News Archive February 2016

tralac’s Daily News Selection

The selection: Friday, 26 February 2016

Launching today, in Addis: 'Trade in services - case studies from Africa' (AU)

The book highlights air transport services in Ethiopia, banking services in Nigeria, business processing outsourcing/ICT services in Senegal, cultural services in Burkina Faso, and higher education services in Uganda. The studies are an examination of possible best practices in services exports on the continent, as seen from the suppliers’ point view, with a review of the role of government policy and other factors that may have shaped their success. The countries and sectors were selected on the basis of their service sector performance. In some cases (such as for Cultural Services in Burkina Faso), we have looked for non-traditional service sectors, especially where the private sector’s role in exploring the foreign market has been a critical success factor.

African citizens to get easy entry into Ghana in July (Africa News)

Ghana’s president, John Dramani Mahama, said the West African country will offer visas to citizens of African Union member states on arrival into the country from July. President Mahama made the declaration on Thursday, February 25, 2016 during the delivery of Ghana’s State of the Nation Address to parliament in the capital, Accra.

Featured tweet, @DonaldKaberuka: Tariffs no longer the major obstacle. Now fast track non-tariff issues: visas, aviation, cross border red tape. (In reponse to The Economist’s article ‘Tear down Africa's trade walls’)  

Mihe Gaomab II: 'Competition law - a necessity for effective regional integration' (Southern Times)

If competition laws are fostered at the regional level, it would have the potential to ensure such cross border competition behaviour is disciplined to the best regional interest of growing economies through trade. Regional competition policies and laws can assist in enforcing anti-competitive behaviour right across the regions and on the African continent. It can also ensure uniform market discipline through curbing substantial abuse of market power or dominant position or monopoly situations.  The above shows that the importance of competition law as a tool to regional integration especially on the business conduct and the competitive markets in Africa cannot be underemphasised and should be pitched at regional, continental and international agendas such as SACU, SADC,COMESA, AU, and the World Trade Organisation.

Dr Chris Kiptoo: 'How Kenya plans to close its ever-growing foreign trade deficit' (Business Daily)

Dr Chris Kiptoo, the Principal Secretary State Department of Commerce and Trade at the Ministry of Industry, Investment and Trade, spoke to the Business Daily’s Charles Mwaniki on the sidelines of last week’s Africa 2016 conference in the Egyptian resort of Sharm el Sheikh about Kenya’s export strategies as Africa moves towards a free trade area: 'At the continental level, the summit has also pronounced itself for a continental FTA. The only problem is that the level of intra-regional trade is still low although it has improved from around 10% to about 15-16%. Trade of that level in an FTA is not meaningful enough. We need to grow that by dealing with connectivity issues — transport challenges. We are doing something but I think it can be fast tracked. We also have to do something about non-tariff barriers by adopting ICT platforms that improve transparency.'

Eating the intra-African trade pudding: Uganda, South Africa top as neighbours drive Kenya’s tourism recovery (M&G Africa)

One promising way of solving this is seen as ramping up regional trade in services - a model that has contributed to the booming growth in many Asian countries.  It may be already happening and could herald exciting possibilities.  The number of tourists visiting Kenya from neighbouring countries has increased over the past few months as the East African nation set off on  promotions around the region to make up for dwindling numbers from its traditional source markets in Europe.

Malaysia, African continent bilateral trade to grow by 10% (New Straits Times)

Bilateral trade between Malaysia and the African continent is expected grow by 10% this year from RM30.1 billion recorded in 2015, Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said today. South Africa, Eqypt, Nigeria and Angola are Malaysia’s top trading partners and export destinations.

Tanzania: Giant $30bn gas project now hangs in the balance (IPPMedia)

Mozambique's commissioning of an Italian company to start building a planned liquefied natural gas plant in that country has put neighbours Tanzania at a considerable disadvantage in the race to construct the first gas exporting facility in this part of Africa.  The Mozambican government this week granted its approval to the Italian energy firm Eni to go ahead with the project, with Eni - which aims to sell the gas produced by the plant to British oil company BP - expected to make its final investment decision later this year. In contrast, Tanzania was initially expected to make a final investment decision regarding  its own planned LNG plant this year, but this has been delayed for at least another four years due to red tape and regulatory uncertainties.

