Search News Results
Communiqué from Private Sector and Business Associations in SADC on COVID-19 Trade Challenges and Post Recovery Strategies
Background
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 directors acknowledge the paramount importance of protecting the health, and safety of the Southern African people and, as the regional private sector, we commit and join hands with the Governments to ensure that the business community complies with the measures to protect the lives of SADC citizens and the global community. The meeting discussed:
-
The COVID-19 induced regional trade challenges in SADC Member States
-
Priority sectors to be prioritized in the post COVID-19 period to stimulate quick economic recovery.
-
Recommendations for required interventions as economies gradually re-open.
The ongoing COVID-19 presents a significant challenge to SADC economies by disrupting global and regional value chains. It will lead to a global recession and global trade contraction. It is also expected that cyclical unemployment will increase because of COVID-19. Navigating the COVID-19 challenges will take well-coordinated interventions at national, regional and at the global level.
COVID-19 induced regional trade challenges
The meeting noted that the COVID-19 outbreak in SADC has brought the following challenges on trade:
-
Lack of information on the measures that are being applied by the countries across the corridors affecting the movement of cargo or trade flows.
-
Lack of harmonisation of interventions, measures, and recommendations to COVID-19 at country and regional level.
-
Cargo blockages caused by temporary shutdown of inland ports and seaports. This problem continues despite efforts by different stakeholders to find a permanent solution.
-
Varying and non-standardised COVID-19 testing procedures across different member states resulting in slower processes at border posts.
-
Lack of clear strategy towards movement of essential cargo and the repatriation of citizens with member states in the region.
-
Challenges in the classification of essential commodities i.e. different countries have different classifications.
-
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.
Private sector interventions to COVID-19
As SADC member states responds to the COVID-19 outbreak, the region is urged to balance managing the infections with funding / prioritising key economic sectors to stimulate the economy and, in the process, create the needed jobs in the post COVID-19 period. To improve employment, job security and food security, member states are urged to prioritize on the following labor-intensive economic sectors post COVID-19:
-
Agriculture
-
Tourism
-
Manufacturing
-
Transport
-
Mining with reference to the copper and cobalt value chains
-
Health Industry to produce enough heath products for the region
-
Energy sector
-
Pharmaceuticals
-
Construction with focus on major capital projects
Private sector recommendations to government
Furthermore, to aid the quick economic recovery to COVID-19 as lockdowns are phased out gradually, governments are urged to implement the following measures and interventions:
Financial Interventions
-
Provide cheaper loans to SMMEs at special lending rates since many of the small businesses which many African livelihoods depend on are threatened by COVID19.
-
Provide loan facilities and other incentives at special rates to businesses to fund the resuscitation of key economic industries such as Manufacturing, Agriculture, Tourism, Health and Transport.
-
Promote import substitution measures to replace previously imported commodities.
-
Promote the use of the SADC Integrated Regional Electronic Payment System (SIRESS) to reduce corresponding banking charges in regional trade.
Cross-border logistics
-
Harmonize border protocols including strategies on movement of people and repatriations.
-
Enhance the capacity of border authorities at entry points so that most goods and services are cleared in real time.
-
Create integrated digital interface between neighbouring / corridor countries to reduce paperwork delays at entry points and reduce driver idle time at borders
-
Promote use of rail for long-distance bulk commodities.
-
To accelerate speedier resolution of reported Non-Tariff barriers.
COVID-19 support
-
Standardise regionally COVID-19 tests and have them done in real time.
-
Establish regional controlled test centers at points of entry and exit as part of the harmonization process.
-
Support local companies to increase their capacity to produce COVID-19 products and equipment.
-
Share national and international best practices from other regions in managing COVID-19.
Conclusion
We, the SADC Business Council, and our member federations, reiterate our full commitment to supporting our respective governments and international institutions. On-going dialogue with business, employees and their representatives on the scope, content and implementation of extraordinary measures is essential to mitigating the negative impact of COVID-19 on employment and business.
Related News
SADC Regional Response to COVID-19: Transport and trade facilitation, climate change and the environment
The 7th Bulletin of the SADC Regional COVID-19 provides highlights of global and regional developments.
The world is currently waiting for a vaccine; this report provides highlights from the recently concluded Global Vaccine Summit which provided information on the progress being made towards finding a vaccine for COVID-19. The report further outlines some key impacts of COVID-19 on, among others, the health work force, health systems, trade and transport, economy as well as on climate change and the environment.
Trade and transport facilitation continue to remain high on the SADC agenda, including during this period of COVID-19. To that end, the developments on these sectors continue to unfold, and the report highlights these emerging issues including joint efforts involving the SADC, East African Community (EAC) and COMESA to harmonise the respective guidelines.
Key recommendations for Member States to consider, include;
-
The need for Member States to position themselves for the upcoming interventions such as vaccines, given the importance of vaccines in addressing COVID-19.
-
The importance of continued implementation of public health measures such as hand hygiene, using masks in public as well as maintaining social distancing at all times.
-
Importance of planning and forecasting human resource needs to address the expected demands in health workers as the pandemic progresses, this may include recruiting retired/semi-retired and other cadres to address human resource gaps that may be experienced.
-
Continuous engagement with the private sector, who not only provide resources to support governments, but who also facilitate local production of supplies such as Personal Protective Equipment (PPEs) and other essential products.
-
Implement broad based policies including those related to sound debt management and transparency; good governance; effective regulation and supervision; and prudent macroeconomic policies to address economic impacts including in the post COVID-19 recovery phase.
-
Continue to implement the SADC Regional Guidelines on Trade and Transport Facilitation.
-
Adopt and implement safe waste management practices to minimize COVID-19 infections at health facilities and domestic settings.
SADC Regional Response to COVID-19
pdf Bulletin No. 6: Specific focus on Fisheries and Aquaculture Value Chains (4.36 MB)
pdf Bulletin No. 5: Report on the COVID-19 Pandemic in the SADC region (3.48 MB)
pdf Bulletin No. 4: Report on the COVID-19 Pandemic in the SADC region (264 KB)
pdf Bulletin No. 3: Report on the COVID-19 Pandemic in the SADC region (584 KB)
pdf Bulletin No. 2: An Analysis of the Regional Situation and Impact (6.15 MB)
pdf SADC Regional Response to COVID-19 Pandemic - April 2020 (1.79 MB)
Related News
tralac’s Daily News selection
Launched today by the ECA, in collaboration with the MTN Group: The Africa Communication and Information Platform. The Platform will furnish national and regional COVID task forces with user generated survey data and actionable health and economic insights.
-
The rollout of Phase One starting June 23 2020, will cover mobile users across more than 23 countries, representing more than 80% of Africa’s total mobile subscribers. Users will be able to access locally relevant health advisories and medical advice including a symptom checker. Anonymized user inputs- including survey responses- will be fed to an Artificial Intelligence driven system. This integrator will build data dashboards and actionable insights for national and regional level policy makers.
-
Under Phase Two in a few months’ time, the service will encompass an additional 20% of African mobile users- and expand to include economic and humanitarian focused communication. National authorities will be able to conduct community level messaging for social welfare, e.g. facilitate cash distribution (including e-payments); send targeted information on local food distribution or clean water provision.
Financing the Union: Towards the financial autonomy of the African Union. Since the adoption of the Kigali Decision in July 2016, there has been unprecedented momentum gathered around its implementation. As of 16 June 2020, there were 17 countries, representing about 31% of AU membership that were at various stages of domesticating the Kigali Decision on Financing the Union.
-
Collectively, these countries are assessed $73,761,008 for regular budget and $15,307,159 as contribution to Peace Fund, representing 30%, respectively, of the total amount assessed to Member States to the Regular budget and Peace Fund. These countries owed the Union $41,735,749 ($30,761,020 for regular budget and $10,974,729 for Peace Fund) for prior budgets and as much as $33,359,115 ($22,095,806 for regular budget and S$11,263,308 peace fund) for the 2019 budget.
-
As of June 16, 2020, an amount of $7,419,039 was received from these Member States (S$6,417,102, $1,001,938 as contribution to regular budget and Peace Fund, respectively). This represents 9% and 7% of amount expected. Another $16,181,591 and $7,039,343 was collection in arrears for Regular budget and Peace Fund, respectively.
-
All the 17 countries have remitted to AU either partially or in full for 2020 budget.
-
As at the date of report an amount of $25,135,107 ($12,767,675 and $8,833,571 for regular budget and Peace Fund, respectively) was in arrears. All of it is attributable to Sudan who due to the economic embargo imposed on them and other considerations made it impossible to remit the funds to AU on time.
Conclusion: While this report paints a picture of considerable progress on matters of budget oversight and Member States compliance with regards to their financial obligations of the Union, challenges still remain. Whereas contributions are due as from 1 January of the financial year, the actual flow of funds from Member States has not been consistent with cash flow requirements of the Union. A great deal of funds is received during the second half of the year. The schedule for payment as to when funds should be transmitted to AU is yet to be agreed upon.
Trade falls steeply in first half of 2020 (WTO)
The volume of merchandise trade shrank by 3% year‑on‑year in the first quarter according to WTO statistics. Initial estimates for the second quarter, when the virus and associated lockdown measures affected a large share of the global population, indicate a year‑on‑year drop of around 18.5% (Chart 1). These declines are historically large, but could have been much worse. The WTO’s 20 April annual trade forecast, in light of the large degree of uncertainty around the pandemic’s severity and economic impact, set out two plausible paths: a relatively optimistic scenario in which the volume of world merchandise trade in 2020 would contract by 13%, and a pessimistic scenario in which trade would fall by 32%. As things currently stand, trade would only need to grow by 2.5% per quarter for the remainder of the year to meet the optimistic projection. However, looking ahead to 2021, adverse developments, including a second wave of COVID‑19 outbreaks, weaker than expected economic growth, or widespread recourse to trade restrictions, could see trade expansion fall short of earlier projections.
Looking ahead to next year, a slower-than-expected pace of economic recovery would weigh on trade growth. This possibility is illustrated by the dotted green line in Chart 1, which would see trade growth for 2021 come in at closer to 5%, which would leave it well below the pre-pandemic trajectory. On the other hand, a quick return to its pre-pandemic trajectory would imply trade growth in 2021 of around 20%, in line with the April forecast’s optimistic scenario. Monetary, fiscal and trade policy choices will play a significant role in determining the pace of recovery.
There are several reasons why trade might respond less to changes in GDP than it did during the financial crisis. First, fiscal and monetary policies have arguably been rolled out more quickly and on a larger scale in the current crisis than they were in 2008‑09. The WTO forecast scenarios did not include an attempt to model either set of policy responses, since, at the time, these policies were just being introduced. Second, income support to households and expectations that the pandemic would eventually ease may have encouraged consumers to maintain consumption levels at a higher level than expected. Finally, much of the decline in output has been concentrated in non‑tradeable services such as hospitality, personal services and entertainment, which tend to be less import‑intensive than manufacturing.
Mukhisa Kituyi: The intricacies, impact and opportunities of e-commerce for trade and development (UNCTAD)
The impact of digitalization on trade is seen in trade statistics. Information and communications technology goods play a crucial role in enabling the digitalization of our economies. In 2017, ICT goods exports amounted to almost $2 trillion. This trade is highly concentrated. In fact the top 10 exporters – mainly from East Asia and some developed economies – account for more than 99% of all exports. Exports of ICT services, which comprise both telecommunications, information and computer services, have grown faster than services’ trade in general and amounted to $568bn in 2017. Meanwhile, digitalization has made more services tradable by enabling their delivery over ICT networks. The value of the exports of services that are digitally deliverable amounted to some $2.9 trillion in 2018, or about half of all services exports. Such exports increased substantially across all regions during the period 2005–2018, with the highest growth rate in developing countries, especially in Asia. In Africa and other developing regions, exports of such services have been growing as well but from a lower level.
While all parts of the world are affected by the shift towards online commerce, many developing countries are still held back by limited digital readiness. While the majority of the populations of developed countries now shop online, that is not yet the case in most developing countries. In sub-Saharan Africa, for example, Kenya, Mauritius, Namibia and South Africa are the only countries where this share exceeds 8%. And in most other sub-Saharan African countries it is below 5%. As shown by the eTrade Readiness Assessments conducted by UNCTAD in 27 least developed countries, gaps and barriers are found in several policy areas, ranging from ICT infrastructure and payment solutions to skills and legal framework.
The inclusion of e-commerce on the agenda of the AfCFTA should pave the way for African countries to set rules that can facilitate more regional, cross-border e-commerce. As of today, most e-commerce in Africa is either domestic in nature or involves trade with non-African countries. AfCFTA offers an opportunity for consolidating e-commerce rules and regulations across the continent and openly discussing disagreements. This is an opportunity for Africa to become a global player in trade and have the voice of the continent heard.
Related UNCTAD reports:
-
Bénin: Evaluation rapide de l’état de préparation au commerce électronique
-
Fifteen years since the World Summit on the Information Society
Building and utilizing productive capacities in Africa and the LDCs: A holistic and practical guide (UNCTAD)
African countries and LDCs are facing micro- and meso-level production and technical challenges. The recognition and investment in different and complementary types of productive capacities – including production, technological, organizational and innovation capabilities – is a fundamental step in advancing their industrial competitiveness. Building an industry without industrialization is, however, not sufficient to develop and transform the economy and society in Africa and the LDCs. Since the 1980s, African countries and LDCs have been increasingly involved in international production networks; however, this has not gone hand in hand with a deep process of industrialization at the level of their local production systems. These economies will industrialize only when linkages in their domestic industrial systems develop, leading to productive and inclusive transformations (pdf).
Finding technical solutions to these challenges calls for a joined-up industrial policy approach which emphasizes the introduction, coordination and governance of multiple policy instruments beyond policy silos. The development of various institutions providing technical, financial and organizational support to productive firms in Africa and LDCs is also critical in the implementation and enforcement of these instruments. The allocation of resources and rents through industrial policy is a political economy process that requires technical coordination and effective enforcement solutions. In Africa and LDCs, the limited number of productive organizations and their institutional weaknesses reflect a specific type of political economy settlement, where transformative investments are challenged and discouraged by the distribution of power and incentive structure. This condition must be reverted to make industrial transformation possible.
The AfDB has posted a set of Economic Briefs:
-
pdf COVID-19 pandemic: Potential risks for trade and trade finance in Africa (2.13 MB) . Small and medium-sized enterprises could be particularly exposed to higher rejection rates. When liquidity is low, banks tend to favor larger clients to the detriment of Small and medium-sized enterprises. Default rates on SME trade finance transactions have decreased over the past six years, from 14% to 8.5% in 2019 and have edged closer to the overall default rate on all trade finance assets (Figure 6). However, rejection rate for trade finance applications by SMEs is over two times higher than that on overall trade finance applications. Currently, less than a third of bank-intermediated trade finance in Africa is dedicated to SMEs, although such enterprises play a significant role in the private sector - contributing around 80% of all jobs created in the continent. In normal times, some banks cite the inability by SMEs to provide appropriate documentation to meet regulatory standards (Know your customer (KYC) compliance and anti-money laundering (AML) requirements as one of the reasons for higher rejection rates of trade finance applications. As inperson interactions are reduced and business are forced to shut-down, the crisis could further worsen SMEs’ ability to timely furnish appropriate documentation. [The authors: Eugene Bempong Nyantakyi, Lamin M. Drammeh]
-
pdf Opportunities amid COVID-19: Advancing intra-African food integration (1.79 MB) . Although AfCFTA will not probably be able to start functioning on its scheduled start date of 1 July, 2020, because of COVID-19 and the related containment measures and restrictions on trade and movement of people, there is a renewed urgency to implement the agreement. Important negotiations to complete some pending technical elements—such as the rules of origin for some sensitive sectors including the agricultural sector, and the exchange of tariff concessions on trade in goods —which were suspended due to the pandemic, should resume as soon as possible to ensure that AfCFTA is not unnecessarily delayed. This is crucial for the future of the agricultural sector and its structural transformation. This also means that, in the short term, African policymakers should avoid anti COVID-19 policy responses that could undermine the AfCFTA agreements. For instance, although import- and export- restricting measures are understandable to contain the spread of the coronavirus, it is also important to establish safe trade and travel corridors that minimize disruptions to agricultural supply chains as much as possible and maintain the provision of essential food items.
