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Goods worth N5.3bn cleared through ECOWAS trade deal
Goods worth N5.3 billion were cleared through the ECOWAS Trade Liberalisation Scheme (ETLS) and Joint Committee on Commerce (JCC) in the first half of the year. Nigeria Customs Service (NCS), Customs Area Controller (CAC), Seme Border Command, Comptroller Willy Egbunin disclosed this in while reviewing the performance of the command for the first half of 2014.
The ETLS/JCC is a sub-regional effort of the Economic Community of West African States (ECOWAS) to facilitate trade and foster regional integration among member states.
It is one of the instruments used by member nations in the sub-region to boost their economies through free movement of goods and services.
According to Egbunin, ETLS compliant goods with a cost, insurance and freight (CIF) value of N5.3 billion were cleared through this command. He said while the revenue loss as a result of the concession to the scheme stood at N15 billion, the one per cent comprehensive import supervision scheme (CISS) collection amounted to N37.2 million
He explained that JCC like the ETLS is a trade facilitation tool as well as an economic arrangement between Nigeria and Republic of Benin.
He added that it is a bilateral agreement in which goods wholly manufactured in Republic of Benin can be imported into Nigeria without payment of duty.
He also disclosed that as at June 30, 2014, no fewer than 24 factories were listed under the scheme.
According to the customs chief, their relationship with the surrounding communities, their monarchs, Nigeria and Benin security agencies are at an all-time high.
“We have improved on the existing cordial tie between the Customs and various communities, as well as agencies in the border area. Beside the periodic visits to monarchs wherein we enlist their support in educating their subjects on the ills of smuggling, we have also been holding meetings with baales and representatives of various communities,” he said.
He explained that at various fora and meetings, the focus of the command was to sensitise the youths to avoid any unlawful act like smuggling and arson.
“They are also encouraged to report any infraction or strange movements and developments to law enforcement agencies. The law enforcement agencies meet monthly at a joint border security meeting to synergise in promoting the security of the nation”, he added.
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More and better financing for development
One of the major issues in the Open Working Group’s outcome report on the shape of the post-2015 agenda is the availability and access to financing to allow the goals to be met. There is a great temptation to simply try and calculate the financing needs for each goal and add them up to get the total financing need. Because this approach seems simple, it is appealing to many. The problem is that it is conceptually wrong.
First, financing cannot be easily separated from the policies and institutions in place in a particular country or region. To take just one example, there is no simple way of computing the amount of spending needed to improve the level of learning in a country so that all children pass some basic numeracy and literacy level. A lot depends on the overall efficiency of the schooling system. (In fact, the available research shows almost no robust relations between spending and learning outcomes, but conceptually one could imagine that in a specific country a calculation like this might be possible to do.)
Second, many development goals and outcomes depend on each other. It will cost less to reduce avoidable child deaths if women and girls are better educated than otherwise. Or, to take the most recent example of cross-sectoral effects, maybe the best way of reducing malnutrition is through better sanitation. We tend not to have good estimates of all these cross-effects, so typically when financing needs for one sector are calculated it is assumed that the situation won’t change much in other sectors. But if progress is made across the board in many sectors, the unit costs come down, sometimes quite dramatically.
Third, many of the costs of delivering public services take the form of wages paid to public sector employees – think of the salaries of teachers, doctors, nurses and the administrative staff in their ministries. Approaches to civil service salaries depend a lot on the macroeconomic context of each country. In Ghana, for example, after discovery of oil seemed to put the country on a path towards greater prosperity, teachers and health workers went on strike for higher wages. More generally, in any economy with a boom resulting from commodity price increases or new mineral discoveries, or even for one attracting large amounts of foreign direct investment, there will be pressures to raise wages. So costing social development goals also depends on the macroeconomic situation.
If we can’t easily add up how much money is needed, what, you might ask, is the point of having an international conference on financing? I think the answer is that the amounts, instruments and organization of financing have to change in important ways.
We should face the fact that developed countries are unlikely to commit substantial more resources to ODA. The commitments made to replenish IDA, the Global Fund and to the Global Partnership for Education have all fallen short of what was desired. Least Developed Countries (LDCs) rely most heavily on ODA, but most ODA still goes to middle income countries. Should there be a reallocation of ODA to LDCs? What about meeting the needs of disaster-prone small island economies? Or should ODA now be used to fund the growing array of global public goods (like clean energy) bearing in mind that most of the demand for such financing comes from large, relatively well-off middle income countries?
Alongside these issues of how to make better use of ODA are issues about the role and function of non-concessional financing agencies, like the multilateral development banks, IFC and bilateral non-concessional agencies. These were historically the main providers of infrastructure finance for middle income countries, but today they are small relative to other financial offerings or to the scale of what is needed. Is there a plan to see if these institutions are fit for purpose in terms of scale and instrumentality?
The BRICS have announced a New Development Bank to provide infrastructure financing, but it is not clear whether this will operate cooperatively or competitively with the existing financial institutions. China has proposed collaborating with the United States on infrastructure investments in Africa, following the bold new commitments of the US’ Power Africa program. These are encouraging signs of a potential collaboration between South-South Cooperation and traditional development cooperation, but there is much work to do to agree on operational modalities.
Businesses will also have a significant role to play in financing development, especially on the growth-related aspects of the agenda but also in selected parts of the social and environmental components. But businesses operate best in an environment of transparent rules and development-appropriate regulations, which have yet to be fleshed out.
It is these kinds of questions that should be at the forefront of the financing for development conference to be held in Addis in July next year. The questions arise because of a new context for development – more ambitious goals, more access by more countries to alternative sources of private capital, a global environment where low real interest rates are likely to prevail for a decade or more, more middle income countries with huge infrastructure bottlenecks, a growing level of deal flows across the world and a level of engagement by the business community in development of all kinds that is far more serious than before.
Encouragingly, the Global Development Network, in partnership with the Bill and Melinda Gates Foundation, has announced a new Next Horizons Essay Contest 2014 to solicit the best ideas. So if you have thoughts about how to organize development financing better, this is a chance to submit your thoughts to the scrutiny of your peers. Who knows, you may win a cash prize and the world may be exposed to a new idea that delegates can debate at Addis next year.
Homi Kharas is the Lead Author and Executive Secretary of the Secretariat supporting the High Level Panel advising the U.N. Secretary General on the post-2015 development agenda. He is a Senior Fellow and Deputy Director in the Global Economy and Development program of the Brookings Institution in Washington, D.C.
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‘Made in China’ now being Made in Africa
The cost of labor in China is going up, so Chinese manufacturers are moving to Africa, and they’re playing all the angles.
Sun Qiaoming is a trader from Jiangsu. He operates his import-export business on the Eastern coast of China, where there is plenty of space for a man with his drive and skills to prosper. Already fairly successful, he recently set his sights beyond his country’s borders. “There’s been much talk about the Chinese Dream in the past few years, but I have an African Dream.” he said. “African gold will fill my next bucket of gold.”
He wasn’t referring to the natural resources that President Obama recently hinted as the reason for China’s presence on the African continent. After all, Sun is a private entrepreneur, and receives no direct support from the government in his business endeavors. His “gold” is the labor in Africa – cheap, trainable, abundant, and ready to work. They may not have the decades of know-how that the Chinese developed during their meteoric rise in global production, but Sun is confident that with time and proper training, they will be able to match the efficiency and productivity of workers in China.
With rising labor and energy costs, as well as tightening environmental restrictions, it is becoming increasing difficult for Chinese industrialists to churn out cheap goods at a massive scale in their own country. Even as fresh university graduates suffer a high unemployment rate, few want to take jobs on factory floors. “The post-90s generation wants office jobs, not blue collar work,” Sun explains. “It’s understandable. Life is much easier now. Factory work is stable but I want my children to have other options.”
The result is an exodus of Chinese manufacturing to places where labor is cheaper and financial incentives like capital subsidies are offered to foreign-owned factories.
But vibrant industry requires solid infrastructure, which is where the Chinese government enters the equation. Last year, over 214,000 workers were posted in Africa to build highways, bridges, dams, and power plants. That’s about a quarter of all Chinese workers who are sent abroad to work for state-owned enterprises.
For decades, the Chinese government has had a foothold on the African continent. During the Mao era, the Chinese government funded and executed massive infrastructure projects like a railway connecting Tanzania and Zambia, reaping benefits on multiple levels. Not only does China have access to the wealth of natural resources in a multitude of African countries, the support from those nations was necessary for the People’s Republic of China to gain membership to the United Nations, opening up a plethora of opportunities in international diplomacy and trade.
Chinese support in Africa has been on a steady rise in the past 25 years. Trade between China and Africa rose by 700 percent in the 1990s. China’s foreign direct investment in Africa has increased by over 50 percent per year since 2001. Aside from the highly visible presence of state-owned enterprises that take on massive projects, privateers like Sun Qiaoming have been carving out their own commercial fiefdoms as well.
