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Government commences urgent investigation into the supply of scrap to the metals industry in response to Covid-19
The Minister of Trade, Industry and Competition (the dtic), Mr Ebrahim Patel, has issued a trade policy directive to the International Trade Administration Commission of South Africa (ITAC) to urgently look into measures to help support the metals industry which, as a result of COVID-19, is facing several severe challenges due to increased global demand for raw materials and a significant price increase for all main inputs into the sector.
The downturn in global manufacturing resulting from COVID-19, has led to the amount of scrap metal available locally and internationally being dramatically reduced and, as a result, prices have increased sharply. Local mini-mills and foundries have made representations that they are struggling to survive and are calling on government to help protect their investments, save jobs and livelihoods.
“Scrap metal is an essential material for the domestic processing industry, which itself is crucial for the South African manufacturing industry and for infrastructure development. Due to the steep global increase in prices and reduced economic activity, the industry has called on government to urgently assist it. I have therefore issued a trade policy directive to ITAC to urgently investigate the market conditions around the demand-supply imbalance in the scrap metal industry as a result of COVID-19. The objective of this investigation is to determine appropriate amendments to the Price Preference System guidelines which can address the shortage in affordable good quality scrap metal,” says Minister Ebrahim Patel.
No ferrous and non-ferrous waste and scrap of any kind may be exported for a period of the investigation unless ITAC determines that it will not be used by the domestic processing industry. This will not affect existing export permits or applications made before the date of the notice in the government gazette. ITAC has been directed to complete its investigation within a period of 2 months.
“Our long-term plan for the industry, which was announced by the Minister of Finance during his budget speech in 2019, and which is widely agreed upon within the sector, is to introduce an export tax on scrap metal as soon as possible. Whatever measures we take now are temporary to deal with this immediate challenge created by the COVID-19 pandemic, but they also lay the basis for the new Steel industry Masterplan,” Minister Patel said.
The metals value chain is central to South Africa’s industrialisation and has significant linkages to infrastructure, construction, mining and a range of manufacturing industries. The three largest consumers of metal products in South Africa are the construction industry, the mining industry and the transport equipment manufacturing industry which together account for approximately R750 billion or 15% of SA’s GDP and employ nearly 2 million people (both formal and informal).
The scrap metal industry in turn is of critical importance as a supplier of raw material into primary and secondary metal production. The industry contributes R15 billion to GDP and employs about 350 000 people, many of whom are involved in informal collection. Metals are reusable and maintain their useful properties once they have been processed and ultimately scrapped.
Scrap metal is also important as a feedstock in the production of downstream metals due to the relatively lower energy consumption and its lower carbon footprint versus other metal production processes. It is widely seen as a strategic resource and many countries have scrap metal policies and regulations in place to support the development of their domestic metal producing industries. Over 30 countries impose some sort of restriction on scrap metal.
In 2013, a Price Preference System (PPS) administered by the International Trade Administration Commission was introduced by Minister Patel (then the Minister of Economic Development), regulating the export of ferrous and non-ferrous scrap, by not allowing the exportation of scrap metal unless it has first been offered to domestic consumers at a discount to the international price at the time of sale. While the PPS has provided greater certainty of affordable scrap metal supply to the local industry, a policy decision has been taken by government to introduce an export tax on scrap metal. the dtic and National Treasury are thus working on implementation of an export tax on scrap metal, which is expected to be put in place in due course.
The South African government continues to put in place measures to support the beneficiation and availability of good quality affordable scrap metal to foundries and mills. As announced by President Ramaphosa during his State of the Nation Address in February this year, government is working with industry stakeholders to develop a master plan for the entire steel and metal fabrication value chain. Key parts of the plan are expected to be circulated to industry stakeholders for comment within the next month.
In addition, the dtic has established an inter-governmental working group to increase efforts to combat illicit trade of scrap metal with the help of the South African Revenue Service (SARS). In October 2019, SARS announced a fine of R500 000 on the owner of a Durban-based metal recycling company, which pleaded guilty to several charges relating to the illegal exportation of mixed copper and brass scrap.
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South Africa’s policy response to the COVID-19 pandemic
Since midnight on Thursday, 26 March 2020, South Africa has been in lockdown.
President Cyril Ramaphosa first addressed the nation on COVID-19 on 15 March, declaring a national state of disaster in terms of the Disaster Management Act. He announced that government is taking ‘urgent and drastic measures to manage the disease, protect the people of our country and reduce the impact of the virus on our society and on our economy’.
In his second address, on 23 March, the President announced a national lockdown, initially for 21 days, and outlined more stringent interventions in a comprehensive plan to limit transmission of the virus and to mitigate its economic and social impact.
South Africa’s economic response can be divided into three phases:
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The first phase began in mid-March when the coronavirus pandemic was declared as a national disaster. This included a broad range of measures to mitigate the worst effects of the pandemic on businesses, on communities and on individuals. The measures included tax relief, the release of disaster relief funds, emergency procurement, wage support through the UIF and funding to small businesses.
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The second phase of the economic response was aimed at stabilising the economy, addressing the extreme decline in supply and demand and protecting jobs. On 21 April, the President announced that a social and economic support package of R500 billion had been finalised, amounting to approximately 10% of GDP. The three areas of focus are (i) redirecting resources to fund the health response to coronavirus; (ii) providing direct support to households and individuals for the relief of hunger and social distress; and (iii) providing assistance to companies in distress and seeks to protect jobs by supporting workers’ wages.
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The third phase is an economic strategy aimed at driving the recovery of the economy as the country emerges from this pandemic. Central to the economic recovery strategy will be measures to stimulate demand and supply through interventions such as a substantial infrastructure build programme, the speedy implementation of economic reforms, and other steps that will ignite inclusive economic growth.
Government’s goal is to steadily increase economic activity while putting measures in place to reduce the transmission of the virus and provide adequate care for those who become infected and need treatment. As part of this approach, there will be five Coronavirus Alert Levels, in line with a risk-adjusted strategy which seeks to slow down the rate of infection and flatten the curve:
pdf Risk Adjusted Strategy: Schedule of Services - Draft Framework, 25 April 2020 (320 KB)
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Level 5: drastic measures are required to contain the spread of the virus to save lives.
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Level 4: some activity can be allowed to resume subject to extreme precautions required to limit community transmission and outbreaks - effective 1 May 2020
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Level 3: easing of some restrictions, including on work and social activities, to address a high risk of transmission - effective 1 June 2020
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Level 2: further easing of restrictions, but the maintenance of physical distancing and restrictions on some leisure and social activities to prevent a resurgence of the virus - effective 18 August 2020
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Level 1: removes many of the remaining restrictions on economic activity, although it may be some time before it is safe for all sectors to return to full operation - effective 21 September 2020
The phased reopening of the economy began on 1 May 2020. In his address to the nation on 15 September, President Ramaphosa indicated that South Africa will move to Alert Level 1 with effect from midnight on Sunday, 20 September 2020. The national state of disaster was extended until 15 October 2020.
Re-opening of the borders and ports of entry for international travellers
On 1 October 2020, South African borders were opened for business and leisure travel for international traveller’s subject to a number of restrictions for travellers. These restrictions included that all travellers visiting the country will be expected to abide by the regulations which include mandatory wearing of masks at all times, practising social distancing in public spaces, regular washing or sanitizing of hands and presenting a negative COVID-19 test result not older than 72 hours from the time of departure. Upon arrival in the port of entry, the traveller will be screened for any COVID-19 symptoms or for contact with people who have been infected with the COVID-19 virus.
South Africa has developed a risk categorisation model for different international travellers. This model classifies international travellers according to a scale of high, medium and low risk. High risk travellers are those who come from countries with higher numbers of COVID-19 infections and reported deaths compared to South Africa.
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Re-opening of airports for travel by air: Three airports will be opened and operational for international air travel. These airports are OR Tambo International (in Johannesburg, Gauteng), Cape Town International (in Cape Town, Western Cape) and King Shaka International in (Durban, KwaZulu-Natal). The restrictions indicated above apply.
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Travellers from African countries: To facilitate free movements of people, goods and services from South Africa, SADC and the African continent, travellers from the neighbouring countries are allowed to visit our country. Travellers from all African countries are allowed and must possess relevant travel documents, and will also be screened for COVID-19 symptoms.
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Sea ports operations: To facilitate ease of transportation of goods and medicines to and from the country, ships will be allowed to dock, load and off-load cargo. Crew members from the cargo ships will be allowed to crew changes. These crew members will also be medically screened for COVID-19 symptoms. Passenger liners for luxury travel are still not allowed to dock and off-load passengers.
Africa Medical Supplies Portal
In his address to the nation on 17 June 2020, the President announced a new initiative being pursued across the continent – the Africa Medical Supplies Portal. This is a single continental marketplace where African countries can access critical medical supplies, such as test kits, from suppliers and manufacturers in Africa and around the world in the necessary quantities and at competitive prices. This platform will complement the work that is being done to ensure that sufficient medical equipment, personal protective equipment and hospital facilities are available to manage the anticipated increase in COVID-19 patients.
tralac Resources
South Africa’s July 2020 trade data – exports recover while imports remain below 2019 levels
Blog by Willemien Viljoen - 05 Sep 2020
The costs of driving smoking underground
Blog by David Christianson - 24 Jul 2020
Blog by Willemien Viljoen - 14 Jul 2020
Blog by Willemien Viljoen - 14 Jul 2020
South Africa’s April 2020 trade statistics – reduced exports lead to a significant trade deficit
Blog by Willemien Viljoen (tralac) - 16 June 2020
Governance in abnormal times – dealing with COVID-19: A regional perspective from South Africa
Working Paper by Gerhard Erasmus and Trudi Hartzenberg (tralac) - 13 May 2020
Blog by Willemien Viljoen (tralac) - 13 May 2020
South African tourism and the coronavirus pandemic
Blog by David Christianson - 28 Apr 2020
Impact of COVID-19 on poultry production – view from a woman entrepreneur
Blog by Motlatsi Tolo (Raseto Agricultural Enterprise) - 7 Apr 2020
Trade restrictions – what is essential cargo?
Blog by Terry Gale (Exporters Club Western Cape) - 7 Apr 2020
Coronavirus, food supply and demand constraints: panic-buying and logistics
Blog by Willemien Viljoen (tralac) - 31 Mar 2020
South Africa’s response to the COVID-19 pandemic
Blog by Trudi Hartzenberg (tralac) - 26 Mar 2020
COVID19-related export control measures – has South Africa adopted the same yet?
Blog by Talkmore Chidede (tralac) - 20 Mar 2020
Official statements
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pdf Briefing statement on the re-opening of the borders and ports of entry for international travellers (98 KB) - 30 September 2020
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pdf Statement by President Cyril Ramaphosa on progress in the national effort to contain the COVID-19 pandemic (111 KB) - 16 September 2020
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pdf Statement by President Cyril Ramaphosa on progress in the national effort to contain the Covid-19 pandemic (150 KB) - 15 August 2020
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pdf Statement by President Cyril Ramaphosa on Progress in the national effort to contain the COVID-19 pandemic (92 KB) - 23 July 2020
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pdf Statement by President Cyril Ramaphosa on Progress in the national effort to contain the COVID-19 pandemic (112 KB) - 12 July 2020
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pdf Address by President Cyril Ramaphosa on South Africa’s Response to the Coronavirus Pandemic (113 KB) - 17 June 2020
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pdf Address by President Cyril Ramaphosa on South Africa’s Response to the Coronavirus Pandemic (171 KB) - 24 May 2020
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pdf Statement by President Cyril Ramaphosa on South Africa’s response to the coronavirus pandemic (105 KB) - 13 May 2020
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pdf Remarks by Minister of Finance Mr Tito Mboweni during the media briefing to outline R500bn economic support package (365 KB) - 24 April 2020
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pdf Statement by President Cyril Ramaphosa on South Africa’s response to the Coronavirus Pandemic (99 KB) - 23 April 2020
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pdf Statement by President Cyril Ramaphosa on further economic and social measures in response to COVID-19 (89 KB) - 21 April 2020
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pdf Finance Minister Tito Mboweni: Remarks at Media Briefing on COVID-19 (460 KB) - 14 April 2020
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pdf Statement by President Cyril Ramaphosa on Measures to Combat the Covid-19 Epidemic (98 KB) - 9 April 2020
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pdf Comments by Minister Ebrahim Patel at a Briefing to the Press after the First Day of the Covid-19 Lockdown (415 KB) - 27 March 2020
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pdf Media briefing: Remarks by Minister of Trade Industry and Competition Ebrahim Patel (406 KB) - 24 March 2020
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pdf Statement by President Cyril Ramaphosa on escalation measures to combat COVID-19 epidemic (155 KB) - 23 March 2020
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pdf President Cyril Ramaphosa: Measures to combat Coronavirus (COVID-19) epidemic (93 KB) - 15 March 2020
Policy regulations and economic measures to address COVID-19
Government and the dtic have prioritised 9 key interventions, including: 1. Economic impact assessment and measures to mitigate; 2. Supporting health measures: essential health and PPE stocks; 3. Food and hygiene product supply-lines: from farm to shop; 4. Solidarity and social protection measures to assist the vulnerable; 5. Regulatory support to facilitate cooperation and keeping firms in business; 6. Protecting consumers: Action against unfair price rises; 7. Global coordination and engagement; 8. Reopening the economy and reconstruction; and 9. Internal dtic processes to manage outbreaks amongst staff (dtic Parliamentary Presentation, 19 August 2020)
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Africa should eye strategies to reduce import dependency of essential goods
Africa has been battling to curb the spread of COVID-19 pandemic and to address its impacts but the socioeconomic hardship suffered is significant.
The continent has experienced a severe economic contraction of at least 2.6 per cent which comes in contrasts to the growth rate of 3.2 per cent that was forecast for 2020 before the crisis.
According to Ms Mama Keita, Director of ECA in Eastern Africa, the COVID-19 pandemic disrupted our normal way of doing things but all is not dark as the crisis has created unusual opportunity, exposing that heavy reliance on imports of essential goods in sensitive areas such as medical, nutritional and pharmaceutical, is not a sustainable solution for Africa.
Ms Keita made the remarks while speaking during a Digital Forum organized by “La Tribune Afrique” that focused on preparing the next world.
Asked about the potential of the AfCFTA as part of the solution to Africa’s development in the aftermath of the crisis, Ms Keita said that the current crisis proved that Africa’s private sector, if supported, could enhance its productive capacities and supply quality goods.
“In times of necessity to acquire some products during the world that was confined, the "Made in Africa" products were valued and the private sector was compelled to use innovation and creativity to supply their local markets” explained Mama, citing the production of facemasks that occurred in many countries as an example.
Ms Keita stressed that Africa has less than 2 hospital beds per 1000 people, the bulk of its pharmaceutical needs are sourced from outside the continent, and the situation is similar as far as foodstuff such as cereals is concerned. Yet the continent’s private sector could fill these gaps if provided with adequate support.
“Governments should continue to express trust to their private sectors, just like they are trusting them at the moment with the production of masks, test kits, personal protective equipment, ventilators,” affirmed Ms Keita.
In order to be encouraged to produce and sell on the AfCFTA market, Ms Keita argues that the private sector will need to be ascertained that the demand for their products exists. “The public sector could play a major role in that regards”.
