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South Africa lobbies the US to extend Agoa
In August this year, US President Obama made a commitment to support the continuation of the African Growth and Opportunity Act (Agoa), a legislation that provides duty-free market access to the United States for qualifying sub-Saharan African countries.
Obama mentioned particularly South Africa, Nigeria and Angola, saying the US still does a lot of trade with these three countries. “We need more Africans, including women and small- medium-sized businesses, getting their goods to market,” he said, addressing delegates at the US-Africa Business Forum in Washington.
South Africa had welcomed Obama’s comments, with Ambassador to the United States, Ebrahim Rasool, saying the US is the biggest source of foreign investment to the country. Since then, South Africa gone all out to woo leaders of the US Senate and House of Representatives to include South Africa when Agoa is extended. Agoa expires in 2015.
Agoa allows more than 98% of South Africa’s exports to enter the US duty-free. Agoa was approved by the US Congress in May 2000 to assist Africa’s sub-Saharan economies and to improve economic relations between the US and the region. Agoa has seen total African exports to the US more than quadruple, and US exports to sub-Saharan Africa more than triple, since its inception.
South Africa-US trade
The US is the second largest destination for South African exports after China, accounting for 7% of exports. It is by far the largest destination for South Africa’s automotive manufacturing sector, making up 21% of all vehicle exports and 42% of car exports.
Obama’s commitment has given South Africa impetus to lobby for Agoa to be renews for the country. On 22 October, Business Day Live reported that Rasool met the American Chamber of Commerce to discuss the way forward.
“The chamber is very supportive of having Agoa renewed for South Africa, even though American companies don’t benefit from it directly. To ensure that it gets renewed … we want to show the US that South Africa is giving something back to the US that will benefit American business,” the chamber’s executive director Carol O’Brien had told the publication.
Doing business with South Africa
During the US visit, the chamber discussed the finer details of doing business with South Africa, which included the ownership element of black economic empowerment, local content requirements, labour laws and strikes, lack of policy and cohesiveness among different government departments, according to O’Brien.
South Africa is eligible for Agoa this year and also qualifies for textile and apparel benefits, according to the Office of the US Trade Representative. South Africa is the United States’ 39th largest supplier of goods imports in 2013. US goods imports from South Africa totalled $8.5-billion in 2013, a 2.2% decrease ($193- million) from 2012, but up 83% from 2003.
The five largest import categories in 2013 were: precious stones which includes platinum and diamonds ($2.6-billion); vehicles ($2.3-billion); iron and steel ($696- million); ores, slag, ash ($577-million); and machinery ($404-million).South Africa exported agricultural products worth $253 million in 2013, and leading categories included wine and beer ($69 million); fresh fruit ($59 million); and tree nuts ($42 million).
South African exports to the US
South Africa was the US’s 36th largest goods export market in 2013. US goods exports to South Africa in 2013 were $7.3-billion, down 3.4% ($259 million) from 2012, but up 159% from 2003.The top export categories for 2013 were: machinery ($1.6-billion), precious stones, mainly gold ($1.1-billion), vehicles ($1.0-billion), electrical machinery ($418-million), and optic and medical instruments ($362-million).
US exports of agricultural products to South Africa totalled $295-million in 2013 and the top categories included dairy products ($28-million), wheat ($25-million), planting seeds ($24-million), and poultry meat ($24-million).
Foreign direct investment
The latest data (2012) on US foreign direct investment (FDI) in South Africa was $5.5 billion, a 5.6% decrease from 2011. This FDI was led by the manufacturing and wholesale trade sectors. On the other hand, South Africa FDI in the United States totalled $1.5 billion in 2012, up 55.4% from 2011.
In 2012, the US and South Africa signed a Trade and Investment Framework Agreement (TIFA), which amends the United States-South Africa TIFA originally signed in 1999. The most recent meeting of the United States-South Africa Council on Trade and Investment was held in June 2012 in Washington D.C.
In addition, the US and the Southern Africa Customs Union (SACU), which includes South Africa, signed a Trade, Investment, and Development Cooperative Agreement (TIDCA) in 2008. The TIDCA establishes a forum for consultative discussions, cooperative work, and possible agreements on a wide range of trade issues, with a special focus on customs and trade facilitation, technical barriers to trade, sanitary and phytosanitary (SPS) measures, and trade and investment promotion.
South African Competitiveness Forum
Brand South Africa will host its second South African Competitiveness Forum in Johannesburg on 4 and 5 November 2014 under the theme “Active citizenship and its role in changing the South African brand reality”. Top minds from business, government, civil society and the academic world will come together to discuss our position in the world, and uncover ways to give South Africa a competitive edge on the global stage. Click here to find out more.
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EAC law to regulate trade coming in Dec
The East African Community law on competition will come into force in December promising a boost to cross-border trade. The EAC Competition Act 2006 seeks, among other things, to promote fair trade and ensure consumer welfare and to establish the EAC Competition Authority.
It grants consumers the legal right to take on unscrupulous traders who sell them substandard products and those who offer poor quality services.
The EAC Council of Ministers recently decided that the law should become operational in December bringing to an end an eight-year delay occasioned by intermittent haggling and backpedalling by partner states.
Trade specialists say that while some EAC partner states had enacted national competition Acts, these laws are deemed inadequate to deal with cross-border and multi-jurisdictional competition cases. They add that co-operation at the bilateral level may be enough to redress some non competitive and restrictive business practices, but a regional framework provides a more consistent and sustainable way of addressing these regional issues.
The East African Business Council executive director, Mr Andrew Luzze said that as the cross border trade grows, a regional competition law becomes crucial to check unfair trade practices.
Available statistics show that the EAC’s total intra-regional trade soared from $2 billion in 2005 to $5.8 billion in 2012, while the total intra-regional exports grew from $500 million to $3.2 billion in the period under review.
“Without regional competition law, monopolies or firms with a lion’s market share can easily abuse their market dominance by engaging in such activities as price fixing, sharing of markets and compromising quality to the detriment of consumers” Mr Luzze said.
According to him the EAC competition law will create a level playing ground for major and small companies, contrary to the current environment where major merchants tend to collude and fix prices.
EAC spokesperson, Richard Owora said that the Secretariat is working overtime to establish a regional competition authority to oversee the operationalisation of the law.
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New revenues can offset Africa’s rising income inequality
Combating rising income inequality in sub-Saharan Africa will require a pragmatic, multipronged approach to uncover new sources of revenue while also enabling critical investments in human capital, seminar participants agreed.
The “Fiscal Policy and Income Inequality in Sub-Saharan Africa” seminar explored practical areas where taxation and public investment can contribute to greater incomes for all. The October 10 seminar was held on the sidelines of the 2014 IMF-World Bank Annual Meetings in Washington, D.C.
Sub-Saharan Africa’s remarkable growth over the past two decades has not translated into shared prosperity. The subcontinent remains marred by inequality, despite being one of the world’s fastest growing regions.
To be sure, income inequality has caught the attention of policymakers for some time, and momentum is building to develop innovative strategies to fight it. Making growth inclusive was one of the central themes of the Africa Rising conference held in Mozambique in May 2014. It was also discussed in depth in the April 2014 edition of the Regional Economic Outlook. In addition, an IMF staff report published earlier in 2014 found that fiscal policy is the primary tool for governments to affect income distribution.
Focus first on boosting revenue
Governments should first ensure that they raise enough revenue, the seminar heard. “In sub-Saharan Africa, the revenue-to-GDP ratio is still relatively low compared to other parts of the world,” said Antoinette Sayeh, Director of the IMF’s African Department. “You cannot have the fiscal space to spend on things that will help reduce inequality if you do not have enough revenue,” she added.
This can be achieved by implementing progressive taxation, for example by substituting consumption-based taxes with levies on income or property. Additional revenue could come from the removal of across-the-board tax breaks such as generalized fuel subsidies, which tend to benefit the well-off far more than the poor. Where appropriate, these need to be replaced with targeted alternatives, such as conditional cash transfers, Sayeh said.
For Martin Ravallion, a professor at Georgetown University who has done extensive research on poverty and inequality, African governments should make smart investments in broader economic enablers that do not cause a conflict between promoting growth and fighting inequality. These include spending on health and education, as well as making the legal system accessible to all. “It’s important to get the priorities right for sub-Saharan Africa,” he said.
