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Why NTBs are still a big problem to regional trade
Traders are losing millions of francs through non-tarriff barriers (NTBs) along the Northern and Central corridors, a new survey has revealed.
According to a survey by the National Monitoring Committee on NTBs and East African Community, some partner states have not done much to eliminate NTBs, which is hurting business growth.
“The slow pace at which some of the member states are removing non-tariff barriers has resulted into a profound effect with 39 per cent of imports and exports paying a heavy price,” the study, “The Current Status of NTBs in East Africa” that was released last week in Kigali shows.
In fact, according to the report, 24 per cent of manufactured goods are being affected by NTBs, 7 per cent rice, 7 per cent tea, and 5 per cent beverages.
Also, 3 per cent of dairy products and sugar are affected, as well as 1 per cent of beef and 3 per cent of agricultural processed products.
Over all, Tanzania still has the highest number of NTBs at 26 per cent), followed by Kenya with 24 per cent, Uganda 22 per cent and Rwanda with 14 per cent, the report indicates.
According to Vincent Safari, the national co-ordinator in charge of NTBs at the Ministry of Trade and Industry, up to 72 per cent of NTBs have been resolved, while work is ongoing to remove 22 per cent of the barriers to trade.
However, traders have recently reported up to 8 per cent NTBs to have been introduced by member states in the near past, hindering regional trade.
There are complaints about Uganda restricting beef and beef products from Kenya. There are also about 30 Police road blocks along the Central Corridor, Dar es Salaam to Rusumo border. Also, Rwanda and Uganda are still reluctant to treat rice imports from Tanzania through Rusumo and Mutukula borders in a preferential manner.
“There are also unjustified and improper application of non-tariff measures such as sanitary and phytosanitary measures and other technical barriers to trade.
“However, we are taking the lead in ensuring that these barriers are eliminated to facilitate trade,” Safari told the business community during a meeting to update stakeholders on the EAC integration process and new developments.
Delays, theft at Dar es Salaam, Mombasa ports
According to some traders, the theft of containers, especially of minerals and fertilisers, is increasing at the port of Dar es Salaam.
The port is also not open 24 hours contrary to what is claimed by authorities in Tanzania, traders added.
“Most of the theft takes place inside the port before containers are loaded. So, it is important that measures are put in place to ensure containers are sealed to minimise some of these risks. There is also need to increase surveillance cameras at the port,” Grace Mulinda, a clearing agent said.
She added that sometimes they wait for long hours before accessing containers, noting that there are also delays in reimbursing container deposit fees which is increasing the cost of trade.
On average, a trader pays $4,000 for a 40-feet container as container deposit.
Port congestion is also forcing truck drivers to park along the road resulting into payment of penalties to the city council, said Abudul Ndaru, the managing director, TransAfrica Container Transport. Ndaru is also the vice-chairman of the Long Distance Drivers Association.
National park charges
“Rwandan trucks are being charged $300 for passing through the national parks of Tanzania while our Tanzanian counterparts only pay $50. This fee should be harmonised to facilitate easy movement of goods and lower the cost of doing business along the Central Corridor,” Ndaru appealed.
According to the EAC time-bound programme on NTBs, lack of co-ordination among regional institutions involved in harmonisation of standards and existence of several weighbridges along Northern (eight) and Central (seven) corridors are still hindering cross-border trade.
The business community is now calling on the National Monitoring Committee to be assertive in its advocacy at national and regional level, and to ensure all NTBs are removed.
“It also needs more commitment from the private sector to influence policy,” business analysts noted.
Efforts to address NTBs on going
According Valentine Rugwabiza, the East African Community Affairs Minister, the regional common market protocol is not yet a reality.
“There still a number of trade barriers hindering free movement of labour and capital across the region.
“Rwanda will continue playing its role and ensure all trade barriers are eliminated to create an enabling environment that will make the private sector more competitive,” Rugwabiza said.
Rugwabiza revealed that the single customs territory along the Central Corridor will be implemented next month.
“This will help leverage business opportunities for local entrepreneurs,” she noted.
“Rwanda has signed agreements with governments of Uganda and Tanzania on harmonisation of procedures and elimination of trade barriers. We have put in place joint technical committees and joint border committees to help in the identification and elimination of trade barriers,” Safari told the Business Times.
“We have also put in place strong communication tools, including a website and an SMS feedback (2525) so people can report any barriers to doing business across the region.”
According to Hannington Namara, the TradeMark East Africa country manager, the introduction of electronic single window system has reduced the cost of doing trade in real time.
“Embracing a single location to remove unnecessary obstacles which hinder legitimate trade, use of non-intrusive cargo scanners to reduce time for physical verification of goods and working for more hours will greatly enhance regional trade.”
Eliminated NTBs
Road toll in Tanzania has reduced from $500 to $152 per truck per trip resulting into a saving of up $800,000 per year for transporters using the central corridor.
Weighbridges in Kenya have been reduced from six to four, and in Tanzania from eight to seven, while Police roadblocks have been removed in Kenya and Uganda and reduced in Tanzania, the report indicates.
The state of road and ports infrastructure has significantly improved and Tanzania removed the requirement of cash bonds for transportation of sugar to Rwanda.
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Egypt participates in African trade meetings
It will see Egypt talk to the Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC), and East African Community (EAC)
Egypt will participate in the Tenth Meeting of the Trade Negotiations Forum with three African blocs scheduled to take place in Burundi this October.
The announcement was made by Saeed Abdullah, Chairman of the Trade Agreements and Foreign Trade Sector at the Ministry of Trade and Industry. It will see Egypt talk to the Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC), and East African Community (EAC).
The Forum’s goals include finalising negotiations on the draft free trade agreement items which will come into force for these blocs. It will also include adopting technical work group reports in the fields of customs cooperation, trade, dispute settlement, and rule of origin.
The Forum is also intended to research developments in negotiations among member states on tariff reductions and adopting an executive roadmap after signing the draft free trade agreement. The announcement of the first stage negotiations results is also set to be adopted during the Forum.
Abdullah said that the results of the meeting will be sent to senior officials and then onto a ministerial committee for approval.
He added that a meeting was also held surrounding non-tariff barriers for COMESA last week in Kenya. A presentation was given by UNCTAD on non-tariff barriers and non-tariff measures, while another focused on classifying non-tariff barriers in COMESA. A third presentation discussed the impact of non-tariff barriers on COMESA, and a study of the minimum criteria necessary cross-border trade was also presented.
He said the meeting produced many results, the most important of which included the adoption and execution of minimum standards for small merchants interacting across borders, which will be adopted by member states and added in Arabic to the non-tariff barriers site.
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New facts and figures from FinScope Mauritius 2014
FinMark Trust released the results of its first FinScope Consumer Mauritius 2014 survey results on 3 October 2014. The FinScope Survey, developed by FinMark Trust, is a research tool to assess financial access in a country and to identify the constraints that prevent financial service providers from reaching the financially under- and unserved people. The FinScope Survey is a nationally representative survey of how individuals source their incomes and how they manage their financial lives. It also provides insight into attitudes and perceptions regarding financial products and services. FinScope Mauritius involved a range of stakeholders engaging in a comprehensive consultation process, thereby enriching the survey.
To date, FinScope Consumer Surveys have been conducted in 19 countries including Mauritius. The survey was carried out under the auspices of the Ministry of Finance and Economic Development (MOFED) and funded by FinMark Trust. The sampling frame and weighting of the data was conducted under the guidance of Statistics Mauritius.
The study was based on a nationally representative sample of 4000 adults who are 18 years or older. The sample is representative at national, urban/rural, and regional levels. Below are some of the highlights from the 2014 survey.
Levels of Financial inclusion in Mauritius
The study revealed that the level of financial inclusion is high in Mauritius, with only 10% of adults 18 years or older classified as financially excluded; that is they do not use any formal or informal financial product or service to manage their financial lives. This means that Mauritius has the highest level of financial inclusion in SADC, with 90% of adults having or using a formal or informal financial service.
