News Archive December 2017

tralac’s Daily News Selection

Featured infographic, @TradeNewsCentre: Which 70 members have formed e-commerce group at WTO? Related: Too early to regulate e-commerce: Jack Ma

Project Syndicate commentary by UNIDO’s Li Yong: Africa’s must-do decade

Recommendations from the 2nd EA Business and Entrepreneurship Conference (EABC)

Arising issues from the deliberations include: (i) Lack of viable strategies, policies and systems of coherent laws and regulations to stir up industrialization; (ii) Failure to fully implement the EAC Customs Union and Common Market Protocols, (iii) Different investment incentives across the region leading to competition instead of cooperation; (iv) Lack of a regional local content policy. Highlighted recommendations (pdf): Creating an enabling environment for business to foster industrialization, innovation and investment in the EAC: (i) Diversifying the manufacturing base and raising local value add from existing rate of below 10% to at least 40%. This can be achieved through promoting the development and investment in strategic regional industries with sectors in which EAC has potential comparative advantage, (ii) Partner States should accelerate promotion of cross border investment and double their efforts to encourage East Africans to take advantage of regional opportunities to grow their businesses instead of over-depending on FDI outside the region, (iii) Create a credible, rules-based regional investment regime that enhance predictability for investment policies and laws with mechanism to resolve trade disputes and enhance awareness about and promotion the EAC region as a single investment destination, (iv) Transforming micro, small and medium enterprises capable of contributing up to 50% of manufacturing GDP from 20%. Towards a single EAC investment destination: (i) Implement fully the EAC Customs and Common Market Protocols, (ii) formulate an EAC Investment Policy and Strategy.

Namibia: Third Quarter Trade Statistics Bulletin (pdf, NSA)

Chart 1 depicts that from q4-2012 to q3-2017, the country experienced continuous trade deficits that averaged N$6,857m. The highest deficit of N$12,084m was recorded in q2-2015, while the lowest of N$1,002m was registered in q1-2016. The chart also shows an unsteady growth trend with the most significant growth of 773.8% recorded in q2-2016. On average, over a period of 20 quarters, the trade deficit grew by 54.6%. The persistent deficits are mostly driven by Namibia’s high demand for high-valued manufactured commodities and machinery from the rest of the world as opposed to exporting mainly primary commodities that are of low value. Namibia’s exports [in Q3] were mostly absorbed by African regional groupings and the EU, with SACU absorbing 43.8%, the EU with 18.7%, EFTA with 13.4%, and SADC-Non-SACU with 8.9% and BRIC with 7.9%. Equally, imports were also sourced from the same economic regions with SACU accounting for the largest share of 60.3% of total imports, EU with 22%, BRIC with 9.4%, COMESA with 4.2% and SADC-Non-SACU with 3.9%. .

South Africa Economic Overview: recent developments in the global and South African economies (IDC)

The Low Road scenario for the South African economy outlined in this report brings to the fore some of the potential consequences if politico-economic developments result in a more unfavourable growth trajectory than that presented in the IDC’s baseline forecasts. All sectors of the economy would face increased strain in such an adverse scenario. Many business enterprises would likely face serious financial difficulties, which could compromise their sustainability and employment. [Related: SARB Q3 Bulletin and tables; TIPS Real Economy Bulletin: Third Quarter 2017]

South Africa: Measuring shadow banking activities and exploring its interconnectedness with banks in South Africa (SARB)

Shadow banking entities or activities and its interconnectedness with financial intermediaries raise important policy concerns. However, research in this area in South Africa remains limited. Accordingly this paper maps the financial landscape in South Africa, focusing on non-bank financial intermediaries as well as the narrower ‘shadow banking’ measure for South Africa, measured in line with guidance provided by the Financial Stability Board. The interconnectedness between financial intermediaries in South Africa is also explored and key financial stability risks in the South African financial system are highlighted. One of the most notable risks currently is the lack of data. Whilst the shadow banking system in South Africa remains relatively small when compared to global peers, its assets under management are growing at a faster pace than those of banks. Furthermore, banks in South Africa obtain a relatively large portion of their funding from non-bank financial intermediaries and generally interconnectedness among financial intermediaries in South Africa is relatively high.