Shared strategy
According to Lucien Marie Noel Bembamba, Finance Minister of Burkina Faso, fighting inequality requires inclusive governance. “Governments need first to formulate a common vision, because when the strategy is shared, it is much easier to succeed,” he said. He recalled how, in 2008, a food crisis sparked riots in several cities across the country.
The authorities responded with a series of short-term safety nets. First, the government bought local staples and sold them at reduced prices to meet the immediate needs of the most vulnerable. This in turn led to an overall drop in food prices. In addition, targeted cash transfers were channeled through local entities to minimize waste and abuse.
Over time, a series of consultations were held to work out a long-term growth and resilience plan in five-year increments with a focus on sectors where Burkina Faso can claim a decisive advantage. Agriculture proved to be a vehicle of choice. “We found that agricultural development helps boost growth, provides food security, and generates income for the poor,” Bembamba said.
Targeted intervention
“Distribution through expenditure works,” said Henry Rotich, Kenya’s Secretary of the Treasury. To combat inequality, the government relies on a combination of revenue-boosting measures and targeted interventions. In addition to increased spending in health and education, Rotich said, the government changed the procurement code to set aside a percentage of public works contracts for women-owned enterprises and to promote youth employment.
Tapping into the technological innovation that has swept through the country, policymakers were able to reach more easily underserved populations. As a result, the number of people excluded from the formal banking system has declined. “Innovation has changed lives in Kenya,” Rotich said.
How the IMF helps
“Ultimately the outcome we’re pursuing is that the rising tide of African economic expansion does indeed lift living standards for ordinary families and communities across the continent,” said Antoinette Sayeh. “The IMF can help by ensuring that relevant models of success seen in other parts of the world are replicated in Africa.”
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Trade without trade-offs
Economic Partnership Agreements (EPAs) present an opportunity to strengthen and foster intra- and inter-regional integration, an opportunity which should not be wasted. The long-stigmatised EPAs process has the potential to become a catalyst of improved Africa-Africa and Africa-EU political and business relations.
Towards genuinely fair trade
Free and fair trade can be a powerhouse for job creation and growth if the conditions are right. Resources and know-how brought about by properly regulated and transparent foreign direct investment are crucial aspects for success. Trade and investment policy must create and sustain conditions to add value to the complex cross-border supply chains of the world we live in.
Globalisation has demonstrated its capability of lifting millions out of poverty by creating and upgrading jobs. If properly governed, it can improve standards of living and boost economic and social integration. But if left to the forces of the free market and crony capitalism it has proven time and again to be the cause of social and environmental degradation.
The European Parliament and its Committee on International Trade (INTA) are deeply committed to ensuring that trade is not only free, but fair; balancing values and shared interests. We are convinced that only a rules-based trade regime without distortions, red-tape, arbitrary import and export bans and discrimination of foreign businesses and investors is free. We also believe that trade policy must be used to uphold sustainable development, social inclusion and protection of human rights to be considered as fair. In this spirit, trade and investment policy must be used to contribute to advancing not only economic interests, but also civil, political, social, environmental and solidarity rights.
The European Parliament analyses every EPA and related legislation, putting it to the interests, values and development test. And of course it has the last word in ratifying any agreement. During the long-drawn-out EPAs negotiation process, the European Parliament re-focused the EU’s Generalised System of Preferences (GSP) on the countries most in need. We have extended the phasing out of the Market Access Regulation (MAR) 1528/2007, approved interim EPAs with the Pacific, Eastern and Southern African countries and Cameroon and scrutinised the implementation of the CARIFORUM EPA. Our work is far from being complete: the agreements with the Western and Southern African groupings will soon be on the agenda of the INTA committee and soon after debated by the entire European Parliament.
EPAs – a rocky road to success
The EU’s trade policy in general and EPAs in particular are the outcome of extensive discussions and consultations involving EU institutions, EU member states and stakeholders from within the EU and beyond. In spite of long delays, a breakthrough in key talks launched back in 2002 between the EU and African, Caribbean and Pacific (ACP) groupings of states on the conclusion of WTO-compatible and development-oriented regional EPAs was reached this summer.
Both the conclusion of regional EPAs with the Western African and Southern African groupings and the ratifications of further interim EPAs mark important milestones for EU-Africa trade relations. Even though flawed, the oftentimes bumpy and protracted EPA process can nevertheless be considered a success story for several reasons:
In terms of content we have coupled the principle of substantial trade liberalisation with an improved rules of origin and development component, adding a boost to regional cohesion for our partner countries. Up-front access to the EU’s market and asymmetrical and gradual market opening in partner regions characterise our approach.
We have also succeeded in terms of process. The years African and European negotiators dedicated to trade talks were not wasted. We have proven our political will when making necessary policy choices showing a remarkable degree of flexibility. We reached compromises when we were close to losing hope, and maybe most importantly, we have confirmed our commitment to trade-driven development. And we have remained flexible: the doors for expanding membership and deepening interim EPAs when the time is ripe remain wide open.
And this option will remain important. It is clear that bilateral and plurilateral trade agreements which replace unilateral preferences continue to be essential while uncertainty looms around the implementation of the WTO Trade Facilitation Agreement.
Furthermore, mobilisation of civil society and the interest of the academic community triggered substantial discussions and valuable analysis, helping to raise awareness and clear up concerns among our partners. While monitoring the EPA negotiating process, the European Parliament carefully listens to the voices of the civil society and business community from within and outside the EU and will continue doing so. Let me reiterate that the “non-execution clause” in EPAs is a red line for the European Parliament. The protection of human rights as well as social and environmental standards is deeply embedded in the EU’s trade relations and the European Parliament will continue to act as Europe´s democratic conscience when protecting these.
However painful for some partner countries, “the choices deadline” of the Market Access Regulation, which phases-out preference discrimination, gave an extra boost for policy-makers to think regionally. Nevertheless, it should be obvious that regionalisation and development cannot be forced upon any country or region. It is therefore encouraging to see a feeling of genuine ownership of the process emerging throughout different regional blocks. We must seek to transform the EPAs process into a catalyst for genuine positive change, facilitating qualitatively new Africa-Africa and Africa-EU political and business relations.
EPAs partners have undertaken WTO-compatible contractual obligations aiming to facilitate regional integration and trade-driven development. But efforts are required: painful structural reforms will be needed and economic operators will have to adapt to their new realities of increased competition.
Although trade is among preconditions for development, it is not sufficient by itself. Therefore, the EU must fulfil its duty to support countries that take responsibility to play the role of engines for long-term integration within their respective regions, willing to accept short-term pains for the sustained growth benefiting their businesses and societies. Effectively targeted aid for trade must be put at the service of trade mainstreaming. The EU must walk the extra mile and continue assisting developing countries to create regional value chains and eventually join the global production lines.
A process rather than a destination
Let’s not forget that however difficult the process of negotiating and ratifying agreements is, it is just the first step of the long process. Implementation is the key. The CARIFORUM EPA is a case in hand.
The challenges and opportunities for the different ACP groupings, including Africa’s regional economic communities, are clear. Many steps forward seem to be self-evident. One piece of the growth puzzle will be to minimise or eradicate barriers to trade amongst African countries. Without a doubt these are an impediment to development. To put it differently: it is obvious that total isolation from world trade and overreliance on raw-material exports are not a formula for sustainable growth and development.
It is up to our ACP partners to tap into their potential and use available instruments to trigger positive socio-economic transformation. In this process, the success of partnerships will very much depend on the credibility and effectiveness of regional bodies, the involvement of parliaments and civil society and the capacity of national authorities to deliver on promises made in the past.
The creation of a strong agricultural and industrial backbone is not possible without a functioning “hard” and “soft” infrastructure and services that glue economies together. As ample successful examples illustrate, fostering linkages within an economy, diversifying trade and investment flows and trading partners are key for capturing “value-added” elements. In times of scarce public finances, technical assistance targeted at trade mainstreaming, public-private partnerships and the role of emerging economies, it is ever more important.
Moving-up the value chains is impossible without legal certainty and sound regulatory environment, enabling transfer of technologies and skills that increase competitiveness and productivity. In this regard, the role of national and regional parliaments in shaping policies and holding governments accountable for the policies they implement and agreements they conclude is essential.
Ambitious targets and visions, like the one of creating an African Continental Free Trade Area by 2017 are important focal points. However, we must remain realistic and start with bringing down barriers between individual countries. Only genuine intra-regional integration and effective inter-regional coordination can make continental ambitions come true. After a critical mass within a regional block is attained and common institutions are strengthened, we may be able to witness further “enlargements” and “mergers” of regional economic communities, such as the envisaged Tripartite COMESA-EAC-SADC initiative.
EPAs ensuring “traditional” market access to the EU market by themselves are not solutions to Africa’s economic challenges. While EPAs were negotiated, a complicated network of interlinked intermediate inputs covered by a “spaghetti bowl” of free trade agreements has emerged. The EU has both concluded and embarked upon a wide range of trade talks, including the comprehensive Transatlantic Trade and Investment Partnership.
Nevertheless, in this context the EPA-process can still become a stepping stone for long-term economic reforms, preparing developing partners to use the potential offered by investment, services and trade-related rules. I am convinced that despite the challenges, Economic Partnership Agreements have the potential to play an important role for countries seeking sustainable economic growth and deepened integration. Furthermore, EPA partners should strive to adhere to environmental and labour standards, ensure sustainable use of resources and promote Corporate Social Responsibility. Although flexibility is important, double standards and discrimination among trade partners in this field have to be avoided. Monitoring in this area is indispensable. EPAs must now be put to the service of sustainable and sustained development.
Bernd Lange is a member of the European Parliament within the Progressive Alliance of Socialists and Democrats and Chair of the European Parliament Committee on International Trade (INTA).
This article was published in GREAT insights Volume 3, Issue 9 (October/November 2014).
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Sustaining Africa’s development by leveraging on climate change
By leveraging knowledge about climate change, through adopting improved agriculture technologies and using water and energy more effectively, Africa can accelerate its march towards sustainable development.
Policy and development practitioners say Africa is at a development cross roads and argue that the continent – increasingly an attractive destination for economic and agriculture investment – should use the window of opportunity presented by a low carbon economy to implement new knowledge and information to transform the challenges posed by climate change into opportunities for social development.
“Climate change is not just a challenge for Africa but also an opportunity to trigger innovation and the adoption of better technologies that save on water and energy,” Fatima Denton, director of the special initiatives division at the United Nations Economic Commission for Africa (ECA), told IPS.
“At the core of the climate change debate is human security and we can achieve sustainability by using climate data and information services and feeding that knowledge into critical sectors and influence policy making.”
Africa, while enjoying a mining-driven economic boom, should look at revitalising the agriculture sector to drive economic development and growth under the framework of the new sustainable development goals, she said.
Denton said that for too long the climate change narrative in Africa has been about agriculture as a vulnerable sector. But this sector, she said, can be a game changer for the African continent through sustainable agriculture. In Africa, agriculture employs more than 70 percent of population and remains a major contributor to the GDP of many countries.
Climate-smart agriculture is being touted as one of the mechanisms for climate-proofing Africa’s agriculture. CGIAR – a global consortium of 15 agricultural research centres – has dedicated approximately half its one-billion-dollar annual budget towards researching how to support smallholder farmers in sub-Saharan Africa through climate-smart agriculture.
When announcing the research funding in September, Frank Rijsberman, chief executive officer of CGIAR, said there can be no sustainable development or halting of the effects of climate change without paying attention to billions of farmers who feed the world and manage its natural resources.
Although Africa has vast land, energy, water and people, it was not able to feed itself despite having the capacity to.
The inability of Africa’s agriculture to match the needs of a growing population has left around 300 million people frequently hungry, forcing the continent to spend billions of dollars importing food annually.
Climate change is expected to disrupt current agricultural production systems, the environment, and the biodiversity in Africa unless there is a major cut in global greenhouse gas emissions.
The Intergovernmental Panel on Climate Change’s (IPCC) Fifth Assessment Report has warned that surpassing a 2°C temperature rise could worsen the existing food deficit challenge of the continent and thereby hinder most African countries from attaining the Millennium Development Goals (MGDs) of reducing extreme poverty and ending hunger by 2015.
Economic and population growth in Africa have fuelled agricultural imports faster than exports of agriculture products from Africa, says the 2013 Africa Wide Annual Trends and Outlook Report (ATOR) published by the African Union Commission.
The report shows that the agriculture deficit in Africa rose from less than one billion dollars to nearly 40 billion in the last five years, highlighting the need for major agriculture transformation to increase production.
Francis Johnson, a senior research fellow with the Swedish-based Stockholm Environment Institute, told IPS that renewable energy like wind, solar and hydro-power, are vital components in Africa’s sustainable development toolkit given its unmet energy demands and dependence on fossil fuels.
He added that developing countries should embrace clean energy as they cannot afford to follow the dirty emissions path of developed countries.
“In Africa competition is more about water than about land. And right decisions must be made. And when it comes to bio energy, it is the issue of choosing the right crops to cope with climate change,” Johnson said.
According to research by the Ethiopia-based Africa Climate Policy Centre, the cost of adaptation and putting Africa on a carbon-growth path is 31 billion dollars a year and could add 40 percent to the cost of meeting the MGDs.
Adaptation costs could in time be met from Africa’s own resources, argues Abdalla Hamdok, the deputy executive secretary of the ECA. He said that Africa could do this by saving money lost to illicit financial flows estimated to be more than 50 billion dollars a year.
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Thirst for a seamless bloc growing among political leaders, captains of industry
When the Treaty for the establishment of the East African Community was signed in November 1999 and thereafter enforced in July 2000, it heralded a new dawn for the people of this region after efforts to form a political federation collapsed in 1977.
Since then, the presidents of the five member states – Kenya, Uganda, Tanzania, Rwanda and Burundi – have gone into overdrive to ensure that the objectives of this union become a reality.
Such conviction was clear when Kenya’s President Uhuru Kenyatta and his Rwandan counterpart Paul Kagame took stock of the state of the EAC and expounded on their vision of the integration agenda during the just concluded 2014 East African Business Summit in Kigali, Rwanda.
As I moderated the panel session where the two presidents tackled the various issues, opportunities and challenges facing the region, the thirst for a seamless bloc was visible, coming from the political leaders as well as the hundreds of EAC captains of industry present.
One unique aspect that the EAC has expressly confirmed is the crucial role of the private sector and civil society. Article 7 of the EAC Treaty states that the principles that govern the objectives of the community shall be “people-centred and market-driven.”
By 2020, measured by the size of population, the East Africa region will be equivalent to the seventh largest country in the world. As such, the region must prepare its business and political environment for the coming challenges and ooportunities.
According to the World Bank’s latest Doing Business Report (2014), the EAC economies have an average ranking on the ease of doing business of 117 (among 185 economies globally). But there is great variation among them – from Rwanda at 52 in the global ranking to Burundi at 159.
This wide variation in business regulations is among the issues that the EAC needs to tackle to achieve the desired level of integration. The growth of the EAC economies is hinged on the removal of critical obstacles to entrepreneurial activity by all stakeholders in the region.
Apart from the need by the EAC economies to create an enabling environment for doing business, some other key elements need to be harmonised to ensure uniform multisectoral development:
The EAC member states have continued to lag behind in terms of human resource development and mobilisation. The absence of uniform labour laws has seen the region lose great minds as a result of brain drain to its competitors; restricting work permits to highly skilled workers, exorbitant permit fees and tedious documentation processes are among the factors stifling free movement of labour within the East African bloc.
Presidents Kagame and Kenyatta were categorical on the bitter pill citizens and governments in the region must swallow to achieve full integration. They termed as “primitive and unfounded” fears that opening up domestic job markets to regional job seekers would erode opportunities for nationals.
To quote President Kagame, “We do have unwarranted worries. We have experimented with this in Rwanda. When we opened our borders, removed restrictions on work permits and visas, everyone benefited… It is about leaders making decisions and involving the people.”
So a lot of work still needs to be done to make free movement of goods, capital and labour across all partner states a reality.
KCB, as a regional business with footprints in all the EAC countries and South Sudan, believes that the removal of trade barriers across all EAC countries will go a long way towards facilitating regional commerce and driving economic growth.
Labour market demands have changed over time; to facilitate free movement of human resources, harmonisation of education curricula, standards and assessment needs to be made a priority issue.
With agriculture being one of the region’s most important sectors, accounting for about 44 per cent of GDP in Burundi and Tanzania, 30 per cent in Uganda, 24 per cent in Kenya and 38 per cent in Rwanda, the EAC economies still face serious supply constraints on competitive agricultural production, ranging from poor road infrastructure to high energy costs.
Investment in value-addition for agricultural products as well as increasing labour productivity are thus another priority issue.
The extractive and manufacturing industries remain the economic bedrock for many developing countries, generating revenues, foreign-exchange earnings and surpluses to finance development. Most industrialised nations have witnessed exponential economic growth as a result of prudent use of minerals resources.
Flagship projects like Base Titanium’s Kwale Mineral Sands project, and the discovery of oil reserves by Tullow Oil and Africa Oil in Uganda and northern Kenya, signal the strong potential for growth in the sector with the possibility of creating thousands of jobs for local people and generating revenue.
It goes without saying that the ICT sector plays a significant role in the development agenda of most sectors. The sector will definitely be a key growth driver in coming years. According to McKinsey & Company estimates, the overall telecommunications sector in EAC has experienced explosive growth since 2003 with the telecommunications market in the region witnessing tremendous growth in the past decade, thanks to the expansion of the mobile telephony sub-sector.
Even though EAC member countries have committed to investing in ICT as an important part of their national growth plans, there are variations in government involvement within each country, hence the need for an integrated policy framework by the East African Community Secretariat.
Investment in innovation has changed the way East Africans do business and operate. With mobile money, Internet banking, agency banking and lifestyle products such as Biashar@Smart, which KCB has created in partnership with Safaricom, more people in East Africa now have access to financial and advisory services.
At KCB Group, we have contributed immensely to the development of the EAC given that we have a presence in all the EAC members states, employing more than 5,300 employees and extending loans worth over $2.5 billion in the past one year.
Joshua Oigara is the chief executive of KCB Bank Group.
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EAC States unveil plan to monitor food output
Three East African countries will now be able to monitor food situation simultaneously online in an effort to tackle shortages.
The launch of the East African Community (EAC) RegionSTAT database is the culmination of a meeting by the Heads of States of the five East African countries to come up with a food action plan that will see the effects of drought and hunger minimised.
The monitoring system is also an attempt to deal a body blow to the perennial problem of hunger.
During the launch of the database in Nairobi on Friday, East African Community PS, Mr John Konchellah, said the plan would ensure that all the five countries can ably handle food crisis together.
“Articles 105-110 of the EAC Treaty provide for the basic elements for the partner states to objectively cooperate for the achievement of rational agricultural production and food security,” he said during official launch of the database.
Mr Konchellah said food insecurity in the region was marked by inadequate trade in produce such as maize, which is a staple food, between countries where there were bumper harvests and those grappling with deficits.
Quite often, agricultural production has been affected by drought and climate change, making the food situation across the member states worse, he said.
COMMON POLICY
The PS said the aim of the five countries – Kenya, Uganda, Tanzania, Burundi and Rwanda – which have all often been hit by drought and famine, was to come up with a common agricultural policy, ensure there was regional food sufficiency, increased agricultural production and enhance trade within and outside the region.
He said Presidents from the region, in a previous EAC Heads of Sates summit had deliberated on formulation of a regional food action plan, for which timely and reliable agricultural information was considered a critical element in achievement of food security.
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Women in Rwanda make remarkable advances thanks to inclusive policies, UNCTAD study finds
Rwanda is a leading example of the successful integration of gender considerations in a country’s legislation and development framework, a new UNCTAD study has found, leading to remarkable advances in the status of Rwandan women and girls.
A new UNCTAD study, Who is Benefiting from Trade Liberalization in Rwanda? A Gender Perspective, attempts to assess the impacts of Rwanda’s trade policies on women and examines their role in the country’s economy.
The report found that Rwanda has acknowledged the importance of gender equality and women’s empowerment as tools for development and has made remarkable advances in furthering the status of women and girls - especially in education and political participation.
However, women’s ability to fully benefit from the country’s recent economic expansion remains impinged by factors such as gender-based cultural norms and women’s limited access to economic assets and resources.
By looking at the direct effects of exports on women’s employment structure as well as the effects of imports on women’s consumption patterns and government spending (“revenue effect”), UNCTAD’s analysis shows that men and women are not benefitting equally in the gains from trade.
The study finds that women are crowded into subsistence-oriented staple agriculture and tend to be segregated into less-dynamic, contracting sectors of the economy – by and large those that are informal and non-tradable. On the one hand this means they remain relatively insulated from the potential threats of trade, including food-price fluctuations, but on the other from its direct benefits.
The Rwanda case study underlines the need for policies that correlate more tightly the creation of jobs for women with the economic and trade performance of the country.
It points to issues that may negatively impact women if they are not taken into account, specifically:
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the intensification of export-oriented agricultural segments, particularly export cash crops such as tea and coffee, may mainly favour commercially-oriented farmers and crowd out small and marginal farmers – who tend to be women;
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the modernization of the domestic-oriented staple food production may hamper women’s ability to integrate efficiently into upgraded supply chains if constraints on them, in terms of their capabilities and access to productive resources, are not addressed.
However, Rwandan women may well benefit from the country’s trade and economic expansion, the study found. So that they might, the study explores a set of policy measures that the government of Rwanda may wish to consider in order to stimulate those sectors in which women are typically concentrated, as well as to increase women’s participation in expanding and commercially-oriented sectors of the economy.
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Tripartite Free Trade Area within sight
COMESA is in the final stages of preparations for the Tripartite Summit, which is scheduled to take place on 19-20 December 2014. The summit is expected to launch the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) thus heralding the culmination of intense negotiations that have been going on for the last six years.
The negotiations on the technical frameworks for the establishment of a mega free trade area will bring together the 26 Member States in one market.
The launch of a regional free trade area has remained a moving target since 2011 when the Summit adopted the tripartite agreement. According to the road map approved by the Tripartite Summit of Heads of State and Government in June 2011 in Johannesburg, South Africa, the Tripartite FTA should have been launched in June 2014. However, this deadline was missed owing to several factors key among them lack of funding after Trademark Southern Africa, which had been financially supporting these negotiations, closed down.
The other major sticking points that have slowed down the implementation of the TFTA were lack of agreements on substantive issues. These include negotiations on the rules of origin, trade remedies and dispute settlement, customs co-operation, documentation procedures and transit instruments.
In June this year COMESA assumed the chairmanship of the tripartite and with it came new energy to deliver the TFTA before the year ends. A flurry of meetings have since taken place between the Three Technical Working Groups with the objective of finalizing the outstanding work before the launch of Tripartite FTA Agreement on trade in goods.
The launch of the tripartite in December will no doubt bring tremendous benefits for the 600 million people in the tripartite region, through the removal of inconsistencies and costs in regional integration brought about by overlapping memberships especially in the area of trade policy and trade facilitation.
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Far greater effort needed to eradicate extreme poverty in world’s poorest nations – UN report
While the world’s 48 most vulnerable nations continue to make in-roads into poverty reduction, a far greater effort is needed if these countries are to eradicate extreme poverty by 2020, according to a new report launched at the United Nations on 23 October 2014.
The study conducted by the UN Office for Least Developed Countries, Landlocked Developing Countries, and Small Island Developing States (UN-OHRLLS) noted that since the adoption of the 2011 Istanbul Programme of Action on their on their sustainable development, least developed countries (LDCs) have seen incremental economic and social gains.
This is mainly because of an increase in public spending and stronger investment and activity in mining, construction, manufacturing and service sectors.
The report however cautions that despite the uptick, the LDCs continue to be among the most vulnerable to external shocks, such as economic crises, climate-related events, natural disasters and health-related threats.
The recent outbreak of Ebola, which is concentrated in 3 least developed countries (Guinea, Liberia and Sierra Leone), highlights the importance of comprehensively addressing structural vulnerability, requiring joint efforts by such vulnerable countries and their development partners.
It also underscores that deepening inequality threatens to exacerbate existing poverty with implications for political and social stability in these countries.
The study identifies four main determinants of the reduction of extreme poverty in the LDCs: gender inequality, institutional frameworks, infrastructure development and service delivery, and external factors.
The authors encourage leadership at the national level to implement policies that improve service delivery, address gender inequality and enable the poor to acquire investment assets that can improve their future income. Women and girls are especially in need of better access to economic opportunities through vocational and managerial skills training.
At a Headquarters press briefing today launching the report, Gyan Chandra Acharya, High Representative and head of UN-OHRLLS said the survey noted that since the 2011 Istanbul conference, progress of LDC’s on many of the goals and targets has been “mixed.”
While some countries had seen improvements in human and social development – in particular in education, health and youth development – others remained mired in extreme poverty. During the same period, official development assistance (ODA) from partner countries had “volatile.”
Given extreme vulnerability and high-levels of poverty within these countries, the UN was recommending that their needs remain of particular concern, he said, adding: “There is still a long way for these countries to go, even to catch up with other developing countries, not to mention [developed nations].”
Among its other highlights, the report argues, greater access to land, technology and finance are integral to boost growth in the LDCs and reduce inequality. “The effectiveness of all policies, in their formulation and implementation, critically depends on sound national institutions,” the report notes.
The study further recommends that governments ensure that efforts to increase domestic revenue are designed in ways that curb inequality. In order to increase public resource mobilization, fiscal policies need to promote public investment that is sustainable, it says.
While governments are encouraged to take the lead on national development, the report highlights the importance of development partners in supporting the LDCs. “Actions by LDC development partners on trade, official development assistance (ODA), and other forms of external finance, including foreign direct investment, and technology transfer and acquisition will determine progress in ending poverty to a large degree,” the report says.
It adds that the UN Secretary-General’s proposal for a technology bank and an international investment support centre for the LDCs could play an important role in upgrading productive capacity, and leveraging the growth and poverty eradication effects of technology transfer and foreign direct investment inflows.
The report concludes by calling for greater attention to be paid to eradicating extreme poverty in the LDCs within the on-going post-2015 development agenda, especially since most of these countries will miss most of the Millennium Development Goals (MDGs).
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Mauritius to put Trade Obstacles Alert Mechanism in place to ease business
Mauritius is planning to put in place a Trade Obstacles Alert Mechanism, to help businesses successfully overcome any obstacles they may face in the course of trading activities.
The Mechanism, which is to be operated using the existing Mauritius Trade Portal platform, is expected to be used by the corporate community to report obstacles which they may encounter during trade transactions.
The Trade Obstacles Alert Mechanism will have as its objectives the identification and elimination of trade barriers; enhancing transparency in decision-making processes; improving public-private sector dialogue and promoting inter-agency exchanges.
This advanced mechanism to ease business has been introduced to relevant stakeholders during a national workshop on 16th October 2014, at the Labourdonnais Waterfront Hotel in Port Louis.
The one-day workshop was organised by the Ministry of Foreign Affairs, Regional Integration and International Trade, in collaboration with the International Trade Centre.
It aims to bring together some 45 representatives from various ministries and institutions, as well as from the private sector.
This new project on the Trade Obstacle Alert Mechanism is an extension of the ITC project for Mauritius on Non-Tariff Barriers which was based on a survey of operators in 2012.
It involves, firstly, the setting up of a National Monitoring Committee to ensure its smooth functioning; and secondly, the setting up of a National Focal Point that would administer the online tool, receive and scrutinise the obstacles, channel them to the required government agency and follow up with them for resolution of reported obstacles.
Once reported, these barriers would be channeled to the relevant government agencies such as Customs, Ministry of Industry, Commerce and Consumer Protection, Ministry of Agro-Industry and Food Security and Ministry of Health and Quality of Life, among others, to find solutions, where required.
Last year, a state-of-the-art trade portal, which aimed to provide maximum information to the business community and to the public at large relating to import and export procedures in Mauritius, was launched on 6 August 2013.
This portal, called the Mauritius Trade Easy, also aims to provide information on opportunities that exist on the regional and international markets under the different agreements signed by the island economy.
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Nigeria cocoa processors face cost barriers to EU exports
Nigerian cocoa-processing companies say the cost of exporting their products to Europe has been inflated by 30 percent because of a stalemate in agreeing new trade terms with the European Union, reports Bloomberg.
Nigerian cocoa butter and cake exports are charged from 4.2 percent to 6.1 percent of freight-on-board values as taxes at EU ports without an agreement, Felix Oladunjoye, executive secretary of the Cocoa Processors Association of Nigeria said in a phone interview on Wednesday from Lagos. Nigeria is the only country in West Africa yet to sign the Economic Partnership Agreement protocol on free trade by the EU and African, Caribbean and Pacific countries, he said.
“It makes Nigeria-origin cocoa butter and cake less competitive in the international market,” Oladunjoye said. “It is a direct loss of revenue to the local processing industry.”
Apart from having to export at a cost disadvantage, many of them are burdened by unserviced debts estimated collectively at about N40 billion ($241 million), preventing new credit lines from banks, according to Akin Olusuyi, managing director of Ile-Oluji Cocoa Products Ltd. and vice president of Copan.
Eight processing companies located in the main cocoa-growing region in the South West have a combined installed capacity of 155,000 metric tons a year. Since 2011 they’ve run at 25 percent to 27 percent of installed capacity, according to Oladunjoye.
Nigeria is the world’s fourth-biggest producer of cocoa after Ivory Coast, AbujaGhana and Indonesia. Nigeria produced 350,000 tons of cocoa in the 2013-2014 season, according to the Agriculture Ministry. Cocoa fell 0.5 percent to $3,095 per ton as of 10:28 a.m. in London, according to data compiled by Bloomberg.
A government incentive plan to encourage exporters of agricultural items with subsidies ranging from 5 percent to 15 percent has been slow to come into effect, according to Oladunjoye. A backlog of applications going back to 2011 is still awaiting approval at the Finance Ministry, he said.
Three phone calls to numbers listed for Trade and Investment Ministry went unanswered. Finance ministry officials weren’t immediately available to comment, an official who answered its phone number said.
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Nigeria’s former President urges investors to focus on ‘inclusive growth’
Nigeria’s former president warned investors at an African business summit in London they should focus on promoting “inclusive growth” if they want to avoid triggering social strife.
Olusegun Obasanjo, who was president of Nigeria from 1999 to 2007 was speaking at the Global African Investment Summit to about 450 people who were considering the merits of 136 African investment projects worth $246 billion.
“Old practices are no longer acceptable,” said the former president, who chaired the two-day investment meeting. “Today, we expect our partners to place the social and economic development of our citizens at the forefront of their projects’ design.”
Mr. Obasanjo added: “Our projects offer some of the best rates of return anywhere in the world and in return we want the best technology, cheaper finance and a greater commitment to our social and economic welfare. We want you to source locally and to actively grow supply chains in our countries. Value addition is the key.”
The former president acknowledged there have been setbacks on the continent, such as the rise of the Boko Haram terror group in Nigeria and al-Shabaab in East Africa, as well as conflict in South Sudan and the Ebola outbreak in West Africa. However, he said the overall trajectory of the continent is “overwhelmingly positive.”
Former U.K. foreign minister William Hague told investors that private equity funds could help fill a funding gap that is holding back the development of infrastructure in Africa.
“The gap cannot be plugged by government expenditure alone,” Mr. Hague said. “Investors are still quite tentative. Changing perceptions takes time but an improved track record of political stability in many countries is helping.”
President John Mahama of Ghana described Africa as full of opportunities for investors, from infrastructure to energy, tourism, transport and hospitality. Taking a different tack than most leaders aiming to attract investment, he pointed out that his children have no amusement park to visit in his country’s capital, which could provide investors one opportunity.
“We have no light industry and manufacturing,” President Mahama added. “China and Asia are beginning to become high-cost areas because wages and salaries are going up. People who are interested in electronics and light manufacturing probably should be looking to Africa now to move their production there.”
Mr. Obasanjo summed up his sales pitch for the continent, noting the opportunities in Africa are “electrifying.”
However, Uganda is one country where opportunities for investors may literally not be electrifying. Ugandan president Yoweri Museveni surprised investors on Monday by saying he’d prefer them to stay away from building power plants in his country, where Blackstone Group built a hydroelectric dam, unless they can lower their electricity fees.
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Mistrust and bureaucracy hurting extractive sector growth – experts
Bureaucratic procedures and mistrust between governments and investors are frustrating the development of the regional extractive industry, including oil and gas, whose exploitation could turn around the region, experts have said.
The experts were discussing mechanisms on managing the region’s mineral wealth for broad-based and inclusive economic growth development in the East African Community (EAC) in Kigali last week.
“The recent discoveries of oil and gas will completely change the dynamics of doing businesses in the region.
“This calls for the enactment of enabling laws that will attract more investment in the extractives industry and also promote interests of local communities and ensure sustainable resource exploitation,” Mary Mukindia, a Nairobi-based oil and gas consultant, said.
She also called on regional governments to invest in capacity building of their people and local firms so that they can acquire requisite skills to contribute to the sector’s development and participate meaningfully.
Mukindia also urged EAC governments to invest in infrastructure and emphasise value addition along the value chain.
“Governments should understand that they are the biggest stakeholders and therefore work toward streamlining regulations that govern the sector. This includes reducing bureaucracy and drafting laws that will attract both local and foreign investors into the sector,” she said.
She added that laws which promote local content, openness, governance and ensure environmental protection are essential for the industry and to ensure the region benefits from its natural resources.
Predeep Paunrana, the chief executive officer, Athi River Mining, a Kenyan firm, called on the private sector to play a key role, especially in supporting skills development and financing to ensure inclusive growth.
Paunrana advised firms involved in the extractive industry to contribute to the development of local communities in which they operate to improve the living standards of the people.
“Investors need to understand that supporting the local communities and involving them in the industry, especially giving local firms tenders, is one of the best practices for any company,” Paunrana added.
Richard Omwela, the managing partner at Hamilton Harrison and Mathews, a consultancy firm, said there is need for governments to invest more in geological surveys for a better understanding of region’s mineral wealth.
“The EAC should focus on processing the minerals and oil within the region to create jobs for the people and ensure maximum gain from the natural resources,”
In the past few years, commercial oil and gas discoveries have been made in Uganda, Kenya and Tanzania. All the oil and gas discoveries are at different levels of development and the three countries project to have their first oil within two or so years.
Rwanda has resumed oil exploration activities after Canadian explorer licence was annulled following disagreements with the government on some issues.
The region is also rich in minerals like wolfram, gold, diamond, tin and cassetirite.
Rwanda mainly produces cassiterite, wolfram and coltan. The sector’s production increased by 14.2 per cent during the first half of 2014, according to the central bank data.
The country is also looking to exploit its methane gas in Lake Kivu to develop methane-to-power projects.
The methane in Lake Kivu is estimated to be sufficient to generate 700MW of electricity over a period of 55 years.
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BRICS countries share strategies against malnutrition ahead of ICN2
“Hidden hunger” featured prominently at a BRICS (Brazil, Russia, India, China, South Africa)-led public discussion on nutrition held at FAO on Wednesday, ahead of the Second International Conference on Nutrition (ICN2) scheduled to take place in November 2014.
Speakers from the BRICS countries emphasized that food insecurity and malnutrition can only be resolved with strong political commitment and adequate resourcing, ensuring that ministries and non-state actors work closely together in a coordinated manner.
The BRICS Dialogue on Nutrition, designed to raise awareness and stimulate debate around key nutrition issues, follows a few days after an agreement was reached by member states of FAO and the World Health Organization (WHO), on a Declaration and a Voluntary Framework for Action including 60 policy recommendations aimed at ensuring that people around the world have access to healthier diets. ICN2 is expected to endorse the framework in November.
In his opening remarks, Jomo Kwame Sundaram, FAO Assistant Director-General and Coordinator for Economic and Social Development, described “the three faces of malnutrition,” the persistent challenge of hunger, or inadequate dietary energy, “hidden hunger” or micronutrient (mineral and vitamin) deficiencies – and diet-related non-communicable diseases often associated with obesity.
Jomo stressed the need for political commitment at the highest level and “integrated, comprehensive approaches,” but to do so within a framework which is flexible enough to recognize different national priorities. ICN2 will emphasize the centrality of food systems, especially sustainable food production and consumption in ensuring access to healthy, balanced and diversified diets for all.
While there has been a substantial drop in the number of people suffering from hunger since 1992, it is estimated that at least two billion people suffer from micronutrient deficiencies of one form or another. Another half a billion are obese. Malnutrition not only impairs people from reaching their full human potential, but reduces global economic welfare by around five percent, according to estimates.
Speaking about the Brazilian Experience, Pedro Braga Arcuri, Liaison Officer for Multilateral, Regional & National Entities of the Brazilian Agricultural Research Corporation (EMBRAPA), and Edurdo Nilson, Technical Advisor for Nutrition at Brazil’s Ministry of Health, outlined the strategies at the heart of the country’s Zero Hunger project and its efforts to establish health and nutrition as a human right.
“The interdisciplinary approach has always been crucial to us,” said Nilson, who stressed the importance of combining a variety of policies across different sectors and building diverse partnerships to tackle hunger and malnutrition. “[Fome Zero] has gotten the attention of the world to look at these problems from an early age.”
Like Nilson, Oleg Kobiatov, Alternate Permanent Representative of the Russian Federation to the Rome-based UN Agencies, underlined that “social protection is an important element in achieving better nutrition for all.” Russia is implementing this through targeted domestic food aid programs, including to mothers and vulnerable populations, modeled on the successful interventions of other countries, he said.
Breaking silos
Speaking candidly about his country’s efforts to combat child malnutrition, Vimlendra Sharan, Indian Alternate Permanent Representative to the Rome-based UN Agencies, said that while he was proud of many of India’s recent economic and technological successes – including this year’s Mars mission – it contrasts with the sadness of having one of the highest malnutrition rates in the world.
To successfully combat malnutrition, he underlined the importance of government programmes that break through silos and create horizontal, multisectoral linkages.
“Ideally the world will not need an ICN3, but if we do, I hope it is only to celebrate the eradication of hunger and malnutrition,” he added.
Xia Jingyuan, Permanent Representative of the People’s Republic of China to the Rome-based UN Agencies, underlined China’s goal of remaining self-reliant in the production of staple foods, while reaffirming the country’s commitment to sharing technologies with developing countries. “Food for all is a basic human right,” he said, “and it is the basis for all human rights.”
Lynn Moeng-Mahlangu, Chief Director of Health Promotion, Nutrition and Oral Health at the South African Department of Health, outlined the country’s current challenges in fighting increased stunting and obesity, and stressed the importance of creating systems and policies that galvanize support from all government departments, including agriculture and health. “If we don’t put systems in place, we cannot address these issues,” said Moeng-Mahlangu.
The ICN2 Declaration and Framework for Action acknowledge that malnutrition in all its forms, including under nourishment, micronutrient deficiencies, overweight and obesity, not only affects people’s health and wellbeing, but also poses a burden in the form of negative social and economic consequences for individuals, families, communities and States.
The final ICN2 Dialogue will be led by the group of G77 countries on 30 October. The first Dialogue was led by Nancy Stetson, U.S. Special Representative for Global Food Security.
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Addressing losses and waste across the food chain should be a critical pillar of national agricultural strategies
“Enhanced coordination among stakeholders is key to implementing the Malabo Declaration on halving Post Harvest Losses by 2025,” says AUC Head of Rural Economy at the Department of Rural Economy and Agriculture, Dr. Janet Edeme.
She was speaking at the opening of the African Union Commission (AUC) and Food Agriculture Organization high-level consultative meeting on Post Harvest Losses (PHL), organized to develop specific actions for addressing PHL within the framework of the Implementation Strategy and Roadmap for the Malabo Declaration on Agriculture and also to propose specific actions for implementing the recommendations on PHL reduction in the Comprehensive Africa Agriculture Development Programme (CAADP) National and Regional Agriculture and Food Security Investment Plans.
Dr. Edeme reiterated the AUC’s commitment to prioritize the formulation of concrete and deliverable actions to combat PHL in response to the Malabo declaration.