Furthermore, as African countries start to reopen their economies and ease confinement measures, it is also equally important to think of structural agricultural reforms that could facilitate the success of the AfCFTA agreements and maximize their impact. Such reforms could include, for instance, agricultural infrastructure development to ensure productivity growth and boost food production; increased uptake of improved technologies and modern inputs to enhance competitiveness of the agricultural sector; removal of labor, land, and financial market failures that impede technology adoption and efficient resource allocation; and better connection of farmers to agricultural markets to increase their revenues. These reforms are particularly essential in the context of rapidly growing populations and increased levels of urbanization in most African countries, which necessitate substantial growth in food production.
The on-going COVID-19 pandemic is a wake-up call for African countries and presents unique opportunities to speed up Africa’s integration agenda and implementation of AfCFTA agreements. This is important to reduce the impact of COVID-19 and any future pandemics, enhance food security, and foster economic growth on the continent. [The authors: Hanan Morsy, Adeleke Salami, Adamon Mukasa]
-
COVID-19 and gold mining in Africa: Turning challenges into opportunities. It is important that countries enforce compliance of mining agreements in their operations with relevant countries’ mining codes. Clear fidelity to the mining codes would require mining companies to put in place Disaster Risk and Business Continuity Plans, which would mitigate the adverse effects of the kind of shocks the sector is experiencing in a crisis such as COVID-19.
Gold-producing countries should update their mining codes, as several countries have done recently, to automatically adjust for price volatility in times of windfalls. The updates should specifically include a windfall-profit tax, which would go into effect when gold prices reach a particular threshold. Mali’s new mining code, enacted in 2019, introduced a windfall tax. Burkina Faso in 2011, Mauritania in 2012, and Ivory Coast in 2014 indexed their royalty rates to gold prices, which enable the countries to increase their shares of resource rents when prices increase.
The current stability clauses, which tie the hands of governments in making policy changes that affect mining operations, need to be shortened. While some predictability in contracts is essential, stability clauses that extend for more than five years are disadvantageous to countries. While recommendations for formalizing the ASM sector have been discussed for a while, the COVID-19 pandemic underscores its importance. This sector, if well managed, has the potential to generate significant employment for Africa’s youth, given that the sector is responsible for significant levels of gold production in key gold-producing African countries, e.g., Sudan, Ghana, South Africa, Tanzania and Burkina Faso.
It is important that African countries put in place measures that encourage the establishment of gold refineries in the country, as a way of locally adding value to the product. It would not only enable the countries to capture more value out of the commodity, but it is also likely to reduce the market risk for ASM miners. [The authors: Ousman Gajigo, Jerry Ahadjie]
Companion AfDB Economic Briefs:
AfDB report: Macro-Economic Policy Responses for Building Resilient Economies in Post COVID-19 Africa
The COVID-19 pandemic has brought unexpected exogenous shocks that have resulted in global, regional, and national policy responses. To contain the spread of the virus and mitigate its impacts, different countries have adopted unprecedented policy measures based on their capacities. These measures are largely two-pronged. The first set – short term – focuses on immediate response strategies to flatten the disease curve through non-pharmaceutical prevention and containment measures – notably personal hygiene, social distancing, border closures, and lock-down of economic activity to various degrees. The second set takes the form of eased monetary and fiscal policies to help citizens, businesses, and public institutions to cope with the crisis. Indeed, most of the policy interventions have focused on the short term.
Related News
Breaking ground for economic growth
Going beyond talking to breaking ground, President Cyril Ramaphosa has spelt out how government will foster infrastructure development, while creating much-needed jobs to boost the economy.
Speaking at the opening of the inaugural Sustainable Infrastructure Development Symposium of South Africa (SIDSSA) on Tuesday, the President said this was a historic moment, as the country places infrastructure at the heart of the stimulus to realise economic recovery in the face of COVID-19.
Meanwhile, while disease caused by SARS-CoV-2 has crippled economies across the globe, the President said South Africa has not been spared either, and government is resolute to turn this around.
The President spoke frankly about the country’s economy, which is expected to shrink by at least 7% compared to the anticipated 1% growth before the pandemic.
“A long period of recovery can be expected, even when we relax the interventions that we take to stem the transmission of the virus,” he acknowledged.
The economic decline has also been exacerbated by the downgrade of South Africa’s credit rating to sub-investment by all three credit rating agencies.
However, he said the country’s financial system remained resilient despite the ongoing crisis.
“A combination of policy measures has ensured that government continues to be able to fund itself through the domestic bond market at a reasonable cost, stabilising yields, injection of liquidity, reducing market volatility and alleviating disruptions to the flow of credit to the real sector.”
Infrastructure development to be revived
The damage caused by the pandemic in infrastructure development has not deterred government’s ambitious and sustainable infrastructure development programme drive.
“To the contrary, the Coronavirus pandemic has made infrastructure investment even more compelling, even more, important and even more urgent,” President Ramaphosa said.
He also noted South Africa’s dwindling infrastructure investment over the years, which has caused great hardship for construction and related industries.
The industry took another beating during the pandemic, as operations ground to a halt during the lockdown.
“Buyers of infrastructure services have delayed the procurement of new projects or cancelled projects. Lenders and investors, in turn, are revisiting their decision to invest in infrastructure projects that were deemed bankable prior to the pandemic,” the President said.
He said lower revenues, higher costs and non-payment has resulted in layoffs, financial losses and cash shortages.
“This requires that we not only push ahead to revive infrastructure investment but that we rapidly move to increase the scale of our ambitions.”
However, the President said the Minister of Finance has put forward a package of reforms to address macroeconomic imbalances and boost long-run growth as the crisis eases to lower borrowing costs and provide additional space for infrastructure investment to occur.
“The recovery package is intended to contribute to the speed with which South Africa can emerge from the crisis and improve the capacity of the economy to deliver sustainable inclusive growth.”
He told delegates that infrastructure investment provides both short- and long-term economic benefits.
“In the short term, it creates jobs and economic activity as roads, bridges, hospitals, schools, power plants and much else is built.
“It gets construction and related services companies back to work, inducing them to hire staff and expand capacity.”
He said as construction services are procured, government could assess project proposals on the employment impact to ensure the job creation impact is maximised.
“Shovel-ready projects that have been fully developed for implementation will be the priority, ensuring the ground is broken as soon as possible.”
The President said infrastructure investment increases the capacity of the economy, reducing the cost of transport, and the capacity and reliability of key services like electricity and municipal services.
Government should also invest in infrastructure to enable businesses to accelerate employment and grow the economy, which will also allow government finances to stabilise and recover.
Supporting economic recovery
Government is looking at policies that facilitate economic recovery, such as introducing stimulus packages that boost government’s infrastructure spending. It is creating financing instruments that provide liquidity, bridge financing or debt restructuring instruments, as well as guarantee products and funds.
The President is also encouraging proposals from private developers for sustainable and resilient infrastructure projects, offering a clear and expedited path for their approval.
“We will seek to prioritise proposals for infrastructure sectors, which are important to economic recovery and resilience, including energy, transportation, health care and digital infrastructure.”
The SIDS process has prioritised key network industries for investment, specifically energy, water, transport and information and communication technology infrastructure, as these sectors have proven to have superior multiplier effects.
“They introduce greater efficiencies in the economy, promote spatial justice and have the capacity to absorb skills.”
Agriculture has also been included due to its employment absorption capacity, which could lead to the revitalisation of rural economies.
Decent low-income communities
Another priority of government is to provide integrated human settlements, which is also a focus area in the SIDS process, by providing decent housing to low-income communities.
“We are fashioning innovative building technologies and financing instruments to allow the private sector to participate in the low-income housing market,” the President said, adding that government will support black infrastructure service providers in much the same way it supported the emergence of black industrialists.
“This is an industry which needs to be transformed, in terms of ownership, participation, capabilities and skills.”
The industry needs to work towards blending the skills and experience of seasoned and even retired professionals with a new generation, who have the qualifications but would benefit from mentoring and support.
The President said they are determined to root out the corruption and collusion that has plagued this sector over many years. “This must be seen as an opportunity to build and maintain infrastructure in a different way, transparently, efficiently, and with effective accountability.”
Investors and addressing policy uncertainty
He said clear policies, institutional frameworks and bankable investment opportunities are critical to incentivising private investors.
“Domestic business investor sentiment is a key first-mover that will help crowd-in foreign investors and portfolio investors. Therefore, we are listening to our domestic private sector needs and requests to deal with blockages to greater investment. “
The private sector has an important role to play as builders and operators of public infrastructure, the President said.
“These functions can add considerable value to the public if the right procurement and contracting processes are followed to ensure low prices and appropriate allocation of risks.
“As we work at strengthening this newfound relationship with the private sector, government will work towards addressing investment policy uncertainties, accelerating SOE reforms and formulating the necessary infrastructure policy reforms.”
The President said working with the private sector, government will invest in the creation of both the technical and financial engineering capacity in the State.
“The SIDS process has convinced us that this is possible.”
He said there currently 276 projects over a period five months, some which have been committed to funding, but the President said he needs more money for the other projects as well.
“We are institutionalising the SIDS methodology as a new way of packaging and preparing projects for funding.
“This methodology will determine three pathways for project funding: commercial funding, blended financing and fiscal allocation.”
The President has thanked multilateral development banks, development finance institutions, commercial banks, organised business and infrastructure-oriented organised bodies for contributing resources to the success of the SIDS.
Uprooting corruption and collusion
Public Works and Infrastructure Minister Patricia de Lille said in this new normal, there is an even greater need to collaborate in the investment and implementation of infrastructure that will facilitate social and economic growth in a workable and purposeful way.
“In South Africa, infrastructure investment, together with the use of public land and buildings, is a critical lever to achieve spatial and economic justice by connecting our people, integrating our communities and bringing people closer to work opportunities.”
She said infrastructure is no longer talking about new construction but also the maintenance and upgrading of the existing infrastructure.
“Innovative construction methods, technologies and management systems are being explored, especially in relation to climate change and the green economy.”
The Minister said government is also exploring the introduction of Green Infrastructure Bonds.
“At the policy level, we must do more to transform the construction industry, which is one of the least transformed industries in the country.”
Meanwhile, preventing and detecting corruption is going to be dealt with as it steals from the poor.
“The wellbeing of the people of South Africa and our continent lies on our shoulders, with critical infrastructure projects that must be delivered now.
“We need to see less talk and more action. We must always remember our past but we now have an opportunity to design our own future.”
Related News
Treat climate crisis with same urgency as COVID-19 pandemic: new ECA paper
A post-coronavirus recovery in Africa should address the fundamental causes of vulnerabilities and go beyond fiscal and monetary adjustments whose sole aim is to ensure the survival and perpetuation of the current system of production, consumption and distribution which is responsible for the climate crisis, according to a new discussion paper published by the Economic Commission for Africa (ECA).
In the discussion paper produced against the backdrop of the unprecedented global health crisis, titled “Climate Change and Development in Africa Post COVID-19: Some Critical Reflections”, the ECA’s African Climate Policy Centre’s (ACPC) argues that a new political economy based on cohesion, equality and environmental sustainability is required to enable drastic climate actions.
The paper addresses the climate emergency and lessons from COVID-19, global warming, financing the twin crises, the required energy transition, climate change perceptions and whether COVID-19 lessons can benefit climate action.
“Sustainability in a post COVID-19 world should be based on reducing greenhouse gas emissions and protecting the environment,” reads the paper, adding recovery plans must not reinvest in dirty, polluting industries but promote meaningful employment, ensure just transitions, and be based on available science.
“Funds required to underwrite climate actions actually exist, and the same approach used to mobilize COVID-19 funds should secure even greater investment in a carbon-neutral economy.”
The paper highlights that the fundamental reason for the recognition of COVID-19 threats and the limited recognition of climate change threats is that COVID-19 has been clearly understood, beyond the health impacts as an immediate and present threat to global development, while climate change continues to be viewed as a long term and uncertain threat to some remote communities of the world.
“What is required, and urgently, is a fundamental shift in perceptions and attitudes in order to engender a development centric understanding of climate change,” the ACPC experts say, adding; “Suggestions that we cannot afford to address climate change, biodiversity loss and economic crises at the same time represents a false choice, both crises must be addressed at the same time."
“We should not seek to simply restore the pre-pandemic status quo. What is required is a paradigm shift. Green transitions are not only about energy transitions, they are about transforming everything from food systems to consumption and waste management,” ACPC experts proffer in the paper.
They advocate a massive injection of resources into national meteorological and hydrological services across Africa in line with the scale of the climate threat to all sectors of the continent’s economies.
“We have learned from the COVID-19 pandemic that timely response is of the essence. It marks the difference between containing a crisis and allowing it to spill over and completely overwhelm public organizations’ ability to function effectively,” the experts say.
Climate change exacerbates existing vulnerabilities and inequalities, and that historical, political and economic factors determine societal vulnerability to climate change hazards and risks, the experts said.
They note that the Paris Agreement, is pivoted on the principle of ‘enlightened self-interest’ and that every nation will act in its enlightened self-interest to mitigate its own emissions, and will increase its mitigation actions as other nations also mitigate theirs.
“The inadequacy of this principle is glaring,” the ACPC experts say in the paper, adding the global response to COVID-19 had demonstrated the utility of multilateralism and the common interest of humanity.
“The lesson of COVID-19, therefore is that science can in fact be translated into urgent policy decisions if there is sufficient political will. The response to COVID-19 has been based on unprecedented government intervention, and almost universal social acceptance of the radical measures adopted by all but a few governments. Countries quick to respond have handled the virus more effectively.”
The same approach is needed for climate policies, the paper opines.
“COVID-19 has given rise to an uncontested recognition of the centrality of the state in managing the crisis. It has demonstrated the urgent need to build state capacities,” reads the paper.
The paper also touches on the revised Nationally Determined Contributions (NDCs) and the need for an immediate review if they do not put the world on course for limiting global warming to less than two degrees Celsius.
It urges the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties to move from perpetual negotiation to a deliberative and democratic process where representatives of all stakeholders in society agree on the best ways to transition to a sustainable future, including imposing restrictions on detrimental activities and determining the allocation of responsibilities, costs and reparations.
Related News
The intricacies, impact and opportunities of e-commerce for trade and development
The world is increasingly going digital. This creates both opportunities and challenges, calling for changes to existing policies and adoption of new policies in many areas. Many countries are poorly prepared.
One striking way that digitalization is impacting our economies is through growth in e-commerce. According to UNCTAD’s latest estimates, global e-commerce sales in 2018 amounted to $25.6 trillion, up 8% over 2017.
A growing share of e-commerce involves cross-border sales and therefore contributes to international trade. For example, the share of the 1.45 billion online shoppers worldwide that made cross-border purchases rose from 17% in 2016 to 23% in 2018.
The value of e-commerce and contactless payments has been accentuated by the current COVID-19 crisis, provoking actions by governments.
Much of this digital innovation is taking place in Africa. In Senegal, the Ministry of Trade and SMEs is partnering with the private sector to facilitate delivery of essential goods and services through e-commerce. In Uganda, the Ministry of ICT has made a call to develop digital solutions in the fight against COVID-19 to support health systems and public service delivery.
Platforms have also been put in place, linking informal operators to established marketplaces and helping out-of-reach households access market vendors, using local transport solutions.
Central banks and regulators, such as the Central Bank of West African States, have taken measures aimed at reducing transactions costs of electronic payments, boosting uptake of cashless e-government solutions, for example, for the provision of monetary transfers to the most vulnerable groups.
Digital solutions help reduce the spread of the virus by minimizing the need for face-to-face interactions, and at the same time keeping some businesses from closing shop. And the digital world has served as a welcome palliative amidst prolonged physical distancing and self-isolation during the crisis.
This deepening in the digital shift has wide implications for trade and development. It is influencing the behavior of people, businesses and governments, helping drive an unprecedented transformation of how goods and services are developed, produced, sold, distributed and consumed.
As more and more companies and consumers go online to find the products they are looking for, sellers need increasingly to have a presence on the internet. Otherwise they become invisible in the market.