In the early 2000s, an acquaintance told Sun about the possibility of doing business in Ethiopia. At the time, Ethiopians still relied on imports from Western Europe for many commodities, most of which were costlier than goods produced in China. As a test, Sun shipped over a container stuffed with apparel made in his home province. After it reached Ethiopia, the contents were distributed and sold out in under two weeks. That marked the beginning of a fruitful long-term relationship with his Ethiopian clients. By utilizing those existing connections, and partnering with another entrepreneur from his hometown, he is in the final stages of planning for a new textile factory near Addis Ababa, joining other Chinese industrialists who have made the move.
Even though Sun and his partner plan on using materials and equipment imported from China, all of his factory staff will be Ethiopian. “It’s about adding value locally,” he explained. “Once we hit the 20 or 30 percent mark, our clothes will officially be ‘Made in Ethiopia.’ Then it will be easier for us to sell to the US and EU.” The west puts limits on commodity imports from China. Production relocation to Africa and South America have allowed Chinese enterprises to circumvent trade caps.
Sun is one of a small segment of Chinese businessmen willing to take the risk to establish new businesses in far-off lands, but prejudice is still an issue. “My family thinks all of Africa is the same. Just because Libya was evacuated and West Africa is dealing with Ebola, it doesn’t mean business is affected everywhere else,” he said. “But then, as much as I want to work there, I can’t look for a wife – marrying an African is marrying down – so I will need to do that here.”
It took a long time for the US government to realize that it is falling behind China when it came to economic engagement with Africa, whether between governments or private enterprises. Eager to catch up, President Obama hosted the recent US-Africa Leadership Summit, but positive attention on cooperation and renewed ties was overshadowed by statements suggesting that China was the elephant in the room.
Last week, during an interview with NPR’s Morning Edition, National Security Advisor Susan Rice attempted to point out the differences in how Americans and Chinese do business in Africa, suggesting that Chinese (state-owned) businesses bring in their own workers for projects in Africa, while American enterprises give those opportunities to locals and builds their capacities to maintain the infrastructure once construction is complete. However, Howard French, author of China’s Second Continent, contested those words and pointed out that American engagement on the ground in Africa is nearly absent, bringing up examples of American construction projects in Africa that were outsourced to a Chinese firm.
As the spin continues, it seems like the scales are tipped in China’s favor. The nation’s investment in Africa polishes its soft power image, and the improved infrastructure benefit the African nations and the many Chinese businessmen they host. Sun is confident about his new venture, and genuine enthusiasm and excitement are packed into his words when he speaks of his upcoming journey. “I love spicy food, and my friends tell me that Sichuan hotpot has become very popular in Addis Abeba,” he said. Even with new beginnings, he won’t be missing some of the comforts of home.
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India amends DFTP scheme to increase trade with Africa
India has amended its duty-free market access scheme for African nations to help boost trade between the two regions, industry body CII said today.
“In order to expand trade with Africa, India had recently amended its Duty Free Tariff Preference (DFTP) scheme to cover around 98 per cent of the tariff lines,” CII said, quoting Commerce Secretary Rajeev Kher.
Under the scheme, import of most products from least developed nations to India attract lower duties.
The government is in the process of disseminating this information to all the nations.
The government is also considering expanding and augmenting the Lines of Credit extended to Africa, Kher said.
Kher was addressing the representatives of Regional Economic Communities in Africa late evening yesterday.
Highlighting growth in India-Africa trade relationship, Kher said it has increased 10-fold over the past 10 years.
Further, he also sought cooperation of African countries at the WTO on the issue of food security.
Meanwhile in a separate statement, Engineering Export Promotion Council (EEPC) said that India and Africa need to resolve issues like connectivity and infrastructural bottlenecks to reach the mutual trade target of USD 100 billion by the end of 2015 from the present level of about USD 70 billion.
These issues were highlighted at a meeting between the EEPC members, senior officials of the Commerce Ministry and diplomats from the African countries here today.
Engineering exports to Africa stood at about USD 10-12 billion, which is about one-third of India’s total exports to the continent.
“We are keen on further engaging not only with top destinations like South Africa, Nigeria, Kenya, Egypt etc but also several other countries in the region, rich in natural resources,” EEPC India Chairman Anupam Shah said.
See also: Can India’s Duty-Free Scheme foster Trade and Development in African Least Developed Countries? Published in GREAT Insights Volume 3, Issue 4 (April 2014)
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Kenyan exporters to EU to pay taxes from October
Kenyan exporters will from October start paying taxes on goods entering the European Union, until the ratification of the Economic Partnership Agreements – which could take months – is complete.
“The EU regulations require that any trade agreement made will have to be discussed at the Council of Ministers level and ratified by the EU parliament before it is implemented – and that takes time,” said Christophe De Vroey, the trade counsellor at the EU mission in Nairobi.
He would not say exactly how long it would take for the agreement between the EU and the East African Community to be ratified, but noted the process normally takes three or more months.
“It is the ratification that will allow Kenyan products to be added to the list of goods that are tax exempt,” he said.
Negotiations for the EPAs between the EAC and the EU started in 2007 with the initialling of the Framework EPA happening on November 27, 2007. However, the two blocs have failed to agree on a number of issues, causing the deadline to be postponed several times.
Last month in Kigali, the two sides yet again failed to agree on provisions for agricultural subsidies that farmers in the EU benefit from, duties, taxes on EAC exports and non-trade issues such as good governance and transparency in the Cotonou Partnership Agreement. The three remain pending out of 11 issues.
It was the reason the delegates resolved that the discussions be moved to the ministerial level for a political solution to be found.
The EPAs are trade and development agreements negotiated between EU and the African, Caribbean and Pacific (ACP) region.
With an EPA, exporters from Kenya will continue selling produce to the EU duty free, instead of being at a price disadvantage against rivals like Ethiopia and Colombia, which have signed the agreements.
Mr De Vroey said it was only Kenya in the list of top countries doing trade with the EU but not classified as a least developed country that was yet to sign the agreement. Least developed country status means other member states will continue benefiting from tax exemptions, even if the signing of the EPA is delayed.
Deadline lapse
Once the deadline lapses on October 1, Kenyan exports will fall under the GSP (Generalised System of Preferences) standard regime, meaning its flowers and other horticultural products will attract a tax of between five and eight per cent and fish products about 12 per cent.
Kenya exports flowers to the EU worth Ksh46.3 billion ($537 million) and vegetables worth more than Ksh26.5 billion ($307 million) annually. The EU takes about 40 per cent of Kenya’s fresh produce exports.
“If EAC fails to reach an agreement with the EU, Kenya will lose about Ksh12 billion ($140 million) per year. The figure could rise to Ksh18 billion ($209.3 million) if you factor in processed products entering the EU,” said Jane Ngige, the Kenya Flower Council chief executive.
It is not known when the two economic blocs will hold a ministerial meeting to thrash out the remaining contentious issues as had been recommended in the last EU-EAC meeting held in Kigali.
Mr De Vroey confirmed that EAC Secretary-General Richard Sezibera has written to the EU requesting a ministerial meeting but added that the 28-member trade bloc was yet to respond to the letter.
“Yes, the EAC has written to my commissioner requesting a ministerial meeting but we are yet to respond. We would have preferred that the outstanding issues be dealt with at the senior officers level and only move to the ministerial level for signature,” he added.
Mr De Vroey said the senior level is where all the technical officers are, adding that it would have been prudent to complete the agreement there.
He added that the EU had been flexible but had reached a point where it could not go any further, urging the EAC to sign the agreement.
“There has been flexibility on both sides since this is a very complex agreement and is not like selling a car where you agree on the price and that is all. However, there is a limit to flexibility. We have already concluded the agreement with the other trade blocs in Africa.”
The announcement will be a major blow to the economy in general, currently experiencing tough times due to a myriad factors ranging from poor performance of the agricultural sector, to a decline in tourism numbers due to rising insecurity.
Efforts to get a comment from Kenya’s Principal Secretary for Foreign Affairs, Karanja Kibicho, who was the head of the EAC negotiating team in Kigali, proved futile.
However, in an opinion piece published in the Daily Nation on August 14, Dr Kibicho said what remains now is to agree on a few points of concern, “basically to do with the phrasing of some sentences.”
He accused the EU of seeking to prevent the EAC from imposing duty and tax on its exports.
“This is a vital policy instrument used by all the World Trade Organisation countries for purposes of value addition to products, industrial development, development of infant industries, food security, environmental protection, currency stabilisation, and revenue collection,” Dr Kibicho said in the opinion piece.
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Smuggling: Zim’s headache
Corruption within the law enforcement agents and customs officials at Zimbabwe’s border post with South Africa is fast wiping off the achievements this country has registered, such as high literacy levels and the commitment to duty that its workforce is generally renowned for.
The smuggling of minerals, cigarettes and explosives into South Africa through the Beitbridge border post has become rampant. This, however, happens under the nose of able law enforcement agents and customs officials.
