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Full agenda for 33rd SADC summit in Malawi
The SADC Heads of State and Government Summit set for Lilongwe, Malawi this week will deliberate on a wide range of regional issues including the appointment of a new leadership for the secretariat.
According to a draft agenda, the Southern African Development Community (SADC) Summit will discuss a report of the Ministerial Task Force on Regional Economic Integration.
The Task Force was mandated by southern African leaders to work on a roadmap for the proposed launch of the SADC Customs Union, which is aimed at deepening integration and promoting the smooth movement of goods and services across the region through the removal of non-trade barriers.
Establishment of a SADC Customs Union would complement the SADC Free Trade Area (FTA) that was launched in 2008. At the last summit held in Maputo, Mozambique, the Task Force reported that some progress had been made in developing the parameters, benchmarks, a model customs union for the region and the timing of activities leading to the launch of the Customs Union.
The launch of the SADC Customs Union was initially scheduled for 2010. However, member countries asked for more time to first implement the SADC FTA. A Customs Union is an advanced stage of integration when compared to a FTA as it does not require tariffs or quotas on goods originating from within the region.
Another issue for discussion is the report on the recent SADC infrastructure investment summit held in Mozambique in June. The conference had southern Africa presenting its multi-billion-dollar infrastructure development plan to potential funders.
Infrastructure development is critical towards socio-economic growth; hence the region is aiming for an efficient, seamless and cost-effective trans-boundary infrastructure network at the national and regional levels. At least 106 cross-border infrastructure projects covering the priority sectors of energy, transport, tourism, water, information communication technology and meteorology were presented to the investment summit.
These projects are contained in the Regional Infrastructure Development Master Plan – a 15-year blueprint that will guide the implementation of cross-border infrastructure projects between 2013 and 2027. The master plan will be implemented over three five-year intervals – short term (2012-2017), medium term (2017-2022) and long term (2022-2027).
With regard to the political situation in the region, the leaders are expected to receive a report from the outgoing chairperson of the SADC Organ on Politics, Defence and Security, Tanzanian President Jakaya Kikwete.
The report is expected to include the situation in the Democratic Republic of Congo (DRC) and Madagascar as well an update on the recent harmonized elections in Zimbabwe, which were endorsed as credible by a 573-member SADC observer mission.
The DRC slid into political turmoil early last year when anti-government rebels calling themselves the March 23 movement invaded and captured the city of Goma, causing displacement of people and loss of lives and property.
SADC has called for a peaceful and durable resolution of the conflict in DRC and have pledged to contribute troops to be deployed for this purpose. Madagascar is in a constitutional crisis following the ouster of former President Marc Ravalomanana by Andry Rajoelina in 2009, in a similar method used by Ravalomanana on former President Didier Ratsiraka a few years back.
Southern African leaders are expected to also receive a report on the SADC Tribunal. The SADC Tribunal was disbanded in 2010, following an order by the SADC summit for an independent review of its functions and terms of reference.
Summit last year directed that the Protocol on the SADC Tribunal and Rules of Procedure Thereof be negotiated and the jurisdiction of the new Tribunal be confined only to an advisory role and interpretation of the SADC Treaty and any protocols that may be negotiated among Member States.
On the new leadership for the secretariat, the summit is expected to appoint a new executive secretary and deputy executive secretary for regional integration. The tenure of Tomaz Augusto Salomão as executive secretary is coming to an end after serving in that capacity for two four-year terms.
Deputy Executive Secretary, João Caholo has also been with the secretariat for two four-year terms. However, he was only appointed the deputy executive secretary for regional integration in 2009 when a second post of deputy executive secretary was created to take charge of finance and administration.
Although it is still unclear on who will lead the SADC Secretariat, a meeting by the SADC Council of Ministers that met in March in Maputo, Mozambique discussed and shortlisted two candidates from Tanzania and Seychelles.
Angolan Foreign Minister Georges Chikoti told journalists after the Maputo meeting that there were a sufficient number of candidates for the executive secretary and deputy executive secretary positions.
Summit will review progress towards targets set in the SADC Protocol on Gender and Development which entered into force this year. Among other issues, the protocol commits Member States to attaining 50-percent representation of women and men in political and decision-making positions by 2015. Other socio-economic issues to be discussed during summit include the global economic crisis, food security and ways to curb HIV and AIDS.
The 33rd annual SADC summit will be held from 17-18 August. Meetings of senior officials are scheduled for 10-13 August, followed by the Council of Ministers from 14-15 August.
Malawian President Joyce Banda is expected to assume the rotating SADC chair from President Armando Guebuza of Mozambique.
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Post 2015 Report launched with calls for a bold agenda for Africa
During the launch of the high level panel of the post-2015 global agenda, held at the UN Conference Centre today in Addis Ababa, Mr. Carlos Lopes, Executive Secretary of the Economic Commission for Africa on 5 August 2013 called for a more bold agenda for Africa – one that takes into account the existing continental frameworks.
“Our continent faces unique challenges and opportunities that require specific policy interventions and distinct goals for both economic and social development, said Lopes, adding that it is in this regard that recent policy discussions amongst leading regional institutions have proposed “African Development Goals”.
These ADGs, he said, should be framed to take into account the existing continental frameworks, particularly the AU/NEPAD programme, Agenda 2063 Vision and other programmes on infrastructure, agriculture, governance, industrialization, resource mobilization and capacity development.
The Executive Secretary lauded the panel for “an excellent job” of capturing global priorities and key, overarching and cross cutting issues that should be included in the post 2015 agenda.”
“We failed to anticipate the data challenges associated with monitoring real performance or lack thereof,” said Lopes stressing that without the ability to properly monitor whatever new goals, targets or indicators we come up with, the post 2015 agenda will suffer this same major shortfall.
“It is therefore critical to tackle data methodological constraints and work hard to generate robust economic and social statistics,” he added. He welcomed the Report’s emphasis on a data revolution to improve the quantity and quality of statistics available for monitoring development indicators, which said was a point of emphasis at the inception of ECA’s renewed vigor in September 2012. He recommended that efforts in this regard be done in a coordinated manner.
Mr. Lopes said the Report underscores the need for big transformative shifts, which include leaving no one behind. This, he said, touches upon our concern that the MDGs were mostly silent on issues of equality.
He further noted that putting sustainable development at the core recognizes the significant interlinkages between economic, social and environmental sustainability, and the importance of tackling climate change.
“The call to transform economies for jobs and inclusive growth echoes our vision to assist Africa in embarking on a structural economic transformation, focused at diversified economies, creating employment and adding value to natural resources,” he said.
He also said the Report urges for building peaceful and effective, open and accountable institutions for all. “This, coupled with the fifth key point of forging global partnerships takes into account the need for good governance at the local, nation, regional and global level,” he said.
On global partnerships, Mr. Lopes said the ongoing consultations on the post 2015 agenda have illustrated the need for inclusiveness in global dialogue, helping address issues of accountability in the current MDGs.
He stressed the need to fast-track economic transformation and inclusive growth. “Such a transformative agenda is essential if Africa wishes to pursue high-level and sustainable economic growth and social development,” he said.
Touching on the draft Common Position on the post-2015 agenda, Mr. Lopes said, “I believe what Africa needs is to articulate an aggressive industrialization drive; Africa needs more modern jobs, value addition, agricultural productivity revolution, better use of natural resources, all of which are pointing in the direction of a recomposition of Africa’s GDP with a greater part for industrialization.”
The event was attended by representatives of member States based in Addis Ababa, as well as members of Civil Society. Betty Maina from Kenya and Fulbert Amoussouga Gero from Benin.
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Africa’s Agenda 2063 to help address the Continent’s new growth challenges
Amidst the new sense of optimism found in Africa’s new natural resources discoveries, rapid urbanisation and increased regional integration, the tripartite partnership of the African Development Bank (AfDB), African Union Commission (AUC) and Economic Commission for Africa (ECA), as well as the Regional Economic Commissions (RECs) are rallying round the need for a new vision.
Dubbed ‘Agenda 2063’, the three institutions are in agreement, that this vision, crafted by the AU can be the pathway for addressing the challenges found in Africa’s new opportunities towards its sustainable growth.
During the recent roundtable on financing Africa’s transformation held in Tunis on 19 July, a technical session on Agenda 2063 highlighted the high levels of growth witnessed in such during the past decade. The session underscored that the growth “is happening against the backdrop of Africa’s structural challenges which include infrastructure deficits, adverse effects of climate change, and food insecurity.”
In this respect, said participants, “opportunities and challenges provide room for Africa to re-think the conventional approach to conducting the business of development, hence the rationale for Agenda 2063.”
ECA assured participants that the articulation of Agenda 2063 is based on an analysis of past experience as well as critical success factors, risks and challenges.
ECA officials stressed the necessity for a paradigm shift in Africa’s development where change is driven from within the continent, stressing that this requires a reinforcement of the capacity of Africa’s institutions.
They pointed out that the African Development Goals (ADGs) would build on existing continental frameworks and add value to the process of implementing Agenda 2063.
“The goals will also set key milestones to track progress in the vision,” they said.
The idea of the African Development Goals received strong support from participants of the roundtable as reflected by the final Communique of the meeting.
The objectives of the Roundtable were, among others, to map out priorities to accelerate Africa’s transformation agenda, to define innovative financing mechanisms and instruments to respond to priorities, and to strengthen partnerships among the continent’s leading regional organisations.
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Shift from traditional approach to integration to ‘developmental regionalism’, report urges
The Economic Development in Africa Report 2013, subtitled “Intra-African Trade: Unlocking Private Sector Dynamism”, says that efforts to date to spur jointly reinforcing economic growth on the continent have relied on a ‘textbook’ and ‘linear’ approach to regional cooperation that does not fit with Africa’s situation. It says that what is required is a “21st century approach to dealing with 21st century challenges”.
