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23rd AU Assembly: Decision on Post-2015 Development Agenda
The Assembly,
1. TAKES NOTE of the Report of Seventh Joint Annual Meeting of the African Union Conference of Ministers of Economy and Finance and Economic Commission for Africa Conference of African Ministers of Finance, Planning and Economic Development;
2. REQUESTS:
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Member States to ensure that the overarching goal of the Common African Position, which is to eradicate poverty in all its forms, is the key message in the intergovernmental negotiation process on the post-2015 development agenda, and to be vigilant about what Africa is negotiating;
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The Commission, in collaboration with partners, to carry out projections of financing needs for implementing the Post-2015 Development Agenda in Africa using sustainable finance including domestic resources.
3. CALLS UPON the secretariat of the High-level Committee, with the support of partners, to come up with an advocacy and negotiation strategy to build alliances in order to ensure that African priorities identified in the Common African Position are reflected in the global Post-2015 Development Agenda;
4. REQUESTS member States to enhance their statistical capacity to enable them to effectively monitor progress in the implementation of the Post-2015 Development Agenda, and CALLS UPON countries that have not signed and ratified the African Charter on Statistics to do so as expeditiously as possible;
5. CALLS UPON the Commission, in collaboration with the Economic Commission for Africa, the African Development Bank and the African Capacity-Building Foundation, to fast-track the establishment of the African Union Institute for Statistics and the African Statistics Training Centre, in accordance with the decision made by Heads of State and Government;
6. REQUESTS:
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the Commission, the Economic Commission for Africa, the African Development Bank and the United Nations Development Programme to facilitate regular expert dialogue between development planners and statisticians, with the purpose of embedding statistics in planning and management for results, so that Africa’s transformative Agenda is achieved;
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the Commission, the Economic Commission for Africa, the African Development Bank, the United Nations Development Programme and the regional economic communities, with the support of partners, to organize a high-level conference in 2014 to discuss the data revolution in Africa and its implications for the African Union’s Agenda 2063 and the Post-2015 Development Agenda.
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China issues white paper on foreign aid
China on Thursday issued its second white paper on foreign aid, elaborating how the nation helps other developing countries reduce poverty and improve livelihood without imposing political conditions.
The white paper, China’s Foreign Aid (2014), says as the world’s largest developing country, China appropriated 89.34 billion yuan (about 14 billion U.S. dollars) for foreign assistance through grant, interest-free loans and concessional loans from 2010 to 2012.
“When providing foreign assistance, China adheres to the principles of not imposing any political conditions, not interfering in the internal affairs of the recipient countries and fully respecting their right to independently choosing their own paths and models of development,” the document said.
China first began to provide foreign aid in 1950, when it provided material assistance to the Democratic People’s Republic of Korea and Vietnam, according to an earlier white paper on foreign aid issued in 2011.
Before the updates on foreign aid from 2010 to 2012, China had offered aid to 161 countries and more than 30 international and regional organizations, already providing 256.29 billion yuan in aid to foreign countries, data from the previous white paper showed.
From 2010 to 2012, over half of China’s foreign aid went to African nations, according to the new white paper.
During the period, China provided foreign assistance in forms such as undertaking complete projects, dispatching medical teams and volunteers, offering emergency humanitarian aid, and reducing or exempting the debts of the recipient countries.
Recipient countries of China’s foreign aid from 2010 to 2012 included 51 African nations, 30 Asian countries, nine in Oceania, 19 in Latin America and the Caribbean and 12 European countries.
Besides, China also provided assistance to regional organizations such as the African Union, according to the white paper.
“Developing countries, especially the least developed ones, are still confronted with the tough task of poverty reduction and development,” the white paper said.
The document called for the international community to mobilize more development resources to promote economic and social development of developing countries to eliminate poverty worldwide.
In total, China undertook the construction of 580 projects in 80 countries, including 80 hospitals, 85 schools and 156 economic infrastructure facilities.
Also, China relieved nine least developed countries and heavily indebted poor countries, namely, Tanzania, Zambia, Cameroon, Equatorial Guinea, Mali, Togo, Benin, Cote d’Ivoire and Sudan, from 16 mature interest-free loans totaling 1.42 billion yuan.
One of the important objectives of China’s foreign assistance is to support other developing countries to reduce poverty and improve the livelihood of their peoples.
China will respect and support developing countries’ exploration of development paths suited to their own national conditions and make concrete efforts to help other developing countries promote social and economic development, it noted.
The white paper vowed to continue increasing the input in foreign assistance, saying China is willing to work with the international community to make greater contribution to the development of mankind.
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Russia says BRICS Development Bank ready to launch
Leaders of the BRICS nations will launch their long-awaited development bank at a summit next week and decide whether the headquarters should be in Shanghai or New Delhi, Russian Finance Minister Anton Siluanov said Wednesday.
The creation by Brazil, Russia, India, China and South Africa of a $100 billion bank to finance infrastructure projects has been slow in coming, with disagreements over its funding, management and headquarters.
“The [headquarters] issue will be decided on the level of the heads of the countries,” Siluanov told journalists, adding that the choice is between China’s Shanghai and India’s New Delhi. BRICS leaders will meet July 15-16 in the Brazilian coastal city of Fortaleza.
The launch of the bank will be the group’s first major achievement after struggling to take coordinated action following an exodus of capital from emerging markets last year, triggered by the scaling back of U.S. monetary stimulus.
The new bank will symbolize the growing influence of the BRICS, something that Russia has hoped for after the West imposed sanctions on Moscow in the spring for annexing part of Ukraine and its continued involvement in the country’s crisis.
Capitalization of the new bank has been a major sticking point, but Siluanov confirmed that the funding would be divided equally, with an initial total of $10 billion in cash over seven years and $40 billion in guarantees.
The $50 billion will be eventually built up to $100 billion, and the bank will be able to start lending in 2016, he said.
The bank was first proposed in 2012. The proposal was approved last year at a BRICS summit in South Africa but failed to be launched during the meeting in Russia last autumn of the Group of 20 developed and developing nations.
The bank will be open to other countries that are United Nations members, but the BRICS share is never to decline below 55 percent, Siluanov said.
The chairmanship, with a term of five years, will rotate among the members, but the first chairmanship is yet to be decided, Siluanov said.
Framework Agreement on Currency Pool
The heads of the BRICS will also sign a blueprint agreement on the group’s other project – a $100 billion fund to steady the currency markets, which has also been off to a slow start.
The initiative became more acutely needed after an inflow of cheap dollars fueled a boom in the BRICS for a decade and then reversed to a sharp outflow last year.
“We have reached an agreement that, in current conditions of capital volatility, it is important for our countries to have this buffer in addition to the International Monetary Fund,” Siluanov said.
But the framework agreement to be signed in Brazil will not include any direct commitments, which are due to come later when the central banks sign agreements.
A senior Brazilian official who participates in the negotiations said the pool could become operational as soon as in 2015.
According to the agreement, the cash will continue to be held in the reserves of each BRICS country, but it can be transferred if needed to another member to soften volatility in its foreign exchange market.
China, holder of the world’s largest foreign exchange reserves, will contribute the bulk of the contingency currency pool, or $41 billion.
Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion.
“It is to be a mechanism that could react swiftly to capital outflow by offering swap operations... in dollars,” Siluanov said.
If a need arises, China will be eligible to ask for half of its contribution, South Africa for double and the remaining countries the amount they put in.
“Some countries may put in less, but their needs are also greater, proportionally,” Siluanov said.
A BRICS member would be able to immediately get 30 percent of its eligible share and the remaining 70 percent only with a stabilization program from the IMF, Siluanov said.
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Promote economic diplomacy
The successful implementation of the policy on economic diplomacy demands a critical analysis and deep understanding of the dynamics of international trade and commerce, says President Hifikepunye Pohamba.
Pohamba made the statement when he officially opened the 7th five-day Heads of Mission Conference currently underway in Swakopmund.
The conference, which is being attended by Namibian diplomats, consuls and former diplomats, has the theme “Enhancing Economic Diplomacy in Pursuance of Namibia’s Foreign Policy.”
Currently Namibia has 28 diplomatic missions abroad and is represented by 34 honorary consuls in various countries.
The aim of the conference is to give heads of mission an opportunity to review the implementation of Namibia’s foreign policy and adopt other policy documents that will further enhance efficiency of foreign services.
The missions are mandated to protect the interests of Namibia abroad and negotiate various agreements and memoranda of understanding with governments or organizations to which they are accredited.
They promote friendly relations between Namibia and host countries and market Namibian products, while promoting trade and investment.
The conference will devise ways to effectively market Namibia as an investment and tourism destination and align the missions’ activities with the objectives of the 4th National Development Plan.