The Zimbabwe Revenue Authority has two mobile scanners which are used for detecting contrabands from goods or cargo that is being exported to South Africa and two scanners on the import side.
Zimra also has an anti-smuggling team and the specialised dogs section dedicated to deal with intrusive leakages at the border post.
There is a high presence of police officers on both sides of the border (exit and entry).
Zimbabwe recently received hi-tech scanners worth US$105million from China in a move set to curb smuggling.
The mobile scanners have a potential to scan 20 vehicles per hour.
According to Zimra, the scanners verify cargo with its density in relation to the customs declarations made by the importer or exporter.
For instance a person can declare that they are exporting liquid but the scanners can detect if there is anything other than liquid in the consignment.
Despite having all these resources the police and customs officers have failed to detect these intrusive leakages.
On average, SA intercepts three or four people trying to smuggle minerals, explosives and cigarettes through Beitbridge Border post per week.
The criminals will be using haulage trucks or private vehicles.
These are arrested after being detected by the South African Revenue Services’ (SARS) dog unit.
In most cases the smugglers claim to have paid either Zimra or police officers to facilitate a smooth passage into the country southern neighbour.
Limpopo police spokesperson Brigadier Hangwani Mulaudzi said the smuggling of explosives, minerals and cigarettes was a cause for concern at Beitbridge Border Post.
Brig Mulaudzi said police had intensified patrols and searches on travellers in light of an increase in cases of smuggling.
“We are worried about the recurrence of such cases where people try to smuggle these explosives into the republic. We suspect these are used for illegal mining activities and ATM bombings,” he said.
They are more than 15 roadblocks between Harare and Beitbridge border post where most of the minerals and cigarettes come from.
There are approximately 10 roadblocks between Bulawayo and Beitbridge border where most detonators and explosives come from.
The trading of export quality cigarettes, explosives and minerals is controlled in Zimbabwe and still remains a mystery why the police are failing to intercept them before they get to the border post at the many roadblocks on the highways leading to the border post.
The then Zimra’s regional manager for Beitbridge border post, Mr. Adrian Swarres told students from the National Defence College during a tour of the facility last year that smuggling was rampant along the Limpopo River.
He said that on the export side cigarettes were the main product that was being smuggled while banned food stuffs which are genetically modified especially chickens and potatoes formed the bulk of items that were being smuggled on the imports side.
Mr Swarres said they had periodic meetings with security agents from both Zimbabwe and South Africa exchanging notes on how best they could reduce smuggling.
The smuggling of cigarettes has been on the increase especially to countries that are outside Southern African Customs Union (SACU) because of high excise duty as compared to the union members which are; Lesotho, Swaziland, Botswana, Namibia and South Africa.
Reports also indicate that these cigarettes are repackaged in South Africa before being exported to Asia and other European countries.
According to a report by SARS in 2013, Zimbabwe contributed 70 percent of the cigarettes smuggled into that country through Beitbridge border post alone.
National police spokesperson Senior Assistant Commissioner Charity Charamba said they intensified patrols along the Beitbridge Border with a view to curbing the smuggling of goods into and outside Zimbabwe.
“These patrols include joint operations with our South African counterparts. Since January 2014, the Zimbabwe Republic Police has arrested 62 Zimbabweans and foreign nationals who were trying to smuggle goods into and outside the country’s borders.
“A total of 6 869 cartons of cigarettes valued at US$686 980 were recovered in the process,” she said.
Snr Asst Comm Charamba said the police were encouraging people to follow laws governing the sell, importation and exportation of cigarettes within and outside Zimbabwe.
“As police, we encourage individuals and companies to follow these procedures and engage the Ministry of Industry and Commerce for assistance. We will not hesitate to arrest anyone who tries to evade the country’s system by smuggling goods outside our borders,” she said.
She said in the case of explosives members of the public should approach the Ministry of Mines and Mining Development on the modalities of handling and exporting explosives.
She added that the movement of goods within Zimbabwe is not an offence though there were some people who were burnt on breaking the law.
“We also have situations where smugglers have passed through police, Zimra and Immigration checkpoints which include roadblocks; however, this is by chance as most culprits have been arrested at these points.
“Please take note that it is not possible for the Zimbabwe Republic Police to search each and every vehicle which passes through a roadblock lest the public will raise concerns.
“Our officers are required to use their discretion so as not to create traffic congestion on the road,” she added.
She said the force had adopted a zero tolerance stance on corruption.
She said swift and decisive disciplinary action has been taken on police officers who have engaged in any form of corruption.
She added that some of the cases were still pending before the courts.
“We have also arrested members of the public who have tried to connive with bad elements within our system to perpetuate corrupt acts.
“We have regularly conducted lifestyle audits on all our Police details and this is an ongoing exercise. Routine transfers have always been conducted in the Zimbabwe Republic Police in line with our human resources Policy
“However, it is disturbing to note that some journalists have been querying our recent transfers yet they cry foul if such transfers are not affected,” said Senior Ass Comm Charamba.
She said anyone with information on corrupt activities by members of the police force, Zimra, Immigration Officers and the public should report to the Police Command so that swift action can be taken.
“The public should utilize our National Complaints Desk telephone number (04)-703631 to report any corrupt incident,” she said.
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Comesa lobbies MPs to enact anti-food trade ban laws
Comesa wants national parliaments to enact laws that discourage bans on the food trade.
Bans on import and export of staple food, particularly maize, have become common among member states, discouraging private sector investment in agriculture over fears that policy shifts could destabilise markets.
Some members like Tanzania and Zambia have recently announced ad hoc measures affecting either import or export of certain food crops. The most affected is maize, the region’s staple food.
“The implications of such decisions include market gluts at the producer level, resulting in informal trade channels including smuggling, corruption and ultimately higher transaction costs and consumer prices,” said Argent Chuula, Alliance for Commodity Trade in Eastern and Southern Africa chief executive.
At the Eastern and Southern Africa Parliamentary Policy Seminar on Import and Export Bans held recently in Lusaka, Zambia, Comesa said it would work with Members of Parliament from its member states to ensure a predictive policy on food trade is implemented.
Comesa also wants to establish a formal framework of working with regional parliaments to evaluate, monitor and enforce some of its policies.
Predictive policy
Comesa will now compel member states to have a predictive policy, following a resolution reached at the recent meeting between the bloc and MPs.
“We also need up-to-date documentation on food production data to aid food trade. Country A should know what county B has or does not have,” said Mr Chuula.
To enforce its policies, Comesa will work with MPs. Currently, there is no link between Comesa and regional parliaments.
“There is a political disconnect at the Comesa level. The bloc is seen as elitist – a club of ministers and presidents – yet its policies are meant to benefit the wider public,” said Kenyan MP Benjamin Washiali.
Another policy change will involve participation of the private sector in building up strategic food reserves. This will be done by providing an enabling environment for a warehouse receipt system that works, the key component of commodity exchanges.
Intra-Comesa trade in goods increased from $3.1 billion in 2011 to $19.3 billion in 2013. This excludes informal cross-border trade in goods estimated at about 40 per cent of total trade and services. These, on average, contribute 60 per cent of the GDP of Comesa member states.
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Namibia denies SADC rift
The Minister of Trade and Industry Calle Schlettwein has set the record straight after international media reports claimed that Namibia refused to sign the Southern Africa Development Community (SADC) Protocol on Trade in Services. According to international media reports, South Africa and Namibia left SADC Chairperson Robert Mugabe ‘red-faced’ when they declined to sign the protocol at the close of the SADC Heads of State and Government Summit in Victoria Falls this week.
During the Summit, Mugabe pleaded for support to allow him to steer the agenda of the regional group, reports said.
The veteran Zimbabwean leader appealed to South Africa to cooperate with the region and allow other SADC states the chance to sell their products.
Mugabe hit out at the Zuma administration for being “selfish” by refusing to sign the protocol.
South Africa, which was highly industrialised, should cooperate with SADC and “not just regard the whole continent as an open market for products from South Africa,” he said, adding that the aim was to create a reciprocal relationship where countries sold to each other instead of just receiving products from one source.
Reports also sensationalised the issue, claiming that the master of ceremonies at the closing ceremony indicated that the two countries would sign the protocol, which turned out not to be the case.
President Jacob Zuma of South Africa and Namibian President Hifikepunye Pohamba decided not to sign after consulting with their ministers of trade.
Speaking on Thursday this week, Schlettwein noted that Namibia had actually given notice that it would not sign the protocol.
He emphasised that the country would only do so once it has concluded its own internal processes relating to regulated industries.
“I reminded [the president] that we are still busy with internal processes for the signing of free trade in services,” Schlettwein said.
“The difficulty is that all the services covered to date by the protocol are regulated services. There are complex issues we need to conclude and annexure. We will consider signing when this process is complete,” he said.