ECA has been arguing that higher level of industrial development and intra-African trade would drive the economic transformation of the continent through value-chain development, and this would reduce Africa’s dependence on commodities and generate the jobs needed. AfCFTA could be an engine to promote that industrialization, if the private sector, starts transforming locally the huge natural resources that the continent is endowed with.
At the same digital platform, Mr Romuald Wadagni, Minister for the Economy of Benin pleaded for more integrated and open Africa saying that the fragmentation of countries is a brake to our development. He made a strong plea for a more integrated financial market in Africa, which would allow the reduction of interest rates, very high at the moment and which is compromising the development prospects of the continent.
The Digital platform also hosted Mr Abdoul Aziz Mbaye, State Minister and Personal Advisor to the President Macky Sall of Senegal. He commended that in the face of the crisis, Africa is standing more resilient than some advanced countries; he said that fragility is different from fatality, and expressed confidence that the continent will be strong enough to pursue its development trajectory after the crisis.
Panellists at the Digital Platform discussed also the importance of the governments in raising the necessary awareness among the youth entrepreneurs, which could result in moving most of them from the informal sector to formal work.
About 15 million youth enter the workforce market every year, yet only 3-4 million formal jobs are created.
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WHO urges strong COVID-19 safety measures as African countries to resume air travel
As African countries begin to reopen borders and air spaces, it is crucial that governments take effective measures to mitigate the risk of a surge in infections due to the resumption of commercial flights and airport operations.
Many African governments acted swiftly, implementing confinement and travel restrictions in the early days of the pandemic. In the World Health Organization (WHO) African Region, 36 countries closed their borders to international travel, eight suspended flights from countries with high COVID-19 transmission and others had partial or no restrictions. So far Cameroon, Equatorial Guinea, Tanzania and Zambia have resumed commercial flights. The 15-member Economic Community of West African States is expected to open their airspace on 21 July.
While open borders are vital for the free flow of goods and people, initial analysis by WHO found that lockdowns along with public health measures reduced the spread of COVID-19. Even with border restrictions, imported cases have sometimes brought back COVID-19 to countries which had not reported cases for a length of time. For example, Seychelles had not had a locally transmitted case since 6 April 2020, but in the last week 66 new cases – all crew members of an international fishing vessel – have been recorded.
“Air travel is vital to the economic health of countries,” said Dr Matshidiso Moeti, WHO Regional Director for Africa. “But as we take to the skies again, we cannot let our guard down. Our new normal still requires stringent measures to stem the spread of COVID-19.”
To resume international air travel, WHO recommends that countries assess the epidemiological situation to determine whether maintaining restrictions outweighs the economic costs of reopening borders if, for instance, there is widespread transmission of the virus. It is also crucial to determine whether the health system can cope with a spike in imported cases and whether the surveillance and contact tracing system can reliably detect and monitor cases.
It is important that countries have systems in place at points of entry including airports. Comprehensive entry and exit screening should be considered based on risk assessment and cost-benefit analysis, and as part of the overall national response strategy. Such screening may target, as a priority, direct flights from areas with community transmission. In addition, observance of preventive measures such as personal hygiene, cough etiquette, physical distancing remains crucial. Passengers should be registered and followed up, and if they develop symptoms be advised to inform health authorities.
“The resumption of commercial flights in Africa will facilitate the delivery of crucial supplies such as testing kits, personal protective equipment and other essential health commodities to areas which need them most,” Dr Moeti said. “It will also ensure that experts, who can support the response can finally get on the ground and work.”
The impact of COVID-19 on airlines is likely to be severe. African airlines could lose US$ 6 billion of passenger revenue compared to 2019 and job losses in aviation and related industries could grow to 3.1 million, half of the region’s 6.2 million aviation-related employment, according to the International Air Transport Association.
In the worst-case scenario, international air traffic in Africa could see a 69% drop in international traffic capacity and 59% decline in domestic capacity, according to an analysis by the International Civil Aviation Organization.
Together with the World Economic Forum, WHO held a virtual press conference on 2 July 2020 with Dr Moeti, Dr Amani Abou-Zeid, Commissioner for Infrastructure and Energy at the African Union Commission and Prosper Zo'o Minto'o, Regional Director, Western and Central African Office, International Civil Aviation Organization.
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tralac’s Daily News Selection
African Union says urgent need to address patents and technology barriers for access to future COVID-19 vaccines (ReliefWeb)
In a communique issued following the ‘Africa’s Leadership Role in COVID-19 Vaccine Development and Access’ conference of the African Union (AU), African health ministers took a crucial step to state their concern that patents and other technology barriers could negatively impact the ability to ensure access of future potential COVID-19 vaccines in developing countries.
Access by CARICOM to the Africa Medical Supplies Platform: Statement by the Chairman of CARICOM the Honourable Mia Amor Mottley, Prime Minister of Barbados (SKNVibes.com)
Member States of the Caribbean Community (CARICOM) have been given access to the Africa Medical Supplies Platform (AMSP), a procurement system for supplies and equipment in the fight against COVID-19. The AMSP unlocks immediate access to an African and global base of vetted manufacturers and procurement strategic partners. It enables African Union Member States to purchase certified medical equipment, such as diagnostic kits, personal protection equipment (PPE) and clinical management devices, with increased cost effectiveness and transparency.
African Development Fund approves $9.52 million to enhance coordinated COVID-19 response in East and Horn of Africa and the Comoros (AfDB)
The Board of Directors of the African Development Fund (ADF) have approved grants totaling $9.52 million to strengthen responses to the COVID-19 pandemic in East Africa and the Horn, and in the Comoros. The grant, approved on 26 June, is part of the $10 billion COVID-19 Rapid Response Facility (CRF) approved by the Board of Directors in April 2020 and complements the Bank’s direct support to regional member countries across the continent.
Why Accelerating Implementation of AfCFTA Must Remain a Top Priority (Inter Press Service)
There is an important role for trade policy in ensuring that such mindset shifts take place, and that new stories of jobs for women and youth in trade, gain momentum. For the development professional, the challenge is how to nurture this footprint – to ensure that it was not just a passing phase. The goal must be to support scaling up of what is evidence of a proven concept (which has a ready market in the new-normal COVID 19 economy). This can be done in at least six ways:
Author: Ahunna Eziakonwa is Assistant Secretary General, Assistant Administrator and Director of the UNDP Regional Bureau for Africa
The end of the West African CFA franc (Business Day)
As of this month, the West African CFA franc is supposed to be replaced by a new currency. In many respects the move looks symbolic – though it has still created waves in the region. At an extraordinary meeting of the Wamz heads of state and government last week, Nigeria’s President Muhammadu Buhari criticised Uemoa for jumping the gun, warning that Ecowas’s plan for a regional currency could be in "serious jeopardy" if member states did not comply with already agreed processes.
EAC: Assembly declines to approve Vote on Account of USD 29.4 million for quarter 1 of new financial year
The East African Legislative Assembly today unanimously stayed a request by the EAC Council of Ministers to approve a Vote on Account of USD 29,402,292, to support the normal operations of the EAC, as it awaits the tabling of proposals of budget estimates by the Council of Ministers. Consequently, the Speaker, Rt Hon Ngoga Martin, upon request by the House agreed to invoke section 12 of the EAC Budget 2008, to extend the period for consideration of the EAC Budget for FY 2020/2021.
Uganda sugar imports most expensive among Comesa markets (Business Daily)
The cost of Common Market for Eastern and Southern Africa (Comesa) free trade area has been on a steep rise since March when a tonne landed in Mombasa at Sh55,000, Sh59,000 in April and Sh60,000 in May.
Trade statistics
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South Africa Records First Current Account Surplus in 17 Years. South Africa recorded its first current account surplus in 17 years in the first quarter of 2020 as the trade balance more than doubled, central bank data showed on Thursday.
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Morocco's trade deficit narrows 12% year/year in Jan-May. Morocco’s trade deficit shrank by 12% to 73.7 billion dirhams ($7.58 billion) in the first five months of 2020 from a year earlier, the foreign exchange regulator said on Wednesday.
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Egypt’s trade balance deficit declines by 45%, reaching $2.36 bln in April
Global Economic Recovery must Prioritise Restructuring of Debt for Developing Countries (Inter Press Service)
Unless there is a restructuring of debt for developing countries, the servicing for this debt will take away valuable resources from these nations that are needed to prevent the further suffering of people during the coronavirus pandemic — particularly with regards to safeguarding the health systems, and protecting the “integrity and resilience of economies”. This is according to Bogolo Joy Kenewendo, former minister of trade of Botswana.
UN Secretary-General issues global wake-up call (ReliefWeb)
From COVID-19 to climate disruption, from racial injustice to rising inequalities, we are a world in turmoil. Our challenge is to channel the spirit behind the UN charter and rise to this moment of trial and test.
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tralac’s Daily News Selection
Diarise: As part of the AU’s commemoration of Africa Integration Day 2020, tralac will on 4 July host a webinar, Leveraging the AfCFTA for Africa’s development – Lessons from COVID-19 experience. The keynote speaker is Mr Wamkele Mene (AfCFTA Secretariat SG). The panel is composed of David Luke (African Trade Policy Centre), Jason Blackman (DHL Express – Sub-Saharan Africa), Etiyel Chibira (Cross-Border Road Transport Agency, South Africa), Wilfried Deudjui Mbouwe (Cameroon National Shippers’ Council) and Ahmed Bennis (Africa Economic Zones Organisation). The webinar will be moderated by Trudi Hartzenberg (Executive Director, tralac).
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Download the concept note.
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Register for the webinar here.
A reminder: The AfCFTA was supposed to take operational effect today (1 July) but the timeline has slipped, under the complications caused by the COVID-19 outbreak but also the slow pace of negotiations themselves. “Everybody can see, objectively, nothing can be done on the 1st of July,” AfCFTA’s secretary general, Wamkele Mene, told Agence France-Presse. A new date for January 2021 has been proposed by ambassadors at the AU’s headquarters in Addis Ababa. The recommendation has yet to be adopted by heads of state. Mr Mene cautioned that the proposed date is itself subject to change: “It really all depends on the pandemic.”
Chuku Chuku: Putting the AfCFTA, Brexit, and COVID-19 to work for Africa (Brookings)
In just one year, three events have permanently reshaped Africa’s trade relationship with the United Kingdom: The entry into force of the AfCFTA on 30 May 2019, the official withdrawal of the UK from the European Union (Brexit) on 31 January 2020, and the COVID-19 pandemic in which we are currently mired. If policymakers act fast to seize the opportunities that this “ABC” triangle of events offer and reset UK-Africa trade relations, a win-win partnership can emerge. While UK trade with Africa peaked in 2012 at $51bn, by 2019 it had almost halved to $27bn, representing only 2.4% of total UK trade. Yet untapped export potential from Africa to the UK is large (Figure 1), with significant gaps in apparel ($165.6m), electronic equipment ($142.6m), and cocoa products ($91.7m). With the cloud of uncertainty surrounding the COVID-19 pandemic dissipating, it is now up to the parties in Africa and the UK to move to the next item on the agenda, namely, prepare a UK-Africa Economic Partnership Agreement that is a win-win for both parties.
South Africa: pdf Trade statistics for May 2020 (589 KB) (SARS)
The South African Revenue Service yesterday released trade statistics for May 2020, recording a trade surplus of R15.94bn. April 2020’s trade deficit was revised upwards by R0.93bn, to R35.95bn. The May surplus is attributable to exports of R101.85bn and imports of R85.91bn. Exports increased from April 2020 to May 2020 by R49.92bn (96.1%) and imports decreased from April 2020 to May 2020 by R1.97bn (2.2%). Exports for the year-to-date (1 January to 31 May) decreased by 5.2%, from R506.44bn in 2019 to R480.09bn in 2020. Imports for the year-to-date of R467.12bn are 9.1% less than the R513.66bn imports recorded during the same period in 2019. The cumulative trade surplus for 2020 is R12.97bn.
South Africa: Amsa seeks safeguards on steel imports amid demand concerns (IOL)
ArcelorMittal South Africa (Amsa) has approached the International Trade Administration Commission for safeguards on imports of structural steel products amid concerns over poor demand and rising steel imports. An Amsa spokesperson said the safeguards would not only apply to the company, but to the entire local steel industry. “Amsa, in collaboration with Evraz Highveld Steel, has applied for safeguards on structural steel products produced in the Highveld Mill,” said the spokesperson, adding that the company had not indicated any level for the safeguard duty. In response, Itac confirming it had initiated an investigation for remedial action in the form of a safeguard measure for structural steel. Itac said that all countries that might be impacted by the safeguard had been contacted and requested to provide written comments on the matter.
The World Bank realigns, from today, its Africa Region into two Vice Presidencies:
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Hafez Ghanem takes on the role of Vice President for Eastern and Southern Africa
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Ousmane Diagana becomes Vice President for Western and Central Africa
The World Bank has established a $425m Regional Infrastructure Financing Facility for Eastern and Southern Africa: the project aims to expand long-term finance to private firms in selected infrastructure in the power sector, as well as in the transport, logistics and social sectors. This is the first regional facility of this kind in Africa. Through the Trade Development Bank, the RIFF will provide long-term infrastructure finance that would contribute to job creation and would present cross-border benefits in terms of trade and investment flows or transfers of technology. In the context of the COVID-19, the RIFF’s focus on off-grid solar solutions will contribute to preserve households’ livelihoods by supporting micro-entrepreneurial activities that play a critical role in income generation in poor communities.
New UNCTAD policy papers:
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COVID-19 and tourism: assessing the economic consequences. The world’s tourism sector could lose at least $1.2 trillion, or 1.5% of global GDP, having been placed at a standstill for nearly four months due to the coronavirus pandemic, UNCTAD said in a report published today (pdf). It warned that the loss could rise to $2.2 trillion, or 2.8% of the world’s GDP, if the break in international tourism lasts for eight months, in line with the expected decline in tourism as projected by the UNWTO. UNCTAD estimates losses in the most pessimistic scenario, a 12-month break in international tourism, at $3.3 trillion or 4.2% of global GDP. Developing countries could suffer the steepest GDP losses. Jamaica and Thailand stand out, losing 11% and 9% of GDP respectively in the most optimistic scenario of UNCTAD’s estimates. Other tourism hotspots such as Kenya, Egypt and Malaysia could lose over 3% of their GDP.
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G20 countries respond to COVID-19 with investment reforms. The coronavirus pandemic has accelerated in G20 countries a trend towards policies designed to safeguard national security interests against threats associated with international investment, according to a joint report by UNCTAD, the OECD and the WTO. It is the 23rd edition in its series and outlines the investment measures implemented by G20 members from mid-October 2019 to mid-May 2020. Extract (pdf):
The report, jointly prepared by the OECD and UNCTAD Secretariats, covers investment and investment-related measures that G20 members have taken between 16 October 2019 and 15 May 2020. It documents policy actions that G20 Members have taken in the last months preceding the pandemic and in response to the unprecedented economic crisis that followed, just a decade after the Global Financial Crisis. Many countries were still preparing and refining their investment policy responses, when this report was finalised for release; this report takes a snapshot of their actions as of mid-May 2020. FDI has been on a downward trajectory since 2016 and is expected to decline sharply as a consequence of the pandemic and the resulting supply disruptions, demand contractions, and pessimistic outlook of economic actors. Even under the most optimistic scenario – in which the economy begins to recover in the 2nd half of 2020 – FDI flows in 2020 are expected to fall by more than 30% compared to 20195 and could plunge by 40% (Figure 1). This decrease is accentuating and accelerating the steady decline of FDI flows observed in the past five years (Figure 2). Reinvested earnings – which play an increasingly important role in FDI flows – will drop substantially in the short term, as the crisis will depress earnings and investors are expected to reinvest a smaller share of their earnings than they have done in the recent past. Equity capital flows will also decline as many new investments, both mergers and acquisitions and greenfield investments, have been put on hold. [Summary report (pdf)]
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The changing international investment agreements landscape: new treaties and recent policy developments (pdf). Change in the IIA regime is underway. In 2019, the number of IIA terminations (34) exceeded the number of new IIAs (22). This brought the total to 3,284 IIAs and 349 effective terminations. By the end of the year, at least 2,654 IIAs were in force (see figure 1).
