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Expanding services trade offers major opportunities for growth and jobs, OECD says
The services sectors offer tremendous opportunities to stimulate growth and jobs worldwide, but much more can be done to reduce the existing barriers to international services trade, according to new OECD research.
Services generate more than two-thirds of global GDP and are the top source of employment in most major economies. But the services sector’s share of global trade is far below its share of the wider economy. This under-performance is largely attributed to the various legal and regulatory obstacles slowing international services trade.
The OECD’s new Services Trade Restrictiveness Index (STRI), released during the Organisation’s annual Ministerial Council Meeting, provides a unique and comprehensive snapshot of services trade restrictions across 18 sectors in 40 leading economies, representing over 80% of global services trade.
“As G20 economies seek to achieve 2% growth above trend over the coming five years, services markets could be an important contributor to future growth,” OECD Secretary-General Angel Gurría said. “The new Services Trade Restrictiveness Index will help countries benchmark their performance while enabling negotiators to target critical trade bottlenecks. It will also help governments detect barriers and the scope for reform, and it will allow businesses to better identify requirements in order to enter foreign markets.”
The Index is based around two key elements: a comprehensive on-line regulatory database of the laws and regulations impacting services trade in all countries and sectors covered; and a series of composite indices that quantify restrictions across five standard categories, with values between zero and one. Complete openness to trade and investment gives a score of zero, while being completely closed to foreign services providers yields a score of one.
Key findings:
- Average levels of restrictiveness are significant, with very wide variations around the average, meaning that there are very real opportunities for most countries to move towards best practices.
- Across all countries, air transport, legal services and accounting services stand out as highly restricted, while rail transport has a lower average level of restriction, but the widest dispersion around the average. Strong network services are crucial for facilitating trade, so reform in these areas potentially brings large benefits.
- Foreign equity limitations are common in backbone infrastructure sectors, while national licensing requirements and restrictions on the movement of people often restrict professional services trade. Public procurement regulations are particularly important for construction services.
- Even modest reforms offer significant benefits: reducing services trade barriers increases imports, but can also increase exports by twice or more, depending on the sector. Modest reforms can increase exports by 3-7%, while lowering import prices by as much as 10%.
- No country is amongst the three most or least restrictive in all sectors – demonstrating that all countries have areas where reform is possible.
“Our aim with this new Index is not to prescribe reforms for countries,” Mr Gurría said. “The Index provides the information governments need to identify areas of regulatory under-performance as well as best practices elsewhere. Whether reforms are undertaken, domestically, multilaterally or not at all, is for governments to decide. But we certainly hope that, based on this new evidence, they will take action to reduce existing barriers and tap on the tremendous opportunities that expanding services trade offers for growth and jobs.”
For further information on the Services Trade Restrictiveness Index, an interactive website allows users to compare services trade restrictiveness across 18 sectors in the countries covered. Once a given countries’ restrictiveness issues are identified, a policy simulator allows users to test the effects of policy changes. A Policy Brief summarises the main findings.
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China, Africa devoted to deepening cooperation
Chinese Premier Li Keqiang’s ongoing four-nation Africa tour, which started Sunday, is widely expected to deepen cooperation between the Asian giant and the promising continent.
The visit to Ethiopia, Nigeria, Angola and Kenya, Li’s first to the “Land of Hope” since taking office last year, is believed to be able to unleash the great potential for the two sides’ mutually-beneficial cooperation in various fields.
Analysts say the eight-day tour, which coincides with the 50th anniversary of China’s late Premier Zhou Enlai’s first visit to Africa and comes after President Xi Jinping’s maiden overseas trip in March 2013, is of great significance for the traditional friendship, pragmatic cooperation, and a new type of strategic partnership between China and Africa.
China, the world’s largest developing country, and Africa, a continent with the most developing countries, are natural partners in pursuing common development.
Expounding Africa policy, boosting cooperation
Five decades ago, a Chinese government delegation led by late Premier Zhou visited 10 counties in Africa, setting a milestone for the development of relations between China and the continent.
Over the past half century, China has not only unswervingly developed a friendship of cooperation with African nations, but also continued to inject fresh contents and vitality into bilateral relations.
The establishment of the Forum on China-Africa Cooperation (FOCAC) has particularly made significant contributions to consolidating the two sides’ traditional friendship, deepening their strategic mutual trust, and pushing forward pragmatic cooperation in various areas.
Africa has become increasingly important for China’s foreign policy, and both sides have continuously created mutually beneficial and win-win prospects.
Huang Zequan, executive vice president of the Chinese Research Society of African Affairs, said Li’s visit again shows that the new Chinese leadership attaches great importance to China-Africa ties.
“The friendly cooperation between China and Africa will continue to be accelerated and enriched with new connotations,” Huang said.
On Monday, the Chinese premier visited the convention center of the African Union (AU) in Addis Ababa and delivered a speech there on China-Africa cooperation, in which he expounded China’s Africa policy and reaffirmed Beijing’s commitment to deepening China-Africa comprehensive cooperative partnership.
He called on both sides to earnestly boost collaboration in industry, finance, poverty reduction, ecological protection, people-to-people exchanges, and peace and security so as to create an upgraded version of their all-round cooperation.
In Abuja, capital of Nigeria, Li attended the 2014 World Economic Forum (WEF) on Africa and delivered a speech on China-Africa common development, China’s bid to promote Africa’s inclusive development, and international cooperation with Africa.
“Addis Ababa is the AU’s headquarters. In a sense, it is Africa’s political and diplomatic capital,” said Liu Guijin, a former Chinese special representative on African affairs.
Li’s speech at the AU headquarters was a “centralized declaration” on China’s Africa policy, Liu said, adding that Li was the first Chinese leader to attend a regional WEF summit.
“China-Africa cooperation has scored tremendous achievements, but under the new situation, it’s also facing some challenges,” he said. “Premier Li’s Africa visit this time will strengthen China-Africa relations and help steer their development in a greener, healthier and more sustainable direction.”
Deepening trade, economic cooperation, improving people’s livelihood
During his stay in Ethiopia, Li attended the completion ceremony of a highway constructed by Chinese corporations, visited an industrial park, and held a seminar with businessmen from China and African countries.
China and Africa were expected to sign nearly 60 deals, covering cooperation in such areas as trade, health, culture, agriculture and personnel training.
“Trade and economic cooperation is playing a key supportive role in the development of China-Africa relations,” said Liu Hongwu, director of the School of African Studies at Zhejiang Normal University.
“The two sides’ cooperation in such fields as agriculture, industry, science and technology, and new energy has increasingly become one of the most important outside forces that boost Africa’s economic development,” he said.
He added that the visit would deepen trade and economic cooperation between China and African nations.
Official statistics show the total volume of China-Africa trade hit an all-time high last year, reaching 210.2 billion U.S. dollars, up 5.9 percent year-on-year.
China has been Africa’s largest trade partner for five consecutive years and a major source of new investment, while Africa has been China’s important import market and second largest market of overseas contract projects.
According to the Chinese Commerce Ministry, Chinese direct investment in Africa amounted to 25 billion dollars by the end of 2013, with more than 2,500 Chinese companies operating in Africa in the fields of finance, telecommunications, energy, manufacturing and agriculture, and creating more than 100,000 local jobs.
“The rapid growth of China-Africa trade has resulted in a sharp increase of African exports, which improves Africa’s foreign currency earnings, creates employment opportunities, and accelerates Africa’s industrialization,” said Liu of Zhejiang Normal University.
In fact, China has always kept every commitment it made to Africa and attached no political strings so that African nations can translate their advantages in natural resources into advantages in development.
Lansana Camara, a political analyst based in Conakry, Guinea, said Chinese companies in the African country filled a vacuum left by global mining firms from the West, sustaining the country’s pillar sector and saving a lot of local jobs.
“As the West is still embroiled in economic meltdown and has rolled back investment in Africa, the emergence of Chinese companies is naturally welcomed by Africans,” Camara said.
Accelerating people-to-people exchanges
In an interview with African media before his trip, Li said Africa has the biggest potential in human resources.
China is ready to train more professionals of various types for African countries, and provide more vocational education tailored for African young people to help Africa fully and durably unleash its population dividends, the premier said.
As one saying goes, the key to people-to-people exchanges lies in heart-to-heart communication, he said, noting that China will roll out a series of projects on people-to-people exchanges and cooperation to enrich exchanges between the two peoples and promote their mutual understanding and friendship.
As part of China’s public diplomacy effort, Li visited Ethiopian patients who have benefited from the “Bright Journey,” a campaign launched by Chinese health authorities to provide free cataract surgical operations and other medical services to local residents.
“During public diplomacy events, Chinese leaders will conduct closer contacts with local residents,” said Liu, the former Chinese special envoy.
“This will not only help the public get a direct understanding of China’s foreign policy, but also remove misunderstandings caused by some Western countries and media prejudiced against China-Africa relations,” he added.
Huang, of the Chinese Research Society of African Affairs, said that compared with trade and economic cooperation, the two sides’ enormous potential in cultural exchanges and people-to-people contacts needs to be tapped by governments, non-governmental organizations, and scholars.
According to official statistics, there were 33,000 African students in China last year. By the end of 2013, China had trained 54,000 technicians for African nations, and sent more than 360,000 technicians, young volunteers and agricultural specialists to Africa.
Confucius institutes serve as another channel for African students to access Chinese culture and learn the Chinese language.
Now about 30 Confucius institutes have been set up across Africa, offering various language courses and lectures, exhibitions and performances to African students.
Liu, of Zhejiang Normal University, suggested that future China-Africa cooperation focus on such key areas as people-to-people exchanges, education, and science and technology.
“Africa is in great need of educational resources, while China has an enormous education system,” he said.
“China can help Africa train elementary and middle school teachers and provide textbooks and other teaching materials within the framework of UNESCO. This can help build a solid public base for bilateral ties,” he added.
Just as Vice Foreign Minister Zhang Ming put it, with rich contents and fruits, Li’s visit, another significant diplomatic move taken by the new Chinese leadership under new circumstances, is of great importance for China-Africa cooperation.
“I believe this visit will consolidate the strategic trust between China and Africa, deepen their cooperation in all areas, and raise China-Africa and China-AU relations to a new high,” Zhang said.
