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Sendai takes root in Africa
African countries have held fresh talks to drive forward their implementation of the Sendai Framework for Disaster Risk Reduction, a global agreement that is part of wider efforts to make development sustainable.
The 8th Africa Working Group, which brought together governments, the African Union Commission, the continent’s regional economic communities and other partners, met in the Ethiopian capital Addis Ababa last week.
Mr. Amjad Abbasar, Head of the UNISDR Regional Office for Africa, said that the meeting created a “solid foundation for implementing a series of intergovernmental agreements adopted in 2015 in Africa, championing disaster risk reduction as the medium for risk-sensitive development.”
On average, almost two disasters of significant proportions have been recorded every week in Sub-Saharan Africa since 2000. Water, weather and climate hazards, notably floods and drought, dominate the region’s disaster profile, affecting around 12.5 million people per year.
The Sendai Framework, adopted by the international community in March 2015, seeks to bring about substantial falls in disaster mortality, numbers of affected people, and economic losses.
The first in a series of four global accords put in place last year to shape the global agenda through to 2030, the Sendai Framework was followed by the Addis Ababa Action Agenda on financing for development, the Sustainable Development Goals, and the COP21 Paris Agreement on climate change.
Speaking at the Africa Working Group meeting, Dr. Janet Edeme, Acting Director of the African Union Commission’s Department of Rural Economy and Agriculture, underscored the links between implementing the Sendai Framework and the Sustainable Development Goals.
The Africa Working Group is the continent’s top technical body for the coordination of disaster risk reduction. Its current task is to flesh out the Yaoundé Declaration, a Sendai Framework implementation plan that was adopted by ministers last July at a conference in the capital of Cameroon.
At the end of the two-day meeting, members of the Africa Working Group issued a Summary Statement highlighting the importance of implementation of the Sendai Framework in Africa particularly in light of the continued spate of disasters on the continent, including those induced by the El Nino climate phenomenon. They also recognised that the series of post-2015 agreements provide a unique opportunity to Africa to bring together international frameworks through the lens of disaster risk reduction for resilience.
The meeting was convened with financial support from the European Union as part of its cooperation with the African, Caribbean and Pacific Group of States. Its outcomes will be deliberated at various future meetings, notably the 6th Session of the Africa Regional Platform for Disaster Risk Reduction later this year.
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Advanced biofuels set to play key role in developing countries
Advanced biofuels made from non-food biomass, also known second-generation biofuels, have become a commercial reality, a new UNCTAD report concludes.
Advanced biofuels made from non-food biomass, also known second-generation biofuels, have become a commercial reality, a new UNCTAD report concludes. The report, Second-Generation Biofuel Markets: State of Play, Trade and Developing Country Perspectives, says that this is happening in the context of advanced technologies, economic pressures and a political will to act on climate change.
In the wake of the environmental commitments countries have made with the Sustainable Development Goals (SDGs) and the Paris COP21 climate change agreement, the report focuses on how the market for second-generation biofuels can be exploited, and how to make the technology available in developing countries.
With a specific focus on cellulosic ethanol, a new type of biofuel produced from wood, grass or the inedible parts of plants, the report provides a wide-ranging review as of 2015–2016 of the second-generation biofuels sector, maps selected cellulosic ethanol projects, and details recent policy developments from around the globe. A key factor in decreasing costs for the industry has been process improvements that have allowed the market to expand, the report says.
The United States has the largest installed capacity for cellulosic ethanol production and the greatest number of working second-generation biofuel facilities, the report found, followed respectively by the People's Republic of China, Canada, the European Union (EU) and Brazil.
Projects in these countries vary significantly in their technological approaches as well as the raw material ("feedstocks") used for fuel production. These include corn stover (plant material left in fields after grain harvesting, such as leaves and stalks), sugarcane bagasse (fibrous matter remaining after sugarcane stalks have been crushed to extract juice), municipal solid waste, and forestry residues.
The report found that EU- and United States-based companies have engaged in partnerships abroad to build advanced ethanol facilities: for example, the Fuyang Bioproject in China is the result of cooperation between Italy-based Beta Renewables and the Guozhen Group of China.
While, as of 2015, there were no cellulosic ethanol projects on the African continent and in Latin America (excluding Brazil), progress has been made in bagasse-fired electricity co-generation and biomass cook stoves in these regions, the report says.
Overall, two main strategies have given traction to advanced biofuels in the world. The first is a market-segmentation strategy in conventional / advanced cellulosic biofuels used in the US, and more recently in the EU with the adoption of limits for conventional biofuels, resulting in premium pricing. The second is the availability of national development bank loans that have reduced risk and promoted growth in the industry, especially in China and Brazil. Low interest rates and a venture-capital culture have also played a role in advancing the position of second-generation biofuels.
However, while production facilities have been scaled-up over the past three years, evidence suggests that actual production is much smaller than nominal capacities. This is due to a confluence of factors including high feedstock costs, high processing costs, incomplete domestic regulatory frameworks favourable to advanced biofuels, risk avoidance, and limits to the amount of biofuel that can be blended with conventional petroleum-based fuel in major markets.
In the United States, expected use of cellulosic fuels for 2015 corresponds to 400 million litres, or about 80 per cent of installed US capacity. Other countries are expected to have much lower rates of this indicator.
Trade opportunities may exist in second-generation biofuel markets, particularly as recent limits on first-generation (conventional) biofuels in Europe, together with the EU's growing self-sufficiency in conventional biofuels, suggest that imports of second-generation biofuels will most likely be made if domestic producers fail to deliver their expected output. The US is also likely to begin cellulosic ethanol imports in the years ahead, its own official statistics suggest.
The report notes that future rules on second-generation biofuels in international trade law should be well-balanced and take into consideration the different conditions in which biofuels are produced around the world. Such rules should not create unjustifiable obstacles to international biofuel trade, particularly as long as there is a lack of scientific certainty about the "indirect land use change" effects on food prices, biodiversity and greenhouse gas emissions.
The report concludes with five suggestions for the responsible development of the second-generation biofuels industry:
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Create regulatory frameworks for advanced bioenergy tailored to national circumstances, which do not necessarily focus on the type of supply but instead on existing local demands. The fulfilment of such regulations is likely to meet domestic development strategies in line with the SDGs.
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Promote cooperation between domestic organizations and foreign companies for joint ventures by means of investment agreements in order to facilitate technology transfer. This is important to avoid the emergence of a large technological gap between first-generation, land-intensive feedstocks and second-generation, capital-intensive biofuels in developed and developing countries.
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Consider the broader aspects of bioeconomy sectors, including biomaterials, in ways that avoid locking industrial development paths into specific sectors or technologies. This would provide flexibility for market players that operate biorefineries as they could target multiple markets, including materials, feed, food and energy – both domestic and internationally.
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Incorporate lessons from the sustainability criteria applied for first-generation biofuels into near and mid-term sustainability provisions or labels for advanced biofuels.
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Continuously promote technical dialogue among different production regions of advanced fuels in order to ensure compatible standards for feedstock and promote trade in advanced biofuels.
The report, Second Generation Biofuel Markets. State of Play, Trade and Developing Country Perspectives, updates a similar survey carried out by UNCTAD in 2014.
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tralac’s Daily News Selection
The selection: Tuesday, 23 February 2016
Continental Free Trade Area capacity building workshop: meeting updates (AU)
Trade between the United States and AGOA countries continues to decline (Bridges Africa)
Total trade between the United States and countries supported under the African Growth and Opportunity Act showed another decrease in 2015, according to data published by the AGOA.info website. Combined trade, which came to US$50bn in 2015, only reached US$36bn last year. Trade between the United States and AGOA countries has now been declining for four years in a row. The reduction of trade between countries supported by AGOA and the United States during 2016 was caused by a lowering of trade from both sides.
Sweden’s co-operation with the African Development Bank Group 2016–2018 (Government of Sweden)
The strategy will also guide Sweden’s positions in negotiations on the fourteenth replenishment of the African Development Fund (AfDF14), which will be ongoing during most of 2016. The outcome of the negotiations will be important for how the AfDB contributes to the implementation of the 2030 Agenda for Sustainable Development and its global goals, which were adopted in September 2015.
West Africa: Checkpoints, bribes block trade flow – report (My Joy)
The study, conducted by the Permanent Interstate Committee for Drought Control in the Sahel with support from USAID, found that one of the major obstacles to development of intraregional trade in agricultural and food products in West Africa is the multiplicity of checkpoints. The study titled 'Road Harassment on Agricultural Products in the Sahel and West Africa' was conducted between August and December 2015. On the Ougadougou, Burkina Faso to Accra route, which is about 1,004 kilometres, the study showed that there were as many as 54 barriers, while each trip cost close to about ₵1,000 in illegal payments and bribes to officials mounting the barriers.
West Africa: Trade Hub and Borderless Alliance announce anti-corruption billboard campaign (WATH)
Beginning 29 February, the Borderless Alliance, a Trade Hub partner, will roll out six new strategically placed billboards along one of West Africa’s busiest transport corridor. The billboards, funded by the Trade Hub, will push targeted messaging for driver compliance with traffic regulations, fighting corruption, and preventing road harassment along the Tema-Paga transport corridor.
What Ghana’s latest importation ban could mean for West Africa (Ventures Africa)
Ghana, Nigeria’s largest trading partner in West Africa, has placed a ban on the importation of goods such as crude oil, cement and pharmaceuticals from Nigeria and other countries. Ghanaian authorities are laying claim to unfair trade practices between both countries as the underlying factor for its decision. However, Ghana’s decision to place a ban on goods from Nigeria appears to be a retaliation for its inclusion in Nigeria’s “Import Prohibition list” as part of the measures to restrict foreign exchange and manage the country’s reserves.
Related: Jibrin Ibrahim: 'Nigeria's economic recovery programme - imperative of a real debate' (Premium Times), Nigeria-China trade volume hits $14.94b (The Nation), Nigeria's FG urged to expand sources of forex inflow (ThisDay)
Trade facilitation in Central Africa: Barcelona-based, Global CAD releases a video tomorrow on the challenges and opportunities of trade and transport in Central Africa. To participate in a live twitter chat: #TTCentralAfrica, @GlobalCADTweets
Central Africa: ICTs marked as levers for intra-regional trade (UNECA)
Central Africa is the area of the continent with the lowest intra-community trade volume, though it may rapidly increase it by using Information and Communication Technologies. This was reiterated in presentations during day one of an Ad Hoc Expert Group Meeting on using Information and Communication Technologies to promote Intra-regional trade in Central Africa, organised in Cameroon’s economic capital by the UNECA.
EAC presidents to have final word on mitumba ban (Business Daily)
Thousands involved in the second hand clothes and shoes trade will know their fate next week as East African leaders meet in Arusha to discuss a ban on used garments. esident Uhuru Kenyatta and leaders of Uganda, Tanzania, Burundi and Rwanda will decide on whether to adopt their ministers’ position calling for a ban on importation of used clothes. The move is aimed at promoting local textile and leather industry in the East African region that has been severely affected by the presence of cheap second hand clothes and shoes from western countries.
From the RECs: SADC Protocol on Employment and Labour implementation plan: individual consultancy, IGAD: learning from the impacts of El Nino 2015 on the Greater Horn of Africa Region, EAC: Tanzania country engagement on the East African Community Regional Reference Information System, ECOWAS: regional workshop (14-15 March) on mainstreaming nutrition into NAIPs
Zambia: Weak immigration laws, trade policies costing government revenue - SACBTA (The Post)
Southern Africa Cross Border Traders Association secretary general Jacob Makambwe says Zambia’s weak immigration laws, trade policies and porous borders are encouraging illicit trade, causing government to lose revenue. “In terms of Zambia being open, it is number two on a scale of 1-10, which is way too open to properly manage cross border trade. For example, because of the export ban on maize, you will be shocked that if you go to Kasumbalesa today, you will find four or five trucks full of maize and you will see people from Congo coming to buy the maize on bicycles using the zalewa or bush paths. In a space of two hours, you will find that all the maize is gone without being taxed. That’s how Zambia loses revenue because of its porous borders,” Makambwe said.
The rise and fall of the mining royalty regime in Zambia (CMI)
Zambia has a long history of disputed changes of the mining tax regime with damaging effects on the working relations between the Government and the mining sector. A shared assumption has been that profit-related taxes such as the corporate income tax should be a main component of the mining tax regime. In the 2014/15 Budget, the Government abolished the CIT and instead increased the royalty rates substantially. A few months later the new tax regime was reversed, the CIT was reintroduced and royalty rates reduced. In this Brief we examine these dramatic changes in mining taxation. We argue that a more constructive public-private dialogue is essential to ensure a sustainable tax framework and taxpayers’ trust in the tax system. [The authors: Odd-Helge Fjeldstad, Caleb Fundanga, Lise Rakner]
Zimbabwe: Govt orders 9 diamond firms to cease operations (NewsDay)
Mozambique: diagnostic study on trade integration in national development policies (SPEED)
The 2004 DTIS for Mozambique was expected to help build national consensus on the importance of trade to the country’s development objectives, including sustainable growth that benefits the poor. A significant step in building consensus was the National Validation Workshop, held in Maputo in September 2004 to discuss the conclusions and recommendations presented in the report. In 2015 the DTIS was updated and the revised version is included below: [Various downloads available]
Ghanaian businesses to get 10-year visa to SA (Pulse)
Ghanaian businesses could get a 10 years visa grant to South Africa to do their business as part of plans to deepen bilateral trade between Accra and Pretoria , the South African High Commissioner to Ghana, Ms Lulama Xingwana, has said. She made the comments during Ghana-South Africa Business Chamber forum on Thursday. She also asked the Ghana government to intervene in the impasse between illegal miners and AngloGold Ashanti (AGA) so as to save lives and investments in Obuasi.
South Africa: Scrap metal proposals should be withdrawn (IOL)
South African scrap metal merchants and freight operators were calling for the government to withdraw the proposed amendments to the preference price policy guidelines aimed at curbing scrap exports, saying it was “punitive” and threatened 400 000 jobs in the informal sector. The proposed PPS revisions were published by the International Trade Administration Commission of South Africa in the Government Gazette in December and focused on aligning scrap exports with the Second-hand Goods Act and the government’s empowerment aspirations, while enforcing stricter controls. The amendments also proposed that scrap metal be exported via Port Elizabeth, which Itac had designated to being the sole port of export, and which would be reflected on each Itac export permit as a condition. Scrap is mostly exported from Durban.
Inaugural Abidjan Union meeting of insurance bodies urges closer cooperation to boost investments(AfDB)
Over 30 participants from 18 institutions that provide guarantees and insurance in Africa gathered in Abidjan, Côte d’Ivoire, from February 15 to 16, 2016 for the Abidjan Union, the first pan-African meeting of export credit and investments insurers in Africa. Organised by the Private Sector and Treasury Departments of the African Development Bank, with the sponsorship of the Initiative for Risk Mitigation in Africa funded by the Government of Italy, the meeting aimed to facilitate the creation of an information exchange network for providers of export credit and investment insurance in Africa. The second Abidjan Union meeting is planned for 2017.
FAO puts fast-growing fish trade on the ‘sustainability’ menu (UN)
Top fishery officials are gathering in Morocco this week to discuss sustainable trade practices in a $144bn industry that provides developing countries with more export revenue than meat, tobacco, rice and sugar combined. Lower-income nations’ exports of fish and fishery products reached $78bn in 2014, more than triple the value of global rice exports, according to the United Nations Food and Agriculture Organization. One major topic for consideration is how to better trace products throughout the supply chain. Ministers are poised to agree on FAO’s proposed technical guidelines for catch documentation schemes, a set of documents testifying to the legal origin of the catch.