Tanzania: AfDB board approves 2016-2020 Country Strategy Paper (AfDB)

The AfDB will support Tanzania’s economic transformation to inclusive and green growth with an indicative concessional resource assistance package estimated at over US $1.1 billion over a five-year period. The Bank Group’s portfolio in Tanzania comprised 29 operations with total net commitment of US $1.97bn as of 30 November 2015. The portfolio consists of 15 public sector operations, 4 private sector operations and 10 multinational operations. Infrastructure (transport – 44%, energy – 5%, and water – 16%) accounted for 65% of the portfolio in value terms. Social sector accounted for 5%, agriculture 3%, multi-sector 4% and multinational operations 16% (79% of which are in energy and transport). Private sector operations accounted for 7% of the overall portfolio.

Seychelles: new development strategy targets diversification and resilience (AfDB)

Fitch revises Zambia's outlook to negative; affirms at 'B' (Reuters)

The revision of the Outlook reflects the following key rating drivers: a combination of falling copper revenue and slowing growth has led to persistent and large fiscal deficits and a doubling of gross general government debt since 2012. Fitch forecasts the 2016 fiscal deficit to narrow slightly to 7.1% of GDP, materially higher than the 3.8% deficit forecast by the Zambian authorities in the 2016 budget. Mining revenues, which directly contributed about 17% of total government revenue in 2012, fell to under 13% of revenue by 2015.

Namibia: Budget Statement (Ministry of Finance)

The Sub-Saharan African region has also taken a knock from the generalized slowdown in Emerging Markets economies. In fact, the soft landing for the Chinese economy has resulted in a much harder landing for Sub-Saharan African economies through the trade channel. Closer to home, the South African economy, which is closely linked to Namibia through strong trade, monetary and financial ties, is projected to grow at a rate of about 0.9% in 2016, which represents a further slowdown from 1.3% in 2015. This low growth trend for the South African economy holds negative implications for Namibia through trade and financial linkages as well as revenue derived from SACU.

I am aware that there have been mixed public reactions regarding the relevance of the currency peg to the South African Rand. Let me use this opportunity to reassure the public that due to the significant trade linkages, the currency peg to the South African Rand remains a relevant policy and a credible anchor of domestic price stability and trading for Namibia. Such relevance only gets eroded if imported inflation and excess volatility becomes a permanent occurrence and fundamental macroeconomic imbalances emerge. [Calle tightens government’s belt (New Era)]

Botswana: 2016 Monetary Policy Statement (Bank of Botswana)

The 2015 Business Expectation Surveys indicates a generally subdued level of business confidence, particularly among export-oriented businesses. However, optimism about recovery in output improves, going forward, in line with projected higher output growth for 2016. Overall, the key challenges to businesses include weak demand, deficiency of key inputs and the regulatory environment as well as related scarcity of skilled manpower. For the 2016/17 fiscal year, while total government expenditure is estimated to decrease by 2.7%, a budget deficit of P6.05bn (3.8% of GDP) is anticipated, given the projected contraction in government revenue of 6.5%. The budget includes spending associated with the Economic Stimulus Programme, which is partly aimed at accelerating completion of NDP 10 projects.

Africa’s infrastructure: five years on (World Bank Blogs)

Africa’s Infrastructure: A Time for Transformation, the inaugural report in the Africa Development Forum series in 2010, was the fruit of an unusual confluence of circumstances. Seldom have donors put such a solid funding base behind primary data collection and analytical work on infrastructure, seldom has World Bank management been able to dedicate such significant human resources over a multiyear horizon to study these issues, and seldom has an infrastructure knowledge project brought together such a broad coalition of stakeholders including the key regional bodies in Africa. Five years later, after a period of great dynamism and momentous changes, an update of the report would be very timely. Work would need to start soon to be completed in time for the 10th anniversary. [The author: Vivien Foster]

 Overloading costing East Africa millions in road deterioration (How we made it in Africa)

“The main cause of road deterioration is overloading,” says Nicholus Kithinji, managing director of Avery East Africa (AEA), a large supplier of weighbridges in Kenya. AEA sells equipment used by government authorities to check compliance with axle load requirements. “Overloading costs hundreds of millions of shillings in road deterioration. A truck that is loaded 10% more than it should causes 50% more damage on the road than a compliant truck. Some of the trucks coming from Congo, for example, that are 200% loaded reduce the life of the roads they pass on by nearly half. So axle load control is the first step in road maintenance,” says Kithinji. “If we can’t maintain what we have, every 10 years we will be redoing the infrastructure we already have. We will build forever.”