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Several other developments will affect the international investment policy landscape, including the agreement by EU member States to terminate intra-EU bilateral investment treaties, Brexit and the entry into force of the agreement establishing the African Continental Free Trade Area.
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Policy responses taken by governments to address the COVID-19 pandemic and its economic fallout could create friction with existing IIA obligations. This highlights the need to safeguard sufficient regulatory space in IIAs to protect public health and to minimize the risk of investor–State dispute settlement (ISDS) proceedings, while protecting and promoting international investment for development.
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Progress on the reform of the IIA regime is visible in treaties concluded in 2019. Nearly all new IIAs contain features in line with UNCTAD’s Reform Package for the International Investment Regime, with the preservation of States’ regulatory space being the most frequently seen area of reform. Countries also continued to implement ISDS reform elements in new IIAs. To support the IIA reform process, UNCTAD will launch its IIA Reform Accelerator later in 2020.
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Special Economic Zones and urbanization: This joint UNCTAD-UN Habitat discussion paper builds on an earlier exchange between experts on this subject in February 2020 at the Tenth Session of the World Urban Forum in Abu Dhabi.
UNSC debate: Water cooperation between States ‘key’ to Blue Nile dam project (UN)
The Blue Nile is “critical for the livelihoods and development” of Egyptians, Ethiopians and Sudanese, the top UN official for Political and Peacebuilding Affairs told the Security Council on Monday, urging those States to reach a construction agreement on the Grand Ethiopian Renaissance Dam. Under-Secretary-General Rosemary DiCarlo underscored via videoconference that “transboundary water cooperation is a key element in the implementation of the SDGs”. She also warned that “climate change, combined with projected demographic growth and socio-economic changes, will increase water management challenges worldwide. Through the generation of hydroelectricity, the GERD will significantly boost Ethiopia’s energy sources, allowing it to increase electrification, accelerate industrialization, and export excess electricity to the region”, the top UN political official said.
ILO Monitor: COVID-19 and the world of work
For this edition of the ILO Monitor, the information available to track developments in the labour market has increased substantially. In particular, the following data sources have been incorporated into the model: labour force survey data for the first quarter and for April and May 2020; and administrative data on the labour market (e.g. registered unemployment and up-to-date mobile phone data from Google Community Mobility Reports). Additionally, the most recent Google Trends data and COVID‑19 Government Response Stringency Index (hereafter “Oxford Stringency Index”) values, along with data on the incidence of COVID-19, have been used in the estimates. The modelling itself was carried out over several days. The results were finalized on 17 June, with the latest data update spanning the period from 10 to 15 June 2020 depending on the source. In Africa, the total working-hour loss in the second quarter of the year is estimated at 12.1%, or 45 million FTE jobs, up from the previous estimate of 9.5%. In terms of sub-regions, estimates for working-hour losses in the second quarter of 2020 indicate that Northern Africa experienced the sharpest decline (15.5%), followed by Southern Africa (12.2%), Central Africa (11.9%), Western Africa (11.6%) and Eastern Africa (10.9%).
AfDB Covid-19 crisis response: two appraisal reports to be implemented over 18 months, starting in June 2020 and closing in December 2021.
The European Union’s support for Africa’s COVID-19 continental response
pdf Heads of WTO and development banks voice support for trade finance amid COVID-19 crisis (479 KB)
IMF’s Abebe Aemro Selassie: remarks at IEA Africa Ministerial Roundtable on COVID-19’s impact on Africa’s energy sector
IMF: Vietnam’s success in containing COVID-19 offers roadmap for other developing countries
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The European Union Supports Africa’s COVID-19 Continental Response
The European Union (EU) has provided EUR 10 million towards the implementation of the pdf Africa Joint Continental Strategy for COVID-19 Outbreak (777 KB) . The funding is the initial contribution by Team Europe to the continental action against COVID-19.
H.E. Ambassador Ranieri Sabatucci, Head of the EU Delegation to the African Union, and Dr John Nkengasong, Director of the Africa Centres for Disease Control and Prevention, announced the COVID-19 support package today.
“Global solidarity is key to fighting COVID-19. This is why in these difficult times partnership between Team Europe and the African Union is as strong and reliable as ever” said Ambassador Ranieri Sabatucci. “The European experience is teaching us that a continental approach is essential to fight COVID-19 and the Africa CDC is in a privileged position to coordinate a continental response for Africa, thanks to its solid experience in dealing with epidemics.”
With this contribution, Africa CDC will provide in-country training on surveillance to healthcare workers and rapid responders in 30 African Union Member States, prioritizing those with significant community transmission.
In the next four months, Africa CDC will support at least 90 in-country cascade and 40 virtual training workshops, and the deployment of 3000 community healthcare workers in these 30 countries to enhance their capacity for early detection, effective monitoring, and contact tracing so they can contain the spread of the virus.
It will support the deployment of 180 rapid responders with expertise in surveillance, laboratory, and case management to 25 other African Union Member
States to address the immediate needs arising from the COVID-19 pandemic.
In addition, the fund will contribute to strengthening the coordination function of the Africa Continental Taskforce for Coronavirus (AFTCOR), an implementing instrument of the Joint Continental Strategy, and implementation of the Test, Trace and Treat initiative, also known as the Partnership to Accelerate COVID-19 Testing (PACT).
“This pandemic is a global challenge and it requires everybody working together with a unique level of cooperation. We need to quickly scale up testing and contact tracing, we must deploy more healthcare workers and keep feeding the supply chain component. All these require strong partnerships. We deeply appreciate this timely contribution by the European Union towards achieving the goals of PACT in Africa,” said Dr John Nkengasong, Director of Africa CDC.
The EUR 10 million grant provided by Team Europe will be followed in the coming weeks by additional fund (at least EUR 15 million) and/or material support to reinforce Africa’s response to the pandemic.
Background
Africa CDC is the lead institution for Africa’s preparedness and response to COVID-19. As a specialized technical institution of the African Union and with a mandate to safeguard the health of Africa, Africa CDC supports all Member States in their efforts to effectively respond to disease threats. Given the continent’s fragile health systems and economic situation, the pandemic is already having a heavy toll on Africa. Therefore, Africa needs extraordinary efforts at all levels by all stakeholders to prevent further transmission, deaths and social and economic harm resulting from COVID-19.
The European Union is at the forefront of the fight against COVID-19 crisis in Europe and globally. Europe’s strong partnerships around the world are thus even more relevant in tackling this pandemic and its consequences. The EU’s response follows a Team Europe approach, which combines resources from the EU, its Member States, and financial institutions, particularly the European Investment Bank and the European Bank for Reconstruction and Development. The pledged amount to support partner countries in the fight against COVID-19 is EUR 20 billion, of which about EUR 5 billion is foreseen for Africa.
The Africa continental response is in synergy with country-specific allocations by Team Europe. For example, EUR 50 million has been allocated to Nigeria to contain the spread of the virus; EUR 10 million will help Ethiopia increase the number of diagnostic laboratories, test kits and treatment centres, and EUR 105.5 million will support health and social services in countries in the Horn of Africa. In addition, Team Europe, with other international partners, is leading the research and development of COVID-19 solutions, with a EUR 6.5 billion pledge to the Coronavirus Global Response, the global action for universal access to affordable coronavirus vaccination, treatment and testing.
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tralac’s Daily News Selection
The 2nd G20 Trade and Investment Working Group meeting concludes today
South Africa’s May merchandise trade data will be posted tomorrow
Regional Economic Outlook for Sub-Saharan Africa, June 2020 (IMF)
The outlook for 2020 for sub-Saharan Africa is considerably worse than was anticipated in April and subject to much uncertainty. Economic activity this year is now projected to contract by some 3.2%, reflecting a weaker external environment and measures to contain the COVID-19 outbreak. Growth is projected to recover to 3.4% in 2021 subject to the continued gradual easing of restrictions that has started in recent weeks and, importantly, if the region avoids the same epidemic dynamics that have played out elsewhere. Africa’s authorities have acted swiftly to support the economy, but these efforts have been constrained by falling revenues and limited fiscal space. Regional policies should remain focused on safeguarding public health, supporting people and businesses hardest hit by the crisis, and facilitating the recovery. The region cannot tackle these challenges alone, and a coordinated effort by all development partners will be key. Extract: The crisis impact is set to wipe out almost 10 years of progress in development (pdf).
Real per capita GDP in the region is projected to contract by 5.4% in 2020, before recovering by 1.1% in 2021. This will bring the per capita GDP seven percentage points below the level projected before the COVID-19 outbreak, in October 2019, and almost back to its level in 2010 (Figure 1.8). COVID-19 is likely to cause the first increase in global poverty since 1998, when the Asian Crisis hit. According to World Bank estimates, in sub-Saharan Africa the pandemic could push about 26 million more people into extreme poverty in 2020, and up to 39 million in case downside risks to growth materialize. At the same time, income inequality is expected to increase, as lockdowns disproportionally affected informal sector workers and small- and medium-sized companies in the services sectors. For example, almost all households surveyed in Kenya said that their income decreased, and about half said that they are “cooking less frequently” and “altered their diet.” In Uganda, about half of the households said that they cannot sustain their lifestyle even for 1 day of quarantine, which reflects the high share of people working “hand-to-mouth” in the informal sector.
WTO election: There is no AU candidate yet, says Okonjo-Iweala (The Cable)
Ngozi Okonjo-Iweala, Nigeria’s candidate for the World Trade Organisation director-general election, says it is false to believe that the African Union already has a consensus candidate. In an interview with The Telegraph, Okonjo-Iweala said efforts to get the backing of the entire continent is ongoing. “The notion that there’s an AU candidate at the moment is not true. We’re working extremely hard to make sure we bring Africa to support me and it’s going quite well,” she said. ECOWAS recently endorsed Okonjo-Iweala’s candidate and the Republic of Benin withdrew its candidate to support her.
Okonjo-Iweala, who currently chairs the Global Alliance for Vaccines and Immunization (GAVI) backed by the Bill Gates Foundation, said the WTO needs a fresh pair of eyes to break out the challenges it faces. “The issues aren’t just technical. If they were, they would have been solved long ago. I’m not from the WTO but that’s good. We need a fresh pair of eyes and ears that stands back and looks at things from a different perspective and picks up where the intersections are and where we can make progress. I see the job of the next director-general as restoring the WTO, breaking out of the challenges it faces and restoring it to serve the multilateral trading system that the world needs. China and the US are members so I’ll be looking to see how I can serve their interests so that the system can be stronger. But my desire is to be there for all members.”
Grand Ethiopian Renaissance Dam: Communiqué of the Extraordinary AU Bureau of the Assembly of Heads of State and Government
The Meeting of the Bureau was held pursuant to consultations undertaken by His Excellency, President Ramaphosa, in his capacity as the Chairperson of the Union with the three Negotiating Parties concerning the Grand Ethiopian Renaissance Dam, namely, Egypt, Ethiopia, and Sudan. The Bureau of the Assembly noted that the three negotiating parties are founding members of the former Organisation of African Unity, and the African Union and have significantly contributed to the unity, integration and the development of the continent. They further noted the potential the GERD project possesses for Africa.
The Bureau of the Assembly received with appreciation a report from the Chairperson of the AUC, H.E. Moussa Faki Mahamat, which, inter alia noted that more than 90% of the issues in the Tripartite Negotiations between Egypt, Ethiopia and Sudan have already been resolved. The Bureau of the Assembly was addressed by President Abdel Fattah al Sisi (Egypt); Prime Minister Abiy Ahmad (Ethiopia); and Prime Minister Abdalla Hamdok (Sudan), with regards to their respective positions pertaining to the GERD matter.
In this regard, the Bureau of the Assembly decided to lend renewed impetus to the Tripartite Negotiations and urged the three Parties to expeditiously work towards finding a mutually acceptable and amicable solution on the outstanding technical and legal issues in the negotiations process. The Bureau of the Assembly welcomed the undertaking by the three Parties to refrain from making any statements, or taking any action that may jeopardize or complicate the AU-led process aimed at finding an acceptable solution on all outstanding matters. The Bureau of the Assembly and the participating Heads of State and Government agreed to reconvene in two weeks from the date of issuance of this Communique to consider a report on the outcome of negotiations of the outstanding issues concerning the GERD matter.
Why COMESA trade in services should be cushioned from the impacts of Covid-19 pandemic (COMESA)
Most of COMESA member states have put in place policy measures to minimize the effects of Covid-19 as well as support to post crisis recovery in the services sector. Such measures include stimulus packages, tax holidays, granting of grace periods for postponement of bookings and relaxing the liquidity requirements for commercial banks. Besides, Member States have adopted guidelines on movement of goods and services during the Covid-19 pandemic. As countries develop exit strategies, there is need to reduce restrictions and/or liberalize services sectors to:
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Ease movement of professionals like medical personnel, engineers, technicians, essential goods and services across borders
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Reduce costs of communication – mobile, internet and financial services to increase/expand the benefits of digital technology
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Safeguard and ensure smooth and continued operation of the logistics networks that serve as the backbone of regional supply chains
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Consider improving digital infrastructural foundations to improve internet; and
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Consider the inclusion of internet service workers within ‘essential services’ not subject to work from home restrictions to avoid disruptions over the period of Covid-19. [The authors: Benedict Musengele, Jane Kibiru]
COVID-19 accelerates greater trade coordination in East Africa (UNCTAD)
The East African Community to date has been a grand experiment in more than just free trade between Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda. It also seeks to transform the region into a single market that allows free movement of goods, people, services, labour and capital, and create a single investment area. The coronavirus pandemic has curtailed this dream in the short-term but the experience has been a learning curve, and UNCTAD, TradeMark East Africa and other regional partners have used the moment to help the region’s national trade facilitation committees (NTFCs) improve their skills and work more effectively by offering them ground-breaking online training.
A trio of regional trade stakeholders came together to deliver the first regional online training programme on trade facilitation for East African NTFCs, led by UNCTAD, in cooperation with the EAC Secretariat, and with financial support from TMEA. More than 130 NTFC members from Burundi, Kenya, Rwanda, Tanzania and Uganda completed the nine-week training. Flavia Busingye, the EAC Secretariat acting director customs, noted that the online trade facilitation training was a great opportunity for the region to reinforce its capacity to address unprecedented demands due to COVID 19. She was optimistic that the training would greatly enhance the regional capacity on trade facilitation interventions and facilitate faster clearance of goods amid the coronavirus pandemic. The online training was delivered under exceptional conditions, with participants usually undertaking the training from home while tele-working, many of them with unstable internet connections.