ECOSOC debate: UN development system must work flexibly across all sectors (UN)
Offering a national perspective, Claver Gatete, Minister for Finance and Economic Planning of Rwanda, recalled that his country had been among the first eight to pilot the United Nations “delivering as one” approach. Today, its partnership with the Organization had “come a long way”. Joint planning — across agencies and with the Government — had made the most progress. The United Nations Development Assistance Programme was fully aligned with Rwanda’s economic development and poverty reduction strategy. However, he said, such coherence was lacking at the regional and global level.
How can the G20 support the multilateral trading system?: China’s contribution (E15 Initiative)
Therefore, in order to strengthen the practicality and comprehensiveness of the multilateral trading system, the G20 could make a further clarification to support it. Based on the above analysis, we think China could raise the following policy proposals at the 2016 G20 summit to promote the multilateral trading system: [The authors, Xinquan Tu, Naijiang Wang, are attached to Beijing's UIBE)
Can the world adjust to China's "New Normal"? (PIIE)
One thing is increasingly certain: China can no longer argue that it is a passive recipient of the policy choices made by others. The impact of Chinese policies is now felt globally. Historically, these policies have been for the greater good. How the government reacts to its new role and responsibilities will determine the direction of its future trajectory on the international economic policy stage. [Extract from WEF's Global Agenda Council on Geo-Economics report]
Building a competitive city through innovation and global knowledge: the case of Sino-Singapore Suzhou industrial park (World Bank)
One of the great special economic zone success stories in China is the Suzhou Industrial Park, a modern industrial township developed in the early 1990s through a Sino-Singapore partnership. It is successful not just in the economic sense, but also in terms of urban and social development in an eco-friendly way. One key lesson is that in a weak market environment, a facilitating and reform-oriented host government, coupled with foreign expertise and knowledge as well as a "whole value chain" approach can go a long way in developing urban-industry well-integrated special economic zones. This paper is intended to examine the success factors and key lessons of the Sino-Singapore Suzhou Industrial Park, which can be useful for other developing countries. [The author: Zhihua Zeng]
Swaziland hosts first national transport dialogue (The Observer)
Tanzania: Procurement law reform report ready (The Citizen)
Ghana chairs Union of African Shippers Council (Business Ghana)
Zambia: ‘Poultry sector has huge prospects’ (Daily Mail)
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Trade between the United States and AGOA countries continues to decline
Total trade between the United States and countries supported under the African Growth and Opportunity Act (AGOA) showed another decrease in 2015, according to data published by the AGOA.info website. Combined trade, which came to US$50b in 2015, only reached US$36b last year. Trade between the United States and AGOA countries has now been declining for four years in a row.
The reduction of trade between countries supported by AGOA and the United States during 2016 was caused by a lowering of trade from both sides. Whereas exports from AGOA countries to the US dropped from US$26b in 2014 to US$19b in 2015 – a reduction of approximately 25 percent – US exports to these countries also experienced a significant decrease, falling from US$24b to US$17b. The trade balance is therefore still stable, with a surplus of approximately US$2b for countries supported by AGOA.
AGOA, which is considered to be the central pillar of economic relations between the US and Sub-Saharan Africa, provides duty-free quota-free access to the US market for over 6,000 products. In June of last year, its renewal for another ten-year period – until 2015 – was enthusiastically welcomed by many observers.
However, there is no agreement regarding the scale of benefits that African countries have been able to gain from AGOA to date. Last August, the AGOA Forum – the yearly event that aims to assess the outcomes of the preferential treatment and to boost the opportunities it can offer – resulted in a mixed consensus.
During the event, many American delegates had insisted on the advantages that AGOA could bring to Sub-Saharan African economies. According to them, AGOA has helped create approximately 300,000 direct jobs in eligible countries.
“AGOA is creating economic opportunities for families across the continent and helping African companies to improve their competitiveness, while creating an environment conducive to the growth of private sector investment,” US president Barak Obama had insisted in a video message to the Forum participants.
On the African side, however, the Forum participants seemed less convinced. Although the usefulness of such a law was largely recognised, many people highlighted that this preferential treatment had not yet delivered the expected outputs. Trade between the US and Sub-Saharan Africa is still low and highly concentrated. In fact, only approximately one percent of US imports come from the 39 African countries supported by AGOA, and the hydrocarbon sector alone accounts for most of the African exports under AGOA.
“All African countries have not benefited from AGOA,” insisted Ngoulakia Barthelemy, President of the Scientific Committee of the AGOA Forum, in August of last year. It is true that, until now, only a few Sub-Saharan African economies have managed to take advantage of the opportunities offered under AGOA. These include Nigeria, Angola, Chad, Congo, Congo-Brazzaville and South Africa, Unsurprisingly, these are some of the largest oil producers in the region.
Indeed, this dependency on oil and gas exports is widely responsibly for the decline experienced by US–Sub-Saharan African trade since 2012. The United States have significantly decreased oil imports from AGOA countries, a trend that was once again confirmed last year. In fact, the reduction of US oil and gas imports is almost solely responsible for the decrease in exports from Sub-Saharan African economies to the United States.
Nevertheless, other sectors have been able to benefit from the situation. For example, transport equipment and textile product exports from AGOA countries to the United States increased in 2015, by 3.5 percent and 6 percent respectively. Likewise, sectors such as farm goods (up by 10 percent), machinery (up by 30 percent) and manufactured goods (up by 35 percent) have also experienced significant growth, even though the volume of exports is still quite modest.
In this context, the challenge for countries supported by AGOA is to diversify their exports to the United States as much as possible. It was with this in mind that Assistant Secretary of State for African Affairs Linda Thomas-Greenfield recently said: “We want to see there be a diversification of the products that are being sent under AGOA, and we’re working with countries to bring them into a better economic place so that they can benefit from the AGOA benefits. It’s a work in progress, but we are seeing some efforts improve.”
This article first appeared in Passerelles, 18 February 2016.
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UN agency puts fast-growing fish trade on the ‘sustainability’ menu
Top fishery officials are gathering in Morocco this week to discuss sustainable trade practices in a $144 billion industry that provides developing countries with more export revenue than meat, tobacco, rice and sugar combined.
Lower-income nations’ exports of fish and fishery products reached $78 billion in 2014, more than triple the value of global rice exports, according to the United Nations Food and Agriculture Organization (FAO).
“Sustainably serving those lucrative markets is of critical importance to developing countries, where most fish are produced, whether caught in the wild or grown in cages or farm ponds,” the agency’s news release says.
The biennial high-level meeting of FAO’s Sub-Committee on Fish Trade, being held in Agadir through Friday, 26 February, has drawn delegations of fisheries ministries from more than 50 countries to discuss emerging governance needs of the fisheries sector.
“Trade in fish is much more important than people think, both in absolute and relative terms,” said Audun Lem, Deputy-Director in FAO’s Fisheries and Aquaculture Policy and Resources Division, who serves as Secretary of the meeting.
Dialogues will help FAO, its member countries and industry representatives understand new trends, opportunities and challenges in the fishing sector, fostering the development of strategies that can “best position developing countries to develop their fisheries sectors in a sustainable manner and to maximize their economic benefit from the growth we expect to witness,” Mr. Lem said.
Traceability
One major topic for consideration is how to better trace products throughout the supply chain. Ministers are poised to agree on FAO’s proposed technical guidelines for catch documentation schemes, a set of documents testifying to the legal origin of the catch. This could become an important tool in curbing illegal fishing, a target concerning the conservation and sustainable use of the oceans, seas and marine resources under Goal 14 of the 2030 Agenda for Sustainable Development adopted by the UN General Assembly in September 2015.
Central to the effort is FAO’s Agreement on Port State Measures to Prevent, Deter and Eliminate, Illegal, Unreported and Unregulated Fishing, which has now been ratified by 21 nations and is on course to have the 25 national ratifications required to enter into full legal force by the time the Committee on Fisheries, an intergovernmental forum, meets in July.
Work will also focus on harmonizing certification requirements for fish exports to major international markets, where consumers as well as retailers are becoming more alert to quality, safety and legality concerns.
Emerging Trends
New trends will also be among the subjects at the Agadir meeting. Aquaculture output has more than tripled to 78 million tonnes over the past 20 years, making it the world’s fastest-growing food producing sector. FAO expects wild-caught fish to grow modestly in volume terms while its share of the market for human consumption declines to 38 per cent in 2030.
While most fish farms are in Asia, aquaculture's highest growth rates have of late been in Africa and South and Central America, where its marginal contribution to food security can be higher than elsewhere precisely due to the fact that per-capita consumption of fish in these emerging regions has traditionally been low.
Aquaculture, typically far less seasonal and volatile than open-sea fishing, can help food waste be minimized and food safety enhanced, and investments in cold-storage facilities incentivized, all enabling supermarkets to plan and guarantee procurement.
The seafood menu is also changing in many ways, as exemplified by the fact that, for the first time in history, more fresh tuna was flown to the US than to Japan.
Shifts in age-old patterns are likely to become a common feature in the future of fish, especially as developing countries increase their share of world imports. Since 2013, salmon and trout have replaced shrimp as the most important commodity traded in value terms.
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Checkpoints, bribes block trade flow – Report
Trade flow between Burkina Faso to Accra is impeded by at least 54 police and Customs checkpoints, well as unofficial impediments which combine to hamper the smooth flow of trade between the country and landlocked Burkina Faso, a new study has shown.
The study, conducted by the Permanent Interstate Committee for Drought Control in the Sahel with support from USAID, found that one of the major obstacles to development of intraregional trade in agricultural and food products in West Africa is the multiplicity of checkpoints.
“These are the natural forms of administrative barriers and costs of all kinds (official taxes, fees, contributions, illegal payments etc.). These checkpoints cause delays in getting products to consumer markets, and different types of illegal payments increase the cost-price of commodities to the final consumer,” the study revealed.
The study titled ‘Road Harassment on Agricultural Products in the Sahel and West Africa’ was conducted between August and December 2015.
On the Ougadougou, Burkina Faso to Accra route, which is about 1,004 kilometres, the study showed that there were as many as 54 barriers, while each trip cost close to about ₵1,000 in illegal payments and bribes to officials mounting the barriers.
The study was undertaken in the last quarter of 2015 as a collaboration between ECOWAS and selected countries in the Sahel region of Africa, to promote the development of regional trade, enhance and expand the achievements of other programmes in the field, and enhance the flow of trade of agricultural and food products.
The goal of the quarterly study is meant to overcome obstacles and provide regular information on barriers to regional trade; collect data on trade flows along corridors; obtain information from surveys on road harassment, and work with traders, drivers and public officials to facilitate the free movement of people, goods and vehicles in the respective space.
The report is supported the USAID under the Feed the Future initiative of the United States of America government.
The survey data generated are used to produce monthly reports which are disseminate widely, especially policymakers.
These reports are also presented to stakeholders in each of the countries where national meetings known as road shows are conducted, and to share the results of surveys on road harassment involving public authorities, private economic operators, civil society and the media.
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The African Union Commission opens the two-day Capacity Building Workshop for CFTA Members prior to the 1st Continental Free Trade Area Negotiating Forum
The two-day capacity building and information sharing workshop for Member States and other Stakeholders ahead of the 1st Meeting of the Continental Free Trade Area Negotiating Forum (CFTA-NF), kicked off on Monday, 22 February at the African Union Commission (AUC) Headquarters in Addis Ababa.
Experts in Trade Negotiations from Various partners will strengthen the capacity of Chief Negotiators on how to support trade negotiations from both an operational and strategic perspective. The Training will use a combination of lectures, panel discussions and simulations to support skills development and interactive learning. A capacity needs assessment will enable the Commission to draw up further capacity building programmes for Member States to enable them to effectively engage in CFTA negotiations.
The main objectives of the CFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union. But to be able to effectively engage in the CFTA negotiations, stakeholders need to be well equipped with the necessary information and knowledge. This two-day workshop will include highlights on key studies that have been conducted in the past on the establishment of the CFTA as well as presentations on capacity building and perspectives from key partners.
In her opening remarks, the Commissioner for Trade and Industry H.E. Fatima Haram Acyl, recalled that the African Union Commission recognizes the importance of technical and capacity building for Member States to be able to engage in the CFTA negotiations. She mentioned the positive feedback received from the two Training sessions organized last year by the AUC on Trade in services. “It is imperative to consider how we can boost our intra-African trade in goods. This requires accelerating Industrialization through promotion of regional value chains. For this to happen we need to build our domestic industries’ productive capacities by focusing on 5 key areas: infrastructure, trade facilitation, Rules of Origin, trade Finance and Quality Infrastructure,” she emphasized.
Commissioner Acyl encouraged Trade Negotiators to position the continent to take advantage of the trade and investment opportunities that will result from the CFTA. “We need to prioritize the strategic Industrial sectors where we have comparative advantages and growth potential particularly in areas such as Agro-Industry, Mining, Pharmaceutical-Industry and SMEs,” she argued. The Commissioner thanked Member States for the 3 Million US dollars contribution towards the CFTA project.
She concluded by also thanking key partners such as UNCTAD, UNECA, TRALAC (Trade Law Centre), the World Trade Organization (WTO), the United Kingdom Department for International Development (DFID), the European Union (EU), The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), the United States Agency for International Development (USAID) and Sweden for the assistance that the Commission has received and continues to receive from them.
The CFTA is a flagship project of Agenda 2063, which covers 54 countries in Africa, 1 billion people with the potential to create a single market for goods and services with a combined GDP of over 3 trillion US dollars.
The formal session of the CFTA Negotiating Forum will commence on Wednesday 24 February, 2016.
Opening Statement by H.E Fatima Haram Acyl, African Union Commissioner for Trade and Industry
First CFTA Negotiating Forum Meeting, 22 February 2016
It is my pleasure today to address this very important meeting. It is the very first meeting of the Continental Free Trade Agreement Negotiating Forum, set up under the authority of the Heads of State and Governments to negotiate the African Continental Free Trade Area.
The establishment of the Continental Free Trade Area is aimed at integrating Africa’s markets in line with the objectives and principles enunciated in the Abuja Treaty, establishing the African Economic Community. Heads of States have further mandated us to conclude this negotiations by 2017.
The first CFTA Negotiation Forum is commencing with a two day workshop as mandated by the adopted indicative roadmap for the negotiations. This two day workshop will include presentations on key studies that have been conducted in the past on the establishment of the CFTA as well as presentations on capacity building and perspectives from key partners.
The African Union Commission recognises the importance of technical and capacity building for the Member States to be able to effectively engage in the CFTA negotiations. This is why last year, the AUC organised two Training sessions for trade in services, the first was held in Nairobi, Kenya and the second in Dakar, Senegal. We have received positive feedback from Members and we look forward to organising more training sessions along with the negotiations.
Let me take this opportunity to express my appreciation for the various partners that have been working with us in this regard, UNCTAD, TRALAC, UNECA, WTO and DFID through Trade Advocacy Fund.
In the same vein let me also express my appreciation for the assistance that the Commission has received and continues to receive form various partners including the EU, GIZ, USAID, DFID, Sweden.
Let me also recognise the efforts that you a s member states have deployed to make the CFTA a reality, this year alone, we have received US $3 million towards the CFTA special project. This is a demonstration of your commitments and ownership of this important process.
On Wednesday, we will have the formal session of the CFTA Negotiation Forum which will be primarily focused on the adoption of the Rules of Procedure that will guide these negotiations.
I will be important that as your consider these rules, you give guidance on how the private sector and civil society can be involved in the CFTA process. At the end of the day, they are the beneficiaries of the establishment of the CFTA.