Pohamba said it is required that diplomats and relevant government officials and agents work together to continue identifying economic sectors where Namibia has the most competitive and comparative advantages and also to focus on attracting investors.
“It should be noted that the pursuit of economic diplomacy entails strengthening south-south cooperation and regional economic integration, boosting intra-African trade and learning from developing countries that have managed to industrialise their economies – as well as to create employment and reduce poverty,” the president explained.
He added that in order for Namibia to succeed, the country should establish strategic partnerships that will enable the country to achieve its national goals as encapsulated in the national development plans and Vision 2030.
“In addition to the focus on traditional sectors of the economy such as mining, fishing and agriculture more efforts should be orientated towards taking advantage of the opportunities in new industries such as information communication technology, logistics and the service sectors. For instance, more should be done to market the immense potential of the West Coast Cable System that has a landing point here in Swakopmund. This infrastructure should be marketed as one of Namibia’s strong points in the area of ICT competitiveness. It is therefore important that we do more to focus on the industries of the future,” Pohamba said.
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Trade facilitation crucial for Africa
In the 1960s, there were high hopes for the development of the newly independent Sub-Saharan African countries.
However, these hopes were quickly dashed following a series of shocks which began in the mid-70s, with the first oil price spikes, followed by a severe decline in GDP growth and increase in poverty in the 80s and early 90s.
However, by the mid-1990s, economic growth had resumed in certain African countries.
Economic reform, better macroeconomic management, donor resources and a sharp rise in commodity prices were having a positive effect.
In the 2000s, many African countries witnessed high economic growth performance and during that period some of the world’s fastest growing economies were in Sub-Saharan Africa.
Angola, Nigeria, Chad, Mozambique and Rwanda all recorded annual GDP growth of over 7 per cent.
In 2012 Africa’s exports and imports totalled $630 billion.
And the long term prospects for growth are good.
The Economist Intelligence Unit has forecast average growth for the regional economy of around five per cent a year from 2013-16.
Despite all this, the continent still plays a marginal role in the global market, accounting for barely three per cent of world trade.
One significant reason – though of course there will be others – is that African economies are still narrowly based on the production and export of unprocessed agricultural products, minerals and crude oil. Now, due to relatively low productivity and technology, these economies have low competitiveness in global markets – apart from crude extractive products.
The low productivity of traditional agriculture and the informal activities continue to absorb more than 80 per cent of the labour force.
And growth remains highly vulnerable to external shocks.
So, overall you could say it is a mixed picture. But I think this story of half a century of struggle, set-backs and progress shows two things:
One – the road to meaningful and inclusive development still seems long.
Two – we are in a better position than ever to make real, sustainable progress. So we must make the most of this opportunity.
I think there are a number of essential steps to take:
- the diversification of economic structure, namely of production and exports;
- the enhancement of export competitiveness;
- technological upgrading;
- the improvement of the productivity of all resources, including labour; and
- the reduction of infrastructure gaps.
Only by delivering in these and other areas can policy makers ensure that growth enhances human well-being and contributes to inclusive development.
But how can we take these steps?
Well, I’m sure it won’t surprise you if I say that I think trade can play a vital role.
And it is worth noting here that the Trade Facilitation Agreement broke new ground for developing and least-developed countries in the way it will be implemented. For the first time in WTO history, implementation of an agreement is directly linked to the capacity of the country to do so.
Previously it was more about giving a few more years – so developed countries implement an agreement immediately and least-developed and developing countries just get a few more years.
Nobody ever talked about whether, when the deadline came, those countries would have the capacity to implement the provisions that were agreed.
So now, and for the first time, we have more than that – we are taking of a more dynamic approach.
Under the Trade Facilitation Agreement, not only does a country have to have the capacity before being required to implement the provisions, but technical assistance and support must be provided to help them achieve that capacity.
Moreover, developing and least-developed countries can determine for themselves when they have the capacity to implement each of the trade facilitation measures of the Agreement.
This has never happened before and it did not happen by accident. Members made the decision together. Africa was a big part of that.
Clearly a central element of implementing the Agreement will be ensuring that the assistance, that developing and least-developed countries need, will be available.
A great deal of very welcome work has already been done. But from my consultations with members, including the coordinators of the African Group, the Africa, Caribbean, Pacific Group and the LDC Group, I know that some real concerns remain on how easy, affordable and accessible the technical assistance will actually be.
We have been working very hard to address these issues and ensure the provision of technical assistance to everyone, without exceptions.
Roberto Azevêdo is World Trade Organisation Director General. This article is extract of a speech he delivered during the African Union Forum on Industrialization and Inclusive Development in Africa on 1 July 2014. Click here to read the full speech.
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Value-addition can make Namibia richer – Schlettwein
Namibia’s economic growth is largely dependent on investments in the primary sector (raw materials), specifically in mining; a trend that must change to focus on the secondary sector (production), if the country is to see more wealth.
This was said by the Minister of Trade and Industry, Calle Schlettwein, at a dinner hosted by the Walvis Bay branch of the Namibia Chamber of Commerce and Industry on Monday.
He said Namibia inherited a skewed economy that “leaned” on the primary sector, because prior to independence, the country had no economic contact with the global market.
The new government however attempted to break that isolation and join the global economy through a variety of partnerships and policies that opened doors for trade between Namibia and global economies including the European Union and Asia.
“Namibia is at the bottom of the global value chain because it exports valuable raw materials and then it imports the value-added products from its own raw materials,” said Schlettwein.
He said Namibia’s economy has grown steadily since independence but the growth did not create enough local wealth; nor did it distribute industry evenly across the country. People leave their homes to find wealth through employment in industrial centres. Most of this time, this hope is shattered as they get no jobs, thereby being left poorer.
“This skewness brings about a perpetual poverty,” he said.
He said Namibia is endowed with valuable resources, and value-addition to these resources was the key to creating jobs and wealth, and do away with skewed wealth distribution.
According to Schlettwein, had Namibia kept all the earnings from its diamonds, which have been mined in the country for the past 120 years, “we all would be very wealthy... which we are not”.
He said Namibia’s earnings was a “tiny fraction” of what it could be and the answer to this is value addition. “We need to use our raw materials in a value-chain environment,” he said. “Without value addition in the economy, we will not become wealthy at industrial level.”
Schlettwein believes the involvement of SMEs in the economy is also important for wealth creation and distribution.
“Investment by multi-nationals is good for economic development; but not for wealth creation. Only investment in SMEs will bring wealth,” he said.
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One thing leads to another
How can Sub-Saharan African countries make the most of the commodity price boom to promote sustainable development?
In the context of the opportunities opened up by the boom in commodities prices, how can sub-Saharan Africa (SSA) ensure that the benefits are widely spread and inclusive whilst promoting sustainable development and protecting economies against the volatility of commodity prices?
Commodity prices boomed in 2002, and despite a sharp fall in 2008 they rebounded in early 2013 and are likely to continue through 2014-2015. In fact trends indicate that prices are likely to remain robust for some years, albeit with considerable price volatility. This robust price scenario arises from a combination of rising demand from emerging powers (such as, but not only, China) and limits to low-cost supply.
The limits to low cost-supply are attributable to a combination of factors. In agricultural commodities, climate variation (as much as climate change), a shortage of water and declining productivity rates are all barriers to increased low-cost production. In minerals, oil and gas, outside of the United States (US), low-cost deposits have already been exploited, and poor infrastructure adds to the costs of extraction and export. But, sustainability also has to be understood in relation to the social licence to operate. Are benefits of resource exploitation spread widely enough to legitimise the sustained exploitation of resources? Thus, the social and economic outcomes of commodity production are not only an objective for policymakers, but also a determinant of sustainable production.
Three factors frame the development of the resource sector in Africa. First, Africa is the new frontier for commodity production. As the CEO of Glencore (the world’s leading commodity-trader-producer) remarked prior to its public flotation in 2011, “Unfortunately, God put the minerals in different parts of the world. We took the nice, simple, easy stuff first from Australia, we took it from the United States, we went to South America and we dug it out of the ground there. Now we have to go to more remote [and unstable] places [in Africa].” Secondly, despite rapid economic growth (six of the ten most rapidly growing economies over the past decade have been in Africa), much of Africa’s population has been excluded from the development process. The number of people living below $1 per day increased from 224 million in 1990 to 355 million in 2008. Thirdly, Africa’s industrial base, infrastructure provision and modern service sectors are weak. Africa’s share of global manufacturing is about 1 percent and has been declining since the 1980s.
One key contributor in meeting the objective of linking the commodities boom to development is the promotion of linkages between the commodities sector and domestic industrial and service sectors. Traditionally, this policy agenda has tended to be confined to the development of downstream forward linkages, processing and then beneficiating the commodities once they have been extracted. However, these are not the only types of linkages that can be developed. There are manifold opportunities for the development of upstream backward linkages, feeding inputs into the resource sector. Moreover, beyond the first stages of backward and forward linkages, there is also scope for the development of horizontal linkages which feed inputs into other sectors (for example, basic metal fabrication industries). While initially directly linked to the resource sector, these horizontal linkages potentially have application in other sectors.
