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All set for SADC annual summit amid COVID-19 concerns
The 40th SADC Summit scheduled for Maputo, Mozambique on 17 August will for the first time in history be held in a virtual format.
This is due to health measures and travel restrictions imposed by most Member States in response to the novel coronavirus, commonly known as COVID-19.
Described as the most serious health emergency in generations by the World Health Organisation (WHO), the pandemic has affected the global socio-economic landscape and resulted in the loss of many lives.
In light of this, the 2020 Southern African Development Community (SADC) Summit will be coordinated from Mozambique with other Heads of State and Government linking up via video conferencing technology from their various capitals.
The fact that the region has managed to convene the 40th SADC Summit in a virtual format is commendable, and a demonstration of SADC ability to move in unison and conquer challenges no matter the magnitude of a challenge.
Running under the theme “SADC: 40 Years Building Peace and Security, Promoting Development and Resilience to face global challenges”, the virtual summit will be held under a reduced agenda to allow the leaders to focus more on critical issues in the region.
This article looks at some of the major issues expected to be discussed by the 40th SADC Summit.
Coordinated response to COVID-19 pandemic
Extraordinary times call for extraordinary measures.
As such, one of the main highlights at the Summit will be how SADC Member States – both at the national and regional levels – could combat the coronavirus, which has not only disrupted the implementation of various regional activities and projects, but also caused the loss of lives.
In this regard, the Summit is expected to explore ways on how Member States could invest more resources in strengthening their public health systems and implement measures to curtail the spread of the virus.
For example, Member States that are beginning to reopen their economies as well as air travel and land borders should observe and enforce strict anti-coronavirus standards such as social distancing at workplaces, regular health screenings and wearing of masks at all times.
It is also critical for countries to put in place vibrant social protection measures to cushion the population from the effects of loss of income, particularly due to the economic lockdown imposed by a number of countries in response to the pandemic.
Post-2020 SADC agenda
The current SADC development blueprint, the Revised Regional Indicative Strategic Development Plan (RISDP) 2015-2020, is coming to an end in December.
Therefore, the 40th SADC Summit is expected to review progress towards the development of a post-2020 SADC agenda.
Formulation of a new 30-year vision that will lay the foundation and set a strategic direction for the region to implement its programmes and activities until 2050 is already at an advanced state, and a progress report is set to be presented to the Heads of State and Government for deliberation.
The proposed SADC Vision 2050 will be aligned to the African Union Agenda 2063 and a resolution was also made by the region that the vision should inform the development of the RISDP 2020-30.
In a departure from the previous regional strategic plans, the RISDP 2020-30 is expected to combine interventions previously presented under the Revised RISDP and the Strategic Indicative Plan for the Organ on Politics, Defence, and Security Cooperation.
The decision to include peace, security and governance matters in the RISDP 2020-30 is important as the two strategic plans are complementary and seek to achieve the same common objective.
State of regional food security
The 2020 Synthesis Report on the State of Food and Nutrition Security and Vulnerability in southern Africa released in July indicates that about 44.8 million people across 13 SADC Member States are food insecure this year.
This is due to various factors, including a poor harvest and low rainfall experienced during the 2019/20 agriculture season.
The impact is further exacerbated by the current effects of COVID-19.
The 40th SADC Summit is expected to discuss measures to address the food insecurity.
Possible strategies include a combination of short-term measures such as social protection programmes to support those immediately affected, as well as more medium- to long-term strategies focused around areas such as the maintenance of domestic and international supply chains and incentives for the diversification of agricultural production.
Taking stock of the industrialization agenda
Summit will also take stock of the implementation of the SADC Industrialization Strategy and Roadmap 2015-2063, which was adopted in 2015 to unlock the industrial potential of the region.
Industrialization is a top priority for southern Africa, and Member States are implementing various measures to accelerate economic growth through industrial development.
Summit is expected to receive a progress report on the implementation of the industrialization strategy.
In August 2109, the region adopted a Protocol on Industry in a bid to ensure the attainment of unified goals and cohesion among Member States in terms of their industrialization policies and strategies.
The protocol is a binding instrument that gives legal effect to the SADC Industrialisation Strategy and Roadmap and seeks to ensure adequate coordination, monitoring and evaluation of implementation.
Strengthening peace and security
On the political front, the leaders will remain seized with the political and security situation prevailing in the region since stability is a key conduit for sustainable development.
The SADC region has generally enjoyed stability despite some pockets of volatility in northern Mozambique and the eastern part of the Democratic Republic of Congo.
Summit is expected to take stock of interventions undertaken by the region to promote peace and stability in these and other Member States.
As captured by the theme of the Summit – “SADC: 40 Years Building Peace and Security, Promoting Development and Resilience to Face Global Challenges” – peace and stability are a key conduit for sustainable development and regional integration.
40 years anniversary
The SADC regional integration journey has been long but worthwhile.
From a series of consultations held in the late 70s by representative of the Frontline States to forge closer alliance, southern Africa was finally able to form a vibrant regional organization, the Southern African Development Coordination Conference (SADCC) in 1980, which was later transformed to SADC in 1992.
This April, SADC turned 40 years, and as part of its celebrations, the Summit will take stock of its integration journey.
New SADC leadership
The 40th SADC Summit will see Mozambican President Filipe Nyusi assuming the rotating SADC chair from President John Magufuli of the United Republic of Tanzania.
The SADC Summit is responsible for the overall policy direction and control of functions of the Community, ultimately making it the supreme policy-making institution of SADC.
It is made up of all SADC Heads of States or Government of Member States and is managed on a Troika system that comprises the current SADC Summit Chairperson, the incoming Chairperson (the Deputy at the time), and the immediate previous Chairperson.
With respect to the Organ on Politics, Defence and Security Cooperation, President Mokgweetsi Masisi of Botswana will assume the chairmanship from President Emmerson Mnangagwa of Zimbabwe.
The SADC Organ on Politics Defence and Security Cooperation is also managed on a Troika basis and is responsible for promoting peace and security in the SADC region. It consists of a Chairperson, Incoming Chairperson and Outgoing Chairperson, and reports to the SADC Summit Chairperson.
The SADC Summit and the Organ Troika are mutually exclusive, and the Chairperson of the Organ does not simultaneously hold the chair of Summit.
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Industrialisation and economic diversification at the heart of a reviewed PREF-CEMAC
In line with ECA's campaign on the structural transformation of the economies of Central Africa, CEMAC countries have just adopted a five-year post-COVID-19 recovery plan that prioritises industrialisation and economic diversification.
Central African Economic and Monetary Community (CEMAC) member States plan to make industrialisation and economic diversification a key to the zone’s second generation economic programmes and the post-COVID-19 economic recovery plan, as advocated by the Sub-regional Office for Central Africa of the UN Nations Economic Commission for Africa (ECA).
The 11th session of the Steering Committee of the CEMAC Economic and Financial Reform programme (PREF-CEMAC), which was held by videoconference on Monday, 3 August 2020, adopted these guidelines.
It was agreed that the reforms and the recovery programme should lead to a fundamental change in the socio-economic fabric of the sub-region through structural transformation, economic diversification and inclusive growth, in which human capital development and private sector participation are central.
The PREF-CEMAC Steering Committee is composed of the Ministers of Finance and Economy of the CEMAC countries, the President of the Commission, the Governor of the Central Bank of Central African States (BEAC), the President of the Central African Development Bank (BDEAC) and representatives of technical and financial partners.
The concluding points of the 11th session of the PREF-CEMAC Steering Committee have come to reinforce the campaign of ECA’s sub-regional office for Central Africa to foster industrialisation and economic diversification through the development of adequate skills.
ECA intends to contribute to the efforts to formulate second generation economic programmes and the post-COVID-19 recovery plan of the CEMAC countries.
During the videoconference, Antonio Pedro, Director of the ECA Sub-regional Office for Central Africa, stated that it will focus on "our work on economic diversification and particularly the Central Africa's Sub-Regional Industrialisation and Economic Diversification Master Plan (PDIDE-AC)".
In view of formulating the PDIDE-AC, the President of the CEMAC Commission has set up an internal CEMAC task force composed of all sector directors who will work with their counterparts at ECA and ECCAS offices.
During the discussions, the Governor of BEAC insisted on "the need to guarantee more budgetary space for structural transformation and the need to redefine local economies".
During an exchange with the Bank’s Governor, Antonio Pedro, Director of the ECA Sub-regional Office for Central Africa, stated the position of his institution, which intends to undertake one of the exercises to rebase the economies of Central Africa in order to promote the integration of natural capital into national accounts. He cited the example of work planned in Gabon on natural capital accounting and green bonds.
Pedro thinks "the rebasing exercise will certainly be a massive undertaking in which collaboration with other ECA divisions and partners will be crucial”.
The forthcoming structural economic changes in the CEMAC zone are taking place at a time when the Economic Community of Central African States (ECCAS) is operationalising its institutional reform with a Commission to replace its General Secretariat as its executive organ.
The very first Commissioner for Trade and Industry of the new ECCAS 'Commission', François Kanimba, former Rwandan Minister, held talks with economic operators and experts from the sub-region after his appointment, on his country's public television channel. He spoke at length about the importance of economic diversification for the sub-region, as canvassed for by ECA.
For Antonio Pedro, Central Africa is entering "a very interesting and exciting times" of economic diversification which will break the vicious circle of the current model of economic growth characterised by an overdependence on the export of raw materials which exposes the region to the fluctuations in international prices and their resulting economic shocks.
The 11th session of the PREF-CEMAC steering committee preceded the meeting of the Inter-State Committee of Experts of the Central African Economic Union (UEAC), which took place on 4 and 5 August 2020.
The Inter-State Committee of Experts met to prepare the 35th session of the Council of Ministers of the Central African Economic Union (UEAC), which will be held on 10 August 2020. The Council brings together ministers of economy and finance who will once more examine the guidelines of the sub-region’s second generation economic programmes and its post-COVID-19 recovery plan.
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Rwanda harnesses technology to fight COVID-19, drive recovery
In a conversation with IMF Country Focus, Rwanda’s Minister of State in Charge of National Treasury Richard Tusabe explains how his government is leveraging technology and grass-roots networks to fight the spread of COVID-19 and ensure financial support for households and businesses.
What has been the impact of COVID-19 on the country and what sectors suffered most?
Most of the impact has been on Rwanda’s services sector, which has been adversely affected by limitations on international travel and social distancing measures. The services sector is projected to grow by only 1 percent in 2020 due to lower trade (imports are expected to fall by 7 percent) and travel. Travel to Rwanda has fallen by 70 percent, which has caused a major impact on the tourism industry.
The agricultural sector, which is a major economic driver, was also impacted, further to the already expected decline because of adverse weather. A reduction in demand due to COVID-19 as well as a drop in international prices of export crops has made the situation worse. The industrial sector will also slow because of a drop in demand and delays in foreign direct investment in the construction sector.
Economic growth is projected to slow down to 2 percent in 2020 from 9.4 percent in 2019. In the medium term, the economy is expected to recover with growth reaching 6.3 percent in 2021, and back to its average growth of 8 percent in 2022.
Rwanda’s use of grassroots networks and local governments has been cited as an innovative way to assist households. How does this program work?
In the year 2000, Rwanda adopted the National Decentralization Policy – a “people centered” policy that uses grassroots networks and local governments to help lessen shocks on households and alleviate poverty. Household assistance is based on Ubudehe categorization, a long-standing cultural value of mutual assistance that was also adopted by the government as a poverty reduction strategy.
Ubudehe is a socio-economic stratification system that provides support for Rwandans in lower categories with social protection schemes such as cash transfer, public works, access to agricultural inputs, shelter, health, and education with the aim to graduate to higher categories. The process has been useful in identifying vulnerable households – through community-based identification, the Ubudehe database, and other means – that need assistance as a result of the crisis. In 2018, core social protection programs covered 6.5 percent of the population. These are being scaled up to cover more people in this period of pandemic.
How has emergency assistance been used to supplement and support the country’s economic and health response? Can you elaborate on any specific programs operating as a result of IMF funding?
In April 2020, the government established an Economic Recovery Fund that will be bolstered through emergency assistance from the IMF’s Rapid Credit Facility. The Fund will support the recovery of businesses hardest hit by COVID-19 to allow them to resume operations and safeguard employment. Efforts include refinancing hotels; providing working capital for large companies, microbusinesses and small- and medium-sized enterprises (SMEs); and setting up an SME guarantee scheme.
Can you highlight some examples of how the Rwandan government is leveraging digitization of healthcare to help respond directly to the public health crisis and provide support for households and businesses?
The government has effectively responded to the COVID-19 outbreak through existing and new innovative digital solutions:
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Contact tracing: Infections are being traced through the paperless Open Data Kit application that can be downloaded on a mobile device. Data is collected for analysis by outbreak investigation teams.
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COVID-19 surveillance: A health facility digital reporting surveillance system is used to monitor influenza-like illnesses and severe acute respiratory infections in real time to provide an early warning of suspected COVID-19 cases.
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Infection prevention: Robots have been used in healthcare settings to carry out simple tasks, like checking temperatures and monitoring patients, to reduce exposure of healthcare workers.
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Data visualization: A Geographic Information System (GIS) is being used to monitor COVID-19 cases at the household level to assess the need for implementing lockdown measures, focus public health interventions where there is evidence of community transmission, and monitor at-risk populations.
Do you expect the pandemic to increase inclusion of people in the financial system? Is the government seeing any upward trends in the use of digital financial services?
Financial inclusion measures have been taken to support people’s ability to save before the crisis. Financial digital services are proving essential as lockdowns have prevented some people from accessing cash at physical bank branches.
The government leveraged the country’s already high financial inclusion rate (93 percent) and took measures to limit the spread of COVID-19 by waiving peer-to-peer mobile money transfer fees, merchant payment fees, and transfers from account to mobile wallets or vice versa for three months.
The above measures limited cash usage, which raises the risk of COVID-19 transmission. For example, peer-to-peer transfers increased significantly from $11 million the week of March 15, 2020 to nearly $73 million in the last week of May 2020.
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Nations to meet in Barbados to chart new path for post-coronavirus economic recovery
UNCTAD15, the UN trade and development body's fifteenth quadriennial conference, will take place under the theme “From inequality and vulnerability to prosperity for all” as the world seeks solutions for a global new normal.