Concerns over cargo at Dar es Salaam, Mombasa ports (The East African)
Rwandan importers are pushing for talks to resolve a longstanding problem of cargo that has overstayed at Tanzanian and Kenyan ports, and now face imminent auction to clear charges and penalties accrued due to delays attributed to the Covid-19. The East African has learnt that 2,064 containers that arrived between December and May this year are stuck at the Dar es Salaam port, port of Mombasa and Naivasha ICD due to delays in processing logistics and paperwork. This is in addition to introduction of new operational protocols governing borders and the drivers’ strike at borders of Benaco and Malaba respectively. Importers say that while they had successfully received respective governments’ extension of free demurrage days from 14 days to 55 days, and nine days to 90 days for Tanzania and Kenya respectively, nothing substantive has taken place to resolve the matter.
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EAC facing cash crisis after delay in 2021 budget presentation
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Editorial comment: Without a budget, EAC secretariat will lose its vision
SADC: Key outcomes of the 22nd Meeting of the Ministerial Committee of the Organ
On women and youth, the MCO urged Member States to pay particular attention to the low level of representation of women and youth in elected political positions, noting that, whilst women form more than 50% of registered voters across the SADC Region, they remain greatly marginalized in elected positions, thus reflecting poorly on performance to achieving the set targets under the SADC Protocol on Gender and Development. [Downloads: SADC calls for new thinking in the face of emerging threats to regional peace and security]
Tanzania’s exports of cloves, sisal, gold go up (The East African)
Cashew nuts, sisal, cotton, cloves and gold boosted revenue from exports to $9.982 billion in the year ending April, from $8.618bn in the same period in 2019, according to the Bank of Tanzania’s monthly review for May. Month-on-month, exports also increased to $634.3m in April, from $605.7m in the same period last year. Released last week, the BoT monthly economic review for May says exports of goods increased by 30.3% to $5,897m in the year ending April, was driven by traditional and non-traditional exports. Traditional exports almost doubled, from $553.7m last year to $1.032bn, driven by cashew nuts, cotton, cloves and sisal exports. “Meanwhile exports of coffee, tea and tobacco show a decline,” the report noted. [Download: Bank of Tanzania Monthly Economic Review, May 2020, pdf]
Two updates from Reuters Africa on Mocambique’s LNG industry:
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Sasol to sell stakes in Mozambique pipeline, power plant - sources. Struggling petrochemicals producer Sasol has appointed advisers to sell its stakes in a power plant in Mozambique and a gas pipeline running from the country into South Africa, two sources familiar with the matter told Reuters. Sasol, the world’s top producer of motor fuel from coal, is trying to shed assets to pay off its debt pile and avoid a rights issue of up to $2bn, but has not previously flagged the Mozambique assets as up for sale. It has appointed South Africa’s Nedbank to manage the sale of its 50% stake in the Republic of Mozambique Pipeline Company (ROMPCO), the joint venture operating the pipeline that runs 865 kilometres from Mozambique into South Africa, the sources said. The sources said the company had also appointed Deloitte to sell its 49% stake in Central Termica de Ressano Garcia, Mozambique’s first permanent large-scale gas power plant which, at a capacity of 175 megawatts, meets almost a quarter of the country’s energy demand, according to Sasol’s website.
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UK Export Finance set to back Total’s $20bn Mozambique LNG project - source. Britain’s export credit agency UK Export Finance (UKEF) is set to back a $20bnliquefied natural gas project in Mozambique, a source with direct knowledge of the matter told Reuters on Friday. UKEF listed the project, led by French energy major Total, as under consideration for financing last August. A decision to contribute will draw criticism from campaigners who have opposed such a move.
Attracting private solutions and participation in the power sector in Sub-Saharan Africa: findings from a survey of investors and financiers (World Bank)
This paper develops a classification of investor risks and surveys 51 private investors and financiers in the power sector in Sub-Saharan Africa. It finds that the average investor assigns more weight to power sector policy and regulatory framework risks than to the wider sector and country context risks. And, despite many challenges, investors perceive three segments as ready for private solutions in Sub-Saharan Africa: power generation, off-grid electrification, and mini-grids. Investors see lower readiness in distribution, transmission, and retail.
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Sub-Saharan Africa: A Cautious Reopening
The COVID-19 pandemic continues to represent an unprecedented health and economic crisis, with costs that will be felt most keenly by the poorest segments of the world’s population, the International Monetary Fund (IMF) said in its latest Regional Economic Outlook for Sub-Saharan Africa.
The regional outlook has deteriorated sharply since the April 2020 Regional Economic Outlook report release. Sub-Saharan Africa’s economy is now expected to contract by 3.2 percent in 2020; double the contraction expected in April. This will contribute to poverty increase this year.
The growth rate of new COVID infections has slowed somewhat, allowing some countries to gradually ease their containment measures. However, the scope for the pandemic to spread as aggressively as elsewhere remains a very real threat.
“This is a fast-moving crisis,” said Abebe Aemro Selassie, Director of the IMF’s African Department. “And recent developments suggest that the downturn will be significantly larger than we had anticipated only 10 weeks ago. The risks we highlighted in April all continue to be a concern, but the deterioration of the global outlook has been particularly striking. In line with this new outlook, and consistent with local high-frequency indicators, output in Sub-Saharan Africa is now projected to shrink by 3.2 percent this year, more than double the contraction we had outlined in April. Again, this is set to be the worst outcome on record.
“On the pandemic, the growth rate of new cases has slowed slightly since April, and a number of countries have cautiously eased some of their containment measures. But region-wide, the pandemic is still in its exponential phase – Sub-Saharan Africa has recently exceeded more than a quarter of a million confirmed cases, and new cases are still doubling every 2-3 weeks. Given the region’s already-stretched healthcare capacity, the immediate priority is still to protect lives and to do whatever it takes to strengthen local health systems and contain the outbreak.
“On economic policies, sub-Saharan African countries have acted swiftly and aggressively to support the economy. Monetary and prudential policies have been eased, with countries adopting a mix of reduced policy rates, added injections of liquidity, greater exchange-rate flexibility, and a temporary relaxation of regulatory and prudential norms, depending on country circumstances.
“On the fiscal side, however, country responses have often been more constrained. Even before the crisis, debt levels were elevated for many countries in the region. In this context, and in light of collapsing tax revenues, the ability of governments to increase spending has been limited. To date, countries in the region have announced COVID-related fiscal packages averaging 3 percent of GDP. This effort has been indispensable. But it has often come at the expense of other priorities, such as public investment, and is markedly less than the response seen in other emerging markets or advanced economies.
“Also, authorities in sub-Saharan Africa face a distinct challenge in getting support to those who need it most. Around ninety percent of non-agricultural employment is in the informal sector, where participants are usually not covered by the social safety net. Moreover, a large proportion of this activity centers on the provision of services, which have been particularly hard hit by the crisis. Further, informal workers typically have few savings and limited access to finance. So staying at home is often not an option; complicating the authorities’ efforts to maintain an effective lockdown. In response, many authorities have done what they can to temporarily expand their safety nets; using home-grown, often innovative approaches to ensure that transfers reach as much of their population as possible. But again, resources are limited, and these efforts cannot hope to offset the full impact of this crisis.
“In sum, many authorities in Sub-Saharan Africa face a particularly stark set of near-term policy choices; concerning not only the scale of support they can afford, but also the pace at which they can reopen their economies.”
Against this backdrop, Mr. Selassie pointed to a number of policy priorities going forward.
“First and foremost, the immediate priority remains the preservation of health and lives. But as the region starts to recover, authorities should gradually shift from broad fiscal support to more affordable, targeted policies; concentrating in particular on the poorest households and those sectors hit hardest by the crisis.
“Looking even further forward, and once the crisis has waned, countries should refocus their attention on transforming their economies, creating jobs, and boosting living standards – clawing back some of the ground lost during the current crisis. As before the crisis, part of this effort will require putting fiscal positions back on a path consistent with debt sustainability; which will in turn require a renewed determination to implement revenue-mobilization, debt-management, and public financial management reforms. In addition, sustainable, job-rich, and inclusive growth will require private-sector investment, along with a business environment in which new ideas and projects can flourish, and where new opportunities (such as from the digital revolution) can be developed fully.
“None of this will be easy, particularly in light of the scale of the crisis and its longer-term consequences. The region cannot tackle these challenges alone, and a coordinated effort by all development partners will be key. The IMF has modified the Catastrophe Containment and Relief Trust (CCRT) to provide immediate debt service relief for its poorest and most vulnerable members, and has also doubled its emergency lending facilities. So far, 29 countries in the region have received around $10 billion in funding through these facilities, or through expanded access under existing programs. In April, the G20 also announced the Debt Service Suspension Initiative (DSSI), which allows the world’s poorest countries – most of them in Africa – to suspend up to US$14 billion of debt service payments due between May and December this year.
“Nonetheless, more international support is needed urgently. This year alone, countries in the region face will additional financing needs of over $110 billion, and despite the efforts outlined above, $44 billion of this has yet to be financed.
“This crisis is unprecedented. Our members need us now more than ever. And our efforts today will have significant consequences down the road, not only in helping our members offset the immediate tragedy of the crisis, but also in ensuring that peoples’ lives and livelihoods are not destroyed forever.”
Africa’s resilience is being tested. The Continent has come through much and will come through this crisis also. But with stepped-up support from the international community, the region will be able to boost local containment efforts and healthcare capacity and also enjoy a robust recovery in the coming months.
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Mauritius, Senegal and South Africa among co-authors of cross-regional statement on COVID-19 “infodemic”
Australia, Chile, France, Georgia, India, Indonesia, Latvia, Lebanon, Mauritius, Mexico, Norway, Senegal and South Africa as the co-authors have the honor to transmit the following statement.
Cross-Regional Statement on “Infodemic” in the Context of COVID-19
Since the outbreak of the COVID-19 virus and declaration of the pandemic, the UN Secretary-General and other senior leaders of the UN and its institutions have increasingly drawn attention to the challenge of the “infodemic” or misinformation and disinformation pandemic. Quoting the UN Secretary General, “as COVID-19 spreads, a tsunami of misinformation, hate, scapegoating and scare-mongering has been unleashed.”
In times of the COVID-19 health crisis, the spread of the “infodemic” can be as dangerous to human health and security as the pandemic itself. Among other negative consequences, COVID-19 has created conditions that enable the spread of disinformation, fake news and doctored videos to foment violence and divide communities. It is critical states counter misinformation as a toxic driver of secondary impacts of the pandemic that can heighten the risk of conflict, violence, human rights violations and mass atrocities.
For these reasons we call on everybody to immediately cease spreading misinformation and to observe UN recommendations to tackle this issue, including the United Nations Guidance Note on Addressing and Countering COVID-19 related Hate Speech (11 May 2020).
The COVID-19 crisis has demonstrated the crucial need for access to free, reliable, trustworthy, factual, multilingual, targeted, accurate, clear and science-based information, as well as for ensuring dialogue and participation of all stakeholders and affected communities during the preparedness, readiness and response. It also has confirmed the key role of free, independent, responsible and pluralistic media to enhance transparency, accountability and trust, which is essential to achieving adequate support for and compliance by the general public with collective efforts to curb the spread of the virus. Better international cooperation, based on solidarity and goodwill among countries, can contribute to achieving this goal.
States, regional organizations, the UN system and other stakeholders such as media workers, social media platforms and NGOs have a clear role and responsibility in helping people to deal with the “infodemic”. In this regard, we strongly support the United Nations Communications Response initiative and the “Verified” campaign announced by the UN Secretary General on April 14, 2020.
Many countries, including ours, and international institutions, such as the WHO and UNESCO, have worked towards increasing societal resilience against disinformation, which has improved overall preparedness to deal with and better comprehend both the “infodemic” and the COVID-19 pandemic.
We are also concerned about the damage caused by the deliberate creation and circulation of false or manipulated information relating to the pandemic. We call on countries to take steps to counter the spread of such disinformation, in an objective manner and with due respect for citizens’ freedom of expression, as well as public order and safety. We reaffirm the importance of ensuring that people are accurately informed from trustworthy sources and are not misled by disinformation about COVID-19.
These efforts are based, inter alia, on freedom of expression, freedom of the press and promotion of highest ethics and standards of the press, the protection of journalists and other media workers, as well as promoting information and media literacy, public trust in science, facts, independent media, state and international institutions. Different initiatives have been launched to provide independent expertise and recommendations for States and private actors to strengthen these efforts.
We call for action by all Member States and all stakeholders to fight the “infodemic” to build, to quote the Secretary General, a “healthier, more equitable, just and resilient world.” We remain committed to creating a healthy information environment at the national, regional and global levels, in which the “infodemic” is countered by scientific, evidenced- based information and facts. By doing this, we will be better prepared for dealing with the next “infodemic.”
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COMESA: Trade in services the biggest contributor to regional GDP: why states should cushion the sector from COVID-19 impacts
The services sector accounts for more than half of COMESA’s GDP and over a third of employment, outpacing manufacturing and agriculture sectors in terms of growth generation, income and jobs.
According to a report prepared by research experts at the COMESA Secretariat, the value added by services account on average to 52.5% of the Gross Domestic Product and contributes 37.2 % of the total employment (2018).
With the Covid-19 pandemic, services, which rely on physical proximity between suppliers and consumers have been most impacted by mobility restrictions and social distancing measures. Transport and travel services, which constitute the bulk of regional trade have been the worst hit. On the other hand, those that rely on digital technologies, such as financial services have shown greater resilience.
The report prepared by the research experts, Benedict Musengele and Jane Kibiru states that the Covid-19 crisis has shifted the focus of Member States from the traditional services sectors of transport and travel-related services.
“Transport and travel services account for 83% of the total exports and 66% of the total imports. This implies that they are the major traded services in the COMESA region with the other major sector in imports being Other Business Services, accounting for 18%,” the report says.
In COMESA region, travel and tourism accounts for more than 40% of the services exports in addition to its contribution in GDP and employment. Yet, these are heavily affected by the pandemic because most of the inbound arrivals are from countries most hit by Covid-19 such as US, UK, France, China, Germany and Italy.
In aviation sector, the International Air Transport Association estimates that African airlines could lose US$6 billion in passenger revenue, 3.1 million jobs and related industries. Ethiopia, Kenya and Mauritius are quoted among the hardest hit in Africa and COMESA. Ethiopia and Kenya could lose US$1.9 billion and US$1.6 billion of their respective contributions to their economies.
The road transport sub-sector, which accounts for over 80% passenger traffic and 76% freight in most of the COMESA Member States continue to experience revenue and employment loses due to the slowdown economic and social activities.
On the positive side, the report cites advancements in digital technologies as having led to greater attention on online supply in sectors such as retail, health, education, telecommunications and audiovisual services.
“These have accelerated companies’ efforts to expand online operations and created new consumer behaviour that are likely to contribute to a profound and long-term shift towards online services” the report says. “Accordingly, financial services are less affected due to the digitization that have taken place such as internet and mobile banking.”
The report however notes that some services such as telecommunication may benefit from the pandemic due to the ‘working from home’ arrangement and uptake of e-commerce as people observe social distancing. Greater liberalization of financial and telecommunication services would help to reduce costs of services provisions which are currently high.