The report, released on 10 July 2013, suggests that African countries should adopt a new approach to regional integration, referred to as “developmental regionalism”, which encompasses cooperation among countries in a broader range of areas than just trade and trade facilitation, to include – for example – investment, research and development, as well as policies aimed at accelerating regional industrial development and regional infrastructure provision, such as the building of better networks of roads and railways.
Harvesting the many benefits that can come from vibrant regional markets – spurred by African leaders’ 2012 decision that they will eliminate barriers to intra-African trade – depends on an expansion of the continent’s private sector, the report notes. Selling in nearby markets gives firms cost advantages through proximity, potentially reduced transport expenses, better knowledge that allows goods to be fitted to local conditions, and, if sufficient customers can be found, enough critical mass to justify expanding industry.
But additional holistic approaches – a form of enhanced teamwork – are required of African governments to enable the private sector to expand and thrive, the report says. Experiences elsewhere in the world indicate that setting up regional markets will result in a greater demand for goods; African businesses must therefore be encouraged and enabled to provide these goods or they will lose out to foreign competitors, the report warns.
The capabilities of African countries must be enhanced so that they can produce a wider range of sophisticated goods that they can then trade with one another – a process that economists call expanding productive capacity. The report says that regional industrial policies are an important tool for developmental regionalism. African countries need to coordinate their national industrial policies around regional industrial policies in order to build complementarities in what can be produced and traded within Africa.
The Economic Community of West African States (ECOWAS) has such a regional industrial policy which has yet to be fully implemented, the report notes. One of its objectives is to promote local processing and the creation of value added in the sectors and subsectors where the region as a whole enjoys high comparative advantage (such as mining, and the processing of agricultural products).
The concurrent development of national and regional industrial policies can stimulate the development of regional industrial value chains in Africa, in turn offering African countries larger opportunities to trade more goods among themselves. Examples are the cotton-textile-apparel value chain, and the livestock-meat-canned products value chain.
A second element of developmental regionalism lies in strengthening the capacity of the private sector in Africa as an important driver for expanding regional cooperation. So far in Africa, governments have been the only active force for regional integration, while the private sector has remained a passive participant in the process, the report contends. There is a need to create mechanisms for constant dialogue between States and the private sector so that the problems and challenges faced by existing and prospective businesses are clear to governments, and well-coordinated plans can be established for dealing with them. In Mauritius, for example, the Joint Economic Council, a coordinating body of the Mauritian private sector, meets on a regular basis with the Government to discuss broad economic policies.
A third element of developmental regionalism consists in building economic linkages among African economies in specific sectors of activity, through the creation of “development corridors,” the report says. Developmental regionalism goes beyond trade, and encompasses cooperation among African countries in a wide range of areas including investments in transport and in production-related infrastructure, as well as in agriculture and industrial projects.
Cooperation in a wide range of areas can help African countries build international competitiveness. The Maputo Development Corridor, linking Gauteng Province in South Africa to the port of Maputo in Mozambique, has been hailed as a successful, true transport corridor that has unlocked landlocked provinces in one of the most highly industrialized and productive regions of Southern Africa. There are currently more than 20 corridors in operation in Africa, but most tend to be traditional transport corridors. There is a need to go beyond that and to create industrial development corridors as well, the report says.
Developmental regionalism is not a vague concept, the report notes. It is actually being carried out elsewhere. An example is the Greater Mekong Subregion Project in South-East Asia, which is promoting economic linkages and boosting development among six countries sharing the Mekong River (Cambodia, China, the Lao People’s Democratic Republic, Myanmar, Thailand and Viet Nam), with assistance from the Asian Development Bank. The joint strategic development programme is based, among other things, on public–private partnerships, shared use of natural resources, and the creation of economic development corridors. One new project involves marketing the Mekong area as a single travel and tourism destination.
While there are elements of a “developmental” integration agenda in some African subregions, such as the proposed Tripartite Free Trade Area that will cover 26 countries mostly in Eastern and Southern Africa, the report says that more numerous and more comprehensive developmental integration programmes should be designed and implemented in Africa.
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Obama plan to electrify Africa offers a “new model” of aid
During an eight-day trip to Africa, President Barack Obama unveiled an ambitious plan to improve access to electricity across the continent, a move the White House says is designed to lift Sub-Saharan Africa out of poverty and help the region develop a stable middle class.
While the initiative may appear to be a generous increase in U.S. government aid to the continent, analysts suggest that it is perhaps more noteworthy as a change in the paradigm of how the United States assists developing nations.
The plan, dubbed Power Africa, will be aimed at doubling access to electricity in the region, where some 85 percent of the rural population continues to lack access to power. The hope is that vastly increasing this infrastructure will in turn strengthen African economies.
“The initiative seeks to address a major, major issue,” John Campbell, a senior fellow for Africa policy studies at the Council on Foreign Relations, a think tank here, told IPS. “The absence of electrical power, among other things, makes it difficult to establish the kind of manufacturing that generates employment.”
Power Africa was announced on the heels of an address given by President Obama at the University of Cape Town, in South Africa. The president, who has been criticised for actions that fail to live up to his impressive speeches and for largely ignoring Africa during his first term, called on the United States to “up [its] game when it comes to Africa”.
Obama referenced Nelson Mandela’s experience in captivity as analogous to Africa’s continued suffering with poverty and underdevelopment.
“(J)ust as freedom cannot exist when people are imprisoned for their political views,” he stated, “true opportunity cannot exist when people are imprisoned by sickness, or hunger, or darkness.”
The president also asserted that development assistance to the region would be in the United States’ own interests, saying an enlarged middle class there would translate into “an enormous market for [U.S.] goods”.
Assistance as insurance
Establishing reliable sources of electricity, the Obama administration believes, will be a key part of the effort to bolster that middle class.
An estimate endorsed by the administration states that it would take around 300 billion dollars to grant all Sub-Saharan Africans access to electricity by 2030. With Power Africa, the U.S. ensures the region will receive seven billion dollars over the next five years.
That sum will be split among six countries (Kenya, Ethiopia, Ghana, Liberia, Tanzania and Nigeria). It will be used to exploit the region’s large, newly discovered reserves of oil and gas, as well as its potential to develop renewable energy from geothermal, hydro, wind and solar sources.
But, as Campbell points out, the way the United States will raise the seven billion dollars represents a shift in how it provides aid to Africa, focusing more on private trade and investment rather than on direct government aid.
“The old model would have been a government aid agency providing U.S. taxpayer money to fund development projects,” he says. “Here we will have the government partnering with private sources of money by guaranteeing against losses.”
Essentially, Campbell explains, the United States will marshal seven billion dollars’ worth of both money and material from private investors, who will then provide much of this by exporting manufactured goods intended to improve African infrastructure. These investors will be protected from losses by guarantees from Washington, which will play a role similar to that of an insurance provider.
Five billion dollars of support will be provided by the U.S. Export-Import Bank (Ex-Im) to U.S. exporters, while another 1.5 billion dollars in financing and insurance will come from government’s Overseas Private Investment Corporation (OPIC).
Only a small portion of the seven billion dollars will come in the form of government aid. One billion dollars will come from the publicly-funded Millenium Challenge Corporation (MCC), while the country’s main foreign assistance arm, U.S. Agency for International Development (USAID), will provide just 285 million dollars.
“At the end of the day, if it all works out well, the U.S. government will actually make money,” Campbell says.
He also notes that the new model will mean insured profits and new jobs for U.S. manufacturers assigned with exporting needed products.
Campbell is concerned, however, that the new plan could fall short of its goals without additional U.S. government funding. But given the budget-conscious attitude prevailing in the U.S. Congress, he suggests this funding could be unobtainable.
China question
Some have speculated that the revamped assistance to Africa comes as a response to Chinese movement into the continent. China has, over recent years, invested massive amounts of its reserve funds into bolstering African infrastructure, and thus making inroads for future commercial and political relations.
Yet Campbell believes this speculation reflects an outmoded Cold War-era mentality and is an incorrect interpretation of what motivates the United States. He points out that Obama on Sunday welcomed investment in Africa by states other than the U.S. – including China.
“Governments and businesses from around the world,” Obama stated, “are sizing up the continent, and they’re making decisions themselves about where to invest [and] that’s a good thing. We want all countries – China, India, Brazil, Turkey, Europe, America – we want everybody paying attention to what’s going on here, because it speaks to your progress.”
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Disconnected: African markets remain fragmented and inefficient
Africa has over the years been unable to boost internal commerce due to countries’ low level of connectedness, despite the existence of abundant empirical evidence showing that increased economic integration can bring large gains in wealth and welfare.
The bulk of African countries are still dependent on exports to former colonisers – a situation made possible by the fact that colonial Africa’s infrastructure was originally designed as feeder routes to largely serve European markets.
African governments’ inability to invest in new infrastructure and to bring down colonial borders and raise the level of connectedness, even between neighbours, has resulted in just about all trade routes leading to Europe.
Numerous studies have provided evidence that African borders have pronounced effects in hampering the flow of goods given the fact that Africa is the least connected region in the world.
Analysts now argue that the poor levels of integration in Africa are not because of want of good policies, but rather substandard – or in some cases non-existent – facilitation and implementation.
Adrian Saville, Visiting Professor of Economics at the Gordon Institute of Business Science (GIBS), and Dr Lyal White, director of the Centre for Dynamic Markets at GIBS, argue in a report titled “Realising Potential: Connecting Africa” that poor connectivity in the past was one reason why the continent’s economy has underperformed.
They add that Africa is by far the most disconnected region when measured by movement of goods, services, people and information within countries and across borders.
Despite pursuing a trade liberalisation agenda and entering into a number of free and preferential trade agreements with partners around the world, the movement of goods and services between Africa and the rest of the world has been slow.
Prof Saville and Dr White argue that Africa’s poor trade performance has been less about policy and preferential access to key markets than about facilitation.