It is important for us however, to remember the economic context that has created the need for the establishment of the CFTA. Many of Africa’s 54 countries are small, with populations of fewer than 20 million and economies of less than $10 billion. 12 African states had a population of less than 2 million, and 19 had a GDP of less than $5 billion in 2008. National markets are therefore too small to justify investments, since both adequate supply of inputs and sufficient client bases (demand) remain too expensive or out of reach. The establishment of a continental Free Trade Area in particular will create a single market for goods and services in Africa of over a billion people and a GDP of over 3 trillion dollars providing a good reason to invest in Africa.
Mckinsey estimates that consumer spending in Africa will rise from USD 860 billion (2010) to USD 1.4 trillion (2020) and thus potentially lifting millions out of poverty. As Trade Negotiators, let us position our continent to take advantage of the trade and investment opportunities that will result from these positive developments. The United Nations Economic Commission for Africa (UNECA) calculates that the CFTA could increase intra-African trade by as much as $35 billion per year, or 52 percent above the baseline, by 2022. If coupled with complimentary trade facilitation measures to boost the speed and reduce the cost of customs procedures and port handling, the share of intra-African trade would more than double over the baseline, to 22 percent of total trade by 2022.
As we discuss the CFTA, it is imperative to consider how we can boost our intra-African trade in manufactured and intermediate goods. This requires accelerating Industrialization through promotion of regional value chains. For this to happen we need to build our domestic industries productive capacities and technological, capabilities through regional value chains by giving focus on 5 key areas: infrastructure, trade facilitation, Rules of Origin, trade Finance and Quality Infrastructure.
In addition, we need to prioritise the strategic Industrial sectors where we have comparative advantages and have growth potential particularly in areas such as Agro-Industry, Mining, Pharmaceutical-Industry and SME’s.
Beyond these economic realities however, there are also the happenings at the global and multilateral level that have a direct impact on the establishment of the CFTA. For example, the challenges with the WTO have severely limited the ambitions that are achievable in the context of the Doha Round of Negotiations and possibly other future Rounds of negotiations. In addition, the emergence of Mega Regional Trade Agreements continue to threaten Africa’s market access in established markets – severely diminishing the value of preferences such as AGOA and EBAs, and it appears that this trend will continue to accelerate.
What does this mean? It means that Africa’s destiny is once again in its own hands. While we may not be able to control what happens at the WTO or in the MRTAs, what we make of the CFTA is entirely in our hands. Ladies and Gentlemen, as the Chief Trade Negotiators of our countries – we have been entrusted with this historic and highly important task. We have a chance to make a real difference. I urge us to approach this task with a sense of history and deep commitment. What we decide in the context of these negotiations will have an impact on untold generations of Africans to come.
These are the few words that I will share with you at this moment as there will be several opportunities for us to engage further on these issues throughout the week. I thank you for your kind attention and I wish us a fruitful deliberation.
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tralac’s Daily News selection
The selection: Monday, 22 February 2016
Profiled research report: Outlook for the EU-SADC Economic Partnership Agreement (IFPRI)
The study’s estimates find positive but very limited impacts for trade flows, GDP growth, welfare, and poverty reduction. Exports from the African countries to the EU increase more than exports from the EU to its SADC partners. Import duties placed by the SADC countries on EU imports declined very slightly; for example, the study estimates that Namibia would see a decline in import duties from 3.5% at baseline (2014) to 3.48% in 2035. The EU would also see very slight improvements in its foreign market access, as would South Africa, Namibia, Swaziland, and Lesotho. The only significant change in trade flows is estimated to be that from the EU to Mozambique and South Africa. The study estimates average protection to decline for these trade flows from 7.48% to 6.33% for Mozambique and from 5.68% to 5.17% for South Africa. Such increase in trade flows may result less from the EPA, however, than from the fact that these two countries impose more protections on goods coming from areas outside the EU and SADC. [The authors: Antoine Bouët, David Laborde Debucquet, Fousseini Traoré] [Download]
Assessment survey of trade facilitation measures: Botswana, South Africa, Zambia, Malawi, Namibia (Devex)
MSI is currently seeking candidates to serve as short term roles as local researchers/logisticians in Botswana, South Africa, Zambia, Malawi, and Namibia. MSI anticipates that one candidate per country will be recruited to support the design and implementation of two distinct but related studies: a final performance evaluation of the USAID Southern Africa Trade and Competitiveness Program (the “Southern Africa Trade Hub,” or SATH), and an assessment survey for USAID on the costs and benefits of selected trade facilitation measures in the Southern Africa Region.
Namibia's fishing industry: structure, performance, challenges, prospects for growth and diversification (AGRODEP/IFPRI)
The analysis concentrates on the marine-based fisheries and applies two analytical methods: a qualitative approach that solicits views from local fishing associations and companies and a quantitative approach that uses the decision support model to identify realistic export opportunities. The main challenges inhibiting the growth of Namibia’s fishery sector include a shortage of skilled labor, a lack of vessels, seismic impacts of oil exploration, and threats posed by proposed phosphate mining at sea. The paper also examines the government’s drive for value addition. [The authors: Blessing Chiripanhura, Mogos Teweldemedhin]
East African Business Leaders’ Summit: enhancing the role of the private sector as a driver of the EAC integration process (EABC)
As EAC business leaders, we shall take this opportunity to take stock of our performance and capitalization of the wider market presented by the EAC Integration, challenge ourselves on what we can improve and challenge policy makers on the priority issues that must be resolved to continuously improve the business environment in the region. We shall also look at the need to expeditiously implement the agreed commitments under the EAC Customs Union Protocol, EAC Common Market Protocol and currently the implementation of the East African Monetary Union to facilitate increased intra-EAC trade. Summit participants will engage in: pre-launch of the EAC Code of Conduct and Code of Ethics by the Chairman of EABC and also sign the Code; launch of the EABC Non-Tariff Barriers Report which focuses on addressing core NTBs affecting intra-EAC trade; launch of the EABC Corporate Book.
Related: EABC Summit, 28 February: draft programme, Study on opportunities for the EA private sector to invest along the Northern Corridor (EABC), Lack of consensus delaying common tax regime in EAC (The East African), USTDA: details of East African reverse trade missions
Africa Country Benchmark Report 2016 (IOA)
The ACBR draws on various reputable indices spanning a complementary array of focus areas – business, economic, political and social, as well as insights from more than 40 IOA experts across the African continent. The result is a clear view of African country performance through a comparative assessment, revealing the true country benchmarks of the continent.
A suite of postings from this weekend's 'Africa 2016: Business for Egypt, Africa and World' conference:
Keynote speech by AfDB's President Adesina (AfDB)
Africa must not fall again into the debt trap. To avoid it, there is need to urgently focus on macroeconomic stabilization and fiscal consolidation, and rapidly diversify African economies, broaden the export market destinations, and expand the export mix. And most importantly, Africa must shift its focus to domestic resource mobilization for capital formation for sustained growth. Africa must tap into and securitize remittances for development. Africans investing in Africa sends a powerful signal: remittances to Africa have risen from $11bn in 2000 to over $62bn in 2014, far exceeding Official Development Assistance inflows. Sovereign Wealth Funds assets under management in Africa have risen from $114bn in 2009 to $162bn in 2014. Pension funds currently stand at $334bn. And Africa today generates about $500bn in domestic taxes. Africa must mobilize all these domestic resources to accelerate its development - that way it can decide its own direction and pace of growth. It can develop itself with pride. [Download]
Egypt’s Sisi opens African business forum: calls for joint action (Ahram)
El-Sisi said he looks forward to the logistic and industrial zones that will be established in the Suez Canal zone, describing it as a “major and aspiring project that will contribute to pushing the African trade movement with international markets.” He expressed Egypt's anticipation to continue with the construction of the Cairo - Cape Town Highway, a road network that connects Egypt and South Africa, along with other African countries in between. "I call on my African brother leaders and our partners in development to put together the first building blocks to launch several projects and developmental initiatives in a frame that ensures a needed balance between the legitimate aspirations of the sons of the continent for a better tomorrow and the aspiration of our partners in development to incentives and rewards that open new horizons for more investments and capital flows," El-Sisi said. [Text of speech]
Ambassador Mona Omar discusses importance of Egypt's engagement with Africa (Ahram)
Without “a sustainable approach towards Africa” Omar warned, Egypt’s share of investment in and trade with Africa is bound to remain insignificant compared to the big shares going to other countries like China, Turkey, Iran and Israel. “We have to abandon the on-and-off efforts; we need to realise that our friends and brothers in Africa are sceptical about whether we seriously want to build strong ties of cooperation for the joint interests of everybody or if we are just showing interest now given that we are going through intense negotiations with Ethiopia over the issue of the Renaissance Dam,” Omar said. According to Omar, these two matters should not be made to overlap – because while the path of negotiations seems to be taking a tough curve, the avenues for economic cooperation seem endlessly open.
Egyptian businessmen criticized for neglecting African market (State Information Service)
Chairperson of the COMESA Business Council Amany Asfour criticized Egyptian businessmen for neglecting the African market - one of the largest world markets. This gave a chance for Chinese and Turkish businessmen to take the lion's share of the African market, she said in statements to MENA on Saturday on the fringe of the Business for Africa, Egypt and the World Summit currently held in Sharm El Sheikh.
Related: Egypt's GAFI is developing a work vision between the state and businessmen (Daily News), Aga Khan:'Africa’s moment has come' (Reuters), Salman: ‘Intra-African economic integration essential to speed up global growth’ (Daily News), Egypt's Central Bank signs $500mn trade facility agreement with Afreximbank (Ahram), Egypt, Ethiopia, Sudan agree on measures to strengthen trilateral ties (Ahram), Kenya, Ethiopia, South Sudan in talks over disputed land (The East African)
Gerson Lwenge: 'Nile cooperation - gateway to regional integration' (New Vision)
Among NBI’s priorities for the coming years is strengthening water resources analysis using NBI analytic tools to address key water resources management issues; strengthening commitment to an all-inclusive Nile cooperation and phased implementation of the Hydromet system, which shall cover water quantity, quality and meteorological variables with monitoring stations designed at optimal locations to enhance trans-boundary benefits. All inclusive regional cooperation, through leveraging the Nile resources to foster economic growth, has therefore become an opportunity not to be missed in the context of regional integration processes. [The author is the chairman of the Nile Council of Ministers (Nile-COM), Minister of Water and Irrigation of Tanzania]
UN panel chief, Thabo Mbeki, urges action plans to tackle illicit financial flows (UN)
African countries are not simply asking others to rectify the situation, but are firmly committed to addressing the issue from within, he said. To do that, institutional capacity must be bolstered. At an AU Summit last year, African leaders decided to prepare annual reports on implementation, he said, calling for the establishment of a coordinating mechanism between AU and ECOSOC. ECOSOC President Oh Joon said that implementing the transformative agenda for sustainable development will present formidable challenges. These challenges will be no doubt steepest for Africa, he said. “Stemming illicit financial flows from Africa is both an African and international challenge,” he said. “The call made by the High-Level Panel for engagement with partner institutions to elaborate a global governance framework to address this problem, therefore deserves our full attention.” [Global Financial Integrity statement]
Revenue mobilization and international taxation: key ingredients of 21st century economies (IMF)
New IMF research suggests that once the tax-to-GDP ratio reaches 12½ percent, real GDP per capita increases sharply. Countries should, therefore, aim to remain comfortably above this threshold – say, above 15 percent. In about half of all developing countries, tax ratios are below 15% of GDP – compared with 18% in emerging economies and 26% in advanced economies. [The author: Christine Lagarde]
Kenya: Diaspora remittances rise by Sh12bn in 2015 (Central Bank of Kenya)
South Sudan: Diagnostic trade integration study launched (UNDP)
In his presentation on the salient findings of the report, the Under Secretary of the Ministry of Trade, Industry and Investment, Hon. Biel Jock, highlighted that the DTIS Action Matrix provides concrete pointers on the cross-cutting and sectoral reforms, as well as quick wins to unlock the potential of trade in the country over the next three to five years. “South Sudan has a comparative advantage in the agriculture sector and with concrete efforts on value chains, branding and packaging, agricultural and horticultural can be transformed into exportable items,” says Managing Director of Ebony Centre for Strategic Studies, Dr. Lual Deng.
OECD: Development aid revised to include some military and security activity (Thomson Reuters Foundation)
Funding towards activities aimed at preventing violent extremism can now be reported as development aid, provided they are “are led by donor countries and their primary purpose is developmental”, the Development Assistance Committee, a group that oversees what can be counted as aid, said in a statement. Activities that can now be reported as aid include education, efforts to support the rule of law and work with charities to prevent radicalisation, the 29-member group, which is part of the Organisation for Economic Co-operation and Development (OECD), said after a two-day meeting in Paris.
Japanese government interested to support regional integration agenda (Daily News)
SADC investment opportunities attracts Japanese business federation (SADC)
‘165 days left before Kariba shuts down’ (NewsDay)
TOR for a SADC Regional Common Position for CITES COP17 (SADC)
Trade ministers from G20 to boost cooperation in China (Prensa Latina)
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UN panel chief, Thabo Mbeki, urges action plans to tackle illicit financial flow from Africa
Addressing billions of illicit financial outflows from Africa is imperative as the continent needs domestic resources for its development, said the former President of South Africa, Thabo Mbeki, who chairs a United Nations panel on the issue, urging the UN Economic and Social Council (ECOSOC) and partner institutions to relevant elaborate action plans.
In a special briefing to the Council, Mr. Mbeki, Chair of the UN Economic Commission of Africa (UNECA) High-Level Panel on Illicit Financial Flows from Africa, said the issue of illicit financial flow came up during the discourse on how to mobilize domestic resources in the context of the newly-adopted 2030 Sustainable Development Agenda.
The panel was established at the 4th meeting of the Joint African Union Commission – UN-ECA Conference of African Ministers of Finance, Planning and Economic Development in 2011. “There is now a universal consensus that illicit financial flow is a challenge requiring global action,” he said.
Issues related to illicit financial flows, such as taxation, corruption, the function of the corporate sector, and recovery of stolen assets have been identified, he said, urging ECOSOC to elaborate action plans and practical steps to be taken to address those challenges.
The pdf Addis Ababa Action Agenda (873 KB) and the 2030 Agenda for Sustainable Development, adopted in 2015, provided a positive climate to address illicit financial flows, he said, adding that the indicators for measuring implementation of the development goals, including that for illicit financial flow, must be developed.
African countries are not simply asking others to rectify the situation, but are firmly committed to addressing the issue from within, he said. To do that, institutional capacity must be bolstered.
At an AU Summit last year, African leaders decided to prepare annual reports on implementation, he said, calling for the establishment of a coordinating mechanism between AU and ECOSOC.
ECOSOC President Oh Joon said that implementing the transformative agenda for sustainable development will present formidable challenges. These challenges will be no doubt steepest for Africa, he said.
“Stemming illicit financial flows from Africa is both an African and international challenge,” he said. “The call made by the High-Level Panel for engagement with partner institutions to elaborate a global governance framework to address this problem, therefore deserves our full attention.”
Other members of the High-level Panel also delivered presentations, followed by a question and answer session between Member States and Mr. Mbeki. Interventions were made by South Africa, Sweden, Italy, Zimbabwe, Uganda, Peru, Benin, Botswana, and Gambia.
IOA Africa Country Benchmark Report 2016: Revealing the true country benchmarks of the African continent
IOA’s Africa Country Benchmark Report (ACBR) assesses African country performance from a holistic perspective, with the primary objective of providing readers with an all-encompassing picture that provides the most accurate profile of every country on the African continent.
With this objective in mind, the ACBR draws on various reputable indices spanning a complementary array of focus areas – business, economic, political and social, as well as insights from more than 40 IOA experts across the African continent. The result is a clear view of African country performance through a comparative assessment, revealing the true country benchmarks of the continent.