Given the critical role trade in services plays in the COMESA region, the report recommends a number of measures to mitigate the adverse effects in the sector. Specifically, as countries develop exit strategies, there is need to reduce restrictions and/or liberalize services sectors to ease movement of professionals like medical personnel, engineers, technicians, essential goods and services across borders.
“Governments should ensure smooth and continued operation of the logistics networks that serve as the backbone of regional supply chains, improve digital infrastructural foundations to improve internet, and enhance investments in internet infrastructure and penetration to promote online supply of services, while embracing e-commerce in trade in services,” the report concludes.
This report has been prepared by Benedict Musengele and Jane Kibiru of the Trade and Customs Division, COMESA Secretariat. The views expressed therein are solely those of the authors and do not reflect the policy of COMESA.
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Key Outcomes of the 22nd Meeting of the SADC Ministerial Committee of the Organ
The following are the Key Outcomes of the 22nd Meeting of the SADC Ministerial Committee of the Organ (MCO) on Politics, Defence and Security Cooperation virtual meeting held on 26 June, 2020. The meeting was Chaired by Honourable Lt General (Rtd) Dr Sibusiso B. Moyo, Minister of Foreign Affairs and International Trade of the Republic of Zimbabwe and Chairperson of the MCO.
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The MCO noted that, whilst the region has remained peaceful and stable, there are isolated challenges in some Member States. On this note, MCO committed to remain seized with the political and security developments in the region.
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The MCO commended the Chairperson of the Organ, H.E. Emmerson Dambudzo Mnangagwa, President of the Republic of Zimbabwe, for convening the Extraordinary Summit to discuss the security situation in the Republic of Mozambique, and reiterated SADC Region’s solidarity with the Republic of Mozambique and commitment to collectively address terrorism in the Region
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The Meeting of the Ministerial Committee of the Organ (MCO) considered an assessment on Peace and Security threats, commended the Secretariat for the compressive report and directed it to prepare a costed action plan for the implementation of the recommendations contained in the Assessment Report, and to mainstream high impact and urgent recommendations in the 2021/22 plan and budget.
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The MCO endorsed the Mechanism in Honour of the Founders of SADC, which will include naming of rooms at the SADC Secretariat, its Satellite Offices, and other strategic places such as Government buildings and Parliament offices in different countries; SADC Essay Competition and Curriculum reforms to include the legacy of SADC Founders; Commissioning research leading to publications focusing on all the founders (individually and/or collectively); and Awarding Medals.
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Noting the need to respond to the contemporary threat of proliferation of small arms and light weapons in the SADC Region, the MCO endorsed the Draft Agreement Amending the SADC Protocol on the Control of Firearms, Ammunition and Other Related Materials to be submitted to the Committee of SADC Ministers of Justice for legal clearance The Draft Agreement seeks to broaden the scope of application of the Protocol to include conventional weapons; align it with the international conventions; and incorporate contemporary threats of proliferation of small arms and light weapons in the region and best practices and standards for prevention and combating illicit proliferation, circulation and trafficking of firearms, ammunitions and related materials.
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On women and youth, the MCO urged Member States to pay particular attention to the low level of representation of women and youth in elected political positions, noting that, whilst women form more than 50% of registered voters across the SADC Region, they remain greatly marginalized in elected positions, thus reflecting poorly on performance to achieving the set targets under the SADC Protocol on Gender and Development.
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The MCO congratulated the people of Malawi for the peaceful manner with which they conducted themselves in the fresh Presidential Election held on 23rd June 2020; and urged all stakeholders to remain peaceful whilst the Malawi Electoral Commission finalizes the process of tallying the results of the Election
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Noting the impacts of COVID-19 on SADC Electoral Observation Missions, the MCO directed the Secretariat in collaboration with the SADC Electoral Advisory Council to develop guidelines on electoral observations during outbreaks and pandemics such as the COVID-19
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The MCO urged the Member States holding elections during the COVID-19 pandemic to implement health requirements and regulations to combat its spread.
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The MCO condemned the continued occupation and exploitation of the Glorieuse Islands by the French Government in defiance of the relevant resolutions of the United Nations General Assembly and the African Union (formerly OAU).
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The MCO commended theChairperson of the MCO Hon. Lt General (Rtd) Dr Sibusiso B. Moyo for the excellent stewardship and exceptional leadership provided during his tenure.
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A tralac Special Feature on the Corporate Council on Africa’s inaugural Leaders Forum, Resilient US-Africa business engagement to drive post COVID-19 recovery, which concludes today:
Day 1 (23 June): The global financial response to COVID-19 in Africa
Day one of the Forum also featured a high-level panel discussion with private sector leaders and senior multilateral officials including Dr Donald Kaberuka (SouthBridge Group), Dr Vera Songwe (UNECA), Admassu Tadesse (Trade and Development Bank), Dr Albert Zeufack (World Bank’s Chief Economist, Africa) and Akin Dawodu (Cluster Head for Sub-Saharan Africa, Citi).
Panelists addressed debt relief for the continent and called for a coordinated African and global financial response to COVID-19 and economic recovery in Africa, emphasizing the role of the private sector and multilateral institutions. Dr Kaberuka, one of four AU COVID-19 response “envoys”, stated that “Africa is not going to the world looking for something, but we are trying to figure out how Africa can be part of this global financial response.” Dr Vera Songwe provided background on the elements and logic of the debt relief being sought for Africa, noting that “It is a no brainer for African countries to access the Debt Service Suspension Initiative which will give them immediate access to $13 billion in liquidity.”
Dr Zeufack emphasized the important role the World Bank and international financial institutions must play in Africa’s economic recovery from the pandemic. Trade and Development Bank President Admassu Tadesse noted that his institution was not only providing resources to governments and private sector companies, but supporting development projects urgently needed under the current circumstances.
Citi executive Akin Dawodu noted that Citi and other financial institutions were playing their part by “protecting their balance sheet, maintaining their capital adequacy and maintaining access to liquidity in general while providing working capital and financing short term needs to their corporate clients.”
ECA statement: Ms Vera Songwe, the Executive Secretary of the Economic Commission for Africa, hailed Africa’s efforts in tackling the health crisis collectively. She said there was nothing wrong with African nations asking for debt standstill to provide immediate stimulus to save jobs and livelihoods as the continent prepares to build back better. “The need for immediate liquidity is not an African-specific issue. It’s a global issue,” said Ms Songwe, adding the ECA will continue to work hard to ensure African countries have more resources immediately available to them to help combat the COVID-19 pandemic.
She said it was crucial for Africa to save small to medium enterprises that form 70% of Africa’s economy. “If banks don’t have the liquidity they need then the SMEs close down. We need to make sure that those 70% of our SMEs that are alive today, stay alive,” adding that 20 million African jobs were currently on the line due to the pandemic. She also said Africa needs to build strong institutions that will stop illicit financial flows as nations work on improving domestic resource mobilization. “As long as we continue to have leakages in our systems we will continue to suffer,” the ECA Executive Secretary said, adding it was great that African leaders had come out clearly to say that they will transparently use COVID-19 resources coming their way.
Day 2 (24 June): Resiliency in Action – Economic and health innovations in response to COVID-19
During a Fireside Chat moderated by CCA member, Bill Killeen (CEO of Acrow Bridge), President Nyusi noted the importance of having a collaborative approach to address the COVID-19 pandemic. In talking about Mozambique’s COVID-19 and post COVID-19 response strategy, President Nyusi said: “Our strategy is to lead the fight against the pandemic by opening the economy to make COVID-19 response management sustainable. Therefore, we are committed to ensuring that Mozambique remains an important destination for business now and after the pandemic.”
Day Two also featured a high-level panel moderated by Witney Schneidman (Senior Advisor for Africa, Covington & Burling LLP). Farid Fezoua (President and CEO, GE Africa) emphasized the importance of ensuring the safety of GE employees and customers: “We had to adapt fast and establish new safety protocols particularly for employees on the frontlines as well as our customers.” He mentioned that the pandemic has accelerated GE’s digital innovations: “We had adopted digital and remote work for a while, but COVID put us in real situations and leveraging technology tools in this regard has been key.
Gregory Rockson (CEO, mPharma) discussed how mPharma sent over 800, 000 test kits to countries across the continent by leveraging its supply chain infrastructure in Ghana. He urged that “Africa needs to build the critical infrastructure that is needed to prevent the next pandemic” by establishing regional alliances, where each region specializes to meet different needs across the health supply chain.
Jim Winkler (Economic Growth Division, Creative Associates) commended the innovative partnerships that have been established as a result of the pandemic. He highlighted how Creative Associates has been supporting innovation by local SME’s during the pandemic through the provision of funds to create guarantees, promote piloting, and facilitate export and trade.
Hon. Betty Maina, Cabinet Secretary, Ministry of Industrialization, Trade and Enterprise Development, Kenya highlighted the need for greater self-sufficiency in terms of medical commodities: “It is important that countries build some level of security around medical commodities and medical supplies.” She said Kenya had prioritized building capacity in this area, adding: “The US-Kenya FTA provides an opportunity for us to create a much more predictable environment for investment by companies that supply these goods.”
Day 3 (25 June): Drivers of growth in post COVID Africa
In her opening remarks, USAID Deputy Administrator Ms Bonnie Glick noted the critical role the US government played in Africa to help tackle COVID-19. She stated that in Sub-Saharan Africa, “our US government contribution of assistance includes more than $361m to meet the critical needs of communities, governments and of course the health workers on the front lines of the pandemic.”
Day Three of the Forum also featured a high-level panel moderated by Dr Acha Leke (Chairman, McKinsey Africa) who in his opening statement impressed upon the audience the need to reimagine society. Panelists discussed the impact of COVID-19 on their economies, business and growth drivers and their outlooks for the future. Dr Sarah Alade, Special Advisor to the President on Finance and The Economy, emphasized Nigeria’s Economic Sustainability plan, a $6bn initiative to stimulate the economy and prevent business collapse in the face of COVID-19. This initiative will prioritize investments in the healthcare sector, job creation, infrastructure, and manufacturing. Dr Alade stressed the need for an enabling business environment to sustain self-sufficiency: “the whole idea is that whatever businesses we have, we want to ensure that they continue to produce. We also intend to create jobs using labor-intensive methods. We need to support our youth with strong innovator and entrepreneur systems in order to enable them to solve the problems that the continent will face, and to create jobs.”
Mohamad Darwish (IHS Nigeria) urged African economies to diversify from reliance on natural resources, to create enabling business environments that support SMEs and investment, and to further invest in ICT. He acknowledged that “these challenges create avenues for improvement and a better future, especially in the telecom sector.”
Aida Diarra (Sub-Saharan Africa, VISA) highlighted VISA’s $200m commitment to support SMEs over the next five years with the goal of enabling 50 million SMEs globally to digitalize. She stressed the importance for African countries to create a business environment that is conducive to innovation and remarked on the impact the AfCFTA will have on enabling e-commerce, affirming that “it is about formalizing the SMEs and giving them a chance to enter the formal ecosystem and enabling the digital payment service providers.”
Karim Senhadji (OCP Africa) commended the AfCFTA as a vital tool to increase intra-Africa trade and highlighted the importance of digitalization, research and development as keys to transforming Africa’s agricultural sector. He noted that “we have to promote innovation and entrepreneurship. We need to support our youth with strong innovator and entrepreneur systems in order to enable them to solve the problems that the continent will face, and to create jobs.”
Riva Levinson (KRL International) closed out the session by calling for a global response to the global pandemic: “The COVID-19 pandemic has underscored the truth that a novel viral infection anywhere is a viral contagion everywhere.” She stated “this is what this week’s CCA Leader Forum has been about: reimagining the world we find ourselves in.”
Day 4: Today’s final day, Resiliency in Action: sustaining regional and bilateral trade post-COVID-19, will be moderated by Florizelle Liser (President and CEO, Corporate Council on Africa). It will highlight how trade in Africa may be affected in the longer term and will consider the future and potential impact of the AfCFTA and of US-Africa trade arrangements. This session will feature President Uhuru Kenyatta and President Nana Addo Dankwa Akufo-Addo.
Diarise (29-30 June): The African Economic Research Consortium will host its 52nd Plenary Session on “Business Environment, Competitiveness and Economic Growth in Africa” on Monday. The official opening and keynote address be given by Hon. Betty C. Maina (Cabinet Secretary, Ministry of Industrialization, Trade and Enterprise Development, Kenya). Papers will then be presented by: Dr Shantayanan Devarajan (Georgetown University), Prof Ernest Aryeetey (ARUA), Prof. Pramila Krishan (University of Oxford)’.
The AERC will host a special session on “African economies amid COVID-19: impacts and the road ahead”, on Tuesday, to reflect on pertinent issues and identify policy and administrative responses by drawing lessons from global experiences. The keynote address will be delivered by Mr Abebe Selassie (Director of Africa Region, IMF). Other presenters include: Prof Benno Ndulu Pathways (Prosperity Commission on Technology and Inclusive Development), Stephen N. Karingi (UNECA) and Hanan Morsy (AfDB).
Promoting equity through structural transformation: Impact of regional free trade agreements on East African regional integration (ECONEWS Africa)
What are the likely implications of the AfCFTA and Tripartite Free Trade Area on integration initiatives in the East Africa Community? The formation of these two economic blocs is aimed at consolidating the African market and expanding intra-African trade through better harmonization and coordination of trade policies. While the EAC relies on importation of a wide range of products for which it has potential to produce, including agricultural and industrial products. Kenya simulation results indicate that substantial trade creation effects or welfare gains will rise following removal of tariffs and other trade barriers. The following 10 policy suggestions are made in view of the study findings (extract, pdf):
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EAC should strive to fully implement the Customs Union and Common Market Protocols in order to harmonize its position in the on-going negotiations on the TFTA and the AfCFTA because this is the starting point for the consultations on harmonization. This would strengthen partner states on various trade issues thereby supporting its trade and investment agenda. Piecemeal implementation of the two protocols would generate barriers which hinder structural transformation and realization of the potential benefits of integration.
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The EAC countries should effectively address non-tariff barriers to allow for expansion of industrial production and trade amongst its members. Despite potential for self-reliance in agricultural and other products, it is notable that the region heavily relies on imports from elsewhere. Other than infrastructure deficits, the other barriers include SPS, stringent standards requirements, cumbersome customs procedures, multiple fees/levies among others. These have greatly hindered development of industries and participation of small-scale producers in various value chains, hence constraining job creation and income generation.
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EAC partner states should strive to remove all forms of restriction on the movement of persons and professionals in the spirit of the Common Market protocol. Additionally, effective implementation of the protocol on free movement of persons adopted by the AU would be critical in facilitating cross border trade in goods and services.
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About services, the removal of restrictive measures in various service sectors including finance, transport, business, education, tourism, communications and distribution services cannot be overstated. These range from restrictions on ownerships, economic needs tests, non-recognition of qualifications, restrictions on number of services suppliers among others. Services have become essential tools for supporting production, value addition and industrial development. Effective participation of the EAC countries in the TFTA and AfCTA can only be realized if trade costs are reduced, including restrictive regulatory environments.
