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East Africa States join hands to ban mitumba imports
East African countries plan to stop importation of used clothes and shoes, a move that is likely to have a huge impact on the multi-billion shilling industry.
The decision to initiate the process was among the agreements made at the 16th East African Community heads of states summit that ended on Friday, in Nairobi. The ban on importation of used clothes and shoes, referred to as mitumba in Kenya, is intended to boost local textile and leather industries.
“The summit further directed the council of ministers to study the modalities for the promotion of textile and leather industries in the region and stopping the importation of used clothes, shoes and other leather products,” the presidents said in a communiqué read at the end of the summit.
The council of ministers, composed of the region’s ministers in charge of East African Affairs, is required to report on their progress in the next summit. The presidents also tasked the ministers to assess how assembly of cars within the region could be promoted to reduce second-hand car imports.
Total Ban
A total ban on importing used clothes would likely have a big impact given that the clothes are bought by the poor who cannot afford news ones. Banning imports of such clothes would, however, be good news for textile firms, which have over the years been asking the government to either ban them or slap high taxes on them to discourage imports. This would not be the first time for Kenya, which allowed importation of used clothes in the early 1990s, to seek a ban on the imports.
In 2012, then Finance minister Njeru Githae introduced the same idea through Sessional Paper Number 9 of that year. The argument from the executive was that importation of second-hand clothes had changed from the noble idea of helping the poor in developing countries by having people in the First World donate their extra clothes into a huge business benefiting rich traders who now steer the multi-billion shillings industry. But the passage of the sessional paper would require accompanying laws to take effect. This would require initiative from the Executive and support of MPs.
When President Kenyatta was Finance minister, he slashed import duty on second-hand clothes from $0.3 per kilo (or 45 per cent whichever is higher) to $0.20 per kilo (or 35 per cent whichever is higher). These rates are still applicable. Mr Kenyatta said then that the cut was necessary to allow low income earners afford clothes during the economic slowdown that the country was grappling with then.
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High-level event stresses importance of extractive industries to sustainable growth in Africa
The United Nations Office of the Special Adviser on Africa (OSAA) held a meeting at Headquarters in New York on 24 February on the role of the extractive industry in Africa.
The High-Level Expert Group Meeting was organized by Special Advisor Maged Abdelaziz in conjunction with the African Union Commission (AUC), as well as bodies such as the UN Economic Commission for Africa (ECA), the African Development Bank (AfDB), the UN Industrial Development Organization (UNIDO) and the Department of Public Information (DPI).
The event, which looked to the post-2015 development agenda and the African Union ‘Agenda 2063,’ explored how to enhance management of Africa’s extractive industries in order to fully harness their potential as important drivers for sustainable development, structural economic transformation and inclusive growth.
According to the OSAA, Africa has an abundant natural resource endowment, boasting 12 percent of the world’s oil reserves, 40 per cent of its gold and around 60 percent of its uncultivated arable land. With increasing global demand for primary resources, especially in rapidly growing emerging economies, the continent aims to continue exploiting its comparative advantage, with efforts so far seeing trade grow from $251 billion in 1996 to $1.151 trillion in 2011.
Despite strong export performance in the sector, African countries have not yet fully harnessed the full potential of their rich natural resource endowments or employed their natural resource advantages as an engine for inclusive economic growth.
Under the post-2015 agenda and the African Union Agenda 2063, revenue from natural resources, including the extractive industries, will be a key source for development financing. Both aim at achieving long-term economic growth and full and productive employment, with the AU Agenda 2063, in particular, underscoring the crucial role of industrialization, including through value addition of natural resources.
Sir Paul Collier, the co-director of the Centre for the Study of African Economies at Oxford University and author of the book, The Bottom Billion, was the keynote speaker at the event, while panellists included Ibrahim Assane Mayaki, the Chief Executive Officer of the New Partnership for Africa’s Development (NEPAD), the African Union’s development agency, and Fatima Haram Acyl, the African Union Commissioner for Trade and Industry.
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Tripartite Africa free trade zone now preparing for launch in May
Negotiations have been finalized in preparation for the launch of Africa’s largest free trade area in May, officials said on Tuesday.
The Common Market for Eastern and Southern Africa (COMESA) Assistant Secretary Kipyego Cheluget told a media briefing in Nairobi that the free trade zone will result from merger of the East African Community (EAC), Southern African Development Community (SADC) and COMESA.
“All the 26 member states in the three trading blocs have expressed great political will to allow the free movement of goods and services by end of May,” Cheluget said during the opening ceremony of the Afrik4r-Comesa 1st peer review meeting.
The FTA would cover 26 countries ranging from Egypt to South Africa with a combined population of 625 million people and an aggregate GDP of 1 trillion U.S. dollars. These figures represent half of the African Union’s membership and 58 percent of the continent’s economic activity, according to COMESA. Cheluget said after the launch, all the members states will be required to ratify the agreement before the FTA takes effect.
The COMESA Assistant Secretary General said the tripartite will form a building bloc to the continent wide free trade agreement. Since July 2014, the African Development Bank has also been supporting the Tripartite Capacity Building Programme (TCBP). He added that the main objective of the programme is to provide technical assistance to the three regional economic blocs and the tripartite countries with the view of increasing intra-Tripartite trade.
“The programme will also support the tripartite negotiations process, the development of trade facilitation instruments as well as an industrial cluster action plan for the Tripartite Free Trade Area (TFTA),” he said.
The launching of the TFTA is the first phase of implementing a developmental regional integration strategy that places high priority on infrastructure development, industrialization and free movement of business persons. In order for the Tripartite FTA to realize inclusive and equitable growth, officials agree on the need for expeditious formulation and implementation of a regional industrial programme.
Cheluget said the Tripartite FTA offers significant opportunities for business and investment within the Tripartite and will act as a magnet for attracting foreign direct investment into the tripartite region.
The business community, in particular, will benefit from an improved and harmonized trade regime which reduces the cost of doing business as a result of elimination of overlapping trade regimes due to multiple memberships, Cheluget added.