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EU urged to look at Africa as equal partner
The Economic Partnership Agreement (EPAs) negotiations between the European Union (EU) and the East African Community (EAC) member States should not be based on the economic imbalance between the two parties but on the quality of trade that exists, Kenya’s flower industry has pleaded.
The Kenya Flower Council CEO Jane Ngige on Thursday challenged the European Union not to look at Kenya and other East African countries from the lens of developing nations, but rather on the quality of products that they can export to the EU.
“What we need to get off our table – and this is really my personal view – is this feeling that we are coming from adeveloping country; we have poor producers and so on. When it comes to trade, it’s really a question of… you have a product, I have the money, we want to do business,” she stressed.
She said this was the time to allow fair trade by ensuring there is an equal level playing field.
Economic Partnership Agreements are new legally binding bilateral contracts between the European Union and African, Caribbean and Pacific countries, giving some concessions to products from the countries into the EU market.
If the EAC and EU do not sign them by October this year, Kenya stands to lose as its products to the EU market will attract taxes.
This is on the basis that Kenya is a bigger economy than the rest of the East African countries.
“Our exports are of good quality, especially on my area, the horticultural products; even in the other areas of fish, tea and coffee; I mean, we have good products and we do not need to feel apologetic about it,” she said.
She however appreciated that the negotiations have progressed and is optimistic that Kenya’s interests will be well represented and protected to allow continuous smooth EU- Kenya trade relations.
Ngige was speaking while giving her contribution during a panel discussion on the trade between Kenya and EU countries on Thursday.
“Today we are engaged at a higher level. What I would suggest to you is that rather than talk of a hard-line position, is to understand that there are serious issues at stake. An example is that the European Parliament insists on the respect of human rights because in most trade negotiations, this is often ignored,” Head of EU delegation to Kenya Lodewijk Briet said during the discussions.
In 2012, thirty four percent of flowers exported to the EU came from Kenya alone, 29 percent tea and 22 percent peas.
The European Union, comprising 27 member states is a single market of 500 million consumers.
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African leaders asked to boost trade and share knowledge
African leaders have been urged to boost trade and learn to share knowledge and infrastructure in order to develop the continent to a desired standard.
Discussing how African countries can partner with other countries around the world and the private sector to create jobs, discussants stressed the need for African countries to explore all sectors in order to open their economy more and create needed jobs for the youth.
At Thursday’s session on “Partnering for Prosperity” US Trade Representative, Michael Froman, stressed the need for African countries to explore the agriculture sector, which he said was capable of opening the economy of many African countries, since Africa has at least 20 per cent of the world’s land.
He also stressed the need to implement the World Trade Organisation (WTO) agreement reached in December on trade facilitation, which is aimed at reducing bills at the border and harmonising customs, making it easier for countries to trade with each other.
He also emphasised the need for security in the continent.
Lack Of Political Will
The Deputy, Director-General, WTO, Geneva, Yonov Fredrick Agah, stressed the need for African governments to take advantage of free trade rules and enhance trades within and outside Africa.
He suggested that profits made from trades could be channelled to other sectors of the economy in order to develop other sectors.
“Trade rules are not bad. It enables you to work for your own economy and for the economy of the trading partner.
“Trade is part of the solution to Africa’s development. A trade led growth strategy is compatible with other strategies that would grow the economy. From trade, you direct resources into manufacturing to create more jobs and reduce poverty level.
“With the increasing importance of free trade agreements, Africa should begin to think of how it will take advantage of the free trade in order to reduce the number of the unemployed in the continent,” Mr Agha said.
He also insisted that lack of political will on the part of the leaders was affecting growth.
Conducive Investment Environment
For Mr Jabu Mabuza, chairman, Telkom Groups, South Africa, educating Africans would go a long way in bringing the needed development in the continent.
He also stressed the need for Local domestic investments to be encouraged in order for foreign investments to come in.
“We need to recognise that we are at various stages and we need to sort out our own regional issues first,” he said.
Nigeria’s President, Goodluck Jonathan, told the discussants that the challenge Africa had at the moment was not the political will to move the continent forward, stating that African leaders were doing all they could to ensure that the investment environment was conducive for investors.
He said that Nigeria was open for investment, with adequate consideration given to the private sector’s interest in order to ensure that the purpose of opening the economy, which is to create jobs, would be achieved.
“There is the political will in Africa now for us to properly integrate. And that is why a committee has been established in the African Union level to look at how Africa can facilitate intra-Africa trade, having discovered that it is easier for countries in Africa to trade within the continent,” he said.
President Jonathan also stressed the need for African countries to also consider growing the manufacturing sector.
The discussants also pointed out that African governments should reduce bureaucratic process, which President Jonathan said “an abuse of the process was a challenge that should be tackled”.
The discussion was the last for the Thursday’s session of the WEFA that started on Wednesday.
The forum with participants from over 80 countries will end on Friday.
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Nigeria’s GDP rebasing and boosting intra-Africa trade
Data released by the Nigerian Bureau of Statistics following the recent rebasing of the country’s Gross Domestic Product shows that the Nigerian economy is much more diversified than we had thought or acknowledged. But it was not altogether surprising. Efforts in structural transformation of the Nigerian economy have been ongoing for the better part of the last 10 years. The Transformation Agenda of President Goodluck Jonathan has provided additional fillip in the last four years of supporting private sector-led, non-oil sector growth.
So here we are. And this is what we now know about the Nigerian economy after the rebasing. Agriculture, largely subsistence farming, which used to contribute 35 per cent to the GDP now contributes 22 per cent. The oil and gas sector which used to account for 32 per cent of the GDP now contributes 14 per cent. Those are the headline downward adjustments. The structural adjustment that has taken place shows these sectoral gainers. Manufacturing, which had accounted for approximately 2 per cent of the country’s GDP jumped to 6.8 per cent. From 0.9 per cent, the contribution of the telecommunication sector has expanded to 8.7 per cent. The biggest leap was made in the services sector with a rise in contribution from 29 per cent to 52 per cent.
Past trade trend
Data provided by Central Bank of Nigeria (CBN) for the period 1981-2010 shows structural rigidity to Nigeria’s external trade. In 1981, crude oil accounted for 96.89 per cent of the country’s exports. All through the 30-year period, there was no noticeable change in the trade pattern; oil export stood at between 95 per cent and 98 per cent of total export merchandise. A 2004 data shows that roughly 60 per cent of non-oil exports from Nigeria consisted of cocoa and rubber – primary products as well.
In this period, the country’s very narrow export goods base invariably meant that Nigeria was trading with very few countries. Indeed, the United States received about 50 per cent of Nigeria’s oil export. A handful of developing economies, mainly China and Brazil also received Nigerian oil export. Nigeria’s imports are mainly in finished products. Thus, our imports are mainly from the industrialised world, again principally the United States and China, and from few countries in the European Union.
With this trend, Nigeria was not able to lift intra-Africa trade. Trade within the continent has been very low. At 11 percent of total trade volume by African countries, trade within Africa has been the lowest compared with trade within other regions of the world. An assortment of often discordant policy, tariff and non-tariff barriers to intra-Africa trade has been identified. In addition to this, lack of political will to integrate the economies of Africa beyond fruitless policy engineering to aid trade has been cited. However, many African countries have exactly the same economic structure as Nigeria; they export primary goods to the leading industrialised nations while they import finished products from the same countries. For this reason, the most knotty of the issues that constitute barriers to intra-Africa trade is the narrow base of economic activities of scale on the continent. This issue then expresses itself in the narrow external trade pipes.
Likely new trade scenario
The possibility that Nigeria will now influence a new trade scenario within Africa is established in the far-reaching structural adjustment in our domestic economy, as revealed in the new GDP data. The trade influencers are tied in both the absolute size of the country’s $509.9 billion GDP (which is by a wide margin the biggest in Africa), and the structural diversification that is revealed in the recent GDP rebasing. For example, the Nigerian services sector is now worth $265 billion. With the banks accounting for significant part of this economic value, little wonder that over the past few years, Nigerian banks have been playing big in international trade in banking services in Africa. Like it played out for the South African external sector performance, the widening footprint of Nigerian banks across sub Saharan Africa will pave the way for other sectoral trade in Nigerian goods and services in Africa. Financial market infrastructure is a facilitator of international trade. With the linkages the banks have established with other SSA markets through the operations of their subsidiaries, a key facilitator of Nigeria’s external trade within Africa has gained ground.
However, a unidirectional trade flow from any African country cannot, mainly because of geopolitical concerns, lift intra-Africa trade. What we now see with the Nigerian services sector’s value of $265 billion is that it will accelerate on foreign participation. While trade flows in the Nigerian services sector will be led by the Western countries because they are more able to tap the Nigerian opportunities, the sheer size of this sector leaves enough head room for other African countries to come in. We also expect the export of services from other African countries into Nigeria. Cross-border trade in research and legal services are immediately contemplated to influence trade flows into Nigeria. Several foreign acquisitions which Nigerian businesses are expected to make in Africa makes this quiet imaginable.
The Nigerian manufacturing sector, now worth $35 billion and constituting 6.8 per cent of GDP, has also assumed scale. Gradually, we have begun to see the outflow of Nigerian manufactured products into our sub-regional markets. From cement, sacks to biscuits, Nigerian manufactured products are making a showing outside our borders. Now that the sector has become recognized again with its 6.8 per cent contribution to GDP, coupled with the consumption profile of Nigeria’s over 170 million population, Nigeria will evolve to be a major manufacturing hub, attracting investments as well as merchandises from other African countries, thus maintaining desired two-way directional trade flows.
The big lesson
The most important structural adjustment to note in the Nigerian economy is that it is now dominated by the private sector. Indeed, further transfer of public sector assets through the ongoing privatization programme, including in the power sector, will unlock resources, accelerate growth and broaden the economic base. Therefore, policies supporting private sector development and broader economic base are critical to opening the clog in intra-Africa trade pipelines. As we look to leverage Nigeria’s diversified economic base to boost trade within the continent, the example Nigeria has set is worth emulating by other African states.