To bolster their argument, they point out that trading with Africa is significantly more expensive than trading with other regions of the world.
For example, the cost of moving a container in Nigeria is five times the cost in Brazil and ten times that in The Netherlands.
The same can be said for visa requirements and border controls, which the analysts say frustrate trade and movement of people.
For example, while a flight between Johannesburg and Harare can take 90 minutes, passengers might take another 90 minutes to clear immigration controls in both countries.
“Africa needs to trade and become more integrated in global value chains if it is to harness its natural potential and stimulate wealth and prosperity. This also means growing integration within Africa-to build economies of scale and competitiveness in global markets,” Prof Saville and Dr White say.
There is emerging consensus that the low level of regional integration is due to lack of product diversification, historical relationships, poor or inadequate infrastructure and small, fragmented markets with low purchasing power.
“There is little complementarity between African countries and historically, infrastructure was designed and built to extract resources from the continent to be shipped to other locals and not necessarily to connect one African market to the next.
“With low levels of economic and product diversification, the markets for exports from African countries are not in other African countries, but rather further afield in markets requiring these resources, but that do not have their own internal supply.
“African countries still produce overwhelmingly the same (or similar) goods at the same time of year, offering little trade complementarity. As a consequence, African economies often compete against each other with low degrees of differentiation in common external markets for goods,” the analysts say.
They further point out that preferential market agreements with the EU, US also encourages products to flow to those markets instead of neighbouring African countries.
Historical ties play a key role in African countries’ inability to do business with each other.
There is the example of Angola, a former colony of Portugal whose major trade ties are with Portugal and Brazil.
“Angola is essentially disconnected from the African countries east of it. There are few road networks and no rail networks linking Angola to other African countries.
“This makes cross border trade difficult or impossible with neighbouring countries. It simply is easier, and by inference more profitable, to trade with countries like US, Brazil, Portugal and China.”
The DRC, a treasure trove of untapped natural resources, has no road or rail network linking Kinshasa with the eastern parts of the country.
“Transporting products between the rich copperbelt – which spans the border between Zambia and the DRC – and the coast, is an arduous logistical undertaking which can take up to two weeks if southward bound through South Africa or up to a month if eastward bound through Kenya or Tanzania.
“Over half of this transport time is spent at road blocks and bottlenecked borders,” the analysts say.
It is estimated that transportation costs are 136 percent higher in Africa than in other developing regions.
The movement of goods and people is not just constrained by poor physical infrastructure alone.
Studies reveal that on average, customs transactions involve 20 to 30 different parties, 40 documents, 200 data elements (30 of which repeated at least 30 times), and the rekeying of as much as 70 percent of all data at least once.
Each day of delay at customs is equivalent to an estimated 85km of travel distance.
The delays do not only involve people and goods as moving capital has also been found to be expensive and difficult.
For instance, the cost of sending money across the Tanzania-Kenya border is nearly ten times that of sending from the United Kingdom to Pakistan.
The cost of moving money between Tanzania and Rwanda is eight times that of moving it between UK and Pakistan, and the multiple for South Africa and Mozambique is six times.
These exorbitant costs of moving funds across borders act as a direct challenge to financial integration and considering the movement of people, inefficiencies and deficits in air travel infrastructure are glaring and gaping, the analysts say.
“Hampered by infrastructure that was designed by former colonial powers to efficiently move resources out of Africa rather than within Africa, infrastructure, which includes improved processes as much as it includes physical infrastructure, geared towards intraregional flows will go a long way in connecting African countries with each other and from there, through their coastal ports to global markets.
“Improving border posts and customs procedures will not only reduce the cost and delays incurred by commercial companies, and enhance trade competitiveness, but will also boost government revenues by up to 25 percent and accelerate economic development on the continent,” Prof Saville and Dr White say.
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World Bank formally urged to overhaul ‘Doing Business’ Report
An external review panel is calling on the World Bank to institute sweeping reforms to its widely cited annual “Doing Business” report, including doing away with a controversial ranking of countries on a variety of business-friendliness metrics.
Doing Business is put out jointly by the World Bank and its private sector arm, the International Finance Corporation (IFC), both based in Washington, and has become one of the bank’s most high-profile publications.
“Over the decade that it has been published, Doing Business has achieved a great deal of influence,” Trevor Manuel, South Africa’s planning minister and chair of the review panel, said Monday at the audit’s London unveiling.
“It is the leading tool to judge the business environments of developing countries, generating huge global media coverage every year. Several countries – such as Rwanda – have used it as a guide to design reform programmes.”
Indeed, reportedly used by some 85 percent of global policymakers, the report has built up particularly outsized influence in the developing world, as government officials have competed to raise their index ranking.
Yet for this reason, critics have for years warned that the report was pushing countries to lower taxes and wages and weaken overall industry regulation, thus potentially endangering the poor.
On Monday, the 11-member panel, appointed in October by World Bank President Jim Yong Kim, offered strong backing for several of these criticisms, even while it stated that the report should continue to be published. Most prominent among these is the recommendation to do away with the aggregated Ease of Doing Business Index, introduced in 2006.
“The decision to retain or drop the aggregate rankings table is the most important decision the Bank faces with regard to the Doing Business report,” the review states.
“Removing it would defuse many of the criticisms levelled against the report, but would diminish the report’s influence on policy and public discussion in the short term. In the long term, however, doing so may improve focus on underlying substantive issues and enhance the report’s value.”
The report also calls for greater transparency within the reporting and evaluation processes, and urges the bank to move the report’s “home” from the IFC to the research department within the bank proper. This latter recommendation could be particularly important given past criticisms that the Doing Business team has been reticent to implementing any major changes.
In an unusual public statement ahead of the review’s publication, President Kim suggested that plans were afoot to make just such a change. Yet he also sketched out a clear stance on the overall importance of both the report and its rankings.
“It is indisputable that Doing Business has been an important catalyst in driving reforms around the world,” Kim said on Jun. 7. (The bank declined IPS’s request for further comment Monday.) “I am committed to the Doing Business report, and rankings have been part of its success.”
Pure knowledge
The Ease of Doing Business Index rankings are based on metrics drawn from 10 regulations and other factors impacting on a country’s business environment. These include permitting and registering, ease of getting credit and electricity, the legal framework for enforcing contracts and protecting investors, how much tax a company must pay and how a government regulates cross-border trade.
These data points are then distilled down to a single score, allowing World Bank researchers to rank all 185 countries the report covers. The 2013 rankings awarded top scores to Singapore and Hong Kong and bottom scores to Chad and the Central African Republic.
Yet the review panel is now warning that such aggregation tends to cloud crucial country-level variations.
“It is important to remember that the report is intended to be a pure knowledge project,” the review states. “As such, its role is to inform policy, not to prescribe it or outline a normative position, which the rankings to some extent do.”
The past year has seen significant pushback against such criticism of the rankings, from prominent voices within the business community as well as certain development scholars.
“I think these rankings really do have fundamental value, as without the rankings the Doing Business report is just one more research exercise among many the World Bank does,” Scott Morris, a visiting policy fellow at the Center for Global Development, a Washington think tank, told IPS.
“It is because of the ranking that this report has unique value to those countries that have a long way to go on economic reform. Think of a small sub-Saharan African country with a reformist government in place – how does it get international leverage for reform or gain global attention for what it has accomplished? The rankings exercise, with its very high profile, is tremendously valuable in this regard.”
Regulatory opportunity
While the Doing Business report has received regular low-level criticism since its introduction, much of this was technical.
Over the past year, however, the issue has become far more politicised, with certain countries – led by China – complaining that the report was biased in favour of capitalist systems. Beijing has wanted the World Bank to halt publication of the report outright.
Meanwhile, humanitarian, labour and other progressive groups have also stepped up calls to reform the report. On Monday, many of these groups found the panel review to be surprisingly in line with their own worries about Doing Business leading to a weakening of regulation.
“After years of working with small and micro enterprises in developing countries, (we) know that helping people to set up and run a business is only half the job,” Christina Chang, lead economist for CAFOD, the Catholic aid agency for Britain and Wales, said in an e-mail to IPS. “Without a conducive regulatory environment, the odds are stacked against their success and many may never even get off the ground.”
CAFOD has actively pointed to problems with scoring on the report.
“Some indicators are linked with a drive to lower labour standards and corporate taxation rates,” the agency states. “These are not ideas that other publications of the Bank endorse, and they should not be in their most influential publication.”
Yet the panel’s recommendations, some groups contend, now offer a potent opportunity.
“The panel’s report is a defining moment for World Bank policy to reflect the needs of working people, and a balanced approach to labour market regulation,” Sharan Burrow, general-secretary of the International Trade Union Confederation, said Monday in a statement. “If adopted, the World Bank has the opportunity to reshape the relationship between working people, business and governments.”
Civil society proposes next steps after Doing Business Review is concluded
The Independent Panel appointed by the World Bank President Mr Jim Kim recently finalized its review of the Doing Business project.
In a new brief, civil society organizations assessed the review and offered recommendations on how to build on it and next steps for implementation.
Among other recommendations in the brief:
- CSOs called on the Bank to transparently review the relevance of the current indicators to the poverty eradication and inclusive growth objectives of the Bank, so as to cease the use of indicators for which there is no robust correlation with those objectives. As the panel notes, current indicators are not chosen according to any robust scientific analysis and there is scant evidence of their usefulness to socioeconomic performance.
- Noting the Panel’s finding that Doing Business is a “poor guide” for policy formulation and emphasis that the Doing Business report “should not be viewed as a one-size-fits-all template for development,” CSOs called to end practices to use it in conditional lending practices (for example, by the US Millennium Challenge Account), the Bank’s own use in Country Policy and Institutional Assessments and in setting terms and conditions for its lending strategy and the use by several international aid agencies in their approach to official development assistance
- The Panel stated that “Doing Business users should fully understand the report’s sphere of relevance and importantly its limitations. These caveats, which do appear in small print on page 17 of the 2013 Doing Business report, should be emphasised more prominently within the first few pages, and throughout the supporting communication strategy.” CSOs agreed with the Panel’s recommendation that the report carry a prominent “health warning” at the beginning, and also changing the report’s title so that it no longer “implies that it provides a comprehensive measure of the business environment.”
