Search News Results
South Africa Merchandise Trade Statistics for January 2016
South Africa’s trade balance swings to a deficit R17.87 billion ($1 billion) in January from a revised R7.56 billion surplus in December, the national revenue agency said on Monday.
Exports were down by 18.8% to R71.5 billion on a month-on-month basis, while imports rose by 11% to R89 billion on a month-on-month basis, the South African Revenue Service said in a statement.
The consensus for the trade deficit was R14.10 billion.
In a flash comment, Nedbank’s Economic Unit said: “A large deficit is usual in January as imports recover from the slowdown during the December break and exports struggle from low production over the festive season.
“The performance of exports during 2016 will remain largely dependent on the recovery of commodity prices as well the improved competitiveness of manufactured exports following significant currency weakness, although softer global demand will constrain growth. However, any disruptions to domestic production, from power shortages to labour instability, would inhibit the recovery.
“On the import side, low international oil prices will continue to keep the oil import down, while machinery purchases will continue to moderate as some of the major infrastructure projects near completion. A sharp rise in agricultural imports is likely due to the drought.
“The trade figures are volatile and have no direct impact on monetary policy,” stated Nedbank.
The South African Revenue Service (SARS) has released trade statistics for January 2016 that recorded a trade deficit of R17.87 billion. This figure includes trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R17.87 billion deficit for January 2016 is due to exports of R71.50 billion and imports of R89.37 billion. Exports decreased from December 2015 to January 2016 by R16.57 billion (18.8%) and imports increased from December 2015 to January 2016 by R8.86 billion (11.0%).
The R17.87 billion deficit is a 23.7% decrease on the deficit recorded in January 2015 of R23.43 billion. Exports of R71.50 billion are 5.4% more than the exports recorded in January 2015 of R67.82 billion. Imports of R89.37 billion are 2.1% less than the imports recorded in January 2015 of R91.25 billion.
The month of December 2015 trade balance surplus was revised downwards by R0.66 billion from the previous month’s preliminary surplus of R8.22 billion to a revised surplus of R7.56 billion.
Trade highlights by category
The month-on-month export movements (R’ million):
Section: | Including BLNS: | |
Precious Metals & Stones | - R6 563 | - 36.6% |
Vehicle & Transport Equipment | - R3 195 | - 34.5% |
Chemical Products | - R1 488 | - 24.9% |
Prepared Foodstuff | - R1 077 | - 25.5% |
Machinery & Electronics | - R 970 | - 12.2% |
The month-on-month import movements (R’ million):
Section: | Including BLNS: | |
Equipment Components | + R 3 973 | + 129.4% |
Machinery & Electronics | + R3 403 | + 16.5% |
Base Metals | + R1 274 | + 30.5% |
Vehicle & Transport Equipment | - R1 070 | - 10.9% |
Mineral Products | - R2 271 | - 17.2% |
Trade highlights by world zone
The world zone results from December 2015 to January 2016 are given below.
Africa:
Trade surplus: R11 848 million – This is a 14.1% decrease in comparison to the R13 798 million surplus recorded in December 2015.
America:
Trade deficit: R3 587 million – This is an 89.4% increase in comparison to the R1 894 million deficit recorded in December 2015.
Asia:
Trade deficit: R17 748 million – This is a deterioration in comparison to the R6 698 million deficit recorded in December 2015.
Europe:
Trade deficit: R12 568 million – This is a deterioration in comparison to the R5 662 million deficit recorded in December 2015.
Oceania:
Trade deficit: R 285 million – This is a deterioration in comparison to the R 49 million surplus recorded in December 2015.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for January 2016 recorded a trade deficit of R25.49 billion, with exports of R61.31 billion and imports of R86.80 billion. Exports decreased from December 2015 to January 2016 by R16.32 billion (21.0%) and imports increased from December 2015 to January 2016 by R8.49 billion (10.8%).
The cumulative deficit for 2016 is R25.49 billion compared to R30.49 billion in 2015.
Trade highlights by category
The month-on-month export movements (R’ million):
Section: | Excluding BLNS: | |
Precious Metals & Stones | - R7 377 | - 41.2% |
Vehicles & Transport Equipment | - R3 051 | - 37.2% |
Chemical Products | - R1 299 | - 26.0% |
Prepared Foodstuff | - R1 055 | - 37.0% |
Machinery & Electronics | - R 910 | - 13.8% |
The month-on-month import movements (R’ million):
Section: | Excluding BLNS: | |
Equipment Components | + R3 973 | + 129.4% |
Machinery & Electronics | + R3 245 | + 15.8% |
Base Metals | + R1 295 | + 31.6% |
Vehicles & Transport Equipment | - R1 093 | - 11.2% |
Mineral Products | - R2 267 | - 17.3% |
Trade highlights by world zone
The world zone results other than Africa from December 2015 to January 2016 are given above.
Africa:
Trade surplus: R4 230 million – This is a 23.8% decrease in comparison to the R5 554 million surplus recorded in December 2015.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for January 2016 recorded a trade surplus of R7.62 billion, a result of exports of R10.19 billion and imports of R2.58 billion.
Exports decreased from December 2015 to January 2016 by R0.26 billion (2.5%) and imports increased from December 2015 to January 2016 by R0.37 billion (16.7%).
The cumulative surplus for 2016 is R7.62 billion compared to R7.06 billion in 2015.
Trade Highlights by Category
The month-on-month export movements (R’ million):
Section: | BLNS: | |
Chemical Products | - R 189 | - 19.1% |
Vehicles & Transport Equipment | - R 145 | - 13.6% |
Textiles | - R 110 | - 23.6% |
Live Animals | - R 99 | - 27.8% |
Precious Metals & Stones | + R 814 | + 4542.2% |
The month-on-month import movements (R’ million):
Section: | BLNS: | |
Precious Metals & Stones | + R 334 | + 896.7% |
Machinery & Electronics | + R 158 | + 150.8% |
Prepared Foodstuff | + R 33 | + 7.7% |
Live Animals | - R 39 | - 19.6% |
Chemical Products | - R 160 | - 22.6% |
Related News
Namibia rakes in over $1 billion from EU Trade
Namibia has raked in U$1.059 billion from trade exports to the European Union (EU) almost twice as much as the U$643 million worth of goods imported from the EU for the year 2014/2015.
In comparison, South Africa recorded a negative trade balance with the EU of about U$5 million after exporting goods worth of U$20 million while importing goods worth about U$25 million.
Botswana on the other hand exported goods worth U$2 million while importing goods worth only about U$300 thousand over the same period.
Latest statistics dated February 2016 from the European Commission in Namibia shows that 26 percent of the U$1.059 billion came from the exportation of fish and crustaceans, molluscs and other aquatic products.
Zinc represents 19 percent, copper 18 percent while inorganic chemicals represent 9 percent with ‘others’ make up the other 27 percent.
Such exports has made Namibia to become EU’s second largest trading partner after South Africa with approximately 30 percent of all Namibian exports going to the EU market.
This trade income is guaranteed to decrease however if Namibia does not sign the Economic Partnership Agreement (EPA) with the EU by October 2016 as the current application of the Market Access Regulation will lapse on 1 October 2016.
“The current terms of trade with the EU are very much in Namibia’s favour. Namibia’s raw materials and goods enjoying duty and quota-free access to the EU market under what is referred to as the Market Access Regulation.
“While on the other hand, EU imports to Namibia are subjected to tariffs and customs duties. In order for Namibia to continue to enjoy duty and quota-free access to the EU market, Namibia needs to sign an Economic Partnership Agreement with the EU,” said EU Ambassador to Namibia Jana Hybášková.
Namibia has negotiated the EPA as part of a regional Southern Africa Development Community group that included Botswana, Lesotho, Swaziland, Mozambique, Angola and South Africa. The negotiation process started in 2007 and ended on 15 July 2014 which Namibia now needs to sign, ratify and implement the EPA.
Hybášková said the EPA is in compliant with World Trade Organisation rules and its asymmetric nature benefitting Namibia more than it benefits the EU – is intentional on the latter’s part in order to help the gradual integration of Namibia into the world trade.
“In this manner, EU trade can act as an instrument for the development of Namibia, creating jobs and fostering growth in the long-term,” she said.
The EU has also set its sights on reinforcing economic ties with Namibia saying that the emerging investment opportunities both in Namibia and Europe, access to new markets and the exchange of skilled labour will make the partnership more equal.
The EU demonstrated the importance of the reinforcement of relations with Namibia by availing late last year over N$900 million towards the new National Indicative Programme which will be focused on education and rural development as well as continued support to projects and programmes in the areas of good governance and civil society in Namibia.
Hybášková said the long-standing partnership with Namibia will continue in terms of development cooperation and that their focus up until 2020 will be on education and skills development as well as agriculture.
“By supporting activities in these sectors we hope to support increased employment opportunities and incomes in a sustainable manner in order to help reduce poverty. Other areas of support include strengthening the capacity of civil society (CSOs) to better undertake their vital role as development actors.
“Furthermore, our aim will be to support sustainable growth and stability in the country. Peace and security, the democratic process, respect of human rights and the rule of law should never be taken for granted. They should be safeguarded and further embodied into the social fabric of Namibia, as all other development efforts depend on these pillars,” she said.
With regard to trade, Hybášková says the relations between Namibia and the EU are on a solid footing following the successful conclusion of the Economic Partnership Agreement negotiations and that they now look forward to the signing and ratification of the EPA Agreement in 2016.
“Also in 2015 the EU launched a public consultation on the future of the EU’s partnership with African, Caribbean and Pacific countries as the Cotonou Agreement will expire in 2020. The relationship between the EU and ACP countries has moved beyond simply development cooperation and trade in the last twenty years.”
In addition she said a number of pressing challenges have come to light – such as the fight against terrorism, sustainable and inclusive growth, migration and climate change. There is need for debate and consultation in order that they arrive at a new formulation of the EU and ACP partnership that better reflects these common challenges and promotes the shared interests.
Related News
EAC launches first One Stop Border Post at Holili/Taveta
The East African Community officially launched the first One Stop Border Post (OSBP) in Holili/Taveta towns on the Kenya/Tanzania border on 27 February 2016.
The facility was built at the cost of approximately US$12 million from TradeMark East Africa (TMEA).
The project was launched jointly by Tanzania’s Minister for Foreign Affairs, East African, Regional and International Cooperation, Hon. Amb. Dr Augustine Mahiga, and Kenya’s Labour and East African Affairs Cabinet Secretary, Hon. Phyllis Kandie.
Dr Mahiga said the One Stop Border Post will ease the movement of people from the two Partner States.
“It’s a demonstration of the trust between the two countries and that the One People, One Destiny dream is slowly being realized through various East Africa Community initiatives,” said Dr Mahiga.
The Minister reaffirmed Tanzania’s commitment to the integration process by assenting to the OSBP Bill and concluding agreements for Management of OSBPs with all Partner States.
Dr Mahiga said the OSBP is set to increase efficiency by reducing time and transport costs incurred by businesses, farmers and transporters while crossing from one Partner State to the other.
The Minister further said that the Arusha-Holili/Taveta-Voi road which was currently under construction would boost cross border trade and foster good neighbourliness between Kenya and Tanzania, adding that the two countries had demonstrated the political goodwill to implement EAC initiatives.
Dr Mahiga said the next step was capacity building in the management of OSBPs to ensure smooth operation and better service delivery.
In her remarks, Hon. Kandie said that in addition to facilitating farmers and business persons from Northern Tanzania to access the Kenyan market, the Holili/Taveta OSBP will also enhance mutual interactions, create synergy and unity of purpose.
“I am pleased to appraise the substantial progress already recorded in the construction of the Taveta-Mwatate-Voi road section. Already, 75% of the road is complete and opened for use. It is anticipated that by the end of this year, the outstanding works on that section will be complete and the people of Taveta and Northern Tanzania for the first time will travel to and from Mombasa and other parts of Kenya with ease,” said Hon. Kandie, adding that the road would unlock the vast potential of the Taita-Taveta/Kilimanjaro region.
Hon. Kandie noted that Non-Tariff Barriers (NTBs) remained a big challenge on the economic front and should be addressed by all Partner States as a matter of urgency.
“NTBs constitute prolonged formalities, multiplicity of institutions, limited capacity at entry points, technical requirements and travel restrictions through convoys and time of day among others. These are implemented through protectionist tendencies among trading blocs commonly referred to as ‘Behind the border measures’.
“The challenge that comes with the elimination of NTBs is their mutative nature. Their impact on intra-EAC trade flows is serious and real. They stifle trade; depress returns on investment, and add extra costs to goods traded across our borders,” said the Cabinet Secretary.
She emphasized Kenya’s commitment to continue working with other Partner States to strengthen regional mechanisms geared towards eliminating NTBs with a view of making the Community more competitive and promoting intra-regional trade.
EAC Secretary General, Amb. Dr Richard Sezibera, disclosed that the Holili/Taveta OSBP is the first among eight on the borders of the EAC Partner States that have been completed and are awaiting to be commissioned.
Dr Sezibera said the EAC realized that the economies of Partner States were interdependent, adding that the best approach was to work together to reduce the costs of doing business.
“This OSBP will boost trade by facilitating faster clearance of cargo, realize significant reduction in transport costs and ensure effective border control mechanisms are put in place,” said the Secretary General.
Mr. Theo Lyimo, the Director OSBPs at TMEA, thanked their financiers especially – DFID, Canada, USAID and the World Bank for supporting the project.
“The One Stop Border Posts at Holili/Taveta are the first to be operationalised among the 15 OSBPs in East Africa and South Sudan through TradeMark East Africa’s funding. We have invested about US$117 million in OSBPs and One Access Road, and what is exciting about this is that we expect a return of $30 for every dollar invested,” said Lyimo.
Also present at the function was the EAC Deputy Secretary General in charge of Planning and Infrastructure, Dr Enos Bukuku and heads of diplomatic missions from the EAC Partner States.
Related News
2016 Conference of Ministers: Towards an integrated and coherent approach to implementation, monitoring and evaluation of Agenda 2063 and the SDGs
Ministerial Conference
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 will take place from 31 March to 5 April 2016 in Addis Ababa, Ethiopia.
The Conference will tackle the theme, “Towards an integrated and coherent approach for the implementation, monitoring and evaluation of Agenda 2063, the 2030 Agenda for Sustainable Development and the Sustainable Development Goals.”
This year’s conference will take place against the backdrop of the adoption of the Sustainable Development Goals, agenda 2030, where African leaders, along with other world leaders, recommitted themselves to the pursuit of a more sustainable development pathway. In this context, African countries are confronted with a dual transition: a global level transition from the Millennium Development Goals to agenda 2030; and a regional level transition to Agenda 2063. By signing onto Agenda 2030 and Agenda 2063, African member States demonstrated commitment to the implementation and follow-up on both agendas.
The conference will therefore deliberate on pertinent issues of how countries can harmonise frameworks and establish common mechanisms of implementation, monitoring and evaluation to achieve Africa’s collective goals of sustainable development and transformation. A common development framework for Africa has the potential to be a powerful driver of sustainable pro-poor growth in African countries. The conference will place greater emphasis on the policies and institutions needed for the transformation of African economies.
The conference, which will draw seasoned and high-level panellists from Africa and other regions, will be interactive so as to give Ministers the opportunities to address the issues, discuss and share their views and experiences in the advancement of Africa’s development.
The 2016 conference promises to be a very exciting and engaging event, with high expectations, as the topics to be discussed and decisions to be taken will have important implications for Africa’s future.
» Ministerial Conference: Concept note
African Development Week
The inaugural Africa Development Week is being hosted by the Economic Commission for Africa and the African Union from 31 March to 5 April. Close to 30 side events on topical issues including migration, industrialization, regional integration, and recent global agreements such as the Paris Agreement and the Sustainable Development Goals, will also be convened during the week. The annual high-level joint ECA-AU ministerial Conference will also take place during the week.
Over 1000 high level delegates, including Heads of State, former heads of state, member States, civil society, media and experts in various sectors of industrialization, energy, statistics, banking, and climate change, are expected.
Highlights of the development week include the Annual Adedeji Lecture. Renowned Development Economist Ha-Joon Chang and author of many popular policy books, most notably Kicking Away the Ladder and 23 Things They Don't Tell You About Capitalism, and Economics, will deliver the 2016 edition of the lecture. Chang teaches Economics at the University of Cambridge.
Other major events include the launch of ECA’s flagship Economic Report on Africa. The 2016 edition looks at Greening Africa’s Industrialization. The ECA will during the week also launch 20 Country Profiles which are meant, among other things, to provide a quality assessment of economic forecasting for the featured countries and help them in policy formulation, planning and other issues. Other publications to be launched include the Africa Governance Report IV on Measuring Corruption in Africa; a report on Investment Policies & Bilateral Investment Treaties in Africa.