UNCTAD’s 15th quadrennial ministerial conference (UNCTAD15) to be held in Bridgetown, Barbados from 25 to 30 April 2021 will present the world with the first opportunity to align the sustainable development agenda with global efforts to recover from the COVID-19 pandemic.
The Prime Minister of Barbados Mia Amor Mottley and UNCTAD Secretary-General Mukhisa Kituyi today signed an agreement for the hosting of UNCTAD15, officially setting off preparations for the landmark gathering of the organization’s 195 member States.
“The COVID-19 global emergency and its extreme repercussions have exposed the need for a fundamental rethinking of many of the assumptions that previously underpinned the international economic order,” Prime Minister Mottley said during the signing ceremony held virtually.
“In a sudden and unexpected way, the crisis has provided the UNCTAD membership with a unique opportunity to be at the forefront of the new thinking and radical policy corrections that the situation now requires,” she added.
Dr. Kituyi said: “In a world overhung with the COVID-19 pandemic, UNCTAD15 is a first opportunity for the development community to give us a mandate aligning Agenda 2030 with the global new normal.”
The UN’s 2030 Agenda for Sustainable Development and its Sustainable Development Goals (SDGs) are a universal call to action to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere, in line
Major event of the ‘decade of action’
UNCTAD15 will be a major global event of the UN’s “decade for action” to deliver on the SDGs. It will mobilize governments, civil society organizations, businesses and the youth to address the massive unmet trade, finance, investment and technology needs of developing countries struggling to tackle the coronavirus crisis.
According to UNCTAD’s estimates, developing countries need $2.5 trillion in immediate resources to begin meeting the challenge of the pandemic. This is beyond the outstanding SDG funding gap of billions.
For example, even before the pandemic, least developed countries (LDCs) alone needed annual investments of $120 billion to achieve the SDG targets.
From inequality and vulnerability to prosperity for all
UNCTAD15 will be held under the theme “From inequality and vulnerability to prosperity for all”, offering the nations of the world a platform to devise new ways to use trade as an enabler of sustainable development.
With economies all over the world ravaged by COVID-19, countries will explore how to build back better and strengthen their resilience. They will discuss the strategies and policies needed to resist shocks and quickly recover from crises – economic, financial, climate and social.
The pandemic has hit the most vulnerable countries and people hardest. Over 70 million additional people living in LDCs will be pushed into extreme poverty this year, increasing the global poverty headcount ratio for the first time in two decades, according to UN estimates.
COVID-19’s economic impact is particularly acute in small island developing states (SIDS) such as Barbados, the UNCTAD15 host country, where the services industry, especially travel, tourism and hospitality, have borne the brunt of the pandemic.
These sectors are the lifeline of SIDS and the main sources of employment for women and small businesses, all of whom are severely affected by the pandemic’s economic fallout.
At UNCTAD15, countries will discuss how to get these vulnerable economies quickly back on their feet and trigger the investment needed to enhance their resilience to shocks, including climate change, which exacts a disproportionately heavy toll on SIDS.
Urgent need for new approaches to trade and development
Dr. Kituyi said COVID-19 has starkly revealed that the world must transform global approaches to trade and development to chart a sustainable course to a better recovery.
“We need to rebuild entirely from the ground up, because for too many, going back to business as usual is anathema to sustaining prosperity,” Dr. Kituyi said.
As the number of COVID-19 cases continues to rise in the developing world, the global economy enters a synchronized recession unseen since the Second World War.
To cope with the spiralling economic fallout, developing countries need the galvanized attention of the international community. UNCTAD15 will offer the focused attention needed to mobilize political will towards the systemic changes needed for a better recovery.
“From a trade and development perspective, a better recovery must be green, resilient, just and digital – but it must also be for all people and all countries, not just those who can afford it,” Dr. Kituyi said.
UNCTAD15 will build on the success of previous conferences that have generated ambitious solutions and policy responses to development challenges globally.
The quadrennial conference is the highest decision-making body of UNCTAD. It sets the organization’s work priorities for the next four years.
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COMESA COVID-19 Food Security and Nutrition Plan adopted
Ministers responsible for agriculture, environment and natural resources have adopted the COMESA COVID-19 Food Security Response Plan to help the region deal with the impacts of Covid-19 on regional food security.
In their 7th joint meeting conducted virtually, the Ministers expressed concern about the unfolding effects of Covid-19 on food and nutrition and called on Member States to immediately mobilise resources to support the implementation of the regional plan to ensure food security.
The Ministers have also committed themselves to ensure that food and agricultural input markets and supply chains, along with associated logistics and services remained open and functional in line with the pdf COMESA-EAC-SADC Tripartite COVID-19 guidelines (651 KB) adopted last week.
In a Declaration issued at the end of the one-day meeting, the Ministers pledged to support agricultural research to develop, transfer and disseminate technologies, innovations and management practices that are climate-resilient, market-responsive, suited to assorted agro-ecological contexts and end-user preferences in the region.
“We commit ourselves to supporting smallholder farmers to increase production and productivity, through access to inputs, services and improved technologies including seeds, planting materials, fertilizer, veterinary products and animal feeds,” the Ministers said.
Speaking at the official opening, Secretary General Chileshe Mpundu Kapwepwe said a lot more that still needs to be done for the region to effectively address the challenges of climate change, transboundary plant pest and animal diseases, and degradation of natural resources.
“We need to build the resilience of our agriculture and agri-food systems as well as ecosystems for greater functionality and efficiency. This will also call for adoption of comprehensive approach to early warning, disaster preparedness and response including social protection & safety net systems,” the Secretary General noted.
She urged Member States to collectively deal with food safety issues to further open-up of markets and enhance trade in safe agricultural and food commodities in the region and in the context of African Continental Free Trade Area.
As part of efforts to boost sustainable agricultural productivity, the Secretariat has supported Member States to adopt Climate Smart Agricultural policies and strategies and implementation of the Comprehensive African Agriculture Development Programme (CAADP) through technical and advisory support.
The Secretariat has also supported the development of livestock and fisheries development through provision of financial, technical and organizational support in the development and implementation of policies and strategies.
Through its Agency, the Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA), COMESA Secretariat has been working with Member States and partners in harmonizing and domestication of the seed trade regulations to promote cross-border seed trade for increased access to quality seeds by the farmers.
Representatives of partners organization including the Alliance for a Green Revolution in Africa (AGRA), the United Nations Industrial Development Organization (UNIDO), Forum for Agricultural Research in Africa (FARA) and the African Union Inter-African Bureau for Animal Resources (AU-IBAR) among others attended the meeting.
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WTO report draws attention to impact of COVID-19 trade disruptions on women
Women are likely to be harder hit than men by trade disruptions caused by the COVID-19 pandemic and the dangers are particularly acute in developing countries according to a new information note from the WTO Secretariat. The paper points to how governments’ policy responses could address gender-specific effects of the crisis.
Women make up a larger share of the workforce in the manufacturing sectors, such as textiles, apparel, footwear and telecommunication products, that have seen the largest falls in export growth during the first months of the pandemic, the paper notes. In the services sector, women also outnumber men in industries that have been directly affected by travel restrictions, such as tourism and business travel services.
The paper estimates the risk posed by trade disruptions on men and women using employment data from the World Bank Enterprise Surveys, monthly merchandise exports data and statistics on the mode by which a service is supplied.
The paper furthermore notes that women are disproportionately present in the informal sector in developing and least-developed countries and in activities that cannot be done remotely. It also highlights how the existing gender gap in terms of income, education, information technology skills, access to finance, and childcare responsibilities put women at a further disadvantage during the pandemic.
Maintaining open markets during the recovery period is key to building faster and more inclusive growth, the information note states, adding that this should be complemented by appropriate labour and education policies as well as legal and social reforms to support women workers, consumers and traders. The paper also points to the recently launched WTO-World Bank report pdf Women and Trade: The role of trade in promoting gender equality (14.36 MB) , which highlights ways to ensure women continue to benefit from trade during the economic recovery after the pandemic.
Key points
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Women are at risk of suffering more than men from the trade disruption generated by the COVID-19 pandemic. One of the reasons for this is that a larger share of women works in sectors and types of firms that have been particularly hard-hit by the pandemic.
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Women make up a larger share of the workforce in the manufacturing sectors, such as textiles, apparel, footwear and telecommunication products, that experienced some of the largest falls in export growth during the first months of the pandemic. For example, female employees represent 80 per cent of the workforce in ready-made garment production in Bangladesh, in which industry orders declined by 45.8 per cent over the first quarter of 2020, and by 81 per cent in April alone.
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A larger share of women than men works in services, such as tourism and business travel services, that have been directly affected by regional and international travel restrictions.
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A large share of firms owned or managed by women are micro, small and medium-sized enterprises (MSMEs), and lower levels of financial resources and limited access to public funds are placing the survival of such businesses at greater risk.
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The economic impact of the pandemic is expected to be particularly significant for women in least-developed and developing economies because fewer women than men are employed in these economies in occupations which can be undertaken remotely, and a larger share of women is employed in sectors highly exposed to international travel restrictions.
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The effects of the pandemic are aggravating existing vulnerabilities. Many channels through which COVID-19 is having a greater impact on women are those at the heart of gender inequalities, such as lower wages for women, fewer educational opportunities, limited access to finance, greater reliance on informal employment and social constraints. Limited access to digital technologies and lower rates of information technology (IT) skills further reduce women's opportunities for teleworking and e-commerce, and thus for adapting to the current crisis.
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Many governments have adopted a broad range of support measures to help individuals and businesses. Some of these measures, mainly social protection initiatives adopted by some central or local governments, are specifically targeted at women.
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Maintaining open trade during the economic recovery period is key to building faster and more inclusive growth.
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The joint World Bank and World Trade Organization report on trade and gender, "Women and Trade: the role of trade in promoting gender equality", published in July 2020, highlights ways in which trade can continue to benefit women in the post-COVID-19 recovery period.
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South Africa looks toward inclusive recovery to stabilise debt, boost growth
In a conversation with IMF Country Focus, the Director-General of South Africa’s National Treasury Dondo Mogajane explains how the government has responded to the COVID-19 crisis, how IMF financing will help to stabilize the economy, and strategies for addressing debt and spurring growth.
South Africa’s economic activity is projected to contract by 7.2 percent in 2020, according to the International Monetary Fund (IMF’s) staff report that accompanied the government’s Rapid Financing Instrument request.
What has been the impact of COVID-19 on South Africa and what sectors have been hit the hardest?
COVID-19 brought many challenges: a decline of about 18 percent in employment between February and April; every third income earner in February did not earn income in April; job losses were felt most among women and manual labor. Those at the bottom of the income distribution have suffered a great deal.
Based on our assessment, the most affected sectors are construction, personal services, trade, catering, hospitality, transport, storage, and communications. The crisis also brought manufacturing and mining to a halt.
We are projecting a loss in government revenue of $18.2 billion this year.
What measures are being taken to provide relief to households and businesses?
A second phase is aimed at stabilizing the economy. This is driven by support from the IMF and others. Assistance comes through a $29.9 billion package announced by President Ramaphosa on April 21 that boosts healthcare spending, provides financial relief to municipalities, and temporarily expands the social grant payment system.
The third phase will help drive the recovery and economic growth. Central to this recovery strategy will be measures that stimulate demand and supply through interventions such as infrastructure funding.
How will the recently approved $4.3 billion IMF Rapid Financing Instrument be deployed?
This funding will support five interventions laid out in the supplementary budget: supporting health and frontline services; protecting the vulnerable by extending child support, old age benefits, and disability grants by six months; creating more jobs; unlocking economic growth through our reform initiative; and taking measures to stabilize public debt.
We think that over time we will be able to augment these budget initiatives by reprioritizing and ending certain programs and projects that are not effective.
What measures are being put in place to ensure the IMF assistance is used for its intended purpose?
We have agreed with the Auditor General, an independent body, to not wait until next year to audit COVID-19 related spending. General Emergency Procurement instructions were issued by the Treasury on April 28 to put measures in place to prevent and combat the abuse of supply chain management processes and ensure monies go where intended. These instructions also specifically outline control measures that must be put in place in relation to COVID-19 spending, such as reporting frameworks, internal measures between and within departments, the establishment of audit committees, and reporting on a monthly basis what has been procured, who has ordered these, and the amounts. Procurement of personal protective equipment will also be based on a price reference list.
The President also recently announced a high-level committee that includes law enforcement agencies, the Special Investigating Unit, and the Financial Intelligence Center to investigate anti-corruption cases involving COVID-19 funding.
South Africa’s debt is expected to further increase this year. What actions are being taken to address this?
We have designated $9.6 billion for budget cuts. Some of this is part of $23.3 billion in designated spending over three years in relation to public wages and salaries. I recently filed an affidavit to the High Court in South Africa to explain that we cannot fulfill wage increases in the last year of the three-year wage agreement with labor unions because of lost revenue due to the crisis.
We are committed to stabilize debt so that it peaks at 87 percent debt to GDP by 2023-2024 and starts declining thereafter. Ahead of the medium-term budget policy statement in October, some debt reduction will be achieved as a result of the expenditure reviews that we are currently conducting.
We also agreed to a zero-based budgeting exercise. It will help us to focus on areas where we should cut to reverse the rise in debt.
Economic growth in South Africa has been very low in the last decade and is now negative. What is the government doing to reverse this trend?
The government is undertaking structural reforms to facilitate higher and more inclusive growth. Network industries in telecommunications, electricity, ports, rail, and roads will undergo modernization and reform. Trade policies will be reoriented to take advantage of the free trade area in Africa, pursue greater regional integration, and establish South Africa as an export platform to the region. Entry barriers will be lowered to make it easier for business to start, grow, and compete. Support will be focused on labor-intensive sectors like tourism and agriculture where there is more potential for people to get jobs. Finally, reforms will be implemented to strengthen the governance of state-owned companies.
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National news
Nairobi informal area businesses feel Covid pinch (Business Daily)
More than 80 percent of retailers in Nairobi's informal settlements reported demand and supply challenges last month amid supply chain disruptions caused by Covid-19, a study shows.Latest Impact Initiatives, a Geneva-based think tank, says a majority of retailers attribute the disruption to an increase in prices of items (53 percent) and decrease in demand for commodities (46 percent).
"The proportion of retailers reporting that community members were facing challenges in accessing markets decreased from 75 percent in June to 50 percent in July, which might have been due to the ease of Covid-19 induced movement restrictions.”