He added that, contrary to what the international media had portrayed, the decision had not caused an uproar and Namibia had not blatantly refused to sign the agreement.
Reports stated that the two countries had resisted pressure from regional heads during the deliberations.
However, Schlettwein said Namibia had decided on its position beforehand, and there would be no impact as the protocol and its annexures (some of which were still under negotiation) had not yet been enforced.
While the Heads of State signed the SADC Protocol on Trade in Services in August 2012, Namibia and South Africa requested more time to consider.
According to the SADC website, the protocol sets out general obligations for all State Parties with regard to the treatment of services and service suppliers from other State Parties.
It does not contain liberalisation obligations, but provides for a mandate to negotiate removal of barriers to the free movement of services progressively.
SADC launched negotiations on the liberalisation of six priority sectors (communication services, construction services, energy-related services, financial services, tourism services, and transport services) in April 2012.
Member countries expected these negotiations to result in market access commitments that would provide a predictable legal environment for trade and investment in the sector within the region, according to the regional body.
However, Schlettwein emphasised that people should not confuse the delay in the signing of this protocol with the SADC Free Trade Area, with which Namibia remained fully compliant and a strong proponent of.
The regional grouping achieved the SADC Free Trade Area in August 2008, when a phased program of tariff reductions that had commenced in 2001 resulted in the attainment of minimum conditions for the Free Trade Area.
The meant that 85 percent of intra-regional trade amongst the partner states attained zero duty.
While they met the minimum conditions, member countries only attained maximum tariff liberalisation by January 2012, when they completed the tariff phase down process for sensitive products.
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Tripartite FTA: How EA manufacturers can compete with South Africa
The ongoing tripartite negotiations will open up new markets for Kenyan goods in the EAC, Comesa and SADC blocs.
But how will Kenya respond to the threat of South Africa’s manufacturing industry while still leveraging on the opportunities of a larger trading bloc?
Both nations share similarities as they are influenced by access to local resources and therefore have strong food, textiles and metal processing activities.
The largest manufacturing sectors in both nations are food and beverage and non-metallic mineral processing while petroleum and chemical products are among the fastest growing sub-sectors. This makes South Africa a formidable competitor.
But a comparative study done this year by the Carnegie Mellon University of Australia shows that it could be a David vs Goliath scenario since the South African manufacturing industry is 9.3 times larger, less import-dependent and more sophisticated.
It includes a significant production level of elaborately transformed products such as electrical machinery with an export value that is nearly 13 times higher than Kenya’s.
Growth rate
Still, the fastest growing sub-sectors are relatively small while the largest sub-sectors feature modest growth, and this is the reason why the growth rate in both nations has been disappointing.
Manufacturing remains a declining part of GDP, prompting both governments to target manufacturing to accelerate future development.
Both nations export much less than they import and they have a significant trade deficit.
To compete with South Africa, Kenya can exploit a few weaknesses in Pretoria’s policies. For example, the National Growth Path is said to target economic sectors with the most growth potential, but it does not have clear criteria to determine that potential, nor is it obvious why fast growth sectors need assistance.
The Industrial Policy Action Plan II targets 14 different sectors, eight of which are manufacturing sectors and again, the criteria for targeting remain unstated and the list of targets is very long.
In effect, the country tries to support all of its industries.
South Africa’s policies are aimed at multiple objectives. The National Growth Path seeks to address economic development, but also deals with unemployment, inequality and poverty.
The Industrial Policy Action Plan II has mixed goals: While addressing the nation’s industrial development, it also includes historically disadvantaged people and marginalised regions. In a nutshell, while South Africa talks about targeting, it has no strategy for targeting.
Industrial clusters
By contrast, Kenya has a clearer policy and strategic intent. As outlined in the Second Medium Term Plan under Vision 2030, Kenya will develop industrial clusters such as meat and leather through the establishment of meat processing plants, tanneries and the promotion of dairy products processing.
As part of the policy development work within the EAC, some clear criteria have been identified. Using a framework developed by the UN Industrial Development Organisation (Unido), two parameters – attractiveness and strategic feasibility – are used with 17 weighted sub-criteria for calculating them. Industries that score highly on both parameters become priority.
While the scoring system used is unclear in the policy documents, we take this to indicate that Kenya appreciates the need for a targeting rationale within a national development strategy even though it lacks a sophisticated approach to manufacturing and fails to clarify how these targets fit into the continental supply chains that will emerge with the Tripartite Free Trade Agreement (T-FTA).
The best way to respond to the upcoming T-FTA and competition from South Africa, is not to defend all Kenyan industries. Rather, policies should augment the current approach to give it a more pro-Kenyan focus.
If the government can build clusters around benefits emanating from strong industries, it can effectively restructure the economy to make it less assistance-dependent and more self-supporting in a way that promises greater benefits with the same base level of government-assistance expenditure.
Written by Betty Maina, Chief Executive Officer, Kenya Association of Manufacturers
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Opportunities between Brazil and Africa in Fortaleza
The Brazilian city will host the 2nd edition of the Brazil-Africa Forum on August 28th and 29th, with government officials from 30 African countries, including Algeria and Morocco. The main topic will be infrastructure.
Next week, the city of Fortaleza will host the second edition of the Brazil-Africa Forum. The event is organized every two years by the Brazil Africa Institute and was created to foster closer relations between Brazil and African countries. This year edition will be themed “Infrastructure, partnerships and developments”. On August 28th and 29th, the capital of Ceará will receive government officials and delegations from 30 African countries, in addition to Brazilian government officials, public institutes and companies. They will take part in debates and deliver lectures.
From the Arab countries, OCP, a Moroccan fertilizer company which already operates in Brazil, the local ambassadors of Egypt, Hossameldin Ibrahim Zaki, and Mauritania, Abdellahi Nagi Kebd, representatives of the Sudanese Contractors Association, of the Sudanese ministries of Infrastructure, Transportation and Water and Energy Resources and the chairman of the industrial and trade conglomerate Cevital Group, from Algeria, Issad Rebrab have confirmed their attendance. The chairman of the Brazilian Sudanese Agribusiness Company, Paulo Hegg, will deliver the lecture "Agriculture with innovation: doing business and promoting social development" on Friday (29th), according to the event's schedule.
The president of the Brazil-Africa Institute and organizer of the event, João Bosco Ponte, told ANBA this Wednesday (20th) that the idea to have the forum arose out of the need to discuss a “shared agenda” of issues important to both Brazil and the African countries. Arab countries in North Africa, Ponte asserted, have shown interest in strengthening their ties with Brazil.
“I visited North African countries and noticed they are avid for closer ties with Brazil. We (the forum organizers) were seduced by the idea of carrying out an action with them. We should have a stand-alone event in the first half of next year in a North African country, which attests to their interest in effectively having closer relations with Brazil. A prime example of this interest is the return of Royal Air Maroc flights to Brazil, which brings the regions together,” he said.
According to Ponte, one of the reasons behind this desire to boost trade relations is the fact that major business partners of North African countries are European nations which are still trying to rebound from the crisis of 2008.
“They have been impacted by a European investment deficit and Brazil is proving to be a landmark, a safe haven for them. Furthermore, the Brazilian market is attractive for them,” said Ponte.
According to the event’s organizer, the other African countries show interest in strengthening trade and diplomatic ties with Brazil, which, in turn, sees them as an investment destination. Ponte mentions the presence of Brazilian business, especially construction companies, in the region and notes that the Brazilian Development Bank (BNDES) has opened an office in Johannesburg, South Africa.
In addition to the BNDES, the forum will feature delegates from Brazilian companies, the United Nations Environment Programme (UNEP), the National Confederation of Industry (CNI, in the Portuguese acronym), government officials from the state of Ceará, representatives of the Brazilian Agricultural Research Corporation (Embrapa), of the Oswaldo Cruz Foundation, the mayor of Fortaleza, Roberto Cláudio Rodrigues Bezerra, the Brazilian minister of External Relations, Luiz Alberto Figueiredo Machado, and the Brazilian minister of Development, Industry and Foreign Trade, Mauro Borges Lemos.
Click here for more information on the 2nd Brazil-Africa Forum – Infrastructure, partnerships and development.
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Nigeria’s shrinking imports data show policy gaining traction
Recent trends in Nigeria’s import trade dynamics have seen import values shrink since the last quarter of 2013, indicating that government’s policies to improve the country’s terms of trade are gaining traction.
These policies include the Agriculture Transformation Agenda, National Industrial Revolution Plan, backward integration programme, among others.
Imports into Nigeria have been falling for the two most recent quarters for which data are available (Q4 2013 and Q1 2014).
The National Bureau of Statistics’ (NBS) import figures for Q4 2013 show that imports fell by 19 percent from Q3 2013, recording a trade surplus of 20.3 percent for the period.