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The EAC region should strive to be strategic to minimize losses in the wider economic blocs, while at the same time consolidating integration. For instance, the revival of cotton growing in the EAC region is critical for long term and sustainable development of the textile sector. Hence, strategies should focus on addressing issues affecting all segments of the cotton value chain from production, ginning, milling and markets. Presently, the focus is mainly on EPZs tackling value chains at the milling and marketing levels, hence ignoring the lower ends which hold the key to success needed against other competitor countries. Availability and proximity of raw materials including cotton lint plus other associated accessories (including buttons, needles currently being imported) will go a long way in increasing employment opportunities together with household incomes for a greater portion of domestic populations. [The author: Dr Christopher Onyango]
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COVID-19: Africa and the United States to remain key partners, says President Kagame
On Tuesday, June 23, 2020, Corporate Council on Africa (CCA) launched its inaugural Leaders Forum – a high level virtual forum to bring together Heads of State, senior USG and African government officials, CEOs and private sector executives, and leaders from multilateral institutions.
The forum opened with Rwandan President Paul Kagame saying Africa and the United States will remain key trade and investment partners post the crippling coronavirus pandemic.
Mr. Kagame, in opening remarks to the forum on the theme “Resilient U.S.-Africa Business Engagement to Drive Post COVID-19 Recovery”, said; “The world is full of uncertainties right now but there is no doubt that Africa and the United States will continue to be important trade and investment partners for each other.”
The United States, the President said, has been a strong supporter of development in Africa through trade, especially through the African Growth and Opportunity Act (AGOA).
Mr. Kagame highlighted what he said were three areas of common interest between the U.S. and Africa. These are combating the pandemic; the urgent need for coordinated action to ensure adequate fiscal space for Africa; and trade.
“Yesterday marked the 100th day since the first coronavirus case was detected in Rwanda. We have fortunately managed to keep the pandemic under control so far through a combination of lockdown policies and rigorous testing and tracing,” he said.
“However, procuring adequate supplies of testing materials and protective equipment has been a real challenge for every African country. Last week the African Union launched an African medical supplies platform to pull the procurement of essential health items. This is a partnership with Africa’s private sector led by Strive Masiiwa at the AU’s invitation. We welcome participation by the American private sector in this effort.”
Mr. Kagame also said there was an urgent need for coordinated efforts at combating the unprecedented health pandemic to ensure adequate fiscal space for Africa.
“This is essential both for the health response and also to preserve jobs and livelihoods. The United States supported the G20 initiative to suspend debt service on public debt. This was an important first step, but as the crisis drags on more will need to be done. The African Union has appointed six special envoys to represent our continent in these negotiations. Once again the backing of the United States for timely and innovative measures will be vital,” he said.
Mr. Kagame said the launch of the African Continental Free Trade Area (AfCFTA) was also key, adding Africa was focusing on combating the pandemic as a united entity to avoid fragmented efforts.
“As these internal trade obstacles within Africa continue to fall, we look forward to strong engagement from American companies and investors working together with African firms,” he said.
Ms. Vera Songwe, the Executive Secretary of the Economic Commission for Africa, for her part also hailed Africa’s efforts in tackling the health crisis collectively.
She said there was nothing wrong with African nations asking for debt standstill to provide immediate stimulus to save jobs and livelihoods as the continent prepares to build back better.
“The need for immediate liquidity is not an African-specific issue. It's a global issue,” said Ms. Songwe, adding the ECA will continue to work hard to ensure African countries have more resources immediately available to them to help combat the COVID-19 pandemic.
She said it was crucial for Africa to save small to medium enterprises that form 70 percent of Africa’s economy.
“If banks don't have the liquidity they need then the SMEs close down. We need to make sure that those 70 percent or our SMEs that are alive today stay alive,” said Ms. Songwe, adding 20 million Africa jobs were currently on the line due to the pandemic.
She said Africa needs to build strong institutions that will stop illicit financial flows (IFFs) as nations work on improving domestic resource mobilization.
“As long as we continue to have leakages in our systems we will continue to suffer,” the ECA Executive Secretary said, adding it was great that African leaders had come out clearly to say that they will transparently use COVID-19 resources coming their way.
Ms. Songwe said besides the external debt, African governments also need to pay the continent’s private sector which largely goes unpaid for work done for state entities.
She also spoke about the G20's Debt Service Suspension Initiative (DSSI) and the creation of a Special Purpose Vehicle to finance Africa’s debt to commercial lenders, which she said will be vital in financing private sector debt and consequently expanding the fiscal space of African countries.
Africa, said Ms. Songwe, can leverage the AfCFTA which is designed to boost intra-African trade, jobs, investments in infrastructure and financing for Africa’s development as it aims to build back better after COVID-19.
Other speakers on the panel with Ms. Songwe were Mr. Akin Dawodu, Managing Director, Head for Sub Saharan Africa, Citi; former African Development Bank President and Special Envoy of the African Union on Financing the Peace Fund and COVID19 response, Mr. Donald Kaberuka; U. S. Corporate Council on Africa Chairman and CEO at Rabin Martin, Jeffrey L. Sturchio; and Mr. Albert G. Zeufack, the World Bank’s Chief Economist for Africa.
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WTO: African Group Statement on the Implications of COVID-19
Introduction
COVID-19 is an unprecedented crisis of our time – the worst global health crisis in 100 years. It threatens to disproportionately affect developing and least developed countries, and Small Island Developing States not only as a health crisis in the short term but also as a devastating social and economic crisis in the foreseeable future.
Initial ECA estimates suggest Africa will face an immediate decline in GDP growth from 3.2% to 1.8% in 2020 as a result of COVID-19, but with a further adverse impact if COVID-19 is not contained in the short-term. The downward growth revision in 2020 reflects macroeconomic risks arising from the sharp decline in output growth among the region’s key trading partners, the fall in commodity prices, reduced tourism activity in several countries, as well as the effects of measures to contain the COVID-19 global pandemic. A recent publication by the UN stipulated that initial estimates indicate that Africa maybe in its first recession in the last 25 years, and the World Bank estimates suggest that the number of people who could be pushed into extreme poverty in 2020 may reach as high as about 49 million people, with around half of this increase occurring in SubSaharan African countries.
Public health
We underscore that the coronavirus is fundamentally a health crisis and has affected many countries globally. It demonstrates our shared fate as human beings and why inclusive growth and development needs should be at the heart of all multilateral organizations, none more so the WTO. Global cooperation is therefore critical to ensure that its treatment is accessible and affordable to the world as a public good. The TRIPS Agreement, including its flexibilities, can contribute to this objective.
Over dependence of Africa on imports of medicinal and pharmaceutical products subjects African healthcare systems to serious vulnerabilities, and overwhelming social and economic consequences of COVID-19. It is evident from past experiences that while in the middle of a health crisis, the critical success factors are speed, sharing initiatives and solutions being undertaken. Initiatives such as “Access to COVID-19 Tools (ACT) Accelerator” are, therefore, important to accelerate the development and availability of COVID-19 tools to ensure equitable global access to safe, quality, effective and affordable COVID-19 diagnostics, therapeutics and vaccines. An agreement on how these tools will be allocated equitably across countries through (new) intellectual property flexibilities is key to successfully addressing public health crises – now and in the future.
We emphasize the importance to take policy and legislative measures to ensure that patents and other intellectual property do not erect barriers to access to medicines, diagnostics, vaccines, and medical supplies and devices.
We reiterate the urgent cooperation and coordination needed to facilitate the local manufacturing as well as the importation of essential medical supplies, devices, or technologies, including diagnostics, medicines, and vaccines – at reasonable and affordable terms.
Multilateral Trading System
We underscore that the current environment is marked by great uncertainty. It remains unclear how the coronavirus will evolve in different countries and regions. Therefore, the work of the WTO must take these realities into account.
We emphasize the need for transparency, inclusivity and effective participation of all Members on issues that affect their interests, bearing in mind the capacity constraints our countries face in this respect.
We stress that given the structural vulnerability of African economies and resultant concerns about their overall capacity and resilience, there is need for policy options that respond to the specific challenges facing African countries, enhance preparedness for future crises and to pursue economic recovery, as well as realize structural transformation in Africa.
We emphasize the importance of international trade and the centrality of the WTO in facilitating trade in essential medical goods and agriculture products.
In this connection, the African Group supports the view that “emergency measures designed to tackle COVID-19, if deemed necessary, must be targeted, proportionate, transparent, and temporary,” and should be “consistent with WTO rules.”
We reiterate that cooperation and coordination is critical to protect human life and to lay the foundations for a strong economic recovery and a sustainable, balanced, and inclusive growth with an emphasis of building a more resilient trading system. Therefore, we urgently need to engage constructively on the role the WTO can play to provide developing and least developed countries with the necessary policy space to rebuild their domestic industries.
We recommend that Aid for Trade and the EIF further support economic recovery (production, exports, imports and consumption) in developing and least-developed countries for the benefit of women, young people and micro, small and medium-sized enterprises, who are most affected by the economic and social difficulties aggravated by the COVID-19 pandemic.
Agriculture
We stress that the COVID-19 crisis is contributing to increased food insecurity and malnutrition as currencies are weakening, more vulnerable segments including small farmers and seasonal workers are experiencing income shocks and prices of staple foods are rising in many parts of Africa. The World Food Programme estimates suggest that deteriorating employment conditions and other factors may have pushed almost 12 million people in Sub Saharan Africa into acute food insecurity since February 2020.
This is compounded by other existing crises in many African countries. As per the UN June 2020 policy brief “The Impact of COVID-19 on Food Security and Nutrition”, in some parts of Africa the March to May rainfall period was one of the wettest the region has seen since 1981, resulting in localized flooding and river overflows, population displacement, as well as infrastructure and crop damage. Further, Abundant rains have also promoted the breeding and development of Desert Locusts and protracted the outbreak across the region. Combining the COVID-19, flooding and the spread of these locusts, many African countries find themselves combatting a triple menace.
We reiterate the need for reform in the Agreement on Agriculture with priority given to providing our countries – especially NFIDCs and LDCs – with the policy space they need to support low income and resource poor farmers who are extremely vulnerable to the effects of COVID-19. Priority should also be given to delivering on issues directly related to food security and on which Ministerial mandates exist, including cotton, SSM and PSH. Addressing long outstanding trade distorting domestic support is critical to promoting resilience in agriculture trade.
Industrialization
We underscore the importance of the AfCFTA and the development integration agenda that aims to promote industrialization and diversification. We call for a Multilateral Trading System (MTS) that supports Africa’s structural transformation agenda which is key to building resilient economies that can respond efficiently to crises of this nature. The effects of COVID-19 have highlighted the imperatives to deal with strategic vulnerabilities and support efforts to diversify supply chains.
Digitalization
COVID-19 has highlighted the importance of e-commerce and digital transformation. However, the digital divide both within and between countries still remains, especially in Africa. This has a limiting effect to the equitable and meaningful distribution of the economic and transformational benefit of e-commerce and digital trade.
We call on all WTO Members to commit to the implementation of the 1998 Work Programme on E-commerce. Global rules without addressing the developmental aspects on e-commerce will only serve to exacerbate the existing disparities. Trade, debt and finance interlinkage.
We emphasize the interrelationship between trade, debt and finance in order to lend international support to the financing needs of developing countries to deal with the immediate and long-term consequences of the crisis.
It is important to highlight that pre COVID-19 Africa was already faced with a debt crisis. Consequently, Africa needs support with debt relief especially in light of the sharp declines in commodity prices, trade, and tourism as a direct result of COVID-19 pandemic are causing government revenues to dry up and negatively affecting efforts to adequately respond to the containment of the virus. Debt relief will, therefore, help African countries channel scarce resources towards the emergency response to COVID-19. We call upon the WTO membership to further consider the discussions conducted with respect to debt restructuring and debt relief in other international forums.
There is a need to consider effectively within the WTO context any immediate balance of payments needs and support the most affected sectors and vulnerable groups of people and other urgent pandemic related needs.
S&D
We stress that trade is an important part of the economic recovery process. Immediate and longer-term measures should be designed to build resilience and ensure an inclusive multilateral trading system that is responsive to the needs of developing countries, especially LDCs. A clear articulation of special and differential treatment across various WTO agreements has to remain an integral part of all trade agreements and negotiations. Development considerations must underpin WTO Members’ trade and investment responses and recovery plans given the impact of COVID-19 on developing countries and LDCs, notably those in Africa.
WTO Members should, therefore, be aware that it is in everyone’s benefit to avoid to the extent possible that the inequality gap widens. Special and differential treatment is therefore necessary to help address the challenges posed by future global crises, such as the COVID-19 pandemic.
We re-iterate the urgent need for strengthening S&D provisions which are critical to promoting public health, accelerate industrialization, upgrade and modernize manufacturing, promote technology transfer and close the digital divide. As well as implement governmental assistance measures to economic development available under GATT Article XVIII.
Conclusion
The African Group reiterates its commitment to the Multilateral Trading System (MTS) and to work with all WTO Members for a MTS that contributes to decent employment, sustainable development, improved living standards, and inclusive growth recognized in the Marrakesh Agreement and reaffirmed in the Doha Development Agenda.
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tralac’s Daily News selection
The first round of talks for the proposed Kenya-USA FTA will take place from 9-17 July. Multi-video: CS Maina unveils negotiation guide
Proposed Kenya-United States FTA Agreement: Negotiation principles, objectives and scope (GoK)
Kenya and the US, in February 2020 jointly announced their intent to initiate negotiations on a Free Trade Agreement between themselves. Towards this end, the Ministry of Industrialization, Trade and Enterprise Development, having consulted and heard from various stakeholders, developed Negotiating Objectives and Principles to guide the negotiations for this first bilateral FTA between Kenya and the US. This is now made available for public review.
pdf Proposed Kenya-US FTA Agreement: Negotiation Principles, Objectives and Scope (318 KB)
The following principles will be articulated and guide the negotiations:
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The FTA will be WTO compatible and will allow for application of the ‘Special and Differential Treatment’
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The FTA will be an instrument for economic and trade development
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The FTA negotiations shall respect the commitments that Kenya has taken at Multilateral (WTO), Continental (AfCFTA), Regional (EAC, COMESA, TFTA) and Bilateral level
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The FTA will preserve and build on AGOA acquis
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The Negotiations shall cover substantially all trade
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Any EAC Partner State that did not participate in these negotiations at the outset should be allowed to join the negotiations, subject to terms and conditions already agreed or accede to the concluded FTA.
Related: The East African Trade Network has issued a statement opposing the FTA
Building trade integration dynamics in the Indian Ocean Rim Association: A technical analysis (Institute for International Trade)
This technical report, prepared for the Australian Government Department of Foreign Affairs and Trade, examines the evolution of trade, investment and regional integration amongst IORA member states since 1997 and makes observations about how to enhance intraregional trade to support ongoing discussions in this regard. Section 2 briefly describes the methodologies used in the technical analysis, encompassing data sources and techniques. It also sets out a few caveats regarding the availability of key data, as well as limitations of certain data sets.
Section 3 anchors the trade and investment analysis in a high-level overview of IORA members’ economic propositions. This builds on previous assessments, as indicated in the corresponding text. Two levels of supplementary analysis are provided: aggregate IORA members’ data set against a reference group of countries and regions including IORA dialogue partners; and a brief review of economic performance and structural change within IORA members.
Section 4 discusses IORA members’ trade performance, starting with a comparison of their trade performance over the past two decades with comparator regions, for both goods and services. It then analyses the current trade structure of IORA members disaggregated by trading partners, product categories, and individual IORA member. The section concludes with an analysis of trade flows among sub-regions within the IORA membership.