Egypt signs African anti-corruption pledge (Arab News)
Egyptian President Abdel Fattah El-Sisi has approved Egypt’s accession to the African Union Convention for the Prevention and Combating of Corruption. The 2003 agreement, signed in Maputo, Mozambique, aims to encourage and strengthen measures by African states to prevent, punish and eradicate corruption and related crimes in the public and private sectors. It also seeks to strengthen, facilitate and regulate cooperation among states to ensure the effectiveness of measures for preventing corruption and related crimes in Africa, as well as and harmonizing and streamlining policy aimed at corruption on the continent.
Algeria chafes against EU trade deal as deadline looms - France 24
Days ahead of a final deadline, activation of a long-planned Algeria-EU trade deal risks unravelling as political and business leaders in the North African country warn it will undermine economic sovereignty.The deal is meant to come into effect on September 1, a decade and a half after the two sides initially agreed their Free Trade Agreement as part of a wider pact setting out economic, social, cultural and judicial cooperation.
But as the clock ticks, concern has grown in Algiers about the coronavirus-hobbled economy's ability to cope without tariffs on steel, textiles, electronics and vehicles -- protective measures originally meant to end three years ago.
Naira crashes 108% against CFA (The Guardian Nigeria)
The naira has fallen by 108 per cent against the West African CFA (popularly known as CFA) in the past five years as the latter rallies to wipe out the hitherto wide trading gap between the two currencies.
According to data sourced from the Central Bank of Nigeria (CBN), it gained 36 kobo from August 19, 2015 to close at 0.6888 CFA/N1 on the CBN rate last week. This translates to a 108-per cent loss for the struggling naira.
CFA’s current resurgence is coming on the heels of the continued closure of the country’s border against neighbouring West African countries, especially the Republic of Benin, where Nigerians engage in unrestrained trade.
Regional and continental news
As world wavers on free trade, Africa is embracing it (TechCentral)
Amid trade tensions between the US, China and Europe, and the UK’s fraught departure from the European Union, African leaders are moving in the opposite direction to establish the world’s largest free-trade zone. Talks on driving forward the African Continental Free Trade Area that stalled with the onset of the coronavirus pandemic are being revived by the African Union, but there is some way to go. A fully implemented deal could cover a market of more than 1.2 billion people with a combined GDP of US$2.5-trillion.
COMESA-EAC-SADC Develop Electronic Corridor Trip Monitoring System (Common Market for Eastern and Southern Africa)
A regional electronic Corridor Trip Monitoring System (CTMS) which will allow cross border road transport operators, drivers, regulators and law enforcement agencies to record and monitor driver wellness data such as COVID-19 test results has been approved by the Tripartite group. The CTMS will also enable operators to track the driver, crew and truck movements against pre-approved route plans.
Director of Infrastructure at COMESA Secretariat Mr Baptiste Mutabazi revealed in Lusaka that the CTMS will enable operator, vehicle and driver information to be readily available along regional transport corridors at the roadside and at border posts to all regulatory and law enforcement agencies. The CTMS is an immediate remedial response to the COVID-19 pandemic and its use will in future be further enhanced through the Tripartite Transport Registers and Information Platform System (TRIPS) which is now under development, as a corridor performance management tool for smart corridors,” Mr Mutabazi noted.
Women in business have a big role to play in a post-COVID 19 Africa and could significantly reduce the continent’s high dependence on imports of essential food, medical and pharmaceutical items, said UN Economic Commission for Africa's Mama Keita in a virtual meeting organized by the Office of the Special Envoy for the Great Lakes.
“As we are building back our economies after COVID and are seeking to turn vulnerabilities into opportunities, let us recall that intra-Africa trade is still very low at less than 20 per cent and that Women entrepreneurs have a big role to play in boosting this, said Ms Keita.
Saving lives, economies and livelihoods campaign launches in Africa (Africa CDC)
“Last two weeks, Africa passed one million cases of COVID-19. Noting that we do not have a vaccine yet, and recognizing the socioeconomic effects of the pandemic on Member States, we must continue to be proactive so that we do not lose the precious gains made with the preventive measures. I am therefore proud to announce the official launch of the African Union Africa Against COVID-19: Saving Lives, Economies, and Livelihoods as an effort to use innovative tools, methods and partnerships to prevent further transmission, deaths and socioeconomic harm on the continent as economies, borders and schools re-open,” said H.E. Amira Mohammed.
Global news
Bitcoin has been catapulted back into the limelight following its recent price rally and interest from some big-name investors.
"There’s no better place for bitcoin to thrive than Africa," Nigeria-based bitcoin-buying service Yellow Card co-founder and CEO Chris Maurice said, pointing to the "practical" use of bitcoin for "payments and savings" as "why crypto will go mainstream in Africa long before the West or any other part of the world."
Earlier this year, a report by Arcane Research found that "Africa is one of, if not the most, promising regions for the adoption of cryptocurrencies," with bitcoin and crypto ownership rates in South Africa and Nigeria at 13% and 7%, respectively—far higher than the worldwide average of 7%.
Stronger China-Africa ties key to post-COVID-19 economic recovery: scholar (CGTN Africa)
Stronger China-Africa ties are key to the post-COVID-19 economic recovery of the African continent, a Kenyan scholar said on Sunday. Peter Kagwanja CEO, Africa Policy Institute, a regional think tank, said in a commentary published in the Sunday Nation that as the global COVID-19 crisis continues, promoting manufacturing and technological innovation is emerging as key to Africa’s COVID-19 response and recovery.
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Infrastructure Commission to fast-track projects valued at R340bn
Government will in the coming months expedite the implementation of at least 50 infrastructure projects with a total investment value of more than R340 billion.
The fast-tracking of the projects forms part of the reconstruction and recovery of the South African economy.
This was the key outcome of the inaugural meeting of the reconstituted Council of the Presidential Infrastructure Coordinating Commission on Thursday.
President Cyril Ramaphosa chaired the meeting, which brought together Ministers, Premiers, Mayors and the South African Local Government Association to ensure the effective integration of the country’s substantial infrastructure programme.
President Ramaphosa said the focus of this administration is to consolidate infrastructure under one roof to ensure effective implementation.
“Our experience has been that infrastructure can only be sustainable if there is cooperation and partnership between all three spheres of government and if there is a common intent,” he said.
In terms of the Infrastructure Development Act of 2014, the Presidential Infrastructure Coordinating Commission (PICC) acts through its council.
The council coordinates the development, maintenance, implementation and monitoring of the National Infrastructure Plan; coordinates the determination of priorities for infrastructure development; designates strategic integrated projects (SIPS) and ensures that infrastructure development, in respect of any SIP, is given priority in planning, approval and implementation.
The council also coordinates the identification of strategic partners with which to conclude agreements that seek to promote the objects of infrastructure development.
The council must ensure that infrastructure projects promote economic equality, social cohesion, decent employment opportunities and skills development.
In keeping with this mandate, the council agreed to expedite the implementation of projects in prioritised sectors such as human settlements, transport, energy, water and sanitation, agriculture and agro-processing, and digital infrastructure.
The council confirmed a new approach to infrastructure build including:
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Preventing corruption through transparent tender processes and stronger due diligence;
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Greater involvement of communities in design and implementation;
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Emphasis on local employment and procurement, and targeted involvement of SMEs, and
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Blended financing through the Infrastructure Fund to mobilise more resources from the private sector, multilateral development banks and development finance institutions.
President Ramaphosa emphasised the vital importance of infrastructure development in responding to the economic impact of the COVID-19 pandemic, restoring growth and creating jobs.
“Extraordinary measures are required to return us to a path of sustainable growth. Central to this effort is infrastructure construction and maintenance, which is the flywheel for economic growth and large-scale job creation,” he said.
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Women gain key economic benefits from greater trade, study finds
"Pink tariffs” and other trade barriers are obstacles to better jobs, wage equality
Trade increases women’s wages and helps close the wage gap between men and women while creating better jobs for women, a new World Bank Group report concludes. Countries that are open to international trade tend to grow faster, innovate, improve productivity, and provide higher income and more opportunities to their people. Countries that are more open to trade, as measured by the trade-to-GDP ratio, have higher levels of gender equality.
The report, produced in collaboration with the World Trade Organization, marks the first major effort to quantify how women are affected by trade using a new gender-disaggregated dataset. The dataset, developed by the World Bank Group, allows researchers to understand how women are employed, in which industries they work, how much they earn, and whether or not they are involved in global trade. This analysis helps governments see how trade policies can affect women and men differently.
“Over the past 30 years trade has been the engine of poverty reduction. This report shows that, provided the right policies are in place, it can also provide an engine to reduce the gender gap,” said World Bank Managing Director Mari Pangestu. “Trade can expand women’s role in the economy and decrease disparities with men by giving women more and better employment opportunities. Seizing these opportunities will be even more important in a post-COVID-19 world.”
The report, Women and Trade: The Role of Trade in Promoting Women’s Equality, offers several key findings. Firms that are part of global value chains (GVCs) employ a greater percentage of women (33 percent) relative to non-GVC firms (24 percent). When countries open themselves to trade, women’s share of wages in the manufacturing sector increase by 5.8 percentage points on average. When women are employed in sectors with high exports, they are more likely to be formally employed. Formal employment means better job benefits, training, and job security.
The report also highlights the importance of addressing discrimination against women in trade policy. Although no country overtly imposes tariffs according to gender, implicit biases can amount to “pink tariffs” that put women at an economic disadvantage. The report shows that products specifically consumed by women face a higher tariff burden than men’s products. In the textile sector, for instance, tariffs on women’s apparel are US$2.77 billion higher than on men’s clothing, a consumption gap that grew about 11 percent in real terms between 2006 and 2016. Disparities like this can hurt women consumers all over the world.
Targeted policies can help women maximize the benefits of trade. These include removing trade barriers that impede women’s access to international markets and improving women’s access to education, financial services, and digital technologies. Governments can design trade facilitation measures that remove gender-specific barriers to trade. These measures could address burdensome customs requirements, limited access to trade finance, and exposure to extortion or physical harassment at borders.
Key Findings
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Exporters employ more women: In developing countries, women make up 33 percent of the workforce of exporting firms compared with just 24 percent of non-exporting firms.
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Trade creates better jobs for women: When women are employed in sectors with high levels of exports, they are more likely to be formally employed in a job with better benefits, training and security.
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Trade increases women’s wages and increases economic equality: Developing countries that double their manufacturing exports – a typical increase for developing countries that open themselves to trade – would see women increase their share of total manufacturing wages from 24% to 30% through a combination of increased employment and higher salaries.
Despite many advances, women across the world hold fewer jobs, are paid less, and are more likely to experience worse job conditions than men.
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Fewer than one in two women works.
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Among those who do work, 80% occupy medium- and low-skilled jobs.
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Women are also overrepresented in the informal sector, with up to 90% of women informally employed in Sub-Saharan Africa.
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Just 3% of female employees in low-income countries are skilled workers.
Trade policy is inadvertently biased against women, resulting in lower levels of employment and higher prices for consumer goods.
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Although no country overtly imposes tariffs according to gender, implicit biases can amount to “pink tariffs” that put women at an economic disadvantage – as both producers and consumers.
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Compared to men, women tend to spend a larger share of their income goods with high tariffs, such as food. Removing import tariffs could help women gain 2.5 percent more real income than men.
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Targeted policies can help women maximize the benefits of trade. These include removing trade barriers that impede women’s access to international markets and improving women’s access to education, financial services, and digital technologies.
The lack of gender-specific data reinforces biases against women in trade policymaking. Sex-disaggregated data is necessary to assess how different policies and obstacles impact women and men differently.
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This report makes use of a new dataset that for the first time allows researchers to see labor data at the industry level by gender, reducing subjectivity of trade-related analysis.
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This data sheds light on how women are employed, in which industries they work, what their income is and whether or not they are involved in global trade.
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This analysis helps governments understand how trade policies will affect women and men differently.
The changing global economy offers new opportunities for women through services, GVCs and digital technology.
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More than two-thirds of women in developed countries were employed in the services sector in 2017, up from 45 percent in 1991. In developing countries, the proportion of women in the service sector jumped to 38 percent from 25 percent over the same period.
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Countries are becoming more integrated with global value chains, which tend to create jobs and increase wages for women. GVC jobs tend to have positive, indirect benefits on other aspects of women’s livelihoods, such as education.
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Digital technology and new online platforms create opportunities for women to bypass traditional trade barriers, expand their entrepreneurial skills and develop flexible careers that enable them to manage both work and household responsibilities.
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External debt complicates Africa’s COVID-19 recovery, debt relief needed
Calls made for temporary debt standstill for all African countries
Mozambique was already struggling with repaying its $14 billion external debt when COVID-19 hit earlier this year.
The country’s debt-to-GDP ratio, which was 100% in 2018 ballooned to 130% in 2020. With debt overtaking total economic output, Mozambique has little fiscal space to provide a robust response and recovery from the pandemic.
The COVID-19 pandemic is just the latest of Mozambique’s woes. The country continues to recover from cyclone Idai which struck in March 2019, and during which 607 people lost their lives and thousands were displaced.
Like Mozambique, many poor and heavily indebted African countries such as Angola, Cabo Verde, Congo, Djibouti and Egypt – all with a higher than 100% external debt-to-GDP ratio – must now, amid a pandemic, decide how to navigate significant financial difficulties.
An African Union (AU) study on the economic impact of COVID-19 released in April 2020 showed that the continent could lose up to $500 billion and that countries may be forced to borrow heavily to survive after the pandemic.
UN Secretary-General António Guterres in in June 2020 warned that an additional “50 million people risk falling into extreme poverty in 2020 owing to the pandemic.” Mr. Guterres has appealed for a “global response package amounting to at least 10% of the world’s Gross Domestic Product. For Africa, that means more than $200 billion as additional support from the international community.”
Africa needs at least $100 billion to immediately resource a health and social safety net response, and another $100 billion for economic stimulus, including a debt standstill, the financing of a special purpose vehicle for commercial debt obligations, and provision of extra liquidity for the private sector, according to the UN Economic Commission for Africa (ECA).
African countries’ lack of fiscal space to tackle the pandemic and its aftermath could be attributed to four challenges, according to the International Monetary Fund (IMF).
The first challenge is high debt-to-GDP levels, which are unsustainable.