Assessing African benchmarks across business, economy, politics and society
Africa is comprised of 54 independent nations and the disputed territory of Western Sahara. While some nations are blessed with abundant natural resources and others are harsh desert environments or isolated volcanic islands, all have the potential for greatness. The ACBR shows a wide divergence in African countries’ success at obtaining economies, political systems and social welfare benefits for their people. Some countries do very well, while others are virtual ‘failed states’ – dangerous, miserable places with dysfunctional political and social systems.
Failure or success when applied to a country can be objectified statistically, which is what the component indices of the ACBR do. With numerical ratings and charts, data show the rise or fall of gross domestic products and other indicators of national prosperity. Education levels and health measurements are determined mathematically by the social welfare indices rather than being rooted in anecdotal evidence. Some index data relies on subjective analysis, such as a corruption perception index in which business people provide input; however, by relying on expert opinion, this data becomes credible rather than whimsical. The indices used to compile the ACBR have earned their reputation for probity. From its findings, the ACBR draws larger conclusions that are more than generalisations because they are founded on data from the constituent indices.
How to account for the successes and failures as presented by the indices used to compile the master ACBR? What are the commonalities that influence how a nation performs on the index? With the ACBR a holistic approach is used, in which data from several sources is combined. Having done this, the opportunity is at hand to look at these ‘complete country pictures’ and examine them for clues as to the reasons for good versus bad rankings in the report. What are the microcosmic features that determine the larger picture of a country’s overall standing?
Overall, an analysis of the continent’s 54 nations to determine which succeed and which fail does find a common thread: political maturity in African countries corresponds with stable governance and sound economic development. Such political maturity, in which Rule of Law is enshrined above the power of the leader or faction and where human rights are respected, term limits are honoured by presidents and separation of power guides governing institutes, is not a result of a country’s age but of the will of a country’s people to be ruled by equitable governments that respond to their needs and which put laws above men. Where political maturity is absent, where autocrats run roughshod over oppressed populations and governance institutions are no more than the will of one powerful man, a state falters on instability and its people are mired in armed conflict, ill health and poverty.
As the ACBR examines the business, economic, political and societal indices compiled by a variety of organisations throughout the world, Africa’s best performing countries in terms of prosperity, security and stability are all grounded in Rule of Law. From an examination of myriad charts and graphs on which organisations as diverse as Human Rights Watch and the World Bank seek to illustrate in numerical form the fortunes of nations, it is clear that some qualities are closely bound to other qualities; indeed, they cannot exist in isolation from each other. Good governance goes hand in hand with economic prosperity. Pluralism is linked to the state of a nation’s security. Quality of life is best enjoyed by those living in democracies.
On the opposite end of the scale are the miseries of nations under dictators and autocrats. Non-democratic states drain an economy’s vitality through corruption, overregulation, nepotism and cronyism. The greedier and more power-hungry a leader, the less free, healthy and prosperous are his subjects.
For instance, South Africa enjoys Africa’s most economically advanced economy and a human rights-based democratic government that is the governance ideal of the continent. However, nothing is static in any country’s development. Having liberated South Africa from the apartheid era, the African National Congress (ANC) is becoming insular and allegedly corrupt, and shows a desire for a state-controlled command economy that is opposed to the free market economy that has been so successful. The result has been a business confidence crisis and street protests against government’s inability to provide social services. If the ANC government continues with its current policies, the economic and political data that inform the ACBR will reflect a shift in the country’s fortunes.
Politically, then, countries do well that have gained a grounding in democracy that curbs political ambitions for the greater good of all citizens. The countries’ performances in the remaining categories considered in the ACBR follow accordingly. Where political tyranny exists, rankings on societal indices decline. Countries may have high per capita incomes according to the indices, and these may be real in the case of Mauritius where national wealth is relatively evenly distributed, or the statistic may be illusionary, such as in Angola and Equatorial Guinea where corrupt leadership commands a lion’s share of the GDP at the expense of ordinary citizens.
ACBR Business Analysis
African countries that perform best overall in the business quadrant have governments that strongly support entrepreneurs both local and foreign, and strive to stimulate business growth. These countries are aware that there are few things more detrimental to the healthy growth of a country than a poorly structured environment for business development. In order for African countries to move away from natural resource dependency in an age of services and value-added resources via manufacturing, countries with successful business models have in place structures that attract foreign as well as domestic investors, and both understand and implement pro-business policies.
A conducive business environment for start-ups and new entrants alike is a pre-requisite for good performance in the business quadrant. Countries such as Ghana, Mauritius, Namibia, South Africa, Tunisia and Zambia have all put in place mechanisms that enhance the functioning of businesses from registering property to dealing with construction permits. These nations have enshrined policies that protect minority investors and ensure smooth trade across borders. Unlike countries favoured by the possession of natural resources who become complacent with the income from extractives and, in effect, become poorer because they do not diversify their economies, nations with successful business models constantly look to expand their economies in bold new directions. A common denominator between countries that enjoy good foreign investment are policies that offer incentives to both foreign and local investors.
Top performers within the business quadrant have another commonality: a strong capacity for civil society oversight with regard to business operations. Countries such as Mauritius, Rwanda, South Africa, Tanzania and Zambia have in place means to monitor business fair play. Without oversight, businesses would be able to flaunt laws of governance in an attempt to maximise profit at the expense of local communities, as has been the case throughout Africa where totalitarian regimes look to benefit from multinational deals to the detriment of the domestic population.
Illicit business activities have been one form of corruption that has most negatively impacted nations’ business environments. A system of checks and balances in business deals is essential for any country seeking to provide an environment that will favour business development and growth. African nations that perform well in the business quadrant have in place systems to control bribery in business activities. These same countries also look to enhance efficiency and stimulate innovation within the business sector, leading to policy reforms if these prove necessary. New technologies being introduced into the markets can stimulate innovative solutions to problems while also maximising the available output on a daily basis.
Conversely, the worst performers in the business quadrant show similar ailments that necessarily deter business development and drive away investors who then seek out more feasible markets. Poor business and poor governance environments go hand in hand, as witnessed by the problematic business landscapes of the Central African Republic, Chad, Eritrea and South Sudan. From starting a business and dealing with construction permits, through to registering property, getting credit and paying taxes, these four nations all perform poorly. Without the necessary tools and mechanisms for business operations to function optimally, new enterprises generally do not survive beyond the first 24 months. These countries also fail at stimulating the private sector and necessarily leave business operations up to government, which is invariably inefficient. In the current global sphere of capital markets, African nations with command economies cannot compete with freer markets and their businesses are at a disadvantage in cross-border deals.
Further deteriorating the business environment is poor enforcement of anti-bribery laws. Angola, Burundi, Chad and Guinea are foremost amongst nations that fail to stifle illicit business activities. Some nations, as in the case of Angola, even encourage corruption as a means to enrich the political leadership. Lack of civil society oversight and transparency in government invariably accompany poorly enforced anti-bribery laws in these countries. If a nation is not willing to decentralise power to its citizens and restricts information on the true state of the economy and government actions, the business environment becomes untenable for the success of local and international businesses. The only firms that survive are those that are subservient to government demands that come with government-controlled financial opportunities. Angola again is a case in point – there is a lack of government transparency in business operations and also restrictions on the involvement of civil society at any level, so that profits from Southern Africa’s most lucrative oil industry line the pockets of the ruling Dos Santos family.
ACBR Economic Analysis
African countries that enjoy the best economic performance possess characteristics of strong institutions that guide economic development that are in line with international law on trade governance. Political and economic development go hand in hand and the economies of these countries are well governed through enacted laws and regulations that maximise the benefit accrued by economic growth. Through the implementation of appropriate laws and structures, property rights, business, investment and trade freedoms are enshrined in business activities and operations and are made evident through consistent growth and development.
Those countries that have performed well in the economic quadrant have developed strong market and business sophistication. Again, countries such as Mauritius and South Africa, but also Seychelles and Tunisia, have evolved their markets in a way that is conducive to economic development and entrepreneurial growth. Although small countries geographically and in terms of populations, both Mauritius and the Seychelles have looked to diversify their economies over time and attract investment in sectors that have been targeted for development. South Africa has also looked to more than resource exploitation and given substantial attention to a variety of sectors, including agriculture, financial services and tourism.
Regulation and strong institutions are other common factors that the top performers exhibit. Countries such as Kenya, Rwanda and Uganda look to exercise less regulation over business activities, but have put in place increasingly adaptable institutions to steer economic development. The Rwandan market is small but it is dynamic and looks to constantly re-position itself to attract investment. Such a system of de-regulation coupled with good governance seeks to enhance the independent growth of business activity while also ensuring that procedures and laws are followed.
African countries that are excelling in the economic realm also make use of the human capital at their disposal and ensure property rights. Countries throughout Africa that excel economically are incorporating their young citizens in development initiatives. Botswana, Ghana and Zambia perform well in this regard. Each of these countries has the ability to tap into a large pool of under 25-year-old human capital that will both be included in development and contribute to economic growth from a consumer perspective. Though South Africa is another top performer, there is still a way to go in terms of the government’s development plans to incorporate greater portions of the youth into the labour force.
African nations that are the worst performers in the economic quadrant display commonalities that inhibit stable and consistent economic growth. Foremost of these is overbearing levels of government involvement in economic activities. At the same time, they also show a dire need for infrastructural development to stimulate economic growth. Economically failing states such as the Central African Republic, Chad and Zimbabwe highlight a consistent inability to allow free market forces to dictate supply and demand. Other countries with poorly performing economies, such as Burundi and Somalia, fail to stimulate economic development or to step back from the overregulation of their markets.
Weak knowledge and technology outputs have also been the downfall of economic growth in African states. Burundi and Swaziland are examples of conflicted or undemocratic countries where little innovation takes place and output is confined primarily to natural resource extraction. Such countries tend to have totalitarian regimes in power that show no interest in economic growth to benefit the general population, but rather growth that directly enriches the governing regime. King Mswati III of Swaziland and Pierre Nkurunziza of Burundi are both notorious for benefitting from state coffers while allowing their citizens to live in poverty. As a result, they also have an underutilised labour force that is poorly educated and lacks the knowledge to participate meaningfully both in the economy of their countries and the political development thereof. Nigeria, with nearly 180 million people, also makes poor use of the available labour force, far preferring a dependency on oil revenue without the necessary economic diversification one would expect from the largest economy in Africa.
Given the dominance of capitalism and free markets in Africa since the 1990s, it is an inevitability that countries need to open up their markets to foreign investment and trade. Regulation is necessary but it must be calculated to generate the greatest returns possible both for governments and the citizenry. Africa’s best performing countries economically are those that have allowed free market mechanisms to dictate supply and demand trends, but also have in place strong institutions to steer market forces. They also look to increasingly adjust and adapt their markets and businesses that function within them to accommodate the evolution of the economy. Business owners are provided with property rights to take control of their enterprises, while labour is well utilised in areas of growth and demand. By comparison, African nations that perform poorest economically have overbearing government regulation of the market space that makes it difficult to conduct business. They also tend to lack efficient energy and transportation infrastructure, which makes it difficult for businesses to thrive and grow. Compounding these maladies is a poorly educated and underutilised labour force. An environment of poor knowledge and technology output tends to leave countries at the mercy of foreign aid and donors in times of economic instability.
Meanwhile, governments that are successful at stimulating economic growth are those that have managed the right balance between governing economic growth and making the best use of their human capital. Those that fare poorly allow government to meddle in economic initiatives, resulting in stagnant growth while also restricting avenues to free market forces.
IOA’s closing remarks and a look ahead to 2016
The ACBR combined extensive African in-country presence and expertise with an assessment of some of the leading indicators of country performances to achieve an ultimate, holistic picture of each African country and to identify the commonalties and differences the define the top and bottom performers. The report presented some expected results and also some surprises.
The conclusiveness of index performance clustered into four quadrants – business, economy, politics and society – showed that often, though not uniformly, individual indicators can suggest a country’s standing in other fields. A country that is performing poorly in political indicators is unlikely to perform well in economic and social indicators because government is unable to create sound economic policies or provide for the needs of its citizens.
Consequently, some results that might be anticipated include poor holistic performances of countries in conflict, such as the Central African Republic, the Democratic Republic of Congo and Somalia, or countries led by despots, such as Equatorial Guinea and Zimbabwe. It may have come as no surprise that politically stable and democratically-run countries rank highly on business, economic and social indicators. No country’s quadrants exist in isolation and they should therefore not be treated as such – in research or in practice.
The surprises include the higher than expected rankings relative to other African nations of such countries that seemingly have little to offer, with Lesotho and Swaziland as two examples - ranked higher on the totality of indices than such continental giants as Côte d’Ivoire and Nigeria. This is indeed an anomaly until the phrase “relative to other African nations” is considered. These countries do particularly poorly relative to Western nations and even to developing countries elsewhere in the world.
However, some of Africa’s giant democracies, rich in resources and human capital, are plagued by crises such as Nigeria’s Boko Haram terrorists and Egypt’s post-revolution struggle to balance civil liberties and security against ISIS terrorists.
Smaller, resource poor and non-democratic countries may be spared civil war or insurgency crises during a year under review, and this assists them in the rankings relative to other countries. In other words, often the ACBR shows countries that are performing poorly across all four quadrants, and yet holistically perform better relative to the perceived giants of the continent, who continue to struggle with balancing economic growth and international business interest with strong political governance and social development.
The top five countries in terms of overall performance in the ACBR are Mauritius, Botswana, Namibia, Cape Verde, and Seychelles. They all have one commonality: they are small nations in terms of either size (Cape Verde, Mauritius and Seychelles are islands) or population (the relatively sparselypopulated desert lands of Botswana and Namibia). Smaller populations do not mean fewer social issues, and all these countries have had to deal with poverty, education, health and the creation of a modern economy. Where these five nations succeed is their ability to provide better economic opportunities and social services, and this is grounded on responsive and sometimes progressive governance. While hardly flawless, the governance in these countries is still the bedrock on which the country’s business, economic and social sectors rise. Secondly, although Botswana has its diamond reserves, the other four countries have no appreciable natural resources and must rely on innovation and the attractiveness of their natural environments, be these the pristine deserts of Namibia or the lure of a tropical island paradise to attract foreign investment. ACBR’s top five performers have worked hard for national advancement.
Thirdly, these countries have achieved the inclusion of all their people in the success of their country that is the heart of representational democracy. Social, ethnic and religious tensions can be found in even the best performing countries in the ACBR. However, these are managed with respect between groups. Lesser performing countries are torn by civil war, terrorism and tribalism, in which respect for others is not a consideration, or by coups d’état in which usurpers respect only the efficaciousness of blunt power.
Crises come and go, transforming political landscapes and affecting countries business climate and the economic and social welfare of populations. Such crises also affect the indices that comprised the ACBR. African nations’ rankings are in constant flux. Comparable rankings for European countries are stable to the point of seeming frozen in place, as are the developed countries of Asia. A coup d’état in Africa can cripple a prosperous country’s performance across all quadrants, as was the fate of Côte d’Ivoire in 2000 before the country’s slow rise in indices reflected its return to political stability and prosperity. Other African nations have experienced precipitous drops in rankings, only to recover.
The results on display in the 2016 edition of the ACBR are definitive but transitory. As events unfold in the months and years ahead, many African nations will persist in their efforts (however significant or insignificant they may be) to climb the rankings across all four quadrants to improve the lives of their citizens and increase foreign interest and investment. As they do so, it is the IOA team’s hope that the ACBR will provide governments with valuable insights into the yardsticks that should be strived towards and their fellow African countries that they should look to as examples to follow (or not follow). The ACBR also serves to better inform international businesses and institutions on the true, holistic standing of African nations and reveals for the first time Africa’s country benchmarks.
» Download the full IOA Africa Country Benchmark Report (ACBR) 2016.
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Development aid revised to include some military and security activity – OECD
The world’s biggest donors agreed on Friday to expand the definition of development aid to include limited forms of counter-terrorism measures and military activities or training, a move campaigners said could divert scarce funds away from the poorest people.