Why DFIs are relevant
Nigerian Export-Import Bank (NEXIM Bank) is the designated trade policy bank of the Federal Government of Nigeria. As a development finance institution, NEXIM Bank has been supporting the process that is leading to a more diversified Nigerian economy. In the last five years, NEXIM Bank has pushed forward, through its communication programme, the policy agenda which accentuated the big sectoral gainers in the structural adjustment that was revealed by the GDP rebasing. Through our “MASS Agenda”, we have presented Manufacturing, Agro-processing, Solid minerals and Services as the key sectors for economic diversification and job creation. This being the case, the bigger contribution we now see from services and manufacturing, as well as the strong showing of the entertainment industry in the Nigerian GDP basket, is a big plus for this Administration.
While policy support for economic transformation is very important, it is not enough. Accordingly, NEXIM Bank and other DFIs in the Nigerian space have received institutional reinvigoration and financial backing from the Federal Government so as to be able to effectively intervene in the sectors that made good showing in the GDP data. Moving forward, financial intervention in SME manufacturing, services and the other areas of our focus at NEXIM will be critical to maintaining growth momentum. As we know, lower cost credit, which development banks provide is important for lifting businesses in these sectors to the point where they can afford and therefore attract commercial credit. NEXIM Bank has lifted a number of firms to this position, helping them to realize export potentials.
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China to extend over $12 bln in aid to Africa
Chinese Premier Li Keqiang unveiled extra aid for Africa totalling at least $12 billion on Monday, and offered to share advance technology with the continent to help with development of high-speed rail, state media reported.
Li pledged the additional funding in a speech at the Organisation of African Union headquarters in the Ethiopian capital, Addis Ababa.
China will increase credit lines to Africa by $10 billion and will boost the China-Africa Development Fund by $2 billion, bringing it to a total of $5 billion, Li said, according to the official Xinhua news agency. He provided no details of the timeframe.
Li “depicted a dream that all African capitals are connected with high-speed rail, so as to boost pan-African communication and development,” the report said. As China has advanced technologies in this area, Li said China was ready to work with Africa “to make this dream come true”.
China will also offer $100 million in aid for wildlife protection, Li added, for a part of the world where the Chinese appetite ivory and rhino horns have driven some species to the brink of extinction.
It is Li’s first visit to Africa since he became premier last year, and follows on from a trip to the continent by President Xi Jinping in March 2013, when he renewed an offer of $20 billion in loans to Africa between 2013 and 2015.
Li said that the new $10 billion credit line would be on top of the existing $20 billion already offered, the China News Service reported.
Chinese officials said last week that Li’s trip, which also takes in oil-rich Nigeria and Angola, would not simply be for energy deals and Beijing will be seeking to help boost African living standards.
Li said he hoped that some of the loans being offered would be used to support small and medium-seized companies in Africa, adding that economic development on the continent offered huge opportunities for both China and Africa.
“History and reality make clear to all: China’s development gives opportunity to Africa; Africa develops, and China also benefits,” he said.
Trips by Chinese leaders to Africa are often marked by big natural resource deals, triggering criticism from some quarters that China is only interested in the continent’s mineral and energy wealth.
China has a relationship with Africa which pre-dates its current resource-hungry economic boom. In previous decades, China’s Communist leaders supported national liberation movements and newly independent states across the continent.
Africans broadly see China as a healthy counterbalance to Western influence but, as ties mature, there are growing calls from policymakers and economists for more balanced trade relations.
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New report highlights transnational infrastructure programme successes in Africa
The World Economic Forum has released a new report on regional infrastructure development in Africa.
Managing Transnational Infrastructure Programmes in Africa – Challenges and Best Practices, released in collaboration with The Boston Consulting Group, serves as a guide for policy-makers, sponsors and managers to help facilitate the delivery of transnational infrastructure programmes on schedule, at cost and at a high quality.
According to the report, such programmes can make a huge contribution to social and economic welfare by boosting intra-regional trade, connecting landlocked countries to world markets, and improving access to and security of electricity supply by linking large power plants with neighbouring countries.
The management of any complex infrastructure programme – a railway system, for instance, or an electricity production and distribution network – is difficult enough within an individual country. The challenges, says the report, are tremendous with transnational programmes, and more so still in Africa, owing to the continent’s wide variation in languages, cultures, financial capacities and maturity of public institutions.
“Infrastructure is essential for integrating regions, realizing socio-economic potential and fast-tracking development in Africa,” says Ibrahim Assane Mayaki, Chief Executive Officer of the NEPAD Planning and Coordinating Agency. He adds that the release of this report is an important contribution to identify best practices that will ultimately help facilitate and coordinate the implementation of regional priority programmes.
Leading organizations, including NEPAD, set up the Priority Action Plan of the Programme for Infrastructure Development in Africa (PIDA) in 2012, which encompass 51 programmes with an investment need of $68 billion until 2020.
There are myriad challenges when it comes to infrastructure projects in Africa, including financial, technical and regulatory alignments, as well as governance and human relations issues. Difficulties may also have a historical dimension too: a legacy of mistrust or even conflict can often jeopardize cooperation between participating nations, and many countries lack a tradition of conducive environmental measures, such as enforcement of anti-corruption laws and the availability of stringent regulations on public-private partnerships.
“Africa’s growth will accelerate through success in building intra-African trade. Coordinating actions across multiple Governments inevitably makes the process more complex, costly and bureaucratic. But the payoff from regional integration – building more efficient and reliable infrastructure for energy, logistics management, and movement of labor across borders – is high and will have a strong multiplier effect on growth, entrepreneurship and employment” notes Jay Ireland, Chief Executive Officer of GE Africa.
The report enumerates best practices that have been brought to bear in response to the challenges at various phases of a programme’s lifecycle. They include: a joint strategic vision for regional infrastructure and integrated national infrastructure plans; a comprehensive cost-benefit analysis assessing the impact in all affected countries; the issuing of a single transnational concession rather than several intra-national concessions; a precise allocation of the costs, risks and benefits to the participating countries, with a detailed compensation plan for people adversely affected by the facility; a rigorous and transparent tendering process; harmonization of regulations; and coordination of demand profiles and maintenance schedules.
Another key success factor is to institutionalize cross-border collaboration. This could best be done by setting up a strong programme management unit, established through a special treaty between all participating countries. Whether based on public or private resources or a mix of the two, such a unit would oversee most of the phases of the programme, and coordinate all the stakeholders.
“The relevance and applicability of the various best practices have to be determined on a programme-by-programme basis,” says Alex Wong, Senior Director, Head of Centre for Global Industries and Head of Basic & Infrastructure Industries at the World Economic Forum. “Adopted and applied appropriately, they should remove roadblocks to the implementation of regional infrastructure programmes and make them a reality.
The 24th World Economic Forum on Africa will be held in Abuja, Nigeria, on 7-9 May 2014. The theme of the meeting is Forging Inclusive Growth, Creating Jobs.
The dividend of democracy: 20 years of economic growth
South Africa’s 20 years of freedom have seen inflation dropping significantly, while the economy’s gross domestic product has enjoyed sustained and unprecedented growth.
The transformation of South Africa’s economy over the past two decades, from apartheid-era isolation to openness and growth, was the subject of a Twenty Year Review discussion hosted by Brand South Africa and the Department of Trade and Industry at Constitution Hill on Wednesday 23 April.
Speaking to a group of foreign correspondents, trade and industry minister Rob Davies said over the past two decades his department has had to respond to profound changes in the global economy and realign South Africa to shifting world economic power and influence. “The domestic economy has been impacted by these changes and had also developed adynamic of its own, which, if left unchecked, would have done little to create they type of inclusive growth that many ordinary South Africans hope for,” he said.
In 1994 South Africa’s first democratically elected government inherited an economy with deep structural flaws, after lurching through varying degrees of crisis for more than a decade. International isolation, economic sanctions and the apartheid state’s resulting import-substitution approach to industrialisation had created an insular economy. This was made worse by the corrupt relationship between business and the apartheid state, with the private sector having massive power over ministers, public officials and state agencies.
“Where we come from as the touchstone we have a good story to tell, but there are enormous challenges ahead, and we will deal with them,” said trade and industry minister Rob Davies.
Short-term apartheid interests
“In a number of areas such as competition, industrial and labour market policy, the private sector steered government policy in order to maximise its short-term business interests with little concern for the long-term stability of the economy or the human rights abuses of the apartheid state,” Davies said. “There was no empowerment and no inclusion.”
The migrant worker system was encouraged, and wages kept low as the private sector benefited from poorly designed but generous investment and export incentives, and the intricate schemes of a feeble competition board.
“As a result, the economy in 1994 was characterised by an extended period of negative growth rates, falling per capita incomes, ballooning fiscal deficit, double digit inflation rates, negative rates of fixed investment, rising unemployment, low rates of firm-level R&D, declining gold production coupled with a low gold price, and adversarial labour relations at shop-floor level.
“At the industrial level concentration was extremely high, with more than 80% of all the Johannesburg Stock Exchange-listed companies owned by just six diversified conglomerates,” Davies said. “Exports were highly concentrated around mining and mineral products, mainly exported to Europe and the United States.”
International isolation ensured industrial policy was heavily focused on strategic investments to ensure self-sufficiency, while the “separate development” policy of apartheid meant relatively small-scale production of consumer goods for a small market of affluent white consumers. Economic sanctions imposed to pressure the government to end apartheid resulted in little state support for sustainable exports and a low level of competitiveness in domestic industry. Desperate attempts to make the “homelands” system work caused a highly distorted investment environment, as the government sought to encourage investment outside South Africa’s metropolitan areas.
Sustained economic growth
Over two decades of freedom much work has gone into revitalising the moribund economy bequeathed by apartheid.
“Between 1994 and 2013, the South African economy experienced positive growth in every quarter except for two of the 78 quarters,” Davies said. “In both instances where the South African economy experienced negative economic growth,international crises precipitated the contraction.
“In 1998, the East Asian financial crisis led to a significant slowdown in the world economy, while the 2008 global financial crisis led to a global recession from which South Africa was not fully insulated,” said Davies.
The country’s 76 quarters of growth have been the longest continuous economic expansion since the South African Reserve Bank first started keeping records.