The FTA was originally endorsed at the Tripartite Summit of Heads of State and Government in Johannesburg in June 2011. That endorsement came three years after another tripartite summit in Uganda, where the Heads of State and Government of the respective regional economic communities (REC) on a “programme of harmonisation of trading arrangements amongst the three regional economic communities.”
The tripartite will create a single market of approximately 600 million people and account for about 58 percent of the Africa’s Gross Domestic Product. Cheluget added that once operational, the trading bloc will help to increase intra-Africa trade. “We want to ensure that trade within the continent reaches to the level of that of other continents,” he said.
The enlarged FTA will include Libya, Djibouti, Eritrea, Sudan, Egypt, Ethiopia, Kenya, Uganda, Burundi, Rwanda, Tanzania, Malawi, Zambia, Zimbabwe, Angola, the Democratic Republic of the Congo, Mauritius, Madagascar, Comoros, Seychelles, Mozambique, Botswana, Lesotho, Namibia, South Africa and Swaziland.
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US-Africa Trade Updates: Outcomes of African Trade Ministers’ visit to Washington
Last month, from January 19 to 23, the African Union mission, in collaboration with the African Ambassador Group of Washington, DC and the African Development Bank with the support of the Africa Trade Fund project on boosting US-Africa trade, hosted a high-level delegation of African Ministers of Trade focused on promoting the expeditious renewal of the African Growth and Opportunity Act (AGOA) – a key component within the architecture of US-Africa trade.
The delegation was led by S’khulumi Ntsoaole, Minister of Trade and Industry, Cooperatives and Marketing in Lesotho, who was accompanied by Gabriel Tchango, Minister of Trade, Small and Medium Size Enterprises, Handicrafts and the Development of Services in Gabon, and Etienne Ghislain Sinatambou, Minister of Foreign Affairs, Regional Integration and International Trade in Mauritius.
The visit offered the delegation a unique opportunity to hold important consultations with representatives of the US Government, including the National Security Council at the White House, the State Department, the Office of the US Trade Representative, key members of both houses of Congress, and other critical US stakeholders, including the private sector, civil society, and think tanks, on the importance of AGOA’s timely reauthorization for the US-Africa strategic partnership. The consultations also highlighted the implications of that partnership for the shared interests of economic opportunity and the stability and prosperity of Africa.
The series of meetings made it possible for the Ministers to underscore particularly the urgent need for an expeditious reauthorization of AGOA as a critical avenue for boosting US-Africa trade, at the latest during the first quarter of 2015 before the eligible countries face huge economic and social challenges. The Ministerial delegation also called upon the US Congress and US Administration to not attach the potential AGOA bill to other trade policy bills (e.g. the Trade Promotion Authority), apart from the Generalized System of Preferences, which is related to AGOA, but to have it stand alone so as to separate AGOA from any lengthy negotiations or controversial pieces of proposed legislation that could harm or delay its chance of being reauthorized in a timely fashion.
If AGOA’s reauthorization is delayed beyond March 2015, as the Ministers stressed, there would be negative and harmful repercussions on employment, the business climate, and regional integration efforts, accompanied by the potential for engendering risks of insecurity and instability, which would erode the achievements made since the enactment of AGOA.
Outcomes and key takeaways from the delegation’s visit
The visit was successful in establishing a better understanding of the importance of the AGOA and its expeditious renewal, and the importance of trade and investment occurring on a predictable and certain basis.
The representatives of the US Administration at the US Trade Representative (USTR), National Security Council (NSC) and State Department all reiterated President Obama’s strong commitment to a long extension of AGOA and the readiness of his Administration to do everything it can to ensure that AGOA reauthorization happens quickly. AGOA enjoys a great deal of bipartisan and bicameral support, and US Government officials from the Administration and Congress indicated that the key question was not whether AGOA would be renewed, but when, how, and what legislative vehicle should be used.
The Administration and some Members of Congress also attached great importance to the enhancement of AGOA, to increasing and expanding its utilization, and to increasing its role in fostering deeper regional integration. Currently, most countries that are AGOA-eligible export using the preferences available under AGOA. However, while almost 900 different types of products were exported, this is still less than the 6,400 product-lines available, and one-third of these product-lines saw exports below $20,000. These numbers seem to indicate that, while countries are better utilizing the benefits available and new export product sectors are developing, there are still barriers to fully utilizing and scaling product exports. As stated by the UN Economic Commission for Africa (ECA), these flows still do not reflect the economic relationship that should exist between the world’s largest economy, and the world’s fastest-growing region. Supply-side challenges and problems complying with US market requirements still remain. The uncertainty and fixed duration of AGOA preferences also results in diminishing incentives for American firms to trade with and invest in Africa.
Making US-Africa trade more effective and addressing supply-side weaknesses requires a comprehensive focus on incorporating trade capacity and trade facilitation provisions into AGOA and individual country trade development strategies. There are some resources currently provided to AGOA-eligible countries to address these constraints, like the USAID Trade Hubs that work to enhance AGOA utilization and assist with sector export strategies, but more than this is needed. The delegation highlighted the efforts that are currently being made by individual countries to increase their utilization of AGOA’s benefits. Many countries have already created and others are currently developing or updating their national AGOA export strategies. During the course of this year the African Development Bank under the Africa Trade Fund (AfTRA) hopes to support the development of two national AGOA Strategies for Côte d’Ivoire and Malawi to enhance utilization of US trade preferences. Producers are also increasing their collaboration with the USAID trade hubs. For example, the West Africa Trade Hub is targeting support towards value chains for cereals, cashew, shea, apparel and mango. There is, however, always scope to scale up support.
The delegation confirmed as well their interest in seeing enhancements made to AGOA – as has been indicated previously in reports identifying the recommendations made by the AU and the African Ambassador Group. These reports, along with recommendation reports from other institutions like ECA and Brookings, were released nearly two years ago. Despite the availability of these recommendations, it is still not clear from discussions with policy-makers that draft legislation exists. Many believe that it is now too late for negotiations and dialogue on enhancements to take place if renewal is to be achieved in time, and want to focus instead simply on reauthorization. Thus, while enhancements are important, the biggest concern for AGOA-eligible countries now is over Congress’ ability to draft and pass an AGOA bill in the next month before more negative repercussions are experienced by eligible countries.