- In particular, CSOs supported the Panel’s findings questioning the methodology of using overall aggregate rankings. Because of how the rankings are constructed, a country’s position in the rankings can change dramatically with only small reforms or even with no reforms at all. They Panel went on to note that there is no strong justification for averaging scores across the rankings to produce the “Ease of Doing Business” index and that the cardinal scores, rather than positions in the rankings, provide more useful information to reform-minded policy-makers. Therefore, there is no good justification for maintaining an overall ranking.
- CSOs also brought to attention the Panel’s findings regarding particular indicators of concern, such as the tax reform and the labor regulation indicators. On tax reforms, the Panel noted several methodological and conceptual flaws in how this score is calculated, for instance, the indicator assumes that a low rate of taxation is better for business, and three diverse sub-indicators are aggregated into a total ranking score. On the labor market regulations, the Panel said that the one-sided view of labour market regulations embodied in the indicator parameters could encourage governments, especially those that are World Bank clients, to engage in major deregulatory reforms. The panel criticised unsubstantiated assertions that countries that improve their indicator ranking through deregulatory measures obtain superior economic outcomes. The Bank’s own Independent Evaluation Group found no evidence of such a relation. Similarly claims that the World Bank needs to focus on labour market regulations because enterprises in the Bank’s client countries tend to consider these major obstacles to investment and job creation are not borne out by evidence. On the contrary, the WDR 2013 on Jobs found that labour regulations did have impacts on inequality and that a weakening of labour market institutions and social protection mechanisms, along with several other factors, account for the growth of inequality in most countries over the past two to three decades. CSOs called for the Employing Workers Indicator to be permanently removed from Doing Business and endorsed the Panel’s recommendation that the total tax rate indicator be scrapped.
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Africa’s positive Aid for Trade trends; more needed to overcome constraints
Although Aid for Trade in Africa is starting to show results, interventions are urgently needed to overcome the short and long term constraints this was the key message by the Economic Commission for Africa underlining “African Case Stories: A Snapshot of Aid for Trade on the Ground in Africa”. The publication captures the African experiences on how AfT is progressing on the continent from a total of 114 submitted case stories.
“Since the AfT Initiative was launched in the Hong Kong Ministerial Meeting in 2005, Africa has received technical and financial assistance for trade-related activities.” In addition, “AfT funding has been kept and priority areas and categories identified by beneficiaries are being targeted,” according to ECA experts.
The study’s baseline period (2002-2005) shows the momentum of increasing commitments and disbursements has been sustained, with the structure of allocations remaining the same.
In 2009 Africa surpassed Asia, becoming the first recipient of AfT disbursements since the initiative was launched.
Although AfT continues to be primarily channelled to infrastructure, a growing share of commitments is going to building trade capacities and trade policy and regulations. This progress, says ECA is promising – largely because AfT is increasingly matching expectations in the continent and all partners are showing strong willingness in supporting the initiative.
AfT that is aimed at projects with a regional dimension is on the rise, with an emphasis on economic infrastructure, building productive capacities and trade facilitation. However, more interventions are urgently needed to overcome the short and long term constraints. In addition, it has been difficult to target greater employment, diversification or positive gender or poverty impacts through AfT interventions.
With improved M&E mechanisms and tools, it might be possible to fine-tune AfT responses to desired outcomes.
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AU official urges member states to pursue continental integration
Member states of the African Union (AU) and political leaders must muster political will to surrender part of their sovereignty over trade, economic and financial issues to regional and continental supranational organisations because the continent must be fully integrated in the coming 50 years, a senior AU official said here Monday.
“African countries should think regional and continental not only in name but also in deed and mainstream regional and continental integration programmes into their development strategies,” said Ms. Fatima Haram Acyl, the AU Commissioner for Trade and Industry.
Briefing journalists on Africa’s 2063 Agenda with a particular focus on the way to enhanced integration, the Commissioner noted that progress towards continental integration had been slow.
The process to total integration, she said, should be driven not only by governments but also by other majority stakeholders – private sector, civil society, mass media, youth and women.
Fatima suggested that institutional arrangements needed to be improved with elimination of multiplicity and overlapping membership of regional economic communities, better funding of organisations, mechanisms for monitoring and evaluation of decisions and sanctions for non-implementation of decisions, among others.
She said that for greater effectiveness and efficiency, integration institutions must be able to add value to the well-being and living conditions of ordinary Africans so that the relevance of integration becomes obvious to them.
“If we have to achieve sustainable and rapid economic growth and claim the 21st century for our people, the challenge is to be fully integrated within the next 50 years, and certainly not later than 2063,” she underlined.
The blueprint for African integration is the Abuja Treaty of June 1991 which provides for the establishment of an African Economic Community in six stages, with regional economic communities serving as the building blocks.
Meanwhile, AU’s Commissioner for Rural Economy and Agriculture, Rhoda Peace Tumusiime, has called on African countries to back their commitments with commensurate actions in transforming the agricultural sector with a focus on smallholders.
“The best reality check for our commitment to support smallholders would be to ensure mutual accountability in terms of clear targets such as budget allocations, access to productive resources for smallholders and building their resilience to certain shocks that make them vulnerable on account of climate variability and volatility of prices,” she said.
Talking to journalists here Monday on building Africa’s self-reliance towards the realisation of the 2063 Agenda on food security and nutrition, Tumusiime said that small farmers constitute the majority of producers in the sector and they make significant contribution to agricultural production in Africa.
“Africa’s independence has been compromised for a long time partly because of the continent’s disproportionate dependence on commercial food and aid from external sources to feed itself.
“We shall only achieve self-reliance if we address the strategic challenges of agricultural growth and transformation ... to become self-reliant, first and foremost, in food and nutrition security,” said Tumusiime.
Referring to population forecasts which suggest that Africa’s population will be more than doubled by 2050, she said that continent would then be dealing with a different category of farming communities from what is known today.
“Not only are these going to be younger, but also they will be better educated, better exposed to new technologies and modern ideas, better informed through ICTs and with growing needs and aspirations,” she said.
On that account, Tumusiime added that the issue of motivating the youth to see their future in a growing and transforming agriculture and rural economy present a real challenge to all at present, and more so, an opportunity.
The press conference may have been part of the African Union (AU) “memorable, people-centred and global year-long celebrations” which kicked off Sunday Addis Ababa, Ethiopia, with a preparatory meeting of its Permanent Representatives Committee (PRC).
The year-long celebrations will include a commemorative summit, celebrations, sporting and cultural events as well as a gala dinner.
They will coincide with the Special Commemorative Summit on 25 May, 2013, on the theme “Pan Africanism and African Renaissance”, and the 21st Assembly of the Heads of State and Government on 26-27 May, 2013, which will be concluded with the adoption of a ‘landmark’ proclamation.
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Africa faces the devil’s choice amidst huge natural resources
The leaders of Africa, the world’s poorest continent in terms of economy but richly endowed in natural resources are facing the devil’s choice: to either invest their natural resource revenue in people in order to generate jobs and opportunities for millions now and in future – or squander those resources – and allow lack of jobs and inequality to take root.
This is the verdict of the Africa Progress Panel, contained in a report released here on Friday during the last day of the World Economic Forum for Africa.
Chaired by former UN Secretary-General Kofi Annan, the ten-member Africa Progress Panel advocates the agenda for equitable and sustainable development in Africa be addressed at the highest levels of the continent’s governance. The Panel releases its annual flagship publication, the Africa Progress Report, every May.
According to this year’s report, Africa is standing on the verge of enormous opportunities, and that African policy-makers face critical choices to ensure that the continent’s huge natural resources are harnessed to transform the lives of millions of people languish in poverty.
In many African countries, natural resource revenues are widening the gap between rich and poor and, though much has been achieved, a decade of highly impressive growth has not brought comparable improvements in health, education and nutrition.
Citing Tanzania as a case in point, the reports says that the country’s reformed mineral sector had raked in about $2 billion (Sh3.2 trillion) a year from exports of gold, diamond and Tanzanite over the past decade, but the economic impact of these huge economic gains to the people still remain largely elusive.
According to official statistics from the Bank of Tanzania, the country exported gold worth $11.3 billion between 1998 and 2011; in return, the government earned only $450 million or 4 percent as taxes and royalties. In the meantime, Tanzania last year announced a major discovery of 35 trillion cubic feeds of natural gas in the southern and coast regions, making it one of the continent’s major gas producers in future, a move that has attracted key foreign players from Europe and China.
Preliminary findings show that Tanzania would earn about $3.5 billion in revenues a year from the gas industry, but the question remains whether these monies will mean anything to the millions of poor in a country where per capital income is estimated at a paltry $500, the lowest in Sub-Saharan Africa.
The Africa Progress Panel is convinced that Africa can better manage its vast natural resource wealth to improve the lives of the region’s people by taking bold steps to improve transparency and accountability – both key to any national agenda.
However, an international syndicate of tax avoidance and evasion, corruption, and weak governance represent major challenges – and the report welcomes the commitment of the current G8 presidency, the United Kingdom, and other governments to put tax and transparency at the centre of this year’s dialogue. It urges all OECD countries to recognize the cost of inaction in this vital area, in itself sound argument given the fact that Africa loses twice as much in illicit financial outflows as it receives in international aid.
The Africa Progress Panel finds it ‘unconscionable’ that some companies, often supported by dishonest officials, are using unethical tax avoidance, transfer pricing and anonymous company ownership to maximize their profits, while millions of Africans go without adequate nutrition, health and education.