The Regional Coordination Mechanism for Africa (RCM-Africa) will also hold its 17th session to discuss UN support for implementing Agenda 2063 and the Sustainable Development Goals. While the Caucus of Governors of African Central Banks will hold their annual meeting to address their role in Africa's transformation amidst turbulent times.
» African Development Week: Concept note
Background documents
-
Agenda 2063 – A Shared Strategic Framework for Inclusive Growth and Sustainable Development: First Ten-Year Implementation Plan 2014-2023 | September 2015
-
Progress report on the work of the African Institute for Economic Development and Planning | March 2016
-
Status of African Integration: The Implications of Agenda 2063 and Agenda 2030 on African Integration | March 2016
-
Report of the ninth session of the Committee on Regional Cooperation and Integration | March 2016
-
Overview of recent economic and social developments in Africa | March 2016
-
Global and continental frameworks: implications for Africa | Briefing note, March 2016
-
Accra Declaration: Fourth Congress of African Economists | March 2016
-
Report of the 7th Ordinary Meeting of the African Union Sub-Committee of Directors General of Customs | March 2016
-
Report of the first session of the Committee on Gender and Social Development | March 2016
-
Report on United Nations support to the African Union and its New Partnership for Africa’s Development Programme | February 2016
-
Joint AUC-AACB strategy on the establishment of the African central bank (ACB) | March 2016
-
Proposed strategic framework for the period 2018-2019: Programme 15 - Economic and social development in Africa | March 2016
-
The status of statistical development in Africa | March 2016
-
African Inclusive Markets Center of Excellence (AIMEC) | Working Document, March 2016
-
Draft Pan-African Investment Code | March 2016
-
Draft revised statute of the African Institute for Economic Development and Planning | March 2016
-
Report of the ninth session of the committee on Sustainable Development | March 2016
Background
For over a decade, economic growth in African countries has exceeded the global average and remarkable progress has been made on several socioeconomic indicators despite low initial conditions. Notwithstanding the positive performance, much more remains to be done to reduce poverty and improve access to health and education services that meet minimum standards of quality. Almost one out of every two individuals in Africa lives below the extreme poverty line and the continent has the highest levels of maternal and child deaths. Approximately 3.2 million of the continent’s children did not reach their fifth birthday in 2012 and the maternal mortality rate of 289 maternal deaths per 100,000 live births exceeds the global average of 210 deaths per 100,000 live births.
The relatively high level of poverty is linked to the structure of most African economies. African countries are largely dependent on commodities which are exported with little or no value added, undermining prospects for job creation. Through commodity-based industrialization, economic transformation can create decent job opportunities, substantially reduce poverty and minimize income and wealth inequalities.
It is against this backdrop that African Member States prioritized structural transformation in Agenda 2063 (the continental framework for development), the 2030 Agenda for Sustainable Development (the global development agenda, which sets out the new Sustainable Development Goals) and the Addis Ababa Action Agenda, which supports the implementation of Agenda 2030. Through the adoption of Agenda 20631 by Heads of State and Government at the African Union Summit in January 2015, in Addis Ababa, and the first ten-year implementation plan during the June 2015 Summit in Sandton, South Africa, African policymakers have designed the continental, sequenced, forward-looking vision for the next fifty years. At the global level, the 2030 Agenda for Sustainable Development, together with the Sustainable Development Goals, were adopted in September 2015 as the international community’s response to the fundamental challenges facing the world today: eradicating poverty and achieving inclusive and sustainable development for present and future generations.
Objective of the Conference of Ministers
There is an imperative need for Africa to adopt a coherent strategy for the effective and coordinated implementation of Agenda 2063 and the 2030 Agenda for Sustainable Development. The Joint Annual Meetings of the African Union Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration and the Economic Commission for Africa Conference of African Ministers of Finance, Planning and Economic Development, more commonly referred to as the Conference of Ministers, provide an ideal opportunity to address this challenge, as the gathering has become the premier forum on the continent for African ministers responsible for finance, economy, planning, integration and economic development and governors of central banks to discuss issues pertinent to the development of Africa.
The Conference of Ministers will, therefore, address the question of how African countries could adopt and implement effectively the first ten-year implementation plan, with a wider mandate to support the promotion and implementation of a common framework for meeting the goals of Agenda 2063 and the 2030 Agenda for Sustainable Development. Such strategies should not only focus on promoting strong and sustainable long-term growth but also ensure that the benefits of such growth are widely shared in order to reduce poverty and improve the standard of living for all Africans. Furthermore, at the end of their deliberations, the ministers will offer guidance on mechanisms for the adoption and successful integration of the first ten-year implementation plan at the national, regional and continental levels.
The Conference of Ministers is expected to draw on lessons learned from the ongoing process of domesticating the first ten-year implementation plan, which has already taken place in 23 countries, as well as Africa’s development experience with other continental initiatives and global development processes, to ensure that the implementation framework includes:
-
Effective implementation, coordination, monitoring and evaluation arrangements at the national, regional and continental levels
-
Mobilization of resources for implementation at the national, regional and continental levels
-
Provision to enhance the capacities of national, regional and continental institutions involved in the execution of the common framework
-
Raising awareness among institutions and organizations at the national, regional and continental levels responsible for the design, implementation, monitoring and evaluation of the common development goals
-
Engagement with the African public, civil society organizations and all other identifiable groups for information exchange and participation in decision-making with respect to the design, implementation, monitoring and evaluation of the framework
The Conference of Ministers offers an opportunity, therefore, to discuss the harmonization of Agenda 2063 and the 2030 Agenda during implementation by addressing the following issues: harmonization, synergies and sensitization regarding the two frameworks; integration of the frameworks into national development plans; monitoring and evaluation; and financing.
Senators announce arrival of first US poultry to South Africa in 15 years
US Senators Chris Coons (D-Del.) and Johnny Isakson (R-Ga.), co-chairs of the Senate Chicken Caucus, have applauded the news that the first US poultry in more than 15 years has arrived in South Africa.
Today’s news is the outcome of a June 2015 agreement reached between the United States and South Africa that required South Africa to eliminate longstanding barriers to US poultry imports.
“We are thrilled that after more than 15 years of South Africa illegally blocking imports of US poultry, chicken from Delaware, Georgia, and states around the United States will finally reach the dinner tables of South Africans,” said Senators Coons and Isakson.
“Today’s news is the result of years of hard work and negotiations led by our poultry producers and US trade officials, and we are proud to have also played a part. This is a significant win for poultry farmers in Delaware and Georgia and for South Africans who will now have access to our healthy, affordable, and high-quality poultry.”
Senators Coons and Isakson and have been pressuring the South African government for more than a year to end the anti-dumping duties and unfair food safety and health trade policies on US poultry. The senators met on numerous occasions with South African President Jacob Zuma and other South African officials to discuss this issue over the last several years.
They also secured language in last year’s African Growth and Opportunity Act reauthorization to require an out-of-cycle review of South Africa's benefits due to the persistence of these issues. The bipartisan amendment was introduced in the Senate Finance Committee by Isakson and co-sponsored by Sen. Tom Carper, D-Del., and Sen. Mark Warner, D-Va.
On June 8, 2015, a settlement was reached between the United States and South Africa after negotiations in Paris led by the United States Trade Representative, the Department of State, US Ambassador to South Africa Patrick Gaspard, and trade experts from the poultry industry.
Since the settlement was reached, South Africa repeatedly failed to fulfill the obligations agreed upon in Paris. In response to the delays, Senators Coons and Isakson called on President Zuma in September to act quickly to address the unresolved issues in the agreement.
In November 2015, President Obama issued a 60-day notice of his intent to suspend AGOA benefits for South Africa’s agricultural products if South Africa continued to fail to eliminate trade barriers to US poultry, beef, and pork as a result of the out-of-cycle review. That notice expired on January 4, 2016, and shortly thereafter, South Africa announced it would comply with the terms of the settlement.
Senators Coons and Isakson are the co-chairs of the Senate Chicken Caucus, of which Senator Carper of Delaware and Senator Perdue of Georgia are also members. Both Delaware and Georgia have large poultry industries and are major exporters of poultry. The poultry industry annually contributes over $15.1 billion to the Georgia economy. Delaware’s poultry industry supports more than 14,000 jobs and contributes more than $4.6 billion to the state’s economy, according to the National Chicken Council.
Related News
EAC positions itself for Nile irrigation and power projects
East African countries are positioning themselves to benefit from irrigation and hydroelectric power projects along the River Nile.
Eleven of 30 of such projects, commissioned under the Nile Basin Initiative (NBI), will soon be completed after funding bottlenecks are addressed.
NBI executive director John Nyaoro told The EastAfrican that most of the $6 billion projects that have been in development for the past 16 years will be commissioned by 2017.
Mr Nyaoro said that already, projects worth $1.3 billion are at various stages of implementation while 19 others have been lined up for implementation as soon as funds are made available.
Sourcing funding
The 10 countries sharing the Nile’s waters – Kenya, Egypt, Ethiopia, Rwanda, South Sudan, Tanzania, Uganda, Democratic Republic of Congo, Sudan and Burundi – are all involved in the projects.
The ministers in charge of water resources in these countries are working on ways of sourcing funding for the completion of the joint projects that seek to connect countries in the entire basin to clean energy resources for rapid industrialisation.
“One such power connection involves Kenya, Uganda, Rwanda, Burundi and South Sudan and another connects Ethiopia to Sudan,” said Mr Nyaoro.
The interconnections have been made easier by construction of electricity transmission lines to handle the increased wattage. According to Mr Nyaoro, most of these lines will be commissioned by the end of 2016.
A series of activities have been lined up to celebrate the Nile Basin Initiative.
The initiative came into being on February 22, 1999 and has been expanded in the past 16 years despite funding challenges.
Effects of overfishing
There is also a fisheries project that seeks to mitigate the effects of overfishing on Lakes Edward and Albert under the Lakes Edward And Albert Fisheries and Water Resources Management Project funded by the African Development Bank.
“We want to regulate how Uganda and DRC manage the resources in the two lakes for sustainability. The regulations will deal with piracy and other attacks on fishermen,” Mr Nyaoro said. “Communities that live around the rivers that are at the risk of destruction are also being given alternative means of earning a livelihood through beekeeping, fish ponds and dairy farming.”
The NBI is also installing technologies that give early warnings for floods and droughts.
Mutaz Musa Salim, chairman of the Nile Council of Ministers, said all states must make a commitment towards mobilisation of resources to support the joint ventures.
“We still have a gap in funding, since only $1.3 billion of the required $6 billion has been received. This threatens the sustainability of the projects. We must now do more by engaging NBI’s traditional and non-traditional development partners,” said Mr Salim, who is the Sudanese Minister for Water Resources, Irrigation and Electricity.
Related News
2030 Agenda’s promise of well-managed migration and mobility must become a reality – UN deputy chief
The promise of the 2030 Agenda for Sustainable Development is that well-managed migration and mobility will benefit migrants and their families as well as countries of origin and destination, United Nations Deputy Secretary-General said on Monday, 29 February, urging Member States to work together to “make sure this promise becomes a reality.”
“I cannot recall a time when the issue of mass displacement, refugees and migratory movements was as high on the agenda of the international community as it is today,” Mr. Eliasson told the 2016 International Dialogue on Migration, a two-day event organized at Headquarters by the International Organization for Migration (IOM) and focused on the 2030 Agenda and its landmark Sustainable Development Goals (SDGs).
‘The Numbers Speak for Themselves’
He said the number of international migrants who reside outside their country of birth or citizenship had risen from some 170 million in 2000 to nearly 250 million in 2015 – an increase of 41 per cent. Seven out of every 10 international migrants reside in high-income countries.
“Without migration, the population of Europe would have fallen in the past 15 years. Generally, we need to recognize what migrants and refugees contribute to our societies. We have an obligation to counter the negative narrative characterizing the present public discourse,” said Mr. Eliasson.
He went o note that more than 60 million people are currently displaced – the highest figure since the end of the Second World War. This includes 20 million refugees, which means that eight out of every 100 international migrants are now refugees. The large majority of these refugees are hosted by developing countries.
Bolster Human Rights; Prevent and Resolve Conflicts
The differing narratives of migrants and refugees have some very important points in common, Mr. Eliasson said, underscoring that irrespective of the motives people have for crossing international borders, all migrants have basic human rights. Further, migrants and refugees increasingly move together as part of mixed migratory flows.
“In the absence of channels for safe, orderly and regular migration, as stated in SDG 10, target number 10.7, smugglers and traffickers exact obscenely high fees and often take advantage of the migrants and refugees. Ultimately, “we must do more to prevent and resolve conflicts which give rise to forced displacement. Syria is the most blatant case in point.”
“We must also deliver on the promise of the Sustainable Development Goals to leave no one behind. We must improve the conditions for a life of dignity and fulfilment at home. We must reduce inequalities, and promote peaceful and inclusive societies,” Mr. Eliasson emphasized, adding that all refugees are protected from forcible return by 1951 Convention Relating to the Status of Refugees.
Humanitarian Financing and Ensuring ‘No One is Left Behind’
Against this backdrop, there is a pressing need to increase humanitarian financing. The Secretary-General's High-Level Panel on Humanitarian Financing has made proposals which will be taken further at the World Humanitarian Summit in Istanbul 23-24 May, he said, urging governments to ensure high level attendance at the first-ever Humanitarian Summit, “placing the human being in the centre.”
Recalling that earlier this month at an informal meeting of the UN General Assembly on follow-up to the 2030 Agenda, he had presented several conditions for success, Mr. Eliasson said they equally applied to preparations for the High-Level meeting of the General Assembly on 19 September on large-scale refugee and migratory movements.
They were: leadership as Member States and other actors must be fully committed to develop predictable and equitable responses to mass population movements; ownership; partnerships; and collaboration, as a global approach at the United Nations must be complemented by regional and national contributions.
With this in mind he noted that as many countries are struggling to deal with issues of displacement, migration and refugees, the UN must not remain on the sidelines. And while the issues are complex, that would not prevent the Organization from developing responses, searching for solutions, identifying good practices, and putting well financing systems and institutions in place.
Carlos Lopes on Africa’s debt: They don’t believe in the future
The domino effect of five central banks – Denmark, Switzerland, the European Central bank, the bank of Japan and more recently Sweden, slashing interest rates to sub-zero levels has certainly given many the chills.
Viewed as a desperate move to stimulate growth by rewarding spending and penalizing savings – it is in fact more related to the unsustainability of public expenditure modelled for a demographic curve that is no longer there.
An ageing population whose workforce is weak and has low productivity is coming to surface. The world seems to be gripped with the psychological fear of another looming global debt crisis. This is hardly surprising. Analysts and political leaders refuse to discuss population trends because the reality is very difficult to reconcile with populism and short term expediency.
In the last decade growth seem to be shifting to emerging economies, but all of the sudden the BRICS, with one exception, India, got engulfed in the same patterns as those they rivalled. It is no coincidence they too, with precisely the Indian exception are facing a diminishing of their labour force in the near future.
Yet in this whirlwind, growth will have to come from somewhere. Africa’s growth has been driven by investors seeking high returns and opportunities rooted in a number of mega trends. These include a sizeable number of consumers, that will be almost as large as the Americas and Europe population combined by 2025; a rising middle class coupled with a rapid urbanization with eager consumers expected to spend about USD1 trillion by 2020; and a young population that will constitute over a quarter of the world’s labour force by 2050.
In addition to reforms, Africa’s financial sector has also matured wetting the appetite for sovereign bonds – now at the center of the continent’s debt sustainability discussion. This trend in particular has created the buzz about another debt crisis looming in Africa. When we talk of debt sustainability, the agreed definition is whether a country can meet its current and future debt service obligations in full, without recourse to debt relief, rescheduling or accumulation of arrears.
It is important to give some context with regards to Africa’s past indebtedness. Contrary to common perception, Africa’s past over-indebtedness was not solely attributable to the continent’s poor governance, corruption or conflict, as most would have you believe. Other contributing factors include cold war geopolitics; relatively poor fiscal policies and negative real interest rates in industrial countries, which in turn encouraged developing countries to go on a borrowing spree; as well as easy credit access, particularly to oil-exporting countries, that in hindsight seemed to be helping industrial countries adjust to the two oil-shocks of the 1970’s. A long drawn global recession caused commodity markets and prices to collapse. Volatile exchange rate movements saw Africa’s debts appreciated against the US dollar. Adding to this potent cocktail, protectionist policies in the world’s markets stood in Africa’s way to escape the debt trap. With onerous debt service burdens, a vicious cycle began: African countries taking on new loans to repay old ones. More was actually being spent on servicing debt than any other expenditure or investment category. By 2012, African countries were still spending about 10 percent of their export earnings on servicing external debt, an improvement from the 40 per cent plus of the 1990s.