She noted that the AU Heads of State and Government in their 2014 Malabo Declaration on Agriculture committed to reducing PHL as they realized it was very critical for achieving the continental agricultural transformation goals and targets.
“This commitment by Africa’s leaders means we have the political mandate to come up with specific and concrete actions to halve the current level of PHL by 2025. We are also coming up with a roadmap to implement the Malabo declaration; so this is a chance to feed into the roadmap,” Dr. Edeme said.
FAO Representative for South Africa, Dr. Tobias Takavarasha said, “In Africa, food losses are significantly higher than those considered acceptable or unavoidable for efficiently functioning food supply chains.’’
He said total quantitative food loss in Africa, south of the Sahara had been estimated at 100 million metric tones per year. He however emphasized that food loss and waste is a global phenomenon not restricted to the African continent hence the need for a global coordinated support.
Dr. Takavarasha quoted the FAO report, ‘Global food losses and food waste’, which states that roughly one-third of the food produced in the world for human consumption every year, approximately 1.3 billion tones gets lost or wasted. Food losses and waste amount to roughly USD 680 billion in industrialized countries and USD 310 billion in developing countries.
He said that the need, therefore for interventions to reduce PHL become even more imperative when the environmental impact of losses, loss in nutritional value and market opportunities, as well as the possible adverse effects on the health of populations consuming poor quality products, are taken into consideration.
The two day event has brought together, African Government representatives, Regional Economic Communities, Civil Society, Private Sector, Farmer organizations and development partners.
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Productive capacity, diversification needed to boost growth in Landlocked Developing Countries
There are structural hurdles to unlocking growth in landlocked developing countries (LLDCs), a high-level meeting on investment in LLDCs heard on the final day of UNCTAD’s World Investment Forum at the Palais des Nations, Geneva, on 16 October.
LLDC ministers called for stronger efforts to develop productive capacity and drive diversification through foreign direct investment (FDI), to set these countries on a growth path.
In contrast with the recovery in global FDI in 2013, FDI inflows to LLDCs declined for the second year running. The flows to these countries fell by 11 percent in 2013, compared with the 9 percent rise in world flows. While the $30 billion in FDI flows to LLDCs in 2013 represented only 2 percent of global flows, with three-quarters of these investments going to six mineral-exporting LLDCs, FDI remains relatively more important for this group of economies than for developing countries as a whole. The potential role of FDI is therefore significant.
“Given the importance of FDI to this group of economies, more efforts should be made to increase and diversify foreign investments, and to maximize their impact on sustainable development outcomes,” UNCTAD Secretary-General Mukhisa Kituyi said.
Because economies of landlocked countries face persistent challenges linked to the negative impact that their geographical location has on trade opportunities, the Almaty Programme of Action has focused on actions needed for the further development of trade-related infrastructure and improvements in customs and in trade facilitation.
Gyan Chandra Acharya, United Nations Undersecretary-General and High Representative for least developed countries, LLDCs and small island developing states, said that collaboration between LLDCs and transit countries, and the development of productive capacities and economic diversification, was important in boosting the economies of LLDCs.
Ministers at the meeting echoed this, with Lao’s Vice Minister of Planning and Economy, Bounthavy Sisouphanthong, noting that “growth in the non-resource industrial and services sectors is an important basis for diversification of the Lao economy over the long-term.”
Enhanced regional cooperation was also mentioned as an important way to realize development through cross-border infrastructure projects and regional clusters of firms. This will require measures to reduce barriers and facilitate cross-border investments, mechanisms for joint investment promotion and a series of policy measures to accommodate regional business development projects, including policies to harmonize or mutually recognize regulatory standards.
Rigoberto Gauto Vielman, Minister for Economic Relations and Integration of Paraguay, underlined the importance of regional integration. He also said that countries should support their domestic enterprises because a vibrant local business community gives a strong signal to foreign companies.
Louise Kantrow, Permanent Representative of the International Chamber of Commerce to the United Nations, added that more government and multilateral action should be taken to increase the size of the formal economy.
Ahmed Abtew Asfaw, Ethiopia’s Minister of Industry, said: “Geography matters in FDI and trade, but it’s equally important not to overstate this factor. New technologies are changing the impact of traditional barriers.”
The important role of technology was also underlined by Anat Bar-Gera, Chairman of YooMee Africa, an international telecommunications and Internet company. She said that the introduction of broadband in LLDCs can bring innovation, advance learning and spur enterprise development.
Private sector representatives agreed that investment would play a key role in developing these productive capacities, which can help to advance targets in the proposed sustainable development goals.
A report on the meeting will be made available to the participants of the Second UN Conference on Landlocked Developing Countries, which starts in Vienna on 3 November 2014.
UNCTAD also launched the third edition of its Investment Guide to the Silk Road at the meeting. The publication outlines the investment climate and opportunities in Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, as well as four western provinces of China.
Temir Sariev, the Minister of Economy of Kyrgyzstan, welcomed UNCTAD’s publication, saying that the guide will contribute to the rebirth of the Silk Road.
Wang Shouwen, China’s Assistant Minister of Commerce, congratulated UNCTAD on the publication and said that previous editions of the guide had been very helpful to the Chinese government and private sector.
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Global African Investment Summit ends with record number of bankable projects in Africa presented to international investors
The Global African Investment Summit (TGAIS) closed on Tuesday after two days of high level panels and roundtables to explore investment opportunities in Africa. Over 500 of the city’s pension funds, sovereign wealth funds, private equity firms, asset managers, bankers, corporate, professional services firms and project developers convened at the Savoy Hotel to review the continent’s most bankable projects in power, transport infrastructure, agribusiness, natural resources and tourism.
The final day of TGAIS included panels and round tables on private equity, capital markets, transport and ICT infrastructure and financing’s Africa’s power sector.
Highlighting the growing interest of family offices in the region, Lady Lynn Forester de Rothschild, Chief Executive at E.L. Rothschild LLC, argued that Africa has “the opportunity to leapfrog all the technology legacies of the west,” making it an attractive destination for this typically conservative asset class that has previously had very limited involvement on the continent.
The Summit also highlighted the linear relationship between GDP growth and power. Bryant (ABC) Orjiako, Chairman of Seplat, recommended “Africa should start thinking about itself and develop the industry and infrastructure that will require us to consume our hydrocarbons in the continent. Gas is by far the most important investment opportunity in Africa to drive sustainable growth.”
Stressing the energy gap in the continent and the massive opportunities for investment, Scott Mackin, Managing Partner at Denham Capital Management LP noted that “if you take out South Africa, sub-Saharan Africa has the same level of electricity generation as Spain. If you include it, it is still equivalent to only Norway.”
In a session on deepening Africa’s capital markets, Miguel Melo Azevedo, Managing Director & Head of Investment Banking Africa at Citigroup advocated for “big companies to list —especially in the sectors of power, telecoms, oil and gas—to bring size and depth to the market.”
Ibukun Adebayo, Co-Head Emerging Markets and Equity Primary Markets at the London Stock Exchange Group, suggested “more reform is needed for African exchanges to enable deeper participation by institutional and retail investors. Seplat raised 70% of its capital in London but most trading is done in Lagos. It’s a great example of dual listing and the symbiosis between local and international capital to create optimum value for the issuer.”
The need to deepen not just the continent’s financial infrastructure but its physical infrastructure was also highlighted. Tas Anvaripour, CEO of Africa50, believes African risk is exaggerated and that innovation in project structuring is needed to reduce the time taken to bring infrastructure projects to financial close. She called on investors “to have the courage to do large complex projects like Simandou in Guinea and the Tanzania-Kigali road”, noting that “Africa 50 is designed as a one stop shop for project finance, using a range of financial tools and acting as an honest broker to Governments and investors to get quality deals done better and quicker”.
Closing the event, Paul Sinclair, TGAIS Event Director, confirmed that “due to the success of this inaugural event, combined with the excellent response from participants, the Global African Investment Summit will be returning to London in November 2015.”
The Summit was opened yesterday by Lord Mayor of London Fiona Woolf and First Secretary of State William Hague and addressed by the Presidents of Ghana, Rwanda and Uganda, HE John Dramani Mahama, Paul Kagame and Yoweri Museveni respectively, and the Prime Minister of Tanzania Mizengo Pinda. A hundred and thirty-six bankable projects worth a combined total of US$246 billion were presented during a series of sector specific project roundtable to an audience representing over US$265 billion in capital over the two days.
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Medium Term Budget Policy Statement 2014 for South Africa
Foreword
Since the dawn of democracy just over 20 years ago, government has financed a massive expansion of services to all South Africans, with a focus on the poor. We have done so in a sustainable way, ensuring that our public finances remained healthy so that we could continue building the society envisioned in our Constitution.
Today, we are at a turning point. The world economic recovery remains shallow and structural challenges in our economy have contributed to weak economic growth. This has serious consequences for tax revenue, and our ability to continue funding social and economic programmes.
This year we anticipate GDP growth of 1.4 per cent. While growth is expected to reach 3 per cent in 2017, this is well below the country’s potential and has placed the public finances under increasing pressure. Rising debt levels, if left unchecked, would absorb more and more of our spending. The end result would be less money to spend on improving the lives of our people.
The 2014 Medium Term Budget Policy Statement provides a roadmap to safeguard the public finances. In response to a worsening debt outlook, government proposes a fiscal package that reduces the expenditure ceiling and raises tax revenue over the next two years. This will reduce the budget deficit and stabilise debt, which is now set to reach R2.4 trillion in 2017/18.
Two years of fiscal consolidation will put the public finances on a sustainable footing. We will also approach budgeting with a greater focus on long-term expenditure planning and alignment with government’s policy objectives.
In considering these proposals, we must emphasise that restraining expenditure growth will not compromise front-line services. National, provincial and local government will need to continue identifying savings and improving the way they spend money. Key social programmes will be protected. Government will continue to roll out its capital investment programme. We will encourage private-sector participation in infrastructure delivery.
While expenditure ceilings are being reduced, the budget will continue to grow in real terms. Government will spend R4.4 trillion over the next three years. Allocation of these funds will be in line with the medium-term strategic framework, which gives expression to the National Development Plan.
I would like to thank the President and all of my Cabinet colleagues for their contributions to shaping the proposals before us, as well as the Ministers’ Committee on the Budget, which has brought tremendous insight into the process. I would also like to acknowledge the officials of the National Treasury, who are working with their colleagues across government to ensure that our public finances remain sound.
The choice we face in considering these proposals is a difficult one. But we believe that this course can no longer be postponed.
Nhlanhla Musa Nene
Minister of Finance
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Give landlocked nations a tech boost, says UN chief
The international community must do more to provide landlocked developing countries (LLDCs) with the agricultural and industrial technology to turn raw materials into high-value products, a UN chief tells SciDev.Net ahead Second UN Conference on LLDCs, in Vienna, Austria (3-5 November).
Providing better access to new technologies should be a central pillar of any future development strategy or these countries will remain overly-reliant on the export of low-value commodities, slowing their economic development, says Sandagdorj Erdenebileg.
“If they want to diversify their economies they have to do so through the transfer of technology,” says Erdenebileg, who is head of the Policy Development, Coordination, and Reporting Service at the UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States.
“The need is more pressing than in any other developing country.”
There are 32 landlocked developing countries: 16 in Africa, 12 in Asia, two in Latin America and two in Europe. They include Bhutan, Burundi, Chad, Laos, Macedonia, Niger and Zambia.
Erdenebileg says that helping LLDCs make high-value processed goods is an accepted way for them to overcome the geographical isolation that raises their transport costs by up to 50 per cent, as these products are less bulky compared to their value.
But high commodity prices during the early years of the new millennium caused governments and international development agencies to favour raw material exports, he says.
This issue will be back on the agenda of decision-makers when they meet next month (3-5 November) to produce a text to replace the Almaty Programme of Action (APoA), a document that has guided international attempts to speed up development in coastless nations since 2003.
Discussions at UN’s Vienna conference on LLDCs will include ways of pushing richer nations for more explicit commitments to aid tech transfer to boost manufacturing and trade, he says.
This may include developing licensing agreements to give free of preferential access to technologies providing training and capacity building, and encouraging foreign investment in agriculture and industry, says Erdenebileg.
Many of the networks needed to implement these changes already exist, such as the UN-hosted South-South Global Assets and Technology Exchange (SS-GATE), but donors are “not doing enough” to maximise their impacts, he adds.
Erdenetsogt Odbayar, the interim director of the International Think Tank for LLDCs, based in Mongolia, agrees that the international development community is giving insufficient attention to the “major issue” of tech transfer.
But before any meaningful action is taken, the specific technological and human capacity needs of each country must be assessed, he tells SciDev.Net.
And, the private sector must be better integrated into discussions, as business investment is the only way to meet the high, long-term costs of developing the extractive industries, such as mining, that so many LLDCs rely on to provide the raw materials for conversion, Odbayar adds.
The draft of the conference outcome document already acknowledges this reality, as well as making significant improvements to the APoA it will replace on issues such as capacity building and infrastructure, he adds.
Unlike the APoA, the document has a section on science, technology and innovation, in which it calls for access to new technology and knowledge and is peppered with references to science.
“Landlocked developing countries should promote investment in science, innovation and technology for sustainable development,” it says.
They should prioritise the development of a national policy to promote science, technology and innovation; build and expand strategic partnerships, such as with the private sector, universities and other research institutions; promote innovative solutions for modern and cost-effective technologies that could be adapted locally; and establish high-level technology centres, the document says.
Development partners, it adds, could provide financial and technical support; promote the sharing of best practice and innovative technologies and the transfer of technology and know-how; and support the networking of research institutions and the creation of high-level technology centres.
But despite tech transfer’s importance, many LLDCs have more fundamental problems, says Odbayar.
“They don’t even have basic governance,” he says. “Political stability must be established before tech transfer can be effective.”
Landlocked Developing Countries: Facts and Figures, 2014 (UNCTAD)
There are 32 landlocked developing countries (LLDCs): 16 are located in Africa; 10 in Asia, 4 in Central and Eastern Europe and 2 in Latin America. As diverse as these countries are, they share one common feature, namely the lack of direct territorial access to the sea, often coupled with remoteness from major markets.
This locational factor has a profound impact on the scope and the dynamics of these countries’ integration in the global trading system. Their dependence on transit transport routes and transit facilities for merchandise trade increases transaction costs, reduces international competitiveness and discourages foreign investors. Consequently, transit dependence and market distance limit the classic development choices – the produce of labour-intensive, low-value and bulky goods – of these countries.
However, as empirical evidence from developed landlocked countries demonstrates, these limitations are not an insurmountable obstacle to economic growth and development. The building of supply capacities for goods and services that are less sensitive to transportation and distance, as well as the promotion of stronger regional trade expansion are development options that could also help LLDCs to mitigate the adverse impact of their geographical location.
Still, many LLDCs stagnate at the bottom end of international rankings of income levels and social development indicators. In fact, 17 of the LLDCs are classified as least developed countries (LDCs). Responding to the specific problems of LLDCs requires a multidimensional approach to being landlocked as a development challenge. This notably implies the implementation of policies and measures aimed at economic restructuring and specialization that take into account the transport-related obstacles facing their economies. The international community has expressed in many ways its resolve to assist these countries in their efforts to overcome the impediments of geography.
The Almaty Programme of Action, adopted in 2003 at the International Ministerial Conference of Landlocked and Transit Developing Countries and Donor Countries and International Financial and Development Institutions on Transit Transport Cooperation, was a hallmark of these global efforts.
During the past decade, awareness and recognition of the special needs of LLDCs have risen at the international level and, despite large differences among individual LLDCs, there are encouraging signs of economic and social improvements in these countries. Nevertheless, laying the foundation for sustainable development continues to be work in progress for many, if not most, LLDCs.
The Second United Nations Conference on Landlocked Developing Countries, which will take place in Vienna from 3 to 5 November 2014, provides an opportunity to reaffirm the global commitment to addressing the special needs of these countries and renew the partnership between LLDCs, their transit neighbours and their development partners.
This publication is prepared as part of UNCTAD’s contribution to this global gathering. It presents key economic, social and trade information on all 32 LLDCs with the aim of underpinning the dimension of their development challenge with facts and figures.