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Immigration overhaul
New Home Affairs Minister Malusi Gigaba appears to have been deployed to oversee a complete overhaul of South Africa’s immigration laws that go much deeper than the amendments of immigration regulations that are raising a fuss.
In an interview with The New Age, Gigaba said the world together with immigration patterns had changed which left South Africa’s regulations with dangerous holes that needed to be closed in the areas of security and the economy.
“One of the things that we are going to take forward from the previous administration is to undertake a complete review of South Africa’s immigration policy and legislation and try and close some gaps,” the minister said. He said the current policies did not adequately deal with new dynamics like economic migrants.
He said the country had seen an increased number of economic migrants from all over the SADC region and other parts of the world.
“Workers from other countries and I dare say Zimbabwe have flocked to South Africa seeking asylum. We must ask: Is there a conflict in Zimbabwe which necessitates that Zimbabwean nationals must apply for asylum in South Africa?”
He said issuing asylum to some nationals can cause diplomatic difficulties for South Africa because it amounts to passing a judgment against the political status of another country.
Gigaba cited the case of a South African who applied for political asylum in Canada claiming that he was persecuted as a white person. “Remember that we kicked up a storm on the issue. Therefore we can’t be found doing the same thing.”
The minister is already walking into a storm over new immigration regulations which kicked in this week. Some stakeholders and mainly organs representing business interests are seeing red and threatening legal action. The new regulations are also shaking explosive political areas like accommodation of immigrants from troubled spots across the African continent.
Gigaba stuck to his guns, saying the department was going ahead with implementation but the door was not shut for dialogue.
The minister said the new regulations were primarily designed to address security and the economy. “The philosophy that underpins our migration services is management,” Gigaba said.
“We don’t view immigration as a nuisance that must be combated. We look at immigration as a service to be managed in order to enhance national security and facilitate economic development.” He dismissed suggestions this area was directly linked to concerns South Africa may become a terrorist haven.
Gigaba said: “I will in the next few weeks announce how we are going to deal with the Zimbabweans dispensation.”
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African countries feel cornered in EU trade negotiations
The EU is anxious to finalise talks with Africa over a planned Economic Partnership Agreement. If negotiators do not seal the deal by 1 October, preferential access to the EU’s internal market will be cut short, putting pressure on African negotiators, who feel their concerns are falling on deaf ears. EurActiv Germany reports.
“The EPA negotiations are like a soap opera on television: You never know when the last episode will come”, said Ajay Bramdeo. Every time a conclusion seems to be near, new problems crop up, he said.
The negotiations are not coming to an end, said the South African and Permanent Representative of the African Union (AU) to the EU on Tuesday (3 June) in Berlin.
Indeed, the negotiations between the EU and 78 ACP (African, Caribbean and Pacific) countries over Economic Partnership Agreements (EPA) have been under way since 2002.
One of the central issues of the EPA concerns the so-called non-reciprocal trade preferences of the Lomé Convention (1975-2000). Talks were originally due to be concluded by 1 January, 2008, but the African side fought more and more determinedly against submitting to negotiations they felt were dominated by the EU.
Now, the EU is pointing a gun at the Global South’s chest. Countries which have not concluded an EPA by 1 October will lose privileged access to the EU’s internal market.
Trade policy by prescription – “Like a trip to the doctor”
Bramdeo regrets the endlessness of the negotiations, but he more sharply criticises the EU’s established deadline.
It is not the Africans who are responsible for foot-dragging in discussions, he said, but the Europeans. The latter simply do not listen to concerns voiced by the South, Bramdeo pointed out.
The method is quite similar to that of a doctor who simply prescribes a medication, he explained. “We do not need to be told what is good for us. Please, give us the opportunity to decide for ourselves what is good for us”, was Bramdeos urgent appeal.
The ACP states are mostly worried about individual EPA guidelines which are completely incompatible with regional economic agreements in Africa (for example ECOWAS). They “threaten Africa’s regional integration agenda”, warned the ambassador.
If the African side were simply to accept the demands of the Europeans, this would lead to a fragmentation of regional economic communities, having “disastrous” effects, Bramdeo said. For this reason, he contended, “the development dimension in the EPA negotiations must also be considered.”
And this is not the first time, Bramdeo indicated, saying that African countries expressed similar demands at the EU-Africa Summit two months ago in Brussels. Still, after 8 weeks there is only “deafening silence”, Bramdeo stated.
But this is hardly a surprise, he added, arguing that the summit in Brussels was completely orchestrated for PR reasons. A genuine exchange of views was not able to happen at all, Bramdeo said, as it had been determined in advance, who would be speaking about which issue at what time.
“The speeches are written in advance. There is no interactive discussion or debate. You go there, read your statement and no one responds to it,” Bramdeo said, frustrated.
For this reason, the format of these summits must be changed in the future, he commented. “Let the heads of state discuss among themselves. That is the political dialogue we need.”
No trusted foundation for negotiations
If the dialogue remains as it is, Africa only has a slim hope, Bramdeo said. The trusted foundation of the EPA negotiations is being systematically undermined by the Europeans. Those African ambassadors who insist on national interests are constantly running the risk of being blamed by the European Partners as “rabble-rousers” – which, in the worst case scenario, could lead to their replacement.
In addition, the negotiations are not transparent enough, criticised the South African. A point of criticism that Klaus Schilder, from the aid organisation MISEREOR, agrees with: “The EU and the Commission were not honest about their own economic interests.” But this is the fault of the member states, the aid worker stated, who are constantly promoting their own trade agendas.
The process is similar to negotiations on the planned Transatlantic Trade and Investment Partnership (TTIP) with the United States, “completely non-transparent and undemocratic”, explained Schilder.
Meanwhile Daniela Zehentner-Capell from the German Federal Development Ministry (BMZ) admitted: “In the European Commission, the dialogue was not transparent enough. […] The EU member states did not force the Commission to lay its cards out on the table.” But even so, she said, both sides are at fault. Dialogue on the African side was not good, particularly between the governments and civil society.
Bramdeo did not attempt to predict whether or not the EPA “soap opera” will actually come to an end this year. But in the interest of ACP countries, he hopes for more time and that negotiations with the EU will finally take place on a level playing field.
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SA’s red tape ‘limits Nigerian companies investing’
Nigerian companies have a “huge appetite” for investing outside the country, says the Nigeria-South Africa Chamber of Commerce.
But regulatory restrictions on equity ownership and moving money in South Africa were limiting the number of Nigerian companies setting up shop locally, chamber director Osayaba Giwa-Osagie said last week.
Recorded trade traffic by the chamber showed that there were more South African companies considering and setting up shop in Nigeria than Nigerian companies doing similarly in South Africa.
This could also be attributed to Nigeria having more untapped industries, such as agriculture and mining, making it a “virgin market”, Mr Giwa-Osagie said in an interview in Lagos.
But the restrictions of black economic empowerment (BEE) laws on the percentage of equity that should be in South African hands were limiting Nigerian investments in South Africa.
The difficulty of moving money in and out of South Africa was also a hindrance for investors.
According to exchange control law, companies are required to seek approval from the Reserve Bank to move money in and out of South Africa.
Last year, Nigerian billionaire businessman Aliko Dangote criticised South Africa’s BEE laws, calling them an obstacle to investment from other African states and discouraging of intra-continental trade.
In an interview with Business Day on the sidelines of the South Africa-Nigeria Business Forum, Mr Dangote said South Africa needed to review its BEE laws and policies to attract more investment from other African states and to encourage them to take part in South Africa’s economy.
At least 100 South African companies were operating in Nigeria last year, said the chamber.
These included MTN, MultiChoice, Sasol, Unilever, Mr Price and Old Mutual.
The chamber believed it was just a matter of time before more Nigerian companies invested and did business in South Africa.
“We believe that with the rebasing of the economy’s gross domestic product, Nigerian companies have a huge appetite for investing outside of Nigeria. South Africa being a very large market, I believe sooner or later you will see more Nigerian companies coming to South Africa.”
Nigeria had “liberal” laws to attract investment from companies around the world, said Mr Giwa-Osagie
Apart from restrictions such as having a local partner in the oil and gas industry in Nigeria, the country’s policies on ownership were liberal, which made it an attractive investment destination for South African companies, he said.
In most industries, foreign shareholders were allowed to hold 100% of the equity of the company and there was no legal requirement to have Nigerian directors and shareholders, he said.
However, the chamber advised companies starting business in the country to have local partners for better understanding of the market and access to government officials.
Companies could be incorporated within 48 hours in Nigeria, according to the chamber.
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UN group chairs unveil zero draft for Sustainable Development Goals
A UN group tasked with formulating a proposed set of sustainable development goals (SDGs) will for the first time consider a zero draft of a possible text at their next meeting later this month, officials confirmed earlier this week.
The co-chairs of the Open Working Group on Sustainable Development Goals (OWG) – as the body is formally known – circulated the 21-page text on Monday 2 June, which now offers 17 suggested goals, following the separation of poverty and inequality into separate headlines. The co-chairs had foreshadowed this move at the close of the group’s previous session in May, shortly after which they also released a draft introduction for the framework.
Ahead of the expected release, it was not clear whether the co-chairs felt they had the mandate to produce a zero draft for line-by-line negotiations. Since the end of the earlier “stock-taking” phase in February, input for the group’s meetings had been framed as working documents.
In an accompanying letter circulated to UN members, the co-chairs reminded delegations that the group’s next week-long session would be preceded by three days of informal meetings from 9-11 June. While these gatherings will not pre-empt the official work, OWG participants have been urged to use this as an opportunity to take stock of the proposed goals, their targets, and means of implementation.
“As stated at OWG11, we would strongly request that delegations move directly into focused consideration of the proposed goals and targets contained in the zero draft in order to make progress towards a successful and timely conclusion of the report for onward submission to the General Assembly for appropriate action,” the co-chairs’ letter read.
The SDG effort – a direct result of a UN Conference on Sustainable Development (Rio+20) held in June 2012 – is part of a broader process to develop a post-2015 development agenda that would replace the current eight headline Millennium Development Goals once they expire next year.
Work in the OWG has been ongoing for over a year. Seats in the group are often shared between “troikas” of like-minded states, and broadly represent the five UN regional country groupings. The working group should produce a set of SDG recommendations by July, to be considered by the UN General Assembly this autumn.
Compromise structure for means of implementation
The means to achieve development goals and targets has historically proved contentious in multilateral discussions of this type. Such divisions emerged noticeably at the group’s April meet, with members split over whether to include relevant “means of implementation” (MoI) under each individual goal, separately as its own goal, or both.
The zero draft appears to make a bid for the middle ground. Although MoI are included as the final goal, this is made up of several subsections detailing options for each of the previous goals.
“What they have done is to show how particular MoI would fit under each goal. This enables there to be an agreement either to leave it as a separate goal or put them under the relevant goal at a later stage,” said Felix Dodds, former executive Director of the Stakeholder Forum for a Sustainable Future (1992-2012).
