News Archive April 2016
tralac’s Daily News Selection
The selection: Friday, 29 April 2016
Diarise: the 27th African Union Summit will take place in Kigali, 10-18 July
South Africa's March trade statistics have been released
Services in COMESA: an industry perspective (COMESA Business Council)
The services sector accounts for an average of 53% of GDP in the Common Market for Eastern and Southern Africa countries, outpacing manufacturing and agriculture sectors in terms of generating growth, income and jobs. In the context of the international value chains, a more robust services sector provides vital inputs to manufacturing and agriculture and can help increase the overall efficiency of the COMESA economy. Services trade in the COMESA region is also on the rise, offering enormous opportunities for diversifying exports, pursuing new dynamic, innovative and sustainable growth. A COMESA country’s average trade in services contribution to GDP is around 21%, higher than the world average of 12%. Egypt is the largest services exporter of the region, but Mauritius and Seychelles both stand out as two export-based services economies, with services contributing 51% and 58% to their respective GDP. As the COMESA economy becomes increasingly integrated into the regional and global market, services trade will play a more important role in the growth strategy of the region.
To better address these challenges to services growth in the COMESA region, the establishment of a Regional Services Industries Group (RSIG) has been proposed to act in the interest of the private sector. Through the examination of four key sectors in the COMESA region (tourism, transport, finance and telecommunications), the report identified key stakeholders and services associations in the region and charted a four-phase roadmap for establishing the RSIG. [Download]
The COMESA region recorded relatively flat Foreign Direct Investment in 2014 at US$16 billion, registering a marginal decline of less than 1% compared to 2013. The inflows were concentrated in a few economies, with the top six destinations accounting for 76% of the flows. This is according to the latest COMESA Investment Report issued in Lusaka. The six countries are divided into two groups; those that recorded positive and growth and those in the negative growth. Inward FDI was recorded in Egypt, Ethiopia and Uganda while negative growth was noted in Zambia, Sudan and the Democratic Republic of Congo.
The report ‘Developing export-based manufacturing in sub-Saharan Africa’ found while the share of manufacturing in GDP had fallen from 19% in 1975 to 11% in 2014, it had still grown faster than the global average at a rate of 3.5% annually, from $73 billion in 2005 to $157 billion in 2014. At the same time, manufacturing exports doubled from $50 billion in 2005 to more than $100 billion in 2014, while many countries have also seen an increase in Foreign Direct Investment. The report argues strong growth in many parts of the continent, rising wages in China and policy improvements have provided the region with a unique opportunity to attract investment in manufacturing. The analysis includes a Manufacturing FDI Potential Index, which ranks nine country case studies based on their potential to attract FDI. Researchers highlighted Ethiopia, Kenya, Mozambique and Zambia as four countries which are particularly well-positioned to attract FDI in manufacturing. The report also suggests a number of promising manufacturing sub-sectors, with Africa’s share in global exports of fertilisers and inorganic chemicals rising to more than 5% and more than 4% for leather.
Botswana: February 2016 international merchandise trade statistics (Statistics Botswana)
Total exports for February 2016 were valued at P6, 401.9 million, with 32.8% (P2, 098.0 million) destined to SADC. Chart 3.2 shows that exports are mainly destined to Belgium (20.2%), South Africa (16.2%), Namibia (15.6%) and India (10.9%). These are the main destinations for diamond exports. Some significant portions of diamond exports go to Canada, Singapore and Israel as can be seen on Table 3.2 B. Exports to Norway consist of Copper/Nickel mainly. Imports for February 2016 were valued at P5,852.6m, with South Africa contributing 61.2% (P3,582.3m), while Namibia contributed 13.0% (P758.0m). [AfDB supports Botswana’s economic diversification programme]
Namibia's informal cross border trade (The Namibian)
During the official launch of the 2015 Informal Cross−Border Trade Statistics yesterday, NSA’s statistician general Alex Shimuafeni announced that while there was a decline in informal exports, informal imports increased in 2015 due to significant increases in informal imports from Angola, South Africa and Zambia. The report is a compilation of analysed data collected during the Informal Cross−Border Trade Survey conduced by the agency in September 2015. [Download]
South Africa: Value of agriculture, forestry and fisheries exports on the rise (SA Parliament)
Export value has increased and South Africa remains in a positive trade balance in the agriculture, forestry and fisheries sectors. Furthermore, the value of forestry and fisheries exports increased from R135bn in 2014 to R144bn in 2015, the Minister of Agriculture, Forestry and Fisheries Mr Senzeni Vokwana told Members of the National Assembly during the Budget Debate on Agriculture, Forestry and Fisheries recently in Parliament. He said exports from these sectors into other African countries increased from R59bn to R62bn and into Asia from R34.5bn to R37.1bn. [Drought-hit SA importing maize to cover shortfall]
Trade data discrepancies: South African exports to the USA versus US imports from South Africa (tralac)
Sub-Saharan Africa trade: most recent value (WITS World Bank)
Burundi's trade deficit narrows in 2015 on lower imports (The East African)
Tanzania: Government forms bureau to offer advice on oil and gas matters (IPPMedia)
The government has established an oil and gas advisory bureau under the President’s Office as it moves to gain an upper hand in the fast-developing oil and gas sector. Apart from offering technical advice to the government on oil and gas sectoral matters, including investment policy, rules and regulations, the bureau will also be tasked with examining various research findings on how best to make the sector an economic powerhouse for the country, the minister explained. It will furthermore set strategies for dialogue within the sector, offer technical advice during contract negotiations with potential investors, and work on building the capacities of local oil and gas experts within and outside the country, she added.