China-Africa Industrial Capacity Cooperation Exhibition: updates

(i) Kenya to China: Open your markets for our goods. Kenya has asked China to open up its market for Kenyan commodities in order to mitigate the widening trade imbalance in favor of the second largest economy in the world. Speaking while opening the three day China-Africa Expo on Wednesday at the Kenyatta International Conference Centre, Industry Trade and Cooperatives Cabinet Secretary Adan Mohamed welcomed Chinese investors to visit the country and sample Kenyan products needed in their markets. “China is a leading economic partner to Kenya, financing and overseeing landmark infrastructural transformation in the country. We have created a conducive investment environment for Chinese investors in the country and we hope that China will reciprocate and open its over 1.3 billion people market for Kenyan products,” said Mohamed. He asked Chinese firms to explore opportunities and invest in President Uhuru Kenyatta’s big four economic areas of food security, affordable housing, health and manufacturing. [China-Africa Development Fund, ITC, CCPIT roundtable: Africa eyes enhanced China ties to boost industrial growth]

(ii) Kenyan special economic zone to launch Chinese industrial park. A Kenyan special economic zone Tatu City is set to launch a Chinese industrial park to accommodate firms from the Asian nation, officials said Wednesday. Nick Langford, Country Head of Tatu City, told Xinhua that the city, located 15 km northeast of Nairobi, has so far attracted three Chinese firms into its industrial park. “Due to increasing interest by Chinese investors, we are seeking to set aside 50 acres out of the 900 acres of industrial park to Chinese firms,” Langford said. Tatu city is a 5,000-acre mixed-use city that will house over 150,000 residents when fully developed. [Chinese battery firm, Ritar Power and Kenya’s Chloride Exide sign MoU to promote renewable energy in East Africa]

At MC11, new research shows convergence on rules of origin is happening (UNCTAD)

Although deliberations on rules of origin weren’t on the agenda at MC11, the WTO has been dealing with the issue since the General Agreement on Tariffs and Trade was signed in 1947. “Despite multilateral attempts within the WCO, UNCTAD and, most recently, the WTO, it has proven impossible to reach consensus on a multilateral discipline on rules of origin for the last half a century,” Mr Inama said. Although progress towards convergence hasn’t been possible though formal negotiations at the WTO, the study shows that for some products it has “naturally” happened between the rules of origin contained in different free trade agreements. “We have to take this information to the public – that such progress exists and that we can build upon it. We have to break the kind of ‘curse’ that exists on rules of origin.” [Download: Rules of origin as non-tariff measures: towards greater regulatory convergence]

Global e-commerce policy work to continue despite no deal at WTO’s MC11 meeting (UNCTAD)

“The lack of progress on the digital economy negotiation at the WTO has been disappointing but we must not give up,” Sweden’s trade minister Ann Linde said. With the world on the cusp of a new digital economy in which e-commerce and automation will transform production, trade, investment patterns – as well as helping meet the Sustainable Development Goals – the need for new policies to be adopted is clear. “The gains of digitalization are not automatic and there will be major challenges for countries, enterprises and people to adapt, but we must start somewhere,” UNCTAD Secretary-General Mukhisa Kituyi said. “UNCTAD’seTrade for All offers an important platform to support policymaking in developing countries and to champion successful initiatives,” said Torbjörn Fredriksson, chief of UNCTAD’s Information and Communication Technology Analysis Section. “Increasingly, the contribution of digitalization to sustainable development will require a concerted, holistic, cross-sectoral and multi-stakeholder approach,” he said.