Related: Trade in the Digital Economy: a tralac collection
Digital realities are reshaping trade patterns
The impact of digitalization on trade is seen in trade statistics. Information and communications technology (ICT) goods play a crucial role in enabling the digitalization of our economies.
In 2017, ICT goods exports amounted to almost $2 trillion. This trade is highly concentrated. In fact the top 10 exporters – mainly from East Asia and some developed economies – account for more than 99% of all exports.
Exports of ICT services, which comprise both telecommunications, information and computer services, have grown faster than services’ trade in general and amounted to $568 billion in 2017.
Meanwhile, digitalization has made more services tradable by enabling their delivery over ICT networks. The value of the exports of services that are digitally deliverable amounted to some $2.9 trillion in 2018, or about half of all services exports.
Such exports increased substantially across all regions during the period 2005-2018, with the highest growth rate in developing countries, especially in Asia. In Africa and other developing regions, exports of such services have been growing as well but from a lower level.
Platforms and data
Digitalization affects most productive processes and activities in an economy, involving products in all sectors, from agriculture to services. Today is only the early stages of this digital transition.
The market’s invisible hand seems set to become a digital one, increasingly managed by major digital platforms. E-commerce and other aspects of the digital economy are driven by two main factors: digital data and digital platforms.
Digital data have become a new economic resource for creating and capturing value. Control over data is strategically important to be able to transform them into digital intelligence.
In virtually every value chain, the ability to collect, store, analyze and transform data brings added power and competitive advantages. They are core to all fast-emerging digital technologies, such as data analytics, AI, blockchain, IoT, cloud computing and all internet-based services.
Data are also intrinsic to e-commerce. These platforms can use the data they collect from buyers and sellers to offer better services. Unsurprisingly, data-centric business models are being adopted not only by digital platforms, but also, increasingly, by lead companies across various sectors.
Digital platforms are increasingly important in the world economy. Some global digital platforms have achieved very strong market positions in certain areas.
For example, Google has some 90% of the market for Internet searches. Facebook accounts for two thirds of the global social media market and is the top social media platform in more than 90% of the world’s economies. Amazon boasts about 40% share of the world’s online retail activity, and its Amazon Web Services accounts for a similar share of the global cloud infrastructure services market.
In China, WeChat (owned by Tencent) has more than 1 billion active users and, together with Alipay (Alibaba), its payment solution has captured virtually the entire Chinese market for mobile payments. Meanwhile, Alibaba has been estimated to have close to 60% of the Chinese e-commerce market.
Local firms in developing countries can benefit from being able to use services offered by global platforms. E-commerce platforms may, for example, provide export opportunities to small firms, enabling them to reach beyond small domestic markets. Using existing payment and e-commerce platforms can enable them to boost their sales, especially if they cater to certain niche markets.
In some cases, local knowledge of search habits, traffic conditions and cultural nuances may also give an advantage to locally rooted digital platforms, enabling them to offer services tailored to local users. However, developing-country platforms that are trying to scale typically face an uphill battle due to weaknesses in the e-commerce ecosystem.
Quality of e-commerce ecosystems affects trade effects
While all parts of the world are affected by the shift towards online commerce, many developing countries are still held back by limited digital readiness. While the majority of the populations of developed countries now shop online, that is not yet the case in most developing countries.
In sub-Saharan Africa, for example, Kenya, Mauritius, Namibia and South Africa are the only countries where this share exceeds 8%. And in most other sub-Saharan African countries it is below 5%.
As shown by the eTrade Readiness Assessments conducted by UNCTAD in 27 least developed countries, gaps and barriers are found in several policy areas, ranging from ICT infrastructure and payment solutions to skills and legal framework.
For example, there is a need to strengthen the protection of users and consumers to boost trust in online commerce. Efforts to strengthen cyber security are equally important. On the supply side, constraints often include a lack of familiarity with e-commerce of many SMEs and persisting challenges in transport and logistics.
Due to such weaknesses in the local ecosystem and low technological capacity of customers and employees, digital platforms in developing countries have to employ a range of business-model innovations to be viable.
They may need to have a person to function as the customer’s interface with the digital platform, to facilitate data entry, allowing cash payments on delivery, building up local call-centre capacity for quick call-backs, etc.
Platforms often need to establish physical supply-chain and logistics services, such as distribution centres, payment points, warehouses, drivers and delivery vehicles. There is similarly often a need to invest in management, IT and entrepreneurial skills.
Overcoming these challenges requires proactive government policies, worked out in close dialogue with the private sector. Stakeholders consulted in UNCTAD eTrade Readiness Assessments have stressed the need for inclusive and comprehensive e-commerce national development strategies as a priority to organize policy and regulatory reforms, cooperate with the private sector and help secure more support from development partners.
How to bridge the divides and make cross-border e-commerce more inclusive
Technology is not deterministic. It is up to governments, in close dialogue with other stakeholders, to shape e-commerce and the digital economy by defining the rules of the game. This is a huge challenge that will involve adapting existing policies, laws and regulations, and/or adopting new ones in many areas.
For most countries, the digital economy remains relatively unchartered territory, and policies and regulations are failing to keep up with the rapid digital transformations taking place.
National policies play a vital role in preparing countries to take advantage of online commerce. In view of the cross-sectoral nature of digitalization, a whole-of-government response is important to the formulation and implementation of policies aimed at securing benefits and dealing with challenges associated with e-commerce.
Ensuring affordable and reliable connectivity remains a major challenge in many African economies, especially in rural and remote areas, and requires attention.
Another challenge concerns border obstacles. Many trade facilitation measures require collaboration among neighboring countries.
In order to promote the consolidation of e-commerce shipments and the use of land rather than air transport for e-commerce within Africa and African regional economic communities, ambitious regional programmes need to be encouraged to harmonize trade procedures, transit regimes and trade facilitation monitoring tools.
Increased interoperability among e-payment platforms is also greatly needed. Mobile payments and cashless solutions must be easy to use. Payment solutions should reduce operating costs for businesses and platforms.
Enhanced interoperability both within countries and across borders will reduce friction in e-commerce transactions, increase ease of use for consumers and reduce costs for platform operators.
The adoption of the pan-African payment and settlement system as one of the five key instruments of the operational phase of the African Continental Free Trade Area (AfCFTA) is a milestone towards greater integration of digital financial services.
Taxation is one area that needs additional attention. Observers have noted a mismatch between where profits are taxed and where and how value is created.
As developing countries are mainly markets for global digital platforms, and users in these countries contribute significantly to the generation of value and profits, tax authorities should have the right to tax such platforms.
As the tax landscape evolves, it is essential to ensure wide and more inclusive participation of developing countries in international discussions on taxation in the digital economy.
In Africa, much attention has been given to taxation of internet and mobile money users. Countries that are imposing taxes on internet applications or services include Kenya, Uganda, Tanzania and Zambia. While this may be attractive to governments, it can be counterproductive if it results in a decline in economic activity by reducing the number of active internet users.
There is a need for speed, flexibility and international support
Digital divides, differences in readiness and the high concentration of market power all point to the need for policies and regulations that will help create a fairer distribution of gains from the ongoing process of digital transformation and increased reliance on e-commerce.
Digitalization affects different countries in different ways, and individual governments require policy space to regulate the digital economy in order to fulfil various legitimate public policy objectives.
At the same time, several policy challenges may be more effectively addressed at the regional or international level. This applies, for example, to data protection and security, taxation and trade.
Finding adequate solutions requires greater international collaboration and policy dialogue, with the full involvement of developing countries. Any consensus will need to incorporate significant flexibilities to enable all countries to participate.
The inclusion of e-commerce on the agenda of the AfCFTA should pave the way for African countries to set rules that can facilitate more regional, cross-border e-commerce. As of today, most e-commerce in Africa is either domestic in nature or involves trade with non-African countries.
AfCFTA offers an opportunity for consolidating e-commerce rules and regulations across the continent and openly discussing disagreements. This is an opportunity for Africa to become a global player in trade and have the voice of the continent heard.
Mukhisa Kituyi is Secretary-General of UNCTAD.
Related News
tralac’s Daily News selection
Diarise: ECOWAS Ministerial meeting for the adoption of two new ECOWAS standards (25 June)
The West Africa Competitiveness Programme (WACOMP) has launched its official website. The EU-funded programme aims to support several selected value chains at national and regional level to promote structural transformation and better access to regional and international markets, while taking into account social and environmental considerations.
Reviving the WTO: a commentary by Dr Ngozi Okonjo-Iweala (Project Syndicate)
Over the last two decades, international trade has become a bogeyman for critics who blame it for the economic woes some countries face. But trade is not a zero-sum game: rights and obligations can be balanced, as the evolution of global and regional trading rules since 1948 has shown. The question facing the WTO and its members now, therefore, is how to make progress and reach mutually beneficial agreements. All members should participate in this endeavor, because that is the only way the organization can regain its credibility and carry out its rule-making function. New negotiations must therefore take account of members’ varying levels of economic development, and aim – as ever – to reach fair and equitable agreements. Other crucial priorities for the WTO include enhanced transparency, in the form of timely notifications of countries’ trade measures, and an effective dispute-settlement system that commands the confidence of all members. A moribund WTO does not serve any country’s interest.
ECOWAS endorses Okonjo-Iweala for WTO job: “She is a fearless reformer” (The Cable)
“Having acknowledged the strong academic and professional background of Dr. Okonjo-lweala and her very large experience in national affairs as Nigeria’s Finance Minister (2003-2006 and 2011-2015) and Nigeria’s Foreign Affairs Minister briefly in 2006;
“Having further acknowledged her long years of managerial experience at the top echelons of multilateral institutions, her established reputation as a fearless reformer, her excellent negotiating and political skills, her experience of over 30 years as a Development Economist with a long standing interest in trade, her excellent academic qualifications, her positions as Managing Director World Bank, and currently as Board Chair Gavi, and African Union Special Envoy to Mobilize Financial Resources for the fight against Covid19;
“Endorses the candidature of Dr. Ngozi Okonjo-lweala for the position of Director-General of the World Trade Organization for the period 2021-2025 and calls on other African countries as well as non-African countries to endorse her candidature.”
Marc L. Busch: Lighthizer’s tariff ‘reset’ would dramatically change the politics of US trade remedies (The Hill)
Last week, US Trade Representative Robert Lighthizer testified before the House Ways and Means Committee that other countries’ “very high bound tariff rates” are unfair to the United States. Lighthizer called for a “reset” of tariffs at the WTO to level the playing field. He is right to do so. But a tariff reset would put a new spin on trade remedies like antidumping duties. If Lighthizer were to get his tariff reset, U.S. exporters would increasingly be harassed by trade remedies abroad. That’s because countries lowering their bound tariffs rates would back fill with measures like antidumping duties. This would dramatically change the politics of trade remedies in Washington. First, the problem.
The 4,500km Lagos – Algiers road takes a step closer to reality (The Africa Report)
The completion of a strategic section in the Chiffa Gorge gives a decisive boost to the project - born more than fifty years ago - of a road linking Algiers and Lagos. Seven small kilometres. This is the size of the segment of the motorway between Haouch Messaoudi and Médéa that is due to be delivered in the coming weeks. If the section is attracting so much attention, it is because it is the last of the Chiffa-Berrouaghia section (53 km), the most strategic of the expressway being built between Algiers and El Menia, over more than 800 km, essentially doubling the length of Algeria’s National Road 1. To achieve it, 5km of tunnels and 14km of bridges and viaducts, the highest piers of which reach 70 m, have been built since April 2013 by China State Construction Engineering Corporation, in particular in association with the Algerian public groups Sapta and Engoa.
This is also good news for Africa, says Mohammed Ayadi, Secretary General of the Liaison Committee of the Trans-Saharan Road (CLRT), which includes six countries, since if the main artery of this road crosses Algeria, Niger and Nigeria, several branches join Mali, Tunisia and Chad. “A feasibility study ten years ago showed that operators in northern Niger and northern Mali, who would move their goods via the trans-Saharan route from Mediterranean ports rather than the Gulf of Guinea, would save 11 days,” he says.
Ghana: State not losing revenue at entry points - Commissioner-General (Business Ghana)
The state is not losing any revenue at the country’s entry points as the Integrated Customs Union Management Systems deployed on June 1, 2020 is working creditably. Rev. Amishaidai Owusu-Amoah, the commissioner-General Ghana Revenue Authority, who disclosed this at a press briefing said between June 1 and 17 the customs Division of the GRA was able to collect 490 million cedis in revenue. This, he said, compares favourably with the average monthly revenue collections of about 942 million cedis from January to May this year from the country’s entry points when the old system deployed by GCNET was in use. While admitting that there were teething challenges with the system, the Commissioner-General said most of these initial problems were being fixed to allow for seamless operations. [IMANI Africa’s Franklin Cudjoe worried ‘organised chaos’ at the ports will hit hard at national revenue]
Rwanda: Cross-border trade unscathed despite COVID-19 - Minister Gatete (New Times)
The Minister of Infrastructure Claver Gatete has said that cross border trade is progressing well, despite the measures in place to contain the Covid-19 pandemic. “Trade is going well. In 25 hours, we receive between 400 and 500 cross border trucks at Rusumo border. Sometimes they are more. At Kagitumba, it is between 45 and 60 while at Cyanika, they are between 9 and 15.” Rusumo is Rwanda’s gateway to Tanzania on the Central Corridor while Kagitumba and Cyanika link Rwanda to Uganda and serves as the gateway to the port of Mombasa in Kenya, through the Northern Corridor.
Kenya: Sugar imports increase 21% despite upturn in local production (Business Daily)
According to the Sugar Directorate, imports between January and May stood at 207,814 tonnes against 172,213 tonnes last year. Enhanced imports came amid a 15% increase in local production, with growth in local yields attributed to a slight improvement in sugar cane supply to private millers. All the private mills registered improved productivity in the review period. According to the regulator, May registered a decline of 13% in imports due to logistics hitch brought about by Covid-19. In April there was a 14% decline. Common Market for Eastern and Southern Africa countries supplied Kenya with 13,755 while East African Community provided 1,180 tonnes with the rest of the world providing 7,702 tonnes.
Zambia gets tough on mineral export declarations (Xinhua)
The Zambian government said on Wednesday that it will not accept mineral samples from exporters of minerals from July 1 in order to address the problem of under-declaration by some exporters. The Ministry of Mines and Minerals Development said mineral samples from exporters which currently were being submitted to the Geological Survey Department will not be accepted because the government wanted to ensure mineral grading and safeguarding export revenue. Barnaby Mulenga, Permanent Secretary in the ministry, said exporters were required to submit their samples before an export permit was issued but noted that the government has been losing revenue due to undervaluation. [US farming body and Zambian firm partner aim to boost crop yields]
Namibia: Namports records 30% increase in cargo (Namibia Economist)
The Namibian Ports Authority has managed to handle 1 million tons of cargo carried along the corridors from 1 April 2019 until 31 March 2020, with the Port of Walvis Bay and Lüderitz also recording 5,561,999 tonnes of cargo handled during this last financial year. According to Namport, the largest portion of growth is reflected by the 100% increased activity along the Trans-Oranje Corridor as 204,301 tonnes of manganese ore was exported via the Port of Lüderitz. The benefit of the Trans-Oranje corridor is to serve the mines in the Northern Cape as it is a much shorter route versus using a South African based port. This unique initiation between TradePort Namibia logistics deal came into fruition early last year.
South Africa: President refers Copyright and Performers’ Protection Amendment Bills to Parliament (The Presidency)
The President has, in correspondence to the Speaker of the National Assembly, acknowledged the noble objectives of the amendments but also indicated to the Speaker that the Presidency has received a number of submissions opposing the signing into law of the two Bills. The President is concerned that both Bills have been incorrectly tagged Section 75 Bills in terms of the constitutionally prescribed process for Parliament’s processing of legislation. Section 75 Bills are Bills do not affect the provinces. However, the President is of the view that the Bills concerned are in fact Section 76 Bills, given that they affect cultural matters and trade – namely trade in copyright - in which provinces exercise competence.