There is a widespread belief in policy circles that these production linkages are weak and hold little potential in the future, in part because of the enclave mentality of major resource-producing firms. The tendency of resource-producing firms to act in isolation from the rest of the economy may have been a historical reality. But, the modern firm increasingly seeks to concentrate on its core competences and to outsource everything else to other firms. If these other firms are proximate to resource extraction and can provide low-cost and quality inputs reliably, or process commodities effectively, this is in the direct interest of the resource-extracting firm. Thus, far from the lead commodity firms obstructing local linkage development, it is now increasingly one of their primary objectives.
Not much is known about the extent and determinants of these linkages into and out of the resource sector in SSA. For this reason, a group of 15 researchers, largely of African origin, devoted 2 years to an analysis of linkage development in 8 economies – Angola, Botswana, Gabon, Ghana, Nigeria, South Africa, Tanzania and Zambia. They examined a variety of sectors, including oil pipelines, oil services, diamonds, copper, timber, gold, mining equipment, construction and infrastructure.
Linking commodity boom to development
One of their most important findings was a surprising degree of linkage development in each of these economies, and that the market played an important role in diffusion. Lead resource companies are increasingly happy to outsource non-core activities (see Figure below). These linkage developments include the well-developed mining equipment supply industry in South Africa, knowledge-intensive indigenously-owned supplier firms in Nigeria, undersea-pipeline fabrication in Angola and diamond cutting and polishing firms in Botswana. Although each commodity has specific production characteristics, and each economy has specific capabilities, five common factors were identified by the researchers as having a bearing on the promotion of a sustainable pattern of development in the resource sector.
The first was the growth in outsourcing by the lead commodity-producing firms. In most cases, this was spurred by their desire to focus on their core competences and, in other cases, by the promotion of corporate social responsibility (CSR) programmes. In other cases, government policies designed to promote linkages reinforced the commitment of lead commodity producers to local outsourcing.
The second factor affecting the promotion of linkages was the ownership of both the lead commodity firms and their first-tier suppliers and customers. The research uncovered no general trend to reinforce the conclusion that foreign-owned firms were more or less likely to promote linkages. But, they did find important variations in the behaviour of different nationality foreign firms (particularly Chinese firms), different types of foreign firms (for example, state-owned Chinese firms operated differently than privately owned Chinese firms), and individual firms pursuing different strategies in the same sector (this was an important factor in the Angolan oil industry).
Third, the development of linkages was influenced by the quality and availability of infrastructure. Infrastructure is a pervasive problem. The African Development Bank estimates Africa will require more than $90 billion in investment in infrastructure per year to make up its infrastructure deficit. In some cases, the weakness of infrastructure promotes local sourcing (since imports are both expensive and face delays in reaching users). But, more often poor infrastructure proved to be an obstacle to linkage development, constraining the development of local suppliers.
Fourth, skill deficits and weaknesses in the national systems of innovation (NIS) – the educational and research establishments supporting the resource, industrial and service sectors – constrained linkage development. The skills gap was ubiquitous and a continuous concern to all firms in the commodity value chains. The constraints imposed by the NIS become more important as linkages develop and become more sophisticated.
Fifth, effective policy design and implementation has the capacity to speed up and deepen linkages into and out of the commodities sector. By the same token, however, poorly designed and delivered policy has acted to slow down and to reduce the depth of linkages to the local economy.
An effective policy framework is the key
Of these five factors, perhaps the most important determining factor in the development of local linkages was found to be the policy framework. An effective policy environment clearly acts to promote linkage development. Botswana has a focused vision that guides the development of downstream linkages. By contrast, in other environments, such as Tanzania, the absence of a clear vision, the contradictory nature of individual policies and weaknesses in policy implementation all acted to hinder linkage development. There is a widespread tendency for governments to confuse linkage development with the indigenization of ownership (since not all local firms are owned by citizens).
Emerging from all the individual country studies is the need to decompose the “policy challenge” into a series of discrete steps: the development of a coherent vision; the introduction of specific policies that contain both positive incentives (carrots) and negative incentives ( sticks); efforts to ensure that individual policies are “joined up” and supportive rather than being mutually exclusive; and measures to attune policies to the capabilities of the state. It is also critical for the state to have the integrity and will to implement its stated vision.
Finally, and perhaps least recognized, the policy challenge is not confronting only governments. The same problems (vision, incentives, joined up policies, capabilities and integrity and will) are evidenced in the private sector. Almost all the lead firms failed to “walk the talk” in the promotion of local linkages. This is not because management is deliberately disingenuous. It is because, for firms in all countries and all sectors, the deployment of corporate strategy is filled with pitfalls. Based on these failures in both the state and the private sectors, the researchers concluded that there is an urgent need for the state and the private sector to align their efforts in linkage development and together to focus on what is required to achieve win-win outcomes in promoting value-chain efficiency in the resource sector.
Conclusion
While the commodity price boom has the potential to force SSA back into conflict and resource dependency, it also has the potential to promote more sustainable patterns of development. Neither outcome is pre-ordained; each is the consequence of how governments and lead commodity firms react to the boom. What is required to make the most of commodities in Africa is for governments and firms to act in concert.
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‘Time is not on our side’, says Ban, hailing new report on curbing carbon emissions
Secretary-General Ban Ki-moon, introducing a new United Nations-backed report outlining pathways major industrial economies can use to cut their carbon emissions by mid-century, called today for broad cooperation and “bold” action or the world will face dangerous and irreversible climate disruption.
“We know that we are not on track, and time is not on our side,” Mr. Ban warned during a Headquarters press conference to launch the Deep Decarbonization Pathway Project report, produced by leading research institutes in 15 countries, is the first global cooperative program to identify practical pathways to a low-carbon economy by 2050.
The report compiled by the Sustainable Development Solutions Network, established by the UN chief in 2012, emphasizes three key pillars: energy efficiency, low-carbon electricity and fuel switching. It also outlines steps countries can take to meet internationally agreed target of limiting the increase in global mean surface temperature to less than 2 degrees Celsius.
“I expect countries to adopt different combinations according to their needs, resources and priorities. But all countries need to embark on the same journey,” said the Secretary-General, stressing that deep decarbonisation is feasible, but requires global commitment to advancing key low-carbon energy technologies.
He highlighted the importance of leaders from Governments, business, finance and civil society to come together at his climate summit in September and the Conference of Parties to the UN Framework Convention on Climate Change held three months later in Lima, Peru.
“By seeing what is possible, others can take inspiration and follow suit,” he said, adding that, media participation in getting the word out is critical, as is conducting workshops and roundtables around the world following the climate summit to foster discussions in every city and country.
“People need to understand why decarbonisation is necessary. They need to know it is possible. And they need to see that cutting emissions can benefit economics and people’s well-being,” he said.
The Project does exactly that by listening to feedback and continuing to refine its pathways, Mr. Ban said, calling it exactly the kind of problem-solving needed to tackle climate change and achieve sustainable development.
Also speaking at the press conference was Jeffrey Sachs, the Director of the Earth Institute at Columbia University and Laurence Tubiana, the French Ambassador for climate change.
Mr. Sachs said the report shows there is a path to climate safety and keeping global warming below 2 degrees Celsius limit “which researchers and scientists say we must respect.” What is concerning about the report is that “we are way off track and to get on track would require major cooperative efforts that are not currently in place,” he continued.
A “business as usual” path would be “an absolutely reckless and unforgivable gamble” to the planet and all people, he said. While there is an overarching responsibility for UN Member States, what each country will choose to do is different and based on history, structure, political attitudes and resources.
Ms. Tubiana called the report a “transformational milestone” for coordinated global action. “No country can afford to diverge,” she said, stressing the need for international cooperation, policy, economic signals, and sharing technology and research.
Cities must be organized to respond, she continued, emphasizing the need for a viable balance between energy conservation and energy efficiency. It would also be important to compare national progress between countries, as this will help them better understand relative experiences.
Diamond manufacturing reaches saturation
High labour costs in Botswana’s fledging diamond cutting and polishing companies is threatening the expansion of the industry, with government unlikely to issue more licences due to shortages of suitable supply.
Due to relatively higher labour costs in comparison with other cutting centres around the world, local firms can only viably cut larger stones, which are in limited supply in Botswana.
It is estimated that diamond cutting costs $12 to $25 per carat in India, $20 to $30 in China while in Botswana it costs between $60 and $65 per carat thereby forcing local manufacturers to cut only larger stones which have larger profitability margins.