Nigerian exports in the first quarter of 2014 also rose by 14.2 percent from the previous quarter, while imports fell by 8.3 percent, resulting in a trade surplus of N2.4 trillion. Q1 2014 trade surplus rose to 35.4 percent, higher than the surplus for the previous quarter. Imports fell by 8.3 percent from Q4 2013, and 6.2 percent from the corresponding quarter of 2013.
Nigeria’s import figures have been falling markedly since the new Federal Government’s policy on rice, sugar (initiated in February 2013, but took effect in June 2013), fish, and most recently, the new automotive policy.
The policies, aimed at boosting the nation’s agric sector, have seen food imports fall by N2.5 billion in the last three years, according to Akinwumi Adesina, minister of agriculture and rural development, adding that Nigeria would surpass its target and produce 22 million tonnes of additional food by 2015.
“When we started in 2011, our aim was to produce additional 20 million tonnes of food to the existing production. As at the end of 2013, 17 million tonnes of additional food had been produced since 2011, and by 2015, 22 million tonnes of additional food would be produced,” said Adesina.
He said Nigeria was now the reference point for agriculture on the continent as the country was rapidly closing its food importation gap.
The new policies have seen a significant fall in the volume of those goods imported. Since the Federal Government imposed the new levy in addition to the import duty on rice imports, the Nigerian Customs’ rice-related annual revenues have fallen by at least 70 percent.
Prior to the implementation of the policy, rice imports accounted for between 70 percent to 90 percent of the Apapa Area One Customs Command’s monthly revenue.
Revenue generated from rice levies dipped by 90.6 percent, from N125.3 billion to N11.8 billion.
Charles Edike, Customs area controller, Apapa Area1 Command of the Nigeria Customs Service (NCS), said in an interview that the new import policy affected the revenue collection of the command.
“Fish, which used to be the second revenue source for the command, was also affected by the policy of government,” Edike said.
The NBS’ classification by section showed that the structure of Nigeria’s import trade was dominated by boilers, machinery and appliances (23.7 percent) mineral products (16 percent), vehicles, aircraft and parts (13 percent), base metals and articles of base metals (9.5 percent), and chemical and allied industries (8.5 percent).
At specific product level, motor spirit had the greatest value of imports, comprising 12.5 percent of total imports for Q1 2014, followed by spelt (common wheat) and meslin (a mixture of wheat/rye) at 3.5 percent, and machine tools at 3 percent of the total value of imports.
Wheat and wheat-related products, accounting for the second largest import commodity by value, highlights the degree of food dependency of the Nigerian economy.
This means that the Nigerian economy is still susceptible to fluctuations of food commodity prices on the international market. Increased wheat prices internationally will have knock-on effects for the FMCG industry and subsequently result in imported inflation.
Classification by broad economic categories showed that industrial supplies comprised 28.2 percent of total imports, followed by capital goods (22.3 percent) and transport equipment and parts (14.4 percent).
Nigeria’s trade surplus figures have acted as a boosting factor to the country’s macro-economic fundamentals. The value of the naira is expected to be stable in the near term, as demand for dollar eases, going by the analysis of the trade data. More accretion in the foreign reserves is also expected.
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A step toward formalization: The Charter for Cross-Border Traders
If you are woman in Sub-Saharan Africa and you live and work in a rural area, you are probably a trader. You are likely to be carrying a variety of goods across the border several times per day or week, and to rely on that as a major source of income to your household. You’re probably facing high duties, complex procedures, and corrupted officials at the border – the latter, in some cases, might want to harass you before they let you go through. You may not be able to read or understand what duties apply to the goods you are trading. In this scenario, what is your incentive to go through the formal border post?
It’s probably easier, cheaper, and faster to cross the border informally.
Informal trade in Africa
Informal trade is a common feature of African landscapes. Estimates indicate that some 3 million metric tons of staple food commodities were traded informally in East Africa in 2013, and that several hundred thousand cross Southern Africa’s borders via informal routes every year. In most cases (some say up to 70%) it’s women trading. And it’s not only agricultural commodities but also includes small electronics, household appliances, clothes, shoes and cosmetics, among others. Such trade is essential for welfare and poverty reduction: it creates jobs (particularly for vulnerable groups – not only women but also youth), supports livelihoods, and contributes to food security.
Yet, the challenges faced by small traders are huge. At the Mwami/Mchinji border post dividing Zambia and Malawi, for instance, small traders pay on average 62 percent more than large traders to informally move one ton of a commodity across the border, according to a forthcoming Diagnostic Trade Integration Study (DTIS) for Zambia. It would be three times that amount if they were to go through the formal border post. Then there is the centralization of procedures (e.g. permits and phytosanitary certifications only issued in capital cities), the unclear duty structure and documentary requirements, and the hostility of officials.
Existing measures to help small traders at the border
COMESA (Common Market for Eastern and Southern Africa) has tried to address some of those challenges with the Simplified Trade Regime (STR). Under this , traders carrying goods included in a pre-negotiated list and worth up to $1,000 can clear them with little paperwork (using a simplified certificate of origin) and without inspection by clearing agents. The processing fee also has been lowered in a number of COMESA countries. And yet, if you go to the Mwami/Mchinji border and ask the revenue authorities for statistics on STR users/month, you will get a very disappointing figure: between 5 and 10. Then, if you look out across the landscape, you can see hundreds of small traders walking or cycling through the bush. Some others do use the formal border but do not know about the STR and end up paying more than they should.
Filling the gap that remains
A gap still divides the traders from the officials: it’s the lack of awareness, the mutual distrust and the inaccurate information that induce the former to avoid the latter and choose informality.
The “Charter for Cross-Border Traders,” described in this World Bank Group policy note, tries to fill that gap. Similar to the idea of the lists of passengers’ rights and responsibilities displayed at many airports worldwide, the document enshrines a basic set of rights and obligations for traders and officials, and it does so using a mirror approach: each right of the former corresponds to an obligation for the latter, and vice versa.
Obligations are spelled out very clearly for both categories. For instance, the charter requires that whenever a physical check is requested, female traders have the right to be inspected by female officials in a private but regulated and accountable environment. Similarly, it states that traders are required to treat the officials with respect, and to avoid offering bribes or other favors in exchange for preferential treatment.
The purpose is to promote transparency of rules and increase awareness of all actors at the border, so to reduce misunderstandings and complaints. This should in turn encourage behavioral change, enhance processing times, facilitate trade and ultimately make the border a friendly environment – a place where traders can cross safely, and officials can work efficiently.
How is this different?
So far, so good. But aren’t there already Service Charters/Codes of Conduct within each border agency? Yes there are, and the Charter for Cross-Border Traders builds on them. Yet it applies to all agencies, and in this sense it operates at a horizontal level. Also, it has a clear focus on gender-related issues: a number of provisions are specifically intended to tackle challenges faced by women traders at the border. It also comes with a credible complaint mechanism. The charter is linked to toll-free numbers (including one specific for gender cases), that traders can call or text to report abuses and access information on duty levels, documentary requirements. etc. Those are in turn linked to an ICT platform that traders’ associations and CSOs can use to check the status of reported cases and follow up with relevant authorities. Last, implementation is complemented by training for traders and border officials and large-scale dissemination.
A win-win-win situation
Why should all stakeholders cooperate? Because an effective charter implementation can lead to a scenario where traders can safely use the formal border post and avoid prosecution, goods confiscation. Their associations can provide members with better services, using state-of-the-art technology to promote social accountability. Border officials can perform their duties effectively and expect a boost in revenue collection. In such a scenario, a gradual formalization of informal cross-border trade can be possible.
The Charter for Cross-Border Traders is currently being piloted at the Mwami/Mchinji border post. Plans are to extend it other border posts in Southern and East Africa, and to tailor its contents to the specificity of each local context. As a senior official at the Mchinji border post once said: “Small traders pay our [i.e. civil servants’] salaries through taxes. The more they are, the more revenue [is] collected. We must help them.” The charter tries to do so using an innovative, holistic approach.
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Aussie explorer threatens govt with SADC
Australian mineral explorer, Mount Burgess, which is currently involved in a 14-month acrimonious battle with government over zinc and silver licences in Ngamiland, could drag Botswana to SADC for “violating” an investment protocol.
The two parties have tussled since Monday May 13, 2013 when Mount Burgess learnt that the Ministry of Minerals, Energy and Water Resources had rejected its application for the renewal of a prospecting licence for an area in Ngamiland potentially holding 33 million tonnes in zinc and silver.
Mount Burgess had spent 16.2 million Australian Dollars (P133.5 million) in Ngamiland between 2003 and 2012 in proving the mineralisation, before pumping a further 1.2 million Australian Dollars (P9.9 million) in the months to May 13 on the goodwill assumption that the licence would be renewed.
This company lost an appeal to the Vice President and a High Court case, in pursuit of a discretionary third renewal of the licence and expects its Court of Appeal date next January.
“The company is reviewing the potential of pursuing investor-state arbitration proceedings against Botswana under the SADC Protocol on Finance and Investment, if required,” the company says in a statement. “The Protocol provides certain protections to investments in the SADC and Mount Burgess claims that Botswana has breached its obligations to accord several of these protections.”