Trade features across MoIs
In the previous version of the working document, trade featured as a sub-section within the “means of implementation” goal. In this version, trade-related targets are now posited as potential “means of implementation” for several of the proposed development goals.
The target of “timely implementation of duty-free quota-free [DFQF] market access… in accordance with WTO decisions and the Istanbul Programme of Action” is listed as one measure that would support progress towards the central target of poverty eradication.
DFQF was also included in previous working document iterations. Talks on the issue have struggled to advance at the WTO since a ministerial decision in 2005 to implement substantially increased DFQF market access for goods from least developed countries (LDCs), although ministerial decisions last December urged a renewal of efforts in this area.
Several trade-related targets appear as possible means of implementation for the goal of promoting strong, inclusive, and sustainable economic growth and decent work for all. This includes, for example, complying with the mandate for agriculture, services and non-agricultural products in the WTO Doha Round – the global trade body’s latest series of talks.
The same MoI subcategory also mentions the implementation of the outcomes of the WTO Bali Ministerial Declaration. At the Bali December meet, trade ministers from the 159-member body formally agreed a multilateral deal on trade facilitation, along with a few items involving agriculture and development.
The subcategory for “sustainable growth implementation means” continues by mentioning increasing trade-related capacity building to assist development and Aid for Trade initiatives – a WTO-led financial assistance framework reaffirmed at the body’s ninth ministerial meeting in December 2013.
Improving market access for agricultural, fisheries, and industrial exports from developing countries, African economies, and the world’s poorest nations in order to increase their share of global exports is also included as a MoI to support progress towards the goal of sustainable economic growth and decent work. In a departure from the text for the May meeting, however, the zero draft has replaced the target of doubling LDC exports as a share of the global total by 2020 with the objective of simply “increasing” their share of exports in world markets.
Encouraging the full use of Trade-Related Aspects of Intellectual Property Rights (TRIPS) flexibilities is a new addition by the zero draft, now mentioned in two subcategories of MoI, supporting the goals of “attain healthy life for all at all ages” and “promote sustainable industrialization,” the latter in the context of clean energy technology diffusion. A key text in the 1994 Uruguay Round documents establishing the WTO, the TRIPS Agreement brought intellectual property rules into the multilateral trading system for the first time.
Removing agricultural export subsidies – a polarising topic in trade negotiations – is placed as a MoI under the category for ending hunger, achieving food security and adequate nutrition for all, and promoting sustainable agriculture. The draft text calls for a reduction in distortions to international trade, including phasing out agricultural export subsidies. Reference is made to the WTO 2005 Hong Kong ministerial, where members agreed to the elimination of such trade support, with longer compliance timelines for developing economies.
Oceans goal intact
Other forms of subsidies are also addressed as targets within other goals themselves. The proposed marine resources and oceans goal includes a target of eliminating subsidies that contribute to overcapacity and overfishing by 2020, and for the first time includes the idea of a standstill under which countries would refraining from introducing new subsidies of this kind. The target does, however, include language aimed at accounting for the special needs of poor countries and small island developing states (SIDS).
Dubbed 21st century issues, observers had feared that separate oceans and terrestrial ecosystems headlines would be assimilated into one goal as the proceedings moved forward. Although previous OWG sessions had seen some governments advocate for a stand-alone oceans goal, discussion around prioritising in both these areas has reportedly proved complex. Notably, no means of implementation are suggested at the end of the document for the ecosystems goal.
Climate and energy
Elsewhere, phasing out inefficient fossil fuel subsidies by 2030 remains a target under the goal of affordable and sustainable energy services for all, together with doubling of the share of renewables in the global energy mix. As with the fisheries subsidies language, however, the target of reduction of fossil fuel subsidies is now somewhat more nuanced, and includes the development of “solutions that aim to secure affordable energy for the poorest.”
The renewable energy targets reflect UN Secretary General Ban Ki-moon’s Sustainable Energy for All (SE4ALL) initiative, launched in 2011. Some critics have suggested that this figure will not be enough to achieve an energy mix that avoids further climate damage.
For its part, the proposed climate goal includes two phrases: “promote actions at all levels to address climate change,” as well as “build a climate change goal based on the outcome of COP21 of the UNFCCC,” referring to a process under the UN Framework Convention on Climate Change (UNFCCC). Countries are currently in the process of tough negotiations towards a universal climate deal to be concluded by next year’s 21st Conference of the Parties (COP) in Paris, with a round of preparatory meetings currently taking place in Bonn, Germany.
Next steps
As the clock ticks down on the expiry of the MDGs, observers and governments alike are increasingly looking for guidance on how the SDG and post-2015 process will move forward and come together as a coherent whole. Some suggest guidance may come from a synthesis report produced by the UN Secretary-General towards the end of 2014.
OWG participants will convene for their next formal session from 16-20 June. With only 10 working days left on the group’s schedule, the pressure is on to produce a concise, action-oriented document required by the Rio+20 mandate. Analysts suggest that this next meeting will be particularly important in this respect.
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Singapore to boost economic ties with Africa
Third edition of Africa Singapore Business Forum sets the stage for stronger trade and investment flows between both markets
1. Singapore has emerged the largest investor in Africa among the ASEAN countries, according to the latest United Nations’ World Investment Report 2013. Located strategically in the heart of Southeast Asia, Singapore’s economic ties with Africa have been on the rise. As of end 2012, Singapore’s investments into Africa saw a compound annual growth rate (CAGR) of 11.2% over the previous five years, reaching US$15.9 billion(1). Singapore-Africa trade has also increased, reaching US$11.1 billion in 2013, achieving a strong CAGR of 11.7% since 2009.
2. According to International Enterprise (IE) Singapore, the Singapore government agency promoting trade and overseas investments, there are currently over 60 Singapore companies operating in over 50 countries in Africa. Projects span a wide range of sectors from agri-business, food & beverage and oil & gas, to eGovernment services, information & communications technology, and transport & logistics.
3. Said Mr G. Jayakrishnan, Group Director for Middle East and Africa, IE Singapore, “Singapore companies are taking concrete steps to participate more actively in Africa’s growth. Given Africa’s significant development needs, we see an opportunity to collaborate and develop long-term solutions in many areas including urban development & planning, eGovernment, oil & gas, transport & logistics, manufacturing & special economic zones, technical and vocational training, power, water and affordable housing. Singapore can contribute actively as governments across Africa look to diversify growth and improve both business and social infrastructure for their countries.”
Potential for increased Africa-Singapore partnerships
4. Despite Singapore’s limited domestic market and lack of natural resources, the country has progressed from a third to first world country and developed into a competitive and dynamic business hub. During its post-independence years, Singapore companies have accumulated extensive experience and capabilities in many sectors including eGovernment, urban planning and development, and oil & gas.
eGovernment
5. Singapore’s eGovernment journey started in the early 80s with the goal of transforming the small city-state into a world-class user of information technology. Today, Singapore is consistently recognised by international benchmarking studies such World Economic Forum’s Global IT Report and the country’s eGovernment projects have garnered international accolades including the Stockholm Challenge Award and the UN Public Service Award. Sharing its expertise with Africa, CrimsonLogic, a Singapore eSolutions provider, developed an eJudiciary system (Electronic Judiciary) for the Supreme Court and High Courts in Oshakati and Windhoek, Namibia. The new system enabled the judiciary to effectively file court documents and manage case activities electronically, and digitally record court proceedings.
Urban planning and development
6. Constrained by land space, Singapore has paid careful attention to the efficient use of land through long-term urban planning since its early stages of development. This has enabled Singapore to manage challenges that many rapidly-growing cities face, such as outages of power and water, insufficient public housing, sanitation and waste treatment, and traffic congestion.
7. From a water-scarce nation faced with acute housing shortage, Singapore has grown into a world leader in the field of integrated water management with quality homes and living environments. Today, 100% of Singapore’s population has access to drinking water and modern sanitation facilities while over 90% Singaporeans possess their own homes – this is one of the highest rate of home ownership in the world(2). Singapore companies have exported these solutions to Africa, such as Sembcorp Silulumanzi projects in Ballito and Mbombela municipalities, which provide safe drinking water and wastewater treatment.
Oil & gas
8. In the oil & gas sector, Singapore is one of the biggest refining centres in the world and home to many oil & gas equipment manufacturers and distributors. As the world leader in the construction of offshore equipment such as jack-up rigs, semi-submersibles, and floating production storage and offloading services, Singapore companies such as Keppel Offshore & Marine, Sembcorp Marine, RK Offshore, and Pacific Radiance, are presently providing these services to Africa.
Singapore – the gateway to Asia
9. For African companies looking to expand into Asia, Singapore can also be the ideal launch pad. We are the world’s easiest place to do business(3) and Asia’s most competitive country(4). Over 7,000 multinational companies have set up in Singapore, with more than 50% using Singapore as their regional headquarters. To date, there are over 10 African companies present in Singapore. For example, African oil company Sonangol, has set up a Singapore office to facilitate its oil trade with Asia, leveraging Singapore’s good geographical location and pro-business environment.
10. Added Mr G. Jayakrishnan, “Asia is enjoying a period of upward growth and remains one of the bright spots amid the current global landscape. To tap into this growth, we welcome African companies to partner Singapore companies, leverage Singapore’s position and connectivity to expand into the region.”
Catalysing partnerships – Africa Singapore Business Forum 2014
11. To help African and Singapore companies to connect and identify joint business opportunities, IE Singapore has been organising the Africa Singapore Business Forum (ASBF). A premier business platform for fostering investment, trade and thought leadership between Asia and Africa, the third edition will be held in Singapore from 27-28 August 2014.
12. ASBF 2014 will address a wide range of critical issues on Africa’s economic landscape, provide insights into Singapore’s competitive advantages as well as identify opportunities for strategic collaboration between both regions. A highlight of this year’s programme is the keynote panel with Singapore’s Deputy Prime Minister and Minister of Finance, Tharman Shanmugaratnam.
13. Hosted in Singapore since 2010, ASBF has brought together close to 1,000 business leaders and government leaders from 30 countries. For more information on ASBF 2014, please visit www.iesingapore.com/asbf.
Distributed by APO (African Press Organization) on behalf of International Enterprise (IE) Singapore.
(1) Source: Department of Statistics, Singapore’s Ministry of Trade and Industry
(2) Source: Singapore’s Ministry of National Development
(3) Source: Ease of Doing Business Ranking, World Bank
(4) Source: Global Competitiveness Report 2013/14, World Economic Forum
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Writing Africa off is a mistake
May 25 marked Africa Day, an opportunity to celebrate the continent’s potential and its new-found economic dynamism. And yet, despite a record of growth rates consistently outperforming that of other emerging economies, huge natural resources endowments, an expanding middle class and an energetic, youthful workforce, Africa is consistently written off. Why?
The unconscionable kidnapping of over 200 schoolgirls was just one of a string of recent attacks by extremists in Nigeria. But while our hearts go out to the girls and their families, and those killed by recent bombings, these tragic stories must not be allowed to completely overshadow the progress and potential that Africa has demonstrated in recent years. For while violence typically seizes headlines, the continent’s rapidly growing population and consumer base is providing an alternative, oft-overlooked narrative – one of an attractive market for regional and global companies.