In an interview with BusinessWeek, Diamond Hub coordinator of relocation and opportunities, Mmetla Masire said that due to shortage of larger stones that can sustain an expansion of the industry, the number of licenced diamond manufacturers is unlikely to increase.
“We have reached the optimal level of cutting and polishing companies given the available guaranteed supply. We currently have 31 cutting and polishing licences but only 21 are operational and these are the ones who are sightholders and have guaranteed supply.
“Botswana labour costs are higher than in some areas so it makes more economic sense to focus on larger stones. We can handle small stones just as well as we can handle big stones, it is just economics and profitability that determine the best stones to be processed in Botswana and which should be sent to other centers. If we have too many cutting and polishing companies without sufficient supply it will jeopardise the industry,” he said.
With production of an average of 22 million carats a year, Botswana is presently cutting and polishing less than two percent on its production locally, with some analysts querying why the allocation cannot be increased to grow the local cutting and polishing industry which presently employs about 3,500 people.
According to Statistics Botswana figures, in 2012 Botswana exported almost 21 million carats of rough diamonds and 257,000 carats of polished. This means Botswana processed roughly 1.2 percent of local production in the year.
“How is it that we are only processing 1-2 percent of our rough diamonds and yet you said we are reaching saturation,” questioned an observer within the industry.
However, Masire believes the figures on local beneficiation through cutting and polishing are much higher. According to Masire in 2013, De Beers diamond sales were about $5.8 Billion of which $ 812 million was supplied to the Botswana based cutting and polishing industry, which is about 13 percent of the total sales.
“This means about 13 percent of Diamonds sold by De Beers go to the Botswana cutting and polishing industry. Also, the point about currently having enough cutting and polishing is based on the fact that we have a 10-year agreement with De Beers and they have committed to supplying the local market a certain quantity. Until we negotiate more diamonds should we have additional supply from outside, it will not be easy to grow the cutting and polishing,” he said.
With cutting and polishing having reached saturation, Masire says that focus has turned to growing the jewellery industry, which can readily be supplied by the 21 cutting and polishing factories or be supplied by goods from outside the country. Only one company, Shrenuj has ventured into jewellery manufacturing in Botswana. “Whilst we are happy that beneficiation is moving in the right direction, we are disappointed that we have not been able to see the jewellery side grow as fast as we had expected. The returns of jewellery are higher and more profitable for the investor,” he said.
As part of a grand plan to transform Gaborone into a global diamond centre in the mould of Mumbai, Tel Aviv and Antwerp, government is pushing hard for Botswana to be involved in all diamond downstream activities.
The establishment of the Okavango diamond trading company is not only aimed at assessing the price development in the industry, but also building a platform for diamond trading in Gaborone outside of the De Beers channels.
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Statement by International Relations and Cooperation Minister Maite Nkoana-Mashabane on international developments, 08 July 2014
Good afternoon ladies and gentlemen of the media.
In this briefing today, we would like to share information with you regarding our work, including our preparations for the Sixth BRICS Summit; the outcomes of the Joint Ministerial Meeting of the SADC/ICGLR; and reflect on recent developments in Kenya and Somalia.
1. Preparation for the Sixth BRICS Summit
As we are about to leave for Brazil, forming part of His Excellency President Jacob Zuma’s delegation to the Sixth BRICS Summit, it is worth reminding members of the media and South Africans in general that South Africa joined BRICS with three objectives in mind, namely:
- to advance our national interests as outlined in the President’s recent State of the Nation Address;
- to promote our regional integration programme and related continental infrastructure programmes; and
- to partner with key players of the South on issues related to global governance and its reform.
The forthcoming Summit will be the first to be hosted in the second cycle of BRICS Summits and provides an opportune moment to reflect on the priority areas for cooperation. Since its first Summit in 2009, BRICS has consolidated its position as a positive force for the democratisation of international relations and for the enhancement of existing institutions of international governance. It has also forged an impressive partnership carrying out cooperation initiatives in more than 30 areas between its members.
It is worth noting that the South African Government has fully implemented the eThekwini Action Plan and will present a Hand-over report on sectoral cooperation during its tenure as BRICS Chairperson. The report highlights the progress made by South Africa during its tenure as Chair of BRICS in relation to the high-level meetings of BRICS Leaders chaired by President Jacob Zuma and Ministerial of BRICS Foreign Affairs Ministers which I chaired.
Other key BRICS Ministerial meetings hosted and chaired by South Africa include, inter alia, the BRICS National Security Advisors, Ministers responsible for Trade, Finance, Agriculture and Agrarian Affairs, Education, Health, Social Security, and Science, Technology and Innovation (STI).
During South Africa’s tenure as Chair, substantive progress was achieved in anchoring the new BRICS mechanisms that were launched at the Fifth BRICS Summit, i.e. the BRICS Business Council as well as the BRICS Think Tanks Council and reports will be submitted to the BRICS Leaders on the work undertaken by these structures.
Brazil as the host and incoming Chair has identified that the theme of the Summit will be ”BRICS: Inclusive growth, Sustainable solutions”.
Among other topics, the Leaders will discuss issues regarding global governance and peace and security as well as the Contingent Reserve Arrangement (CRA) and the receive reports on progress towards the establishment of the BIRCS led New Development Bank (NDB).
The CRA is an additional line of defence available to the BRICS countries in scenarios of Balance of Payments’ difficulties. The issue of the venue or domicile for the BRICS led Development Bank is on the agenda for discussion. The BRICS Leaders indicated at their last meeting held in St Petersburg in September 2013 on the margins of the G20 Summit that they expected tangible results by the time of this Summit. We are confident that the Leaders will not be disappointed. Our Finance Ministers will meet the day prior to the Summit to finalise recommendations to the Leaders in this regard. The Development bank will finance, amongst other things, infrastructure and sustainable development projects.
2. Joint SADC/ICGLR Ministerial Meeting
South Africa participated in the Joint SADC-ICGLR Ministers’ Meeting, which took place on 01-02 July 2014 in Luanda, Republic of Angola. The purpose of the Meeting was to consider the political and security situation in the Democratic Republic of Congo (DRC), especially in the eastern part of the country, following the defeat of the M23 and the beginning of a process of voluntary disarmament, demobilisation and reintegration by the Democratic Forces for the Liberation of Rwanda (FDLR).
The meeting forms part of a process agreed to during the first and historic Joint Summit of the SADC and ICGLR held in November 2013 in Pretoria, South Africa. The political and security situation in the eastern DRC is the principal reason why the SADC and ICGLR held their historic, first joint Summit in Pretoria, with a view to bring about long-lasting peace and stability in the DRC in particular and the Great Lakes Region in general.
The Ministerial Meeting in Angola made a number of recommendations to the Heads of State and Government of the SADC and ICGLR, which include the following, amongst others:
- Enhance the established mechanism for evaluation and implementation of DDRRR for those willing to disarm and be repatriated to Rwanda involving UN, AU, ICGLR, SADC, Rwanda and DRC;
- Voluntary surrender and disarmament which must be done within the timeframe of six months from 2nd July 2014 with verifiable review after three months;
- Demand the FDLR to fully surrender within the given timeframe and also making them aware of military consequences of failure to comply with the agreed timeframe.
South Africa welcomes the steps undertaken by the government of the DRC since the defeat of the M23 to implement the commitments it made since the signing of the Nairobi Declaration and Communiqué, to facilitate and to accelerate the definitive demobilisation of the M23, which includes urgently addressing the issue of amnesty and their eventual reintegration.
Developments in Kenya and Somalia
In conclusion, we would like to reflect on the recent developments in Kenya and Somalia.
A key component of South Africa’s foreign policy for Africa is support for the establishment of peace and political stability in order to create the foundations for democracy as a necessary prerequisite for sustainable social and economic development. The recent attacks in Kenya are therefore diametrically opposed to our vision and our efforts for peace and political stability in East Africa and the wider African community.
The Kenyan Government has shown renewed determination not to let terrorism deter them from having peace in their country, nor from supporting democracy, development, peace and security for their neighbourhood.
In this regard, the South African Government will continue to express its strong condemnation of all forms and manner of terrorism. Furthermore, we will continue to support the efforts of the Kenyan Government in promoting national harmony and national reconciliation, as South Africa is of the view that political stability, reconciliation, democracy, nation-building, good governance and socio-economic development are crucial to lasting peace in the East African region.
Regarding Somalia, over the last number of years South Africa has invested in efforts to support democracy and peace initiatives as well as post-conflict reconstruction and development in Somalia.
