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Kenya tops East Africa with most infrastructure projects last year
Kenya had the highest number of infrastructure deals in East Africa last year on the back of mega real estate projects and the standard gauge railway, says a report by financial consultancy Deloitte.
The Africa Construction Trends report 2015 says that there were some 61 reported infrastructure projects in the region worth Sh5.9 trillion ($57.5 billion), an amount nearly equivalent to the size of Kenya’s gross domestic product.
Kenya had 20 reported infrastructure deals, followed by Ethiopia which had 12 projects but Deloitte did not give a breakdown on the value of projects per country.
The survey looked at reported infrastructure deals worth at least Sh5 billion ($50 million) that had broken ground by the start of June 2015.
Deloitte’s report said the growth in shopping malls, commercial office development and the rail project are the biggest areas with the large construction works going on.
“There have also been some changes in the retail estate sector where countries such as Kenya and Tanzania are experiencing significant growth in retail, entertainment and lifestyle facilities, modern office parks, and hotel space,” said the report.
The changes can be attributed to expansion in cities and a growing middle class, high yields in retail property rentals, technology innovation and sustainability with a drive toward green and open spaces, growth of ‘new urbanism’, increased foreign direct investment, and a shortage of quality property.
Similar report have also found that retail space development in Nairobi has rapidly increased over the last few years driven by heavy consumer spending.
The Shop Africa 2016 report by Knight Frank found that Nairobi had the hottest retail property market outside South Africa.
“Among the cities covered by this report, Nairobi stands out as a major focus for shopping centre development. It is ranked as the largest market by existing shopping centre floor space and it has the biggest development pipeline,” said the report.
Since the June 1, 2015 cutoff date there have been other mega deals on the real estate sector that have been announced such as the construction of Avic’s African headquarters in Nairobi.
Chinese conglomerate Avic announced that it would construct a 43-storey office block in Nairobi, a hotel with 35 floors and a 25-storey apartment complex in the Westlands area of the city. The project is worth Sh20 billion.
Background
The 4th edition of the Deloitte African Construction Trends cumulates and compares data and trends from the past three years, drawing out insights at both a continental and regional level. The data within this annual research by the firm pinpoints the realities of mega infrastructure project ownership, funding and construction. It also identifies details such as the sectoral spread of projects. The research data and trends extrapolated are supplemented by editorial contributions from various Deloitte Africa ICP leaders and as a team, we welcome your thoughts and considerations on this and future reports of this nature.
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Aid-for-Trade Work Programme 2016-2017: “Promoting Connectivity”
Overview
At the 10th Ministerial Conference (MC10) held in Nairobi, Kenya on 15-18 December 2015, Ministers agreed the following text on Aid for Trade as part of the Ministerial Declaration:
“We recognize the importance of the Aid for Trade initiative in supporting developing country Members to build supply-side capacity and trade-related infrastructure and we shall accord priority to the LDCs’ needs. We take note of the outcomes of the WTO global reviews on Aid for Trade, in particular the Fifth Global Review, and recognize the continuing need for this initiative”.
The Aid-for-Trade Work Programme for 2016-2017 will contribute to the aims set out in the MC10 text through a focus on “Promoting Connectivity” by reducing trade costs. A strong message emerging from the 2014-2015 biennial Aid-for-Trade Work Programme is that many developing countries, and in particular least developed countries (LDCs), continue to face difficulties in connecting to the global trading system as a result of high trade costs. By focusing on “promoting connectivity”, the 2016-2017 Work Programme will seek to further deepen analysis of the supply-side capacity and trade-related infrastructure constraints faced by developing countries, with an increased focus on services trade and upgrading infrastructure. Through these actions, the 2016-2017 Work Programme will contribute to coherence.
A document reviewing the Aid-for-Trade Initiative’s achievements will be prepared and presented at one of the CTD dedicated sessions on Aid-for-Trade, the discussions on which will then be reported to the General Council. Gender will be considered as a cross-cutting theme within the new Work Programme, including in the Aid-for-Trade review document.
The centrepiece of the Work Programme will continue to be the biennial Global Review of Aid for Trade. The theme of the 6th Review will be “Promoting Connectivity” by reducing trade costs. As per previous practice, the Global Review will be based on a monitoring and evaluation (M&E) exercise conceived around the central theme of promoting connectivity, and with a particular emphasis on the services perspective and infrastructure constraints, together with their regional dimension. In addition to formal meetings, a series of thematic workshops are also planned under the auspices of the Committee on Trade and Development (CTD). Taken together and individually, these activities will continue to support implementation of the 2030 Agenda for Sustainable Development and relevant Programmes of Action.
Review of Aid-for-Trade achievements
The Hong Kong Ministerial Declaration of December 2005 states that: “Aid for Trade should aim to help developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade”. Ministers at MC6 invited the Director-General to constitute a Task Force to draw up recommendations on how to operationalize Aid for Trade. The Task Force reported in July 2006.
One of the Task Force recommendations was that a “global periodic review of Aid for Trade should be convened”. Five global reviews have been held since 2007. Each one has been informed by the results of a joint Organisation for Economic Co-operation and Development (OECD) and WTO monitoring and evaluation exercise – an exercise that now also brings in other collaborating partners. Regional reviews supplemented by analysis and reports submitted by Regional Development Banks and United Nations regional economic commissions have complemented the analysis undertaken at multilateral level. Significant outreach activities have been undertaken with the World Bank Group and other international financial institutions, the United Nations and its specialized agencies and regional economic commissions, the private sector, non-governmental organizations and academia. This outreach has resulted in a substantial body of research.
Against this background, it is an opportune moment to reflect on what the Aid-for-Trade Initiative has achieved. A review document will be drafted and presented to the CTD Aid for Trade, and the discussions on which will then be reported to the General Council. It will also be fed into the G-20 deliberations as part of the ongoing monitoring of the G-20’s commitment on Aid for Trade. The review document will be prepared jointly with the OECD – WTO’s core partner in the monitoring and evaluation of the Aid-for-Trade Initiative.
Work Programme – Areas of focus
The theme for the 2016-2017 Work Programme, “Promoting Connectivity”, seeks to continue and build on insights emerging from the 2014-2015 Work Programme that had as its main topic: “Reducing Trade Costs for Inclusive, Sustainable Growth”. One key message that emanated from the last Work Programme was that high trade costs inhibit many developing countries from fully exploiting their trade and development potential. Prohibitively high trade costs continue to act as a brake on economic development with, in particular, landlocked (notably landlocked, least developed countries) and small and vulnerable economies (notably geographically remote island economies) facing inherent challenges in this regard. Trade costs also remain stubbornly high in some critical sectors where growth is associated with strong poverty reduction effects, most prominently in the agriculture sector. Evidence also suggests trade costs fall disproportionately heavily on micro, small- and medium-sized enterprises (MSMEs). Trade Facilitation Agreement implementation and infrastructure upgrading were among the actions identified that would reduce trade costs.
Follow-up work on trade costs will be undertaken during the Work Programme period to further elaborate on the insights collected by past work programmes. One action here will be to hold a CTD workshop to discuss establishing a “trade costs baseline” using existing indices, against which to track and report on future progress. The workshop will further examine the design and implementation of policies to reduce trade costs, including in the context of promoting regional value chains, regional economic integration and implementation of relevant Programmes of Action.
A CTD workshop on Aid for Trade and Services had highlighted the importance of services for economic development – and the relative neglect of services in the research on trade and economic development. This research gap is particularly marked in the area of trade costs as they relate to services’ trade and e-commerce. This omission is conspicuous when considered in the context of the various technical assistance initiatives announced by WTO Members to improve LDC services’ export capacity. Research in the area of services’ trade costs is timely for the further programming of support both to LDCs and for Aid-for-Trade support for services’ sector trade development more generally given the importance of services (including of small and vulnerable economies) for economic development.
Research prepared for the 5th Global Review by the Asian Development Bank highlights how e-commerce is being leveraged by MSMEs as a means to overcome high transport costs and with positive impacts on women’s economic empowerment – in this case associated with the geographic remoteness of many Pacific islands. A message that also emerged strongly from plenary sessions at the 5th Global Review of Aid for Trade is that progress on so-called soft infrastructure (e.g. border procedures) often unmasks deficiencies in other areas (e.g. under-capacity in transport infrastructure and related services). Another theme to be elaborated in this regard is the nexus between Trade Facilitation Agreement implementation (identified at the 5th Global Review as a tangible step in reducing trade costs) and the operation of efficient backbone infrastructure services, and how the latter can act as a multiplier for the economic welfare gains associated with TFA implementation.
At the 5th Global Review of Aid for Trade, the WTO and World Bank Group launched a publication entitled: “The Role of Trade in Ending Poverty”. One conclusion emerging from the report was that the Aid-for-Trade Initiative had helped mobilize significant additional resources for trade-related assistance, but that more could be done to monitor the impacts of trade integration on poverty reduction. Important also to note in this regard is the gender dimension to the burden of extreme poverty world-wide. Gender is a cross-cutting theme within the new Work Programme, and one that will be explored in particular in the context of monitoring the impacts of trade integration on poverty reduction. Building on existing work, a joint conference will be organized with the World Bank Group to further deepen analysis of the intersection between the four characteristics of poverty (rural poverty, informality, gender, fragility) and how trade can help alleviate these constraints – and conclusions for Aid-for-Trade support.
A significant amount of research material has been collected on Aid-for-Trade support to MSMEs. On 9 October 2014, a joint ITC-WTO workshop on Aid for Trade and SME competitiveness was held and a background paper prepared. In addition, a series of case stories and other research has been received. This information will be fed into the research agenda of the WTO’s Economic Research and Statistics Division in 2016. Under the private sector agenda item at regular formal meetings of Aid-for-Trade sessions of the Committee on Trade and Development, Members and Observers will be invited to update on their actions in support of MSMEs, including by highlighting the gender dimension of these actions.
Actions to support Members in implementation of the Trade Facilitation Agreement will continue. Ongoing collaboration with the Trade Facilitation Agreement Facility (TFAF) will also be pursued, with a view to having a coordinated approach among the various actors. Activities performed through the TFAF require detailed information on aid for trade facilitation support being undertaken at national and regional levels, as well as by international organizations. Information harvested through the M&E exercise (notably on trade facilitation funding flows) is relevant in this regard. Information on the evolution of trade costs is also germane in the context of discerning the impact of aid for trade facilitation.
Work Programme Activities
The centrepiece of the 2016-2017 Work Programme will be the 6th Global Review of Aid for Trade: “Promoting Connectivity”. Following the biennial scheduling of past Reviews, the 6th Global Review would be scheduled in mid-2017. Results of the Global Review would then be transmitted to the Aid-for-Trade session of the CTD, reported to the General Council and onwards to the WTO Ministerial Conference.
As per past practice, the 6th Global Review would be underpinned by a monitoring and evaluation exercise, surveying trade mainstreaming by developing countries, regional economic communities and their development partners, undertaken jointly with the OECD and including other collaborating partners. Efforts will be made to engage a broad range of partners in the M&E exercise, notably as regards engagement with the private sector, specifically SMEs in developing countries, and in particular LDCs. In addition, a reflection of what the Aid-for-Trade Initiative has achieved will be undertaken. These types of exercises increase transparency and incentives for donors and recipients of Aid for Trade.
Monitoring and evaluation also provides the analytical foundation for advocacy and outreach functions; functions that are exercised through the WTO’s coherence mandate with the International Monetary Fund and World Bank Group and outreach activities with a diverse range of other Aid-for-Trade stakeholders, including, but not limited to, multilateral development banks, regional economic commissions, the United Nations and specialized agencies, intergovernmental organizations (such as the World Customs Organization), the private sector, academia, and civil society. Of note in this regard has been the inclusion of monitoring results in reporting to the G-20 (on issues related to connecting to global value chains) and in the WTO’s World Trade Report (the 2015 edition of the World Trade Report included analysis of monitoring questionnaires discussing trade facilitation implementation).
Outreach and advocacy efforts will continue to promote mainstreaming trade by developing countries and their development partners, implementation of national and regional Aid-for-Trade strategies, and for the mobilization of additional, predictable, sustainable and effective Aid-for-Trade resources. Advocacy on resource mobilization should reflect the views of developing countries with regard to their development and financing needs, in particular those of LDCs notably with regard to infrastructure financing. The Enhanced Integrated Framework (EIF) for LDCs is germane in this context. Outreach efforts will also continue towards South-South partners, notably during the Chinese Presidency of the G-20, to discuss South-South and triangular trade and investment activities, in particular with LDCs. Outreach and advocacy activities will be reviewed as part of the reflection on what the Aid-for-Trade Initiative has achieved.