Kenya: China wins another sweetheart deal to run new rail (Business Daily)
Kenya has given China another sweetheart deal after agreeing to have a Chinese company operate business on the standard gauge railway without public bidding. The deal to offer the firm the contract was reached on Saturday at a summit of the East African Community bloc in Kampala attended by President Uhuru Kenyatta, putting Rift Valley Railway (RVR) business at risk. RVR, which operates the Kenya-Uganda railway, is expected to face competition from the new railway being built with Chinese financing from Mombasa to the Ugandan border.
New regulations for EAC trade (The Exchange)
New maritime shipping regulations may put shippers and clearing agents in trouble in the event of failure of compliance. Jocye Awino from the Kenya Maritime Authority (KMA), asserted that the new Safety of Life At Sea (SOLAS) rule that will be effected on July 1, require shippers to present verified gross mass (VGM) certificates before their containers are loaded on vessels. SOLAS regulations make it mandatory for shippers to verify the gross weight of every export cargo prior to loading. The amended law was adopted by the International Maritime Organisation last year. [New maritime regulations to improve safety, EAC trade]
Rwanda-Tanzania trade forum slated for May (New Times)
The trade forum, to be held on 20 May, is organised by the Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA), Tanzania Trade Development Authority (TANTRADE), Tanzania Truck Owners Association (TATOA), and Rwanda’s PSF. The statement indicates that this first annual bilateral trade forum comes after “an exciting aura of refreshed political will and relations” between the two countries after the inauguration of the current President of Tanzania, John Pombe Joseph Magufuli in October last year.
Nigeria: MAN demands passage of 7 bills for manufacturing competitiveness (Vanguard)
Engr. Ibrahim Usman, Chairman, Infrastructure Committee of MAN, said these bills include: “The Federal Competition and Consumer protection Bill 2015; Roads Authority Bill 2015, National Inland Waterways Authority Bill 2015 and National Roads Funds and Harbour Bills 2015. Enabling environment Other bills under the reference are National Transport Commission Bill 2015, Nigerian Ports and Authority Bill 2015; Nigerian Postal Commission Bill 2015 and Nigerian Railway Authority Bill 2015.” He said that MAN Executive council, will be visiting the Speaker of the House and the Senate President to request for an urgent and decisive action on the 168 page report titled: “Comprehensive Review of the Institutional, Regulatory, Legislative and Associated Instruments Affecting Businesses in Nigeria.” [Blurred lines: smuggling in Nigeria (The Economist)]
Africans investing in Africa (The Africa Report)
After a day and a half of high-level discussions at an Africa investment conference, Arnold Ekpe, non-executive chairman of financial services holding firm Atlas Mara and former chief executive of Ecobank, sounds slightly exasperated. "African countries are not doing enough for themselves," he says. "I have been going to conferences like this for 20 years. We have to move from talk to action." An elite band of companies are doing just that – with a toolkit that helps expand their operations across African borders. But Ekpe argues that Africa needs many more champions like Dangote Group, MTN and ShopRite.
Our newest publication highlights the tools that competition authorities have developed to overcome the practical challenges, political-economy constraints and emerging trends that affect competition advocacy. Competition advocacy is both challenging and rewarding, as illustrated by 42 stories from around the world. In Malawi: Removing the restrictions set up by the national sugar monopoly on how wholesale distributors can procure sugar in Malawi required securing buy-in from various stakeholders, including the Ministry of Industry and Trade. The new distribution system has led to increased access to this key commodity for the food-processing industry.