The report details five deals between 2010 and 2012, which costs the Democratic Republic of the Congo over $1.3 billion in revenues through the undervaluation of assets and sale to foreign investors. This sum represents twice the annual health and education budgets of a country with one of the worst child mortality rates in the world and seven million pupils out of school.
Kofi Annan, who chairs the Africa Progress Panel, says: “Tax avoidance and evasion are global issues that affect us all. The impact for G8 governments is a loss of revenue. But in Africa, it has direct impact on the lives of mothers and children.
Throughout the world, millions of citizens now need their leaders to step up to the mark and lead. Fortunately, momentum for change appears to be accelerating.”
Different partners have similar goals and their interests overlap, the report finds.
Building trust is harder than changing policies – yet it is the ultimate condition for successful policy reform. This year’s report identifies a shared agenda for change: African governments must improve their governance and strengthen national capacity to manage extractive industries as part of a broader economic and developmental strategy.
African governments are also urged to slate transparency and accountability at the top of of natural resource policies, secure a fair share of their natural resource revenues for the benefit of their citizens, and spread those gains via equitable public spending. The global community should build on the US Dodd-Frank Act and comparable EU legislation to develop an world-class standard for transparency and disclosure, develop a credible and effective multilateral response to tax evasion and avoidance, and tackle money laundering and anonymous shell companies.
The report further urges international businesses to follow best practices on transparency, help build national capacity, procure more products and services locally, and raise standards in all areas of corporate accountability and responsibility; at the same time, civil society should build capacity and continue to hold governments and companies to account.
Graça Machel, President of the Foundation for Community Development and Founder of the Graça Machel Trust and member of the Africa Progress Panel, says, “This report makes a critical contribution to debates on Africa’s natural resource wealth. If its recommendations are taken, Africa will accelerate progress towards the Millennium Development Goals. More kids will go to school, fewer women will die in child birth, and more children will survive their childhood.”
Strive Masiyiwa, Chairman and Founder of Econet Wireless and member of the Africa Progress Panel says: “While some major companies show outstanding leadership on transparency, others show a disregard for ethics and human lives. By cheating the system, they make work harder for honest business.”
Linah Mohohlo, Governor of Botswana’s Central Bank, also member of the Africa Progress Panel, says: “Botswana’s key lesson has been that Africa’s natural resources belong to the people.
“In this way, diamonds became the country’s relative economic success.”
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Regional integration key to Africa’s future competitiveness
The strides made by African economies in achieving economic growth must be accompanied by efforts to boost long-term competitiveness if the continent is to ensure sustainable improvements in living standards finds a new report, the Africa Competitiveness Report 2013, released on 9 May 2013.
The report, themed Connecting Africa’s Markets in a Sustainable Way, is jointly produced by the African Development Bank, the World Bank and the World Economic Forum. Regional integration is a key vehicle for helping Africa to raise competitiveness, diversify its economic base and create enough jobs for its young, fast-urbanizing population. The report maps out the key policy challenges in establishing closer regional integration:
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Closing the competitiveness gap: Africa’s competitiveness as a whole trails other emerging regions – especially in quality of institutions, infrastructure, macroeconomic policies, education and technological adoption – while big gaps persist between its highest and lowest ranked economies. The report assesses Africa’s success in creating the social and environmental factors that are necessary to address or mediate these gaps.
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Facilitating trade: Africa’s exports remain too heavily focused on commodities and its share of world trade remains low, despite numerous regional economic communities and domestic market liberalization. Intra-African trade is particularly limited. The report identifies cumbersome and non-transparent border administration, particularly import-export procedure, the limited use of information communication technologies (ICT) and persistent infrastructure deficit as major barriers to higher levels of regional integration. It also shows that these challenges are particularly pronounced for Africa’s landlocked economies.
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Building better infrastructure: Africa’s infrastructure deficit presents a serious impediment to regional integration, a problem that is made more pronounced by growth in consumer markets and urbanization. Developing adequate and efficient infrastructure will assist African economies to increase productivity in manufacturing and service delivery, contribute to improvements in health and education and help deliver more equitable distribution of national wealth. The report examines how developments in energy, transportation and ICT can be deployed to maximize the benefits of regional integration.
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Investing in growth poles: Defined as multi-year, generally public-private investments aimed at accelerating export facing-industries and their supporting infrastructure, growth poles represent important ways of building productive capacity and boosting regional integration through the attraction of investment. As the World Bank has invested in growth poles for a number of years, the report looks at how best practice can be deployed to deliver further benefits across the continent.
“Africa’s growth needs to be seen in the wider international context, where encouraging gains in economic growth belie an underlying weakness in its long-term competitiveness. Regional integration is key to addressing this weakness through the delivery of wider social and economic benefits and should be prioritized by Africa’s leaders as they look to ensure that Africa delivers on its promise,” said Jennifer Blanke, Chief Economist, World Economic Forum.
“Sustained high economic growth often occurs in an environment where there is a meaningful infrastructure development. It is therefore imperative that planning for both national and regional infrastructure projects is coupled with the requisite legal and regulatory framework that will allow for increased involvement of the private sector in infrastructure development on a public-private partnerships model. Improved infrastructure investment in Africa is crucial for the continent’s competitiveness and productivity; and contributes to spatial-inclusion and reducing spatial inequalities,” said Mthuli Ncube, Chief Economist and Vice-President, African Development Bank (AfDB).
“Africa has been enjoying an economic transformation, with growth rates of more than 5 percent annually over the past decade,” says Gaiv Tata, Director Financial Inclusion and Infrastructure Practice, Africa Region, World Bank Group. “To turn its economic gains into sustainable growth and shared prosperity, Africa’s public and private sectors must work together to connect the continent’s markets, deepen regional integration, and adopt reforms that enhance national competitiveness.”
Also included in the report are detailed competitiveness profiles of 38 African economies. The profiles provide a comprehensive summary of the drivers of competitiveness in each of the countries covered by the report, and are used by for policy-makers, business strategists and other key stakeholders, as well as those with an interest in the region.
With the support of the Government of South Africa, the World Economic Forum on Africa is being held in Cape Town, South Africa, from 8 to 10 May. Over 865 participants from more than 70 countries are taking part. Under the theme Delivering on Africa’s Promise, the meeting’s agenda will integrate three pillars: Accelerating Economic Diversification; Boosting Strategic Infrastructure; and Unlocking Africa’s Talent.
The Co-Chairs of the meeting are Frans van Houten, Chief Executive Officer and Chairman of the Board of Management and the Executive Committee, Royal Philips Electronics, Netherland; Mo Ibrahim, Chairman, Mo Ibrahim Foundation, United Kingdom; Mustafa Vehbi Koç, Chairman of the Board, Koç Holding, Turkey; Frannie Léautier, Executive Secretary, The African Capacity Building Foundation, Zimbabwe; and Arif M. Naqvi, Founder and Group Chief Executive, Abraaj Capital, United Arab Emirates.
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Africa must boost commodity-based industrialization to grow economy, end poverty, says ERA 2013
African countries have an opportunity to transform their economies through a commodity-based industrialization strategy that leverages the continent’s abundant resources, current high commodity prices and changing organization of global production process, according to a newly published report.
If grasped, these opportunities will help Africa promote competitiveness, reduce its dependence on primary commodity exports and associated vulnerability to shocks, and emerge as a new global growth pole.
According to the 2013 edition of the Economic Report on Africa, co-authored by the UN Economic Commission for Africa and the African Union Commission, a commodity-based industrialization policy is necessary if the continent is to become a global economic power that can address the challenges of youth unemployment, poverty and gender disparities.
“Maximizing Africa’s commodities for industrialization involves adding value to soft and hard commodities and developing forward and backward linkages to the commodity sector,” says the report whose theme is “Making the Most of Africa’s Commodities: Industrializing for Growth, Jobs, and Economic Transformation.”
Apart from providing employment, income, price and non-price benefits, African countries, by adding value to their raw materials locally, could also bring about diversification of technological capabilities, an expanded skills base, and deepening of individual countries’ industrial structures, the document reveals.
Although Africa boasts about 12 percent of the world’s oil reserves, 40 percent of its gold, 80 to 90 percent of chromium and platinum group metals, 60% of arable land and vast timber resources, value addition is still limited, culminating in the paltry receipts for the export of its primary commodities.
A case in point is the coffee industry where up to 90 per cent of Africa’s total income from the commodity, calculated as the average retail price of a pound of roasted and ground coffee, goes to consuming countries in Europe, North America and Asia. African producers like Ethiopia too can benefit more from this, it says.
While some African countries have made modest progress in forward and backward linkages to their commodity sectors, others still have some ground to cover, according to the report, adding that interventionist state policies and continental initiatives could help improve the situation.
To further boost current levels of linkages, the report calls for urgent moves to reduce the infrastructural constraints and bottlenecks on the continent.
It also recommends improved policy implementation through coordination among relevant ministries in order to reduce incidents of coordination failure that have for long plagued the continent.
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BRICS membership opens opportunities
This week the heads of state of four of the largest economies in the world – collectively representing a fifth of global gross domestic product (GDP) – arrive in Durban for the fifth BRICS summit, each accompanied by delegations representing some of the most dynamic multinational corporations.
These dynamics put an end to any doubts about the relevance of the BRICS grouping of Brazil, Russia, India, China and South Africa as a whole, and indeed South Africa’s place in it. For those alive to the shifts in global geopolitics and commerce, this week presents profound opportunities.
The meeting takes place as the collective power of the developing world rises. Last year, emerging markets’ collective GDP increased by 7.4 percent to $29 trillion (R270 trillion), only marginally lower than total Group of Seven (G7) output of $33 trillion. This narrowing gap is remarkable considering that, just five years ago, G7 output was twice the size of emerging markets’ output.
Part of the emerging world’s resilience is explained by the way developing economies have turned to each other to offset the softness in demand from the advanced world.