Interestingly, the continent’s total external debt as a percentage of GDP has actually been declining in Africa since the Monterrey consensus of 2002 that launched debt relief through the Heavily Indebted Poor Country (HIPC) scheme, and the Multilateral Debt Relief Initiative (MDRI). Together they helped 35 African countries cancel USD100 billion of external debt.
Africa’s total foreign debt has been higher than 30 percent of GDP since 2010 and it was projected to have risen to 37.1 percent by the end of 2015. However, net foreign debt as a share of GDP is only 1 per cent, having been negative since 2006 because of Africa’s international reserves[1]. For example, net foreign debt as a share of GDP in Algeria has averaged -82.3 percent since 2010.
With regards to Africa’s total public debt-to-GDP, figures have hovered above 30 percent of GDP since 2006 and with gradual increases taking place between 2010 and 2014. Even then, it is still lower than recorded in previous decades standing at 38 percent as of 2014[2]. This debt level is also comparable to other developing countries and is well below that of advanced economies. For example, the total debt for OECD countries was nearly 80 percent of the OECD GDP in 2008 and was expected to grow to 111.2 percent in 2015[3]. The champion of debt is Japan with GDP/debt ratio of 230 percent.
So why is the talk of debt pressure coming from?
Prior to 2009 sovereign bonds issued by African countries were negligible. The current stock is over USD18 billion. This amount actually is not reflective of incompetent governments building up unsustainable levels of debt but rather reasonable borrowers taking advantage of low interest rates to finance growth. The bad move was to not take into account the volatility of the exchange rates and currency markets. African governments are expected to experience up to USD10.8 billion in losses or the equivalent to 1.1 percent of the region’s GDP on sovereign bonds that they issued in 2013 and 2014, due largely to exchange rate risks.
Changes in macroeconomic fundamentals, such as a collapse in commodity prices, can also affect sovereign debt significantly[4]. Sovereign debt is driven by advanced and powerful economies asynchronous monetary policies. Defaulting is always risky – while governments may forgive debt, private investors certainly don’t; conditions are more stringent to meet maturity deadlines. There is no coherent mechanism to govern any future sovereign debt crises. Creditor specific mechanisms used to facilitate past debt restructurings are no longer available. Although a sovereign debt restructuring mechanism was proposed by the IMF more than a decade ago, there is still no international agreement on the topic to date. There is a general consensus that the existing rules are too creditor-friendly, but that a push for an international agreement that is too borrower friendly might not be the best way forward. Any global agreement should therefore strike the right balance[5].
The bottom line is that debt will be exacerbated in countries with weak fiscal discipline and for those who over borrow and pay little attention to repayments. Individual governments must build debt management capacity and be held accountable for the effective use of borrowed funds. This includes assessing any expansion in borrowing within the context of a comprehensive medium-term strategy for sovereign debt management.
Finally there is need for flexibility in placing debt ceilings and assessing debt. African countries should not be over-constrained or unduly deprived. The issue of debt sustainability will essentially depend on a comprehensive treatment of all components of debt in a debt restructuring, and the provision of clear mechanism to engage all stakeholders to build up consensus on how to close the gaps in financial architecture. This is going to be difficult for rich countries to accept. It requires facing the real structural problems they have through ageing.
If the answer is to pay the banks to keep the money, OECD countries will show they don’t believe in the future. Africa does not have that luxury.
This article was first published in French online in NotreAfrik magazine, 23 February 2016.
Carlos Lopes is the Executive Secretary of the United Nations Economic Commission for Africa.
[1] Economic Commission for Africa (2015). Economic Report on Africa 2015: Industrializing through trade. Addis Ababa, UNECA.
[2] Data set from EIU, 2016
[3] Global finance magazine. https://www.gfmag.com/global-data/economic-data/public-debt-percentage-gdp?page=2
[4] Hilscher, J. and Y. Nosbusch (2010). Determinants of Sovereign Risk: Macroeconomic Fundamentals andthe Pricing of Sovereign Debt, London School of Economics, UK.
[5] Ibid
Related News
tralac’s Daily News Selection
The selection: Monday, 29 February 2016
Later today, in Pretoria: South Africa's January 2016 trade data will be published
Later today, in London: launch of the 'Smart Industrial Policy for Africa in the 21st Century' report
Featured infographic, @ECA_Lopes: The services sector are taking the lion's share of Africa's GDP growth instead of industry or manufacturing
Featured tweet, @ECA_Lopes: Looking forward to the High Level Seminar [8-9 March] on the future of monetary integration @ATI_IMF
ECOWAS workshop: why has the convergence criterion, Wage Bill to Tax Revenue Ratio, been difficult to achieve?
Call for proposals: One of the key arguments put forth to removing the above criteria, especially the Wage Bill to Tax Revenue ratio, is the inability of a significant number of member states to meet them. Although research work has been done to better understand and explain the reasons behind the inability to meet them, some of the above criteria (Ratio of tax Revenue to GDP; Ratio of Public Debt to GDP, Ratio of Budget Deficit to GDP) no empirical work has been undertaken (to our knowledge) to explain why the Wage Bill to Tax Revenue Ratio criterion is yet to be met by many ECOWAS member States. In line with the growing concern on the non-achievement of this criterion, a regional workshop will be organized by the ECOWAS Commission in Abidjan, Cote d’Ivoire 2016, with a view to soliciting plausible explanation from ECOWAS Member States.
West Africa: Socio-economic profile in 2015 and prospects for 2016 (UNECA)
This report has been prepared against this backdrop on the economic profile of West Africa in 2015 and prospects for 2016. The current edition is divided into two parts. The first provides a review of the international economic environment, a sub-regional situation analysis and risks and prospects for 2016. The second part of the report provides the theme for the ECA country profiles. Lastly, the report makes recommendations on policies likely to accelerate the dynamics of the economic and social development of the sub-region. [Download]
Erdoğan's West Africa tour begins in Cote d'Ivoire (Daily Sabah)
Regional economic integration in the Horn of Africa: wishful thinking or a basis for peace? (ecdpm)
While IGAD has a strong focus and considerable renown on peace and security issues, economic integration is often seen as lower priority in the region. But rising economic interdependence in the region may be slowly altering the interests and incentives for conflict. By adapting to these changing interests and incentives, IGAD may be able to play a supportive role in promoting regional peace and prosperity with benefits at the national level. [The authors: Bruce Byiers, Sophie Desmidt]
Is the Grand Ethiopian Renaissance Dam transforming Ethiopia’s regional role? (SAIIA)
Concentrating on the GERD, this paper identifies several challenges to energy co-operation between Ethiopia and regional stakeholders. It argues that Ethiopia’s ownership of the GERD, the recent trade agreement between SADC, the Common Market for Eastern and Southern Africa and the East African Community, and growing interest in regional power pooling have created a timely opportunity for greater energy co-operation. Such cooperation will be sustained by an increase in power supply in these regions, but also by shifting national perspectives on regional prospects. [The author: Agathe Maupin]
Regional integration for a brighter future (Ethiopian Herald)
In his two days official visit in Djibouti recently, US Assistant Secretary of State Antony Blinken has noted the importance of this new program. These initiatives included: Plans to construct pipeline which will transport oil between Ethiopia's Awash region and Djibouti. Black Rhino, an American company that invests on African infrastructure development, will fund the project, which will also include the creation of new oil storage facilities in Djibouti. And the project is scheduled to begin in June 2016. Furthermore, another agreement was signed between Ethiopia and Djibouti to construct a pipeline to transport natural gas from the Ethiopian region of Ogaden to Djibouti. The Chinese company GCL-POLY GROUP won the bid that costs over U$3bn.
Tanzania: Non-tariff barriers a burden, minister admits (IPPMedia)
Speaking at the launch of the One Stop Border Post at Holili and Taveta on the Tanzania-Kenya border, Dr Mahiga said the multiplicity of checkpoints and other obstacles were serious issues that ought to have been resolved long ago. “I must admit that Tanzania had become an obstacle in getting certain goods and services to other neighbouring countries. For instance, the port of Dar es Salaam was one of the biggest NTBs,” Mahiga said. Flanked by East African Community secretary general Richard Sezibera, the minister described the Dar es Salaam port - which serves as an entry and exit point for imports and exports from countries like Rwanda, Burundi, DRC and Zimbabwe - as being overstretched. [Kenya-Tanzania border post to boost trade between states (The Standard])
CTI explains why local manufacturers are uncompetitive against imports (IPPMedia)
Delays in cargo release and Tanzania Revenue Authority's verification process at the Dar es Salaam Port are some of the obstacles the country’s manufacturers cite as factors that make them unable to compete. This was according to the recent Confederation of Tanzania Industries members’ survey results for 2015. In fact, when manufacturers were asked on time taken to clear cargo from the Dar es Salaam Port, the survey results revealed that 32% of 57 respondents to this question spent between 7 and 14 days to have their cargo completely cleared.
AfDB country strategy papers: Tanzania 2016-2018
Extract: These complementary interventions and investments along the Central and North-South corridors will support the country’s objective of using the regions in which the Bank’s projects will be located as catalysts for local economic development. This holistic development approach is expected to foster inclusive growth. Improvements in agriculture productivity will notably benefit women who currently account for the largest share of the agricultural labour force. Urban transport will also be supported to decongest Dar es Salaam to ease movement in and out the city as well as improve access to the seaport, further supporting economic inclusion. Investment in ports will aim to facilitate expansion in economic activity through trade and regional integration thereby supporting job creation and economic transformation. [Seychelles country strategy paper 2016-2018]
Angola produces more oil in 2015 but revenues fall 34% (MacauHub)
In 2015 Angola produced over 649 million barrels of oil, a 6% increase year on year and a daily average of 1.779 million barrels, Angolan state oil company Sonangol said Thursday in a statement. Natural gas production in turn fell 8% to 507,000 tons, in a year in which the natural gas processing plant in Soyo, in the north, remained at a standstill. Sonangol posted income of 2.29 trillion kwanzas (US$14.38 billion), “lower by about 34 percent against total revenue in 2014,” a drop that was partially offset by higher income from refining operations, distribution and sale of fuels.
Botswana: Anglo shuts down Botswana coal operations (Mmegi)
Anglo Coal Botswana managing director, Mothibedi Mothibedi told BusinessWeek that it would cease works at its 700 million tonnes Mmamabula coal fields and close offices in Botswana. “In line with this announcement, Anglo American will be making changes to the way it is structured, which includes the closure of certain offices, including Botswana. This will also see the company winding down all exploration and related activities in Botswana,” he said.
El Niño: SADC Consultative meeting outcomes
Short term: Member States and partners to establish El Niño specific coordination centre at the SADC Secretariat for this crisis. Member States and partners to establish logistics/transport task team to evaluate the available logistics capacity, procurement options, bottlenecks to free flow of food, coordinate and facilitate food commodity importation. Medium/Long term: Member States and partners to develop a regional resilience and M&E frameworks. Member States and partners to implement regional agricultural policies that promote production, productivity, competitiveness and improve access to markets and promote private sector participation.
COMESA signs collaborative pact with Great Lakes body (COMESA)
The MoU was signed on 25th February 2016 at the margins of the United Nations Private Sector Investment Conference in the Great Lakes Region, in Kinshasa, Democratic Republic of Congo. COMESA Secretary General, Mr Sindiso Ngwenya and the Executive Secretary of CEPGL Mr Herman Tuyaga signed on behalf of their respective organizations. Specifically both organizations have committed to work together in the areas of mutual interest including projects on trans-border trade, energy, agriculture, and infrastructure and also in the areas of peace and security. The two organizations also agreed to mobilize resources jointly to enable them to implement the projects.
COMESA seed mutual accountability workshop (COMESA)
Mr Marc Van Uytvanck, team leader, FoodTrade Eastern and Southern Africa, said the investment of US$1.8m will assist the Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA) to facilitate the domestication of harmonised seed trade regulations in the Eastern and Southern Africa. He added that FoodTrade through ACTESA will organize dialogues and activities with member states to promote and accelerate seed reforms at the national level in Zambia, Burundi, Malawi, Kenya, Uganda, Zimbabwe and Rwanda.
Kenya exports hit four-year high to Sh580bn (Business Daily)
Kenya’s exports last year grew by the largest margin in four years on increased orders from Uganda, Britain and US, offering crucial support to the shilling against the bullish US dollar. Official data shows that the country exported Sh580 billion worth of goods in 2015, up from Sh537 billion a year earlier, marking a growth of Sh43 billion, which is the highest since 2011 when exports rose by Sh102 billion. Uganda, the largest buyer of Kenyan goods like steel, paper and salt, stepped up its purchases from Nairobi to Sh60 billion in the review period from Sh48.6 billion. Orders from the US, mainly textiles and coffee, grew by Sh2 billion to Sh40.3 billion while Britain’s purchases rose by Sh4 billion to Sh40 billion.
Related: Flower sector earns Sh63b despite dip in export volumes (Daily Nation), Middle class appetite for imports ‘hurts growth’ (Business Daily)
India: FTAs have led to more imports than exports - Economic Survey (LiveMint)
The 42 free trade agreements signed by India so far have led to more imports than exports as the country has had to go for larger tariff reductions than its FTA partners because of relatively high tariffs, the Economic Survey 2015-16 said. “Analytical and other preparatory work must begin in earnest to prepare India for a mega-regional world,” it said. [Note: the Economic Survey and India's 2016-17 Budget can be accessed from here]
Related: Arun Jaitley could apply budget balm to record export slide (LiveMint), Indian Bilateral Investment Treaty: model text (Ministry of Finance)
G20: Finance Ministers and Central Bank Governors communiqué (Reuters)
Widespread, consistent and effective implementation of G20/OECD Base Erosion and Profit Shifting project is critical for a fair and modern international tax system. We reiterate our commitment to timely implementation of the BEPS project, and continue to monitor and address BEPS-related issues in order to ensure tax fairness and a level playing field. To ensure a consistent global approach, we endorse the inclusive framework proposed by the OECD for the global implementation of BEPS project and encourage all relevant and interested non-G20 countries and jurisdictions, which commit to implement the BEPS project, including developing countries, to join in the framework on an equal footing. We support that the specific challenges faced by developing countries in BEPS implementation should be appropriately addressed under the framework.
OECD's 'Going for Growth' report is published
Remittances and integrity: how to exist in harmony (World Bank Blogs)
How do countries ensure that remittance service providers – who are often serving the world’s poorest people – mitigate their risk for abuse by money launderers and terrorist organizations? This important question is addressed by new Guidance from the Financial Action Task Force (FATF), the international standard-setting body for anti-money laundering and combating the financing of terrorism (AML/CFT).
Oby Ezekwesili: 'Ideologies don’t deliver results for the poor' (Premium Times)
Grieve Chelwa: 'It’s the economy stupid, N°3' (Africa is a Country)
Dianna Games: 'Struggling Egypt looks across the Sahara to Africa’s rich potential' (Business Day)
Namibia: Economic analysts welcome Schlettwein’s contractionary budget (New Era)
Egypt to sign soft loans of $575m with Japan, South Korea (Ahram)
East Africa Trade and Investment Hub: Senior Economic Policy Advisor position
UN appoints independent advisors to position UN development system for 2030 Agenda
tralac’s Daily News archive
Catch up on tralac’s daily news selections by following this link ».
SUBSCRIBE
To receive the link to tralac’s Daily News Selection via email, click here to subscribe.
This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 350 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome.
Related News
G20 to say world needs to look beyond ultra-easy policy for growth
The world’s top economies declared on Saturday that they need to look beyond ultra-low interest rates and printing money to shake the global economy out of its torpor, while renewing their focus on structural reform to spark activity.
A communiqué from the Group of 20 (G20) finance ministers and central bankers flagged a series of risks to world growth, including volatile capital flows, a sharp fall in commodity prices and the potential “shock” of a British exit from the EU.
“The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth,” said the communiqué, issued at the end of a two-day meeting in Shanghai.
“Monetary policies will continue to support economic activity and ensure price stability... but monetary policy alone cannot lead to balanced growth.”
Faltering growth and market turbulence have exacerbated policy frictions between major economies in recent months, and the statement also noted concerns over escalating geopolitical tensions and Europe’s refugee crisis.
The reference to “Brexit” had not been included in earlier versions of the text, according a senior official who had seen various drafts, but was added after British officials pressed for it. Britons will vote in June 23 referendum on whether to remain in the European Union.