Pradeep S Mehta: 'How to solve India’s exports puzzle' (The Hindu)
The steady decline in India’s exports over the past one-plus year has been at the centre of a raging debate in India. Granted, global factors such as tepid global demand, erosion of commodity prices and high volatility in currency markets have contributed to this conundrum. However, trade performance of any country is determined by internal as well as external factors. Exchange rate management alone will not relieve India’s export conundrum. The country should make continuous efforts in alleviating supply-side bottlenecks to boost sectoral productivity and export competitiveness. Therefore, India should adopt a calibrated approach towards structural reforms to address cyclical as well as structural factors at the external and internal fronts, which are adversely affecting our export performance. [The author is secretary general of CUTS International] [Rajeev Kher: 'A trade policy agenda for India-II']
To begin a contribution to this process, this Policy Briefing explores what the AIIB can learn about infrastructure finance from the experience of the two largest MDBs: the World Bank and the European Investment Bank (EIB). It concludes with eight recommendations. [The authors: S. Griffith-Jones, L. Xiaoyun, J. Gu, S. Spratt]
IGAD's Drought Disaster Resilience and Sustainability Initiative: update
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How advocacy strategies can help boost competition and transform markets
Many of the World Bank Group’s client countries face a difficult challenge – and the White House recently put this issue at the top of the agenda, too: How can policymakers increase competition to support continued growth of the economy? In a global low-growth environment, developing and advanced economies alike are looking for new ways to boost productivity and innovation. A global panel of Ministers agreed at a recent Spring Meetings event that market competition is pivotal in finding a solution.
When firms collude to fix prices or divide markets, thus harming consumers and reducing competitiveness in their sector and the broader economy, independent competition authorities can fine and therefore deter such illegal conduct. When governments set up rules that reinforce the market power of a dominant firm or that allow such illegal conduct, then competition authorities can rarely demand that those rules be changed – even though the effects on prices, service quality or the availability of products can be just as severe. If champions of competition seek to promote more pro-competition government interventions in markets, they must rely on competition advocacy.
On Friday in Singapore, Klaus Tilmes, Director of the Trade and Competitiveness (T&C) Global Practice of the World Bank Group, will present awards to the winners of the 2015-2016 Competition Advocacy Contest at the Annual Conference of the International Competition Network.
A new World Bank Group publication, launched by T&C on April 15, showcases the results of the 2014-2015 Competition Advocacy Contest, sharing the lessons that have been learned about effective advocacy and discussing innovative ways of adapting to new competition challenges. Previous rounds of the contest have shown how the notable impact of competition advocacy can change mindsets.
Our newest publication highlights the tools that competition authorities have developed to overcome the practical challenges, political-economy constraints and emerging trends that affect competition advocacy.
Competition advocacy is both challenging and rewarding, as illustrated by 42 stories from around the world:
Changing the rules of how to allocate spectrum in Colombia required careful market analysis and continuous dialogue with the regulatory authority. This change allowed for one additional telecom operator and gave 22 percent more Colombians access to mobile internet.
Addressing the lack of uniformity in how local authorities apply rules to license and supervise commercial activities in Finland required individual engagements at the subnational level. This led to comprehensive shop-opening-hour liberalization, benefiting (in particular) convenience-store owners and allowing for the creation of jobs in the retail sector.
Removing the restrictions set up by the national sugar monopoly on how wholesale distributors can procure sugar in Malawi required securing buy-in from various stakeholders, including the Ministry of Industry and Trade. The new distribution system has led to increased access to this key commodity for the food-processing industry.
The new publication describes some of the lessons recently learned:
Competition authorities are more actively anticipating challenges and opportunities for competition, such as the advent of technologies and other innovations that affect industries. In Israel and South Africa, authorities pro-actively assessed potential competition issues in specific banking and financial-services markets to understand the need for regulatory intervention and the potential benefits of easing restrictions (whenever those limits are not indispensable for broader public-policy objectives). This brought to light the way that certain upstream charges in payment systems needed to be regulated so that more providers could offer final payment services to consumers and businesses.
Advocacy is becoming more targeted, as authorities are beginning to engage more closely with sub-national entities like municipalities or local licensing agencies rather than operating only at the national level. This recognizes the prevalence of anti-competitive regulatory barriers and practices at the subnational level, and this helps ensure that healthy competition dynamics will energize local markets.
Through advocacy, competition authorities play an essential role in developing and sharing market-specific knowledge and expertise across the entire government. In Singapore, the insight into the potential benefits for taxi drivers from linking taxi networks through third-party booking platforms did not just inform the competition authority’s recommendations: It also served as a basis for regulatory decisions by the sector’s regulator.
Advocacy initiatives are having more and more concrete impact in other areas of a country’s economy. Authorities in Moldova have improved sector-specific or regional development policies by ensuring that related incentives and state-aid measures do not grant any competitor an undue advantage in the market. That allows for the better use of taxpayers’ money.