In this regard, BRICS has been pioneering. Last year, trade between the five BRICS members totalled $310 billion, up from $28bn in 2002. Today, intra-BRICS trade accounts for almost a fifth of BRICS total trade with emerging markets, up from just 13 percent in 2008. In contrast, BRICS actually traded less with the EU last year than in 2008.
BRICS-Africa trade volumes have also risen profoundly. We estimate that BRICS-Africa trade hit $340bn last year, up more than 10 times over a decade. This means that, last year, BRICS-Africa trade was 10 percent larger than total intra-BRICS trade, a staggering statistic when one considers the collective GDP of the BRICS (of roughly $15 trillion) is almost seven times larger than Africa’s collective GDP.
Since 2007, during a period of relatively slow trade growth globally, BRICS-Africa trade has more than doubled. Looking ahead, we hold firm to our projection that BRICS-Africa trade will eclipse $500bn by 2015.
Investment ties have been broadly commensurate. While the total fixed investment by the BRICS in Africa is difficult to ascertain, Chinese Minister of Commerce Shen Danyang recently confirmed that the country’s total foreign direct investment stock in Africa at the end of last year was $20bn, complementing the roughly $30bn in concessional loans extended by Beijing to African states since the century began.
For Brazil, flagship investments such as that led by Vale in the coal-rich Tete province in Mozambique have captured attention. As with China, large investments in Africa have often been facilitated by credit offered to Brazilian companies by the Brazilian Development Bank (BNDES). In Angola alone, BNDES credit has surpassed $3bn. And for India, private multinationals have been exceptionally successful in building a footprint in east and southern Africa.
South Africa’s benefits from BRICS engagement are large. Last year, South Africa’s exports to emerging markets grew by almost 50 percent.
South Africa’s trade with the BRICS economies rose from a mere 5 percent of our total trade with the world a decade ago to almost 20 percent now.
Last year, South Africa’s exports to fellow BRICS economies rose almost 17 percent, the fastest rate of export growth within the group.
South Africa’s commercial footprint in the rest of Africa is also maturing swiftly. South Africa’s trade with the rest of Africa touched $35bn last year.
Importantly, about half of South Africa’s total exports to Africa comprise value-added capital goods. South Africa’s success in securing market share within key Southern African Development Community (SADC) economies has been powerful. Last year South Africa was the largest import partner for nine out of the 13 SADC states.
South Africa’s investment stock in the rest of Africa has swelled, from R14.7bn in 2001 to R121bn in 2010.
More broadly, the BRICS affiliation gives South Africa a solid scaffold to recalibrate its growth potential. South Africa offers logistical access to the SADC market, as well as legal, financial and management support to firms looking to grow their African presence.
Already, South African firms across a variety of industries enjoy meaningful strategic relationships with BRICS partners. This week, it is likely that a variety of significant deals will be signed on the sidelines of the summit.
BRICS inclusion also gives South Africa an opportunity to build consensus among key African partners around areas of geopolitical and commercial importance. South Africa has Africa’s foremost market economy and is sufficiently capacitated to sketch an African programme. At the same time, South Africa’s leaders are aware of the delicate diplomacy required in casting an inclusive African agenda.
Meanwhile, the concerns raised by President Jacob Zuma and Minister of Trade and Industry Rob Davies around the structural imbalances inherent in South Africa’s trade with China echo across Africa. Building more sustainable ties within the BRICS could help steer broader BRICS-Africa engagements.
The BRICS states’ superior economic and negotiating might bears heavily when constructing bilateral deals with smaller African states. South Africa’s regional approach to BRICS will aid more constructive and lasting links.
Though still a relatively loose political grouping, BRICS as a commercial collective wields significant influence.
The symbolism of this gathering on African soil is vast. The rise of BRICS represents a shift towards a more multi-polar, and representative global economy. The substance for launching another wave of African ambition, in partnership with 21st century leaders, is mammoth. It should not be lost on anyone.
Ballim is Standard Bank’s chief economist. Freemantle is a senior analyst and the head of Standard Bank’s African political economy unit.
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SA in BRICS – Are we making the most of it?
The BRICS bloc wants deeper trade and investment ties to underpin its alliance. Troye Lund assesses whether the five members have moved beyond being a loose political grouping.
Amid much fanfare, SA hosts a summit of the BRICS bloc of countries later this month and though the newest – and smallest – of the group, it is revelling in its inclusion. Eager to belong, SA views the hosting of the summit as an endorsement of its tendency to punch above its weight in global affairs.
Trade & industry minister Rob Davies has enthused: “We are convinced that the BRICS bloc is championing a new paradigm for economic co-operation.”
When the acronym BRIC was coined in 2001 by Jim O’Neill, then Goldman Sachs’s head of global economics research, a formal alliance was not envisaged. O’Neill’s paper on Brazil, Russia, India and China described a shift in global economic power away from the G7 (Group of 7) towards these countries that were enjoying rapid growth.
Since 2009, when it held its first summit in Russia, the BRICS group has become more formalised. But SA’s inclusion since December 2010 has been roundly criticised by O’Neill, who says SA does not belong because its economy is too small and lacks potential.
But the BRICS concept has morphed into something more than a group of fast-growing countries. It has become a political grouping that represents a desire to shift influence away from Western states and institutions. On these grounds SA, which has always been vocal about greater representation of developing countries in global institutions, qualifies.
Yet the combined economic weight of the BRICS cannot be underestimated. They represent about 40% of the global population, close to a fifth of global gross domestic product (GDP), estimated at US$13,7trillion, combined foreign reserves estimated at US$4,4trillion, and 17% of world trade, according to the Africa Strategy Group, a consultancy that is promoting the summit.
When the five heads of state gather later this month, there will be much talk about co-operation and mutual benefit in the alliance. But the relationships are not always smooth and are filled with contradictions.
China’s “dumping” of cheap goods in SA and the rest of the continent has been blamed for contributing to the decline in local manufacturing; SA has been taken to the WTO (World Trade Organisation) in a dispute about chicken imports from Brazil; and business with India can be hampered by regulation. For instance, regulatory hurdles forced MTN to abandon a tie-up with Bharti Airtel while Shoprite canned an Indian venture in 2010 due to that government’s curbs on foreign ownership of retail businesses.
Speaking at the China-Africa Forum in Beijing last year, just after China’s president pledged $20bn in loans to Africa, President Jacob Zuma warned about an unequal partnership with Beijing.
“This trade pattern [where Africa exports commodities and imports manufactured goods] is unsustainable in the long term. Africa’s past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies.”
But last week Zuma told the Financial Times that Western companies should drop the “colonial” approach to doing business in Africa or lose out to China and other developing countries.
The summit in Durban will paper over the cracks and inevitable tensions as the five heads of state reiterate their commitment to building on the theme of the gathering: partnership for development, integration and industrialisation.
Trade ministers will meet the day before to try to resolve some of the disputes.
The department of trade & industry’s (DTI) deputy director-general in charge of international trade & development, Xavier Carim, says SA prefers to find “win win” solutions to “trade frictions”, especially with BRICS allies.
Though the eurozone remains SA’s largest trading partner, intra-Bric investment is growing. Pretoria is promoting itself as the gateway to the rest of Africa in an effort to make up for the small size of its economy compared with the other BRICS members.
In his budget speech last month finance minister Pravin Gordhan announced several measures aimed at stimulating cross-border trade and investment.
SA trade with BRICS has grown rapidly over the past decade. Between SA and China, trade grew 32% last year; with India it increased 25% and Brazil 20%. SA’s exports to China grew 46% while exports to India rose 20%, to Brazil 14% and to Russia 7%.
SA’s desire to promote investment and trade in sectors other than natural resources appears to be gaining ground. Business forums are held regularly and companies that have shown an interest in SA include those working in electronics, automobiles, ceramics, renewable energy and financial services.
But SA’s unequal relationship with China still grates. Is it prepared to stand up to China to protect its business interests, despite the fact that China is SA’s single-largest trading partner as a country and is involved in 85% of all intra-BRICS trade. The DTI argues that it isn’t about standing up to any BRICS partner, but about negotiating investments that free African economies from exporting raw materials and importing the goods that are manufactured with those resources.
SA’s stance on China has been to point out that China stands to benefit most from any expanded BRICS influence in global affairs and should therefore be magnanimous towards Africa, which offers resources and new markets.
Though O’Neill insists the only reason SA was included in BRICS was, as the gateway to Africa, to secure supply lines for fellow BRICS members, SA Institute for International Affairs senior researcher Memory Dube says there’s more to SA’s “Africa first” approach.
It’s linked to SA’s belief that its economic future is tied to the continent’s success. But SA’s efforts to establish itself as leader on the continent don’t sit well with other African states, especially Nigeria and Kenya, and aren’t limited to its BRICS membership. It’s a recurrent theme that can be traced back to apartheid SA.
“Post-apartheid SA has been emphatic about the African agenda and this has been a prominent characteristic of SA’s foreign policy towards the region,” says Dube.
But the question remains whether SA can leverage its relations with its BRICS allies so that their commercial interests are aligned with SA’s, as well as wider African interests.
A major thrust of SA’s foreign policy is to encourage investment in beneficiation which will allow Africa to add value to its abundant raw materials.
In a bid to convince African leaders that SA’s position in BRICS is delivering gains for the continent, Zuma is expected to make announcements on three projects at the summit. These will be discussed at a BRICS-Africa leaders’ retreat that he’ll host straight after the summit.
The projects are:
An undersea cable to connect the BRICS. Currently BRICS countries are connected via telecommunications hubs in Europe and the US which, SA argues, keep costs high and create the potential for “critical financial and security information to be intercepted”.
Risk reinsurance for the five BRICS countries. The BRICS Trade & Risk Development Pool will combine the financial strength and insurance capacity of state-owned and private-sector users. This, according to SA, will support development as well as domestic and cross-border trade. SA’s financial sector will take the lead in developing this.