Looking Ahead: The Consequences of Delayed Renewal
While, the delegation achieved its objective of highlighting the importance of having Congress present and pass a bill reauthorizing AGOA before March, it is clear that a great deal of work remains to be done to ensure that the renewal is achieved before major trade, job and economic losses occur in AGOA-eligible countries.
AGOA has achieved great economic growth over the life of the legislation. Exports of non-energy related products increased over three-fold since the legislation’s benefits began in 2001. AGOA has also achieved a lot in the area of employment. Many countries have created tens of thousands of jobs in sectors that developed and flourished under AGOA – the textile and apparel sector being one of the largest documented job-creating industries, which is estimated to have directly generated over 300,000 jobs.
The severity of the repercussions of AGOA’s delayed renewal for the textile and apparel sector are particularly important to consider. For instance, in 2012 when the renewal of the TCF provision was delayed until the 11th hour (only weeks before its expiration), the apparel imports from Africa that it promoted were down 12% in the months leading up to its expiration, and African apparel producers had to lay off tens of thousands of employees.
Right now, 1 in 45 people in the entire working and non-working age population of Lesotho are employed in a job that exports directly under AGOA (with the majority of jobs in the apparel sector) If the legislation is not renewed quickly, over 40,000 people in Lesotho alone could lose their jobs, resulting in economic instability for the country.
Ultimately, it is critical for AGOA-eligible countries to maintain robust advocacy towards different economic stakeholders to ensure that Congress acts quickly within the next two months to address the concerns of African countries waiting on AGOA’s renewal.
Next Steps
The African Ministerial delegation and the AU wish to see AGOA expeditiously renewed for at least 15 years. This would allow a reliable time horizon for new sectors to develop, increased investment to continue into these sectors and the broader region, and for African countries to enhance their regional value chains and integration to achieve anticipated high growth levels. There is no desire for AGOA to be continued indefinitely, but instead for a period that would allow the continent to fully realize its economic potential. In 15 years, it is expected that many AGOA-eligible countries would be, at a minimum, lower-middle income and at this point the region would be in an excellent place to negotiate mutually beneficial trade agreements with the US that are fitting to its post-AGOA economic level.
The African Union mission, the African Ambassador Group and the African Development Bank will continue to work closely with key members of the private sector and civil society and policy-makers to advocate for and highlight the importance of AGOA’s renewal in the first quarter of 2015. Continued efforts will be made to draw attention to the very real consequences of AGOA’s delayed renewal. Parallel to this, the AU, with support from partners like the AfDB, will continue to support countries to promote the effective utilization of US trade preferences and investment between the US and Africa.
Zenia A. Lewis is a US-Africa Trade and Investment Specialist working with the AfDB in Washington, DC. She has worked extensively on African trade and economic development issues with the AfDB, the Brookings Institution and within the private sector.
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SADC Industrialists in Harare for strategy
TRADE and industry experts from the Southern African Development Community (SADC) are meeting in Harare, Zimbabwe to discuss the strategy and roadmap for on-going efforts to industrialise the 15-member bloc.
The meeting, which kicked off on Tuesday and ends on Wednesday, is discussing a draft strategy and roadmap developed by the Botswana-based SADC Secretariat in consultation with member states. It comes in the wake of a decision by the 2014 Summit of SADC leaders held in Victoria Falls, Zimbabwe, which directed the Secretariat and member states to prioritise the industrialisation pillar during the ongoing review of the Regional Indicative Strategic Development Plan (RISDP).
The RISDP is SADC’s 15-year development blueprint that was adopted by member states in 2003 in Mauritius. The experts meeting will be followed by those of the Ministerial Task Force on SADC Regional Economic Integration the Council of Ministers next week, also in Harare. Industrial development has been identified as one of the main drivers of the integration agenda in southern Africa as the region moves away from an economic path built on consumption and commodity exports onto a sustainable developmental path based on value-addition and beneficiation.
The structure of production in southern African countries is characteristic of a developing region where large shares of Gross Domestic Product originate from primary production sectors, mainly agriculture and mining. According to the SADC Industrial Development Policy Framework, the contribution of these sectors to GDP is relatively high, averaging close to 50 percent of GDP. Fishing has equally grown to be important in a number of countries.
The manufacturing sector’s contribution to GDP in all SADC member states is estimated at less than 20 percent, and lower than five percent in some cases. With the exception of South Africa and Mauritius, which have sizable manufacturing sectors, the SADC industrial sector remains relatively undiversified.
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Lamu port set up starts next month
Construction of the proposed Lamu port is set to begin next month, with the promise of more jobs and expanded regional trade.
President Uhuru Kenyatta yesterday said the facility, which is part of the Lamu Port Southern Sudan-Ethiopia Transport corridor project, will provide an opportunity for exploitation of Kenya’s expansive maritime resources.
“Kenya’s maritime domain extends over 230,000 square kilometres — the equivalent of about 31 of our 47 counties. This vast resource has hitherto lain untapped by Kenyans. Special attention must be paid to education and training, so that our skills match the infrastructure we are building,” said Mr Kenyatta.
He spoke while addressing the opening of the 1st national maritime conference at Kenyatta International Convention Centre. Mr Kenyatta invited the private sector to help in education and training of the youth to boost the maritime sector.
Cabinet secretaries for Transport, Labour, Education and the National Treasury were directed to fast-track establishment of a centre of excellence in one of the public universities. It is expected to provide specialised training for the industry.
The President said recent investment in expansions was justified given that the maritime sector accounts for 92 per cent of Kenya’s global trade.