South Africa remains determined to work with our partners worldwide, and specifically in Africa, to improve our continent, to create a more peaceful, democratic, politically stable, well governed and economically vibrant place for all its people. In this regard South Africa will continue to support all efforts that enable Somalia to find lasting solutions to its many challenges through the provision of capacity- and institution building, socio-economic support, and specified training in key government sectors. Thank you
ISSUED BY THE DEPARTMENT OF INTERNATIONAL RELATIONS AND COOPERATION
OR Tambo Building
460 Soutpansberg Road
Rietondale
Pretoria
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Africa: World Bank Group sets historic new development financing record for region
The World Bank Group committed a record-breaking *$15.3 billion to Sub Saharan Africa’s development in fiscal year 2014 (July 2013 to June 2014) supporting shared prosperity in the Region and focusing on increased efforts to reduce poverty.
“Africa is making significant progress and at the World Bank we are stepping up the momentum to innovate and think big in order to help our clients achieve their development goals. We applaud the improved policies and prudent fiscal decisions many governments have made and we will continue to provide financing through loans and grants, technical expertise and to mobilize our unique convening power to leverage the resources of other development partners,” said Makhtar Diop, World Bank Vice President for the Africa Region.
The Bank Group continued its strong commitment to Africa delivering $10.6 billion in new lending for 160 projects this fiscal year (FY14). These commitments included a new record of $10.2 billion in zero-interest credits and grants from the International Development Association (IDA), the World Bank’s fund for the poorest countries. This is the highest level of IDA delivery by any region in the World Bank’s history.
Private Sector-Led Growth and Job Creation
IFC's work in the private sector in Africa during FY14 focused on bridging the infrastructure gap, promoting a productive real sector and leading inclusive business approaches to help drive growth and job creation. IFC investments on the continent amounted to over $4.2 billion, with over $3 billion committed in IDA countries and almost $800 million in fragile and conflict-affected states. IFC spent $55 million on Advisory Services programs in the region, 96 percent of which was distributed to IDA countries.
In FY 2014, MIGA issued guarantees of $515 million in support of projects in the oil and gas, power, services, and telecommunications sectors. The Agency also teamed up with the Overseas Private Investment Corporation to establish a $350-million political risk facility that will support planned investments in sustainable agribusiness in up to 13 countries throughout sub-Saharan Africa.
The Bank Group worked collaboratively to tackle development challenges and focused on regional projects in sustainable energy, irrigation, water management, and food security, and also on job training programs for youth, preventing malaria and other tropical diseases, and on social protection for poor families across the region.
Fragility and Emergency Action
In FY14, the Bank Group focused its efforts to act quickly and effectively in emergency situations across Africa. In response to the crisis in Central African Republic, the Bank delivered emergency development funds of over US$70 million to help restore key government services and to support food distribution and health services.
Major regional initiatives focused on the challenges of fragility and conflict. In November 2013, World Bank Group President Jim Yong Kim pledged $1.5 billion to boost economic growth and lift the people of Africa’s Sahel Region out of devastating poverty. Kim’s pledge came during an historic joint trip to the Sahel with UN Secretary-General Ban Ki-moon.
Boosting Energy
Sub-Saharan Africa is blessed with large hydropower resources that can create electricity, yet only 10% of its potential has been harnessed. Boosting access to affordable, reliable, and sustainable energy is a primary objective of the Bank’s work in Africa. During the fiscal year (FY14) projects focused on developing hydropower potential and providing new forms of sustainable power to increase energy production and benefit millions of Africans.
In a major push, IBRD, IFC, and MIGA combined forces under a joint Energy Business Plan for Nigeria. The plan will support Nigeria’s energy reform program and help increase installed generation capacity by about 1,000 MW while mobilizing nearly $1.7 billion of private sector financing for Africa’s largest economy. Many projects benefit from IBRD, IFC, and MIGA working together across the World Bank Group to better leverage their development impact in the region.
In FY14, the Bank also supported the 80-megawatt Regional Rusumo Falls Hydroelectric Project in Burundi, Rwanda, and Tanzania, and provided a $100-million grant to Burundi for the Jiji-Mulembwe hydropower project. Both initiatives will increase electricity generation capacity benefitting millions of Africans.
Improving Agricultural Productivity
The Bank supports country-led efforts to improve agricultural productivity by linking farmers to markets and reducing risk and vulnerability; increase rural employment; and make agriculture more environmentally sustainable. Projects during FY14 included support for improving pastoralism through community development and livelihoods in Ethiopia, boosting agribusiness in Senegal, and pushing the envelope on landscape management, notably in the Sahel.
Higher Education for Development
Higher education plays a key role in promoting economic growth and development especially for Africa’s fastest growing youth population. As one of the largest financiers of higher education in the region, the World Bank is mobilizing its knowledge and leadership behind countries to champion education. The World Bank’s new $150-million Africa Higher-Education Centers of Excellence project is funding 19 university-based centers for advanced education in West and Central Africa. It will support regional specialization among participating universities in mathematics, science, engineering and ICT to address regional challenges.
For more information about the World Bank Group's total support to developing countries in FY14 click here.
*Preliminary and unaudited numbers as of July 7
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Azevêdo welcomes launch of plurilateral environmental goods negotiations
Fourteen WTO members launched plurilateral negotia-tions for an Environmental Goods Agreement on 8 July 2014 at the WTO. These members said the talks will promote green growth and sustainable development while providing impetus for the conclusion of the Doha Round.
The participants said the talks are open to any WTO member and that the results will be applied in accordance with the most-favoured nation principle, under which WTO members should treat their trading partners in a non-discriminatory manner. Taking part are Australia, Canada, China, Chinese Taipei, Costa Rica, the European Union, Hong Kong China, Japan, New Zealand, Norway, Singapore, the Republic of Korea, Switzerland and the United States, which make up 86 per cent of global environmental goods trade.
“I am pleased that a group of WTO Members have begun negotiations to liberalize trade in environmental goods. I understand that the 14 WTO Members involved in these talks account for nearly 90 per cent of world trade in the environmental goods covered by the initiative so far,” said Director-General Roberto Azevêdo.
“Those involved made it clear that these negotiations on environmental goods are open to all WTO Members and that all Members would benefit from the tariff reductions that arise from any agreement. Above and beyond the economic benefits that enhanced trade in environmental goods will deliver, we remain conscious of the positive role that trade can play in environmental protection. The topic of environmental protection is of utmost importance in the WTO and the liberalization of environmental goods is also a significant element of negotiations under the Doha Development Agenda.”
The talks will build on a list of 54 environmental goods put together by the APEC countries – the Asia-Pacific Economic Cooperation forum – in 2012 to reduce import tariffs to 5 per cent or less by the end of 2015. These include wind turbines, air quality monitors and solar panels. Negotiators said that they will meet regularly to discuss substance and product coverage.
The first phase of the negotiations aims to eliminate tariffs or customs duties on a wide range of environmental goods. A second phase will address the bureaucratic or legal issues that could cause hindrances to trade – known as non-tariff barriers – and environmental services, negotiators said.
These talks take place while WTO members consult with each other on how best to advance the trade and environment talks so that agreement can be reached on a work programme for early conclusion of these negotiations. Efforts to agree such a programme are part of the broader task of agreeing by December 2014 on a work programme to conclude the entire Doha Round, which was launched in the Qatari capital in 2001. Ministers mandated the year-end completion of the Doha work programme at the December 2013 Bali Ministerial Conference.
Read the latest statement of the chairperson of the environment negotiations committee to the committee overseeing the Doha negotiations.
Joint Statement regarding the Launch of the Environmental Goods Agreement Negotiations
8 July 2014, Geneva, Switzerland
Earlier this year, the representatives of Australia; Canada; China; Costa Rica; the European Union; Hong Kong, China; Japan; Korea; New Zealand; Norway; Singapore; Switzerland; Chinese Taipei; and the United States, committed to begin preparations for negotiations to liberalise trade in environmental goods, building on the APEC List of Environmental Goods.
The global challenges we face, including environmental protection and climate change, require urgent action. Today, we are pleased to announce the launch of negotiations on the Environmental Goods Agreement (EGA), through which we aim to achieve our shared goal of global free trade in environmental goods. We will now engage in intensive negotiations, meeting regularly in Geneva, to discuss the substance of the agreement, including product coverage. We are committed to work towards the timely and successful conclusion of the agreement.
In this process we are committed to work together and with other WTO Members similarly committed to liberalization that are interested in joining our ambitious efforts. We are convinced that this WTO initiative will strengthen the rules-based multilateral trading system, support its mission to liberalise trade, provide important impetus to the DDA negotiations and benefit all WTO Members, including by involving all major traders and applying the principle of Most Favoured Nation, once a critical mass of Members agree to participate.
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Africa must broaden sources of growth and investment to create jobs and reduce poverty, UNCTAD report argues
UNCTAD’s Economic Development in Africa Report 2014, launched on 3 July, shows that there are structural problems in the pattern of growth in Africa and that these require a move away from consumption to coherent investment policies.