The formation of a BRICS Development Bank will be confirmed. Though the bank is likely to take years to be set up, the aim is to finance projects that will accelerate growth in emerging markets and act as a counterweight to institutions like the World Bank.
Research by Standard Bank analysts Simon Freemantle and Jeremy Stevens shows that intra-BRICS trade in 2012 reached $310bn. This was a tenfold increase since 2002.
Today intra-BRICS trade accounts for almost one-fifth of BRICS total trade with emerging markets, up from 13% in 2008. In contrast, the research shows the BRICS traded less with the EU last year than they did in 2008.
They project that BRICS-Africa trade will be about $500bn by 2015, roughly 60% of which will be China-Africa trade.
The leap in importance of trading within BRICS has been the most pronounced for SA. A decade ago trade with the Bric economies accounted for 5% of SA’s total trade with the world. In 2012 this figure stood at 19%. Last year SA exports to its fellow BRICS economies increased to 17%.
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EAC states not ready for TRIPS, ask for extension
The East African Community (EAC) partner states should ask the World Trade Organisation to unconditionally accord the Least Developed Group (LDC) an extension of the transition period to put up in place requirements for TRIPS, trade and economic experts have advised.
The World Trade Organisation (WTO), article 66.1 of the Trade Related Aspects of Intellectual Property Rights (TRIPS) accorded LDCs members, Uganda inclusive a renewable ten-year exemption from most obligations under the TRIPS agreement. The grace period that expires in July 2013 is seen as so soon by experts thus the call for further extension.
The exemption was originally due to expire on December 31 2005 but was extended following a TRIPS council meeting held in June 2002.
According to Elizabeth Tamale the Assistant Commissioner in the Ministry of Trade, the LDCs were exempted from implementing the patents and test data obligations with regard to pharmaceutical products as required by the WTO. The deadline to enforce the patents with regard to pharmaceuticals products expires in January 2016.
“We were given 10 years but I must say that it is not easy to implement. Most EAC states still lack the technical base, coupled with lack of awareness regarding Intellectual Property rights. That is why we are seeking for further extension,” said Tamale.
Under TRIPS, governments must apprehend and punish people who breach IP and copyright laws, but Tamale says Ugandan police still lacks the capacity to implement this. TRIPS is an international agreement administered by the WTO that sets nationals of other WTO minimum standards for many forms of Intellectual Property (IP) regulation as applied To nationals of other WTO members.
Tamale who was addressing stakeholders at the Open Society Foundation funded EAC meeting held at Metropole Hotel in Kampala on Tuesday noted that only 10 out of 40 LDCs had implemented the TRIPS.
“We need the laws in place and for the people to understand the laws before we can make any move. But we should also remember that the extension won’t be forever. We need to unite as an EAC block,” said Tamale.
She said without the extension, EAC states will immediately need to enact and or amend their intellectual property laws to become TRIPS complaint and would be under extreme pressure to do so.
Apart from Kenya that is considered as developing country, Uganda, Rwanda, Burundi, and Tanzania still have to put in place Intellectual property right laws so as to compete in WTO. Bernard Mulengani the EALA legislator said failure by the TRIPS council to grant LDCs an extension would be disastrous. “As MPs we need to put in place laws that will be implemented come 2016. We shouldn’t expect another extension after 2016,” he said.
Ambassador Nathan Irumba, the Southern and Eastern Africa Trade and Information Negotiation institute (SEATINI) executive director said the EAC still lacks the capacity to implement TRIPS.
“We need to strictly enforce IPR (Intellectual Property Rights) so as to address counterfeit and it is not until you have acquired enough technology that you can design this,” he said.
Dr. Kamamia Murichu, the Chairman Kenya Pharmaceutical Distributors said TRIPS agreement was signed to boost trade and encourage innovation but described as unfortunate that only Kenya out of the EAC partner states had Patent laws in place.
“Patents are granted by the State, but if you lack the laws and somebody snatches your patent where will you report. We need uniformity regarding Intellectual Property right laws in East Africa,” he said.
Murichu noted that TRIPS contains requirements that nation’s laws must meet for copyright such as rights for performers, broadcasters, producers, new plant varieties, and trademarks. Denis Kibira a medicine advisor with HEPS Uganda however noted that LDCs don’t need any further extension of TRIPS but suspension.
“The TRIPS haven’t really benefited us. What we need are anti-counterfeits laws, strong boarder measures, medicine seizures and media scares,” he said. He pointed that EAC doesn’t need an extension of TRIPS to put IP laws but rather technological transfers to set up pharmaceuticals for medicines.
“The EAC partner states need to increase import duties on generic drugs so as to reduce competition and protect local industries,” he said.
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EU backs new transparency standards for investor-state dispute settlement
The European Union supported new United Nations rules for greater transparency in disputes between investors and host countries.
On Friday 8 February a United Nations Working Group agreed the new rules which will make such dispute settlement procedures much more transparent. The public will have access to the documents submitted, hearings will be open to the public, and interested parties will be able to make submissions to the proceedings.
Under its competence for investment acquired under the Lisbon Treaty in 2009, the EU has played a key role in the UN Working Group for international trade law, where it has pushed for greater transparency in investment disputes. Transparency and accountability are key objectives of the new EU investment policy and are also pursued in the negotiation of EU investment agreements.
Welcoming the development, EU Trade Spokesman John Clancy said: “The protection of investment and the availability of Investor-State Dispute settlement mechanisms play a key role in attracting investors and encouraging economic growth. Having these new transparency rules in place will set a benchmark for all future EU investment treaties. Improving transparency in investor-state dispute settlement is essential. The success of the UN Working Group shows that the EU has a key role to play in the world of international investment policy making.”
International investment agreements permit investors to sue the countries where they have invested in the event that the country is alleged to have breached the agreement's rules. Many such cases take place behind closed doors, with no or limited information being provided to the public. After almost three years of discussions, delegates to the United Nations Working Group finally gave the thumbs up to the new rules on 8 February 2013. The rules will now go for final approval within the UN system
Detail
The Working Group is responsible for the development of the Arbitration Rules of the United Nations Commission for International Trade Law (UNCITRAL). The UNCITRAL Arbitration Rules are the second most frequently used rules for investor-state dispute settlement. The UNCITRAL Arbitration Rules are used for commercial arbitration, and so all documents submitted to the arbitrators have so far been confidential, hearings have been closed to the public and sometimes the public did not even know of the existence of such cases.
Since 2010, the Working Group has been developing rules on transparency for investor-state arbitration. The rules as adopted are the most advanced in ensuring a high degree of openness of proceedings, in terms of making documents available to the public, access to hearings and in allowing interested parties (like environmental NGOs) to make submissions. These rules will set the standard for transparency. The rules now need to be approved by the UNCITRAL Commission in June/July 2013 and then by the UN General Assembly in September 2013. They will apply automatically to all treaties concluded after their adoption, and work will continue in the Working Group on a system to permit the application of these rules on transparency to existing treaties.
The EU is currently negotiating investment agreements including investor-state provisions with Canada, Singapore and India. In these negotiations, the European Union is seeking to address some of the concerns raised by investor-state dispute settlement. The lack of transparency is often cited as an example of such concerns. The newly agreed UNCITRAL rules will form the basis of the transparency provisions in future EU investment treaties.
Background
What is Investor-State Dispute Settlement?
It is a form of dispute settlement included in international treaties by which an investor can sue a country in which it has made an investment. Such cases concern alleged breaches of the agreement by the country hosting the investment. For example, if an investor’s factory was expropriated and compensation paid were felt to be insufficient.
What is the role of the EU?
Since 2009 the EU has exclusive competence for investment matters. This means that it represents the Member States on the international stage. The European Commission has played a key role in representing the views of the Union and co-ordinating the views of the EU's Member States.
What is the EU doing on investment?
Since 2011 the EU has been negotiating provisions on investment protection with Canada, India and Singapore. These provisions concern both the protection of investment and investor-state dispute settlement. They will form part of larger free trade agreements.
The EU's investment policy after the Lisbon Treaty
Foreign direct investment (FDI) is a main contributor to economic growth. Outward FDI offers access to markets, technologies and resources, has a positive effect on the competitiveness of EU firms by reducing costs and creating economies of scale. Inward FDI enhances the EU's competitiveness by bringing in foreign capital, technologies, management expertise, and often boosts exports.
The EU is the world's leading host of foreign direct investment, attracting investments worth €225 billion from the rest of the world in 2011 alone. By 2010 outward stocks of FDI amounted to €4.2 trillion (26.4% of the global FDI stock in FDI) while EU inward stocks accounted for €3 trillion (19.7% of the global total).
Those investments are secured via Bilateral Investment Treaties (BITs), concluded between individual EU Member States and non-EU countries. They establish the terms and conditions for investment by nationals and companies of one country in another and set up a legally binding level of protection in order to encourage investment flows between two countries. Amongst other things BITs grant investors fair, equitable and non-discriminatory treatment, protection from unlawful expropriation and direct recourse to international arbitration. EU countries are the main users of BITs globally, with a total number of about 1,200 bilateral treaties already concluded.
Foreign direct investment became the exclusive competence of the EU under the Lisbon Treaty (Article 207 TFEU).
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State of the EAC: Bureaucratic delays, missed targets hurt integration
The decision by East African presidents on Friday, 30 November 2012 to postpone key issues – mainly the Monetary Union and admission of South Sudan and Somalia to the bloc – has left the region’s journey to full integration looking longer than ever, and exposed the bureaucratic delays that continue to haunt the plan.
The Heads of State, in the summit in Nairobi, directed that the deadline for the establishment of the East African Monetary Union be pushed to November next year – a whole year after the earlier set target.
The final report on the monetary union was not submitted to the EAC Heads of Summit for approval, with the presidents directing that the document be presented during an extraordinary summit in April 2013.