“South Africa’s economic growth performance compares favourably with a number of countries at similar levels of development,” Davies said. “The nature of South Africa’s growth dynamic is an important explanatory factor for South Africa’s poor job creation performance as well as the unbalanced trade performance over the two decades for 1994.
“There are a number of important trends to be noted. The service sector has grown substantially faster than any other sector. The primary sectors – which include agriculture and mining – have been in long tern decline. The contribution of the manufacturing sector has declined and the contribution of the government has remained largely static.”
Bringing black South Africans into the economy
Since 1994 a wide range of policies – including broad-based black economic empowerment (B-BBEE) and employment equity – have allowed black South Africans to participate meaningfully in the economy. “Government’s approach to empowerment has been a multi-pronged strategy encompassing the full spectrum of economic and social activities,” Davies said, “including access to government services such as social grants, business incentives, procurement, the stick market, employment opportunities across all sectors and the eradication of all discriminatory policies, programmes and practices.”
In the past 20 years a number of organisations and initiatives were set up to support economic transformation, by providing financial and other support to black businesses. “It is important to note that government’s empowerment programmes are not only based on the need for post-apartheid economic redress,” Davies said.
“From an economic policy perspective the expansion of the entrepreneurial, investor, consumer and taxpayer base as a result of governments B-BBEE policies has been substantial and has contributed positively to the growth of the South African economy.”
Increasing competitiveness
Davies said a major thrust of the work of the first democratic administration elected in 1994 was to inject new life into the South African economy. The redesign of the country’s competition policy and the introduction of focused small business support programmes topped the list.
“One measure of industry competitiveness is exports,” he said. “Data proves that competitiveness in the manufacturing sector over the last two decades has improved. Given that South Africa does not have any export incentives of any real significance and that the exchange rate was over-valued and volatile for large parts of the period 1994 to 2013, it is probable that South Africa’s industry competitiveness has improved overall, although there remains pockets of relatively low levels of competitiveness.”
Strategic trade repositioning and diversification
“In 1994 South Africa was an international pariah with limited international trade possible under international sanctions and the manufacturing sector poorly positioned to trade,” Davies said. “South Africa’s trade performance has increased progressively over the two decades with both imports and exports growing particularly rapidly in the period up to 2008. However, the growing gap between imports and exports has led to a significant and growing trade deficit, which is cause for concern.”
While South Africa has successfully diversified away from the relatively slow-growing EU and US regions and towards the faster growing regions of Asia and Africa, this has come at a cost. South Africa’s trade with Asia is increasingly dominated by mining and mineral exports to China, and rapidly rising imports of value-added and increasingly sophisticated consumer and electronic goods.
An important success story is the growth in South African exports to the rest of Africa as well as the fundamental changes in the trade profile of products exported into Africa compared to South African exports to the world.
A downward spiral avoided
“The first democratically elected government inherited an economy which was composed of a business sector which had been insulated from international competition, had become accustomed to generous cash and tax incentives from government and enjoyed a close relationship with the previous government and its key agencies such as the then board on tariffs and trade, and the competition board,” Davies said.
“As the limits of economic development premised on self-sufficiency (accompanied by international isolation) low wages, and a small captive consumer market became apparent, the South African economy in 1994 could very easily have entered a downward spiral of company closures and capital flight or a period of sustained under-investment leading to de-industrialisation and the erosion of South Africa’s manufacturing capabilities.
“Predictably, challenges remain. Job creation has been disappointing and has contributed to the relatively low alleviation of poverty and inequality. The risk of the industrial sector reverting to a capital- intensive minerals-based growth path and over-reliance on traditional export markets which are forecast to grow slowly over the next decade pose significant risks to South Africa’s economic growth potential.
“Nevertheless, the economy is increasingly well-positioned for another period of sustained growth. The key challenge will be to ensure that the progress made in deepening and widening industrial development is accelerated and that this translates to more job-creating and inclusive economy in the next decade.”
“Where we come from as the touchstone we have a good story to tell, but there are enormous challenges ahead, and we will deal with them.”
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ECA Chief calls for a rethink of financing strategies for the Continent’s transformation agenda
The Executive Secretary of the UN Economic Commission for Africa, Mr. Carlos Lopes has stressed the need to scale up both domestic and private external financial resources for Africa’s structural transformation.
He made the remark at the opening of the Regional Outreach of the Intergovernmental Committee of Experts on Sustainable Development Financing (ICESDF) to the Africa Region; a two day event which commenced today in Addis Ababa. The meeting is mandated among other goals, to produce a report proposing options on an effective sustainable development financing strategy.
Speaking to the committee of experts on the importance of current sustainable development challenges within the continent and the critical aspect of mobilizing resources to address these challenges, he stressed the need to be “creative and innovative to ensure that first and foremost it is domestic sources of financing that underpin Africa’s structural transformation.”
Mr. Lopes said that contrary to perceptions Africa does not have the largest concentration of poor people in the world and also fairs well on the MDGs, “if only we measured efforts and not universal lines”.
He reasoned that these perceptions need to be corrected not to make the case for less development financing, but rather how it is used. “In order to contemplate new forms of engagement one needs also to consider new forms of mobilizing resources” he said.
The Executive Secretary recalled the Rio +20 Conference on Sustainable Development (Rio+20) which delegated the objectives of the ICESDF, and stated that Africa realized then that it could not simply be a spectator and that it needed to take ownership of its own narrative to ensure that continental realities and priorities are taken into account going forward. He noted Africa’s consistency in fulfilling this goal since then saying, “It is the only region, so far, that has done such a groundbreaking political work, stating its hopes, and strategizing on its options.”
In the same vein, the Executive Secretary proposed a five pronged approach that would contribute towards meeting these financial objectives for the sustainable development agenda. These are mainly:
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To actively harness Africa’s clear leverage to increase traditional tax revenues. Currently, traditional taxation in many African countries is still too far below the threshold of 15% of GDP. He said it is important for the continent to stop granting tax incentives on the pretext of attracting Foreign Direct Investments as the reality is that such practices have resulted in revenue losses, which in the case of just four East African countries have been estimated at US$ 2.8 billion a year.
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The imperative need to increase the use of non-traditional financing instruments. Mr. Lopes stated that there is the need to explore and leverage instruments such as: Sovereign Wealth Funds, Private Equity Funds, Pension Funds, Insurance and Bonds.
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Africa needs to optimize the US$ 60 billion savings made by over 140 million Africans in the Diaspora. “By bringing this cost down to about 5 percent, the continent could save up to US$4 billion a year.”
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The need to better engage the private sector in public service delivery and infrastructure development. Moreover, targeted public and private sector investments also need to foster green growth.
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The crucial importance of resolving phenomenon of Illicit Financial Flows. “Most of you will not know that since 2000, Africa has lost over US$50 billion annually through illicit outflow of funds.” This amount equates to Official Development Assistance (ODA) received from donor countries over the same period.
Also highlighting the crucial timeliness of this meeting of experts, the Co-chair of the ICESDF, Mr. Mansur Muhtar said that Africa’s work towards achieving Sustainable Development Goals (SDGs) is also an important means of strengthening ownership and a broader process of elaborating its development agenda.
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Zimbabwe’s struggle to formalise the informal
Zimbabwe’s extensive informal sector could help boost government revenue if regularised, but this won’t happen unless the government creates incentives for the informal sector to register, economists say.
“Formalisation of the informal sector would significantly improve revenue inflows through taxation on employees’ salaries, import duty, property fees and other forms of taxes on the sector. However, there is need to create incentives for the informal sector to register,” Eric Bloch, a Bulawayo-based economist, told IPS.
A 2013 FinScope survey, which is now being used by government officials as reference, indicates that 2.8 million micro, small and medium businesses - 85 percent of which are unregistered - have created 5.7 million informal jobs. These businesses generate an estimated turnover of 7.4 billion dollars, according to the survey.
Finance and Economic Development Minister Patrick Chinamasa has already cast a light on the growth of the informal sector and its significance to the economy in this southern African nation.
Responding to questions in parliament in February, Chinamasa said: “Our economy is now informal…That is the reality of our economy and it is a reality we must recognise and take measures on how to tap into this sector.”
Godfrey Kanyenze, an economist and director of the Labour and Economic Development Research Institute of Zimbabwe, a think tank of the Zimbabwe Congress of Trade Unions, explained that the government was failing to fund public programmes because the treasury struggled to mobilise money from existing industry and labour.
“There is no way the government can maximise on revenue collection in the informal sector if it is not regularised. Government must come up with a working strategy to ensure that the informal sector is formalised and taxed to improve revenue collection, which is currently in a sorry state,” he told IPS.
He said the government was also losing out because the Zimbabwe Revenue Authority (ZIMRA) was struggling to tax registered small to medium enterprises.
The formal sector has been negatively affected for more than a decade by the withdrawal of investment, low investor confidence, rampant power outages and a struggling economy that was marked by hyperinflation and acute shortages.
Kanyenze said that to ensure effective monitoring, the government must organise the informal sector into clusters based on the services or products they supplied or produced. He said the government should also offer business development and training services to the sector and devise mechanisms to protect and promote them.
Economist John Robertson told IPS that formalisation of unregistered enterprises would bring a host of other advantages.
“Besides improving revenue collection and encouraging better public sector performance, formalisation of the informal sector would hopefully ensure better working conditions for the millions said to be employed there. They would enjoy benefits associated with the formal sector such as medical aid schemes, pension, better work safety and the ability tonegotiate salaries,” he said.
Tapson Mandiziva, who works as an assistant carpenter at an unregistered furniture-making firm in Glenview, a low income suburb in Harare, does not enjoy such benefits.
“I don’t have an employment contract and my boss pays me as and when he likes. Sometimes he makes huge profits from the sale of wardrobes and the kitchen furniture that we manufacture but uses the money to buy cars and personal items and does not pay us. When he does, the money is too little and he has dismissed workers on flimsy grounds,” Mandiziva, 31, told IPS.
In the three years he has worked for the furniture firm, the highest salary he has received is 200 dollars a month. But Mandiziva says he can go for as long as four months without receiving a wage and does not receive backdated payments.
The police and municipal authorities periodically raid backyard industries like the one Mandiziva works for. They have been accused of confiscating products or extorting bribes from companies operating without licences. There are also allegations that they sell the seized goods at office auctions where the officers or local authority officials are the only buyers.