The individual advocacy initiatives awarded as part of the Competition Advocacy Contest for 2015 exemplify successes that are having an impact on consumers and businesses:
In Kenya, pro-actively preventing an association of healthcare providers from increasing charges saved consumers about $1.7 million a year.
Prices for domestic airplane flights came down by 70 percent in Indonesia following the removal of restrictive air-fare regulation.
Israel’s advocacy for changes in the immediate area of debit-card payments will help reduce inefficiencies in the payment market that cost the economy an estimated US$100 million a year.
Key lessons learned have emerged in successful competition advocacy initiatives:
How advocacy tools are used is more important than whether they are explicitly included in the legal framework.
Changes to market and regulatory environments are occurring faster than ever, and so long-term engagements with regulators and industry are important.
Measuring what advocacy strategies can achieve and have achieved makes efforts tangible and makes any mandate more credible.
The publication traces how each of the stories has delivered tangible impact, as well as showing how it has contributed to broader economic growth and consumer welfare – a factor that especially benefits those in the greatest need. That demonstrates how competition ultimately advances such priorities as public health and financial inclusion, and how it allows industries and economies become more competitive and thus create more and better jobs.
Voice of business in policy to boost COMESA services trade: new ITC-CBC study
The report highlights a need for stronger cross-border business support services and direct participation of services suppliers in the regional integration process to accelerate trade, economic growth and employment in the Common Market for Eastern and Southern Africa
Services trade in the Common Market for Eastern and Southern Africa (COMESA) – which accounts for more than half of its gross domestic product (GDP) – outpaces traditional manufacturing and agriculture in driving growth and employment, and presents strong potential for further expansion.
A new report called Services in COMESA – An Industry Perspective: Integrating the Voice of Business in Policy by the International Trade Centre (ITC) and the COMESA Business Council (CBC) finds that stronger participation of the private sector in the policymaking process will create a more business-friendly environment.
The report, based on extensive private sector consultations in the region, is being launched on 19-20 April at the COMESA Business Council (CBC)’s first public-private dialogue for information and communications technology (ICT) services industries, in Nairobi, Kenya.
Businesses consulted for the study expressed a need for cross-border business support services and direct participation in the regional integration process. As competitiveness of the services sectors often depends on policies and regulatory practices that shape the services business environment, the voice of services-oriented businesses in policymaking is essential.
To facilitate this process, the report offers regional data for key services industries – tourism, transport, finance and telecommunications – as well as ‘services snapshots’ for each COMESA country. It also identifies key constraints to trade, such as challenges of size, funding and know-how, and recommends solutions.
A core recommendation of the report is a call for services business groupings to join forces in a Regional Services Industries Group, to collectively advocate the interests of the private sector through collaboration with governments. The report charts a four-phase roadmap to establish a coalition of services industries as a step towards stronger regional trade.
South African banks face growing credit risks as the economy slows, report says
South African banks face profitability pressures over the next few years amid a weakening economy and rising credit risks, says Standard & Poor’s Ratings Services in a report published on 28 April 2016.
“The outlook on all banks we rate in the country turned negative at the end of 2015, reflecting the negative outlook on the sovereign, the prospect of slower economic growth, rising interest rates, and inflationary pressures on the banking system’s asset quality,” said Standard & Poor’s credit analyst Matthew Pirnie.
We expect top-tier banks will face credit losses on their lending activities ranging between 0.9% and 1.2% in 2016, worsening by another 20 basis points in 2017.
Elements of market dislocation are also entering South Africa’s banking system, with one bank up for sale, another likely to be divested, the re-entry of one bank from resolution, and a fourth bank shaking up mass market retail banking in the country.
South African banks’ expansion into other parts of the continent also appears less attractive in 2016 than over the past few years, which is likely to limit appetite for growth and raise credit costs. Consequently, banks’ strategic focus is likely to turn defensive rather than expansionary.
Nevertheless, funding pressures on banks have eased a little due to the proposed regulatory discretion on the requirements on banks of net stable funding ratio (the proportion of long-term assets which are funded by long-term, stable funding).
However, we expect the restructuring of funding will continue, albeit at a slower pace. We still consider short-term concentrated wholesale funds to be a common idiosyncratic risk for most of the banks in the sector. Yet, systemic risks are lower than in other emerging markets because of the closed rand system and minimal reliance on external and hard currency funding.
“We expect that changing funding profiles, regulatory changes, and rising credit costs will place pressure on the industry’s profitability in 2016 and 2017, despite the endowment effect from increasing interest rates,” said Mr. Pirnie.