Access the Speech by Pesident Uhuru Kenyatta at the opening of the 1st National Maritime Conference 2015 here
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South Africa upbeat on ‘Make In India’ to boost trade
30-member South African team in India to exploring partnerships in pharma, manufacturing and IT
South Africa is considering the ‘Make In India’ initiative a key area of interest at a time when the country is keen on boosting bilateral trade and has placed India as a priority destination for improving the business ties.
“Prime Minister Modi’s ‘Make In India’ is of great interest to us. This will see much more participation of South African companies in India. Over the next few years, we will see more of our firms taking up industrial projects that support the development of airports and seaports in India. Our defence industry is also coming in a big way to the country,” said Pule I Malefane, consul general of South Africa in Mumbai, today here.
Meanwhile, a 30-member South African business delegation led by the department of Trade and Industry is in India as part of sixth trade and investment drive for exploring potential partnerships in pharma, manufacturing and information technology.
The delegation is keen on diversifying trade basket by focusing on value-addition by tying up with Indian industry.
“Value-addition would form an important element in our bilateral trade even as South Africa had traditionally been exporting gold, diamonds, coal and other raw materials to India,” said deputy minister of trade and industry Mzwandile Masina today.
Masina said the imposition of restrictions on gold import had dealt a considerable blow to the bilateral trade, which stood at 90 billion Rand in the fiscal 2013-14. While China is the top trading partner for it, India is at a distant eighth. During 2009-14, South Africa had picked up investment to the tune of 80 billion Rand from the Indian companies, Masina said.
On what were the issues affecting business, a high commission official accompanying the minister said, “India has a difficult business environment and our companies are facing non-trade barriers. While Indian banks SBI, Bank of Baroda and ICICI are free to expand anywhere in our country with one licence, whereas in India, our First Rand Bank was not being allowed to move beyond Mumbai.
“However, he said, issues like this and others were being discussed with the Indian government. Masina said the business delegation would be meeting Andhra Pradesh chief minister Chandrababu Naidu today to express their interest in partnering the state government in its plan to develop three new cities with modern airports. They would also call on Telangana industries commissioner to discuss business.
South Africa is expecting India would kickstart the official process for issuing the “10-year multiple long term CEO visa” for the top business officials. The exclusive arrangement had been agreed as part of the BRICS common understanding. Masina said South Africa was the first in the emerging countries club to put in place the exclusive visa.
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Angola, Namibia push for improved cross-border trade
The Namibia Chamber of Commerce and Industry (NCCI) and the Angolan Chamber of Commerce and Industry (CCIA) are engaging stakeholders to improve the cross-border trading environment between the two countries.
During a visit to Luanda last week, NCCI’s Chief Executive Officer, Tarah Shaanika, held talks with his counterpart, Tiago Gomes, and exchanged views on making trading arrangements between the two countries more efficient.
During the meeting, the two chambers agreed that cross-border trade between Angola and Namibia needed significant improvement, especially the level of efficiency in moving goods from one country to the other. It was noted that the process of clearing goods at the borders on both sides needed to be accelerated so that the turnaround time for trucks carrying goods from Namibia into Angola and vice versa is reduced to competitive levels.
The two chambers therefore agreed to engage stakeholders to identify bottlenecks in the customs clearing processes and reduce unnecessary bureaucracy, which delay the export of goods between the two countries. NCCI and CCIA will engage the governments of Namibia and Angola, respectively, to address bureaucratic hurdles hampering cross-border trade between the two countries.
The meeting commended the central banks of Angola and Namibia for signing a currency exchange agreement, which allows the Angolan Kwanza to be accepted by Namibian banks at Oshikango and the Namibia Dollar to be accepted by Angolan banks at Santa Clara. This agreement, which is expected to be implemented in March 2015, will be very crucial in the facilitation of trade between Namibia and Angola through the Oshikango/Santa Clara border post.
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Tanzania’s exports to India increase by 70pc
Tanzania’s exports to India increased by about 70 per cent last year as the two countries amplify efforts to boost their bilateral trade relations, it was revealed yesterday.
Tanzania exported goods worth $1.3 billion (Sh2 trillion) to the world’s tenth-largest economy – by nominal gross domestic product – last year from $752.2 (Sh1.2 trillion) exported the previous year, the Indian High Commissioner said in Dar es Salaam. “This is the first time that Tanzania’s exports have shown an impressive growth,” Mr Debnath Shaw as he addressed a high level business delegation from Federation of Gujarat Industries, Vodadara and Gurarat.
The growth, according to the Indian diplomat, stems from efforts such as organising seminars, exhibitions and business visits between governments and members of the private sector from the two countries. The High Commissioner of India to Tanzania, Debnath Shaw described the performance as a huge achievement, given the country has not recorded such export volume to India before.
He said there have been a lot of positive trends in trade ties between the two countries during the past two years of his term as Indian Ambassador to East Africa’s second largest economy. “When I came, the volume of trade between the two counties was $1.5 billion (Sh2.7 trillion). But, the figure has more than doubled to $4 billion (Sh7.2 trillion),” he said, noting that the data are from Tanzania Revenue Authority (TRA).
Last year, the volume stood at $3.7 billion (Sh6.7 trillion) of which imports were about $2.5 billion. He was optimistic that in the next two and a half years, trade volume between the two will hit the $5 billion (Sh9 trillion) mark. The High Commission of India and the Tanzania Chamber of Commerce Industry and Agriculture (TCCIA) hosted the 15 companies from Gujarat, under the event dubbed ‘Seminar-cumB2B meeting’.
TCCIA Dar es Salaam region chairman, Francis Lukwaro said it was the duty of the chamber to connect and give opportunities to its members so they can learn what it takes to do business or get into joint ventures with their Indian counterparts. “I call upon Tanzanians to make use of this opportunity. The chamber is also ready to connect some delegates to institutions like power utility and road agency,” explained Mr Lukwaro.
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Nigeria will call emergency OPEC meeting if oil rout continues
Nigeria will call an extraordinary meeting of OPEC if crude oil prices slip any further, the country's oil minister said in an interview with the Financial Times, in a sign of growing alarm over the impact of oil's collapse on oil-producing economies.
