News Archive November 2014

Launch of free trading arrangement to spur China - Africa trade relations

Analysts said on Thursday that a proposed tripartite free trading arrangement to be launched by three African trading blocs next month will have a positive bearing in promoting China-Africa trade relations.

The Common Market for Eastern and Southern Africa (COMESA), the Eastern African Community (EAC) and the Southern African Development Community (SADC) are expected to launch the tripartite free trading arrangement in December. Once launched, the tripartite free trading arrangement will be the largest economic bloc on the continent and will pave way for the establishment of a continental free trade area in 2017.

Dr. Lubinda Habaazoka, a Lecturer in the School of Business Studies at the Copperbelt University (CBU) said the initiative presents unique opportunities for the enhancement of trade relations between China and member countries of the regional bloc.

"This will good for the enhancement of relations between China and Africa. Instead of negotiating with individual countries, China will be negotiating with a bloc and this is good for business development," he said in an interview with Xinhua.

While acknowledging that the launch of the initiative was long over-due, the analyst said it was appropriate that it was coming at a time when China has emerged as a super economic power house and when African nations are looking to the Asian country for increased investment. According to him, the launch of the free trading arrangement will allow for the smooth movement of goods and services but member countries are urged to consider free movement of people as well. He further warned that some industries in some countries may face negative consequences and close due to cheap goods that may be moving throughout the free trade area and urged countries to put in place measures to enhance productivity.

Richard Musauka, country director of Development Partnership International (DPI) Zambia office said the initiative has come at a time when China has invested a lot in improving infrastructure in many countries in Africa.

"This initiative will definitely have an influence on Africa/ China trade relations. Like you know, China has invested a lot in improving infrastructure in Africa and will definitely try to take advantage of this initiative to improve trade relations," he said. He however said China should help countries in the three regional blocs through technology transfer and training of human resource. The tripartite free trading arrangement encompasses 26 member states from the three regional blocs, with a combined population of 625 million people and a gross domestic product of 1.2 trillion U.S. dollars. It will account for half of the membership of the African Union and 58 percent of the continent's gross domestic product. Sindiso Ngwenya, the head of COMESA said in October that the launch of the initiative followed progress made by the three economic blocs in tariff offers and rules of origin which stipulates that imported products should meet 75 percent value addition from the country of origin. The initiative will particularly benefit the business community due to an improved harmonized trade regime which in turn will reduce the cost of doing business as a result of elimination of overlapping trade regimes.

The launch of the initiative was arrived at following a tripartite sectorial meeting of ministers in Burundi in October. It will be launched during a tripartite summit of heads of state to be held in Egypt next month.

WTO clinches first global trade deal

The World Trade Organization adopted the first worldwide trade reform in its history on Thursday, after years of stalemate, months of deadlock and a final day’s delay following an eleventh-hour objection.

The agreement means the WTO will introduce new standards for customs checks and border procedures. Proponents say that will streamline the flow of trade around the world, adding as much as $1 trillion (0.64 trillion pounds) and 21 million jobs to the world economy.

“It’s all agreed,” a WTO official said outside the closed-door WTO meeting in Geneva, after trade diplomats applauded the end of their 19-year wait for a deal.

Still, the agreement is just a fraction of the original Doha Round of trade talks begun in 2001, which eventually proved impossible to agree on. The WTO cut back its ambitions and aimed for a much smaller deal.

Even that was blocked by a four-month standoff caused by India, which had vetoed adoption of the reform package as the original deadline passed at midnight on July 31.

India demanded more attention be given to its plans to stockpile subsidized food, in breach of the WTO’s usual rules. A compromise on wording reached by the U.S. and Indian governments broke the deadlock.

The reform package adopted on Thursday was agreed at a WTO meeting in Bali in December last year. Its passage is widely seen as opening up progress towards further global negotiations, the content of which is due be laid down by July 2015.

That should reassure smaller nations in the 160-member WTO. Many had feared India’s tough stance would prompt the United States and the European Union to turn their backs on the WTO and concentrate on smaller trading clubs instead, ending hopes of trade reforms benefiting all.

Thursday’s deal had originally been due for agreement on Wednesday, but an objection by Argentina forced its postponement for 24 hours.

Ugandan traders threaten to boycott Mombasa port

Uganda traders under the Kampala City Traders Association (Kacita) have given the Kenya Revenue Authority (KRA) two weeks to unconditionally release Uganda-bound cargo or boycott the Mombasa port.

The ultimatum was issued on Thursday after hours of consultations on the impact of the KRA’s decision to tax all goods that dock at the port upfront.

Previously, traders had been collecting port fees and other handling charges.

The move, according to Kacita, is not only against the spirit of EAC integration but is also hurting Ugandan traders and the country’s economy.