The global costs of protectionism (World Bank)

This paper quantifies the wide-ranging costs of potential increases in worldwide barriers to trade in two scenarios. First, a coordinated global withdrawal of tariff commitments from all existing bilateral/regional trade agreements, as well as from unilateral preferential schemes coupled with an increase in the cost of traded services, is estimated to result in annual worldwide real income losses of 0.3%, or $211bn, relative to the baseline after three years. An important share of these losses is likely to be concentrated in regions such as East Asia and Pacific and Latin America and the Caribbean which together account for close to one-third of the global decline in welfare. Highlighting the importance of preferences, the impact on global trade is estimated to be more pronounced, with an annual decline of 2.1%, or more than $606bn, relative to the baseline if these barriers stay in place for three years. Second, a worldwide increase in tariffs up to legally allowed bound rates coupled with an increase in the cost of traded services would translate into annual global real income losses of 0.8%, or more than $634bn, relative to the baseline after three years. The distortion to the global trading system would be significant and result in an annual decline of global trade of 9%, or more than $2.6 trillion, relative to the baseline in 2020.

ECOWAS Commission President pleads for prompt payment of community levy

Making the appeal on Wednesday at the opening of the 79th Ordinary Session of the ECOWAS Council of Ministers in Abuja, Mr de Souza indicated that the non-payment or delay of the Community Levy by member states remains a major challenge. He urged the Ministers to continue to plead with their respective governments to respect their primary obligation for the survival of ECOWAS. Marcel de Souza also provided update on the institutional reform in ECOWAS, noting that the collective commitment and resolve of the entire Commission would be required to successfully complete the reform within the shortest possible time, despite the opposition and challenges encountered at various stages of its implementation. [ECOWAS to delay discussion of Morocco’s admission until early 2018 at extraordinary summit]

Africa 2017 Forum sets strong development agenda (African Business)

Intra-African trade was on the agenda in almost every session at Africa 2017. A continent-wide trading zone has the potential to enhance export competitiveness, create employment, contribute to economic diversification and reduce vulnerability to global shocks. China-Africa discussions also featured heavily throughout the forum. With other Asian players entering the African market, it is clear China-Africa relations are changing and African nations and businesses are querying how to get the most out of Chinese investment and the One Belt One Road initiative. [African presidents draw strong consensus for inclusive growth at Africa 2017]

Egypt launches its first locally-built smartphone with China’s help

Last week, in a lavish ceremony President Abdel Fattah El Sisi was handed the first locally made smartphone called Nile X, which is designed for the Egyptian consumer. In his push for investment in the technology sector, Sisi’s administration has supported an Egyptian Silicon Valley in Assiut, deep in the country’s impoverished southern region, to jump start local manufacturing. SICO, the Egyptian firm behind the 4G enabled smartphone, has been eyeing a growing consumer base of tech savvy Egyptians. With a population of over 95 million, mobile phone subscriptions topped 99 million. Only 32% of Egyptians though have smartphone making it a burgeoning market that the firm would like capitalize on through affordable handsets. SICO is looking to expand in Africa with plans to build an East African regional hub in Nairobi and to expand to Mozambique, Nigeria and South Africa.

Mozambique: IMF Completes 2017 Article IV Mission

On the structural front, the mission urges the authorities to take decisive steps to strengthen the business environment and to restructure financially-weak SOEs that pose significant fiscal and financial sector risks. The mission commends the authorities for submitting to Parliament the SOE law and for approving a decree providing a regulatory framework to the issuance of public debt and guarantees. In this context, the mission encourages the authorities to continue developing their action plan to strengthen governance, transparency, and accountability. Regarding the follow up to the audit of Ematum, Proindicus and MAM companies, the mission reiterates the need to fill the information gaps in the audit report and takes note of the Government’s recommendation to wait for the outcome of the ongoing investigations by the Prosecutor General Office.

International commodity prices and domestic bank lending in developing countries (IMF)

We study the role of the bank-lending channel in propagating fluctuations in commodity prices to credit aggregates and economic activity in developing countries. We use data on more than 1,600 banks from 78 developing countries to analyze the transmission of changes in international commodity prices to domestic bank lending. Our results also show that there is no significant difference in the behavior of foreign and domestic banks in the transmission process, reflecting the regional footprint of foreign banks in developing countries.

Today’s Quick Links:

Could dropping of visas boost intra-continental trade?