The second is that high fiscal deficits (gaps between spending and revenues) will force countries to explore alternative financing for development projects. Consequently, loans become a recourse, further exacerbating their debt burden.
The third challenge is the high cost of borrowing, with interest rates between 5% and 16% on 10-year government bonds, compared to near-zero to negative rates in Europe and America.
For sub-Saharan African economies, interest repayments constitute the highest expenditure portion – and fastest-growing expenditure – of budgets.
Lastly, the depreciation of many African currencies against major international currencies has triggered inflation. For example, the Botswanan Pula and the South African Rand have lost about 8% of value against the US dollar and the euro since the outbreak of the pandemic.
To recover better, Mr. Guterres has called for debt relief, while advocating for a transition to low-carbon, climate-resilient growth that will create millions of green jobs and ensure sustainable production and consumption.
Addressing these challenges requires bridging inequalities based on income, gender and race, says Mr. Guterres. He continues to advocate for equity in global liquidity and has proposed a set of innovative solutions to financing post-pandemic recovery.
For example, the UN Chief has urged the IMF to increase its financial support to African countries under its Special Drawing Rights facility – a monetary reserve currency that countries in financial stress can draw from.
Call for debt cancellation
While the G-20 agreed to suspend debt repayment for the world’s 75 poorest countries until the end of this year, Mr. Guterres maintains that debt suspension should be extended to all developing countries, adding that the private sector must be part of any dialogue on debt forgiveness.
The ECA also recommends a “complete temporary debt standstill for two years for all African countries, without exception.”
The African Union has launched several programmes, such as the African Union Development Agency (AUDA-NEPAD) COVID-19 Response Plan to help countries fight the pandemic and recover better.
The CEO of AUDA-NEPAD Ibrahim Mayaki acknowledges that countries desperately need to lighten the burden of debt. “Consultations are ongoing with major financial development partners for a short- and medium-term scheme that can respond to those needs,” he told Africa Renewal, in an interview.
Calls for debt cancelation for poor countries have been ongoing for many years. In 2005 the World Bank and the IMF cancelled $55 billion of the debt owed by Africa’s most impoverished states; still, a full cancellation would be unprecedented.
Also, total debt forgiveness usually involves intense political negotiations. The China Development Bank and the Export-Import Bank of China account for most of the lending to African countries. These institutions are closely linked to the Chinese government and its Belt and Road Initiative. Therefore, they are likely to toe the official position of the government.
In April 2020, China expressed a willingness to provide Africa debt relief, but not forgiveness.
In a meeting with African leaders in mid-June to discuss the COVID-19 response, China’s President Xi Jinping offered to cancel Africa’s interest-free loans, but indicated that negotiations would be carried out bilaterally.
However, Johns Hopkins University in the US analyzes that the loans China intends to cancel are less than 5% of Africa’s debt to China – hardly a dent on the continent’s debt.
Meantime, the Secretary-General of the African Continental Free Trade Area (AfCFTA) Wamkele Mene maintains that the implementation of the trade pact would increase intra-African trade and boost industrialization on the continent – precisely the stimulus Africa needs.
However, stimulus from AfCFTA implementation will have to wait as trading could not begin on the scheduled date of 1 July. The AU is expected to announce a new date soon.
Related News
tralac’s Daily News Selection
Diarise (5 August): PIIE Trade Winds, with Anabel González. African perspectives on the WTO and prospects for regional trade cooperation. Is a new African voice on trade emerging? How does Africa view WTO reform and how could it contribute to strengthening global trade cooperation? How can the AfCFTA help Africa recover from the pandemic. Guests:
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Dr Vera Songwe (Executive Secretary, UNECA)
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Ambassador Albert M. Muchanga (African Union Commissioner for Trade and Industry)
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Robert Z. Lawrence (Harvard Kennedy School, PIIE)
A South African trade and development policy special focus: SARS, dtic, BUSA, OECD, Wits University
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South Africa: A June trade surplus of R46.63bn (SARS)
The South African Revenue Service today released trade statistics for June 2020 recording a trade surplus of R46.63bn. The surplus is attributable to exports of R116.31bn and imports of R69.68bn. Exports increased by R10.68bn (10.1%) between May and June 2020 and imports decreased by R16.25bn (18.9%) between May and June 2020. Exports for the year-to-date (1 January to 30 June 2020) decreased by 2.1% to R599.83bn from R612.54bn over the same period during 2019. Imports for the year-to-date of R536.76bn are 13.0% less than the R617.28bn imports recorded during the same period in 2019. The cumulative trade surplus for 2020 is R63.07bn (pdf).
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Top 5 countries for SA exports: China (13.7%), United Kingdom (7.7%), United States (6.7%), Germany (5.1%), Netherlands (4.2%)
Top 5 countries for SA imports: China (23.9%), United States (7.6%), Germany (7.5%), India (6.1%), Italy (3.3%)
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Minister Ebrahim Patel: Briefing to the Portfolio Committee of Trade and Industry on developments in the steel and sugar industries (pdf)
Shrinking market: SA share of SACU local market shrunk from 1.6 to 1.2 million tons – the lowest since 1983
Slowly shrinking SA sugar industry – mainly in KZN. Area under cane has shrunk by 70 000 ha from 430 000 ha in 2000 to current 360 000 ha; loss 2% per annum – the lowest since 1983; Shrinking slowly – 10 year crop – farmers stop investing or switch; Marginal growers going out of business
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Milling and refining over capacity increasing
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Job losses in both growing and milling sector
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Urgent diversification to prevent further shrinkage and create sustainable industry
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Financial sustainability prerequisite for meaningful transformation
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Key challenges facing the sugar industry:
The global sugar price has declined below local cost of production – with no real prospect of improvement
The Health Promotion Levy (commonly known as Sugar Tax) and eSwatini imports have significantly reduced demand for locally produced sugar resulting in: 50%+ of raw sugar currently exported at a loss; 20-40% excess capacity in milling and refining
Majority of growers and millers are losing money, many under severe pressure: Likely acceleration of small-scale grower exits; Despite disincentives, unmanaged unilateral capacity reduction a possibility
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Call to Action: Local procurement approach beyond COVID-19 (BUSA, Agbiz)
Our local manufacturing opportunity however needs to extend beyond COVID19 demands, to strengthen and grow our local manufacturing base on an economically feasible and competitive basis. To this end, local procurement advocates have been collaborating to ensure that a holistic approach is applied, prioritizing local procurement in support of economic recovery. These advocates have formed a Technical Working Committee focused on mobilising corporate to support the localisation agenda. Members of the technical working committee include Business Unity South Africa, Business Leadership South Africa, National Business Initiative, Manufacturing Circle, Proudly South African and South African Breweries. We communicate the following Call to Action for Corporate South Africa (pdf):
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Review your procurement practices and give preference in all cases possible, to companies that are manufacturing locally;
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Secure procurement commitments to give preference through your entire supply chain to local manufacturers;
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Earmark procurement opportunities for companies manufacturing locally; and
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Utilise the procurement portal (Market Access Platform) that influences localisation and transformation, to refer and find high performing suppliers and advertise procurement opportunities to local producers and service providers.
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Economic Survey of South Africa (OECD)
In the latest Economic Survey of South Africa, the OECD indicates that the nationwide lockdown enacted in March 2020 reduced activity in mining and industry while bringing the tourism, entertainment and passenger transport sectors to a near-standstill. The pandemic adds to South Africa’s long-standing challenges, the Survey says. Under a so-called double-hit scenario, a new outbreak affecting South Africa and its trading partner countries will curtail exports, deepening the recession to -8.2% in 2020, and limiting the recovery in 2021 to GDP growth of just 0.6%. In the single-hit scenario, where a second wave of the virus is avoided, economic activity will still fall by 7½ percent in 2020 before picking up progressively to growth of 2½ percent in 2021. Extract (pdf):
Reaping the benefits of participating in global value chains South Africa’s participation in global value chains is more pronounced than that of many of its peers, but remains below the OECD average. In 2015, 23.5% of South Africa’s domestic value added was driven by foreign demand compared to the OECD average of 31.9%. However, South Africa’s domestic value added was higher than in other emerging countries such as Argentina (10.9%), Brazil (12%), Indonesia (18.3%) and Turkey (20%). Tariff liberalisation in the early 2000s mainly benefited the skill– and capital intensive manufacturing sector allowing greater integration in global value chains. Thus, the foreign value added content to exports increased from 22% to about 30% between 2005 and 2016 in the manufacturing industries (Figure 1.21). By contrast, deepening of integration into global supply chains stalled in the service industries over the same period. This development reflects an increase in South Africa’s services trade restrictiveness of recent years in all services sectors.
South African firms benefit from more global openness to trade. Tariff barriers on imports are significantly lower in South Africa than in other emerging countries such as Brazil, India and Argentina (Figure 1.22). Competitive pricing of intermediate inputs is important due to the high import intensity of many South African exporters. Thus, comparatively low import tariffs on intermediate goods increases the competitiveness of exporting firms. By contrast, tariff barriers on South African exports to developing countries – including Brazil, China and India – far exceed those to developed countries. South Africa has to increase trade access for its firms to fast-growing developing economies to harness growing demand in these countries. It is necessary to push for reduced tariffs on South African exports and the removal of non-tariff barriers. Moreover, further measures should focus on advancing the SADC free trade agreement and pursuing new and re-negotiated trade agreements in markets where there is growing demand for key export products. As recommended in previous surveys, trade facilitation measures should address non-tariff barriers, such as improving the quality and access of infrastructure, as well as the access to export credit and credit insurance. [Overview of the Survey with key findings and charts]
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WSG, Telkom team up to address South Africa’s economic challenges (Wits University)
The aim of this project - led by the new Head of the Wits School of Governance, Professor Mzukisi Qobo and Dr Nomfundo Ngwenya, a Visiting Research Fellow at the WSG - is to provide evidence-based research to be considered by policy makers and other stakeholders such as business, labour and civil society. Although South Africa’s triple challenges of unemployment, poverty and inequality have been amplified by COVID-19, the country’s current economic malaise preceded the pandemic. The project will therefore recognise the epoch-defining shifts presented by COVID-19, but it will not utilise the pandemic as the sole prism through which to view South Africa’s challenges. The team will explore areas such as the role of the state and markets in development (including industrial policy, competition policy, and state capabilities); rethinking macro-economic policy (including fiscal and monetary policy) and sectors identified for future development including the health sector (economic and social); energy and ecology products; agriculture; infrastructure (including transport and other social sectors). They will also study new industries (including digital products, platforms and services) and employment trends and labour markets.
The COVID-19 crisis in Liberia: Projected impact and policy options for a robust recovery (World Bank)
The COVID-19 pandemic continues to exact a toll on the global economy, and Liberia is facing its dire human and economic impact, with real GDP projected to contract by 2.6% in 2020, according to the first Liberia Economic Update. The report shows that the human cost of COVID-19 could be high. The population living below the national poverty line is expected to increase from 55.5% in 2019 to 68.9%, which means that an additional 526,000 Liberians are at risk of falling into poverty. The authors also warn that economic growth could further slowdown if government’s policy response is delayed, not well-targeted, or if the external environment does not improve significantly this year. Liberia’s near-term outlook is highly uncertain (pdf). Under the baseline scenario, a sharp rebound is expected with real GDP growth projected to rise to an average of 4.1% during 2021-22. However, under the downside scenario, real GDP is expected to recover more slowly, growing at an average rate of 3.7% in 2021-22. In both scenarios, the medium-term recovery will be underpinned by the post-COVID-19 normalization of economic activity and the implementation of structural reforms designed to alleviate constraints on productivity growth and support economic diversification.
pdf The COVID-19 crisis and trade facilitation (8.70 MB) (WTO, TFA, ICC, GATF)
To get a more detailed understanding of how the COVID-19 pandemic is affecting the movement of goods across borders and to ascertain how implementation of the WTO Trade Facilitation Agreement might ease the situation, the WTO Trade Facilitation Agreement Facility, International Chamber of Commerce and the Global Alliance for Trade Facilitation decided to carry out an online survey of business, government and other groups. The survey asked government officials and private sector representatives to identify which import, export and transit processes have become more cumbersome or time consuming in the context of the COVID-19 containment efforts, which processes have become less cumbersome or time consuming, and which trade-related processes would have the most positive impact if implemented in the current circumstances.
Digitalisation of trade processes represents a significant opportunity to deliver a trade policy that addresses current needs while also preparing for the future. There have been some indications that in some countries, having measures such as a single window in place has helped with their response to Covid-19, while others have implemented ad hoc digitalisation of their processes to better cope with the pandemic. We need to harness this impetus on digital while also ensuring that these initiatives form part of a cohesive trade policy. Countries also have to resist any backsliding once the immediate shock of the disease has passed. We propose that the WTO Trade Facilitation Agreement provides tools that can help WTO Members to overcome these problems, particularly as trade facilitation measures can reduce the cost of trade and spark competitiveness, productivity, innovation and growth, thus assisting countries with the post-virus period, and economic growth into the future. In this way countries around the world, of all development levels, will be better prepared for any shocks on the scale of the current crisis.
IISD: COVID-19 and food export restrictions. This policy brief draws on the International Food Policy Research Institute’s COVID-19 Food Trade Policy Tracker to compare how governments have reacted to the current crisis with how they did so in the past.
Tsafrir Attar: Setting the new global standard in trade finance digitisation (ICC Guest Blog)
Perhaps finally the future of trade finance digitisation really is now; perhaps now presents an unprecedented opportunity for banks to set the new global standard? While consumers are adapting like never before to the new digital norm, so too will corporate customers, expecting their banking partners to keep pace and to deliver their services without delay or error. But how can banks leverage this opportunity? Quite simply by implementing new technologies and adjusting their services and operations to provide end-to-end digital services with higher efficiency and lower costs. The scope of trade finance digitisation possibility is endless and contrary to some misconceptions, does not require a drastic change in operations.
Adding new automation tools without seamless interoperability to incumbent systems, however, will undoubtedly increase deployment costs and decrease return on investment (ROI). It is far better to streamline operations by eliminating multiple systems that address the same problem and then focus on technologies that connect and facilitate customer engagement. While individual platforms can contribute value to a business, it is far better to use integrated, complementary solutions for greater impact, reduced implementation time, increased ROI and faster results. [The author is Surecomp’s Vice-President of Digitisation]
African Union: Mobility of African health workers comes under the spotlight, post-COVID19
As we move towards a more digitally-aggregated news service, we would like to thank Richard Humphries (@RichardHumphri1) who has worked with tralac to build this daily news selection since its inception. We greatly appreciate your input and wish you well!