Funding towards activities aimed at preventing violent extremism can now be reported as development aid, provided they are “are led by donor countries and their primary purpose is developmental”, the Development Assistance Committee, a group that oversees what can be counted as aid, said in a statement.
Activities that can now be reported as aid include education, efforts to support the rule of law and work with charities to prevent radicalisation, the 29-member group, which is part of the Organisation for Economic Co-operation and Development (OECD), said after a two-day meeting in Paris.
Some limited forms of military training will also be eligible, provided they are done under civilian oversight, with civilian participation and have a clear purpose for the benefit of civilians, the communique said.
The committee stressed the financing of military equipment or services is “generally excluded” from aid reporting and that aid must not be used to promote donor countries’ security interests.
The committee also said it would start tracking private finance flows as aid to recognise the importance of strengthening private sector engagement in development.
Less money for the poor?
Campaigners had expressed concern earlier last week that aid meant to help poor people in developing countries would increasingly be used to pay for security costs and hosting migrants, in particular in light of the European refugee crisis.
“We’ve embarked on a very slippery slope,” Sara Tesorieri, deputy head of Oxfam’s EU office, said in response to Friday’s announcement.
“It is hugely disappointing to see governments taking steps to twist aid into a tool to advance their own security agendas.”
The committee said it had agreed to work on ways donor countries could better respond to the current refugee crisis, with the aim of ensuring the costs of looking after migrants do not eat into aid budgets.
Faced with the substantial cost of looking after a record one million migrants who arrived in Europe last year, several governments have already diverted money from their development aid budgets to pay for hosting the new arrivals.
“These decisions run the risk that aid will benefit rich countries in the future instead of going to poverty reduction in developing countries,” Jeroen Kwakkenbos, policy and advocacy manager at the European Network on Debt and Development.
Official development assistance (ODA) reached a record high of $137.2 billion in 2014, up 1.2 percent from 2013, but the poorest countries’ share dropped by 9.3 percent, leaving them with less than a third of overall aid.
Adrian Lovett, Europe executive director of advocacy organisation ONE, said donors had failed to ensure that vital resources for refugees arriving in Europe are not taken from existing commitments to the world’s poorest.
“By extending aid rules to include more peace and security costs, the OECD risks further eroding what is available for the poorest countries,” he said.
Better aid for more effective development
The members of the OECD Development Assistance Committee (DAC) met in Paris 18-19 February 2016 to modernise the way official development assistance (ODA) is measured and to incentivise better mobilisation of private investments for development. Reaffirming their commitment to the 2030 Agenda for Sustainable Development and its Sustainable Development Goals, they stressed that in implementing these ambitious universal goals, ODA must encourage private investment strategically and effectively.
DAC members recognised the particular challenges of investing in poor countries and agreed that such efforts should be appropriately credited. They also reaffirmed their ODA commitments and agreed to reverse the declining trend of development assistance to the least developed countries.
DAC members agreed to update the definitions of when expenditures for peace and security may be reported as ODA. This includes making small adjustments to make development assistance work more efficiently in countries affected by fragility and conflict, for example the use of military aircraft for the delivery of medical help in health emergencies such as the recent Ebola crisis.
The multiple refugee crises in the world have applied pressure in countries and regions of origin, transit and destination. OECD and non-OECD countries at all income levels are struggling to address the resulting humanitarian, budgetary, security, political and development challenges. Over the long term, development will be key to addressing the root causes of these movements, and development efforts will have to play a central role. DAC member countries also agreed to work together towards a long-term solution that will improve the consistency, comparability, and transparency of the reporting of in-donor refugee costs as ODA.
Participants agreed to launch a process to transform the DAC, ensuring that it is representative and maximising its relevance and impact in supporting the 2030 Agenda. The participants in the High Level Meeting included representatives from the 29 DAC member countries, as well as many nonmember countries, international organisations, and civil society and private sector stakeholders. An important part of the discussion focused on how to open up the DAC to bring in new member countries, including recipients of development assistance.
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Africa 2016: Egypt business forum promotes key African ties
Egyptian President Abdel Fatah el Sisi is calling on African leaders to invest in education so that the continent’s peoples can acquire the skills to contribute to the region’s economic growth.
“Africa needs to concentrate on transforming societies… using innovation and research as a basis for future success,” he said. The Egyptian leader was speaking at the opening of an investment conference in Sharm el-Sheikh, the historic Egyptian tourist hub in the south of the Sinai Peninsula.
The two-day gathering brought hundreds of business leaders together with government officials and heads of international organizations to discuss trade and investment as engines of progress.
Several African heads of state participated, including Nigeria’s Muhammadu Buhari, Teodoro Obiang Nguema of Equatorial Guinea, Gabon’s Ali Bongo and Sudanese President Omar Al Bashir, whose global travels are limited by sanctions resulting from an International Criminal Court indictment but who is able to travel widely in Africa.
Ethiopian Prime Minister Hailemariam Desalegn, in a presentation to the conference, said: “Today, in our globalised world no country can achieve development in isolation”.
Sisi told delegates that Egypt wants to work with other African countries to help develop institutional and human capacity, with a particular focus on the needs of young people.
“Crossing into the future requires taking into account the advancement of technology and paving the way for generations that have the capability to face current challenges,” he said. Young people are the focus of economic and legislative reforms that will accelerate investment, he said.
Organizers say the forum intends to strengthen intra-African business ties by reflecting on the “African opportunity,” which will encourage policy makers to take steps that will make it easier for investors to access markets. The Egyptian president said his country’s investment on the continent currently exceeds U.S. $8 billion, while the volume of its African trade has increased by U.S. $5 billion over the past 5 years.
During a presidential roundtable discussion which followed the opening ceremony, Bongo urged Africans to recount their own narrative, saying that although they have worked hard to attract investment to the continent, “it has not been recognized enough”. He said the continent’s progress “didn’t just happen overnight” but comes through the hard work of Africans themselves. Bongo said the future can be a “great one” if the continent’s leaders decide to work together. “And if others want to invest, it will have to be with Africans.”
While the focus on manufacturing and infrastructure is paramount, Bongo said, equally important is for leaders to have a shared vision. “We have to lead,” he said, adding that opportunities must be given to African businesses, along with encouragement to invest in other African countries.
Equatorial Guinea’s Nguema spoke of the need for African integration, which he called “the key point for our development.”
Nigeria’s Mohammadu Buhari, who presides over the continent’s largest economy, lamented the sharp fall in the price of oil on the global market, which he said has adversely affected his country’s currency, the Naira. “But we are absolutely clear about the effect of devaluing our currency”, he said, in an apparent counter to suggestions for him to do so. Unlike developed economies that compete in exportable goods, he said, Nigeria is an import-based economy and currency devaluation is not an option.
President Omar Al Bashir of Sudan highlighted laws that his country has implemented to encourage investment. “We do have a high council on investment, presided over by the president,” he said. He also said his country has taken steps to improve access to financing in order to help reduce poverty. “We have institutions particularly working on financing for young people in different sectors, as well as women,” he said.
Top African economic leaders participating in the forum include Carlos Lopes, executive secretary of the UN Economic Commission for Africa, and Akinwumi Adesina, president of the African Development Bank.
In a welcome development for Egypt, the forum host, Adesina announced Saturday that the bank will provide US $1.5 billion towards the country’s new administrative capital, planned to be built east of the ancient, congested sprawl of Cairo, whose population of $18 million is projected to double within four decades.
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Breaking the gender earnings gap
Women in typically male sectors earn as much as their male peers and three times more than other women, according to a study in Uganda.
Betty Ajio has made a living for the past 23 years doing a job that most women would not think of doing.
The 43-year-old metal fabricator makes 120 to 230 cooking pots a day in Kisenyi, a slum in the heart of Kampala, Uganda.
Ajio and her four male employees operate in sweltering conditions. They shovel dirt and pour molten metal to make the pots. Ajio admits the work can be grueling, but says she would not trade her job for an easier one.
“I prefer doing this, because I think I can earn more than by selling clothes or vegetables,” she says.
Ajio is a fairly rare phenomenon in Africa and even globally as a woman in a male-dominated industry.
About 6% of female entrepreneurs in Kampala work, like Ajio, in a mostly male sector, says a study of 735 entrepreneurs in the city.
They earn, on average, as much as their male peers and three times more than women in more traditionally female sectors, according to “Breaking the Metal Ceiling: Female Entrepreneurs Who Succeed in a Male-Dominated World.”
Women around the world tend to be clustered in industries that see lower profits than sectors where men are dominant, according to the World Bank’s 2012 World Development Report on gender equality and development.
“The segregation of jobs by sex is something that you see in every country of the world,” from Sweden to Bangladesh, says economist Markus Goldstein, one of the 2012 WDR authors and the lead economist in the World Bank’s Africa Gender Innovation Lab. “It’s not something that automatically goes away with economic growth”
Gender segregation of the workforce is a “big component of the earnings gap between men and women,” he adds. “This is well known and the changes over time are well documented. The question is how to fix it.”
Goldstein was working on an entrepreneurship project in Kampala when he noticed a pattern in the findings that raised the question: What drives some women to venture into mostly male industries? Is there something different about them?
In what may be the first research of its kind, the “Breaking the Metal Ceiling” study tried to find out.
The study analyzed data collected in 2011 to see if the small number of women in male-dominated industries had special abilities or characteristics.
Goldstein says he fully expected the women to be “super-entrepreneurs. I thought it was easily about entrepreneurial ability. It turned out it wasn’t,” he says.
“In the sense of having abilities that are far above the average in any of the dimensions we could measure, that doesn’t appear to be the case.”
Instead, the biggest factors influencing women were support from their households and mentoring – in particular, from a male role model.
The women, dubbed “crossovers” by the researchers, were 3.5 times more likely to have been introduced to their work by a male family member. They were 80% more likely to have had a male role model than other women.
They were also much more likely to have been exposed to the sector at a relatively young age with the support of someone they trusted, typically a male, who helped them,” says Francisco Campos, a co-author of the “Breaking the Metal Ceiling” study.
The study was replicated in Ethiopia in 2014/15 to see if the results would be the same and to accumulate more evidence in the region. This study found that a woman’s husband seems to play an important role in helping her cross over to a male-dominated sector, says GIL economist Niklas Buehren. Husbands provide finance and also introduce women to the kinds of skills they need, and often the couple co-founds a business and go “together into that sector,” he says.
Often, however, crossovers are single – never married, widowed, or divorced.
And curiously, the crossovers were 93% less likely to have been influenced by their teacher, according to the Uganda study – perhaps because schools tend to reinforce traditional professions for women, says Goldstein.
“The real reinforcers of gender norms in Uganda are the teachers,” he says. “If teachers influenced you in your choice of profession, you’re going to be a hairdresser or a caterer.”
Another factor seems to be lack of information about how much people earn.
In Uganda, “more than 75% of women in traditional sectors that make less don’t know they make less, on average, than those who cross over. So there’s an information gap in general,” said Maria Muñoz Boudet, another co-author in the study.
Women in Ethiopia “didn’t seem to be aware that sector choice matters for income,” says Buehren. “It’s hard information to get, and there is a lack of data.”
Amid the bustle of Kisenyi’s metal fabrication production line, Ajio explains that her father introduced her to the trade. He was retiring from his business when he realized she could step into his shoes and make a good living. He encouraged her to take over and arranged for a friend to train her, she says.
Today she supports her seven children and two children of her siblings. She encourages other women to do the same kind of job – and several have come, she says.
A few steps away from Ajio’s workshop, Christine Lamum, 46, describes what she does as “jua kali” (a small-scale informal business) – manning one of many cauldrons in Kisenyi that turn car parts into liquid metal for the cooking pots. Lamum used to trade in vegetables in Gulu, a district in northern Uganda, but switched careers in 2002, after moving to Kampala to find a job. She saw men working in the slum and joined in, and now has enough money to send her eight children to boarding school, she says.
Lamum says she tells other women they could make their lives easier by doing what she does. “They shouldn’t minimize this kind of work because maybe it’s a man’s job. Everything is possible. Men and women can be equal.”
Given the studies’ findings, Campos says he thinks the next step should be a pilot project that provides information to women about opportunities in non-traditional fields, along with training and mentorship.
Developing countries should try to ease the path for women to enter male-dominated industries, says Goldstein.
“If you care about economies growing, then this seems like a much better way to get people to the jobs they’re better suited for – which would make your economy grow. It will also make those people happier, because you’re not ruling out whole professions for people. There’s more choice for them to find something that will make them happy, and it will also address gender inequality in earnings, so we’ll get more equality.”
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Revenue mobilization and international taxation: Key ingredients of 21st-century economies
Creating successful 21st-century economies requires robust government revenues and an international tax system that works for everybody, said IMF Chief Christine Lagarde at the Arab Fiscal Forum in Abu Dhabi on 22 February 2016. These ingredients are essential for growth, fairness, and development.
Good morning – Sabah Al-Khair
Ministers and Governors – thank you for honoring us with your presence. It is a great pleasure to speak before such a distinguished audience.
Dear Minister Al-Tayer: Thank you for your generous hospitality and the gracious introduction, and thank you, Dr. Al-Hamidy, for joining hands with us to organize the Arab Fiscal Forum.
This event is taking place at a pivotal moment not only for this region but for many other countries that have seen fiscal issues rise to the top of their policy agendas.
Or, to be more precise, it is taxation that has risen to the agenda in many countries. If you wonder why this issue has become so important, let me assure you that this is nothing new in the history of mankind!
Already some 260 years ago, the great philosopher and economist Adam Smith noted:
“Little else is required to carry a state to the highest degree of opulence... but peace, easy taxes, and a tolerable administration of justice.”
It is striking that he singled out taxation alongside peace and justice as the key to a successful society. This insight is now more important than ever.
Today, I would like to take Adam Smith into our modern time and talk about two ingredients of taxation for successful 21st-century economies.
The first one is the ability of countries to generate robust government revenue. This is, of course, the lifeblood of modern states. This is what allows governments to provide public goods that support strong and durable growth.
The policeman on the beat, the nurse who is attending to a patient, the teacher who is inspiring young minds, the scientist who is conducting cutting-edge basic research: these are only some of the people who could not do their work without reliable government income.
Now, we all know that, right now, there is in many countries a pressing need to generate higher and more reliable revenue, although not necessarily for the same reason.
For example, oil exporting-countries are adapting to a new reality of low commodity prices. Developing economies need more domestically generated revenue to achieve the new Sustainable Development Goals. And some advanced economies, especially in Europe, need higher fiscal revenue to bolster their economic recovery and financial stability.
The second ingredient of successful 21st-century economies is international taxation. This is an essential means by which governments mobilize their revenues in a globalized economy.
Recent headlines about Google, Starbucks, or Ikea have underlined that an international tax system needs to work for everybody. We need a system that discourages the artificial shifting of profits and assets to low-tax locations. And we need a system that discourages overly aggressive tax competition among countries.
In other words, we need a tax system in which ordinary citizens are convinced that multinational companies and wealthy individuals are contributing a fair share to the public purse, to the common good.
While talking about these two angles of taxation, I would also like to highlight the role of the IMF in helping counties achieve the best possible form of government financing – one that is reliable, fair, and efficient.
1. Revenue Mobilization
So let us start with the first ingredient of successful 21st-century economies – revenue mobilization – which is on the minds of so many policymakers, especially in the Middle East and North Africa.
Higher government revenues would create much-needed fiscal room for maneuver and allow for more spending on all the things that drive potential growth over the medium term, including infrastructure, healthcare, and education. In addition, more reliable sources of revenue would help avoid volatility in public expenditure and pro-cyclical fiscal policy.