The European Union and the African Union: a statistical portrait

With data up to and including the year 2014, this “portrait” includes various domains such as demography, health, education, national accounts, trade, and more. Tables in the eight chapters help the user to gain a detailed view on different aspects, such as mobile phone subscriptions, number of teachers, life expectancy, GDP, tourism, etc. An overview chapter is also included, presenting statistical comparisons with the rest of the world.

International trade: Africa accounted for around 9% of both the imports to the EU-28 and the exports from the EU-28 in 2014, measured by value. This was far below Asia, which stood for 43% of the imports value to the EU-28 and about a third of the exports value. Northern America only accounted for 14% of the imports to the EU-28 but was the destination for 21% of the exports. The EU-28 goods trade balance with Africa was negative in all years between 2003 and 2014 (Figure 1.11). The EU’s trade deficit with Africa fell sharply from EUR 41 billion in 2008 to around EUR 4 billion in 2009 with both import and export values dropping, clearly reflecting the worldwide economic crisis. This decline in EU-28 exports to and imports from Africa broke the steady increase of EU-28 trade with Africa between 2003 and 2008, which had seen export values raise by 71% and imports by 94%. [Download]

Digital globalization: the new era of global flows (McKinsey)

Global flows of all types support growth by raising productivity, and data flows are amplifying this effect by broadening participation and creating more efficient markets. MGI’s analysis finds that over a decade, all types of flows acting together have raised world GDP by 10.1 percent over what would have resulted in a world without any cross-border flows. This value amounted to some $7.8 trillion in 2014 alone, and data flows account for $2.8 trillion of this impact. Both inflows and outflows matter for growth, as they expose economies to ideas, research, technologies, talent, and best practices from around the world.

Although there is substantial value at stake, not all countries are making the most of this potential. The latest MGI Connectedness Index - which ranks 139 countries on inflows and outflows of goods, services, finance, people, and data - finds large gaps between a handful of leading countries and the rest of the world. Singapore tops the latest rankings, followed by the Netherlands, the United States, and Germany. China has grown more connected, reaching number seven, but advanced economies in general remain more connected than developing countries. In fact, each type of flow is concentrated among a small set of highly connected countries.

To understand GVCs, connect the dots: visualisation tool (World Bank)

The increasing salience of global value chains and their analysis has created tremendous demand for “mapping” these chains. How can we quantify the ‘value’ along a chain? How can we visualize the connections between each link? These are questions we’ve been seeking to answer at the World Bank Group. And we’ve developed a new visualization tool, accessible through our World Integrated Trade Solution database, which allows the public to explore the quantifiable reality of GVCs.

Resource exploration: A move south (IMF)

Our analysis suggests that if all of Latin America and sub-Saharan Africa were to adopt the same quality of institutions as the United States, the number of discoveries worldwide would increase by 25%, all else equal. Institutions can affect discoveries in many ways. A stronger rule of law may reduce the risk perceived by potential foreign investors, making them more willing to undertake the long-term investments usually required in resource exploration and extraction. This could make it easier for a country to adopt better technology, if, for example, stronger contracts make the prospect of costly investments in technology more attractive.

The leaders of Africa’s Great Lakes Region and private sector stakeholders agree to boost investment (PSIC)

SADC security committee addresses piracy, human trafficking (New Era)

Zimbabwe: Zimra introduces hand scanners at Beitbridge Border Post (The Herald)

Vale writes $2.4bn off its Mozambique coal assets (Zitamar)

Mozambique to chair Zambezi Watercourse Commission (Club of Mozambique)   

Ministerial Declaration: 'Universal access to immunization as a cornerstone for health and development in Africa'

Makhtar Diop, Cristina Duarte: 'Closing the gender gap: lessons from Africa' (World Bank)

US Commerce Secretary Penny Pritzker: statement on signing the Trade Facilitation and Trade Enforcement Act of 2015


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tralac’s Daily News Selection

26 Feb 2016
The selection: Friday, 26 February 2016 Launching today, in Addis: 'Trade in services - case studies from Africa' (AU) The book highlights air transport services in Ethiopia, banking services in Nigeria, business processing...
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Digital globalization: The new era of global flows

Soaring flows of data and information now generate more economic value than the global goods trade.

Conventional wisdom says that globalization has stalled. But although the global goods trade has flattened and cross-border capital flows have declined sharply since 2008, globalization is not heading into reverse. Rather, it is entering a new phase defined by soaring flows of data and information.

Remarkably, digital flows – which were practically nonexistent just 15 years ago – now exert a larger impact on GDP growth than the centuries-old trade in goods, according to a new McKinsey Global Institute (MGI) report, Digital globalization: The new era of global flows. And although this shift makes it possible for companies to reach international markets with less capital-intensive business models, it poses new risks and policy challenges as well.

The world is more connected than ever, but the nature of its connections has changed in a fundamental way. The amount of cross-border bandwidth that is used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intracompany traffic continue to surge. In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.

Trade was once largely confined to advanced economies and their large multinational companies. Today, a more digital form of globalization has opened the door to developing countries, to small companies and start-ups, and to billions of individuals. Tens of millions of small and midsize enterprises worldwide have turned themselves into exporters by joining e-commerce marketplaces such as Alibaba, Amazon, eBay, Flipkart, and Rakuten. Approximately 12 percent of the global goods trade is conducted via international e-commerce. Even the smallest enterprises can be born global: 86 percent of tech-based start-ups surveyed by MGI report some type of cross-border activity. Today, even the smallest firms can compete with the largest multinationals.

Individuals are using global digital platforms to learn, find work, showcase their talent, and build personal networks. Some 900 million people have international connections on social media, and 360 million take part in cross-border e-commerce. Digital platforms for both traditional employment and freelance assignments are beginning to create a more global labor market.

In this increasingly digital era of globalization, large companies can manage their international operations in a leaner, more efficient ways. Using digital platforms and tools, they can sell in fast-growing markets while keeping virtual teams connected in real time. This is a moment for companies to rethink their organizational structures, products, assets, and competitors.

Global flows of all types support growth by raising productivity, and data flows are amplifying this effect by broadening participation and creating more efficient markets. MGI’s analysis finds that over a decade, all types of flows acting together have raised world GDP by 10.1 percent over what would have resulted in a world without any cross-border flows. This value amounted to some $7.8 trillion in 2014 alone, and data flows account for $2.8 trillion of this impact. Both inflows and outflows matter for growth, as they expose economies to ideas, research, technologies, talent, and best practices from around the world.

Although there is substantial value at stake, not all countries are making the most of this potential. The latest MGI Connectedness Index – which ranks 139 countries on inflows and outflows of goods, services, finance, people, and data – finds large gaps between a handful of leading countries and the rest of the world. Singapore tops the latest rankings, followed by the Netherlands, the United States, and Germany. China has grown more connected, reaching number seven, but advanced economies in general remain more connected than developing countries. In fact, each type of flow is concentrated among a small set of highly connected countries.

Lagging countries are closing the gaps with the leaders at a very slow pace, and their limited participation has had a real cost to the world economy. If the rest of the world had increased its participation in global flows at the same rate as the top quartile over the past decade, world GDP would be $10 trillion, or 13 percent, higher today. For countries that have been slow to participate, the opportunities for catch-up growth are too substantial to ignore.

James Manyika, Jacques Bughin, and Jonathan Woetzel are directors of the McKinsey Global Institute, where Susan Lund is a principal; Kalin Stamenov and Dhruv Dhingra are consultants in McKinsey’s New York office.

» Download: Digital globalization: The new era of global flows – Full report (PDF, 6.71 MB)

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Digital globalization: The new era of global flows

26 Feb 2016
Soaring flows of data and information now generate more economic value than the global goods trade. Conventional wisdom says that globalization has stalled. But although the global goods trade has flattened and cross-border...
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The leaders of Africa’s Great Lakes Region and private sector stakeholders agree to boost investment

The Democratic Republic of the Congo hosted a two day inaugural Great Lakes Private Sector Investment Conference. The Conference was co-organized by the Office of the Special Envoy of the Secretary-General for the Great Lakes region and the International Conference on the Great Lakes on 24-25 February 2016.

The regional investment conference, which was the first in the Great Lakes region of Africa brought together over 500 participants from the region and the world. The opening ceremony, presided by the President of the Democratic Republic of the Congo (DRC), H.E. Joseph Kabila Kabange, was attended the United Nations SecretaryGeneral, Ban Ki-moon; the Vice Presidents of Angola and Burundi; the Prime Minister of Rwanda; Ministers and Ambassadors from the region; representatives of international organizations; the diplomatic corps; and investors as well as business leaders.

The main objective of the Conference was to provide a platform for public-private dialogue on promoting responsible investment in the region and enhanced networking opportunities between regional and international stakeholders. Participants reviewed current and emerging challenges to private sector investment in the region and identified priorities actionable policy recommendations for the Leaders of the region.

Discussions covered several sectors including Agriculture, Infrastructure, Mining, Energy, Information and Communication Technology, Tourism, and Finance.

Twenty-five illustrative regional investment opportunities were presented to the participants in an attempt to generate business interest, and to encourage participants to take advantage of the region’s rich endowments.

President Kabila welcomed the opportunity to host this event which, in his view will have a positive impact not only on the DRC, but also on the entire region. He expressed hope that the outcome of the meeting will be followed by real investment transactions. “From now on, we shall no longer refer to the Great Lakes as a region marred with instability and conflicts, but one where it is good to invest. I hope that the conclusions of this conference will trigger real interactions between the private sector and political decision makers both at national, regional and international levels. In doing so, we will ensure continued economic growth in the region materialized by job creation, and thus we will definitely turn the page of violence and insecurity that the region has been known for,” President Kabila said.

At the opening ceremony, Secretary-General Ban Ki-moon recalled the Peace, Security and Cooperation Framework agreement the DRC and the region signed in Addis Ababa in 2013 and the decision to organize the Private Sector Investment Conference. “Because leaders recognized that peace and development are two sides of the same coin. They understood that the lack of jobs and opportunities creates a breeding ground for conflict. So we have joined together today to share ideas and experiences underscoring the importance of attracting private investment, promoting business activity and enhancing regional economic cooperation and integration,” the Secretary General said.

“The people of the Great Lakes region count on you to fully contribute to the goal of transforming the region. They look to you to strengthen productive capacity; create decent jobs and livelihoods; improve economic governance; and foster inclusive development and shared prosperity. This is a win-win approach for the well-being of society and a company’s bottom-line. It is the pathway to peace and stability,” he added.

The opening ceremony was followed by a high-level panel involving the Prime Ministers of the DRC and Rwanda, the Vice-Presidents of Burundi and Angola on what their respective countries were doing to improve the investment climate in the region. Thematic sessions were organized along the seven priority sectors identified. These sessions provided a unique opportunity for dialogue among political leaders, government officials, and private sector investors and other stakeholders on investment opportunities in the Great Lakes region.

This conference was convened as a follow-up to a decision adopted by the leaders of the region during the second meeting of the Regional Oversight Mechanism of the Peace, Security and Cooperation Framework agreement for the DRC and the region, held in Addis Ababa, Ethiopia, on 31 January 2014.

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Competition law: A necessity for effective regional integration

Competition laws and policies have long been present in industrialised economies but only started to take root around the 1990s in the non-industrialised and emerging economies.

It was estimated that since the year 2000, only half of the 54 Member States of Africa have enacted competition laws in their countries. The adoption of competition laws in Africa have largely been as a motive for African economies to comply with regional trade agreements, especially within Southern Africa as a result of being members of the Southern African Customs Union (SACU) and the Southern African Development Community (SADC). SACU has a legal annex on competition law developed but not enforced and SADC has a cooperation model on competition across its member states.

A major milestone for acceleration of competition regime in Africa has been as a result of the Tripartite arrangement where the regional blocs in Eastern and Southern Africa comprising members states of SADC (that comprises Member States of SACU), East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA) have focussed on the enactment and harmonisation of competition policies and laws amongst and between its member states. The COMESA Competition Authority was also recently established to implement competition enforcement within its member states.

Having to enact and operationalise competition policies and laws for an African economy is essential if it wants to manage its economy through a regulatory system that fosters economic growth, innovation and development.

Anecdotal and researched literature shows that competition laws do discipline market competition in any economy.

It fosters competitiveness of markets and businesses and also assist in consumer protection where consumers get the best products for the least prices.

Competition Laws do condition and heal market failures i.e. the private sector sometimes not doing what it ought to do in terms of proper and orderly competitive conduct in the marketplace.

Competition laws assist in fostering innovation by nudging businesses to constantly improve, bringing in new equipment and producing products which are competitive and offering wide range of choice for consumers.

The competitive dynamics ensure that new firms come into the market and prosper if they perform well in the marketplace and less efficient firms become unprofitable and are forced out or close down. These have implications for the industrialisation efforts in an economy and industrial growth in general for Africa.

Competition protects consumers and SMEs, and can aid in economic democracy where the consumers who form a larger economic agent in the social and productive process of an economy has a voice on consumer issues and also ensure proper behavioural conduct of firms especially of the bigger firms on SMEs in African economies. Small Firms can be harmed, no less than individual consumers by the actions of bigger firms on which they rely for inputs.

Competition laws change the business landscape through Mergers and Acquisitions in the African economies because they inadvertently reduce the number of market players.

Merger review allows examination of the positive and negative implications of any merger and assists in whether a new firm coming into an economy through foreign direct investment lessens competition, promotes abuse dominance, stifles SMEs, or dislocates regional or industrial sectors, leads to unemployment or has efficiency gains.

Competition Policy and Law can assist in securing gains from trade liberalisation and market opening. The reduction of barriers to trade and the removal of barriers to entry for domestic and foreign investment can actually assist African economies to access their regional and continental markets and can spur competition for the production of goods and services unique to Africa  through free trade, efficient production and industrial processes and proper market access.

Regional integration is about deepening the areas of cooperation amongst a group of member states. Regional Integration is a process and a means to an end and requires certain discipline for Africa to succeed. Successful regional integration is always characterised by free movement of goods amongst Member States, albeit with a recognition to ensure protection of its sensitive and economically necessary local productive and industrial capacities.

Regional Integration requires adherence to compliance measures which facilitate trade such as the simplified customs procedures, one stop border posts, harmonised rules and proper documentation on trade standards at borders and converged tariff setting and import and export charging rules.

Regional Integration is important for developing industrial capacity. It can provide agreed sectoral and product growth points amongst its Members States and strengthen regional value chains and can provide higher scale of regional industries that have high potential for backward and forward linkages on sectors such as pharmaceuticals, agro-processing, mineral beneficiation and natural indigenous resource products.

Regional Integration is an important basis for enforcing regional competition policies and laws.

It is a well know fact that firms and business especially multinationals tend to acquire significant market power and influence pricing and volumes of supply through either monopolistic or pricing behavioural strategies.

They ultimately determine the scope and volume of business transactions and tend to capture regional markets through cross border commercial market power.

If Competition laws are fostered at the regional level, it would have the potential to ensure such cross border competition behaviour is disciplined to the best regional interest of growing economies through trade.

Regional competition policies and laws can assist in enforcing anti-competitive behaviour right across the regions and on the African continent.

It can also ensure uniform market discipline through curbing substantial abuse of market power or dominant position or monopoly situations.

The above shows that the importance of competition law as a tool to regional integration especially on the business conduct and the competitive markets in Africa cannot be underemphasised and should be pitched at regional, continental and international agendas such as SACU, SADC, COMESA, AU, and the World Trade Organisation (WTO).

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