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tralac’s Daily News Selection
AfCFTA: Nigeria not ready for restrictive Rule of Origin (Nairametrics)
Adopting a restrictive Rule of Origin will not allow the Nigerian manufacturing industry to enjoy the full benefits of the AfCFTA. This is according to Peter Lunenborg, the senior programme officer at South Centre. According to him, most sectors in the industry still source the bulk of their raw materials and expertise from outside the continent. Speaking at the Manufacturers Association of Nigeria webinar themed AfCFTA Rule of Origin: Implication for growth of manufacturing sector, Lunenborg noted that while restrictive rules of origin are the best for wealth creation, the African continent cannot afford to toe that path just yet. “It needs to be flexible because so far, most of the things produced here still require some input from foreign countries, in form of raw material or technology or expertise. For instance, Nigeria imports half of the wheat used for its flour manufacturing from the United States, because Africa has a huge supply deficit,” he said.
Secretary of the National Action Committee on AfCFTA, Francis Anatogu, stated in his presentation that some of the threats hindering Nigeria’s ratification of the agreement include: the rise in smuggling, illegal transshipment of goods from non-African countries, and import surge arising from trade liberalisation without corresponding growth in export of Nigerian products. “Nigeria also has to combat the influx of substandard products due to uneven quality standards in some African countries, and loss of revenue from import duties and levies, exacerbated by smuggling and Rule of Origin abuses. Putting these things in check will help speed the ratification of the AfCFTA” Anatogu stated. [Reuters: Starved of dollars, Nigerian businesses struggle for survival]
Malawi ready to ratify AfCFTA (Business Malawi)
The Malawi government says it has concluded consultations with stakeholders on the matter. In an interview Tuesday, Minister of Trade, Sosten Gwengwe, said the country is expected to deposit its ratification instruments to the African Union within a month from now. “Malawi [government], after consultations with private sector, has signed the approval of the AfCFTA. The instruments are with Ministry of Justice as we finalise the ratification processes. After proof reading the agreement, it will be deposited to the AU, but approval protocols are done. We should deposit the instruments within a space of one month,” Gwengwe said.
Gerhard Erasmus, Trudi Hartzenberg: Completing and implementing the AfCFTA in difficult times.This tralac paper discusses the steps still required to finalise the AfCFTA framework and to implement the relevant technical aspects as provided in or required by its legal instruments. The discussion commences with an overview of where the process stands and what is still outstanding.
Michel Russo: Impact of COVID-19 on Associations and Chambers in Africa (CIPE)
In June, CIPE began surveying business associations and chambers of commerce throughout Africa. The survey was designed to measure the impact of COVID-19 on these organizations and their respective communities. In the words of CIPE’s Executive Director, Andrew Wilson, business associations and chambers are “conduits of information, advocates for policy, providers of service, and mobilizers of relief.” The importance of a response from these organizations is critical to recovering from the pandemic and re-opening the economy. In light of the challenges, the survey reveals innovation and the creative response of organizations. The inherent nature of these organizations – to advocate and provide for their member’s interest and well-being – has hardly been more evident. Challenges are abounding, yet so are impactful responses. CIPE received over 100 preliminary responses from associations and chambers of all sizes and areas of focus across the continent from 12 countries including Nigeria, Kenya, Ethiopia, Rwanda, Zimbabwe, Ghana, South Africa, Liberia, Uganda, Mauritius, Algeria, and the Gambia.
COMESA, EAC and SADC adopt harmonised Guidelines on Trade and Transport Facilitation
The three RECs, on 29 July, adopted harmonised Tripartite Guidelines on Trade and Transport Facilitation Guidelines for Safe, Efficient and Cost-Effective Movement of Goods and Services during the COVID-19 Pandemic. In his remarks at the opening of the Tripartite Council of Ministers meeting, Mr Tarek Shalaby (Assistant Minister for Foreign Trade, Agreements and International Relations, Egypt), representing the chairperson of the COMESA-EAC-SADC Tripartite Council of Ministers, said the harmonisation of guidelines presents an opportunity towards the realisation of the Tripartite Free Trade Area which was signed by the Tripartite Heads of State and Government in June, 2015.
The Chairperson of the COMESA-EAC-SADC Tripartite Task Force, Dr Stergomena Lawrence Tax, highlighted that the overlapping nature of membership and sharing of traffic among the three RECs necessitated the urgent need for harmonised Guidelines for the Movement of Persons, Goods and Services across the Tripartite Region during COVID-19 Pandemic. Dr Tax noted that mobility restrictions to contain COVID-19 affected regional trade and transport, and resulted in shortage of goods, and long queues at ports of entry and exit, translating into increased cost of doing business and consumer prices. On the experiences of cross-border truck drivers, Dr Tax said the COVID-19 cross-border restrictions that have been targeted on truck drivers have led to stigmatisation of cross-border drivers, impacts of which have not only affected the drivers and local communities, but also negatively impacted the ongoing efforts to contain the spread of COVID-19. She urged the Tripartite members to work together to sustainably contain the negative impacts of COVID-19 and address any future health emergencies that might arise.
During the meeting, the Tripartite Council of Ministers directed the Tripartite Task Force to establish the required institutional arrangements for monitoring the implementation of the adopted Guidelines. The Ministers agreed on the development and integration of Electronic Surveillance Systems to Monitor Driver Health and Track the Movement of Drivers and Trucks in order to facilitate the implementation of the Tripartite Guidelines. On this note, the Ministers agreed that the management of the electronic surveillance systems for monitoring the drivers and vehicles during COVID-19 Pandemic will be undertaken by Member/Partner States. [Download: pdf Tripartite Guidelines for Trade and Transport Facilitation during COVID-19 (651 KB) ]
12th West Africa Internet Governance Forum: update
The two-day video conference forum with the central theme, Digital Inclusion and Access in West Africa in response to COVID-19, was convened from 22 -24 July 2020. The forum aims to strengthen the active participation of various stakeholder groups in the Internet governance debate on the utilisation of the Internet, exploration of the digital landscape in the context of COVID-19, which included the impact of Trust and Privacy in the current COVID-19 pandemic, Cybersecurity and cybercrime in the era of digital cooperation and beyond. Extract from the communique (pdf): On Emerging Technology
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ECOWAS Member States to develop a national strategy on emerging technologies using multistakeholder processes which will allow for assessment of the viability and added value for emerging technology within local contexts.
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Call on Member States to encourage the production of local content and local datasets for the designing and training of emerging technologies.
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Urge Member States to collaborate with the private sector, civil society and technical organisations to encourage innovation and an enabling environment for start-ups.
4th annual Ministerial meeting on ECOWAS regional migration cooperation: update
Following the impact of COVID-19 pandemic on regional free movement, the ministers were also briefed on guidelines to be adopted by member states, in this regard, on border management for ease of implementation given that they have oversight function on the enforcement agencies. Mr Rauf Aregbesola (chair of the meeting and Nigeria’s Minister of Interior) sued for greater collaboration with the government of Nigeria in order to deal more decisively with the incursion of bandits, terrorists and insurgency elements that are infiltrating the territories of Member States. While rounding up the meeting, he called on delegates to ensure that resolutions on ease of movement are well guarded even as a harmonized data management and integrated systems for efficiency are developed. Ms Eleni Zerzelidou (International Office for Migration) disclosed IOM’s optimism that ministers will validate the ECOWAS Regional Migration Policy and the manual on border management and free movement training. This also include the guidelines for the harmonization of migration data management in the ECOWAS Region as well as the MIDWA Monitoring and Evaluation Plan. [African Union launches a new programme on Migration and Health]
The World Bank Board of Directors has approved $300m in International Development Association credits and grants to support reforms that will help promote electricity trade in West Africa. The West Africa Regional Energy Trade Development Policy Financing Program is the first World Bank operation to use the IDA Regional Window for a DPF program.
IGAD-FAO-WFP: Urgent action required to prevent a major food crisis in Eastern Africa. Considering the combined effects on vulnerable populations of current and projected shocks, in addition to the protracted impacts of previous hazards, significant food security deteriorations across the region are now projected. Ongoing and upcoming food security assessments and IPC analyses will soon provide a better picture of food security outcomes. In the meantime, however, current estimates suggest that the compounding impacts of the COVID-19 pandemic, desert locust upsurge, and flooding may drive the population facing severe food insecurity up sharply by the end of 2020, potentially to 50.6 million people, or approximately 20% of the population in the IGAD region. Though the bulk of the food insecure population will remain in rural areas, these estimates assume a significant deterioration in food security amongst the urban poor, who are not often factored into IPC analyses and are driving the steep increases in humanitarian needs.
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Displacement Tracking Matrix: East and Horn of Africa monthly regional snapshot, May 2020
IMF Executive Board approves $49.1m in emergency support to Lesotho. The COVID-19 pandemic is having a severe social and economic impact on Lesotho. Disruptions to supply chains for major industries and a national shutdown to contain the virus have led to a sharp drop in production. The economy is being further hit by declining external demand for textiles and diamonds, shrinking remittances, and delays to major construction projects. The authorities have been taking strong actions to mitigate the health and socio-economic impact of the pandemic. In collaboration with development partners, they are scaling up urgent health spending, and are introducing measures to mitigate the economic impact, including by boosting social safety nets and ensuring access to credit for affected businesses. The economic shock, as well as the additional required spending, has generated urgent balance-of-payments (BOP) financing needs.
IMF Executive Board approves $110.4m in emergency support to Eswatini. The authorities’ commitment to transparently use and report all emergency spending— including through the publication of pandemic-related spending execution, awarded procurement contracts, and independent audit of such spending—is crucial to ensure that emergency funds are used for their intended purposes. Accelerating public financial management (PFM) reforms, including by applying the implementation guidelines for the 2017 PFM law and strengthening public procurement process, will be key towards improved fiscal transparency and governance. Once the pandemic subsides, steadfast implementation of the authorities’ multi-year fiscal consolidation strategy and structural reform agenda will be critical to ensure debt sustainability and to support a durable and inclusive recovery and stronger governance.
IMF Blog: Corruption and COVID-19. Governance safeguards for emergency assistance related to COVID-19 are part of a more comprehensive effort by the IMF to improve its member countries good governance and efforts to tackle corruption. The IMF has significantly increased its focus on governance and corruption over the last few years. We adopted in 2018 an enhanced framework designed to make our work with countries more candid, even-handed, and effective. This laid the foundation for our COVID-19 policy and lending response, where stronger governance matters even more. We recently assessed our progress in recent years and published the findings in a staff analysis.
WHO, WIPO, WTO launch updated study on access to medical technologies and innovation. Building on the first edition launched in 2013, the publication seeks to strengthen the understanding of the interplay between the distinct policy domains of health, trade and intellectual property, and how they affect innovation and access to medical technologies, such as medicines, vaccines and medical devices.
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Asmita Parshotam: Developing a medical sector in Africa - Taking Africa into the 21st Century (pdf)
World Bank’s China Economic Update: Leaning forward – COVID-19 and China’s reform agenda
The report projects that economic growth in China will slow sharply to 1.6% this year - marking the slowest expansion since 1976–before rebounding to 7.9% in 2021. Even as economic activity rebounds, the pace of China’s poverty reduction is expected to slow, reflecting slower growth in household incomes. Without additional policy measures, 8-20 million fewer people are projected to escape poverty in 2020, compared to pre-pandemic projections. Risks to China’s economic outlook are unusually high. On the downside, recurrent COVID-19 flare ups could continue to disrupt economic activity, despite efforts to suppress the spread of the virus. Externally, a deeper and more protracted global recession and escalating bilateral tensions between China and some of its main trading partners could also derail the recovery. On the upside, the downturn could be less severe if domestic and global confidence recover faster than anticipated, and if economic tensions de-escalate.
Today’s Quick Links:
Neil Cole: Recruitment for African Union positions should be transparent and favour best candidates
Jutta Urpilainen: “Africa wants a balanced partnership, and that is what we are offering”:
Olivier Caslin: EU wants to keep its status as one of Africa’s largest trading partners
AfDB: Strengthening Somalia’s institutions for economic policy management
WEF Briefing Note: Plastics, the Circular Economy and Global Trade
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COMESA, EAC and SADC adopt harmonised Guidelines on Trade and Transport Facilitation
The Common Market for East and Southern Africa (COMESA), East African Community (EAC) and the Southern African Development Community (SADC) on 29th July, 2020 adopted harmonised Tripartite Guidelines on Trade and Transport Facilitation Guidelines for Safe, Efficient and Cost-Effective Movement of Goods and Services during the COVID-19 Pandemic.
The Guidelines are aimed at containing the spread of COVID-19 whilst facilitating trade and transport of goods and services across the Tripartite area during the COVID-19 pandemic.
In his remarks at the opening of the Tripartite Council of Ministers meeting, Honourable Mr Tarek Shalaby, Assistant Minister for Foreign Trade, Agreements and International Relations of the Arab Republic of Egypt, representing the Chairperson of the COMESA-EAC-SADC Tripartite Council of Ministers said the harmonisation of guidelines on Trade and Transport Facilitation presents an opportunity towards the realisation of the Tripartite Free Trade Area (TFTA) which was signed by the Tripartite Heads of State and Government in June, 2015.
The Minister called for collective action to guarantee movement of goods and services to promote intra-regional trade, while reducing the cost of goods and services within the tripartite area. He added that the attainment of tripartite and continental integration can only be realised with the harmonisation of regional initiatives and overcoming the challenges of overlaps and multiple membership of COMESA, EAC and SADC.
On her part, the Chairperson of the COMESA-EAC-SADC Tripartite Task Force, the Executive Secretary of SADC, Her Excellency Dr Stergomena Lawrence Tax, highlighted that the overlapping nature of membership and sharing of traffic among the three Regional Economic Communities (RECs) have necessitated the urgent need for harmonised Guidelines for the Movement of Persons, Goods and Services across the Tripartite Region during COVID-19 Pandemic.
H.E. Dr Tax noted that mobility restrictions to contain COVID-19 affected regional trade and transport, and resulted in shortage of goods, and long queues at ports of entry and exit, translating into increased cost of doing business and consumer prices.