"We're already talking with member countries," said Diezani Alison-Madueke in the interview published on Monday. As OPEC president, she is responsible for liaising with member countries and the producer group's secretary-general in the event of an emergency meeting. If the price "slips any further it is highly likely that I will have to call an extraordinary meeting of OPEC in the next six weeks or so", she said.
Almost all OPEC countries, except perhaps the Arab bloc, are "very uncomfortable," she said. The comments are the first public sign of the deepening unease about the oil crisis since Venezuela and Iran last month pushed for the cartel to cut output in a bid to reverse the more than 50-percent drop in prices since June last year.
In November, the 12-member group chose to hold production at 30 million barrels a day. The next official meeting is scheduled for June. Global benchmark Brent oil prices briefly rose by more than $1 a barrel on the comments, reversing earlier losses, but quickly sank again as dealers doubted whether there was any scope for rapid action given core Gulf OPEC members led by Saudi Arabia have given no sign they are ready to curb production.
Nigeria "obviously needs more money for its oil, but if the Saudis, who control one third of OPEC production, do not go along, what can it do?" said James L. Williams, energy economist at WTRG Economics in London, Arkansas.
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Swaziland SACU woes: Reduced foreign reserves, capital projects
THE unpredictable Southern African Customs Union (SACU) receipts in the country will have a negative impact on the country’s foreign reserves.
Southern African Research Foundation for Economic Development (SARFED) Regional coordinator George Choongwa said the fiscal situation of the country was unpredictable mainly because of the continuous decline in SACU receipts and other external forces.
He said this would have an indirect impact on the socioeconomic status of an average Swazi with high cost of living due to reduced level of incentives such as subsidies in concurrence of the projected two years economic downturn. “The long term expected impact would be a reduction in capital projects and reduced foreign reserves which would negatively affect the government spending. “Adding, the degree of indicator predictability perpetrates that since the decline in revenue due to 2011 economic crisis, government has engaged several provisions that have continued to mitigate the impact,” he said when commenting on His Majesty King Mswati III’s speech he delivered during the official opening of the second session of the 10th parliament.
Meanwhile, the King said the highly unpredictable SACU revenues remained one of the biggest challenges in the country. He said SACU receipts continued to present a critical challenge to the country’s fiscal sustainability and this would remain one of the biggest challenges of the times. The King said the solution was to save for rainy days during good years whilst carefully investing in critical infrastructure projects. He said this would be critical for growing the economy and diversifying Swaziland’s revenue base.
“The nation is aware that we are still faced with a risk of declining SACU revenues over the next two years, at the very least. “This would require us to invoke all the lessons we learnt in the past financial crisis. “Greater fiscal discipline will also be needed, both in the way resources are allocated and utilised,” he said.
He said they were pleased that this was what government has been doing since the fiscal crisis that ended in 2011. The King said government has progressively increased the country’s reserves to around four months of imports from two months in March, 2012. On another note, Choongwa said Swaziland has introduced several revenue incentives of which have simulated a positive indication of improved average social status and national performance. These were; improved government accountability for service delivery and cost-effective socioeconomic monitoring system, increased consumer purchasing power parity, improved standard of living and reduced cost of living.
However, he said government would have to intensify on public information sharing platform and establish systems such as boarder trade aided system in order to reduce social costs like tax inversion and tax non-compliance.
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South Africa alleges “inconsistent” citrus inspections in Southern Europe
South African delegates will soon be touring several European nations in a bid to clarify citrus black spot (CBS) inspection procedures, which are estimated to be squeezing more than ZAR1 billion (US$86 million) out of the industry each year in associated spraying, market access and fruit deviation costs.
During a CBS briefing at Fruit Logistica in Berlin last week, the Citrus Growers Association of Southern Africa’s (CGA) special envoy for market access Deon Joubert said the group had obtained documents showing Spain had tested fruit without symptoms this past season.
“As long as South Africa is dealt the same hand as anybody else then there’s no problem, but we know the other importing countries didn’t have this kind of focus on asymptomatic fruit,” the former Capespan exec told the crowd gathered at the South African stand. “We have official documentation from Spain that says that every South African container will be technically tested for CBS, and that’s inconsistent. “We have had imports cleared of CBS on the border, sold, eaten, finished and then we have two or three weeks later a report of a CBS strike, which is inconsistent with the normal procedure.”
Exporters have seen varied detection rates for the disease in the old continent, with a dramatic reduction in interceptions in the Netherlands where similar volumes were able to move through, contrasted with a sharp uptick in strikes from the Mediterranean.
Drawing up an inspection direction
Joubert, along with South African experts and officials, have sought to harmonize inspection practices in a bid to remove these discrepancies. The envoy noted a very productive visit to Dutch and German laboratories in August where the industry was assured it could be confident in handling and testing methods. “Theoretically on those [labs] we don’t have any problems. We had four [interceptions] in Germany, five in Holland, one in the U.K., no issue,” he said, adding the total number of interceptions was 28 but the figure was being challenged.
“The concern is to the south. We had what was a very low two [interceptions] go to 18….the problem is in Spain. We had 401 consignments, and we had 10 interceptions.” “Although the legislation on access and trade is harmonized in Europe, the inspection services are the national authority’s responsibility. So each country can principally interpret and report as they want.” While changing legislation would be a challenge, the South Africans are doing what they can to standardize procedures on a practical level. Joubert himself plans to visit the inspection services of Spain and Italy at the end of the month to try to reach an agreement.
“We seem to be quite near to agreement in the northern part of Europe,” he said. Additionally, he said the EU’s Directorate General for Health and Food Safety (DGSANCO) would be arranging an expert visit with South Africa’s Department of Agriculture, Forestry and Fisheries (DAFF) to Spain, Italy, Portugal, England and France. “Then the issue is for South Africa to improve or rectify its performance, we need to know as much as we can from what happened in each individual case.” The industry representative clarified that no decision had yet been made by South Africa to avoid Mediterranean import markets.
