as CEMAC and also includes Angola, Burundi and Sao Tome and Principe.
Gabonese analyst and integration expert Emmanuel Bimbo said there has been a misallocation and duplication of resources.
“The impact of this overlapping scheme is negative because since they are working on the same program, it means that they are wasting resources and time. The region is not advancing too well as the other sub regions of the continent. They have to put in practice what the heads of state have decided. The objective of the African Union is to move to one economic community for the continent around 2028,” said Bimbo.
Economic growth last year for the six CEMAC member states did not top three percent, a disappointment compared to the six percent growth that was forecast.
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Abidjan opens its doors to the Africa CEO Forum, global meeting place for the African private sector and decision-makers
The fourth Africa CEO Forum – meeting place for entrepreneurs, decision-makers and financiers from the African private sector – takes place on 21-22 March 2016 in the Palais des congrès of the Sofitel hotel in Abidjan, Côte d’Ivoire.
It is the first time that the event has been held on the continent, in the city where the African Development Bank, a key and historic partner in the Forum, has its headquarters. It is an important choice, as underlined by the founder and President of the Africa CEO Forum, Amir Ben Yahmed. “We have chosen a country and a region that is showing clear signs of robust economic development. The fact that the African Development Bank is based there – our partner since the first edition – was a further contributing factor.”
This year’s Africa CEO Forum will feature the Bank’s five top priorities (the High 5s) which are designed to sharpen the focus of the Bank’s Ten Year Strategy. They are: light up and power Africa; feed Africa; industrialise Africa; integrate Africa; improve the quality of life for the people of Africa.
“The High 5s are a bold initiative that require a collective effort and collaboration between the African Development Bank and the private sector,” says Akinwumi Adesina, President of the AfDB, who will open the ceremony alongside d’Amir Ben Yahmed. “I look forward to working closely with private sector leaders to deliver on the High 5s.” The President of the Bank is convinced, as he says in this video, that the private sector is a key vector for growth in Africa.
As well as the President of the AfDB, Alassane Ouattara, President of the Republic of Côte d’Ivoire and Uhuru Kenyatta, President of the Republic of Kenya, will be present.
The Africa CEO Forum aims to be a marketplace for exchange on the development challenges for African business, within the context of global competition. It is also a place for meeting and networking. It seeks to advance the economic transformation of Africa, establishing the African private sector as the motor of African growth and the creator of added value.
As well as plenary sessions, round-tables and other workshops, the 2016 Forum will see the establishment of ‘Deal Rooms’, offering business people and investors the opportunity to identify new partners and to share the experiences and best practice of their respective sectors.
The theme of this year’s Forum is ‘New realities, new priorities’. The Forum will also present the findings of the Visa Openness Index, a report which was developed in partnership with McKinsey & Company and the World Economic Forum Global Agenda Council on Africa.
More than 800 key players from the African private sector and worldwide, of whom 500 are CEOs, have confirmed their attendance at the event, which is organized jointly by Groupe Jeune Afrique, the AfDB and Rainbow Unlimited.
Since its inception in 2012 in Geneva, the Africa CEO Forum has attracted the participation of more than 1300 private sector companies
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Africa’s $700 billion problem waiting to happen
The Horn of Africa region is central to the world’s maritime trade. It’s also beginning to fall apart.
Back in 2002, Meles Zenawi, then prime minister of Ethiopia, drafted a foreign policy and national security white paper for his country. Before finalizing it, he confided to me a “nightmare scenario” – not included in the published version – that could upend the balance of power in the Horn of Africa region.
The scenario went like this: Sudan is partitioned into a volatile south and an embittered north. The south becomes a sinkhole of instability, while the north is drawn into the Arab orbit. Meanwhile, Egypt awakens from its decades-long torpor on African issues and resumes its historical stance of attempting to undermine Ethiopia, with which it has a long-standing dispute over control of the Nile River. It does so by trying to bring Eritrea and Somalia into its sphere of influence, thereby isolating the government in Addis Ababa from its direct neighbors. Finally, Saudi Arabia begins directing its vast financial resources to support Ethiopia’s rivals and sponsor Wahhabi groups that challenge the traditionally dominant Sufis in the region, generating conflict and breeding militancy within the Muslim communities.
Fourteen years later, reality has exceeded Zenawi’s nightmare scenario; not only has every one of his fears come to pass, but Egyptian President Abdel Fattah al-Sisi and Saudi King Salman bin Saud are working hand-in-glove on regional security issues – notably in Yemen and Libya – which has raised the stakes of the long-running Egypt-Ethiopia rivalry. If the worsening tensions in the Horn of Africa erupt into military conflict, as seems increasingly possible, it wouldn’t just be a disaster for the region – it could also be a catastrophe for the global economy. Almost all of the maritime trade between Europe and Asia, about $700 billion each year, passes through the Bab al-Mandab, the narrow straits on the southern entrance to the Red Sea, en route to the Suez Canal. An endless procession of cargo ships and oil tankers passes within sight – and artillery range – of both the Yemeni and African shores of the straits.
Zenawi’s nightmare scenario, in other words, may soon become the world’s – and no one has a white paper to prepare for it.
A crisis in the Horn of Africa has been a long time in the making. The regional rivalries of today date back to 1869, when the Suez Canal was opened to shipping, instantly making the Red Sea one of the British Empire’s most important strategic arteries, since almost all of its trade with India passed that way. Then as now, the security of Egypt depended on control of the Nile headwaters, 80 percent of which originate in Ethiopia. Fearful that Ethiopia would dam the river and stop the flow, Egypt and its colonial masters attempted to keep Ethiopia weak and encircled. They did this in part by divvying up rights to the Nile’s waters without consulting Addis Ababa. For example, the British-drafted Nile Waters Agreements, signed in 1929 and 1959, excluded Ethiopia from any share of the waters. As a result, Egypt and Ethiopia became regional rivals, intensely suspicious of each other.
The Nile remains a high-profile source of tension between the two countries to this day; Sisi’s state visit last year to Ethiopia failed to achieve much, in large part because of Egypt’s unease over a huge Ethiopian hydroelectric project on the Blue Nile. But another important source of friction between the two countries has centered for some time on two of Ethiopia’s volatile neighbors – Eritrea and Somalia – which Cairo has long viewed as useful partners to secure its interests along the Red Sea littoral. Ethiopia has shown it will resist what it views as Egyptian encroachment near its borders. From 2001 to 2004, for instance, Ethiopia and Egypt backed rival factions in Somalia, which prolonged that country’s destructive civil war.
These fractures in the Horn of Africa have been deepened by Saudi Arabia’s reassessment of its security strategy. Worried that the United States was withdrawing from its role as security guarantor for the wider region, it resolved to build up its armed forces and project its power into strategic hinterlands and sea lanes to the north and south. In practice, that has meant winning over less powerful countries along the African coast of the Red Sea – Sudan, Eritrea, Djibouti, and Somalia – a region that Ethiopia has sought to place within its sphere of influence.
The Saudi presence along the African Red Sea coast has grown more sharply pronounced since its March 2015 military intervention in Yemen, which drew in Egypt as part of a coalition of Sunni Arab states battling Iran-backed Houthi rebels. The coalition obtained combat units from Sudan and Eritrea, and scrambled to secure the entire African shore of the Red Sea. Then in January of this year – under pressure from Saudi Arabia – Djibouti, Somalia, and Sudan all cut diplomatic ties with Iran. By far the most significant of these was Sudan, which has had long-standing political and military ties with Tehran. For years, Iranian warships called at Port Sudan, and Iranian clandestine supplies to the Palestinian militant group Hamas passed freely along Sudan’s Red Sea coast (occasionally intercepted by Israeli jet fighters). Now Sudan is part of the Saudi-led coalition pummeling the Iran-backed Houthis.
But the most important geopolitical outcome of the Saudi-lead Yemen intervention has been the rehabilitation of Eritrea, which capitalized on the war to escape severe political and economic isolation. After it gained independence from Ethiopia in 1993, Eritrea fought wars with each of its three land neighbors – Djibouti, Sudan, and Ethiopia. It also fought a brief war with Yemen over the disputed Hanish Islands in the Red Sea in 1995, after which it declined to reestablish diplomatic relations with Sana’a and instead backed the Houthi rebels against the government.
After the Ethio-Eritrean border war of 1998-2000, Eritrea became a garrison state – with an army of 320,000, it has one the highest soldier-to-population ratios in the world – and Ethiopia led an international campaign to isolate it at the African Union, United Nations, and other international bodies. This was made easier by Eritrea’s increasingly rogue behavior, including backing al-Shabab militants in Somalia. The imposition of U.N. sanctions in 2009 brought the country to the brink of financial collapse.
But the war in Yemen gave Eritrean President Isaias Afewerki a get-out-of-jail-free card. He switched sides in the Yemen conflict and allied himself with Saudi Arabia and its Gulf partners. As a result, the Eritrean president is now publicly praised by the Yemeni government and welcomed in Arab capitals. His government is also reaping handsome if secret financial rewards in exchange for its diplomatic about-face.
But the fact that Eritrea has decisively escaped Ethiopia’s trap does not mean it has suddenly become a more viable dictatorship. On the contrary, the renewed geostrategic interest in the country and its 750-mile Red Sea coast make the question of who succeeds Afewerki, who has been in power for a quarter century, all the more contentious – especially since Ethiopia has long sought to hand pick a replacement for the Eritrean president. Already, Ethiopia mounts regular small military sorties on the countries’ common border to let Eritrea know who is the regional powerbroker. It would not take much for these tensions to explode into open war.