Section 5 changes focus from trade in final goods to trade in parts and components through the prism of GVC participation. It considers the degree to which IORA members collectively, and individually, are engaging in GVCs. Then the intensity of trade in parts and components, and countries from which these products are sourced, is mapped in order to judge how far IORA members have maximised the developmental advantages to be gained from GVCs. Section 6 explores investment flows into and from IORA members, in comparative perspective.
Nigeria Development Update (World Bank)
The report, pdf Nigeria in times of COVID-19: Laying foundations for a strong recovery (2.04 MB) estimates that Nigeria’s economy would likely contract by 3.2% in 2020. This projection assumes that the spread of COVID-19 in Nigeria is contained by the third quarter of 2020. If the spread of the virus becomes more severe, the economy could contract further. Before COVID-19, the Nigerian economy was expected to grow by 2.1% in 2020, which means that the pandemic has led to a reduction in growth by more than five percentage points. The macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus.
Oil represents more than 80% of Nigeria’s exports, 30% of its banking-sector credit, and 50% of the overall government revenue. With the drop in oil prices, government revenues are expected to fall from an already low 8% of GDP in 2019 to a projected 5% in 2020. This comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy. Meanwhile, the pandemic has also led to a fall in private investment due to greater uncertainty, and is expected to reduce remittances to Nigerian households, which in recent years have been larger than the combined amount of foreign direct investment and overseas development assistance.
Extracts: Nigeria’s Border Closure - Impacts and the Way Forward
In light of the COVID-19 pandemic, the closure order has now been extended indefinitely and broadened to include any kind of cross-border activity. This analysis highlights six key impacts of Nigeria’s border closure and subsequent COVID-19 restrictions. These comprise:
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an increase in inflation, especially for food products;
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lower household consumption due to higher food prices, with the average Nigerian now having to pay two percent more for the same basket of goods;
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a decrease in welfare standards among Nigeria’s neighbors, especially Benin;
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a marked shift in formal trade to Nigeria and away from Benin, leading to some improvement in customs revenues;
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a short-term but not potentially not sustained reduction in smuggling; and
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a decline in trade for some private sector businesses, although precise outcomes vary greatly depending on the industry sector, import requirements, and customer base of individual firms.
The COVID-19 crisis provides an opportunity for Nigeria to cooperate more closely with its neighbors on shared priorities, including public health, counterterrorism, trade and investment. Nigeria’s industries will stand to benefit from streamlining cross-border trade. Making transit procedures and logistical services more efficient would also present advantages. Among the anticipated benefits of these measures would be to strengthen Nigeria’s participation in regional and global value chains, lower the prices consumers face, accelerate economic diversification, and increase value addition and competitiveness of domestic firms.
East Africa Regional Market and Trade Update: June 2020 (WFP)
On regional cross border trade: COVID-19 related disruptions and delays at the Kenya-Tanzania border led to reduced cross-border trade volumes of both maize and beans from Tanzania to Kenya in April and May 2020, compared to the same period last year and the five-year average. Beans imported from Ethiopia into Kenya also dropped drastically during the same period. Despite some reported challenges initially at the Malaba and Nimule Borders that increased delivery lead-times, overall, maize, sorghum and beans imports from Uganda into Kenya and South Sudan in April-may 2020 was slightly higher than the same period in 2019. This was after an initial dip in cross border trade volumes in March following COVID-19 related restrictions.
pdf East Africa: Market and Trade Update, June 2020 (2.10 MB)
There are 11 main trade corridors that WFP is using to deliver food to multiple in-country destinations in the region. Status of major corridors is as follows.
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Northern Corridor:
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Mombasa to: Uganda, Rwanda, Burundi, DRC - fully functional with limited delays at border crossings because of testing of divers
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Mombasa to: Uganda and South Sudan through Nimule - fully functional
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Mombasa to Juba South Sudan through Nadapal - partly functional
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Mombasa to Ethiopia through Moyale - partially functional
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Central Corridor and Lake Tanganyaki Corridor:
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Dar es Salaam Tanzania to Burundi, Rwanda and Uganda - fully functional
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Dar-es Salaam Burundi through rail and Lake Tanganyika - fully functional
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Zambia-Burundi through Lake Tanganyika - fully functional although with quarantine restrictions at Bujumbura Port
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Berbera-Addis Ababa-Gambela corridor - partially functional
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Djibouti-Addis Ababa-Gambela corridor - fully functional
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Southern Somalia Trade Corridor - most roads closed or inaccessible although ports are operational. Most roads in northern regions are functional
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Sudan-South Sudan Corridor - partially functional-the border is open for humanitarian cargo, after obtaining clearance & approval from Authorities. Road convoys are also experiencing challenges.
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Sudan-South Sudan Corridor - partially functional - From Ethiopia, road and river access to South Sudan is allowed only for essential goods.
Exploring the impact of COVID-19 in Africa: A scenario analysis to 2030 (ISS)
This report presents three scenarios on the potential impact of COVID-19 in Africa and compares that to a pre-COVID-19 baseline, using the International Futures forecasting platform, Ifs. The likely impacts are then examined on economic growth, per capita income, poverty and the attainment of selected SDG targets with a forecast horizon to 2030. The report concludes with four main policy recommendations aimed at reducing vulnerability and strengthening Africa’s resilience. These recommendations aim to make a robust contribution to the debate about policy options for Africa facing the international community, African governments and in-country stakeholders. In addition to the scenarios presented in this report, a parallel qualitative approach undertook a series of three dialogues that provided a platform for deliberation between economists, political analysts, public health experts and other development practitioners from Africa as well as global experts on Africa. The impact of COVID-19 on current and future trends and drivers of change was discussed. The focus of the study was on 15 African countries considered to be broadly representative of Africa’s developmental, regional and cultural diversity. [The authors: Jakkie Cilliers, Marius Oosthuizen, Stellah Kwasi, Kelly Alexander, TK Pooe, Kouassi Yeboua, Jonathan D Moyer]
pdf Tax Transparency in Africa 2020: Africa Initiative Progress Report, 2019 (7.29 MB) (AU)
The report enlightens policy makers and citizens by presenting concrete case studies showing how exchange of information has been useful in tax investigations carried out by several African tax administrations to improve tax transparency and tackle tax evasion. It shows significant progress has been made on two pillars of the Africa Initiative: (i) Raising political awareness and commitment in Africa and (ii) Developing capacities in African countries in tax transparency and exchange of information.
Particularly, progress has been made through the expansion of exchange of information networks of African countries of up to 3 262 bilateral relationships compared to 2 523 in 2018. The increase in exchange of information requests translated into additional tax revenue for countries. More African countries can now use cross-border exchange of information in their tax investigations.
As a step forward, the African Union is committed to playing a leadership role in the implementation of the Africa Initiative on tax transparency and keeping the discussions at the high political level to ensure that all Member States join the Initiative. The Union will also make sure that Member States prioritise domestic resource mobilisation by improving good governance and increasing tax transparency among jurisdictions. The African Union will spare no effort to work with policy decision makers and tax administrations of its Member States, the Global Forum and development partners to ensure the sustainable financing of its development.
Note: 33 African countries responded to the Tax Transparency in Africa 2020 questionnaire: Angola, Benin, Botswana, Burkina Faso, Cameroon, Cabo Verde, Chad, Côte d’Ivoire, Eswatini, Gabon, Ghana, Guinea, Guinea Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Tanzania, Togo, Tunisia, Uganda.
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Proposed Kenya-United States FTA Agreement: Negotiation Principles, Objectives and Scope
Kenya and the United States, in February 2020, jointly announced their intent to initiate negotiations on a Free Trade Agreement (FTA) between themselves.
Towards this end, the Ministry of Industrialization, Trade and Enterprise Development (Republic of Kenya), having consulted and heard from from various stakeholders, developed Negotiating Objectives and Principles to guide the negotiations for this first bilateral FTA between Kenya and the US. This is now made available for public review.
INTRODUCTION
Kenya and United States of America (USA) have strong and deep-rooted diplomatic relations which have existed since 1964. This is demonstrated by Kenya hosting one of the largest US diplomatic missions in Africa. Similarly, Kenya has an Embassy in Washington DC.
On the trade front, USA and Kenya have strong trade relations demonstrated by growing exports and imports which have grown over the years. USA is the third significant destination market for Kenya, a position that has been sustained over the years after the East Africa Community (EAC), European Union (EU) and Common Market for Eastern and Southern Africa (COMESA). Kenya’s excellent export performance in the USA is mainly attributed to the duty-free market access preferential treatment under Africa Growth Opportunity Act (AGOA).
As AGOA expires in 2025, Kenya’s option for trading with the USA will be in accordance to the WTO, to be either under Generalized System of Preferences (GSP) because of Kenya’s status as a developing country or a trade arrangement under Free Trade Area as provided under WTO’s Article xxiv of General Agreement on Tariffs and Trade (GATT) 1994.
Sustaining current export performance to the USA will require a trade arrangement that would guarantee duty free quota free market access for Kenyan products to the USA.
It is in this spirit that on 27th August 2018 His Excellency President Uhuru Kenyatta and President Trump, announced the commencement of negotiations leading to a conclusion of a Free Trade Area Agreement (FTA). As a first step, both countries set up a Trade and Investment Working Group (TIWG) to spear head the negotiations
The TIWG came up with the four objectives coving the following thematic areas
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Maximizing the remaining years of AGOA;
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Strengthening commercial cooperation between the two countries;
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Development of short-term solutions to reduce barriers to trade and investment; and
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Exploratory talks on future Kenya – U.S.A. bilateral trade and investment relations
Pursuant to the above development, the proposed FTA is based on the thematic area on ‘exploratory talks on future Kenya – U.S.A. bilateral trade and investment relations’.
On 6th February 2020, H.E President Uhuru Kenyatta and H.E. President Donald Trump in Washington, DC jointly and publicly announced the intent for Kenya and USA to negotiate and conclude and FTA. Ahead of the announcement, both sides had identified Trade in Goods, Trade in Services, Intellectual Property Rights, including investment and other trade related areas as possible areas for negotiations.
Kenya-USA FTA negotiations provide the country with a unique opportunity to enter into a bilateral trade and development cooperation negotiations with one of the global economic powerhouses -the United State of America which is Kenya’s third largest export market and seventh overall trading partner.
The negotiations will also make good use of the fraternal relationship between Kenya and USA and especially for Kenya as one of key non-oil African trading partner of United States.
PRINCIPLES
The following principles will be articulated and guide the negotiation
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The FTA will be WTO compatible and will allow for application of the ‘Special and Differential Treatment’
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The FTA will be an instrument for economic and trade development.
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The FTA negotiations shall respect the commitments that Kenya has taken at Multilateral (WTO), Continental (AfCFTA), Regional (EAC, COMESA, TFTA) and Bilateral level
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The FTA will preserve and build on AGOA acquis
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The Negotiations shall cover substantially all trade
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Any EAC Partner State that did not participate in these negotiations at the outset should be allowed to join the negotiations, subject to terms and conditions already agreed or accede to the concluded FTA
NEGOTIATING OBJECTIVES
General Objectives
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To initiate, negotiate and conclude a WTO compatible Free Trade Area (FTA) Agreement based on the International and WTO General principles and one that promotes preferential and mutually beneficial trade, investment and economic relations; The negotiations shall also be consistent with GATT 1994 Article XXIV, Part IV on Trade and Development and GATS Article V.
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To ensure that Kenya benefits from the American foreign policy towards Africa and Kenya in particular with a view to reaping the benefits of first mover advantage of such trade agreement with USA
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To ensure that the FTA agreement pays fidelity to Kenya’s commitments and obligations with existing Multilateral, Regional and Bilateral trade agreements for which Kenya has signed and ratified.
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To make sure that the FTA provides for safeguards, and exceptions to protect Kenya’s nascent industrial and agricultural sectors.
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To increase the inflow of USA Foreign Direct Investment into Kenya that will improve vertical and horizontal linkages in the Kenyan economy.
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To take advantage of the opportunities created within the negotiations to provide market access for identified goods and services.
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To take advantage of the opportunities created within the negotiations that provide for national and regional advantages arising from foreseen commercial consequences associated with global health, economic and social dynamics
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To promote Kenya’s position as a transit hub for goods and services that has been availed by the expansion of land sea and air transport infrastructure to attract investments.
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To ensure the expansion of value chains, especially in production, value addition and transit trade and to create demonstrable economic benefits to the Kenyan economy especially creation of decent jobs and sustainable livelihoods.
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To make sure that the outcome of the negotiations will become the basis of future FTAs with other African Countries, Kenya and the USA will endeavour to brief interested African Countries periodically.
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To make sure that the outcome of the negotiations contains provisions for technical assistance and capacity building which will be made available to enable Kenya to fully participate in the negotiations, implement obligations under the FTA.
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To make sure that the negotiations on trade in goods, trade in services, investment and other areas will be conducted in an agreed sequence to ensure a balanced outcome.
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To create a framework through which any EAC Partner State that did not participate in these negotiations at the outset is allowed to join the negotiations, subject to terms and conditions that would be agreed between the USA and Kenya.
Additional resources and analyses
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USTR: United States-Kenya Negotiations: Summary of Specific Negotiating Objectives
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AGOA.info: Proposed Kenya - USA Free Trade Agreement
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United States - Republic of Kenya Trade Agreement: USTR Federal Register docket folder
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tralac Working Paper: The United States-Kenya Free Trade Area (FTA): insights into the bilateral trade relationship and early progress on setting terms for an FTA
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tralac Trade Brief: The proposed US – Kenya Trade Deal: Context and Consequences
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tralac’s Daily News selection
UNCTAD’s latest Policy Brief: Making trade agreements work for gender equality - exploring data gaps and availability
The SADC extra-ordinary Council of Ministers Meeting, held virtually on 23 June, has approved the Revised Regional Guidelines on Harmonization and Facilitation of Cross Border Transport Operations across the Region, and Regional Standard Operating Procedures for the Management and Monitoring of Cross Border Road Transport at Designated Points of Entry and Covid-19 Checkpoints. The revision of the Regional Guidelines has been informed by the lessons learnt from the implementation of the original Guidelines which were approved by Council on 6 April 2020, to facilitate harmonisation in the movement of essential goods and services across borders during the COVID-19 Pandemic. The approved guidelines aim to first and foremost, balance, realign, harmonise and coordinate COVID-19 response measures with the requirements for trade and transport facilitation; secondly, to promote safe trade and transport facilitation for economic growth and poverty alleviation in the SADC region; and thirdly, to facilitate the adoption and implementation of harmonised standard operating procedures for management and monitoring of cross border road transport at designated points of entry and COVID-19 checkpoints.
The revised guidelines, will also facilitate the implementation of SMART corridor trip monitoring system for management of the registration of cross border trips through, recording, monitoring and surveillance of driver wellness; tracking of vehicles loads and drivers; contact tracing; queue management; as well as statistical analysis and reporting. [Note: Various downloads available]
SADC Private Sector and Business Associations: Communiqué on COVID-19 trade challenges and post recovery strategies. The Directors of National Private Sector Apex Body and Regional Business Body Associations in the SADC region held an online meeting on 10 June 2020 to discuss the post COVID-19 recovery strategies. The meeting noted that the COVID-19 outbreak in SADC has brought the following challenges on trade:
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Lack of information on the measures that are being applied by the countries across the corridors affecting the movement of cargo or trade flows.