“It will not be our recommendation, unless we find it extremely difficult or highly risky to the entire campaign in the middle of June if we have the inconsistent application of rules which will bring a spate of CBS interceptions based on dead genetic material.”
The feasibility of viability
While the CGA accepts that the EU has a different scientific opinion on the risk of CBS infection, it is holding the authorities to account for the consequences of their view. The core issue revolves around “viability”, which Joubert explained to www.freshfruitportal.com prior to the briefing. “For Europe to be consistent in terms of their thought process, at least for them to have infection possible you must have something that can infect, so you have to have something that is viable and alive. “So we’ve said, ‘test the product for viability this year’. If you get an interception, cut the lesion out and grow a live culture. If you can grow a fungus, then at least we would know that theoretically there is something to start the process with.”
He told participants at the briefing that after adopting this method, authorities were only able to find one viable culture out of 28 CBS interceptions, with the fruit in question detected in Nancy, France. “Our argument is that because of the sprays and the inspection, and the fact we’ve got an ethephon test for viability at the packhouse level, we’ve reduced CBS symptoms dramatically,” “If you have traces of CBS on arrival here, that’s fine in the sense of a viable culture. That’s the principle that DGSANCO accepted, but it’s not applied as such,” he said during the briefing. “The solution at the moment seems to be to get an agreement on a national level for 2015 that the individual inspection services of the member countries will report CBS on finding a viable organism.”
And then there’s Russia
South Africa’s inspection circumstances in Europe have been compounded by the Russian ban on EU fruit, as rejected fruit can no longer just be sent to St Petersburg as an alternative option. “What we’ve found is that if they’ve exported to Europe and the authorities would stop the export due to say symptoms of CBS, then you’ve got a problem because principally it’s imported,” Joubert said. “Then you have to re-export and you can’t do that with European product. So it loses nationality in that moment. “I’d say we’d do 12-15% with Russia so the majority would be set up to go to Russia directly in any case. But that option if something goes wrong to then send to Russia has been jeopardized.”
He said the drop in the ruble has not only had an impact on exporter returns in the Russian market, but the overal negative state of the economy has also led to heightened levels of non-payment. “Even though the fall happened after the product was received, it had a massive effect on the negativity of the payments. “It always takes 10-16 weeks after export that you usually get paid. The Russian shipments are late, towards the end of the season, so it had a profound effect on the payment. “There are a lot of guys who have not yet received their payment, so that effect has been severe.”
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Status of Elimination of Non Tariff Barriers in the EAC
This publication highlights what the East African Community has achieved in redressing Non Tariff Barriers in the second quarter of the financial year 2014/2015.
It is aimed at galvanizing more support for the removal of Non Tariff Barriers which continue to hinder full achievement of the objectives of the East African Community Customs Union and Common Market.
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Uganda scraps work permits and visa fees for Kenyans, Rwandans
Uganda has scrapped work permit fees and visa requirements for Kenyans and Rwandans entering and leaving the country.
The decision is in line with the ongoing implementation of the “free movement” system under the East African Community Common Market Protocol that was signed in 2009 by presidents Museveni (Uganda), Mwai Kibaki (Kenya), Jakaya Kikwete (Tanzania), Paul Kagame (Rwanda) and Pierre Nkurunziza of Burundi.
The commissioner for Immigration Control in the Ministry of Internal Affairs, Mr Anthony Namara, told Saturday Monitor on Thursday that nationals of the two countries will also not be required to produce visas or other travel documents to enter Uganda except their respective national Identity Cards.
He said Kenya and Rwanda are already implementing the “free travel” system, which is intended to promote tourism in the region and also allow free movement of professionals across the three countries.
“We are yet to agree on the category of people who can move freely. At first, we had said we will allow managers, professionals, artisans and people in related fields but we want to subdivide these categories; for example which specific kind of manager can move,” Mr Namara noted.
Tanzania and Burundi are not catered for in this arrangement of work permits and visa requirements. In September last year, East African professional bodies signed agreements allowing the movement of select professionals such as engineers, accountants and architects in any of the five countries.
Attempts to reach Kenyan authorities were futile by press time. But the Rwandan ambassador to Uganda, Maj. Gen Frank Mugambage, commended the development and said his country had done it earlier.
Mr Namara urged Ugandans to use their national identity cards or voter cards to cross into Kenya or Rwanda.
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Egypt: Going for roubles
Experts have praised an agreement to use national currencies in future bilateral trade between Cairo and Moscow instead of the US dollar that was taken during Russian President Vladimir Putin’s visit to Egypt last week.
The two countries also discussed a free-trade agreement between Egypt and the Eurasian Economic Union led by Russia, as well as Russia’s supplying Egypt with more natural gas.
By replacing the dollar with the Egyptian pound and the Russian rouble for settling accounts in bilateral trade, the decision is seen as a way of boosting the volume of trade and reducing dependency on the dollar in trade agreements, something that had previously contributed to the weakening of both currencies on the exchange markets.
This is not the first time Russia has sought to reduce the influence of the US dollar on its currency. At the end of last year, an agreement with China resulted in both countries switching to domestic currencies in trading. Officials from Egypt and Russia are still discussing the mechanisms by which bilateral trade can be conducted in local currencies. The countries aim to double their mutual trade exchanges to reach $10 billion in five years. In 2014, bilateral trade was $4.5 billion, an 80 per cent increase compared to the previous year.
“Both sides will benefit from direct payments and will not have to worry about charges for the conversion of currencies,” said Salama Al-Khouli, an economist at the National Bank of Egypt, adding that the move would ease the burden on Egypt’s foreign currency reserves. Al-Khouli said that the decision to use national currencies did not necessarily mean paying for goods and services in money and that a kind of barter system was more likely to take place.
It would mean that the Egyptian government and companies would be able to import from Russia in exchange for the value of purchases of Egyptian products by the Russian government and businessmen, he explained. A special banking system needs to be created between the two countries as part of the agreement to make sure trade accounts are settled between the two sides.