Saudi Arabia’s revamped security strategy has also meant a sudden influx of Arab funds into Somalia. The Saudis promised $50 million to Mogadishu in exchange for closing the Iranian embassy, for example, while other Arab countries and Turkey have spent lavishly to court the allegiance of Somali politicians. This is partly intra-Sunni competition – Turkish- and Qatar-backed candidates pitted against those funded by the Wahhabi alliance – but it also reflects Somalia’s increasing geopolitical importance. In the country’s national elections scheduled for September, Arab- and Wahhabi-affiliated candidates for parliament could very well sweep the board.
All of this has made Ethiopia very nervous – as it should. The tremors of the region’s shifting tectonic plates may not directly cause a major crisis. The more probable outcome is deeper divisions between Egypt and Ethiopia, which could cause a proliferation or deepening of proxy disputes elsewhere in the region, such as the two countries’ competing efforts to shape the future leadership of Eritrea and Somalia.
Still, it’s impossible to rule out the possibility of a dramatic security crisis stemming from the shifting regional balance of power. It could come in the form of renewed fighting over Eritrea’s still-disputed land borders, or spinoffs from the war in Yemen, such as the eruption of maritime terrorism. That would lead to a dramatic escalation of the militarization of the region. It would also threaten to entirely close the region’s sea lanes – the ones that are so central to global commerce.
Unfortunately, the international community is sorely unprepared for such an outcome. A well-established, multi-country naval coalition patrols the sea lanes off Somalia’s coast to combat piracy, but no international political mechanism currently exists to diffuse a regional crisis. In the relevant bureaucracies that might be called upon in an emergency – from the United Nations to the U.S. State Department – Africa and the Middle East are handled by separate divisions that tend not to coordinate. The EU’s special envoy for the Horn of Africa, Alex Rondos, has taken the lead in developing an integrated strategy for both shores of the Red Sea, but the EU’s foreign policy instruments are ill-suited to hard security challenges such as this that span two continents.
For its part, the African Union has developed a sophisticated set of conflict management practices for its region. It has taken a hard line against coups and pioneered the principle of non-indifference in the internal affairs of member states – foreshadowing the doctrine of “responsibility to protect.” Its summits serve as gatherings where peer pressure is used for the informal management of conflicts, with more success than is usually recognized. The Gulf Cooperation Council, the regional alliance of Gulf monarchies that would inevitably be involved in a major regional dispute of this kind, should learn from these African best practices. That would require a dramatic change in the mind-set of Arab royal families, which assume that their relationship with Africans is one of patron and client. Too often, the Africans reinforce that mind-set by acting as supplicants. For example, when the African Union sent a delegation to the Gulf countries in November, the agenda wasn’t strategic dialogue or partnership – it was fundraising.
But to prevent Zenawi’s “nightmare scenario” from coming to fruition, the Africans and the Arabs need to recognize the Red Sea as a shared strategic space that demands their coordination. A sensible place to start would be by convening a Red Sea forum composed of the GCC and the AU – plus other interested parties such as the United Nations, European Union, and Asian trading partners – to open lines of communication, discuss strategic objectives for peace and security and agree on mechanisms for minimizing risk. The fast-emerging Red Sea security challenge is well suited to that most prosaic of diplomatic initiatives – a talking shop.
The problem is, all these actors tend to start talking only after a crisis has already exploded. Here’s a timely warning.
Alex De Waal is a research Professor at Tufts University and an expert on the horn of Africa.
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ADF-14 meeting in Abidjan: Funding the development of a winning Africa
On March 17, 2016, the Fourteenth Replenishment of the African Development Fund (ADF-14) began its first meeting, which was held in camera over two days in Abidjan, where the African Development Bank (AfDB) has its headquarters.
In his opening address, AfDB President Akinwumi Adesina – who is also president of the ADF – emphasized the importance of this first meeting on the 14th replenishment of the Fund. This replenishment is crucial to enable the ADF and the Bank Group as a whole to “help deliver on the expectations, thereby improving the lives of hundreds of millions of vulnerable and impoverished people in Africa, particularly women and children,” he said.
Members of the Board of Directors and Board of Governors of the Bank Group are also taking part in the meeting, as are other prominent public figures, representatives of ADF-eligible countries and development partners.
Accustomed to ADF meetings, in which she never fails to participate as a representative of a beneficiary country of the Fund, Liberian President Ellen Johnson Sirleaf highlighted at the outset “how crucial it is for the Fund to sustain its valuable assistance to Africa.”
The ADF is crucial in that it is the epicentre of the mobilization of resources allocated to funding development projects carried out by the Bank Group in the thirty or so African countries that are eligible for loans and grants, made to them on preferential terms and well-defined criteria. These are the most fragile countries of the continent which, without the ADF, would not have access to the funding that is essential to their development.
It is thanks to the ADF that many development projects take place such as – among numerous other examples – the NERICA project (video), the Ketta-Djoum to Congo-Brazzaville road (video), the Menengaï project in Kenya (video), or the Drinking water project in Mozambique (video). Like the Bank Group, within which it is one the major entities, the ADF has a vocation that could hardly be more ambitious: Changing the lives of the most vulnerable African populations.
ADF-14 is taking place in difficult times. The world economic situation has seen better days: “The ADF-14 negotiations are taking place at a critical juncture,” said the Liberian President and co-winner of the Nobel Prize for Peace, “with numerous challenges facing Africa and the world economies. Johnson Sirleaf went on to say, “the economic slowdown in emerging markets has adversely affected the international prices of principal commodity exports and resultantly the macroeconomic and financial conditions.”
Falling world raw materials prices, climate change that particularly affects Africa, a lack of infrastructure, population growth and urban sprawl, unemployment and youth employment, heightened insecurity and risk of terrorism in some regions of the continent, fragile states... The challenges that Africa must meet are considerable. Not to mention health-related problems made more acute in the last two years by the spread of the Ebola virus, causing the loss of thousands of lives and severe economic losses in the most-affected countries of West Africa (Guinea, Liberia and Sierra Leone). The AfDB was at the forefront of the fight against Ebola, said the Liberian President, paying tribute to everything that the ADF and the Bank Group overall are accomplishing for the development of Africa.
Responding to the many challenges facing Africa requires funding of commensurate size. And ambitions for the development of the continent are also on the rise, stressed AfDB President Akinwumi Adesina on the first day of the meeting: The Sustainable Development Goals (SDGs), adopted at the United Nations in September 2015, are bolder even than the MDGs that preceded them. The Addis Ababa Programme of Action of Financing for Development agreed to in July 2015 and the global agreement on climate change ratified at COP21 in December 2015, are a few of the global commitments that will move the continent forward.
This first meeting behind closed doors was coordinated by Richard Manning, a high-ranking British official, expert in development matters and with outstanding knowledge of Africa, who will produce a conference report for the AfDB President at its conclusion.
ADF-14 negotiations, which will be held over several meetings, will determine the amount of resources available for allocation over the next three years in full accord with the Bank’s Ten-Year Strategy, for the development of the most vulnerable African countries and the well-being of their populations.
ADF resources are replenished every three years. This is the fourteenth replenishment, intended to mobilize the funds necessary for the period 2017 to 2019. ADF-13, held in 2013, led to the mobilization of US$1.8 billion.
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ECOWAS countries to strengthen migration data management
Experts from national statistical offices of ECOWAS member States agreed to strengthen migration data management for evidence-based policy making on labour migration.
The International Labour Organisation (ILO) shared expertise and knowledge in labour migration statistics by contributing to improve the evidence base for programmes and policies that facilitate labour mobility for development within the ECOWAS region.
From 15-18 March 2016 in Lome, Togo, senior statisticians and migration data management experts from ECOWAS Member States and international organisations, took part in a workshop, planned in collaboration with the ILO, to discuss best practices and latest trends in migration data collection and analysis.
“The ILO supports the collection, compilation and sharing of statistics on labour migration and provides technical assistance tailored to national statistical offices to create or extend their investigations into workforce related matters by collecting reliable statistics based on international standards and common methodologies,” ILO’s Senior Statistician Honore Djerma explained.
Strengthening national migration data management systems and improving the coordination between national stakeholders has been a common challenge in the sub region. Currently, there is a lack of comprehensive, reliable and accurate data on migration and labour market in the sub region which is also facing serious obstacles in the implementation of ECOWAS protocols.
The Lome workshop was an opportunity for ILO to share the Recommendation 19 on migration statistics, databases on labour migration statistics in ASEAN, Arab States and African countries as well as data collection tools.
A representative from the African Union Commission presented the data component of the joint labour migration programme (JLMP), an AU/ILO/IOM/ECA initiative, adopted by the African Heads of State and Government in January 2015 on establishing coherent, accurate, and up-to-date data and statistics on migration in Africa.
Participants included ECOWAS Commission, ILO, IOM, AU, UN DESA, UN ECA, ICMPD and senior experts of national statistics institutions of ECOWAS Member States and Mauritania.
Effective labour migration and policies
Ensuring the effectiveness of labour market policies including labour migration issues is a complex task which requires having reliable qualitative and quantitative data. The statistics on labour migration are not only useful to inform policy debates at national, regional and international, but also to formulate, implement and evaluate policies on labour migration that address real effects of migration on the labour markets and developing countries, Djerma emphasized.
