News Archive July 2019

tralac’s Daily News Selection

SACU’s reforms in shreds (Southern Times)

Namibia’s Finance Minister Calle Schlettwein, who last week became the chairperson of the SACU Council of Minister, admitted to The Southern Times that there have been delays in implementing the work programme: ”Well yes, I think our ambitions were high than our achievements will show. The work programme that we have had agreed upon basically says that the customs union, which has been a revenue driven organisation most of the time has to re-emphasize real economic integration and shared productive capacity to improve trade within and amongst each other but also to improve SACU’s ability to trade with finished goods with other blocs. This is within the continent, and the world in general.”

Despite the challenges, Schlettwein believes that SACU has made great strides in gaining market access, the world over. SACU has free market access to the EU through the Economic Partnership Agreement. It also has a market access into the US through the AGOA agreement. “Additionally, we have got a market access into Southern America. We got a market access into the African continent through the SADC free trade protocol, which we are part of. That gives us an opportunity to trade globally. What is missing is enhancing productive capacity, enhancing output of finished goods of which we trade. I think that’s where SACU is in within a good opportunity to create cross border value chains within members so that we complement each other without out-competing each other to become export-driven.” [Lesotho finally explains failure to host SACU Summit]

Marek Hanusch: Why South African manufacturing is under pressure – and what to do about it (World Bank)

This dynamic has a few important implications for South Africa. For one, it helps explain why manufacturing exports barely respond to a depreciating real exchange rate: the real exchange rate captures the differential between prices for traded and non-traded goods. South Africa’s long-term depreciation reflects the relative drop in productivity of South Africa’s manufacturing sector. In this case, clearly, a depreciation will not result in higher exports. Our paper also shows that the dynamic disproportionately hurts the poor: the poor consume relatively more manufactured goods (notably food) than services, so if productivity gains are higher in services, the rich can afford more items in their consumption basket at the same price. The poor do not benefit from a similar gain in the goods they tend to buy. South Africa is cheap for the rich and expensive for the poor.

What does this mean for policy, and for the role of the World Bank? Clearly, the answer is that productivity in manufacturing needs to increase. Linking South African manufacturing more closely with global productivity trends requires a further opening of the economy to international trade—this would need to be done very carefully, however, as it can result in large-scale job-losses in the short-term, as South Africa painfully experienced in the 1990s. The World Bank is already working with the South African government to increase global competitiveness, attract foreign direct investment, and foster regional integration. [The author is Senior Economist in the World Bank’s Global Practice for Macroeconomics, Trade and Investment]

AfCFTA will boost Nigeria’s exports by 8% – Osinbajo (Vanguard)

Amidst controversy over the benefits of Nigeria’s signing of the AfCFTA, the Vice President of Nigeria, Professor Yemi Osinbajo, has said that the new trade environment will boost export by 8%. Osibanjo disclosed this at a conference organised by Financial Derivative Company in Lagos yesterday. Represented by Dr Jumoke Oduwole, Senior Special Adviser to the President on Industry, Trade and Investment, he stated: “In spite of the fact that Nigeria just only signed, AfCFTA in terms of readiness, we are not on ground zero. At $35.45bn, Nigeria’s manufacturing value-added, a measure of capacity to produce and export semi and fully finished goods, is about 7 times more than the current average of the top 20 African countries. The concerns raised by some Nigerian stakeholders of the risks of AfCFTA are not without merit. Even prior to the agreement, policies of this administration had identified many of these priorities in the area of competiveness pillar under the economic, recovery and growth plan directly speaks to how infrastructure challenges and how reforms required to deliver an enabling business environment or businesses operating in Nigeria to thrive. And this has been on since 2016.”

Related: Editorial commentary by Lagos-based newspaper, Vanguard: As the frenzy over the delay, the rigmarole and the eventual assent to the African Continental Free Trade Agreement, AfCTA, dies down, we draw attention to the task ahead given its implications to Nigeria’s economy:

Growth slows in Africa for Moroccan banks (Africa Report)

The activity of Morocco’s banks outside the kingdom’s borders is generally decelerating, according to a recent report by the Moroccan central bank. This is due to a slowdown in some countries and international regulations that modify the evaluation of financial results. Last year was a slower year for Moroccan banks in Africa. The three groups with a strong presence on the continent, Attijariwafa Bank followed by BMCE Bank Of Africa and the Banque Centrale Populaire (BCP), had more than Dh284bn ($29.6bn) in assets at the end of 2018, representing an increase of just 1.8% compared to the previous year. After an expansion period – from 2012 to 2015 – the appetite of Moroccan groups has decreased. In 2018, BCP was the only one to establish itself in new territories. It acquired Banque des Mascareignes, located in Mauritius, which itself has a banking subsidiary in Madagascar.

The World Bank has posted an extensive set of Background Notes on São Tomé and Príncipe growth and development policy issues. Profiled reports:

  1. Where has trade growth come from in São Tomé and Príncipe? The main findings of this note are as follows: Trade remains important for São Tomé and Príncipe, especially imports to satisfy local demand. Total exports have been increasing,both for goods and services. Goods exports, however, remain highly concentrated in cocoa exports to the EU market. Export trends for goods have tended to sustain this dependence, with very little expansion in the extensive margin, and thus with limited diversification of goods exports. This is despite relative comparative advantages in other agricultural products, such as coconuts, dried fruits, and seafood and preferential duty-free and quota-free access into the EU and other developed countries’ markets. Meanwhile, exports of services have increased rapidly, led by travel services. São Tomé and Príncipe exports more services than goods and it has become a net exporter of services. Creating strong (backward) linkages between the tourist industry and the rest of the economy could sustain growth in other industries that, in turn, can support export diversification.

  2. Is it sustainable to have a large current account deficit and a fixed exchange rate? Sao Tomé and Príncipe pegs its currency, the dobra, to the euro and has both persistent current account deficits and a persistent inflation differential with the Euro Area. In other countries, these characteristics have proved to be unsustainable over time, as rising debt and a worsening trade imbalance leads to the abandonment of the peg. This note examines whether this might be the case in STP, and finds that, despite some vulnerabilities, there does not appear to be an immediate threat to the peg, as the country’s current account deficits seem to be determined not by its trade balance but by its capital balance, which is largely sustained by inflows of aid and remittances. This background note has four sections: [Related Background Notes: Stock take on business environment reform in São Tomé and Príncipe; What is the potential and hindrances for the tourism sector?]

Botswana, Zambia to construct railway across Zambezi at Kazungula (Southern Times)

Zambia and Botswana have signed a $259m agreement to construct a 430-kilometre long railway to link the two countries across the Kazungula Bridge to bolster bilateral trade. The project, it is envisaged, will reduce transit time and transportation costs for both the people and goods traded and will boost trade among other member states in the region. A statement seen by The Southern Times, shows that Zambia Railways Ltd and Botswana Railways’ boards resolved during a meeting in Kasane to facilitate the construction of the lengthy line. The railway project dubbed “Mosetse-Kazungula-Livingstone” will be commissioned by June next year. The actual cost of the project will be determined after undertaking a feasibility study.

Tanzania joins Kenya, Uganda in fall back to old railway (The East African)

As Tanzania continues with the construction of the standard gauge railway, the government has also embarked on revamping the old metre gauge railway network built by colonialists over a century ago. Tanzania’s recent move mirrors Kenya’s and Uganda’s, both of whom have announced plans to revamp their old lines amid uncertainty over the progress of the joint SGR line on the Northern Corridor, due to lack of funding. Tanzania Railway Corporation’s managing director Masanja Kadogosa said the renovation would end years of neglect. Phase one of the programme, which started in early 2018 of the northern railway network from Tanga port to Moshi railway station, covering 353km, is complete. It was fully funded by the government at Tsh5.7 billion ($2.1m). A section of the line connects to Kenya at the junction of Kahe railway station with a branch passing through Taveta border and connecting to the Mombasa-Kampala line at Voi in Taveta hills in Kenya. The line has been out of commission for years from neglect and lack of funding, which resulted in the cargo trains suspending services since 1994. The Minister for Works, Transport and Communication, Isaack Kamwelwe, said the government has started the process of purchasing 22 locomotive engines for passenger wagons, 1,430 cargo wagons and 60 passenger wagons to be used for operations once the first section is complete by December this year.

Kurt Davis: Ethiopia could be the first African country to show China it has bargaining power (Africa Report)

The light railway system in Addis Ababa provides a direct view into the successful and tangible economic diplomacy of China across the African continent. This example of mass public transport is unique in sub-Saharan Africa, with the train and extensive track providing a manifestation of development and growth in this populous East African country.

China begins export of used cars to Nigeria, others (Vanguard)

The Chinese Ministry of Commerce has said that it has commenced the export of used cars to Africa, Asia and Europe, with Nigeria as one of the major destinations for the first batch of 300 cars. It said that the first batch of the 300 exported used cars, with a total value of $2.5m, comprised Land Rover, Toyota, Hyundai, Volkswagen, Trumpchi, King Long, Yutong, Zhongtong and WOHO brands and they are being taken to destinations that include the Lagos port (Nigeria), Sihanoukville Autonomous port (Cambodia), Rangoon Port (Myanmar) and Vorsino and Saint-Petersburg ports (Russia). A statement from China’s Ministry of Commerce said: “Although trade in new cars in China last year almost doubled the 13.82 million used cars figure, trading volume of used cars in developed countries, in comparison, was about two times that of new car sales. China is hoping to key into this yawning advantage lying beyond its borders. It is estimated that used car exports may fetch about 60 billion Yuan for China in export value if the market is fully opened up. It is also expected the trade would generate higher auto parts and maintenance service exports.”

Adam Minter: China will be the world’s used car salesman (Bloomberg)

Hints of that disruption are already emerging in another secondhand marketplace: used clothing. As China has evolved into the world’s largest maker and consumer of apparel, it has also become the world’s biggest disposer of apparel, with estimates ranging as high 26 million tons tossed annually. (The US threw out around 16 million tons of clothing in 2015, the last date for which data is available). Data on China’s used-clothing exports are thin, but in 2015 it officially exported $218.2m in used apparel, while the US shipped $575.5m. Within the industry, it’s widely acknowledged that China is the fastest-growing source of used clothes globally. Traders in West Africa claim that the recent surge in Chinese clothing imports has undercut the market for new and used clothes.

Afshin Molavi: Africa and the Middle East: keys to prosperity (Asia Times)

Here is where cities like Dubai and Abu Dhabi, and countries like Saudi Arabia, Turkey, Egypt and Morocco, come in. One of the defining features of our era today is the massive growth in South-South trade and investment. Countries across the “global South” are no longer waiting for the West to come to their rescue with aid or to invest in their markets; instead, they are increasingly also engaged with other emerging markets. Dubai has become something of a Miami for Africa, a major hub for African business, trade, finance and tourism, while UAE entities have become major investors across the continent. Companies like the Abu Dhabi-based Etisalat and Dubai-based Emirates have become household names across the continent, and are major trade and connectivity enablers; the Dubai-based ports operator, DP World, runs eight marine and inland terminals on the African continent. There are an extraordinary 12,000 African businesses registered with the Chamber of Commerce in Dubai. All of this is positive, but it is not one-way. [The author is senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies]

Today’s Quick Links:

CNBC interviews Visa’s Suzan Kereere on the role of digital payments in boosting intra-African trade

Akufo-Addo to US House Speaker: Ghana wants more progressive trade relations with US

Madagascar: IMF completes Fifth Review of Extended Credit Facility Arrangement

Flutterwave, Alipay partner on payments between Africa and China

Ethiopian coffee exporters eye young Chinese market

World Bank: The basics of food traceability

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tralac’s Daily News Selection

30 Jul 2019
SACU’s reforms in shreds (Southern Times) Namibia’s Finance Minister Calle Schlettwein, who last week became the chairperson of the SACU Council of Minister, admitted to The Southern Times that there have been delays in...
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tralac’s Daily News Selection

Diarise: The launch of UNCTAD’s Digital Economy Report 2019 (4 August)

Featured infographic, @martinslabber: “Good news, as South Africa’s total trade with Germany increases to R229bn over the 12 months to the end of May 2019. Our exports now above R100bn per annum for the first time in five years (and I imagine longer than that).”

Nigeria and the AfCFTA: selected updates

  1. Buhari establishes committee for implementation of AfCFTA. President Muhammadu Buhari has approved the establishment of a National Action Committee for the implementation of the AfCFTA Agreement, which he signed on behalf of Nigeria at the 12th Extraordinary Session of the AU Heads of State on 7 July in Niamey. The National Action Committee will be comprised of representatives of ministries and agencies with competent and relevant jurisdiction, and selected stakeholder groups from the private sector and the civil society to coordinate the implementation of all the AfCFTA readiness interventions. On the list of the President’s approval are: fast-tracking domestic work, for the implementation of AfCFTA readiness interventions to enhance productivity, competitiveness and facilitate trade which include policies to grow local capacity to produce and export goods and services; infrastructure projects, trade facilitation, ease of doing business and trade rules enforcement initiatives. And support, actively, Micro- Small and Medium Enterprises. The National Action Committee will upon inauguration, undertake a process of engagement with stakeholders to sensitize them on the opportunities and challenges of the AfCFTA, with preparedness plans for the Nigerian economy.

  2. Nigeria will lose out on AfCFTA if issues around ports, taxes remain unresolved – MAN DG. Segun Ajayi-Kadir is the director general of the Manufacturers Association of Nigeria. In this interview with Odinaka Anudu, Business Day’s industry editor, he speaks on why the association recently changed its earlier position on the AfCFTA and how the country should position itself to benefit from it. Extract: There is a moratorium for us to get our acts right, and it could be anything between five and 10 years. I believe strongly that if government is willing, and this president has told us that he is willing, we can mitigate those risks and manage the process robustly and become net gainers of the free trade. The only thing is that if we carry on as business as usual, the Nigerian economy will suffer badly.”

  3. Nigeria traders to Akufo-Addo: Protect our members after winning AfCFTA. The leadership of the National Association of Nigerian Traders (NANTS) has appealed to President Akufo-Addo to guide against what they describe as needless humiliation of Nigerians citizens sojourning in Ghana. NANTS notes that the hosting right given to Ghana is indeed a victory for the entire people of ECOWAS, contrary to happenings to their members, after Ghana’s successful hosting of the AfCFTA Secretariat. “We believe that in order to guide against needless humiliation of Ghana’s integrity herein secured by the hosting of AfCFTA Secretariat, your Government will need to weigh down on politicians as well as miscreants who masquerade as leaders and fan the embers of xenophobic attacks against citizens of other nationals trading in Ghana”, NANTS president, Ken Ukaoha, said.

  4. Standards Organisation of Nigeria set for full implementation. The Standards Organisation of Nigeria said it is prepared for the imminent implications of Nigeria’s signature to the AfCFTA, recently assented to by President Muhammadu Buhari. The organisation has been working in close collaboration with other Ministries, Agencies and Departments of government as well as development partners to develop the National Quality Infrastructure (NQI) to cater for the free movement of goods and services in Africa. These assertions were made by the Director General, Osita Aboloma, at a media interview on the AfCFTA in Abuja. He enumerated some of the NQI project already delivered by SON to include a National Metrology Institute nearing completion in Enugu, international accreditation of SON laboratories, its training and management systems certification services as well as ongoing automation of all services to stakeholders. These he said, are aimed at promoting the ease of doing business in and with Nigeria. Nigeria, through SON, holds the Chairmanship and Secretary of many of the Technical Harmonization Committees of ARSO, in addition to promoting the participation of many stakeholders in Nigeria in the standards harmonization process, the SON helmsman disclosed. Aboloma acknowledged the imminent challenge of combating the possible dumping of substandard and life-endangering products through the Seaports since the agency is not present to carry out quality verification of products on arrival.

Ghana:  pdf Mid-year fiscal policy review of the 2019 Budget Statement and Economic Policy (1.72 MB)  (GoG)

Selected extracts: In view of the various reforms and implementation of the government’s priority programmes we believe that Ghana is well positioned to take advantage of the Free Trade Area. As part of measures to ensure that Ghana derives maximum benefit from the AfCFTA, a National Strategy and Action Plan will be developed to further boost industrial production and exports. Government will also undertake the needed institutional, legal and regulatory reforms to facilitate the new trade regime.

The industry sector remained the best performing sector for the third year in a row, growing at 10.6% in 2018, despite the considerable slowdown of the petroleum and electricity sub-sectors. The petroleum sub-sector recorded a growth of just 3.6% in 2018 compared to 80.4% in 2017, while the electricity sub-sector grew by 5.5% in 2018 compared to 19.4% in 2017. The agriculture sector recorded a growth outturn of 4.8% in 2018 compared to a target of 6.8% and 2017 outturn of 6.1%. The less than expected performance of the agriculture sector was attributed to the slower growth of the cocoa sub-sector and the continuous decline of the fishing sub-sector. That notwithstanding, growth in crops other than cocoa posted an annual growth of 6.1% partly reflecting progress on government intervention in the sector including the Planting for Food and Jobs Programme which commenced in 2017. The services sector recorded a growth of 2.7% in 2018 against a target of 4.9% and the 2017 outturn of 3.3%. The services sector remained the dominant sector in 2018, increasing its share marginally from 46.0% of GDP in 2017 to 46.3%. The industry sector increased its share of GDP from 32.7% in 2017 to 34.0% in 2018, while the share of the agriculture sector declined from 21.2% in 2017 to 19.7% in 2018.

South Korea targets Africa infrastructure deals with Nairobi office (Business Daily)

The Korea Overseas Infrastructure and Urban Development Corporation (KIND) will use its new Nairobi office to push for a piece of the countries mega infrastructure deals currently dominated by China and use the country as a stepping stone to the rest of Africa. Kenya now becomes the Korean corporation’s fourth overseas office after Indonesia, Vietnam and Uzbekistan. KIND Executive Vice President Han Kyu Lim said the organisation which supports Korean companies for project planning, feasibility studies, project information and project bankability will soon be a major player in the continent through financed projects and Public-Private Partnership business models. “We are looking into four major deals this year and Kenya is both strategic and still full of business opportunities considering the infrastructure gaps that exists within the country and its neighbours. Our PPP models means we are part of the investment and this is going to be a game changer,” Mr Lim said. The Korean firm also signed a memorandum of understanding with the Eastern and Southern African Trade and Development Bank to facilitate financing of the infrastructure deals that will come from the region as its settles in Nairobi.

India: President Ram Nath Kovind, Defence minister Rajnath Singh to visit African nations this week (Mint)

India is stepping up the intensification of its outreach to Africa with two high-level visits to the resource-rich continent on Sunday. President Ram Nath Kovind will travel to three countries in West Africa, Benin, Gambia and Guinea, the highest-level visit from India ever to the three nations. The second will be a three-day visit starting on Sunday by defence minister Rajnath Singh to Mozambique, seen as a maritime neighbour of India across the Indian Ocean. Kovind’s week-long visit is seen as one that will lay the foundations of India’s engagement with a part of Africa that hasn’t figured very high on India’s agenda, partly because the countries in the region were part of Francophone Africa. [Related: India, Mozambique sign two MoUs to further strengthen defence co-operation]

Refining Uganda’s draft Urban Strategy (ECA)

The ECA and Uganda’s National Planning Authority are this week hosting a workshop to review the country’s draft Urban Strategy and its associated Ten-Year Perspective Plan. The workshop (1-2 August) will allow experts from the two institutions to collect feedback and inputs from government officials and other stakeholders before the finalization of the strategy. Cities account for close to 70% of Uganda’s non-agricultural GDP, with the informal sector being a significant source of employment. Thus, urbanization is both a driver of growth and facilitator of development in Uganda. Speaking ahead of the workshop, Ms Edlam Yemeru Abera, Chief of the ECA’s Urbanization and Development Section, said successful planning and managing the ongoing process of urbanization is a precondition for Uganda to become an upper middle-income country, as part of achieving its Vision 2040 agenda.

Judd Devermont: How Africa is leaving its rural mantle behind (Business Day)

Africa is rural. Or that’s what senior Western officials envision when they talk about the continent. America’s top diplomat for the region, Tibor Nagy, recently said that Africa is “by and large an agricultural society.” He isn’t alone: Germany’s recent Marshall Plan with Africa insists that “rural areas will determine Africa’s future.” This is wrong. Dangerously wrong. Africa is increasingly urbanised, and its future will be shaped not in sleepy remote spaces but in the dense, vibrant clusters of Lagos, Addis Ababa and Kinshasa. Big cities are becoming the engine of the continent, with huge implications for future energy needs, security, governance and public services - as well as rising risks if urban growth is poorly managed. How can the US and its allies change their approaches to face the challenge Africa’s burgeoning urban areas will pose?

Here are four good ways to start: First, US policy and investments should be shifted heavily toward major urban clusters, rather than to countries as a whole. USAID could programme more funds to tackle urban development, while the Millennium Challenge’s city programme in Zambia could be replicated with subnational compacts across the continent. [The author is the director of the Africa programme at the Centre for Strategic and International Studies]

PAP backs SADC Parliament bid (The Herald)

The Pan African Parliament has thrown its weight behind plans to establish a SADC Regional Parliament, which will, among other things, enact robust legislation to combat climate change in the wake of recurring natural disasters such as Cyclone Idai that swept across Southern Africa early this year. Speaking during the official opening ceremony of the 45th Plenary Assembly of the SADC Parliamentary Forum in Maputo last Monday, PAP vice president Chief Fortune Charumbira said the SADC Regional Parliament would bring Southern Africa into the league of other regional blocs, such as ECOWAS, which have such institutions. “Recent benchmarking visits, including one to the PAP, have keenly been followed by the PAP and be assured that the PAP is in support of a SADC Regional Parliament,” he said. “If the EALA and ECOWAS have parliaments, why not SADC? The Bureau of the PAP is privileged to interact with Heads of State and Government at various forums. I assure you that we will push your agenda until we realise the dream of a SADC Parliament. It will not, and never die a pipedream. Be assured. A transformed SADC PF will work better towards addressing climate change through legislation for the region.”

Speaker of SA’s Parliament, Ms Thandi Modise: “Our Parliament, like all Parliaments, is expected to be part of the global community. We influence and are influenced by others we interact with internationally. We need to take the South African participation at both the SADC-PF and the PAP seriously. We have the responsibility to ensure that the host agreement for PAP is concluded and honoured. We fail the continent if we do not ensure that the PAP delivers as excepted and that its administration is up to scratch. The SADC-PF is set to finally become the regional Parliament. This is important as we need to tighten regional cooperation in the same way as West Africa and East Africa have managed to do.”

East African leaders must anchor durable integration (The East African)

After months of despair during which East African regional integration increasingly appeared to be in peril, the past couple of weeks have given cause for optimism. President John Magufuli played back-to-back host to his Kenyan and Ugandan peers in what were described as private visits at Chato home in Geita President Yoweri Museveni, seen as being on a briefing mission, arrived in Chato straight from Luanda, where he had attended a meeting that tried to broker rapprochement between Kampala and Kigali, among other issues affecting the Great Lakes region. Beyond the camaraderie and the difficult situation between Uganda and Rwanda that refuses to go away, there has been some tangible movement. Tanzania this week opened the door for Ugandan sugar while Ugandan cane growers, facing potential ruin from a glut, struck a deal to export the surplus to struggling millers in western Kenya. [Note: Editorial comment in The East African]

 

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tralac’s Daily News Selection

29 Jul 2019
Diarise: The launch of UNCTAD’s Digital Economy Report 2019 (4 August) Featured infographic, @martinslabber : “Good news, as South Africa’s total trade with Germany increases to R229bn over the 12 months to the end of May 2019....
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tralac’s Daily News Selection

Is the AfCFTA practical?: a CNBC interview with Rudi Steinbach (World Bank Africa specialist)

Regional growth spillovers in Sub-Saharan Africa (IMF)

This paper attempts to shed light on this question and fill a gap in the literature that has largely overlooked integration and its implications within sub-Saharan Africa. Namely, we ask how has intraregional integration evolved in sub-Saharan Africa in recent decades and how has this affected growth spillovers on the continent? We focus on trade linkages, which are the strongest in the region. We first present a novel set of stylized facts that document that intraregional integration in sub-Saharan Africa is significantly greater than is widely believed and is indeed inline or greater than in developing and emerging economies in other regions. With this, we identify the countries in sub-Saharan Africa that are more likely to generate regional growth spillovers through trade, as well as the countries that are more likely to suffer from growth spillovers from their regional trading partners. We then estimate and quantify growth spillovers between trading partners in sub-Saharan Africa, in both the short run and in the long run. [IMF Working Paper:  pdf Regional Growth Spillovers in Sub-Saharan Africa (567 KB) ]

Extract: The value of the regional imports purchased by the top 10 regional importers (those listed in Figure 6) represents significant shares of the economies of the exporting countries, setting the stage for potentially large spillovers. For instance, South African imports from Swaziland, Lesotho, Zimbabwe and Mozambique represent between 4 and 11% of these economies’ GDP. Zimbabwe’s total demand for goods from Zambia, Malawi and Botswana constitutes between 1 and 4% of these countries’ GDP. Other countries also import in amounts that are non-negligible shares of their neighbors’ GDP, even though they do not constitute substantial shares of total sub-Saharan African intra-regional imports. This is the case of Nigeria, Mali, Ghana, and Burkina Faso, who’s imports amount to more than 1% of GDP of their sub-regional trading partners (see Figure 7). In these cases, any reduction in import demand, caused by an economic downturn in the importing country, could have significant consequences for GDP growth in their trading partners.

From the conclusion: Motivating our econometric analysis is the increasing trend towards regional integration in sub-Saharan Africa that we have documented, a novel result that is contrary to the common perception of countries in the continent as silos who are integrated with the rest of the world but not with each other. Indeed, trade integration in sub-Saharan Africa is now at comparable levels with developing and emerging market economies in other regions. In this vein, we have identified the countries that are potentially the main sources and destinations for growth spillovers via trade linkages, based on their intraregional trade networks. The rate at which these countries will continue to growth will therefore have implications for their major trading partners, as our econometric analysis implies. Supported by appropriate policies, the steady increase in trade integration experienced in sub-Saharan Africa has the potential to be further deepened. [The authors: Francisco Arizala, Matthieu Bellon, Margaux MacDonald; The IMF’s new report, Internal trade in Canada: case for liberalization]

Policy and regulatory issues with digital businesses (World Bank)

This policy paper lays out the key policy and regulatory issues around digital businesses. Competition laws need to be revisited to address the winner-take-all tendency of digital platform businesses. Tax systems should also be updated to close the loopholes available to digital platform businesses so that they pay their fair share to society. This paper also provides the first analysis of the World Bank’s Digital Business Indicators initiative, which collects information on the existence and quality of regulations in broadband connectivity, digital payment, data privacy and security, as well as logistics, in 21 pilot countries. Extracts (pdf): Concerns about anticompetition arise when digital platforms exhibit monopolistic tendencies. Alibaba’s Taobao.com Marketplace and Tmall now account for almost two-thirds of online shopping in China. Flipkart is the Indian e-commerce fortress with a domestic market share of 60%. Grab in Malaysia merged with Uber’s Southeast Asia business, aiming for a dominant position in the regional ride-hailing business. Although dominance alone may not warrant regulatory sanctions, emerging monopolistic behaviors are calling for government intervention. For example, JD.com, China’s second-largest online retailer, is accused of forcing online merchants to slash product prices in preparation for platform-wide promotions. Passengers in Singapore started complaining about higher fares after the Uber-Grab merger deal. The most common way of regulating cross-border transfers of personal data among the countries studied by the Digital Business Indicators project is the adequacy approach. Ten of the 21 countries studied allow cross-border data transfers subject to conditions that vary by country. The Personal Data Protection Agency in Armenia has approved a list of countries to which data transfers are allowed. In Tunisia, the existence of security measures to ensure data protection in the destination country is a key condition for approval of the data protection agency granting the transfer. [Note: The Sub-Saharan Africa countries covered in the Digital Business Indicators initiative are Burkina Faso, Kenya, Senegal, Tanzania]

Communications Authority of Kenya: The Digital Economy Blueprint. “The Blueprint is a framework to improve Kenya’s and Africa’s ability to leapfrog economic growth. The document is hinged on five pillars: Digital Government; Digital Business; Infrastructure; Innovation-Driven Entrepreneurship and Digital Skills and Values. The Blueprint also highlights the cross cutting issues that need to be considered for the success of a digital economy.”

Foreign private investment in Low-Income Countries: more important than you think (CGD)

In a world of stagnating public aid, limited fiscal space, and rising public debt in low-income countries, can they realistically expect to rely more on private finance from foreigners? What does the evidence suggest? Our new paper looks at recent cross-border private capital inflows to LICs. You might be surprised at what has happened since the global financial crisis. For individual LICs, external private capital is an important and growing source of finance (Figure 1). The global financial crisis has not had a lasting, dampening effect on private inflows to LICs - quite the opposite. The median ratio of inflows/GDP reached new highs - over 6% from 2011 on - with the exception of 2015 and 2016 when the downturn in global commodity prices and tightening US monetary policy pushed short-term capital inflows lower. Foreign direct investment - which makes up most of the inflows to LICs - has been stable and resilient throughout the post-crisis period. In contrast to higher median private capital inflows and tax revenue as a share of GDP, median foreign development aid has dropped by almost half as a share of GDP since 2006. We also see an interesting shift in the sources of FDI over a relatively short period of time. China more than doubled its stock of FDI in Africa between 2011 and 2016 (Figure 5) - and the amount is now closing in on that of large traditional direct investors like the US, UK, and France. Much attention has been paid to China’s role as a creditor to Africa; its role as a rapidly growing direct investor has received less attention. [The authors: Nancy Lee, Asad Sami]

Indonesia-Africa Infrastructure Dialogue (20-21 August, Bali): ministerial briefing

Minister Marsudi expressed her hope that the Indonesia-Africa Infrastructure Dialogue would be attended by around 700 participants from 53 African countries and Indonesia. Like the 2018 Indonesia-Africa Forum, this year’s IAID is also expected to produce a number of concrete business deals with Africa. Minister Marsudi also emphasized three strategies to enhance the cooperation with Africa. First, it is important to improve the trade infrastructure to reduce the trade rates with Africa, through a Preferential Trade Agreement with a number of African countries and its entities. Second, it is necessary to strengthen the African diplomacy infrastructure. Third, it is also vital to increase business activities between Africa and Indonesia, among others by organizing and utilizing the four main events at the IAID 2019 forum in Bali, namely the signing of business agreements, PTA discussions, panel discussions, and business exhibitions.

Kenya urges East African countries to implement road overloading law (Business Daily)

Kenya has challenged its East African neighbours to fully implement regional road overloading law passed in December 2015. The Kenya National Highway Authority (KeNHA) said seamlessly implementing the East Africa Community Vehicle Load Control Act, 2016, will protect roads from overloaded trucks. KeNHA Highway Planning and Design director Samuel Omer said Kenya is way ahead in implementing the law but some EAC member states have been reluctant to enforce it along the Regional Trunk Road Network. Mr Omer said Kenya has positioned itself to handle more transporters with the introduction of virtual weigh stations in its 10 weighbridges along the Northern Corridor. At the stations, trucks are weighed while in motion, meaning that little time is wasted in conducting inspection.

South Africa: Nedbank’s billion-rand debt financing deal with Kenya’s Centum (Moneyweb)

Looking to the rest of Africa to grow its property finance loan book, Nedbank Corporate and Investment Banking has provided financing of more than R1bn to Kenya’s Centum Real Estate, part of Centum Investment Company plc. Nedbank CIB’s property finance division – the largest commercial real estate financier in South Africa, reportedly with a 40% share of the market – said in a statement that the deal is linked to Centum’s Two Rivers mega-development in Nairobi. Gerhard Zeelie, Nedbank CIB’s Africa divisional executive for property finance, notes that the deal with Centum is part of Nedbank’s recent move to grow its property finance business northwards, beyond South Africa. “The focus is on Ghana, Nigeria, Uganda, Kenya, Tanzania, Mozambique and Zambia. We are busy working on a number of transactions with a pipeline in excess of $300m [R4.5bn] and are also keeping a keen eye on opportunities in the Francophone countries in West Africa.”

Sustainability and voluntary certification in the Rwandan coffee sector: Developing an action plan to address opportunities and challenges (IISD)

Rwanda’s coffee sector accounts for 24% of domestic agricultural production. About 400,000 small-scale farmers (representing 80% of the country’s farmers) produce an average of 267,000 to 420,000 bags per year, which accounts for 16,000 to 21,000 metric tons of Rwanda’s Arabica coffee annually, representing 0.2% of the world’s coffee exports and ranking 40th globally. Coffee destined for the export market accounts for 95% of Rwandan-produced coffee, while the remaining 5% is sold on the domestic market. Currently, at least 35% of coffee produced globally is certified or verified under voluntary standards. Over the years 2010–2016, certified/verified coffee production increased at a 24% compound annual growth rate. In the Rwandan coffee sector, specifically, there are at least 24 private standards addressing sustainability. In 2016, it was estimated that 32.3% of Rwandan coffee was standards-compliant. The needs assessments and workshop activities (February 2019) expanded on these challenges and provided related recommendations, which this document describes in detail (pdf). [Bitange Ndemo: The future of food regulation]

World Resources Report: Creating a Sustainable Food Future (World Bank)

With the world’s population expected to reach nearly 10 billion by 2050, a major new report shows the global food system must undergo urgent change to ensure there is adequate food for everyone without destroying the planet. The World Resources Report: Creating a Sustainable Food Future reveals that meeting this challenge will require closing three gaps: a 56% “food gap” between what was produced in 2010 and food that will be needed in 2050; a nearly 600 million-hectare “land gap” (an area nearly twice the size of India) between global agricultural land area in 2010 and expected agricultural expansion by 2050; and an 11-gigaton “greenhouse gas mitigation gap” between expected emissions from agriculture in 2050 and the level needed to meet the Paris Agreement. [Niger to stop importing rice by 2023]

Global Innovation Index 2019

The World Intellectual Property Organization has named Switzerland as the world’s most innovative country. Following Switzerland in the rankings are Sweden, the US, the Netherlands and the UK. India has risen most in the rankings since 2018, jumping five places to 52nd most innovative country. The annual Index, which has been published for the last 12 years by WIPO, and a number of partners, is designed to help policy makers better understand innovation activity, which WIPO describes as a “main driver of economic and social development”. Overall, this year’s Index finds that, despite the global economic slowdown, innovation is “blossoming”, particularly in Asia, but trade disruptions and protectionism are putting this at risk. It also notes that planning for innovation is critical for success. [Downloads, rankings here and here]

Today’s Quick Links:

Study shows armed groups’ strong capacity to move weapons across borders in Africa

Namibia-Zimbabwe Joint Commission of Cooperation: Namibia, Zimbabwe urged to join hands on investments

COMESA workshop: Africa urged to establish climate change early warning systems

Reuters special report: The wildcat goldminers doomed by their toxic trade

Trade and foreign aid: Will Boris Johnson bring an end to DfID?

Kenya: South Africa’s Game opens doors in Kisumu

World Bank blog: How mobile text reminders earned Madagascar a 32,900% ROI in collecting unpaid taxes

Regional workshop on international merchandise trade statistics: implementing IMTS 2010 concepts and definitions (24-28 June, Johannesburg)

Hanningtone Gaya: Kenya-Somalia maritime dispute quite unfortunate

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tralac’s Daily News Selection

26 Jul 2019
Is the AfCFTA practical?: a CNBC interview with Rudi Steinbach (World Bank Africa specialist) Regional growth spillovers in Sub-Saharan Africa (IMF) This paper attempts to shed light on this question and fill a gap in the...
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Regional growth spillovers in sub-Saharan Africa

After close to two decades of strong economic activity, growth in sub-Saharan Africa (SSA) decelerated markedly from 2015-16, to its lowest level in more than 20 years at 1.4 percent in 2016.

Nonetheless, this average mask substantial heterogeneity across the region. While the largest economies (i.e., Nigeria and South Africa) experienced negative or very low growth, a third of countries in the region continued to grow at 5 percent or more during the period. While these trends have been well documented, little is known about how they are interlinked.

This paper attempts to shed light on this question and fill a gap in the literature that has largely overlooked integration and its implications within sub-Saharan Africa. Namely, the authors ask how has intraregional integration evolved in sub-Saharan Africa in recent decades and how has this affected growth spillovers on the continent? They focus on trade linkages, which are the strongest in the region (Arizala et al., 2018). They first present a novel set of stylized facts that document that intraregional integration in sub-Saharan Africa is significantly greater than is widely believed and is indeed inline or greater than in developing and emerging economies in other regions. With this, they identify the countries in sub-Saharan Africa that are more likely to generate regional growth spillovers through trade, as well as the countries that are more likely to suffer from growth spillovers from their regional trading partners. We then estimate and quantify growth spillovers between trading partners in subSaharan Africa, in both the short run and in the long run.

The growth spillover literature is broadly based on the idea that domestic growth in any country is determined by three main drivers: domestic shocks, global shocks, and shocks to a foreign country or region(s) that are transmitted through various channels to the domestic country. While evidence on the comparative importance of each driver varies, it is widely accepted that growth co-moves across countries in the long term in countries who have large bi-lateral trade flows or coordinated fiscal policy, and especially in advanced economies. The presence of growth spillovers in the shorter-term within and between low income and emerging market countries has also been documented. And others bridge the gap between these literatures and show that shocks to long-term growth (trend growth) have larger cross-country spillovers than shocks to short-term growth (cyclical growth).

Yet, whether longer term growth spillovers exist within groups of low-income countries, particularly in sub-Saharan Africa, is less evident. Indeed, it could be argued, a priori, that given the nature of their trade relationships and the structure of their economies, these countries may experience growth spillovers differently than advanced or emerging countries. Structural barriers to regional spillovers in these countries may include their position in global value chains, the absence of widespread multinationals, their reliance on imports for most consumption goods and their historically limited regional integration.

Intraregional Trade Linkages are Steadily Gaining Strength

Though often thought of as silos that are linked to the rest of the world but not each other, sub-Saharan African economies have become much more intertwined in the last 35 years. This trend is particularly well illustrated by the increase in regional trade as a share of total trade, which represented 6 percent in 1980 before taking-off in the early 1990s, and eventually reaching 20 percent in 2016. This increase in regional trade was significant relative to the size of sub-Saharan African economies, and it was faster for small countries in the region, as reflected by the faster growth in the simple average level of trade integration.

Tighter regional trade integration, which coincided with a rise in global integration, is the result of both global developments and of a strengthening of institutional and macroeconomic conditions in the region. The rise in trade with the rest of the World was driven in part by a two-fold increase in the relative price of commodity exports over the period 1995-2013 and in part by a rise of two and a half times in volume of exported commodities (Allard and others, 2016). In addition to these supporting conditions, countries in sub-Saharan Africa substantially strengthened their macroeconomic policies and political and economic institutions over the last 20 years, and experienced abating of internal and external conflicts. These elements all contributed to improving the business environment, which lead to faster growth than in the rest of the World and thereby supported the deepening of regional trade (IMF, 2015). Furthermore, the establishment of regional trade agreements in different subregions also contributed to regional and bilateral reductions in tariffs which further supported regional trade integration (ODI, 2010).

The average level of regional trade integration in sub-Saharan Africa, and hence the potential for regional spillovers, is broadly in line with other developing and emerging market economies in other regions. Measured as a share of total exports, sub-Saharan Africa exhibits the highest share of intra-regional trade integration among emerging and developing economics, followed by Middle-East and North Africa and emerging and developing Asia. Relative to the size of the economy, sub-Saharan Africa is in the middle of the pack.

Many sub-Saharan Africa countries are highly integrated to other countries in the region, as measured by intra-regional trade, and integration is particularly strong within sub-regions. For example, in small and very open economies in the SACU and the Economic Community of West African States (ECOWAS), like Swaziland, Lesotho, Togo and The Gambia, intraregional exports represent more than 65 percent of these countries’ total global exports (IMF, 2012). In many countries intra-regional exports are also large relative to the size of the economy. This is the case for certain countries in the Southern African Development Community (SADC) (Zimbabwe, Botswana, Lesotho, and Namibia) where intra-regional exports represent about 20 percent of GDP, and some Western Africa Economic and Monetary Union (WAEMU) countries (Côte d’Ivoire, Guinea, Senegal), where they constitute close to 10 percent of GDP.

One can also see a concentration of integration from the opposite perspective: demand for regional exports is concentrated in very few countries. Ten sub-Saharan countries represent 65 percent of total regional demand for intra-regional exports, with South Africa, Botswana and Namibia accounting for the largest shares of total regional demand, and South Africa alone importing 15 percent of total regional exports. When countries trade significantly among themselves an economic deceleration in any one country has the potential to weaken demand for intra-regional exports and may constitute a source of wider negative spillovers.

The value of the regional imports purchased by the top 10 regional importers represents significant shares of the economies of the exporting countries, setting the stage for potentially large spillovers. For instance, South African imports from Swaziland, Lesotho, Zimbabwe and Mozambique represent between 4 and 11 percent of these economies’ GDP. Zimbabwe’s total demand for goods from Zambia, Malawi and Botswana constitutes between 1 and 4 percent of these countries’ GDP. Other countries also import in amounts that are non-negligible shares of their neighbors’ GDP, even though they do not constitute substantial shares of total sub-Saharan African intra-regional imports. This is the case of Nigeria, Mali, Ghana, and Burkina Faso, who’s imports amount to more than 1 percent of GDP of their sub-regional trading partners. In these cases, any reduction in import demand, caused by an economic downturn in the importing country, could have significant consequences for GDP growth in their trading partners.

The authors estimate gravity equations to illustrate and quantify the above stylized facts on regional integration (see Annex I). As expected, empirical estimates suggest that trade in the region is larger between closer countries (culturally and geographically) and that regional trade growth over the last four decades was supported by favorable macro-conditions (proxied by GDP per capita and population growth). The authors modify the standard equation to perform cross-region comparisons, and find that distance is a greater barrier to trade in sub-Saharan Africa, possibly because of the well-known infrastructure gaps in the region. Results also show that sub-regional trade agreements played a major role in strengthening bilateral trade in the region, in particular in the cases of the SADC and the EAC.

This Working Paper was prepared by Francisco Arizala, Matthieu Bellon and Margaux MacDonald.

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Regional growth spillovers in sub-Saharan Africa

26 Jul 2019
After close to two decades of strong economic activity, growth in sub-Saharan Africa (SSA) decelerated markedly from 2015-16, to its lowest level in more than 20 years at 1.4 percent in 2016. Nonetheless, this average mask...
1 ~ 1522