According to Al-Khouli, special accounts can be opened in the banks of the two countries in order to settle debts without having to transfer money each time. He explained that through such an account a Russian company could deposit roubles for the value of products it purchased from an Egyptian company, and then the Russian bank concerned could wait until an Egyptian company bought products from a Russian company, and vice versa. Debts could be settled at the end of a scheduled waiting period, he added.
Putin told Al-Ahram daily last week that settling accounts by national currencies would also help create more favourable conditions for Russian citizens spending their holidays in Egypt. The depreciation of the Russian rouble against the dollar and euro has been discouraging Russian tourists from visiting Egypt.
After the agreement to use local currencies comes into effect, Russian tourists would be able to pay tour agents in roubles and not worry about changing exchange rates against the dollar. A third of all tourists visiting Egypt each year comes from Russia. Egypt received around 9.5 million tourists in 2014.
The method by which the currencies will be valued remains a topic of discussion between the central banks of Egypt and Russia. Once Egypt and Russia start trading in local currencies, the same method could be applied to other countries that have higher bilateral trade volumes with Cairo, like China, said Ahmed Sheiha, head of the Importers Division at the Cairo Chamber of Commerce and former head of the Egyptian-Russian Business Council.
This will lead to a significant reduction in the huge amount of payments in dollars for Egyptian imports, Sheiha said. “The dollar, consequently, will not be the main force moving our economy.” The trade balance between Egypt and Russia, currently tilted in favour of Russia at almost $4 billion against $500 million, is expected to become more balanced after the dollar is replaced with domestic currencies and the barter system.
However, obstacles still face Egyptian products when trying to enter Russian markets. “The customs authorities in Russia are valuing some Egyptian products at more than their real value and more customs duties are paid as a result,” said Mustafa Al-Naggari, head of the exports committee at the Egyptian Businessmen’s Association.
He added that the Russian customs authorities had been concerned that the bills of Egyptian products entering Russian markets were not accurate. “This is a problem that should end soon, as a Russian delegation will be visiting Egypt on 24 February to discuss ways to solve the matter,” Al-Naggari said.
He said that Egypt’s efforts to reach an agreement with the Eurasian Economic Union, which includes Russia, Belarus, Armenia and Kazakhstan, would make a huge difference to Egyptian exporters because entering the markets of these countries duty-free would give the Egyptian economy a boost driven by a quick rise in exports. However, this could take some time as the four countries are still studying benefits.
Al-Naggari said that Russian demand for Egyptian products would likely be limited primarily to goods that Russia has stopped importing from the EU in retaliation for the sanctions imposed by the latter following the crisis in Ukraine. “Agricultural goods and dairy products top the list,” he said.
Egypt relies heavily on Russian wheat to meet local demand, with almost 40 per cent of wheat consumed in Egypt coming from Russia. The agreement to pay in Egyptian pounds instead of dollars should ease pressures on the country’s hard currency reserves. Net international reserves stood at $15.4 billion at the end of January. Egypt and Russia will also cooperate in the area of energy, and discussions are underway for the construction of a nuclear power plant in Dabaa on the north coast.
The Ministry of Petroleum has announced that an agreement will be signed by the end of February with the Russian company Gazprom to provide Egypt with liquid natural gas over the next five years, with an average of seven shipments per year starting this year.
Neither the exact amount of gas in each shipment nor the total amount was specified.
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ECOWAS Community Development Programme to mobilize $21bn for projects
The ECOWAS Community Development Programme (CDP) is set to mobilize about $21 billion to enable them finance over 200 projects that cuts across various sectors of the economy in the West African sub-region.
The projects are part of a long-term development strategy to be implemented over a five-year period. Sectors to benefit from the projects include transport infrastructure, energy, agriculture, health, education development, capacity building among other areas.
Dr Guevera Yao, Coordinator of the ECOWAS-CDP made this known at a meeting of the Network of Economic Journalists in West Africa. The meeting brought journalists from 15 countries in the sub-region to review and validate the communication plan of an impending High level Conference and Roundtable to be held in Cote D’ Ivoire later this year. Dr Yao said the ECOWAS -CDP already has seven billion dollars in their coffers and need the 21 billion to enable them to holistically implement the five-year development plan.
He explained that the projects to be implemented are proposals brought to the CDP through a survey conducted among inter-governmental organizations, non-state actors and media networks. He further explained that if the ECOWAS CDP gets the needed funds to implement the projects it will enhance the overall economic development in the sub-region by increasing the Gross Domestic Products as well as reduce poverty.
Mrs Sena Siaw-Boateng, Director, Africa and Regional Integration Bureau at the Ministry of Foreign Affairs who chaired the meeting, earlier noted that the Network of Economic Journalists had an important role to play in the resource mobilization effort. While pledging government’s support for the meeting, she expressed believe that the meeting would be a success and urged the participants to develop a good action plan for the regional media network.
The ECOWAS CDP programme was formulated in 2008 to help with the vision of transforming the ECOWAS from an organization where heads of states meet to an organization where people or citizens play a vital role.
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Deputy Minister Masina lead business delegation to India, 23 to 27 Feb
The Deputy Minister of Trade and Industry, Mr Mzwandile Masina will lead a delegation of 25 South African business people to the sixth annual India Investment and Trade Initiative (ITI) taking place in Hyderabad and Kolkata, India from 23 – 27 February 2015.
The ITI is part of the Department of Trade and Industry’s (the dti) export and investment promotion strategy to focus on India as a high growth export market and foreign direct investment source.
Deputy Minister Masina says as a follow-up to the fifth ITI held in March 2014 , this ITI will target South African companies seeking to attract foreign direct investment and also project owners and managers seeking joint venture partnerships in agro-processing, cosmetics, pharmaceuticals, mining and mineral beneficiation, infrastructure, architecture and renewable energy sectors.
According to Masina, South Africa’s economic relations with India have flourished since the establishment of diplomatic relations in 1993. Closer economic ties are also fostered using initiatives such as the Joint Ministerial Commission and business engagements facilitated through the SA-India CEOs Forum.