Innocent Makwiramiti, an economist and former chief executive officer of the Zimbabwe National Chamber of Commerce, told IPS that the illegal raids could be avoided if the informal sector was regularised.
“The police officers, municipal and ZIMRA officials are collecting thousands of dollars in bribes from the informal traders and, in some cases, are forcing traders to surrender part of their earnings as a protection fee against the raids.
“Part of this money could be going to the treasury had the informal sector been registered and compelled to observe company and taxation regulations,” he said.
However, formalisation and taxation of the informal sector will not be easy, according to experts.
“The biggest constraint is reluctance by small businesses to register. They tend to suspect that formalisation would open them to too much scrutiny that would affect their income generation. Since most of them are run by individuals and families that view adhering to labour laws as a burden, they would rather remain as they are,” said Bloch.
The February edition of the Public Administration and Development Journal shows that there are numerous hurdles the government faces in its attempts to harness taxes from the informal sector and registered SMEs. This includes the manpower and administrative constraints of ZIMRA.
According to the report, many businesses would be reluctant to pay taxes because of concerns that “taxes collected will not be used in the national interest”.
Many are also disgruntled over poor service delivery and the fact that some politically-connected businesspeople were being let off the hook for failing to pay tax.
Augustine Tawanda, the secretary general of the Zimbabwe Crossborder Traders Association, which comprises informal entrepreneurs whose businesses involve sourcing for resale or selling goods in neighbouring countries, told IPS: “There is plenty of money circulating in the informal sector and it is possible to innovate a win-win situation with the government.”
However, his organisation is opposed to registration of informal businesses, preferring that the government just includes them in its data base only for purposes of taxation rather than formalisation.
“The main problem is that the government is only concerned about taxing us, rather than making us grow as businesses. It does not have clear policies for formalisation and has not shown how it is going to incentivise informal traders,” he said.
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Africa is on the rise, and we need to help make sure it continues
The best untold story of the last decade may be the story of Africa. Real income has increased more than 30 percent, reversing two decades of decline.
Seven of the world’s 10 fastest-growing economies are in Africa, and GDP is expected to rise 6 percent per year in the next decade. HIV infections are down nearly 40 percent in sub-Saharan Africa and malaria deaths among children have declined 50 percent. Child mortality rates are falling, and life expectancy is increasing.
This is a moment of great opportunity for Africans. It is also a moment of decision.
The choices that Africans and their leaders make will determine whether a decade of progress leads to an era of African prosperity and stability – or whether Africa falls back into the cycle of violence and weak governance that held back the promise of the continent for far too long.
The challenges are real. Bitter and bloody conflicts are embroiling South Sudan, the Central African Republic and Congo. Corruption remains rampant; the African Union reports that $148 billion is wasted through corrupt practices each year. Africa needs strong leaders and strong institutions to stand up for human rights, address discrimination against women and minorities, and remove restrictions on freedom of expression.
The United States and African nations have deep historic and economic ties. The U.S. government has invested billions of dollars in health care, leading to real progress in combating AIDS and malaria. Our security forces work with their African counterparts to fight extremism. U.S. companies are investing in Africa through trade preferences under the African Growth and Opportunity Act. As a friend, the United States has a role to play in helping Africans build a better future.
Many of the choices are crystal clear. African leaders need to set aside sectarian and religious differences in favor of inclusiveness, acknowledge and advocate for the rights of women and minorities, and they must accept that sexual orientation is a private matter. They must also build on their economic progress by eliminating graft and opening markets to free trade.
The conflict and crises that have held Africa back for too long were evident Friday when I flew into Juba, the capital of South Sudan. I remember arriving in Juba in January 2011 when the people of South Sudan voted overwhelmingly for independence. Even in that moment of jubilation, the threat of ethnic violence loomed just over the horizon.
The violence turned tragically real in December when fighting broke out between forces loyal to the government and militias aligned with a rebel leader. Today we see the echoes of too many earlier conflicts: thousands of innocent people killed, both sides recruiting child soldiers and a country on the cusp of famine.
Led by the U.S. special envoy to South Sudan, Donald Booth, the United States and our partners in Africa have been trying to mediate the conflict. On Friday, when I met with President Salva Kiir, I reminded him of our conversations about his nation’s promise. I urged him to set aside old grudges and reach a settlement with the opposition before that promise is soaked in more blood.
Resolutions of age-old grievances are difficult, but they are possible. For two decades, Africa’s Great Lakes region has endured a crisis as militants and gangs have fought over mineral wealth and ethnic differences. In recent weeks, Angola has demonstrated remarkable leadership in working with other African countries and the State Department’s special envoy to the Great Lakes region, Russ Feingold, to promote a framework for peace. There is a long way to go, but the progress is real and it represents hope for the region and the continent.
Our role in Africa goes beyond security assistance. We are working to develop the prosperity that is critical to a better future. One aspect of that effort is Power Africa, a public-private partnership conceived by President Obama to pump billions of dollars into the continent’s energy sector and double the number of people with access to electricity.
And we are engaging the promise of a new generation of leaders across Africa. This summer, 500 Africans will come to the United States for the Washington Fellowship for Young African Leaders. The fellowship is part of President Obama’s Young African Leaders Initiative, providing training, resources and platforms to support leadership development, promote entrepreneurship and connect leaders with one another and the United States. In August, the president will host the first summit between African and U.S. leaders.
Africa can be a beacon for the world: Dramatic transformations are possible, prosperity can replace poverty, cooperation can triumph over conflict. This is tough work, and it requires sober commitment, regional cooperation and a clear vision of a better future. The goal of a prosperous, healthy and stable continent is within reach if Africans and their leaders make the right decisions.
John F. Kerry is US Secretary of State. He is currently on a six-day trip to Africa.
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China-Africa trade cooperation has broad prospects: Chinese minister
Chinese Premier Li Keqiang’s ongoing visit to African countries will inject vitality into China-Africa economic and trade cooperation, Chinese Commerce Minister Gao Hucheng said on Monday.
Fifty years after former Chinese premier Zhou Enlai’s landmark visit to the continent, Li’s visit is crucial to facilitating the innovation, expansion and improvement of China-Africa economic and trade cooperation, the minister said in an interview during Li’s visit.
The Chinese premier’s tour is likely to create a good atmosphere for further cooperation between African countries and Chinese enterprises by establishing communication platforms, he said.
According to the minister, as infrastructure construction to improve regional inter-connectivity is vital for Africa’s economic integration, China, with a competitive advantage in this regard, will eye deepening cooperation on road, railway, port, aviation, electricity and communication, and Li’s visit is aimed to push forward such projects.
In addition, the Chinese premier will facilitate the shift of Chinese labor-intensive industries – such as manufacturing – to Africa, helping the growth and prosperity of “Made in Africa” and making investment the pivot of a closer, more inclusive and sustainable China-Africa economic and trade relationship, he said.
Moreover, China will continue to help its African friends improve their living standards, offering more favorable policies in such areas as agriculture, medicine, environment and education, he said, while emphasizing friendship, fast economic growth and complementary advantages as the major pillars supporting their economic and trade ties in a new era.
Gao lauded China-Africa trade and economic cooperation as a fine example of one between developing countries, noting that the principle of sincerity, equality and mutual benefit has not changed over the past 50 years, and the continuous expansion of their cooperation has persisted despite international economic upheavals.
China-Africa trade expanded to 210.3 billion U.S. dollars in 2013, a remarkable jump from a mere 250 million in 1965. China has been Africa’s largest trading partner for five consecutive years.
Chinese direct investment in Africa amounted to 25 billion dollars by the end of 2013, with more than 2,500 Chinese companies doing business in Africa, covering finance, telecommunication, energy, manufacturing and agriculture, and creating more than 100,000 local jobs.
The minister also noted the fast growth of contracted projects signed between the two sides, as Africa becomes China’s second largest contracting market overseas.
By the end of 2013, the total volume of contracted projects Chinese enterprises have won in Africa reached nearly 400 billion dollars, with more than 2,200 km of railway and 3,500 km of road built by the Chinese in Africa.
Through such cooperation, Gao said, Chinese companies brought capital and technology into Africa, lowered construction costs and promoted the image of “Constructed by China.”
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Agoa creates goodwill for US – Davies
The Government will consider giving some US producers the same access to the local market as the EU, if that’s what it takes to save its African Growth and Opportunity Act (Agoa) benefits.
Trade and Industry Minister Rob Davies believes President Barack Obama plans to make this proposal at the first US-Africa summit, which he is convening in August. Agoa offers South Africa and most other African countries duty-free access to the US market for most of their goods. They do not have to reciprocate.
Agoa has substantially boosted South African exports to the US, especially of manufactured goods such as cars, which has also helped the government’s industrialisation and job-creation strategies.
But Agoa is due for renewal by the US Congress next year and some influential legislators are under pressure from their constituency companies to withdraw Agoa benefits from South Africa because it has done so well out of them.
Some legislators are also unhappy that South Africa has increased tariffs on imports of US foodstuffs such as beef, pork and chicken, even as it enjoys tariff-free access to the US market under Agoa. And they are complaining that they are being beaten in the South African market by their EU competitors, which have a reciprocal free trade agreement with South Africa that lets in EU goods at lower tariffs.
Davies in an interview last week said that Agoa would be discussed at the US-Africa summit where the Obama administration would present a proposal for Agoa’s renewal. The US government had done several studies on Agoa, including on its use by South Africa, he said.
He did not know for sure what the Obama administration’s proposal was. “But I’ve heard a few voices in the US say we must ‘MFN-ise’ if that’s the word, some of the things we’ve done towards the EU.”
MFN stands for Most Favoured Nation and an MFN agreement with the US on some products would mean that the tariffs on imports of those products into South Africa could not be higher than anyone else’s – including those of the EU.
Davies stressed that South Africa believed Agoa was fine as it was and so there was no need to fix it. He had told the US that it gave America goodwill – unlike the reciprocal Economic Partnership Agreements (EPAs) that South Africa andother countries are negotiating with the EU, which were unpopular. But he said: “If somebody came to us and said, ‘you do this and you keep Agoa’, we’ll have to make an assessment. No one’s done that yet. It won’t be for every single product either.”