“Our view is that it’s in the national security and economic security of the United Kingdom, of Europe and of the United States for the United Kingdom to stay in the European Union,” U.S. Treasury Secretary Jack Lew said after the meeting.
Volatility vs fundamentals
The G20 ministers agreed to use “all policy tools – monetary, fiscal and structural – individually and collectively” to reach the group’s economic goals.
Christine Lagarde, managing director of the International Monetary Fund, said she sensed renewed urgency among the group’s members for collective action, warning that without it there was a risk that the recovery could derail.
But there was no plan for specific coordinated stimulus spending to spark activity, as some investors had been hoping after markets nosedived at the start of 2016. Over the course of the two-day meeting in Shanghai comments by policymakers made clear the divergence of views on the way forward.
Finance chiefs had agreed that “the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy”, the communique draft said.
To pep up the global economy, faster progress on structural reforms “should bolster potential growth in the medium term and make our economies more innovative, flexible and resilient”, it said.
“We are committed to further enhancing the structural reform agenda,” it added.
Divisions have emerged among major economies over the reliance on debt to drive growth and the use of negative interest rates by some central banks, such as in Japan.
Germany had made it clear it was not keen on new stimulus, with Finance Minister Wolfgang Schaeuble saying on Friday the debt-financed growth model had reached its limits.
“It is even causing new problems, raising debt, causing bubbles and excessive risk taking, zombifying the economy,” he said.
The G20, which spans major industrialized economies such as the United States and Japan to the emerging giants of China and Brazil and smaller economies such as Indonesia and Turkey, reiterated in the communique a commitment to refrain from targeting exchange rates for competitive purposes, including through devaluations.
They pledged to “consult closely” on foreign exchange markets.
Currency concerns
Jeroen Dijsselbloem, chairman of euro zone finance ministers, said G20 members had agreed to inform each other in advance about policy decisions that could lead to devaluations of their currencies.
G20 host China used the meeting to try to allay concerns about the world’s second-biggest economy, and Beijing’s ability to manage it, that have grown since a market rout and a surprise devaluation last August.
“Monetary policy will probably have to be kept appropriately loose, even though people have realized that its role cannot replace fiscal policy,” said China’s Finance Minister Lou Jiwei.
Chinese policymakers reiterated pledges not to devalue the yuan again, and Premier Li Keqiang told the G20 opening session on Friday there was no basis for continued depreciation of the yuan.
But there appeared to be concerns that some members may seek a quick fix to domestic woes through a weaker currency.
Japan implemented negative interest rates this month to spur growth, and Bank of Japan governor Haruhiko Kuroda said he had “fully gained (their) understanding” from G20 ministers about the BOJ’s thinking with regard to negative rates as a tool for escaping the deflation that has dogged its economy for years.
Japanese Finance Minister Taro Aso said he had urged China to carry out currency reform and map out a mid-term structural reform plan with a time frame.
“Chinese authorities need to present a mid-term structural reform plan with concrete schedule and a package of measures to stabilize yuan, based on recognition that communication between Chinese authorities and markets has caused market volatility and capital outflows,” he told reporters.
G20 Finance Ministers and Central Bank Governors Meeting: Communiqué
26-27 February 2016, Shanghai, China
-
We met in Shanghai to review and address key global economic challenges and move forward on the policy agenda for the Hangzhou Summit. The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth. Downside risks and vulnerabilities have risen, against the backdrop of volatile capital flows, a large drop of commodity prices, escalated geopolitical tensions, the shock of a potential UK exit from the European Union and a large and increasing number of refugees in some regions. Additionally, there are growing concerns about the risk of further downward revision in global economic prospects. While recognizing these challenges, we nevertheless judge that the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy. We expect activity to continue to expand at a moderate pace in most advanced economies, and growth in key emerging market economies remains strong. However, we agree that we need to do more to achieve our common objectives for global growth. We will continue to monitor global economic and financial developments closely.
-
Over the last several years, the G20 has made important achievements to strengthen growth, investment and financial stability. We are taking actions to foster confidence and preserve and strengthen the recovery. We will use all policy tools – monetary, fiscal and structural – individually and collectively to achieve these goals. Monetary policies will continue to support economic activity and ensure price stability, consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth. Our fiscal strategies aim to support the economy and we will use fiscal policy flexibly to strengthen growth, job creation and confidence, while enhancing resilience and ensuring debt as a share of GDP is on a sustainable path. We are also making tax policy and public spending as growth-friendly as possible, including by prioritizing expenditure in favor of high-quality investment. We reaffirm the role of mutually-reinforcing macroeconomic and structural policies to buttress our efforts to achieve strong, sustainable and balanced growth. Faster progress on structural reforms should bolster potential growth in the medium term and make our economies more innovative, flexible and resilient. To enhance our readiness to respond to potential risks, we will continue to explore policy options that the G20 countries may undertake as necessary to support growth and stability. We reiterate that excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will consult closely on exchange markets. We reaffirm our previous exchange rate commitments, including that we will refrain from competitive devaluations and we will not target our exchange rates for competitive purposes. We will resist all forms of protectionism. We will carefully calibrate and clearly communicate our macroeconomic and structural policy actions to reduce policy uncertainty, minimize negative spillovers and promote transparency.
-
We reiterate the importance of raising actual output as well as the essential role of structural reforms in boosting productivity and potential output. We will prioritize and put special emphasis in 2016 on the implementation of our adjusted national Growth Strategies with a view to achieving the objective of 2 percent additional output by 2018. Building on past country- specific commitments, we are committed to further enhancing the structural reform agenda, including by developing a set of priorities and guiding principles as a reference for G20 reform efforts, as well as by creating an indicator system to further improve assessing and monitoring of the progress of structural reforms and their adequacy to address structural challenges, taking into account the diversity of country circumstances. This enhanced structural reform agenda will be incorporated into the existing work stream under the Framework for Strong, Sustainable and Balanced Growth. In order to enhance the efficiency of our efforts, we will combine our investment strategies with growth strategies and remain committed to their timely and effective implementation to accomplish our goals. We will review the combined strategies, including through enhanced peer review, and will adjust them as necessary to ensure progress towards our collective growth ambition and our overarching objective of strong, sustainable and balanced growth. Recognizing the importance of trade and investment for growth and their recent weakness, we will explore potential policy measures in these areas, with support of the IOs. We will continue to take steps to promote greater inclusiveness and reduce excessive global imbalances.
-
We reaffirm our commitment to advancing the investment agenda with focus on infrastructure both in terms of quantity and quality aspects. We look forward to the Multilateral Development Banks (MDBs) to present concrete actions by July to optimize their balance sheets as agreed in Antalya. Given the unique role of MDBs in promoting infrastructure development and considering the MDB’s mandate on promoting infrastructure investment and poverty reduction, as called for in the Addis Ababa Action Agenda, we encourage MDBs to formulate quantitative ambition for high-quality projects and take joint actions to demonstrate their commitment to infrastructure investment to attract new sources of long-term investment financing, including by catalyzing private sector funding, enhancing cooperation among existing and new MDBs, promoting multi-partite cooperative co-financing models and supporting works concerning project preparation. Strengthening connectivity is the key to maximize the positive spillovers of national infrastructure and create more investment opportunities. We will launch a global infrastructure connectivity alliance initiative to enhance the cooperation and synergy of infrastructure programs. We support the development of a guidance note on recommended policy steps that could contribute to diversified financing instruments for infrastructure and SMEs with special attention to equity financing by promoting capital markets development, engaging institutional investors, encouraging implementation of G20/OECD corporate governance and SME financing principles and promoting infrastructure investments as an asset class.
-
A stable and resilient international financial architecture is a key element to foster strong, sustainable and balanced growth as well as financial stability. We endorsed the work program of the International Financial Architecture Working Group (IFAWG) aimed at promoting a smooth functioning and orderly evolution of the international monetary system (IMS), informed by the IMF’s stocktaking of the IMS. We welcome the entry-into-effect of the 2010 IMF Quota and Governance reforms. We support the timetable for completing the IMF’s 15th General Review of Quotas, including a new quota formula, by the 2017 Annual Meetings, and reaffirm our commitment to a strong, quota-based and adequately resourced IMF. We support the World Bank Group (WBG) to implement its shareholding review according to the agreed roadmap and timeframe, with the objective of achieving equitable voting power over time. We will continue to promote the orderliness and predictability of sovereign debt restructuring processes and strengthen debt sustainability frameworks. Capital flows are a central feature of the international monetary system. Given the current development in the global economy, we will better monitor capital flows, including more timely identification of risks, and take stock of and review policy tools and frameworks as appropriate to address challenges arising from large and volatile capital flows, drawing on country experiences. We stress the importance of an adequate and effective global financial safety net (GFSN) and look forward to discussing the IMF’s analysis on the GFSN architecture in April. We welcome the completion of the IMF’s 2015 Review of the Method of Valuation of the Special Drawing Rights (SDR) and support further work to examine the possible broader use of the SDR and on local currency bond market.
-
We remain committed to timely, full and consistent implementation of the agreed financial reforms, including the Basel III and total-loss-absorbing-capacity (TLAC) standard. To this end, we encourage national authorities to strengthen cross-border cooperation, including in implementing effective cross-border resolution regimes and over-the-counter derivatives reforms, and to defer to each other when it is justified, in line with the St. Petersburg Declaration. We support the work by the Basel Committee to refine elements of Basel III framework to ensure its coherence and maximize its effectiveness without further significantly increasing overall capital requirements across the banking sector. We will continue to monitor and assess reform implementation and effects, including to address any material unintended consequences, including for emerging market and developing countries. We support the work underway to improve the assessment methodology for global systemically important insurers and the further progress in developing the Insurance Capital Standard according to the agreed timeline. We strongly encourage implementation of the agreed CPMI-IOSCO Principles for Financial Market Infrastructures (FMIs), and further strengthening the regulation and oversight of FMIs. We look forward to further progress in identifying and addressing gaps related to resilience, recovery planning and resolvability of central counterparties (CCPs), including cooperation arrangements for CCPs that are systemic across multiple jurisdictions. We continue to closely monitor, and if necessary, address emerging risks and vulnerabilities in the financial system, including those associated with shadow banking, asset management and other market-based finance. We welcome the work by the BCBS and IOSCO on criteria for identifying simple, transparent and comparable securitizations. We will review holistically changes in market liquidity and impact on market stability, and we will consider policy measures if necessary. We welcome the ongoing work by the IOs, as set out in the FSB work plan on the decline in correspondent banking services, and look forward to accelerated progress in assessing and addressing this issue as appropriate. We welcome the planned work by the FSB, IMF and BIS to take stock of experiences and potential lessons with macro-prudential frameworks and tools, and report back to us by our meeting in July. We remain committed to strengthen the financial inclusion agenda. We ask the Global Partnership for Financial Inclusion (GPFI) to produce a framework for implementing the G20 SME Finance Action Plan, and explore developing a set of high-level principles on digital financial inclusion, and improving data collection and indicators.
-
Widespread, consistent and effective implementation of G20/OECD Base Erosion and Profit Shifting (BEPS) project is critical for a fair and modern international tax system. We reiterate our commitment to timely implementation of the BEPS project, and continue to monitor and address BEPS-related issues in order to ensure tax fairness and a level playing field. To ensure a consistent global approach, we endorse the inclusive framework proposed by the OECD for the global implementation of BEPS project and encourage all relevant and interested non-G20 countries and jurisdictions, which commit to implement the BEPS project, including developing countries, to join in the framework on an equal footing. We support that the specific challenges faced by developing countries in BEPS implementation should be appropriately addressed under the framework. We remain committed to implementing the standard for information exchange on request as well as for Automatic Exchange of Information (AEOI), and call on all financial centers and jurisdictions to do so by 2017 or at the end of 2018. We reiterate our call for all countries to join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and look forward to the progress report by the Global Forum. We welcome the different existing initiatives aimed at building capacity for developing economies to their needs on tax issues, including the Addis Tax Initiative, the Tax Administration Diagnostic Assessment Tool, and the Tax Inspectors Without Borders. In this connection, China would make its own contribution by establishing an international tax policy research center for international tax policy design and research as well as technical assistance to developing economies. We also welcome the new proposal of developing a tax platform jointly by the IMF, OECD, UN and WBG, and call on them to recommend mechanisms to help ensure effective implementation of technical assistance programs, and recommend how countries can contribute funding for tax projects and direct technical assistance, and report back with recommendations at our July meeting. We recognize the role of tax policy in achieving sustainable economic growth, and will explore this issue further at the G20 Tax Symposium to be held in July. We recognize the significant negative impact of illicit financial flows on all our economies, and we continue to take forward the work of the G20 on this theme.
-
We are resolved to combat decisively terrorist financing. We will intensify our efforts to tackle all sources, techniques and channels of terrorist financing and will enhance our cooperation and exchange of information. We call on all countries to join us in these efforts, including through a swift implementation of FATF standards and provisions of the UN Security Council Resolution 2253 in all jurisdictions. We ask the FATF, working with the relevant IOs, to strengthen its work on identifying and tackling loopholes and deficiencies that remain in the financial system and ensure that the FATF standards are effective and comprehensive, and fully implemented. We call on the FATF to intensify its work on identifying, analyzing and tackling terrorist financing threats, the sources and methods of funding and the use of funds.
-
Recognizing the pressing environmental challenges and the importance of mobilizing green finance, we have established the G20 Green Finance Study Group (GFSG). We ask the GFSG to identify institutional and market barriers to green finance, and based on country experiences, develop options on how to enhance the ability of the financial system to mobilize private capital for green investment. The GFSG will collaborate with other G20 groups and other external initiatives as well as with the private sector. We expect the GFSG to deliver a synthesis report by our July meeting.
-
We welcome the adoption of the Paris Agreement on Climate Change and the commitments made by developed countries and international organizations and announcements made by other countries on climate finance, and call for timely implementation. Developed country Parties shall provide financial resources, including support provided through the Green Climate Fund, to assist developing country Parties with respect to both mitigation and adaptation, in continuation of their existing obligations under the United Nations Framework Convention on Climate Change (UNFCCC). Other Parties are encouraged to provide or continue to provide such support voluntarily. We reaffirm our commitment to implementing the 2030 Agenda for Sustainable Development.
-
We reaffirm our commitment to rationalize and phase out inefficient fossil fuel subsidies that encourage wasteful consumption, over the medium term, recognizing the need to support the poor. Further, we encourage all G20 countries to consider participation in the voluntary peer review of inefficient fossil fuel subsidy that encourages wasteful consumption.
Annex
Issues for further action
-
We request the Framework Working Group (FWG) to further work on the priorities and guiding principles as well as the proposed structural indicator system to secure delivery of the Growth Strategies, with an aim to submit policy papers on both topics for our review, and endorsement if appropriate, in our next meeting in April. We call on the IMF and the OECD to continue to provide technical support and further work on the enhanced structural reform agenda, including updating the policy papers based on the proposals by China, the IMF and the OECD and members’ feedbacks.
-
We ask the IMF, OECD and WBG to update the assessment of the implementation of key commitments in our growth strategies, implementation gaps, as well as of progress towards our collective growth ambition as defined in Brisbane, to provide technical support to our peer review and report back to us by our meeting in July.
-
We look forward to a progress report on the implementation of the MDBs’ Action Plan to Optimize Balance Sheets in July.
-
We look forward to a proposal of joint actions led by the WBG, together with other MDBs, to demonstrate the MDBs’ commitment to infrastructure development.
-
We look forward to a productive discussion in Singapore in April to promote global infrastructure connectivity.
-
We look forward to receiving the Global Infrastructure Hub’s (GIH) knowledge sharing report at our April meeting and to the Hub developing, in coordination with other IOs involved in PPPs, a knowledge sharing platform that will help improve global infrastructure connectivity and institutional capacity of developing economies in delivering bankable infrastructure projects.
-
We look forward to guidance note on recommended policy steps to diversify financial instruments for infrastructure and SMEs, and attract new sources of long-term financing including private investment with inputs by the OECD, and other IOs.
-
We welcome and support the implementation of the related G20/OECD Corporate Governance and SME financing Principles, and the G20 SME Finance Action Plan, and look forward to being updated on its progress at our next meeting, including assessment methodology of corporate governance principles.
-
We look forward to the report of the IMF and the FSB in the fall of 2016 on the second phase of the Data Gaps Initiative (DGI-II), including on the finalized action plans.
-
We look forward to further work on capital flows by the IMF, the BIS, the OECD, and other IOs and we look forward to their studies and reports.
-
We look forward to the IMF’s report to examine and reflect on the possible broader use of the SDR by July.
-
We look forward to the report by the IMF, in consultation with other parties, on the progress in implementing the enhanced collective action and pari passu clauses and further explore market-based ways to speed up their incorporation in the outstanding stock of international sovereign debt.