Oil exporting-countries
This is particularly important for oil-exporting countries that have been heavily affected by the recent plunge in oil prices.
Last year, for example, oil exporters in the MENA region lost more than US$340 billion in oil revenue from their budgets, amounting to 20 percent of their combined GDP.1
Not only have oil prices fallen by around two-thirds from their most recent peak, but supply and demand-side factors suggest that they are likely to stay low for an extended period. The size and likely persistence of this external shock means that all oil exporters will have to adjust by reducing spending and increasing revenue.
Of course, the fiscal adjustment needs vary from country to country. For instance, thanks to their prudent polices, most members of the Gulf Cooperation Council (GCC) are now in a position where they can pace their adjustment over several years and thus limit the impact on growth.
It is also worth remembering that GCC economies have made large fiscal adjustments in the past – and I am confident that they can do it again.
At the same time, these economies need to strengthen their fiscal frameworks and reengineer their tax systems – by reducing their heavy reliance on oil revenues and by boosting non-hydrocarbon sources of revenues.
This would help bolster growth and job creation and, at the same time, help to maintain debt sustainability and strengthen resilience. It also provides a unique opportunity to design tax systems that emphasize fairness, simplicity, and efficiency.
How can GCC countries achieve this?
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Start by putting in place a simple system that initially focuses on VAT – ideally, a harmonized regional VAT. Even at a low single-digit rate, such a tax could raise up to 2 percent of GDP.
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Add to this a greater emphasis on corporate income taxes, as well as property and excise taxes.
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And continue to invest in building tax administration capacity that could eventually allow for the introduction of personal income taxes.
Progress is already visible in many countries. In Kuwait, for example the IMF has assisted in the study and design of broad-based taxes, such as VAT and business profit tax.
This work has contributed to a national dialogue on why and how Kuwait should diversify its revenue sources. Proponents of reform argue – rightly – that this would allow the country to better manage the fiscal risks associated with volatile oil prices.
Middle-income oil importers & low-income countries
Likewise, many middle-income oil importers are also facing significant challenges in revenue mobilization and designing more equitable tax systems.
Oil importers in the MENA region, for example, generate tax revenue of about 13 percent of non-oil GDP, on average – compared with 17 percent in other emerging and developing economies.2
Clearly, there is scope for revenue increases – again, by broadening the tax base, making personal income tax more progressive, and eliminating privileged corporate income tax regimes.
A good example is Tunisia, where some export-oriented companies benefited from extremely favorable tax treatment and limited regulations over the past three decades. It is estimated that the total cost of fiscal incentives for these privileged firms amounted to about 2 percent of GDP in 2012.3
The Tunisian government has since halved the tax differential between these companies and their less privileged peers. A further reduction of this tax differential would maintain Tunisia’s competitiveness, while creating a more equitable and efficient system.
What about low-income countries?
In these economies, additional fiscal space is critically needed to provide the opportunity for greater investment in human capital and infrastructure.
New IMF research suggests that once the tax-to-GDP ratio reaches 12½ percent, real GDP per capita increases sharply.4 Countries should, therefore, aim to remain comfortably above this threshold – say, above 15 percent. In about half of all developing countries, tax ratios are below 15 percent of GDP – compared with 18 percent in emerging economies and 26 percent in advanced economies.5
This is why domestic revenue mobilization is an imperative for those countries that are seeking to achieve the new Sustainable Development Goals. It means implementing tax systems that are simple, broad-based, and fair.
Of course, it also means that – once revenues are raised – they must be spent efficiently and effectively in support of inclusive growth. Strong fiscal institutions and public financial management are essential.
These are areas in which the IMF is providing extensive technical assistance and capacity building every day.
2. International Taxation
Let me now turn to international taxation – another key ingredient of successful 21st-century economies.
As I noted previously, taxation is the tool that allows governments to mobilize their revenues. But these vital efforts can be undermined by overly aggressive tax competition among countries. This beggar-thy-neighbor strategy hurts everybody.
As you know, tax evasion and avoidance is not only hitting the headlines recently, but is also at the top of the global policy agenda. This reflects frustration in many countries at a time of rising fiscal pressures and modest global growth. It also reflects anger among many ordinary citizens around the world over rising inequality of income and wealth.
In fact, there is a widely shared recognition that too many multinational companies and wealthy individuals are “gaming” a creaking system of international taxation that is no longer fit for the modern global economy.
Let me be clear: significant progress has been made in recent years. A good example is the automatic exchange of taxpayer information among governments. This new global standard will make it harder for wealthy individuals to avoid income and wealth taxes by moving assets to offshore locations.
These low-tax locations have become part of the increasingly vigorous debate on excessive income and wealth inequality. According to one estimate, about 30 percent of Africa’s financial wealth is held offshore – and the percentages are thought to be even higher in some major oil-producing countries.6
The BEPS project
On the corporate side, we have also seen significant progress. Let me highlight the recent agreement by the G20 on measures to prevent “base erosion and profit shifting”. This so-called BEPS project led by the OECD is an important step in the right direction, because it seeks to prevent multinational companies from artificially shifting profits to low-tax locations.
The OECD estimates that government revenue losses from this kind of tax avoidance have grown to as much as $240 billion a year, or 10 percent of global corporate income-tax receipts.
In other words, the BEPS project is good news for countries that are seeking to protect their national tax bases and bad news for corporate tax avoidance strategies.
Nevertheless, much more work needs to be done both in terms of substance and scope.
On substance, it is clear that the BEPS rules are designed to work within the traditional architecture for international taxation. This system was developed nearly a century ago for a world in which cross-border trade was far less important and took place almost entirely in physical goods. Today’s big challenges include the taxation of traded services and the shifting of intellectual property across borders.
This shift in the global economy is set to continue, and more value-added will likely come from services and intellectual property rather than fields and factories. This is why we need an international taxation system that is truly fit for the 21st century.
We also need a system that works for all economies. For example, a major effort has been made to include developing economies in the discussions that led to the BEPS rules. But these measures do not fully address some of the specific needs of these countries.
Their gains from curbing tax avoidance could be significant: estimates by IMF staff suggest that lost tax revenues in developing economies are equivalent to 1.3 percent of their GDP, compared with one percent in advanced economies.7
Of particular concern to developing economies is the indirect, offshore transfer of interests in certain assets – telecoms or mineral licenses spring to mind. In some cases, this practice has caused hundreds of millions of dollars in lost government revenue. This can be a huge blow to low-income countries that may already have fragile public finances.
The IMF has a special responsibility here because of our global membership and because of our ability to provide world-class technical assistance and training on a global scale.
Our key objective is to help develop approaches to all of these taxation issues that are relevant and appropriate for our low-income members. And we are not doing this alone, but very much in cooperation with our international partners: the World Bank, regional development banks, and the United Nations.
3. The Role of the IMF
Let me expand a little on the Fund’s role in achieving fair and reliable government financing – it is the unsung story of many small successes, one step at a time.
It is based on our unique experience of working with our member countries over more than 70 years. This gives us the ability to cover the full spectrum of fiscal issues – through our research, policy advice, and direct technical assistance and training. This is how we can address the specific needs of our 188 member countries.
The lion’s share of our technical assistance is provided to our low- and middle-income members. For example:
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We work with Ministries of Finance on their expenditure policy and public financial management so that high-quality public services are delivered in a transparent and cost-effective manner.
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We assist our members in establishing fiscal rules, strengthening public debt management, and managing natural resource wealth.
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And every year, we help more than 100 countries improve their domestic revenue mobilization – through analysis and hands-on assistance on tax policy and administration.
Over the past five years, our worldwide technical assistance on revenue mobilization has more than doubled – and we plan to further expand this work as we respond to strong demand from our members.
In this particular area of technical assistance, success often depends on a combination of political resolve and long-term commitment.
This why the Fund has developed deep, long-standing relationships with many of our low- and middle-income members – and I am pleased to say that these efforts have helped produce tangible results. Just to give you a few examples:
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In Kosovo, the Fund helped align the country’s tax administration with internationally recognized standards, including the introduction of electronic filing of tax returns. These measures allowed Kosovo to boost its tax revenue by 8 percent in 2013.
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In Peru, the IMF has over several years supported the government in adopting a more modern tax administration and improving revenue performance, especially on VAT. These reforms contributed to an increase in the tax-to-GDP ratio from 15 ½ percent in 2010 to 16 ½ in 2014.
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In Senegal, IMF technical assistance helped trigger a jump in the number of tax payers subject to VAT and led to a sharp increase in revenue collection from medium-sized enterprises. Senegal has used these fresh resources to drive growth and poverty reduction.
These are only some examples of where our technical assistance has helped to move the needle.
To be clear: while our members are learning from us, we constantly learn from them, too. We enrich our policy advice by making use of the wealth of data from our technical assistance work and our close links with our members on fiscal issues.
Both domestic revenue mobilization and international taxation will feature prominently in our Article IV reports over the next few years. It means that our insights from technical assistance will feed even more into our country surveillance work – which, in turn, will improve the effectiveness of our technical assistance.
This mutual learning process is taking place right now – right here at the Arab Fiscal Forum. For all of us, this is a unique opportunity to listen, learn, and engage in a regional dialogue on pressing revenue and tax policy issues.
Conclusion
Before we engage in these discussions, let me conclude by returning to Adam Smith, who wrote in the Wealth of Nations:
“Political economy… proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people… and secondly, to supply the state or commonwealth with a revenue sufficient for the public services.”
My main message today is this: creating successful 21st-century economies requires robust government revenues and an international tax system that works for everybody. These ingredients are essential for growth, fairness, and development.
They provide the fertile ground for the prosperity of nations. And we at the IMF are ready to play our part for the benefit of our membership.
1 IMF estimate.
2 IMF, Staff Discussion Note: Fair Taxation in the Middle East and North Africa.
3 World Bank estimate.
4 Unpublished IMF research.
5 IMF Fiscal Monitor. Tax to GDP ratios do not include social security contributions.
6 Gabriel Zucman’s book: “The Hidden Wealth of Nations”.
7 IMF, Working Paper: Base Erosion, Profit Shifting and Developing Countries (May 2015).
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Lack of consensus delaying common tax regime in EAC
East African countries are dragging their feet on tax harmonisation because of concerns about tax sovereignty, failure to agree on a common excise policy, fear of losing revenue, and the difficulty of converging excise rates, given the differences in per capita income.
A study by PriceWaterhouseCoopers (PwC) on the impact of EAC excise tax harmonisation recommends that in order to move faster on the matter, the EAC partners need to focus on key areas including procedures and administration, classification rules and definitions and remission schemes.
Rajesh Shah, senior tax partner at PwC, said tax harmonisation need not necessarily result in the same tax rates and laws, but in processes that will enable the EAC partner states to eliminate barriers that hamper the free movement of goods, services and capital, and promote investment within the region.
These freedoms are provided for in the EAC Treaty and Common Market Protocol.
“We need common warehousing procedures, declaration and documentation for products destined for another partner state,” said Mr Shah. “This should only apply on products released for consumption and not consumed due to setbacks such as spoilage and expired products.”
So far, only Customs duties have been harmonised by setting a common external tariff (CET) for imports into Kenya, Uganda, Tanzania, Rwanda and Burundi.
Building the foundation
Although the EAC faces challenges such as illicit trade and wide disparities in rates and structures, it should be possible to build the foundation of a harmonised excise tax system and secure long term growth in revenues as well as allow industry players to trade with minimum cross-border issues, the study notes.
“Significant differences in tax rates induce trade in counterfeits and smuggling of goods across borders which leads to tax evasion and criminal behaviour including corruption,” said Mr Shah.
The EAC partner states impose excise duty on the same products – alcoholic beverages, tobacco, motor vehicles, petroleum products, soft drinks and bottled water.
However, in order to be in line with international practice, Mr Shah said that EAC should adopt a list of the main excisable goods including alcoholic beverages, cigarettes, motor vehicles and petroleum products.
“The bulk of the excise duty is collected mainly from alcohol, tobacco and motor vehicles with the former two contributing to an average of 58 per cent of excise tax revenue in the EAC,” said Mr Shah.
He added: “While most partner states have data on the volumes of excise duty collected, there is no adequate documentation of excise duty fore gone from the remissions granted in the various partner states.”
Currently the EAC lacks a common list of excisable products and this is the cause of the variations in the excisable products from partner state to partner state.
The partner states therefore need to define a common list of excisable goods that will then be adopted across the EAC, notes PwC.
“For alcohol and tobacco, EAC partner states are still charging excise duties on highly different tax bases. Since the partner states are at different economic stages, proposing common rates will not be feasible,” says the report. “We therefore propose the setting of a minimum rate and a maximum rate within which all countries will have to operate.”
The report adds that in the same way that the excise duty structures for motor vehicles and petroleum products are aligned, those of tobacco and alcohol need to be considered too.
Among the partner states, Uganda has the most comprehensive local raw materials regime with regard to its alcoholic beverages, followed by Tanzania. Kenya also has a remission scheme targeting certain alcoholic products brewed using local sorghum and millet.
“Clear criteria and an agreed basis for the remission schemes between partner states would ensure that their effects are fairly spread in the EAC and thereby guard against price distortions in the trade among partner states,” notes the report.
Remission schemes
According to the PwC report, although the remission schemes in the partner states are supposed to promote the domestic agricultural sector by creating a ready market for raw materials, the overall effect is that excisable products made from domestic raw materials are cheaper than imports.
This in itself discourages the importation of these products into countries where such remission schemes exist.
Furthermore, the distortions facilitate smuggling whereby consumers move across the borders to buy the beverages in the country where prices are low and bring them into their own countries, notes the report.
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Help at hand for countries desperately seeking climate cash
Several big international funds, including the U.N. Green Climate Fund, are trying to dole out billions of dollars to countries and communities to help them tackle climate change by adapting to extreme weather and adopting renewable energy.
But most government officials and smaller institutions simply do not know how to access this money, experts say. Meeting the funds’ conditions is often laborious.
“There’s lots of money out there for climate change, but countries are having real difficulty in accessing it,” said Peter King, Bangkok-based senior policy adviser for the Institute for Global Environmental Strategies (IGES).
One of the most challenging issues is getting accredited to a fund, to be eligible for its grants and loans.
King said this was so difficult because tough accreditation rules apply to national and local-level agencies too.
“They’re looking for the same level of fiduciary responsibility and fiscal management as they ask of the Asian Development Bank,” he said.
High standards are needed to ensure the money is spent well and in line with funds’ policies on gender equality, for example. But extra support is needed for many developing countries to be able to meet those requirements.
The Green Climate Fund (GCF), which has collected pledges of around $10 billion and aims to commit $2.5 billion this year, wants to support smaller-scale projects, and provide direct access to its resources for developing-world banks, ministries and local agencies.
But those organisations are put off by the accreditation process, the GCF’s mitigation coordinator Youssef Arfaoui said after a presentation for climate experts in Bangkok this week.
“We have been saying to all these countries, if you need assistance to get accredited, we have colleagues, consulting companies, assisting them to get through accreditation,” said Arfaoui, who used to work with the African Development Bank.
“We know many agencies are not used to this system. They think it’s very difficult – but it’s not actually.”
In meetings with officials about their climate change action plans, Arfaoui watches out for projects in their pipeline so he can discuss how the GCF could help with their financing needs.
The GCF has what it calls a “readiness” programme, with $30 million available to help countries prepare to access its funding. So far 97 requests for support have been received, and 43 approved.
But when it comes to actual accreditation, of the 20 agencies that have the green light so far, the majority are regional, international and U.N. organisations.
Only a quarter are national level, including Rwanda’s Ministry of Natural Resources and India’s National Bank for Agriculture and Rural Development.
Training for officials
Another reason for the limited success of efforts to hook up developing-country governments in need with international funding sources is that projects are often poorly designed.
“They’re just not able to put together quality projects,” said IGES’ King.
So now climate experts are planning to walk officials through proposals, with mentors, in a bid to secure financing.
King, who also leads USAID’s Asia-Pacific efforts on climate adaptation funding, is working on a proposal for a $20 million five-year programme to train 5,000 people to prepare high-quality projects to reduce emissions and adapt to climate shifts.
With USAID Adapt Asia-Pacific, he has developed three short courses on the economics of climate change adaptation, urban adaptation and resilience, and managing project preparation.
These courses will be part of the programme, planned to be launched at the Asian Institute of Technology (AIT) north of Bangkok, then rolled out at universities and institutions across Asia. It will be geared at mid-level government officials, who would bring along their project concepts to flesh out.
Afterwards, participants would continue working with a mentor until the project is ready to be submitted for financing, King said.
There will also be a practical testing-bed for clean technologies – for example, to see if they can withstand wet and dry seasons, or if there are any drawbacks. Each technology will get a one-page assessment, King said.
“We think this would be a good service for countries that are having a hard time deciding which technology to adopt,” he added.
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Aga Khan says: Africa’s moment has come
His Highness the Aga Khan on Sunday, 21 February extolled Africa’s resilience, economic progress and new willingness to accept diversity.
“What I see emerging today is a refreshingly balanced confidence in Africa – a spirit that takes encouragement from past progress, while also seeking new answers to new challenges,” he said.
The Imam (Spiritual Leader) of the Shia Ismaili Muslims made the remarks in a keynote address to the “Africa 2016: Business for Africa, Egypt and the World” conference in Sharm el-Sheikh, Egypt, hosted by Egypt’s president, His Excellency Abdel Fattah el Sisi.
The Aga Khan noted the decidedly upbeat spirit about Africa’s economic future that emanated from the speeches of African leaders taking part in the conference. “My enthusiasm today is especially strong because of the message which is at the heart of this Forum. And that message is, quite simply, that Africa’s Moment has come,” he declared.
While cautioning that Africa still faced formidable challenges, including high unemployment levels among the continent’s young people, he said that the continent had made significant progress in a number of key areas.
“The story of Africa’s progress and potential is also impressive – whether we talk about growing GDP and foreign direct investment, whether we look at economic diversification and national resiliency, whether we chart the rise of a vital middle class – and the expansion of consumer spending – now breaking through the one trillion dollar mark,” he said.
He noted that the experience of the Aga Khan Development Network, which is active in 13 African countries and works in an array of sectors ranging from health to education to culture to economic development, supports the positive picture.
He observed that fragmentation has long been one of the continent’s main weaknesses. “The problem of fragmentation has often afflicted Africa, separating tribe from tribe, country from country, the private sector from the public sector – those who hold political power from those who are in the opposition,” he explained.
And yet the Aga Khan noted that Africa has shown new willingness to embrace diversity and emphasised the importance of civil society in creating an enabling environment for progress.
“In sum I believe that social progress will require quality inputs from all three sectors – public, private and Civil Society. Sustainable progress will build on a three-legged stool,” he said, arguing that “cooperating across traditional lines of division does not mean erasing our proud, independent identities. But it does mean finding additional, enriching identities as members of larger communities – and ultimately, as people who share a common humanity. It means committing ourselves to an Ethic of Pluralism.”
Building on this idea, the Aga Khan emphasised the need for strong Civil Society institutions in Africa’s quest for development, noting that Civil Society has often been underappreciated, marginalised or even dismissed.
“I focus on Civil Society because I think its potential is often under-appreciated as we become absorbed in debates about the most effective programs of governments and others, or the most successful business strategies. But, in fact, it is often the quality of the third sector, Civil Society, that is the “difference-maker”. It not only complements the work of the private and public sectors, it can often help complete that work,” he said.
He lauded the positive role Civil Society played at key junctions in Africa’s recent history. “The influence of Civil Society has also been felt at seminal moments in the continent’s recent history, for example: in shaping the Arusha Accords which recently ended 12 years of civil war in Burundi, in the peaceful resolution of the violent clashes in Kenya following the 2007 elections, in the drafting of a new promising Tunisian Constitution, and in the courageous response to the Ebola crisis,” he said.
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tralac’s Daily News selection
The selection: Friday, 19 February 2016
Featured tweet, by Dr Chris Kiptoo (Kenya's Trade PS): 'Our maiden mission on economic diplomacy to [Washington] DC to lobby to reduce impact of TPP on AGOA'
Starting on Monday:
In Addis: the Continental Free Trade Area Negotiating Forum
The meeting in Addis Ababa will be preceded by a two-day capacity building and information sharing workshop (22-23 February 2016) where the AUC will introduce a capacity needs assessment and share findings and conclusions from a select number of studies that have been conducted on the establishment of the CFTA. The main objective of 1st Meeting of the Continental Free Trade Area Negotiating Forum is to consider all the post launch preparatory issues and essential process issues and technical documents that will enable the efficient conduct of the negotiations. Specifically, the meeting will undertake the following:
In Luanda: the 46th Southern Africa Power Pool meeting
EAC moves to reduce heavy reliance on US dollar in intra-regional trade (New Times)
While presenting the monetary policy and financial stability statement in Kigali, yesterday, the Governor of the National Bank of Rwanda, John Rwangombwa, said Kenya, Uganda and Tanzania were already part of the agreement. Burundi is also part of the memorandum of understanding. “We also worked with our partners within the region to ensure currency convertibility; we want to be using our local currency to trade across our borders. We are working with Kenya, Tanzania and Uganda; we have a memorandum of understanding on currency convertibility. Burundi is also signatory to the agreement. We expected to reduce the volatility of the impact of the US Dollar in our economies,” Rwangombwa said. [Download: Monetary policy and financial stability statement]
Mauritius: inclusiveness of growth and shared prosperity (World Bank)
The rise in income inequality combined with lagging shared prosperity indicators have adverse impacts on relative poverty in Mauritius, says a World Bank report launched today. “We believe Mauritius has what it takes to achieve its ambition of becoming a high income country with the implementation of the right set of reforms,” said Mark Lundell, World Bank Country Director for Mauritius, Mozambique, Madagascar, Seychelles, and Comoros. “Reaching high-income status will imply a careful review of the country’s economic model. This includes the ability to improve the labour force skills set, develop infrastructure, and further improve the business environment to attract FDI and generate domestic investment.” [Download] [World Bank reiterates support to the new economic strategy of Mauritius (Government of Mauritius)]
Mozambique: Better enforcement of anticorruption laws needed to clean up business (Transparency International)
Minimal enforcement of anti-corruption laws coupled with the private sector’s lack of exposure to international anti-corruption norms allows corruption to thrive in Mozambique’s business sector, according to a new study from Transparency International and its chapter in Mozambique, the Center for Public Integrity. The new report, which will help set a Business Integrity Country Agenda for Mozambique, is part of an effort by the Centre for Public Integrity and Transparency International to reduce corruption in Mozambique’s private sector.
AGOA: SA failure to comply might benefit Botswana (Daily News)
Apart from AGOA, Botswana, under the SACU configuration, is negotiating a SACU-US Trade, Investment, Development and Cooperation Agreement (TIDCA). This cooperative agreement, said the deputy permanent secretary, aims to promote an attractive investment climate and to expand and diversify trade between the two parties through capacity building on areas that include trade and investment promotion as well as trade facilitation. Ms Ward said the cooperative agreement would also address technical barriers, sanitary and phyto-sanitary measures as well as private sector involvement.
EXIM Bank holds meeting to facilitate US/Angola trade (Angola Press)
The director of Global Business Development for Africa of Export-Import Bank of the United States, Rick Angiuoni, will meet with major commercial banks and officials of the Government of Angola to discuss funding programmes of this financial institution. In 2014, the EXIM Bank signed a Memorandum of Understanding with the Angolan Government to finance trade and infrastructures, using the EXIM financing tools.
Ghana: Parliament discuss proposed EXIM Bank (GhanaWeb)
An Export and Import Bank bill which is currently before Parliament has received attention with the document going through a second reading. The bill is to provide legislation to back a project that will see Ghana provide some financial assistance to its local firms engaged in the business of export and import.
Related: AGI President welcomes CET implementation for manufacturers (News Ghana), CBN policy hurting our economy, Ghanaians lament (The Cable), GUTA unhappy with GIPC over influx of foreign retail traders in Ghana (News Ghana)
The Nigerian economy: past, present and future (National Bureau of Statistics)
The Nigerian Economy; Past, Present and Future is the fourth edition of Macroeconomic forecasts being published at the NBS and aims to provide policy-makers, researchers, investors and the general public of its assessment of the Nigerian economy in the past years, the likely trends of key macroeconomic indicators in the current year and future years. Similar to previous editions published by the NBS, the focus of this report continues to be macroeconomic statistics including GDP, Inflation, and Merchandise Trade; key macroeconomic indices followed by policy makers and analysts. [Download]
Egypt establishes model farms in Tanzania, Zambia, Congo (FreshPlaza)
Three model pilot farms have been set up in Tanzania, Zambia and Congo, through an agreement between Egypt's Ministry of agriculture and the governments of the respective countries. The farms have areas ranging between 500 and 600 acres. Director of Common Market for Eastern and Southern Africa, (COMESA), Department at the Ministry of Agriculture Maher El-Maghrabi said the ministry agreed with the three countries to establish farms to produce various crops. The ministry is intensifying its efforts, through the centre, to increase the number of farms in all African countries by negotiating with Ethiopia, Kenya, and Eritrea and other states to establish plantations on 600 acres of land per farm to deepen mutual agricultural cooperation. [Reining in imports (Al-Ahram Weekly)]
Kenya eyes crude exports in 2017 via trucks and railway (Business Daily)
Kenya is considering moving its crude oil to Mombasa by road and railway as President Uhuru Kenyatta’s administration races to hit export markets before the General Election set for August next year. The Energy ministry has offered Rift Valley Railways the contract to move the oil over a distance of more than 800km, from Eldoret to the Kipevu-based Kenya Petroleum Refineries from as early as February next year. By choosing trucks and train, Mr Kenyatta’s administration appears determined to sidestep bureaucracy involved in constructing a joint pipeline with Uganda in an effort to beat its tight timelines.
India’s failed diplomacy at the WTO (Livemint)
The development agenda has taken a beating of late in Nairobi and then again in Paris. And with the day of the BRICS grouping all but done as their economies tread divergent paths, a splintering of consensus among the leaders of the developing world has already begun to show. WTO negotiations will not get any easier from here on. New Delhi must do better than it has done so far.
India to push for BRICS cooperation in services, non-tariff measures (The Hindu)
India, which has gained presidency of the five-nation BRICS this year, is planning to initiate greater cooperation among member-countries in the areas of services and ways to deal with non-tariff measures. As per the Commerce Ministry’s action plan, the exercise will kick off with two seminars, comprising senior officials from all five countries in the identified areas of NTMs and services in April this year. “The seminars will be an exploratory exercise to see how the countries can cooperate in boosting services trade and also addressing NTMs, such as onerous standards and procedures, to boost flow of goods and services,” a government official told BusinessLine. It will be followed by a second meeting sometime later.
Putting trade and investment at the centre of the G20 (World Bank Blogs)
It might not have made the leading global headlines but, three weeks ago, there was a significant new development in global governance of trade and foreign investment. In Beijing, China convened the first meeting of a new working group in the G20 to pursue initiatives in these areas: the G20 Trade and Investment Working Group (TIWG). Over two days, officials from G20 members and invited governments, along with the World Bank Group and other international organizations, discussed the future direction of trade and investment in the G20. This is a promising step. [The author: Marcus Bartley Johns]
Painful spillovers from slowing BRICS growth (VOX)
South Africa: Zuma makes economy his new mantra (Business Day)
Zim deflation decelerates (Zimbabwe Independent)
Somalia-Eritrea Sanctions Committee: UNSC update (UN)
The Chair of the “751/1907” Somalia-Eritrea Sanctions Committee provided an update to the Security Council on the recent findings of its Monitoring Group, as delegates called for improved coordination to staunch the illegal charcoal trade in Somalia, and pressed Eritrea for “frank and sincere” cooperation over its reported involvement in the Yemen conflict, support for armed groups in Ethiopia and progress on the question of Djibouti war prisoners.
Laurent Bossard: 'Why have they chopped Africa in two?' (SWAC, OECD)
In his most recent post published on the OECD Development Posts blog, SWAC Secretariat Director Laurent Bossard draws attention to two opposing visions of the African continent. The African Union’s administrative organisation is based on the establishment of five major regions within which national borders freely allow production, trade and friendship to flourish between peoples; the five groupings being ultimately destined to merge into a vast continental whole. On the other hand, development partners tend to deal with sub-Saharan Africa and North Africa separately. “Without warning, the international community is chopping Africa in two! It has created (no one knows exactly when) a region unknown to geographers made up of North Africa and the Middle East, known by the MENA acronym. In minds and in policies, Africa ceases to be a continent. It is demoted to the rank of region and its regions lowered to the status of sub-regions”, Mr Bossard writes. [MENA: WEF meeting cancelled (Al-Ahram Weekly)]
Global manufacturing increased modestly in 2015 (UNIDO)
Global manufacturing production rose by just 2.8% in 2015 as developing and emerging industrial economies registered reduced growth rates, according to the 2016 edition of the International Yearbook of Industrial Statistics released in Vienna today. The Yearbook states that despite a declining manufacturing growth rate China has become the largest manufacturer in the world, surpassing the United States of America. Japan, Germany and the Republic of Korea stand in third, fourth and fifth positions, respectively. Among other industrial economies, India moved up to sixth position, leaving Italy and France in seventh and eighth positions among the world’s leading manufacturers. Indonesia has become a new entrant to the group of top 10 manufacturers.
Interim Economic Outlook (OECD)
The OECD projects that the global economy will grow by 3% this year and 3.3% in 2017, which is well below long-run averages of around 3¾ percent. This is also lower than would be expected during a recovery phase for advanced economies, and given the pace of growth that could be achieved by emerging economies in convergence mode. The Interim Economic Outlook calls for a stronger policy response, changing the policy mix to confront the current weak growth more effectively.
AIIB: Now comes the hard part (commentary by Larry Greenwood, CSIS)
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EAC moves to reduce heavy reliance on US Dollar in intra-regional trade
To cushion the economy against volatility of exchange rate markets, Rwanda has teamed up with other countries in the East African region to allow the use of local currencies across borders.
Trade across borders has previously been by the American Dollar, which made traders vulnerable to the exchange rate market volatilities and exposed them to high exchange rate costs.
Ordinarily, traders in the region involved in cross border trade have to convert their national currencies to the Dollar before conducting transactions and later convert the currency back to their national currency.
In the process, they incur exchange related costs twice.
The reduction of the reliance on the dollar in intra-regional trade will cushion Rwanda and her neighbours from depreciation of their respective national currencies as was seen last year, following the strengthening US Dollar and weak export earnings in the region due to low commodity prices on the international market.
While presenting the monetary policy and financial stability statement in Kigali, yesterday, the Governor of the National Bank of Rwanda, John Rwangombwa, said Kenya, Uganda and Tanzania were already part of the agreement.
Burundi is also part of the memorandum of understanding.
“We also worked with our partners within the region to ensure currency convertibility; we want to be using our local currency to trade across our borders. We are working with Kenya, Tanzania and Uganda; we have a memorandum of understanding on currency convertibility. Burundi is also signatory to the agreement. We expected to reduce the volatility of the impact of the US Dollar in our economies,” Rwangombwa said.
Although the sub-Saharan African economy too slowed down just like the global economy, countries in the region –other than Burundi- performed well in 2015.
According to the monetary policy and financial stability statement presented, the Kenyan economy is projected to grow by 6.5 per cent, the Ugandan economy by 5.2 per cent, the Tanzanian economy by 6.9 per cent.