They set a new date – November 2013 – by when the Monetary Union Protocol should be signed.
While the presidents did not give South Sudan the final nod to join the bloc, they approved a verification report on the country’s bid.
Kenya’s President Mwai Kibaki, Uganda’s Yoweri Museveni, Burundi’s Pierre Nkurunziza, Rwanda’s Paul Kagame and Tanzania’s Jakaya Kikwete said the EAC Council of Ministers should start negotiations with South Sudan following the completion of the verification work.
They also directed the Council to look into Somalia’s application to be admitted to the fast-growing regional body.
Government officials and delegates attending the Summit decried delays in implementing the EAC Common Market Protocol signed in July 2010, saying this was slowing economic growth in the region, which is reeling from delays in removal of non-tariff barriers (NTBs) to trade.
While the five EAC partner states have in principle agreed to remove NTBs by December 2012, in the absence of a legally binding framework, action largely depends on the willingness of the different countries.
So far, this push has suffered hiccups as businesses continue to incur huge costs arising from weighbridges, roadblocks, poor infrastructure, unnecessary delays at border posts, and lack of harmonised import and export standards, procedures and documentation.
Frustration is growing among landlocked countries like Rwanda, which are paying a heavy price for the unnecessary and costly delays caused by NTBs like weighbridges and port inefficiencies in Kenya.
Over the past seven years, reforms in the EAC have focused on simplifying regulatory processes, such as trading across borders and starting a business in the region.
Traders and truck drivers in the region complain of the numerous police roadblocks, especially on Kenyan roads, differing transit procedures, longer Customs and administrative procedures and varying trade regulations in the region.
The just-concluded second EAC Heads of State retreat on infrastructure development and financing, in Nairobi, highlighted inadequate regional capacities to co-ordinate and develop a sustained pipeline of infrastructure projects as a major challenge to the integration process.
The creation of the monetary union is the next step in the integration of the EAC after the adoption of a Common Market and a Customs Union.
However, experts have warned against the quick adoption of a monetary union, pointing to the different macroeconomic conditions of member states.
Further, they use the ongoing crisis in the Eurozone as a cautionary tale for the bloc’s ambitions.
The trading bloc also signed a letter of intent for the start of a commercial and trade dialogue with the US.
The presidents backed Burundi’s application to join the Commonwealth and Rwanda’s admission to the UN Security Council, while supporting regional efforts of the International Conference of Great Lakes Region, chaired by President Museveni, to ensure peace in the Democratic Republic of Congo’s North Kivu region.
It is understood that the decision by the Heads of State to defer the admission of South Sudan to the bloc was informed by the need to investigate the country’s governance, democracy, rule of law, respect for human rights and social justice credentials as per Article Three of the EAC Treaty.
Although the verification report carried out by the EAC team early this year, and approved by the EAC Council of Ministers, had indicated that South Sudan had put in place legal and institutional frameworks that would enable it to meet membership requirements as outlined in the EAC Treaty, these institutions were still in their infancy or not yet operational; the Heads of State indicated that more verification was required.
The Council of Ministers was also put under pressure to speed up the expansion of the East African Court of Justice to cover other jurisdictions apart from crimes against humanity.
The Council was also required to come up with a model for the establishment of a political federation.
The Council of Ministers’ Committee is expected to meet from December 10 to 15 to deliberate on the report on the monetary union.
Sources said one of the factors blocking the establishment of the monetary union is Kenya’s fear that its currency would be devalued to the level of its counterparts’ units.
Kenyan EAC Director for Economic Affairs Richard Sindiga said 63 out of the 77 articles of the East African Monetary Union (EAMU) have been dealt with, but members were yet to agree on a few issues in the remaining 14.
These include the creation of necessary institutions for the proper functioning of EAMU.
“The issue yet to be finalised here is which of these institutions should be temporary and permanent, and whether they should be established during the transition period or after,” said Mr Sindiga.
The other issues to be concluded include the macroeconomic convergence criteria, whether certain articles should be shifted, deleted or retained, allocation of roles to the organs and institutions of the community, and envisaged benefits of the EAMU.
Negotiations on the monetary union started last year, spearheaded by the High Level Task Force that was appointed by the Council of Ministers in 2010.
According to analysts, the EAC stands to benefit from a monetary union as it will reduce the cost of transactions by eliminating foreign exchange commissions. It will also end destabilisation of local currencies.
“The only fluctuation that could occur is between the EAC currency and other currencies such as the yen, dollar and euro,” said Mr Sindiga.
Adoption of a single currency will also eliminate the risks related to exchange rates between the member states, leading to a speedy development and integration of the financial markets in the region.
The EAC verification report on the South Sudan application had shown that senior government officials had different views on its joining, with the main issues being when to join and what agreements the country should sign.
The Council was mandated to engage the Sudan government and give a report in November 2013.
Last week, Tanzania, which was previously opposed to South Sudan joining the bloc, accepted the report on the admissibility of the new country to the Community following its request in the last Council of Ministers meeting held in Bujumbura that it needed more time for consultation with all the key stakeholders on the matter.
Among the things that qualify South Sudan to join the community as cited by the EAC Council of Ministers is its established mechanism for ratification and accession to international treaties “the country has already acceded to UN and AU charters, and it has been admitted to several regional and international organisations such as Igad, the Nile Basin Initiative and Unesco.
Somalia’s application to join the Community, which was received early this year, was not considered for approval.
Rwanda and Burundi formally joined the East African Community in 2007, 10 years on from their application, so, according to some experts, although South Sudan could know its fate sooner than that, it is not as easy to approve a new member’s application as it may seem.
The EAC leaders also approved a proposal advocating that the Infrastructure Development and Financing Retreat be institutionalised and held once every two years instead of every year.
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Africa can feed itself, earn billions, and avoid food crises by unblocking regional food trade
A new World Bank report says that Africa’s farmers can potentially grow enough food to feed the continent and avert future food crises if countries remove cross-border restrictions on the food trade within the region. According to the Bank, the continent would also generate an extra US$20 billion in yearly earnings if African leaders can agree to dismantle trade barriers that blunt more regional dynamism. The report was released on the eve of an African Union (AU) ministerial summit in Addis Ababa on agriculture and trade.
With as many as 19 million people living with the threat of hunger and malnutrition in West Africa’s Sahel region, the Bank report urges African leaders to improve trade so that food can move more freely between countries and from fertile areas to those where communities are suffering food shortages. The World Bank expects demand for food in Africa to double by the year 2020 as people increasingly leave the countryside and move to the continent’s cities.
According to the new report – Africa Can Help Feed Africa: Removing barriers to regional trade in food staples – rapid urbanization will challenge the ability of farmers to ship their cereals and other foods to consumers when the nearest trade market is just across a national border. Countries south of the Sahara, for example, could significantly boost their food trade over the next several years to manage the deadly impact of worsening drought, rising food prices, rapid population growth, and volatile weather patterns.
With many African farmers effectively cut off from the high-yield seeds, and the affordable fertilizers and pesticides needed to expand their crop production, the continent has turned to foreign imports to meet its growing needs in staple foods.
“Africa has the ability to grow and deliver good quality food to put on the dinner tables of the continent’s families,” said Makhtar Diop, World Bank Vice President for Africa. “However, this potential is not being realized because farmers face more trade barriers in getting their food to market than anywhere else in the world. Too often borders get in the way of getting food to homes and communities which are struggling with too little to eat.”
The new report suggests that if the continent’s leaders can embrace more dynamic inter-regional trade, Africa’s farmers, the majority of whom are women, could potentially meet the continent’s rising demand and benefit from a major growth opportunity. It would also create more jobs in services such as distribution, while reducing poverty and cutting back on expensive food imports. Africa’s production of staple foods is worth at least US$50 billion a year.
Moreover, the new report notes that only five percent of all cereals imported by African countries come from other African countries while huge tracts of fertile land, around 400 million hectares, remain uncultivated and yields remain a fraction of those obtained by farmers elsewhere in the world.
Poor roads and high transport costs blunt progress
Transport cartels are still common across Africa, and the incentives to invest in modern trucks and logistics are weak. The World Bank report suggests that countries in West Africa in particular could halve their transport costs within 10 years if they adopted policy reforms that spurred more competition within the region.
Unpredictable trade policies a liability
Other obstacles to greater African trade in food staples include export and import bans, variable import tariffs and quotas, restrictive rules of origin, and price controls. Often devised with little public scrutiny, these policies are then poorly communicated to traders and officials. This process in turn promotes confusion at border crossings, limits greater regional trade, creates uncertain market conditions, and contributes to food price volatility.
Establishing a competitive market will enhance food distribution networks
A competitive food market will help poor people most, the report notes. For example, poor people in the slums of Nairobi pay more for their maize, rice, and other staple food than wealthy people pay for the same products in local supermarkets. The report underlines the importance of food distribution networks which in many countries fail to benefit poor farmers and poor consumers.
“The key challenge for the continent is how to create a competitive environment in which governments embrace credible and stable policies that encourage private investors and businesses to boost food production across the region, so that farmers get the capital, the seeds, and the machinery they need to become more efficient, and families get enough good food at the right price,” said Paul Brenton, World Bank’s Lead Economist for Africa and principal author of the report.
World Bank Group support for trade and agriculture in sub-Saharan Africa
The World Bank is recognized as a key source of knowledge on trade policy issues, analysis and investments for trade-related infrastructure at the country level. The institution’s agriculture support for Africa has grown significantly over the past decade. Concessional lending totaled US$1.07 billion in fiscal year 12 (July 11-June 12): a fourfold increase from FY03. The share of trade-related lending in total Bank lending has also grown from an average of two percent in FY03 to five percent in FY12. New trade-related commitments in FY13 are expected to increase to US$3 billion, 70 percent of which will go to Africa.
Since 2008, World Bank Group lending for agriculture and related sectors in sub-Saharan Africa total approximately US$5.4 billion.