Egypt-Mercosur free trade agreement meeting kicks off in Argentina

Domestic IPO by African issuers rises 19.5%, to $1.4b in 2017

Food trade and investment in South Africa: improving coherence between economic policy, nutrition and food security

Mombasa’s Green Port policy: ships to switch off diesel engines

Three reasons why maritime transport must act on climate change

Pathways to resilience in pastoralist areas: a synthesis of research in the Horn of Africa

Strengthening post-Ebola health systems: from response to resilience in Guinea, Liberia, Sierra Leone

Please note: This is the final Daily News Selection for 2017. Updates will resume in early 2018. Wishing our readers a wonderful festive season and a Happy New Year.

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2nd EA Business and Entrepreneurship Conference calls for promotion of cross-border investments

East Africans urged to take advantage of regional opportunities to grow their businesses

The second edition of East African Business and Entrepreneurship Conference & Exhibition themed Accelerating Industrialization, Innovation and Investment in the EAC was held from 14th-16th November 2017 at Serena Hotel in Dar es Salaam, Tanzania. The conference looked at Creating an Enabling Environment for Businesses to Foster Industrialization, Innovation and Investment in the EAC and Towards a Single EAC Investment Destination as cross cutting issues.

Her Excellency Samia Suluhu Hassan, Vice President of the United Republic of Tanzania, graced the 2nd East African Business and Entrepreneurship Conference & Exhibition during the official opening ceremony on the 14th of November 2017. The conference attracted participation of more than 330 high-level government and private sector decision makers from the EAC Partner States as well as business leaders, East African Diaspora, Entrepreneurs & investors from the region and abroad.

“More raw materials for East African industries should be sourced from within the EAC Partner States and there is need for employment creation for the growing youth population in the region,” said H.E Samia Suluhu Hassan, Vice President of United Republic of Tanzania.

Amb. Dr. Augustine Mahiga, Minister of Foreign Affairs and East African Cooperation, United Republic of Tanzania and Amb. Liberat Mfumukeko Secretary General, East African Community, Dr. Detlef Waechter Ambassador of the Federal Republic of Germany to the United Republic of Tanzania and to the East African Community; Mr. Vijay Pillai Adviser to Vice President for Africa, World Bank; Mr. Dennis Karera, Managing Director, Kigali Heights, Rwanda; Dr. Samuel Nyantahe, Chairman, Confederation of Tanzania Industries (CTI), Tanzania; Mr. Olivier Lambert, Lead Operations Officer, Multilateral Investment Guarantee Agency, Worldbank Group and Mr. Felix Mosha, Managing Director IBM Holdings, Tanzania set the stage for discussions on the current policies and missing links in bid to accelerating industrialization, innovation and investment in the EAC.

The second day of the conference was marked by the launch of “Creating Perspectives: Business for Development” project that aims to improve economic perspectives for Small and Medium Enterprises (SMEs) in East Africa through scaling up of production and thus growth of businesses.

Hon Christophe Bazivamo, EAC Deputy Secretary General Productive and Social Sector EAC alongside with Mr. Jim Kabeho, Chairman, East African Business Council (EABC), Mr. Ernst Hustaedt, Country Director, GIZ, Tanzania and Mr. Matthias Wachter Head of Department Security, Raw Materials and Africa Federation of German Industries (BDI), Germany officially launched the new project.

“A lot of companies in Africa are SMEs facing challenges in enhancing competitiveness and growth,” said Mr. Matthias Wachter. “SMEs in Germany would like to know the processes of investing in Africa.”

“We are happy to be spearhead this new project that will support the growth of SMEs in the region,” said Mr. Jim Kabeho, EABC Chairman.

Also, the East African Business Council signed an affiliation agreement with the World SME Forum to support and enhance African SMEs’ integration to global markets so as to contribute to economic development, job creation and inclusive growth in EAC countries. The agreement was signed by Ms. Lilian Awinja, Executive Director of the EABC and Dr. Tunc Uyanik, President of the World SME Forum.

This conference offered an opportunity for the region to dialogue critically on how to encourage entrepreneurship and attract more foreign & cross border investments. It played a key role to inspire entrepreneurship spirit among East Africans with aim to support start-ups to set up businesses, small enterprises to grow, the medium to scale up and the large enterprises to outsource to small ones.

The simultaneous exhibition offered a platform for the EAC Investment Authorities to showcase investment opportunities in the region and firms and entrepreneurs show cased their products and services and shared bankable project proposals ready for investment not only from foreign but also local investors.