According to the ILO, national statistics – comprehensive, comparable, official and reliable estimates – at regional and global level of the economically active immigrant population are still largely lacking and short-term migration are difficult to understand.
Access to the main data disaggregated by age and sex, data on the needs of the labour market, professions and skills, working conditions and wages, and social protection of migrants, is very scarce, ILO’s specialist stressed.
This is also valid at the ECOWAS level which is a high mobility area. However despite the fact that flows of labour migration in West Africa are mainly intra-regional, more attention on migration data issues is essential to the sub region, Honore Djerma concluded.
In the area of data collection and management, the Support to Free Movement of Persons and Migration in West Africa (FMM West Africa) Project seeks to support the development of standardized procedures to collect and process migration-relevant data as well as the analysis and dissemination of such data.
Background information
Support to Free Movement of Persons and Migration in West Africa (FMM West Africa) aims to maximise the development potential of free movement of persons and migration in West Africa by supporting the effective implementation of the ECOWAS Free Movement of Persons' Protocols and the ECOWAS Common Approach on Migration.
FMM West Africa is co-funded by the EU and the ECOWAS Commission, and with a budget of over 26 million Euros, provides technical assistance and capacity-building support to the ECOWAS Commission, the fifteen ECOWAS Member States and Mauritania.
Migration data management, border management, labour migration and counter-trafficking are the key areas covered by the project.
All activities are steered by the ECOWAS Commission and implemented by an IOM-led consortium that includes ICMPD and the ILO. The Project Support Unit, which implements the project, is based in Abuja, Nigeria. The project commenced on 1 June 2013 and will run up to 2018.
tralac’s Daily News Selection
The selection: Friday, 18 March 2016
Report of the first session of the Committee on Gender and Social Development (UNECA)
Presenting the report on the development of national satellite accounts of household production, Mr Gonzague Rosalie, Economic Affairs Officer at the African Centre for Gender, said that the exclusion from official national accounts of most services produced by households for their own consumption led to an understatement of the importance role played in the national economy by those working in the household sector, in particular women. It was therefore important to compile satellite accounts of household production that imputed monetary values to services produced by households for their own account, in order to supplement the core national accounts and obtain a broader measure of national welfare. To that end, the report proposed a framework for constructing such satellite accounts of household production and discussed the policy implications of those accounts.
Related: SADC states lag behind in data dissemination (Mmegi), The ENACTS approach: data at the front lines of Africa’s climate crisis (World Policy)
SADC targets sustainability of regional integration agenda (Southern African News Features)
Development of the fund has been going on for a long time, albeit with challenges related to administrative and logistical issues. However, a SADC document released at the 33rd SADC Summit held in Lilongwe, Malawi in August 2013, indicated that a lot of groundwork has been made with regards to the establishment of the fund. At the time there were suggestions that member states should take up 51% of the shares in the facility, against 37% for the private sector and 12% for ICPs. It was also proposed that the fund will have seed capital of $1.2bn, with member states expected to contribute $612m while the private sector will take up $444m of the share capital and $144m will come from ICPs.
EALA set to pass omnibus law on integration (East African Legislative Assembly)
The East African Legislative Assembly has proposed enactment of an omnibus law to harmonise national laws appertaining to the Community and to institute an administration law for the Common Market Protocol. The Assembly is of the view such a move shall cure, existing challenges of harmonisation of Partner State laws appertaining to the Community. At the same time, the Assembly wants the Council of Ministers to direct the Sectoral Council on Legal and Judicial Affairs to hold regular meetings and to prioritize harmonisation of laws for EAC in order facilitate integration within the set time frames.
Mobile money: lessons for West Africa (International Growth Centre)
This workshop – jointly organised and supported by the Bank of Sierra Leone and the International Growth Centre offices in Sierra Leone, Liberia, and Ghana – aimed to achieve this experience sharing and learning across sub-Saharan Africa. The workshop brought together government and private sector representatives from Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone, and builds on previous SSA meetings over the past two years in Mozambique and Senegal. Key emerging policy areas were identified for workshop sessions to address, and the IGC identified relevant economic questions that can be addressed by the SSA experience. The workshop addressed the following topics: [Various downloads available]
Roberto Azevêdo: 'The future of the WTO Doha Round of trade negotiations and the implications for Africa’s regional integration' (WTO)
Indeed, I would say that the need for better integration across the continent is indisputable. It’s clear in the fact that intra-African trade remains just a tenth of Africa’s total trade. Or in the fact that the cost of moving goods within Africa is twice the global average. Or in the fact that an African company faces an average tariff of 8.7% when selling within Africa, against 2.5% elsewhere. We need to tackle these barriers. And I would argue that doing this will help drive Africa’s integration globally.
Different kinds of trade initiatives have always co-existed with the multilateral system. It is important that they are coherent and compatible, so that they can all help to spread the benefits of trade. The economic map of Africa today is defined by these efforts: from SADC, COMESA, ECOWAS and the EAC — to the Tripartite FTA — and, in due course, the Continental FTA. The WTO supports these efforts. And the WTO’s Trade Facilitation Agreement provides a very practical mechanism for taking them forward. [@WTODGAZEVEDO: Great news from South Africa Trade Min Davies. National Assembly has approved ratification of WTO Trade Facilitation Agreement]
Alicia Greenidge: 'A possible development journey in a post-Nairobi WTO' (Bridges Africa)
Developing countries in the WTO might form their own clusters to refine specific elements to conclude the DDA starting from the needs of the LDCs working up the chain of developing countries in need to form tranches of practical decisions. Perhaps one WTO member’s idea offered at Davos this year for a solidarity work programme in the WTO can provoke discussions on ways to resolve areas in the DDA, particularly development. However, there may be little interest in propagating “work programmes” and more of an appetite for concrete outputs.
Does trade reduce poverty?: a view from Africa (World Bank)
This paper examines how the effect of trade openness on poverty may depend on complementary reforms that help a country take advantage of international competition. Using a non-linear regression specification that interacts a proxy of trade openness with proxies of various country structural specificities and a panel of 30 African countries over the period 1981-2010, we find that trade openness tends to reduce poverty in countries where financial sectors are deep, education levels high and institutions strong.
Export trends in Africa: an analysis of South Africa’s manufactured exports to Africa (tralac)
As the process of regional integration continues with countries in Africa now committed to establish a continental free trade area (CFTA), it is in South Africa’s interest to ensure that it remains one of the major players within this envisaged expanded market. The objective of this paper is to look at South Africa’s export profile with Africa. More specifically, we would like to analyse the performance of South Africa’s manufactured exports in this market and determine whether South Africa has been gaining or losing market share. Can we expect South Africa’s role as a major investor and trading player to continue? [The author: Taku Fundira]
Related: Namibia: SA imports skyrocket (Informante), Q4 South African fruit exports good, expected to drop (FreshPlaza), Threat to SA cement producers confirmed (IOL)
Africa’s ports: the bottleneck (The Economist)
What is true of Mombasa is true of ports across Africa. From Nigeria to Djibouti, decrepit and inefficient container ports are being expanded with money from the World Bank, governments (particularly those of China and Japan) and logistics firms such as Bolloré (a big French company which operates 14 port concessions across the continent). That offers the potential to transform African trade. Yet corruption and poor management may mean the gains will be squandered. Good ports are perhaps more important to Africa than any other region. On a continent bereft of good roads and productive factories, fully 90% of trade happens by sea. Ports also corrall trade where it can be regulated and taxed: in Kenya, for example, some 40% of government revenue is generated by the customs department. Ports are also the means by which much contraband, from drugs to ivory, escapes to the rest of the world.
Replenishment of the African Development Fund: speeches by Akinwumi A. Adesina, President Ellen Johnson Sirleaf
Global Value Chain Development Report 2016: background paper conference (World Bank)
Finally, let me conclude with one important consideration. Fully understanding the analytics of GVC participation importantly requires further investment in enhancing the statistical capacity. It is now readily accepted across the international statistical community that a ‘whole of value chain’ approach to GVC policy making requires a similar ‘joined-up’ perspective at the statistical level, that can provide the evidence needed for a holistic perspective; one that fully articulates the role of the different actors involved. Progress is being made in this area by several institutions and by the research community and it should be fostered further. [The author, Anabel Gonzalez, is the World Bank Group’s Senior Director for Trade and Competitiveness]
France’s proposed palm oil tax threatens African small farmers (Vanguard)
Initiative for Public Policy Analysis - the Nigeria-based public policy think tank - has condemned the French Government’s proposed tax on palm oil that will be of disadvantage to Africa, and undermine efforts to alleviate poverty across the continent. The proposed taxes – a huge additional tax of 90EUR per tonne and a differential tax for palm oil produced according to rich Western standards – is purposefully discriminatory and would lead to devastating consequences for African farmers of palm oil, and throughout the rest of the developing world. Thompson Ayodele, Director of IPPA said in a statement:
Nigeria invests in tomato processing (FreshPlaza)
Nigeria is the world's 13th largest producer of tomatoes and second in Africa, yet the country continues to spend over $300 million annually on importing tomato concentrate. The Federal Ministry of Agriculture and Rural Development states that domestic demand for tomatoes is 2.3 million tons, while the country only produces 1.8 million tons a year. The absence of a proper agricultural value chain system means that most of the tomatoes produced in the country are wasted due to post harvest loss, poor handling system, poor distribution channels and lack of easy access to markets. [Nigerian mining chamber calls for establishment of development bank (Mining Review)]
Tanzania: Agra flags off new crop value chains (The Citizen)
The Alliance for Green Revolution in Africa has launched a new initiative for the Southern Agricultural Growth Corridor of Tanzania dubbed Inclusive Green Growth of the Smallholder Agriculture programme. The over arching goal of the initiative supported by the Norwegian Ministry of Foreign Affairs is to increase incomes and food security of at least 30,000 farming households in Mbeya Region by 2020.
