News Archive February 2018

Digitisation will overcome African trade barriers

Digitally integrating Africa’s higher risk trade transaction ecosystem into a global economy returning to growth offers Africa a unique opportunity to drive inclusive and sustainable development.

Standard Bank’s achievements in leveraging digitization to support the growth, efficiency and reach of African trade is built upon a unique understanding of the broader landscape of challenge and risk that defines the scale of the opportunity presented by trade to transform African growth.

With broad-based growth expected across 120 world economies this year, 2018 is currently presenting potential for a globally synchronized return to growth. Significantly this growth is, for the first time in decades, expected to occur across both mature economies such as the United States, Germany and Japan – as well as emerging economies such as Mexico, Brazil, India and China.

Africa is no exception. The African Development Bank (AfDB), for instance, is predicting the average growth rate across 54 African markets to reach 4.1% in 2018. This represents a 30-basis point increase over 2017’s estimated average growth rate.

Following a decade of low growth and poor commodity prices, optimism – and some green shoots – are emerging on the continent. From Nigeria to Mozambique, Ghana and Zambia, improved commodity prices are combining with new global growth opportunities to drive positive emerging market sentiment. At the same time political stability appears to be returning to Kenya and other leading African economies. Even growth-challenged South Africa is currently experiencing a bout of optimism as political events point to the prospect of improved policy certainty.

In short, if the risks of doing business in and with Africa can be managed, and global growth and some of the consumption variables turn favourable for the continent, Africa’s chances of benefitting from this generalised return to growth in 2018 are strong.

In a globally generalised growth environment Africa’s demand for trade finance is only likely to increase. This means that 2018 is likely to see Africa’s bank-intermediated trade finance deficit significantly exceed the AfDB’s estimation of a c. USD 100m shortfall. Given these numbers, using digitisation to increase the efficiency and reduce the cost of trade will be essential if Africa is to – quickly leverage the full potential of this historically unique instance of synchronised global growth.

In particular, access to trade finance remains a challenge for Africa’s small and medium-sized enterprises (SMEs).

Developing effective SME financing able to support the rapid expansion of intra-African trade remains critical to both growth as well as social and political stability.

Trade finance in Africa is currently heavily paper-based and siloed both within and between nations. For a while now African governments have been encouraging digitisation as a way of boosting domestic and global trade in markets that lack traditional domestic and cross-border trade infrastructure. For example, the tea industry in Kenya has adopted a platform that brings buyers and sellers together. Other similar digital platforms in Kenya, Ghana and Tanzania provide services to businesses in the bulk oil importation space.

What is immediately obvious is that Africa is being transformed by digitisation on three levels, namely; through the digitisation of the physical supply, the financial supply and also via the documents chain. Standard Bank has been most directly involved in digitising the financial supply chain for some time now. For example, the bank has worked with regulators supporting price discovery and risk management in the tea industry in Kenya. Standard Bank has also been working hard to digitise the documents chains, including proof of concept tests using blockchain to digitize bills of lading, for example.

Developing digital solutions that simplify and broaden access to trade finance amongst Africa’s SME segments in key markets is a strategic focus for the bank over the next 12 to 18 months.

Supporting trade in Africa also means working with clients to manage multiple categories of risk, including; counterparty credit risk, country risk, FX risk and operational risk. A key element in this is helping clients match responses to real rather than perceived risk – by partnering with FinTech firms operating trade contingent and asset risk distribution services, for example.

Standard Bank provides support and strategic guidance to regional organisations working to reduce trade barriers, speed up the clearing and release of goods, increase the predictability of landing costs, and support compliance – so as to minimise the disruption and costs of legitimate trade. Leading examples include Standard Bank’s work with the Tripartite Free Trade Area which is working to promote a Cape-to-Cairo regional economic block. Developing the digital platforms for organisations of this nature to accomplish their work on the continent is a key area in which banks can support the expansion of trade in and between African markets.

In short, through collaboration and partnership across Africa, Standard Bank is developing the digital tools to support the efficiency and effectiveness of intra-African trade. This process will reduce the costs and promote the expansion of trade while realising the benefits of trade within and amongst African countries – and between Africa and a world economy returning to growth.

Vinod Madhavan is Group Head of Trade for Standard Bank Group.

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Digitisation will overcome African trade barriers

28 Feb 2018
Digitally integrating Africa’s higher risk trade transaction ecosystem into a global economy returning to growth offers Africa a unique opportunity to drive inclusive and sustainable development. Standard Bank’s achievements in...
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Zambia Ministry of Finance: Statement on the economy and on government reforms

Delivered by Margaret Mwanakatwe, MP, Minister of Finance of the Republic of Zambia, in Lusaka on 21 February 2018

I wish to update the nation on the performance of the economy in 2017, the general outlook for 2018, and Government’s reaffirmation of the commitment to continue the implementation of policy and structural reforms aimed at sustaining the macroeconomic stability attained so far. This is in the light of recent observations and speculations on the state of the economy and on government’s engagement with various stakeholders on the economy, both local and foreign.

I take this opportunity to strongly re-affirm that the work on policy, structural, and legal reforms will continue to be implemented with greater vigor.

2017 Economic performance

GDP Growth: Driven largely by positive performance in manufacturing, mining and agriculture sectors, GDP growth continued on a positive trajectory. Despite being positive, preliminary data shows that growth is expected to be lower at 3.7% than the above 4% earlier projected. I will update the nation on growth once the final 2017 assessment is finalised.

Inflation: Inflation was contained within the band of 6-8 percent that was set at the beginning of the year. End-2017 inflation closed at 6.1%, the lowest in over thirty years.

Fiscal Performance: Preliminary numbers show that the fiscal deficit was below the budget target of 7.0% of GDP at 6.1%. This is consistent with the fiscal consolidation policies that the Government embarked on in the year under review.

Monetary policy, and banking and external sectors

Banking sector conditions continued to be sound and satisfactory. Liquidity conditions largely improved with the easing of monetary policy.

A slight reduction in lending rates was recorded at 24.6% as at end 2017 from 29.49 0% in 2016. Lending rates are still prohibitively high and posing challenges for enhanced business activities. The Government will work with the Bank of Zambia (BOZ) to institute targeted measures and engagements with the banking sector to meaningfully start to achieve lower rates in 2018.

The Kwacha remained relatively stable against the major convertible currencies. The Kwacha trade against the US Dollar in 2017 averaged K9.99 per US$. The current account deficit narrowed to US$760.3 million in 2017 from US$1.037 billion in 2016. International foreign reserves in 2017 were recorded at US$2.1 billion.

2018 Economic outlook

Economic performance in 2018 is expected to remain positive supported by a stable macroeconomic environment and implementation of various policy, structural and legal reforms under the Economic Stabilization and Growth Programme (ESGP). Growth is projected to remain positive while inflation is expected to be low and in single-digit while the fiscal deficit will be maintained within budgeted levels.

However, some of the potential risks for 2018 include relatively high lending rates and uncertain weather patterns that may impact negatively on electricity generation and agriculture activities.

Policy, legal and structural reforms

The envisaged positive economic outlook in 2018 and the medium term will be anchored on key reforms being undertaken by Government under the ESGP. These reforms will also support the implementation of the Seventh National Development Plan.

The need to sustain economic and fiscal governance, through maintenance of price stability for sustaining macroeconomic stability and fiscal fitness is paramount and necessary ingredient for growth, employment creation and poverty reduction. In this regard fiscal and monetary policy coordination will continue to be strengthened.

Government will step-up fiscal reforms to ensure fiscal consolidation is fully attained. Government will continue to enhance domestic revenue mobilization and expenditure restraint to attain a 3% of GDP fiscal deficit by the end of the medium term. Key to expenditure restraint is to concentrate on completing ongoing projects as outlined in the ESGP and emphasized by His Excellency the President of the Republic of Zambia Mr. Edgar Chagwa Lungu.

On debt management, the Government will continue to enhance debt management capacities and transparency. In this regard, the Government will prioritize the slowing down of debt accumulation and address perceptions around debt numbers by strengthening institutional and legal framework that will boost transparency in debt contraction. To this end, Government will be re-energising the engagement of stakeholders that are cardinal to improving debt dynamics and related economic fundamentals to support these reforms. Government is also working on improvement of Public financial management laws.

In addition, Government has developed a Medium-Term Debt Strategy while regular debt sustainability analysis will be undertaken.

Regarding the programme with the IMF, the nation may wish to note that we started engaging with the IMF on the basis of the ESGP approved by Cabinet in 2017. The ESGP is being strictly implemented with much of the milestones achieved. We are committed to continue the implementation at all levels of Government. In this regard, we will continue to engage the IMF on a similar basis with respect to debt management.

The government is developing a financing profile that is aimed at addressing our economic development aspirations without compromising debt sustainability, in an effort to bring the debt levels to moderate risk of debt distress over the medium term from high risk of debt distress. Once our new strategy has been completed, I will be engaging the IMF to obtain their concurrence.

I will now clarify the position of Cabinet and the Ministry on the restructuring of debt. This issue is unfortunately being misinterpreted that Government is anticipating challenges in servicing its debt. As announced in the 2018 budget address, the Government has commenced preparations to address the repayment of its Eurobonds through the operationalization of a sinking fund. Part of the process involves addressing liquidity risks at the time of paying/refinancing of the Eurobonds. As part of prudent risk management, the Government decided to reposition some flows falling due during the period of the Eurobonds, by engaging some creditors that may be open to pushing some flows this period forward. We are not contemplating any stock re-profiling but just the flows that fall due in the period of the repayments. China being a natural first creditor and accounting for 28% of our debt was a natural creditor to have a discussion with.

May I emphasize that Zambia does not intend to and will not default on its obligations. Only creditors that will be amenable to the proposal will be engaged and this will be on the basis of willingness. As part of the broader strategy, the Government has since put in place a team of officers from the Bank of Zambia, Ministry of Finance and Ministry of Justice to undertake work that will determine exactly what form of strategy will be adopted for the repayment/redemption of Eurobonds. The work will be completed by the end of the 1st quarter 2018.

Other major policy reforms that must continue are in agriculture and energy. In the agriculture sector Government is committed to resolving the teething challenges of the implementation of the e-voucher. Further, the e-voucher has given us an opportunity that will allow us to have a benchmark for graduating of farmers in future. In the energy sector, reforms in the both fuel and electricity sub-sectors, will continue in 2018 and beyond. These include full migration to cost reflective prices and sustenance thereafter, Government disengagement from importation of finished petroleum and comingled products. These will help anchor the fiscal and ensure efficiency in service delivery thereby enhancing economic performance.

Structural reforms

The implementation of measures to strengthen tax revenue will commence in earnest in 2018. The Treasury has developed a monitoring framework to ensure early finalization and implementation of the National land titling programme, installation of fiscal registers and monitoring system for excise duties in telecommunications.

Other structural reforms include improving business environment and ensuring an affordable and more sustainable pension system. Government will accelerate the development and implementation of legal and institutional framework that will give business greater chance of survival. This will be done through limiting regulatory and administrative burden for MSMEs as contained under the ESGP. In the pension area, a review of national pension and broader social security protection reforms will be carried out.

In order to reposition the State-Owned Enterprises, Government through IDC will continue work on ascertain long term sustainability of these assets. This is with the view to improve the contribution of state owned enterprises to the Treasury as well as country’s development.

The Government will strengthen the PPP function and law as a key measure to augment resource mobilization going forward through private sector engagement.

Legal reforms

Legal reforms form a cornerstone of effective service delivery for any country. In this regard reforms, such as those in the Public Financial Management will continue. These include the Zambia Public Procurement Act (ZPPA), Insurance Bill, Bank of Zambia Bill, Deposit Protection and Pensions and Social Security bill, planning and budgeting, loans and Guarantee (Authorization) Act.

Government will ensure the enactment of the new Public Financial Management Act during the current sitting of Parliament in 2018.

Procurement reforms will continue to control wastage and overpricing. The amendment of the law will be undertaken to introduce reference pricing, expert estimates for works and services and enhance preferential contracting for locals.

Information provision to the public

In order to improve information flows, the Ministry of Finance will be working out measures to periodically disseminate information on economic performance on a predictable basis and undertake appropriate stakeholder engagements.

Conclusion

As a democratically elected Government, we owe it first to the Zambian people to tell them the truth not just about the debt government contracts on their behalf, but also about the state of the economy in general. Transparency in the management of public finances will therefore be key for us to win both the public trust, confidence of international financiers trading in government instruments and investors.

May I take this opportunity to thank His Excellency the President of the Republic of Zambia, Mr. Edgar Chagwa Lungu for his trust through the mandate given to me to steer the Ministry of Finance’s work in delivering service to the people of Zambia and to build on the successes of my predecessor Honourable Felix Mutati, MP. I wish to commit myself to His Excellency’s call for me to deliver the mandate without letting down the people of Zambia. Fiscal sustainability for a prosperous Zambia will be my guiding principle as I take up this work. Together, we will succeed.

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Regional conference on Corruption and the challenge of economic transformation in southern Africa: Call for abstracts

The UN Economic Commission for Africa (ECA) Sub-regional Office for Southern Africa (SRO-SA), in collaboration with the African Union Southern Africa Regional Office (AU-SARO), are organising a regional conference on Corruption and the Challenge of Economic Transformation in Southern Africa from 4-6 July, 2018.

The conference will bring together academics, high-level government officials from member States, members of the private sector, CSOs, NGOs, anti-corruption institutions, research institutions, invited legislators and members of the judiciary, as well as regional and international organizations.

Not only timely but of imperative necessity, the conference resonates with the declaration of 2018 by the African Union as the year of anti-corruption on the theme; “Winning the Fight against Corruption: A Sustainable Path to Africa’s Transformation.”[1] Although Africa since the 1980s has crafted economic development blueprints like the Lagos Plan of Action and the Final Act of Lagos, the African Alternative Framework to the Structural Adjustment Programme (ALF-SAP), the NEPAD Document, and currently Agenda 2063, bolstered by national development plans in different African countries, the goal of economic transformation remains quite elusive. Issues of policy inconsistency, governance challenges, leadership inertia, and more importantly, corruption have stalled Africa’s efforts at radical economic transformation.

In its varied forms (state capture, grand and petty), there is mounting evidence labeling corruption as the root of the economic hemorrhage in Africa, engendering rent and unproductive behavior in the economy, capital flight, misallocation and misappropriation of scarce resources, missed investment opportunities, retarded growth, deteriorating social services, worsening inequalities and poor governance culture, all of which undermine the goal of economic transformation in Southern Africa and Africa, in general.[2]

However, there is renewed commitment towards the goal of economic transformation in Africa. Backed by the African Union’s Agenda 2063, economic transformation is being progressively adopted by African countries to direct the deployment of factors of production to more productive sectors (industrialization). In this realm, Southern African Development Community (SADC)’s Heads of State and Government endorsed the SADC Industrialization Strategy in 2015 – demonstrating their readiness to spearhead economic transformation in the sub-region.

Whereas economic transformation in Africa requires massive investment in human capital and infrastructure development, Africa’s investment has succumbed to corruption-induced illicit financial flows. Estimates by the AU and the ECA in the 2016 Report of the High Level Panel on Illicit Financial Flows from Africa[3] shows that, illicit financial flows in Africa over the past 50 years exceeds $1 trillion (an amount nearly matching the total ODA received by Africa over the same period). Additionally, approximately $50 billion is lost from Africa annually through illicit financial flows instead of augmenting domestic resource mobilization (DRM) and investment. On account of corruption, the average African growth rate of 5% per year since 2000 to around 2012, remains below the 2-digit growth rate which transformed Asian economies.

Noting the grievous welfare and economic effects of corruption, the United Nations enacted the United Nations Convention Against Corruption (UNCAC). At a regional level, AU has set in motion a number of initiatives meant to combat corruption (African Convention on Preventing and Combating Corruption (AUCPCC), AU Advisory Board on Corruption (AUBC) and the African Charter on Democracy, Elections and Governance (ACDEG)). At sub-regional level, SADC introduced the SADC Protocol against Corruption in 2001 as a way of preventing, identifying, penalizing and stamping out corruption. At national level, nearly all Southern African Member States have established bodies, institutions and legislatures meant to eliminate corruption. Despite the concerted effort, corruption in Southern Africa has continued unabatedly.

A 2017 study on the effectiveness of anti-corruption agencies in Southern Africa conducted by the Open Society Initiative for Southern Africa (OSISA)[4] noted that corruption in Southern Africa obstructs transparency in governments’ revenues and in mining contracts, allows illicit exploitation of minerals and militarization of mining, the smuggling of minerals, political patronage and clientelism, as well as political and electoral corruption. Transparency International’s Perception Index of 2016 shows that Southern African countries have dropped in their corruption rankings. Against this background, average growth for SADC has continued to fall in the recent past (2.3% in 2015 and 1.4% in 2016). Also, the manufacturing sector which is tipped to be the engine behind economic transformation in the SADC region has been sliding since 2010 (4% in 2010 and 2.6% in 2016). This evidence confirms that endemic corruption in Southern Africa is linked to the poor showing of the economy thus sweeping and radical measures to arrest corruption are highly necessary.

In this anti-corruption year and reflecting on the need to transform economies in Southern Africa, it is unavoidable to pose a number of questions; what forms and dimensions does corruption take in Southern Africa? What are the major drivers and agencies of corruption in the region? How has corruption affected the economy (domestic private investment, foreign direct investment, state revenue, capital formation, and aid flows)? How are illicit financial flows related to investment and economic growth in SADC? How is poverty related to corruption? What is the role of the legislature and judiciary in curbing corruption? Are current corruption measures capturing all the facets of corruption? What are the powers vested in anticorruption institutions and bodies in Southern Africa and how effective are they? What initiatives have been implemented by anti-corruption bodies and what results are there to share? Is there room to improve the effectiveness of anti-corruption institutions? How is the SADC protocol on corruption being implemented? Why is corruption still on the rampage in Southern Africa? What are the key policy interventions – at the national, regional and international levels – necessary in upscaling the fight against corruption and the role of key stakeholders in it? These and more questions will be addressed at the regional Conference (in the context of Southern Africa) through well formulated and methodologically-sound researches.

Sub-themes

The following sub-themes have been identified:

  1. Conceptualization and Theoretical Perspectives on corruption and economic transformation;

  2. Governance, Politics, and corruption and its implications;

  3. The Economics of Corruption (Corruption, investment, growth, state revenue, capital formation, market trust and confidence, poverty and inequality);

  4. State institutions (including state owned enterprises and the public service), the private sector (MNCs and SMEs), international actors and Corruption;

  5. Legal and institutional frameworks and state capacity in combating corruption (anticorruption institutions, horizontal accountability and audit institutions, and their practices);

  6. Culture, Values and corruption;

  7. Illicit financial flows: causes, trends, economic links and remedies;

  8. The role of regional bodies in fighting corruption;

  9. The future of fighting corruption; and

  10. Reversing the scourge of corruption in Southern Africa


Submission of Abstracts

Abstracts for the regional conference, not more than two pages maximum, should be submitted not later than 20th March 2018 to the email addresses below. Successful authors of abstracts will be notified by the end of March 2018.

Email: This email address is being protected from spambots. You need JavaScript enabled to view it. and CC: This email address is being protected from spambots. You need JavaScript enabled to view it.


[1] The theme was declared at the AU 30th Assembly of Heads of State and Government held in Addis Ababa, 22-29 January 2018. 

[2] ECA, 2016. African Governance Report IV: Measuring Corruption in Africa: The International Dimensions Matter. https://www.tralac.org/news/article/9386-african-governance-report-iv-rethinking-how-we-measure-corruption.html

[3] See Report of the High Level Panel on Illicit Financial Flows from Africa: Track it! Stop it! Get it!, available at https://www.tralac.org/news/article/6951-report-of-the-high-level-panel-on-illicit-financial-flows-from-africa.html

[4] OSISA, 2017. Effectiveness of Anti Corruption Agencies in Southern Africa: Angola, Botswana, DRC, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe. A review by Open Society Initiative for Southern Africa (OSISA).

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CFTA, migration & illicit financial flows discussed in Songwe’s meeting with African Ambassadors

Economic Commission for Africa’s Executive Secretary, Vera Songwe, on Tuesday met with African Ambassadors in Ethiopia for their 19th quarterly briefing which touched on a number of issues affecting the continent and the work of the ECA in supporting the continent’s quest for economic and structural transformation.

Ms. Songwe opened the meeting with an overview of the work done by the ECA in the past three months in implementing its work programme for the biennium 2016-2017.

She provided the Ambassadors with some important updates on the ongoing United Nations system-wide management reforms and other matters relevant to the work of the Secretariat.

The ECA Chief and the Ambassadors discussed the forthcoming historic signing of the Continental Free Trade Area in Kigali, Rwanda, in March and the work the ECA continues to do in supporting the African Union Commission and member States in the CFTA negotiations.

Member States, like Ghana, were concerned that it seemed like the private sector was not heavily involved as would be expected to make sure they benefited and entered trade deals that would be benefit the continent and its people once the CFTA was implemented.

Of particular concern to member States were also issues to do with migration and the need to change the narrative to reflect that African migration was more intra-regional than international, and statistics to record the movement of African people within the continent.

Ms. Songwe, supported by Social Development Policy Division Director, Thoko Ruzvidzo, told the Ambassadors about the High Level Panel on Migration (HLPM) which is chaired by former Liberian President Ellen Johnson Sirleaf.

The HLPM, which seeks to identify and articulate key issues that form the African migration story, challenges and priorities for the continent, is expected to produce a report in April following its work on migration in Africa.

The Ambassadors were also briefed about consultations on the Global Compact on Safe, Orderly and Regular Migration. They urged the ECA to work closely with its partners, the AUC and the African Development Bank (AfDB), to find ways through which Africa can stop illicit financial flows that are costing the continent an estimated $80 billion annually.

Ms. Songwe urged the Ambassadors to encourage their countries to sign-up to global tax transparency and other relevant legislation to stop the bleeding and to ensure that money and assets siphoned out of the continent illicitly can be brought back once tracked successfully.

“As much as we talk about illicit financial flows and we make a lot of fuss about it, many of us have not taken basic steps that are needed and required to ensure that the money doesn’t go out,” she said.

“If you don’t close your door and you wake up every day saying your goats have been taken, everybody will say but you didn’t close your door. We have a sort of pretend problem because we have not closed our doors. We should start by saying how many countries are still pending in signing this legislation that says close your doors,” Ms. Songwe said, adding much more has been lost from Africa since the Thabo Mbeki on Illicit Financial Flows in Africa was released in 2015.

Other subjects that came up during the briefing include the Economic Partnership Agreements (EPAs), which are trade and development agreements negotiated between the European Union and the African, Caribbean and Pacific (ACP) partners engaged in regional economic integration processes; Neighbourhood Policy Agreements; the Conference of Ministers which is expected to be held in April; and the UN Peace and Security Council.

The Ambassadors agreed the ECA should continue to support Africa on migration and the EPAs; ensure cohesiveness between Addis Ababa and New York, among other things.

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