Caixin Summer Summit 2020: “Covid-19: We need more connectivity, not less”. Keynote speech by Mr Ravi Menon (Monetary Authority of Singapore):
I think there are two priorities for international co-operation in the wake of Covid-19: first, keeping supply chains open; second, strengthening digital connectivity.
An area that could clearly benefit from digital and data connectivity is cross-border trade. There is a large number and variety of parties involved in an international trade transaction. The trade process is highly fragmented, paper-based, slow, and cumbersome. Harmonising and digitising trade documents and putting them through a seamless digital platform will help to make trade more efficient and secure.
Food safety will be an area of high priority as we emerge from the Covid-19 pandemic. This often requires traceability in supply chains that span multiple countries. Being able to do this well requires data sharing and digital connectivity. An example of digital connectivity that addresses both trade finance and food safety is DBS Bank’s partnership with Agrocorp, a Singapore-headquartered agricultural commodity and food solutions provider. They have developed a block chain trade platform that connects 4,500 Australian farmers with Agrocorp’s restaurant and supermarket customers. The platform provides real-time pricing, shared delivery information, and automated trade finance approval. The platform will be extended to include additional source information about the water, fertiliser, and pesticide usage of the commodities traded. This will improve food traceability and food safety.
A particularly important dimension of digital connectivity is cross-border data connectivity. Covid-19 has shown that the ability to leverage the cloud to store and access data is critical for business continuity and cyber security, amid travel restrictions and office closures. We need to put in place agreements to enable cross-border data flows in a secure and seamless manner, so that digital transactions can be consummated efficiently. Digital connectivity and trusted data corridors are to the digital economy what free trade agreements were to the traditional economy. Singapore has signed so-called Digital Economy Agreements with Australia, New Zealand, and Chile. These joint commitments provide clarity and certainty to firms moving data across our jurisdictions to support their business operations and risk management.
Today’s Quick Links:
-
Rwandan bankers predict economy may recover after five years
-
Uganda, Tanzania agree on truck drivers’ movement amid Covid-19
-
Clustering in special economic zones can boost Central Africa’s creative industry, says ECA’s Pedro
-
Jumia has gone from eCommerce to full-blown logistics overnight
-
Asia Times: Pakistan engages Africa through economic diplomacy
-
The Africa Report: DfID merger signals shift to promoting UK national self interest
Related News
tralac’s Daily News selection
A special feature on the Kenya-USA FTA:
-
This working paper looks at the planned Kenya-US FTA mainly from the perspective of the current trade relationship, reviewing developments and growth in Kenya’s US-bound exports since 2000 when the African Growth and Opportunity Act (AGOA) began to offer expanded preferences to Kenyan exporters, and also the extent to which Kenya utilises and perhaps relies on such preferences. It also analyses patterns in US exports to Kenya, which take place on standard Most Favoured Nation (MFN) terms, and for some context provides a snapshot of Kenya’s imports from other global sources as well as the EU with which it has previously concluded a reciprocal free trade agreement, albeit not yet fully operational. Finally, it looks at the legislative framework and related guidelines for the US to conclude new free trade agreements with third countries, and the manner in which such policy objectives relate to the planned US-Kenya FTA. [Author: Eckart Naumann]
-
Kenya’s president says talks on trade deal with US delayed (Reuters)
Kenya has delayed talks on a trade deal with the United States until a pan-African trade bloc comes into force, President Uhuru Kenyatta said on Thursday, likely holding up what would be Washington’s first such pact in sub-Saharan Africa. Kenyatta said Kenya, East Africa’s richest economy, had delayed discussions with Washington until the Africa free trade arrangement comes into force, originally set for July 1 but now delayed until later by the coronavirus pandemic. “When we met with the United States we made it clear that negotiation would have to be done on the basis of, and without undermining, the Africa free trade arrangement,” Kenyatta said. “This works not just for Kenya and Africa, but I also believe it works for the United States, because it gives that wider market access,” he added during a webinar hosted by the Atlantic Council. It was not immediately clear how long the delay to the talks would last.
-
Inside Trade: However, USTR Robert Ligthizer told US lawmakers (Wednesday) the talks would begin the week of 6 July. “So long as that trade agreement with the United States does not interfere with [AfCFTA] and that is why we actually delayed our discussions until the [AfCFTA] came into place,” he said, calling the initiation of talks with the US a “win-win” for everyone “because it gives them wider market access and secondly … we are going to be able to go through all of the preliminaries, which tomorrow could be copied and imitated by others.”
”We’ve had preliminary discussions. We expect that to be as ambitious on FTA as you would have under the circumstances with the country with their level of institutional development, so we’re excited about that and I know the Kenyans are excited about it and I know that President Kenyatta’s hope is that we can get this done in enough time so it comes in under his term,” he testified. “So that’s where we are on that.”
-
Financial Times: President Kenyatta told the FT that Nairobi had made it “very clear” to Washington it would not undermine Africa’s nascent free trade area. The paper said the FTA could take two years to negotiate.
-
The Star: On the revitalization of the East African Community, the President regretted the slow pace at which the integration process is unfolding and assured of his commitment to see a more cohesive and prosperous region. He warned against historical suspicions and barriers which he said serves to derail the EAC integration process.
-
Multimedia:
-
-
Atlantic Council’s Africa Center: Kenyan President Uhuru Kenyatta on Strengthening US-African ties through trade
-
US Senate: US Trade Representative Robert Lighthizer testifies on trade policy
-
Diarise: The Corporate Council on Africa Leaders Forum takes place next week as a four day virtual events (23-26 June). The conference theme: Resilient US-Africa business engagement to drive post covid-19 recovery. Daily session themes:
-
The global financial response to COVID-19 in Africa
-
Economic and health innovations in response to COVID-19 in Africa
-
Drivers of post-COVID 19 growth in Africa
-
Sustaining regional and bilateral trade in Africa post-COVID-19
-
African Presidents confirmed to speak: President Nana Akufo-Addo, President Uhuru Kenyatta, President Filipe Nyusi.
The British Trade Commissioner for Africa, Emma Wade-Smith, recently made a virtual visit to Kenya during which she discussed with government officials and business leaders how the UK and Kenya are working together to respond to the Covid-19 pandemic and shape a strong economic recovery. She spoke to Business Daily about the visit and other aspects of the UK-Kenya relations:
Transnational cartels dictate what’s for breakfast in Kenya (ENACT)
Kenya can boast of being a regional hub for many things, but food sovereignty isn’t one of them, as the latest import dependency ratio on its food balance sheets shows. And not all of these imports are legal, or safe to eat. The trade of substandard foodstuffs is controlled by criminal cartels that run from Kenya with regional links to Uganda, Tanzania and Somalia. While genuine traders follow Kenya’s import regulations, criminals are bringing food products such as sugar, maize, rice, milk powder, vegetables and pulses full of mercury, lead and other insoluble matters unfit for human consumption into the country.
There are three main value chains and routes used by criminals in smuggling or importing food into Kenya. The first is the Somalia-Kenya route where goods, mainly sugar, are smuggled into Kenya from Somalia’s port of Kismayo using lorries, vehicles and donkey carts. The second value chain works along separate smuggling routes through the Uganda-Kenya and Tanzania-Kenya border crossing points. The third value chain is through product-specific duty-free importation windows periodically announced by the Kenyan government. [The author: Mohamed Daghar]
Regional peace, security top of Kenya’s UN Security Council agenda (Capital FM)
The fight against terrorism and radicalization as well as regional peace and stability will shape Kenya’s agenda at the UNSC following the country’s victory on Thursday over Djibouti which was eyeing the two-year non-permanent slot. Foreign Affairs Chief Administrative Secretary Ababu Namwamba told Capital FM News, being one of the countries in the region that has experienced myriad terror attacks, Kenya will champion the anti-terrorism agenda at the global security council for the benefit of all countries in the region.
“This is a region that has had its fair share of terrorism and other conflicts therefore Kenya will have a very good opportunity to bring its very well-defined credentials as a peace maker. We have been a peace maker in Liberia, Sierra Leone, and Somali,” he said. Kenya won the UNSC non-permanent seat on Thursday night, after beating Djibouti having garnered 129 votes against Djibouti’s 62 in the second round of voting at the UN headquarters in New York. [Note: Kenya will hold the presidency of the UN Security Council in October 2021]
-
Region expected to grow at 0.6% in 2020. The COMESA regional economy is projected to grow at a paltry 0.6% this year down from 5.2% recorded in 2019 and 6.0% in 2018. The slight dip in 2019 was attributed to lower commodity prices while the expected slump in 2020 will result from the devastating impact of the Covid-19 pandemic suggesting a deeper economic contraction for the region. According to a report on macroeconomic developments in COMESA region in 2019, the slowdown in growth was experienced in most COMESA member countries except Egypt, Ethiopia, Malawi, Rwanda and Seychelles which registered improved economic growth compared to 2018. “The impressive growth of above 5% in both years reflected among others, improving growth fundamentals, with a gradual shift from private consumption toward investment and exports,” says the report prepared by the COMESA Monetary Institute. The projected contraction of the regional economy will be driven by the impact of containment measures, the decline in global demand and regional spillovers, the external financial constraint and the impact of multiple shocks.
Going forward, the report recommends that strengthening of continental value chains should be a priority given the uncertain global business environment. The report concludes: “In the medium-long term, the effective implementation of regional integration agenda of the Regional Economic Communities and the continental free trade area will be key to strengthening regional production networks and trade, reducing the continent’s vulnerability to external shocks, and consequently leading to improvements in external current account balances.”
-
Fifteen COMESA member states are ready to start piloting the COMESA Electronic Certificate of Origin (eCO) System. The eCO is one of the latest tools developed under the COMESA Digital Free Trade Area initiative. Burundi, DR Congo, Egypt, Eswatini, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Tunisia, Zambia and Zimbabwe have indicated their readiness to pilot the COMESA eCO system. The need to start implementing the eCo system has gained urgency given the challenges that movement of goods across borders is facing as a result of restrictive measures put in place in response to the Coronavirus pandemic. The eCO will replace the manual certificates and help to circumvent the onerous manual process.
COMESA Director of Trade and Customs, Dr Christopher Onyango noted that the region was currently facing two critical challenges: firstly, the COVID-19 pandemic, which has changed ways of conducting businesses across the world threatening to reverse the gains already made in fostering a liberalized trade regime. Secondly, the value of intra-COMESA trade has remained stagnant and does not mirror the instruments put in place, especially under the FTA trade regime adopted way back in 2000. “It is rather disheartening that despite the preferences offered under the FTA, intra-COMESA is at 8% of total trade, compared to Africa’s 15%, America’s 47%, Asia’s 61% and Europe’s 67%,” Dr Onyango noted. “We hope the recently adopted COMESA response guidelines will help restore order and safeguard existing trading arrangements.”
EU continues to open up markets outside Europe in midst of rising protectionism: Trade Barriers Report
Thanks to the European Union’s successful intervention, European companies generated €8bn in additional exports in 2019. The high number of new restrictions that hinder EU exports shows however that protectionism has become deeply ingrained in global trade. These are some of the findings of the Commission’s annual Trade and Investment Barriers Report (pdf) published on 18 June 2020. However, EU companies face also a multiplication of new unlawful barriers in sectors of strategic importance for the EU, notably in information and communication technology, electronics, auto and other high-tech industries. The total number of existing trade barriers around the word amounts to 438, out of which 43 were introduced last year by 22 different countries. The highest number of trade restrictions concern access to the Chinese and Russian markets (respectively 38 and 31 measures). China also imposed the highest number of new restrictions in 2019, followed by South Mediterranean and Middle East countries.
Today’s Quick Links:
-
US says South Africa’s poultry tariffs give EU unfair benefit
-
New proposal for South Africa to tax digital services like Netflix and Spotify
-
PPC Zimbabwe: “Cheap substandard imports crippling cement industry”
-
African Parliamentarians aim for increased health budgets amid COVID-19 pandemic
-
UNECA: Impact of COVID19 can open up new avenues for structural transformation in North Africa
-
Dr Lydiah Kemunto Bosire: The African Union needs a COVID-19 Think-And-Do Tank
-
UNGIS Dialogue: The role of digitalization in the Decade of Action
Related News
15 Member states ready to pilot the COMESA Electronic Certificate of Origin
Fifteen COMESA Member States are ready to start piloting the COMESA Electronic Certificate of Origin (eCO) System. The eCO is one of the latest tools developed under the COMESA Digital Free Trade Area (DFTA) initiative.
Burundi, DR Congo, Egypt, Eswatini, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Tunisia, Zambia and Zimbabwe have indicated their readiness to pilot the COMESA eCO system.
The need to start implementing the eCo system has gained urgency given the challenges that movement of goods across borders is facing as a result of restrictive measures put in place in response to the Coronavirus pandemic. The eCO will replace the manual certificates and help to circumvent the onerous manual process.
Certificates of Origin are issued to exporters within the COMESA Free Trade Area (FTA) to confer preferential treatment to goods originating from an FTA member State. The uptake of the electronic certificate has not gained traction among Member States in the past for lack of the necessary regulations under the COMESA Rules of Origin (RoO).
The decision to adopt the eCo was made by the Council of Ministers in 2014 to replace the manual certificate. The objective was to facilitate intra-regional trade through reduction in the costs and time required in registration, application and submission of certificates and the post-verification of originating goods. In November last year, the 40th Meeting of the Council of Ministers adopted the draft regulations to implement the COMESA eCO system.
Subsequently, a Technical Working Group (TWG) on Rules of Origin was tasked to review the Rules to facilitate implementation of the COMESA eCO and other trade facilitation instruments.
On Wednesday, last week, during the 14th meeting of the TWG, COMESA Secretariat undertook to collaborate with Member States that are ready to pilot the system to develop national piloting plans to ensure that electronic certificates are implemented sooner rather than later.
“The emergence of the COVID-19 pandemic calls for speedy implementation of the COMESA eCo by all Member States,” said the COMESA Director of Trade and Customs, Dr Christopher Onyango. “This together with the improvement of customs cooperation and trade facilitation, will no doubt enhance intra-regional trade and attract more investments into the region.”
Critical Challenges
He noted that the region was currently facing two critical challenges: firstly, the COVID-19 pandemic, which has changed ways of conducting businesses across the world threatening to reverse the gains already made in fostering a liberalized trade regime. Secondly, the value of intra-COMESA trade has remained stagnant and does not mirror the instruments put in place, especially under the FTA trade regime adopted way back in 2000.
“It is rather disheartening that despite the preferences offered under the FTA, intra-COMESA is at 8% of total trade, compared to Africa’s 15%, America’s 47%, Asia’s 61% and Europe’s 67%,” Dr Onyango noted. “We hope the recently adopted COMESA response guidelines will help restore order and safeguard existing trading arrangements.”
As the TWG reviews the Protocols on RoO to incorporate the eCO, the Director urged the team to consider rules that are simple, transparent, predictable and trade-facilitating for businesses and trade operators.
“It is important to remember that RoO have a direct impact on the uptake of preferences and the rate of preference utilization. They are not just the passport for circulating goods under preferential tariffs but are as well the cornerstone behind effective application of preferences towards Member States.”
He observed that when the RoO are too costly to be implemented by firms relative to the expected benefits, exporters would rather pay tariffs than comply with strict rules of origin, leading to low utilization.
The meeting was attended by participants from Burundi, Comoros, Egypt, Eswatini, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tunisia, Zambia and Zimbabwe.
Related News
Trade Barriers Report: EU continues to open up markets outside Europe in midst of rising protectionism
Thanks to the European Union's successful intervention, European companies generated €8 billion in additional exports in 2019. The high number of new restrictions that hinder EU exports shows however that protectionism has become deeply ingrained in global trade. These are some of the findings of the Commission's annual Trade and Investment Barriers Report published on 18 June 2020.
Commissioner for Trade Phil Hogan said: “Ensuring respect of the existing international trade rules is one of my top priorities. Our action to enforce trade rights and eliminate trade barriers brings tangible benefits for EU companies, including small ones. In 2019, our joint efforts regained for them €8 billion. Yet, we have also been facing a worrying sea change in world trade. Barriers affect EU export sectors of particular importance and obstacles spread across regions. While we focus all our efforts on the post-COVID economic recovery, this calls for new impetus to enforcement. It is essential to keep global trade flows open.”