Zambia to launch agricultural blueprint (Shanghai Daily)
The Zambian government will launch a new agriculture policy next month that will drive the development of the sector, state media reported Tuesday. The policy, covering the period 2016 to 2021, will form part of the country's revised National Agricultural Investment Plan (NAIP). Minister of Agriculture Given Lubinda said the policy will help reduce poverty through increased investment, productivity and value chains in the sector. [Zambia: Cashew value chain project update (AfDB)]
Ertharin Cousin, Anthony Lake: 'Surviving El Niño' (Mail and Guardian)
Contested Agronomy 2016: imagining different futures for food and farmers (IDS)
Africa becoming Chinese enterprises' foreign investment and cooperation hotspot (Forum on China-Africa Cooperation)
"My company keeps two times - Beijing Time and Ethiopian Time", Li Weiming, Special Assistant to President of Huajian Group, disclosed to journalists at the Seminar on Investment Promotion to Ethiopia, Kenya, Mozambique and Zambia held in Tangshan recently. He added that his company had established a subsidiary factory in Ethiopia over the past five years or so.
Premier Li Keqiang: 'Report on the work of the government' (Xinhua)
I now want to discuss the major areas of work for 2016: Third, we will improve the trade mix. We will launch trials to create innovative ways of developing trade in services, see that more cities become trendsetters in providing foreign outsourced services, and accelerate the development of foreign trade in cultural goods and services. We will further integrate and improve special customs regulation zones, and encourage processing trade to move to the central and western regions and extend to the medium-high end of the industrial chain. Fourth, we will further facilitate trade. We will see that the single window system is implemented for international trade nationwide. We will reduce the frequency of inspections for exports. Fifth, we will adopt a more proactive import policy. We will increase the import of advanced technology and equipment, key spare parts and components, and energy and raw materials in short supply in China.
Namibia misses Indian-Africa business meeting (The Namibian)
Productivity, price nexus and Zim competitiveness (The Chronicle)
Back-office blues hit India as services exports start to slow (Livemint)
Lídia Cabral: 'How Brazil missed its golden South-South co-operation moment' (The Conversation)
Sanusha Naidu: 'South-South cooperation: new wine in old bottles?' (UNA-UK)
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SADC targets sustainability of regional integration agenda
The operationalization of the proposed SADC Regional Development Fund is expected to provide alternative financing modalities for southern Africa to support its integration agenda.
Ultimately, the fund should allow the region to take full control of its regional integration agenda, which currently depends on external support.
It is estimated that more than 70 percent of the Southern African Development Community (SADC) budget comes from International Cooperating Partners (ICPs) – a situation that compromises the ownership and sustainability of regional programmes.
In this regard, the decision by the SADC Committee of Ministers of Finance and Investment to finalize the establishment of the SADC Development Fund is a positive step towards accelerating regional integration in southern Africa.
Speaking during a meeting of the SADC Committee of Ministers of Finance and Investment on 12 March in Gaborone, Botswana, chairperson of the SADC Council of Ministers, Kenneth Matambo said it was time the region took charge of its development agenda.
“Committing our own resources to dealing with these issues is important while we seek the support of our International Cooperating Partners to complement our limited funds,” Matambo, who is also the Minister of Finance and Development Planning of Botswana said.
SADC Executive Secretary, Dr Stergomena Lawrence Tax concurred, saying the establishment of the fund will promote development in the region.
“I believe that the stage has been set for the region to move forward and establish the needed mechanism for resource mobilisation, and take its rightful place in the global arena,” she said.
The SADC Regional Development Fund is a financial mechanism intended to mobilize resources from member states, the private sector and development partners to finance programmes and projects to deepen regional integration.
Development of the fund has been going on for a long time, albeit with challenges related to administrative and logistical issues.
However, a SADC document released at the 33rd SADC Summit held in Lilongwe, Malawi in August 2013, indicated that a lot of groundwork has been made with regards to the establishment of the fund.
At the time there were suggestions that member states should take up 51 percent of the shares in the facility, against 37 percent for the private sector and 12 percent for ICPs.
It was also proposed that the fund will have seed capital of US$1.2 billion, with member states expected to contribute US$612 million while the private sector will take up US$444 million of the share capital and US$144 million will come from ICPs.
Under the proposal, subscription to shares will be made over five years in equal instalments. The first subscription will be due within the first year of the Fund coming into force.
Any shares not subscribed to by the end of the fifth year will be reallocated to other member states on the basis of ability to pay.
The proposal is to have the first 25 percent of the shares divided equally among member states and members will be obliged to contribute. The remaining 26 percent will be allocated based on economic ability.
In terms of the administrative structure, the facility will have a board of governors comprising ministers responsible for finance in member states as well as a board of directors tasked with its day-to-day operations.
The board of governors will be the highest decision-making organ for the Fund and will have powers to admit new members; increase or decrease the share capital; amend the statutes governing the facility; as well as appoint directors.
The fund will have a chief executive officer who will be responsible for the daily running of its operations.
The creation of the facility comes at a time when there has been concern about the slow pace of implementation of regional programmes and projects, largely due to lack of funds and over-reliance on ICPs for support.
The operationalization of the fund is expected to be done through a two phased approach, with phase one focusing on project preparation and development, and phase two dealing with the infrastructure development, industrial development, integration and economic adjustment and social development windows.
Each window will focus on the following:
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The infrastructure window will provide financial support for implementation of regional infrastructure projects mainly emanating from the SADC Regional Infrastructure Development Master Plan;
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The integration and economic adjustment window will support and facilitate efforts by member states to implement the SADC economic integration agenda
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The industrial development window will support the industrialisation process in the region; and
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The social development window will support the human and social aspects of the regional agenda and incorporate all other related funds such as the SADC Regional HIV and AIDS Fund.
The selection of projects for consideration under the fund will, among other things, ensure that these advance the goal of promoting sustainable socio-economic development in the region.
The SADC Committee of Ministers of Finance and Investment is one of a series of meetings held prior to the SADC Council of Ministers that took place on 14-15 March.
The SADC Council of Ministers deliberated on a wide range of issues, including the approval of the budget for implementation of the region’s operational plans.
The Council approved the SADC budget for the 2016/17 financial year of about US$72 million. The budget for the 2015/16 financial year was US$79.4 million.
Southern Africa has identified priority areas for implementation during the year. These include the implementation of key milestones on industrialization, trade, infrastructure development, as well as peace and security.
Related News
DG Azevêdo: South Africa’s leadership vital for future trade talks
WTO Director-General Roberto Azevêdo held a series of meetings in Cape Town, South Africa, on Thursday, 17 March 2016 to discuss recent WTO agreements and the future work of the organization. He met with the Minister of Trade and Industry Rob Davies, the Minister of Agriculture, Forestry and Fisheries Senzeni Zokwana, and the Minister of Economic Development Ebrahim Patel.
The Director-General said:
“The outlook for the global economy is currently very mixed. Many countries, including South Africa, are being affected by low commodity prices and a number of other factors. In this context it is vital to ensure that the global trading system continues to support growth, development and job creation.
“The successful trade deals struck at the WTO’s Nairobi Ministerial Conference in December last year – and at the Bali Ministerial Conference in 2013 – show what we can achieve. Now we must work together to implement those deals, realize their benefits, and seek to be even more ambitious in the way ahead.
“South Africa has a long history in the multilateral trading system and has always played a central role in the WTO. With the organization now embarking on a debate which will shape future global trade talks, South Africa’s leadership will be more important than ever. This is an opportunity to ensure that the global trading system delivers even more, and that it continues to serve the development goals of the country, and the whole region.”
The Director-General also held meetings with representatives of the National Economic Development & Labour Council (NEDLAC) and the Chair of the Parliamentary Trade and Industry Portfolio Committee, Joanmariae Louise Fubbs MP, as well as some other members of the Committee,
He also gave an address at the University of Cape Town. The text on which the Director-General based his remarks is available below.
‘The Future of the WTO Doha Round of Trade Negotiations and the Implications for Africa’s Regional Integration’
Remarks by Director-General Roberto Azevêdo at the University of Cape Town Seminar, 17 March 2016
I am very happy to be in South Africa today, and to be here at the University of Cape Town.
I’d like to thank the organizers – including my old friend and colleague Faisal Ismail – for this opportunity to interact with you today.
South Africa has a long history in the multilateral trading system. The country joined the WTO’s predecessor – the General Agreement on Tariffs and Trade – in 1948, the year that it was founded.
Half a century later, President Nelson Mandela came to Geneva for a conference to mark the system’s 50th anniversary.
In a speech that is still talked about in Geneva today, he said that the WTO “provides the foundation on which our deliberations can build in order to improve. However, to realize the aspirations of all requires wise work to be done.”
That work of improvement is still under way. And the need for wisdom in this task is more apparent than ever.
So I am pleased that South Africa remains a central player in the system today – as a leading voice in the African Group of WTO members, and in all aspects of our work.
In fact, your current representative in Geneva, Ambassador Xavier Carim has recently been appointed as chair of the WTO’s Dispute Settlement Body.