Africa cannot achieve sustained economic growth and transformation without diversifying the sources of its economic growth both on the demand and supply sides of its economies, UNCTAD’s Economic Development in Africa Report 2014 argues.
“This year’s report shows that investment will be critical to the future development of the continent,” UNCTAD Secretary-General Mukhisa Kituyi said. “The report says that investment is a major driver of structural transformation, and will be critical for sustaining growth for employment and poverty reduction in Africa over the medium-to long-term. Of course, governance, policies and institutions that generate, utilize and catalyze investment matter enormously. These are key because investment rates in Africa are currently low relative to what will be required to achieve national development goals.”
Subtitled Catalyzing Investment for Transformative Growth in Africa, the report says that Africa has experienced relatively high growth during the past decade but the nature and pattern of this growth has not resulted in more jobs and poverty reduction because consumption has been the dominant driver. Instead, the report says, a consumption-based growth strategy must go hand-in-hand with an increase in investment, particularly investment that which increases the capacity to produce tradable goods, to reduce the likelihood of current account imbalances in the future and to diversify sources of growth on both the demand and supply sides.
On the demand side, the report recommends balancing the relative contributions of consumption and investment to the growth process since it is evident that a consumption-based growth strategy cannot be sustained in the medium to long term. This is because it often results in such economic challenges as over-dependence on imports that in turn affects the development and survival of local industries, and job creation.
On the supply side, the report recommends that sources of growth on the supply side also need to be diversified, requiring a shift from low- to high-productivity activities, both across and within sectors.
The report shows that structural problems exist within Africa’s recent growth from a supply or sectoral perspective, with many countries yet to go through the normal process of structural transformation characterized by a shift from low- to high-productivity activities, and a declining share of agriculture in output and employment, as well as an increasing share of manufacturing and modern services in output.
Capital to move freely in the EAC
The move will also allow Tanzanians to invest in the EAC region without requiring prior permission from the BoT
Tanzanians who wish to move their capital and invest in any of the East African Community (EAC) member countries are now free to do so, thanks to the government decision to partly liberalise the capital account.
A statement issued yesterday by the Ministry of East African Cooperation, says that the change will also allow foreigners to participate on the Dar es Salaam Stock Exchange (DSE). However, foreigners will have limited allowance to participate in government securities.
The move will also allow Tanzanians to invest in the EAC region without requiring prior permission from the Bank of Tanzania (BoT).
This is a significant move towards fulfilling the requirements of the EAC Common Market as annexed in its Schedule on the Removal of Restrictions on the Free Movement of Capital by 2015, says the ministry statement.
Commenting on the development, the deputy minister for East African Cooperation Dr Abdulla Juma Saadalla, said the move was one of the government’s deliberate efforts to open up opportunities for Foreign Direct Investments (FDIs) and wealth creation through Tanzanians’ investments abroad.
“This is yet another milestone for Tanzania in its quest to attract more FDIs and allowing its people to invest abroad,” said Dr Saadalla, adding that the country was already moving in the right direction in attracting investors.
Liberalisation of capital account has been necessitated by BoT’s recent amendments of two key regulations namely; the Foreign Exchange (Listed Securities) (Amendment) Regulations 2014, and the Foreign Exchange (Amendment) Regulations 2014.
The two regulations were availed through Government Notice No. 132 and were published in the Government Gazette on May 2, 2014.
Before this amendment, foreigners were not allowed to participate in government securities at all.
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Another setback for livestock sector
Negotiations between Namibia and South Africa on the livestock export crisis suffered a major setback when the South African Feedlot Association halted the process by demanding more time to finalise the standard operating procedures (SOPs) for Namibian livestock imports
The association last week requested more time to finalise the SOPs for the import of weaners and sheep from Namibia, further exacerbating the crisis.
Hopes are dashed for now that the export of especially weaners would be possible in the first quarter of July.
Analysts warned over the weekend that the situation would leave Namibia with an excessive amount of weaners and no market on the eve of the annual weaner season that starts in August when the majority of Namibia’s some 160 000 weaners usually leave the country for feedlots in South Africa.
This unexpected twist in the ongoing saga has resulted in the Meat Board calling for an urgent meeting with all Namibian stakeholders this coming Wednesday in Windhoek to immediately discuss alternative markets, as it became clear the door to South Africa’s feedlots will remain shut for an unknown time.
Except for goats, which all go to the direct slaughter market in Kwazulu-Natal, some 85 percent of all Namibian cattle and sheep exports do not end up as direct slaughter animals but go via the SA Abattoir Association.
General manager of the Meat Board Paul Strydom confirmed this coming Wednesday’s meeting, expressing his bitter disappointment on behalf of all Namibian livestock producers about the latest stance of the SA Abattoir Association.
The Acting Director of the Directorate of Veterinary Services (DVS) Dr John Shoopala toldNew Era it is not about animal health requirements but rather a case of the South African role players in the industry looking after their own interests.
Chief Financial Officer of Meatco Nico Weck echoed similar sentiments when asked for comment on the latest developments, saying it is now clear that more restrictions can be expected by South Africa in an effort to widen their trade base as a foot-and-mouth disease-free country.
“A call for national intervention is now needed because the real tragedy is that Namibian communal farmers suffer the most since new restrictions were implemented by South Africa on 1 May. Communal farmers contribute the lion’s share of the total volumes of export animals and they rely 100 percent on the industry for an income,” he lamented. He says it is a massive challenge for Namibia to open its own feedlots and a big responsibility will rest on the green schemes for fodder production for such animals.
“There is no one silver bullet for our situation,” he said.
Strydom says the SA Feedlot Association has not withdrawn from the current discussions of which the next round amongst South African role players will take place on 21 July.
“But we have to look at every single possible alternative at this coming Wednesday’s meeting because our producers have been suffering since 1 May and there is still no light at the end of the tunnel. We don’t know when the two sets of permits – one for slaughter animals and one for breeding animals – will eventually be finalised. Therefore, we must be pro-active.”
Shoopala, who has been instrumental in negotiating the animal health permits with SA authorities, said the situation should serve as a serious wake-up call for Namibia as we have no feedlots for weaners and no abattoirs for the slaughtering of goats.
“We have become way too dependent on South Africa. It is now time to think out of the box,” he said.
Not a single head of cattle has been exported on the hoof to South Africa since 1 May due to the stringent new requirements. Local livestock producers had their sights set on a meeting last Wednesday in Pretoria where good news was expected, but exactly the opposite resulted.
Namibia’s lucrative weaner export industry – which amounts to earnings of more than N$2 billion from some 160 000 weaners exported annually – has since 1 May grinded to a halt and so has sheep exports while only about 2 500 live goats have been exported to KwaZulu-Natal.
Namibia normally exports about 240 000 goats to South Africa which ensures an income of about N$16,8 million while its live sheep exports amounts to about N$8,5 million per annum. Communal famers make up for about 60% of the total exports and are hardest hit by the impasse as prices for their goats have dropped by some 40 per cent already.
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AU gives nod to creation of African Monetary Fund
African Union countries last week approved a proposal to create an African Monetary Fund in line with plans for greater economic integration on the continent.
Broadly, the AMF would be charged with maintaining macro-economic stability in the continent, a mandate that mirrors that of the International Monetary Fund.
“The purpose of the Fund shall be to foster macroeconomic stability, sustainable shared economic growth and balanced development in the continent, to facilitate the effective and predictable integration of African economies,” reads the protocol for the establishment of the AMF.
The body, to be headquartered in Yaoundé, Cameroon, is one of three institutions stipulated in the treaty that constitutes the AU as necessary in the creation of an African Economic Community.
The other two bodies are the African Central Bank and the African Investment Bank.
The protocol on the AMF will only come into force after it is ratified by at least 50 member countries of the African Union.
The body is expected to promote macro-economic stability by extending loans to countries in need of foreign exchange to meet international obligations such as imports and debt payment. In the long term, the AMF will provide advice and technical assistance to governments in crafting economic policies.
In addition to feeding into pan-African ambitions of integration, the AMF is also an answer to long-held dissatisfaction of African countries with the IMF and its perceived biases in favour of advanced economies.
Days after the AU general assembly adopted the AMF protocol, a report released by the IMF’s internal auditors revealed that the body was still dogged by concerns that it is still a rich nations’ club.
“Ultimately, the perception of even-handedness is rooted in the uneven decision-making power within the IMF,” reads the report by the IMF’s Independent Evaluation Office (IEO).
Significant sway
In the IMF, the voting power of countries is determined by the size of their economies. Therefore, countries like the United States and the United Kingdom legitimately hold a significant sway in terms of the policies of the IMF.
In particular, the IEO said, various surveys had shown that IMF staff usually adopt sterner assessment approaches when dealing with poor nations, in comparison with advanced economies facing similar challenges.