-
We look forward to the FSB’s second annual report on implementation and effects of regulatory reforms.
-
We ask the FATF to report back to us by our meeting in July on the update of implementation of its standards by jurisdictions worldwide and of FATF’s new Strategy on combating terrorist financing, as well as on the follow-up procedures that have been launched to accelerate implementation in those jurisdictions where weaknesses have been identified.
-
We ask for a report for our next meeting on the first stage of the work of the FSB’s task force on climate-related financial disclosures.
-
We request the Climate Finance Study Group (CFSG), based on the outcomes and towards the objectives of the 21st session of the Conference of the Parties to the UNFCCC (COP21), to continue its work in the areas as set out in its 2016 Work Program in accordance with the principles, provisions and objectives of the UNFCCC and report back to us in our July meeting.
Related News
Global economy urgently needs a stronger and more coherent policy response to promote robust and inclusive growth
Policymakers need to deploy broad-based reform plans that incorporate monetary, fiscal, and structural policies to stimulate persistently weak demand, re-launch productivity growth, create jobs and build a more inclusive global economy, according to the OECD’s annual Going for Growth report.
Going for Growth 2016 offers a comprehensive assessment of how government policy reforms affect economic performance and their citizens’ well-being. It identifies new priorities to revive growth and underscores the importance of synergies among policies in designing reform programmes.
This year’s edition of Going for Growth shows that a slowdown in the pace of reforms first observed in the 2013-14 period continued during 2015, notably in advanced economies, but also in emerging ones. New reforms are aimed at improving educational outcomes and lifting the labour force participation of women. But not enough is being done to boost innovation or streamline product and labour market regulation, which are critical aspects of today’s productivity and equity challenges.
“The worrying slowdown in the global economy calls out for an urgent and comprehensive policy response, drawing on all the monetary, fiscal and structural policy levers at governments’ disposal,” OECD Secretary-General Angel Gurría said.
“Given the breadth and evolving nature of the growth and inclusiveness challenges facing advanced and emerging economies, the slowdown in the pace of structural reforms is a serious concern. Greater ambition on structural reforms can help bring about better conditions for investment and innovation, leading to higher productivity, better quality jobs and a more inclusive approach to the pursuit of growth that benefits all segments of society.”
Going for Growth 2016 makes the case for prioritising growth-enhancing measures that can best support demand in the short term, combining structural policies targeted toward regulatory reform with investment in public infrastructure. “Today’s exceptionally low interest rates improve governments’ fiscal space, affording a unique opportunity to make investments in infrastructure that will boost demand, stoke growth and actually improve public finances,” Mr Gurría said. “Choosing the right projects, combined with structural reforms, will generate higher multipliers on economic activity. This can re-launch growth while lowering the debt-to-GDP ratio, opening additional space for policies aimed at creating a more inclusive society."
Presenting Going for Growth 2016 with Chinese Finance Minister Lou Jiwei, ahead of the G20 Meeting of Finance Ministers and Central Bank Governors taking place in Shanghai, Mr. Gurría said the report’s reform recommendations, tailored for each country, could boost growth in OECD and G20 countries alike. The recipe for reform varies by country, but the ingredients include improving product market competition, labour market flexibility, financial market resilience and tackling barriers to cross-border trade and investment.
The Going for Growth analysis forms the basis of the OECD’s wider contribution to the G20 Framework for Strong, Sustainable and Balanced Growth. The OECD works with G20 countries to quantify their efforts to fulfil a pledge made during the 2014 Leaders’ Summit in Brisbane to boost their combined GDP by 2% over the coming five years, and to achieve their national growth strategy objectives.
Going for Growth 2016 notes that the pace of reforms has varied both across countries and policy areas. Among the highlights:
-
The slowdown in the pace of reform observed over the 2013-14 period has continued in 2015, even after taking into account measures that are in the pipeline but that have yet to be fully implemented.
-
In Europe, Southern European countries – in particular Italy and Spain – have more reform achievement than Northern European countries, which were less impacted by the global economic crisis.
-
Outside Europe, countries where a relatively high number of measures related to Going for Growth recommendations have been taken include Japan, among advanced economies, and China, India and Mexico, in the case of emerging economies.
-
Relatively more actions are being taken to lift the labour force participation of women and to improve educational outcomes, while fewer actions are observed in innovation policy, public sector efficiency or product and labour market regulation.
-
In countries where income inequality is a particular concern, the majority of reform actions taken would help to narrow the income distribution.
Restoring healthy growth: policies for higher and more inclusive productivity
A pickup in global growth remains elusive, almost eight years after the financial crisis erupted. The recovery in advanced economies is still muted, particularly in the euro area and Japan, while growth has slowed in emerging-market economies (EMEs). Trade and investment remain weak, while jobs and wage growth have been disappointing. Financial markets are increasingly volatile as capital searches for both yield and safety. Getting back to healthy and inclusive growth calls for urgent policy response, drawing on monetary, fiscal, and structural policies working together: On the one hand, demand policies alone will not restore sustainable growth; but on the other hand, policies to strengthen competition and innovation, spur job creation, and repair financial systems to fund investment will only yield results if there is enough demand.
This 2016 Going for Growth report underscores the importance of synergies among policies in designing policy packages. Policy coherence across a broad range of reform objectives such as product market competition, labour mobility and financial market robustness is critical to create an environment conducive to innovation and resource reallocation, which are crucial to reverse the widespread slowdown in productivity and the rise in inequality.
Productivity – a central ingredient in the pursuit of wellbeing – has been decelerating in a vast majority of countries, with the slowdown going back to around 2000, at least in advanced economies. While this may partly reflect measurement issues, a common set of unsettling trends lie behind the aggregate slowdown: the dispersion of productivity growth across firms within industries, the decline in the growth rate of investment in knowledge-based capital, and the reduction in the pace of business creation. These trends are outcomes from problems in the basic policy environment – market competition and innovation, labour market institutions, financial structure and robustness – which also contribute to unfavourable trends in income distribution.
In addressing the productivity and inclusiveness challenges, governments need to keep in mind the basic policies that underpin these developments, and hence the need for coherent policy packages. Start with narrowing the productivity gap across firms, which requires a better diffusion of innovations from leading to lagging firms. Since leading firms are mostly multinationals, the intensity of cross-border connections via trade, FDI, global value chains and the mobility of skilled labour is crucial for the diffusion of knowledge and technologies from these globalised “frontier” firms to national firms.
Giving international trade a fresh boost requires that recent multilateral agreements in this area be forcefully implemented but also that efforts be made to further reduce barriers in the form foreign ownership restrictions or preferential treatments of domestic suppliers with respect to public procurement, taxes and subsidies. In several EMEs – notably Brazil, India and Indonesia – barriers to infrastructure investment need to be addressed to significantly improve the transport and logistic services that underpin cross-border trade.
Next, consider improving knowledge diffusion and making the most of new technologies, which necessitates synergic investments by lagging firms in various forms of knowledge-based capital such as R&D, skills and organisational know-how. Despite the need to revive investment in knowledge-based capital, the incidence of innovation policy reforms appears to have steadily fallen in recent years, as documented in this report. Furthermore, for reforms in the area of innovation to pay off, firms need the right incentives to strive for the development of new and better-quality products at lower costs. Strong product market competition provides such incentive. In this regard, the decline in business start-ups in advanced economies could be a sign that barriers to entry, including through the financial system, have been creeping up and hence that the strength of competition is eroding.
Re-examination is needed of competition policy, bankruptcy legislation and product market regulations to facilitate entry and exit, and to provide a level playing field between new firms and incumbents. As emphasised in this report, pro-competition reforms are particularly needed in services where the scope for both job creation and productivity gains remains large. This is especially true for Germany, Japan and Korea where the gap in productivity between services and manufacturing is the largest among advanced economies, but also for China as the economy goes through a challenging rebalancing from manufacturing to services.
Deeper global integration and the growing reliance on intangible forms of capital stresses the importance of collective policy approaches in the areas of competition law enforcement, regulatory harmonisation, basic research and the taxation of mobile capital. One major achievement in 2015 has been the global agreement on a list of measures to limit tax avoidance by multinationals through the so-called Base Erosion and Profit Shifting (BEPS) action plan elaborated under the auspices of the G20 and the OECD.
In addition to fostering competition, product market reforms also facilitate the reallocation of resources from low- to high-productivity firms. The efficiency of resource allocation would be further enhanced with measures to reduce barriers to labour mobility, notably those linked to housing markets. In turn, to ensure that resource reallocation truly serves wellbeing, workers need to be better equipped and offered real opportunities to adapt skills. Adult learning programmes should thus focus more strongly on skills complementarity with technological progress so as to help to reduce skills mismatch and to facilitate adaptation to the rapid change in the nature of tasks associated with specific jobs. Improving the matching of skills to jobs raises productivity and reduces inequality.
Sustained growth and job creation are the best ways to improve income distribution, since the low- income and less-skilled bear the brunt of economic downturns. A challenge for several advanced economies – in particular those facing persistently high unemployment such as France, Italy and Spain – is to shift social protection from specific jobs to individuals so as to better support the process of jobs and firms turnover that underpins dynamic, growing economies. Reforms in this area will help to improve job opportunities for youth and low-skilled workers, particularly hard hit by unemployment. For emerging economies, stronger social protection is needed to reduce informality and inequality, while fostering domestic consumption.
Strong employment growth is critical to ensure that growth benefits all segments of society, but it is not sufficient. In several countries, a large and rising share of the growth benefits have accrued to high-income households, while income at the bottom has been stagnant for many years. In the United Kingdom and in particular the United States, reforms to provide better access to high-quality education for students from disadvantaged backgrounds combined with measures to make the tax system more efficient and equitable would help to make growth more inclusive. In some countries such as Italy and Korea, household income has not kept up with GDP gains over the past two decades. Chapter 3 of this report explores the channels through which the income generated through GDP is transmitted to households.
Given the breadth and evolving nature of the growth and inclusiveness challenges facing advanced and emerging economies, the slowdown in the pace of structural reform documented in this report is deeply concerning. While the pace of reform should be accelerating to restore sustainable and equitable growth, the pace of reforms appears to have steadily declined since 2011-12. While some countries have made considerable efforts, many have taken very little action and countries with ambitious reform programmes, such as in India, Japan and Turkey face significant political challenges and the risk of losing momentum. Progress has been made on the G20 action plan to raise reform efforts, but much remains to be fully implemented.
Given the weak demand environment, structural reform packages that promote productivity should focus as well in design on maximising short-run growth gains. Chapter 2 of this report reviews the issues and evidence on the impact of reforms introduced in a difficult economic conjuncture for their outcomes in terms of both productivity and income distribution. Reform strategies that put more weight on shifting the composition of public spending towards investment, facilitating the entry of new firms in services, and reducing barriers to labour mobility are most likely to boost activity in the short term, with the support of demand policies and a repaired financial sector. More vigorous reform efforts from euro area countries with a large current account surplus would also help to ensure that the current growth pick-up in that region does not succumb to internal divisions and external headwinds. All countries contributing collectively to reform efforts and to supportive demand improves the prospects for a return to higher productivity and more inclusive growth both at home and in the global economy.
Catherine L. Mann
OECD Chief Economist
Related News
Socioeconomic Profile of West Africa in 2015 and Prospects for 2016
The Economic Commission for Africa (ECA) report on the socioeconomic profile for West Africa is submitted to the Intergovernmental Committee of Experts for its recommendations on development strategies and policies likely to contribute to the economic and social development of the countries in the subregion.
The present report analyses the economic situation in 2015 and the prospects for 2016 for the West Africa region. It includes a thematic section on ECA country profiles, which is a new reference publication designed to support West African countries embarking on the structural transformation of their economies.
According to the October 2015 projections of the Department of Economic and Social Affairs (UN-DESA), global economic activity is expected to dip slightly in 2015, with an expected growth rate of 2.3 per cent, down from 2.6 per cent, in 2014. It is likely that this trend stemmed from the growth rate of the top two economies in the world in 2015, namely the United States of America (2.4 per cent) and China (6.8 per cent), as well as the continued upswing in the euro zone (1.7 per cent). The year 2015 was characterized by expected poor performance by some transition and emerging economies, such as Russia (- 3.8 per cent) and Brazil (-1.1 per cent).
On the African continent, economic activity is likely to firm up, with an expected growth rate of 3.7 per cent in 2015, up from to 3.1 per cent in 2014.
Growth declined steadily in the West Africa region, at an expected rate of 4.4% in 2015, compared to 5.7 per cent in 2014. The subregion came second, behind East Africa, expected to post a growth rate of 6.2 per cent in 2015, down from 7 per cent in 2014.
DESA projections for 2016 show a more sustained activity, globally (3 per cent), and for the United States (2.6 cent), the euro zone (2.2 per cent) and Africa (4.4 per cent). The ECOWAS subregion experienced the same trend, with a more sustained growth rate of 5.2 per cent. While growth estimates and projections for the subregion continue to be favourable, things will slow down, with the growth rate averaging 4.8 per cent over the period 2015-2016, compared to nearly 6 per cent over the period 2010-2014.
This situation partly stems from downward fluctuations of primary commodity and oil prices, which, in early December 2015 reached an all-time low of $40 per barrel. With the end of the embargo on Iran, the country is expected to add over 500,000 barrels per day to the already excess supply. These fluctuations are also due to the slowdown in the economy of China, one of the subregion’s major clients and suppliers, with an expected growth rate of 6.8 per cent in 2015, a first, in nearly 10 years. The other factors likely to affect economic performance in the region include risks of sociopolitical instability and terrorism.
Added to these constraints are structural trends of growth sustained by the performances of low-skilled, labour-intensive sectors, such as primary commodities and services. Despite the positive movements noted in several countries, the agricultural sector, which engages nearly 60 per cent of the working population of the subregion, continues to be characterized by low productivity and high dependence on the weather. For the secondary sector, the poor performance of the manufacturing sector, evaluated at less than 10 per cent of the subregion’s GDP, has led to limited generation of value added and productive employment.
This configuration, which reflects the dire need for the economies of the subregion to move toward structural transformation, justifies the choice of the theme of the present report on the ECA country profiles. Indeed, this new publication aims to provide the countries of the West Africa subregion with an analysis of its economic and social situation, with indices, such as the African Social Development Index (ASDI), the African Gender Development Index (AGDI) and the Africa Regional Integration Index. This diagnosis will rely on comparative priority national data sources to meet the needs of decision-makers and other users of the research sector and non-State stakeholders. The approach recommended will entail introducing mechanisms for data sharing, knowledge exchange and policy dialogue and capacity building, in particular in the areas of statistics and development planning.
This report has been prepared against this backdrop on the economic profile of West Africa in 2015 and prospects for 2016. The current edition is divided into two parts. The first provides a review of the international economic environment, a subregional situation analysis and risks and prospects for 2016. The second part of the report provides the theme for the ECA country profiles. Lastly, the report makes recommendations on policies likely to accelerate the dynamics of the economic and social development of the subregion.
Economic situation of West Africa in 2015 and prospects for 2016
Growth
In 2015, growth in West Africa was 4.2 per cent, down from 6.1 per cent in 2014. This drop in regional growth resulted mainly from the fall in primary commodity prices, in particular oil. The sharp drop in the price of oil, which lost over half of its value in under a year, has highlighted the fragile nature of the foundations of West Africa’s growth, which is highly dependent on primary commodity exports. A slowdown in the pace of activity is observed in most ECOWAS countries.
Economic growth disparities do exist, however, among the countries. Côte d’Ivoire (9.5 per cent), the Gambia (7 per cent), Senegal (5.4 per cent), Guinea Bissau (4.7 per cent) and Burkina Faso (4.4 per cent) are expected experience higher economic growth in 2015, compared to 8.5 per cent, 0.5 per cent, 4.7 per cent, 2.9 per cent and 4 per cent respectively in 2014. Togo (5.8 per cent) and Benin (5.2 per cent) recorded a slight downturn in economic activity compared to 2014, and to a lesser extent, Mali (4.9 per cent) and Niger (4.4 per cent), which experienced relatively solid growth in 2015.
The negative effects of the decline in oil prices should affect oil-exporting countries such as Nigeria, and to a lesser extent, Ghana. The GDP growth rate of Nigeria is expected to drop to 4 per cent in 2015, down from 6.3 per cent in 2014. For Ghana, subdued economic activity led to a 0.5 percentage point drop from 2014, to 3.5 per cent.