Key industry experts and relevant public decision makers led deliberations on the current policies and missing links in the conference sectors sessions namely: Information Communication Technology (ICT), Agri-Business, Urbanization, Cotton and Textile, Patents and Copyrights in the Creative Industry, Trade and Gender, Health, Banking and Finance, e-Commerce and Start-Ups.

Arising issues from the deliberations include:

  1. Lack of viable strategies, policies and systems of coherent laws and regulations to stir up industrialization

  2. Failure to fully implement the EAC Customs Union and Common Market Protocols

  3. Different investment incentives across the region leading to competition instead of cooperation

  4. Lack of a Regional Local Content Policy

Indeed, the conference allowed for exchange of ideas, expertise, B2B (Business to Business) and B2G (Government to Business) networking and offered a platform to learn about latest developments in the region. Below are key recommendations that arose from the conference in bid to trigger more cross border investments and enhance the business environment.

Creating an Enabling Environment for Business to Foster Industrialization, Innovation and Investment in the EAC

  1. Diversifying the manufacturing base and raising local value add from existing rate of below 10% to at least 40%. This can be achieved through promoting the development and investment in strategic regional industries with sectors in which EAC has potential comparative advantage

  2. Partner States should accelerate promotion of cross boarder investment (CBI) and double their efforts to encourage East Africans to take advantage of regional opportunities to grow their businesses instead of over-depending on FDI outside the region.

  3. Create a credible, rules based regional investment regime that enhance predictability for investment policies and laws with mechanism to resolve trade disputes and enhance awareness about and promotion the EAC region as a single investment destination

  4. Transforming Micro Small and Medium Enterprises capable of contributing up to 50% of manufacturing GDP from 20%

Towards a Single EAC Investment Destination

  1. Implement fully the EAC Customs and Common Market Protocols

  2. Formulate an EAC Investment Policy & Strategy

Amb. Celestine Mushy, Director of Multilateral in the Ministry of Foreign Affairs and East African Cooperation, United Republic of Tanzania, urged the business community to collectively champion free trade as well as movement of capital and people during the official closing ceremony of the 2nd East African Business and Entrepreneurship Conference & Exhibition.

“We will read your views expressed during your discussions keenly with the aim of identifying what more we can do to strengthen business activities in the region and to speed up wealth creation for our people,” said Amb. Mushy who noted the recommendations of the conference.

EABC through our Observer Status with the East African Community (EAC), we are committed to follow closely the implementation of the recommendations in order to amplify investments in to the region.

EABC appreciates the support received form all key players in organizing the 2nd East African Business and Entrepreneurship Conference & Exhibition in particular, Tanzania Investment Center, Burundi Investment Promotion Agency (API), Kenya Investment Authority (KenInvest), Rwanda Development Board (RDB) and Uganda Investment Authority as well as EABC members, National Focal Points (NFPs) and sector associations for their continued support and commitment to the regional agenda, namely Tanzania Private Sector Foundation, Federal Chamber of Commerce Industries Burundi, Kenya Private Sector Alliance, Rwanda Private Sector Federation, Private Sector Foundation Uganda, Confederation of Tanzania Industries, Association of Burundi Industries, Kenya Association of Manufacturers, Rwanda Association of Manufacturers and Uganda Manufacturers Association. Our sincere gratitude goes to SBC Pepsi, DEG, HEVA Fund, Oxford Business Group, ALAF Ltd Tanzania, Kenya Commercial Bank – Tanzania, JC Decaux, Zoom Tanzania and Strathmore Business School our knowledge partner and Jumia Travel our Travel partner.

Much appreciation to development partners German Development Cooperation (GIZ), Federation of German Industries (BDI), and the EAC-German Cooperation particularly the GIZ-EAC integration Programme was expressed.

Economic overview: Recent developments in the global and South African economies – November 2017

Although conditions have recently improved to varying degrees in a number of sectors of the South African economy, such as agriculture, mining, manufacturing and retail trade, the economic environment remains generally weak.

South Africa’s economic outlook

Growth prospects are likely to remain unsatisfactory in the short-term, with some acceleration in the expansion momentum expected over the medium- to longer-term.

The rate of increase in South Africa’s gross domestic product (GDP) is projected by the IDC at only 0.6% for 2017, potentially rising to a very modest 1.2% in 2018. GDP growth is projected at 2.3% per year, on average, for the period 2018 to 2022, which would be well below the National Development Plan’s average annual growth target of 5.4% per annum over the period up to 2030.

External trade

Benefitting from surpluses on the balance of trade since February 2017, the deficit on the current account of the balance of payments narrowed during the course of the year. The cumulative trade surplus for the first 9 months of 2017 amounted to R47.1 billion, compared to a deficit of R6.7 billion over the same period a year earlier.

Weak economic conditions at home resulted in imports declining by 1.2%, with machinery and equipment imports falling by 6%. Higher agricultural production due to improved climatic conditions in most of the country permitted a 29% drop in imports of agriculture products. On the other hand, the value of imports of refined petroleum product imports increased by 47%.

South Africa’s export performance has benefited from steadily improving demand conditions in external markets. A relatively competitive ZAR exchange rate and some recovery in commodity prices also supported overall exports, which increased by 5.4% (year-on-year) over the first 3 quarters of 2017. Whereas mining exports rose by 15%, external sales of motor vehicles declined by 8.6% despite the improving economic climate globally, including Europe.

Increasing optimism amongst global business and consumers are supporting higher levels of economic activity in advanced economies as well as in emerging markets. This underpins the International Monetary Fund’s projections of 3.6% and 3.7% growth in world GDP for 2017 and 2018, respectively. This is a significant improvement on the 3.2% expansion recorded in 2016.

This momentum is being assisted by accommodative monetary policy made possible by relatively muted inflationary pressures, especially but not exclusively in advanced economies. Although the normalisation of monetary policy is now under way in the United States (US), the pace of increase in policy rates going forward is expected to be quite gradual. Market expectations are positioned in favour of another 25 basis points’ increase in the Federal Funds rate in December 2017, but this should not destabilise global financial markets.

Since the tax cuts sougth by the Trump administration have yet to materialise, the associated stimulus has not been forthcoming. Nonetheless, the US economy is still expected to record growth of 2.2% and 2.3% in 2017 and 2018, respectively. This has positive implications for global trade dynamics and for South Africa’s export performance, for the US accounts for around 13% of global import volumes and 7.3% of South Africa’s exports.

The IMF is projecting output growth in the Eurozone at 2.1% for 2017, or 0.4 of a percentage point higher than its previous estimates. This is underpinned by lower political risks and improving aggregate demand, which is also being supported by accommodative monetary policy. The European Union (EU) accounts for 34% of global import volumes and 22.6% of South Africa’s export basket. However, the medium-term prognosis for the EU’s economy continues to be weighed downward, to some extent, by the potentially negative implications of Brexit as well as the public and private debt overhang in its peripheral member states.

Economic growth in China has been supported by sustained domestic policy stimulus and robust public investment, which has been significantly propelled by the rapid accumulation of municipal debt. Despite the debt sustainability risks and the Chinese authorities’ deleveraging efforts, economic growth is projected to come in at 6.8% for 2017, moderating to 6.5% next year. While restrictions on industrial production related to pollution control measures are expected to weigh on demand for commodities, the net effect of China’s robust economic expansion is still expected to favour South Africa’s trade performance.

The prognosis for growth in import demand in the world’s major markets, including the United States, Eurozone and China, is thus increasingly favourable. The rate of increase in import demand by advanced economies is projected by the IMF to accelerate from 2.7% in 2016 to an average of 3.9% over the period 2017 to 2020. Import growth in emerging markets, in turn, is forecast to rise from 2% last year to an average of 4.8% over 2017-2020. This provides a strong basis for sustained growth in global demand for South African primary commodities and manufactured exports going forward.

Improving economic sentiment globally and a still robust growth outlook for China in particular, which accounts for 50% of world demand for commodities, are expected to support global demand and the prices of industrial commodities. This should have positive implications for South Africa’s terms of trade over the short- to medium-term.