Davies also threw light on what EU ambassador Roeland van de Geer recently called the “difficult dossiers” in relations between the EU and South Africa.
One of these are the bilateral investment protection treaties with some individual European countries, which South Africa has declined to renew, drawing criticism from those governments.
Davies noted that the single investment protection bill with which his government is proposing to replace all the individual investment treaties is still being circulated for comment. He said the environment for the debate on bilateral investment treaties was changing rapidly.
The EU was discussing the merits of bilateral investment treaties in its negotiations with the US for a Transatlantic Trade and Investment Partnership (TTIP) agreement. The EU was, for example, grappling with the implications of Australia being dragged into litigation by foreign tobacco companies who were arguing that its decision to ban branding on cigarette packets violated their rights under bilateral investment treaties.
“So the health policy decision will be subject to the investment treaty, could be changed or invalidated as a result of it. I think many people around the world think that’s outrageous. That’s an extreme example of intrusion into policy space.”
Davies repeated that the discontinuation of the bilateral investment treaties with EU countries did not mean their investments were in jeopardy. “There is absolutely no intention by South Africa to expropriate anybody’s investment,” he said.
Davies also expressed concern about another “difficult dossier”, the EU’s threat to ban imports of South African citrus infected by the black spot fungus. He noted that the fungus did not affect consumers, and scientists from both sides were still investigating whether it could infect European orchards. There was no evidence so far that it could.
But last year, the EU intercepted more than five shipments of citrus with the black spot and had stopped all citrus imports from South Africa. Because that had happened near the end of the season, it had had little commercial impact. But it could have a major impact in the coming season, as South Africa is the largest exporter of citrus to the EU and about 60 000 jobs are at risk.
Davies said the black spot issue showed how “the real game in international trade, particularly agricultural trade, is now becoming standards, phytosanitary and sanitary standards. South Africa believed the black spot restriction was a form of trade protection under another name, he indicated.
Another “difficult dossier” are imports of frozen chickens and frozen potato chips from the EU. South Africa has launched an anti-dumping inquiry into these imports.
Davies said that the overall trade figures with the EU explained why South Africa had taken that action. In 2008, South Africa had exported e22 billion (R320bn) of goods to the EU and imported e20bn, earning a e2bn surplus. But in 2012, South Africa exported only e20bn to the EU, while imports from the EU increased to e25bn, creating a e5bn deficit for South Africa.
Davies said European companies invested in South Africa had been making frozen chips with South African potatoes. But now South Africa was importing those chips. Meanwhile, frozen chicken imports had rocketed about a hundred-fold, from about R3 million to R300m a year.
Yet another difficult dossier was the export taxes that South Africa was proposing to impose on raw materials. The EU has complained that these taxes are an unwarranted protective measure for local buyers of raw materials. The issue is being thrashed out as part of the protracted negotiations for a SADC-EU EPA.
Davies said the EU’s interest was not in helping other countries develop resources, but about ensuring the EU was not deprived of access to raw materials. The proposed taxes were designed as an incentive to companies to invest in the beneficiation of raw materials in South Africa so they could export processed materials.
The SADC EPA negotiations are the most difficult dossier of all between the EU and South Africa – as well as the other SADC members in the proposed EPA – Botswana, Namibia, Swaziland, Lesotho, Mozambique and Angola.
Davies said “we are beginning to approach the end game”, in the negotiations, with another technical round of negotiations coming soon, and then one with ministers after the elections but before the new administration comes in.
Another “difficult dossier” is geographical indications, or the geographic trade names for products, which may only be used by producers in the areas concerned.
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State-of-art port control centre opens in Cape Town
South Africa’s first maritime port of entry control centre represents a milestone in the country’s journey to secure, modernise and control its borders, Finance Minister Pravin Gordhan said at the opening of the centre at Cowrie Port in Cape Town harbour on Friday.
The centre puts all the government departments and agencies involved in immigration and border control under one roof. These include the departments of home affairs, health, agriculture and fisheries, the SA Police Service (border police and crime intelligence), and the SA Revenue Service (customs).
The state-of-the-art centre would not only improve security and immigration issues, but would also serve to enhance trade and South Africa’s status as a logistical gateway to Africa, Gordhan said.
Trade
The rationale behind the centre was in line with the National Development Plan, the minister said. Among other things, the NDP aims to stimulate growth by lowering the cost of doing business in South Africa, improving the country’s competitiveness and exports, and linking local products with other emerging markets.
Gordhan said the fast-growing markets of Africa represented important new markets, and the NDP was committed to increasing South Africa’s trade with its regional neighbours from 15% to 30%.
‘Complex borders’
Home Affairs Minister Naledi Pandor, also speaking at Friday’s opening, said the centre had been designed “to accommodate in one spot not only customs, excise and immigration, but also health, safety and intelligence.
“Ports are complex borders to manage. Cowrie Place will provide the space and facilities to manage passengers and cargoes more efficiently than before.”
Pandor said the government hoped to establish a border management agency by the end of 2016, taking advantage of the lessons learnt from Cowrie Place.
A flagship feature of Cowrie Place is the co-ordination monitoring centre, where the data and information will be fed, assimilated and made available to all government department and agencies involved in the maritime border management.
“For the bona fide tourist or member of the trade community, this will mean better service,” Gordhan said. “For those who intend to challenge the laws of our country, be warned, as we intend to raise the bar of compliance by an order of magnitude.”
Important port
Cape Town’s port is oldest in South Africa, but despite changes to its maritime culture brought by air travel and containerisation, it is still an important point of entry.
The port processes more than 870 000 containers as well as nearly 730 000 tons of dry bulk per annum, Pandor said.
A total of 6 173 commercial vessels and 55 passenger vessels entered and/or left the port in 2013, while more than 62 000 people entered and/or departed from Cape Town harbour.
Pandor said E-berth at the harbour would be developed into a fully fledged passenger liner terminal to complement Cowrie Place.
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Liberia launches National Export Strategy and National Trade Policy
President Ellen Johnson Sirleaf: National Export Strategy and National Trade Policy show way forward for Liberia’s economic growth and sustainable development
Liberia today (29 April) launched its National Export Strategy (NES) and its National Trade Policy (NTP) with a view to boost the capacities of its private sector and re-connect the country with regional and global markets. The launch, which took place at the National Micro, Small and Medium Enterprises Conference and Trade Fair in Monrovia, comes after several rounds of multi-stakeholder consultations led by the Ministry of Commerce and Industry in collaboration with the International Trade Centre (ITC).
The NES and NTP will function as blueprints for the Government, the private sector and Liberia’s development partners in their joint efforts to help Liberian SMEs enhance competitiveness and value addition. They will guide Liberia’s efforts to generate employment opportunities, improve the business environment and explore means of sustainable growth.
‘I am proud to launch the Liberia National Trade Policy 2014-2019 and the Liberia National Export Strategy 2014-2019. These two documents outline the Liberian Government’s strategy for creating inclusive growth through trade competitiveness,’ said Ellen Johnson Sirleaf, Liberia’s President.
‘The trade policy serves as the Government’s overarching strategy for trade steering the country towards regional integration into ECOWAS and multilateral integration into the World Trade Organization.
The National Export Strategy provides sector support to key sectors where we have the best opportunity to generate export diversification. Through implementing this strategy we expect to create a vibrant and diversified export basket and to open new markets and opportunities for business owners,’ Ms. Johnson Sirleaf said.
ITC Executive Director Arancha González said: ‘Trade is about finding ways of adding value to a country’s goods and services, and through that get greater access to local, regional and global value chains. This is important for all countries, but for a post-conflict such as Liberia, the urgency is greater as trade helps provide stability and security.’
‘Any country wishing to navigate these value chains needs a compass. For Liberia, a least developed country, the National Export Strategy and the National Trade Policy provide a clear direction on how to best take advantage of the country’s natural resources and its people, women and youth, in a sustainable manner,’ Ms. González said.
The NES targets the development of five priority sectors: cassava, cocoa, fish and crustaceans, oil palm, and rubber. The strategy also targets three trade-support functions – access to finance, quality management, and trade logistics and facilitation – which has a positive impact on the export competitiveness of all sectors. Work has also already begun on exploring the opportunities offered by tourism and the furniture sectors.
The NTP, meanwhile, is Liberia’s first policy document that holistically addresses issues related to trade. Its main objective is to promote the integration of Liberia into the global economy through increasing the competitiveness of its businesses, with a focus on the agricultural, industrial and services sectors.
By promoting a balanced relationship between trade integration, sustainable development and social inclusion, the NES and the NTP set out to boost employment generation, improve livelihoods and reduce poverty.
Axel Addy, Liberia’s Minister for Commerce and Industry, said: ’Often businesses cannot access finance to purchase needed equipment. Sometimes farmers cannot get their goods to market, and are left to watch their produce spoil. Other times businesses lack the skills necessary to run and maintain a business. These are exactly the hurdles the NES and NTP seek to overcome: they will guide the implementation of our country’s development programmes and help boost our exports.’
For further information about Liberia’s National Export Strategy and National Trade Policy, please visit ITC’s website:
- Factsheet: Liberia National Export Strategy
- Factsheet: Liberia National Trade Policy
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EPA: African leaders align with Nigeria’s position
African Ministers of Trade and experts in Trade and Regional Integration have aligned with Nigeria’s position on the trade liberalisation deal with the European Union under the Economic Partnership Agreement (EPA), saying it will have a long-term negative impact on the continent’s efforts towards industrialisation and job creation.
The ministers spoke during the Extra-Ordinary Session of the Conference of African Union Ministers of Trade in Addis Ababa, Ethiopia recently.
The meeting was convened to discuss Africa’s common position ahead of the October 1 deadline for signing of the EPA with EU; the establishment of the Common Free Trade Area (CFTA) by 2015; extension of African Growth and Opportunity Act (AGOA) by the American Government for 15 more years; and Africa’s strategic response to World Trade Organisation negotiations, among others.
While reiterating Nigeria’s position on EPA, the Minister of Industry, Trade and Investment, Olusegun Aganga, said, “Nigeria’s position on EPA is very clear. Africa is on the rise. It is a very big and strategic market for any trading partner. That is what the EU wants from us but Africa must jealously protect what it has.