In the last decade alone, growth has been broad-based, not just in commodities, but also in telecommunications, banking, construction, retail and real estate. Such opportunities have not gone unnoticed in the developed world, and an increasing number of investment funds are looking to Africa for high returns.
This is occurring against a backdrop of declining risk and an improved business environment thanks to better legislation, enforcement of such legislation, and stronger institutions. Such improvements have paved the way for some eye-catching investment numbers: according to the African Development Bank, in 2012 China alone had some $27 billion invested in the continent. And just last month, at the World Economic Forum in Nigeria, the Chinese government announced it would invest $42 billion in Africa, $30 billion of which will go to the extension of credit lines, $10 billion to finance investment and $2 billion for the China-Africa investment fund. The United States is also planning to increase business opportunities for American companies in Africa.
But as the yardstick of the Millennium Development Goals underscores, the gains have not just been in business. True, the top goal of reducing hunger and extreme poverty is very much a work in progress, but significant strides have been made in other areas. According to the United Nations, primary school enrollment increased markedly in sub-Saharan Africa, from 58 percent to 76 percent between 1999 and 2010. Access to treatment for people living with HIV, meanwhile, has expanded right across Africa – from a 20 percent increase in sub-Saharan Africa to what is termed universal access (defined as coverage of at least 80 percent of the population in need) in Botswana, Namibia and Rwanda.
Yet while doing business in Africa seems a safer investment than ever before, we must not be naïve. For a start, while the promising growth and investment seen among some countries is certainly real, it is sometimes unclear if average Africans are benefiting – even as billions pour in, there are educational and environmental issues aplenty, not to mention a massive shortfall in basic infrastructure.
With this in mind, African leaders would do well to consider expanding the role of public-private partnerships, which can leverage public financing and strengthen collaboration with emerging donors. The Global Alliance for Vaccines and Immunization (GAVI), for example, has enjoyed a decade of successes thanks to its unique public-private partnership model, which has built a lean organization that relies on local partners in beneficiary countries. As a result, in 10 years, GAVI has saved more than 4 million lives and has immunized an additional 256 million children in the world's poorest countries. More recently, the U.N. secretary general has launched several initiatives based on strong partnerships between private and public actors, including Every Women Every Child and Sustainable Energy for All.
But such partnerships cannot succeed without the foundations of effective, accountable governance, something that Africans themselves are calling for. Just look at the voting on the U.N. MY World’s global survey, which gives citizens the chance to contribute to the new 2015 Sustainable Development Agenda. Of the nearly half a million Africans who have voted, an honest and responsive government was rated as one of the top four priorities for a better life.
Clearly, the communications revolution is allowing citizens to be more engaged in how their countries’ are run, and is allowing them to play a fuller role in society by providing better access to information and helping them organize. This has energized participation and fostered greater accountability. But more needs to be done, a reality noted by the U.N. Secretary General’s High-level Panel on the Post-2015 Development Agenda, which called for a “data revolution” to monitor progress and strengthen accountability. Data, hard numbers and evidence are poised to take over from ideology.
What does all this mean for the new development agenda, which is to be set next year to succeed the MDG’s?
As noted in the work of the African Union High-Level Committee on Post-2015, finding a balance between people and planet is not just a priority, it is essential. Africa must therefore tackle much needed structural reorganization – including establishing fair prices for domestic resources, proper taxation both domestically and for foreign companies – while stemming illicit financial flows through secret tax havens and other channels. Indeed, an upcoming report from the United Nations Economic Commission for Africa’s High Level Panel on illicit Financing Flows led by former South African President Thabo Mbeki is expected to indicate that illicit flows from Africa each year could be as much as twice as large as the amount of Official Development Assistance (ODA) allocated to Africa for the same period.
The solutions are many and complex, but must include greater transparency in the international corporate tax system. The United States and EU have already passed legislation requiring all companies in the oil, gas and mining sector to disclose their payments to governments on a country-by-country and project-by-project basis, but this must be expanded to cover all sectors. There must be fair and open exchanges of information between developed and developing countries, requiring commitment on both sides.
Ultimately, it is important to remember that Africa is not a single entity with one-size-fits-all solutions. Instead, it is a vast continent of small economies and landlocked countries. Given its geography, problems must be tackled by region, so countries can work together to reap the benefits of economies of scale. The continent’s infrastructure, which is sorely in need of significant investment and upgrade, is a good example of where these economies of scale could prove useful. Such cooperation would also help develop intra-African trade and enhance the region’s competitiveness in the global economy.
But all of this will only be possible if developed nations keep an open mind, and appreciate that while extremism and unrest such as that seen in northern Nigeria or elsewhere in the continent is a reason for caution, it is not a reason to overlook the progress that has been made. The West, especially, needs to change the way it looks and acts towards Africa, and be willing to embrace its opportunities, even as it remains realistic about the challenges. If it can do so, it will help foster the kind of sustainable growth and progress that will be good for everyone.
Amina Mohammed is a special adviser to the U.N. Secretary General on Post-2015 Development Planning. Hadeel Ibrahim is the founding executive director of the Mo Ibrahim Foundation, which supports leadership and governance issues in Africa. They are working to convene a discussion on this theme on the margins of the 69th Session of the U.N. General Assembly in. The views expressed are their own.
Mining sector core to SA’s GDP growth
Mining was at the core of South Africa’s economy and was one of the top five priority sectors that government was focusing on, Chamber of Mines COO Roger Baxter emphasised during the fourth Africa Iron Ore Conference, in Johannesburg, on Wednesday.
He stated that the mining sector’s contribution to the economy was not insignificant, contributing 18% on a multiplied basis to the country’s gross domestic product (GDP).
“Mining is the flywheel of South Africa’s economy and when the mining sector is not doing well, it is reflected in the economy, which we have seen in the first quarter of this year with the strikes in the platinum sector,” he said.
He added that, during the first half of the year, mining had experienced a 24% decline in its contribution to the GDP, the biggest rate of decline in mining output in the last 47 years.
“The country’s economic growth in the last two decades has been just above 3%, with the recent growth rate being 2%. That translates into South Africa doubling its economy in 35 years, which is too slow and not sustainable from an economic and social perspective,” Baxter stressed.
He cited that making the country’s economy more inclusive as it grew was critical and that the biggest problem was that nontradable domestic consumer sectors such as financial services, wholesale and retail trade had seen most of the growth in the past two decades.
“Tradable exports have grown at a much slower pace, resulting in the country consuming more than it produces,” he said.
Baxter added that the National Development Plan (NDP), which was put forward as the focus of economic policy-making at the African National Congress’s elective conference, in Manguang, in 2012, recognises that tradable export sectors needed to grow at a faster pace for the country to have more sustainable, balanced and inclusive growth.
He believed that mining had a lot of potential to contribute towards that goal.
The specific policy resolutions in the NDP related to State intervention focused on beneficiation and the declaration of strategic minerals.
“From the Chambers of Mine’s perspective, the policy resolutions are supported and they make a lot of sense,” he said.
Baxter explained that South Africa beneficiates a significant portion of its minerals, with 80% of the country’s steel being produced locally, from locally mined minerals.
He pointed out that Sasol had mined R11-billion worth of coal in 2012 and generated R165-billion worth of sales value, which, he said, was another good example of beneficiation in the mining sector.
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Developing countries not ready to join tax evasion crackdown – OECD
Most developing countries do not have tax systems sophisticated enough for them to join a new OECD-led transnational project for countries to automatically exchange tax information in an effort to tackle evasion and offshore financial havens, said an official from the OECD.
The Paris-based Organisation for Economic Development and Cooperation announced earlier this month that 47 countries have committed to automatically share on an annual basis the financial information of account holders in their jurisdictions.
The information will include taxpayers' bank balances, dividends, interest income and sales proceeds used to calculate capital gains tax. Financial companies will also be required to identify the ultimate beneficiaries of shell companies, trusts and similar legal arrangements.
While the OECD’s new standard should make it more difficult for companies and individuals to dodge taxes by shifting their money abroad, only relatively rich countries will take part in the automatic exchange of financial information.
“Most (developing countries) are not yet ready and most of them don’t want it,” Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration said. “When we talk to them, and we’re deeply involved with them, a significant number of them say ‘we don’t see any interest for us in there.’”
However, campaign groups say that developing countries are hit particularly hard by opaque offshore financial centres and secretive banking laws, which hold back their economies and increase inequality globally.
Fraudulent trade invoicing in five African countries cheated taxpayers out of a combined $14.4 billion in revenue in the 10 years to 2011, according to a report this month by Global Financial Integrity, a Washington DC-based research and advocacy organisation.
A February report by campaign group Tax Justice Network - Africa and international development agency Christian Aid noted that while a number of African countries are achieving high economic growth rates, those figures mask widening inequality.
The report highlighted poor tax policy, tax evasion and the growth of illicit financial flows from Africa as key factors in increasing inequality on the continent.
Saint-Amans said that the reason developing countries were not ready to automatically exchange financial information with other countries was because their domestic tax systems were not sufficiently sophisticated.
“Some don’t have an automatic exchange of information internally. They don’t have access automatically to the information of their own citizens, their own taxpayers,” Saint-Amans said.
The OECD and the G20 are working to establish “a road map” that will set conditions for developing countries to progress towards automatic exchange of information, Saint-Amans said, adding that while developing countries would face challenges meeting some of the conditions, the OECD would provide help where it could.
PROTECTING CONFIDENTIALITY
The ability of a developing country to safeguard confidentiality of the financial information it receives from abroad was one challenge that Saint-Amans highlighted.
Currently, a country requests the financial details of an individual or company from another country, which in turn can decide not to respond if they choose, Saint-Amans said, giving the example of requests for information that may be used for political gains.
“You have a request from the government on the main opponent in the country… in that case, you know there are risks of leakage of the information or misuse of the information,” Saint Amans said.
“Automatic exchange of information is radically different because the bank collects the information and sends it automatically to other countries; therefore the risks of misuse of the information are pretty high.
“That’s why you shouldn’t engage with automatic exchange of information with a country unless that country has ‘Chinese Walls’ in all its procedures to protect the confidentiality of the information,” Saint-Amans added.
While it may take time for a developing country to build up its tax systems to the point that it can share financial information on an automatic basis, the process could have very good spillover effects, enhancing the capacity of a country’s domestic collection of information, Saint-Amans said.
The countries that have committed to automatic exchange of information are all 34 OECD member countries, plus Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa.
Although the signatories did not officially commit to a specific deadline, the UK, France, Germany, Italy and Spain have agreed to become early adopters and aim to have exchange of information up and running by 2017 using tax data collected from the end of 2015.
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WTO Annual Report 2014
The Annual Report 2014 provides an overview of WTO activities in 2013 and early 2014. The report opens with a message from WTO Director-General Roberto Azevêdo and a brief summary of the year, followed by an in-depth review of the WTO's main areas of activity.