This is one of the most prominent positions in the organization and it is the first time that South Africa has held this position. So it is a significant moment.
It stands testament to South Africa’s leadership in the trade debate today.
And I think that the WTO can do a great deal to support South Africa to achieve its goals.
Today’s seminar is focused on WTO negotiations under the Doha Round, and Africa’s regional integration.
These are extremely important issues. So let me say a few words about each one – starting with regional integration.
I think there is a misconception, by some, that the WTO is a barrier to regional integration. It is one of a number of misconceptions that do not match up with the facts – like the perception that the WTO is a rich man’s club.
Today the WTO has 162 members – and rising – at all stages of development. 43 of those members are African countries – and rising.
The organization now covers around 98% of world trade. It is a truly global organization – one where everybody has an equal say.
And it is an organization which supports regional integration here in Africa.
Indeed, I would say that the need for better integration across the continent is indisputable.
It’s clear in the fact that intra-African trade remains just a tenth of Africa’s total trade.
Or in the fact that the cost of moving goods within Africa is twice the global average.
Or in the fact that an African company faces an average tariff of 8.7% when selling within Africa, against 2.5% elsewhere.
We need to tackle these barriers.
And I would argue that doing this will help drive Africa’s integration globally. The statistics I just quoted show that the vast majority of Africa’s trade is with the rest of the world. Here in South Africa your biggest trading partner is the European Union. So, while greater trade in the region would be very positive in itself, it can also help to drive the continent’s competitiveness in the global economy.
And existing WTO rules give a great deal of flexibility for members to pursue regional agreements.
This is plain in the proliferation of such agreements that we have seen in recent years. But they are not a new phenomenon.
Indeed, regional initiatives such as the Southern African Customs Union predate the multilateral system by some decades.
Different kinds of trade initiatives have always co-existed with the multilateral system. It is important that they are coherent and compatible, so that they can all help to spread the benefits of trade.
The economic map of Africa today is defined by these efforts: from SADC, COMESA, ECOWAS and the EAC – to the Tripartite FTA – and, in due course, the Continental FTA.
The WTO supports these efforts. And the WTO’s Trade Facilitation Agreement provides a very practical mechanism for taking them forward.
This Agreement, finalised in 2013, is about simplifying and standardising customs procedures, thereby reducing the time and cost of moving goods across borders.
We expect that, when fully implemented, the Agreement could reduce trade costs by an average of 14.5%.
And the lion’s share of these gains will accrue for developing economies, where trading costs tend to be much higher. In fact, developing economies could benefit from a boost in exports of almost $730 billion per year.
The East African Community has already applied a range of trade facilitation reforms, which have delivered remarkable results in cutting the time and expense of moving goods between countries.
Rolling out such measures would unlock the potential of many traders across the continent – especially SMEs.
But, in order to benefit from the Agreement, first it must be ratified. I was delighted to hear from the Minister of Trade and Industry, Rob Davies, that the National Assembly approved the ratification of this Agreement yesterday – so now it will move on to the next stage. South Africa is well on the way to joining the 10 African countries which have already completed this process.
The Trade Facilitation Agreement is notable for the benefits it will deliver – but also because it was the first multilaterally agreed deal in the WTO’s history.
But members didn’t stop there.
We held another ministerial conference in December last year, in Nairobi – the first such WTO meeting to be held in Africa.
South Africa played an important role in the discussions leading up to this conference. And again, members delivered some pretty important outcomes.
For example, they agreed to eliminate agricultural export subsidies.
This helps to level the playing field, so that farmers in developing countries may compete on better terms.
Of course domestic subsidies still exist, so there is much work still to do. But that doesn’t change the fact that abolishing export subsidies is a big step.
This is something which developing countries, including South Africa, have been fighting for over many years.
In fact, it is the biggest reform of agricultural trade rules for 20 years.
And it is a key target of the UN’s new Sustainable Development Goals – delivered just three months after the goals were agreed.
In the context of regional integration it is important to recognise that results like this could only be delivered at the global level. That’s why we need trade initiatives on all levels to be working well.
And this brings me to the other topic before us today – the Doha round.
This action on export competition was part of the Doha round – as were other elements that were delivered in Nairobi, relating to food security and LDCs.
Notwithstanding these outcomes, clearly progress on the round as a whole has been too slow. It has not delivered as we had hoped when the round was launched in 2001.
The future of Doha was a major feature of the debate in Nairobi, and in the end members could not agree on a common position.
Members are committed to keeping development at the centre of our work.
They are also committed to addressing the remaining Doha issues, such as agriculture (particularly domestic subsidies), market access for industrial goods and services.
But, they do not agree on how to tackle them. And, at the same time, some members would like to start discussing other issues, in addition to the remaining Doha issues.
Members have wisely decided to reflect on how these differences might be overcome and how we might collectively move the agenda forward.
So we are in a very important period right now.
Members are talking to each other about how to advance the Doha issues and, potentially, how to move forward on other issues as well.
For South Africa this may be an opportunity to advance your development goals. That could mean taking action on domestic subsidies in agriculture, fisheries subsidies. Or it could perhaps mean discussing how the country’s SMEs could be supported to start exporting.
It is an opportunity to shape the agenda in a way which may serve your interests.
This debate on the WTO’s future work is happening now – and I have no doubt that you will make your voice heard.
Of course the economic outlook is tough at present, not least given the slump in commodity prices, but South Africa is still in a strong position.
The country provides a good environment for business compared to its peers around the world. It is the second biggest economy in Africa and one of the most diverse. The potential is huge. And the current exchange rate makes your exports quite competitive.
So there are opportunities – and trade can support South Africa’s growth and development.
To recall Nelson Mandela’s words, there is much ‘wise work’ to be done.
I look forward to our discussion.
Thank you.
Related News
Making global value-chains work for economic development and shared prosperity: Opening remarks by Anabel Gonzalez
Global Value Chain Development Report 2016 Background Paper Conference – Beijing, China, 17 March 2016
Good morning, it is a pleasure to be here and participate in this meeting, attended by so many friends, on global value chains and their impact on development. I will divide my initial remarks into three topics:
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Why worry about GVCs
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The World Bank Group’s work on Global Value Chains
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World Bank Group’s contribution to this conference
Why worry about GVCs?
Borders between economic sectors have become increasingly blurred through the globalization and fragmentation of production. Today, economists focus on specialized tasks along global value chains (GVCs), seeking answers on how best to integrate regions into this dynamic world economy. Patterns of development have changed, and they require expanded perspectives on growth and the development dividends from increasing productivity, upgrading, and organizational change. Understanding how best to participate in GVCs and how to produce at world class standards will become increasingly important to achieve structural transformation and development in the 21st century. Competing successfully and sustainably in GVCs will require becoming hyper-competitive in specific tasks.
Recent analysis has shown that this requires a number of enabling conditions. First, policies targeting investment and trade flows must address infrastructure, connectivity, investment and trade policy. Second, policies must support the business climate and institutions, including financial and labor markets. Third, policies need to target the quality and conditions of input and output factors, which flow through education, skills development, product standards, innovation, and environmental, social, and labor standards.
Early results of cross-country econometric panel analysis, conducted by the World Bank Group show that:
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Countries’ policies are a major factor for economic upgrading through GVC integration. This holds in particular for developing economies, for which results indicate that all areas of policy identified, from those targeting investment and trade flows to policies supporting the business climate and institutions, to those addressing the quality and conditions of input and output factors can act as a mediator for gains from GVC participation.
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However, many areas are equally important for industrialized economies. For instance, the estimates for trade and investment policy show that there is still a lot of idle potential for industrialized economies with restrictive policies in this area. Similar results hold in the fields of infrastructure, financial development, quality and functional standards, and education and innovation.
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Other policy areas exhibit decreasing returns as income grows. We observe for example that improvements in a country’s institutional framework offers proportionally greater benefits for developing economies than for industrialized economies. The same holds for connectivity, an area referring to customs procedures, logistics, and communication services.
The World Bank Group’s work on Global Value Chains
Acknowledging the great potential for development that GVCs entail, the World Bank Group has established a Global Solutions Group, a team of over 180 experts with cross-cutting skillsets, with a specific mandate to improve the development outcomes of programs and projects incorporating Global Value Chains (GVCs). This is one of four thematic Global Solutions Groups housed within the Trade & Competitiveness Global Practice.
The GVC Global Solution Group objective is to develop innovative analysis and approaches to facilitating international development through GVCs, and it seeks to mainstream these tools into project design and implementation. By developing customized country and sector diagnostics, the GVC Global Solution Group can enhance and improve the outcomes and impacts of pro-competitiveness interventions. The GVC Global Solution Group works across all topical areas affecting GVC participation.
The chosen approach is comprehensive and built upon three pillars of action:
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Customizing country diagnostics, including investing in analytical capacity through more and better data
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Targeting interventions to improve firm capabilities, domestic firm competitiveness, and the domestic and international environment for GVC participation
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Leveraging global platforms for sharing lessons and learning
The GVC Global Solution Group operates with an integrated framework for policy intervention, connecting and collaborating with other World Bank Group Global Practices, including teams from the International Finance Corporation (IFC). The GVC Global Solution Group has also established a strong network of partnerships outside the WBG driven by strategic alignment, recognized thought leadership, and complementary expertise. These include other multilateral organizations, academia, research institutes, think tanks, the private sector, other civil society organizations, and development partners.