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Lack of harmonisation of interventions, measures, and recommendations to COVID-19 at country and regional level.
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Cargo blockages caused by temporary shutdown of inland ports and seaports. This problem continues despite efforts by different stakeholders to find a permanent solution.
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Varying and non-standardised COVID-19 testing procedures across different member states resulting in slower processes at border posts.
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Lack of clear strategy towards movement of essential cargo and the repatriation of citizens with member states in the region.
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Challenges in the classification of essential commodities i.e. different countries have different classifications.
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Whilst the NTB reporting and monitoring mechanism is recording some of the challenges being faced by the business during this time, the process of monitoring and resolution usually takes time.
In brief:
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SADC Regional Response to COVID-19: Transport and trade facilitation, climate change and the environment
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COMESA BC and SADC BC joint position statement: Addressing trade restrictive measures during the covid-19 pandemic (pdf)
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Conference on Africa’s Leadership role in COVID-19 Vaccine Development and Access: remarks by AUC chairperson President Cyril Ramaphosa
- Coronavirus may trigger debt emergency across Africa: summary of a new study
President Buhari urges caution on ECOWAS common currency (GoN)
President Muhammadu Buhari yesterday cautioned that the ambition for Eco regional currency could be in ‘serious jeopardy,’ unless member states complied with agreed processes of reaching the collective goal. President Buhari also expressed concern over the decision of francophone countries that form the West African Economic and Monetary Union (UEMOA) to replace the CFA Franc with Eco ahead of the rest of Member States. The President delivered Nigeria’s position on the new regional currency at a virtual extraordinary meeting of the Authority of Heads of State and Government of the West African Monetary Zone. The meeting discussed the implementation of the ECOWAS Monetary Cooperation Programme and the ECOWAS Single Currency Agenda. [Gambia remains committed to the ECO: urges member states to do same]
The IMF’s pdf World Economic Outlook Update (June 2020) (656 KB) : A crisis like no other, an uncertain recovery (IMF)
Global growth is projected at –4.9% in 2020, 1.9 percentage points below the April 2020 World Economic Outlook forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4%. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020. As with the April 2020 WEO projections, there is a higher-than-usual degree of uncertainty around this forecast. Extract: Overall, growth in the group of emerging market and developing economies is forecast at –3.0% in 2020, 2 percentage points below the April 2020 WEO forecast. Growth among low-income developing countries is projected at –1.0% in 2020, some 1.4 percentage points below the April 2020 WEO forecast, although with differences across individual countries. Excluding a few large frontier economies, the remaining group of low-income developing countries is projected to contract by –2.2% in 2020.
ITC’s 2020 SME Competitiveness Outlook: The great lockdown and its impact on small business
The novel coronavirus COVID-19 is having a profound impact on global trade and the businesses that drive it. With countries in various stages of lockdown or loosening confinement periods, it is becoming clear that the virus has particularly impacted SMEs. Released yesterday, the 2020 edition of the International Trade Centre’s 2020 SME Competitiveness Outlook reveals just how profoundly SMEs and global supply chains have been tested by the COVID-19 pandemic and left international trade in turmoil.
While most countries experienced some form of shutdown, the findings in the SME Competitiveness Outlook highlight that it was lockdowns in China, the European Union and the United States that have had the greatest impact on trade. Together these three economies account for 63% of world supply-chain imports and 64% of supply-chain exports. The report estimates that the global disruption of these manufacturing hubs will amount to $126 billion in 2020. This disruption is also having a negative knock-on effect on developing countries. The SME Competitiveness Outlook predicts that African exporters are set to lose more than $2.4 billion in global industrial supply-chain exports as a result of factory shutdowns in China, the EU and the US. The bulk of this loss - more than 70% - is caused by the temporary disruption of the supply-chain linkages with the EU.
Future drivers of growth in Rwanda: Innovation, integration, agglomeration, and competition (World Bank)
Rapid economic growth is Rwanda’s overarching development goal— a strategic choice to anchor its long-term vision. Vision 2050 encapsulates this choice with long-term, income-based goals that aim for upper-middle-income status by 2035 and high-income status by 2050. With this vision, Rwanda has aligned itself with the successful East Asian economies that began their development journey with a similar quest for high growth. The prioritization of long-term growth recognizes an important truth—sustained growth does not just happen, especially in a global landscape marked by forces of technology, trade, and tremendous competition. It requires a combination of leadership, social cohesion, and deep investments in core capabilities—of people, firms, and institutions—to harness the opportunities on offer. The implications of different growth pathways are staggering. At its current pace of growth (4% per capita), Rwanda will barely cross the threshold for lower middle- income status by 2035. At growth of 7% per capita, average income would reach $2,400 (2017 prices). To become an upper-middle-income country by 2035, Rwanda will need to grow at more than 10% per capita. In 2035, the economic landscape of Rwanda could resemble that of present-day Bangladesh or, alternatively, surpass that of today’s Vietnam or even Georgia and Indonesia. Extracts from Chapter 2: Transformation through trade - using exports and regional integration to drive future growth (pdf)
A key focus should be on revising and lowering the common external tariff within the EAC to benefit Rwandan producers and exporters that use imported inputs and poor consumers who disproportionately consume heavily taxed imports. The integrated market can also be extended by promoting harmonized standards in goods and services and by reducing nontariff barriers. For key sectors such as energy and finance, the EAC and SADC should develop regional supply chains that can result in economies of scale. Intra-industry regional trade competition can force firms to larger scale and drive out less productive firms. Finally, Rwanda could advocate for stronger EAC and SADC secretariats that can review and discuss potential violations of common market protocols. The recently agreed AfCFTA, a pan-African initiative to liberalize continental trade, can also be advantageous, once details are penned and implementation modalities agreed to.
Lower policy barriers to services competition and stronger services trade within the region would enhance competitiveness across the EAC. Rwanda should look to broaden value added tax exemptions on services exports by aligning itself with leading African countries such as Mauritius and South Africa. Rwanda would benefit from elevating tourism promotion in a separate, high-visibility strategy that seeks to expand leisure tourism beyond gorillas and to convince tourists to spend more time in Rwanda. In the decades ahead, Rwanda is strategically positioned to take advantage of exports in mining, education, and business services. Realizing these opportunities requires seeking out foreign firms and facilitating near-term services trade for EAC and SADC professionals, which can be strengthened by extending mutual recognition agreements beyond architecture, accounting, and engineering to include, for example, legal, finance, and consulting services. Abolishing limits in work-permit regimes for all eligible professionals is also critical and would help to facilitate services trade for short-term assignments. However, stimulating services exports requires considerable investment in addressing Rwanda’s skills deficit. [Download the overview report (Vol 2) here]
Zambia: Digital Economy Diagnostic Report (World Bank)
This digital economy diagnostic assesses Zambia’s strengths and weaknesses with respect to five pillars that together form the foundation upon which the benefits of digital transformation can be realized. These pillars are digital infrastructure, digital skills, digital entrepreneurship, digital platforms, and digital financial services. This analysis finds that Zambia has made significant strides on its path to digital transformation over the past few years. Progress is particularly evident in digital infrastructure, digital financial services, and digital platforms, while more significant gaps remain in digital skills and digital entrepreneurship. This report suggests that the digital transformation strategy include four strategic thrusts:
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promoting greater use of digital technologies in the economy
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reducing government transaction costs and reducing the cost of doing business through digitally optimized government systems
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improving the adoption of innovative digital solutions by enabling entrepreneurship
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leveraging data and digital systems to improve sector-specific outcomes in secondary towns and rural areas.
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Speech by Dr Denny Kalyalya (Governor, Bank of Zambia)
Scaling up disruptive agricultural technologies in Africa (World Bank)
This study — which includes a pilot intervention in Kenya (pdf) — aims to further the state of knowledge about the emerging trend of disruptive agricultural technologies (DATs) in Africa, with a focus on supply-side dynamics. The first part of the study is a stocktaking analysis to assess the number, scope, trend, and characteristics of scalable disruptive technology innovators in agriculture in Africa. From a database of 434 existing DAT operations, the analysis identified 194 as scalable. The second part of the study is a comparative case study of Africa’s two most successful DAT ecosystems in Kenya and Nigeria, which together account for half of Sub-Saharan Africa’s active DATs. The objective of these two case studies is to understand the successes, challenges, and opportunities faced by each country in fostering a conducive innovation ecosystem for scaling up DATs. The case study analysis focuses on six dimensions of the innovation ecosystem in Kenya and Nigeria: finance, regulatory environment, culture, density, human capital, and infrastructure. The third part of the study is based on the interactions and learning from a pilot event to boost the innovation ecosystem in Kenya.
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President Buhari urges caution on ECOWAS common currency
President Muhammadu Buhari on Tuesday cautioned that the ambition for Eco regional currency could be in ‘serious jeopardy,’ unless member states complied with agreed processes of reaching the collective goal.
President Buhari also expressed concern over the decision of francophone countries that form the West African Economic and Monetary Union (UEMOA) to replace the CFA Franc with Eco ahead of the rest of Member States.
The President delivered Nigeria’s position on the new regional currency at a virtual extraordinary meeting of the Authority of Heads of State and Government of the West African Monetary Zone (WAMZ).
The meeting discussed the implementation of the ECOWAS Monetary Cooperation Programme (EMCP) and the ECOWAS Single Currency Agenda.
‘‘Your Excellencies, you all are familiar with the history of the Eco thus far, so I will not bore you with that. We reverted to a single track approach, giving up Eco which is the original idea of the WAMZ so the ECOWAS-wide programme could thrive.
‘‘In this regard, we have made remarkable progress including the adoption of the Exchange Rate regime, the name and model of the common Central Bank and the symbol.
‘‘We have urged our Ministers towards an expeditious path to success. It, therefore, gives me an uneasy feeling that the UEMOA Zone now wishes to take up the Eco in replacement for its CFA Franc ahead of the rest of the Member States.
‘‘This is in addition to deviating from the Community Act on a consistent attainment of convergence in the three years running up to the introduction of the currency, and our subsequent reinforcing directives.
‘‘I am informed that the French Ministers have approved a bill to reform the CFA Franc and most, if not all of the UEMOA Member States, have already passed legislations in their various Parliaments to that effect.
‘‘It is a matter of concern that a people with whom we wish to go into a union are taking these major steps without trusting us for discussion,’’ he said.
President Buhari, who assured ECOWAS leaders of Nigeria’s commitment to the ECOWAS single currency, urged them to critically consider the recommendations made by the Convergence Council and take a common position to safeguard the West African Monetary Zone from the pitfalls of a questionable union.
He affirmed Nigeria’s support for a monetary union with the right fundamentals, which guarantees credibility, sustainability and overall regional prosperity and sovereignty.
According to the President, Nigeria also believes that given the potential contractions and even losses from the global Covid-19 pandemic, member states cannot but be too cautious about ensuring compliance with the set standards.
‘‘We cannot ridicule ourselves by entering a union to disintegrate, potentially no sooner than we enter into it.
‘‘We need to be clear and unequivocal about our position regarding this process. We must also communicate same to the outside world effectively. We have all staked so much in this project to leave things to mere expediencies and convenience.
‘‘My dear colleagues, Heads of State and Government, It is obvious that we are at a crossroads.
‘‘We must proceed with caution and comply with the agreed process of reaching our collective goal while treating each other with utmost respect. Without these, our ambitions for a strategic Monetary Union as an ECOWAS bloc could very well be in serious jeopardy,’’ he said.
In the light of the caution raised by Nigeria and some other West African countries at the meeting, ECOWAS leaders resolved to convene an enlarged meeting of the regional bloc on the single currency issue.
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SADC Council approves revised regional guidelines to ease cross-border transport operations and standardise operating procedures
The Southern African Development Community (SADC) extra-ordinary Council of Ministers Meeting held virtually on 23rd June 2020 has approved the Revised Regional Guidelines on Harmonization and Facilitation of Cross Border Transport Operations across the Region, and Regional Standard Operating Procedures for the Management and Monitoring of Cross Border Road Transport at Designated Points of Entry and Covid-19 Checkpoints.
The revision of the Regional Guidelines has been informed by the lessons learnt from the implementation of the original Guidelines which were approved by Council on 6th April 2020, to facilitate harmonisation in the movement of essential goods and services across borders during the COVID-19 Pandemic. The approved guidelines aim to first and foremost, balance, realign, harmonise and coordinate COVID-19 response measures with the requirements for trade and transport facilitation; secondly, to promote safe trade and transport facilitation for economic growth and poverty alleviation in the SADC region; and thirdly, to facilitate the adoption and implementation of harmonised standard operating procedures for management and monitoring of cross border road transport at designated points of entry and COVID-19 checkpoints.
The revised guidelines, will also facilitate the implementation of SMART corridor trip monitoring system for management of the registration of cross border trips through, recording, monitoring and surveillance of driver wellness; tracking of vehicles loads and drivers; contact tracing; queue management; as well as statistical analysis and reporting.
In his opening remarks to the virtual meeting Hon. Prof. Palamagamba John Kabudi, Minister of Foreign Affairs and East African Cooperation of the United Republic of Tanzania, and Chairperson of the SADC Council of Ministers, reiterated the call for coordinated regional response in the fight against COVID-19 and called on the SADC region to continue exhibiting determination and solidarity while addressing the COVID-19 pandemic. He said it was important to put up stringent measures to contain the pandemic, and work as a coordinated unit in nurturing the very aim of integration amongst Member States, which is to boost intra-regional trade.
In her welcome remarks, the Executive Secretary of SADC, H.E. Dr Stergomena Lawrence Tax highlighted that the COVID-19 Pandemic has had devastating impact on the region, which was now operating under very difficult and challenging times in which the social-economic fabrics of Member States and the Region were negatively impacted and brought under severe stress, requiring extra-ordinary measures.
Dr Tax added that unhindered facilitation of movement of people and industrial goods across borders was a necessary step now that Member States were beginning to come out of the lockdowns to resume normal business and industrial operations. “All indications show that until a vaccine or treatment for COVID-19 is found, which might take a while, the region has to remain pragmatic and vigilant by considering both, health requirements, but also socio-economic imperatives,” Dr Tax, said, and added that the region needed to move on and continue facilitating safe trade, while promoting economic growth, poverty alleviation, and protecting the wellbeing and livelihoods of the SADC citizens.
Council also urged Member States who have not yet established and or activated National Transport and Trade Facilitation Committees (NTTFCs) with expanded membership to include public health, public security and private sector, in order to address COVID-19 remedial measures, to do so. Further, Member States were urged to collaborate with Secretariat in a survey to identify capacity building needs of NTTFCs and the design of a program to strengthen them.
Council also directed the Expanded Technical Committee to develop guidelines aimed at encouraging the development of local and regional pharmaceutical manufacturing capacities that are safe and uphold highest standards of integrity.
Council noted the initiative by the Chairperson of the African Union, supported by the African Union Special Envoy of sourcing COVID-19 medical supplies and equipment from the ‘Africa Medical Supplies Online Platform’, as a single marketplace, and encouraged Member States to use the Platform.
Council extended appreciation to the Government of India for her readiness to support SADC region in fight against COVID-19.