A message from WTO Director-General
Roberto Azevêdo
The World Trade Organization is back in business. That’s the message that rang out loud and clear from the Bali Ministerial Conference at the end of last year, when all members of the WTO agreed on a package of measures aimed at streamlining customs practices, tackling important agricultural issues, and boosting opportunities for our poorest members. The “Bali Package” is the first set of agreements struck since the WTO was created in 1995 and represents a positive step towards concluding the Doha Round of trade negotiations, which began in 2001.
Once implemented, the Bali Package will provide a boost to the global economy, delivering growth and jobs. Indeed, it is estimated that the deal could be worth up to US$ 1 trillion per year, generating up to 21 million jobs around the world. Crucially, the majority of these gains would accrue to developing and least-developed countries. Indeed, the negotiating process leading up to Bali created a new dynamic in the WTO as developing and least-developed countries made their voices heard as never before.
The practical benefits of the Bali Package are manifold. Entrepreneurs in developing countries will have new opportunities to participate in global trade while enterprises across the world, particularly small and medium-sized companies, will benefit from a reduction in red tape – and in an unprecedented step developing countries will be given support to build capacity in order to implement the agreement. In addition, trade in agriculture will be more transparent for many products and markets. Governments agreed to reduce export subsidies in agriculture and keep them at low levels, to increase transparency and opportunities with respect to trade in agricultural products, and to facilitate efforts of developing countries in stockpiling for food security purposes.
Bali also brought significant systemic benefits. Once again the WTO is a viable forum for negotiations. By demonstrating we can reach multilaterally agreed outcomes, we have put the spotlight back onto the WTO and raised expectations for what else we might be able to achieve. Over the coming months, it is vital that we build on the momentum that the deal created – and ensure that the WTO can deliver even more in the future.
First and foremost, we have to harvest the benefits of Bali by fully implementing the decisions reached at the Bali Conference – including implementing the Trade Facilitation Agreement and delivering the support promised for developing countries. Secondly, as instructed by ministers at the end of the Conference, we must prepare a clearly defined work programme by December 2014 which sets out a roadmap to conclude the Doha Round. Our goal is nothing less than to complete the Doha Round, and to do it as quickly as possible.
Let’s not forget what is at stake here. Trade is a powerful force for growth and development. It stimulates innovation and competitiveness, supports the creation of high-quality jobs, provides access to new products, lowers prices, cuts the cost of living and brings peoples of different nations closer together. Above all, trade improves the quality of people’s lives.
In the last two years, trade growth has slowed to just over 2 per cent and our forecast for 2014, while higher at 4.7 per cent, is still below the 20-year trend. But members are not powerless in the face of these figures. We can actively support trade growth by avoiding protectionism in times of uncertainty and by reaching new trade agreements.
There has been a lot of focus in recent times on regional and bilateral agreements. These initiatives clearly have a role to play – indeed, I believe they are an important complement to the multilateral system. But it is clear that they are not sufficient on their own. For example, they leave out a large number of countries – not only the most dynamic emerging economies, but also the smallest and most vulnerable. In addition, many of the big issues (and therefore many of the big gains) can only be tackled at the global level. Streamlining customs procedures through the Trade Facilitation Agreement and tackling agricultural subsidies are just two examples of issues which can only be properly tackled multilaterally.
This is not just my view. Since the Bali conference, I have travelled far and wide to consult with leaders on the next steps for the WTO. From every country I have visited and every leader I have spoken to, I have been struck by the positivity towards our work in Geneva. There is strong support for the multilateral trading system and the WTO – and a will to build on the momentum of Bali.
Since my appointment as Director-General in September of last year, I have been struck by the commitment shown by WTO members and the Secretariat to achieve results. Bali was an historic occasion for the WTO. My sincere hope is that it heralded the beginning of a new era. Of course, hope is not enough on its own, but I am confident that with the same dedication and commitment we saw from our members last year, we will continue to make further progress in 2014 and beyond – and therefore help to improve the lives of the people we are here to serve.
Excerpts taken from the WTO Annual Report 2014 - Chapter 1: Introduction.
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New realities in the world order
While Narendra Modi’s immediate task will be to focus on bailing India out of its current economic crisis, it would be a mistake to ignore the massive shifts the world has undergone while India was caught up in election fever
Sometime in 2005, goes the story at the Indian Embassy in Beijing, the then Gujarat Chief Minister Narendra Modi got in touch as he wanted to visit China and study business and investment opportunities. The Ministry of External Affairs in Delhi was cold to the idea, given the taint of the Gujarat riots of 2002, while the Embassy was unsure of what kind of protocol Mr. Modi could receive as no dignitary was available to meet him.
Mr. Modi’s reply startled them as he said his was a “study tour,” and if they wished to, they could treat it as a personal visit. Officials describe how Mr. Modi arrived a few months later, on his own, armed with only a notebook and pen. Gujarati businessmen helped open a few doors for him, but for the most part Mr. Modi travelled to state capitals and economic zones like Shenzhen, taking furious notes. At the end of his visit, Mr. Modi said that he had been struck by three things — the importance of economic diplomacy, the marvel of urban planning (his plan for the Sabarmati riverfront possibly came from here), and the fact that China was hampered most by the lack of spoken English in the country.
Driven by trade
Each of these impressions has had lasting impact on Mr. Modi, who made four official visits after the first one to China, and was even received in the Great Hall of the People in 2011. He has made it clear that his foreign policy will be driven by trade and boosting investment in India. Mr. Modi’s ideas include getting Indian States to drive investment by engaging with foreign countries directly (à la ‘Vibrant Gujarat’), having an economic officer in every Indian embassy (a hint that non-service officers and businessmen will be enlisted for the job), and a key goal, according to reports from his team, of raising India’s ranking in the World Bank’s “Ease of doing business” index from the current 134 to less than 100.
Global power structures
As Chief Minister, Mr. Modi was able to keep the focus on business in bilateral ties. In the midst of the border row with Chinese troops and the anger over stapled visas for example, he paid a visit to Beijing and Shanghai, to speak of R&D investment from Huawei and a deep sea port for Gujarat. Despite tensions at the Line of Control in July 2013, Mr. Modi had an official delegation from Pakistan to discuss solar energy projects. On visits abroad too, he has confined himself to countries where business opportunities are most viable — China, Japan, Israel, Singapore and Australia. But for America’s visa ban, the United States would undoubtedly have been high on that list. The new External Affairs Minister, Sushma Swaraj, has certainly taken the same cues from here. As she kicks off her bilateral meetings with a visit from Chinese Foreign Minister Wang Yi this weekend, she has yet to confirm whether she will give any time to the U.S. Assistant Secretary for South and Central Asian Affairs, Nisha Desai Biswal, at the same time.
However, while Mr. Modi’s task will be to focus on bailing India out of its current economic crisis, it would be a mistake to ignore the massive shifts the world has undergone while India was caught up in election fever — to begin with, the situation in Ukraine, a lightning rod for what is now called “Cold War 2.0” between the U.S. and Russia. While the unrest in the country may ease up after the presidential elections, and the impending withdrawal of Russian troops from the Ukraine border, there are even more far-reaching consequences for the new Indian administration to study. Russia’s annexation of Crimea has not only changed the map in the most dramatic way possible, but has also changed power structures in the world, with Russian President Vladimir Putin gaining the upper hand. In their campaign against Russia at the U.N., U.S. and European Union officials have warned that Mr. Putin’s actions hold a dangerous precedent for India too, especially when it comes to possible designs by China on parts of Arunachal Pradesh. Conversely, the actions of western diplomats and U.S. non-governmental organisations in Ukraine, who openly supported anti-Russian protesters to oust their government while attempting to pull Ukraine into the EU, is also a dangerous precedent for the world. Mr. Modi will face his first look at all these new realities in mid-July, when he meets Mr. Putin at the BRICS summit in Brazil, and when the world, especially the U.S. and EU countries, will be watching his statements.
BRICS Summit
The BRICS summit will also be an occasion for Mr. Modi to meet Chinese President Xi Jinping, and set the course for India-China ties. Chinese think tanks and newspapers have hailed Mr. Modi’s electoral victory, and chosen to downplay his campaign speech on China’s “expansionist mindset.” Yet, China’s actions in the South China Sea in the past few months will be, like Crimea, another talking point in Brazil. The latest stand-off has been sparked by China building an oil rig in waters that Vietnam lays claim to. Tensions have also been building with Japan, the Philippines and Vietnam over China’s increasing claims on airspace and maritime boundaries in the region. For its part, India has resisted joining the argument. But once again, the world will be scrutinising the interactions between Mr. Modi and Mr. Xi, more so Japan’s Prime Minister Shinzo¯ Abe, who has welcomed Mr. Modi to Japan in the past and made glowing references to him in the just concluded “Shangri-La” Dialogue conducted by the International Institute for Strategic Studies (IISS) in Singapore. When Mr. Abe won his 2012 election, Mr. Modi was one of the first to congratulate him. Mr. Abe even follows Mr. Modi on Twitter (significant because Mr. Abe only follows three accounts). The two leaders spoke for 15 minutes when Mr. Abe called to return the greetings on Mr. Modi’s win. It will be important to see how he balances Japan’s concerns with his own old relationship with the Chinese leadership.
Perhaps the most significant discussion at the BRICS summit, however, will be over West Asia, and nuclear talks between Iran and six world powers (the U.S., the United Kingdom, France, Germany, China and Russia) that hope to reach some conclusion in July. If the talks succeed, it could rewrite history, given the far-reaching consequences on the oil economy, nuclear energy and Arab-Persian rivalry in a region that houses and employs six million Indians. The talks so far have been ignored in the din of the election, but repercussions, including the anger of U.S. allies, Israel and Saudi Arabia, will have an impact on South Asia as well.
Finally, there are all the significant developments in India’s neighbourhood — Afghanistan’s historic elections that will possibly confirm front runner Dr. Abdullah Abdullah’s victory in June; Pakistan’s talks with the Taliban, and the rise in attacks on the media.
Inviting all South Asian Association for Regional Cooperation (SAARC) leaders to Mr. Modi’s swearing-in is certainly a nice touch to start with, and hopefully heralds India’s re-engagement with a world it has effectively shut out during nine months of what has perhaps been its longest campaign. For Mr. Modi, unlike his experience of 2005, the welcome mat is no longer a problem, but the new Indian Prime Minister may want to keep that notebook and pen handy as he sets out to deal with new realities in the world order.
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Region’s economic growth third fastest
More than half the countries in Sub-Saharan Africa are estimated to have realised economic growth rates of not less than 5 per cent, a report shows.
The International Labour Organisation (ILO) “Global Employment Trends 2014 Report” also shows that only two countries – the Central African Republic and Equatorial Guinea – registered negative growth.
It notes that the current economic outlook indicates that regional growth rates of at least 5 per cent are sustainable, provided that global economic conditions do not weaken exports or reduce inflows of investment and aid.
“Both investment and aid are important as different groups of countries tend to benefit from these financial flows,” adds the report.