AN ULTIMATUM

Kacita chairman Everest Kayondo said: “By Wednesday there were about 4,000 containers held up at Mombasa, Kenya, because of arbitrary taxes that KRA keeps introducing.”

”And for that we are giving them (KRA) two weeks, beginning immediately (Thursday) to release all Ugandan-bound cargo that (has) cleared all port charges and other logistical fees or else we relocate to the Dar es Salaam Port,” he added.

In addition, the traders said if their conditions were not met, they would put pressure on the Ugandan government to block Kenyan products from getting to the Ugandan market.

The association’s spokesperson, Mr Isa Ssekitto, said they would write a formal letter to the governments of Uganda and Kenya outlining the traders’ resolutions.

The letter, he said, would also remind Kenya to pay Ugandan traders $14 million (USh40 billion) that they lost during the post-election violence of 2007/08 in Kenya.

UPFRONT PAYMENT

However, Uganda Revenue Authority commissioner for Customs Richard Kamajugo told the Daily Monitor the piled-up cargo at the port had nothing to do with the Single Customs Territory.

The cargo, which he said consists of almost 100 [containers], has been held because KRA wants traders to pay all tax dues upfront.

Amb Julius Onen, the Permanent Secretary in the Ministry of Trade, confirmed the development, saying officials were trying to handle the matter at a high level.

Before (the) close of the week or earliest next week, this issue is likely to have been sorted (out),” he said.

MUSEVENI WARNS

On Wednesday, Ugandan President Yoweri Museveni warned Kenyans that he would block the country’s goods from entering Uganda if the Kenya Revenue Authority did not stop blocking Ugandan exports from entering Kenya.

Museveni said the move was not only “myopic” but contravenes the East Africa Community Protocol.

”We buy a lot of goods from Kenya. Some of those (KRA) officials are narrow-minded. They wanted to block our sugar. Now they have gone for our chicken. If I say no more, Kenya will feel it...,” he said.

Speaking at the launch of the Hudani Manji Chicken plant in Semuto, Nakaseke District, President Museveni said he would petition the Kenya government to resolve the matter.

”I shall sort it out with President Uhuru Kenyatta,” he said.

KRA officials said on Thursday evening they would comprehensively respond to Mr Museveni’s comments on Friday.

Zimbabwe Government suspends platinum export tax

Government has suspended export tax on unbeneficiated platinum until January 1, 2017, Finance and Economic Development Minister Patrick Chinamasa said in the 2015 National Budget statement.

In view of the potential to beneficiate platinum, Government introduced an export tax at a rate of 15 percent, with effect from January 1 2015. The move was designed to force companies to build refineries as Government intensified efforts to realise real value of mineral exports.

Zimbabwe has three platinum mining companies – Zimplats, Unki and Mimosa. Following commitment by platinum producers to undertake beneficiation and value addition initiatives, Government decided to defer export tax on unbeneficiated platinum to 2017.

“Platinum producers have, however, demonstrated efforts to beneficiate, to the extent that Zimbabwe Platinum Mines Limited will be commissioning a $200 million base metal refinery in the next twenty four months.

“The facility will be expanded to accommodate other platinum producers. I, therefore, propose to defer export tax on un-beneficiated platinum to January 1 2017,” said Minister Chinamasa.

He said the country is currently one of the major producers of diamonds in the world yet most of the diamonds are exported in raw form, thus depriving the country of employment opportunities as well as potential revenue to the fiscus.

Minister Chinamasa, however, proposed to remove royalties on rough diamonds sold to firms licensed to cut and polish diamonds, with effect from January 1 2015 in a bid to support beneficiation.

He said Government in 2013 comprehensively reviewed the fiscal mining regime, with a view to ensuring a balance between the viability of the mining industry and revenue inflows to the fiscus.

Minister Chinamasa said the long term sustainability of the mining sector requires Government to put in place a mechanism to assess the economic impact of various policy decisions.

The mining fiscal model will enable Government to design an appropriate tax system that attracts investment into the mining sector and promotes optimal mineral extraction and revenue generation, without sterilising minerals, that is, extraction of high grade ores, at the expense of less economic grades.

In addition, the model will be used as an audit tool to assess mineral and revenue leakages and also project future revenues from the mining sector. He also noted that there must be transparency accountability in the mining sector if real value is to be realised.

The effectiveness of the mine fiscal model is dependent on the availability of quality data from the mining sector and availability of data will ensure transparency of the mining operations.

“I, therefore, propose to compel mining houses to provide data to the Zimbabwe Revenue Authority, such as exploration costs, pre and post operative costs, debt-equity mix and repayment terms in a prescribed format,” said Minister Chinamasa.

Zimbabwe is increasingly looking to the mining sector as the anchor to economic revival and development.