On the experiences of cross-border truck drivers, H.E. Dr Tax said the COVID-19 cross-border restrictions that have been targeted on truck drivers have led to stigmatisation of cross-border drivers, impacts of which have not only affected the drivers and local communities, but also negatively impacted the ongoing efforts to contain the spread of COVID-19. She urged the Tripartite members to work together to sustainably contain the negative impacts of COVID-19 and address any future health emergencies that might arise.
During the meeting, the Tripartite Council of Ministers directed the Tripartite Task Force to establish the required institutional arrangements for monitoring the implementation of the adopted Guidelines.
The Ministers agreed on the development and integration of Electronic Surveillance Systems to Monitor Driver Health and Track the Movement of Drivers and Trucks in order to facilitate the implementation of the Tripartite Guidelines. On this note, the Ministers agreed that the management of the electronic surveillance systems for monitoring the drivers and vehicles during COVID-19 Pandemic will be undertaken by Member/Partner States.
The meeting was attended by, among others, Ministers and senior Government officials from COMESA, EAC and SADC Member States, the Secretary General of COMESA, H.E. Chileshe Kapwepwe; Mr Kenneth Bagamuhunda, the representative of Secretary General of EAC, H.E. Ambassador Liberat Mfumukeko and the Executive Secretary of SADC, H.E. Dr Stergomena Lawrence Tax.
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tralac’s Daily News Selection
Diarise: This event (30 July) will introduce Women and Trade: The Role of Trade in Promoting Women’s Equality – a joint report by the World Bank Group and the WTO. The report marks the first major effort to quantify how women are affected by trade through the use of a new gender-disaggregated labor dataset. Stephen Karingi (Director, Regional integration and trade division, UNECA) will be one of the speakers.
The Northern Corridor Transit and Transport Coordination Authority executive committee meeting began yesterday and will conclude tomorrow. The theme: “Towards a Resilient, Smart & Responsive Corridor for Trade & Transport Logistics“.
Witney Schneidman, Brionne Dawson: The US and Kenya launch negotiations on a free trade agreement. Will they succeed? (Brookings)
Trade agreements can take several years to negotiate. In just over three and a half months, the U.S. will hold its presidential elections. As we saw in the transition from the Obama to the Trump administrations, trade negotiations can be scuttled. If Biden wins in November, will his administration continue the negotiations with Kenya? The strong bipartisan support that has existed in Congress over the course of four administrations for programs in Africa suggests that there will be continuity on this initiative. Another challenge is that Trade Promotion Authority (TPA)—the law that lays out parameters for consultations between the administration and Congress and ensures an up-or-down vote on the final deal—will expire in July 2021. Without TPA, the eventual implementing bill could be amended by Congress, potentially unraveling it. Another potential complication is that President Kenyatta’s second term ends in 2022. He sees the FTA as a legacy issue. Will it be completed by then?
2020 Synthesis Report on the State of Food and Nutrition Security and Vulnerability in Southern Africa. The report, released today by SADC (pdf), has revealed that close to 44.8 million people in urban and rural areas across 13 members states are food insecure. While the effects of COVID-19 on malnutrition are not yet to be fully known, it is projected that the multi-dimensional impacts of COVID-19 could increase acute malnutrition across the region increased by 25% or more over the remainder of 2020 and into 2021. With these considerations, some 8.4 million children are likely to suffer from acute malnutrition across the region in 2020, and of these some 2.3 million children will require life-saving treatment for severe acute malnutrition. In the light of the findings from the report, SADC is putting forward wide-ranging recommendations to support those member states suffering from increased food insecurity.
COMESA COVID-19 food security response plan underway. The COMESA Secretariat has developed a draft COVID-19 Regional Food and Nutrition Security Response Plan to improve agricultural productivity, enhance access to competitive markets and trade in agri-food commodities in the region. Implementation of the Plan is expected to create synergies and complement existing initiatives in the region and member states, targeting specific commodities and value chains that are critical for both regional and national food security and nutrition, and with strong linkage to smallholder agriculture. Agriculture and environment experts from COMESA countries attending the 7th Joint Technical Meeting on Agriculture, Environment and Natural Resources conducted virtually, Tuesday 28 July 2020 were informed that the draft plan has been shared with their respective governments for further inputs.
Selected Permanent Secretaries from the Zambian Government, their representatives and members of the civil society have been sensitized about the COMESA Early Warning System Vulnerability Assessments strategy and the Continental Structural Vulnerability and Resilience Assessment. Zambia’s Minister in the Office of the Vice President Olipah Phiri indicated that the government is on course to undergo a voluntarily structural vulnerability assessment in line with the African Union resolution.
ECA’s Office for Central Africa meets performance objectives for Q2 of 2020. Adama Coulibaly: “This quarter, we have supported Cameroon in the formulation of its national AfCFTA strategy, provided member states with a succinct report on the role of mobile telephony in e-commerce, and supported countries with COVID-19 impact analysis and response strategies. Our report on the role of mobile telephony in e-commerce in Central Africa is a major contribution towards the development of the sector in the subregion.”
Streamlining tax, revenue management and digitization of customs administrations in five ECOWAS countries: project appraisal report (AfDB)
The main objective of the project is to provide technical assistance and capacity building to the Customs Administrations in five ECOWAS countries, namely Liberia, Mali, Niger, Sierra Leone, and the Gambia. The support will enable the streamlining of tax, revenue management, management of transit cargo, digitisation and automation of services including electronic management of customs data. The expected outputs for the target countries are:
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simplified, harmonized and coordinated customs documentation and processes
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strengthened capacity for the customs taxes administration
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improved electronic management of transit cargo in Mali, Niger and the Gambia
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improved customs capacity for the regional trade initiatives i.e. the ECOWAS Trade Liberalisation Scheme; and
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upgraded information technology and automated systems for customs data Liberia and Sierra Leone.
ECOWAS launches Improved Business and Investment Climate in West Africa Project website. View the ECOWAS Investment Climate Monitoring Platform
Bilateral trade and investment: Egypt-Switzerland (Daily News)
Economically, Egypt is our most important export market in Africa and our fourth most important bilateral trading partner in the MENA-region. According to the Swiss Federal Customs Administration, the volume of trade between the two countries for the first quarter (Q1) of 2020 is CHF 410m, compared to CHF 383m in Q1 of 2019, which is a remarkable increase considering the difficult situation. According to FCA data for 2018 and 2019, Egypt has been Switzerland’s biggest trade partner in Africa and will certainly remain one of the biggest trade partners in 2020. Switzerland was Egypt’s tenth biggest trade partner in fiscal year 2018/2019. In 2019, the total trade volume between the two countries amounted to CHF 1.3bn. It has increased by 14.2% from 2018, with a significant boost in Swiss exports to Egypt (+24.7%) and a decrease in imports (-52.2%). This is due to the decrease of imported precious metals and gemstones including gold. Furthermore, some Swiss companies re-export from Egypt to other countries, which is a direct contribution to Egypt’s economy. Our Free Trade Agreement with Egypt still offers much potential. The agreement abandoned all tariffs on industrial products between our two countries as of 1 January 2020.
South Africa: Guide to the Economy, July 2020 (pdf, Nedbank Economic Unit)
On the bright side, the country’s balance of payment position improved significantly in early 2020. The current account recorded a surplus for the first time in 17 years in the first quarter. The surplus amounted to 1.3% of GDP. This was a result of a much narrower deficit on the services, income and transfers account, due to poor corporate earnings and therefore lower dividend payments. A doubling in the trade surplus to R208bn also contributed. Exports rose by 3.3% q-o-q, while imports declined by 4.9% ─ the third consecutive quarterly contraction ─ due to weak consumer demand and shrinking fixed investment. The terms of trade (the ratio of export prices to import prices) improved by 3.8%, primarily reflecting the implosion in global oil prices in late March. The current account is likely to remain in surplus for the remainder of this year. The local recession is forecast to subdue dividend payments and imports by more than the global recession and any Covid- related disruptions will undermine exports and tourism receipts. The terms of trade will remain supportive in the months ahead (pdf). Further substantial improvements are, however, unlikely as oil prices have recovered some lost ground in recent months. We expect a current account surplus of 1.3% this year ─ the first surplus since 2002.
Ghana: Fiscal deficit estimated to expand to 11.4% of GDP by the close of the year - BoG (GhanaWeb)
The Monetary Policy Committee of the Bank of Ghana has noted that the COVID-19 pandemic has pushed public finances out of the path of fiscal consolidation. The Committee at its sitting on Monday, July 27, said the fiscal deficit is estimated to expand to 11.4% of GDP by the close of the year. The huge financing gap brought about by the expanded deficit could exert pressure on public debt, with long term implications for the economy. While government stimulus package for various sectors of the economy, including micro, small and medium-sized enterprises is in the right direction to boost economic activity, the Committee’s view was that going forward (pdf), the 2021 budget should be focused on instituting measures to return to the fiscal consolidation path with the view to building resilience and strengthening the pillars of the economy for a return to macroeconomic stability. The Bank of Ghana’s latest forecast shows that inflation is currently above its upper limit, driven mostly by food prices.
Turkey considering establishment of logistics centres in Ghana - Ambassador (GhanaWeb)
The Turkish government is considering the establishment of a bilateral chamber of commerce in Ghana to facilitate sustainable trade between the two countries. The Turkish Ambassador to Ghana, Özlem Gülsün Ergün Ulueren, who announced this, said Ghana was one of the major trade partners of Turkey in the Sub-region and the move would further strengthen the bilateral relationship between the two countries. She was speaking during a virtual conference dubbed, Turkey-Ghana Interconnected Business for captains of industries of the two countries. It was put together by NIM Global, a Ghanaian business promotion firm in collaboration with the Foreign Economic Relation Board of Turkey and the Association of Ghana Industries.
Ugandan e-commerce platforms power recovery from COVID-19 crisis. Uganda has seen a boom in e-payment solutions in recent years. Between 2015 and 2019, mobile money transactions in Uganda more than doubled in value, from about $9bn to $20bn, according to the country’s central bank. COVID-19 has amplified the uptake of e-payments and growth of local fintech solutions. Among the beneficiaries of the growth is Xente, an e-commerce and financial services mobile app with more than 50,000 subscribers. It allows people to buy goods from marketplaces using methods such as mobile money, credit cards or bank transfers, and to access loans within the app. Following the COVID-19 outbreak, the company waived set-up and commission fees for small businesses for three months. This saw it record a 10% increase in business-to-consumer transactions and a 200% jump in business-to-business turnover, said its chief executive officer, Allan Rwakatungu. The company also launched a new service to ease online and mobile transactions and payments for micro, small and medium enterprises hardest hit by COVID-19.
International trade in services 2020 Quarter 1 (pdf, UNCTAD)
With the Covid-19 pandemic in Q1-2020, global services trade dropped heavily, by -7.6% year-on-year, measured in current US$. In seasonally adjusted terms, the quarter-on-quarter decline is estimated at -7.3%. As expected, the hardest hit service sector ws travel that slumped by -24.4% year-on-year. Transport dropped by -8.6%. Other services, many of which can be traded remotely, resisted the crisis better and fell by -2% year-on-year.
Four recent trade analyses from Commonwealth Trade:
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The potential impact of COVID-19 on Commonwealth trade, recovery and resilience (pdf). Table 2 presents the expected change in sectoral value-added for Commonwealth countries. The most affected sectors are textiles and apparel (-5.9%) and re-import & re-export of services (-5.9%). Hotels and restaurants also shows losses (-4.4%), which is especially important for Commonwealth small island developing states that rely on tourism. The results are in line with the WTO, which suggests that the shutdown of the transport sector will affect merchandise trade whereas travel restrictions will have severe impacts on tourism. The Commonwealth is not a formal trading bloc. However, member countries share historical ties, familiar legal and administrative systems, a common language of operation (English) and large dynamic diasporas, which help make trade and investment more convenient and efficient. This ‘Commonwealth Advantage’ enables member countries to trade up to 20% more with each other, while bilateral trade costs are 21% lower, on average (Commonwealth Secretariat, forthcoming). [The authors: Hubert Escaith, Sangeeta Khorana, James MacGregor, Brendan Vickers, Salamat Ali]
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Commonwealth Greenfield Investment: Stylised facts and the effect of Commonwealth membership. This issue examines the effect of Commonwealth membership on greenfield investment. Estimates suggest that Commonwealth membership is associated with 19% more greenfield investment, but this study finds this effect to be only weakly significant. It finds that the presence of common legal origins is a significant determinant of both intra- and extra-Commonwealth greenfield investment, along with membership of goods trade agreements and common historical antecedents for the latter. Geography has a negative bearing on both. No single factor consistently explains the Commonwealth’s greenfield investment into the rest of the world, though the effect of geography and bilateral investment treaties is negative. [The authors: Anirudh Shingal, Akshaya Aggarwal]
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COVID-19 and tourism: Charting a sustainable, resilient recovery for small states
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Leveraging digital connectivity for post-COVID competitiveness and recovery
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WHO, WIPO, WTO launch updated study on access to medical technologies and innovation
On 29 July, the Directors-General of the World Health Organization (WHO), the World Intellectual Property Organization (WIPO) and the WTO presented a new edition of the Trilateral Study on Access to Medical Technologies and Innovation.
Building on the first edition launched in 2013, the publication seeks to strengthen the understanding of the interplay between the distinct policy domains of health, trade and intellectual property (IP), and how they affect innovation and access to medical technologies, such as medicines, vaccines and medical devices. The second edition provides an improved, evidence-based foundation for policy debate and informed decision-making at a critical time for global health.
In a video message released on the day of the launch, WTO Director General Roberto Azevêdo emphasized the need for policy coherence and collaboration. Recognizing the close link between the health, trade and IP dimensions, he noted that “coherent approaches to vital medical technologies that bring together the key determinants for innovation as well as access” were required and needed “to span the entire process, from research to development to manufacturing and delivery to those in need”.
DG Azevêdo said: “Close collaboration between our three specialized agencies has yielded important practical benefits. Similar benefits could be replicated at the domestic level by mirroring this integrated approach.” He expressed the hope “that the revised material will support policy debate and help build governments’ capacity to deal with health challenges”. DG Azevêdo recalled that “it is only through joint efforts at the global level that we can achieve our shared public health goals” and that “cooperation is also necessary to prepare for future health crises”, a goal to which the study contributes.