Ghana
The report says high rates of growth contributed to an improvement in some labour market indicators with countries like Ghana realising an average annual economic growth rate of 6.8 per cent during the 2001–12 period.
It adds that the growth has continued to be solid in Sub-Saharan Africa with GDP year-on-year growth in 2013 being estimated to be 4.8 per cent.
“This is slightly below the growth rates seen in recent years but it is still the third fastest regional growth rate after East Asia and South-East Asia and the Pacific,” notes the report.
It adds that growth in Sub-Saharan Africa is also high compared to the 1990s. From 1991 to 2000, the regional economic growth averaged 2.3 per cent annually. During the 200-12 period, it shot to 5.7 per cent.
“The average unemployment rate in Sub-Saharan Africa as a whole during the 2001–12 period is estimated to be half a percentage point below the 1991–2000 rate,” it adds.
The report says there is a similarity with the development of Sub-Saharan Africa as the regional vulnerable employment rate decreased by only 2.3 per cent from 2001 to 2012.
“All other developing regions show a larger decrease in the vulnerable employment rate despite lower rates of economic growth than were experienced in Sub-Saharan Africa,” notes the report.
The report adds that the vulnerable employment rate in Sub-Saharan Africa is estimated at 77.4 per cent in 2013 – the highest in all regions.
“Facing underdeveloped or non-existent social protection systems, a large share of the working-age population in the region is obliged to work to provide for their families,” adds the report.
The report also says that as a consequence, the labour force participation rate across all labour market groups is estimated at 70.8 per cent in 2013, and Sub-Saharan Africa is the only region in which the male adult labour force participation rate is projected to rise in 2014 and 2015.
“In many developing economies, the manufacturing sector has served as an engine of paid employment creation but by and large, this has not happened in Sub-Saharan Africa,” adds the report.
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Russia getting support from European Commission in Ukraine gas talks - minister
The European Commission has effectively supported the Russian position in the second and third round of talks on payment of Ukraine’s gas debt to Russia, Energy Minister Alexander Novak said in an interview with Rossiya 24 television.
“I consider that the European Commission has behaved quite constructively at these and previous consultations and many of the positions that Russia has announced are effectively being supported, including over the need to repay the debt. In the estimation of [European] Energy Commissioner [Gunther Oettinger] that price the Ukrainian side is declaring - $268 per 1,000 cubic meters - is not a market price,” Novak said.
“The Ukrainian side constantly changes its position: it previously said it would not contest the debt as of April 1, 2014, either the prices or volumes Then it said it would only pay for deliveries in February and March [and would dispute the price of deliveries in 2013],” Novak said.
The talks scheduled for Monday will include a discussion of the repayment schedule, he said. The price proposed by Ukraine - $268 per 1,000 cubic meters - is unacceptable to Russia, he said.
“The discussion here can only be about the price that has shaped up on the market and at which Russia delivers gas to neighboring, analogous EU countries,” he said, adding that price, all the same, remains the subject for talks between the companies, since the contract contains a great number of provisions.
The European Commission has come to the “complete understanding” that Russia has no interest in escalating the situation and is fully meeting its commitments.
“Meanwhile, the Ukrainian side keeps changing its position, making fresh demands, and is still not paying for the gas being delivered,” Novak said.
Russia, in contrast to Ukraine, is not aggravating the situation by filing a lawsuit in Stockholm for arbitration, which will prevent a speedy settlement of the issues in dispute.
“We are trying to find a compromise and reach an agreement. We are interested in having reliable, stable gas deliveries to consumers in Ukraine and in Europe,” he said, Interfax reports.
Gazprom has plans to file a lawsuit against Naftogaz in Stockholm arbitration, Gazprom CEO Alexei Miller said without providing further detail. Gazprom previously reported that it presented Ukraine a bill totaling $11.388 for failing to take up gas volumes specified under take-or-pay provisions in 2013 and another totaling $7.2 billion for 2012. The Ukrainian side has refused to pay the bills.
“Simultaneously with its decision no to impose prepayment requirements until June 9, Gazprom has made the decision to refrain from filing suit in Stockholm arbitration during this period,” Gazprom CEO Alexei Miller told journalists on Monday.
A discount from Gazprom could reduce the price Ukraine pays for Russian gas below $385.5 per 1,000 cubic meters, Gazprom CEO Alexei Miller told journalists.
“If Ukraine repays its gas debt, the Russian side will be ready to consider an arrangement for resolving the issue of price not only with a reduction in the export duty, but also under a direct commercial agreement on a corporate basis,” Miller said.
Gazprom confirmed on Monday receipt of the first tranche of Naftogaz payment for gas equal to $786 million. “We welcome the start to repayment by Ukraine and reschedule the prepayment regime for June 9,” Gazprom CEO Alexei Miller told journalists.
“Introduction of the prepayment regime will depend on repayment of the debt for gas delivered prior to April 1 totaling $2.237 billion, a portion of which was paid today, and from progress in payment for deliveries in April and May. Payment for May must be made before June 9,” Miller said, Interfax reports.
The Naftogaz Ukrainy Company has sent Gazprom a draft supplementary agreement to the concluded contract, dated 2009, for the purchase-and-sale of natural gas. The draft supplementary agreement “will make it possible to settle all contentious issues regarding the import of Russian gas,” the press service of the Ukrainian company announced on Monday.
“The supplementary agreement provides for the introduction of changes to the contract terms concerning price, amounts and conditions for the deliveries of natural gas,” the company announcement said.
The announcement also points out that on Monday “a fourth round of trilateral talks of Ukraine, Russia, and the European Union will be held on matters relating to the supply of Russian gas to Ukraine”.
“The NAK (national joint-stock company) Naftogaz Ukrainy intends to carry on talks with the OAO (public joint-stock company) Gazprom in a constructive vein,” the company’s press service emphasized.
Russia confirmed receiving $786.4 million as payment for part of Ukrainian gas debt on Monday, the day when Moscow, Kiev and EU Energy Commissioner Gunther Oettinger will meet to discuss gas agreement and discounts.
Ukraine’s parliament-appointed Prime Minister Arseniy Yatsenyuk said that Monday’s talks between Russian Energy Minister Alexander Novak and Ukrainian Energy Minister Yuriy Prodan will either result in signing a Russian-Ukrainian deal or in Kiev turning to a Stockholm arbitration court.
Ukraine’s Naftogaz of Ukraine has sent a draft additional agreement to Russia’s gas giant Gazprom which can settle all the controversial matters, the company said in a statement.
“The additional agreement envisages the contract’s price, volume and the terms of natural gas supplies,” the statement said. “Naftogaz of Ukraine intends to resume the talks with Gazprom in a constructive manner.”
The European Commission is also committed to reaching a deal.
“The European Commission believes it necessary to use all the possibilities to reach a mutually acceptable compromise. Russia and Ukraine must try to find at least an intermediate solution to prevent interruption in gas supplies,” an European Commission official said.
On Friday, Ukraine said it paid $786 million, which Prodan said Kiev does not doubt as debt. Ukraine calculated the debt at $268.5 per 1,000 cubic meters of gas.
Kiev has long been seeking a revision of a 2009 contract, under which it is to buy a set volume of gas, whether it needs it or not, at Europe’s highest price of $485 per 1,000 cubic meters.
Moscow dropped the price to $268.5 after Ukraine’s then-President Viktor Yanukovych turned his back on an association agreement with the EU last year, but reinstated the original price after he was ousted in February.
Gazprom says Ukraine owes it around $3.5 billion, and has threatened to stop supplying the neighboring former Soviet republic with gas if it fails to make a pre-payment for June supplies.
CEO Alexei Miller said that Gazprom is not ready to discuss a discount in the current circumstances.
Oettinger indicated that the European Commission may support Ukraine’s discount demands but not before Ukraine repays the debt.
Prodan also said that Ukraine is preparing a suit worth “hundreds of billions of dollars” against Crimea’s seccession from Ukraine in March.
“It is part of a larger suit which Ukraine is preparing against Russia,” he said.
On May 30, Prodan said that Kiev was ready to file a suit against Russia’s Gazprom to the court of arbitration in Stockholm to make Gazprom revise its contract prices for gas.
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Africa: Minerals for manufacturing – Towards a bolder China strategy
Alongside its rise as a dynamic global economy, China has become a key partner to sub-Saharan Africa.
An emerging pattern in China’s growing share of African trade [totaling nearly U.S.$200 billion in 2012] is deals that pair China’s investment in African infrastructure with Chinese access to Africa’s natural resources. African countries provide mainly oil and minerals in exchange for infrastructure financing, either by Chinese state-owned or publicly guaranteed private companies.
This partnership has helped African countries in their quest for growth-enhancing investment. More than ever before, the continent has received tangible returns on its natural resources.
Yet, ahead of the inevitable depletion of its natural resources, Africa needs to shift from the “resources-for-infrastructure” model to a bold strategy of “resources-for-manufacturing”. While the former targets mainly ‘growth enablers’, the latter can ignite a virtuous cycle by emphasizing the ‘engines’ of growth. In this potentially more rewarding partnership, Africa would supply resources to Chinese industries while making progress towards its own industrialization.
A resources-for-manufacturing strategy should be part of a well-designed industrial policy whereby a country could leverage its natural resources to attract some of the labor-intensive manufacturing looking to relocate out of China. With Chinese wages increasing, labor-intensive industries are already being established in developing Asian countries. Africa, with a billion people and a very young labor force – half the population is 19 or younger – is the next logical target for outsourced Chinese manufacturing.
Three main arguments could form a rationale for a resources-for-manufacturing strategy.
Development-targeted infrastructure
First, while the infrastructure gap in sub-Saharan Africa is clear, the quality of infrastructure investments, whether domestically or externally financed, have not always met expectations. Most projects have a limited impact on long-term growth, partly because they were not integrated into a comprehensive development agenda. The story of “the bridge to nowhere” stills haunts some high-cost investments.
Roads, bridges or railways were too-often built to improve the appearance of capital cities or to facilitate the exploitation of the very natural resource for which they were traded. Unless they are part of a broader development strategy, which promotes manufacturing and industrialization, the growth dividends from infrastructure financing will remain below potential.
Resources for job creation
Second, natural resources remain for now the most valuable asset to Africa’s position in world trade. These unrenewable assets should be used strategically and harnessed to support strong, job-creating growth.
Africa’s rapidly expanding economies are creating too few jobs to absorb the 10-12 million young people entering the labour market annually. By leveraging their resources to attract and host Chinese low-skill industries, African countries could spur their structural transformations from low-productivity agriculture to job-generating manufacturing that provides employment – especially for youths and women.
Absent such a strategy, pervasive unemployment will continue to be a drain on the continent’s social fabric and a threat to political stability. A ‘redistributive’ approach that merely tries to spread the benefits of natural resource revenues more widely is at best a sub-optimal solution to address this deep-rooted issue.
Exploiting the ‘Africa Rising’ narrative
Third, a resource-for-manufacturing strategy is timely for both African and Chinese interests.