Continuing challenges in some of Sub-Saharan Africa’s economies, including several macroeconomic imbalances, as well as political and policy uncertainty, continue to hamper the region’s growth, which is expected to register 2.6% in 2017. Nevertheless, the region’s economic performance is expected to gather momentum in the years ahead. This will be on the back of more supportive domestic as well as external conditions, including increased foreign demand for and prices of key export commodities. The IMF expects the region to post 3.5% average annual growth over the period 2018 to 2020, which is well below the average of 5.6% achieved over the 15-year period to 2015. African economies accounted for 27.8% of South Africa’s exports last year.

Against this background of improving conditions in global (and regional) markets, numerous South African business enterprises are likely to focus increasingly on growing export sales, especially in light of yet subdued demand domestically.

Macroeconomic performance under more adverse conditions

The downside risks to South Africa’s economic outlook are high. It is therefore important to assess the potential repercussions of a worse performance. Accordingly, to supplement IDC’s baseline growth projections (Base Case), as outlined in previous sections of this report, an alternative scenario (Low Road) has been modelled on the basis of a set of assumptions.

In such a scenario, the assumptions regarding global growth were lowered to some extent; South Africa’s sovereign credit ratings were assumed to be downgraded to sub-investment levels across the board (including ratings for local currency denominated debt); confidence levels in the economy were assumed to decline further and to remain very low for an extended period of time, leading to a substantial further deterioration of domestic demand and investment conditions; and, due to the exclusion of South African bonds from major global indices, the ensuing large net capital outflows were assumed to lead to a sharp weakening of the ZAR, with adverse implications for inflation and interest rates.

Sectoral performances in a Low Road scenario

A deterioration of the domestic economic environment would reflect increasing strain in the various drivers of demand in one way or another, impacting on sectoral performances. However, in the Low Road scenario described above, all sectors of economic activity, without exception, would be expected to be affected adversely, albeit to differing degrees.

For example, reduced household spending on durable goods would have a negative impact on the local motor vehicles sector, mainly passenger cars, whilst lower investment expenditure would affect the demand for commercial vehicles, both medium and heavy. In addition, weaker global demand would affect the sector’s export performance. Reduced overall demand for motor vehicles would, in turn, have negative consequences for capital spending and employment levels in the sector itself.

Many supplying and supporting industries whose activities are closely linked to the motor vehicle sector would also be affected by lower production in this sector. For instance, demand for inputs such as fabricated metals, rubber, textiles, leather, electronics, glass, paint etc. would tend to fall. Hence, production in the respective supplying industries would have to be adjusted downward in line with weakening demand from the motor vehicle sector.

In a Low Road scenario, many firms across several sectors would face serious financial difficulties, which could compromise their sustainability and employment. Substantial job losses would possibly be recorded in labour-intensive sectors such as agriculture, forestry and fishing; textiles, clothing, leather and footwear, as well as in construction. Consequently, efforts to address the triple challenges of unemployment, poverty and inequality would suffer major setbacks in such a scenario.

African presidents draw strong consensus for inclusive growth at Africa 2017

Egypt looks to play a key role in driving regional integration in Africa

The Africa 2017 Forum wrapped up in the Egyptian resort city of Sharm el Sheikh with a clear message of intent from President Al Sisi to bring Africa closer together. The business and investment Forum, titled “Driving investment for inclusive growth”, was convened from 7th to 9th December 2017 to increase intra-African investments and cross-border collaboration.

Egyptian President Abdel Fattah El Sisi hosted five African heads of state and top business leaders from across the continent, including President of the Republic of Guinea Alpha Condé, President of the Republic of Rwanda, Paul Kagame, President of the Republic of Côte D’Ivoire Alassane Ouattara, and President of Somalia, Mohamed Abdullahi Mohamed.

The second edition of the Forum was another clear statement of intent from the Egyptian President, who, in his opening remarks, highlighted the strong bond Egypt has with the rest of the continent, saying it has always been a partner in African development. Putting Africa on the global map and paving the way for a prosperous future can be achieved by working harder to attract investment and collaborating more closely.

African presidents reached a strong consensus to focus on regional integration, inclusive growth and youth empowerment in order to achieve continued and sustained growth on the continent. The message from the Forum was that entrepreneurship and private sector would be the driving force to transform the continent.

The Heads of State stressed the need for self-reliance and domestic resource mobilisation. The event offered business owners with an opportunity to meet investors, engage with political leaders and policy makers and explore new ideas to improve business environment across the continent.

In two private roundtables held on the sidelines of the event that the President held alongside other African heads of state and business leaders from Egypt and the rest of the continent, it was said that Al Sisi would do whatever he could to bring the continent together, both politically and economically.

The Forum had a strong focus on increasing intra-Africa trade, inclusive growth and stronger China-Africa cooperation, especially in terms of technology transfer.

During the event, Egypt also has signed a deal with the World Bank for a US$1.15 billion development policy loan to fund the government’s plan to boost economy. It is the last one in a series of three annual loans provided from 2015 to 2017 totalling US$3.15 billion. The deal supports the Egyptian economic reform program aimed at creating jobs, ensuring energy security, strengthening public finances and enhancing business competitiveness.

The final day of the Forum focused on industrial revolution for Africa and China-Africa economic relations. It was agreed that China-Africa relationship was a win-win one. Ambassador Helen Hai, CEO, Made in Africa initiative, China, said China had a clear strategy for Africa but the continent needs to be in the driving seat when it comes to discussions about the China-Africa relationship.

She said the relationship was moving on from resources to partnerships with African countries but they needed to be clear about what they wanted from China. She said 85 million jobs were likely to be exported from China in the next few years as labour costs increased in that country and Africa was well placed to attract them. “If Africa can capture those jobs they can enjoy the same economic transformation China had.”

However, Carlos Lopes, Former Executive Secretary, UNECA, and Professor, Graduate School of Development Policy and Practice, University of Cape Town, Guinea-Bissau, said it was not inevitable that the jobs would migrate to Africa.

He warned that many jobs that could move out of China could be replaced by robots and automation, not Africans, and that other regions would also compete for the kind of jobs that Africa seeks – those at the lower end of the value chain. “A few African countries will make it, but not all,” he said.

“This huge move to get jobs can be elusive if we are not fast enough in creating opportunities. The window is closing very fast. We need to move quickly and do so in a way that is commensurate with the interests of China’s strategy.”

The three-day event, organised by Egypt’s Ministry of Investment and International Cooperation and the COMESA Regional Investment Agency (RIA), saw over 2,000 delegates from 75 countries attend the Forum. Minister of Investment and International Cooperation Sahar Nasr said that the forum’s sessions offered a chance to exchange expertise and showcase investment opportunities in Egypt and Africa.

The conference has put forward five recommendations:

  1. Pumping new investments in Africa to boost economic growth and development

  2. The establishment of joint projects, particularly in infrastructure, to support investment and trade among African states.

  3. Enhancing the role of the African private sector to increase investment rates in the continent.

  4. The execution of programs that encourage entrepreneurship and the adoption of programs that would increase youth’s participation in the African economy.

  5. Empowering women in all fields of economic activity, considering them as active members in the process of developing Africa and achieving economic stability.

The Forum was preceded by a Young Entrepreneurs Day which brought together over 200 young African entrepreneurs who were meeting investors to pitch their businesses over the two days of the Forum. Al Sisi highlighted the importance of African youth, saying they should be the cornerstone of development plans in the continent as governments strive to promote innovation and technology.

President of Rwanda, Paul Kagame, co-chair of the Young Entrepreneurs Day, reiterated the need for more urgency: “We cannot afford to waste opportunities because of unnecessary red tape and associated delays.” Citing the launch of the Tripartite Free Trade Area in Egypt in 2015, he added it was important that African leaders drive the institutional reform of the African Union in order to get the FTA fully operational.

Heba Salama, Director of the COMESA Regional Investment Agency, co-conveners of the Forum, in an emotional address reminded the young and the leaders in the room that if your dreams don’t scare you, they’re not big enough. This did not go unheeded by the entrepreneurs in the room many of whom had scaled up businesses that were ripe for take-off.