The countries affected by the Ebola epidemic did not fare very well. Guinea and Liberia were finding it difficult to rise from the ashes in the aftermath of the serious health crisis, which affected the social and production systems of the two countries. Their growth rate in 2015 was 0.9 per cent for each country, down from 1.1 per cent and 0.7 per cent respectively in 2014. For Sierra Leone, the effect of the Ebola epidemic on economic activity was even more intense. The GDP growth rate was -21.5 per cent in 2015, compared to 4.6 per cent in 2014. This decline stemmed from the closing down of two iron and ore manufacturing plants, following the Ebola epidemic.
Outlook and risks in 2016
Outlook
Despite the Ebola epidemic, West Africa maintained a relatively steady growth rate of 4.2 per cent in 2015. In 2016, this growth is expected to firm up to 5.2 per cent (UN-DESA 2015), despite a downturn in economic activity in Nigeria in the first half of 2015, because of uncertainties surrounding the elections and the subsequent political transition, fuel and power shortages, rise in import costs and consolidation of public finance, which hampered the non-oil sectors. That said, while the fall in oil prices eased their energy import bills, other low-income countries, such as Burkina Faso and Sierra Leone were hard hit by the decline in the prices of their major export products. The economy of Sierra Leone is expected to decline by 20 per cent, as the closing down of the two major ore manufacturing companies has exacerbated the impact of the Ebola crisis.
The average inflation rate in the ECOWAS area should increase slightly to 8.4 per cent in 2016, up from 8.3 per cent in 2015. The lowest levels of inflation should be observed in the UEMOA area, where the average inflation rate could be 1.63 per cent in 2016, partly because of the drop in oil prices. Ghana, for its part, is expected to maintain double-digit inflation at 12.5 per cent, mainly under the effect of past currency depreciations and fuel price adjustments.
The situation of public finances in 2016 would remain fragile because of the priority given to public investment and security expenditure for the social sectors and infrastructures, in a context where little can be done to contain the fiscal pressure. The overall budget balance, including grants, and the non-grant overall balance should settle at 3.3 per cent of GDP and 3.9 per cent of GDP for the entire Community in 2016 (IMF, 2015). For UEMOA, the deficits of the two balances are expected to be 3.7 per cent of GDP and 6.6 per cent of GDP respectively.
Security conditions, which are still difficult in some countries of the Sahel (especially Mali and Niger) and the north of Nigeria, will continue to be major risks for the economic outlook for 2016.
Risk analysis
The present analysis is on the performances of West Africa, in terms of the indicators and rankings for the business environment, good governance and human development.
Among the 10 economies, which have significantly improved their business climate after embarking on three reforms at least are Senegal (153rd) and Benin (158th). Significant improvements have been observed in Côte d’Ivoire (142nd), Togo (150th) and Niger (160th) (World Bank, Doing Business 2016: Measuring Regulatory Quality and Efficiency).
Despite the clear improvements, the governments of West Africa should continue to reduce the chasm separating them from best practices in many major dimensions, such as the ease of doing business, by increasing reliable access to electricity and setting up an efficient trade dispute settlement system.
With regard to governance assessments in 2015, according to the Mo Ibrahim Foundation, West Africa ranked second, after Southern Africa, with a score of 52.4 on a scale of 100, and was the area, which progressed the most. Again in 2015, three countries, which performed well in the region featured among the top 10. They are Côte d’Ivoire, Senegal and Togo. However, good governance remains a challenge in the area, where several countries are poorly ranked for overall governance.
In terms of human development, with an average development index of 0.46 for West Africa, most of the countries of the zone are in the category of countries with “low human development”. Only Cabo Verde and Ghana are ranked in the category of countries with “average human development” (UNDP, 2015).
The fight against corruption is of major concern to the West Africa subregion and has had mixed outcomes. According to Transparency International, Cabo Verde occupies a major place in West Africa, ranking 42nd, with a score of 57 against an average of 34.73 for West Africa, out of a total of 175 countries in 2014. Ghana and Senegal, which ranked 61st and 69th respectively out of 175 in 2014, improved their scores by 3 and 7 points respectively from 2012 to 2014.
ECA country profiles
Background and rationale
As part of the implementation of its repositioning strategy, started in 2012, which, among others, highlights Africa’s quest for growth that takes the continent’s priorities into account, and leads to structural transformation of its economies, ECA has included the country profiles in its new flagship publications.
This orientation aims at helping countries to refocus their efforts on macroeconomic and social policy, to achieve the structural transformation of Africa. It also aims at strengthening regional integration, development planning and economic governance; as well as mitigating the potential risks.
The ECA country profiles should provide periodic macroeconomic and social assessments of member States, with a view to making relevant and strategic recommendations to governments and regional organizations. They will also be a useful and unique source of comparative data for universities, investors, development practitioners, civil society and analysts.
One specific contribution of this knowledge tool is its solid methodology, based on joint data collection from credible national sources (including national statistics institutes, ministries of finance, economy and planning and central banks) and other stakeholders, as well as its periodic publication.
In addition to providing updated sectoral analysis, the ECA country profiles will monitor progress made under the Sustainable Development Goals, with the ultimate aim of supporting country efforts, to achieve the Africa Union 2063 vision on the socioeconomic transformation of Africa.
Following the adoption by the Conference of African Ministers of Finance, Planning and Economic Development, held in March 2013, in Abidjan, of the reference model to serve as basis for preparing the ECA country profiles, the pilot phase, with five country profiles, including that of Nigeria, was launched at the Conference of Ministers held in March 2015 in Addis Ababa.
By March 2016, 20 country profiles, including four from West Africa, are expected to be published. By 2017, the country profile exercise will be scaled up to cover the entire continent.
In that connection, and on account of the priority given to policy dialogue and the use of statistical data from national sources to feed the country profile analyses, ECA embarked on a process to strengthen cooperation with member countries, by building their development planning and national statistics systems capacities.
Value added of ECA profiles
The issue of value added of the ECA country profiles is relevant, because of the many country profiles developed by the international institutions, in addition to those produced regularly by the countries themselves and subregional organizations.
In this regard, the ECA profiles include all the indicators reviewed and most of the development carried out by these different profiles. They present analysis extended to the economic, social and environmental sectors. The profiles focus on a process and close collaboration of dialogue with countries.
The profiles will be based mainly on the need for information on their potential users and will take into account the basic data collected in conjunction with national and subregional statistics institutions. They will increasingly focus on essential areas for the development of the continent. These include regional integration, structural transformation processes, risk analyses and gender-related issues, and the quality of economic aggregate estimates and forecasts. These profiles have introduced comparative country performance analyses based on assessment indices for subregional integration, social development and gender.
Lastly, as the countries and organizations will continue working together on policies and statistics, the country profiles will help ECA and Africa to have a database and be up to date on relevant analysis indicators and independent and comparative technical assessments likely to better inform the actions of decision-makers.
Overall, the country profiles provide value added through:
-
A more collaborative dialogue and process on statistics and policies, making way for a data-sharing mechanism and capacity building of statistics systems and national and subregional planning
-
Use of reference indicators to address key issues related to regional integration and gender and social development
-
Assessment of forecasts on major economic analysis aggregates
-
Specific development on the dynamics of structural transformation in countries
-
Monitoring progress toward achievement of the Sustainable Development Goals for the purpose of drafting a subregional and continental comparative report
Format, structure and model of profile data
The format of the country profile incorporates the structure of major analysis indicators. It articulates the various parts of the document and specifies the standard graphs and tables. It is structured in five main parts:
-
Overview/Abstract
-
National and subregional context
-
Economic performance: Economic growth; Fiscal policy; Monetary policy; Current account; Capital and financial account
-
Social development: Population; Poverty and employment; Health; Education; Gender equality and policy
-
Thematic analysis/major policy challenges
The analysis carried out for the country profiles is based on data and empirical evidence from national sources. Exceptionally, data from international sources will be used if national statistics are not available. The main indicators to be reported and tables to be included in the documents are listed in the annex. On the introductory page of the document, there is also a brief table, which provides an introductory portrait on the characteristics and key indicators of the country at the institutional, economic, social and environmental level. The portrait also includes the ranking and position of the country in terms of international benchmarks.
Characteristics and value added of ECA country profiles
The overall content of the ECA country profiles is similar to the format and structures of the classic economic profiles prepared at the national level, as well as by subregional and international institutions. They do, however, have their peculiar features, as they include relevant indices for analysing the dynamics of social development, gender and regional integration. They include an analysis of the quality of economic forecasts. Lastly, the country profiles are innovative as they introduce a thematic analysis on the dynamics of structural transformation of African economies.
Analysis based on relevant indices
The analyses in the profile documents are often constrained by lack of relevant data to help capture some specific dimensions, such as regional integration, inclusive growth and social development, as well as gender development.
The ECA country profiles therefore include country assessments on these dimensions, based on empirical indices, prepared on the basis of dialogue and data gathered mainly in countries and from subregional organizations.
- Africa Regional Integration Index
The Africa Regional Integration Index is designed to determine how each African country is meeting its commitments to pan-African integration mechanisms such as Agenda 2063 and the Abuja Treaty. The index is prepared jointly by AfDB, the African Union Commission (AUC) and ECA. In the country profile analysis, the following dimensions have been covered: free movement of persons, trade integration, productive integration, (development of regional value chains), interconnections and regional infrastructures and convergence of macroeconomic policies.
More generally, the final version of the index will cover seven dimensions, through 43 indicators: (a) regional migration and job market; (b) trade integration; (c) economic policy; (d) productive integration; (e) financial integration and macroeconomic policy; (f) regional infrastructure and interconnection; and (g) social and cultural integration.
- Africa Social Development Index
One of the major challenges of the development and structural transformation policies underway in Africa is making growth more inclusive and equitable. In this respect, ECA has developed a specific monitoring mechanism to help identify the “causes” of exclusion in each country, map and assess the efficiency of the social policies and improve the quality, collection and disaggregation of data in the social sectors. The index assesses the exclusion factors related to health and nutrition, access to education, employment, revenue and life expectancy, according to six indicators: Neonatal mortality rate, percentage of malnourished under-five children, literacy rate of 15 to 24 year olds, poverty rate and life expectancy at birth.
Apart from focalizing on human exclusion, the index also has a disaggregated feature, as it takes the regional, national and local levels into account. It develops an approach based on the life cycle (birth, early childhood, formative years, access to employment, productive years and advanced years.
In terms of implementation, in December 2014, a first pilot phase for data collection and index calculation was finalized for five countries, including Senegal, for the West Africa subregion. Capacity building and extension workshops were organized for the countries of the five subregions from 2014 to 2015. Likewise, initiatives were undertaken among subregional organizations for ownership and implementation of the index. To that end, a session on capacity building was held for the UEMOA region in October 2015.
- African Gender and Development Index
The African Gender and Development Index (AGDI) was developed by ECA in 2004, as a monitoring and evaluation tool to measure the progress made by African countries in implementing regional and international instruments on gender equality and women’s empowerment. These instruments include the Dakar and Beijing platforms for action, the Convention on the Elimination of all Forms of Discrimination Against Women, and the Protocol to the African Charter on Women’s Rights.
Following its adoption, a first implementation phase of the index covered 12 African countries. The pilot phase was then scaled up to 14 other countries. In 2012, ECA started implementation of a third phase, extended to 13 African countries. AGDI is a composite index comprising two parts: The Gender Status Index (GSI) and the African Women’s Progress Scoreboard (AWPS). GSI measures relative gender inequalities, based on readily available quantitative indicators on education and health; incomes, time use, employment and access to resources; and formal and informal political representation. AWPS measures progress made in women’s empowerment and advancement.
In terms of prospects, by 2017, AGDI should be implemented in all African countries.
Related News
GSMA report shows registered mobile money accounts increased by 31 percent to 411 million in 2015
Mobile money industry continues to grow with more than one billion transactions processed in December 2015
The GSMA has released its fifth annual ‘State of the Industry Report on Mobile Money’. The report provides a quantitative assessment of the industry, drawing on the results of the annual GSMA Global Adoption Survey of Mobile Financial Services, data from the GSMA Mobile Money Deployment Tracker and insights on mobile money performance from the GSMA’s engagement with the industry over the last year.
“Mobile money is driving social and economic impact for millions of people in emerging markets,” said John Giusti, Chief Regulatory Officer, GSMA. “Over the last decade, mobile money has done more to extend the reach of financial services than traditional bricks and mortar banking were able to do over the last century. With 411 million mobile money accounts today, mobile is an increasingly critical platform for expanding financial inclusion globally.”
Growth in Services
Mobile money is changing the landscape of financial inclusion. With 271 services in 93 countries, mobile money is now available in 85 per cent of markets where less than 20 per cent of the population have an account at a formal financial institution. The report shows that the number of active mobile money users is growing rapidly year-on-year. As of December 2015, there were more than 134 million accounts active, with 30 services having more than one million active accounts and seven services with more than four million. Mobile network operators continue to play a leading role in delivering mobile money and expanding financial inclusion.
Key 2015 findings:
-
Mobile money is now available in 93 countries via 271 services.
-
More regulators are recognising the importance of creating an open and level playing field for mobile money services, although policy improvements are still required to ensure mobile financial services reach the full addressable market and achieve financial inclusion. In 2015, 51 of 93 countries have an enabling regulatory framework.
-
Industry collaboration continues to gather steam. Nearly one-quarter of respondents reported that they currently collaborate with other mobile money services, and a third reported they were planning to collaborate in the next 12 months.
-
Agents remain the physical backbone and face of mobile money to digitise and disburse cash (versus ATMs, banks, etc.), representing more than 90.5% of the cash-in and cash-out footprint. They also account for a significant cost of doing business, with an average of 54.4% of the top 10 providers revenues going to agent commissions.
-
Mobile money is changing the landscape of financial inclusion. In 2015, 37 markets had ten times more registered agents than bank branches and registered customer accounts grew 31% to reach a total of 411 million registered accounts globally.
-
Mobile money providers processed just over a billion transactions in December 2015, which is more than double what PayPal processed globally. Furthermore, active mobile money customers conduct an average of 11.2 transactions per month and maintain a median account balance of US$ 4.70, both increases from 2014.
-
While OTC continues to be a significant part of mobile money, the growth rate is slowing, relative to the growth of account adoption. In South Asia, home to especially high OTC activity, the 19% growth (year-on-year) of OTC is dwarfed by the 47% growth in registered accounts. This promising sign suggests that the increased focus of providers to migrate OTC customers is bearing fruit.
-
Cross-border transactions were the fastest growing product in 2015. Mobile money services offering International Money Transfer (IMT) saw the volume of cross-border remittances increase by 51.8%.
-
Fifteen providers reported revenues of more than US$ 1 million during the month of June 2015, up from 11 in June 2014. All but three of these providers are MNOs, and 12 have over one million active accounts on a 90-day basis.
-
The majority of mobile money providers recognise the need for long-term investment in their service. In 2015, three-quarters of respondents maintained or increased their investment in mobile money over the previous year.
While Sub-Saharan Africa continues to account for the majority of live mobile money services, more than half of the new services launched in 2015 were outside this region, primarily in Latin America and the Caribbean. Looking ahead, new mobile money services are expected to grow by as much as 50 per cent in Europe and Central Asia, as well as the Middle East and North Africa, demonstrating the significant traction that mobile money is gaining globally.
Continued Increase in Industry Collaboration
Mobile money providers recognise the critical role that industry collaboration can play in accelerating ecosystem growth. Nearly one-quarter of mobile money providers surveyed indicated that they are collaborating today and a third are planning to collaborate in the next 12 months. In 60 of the 93 markets where mobile money is available, there are two or more live mobile money services, and 35 markets have three or more live mobile money services. This provides continued opportunity for industry collaboration. As mobile money becomes a core service offering for MNOs, increased competition and customer demand has led to greater interest in the development of account-to-account interoperability. Currently operators in Indonesia, Madagascar, Pakistan, Rwanda, Sri Lanka, Tanzania and Thailand are interconnecting their services to allow their customers to send money directly to mobile wallets on other networks.
Introduction
Mobile money has done more to extend the reach of financial services in the last decade than traditional “bricks and mortar” banking has in the last century.
Today, there are 411 million mobile money accounts globally. Moreover, mobile money is available in 85% of countries where the vast majority of the population lacks access to a formal financial institution. This is an extraordinary achievement, demonstrating the power of mobile, underpinned by the important role mobile network operators have played in building this industry.
However, while the success to date is to be celebrated, the future success of mobile money depends on the industry’s capacity to adapt to a changing landscape. The findings from the 2015 report provide insights on both current and future trends, giving better visibility on what is changing and how to adapt. This year, we see four trends that will impact the industry’s evolution:
-
With an increasingly active customer base, further development of the mobile money ecosystem will be essential to diversify customer usage.
-
Operational foundations and agent management remain critical to digitise cash.
-
Increased investment will be key for providers to compete in an online world.
-
While mobile money is more accessible than ever before, there is still an opportunity to reach underserved segments, particularly women and rural consumers.
The full findings of the report provide a complete quantitative assessment of mobile financial services based on data collected though GSMA’s annual Global Adoption Survey on Mobile Financial Services. In 2015, 107 mobile money providers from 67 countries participated in this survey.
This publication focuses on the state of the mobile money sector and industry trends. Specifically, it looks at:
-
Availability and spread of mobile money services globally
-
Access to mobile money services, including both physical access through agent networks and technical access through the mobile interface
-
Adoption and customer activity levels, particularly how service providers drive scale
-
Usage and how the industry is focusing on usage that builds the ecosystem
-
Revenues and investment
The forthcoming analysis on the adoption of other mobile financial services: mobile insurance, mobile savings, and mobile credit, will be released in late spring 2016.
» Download the full 2015 State of the Industry Report on Mobile Money (PDF, 6.44 MB)
Related News
SADC Statement on Preparedness and Response to Impact of El Niño
SADC Consultative Meeting on Preparedness and Response to the Impact of El Niño on Agriculture, Food and Nutrition Security in Southern Africa
The SADC Consultative Meeting on Preparedness and Response to the Impact of the 2015/16 El Niño on Agriculture and Food and Nutrition Security in Southern Africa was held from 25th to 26th February 2016 in Johannesburg, South Africa, with support from the Food and Agriculture Organization of the United Nations (FAO) and United Nations World Food Programme (WFP).
The meeting was attended by senior officials from 13 SADC Member States namely; Angola, Botswana, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Zambia and Zimbabwe. The meeting was also attended by representatives from the humanitarian, development and donor communities, academia, NGOs, farmer unions and the private sector and the UN.
The meeting was opened by the representative of the Chairperson of SADC, Mr. Boweditswe Masilo. Also speaking at the official opening were Mr. Khathutshelo Neluheni of South Africa Department of Agriculture, Fisheries and Forestry, who welcomed delegates to South Africa; Mr Chris Nikoi, WFP Regional Director; Dr David Phiri, FAO Sub-Regional Coordinator for Southern Africa and Dr Thembinkosi Mhlongo, the SADC Deputy Executive Secretary for Regional Integration, who gave the keynote address.
The overall objective of the meeting was to create a common understanding of the effects of the current El Niño event from a regional and country perspective and agree on essential actions and commitments.
The meeting noted that the Strong 2015/16 El Niño has resulted in one of the driest rainfall seasons in over 35 years in Southern Africa. This will have the following implications:
-
low production of the 2015/16 agricultural production season leading to further declines in food production and regional cereal supplies.
-
higher prices of maize and other cereals, livestock and livestock products and other food products.
-
increased hunger and malnutrition given that approximately 70% of the region’s population are either directly or indirectly dependent on agriculture.
-
increased number of people vulnerable to food insecurity, particularly women, children and HIV affected people.
-
adverse effect on water, energy, education, and health sectors.
The meeting noted that SADC Member States, Cooperating Partners and the SADC Secretariat are undertaking a number of regional initiatives in disaster prevention, preparedness, mitigation and response. However, the magnitude of this disaster requires additional measures to reduce the impact of El Niño on lives and livelihoods of affected population and ensure that development gains registered in the past are not reversed. This may scuttle the global Sustainable Development Agenda.
The meeting acknowledged that the El Niño/La Niña phenomenon will continue to recur hence agreed on the immediate implementation of the following short, medium and long-term measures in a collective and coordinated manner to minimize the impacts on the communities.
In Short-Term
-
Member States to provide preliminary data on the number of people affected, cereal and other food deficits for planning and resource mobilization.
-
Members States with the support of cooperating partners to provide immediate relief to meet the food and non-food needs of more than 28 million vulnerable population who were affected by the previous poor season. The numbers are likely to increase in view of the current El Niño.
-
Member States to scale-up on-going social protection/safety nets and to provide capacity needs for support by international cooperating partners.
-
Member States and partners to increase budgetary allocation for disaster prevention, preparedness, mitigation and response.
-
Member States and partners to maintain accessible, affordable and quality basic social services for the most vulnerable.
-
Member States and partners to support male and female small-holder farmers to produce in the next production season.
-
Member States and partners to provide targeted support to the vulnerable people to assist in recovery and build resilience.
-
Member States and partners to establish logistics/transport task team to evaluate the available logistics capacity, procurement options, bottlenecks to free flow of food, coordinate and facilitate food commodity importation.
-
Member States and partners to ensure swift imports of food and essential non-food items into the region.
-
Member States and partners to establish El Niño specific coordination centre at the SADC Secretariat for this crisis.
Medium/Long-term
-
Member States and partners to develop a regional resilience and M&E frameworks.
-
Member States and partners to promote and scale-up appropriate technologies to adapt and mitigate against climate variability and change.
-
Member States and partners to scale-up provision of primary health care services, including nutrition, HIV treatment, water and sanitation in line with approved regional strategies.
-
Member States and partners to scale-up implementation and strengthen disaster risk reduction strategies for preparedness, mitigation, response and recovery.
-
Member States and partners to implement regional agricultural policies that promote production, productivity, competitiveness and improve access to markets and promote private sector participation.
-
Member States and partners to use risk financing instruments to manage disasters.
Related News
A year in the lives of smallholder farmers
There are an estimated 500 million smallholder farming households globally, who comprise a large proportion of the world’s poor living on less than $2 a day. In CGAP’s Smallholder Diaries, researchers met with 270 smallholder farmers in Mozambique, Pakistan, and Tanzania every two weeks for a year to understand their agricultural production, income, and expenses.
Put yourself for a moment in the shoes of a small-scale farmer in rural Mozambique. Two weeks before harvest, a massive flood wipes out your entire maize crop. You had been counting on this harvest for most of your annual income and much of your food. What would you do? How would you cope?
When Alina, a woman in northern Mozambique, lost all of her chickens and most of her ducks to disease in September 2014, her options were limited. She did not have access to a savings account, emergency credit or insurance on her farm to recoup her loss. Her only choice was to cut out meals, and from January through May she often went to bed hungry.
In addition to being ill-equipped to cope with health, financial, and agricultural risks, smallholder families in CGAP’s Smallholder Diaries study had little recourse when something went wrong. For example, Bertha, a widow with five children in Tanzania, lost about half her potential annual agricultural income when a local buyer never paid her for a sizeable amount of potatoes. They had not made a formal sales agreement, and she did not see a way to get this money or to avoid the same problem down the road.
There are an estimated 500 million smallholder households globally, amounting to upwards of two billion people. Mostly small-scale farmers cultivating less than five acres, they make up a significant portion of the world’s poor who live on less than $2 a day. That is why improving the lives of this huge group is a priority in efforts to end global poverty. Until now, however, very little was known about the financial lives of smallholders, making it unclear exactly how to help.
CGAP’s Smallholder Diaries fills some of this information gap and offers recommendations for the types of financial services, assistance, and training that could improve lives. The yearlong study, modeled on the methodology pioneered by researchers in the book Portfolios of the Poor, tracked the income, expenses, and agricultural production of 270 smallholder families in Mozambique, Tanzania, and Pakistan. In-depth interviews conducted every two weeks generated approximately 500,000 data points on the financial and agricultural lives of these families. But the results of the study go beyond the data.
This research opens a unique window onto the livelihoods of smallholder families and how they manage their money, providing insights into the struggles, risks, and trade-offs these households face on a daily basis. The rapport established between researchers and family members allowed rich details to emerge that could not have been captured in a one-time survey.
“It’s not just about the cash flows,” said Kristy Bohling, director at Bankable Frontier Associates and lead researcher on the Tanzania portion of the study. “It’s about these stories that relate to education, health, income-generating activities, and life in general.”
The CGAP Smallholder Diaries shows that farmers face distinct risks and challenges depending on their circumstances. Armed with the insights from this research, it is no longer practical to talk about smallholders in general terms. Financial service providers seeking to reach farmers as potential customers or others aiming to improve the lives of these families need to be more deliberate in their approach and create more tailored solutions.
Several market-specific solutions emerged from the research:
-
Almost two-thirds of the families in the Mozambique Smallholder Diaries lost significant portions of the crop to pests in storage. Improving post-harvest storage could be an opportunity to improve both their agricultural and financial lives.
-
The Smallholder Diaries households in Tanzania demonstrated the most interest in mobile money, but relatively few families actually used it over the course of the year. Relevant and accessible digital solutions in Tanzania need to catch up with interest in using them.
-
For the Smallholder Diaries families in Pakistan, their relationships with middlemen create both financial opportunities and challenges.
The data and insights generated from the CGAP Smallholder Diaries identify ways to improve the lives of this important and often marginalized group.
“Through projects like this, these villages will start seeing positive changes in the future,” said Gerald Mashishi, research manager at Digital Divide Data in Tanzania. “They will be able to decide even their future for their children.”
Related News
Key messages from experts’ session on agriculture in Douala: Central Africa urged to prioritise agribusiness
At a time when international oil prices have plummeted, the public finances and current accounts of countries that depend heavily thereon are deteriorating. Such is currently the plight of several Central African countries. This is also why the Economic Commission for Africa (ECA) reiterates the need for active engagement in diversification and structural transformation of the economies of the sub-region and of the entire African continent.
Central Africa urged to prioritise agribusiness
In the context of a sharp decline in the price of crude oil, Central Africa must capitalise on the diversification of its economies via the transformation of its agricultural products. This was the key message from Cameroon’s Minister Delegate in the Ministry of the Economy, Planning and Regional Development – Mr Yaoba Abdoulaye – as he opened the 32nd session of the Intergovernmental Committee of Experts (ICE) of Central Africa, convened in Douala, Cameroon, by the United Nations Economic Commission for Africa (ECA).
The three-day meeting, held under the theme: “Harnessing the agricultural potential of Central Africa for food Security and the Structural Transformation of the Sub-region” provides experts from the zone the opportunity to reflect on current and emerging development issues in order to make recommendations for the harmonisation and coordination of economic and social policies in Central Africa.
While hailing ECA’s choice of the session’s theme as timely, Mr Yaoba Abdoulaye intimated that faced with a “contingency that weakens economies of our countries, and in order to mitigate their continued vulnerability vis-à-vis fluctuations in international commodity prices, it should seek solutions that some might see as alternatives, but which would be the real bedrock of the development of our sub-region namely – agriculture. "
On a similar note, the Director of the Sub-regional Office for Central Africa of ECA – Mr Emile Ahohe – argued that “commodity-based industrialisation, the diversification and structural transformation of our various economies, which have constituted the central thrust of ECA’s advocacy to Member States in recent years, are more topical today than ever” while adding that “agribusiness offers, especially Central Africa, opportunities not only for the attainment of faster and inclusive growth, but also for massive job creation.”
On his part, the outgoing President of the ICE of Central Africa and Head of the Congolese delegation to the session – Mr Jean Christophe Okandza, who spoke on behalf of the experts present, offered his encouragement to ECA, and particularly its sub-regional office for Central Africa, to forge ahead with its efforts in research and analysis for policy orientation in the zone.
Over 80 experts from central African states, as well as representatives of the African Union Commission, the ECCAS General Secretariat, the CEMAC Commission, the African Development Bank and UN specialised agencies took part in the session.
Related News
Non-tariff barriers a burden, minister admits
The government has conceded that the existence of non-tariff barriers (NTBs) is costing the country dearly on the economic front.
According to the Minister for Foreign Affairs, Regional East African and International Cooperation, Dr Augustine Mahiga, NTBs have also not helped Tanzania’s image if frequent complaints from neighbouring countries on the cost of doing business in the country are anything to go by.
Speaking at the launch of the One Stop Border Post (OSBP) at Holili and Taveta on the Tanzania-Kenya border, Dr Mahiga said the multiplicity of checkpoints and other obstacles were serious issues that ought to have been resolved long ago.
“I must admit that Tanzania had become an obstacle in getting certain goods and services to other neighbouring countries. For instance, the port of Dar es Salaam was one of the biggest NTBs,” Mahiga said.
Flanked by East African Community secretary general Richard Sezibera, the minister described the Dar es Salaam port – which serves as an entry and exit point for imports and exports from countries like Rwanda, Burundi, DRC and Zimbabwe – as being overstretched.
This, he said, had compelled the current (Tanzanian) government to address issues of corruption and inefficiency that had become the order of the day at the port.
“Our aim is to reform and revamp the Dar es Salaam port so that it regains its lost glory,” said Mahiga.
He assured Kenya’s Cabinet Secretary (Minister) for EAC Affairs, Commerce and Tourism, Phyllis Kandie, that the government of Dr John Magufuli was determined to do away with bureaucracy and other obstacles hampering the EAC’s progress.
“A country cannot develop on its own as it takes two to tango,” Mahiga quipped.
According to official research, low skills and little use of modern technologies are affecting the management of cargo flows in East Africa, a problem which accounts for over 40 per cent of business costs in the region.
Financed by Trade Mark East Africa (TMEA), the $12 million state-of-the-art OSBP facility is expected to reduce the time spent in a cross-border trade transaction by combining all activities at a single location, with simplified exit and entry procedures and joint processing.
The concept of the facility is to reduce unnecessary traffic snarl-ups at the border point and ease the way of doing business in the region. According to Kandie, the OSBP is expected to also help in achieving the desired goal of regional political integration.
“Integrated border management is crucial, it is also imperative we involve business partners in implementing the OSBPs in the region,” she added.
TMEA one-stop border post director Theo Lyimo said the aim of such centres is to reduce transit costs incurred in cross-border movement, which is done by combining the activities of countries that share borders.
“The time taken by vehicles at border posts will be reduced by 30 per cent and trade effectiveness in the East African Community will be enhanced,” he said.
According to TMEA, the posts are expected to improve the performance of the northern and central corridors, saving $1.9 billion in annual transport costs.
East Africa is among regions in the world that have inordinately high transport costs, rendering it unable to trade competitively in international markets.
For instance, many hours are taken to travel to and from the hinterland to land-locked countries. Poor infrastructure and delays in crossing borders are also frustrating importers and exporters.
Related News
tralac’s Daily News Selection
The selection: Friday, 26 February 2016
Launching today, in Addis: 'Trade in services - case studies from Africa' (AU)
The book highlights air transport services in Ethiopia, banking services in Nigeria, business processing outsourcing/ICT services in Senegal, cultural services in Burkina Faso, and higher education services in Uganda. The studies are an examination of possible best practices in services exports on the continent, as seen from the suppliers’ point view, with a review of the role of government policy and other factors that may have shaped their success. The countries and sectors were selected on the basis of their service sector performance. In some cases (such as for Cultural Services in Burkina Faso), we have looked for non-traditional service sectors, especially where the private sector’s role in exploring the foreign market has been a critical success factor.
African citizens to get easy entry into Ghana in July (Africa News)
Ghana’s president, John Dramani Mahama, said the West African country will offer visas to citizens of African Union member states on arrival into the country from July. President Mahama made the declaration on Thursday, February 25, 2016 during the delivery of Ghana’s State of the Nation Address to parliament in the capital, Accra.
Featured tweet, @DonaldKaberuka: Tariffs no longer the major obstacle. Now fast track non-tariff issues: visas, aviation, cross border red tape. (In reponse to The Economist’s article ‘Tear down Africa's trade walls’)
Mihe Gaomab II: 'Competition law - a necessity for effective regional integration' (Southern Times)
If competition laws are fostered at the regional level, it would have the potential to ensure such cross border competition behaviour is disciplined to the best regional interest of growing economies through trade. Regional competition policies and laws can assist in enforcing anti-competitive behaviour right across the regions and on the African continent. It can also ensure uniform market discipline through curbing substantial abuse of market power or dominant position or monopoly situations. The above shows that the importance of competition law as a tool to regional integration especially on the business conduct and the competitive markets in Africa cannot be underemphasised and should be pitched at regional, continental and international agendas such as SACU, SADC,COMESA, AU, and the World Trade Organisation.
Dr Chris Kiptoo: 'How Kenya plans to close its ever-growing foreign trade deficit' (Business Daily)
Dr Chris Kiptoo, the Principal Secretary State Department of Commerce and Trade at the Ministry of Industry, Investment and Trade, spoke to the Business Daily’s Charles Mwaniki on the sidelines of last week’s Africa 2016 conference in the Egyptian resort of Sharm el Sheikh about Kenya’s export strategies as Africa moves towards a free trade area: 'At the continental level, the summit has also pronounced itself for a continental FTA. The only problem is that the level of intra-regional trade is still low although it has improved from around 10% to about 15-16%. Trade of that level in an FTA is not meaningful enough. We need to grow that by dealing with connectivity issues — transport challenges. We are doing something but I think it can be fast tracked. We also have to do something about non-tariff barriers by adopting ICT platforms that improve transparency.'