WIPO Director General Francis Gurry said in a video message that the new edition of the trilateral study is an important example of the three international organizations bringing their separate expertise together to address core issues at the intersection of health, trade and innovation. He observed that the original study, published in 2013, was well received precisely because it provided a factual account of the landscape on access to medical technologies and innovation, and of the multiplicity of actors involved.
“Our first duty,” DG Gurry said, “always is to survey what the situation actually is” before determining the best way to improve it. He noted that while the new edition coincides with the current global health crisis, it was completed prior to the advent of the COVID-19 pandemic. The study nonetheless includes a separate section on this hugely challenging and complex subject matter. DG Gurry underscored the importance of interdisciplinary approaches and of cooperation amongst international organizations as “the COVID-19 pandemic is showing the need for health, trade and innovation policy to come together to provide the answers that we need to confront this huge challenge for humanity”.
Dr Tedros Adhanom Ghebreyesus, WHO Director-General, said in his video message: "Barriers to access must be removed, including unaffordable prices, intellectual property barriers, unjustified tariffs and challenges in ensuring effective and efficient regulatory review."
"We have seen over the past months how countries have mobilized unprecedented investments in collaborative, not-for-profit research and development. The COVID-19 pandemic is showing what we can do when we come together to face a shared global health threat. That’s the kind of collaboration that can save lives and transform the health of billions of people globally," he added.
What’s new in the revised edition?
The study discusses key factors determining access to medical technologies and innovation, including regarding medicines, vaccines and other medical technologies, such as medical devices and diagnostics. The second edition draws practical lessons from experiences regarding the intersections between public health, IP and trade within the broader perspectives established by the human rights dimension of health and the Sustainable Development Goals (SDGs).
The study records numerous significant developments since 2013 when the first edition was launched. Among the new topics covered are antimicrobial resistance and cutting-edge health technologies. The revised edition provides updated data on health, innovation trends in the pharmaceutical sector, and trade and tariffs regarding medical products. It also includes an updated overview of access to medical technologies globally and key provisions in regional trade agreements. In addition, it takes account of developments in IP legislation and jurisprudence.
A COVID-19 section at the start of the publication provides a factual overview of the developments and measures taken to address this extraordinary public health crisis, which began after the work on the second edition of the study had been completed. The section guides the reader to parts of the study that are of direct relevance to the issues that have been raised during the pandemic.
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COMESA COVID-19 Food Security Response Plan underway
The COMESA Secretariat has developed a draft COVID-19 Regional Food and Nutrition Security Response Plan to improve agricultural productivity, enhance access to competitive markets and trade in agri-food commodities in the region.
Implementation of the Plan is expected to create synergies and complement existing initiatives in the region and Member States, targeting specific commodities and value chains that are critical for both regional and national food security and nutrition, and with strong linkage to smallholder agriculture.
Agriculture and environment experts from COMESA countries attending the 7th Joint Technical Meeting on Agriculture, Environment and Natural Resources conducted virtually, Tuesday 28 July 2020 were informed that the draft plan has been shared with their respective governments for further inputs. Once approved by Member States, it will be used to help the region address food security and nutrition needs of the populations that are most vulnerable to the pandemic.
Speaking during the official opening of the meeting, Secretary General Chileshe Kapwepwe noted that a number of agricultural projects have been put on hold in the region due to the pandemic and this will negatively affect the sector, hence the need for a strategic response plan for the next five years.
“This Plan will help the region deal with food insecurity worsened by various threats including floods, recurrent droughts, fall army-worm and the worst locust infestation in decades that have destroyed crops and vegetation,” Ms Kapwepwe added. She was represented by the Assistant Secretary General in charge of Programmes Dr. Kipyego Cheluget
According to COMESA agriculture experts, COVID-19 risks escalating further, the current food insecurity arising from the negative impact of the containment measures on the agri-food system. These include restrictions on movement and availability of labour for farm work, difficulties in moving food from rural to urban areas, limitations to agro-input supplies and availability, closed markets, restrictions on agriculture extension and advisory services and financing agricultural activities due to curtailed banking services.
“This is likely to disrupt further the entire food supply chains from production to processing, packaging, transporting, marketing and consumption resulting in rising staple food prices, food insecurity, loss of livelihoods and incomes and increased need for social safety nets,” COMESA’s Agriculture Economist, Joel Okwir said during his presentation to the meeting.
Other key supportive intervention programmes that COMESA Secretariat is implementing to support the sector include: the Regional Enterprise Competitiveness and Access to Market Programme (RECAMP), Joint Industrialization Pilot Programme between Zambia and Zimbabwe, Reinforcing Veterinary Governance (VET-GOV) in partnership with AU-IBAR – Funded by EU and AU, the Climate Change Programme, Prioritizing of Sanitary and Phytosanitary (SPS) Investments for Market Access (P-IMA), the COMESA Seed Harmonisation Implementation plan (COMSHIP), the Biotechnology and Biosafety Programme and the CBC Agro-Industry Seed.
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SADC member states urged to strengthen mechanisms to mitigate the impact of COVID-19, as 45 million people across the region face increasing food insecurity
A new report released by the Southern African Development Community (SADC) has revealed that close to 44.8 million people in urban and rural areas across 13 Members States of Southern Africa are food insecure.
The 2020 Synthesis Report on the State of Food and Nutrition Security and Vulnerability in Southern Africa also reveals that the number of food insecure people, lacking reliable access to sufficient quantity of nutritious food, has increased by almost 10% in 2020, compared with the data provided at the same time last year.
As a result of the findings, SADC is recommending measures to address these challenges and help those impacted by increased food insecurity. These include a combination of short-term measures such as social protection programmes to support those immediately affected, as well as more medium-long term strategies focused around areas including the maintenance of domestic and international supply chains and incentives for the diversification of agricultural production.
Number of food insecure rises by 10% in the past year
Common climate-induced shocks (droughts and floods), economic challenges and poverty have been further exacerbated by the devastating impact of COVID-19 on communities, which has caused severe socio-economic impacts due to loss of livelihoods and employment opportunities, remittances, as a result of lockdowns, and other movement restrictions. This has been particularly evident in the urban poor, who rely heavily on livelihoods from the informal sector and local markets, which were forced to close temporarily as a result of lockdown measures.
However, the region was on course for an increase in food insecurity even before the pandemic because of the recurrent and severe climate-induced shocks and macroeconomic challenges. It is likely that the projected number of the food insecure will rise further in light of the fact that the full impact of COVID-19 on the urban poor is yet to fully materialize alongside the approaching lean season between November 2020 and January 2021.
COVID-19 pandemic exacerbating the problem of acute malnutrition
The SADC region is impacted by the triple burden of malnutrition, characterised by undernutrition (stunting and acute malnutrition); over-nutrition (overweight/obesity); and micronutrient deficiencies.
Children under the age of 5 are predominantly fed a poor diet and nine out of the 16 SADC Member States have reported stunting rates above 30%, while micronutrient deficiencies are widespread. Reduction in stunting is occurring at too slow a pace to meet the World Health Assembly (WHA) 2025 or the Sustainable Development Goals (SDGs) 2030 targets.
The COVID-19 pandemic has further increased the risk of malnutrition due to the socio-economic impacts of COVID-19 and lockdown measures taken by various Member States to contain the spread of the virus, resulting in reduced access to food. As more restrictions have been put in place by Member States, food diversity has been constrained, inaccessible and unaffordable to the most vulnerable households. There is a risk that households will be forced to adopt negative eating practices, including reducing frequency, quantity and quality of foods, to adapt to the lockdown and other impacts of other measures.
While the effects of COVID-19 on malnutrition are not yet to be fully known, it is projected that the multi-dimensional impacts of COVID-19 could increase acute malnutrition across the region increase by 25% or more over the remainder of 2020 and into 2021. With these considerations, some 8.4 million children are likely to suffer from acute malnutrition across the region in 2020, and of these some 2.3 million children will require life-saving treatment for severe acute malnutrition.
The food and nutrition security of school-aged children has been particularly affected during the pandemic. The disruption and closure of schools and school meal programmes in the region due to COVID-19 will have a negative impact on the adequacy of food and nutrition services to children. According to the United Nations World Food Programme (WFP) Global Monitoring Report on School Meals, it is estimated that 20.5 million SADC school children will not have access to regular school health and nutrition services due to the school closures.
To support Member States with COVID-19 response, the region has mobilised resources to support the containment of the COVID-19 pandemic, and mitigation of its socio-economic impact on the SADC region. The regional resource mobilisation initiative was based on gaps identified by individual Member States to respond to the COVID-19 short to long-term needs. Immediate needs, include, resources to support SADC Member States in the acquiring of essential medicines, medical supplies and medical equipment, especially testing kits, Personal Protective Equipment and ventilators. So far the African Development Bank (AfDB) and the Federal Republic of Germany through the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) have provided funding for this purpose.
Climate change causing decline in harvests across the region
Designated as a climate “hotspot” by the Intergovernmental Panel on Climate Change, Southern Africa is prone to recurrent extreme climatic shocks and has experienced normal rainfall in only one of the last five cropping seasons.
In 2020, crop production was impacted by the late onset of rains, prolonged dry spells, sporadic heavy rainfall, as well as pest outbreaks. Despite these factors, the region’s year-on-year maize harvests rose by 8%. This is due to improved harvest in Zambia that increased by 69% increase, and South Africa expecting a 38% increase. This is the second largest harvest for South Africa on record, which has produced more than 30% of the region’s annual staple cereal crop over the past 10 years.
Internationally, record high production of maize, wheat and rice are expected, meaning grain-deficit countries are likely to benefit from depressed world grain prices, if there is no malfunction in global grain supply chain due to COVID-19 restrictions. However, poor rainfall and economic challenges saw maize production in Zimbabwe drop by 57%, while dry conditions also affected production in Eswatini, Lesotho, south-eastern Angola, southern Madagascar and Mozambique.
Rural food insecurity is expected to peak between November 2020 and January 2021, by which time smallholder farming households would have depleted their own food stocks, with the next harvest not expected until April 2021. This lean season is expected to come earlier than usual in parts of the region that were severely affected by the drought such as most of Zimbabwe, southern Madagascar and southern Mozambique.
Households resorting to desperate measures to fight poverty
Although assessments were delayed in several Member States due to lockdowns, data from those who were able to undertake assessments shows that households are already engaging in food coping strategies; borrowing money; selling household and livelihood assets to access food. Urban populations have suffered from significant income shocks, as a result of rising unemployment caused by lockdowns and other restrictions on movement. Furthermore, the effect on food supply chains has led in many cases to food price increases, negatively impacting household incomes.
As of June 2020, Southern African economies were facing a precipitous decline in growth, which could undo the development gains of recent years. 2019 growth had already been sluggish in the region’s leading economy - South Africa - with unstable commodity prices, regional droughts and climate shocks, and increasing public debt, leading to a weak economic environment. The arrival of COVID-19 exacerbated these difficulties further.
SADC makes recommendations in wake of report findings
In light of the findings from the report, SADC is putting forward wide-ranging recommendations to support those Member States suffering from increased food insecurity.
Short-term measures:
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Urgently assist food and nutrition insecure populations, ensuring harmonization with national shock-responsive social protection programmes.
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Strengthen Member State mechanisms that mitigate the impact of COVID-19 from disrupting the food supply chains and associated livelihoods, by minimizing disruption to farming operations, enabling access to production inputs, critical emergency veterinary drugs as well as produce markets by farming households.
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Expand school meal coverage as a safety net for school aged-children and adolescents. This will provide an indirect income transfer to households and communities to buffer the negative economic and food security consequences of COVID-19. Where on-site distribution of school meals is not feasible, consider providing or larger take-home rations or cash-based transfers.
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In response to COVID-19, develop and implement a regional strategy on hygiene and hand washing with soap. This should not only focus on risk communication and community engagement but also include support for provision of hand washing infrastructure and products up to household level including stimulation of supply chains, deployment of fiscal mechanisms such as value-added tax (VAT) and other social protection mechanisms.
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Domestic violence disrupts the cooperation and proper functioning of families disrupting their income (including food) generation and abilities to access, prepare and share food in the home. Childcare and feeding practices can be seriously compromised. Member States to pay special attention to the rising cases of domestic violence and gender-based violence during the COVID-19 pandemic by, among others, ensuring that women and girls are protected from all forms of abuse. Shelters, places of safety and helplines for victims of abuse must be considered an essential service and remain open for use and must be afforded the necessary financial and other support. Further, Member States to incorporate gender perspectives in all responses to COVID-19 to ensure that actions during, and after the COVID-19 crisis aim to build more equal, inclusive and sustainable economies and societies.
Medium-Long Term Measures:
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Encourage crop diversity through the promotion of diversified diets, including indigenous foods. This includes species diversification in livestock production, especially small ruminants that are adapted to harsh weather conditions.
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Address market-related challenges for small scale farmers by such measures as improving and developing the road infrastructure the improve farmers’ access to both inputs and outputs markets as well as providing incentives for input suppliers and other services providers to move closer to the farmers.
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Promote community irrigation schemes and rainwater harvesting and construct dams to ensure year-round agricultural production.
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Develop resilience-building initiatives, including employment creation in rural areas, incorporating climate-smart technologies in subsidies and conservation agriculture.
The Report was compiled by the SADC Regional Vulnerability Assessment and Analysis (RVAA) Programme from available secondary information and the 2020 assessments and analysis conducted by National Vulnerability Assessment Committees (NVACs) of SADC Member States.
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tralac’s Daily News Selection
David Luke: Why trade matters for African development (LSE Africa)
The central role of trade in development requires that trade policies, trade agreements and concessional arrangements are monitored, assessed and analysed in relation to positive and negative externalities. Key issues for analysis range from structural changes to the economy, regional imbalances, and poverty to employment, decent work and gender equality, and from technological change including digitalisation to public health and climate change. There is a good case for independent work that:
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systematically monitors trade negotiations in which African countries are engaged
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assesses the impact of trade agreements and policies in Africa, and
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identifies practical policy measures and other changes to improve the developmental impact of trade.