A series of formal Aid-for-Trade sessions of the Committee on Trade and Development will be scheduled by the CTD Chairperson. These meetings will provide a forum to discuss Aid-for-Trade issues, including suggestions made during the elaboration of this work programme and other Aid-for-Trade issues of interest to Members. Following established practice, the meetings will be organized around the following headings: resource mobilization and implementation activities; mainstreaming; regional dimension; private sector; and monitoring and evaluation of development effectiveness. Members are particularly encouraged to use their Trade Policy Reviews and the results of EIF Diagnostic Trade Integration Studies and related approaches in non-LDCs, as the basis for discussion of mainstreaming activities.
An accompanying series of thematic workshops and a conference will also be organized back-to-back with the formal CTD Aid-for-Trade sessions. Topics proposed are as follows: Trade and Poverty – Designing and Measuring Policies and Interventions (joint conference with the World Bank Group); Promoting Connectivity – Exploring the Services Dimension (CTD workshop); Aid for Trade, Trade Costs Indices and Design and Implementation of Policies to Reduce Trade Costs (CTD workshop); and Results of the 2016-2017 Monitoring and Evaluation Exercise (CTD workshop). In addition, the review document will be presented at one of the CTD dedicated sessions on Aid-for-Trade, the discussions on which will then be reported to the General Council.
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West Africa-EU prepare for final signatures towards implementation of the EPA
West Africa and the European Union (EU) are gearing up for the finalisation of the signatures for the onward commencement of the Economic Partnership Agreement (EPA).
To this end, the Regional Preparatory Task Force (RPTF) and the Joint implementation preparatory meetings held on the 5th and then 7th-9th February respectively in Brussels to give the desired impetus to the implementation of the EPA
During the RPTF meeting, West Africa presented the updated needs of the region, as expressed in the priority matrix of the EPA Development Programme (EPADP) projects for the period 2015-2020. It also presented an outline for the establishment of the EPA Regional Fund, which is designed to accelerate the implementation of regional projects. In response, the EU reaffirmed its commitment to the EU Council conclusions of March 2014, which committed 6.5bn EUR for the period of 2015-2020 for EPADP related projects.
The RPTF meeting was attended by West African States, the Commissions of ECOWAS and West African Economic and Monetary Union (UEMOA), the European Union States, the EU Commission as well as the European Investment Bank (EIB).
At the talks, the RPTF was the central platform for West Africa and European Union States and Commissions to discuss West Africa’s development needs. The RPTF will now act as a transitional framework for dialogue on the implementation of the development dimension of the EPA pending the entry into force of the EPA and the establishment of the managing and monitoring institutional framework.
Relatedly, the joint meeting on the Preparation of the implementation of the EPA was attended by ECOWAS, UEMOA and European Union Commissions. The Parties examined draft texts for the functioning of the joint bodies established by the EPA to monitor the implementation of the Agreement. These bodies include the Joint Council, the Joint Implementation Committee, and the Special Committee on Customs and Trade Facilitation.
Furthermore, the Parties exchanged views on the establishment of other bodies such as the Joint Parliamentary Committee and the Joint Consultative Committee. The meeting also considered the establishment of the Competitiveness Observatory, which will also monitor the implementation of the EPA, as well as assess the economic and social impact of the Agreement.
Considering the work now done, West Africa and the European Union continue to prepare for the implementation of the EPA (pending its signature by all Member States) by putting together the necessary texts for the Institutional bodies and instruments envisaged under the EPA, in order that the Agreement becomes operational immediately upon entering into force.
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Unconventional gas is structurally changing global gas markets
The growth of unconventional gas is spreading across the world with major implications over many years for markets and prices according to a new World Energy Council study ‘Unconventional gas, a global phenomenon,’ which looks at where and how fast the revolution is taking place.
The study, developed with project partner Accenture Strategy, says that despite an uncertain price environment, the magnitude and speed of change is not only influencing the United States market, but also other markets including countries such as China, Argentina and Algeria which have similar potential as the U.S. in shale gas production. Also, countries such as Mexico, Saudi Arabia, South Africa, Poland and Turkey are mentioned in the study as having significant potential for shale gas development.
Christoph Frei, Secretary General, World Energy Council, said: “Unconventional gas is causing a shift in the dynamics of the natural gas market which will be felt for many decades to come. Its spread around the world is being accelerated because it can make gas more affordable to consumers and reduce concerns about the security of supply.
“So far, the surprising resilience of the U.S. shale gas market has led the way in the shale gas boom, and whilst other countries may not have the unique characteristics of the U.S., they will learn how to become LNG producers or exporters which will change the global dynamics of energy.”
The study identifies three emerging global trends:
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Shifting portfolio allocations: current price uncertainties are resulting in operators shifting their capital to more flexible, shorter-cycle investments rather than in deep well projects which is exemplified by the United States.
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International growth of unconventional gas operators: new operators across the world are realising the global opportunities and bringing new supplies to the markets such as China, Australia and Argentina which will have an effect on markets before 2020.
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Interconnected markets: excess supplies in some countries have led to price normalisation and other structural shifts that are making the market more global and transparent across the three main regional hubs of Asia, Europe and North America. Lower oil prices and weakened Asian demand has resulted in the virtual disappearance of the price spread between the Japanese LNG and UK markets in 2016. Additionally, U.S. prices remain depressed due to the continued build-up of domestic supplies.
In order to realise the full potential of the global gas phenomenon, the study goes on to highlight the need for certain decisive interventions to alleviate uncertainty in the market:
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Industry: Bring a higher degree of focus to portfolio allocation, risk management, and efficiency and continue to seek new and innovative investment partnerships to deliver projects.
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Policymakers: Establish policies that promote a liquid market and competition needed for security of supply and the formation of clear price signals
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Consumers: Evaluate the economic and environmental benefits of diversifying energy assets with natural gas in power, industry, transportation, and chemicals and consider innovative investment partnerships to secure supplies.
In addition, the study says that there are also society and environmental concerns which national oil companies are best placed to address and thereby puts them in a prime positon to take advantage of growth opportunities.
Christoph Frei said: “Already, the rapid growth in unconventional gas has significantly disrupted global trade flows. With concerns about affordability and security driving exploration into unconventional resources outside of North America, unconventional gas will continue to be a key factor in how the world energy market develops.
“In particular, continued growth in the U.S. and Australia will significantly influence the balance of supply and demand with Argentina, China and Saudi Arabia emerging as unconventional gas producers out to 2020-2025.”
Melissa Stark, managing director, Energy industry group, Accenture, and co-author of the report, added: “The report emphasises the smooth nature and optionality of the U.S. shale gas supply. The U.S. LNG exports are very different from any supply we have seen before because this supply can come on-stream very quickly in response to market demand and prices. This LNG supply is driving fundamental changes and commercial innovation in the global LNG market.”
The rapid growth of unconventional gas is demonstrated by the U.S. – in December 2015 49% of its gas supplies came from unconventional gas and by 2019 it is predicted that U.S. LNG supplies will account for one fifth of global capacity and that the U.S. will be the third largest LNG exporter.
The study, which is the work of leading industry and academic experts from across the world who are part of the Council’s Natural Gas Knowledge Network, was launched at the Africa Gas Forum during the Africa Energy Indaba on Monday 15 February.
‘Unconventional gas, a global phenomenon’ is one of 15 Knowledge Networks studies for the World Energy Resources flagship study which will be presented at the 23rd World Energy Congress in Istanbul, Turkey in October 2016.
Used by permission of the World Energy Council, London, www.worldenergy.org
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DG Azevêdo welcomes Côte d’Ivoire’s efforts in trade facilitation
WTO Director-General Roberto Azevêdo visited Abidjan, Côte d’Ivoire, on 16 February as part of his current visit to West Africa.
The Director-General met with President Alassane Ouattara, Prime Minister Daniel Kablan Duncan, Minister of Trade Jean-Louis Billon and other senior government representatives to welcome Côte d’Ivoire’s leadership on trade facilitation and discuss how the WTO can complement initiatives to support the country’s development.
The Director-General said:
“Côte d’Ivoire has been working hard to boost growth and development through a series of reforms, including by improving infrastructure and facilitating trade. This is already bringing results and creating a more business-friendly environment in the country – but of course there is still work to be done. The WTO can help Côte d’Ivoire in this effort.
“Implementing the WTO’s Trade Facilitation Agreement will complement the country’s initiatives and will have a positive impact on the economy. By making trade flows easier and more predictable, the Agreement will help the integration of Côte d’Ivoire into global value chains and support the diversification of the economy.
“Côte d’Ivoire has shown real leadership on this front. It was one of the first African countries to ratify the Trade Facilitation Agreement and is now laying the foundations to make the benefits of the Agreement a reality. I saw this leadership during a series of excellent meetings in Abidjan today, and I was very encouraged by the government’s commitment to use trade as a tool for growth and development. I support this endeavour and look forward to strengthening the WTO’s fruitful partnership with Côte d’Ivoire in the years ahead.”
During his time in Abidjan the Director-General also addressed a meeting of government officials and private sector representatives, reviewing the results of the WTO’s 10th Ministerial Conference in Nairobi and discussing the future work of the organization. The Director-General’s full speech is available here [in French].
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New report tracks the rapid growth of sustainable markets
Survey results from 14 sustainability standards for nine commodities point to emerging trends for sustainable-certified production
Worldwide cultivation and trade of agricultural products with sustainability certification or verification is growing rapidly, according to a new report. While sustainability standards for an ever-wider array of products have been on the rise for years, the new findings offer a deeper, more granular understanding of growth trends.
The State of Sustainable Markets: Statistics and Emerging Trends 2015 is the first global data report on voluntary sustainability standards. It outlines the share of bananas, cocoa, coffee, cotton, forestry, palm oil, soybeans, cane sugar and tea production covered by 14 major standards.
The report is based on a partnership between the Research Institute of Organic Agriculture (FiBL), the International Institute of Sustainable Development (IISD) and the International Trade Centre (ITC), and is supported by the Swiss State Secretariat for Economic Affairs (SECO).
Sustainable production trends vary considerably from one sector to another. For instance, the agricultural area under cultivation to produce palm oil certified by the Roundtable on Sustainable Palm Oil expanded almost 30 times between 2008 and 2014. Areas certified to produce forestry products, meanwhile, expanded by 41% over the same period. Nevertheless, for all 14 standards covered by the report, standard-compliant cultivation areas have expanded since 2008, when data for most of the standards was first compiled.
“The purchasing preferences and actions of consumers are increasingly influencing and impacting how goods are produced,” said ITC Executive Director Arancha González. “As consumers in both developed and developing countries are asking for more sustainable products to be available, and greater transparency of value chains, producers are shifting their practices to meet this demand. This new report for the first time collects market data on standards and examines trends to see exactly how sustainable products are penetrating mainstream markets.”
As more farmers subscribe to their requirements, sustainability standards are seeing their production area coverage grow. Rainforest Alliance, a sustainability labelling initiative, has seen their certified area grow nine-fold in only four years.
Among the report’s other findings was that India has the highest number of organic producers. The country also ranked high for sustainable tea growing area. The United States was the largest market for organic food.
The report, which offers a snapshot of voluntary sustainability standards and their growing market influence, includes a wide range of open-access data for independent analysis.
The analysis shows that sustainability certification creates opportunities for SMEs to access new markets that place a premium on proof of sustainable production.
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Kenya signs global tax deal to crackdown on multinationals
Kenya has signed a global tax deal that will help to crackdown on multinationals and individuals keen on evading taxes and curtail the use of tax havens.
The law will make it harder for multinationals who concentrate their taxes in low-tax countries and tax havens thereby denying regular countries their share of tax revenues.
Kenya’s Ambassador to France Salma Ahmed, signed the Convention in the presence of the Organisation for Economic Cooperation and Development (OECD) Deputy Secretary General, Douglas Frantz committing to exchange of information that would help governments to collect revenue domestically.
Kenya becomes the 12th African country to sign the Convention and the 94th jurisdiction to join it.
“This is part of our commitment to reduce the scope of tax avoidance and evasion through up-scaling use of electronic data matching and third party information,” Kenya Revenue Authority (KRA) Commissioner General John Njiraini wrote to the Nation.
The convention will not only make it possible to reveal the names of tax evaders, but also make it easier for the government to pursue them within and outside the country.
The agreement is the most comprehensive multilateral instrument available for all forms of co-operation to tackle tax evasion and avoidance.
It provides for exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection.
Driving up local taxes
According to the report from the Independent Commission for the Reform of International Corporate Taxation (ICRICT), released late last year, tax abuses by global corporations are driving up local taxes and siphoning trillions from the developed world.
“When corporations do not pay their fair share of tax in developed countries, essential public services and infrastructure spending are cut, and the tax burden is shifted onto ordinary citizens, usually in the form of regressive consumption taxes such as value-added taxes (VAT),” the report reads.
Kenya has also enacted a Tax Procedures Act giving KRA powers to investigate pricing arrangements between local units of multinationals with their parent companies and overturn any that it deems to have been structured with the intention of avoiding tax.
This comes as KRA was reported to have missed its half-year revenue-collection targets by Sh47.6 billion, according to a draft budget policy statement by the Treasury.
The twin moves however leave Treasury in an awkward position over some bilateral agreements that are seen to promote tax avoidance.
Treasury is fighting in court to keep a tax agreement out of parliament after a lobby group, Tax Justice Network-Africa, sued them over a pact it signed with Mauritius back in 2012.
The double taxation avoidance agreement allows firms registered in the two countries to pay taxes in only one country.
However, the Indian Ocean country is regarded as a tax haven because income tax is at a maximum of 15 per cent while Kenya’s is 30 per cent.
KRA has been on record admitting that some of the DTA’s have been abused by some of the companies to avoid the taxman.
Due to the exploitation of the current transfer pricing regime (transaction between related firms located in different States), Kenya has been losing billions of shilling.
Naivasha based Karuturi firm sold flowers directly to Europe although according to its records, it was selling them to a subsidiary in Dubai first at very low prices.
The International Monetary Fund researchers suggest that poor countries are losing as much as Sh20.4 trillion (USD212 billion) a year to tax avoidance by multinationals.
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tralac’s Daily News selection
The selection: Tuesday, 16 February 2016
Diarise? Unleashing the next engine of growth: a services trade agenda beyond Doha and the TPP (webstreaming, 7 March, Washington)
Roberto Azevêdo: ‘How trade can serve Nigeria’ (WTO)
Nigerian farmers should not have to compete with the treasuries of developed countries. So ending these subsidies is very significant – it will help to level the playing field in agriculture markets to the benefit of farmers and exporters in Nigeria. Eliminating these subsidies was actually one element of the UN's new Sustainable Development Goals – so it is a big achievement that we delivered this, just three months after the goals were agreed! The decision will also help to limit similar distorting effects associated with export credits and state trading enterprises. And it will provide a better framework for international food aid – maintaining this essential lifeline, while ensuring that it doesn't displace domestic producers.
In Nigeria today the average time it takes to export goods is around 20 days, while imports take around 30 days. This pushes costs up so that many businesses can't afford to buy and sell goods internationally. So these reforms could make a big difference here. By making trade flows easier, this Agreement can also support Nigeria's economic diversification. WTO research suggests that the Agreement could help developing countries to increase the number of new products exported by as much as 20% and it could help them to enter 30% more foreign markets. It is also worth noting that the Trade Facilitation Agreement is actually very flexible. It provides developing countries such as Nigeria with a lot of leeway to adopt reforms at a pace which suits you, and it provides practical support to help in doing so.
Nigeria committed to free trade, says Buhari (ThisDay)
Meanwhile, Minister of Industry, Trade and Investment, Dr Okechukwu Enelamah said the country understood the implications of the multilateral trading system adding that it would be keen to deriving benefits from the global system. He said the way forward was to engage the WTO rather than be isolated. The minister said the federal government was currently working on a blueprint that would improve the investment climate and significantly boost its profile on the ease of doing business. He added that subsequent improvements in trade flows among other reforms would be measurable. He said government would further strengthen its relationship with the private sector.
Kenya's exports spike on weak shilling, tea (Daily Nation)
A new department of commerce and international trade at the Ministry of Industrialisation will this week meet stakeholders to discuss how to exploit the opportunities in value-added exports. “I met over 150 stakeholders with three things on the table; validation of a trade policy, an export development strategy and a position on the Economic Partnership Agreements (EPAs),” newly appointed Permanent Secretary Chris Kiptoo told Smart Company. He said his department is set to deliver a new set of rules on taxes, subsidies, import and export in the next four months to boost trade. Mr Kiptoo said he would focus on a trade policy to address the imbalance in Kenya exports against imports. The gap between exports and imports narrowed significantly last year thanks to drop in oil prices.
Featured tweets on Kenyan trade issues: @EABCArusha: Are EA nations losing out on EPA agreement signed btwn EU & EAC? Member states’ parliament are required to endorse the deal by end of June. @WilliamsRuto: The balance of trade between Kenya & Japan, favours Japan by 97%. Japanese investors need to set their hub in Kenya.
Angola adopts measures to minimise drop in oil prices (MacauHub)
The measures are contained in a memorandum that was presented at the joint meeting of the Economic Commissions and Real Economy of the Council of Ministers. The document, which must still be approved by a Council of Ministers meeting, includes a series of measures to be taken to increase domestic production, promote the export of goods and services in the short term, increase non-oil tax revenue, optimise public expenditure and streamline the import of goods and services.
Five countries being squeezed by currency pegs (Bloomberg)
Only on the streets of cities like Cairo, Abuja or Tashkent can you gauge just how much pressure developing countries are under to ease controls on their currencies. Individuals and businesses in five nations across central Asia, the Middle East and Africa are paying anywhere from 4% to 136% more than official exchange rates to get their hands on dollars, according to a Bloomberg survey.
Related: Ratings agency Moody’s maintains stable outlook for Kenya (Business Daily), Barry Eichengreen: 'China’s exchange rate trap' (Livemint)
Bridging the gap: communications for the Continental Free Trade Area (Bridges Africa)
Improving communication with the private sector must be addressed from a variety of angles. The AUC’s initiatives to establish a Trade Observatory and African Business Council, as well as regional and national business councils and chambers of commerce, have a significant role to play. So, too, do civil society organisations and NGOs that can help strengthen lines of communication between the private sector and the negotiators. Creative and novel approaches, like online forums and crowdsourcing tools that make gathering information and communicating across a vast continent much easier, are also needed. Along with improving communication with the private sector, strengthening communication between the RECs and the AUC will also be necessary in bringing the CFTA to fruition. The AUC is tasked with the difficult challenge of coordinating and facilitating successful negotiations. Accordingly, significant focus has been placed on strengthening the AUC's capacity, including a considerable mobilisation of resources on the part of development partners towards hiring technical experts to establish a dedicated CFTA Unit at the AUC. [The author: Luke Warford]
Can rules of origin in sub-Saharan Africa be harmonised?: a political economy exploration (DIE)
Throughout the paper, we draw lessons and implications for African countries negotiating the CFTA. Overall, we are concerned that developed-country norms for negotiating rules of origin are taking root in the TFTA, and that these are likely to become the default approach in the CFTA. Our concern hinges on the restrictive nature of these norms and the high institutional / organisational capacities required to implement them. The former concern relates to what we see as the broader drift of African trade politics away from openness to the world – as expressed in trade and industrial policies that would favour integration into GVCs – and towards more inward-looking approaches favouring RVCs. The second concern relates to weak governance capacities in African states generally, in relation to the implications of adopting developed-country approaches to rules of origin. [The authors: Peter Draper, Cynthia Chikura, Heinrich Krogman]
Also from DIE: 'Making retail modernisation in developing countries inclusive: a development policy perspective'
Namibia: Locals pay 30% more for chicken compared to SA (New Era)
While Namibians pay less than South Africans for beef, canned fish and lamb, locals are still paying more for dairy products, maize meal, eggs, pasta, pork, poultry and wheat flour. In fact, Namibians pay approximately 30% more for chicken compared to South Africans. This is according to a Retail Price Monitoring Report being produced by the Namibia Trade Forum, which since 2013 records and monitors retail prices for locally manufactured products that receive some sort of government support measure. The support measures are in the form of Infant Industry Protection, Market Share promotion schemes and quantitative support measures, such as quotas. [Download the NTF survey]
Zimbabwe: New import regime on the cards (The Herald)
Importers who bring consignments of product without conformity certificates will be denied entry into Zimbabwe under a new import regime taking effect next month as the country intensifies measures to safeguard consumers from sub-standard imported products. The new measures come into effect on March 1 under the Consignment Based Conformity Assessment programme which ensures that all listed imported products meet quality, safety, health and environmental standards in line with WTO agreements.
Rwanda: Strengthening quality management systems for enterprises (COMESA Business Council)
"In the next one year, we want to see more than Rwanda’s corporate market sourcing their products locally. This project is timely as it addresses the core gaps of our local industry provides a solution on improving competitiveness, quality control and consistency of supply of our products into regional and international markets.” This was said by the Permanent Secretary in the Ministry of Trade and Industry, Mr. Emmanuel Hategeka ahead of the Local Sourcing for Partnerships training workshop that is to take place on the 16- 19th February, 2016 at the Serena Kigali, Hotel. [COMESA boosts SMEs to foster local sourcing by corporate firms (New Times)]
East Africa ICE discussions: extracts from draft communique
The meeting also noted that there are emerging threats to the rapid economic progress in the region. These include declining commodity prices and a slowing global economy and reduced growth prospects in China. The large current account deficits recorded by some countries, combined with low savings rates, leaves them dependent on external capital flows. This raises a macroeconomic risk to those countries given that international development assistance to the region has generally declined in the last two years and foreign direct investment has plateaued since 2012.
The meeting noted with concern the fact that Eastern Africa has not yet successfully diversified its production and export patterns. This leaves some countries in the region vulnerable to adverse changes in commodity prices or unexpected developments in major trading partners. In light of the changing global environment and the need for sustainable job creation, member States are encouraged to explore domestic and regional economic policies that drive innovation, raise productivity, create new industries and advance the structural transformation agenda. [Experts call for intra-regional trade to sustain eastern Africa economies (New Times)]
Mozambique: Simplification – it begins with you Mr Director (SPEED)
I have recently been observing an export process from Beira. Before the export product can even enter the port the exporter must follow a series of procedures. The product must be inspected. I agree, it should be. But does it need to be inspected twice, by two separate departments? In order for the first inspection to take place the exporter must provide the provincial government with a detailed list of items being exported. This makes sense, otherwise how can the inspectors check the cargo? What happens next makes no sense. [The author: Carrie Davies]
Tanzania: No plans to kick out experts, says minister (Daily News)
The government does not intend to expel foreigners working in the country but is focused to realign the employment regulatory framework in implementing legislation on employment. The Minister for Home Affairs, Mr Charles Kitwanga, told business leaders in Dar es Salaam at the weekend that the government was committed to support development of the private sector as the engine of growth and would not come up with contrasting laws, policies and regulations.
Kenya replaces Mombasa port management amid smuggling probe (Reuters)
South Africa: Ports authority to spend R800m on security upgrades (Business Day)
South Africa launches fuel cell feasibility study (SAnews)
African Labour Ministers to meet in Zambia (SAnews)
Low copper prices cripple Zambian towns (multimedia, BBC)
Indian pharma companies target West African market (New Kerala)
Burundi: report of the EALA's Committee on Regional Affairs and Conflict Resolution on PALU's petition
Swaziland: WCO invites SRA’s application to E53.1 million trade fund (Swazi Observer)
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From fragility to resilience: Managing natural resources in fragile situations in Africa
New report urges Africa to address fragility through natural resources management
The African Development Bank Group (AfDB) and the Washington-based Environmental Law Institute (ELI) have produced a new report on natural resources management in fragile and conflict-affected countries. This flagship report examines how African countries in fragile situations can work towards addressing the causes and drivers of fragility by better managing natural resources across sectors.
The report, From Fragility to Resilience: Managing Natural Resources in Fragile Situations in Africa, delves into cross-cutting issues such as climate change, governance, private sector, regional integration, and conflict sensitivity. It also provides options for the design and implementation of natural resource-related programmes geared toward building the resilience of African countries.
“The report posits that fragility is a continuum, and many states that are not fragile experience tensions, localized conflict, and other pockets of fragility,” said Janvier Litse, the AfDB Vice-President for Country and Regional Programmes.
“Fragility spans a broad spectrum that is varied in geographic scope and frequency of conflict, ranging from declared hostilities between warring parties to established states that experience sporadic violence,” explained Sibry Tapsoba, Director of the Bank’s Transition Support Department.
The report is part of a series of initiatives carried out by the AfDB within the context of its Strategy for Addressing Fragility and Building Resilience in Africa for the period 2014-2019. This strategy aims to place the Bank at the centre of Africa’s efforts to address fragility and pave the way for a more resilient and inclusive development trajectory. It is based on an understanding of fragility as a condition of elevated risk of institutional breakdown, societal collapse or violent conflict.
The findings of this report will help the Bank to enhance its engagement with African countries in fragile situations, and reinforce its interventions in bridging the gap between natural resource management and development on the continent.
In supporting countries to improve their natural resource management for resilience, the publication will contribute to accelerating Africa’s sustainable development and meeting the critical needs of Africans through the implementation of the Bank’s top development priorities – the High 5s. They are: Light up and power Africa, Feed Africa, Industrialize Africa, Integrate Africa, and Improve the quality of life of the people of Africa.
Overview
Introduction
Natural resources have the potential to catalyze transformative change in Africa. In the African Development Bank’s Ten Year Strategy (2013-2022), the Bank envisions the next decade as an opportunity for Africa to become the world’s next emerging market with growing internal and external demand for African products “if Africa can seize its potential in water, agriculture, renewable energy and other sectors, especially oil, gas and minerals.”
Natural resources, for the purposes of this report, include extractive resources (oil, gas, and minerals), renewable resources (arable land, forests, fisheries, and livestock), land, and water. They provide employment, food security, export revenues, and a basis for private-sector development. They are essential for basic services as many of them form the pillar on which local livelihood systems are built. They have cultural and social values. If managed inclusively and equitably, resource revenues can be the foundation for transformative change: when oil was discovered in São Tomé and Príncipe, the signature bonuses for nine offshore blocks constituted more than twice the country’s annual budget.
Nevertheless, many African states affected by fragility and conflict have struggled to leverage their resource wealth to realize practical development gains for their populations. Fragile states are still often hampered by widespread poverty, frequent conflict, poor governance, weak administrative capacity, high perceptions of corruption, and challenging climates for doing business – much of which relates to natural resource management.
This Flagship Report is the first to examine how fragile states in Africa can work towards addressing the causes and drivers of fragility by better managing natural resources across sectors. It is a reference for fragile states in Africa, Bank staff, and development partners that highlights key challenges, themes, opportunities, and approaches for managing natural resources in fragile states. Delving into key natural resource sectors, crosscutting issues, and programming approaches, it provides options for designing and implementing natural resource-related initiatives in ways that build resilience. This Report provides a broad vision drawing upon experiences to date; further efforts (such as checklists and resource-specific guidelines) are necessary to translate this vision into operational reality.
Recommendations and Next Steps
The sustainable management of natural resources is essential for fragile states seeking to improve economic growth, employment, good governance, basic services, and private-sector investment. The Bank’s Ten Year Strategy (2013-2022) places an emphasis on not only on “sustainable growth, but also [on] the sustainable management of natural resources” and it has identified fragile states as one of its three areas of focus in the coming decade.
Accordingly, this Flagship Report identifies ways that the Bank can further support fragile states in their efforts to build resilience through improved management of natural resources. This report has examined how the linkages between fragility, conflict, and natural resources sometimes necessitate natural resource management initiatives in fragile states to use approaches that differ from development approaches appropriate to other RMCs. Fragile states frequently require additional support or attention to development fundamentals that are universal to developing countries, but may require special attention due the challenges of state fragility. As one among the many development partners working with fragile states on natural resource management, a coordinated approach is needed to address unmet needs in each country. Thus, the bulk of the Flagship Report focuses on experiences and lessons for the broad community of fragile states and development partners.
The final section, in contrast, examines how the Bank can improve the way that it engages RMCs and development partners to leverage natural resources for resilience in fragile states. It emphasizes four priority opportunities: (1) mainstreaming natural resource management, conflict sensitivity, peacebuilding, and statebuilding in Bank processes, tools, and training opportunities throughout the program cycle; (2) using natural resource data collection, analysis, and management to build resilience and transparency in fragile states; (3) improving natural resource concessions; and (4) building fragile state capacity for natural resource revenue management.
If managed soundly, natural resources and their revenues have the potential to be a catalyst for resilience and sustainable economic and social development in fragile states in Africa. The Bank has a key role to play in promoting conflict-sensitive natural resource management projects that support peacebuilding and statebuilding in fragile states in Africa. In pursuing actions highlighted in the Flagship Report, fragile state governments, the Bank, and other development partners can more effectively and equitably manage natural resources and their revenues, laying the foundation for inclusive development, building resilience, and supporting the transition away from fragility.
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DG Azevêdo visits Abuja to discuss how trade can support Nigeria
WTO Director-General Roberto Azevêdo visited Abuja, Nigeria, on 15 February to meet with President Muhammadu Buhari and discuss how trade, and the WTO, can serve Nigeria in the years to come. He also met with Vice President Oluyemi Oluleke Osinbajo, Minister of Industry, Trade and Investment Dr Okechukwu Enelamah, and representatives from the private sector.
During his time in Abuja the Director-General addressed a meeting of private sector representatives on how the WTO can continue to serve Nigeria. He reviewed the benefits for Nigeria of the ‘Nairobi Package’ of trade reforms and other recent breakthroughs such as the Trade Facilitation Agreement. He also called for Nigeria’s private sector to make its voice heard in the current debate about the WTO’s future work.
The Director-General’s full speech is available below.
Meeting with private sector representatives in Abuja, Nigeria – ‘How trade can serve Nigeria’
Remarks by Director-General Roberto Azevêdo
Thank you for being here today. I am delighted to be back in Nigeria.
Just two months ago the WTO held its first Ministerial Conference in Africa. This event – which was held in Nairobi – was a major success. It delivered some important outcomes to support growth and development. And – crucially – it put the spotlight on this continent.
Africa is on the rise. It is the world’s youngest continent. Its economy is the fastest growing. Its potential is unmatched.
And it is clear that trade has a crucial role to play in helping to realize this potential.
We are seeing efforts to dismantle trade barriers across Africa. And we are seeing a real belief in the positive difference that trade can make.
The WTO has been working to support these efforts – and we want to do more. I want to keep the spotlight on Africa and ensure that trade is a catalyst to achieving your development goals.
That’s why I’m here today.
It seemed appropriate that my first visit to Africa since the success of our Ministerial Conference should be to Nigeria – the continent’s biggest economy, and a leader in all senses of the word. I want to discuss how the WTO can do more to serve you.
Economic Context
Around the world governments are struggling with a gloomy economic outlook and a range of challenges to delivering a return to strong growth. Nigeria is no exception.
Indeed, the country faces a range of formidable challenges – such as security and governance issues – which have been compounded by the steep decline in oil prices, due largely to global over-supply. This is acting as a brake on economic growth in Nigeria. And there are few signs that the decline in commodity prices will be reversed in the near future.
Diversifying the economy to reduce dependence on the oil sector is a clear priority. And improving the conditions for trade and investment will be an essential part of the policy mix.
By reducing barriers to trade and lowering the costs of doing business across borders we can help to attract investment, and provide access to new markets for Nigeria’s budding business community.
And it is clear that there is huge potential here.
Nigeria has well-developed financial, legal, and communications sectors and the second largest stock market in Africa.
The manufacturing and services sectors have grown significantly in recent years, helping to rebalance the economy.
Innovative start-ups are emerging rapidly – covering everything from fashion to software development.
And, of course, Nigeria is also a real cultural force – with famous exports like Fela Kuti, Ben Okri or Nollywood – which is a whole industry itself.
This creative force needs to be supported by an enabling business environment – which helps you to get out there and compete.
And under Nigeria’s new leadership, I think the country can look to the future with a renewed sense of optimism.
I met with His Excellency President Buhari earlier today and I commended his efforts to tackle the issues facing the country. We discussed how trade – and the WTO – can help in overcoming some of the challenges and seizing some of the emerging opportunities.
I look forward to strengthening this partnership as we look to the future. And, in addition to providing practical, technical assistance to help improve Nigeria’s trading capacity, I think there are two key things that the WTO can bring to the table.
Implementing Nairobi & Bali
The first element is to implement the series of significant WTO trade agreements that have been concluded over the last two years.
I’d like to say a few words about what has been delivered – because actually there are some very significant items here for Nigeria.
I will start with the results of that Nairobi Conference.
On agriculture, members took a decision on export competition which is particularly important. It is the most significant reform in international trade rules on agriculture since the creation of the WTO.
Perhaps the most important point is that it will eliminate agricultural export subsidies which can distort trade and harm developing country farmers.
Nigerian farmers should not have to compete with the treasuries of developed countries. So ending these subsidies is very significant – it will help to level the playing field in agriculture markets to the benefit of farmers and exporters in Nigeria.
Eliminating these subsidies was actually one element of the UN’s new Sustainable Development Goals – so it is a big achievement that we delivered this, just three months after the goals were agreed!
The decision will also help to limit similar distorting effects associated with export credits and state trading enterprises.
And it will provide a better framework for international food aid – maintaining this essential lifeline, while ensuring that it doesn’t displace domestic producers.
Members also took action on other developing-country issues. They committed to negotiate steps to improve rules on public stockholding for food security and to negotiate a Special Safeguard Mechanism to help deal with import surges of food products, which can harm domestic food production.
Significant steps were also taken on Cotton, opening foreign markets for the most vulnerable producers – and ending cotton export subsidies as well.
And members agreed a package of specific decisions for least developed countries, to support their integration into the global economy.
It is important now that we follow-up on all of these commitments.
In addition, a group of WTO members has agreed a deal to expand the Information Technology Agreement. This will eliminate tariffs on 201 new generation IT products. Trade in these products is worth around $1.3 trillion each year – that’s 10% of global trade. Significantly, the benefits of this deal will be available to all WTO members.
Altogether, these breakthroughs will have real-world economic effects, which can help to improve people’s lives – particularly in developing countries.
And these results build on our previous Ministerial Conference, where members delivered a number of important outcomes, including the Trade Facilitation Agreement.
This Agreement was designed to reduce the time and cost of moving goods across the border. It will significantly cut the costs of trade – by an average of 14.5%. For developing economies alone, it could boost their exports by almost $730 billion per year.
In Nigeria today the average time it takes to export goods is around 20 days, while imports take around 30 days. This pushes costs up so that many businesses can’t afford to buy and sell goods internationally. So these reforms could make a big difference here.
By making trade flows easier, this Agreement can also support Nigeria’s economic diversification. WTO research suggests that the Agreement could help developing countries to increase the number of new products exported by as much as 20% and it could help them to enter 30% more foreign markets.
It is also worth noting that the Trade Facilitation Agreement is actually very flexible. It provides developing countries such as Nigeria with a lot of leeway to adopt reforms at a pace which suits you, and it provides practical support to help in doing so.
In an increasingly globalized economy, countries where trade flows more easily also tend to integrate better into global production chains – and benefit from the boost in economic growth that this can bring.
However, in order to benefit from the Agreement, first it must be ratified. This is one immediate and very positive step that Nigeria could take. Ten African countries have already taken this step. So I urge Nigeria to act on this point.
Another action that is within reach – and that will benefit Nigeria – is to ratify a measure known as the TRIPS amendment.
This amendment allows essential medicines to be exported at affordable prices into countries that cannot produce the medicines themselves, without fear of action over intellectual property rights.
The amendment is very important. It was a demand of the African countries. But, for it to come into force, it needs to be ratified. I urge you to act on this as swiftly as possible, so that we can enact this important measure. The most important thing to bear in mind is that this ratification requires no changes to Nigerian regulations whatsoever.
On all these issues, the WTO is here to help. If more information or support is needed then we stand ready to provide assistance wherever we can.
Implementing all of these agreements is the first way that the WTO can support Nigeria. The second thing we can do is reach new agreements which will deliver for you.