Chinese labor-intensive industries will outsource an estimated 80 million jobs to the developing world in the next decade, as the country shifts toward high-end manufacturing. Frontier markets like Bangladesh and Indonesia are already attracting textile industries from this trend. With their resource endowments, many African countries that have similar business climates and labor-market characteristics as their developing Asian peers, have an edge to bargain and position themselves as destinations for relocating Chinese industries.
Meanwhile, sub-Saharan Africa’s continued growth has changed the narrative about the region. Many analysts and mainstream media outlets say, “Africa is rising”! Helped by the global slowdown, many investors view Africa as the next frontier of growth. International manufacturing trademarks are moving some of their production lines to a few African countries that have made steps to attract them.
Ethiopia for instance, with low labor costs, has recently attracted a Chinese shoe manufacturer, which is now exporting Ethiopian-made shoes to Europe and the United States. Such an example should be replicated on a larger scale. Adding value to many of the continent’s agricultural products could also give rise to China-financed joint ventures.
The resources-for-manufacturing strategy could be designed at the national level, but could also come as a mandate from Africa’s regional institutions, some of which are exploring ways to better assist countries in their relationship with China. There is room to set up regional baskets of agricultural commodities or minerals and leverage them to negotiate for factories and associated cross-border infrastructure projects.
If there is any one lesson from China’s rise as a key player in the world economy, it lies in the country’s ability to harness its advantage in abundant low-skill labor, assisted by a demographic gift. Paired with far-reaching economic reforms, this has paved the way for massive industrialization and buoyant job creation. More than any redistributive policy, China’s resultant vibrant manufacturing sector has helped lift millions of people out of poverty.
Africa now has the once-in-a-lifetime opportunity to make the best use of its natural resource advantage – by trading access to resources for industries that enhance the manufacturing sector, broaden the fiscal base and create jobs. It may be the ideal way of putting into practice the well-known Chinese proverb: “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime”.
Economist Koffi Alle, senior advisor to the IMF Executive Director for Africa, is a former Economic Advisor to the Minister of Economy and Finance of Cote d’Ivoire, He has over 14 years of development policymaking experience. Opinions expressed in this article are his own and do not represent the views of the IMF or its Executive Board.
Decision by the European Commission’s standing committee on plant health regarding the importation of South African citrus
The phytosanitary measures for Citrus Black Spot (CBS) on fruit imported from South Africa have been a point of discussion in the European Union (EU) by the Standing Committee on Plant Health (SCPH) over the past few weeks. These measures are aimed at preventing the introduction of the fungus Guignardia (Phyllosticta) citricarpa, which causes lesions (black spots) on the citrus fruit.
The EU market remains an important market for South African citrus and, therefore, this department will continuously strive to ensure compliance to the current measures. The key instrument in achieving this compliance goal remains the CBS-risk management system (RMS) which aims to prevent the occurrence of CBS in consignments destined for the EU and other CBS-sensitive markets.Within the RMS, control measures (including registration of orchards and fields, mandatory spraying regimes and inspections pre and post-harvesting) are carried out to minimise the risk. We also continue to ensure that sufficient information is shared with the EU regulatory authorities on any matter concerning the RMS.
The new measures currently being proposed by the SCPH require the sampling of fruit (600 fruit per 30 tons) and, where any symptoms are found, confirmatory tests to be undertaken. This will mean that the producer will incur additional costs for compliance and the department will have to bear the costs for an additional regulatory burden.
The Department of Agriculture, Forestry and Fisheries maintains its position that the commercial fruit does not pose a risk to the EU in terms of the introduction and establishment of CBS into the territory of the EU. However, we are committed to ensuring compliance and acknowledge the open channels of technical communication with the EC affording us opportunities to make inputs.
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African Union Commission to tackle ethics and integrity in customs administrations
The African Union Commission’s seminar on Integrity and Ethics in Customs administrations kicked off on 28 May 2014 in Kigali, Rwanda. Organized by the Department of Trade and Industry in collaboration with the Rwanda Revenue Authority, experts from the Regional Economic Communities (RECs), the African Union Member States, the World Customs Organization (WCO), the United Nations Economic Commission for Africa (UNECA), the private sector representatives and the representatives of anti-corruption commissions, will focus on making recommendations on how best customs administrations in Africa can deal with challenges of implementing effective Integrity and Ethics Programs so as to improve their service delivery. In the three days, experts will also focus on the outcomes of the seminar and inform the Trade Facilitation Cluster of the Action Plan in boosting Intra Africa Trade that was endorsed by the African Union Assembly of Heads of State and Government through their decision (Assembly/ AU/Dec.394 [XVIII]) on Boosting Intra-African Trade and Fast tracking the Continental Free Trade Area (CFTA).
The objective and scope of the Seminar is to take stock of Integrity and Ethics programs in AU Member States Customs Administrations and to critically examine the challenges of implementing them. In addition, the Seminar will also provide a forum for the exchange and sharing of best practices among and between Member States on various issues regarding the implementation of effective Integrity programs. Participants will be given a chance to examine the options available and interrogate them for suitability for implementation at the Continental level.
In his opening remarks, M. Aly Iboura Moussa, Acting Head of Customs Division for the AUC Department of Trade and Industry, pointed out that Customs administrations are often cited as among the most corrupt of all government agencies. He explained that this is essentially because of the nature of their job. “We are all aware that Customs Administrations world over play a vitally important role in every international trade transaction, and is often the first window through which the world views a country. The implications of unethical behavior in customs on a nation’s capacity to benefit from the expansion of the global economy are obvious. More often than not, investors tend to shun countries perceived to have high levels of corruption”, he said. He also mentioned that quick fix solutions to address integrity and ethics issues do not work, and to effectively tackle the problem, a comprehensive and sustainable approach that addresses the underlying causes and consequences is required. “In addition, there should be political support at the policy level and involvement of the private sector through various mechanisms, for example, having Memorandum of Understandings (M.O.Us) for cooperation and implementation of best practices as well as Authorized Economic Operators (AEOs) programs”, he emphasized.
The Commissioner General for Rwanda Revenue Authority, Mr. Richard Tusabe defined corruption as a two way act that implies a giver and a taker and he admitted that private sector is mostly part of the equation. He revealed that Rwanda is one of the few Africa countries that have managed to relatively combat corruption. “However, despite our achievements, we are open to learn from views of different experts in this seminar, while at the same time keeping our doors open for those who would like to learn from us”, he declared. “I hope this seminar will serve as an interactive platform to share views on challenges met while dealing with the issues of corruptions and come up with possible recommendations to ensure the achievement of integrity and ethics in both our Customs Administrations and partners”, he concluded.
The Seminar is organized on the recommendations of the African Union Sub-Committee of Director Generals of Customs who, at their 4th Ordinary session meeting held in Addis Ababa Ethiopia from 6-7 September 2012, recommended among others that “a continental seminar be held to discuss the issue in depth and produce a more specific Declaration that AU Member States can adhere to and implement.”
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Tanzania’s poor suffer from trade tax theft
Tanzania’s mining revenues are touted as a key way to reduce reliance on foreign aid and pull people out of poverty, but experts argue companies are swindling the government out of at least $248 million a year.
The East African nation topped the worst of a list of nations across the continent examined by the watchdog group Global Financial Integrity (GFI), with nearly $19 billion (14 billion euros) in illicit flows over the past decade, the equivalent to over seven percent of the country’s total government revenue.
“There’s a narrative in the development community that there’s something wrong with developing countries, because we keep pumping money in, and they’re not developing as quickly as we’d like them to,” said GFI economist Brian LeBlanc.
“The reality is that we’re draining money out, and we’re doing it at an increasing rate.”
The Washington-based GFI’s examination of trade mis-invoicing reveals stark figures.
Mis-invoicing occurs when businesses deliberately lie about the value of the goods they’re importing or exporting. There are a lot of illegal reasons to do this, including tax evasion and money laundering.
Globally, trade mis-invoicing is a $424 billion a year problem, and makes up about 80 percent of all the money that flows out of developing countries illegally, GFI said.
Numbers like this, when compared to aid, mean there’s far more money draining out of Africa than going in.
Much attention has been given to transfer pricing, when multinational companies employ accounting tricks to shift profits into countries where they’ll pay less tax.
Trade mis-invoicing is different. It involves tangible goods that are shipped across borders, and the activity is therefore a lot easier to spot.
- ‘Critical’ resources lost -
The researchers simply looked at the value of goods sent to or received from developed countries – where customs officials tend to be more rigorous – and compared it to the values declared in developing countries.
In Tanzania, the report discovered that, rather than undervaluing imports, corporations were overvaluing them.
In the case of fuel imports, overvaluing allows companies exempt from paying fuel taxes – such as mining companies – to reduce on paper the profits they will be taxed on, with GFI calculating as much as $248 million a year in revenue was lost.
In total, at least $8 billion was illegally drained out of the Tanzanian economy over just 10 years, said LeBlanc.
“These critical resources could have helped to create more jobs, to fund greater access to social services to improve the lives of average Tanzanians, and to improve infrastructure that is vital to additional economic development,” he said.
But it wasn’t all money going out. The report identified nearly 11 billion in export over-invoicing, which may be a sign of money-laundering and payments for illicit goods.
The port of Dar es Salaam is a major hub for the illegal export of wildlife products like rhino horn and ivory, as well as drugs and gold.
Stronger and more specific laws can help tackle the problem, the report added.
They also suggest that customs officials have access to up-to-date pricing data, to allow them to flag questionable exports and imports.
“Every international organisation in the world is basically telling them promote exports and trade facilitation, and then we come along and say that perhaps these things have unintended consequences that need to be addressed,” said LeBlanc.
“For years and years this problem has been known by the World Bank and IMF, but it’s been viewed as an intrinsic problem with the African countries, not looking at the other side of the equation – the overall financial system, which is a system largely created by Western nations,” he added. “It’s a much larger, more intricate problem.”
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One billion people, one billion opportunities: AfDB approves its first Human Capital Strategy
The Board of Executive Directors of the African Development Bank Group (AfDB) approved on May 28, 2014 in Tunis the AfDB’s first Human Capital Strategy (HCS). The strategy paves the way for Bank investments in areas such as education, skills development, health, science, technology, innovation, social protection, safety nets and youth employment.
Investing in one billion people in Africa is at the heart of this four-year strategy. This vision is to build skills and make the most efficient use of new technologies to improve competitiveness and create jobs. As the operational framework for the Bank’s newly approved ten-year strategy, the HCS will serve as backbone to support the Bank’s investments in all sectors of development.
“One billion people, one billion opportunities: Building Human Capital in Africa” is the result of a broad based consultation within and outside the Bank involving governments, private sector, NGOs, academia, and civil society.
While Africa is on the rise, the continent is faced with challenges of rapid economic growth, poverty, inequality and striking disadvantages for youth and women. Overcoming major problems such as low quality education, skills mismatch, poor service delivery, low productivity in the informal sector, unemployment and underemployment is critical to growth.