Eating the intra-African trade pudding: Uganda, South Africa top as neighbours drive Kenya’s tourism recovery (M&G Africa)
One promising way of solving this is seen as ramping up regional trade in services - a model that has contributed to the booming growth in many Asian countries. It may be already happening and could herald exciting possibilities. The number of tourists visiting Kenya from neighbouring countries has increased over the past few months as the East African nation set off on promotions around the region to make up for dwindling numbers from its traditional source markets in Europe.
Malaysia, African continent bilateral trade to grow by 10% (New Straits Times)
Bilateral trade between Malaysia and the African continent is expected grow by 10% this year from RM30.1 billion recorded in 2015, Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said today. South Africa, Eqypt, Nigeria and Angola are Malaysia’s top trading partners and export destinations.
Tanzania: Giant $30bn gas project now hangs in the balance (IPPMedia)
Mozambique's commissioning of an Italian company to start building a planned liquefied natural gas plant in that country has put neighbours Tanzania at a considerable disadvantage in the race to construct the first gas exporting facility in this part of Africa. The Mozambican government this week granted its approval to the Italian energy firm Eni to go ahead with the project, with Eni - which aims to sell the gas produced by the plant to British oil company BP - expected to make its final investment decision later this year. In contrast, Tanzania was initially expected to make a final investment decision regarding its own planned LNG plant this year, but this has been delayed for at least another four years due to red tape and regulatory uncertainties.
Tanzania: AfDB board approves 2016-2020 Country Strategy Paper (AfDB)
The AfDB will support Tanzania’s economic transformation to inclusive and green growth with an indicative concessional resource assistance package estimated at over US $1.1 billion over a five-year period. The Bank Group’s portfolio in Tanzania comprised 29 operations with total net commitment of US $1.97bn as of 30 November 2015. The portfolio consists of 15 public sector operations, 4 private sector operations and 10 multinational operations. Infrastructure (transport – 44%, energy – 5%, and water – 16%) accounted for 65% of the portfolio in value terms. Social sector accounted for 5%, agriculture 3%, multi-sector 4% and multinational operations 16% (79% of which are in energy and transport). Private sector operations accounted for 7% of the overall portfolio.
Seychelles: new development strategy targets diversification and resilience (AfDB)
Fitch revises Zambia's outlook to negative; affirms at 'B' (Reuters)
The revision of the Outlook reflects the following key rating drivers: a combination of falling copper revenue and slowing growth has led to persistent and large fiscal deficits and a doubling of gross general government debt since 2012. Fitch forecasts the 2016 fiscal deficit to narrow slightly to 7.1% of GDP, materially higher than the 3.8% deficit forecast by the Zambian authorities in the 2016 budget. Mining revenues, which directly contributed about 17% of total government revenue in 2012, fell to under 13% of revenue by 2015.
Namibia: Budget Statement (Ministry of Finance)
The Sub-Saharan African region has also taken a knock from the generalized slowdown in Emerging Markets economies. In fact, the soft landing for the Chinese economy has resulted in a much harder landing for Sub-Saharan African economies through the trade channel. Closer to home, the South African economy, which is closely linked to Namibia through strong trade, monetary and financial ties, is projected to grow at a rate of about 0.9% in 2016, which represents a further slowdown from 1.3% in 2015. This low growth trend for the South African economy holds negative implications for Namibia through trade and financial linkages as well as revenue derived from SACU.
I am aware that there have been mixed public reactions regarding the relevance of the currency peg to the South African Rand. Let me use this opportunity to reassure the public that due to the significant trade linkages, the currency peg to the South African Rand remains a relevant policy and a credible anchor of domestic price stability and trading for Namibia. Such relevance only gets eroded if imported inflation and excess volatility becomes a permanent occurrence and fundamental macroeconomic imbalances emerge. [Calle tightens government’s belt (New Era)]
Botswana: 2016 Monetary Policy Statement (Bank of Botswana)
The 2015 Business Expectation Surveys indicates a generally subdued level of business confidence, particularly among export-oriented businesses. However, optimism about recovery in output improves, going forward, in line with projected higher output growth for 2016. Overall, the key challenges to businesses include weak demand, deficiency of key inputs and the regulatory environment as well as related scarcity of skilled manpower. For the 2016/17 fiscal year, while total government expenditure is estimated to decrease by 2.7%, a budget deficit of P6.05bn (3.8% of GDP) is anticipated, given the projected contraction in government revenue of 6.5%. The budget includes spending associated with the Economic Stimulus Programme, which is partly aimed at accelerating completion of NDP 10 projects.
Africa’s infrastructure: five years on (World Bank Blogs)
Africa’s Infrastructure: A Time for Transformation, the inaugural report in the Africa Development Forum series in 2010, was the fruit of an unusual confluence of circumstances. Seldom have donors put such a solid funding base behind primary data collection and analytical work on infrastructure, seldom has World Bank management been able to dedicate such significant human resources over a multiyear horizon to study these issues, and seldom has an infrastructure knowledge project brought together such a broad coalition of stakeholders including the key regional bodies in Africa. Five years later, after a period of great dynamism and momentous changes, an update of the report would be very timely. Work would need to start soon to be completed in time for the 10th anniversary. [The author: Vivien Foster]
Overloading costing East Africa millions in road deterioration (How we made it in Africa)
“The main cause of road deterioration is overloading,” says Nicholus Kithinji, managing director of Avery East Africa (AEA), a large supplier of weighbridges in Kenya. AEA sells equipment used by government authorities to check compliance with axle load requirements. “Overloading costs hundreds of millions of shillings in road deterioration. A truck that is loaded 10% more than it should causes 50% more damage on the road than a compliant truck. Some of the trucks coming from Congo, for example, that are 200% loaded reduce the life of the roads they pass on by nearly half. So axle load control is the first step in road maintenance,” says Kithinji. “If we can’t maintain what we have, every 10 years we will be redoing the infrastructure we already have. We will build forever.”
The European Union and the African Union: a statistical portrait
With data up to and including the year 2014, this “portrait” includes various domains such as demography, health, education, national accounts, trade, and more. Tables in the eight chapters help the user to gain a detailed view on different aspects, such as mobile phone subscriptions, number of teachers, life expectancy, GDP, tourism, etc. An overview chapter is also included, presenting statistical comparisons with the rest of the world.
International trade: Africa accounted for around 9% of both the imports to the EU-28 and the exports from the EU-28 in 2014, measured by value. This was far below Asia, which stood for 43% of the imports value to the EU-28 and about a third of the exports value. Northern America only accounted for 14% of the imports to the EU-28 but was the destination for 21% of the exports. The EU-28 goods trade balance with Africa was negative in all years between 2003 and 2014 (Figure 1.11). The EU’s trade deficit with Africa fell sharply from EUR 41 billion in 2008 to around EUR 4 billion in 2009 with both import and export values dropping, clearly reflecting the worldwide economic crisis. This decline in EU-28 exports to and imports from Africa broke the steady increase of EU-28 trade with Africa between 2003 and 2008, which had seen export values raise by 71% and imports by 94%. [Download]
Digital globalization: the new era of global flows (McKinsey)
Global flows of all types support growth by raising productivity, and data flows are amplifying this effect by broadening participation and creating more efficient markets. MGI’s analysis finds that over a decade, all types of flows acting together have raised world GDP by 10.1 percent over what would have resulted in a world without any cross-border flows. This value amounted to some $7.8 trillion in 2014 alone, and data flows account for $2.8 trillion of this impact. Both inflows and outflows matter for growth, as they expose economies to ideas, research, technologies, talent, and best practices from around the world.
Although there is substantial value at stake, not all countries are making the most of this potential. The latest MGI Connectedness Index - which ranks 139 countries on inflows and outflows of goods, services, finance, people, and data - finds large gaps between a handful of leading countries and the rest of the world. Singapore tops the latest rankings, followed by the Netherlands, the United States, and Germany. China has grown more connected, reaching number seven, but advanced economies in general remain more connected than developing countries. In fact, each type of flow is concentrated among a small set of highly connected countries.
To understand GVCs, connect the dots: visualisation tool (World Bank)
The increasing salience of global value chains and their analysis has created tremendous demand for “mapping” these chains. How can we quantify the ‘value’ along a chain? How can we visualize the connections between each link? These are questions we’ve been seeking to answer at the World Bank Group. And we’ve developed a new visualization tool, accessible through our World Integrated Trade Solution database, which allows the public to explore the quantifiable reality of GVCs.
Resource exploration: A move south (IMF)
Our analysis suggests that if all of Latin America and sub-Saharan Africa were to adopt the same quality of institutions as the United States, the number of discoveries worldwide would increase by 25%, all else equal. Institutions can affect discoveries in many ways. A stronger rule of law may reduce the risk perceived by potential foreign investors, making them more willing to undertake the long-term investments usually required in resource exploration and extraction. This could make it easier for a country to adopt better technology, if, for example, stronger contracts make the prospect of costly investments in technology more attractive.
The leaders of Africa’s Great Lakes Region and private sector stakeholders agree to boost investment (PSIC)
SADC security committee addresses piracy, human trafficking (New Era)
Zimbabwe: Zimra introduces hand scanners at Beitbridge Border Post (The Herald)
Vale writes $2.4bn off its Mozambique coal assets (Zitamar)
Mozambique to chair Zambezi Watercourse Commission (Club of Mozambique)
Makhtar Diop, Cristina Duarte: 'Closing the gender gap: lessons from Africa' (World Bank)
tralac’s Daily News archive
Catch up on tralac’s daily news selections by following this link ».
SUBSCRIBE
To receive the link to tralac’s Daily News Selection via email, click here to subscribe.
This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 350 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome.
Related News
The leaders of Africa’s Great Lakes Region and private sector stakeholders agree to boost investment
The Democratic Republic of the Congo hosted a two day inaugural Great Lakes Private Sector Investment Conference. The Conference was co-organized by the Office of the Special Envoy of the Secretary-General for the Great Lakes region and the International Conference on the Great Lakes on 24-25 February 2016.
The regional investment conference, which was the first in the Great Lakes region of Africa brought together over 500 participants from the region and the world. The opening ceremony, presided by the President of the Democratic Republic of the Congo (DRC), H.E. Joseph Kabila Kabange, was attended the United Nations SecretaryGeneral, Ban Ki-moon; the Vice Presidents of Angola and Burundi; the Prime Minister of Rwanda; Ministers and Ambassadors from the region; representatives of international organizations; the diplomatic corps; and investors as well as business leaders.
The main objective of the Conference was to provide a platform for public-private dialogue on promoting responsible investment in the region and enhanced networking opportunities between regional and international stakeholders. Participants reviewed current and emerging challenges to private sector investment in the region and identified priorities actionable policy recommendations for the Leaders of the region.
Discussions covered several sectors including Agriculture, Infrastructure, Mining, Energy, Information and Communication Technology, Tourism, and Finance.
Twenty-five illustrative regional investment opportunities were presented to the participants in an attempt to generate business interest, and to encourage participants to take advantage of the region’s rich endowments.
President Kabila welcomed the opportunity to host this event which, in his view will have a positive impact not only on the DRC, but also on the entire region. He expressed hope that the outcome of the meeting will be followed by real investment transactions. “From now on, we shall no longer refer to the Great Lakes as a region marred with instability and conflicts, but one where it is good to invest. I hope that the conclusions of this conference will trigger real interactions between the private sector and political decision makers both at national, regional and international levels. In doing so, we will ensure continued economic growth in the region materialized by job creation, and thus we will definitely turn the page of violence and insecurity that the region has been known for,” President Kabila said.
At the opening ceremony, Secretary-General Ban Ki-moon recalled the Peace, Security and Cooperation Framework agreement the DRC and the region signed in Addis Ababa in 2013 and the decision to organize the Private Sector Investment Conference. “Because leaders recognized that peace and development are two sides of the same coin. They understood that the lack of jobs and opportunities creates a breeding ground for conflict. So we have joined together today to share ideas and experiences underscoring the importance of attracting private investment, promoting business activity and enhancing regional economic cooperation and integration,” the Secretary General said.
“The people of the Great Lakes region count on you to fully contribute to the goal of transforming the region. They look to you to strengthen productive capacity; create decent jobs and livelihoods; improve economic governance; and foster inclusive development and shared prosperity. This is a win-win approach for the well-being of society and a company’s bottom-line. It is the pathway to peace and stability,” he added.
The opening ceremony was followed by a high-level panel involving the Prime Ministers of the DRC and Rwanda, the Vice-Presidents of Burundi and Angola on what their respective countries were doing to improve the investment climate in the region. Thematic sessions were organized along the seven priority sectors identified. These sessions provided a unique opportunity for dialogue among political leaders, government officials, and private sector investors and other stakeholders on investment opportunities in the Great Lakes region.
This conference was convened as a follow-up to a decision adopted by the leaders of the region during the second meeting of the Regional Oversight Mechanism of the Peace, Security and Cooperation Framework agreement for the DRC and the region, held in Addis Ababa, Ethiopia, on 31 January 2014.
Related News
Digital globalization: The new era of global flows
Soaring flows of data and information now generate more economic value than the global goods trade.
Conventional wisdom says that globalization has stalled. But although the global goods trade has flattened and cross-border capital flows have declined sharply since 2008, globalization is not heading into reverse. Rather, it is entering a new phase defined by soaring flows of data and information.
Remarkably, digital flows – which were practically nonexistent just 15 years ago – now exert a larger impact on GDP growth than the centuries-old trade in goods, according to a new McKinsey Global Institute (MGI) report, Digital globalization: The new era of global flows. And although this shift makes it possible for companies to reach international markets with less capital-intensive business models, it poses new risks and policy challenges as well.
The world is more connected than ever, but the nature of its connections has changed in a fundamental way. The amount of cross-border bandwidth that is used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intracompany traffic continue to surge. In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.
Trade was once largely confined to advanced economies and their large multinational companies. Today, a more digital form of globalization has opened the door to developing countries, to small companies and start-ups, and to billions of individuals. Tens of millions of small and midsize enterprises worldwide have turned themselves into exporters by joining e-commerce marketplaces such as Alibaba, Amazon, eBay, Flipkart, and Rakuten. Approximately 12 percent of the global goods trade is conducted via international e-commerce. Even the smallest enterprises can be born global: 86 percent of tech-based start-ups surveyed by MGI report some type of cross-border activity. Today, even the smallest firms can compete with the largest multinationals.
Individuals are using global digital platforms to learn, find work, showcase their talent, and build personal networks. Some 900 million people have international connections on social media, and 360 million take part in cross-border e-commerce. Digital platforms for both traditional employment and freelance assignments are beginning to create a more global labor market.
In this increasingly digital era of globalization, large companies can manage their international operations in a leaner, more efficient ways. Using digital platforms and tools, they can sell in fast-growing markets while keeping virtual teams connected in real time. This is a moment for companies to rethink their organizational structures, products, assets, and competitors.
Global flows of all types support growth by raising productivity, and data flows are amplifying this effect by broadening participation and creating more efficient markets. MGI’s analysis finds that over a decade, all types of flows acting together have raised world GDP by 10.1 percent over what would have resulted in a world without any cross-border flows. This value amounted to some $7.8 trillion in 2014 alone, and data flows account for $2.8 trillion of this impact. Both inflows and outflows matter for growth, as they expose economies to ideas, research, technologies, talent, and best practices from around the world.
Although there is substantial value at stake, not all countries are making the most of this potential. The latest MGI Connectedness Index – which ranks 139 countries on inflows and outflows of goods, services, finance, people, and data – finds large gaps between a handful of leading countries and the rest of the world. Singapore tops the latest rankings, followed by the Netherlands, the United States, and Germany. China has grown more connected, reaching number seven, but advanced economies in general remain more connected than developing countries. In fact, each type of flow is concentrated among a small set of highly connected countries.
Lagging countries are closing the gaps with the leaders at a very slow pace, and their limited participation has had a real cost to the world economy. If the rest of the world had increased its participation in global flows at the same rate as the top quartile over the past decade, world GDP would be $10 trillion, or 13 percent, higher today. For countries that have been slow to participate, the opportunities for catch-up growth are too substantial to ignore.
James Manyika, Jacques Bughin, and Jonathan Woetzel are directors of the McKinsey Global Institute, where Susan Lund is a principal; Kalin Stamenov and Dhruv Dhingra are consultants in McKinsey’s New York office.
» Download: Digital globalization: The new era of global flows – Full report (PDF, 6.71 MB)