Future Work
Ministers have started a frank conversation on the future of the WTO – and on how it can achieve more, and do it more quickly
All 162 WTO members want to deliver on the outstanding issues of the Doha Agenda, such as agriculture (particularly domestic subsidies), market access for industrial goods and services – to name just a few. But they do not agree on precisely how these issues should be tackled. In addition, some members would like to start discussing non-Doha issues, bringing some new topics into play.
This conversation has already started, in Geneva and in capitals around the world. And despite members’ differences, there are some important commonalities. For example, there is a strong desire to maintain development at the centre of our work.
We need to build on these elements of agreement – and learn from our recent successes – to keep on delivering, and making as full a contribution as we can.
This conversation is an opportunity to make sure that the future work of the WTO delivers for you.
We can potentially take actions which will support your development goals – helping to diversify the economy and help more businesses to trade.
Many businesses in Nigeria are micro, small & medium-sized enterprises, so we can take further steps to support them to trade – and to lower the costs and the barriers which today make it too difficult for them to start exporting.
That’s just an example. The point is that you have an opportunity to shape the future of global trade discussions in your interests. I want to help you seize that opportunity.
I have spoken a lot about what the WTO has delivered today – but we have to look at the full picture. The fact is that, until recently, global trade negotiations were simply not delivering enough.
This is one of the reasons why countries pursued other initiatives – like regional or bilateral agreements – to advance their trading agenda. Such initiatives are very positive and can complement efforts at the multilateral level. But they do create some challenges.
For example, the negotiations on the Trade in Services Agreement (TISA) are positive, but Nigeria is not involved. So, although the services sector is a big part of Nigeria’s economy, much of the conversation is happening elsewhere.
The stronger the WTO is, the more issues we will see being negotiated at the WTO – where everyone has a seat at the table.
Moreover, the stronger the WTO is, the better it can serve you.
In recent years we have shown that we can deliver. Now we need to keep making progress at the WTO so that Nigeria and others have their voices heard loud and clear in shaping the trade agenda.
Conclusion
Nigeria has always been a leader in the multilateral trading system. It was a founding member of the WTO, and joined our predecessor, the General Agreement on Tariffs and Trade in 1960 – the year of the country’s independence.
Today Nigeria is a member of some major negotiating groups at the WTO – and it played a key role in the recent negotiating breakthroughs which I have described today.
I look forward to working with Nigeria to ensure that the WTO delivers further reforms which can support development here – and across Africa.
You have my full commitment in that effort – and I ask you to get engaged in the debate. Nigeria’s leadership will be as important as ever.
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Experts call for intra-regional trade to sustain eastern Africa economies
Eastern Africa regional states should strengthen intra-regional trade and enact policies to reduce poverty among poor members of their societies to sustain economic growth.
That was one of the key resolutions by experts at the 20th Intergovernmental Committee of Experts (ICE) of the UN Economic Commission for Africa (UNECA) in the Eastern Africa region, which was concluded in Nairobi, Kenya, last week.
The experts said the region has achieved notable rates of economic growth over the last ten years, but warned that dropping prices for international commodities like oil and minerals as well as economic weaknesses in both developed economies such as the US and Europe and emerging economies like China call for seeking answers from within Africa.
Andrew Mold, a senior economic affairs officer at the UN Economic Commission for Africa (UNECA), argued that Eastern Africa needed to maximise the potential from both domestic and regional sources of growth in the face of unstable global economic prospects.
“While the prospects for global markets look so subdued, the only sensible strategy is to explore all the possibilities for invigorating intra-regional and intra-African trade and investment. To do otherwise at such a time may condemn the region to a prolonged period of slower growth,” he said.
UNECA’s eastern Africa region covers 14 countries; Burundi, Comoros, DR Congo, Djibouti, Eritrea, Ethiopia, Kenya and Madagascar. Others are Rwanda, Seychelles, Somalia, South Sudan, Tanzania and Uganda.
The region’s ICE meeting is held annually to discuss key issues and challenges about economic and social development of the sub-region and makes recommendations on how to address them.
At the end of the four-day 20th ICE meeting in Nairobi, experts noted that countries in Eastern Africa had achieved considerable improvements in many socio-economic indicators, including in poverty reduction, curbing child mortality, and improving literacy rates.
But they warned that, despite faster economic growth, income disparities still existed and that it remained crucial to ensure that future growth is inclusive and sustained.
Addressing inequalities
Some of the ways to address inequalities would be to invest in quality education for the future generation and to develop adequate infrastructure at national and sub-national levels, the experts said.
“The meeting further encouraged member states to increase local investments in education and economic infrastructure in order to generate good and decent jobs, particularly for young people,” a final communiqué from the session noted in part.
To help countries in Africa map inequality levels, experts at UNECA have designed a special report, the African Social Development Index (ASDI), which will be a tool to measure inclusive development and social transformation.
The first edition of the report is expected to be published in the next two months to help African countries track progress made towards the reduction of human exclusion, identify specific social challenges and develop inclusive social policies.
“This index seeks to estimate the depth of human exclusion in six key dimensions over time, including survival, nutrition, education, employment, means of subsistence, and decent life for the elderly,” said Adrian Gauci, a senior economist at UNECA, who is involved in writing the ASDI.
At the 20th ICE meeting of UNECA’s Eastern Africa region, about 250 participants from 14 countries in the region discussed structural reforms that are needed to drive Africa’s economic transformation.
‘Sound institutions’
The participants included senior government officials and experts from Regional Economic Communities and Intergovernmental Organisations (IGOs), development partners, research centres, media practitioners, as well as members of the private sector and civil society.
Antonio Pedro, UNECA’s director for the eastern Africa, said a sound institutional set-up is needed in order to realise the vision of Africa by the year 2063 to be integrated, prosperous, peaceful, and driven by its own citizens who will be dynamic in a global arena.
At the centre of the effective institutional set-up to drive economic transformation was the decentralisation process, which is crucial for reducing economic and social inequalities, lower regional disparities, and increase investments in infrastructure and public services.
“We need to discuss the extent to which our existing institutional set-up, including decentralisation, is helping the continent to promote structural transformation,” Pedro said at the meeting.
The 20th ICE meeting of UNECA’s Eastern Africa region focused on the theme of “institutions, decentralisation, and structural transformation in eastern Africa” as experts attempted to examine the role of institutions in promoting equitable growth in the sub-region.
The closing session of the 20th ICE that discussed the draft resolutions was covered by the New Times, a video of which is available below.
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Bridging the gap: Communications for the Continental Free Trade Area
The Continental Free Trade Area (CFTA) holds incredible potential for the African continent. Greater focus on communications will be required in order for that potential to be realised.
In some circles, the benefits of the African Continental Free Trade Area (CFTA) are well known: the establishment of one integrated African market; a 52 percent increase in intra-African trade; a 6 percent increase in African exports; significant job creation; and long-term sustainable development. But for many others, including the millions of the people who could reap real, life-changing benefits, the CFTA is relatively unknown.
Jackie Gabriel, the Zambian owner of a Lusaka-based textile company, has aspirations of exporting to East and West Africa. When asked about accessing these new markets, Jackie lists numerous barriers that stand in her way. “All of the paperwork, the shipping costs, it is just too expensive and difficult.” Jackie had never heard of the CFTA, let alone what it could do for her and her business. She, like many other people across the African continent, is disconnected from the continental integration agenda – an agenda created to serve people like her.
While the CFTA negotiations will be carried out by government negotiators and informed by policy experts, at its core, the CFTA is about people – it is people who will benefit in terms of sustainable development, and it is people, especially entrepreneurs and business owners, who will be better able to trade once the CFTA is implemented. But for the potential of the CFTA to become a reality, people must be more connected to the negotiations through better communications. In particular, the success of the agreement hinges on communication with the private sector; between the Regional Economic Communities (RECs) and the African Union Commission (AUC); and with the general public.
Communication with the private sector
Trade is conducted by the private sector, yet negotiated by governments. For trade’s potential to be realised, the negotiations must reflect the needs of the private sector and be conducted in a manner that will facilitate and unlock new businesses opportunities. For that to happen, strong communication with the private sector will be critical.
Not only is private sector communication key in helping to shape the negotiations, it will also be crucial in mobilising domestic support for the CFTA. This will be true both as the CFTA is negotiated and after negotiations are finished, when the CFTA will be subject to ratification and implementation at the national and regional levels.
Improving communication with the private sector must be addressed from a variety of angles. The AUC’s initiatives to establish a Trade Observatory and African Business Council, as well as regional and national business councils and chambers of commerce, have a significant role to play. So, too, do civil society organisations and NGOs that can help strengthen lines of communication between the private sector and the negotiators. Creative and novel approaches, like online forums and crowdsourcing tools that make gathering information and communicating across a vast continent much easier, are also needed.
REC-AUC communication
Along with improving communication with the private sector, strengthening communication between the RECs and the AUC will also be necessary in bringing the CFTA to fruition. The AUC is tasked with the difficult challenge of coordinating and facilitating successful negotiations. Accordingly, significant focus has been placed on strengthening the AUC’s capacity, including a considerable mobilisation of resources on the part of development partners towards hiring technical experts to establish a dedicated CFTA Unit at the AUC.
The African Union’s member states envisaged the RECs as the building blocks of the CFTA. The RECs will be even more important given recent progress towards continental integration with three RECs (SADC-COMESA-EAC) coming together to launch the Tripartite Free Trade Area (TFTA) in June 2015. But in practice, limitations on time and resources can make communication between the RECs and the AUC difficult. Many REC activities exist in isolation, without any formal reporting back to the AUC; similarly, many AUC initiatives do not effectively integrate the RECs.
As the negotiations for the CFTA move forward, this burden will only increase. The negotiations will require a considerable amount of technical work to harmonise differences across a range of difficult and complex issues, including tariff liberalisation; rules of origin; dispute settlement; customs and transit procedures; non-tariff barriers; trade remedies; technical barriers to trade; and sanitary and phytosanitary measures. In order for progress to be made, and for the AUC to effectively facilitate and coordinate a complex negotiating process, considerable coordination and communication between the RECs and the AUC will be required. Communications must be elevated as a priority for managers and development partners. This should include managers making communications a core responsibility for their teams and development partners, increasing their willingness to support communications staff at both the RECs and the AUC. Placing an AUC staff member dedicated to supporting the CFTA at each one of the RECs could be a particularly effective approach.
Communicating with the public
Here, we come back to Jackie. The CFTA has significant potential to improve the lives of millions of people across the African continent. Unfortunately, many of those people are relatively unaware of the CFTA. While mega-regional trade agreements like the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) receive widespread coverage, international and domestic media have remained relatively quiet regarding the CFTA and its potential benefits, a catch-22 whereby the media will not cover it until enough people are interested in learning about it.
It is clear that significant work needs to be done to make the benefits of the CFTA more salient to its intended beneficiaries. Increased public awareness is important so that people can call their representatives to action in support of the CFTA, and so that they can take advantage of new opportunities presented by the CFTA as they become available.
The CFTA is in need of a significant public awareness and public relations campaign. Some progress has already been made: the AUC has developed a CFTA-focused communications strategy, and organised the CFTA negotiations launch event. That event, which took place in Johannesburg in June 2015, helped raise the profile of the CFTA and earned considerable media coverage (by inter alia, the BBC, Financial Times, and Al Jazeera). However, for the CFTA to receive the widespread support necessary for approval and implementation, this momentum needs to continue with additional events and regular media engagement. In order for it to work, the CFTA needs to be known.
Conclusion
Communications is not always attractive or exciting. Nor is it easy to find development partners or managers who are interested in dedicating precious time and resources to communications activities. But for the CFTA negotiations to be successful, and ultimately, for the CFTA to reach its intended beneficiaries, like Jackie, greater focus on communications will be necessary.
Luke Warford works in the Africa practice at global strategic consulting firm Albright Stonebridge Group. Previously, he was as a Fulbright-Clinton Fellow in the African Union Commission’s Department of Trade and Industry based in Addis Ababa, Ethiopia.
This article is published under Bridges Africa, Volume 5 - Number 1, by the ICTSD.
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Kenya’s exports spike on weak shilling, tea
Kenya is seeking ways to take advantage of the turnaround in exports which have risen faster than imports for the first time in more than five years.
According to Financial Times, sliding energy prices helped fuel a 13 per cent year-on-year fall in Kenya’s total import bill in September.
In contrast, exports rose 24 per cent year-on-year, largely due to a 58 per cent jump in the value of tea exports as prices rose despite significant fall in volumes.
This has shifted focus on the slump of Kenya’s export sector which has seen growth in the manufacturing sector stagnate at 11 per cent of the GDP for over ten years, according to the Kenya Association of Manufacturers (KAM).
A new department of commerce and international trade at the Ministry of Industrialisation will this week meet stakeholders to discuss how to exploit the opportunities in value-added exports.
“I met over 150 stakeholders with three things on the table; validation of a trade policy, an export development strategy and a position on the Economic Partnership Agreements (EPAs),” newly appointed Permanent Secretary Chris Kiptoo told Smart Company.
He said his department is set to deliver a new set of rules on taxes, subsidies, import and export in the next four months to boost trade.
Mr Kiptoo said he would focus on a trade policy to address the imbalance in Kenya exports against imports. The gap between exports and imports narrowed significantly last year thanks to drop in oil prices.
The National Treasury says the current account deficit went down from 10.7 per cent in November 2014 to 7.2 per cent. “Our current account has been huge because we have not been doing well in exports, we need to fix that,” Mr Kiptoo said.
EXPORT STRATEGY
The new commerce department would also spearhead development of an export strategy to boost Kenya’s capacity to produce for the global market.
Kenya largely exports services in the financial and tourism sector which suffered last year in the wake of several terror attacks by Al Shabab.
However fall in crude oil prices saw a significant drop in export receipts which made the current account deficit to fall to $4.3 billion in the year to November 2015 from a deficit of $5.8 billion in the year to November 2014.
It is however worth noting that policies which aim to change international trade flows have the tendency of restricting imports and subsidising local producers. Kenya will find itself in a tight spot having signed free trade area deals that prohibit protectionism to keep off imports and provision of subsidies to boost exports.
Kenya has up to the first quarter of 2017 to open its markets to sugar imports from the Common Market for Eastern and Southern Africa (Comesa).
Last year the World Trade Organisation (WTO), of which Kenya is party to, agreed to eliminate agricultural export subsidies.
Kenya, which is classified as a developing country, will only be allowed to use transport and marketing subsides until 2023.
Under the WTO arrangement, Kenya can only advance credit to farmers for 36 months but will have to limit the tenure of export credits to one and a half years by 2019.
“Some like the Economic Partnership Agreement has been a long and winding, probably controversial negotiations because of the concern of how do we protect the interest of East African Community and what we managed to do is to have a sensitive list to take care of the interests if the East African economies,” KAM CEO Phyllis Wakianda said.
Ms Wakianda however said these regimes do come up with some positive agreements like the Trade Facilitation Agreement of the WTO that will make it easier to move goods across borders.
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Five countries being squeezed by currency pegs
Only on the streets of cities like Cairo, Abuja or Tashkent can you gauge just how much pressure developing countries are under to ease controls on their currencies.
Individuals and businesses in five nations across central Asia, the Middle East and Africa are paying anywhere from 4 percent to 136 percent more than official exchange rates to get their hands on dollars, according to a Bloomberg survey. So-called black markets flourish at times when there’s a shortage of greenbacks and are one indicator of how much a currency should be allowed to depreciate to reach its fair value.
Central banks that uphold pegs have been under strain after tumbling commodity prices and slowing global growth weakened currencies from Brazil to Russia by at least 18 percent in the past year. In the four months that followed China’s shock devaluation of the yuan in August, Kazakhstan, Argentina and Azerbaijan abandoned control of their exchange rates to boost competitiveness and avoid draining reserves.
“There is enormous pressure on some of the pegs in emerging markets, with the unofficial rate diverging significantly from the official one,” said Bernd Berg, an emerging-markets strategist at Societe Generale SA in London. “Countries like Nigeria are maintaining fixed exchange rates that are unsustainable. Once the pegs break, investors in the local currency face significant losses.”
In Argentina’s case, the move to a free float in December eliminated the 4.2-peso gap between the official and black market rates. In the months prior to the move, it cost as much as 50 percent more to buy the currency on the street than at the central bank rate.
That premium is similar to what currency vendors in Nigeria’s capital Abuja are charging for dollars now, while hawkers in Tashkent are demanding more than double to convert the Uzbekistani soum. The cost to buy the U.S. currency in unregulated trading in Egypt keeps rising even after the central bank devalued the pound three times last year.
The street rate “is a better reflection of where a market-based rate should be,” said Simon Quijano-Evans, the chief emerging-markets strategist at Commerzbank AG in London. It shows “how domestic participants and individuals really feel about their currencies,” he said.
The existence of a black market isn’t the only indicator that a country may be on the verge of changing currency policy. There wasn’t a parallel rate in Kazakhstan when the country relinquished control of the tenge to boost competitiveness for its goods in neighboring China and Russia.
Below is a selection of countries where thriving unregulated trading may be forcing central banks to reassess currency policy as oil prices trade near 12-year lows, unrest in the Middle East chokes revenue from tourism and devaluations in key export markets hurt trade. To see the countries on a map, click here.
Nigeria
Currency: naira
Since Africa’s biggest crude producer started managing the naira at 197-199 per dollar in March 2015, oil prices tumbled more than 40 percent. Under these pressures, central bank reserves fell to $28 billion this month, the lowest in at least five years, while an executive director at the nation’s biggest company, Dangote Group, said last week the currency policy has created an “extremely tight” supply of foreign exchange. Non-deliverable forwards predict the naira will drop another 30 percent from the official rate to 288 in 12 months, approaching the black market level that exceeds 300 per dollar.
Angola
Currency: kwanza
The stress may be even greater further south in the continent’s second-largest oil producer. Angola has been reducing the amount of foreign exchange it makes available to banks and businesses over the past two years to stem the drain on reserves that fell to the lowest levels since 2011 last year. The central bank let the kwanza depreciate 24 percent in 2015 and another 15 percent last month. But that may not be enough, with hawkers selling the currency at a premium of 136 percent to the official rate at 161 on Friday.
Egypt
Currency: pound
Egypt’s ability to defend the currency with reserves has been crippled since the so-called Arab Spring uprising five years ago triggered political instability, drove out foreign investors and curbed tourism, one of the country’s biggest sources of hard currency. The pound, which has fallen 26 percent since the end of 2010, is still under pressure as street vendors in Cairo charge 8.75 to buy dollars, compared with an official rate of 7.83. Since taking over as central bank governor in November, Tarek Amer has sought to shore up confidence in the pound in part by paying foreign stock and bond investors the money owed to them that had been trapped in the country and by limiting some imports.
Uzbekistan
Currency: soum
A slowdown in China and a plunge in the currencies of Russia and Kazakhstan, Uzbekistan’s biggest export markets, are weighing on the central Asian economy. While low external debt and “large” international reserves provide a cushion, Uzbekistan is likely to allow the soum to weaken at least 15 percent this year to restore competitiveness, according to Per Hammarlund, chief emerging-market strategist at SEB SA in Stockholm. The black market rate of 5,950 in soum is more than double the official level at a record-low 2,837, according to data compiled by Bloomberg and the American Chamber of Commerce in the country. The central bank let the exchange rate slide 13 percent in 2015, compared with drops of 20 percent for the ruble and 46 percent for the tenge.
Tajikistan
Currency: somoni
This country of 8 million people borders Uzbekistan, Kyrgyzstan, China and Afghanistan in the heart of Central Asia. It relies on remittances from workers abroad, notably in Russia, for about half of its gross domestic product, according to SEB’s Hammarlund, who predicted the somoni will depreciate by about 30 percent against the ruble in the coming months. The Tajik currency dropped 25 percent last year and trades at 7.84 per dollar, compared with an unofficial rate of 8.15, according to data compiled by Bloomberg and figures from the American Chamber of Commerce in the capital Dushanbe.
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Climate outlook ‘particularly concerning’ in southern Africa due to El Niño – UN agency
El Niño conditions have caused the lowest recorded rainfall between October and December across many regions of Southern Africa in at least 35 years, the United Nations World Food Programme (WFP) has reported in its latest report.
The agency found that short-term forecasts from January to March indicate the high probability of continuing below-normal rainfall in the south, signaling that this could become one of the worst droughts on record.
“The current growing season, which spans from October 2015 to April 2016, is developing under the peak of the El Niño, with the first phase of the growing season characterized by severe and widespread rainfall deficits,” the situation report highlights.
“El Niño’s impact on rain-fed agriculture is severe. Poor rainfall, combined with excessive temperatures, create conditions not conducive for crop growth,” it adds.
Although El Niño’s impact on people’s livelihood reportedly varies according to preparedness and response capacities, rain-dependent small holder farmers – comprising at least 50 per cent of the population in Southern Africa – are the hardest hit.
In Lesotho, Swaziland, Zambia and Zimbabwe, WFP is highlighting that delayed planting of up to two months or more, severely impacts maize yields. “As the window for planting closes, even good rainfall offers limited scope for recovery,” it warned.
In conclusion, the UN food agency underscored that the climate outlook is particularly concerning as it is coming on top of a poor harvest in 2014 and 2015.
“Poor regional cereal harvests from the 2014-2015 season have tightened cereal supplies. On average, harvests were 21 per cent lower than the 2013-2014 season and 3 per cent lower than the five-year average. In total, the cereal deficit for the region is 7.9 million tonnes for the 2015/2016 marketing year,” WFP noted.
WFP Southern Africa El Niño Situation Report
Highlights:
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The current El Niño event is signalled to be the strongest and longest event in 35 years. For southern Africa, El Niño usually means less rainfall in most countries but high rainfall in northern Tanzania and DRC. Across vast areas of South Africa, Zimbabwe, Zambia and Botswana, this has been the driest October-December, since 1981.
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Lesotho and Zimbabwe have declared a state of disaster following the affects of drought caused by El Niño. Most provinces in South Africa have also declared a state of disaster.
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It is estimated that 40 million rural people and 9 million poor urban people who live in drought-affected areas could be exposed, and an estimated 14 million people in the region are already food insecure.
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Affected countries in the region include: Angola, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe. Major concerns are Lesotho, Malawi, Mozambique and Zimbabwe. Swaziland and Angola command increasing attention.
Situational Analysis
El Niño conditions have caused the lowest recorded rainfall between October and December across many regions of Southern Africa in at least 35 years. Short-term forecasts from January to march indicate the high probability of continuing below-normal rainfall in the south, signalling that this could become one of the worst droughts on record.
The current growing season (October 2015-April 2016) is developing under the peak of the El Niño, with the first phase of the growing season characterized by severe and widespread rainfall deficits. El Niño’s impact on rain-fed agriculture is severe. Poor rainfall, combined with excessive temperatures, create conditions not conducive for crop growth. Although El Niño’s impact on people’s livelihood varies according to preparedness and response capacities, rain-dependent small holder farmers – comprising at least 50 percent of the population in Southern Africa – are the hardest hit. In Lesotho, Swaziland, Zambia and Zimbabwe, delayed planting of up to two months or more, severely impacts maize yields. As the window for planting closes, even good rainfall offers limited scope for recovery.
The climate outlook is particularly concerning as it is coming on top of a poor harvest in 2014/15. Poor regional cereal harvests from the 2014/15 season have tightened cereal supplies. On average, harvests were 21 percent lower than the 2013/14 season and 3 percent lower than the five-year average. In total, the cereal deficit for the region is 7.9 million tonnes for the 2015/2016 marketing year.
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Africa’s big cities offer investors hope in hard times
Africa’s biggest economies have been hammered by the collapse in commodity prices over the past 18 months but there are still investment bright spots to be found.
In cities such as Lagos, Nairobi, Accra, Kinshasa and Johannesburg, growth remains robust and investors are prospering in the retail, financial services, technology and construction sectors.
This means investors can now re-adjust their strategy for Africa. Instead of taking a view on the continent as a whole, or choosing one country over another, they can seize opportunities city by city.
Sub-Saharan Africa is urbanizing faster than anywhere else in the world and city dwellers have more money to spend.
“In the current economic environment, investors want areas where success is proven, growth is strong and will remain strong. Big African cities give you that,” said Jacob Kholi, a partner at Abraaj, a private equity firm with $9 billion under management.
“It has become even more important to focus on these key cities than before,” Kholi added.
Nairobi is the most attractive destination for foreign investment, according to a 2015 report by PricewaterhouseCoopers, followed by Accra, with Lagos and Johannesburg equal third.
Consumption per capita in Accra is 1.6 times greater than the average in Ghana, 2.3 times bigger in Lagos than the average in Nigeria, and 2.7 times larger in Nairobi than nationally in Kenya, Abraaj estimates.
Lagos, one of the world’s fastest growing cities and with a population of 20 million, expects economic growth of 7% this year, twice the pace of the country as a whole.
Even South Africa, which is grappling with youth unemployment of over 40% and could slip into recession this year, has areas where industry is booming.
“Looking around here, you wouldn’t know things were so bad,” construction worker Sifiso Zwane told Reuters in Johannesburg’s wealthy Sandton business district.
“Rich people will always find a way to make more money,” said Zwane, with cranes filling the skyline behind him and billboards advertising new retailers like Krispy Kreme doughnuts and Hennes & Mauritz.
There are similar stories elsewhere.
This year, Kenya is set to unveil the Two River malls in Nairobi, the continent’s largest shopping centre outside South Africa, with brands like Porsche, Hugo Boss and France’s Carrefour already booking space.
“The economy still has opportunities,” said Gabriel Modest, a jeweller who says demand for the gold necklaces and bracelets he sells remains strong.
“Sometimes you have to treat yourself,” he added, ordering a bowl of muesli and yoghurt at an upmarket Nairobi coffee shop.
In Lagos, plans are in place to develop the vast multi-billion-dollar Eko Atlantic city, a Dubai-style gated community that will boast chrome skyscrapers, business parks, palm trees and a marina.
“MEGA-CITY”
By 2025, Mckinsey estimates that more than 80 cities in sub-Saharan Africa will have populations of more than one million, accounting for 58% of the region’s growth.
This rapid urbanisation means Africa’s big cities will need more roads, hospital and power stations, while growing numbers of new inhabitants will be buying consumer goods like instant noodles, washing powder and mobile phone cards.
Though some big companies like Massmart, Barclays and Nestle have slowed expansion plans in Africa in the last two years they are still making healthy profits in the big urban centres, according to banking sources.
“Our investment is focused on cities where we see the best opportunities even if the investment environment in the rest of the country isn’t as robust,” said Louis Deppe, partner at Actis, an emerging market-focused investment company.
“The ‘mega-city’ trend is still very much on the cards.”
The share of Africans living in urban areas is expected to grow from 36% in 2010 to 50% by 2030, with cities expected to be home to 85% of the national population in some countries, according to the World Bank.
The rapid urbanisation of mostly the young and unemployed is placing a huge strain on infrastructure and will put pressure on politicians to direct more resources towards cities. Inequality in African cities is already among the highest in the world.
African governments with stretched public finances will need to improve housing and social safety nets in cities and diversify their economies to support rural areas in order to avoid an increase in inequality that could stir up discontent.
“In a more risk-averse world, ‘urban bias’ – where there are proven returns – is likely to be reinforced. Investors will look at urban areas,” said Razia Khan, head of Africa research at Standard Chartered.
“This trend runs the risk of the rural electorate being marginalized – in especially unequal regions, it may raise political risks, and the potential for unrest.”
Back in Lagos, business is still expanding for cab-owner Cyril Ugochukwu, whose earnings are running well above the target he set for his business, which has contracts with online firm Easy Taxi.
“Individuals must make trips whether times are good or bad,” he told Reuters.
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AfDB President outlines strategy to transform Africa, welcomes development partners
African Development Bank President, Akinwumi Adesina, outlined the Bank’s new development priorities and underscored the importance of partnerships during his first annual luncheon with ambassadors and the diplomatic corps in Côte d’Ivoire, on Thursday, February 11 in Abidjan.
During the luncheon, Adesina presented the Bank’s new agenda, including the High 5s, which aim to light up and power Africa, to feed Africa, to industrialize Africa, to integrate Africa and to improve the living conditions of Africans. He also urged those in attendance to work together to support Africa, especially fragile and conflict-affected States, and to fight climate change. “At the Bank, we are currently accelerating the delivery of our Ten Year Strategy through sharper focus on the High 5s,” the President said, explaining that energy is key.
The President pointed out that no fewer than 645 million Africans have no access to electricity. The result: businesses and SMEs cannot function adequately, resulting in widespread unemployment.
“Energy is crucial, as the region cannot continue to live in darkness and we lose many lives every day due to lack of electricity,” he said.
In spite of the challenges that lie ahead, the Bank Group President affirmed that the continent is resilient, and so is the African Development Bank. “We reached 90% of our African Development Fund (ADF) financing target for the year,” he said. In 2015, “overall loans and grants in the year for the entire Bank amounted to US $9 billion, up from US $7.1 billion in 2014, which is about a 26% increase. Over 50% of the institution’s 2015 approvals went to infrastructure, of which 30% went to transport and 15% to energy projects.”
However, Adesina made it clear that the continent cannot achieve its development goals without its partners. “You are already our greatest champions and advocates,” he said.
He affirmed that the continent is indeed resilient and dynamic, and stressed that it has seen economic growth thanks to improved political stability, and solid macroeconomic and fiscal policies. The continent has built its resilience and dynamism on factors such as increased public sector investment in infrastructure and improved private consumption, he added.
President Adesina also outlined that despite economic headwinds with declines in commodity prices and weakening demand, the economic prospects are still good for the continent, with growth projected to accelerate to 4.4% in 2016 and strengthening further to 5% in 2017.
Adesina thanked the Government and the people of Côte d’Ivoire for facilitating the smooth return of more than 1,000 AfDB staff members to the Bank’s headquarters in Abidjan, and acknowledged the tremendous progress made over the past years to bolster the economy. “We are proud of Côte d’Ivoire as it has just conducted peaceful and successful elections and looks set to consolidate and accelerate its progress,” Adesina said. “It is good to be back home after 11 years of wonderful hospitality in Tunisia.”
Joseph Spiteri, Dean of the diplomatic corps in Côte d’Ivoire, commended the African Development Bank for its work and its efforts to pull millions of Africans out of poverty. He also called on the international community to support the Bank in this regard.
The luncheon ended with a press conference, where local and international media interacted with President Adesina on issues related to African economy, the impact of commodity prices on oil-rich countries and non-oil countries, diversification of markets, and resource mobilization.
Held every year for the past decade, the ambassadors’ luncheon aims to share perspectives and aspirations on African economies and brings together the diplomatic community and representatives of international organizations accredited to the Bank’s host country.
“Today is very special for me, as it is my first such occasion, since I took the baton of leadership, as President of the African Development Bank on September 1, 2015,” President Adesina said.
Côte d’Ivoire’s Minister of Planning and Development, Nialé Kaba, and Minister of Foreign Affairs, Albert Mabri Toikeusse, were also in attendance, as were private and public sector representatives, AfDB Senior Management and Executive Directors, and key Bank staff.
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Mining Indaba 2016: The African Union Commission launches the Compact of the African Mining Vision (AMV)
The African Union Commission (AUC) launched the Africa Mining Vision (AMV) Compact with Private Sector Leaders and Government Officials during a High Level Dinner Dialogue, on Tuesday, 9 February 2016, at the Mining Indaba, Westin Hotel Ballroom in Cape Town, South Africa.
The objective of the Compact is to have a frank dialogue amongst private sector leaders and senior government officials about the mechanisms for mutual implementations / institutionalization of the Africa Mining Vision which is a crucial instrument for achieving the Agenda 2063.
The event led off with a 45-minute cocktail reception followed by a sit-down, plated dinner with AUC-AMDC as the host for the evening. The AMV Compact is to promote wide understanding among stakeholders on the added value that the African Mining Vision provides, and the event with senior public and private officials focused on the AMV’s shared benefits, value creation and addition of minerals for Africa’s Industrialization and structural transformation.
In her keynote speech, read on her behalf by Mr. Frank Mugyenyi, Senior Industry Advisor, H.E. Mrs. Fatima Haram Acyl, the Commissioner for Trade and Industry, called for an Africa Mining Vision (AMV) compact with the private sector, reflecting robust collaborative partnerships and continuous dialogue to propel the shared benefits of the AMV.
“To ensure successful implementation of the AMV, an explicit agreement between African Union (AU) member States and private on a set of standards that would serve as a benchmark for companies and governments to assess performance, resulting in robust policies that cover a range of principles,” he pointed out.
The AMV emphasizes the transformative role played by the minerals sector in the national development goals of African countries. The AMV compact targets mining companies including oil and gas, Chambers of Mines and other mining associations, and it is based on principles that can be aligned with corporate core values, policies, strategic plans and mission statements of companies in the extractive sector.
In her opening remarks Dr. Fatima Denton, Director of Special Initiatives at the United Nations Economic Commission for Africa (UNECA) and African Minerals Development Centre (AMDC), emphasized that African Governments are increasingly becoming more assertive in developing long term visions for mineral resources to increase local content; move up the value chain; and increase inter-sectoral linkages between minerals and non-mineral sectors.
“This falls squarely within the Framework of the African Union’s Agenda 2063 and the African Mining Vision whose overall vision in general terms is towards harnessing Africa’s natural resources for broad based development,” she mentioned.
Before concluding, the Director stressed that the African Union Commission in partnership with its AMV implementing Partners who include the United Nations Economic Commission for Africa (UNECA), The African Development Bank (AfDB), the United Nations Development Programme (UNDP) and through the AU technical institution the African Minerals Development Centre (AMDC), are fully committed to ensure that this Compact becomes a major tool for effective Public-Private Partnership (PPP) with a view to formulating a shared vision on how the mineral resources exploitation can promote broad-based development and structural transformation of Africa.
The African Union Commission and the African Minerals Development Centre had a joint booth at the Mining Indaba to showcase the activities on the implementation of the Africa mining Vision and its Action Plan as directed by the African Union Heads of State and Government which are also in line with the Agenda 2063 10 Year Work Plan. It should be noted that the African Minerals Development Centre (AMDC), which is currently an AU project hosted by UNECA, has recently [been] adopted by the January 2016 Summit as a “Specialised Agency” of the African Union to coordinate the implementation of the Africa Mining Vision.
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Building sustainable partnerships: Strengthening quality management systems for enterprises in Rwanda
“In the next one year, we want to see more than Rwanda’s corporate market sourcing their products locally. This project is timely as it addresses the core gaps of our local industry provides a solution on improving competitiveness, quality control and consistency of supply of our products into regional and international markets.”
This was said by the Permanent Secretary in the Ministry of Trade and Industry, Mr. Emmanuel Hategeka ahead of the Local Sourcing for Partnerships training workshop that is to take place on the 16-19th February, 2016 at the Serena Kigali, Hotel.
The meeting is hosted by the COMESA Business Council’s (CBC) and Rwanda Private Sector Federation (PSF) in partnership with the Ministry of Trade and Industry. The workshop is part of an ongoing project known as the CBC Local Sourcing for Partnerships (LSP) project supported by the Investment Climate Facility for Africa (ICF), USAID-IPAA, in collaboration with the public and Private sector bodies in the six countries where the pilot phase of the project will be implemented. The countries are Zambia, Rwanda, Uganda, Kenya, Ethiopia and Malawi. The key focus sectors of the training are from the suppliers- fruits and vegetables, dairy and dairy products, apiculture, cassava among others. The potential buyers of the project will come from the food and beverages industry, hospitality industry and the retail outlets such as supermarket chains.
Commenting on the event, CBC’s Chief Executive Officer Ms. Sandra Uwera said, “We need to upgrade enterprises to meet the demands of today’s urban African consumers. I cannot overemphasize the importance of this kind of trainings in building the capacity of growth enterprises, whilst integrating them into supply chains of larger industries in the region.”
Local sourcing within the COMESA region remains critically low which indicates the need to structure mechanisms that can encourage the consumption of home-grown products within the COMESA region. Considered timely, the training workshop is being held from 16th-19th February 2016 at Serena Hotel in Kigali Rwanda. This comes after the successful completion of a similar training in Zambia that saw a total of 80 suppliers trained on quality standards and food safety from 25-28th January 2016 at Taj Pamodzi Hotel in Lusaka, Zambia.
“With the training on standards and food safety requirements for enterprises, and the commitment from the private sector in implementing the initiatives such as the Made in Rwanda Campaign, I am confident that our local industry will benefit from the project,” Hategeka said.
Companies often source outside the region due to various reasons which include the limitations of the local market in meeting the basic requirements of time, cost, quality and consistency in supply. Secondly, the challenge of limited and credible information local distributers and suppliers affects partnership confidence between buyers and suppliers.
Commenting on the training, Mr. William Asiko, ICF’s CEO said, “The training of these SMEs will contribute towards improving standards of quality in food safety and thus increasing local sourcing within the COMESA region. SMEs in the region will also be given a platform to share their experiences and lessons learnt in local sourcing for partnerships and therefore contribute towards improving their operating environment.”
The training will address core challenges faced by enterprises while trading in the market which include; The failure of SMEs to meet the international standards requirements, Inconsistent supply from local SMEs, Limited credible information on local suppliers, and lastly, the existing assumption that local sourcing partnerships are viewed as a difficult, unstable process.
The goal of the LSP training workshops is to build inclusive growth of SMEs in business processes, establish job creation of SMEs and to contribute to overall improvement of intra-trade development in COMESA, promote and facilitate international market access of local products.
During the training workshop, participants will be trained on the Hazard Analysis $Critical Points (HACCP) and the Global Food Safety Initiative (GFSI) management system, which includes various models such as the Codex Alimentarius Commission, Principles of Food Hygiene, Primary Production, Controls Systems, maintenance and Sanitation, Personal Hygiene, Product Information and Documentation among others. The training approach will include both in-house classes and field tours to various businesses operating in the Rwandan market.
It is expected that at the end of the project a local sourcing recognition certificate will be awarded to corporate companies that promote local sourcing as practitioners of the Responsible Procurement policies in Africa.
To date, CBC has entered in Buyer agreements with a number of private sector companies, namely – Serena Uganda, Protea Kampala, Protea Lusaka and Taj Pamodzi Zambia. The aim is to link them with the successful local suppliers who have undergone training, thus supporting them to increase their share of local sourcing.
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tralac’s Daily News selection
The selection: Monday, 15 February 2016
Today in Johannesburg: UNCTAD joins SADC review of best approaches to take its Bilateral Investment Treaty template forward. Twitter updates: @UNCTADinAfrica
Featured infographic, from @frostyhk: Here's China's worsening trade figures in a chart. Exports -11% in Jan, imports down every month since Oct 2014.
Featured commentary, by Sultan Ahmed Al Jaber: 'Asia's middle class is reshaping world trade' (CNNMoney)
The United Arab Emirates sits at the pivot point of this re-balancing of the global trade flows. In the last decade, India and China have emerged as the UAE's biggest trading partners - each does about $60bn in trade with us every year. This growth is being driven by middle income earners. Their numbers are projected to rise to five billion by 2030, two thirds of them will live in India and China. As part of our strategic vision to diversify our economy, we have created business friendly enterprise zones next to our logistical hubs, attracting thousands of Chinese and Indian businesses. For instance, the Jebel Ali Free Zone Authority is now home to some 800 Indian and 250 Chinese firms. They are drawn to an environment where the ease of doing business is matched only by the unique location that can serve both established markets and open new markets in Africa. [The author is Minister of State, United Arab Emirates]
South Africa’s exports performance: any role for structural factors? (IMF)
Despite a substantial and prolonged exchange rate depreciation, South Africa’s export performance has disappointed since the global financial crisis. In this paper we focus on the role of structural factors in reducing the responsiveness of South African exports to the real exchange rate depreciation. To this end, we construct a unique database of export performance at the firm level. Our analysis suggests that electricity bottlenecks, limited product market competition, and labor market constraints have reduced the responsiveness of firms’ exports to the rand depreciation. On the other hand, a firm’s ability to diversify its exports has helped it benefit more from currency movements.
Extract: The micro-level data reveals that small and medium sized enterprises are manufacturing-intensive, and export primarily to regional partners. More than 85% of the goods exported by SMEs are manufactured products, while almost half of large companies’ exports are mining products (Figure 3). Over 90% of SMEs’ exports are shipped to Sub-Saharan Africa, while export destinations are more evenly distributed in the case of large firms (Figure 4). [Download]
Inaugural Africa Visa Openness Index is launched (AfDB)
The report highlights regional and geographical differences. Currently, 75% of countries in the top 20 most visa-open countries on the continent are in West Africa or East Africa. Only one country in the top 20 is in North Africa and there are none in the top 20 from Central Africa. The report also shows that Africa’s Middle Income Countries have low visa-openness scores overall, while the continent’s smaller, landlocked and island states are more open. “When we started this work, only 5 African countries offered liberal access to all Africans; this number has grown to 13 over the past three years. We are making progress, but need to accelerate the pace” says Acha Leke, Director of McKinsey & Company and member of the WEF Global Agenda Council on Africa. [Download]
Southern Africa: Gender issues in cross-border trade (SATH)
The Trade Hub is currently undertaking a gender assessment of women’s roles in informal cross-border trade across Southern Africa. The Trade Hub hopes to leverage its connections with border agents and customs officials to identify innovative solutions to address gender constraints and prevent gender-based violence at border crossings. The presentation covered the methodology of the gender assessment, which includes literature and policy reviews as well as fieldwork in Botswana, Zambia, and Malawi.
Beitbridge: Government to enhance security, efficiency (The Herald)
Dr Chombo said most of the challenges at the port of entry included the inadequacy of infrastructure, manpower and accommodation for Government workers. He said they were also seized with the reports of rampant corruption at the border post. “It is worrisome that we are importing for $7bn per year and getting around $3bn on exports. It means we could be losing a lot to smuggling,” Minister Chombo said.
Mutukula One Stop Border Post: URA challenged to reduce cargo clearing time to six hours (The Monitor)
‘I have spent the past 48 hours on a truck going from Abidjan to Burkina Faso. Conclusion: you really don't want to be landlocked in Africa’ (@dlknowles)
West Africa: Germany to finance UNCTAD project on transparent trade procedures (UNCTAD)
The project will create online Trade Portals that will describe export, import and transit procedures in the recipient priority countries of Nigeria, Mali and Benin, all of which are WTO Members. Main benefits for the recipient countries will include:
East African countries could lose out on TFTA benefits from June (The East African)
So far, EAC partner states have agreed to liberalise 63% of their tariff lines to the other TFTA partners and 37% of tariff lines are to be liberalised and further negotiated. On rules of origin, members have agreed that where rules are common (including wholly originating), 35% ex-works costs (distribution and logistics) should be retained as an interim option. If enacted, such a move would mean that products on which the value-added criterion of 35 per cent ex-works cost applies could gain duty-free regional market access. “The agreement is also on product-specific rules of origin,” noted Mr Ogot.
Towards Africa’s own mega-regional: the CFTA (Bridges Africa)
Botswana: Economic Stimulus Programme launch (Government of Botswana)
It is in response to the above that ESP is targeting the construction, the manufacturing, tourism and the Agricultural sectors. The Economic Diversification Drive and the Special Economic Zones in particular will boost the local Manufacturing Sector. These efforts will be further complemented by the implementation of the Doing Business Roadmap and Action Plan, recently launched by the Ministry of Trade and Industry. The Government Implementation Coordination Officeis being strengthened to oversee the implementation of all government projects, monitor and to keep records of their progress while the National Strategy Office will focus on the successful delivery, strategic oversight and support to ensure that the goals of the ESP are achieved. [The author: President Khama]
East Africa: ‘We can’t build integration on political quicksand’ (Citizen Digital)
Although an attempt by Burundi to recall four members of the East African Legislative Assembly has been successfully defeated, the danger signals to regional integration initiatives arising from that attempt are clear. It is not lost on observers that Burundi is going through political turmoil, and the efforts to recall the four legislators could very well be associated with local political manoeuvres. Fortunately, EALA stood its ground, making it clear that the attempted recall was in contravention of the Treaty for the Establishment of the East African Community. [The author: Isaac Mwangi]
Even with open EAC borders, there is so much more to do (New Times)
ECOWAS Parliament as Ekweremadu exits amid accolades (ThisDay)
Ethiopia: That illusive US investment (Addis Fortune)
Business relations have still not taken off satisfactorily. Of the 250 US companies that have made it through the US Embassy's International Trade Administration office in the year and a half since it opened, less that 4% have got to the point of starting operations. Data from the Ethiopian Investment Commission show that in the past 22 years, 522 US companies have been licensed. Of these, 35% made it to operation. The companies made a capital outlay of 7.5 million Br, and created 15,000 permanent jobs. "It takes from two to four years to start operations," the US Embassy's Foreign Commercial Service Officer, Tanya L. Cole, told Fortune, adding that time is one of the biggest deterrents to FDI in Ethiopia.
Egypt: Chinese companies boost operations (ecns)
He explained that the company chose to set up a base in Egypt because of the country's location and the preferential trade policies it enjoys in other markets. "If you export fibreglass to Europe from China, you have to pay anti-dumping and anti-subsidy duties of 24.8 percent, not to mention the tariff. There is no tariff if you export to Europe or the Middle East from Egypt, nor any anti-dumping and anti-subsidy duties." Also, it takes at least a month to ship goods from China to Europe, but from Egypt it takes only a week, and a container could arrive in Turkey in just two days, he said.
South Africa: Zuma releases report that calls for partial privatisation (Business Day)
Signalling that the government is finally ready to move on the reform of state-owned companies, President Jacob Zuma has released the report of the presidential review commission, which advocates partial privatisation through listing and the sale of equity stakes in some companies. The report was commissioned by Mr Zuma in 2010 and he received it in December 2012. In 2013 a brief summary was made public by then minister in the presidency Collins Chabane. The full report was finally released by the Presidency on Friday. [Download: Presidential Review Committee on State-Owned Enterprises]
Ashok Leyland begins work to set up assembly unit in Africa (Economic Times)
"From the traditional market in Middle East, Sri Lanka, Bangladesh (which Ashok Leyland serves currently), we would now like to shift to Africa and select countries there. We also have an East Africa strategy and West Africa strategy," Ashok Leyland Chief Financial Officer Gopal Mahadevan told reporters here. The move comes in the backdrop of orders it received for supply of buses and trucks from Senegal, Ivory Coast, Tanzania and Zimbabwe.
India prods steelmakers to use local coal to cut $4 bln import bill (Reuters)
India is asking the country's big steelmakers to consider converting local medium-quality coal into premium coking coal to slash an annual import bill of more than $4 billion for buying that grade from countries such as Australia and South Africa. Resurgent local output of power-generating thermal coal has been one of Prime Minister Narendra Modi's successes, and the latest project could help India to partly make up for a shortage of coking reserves that forces companies like JSW Steel and Jindal Steel to import heavily.
Social Development Commission: draft Africa resolution (UN)
The Commission for Social Development concluded its fifty-fourth session, approving three draft resolutions for adoption by the Economic and Social Council with one on Africa’s development, traditionally endorsed by consensus, requiring a rare vote to address the United States’ concerns over language around trade issues, and more generally, “the right to development”. As the day began, the Commission approved a draft on “Social dimensions of the New Partnership for Africa’s Development” by an unexpected vote of 29 in favour, to 12 against, with no abstentions. By its terms, the Council would emphasize that “increasingly unacceptable” poverty, inequality and social exclusion in most African countries required social and economic policies to be devised through a comprehensive approach.
Africa-Arab Partnership formulates Action Plan 2017-2019 (Gulf News)
SADC Commission of Inquiry report: main findings (Lesotho Times)
Sustainable Energy for All (SE4All) Africa: workshop (AfDB)
Nigeria: Business, govt regulators plan roundtable to review relationship (ThisDay)
Kenya’s new Insolvency Act will boost ease of doing business (The East African)
East Africa: TradeMark channels $2.5m to private sector (The East African)
United States goes a’courting ASEAN (East Asia Forum)
President Barack Obama is hosting leaders of 10 Southeast Asian countries in Sunnylands in California this week in a bold move to deepen and broaden US engagement with ASEAN. This is a positive development but it also imposes risks that, in the end, will be up to ASEAN to manage. The ASEAN group is the fourth largest trading partner of the United States and American companies are the largest single source of foreign direct investment in the region.
Vivek Dehejia: 'The return of trade protectionism' (LiveMint)
Isabelle Ramdoo: 'Thinking beyond the resource boom: African countries must avoid procrastination' (ECDPM)
Christine Mungai: 'Which are the top think tanks on the continent? Plus insights about the thinking business in Africa' (M&G Africa)
Silk Roads, Night Trains and the Third Industrial Revolution in China (Truthout)
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