Perceptions of bias become acute with the recent economic crises in Europe and the subsequent bailouts, some of which came from the IMF.
“The Euro Area programmes had created the perception that European member countries had excessive weight on decisio-making in the IMF, relative to their economic power, and that the IMF’s programs in the EU had more lenient conditions than those in Asia,” says the IEO.
The IMF is currently attempting to reform its structures in order to shift more power to emerging economies following the criticisms.
Despite the grousing over the structure of the IMF, the African countries have closely emulated the system as they set up their own monetary fund.
Within the AMF, voting rights will also be determined by the size of a country’s economy. According to a draft of the AMF statute seen by Sunday Nation, South Africa will have the largest voting rights at 8.05 per cent followed by Nigeria at 7.94 per cent, Egypt at 6.12 per cent and Algeria at 4.59 per cent.
Only countries with at least four per cent voting rights will hold permanent seats on the AMF board of directors.
Similarities with the IMF also extend to funding limits put in place for countries. The IMF limits the amount of credit countries can access in correlation with their shares in the body. Therefore, larger economies with larger shares can borrow more.
This is replicated in the AMF where loans cannot exceed three times the value of shares states have in the body without special authorisation.
Relations between African countries and the IMF, as well as its sister Betton Woods organisations, began to deteriorate in the late 1980s with the implementation of the structural adjustment programmes. In bailing out countries that had been left heavily indebted during the oil crisis and commodity prices crash of the 1970s, the IMF required governments to institute a series of policy reforms.
These structural adjustment programmes involved privatisation of government assets as well as budget cuts. African countries remain suspicious of international bodies and donors that attach “strings” to aid or loans.
Yet, the AMF seems to follow a similar script. The AMF will be required to ensure that the countries with which it works maintain sound policies.
“The Fund shall ensure strict compliance with principles of good governance including principles of integrity and transparency in its financial arrangements and those of its partners,” says the African Union.
The AU is often cash-strapped and has been criticised as lacking bite. It is therefore unclear whether the AMF will succeed or gain the level of independence and impact envisioned.
However, the AMF, once it stands on its own feet, is envisioned as a body that will be outside the influence of political winds both within the AU and from individual member countries.
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Trade Policy Review: China
The fifth review of the trade policies and practices of China took place on 1 and 3 July 2014. The basis for the review is a report by the WTO Secretariat and a report by the Government of China.
Documents from the review are available below.
Concluding remarks by the Chairperson
The fifth Trade Policy Review of China has provided an excellent opportunity to improve our understanding of its trade and investment policies. I would like to thank Mr. WANG Shouwen, Assistant Minister of Commerce and H.E. Ambassador YU Jianhua, Permanent Representative of China to the World Trade Organization and the whole delegation for their constructive engagement throughout this exercise. I would also like to thank H.E. Mr. Joakim Reiter, Ambassador of Sweden to the WTO for his insightful remarks as discussant. China received over 1,700 advance written questions, which shows the importance attached by Members to its trade and investment policies and practices. China’s written answers to most of these questions have been welcomed by Members who looked forward to answers to additional questions, no later than one month after this meeting.
Members remarked that during the period under Review, China had become the major global merchandise trader and noted the impact that China’s policies had on the world economy and on the functioning of the WTO. Hence, they highlighted the need for China to recognize the increased responsibility that comes with becoming a lead player in the multilateral trading system. They commended China for its determination to carry out challenging reforms and emphasized that the current review came at a particularly opportune time as under its new leadership China had announced an ambitious and comprehensive reform agenda. In this context, Members sought more information on the specifics of the ongoing reforms, including the functioning of the China (Shanghai) Pilot Free Trade Zone, and on future reforms.
Members noted the role that China’s economic growth had played in contributing to world economic recovery in the aftermath of the global financial crisis. However, they observed the need for rebalancing growth, which had been traditionally nurtured by investment and had heavily relied on directed credit availability. It was noted that China had already taken some steps to rebalance economic growth through policies to promote consumption. Members stated their belief that trade and a further liberalization of the domestic market could play an important role in this endeavour. In this regard Members outlined a number of areas where they thought that improvements could be achieved:
- Transparency: as the world’s largest trader China bore great responsibility for supporting a predictable and transparent global trading system. China was encouraged to ensure the effective use of transparency mechanisms within the WTO, including ensuring that its notification obligations are fulfilled in a timely way. Members noted that although China had committed to publish in a single official journal all laws, regulations and other measures related to or affecting trade in goods, services, IPR or foreign exchange, both at the central and sub central level, and to make them available in a WTO language, this had not been effectively accomplished. Members urged China to address this shortcoming by making information regarding trade-related measures available. This would be beneficial to all as it would lead to increased trade and investment.
- Consistency in implementation of laws, regulations and policies: Members understood the difficulties that China faced in ensuring the consistent implementation of laws, regulations and policies in such a vast country. It was noted that implementation inconsistencies affected business directly with and within China, compounding the often-reported problems of predictability and transparency. Members stated that addressing these issues was of the utmost importance, both to improve the operating environment of business – domestic and foreign alike – and to limit the risk of discretionary treatment.
- Role of the State: Members noted that the State still had an active role in China’s economic development and that China continued to pursue policies to support domestic industries including those controlled by state-owned enterprises. They stated that on occasions this had led to overcapacity and excessive credit expansion. In Members’ view, given China’s size and importance, Government intervention affected the allocation of resources and competitive conditions of companies in and outside China.
- TBT and SPS: Members expressed concern with respect to the use of technical requirements that diverged from international standards and the insufficient involvement of interested stakeholders in the standardization process. Regarding SPS measures Members questioned their scientific justification in certain instances, and requested China to make further efforts to increase transparency and predictability in this area.
- Other concerns raised by Members included China’s support policies; the use of export restraints and export taxes; restrictions on services market access; the retaliatory use of trade remedies; enforcement of IPRs; the protection of trade secrets; and restrictions to foreign investors in certain areas.
Members commended China for their leadership in submitting its notification of Category A provisions under the new Trade Facilitation Agreement and in opening its market to products from LDCs. Members urged China to make further efforts to conclude the negotiations to expand the Information Technology Agreement and to become a member of the GPA. Members trusted that China would continue to positively contribute to the adoption of the post Bali work programme. China as a global economic power had an indisputable role to play in maintaining a rules-based trading system which is vital to the current and future prosperity of trading nations.
The participation of over 50 delegations in this meeting and the large number of questions posed during this Trade Policy Review indicate the clear importance of China as a trading partner. In this respect, I would wish to emphasize that it is essential for the system that China abides by its WTO commitments including that of transparency. This, in turn, would allow China to continue reaping the benefits of economic liberalization in a rules-based multilateral framework. Members believed that it is crucially important that China continues to pursue trade liberalization and economic reform despite the challenges that could arise and pledged to support China so that clear improvements could be achieved in the specific areas mentioned, in the questions posed and in the discussions held during these two days.
In closing, I would like to thank Assistant Minister WANG Shouwen and the rest of the Chinese delegation, all the other delegations, the Discussant and the Secretariat for this very successful fifth review of the trade policies of China.
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It’s official: Tanzania Customs Integrated System has started
The Tanzania Revenue Authority (TRA) has said that its new system known as Tanzania Customs Integrated System (Tancis) aimed at bringing greater transparency in customs clearance has officially started with Dar es Salaam customers only.
The system, which is also aimed to simplify and speed up the import and export of goods through the customs came into effect on Tuesday.
Speaking in an interview with The Guardian at the ongoing Dar es Salaam International Trade Fair (DITF), TRA Director for Taxpayer Services and Education, Richard Kayombo, said the tax body has started administering the system with Dar es Salaam customers before moving to other regions after a successful pilot project.
Kayombo also said that in the Tancis pilot project, about 13 clearing and forwarding companies were involved.
He pointed out that the system will help clearing agents not to move from one office to another in their quest for document clearance.
“Clearing and forwarding agents, customers will be able to access Tancis at the comfort of their own offices as long as they have access to the internet,” he clarified.
He underscored that the system will also link in with other stakeholders like shipping lines and ports authorities to speed up goods clearing processes, while banks will also be joined to facilitate quick payment of customs fees and duties.
“Tancis will bring greater transparency in customs clearance requirements and processes. As the system will be available online, all relevant parties will be able to access it for relevant documentation. We therefore expect to reduce cheating, since everything will be online and no one will cheat anyone through this system,” he said.
He underscored that the system will also issue sms alerts to inform importers on the progress of their clearance requests so they could know at all times what is happening and be able to do verifications.
Speaking recently when he visited the Tancis offices, the ICF Board of Trustees co-chair Neville Isdel said “it is good to see what is happening on the ground and to get a full picture of the effectiveness of the project.”
“This has been an impressive project visit. It is encouraging to see the passion and commitment that TRA has for this new system. It gives us confidence that the project will go on well and be of great benefit to Tanzania,” he said.