“This strategy signals the African Development Bank’s commitment to invest in Africa’s greatest asset – its people. Without quick and decisive action to invest in human capital, African countries risk depriving a generation from opportunities to develop their potential, escape poverty and support the continent on a path of inclusive growth and economic transformation,” said Dr. Agnes Soucat, AfDB’s Director for Human Development.
As part of the HCS, the Bank proposes a New Education Model in Africa (NEMA) which presents a radical shift from the brick and mortar approach to education to a model that supports critical thinking, the application of cutting-edge education technologies, and public-private partnerships (PPPs).
“The HCS operationally consolidates and scales up the Bank’s interventions in building human capital in Africa. The success of the strategy rests in its implementation,” said Mr. Emmanuel-Ebot Mbi, AfDB’s first Vice President & Chief Operating Officer who chaired the Board of Executive Directors.
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Africa rising – Building to the future
Introduction
Good morning, bom dia.
It is my great pleasure to welcome you to this conference on Africa. I wish to thank President Guebuza and the government of Mozambique for hosting this event, and the many other partners who have made it possible.
It is indeed a great privilege to be here today, five years after the Tanzania Conference. Africa’s achievements are remarkable, and the overall outlook for the continent is optimistic. This is an exciting time for Africa. And the theme of the conference, Africa Rising, captures this excitement.
Mozambique’s Journey
In many ways, Mozambique epitomizes this positive spirit. Over the past two decades, Mozambique has posted one of the fastest growth rates in the Sub-Saharan region – an average of 7.4 percent per year.
Major steps have been taken to reduce poverty and raise life expectancy. These are the fruits of years of institution-building and sound economic management. The recent discovery of natural resources offers a unique opportunity to further build on these gains and make growth more inclusive.
An African proverb says: “If you want to go quickly, go alone. If you want to go far, go together.”
Mozambique has come far – and the journey continues; the IMF has been and will continue to be by its side. We have been working together providing both financial support and policy advice. We have also supported Mozambique’s reform agenda with stepped-up technical assistance and capacity building efforts, which continue today.
I would like to commend Mozambique – and indeed the region – on this impressive performance. Africa has taken its destiny into its own hands. Now is the time to build the future.
This conference offers a unique opportunity to reflect – together – on the lessons learned from Africa’s success and the challenges ahead. There is still much to be done. The continent is very diverse, and some countries risk being left behind, especially those faced with recurring conflict. In others, the rapid growth is yet to be widely shared across the population, with many Africans failing to see the fruits of economic success.
In that spirit, I would like to share with you three perspectives:
(i) Where we stand – taking stock of Africa’s achievements;
(ii) What near-term and longer-term challenges are emerging; and
(iii) What are the key policy priorities to address these challenges and help deliver on the promise of Africa’s future.
1. Where We Stand – Africa’s Takeoff
Let me start with where we stand. Sub-Saharan Africa is clearly taking off – growing strongly and steadily for nearly two decades and showing a remarkable resilience in the face of the global financial crisis.
Economic stability has paid off. More than two-thirds of the countries in the region have enjoyed ten or more years of uninterrupted growth.
This growth has delivered a more educated population, with significant declines in infant mortality. In Benin and Madagascar, for example, primary school enrolment has increased by more than 50 percentage points. This may be from low levels, but it is still a huge improvement.
And for good reasons, Africa is now a growing investment destination for both advanced and emerging economies – with a record $80 billion inflow expected this year.
Indeed, it is no surprise that ‘frontier economies’ such as Kenya, Uganda, and Botswana are challenging old stereotypes and roaring loud as Africa’s lions.
And yet, the tide of growth has not lifted all boats.
Poverty remains stuck at unacceptably high levels – still afflicting about 45 percent of the region’s households. Inequality remains high. And some countries, still facing recurring internal conflict, are struggling to exit from fragility.
Africa’s success journey has been truly remarkable. But if the global crisis has taught us anything, it is the importance of making the benefits of growth more broadly shared. When everyone benefits, growth is more durable.
Over the years, the IMF has been a close partner in Africa’s journey – including during the crisis. We have listened, we have learned, and we have responded.
We have reformed our lending instruments to increase access and flexibility to countries in need; extended our zero-interest policy; and streamlined conditionality.
We have tailored our policy advice to better address the very specific challenges facing the region. And we have supported this advice with five regional technical assistance centers – in Gabon, Ghana, Côte d’Ivoire, Mauritius, and Tanzania. Today, the largest share of the IMF’s capacity development services is devoted to Africa.
We look forward to continuing – and strengthening – this fruitful partnership.
2. Challenges Ahead – Near-term Worries and Longer-term Challenges
Africa’s future lies with itself and its people. True – the outlook for the region is very positive. Africa is expected to grow by about 5.5 percent this year and next, and the poorest countries even faster – close to 7 percent.
But it must keep a firm eye on what’s going on beyond its horizons. Globally, even as the world turns the corner of the Great Recession, the recovery remains weak and uneven. What does this mean for Africa?
Near-term worries
In the near term, the region’s outlook could be clouded by three main worries:
(i) slower growth in advanced economies, and in particular emerging market economies which are major trading partners for Africa;
(ii) lower prices for some commodities; and
(iii) tightening external financial conditions and potentially increased market volatility as monetary policy is normalized.
Policymakers will no doubt have their hands full. But they know what to do. The IMF stands ready to help with its policy advice, its technical assistance, and if needed, financial support.
Longer-term challenges
Beyond these more immediate worries, there are a number of longer-term challenges that can dramatically affect the outlook for Africa. Some for the better; others – not so much.
Demographic challenges: Africa is the youngest continent in the world. By 2040, the continent is projected to boast the largest labor force in the world – 1 billion workers strong – more than China and India combined. Channeling this increasing reservoir of human capital to productive sectors offers unrivalled economic and social opportunities. To take full advantage of them will require skillful management and vision.
Technological challenges: Technological innovation offers great possibilities. It can help support global integration, improve productivity, and foster inclusion. Harnessing its power effectively and efficiently is the challenge.
Environmental challenges: Climate change and sustained demand growth press on the sustainability of natural resources – further exacerbating inequality and exclusion. The challenge is to implement policies to foster growth that is, in turn, inclusive and environmentally sustainable.
3. Building to the Future – Three Policy Priorities
So what are the policy priorities to ensure that these challenges become opportunities?
I see three: build infrastructure, build institutions, and build people.
Build infrastructure
First, build infrastructure – energy, roads, and technology grids. These are the foundations of any strong and durable edifice.
What does this mean in practice? Closing Africa’s infrastructure gap.
Over the past three decades, per capita output of electricity in Sub-Saharan Africa remained virtually flat. Only 16 percent of all roads are paved, compared with 58 percent in South Asia. These shortfalls represent huge costs to businesses – and to people.
Many countries in the region are taking encouraging steps to close this infrastructure gap. In Ethiopia and Mozambique, for example, investments in the energy sector are being scaled up, including through projects that promote cross-border trade in electricity. Kenya and Côte d’Ivoire are also initiating regional infrastructure projects in electricity, and road and railroad networks.
These investments are critical for growth to be sustained – and broadened. High quality infrastructure can be a magnet for foreign investment. It can accelerate diversification and employment creation, and support further regional integration.
Yet the costs of closing this infrastructure gap can be daunting. The investment needs for the region are estimated at about $93 billion – annually. In most cases, the investments are large and upfront. They need to be carefully selected, managed and implemented within a medium- to long-term budget perspective.
Here, the Fund can help. We are working with many of our member countries – through our capacity building centers and on-the-ground technical assistance – to strengthen public investment and debt management capacity. This helps to put these countries in a much better position to take advantage of increasing financing options.
Build institutions
Let me turn to the second policy priority: build institutions. This means governance, transparency, and sound economic frameworks.
We talked about the foundations for the building; now think of institutions as the systems that ensure that the building functions properly and lasts a long time – like the heating, cooling and water systems.
We all know that Africa has tremendous potential – it is home to more than 30 percent of the world’s mineral reserves. Properly managed, these endowments offer unparalleled opportunity for economic growth and development. Moreover, these resources can be instrumental in relieving the large constraints in infrastructure that I just talked about.
Yet – and let me be frank – in too many countries, the rents from extractive industries are captured by just a few. Mining can account for an important share of output and export earnings, but often contributes relatively little to budget revenues and job creation. This corrodes the fabric of the economy and its social cohesion.
What can be done? Strengthening the institutional and governance frameworks that manage these resources is a good place to start. Transparency can help increase accountability – and help ensure that these resources are harnessed for the benefit of all.
Many countries have taken steps in this direction. For example, Sierra Leone and Uganda are setting new fiscal rules in anticipation of large resource flows. Côte d’Ivoire has also implemented a new legal framework for the mining sector that would help attract higher foreign direct investment.
These are areas where the IMF has helped bring a wide range of cross-country experience to bear. And we look forward to helping even more.
Build people
So, we have the foundations of our building (infrastructure); we have set up the systems to ensure that it functions effectively and efficiently (institutions); now we need to let the people in.
This brings me to my third priority: build people – children, youth, workers, and in particular, women.
Let me be clear: Africa’s greatest potential is its people. They are the key for the region to fully capture the dividends from population growth. By some estimates, a one percentage point increase in the working age population can boost GDP growth by 0.5 percentage points. This is huge.
For this to happen, however, “good” jobs need to be created in the private sector. Today, only one in five people in Africa finds work in the formal sector. This must change. With wider access to quality education, healthcare and infrastructure services, it can change.
Similarly, technology can be tapped to extend the reach and access of financial services to millions of people. Here, Kenya’s experience offers valuable lessons to the rest of the world on how to empower the poor through financial access.
By combining mobile banking with financial services provision, 75 percent of Kenya’s population now has access to financial services. Crucially, it is the poor that have benefited the most from this expansion.
Which brings me to a topic that is close to my heart: women. I know that most of the women in Africa cannot afford not to work. But when they do, they are mostly employed in informal activities. We all know what this means: low productivity, low incomes, low prospects. We also know the constraints: access to education, credit, and markets.
The gains to be made by overcoming these constraints are immense – particularly through girls’ education. By some estimates, the economic loss in developing countries from the education gap between girls and boys could be as high as $90 billion a year – almost as much as the infrastructure gap for the whole of Sub-Saharan Africa!
As the old African adage goes: “If you educate a boy, you train a man. If you educate a girl, you train a village.”
My bottom line: invest in women. It has a great rate of return – economically and socially for the future.
Conclusion
Let me conclude:
We are all witnessing a momentous transformation in Africa. Five years ago in Tanzania, Africa’s economies were under challenge as the global economy faced its most severe crisis since the Great Depression. We meet now in Mozambique with an outlook of optimism and high hopes.
The opportunities are vast and the challenges, while significant, can be overcome – through sustained strong policies, both economic and social. Now is the time to go further – to work together towards an inclusive, job-rich and sustainable growth strategy. Now is the time to extend the gains that many countries have enjoyed to those that have been left behind – by helping them overcome fragility and build strong institutions.