“Beyond bilateral relations, South Africa and India remain committed partners and are determined to strengthen the South-South Cooperation in the context of IBSA (India, Brazil and South Africa) and BRICS. These forums are an undertaking by countries with shared interests in a multilateral system to address political, social and economic matters,” he adds.
Masina’s programme will include bilateral meetings with representatives of government and businesses. He will also conduct site visits to various industries in Hyderabad and Kolkata.
India ranks among the top 10 investing countries in South Africa. Between January 2009 and June 2014 a total of 44 Foreign Direct Investment projects from India were recorded. These projects represent a total capital investment of R18.25 billion which is an average investment of R414.76 million per project.
The total trade between India and South Africa was worth R80.9 billion in 2013 with a trade balance of R22.9 billion in favour of India.
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Worst food crisis since 1992 looms
The country could be facing a food crisis of a magnitude not experienced since the crop failures of 1992, when the government had to subsidise mealie meal for the poor, if the north-west Free State, North West Province and Mpumalanga do not get sustained rain of at least 20mm in the next fortnight.
Chief executive of Grain SA Jannie de Villiers said there was already “90 percent certainty” of a significant grain shortage, owing to extreme heat and low rainfall in those three areas recently. De Villiers said that by Thursday the government would announce the quantity of maize the country would harvest this season, but it was likely it would be significantly short of what is needed for domestic consumption.
De Villiers said the country had 2.6 million hectares of maize in the ground and, despite the fact that last year produced the second-highest yield on record, North West Province, the north-west Free State and Mpumalanga – the areas that produce the bulk of the country’s maize – had received no rain from mid-February and had experienced extremely high temperatures.
“One farmer told us that in the Free State area of Botha-ville there would normally be eight days in the year when the temperature was above 32ºC. Since the start of the year, there have already been 22 such days,” De Villiers said.
“Combined with the low rainfall, the extreme heat limits the ability of the mealie kernels to fill the cob, with a negative impact on the viability of the crop.” The chief executive said that, while exact figures were not yet available on what the shortfall in domestic maize produce would be, “South Africa needs 10.2 million tons to feed those who rely on maize as their staple diet”.
He said local shortages would also have an impact on neighbouring countries such as Botswana, Lesotho, Swaziland and Namibia, whose people also relied on the staple food. “The price of mealie meal has increased by around 50 percent, so the poorest of the poor are hard hit.
“They are paying far more than usual for the mealie pap that is their main food source.” De Villiers said the failure of the local maize crop was exacerbated by the fact that the developed world did not produce white mealie meal for human consumption, but only for animal feed, thus limiting import options.
However, he said it was still too early to declare a food security emergency.
"We are red-flagging the issue, but we will only know the true extent of the problem in six to eight weeks’ time. By the end of March, we will have a clearer idea of where we stand. “While the early plantings have had it, there is still young maize that might survive if we get adequate rain in the next few weeks.”
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Trade Volume and Economic Growth in the MENA Region: Goods or Services?
While the expanding importance of services in the economy has certainly been noticed, it is only recently that the international trade literature has started to study the linkages between trade in services and growth.
This paper explores the effects of trade in goods and trade in services on the economic performance of Middle East and North Africa (MENA) countries.
The study becomes even more important if we take into account how recent political uprisings in North African countries affected trade policies and consequently exports, imports and thus growth. In fact, in the wake of the so-called Arab uprising, several North-African economies have implemented different protectionist measures, especially Egypt, Tunisia and Morocco. For instance, according to the WTO, the Egyptian authorities initiated several anti-dumping investigations against China (on PVC floor) and India (on pens).
For this reason, serious efforts should be deployed in order to reduce both non-tariff and tariff barriers that hinder trade and growth within North African economies.
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Kenya ranked eighth largest global geothermal producer
The injection of additional 280 megawatts produced in Olkaria to the national grid in December has lifted Kenya’s global ranking as the eighth largest producer of geothermal energy, a new study shows.
The US remains the world’s top geothermal producer with an installed capacity of 3,389 MW – nearly six times Kenya’s output – followed by Philippines (1,894MW), Indonesia (1,333MW), Mexico (980MW) and Italy is fifth with 901MW of steam power. New Zealand is graded sixth with 895MW ahead of Iceland (664MW).
Rwandan president Paul Kagame and his host Uhuru Kenyatta on Thursday switched on the second phase of the Olkaria project, offering households and manufacturers hope for cheaper electricity as steam displaces costly thermal power. “Kenya has immense geothermal production potential,” said Albert Mugo, KenGen managing director. “Geothermal power has contributed to lowering the cost of doing business by displacing thermal power and adds to Kenya’s green energy initiatives,” Mr Mugo said.
The Olkaria geothermal power has pushed down fuel cost charge in electricity bills to an all-time low of Sh2.51 per kWh in February from a high of Sh7.22 per unit in August last year. Kenya has the potential to produce about 10,000 megawatts of geothermal power from the Rift Valley basin, studies by the Ministry of Energy show.
KenGen’s Sh118.7 billion ($1.3 billion) Olkaria project is billed Africa’s largest steam development, consisting of four power plants each generating 70MW. In comparison, Japan has 537MW of geothermal, Russia (97MW), China (27MW), France (15MW) while Germany has 13MW.
Geothermal now accounts for 29 per cent of Kenya’s energy mix, up from the previous 13 per cent four years ago. President Uhuru Kenyatta has lined up multiple geothermal projects and is banking on steam power to halve the cost of electricity to Sh9.54 (¢10.45) per kilowatt hour from the current average of Sh18.07 (¢19.78) per unit for domestic households.
State-funded Geothermal Development Company (GDC) has signed a deal with three independent power producers (IPPs) - Ormat Technologies, Quantum Power and Sosian Energy – who will each build a 35MW steam power plant under a build–own–operate (BOO) model. OrPower 4, Kenya’s sole IPP generating geothermal energy, is currently increasing its output by 24MW, which will bring its total capacity to 134MW.