The World Bank Group’s contribution to this conference
The Global Value Chain Development Report 2016 is an important initiative for stimulating research on the essential and timely questions raised by the emergence of global value chains. The transmission mechanisms leading to technology, productivity and income growth, and the key factors that foster long-term growth from GVC participation, and how these differ across countries, income levels, and world regions are far from being fully understood. The body of research stimulated by this initiative represents an important step forward in this understanding. The World Bank Group is contributing to this effort with three research efforts:
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The first background paper, from Osnago, Rocha and Ruta, studies the relationship between the proliferation of deep trade agreements and production networks using a gravity framework. This analysis is important in three main respects. First, the relationship between deep integration and global supply chains deserves investigation in a world where the nature of trade has changed: new trade involving the exchange of customized inputs, incomplete contracts and costs associated with the search for suitable foreign input suppliers creates new forms of cross-border policy effects compared to a situation where goods are produced in a single location. Second, understanding and comparing the depth and impact of agreements across a large set of countries will also shed some light on the patterns of integration across countries with different levels of income and their engagement in global value chains. Third and last, understanding how deep integration influences trade flows is essential to assess the potential impact of new agreements such as the TPP in the context of global production. The findings of this work indicate that signing deep trade agreements (i.e. agreements that include more provisions) is associated with (up to) 25 percent more trade in parts and components and (up to) 23 percent more foreign value added in gross exports. Moreover, the impact of deep integration on production networks is mainly driven by disciplines such as SPS, TBT, and movement of capital, GATS, TRIPS, competition policies, IPR and investment, which, as the theory suggests, are more relevant for GVCs.
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The second study, from Saez and van der Marel, discusses the role of services trade in GVCs, focusing on three issues: the extent to which countries have integrated services as part of global value chains, both in terms of backward linkages and direct forward linkages; what explains this level of servicification across countries within each agricultural, industry and service sector over time; and how this servicification process has helped countries reach higher levels of domestic value-added. The paper’s findings are the following: (i) servicification is determined by regulatory entry-barriers of services markets as opposed to regulatory conduct barriers; (ii) the level of servicification is also determined by FDI regulations, but not all types have the same effect: equity restrictions emerge as the most important barriers; (iii) in addition countries with higher levels of internet connectivity and upstreamness position undergo a greater servicification process over time ; (iv) yet, servicification is critical in downstream (close to final demand) production: lowering regulatory entry barriers of services, and in particular lowering regulatory FDI barriers related to foreign key personnel, greatly enhances domestic value added growth in those downstream sectors which are more servicified.
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The third study, prepared by Boffa, Kuemmirtz, Santoni, Taglioni and Winkler, addresses the question of whether integration in GVCs help countries avoid a “middle income trap”, and more generally, the broader issue of the role that GVC integration may play in supporting countries graduation to higher income levels. The main findings of the research are the following. Expanding and strengthening a country’s GVC participation increases the probability of transitioning to a higher income class. The probability is higher for low and lower-middle income countries. Similarly growth in output per capita is highest for lower income groups. Assessing the impact on GDP growth suggests however that the lack of effect on income growth in high-income countries may be due to unobserved heterogeneity. In fact, once macro-economic conditions and time invariant heterogeneity are controlled for, integration into global production networks is positively correlated with GVC integration also at the higher income levels. Differentiating between intra-industry and inter-industry linkages, it appears that the former have a larger effect for income, possibly due to technology spillovers and other transmission mechanisms enhanced by industry similarity.
Finally, let me conclude with one important consideration. Fully understanding the analytics of GVC participation importantly requires further investment in enhancing the statistical capacity. It is now readily accepted across the international statistical community that a ‘whole of value chain’ approach to GVC policy making requires a similar ‘joined-up’ perspective at the statistical level, that can provide the evidence needed for a holistic perspective; one that fully articulates the role of the different actors involved. Progress is being made in this area by several institutions and by the research community and it should be fostered further. While the World Bank Group intends to leverage existing tools, including the World Bank Group Enterprise Surveys, other World Bank Group surveys, and tools being developed by other institutions, it has also launched a new major initiative to establish a new comprehensive firm survey tool which will delve deeper into the subject of GVC participation, across all areas of relevance: from sourcing practices to export performance and production costs, to technology and skill adoption, to managerial practices, work conditions and standards, providing much needed improvements in the statistical and analytical basis for action in this space. We hope that this tool, over time, will offer an additional mean to understand how to leverage GVC participation for development.
Anabel Gonzalez is the World Bank Group’s Senior Director for Trade & Competitiveness.
The First Conference on Global Value Chains, Trade and Development will be jointly sponsored by the World Bank Group and the Centre for Economic Policy Research. The event will be held at the World Bank Headquarters in Washington, D.C. from 30-31 March 2016.
Global Value Chains: Brief
Participation in global value chains (GVCs), the international fragmentation of production, can lead to increased job creation and economic growth. In order to reap the gains from value chain participation, countries must put in place the right kind of trade and investment policies. The World Bank Group is helping developing countries catch the GVC wave and realize the benefits GVCs can deliver.
CONTEXT
What are GVCs?
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Companies used to make things primarily in one country. That has all changed. Today, a single finished product often results from manufacturing and assembly in multiple countries, with each step in the process adding value to the end product.
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Through GVCs, countries trade more than products; they trade know-how, and make things together. Imports of goods and services matter as much as exports to successful GVCs.
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GVCs integrate the know-how of lead firms and suppliers of key components along stages of production and in multiple offshore locations. The international, inter-firm flow of know-how is the key distinguishing feature of GVCs.
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How countries engage with GVCs determines how much they benefit from them.
Why are GVCs important for growth?
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GVCs are a powerful driver of productivity growth, job creation, and increased living standards.
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Countries that embrace them grow faster, import skills and technology, and boost employment.
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With GVC-driven development, countries generate growth by moving to higher-value-added tasks and by embedding more technology and know-how in all their agriculture, manufacturing, and services production. GVCs provide countries the opportunity to leap-frog their development process.
Are developing countries part of the new GVC paradigm?
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Some developing countries have fully embarked on the GVC revolution, but they still face challenges in aligning GVCs with their national development strategies.
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Others view GVCs as recreating the core vs. periphery pattern, with the “good” jobs concentrated in the North and “bad” jobs in the South.
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Yet even the most reluctant skeptics recognize that the GVC-driven success of nations like China and India illustrates the significant boost in a country’s competitiveness that can be delivered by combining competitive costs of production with high technology.
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The right strategies can help developing countries maximize their participation in GVCs.
STRATEGY
How does the World Bank Group help countries seize GVC opportunities?
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The World Bank Group Global Practices and Cross-Cutting Solutions areas help client countries design and implement effective, solutions-oriented reforms.
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The Bank Group provides integrated solutions tailored to country needs. Advisory services and financial support – including development policy lending to governments, investment in the private sector, and MIGA guarantees – can cover long-term strategies for deep structural reform or support for more targeted policy interventions addressing shorter-term challenges.
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The Bank Group brings to bear its hands-on local presence, access to lead firms and investment communities, rich data, and world-class analytical capabilities.
What can developing countries do to optimize participation in GVCs?
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Governments need to have a clear vision and mandate to improve coordination among government players, and ensure the involvement of the private sector.
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Opening borders and attracting investment can help jump-start entry in GVCs.
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Countries will derive the greatest benefit by maximizing the absorption potential of the domestic economy and by strengthening its linkages with GVCs.
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Many diverse policy areas affect the success of GVCs. They include, among others, trade policy, logistics and trade facilitation, regulation of business services, investment, business taxation, innovation, industrial development, conformity to international standards, and the wider business environment fostering entrepreneurship.
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Finally, countries should identify measures that will complement their GVC strategies. These include a large swath of dimensions, from investment in education and vocational training to environment and urbanization, from ICT and infrastructure building to labor market mobility.
What role does the World Bank Group’s Trade and Competitiveness Global Practice play?
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As the world of GVC production matures, the need for context-specific assessment and intervention has become more important in answering fundamental questions about GVC participation, sustainability, and the benefits to host countries.
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The Trade and Competitiveness Global Practice (T&C) provides evidence-based policy options to formulate and implement context-specific GVC strategies.
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T&C uses analytical and diagnostics tools and data-gathering to offer solutions in terms of analytical services, lending and investment operations, as well as guarantees customized to specific country needs.
Related News
Report of the first session of the Committee on Gender and Social Development
Report prepared for the Ninth Joint AUC-ECA Annual Meetings of the AU Conference of Ministers of the Economy and Finance and ECA Conference of African Ministers of Finance, Planning and Economic Development, taking place from 31 March to 4 April 2016 under the theme: “Towards an Integrated and Coherent Approach to Implementation, Monitoring and Evaluation of Agenda 2063 and the SDGs”
Introduction
The Economic Commission for Africa (ECA), through its Social Development Policy Division, convened the first session of the Committee on Gender and Social Development in Addis Ababa on 17 and 18 December 2015, under the theme: “Sustainable Development Goals in Africa: Enhancing gender-responsive and social development policies”.
The Committee was formed through a merger of the Committee on Women in Development and the Committee on Human and Social Development. It is a statutory body of experts and policymakers, entrusted with providing guidance and advice to the Social Development Policy Division through the review of activities implemented during the current biennium (2014-2015), and strategic vision and direction for the next biennium (2016-2017).
The aim of the first session was to review progress on gender and social development in Africa, and identify achievements, challenges, and implementation gaps to ensure the desired impacts. In particular, the Committee provided guidance and expert opinion on the Division’s priorities and activities, and made recommendations for strengthening ECA programmes to ensure that the needs of member States and regional economic communities were better served. Conclusions and recommendations were adopted at the end of the two-day session.
The meeting was attended by representatives from the following member States: Algeria, Angola, Benin, Botswana, Burundi, Cameroon, Chad, Congo, Côte d’Ivoire, Democratic Republic of the Congo, Ethiopia, Egypt, Gambia, Ghana, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Namibia, Niger, Nigeria, Sao Tome and Principe, Senegal, Sierra Leone, South Africa, South Sudan, Sudan, Togo, Uganda, United Republic of Tanzania, Zambia and Zimbabwe. The following United Nations bodies and specialized agencies were also represented: the Joint United Nations Programme on HIV/AIDS (UNAIDS), the United Nations Entity for Gender Equality and the Empowerment of Women (UN-Women) and the United Nations Office for Project Services (UNOPS).
Presentation of the report on the development of national satellite accounts of household production
Presenting the report on the development of national satellite accounts of household production, Mr. Gonzague Rosalie, Economic Affairs Officer at the African Centre for Gender, said that the exclusion from official national accounts of most services produced by households for their own consumption led to an understatement of the importance role played in the national economy by those working in the household sector, in particular women.
It was therefore important to compile satellite accounts of household production that imputed monetary values to services produced by households for their own account, in order to supplement the core national accounts and obtain a broader measure of national welfare. To that end, the report proposed a framework for constructing such satellite accounts of household production and discussed the policy implications of those accounts.
In the ensuing discussion, participants underscored the importance and relevance of time-use surveys and satellite accounts of household production for recognizing and valuing domestic work in general, and the work of women in particular. They commended ECA on placing its focus on such an important area of work and urged the Commission to continue its work in that area in support of efforts by member States to design, plan, implement and evaluate policies which took cognizance of the difference between the statuses of men and women, and the differing effects of policies on them.
The representatives of Guinea and Uganda specifically requested assistance from ECA in undertaking time-use surveys.
The Committee made a number of recommendations in relation to the satellite accounts of household production, as set out below:
(a) Ministries of member States with responsibility for gender and women’s affairs should take the lead in advocating the application of time-use surveys and satellite accounts of household production;
(b) Member States should:
(i) Undertake regular time-use surveys based on sound methodology to collect nationally representative, quality time-use data. The objectives of the surveys should reflect the national priorities of each country;
(ii) Make use of time-use data in national publications and formulate and evaluate policies;
(iii) Use data from time-use surveys and other information sources to compile satellite accounts of household production. To that end, critical importance attached to the engagement and ownership of accounts by member States;
(c) Non-governmental organizations should strengthen their advocacy of regular time-use surveys and satellite accounts of household production, and of time-use data to inform policymaking in African countries;
(d) ECA should:
(i) Ensure that time-use studies and satellite accounts of household production constituted an important focus of its work programme for the 2016-2017 biennium;
(ii) Assist member States in undertaking time-use studies and compiling satellite accounts of household production, and disseminate the results of the surveys by providing financing and technical assistance. That support should be aligned with the policymaking processes and structures of the countries concerned;
(iii) Promote the sharing of information and best practices among African countries to facilitate the conduct of timeuse studies and the analysis of time-use data for the compilation of satellite accounts of household production;
(iv) Assist member States in using the results obtained from time-use studies and satellite accounts of household production to design, plan, implement and evaluate policies that took cognizance of the difference between the statuses of women and men;
(v) Undertake studies that considered and measured women’s contribution to the economy beyond the household level.
Presentation of the report on the African social development index
In his presentation of the report on the African social development index, Mr. Saurabh Sinha, Chief, Employment and Social Protection Section, said that the index had been developed in response to a request from member States for a tool to track progress in tackling exclusion and promoting more inclusive and equitable policies. The tool was a product of wide and iterative consultations with member States and other stakeholders. It offered a particular advantage in that it followed a life-cycle approach in measuring the impact of social policies on human exclusion in six key dimensions of wellbeing: survival, health, education, employment, productive income and quality of life.
He explained that the index was intuitive and simple to use in planning effective social policies that took due account of Africa’s social development context. The index’s overarching goal was to enhance Africa’s capacity to develop policy options that would help to build more inclusive and equitable societies. The index had been rolled out to 44 member States and had also been presented to the African Union Commission and the regional economic communities, and had been introduced at a number of meetings involving civil society, United Nations agencies and representatives of the academic sector.
In the ensuing discussion, participants acknowledged the usefulness of the African social development index and commended ECA on having introduced it and made it available to member States. They noted with satisfaction that the tool was highly relevant to Africa’s development and planning frameworks. One participant noted that the tool could be very useful in social budgeting and auditing.
Participants wondered how the tool could be extended to other member States, in particular those which did not participate in the subregional training workshops. They also wanted to know how it could be extended to other sector ministries, such as those responsible for education, health, gender and social development, besides those of finance and planning. The presenter informed the Committee that training courses could be organized upon official request for member States that were not covered.
It was pointed out that the definition of exclusion was framed within the social transformation agenda, which placed a high premium on leaving no one behind. The index used national data provided by member States. As a result, its values could not, and should not, be compared across countries since national data used different methodologies, rendering comparisons across countries very difficult. It was for that reason that, unlike other indices, the African social development index did not rank countries. The major challenge arising in the application of the African social development index was often the lack of reliable data, particularly at the subnational levels.
One participant informed the Committee that her country was currently implementing social protection programmes for vulnerable groups and that the African social development index would be a very useful tool in improving the targeting of beneficiaries.
Recognizing the relevance of the African social development index to Africa’s development, the Committee made a number of key recommendations to ECA:
(a) The African social development index tool and training should be extended to all countries that were not covered in the initial capacitybuilding workshops across the region;
(b) ECA should go beyond ministries of finance and national planning in rolling out the African social development index and include ministries responsible for gender, education and health, among others;
(c) The data used in the computation of the African social development index should be further disaggregated, in particular in the rural areas, in order to capture the disparities between women and men, and girls and boys;
(d) The African social development index should be linked to national planning frameworks and, in particular, to social budgets and auditing using disaggregated data.
The representative of South Sudan requested ECA to support that country in conducting an assessment of human exclusion, with the aim of improving the targeting of beneficiaries of social protection programmes. It was decided that, since South Sudan was a special case, consideration would be given to its request for the conduct of an African social development index study.
Presentation of the report on urbanization
Presenting the report on urbanization, Ms. Edlam Yemeru, Chief, Urbanization Section, said that ECA had been providing technical assistance to member States on urbanization from the early 1960s but the issue had since faded from the regional agenda. In 2012, the repositioning of ECA in line with the transformative agenda of the continent had re-established its work on urbanization and a separate section on that issue had been created. In 2013 and 2014, ECA had engaged in consultations and discussions with different stakeholders to help define its urbanization programme, from which the urbanization strategy had been developed.
She observed that urbanization was a far-reaching trend with enormous implications for Africa’s growth and transformation. Only 100 years previously, 8 per cent of Africa’s population had been urban but, today, 40 per cent was urban. In the past five years – 2005-2010 – Africa’s urban growth rates had been 1.7 per cent higher than the global average and, by 2035, more than 50 per cent of the continent’s population would be living in urban areas. In 52 African countries, urban populations were growing faster than rural populations and, by 2050, Africa’s urban population would triple to 1.23 billion. For that reason, efforts were needed to harness the urbanization process for Africa’s transformation and development.
Urbanization and structural transformation were strongly linked, as there were economic and social advantages intrinsic in urbanization. For example, 60 per cent of the world’s gross domestic product (GDP) was generated in 600 urban areas but Africa had yet to harness the full potential of urbanization. Urbanization had previously been delinked from economic growth and development and it was therefore important now to mainstream it into national development planning.
She further noted that, to support member States in harnessing urbanization, ECA work in line with Agenda 2063 and the 2030 Agenda for Sustainable Development was premised on the following: urbanization was a driving force behind inclusive social and economic growth; there were close interlinkages between urbanization and industrialization; urbanization and agricultural transformation were complementary processes; urbanization was the backbone of regional trade and integration; and urbanization presented an opportunity for efforts to tackle environmental and climate change challenges.
In conclusion, she said that implementation of the urbanization strategy and ECA work on urbanization would be effected through evidence-based policy research and knowledge creation; data and monitoring; capacitybuilding and technical assistance; and partnerships.
Presentation on the African gender and development index
In her presentation, Ms. Ngone Diop, Senior Gender Advisor, African Centre for Gender, said that the African gender and development index had been developed by ECA in 2004 to provide member States with a comprehensive tool to assess their progress in implementing their regional and global gender equality and women’s empowerment commitments. The index had been piloted in 12 African countries and the findings had been published by ECA in 2009, its first African women’s report.
Following the pilot study, the index had been refined and studies for the index had been extended to a further 14 countries. The current third phase of the African gender and development index process was being carried out in 13 countries, namely, Gabon, Guinea, Liberia, Morocco, Namibia, Niger, Nigeria, Rwanda, Seychelles, Sierra Leone, South Africa (for technical assistance only), Swaziland and Zimbabwe. To date, a total of 39 countries had participated in studies for the index.
She explained that the index was an Africa-specific resource based on national statistics and informed by Africa’s social, cultural, economic and political landscape. It was a composite index made up of two mutually reinforcing components: the gender status index, a quantitative measure of gender issues, which measured gender equality gaps by assessing whether women and men had the same opportunities to earn income, and the same access to and control over resources and opportunities to obtain education and live healthy lives; and the African women’s progress scoreboard, which captured qualitative issues relating to the performance of the gender policies of African countries and progress in implementing regional and international commitments on gender equality and women’s empowerment.
Unlike many such indices, the African gender and development index was not linked to countries’ GDP. Instead, it measured gender equality, women’s well-being and empowerment in all the social, economic and political spheres. Attention was also given to the voices and agency of women, in other words, to their ability to make choices leading to desired outcomes, free of retribution and discrimination.
The results of the scorecard had been used by the Chairperson of the African Union Commission at the June 2015 session of the Assembly of Heads of State and Government of the African Union in rewarding countries that had made progress towards gender equality.
She informed the Committee that the African Centre for Gender was collaborating with the African Union Commission to produce the gender equality scorecards and also with the African Development Bank to harmonize the two indices on gender equality developed by the two institutions. Countries were encouraged to use the African gender and development index in developing national plans and indicators for the implementation of both Agenda 2063 and the 2030 Agenda for Sustainable Development. The basic rationale for the African gender and development index process was to assist Governments in streamlining and aligning their national development frameworks and visions with regional commitments under the broader framework of gender concerns.
Presentation on the Sustainable Development Goals in Africa: opening inroads for enhancing gender and social development policies
In her presentation, Ms. Manuh said that the focus of the presentation was on two critical frameworks, Agenda 2063 of the African Union and the 2030 Agenda for Sustainable Development adopted by the General Assembly in September 2015. Both frameworks played a critical role in mobilizing consensus for development, although the responsibility for their implementation lay with member States.
Both frameworks emphasized inclusive equitable economic growth, gender equality, empowering vulnerable groups, ending malnutrition and enabling sustainable urbanization. They complemented each other on such issues as gender equality, social development and related actions at the national, regional economic community and continental levels.
She highlighted key priorities in the areas of gender and social development in the 2030 Agenda for Sustainable Development as they related to the work of the Division and the implications for gender and social development policies and strategies on the continent. The areas where member States needed support in implementing the Agenda were outlined. She stressed that member States needed to take lead in the systematic follow-up and review of the implementation of the 2030 Agenda for Sustainable Development, and give due consideration to gender and social development in their planning.
In the ensuing discussion, participants stressed that the mainstreaming of gender perspectives and women’s issues into policies, strategies and budgets should be the responsibility of sectoral ministries. Ministries responsible for gender and women’s affairs should support the sectoral ministries in their mainstreaming efforts through capacity-development interventions based on their needs, the development of guidelines and the provision of appropriate mechanisms and forums for knowledge-sharing and coordination. Egypt, Ethiopia and Rwanda were highlighted as good practices in that regard.
Other issues related to gender equality and the empowerment of women discussed by the Committee were the need to promote regular interface between ministries responsible for gender and women’s affairs and ministries responsible for finance and development planning; the need to capacitate national gender machineries on a regular basis to counter high attrition rates; the need for more effective e-discussions, including through the ECA e-network for national gender machineries for information-sharing and advocacy; and the need for member States to share knowledge and good practices.
Participants highlighted the fragmented nature of social protection systems on the continent and called for more integrated approaches to social protection. In addition, they highlighted the need for a single registry of civil registration and vital statistics to support integrated social protection systems.
The Committee recommended that member States should nominate focal points for the e-network for national gender machineries for information-sharing and advocacy that were at a high enough level to engage effectively in e-discussions; and that there should be more and better engagement with ministries of finance and economic planning, to ensure that gender issues and women’s concerns were well integrated in national budgets and development planning.
It also recommended that ECA, for its part, should support member States by:
(a) Ensuring that the Chair of the Bureau of the Committee on Gender and Social Development attended and reported back on the outcomes of the first session of the Committee to the Conference of Ministers of Finance, Planning and Economic Development, scheduled for March-April 2016;
(b) Undertaking a mapping exercise to ascertain the capacity-development needs of national gender agencies, and to identify good practices in gender mainstreaming;
(c) Providing technical and advisory support to develop gender-responsive budgets;
(d) Reinvigorating the e-network for national gender machineries for information-sharing and advocacy, to facilitate the sharing of knowledge and best practices and more effective e-discussions on topical issues on gender equality and the empowerment of women and girls;
(e) Undertaking a study of existing social protection regimes to identify good practices and assist in developing integrated national social protection systems.
General recommendations
The Committee made the following general recommendations:
(a) Global commitments and frameworks need to be contextualized, taking into account national development priorities in Africa, and ECA should support member States in domesticating both Agenda 2063 and the 2030 Agenda for Sustainable Development, to ensure the effective implementation and monitoring of gender and social development commitments;
(b) ECA should strengthen the cross-fertilization and synergy of the various components of its work on gender and social development;
(c) ECA should continue to strengthen its current good collaboration with the African Union Commission in supporting member States in the area of gender and social development in the context of Agenda 2063 and the 2030 Agenda for Sustainable Development;
(d) ECA should endeavour to support more countries in their efforts to accelerate gender equality, women’s empowerment and social development, and mobilize resources towards that end;
(e) Disabled persons are an important population group in Africa and their specific needs should be taken into account in ECA work and future deliberations of the Committee;
(f) ECA should consider the important role of social entrepreneurship and innovation inspired by good practices in Africa and beyond in respect of the promotion of gender equality and women’s empowerment;
(g) The cultural factors underpinning the violation of women’s human rights should be taken into account in future research by ECA on human rights;
(h) Member States should respond to requests from ECA for information in a timely manner;
(i) Adequate time should be provided for detailed discussion of key agenda items during future meetings of the Committee.
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A possible development journey in a post-Nairobi WTO
The WTO Tenth Ministerial Conference in Nairobi, Kenya was a success with some important agriculture-related decisions, a ministerial declaration, and decisions on select least developed country issues.[1] These decisions and a declaration were a mere possibility when WTO members left Geneva for Nairobi, with some of them holding contending views on whether the Doha Round negotiating framework, the single undertaking, would survive. Many have noted that these views are now recorded in the Nairobi declaration.
In addition, concerns are mounting about the threat of robust activity of regional and so-called mega-regional agreements outside of WTO, including in Africa. However, activity on the regional trade platform, which has happened in parallel for years, should not cause WTO negotiators to falter in their gait.
As delegations at the WTO recharge their engines, major themes that previously hindered consensus on remaining Doha Development Agenda (DDA) issues still linger. However, beginning with priority issues of weaker developing countries and Least Developed Countries (LDCs), both on remaining DDA issues and any other challenges for them on the global scene today, could form a good foundation, to catalyse the path toward a successful development outcome for the DDA.
While WTO’s negotiating function suffered turbulence in the last decade, the Bali ministerial conference, and now Nairobi, provided some signs of light. The penchant might be to wait for major developed WTO members to guide the rest of the membership, predicated on the need for the resolution of their redlines first.
Interestingly, WTO members that are party to the same trade agreements outside of WTO, tend to be less contentious inside of the WTO.[2] One might ask if the EU and US conclude the Transatlantic Trade and Investment Partnership (TTIP), and India, China, and Brazil negotiated free trade agreements with the US, would WTO negotiations be easier?[3] Post-Nairobi reflection may indeed present an opportunity for weaker developing countries and LDCs to engage with each other. Avoiding the lure of polarised approaches to negotiations, progressive bilateral and small group engagement by developing countries with other WTO members might yield practical development-oriented outputs.
In the year 2000, after the Seattle ministerial conference in 1999, fuelled by the prospect of launching a round in 2001, WTO members took decisions in the General Council on developing country implementation proposals (precursors to the SDT proposals). Though these decisions mainly concern the extension of transition periods to implement WTO agreements, they were touted as “confidence building” measures. Other decisions on implementation issues were agreed in different Councils and subsidiary bodies such as on trade-related investment measures (TRIMs) and Article 27.4 of the the Agreement on Subsidies and Countervailing Measures, leading up to the Doha ministerial decision on implementation-related issues and concerns in 2001.[4]
Developing countries in the WTO might form their own clusters to refine specific elements to conclude the DDA starting from the needs of the LDCs working up the chain of developing countries in need to form tranches of practical decisions. Perhaps one WTO member’s idea offered at Davos this year for a solidarity work programme in the WTO can provoke discussions on ways to resolve areas in the DDA, particularly development. However, there may be little interest in propagating “work programmes” and more of an appetite for concrete outputs.
Unlike year 2000, 2016 follows a successful ministerial conference that unfurled what could be a turning point for remaining DDA areas. Opportunities could emerge where developing country objectives from the DDA and their contemporary challenges intersect with global challenges raised by other members. Results might be achieved in a manner that does not add new burdens on the weaker members of the WTO, but instead enhances mutually beneficial gains for the system.
Alicia D. Greenidge is President of Summit Alliances International; former US trade negotiator; and currently adviser to developing countries and Least Developed Countries, and WTO accession countries, on WTO and trade matters.
[1] Some Members also concluded the expanded plurilateral information technology agreement (ITA-II), with MFN benefits for all WTO members.
[2] After the Trans-Pacific Partnership Agreement some developed country parties may seek less concessions from for example, Malaysia, at WTO.
[3] The 2004 “India Shining” reverberations may still pose severe challenges for India on the agriculture pillar of the DDA.
[4] Every working body of the institution has a negotiating function and different mechanisms have been used.