I want to end by quoting from the words of Mozambique’s national anthem: “Pedra a pedra construindo um novo dia.” Stone by stone, building a new tomorrow – that is what Africa Rising is all about.
Africa Rising will benefit the lives of people on the continent. Beyond that, Africa Rising will benefit the world. An Africa ever more integrated in the world – and the world learning from Africa.
Thank you – obrigada.
Keynote Address by Christine Lagarde
Managing Director, International Monetary Fund
Maputo, May 29, 2014
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Made in Africa: Is manufacturing taking off on the continent?
Several African countries have enjoyed economic growth in recent years – but there are fears that a failure to develop manufacturing could prove to be costly.
“Made in China” is a stamp that is ubiquitous and can be found on a wide range of objects – anything from T-shirts and shoes, to watches and televisions – worldwide.
The same is true of labels showing that an object originated in Taiwan or Vietnam.
But it is rare to find an object which has a mark that points to origins in African country – “Made in Nigeria” or “Made in Chad”, for example.
Despite experiencing regional economic growth in recent years, Africa commands a meagre 1.5% share of the world’s total manufacturing output, according to the United Nations Industrial Development Organisation.
That compares with a 21.7% share for the Asia Pacific region, 17.2% for East Asia and North America’s 22.4% share.
“Economies that have sustained high growth over the long term have typically gone through a process of economic diversification, the spread of new technologies, rising productivity in agriculture, the expansion of the manufacturing sector, and the development of a skilled workforce,” write the authors of a recently published Africa Progress Panel report.
“These have not been characteristics of growth in Africa, even in sectors that are attracting foreign investment. Put differently, there has been a lot of growth but little structural transformation,” they conclude.
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World manufacturing output
-
- Europe: 24.7%
- North America: 22.4%
- Asia & Pacific: 21.7%
- East Asia: 17.2%
- Others: 6.7%
- Latin America: 5.8%
- Africa: 1.5%
Source: Unido
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A small wood factory in a town around 20km (12 miles) outside Mozambique’s capital, Maputo, is just one of the many manufacturing sites across the continent trying to buck that trend.
The company – Sociedade Comercial Colosso – employs 26 people and processes timber from 25 different species of Mozambican trees to make various wooden objects, such as furniture, flooring, beams and stairs.
Two of the employees – Bartomoeu Zandamela and Angela Macobela – say the jobs have improved their lives.
“The work helps me put food on the table at home. I’m the bread winner of eight children,” says Mr Zandamela , who works on the maintenance of timber-processing machines.
Ms Macobela, who is learning to make floorings and ceilings, says: “I’m a single mother. But the money I get helps me bring up my two children.
“My dream is to progress in my professional career.”
Mozambique has a thriving economy but the country has an unemployment rate of 20%
Despite having one of the fastest-growing economies in the world, more than 20% of Mozambique’s population remains unemployed.
That dichotomy, which can be found in other African countries, has led some economists to question whether the growth seen across the continent will ever be translated into more jobs and a greater distribution of wealth.
Asian economies have seen their economies grow in recent decades by becoming manufacturing hubs for the world. In countries like Taiwan, Bangladesh and China, factories have produced everyday goods – from clothing to furniture – on a large scale.
The benefit is that the, largely unskilled, work creates jobs – helping to spread wealth and bolstering the country’s economy.
Mozambique’s government says it is in the process of implementing policies of this variety.
“We introduced an initiative of bringing cement factories into the country. With this, we managed to stabilise the price levels of cement in Mozambique,” says Armando Inroga, the country’s trade and industry minister.
“We intend to have market competitive prices in the coming two years so that Mozambicans can have adequate low-cost housing using high-quality material produced in Mozambique.
“We also need to have a highly Mozambican food-processing industry which results from national produce.”
Traditionally, foreign investment has poured into Asia thanks to this model. But production costs in Asia are rising, as are salaries, encouraging firms to look elsewhere.
Some experts say the current dearth of vibrant manufacturing sectors in Africa is among the biggest factors preventing countries on the continent from cutting unemployment and spreading wealth.
The recent Africa Progress Panel report states that fewer than one in 10 African workers find jobs in manufacturing.
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Analysis: Hinh Dinh, World Bank economist
Light manufacturing represents a reliable way to create productive jobs in Africa. This is the right time – there is an opportunity due to the rising wages and labour costs in China and other Asian countries. Wages are still relatively low in African countries.
Job creation is very important for young people coming in to the labour force. Natural resources don’t generate jobs – that’s the dilemma facing a number of countries. There was always a tendency for foreign direct investment to follow natural resources because that is where you get the fastest results.
It is the responsibility of African governments to bring foreign direct investment to manufacturing to create jobs. The history of economic development is such that any country would need to start producing basic household goods. Over time they moved to higher value goods.
No country in the world has developed without producing light manufacturing. And no country can skip it.”
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It quotes Nkosazana Dlamini Zuma, chairwoman of the African Union Commission, as saying: “We believe we cannot achieve development unless we industrialise. We are looking at agriculture as one of the important drivers for industrialisation.
“We have the land, the people and the products. But we need to process more of our products in order to create jobs for the young people.”
Nigeria is a case in point.
Despite having Africa’s biggest economy, a large proportion of the country’s population is unemployed.
The problem of joblessness came to the fore earlier this year when a stampede among job-seekers taking a recruitment test in the national stadium in the capital, Abuja, left several people dead and injured.
High numbers of young, unemployed people means a cheap labour force is readily available in many African countries – not just Nigeria.
Natural resources attract foreign investment, but firms increasingly see benefits in processing raw materials
Middle income goal
But a large part of the problem is the fact that African countries lack the industrial infrastructure that their Asian counterparts have refined in recent decades.
Despite this shortcoming, many experts argue that Africa has the potential to become the world’s low-cost manufacturing hub.
That, they say, allied with an abundance of raw materials and low-cost agricultural products means many African countries are well placed to replace south-east Asia as a low-cost global manufacturing hub.
Analysts argue that foreign investment is likely to continue to rise and will be used to build factories.
World Bank economist Hinh Dinh – co-author of the organisation’s report Light Manufacturing in Africa – says East African countries, such as Tanzania and Uganda, are leading the way where manufacturing on the continent is concerned.
He singles Ethiopia out for particular praise.
The government has set a goal of reaching middle-income status by 2025. This goal would be unattainable through traditional farming alone.
The government hopes to meet its targets by investing in its manufacturing sector and higher education to help rural communities diversify their livelihoods.
Ethiopian Industry Minister Tadesse Haile says the government wants manufacturing to have a “dominant role” in the economy over the next decade.
And it is having an effect, with the country gaining a strong reputation as a hub for textile manufacturing, particularly where leather is concerned.
Huajian, a Chinese shoemaker has built an export factory just outside the capital, Addis Ababa.
Tesco, one of the world’s largest retailers, has announced plans to source more clothes from Ethiopia in the coming years.
And fashion retailer H&M has said it sees opportunities to produce clothing in the country, along with other sub-Saharan African countries.
Is the factory-based line production model of manufacturing outdated?
Silicon saviour?
But is the factory-based line production model of manufacturing outdated? Could technological advances bring new approaches?
Kenya’s technology industry has been praised as one of the fastest growing on the economy.
Innovations such as M-Pesa, a hugely successful mobile phone banking platform, has given the technology industry to ability to change everyday lives.
Last year a $14.5bn (£9.1bn) project was unveiled in Kenya to build an IT business hub, known as Konza Technology City, about 60km from the capital, Nairobi.
The site, dubbed “Africa’s Silicon Savannah”, is expected to take 20 years to build.
Similarly, Rwanda is investing heavily in digital technology in the hope that this will speed up its transition from an agriculture-based economy to a services-oriented one.
So could IT provide a new manufacturing model? And, if so, when is that likely to happen?
“Young Kenyans have already proven themselves quite adept at innovation,” says John Ngumi, who chairs the Konza project.
“We, in Konza, estimate about 20,000 to 30,000 jobs in the first phase that ends in 2018. But we are looking at generating 200,000 jobs in total.
“More than that we are looking at having a strong multiplier effect that Konza becomes the forerunner of a generation of far more jobs.”
But not everyone is convinced.
Alex Mukaru, an aspiring entrepreneur, typifies the kind of young person needed to set up fledgling businesses that could provide jobs in years to come. And he believes much of the hype surrounding Nairobi’s technology scene is unlikely to make it capable of creating jobs on a large scale.
He argues that getting a technology company started is a struggle.
“Getting everything you need to help you compose your project into a working unit is a challenge. You find that you lack the money or resources to move to the next level,” he says.
It may take decades to answer the question of whether computing can become a mass employer in Africa.
Meanwhile, Mr Dinh urges African nations to move quickly. Otherwise, major companies may find opportunities in other parts of the world.
“This is the right time,” says the World Bank economist.
“If African countries miss this opportunity, it will take decades to catch up with the rest of the world.
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Capacity building is critical to Africa’s emergence and industrialisation: Emmanuel Nnadozie
In recent years Africa has been making great strides in policy development and at present looks very prepared to move from principle into practice on this. Some leaders say now is the time to boost Africa's industrialisation efforts and that capacity building, which is critical to the continent's emergence, will play an essential role in this.
"Africa's economy is showing good signs and growth is taking root," says Emmanuel Nnadozie, Executive Secretary of the African Capacity Building Foundation (ACBF), which he says is the result of significant improvements to the macroeconomic environment in Africa, as well as more effective production of development policy.
Speaking during a series of meetings in Kigali, at which politicians and researchers discussed the future of Africa and best practices for achieving the continent’s economic transformation, Nnadozie continued his assessment on a positive note: "Africa now needs to move to the next important phase: industrialisation. This will require substantial capacity-building efforts. I am delighted to note that Africa has understood the importance of industrialisation to its development. In order to achieve this goal, we now need to strengthen our capacities."
Over the coming years, he said, Africa must undertake robust structural transformations. These will include the mechanisation of agriculture and, more importantly, mass industrialisation in order to create decent jobs for our young people. This industrialisation must be based on adding value to raw materials and building links between the primary sector and the rest of the economy.
"We must not seek to achieve added-value industrialisation through skills and institutions from outside Africa. Instead, we must strengthen the capacities of our own human and institutional resources," he said.
He also stressed the importance of improved leadership at all levels, the need for better institutions and the promotion of good governance. Substantial investment will also be required in two key areas: human capital and infrastructure. "This will ensure that new wealth is distributed fairly, in particular through the creation of an environment favourable to private-sector development," explained Nnadozie.
"I am optimistic that Africa will realise its full development potential and will become the key driver of global growth," he added.
To achieve these aims, he continued, Africa will need to focus on capacity building, and especially on the production, implementation, monitoring and evaluation of its development policies and strategies. It will also need to boost entrepreneurship and innovation capabilities to assist its industrialisation efforts.
The ACBF enjoys support from the AfDB. It is a key technical partner for African states and has been helping with capacity-building efforts across the continent for more than a decade. According to Nnadozie, the institution has "high hopes for Africa" and will continue working to support Africa’s economic transformation process, which he says could be achieved within the next 50 years.