News Archive April 2018

Success of AfCFTA depends on creation of traded goods by private sector, says Afreximbank President

The success of the African Continental Free Trade Area (AfCFTA) will rest significantly on the ability of the continent’s private sector to generate or create the goods that will enter the trade, Dr. Benedict Oramah, President of the African Export-Import Bank (Afreximbank), said on Sunday.

Addressing Egyptian business leaders at a breakfast organized in Cairo, Dr. Oramah said that it would also depend on how the private sector in one market was able to identify and realize opportunities in other markets.

He highlighted the need for the private sector to take advantage of the opportunities that the AfCFTA would offer, arguing that Egypt, with its relatively advanced industrial base, could serve as a viable manufacturing hub and major source of technologies for most of the continent.

Its nearness to major markets in Africa also offered a tremendous opportunity for accessing the abundant raw materials and other intermediate goods from other African countries for further processing and export at competitive rates to other markets.

Afreximbank was working actively with the African Union Commission to ensure the realization of the goals of the AfCFTA, he said, telling the business leaders that the Bank could “assist you with information, market intelligence and financing, which will enable you take advantage of the opportunities that are emerging as a result of the AfCFTA”.

According to the President, the AfCFTA has the potential to increase Egypt’s trade with the rest of Africa by at least five folds.

He said that, over the last few years, Afreximbank had championed the growth of trade and investment flows between Egypt and the rest of Africa, providing about $5 billion in trade financing to Egyptian entities in the last three years and launching a $500-million Egypt-Africa Trade Promotion Programme in 2015, partly in response to the strategic move by the Egyptian Government to expand trade with Africa and promote regional integration under the Tripartite Free Trade Area.

The Bank also, recently, signed a $500-million financing package with the Export Development Bank of Egypt for financing Egyptian exports into Africa, he continued.

Afreximbank had made it possible for an Egyptian exporter of heavy infrastructure equipment to compete effectively with global players in African markets, enabling it to export equipment worth hundreds of millions of dollars to more than five African countries in the past three years, added Dr. Oramah. It had also supported Egyptian engineering firms to win construction contracts in Nigeria, Kenya, Togo and Angola, despite stiff competition from international players.

In his own remarks, Amr Kamel, Executive Vice President, Business Development and Corporate Banking, discussed the role of Afreximbank in promoting African trade and talked about the programmes and facilities which the Bank had put in place to support African businesses engaged in trading activities.

Kanayo Awani, Managing Director, Intra-African Trade Initiative, informed the business leaders about the Intra-African Trade Fair being organized by the Bank in Cairo in December 2018.

Ms. Awani, who announced that the trade fair would hold from 11 to 17 December, said that it was being organized in collaboration with the African Union, and being hosted by the Government of Egypt, to support the development of intra-African trade.

The business breakfast was organized by AfroDev, a Cairo-based consulting and training firm that works on promoting economic development and business links among African countries.

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African Corridor Management Alliance (ACMA) moves towards AfCFTA implementation

The African Trade Policy Centre (ATPC) hosted in collaboration with the Walvis Bay Group, the second African Corridor Management Alliance (ACMA) board meeting on the 11th of April in Addis Ababa, Ethiopia.

Johny Smith, the out-going interim Chair of ACMA expressed his appreciation to the ECA for the unwavering support offered to the ACMA interim Secretariat and ACMA’s role in fostering collaboration among Corridor Management Institutions (CMIs).

He noted that this was accomplished by sharing best practices on corridor development from various sub regions on the continent and combining resources “in order to find a common purpose on how to collectively grow our economies.”

He stated that transport corridors are vehicles for economic transformation and the CMIs enhance trade facilitation and infrastructure development through various platforms, debates, discussions and meetings to fast track corridor linkages, value chains, poverty reduction and development of regional economies.

“They therefore play a crucial role in stimulating the economic growth on the African continent,” he said, adding that with ACMA’s support, the CMIs must be formalized to allow a structured progression of development on the corridors.