Coordinated efforts by the Commission, Member States and EU business organisations in the framework of the Market Access Partnership, allowed European companies to regain in 2019 important export markets. This benefited among others EU farmers and food producers, for instance:
-
Beef exporters from France, Ireland and The Netherlands regained access to China; producers from Ireland and Croatia recovered access to Japan and Dutch pork producers can now export also to Mexico;
-
Polish producers of baby milk powder can now export again to Egypt;
-
Belgian pear producers regained access to the Mexican market.
However, EU companies face also a multiplication of new unlawful barriers in sectors of strategic importance for the EU, notably in information and communication technology, electronics, auto and other high-tech industries. The total number of existing trade barriers around the word amounts to 438, out of which 43 were introduced last year by 22 different countries. The highest number of trade restrictions concern access to the Chinese and Russian markets (respectively 38 and 31 measures). China also imposed the highest number of new restrictions in 2019, followed by South Mediterranean and Middle East countries.
Background
The Commission's Report on Trade and Investment Barriers has been published annually since the beginning of the 2008 economic crisis. It is part of the Commission enforcement efforts in the area of international trade rules. The report offers a detailed analysis of the types of barriers causing most problems to EU's companies and the sectors where results have been achieved.
The report is based on information reported by European companies. To increase awareness of the available export support, the Commission established the Market Access Days initiative, bringing together EU companies, national trade associations and trade experts from the Commission and Member States to discuss concrete market access problems on foreign markets. In 2019, sessions were held in the Netherlands, Lithuania, Portugal, France and Latvia in which hundreds of companies participated.
Given the need to step up enforcement efforts in the area of trade, a Chief Trade Enforcement Officer will soon be nominated to coordinate and steer all EU enforcement actions. This will include the establishment of a single entry point for trade enforcement issues to respond faster and more effectively to trade restrictive practices by EU trading partners. Furthermore, on 16 June, the Commission launched of a public consultation to review EU trade policy, seeking among others proposals on how to improve EU enforcement efforts to help small businesses facing unjustified export restrictions in countries outside the EU.
Related News
COVID-19: African Union Chair, President Ramaphosa launches the Africa Medical Supplies Platform, Africa’s Unified Continental Response to fight the pandemic
The African Union Chairperson, Cyril Ramaphosa, President of South Africa, today launched the ‘Africa Medical Supplies Platform’ adopted as a single online marketplace to enable the supply of COVID-19-related critical medical equipment in Africa.
The Africa Medical Supplies Platform (AMSP) unlocks immediate access to an African and global base of vetted manufacturers and procurement strategic partners and enables African Union Member States to purchase certified medical equipment such as diagnostic kits, PPE and clinical management devices with increased cost effectiveness & transparency. The platform serves as a unique interface enabling volume aggregation, quota management, payment facilitation as well as logistics and transportation to ensure equitable and efficient access to critical supplies for African governments.
The online platform was developed under the leadership of African Union Special Envoy, Strive Masiyiwa and powered by Janngo on behalf of the African Union’s Africa Centres for Disease Control and Prevention (Africa CDC) and in partnership with African Export-Import Bank (Afreximbank), the United Nations Economic Commission for Africa (ECA) and other leading African & international corporations, institutions and foundations.
Afreximbank will facilitate payments while logistics partners including African national carriers and global freight forwarders will expedite delivery. A strong emphasis is also placed on showcasing and funding Made in Africa manufacturers of medical equipment with relevant certification. Afreximbank brought to bear its $3-billion Pandemic Trade Impact Mitigation Facility (PATIMFA), of which $200 million has been reserved to support food production as well as the manufacture of, and trade in, medical equipment and supplies.
Special Envoy Strive Masiyiwa: “The Africa Medical Supply Platform is just one innovation that African countries have developed, to help mitigate the devastating impact of this pandemic threatening both the health of our people and our national economies. We are already getting requests from other parts of the world to license the AMSP concept,” he said. “Africa is leading the way with this online solution to ensure all of our governments get access to PPEs and other urgent medical supplies they need, at fair prices.”
Africa CDC is leveraging the pdf Africa Joint Continental Strategy for COVID-19 (777 KB) to aggregate supply and demand for COVID-19-related medical commodities by African Union Member States, providing a list of priority products, overseeing quality assurance, and facilitating distribution of medical resources.
“We commit to providing market intelligence on where the manufacturers are, facilitating pooled procurement when financial resources are made available through this initiative, and distributing these products to respective African destinations,” said Dr John Nkengasong, Director of Africa CDC.
Prof. Benedict Oramah, President of Afreximbank, said the whole initiative was important because the increasingly difficult global trade and financing environment would not only limit the potential of African countries to procure essential supplies, but could also limit their ability to scale up their production capacities.
“Our joint initiative with ECA and the African Union, through Africa CDC, is a proactive way to respond to the pandemic more effectively,” he said. “Afreximbank is also engaging its development partners in COVID-19 response efforts to mobilise additional resources and technical assistance.”
ECA is making use of existing platforms, including its AfCFTA-anchored pharmaceutical pilot project, jointly established with the African Union Commission, WHO, and UNAIDS, to improve economically sustainable access to safe medicines through enhanced localized manufacturing, pooled procurement and a continentally harmonised regulatory and quality framework.
“We are engaging private sector stakeholders and governments to adopt policies to urgently bolster the production and supply chain of critical medical and associated resources that Africa needs to respond to COVID-19 in a manner that promotes the economic and social development of the continent,” said Ms Vera Songwe, Executive Secretary of ECA.
Afreximbank, ECA and African Union Trade Commission will also jointly advocate for the removal of trade tariffs and other restrictions on medical supplies in Africa in the context of the COVID-19 pandemic. They will support countries to adopt policies to strengthen intra-African trade in COVID-19-related equipment and improve quality control and adherence to regulatory standards.
Other key strategic partners include Virgin (Orbit and Galactic) and Invicta (ESG), a first of its kind-alliance producing FDA-approved ventilators and oxygen helmets in South Africa and Janngo, leveraging its venture building capabilities, technology expertise & cross-border marketplace track-record to build and launch the platform. All major strategic & commercial partners of the initiative can be found on the platform website.
Visit the Africa Medical Supplies Platform at www.amsp.africa
About the Africa Medical Supplies Platform
The Africa Medical Supplies Platform (AMSP) is a non-profit initiative launched by the African Union as an immediate, integrated and practical response to the COVID-19 pandemic. The online platform was developed under the leadership of African Union Special Envoy, Strive Masiyiwa and powered by Janngo on behalf of the African Union’s Africa Centres for Disease Control and Prevention (Africa CDC) and in partnership with African Export-Import Bank (Afreximbank) and United Nations Economic Commission for Africa (ECA) with the support of leading African & international Institutions, Foundations & Corporations as well as Governments of China, Canada & France.
Related News
tralac’s Daily News selection
Mainstreaming gender in key e-commerce policy areas: possible lessons for AfCFTA (CUTS)
In particular, the study aims to: (i) outline key policy areas for the promotion of e-commerce, where gender mainstreaming has an important role to play; (ii) analyse how these policy areas can impact gender inclusiveness in e-commerce; and (iii) identify good practices for mainstreaming gender in continental, regional and national strategies, policies and frameworks in relation to ecommerce; and (iv) highlight best practices of implemented programmes and projects at the national and regional levels that maximise participation by women and women-owned enterprises in cross-border e-commerce.
West African ministers propose phased re-opening of borders (Reuters Africa)
West African government ministers have proposed re-opening borders between their countries in the first half of July and allowing in travellers from other countries with low or controlled levels of coronavirus spread by the end of July. The new proposal, contained in an ECOWAS summary of a virtual meeting last week of foreign ministers and trade ministers, called for coordinated efforts to re-open cross-border trade that has been crippled by coronavirus restrictions.
It said a first phase consisting of opening up domestic air and land transport should be implemented this month. Many governments in the region have already begun to do so. A second phase, involving the opening of land, air and maritime borders within the region, should happen by July 15 at the latest. A third phase, involving the opening of air and land borders to “countries with low and controlled levels of COVID-19 contamination rates”, should occur by July 31 but will depend on the evolution of the pandemic, the report said. [ECOWAS Ministers validate reports on ease of business and coronavirus control]
East Africa: EU signs Sh602 million deal to fund safe trade (Business Daily)
Efforts to speed up cargo movement in the region received a major boost Tuesday after the European Union signed a deal with the Trademark East Africa to fund safe clearance at the ports and border points. Under the Sh602 million (€5m) emergency trade programme, mobile testing labs will be provided at Mombasa port and key border crossings, including Busia and Malaba. The programme to be rolled out under public-private partnership will also provide personal protective equipment to port and border point workers to cushion them from Covid-19 spreading at these trade hubs. “This (fund) grant is very important and will complement the government’s efforts that ultimately cushion not only large enterprises but especially also the MSME who rely greatly on the flow of supply chains as most cannot maintain large inventories,” said Trade Secretary Betty Maina.
Tanzania, Kenya agree to end cross-border trade spat (The Citizen)
Tanzania and Kenya have reached an agreement that will see to them facilitating free movement of goods across their common border, the Covid-19 pandemic notwithstanding. The two countries will now conduct coronavirus testing for truck crews at their common border, a departure from the May agreement whereby testing was to be done at the point of departure. Longido District Commissioner Frank Mwaisumbe yesterday said that leaders have resolved that Tanzanian truck crews crossing the Namanga border to Kenya would now be tested by Kenyan authorities - and vice versa. The new agreement was reached after a meeting that involved Arusha Regional Com-missioner Mrisho Gambo, Tanzania Revenue Authority officials and some senior officials from Kenya. He said that, under the new arrangements, truck crews will be allowed to proceed with their journey even without having received their Covid-19 test results. “While returning, they would pick up their results - and proceed home. In short, they would no longer be denied entry into either country due to Covid-19 test results. They will, however, be required to take all precautions against Covid-19,” he said. [Kenya: Trucks backlog at borders to be cleared in a week’s time – CS]
Benchmarking Madagascar’s Free Zone Competitiveness (World Bank)
The Government of Mauritius is implementing a bilateral Special Economic Zone program under the Mauritius-Africa Fund (MAF) which was established in February 2014 as a public company, with the Mauritian government as the sole shareholder. The immediate focus of the MAF is to develop SEZs in select sub Saharan African countries under a government-to-government cooperation framework to further regional integration and South-South cooperation while promoting quality investments into SSA. Facing increasing costs and the loss of preferential trade arrangements, Mauritian firms are seeking to offshore the more labor-intensive segments of the textile and apparel value chains to countries such as Madagascar where Mauritian firms have traditionally made significant investments. One of MAF’s current SEZ projects is in Madagascar where they have partnered with the Government of Madagascar (GoM) for the development and operation of a portion of the proposed Moramanga Textile City/Zone. This technical note (pdf) is in response to a request from both the MAF/Government of Mauritius and the EDBM/GoM for:
-
an update of the current status of the SEZ regime in Madagascar i.e. policy, legal, regulatory and institutional framework and current proposals being considered by the GoM as well as opportunities for improvement
-
benchmarking Madagascar’s main competitors in the global textile and apparel markets (such as Bangladesh, Ethiopia and Kenya) and comparing their SEZ regimes for textile/garment zones to identify competitiveness strengths and weaknesses and lessons learned, and
-
outline opportunities for successful development of the proposed zone for consideration by both the GoM and the MAF/Government of Mauritius.
The following short-term recommendations are proposed for the consideration of both the MAF/Government of Mauritius and the GoM as they move forward with the joint venture agreement and the planning process for the Moramanga Textile City Zone (Figure 3: Recommendations for a new SEZ Regime for Madagascar).
Textile firms want Kenya’s ban on second-hand clothes maintained (The East African)
The local textile industry in Kenya is pushing the government to make the temporary ban on second-hand clothes permanent in order to revive the collapsing domestic apparel sector. The Kenya Bureau of Standards imposed the ban in March as a precautionary measure to prevent the spread of the coronavirus. However, Betty Maina Cabinet Secretary in the Ministry of Industry, Trade and Co-operatives said the ban was temporary and would be lifted when the pandemic was over. The Leather Apex Society of Kenya is among organisations that want the government to permanently lock out the cheap clothes imports and say the country has an opportunity to re-awaken the local sector. “It is important for Kenya to induce demand for locally-finished products by keeping the ban on second-hand imports,” said the lobby group. After several failed attempts occasioned by threats of retaliation by the US — a major source country — the government is now considering a prolonged ban.
Lesetja Kganyago: The SARB the coronavirus shock and the age of magic money (SA Reserve Bank)
Frankly, rather than 1929 repeating itself, I am more worried about a different scenario. As a country, we have got ourselves into a lot of trouble. We are struggling to learn the lessons of these mistakes, and to achieve the consensus to fix them. And we are running out of time. We have just completed our worst growth decade on record – worse than the 1980s or the 1990s. On a per capita basis, South Africans have been getting poorer since 2013. In the world, we are slipping backwards. In 1960, South African incomes were around 26% of those in the US. They are now down to 13%. They were 128% of Brazil’s in 1960, a country to which we are often compared; they are now down to 65%. Rather, we risk following Argentina’s path, where ideological conflicts and unstable macroeconomic policies produced a steady economic decline. In much of the period after 1994, we in South Africa surprised everyone by cooperating despite our differences, and delivering robust and sustainable macroeconomic policies. But those accomplishments have faded. Instead, we now find ourselves sitting on the highest debt pile in our history, arguing about printing money and waving ideological banners at each other. [The author is Governor of the South African Reserve Bank]
Senegal: End-of-Mission statement by IMF team
The COVID-19 pandemic has had a significant impact on economic activity, exacerbated by border closures, a curfew, and social distancing. The GDP growth rate is projected at 1.1% for 2020 compared to 5.3% in 2019. These forecasts are based on the control of the spread of the pandemic, the implementation of measures to support the economy, and a gradual recovery of economic activity during the second half of 2020. The forecasts are nonetheless subject to major downside risks. A comprehensive assessment of the impact of the pandemic on revenue collection and supplementary expenditure requirements raises the estimated budget deficit to 6.1% of GDP in 2020. The authorities have stated their commitment to implementing measures that are temporary, well-targeted, cost-effective, and fully reflected in a revised budget. They intend to return gradually to a budget deficit of 3% of GDP through 2022 (WAEMU convergence criterion) as the crisis abates. The authorities are also committed to taking steps to strengthen transparency and accountability regarding emergency expenditure.
Tanzania: Request for debt relief under the Catastrophe Containment and Relief Trust (IMF)
COVID-19 is having an adverse economic impact on Tanzania, mainly through external channels. These include the collapse of international travel (tourism accounts for 15% of GDP and 35% of export receipts), lower activity in the hospitality and food service sectors, and a slowdown in the economies of the Tanzania’s main trading partners. While there is uncertainty about the extent of the impact (data as of March 2020 do not show a deterioration in economic conditions), these factors will become more prominent in coming months as the tourism high season was expected to begin in June. Moreover, should the number of COVID-19 cases and deaths intensify, the health system will be under severe pressure and more sectors of the economy will be affected. Real GDP growth is expected to fall to about 4% this fiscal year (ending in June) and further decelerate to less than 3% next year compared to the pre-crisis projection of nearly 6%. At present, the baseline macroeconomic projections assume that the health impact is contained and that the economic impact is mainly felt through the external sector with limited implications for the rest of the economy (Tanzania has not, contrary to other countries, imposed a lockdown on the economy). However, given the uncertainties about the effects of the pandemic, downside risks to growth are pronounced. In the baseline, foreign reserves will also be under pressure and are projected to decline by nearly 25% reducing the import coverage from 5.2 months at end-2019/20 to 3.7 months at end-2020/21 (if exceptional financing is not secured to help close the financing gap, the reserve coverage would fall to 3.2 months of imports).
The World Bank’s Board of Executive Directors have approved $250m ($125m grant and $125m credit) in supplemental financing for the ongoing Second Ethiopia Growth and Competitiveness Programmatic Development Policy Financing.