“We should leverage our abundant natural resources and large market to develop our industries; create jobs for our people; increase intra-African trade and achieve regional integration. We must not be in a hurry to give away what we have. We must not sign an agreement without first of all carrying out a robust economic analysis of the overall impact the agreement will have on the region, our children and future generations.”
Aganga, however, stressed that it was also very important not to do anything that would undermine Africa’s regional integration.
“Whilst it is important to look into the October 1, 2014, deadline for the signing of EPA, we should also fully examine the impact of the withdrawal of market access by EU after this deadline. If it is necessary, Africa should look at ways of compensating member countries that will suffer losses as a result of this withdrawal. We must not be in a hurry to sign an EPA if it will not be in the overall best interest of the continent,” he said.
Zambian Minister of Commerce, Trade and Industry, Robert Sichinga, said he agreed with Nigeria’s position, noting that rather than jeopardising their industrialisation and job creation drive by hastily signing the EPA, African countries should work towards enhancing regional integration and intra-African Trade through value addition of their abundant raw materials, especially in the areas where they have competitive and comparative advantage.
“Just like Nigeria has pointed out, before we sign the EPA, we should consider the impact on our children and the future of the continent in terms of industrialisation, job creation and regional integration. I want to state that as long as we have not appended our signatures to the agreement, then there is no agreement. Also, I believe that it is better not to sign an agreement at all than to sign a bad one,” he said.
The African Union Commissioner for Trade and Industry, Fatima Haram, also agreed that signing the EPA would have a negative impact on Africa’s industrialisation, job creation and regional integration of African countries.
Haram said, “Just as Nigeria’s Minister of Industry, Trade and Investment, Olusegun Aganga, has pointed out, industrialisation is an issue that is very critical to the economic and political survival of African countries. If we sign the EPA as it is today, it is going to be difficult for us to integrate because of different Custom Areas.
“Let us be realistic and look at our statistics. The population of Africa is growing very rapidly. Statistics shows that more than 50 per cent of our population are between 18 and 30 years. If we sign the EPA, how do we create the jobs that we require for our growing population; how do we stop the illegal migration of our youths to developed countries?”
Similarly, the Minister of Trade and Private Sector Promotion, Republic of Niger, Alma Oumarou, said there was the need for African countries to realistically evaluate the impact of EPA before signing.
“We support the position of Nigeria on EPA and should also take a cue from what they have done in terms of carrying out a study on the impact assessment of the implications of signing the EPA,” he said.
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ECOWAS Parliament calls for measures to address trade barriers
The ECOWAS Parliament has called for firm measures to address the numerous barriers to cross-border trade and investment in the sub-region, particularly corruption.
It has also urged the ECOWAS Secretariat to involve more stakeholders in its regional integration process, particularly civil society organisations.
A communique issued at the end of a two-day dialogue in Accra and presented by the Speaker of the ECOWAS Parliament, Senator Ike Ekweremadu, observed that the future of West Africa was in its ability to manage, at the regional level, its numerous advantages and challenges, especially regional trade and investment.
The establishment of a free trade area, a customs union and a single currency for the region, it said, was important to foster closer ties and eventually integration.
The meeting
The two-day dialogue session was to discuss the challenges of border crossing and opportunities for trade and finance for ECOWAS countries.
It was organised by the National Institute of Legislative Studies of Nigeria, in collaboration with the African Capacity Building Foundation and the ECOWAS Parliament.
It was attended by members of the ECOWAS Parliament, stakeholders relevant to the two thematic areas from within the ECOWAS subregion, resource persons and Parliamentary staff.
The specific objectives of the dialogue session were to evolve practical solutions to deepen the industrialisation efforts in the region, promote regional trade competitiveness through diversified product regimes rather than the dominance of common primary products, restructure import tariff policies to promote local production, ensure efficient border management, reduce transaction and transportation costs, among many other things.
Six papers were presented by eminent resource persons and discussed by participants.
Resolution
The communique urged ECOWAS to pursue more vigorously the implementation of the single currency policy.
“ECOWAS is encouraged to establish protocols of export product standards in order to improve access to global markets and significantly earn more revenue to promote infrastructure development through enhancement of exports,” it said.
As the ECOWAS community advanced its policies on regional trade and investment, it said, it should be mindful of security considerations, particularly as community borders came down.
“Efforts should continue to develop indigenous industries and their capacity for competition and intra-community trade. Corruption in various forms continues to remain a barrier at community borders, which should be brought to the attention of the Heads of State for remedial measures,” it said.
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In less trade resides economic stagnation
Africa hosts the oldest surviving trade [customs] union – the Southern African Custom Union (SACU). It is 40 years older than Europe’s equivalent. Whereas Europe shares a currency union, Africa trades less within itself than with the rest of the world.
Despite having 17 overlapping regional trade blocs, inter-African trade has stood at 11pc of the continent’s total trade for over two decades. At 2012 prices, this equates to 130 billion dollars, or 14pc of Africa’s gross domestic product (GDP) – the lowest in the world. By comparison, 60pc of European and Asian, and 40pc of North American trade happens within their own continents.
Southern African Development Community (SADC) accounts for half of the inter-African trade, in which South Africa trades with its smaller neighbours. All six African countries that make up 30pc of their total trade in Africa are members of the SADC. Only Lesotho and Zimbabwe trade more than 50pc, both with strong ties to the South African economy.
South Africa itself sells 17pc of its industrial produce to its neighbours. Across the continent, 27 countries trade less than 10pc within Africa, and North Africa conducts almost all its trade with Western Europe.
The effect of this low trade between African countries is obvious. Those regions, including emerging ones, where regional trade is higher add more value to their exports and are, therefore, more competitive than Africa in global markets.
For example, Nigeria is the second largest producer of citrus fruits in the world, but still spends one billion dollars annually on importing juice. Many oil nations export crude-oil only to import refined products at a much higher cost.
Zambia and Ghana have copper and aluminium in profusion, with no industrial base to add value. Nigeria and Zimbabwe could supply uranium if only there was an African nuclear power plant. The Ivory Coast and Ghana still export raw cocoa.
Yet, Africa is ripe for regional trade. The continent is among the world’s fastest growing economic regions and return on foreign investment is the highest anywhere. McKinsey, a consultant, estimates that Africa’s GDP will grow from 1.6 trillion dollars in 2008 to 2.6 trillion dollars by 2020 – with an even stronger outlook beyond that. The International Monetary Fund (IMF) believes that 11 of the 20 fastest growing countries in the world will be African through to 2017.
More promising is Africa’s fast growing consumer market, propelled by the rapid urbanisation of a middle class. In 1980, just 28pc of Africans lived in cities compared to 40pc today. As less people depend on subsistence farming, and increase their income through higher paying jobs, the potential for inter-regional trade increases. Twenty-seven African countries have already gained “middle income” status, where as much as 40 (75pc of countries in the continent) could be in this group by 2025.
Similarly, Africans spent 860 billion dollars on goods and services in 2008 – more than Indians (635 billion dollars) and Russians (821 billion dollars). This figure is projected to be 1.4 trillion dollars in 2020. By 2030, according to McKinsey, the top 18 cities in Africa could have a combined spending power of 1.3 trillion dollars.
And there are some promising efforts to take advantage of. In 2010, for example, the East African Community (EAC) – a customs union of five African countries – took full effect. Cutting out tariffs on goods sold within the region, trade between the countries has jumped by 50pc since 2005. Twelve members out of 15 in the SADC launched a free trade zone, removing import tariffs on goods from member nations. A customs union is currently under negotiation. There are positive signs that the Economic community of West African States (ECOWAS) will follow suit.
In 2012, Erastus Mwencha, deputy chairperson of the African Union, unveiled plans to create a continental free trade area by 2017.
The EAC has also vowed to reduce roadblocks – one of the major non-tariff barriers in Africa – in its transport corridors to boost business. Kenya’s President, Uhuru Kenyatta, reduced police roadblocks from seven to two recently, reducing the average number of days for goods delivery to its neighbours from 14 to four. The regional bloc hopes to cascade this further.
Given the potential, however, these are barely strides. Many countries have difficult import and export procedures, tariff and nontariff barriers, inefficient border control, corruption, unsupportive export policies and unpredictable government services.
African trade tariffs are among the highest in the world. On average, they are 50pc higher than Latin America and Asia. It cost Africans 2,000 dollars to export a container from Africa compared to just 900 dollars from South-East Asia. Furthermore, whereas it costs 935 dollars to import a container from South-East Asia, it costs almost 2,500 dollars to import the same container from Africa. It takes 39 days to import goods into Africa compared with 25 days in Brazil, Russia, India and China (BRICs).
African also has a fragmented market. Most trade blocs remain blocked for outside business, where a significant amount of trade takes place between member countries. Barriers between blocs are extensive, prompting many countries to be part of multiple trade agreements. Most African countries belong to more than one; some, like Kenya, belong to three. Only 12 are in a single bloc.
At a micro level, although best placed to serve the continent, firms face small market sizes. Given the local presence, they have shown that they can tailor their businesses in a manner that overcomes poor roads, low technology reach and numerous other limitations in many countries. Limited markets, however, hinder mass production and the delivery of goods and services, affecting cost and efficiency.
Thus, only 24 firms headquartered in Africa are in the top 2000 companies on the Forbes list, with none in the first two hundred.. Of the 75 best known brands in Africa, according to the African Business Magazine, only 18 are African.
To take advantage, Africans have alternatives. Creating larger regional markets by merging the currently scattered regional blocs is a good start. Through increased market size and manufacturing base, counties and firms could specialise on their competitive advantage. Firms could produce for local and regional markets where they have the advantage of local knowledge. They could build African brands, shape industry policy, consumer preference and advance new technologies tailored to Africa’s realities.
This would also enable diversified and stable economies to be less dependent on natural resources. For example, Africa’s four advanced economies (Egypt, Morocco, South Africa and Tunisia), where manufacturing and services make up 70pc of the GDP, have a steady growth in Africa. In contrast, Africa’s oil giants do not.
Algeria, Angola and Nigeria, the three largest producers, earned one trillion dollars from 2000 through to 2008 from oil exports, compared to just 300 billion in the 1990s. However, manufacturing and services account to just a third of their GDP.