An emerging question that also deserves attention is, how will the UK’s new trade policy affect Africa and other developing countries? The LSE Firoz Lalji Africa for Centre is well placed to become a repository of real time information on current trade negotiations through which African countries are engaged via an Africa Trade Negotiations Monitor. It will allow not only trade experts and policy makers but the whole community of scholars to keep track of the trade rules that shape development outcomes. This can be complemented with analytical work on trade policy impacts with a view toward the publication of an annual Africa Trade Year Book. [Note: David Luke is coordinator at the African Trade Policy Centre, UNECA]
Ebrahim Patel: Building African economic resilience is key for continental prosperity (DTIC)
South Africa’s Minister of Trade, Industry and Competition, Mr Ebrahim Patel, participating in the African Union meeting of Ministers of Agriculture, Trade and Finance yesterday, called for greater efforts to build economic resilience across the African continent. “African countries are learning the hard lesson that we cannot simply remain exporters of raw materials and importers of medical supplies and food products. We must confront uncomfortable facts and deal with Africa’s position in the global economy. Africa has 17% of the world’s population, yet only 3% of the world’s GDP. Our continent imported $66bn agricultural products in 2019 from outside the continent and Africa runs an agricultural trade deficit with the rest of the world of some $22bn. The level of imports is bigger than the individual GDPs of more than 40 African countries.”
Greater attention must be given to building up Africa’s production in agriculture – both in basic staple food as well as higher value added agro-processed food, Minister Patel said. This would require logistics, transport and agro-infrastructure, irrigation, veterinary support, financing systems, the ease of moving across borders and the political will required to enable African-grown food to go from the farm to the table. “Trade policy must support the efforts at building local and continental capacities, building regional markets in energy, digital and financial inclusion, and enable the start of trading under the AfCFTA; and we must be determined that the legacy of covid-19 must be a stronger, economically more prosperous Africa, producing a wider range of value-added products and with a large and dynamic internal African market. This must be the time for the Made in Africa, the Proudly Produced in Africa initiative to be at the heart of our efforts in economic reconstruction,” Minister Patel said
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Chris Onyango (Director of Trade and Customs, COMESA): What can be done to improve intra-Comesa trade and attract more investments into the region?
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Landry Signé, Mary Treacy: Covid-19 is accelerating multilateralism in Africa
The African Continental Free Trade Area: economic and distributional effects (World Bank)
This report is designed to guide policy makers as they continue the process of negotiating and implementing the agreement. Creating a continent-wide market will require a determined effort to reduce all trade costs. This will require legislation to enable goods, capital, and information to flow freely and easily across the African borders. Competitive business environments will boost productivity and investment. Increased foreign competition will put pressure on domestic firms to increase productivity or risk losing market share. For most African firms, the best way to raise productivity and increase market share will be to invest in technological capabilities that enable them to develop domestic and regional value chains while taking advantage of the opportunities offered by global value chains.
In the few sectors where AfCFTA’s implementation results in job losses, governments will need to be ready to support workers with adequate safety nets and policies to retrain them. Policy makers will also have to prepare for AfCFTA’s distributional impacts—across sectors and countries, on skilled and unskilled workers, and on female and male workers. Doing so will enable them to design policies to increase the readiness of their workforce to take advantage of new opportunities.
AfCFTA is a major opportunity for Africa, but implementation will be a significant challenge. Lowering tariffs is only the first step. Reforming non-tariff and trade facilitation measures will require substantial policy reforms at the national level. These reforms may require politically difficult decisions in some cases. However, the agreement’s opportunities can be used to help policy makers overcome these challenges and implement the substantive reforms that are needed to make Africa as competitive as any other region in the world. [Note: Extract from the foreword by Caroline Freund (Global Director, Trade, Competition and Investment), Albert Zeufack (Chief Economist, Africa Region)]
The African Continental Free Trade Agreement represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion. Implementing AfCFTA would:
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30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day
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Boost Africa’s income by $450bn by 2035 (a gain of 7%) while adding $76bn to the income of the rest of the world
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Increase Africa’s exports by $560bn, mostly in manufacturing
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Spur larger wage gains for women (10.5%) than for men (9.9%)
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Boost wages for both skilled and unskilled workers - 10.3% for unskilled workers, and 9.8% for skilled workers.
Of the $450 billion in income gains from AfCFTA, $292bn would come from stronger trade facilitation—measures to reduce red tape and simplify customs procedures.
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Tariff liberalization is important, but by itself it would boost the continent’s income by just 0.2%
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Adding trade facilitation to the mix—including measures to reduce red tape, simplify customs procedures, and make it easier for African businesses to integrate into global supply chains—would boost the income gains by $292bn
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These gains will require major efforts by countries to reduce the burden on businesses and traders to cross borders, quickly, safely, and with minimal interference by officials.
South Africa and the IMF: Request for purchase under the Rapid Financing Instrument
South Africa has the highest number of COVID-19 cases in sub-Saharan Africa. To mitigate the health impact, the government introduced a lockdown with a severe bearing on domestic demand. Existing structural constraints are being exacerbated by disruptions in the global supply chain. Moreover, deteriorating global financing conditions triggered portfolio outflows, particularly at the start of the pandemic, impairing a major source of external financing. As a result, a deep recession is unfolding in an economy already experiencing protracted subdued growth and deteriorating social conditions, with high unemployment, poverty, and inequality. Extracts from Appendix I - Letter of Intent:
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Prolonged weakness in the South African economy would have negative spillovers to the sub-Saharan African region, in particular in the southern part of the continent. South Africa remains a key contributor to the region’s GDP. Trade in goods and services and remittances from regional workers employed in South Africa would also be at risk. At the same time, a drag in South Africa’s investments in neighbouring economies would jeopardize regional integration.
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We do not intend to introduce or intensify exchange and trade restrictions and other measures or policies that would compound South Africa’s balance of payments difficulties.
How conversations with private sector partners are helping shape IFC’s COVID response strategy. It is an extraordinary time. The COVID-19 crisis threatens to reverse much of Africa’s recent progress, with the World Bank forecasting that the region will slide into recession in 2020 for the first time in more than 25 years. Since March, IFC has deployed $517m in COVID-19 related support to partners in Africa and the Middle East, including a combined $200m to Nigeria’s Access Bank, FCMB and Zenith Bank for on-lending to SMEs across several sectors facing working-capital or trade-finance challenges. The facility will support hundreds of businesses in Nigeria’s health, pharmaceuticals, food, and trading sectors, allowing them to strengthen operations, maintain employment, and access critical imports of goods, commodities, and raw materials during these challenging economic times. We will soon be announcing our next wave of engagement, which will focus more closely on specific regional and industry needs. This will include World Bank Group collaboration to help rebuild economies and to create projects that will attract investment back into developing countries. We must keep listening, and we must provide support where it’s needed most. We hear our partners and will continue to respond quickly to their needs.
Mobile money and investment by women businesses in Sub-Saharan Africa (World Bank)
This study connects two important findings in Sub-Saharan Africa. First, digital technologies such as mobile money have become widespread and have increased investment by businesses, especially in East Africa. Second, women-owned business in the region significantly lag their male counterparts in capital investments. Using data for 16 Sub-Saharan African economies, the study connects the two findings by exploring whether mobile money use by women-owned firms increases their investment. Extract (pdf):
Persistent gender disparities are observed also for women entrepreneurs. Female-owned businesses in Africa tend to have fewer employees, lower value-added, and lower productivity than their male counterparts. Part of the observed productivity gaps can be attributed to outward orientation (export status and foreign ownership), the ability to protect themselves from crime, and also the use of digital technology. Another significant disparity between female-owned and male-owned businesses is the degree of capital investment. Data from 14 impact evaluations show that the average capital investment by female owned firms is more than six times lower than the average for male-owned firm in Africa. A key question to answer is, therefore, whether highly inclusive digital technology, like mobile money, can benefit women enterprises by increasing their investments.
A recent study across four East Africa economies uncovered a positive relationship between mobile money use and investment by firms. This study revisits this relationship by exploring whether this relationship varies by gender of the business owner, and also extending the sample of study from 4 economies in East Africa to 16 economies across Sub-Saharan Africa. The analysis is based on a unique firm-level data set with a mobile money module that is implemented using a consistent methodology and the same survey instrument for about 4,700 formal firms across 16 countries in Sub-Saharan Africa. The findings are striking. The positive relationship between mobile money use and investment is confirmed; more importantly, the relationship is largely driven by female-owned firms and is statistically insignificant for male-owned firms. [The authors: Asif Islam, Silvia Muzi]
Related News
AfCFTA: Trade pact could boost Africa’s income by $450 billion, study finds
The African Continental Free Trade Area (AfCFTA) represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion, a new World Bank report has found. If implemented fully, the trade pact could boost regional income by 7% or $450 billion, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035.
The report suggests that achieving these gains will be particularly important given the economic damage caused by the COVID-19 (coronavirus) pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020. The pandemic has already caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.
Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures. Tariff liberalization accompanied by a reduction in non-tariff barriers – such as quotas and rules of origin – would boost income by 2.4 percent, or about $153 billion. The remainder – $292 billion – would come from trade-facilitation measures that reduce red tape, lower compliance costs for businesses engaged in trade, and make it easier for African businesses to integrate into global supply chains.
Successful implementation of AfCFTA would help cushion the negative effects of COVID-19 on economic growth by supporting regional trade and value chains through the reduction of trade costs. In the longer term, AfCFTA would provide a path for integration and growth-enhancing reforms for African countries. By replacing the patchwork of regional agreements, streamlining border procedures, and prioritizing trade reforms, AfCFTA could help African countries increase their resiliency in the face of future economic shocks.
“The African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans,” said Albert Zeufack, the World Bank’s Chief Economist for Africa. “The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers – women and men, skilled and unskilled – across all countries and sectors, ensuring the agreement’s full benefit.”
According to the report, the agreement would reshape markets and economies across the region, leading to the creation of new industries and the expansion of key sectors. Overall economic gains would vary, with the largest gains going to countries that currently have high trade costs. Côte d’Ivoire and Zimbabwe – where trade costs are among the region’s highest – would see the biggest gains, with each increasing income by 14 percent. AfCFTA would also significantly boost African trade, particularly intraregional trade in manufacturing. Intra-continental exports would increase by 81 percent while the increase to non-African countries would be 19 percent.
Implementation of the agreement would also spur larger wage gains for women (an increase of 10.5 percent by 2035) than for men (9.9 percent). It would also boost wages for skilled and unskilled workers alike – 10.3 percent for unskilled workers, and 9.8 percent for skilled workers.
This report is designed to help countries implement policies that can maximize the agreement’s potential gains while minimizing risks. Creating a continent-wide market will require a determined effort to reduce all trade costs. This will require legislation to enable goods, capital, and information to flow freely and at easily across borders. Countries that do so will be able to attract foreign investment and increase competition that can increase productivity and innovation by domestic firms. Governments will also need to prepare their workforces to take advantage of new opportunities with new policies designed to reduce the costs of job-switching.
The African Continental Free Trade Area: Economic and Distributional Effects
The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.
The scope of AfCFTA is large. The agreement will reduce tariffs among member countries and cover policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical barriers to trade. Full implementation of AfCFTA would reshape markets and economies across the region and boost output in the services, manufacturing and natural resources sectors.
As the global economy is in turmoil due to the COVID-19 pandemic, creation of the vast AfCFTA regional market is a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investment.
The World Bank report, The African Continental Free Trade Area: Economic and Distributional Effects, is designed to guide policymakers in implementing policies that can maximize the agreement’s potential gains while minimizing risks. Creating a continent-wide market will require a determined effort to reduce all trade costs. Governments will also need to design policies to increase the readiness of their workforces to take advantage of new opportunities.
Key Findings
The African Continental Free Trade Agreement represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion. Implementing AfCFTA would:
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Lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day;
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Boost Africa’s income by $450 billion by 2035 (a gain of 7 percent) while adding $76 billion to the income of the rest of the world.
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Increase Africa’s exports by $560 billion, mostly in manufacturing.
-
Spur larger wage gains for women (10.5 percent) than for men (9.9 percent).
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Boost wages for both skilled and unskilled workers – 10.3 percent for unskilled workers, and 9.8 percent for skilled workers.
Under AfCFTA, extreme poverty would decline across the continent – with the biggest improvements in countries with currently high poverty rates.
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West Africa would see the biggest decline in the number of people living in extreme poverty – a decline of 12 million (more than a third of the total for all of Africa).
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Central Africa would see a decline of 9.3 million.
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Eastern Africa would see a decline of 4.8 million.
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Southern Africa would see a decline of 3.9 million.
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Countries with the highest initial poverty rates, would see the biggest declines in poverty rates.
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In Guinea-Bissau, the rate would decline from 37.9 percent to 27.7 percent
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In Mali, the rate would decline from 14.4 percent to 6.8 percent.
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In Togo, it would decline from 24.1 percent to 16.9 percent.
Of the $450 billion in income gains from AfCFTA, $292 billion would come from stronger trade facilitation-measures to reduce red tape and simplify customs procedures.
-
Tariff liberalization is important, but by itself it would boost the continent’s income by just 0.2 percent.
-
Adding trade facilitation to the mix – including measures to reduce red tape, simplify customs procedures, and make it easier for African businesses to integrate into global supply chains – would boost the income gains by $292 billion.
-
These gains will require major efforts by countries to reduce the burden on businesses and traders to cross borders, quickly, safely, and with minimal interference by officials.
The World Bank report is designed to guide policymakers in implementing policies that can maximize the agreement’s potential gains while minimizing risks.
-
Creating a continent-wide market will require a determined effort to reduce all trade costs. In general, this will require legislation and regulations to enable the free flow of goods, capital and information across borders; create competitive business environments that can boost productivity and investment; and promote increased foreign competition and foreign direct investment that can raise productivity and innovation by domestic firms.
-
In a few sectors facing job losses, governments will need to be ready to support workers with adequate safety nets and policies to retrain workers.
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Governments will need to design policies to increase the readiness of their workforces to take advantage of new opportunities.
Achieving the gains from AfCFTA is especially important due to the COVID-19 pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020 alone.
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COVID-19 has caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.
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By increasing regional trade, lowering trade costs and streamlining border procedures, full implementation of AfCFTA would help African countries increase their resiliency in the face of future economic shocks and help usher in the kinds of deep reforms that are necessary to enhance long-term growth.
World Bank Group COVID-19 Response
The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. We are supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs. We will be deploying up to $160 billion in financial support over 15 months to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans.