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Global partnership needs to be revitalized to tackle inequality and implement the new sustainable development agenda, says new UN report
The Millennium Development Goals (MDGs) achieved significant progress over the past 15 years, but persistent gaps in official development assistance and an insufficient access to markets, affordable medicines and new technologies have highlighted the need for a rejuvenation of the global partnership for development, according to a new report launched on 18 September by United Nations Secretary-General Ban Ki-moon.
The “Taking Stock of the Global Partnership for Development” report of the United Nations MDG Gap Task Force monitors the recent achievements and challenges in the implemen-tation of the Millennium Development Goal 8, while looking ahead towards the new sustainable development agenda that will be adopted by world leaders at the Sustainable Development Summit this month (September 25-27), and which will include the launch of a new set of Sustainable Development Goals.
“Transitioning from the Millennium Development Goals to the Sustainable Development Goals presents a once-in-a-generation opportunity to advance prosperity, secure the planet’s sustainability for future generations”, said Secretary-General Ban Ki-moon in the preface to the report. “Achieving the SDGs will require an even stronger global partnership, complemented by multi-stakeholder partnerships to mobilize and share knowledge, expertise, technology and financial resources”.
Key report findings reveal official development assistance flows have increased remarkably by 66 per cent from 2000 to 2014. In merchandise exports, developing countries’ access to developed-country markets has improved from 30.5 to 43.8 per cent over the same period. Debt burdens have been reduced in most highly indebted poor countries. Mobile phone penetration in developing countries is estimated to reach 92 per cent at the end of 2015, compared to less than 10 per cent in 2000.
Nevertheless, the Report also finds that major gaps persist in development aid flows to the least developed countries and in eliminating trade barriers for developing countries. Additionally, many people cannot access essential medicines and the Internet at affordable prices.
Market access for developing countries expanded
Developing countries received duty-free treatment on only 65 per cent of their exports to developed countries in 2000, but on 79 per cent in 2014 (excluding arms). Duty-free imports from least developed countries increased from 70 per cent to 84 per cent of their trade over the same period. South-South trade has become an important source of trade expansion.
But, the merchandise exports of least developed countries accounted for only 1.17 per cent of world trade in 2013. According to the Report, there is the need for developed countries to eliminate more barriers to trade, while the remaining Doha Round issues need to be tackled.
Debt relief progressed in 36 out of 39 eligible countries
Debt relief has reduced financial pressures in 36 out of 39 highly indebted poor countries, and only three countries – Eritrea, Somalia and Sudan – have yet to start the debt-relief process. The overall ratio of external debt to gross domestic product (GDP) of developing countries has declined over the past decade, but it has been increasing in some countries in recent years.
However, a number of developing countries, particularly small States, continue to face some of the highest debt-to-GDP ratios in the world, and their underlying economic problems warrant further attention. An urgent need remains for the international community to assist countries to enhance their policies towards debt-crisis prevention and to facilitate resolution of crises.
Access to affordable essential medicines still limited
The availability of essential medicines is still low in developing countries. According to the data on medicine availability and prices, collected in 26 surveys from 2007 to 2014 in a sample of low- and middle-income countries, generic medicines were available on average in 58.1 per cent of public sector facilities and in 66.6 per cent of private sector facilities.
Nevertheless, there have been efforts to increase treatment access, in particular for some diseases such as HIV, tuberculosis and malaria, largely owing to a massive influx of national and international funding, such as from the Global Fund.
Mobile phone signals reach 95 per cent of the world’s population
The Task Force estimates that the number of mobile-cellular subscriptions in the world is estimated to grow to just over 7 billion by the end-2015 and more than 95 per cent of the world’s population will be covered by a mobile-cellular signal. Forty-three per cent of the world’s population uses the Internet today.
The growth of Internet users is robust in developing countries, but only 32 per 100 inhabitants are estimated to be using the Internet, as compared with 80 per cent of people in developed countries in 2014. Access to information and communication technologies (ICTs) can be an important enabler of broader development objectives such as “e-governance” services so that greater efforts must be undertaken, especially in the economies that most need ICTs but which are least able to access them.
Background
The United Nations MDG Gap Task Force is an inter-agency initiative that includes more than 30 organizations with specialised competence in the five core domains of the global partnership for development: official development assistance (oDA), market access (trade), debt sustainability, access to affordable essential medicines and access to new technologies.
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SA economy needs to be labour absorbing: 2014 Development Indicators
While unemployment continues to plague South Africa, reducing it requires the economy to be on a labour absorbing growth path.
“Reducing South Africa’s high levels of unemployment requires the economy to be on a labour-absorbing growth path, as well as the development of entrepreneurship amongst our youth, in terms of interest, skills and creation of opportunities.
This depends on a successful reorientation of the economy to raise labour demand, with matching improvements on the supply side,” said Minister in the Presidency responsible for Planning, Monitoring and Evaluation Jeff Radebe.
The Minister was speaking at the launch of the 2014 Development Indicators in Pretoria on Sunday. The data in the 2014 report reflects that one in four working age adults actively seeking employment remained unemployed during the period under review.
In 2014, youth unemployment reached a peak of 48.8% amongst the 15-24 year age group and 29.6% amongst the age group 25-34 years of age.
Whereas unemployment is exacerbated by lack of appropriate skills, this is also compounded by the shortage of suitable post-school education opportunities, noted the Minister.
Re-industrialisation and economic diversification are also necessary to boost job creation, and these factors are at the heart of the National Development Plan 2030 (NDP), the New Growth Path and the Industrial Policy Action Plan.
“The stark unemployment figures I have just outlined have continuously spurred government into action, and not into despondency,” said Minister Radebe.
Expanded Public Works Programme (EPWP)
Investments in infrastructure have boosted youth employment in construction with the Expanded Public Works Programme (EPWP) having expanded the intake and participation of young people.
The goal of the programme is to provide six million work opportunities by 2019 through the labour intensive delivery of public and community assets and services.
According to the report, employment in the EPWP continues to expand steadily.
“Short-term employment opportunities through the EPWP remain an important intervention to support unemployment working-age adults. In the year 2013/14, the EPWP created more than 1 million work opportunities. Infrastructure has created more work opportunities than other sectors,” noted the report.
While the EPWP has grown substantially with more than three-fold growth in four years, given the country’s focus on decent jobs, this is not sufficient to ensure a skilled, qualified and capable workforce, said Minister Radebe.
The Minister further added that it is not the primary role of government to create jobs, but rather to create an enabling environment for crowding in investments, in terms of the legislative and regulatory dispensation, stimulating economic growth and ensuring a peaceful labour environment, free of exploitation and disruption.
“Jobs created in the public sector are therefore largely a bi-product of successful service delivery, which is our main goal.”
As part of interventions to address the skills deficits, at least 30 000 young people have benefited from internships and learnerships in the public service since the decision to systematically implement this programme in 2009.
Meanwhile, the Industrial Development Corporation and the Small Enterprise Finance Agency have committed a combined R2.7 billion to finance youth-owned enterprises.
The National Youth Development Agency (NYDA) has also supported a range of youth-owned enterprises and cooperatives with more than1 000 youth-owned enterprises having benefited from the support of the NYDA.
The Development Indicators are an initiative by the Department of Performance Monitoring and Evaluation and tracks progress made in various areas of development.
There are 86 indicators in all which are clustered in 10 themes ranging from economic growth and transformation, employment, education and safety and security among others.
These indicators are used as criteria to measure progress and assist government to track, using quantitative measures, the effectiveness of government policies and interventions towards achieving the national goals in areas of development.
Address by Minister Jeff Radebe on the occasion of the release of Development Indicators 2014: Extracts
On this blessed Sunday morning, let me first express my appreciation to you all for your presence here as we release to the people of South Africa the Development Indicators 2014. These indicators play a crucial role in assisting government and the public to track the effectiveness of government policies and interventions using aggregate data. They employ quantitative measures to track progress made in implementing policies against national targets based on data sourced from research institutions, government databases and official statistics.
The purpose of today’s panel discussion with industry and sector experts is to stimulate public discourse and ensure that these Development Indicators are understood in context by the stakeholders and the public. It also seeks to unpack the indicators in detail and get expert opinion and input from the target audience on what is working and how we could improve the reporting in future.
The launch of the Development Indicators occurs against the backdrop of yet another proud milestone in South Africa’s rich history – the discovery of Fossil Naledi. Many of the series we track in this publication date back to 1994 – not quite as far back as the Naledi fossils – but very useful in assessing how we have progressed from 1994. The government and the people of our country and indeed the entire world speak with one loud voice in congratulating the University of the Witwatersrand for this colossal achievement. May this pioneering work grow from strength to strength, and continue to place our country at the epicentre of the global map.
The Development Indicators publication is one of our key sources for tracking progress towards achievement of the National Development Plan (NDP) Vision 2030, on annual basis. Whereas the production of this publication predates the adoption by our country of the NDP 2030, the majority of indicators identified at the outset and tracked since then, remain pertinent to the present. This 2014 publication is useful in many respects. It is the first to be produced since government published the 20-year review in 2014, and thus further enriches the evidence-base that informs the design and delivery of our socio-economic development programmes.
The socio-economic development programmes implemented in partnership with all key stakeholders, and therefore have to be monitored and evaluated jointly with all our partners. Your presence here today fellow South Africans, to join hands with us as we take stock of milestones recorded to date, is of utmost importance.
Consistent with the Labour Force Surveys published by Statistics South Africa, the Development Indicators 2014 reflect that one in four working age adults actively seeking employment remained unemployed during the period under review. In 2014, youth unemployment reached a peak of 48,8% amongst the 15-24 year age group and 29,6% amongst the age group 25-34 years of age. Whereas unemployment is exacerbated by lack of appropriate skills, this is also compounded by the shortage of suitable post-school education opportunities.
Reducing South Africa’s high levels of unemployment requires the economy to be on a labour-absorbing growth path, as well as the development of entrepreneurship amongst our youth, in terms of interest, skills and creation of opportunities. This depends on a successful reorientation of the economy to raise labour demand, with matching improvements on the supply side. Re-industrialisation and economic diversification are also necessary to boost job creation, and these factors are at the heart of the NDP 2030, the New Growth Path and the Industrial Policy Action Plan.
The stark unemployment figures I have just outlined have continuously spurred government into action, and not into despondency. Measures undertaken by the public sector, such as investment in infrastructure, have boosted youth employment in construction. The Expanded Public Works Programme has expanded the intake and participation of young people. The recently launched employment tax incentive has encouraged private-sector employment of new entrants to the labour market.
As the NDP 2030 firmly asserts, it is not the primary role of government to create jobs, but rather to create an enabling environment for crowding in investments, in terms of the legislative and regulatory dispensation, stimulating economic growth and ensuring a peaceful labour environment, free of exploitation and disruption. Jobs created in the public sector are therefore largely a bi-product of successful service delivery, which is our main goal.
As is known, the global economic recovery since the downturn of 2008 has been slow and uneven across continents. The GDP growth rate in South Africa averaged 3.7% in the past 10 years, while annual growth rate averaged 1.5% in 2014. Our target, embodied in the NDP target is 5.4%. Key risk factors include poor global economic conditions which continue to impact on our export markets. Our mining sector is facing an acute crisis partly as a result of the dramatic drop in commodity prices. Current initiatives to stimulate growth include the government’s infrastructure build programme, the war room on electricity, the Operation Phakisa on the Ocean Economy and on Mining, and the 9-Point Plan.
Despite some fluctuations, our overall total investment in fixed capital as a percentage of GDP increased over the last 5-years, and reached 20,3% in 2014. The NDP target is 30% of GDP by 2030. This has resulted from the focused delivery on the government’s Strategic Infrastructure Projects, which included the upgrading of roads, schools and hospitals, with the provincial governments and local authorities in particular stepping up their expenditure. At the same time the level of real fixed capital expenditure is mainly reflecting ongoing spending by the electricity and transport sectors. Lower than expected private sector investment as a percentage of GDP remains a challenge to increasing overall investment. South Africa has not yet recovered to the 2008 level, which was driven largely by preparations for the 2010 Soccer World Cup.
Employment in the Expanded Public Works Programme (EPWP) continues to expand steadily, and reached 6 million at the end of 2012/13. Short-term employment opportunities through the EPWP remain an important intervention to support unemployed working-age adults. In the year 2013/14, the EPWP created more than one million work opportunities, the majority in infrastructure. The Community Work Programme has grown substantially from its modest roots in 2009/10 with more than three-fold growth in four years. However, given the country’s focus on decent jobs, this is not sufficiently crowding to ensure a skilled, qualified and capable workforce.
The National Development Plan envisages rural communities with greater opportunities to participate fully in the economic, social and political life of the country, supported by good-quality education, health care, transport and other basic services. An inclusive rural economy will be achieved through successful land reform, job creation and rising agricultural production.
The medium term strategic framework contains actions to grow and diversify the economy and reduce economic concentration. It focuses on ensuring growth in the core productive sectors of manufacturing, mining and agriculture, including stimulating new areas of economic growth such as the oceans economy. It includes actions to ensure that small business makes a much larger contribution to growth and employment creation.
Current initiatives to create jobs in agriculture are yet to manifest in the employment numbers. In 2014, however, the agriculture sector gained 28,000 jobs, followed by a 200,000 year-on-year increase in the first quarter of 2015.
Current economic conditions affect all sectors, but the agriculture sector is further constrained due to severe drought conditions.
Maintaining good agricultural practices is critical to improving the competitiveness of SA products in the markets, and as such Government has instituted the Good Agriculture Practice (GAP) audits.
South Africa must increase its investment in Research and Development (R&D). Although R&D expenditure as a percentage of GDP has increased over the years, it was only 0,76% of the GDP in 2011/12. A silver lining in this cloud is that there have been some shifts in the overall composition of Gross Expenditure on R&D (GERD) compared to five years ago, primarily as a result of the fact that the government has become the largest source of funds for R&D, and that the bulk of such funds are expended in the higher education institutions and science councils. Notwithstanding, increased investments in R&D are required to ensure that the country remains abreast of other nations in the production and application of scientific knowledge. In our vocabulary, this includes indigenous knowledge systems.
The Development Indicators 2014 include a section on good governance, where we monitor the efficiency of revenue collection, audit outcomes of the different spheres of government, the perceptions of corruption, transparency in budget processes, the public’s opinion on the delivery of basic services and the ease of doing business in South Africa. These measures are useful in assessing the NDP goal to build a capable and developmental state.
According to the Open Budget Index (OBI), South Africa continues to be in the top six of countries that institutionalise transparency initiatives in the budgetary processes. Notably, South Africa maintained the second position both in 2008 and 2013, an impressive record indeed.
South Africa’s corruption perception score improved in 2014. Despite the slight improvement, the perception of corruption in South Africa and our consequent poor performance when compared to other countries are not what they should be. Corruption in both the public and private sectors impedes service delivery, undermines public confidence in the state and the economy, and reduces economic growth, competitiveness and investment. A range of institutions and measures have been put in place since 1994 to counter corruption. These are being strengthened by mechanisms such as preventing public servants from doing business with the state and better management of the risks related to government procurement processes. A culture of zero tolerance needs to be developed across society, with businesses and citizens also playing their part.
Government departments must utilise the taxpayers’ resources, appropriated through Parliament, judiciously and ethically. Financial audit outcomes across national and provincial departments, municipalities and public entities have improved but are still not ideal. The MTSF target for municipalities is that at least 75% of municipalities should have unqualified audit opinions by 2019. Intense support is being provided to municipalities to develop and implement audit action plans through a dedicated initiative by the Department of Cooperative Governance. To date 167 municipalities have plans of action to prepare and submit Annual Financial Statements.
Tax revenue has grown significantly due to economic growth, a broader tax base and more effective revenue collection. The income tax register has been expanded from 3 million taxpayers in 1996 to almost 20 million in 2013. National Treasury’s 2015 Budget Review indicates that there is broad acceptance that South Africa’s tax system is fair and efficient. It forms a part of the country’s social compact, raising the revenue necessary to support public services. Over the past decade, the public finances have supported a large-scale redistributive effort to support national development and reduce poverty. National income, adjusted for inflation, is 50 per cent larger than it was 10 years ago. Over the same period, spending per citizen grew by 80 per cent in real terms, and real expenditure on social services doubled.
Since the global financial crisis began in 2008, however, increasing expenditure has been sustained by a large accumulation of debt. Rising debt-service costs threaten the sustainability of social gains achieved over the past decade. Government is aware that improving the quality of public spending, combating corruption, and eliminating waste and inefficiency are vital to maintaining the goodwill that sustains revenue collection.
The past decade has seen the rise of the black middle class. There was a significant shift in the country’s living standards measure between 2001 and 2013. Despite rising average income levels and the rise in the black middle class, levels of inequality have remained high, with the richest 10 percent of households capturing over half of the national income.
Fellow South Africans and distinguished guests, the key areas of good performance in 2014, as embodied in the Development Indicators 2014 Report are as follows:
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South Africans’ life expectancy increased by 8.5 years from 52.7 years in 2004 to 61.2 years in 2014
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Infant mortality improved from 58 to 34 deaths per 1 000 live births between 2002 and 2014. Over the same period under-5 mortality decreased from 85 to 44 deaths per 1 000 live births.
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South Africa contributed to halting and reversing the spread of HIV (Millennium Development Goal 6). The number of HIV positive persons on antiretroviral treatment in South Africa was at 2.8 million in 2014, which is a significant portion of the global target of 15 million. The number of people on antiretroviral treatment has now reached 3.5 million. The global target was achieved ahead of schedule in 2015.
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The percentage of households in low living standards (LSM 1 to 3) decreased from 40% to 11% over the period 2000 to 2013
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The number of households has expanded from 10.8 million to 15.6 million between 2002 and 2014. Over the same period, the share of households accessing basic services increased from 77% to 86% in the case of electricity, from 80% to 86% for water infrastructure, which exceeded RDP standards. The proportion of households accessing sanitation went up from 62% to 80%.
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The share of 5-year olds attending early childhood development facilities more than doubled from 39% in 2002 to 87% in 2014.
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In 2014, 84% of adults in South Africa were literate, up from 73% in 2002. South Africa compares favourably to other African and Middle Eastern countries in international comparisons.
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Combating the unacceptably high levels of crime remains a priority. Between 2002 and 2013, the number of serious crimes reported was reduced from over 5 thousand to 3.5 thousand per 100 000 population.
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Since first assessed in 2006, South Africa persistently performed well in terms of the public having access to budget information and provided with the opportunity to participate in budget process at national level. In 2012 we were rated second out of one hundred countries.
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Tax revenue has grown significantly due to economic growth, a broader tax base and more effective revenue collection. The income tax register has been expanded from 3 million taxpayers in 1996 to almost 20 million in 2014.
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Almost 15 million international travellers arrived in South Africa in 2013, double the number in 2005. Tourism generated 4.6% of total employment in 2012, up from 4% in 2005 and contributed R93 billion to GDP in 2012, more than double the R45 billion in 2005.
The indicators are, as their name suggests, numerical indications of changes in highly complex and interrelated systems. They should be interpreted jointly, beyond the number and within the broader, socio-economic and historical context.
The two fundamental objectives of eradicating poverty and reducing inequality have been the central focus of government policy since 1994. The Twenty Year Review provided a comprehensive overview and analysis of South Africa’s progress since 1994. The Twenty Year Review has shown that South Africa has emerged from its deeply divided and violent past into a robust and vibrant democracy that has made major strides in improving the lives of its citizens.
Poverty has declined since 1994, but society remains highly unequal. In addition, while there has been progress in addressing the legacy of apartheid, inequality is still largely defined along racial lines. Going forward, a number of challenges will have to be addressed to eradicate poverty and reduce inequality. These include employment creation, improving labour relations, overcoming economic infrastructure constraints, improving the capability of the state and the quality of service delivery, and overcoming the challenges related to basic education, public health services, crime and corruption.
The Development Indicators are a collation of data extracted from many sources, including official statistics, government databases and research institutions. I would like to thank all the institutions and agencies that provided data for their support.
It is my wish that a broad range of institutions and individuals should engage with this publication and should be inspired to work together to achieve our long and medium-term goals as articulated in the National Development Plan (NDP) Vision 2030 and the Medium Term Strategic Framework (MTSF).
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US Chamber of Commerce partners with West African business group
The U.S. Chamber of Commerce is forming a potentially powerful new business partnership with West Africa to strengthen trade and investment ties.
The alliance links the Chamber with the 15-nation Economic Community of West African States (ECOWAS), creating the U.S.-ECOWAS Business Initiative (USEBI) – the first effort of its kind in the region – as part of an effort to churn up large-scale economic growth and improve security throughout the burgeoning area.
“By bringing new jobs to the market, you alleviate a lot of concerns and will help bolster security and peace in the region, and that’s part of what we’re thinking through as we engage there,” Scott Eisner, the Chamber’s vice president of African Affairs, told reporters Friday.
The U.S. and African trading relationship can blossom through improved trade facilitation, supply-chain and transportation development and growing the manufacturing base, Eisner said.
He said the U.S. and West African private-sector business groups, including the Federation of West Africa Chamber of Commerce and Industry, agreed that now is the time to take the reins and promote far-reaching investment ahead of government efforts to jump-start the region's massive economic potential or risk losing a global competitive edge.
In turn, business and the U.S. government will work “hand-and-glove” to develop these regional markets with the goal of lowering trade barriers and increasing competition, Eisner said.
One of the aims is to bring more stability to the region and provide an economic framework that mutes government corruption and bureaucratic red tape that can make U.S. investment difficult.
Burkina Faso, one of the countries in the group, experienced a coup Wednesday that has led to demonstrations and riots and has been condemned by the United States and France, among other nations.
Earlier this summer, President Obama signed the 10-year African Growth and Opportunity Act (AGOA), which provides 39 African nations with tariff-free access to U.S. markets.
Passage of that bill spurred the Chamber and its partners to pick up the pace of their efforts in West Africa, Eisner said.
U.S. Trade Representative Michael Froman said recently that the elimination of tariffs under AGOA won’t be enough to fully stoke the U.S.-Africa trading relationship.
The future of the partnership will depend more on “programs that can support Africa’s own priorities and help build the continent’s capacity to trade competitively in the 21st century global economy,” Froman said during the AGOA trade summit in Gabon in August.
Other goals in West Africa include developing the retail and agricultural sectors, expanding access to the Internet and generating a consistent power supply.
The formal kick-off for the partnership will be held Sept. 29 in New York.
The ECOWAS countries beside Burkina Faso are Benin, Cabo Verde, Cote D’Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.
The Obama administration has ramped up its outreach to Africa over the past six years.
This summer, President Obama made his fourth trip to sub-Saharan Africa, likely solidifying the future of the U.S. presence on the continent.
Last summer, he held the U.S.-Africa Leaders Summit, hosting more than 50 African leaders to discuss a wide variety of pressing issues from trade and investment to health issues such as stopping the spread of Ebola.
National Security Advisor Susan Rice on Friday said the view of Africa has dramatically changed in the global economic equation and, in response, the United States has stepped up its commitments to the continent.
“No longer do we view Africa through the prism of poverty and crisis,” she said at the Congressional Black Caucus Foundation Annual Legislative Conference in Washington.
“We see Africa for what it is – a dynamic, diverse region brimming with economic potential and boundless possibility,” she said.
“Africans are driving their own development, building their own capacity to feed and care for their people and doing more to prevent and resolve African conflicts.”
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Reflections on global economic governance at the “start of a new era”
With the adoption of the post-2015 development agenda on the horizon and negotiations on a new climate regime, what’s changed for governance of the global economy in the last two decades, and what have we learned? This article maps the shifting context for trade, investment, and sustainable development.
Governments around the world are gearing up to adopt a new post-2015 development agenda including 17 Sustainable Development Goals (SDGs) during a summit scheduled to be held later this month at UN headquarters in New York. The new roster of international priorities has been billed as an effort to integrate economic, environmental, and social aspects of development for the next 15 years in a way that is universally applicable while taking into account different realities and capacities, as well as respecting national policies and priorities. The post-2015 development agenda outcome document is also set to include a declaration by world leaders on shared principles and commitments for multilateral cooperation in today’s context, a section on means of implementation, and another on follow-up and review processes at national, regional, and global levels.
A few months later in Paris, France, UN members will come together again in a bid to secure a new, universal climate regime for the post-2020 period. Countries have agreed that the planned deal will be made up of self-defined individual national pledges for cutting greenhouse gas (GHG) emissions, although critics have warned that current submissions will not add up to enough to keep the world below an internationally agreed limit of two degree Celsius average warming above pre-industrial levels, and that arrangements for verification and a continuous upscaling of efforts over time will be needed.
Following hot on the heels of the Paris meet, WTO members will gather in Nairobi, Kenya, for the global trade body’s 10th Ministerial Conference. The possibilities of effective outcomes for that occasion remain unclear, in the face of continued difficulties around wrapping up the Doha Round, and promising, more ambitious parallel mega-regional efforts to ink deep 21st century economic integration deals. Luckily for Nairobi, negotiators from select WTO members have secured an expansion of WTO’s plurilateral Information Technology Agreement (ITA) slashing tariffs on an additional 200 or so high-tech products valued at US$1 trillion in annual trade. Efforts are also underway to deliver a plurilateral tariff liberalising Environmental Goods Agreement. The latter, in particular, might be a potential meaningful contribution to the grand objectives of New York and Paris.
This coincidence of global governance decision-making resembles the “summitry” that characterised 1990s and early 2000s including among others the 1992 UN Conference on Environment and Development (UNCED) dubbed the “Earth Summit,” the 1994 conclusion of the Uruguay Round under the General Agreement on Tariffs and Trade (GATT) that led to the establishment of the WTO a year later, as well as international conferences on social development, least developed countries (LDCs), human rights, women, food, financing for development, and the information society. A year hailed by UN Secretary-General Ban Ki Moon as “a new era” for global governance is a good time to ask pertinent questions.[1] How has the global governance context changed over the past two decades? What have we learned? And what role should the trade and investment regimes play in the years ahead to continue to move sustainable development from an agenda on paper to a concrete reality?
Where have we come from?
It is critical to put global governance efforts into the right historical context. In 1992 the world was emerging from a period of economic fragmentation organised by at least three separate development models, namely centrally-planned economies, closed economies by and large in the global South characterised by import substitution coupled with controls, and the transatlantic and transpacific spaces driven by a pungent US post-war economy into an amalgamated liberal economy. Motion was set towards a new world, one that could turn into a globalised economy – as it gradually did – with the integration of national economies into international markets through an aligned set of economic policies, and the frameworks to enable that integration. It was a critical moment of seeds sewn for a better future, unleashing vast forces of change, and with them respective tensions. Wealth was created in unprecedented forms and millions were lifted out of poverty. A triumph of sorts, at a significant cost, to a great extent due to the lesser attention paid to questions of equity and social inclusion, and an underestimation of persistent and deep-rooted asymmetries in capabilities among countries at different levels of development. As a result, today we face perilous levels of inequality among and within most countries around the world.
A high price has also been paid as a result of insufficient consideration for the natural environment and the now-coined concept of planetary boundaries. In hindsight, the Earth Summit held in Rio de Janeiro, Brazil was the first opportunity for the international community to think comprehensively about the intricacies of acting on a platform of shared values around a number of vital issues, and on the terms of engagement in this new world. Moreover, with good cause, Rio was also labelled as an opportunity to re-examine the relationship between environment and development.
Twenty years on from the 1972 UN Conference on the Human Environment held in Stockholm, Sweden, it had become clear that siloing environment and development priorities would always play against the environment. The Rio Declaration with its 27 principles and Agenda 21 was a forward-thinking proposal for transforming global governance, requiring a re-think of fundamentals of economic management and economic governance. It was an extremely ambitious attempt at reconciling environmental protection and economic growth, and setting a broad common direction for policy. But it was also a vision developed at the turbulent moment mentioned above. Concerns abounded on global inequality, the terms of trade, anxiety from developing economies about their role in a new globalised world, the predatory behaviour of unbridled multi-national corporations in global markets, and rules of the game inadequate for a globalised market. This all gave rise to an anti-globalisation movement to which the intergovernmental machinery of the UN and the development community partly responded with the Millennium Development Goals (MDGs). Yet, albeit their critical coverage, the MDGs were notable for their lack of focus on environmental issues and did not seem to have been affected by UNCED, prompting disarray between governments on the concept of sustainable development and backlash from the environmental community.
Rio did succeed in having an effect on global economic governance, while world economies moved swiftly in the direction of integration. At the time of the Earth Summit, the multilateral trade system was in interregnum, transforming itself from the limited 1947 GATT into the quasi-universal World Trade Organization, practically doubling its membership and expanding itself way beyond borders into issues such as services, investment, and intellectual property. Trade and trade rules up until that time were the purview of a smaller club of countries, geared towards regulating transatlantic and transpacific commerce, with the few developing countries participating in the system not bound by the same level of commitments. Transformation into the WTO was partly a manifestation of the changes in policies happening at that time. The new WTO design embraced the Rio principles by inserting these into its new constitution – the first paragraph of the Marrakesh Agreement referring to sustainable development, standards of living, and environmental protection – and making environment concerns operational through a number of other institutional mechanisms such as a Committee on Trade and the Environment (CTE).
Convergence and divergence
The three global governance endeavours this year are each, in their own context, trying to balance the benefits of convergence behind a universal agenda with the realities of natural divergences in national situations and development pathways. What have we learned in this area since Rio?
The first important change from Rio is substantive and has to do with the international community’s understanding of the complex relationships between economics and the environment. The prevailing view at Rio in 1992 was one based on the Kuznets curve, which suggests that in early stages of economic growth environmental degradation increases, and then declines beyond some level of income per capita. This seemed to give license to those that were under-developed to continue to pollute and mistreat natural resources. We are wiser now 20 years later, in some respects, and there has been an incredible amount of work done to boost our knowledge base in this area. The introduction of sustainability in the global trade architecture, and subsequently in other instruments of trade governance, proved wise. Although many tensions have surfaced since Rio, most have been handled by the appellate level of dispute settlement at the WTO, referring to non-trade treaties or applying principles of sustainability. It’s not all rosy, some key environmental issues continue to challenge the systems of economic integration, not least steering the world away from climate change and fatal pollution and destruction of habitats and oceans.
The second important change is the real and practical impact of the principle of subsidiarity, which began to gain traction around the time of Rio. It was a period when civil society first really started to engage in UN processes, culminating in over 17,000 people and 2,400 non-governmental organisation representatives attending an NGO Forum held on the side-lines of UNCED, and the establishment of the Major Groups in recognition that achieving sustainable development required comprehensive engagement from all sectors of society. At the same time the EU was also going through the negotiation of the Treaty of Maastricht which, among other changes, formally enshrined the principle of subsidiarity into the bloc’s law-making. These projects were all connected to and feeding global conversations. Global and regional governance set common direction, but increasingly was based on input from those on the ground, and implemented through institutions closer to this level.
Finally, two decades ago the WTO was envisaged as a universal, top-down structure. At its dawn, it emerged as a pyramid-like architecture for trade policy, with GATT principles, norms, and institutions at the top, prevailing over all other regional trade agreements, regional, bilateral or otherwise, and domestic policy settings. However, in the last few years, this centrality of the WTO has been forcibly altered as the locus of trade policy decision-making has moved in a variety of different directions. In a quest for deeper or lesser integration, many countries have selectively positioned themselves in new arrangements, opting for different speeds of interaction with global markets. Opportunities driven by changes in information and communication technologies and transportation, and seizing the opening of markets, resulted in new forms of organising production in international networks. As a result a regime complex for trade and investment with coverage beyond the WTO has emerged for the governance of economic interdependence.
Today the post-2015 development agenda, and accompanying outcome from the Third International Conference on Financing for Development held in July, arguably appear to be calling for a single compass for national policies and economic policies without being too prescriptive. General guidance is provided but room is left to accommodate different paths for moving forward. Among the complex challenges of implementing the new sustainable development agenda will be differentiating between aspects intended as references for national policies and those that pertain to the new terms of engagement for international cooperation. The former include, for instance, whether a country will meet these targets and then adjust policies where it does not. The latter has to do with the international obligations and roles played to ensure that every nation, collectively and individually, reaches those targets while also addressing global issues.
The UN Framework Convention on Climate Change (UNFCCC) regime – one of the three conventions born out of the Rio summit – has particularly evolved in structure. It was unclear in 1992 exactly what would happen on climate and the science was still not well understood. The articulation at the first conference of the parties to the UNFCCC in Berlin in 1995 of the principle of common but differentiated responsibility through the artificial division of the world into Annex I and Annex II, influenced by Kuznets curve reasoning, held back cooperation on climate matters for years. Now that the science is firmer, and more widely accepted, it is much clearer that broad participation in tackling climate change is necessary, and new forms of managing the differentiated historical responsibility for the accumulation of greenhouse gasses needs to be found. The dynamics of Chinese growth and significant emissions from other developing nations mean that a Kyoto Protocol-type divide between the developed and developing world is no longer possible.
The road so far has made it clear; it’s not money, but policies, their frameworks and the institutions needed to implement them, that constitute the most powerful lever for change.
More importantly, the challenge is to find ways in which a blend of command and control policies, market mechanisms and behavioural change, deliver the transformation to a low or zero carbon economy. A very difficult aim and one that will need a supportive global economic architecture. For the moment, we are now moving towards a new post-2020 regime to be defined in Paris that will likely be composed primarily of bottom-up, voluntarily outlined, national climate action pledges. The real question is whether this bottom-up process driven by subsidiarity will be enough to achieve our common goal.
Securing future progress
A key part of dealing with the tension between convergence and divergence, or between universality and subsidiarity, is establishing good monitoring, follow-up, and review systems at all levels. Getting the metrics right, those that are able to cope with complexity and disaggregate to the global level, will be important, and can help to enable governance based on shared principles but articulated by disciplines, agreements, and cooperation between countries applied in a very subsidiary manner. The monitoring and review of commitments is the only real tool to ensure delivery on international pledges and the newly agreed terms of engagement.
The post-2015 development agenda will require good indicators to track progress and help governments deal with the complexity of implementing a framework that weaves together the three dimensions of sustainable development across multiple policy areas. Fortunately, theory and academic work on development measurement has changed the way countries think about measuring human wellbeing, in the context of social priorities and the natural environment. The last few decades have seen increased efforts to look beyond gross domestic product per capita as a singular measure of development. The Human Development Report, published annually since 1990 by the UN Development Programme (UNDP), introduced the Human Development Index (HDI) synthesising a dashboard of indicators for countries’ development such as unweighted averages of education, income, and life expectancy. The original HDI did not, however, take into account measures of environmental sustainability reflecting scepticism of its founding economist. This has now evolved under new leadership and a host of other multi-dimensional measurement efforts have joined the fray, including the OECD’s wellbeing index, Jeffrey Sachs-led World Happiness Report, the Genuine Progress Indicator (GPI), the Bertelsmann Stiftung’s Sustainable Governance Indicators (SGI), and Yale’s Environmental Performance Index.
At the WTO, arguments have been made that special and differential treatment (S&DT) must be approached, and measured, from a sustainable development perspective. Simply granting developing countries a few extra years for policy implementation or preferential market access might not take into account the multi-faceted challenges facing a particular economy, trade impacts on domestic natural resources, or the trade effects of diverse environment policies.[2] Implementing the post-2015 development agenda will ultimately require trade rules to be organised around sustainable development outcomes. Here again it will be useful to provide indicators on the extent to which rules are oriented in the right direction or not using some sort of composite of indices. Establishing such a system is, however, very challenging.
The beauty of the new climate regime is that measurements and indicators exist for much of what countries are proposing to do. The international community has fairly sophisticated ways of understanding where and when GHG emissions are generated as well as how they contribute to hikes in global temperatures, ocean acidity, and so on. Countries will individually pledge certain cuts by specific dates for the post-2020 period, in most cases with varying baselines, but nonetheless capacity broadly exists to understand how these efforts add up.
It is extremely likely, however, that the current national climate pledges will not add up to enough mitigation action to keep the world within the two degree warming ceiling. Countries may also not stick to their pledges. And what happens if a situation dramatically changes in a major emitter? A significant economic crash, for example, could trigger a re-think of climate policies. Safeguards need to be put in place to help countries deal with changes in circumstances. Alongside a close monitoring of what policies countries are pursuing to implement their pledges, some sort of “coaching” should occur, to help individual economies understand and manage the low carbon transition. Many stakeholders often attribute the “success” of the trade system to its contractual nature, the mechanics of the dispute settlement understanding, and regular trade policy monitoring. But another, powerful dynamic is also at play. The trade system works and is enforceable because it is firmly anchored in the self-interest of players. If the logic is applied in the climate arena, efforts need to be made to ensure that policymakers understand the win-win outcomes of continuing to implement climate commitments, even if other circumstances change.
Getting the systems right
Global governance will continue to be a matter of striking the balance between global direction-setting, monitoring the ongoing leadership role of government policy, and supporting the subsidiary implementation of commitments at ground level. Aligning national policies will require absorbing the transaction costs of negotiating broad international agreements. In an interconnected economy, implementation of those agreements will also depend at least in part on business, technology, and harnessing the power of well-regulated global markets. Moreover, ensuring trade and investment systems work for sustainable development will take more time, but arguably stands to achieve far more than funding discrete projects.
The trade and investment systems could play two important roles in the years ahead. Trade and investment rules can be the biggest catalyst for transformation due to their ability to change the way economies work and the way millions of people live their lives. We will need to continually ensure that trade rules, whether established at global or regional levels, are clearly in favour of sustainable development outcomes. Solid metrics and indicators will be required, with a sustainable development lens, to monitor the impact of those rules not just on economic activity but on the environment and society.
Moving from words to action on the UN financing for development outcome, post-2015 framework, and climate regime will require continued efforts to get the trade and investment systems right, and to support a well-functioning economy that delivers social, environmental, and economic goods. Ultimately it is the policies that serve to drive the necessary systemic shifts in the global economy, rather than funding in its own right, that will play a crucial role in supporting sustainable, inclusive growth in the coming decades. The road so far has made it clear; it’s not money, but policies, their frameworks and the institutions needed to implement them, that constitute the most powerful lever for change.
Ricardo Meléndez-Ortiz is the Chief Executive, International Centre for Trade and Sustainable Development (ICTSD).
This article is published under BioRes, Volume 9 - Number 7, by the ICTSD.
[1] UN Secretary-General Ban Ki-moon’s remarks at General Assembly Plenary Meeting to adopt the draft resolution to transmit the Agenda 2030 Outcome Document, New York, 1 September 2015. Available at http://www.un.org/sg/statements/index.asp?nid=8944
[2] Meléndez-Ortiz, Ricardo, and Ali Dehlavi. “Sustainable Development and Environmental Policy Objectives: A Case for Updating Special and Differential Treatment in the WTO.” Trade, Environment and Sustainable Development: Views from Sub-Saharan Africa and Latin America. A Reader, ICTSD, Geneva (1998).
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South Africa takes measures to tackle fallout from China slowdown
The South African government is initiating special measures to cope with the fallout from the slowdown in China, which has severely hurt its mining industry, said Ngoako Ramatlhodi, the country’s minister of mineral resources.
In Hong Kong to promote the diamond trade, Ramatlhodi said: “We have been affected by China’s slowdown. Exports have dropped, diamond prices are going down. About 19,000 jobs in the mining industry are at risk.”
China has been South Africa’s biggest trade partner since 2009 and is the second-largest diamond consumer in the world. South Africa is one of the world’s biggest exporters of gold, platinum group metals and diamonds.
“All we are focusing on now is how to mitigate the impact from China,” Ramatlhodi said. “As a member of BRICS, we are looking to convince China to give us preferential treatment in the mining trade. We will have a dialogue at the government level soon.
“What we are hoping is that China will maintain the same level of purchase price and volumes so that we can save the jobs in our industry.”
BRICS refers to the leading emerging market economies of Brazil, Russia, India, China and South Africa.
South Africa’s mining authorities meet their Chinese counterparts twice a year as part of an institutionalised dialogue mechanism.
“We are eliminating blood diamonds from the supply chain by strengthening regulation,” said Ramatlhodi, alluding to diamonds mined in war zones and used to finance conflicts. “The president is encouraging the development of special industrial zones for the business. We are also finding ways to cut production costs.”
China’s overall investment in Africa, however, had maintained a steady growth despite the slowdown, he said.
“China’s investments are very aggressive, the money is still coming in,” said Ramatlhodi, adding that investments in chromium had been the most popular, followed by iron ore and platinum, but added that the diamond sector had been attracting less investment.
Bilateral trade last year amounted to US$61.6 billion.
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tralac’s Daily News selection: 18 September 2015
The selection: Friday, 18 September
DG Azevêdo: 'A package of issues for Nairobi may be within reach' (WTO)
“The view emerging from many of the meetings in which I have participated is that a set of deliverables is within reach which has the potential to make the ministerial a success and to help us move our work forward. And, crucially, there is the common view that those deliverables should have development and LDC issues at their heart. “I am confident that all members want to seize the opportunity that Nairobi represents. We all want to make it a meaningful Ministerial Conference which delivers substantive support for growth and development. So members must now decide on shape and scope of the outcome that they want to achieve in Nairobi. Time is short.”
India’s farm subsidy programme may face fresh challenge at WTO (LiveMint)
Namibia: New Procurement Bill a game changer for local manufacturers (New Era)
The revised Procurement Bill tabled in parliament by Finance Minister Calle Schlettwein on Tuesday could be the lifeline local manufacturers have been waiting for. Although the Bill still needs to be debated by lawmakers before it is sent to the National Council, this crucial piece of legislation is viewed as a game changer by the domestic manufacturing industry, because it gives preference to local products, previously disadvantaged women and youth, SMEs and Namibian enterprises in general. “My main competitors are the South Africans and the Chinese. We need to change the mindset of local companies and consumers to support locally manufactured products, because we can guarantee the same quality as foreign suppliers,” said David Namalenga, Managing Director of Dinapama Manufacturing and Supplies, which manufactures garments.
Zimbabwe’s surtax: its incidence and implementation (tralac)
The above shows that South Africa is the country which is greatly affected by Zimbabwe’s surtax regime. Other countries have an option to use either the COMESA FTA or bilateral agreements they may have with Zimbabwe. Imports entering Zimbabwe under the SADC FTA and the bilateral agreement with South Africa attract surtax. However, surtax also applies to imports from countries outside the region such as China and Japan, among others. [The author: Elisha Tshuma]
Based on countries’ experiences with pre-shipment inspections required for Kenya, Tanzania, Mozambique, Uganda, Togo, Egypt and Ivory Coast these inspections add between 3 to 7 days to the export process. The list of goods subject to inspections (and quality testing if deemed necessary) is extensive. It includes approximately 137 products at the HS4 level in 41 HS Chapters, including food and agricultural products, building materials, wood and wood products, clothing and textiles and transport equipment. [The author: Willemien Viljoen]
What Kenya should do to shield local manufacturers (Business Daily)
Nigeria’s N630bn annual food import bill worries Emefiele (ThisDay)
The Central Bank of Nigeria Governor, Mr Godwin Emefiele, has reiterated his concern over the country’s position as a net importer of agricultural produce with import above N630 billion. The country imports food products such as wheat, rice, flour, fish, tomato paste, textile and sugar in large quantities annually. Emefiele, stated this in a keynote address presented at a training workshop on innovative agricultural insurance products held in Lagos Thursday. The forum was to activate the insurance pillar of the Nigeria Incentive-based Risk Sharing System for Agricultural Lending.
Mozambique: Proposed export surcharge on pigeon peas (SPEED Program)
The Government is proposing a 20% duty (ad valorem) on the export of pigeon peas for a period of five years. The arguments put forward by the Government in its proposal are: (i) the need to protect an emerging/infant pigeon pea processing industry, and (ii) the opportunity to generate additional government revenue, not only through the collection of the export duty but also by reducing and/or eliminating the potential occurrence of under-invoicing pigeon pea exports. In response to requests received to comment on the proposed legislation SPEED prepared three Notes, which are available in Portuguese and English.
SADC Veterinary Committee to upgrade livestock labs (The Herald)
The SADC Veterinary Laboratory Diagnostic Sub-Committee is working on measures aimed at upgrading livestock laboratories to meet international standards as it seeks to stimulate the trade of livestock products in regional and global markets, an official has said. SADC Veterinary Laboratory Diagnostic Sub-Committee chairman Dr Pious Makaya said trade of livestock products has declined due to widespread diseases among African countries. Dr Makaya was speaking during the closing of the annual meeting of SADC Committee for Livestock Health in Harare yesterday.
CZI to set up roadmap to revive Zimbabwe's farming sector (The Herald)
East African Business Council and Innovation Norway sign MOU (EAC)
Under the MoU, which will be effective for a period of five years, EABC and Innovation Norway agreed to work together on various agreed upon priority areas including trade facilitation; joint activities that are beneficial to both institutions including conferences, trade missions (both international and regional), and; business to business engagement both in EAC and Norway and the Nordic countries. Earlier, the Norwegian Minister for Trade and Industry, Ms Monica Maeland, and the EAC Secretary General, Amb. Dr. Richard Sezibera, held bilateral talks on possible areas of cooperation between Norway and the EAC. The talks focused on the upcoming negotiations between the European Free Trade Area and the EAC.
COMESA's Logistics Forum updates: Regional Dialogue on Transport Industry (COMESA), Stationary trucks on highways at night to be a thing of the past (Daily Nation), High transport costs curtail regional trade (The Standard)
Express goods train services between Zambia and Mozambique (Coast Week)
The first express goods train from Zambia to the central Mozambican Port of Beira, through Zimbabwe, will start running by the end of this month, Zambia’s investment agency has said. Candido Jone, executive director of the central division of the Mozambican Ports and Rail Company said the first express train will be formed of 20 platforms, each holding 12 containers which will take two days to move the cargo from Zambia to the Mozambican port, covering a distance of over 1, 000 kilometers.
Djibouti to extend sea-air cargo services to Nigeria (ThisDay)
"Djibouti is seizing this opportunity to develop its own aviation-linked economy. When it comes to sea port services we have been very successful in putting Djibouti on the world map and it is evident to all that we are making rapid advances in this sector by building four brand new ports and port related infrastructure such as our planned ship repair yards. We are building one of the biggest free trade zone spanning 4350 hectares”, he said.
AVIC reveals progress in Africa (China Daily)
China is making good progress in the creation of a network of aviation training and maintenance facilities in Africa, being built in an effort to boost potential sales of the China-made aircraft, and help improve the continent's air transport sector. Speaking on the sidelines of the ongoing Aviation Expo China 2015 in Beijing, Zhang Guangjian, general manager of AVIC International Aero-Development Corp, told China Daily he hoped all the planned facilities would be fully operational by 2020. The network is likely to comprise an aviation training centre, two regional marketing offices, two maintenance and support centers and three spare-parts warehouses, he said.
Africa’s oversold growth story has investors confronting losses (Gulf Times)
To Marlon Chigwende, sub-Saharan Africa managing director for Carlyle, the world’s second-largest private-equity firm, the message is simple: Africa is not a country. “There are individual forces at work within each of the 55 countries that make up Africa,” he said. “There will continue to be investment opportunities."
Mark Mobius, the Franklin Templeton Investments money manager who’s been investing in emerging markets for more than four decades, remains optimistic. “The growth scenario is still excellent,” he said in an e-mailed response to questions. “We do not want to scale back our investments. The problems are here to stay but they pale beside the opportunities.”
Irish exporters should look to sub-Sahara Africa (Irish Times)
Rob Roughan, head of global corporates at Barclays Bank Ireland, said emerging markets in Africa should not be overlooked. “Major African economies such as South Africa, Kenya, Ghana and Nigeria have been the primary focus of Irish companies to date, but with increased competition, businesses need to diversify their trade and investment markets to broaden their horizons and compete more effectively. “By 2020 the five ‘sleeping giant’ economies of Ethiopia, DR Congo, Mozambique, Ghana and Tanzania that we have identified in our index will represent a population of 325 million people, comparable with the US, and experiencing rates of economic growth that were once the preserve of India and China. Household spending for these countries is set to nearly double, so companies that establish themselves in these markets now will be positioned to reap the awards of rapid growth by 2020.”
Trade Winds - Africa: Deepening our commercial engagement with Africa (The World Post)
Trade Winds - Africa will help ensure that our partnerships continue to deepen and expand. It is the largest-ever US government-sponsored trade mission to Africa, involving approximately 108 U.S. companies. In addition to a business development forum and trade mission in South Africa, Trade Winds will stop in seven other sub-Saharan African countries - Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, and Tanzania. The forum participants will include local and American market experts, Fortune 500 companies, small businesses, and government decision-makers. [Stefan M. Selig serves as President Obama’s Under Secretary of Commerce for International Trade]
Indian investment in Africa: January 2003 to July 2015 (Fahamu)
The report includes estimated values on capital investment and the number of jobs created in cases where information was not available at project announcement. Retail and inter-state projects are excluded from this report. Between January 2003 and July 2015 a total of 383 FDI projects were recorded. These projects represent a total capital investment of USD 55.07bn, which is an average investment of USD 143.80m per project. During the period, a total of 100,567 jobs were created. [Catalysing India’s trade and investment: the Exim Bank]
Protecting Scotch the wrong way in Africa (Cato Institute)
Why should this matter to anyone outside of Scotland and West Africa? Because it is part of a very troubling movement within international economic policy. The European Union is using free trade agreements to pressure countries to adopt this excessive form of GI protection and to protect a list of specific GIs even if they are generic terms in that country. These include wine names like champagne, port, and sherry as well as numerous generic cheese names like parmesan, asiago, feta, and gorgonzola. As the United States negotiates the Transatlantic Trade and Investment Partnership with the EU, it’s important for American policymakers to understand that Europe’s approach to GIs is protectionist and incompatible with the goal of free trade in a globalized economy. This is true even if you think “Scotch” can only be made in Scotland.
Initiatives launched to drive R&D in Africa (SciDev)
Zambia grants COMESA 10 acres for new headquarters (COMESA)
Econet to launch SA-Zimbabwe cross border remittance facility (The Herald)
Study on illicit funds flows to be ready next year: BoT (The Citizen)
Akinwumi A. Adesina: 'New Deal On Energy for Africa' speech (AfDB)
Western Cape puts pressure on government to suspend new visa rules (Business Day)
IFC begins re-engagement with the Central African Republic’s private sector (IFC)
This week in the news
Catch up on tralac’s daily news selections for the past week:
The selection: Thursday, 17 September 2015
The selection: Wednesday, 16 September 2015
The selection: Tuesday, 15 September 2015
The selection: Monday, 14 September 2015
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DG Azevêdo: a package of issues for Nairobi may be within reach
Director-General Roberto Azevêdo convened a meeting of all WTO members in Geneva on 17 September to report on the current state of play in negotiations on the remaining issues of the Doha Development Agenda.
Members are working towards delivering negotiated outcomes at the WTO’s 10th Ministerial Conference which will be held in Nairobi from 15-18 December this year. Director-General Azevêdo reported in detail to members on a range of discussions which he had had with different members, and groups of members, over recent weeks.
DG Azevêdo said:
“The significant difficulties that we detected in the first semester are still in evidence. Returning to Geneva after consulting with capitals over the summer, it seems to me that we have not yet found solutions which can bridge the gaps in the most problematic areas. For many months, we have been focusing on the most challenging areas of the negotiations in an effort to find possible solutions, even though the chance of finding such solutions appears to be diminishing. While continuing those efforts, I think it is time for us to start working more intensely on the more promising issues which may be potential deliverables for the Nairobi Ministerial Conference.
“The view emerging from many of the meetings in which I have participated is that a set of deliverables is within reach which has the potential to make the ministerial a success and to help us move our work forward. And, crucially, there is the common view that those deliverables should have development and LDC issues at their heart.
“I am confident that all members want to seize the opportunity that Nairobi represents. We all want to make it a meaningful Ministerial Conference which delivers substantive support for growth and development. So members must now decide on shape and scope of the outcome that they want to achieve in Nairobi. Time is short. It is essential that we have an answer to this question within the next month. Once we have a clear picture of what the Nairobi outcomes might look like, then we can work hard to deliver them.”
The potential emerging deliverables for Nairobi to which the Director-General referred could include LDC and development outcomes, outcomes on export competition in agriculture, and a number of provisions to improve transparency in several issues being negotiated.
Negotiations will continue in the coming weeks through the formal negotiating groups. The Director-General’s consultations will complement those discussions. He will also be interacting with ministers at forthcoming meetings of the G20, the African Union, the African, Caribbean, Pacific Group of States and of Arab Trade Ministers. In addition, he will be attending the UN General Assembly next week to discuss the role that trade can play in the new Sustainable Development Goals – starting with outcomes in Nairobi.
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Deepening our commercial engagement with Africa
In July, President Obama visited Africa and shared an important message at the Global Entrepreneurship Summit in Nairobi and at the African Union in Addis Ababa. He said “As Africa changes, I’ve called on the world to change its approach to Africa. So many Africans have told me, we don’t want just aid, we want trade that fuels progress. We don’t want patrons, we want partners who help us build our own capacity to grow. We don’t want the indignity of dependence, we want to make our own choices and determine our own future.”
Today, the citizens in countries across sub-Saharan Africa are certainly making their own choices and determining their own futures, represented by the fact that the economies in this region are among the fastest growing in the world. And when it comes to the U.S.-Africa commercial relationship, more than any at other time in history, these countries are not dependent. They are equal stakeholders in our business and trade relationships.
The U.S. and Africa today stand as engines of mutual economic growth and prosperity. African exports of non-petroleum goods since 2009 have doubled, creating and sustaining more than a million jobs in Africa. The U.S. was also a leading driver behind the region achieving a record in foreign direct investment of roughly $80 billion last year.
As the head of the International Trade Administration, an agency whose mandate is to create opportunities for U.S. businesses by promoting international trade and attracting foreign direct investment, I fully understand how African businesses are creating such opportunities. On the U.S. side, goods exports to Africa have increased by nearly 60 percent since 2009, and these exports support 250,000 American jobs.
But today, the total amount of American trade with every country on the African continent is roughly equal to our trade relationship with the single country of Brazil. There is enormous potential for us to do so much more. By deepening our commercial engagement in Africa, we can generate even greater growth and prosperity for Africans and Americans.
Trade Winds - Africa will help ensure that our partnerships continue to deepen and expand. It is the largest-ever U.S. government-sponsored trade mission to Africa, involving approximately 108 U.S. companies. In addition to a business development forum and trade mission in South Africa, Trade Winds will stop in seven other sub-Saharan African countries – Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, and Tanzania. The forum participants will include local and American market experts, Fortune 500 companies, small businesses, and government decision-makers. Our Commercial Service officers and State Department colleagues will organize business networking events with leading industry and government officials at the forum, and matchmaking meetings with potential partners at the trade mission stops. And when it is over, not only will we have conducted the largest trade mission to the African continent in American history, I hope that we will see new trade deals that will benefit the economies of countries on both sides of the Atlantic.
Trade Winds - Africa is a critical element of our Doing Business in Africa (DBIA) Campaign. DBIA was launched as an unprecedented whole-of-U.S. government effort to deepen commercial engagement between the U.S. and African countries. Under DBIA, U.S. companies have announced new deals worth more than $14 billion; the Secretary of Commerce has established the President’s Advisory Council on Doing Business in Africa, a federal advisory committee comprised of business leaders that advise the President through the Secretary of Commerce on strengthening commercial engagement between the United States and Africa; and the President has announced the Power Africa campaign, which will work to add 30,000 new megawatts of electricity generation capacity to this part of the world.
Trade Winds - Africa and DBIA reflect the United States’ commitment to further advancing our commercial engagement with Africa. And, perhaps more importantly, they reflect our understanding that deepening our commercial engagement secures our mutual commercial interests. Also importantly, our commercial partnership is essential to the interests of maintaining the international order.
As former president of the World Bank Robert Zoellick once said, “responsible stakeholders recognize that the international system sustains their peaceful prosperity, so they work to sustain that system.” Trade and investment, open markets, and strong institutions have been the core elements of that international system: from Europe, to the Asia-Pacific region, to Latin America. And these are the core elements behind the political and economic development we are seeing and will continue to see in Africa today. Just as with the U.S.-Africa commercial relationship, more than at any other time, Africa is a mutual stakeholder in the international order as well.
As we embark on this historic trade mission, it is important to recognize what Trade Winds - Africa, as well as our larger commercial partnership, represents. That the relationship between the United States and African countries is more mutually beneficial, prosperous, and consequential than it has ever been before. And the trajectory is only pointing upward.
Stefan M. Selig serves as President Obama’s Under Secretary of Commerce for International Trade at the U.S. Department of Commerce.
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How to boost sustainable investment for a post-2015 development agenda
What kind of international effort might be required to facilitate sustainable investment?
The global challenges of poverty, sustainable growth, and climate change are being tackled with renewed vigour through a post-2015 development agenda and accompanying sustainable development goals. This will see many countries embark on the design of national development strategies for 2030. Nations are also currently announcing their national climate action plans as part of an effort to ink a deal in December on a post-2020 multilateral climate regime. On the trade side, while uncertainty remains around the Doha Round trade talks, the WTO Trade Facilitation Agreement (TFA) is expected to enter into force sooner rather than later. The outcome document from the Third International Conference on Financing for Development (FfD3) held in Addis Ababa, Ethiopia from 13-16 July, meanwhile, strengthened international commitments and guidelines around development finance. Investment is common to all these processes that will, one way or the other, update the global development vision and in turn increase demands for quantitatively more investment that is also qualitatively more sustainable.
Shifting investment perspectives
Seen from some angles, investment remains a contentious multilateral issue, with divisions over the future of the international investment regime, rising numbers of disputes and criticism of their settlement, and close scrutiny of corporate contracts by media and civil society. Perspectives on foreign direct investment (FDI) have nonetheless evolved greatly over the years, for example, moving from closure to openness or from positive to negative lists. A few facts help to illustrate countries’ current broader openness to FDI. According to the UN Conference on Trade and Development (UNCTAD), some 80 percent of regulatory changes from 2000-2013 involved liberalisation or promotion, while the number of international investment agreements rose to 3268 by the end of 2014.
FDI demand stems from larger search for investment, not just for current growth, but also for sustaining future growth. Major demographic and energy transitions will require significant investments in education, energy, and infrastructure to mitigate and adapt to the threat of climate change. These needs outstrip the ability to finance investments through public expenditure, even in developed countries, and FDI is also a critical mechanism to help spread technological innovation across the globe.
The links between trade and investment more generally have equally become clearer over the years. Firms increasingly locate specific activities wherever it is best for them to maintain or increase their international competitiveness, helping to boost FDI, and giving rise to the concept of global value chains. FDI and trade are necessary complements for an integrated international production system that can act as an engine of growth.[1] Investment can, moreover, help to boost trade. The WTO TFA promises to reduce transaction costs at the country level by 10 to 15 percent. Reduced trading costs improves a country’s locational advantages that attract efficiency-seeking FDI. If FDI is not forthcoming, then the advantages of trade facilitation are less compelling. Alternatively, potential benefits to a host country would multiply if trade facilitation proceeds jointly with investment facilitation to attract FDI, and promote linkages with domestic enterprises and SMEs active in segments of arm’s length trade.
Bridging the sustainable investment gap
When accounting for all infrastructure needs ranging from water to telecommunications, the gap in global investment is at least US$1 trillion per year. An estimated US$5-7 trillion worth of annual investments, meanwhile, may be required to achieve the SDGs. Can this gap be bridged and needs met? From investor perspective the answer is affirmative, it is a matter of policy, not money. Answering the call of the post-2015 development agenda will require innovative partnerships incentivising private investment in social infrastructure. Global financial markets have abundant funds, including for niche activities such as impact investment, microfinance, and green investment. Civil society and the private sector already play an active role in areas such as education, health, extractive sector, and garments. For example, following the 1992 Rio Earth Summit, world industry associations began preparing responsibility guidelines.
For governments, despite development fatigue and budgetary constraints, many states are open to partnering with the private sector. The rationale for such cooperation is enlightened self-interest, in other words, leveraging donor assistance to enlist private resources to support recipient countries in implementing shared commitments on trade and sustainable development. Governments are, however, expected to lead the process. National policies in many cases can provide the critical enabling environment for investment. Potentially, all investment is sustainable, but depends on discovering and putting in place the appropriate policy and institutional frameworks.
What needs to be done?
Regulation and promotion are the basic policy levers to enhance investment. While most countries have liberalised laws governing entry, treatment, and exit of FDI, these are often inadequate, and where regulatory support infrastructure exists, clarification or improved coordination among different levels of government may still be needed. In many countries, the overall regulatory environment can be made more transparent, and the costs of doing business lowered. However, in the global competition for FDI, it is also important that investment should advance larger development objectives. Governments frequently offer generous fiscal incentives that do not induce specific development activities. Regulatory exceptions should avoid the sacrifice of long-term objectives for short-term gains. But policy experience in incentivising private investment in sustainable development activities is as yet nascent. Demonstration projects, pioneering partnerships involving multiple stakeholders, and institutional capacity in the public sector receptive to positive engagement with the private sector are needed. Many of these suggestions might be helped by an international support programme for sustainable investment facilitation.
Contours of sustainable investment facilitation
Such a programme would focus on the “nuts and bolts” of encouraging the flow of sustainable FDI to developing countries. Moreover, many developing countries and particularly the world’s poorest nations, do not possess the capacity to compete successfully in the world market for FDI and therefore require particular assistance to meet substantial investment needs. The programme would complement various efforts to facilitate trade, in particular, through the WTO led Aid-for-Trade Initiative and the recently adopted WTO Trade Facilitation Agreement. In a world increasingly dominated by global value chains, the latter address the trade side of the equation, while an international support programme for sustainable investment facilitation would address the investment side. Analogous to WTO efforts, a sustainable investment support programme would be entirely technical focusing on a range of practical actions to encourage the flow of sustainable investment to developing countries, with the aim of fostering their economic growth and development. These undertakings would in turn need the support of official development assistance, especially for least developed countries, to strengthen the basic economic determinants of FDI.
Defining sustainability characteristics of international investments is challenging. An international or non-governmental organisation could establish a multi-stakeholder working group to prepare an indicative list of FDI sustainability characteristics to use as guidance by governments seeking to attract sustainable FDI. This could include, for example, carbon dioxide-neutral foreign affiliates. This identification would also be helpful for governments wanting to encourage sustainable domestic investment. UNCTAD’s Investment Policy Framework for Sustainable Development and the OECD Guidelines for Multinational Enterprises or newly launched Policy Guidance for Investment could provide inspiration in this respect. Defining sustainable FDI is also increasingly required for investor-state disputes. The same applies to international investment agreements as these increasingly make reference to sustainable development.[2] The working group could, in addition, identify mechanisms to encourage the flow of sustainable investment that go beyond those used to attract FDI in general. At the national level, special incentives could be one of the tools used by governments for this purpose. At the international level, the working group could examine among other things, lessons learned from established bodies such as the Clean Development Mechanism and the Clean Technology Fund.
The sustainable investment support programme could address a range of subjects starting, for example, with transparency. Host countries could commit to making information easily available to foreign investors on practices directly bearing on incoming FDI, beginning with issues relating to the establishment of businesses, including existing limitations and incentives, investment opportunities, and project development. Governments could also provide an opportunity for comments from stakeholders when changing the regulatory framework affecting FDI, or when introducing new laws and regulations, while retaining ultimate decision-making power.
Transparency is also important regarding the support offered to outward investors by their home countries.These could commit – through a designated focal point – to making information available to their foreign investors on the measures they have in place both to support and restrict outgoing FDI. Supportive home country measures include information services, financial and fiscal incentives, and political risk insurance. Some of these measures are particularly important for small and medium sized enterprises (SMEs). Multinational enterprises, in turn, could make information available on their corporate social responsibility programmes and any instruments they observe in the area of international investment.
On the national institutional side, investment promotion agencies could be the focal points for matters related to a sustainable investment support programme, possibly interacting and coordinating with the national committees on trade facilitation to be established under the TFA. The function of such agencies in attracting sustainable FDI and increasing its benefits for the sustainable development of host countries could be recognised and undertaken within the framework of a country’s long-term development strategy. Investment promotion agencies could also play a role in the development of investment risk-minimising mechanisms needed to attract investment, or in the prevention and management of conflicts between investors and host countries. Regular interactions between host country authorities and foreign or domestic investors would help.
Finally, as in the Aid-for-Trade Initiative and the TFA, donor countries could provide assistance and support for capacity building to developing countries in the implementation of various elements of a sustainable investment support programme starting with an assessment of their needs and the identification of sources of international assistance. Support could focus on strengthening the capacity of investment promotion agencies as country focal points for the sustainable investment support programme.
Practical steps moving forward
There are several ways in which this idea could be moved forward. One option is to extend the Aid-for-Trade Initiative to cover investment as well, recognising the close interrelationship between investment and trade, and in tune with other trade international frameworks such as the WTO’s General Agreement on Trade in Services (GATS). Transactions falling under the latter’s Mode 3 – “commercial presence” – account for nearly two-thirds of the world’s FDI stock. The initial emphasis could be on investment in services and focus on key sectors for promoting sustainable development. Relevant initiatives, however, might require a broader interpretation of the current Aid-for-Trade mandate. This approach could also benefit from the OECD’s Creditor Reporting System that monitors where aid goes and what purpose it serves. The matter could equally be taken up by the Global Review on Aid-for-Trade, to examine its feasibility. Alternatively the current Aid-for-Trade Initiative could be complemented with a separate Aid-for-Investment Initiative but, given the tight interrelationships between trade and investment, this would be a second-best solution.
Another more ambitious and medium-term option is to expand the TFA to cover sustainable investment. This could be done through an interpretation or amending the Agreement as agreed by member states. A subsidiary body of the Committee on Trade Facilitation could provide the platform to consult on any matters related to the operation of what would effectively be a sustainable investment module within the Trade Facilitation Agreement. It is, however, as yet still uncertain when the required two-thirds majority of the WTO membership will have ratified the TFA or how the accompanying Trade Facilitation Agreement Facility will function in its quest to act as a financing facility to support developing countries unable to access funds from other agencies. Member states would also presumably wish to gather some experience with the operation of the TFA before expanding it.
A third, ambitious option might be for WTO members to launch a “Sustainable Investment Facilitation Understanding” focusing entirely on ways to encourage the flow of sustainable FDI to developing countries, inspired by and complementing the TFA, to be undertaken after the completion of the Doha Round. Work could equally begin in another international organisation with experience in international investment matters, for example in UNCTAD, the OECD, or the World Bank. A group of leading outward FDI countries could also launch such an initiative, for example, through the G20. The objectives of a support programme for sustainable investment facilitation can also be reached if its elements were to be incorporated in international investment agreements. Some of these agreements contain commitments by treaty partners to consult on the promotion of investment flows between them. But few contain binding commitments. Such approaches, while helpful, are nevertheless necessarily more piece-meal.
Meeting the future
The issues mentioned for possible inclusion in an international support programme for sustainable investment facilitation, as well as the options outlined on how such a programme could be put in place, are illustrative and all need to be seen against the background of the importance of economic FDI determinants. If these determinants are unfavourable, and investments are not commercially viable, even the best support programme is likely to have negligible effect. Concomitant productive capacity building is therefore critical. The key premise is the urgency of creating more favourable conditions for sustainable FDI flows to meet the investment needs of the future. As governments and the private sector increasingly share this view they will hopefully muster the political will and find the appropriate venue to put an international support programme for sustainable investment facilitation in place.
More details on the ideas outlined in this article can be found in a longer research piece published by the E15Initiative: An International Support Programme for Sustainable Investment Facilitation, July 2015. Implemented jointly by ICTSD and the World Economic Forum, the E15Initiative convenes world-class experts and institutions to generate strategic analysis and recommendations for government, business, and civil society geared towards strengthening the global trade and investment system.
Karl P. Sauvant is a Resident Senior Fellow, Columbia Center on Sustainable Investment (CCS). Sauvant is also the Theme Leader of the E15Initiative Expert Group on Investment Policy. Khalil Hamdani is a Visiting Professor, Lahore School of Economics, Pakistan.
This article is published under BioRes, Volume 9 - Number 7, by the ICTSD.
[1] Sauvant, Karl P. The International Investment Law and Policy Regime: Challenges and Options. E15Initiative. Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum.
[2] Gordon, Kathryn, Pohl, Joachim and Bouchard, Marie. Investment Treaty Law, Sustainable Development and Responsible Business Conduct: A Fact-finding Survey. OECD. 2014.
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AfDB unveils “New Deal for Energy in Africa”
A blue print to get rid of Africa’s energy poverty by 2025
The African Development Bank Group (AfDB) unveiled its landmark initiative to solve Africa’s huge energy deficit by 2025 at a High Level Stakeholder Consultative Meeting attended by business and political leaders at its headquarters in Abidjan on 17 September 2015.
The “New Deal for Energy in Africa,” which charts the way for a transformative partnership on energy focuses on mobilizing support and funding for the initiative from five key areas.
Firstly, the AfDB would significantly expand its support towards energy in Africa; development partners would also be obliged to scale up on-going efforts while countries must also expand their share of financing going into the energy sector and at the same time demonstrate stronger political will to ensure success of the Deal. Development partners would also be required to work together and coordinate their efforts to drive critical policy and regulatory reforms of the energy sector to improve incentives for accelerated investments.
“A lot of financing will be needed. Together, we must close the $55 billion financing gap for energy in sub-Saharan Africa. And we must raise our level of commitment to meet the $22 billion needed to support universal access to energy in the region,” AfDB President Akinwumi Adesina underscored in a speech unveiling the Deal.
Adesina also illustrated how domestic resource mobilization would play a crucial role by leveraging on just 10% of the continent’s tax revenues estimated at US$ 500 billion per year; how ending the over $60 billion annual illicit financial flows out of Africa can help; how developed countries meeting the 0.7% commitment for Gross National Income for development assistance which can generate more than $178 billion can also help to scale up energy development in Africa.
“The New Energy Deal for Africa will push for the establishment of a Bottom-of the Pyramid Energy Financing Facility for Africa. This should support some 700 million people to afford clean cooking energy stoves. The cost is well within our reach to provide, for it will take only $4.2 billion to solve the problem. We can and must solve their problem – and do so quickly,” the AfDB President said.
He called for the development of major regional energy projects such as the Inga dam in the Democratic Republic of Congo.
Quoting an African proverb, Adesina said Africa must go far and solve its energy challenge by 2025. He added: “And for that we must move together. This is why at the Bank we have proposed the formation of the Transformative Partnership on Energy in Africa. Under this, we will pull together to drive the needed reforms in Africa’s energy sector to achieve the universal access to energy by 2025. Success lies just ahead of us!”
Also speaking at the gathering, Nigerian Banker and Co-chair of the African Energy Leaders Group, Tony Elumelu, said that the private sector can play a crucial role in the development of Africa’s energy sector, if provided with the required enabling environment.
He said that given the situation in which some 600 million people lack energy in Africa, it would be necessary for Africa to explore all good sources of energy to meet the huge deficit, adding that the AfDB was in the best position to bring businesses, governments and international organisations together to make the deal a success.
For his part, former United Nations Secretary General, Kofi Annan, in a video message, commended the initiative, noting that Africa’s leaders had no choice but to urgently bridge the energy gap.
The Vice Prime Minister of the Democratic Republic of Congo, Thomas Luhaka and Cote D’Ivoire’s Prime Minister, Daniel Kablan Duncan commended AfDB President Adesina for putting together such as ambition initiative barely two weeks after his investiture. They pledged to mobilise the necessary political support required to ensure that Africa gets rid of its “energy poverty” by 2025.
» Speech by AfDB President Akinwumi A. Adesina at the High-level Consultative Stakeholder Meeting on the New Deal on Energy for Africa
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These are the African nations most exposed to China’s slump
China’s slowdown is rippling across Africa and these three nations are the most exposed, relying on demand from the Asian economy for almost half their exports: Republic of Congo, Angola and Mauritania.
Oil accounts for the bulk of Angola’s and Congo’s exports, damaging their prospects after crude prices plunged 55 percent since the beginning of June last year to below $50 a barrel. The price of iron ore, which makes up more than 40 percent of Mauritania’s exports, has dropped by almost a third in the past year. The three nations each shipped more than 45 percent of their exports in 2014 to China, data from the International Monetary Fund shows.
“For countries like Angola, which basically only has one commodity, there is a huge knock when prices fall and less oil is being exported to China,” Christie Viljoen, an economist at NKC African Economics, said by phone from Paarl, outside Cape Town. “It’s a case of when things are good, it’s really good, but when it turns bad, it’s really bad.”
Angola, Africa’s second-largest oil producer after Nigeria, has been forced to devalue its currency twice since June and has slashed its budget by a quarter following a slump in revenue. Congo’s fiscal deficit almost doubled to 8.5 percent of gross domestic product in 2014 from the previous year and in May Finance Minister Gilbert Ondongo cut $500 million of spending from the 2015 budget to bring it down to $4.5 billion.
Reliance on a single commodity and exposure to one country for the bulk of exports is a double-whammy. China’s slowdown means weaker currencies and higher import prices for these African nations, which in turn feeds into more pressure on their exchange rates and a run down of central bank reserves, said Viljoen.
Domino Effect
“If you are at the top of the list in terms of dependence on China and your economy is not well diversified, there are a bunch of negative things which can fall like dominoes,” he said.
Angola’s kwanza has dropped 24 percent against the dollar this year and was trading at 135.86 on the interbank market as of 6 p.m. on Thursday in Luanda, the capital.
While South Africa is the continent’s single biggest exporter to China – with shipments totaling $45 billion in 2014 – its exports are more diversified and destined to a wider range of countries. China buys 37 percent of South Africa’s goods, followed by the European Union at 20 percent.
Commodities such as gold, platinum and iron ore still make up the bulk of exports at just over half, though vehicle shipments have grown in importance to reach 13 percent of the total, according to data from the South African Revenue Service.
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Exporters should look to sub-Sahara Africa
Angola is a case in point: in the five years to 2013, trade with Ireland was up 782%
The steady flow of migrants from Africa to Europe this year has painted a bleak picture of life on the continent.
However, a report to be published today by British bank Barclays outlines the significant potential that exists for Irish exporters in sub-Sahara Africa.
The Barclays Africa Trade Index, which measures the opportunity and openness of 31 of sub-Saharan economies, reveals that trade between Ireland and Africa grew by more than 43 per cent to about €1.44 billion over five years to the end of 2013. This was supported by Africa’s expanding middle class, associated spending power and demand for high-end goods.
South Africa remains the biggest market for Irish companies at €500 million, albeit that trade with the country has reduced in recent years.
Nigeria has closed the gap at the top, with trade reaching €450 million in 2013.
Kenya ranks third in the Barclays study for market openness and opportunity, although the level of trade is small at €36 million.
Rob Roughan, head of global corporates at Barclays Bank Ireland, said emerging markets in Africa should not be overlooked. “Major African economies such as South Africa, Kenya, Ghana and Nigeria have been the primary focus of Irish companies to date, but with increased competition, businesses need to diversify their trade and investment markets to broaden their horizons and compete more effectively.
“By 2020 the five ‘sleeping giant’ economies of Ethiopia, DR Congo, Mozambique, Ghana and Tanzania that we have identified in our index will represent a population of 325 million people, comparable with the US, and experiencing rates of economic growth that were once the preserve of India and China.
“Household spending for these countries is set to nearly double, so companies that establish themselves in these markets now will be positioned to reap the awards of rapid growth by 2020.”
Angola as a case in point. In the five years to 2013, trade with Ireland increased 782 per cent to €175 million.
What you waiting for?
UK-Africa trade corridor to be fuelled by Sub-Saharan ‘sleeping giants’
South Africa tops the inaugural Barclays Africa Trade Index: Openness and opportunity, followed by Nigeria and Kenya. Nigeria offers the greatest trade opportunity for UK businesses, largely due to its population of close to 180m, but Nigeria’s relative level of openness need to be addressed in order to challenge South Africa’s position.
The Index, which measures the opportunity and openness of 31 of sub-Saharan Africa’s leading economies, also identifies a group of ‘sleeping giants’ which, after experiencing significant economic upheaval, are playing catch up and growing at a rapid pace. The ‘sleeping giants’; Ethiopia, DR Congo, Mozambique, Ghana and Tanzania, are expected to provide UK businesses with the opportunity to increase exports three-fold, from US$1.2bn to $3.6bn, over the next five years as economic development continues and consumer spending increases.
With a combined population of around 270m, and average annual GDP growth of 7.3% over the past five years, these five countries represent a significant opportunity for UK exporters in the coming years.
The growth potential for the UK and other international producers across sub-Saharan Africa is considerable, with total consumer spending in the Sub-Saharan Africa economies reaching around US$1trn (£630bn) in 2014. It is expected to grow by a Compound Annual Growth Rate of around 4-5% over the next 5-10 years.
The Index reveals that 80% of UK exports to sub-Saharan Africa are currently going to South Africa together with Nigeria, Botswana, Angola, Kenya, Ghana and Senegal.
Over the past decade, sub-Saharan Africa has experienced a marked shift in trade flows from traditional partners in Europe, North America and the Middle East to faster growing Asian countries. The region received 19% of its imported goods from Asia in 2004 but this rose to 32% by 2013, largely driven by increased trade with China.
Commenting on the Index findings, John Winter, Chief Executive Officer, Corporate Banking, Barclays said: “Major African economies, such as South Africa, Nigeria and Kenya have been the primary focus of UK companies to date but with increased competition, especially from Asia, businesses need to diversify their trade and investment markets to broaden their horizons and compete more effectively.
He added, “By 2020, the five ‘sleeping giants’ that we have highlighted in our Report, will represent a population of circa 325m, comparable with the US and experiencing rates of economic growth that were once the preserve of India and China. Based on recent growth rates, household spending for these countries is set to nearly double, reaching over US$1,000 a year by 2020. Brands that start to establish themselves today will be well positioned for rapid growth by 2020.”
Regional Connectivity
Kenya is cementing its position as a key hub for East African trade and as a gateway to the wider sub-Saharan African market. Increasingly open borders, along with improving transport links, help the country to rank third in the overall Index. Neighbouring countries, including Tanzania (5th in the Index) and Ethiopia (6th), also benefit from strong regional co-operation and accessibility to key transport and communications infrastructure in the region.
To aid cross border movement, a number of countries have started to adopt one-stop border posts (OSBPs) – a single customs check run jointly by neighbouring countries. East Africa has been an early adopter with seven operational or in development OSBPs in Tanzania, six in Uganda and Kenya, five in Rwanda, and three in Burundi. This is supplemented by significant investment in road infrastructure, including the Ethiopia to Djibouti Corridor; the trade corridor running from the Tanzanian port of Dar es Salaam and the Nacala corridor linking the DR Congo, Zambia and Malawi to the port of Nacala in Mozambique.
Historically, air connections across Africa have been extremely patchy, evident in the air transport sub-categories of the Index. Only six countries* score above 5 on a scale of 1 (weak) to 10 (strong) in terms of international air connectivity and seven countries** score above 5 on regional air connectivity. However, a growing number of connections are transforming the air connectivity of key markets. Ethiopia, for example, now has links to 33 African destinations and Kenya has 35, both well ahead of South Africa’s 26.
Commenting on the state of regional integration across sub-Saharan Africa, Alan Winters, Professor of Economics at the University of Sussex explains: “Regional integration only makes sense up to a point. The important thing is the size of the market; ten years ago the sum total of the sub-Saharan African economies, other than South Africa, was equivalent in GDP terms to Belgium. If Africa develops into a very dynamic market, as it may well do, everyone will want to have a part of it.”
John Winter concludes: “Sub-Saharan Africa has become a much more open and attractive opportunity for international trade and investment over the past decade, reflected by a sharp increase in trade and investment flows across the region. There are significant opportunities for UK business, although it is essential that UK firms continue to tailor their products and services to the diverse range of local needs, establish strong working relationships with local partners and align business plans with local development and integration objectives.”
* South Africa, Ethiopia, Mauritius, Kenya, Angola and Nigeria
** Kenya, Ethiopia, South Africa, Tanzania, Nigeria, Cote d’Ivoire and Senegal
About the Barclays Africa Trade Index
The Barclays Africa Trade Index compares and ranks 31 Sub-Saharan African countries based on their attractiveness for cross-border trade. The countries are the largest in the region in terms of GDP and population. The index is designed to help existing and potential importers understand both the opportunities and challenges to trading in the region.
It comprises 41 individual indicators grouped into two major categories – Opportunity and Openness – and divided between six focused categories: Demographics, Market size & Growth, Trade & Investment Flows, Tariff Policy, Border Administration and Transport & Communications.
The categories are designed to be comparable and were formed through a bespoke scoring method to convert raw data – such as FDI flows into a comparable score of 1-10. Indicators in the “Opportunity” category were scored relative to the best-in-class, resulting in larger markets such as Nigeria and South Africa scoring highly. In the “Openness” category, countries were scored relative to an idealised target – such as 100% participation rates for mobile telecoms or a 0% tariff policy, in this way smaller countries such as the Mauritius scored highly – showing their relative openness to trade. The two categories were then combined to produce an overall score out of 100.
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Countries urged to submit climate action plans ahead of UN conference in Paris
Secretary-General Ban Ki-moon is eager to get countries to submit as soon as possible their action plans that will form the basis of the new universal climate change agreement to be adopted in December in Paris, a senior United Nations official dealing with the issue said.
Janos Pasztor, Assistant Secretary-General on Climate Change, told a press conference at United Nations Headquarters that, to date, 62 out of 194 parties to the UN Framework Convention on Climate Change (UNFCCC) have submitted their Intended Nationally Determined Contribution (INDC).
The Secretary-General is “eager” to get all countries to submit their climate action plans, Mr. Pasztor said, adding “the earlier we get them the better.”
According to the UNFCCC, the Paris agreement will come into effect in 2020, empowering all countries to act to prevent average global temperatures rising above 2 degrees Celsius and to reap the many opportunities that arise from a necessary global transformation to clean and sustainable development.
Mr. Pasztor described as “remarkable” the submissions that have been put forward so far, drawing attention to the fact the plans are based on what countries are prepared to do in response to climate change. Countries have agreed that there will be no back-tracking in these national climate plans, meaning that the level of ambition to reduce emissions will increase over time.
He added that the Secretary-General hopes the visit to the UN by Pope Francis during next week’s General Assembly session devoted to adopting a new global development agenda will bolster support for action on climate change.
The UN expects 154 Heads of State or Government and 30 ministers for the Sustainable Development Summit, which will be held from 25 to 27 September.
On Wednesday, Mr. Ban voiced his concerns at a press conference that not enough is being done to keep temperature rise under the 2-degree Celsius threshold and urged world leaders “to raise ambition – and then match ambition with action.”
Against the backdrop of unprecedented population movements confronting the world today and in response to a question about whether climate change was a cause that forced people to be on the move, Mr. Pasztor said that there is “increasing evidence” that climate change is a factor.
“Climate change is a threat multiplier,” he said, adding that if there are already conditions that are prompting people to be on the move, the effects of climate change are making them worse.
“The facts are clear on the ground,” said Mr. Pasztor.
He also noted that there is “no silver bullet in reducing emissions,” and advocated for investing in substantive research for new technologies in the long-term battle against climate change.
“We are in this game for a long time,” he said.
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Regional Dialogue on Transport Industry kicks-off
Stakeholders in the transport and logistics service industry converged in Nairobi for a two-day regional dialogue on the economic and competitiveness challenges facing the sector in the region.
The dialogue which was opened by Principal Secretary in the Ministry of Transport and Infrastructure, Kenya, Eng. John Mosonik was organized by the COMESA Business Council (CBC) and brought together transporters, shippers, port authorities, freight forwarders, customs and clearing agencies among others.
COMESA Secretary General Mr Sindiso Ngwenya told the delegates that some stubborn issues existed in the transport sector which have slowed the deepening of regional integration and made it difficult for goods to flow easily across the region.
“There is limited awareness on customs and trade facilitation instruments, vehicle overload controls at weigh bridges and different load systems that are applied in the regional states,” Mr Ngwenya said.
He cited other handicaps as customs interconnectivity issues which resulted in intermittent network and electronic system downtimes, slow speed of systems, multiple documentation and process requirements and port inefficiencies.
To address these challenges, he said COMESA had developed various trade facilitation instruments that include the COMESA Yellow Card which is a third party motor vehicle insurance scheme, the Regional Customs Bond to replace the multiple national bonds required in each country of transit, the Carrier License, Harmonized Axle Loads and the Virtual Trade Facilitation System.
These instruments, Mr Ngwenya said are aimed at ensuring reduction of time loss across borders, efficiency in auto-tracking of cargo, revenue collection and opportunities for corruption along the corridors.
“Transport and logistics lie at the center of trade and regional integration. It is when imports and exports can reach their destination without delay at the most affordable cost that the competitiveness of industries increases at both global and regional level,” Mr. Ngwenya said.
He described the dialogue as an opportunity to provide solutions to the long standing challenges associated with transport, logistics and the movement of cargo in the region and Africa as a whole.
In his address, Eng Mosonik outlined the investments that the Kenya government had made in development of transport infrastructure given the country’s strategic location as a getaway to other parts of the region.
These include the construction of the second container terminal at the Port of Mombasa whose first phase is expected to be completed by 2016. Others are the standard gauge railway linking the port to the hinterland economies of eastern and central Africa and a state of the art Greenfield terminal at the Jomo Kenyatta International Airport with capacity to handle 12.5 million passengers.
The Chairperson of the COMESA Business Council Dr Amany Asfour called for continuous dialogue, engagement and consultation between the private sector and governments to resolve the challenges in the transport and logistics sector.
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tralac’s Daily News selection: 17 September 2015
The selection: Thursday, 17 September
Evolving banking trends in Sub-Saharan Africa: key features and challenges (IMF)
This paper discusses key stylized facts and trends of banking development in SSA, looking at a variety of dimensions such as size, depth, soundness, and efficiency. It also assess the rapid expansion of pan-African banking groups, which have overtaken the role of the European and U.S. banks that had traditionally dominated banking activities in SSA, creating significant cross-border networks and becoming the largest participants in new syndicates and large bilateral loans to finance infrastructure development. [Download]
New Unified Insolvency Act can help African SMEs improve access to finance (World Bank)
With support from the World Bank Group, 17 African countries, members of the Organization for the Harmonization of Business Law in Africa, adopted a Unified Insolvency Act last week in Côte d’Ivoire. This new law replaces the previous 1998 law which was widely believed to be lacking key features of a modern insolvency regime, particularly as regards reorganization proceedings and the treatment of creditors.
IFC in Africa: Year in Review, Fiscal 2015
SADC food and livelihoods insecurity: VAC 2015 results (Humanitarian Response)
The SADC summary of the 2015/16 regional food security and vulnerability situation based on the results of the 2015 NVACs vulnerability assessments: given the hazards faced, the number of food insecure people in the countries providing data increased by 13% (13.4 million this year compared to 10.3 million for last year) which was an above average year. The exceptions were Mozambique and Swaziland where numbers continued to decrease. In comparison to last year major increases in food insecure population are noted in Malawi, Namibia, Zambia and Zimbabwe. [Download]
South Africa: Agricultural Policy Action Plan (Agbiz)
Extract (Trade, agribusiness development and support): On the international front, the changing global environment and increasing standards on food safety excludes smaller farmers to play a critical role in international market access. Over and above this is the cost to access foreign markets. Stringent sanitary and phyto-sanitary, private standards, labelling and other technical requirements have gone beyond compliance capacity of many smallholders. Lack of market access could constraint growth and the targeted jobs that the sector intend to create. Strategic interventions are required to integrate smallholder and struggling smaller commercial farms to participate in the mainstream economy and take advantage of both domestic agro-food chains and international markets. [Download]
South Africa promotes expensive wines to boost exports (Bloomberg)
US, South Africa find common ground in bid to resolve poultry row (Bridges/ICTSD)
Kenya unveils blueprint to revive industrial and manufacturing sector (KBC)
The decade-long plan, aptly christened Kenya’s Industrial Transformation Programme (KITP), looks beyond import-substitution and export-led policy regime to develop its industries, stimulating Kenya’s ambitions as Africa’s next industrial power. Anchored on a five-point strategy, prioritizing leveraging Kenya’s comparative advantages, the plan aims at growing the manufacturing sector to levels above 15% of GDP from a static 11% over the past decade. According to Cabinet Secretary Industrialization and Enterprise Development Adan Mohamed, Kenya has identified 10 opportunities within the key strategies that will increase manufacturing sector jobs to 435,000 additional jobs in the next 5 years (+150% compared to today) and add Kshs. 200-300billion to the GDP.
Extract (Agro-processing): More than half of Kenya’s exports are related to agriculture, including tea, horticulture (i.e., cut flowers, fruits and vegetables) and coffee. We will continue to increase these exports and have identified additional opportunities in agro-processing that build on our vast agricultural potential. ƒ Tea is a staple of Kenya’s exports, worth USD 1 billion annually. However, 97% of tea is exported in bulk form. Kenya can attract a 50 to 100% price premium by promoting “Made in Kenya” brands internationally, attracting USD 200 million in value addition, and create 10,000 jobs.ƒ
Only 16% of all exported agricultural output in Kenya is processed; the rest is exported in raw form. By contrast, Tanzania processes 27%, Uganda 34% and Ivory Coast 32%. We can double the amount of our processed agricultural exports to boost agriculture, create an additional 110,000 jobs and earn USD 600 million. Eastern Africa annually imports USD 3.8 billion in raw and processed commodities such as wheat, palm oil and rice for local consumption. The majority of these imports come from outside of the region. We can take advantage of the strategic location of the Port of Mombasa into our priority sectors to set up a “food hub” where we import raw commodities in bulk and process and export consumer goods to serve the growing regional market. This could earn Kenya an additional USD 300 million in GDP and create 60,000 jobs. [Download]
Poorly managed concessioning of the container terminal could harm port (Daily Nation)
Prominent Nairobi lawyer Fred Ngatia has moved to the High Court to demand that tender evaluation documents relating to the controversial privatisation of Mombasa’s newly-built second container terminal be made public. The battle for the lucrative contract is surely going to be a cause célèbre. Indications are that we could end up with a protracted court tussle likely to drag on for a long time. With the new container terminal, Mombasa will be able to reposition itself as the reference port of the Indian Ocean and consolidate its leadership over Djibouti, Dar es Salaam, and Maputo. We should, therefore, select the very best to run it. [The author: Jaindi Kisero]
Two new papers, by Isabelle Ramdoo, on extractive sector policy issues: Resource-based industrialisation in Africa: optimising linkages and value chains in the extractives sector (ecdpm), Unpacking local content requirements in the extractive sector: what implications for the global trade and investment frameworks? (E15 Initiative)
Malawi extractive sector update: Mines Bill to be tabled in October parliament sitting (Mining in Malawi)
One foot on the ground, one foot in the air: Ethiopia’s delivery on an ambitious development agenda (Development Progress)
This case study looks at the progress achieved in material well-being, education and employment, where Ethiopia has shown particularly strong performance over the past 10 to 15 years. However this transformation is far from complete and a number of challenges remain, not least the depth and breadth of chronic poverty. A number of key lessons for the Sustainable Development Goals can be drawn from Ethiopia's experience:
South Africa: Constitution protects foreign investors’ rights (Business Day)
The Department of Trade and Industry defended its Promotion and Protection Investment Bill on Wednesday despite a slew of submissions claiming the bill was investor unfriendly. In his response to the submissions, Department of Trade and Industry director-general Lionel October said SA had an ambitious development agenda, which required new policies and regulations while ensuring it remained open to foreign investment. "SA is the favourite destination for foreign direct investment in Africa by a long way and we want to put to rest the notion that there is less protection under the bill," Mr October said.
South African businesses hoard cash in indictment of economy (Bloomberg)
Tanzania: State promises investor-friendly climate (Daily News)
Trade Hub hosts SADC TIFI thematic group cluster meeting
MTN warns against removing African tax incentive (Business Day)
Republic of Congo: 2015 Article IV Consultation (IMF)
The Republic of Congo has been hit hard by the oil price shock. Fiscal and current account balances deteriorated in 2014 reflecting increased government spending and lower oil prices. Corrective measures are now being taken. Private sector activity is held back by infrastructure gaps, a difficult business climate, and a shallow financial system. Growth and spending have yet to translate into significant reductions in poverty and progress in this area lags peers. Persistent inequality could be a source of instability.
Africa without limits (Times Live)
City bosses across Africa want national governments to ban visa requirements and allow people to move freely between the various countries. Jean-Pierre Elong Mbassi, secretary-general of the United Cities and Local Governments of Africa, said the time for keeping colonial borders had lapsed. Speaking in Sandton yesterday, Mbassi said Africa had to facilitate the movement of people to realise development and intra-continental trade it so desperately needed.
Mozambique updates: Funding development in the districts (SPEED Program), Government wants alternative north south road (Club of Mozambique), Metical devaluates almost 40% against the dollar (Club of Mozambique)
'India, Africa looking at deeper political, economic engagement' (SME Times)
Navtej Sarna, Secretary (West) in the Ministry of External Affairs, also said that India and Africa have a "collaborative partnership", which distinguishes it from the ties between Africa and other nations. Addressing the inaugural session of'National Consultation on India-Africa Partnership: Priorities and Prospects', Sarna said that India and Africa are looking at "a very tangible political and economic engagement, which keeps in view several facts", including that together both comprise one-third of the world population. He said India is only seven years old in its partnership with Africa in the IAFS format, which began in 2008, while Japan, the EU and China have two decades old partnership with the continent.
Mapping the world’s winners and losers from China trade (Foreign Policy)
UNU-WIDER 30th Anniversary conference started today: 'Mapping the future of development economics'
The growth-employment-poverty nexus in Latin America in the 2000s: Brazil country study (UNU-WIDER)
AU gets $70m to fight insurgencies (ThisDay)
C20: new civil society policy paper on tax justice (Tax Justice Network)
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South Africa publishes Agricultural Policy Action Plan (APAP) 2015-2019
Agriculture, forestry and fisheries (AFF) are widely recognised as sectors with significant job creation potential and with strategic links to beneficiation opportunities. However, although between 1994 and 2012 the real contribution of AFF to GDP increased by 29%, over the same period employment declined in both primary production and agro-processing by about 30% to 40%. This combination of slow-to-modest growth and declining employment, continues a longer-term trend evident since at least the 1970s.
The challenges facing AFF are numerous: rising input costs, an uneven international trade environment, lack of developmental infrastructure (rail, harbour, electricity), and a rapidly evolving policy and production environment. At the same time, transformation of the AFF sectors has been slow and tentative.
While there have been a variety of sector strategies established in the past, and while some progress has been made, there is recognition of a need to sharpen our analysis of what accounts for sluggish growth and job losses in AFF, and what is required to reverse this trend. At the same time, it is recognised that while the Agriculture, forestry and fisheries sectors play various strategic roles in respect of food security, agrarian transformation and rural development, and in supporting industrial development, it is also the case that AFF is under-funded: according to National Treasury’s estimates of consolidated government budgets and expenditure (‘functional classification’), the share of public money going to agriculture, forestry and fisheries has been at around 1,7% over the past four years, and is expected to decline to 1,6% over the next two. The OECD recognises South Africa’s agriculture sector as among the least supported in the world: South Africa’s Producer Support Estimate is currently 3,2%, versus 4,6% for Brazil, 7,1% for the US, and 18,6% for the OECD. Of particular concern is the lack of attention to R&D: according to the 2009/10 R&D survey conducted by HSRC on behalf of the Department of Science and Technology (the most recent survey for which the results are available), agriculture accounted for only 6,9% of South Africa’s total R&D spend. This state of affairs can in part be explained by the absence of a compelling, widely-supported strategy and implementation plan.
A detailed analysis of the various challenges is given in the Integrated Growth and Development Policy for Agriculture, Forestry and Fisheries, or ‘IGDP’. Based on this analysis, the IGDP also outlines appropriate responses. The Agricultural Policy Action Plan (APAP) seeks to translate the high-level responses offered in the IGDP into tangible, concrete steps. However, this first iteration of APAP is not offered as a fully comprehensive plan; rather, based on the model of the Industrial Policy Action Plan (‘IPAP’), it identifies an ambitious but manageable number of focused actions, in anticipation of future APAP iterations that will take the process further. APAP is planned over a five-year period and will be updated on an annual basis. Aligning itself with the New Growth Path (NGP), the National Development Plan (NDP) and Industrial Policy Action Plan (IPAP), APAP seeks to assist in the achievement of Outcome 4, Decent Employment through Inclusive Growth, and that of Outcome 7, Comprehensive Rural Development and Food Security.
APAP proposes a number of transversal interventions that complement but also go beyond the specific sectoral interventions identified. Altogether seven transversal interventions – or ‘Key Action Programmes’ (‘KAPs’) – are included, which collectively seek to strengthen the agriculture, forestry and fisheries sectors in diverse ways. One of these is Trade, agribusiness development and support.
Trade, agribusiness development and support
Problem statement
South Africa’s agro-food market landscape has changed in line with changes occurring internationally as a result of globalisation and market reforms. As a result agricultural production portfolio is diversifying and moving towards producing high value products (i.e. fruits, vegetables & animal products) in response to the changing tastes and preferences of the consumer. These changes present opportunities as well as challenges for agriculture in South Africa.
Although consolidation of the market is evident since the 1950s, market liberalisation reforms undertaken by government in the mid-1990s, fast tracked the process in which agriculture grew to the exclusion of the smaller commercial sector, and smallholder producers. Globalised market structures, further characterised by amongst others long chains of transactions between the producers and consumers, poor access to appropriate and timely information, led to many struggling smaller commercial business in the sector, let alone smallholder, being bought out by bigger corporates.
The lack of access to markets both domestic and international has been identified as one of the constraints faced by small-scale operators in the agriculture, forestry and fisheries sectors. Firstly, the entry of large retail supermarket chains into smaller rural towns has largely replaced the role of small-scale farmers as local food producers. Secondly, the procurement requirements of many supermarket chains and agribusinesses are too heavy for the smallholder to comply because of the numerous standards such as food quality and safety. Their access to the market is further constrained by factors such as low volume (with small marketable surplus), poor quality, erratic suppliers, etc. As a result, smallholder farmers cannot benefit from market access opportunities offered by these agro-food chains.
On the international front, the changing global environment and increasing standards on food safety excludes smaller farmers to play a critical role in international market access. Over and above this is the cost to access foreign markets. Stringent sanitary and phytosanitary, private standards, labelling and other technical requirements have gone beyond compliance capacity of many smallholders. Lack of market access could constraint growth and the targeted jobs that the sector intend to create.
Strategic interventions are required to integrate smallholder and struggling smaller commercial farms to participate in the mainstream economy and take advantage of both domestic agro-food chains and international markets.
Aspiration
- To increase market access for agriculture, forestry and fisheries products both domestically and internationally through targeted/product specific interventions. The priority should be given to smallholder farmers through research, capacity building and technical assistance.
Policy levers
- Agriculture, Forestry and Fisheries Trade and Agro-processing strategy
Nature of the intervention
The interventions in this area should be tailored to address both trade and market access opportunities for SMMEs including smallholder farmers. Evidence has shown that smallholder farmers do participate and make a sizeable contribution to the production of high value food commodities, but their links to markets are not strong. DAFF has various programmes to support smallholder farmers, however, some of these interventions have a narrow focus on production with very little or no support directed to activities of market access. On the domestic front, government support and intervention should focus on the creation of smallholder commodity associations, marketing cooperatives, enhance programmes supporting market access information and build on existing production systems and support sectors in which smallholder farmers are involved. Development efforts to resuscitate the smallholder farmer should also be linked with improvements in food safety and development of national food standards and regulations. This could stimulate the smallholder to continue earning income and creating jobs.
Regarding access to international markets, exports orientated programs must be integrated at early stage of production. The specific intervention by government will be to embark to directly assist smallholders by providing training and technological upgrade (in terms of standards for production, quality, packaging and delivery). This will enable smallholder farmers to meet export market requirements. Other interventions in these areas should focus on business networking events, including trade shows, business to business and direct buyer’s engagements. The trade strategy developed by DAFF should further guide the integration of smallholder farmers into global markets.
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Kenya unveils blueprint to revive industrial and manufacturing sector
Kenya has unveiled its first-ever blueprint to revive its manufacturing and industrial exports sector.
The decade-long plan, aptly christened Kenya’s Industrial Transformation Programme (KITP), looks beyond import-substitution and export-led policy regime to develop its industries, stimulating Kenya’s ambitions as Africa’s next industrial power.
Anchored on a five-point strategy, prioritizing leveraging Kenya’s comparative advantages, the plan aims at growing the manufacturing sector to levels above 15% of Gross Domestic Product (GDP) from a static 11% over the past decade.
According to Cabinet Secretary Industrialization and Enterprise Development Adan Mohamed, Kenya has identified 10 opportunities within the key strategies that will increase manufacturing sector jobs to 435,000 additional jobs in the next 5 years (+150% compared to today) and add Kshs. 200-300billion to the GDP.
“As an emerging economy, moving from agriculture based, low income economy to an industrial, middle income economy, it is paramount that the manufacturing share to GDP increases,” said Mohamed.
Under the plan, Kenya will build and innovate on its export engines and continue to support them. “To boost production and exports, Kenya will work to ease regulations on the sale of the exports while looking to attract a 50-100% price premium by marketing tea and coffee as a ‘Made in Kenya’ brand internationally,” said the Cabinet Secretary.
“We also plan to offer incentives for local value addition for multinational companies to consider creating opportunities for SME’s by investing in group packaging,” said the Cabinet Secretary, adding these efforts will attract Kshs 20-24 billion (USD 200-240 million) in value addition and 10,000 jobs.
Kenya is also eyeing on capitalizing on agro-processing’s global market worth Kshs.1,47 trillion (USD 14.7billion), which Mohamed said the Government “is working on attracting investors to develop three to five large integrated value chain ‘Agropolis’ projects with potential to yield Kshs.30 billion (USD 300 million) in GDP and create up to 60,000 jobs.”
Under the plan, Mohamed said the government plans to enforce the ‘Buy Kenyan, Build Kenya’ policy to nip Kenya’s huge Kshs. 82 billion textile and apparel import bill.
Painting a rosy picture of the industry, buoyed by the AGOA extension for another decade, he said Kenya is keen to grow its share of US market from the 0.4%, increasing AGOA exports to Kshs.100 billion in the next 3 years.
“We will be expanding to new geographical markets in textiles and apparel growth, and building an industrial park with a textile cluster in Naivasha to take advantage of natural power sources. Such will help us manufacture enough textiles and apparels to increase our 0.4% pie in the USD 84billion US textiles market,” said Mohamed.
He cited ongoing efforts to build a leather city in Machakos and upgrading the Kariokor leather cluster as key to netting USD 150 to 200 million in GDP and 35,000 to 50,000 new jobs.
Other efforts will include marketing Kenya leather products abroad and securing international sourcing contracts for leather products.
Mohamed said the blueprint commits to work build on capacity of local firms to profit from Kenya’s infrastructure and investments boom. Infrastructure, Residential and Commercial Construction and oil and gas and mining services have witnessed a massive boom with local firms missing out due to scale and expertise.
“Despite the healthy contribution to GDP and employment, only 8% of the 6 trillion regional infrastructure construction market is served by domestic firms. The Government has legislated local content rules such that projects worth Kshs 1 billion are awarded to domestic companies,” said Mohamed.
According to KAM Chief Executive Phyllis Wakiaga, building capacity of Kenya’s local construction companies could yield Kshs.10-20 billion in GDP and create 30,000 jobs from the bludgeoning industry.
“Kenya stands to make 35% of estimated 100 billion mining value at stake annually. The Eastern African Oil and Gas Services market could grow rapidly at around 26% over the next few years to reach USD 3.5 billion by 2020,” said KEPSA’s CEO, Carole Kariuki.
“The National Single Electronic Window System (NSEWS) together with the other administrative reforms will reduce the time taken to comply with payment of taxes, levies, duties and fees as well as facilitate cross border trade across the EAC region. The Single Window System is expected to double East African trade to $33.3 billion by 2016, and enhance transport along the Northern Corridor from the port of Mombasa to Uganda, Rwanda and Burundi,” said Ms. Kariuki.
Also set to be improved are the non-industrial job creating sectors – Information Technology related sectors, Tourism and Wholesale and Retail. The last decade saw a liberalized economic wave driven by a thriving domestic service sector. In the period, telecommunications, wholesale and retail and hotels and restaurants have grown by 12.2%, 8.8% and 7.7% respectively.
“Kenya is keen to develop into an IT service export hub within Africa and a preferred location for business process and IT outsourcing. In tourism, we are positioning our resources to muscle into the Ksh 320 billion conferencing tourism market in Africa,” said Mohamed.
According to KAM CEO, Phyllis Wakiaga the plans commitment to build an enterprise culture with an SME pilot programme dubbed ‘Rising Stars’ Programme is a good step towards supporting SME’s growth.
Further, Mohammed said the government will focus on creating an enabling environment as Kenya seeks to transition to higher-value added manufacturing sectors. With Ease of Doing Business Reforms Agenda in top gear, with new bills signed by H.E the President last week, the stage is set for unprecedented investments. The government will focus on upgrading investment targeting strategies to attract local capital and foreign direct investment.
“We will also create a fund that will allow the Ministry or its agencies to offer attractive co-investment packages to local or foreign investors when they are needed and to support other critical activities in the industrialization programme,” said Mohamed.
Further, industrial parks along major infrastructure corridors including the SGR and LAPSSET Corridor will be created.
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US, South Africa find common ground in bid to resolve poultry row
The US and South Africa have reportedly made progress on the technical health and sanitary discussions related to the imports of poultry, pork, and beef meat from the United States, following a strategic dialogue held this week.
This development comes after growing frustrations from Washington over the alleged lack of implementation of the Paris agreement reached in June, which was meant to pave the way for the re-entry of US chicken imports to the South African market.
Since 2000, imports of certain US chicken products into South Africa had been subject to anti-dumping duties of above 100 percent, which US poultry meat exporters deemed unfair. Under the Paris agreement, South Africa committed to end import duties on US chicken and resume imports, initially at levels of 65,000 tonnes a year.
A separate set of actions was then envisaged in order to resolve the remaining sanitary issues related to poultry, pork, and beef after South Africa raised concerns over an avian influenza outbreak – an infectious viral disease of birds which can sometimes spread to poultry – in 15 US states. This led the former to delay the effective implementation of the agreement.
A policy of “regionalisation”
The South African government welcomed the agreement by US and South African veterinary experts on the meat import issues as a breakthrough, according to the Citizen, an online news platform. On poultry, experts settled on a protocol and health certification allowing for the import of poultry from areas in the US that are not affected by the virus.
A statement issued on Tuesday by South Africa’s Ministry of Trade and Industry confirmed that the two sides aim to finalise the terms and conditions for poultry export certificates by 15 October in order to resume shipments from the US by year’s end.
In a letter addressed to South African President Jacob Zuma last week, US senators Johnny Isakson and Chris Coon requested that Pretoria follow the World Organization for Animal Health (OIE) guidelines and implement a “policy of regionalisation for pathogenic avian influenza,” along with adopting language for export certificates. They specified that without these issues being addressed and in place, US companies would not be in a position to ship any product, regardless of the terms of the Paris agreement.
According to commentators, the common understanding found this week appears to address this issue of “regionalisation,” as South Africa agreed to only to ban poultry imports from specific areas of the US affected by the virus.
Isakson is a Republican from Georgia while Coons is a Democrat from Delaware, both major poultry producing US states. The two senators are also the co-chairmen of the US Senate Chicken Caucus and are members of the Senate Foreign Relations Committee, and have been pressuring the Obama Administration over the past year to block the renewal of the South Africa’s participation in the African Growth and Opportunity Act (AGOA) unless market access for American poultry exports was increased.
The lifting of similar health-related restrictions on US beef and pork were also discussed during this week’s meeting. Both parties reportedly discussed possible South African exports of animal products to the US and exchanged information on the technical requirements to access American markets, reports the Citizen.
One source consulted on this issue indicated that a common ground might have been reached on pork and beef restrictions, but cautioned however that there were still additional issues to be dealt with before a full-fledged solution can be confirmed.
South Africa under pressure
“We look forward to successful implementation of the Paris agreement so the United States and South Africa can at last leave this trade dispute behind,” read the letter co-signed by the US senators to South African President Zuma.
The letter describes two processes that need to be completed by South Africa in order to make the Paris agreement effective. These include the creation of a rebate facility to legally exempt the annual quota amount from anti-dumping duties and the development of rules for allocation and administration of the quota through a transparent legal process.
“We are also disappointed to learn that there has been no progress in addressing South Africa's complete ban on US poultry due to avian influenza,” reads the letter.
The letter also makes specific reference to the review of South Africa’s eligibility under the new version of the African Growth and Opportunity Act (AGOA). In the context of such review, if the US President determines that South Africa does not meet certain requirements, the latter’s eligibility could either be withdrawn, suspended, or limited.
This summer, the US Congress passed legislation to extend duty-free access to the American market for eligible sub-Saharan African countries for another decade through AGOA.
“Congress has made clear that the United States should not allow other countries to enjoy trade benefits under AGOA while actively undermining our trading interests,” said Coons.
At stake are South Africa exports to the US of motor vehicles and citrus valued at US$1.3 billion and US$41 million, respectively.
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IFC expands support for infrastructure, entrepreneurs, and fragile states in Africa in 2015
IFC, a member of the World Bank Group, on 15 September announced that it committed $3.6 billion in new long-term financing and mobilizations in Sub-Saharan Africa during its 2015 fiscal year. IFC’s strategy in Africa aims to help bridge the region’s infrastructure gap, build productive industries, and lead inclusive business approaches through financing for private companies and advice to the private sector and governments. The 2015 financing figure compares with $3.0 billion committed in the previous year.*
Oumar Seydi, IFC Director for Eastern and Southern Africa, said, “IFC’s expanding investments in Africa in 2015 are a reflection of the investment opportunities and our ability to target key sectors critical for African development. IFC supports projects that help nurture entrepreneurs and small businesses and reach projects in Sub-Saharan Africa’s critical sectors, including infrastructure and agribusiness.”
Private sector projects expanding infrastructure through power, transport, and utilities received $1.1 billion in new financing from IFC this fiscal year. Four new public-private partnership mandates were signed, which will help improve healthcare in Mozambique and boost power generation in Ghana, Tanzania and the Democratic Republic of Congo. IFC provided wide-ranging advice to governments and private investors in projects across 30 countries.
IFC committed $246 million in Sub-Saharan Africa’s fragile and conflict affected situations, supporting projects in finance, mining, infrastructure, and smaller businesses. That included more than $80 million in new investment commitments to companies and financial institutions in Guinea, Liberia and Sierra Leone as part of a $450 million, three-year target to step up new investments that respond to Ebola and support economic recovery in countries worst-affected by the epidemic.
IFC invested $1.2 billion, including capital mobilized from partners, in the financial sector in Africa. IFC’s investments in banks and financial institutions helped provide loans to entrepreneurs. Meanwhile, IFC provided more than $500 million to encourage key industries, including agribusiness and healthcare.
Vera Songwe, IFC’s Director for West and Central Africa, said, “IFC aims to help further leverage the private sector to meet critical needs, especially access to power and other infrastructure. Our work with financial institutions is helping entrepreneurs and empowering woman-owned businesses across the continent. IFC seeks to have a strong developmental impact in the region, especially in fragile states, where private sector development is challenging but critical for growth.
IFC also released development data today for the 2015 calendar year showing its activities generated power for 14 million people, connected 2.7 million new users to phone services, reached over a million farmers, delivered healthcare to one million patients, and provided loans to two million entrepreneurs in Sub-Saharan Africa.
* IFC changed its reporting practice regarding investment amounts, beginning in the 2015 fiscal year. To align our approach with commercial banks, we now report short-term finance investments separately from long-term investments. Short-term investments are reported as the average outstanding balance for the year. Data provided in this release are calculated under the new reporting policy, and should not be compared with releases from previous years.
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence, to create opportunity where it’s needed most. In FY15, our long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity.
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Evolving banking trends in sub-Saharan Africa
Banking in SSA has undergone very significant changes over the last two decades. Financial liberalization and related reforms, upgrades in institutional and more recently the expansion of cross-border banking activities and the rapid development of Pan-African banking groups are signaling greater financial integration and significant changes in the African banking and financial landscape. Nonetheless, excess liquidity in many countries reflects limited lending opportunities and, despite improvements, asset quality and provisioning remain comparatively low. Dollarization has also been a persistent characteristic in several natural resource-dependent economies.
Introduction
Since the 1990s, sub-Saharan Africa (SSA) has been among the world’s fastest-growing regions. For the first time since the 1970s, a large number of countries in SSA have been enjoying an extended period of strong economic growth. The recent pace of growth represents a sharp break with the falling living standards and macroeconomic instability of the 1970s and 1980s – a period when the region fell behind developing countries in other parts of the world. The acceleration in growth has been accompanied, and facilitated, by a sharp reduction in inflation, which in most SSA economies is now typically in the single-digit range, despite persistent vulnerabilities to food and fuel price shocks Among the key factors contributing to this turnaround in economic fortunes were the improved macroeconomic policies in many countries. These include the strengthening of fiscal positions, the enhanced emphasis given to containing inflation, the liberalization of exchange controls and unification of exchange rates, and the building of foreign reserves to help contain the impact of adverse external shocks. These shifts in domestic policies were facilitated by international debt relief initiatives, which freed up fiscal space and mitigated against external payment pressures in several SSA countries.
The acceleration in economic growth has been accompanied by an expansion of access to financial services – particularly commercial banks, which have been traditionally, and remain, the backbone of financial systems in SSA. Indeed, banking in SSA has undergone dramatic changes over the past 20 years. Financial liberalization and related reforms, upgrades in institutional and regulatory capacity, and more recently the expansion of cross-border banking activities with the rapid development of pan-African banking group networks have significantly changed the African banking and financial landscape. Once dominated by state-owned institutions and distorted in their operations by restrictive regulations, banking systems in SSA are now deeper and more stable, and the incidence of systemic banking crises have declined dramatically in the past two decades. In fact, banking systems in SSA survived relatively unscathed the turmoil of the global financial crisis, despite indirect pressures through international trade linkages.
Yet, despite these remarkable achievements, concerns persist that this progress may not have been significant enough to sustain future growth, that several countries still display shallow banking systems with insufficient depth and instruments, that financial inclusion – that is, the extent of access to financial services and products by the majority of the population – is still limited, and that high costs, short bank lending maturities, and limited competition remain a drag on the development of a competitive and diversified economic structure in many countries of the region.
Against this background, the purpose of this paper is to take stock of banking-sector developments in the region, outline the challenges, and discuss policies that could deal with them. In discussing trends for SSA as a whole, it is important to keep in mind the striking diversity within the region, whose 45 countries vary markedly in terms of population size, income levels, resource endowments, access to international transportation corridors, and the extent of sociopolitical stability. These diverse conditions have had significant effects on the pace of growth and on the development of financial systems, which show considerable variation in depth, size, reach, and complexity within the region.
The rest of the paper is organized as follows. Section II discusses the key stylized facts and trends of banking development in SSA, looking at a variety of dimensions such as size, depth, soundness, and efficiency. Section III takes stock of the integration of SSA banks with the international banking system. Section IV discusses the rapid expansion of pan-African banking groups and the challenges they pose for cross-border oversight. Section V looks at the role of SSA banks in financing infrastructural development. Finally, Section VI concludes by discussing financial sector policy issues linked to the need to further develop banking and financial markets and forge a stronger financial infrastructure.