According to Mount Burgess the SADC Protocol requires its dispute with Botswana to be referred to the regional body’s Tribunal for dispute resolution. With the Tribunal as yet inoperational, the Australian company says the Protocol gives it the right to refer the dispute to the International Centre for the Settlement of Investment Disputes.
Analysts believe Mount Burgess’ latest tactical move is designed to provide protection against any adverse ruling by the Court of Appeal next January and possibly nudge government into conceding ahead of the court date.
“The SADC Protocol states that the referral of an investment dispute can only take place six months after the State Party and the investor concerned have exhausted all local remedies,” says a local resources analyst who cannot be named as both parties are within his client list.
“Mount Burgess will be sending the message that even if the supreme court of the land rules against them, they are still exploring other means of relief.
“They are saying they are unwilling to simply write off their investment and move on.”
In contrast, in 2011, CIC Energy, wrote off a P28.9 million investment it had spent over five years in exploring and eventually proving a 300 million tonne coal resource at its former Mmamabula South licence.
According to the analyst, Mount Burgess’ latest moves are galvanised by its belief that its chief points have not been addressed by the High Court.
“They were defeated on a technicality because the High Court ruled that they had not cited the right defendant,” the analyst said.
“Their case did not proceed to being argued on merit. They believe justice is on their side, but if they lose, they want a Plan B.”
Mount Burgess’ fight is being led by founding shareholder and 30-year mineral exploration veteran, Nigel Forrester, who listed the company in 1985.
Indicative of their steel in the battle against government, CEO Nigel and his wife Jan, who is the company secretary, have not only foregone their salaries since last August, but have also pumped more of their own funds into its operations.
In the quarter to June 30, 2014, Nigel and Jan lent the Company a further AU$439,749 (P3.62 million) to clear a bank overdraft and for working capital.
Between June 30 and July 21, the couple had loaned Mount Burgess an additional AU$12,000 (P98,880) for more working capital.
“In addition, Nigel and Jan have provided the company with a moratorium in respect of interest on their loan to the company,” a Mount Burgess statement reads.
Government, however, has been equally resolute on the dispute, with Minerals Minister, Kitso Mokaila outrightly dismissing each of the requests Mount Burgess has put forward that have been in his control.
“I have considered your representation and find it to be unsatisfactory,” Mokaila wrote to Mount Burgess in initially rejecting the discretionary renewal of the licence.
Mokaila says Mount Burgess diverted from the approved prospecting programme, failed to conduct a feasibility study and had already exhausted its two permissible renewals of two years each at the time of rejection.
Forrester, meanwhile, charges that Botswana’s power crisis meant that key milestones could not be met and further argues that government was advised on this crucial challenge throughout the years of exploration. Explorers, investors and other market participants are keenly eyeing the case, which will mark one of the few times a mineral dispute pitting an explorer against government, has landed in the highest court and beyond.
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Africa’s growth potential – and its ‘Next 10’ biggest cities
Global investors are increasingly taking note of the untapped potential of sub-Saharan Africa, particularly its unparalleled demographic edge. According to a new report by PricewaterhouseCoopers, Africa will be enjoying faster economic growth than any other region – and will have the world’s biggest labour force.
Most major international corporations are already active in at least one of the three largest cities in sub-Saharan Africa – Lagos in Nigeria, Kinshasa in the Democratic Republic of Congo (DRC), and Johannesburg in South Africa.
However, PricewaterhouseCoopers (PwC) economists believe investors should also be getting excited about the “Next 10” biggest cities in sub-Saharan Africa, namely Dar es Salaam (Tanzania), Luanda (Angola), Khartoum (Sudan), Abidjan (Côte d’Ivoire), Nairobi (Kenya), Kano and Ibadan (Nigeria), Dakar (Senegal), Ougadougou (Burkina Faso), and Addis Ababa (Ethiopia).
According to PwC’s latest Global Economy Watch report, released on Thursday, the population of these cities is projected to almost double by 2030, growing by around 32-million people. In fact, the latest UN projections indicate that, by 2030, two of the “Next 10” – Dar es Salaam and Luanda – could have bigger populations than London has now.
Cities are the typical entry points for businesses looking to expand into new markets, because they enable closer interaction with customers in a relatively small geographical area.
“The report projects that economic activity in the ‘Next 10’ cities could grow by around US$140-billion by 2030,” Stanley Subramoney, strategy leader for PwC’s south market region, said in a statement.
This is roughly equivalent to the current annual output of Hungary, Subramoney said, adding that this was a conservative estimate that did not take into account real exchange rate appreciation, despite relatively strong projected growth in these economies.
Roelof Botha, economic adviser to PwC, said that, in addition to high rates of GDP growth, rapid urbanisation and the so-called demographic edge, “a number of other economic phenomena in the region are starting to appeal to the global investment community”. These include:
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Significant new discoveries of mining and energy resources, in particular gold and gas;
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Substantial investment in infrastructure and capital formation by the private sector, which has witnessed an increase in the ratio of total fixed investment to GDP from 17.7% in 2000 to an estimated 23% in 2013;
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Sustained growth in per capital incomes, which has led to demand shifts that are benefiting household consumption expenditure on durables, semi-durables and services; and
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The ability of a growing number of countries to raise financing for infrastructure projects on the international capital market, in particular Kenya and Rwanda. Both of these countries have recently managed to sell government bonds globally at single-digit yields, which obviate the need for excessive debt servicing costs.
It was factors such as these which had seen a return to sound growth in foreign direct investment (FDI) inflows into a number of key African economies last year, Botha said.
However, according to PwC, there are three issues that sub-Saharan Africa has been struggling to resolve for a number of decades, and which could slow the pace at which the “Next 10” cities grow.
These are: the low quality of “hard” infrastructure like roads and railways; inadequate “soft” infrastructure like schools and universities: and “growing pains” arising from political, legal and regulatory institutions struggling to deal with bigger, more complicated economies.
“The challenges that policy makers face is to convert Africa’s demographic dividend into economic reality by overcoming these hurdles,” Subramoney said, adding: “History suggests this will not be a quick or easy process. Infrastructure development is a key driver for progress across Africa and a critical enabler for sustainable and socially inclusive growth.
“However, investors should form their own plans to mitigate these problems by supporting infrastructure skills and development programmes.”
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Imminent oil bonanza should finally wake up ‘sleeping giant’ DR Congo
They say that the Democratic Republic of Congo (DRC) is the sleeping giant of Africa. Giant because of its immense geography and also its huge quantities and varieties of natural resources as yet not fully explored or exploited.
A company called Oil of DR Congo recently announced that seismic surveys have confirmed presence of about three billion barrels of oil reserves on the western side of Lake Albert, a Rift Valley lake that is shared with Uganda.
However, the oil reserves figures announced should be viewed with caution since technically only after sinking exploratory wells can quantities be correctly estimated.
Information available reveals that the man behind Oil of DR Congo is Dan Gertler, a dual Israeli and DRC citizen who is already involved in extensive mining activities in the DRC.
The explorer owns two of the only three oil blocks on the western side of Lake Albert, and is on the ground working on basic access infrastructure and community facilities.
Although DRC produces about 25,000 bpd on the Atlantic side of the country, when Lake Albert finds are confirmed DRC may become a significant player in oil and gas, joining other emergent regional players (Tanzania, Uganda and Kenya).
The ongoing successful drilling by Uganda on the eastern side of Lake Albert has confirmed presence of about 3.5 billion barrels of oil in place, and in so doing Uganda has significantly de-risked most of the areas around the lake, including the DRC side.
It is, therefore, not out of tune to expect a replica of success on the DRC western side of Lake Albert due to shared geology, basins and reservoirs.
Uganda is entering the oil production development phase (with an estimated flow of about 200,000 barrels per day), and with firm plans for an export pipeline through Kenya and a 60,000 barrels per day refinery in the vicinity of the oilfields.
Ability by DRC to successfully undertake the hydrocarbons exploitation will depend on a number of factors, key among them the sustainability of peace and security in the Eastern DRC. Anywhere in the world, insecurity and investments are mutually exclusive.
It can only be hoped that the ongoing calm and peace in Eastern DRC will persist because foreign capital participation will certainly depend on sustainable security assurances.
Secondly, the very location of the DRC oil finds implies that to explore, develop and commercialise the oil finds, regional co-operation and protocols shall be essential.
Specifically, DRC and Uganda may potentially find themselves sharing the same oil reservoirs across Lake Albert which is an ecologically and environmentally very sensitive area, and which calls for the highest operating standards and safeguards. A joint DRC/Uganda environmental plan would normally be expected when drilling on the common lake starts.
Across the world, there are examples and templates on how cross-border hydrocarbon resources can be exploited between neighbouring countries. However, this requires a strong spirit of mutual understanding between the neighbours.
Thirdly, significant oil development shall require huge capital inflows. To attract such investments DRC shall need to have in place effective oil and gas legal and regulatory framework that sufficiently guides and protects investments. The country would also need to significantly upgrade governance to ensure that perceived country risks are minimised.
Oil of DR Congo is not in the widely known league of international and gas companies and may eventually need to farm out their blocks to larger international oil and gas corporate entities with larger capital and technical capacity.
DRC will need to define an export route for their crude oil, which can be exported via either the Atlantic or Indian Ocean.
If they opt for the Atlantic route and terminate at the River Congo Estuary, then this is all internal DRC transit. If they chose the Indian Ocean route then they have to seek transit co-operation with Uganda and Kenya. The Indian Ocean route has certain pluses that would make it the preferred option.
Uganda and Kenya are already zeroing in on an export pipeline from Lake Albert to Lamu port in Kenya. It may not be too late to join the Uganda/Kenya bandwagon, if DRC can negotiate the necessary protocols without unduly delaying the planned pipeline, which is currently due for feasibility studies.
Additional volumes from DRC would increase pipeline turnover and probably enhance pipeline economics. But it all begins with political protocols being in place.
Whichever direction the DRC oil flows, it is more than certain that the Ugandan and Kenyan logistics and engineering companies stand to benefit by providing services and human resource capacity to Eastern DRC oilfields.
This may already be happening as Mombasa port is the obvious entry point for oilfield materials and equipment for Eastern DRC which is currently active with exploration.
How this new oil benefits DRC and its people will depend on the quality of resource governance that DRC decides to put in place.
Unless major reforms are undertaken, it is difficult to believe that the current DRC “business as usual” resource practices will immediately awaken the sleeping giant when new oil dollars start flowing in.
Mr Wachira is the director, Petroleum Focus Consultants.
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Nigeria and Global Investors
Crusoe Osagie writes that growing investors’ interest in the Nigerian economy is a fallout of favourable policies by the current administration
President Olusegun Obasanjo during his first term as president of the Federal Republic of Nigeria was hugely criticised for his extremely frequent trips abroad in search of foreign investors.
At a point, it appeared as if Obasanjo was going cap in hand to the West as well as other regions of the world, literately begging them to move their investible funds to Nigeria.
At that time, ministers and even lower officials were said to be the ones sent by these nations to receive Nigeria’s then president on arrival in these countries, much to the dismay and chagrin of many Nigerians.
Without casting aspersions on the efforts of president Obasanjo, who many believe made those journeys abroad with a clear conscience in actual search for investment for the Nigeria, it is clear that the government at that time did not take into full cognisance, the fact that investors do not bring funds to any country just because they like its president or because he knelt down and pleaded with them.
The recent United States-Africa summit convened by President Barrack Obama is an eloquent statement to the effect that when a nation or group of nation’s have harnessed their economic endowments and created a discernible pathway for business opportunity for investors to obtain profit through value creation in their economy, it is only a matter of time before they flock around.
Legal practitioner and Vice-President of the National Association of Chambers of Commerce Mines and Agriculture (NACCIMA), Mr. Dele Oye, told THISDAY that the United States does not abhor Nigeria any less than it did before including it among its guests at the just-concluded summit.
“The only difference between then when Nigeria hardly got a second look from the west and now is that the indices are now right for Nigeria and some other African nations to lead global economic growth and development, and unless they are part of it they will be losing a lot to major competitors in global trade,” he said.
So instead of wasting resources junketing around the globe to woo organisations to come to Nigeria to invest, what the country’s leaders should devote more time to is intelligent policy formulation, business environment fine tuning as well as tackling insecurity and corruption in order to place the country among those whose profile is consistent with the ones in which world class investors want to inject their valued funds.
Investment climate reform
Minister of Industry Trade and Investment, Olusegun Aganga, has repeatedly assured international investors that the federal government will continue to provide a conducive environment for investment in Nigeria.
One step taken to match Aganga’s claim of commitment to an improved business environment in the country was the inauguration of the ‘One Stop Investment Centre’ (OSIC), a department of the Nigerian Investment Promotion Commission (NIPC).
With the introduction of the One Stop Investment initiative, it was expected that the challenges of investing in the Nigerian economy had been reduced and the recent increase in the interest of foreign investors in Nigeria indicates that these federal government efforts may be yielding some modest results.
According to Aganga, the initiative has succeeded in fast tracking processes and procedures of business incorporation and registration, adding that OSIC had reduced the ambiguity, bureaucracy and unnecessary delays in documentation processes for businesses.
The minister said that OSIC had inculcated the culture of transparency in government agencies in dealing with investors in other parastatal agencies.
He added that through such initiatives as OSIC Nigeria had made tremendous progress in its economic reforms, therefore calling on the World Bank and other international economic ranking organisations to reflect these reforms and appropriately rank Nigerian in their index.
Targeting US’ $14 billion
As one of the fall outs of Nigeria’s current improvement and eligibility for foreign investment inflow, Nigeria and the United States have commenced plans to leverage US President Barack Obama’s $14bn investment pledge in Africa, for an effective financing structure for infrastructure in Nigeria.
The Minister of Industry, Trade and Investment, Olusegun Aganga, and the US Commerce Secretary, Penny Pritzker, agreed during a bilateral meeting at the just-concluded US-Africa Summit that increased investment in the area of infrastructure would further improve the Nigerian business environment, noting that Obama’s focus on power was particularly encouraging.
While the two countries agreed to work on the financial structure for infrastructure within the next few weeks, Pritzer noted that US companies were eager to do business in Nigeria due to the ongoing reforms in critical sectors, adding that they could also leverage on the US export assistance facilities scattered around the country.
Aganga said apart from the investment commitments and MOUs that were signed during the summit, most investors agreed that Nigeria had the most robust, clear and friendly policies on power, which other African countries should try to emulate.
He said: “This means we already have an enabling environment that will encourage more investors to come and invest in the sector. In fact, what these investors were saying was that most of our sectoral policies, which we have put in place already have, encouraged them to come and invest in Nigeria.
“That was why when we met with the American automotive manufacturing giant, Ford, during the summit, they said that they wanted to come to Nigeria as quickly as possible because of our new automotive policy. If the new auto policy was not in place, Ford would not be talking about coming to invest in Nigeria. That is the value you get as a country when you have a proper industrial plan and well-articulated sectoral policy in place.”
The minister added, “Also, the World Bank made a pledge of $5 billion for risk capital, preparation of projects and to invest in Nigeria overall. Most of these investments will be going to the power sector. This is coming into Nigeria because the country is ready to receive investors.
“On our plans going forward, we are looking forward to the re-formulation and re-modernisation of the African Growth and Opportunity Act (AGOA). We are working on a National AGOA strategy in addition to raising the awareness of Nigerians to fully understand the benefits and opportunities that exist therein for them. Also, we will continue to engage with the United States under the Trade and Investment Framework Agreement (TIFA) in order to build and sustain the present momentum.”
Aganga said that the United States was keen on boosting trade with Africa and Nigeria in particular, noting that the interests cut across all sectors of the Nigerian economy.
“If you look at the people that participated in the summit, they cut across the different strata of the economy. The United States, especially President Obama, is focusing on power. So, overall, I see the major sectors of the Nigerian economy benefiting from Obama’s initiative. In the real sector, for example, we expect more investments coming into the agro-industrial sectors, textile and garment, palm oil, sugar and food processing generally,” he said.
Calling the EU’s bluff
Keen observers of the nation’s international trade activities can tell that two decades ago Nigeria would certainly cower once the European Union sneezes. But not so anymore. Nigeria is gradually coming of age. Africa’s largest economy is slowly finding its own voice to speak up against international trade proposals it considers exploitative.
On one of such global trade protocols, the Economic Partnership Agreement (EPA), Aganga insisted that Nigeria had not shifted its position, saying the EPA must meet the country’s expectations and must be “in our overall best economic interest as a nation.”
“Nigeria will not, and cannot sign, any agreement that will lead to loss of jobs, income and investments. These are our major priorities and concerns as a country and until EPA addresses these priorities and concerns, we will not sign any agreement with the European Union,” he reiterated.
Perhaps if Nigeria had not tried to puts its acts together to attract investors from all over the globe, it would not be able to would not be able to look the european in the eyes and say back off.
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Be realistic in budget allocations, EA govts told
The East African Community (EAC) governments have been told to be realistic when allocating financial resources geared towards execution of economic development projects carried out jointly by partner states.
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Maritime Piracy: New two-part report published by UNCTAD
The report considers the costs and trade-related implications of maritime piracy and takes stock of regulatory and other initiatives pursued by the international community in an effort to combat piracy.
Part I of the report presents overall trends in maritime piracy and related crimes, and highlights some of the key issues at stake by focusing on its costs and broader trade-related implications.
Part II of the report provides an overview of the contemporary international legal regime for countering piracy and identifies key examples of international cooperation and multilateral initiatives to combat the phenomenon.
The importance of oceans and seas for trade-led economic prosperity has increased in tandem with growth in the world economy, global merchandise trade and maritime transport activity. However, increased international trade volumes and value have also heightened the exposure and vulnerability of international shipping as a potential target for piracy, armed robbery and other crimes.
During the past decade, which has seen a dramatic rise in maritime piracy in East African waters and pirates becoming more sophisticated, violent and resilient, the issue has considerably increased in importance and emerged as a transnational humanitarian, economic and security challenge.
While intensified international counter-piracy efforts have since contributed to a reduction in the number of incidents in the region, this positive trend remains fragile and could be undermined and reversed unexpectedly. In addition, with a surge in piracy observed in the Gulf of Guinea, West African waters are also emerging as a dangerous hotspot for piracy.
Given the issues at stake and the broad range of costs and trade-related implications of maritime piracy at both the regional and the global level, sustained long-term efforts to combat and repress piracy clearly remain a matter of strategic importance. While progress will ultimately also depend on the economic situation and on political ?stability ?in affected regions, addressing the challenge of piracy in an effective manner requires strong cooperation at the ?political, economic, legal, diplomatic and military levels, as well as collaboration between ?diverse public and private sector stakeholders across regions.
As part of its mandate on trade logistics, UNCTAD carries out substantive research and analysis on a wide range of legal and policy issues affecting transport and trade, and disseminates information on recent developments including in the field of maritime and supply-chain security, and maritime piracy.
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Kenya scores poorly in EAC logistics survey
Kenya is ranked fourth in the East Africa community behind Rwanda, Uganda and Tanzania as far as performance of its logistics industry is concerned.
This is according to ratings in the East Africa Logistics performance Survey 2014 that is being officially launched today by the Shippers Council of Kenya.
Rwanda is ranked in the first position with a score of 3.52, followed by Uganda in second place with a score of 3.07. Tanzania comes in third with an average score of 2.89 while Kenya and Burundi are ranked at position 4and 5, with scores of 2.82 and 2.78 respectively.
Some of the indicators on which Kenya ranks poorly include timely delivery of shipments, competence and quality of logistics services, percentage of shipment physically inspected, transparency in conducting customs valuations, manner in which trade disputes are handled and incidence of corruption and rent-seeking.
However, it performed very well in areas such as the efficiency of good clearance process, level of preparedness of shippers to undertake international trade, security of cargo while in transit, communicating information when trade regulations change and quality of transport and ICT infrastructure.
“For Kenya to improve its ranking in logistics performance, measures have to be put in place to increase investments in infrastructure, improve services delivered by both private sector entities and State agencies involved in the goods clearance process and an attitude change in the level of preparedness of shippers to effectively fulfil their obligations in international trade transactions,” the report says.
The logistics performance of individual EAC Partner States is rated using 11 key indicators and individual country scores aggregated across all respondents, resulting in a single average score for each indicator.
For the region to become competitive, the report recommends development of regulations that facilitate and encourage private-public partnerships, especially for large regional infrastructure projects such as ports and railroads.
Global economy
There is need for a well-functioning specialised logistics infrastructure to ease freight handling, streamline inspection processes, and provide value-added services in areas closer to ports, airports and border crossings. This report advances some recommendations that are critical to the improvement of the logistics performance of EAC Partner States and their related ability to promote international trade and spur economic growth.
The findings of this logistics performance survey for East Africa focuses on logistics drawn on a set of data collected over a period of four months beginning February to May 2014 from freight forwarding and Shippers companies in East Africa.
The survey tracks specific quantitative indicators of logistics performance in terms of cost, time and complexity of executing trade transactions which EAC countries can use to target policy actions to improve logistics and monitor their progress.
Its findings are expected to spur public and private agencies that have direct or indirect power over logistics performance to focus attention on reducing sources of delays so as to improve the ability of the region to effectively compete in today’s global economy.
It recommends that EAC governments will need to sufficiently invest in transport infrastructure and provide an enabling environment for private sector to provide more efficient transport and logistics services.
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Stakeholders to meet on Post-2015 Development Agenda and the Common African Position
African stakeholders, including academia, CSOs, government representatives, media, private sector and women and youth groups will meet later this week in Addis Ababa to deliberate and propose a concrete accountability framework for the Post-2015 Development Agenda.
Stakeholders are determined to play a strong role in the Post-2015 Development Agenda given the limited role of Africa in the formulation of the MDGs, which many assert resulted in weak ownership and slow progress by many African countries.
Consequently, the forum, which will take place at the United Nations Conference Centre from 21-23 August, is part of a substantial proactive effort to ensure African ownership of the forthcoming global development agenda that will replace the current Millennium Development Goals (MDGs). The event, led by the African Union High Level Committee (HLC) on the Post-2015 Development Agenda comes as a result of a request, made by the AU Heads of State Summit held in Malabo from 26-27 June 2014, to explore the “emerging issues of accountability”. This includes the need for a data revolution – a central issue to monitor, evaluate and assess progress, which are, in turn, key aspects of accountability, according to the Decision of the Malabo Summit.
According to the Chairperson of the HLC Sherpas, Abdoulaye Dukule, “In the spirit of accountability, work has already started on the development of metrics for the six pillars of the Common African Position (CAP), this meeting will therefore serve as a continuation, which will lead to a concrete accountability mechanism. Accountability, in its various formulations, is the first step towards transparent governance”. In addition, the Special Advisor to the Secretary-General on Post-2015 Development Planning, Amina Mohammed emphasised that “this meeting provides African stakeholders with an opportunity to build on successful regional experiences and effectively contribute to the global discussions on robust approaches to monitoring, review and accountability for the post-2015 development agenda. Without credible accountability mechanisms at global, regional and national levels, there is little hope that promises made will become promises delivered”.
Furthermore, Abdalla Hamdok, ECA’s Deputy Executive Secretary, stated “Africa has indeed been a visible presence in the Post-2015 development agenda and as early as 2011, the continent initiated consultations to articulate its priorities for the successor global development framework”. “The consultations are intended to build on existing accountability frameworks, so as to design and formulate an accountability framework suitable for the post 2015 development agenda”, reiterated Hamdok. Such a framework is expected to provide alignment from the global to continental to national levels.
African Forum on Post-2015 provides elements for accountability
African stakeholders from the CSO spectrum represented by NGOs, women, youth and media organizations; as well as government representatives and the international community met in Addis Ababa to deliberate and propose measures for ensuring an accountability framework for the Post-2015 Development Agenda.
The forum, which took place at the United Nations Conference Centre from 21-23 August, proposed key elements for an accountability framework, which is expected to feed into the Secretary-General’s report to the General Assembly in September.
In her opening statement, Ambassador Marjon Kamara, Liberia’s Permanent Representative to the UN, who chaired the meeting underscored the importance of statistics in determining an accountability framework calling for “concerted action, genuine commitment, and empowerment of African society, including youth, women, faith-based organisations, as well as the business community”.
Dr Anthony Maruping, AU Commissioner for Economic Affairs, said that when it comes to accountability mechanisms, Africa was “not starting from scratch”, as the continent had experienced with other regional, sub-regional, national accountability frameworks, such as the African Peer Review Mechanism (APRM)”.
Furthermore, Abdalla Hamdok, ECA’s Deputy Executive Secretary, helped clarify the objective of the consultative meeting, by stating that participants’ “wide-encompassing deliberations need to identify key elements to build an accountability architecture for the post-2015 development agenda that is aligned from the global to continental to national levels”.
In his opening address, Mr Eugene Owusu, UN Resident Coordinator, UNDP/Ethiopia urged participants to help in “demanding real accountability for one billion people, emphasising participatory mechanisms, in which it is possible for the people to hold their leaders accountable”.
Ms Amina Mohammed, Special Advisor to the Secretary-General on Post-2015 Development Planning informed participants that there was a significant momentum for this new agenda, which comes with a high political mandate. Ms Mohammed, stressed the importance of crafting an accountability framework that is “fit for purpose” for the Africa region.
Participants unanimously agreed that an accountability framework for the Post-2015 and the Sustainable Development Goals, which will replace the Millennium Development Goals (MDGs) by 2015, should be based on a set of core principles, accompanied by bold goals and targets and a plan on the means of implementation. Participants emphasised the need for an accountability framework to be implementable across the broad spectrum of society, namely being “bottom-up and people centered. In addition, participants called for country-level commitments to action skillfully led by a multi-stakeholder partnership represented by public, private, civil society and citizen interests”.
Another important element originating from the Forum was the need for a strong culture of reporting, based on accurate and timely data – making a case for evidence-based accountability. This would provide the basis for measuring progress and also mobilize citizens and civil society to hold institutions and partners accountable towards their commitments.
The Forum was organized by the HLC/African Union Commission (AUC) and the United Nations Economic Commission for Africa (ECA) with support from the UN Development Group.