For his part, David Luke, Coordinator of ATPC, said: “the meeting came at an opportune time when the African Union member states endorsed and signed the African Continental Free Trade Area (ACFTA). As a continental body, it is important for ACMA to ensure representation from all regions on the continent and look at long-term initiatives to build capacity and traction in linking African sub-regions through corridors”. 

Stressing the need to address one of ACMA’s challenge of ensuring long-term sustainability, he said, “Developing strategic partnerships is fundamental to driving our agenda of converting transport corridors into economic corridors, thereby enhancing value chains to boost intra-African trade”.

The need to build stronger strategic partnerships with Regional Economic Communities (RECs), regional and continental agencies and private sector players was noted as a priority for ACMA to focus on. The need to improve efficiency, performance monitoring along corridors and collective fine tuning of various performance indicators was discussed.

Harmonizing current efforts for data collection was agreed as a measuring tool for all CMIs. In this respect, the meeting also highlighted the need to support CMIs that were weakly developed, and agreed to explore a CMI link to the Sahel countries with Northern Africa.

The meeting also adopted the ACMA website and logo design, and stressed the need to undertake resource mobilization with the African Union (AU), New Partnership for Africa’s Development (NEPAD), AUC-African Business Council, and the African Development Bank (AfDB) among others who have expressed interest in supporting the work of ACMA.

The Walvis Bay Corridor Group will continue the role of Interim Secretariat for ACMA with Mr. Clive Smith, Acting Chief Executive Officer of the WBCG, taking over the role of Interim Chair of the ACMA Board.

The meeting was attended by the ACMA Secretariat, Walvis Bay Corridor Group, ECA staff, Arab Maghreb Union and prominent CMIs; Maputo Corridor Logistics Initiative, Dar es Salaam Corridor, Abidjan-Lagos Corridor and the Northern Corridor.

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tralac’s Daily News Selection

African CEOs: AfCFTA will boost business sentiment (New Telegraph)

Although the implementation of the CFTA agreement could be hindered by challenges and its benefits likely to take a long time to be felt, the deal will further boost business sentiment on the continent, African CEOs have said. The CEOs’ position is part of findings contained in the launch edition of the Business Barometer: Africa CEO Survey carried out by the Oxford Business Group.

Related AfCFTA commentaries: OBG’s Souhir Mzali: How effective will Africa’s Continental Free Trade Area be?; NANTS’ Ken Ukaoha: Eight lessons on imperatives of private sector-driven AfCFTA

More currencies to be introduced to the SADC regional payment system (SARDC)

The introduction of the United States dollar as a trading currency on the southern African regional payment system is expected to improve the settlement of transactions among banks within the region. According to the SADC Secretariat, the US dollar is expected to be added as a trading currency by October, while other currencies including SADC currencies will be considered as the payment system progresses. The current settlement currency for the SADC Integrated Regional Electronic Settlement System is the South African Rand. The system is housed at the South African Reserve Bank. According to the SARB, around 60% of cross-border transactions in SADC are denominated in US dollars, 35% in ZAR and the rest in other currencies. SADC Executive Secretariat, Dr Stergomena Lawrence Tax told the SADC Council of Ministers, held in late March in South Africa, that “to-date over a million transactions representing ZAR 4.09 trillion have been settled using the system.”

West African Economic and Monetary Union: common policies for member countries (IMF)

Policy recommendations: (i) Fiscal and monetary policy. Growth-friendly fiscal consolidation is essential to lower public debt, lift pressures on international reserves, and preserve external viability over the medium term. The regional central bank should stand ready to further tighten monetary policy in case pressures persist on the money market and on foreign exchange reserves. (ii) Financial sector. The short-term refinancing of sovereign bonds has constrained monetary policy in 2017 and it will be important to restore room for monetary policy to backstop financial stability. To this end, the authorities should use bank supervision and resolution tools to improve bank balance sheets and resolve fragile banks. (iii) Competitiveness and diversification. Structural policies aimed at improving competitiveness and fostering regional integration are critical to making the growth momentum sustainable and more inclusive. Selected Issues Paper, on the theme Growth acceleration in the West African Economic and Monetary Union (pdf):

Real GDP per capita in WAEMU countries has remained mostly stagnant while it has increased in other LIDCs (Figure 2). Income per capita in the WAEMU was close to that of the group of low and middle-income countries or low income developing countries or SSA in the early 1960s. However, since then, in terms of per capita income, WAEMU’s countries have experienced a widening gap relative to other LIDCs. While the share of the WAEMU income per capita in purchasing power parity was 108% of that of the group of low-income developing countries in the early1960s, it dropped to 65% in 2017. The average per capita income growth in WAEMU hides some heterogeneities across member-countries since the 1960s (Figure 2). A close look at WAEMU’s countries suggests that per capita income increased in Benin, Burkina Faso, and Mali, improved slightly in Guinea-Bissau and Senegal, and decreased in Côte d’Ivoire, Niger, and Togo.

Sector in focus: Cocoa

Fourth World Cocoa Conference: Berlin Declaration (ICCO)

On sustainable industry: Supply chain traceability should be recognised as a necessity for a sustainable value chain. A sector wide consensus on traceability should be developed. Efforts must be undertaken to ensure that this does not lead to additional costs and other burdens being transferred to the farmers without sufficient remuneration. Sector sustainability efforts should be transparent and publicly accountable in both efforts and impacts, including through appropriate monitoring and evaluation frameworks.

On sustainable consumption: Engage the sector in dynamic activities to stimulate processing in origin countries and healthy cocoa consumption in origin countries and emerging cocoa markets. Complying with SPS requirements is in the interest of consumers and producers alike. It is essential to ensure that the necessary assistance (technical, financial, or otherwise) is provided to enable producers to comply with these requirements.

On sustainable management: Producing country governments to coordinate national and regional cocoa policies, specifically being mindful of the impact this can have on cocoa prices. Producing country governments should strengthen National Cocoa Development Plans (NCDPs); including a strengthening of infrastructure, extension services, farm diversification, tenure security, etc, making efforts to ensure a transparent, inclusive and participatory approach in the development and implementation of the NCDPs. [Conference daily newsletters

World Cocoa Conference: Low prices still hurt African farmers (DW)

There’s a tense mood at this year’s meeting. “The future of the cocoa sector as a whole is at stake,” explains Jean-Marc Anga, director of the International Cocoa Organization. The reason is the low prices. Cocoa currently stands at around €2,200 ($2,680) per ton. In 2016 prices were even lower. For African farmers and governments, that is simply too little. “We need prices from which the farmers can make a living,” complains Souleymane Diarrassouba, trade minister of Ivory Coast. The country is the world’s largest cocoa exporter. The farmers, however, make less than €0.50 euro cents per day on average. African delegates warn of the consequences – the use of child labor, for instance, because the farmers cannot employ paid laborers. Environmental destruction is another consequence as farmers burn forests to expand their plantations. The resentment over the attitude of the main cocoa importer in Europe and the US is palpable at the meeting. The global prices are totally non-transparent, African delegates say. Some governments would like to see the creation of a global alliance based on the model of the Organization of the Oil Exporting Countries. In this way they could exert more influence on the global market.

US cocoa buyers to get a taste of Africa on record premium (Bloomberg)

Traders said this week that they’re preparing to ship cocoa from the new West African crop to the U.S. as New York futures trade at the highest premium to London in at least three decades. The unprecedented arbitrage window has opened as some funds prefer to bet on U.S. futures and as the London bourse is plagued with supplies from Cameroon that traders don’t want to buy. The price gap -- now at more than $200 a metric ton -- allows traders to make a huge profit even after accounting for the cost of shipping, importing and storing in American warehouses. There are also big premiums for contract months further out, which may encourage demand for beans from top producers Ivory Coast and Ghana when the next crop starts in October. “This has never happened before, this is extraordinary,” said Jonathan Parkman, co-head of agriculture at London-based brokerage Marex Spectron Group and who has been in the market more than 30 years. “In my entire career, I have never seen anything like this. We have an arbitrage a year forward which is not just a record, but it’s a record by a wide margin.”

Related cocoa sector updates: Cargill sees balanced cocoa market, growth in local processing; Decade-long efforts to improve cocoa sector falling way short, claims NGO; Reuters: Ethical cocoa schemes no panacea for struggling farmers

Gum Arabic: Growing demand means new opportunities for African producers (UNCTAD)

UNCTAD is now spotlighting the huge potential of revenue growth that lies in transforming the commodity into processed export goods in a special gum arabic-themed issue of its Commodities at a Glance series. “In a highly concentrated sector, UNCTAD proposes reforms from the micro to the national institution levels,” Mario Jales, an economist at UNCTAD’s Commodities Branch, said. “The objectives are to ensure that all stakeholders get a fair share of the total value generated along the gum-arabic global value chain.” Exports of unprocessed and semi-processed gum arabic have almost tripled in the last 25 years, from an annual average of 35,000 tonnes in 1992–1994 to an annual average of 102,000 tonnes in 2014–2016. In addition, exports of processed gum arabic more than tripled, from 17,000 tonnes to 53,000 tonnes in the same period. The three largest exporters of crude gum arabic are Sudan, which accounts for 66% of the total, Chad with 13%, and Nigeria with 8.5%, in 2014–2016. “But paradoxically, many African countries that export crude gum arabic at low prices re-import processed gum at substantially higher prices to meet local manufacturing demand,” Mr Jales said.

pdf The future of work in Africa: regional perspectives on the future of work (6.09 MB) (AfDB)

One of the impacts of 4IR is increased productivity. For African countries, this probably means increased productivity of the modern sector. Growth driven by automation may create jobs to support new business lines that may be enabled by the 4IR technologies. On the other hand, growth may stem from more production of the same things the firm has been producing through efficiencies enabled by 4IR, and may thus eliminate some jobs. For now, the evidence seems to point to elimination of jobs through automation. However, 4IR offers many opportunities to support transformation strategies that are job-creating growth pathways. This is especially true for agriculture and services, where applications are numerous. Nascent areas of local content provision can also create many opportunities, though much capacity will need to be built. Indeed, a major concern is the low level of preparedness of countries to take advantage of opportunities. Thus, while Africa will surely face the disruptions associated with 4IR, the region currently is ill-prepared to take advantage of the unique opportunities that will come with those challenges.

Yet there is no doubt that Africa has the potential to accelerate its development using 4IR platforms. In less than 15 years, the continent has grown to become the world’s second-largest mobile phone market, offering millions of families access to financial services, public health information, and the internet. Even more impressive is how young people have used this technology as a platform to unleash their entrepreneurial potential. This has led to the emergence of a growing pool of mostly young, successful entrepreneurs. With the right support, Africa’s success with mobile platforms can be replicated on increasingly powerful 4IR platforms and can drive transformation of African economies. This underscores the need to revisit job creation and growth strategies so that they can address the opportunities and challenges presented by 4IR. [Note: This extract from Chapter 2 in the new publication issued jointly by the African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank] [Duncan Green: The World Bank’s flagship report this year is on the future of work – here’s what the draft says (Oxfam)]

Nigeria: Apapa gridlock delays N85m solid minerals export (Punch)

The persistent difficulty in accessing the nation’s major seaport, Apapa, is taking its toll on movement of non-oil exports and may affect the earnings for this year, investigation by our correspondent has revealed. It was gathered that on the average, 15-container load of solid minerals, valued at $18,500 each is expected to be exported every month. But since the beginning of April, half of the containers have been in the queue along the road to Apapa, unable to access the port. The situation, according to the Chairman of the Export Group, Lagos Chamber of Commerce and Industry, Mr Bamidele Ayemibo, has affected loading of fresh cargoes because the trucks that are supposed to pick the cargoes are in the queue waiting to enter the port and discharge the cargoes. Agricultural and other fragile exports are said to be faring very badly as the length of time spent in the queue to get into the ports does a lot of damage to the freshness and market value of the products.

Nigeria: Stakeholders harp on standards to harness trade relations (Guardian)

Stakeholders in the manufacturing and importation sectors have been advised to ensure that their products meet the regulatory standards set up by the Standard Organisation of Nigeria. With the production and importation of substandard goods into the country that has caused more havoc, the Republic of China is collaborating with SON to ensure that products imported reached safety measures. This was the thrust of discussions a seminar organised by the Consulate-General of the People’s Republic of China and SON, in Lagos, yesterday.

Today’s Quick Links:

UNIDO unveils $50m programme to drive industrial devt in Nigeria

SA team’s absence deals Zimbabwe International Trade Fair a blow

Namibia Transport Infrastructure Improvement Project: GPN update (pdf)

Lobito Corridor Trade Facilitation Project: update

Can MTN become Africa’s biggest bank?

African Women Leadership Fund: update

Washington Post: A new ‘resource curse’ is fueling riots around the world

Responsible Mining Index: an interview with Dutch diplomat Prince Jaime de Bourbon de Parme

WBG, IMF to hold 2021 annual meetings in Marrakech

Judicial perspectives on competition law: executive summary of discussion at Session II, 16th Global Forum on Competition (7-8 December 2017)


tralac’s Daily News Selection

26 Apr 2018
African CEOs: AfCFTA will boost business sentiment (New Telegraph) Although the implementation of the CFTA agreement could be hindered by challenges and its benefits likely to take a long time to be felt, the deal will further...
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How effective will Africa’s Continental Free Trade Area be?

Last month, 44 African nations gathered in Kigali to sign an agreement establishing a framework for the world’s largest free trade area (FTA) since the creation of the World Trade Organisation in 1995 – but how ready is Africa for such a deal? And to what extent will the Continental FTA (AfCFTA) be able to enhance intra-regional trade?

The deal aims to establish a single continental market for goods and services, allowing the free movement of businesspeople and investments across Africa. According to the UN Economic Commission for Africa, the AfCFTA has the potential to see trade volumes rise by 50% over the next five years.

Its primary purpose is to promote intra-African trade and accelerate regional integration, but potential spillover effects include better market access, aligned trade regimes, job creation and increased investment. Importantly, the deal could lead the way for economic diversification and structural transformation as markets shift trade away from traditional commodities and move towards developing a robust and modern industrial base, boosting value added and creating new avenues for wealth generation.

Making this a reality, however, will not be an easy task, and the full benefits will take time to manifest.

Mixed views about the potential implications of the AfCFTA

Opinions about how successful the AfCFTA will be have mostly diverged between those who see it as a crucial move to fostering regional economic integration, and those who deem African markets unprepared for heightened levels of competition.

The deal certainly comes at an interesting time, as some of the world’s largest and most developed economies look to disengage from similar blocs and adopt a more protectionist stance.

But unlike those economies, Africa lacks many of the fundamentals that led to the expansion of those markets in the first place. The continent remains plagued by a number of tariff and non-tariff barriers, from poor infrastructure and transportation networks, to heavy bureaucracy and corruption.

As a result, trade within Africa has so far been a missed opportunity. Recent data from the African Union revealed intra-African trade accounted for a mere 16% of the continent’s total trade volumes, falling behind that of Asia and Latin America, where regional trade accounts for 51% and 19%, respectively.

It’s worth noting that this does not mean Africa has performed poorly. The continent has experienced significant economic expansion since the turn of the century, with sub-Saharan Africa’s economy growing from $300bn in 2000 to $1.6trn in 2017, according to the International Finance Corporation (IFC), driven primarily by the burgeoning tertiary sector.

As the continent’s middle- and high-income groups continue to expand, services are poised to develop further. Household spending is expected to rise in a range of areas, particularly in ICT, transportation, education and housing. Consequently, the IFC expects the region’s economy to exceed $2trn by 2020, paving the way for new trade opportunities.

However, some doubt the success of the deal, because as it currently stands, one the region’s largest economies is notably absent. While the deal was initially intended to comprise all of the continent’s nations – representing 1.2bn people and a combined GDP of over $3.5trn – Nigeria has opted to stay out of it for now.

Find out more about the Business Barometer: OBG in Africa CEO Survey.

© Oxford Business Group. Souhir Mzali is Africa Regional Editor at Oxford Business Group. This blog post was first published on the OBR website. Read the full article here.

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