He added: “ICF is happy to work with TRA in this initiative to speed up movement of cargo and help to improve the investment climate in Tanzania.”
The Investment Climate Facility for Africa (ICF) is a development institution that is donor funded and private sector focused, whose purpose is to work with businesses and African governments to improve the investment climate in respective African countries.
Based in Tanzania, it is a unique partnership between governments, the private sector and development partners.
It believes that an improved investment climate is critical for job creation, income growth and poverty reduction across the continent.
Therefore, it works with African governments to create a conducive, legal, regulatory and administrative environment for businesses, both big and small to invest, grow and create jobs.
Apart from customs modernisation, ICF also provides support in the areas of trade facilitation, property rights and contract enforcement, business registration and licensing, taxation, financial markets, infrastructure facilitation, labour markets, competition, and corruption and crime. It is supported by development partners and the private sector.
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Single Customs Territory still a document on the shelf as July 1 deadline lapses
The Single Customs Territory, whose major objective is to overcome the hurdle of slow and costly movement of goods and services and also improve the business environment in the region, is yet to be fully operational even after the lapse of the July 1 deadline.
In the Northern Corridor comprising Kenya, Uganda and Rwanda, the SCT project is at an advanced stage after being at the pilot stage for a long time, but not all goods have been added onto it.
Tanzania and Burundi, which make up the Central Corridor, began implementation on July 1 but are piloting with only a few products.
According to Michael Baingana, policy research advisor to the East African Business Council, piloting in the Central Corridor, that is Tanzania/Burundi and Tanzania/Rwanda, was meant to commence in May but was delayed.
The Tanzania Revenue Authority says the only imports from Kenya that the Central Corridor can handle for the time being are cigarettes, spirits and detergents.
For goods exported to other East African countries, TRA’s Director of Education and Taxpayer Services Richard Kayombo said, the system will only handle wheat flour and cooking oil.
“We hope that the new arrangement will help to increase business competition in the region and efficiency at the Dar es Salaam port,” said Mr Kayombo. “It would also help to foster business relations among clearing agents.”
The Northern Corridor is ahead of the Central Corridor in terms of goods handled under the SCT.
Officials at the Kenya Revenue Authority confirmed that the region failed to meet the deadline due to various hitches, ranging from bureaucracy to technology issues.
They however added that most of the imports to Rwanda passing through the Northern Corridor had been brought into the system.
Modalities are also being worked out to include more goods imported into Uganda from outside the region to be brought under the system, KRA officials said, adding that, at the moment, fuel and clinker imported from outside the region are among the goods included.
They also confirmed that some goods are still going through the old system, adding that the SCT will be implemented in phases.
Not fully implemented
Peter Njoroge, director of Economics at Kenya’s Ministry of East African Affairs, Commerce and Tourism, said Kenya, Uganda and Rwanda had agreed on the July 1 deadline first and that Tanzania and Burundi came on board later.
Uganda Revenue Authority spokesperson Sarah Banage said goods from within the East African Community will be cleared under the rules of origin but added that this has not been fully implemented.
Under the intra-regional arrangement, for example, a manufacturer in Kenya who wants to export their product to Uganda will pay duty at the destination even before the goods leave the Kenyan warehouse. This has cut the red tape that used to hinder intra-regional trade, she said.
It also eases the movement of the consignment through Kenya to Uganda, given that import levies have been removed and an importer is only required to pay domestic taxes that apply in the destination country, such as value added tax (VAT).
Initially, there was duplication of entries, where an importer had to clear with the point of entry country and destination country. However, this has been done away with for goods handled under the SCT system.
But given the missed deadline, handling of goods and services that are yet to be brought under the SCT will continue to be slow and costly, the biggest challenge being import and export through the Central Corridor.
“Missing the July deadline will affect some of the importers and exporters of goods as they will not enjoy the benefits of the SCT system,” George Ngaya, an economist with an interest in East African affairs, observed. “As a result, it is imperative that member countries ensure the SCT system is fully operational as it will help to bring the region under a single Customs Union.”
The SCT issue came up in the tripartite meeting between Kenya, Uganda and Rwanda in Kigali, where partner states again committed themselves to bringing all cargo under intra-regional trade on the Northern Corridor into the SCT effective July 1.
They also agreed that their revenue authorities would quickly finalise the survey on the SCT and continue stakeholder sensitisation on the gains made.
The states also agreed that technical teams finalise the administrative guidelines for harmonisation of electronic cargo tracking system by August 30 and that Ugandan and Rwandan agents be given access to the KRA Customs system by July 15.
It was also agreed that KRA and the Treasury would expedite the removal of VAT imposed on services rendered to goods in transit by September.
Fuel and clinker importers were the first beneficiaries of the SCT, which was launched on January 1 this year.
The revenue authorities from the three countries picked the two industries for the pilot phase to enable importers to clear their goods at the point of entry and have revenues collected at a single point, in this case the port of Mombasa. The revenues were to be remitted to the destination partner states.
According to EABC’s Mr Baingana, the products cleared under the SCT were expanded to include spirits, cement and cigarettes while those from Uganda/Rwanda were cement and Mukwano Industries products.
As at July 1, the EAC member states had expected to have a fully operational SCT, which would also help in the implementation of the Common Markets Protocol signed four years ago, but that was not to be.
Nonetheless, there were signs of progress. A recent public notice issued by URA said beverages such as mineral water, soft drinks and beer imported from Kenya would be allowed in the SCT system.
“Beginning June 16, the items mentioned above imported from Kenya will be cleared using Single Custom Territory (SCT) procedures,” read the URA public notice published in the Daily Monitor.
URA said inclusion of more items came about after SCT passed the experiment to clear fuel, neutral spirit, cigarettes and cement from Kenya.
Electronic declarations
Under SCT procedures, Customs declarations are made electronically and processed and released by URA prior to loading of goods for export from Kenya, said the notice signed by the URA Commissioner for Customs, Richard Kamajugo.
Ms Banage said the only SCT aspect not fully rolled out was where commodities imported into Uganda were cleared at the first port of entry, without needing things like bonds.
Ministry of East African Cooperation acting Director, Trade, Investment and Production, Bernard Haule, said the government planned to scale up public education of stakeholders, including private sector and government agencies, in the current financial year, to ensure all understood the benefits they stood to gain from the new system.
By Scola Kamau, Christabel Ligami, Dicta Asiimwe and Eric Kabendera
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Close ties with Brazil and China position Angola for future funding from BRICS bank
Angola is well positioned to receive funding from the future BRICS bank due to its close ties with Brazil and China, according to the Economist Intelligence Unit (EIU).
The recent state visit to Brazil by Angolan President, José Eduardo dos Santos, underlined the extent of the two-way relationship and in more practical terms included setting up a sixth Brazilian credit line worth US$2 billion focused on power production.
According to the Angolan government two projects have so far been earmarked to receive Brazilian funding: construction of a power plant at the Cambambe, dam in Kwanza Norte province and the Laúca hydroelectric facility, on the Kwanza River.
According to the Economist Intelligence Unit this support is a sign of “strong economic and political ties between the two countries,” as well as “Brazil’s focus on its operations in Angola,” as well as Angola’s capacity to invest in infrastructure and “secure access to funding from a number of sources.”
A meeting between José Eduardo dos Santos and his Brazilian counterpart Dilma Roussef discussed the issue of the next BRICS (Brazil, Russia, India, China and South Africa) summit, which will take place in Brazil in July, the EIU said.
One of the topics on the meeting’s agenda was the project to launch a BRICS bank that can be used as an alternative source of funding to the World Bank and the International Monetary Fund (IMF) and which may be a new source of aid for Angola.
“Angola, which has a string ties with China, Brazil and Russia would be an ideal candidate to receive funding from this kind of operation,” when it is set up, the EIU said.
The new credit line increase the total aid to Angola from Brazilian development bank BNDES to US$8 billion, which has allowed for construction of important infrastructure as well as bolstering the presence of large Brazilian companies in Angola.
Brazilian group Odebrecht, which has been in the country since the beginning of the 1980s, is considered to be Angola’s largest private employer.
Over the last few months Angola has secured new aid from China, the United States and Brazil, which demonstrates the interest that these powerhouses have in improving economic relations with this emerging African nation.
During a recent visit to Luanda by Chinese Prime Minister Li Keqiang, the China Export Import Bank announced new credit lines totalling US$170 million to fund reconstruction of a hydroelectric facility in Moxico province as well as an agro-industrial project in Zaire province and construction of a management training institute in Lubango.
The head of the Chinese government also pledged to donate US$28 million to fund unspecified development projects in Angola, which since 2002, according to the EIU, has received over US$10 billion in funding form China, mainly focused on infrastructure.