Today’s Quick Links:
-
Mombasa port faces stiff competition as Dar extends demurrage period
-
Cameroon-Chad Interconnection Project: Promoting regional power interconnection in Central Africa
-
DG Azevêdo to Ottawa Group: Cooperation at the WTO would help the global economy recover from COVID-19
-
Moldova nominates Mr Tudor Ulianovschi for post of WTO Director-General
Related News
China loses landmark WTO dispute against the European Union
China spent four years fighting for market-economy status, a designation that would give it stronger footing with commercial partners while also curtailing their ability to retaliate over trade disputes. This week, China quietly lost that battle.
On 12 December 2016, China requested consultations with the European Union concerning certain provisions of the EU regulation pertaining to the determination of normal value for “non-market economy” countries in anti-dumping proceedings involving products from China.
When China acceded to the WTO, China and other WTO Members agreed that, for a transitional period of 15 years, China-specific treaty provisions would apply to the determination by other Members of certain elements of "price comparability" in anti-dumping proceedings involving Chinese imports. Specifically, under paragraph 15(a)(ii) of the Protocol on the Accession of the People’s Republic of China, importing WTO Members were, subject to certain conditions, exceptionally permitted to use a methodology not based on a strict comparison with domestic prices or costs in China. Paragraph 15(d) provides that "[i]n any event, the provisions of subparagraph (a)(ii) shall expire 15 years after the date of accession", namely, on 11 December 2016.
Accordingly, from that date, the WTO rules that govern the determination by WTO Members of all elements of price comparability now apply to imports from China. However, the European Union continues to determine normal value on the basis of a special calculation methodology unless the producer establishes that it meets certain criteria, as set forth below. Thus, China argued that the European Union is in violation of its international obligations.
Specifically, China claimed that the measures by the EU appeared to be inconsistent with:
- Articles 2.1 and 2.2 of the Agreement on Implementation of Article VI of the GATT 1994 (the Anti-Dumping Agreement); and
- Articles I:1 and VI:1 of the General Agreement on Tariffs and Trade (GATT 1994).
Panel and Appellate Body proceedings
On 9 March 2017, China requested the establishment of a Panel in accordance with Article 6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). The Panel was established by the DSU at its meeting on 3 April 2017, and was formally composed on 10 July 2017. Australia, Bahrain, Brazil, Canada, Colombia, Ecuador, India, Indonesia, Japan, Kazakhstan, Korea, Mexico, Norway, the Russian Federation, Saudi Arabia, Chinese Taipei, Tajikistan, Turkey, the United Arab Emirates and the United States reserved their rights to participate in the Panel proceedings as third parties.
On 8 December 2017, the Chair of the Panel informed the DSB that the beginning of the Panel’s work had been delayed as a result of a lack of available lawyers in the Secretariat. The Panel also informed the DSB that it expected to issue its final report to the parties not before the second half of 2018. On 26 November 2018, however, the Chair of the Panel informed the DSB that in the light of the complexity of the legal issues covered in this dispute, the Panel only expected to issue its final report to the parties during the second quarter of 2019.
On 7 May 2019, China requested the panel to suspend its proceedings in accordance with Article 12.12 of the DSU. On 21 May 2019, the European Union commented on China’s request; on 23 May 2019, China responded to the EU’s comments. On 14 June 2019, the Panel informed the DSB of its decision to grant China’s request and suspend its work. In its communication, the Panel noted that pursuant to Article 12.12 of the DSU, the authority of the Panel shall lapse after 12 months of the suspension of its work.
Since the Panel has not been requested to resume its work, pursuant to Article 12.12 of the DSU, the authority for establishment of the Panel lapsed as of 15 June 2020. By ending the dispute, China now provides the EU with greater legal certainty to combat low-price Chinese exports with artificially high tariffs.
According to Bloomberg: "The resolution is a major setback for China as the EU steps up efforts to limit its expansionist practices into the continent. On the same day that China allowed the dispute to lapse, the EU announced an unprecedented attempt to block Beijing’s subsidies to exporters. The 27-nation bloc will also unveil a proposal this week to protect European companies from Chinese takeovers."
Related News
Reviving FDI flows is crucial to economic recovery in developing economies
Rebuilding Investor Confidence in Times of Uncertainty
The damage has been done: COVID-19 has dealt the global economy its most severe blow since the Second World War, causing the broadest set of synchronized recessions the world has seen since 1870. Emerging-market and developing economies have suffered unprecedented capital outflows – just when, as a group, they face their first outright recession in 60 years.
Yet one key clear path to recovery is emerging amid the grim news: Developing economies must strive to restore and increase capital inflows, particularly in the form of foreign direct investment (FDI). FDI inflows have long been a key building block for developing countries, usually providing the largest source of external finance – more than official development assistance, or portfolio investment flows. They will be crucial for a COVID-19 recovery.
FDI flows were already slowing before the COVID-19 outbreak amid rising protectionism and other uncertainties that eroded investor confidence. The pandemic added a new – and unprecedented – risk to the mix, sending business confidence to historic lows, and resulting in an expected decline of 40 percent in global FDI flows.
But reviving confidence is not an impossible task. A new World Bank report sheds useful light on what it might take to increase FDI flows. It notes that 2,400 business executives polled in 10 major emerging-market countries reported that low taxes, low labor costs, and access to natural resources matter less to their investment decisions than political and economic stability and a predictable legal and regulatory environment. In short, the top three drivers of FDI decisions are entirely within the control of governments.
Policymakers in developing economies should seize the opportunity – as quickly as possible, as soon as the immediate health emergency is overcome. They have a chance to improve the long-term incentives for robust FDI flows to developing economies – which will emerge from the crisis heavily indebted and with limited fiscal space to pay for the reconstruction ahead. They have a chance to put in place complementary policies to ensure that FDI flows do not exacerbate inequality by benefiting mainly better-educated and higher-skilled workers.
Reducing regulatory risk for investors has striking effects on FDI flows – even more than the effects of trade openness, our research shows. A one-percentage point reduction in regulatory risk tends to boost the likelihood of an investor entering or expanding in a host country by as much as 2 percentage points. By contrast, a one-point increase in the host country’s trade-to-GDP ratio boosts the likelihood by no more than 0.6 percentage point.
Given those effects, the World Bank has established a new global database for measuring regulatory risk. It includes about 14,000 parent companies investing in nearly28,000 new and expansion FDI projects across 168 host countries. Its analytical framework focuses on the three items that investors most closely associated with lower regulatory risk – transparency, legal protection for investors, and investor access to grievance-recourse mechanisms.
Improving transparency and reducing bureaucratic discretion is an important first step for governments in developing economies. This can make the business outlook more predictable and less risky for companies. Governments can strengthen transparency by consulting systematically with the private sector and other stakeholders. They can develop information portals to make laws and regulations publicly accessible. They should articulate clear and specific FDI-related legal provisions and administrative procedures.
Investment competitiveness and good governance were important markers of progress for developing countries long before the crisis began. COVID-19 has elevated their urgency. The magnitude and scale of the crisis require policy makers to employ their full arsenal of policy tools to rebuild investor confidence. They should rise to the occasion – by acting quickly, decisively, and collaboratively.
Ceyla Pazarbasioglu is Vice President for Equitable Growth, Finance and Institutions (EFI) at the World Bank Group (WBG).
Highlights
-
More than two thirds of multinational investors in developing countries are reporting disruptions in supply chains, declines in revenues, and falls in production within months of the COVID-19 outbreak. The impacts are likely to intensify over time.
-
FDI can ease the economic fallout of the coronavirus crisis and boost countries’ economic resilience by continuing to create more and better-paid jobs, alleviating poverty, and boosting productivity.
-
Supportive policies can rebuild investor confidence and FDI flows needed to support economic recovery, based on surveys of 2,400 global business executives in ten major emerging markets.
The COVID-19 pandemic has proven to be a destructive force, with devastating effects on livelihoods, employment, and investor confidence. Two thirds of multinational investors in developing countries are reporting disruptions in supply chains, declines in revenues, and falls in production within months of the outbreak. Global foreign direct investment (FDI) flows are predicted to decline by more than 40 percent this year.
The Global Investment Competitiveness Report 2019-2020 finds that more predictable trade and investment policies could help emerging market governments attract more investment flows needed to support financial stability and economic recovery from the effects of the COVID-19 pandemic.
Governments can leverage Foreign Direct Investment (FDI) for a more robust economic rebound by avoiding protectionist policies, seizing new opportunities from changing FDI and supply chain trends, and fostering global cooperation.
Findings of the report are based on surveys – a large survey of over 2,400 global business executives in ten large middle-income countries conducted in the second half of 2019 and a smaller “pulse” survey in March and April 2020. Results of the surveys, as well as the report’s new global database of regulatory risk, highlight the critical role of government actions in reducing investor risk and increasing policy predictability for rebuilding investor confidence.
The surveys showed that even before the crisis, most foreign investors were delaying investment decisions due to a heightened level of uncertainty around trade and investment policies. Foreign investors cited supportive political environments, stable macroeconomic conditions, and conducive regulatory regimes as their top three investment decision factors – even more important than low taxes, low labor and input costs, or access to natural resources.
Related News
Africa launches medical supplies platform to fight COVID-19
As Africa braces itself for the peak in COVID-19 cases, the continent is launching the Africa Medical Supplies Platform, an innovative marketplace to enable all African governments to access critical supplies, President Cyril Ramaphosa announced on Wednesday.
According to President Ramaphosa, Africa has over 250 000 confirmed infections and about 6 700 deaths.
“Although the number of infections in Africa is currently lower than elsewhere in the world, there is an expectation that the worst is still to come, with dire social and economic consequences,” he said.
As it stands, Africa is in dire need of medical supplies, testing equipment and facilities to isolate and quarantine people, laboratories, personal protection equipment and ventilators, the President told delegates.
While the continent is scrambling to get supplies, many African countries buy goods with resources largely obtained from multilateral agencies, President Cyril Ramaphosa noted.
President Ramaphosa was speaking in his capacity as the Chairperson of the African Union (AU) during a virtual Extraordinary China-Africa Solidarity Summit against COVID-19, co-hosted by the Forum for China-Africa Cooperation (FOCAC) and the AU.
The Summit is aimed at exploring opportunities for African States to leverage multilateral cooperation, through the FOCAC mechanism, so that resources and knowledge can be mobilised in efforts to combat the COVID-19 pandemic.
FOCAC is an official forum that coordinates cooperation between the People’s Republic of China and African States.
The President has also asked China to consider offering a helping hand by providing diagnostic and therapeutic supplies for over six months.
“This support would be managed by Afreximbank, in collaboration with its counterpart in China. This would allow several African countries to procure goods from China,” he said.
The AU has also established an African COVID-19 Response Fund as a key intervention to mobilise and direct resources towards the continent’s response to the challenge.
“The economic global economic downturn has dealt a severe blow to the African continent, as it has the rest of the world,” President Ramaphosa acknowledged.
He said the AU has been at the forefront of mobilising international support for a comprehensive economic stimulus package for Africa.
African leaders have also called for debt relief for indebted African countries, including a two-year debt standstill and a plan for the restructuring of both private and bilateral debt.
“To provide additional liquidity to shore up the private sector, Africa has called for the international community to avail some unused Special Drawing Rights of about $100 billion for Africa,” said the President.
He has also urged China to support and contribute to this call, or to propose other alternatives to be considered on an urgent basis to help support the private sector.
“Although the COVID-19 pandemic will pass, its consequences for people, economies and our planet will be with us for a long time to come.”
Rebuilding economies
The President said it was imperative to embark on a strategic effort to rebuild social and economic systems and restore the confidence of citizens.
“This will require solidarity and a clear vision of the future for developing countries.”
He said Sino-Africa solidarity and better multilateral cooperation is key to winning the battle against this pandemic.
“Through this and other platforms, let us continue to strengthen the bonds of solidarity that exist among us and take collective action to secure the future of humanity.”
The President has also expressed gratitude on behalf of Africans to China's President Xi Jinping, and the government and his people for their generous donation of personal protective equipment and other medical assistance that has been provided to our continent.
“I wish to thank President Xi for the fruitful discussions we have had during the course of this pandemic and his willingness to engage on the issues that African countries face.”
He said the pandemic is not only a threat to health but has a profound bearing on many other areas of global activity, including trade, debt, financial flows, security, migration and action to deal with climate change.
“Humanity is facing a grave and uncertain crisis, as it confronts a virus, which by its nature knows no geographic boundaries and recognises no national sovereignty.”
He has also called for solidarity, global cooperation and collaboration.
“We need to strengthen the multilateral system and support the international institutions that must guide our response to this crisis.
Related News
tralac’s Daily News selection
Extraordinary China-Africa Summit on Solidarity against COVID-19: selected highlights
-
Joint Statement: extract
We fully recognize the positive role of China-Africa investment and financing cooperation in promoting development and improving people’s lives in Africa, and call on the international community to work in solidarity and collaboration, share best practices, and provide more material, technical, financial and humanitarian support to help African countries overcome the impact of COVID-19 and achieve independent and sustainable development. China takes seriously the debt concerns of African countries and will earnestly act on the G20 Debt Service Suspension Initiative, through friendly consultation as equals, and expedite support for the African countries worst hit by COVID-19. The African side expresses appreciation for China’s actions, and calls on the international community, especially developed countries and international financial institutions, to take concrete measures to ease the debt burden of African countries.
-
President Xi Jinping’s speech: extract
Within the FOCAC framework, China will cancel the debt of relevant African countries in the form of interest-free government loans that are due to mature by the end of 2020. For those African countries that are hardest hit by the coronavirus and are under heavy financial stress, China will work with the global community to give them greater support, by such means as further extending the period of debt suspension, to help them tide over the current difficulty. We encourage Chinese financial institutions to respond to the G20’s Debt Service Suspension Initiative and to hold friendly consultations with African countries according to market principles to work out arrangements for commercial loans with sovereign guarantees. China will work with other members of the G20 to implement the DSSI and, on that basis, urge the G20 to extend debt service suspension still further for countries concerned, including those in Africa.
To help Africa achieve sustainable development is what matters in the long run. China supports Africa in its effort to develop the African Continental Free Trade Area and to enhance connectivity and strengthen industrial and supply chains. China will explore broader cooperation with Africa in such new business forms as digital economy, smart city, clean energy, and 5G to boost Africa’s development and revitalization.
-
President Cyril Ramaphosa’s speech: extract
As things stand, however, many African countries are having to purchase goods with resources largely obtained from the multilateral agencies. We would like to ask China to consider support for the provision of diagnostic and therapeutic supplies over a period of six months. This support would be managed by AfriExImBank in collaboration with its counterpart in China. This would allow several African countries to procure goods from China.
The AU has been in the forefront of mobilising international support for a comprehensive economic stimulus package for Africa. We have called for debt relief for African countries that are indebted, including a two-year debt standstill and a plan for the restructuring of both private and bilateral debt. To provide additional liquidity to shore up the private sector, Africa has called for the international community to avail some unused Special Drawing Rights of about $100 billion for Africa. We urge China to support and contribute to this call, or to propose alternative options that can be considered on an urgent basis to help support the private sector. Although the COVID-19 pandemic will pass, its consequences for people, economies and our planet will be with us for a long time to come. [President Buhari’s speech]
How has the COVID-19 pandemic impacted Ugandan businesses? Results from a business climate survey (EPRC)
This special issue of the Uganda Business Climate Index examines the effect of the risk presented by COVID-19 pandemic on Uganda’s businesses. In particular, the report: Examines the effects of the COVID-19 pandemic on various indicators of businesses performance; Assesses future expectations of the businesses in the event the pandemic and containment measures persists; Provides possible policy options to revive businesses in Uganda in the post-COVID-19 era.
Large businesses generally reported no effect of COVID-19 on their ability to repay outstanding loans, but the risk associated with COVID-19 has undermined MSMEs’ ability to repay loans. Although, 65% of the businesses reported a decline in their ability to repay loans (Figure 10) as a result of the risk associated with COVID-19 and the subsequent measures taken to contain the disease (42% reporting moderate decline and 24% reporting severe decline), the decline is largely in micro (69% of the businesses), small (72% of the businesses), and medium (88% of the businesses). This could be attributed to the loss of revenue, since most of the MSMEs halted operations as they could not afford to adopt some of the preventive measures such as encampment or provision of accommodation to their employees. A sectoral analysis shows that high percentages of businesses in manufacturing and services reported decline in ability to repay outstanding debts due to the outbreak of COVID-19 compared to those in agriculture. This could probably be due to the fact that fewer businesses in agriculture have loans and even those with loans, the amounts are relatively small.