In total, 85% of the adult population is banked, 49% use non-bank products and services and 26% use informal mechanisms to manage their finances. 88% of adults are classified as formally served and 2% as informally served. Only 1.2% of adults make use of bank accounts that are not registered in their names. Of those who are unbanked, the main barriers were insufficient money coming in (59%) and insufficient balance after paying for expenses (29%).
The level of financial inclusion is higher among males (94%) compared to females (86%). There is very little difference in overall inclusion levels of adults across urban (91%) and rural (90%) areas or between Rodrigues (87%) and the rest of Mauritius (90%).
High incidence of savings
The study found that 30% of adults in Mauritius do not save. 61% of adults are saving at the bank, a further 4% have other formal non-bank savings mechanisms, a further 2% rely on informal saving mechanisms such as savings groups, while 3% are saving at home only.
Credit and borrowing
The results show that in the 12 months preceding the survey, about half (52%) of adults in Mauritius claimed to have either borrowed money or taken goods on credit. 27% of adults borrowed money from a bank, a further 7% have formal non-bank credit, 9% used informal mechanisms such as money lenders, while 9% use friends and family only.
Insurance driven by motor vehicle and life insurance
Although the majority of adult Mauritians (75%) perceive insurance as a protection in case of problems, 62% of adults do not have any kind of financial product covering risk. About 2 in 5 (38%) adults have some financial product covering defined risk. Insurance cover is driven by motor vehicle (23%) and life insurance (20%). The barriers to insurance uptake are mainly related to affordability reasons, not needing it or never thinking about it. As far as the plans of Mauritian adults to meet non-defined risks are concerned, the two strategies mentioned for meeting expenses in old age were pension/old age grant from Government (63%) and use of own savings (37%).
Remittances low
Use of remittances in Mauritius is low, with only 6% of adults sending or receiving money. 2% of adults in Mauritius either sent or received money to or from people within Mauritius and 4% of adults sent or received money to or from people living outside of Mauritius.
Mobile money
Although about 84% adult Mauritians surveyed use mobile phones, only 2% are registered users of mobile money. Lack of enough information on mobile money (43%) is the major barrier identified by the survey .
Conclusion
Overall, the level of financial inclusion in Mauritius is high with Mauritius ranking first in the SADC region. It is worth mentioning that the level of financial inclusion is hampered by income regularity as most financial products are pegged on regularity of income. 15% of adults who show signs of over-indebtedness have credit.
The study reveals that 11% of the population have low financial literacy (e.g. awareness of financial products) and 21% have low financial skills (e.g. how to budget, keep records). 8% of adults are unable to maintain a minimum balance and around 52% play ‘games of chance’, which accounts for an estimated 3% of their budget. To this end, financial literacy/education campaigns could prove valuable to assist in the financial decision-making of adults. This signals future areas that need to be carefully managed by proper communication of the risks to these individuals.
FinScope was launched in 2002 by the FinMark Trust. Its purpose is to establish credible benchmarks on the use of, and access to, financial services in South Africa. It is designed to highlight opportunities for innovation in products and delivery. The FinScope survey is a comprehensive and national representative study on financial inclusion, looking at how people source their income and manage their financial lives. It has been implemented in 19 countries (11 in SADC, 5 non-SADC Africa and 3 in Asia).
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ECOWAS flat tariff regime nears take-off
The Customs Division of the Ghana Revenue Authority (GRA) will start implementing the ECOWAS Common External Tariff (CET), a flat rate tariff on all shipments within the West African sub-region, on January 1, 2015.
The ECOWAS-CET was adopted in 2006 by the ECOWAS Heads of State and Government as a vehicle for achieving a Customs union that will promote the creation of a common market in West Africa and make goods from ECOWAS countries cheaper and affordable.
Acting Commissioner of Customs Wallace Akondor, who disclosed this to the B&FT in an interview, said his outfit has already started a series of stakeholder engagements and ongoing negotiations with sub-regional counterparts toward smooth implementation of the regime.
“ECOWAS is an economic union with similar trade and bilateral trade policies; therefore, the new directive is being implemented in the spirit of economic integration.
“We have begun sensitising local industry players, especially shippers, about this directive and we are in regular meetings with our counterparts in the sub-region its smooth implementation from January 2015.
“We had some protractions between the Anglophone and Francophone blocs, but there has been a convergence. As Customs unions, we deal with the same clientele, hence the need for cooperation in the interest of intra-regional trade,” he said.
The Common External Tariff is a harmonising instrument that has been employed by ECOWAS governments in their quest for a strong common market for bilateral economic trade in the broader context of regional integration.
Article 3 of the ECOWAS Revised Treaty defines the aims of the community as promoting “cooperation and integration, leading to the establishment of an economic union in West Africa”.
In order to achieve this, the community is to ensure – in stages, among other means – the establishment of a common market through “…the adoption of a common external tariff and a common trade policy vis-à-vis third countries”.
It is toward this end that the ECOWAS Authority of Heads of State and Government established an ECOWAS Customs’ union to foster a harmonised tax regime in the interest of intra-regional trade.
The common tariff regime will provide a common nomenclature that will ensure transparency and reduced delays in customs processes.
Mr. Akondor said the new regime, when rolled-out, will be instrumental in harmonising ECOWAS member-states toward the creation and strengthening of a vibrant common market that will facilitate the timely movement of goods and people within the sub-region.
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UMA wants gov’t bodies to buy Ugandan-made textiles
Uganda Manufactures Association wants all government departments and ministries to buy products manufactured in Uganda especially textiles.
The move will increase the production and consumption of local fabrics and growth of textile industry.
The most produced textile products include school uniforms, socks, t-shirts, among others which manufactures feel should be given priority whenever government is procuring them for different departments.
The call was made by the executive director UMA, Ssebagala Kigozi while visiting textile industries in Jinja who include Sigma and Sunbelt textiles limited in preparation for the forthcoming 22nd International Trade Fair organized by UMA, under the theme Building “Business Partnerships for Sustainable Markets and Competitiveness.” The show started on the 2nd of October 2014 and will run until the 10th of October.
“There is no way you can grow the local capacity in the industrial sector when you are importing everything. Ideally government departments like the Army, Prisons, and Police should buy these socks from the local textile industries because they are of quality compared to those that are imported into the country,” said Ssebaggala.
Sigma Knitting Industries manufacture uniforms and socks while Chinese Sunbelt Textiles Limited are into manufacturing and designing bed sheets and curtains.
He also promised to engage the leaders of the UPDF, Prisons and Police so they can appreciate what is manufactured locally and if possible encourage them to visit the premises so they can consider them in future procurement processes.
“Why import when local industries are producing better quality? This can only happen when the locals cannot produce what the market wants. I plan to set up an appointment with the IGP, Gen. JeJe Odongo from ministry of Defence and Johnson Byabashaija of Prisons so we can help our manufacturers,” he added.
His appeal followed complaints from the managing director of Sigma Knitting, Anant Parmar that government departments continue to import products like socks at a cheaper cost into the country ignoring those made here.
“This has failed our products from penetrating the market because many consumers prefer the imported ones. If there is no one demanding for our products then we cannot keep in the market,” said Parmar.
Parmar explained that since 2009 they have only run the factory to full capacity for only one year because there is no demand.
He adds that he has been further frustrated by the Public Procurement and Disposable Authority that has on several occasions ignored his bids.
“I applied for tenders three times but am not even short listed or even called once so if even the government procurement body cannot see value in the sector how are the other sectors going to compete?”, wondered Parmar.
He added that Uganda should borrow the example from Egypt where investors’ products are promoted by government as their own and even encourage the nationals to consume those that are made in Egypt.
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Towards a research roadmap on climate change in Africa
A group of African climate research and impact communities began meeting in Marrakech, Morocco, today [6 October 2014] to agree a research collaboration platform on climate science in Africa that will be announced at the Fourth Annual Conference on climate Change and Development in Africa (CCDA-IV) which opens here Thursday.
Participants are meeting under the aegis of the World Meteorological Organisation and ECA/Africa Climate Policy Centre “to devise an institutional platform for linking African climate science research and knowledge to inform adaptation decision-making in Africa”, according to Ms Fatima Denton, Director of the Special Initiatives Division at the UN Economic Commission for Africa.
Opening the meeting today, Ms Denton prodded participants to conscientiously promote what she called “utilitarian science” that would help Africa to take its full place on the world’s development train.
“This laudable initiative should aim at science that gives the power to the people; science that would allow the sahelian farmers to make strategic choices; science that will strengthen the productive capabilities of research institutions in Africa; and science that enables Africa to rise above current challenges…” she insisted.
She promised that under the auspices of ClimDev-Africa programme, the African Climate Policy Centre is initiating a 1-Million Dollar capacity building programme to support the training of young African scientists in all areas of climate change and development.
She traced ClimDev’s support to the project back to its inception at the Arusha (Tanzania) conference and promised continued assistance in the provision of space, time and resources because the objectives of CR4D chime with the overall goals of ClimDev-Africa.
The guest of honor at the meeting, Mr Joseph Mukabana, Director, Department of Africa and Lest Developed Countries at the World Metrological Organisation (WMO), harped on the central role WMO has played in fostering research and development for operational climate services in Africa, announcing the eminent creation of a metrological institute for the Central African region.
He welcomed the choice of meeting’s key objective, which is to define a common climate research agenda for Africa and to address priority research gaps to deliver relevant climate services for end-users across the continent.
To the delight of the participants, Mr Ken Johm, coordinator for special initiatives in the agriculture and Agroindustry department at the African Development Bank (AfDB) briefed them on progress made so far on the Fund.
He recalled the support that AfDB has made to climate change projects across the continent and said that the new Fund would further strengthen that assistance to institutions and scientists.
For two days, the meeting will review priority activities identified at ACC2013 Conference, seek new ways to advance climate science research frontiers in Africa-priorities based on societal needs and; identify climate research needs for policy and development in Africa.
Both the CR4D and CCDA-IV come in the wake of ever-increasing damaging predictions on climate risks for Africa by a recent UN-sponsored report which warns that although “African farmers have developed several adaptation options to cope with current climate variability, such adaptations may not be sufficient for future changes of climate.”
The Africa Climate Research for Development (CR4D-2014) is hosted by ClimDev-Africa with support from a number of institutions including ECA/ACPC, FutureEarth, World Climate Research Programme, Climate Change Agriculture and Food Security as well as UK DEFD.
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Africa needs innovative finance to bridge its infrastructure gaps
Africa nations have already begun to tap into global financial markets. Domestic tax and savings also offer solutions.
Power outages and the lack of roads, railways, and ports have long been a frustrating feature of business in Africa, hindering home grown entrepreneur and foreign investor alike.
To become more competitive globally, Africa must close these infrastructure gaps to unlock quality growth for the continent, enabling Africa’s smallholder farmers and rural communities to enjoy the benefits of more equitable economic growth.
As the Financial Times, Ernst and Young, OECD, World Bank and IMF discuss economic and financial issues related to Africa this week in London, Johannesburg, Paris, and Washington, the Africa Progress Panel urges innovative solutions to finance infrastructure for Africa.
Fixing the continent’s infrastructure gaps will cost Africa US$48 billion per year for a decade, according to an estimate in 2009. Economic growth and urbanisation since then mean this gap will almost certainly have widened. As an approximation, Africa must double infrastructure investment.
Africa has already begun to tap into global financial markets, as this year’s Africa Progress Report – Grain, Fish, Money – describes. Domestic tax and savings also offer solutions.
By extending their tax reforms to African countries, G20 and OECD countries can support a clampdown on tax avoidance and evasion, which cost Africa billions of dollars each year.
African governments can boost available infrastructure funds both by reforming their domestic tax systems and by making their banking systems more competitive. In East Asia’s high growth developing countries, higher savings helped finance investment. But with some of the highest spreads in the world, Africa’s interest rates deter both savings and investment.
Outside of Africa, the world has been awash with liquidity since 2008. But in a globally competitive market, Africa must tackle the frequent perceptions that its infrastructure projects are high risk.
The development of insurance markets could help in this respect through the accurate measurement of risk. Meanwhile, the global community can help by scaling up operations of the Multilateral Investment Guarantee Agency, and by using the International Development Association to cover the costs of insurance premiums on infrastructure projects.
Improved regional cooperation also offers solutions through economies of scale for infrastructure. Africa may also wish to tap into its combined foreign exchange reserves – around US$450 billion in 2012 – to finance infrastructure bonds.
Innovation will be key to closing the continent’s infrastructure gap, and Africa has plenty of that.
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IMF: Ethiopia needs to implement structural reforms to sustain growth
Ethiopia needs to move from public sector to private investment-driven growth to keep success
Despite Ethiopia’s achieving robust economic growth, while keeping inflation below 10% and improving social indicators, the International Money Fund says the country must now replace its public sector-led growth strategy with a private investment-led model for sustainable growth.
“The sustainability of the current public sector-led growth strategy was threatened by several downside risks – including external financing of the public investment programme, declining prices for export commodities, and weather-related shocks,” IMF said. “Mitigating these risks will necessitate greater policy coherence and appropriate structural reforms going forward, to help shift the balance toward private sector-led, sustainable growth.”
IMF agreed that Ethiopia’s macroeconomic performance continues to be strong, with robust economic growth supported by higher agricultural production and large public sector and foreign direct investments.
Inflation remains contained and the fiscal stance at the general government level is cautious, although public enterprises continue to provide an expansionary impulse, IMF said.
Public and publicly guaranteed external debt is estimated to have increased to about 23% of GDP from 20.5% in 2012/13, the Fund said.
IMF said tight monetary policy has supported achieving the National Bank of Ethiopia’s (NBE) inflation objective in 2013/14. Base money, the nominal anchor of monetary policy, increased by 17.5% in April 2014, driven mainly by claims on the government.
The current account deficit is estimated to have widened from $2.8bn (£1.7bn, 6% of GDP) in 2012/13 to $3.5bn in 2013/14 (7.1%). It was financed largely by concessional and non-concessional inflows as well as by foreign direct investment (FDI).
Future
IMF said Ethiopia’s economic outlook remains encouraging. The 2014/15 budget plan targets the general government deficit at 3% of GDP and maintains a strong pro-poor focus. Monetary policy, anchored on base money, is geared toward maintaining inflation in single digit.
The public debt to GDP ratio is expected to rise, reflecting large disbursements associated with implementation of investment projects under the Growth and Transformation Plan (GTP).
The fund, however, underscored the need for continued fiscal prudence in order to achieve the GTP goals while increasing the private sector’s involvement.
It has called for stepped-up efforts to increase domestic revenue – by broadening the tax base, improving customs and tax administration, and removing tax exemptions.
The IMF has welcomed Ethiopia’s planned implementation of a new high-level oversight mechanism designed to carefully monitor the operations and financial position of public enterprises and any contingent liabilities.
The fund said monetary restraint is required in the wake of food and energy price shocks and domestic demand pressures stemming from large public investments.
IMF also recommended strengthening liquidity management and monetary transmission through enhanced interest rate flexibility and the adoption of a broader set of monetary policy instruments.
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14th International Economic Forum on Africa: By Africa, For Africa
Remarks by Angel Gurría, OECD Secretary-General, delivered at the 14th International Economic Forum on Africa “By Africa, For Africa: Industrialisation and Integration for Inclusive Growth”
6 October 2014, Paris, France
It is my pleasure to welcome you to the OECD for the 14th International Economic Forum on Africa – our annual rendez-vous with African leaders, where we take stock of progress and challenges, and identify ways of working better together.
This edition of the Forum is called “By Africa, For Africa”. Our choice of title underscores the importance of African citizens, African companies and African governments as drivers of the development process. The OECD is here to listen, to engage, and to strengthen this unique partnership with Africa and its institutions.
Our partnership continues to grow from strength to strength: I am pleased to announce that, for the first time, this year’s Forum has been co-organised by the African Union and the OECD’s Development Centre. And by the end of today, our co-operation will be even stronger! After our remarks, Madame Zuma and I will sign a Memorandum of Understanding that will provide a framework for deeper collaboration on issues such as tax revenue statistics, natural resource-based development, and Global Value Chains.
Africa is experiencing sweeping changes
The African continent has the youngest population in the world. It is experiencing rapid urbanisation, the emergence of new types of consumers, and the spread of mobile technologies. All of these changes are opening up huge development opportunities. They are raising peoples’ demands for quality jobs, for better public services, for a cleaner environment, and for more accountable governments. These changes are transforming African economies and societies for good.
The continent’s output has grown, on average, at over 5% per year between 2001 and 2012. That’s twice the rate of the 1990s, and three times the average of OECD economies (1.7%) during the same period.
Growth in sub-Saharan Africa alone is projected at around 5.8% in 2014, with the fastest expansions foreseen in East and West Africa (though these projections will need to be revised due to the impact of the Ebola outbreak).
External financial flows are expected to surpass USD 200 billion in 2014 – four times their level at the turn of the millennium. Foreign investment in Africa has now fully recovered and is projected to reach a record USD80 billion this year.
Nevertheless, Africa faces important risks and uncertainties
Despite the strong growth I have just described, living standards in sub-Saharan Africa have improved less than in other developing regions. Many countries remain vulnerable to volatile commodity markets, climate change and conflict.
I returned only a week ago from the UN Climate Summit in New York. It is truly shocking that Africa is the region that is most vulnerable to the effects of climate change. Yet it represents less than 4 per cent of the world’s CO2 emissions from the consumption of energy and less than 7% of total emissions.
Vulnerability to epidemics is another major risk. The Ebola epidemic in West Africa – with its tremendous human and economic costs – is a stark reminder. Our thoughts are with those people, those communities, and those countries that are affected.
The Ebola crisis needs an immediate and large-scale response. But it also underscores quite how important investment in health systems is, if we are to avoid seeing history repeat itself. Like climate change, this is a global challenge that needs a global response.
Reforms should harness economic transformation in Africa, enabling it to benefit fully from global value chains
Despite living in an increasingly interconnected world, productivity levels in Africa remain low, and there are too few decent jobs. Every month, 1 million young people become available to join labour markets in Africa. But only a fraction of them finds a job, and even fewer find themselves in high quality jobs. New economic opportunities must emerge to meet the needs and expectations of the growing youth bulge. The key question for us today is: what can we do to help create these opportunities?
Integration into global value chains can bring widespread benefits to African nations. The OECD’s work shows the changing nature of trade and investment: splitting up the production of goods and services across countries offers opportunities for firms to specialise in specific tasks and draw their value-added. You don’t need to develop a whole product from scratch to benefit.
This year’s African Economic Outlook – once again the fruit of our collaboration with the African Development Bank and UNDP – highlights some promising examples ranging from garment and footwear manufacturing, to horticulture and agribusiness. But it also reminds us of some of the deep-rooted problems that hinder productivity, and in turn hamper job creation.
Africa’s role in global value chains remains limited. About 85% of trade in value added takes place within the regional blocks of East Asia, Europe and North America. Africa’s share has increased only very slightly from 1.4% in 1995 to 2.2% in 2011. We speak of “factory Asia”. But I look forward to the day when we will also speak of “factory Africa”. So what can we do to make it happen?
First, we should continue to find ways of better facilitating trade. Our estimates suggest that a comprehensive trade facilitation reform would lower trade costs by as much as 17% in sub-Saharan Africa. We should also look more closely at how to make the most of expanding African markets. Exports within Africa have higher value-added than exports to the rest of the world. Despite this, Africa has the lowest share of intra-regional trade. A vast improvement in Africa’s transport infrastructure is needed.
Second, we need to sustain and deepen efforts to reform public institutions. In any country, entrepreneurs are most likely to thrive in environments with little or no corruption, and where governments are transparent and accountable. I should stress that these are not only African challenges – they are global ones. In OECD countries, a Gallup World Poll suggests that, on average, only four out of ten citizens have confidence in their government.
Third, we need to make sure that Africa seizes fully the opportunities offered by new technologies. These can and should be a driver of green growth. They offer an opportunity to leap-frog, and forge ahead of those regions and countries that are locked into outdated, carbon-intensive technologies. It seems this revolution may already be underway: one recent estimate suggested that more renewable energy projects would be commissioned in sub-Saharan Africa this year than in the past 14 years put together.
The OECD will work hand in hand with Africa as it seizes these opportunities
As a former Minister of Finance, I know that putting in place the right policies is not always easy! But there is good news: there is no copyright on good policies. Countries can and should learn one from another. This is precisely why the OECD will continue to step up its collaboration with African countries and institutions.
Last year, from this podium, Prime Minister Duncan of Côte d’Ivoire asked us to help him design a strategy that would make his country an emerging economy by 2020. Senegal then followed with a request for support in the implementation of their Plan Sénégal Emergent. And Togo asked for our advice in designing a more effective education and training system.
I am proud to say that we have kept our promises. Our Development Centre has embarked on a Multi-Dimensional Review of Côte d’Ivoire – the first in Africa. The other projects are advancing well too.
Ladies and gentlemen, there is no silver bullet. But we can and must do more together – as partners and equals – to promote Better Policies for Better Lives in Africa.
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Government urged to carry-out minerals audit
Government has been urged to do exploration to determine the country’s mineral resources to enable it to enter into meaningful contracts with investors who have often been accused of fleecing the country due to lack of information.
Chairman of the Parliamentary Portfolio Committee on Mines and Energy Lovemore Matuke said this on Thursday while opening a workshop organised for legislators in Kadoma by the Zimbabwe Environmental Law Association to discuss mining legislation.
Matuke said Zimbabwe was endowed with over 40 minerals, but the magnitude and quantity was largely unknown due to lack of information and exploration.
“It is my hope that the government will be able to get adequate information on its mineral deposits to enable it to negotiate contracts with investors that will bring meaningful benefits to the country,” Matuke said.
“There is also need to curb illicit financial flows in the mining sector as it is estimated that Zimbabwe has lost a cumulative $12 billion through secret financial deals, tax evasion and avoidance (African Development Bank and Global Financial Integrity report).”
He said it was imperative for Parliament to craft pieces of legislation to curb illicit financial flows.
The MP said the committee was also concerned by the manner in which some big mines were excluded from the indigenisation programme.
“Sometime in June this year, the Committee on Mines and Energy conducted public hearings on the gold sector and concerns were raised on the manner in which part of the 51% shares were being allocated to the indigenous people,” he said.
“The committee also observed that there were some big mines, such as Vumbachikwe in Gwanda and Metallon Gold which seemed to be exempted from the indigenisation programme.”
Matuke said the proposed Income Tax Bill was too technical and lengthy document which was difficult to understand.
“I hope the proposed Income Tax Bill will be simplified to enable legislators to grasp the key aspects of this law. Let me hasten to say this law is very bulky with over 200 pages and 224 clauses and hence would require a lot of time and patience to fully understand its impact on the economy,” he said.
Chairman of the Institute of Mining at the University of Zimbabwe Lyman Mlambo said Zimbabwe hosted 60 types of minerals, of which only 40 had been historically exploited to various extents.
“Very little exploration has been done on the country’s minerals. Zimbabwe is actually a country awaiting exploration. About 65% of the country has been mapped in terms of geological mapping, but this does not transfer to quantification of minerals,” he said.
Mlambo said the institute was not capacitated to do exploration as there was shortage of geologists, minerologists, mine engineers and other skilled expertise.
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KMA warns levies by counties on cargo could impede trade
Players in the logistics industry have warned that new levies planned by counties on the Northern Corridor could raise the cost of doing business and discourage traders in the region from using Kenya’s seaport.
Through their finance Bills, 16 counties on the Northern Corridor have proposed introduction of levies on cargo passing through their territories to boost internal revenues. These include Mombasa, Makueni, Taita Taveta, Machakos, Nairobi, Nakuru, Uasin Gishu and Bungoma counties.
“It has been brought to our attention that various counties along the Northern Corridor have formulated Finance Bills intended to raise funds under various heads,” Kenya Maritime Authority director-general Nancy Karigithu said in the letter dated October 2.
She said the levies were illegal, adding they could impede trade in the region. Mombasa has sought to introduce transit charges and branding fees on trucks.
For shipping lines, Mombasa’s Finance Bill proposes an export permit fee, import clearance fee, fumigation fee and supervision and destruction fee for condemned cargo each at $20 (Sh1,780) per tonne.
High fees
The county also proposes to charge $60 (Sh5,340) per ship for inspection and for spraying vessels against vectors, including a transport infrastructure development levy of $2 (Sh178) per tonne of cargo handled at the port. Industry players say the charges could impact negatively on competitiveness of the Mombasa port, which already has high handling fees.
The facility has faced stiff competition from the Dar port, which is currently undergoing expansion.
“While the Constitution accords the county governments the revenue raising powers, where the county legislation is in conflict with the national legislation on matters of economic policy, national security and economic unity and in protection of common markets in respect of goods, services, capital and labour, then the national legislation shall prevail,” Ms Karigithu argues in her letter.
The second seaport being built at Lamu is expected to get its life from the goodwill that traders attach to the Mombasa facility. Gilbert Lang’at, CEO of Shippers Council of Eastern Africa (SCEA), said charges proposed by Mombasa and the 15 other counties would amount to double taxation and would scare away importers, resulting in lower cargo volumes at the port.
Last week, Kenya Ports Authority chairman Danson Mungatana said there had been no consultations over the levies, and wondered how the county could go ahead to introduce them.
“We are focused on essential strategies aimed at improving the port performance,” said Mr Mungatana. “When such discussions over new taxes begin to emerge, they derail these ambitious plans.”
Based on the 22.3 million tonnes of cargo handled by the port in 2013, he said, a charge of $20 on each tonne in transit would mean extra costs totaling $446 million a year.
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Ebola clouds Paris discussions on Africa’s economic prospects
African Union Chairwoman Nkosana Dlamini-Zuma is calling for more outside manpower to help “break the cycle” of the Ebola virus that is ravaging three West African countries. She spoke in Paris during a forum on ways to make Africa’s economic growth more sustainable and inclusive.
In remarks at the Organization for Economic Cooperation and Development [OECD], Dlamini-Zuma welcomed the help of several countries in fighting West Africa’s Ebola outbreak, but she said it was not enough.
“We are encouraged that we have seen the world pledging, and we have seen on the ground the Americans and others building infrastructure,” she said. “But what we have seen is still a gap on the human resource side in these countries.”
Dlamini-Zuma said the countries most affected – Guinea, Liberia and Sierra Leone – do not have enough health personnel and some of the health workers have been casualties of the deadly outbreak. African nations and others, like Cuba, are sending in health workers, but more are needed.
This year’s Ebola outbreak has killed roughly 3,500 people in West Africa and is expected to batter the economies of the three countries at the epicenter.
This has cast a shadow on the OECD conference in Paris. Ministers and development experts gathered here to discuss ways to harness Africa’s strong growth, estimated at nearly five percent this year, so it is sustainable and more people can benefit from it.
OECD Secretary-General Angel Gurria said the Ebola crisis needs an immediate and large-scale response.
“But [it] also underscores how important investment in health systems is, if we are to avoid seeing history repeat itself. Like climate change, this is a global challenge that needs a global response,” said Gurria.
The OECD is calling for more investments in African manufacturing and transportation infrastructure to be able to sell higher-value, finished products and to boost their trade inside Africa and overseas. Right now, said Gurria, Africa accounts for only a tiny percent of worldwide trade in these so-called “value-added” commodities.
“We speak of factory Asia. But I look forward to the day when we will also speak of “factory Africa,” he said.
Gurria called for greater institutional reforms and investment in new technology, particularly in renewable energy. He said this year the number of renewable green-energy projects commissioned in sub-Saharan Africa may surpass the total of the past 14 years.
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Push to hasten EAC work permits system
The East African Community (EAC) partner states have not yet agreed on the benchmarks for issuance of work permits and now trade unions want them to be processed within 30 days and fees for getting them abolished.
“Processing time for the handling of work permits should be shortened to a maximum of 30 days”, Francis Atwoli, the chairperson of the East African Conferderation of Trade Unions (EATUC), stressed.
Speaking to reporters after a meeting of regional officials here, he said the required documents for work permit applications should be standardised and made uniform throughout the EAC region.
He said even after the coming into force of the Common Market Protocol four years ago, there has not been an agreed formula which would kick start implementation of the provisions related to free labour movement in the region.
Mr Atwoli, who is the secretary general of the all powerful Confederation of Trade Unions in Kenya, Cotu, suggested a revised version of Annex II of the Common Market Protocol (CMP) be put in place when the current one expires next year.
The new annex on implementation of free movement of labour, he insisted, should be operationalized through a tripartite mechanism at the EAC regional level “and should be administered at national level through tripartite forums”.
All special requirements outside the provisions of the Protocol, which came into force in July 2010, such as requirements of minimum annual salary income level or age limit should be removed immediately, he said.
The Arusha meeting further agreed that simple versions of the CMP documents should be translated into common local languages in order to raise awareness among the people of EA on benefits of free movement of labour in the region.
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Namibia narrowly avoids missing EU trade deadline
African, Caribbean and Pacific (ACP) states that have not ratified Economic Partnership Agreements (EPAs) with the EU will shortly lose their free EU market access. Namibia was one of the last to say it would sign up.
It is cold in the fish sorting room at the Seawork fish processing plant at Walvis Bay in Namibia.
Berta Kamwi is clad in Wellington boots, down jacket and rubber apron. With speed and precision, she runs her knife over a half-frozen hake removing its head and tail. It is evidently a job that brings her some satisfaction.
“I’m proud of what I’m doing here. I have experience of more than eight years in fishing industry. It’s how I’m paying the school fees for my kids and my accommodation,” she told DW.
Fish is one of Namibia’s most important exports. The country sells 373 thousand tons abroad every year, most of it to countries in Europe. Fish accounts for 13 percent of Namibia’s export earnings.
According to Peter Pahl, Seawork’s general manager, they are benefitting from a very strong market. “The Europeans want more and more fish from us, which is, of course, fantastic news for Namibia,” he said.
Fishing is a profitable business for Namibia because the European Union permits ACP states to export their goods to the EU without paying tariffs.
But that could soon change. On October 1, 2014, a deadline for ACP states to sign up to EPAs with the EU expires. Those countries that haven’t signed up will have to pay levies on the goods they export to the EU.
Yet in spite of this threat, Namibia’s trade and industry minister, Calle Schlettwein was reluctant to agree to an EPA.
Regional integeration efforts not respected
“There is the assumption that we are at the same development level,” he told DW in May. “We cannot go into an agreement where our ability and our policy space, which we need to develop capacity, is eroded away.”
Schlettwein said European nations want to be able to export their wares to Africa without paying excessive taxes or tariffs, but this would spell disaster for sectors of African industry which are just beginning to find their feet. They just wouldn’t be able to compete with European products and this would apply to subsidized agricultural produce as well as to hi-tech industrial goods.
The Namibian minister also maintained that the EU was undermining African efforts to foster regional integration. The European Commission was negotiating with loose groups of states, convenient to itself, rather than respecting African regional blocs or alliances.
Schlettwein said SADC comprised a development community of 14 countries, which had ambitions to turn into a customs union, an economic union and eventually a monetary union.
“Now what the Europeans did with the EPA, they said that we cannot accept SADC as a group, we think there must be four different groups within SADC that negotiate different EPAs. So we have now a de facto situation where our ambition as SADC to become a customs union is seriously compromised,” he said.
Schlettwein’s initial opposition to an EPA appears to have paid off because the two sides have reached a compromise. The EU and Namibia said the negotiations have been completed and Namibia wants to sign an EPA. Details have not been released, other than that Namibia will continue to protect and shield its industry. Europeans will continue to consume Namibian hake, much to the relief of the staff at the Seawork fish processing plant.
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Kenya EU market hinges on EAC deal
The European Union now says the fate of Kenya’s imports to the European trade bloc is in the hands of the East African Community trading bloc amid rising anxiety over the future of Kenya’s multibillion shilling.
EU’s Trade and Communications counsellor Christophe De Vroey in Kenya told East African Business Week in Nairobi the five member EAC bloc could cushion Kenyan exporters by fast-tracking deliberations of the contentious issues which stand in the way of the signing of the much elusive Economic Partnership Agreement (EPA) between EAC and its European counterpart.
“If the negotiations are complete and we have a deal by the end of October this year, then Kenya could in three or four months resume to its preferential status exempting its goods from taxes,” Vroey said in Nairobi.
“The fate of Kenyan exporters depends on the sooner we conclude these negotiations but we (the European Union) are more than ever before committed to a deal. We are ready to do this as soon as possible,” Vroey said
Kenya became the only African country to lose out on the duty and quota-free market access to the 28-member EU, beginning October 1 following the deadlock over the contentious EPA negotiations.
This is because the rest of the EAC countries – Tanzania, Uganda, Rwanda and Burundi – are cushioned through Everything-But-Arms trade agreement for least developed countries.
Kenyan exporters from last week therefore began incurring surcharges estimated to amount Ksh 100 million ($1 million) a week following failure by East Africa to broker the trade deal that would have allowed continued free access to the European Union market.
Fresh roses and cut flowers, for instance, are attracting import duty of between 8.5 per cent and 12% under the normal EU tariff and between 5 and 8.5 per cent under GSP.
Consequently, Kenyan products, mainly flowers and fresh vegetables, have become more expensive than those of their competitors like Tanzania and Ethiopia.
Kenya exports flowers to the EU worth Ksh46.3 billion and vegetables worth more than Ksh26.5 billion annually. T
The EU takes about 75% of Kenya’s fresh produce exports.
Other African countries exporting to the EU are safe from higher taxation regime after their respective trading blocs, the Economic Community of West African States, (Ecowas) and Southern African Development Community, (Sadc) both signed EPA pacts with EU last July.
Failure by the EAC to conclude the trade pact in time for ratification before the September 30 deadline has effectively exposed Kenyan produce to a higher tax bracket under the Generalised System of Preference.
Vroey said five outstanding issues stand in the way of the success of the agreement.
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Shippers’ Authority intensifies trade facilitation
The Ghana Shippers’ Authority (GSA) has rolled-out a systematic trade facilitation mechanism to protect and promote the interests of shippers in relation to shipping, port and inland transportation.
The systematic trade facilitation mechanism is to ensure safe, reliable and cost effective maritime transport and logistics operations in Ghana, Dr Kofi Mbiah, GSA Chief Executive has said.
The GSA is celebrating its 40th Anniversary on the theme: “Forty Years Of Providing Dedicated Services to Shippers in Ghana, Achievements, Challenges, and Opportunities”.
Dr Mbiah explained that the systematic trade facilitation mechanism manifested in GSA’s support and indeed its participation as a shareholder in the Ghana Community Network (GCNet) project.
He said the GCNet served as an electronic platform for quick clearance of goods from the port and for providing assurance for the collection of government revenue.
The GSA Chief Executive also said to accelerate inter-regional trade, the Authority signed a Memorandum of Understanding with counterparts in Burkina Faso, Mali, and Niger for the unfettered use of the Ghana’s corridor for transit trade.
Two Transit Shipper Committees in Tema and Takoradi comprising relevant stakeholders in the transit trade had also been established for the purpose of discussing and eliminating bottlenecks in the transit trade.
Speaking on the highlights of the GSA over the past 40 years, Dr Mbiah said the Authority had represented the interest of Ghanaian shippers by making useful input to the Rotterdam Rules, the international legal framework for the international carriage of goods with a sea-link.
At the local level, GSA had made representations to various agencies, protecting the interest of shippers in policies, measures and programmes, including the reduction in clearance steps from 25 to about 15, and the fixing of the foreign exchange rate for one week, instead of the daily changes in the rates.
According to him, GSA had undertaken cocoa freight rate negotiations, which contributed in giving stability to Ghana’s cocoa economy, and resulted also in cost savings to the COCOBOD and saved Ghana $10 million annually.
In 2013, GSA was able to negotiate the tariffs of the Ghana Ports & Harbours Authority (GPHA) and that of Freight Forwarders, he said.
Dr Mbiah said the Authority periodically conducted research into problems and challenges confronting shippers and the findings led to the formulation of appropriate solutions to shippers’ problems.
“Research projects conducted have included those on pilfering at the Port ; Takoradi and Tema Cargo Clearance procedures; Taxes, duty and charges at the Banjul Port in the Gambia; and Evaluation of the Benefits of the Transit Trade in Ghana,” he said.
There have also been studies on the impacts of an upward review of shore-handling rates by GPHA; GCNet’s System on Cargo Clearance Procedures; and Demurrage Payments on the activities of Shippers.
The GSA Chief Executive said the Authority was also contributing to the Boankra Inland Port (BIP) Project.
400 acres of land at Boankra in the Ashanti Region has been acquired for the construction of an inland port.
He said the Boankra Inland Port (BIP) project was being re-packaged together with the Eastern Railway line for development by Government.
“Indeed a Transactions Advisor has been selected to package the project for funding,” he said.
The GSA had established the Takoradi Logistics Platform (TLP), an oil service platform to be used by operators in the Jubilee Oil fields and other similar fields, he said.
Additionally, it had built the Shippers’ Centre – to houses SHIPPERS’ offices equipped with computer facilities for use by shippers and other operators in the transport logistics chain, he said.
He said: “A 12-storey Accra Shippers’ Center under construction is expected to house its Head Office as well as a ship brokerage hall, to create the medium for the establishment of a freight market in Ghana.
“It is expected to be a Centre of “maritime technology” linking the ports of Tema, Takoradi, the Kotoka International Airport as well as the Boankra Inland Port by satellite,” he added.
The Authority started operations as a subvented Agency under the ministerial supervision of the Ministry of Trade.
However, in 1987, with the passage of the Ghana Shippers Authority Cargo Sharing Regulations L.I 1347, the Authority weaned itself from government’s subvention and became a net revenue earner, supporting the foreign exchange requirements of Bank of Ghana.
GSA’s activities were initially supervised by the Ministry of Trade; however, overtime the responsibilities were handed over to the Ministry of Transport because most of the activities were related to the transportation of the cargo.
The move was also to conform to the practice in West Africa where other Shippers’ Councils, who were also members of the Union of African Shippers’ Councils, were under the supervision of the Transport Ministries of their various countries.
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U.S.-Africa business vision clouds up
Conflicts, famine and Ebola blunt bid for greater commercial ties; playing catch-up with China
American and African leaders in August celebrated a new story for Africa, one centered on an era of expanding commerce and a shift away from a relationship built around conflict, terrorism and pestilence. But months after a summit in Washington, those remain the ties that bind. Business, as usual, not so much.
“The expectations coming out of the [U.S.-Africa Leaders’ Summit] might have been unrealistic,” said John Campbell, a senior fellow for Africa Policy Studies at the Council on Foreign Relations in New York. “To develop fruitful economic ties will take a long time.”
The succession of crises is bound to make that transition a bumpy one.
In South Sudan, American and African diplomats are trying through peace talks to bind together a rupturing nation. Three years after independence – and $2.2 billion in total U.S. aid later – warring leaders are fighting over sputtering oil fields. The conflict has killed more than 10,000 people and raised the prospect of famine.
The highest-profile American presence these days is over African skies. In September, U.S. drones and manned aircraft launched Hellfire missiles that killed Somali militant commanders, including al-Shabaab’s leader. In Nigeria, surveillance flights are still searching for more than 200 schoolgirls nearly six months after militant group Boko Haram abducted them from a boarding school; although police on Sept. 25 said one captive was released, there are no signs of the others.
Meanwhile, Ebola has exploded – snarling air traffic, deterring investors and drawing American troops to West Africa. Before the U.S. military and more international assistance arrived, the Centers for Disease Control and Prevention warned that the number of cases in Liberia and Sierra Leone could soar to 1.4 million by mid-January. The hemorrhagic fever has killed more than 3,300 people, and the risks Ebola poses to the U.S. were underscored after a Liberian man emerged in Dallas with the virus.
This isn’t the picture U.S. and African leaders hoped to portray during their summit. It points to a historic challenge of how to alter perceptions of a continent that, from the outside, appears to be in constant turmoil.
In early August, President Barack Obama urged American business leaders attending the summit not “to lose sight of the new Africa that’s emerging.” He announced $21 billion in investment and trade deals to expand America’s commercial footprint. He set aside an additional $12 billion for Power Africa, a program to increase electricity for a continent where 600 million people live without it.
U.S. officials envisioned American companies moving into the slipstream of these commitments, positioning themselves to scoop up deals in power and technology. On a continent where the average age is just 19, there is now a new middle class of consumers – one that is fostering entrepreneurship and democratically elected leaders. This is the flip side to an Africa of brutal insurgencies and aging dictators.
“The story of Africa…is increasingly one of economic dynamism,” said J. Peter Pham, Washington-based director of the Africa Center at the Atlantic Council, a think tank. “What the summit tried to do and, at least for a moment, succeeded in doing, was to shift the narrative to this perspective.”
The failure to capitalize on the continent’s change means ceding more of a billion-person market to China, Africa’s largest trade partner. China’s state-run companies long ago raced into the continent to cut resource and infrastructure deals. Today, it is Chinese private companies courting African consumers with televisions, cars and smartphones. China’s trade in 2013 with the continent grew to $210 billion while U.S. trade with Africa fell for a second straight year, to $85 billion.
“Quite visibly, the U.S. is trying to play catch-up,” said Michael Power, a Cape Town-based strategist for Investec Asset Management. “China Inc., in all its guises, remains very enthusiastic about Africa’s prospects; by contrast, U.S. Inc. is very much more hesitant.”
The Ebola epidemic has reinforced perceptions of Africa as a risky frontier market. Airlines have canceled flights to Ebola-affected countries and even some of the unaffected ones, such as Kenya.
Kenya has suffered a series of shooting rampages on its coast. Those attacks, ascribed to both militants and government opponents, have prompted travel warnings from the U.S. and the U.K. and left tourist hotels empty.
Faith in a South African government racked by graft allegations is slipping, as the continent’s most-advanced economy fell three spots on the most recent Corruption Perceptions Index compiled annually by the Berlin-based Transparency International, to a ranking of 72 out of 175 countries, barely ahead of Greece and China.
These problems obscure opportunities, but also reflect a continent that hasn’t always been a welcome home for American investment, said Ed Royce, chairman of the House Committee on Foreign Affairs and a longtime proponent of increased U.S.-Africa trade.
“Capital is a coward,” he said. “Foreign investors will be timid without rule of law and strong governance.”
For some African policy makers, American security concerns are what will continue to shape engagement with the continent – even as business becomes a growing part of the relationship. That is especially true in a place like Nigeria, home to a huge frontier market as well as an insurgency that has carved a swath of control out of the country’s northeast.
“America sees an existential threat in the fight against global terrorism. It’s that mind-set that prioritizes those things,” said Kingsley Moghalu, author of “Emerging Africa” and deputy governor of Nigeria’s central bank. “It doesn’t mean that things aren’t happening on the ground.”
Patrick McGroarty contributed to this article.
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New electronic port clearance goes live
Clearing and forwarding agents Wednesday started filing documents through the Kenya National Electronic Single Window System, which is expected to ease customs processes at the port.
The Kenya Revenue Authority (KRA) has cleared 80 firms to operate under the Authorised Economic Operators status that gives special cargo clearing privileges. They will be the only ones to lodge import declaration forms, permits and other documents on the system.
“The system will be fully rolled out to importers from December 1,” KRA said in a notice.
The switch to the Single Window system came after a successful piloting by the Kenya Trade Network Agency (KenTrade).
The agency’s general manager in charge of operations, Amos Wangora, said the system is now able to process export and import permits issued by the Kenya Bureau of Standards (Kebs), Kenya Plant Health Inspectorate Services and the Department of Veterinary Services.
Other permits include those issued by the Horticultural Crops Development Authority, Pharmacy & Poisons Board and Port Health.
The system is also integrated with that of the Kenya Ports Authority for processing vessel manifests.
“All the shipping agents have been trained and over 130 manifests have been successfully submitted and approved through the Kenya TradeNet System. Over 3,000 import declaration forms have been lodged and processed,” says a recent implementation status report seen by the Business Daily.
When the system is fully operational, 25 government agencies involved in clearing cargo and issuing import and export documents will be operating through the platform.
“Individual agencies will have to stop using the manual system and we are already in discussion with various chief executive officers to fast track this process,” Mr Wangora said.
Kebs was the first agency to require that inspection of all imports be done through the Single Window System starting August this year.
Initially, importers seeking clearance from Kebs were required to submit their documents manually, a process that was time-consuming and inefficient.
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Obama, Modi highlight TFA impasse concerns, call for “urgent” WTO consultations
US President Barack Obama and Indian Prime Minister Narendra Modi concluded their leaders’ meeting in Washington on Tuesday, directing their officials to “consult urgently” with their fellow trading partners in the hopes of resolving the current WTO impasse on the implementation of the Trade Facilitation Agreement (TFA) and the issue of public food stockholding.
The two said that they discussed both their “concerns” about the ongoing stalemate, as well as its potential effects of the multilateral trading system, according to a joint statement released following the meeting.
“We had a candid discussion on [the] Bali ministerial of the WTO,” Modi acknowledged to reporters on Tuesday, referring to the December 2013 meeting whether the TFA text was agreed. “India supports trade facilitation. However, I also expect that we are able to find a solution that takes care of our concern on food security.”
The Indian premier added that he believes “it should be possible to do that soon.”
Neither leader went into further detail in their remarks, and it remains to be seen what impact their statements may have on the ongoing WTO discussions.
Speaking at the New York-based Council of Foreign Relations on Monday ahead of his meeting with Obama, the Indian premier had reiterated his stance that, while being in favour of the trade facilitation pact itself, advancing its implementation would need to go “hand-in-hand” with a result on food stockholding.
“It cannot be that you do this first and we will see the other later on,” he said.
Months of discord
The highly-anticipated summit in Washington, which was the first between the two leaders since Modi took office in May, had been looked to by trade observers as an opportunity for potentially resolving the conflict, which has dominated WTO talks in Geneva for the past couple of months.
Efforts to advance the implementation of the TFA – one of the main deliverables from last December’s WTO ministerial conference in Bali, Indonesia – screeched to a halt in late July, after India refused to back the adoption of a Protocol of Amendment that would have incorporated the text of the deal into the global trade body’s legal framework. (See Bridges Weekly, 31 July 2014)
At the time, India explained that it would not be able to support the Protocol until it saw sufficient signs of movement on developing a “permanent solution” on public food stockholding. This solution, it has said, should be reached by the end of this year.
The latter issue had been a subject of protracted discussions during the December meeting in Bali, with India having agreed to accept an “interim solution” on the subject while a permanent one was being negotiated in advance of the 2017 ministerial. (See Bridges Daily Update, 7 December 2013)
Under the terms of the interim solution, WTO members committed to “refrain from challenging through the WTO Dispute Settlement Mechanism, compliance of a developing member with its obligations under Articles 6.3 and 7.2 (b) of the Agreement on Agriculture (AoA) in relation to support provided for traditional staple food crops in pursuance of public stockholding programmes for food security purposes.”
This commitment is subject to certain conditions, such as the notification of these programmes to the WTO’s Committee on Agriculture by the developing country in question. The latter must also take steps to make sure that the stocks procured under these stockholding schemes do not distort trade, nor affect the food security of others.
Questions of trust
Back in Geneva, delegates have been meeting in various configurations in an effort to determine next steps.
A meeting of the WTO’s Trade Negotiations Committee (TNC) – which is tasked with the overall Doha talks – is scheduled next Monday, with the TFA stalemate set to be the main focus on the agenda.
Director-General Roberto Azevêdo has instructed the chairs of the negotiating groups to report back on their discussions at that time.
The WTO chief has warned that a prolonged stalemate could have a “freezing effect” on the global trade body’s other work, including on efforts to advance the remaining parts of the Doha Round negotiations.
Sources say that meetings of the agriculture and non-agricultural market access committees have already shown signs of this difficulty, with members unable to agree on how – or whether – to advance any post-Bali work, given the current impasse. Many have reportedly raised the question of whether too much trust has been lost.
During the global trade body’s annual Public Forum this week, Azevêdo told a packed conference hall that the Bali deal – of which the TFA and interim solution on food stockholding were a part – is “this kind of construct that, when you touch one piece, everything moves.”
“The biggest gain from Bali was the recovery of trust,” he noted, given the long-running struggles of the Doha Round of trade talks, which have been underway since 2001. “We’re beginning to lose that trust once again, and we cannot let that happen.”
TF Committee hits snag
A meeting on Monday of the Preparatory Committee on Trade Facilitation – which was established following the Bali ministerial, and is tasked with shepherding the trade pact into force – saw notable divergences among members over its future work.
The US said that discussions on TFA implementation are now at the General Council level, and should not be continued in the Preparatory Committee. Furthermore, the US delegation said that the Committee had completed its work and should thus not host further meetings – a statement that reportedly drew considerable pushback from other members, with some saying that the committee still has more to do.
Others reportedly said that it is up to the chair – Ambassador Esteban Conejos of the Philippines – to determine when the next meeting should take place, and asked him to get clarification as to whether a single member could block the hosting of a meeting. The ambassador had suggested 7 November as a tentative meeting date.
While Australia reportedly agreed that the situation is a political one, and the Preparatory Committee is a technical body, the EU reportedly urged fellow members to wait until next Monday’s TNC before deciding whether to proceed with another meeting.
This article is published under Bridges, Volume 18 - Number 32
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Kenya poised to reap rewards of prudent policies
Rising domestic and foreign investment are set to boost economic activity in Kenya, as the central African country reaps rewards of extensive institutional reforms and prudent macroeconomic policy, the IMF staff said.
In a regular review of Kenya’s economy, the IMF staff noted a surge in public investment in infrastructure, renewed interest of foreign investors, and lower transaction costs thanks to information technology.
The IMF staff report projected higher growth in the Kenyan economy for a third straight year, at 5.8 percent in 2014/15 after an estimated 5 percent in 2013/14. Inflation remains moderate, but rising food prices and rapid credit growth may fuel inflation expectations. Foreign reserves have increased steadily and are broadly adequate (see Chart 1).
Kenya is taking steps to adapt its policies to middle income country-type challenges, the report said, noting the country’s market-friendly business environment. The country’s successful debut Eurobond issuance suggests a promising outlook for Kenya to further integrate with global financial markets and to reach, in time, emerging market status.
The staff report noted, however, that manufacturing, transport, and communications were the main supports of growth in early 2014, while the agricultural sector was relatively subdued due mainly to poor rains. In addition, security concerns following terrorist attacks and threats hit the tourism industry.
Oil discoveries
Promising commercial prospects of oil discoveries could potentially provide significant foreign exchange and fiscal resources, the report said. Kenya’s relatively high current account deficit, at 7.7 percent of GDP in 2013/14, reflects strong capital goods imports – in particular of equipment for oil exploration.
The Kenyan government has embarked on large-scale projects with sizable impact on domestic value added, the report said, citing construction of a railway between the capital, Nairobi, and the port city of Mombasa; geothermal power generation plants; irrigation projects; and new oil pipelines.
Drivers of growth
The report said there are five principal drivers of growth in Kenya that support positive projections of economic expansion.
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Improved business conditions arising from the removal of bottlenecks by increased infrastructure investment in energy and transportation;
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Expansion of the East African Community market thanks to decisive steps toward regional integration with neighboring Burundi, Rwanda, Tanzania, and Uganda;
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Reduced social strife as a result of devolution and central government transfers to 47 newly formed counties under the 2010 constitution;
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A more dynamic small and medium-sized enterprises sector arising from strong financial inclusion and small business access to credit;
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Higher agricultural productivity and reduced medium-term vulnerability of agricultural production to weather shocks, reflecting implementation of large irrigation projects.
A boost in investor confidence following the successful Eurobond issuance could further improve Kenya’s outlook. Accelerated regional integration, improved security conditions, and possible new discoveries of oil, gas, and other minerals could have a large impact on investor sentiment.
Nevertheless, the report added, the Kenyan economy is vulnerable to risks affecting the external and fiscal positions. Near-term risks include the potential for security conditions to deteriorate further, for poor rains followed by other weather-related shocks, and additional difficulties in implementing devolution that could complicate public finance management.
Banking by mobile phone
A section of the IMF staff report focused on financial inclusion – the general population’s access to banking and credit – and the contribution of banking by mobile phone. The low-cost technology of mobile banking has helped reduce overall transaction costs and has particularly benefited the poorest section of the population.
The M-Pesa network of money transfers by mobile phone has particularly boosted financial access, the report said. The number of micro accounts –holding deposits of less than $1,200 – in formal financial institutions has increased more than tenfold in the past decade.
Lower transaction costs, higher financial access, and continuous innovation of the mobile payment platform have a positive impact on social welfare (see Chart 2). Farmers benefit from schemes to acquire capital equipment that allow repayment by mobile banking; solar panel installation can be financed by mobile phone; basic health care management can also be conducted by mobile phone.
Natural resource management
In a section on managing Kenya’s natural resource wealth, the report cited commercial estimates that put the country’s oil and gas reserves at levels similar to those of Equatorial Guinea and the Republic of Congo – respectively sub-Saharan Africa’s fourth- and fifth-largest oil producers. If these reserves are confirmed, they could bring Kenya’s external current account to surplus soon after exploitation starts.
Kenya’s government plans to reform the legal and regulatory framework for natural resources to enable prudent management of oil and gas resources. The report observed that Kenya’s petroleum regulatory and fiscal regime dates from 1986 and is in need of modernization.
Specifically, the production-sharing scheme for oil does not properly reflect costs, prices, and production volumes and should be revised; new production-sharing terms for gas need to be specified; and a full gas-specific regulatory framework is required. The report notes that work to enact most of these enhancements is under way, with the support of technical assistance from the IMF.