Rwanda economy in the first three quarters grew by an average of 6.9 per cent with indicators pointing to good performance evolving towards the projected 7 per cent growth for 2015.
However, due to the ongoing political situation in Burundi, the economy is expected to contract by about 7.2 per cent after a growth of 4.7 per cent in 2014.
Rwanda’s trade with EAC
Rwanda’s exports to other East African Community countries went down in volume and value in 2015 from $142.45 million in the previous year to $127.76 million last year.
The decline comes at a time when East African Community is implementing a common market protocol expected to drive up trade in the region.
The decline was blamed on the fall in international commodity prices coupled with the fall in exports products mostly exported to neighbouring Burundi.
Exports to Burundi went down by 6.7 per cent in value.
Imports from the region went down too from about $546.8 million to $ 519.4 last year. Rwanda’s main exports to EAC members are tea, coffee, raw hides and skins, vegetables, beer and products from the milling industry.
On the other hand, Rwanda imports products such as cement, refined and non-refined palm oil, vegetable fats and clothing, among other products.
Commenting on the trend of imports and exports, the Minister for Trade and Industry, Francois Kanimba, said there were structural constraints as well as shocks that required urgent attention.
Other than the global commodity prices, Kanimba said there were challenges such as supply bottlenecks that would significantly increase the volume in production levels.
“We have strategies in place to do better which we will continue to implement. Our projection is that we may improve in export volume and value in the coming years but at a speed that can affect the current level of trade balance,” Kanimba said.
Kanimba noted a worrying trend in the imports of some consumption goods that Rwanda was also producing.
Giving the example of local cement producer, CIMERWA, Kanimba, said even after expanding their production capacity, improving their quality and reducing prices, the local market was flooded with imported cement reducing the performance of the local product.
“There are issues that I would like us to set operational framework in different institutions to see how we can to better,” he said.
Private Sector Federation (PSF) chairman Benjamin Gasamagera said they were convening session with members of the private sector to look into the issue of local products performance in the market against imports.
He added that initiatives such as the ‘Made in Rwanda’ expo and exhibition slated to take place on February 25 would ensure that the market was aware of quality products produced in the country as well as their comparative advantages.
Regional instability
The central bank meanwhile allayed fears that the political instability in the region, mostly in Burundi (and fears of DR Congo) could hold back Rwanda’s economic growth which is projected to grow by 6.3 per cent in 2016.
Rwanda is aiming at economic growth this year largely driven by service, agriculture and industry sectors.
Rwangombwa said having operated in an unstable region in the past among trading partners such as DR Congo, they were prepared to handle slow down in the event it arises.
He said the Burundian refugee influx hadn’t taken a toll on the country much as Rwanda was working with international partners to maintain them in the country.
“The expected impact is not very big in relation to other challenges expected such as economic crisis. The exports we are sending to the region is about $200m and the impact might be about 20 to 30 per cent of that,” Rwangombwa said.
The other impact could be on tourism as westerners see Africa as one country, the governor said.
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The Nigerian economy: Past, present and future
This report is an analysis of the Nigerian economy over the 2010 through 2015 periods with particular focus on the nation’s Gross Domestic Product, Inflation, and Merchandise Trade Statistics. The report also includes forecasts for the aforementioned variables over the 2016-2019 period.
The demand for statistics at all levels of government; federal, state and local continues to grow exponentially, and with it, the analysis of the aforementioned data into concrete trends on various socioeconomic issues. In line with our mandate of the 2007 Statistical Act as the national statistical office, and the custodian of official statistics in Nigeria, National Bureau of Statistics (NBS) continues to strive for improvements in the delivery of its mandate which includes data production, coordinating the National Statistical System (NSS), advising the Federal, States and Local Governments on matters relating to statistical developments, as well as developing and promoting the use of statistical standards and appropriate methodologies.
The Nigerian Economy; Past, Present and Future is the fourth edition of Macroeconomic forecasts being published at the NBS and aims to provide policy-makers, researchers, investors and the general public of its assessment of the Nigerian economy in the past years, the likely trends of key macroeconomic indicators in the current year and future years. Similar to previous editions published by the NBS, the focus of this report continues to be macroeconomic statistics including GDP, Inflation, and Merchandise Trade; key macroeconomic indices followed by policy makers and analysts.
This edition differs from previous editions, however, as we have decided to provide more historical analysis over the previous five year period (since 2010) before analysis on recent economic developments and projecting. Again, the report combines an analysis of economic developments in 2015 with quantitative inputs into a Bayesian Vector Autoregressive Model (BVAR) modelled with parameters to represent a small open economy in order to arrive at reasonable forecasts of the levels and growth of the aforementioned macroeconomic variables.
Executive Summary
The turmoil in global commodity markets, witnessed in the second half of 2014 brought their full weight to bear on the Nigerian economy in 2015. Oil prices fell 66.8% from $114/barrel recorded in June 2014, to $38.0 by December 2015. Prices fell even further in 2016, to $32.6 as at 3rd February, 2016. Beyond commodity markets, recent developments in the global economy created a trifecta of headwinds that the nation has to contend with.
The return of Iran to the global economy implies substantially larger crude oil supplies are to hit the global market in the near term, and thus the current consensus that oil prices are likely to remain “lower of longer”. The issue of lower commodity prices has been further compounded by the United States Federal Reserve (FED) raising key interest rates, after several years of a very accommodative monetary policy as a result of the global recession which began circa 2008. In December 2015, the FED raised the Federal Funds Rate by a quarter-point. Furthermore, the economy of the Euro Area, a key importer of Nigerian exports is still on the mend. According to recent statistics from the European Commission 1 the Euro Area is expected to grow by 2.0% in 2016, up from 1.9% in 2015.
Interestingly, economists love these times, and thus the phrase; “never let a crisis go to waste”. Few instances give governments the opportunity to take hard decisions. Accordingly, the government is using the 2016 budget as an opportunity to reset and redirect the macroeconomic dynamics of the country. The attempt to consolidate expenditure using the Treasury Single Account to plug leakages (even if this is only at the federal level) is a welcome first step. The proposed 1.6 trillion to be invested in capital projects, and other initiatives in particular in Power, Works and Housing are likely to bode well for the economy. In addition, the establishment of the Efficiency Unit to identify and surgically eliminate inefficiencies without hampering productivity is also another development.
In the near term, the reset may not yield fruits as quickly as Nigerians expect. Economic growth in 2016 is expected to increase to 3.78% from 2.97% in 2015, an increase of less than 100 basis points.
Beyond 2016 however, growth is expected to jumpstart averaging 5.41% yearly between 2017 and 2019 as infrastructure developments take shape and provide support for both the oil and non-oil sectors. While upward pressure on inflation is expected, meaning that the Headline index may rise from 9.55% to 10.16% in 2016, rates are expected to moderate beyond this period and average 9.01% between 2017 and 2019. The value of total trade is expected to slow in 2016, increasing by 2.41% as a result of moderations in imports and exports. Beyond 2016, both import and exports are expected to increase and Total Merchandise trade is expected to Average 15.61% growth during the period.
Statistics on Imports and Exports of Merchandise
Exports
The value of exports fell in every quarter of 2015, resulting in an overall decline over the first three quarters of 21.03%. In the first quarter, the value declined by 9.80% from the Fourth Quarter of 2015 to N 2,665.06 billion. In the second quarter the fall was more modest, the value declined by only 0.42% to N 2,653.79. The third quarter however saw the largest drop of 12.08%, meaning that the value of exports was N 2,333.21 billion in the last quarter for which data is available. In total, the value of exports for the first three quarters together was N 7,652.06 billion, which represents a decline of 42.68% relative to the same period of the previous year.
This fall in the value of exports can be viewed as part of a wider, global trend. Figure 1.12 shows the range of growth rates in the value of total imports for Nigeria’s main trading partners. The numbers refer to imports from all countries, not solely those from Nigeria. It also shows the average of these growth rates, weighted by how important each country is to Nigeria as an export destination. It reveals that average growth in import demand in these countries fell between 2009 and 2012, then remained stable until 2014, but then declined suddenly in the first three quarters of 2015, by 15.19% on average. The countries included account for 77.04% of Nigeria’s exports in 2014.
Overall, the value of global trade fell over the first three quarters of 2015 by 30.16%3 , which was to a large extent a result of falling commodity prices, such as crude oil. Whilst these trends affected all countries, they had a particularly large impact on Nigeria’s exports due to the heavy reliance on crude oil exports. Figure 1.13 plots the yearly growth in the value of exports against the growth in the oil price, from 2001 to 2015 Q1-Q3. Although there have been periods of divergence, the two series have moved together closely over the period, emphasizing the extent to which Nigeria’s exports are affected by changes in the oil price.
This trend continued into 2015. Over the first three quarters the price of oil fell by 24.2%, and the value of exports fell by 21.03%, or N 621.35 billion. However oil exports fell by an even larger amount over the period, by N 627.99 billion, which implies that non-oil exports increased over this period. Exports of Vehicles, aircrafts and parts thereof increased significantly, accounting for the 0.93% increase in non-oil exports. Between 2014 Q4 and 2015 Q3 the value of exports in this section increased by N 124.12 billion.
Although still dependent on oil, Nigeria is beginning to diversify its exports, albeit gradually. Figure 1.15 shows the percentage of the value of total Nigerian exports that is accounted for by crude oil. In 2003, 96.40% of the value of exported goods was accounted for by oil, and this figure fell to 78.45% in 2014. This is despite the increase in the oil price over this period. Over the first three quarters of 2015 the share of oil in exports fell further, to 68.88%. However this is perhaps less surprising given the dramatic fall in the oil price.
By continent, Europe remained the largest consumer of Nigerian exports, and accounted for 39.22%, or N 3,001.14 billion of the total value of exports in the first three quarters of 2015. Asia was the second largest consumer, and accounted for N 2,269.17 billion or 29.65%, followed by Africa (N 1,166.88 billion or 15.25%) and then The Americas (N 1,028.42 billion or 13.44%). It is notable that The Americas, which used to be second only to Europe as a consumer of Nigerian products, has slipped to fourth place. This is largely a result of the large decline in the value of exports destined for the US. In 2010, 34.37%, or more than one third of the value of exports was accounted for by the US. However, this figure has fallen consistently, and in the first three quarters of 2015, only 3.21% of exports went to the US. To a large extent, this can attributed to the discovery of large deposits of shale gas in the US, which reduced their dependence on imported crude oil.
Whilst exports to the US have fallen dramatically, they have been steadily increasing in value for India, the Netherlands and Spain, countries which accounted for 16.76%, 12.14% and 8.89% of exports respectively in the first three quarters of 2015.
Imports
The value of imports followed a clear downward trend in throughout the first three quarters of 2015. The largest fall was seen in the first quarter, when imports declined by 14.94% relative to the Fourth Quarter of 2014. However this continued into the second and third quarters, when the value of imports declined by 1.27% and 1.02% respectively. In total, the value of imports in the first three quarters of 2015 was N 5,121.58 billion, which represents a 4.15% decline relative to the same period of 2014.
A number of factors may have had a downward impact upon the value of Nigeria’s imports in 2015. Since the final quarter of 2014, the Naira has depreciated sharply. The Bureau de Change rate to the dollar was 168.90 Naira in 2014 Q3, compared with 225.49 in 2015 Q34. Whilst in the short term this has the effect of raising the value of imports, over time it may mean that as foreign goods become more expensive for domestic consumers, there is a substitution to local goods. In addition, a number of policy measures have been introduced which been aimed at regulating imports. Notably, CBN issued a circular detailing that importers would not be granted foreign exchange for a list of 41 items, making it more difficult to import them. In addition, the National Automobile Policy, which increased tariffs on imported vehicles was implemented in 2015.
Figure 1.17 shows how each section has contributed to the fall in the value of imports. The section to have contributed most is Vehicles, aircrafts and parts thereof, which fell from N 185.95 billion to N 149.09 billion over the year to 2015 Q3, contributing 2.02 percentage points, or just over a quarter of the fall. This section was particularly affected by policy, given both the National Automobile Policy, and the inclusion of Private Jets in the list of goods not eligible for foreign exchange. The section Base Metals and articles of base metals contributed a similar amount, falling from N 178.73 billion to N 142.15 billion, contributing 2.01 percentage points.
The third largest contributor to the fall was “Prepared foodstuffs; beverages, spirits and vinegars etc.” which contributed 1.22 percentage points. Looking at the share of overall import value accounted for by key sections since 2010, several trends emerge; the share of Vehicles, Aircrafts and Parts Thereof in total imports has on average been falling since 2010, although the series is volatile. Whereas in 2010 this section accounted for 22.18% of the value of imports, it had fallen to 8.97% in the first three quarters of 2015. Its lowest share was seen in 2013, when it only accounted for 8.86%. The share of “Prepared foodstuffs and beverages” has also been declining in recent years, and at 5.05%, is now at its lowest since 2010. By contrast, the share of Mineral Products has increased markedly, from only 2.67% in 2010 to 18.67% in the first three quarters of 2015, although these series are volatile, Just as trade statistics generarlly are.
By content of origin, Nigeria imported N 2,157.65 billion from Asia over the first three quarters of 2015, making it the most important region for imports over this period and accounting for 42.13% of total imports. Europe was the second most important, accounting for 38.34% of the total, followed by The Americas (N 660.15 billion or 12.89%) and Africa (N 280.98 billion 5.49%), and Oceania was the least important, and accounted for only N 58.94 billion, or 1.15% of the total.
This represents the continuation of a trend that has been seen since 2010, in which Europe and Asia have been increasing in importance as import partners, and The Americas has been supplying less products consumed in Nigeria. In 2010, The Americas was the second largest supplier and accounted for 29.97% of total imports; this figure had fallen to 12.89% by the first three quarters of 2015, and had been overtaken by Europe, whose share had risen from 24.35% to 38.34% over the same period. Asia increased its dominance slightly over the period; its share rose from 37.55% to 42.13%.
Most of the decline in trade with The Americas was due to the US, which accounted for 8.38% of imports in the first three quarters of 2015, down from 17.94% in 2010. In contrast, the rise in the value of goods imported from Europe was more wide spread, with a number of countries contributing to the increase. The most notable increases were the Netherlands, whose share of imports rose from 0.79% to 6.46% over this period, and Belgium, whose share increased from 3.86% to 7.70%. Over this period, China’s share rose from 16.56% to 22.81%, which is more than the sum of the next three largest import partners combined, emphasizing China’s importance as a supplier of products.
The share of trade with both the Netherlands and Belgium may be slightly misleading as a result of what is sometimes referred to as the “Rotterdam” effect. It is an international convention that trade is recorded as being with whichever country owns the “first port of unloading” (in the case of exports) or the” last port of unloading” (in the case of imports). This means that if goods pass through a country before arriving at their final destination, then trade will be recorded as being with the intermediate country. This is frequently the case with the Netherlands and Belgium, as the ports in Rotterdam and Antwerp are two of the biggest in the world, and a high volume of trade passes through them.
Total Trade
In the first three quarters of 2015, the decline in the total value of trade that began in 2014 Q2 continued; growth has been negative in every quarter since that period. As a result, the sum of total trade over the first three quarters of 2015 was N 12,773.84 billion, 31.67% lower than the same period of 2014 when total trade was N 18,692.82 billion.
The largest quarterly decline was seen in the first quarter of the year, when the value of total trade was N 4,392.74 billion or 11.89% lower than in the preceding quarter. The second quarter was comparatively stable, falling only by 0.76% to N 4,359.47 billion, but the third quarter saw a larger fall of 7.75%, which resulted in a value of total trade of N 4,021.44 billion in the third quarter, 38.31% lower than in the third quarter of 2014.