Reliance on international rather than regional supply for raw materials and intermediates may be adversely affecting businesses in Uganda. This calls for firms, especially the micro and small companies, to explore the East African Community and COMESA market to get their supplies. In addition, the COVID-19 related risk is a clear opportunity for Uganda to develop a critical domestic value chains and supply chains so that businesses, particularly MSMEs, can have a stable source for their inputs, while saving on the scarce foreign exchange.
Coronanomics and the Nigerian economy: Understanding the realities of an impending recession (Proshare Confidential)
Section 1 of the Coronanomics report (pdf) takes a bird’s eye view of global economic responses to the coronavirus pandemic and does a comparison of different approaches to both healthcare interventions and economic policy. The section looks at the impact of the virus on equities, commodities and global fixed income markets. Section 2 of the report delves into the impact of COVID-19 on large and small-sized African economies. It takes a look at Africa’s trade with the world and its trade amongst member nations. The section addresses issues of protectionism and the currency impact of the COVID-19 pandemic and its potential to disrupt world trade and depress African economic growth. Section 3 breaks down the Nigerian economy in the face of COVID-19 and looks at how the economy has responded to the pandemic and identifies key opportunities beyond the threats. The section deconstructs the economy and takes a look at the country’s sub nationals (states) and the opportunities (as well as challenges) open to the subnational entities across the federation with case studies of two states within each of the six geopolitical zones.
Full report: pdf Coronanomics and the Nigerian Economy: Understanding the Realities of an Impending Recession (9.54 MB)
The South African economy and the pandemic: 8-14 June (pdf, TIPS)
The available data show an initial rebound in the economy following the move to Level 3 flattened out last week. A survey of business by TIPS, BUSA and the Manufacturing Circle found that, when UIF funds run out next month, many companies anticipate retrenchments due to low demand. The government plans a R500bn stimulus package centred on guaranteed loans for small and medium business; the UIF COVID-19 TERS fund; and investment in infrastructure. As of 6 June, however, only around R500m had been lent under the R200bn loan guarantee scheme, which accounts for the lion’s share of the proposed stimulus package. Virtually any effort to mobilise funding on the scale proposed for the stimulus package will affect the power as well as profits of different social groups, and consequently run into heated debates and intense lobbying. In the past week, debates swirled around the reprioritisation of the national budget, the use of UIF funding, the role of impact investments, and borrowing from the IMF and the World Bank. The government approached the IMF for a loan of $4,2bn, or R70bn. [Note: Previous editions of the TIPS Tracker can be accessed here]
Willemien Viljoen: South Africa’s April 2020 trade statistics – reduced exports lead to a significant trade deficit (tralacBlog)
World Investment Report 2020: Investment flows in Africa set to drop 25% to 40% in 2020 (UNCTAD)
All industries on the continent are reeling from the double blow of the coronavirus pandemic and low commodity prices, UNCTAD’s new report says. The trend of declining FDI to Africa is set to exacerbate significantly in 2020 amid the dual shock of the coronavirus pandemic and low prices of commodities, especially oil. FDI flows to the continent are forecast to contract between 25% and 40% based on GDP growth projections as well as a range of investment specific factors, according to UNCTAD’s World Investment Report 2020. “Although all industries are set to be affected, several services industries including aviation, hospitality, tourism and leisure are hit hard, a trend likely to persist for some time in the future,” said UNCTAD’s director of investment and enterprise, James Zhan.
Manufacturing industries intensive in global value chains are also strongly affected, a sign of concern for efforts to promote economic diversification and industrialization in Africa. Overall, there is a strong downward trend in the first quarter of 2020 for announced greenfield investment projects, although the value of projects (-58%) has dropped more severely than their number (-23%). Similarly, as of April 2020, the number of cross-border merger and acquisition projects targeting Africa had declined 72% from the monthly average of 2019.
-
North Africa: FDI inflows to North Africa decreased by 11% to $14bn, with reduced inflows in all countries except Egypt, which remained the largest FDI recipient in Africa in 2019, with inflows increasing by 11% to $9bn.
-
Sub-Saharan and Southern Africa: After a significant increase in 2018, FDI flows to Sub-Saharan Africa decreased by 10% in 2019 to $32bn. Southern Africa was the only sub-region to have received higher inflows in 2019 (22% increase to $4.4bn) but only due to the slowdown in net divestment from Angola. FDI inflows to South Africa decreased by 15% to $4.6bn in 2019, despite key investments in mining, manufacturing (automobiles, consumer goods) and services (finance and banking).
-
West Africa: FDI to West Africa decreased by 21% to $11bn in 2019. This was largely driven by the steep decline in investment in Nigeria due to new investment regulations for multinational enterprises in the oil and gas industry.
-
East Africa: FDI flows to East Africa also decreased, by 9% to $7.8bn. Inflows to Ethiopia contracted by a fourth to $2.5bn caused to some degree by political tensions in parts of the country. Similarly, inflows to Kenya dropped by 18% to $1.3bn despite several new projects in IT and healthcare.
-
Central Africa: Central Africa received $8.7bn in FDI, marking a decline of 7%. The key highlight in the sub-region was the decrease in flows to the Democratic Republic of the Congo (9% to $1.5bn).
In the latest analytical chapter for the Regional Economic Outlook for sub-Saharan Africa, the IMF’s African department examines how digitalization can transform economies and people’s lives. The COVID‑19 pandemic has amplified those hopes. The pandemic illustrates the value of digitalization, but is also a stark reminder of the remaining digital divide. [Dr Ngozi Okonjo-Iweala: Nigeria and other African countries should go digital to boost trade]
COVID-19 in African Cities: Impacts, responses and policies (ECA)
Produced by the ECA, UN Habitat, UN Capital Development Fund, United Cities and Local Governments of Africa, African Development Bank, and Shelter Afrique, the report (pdf), which was virtually launched Tuesday, proposes responses for short, medium and long-term interventions to be led by national and local governments with the support of international and regional development institutions. To adequately address the challenges of COVID-19, five key recommendations have been identified in the report.
-
Applying local communication and community engagement strategies
-
Supporting SMEs and the informal economy
-
Deepening decentralized responses to COVID-19 through strengthened local government capacities
-
Targeting informal settlements through tailored measures
-
Establishing mechanisms to promote rapid access to housing and prevent forced evictions
-
Integrating urban planning and management as key priorities for recovery and rebuilding strategies towards long-term resilience.
Related News
Joint Statement of the Extraordinary China-Africa Summit on Solidarity Against COVID-19
The COVID-19 pandemic is a major challenge to humankind, and is the most serious global public health emergency since the end of World War II.
To defeat COVID-19 through greater solidarity and cooperation, and to highlight an even stronger China-Africa community with a shared future, we, Chinese and African leaders, convened an Extraordinary China-Africa Summit on Solidarity Against COVID-19 via video link on 17 June 2020. The Extraordinary China-Africa Summit on Solidarity Against COVID-19 is a joint initiative between the People's Republic of China, the Republic of South Africa in its capacity as the Chair of the African Union (AU), and the Republic of Senegal in its capacity as the Co-Chair of the Forum on China-Africa Cooperation (FOCAC).
The Summit was attended by H.E. President Xi Jinping of the People's Republic of China, H.E. President Matamela Cyril Ramaphosa of the Republic of South Africa, H.E. President Macky SALL of the Republic of Senegal, H.E. President Abdel Fattah Al-SISI of the Arab Republic of Egypt, H.E. President Felix-Antoine Tshisekedi TSHILOMBO of the Democratic Republic of Congo, H.E. President Abdelmadjid TEBBOUNE of the People's Democratic Republic of Algeria, H.E. President Ali Bongo ONDIMBA of the Republic of Gabon, H.E. President Uhuru KENYATTA of the Republic of Kenya, H.E. President Ibrahim Boubacar KEITA of the Republic of Mali, H.E. President Issoufou Mahamadou of the Republic of Niger, H.E. President Muhammadu BUHARI of the Federal Republic of Nigeria, H.E. President Paul KAGAME of the Republic of Rwanda, H.E. President Emmerson Mnangagwa of the Republic of Zimbabwe, H.E. Prime Minister Abiy Ahmed Ali of the Federal Democratic Republic of Ethiopia and H.E. Moussa Faki MAHAMAT, Chairperson of the AU Commission.
Secretary-General Antonio GUTERRES of the United Nations (UN) and Director-General Dr. Tedros Adhanom GHEBREYESUS of the World Health Organization (WHO) were invited as Special Guests to the Summit.
After cordial and in-depth discussions, leaders attending the Summit reached the following consensus:
-
We express deep concern over the unprecedented, immediate and consequent challenges posed by the global spread of the COVID-19 pandemic to people around the world, especially its major impact on the lives and health of the African people.
We recognize the importance of public health issues to global peace and security and the well-being of people around the world, particularly the fact that Africa is extremely vulnerable to the ravages of this virus and needs solidarity and support, including resources from various parties to bolster its response to the pandemic and to support its economic and social development.
We commend and support the UN Secretary-General's call for a united response to COVID-19, and commit to jointly safeguard global public health security, protect the legitimate rights and interests of developing countries, make greater contribution to world peace and development, and build a community of health for all.
We underscore the close relationship between peace, security and development, call on the international community to support Africa in implementing its "Silencing the Guns" campaign and urge for an early lifting of economic sanctions on the Republics of Zimbabwe and Sudan.
In accordance with the FOCAC spirit and long-term values cherished by both sides, we remain committed to extending mutual support on issues regarding each other's core interests and major concerns. China supports African countries in exploring development paths suited to their national conditions and opposes interference in Africa's internal affairs by external forces. The African side supports China's position on Taiwan and Hong Kong, and supports China's efforts to safeguard national security in Hong Kong in accordance with law.
-
We highly commend and actively support WHO's role, under the stewardship of Director-General Dr. Tedros, in leading and coordinating the global response to COVID-19, and call on the international community to scale up political and financial support for the WHO.
We welcome the 73rd World Health Assembly (WHA) resolution on COVID-19 response, which expresses deep concerns about the negative impacts and consequences of the COVID-19 pandemic, emphasizes the importance of global collaboration, and calls for intensified international cooperation, unity, solidarity and joint efforts to contain and mitigate the pandemic, and to pay particular attention to the needs of people in vulnerable situations. We reiterate opposition to the politicization and stigmatization of the virus, and call on the international community to jointly prevent discrimination and stigma, reject misinformation and disinformation, and strengthen cooperation on the research and development of diagnostics, therapeutics, medicines and vaccines and the identification of the zoonotic source of the virus.
We support the initiation, at the earliest appropriate moment and in consultation with WHO Member States, of a stepwise process of impartial, independent and comprehensive evaluation, including using existing mechanisms as appropriate, to review experience gained and lessons learned from the WHO-coordinated international health response to COVID-19 after the virus is brought under control worldwide, in an objective, impartial science-based and professional manner.
We further commend the UN Secretary-General for his leadership and support for the WHO and related health initiatives during this pandemic, which aims at making vaccines, diagnostics and therapeutics for COVID-19 accessible worldwide.
-
Africa commends the decisive measures taken by the Chinese government to contain the spread of the virus and its timely sharing of information with WHO and relevant countries in an open, transparent and responsible manner, which bought precious time for the rest of the world. China commends the solidarity and support extended by African countries, the AU and other regional organizations for China's COVID-19 response and appreciates the establishment of the AU COVID-19 Strategy and the appointment of Special Envoys to mobilize international support for Africa's efforts to address the economic challenges faced as a consequence of the pandemic, and further commends the resilience African countries have demonstrated and the positive results thus achieved in curbing the spread of the virus by adopting preventive measures.
African countries express appreciation for China's substantial assistance for Africa's fight against COVID-19 and commitment to China-Africa solidarity against COVID-19, and highly commend the new measures China announced at the 73rd WHA to support developing countries' COVID-19 response. China reaffirms its commitment to actively delivering relevant initiatives and measures to help Africa build capacity for disease prevention and control and for sustainable development, and expedite the construction of the Africa CDC headquarters. China undertakes to make its COVID-19 vaccine development and deployment, when available, a global public good as part of China's contribution to vaccine accessibility and affordability in developing countries, in particular African countries.
We reaffirm the commitment to take active measures to protect the health and security of each other's nationals and uphold their legitimate rights and interests, and promote the use of Chinese and African traditional medicine.
African countries express profound gratitude and appreciation to the Chinese institutions and companies that have provided medical supplies and material assistance in the effort to combat the COVID pandemic.
-
We fully recognize the positive role of China-Africa investment and financing cooperation in promoting development and improving people's lives in Africa, and call on the international community to work in solidarity and collaboration, share best practices, and provide more material, technical, financial and humanitarian support to help African countries overcome the impact of COVID-19 and achieve independent and sustainable development.
China takes seriously the debt concerns of African countries and will earnestly act on the G20 Debt Service Suspension Initiative, through friendly consultation as equals, and expedite support for the African countries worst hit by COVID-19.
The African side expresses appreciation for China's actions, and calls on the international community, especially developed countries and international financial institutions, to take concrete measures to ease the debt burden of African countries.
-
We reaffirm the commitment to supporting multilateralism, opposing unilateralism, safeguarding the UN-centered international system, and defending international equity and justice.
We call on the international community to build an open world economy, enhance macroeconomic coordination, and jointly keep global industrial and supply chains stable and unclogged. We express strong support to the development of the African Continental Free Trade Area.
We recognize the importance of digitalization in the post-COVID-19 era and support efforts to speed up the development of Africa's digital economy and expand exchanges and cooperation on digitalization, information and communication technologies, especially tele-medicine, tele-education, 5G and big data.
We support efforts to explore with global partners trilateral or multilateral cooperation in Africa in a way that is active, open and inclusive and based on respect for African countries' wishes, with a view to facilitating an early victory against COVID-19 and faster development in Africa.
-
We extend congratulations on the 20th anniversary of FOCAC, recognizing the important progress in delivering the follow-ups to the FOCAC Beijing Summit, and support a greater focus on public health under the Eight Major Initiatives on China-Africa Cooperation.
We undertake to chart the course for China-Africa cooperation in a post-COVID-19 era, and work together to ensure the success of events on the 2021 FOCAC calendar.
-
We applaud the joint initiative of China, South Africa and Senegal to convene this Summit at a critical juncture in Africa's battle against COVID-19.
We pay high tribute to all African leaders who did and did not attend the Summit for their great efforts to contain COVID-19.
Leaders attending the Summit expressed deep condolences over the passing of H.E. President Pierre Nkurunziza of the Republic of Burundi, and extended sincere sympathy to the people of Burundi.
Related News
Communique of the video-teleconference meeting of the Bureau of the Assembly of the AU Heads of State and Government with Chairpersons of the AU RECs
His Excellency, President Matamela Cyril Ramaphosa of the Republic of South Africa, and Chairperson of the African Union (AU) convened a video-teleconference Meeting of the Bureau of the Assembly of African Union (AU) Heads of State and Government with the Chairpersons of the AU Regional Economic Communities (RECs) on 11 June 2020.
The Meeting was held to consider reports of the AU Special Envoys, regarding economic relief measures and pooled procurement of medical supplies for Member States in the fight against COVID-19. The Meeting also provided a platform for the Chairpersons of the RECs to update the Bureau on measures and coordination efforts that have been undertaken since the last meeting on 29 April 2020.
All Members of the Bureau of the Assembly of Heads of State and Government participated in the Meeting as follows: His Excellency, President Félix Tshisekedi of the Democratic Republic of Congo, His Excellency, President Abdel Fattah el-Sisi of the Arab Republic of Egypt, His Excellency, President Uhuru Muigi Kenyatta of the Republic of Kenya, and His Excellency, President Ibrahim Boubacar Keïta of the Republic of Mali.