Africa also needs to focus on some key industries where its competitive advantage lies. McKinsey argues that four areas hold this promise: telecoms, banking, agriculture and infrastructure, with potential revenue of 2.6 trillion dollars a year by 2020 – one trillion dollars more than current levels.
With rapid population growth and urbanisation, telecoms and banking are growing rapidly in Africa. Banking assets have doubled since 2000 and mobile telecoms revenue has grown by 84pc since 2004. Having inside knowledge, African born companies tailor their products to local realities and grow their business with it.
The Kenyan telecoms company, Safaricom’s mobile phone money transfer service (M-PESA) is a good example. Similarly, Ecobank successfully runs in 29 African countries, MTN in 21, Shorite in 17 and UBA in 16.
Agriculture probably has the most potential, with Africa currently importing food worth 40 billion dollars a year. Africa’s spending on food and drink is projected to increase to 544 billion dollars by 2020 – an increase more than any other consumer category.
Furthermore, agriculture has the most potential for value addition. Africa houses 60pc of the uncultivated arable land in the world – a green revolution in waiting. If Africa is to develop just 500,000 hectares a year, it could raise its production by over 200 billion dollars by 2030. If yield increases to 80pc of the world’s norm, where Africa’s fertiliser use is just a quarter of world average, it could increase its production by another 200 billion dollars.
The major stumbling block for inter-Africa trade, infrastructure, might also hold fruits of its own revival. The World Bank estimates that Africa needs to invest 118 billion dollars a year just to clear its infrastructure backlog, which is 46 billion dollars over current investments. But, Africa’s private investment in infrastructure is the lowest in the world – 13pc of the total by emerging markets. This, although challenging, presents an opportunity for African firms and countries with a potential return of as much 10 billion dollars a year.
Noting the usual forerunners, such as political stability, macroeconomic prudence and political will, regional trade could provide Africa with its next growth spurt. Ignored, the continent risks missing out on yet another opportunity.
Binyam Mesfin is an independent investment advisor.
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Nigeria’s “African Davos” will focus minds on problems, as well as potential
Delegates to the World Economic Forum on Africa next week in the Nigerian capital Abuja will be in the right place to reflect on the rising continent’s problems, as well as its undoubted potential.
Participants, including Chinese Premier Li Keqiang and African leaders, meet as the continent’s largest economy grapples with a surging Islamist revolt and inter-communal clashes that highlight poverty, ethnic and religious schisms, and battles over power and resources in many parts of Africa.
“If people want to take a look at a dynamic, high-potential place in Africa, Nigeria is that place, but it also has a whole host of issues that are not going away anytime soon,” said Mark Shroeder, head of Sub-Saharan Africa analysis at business and security consultancy STATFOR.
Policymakers, entrepreneurs and philanthropists attending the 24th World Economic Forum on Africa (WEFA), a replica of the flagship annual WEF held in Davos, Switzerland, will be ensconced in the concrete fortress of the Abuja Hilton, protected by 6,000 police and soldiers - the largest security operation Nigeria has ever mounted for a summit.
An April 14 bomb blast on Abuja’s outskirts, which killed at least 75 people and was claimed by the radical Islamist group Boko Haram, triggered the big security shield for an event which is normally the setting for convivial and relaxed discussions.
But despite the announced security cordon around the city, another suspected bomb exploded on Abuja’s outskirts on Thursday, killing and injuring several people.
The Hilton’s air-conditioned marble interior may also not drown out the desperate public appeals of parents of some 200 teenage schoolgirls snatched by suspected Boko Haram militants from a northeast school in a mass abduction last month.
The incident has shocked Nigeria, triggered protests in Abuja and embarrassed President Goodluck Jonathan’s administration, showing up the military’s inability to contain a ruthless anti-government insurgency whose targets also include Christian churches and civilians of all races and creeds.
Nigeria’s combustible ethnic, religious and regional faultlines, fanned by the political winds of an upcoming election 10 months away, are the legacy of its artificial creation by former colonial masters.
In this, the West African giant, which recently replaced South Africa as the continent’s biggest economy through a rebasing of its GDP, can be seen as a microcosm of the post-independence pains and trauma of other struggling African nation states - such as South Sudan and Central African Republic.
The World Economic Forum on Africa on May 7-9 will include a session on emerging security threats which are casting a pall on Sub-Saharan Africa’s otherwise ebullient economic promise as it snaps at the heels of Asia as the world’s second fastest-growing region.
Nigerian Finance Minister Ngozi Okonjo-Iweala told Reuters that the meeting’s chosen theme - “Forging Inclusive Growth, Creating Jobs” - was as relevant to Nigeria as to the rest of Africa.
“INCLUSION PROBLEM”
The continent’s most populous nation, Nigeria has tens of millions of poor, many of them unemployed, restless youth, who could pose a real threat to stability if neglected and left without a future.
These masses of underprivileged and excluded from Africa’s natural wealth, such as Nigeria’s oil, offer potential recruits to Boko Haram and other radical or insurgent groups which often arise from, or take advantage of, these social inequalities.
Okonjo-Iweala has acknowledged “an inclusion problem” as one contributing factor behind Boko Haram.
So while Jim O’Neill, the former Goldman Sachs analyst who coined the BRICs (Brazil, Russia, India, China), sees Nigeria as a “fantastic story” and has included it as one of the most powerful newly emerging MINTs (Mexico, Indonesia, Nigeria and Turkey), others like West Africa expert Gilles Yabi fear it could be a “giant with feet of clay”.
Former International Crisis Group analyst Yabi wrote in recent blogs that Boko Haram was a monstrous product of bad governance illustrating “the failure of the attempt to construct a Nigerian society founded on common values”.
WEFA’s Nigerian hosts are keen to keep the focus positive.
“We’ve not had any cancellations, which is amazing to us,” Okonjo-Iweala said.
Delegates are also expected to include former Brazilian President Luiz Inacio Lula da Silva, former British Prime Minister Gordon Brown, former U.N. Secretary-General Kofi Annan and U.S. Trade Representative Michael Froman.
Participants will swap views of Table Mountain and the azure sea in Cape Town, South Africa, the venue for most previous WEFs on Africa, for the sight of Aso Rock - a stark erosion-streaked outcrop that dominates the surrounding African bush and stands guard over the Nigerian presidential complex.
“Participants will not have a problem with security during the summit,” President Jonathan said in a statement aimed at reassuring WEFA attendees.
Boko Haram leader Abubakar Shekau had a chillingly different message in a video released to some media in which he claimed responsibility for last month’s bombing of the bus station on the edge of the federal capital of Africa’s No. 1 oil producer.
“Look at us, we are right within your city, and you don’t even know how to find us,” Shekau taunted Jonathan.
“FAILING STATE”
One figure who will be absent next week will be Nigerian central bank governor Lamido Sanusi, suspended by Jonathan in February after he denounced that up to $20 billion of state oil revenues had failed to be paid into the national treasury.
Widely respected internationally as an anti-corruption reformer, the urbane northern aristocrat had been a regular at Davos. He told Reuters in Abuja this week he would be staying away from the “African Davos” in his own country.
Nigeria’s presidency, which has disputed his denunciations of missing oil revenues as exaggerated, said he was suspended for “recklessness” at the central bank. Sanusi has a different story: “It’s all about shooting the messenger,” he said.
“If you were to look at objective criteria, you would say that Nigeria is a failing state,” he said. Finance Minister Okonjo-Iweala prefers to talk about “democracy in raw form”.
That may be small comfort to the relatives of the abducted schoolgirls, who want the military to do more to find them.
“We’re talking about the lives of 200 innocent girls,” said Lawan Abana, who has a sister and two nieces among the missing.
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Africa needs investment not aid, says Equity boss
Equity Bank Group Managing Director James Mwangi has advised developed nations and partners to consider partnering with African states on investment projects in place of development aid.
Speaking in London, at the weekend, when he addressed delegates during the 13th London Business School Africa Business Summit, Mwangi stressed that sub Saharan Africa is now ripe for investment based partnerships which are more sustainable than aid based credit facilities and grants.
The Equity Bank boss who was one of the keynote speakers addressing the summit theme: ‘Beyond the Hype: The Not-for-Tourists Guide to Investing in Africa’, presented the case for financial education to boost financial literacy as one of the key development agendas.
“In Africa, we do not need aid; let us develop Africa as we have developed other economies through sustainable and innovative investment programmes not aid.”
He expressed regret that despite pumping billions of dollars in aid for sub Saharan countries, the average human development index for the region is still “worrisomely” low with poor education enrolment and achievement.
Though recognized as a contemporary development enabler, banking services and financial inclusion in sub Saharan Africa, Mwangi said is still a challenge with less than 12pc penetration rates.
“Education distributes opportunities more equitably and I am glad that with free compulsory primary education, Kenya, is leading the way. Alongside education, we need to enhance the capacity of most Africans to be financially literate,” he said.
Adding that: “You cannot introduce finance to a population that has never been part of a commercial world.”
To address the banking challenge, Mwangi reiterated that financial inclusion in the region requires innovative solutions beyond the traditional brick and mortar model.
Presenting the Equity Bank example, Mwangi explained that the bank had managed to roll out a robust agency-banking model, which now counts more than 10,000 agents countrywide providing banking services in kiosks, hardware stores, supermarkets and other unconventional outlets.
“To address the issue of banking services provision in the conventional banking halls, Equity Bank has been rolling out an agency and mobile based banking system to enable us reach the population cost effectively and conveniently,” Mwangi affirmed.
Now in its 13th year, the Africa Business Summit is firmly established as a leading forum in Europe for engaged discussion on doing business in Africa. The Summit brings together 300 delegates with an active interest in Africa, providing an excellent opportunity to network with like-minded professionals, including alumni and students of London Business School.
The 2014 Summit, last weekend was staged against a backdrop of hot-button issues, from the rebasing of the Nigerian economy (now Africa’s largest) to the infrastructure crisis, the acute demand for power to support growth, ensuring that growth is more inclusive, facilitating access to capital for entrepreneurs, an accelerating pace of innovation in technology and telecoms, a burgeoning middle class, a call for accountable leadership, regional integration, and achieving better health and education outcomes.