Seven (7) Regional Economic Communities (RECs) of the AU were represented in the Meeting as follows:
-
East African Community (EAC), Chaired by His Excellency President Paul Kagame of the Republic of Rwanda;
-
Economic Community of Central African States (ECCAS), Chaired by His Excellency President Ali Bongo of the Republic of Gabon;
-
Economic Community of West African States (ECOWAS), Chaired by His Excellency President Issoufou Mahamadou of the Republic of Niger;
-
Intergovernmental Authority on Development (IGAD), Chaired by His Excellency Prime Minister Abdalla Hamdok of the Republic of Sudan;
-
Community of Sahel–Saharan States (CEN–SAD), His Excellency Mr. Mahamat Zene Cherif, Minister of Foreign Affairs, who participated on behalf of His Excellency President Idriss Deby Itno of the Republic of Chad;
-
Common Market for Eastern and Southern Africa (COMESA), His Excellency Dr Tehindrazanarivelo Djacoba A.S. Oliva, Minister of Foreign Affairs of the Republic of Madagascar who participated on behalf of COMESA Chair and the President of the Republic of Madagascar, His Excellency President Andry Rajoelina;
-
Arab Maghreb Union (UMA), His Excellency Mr Mohammed Taher Sayila, the Minister of Foreign Affairs of Libya who participated on behalf of the Chairman of the Presidential Council of Libya and Prime Minister of the Government of National Accord (GNA), Mr Fayez Mustafa al-Sarraj of the Libyan Arab Republic.
The following Head of States also participated in the meeting; namely, President of Ethiopia, Her Excellency Sahle-Work Zewde; President of Senegal and the current Co-Chair of the Forum on China-Africa Cooperation (FOCAC), His Excellency Macky Sall, and President of Zimbabwe, His Excellency Emmerson Mnangagwa.
The Chairperson of the African Union Commission, H.E. Moussa Faki Mahamat, and the Director of the Africa Centres for Disease Control and Prevention (Africa CDC), Dr John Nkengasong, also participated in the teleconference Meeting.
The AU Special Envoys, namely, Dr Ngozi Okonjo-Iweala of Nigeria, Dr Donald Kaberuka of Rwanda, Mr Benkhalfa Abderrahmane of Algeria, Mr. Trevor Manuel of South Africa, Mr. Tidjane Thiam of Côte d’Ivoire, Professor Mbaya Kankwenda from the DRC, and Mr. Strive Masiyiwa from Zimbabwe, also participated in the meeting.
The Heads of States and Government observed a moment of silence following the untimely passing on of President Pierre Nkurunziza of the Republic of Burundi and expressed their deepest condolences to his family, the Government and the people of the Republic of Burundi.
Briefing on the implementation of the Continental COVID-19 strategy
The Heads of State and Government welcomed the comprehensive briefing by the AUC Chairperson, HE Moussa Faki Mahamat, which highlighted the initiatives undertaken by the AUC in response to the COVID 19 pandemic, which included a meeting to be held on 24-25 June 2020 with continental stakeholders including researchers, civil society and policy makers to elaborate a Continental framework with regard to the research and development of a COVID19 vaccine, its clinical trials and access modalities. They reaffirmed their commitment to the implementation of the AU Continental COVID-19 strategy and expressed their appreciation for the sterling work of the Commission as well as Africa CDC.
The Heads of State and Government welcomed the epidemiological briefing by Dr John Nkengasong, director of Africa-CDC on the current status of the outbreak in the Continent and expressed concern about the increased infection rate reported since the last update on 29 April 2020, including approximately over 200,000 confirmed infections and more than 5,000 deaths. Of the 200, 000 confirmed cases in the Continent, 61% of them are from Algeria, South Africa, Nigeria, Egypt and Ghana. They further took note of the recommendation of the Africa CDC; to increase Member States’ capacity to test, trace and treat and, adequately absorb the surge in infections, as well as clinical care capacity. They expressed support for Africa CDC’s emphasis on vaccine research, equity, and accessibility of treatments and therapeutics.
Updates from RECs on measures undertaken to deal with the COVID-19 pandemic
The Heads of State and Government expressed their deep appreciation to the Bureau of the Assembly of the AU for its initiatives in combating the scourge of the COVID-19 pandemic, which have begun to bear fruit. Likewise, they commended the sterling work, which has been undertaken by the RECs thus far and reaffirmed their commitment to continue to enhance existing coordination mechanisms between the AU and the RECs in fighting the virus on the Continent.
Update report by the Special Envoys on economic relief measures
The Heads of State and Government welcomed the report presented by the Special Envoys, especially on the critical areas of advocacy, resource mobilization and debt relief. They reaffirmed the importance of economic relief measures to mitigate socio-economic challenges posed by the virus.
On the mobilization of resources, the Heads of State and Government expressed their appreciation to the Special Envoys for the formidable work they have engaged in with international financial organisations regarding economic relief measures for Africa. In particular, they welcomed commitments amounting USD$30 billion that the Special Envoys had managed to mobilise thus far out of the USD$ 53 billion in pledges from these financial organisations as a result of the AU Special Envoys’ efforts.
The Heads of State and Government further took note of the extensive progress the Special Envoys have made in consultations with the G-20 countries and China aimed at debt relief and debt moratorium. They encouraged the Special Envoys to continue their advocacy and vigorously make the case on behalf of the Continent in the face of the unprecedented global shock presented Covid19 and for the prolongation of the moratorium on debt repayments to 4 years to enable countries on the Continent to recover and jumpstart their economies in a sustainable manner beyond the COVID-19 pandemic.
The Heads of State and Government reiterated their call for debt cancellation and the implementation of a comprehensive relief package for African countries in response to COVID-19. They pledged their unwavering political support to the overall work of the Special Envoys.
The Heads of State and Government further reaffirmed their strong solidarity with Sudan and Zimbabwe, and reiterated their calls for the lifting of sanctions against Sudan and Zimbabwe in order to enable these fraternal republics to adequately deal with the spread of COVID 19 pandemic in their countries.
Launch of Africa Medical Supplies Procurement Platform
The Heads of State and Government welcomed with appreciation the excellent progress achieved in the implementation of the Africa Medical Supplies Platform, particularly the success in the negotiation for access to high quality medical supplies at competitive prices. To that end, they took note of the partnership that had been forged with various countries including China, Canada, The Netherlands, South Korea and France, that has facilitated the supply of urgently needed medical equipment and supplies such as ventilators, PPEs and test kits as needed on the Continent. Local suppliers from the continent have also been added on the platform.
They noted with appreciation the significant contribution made by the People’s Republic of China to this effort, including setting aside a portion of its manufacturing capacity to ensure the supply of 30 million testing kits, 10,000 ventilators and 80 million masks each month for the Continent. Member States of the AU were encouraged to place orders and take advantage of the economies of scale that the pooled Africa Medical procurement platform was offering.
The Heads of State and Government unanimously endorsed the launch of Africa Medical Supplies procurement platform and hailed it as a truly Pan-African Initiative aimed at the procurement, coordination and distribution of medical supplies for all AU member states.
The killing of Mr. George Floyd
The Heads of State and Government reaffirmed their strong condemnation of all forms of racism and condemned in the strongest terms the heinous killing of Mr. George Floyd in the United States of America. They expressed their solidarity with all people of African descent and the Diaspora, who routinely face discrimination and harassment in various parts of the world.
Way forward and closure
The Heads of State and Government expressed their profound appreciation to the President of the Republic of South Africa, and Chairperson of the AU, His Excellency Matamela Cyril Ramaphosa, for his leadership in steering the Organisation during these trying times. They further thanked President Ramaphosa for convening Meetings of the Assembly of the Bureau with the Chairpersonship of the RECs of the AU.
The Bureau of the Assembly of Heads of State and Government endorsed the convening of a virtual 2nd Mid-Year Coordination Meeting in July 2020.
Related News
Digitalizing sub-Saharan Africa: Hopes and hurdles
Across sub-Saharan Africa, digital technologies are driving change – from kids learning to code outside Niger’s capital, to drones delivering medicines to remote communities in Sierra Leone. This is all helping to build resilience.
In the latest analytical chapter for the Regional Economic Outlook for sub-Saharan Africa, the IMF’s African department* examines how digitalization can transform economies and people’s lives. The COVID‑19 pandemic has amplified those hopes. The pandemic illustrates the value of digitalization, but is also a stark reminder of the remaining digital divide.
Harnessing digital tools to fight COVID-19
In many sub-Saharan African countries, digital tools are supporting efforts to cope with the COVID-19 pandemic. In Rwanda, for example, anti-epidemic robots are monitoring patients, delivering food and medication, while free e-consultation tools are helping Nigerians to self-assess infection risk and get tested based on symptoms.
While telework arrangements have allowed businesses to continue partial operations in many countries, the switch to telework has been less pronounced in sub‑Saharan Africa.
The region’s less reliable internet connectivity and electricity supply have been limiting factors.
An IMF survey of policy responses to the pandemic suggests that countries in the region that were able to switch to partial telework arrangements by mid-May 2020 had greater access to internet (28 percent of the population) compared to non‑telework countries (17 percent).
A narrowing digital divide
Sub-Saharan Africa’s race to digitalize faces other hurdles. Mobile download speeds in the region are, on average, more than 3 times slower than in the rest of the world. Affordability remains a lingering obstacle to adoption as the cost of accessing digital technologies remains high relative to incomes.
But the gaps between the region and the rest of the world are narrowing fast. Internet penetration in sub-Saharan Africa has grown tenfold since the early 2000s, compared with a threefold increase in the rest of the world.
Digitalization is advancing fast in the financial sector, where some regional countries are global leaders in mobile money transactions – money transactions as a share of GDP average close to 25 percent, against just 5 percent in the rest of the world.
Reshaping the post-COVID-19 recovery
These advances mean that digitalization can play a vital role in supporting the region’s post‑pandemic recovery. According to IMF research, expanding internet access in sub-Saharan Africa by an extra 10 percent of the population could increase real per capita GDP growth by 1 to 4 percentage points.
There are also benefits for businesses and workers. Firms using email for business record annual sales that are 2.6 times higher. On average, digitally‑connected firms employ eight times more workers, and create higher skilled, full-time jobs.
This is not to discount concerns about automation and potential job losses, but smart policies can help reap the benefits of digitalization. And, where digitalization supports better policy design and better economic outcomes, it can be a win‑win.
Countries in the region have embraced digital platforms – from Côte d’Ivoire’s new ePassport agency, to Kenya’s eCitizen portal – to continue delivering government services during the current health crisis.
Governments are also taking advantage of the region’s leadership in mobile money to provide immediate support to households and businesses impacted by the pandemic, while promoting social distancing. For instance, Togo’s “NOVISSI” social protection program uses mobile money and electronic cash transfers to support vulnerable households and informal sector workers. Some central banks in the region have relaxed mobile money regulations to encourage greater use digital payments rather than risk the spread of the virus through bank notes.
Investing in a digital Africa
While the pandemic seems set to accelerate sub-Saharan Africa’s digital transformation, digitalization does not happen by itself, nor is it a cure-all.
Emerging from the pandemic will depend on integrating digital strategies within each country’s broader development agenda. As countries move in this direction, four broad pillars can help guide pro‑digital policies:
-
Investing in infrastructure – both traditional digital‑friendly infrastructure (including more reliable electricity) and digital‑ready IT infrastructure;
-
Investing in policy frameworks by fostering a digital-friendly business and regulatory environment, and championing the use of digital policies;
-
Investing in skills by improving core education as a basis for continued learning alongside focused investments in digital skills; and
-
Investing in risk management frameworks to address cybersecurity threats.
Investing in a digital Africa today, paves the way for more resilient economies tomorrow.
* This article for IMF Country Focus was prepared by Félix Simione and Martha Tesfaye Woldemichael, both economists in the African Department and members of the team who prepared the digitalization chapter.
Related News
Investment flows in Africa set to drop 25% to 40% in 2020 – UNCTAD
All industries on the continent are reeling from the double blow of the coronavirus pandemic and low commodity prices, UNCTAD’s new report says.
The trend of declining foreign direct investment (FDI) to Africa is set to exacerbate significantly in 2020 amid the dual shock of the coronavirus pandemic and low prices of commodities, especially oil.
FDI flows to the continent are forecast to contract between 25% and 40% based on gross domestic product (GDP) growth projections as well as a range of investment specific factors, according to UNCTAD’s World Investment Report 2020.
“Although all industries are set to be affected, several services industries including aviation, hospitality, tourism and leisure are hit hard, a trend likely to persist for some time in the future,” said UNCTAD’s director of investment and enterprise, James Zhan.
Manufacturing industries intensive in global value chains are also strongly affected, a sign of concern for efforts to promote economic diversification and industrialization in Africa.
Overall, there is a strong downward trend in the first quarter of 2020 for announced greenfield investment projects, although the value of projects (-58%) has dropped more severely than their number (-23%).
Similarly, as of April 2020, the number of cross-border merger and acquisition (M&A) projects targeting Africa had declined 72% from the monthly average of 2019.
Hope for recovery
However, two distinct factors offer hope for the recovery of investment flows to the continent in the medium to long run. The first is the higher value being assigned to ties to the continent by major global economies, promoting investment in infrastructure, resources, but also industrial development.
Investments from these countries, which have varying degrees of political backing, despite being affected by the joint impact of COVID-19 and low commodity prices to some degree, could be relatively more resilient.
The second is deepening regional integration due to the commencement of trade under the African Continental Free Trade Area (AfCFTA) after years of deliberation and the expected finalization of its investment protocol.
In the short term, curtailing the extent of the investment downturn and limiting the economic and human costs of the pandemic is of paramount importance.
Longer term, diversifying investment flows to Africa and harnessing them for structural transformation remains a key objective. Both of these objectives will require a prudent, coordinated and timely response from countries on the continent.
FDI was already on the decline before the crisis
The COVID-19 crisis has arrived at a time when FDI was already in decline, with the continent having experienced a 10% drop in inflows in 2019 to $45 billion.
The negative effects of tepid global and regional GDP growth and dampened demand for commodities inhibited flows to countries with both diversified and natural resource-oriented investment profiles alike, although a few countries received higher inflows from large new projects.
-
North Africa
FDI inflows to North Africa decreased by 11% to $14 billion, with reduced inflows in all countries except Egypt, which remained the largest FDI recipient in Africa in 2019, with inflows increasing by 11% to $9 billion.
-
Sub-Saharan and Southern Africa
After a significant increase in 2018, FDI flows to Sub-Saharan Africa decreased by 10% in 2019 to $32 billion.
Southern Africa was the only sub-region to have received higher inflows in 2019 (22% increase to $4.4 billion) but only due to the slowdown in net divestment from Angola.
FDI inflows to South Africa decreased by 15% to $4.6 billion in 2019, despite key investments in mining, manufacturing (automobiles, consumer goods) and services (finance and banking).
-
West Africa
FDI to West Africa decreased by 21% to $11 billion in 2019. This was largely driven by the steep decline in investment in Nigeria due to new investment regulations for multinational enterprises in the oil and gas industry.
-
East Africa
FDI flows to East Africa also decreased, by 9% to $7.8 billion. Inflows to Ethiopia contracted by a fourth to $2.5 billion caused to some degree by political tensions in parts of the country.
Similarly, inflows to Kenya dropped by 18% to $1.3 billion despite several new projects in IT and healthcare.
-
Central Africa
Central Africa received $8.7 billion in FDI, marking a decline of 7%. The key highlight in the sub-region was the decrease in flows to the Democratic Republic of the Congo (9% to $1.5 billion).
The Netherlands overtook France as the largest investor by stock
On the basis of FDI stock data through 2018, the Netherlands overtook France as the largest foreign investor in Africa.
The investment stock held by the United States and France in Africa declined by 15% and 5% respectively, owing to profit repatriation and divestment. Meanwhile, the investment stock of the United Kingdom and China increased by 10% each.
FDI outflows also fell in 2019, by approximately a third
FDI outflows from Africa decreased by 35% to $5.3 billion. South Africa continued to be the largest outward investor despite the reduction in outflows from $4.1 billion to $3.1 billion.
Outflows from Togo increased significantly, from a mere $70 million to $700 million, a tenfold increase. In North Africa, Morocco also increased outward FDI, to approximately $1 billion from $800 million in 2019.